G.R. No. 173090-91, September 7, 2011
Union Bank of the Philippines, Petitioner, vs. Spouses Rodolfo T. Tiu and Victoria N. Tiu, Respondents.

FACTS

On November 21, 1995, petitioner Union Bank of the Philippines (Union Bank) and respondent spouses Rodolfo T. Tiu and Victoria N. Tiu (spouses Tiu) entered into a Credit Line Agreement. From September 22, 1997 to March 26, 1998, the spouses Tiu obtained various loans under this agreement totaling US$3,632,000.00, evidenced by promissory notes. On June 23, 1998, Union Bank advised the spouses Tiu that the loans would be redenominated to Philippine Peso. On July 3, 1998, the spouses Tiu authorized the redenomination at the rate of US$1=₱41.40 with 19% interest for one year.
On December 21, 1999, the parties entered into a Restructuring Agreement. In this agreement, the spouses Tiu confirmed their outstanding principal indebtedness as of December 8, 1999 to be ₱155,364,800.00 (which included the redenominated amount of US$3,632,000.00 at ₱41.40 and an additional ₱5,000,000.00 loan to update interest payments). They also unconditionally waived any action to dispute the amount, collectability, or enforceability of this indebtedness. The agreement further stated that after deducting the value of properties ceded via Deeds of Dation in Payment and adding certain expenses, the total restructured amount to be paid was ₱104,668,741.00. The spouses Tiu also executed a Real Estate Mortgage over their residential property in Mandaue City to secure the obligation.
Asserting that the spouses Tiu failed to comply with the payment schemes in the Restructuring Agreement, Union Bank initiated extrajudicial foreclosure proceedings on the mortgaged residential property. The spouses Tiu, along with other family members, filed a Complaint with the Regional Trial Court (RTC) of Mandaue City (Civil Case No. MAN-4363) seeking to declare the foreclosure null and void. They claimed, among other things, that the loans were originally in pesos, that they were forced to sign the Restructuring Agreement, that their obligation had been fully paid, and that they were not the owners of the improvements on the mortgaged lot. They also alleged that prior to the Restructuring Agreement, they had deposited with Union Bank several share certificates and land titles under a Memorandum of Agreement, which properties Union Bank continued to hold without any lien.
The RTC ruled in favor of Union Bank. The Court of Appeals reversed the RTC decision. Union Bank filed the present Petition for Review on Certiorari.

ISSUE

The core legal issue is whether the Court of Appeals erred in reversing the RTC decision and in ruling on matters related to the validity and consequences of the Restructuring Agreement and the foreclosure proceedings.

RULING

The Supreme Court granted the petition, reversed the Court of Appeals’ Joint Decision, and reinstated the RTC Decision with modification.
The Court held that the Restructuring Agreement, including the clause wherein the spouses Tiu confirmed their debt and waived any action to dispute it, is valid and binding. The spouses Tiu, who are businesspersons, voluntarily entered into the agreement to obtain financial concessions from the bank. The agreement constitutes the law between the parties. Their subsequent claims that the original loans were in pesos and that they were forced to sign are belied by the clear terms of the agreement they signed. The waiver clause effectively bars them from contesting the amount and enforceability of the restructured debt.
Regarding the extrajudicial foreclosure, the Court found it to be valid. The Real Estate Mortgage over the residential property was a valid security for the restructured loan. The spouses Tiu’s claim that they did not own the house on the lot was contradicted by the Warranty clause in the mortgage deed where they declared themselves as the absolute owners of the property, including all improvements. They are estopped from denying the truth of this representation.
Concerning the properties (shares and titles) allegedly deposited under a Memorandum of Agreement, the Court found that the spouses Tiu failed to substantiate their claim that these were held by the bank without any lien. The Restructuring Agreement authorized Union Bank to retain any and all properties of the debtor as security. Furthermore, the Acknowledgement Receipt presented by the spouses Tiu pertained to documents held for a specific dacion en pago transaction, not for the alleged Memorandum of Agreement. Their claim on this matter was unproven.
The Court modified the RTC decision by deleting the award of attorney’s fees to Union Bank, as the justification for it was not sufficiently explained in the body of the decision.