G.R. No. 208638. January 24, 2018. SPOUSES FRANCISCO ONG and BETTY LIM ONG, and SPOUSES JOSEPH ONG CHUAN and ESPERANZA ONG CHUAN, Petitioners, v. BPI FAMILY SAVINGS BANK, INC., Respondent.
FACTS

Petitioners, operating MELBROS PRINTING CENTER, applied for credit facilities with Bank of Southeast Asia (BSA) in 1996. In April 1997, they executed a Real Estate Mortgage (REM) over a property in Paco, Manila to secure a ₱15,000,000 term loan and a ₱5,000,000 credit line. BSA released only ₱10,444,271.49 of the term loan and ₱3,000,000 of the credit line. BSA promised to release the remaining ₱2,000,000 credit line upon petitioners’ full payment of the initial ₱3,000,000. Petitioners complied, but BSA still refused to release the balance. Consequently, petitioners stopped paying amortizations on the term loan.
BPI Family Savings Bank later merged with BSA and acquired its rights. BPI filed for extrajudicial foreclosure of the REM due to petitioners’ default. Petitioners sued BPI for damages to enjoin the foreclosure. The Regional Trial Court ruled for petitioners, awarding actual damages and attorney’s fees. The Court of Appeals reversed, dismissing the complaint and holding that no perfected contract existed for the credit line, thus BPI incurred no delay.

ISSUE

Whether a perfected loan contract existed for the credit line, and whether BSA/BPI incurred delay, entitling petitioners to damages and invalidating the foreclosure.

RULING

The Supreme Court granted the petition, reversing the CA. A loan contract is perfected upon delivery of the object of the contract. Here, BSA’s approval via letters dated January 31, 1997, and the subsequent release of ₱3,000,000 from the ₱5,000,000 credit line perfected the contract. The CA erroneously held that only the term loan materialized. The credit facility was a single package of ₱20,000,000, comprising both the term loan and the credit line.
BSA incurred delay (mora solvendi) by unjustifiably refusing to release the remaining ₱2,000,000 after petitioners fully paid the initial ₱3,000,000 as conditioned. This breach was a violation of BSA’s reciprocal obligation under the perfected contract. Consequently, petitioners were justified in suspending their loan amortizations under Article 1191 of the Civil Code. The foreclosure based on this default was therefore void.
Petitioners are entitled to damages. Actual damages of ₱2,772,000 were awarded, representing the 6% annual interest on the unreleased ₱2,000,000 from 1997 until the REM’s cancellation. Exemplary damages of ₱100,000 were granted due to BSA’s bad faith, as banks hold a fiduciary duty to treat clients with utmost care. Attorney’s fees were reduced to ₱300,000. All damages earn 6% interest per annum from finality of the decision.