G.R. No. 244247 . November 10, 2021.
UNITED COCONUT PLANTERS BANK, INC., PETITIONER, VS. E. GANZON, INC., RESPONDENT.

FACTS

Between 1995 and 1998, respondent E. Ganzon, Inc. (EGI) obtained five loans from petitioner United Coconut Planters Bank (UCPB) totaling P775,000,000.00. EGI defaulted in December 1998. The parties restructured the loan, and on December 28, 1999, they entered into a Memorandum of Agreement (MOA) fixing EGI’s total obligation at P915,838,822.50. In consideration for the extinguishment of this obligation, EGI agreed to convey to UCPB 485 condominium units and parcels of land (the listed properties). An Amendment dated January 18, 2000, readjusted the aggregate appraised value of these properties to P1,419,913,861.00. UCPB later foreclosed on 193 of the listed properties with a total appraised value of P904,491,052.00 but credited EGI only with its bid price of P723,592,000.00 (80% of the appraised value), leaving a claimed balance. UCPB then required EGI to submit additional properties via dacion en pago contracts for 107 units, while holding titles to 28 other units “for safekeeping.” UCPB subsequently informed EGI of an outstanding balance of P60,836,537.00. EGI discovered an internal UCPB memorandum showing a discrepancy between the amount “DISCLOSED TO EGI” (P226,967,194.80) and the “ACTUAL” balance (P146,849,412.58). EGI filed a complaint for Annulment of Foreclosure, Annulment of Dacion En Pago, Rescission/Amendment/Annulment of Contract, Collection, and Damages, alleging fraud, padding of charges, and overpayment.

ISSUE

The primary issue is whether UCPB committed fraud or violated the terms of the MOA, thereby entitling EGI to remedies including the annulment of the foreclosure and dacion en pago, crediting of the full appraised value of foreclosed properties, return of the 28 CCTs, and damages.

RULING

The Supreme Court denied UCPB’s petition and affirmed the Court of Appeals’ decision with modifications. The Court held that the MOA constituted a dacion en pago, whereby EGI’s obligation was extinguished by the conveyance of the listed properties. UCPB’s subsequent foreclosure was inconsistent with this agreement and in bad faith, as the MOA already transferred ownership. UCPB was ordered to credit EGI with the full appraised value of the foreclosed properties (P904,491,052.00), not just its bid price. After applying this credit and the value of the properties transferred via dacion en pago against the stipulated obligation of P915,838,822.50, EGI was found to have overpaid. The Court ordered UCPB to return the 28 CCTs held for safekeeping, as no agreement existed for their transfer. UCPB was also held liable for unrealized income from the properties and for damages. Moral damages were awarded due to UCPB’s fraudulent padding of accounts and bad faith, and exemplary damages were imposed as a corrective measure. Attorney’s fees and legal interest were also granted. The mortgage liens on the remaining unconveyed listed properties were ordered cancelled.