SECOND DIVISION

[G.R. NO. 172592 : July 9, 2008]

SPOUSES WILFREDO N. ONG and EDNA SHEILA PAGUIO-

ONG, Petitioners, v.ROBAN LENDING CORPORATION, Respondent.

DECISION

CARPIO MORALES, J.:

On different dates from July 14, 1999 to March 20, 2000, petitioner-
spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong obtained several
loans from Roban Lending Corporation (respondent) in the total
amount of P4,000,000.00. These loans were secured by a real estate
mortgage on petitioners' parcels of land located in Binauganan, Tarlac
City and covered by TCT No. 297840.1

On February 12, 2001, petitioners and respondent executed an

Amendment to Amended Real Estate Mortgage 2 consolidating their
loans inclusive of charges thereon which totaledP5,916,117.50. On
even date, the parties executed a Dacion in Payment
Agreement3wherein petitioners assigned the properties covered by TCT
No. 297840 to respondent in settlement of their total obligation, and a
Memorandum of Agreement4 reading:

That the FIRST PARTY [Roban Lending Corporation] and the SECOND
PARTY [the petitioners] agreed to consolidate and restructure all
aforementioned loans, which have been all past due and delinquent
since April 19, 2000, and outstanding obligations totaling
P5,916,117.50. The SECOND PARTY hereby sign [sic] another
promissory note in the amount of P5,916,117.50 (a copy of which is
hereto attached and forms xxx an integral part of this document), with
a promise to pay the FIRST PARTY in full within one year from the
date of the consolidation and restructuring, otherwise the SECOND
PARTY agree to have their "DACION IN PAYMENT" agreement, which
they have executed and signed today in favor of the FIRST PARTY be
enforced[.]5

In April 2002 (the day is illegible), petitioners filed a

Complaint,6 docketed as Civil Case No. 9322, before the Regional Trial
Court (RTC) of Tarlac City, for declaration of mortgage contract as
abandoned, annulment of deeds, illegal exaction, unjust enrichment,
accounting, and damages, alleging that the Memorandum of
Agreement and the Dacion in Payment executed are void for
being pactum commissorium.7

Petitioners alleged that the loans extended to them from July 14, 1999
to March 20, 2000 were founded on several uniform promissory notes,
which provided for 3.5% monthly interest rates, 5% penalty per month
on the total amount due and demandable, and a further sum of 25%
attorney's fees thereon,8 and in addition, respondent exacted certain
sums denominated as "EVAT/AR."9 Petitioners decried these additional
charges as "illegal, iniquitous, unconscionable, and revolting to the
conscience as they hardly allow any borrower any chance of survival in
case of default."10

Petitioners further alleged that they had previously made payments on

their loan accounts, but because of the illegal exactions thereon, the
total balance appears not to have moved at all, hence, accounting was
in order.11

Petitioners thus prayed for judgment:

a) Declaring the Real Estate Mortgage Contract and its amendments x x

x as null and void and without legal force and effect for having been
renounced, abandoned, and given up;
b) Declaring the "Memorandum of Agreement" xxx and "Dacion in
Payment" x x x as null and void for being  pactum commissorium;

c) Declaring the interests, penalties, Evat [sic] and attorney's fees

assessed and loaded into the loan accounts of the plaintiffs with
defendant as unjust, iniquitous, unconscionable and illegal and
therefore, stricken out or set aside;

d) Ordering an accounting on plaintiffs' loan accounts to determine the

true and correct balances on their obligation against legal charges only;
andcralawlibrary

e) Ordering defendant to [pay] to the plaintiffs: - -

e.1 Moral damages in an amount not less than P100,000.00 and

exemplary damages of P50,000.00;

e.2 Attorney's fees in the amount of P50,000.00 plus P1,000.00

appearance fee per hearing; andcralawlibrary

e.3 The cost of suit.12

as well as other just and equitable reliefs.

In its Answer with Counterclaim,13 respondent maintained the legality

of its transactions with petitioners, alleging that:

x   x   x

If the voluntary execution of the Memorandum of Agreement and

Dacion in Payment Agreement novated the Real Estate Mortgage
then the allegation of Pactum Commissorium has no more legal leg to
stand on;

The Dacion in Payment Agreement is lawful and valid as it is

recognized x x x under Art. 1245 of the Civil Code as a special form of
payment whereby the debtor-Plaintiffs alienates their property to the
creditor-Defendant in satisfaction of their monetary obligation;

The accumulated interest and other charges which were computed for
more than two (2) years would stand reasonable and valid taking into
consideration [that] the principal loan is P4,000,000 and if indeed it
became beyond the Plaintiffs' capacity to pay then the fault is
attributed to them and not the Defendant[.]14

After pre-trial, the initial hearing of the case, originally set on December
11, 2002, was reset several times due to, among other things, the
parties' efforts to settle the case amicably.15 chanrobles virtual law
library

During the scheduled initial hearing of May 7, 2003, the RTC issued the
following order:

Considering that the plaintiff Wilfredo Ong is not around on the ground
that he is in Manila and he is attending to a very sick relative, without
objection on the part of the defendant's counsel, the initial hearing of
this case is reset to June 18, 2003 at 10:00 o'clock in the morning.

Just in case [plaintiff's counsel] Atty. Concepcion cannot present his

witness in the person of Mr. Wilfredo Ong in the next scheduled
hearing, the counsel manifested that he will submit the case for
summary judgment.16 (Underscoring supplied)cralawlibrary

It appears that the June 18, 2003 setting was eventually rescheduled to
February 11, 2004 at which both counsels were present17 and the RTC
issued the following order:

The counsel[s] agreed to reset this case on April 14, 2004, at 10:00
o'clock in the morning. However, the counsels are directed to be ready
with their memorand[a] together with all the exhibits or evidence
needed to support their respective positions which should be the basis
for the judgment on the pleadings if the parties fail to settle the case in
the next scheduled setting.

x x x x18 (Underscoring supplied)cralawlibrary

At the scheduled April 14, 2004 hearing, both counsels appeared but
only the counsel of respondent filed a memorandum.19

By Decision of April 21, 2004, Branch 64 of the Tarlac City RTC, finding
on the basis of the pleadings that there was no pactum commissorium,
dismissed the complaint.20

On appeal,21 the Court of Appeals22 noted that

x x x [W]hile the trial court in its decision stated that it was rendering
judgment on the pleadings, x x x what it actually rendered was a
summary judgment. A judgment on the pleadings is proper when the
answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party's pleading. However, a judgment on the
pleadings would not have been proper in this case as the answer
tendered an issue, i.e. the validity of the MOA and DPA. On the other
hand, a summary judgment may be rendered by the court if the
pleadings, supporting affidavits, and other documents show that,
except as to the amount of damages, there is no genuine issue as to
any material fact.23

Nevertheless, finding the error in nomenclature "to be mere semantics

with no bearing on the merits of the case",24 the Court of Appeals
upheld the RTC decision that there was nopactum commissorium.25

Their Motion for Reconsideration26 having been denied,27 petitioners

filed the instant Petition for Review on Certiorari,28 faulting the Court of
Appeals for having committed a clear and reversible error
I. . . . WHEN IT FAILED AND REFUSED TO APPLY PROCEDURAL
REQUISITES WHICH WOULD WARRANT THE SETTING ASIDE OF THE
SUMMARY JUDGMENT IN VIOLATION OF APPELLANTS' RIGHT TO DUE
PROCESS;

II. . . . WHEN IT FAILED TO CONSIDER THAT TRIAL IN THIS CASE IS

NECESSARY BECAUSE THE FACTS ARE VERY MUCH IN DISPUTE;

III. . . . WHEN IT FAILED AND REFUSED TO HOLD THAT THE

MEMORANDUM OF AGREEMENT (MOA) AND THE DACION EN PAGO
AGREEMENT (DPA) WERE DESIGNED TO CIRCUMVENT THE LAW
AGAINST PACTUM COMMISSORIUM; andcralawlibrary

IV. . . . WHEN IT FAILED TO CONSIDER THAT THE MEMORANDUM OF

AGREEMENT (MOA) AND THE DACION EN PAGO (DPA) ARE NULL AND
VOID FOR BEING CONTRARY TO LAW AND PUBLIC POLICY.29

The petition is meritorious.

Both parties admit the execution and contents of the Memorandum of

Agreement and Dacion in Payment. They differ, however, on whether
both contracts constitute pactum commissorium or dacion en pago.

This Court finds that the Memorandum of Agreement and Dacion in

Payment constitutepactum commissorium, which is prohibited under
Article 2088 of the Civil Code which provides:

The creditor cannot appropriate the things given by way of pledge or

mortgage, or dispose of them. Any stipulation to the contrary is null
and void."

The elements of pactum commissorium, which enables the mortgagee

to acquire ownership of the mortgaged property without the need of
any foreclosure proceedings,30are: (1) there should be a property
mortgaged by way of security for the payment of the principal
obligation, and (2) there should be a stipulation for automatic
appropriation by the creditor of the thing mortgaged in case of non-
payment of the principal obligation within the stipulated period.31

In the case at bar, the Memorandum of Agreement and the Dacion in

Payment contain no provisions for foreclosure proceedings nor
redemption. Under the Memorandum of Agreement, the failure by the
petitioners to pay their debt within the one-year period gives
respondent the right to enforce the Dacion in Payment transferring to it
ownership of the properties covered by TCT No. 297840. Respondent,
in effect, automatically acquires ownership of the properties upon
petitioners' failure to pay their debt within the stipulated period.

Respondent argues that the law recognizes dacion en pago as a special

form of payment whereby the debtor alienates property to the creditor
in satisfaction of a monetary obligation.32 This does not persuade. In a
true dacion en pago, the assignment of the property extinguishes the
monetary debt.33 In the case at bar, the alienation of the properties was
by way of security, and not by way of satisfying the debt.34 The Dacion
in Payment did not extinguish petitioners' obligation to respondent. On
the contrary, under the Memorandum of Agreement executed on the
same day as the Dacion in Payment, petitioners had to execute a
promissory note for P5,916,117.50 which they were to pay within one
year.35

Respondent cites Solid Homes, Inc. v. Court of Appeals 36 where this

Court upheld a Memorandum of Agreement/Dacion en Pago.37 That
case did not involve the issue ofpactum commissorium.38

That the questioned contracts were freely and voluntarily executed by

petitioners and respondent is of no moment, pactum
commissorium being void for being prohibited by law.39
Respecting the charges on the loans, courts may reduce interest rates,
penalty charges, and attorney's fees if they are iniquitous or
unconscionable.40

This Court, based on existing jurisprudence,41 finds the monthly interest

rate of 3.5%, or 42% per annum unconscionable and thus reduces it to
12% per annum. This Court finds too the penalty fee at the monthly
rate of 5% (60% per annum) of the total amount due and demandable -
principal plus interest, with interest not paid when due added to and
becoming part of the principal and likewise bearing interest at the same
rate, compounded monthly42 - unconscionable and reduces it to a
yearly rate of 12% of the amount due, to be computed from the time of
demand.43 This Court finds the attorney's fees of 25% of the principal,
interests and interests thereon, and the penalty fees unconscionable,
and thus reduces the attorney's fees to 25% of the principal amount
only.44

The prayer for accounting in petitioners' complaint requires

presentation of evidence, they claiming to have made partial payments
on their loans, vis a vis respondent's denial thereof.45 A remand of the
case is thus in order.

Prescinding from the above disquisition, the trial court and the Court of
Appeals erred in holding that a summary judgment is proper. A
summary judgment is permitted only if there is no genuine issue as to
any material fact and a moving party is entitled to a judgment as a
matter of law.46 A summary judgment is proper if, while the pleadings
on their face appear to raise issues, the affidavits, depositions, and
admissions presented by the moving party show that such issues are
not genuine.47 A genuine issue, as opposed to a fictitious or contrived
one, is an issue of fact that requires the presentation of evidence.48 As
mentioned above, petitioners' prayer for accounting requires the
presentation of evidence on the issue of partial payment.
But neither is a judgment on the pleadings proper. A judgment on the
pleadings may be rendered only when an answer fails to tender an
issue or otherwise admits the material allegations of the adverse
party's pleadings.49 In the case at bar, respondent's Answer with
Counterclaim disputed petitioners' claims that the Memorandum of
Agreement and Dation in Payment are illegal and that the extra charges
on the loans are unconscionable.50 Respondent disputed too
petitioners' allegation of bad faith.51

WHEREFORE, the challenged Court of Appeals Decision is REVERSED

and SET ASIDE. The Memorandum of Agreement and the Dacion in
Payment executed by petitioner - spouses Wilfredo N. Ong and Edna
Sheila Paguio-Ong and respondent Roban Lending Corporation on
February 12, 2001 are declared NULL AND VOID for being pactum
commissorium.

In line with the foregoing findings, the following terms of the loan
contracts between the parties are MODIFIED as follows:

1. The monthly interest rate of 3.5%, or 42% per annum, is reduced to

12% per annum;

2. The monthly penalty fee of 5% of the total amount due and

demandable is reduced to 12% per annum, to be computed from the
time of demand; andcralawlibrary

3. The attorney's fees are reduced to 25% of the principal amount only.

Civil Case No. 9322 is REMANDED to the court of origin only for the
purpose of receiving evidence on petitioners' prayer for accounting.

SO ORDERED.

G.R. No. 77465 May 21, 1988

SPOUSES UY TONG & KHO PO GIOK, Petitioners, vs. HONORABLE
COURT OF APPEALS, HONORABLE BIENVENIDO C. EJERCITO, Judge
of the Court of First Instance of Manila, Branch XXXVII and
BAYANIHAN AUTOMOTIVE CORPORATION, Respondents.

Platon A. Baysa for petitioner.chanrobles virtual law library

Manuel T. Ybarra for respondents.

CORTES, J.:

In the present petition, petitioners assail the validity of a deed of assignment

over an apartment unit and the leasehold rights over the land on which the
building housing the said apartment stands for allegedly being in the nature
of a pactum commissorium. chanrobles virtual law library

The facts are not disputed.chanroblesvirtualawlibrary chanrobles virtual law

library

Petitioners Uy Tong (also known as Henry Uy) and Kho Po Giok (SPOUSES)
used to be the owners of Apartment No. 307 of the Ligaya Building, together
with the leasehold right for ninety- nine (99) years over the land on which
the building stands. The land is registered in the name of Ligaya
Investments, Inc. as evidenced by Transfer Certificate of Title No. 79420 of
the Registry of Deeds of the City of Manila. It appears that Ligaya
Investments, Inc. owned the building which houses the apartment units but
sold Apartment No. 307 and leased a portion of the land in which the
building stands to the SPOUSES.chanroblesvirtualawlibrary chanrobles
virtual law library

In February, 1969, the SPOUSES purchased from private respondent

Bayanihan Automotive, Inc. (BAYANIHAN) seven (7) units of motor vehicles
for a total amount of P47,700.00 payable in three (3) installments. The
transaction was evidenced by a written "Agreement" wherein the terms of
payment had been specified as follows:

That immediately upon signing of this Agreement, the VENDEE shall pay
unto the VENDOR the amount of Seven Thousand Seven Hundred
(P7,000.00) Pesos, Philippine Currency, and the amount of Fifteen Thousand
(P15,000.00) Pesos shah be paid on or before March 30, 1969 and the
balance of Twenty Five Thousand (P25,000.00) Pesos shall be paid on or
before April 30, 1969, the said amount again to be secured by another
postdated check with maturity on April 30, 1969 to be drawn by the
VENDEE; chanrobles virtual law library
That it is fully understood that should the two (2) aforementioned checks be
not honored on their respective maturity dates, herein VENDOR will give
VENDEE another sixty (60) days from maturity dates, within which to pay or
redeem the value of the said checks; chanrobles virtual law library

That if for any reason the VENDEE should fail to pay her aforementioned
obligation to the VENDOR, the latter shall become automatically the owner
of the former's apartment which is located at No. 307, Ligaya Building,
Alvarado St., Binondo, Manila, with the only obligation on its part to pay
unto the VENDEE the amount of Three Thousand Five Hundred Thirty Five
(P3,535.00) Pesos, Philippine Currency; and in such event the VENDEE shall
execute the corresponding Deed of absolute Sale in favor of the VENDOR
and or the Assignment of Leasehold Rights. [emphasis supplied]. (Quoted in
Decision in Civil Case No. 80420, Exhibit "A" of Civil Case No. 1315321].

After making a downpayment of P7,700.00, the SPOUSES failed to pay the

balance of P40,000.00. Due to these unpaid balances, BAYANIHAN filed an
action for specific performance against the SPOUSES docketed as Civil Case
No. 80420 with the Court of First Instance of
Manila.chanroblesvirtualawlibrary chanrobles virtual law library

On October 28, 1978, after hearing, judgment was rendered in favor of

BAYANIHAN in a decision the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, ordering the defendants, jointly

and severally, to pay the plaintiffs, the sum of P40,000.00, with interest at
the legal rate from July 1, 1970 until full payment. In the event of their
failure to do so within thirty (30) days from notice of this judgment, they are
hereby ordered to execute the corresponding deed of absolute sale in favor
of the plaintiff and/or the assignment of leasehold rights over the
defendant's apartment located at 307 Ligaya Building, Alvarado Street,
Binondo, Manila, upon the payment by the plaintiff to the defendants of the
sum of P3,535.00. [emphasis supplied].

Pursuant to said judgment, an order for execution pending appeal was

issued by the trial court and a deed of assignment dated May 27, 1972, was
executed by the SPOUSES [Exhibit "B", CFI Records, p. 127] over Apartment
No. 307 of the Ligaya Building together with the leasehold right over the
land on which the building stands. The SPOUSES acknowledged receipt of
the sum of P3,000.00 more or less, paid by BAYANIHAN pursuant to the said
judgment.chanroblesvirtualawlibrary chanrobles virtual law library

Notwithstanding the execution of the deed of assignment the SPOUSES

remained in possession of the premises. Subsequently, they were allowed to
remain in the premises as lessees for a stipulated monthly rental until
November 30,1972.chanroblesvirtualawlibrary chanrobles virtual law library

Despite the expiration of the said period, the SPOUSES failed to surrender
possession of the premises in favor of BAYANIHAN. This prompted
BAYANIHAN to file an ejectment case against them in the City Court of
Manila docketed as Civil Case No. 240019. This action was however
dismissed on the ground that BAYANIHAN was not the real party in interest,
not being the owner of the building.chanroblesvirtualawlibrary chanrobles
virtual law library

On February 7, 1979, after demands to vacate the subject apartment made

by BAYANIHAN's counsel was again ignored by the SPOUSES, an action for
recovery of possession with damages was filed with the Court of First
Instance of Manila, docketed as Civil Case No. 121532 against the SPOUSES
and impleading Ligaya Investments, Inc. as party defendant. On March 17,
1981, decision in said case was rendered in favor of BAYANIHAN ordering
the following:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and

against the defendants spouses UY TONG and KHO GIOK and defendant
Ligaya Investment, Inc., dismissing defendants' counterclaim and
ordering: chanrobles virtual law library

1. The defendants spouses UY TONG and KHO PO GIOK and any andlor
persons claiming right under them, to vacate, surrender and deliver
possession of Apartment 307, Ligaya Building, located at 64 Alvarado Street,
Binondo, Manila to the plaintiff; chanrobles virtual law library

2. Ordering defendant Ligaya Investment, Inc. to recognize the right of

ownership and possession of the plaintiff over Apartment No. 307, Ligaya
Building; chanrobles virtual law library

3. Ordering Ligaya Investment, Inc. to acknowledge plaintiff as assignee-

lessee in liue of defendants spouses Uy Tong and Kho Po Giok over the lot
on which the building was constructed; chanrobles virtual law library

4. Ordering the defendants spouses Uy Tong and Kho Po Giok to pay to the
plaintiff the sum of P200.00 commencing from June, 1971 to November 30,
1972, or a total amount of P3,400.00 as rental for the apartment, and the
sum of P200.00 from December 1, 1972 until the premises are finally
vacated and surrendered to the plaintiff, as reasonable compensation for the
use of the apartment; and chanrobles virtual law library
5. Ordering the defendants spouses Uy Tong and Kho Po Giok to pay
P3,000.00 as and for attorney's fees to the plaintiff, and the costs of this
suit.

Not satisfied with this decision, the SPOUSES appealed to the Court of
Appeals. On October 2,1984, the respondent Court of Appeals affirmed in
toto the decision appealed from [Petition, Annex "A", Rollo, pp. 15-20]. A
motion for reconsideration of the said decision was denied by the respondent
Court in a resolution dated February 11, 1987 [Petition, Annex "C", Rollo,
pp. 31- 34].chanroblesvirtualawlibrary chanrobles virtual law library

Petitioners-SPOUSES in seeking a reversal of the decision of the Court of

Appeals rely on the following reasons:

I. The deed of assignment is null and void because it is in the nature of

a pactum commissorium and/or was borne out of the
same.chanroblesvirtualawlibrary chanrobles virtual law library

II. The genuineness and due Prosecution of the deed of assignment was not
deemed admitted by petitioner.chanroblesvirtualawlibrary chanrobles virtual
law library

III. The deed of assignment is unenforceable because the condition for its
execution was not complied with.chanroblesvirtualawlibrary chanrobles
virtual law library

IV. The refusal of petitioners to vacate and surrender the premises in

question to private respondent is justified and warranted by the
circumstances obtaining in the instant case.

I. In support of the first argument, petitioners bring to the fore the contract
entered into by the parties whereby petitioner Kho Po Giok agreed that the
apartment in question will automatically become the property of private
respondent BAYANIHAN upon her mere failure to pay her obligation. This
agreement, according to the petitioners is in the nature of a pactum
commissorium which is null and void, hence, the deed of assignment which
was borne out of the same agreement suffers the same
fate.chanroblesvirtualawlibrary chanrobles virtual law library

The prohibition on pactum commissorium stipulations is provided for by

Article 2088 of the Civil Code:
Art. 2088. The creditor cannot appropriate the things given by way of pledge
or mortgage, or dispose of the same. Any stipulation to the contrary is null
and void.

The aforequoted provision furnishes the two elements

for pactum commissorium to exist: (1) that there should be a pledge or
mortgage wherein a property is pledged or mortgaged by way of security for
the payment of the principal obligation; and (2) that there should be a
stipulation for an automatic appropriation by the creditor of the thing
pledged or mortgaged in the event of non-payment of the principal
obligation within the stipulated period.chanroblesvirtualawlibrary chanrobles
virtual law library

A perusal of the terms of the questioned agreement evinces no basis for the
application of the pactum commissorium provision. First, there is no
indication of 'any contract of mortgage entered into by the parties. It is a
fact that the parties agreed on the sale and purchase of trucks. chanrobles
virtual law library

Second, there is no case of automatic appropriation of the property by

BAYANIHAN. When the SPOUSES defaulted in their payments of the second
and third installments of the trucks they purchased, BAYANIHAN filed an
action in court for specific performance. The trial court rendered favorable
judgment for BAYANIHAN and ordered the SPOUSES to pay the balance of
their obligation and in case of failure to do so, to execute a deed of
assignment over the property involved in this case. The SPOUSES elected to
execute the deed of assignment pursuant to said
judgment.chanroblesvirtualawlibrary chanrobles virtual law library

Clearly, there was no automatic vesting of title on BAYANIHAN because it

took the intervention of the trial court to exact fulfillment of the obligation,
which, by its very nature is ". . anathema to the concept of pacto
commissorio" [Northern Motors, Inc. v. Herrera, G.R. No. L-32674, February
22, 1973, 49 SCRA 392]. And even granting that the original agreement
between the parties had the badges of pactum commissorium, the deed of
assignment does not suffer the same fate as this was executed pursuant to a
valid judgment in Civil Case No. 80420 as can be gleaned from its very
terms and conditions:

DEED OF ASSIGNMENT chanrobles virtual law library

KNOW ALL MEN BY THESE PRESENTS: chanrobles virtual law library

This deed made and entered into by Uy Tiong also known as Henry Uy and
Kho Po Giok, both of legal age, husband and wife, respectively, and
presently residing at 307 Ligaya Bldg., Alvarado St., Binondo, Manila, and
hereinafter to be known and called as the ASSIGNORS, in favor of Bayanihan
Automotive Corporation, an entity duly organized and existing under the
laws of the Philippines, with principal business address at 1690 Otis St.,
Paco, Manila and hereinafter to be known and called the
ASSIGNEE; chanrobles virtual law library

-witnesseth- chanrobles virtual law library

WHEREAS, the ASSIGNEE has filed a civil complaint for "Specific

Performance with Damages" against the ASSIGNORS in the Court of First
Instance of Manila, Branch V, said case having been docketed as Civil Case
No. 80420; chanrobles virtual law library

WHEREAS, the ASSIGNEE was able to obtain a judgment against the

ASSIGNOR wherein the latter was ordered by the court as follows, to wit:

WHEREFORE, judgment is hereby rendered ordering the defendants, jointly

and severally to pay the plaintiff the sum of P40,000.00, with interest at the
legal rate from July 31, 1970 until full payment. In the event of their failure
to do so within thirty (30) days from notice of this judgment, they are
hereby ordered to execute the corresponding deed of absolute sale in favor
of the plaintiff and/or the assignment of leasehold, rights over the
defendants' apartment located at No. 307 Ligaya Building, Alvarado Street,
Binondo, Manila, upon the payment by the plaintiff to the defendants the
sum of P 3,535.00. The defendants shall pay the costs.

WHEREAS, the court, upon petition by herein ASSIGNEE and its deposit of
sufficient bond, has ordered for the immediate execution of the said decision
even pending appeal of the aforesaid decision; chanrobles virtual law library

WHEREAS, the ASSIGNORS have elected to just execute the necessary deed
of sale and/or assignment of leasehold rights over the apartment mentioned
in the decision in favor of the herein ASSIGNEE; chanrobles virtual law
library

NOW, THEREFORE, for and in consideration of the foregoing premises, the

ASSIGNORS have transferred assigned and ceded, and by these presents do
hereby transfer, assign and cede all their rights and interests over that place
known as Apartment No. 307 at the Ligaya Building which is located at No.
864 Alvarado St., Binondo, Manila, together with the corresponding
leasehold rights over the lot on which the said building is constructed, in
favor of the hererein ASSIGNEE, its heirs or
assigns.chanroblesvirtualawlibrary chanrobles virtual law library

IN WITNESS WHEREOF, We have hereunto signed our names this 27th day
of May, 1971 at Manila, Philippines.chanroblesvirtualawlibrary chanrobles
virtual law library

UY TONG/HENRY UY KHO PO GIOK chanrobles virtual law library

Assignor Assignor chanrobles virtual law library

ACR-2151166 Manila 1/13/51 ACR-C-001620 chanrobles virtual law library

Manila March 3, 1965

This being the case, there is no reason to impugn the validity of the said
deed of assignment.chanroblesvirtualawlibrary chanrobles virtual law library

II. The SPOUSES take exception to the ruling of the Court of Appeals that
their failure to deny the genuineness and due execution of the deed of
assignment was deemed an admission thereof. The basis for this exception
is the SPOUSES' insistence that the deed of assignment having been borne
out of pactum commissorio is not subject to ratification and its invalidity
cannot be waived.chanroblesvirtualawlibrary chanrobles virtual law library

There is no compelling reason to reverse the abovementioned ruling of the

appellate court. Considering this Court's above conclusion that the deed of
assignment is not invalid, it follows that when an action founded on this
written instrument is filed, the rule on contesting its genuineness and due
execution must be followed.chanroblesvirtualawlibrary chanrobles virtual law
library

That facts reveal that the action in Civil Case No. 121532 was founded on
the deed of assignment. However, the SPOUSES, in their answer to the
complaint, failed to deny under oath and specifically the genuineness and
due execution of the said deed. Perforce, under Section 8, Rule 8 of the
Revised Rules of Court, the SPOUSES are deemed to have admitted the
deed's genuineness and due execution. Besides, they themselves admit that
". . . the contract was duly executed and that the same is genuine" [Sur-
Rejoinder, Rollo, p. 67]. They cannot now claim
otherwise.chanroblesvirtualawlibrary chanrobles virtual law library

III. The SPOUSES also question the enforceability of the deed of assignment.
They contend that the deed is unenforceable because the condition for its
execution was not complied with. What petitioners SPOUSES refer to is that
portion of the disposition in Civil Case No. 80420 requiring BAYANIHAN to
pay the former the sum of P 3,535.00. To buttress their claim of non-
compliance, they invoke the following receipt issued by the SPOUSES to
show that BAYANIHAN was P535.00 short of the complete payment.

RECEIPT chanrobles virtual law library

This is to acknowledge the fact that the amount of THREE THOUSAND

(P3,000.00) PESOS, more or less as indicated in the judgment of the Hon.
Conrado Vasquez, Presiding Judge of the Court of First Instance of Manila,
Branch V, in Civil Case entitled "Bayanihan Automotive Corp. v. Pho (sic) Po
Giok, etc." and docketed as Civil Case No. 80420 has been applied for the
payment of the previous rentals of the property which is the subject matter
of the aforesaid judgment. [emphasis supplied.]

(Sgd.) Pho (sic) Po Glok chanrobles virtual law library

(Sgd.) Henry Uy

August 21, 1971

The issue presented involves a question of fact which is not within this
Court's competence to look into. Suffice it to say that this Court is of the
view that findings and conclusion of the trial court and the Court of Appeals
on the question of whether there was compliance by BAYANIHAN of its
obligation under the decision in Civil Case No. 80420 to pay the SPOUSES
the sum of P3,535.00 is borne by the evidence on record. The Court finds
merit in the following findings of the trial court:

... Defendants 'contention that the P 3,535.00 required in the decision in

Civil Case No. 80420 as a condition for the execution of the deed of
assignment was not paid by the plaintiff to the defendants is belied by the
fact that the defendants acknowledged payment of P3,000.00, more or less,
in a receipt dated August 21, 1971. This amount was expressly mentioned in
this receipt as indicated in the judgment of the Honorable Conrado Vasquez,
presiding Judge of the CFI of Manila, Branch V, in Civil Case entitled
Bayanihan Automotive Corp. versus Kho Po Giok, docketed as Civil Case No.
80420, and also expressly mentioned as having been applied for the
payment of the previous rentals of the property subject matter of the said
judgment. Nothing could be more explicit. The contention that there is still a
difference of P535.00 is had to believe because the spouses Kho Po Giok and
Uy Tong executed the deed of assignment without first demanding from the
plaintiff the payment of P535.00. Indeed, as contended by the plaintiff, for it
to refuse to pay this small amount and thus gave defendants a reason not to
execute the Deed of Assignment. is hard to believe Defendants further
confirm by the joint manifestation of plaintiff and defendants, duly assisted
by counsel, Puerto and Associates, dated September, 1971, Exhibit "O",
wherein it was stated that plaintiff has fully complied with its obligation to
the defendants caused upon it (sic) by the pronouncement of the judgment
as a condition for the execution of their (sic) leasehold rights of defendants,
as evidenced by the receipt duly executed by the defendants, and which was
already submitted in open court for the consideration of the sum of
P3,535.00. [Emphasis supplied]. [Decision, Civil Case No. 121532, pp. 3-4].

This Court agrees with private respondent BAYANIHAN's reasoning that

inasmuch as the decision in Civil Case No. 80420 imposed upon the parties
correlative obligations which were simultaneously demandable so much so
that if private respondent refused to comply with its obligation under the
judgment to pay the sum of P 3,535.00 then it could not compel petitioners
to comply with their own obligation to execute the deed of assignment over
the subject premises. The fact that petitioners executed the deed of
assignment with the assistance of their counsel leads to no other conclusion
that private respondent itself had paid the full
amount.chanroblesvirtualawlibrary chanrobles virtual law library

IV. Petitioners attempt to justify their continued refusal to vacate the

premises subject of this litigation on the following grounds:

(a) The deed of assingnment is in the nature of a pactum

commissorium and, therefore, null and
void.chanroblesvirtualawlibrary chanrobles virtual law library

(b) There was no full compliance by private respondent of the condition

imposed in the deed of assignment.chanroblesvirtualawlibrary chanrobles
virtual law library

(c) Proof that petitioners have been allowed to stay in the premises, is the
very admission of private respondent who declared that petitioners were
allowed to stay in the premises until November 20, 1972. This admission is
very significant. Private respondent merely stated that there was a term-
until November 30, 1972-in order to give a semblance of validity to its
attempt to dispossess herein petitioners of the subject premises. In short,
this is one way of rendering seemingly illegal petitioners 'possession of the
premises after November 30, 1972.

The first two classifications are mere reiterations of the arguments presented
by the petitioners and which had been passed upon already in this decision.
As regards the third ground, it is enough to state that the deed of
assignment has vested in the private respondent the rights and interests of
the SPOUSES over the apartment unit in question including the leasehold
rights over the land on which the building stands. BAYANIHAN is therefore
entitled to the possession thereof. These are the clear terms of the deed of
assignment which cannot be superseded by bare allegations of fact that find
no support in the record.chanroblesvirtualawlibrary chanrobles virtual law
library

WHEREFORE, the petition is hereby DENIED for lack of merit and the
decision of the Court of Appeals is AFFIRMED in
toto.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.