Ong v Roban Lending Corporation | 2008 From July, 1999 to March 20, 2000, spouses Ong obtained several

loans from RLC in the amount of 4 million pesos. These loans were secured by a real estate mortgage on Ongs parcel of land in Tarlac. 2001, the parties executed an amendment to the real estate mortgage consolidating their loans inclusive of charges which totalled around 5.9 million pesos. On the same date, they executed a Dacion in Payment Agreement where the Ongs assigned the properties to RLC in payment of their total obligation. 2002, Ongs filed a complaint in the RTC seeking the mortgage contract be declared abandoned, annulment of deeds, illegal exaction, unjust enrichment and damages alleging the MOA and the Dacion in Payment as void for being pactum commissorium. They also allege the interest rates to be unconscionable. They claim theyve made partial payments and because of the illegal exactions, the balance seemed to have not moved at all. They say an accounting is in order. RLC filed an answer with counterclaim. They allege that voluntary execution of the MOA and Dacion in Payment gives the claim of paco comisorio no leg to stand on; that dacion en pago is warranted by 1245 for being a special form of payment whereby the debtors alienate their property to satisfy the monetary obligation. RTC and CA found no pactum commissorium. W/N the MOA and Dacion in Payment Agreement were pactum commissorium. Yes Ratio: Elements of Pactum Commissorium (which enables the mortgagee to acquire ownership without need of foreclosure proceedings): 1. There should be property mortgaged by way of security for the payment of the principal obligation; 2. There should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case on non-payment of the principa within the stipulated period. At case: The MOA and D in P provided no foreclosure proceedings nor redemption; Under the MOA, Ongs failure to settle their debt within one year gives RLC the right to enforce the D and P, transferring to it ownership of the collateral; In effect: automatic transfer of ownership; No true Dacion En Pago: In the true dacion en pago, assignment of property extinguishes the monetary debt; Here, alienation was by way of security, not by way of satisfying the debt; The D and P here did not extinguish Onss obligation since under the MOA, Ongs executed a

PN (worth 5.9M) which they have to pay within one year; Voluntary execution doesnt matter: The MOA and D and A being pactum commissorium which as prohibited by law, are void; Interest: 3.5% monthly interest or 42% per annum unconscionable so reduced to 12% per annum; Penalty (5% per month or 60% per month) and compounded monthly reduced to 12% of amount due, computed from time of demand; Attorneys fees limited to principal amount only (25%); CA REVERSED. Remanded for accounting.