Ong v Roban Lending Corporation | 2008

From July, 1999 to March 20, 2000, spouses Ong obtained several loans from RLC in the amount
of 4million 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 they’ve 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.

[[On various dates, petitioner Spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong obtained several
loans from respondent Roban Lending Corporation in the total amount of P4, 000,000. These loans were
secured by real estate mortgage on Spouses Ong‘s parcel of lands.

Later Spouses Ong and Roban executed several agreements – an amendment to the amended Real Estate
Mortgage which consolidated their loans amounting to P5, 916,117.50; dacion in payment wherein spouses
Ong assigned their mortgaged properties to Roban to settle their total obligation and Memorandum of
Agreement (MOA) in which the dacion in payment agreement will be automatically enforced in case
spouses Ong fail to pay within one year from the execution of the agreement.

Spouses Ong filed a complaint before Regional Trial Court of Tarlac City to declare the mortgage contract,
dacion in payment agreement, and MOA void. Spouses Ong allege that the dacion in payment agreement
is pactum commissorium, and therefore void. In its Answer with counterclaim, Roban alleged that the
dacion in payment agreement is valid because it is a special form of payment recognized under Article 1245
of the Civil Code. RTC ruled in favor of Roban, finding that there was no pactum commissorium. The Court
of Appeals upheld the RTC decision.]]

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 principal within the stipulated period.

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 byway of satisfying the debt;-

The D and P here did not extinguish Ongs’s obligation since under the MOA, Ongs executed a
PN (worth 5.9M) which they have to pay within one year;

Voluntary execution doesn’t matter:

The MOA and D and A being pactum commissorium which as prohibited by law, arevoid;

Interest: 3.5% monthly interest or 42% per annumunconscionable 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; Attorney’s fees limited to principal amount only (25%);