Civil Law

Selegna Management and Development Corporation vs United Coconut Planters Bank

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G.R. No. 165662 – 489 SCRA 125 – Civil Law – Credit Transactions – Mortgage – Default – Mora Solvendi – Extrajudicial Foreclosure – Right of Creditor

Obligations and Contracts – Default

On September 19, 1995, spouses Edgardo and Zenaida Angeles and Selegna Management and Development Corporation acquired a P70 Million loan from United Coconut Planters Bank (UCPB). As security for the loan, Spouses Angeles executed a real estate mortgage of their properties in Muntinlupa, Antipolo, Las Piñas, Quezon and some condo units in Makati. They also executed a promissory note in favor of UCPB. Later, Angeles increased the loan amount to P103 Million with a 21% interest rate per annum which was to mature on March 26, 1999.

UCPB and Angeles agreed in their Credit Agreement that failure to pay any availment of the accommodation or interest or any sum due constitutes a default in payment which would render the loan amount immediately due in full (this is the Acceleration Clause).

Eventually, in 1999, Angeles went into default and their loan ballooned to P132M. UCPB sent them demand letters. In response, Angeles paid about P10M in interest at the same time they asked for a 60 day period to restructure the loan.

UCPB accepted the P10M payment but was unsatisfied hence they filed for extrajudicial foreclosure. Angeles filed for a TRO to forestall the foreclosure. It was not granted because they failed to show any irreparable damage that may be caused them by reason of the foreclosure. Upon Motion for Reconsideration, Angeles’ petition was granted but was later lifted. The foreclosure went on on some of the properties in Antipolo. Angeles claimed they were not given by UCPB any clear accounting on these.

The case was re-raffled anew in another RTC which later reinstated the injunction. UCPB filed an appeal with the CA. The CA affirmed the RTC. UCPB filed for reconsideration which was eventually granted.

In the main, Angeles averred that they have a clear right to injunction based on the fact that UCPB never explained how the loan went up to P132M; that UCPB refused to give them a detailed accounting of the partial foreclosure and that they gave a P10M payment which prevented the determination of the maturity of the obligation.

ISSUE: Whether or not Angeles has a right to forestall the foreclosure.

HELD: No. Angeles is clearly in default per provisions laid down in their Credit Agreement with UCPB which is the binding law between the parties. In fact, the parties stipulated in their credit agreements, mortgage contracts and promissory notes that respondent was authorized to foreclose on the mortgages, in case of a default by petitioners. That this authority was granted is not disputed.

There are three requisites necessary for a finding of default. First, the obligation is demandable and liquidated; second, the debtor delays performance; third, the creditor judicially or extrajudicially requires the debtor’s performance. All three were present in this case.

The 1st requisite is present notwithstanding the absence of a detailed accounting of the partially foreclosed properties. A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of the relevant promissory notes and related documentation. Failure to furnish a debtor a detailed statement of account does not ipso facto result in an unliquidated obligation.

It is in fact clear from the agreement of the parties that when the payment is accelerated due to an event of default, the penalty charge shall be based on the total principal amount outstanding, to be computed from the date of acceleration until the obligation is paid in full. Their Credit Agreement even provides for the application of payments. It appears from the agreements that the amount of total obligation is known or, at the very least, determinable.

Further, in the Real Estate Mortgage agreement between the parties (in the “Event of Default” clause), Angeles granted UCPB the right to extrajudicially foreclose the properties mortgaged which secured the loan/obligation.

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