Pamana, Inc. v. Philippine National Bank

SECOND DIVISION

[G.R. No. 241795. November 19, 2018.]

PAMANA, INC., petitioner, vs.PHILIPPINE NATIONAL BANK, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Second Division, issued a Resolution dated 19 November 2018which reads as follows:

"G.R. No. 241795 (Pamana, Inc. vs. Philippine National Bank). — This Petition for Review 1 seeks the reversal of the March 23, 2018 Decision 2 and August 22, 2018 Resolution 3 of the Court of Appeals (CA) in CA-G.R. CV No. 106790, which upheld the January 20, 2015 Decision 4 of Branch 35 of the Regional Trial Court (RTC) of Calamba City in Civil Case No. 3554-04-C.

The Antecedent Facts

The facts are undisputed.

Sometime in 1991, Pamana, Inc. (Pamana) obtained two (2) loans from the Philippine National Bank (PNB). The first loan, which had to be paid on or before March 2000, was in the amount of P6,000,000.00 and was secured by a promissory note and a real estate mortgage over two (2) parcels of land situated in Barrio Maunong, Calamba City. On the other hand, the second loan, which had to be paid on or before October 1999, was in the amount of P7,000,000.00 and was secured by three (3) promissory notes and a real estate mortgage over two (2) parcels of land situated in Pamana Homes, Bucal, Calamba City. 5 Both loans were payable on an installment basis.

At first, Pamana was able to make good its obligations under the loan agreements. Sometime in 1997, however, it started to default in the payment of amortizations. Thus, to avoid the foreclosure of the mortgaged properties, it sought the restructuring of the two (2) loans. 6

For this reason, Pamana sent a debt restructuring proposal to PNB, requesting that the value of the property that secured the second loan, as well as certain receivables, be set-off against the outstanding balance of both loans. Specifically, Pamana proposed that it cede, by way of dacion en pago, the two (2) lots situated in Pamana Homes in order to answer for P6,500,000.00 of its total liability. In addition, it offered receivables in the amount of P730,000.00, earned by its President, Razul Requesto (Requesto), as commission for brokering the sale of one of PNB's acquired assets. 7

PNB never expressly accepted or rejected the proposal.

Sometime in September 2000, PNB demanded the payment of the two (2) loans under their original terms and conditions. This caused Pamana to reiterate its request for restructuring. AScHCD

In response, PNB, through a letter 8 dated February 20, 2001, informed Pamana that the debt restructuring proposal had to first merit the approval of the former's Executive Committee. In addition, the bank requested the submission of various documents that would facilitate the proposal's evaluation. 9

PNB's Executive Committee never approved the proposal. Nonetheless, Requesto's commission was applied to Pamana's outstanding balance, and PNB conducted an ocular inspection of the lots offered by way of dacion en pago. 10 To Pamana, these acts indicated assent to its debt restructuring proposal.

Subsequently, Pamana was surprised to learn that all four (4) parcels of land that stood as security had been extrajudicially foreclosed. At the foreclosure sale, PNB emerged as the lone bidder for the mortgaged properties. Hence, after the expiration of the redemption period, the bank was able to secure Torrens titles over the lots in its name. 11

On January 7, 2004, Pamana filed a complaint, seeking the annulment of the foreclosure sale and the cancellation of the certificates of title issued to PNB. Pamana maintained that foreclosure was premature, considering that the loans had not yet fallen due pursuant to the debt restructuring agreement. 12

PNB, through an answer dated September 7, 2004, countered that it did not consent to the debt restructuring agreement. Since its Executive Committee never approved Pamana's proposal, the bank continued, both loan agreements were enforceable under their original terms and conditions. Thus, foreclosure was proper. 13

On January 20, 2015, the RTC rendered a decision in favor of PNB, finding that the debt settlement agreement was never perfected. Accordingly, the argument that the foreclosure sale was premature had no legal leg to stand on. 14 The trial court disposed of the case, thus:

WHEREFORE, Judgment is hereby rendered DISMISSING this instant complaint for annulment of foreclosure proceeding, annulment of title, specific performance and damages for lack of merit.

No pronouncement as to costs.

SO ORDERED. 15

Aggrieved, Pamana elevated the case to the CA, which rendered the herein challenged March 23, 2018 Decision. In affirming the RTC, the appellate court held, in essence, that the restructuring agreement was a prospective novation of the terms and conditions of the original loans. However, since PNB never consented to Pamana's proposal, the agreement was never perfected. The fallo of the CA's decision reads:

WHEREFORE, premises considered, the appeal is DENIED. The Decision dated 20 January 2015 of the Regional Trial Court, Branch 35, Calamba City, is AFFIRMED.

SO ORDERED.

Pamana sought reconsideration only to be denied in the challenged August 22, 2018 Resolution.

Hence, the instant petition.

Pamana maintained that the debt restructuring agreement was perfected because PNB began the partial performance of its obligations thereunder. The bank allegedly gave its consent to the agreement by offsetting Requesto's commission against the outstanding balance of the loans, which was one of the main conditions of Pamana's proposal. Additionally, the fact that PNB inspected the lots offered by way of dacion en pago signified that was starting to implement the terms and conditions of the debt restructuring agreement. 16 AcICHD

The Issue

Whether or not the debt restructuring agreement was perfected. 17

The Court's Ruling

The answer is in the negative.

Novation is the total or partial substitution of an old obligation with a new one. 18 The four essential requisites of novation are: (1) a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old contract; and (4) the validity of the new one. 19

In this case, Pamana essentially argued that its original loan obligations were novated by the debt restructuring agreement. PNB allegedly began implementing the agreement by offsetting Requesto's commission and inspecting the offered property. According to Pamana, PNB, by partially performing its obligations under the debt restructuring agreement, showed its implied consent thereto.

The Court does not agree.

So that the restructuring agreement could serve to novate Pamana's original loan obligations, the said agreement should have possessed all the essential requisites of a valid contract, 20viz.:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract; and

(3) Cause of the obligation which is established. 21

Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. The offer must be certain and the acceptance absolute. 22 An offer, to be considered certain, must be definite, while an acceptance is considered absolute and unqualified when it is identical in all respects with the offer so as to produce consent or a meeting of the minds. 23

In this case, PNB through a letter dated February 20, 2001, made it very clear that the acceptance of Pamana's offer to restructure the loans was subject to the approval of the bank's Executive Committee, thus:

Mesdames:

This is to confirm the matters discussed during our meeting on February 16, 2001, viz.:

1) Application of the commission of Mr. Razul Requesto with PNB, after deducting withholding tax and accounts receivable from PNB, on the company's past due accounts;

2) Partial dacion en pago at 54% loan value with right to repurchase for two (2) years on the company's mortgaged properties located at Pamana Letran Homes, Bucal, Calamba, Laguna;

3) Expenses to be incurred in relation to the dacion shall be paid by Pamana, Inc.;

xxx xxx xxx

Please note, however, that our arrangement in the restructuring and the partial dacion is subject to the approval of our Executive Committee.

In this regard, may we follow up the submission of the following documents, viz.:

xxx xxx xxx

To facilitate our evaluation of your request, may we have the above documents on or before March 15, 2001.

Thank you. 24 (Emphasis and underscoring supplied)

Clearly, therefore, Pamana was made aware that the acceptance of its offer could come exclusively from the Executive Committee of PNB. This should have put Pamana on guard as to how the bank could manifest consent to the debt restructuring proposal. Since novation is never presumed, 25 Pamana should not have construed the offsetting of Requesto's commission and the ocular inspection of the lots as implied consent to the debt restructuring proposal. TAIaHE

The fact that Requesto's commission was applied to Pamana's outstanding balance does not mean that PNB began the performance of its obligations under the debt restructuring agreement. Compensation takes effect by operation of law, even without the consent or knowledge of the parties when the following requisites concur: 26

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable; [and]

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. 27

All of the above requisites are attendant in this case. First, PNB was indebted to Pamana in the amount of Requesto's commission, while Pamana was indebted to PNB in the amount of the outstanding balance of the loans. Second, both debts were payable in sums of money. Third, both debts were due. Fourth, they were both demandable. Finally, no third person had any interest in the debts. Hence, compensation ipso jure operated to extinguish Pamana's liability to PNB to the extent of Requesto's commission.

There is no merit in the argument that the application of Requesto's commission signified implied consent to the debt restructuring agreement. To emphasize, here, compensation took place by operation of law. Hence, by offsetting the commission, PNB did not begin to perform its obligations under the debt restructuring agreement. Rather, the bank was still acting pursuant to the original terms and conditions of the loans. By applying the commission to Pamana's outstanding balance, PNB merely sought to partially extinguish the former's liability under the loan agreements.

Moreover, the ocular inspection conducted by PNB militates against Pamana's assertion that the debt restructuring agreement was perfected. The act unquestionably indicated that the parties were still negotiating the terms and conditions of the said agreement. It cannot be gainsaid that the inspection was conducted so that the PNB would be appraised of the physical status of the property, which, ultimately, would aid the bank in determining whether or not it should push through with the dacion en pago. Thus, far from being a manifestation of consent, the conduct of the inspection showed that PNB and Pamana were yet to agree on the definite terms and conditions of the debt restructuring agreement.

Lastly, Pamana failed to present any evidence showing that PNB's Executive Committee had acted favorably on its proposal, instead conceding that the debt restructuring agreement never came to fruition. 28 When the officers of Pamana were called to take the witness stand, they admitted to merely assuming that the bank had accepted their proposal. 29

Considering the foregoing, the conclusion that PNB gave its implied consent to the restructuring agreement is baseless and without merit. Accordingly, there was no new contract that could have novated Pamana's original loan obligations.

WHEREFORE, the petition is DENIED. cDHAES

SO ORDERED." (Reyes, J., Jr., J., designated as additional Member per S.O. No. 2587 dated August 28, 2018)

Very truly yours,

MARIA LOURDES C. PERFECTODivision Clerk of CourtBy:(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court

 

Footnotes

1.Rollo, pp. 10-23.

2. The challenged decision was penned by Associate Justice Manuel M. Barrios and concurred in by Associate Justices Japar B. Dimaampao (Chairperson, Seventh Division) and Jhosep Y. Lopez; id. at 27-41.

3.Id. at 43-44.

4.Id. at 115-119.

5.Id. at 28.

6.Id. at 28-29.

7.Id. at 29.

8.Id. at 55.

9.Id.

10.Id. at 37.

11.Id. at 30.

12.Id.

13.Id.

14.Id. at 31.

15.Id. at 119.

16.Id. at 18-19.

17.Id. at 17.

18. Hector S. De Leon, Hector M. De Leon, Jr., Comments and Cases on Obligations and Contracts, 2010 Edition, p. 405.

19.Garcia, Jr. v. Court of Appeals, 209 Phil. 523, 535-536 (1990).

20.Ever Electrical Manufacturing, Inc. v. Philippine Bank of Communications, 792 Phil. 311, 320-321 (2016).

21. CIVIL CODE, Art. 1318.

22. CIVIL CODE, Art. 1319.

23.Development Bank of the Philippines v. Medrano, 656 Phil. 575, 584 (2011).

24.Rollo, p. 55.

25.CCC Insurance Corporation v. Kawasaki Steel Corporation, 761 Phil. 1, 31 (2015).

26.Trinidad v. Acapulco, 526 Phil. 154, 165-166 (2006).

27. CIVIL CODE, Art. 1279.

28.Rollo, p. 34.

29.Id.