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SPS. WILFREDO N. ONG v. ROBAN LENDING CORPORATION

FACTS:

Petitioner-spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong borrowed money from respondent Roban Lending Corporation and used their parcels of land in Tarlac City as collateral. An Amendment to Amended Real Estate Mortgage was executed on February 12, 2001, consolidating the loans. Furthermore, a Dacion in Payment Agreement was also entered into, wherein the petitioners assigned the mortgaged properties to respondent as payment for their total obligation. In response, the petitioners filed a complaint before the Regional Trial Court (RTC) of Tarlac City seeking to have the mortgage contract declared as abandoned, the deeds annulled, and other reliefs. They argued that the loans had excessive and illegal charges, rendering the agreement void. Respondent, on the other hand, countered in its answer that the transactions were legal and denied the allegations of the petitioners. The case endured multiple reschedulings of the initial hearing, during which the petitioners' counsel indicated that they would opt for summary judgment if the plaintiff was absent. Finally, the RTC rendered a decision concluding that there was no pactum commissorium based on the pleadings.

ISSUES:

  1. Whether the Memorandum of Agreement and the Dacion in Payment executed by the parties are void for being pactum commissorium.

  2. Whether the interests, penalties, EVAT, and attorney's fees assessed and loaded into the loan accounts of the plaintiffs with the defendant are unjust, iniquitous, unconscionable, and illegal and should be stricken out or set aside.

  3. Whether an accounting of the plaintiffs' loan accounts is necessary to determine the true and correct balances on their obligations against legal charges only.

RULING:

  1. The Memorandum of Agreement and the Dacion in Payment executed by the parties are not void for being pactum commissorium.

  2. The interests, penalties, EVAT, and attorney's fees assessed and loaded into the loan accounts of the plaintiffs with the defendant are not unjust, iniquitous, unconscionable, and illegal and should not be stricken out or set aside.

  3. An accounting of the plaintiffs' loan accounts is not necessary to determine the true and correct balances on their obligations against legal charges only.

PRINCIPLES:

  • Pactum commissorium refers to a stipulation that if the debtor fails to fulfill his obligation, the property subject of a mortgage or pledge automatically becomes the property of the creditor. In this case, the court found that there was no pactum commissorium present in the Memorandum of Agreement and the Dacion in Payment.

  • Determination of whether interest rates, penalties, EVAT, and attorney's fees are unjust, iniquitous, unconscionable, and illegal depends on the specific terms and circumstances of the loan agreement. In this case, the court held that the charges assessed by the defendant were reasonable and valid.

  • Accounting of loan accounts may be necessary to determine the accurate balances of the obligations against legal charges. However, in this case, the court ruled that an accounting was not necessary.