Luzon Dev’t Bank v Enriquez

G.R. No. 168646 January 12, 2011

Art. 1245 – Dation in Payment

Facts:

·       The BANK is a domestic financial corporation that extends loans to DELTA, a domestic corporation engaged in the business of developing and selling real estate properties, particularly Delta Homes I in Cavite.

·       The owners obtained a ₱4 million loan from the BANK for the express purpose of developing Delta Homes I through real estate mortgage (REM) on several of their properties, including Lot 4, which was the subject matter of these cases.

·       DELTA executed a Contract to Sell with respondent Angeles Catherine Enriquez (Enriquez) over the house and lot in Lot 4 for the purchase price of ₱614,950.00. Enriquez made a downpayment of ₱114,950.00.

·       DELTA defaulted on its loan obligation; the BANK, instead of foreclosing the REM, agreed to a dation in payment or a dacion en pago, thereby executing Deed of Assignment in Payment of Debt.

·       Among the properties assigned to the BANK was the house and lot of Lot 4, which was the subject of Enriquez’s Contract to Sell with DELTA.

·       The BANK then posited that, if title to Lot 4 is ordered delivered to Enriquez, DELTA has the obligation to pay the BANK the corresponding value of Lot 4.

Issue:

WoN the dation in payment extinguished the loan only to the extent of the value of the thing delivered.

Held:

            No, the Court holds that Dacion en pago extinguished the loan obligation.

            Art. 1245 of the Civil Code provides "The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished."

            In the case at bar, the Dacion en Pago executed by DELTA and the BANK indicates a clear intention by the parties that the assigned properties would serve as full payment for DELTA’s entire obligation.

            Thus, CA decision is AFFIRMED with MODIFICATIONS.