LDB v. Enriquez (G.R. No.168646; January 12, 2011)


FACTS: Delta Development and Management Services (Delta) entered into a loan with Luzon Development Bank (Bank), secured by a Real Estate Mortgage. The REM was amended to include a bigger sum loaned from the bank. The proceeds of the loan were applied to Delta project of developing a subdivision. It subsequently entered into a contract to sell with Angeles Enriquez (Enriquez) over one of the subdivision lots. Enriquez was able to pay around half of the value of the property. Subsequently, Delta was unable to pay for the loan it took with the bank, but instead of letting the bank foreclose on the mortgaged properties, it entered into a dacionen pago (dation in payment) where it turned over property to the bank.

The property subject to the contract to sell with Enriquez was included in the dation. Enriquez protested the transaction through the regional office of the HLURB. She is asking for a refund of the purchase price pointing out that, the agreed upon amount exceeded the limit prescribed by PD 957, or The Subdivision and Condominium Buyer Protective Decree, and that the mortgage Delta entered into was invalid per PD 957. The HLURB ruled in favor of Enriquez, but did not approve a refund. Instead, it reduced the balance due for the property. Delta appealed the ruling, and was able to get a better ruling from the commissioner.

The Office of the President affirmed the ruling. However, when Enriquez appealed to the Court of Appeals, the CA invalidated the dation, saying that Delta lost ownership over the property of Enriquez and could not have validly conveyed the same. Delta and the Bank come before the Supreme Court to question the ruling. The Bank is also asking for the liability of Delta if it loses one of the properties to Enriquez.

ISSUES: Was the dacion en pago valid?
Is Delta liable to the Bank should Enriquez gain ownership of the property? HELD: The mortgage entered into by Delta and the Bank is void for violation of PD 957. However, this does not, in any way, invalidate the dacion en pago. The CA erred when it ruled that Delta lost ownership over the property subject of the contract to sell. The very nature of a contract to sell is that the ownership vests upon full payment of the purchase price. Hence there was no impediment in the dacion. Delta cannot be held liable should Enriquez gain ownership over the land. The effect of the dacion is that the Bank becomes a party in the contract to sell with Enriquez, replacing Delta. Enriquez now owes the Bank the balance of the purchase price of the property. It is the intention of the dacion to extinguish the obligation of Delta in exchange for properties. There are no other conditions. Also, as a financial institution, the Bank should have exercised greater diligence. It cannot claim to be a transferee in good faith. However, Enriquez is liable for the amount agreed upon. The agreement was done in good faith, and Enriquez agreed to the contract price. It cannot be challenged anymore.