Land Bank v. Ong (G.R. No. 190755; November 24, 2010)

CASE DIGEST: LAND BANK OF THE PHILIPPINES, Petitioner v. ALFREDO ONG, Respondent. (G.R. No. 190755; November 24, 2010).

FACTS: Spouses Sy obtained a 16 Million php loan from Land Bank secured by three (3) residential lots, five (5) cargo trucks, and a warehouse. Under the loan agreement, PhP 6 million of the loan would be short-term and would mature on February 28, 1997, while the balance of PhP 10 million would be payable in seven (7) years. The Notice of Loan Approval dated February 22, 1996 contained an acceleration clause wherein any default in payment of amortizations or other charges would accelerate the maturity of the loan.

They failed to pay, and they sold the three parcels of land to Alfredo Ong. When Ong paid the remaining amount, the application for assumption of mortgage was not approved by Land Bank. The bank learned from its credit investigation report that the Ongs had a real estate mortgage in the amount of PhP 18,300,000 with another bank that was past due. Thus, the bank foreclosed the properties. Ong filed an action for recovery of the money that he paid, and won in the RTC. On appeal to the CA, it likewise affirmed the RTC decision. Thus, Land Bank appeals to the Supreme Court.

ISSUE: Is Land Bank liable to Ong?

HELD: Unjust enrichment exists "when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience." There is unjust enrichment under Art.22 of the Civil Code when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another.

Land Bank made Alfredo believe that with the payment of PhP 750,000, he would be able to assume the mortgage of the Spouses Sy. The act of receiving payment without returning it when demanded is contrary to the adage of giving someone what is due to him. The outcome of the application would have been different had Land Bank first conducted the credit investigation before accepting Alfredo's payment. He would have been notified that his assumption of mortgage had been disapproved; and he would not have taken the futile action of paying PhP 750,000. The procedure Land Bank took in acting on Alfredo's application cannot be said to have been fair and proper.

Petition is DISMISSED, but the interest is at 6%.