Banco de Oro v. Laigo
REITERATIONFacts
The Antecedents: Respondents Spouses Lilia and Reynaldo Laigo obtained loans totaling P11 Million from Dao Heng Bank, Inc. (Dao Heng), secured by three Real Estate Mortgages on two parcels of land. The loans were not settled by 2000. Respondents verbally offered to cede one of the mortgaged lots via dacion en pago. Dao Heng commissioned an appraiser, with fees shared by the parties. No further action was taken. Dao Heng demanded settlement of the P10,385,109.92 outstanding obligation. Dao Heng filed an application to foreclose the mortgages. The properties were sold at public auction on December 20, 2000, to Banco de Oro Universal Bank (petitioner) for P10,776,242.00. Petitioner, to which Dao Heng had merged, offered redemption terms on June 29, 2001, requiring P11.5MM plus 12% interest, payable in staggered payments up to January 2, 2002. Petitioner warned on December 26, 2001, that it would consolidate titles if terms were not met by January 2, 2002. Procedural History: On December 27, 2001, respondents filed a complaint for Annulment, Injunction with Prayer for TRO, seeking annulment of the foreclosure and to deliver one property via dacion en pago. They claimed Dao Heng verbally agreed to dacion en pago. Petitioner opposed the TRO, asserting no meeting of the minds. The RTC denied the TRO. Petitioner moved to dismiss, citing the Statute of Frauds and lack of cause of action. The RTC granted the motion, holding that the alleged dacion en pago was unenforceable under the Statute of Frauds as it was not in writing and the delivery of titles was for the mortgage, not the dacion en pago. Respondents appealed to the Court of Appeals, which reversed the RTC and reinstated the complaint, holding that the appraisal constituted partial performance, taking the agreement out of the Statute of Frauds. The Petition: Petitioner filed a petition for review, faulting the Court of Appeals for ruling that the complaint alleged a sufficient cause of action, that the dacion en pago was not unenforceable under the Statute of Frauds, and that the complaint sufficiently stated a cause of action.
Issue(s)
Whether the complaint sufficiently stated a cause of action; and whether the alleged verbal agreement for dacion en pago is enforceable under the Statute of Frauds, considering the need for a written contract. Whether the acts of appraising the properties constituted partial performance that takes the agreement out of the Statute of Frauds. Whether the act of delivering the titles constituted partial performance that takes the agreement out of the Statute of Frauds.
Ruling
The Supreme Court reversed the Court of Appeals, reinstated the RTC's dismissal of the complaint, and held that the alleged verbal agreement for dacion en pago is unenforceable under the Statute of Frauds as there was no perfected contract and no sufficient partial performance to take it out of the Statute of Frauds.
Ratio Decidendi
On the sufficiency of the cause of action and enforceability under the Statute of Frauds: The Court held that a verbal agreement for dacion en pago, which falls under the Statute of Frauds, requires a note or memorandum to be enforceable. The respondents' claim of partial performance, specifically the appraisal of the properties and the delivery of titles, was insufficient to take the alleged verbal agreement out of the Statute of Frauds. The Court found no evidence of a perfected dacion en pago agreement, requiring the common consent of the parties. Petitioner's own opposition to the TRO application explicitly stated that there was "no meeting of the minds." The bank explicitly stated that it found the offer unacceptable and opted to foreclose. On the nature of the act of appraising the properties alleged as partial performance: The Court clarified that the appraisal of the properties, while a step towards potentially agreeing on a dacion en pago, did not constitute acceptance or performance of such an agreement. The Court reiterated that the debtor cannot compel the creditor to receive a different thing in satisfaction of the debt, and the creditor has the prerogative to foreclose on the mortgage. On the nature of the act of delivering the titles alleged as partial performance: The Court clarified that the delivery of the titles to the properties was a usual condition sine qua non to the execution of the mortgage, serving both security and registration purposes, and was not an act of performance of a dacion en pago agreement. The Court emphasized that for partial performance to be an exception to the Statute of Frauds, it must unequivocally demonstrate the parties' consent to the dacion en pago itself, which was not shown here. The respondents' subsequent proposal to redeem the mortgages further undermined their claim of a perfected dacion en pago.
Main Doctrine
A verbal agreement for dacion en pago, involving an amount within the Statute of Frauds, requires a note or memorandum thereof to be enforceable. Partial performance, such as the appraisal of the property, may take the agreement out of the Statute of Frauds, but only if it unequivocally demonstrates the parties' consent to the dacion en pago itself, not merely to preliminary steps like appraisal or the delivery of titles for mortgage purposes.