William Ong Genato v. Benjamin Bayhon

Summary

This case involves a loan dispute where William Ong Genato sought to enforce a dacion en pago against Benjamin Bayhon's estate. Bayhon obtained a PHP1,000,000.00 loan in 1989 and allegedly executed a real estate mortgage and later a dacion en pago. The Supreme Court affirmed that both contracts were void as simulated since Bayhon's wife, whose signature appeared on the documents, was already dead when they were executed. However, the Court reversed the Court of Appeals' ruling that the debtor's death extinguished the obligation. Applying Civil Code provisions on succession, the Court held that contractual obligations are transmissible to heirs and the debt subsists against the estate. The Court also reduced the unconscionable 60% annual interest to 12% per annum, fixing the total estate liability at PHP3,050,682.00. The decision clarifies the principle that while simulated contracts are void, valid underlying obligations survive and are enforceable against the debtor's estate.