Spouses Calvin Luther R. Genotiva v. Equitable-Pci Bank (Now Banco de Oro Unibank

Summary

The Supreme Court partially granted the petition filed by spouses Genotiva against BDO regarding a real estate mortgage contract and retention of P500,000. The Court upheld the validity of the mortgage, finding that despite the spouses' difficult circumstances, they voluntarily offered to mortgage their property to secure their company's loan in exchange for release of Violet's retirement benefits, as evidenced by their own correspondence. However, the Court ruled that BDO improperly retained the P500,000 deposit without due process, violating the principle that creditors must use lawful means to collect from sureties. While banks have the right to proceed against solidary debtors under Article 1216 of the Civil Code, they cannot unilaterally set-off amounts without consent or take shortcuts in collection. The decision reinforces that contract validity requires genuine free will, distinguishes between reluctant but free consent versus vitiated consent, and emphasizes due process requirements in creditor-debtor relationships.