- Petitioner
- Ruby Shelter Builders
- Respondent
- Tan
- Citation
- G.R. No. 217368
- Court
- Supreme Court
- Division
- First Division
- Ponente
- Gesmundo, J.
- Decided
- August 5, 2024
Summary
Ruby Shelter Builders obtained loans secured by real estate mortgage from Tan and Obiedo. Facing payment difficulties, parties executed a MOA allowing extension until December 31, 2005, with interest condonation, and simultaneous execution of deeds of absolute sale as dacion en pago if payment failed. When Ruby Shelter failed to pay, deeds were notarized. Ruby Shelter challenged this as void pactum commissorium. The Supreme Court affirmed that the arrangement constituted valid dacion en pago, not unlawful pactum commissorium, since Ruby Shelter voluntarily offered to sell the properties rather than automatic appropriation by creditors. The Court distinguished between prohibited automatic vesting of title versus mutual agreement for property sale to extinguish debt. Liquidated damages of PHP10,000,000.00 were upheld as reasonable considering the circumstances.
Intellegal Wiki · Key Holding
A voluntary dacion en pago by novation is valid and is not pactum commissorium where the debtor voluntarily offers the property as payment rather than the creditor automatically appropriating it.
An editorially maintained summary of the rule this Supreme Court decision is cited for — not legal advice.