GOTESCO PROPERTIES, INC vs.
INTERNATIONAL EXCHANGE BANK (NOW UNION
BANK OF THE PHILIPPINES)
G.R. No. 212262 | 2020-08-26
Facts:
In 1996, Gotesco Properties, Inc. (Gotesco), as borrower, and International Exchange
Bank (IBank), as lender, executed a Credit Agreement. As security, Gotesco executed a
real estate mortgage over a 20,673-square-meter property covered by Transfer
Certificate of Title No. T-70389. When Gotesco was unable to pay, IBank foreclosed the
real estate mortgage and eventually bought the property. Gotesco filed a complaint for
annulment of foreclosure sale and damages with the Batangas Regional Trial Court,
alleging that IBank failed to comply with the posting and publication requirements of
Act No. 3135. The case was docketed as Civil Case No. 554. Then, on September 27,
2001, Gotesco and IBank executed a Compromise Agreement where Gotesco's
P256,740,000.00 loan was restructured. On December 14, 2001, the Regional Trial
Court issued a Judgment approving the Compromise Agreement. On October 27,
2009, IBank filed with the trial court a Motion for Execution. It claimed that Gotesco
failed to comply with the terms of the Compromise Agreement when it did not pay
619,179,627.01 pesos as of February 5, 2009. In a June 16, 2010 Order, the Regional
Trial Court, through Judge Wilfredo De Joya Mayor (Judge Mayor), denied the Motion
for Execution and found the action premature as the ten-year term loan in the
Compromise Agreement, which started on March 31, 2003, would end in 2013.
Gotesco filed a complaint for annulment of foreclosure sale and damages with the
Batangas Regional Trial Court, alleging that IBank failed to comply with the posting
and publication requirements of Act No. 3135.
Issue: Whether or not the creditor may invoke the contract's acceleration clause
should the debtor fail to comply with their obligation to pay the stipulated
installments?
Ruling:
Yes, In pursuant to Acceleration clauses in loans for a fixed term give creditors a
choice to:
(1) defer collection of any unpaid amounts until the period ends; or
(2) invoke the clause and collect the entire demandable amount immediately. This
right to choose is meaningless if the obligation is made demandable only when the
term expires. In this case, it is undisputed that petitioner had defaulted payment on
its quarterly amortizations, with its last payment being made on June 2, 2006.M
Petitioner has neither pleaded nor produced any evidence to the contrary. Because of
petitioner's nonpayment, respondent invoked the acceleration clauses in the
Compromise Agreement to declare petitioner's entire loan due and demandable, then
exercised its right pursuant to Section 4.03 to move for the immediate execution of the
Compromise Agreement. Under the terms of the Compromise Agreement, petitioner
owed respondent an initial amount of P256,740,000.00, P10,000,000.00 of which was
payable upon execution of the Compromise Agreement. The remaining balance of
P246,740,000.00 was divided into 28 quarterly amortizations, payable starting March
31, 2003 until the balance was fully paid. The balance was likewise subject to a 12%
per annum interest rate, also payable quarterly. Any unpaid interest or principal
amortization was further subject to a 12% per annum penalty interest.
Should petitioner fail to pay any amount when due, Section 1.7 of the Compromise
Agreement allowed respondent to declare the entire obligation due and demandable.
Furthermore, pursuant to Section 4.03 of the Compromise Agreement, respondent was
given the right to move for the immediate execution of the total amount due.
An examination of Sections 1.7 and 4.03 of the Compromise Agreement shows that
they are in the nature of acceleration clauses. An acceleration clause is a provision in
a contract wherein, should the debtor default, the entire obligation shall become due
and demandable.[59] This Court has held that acceleration clauses are valid and
produce legal effect.
