Civil Law, Constitutional Law

BPI vs. SEC G.R. No. 164641 December 20, 2007 Dacion en Pago, Non Impairment of Contracts


The Bank of the Philippine Islands (BPI), through its predecessor-in- interest, Far East Bank and Trust Company (FEBTC), extended credit accommodations to the ASB Group with an outstanding aggregate principal amount of P86,800,000.00, secured by a real estate mortgage over two (2) properties located in Greenhills, San Juan. On 2 May 2000, the ASB Group filed a petition for rehabilitation and suspension of payments before the SEC.

Thereafter, on 18 August 2000, the interim receiver submitted its Proposed Rehabilitation Plan  for the ASB Group. The Rehabilitation Plan provides, among others, a dacion en pago by the ASB Group to BPI of one of the properties mortgaged to the latter at the ASB Group as selling value of P84,000,000.00 against the total amount of the ASB Group’s exposure to the bank. In turn, ASB Group would require the release of the other property mortgaged to BPI, to be thereafter placed in the asset pool.



Does the requirement for SEC approval of the Rehabilitation Plan impair the obligations of contract?



NO. The Court reiterates that the SEC’s approval of the Rehabilitation Plan did not impair BPI’s right to contract. As correctly contended by private respondents, the non-impairment clause is a limit on the exercise of legislative power and not of judicial or quasi-judicial power. The SEC, through the hearing panel that heard the petition for approval of the Rehabilitation Plan, was acting as a quasi-judicial body and thus, its order approving the plan cannot constitute an impairment of the right and the freedom to contract.

Besides, the mere fact that the Rehabilitation Plan proposes a dacion en pago approach does not render it defective on the ground of impairment of the right to contract. Dacion en pago is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in a sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, the payment for which is to be charged against the debtor’s debt. As such, the essential elements of a contract of sale, namely; consent, object certain, and cause or consideration must be present. Being a form of contract, the dacion en pago agreement cannot be perfected without the consent of the parties involved.


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