Pledge: commissorium but affirmed the RTC denial.

PIC and PMO

both filed another set of motions which were both
Philnico vs. PMO denied.
FACTS:
ISSUE:
The Development Bank of the Philippines and the
Philippine National Bank, by virtue of foreclosure 1. Whether or not the automatic reversion of the
proceedings, became the holders of all the shares of PPC shares of stock to PMO in case of default by
stocks in PPC (Philnico Processing Corp). The banks PIC constitutes pactum commissorium.
transferred their stocks to PMO (Privatization and
2. Whether or not there is no valid Pledge
Management Office) in 1987. On May 1996, PMO, PIC,
Agreement since PIC is not yet the absolute
and PPC executed a contract, denominated as the
owner of the said shares
Amended and Restated Definitive Agreement (ARDA),
which laid down the terms and conditions of the HELD:
purchases and acquisition by PIC from PMO and wherein
The court GRANTS the petition for review of PIC by
PIC agreed to pay PMO US $333,762,000.00 as purchase
declaring the automatic reversion of the PPC shares of
price, payable in installments and in accordance with the
stock constitutes pactum commissorium. DENIES the
schedule set.
petition for review of PMO.
In 1999, PMO, PIC, and PPC, executed an Amended
RULING:
Agreement which provided for the restructuring of the
payment terms of the entire obligation under the ARDA. 1. Pactum commissorium is among the contractual
Three years later, in 2002, PMO notified PIC that they stipulations that are deemed contrary to law. It
had defaulted in the payment of its obligations and is defined as a stipulation empowering the
demand that they settle its unpaid amortizations within creditor to appropriate the thing given as
90 days. PIC replied in January 2003, requesting PMO to guaranty for the fulfilment of the obligation in
set aside its notice of default; to not rescind the sale of the event the obligor fails to live up to his
PPC shares of stock; and to give PIC an opportunity to undertakings, without further formality, such as
conclude its fund-raising efforts for its business. PMO foreclosure proceedings and a public sale. 2
thereafter indicated in a letter their intention to enforce Elements: (1) that there should be a pledge or
the automatic reversion of the PPC shares of stock. mortgage wherein a property is pledge or
mortgage by way of security for the payment of
Before the deadline for payment set by PMO, PIC file
an obligation; and (2) that there should be
before the RTC a Complaint for Prohibition against
stipulation for an automatic appropriation by the
Reversion of Shares with Prayer for Writ of Preliminary
creditor of the thing pledged or mortgage in the
Injunction and/or Temporary Restraining Order,
event of nonpayment of the principal obligation
Suspension of Payment and Fixing of Period of Payment,
within the stipulated period. Both elements are
against PMO, PPC, and PPC Corporate Secretary. After
present in the case (1) The Pledge Agreement
the summary hearing, the RTC issued a TRO effective for
and (2) there is automatic appropriation in the
20 days, restraining PMO, PIC, and PIC Corp Sec from
event of default.
effecting the reversion of the PPC shares of stock. PMO
filed a Motion for Reconsideration and a Motion to 2. Among the requirements of a contract of pledge
Dismiss which were both denied. When the parties failed is that the pledgor is the absolute owner of the
to arrive at an amicable settlement, the RTC issued its thing pledge. PMO has transferred to PIC all the
Pre-trial Order in which it enumerated the respective rights, title, and interest in and to the PPC shares
issues for resolution submitted by the parties. The of stock, and delivered to PIC the certificates for
parties filed their different Motions on the Issues for said shares for cancellation and replacement of
resolution and the RTC ruled in favor of PIC. PMO new certificates already in the name of PIC.
assailed the RTC Order and filed a Petition for Certiorary
before the Court of Appeals. In its decision the CA
disagrees with the RTC with the finding of a pactum
 Petitioners argue that they did not receive any amount
from the allegedly approved loan application, thus they
should not be held liable for its payment.
G.R. No. 204412, September 20, 2017
They contend that it was respondent BAP's negligence
VICENTE L. LUNTAO AND NANETTE L. LUNTAO vs. BAP that caused the release of the loan proceeds to a person
CREDIT not authorized by petitioners. Petitioners add that
neither of them gave authorization for BAP to release the
GUARANTY CORPORATION AND EFREN M. PINEDA loan proceeds through Security Bank. There was also no
LEONEN, J.: evidence showing that the power and authority to
receive the loan proceeds under the Special Power of
FACTS: Attorney were delegate to Eleanor.
This case involves the validity of the real estate mortgage According to petitioners, the contract was not
of petitioner Vicente L. Luntao's (Vicente) property in consummated since they did not receive the loan
favor of respondent BAP. The mortgage was executed by proceeds, and therefore, null and void. The principal
petitioner Nanette L. Luntao by virtue of a Special Power contract being void, the accessory contract of mortgage
of Attorney that Vicente issued in her favor. Vicente was was also null and void. Petitioners add that the mortgage
the owner of a real property and he executed a Special contract also contained a pactum commissorium
Power of Attorney in favor of his sister Nanette. Nanette provision.
applied for a loan with BAP and used Vicente's property
as collateral. The loan was for the improvement of the BAP counters that the loan proceeds "were duly
facilities of her business, the Holy Infant Medical Clinic. received, credited and transferred to the Holy Infant
According to Nanette, she was introduced to the lending Medical Clinic/Nanette L. Luntao/Eleonor L. Luntao
institution by her sister Eleanor Luntao, who allegedly under Security Bank and Trust Company Account.
had a personal loan with it and whose office was located Respondent BAP also maintains that Eleanor has no
in the same building where BAP's office was. separate personal loan with them.

Upon approval of the loan, the amount of P900,000.00, Respondent BAP contends that the assailed mortgage
representing the loan proceeds, was ordered to be provision is not pactum commissorium since it does not
released to the clinic through Security Bank. When the "automatically allow the mortgagee to appropriate or
loan obligation became due, BAP sent demand letters. In own the mortgage property without the need of ...
a letter, Nanette and Eleanor's brother Jesus Luntao foreclosure proceedings.”
(Jesus) wrote BAP, asking for additional time to settle his ISSUE: Whether or not the Real Estate Mortgage
sisters’ accounts. He cited cash leakages and pending executed by Vicente L. Luntao and Nanette L. Luntao
accreditation with life insurers as reasons for the clinic’s should be nullified.
substantial losses.
HELD:
However, Nanette's loan was still left unpaid. As a result,
BAP applied for Extra-Judicial Foreclosure of Vicente's As an accessory contract, a mortgage contract's validity
property. RTC issued a Notice of Foreclosure and a Notice depends on the loan contract's validity.
of Extrajudicial Sale. Vicente and Nanette filed a
Complaint for Declaration of Nullity of Real Estate
Mortgage with a prayer for the issuance of a Temporary
Restraining Order and Writ of Preliminary Injunction
against BAP.

Vicente and Nanette claimed that Eleanor's alleged debt

with BAP was separate from Nanette's debt and was not
secured by Vicente's property, which should not be
foreclosed if Eleanor failed to pay her alleged debt.