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Condonation

1) United Planters Sugar Milling Co. (UPSUMCO) took out loans from Philippine National Bank (PNB) secured by UPSUMCO's assets. PNB later assigned its rights over UPSUMCO to Asset Privatization Trust (APT). 2) UPSUMCO argued the loans were condoned by the assignment, but the Court ruled the operational loans were never condoned while the take-off loans were condoned as of September 3, 1987. 3) The Court granted reconsideration and ruled both PNB and UPSUMCO were mutual creditors allowing compensation of UPSUMCO's obligations from its bank accounts, though APT was not entitled to simply take UPSUMCO's

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129 views2 pages

Condonation

1) United Planters Sugar Milling Co. (UPSUMCO) took out loans from Philippine National Bank (PNB) secured by UPSUMCO's assets. PNB later assigned its rights over UPSUMCO to Asset Privatization Trust (APT). 2) UPSUMCO argued the loans were condoned by the assignment, but the Court ruled the operational loans were never condoned while the take-off loans were condoned as of September 3, 1987. 3) The Court granted reconsideration and ruled both PNB and UPSUMCO were mutual creditors allowing compensation of UPSUMCO's obligations from its bank accounts, though APT was not entitled to simply take UPSUMCO's

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3.

CONDONATION

I. Complete Case Title: UNITED PLANTERS SUGAR MILLING CO.,


(UPSUMCO), Petitioner,
vs.
THE HONORALE COURT OF APPEALS, PHILIPPINE NATIONAL BANK
(PNB) and ASSET PRIVATIZATION TRUST (APT), AS TRUSTEE OF THE
REPUBLIC OF THE PHILIPPINES, Respondents.

Docket Number: G.R. No. 126890

Date: April 2, 2009

II. FACTS:

Prior it had waived its right to collect the indebted amount from petitioner for the reason
of friendly foreclosure agreement, the Republic of the Philippines lost for more 1.5
Billion pesos. United Planters Sugar Milling Co., petitioner, engaged into contract of
loan from Philippine National Bank, respondent. This loan was called Takeoff Loan in
which secured with a real estate mortgage for over two parcels of land where the milling
plant stood and chattel mortgages over the machineries and equipment. Another loaned
contracted between UPSUMCO and PNB was the Operational loans which secured by
pledge contract wherein UPSUMCO assigned the respondent all the sugar produced
which the latter can sell in order to satisfy the indebtedness up to the extent of its
proceeds. On February 27, 1987, the respondent assigned its rights, titles and interests
over UPSUMCO through a Deed of Transfer. Later, the government transferred the
said rights and titles to the respondent Asset and Private Trust.

III. ISSUE/S:

 Whether or not both take-off loan and operational loan had been condoned by the
Deed of Assignment?
 Whether or not compensation takes place between PNB and UPSUMCO?

IV. RULINGS:

 The challenged acts of respondents all occurred on or after August 27, 1987, the
day of the execution of sale. UPSUMCO argues that after the date, respondents no
longer had the right to collect monies from the PNB bank accounts which
UPSUMCO had opened and maintained as collateral for its operational and take-
off loans. UPSUMCO is wrong. There were at least two causes for the application
of payments from UPSUMCO’s PNB accounts. First, for the payment of the
operational loan which were never condoned. The second was for the payment of
the take-off loan which APT could obtain until September 3, 1987, the day
condonation took effect.
“The court of Appeals was in turn reversed by this Court in Decision dated
November 28, 2006. The Court then held that both “operational loans” and “take-
off loans” had been condoned by the Deed of Assignment; and the Deed of
Assignment dated September 3, 1987 had retroacted to the date of the foreclosure
sale on August 28, 1987. Respondents filed a Motion of Reconsideration, but the
Court, by a 3-2 vote, reaffirmed its earlier decision through a Resolution dated July
11, 2007. However, in the 2007 Resolution, the Court acknowledges that only the
“take-off loans” had been condoned by the Deed of Assignment. Nonetheless, it
was held that the respondents had failed to established that there still remained
outstanding obligations due from UPSUMCO with respect to the take- off loans.”
 Yes, the Second Motion of Reconsideration is granted. Both PNB and UPSUMCO
are mutual creditors and debtors to each other such would allow the set- off or
compensation of the latter’s outstanding obligations to the former from the latter’s
bank account which expressly stipulated in the take-off loan agreements. PNB
subsequently assigned its rights as creditor of UPSUMCO to APT. However, APT
was the creditor in the main of UPSUMCO for which RTC yet concluded that APT
was not entitled to “simply appropriate the things of the plaintiff”.
“WHEREFORE, the Second Motion for Reconsideration are hereby GRANTED.
The Decision of the Court of Appeals dated February 29, 1996 is hereby
REINSTATED. No pronouncement as to costs.”
SO ORDERED.

ADOPTED BY: . ESPINA, GLORY MAE E.


WITH MY CONFIRMITY: DOLOSO RONNAMIE A.

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