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FIRST DIVISION

SPOUSES FRANCIS N. CELONES G.R. No. 215691

AND FELICISIMA CELONES,
Petitioners, Present:

BERSAMIN, J., *
Acting Chairperson,
- versus - DEL CASTILLO,
JARDELEZA,
TIJAM, and
GESMUNDO
. ' JJ**
METROPOLITAN BANK AND
TRUST COMPANY AND ATTY. Promulgated:
CRISOLITO 0. DIONIDO,
Respondents. .NOV 2· l 2G·t8

x:--------------------------------------------------------------------------------
DECISION

TIJAM, J.:

Before Us is a petition for review on certiorari 1 filed by petitioners

Spouses Francis N. Celones and Felicisima Celones (Spouses Celones),
against respondents Metropolitan Bank and Trust Company (Metrobank) and
Atty. Crisolito 0. Dionido (Atty. Dionido ), assailing the Decision2 dated
April 14, 2014 and the Resolution3 dated December 11, 2014 of the Court of
Appeals (CA) in CA-G.R. CV No. 96236, reversing the Order4 dated
September 1, 2010 of the Regional Trial Court (RTC) of Pasig City, Branch
154, declaring the Memorandum of Agreement5 (MOA) without force and
effect and declaring that Spouses Celones were the ones who redeemed the
mortgaged properties.

• Designated Acting Chairperson per Special Order No. 2606 dated October 10, 2018.
•• Designated Additional Member per Special Order No. 2607 dated October 10, 2018.
1
Rollo, pp. 9-54.
2
Penned by Associate Justice Stephen C. Cruz, concurred in by Associate Justices Magdangal M.
De Leon and Eduardo B. Peralta, Jr.; id. at 58-87.
3
ld.at117-120. /
4
Rendered by Judge Abraham B. Borreta; id. at 150-158. \ l~
~V\
5
Id. at 141-146.
Decision 2 G.R. No. 215691

Antecedent Facts

The Spouses Celones together with their company, Processing

Partners and Packaging Corporation (PPPC), obtained various loans from
Metro bank and for which they mortgaged various properties. 6 The total
obligation of Spouses Celones with Metrobank was P64,474,058.73. 7

The Spouses Celones defaulted in paying their loan, as such,

Metrobank foreclosed all the mortgaged properties. During the foreclosure
sale, Metrobank was declared as the winning bidder. The certificates of sale
were issued on July 2007. Prior to the expiration of the one year redemption
period, Metrobank filed petitions for issuance of writs of possession before
several courts to take possession of the foreclosed properties. 8

Sometime in 2007, the spouses Celones offered to redeem the

properties from Metrobank. The latter issued a Conditional Notice of
Approval for Redemption9 (CNAR) dated December 13, 2007 stating that
the offer of Spouses Celones to redeem the property in the amount of
P55 Million has been approved to be paid on or before December 20, 2007. 10
Pressed for time, Spouses Celones sought the help of banking and financing
institutions who are willing to extend them a loan. Finally, they found Atty.
Dionido who agreed to loan them the said amount. 11

Atty. Dionido then issued two (2) manager's check, one amounting to
P3 5 Million and another amounting to P20 Million. 12

In lieu of executing a loan agreement, Spouses Celones, PPPC,

Metrobank and Atty. Dionido executed a MOA, wherein the parties agreed
for the subrogation of Atty. Dionido to all the rights, interests of Metrobank
over the loan obligation of Spouses Celones and the foreclosed properties. 13

Upon receipt of the two manager's checks, Metrobank issued Payment

Slips in favor of Spouses Celones. 14 It likewise caused the dismissal of the
petitions for issuance of writs of possession on the ground that Spouses
Celones had already redeemed the properties. 15

6
Id. at 58-59.
7
Id. at 60.
8
Id.
9
Id. at 121-122.
10
Id. at 121.
11
Id. at 60-61.
12
Id. at 61.
13

\}(
Id. at 141-145.
14
Id. at 63.
15
Id. at 123.
Decision 3 G.R. No. 215691

On the belief that they have redeemed the foreclosed properties, the
Spouses Celones demanded from Metrobank the issuance of a Certificate of
Redemption. However, the latter refused to issue the same on the ground
that all its rights and interests over the foreclosed properties had been
transferred to Atty. Dionido, as such, he should be the one to issue the said
certificate. 16

Meanwhile, Atty. Dionido sent several demand letters to Spouses

Celones to vacate the foreclosed properties in view of the expiration of the
redemption period without Spouses Celones redeeming the same. 17

Aggrieved, Spouses Celones filed before the trial court a case for
Declaratory Relief and Injunction to compel Metrobank to issue the
certificates of redemption and to deliver to them the certificates of title over
the foreclosed properties. 18

On September 1, 2010, the RTC issued an Order 19 in favor of Spouses

Celones, thus:

WHEREFORE, judgment is hereby rendered declaring the

questioned [MOA] without force and effect as the same has not been fully
executed. The Court further declares the [Spouses Celones] to be the
redemptioners of their foreclosed properties and directs defendant
Metrobank to execute and deliver the corresponding certificates of
redemption over the said properties and tum-over all the Transfer
Certificates of Titles covering the same to [Spouses Celones] so that they
could be registered in accordance with Section 29, Rule 39 of the Revised
Rules of Court.

On the other second transaction, the Court hereby finds that the
transaction between the [Spouses Celones] and defendant [Atty.] Dionido
is one of a simple loan.

Lastly, the writ of preliminary injunction is hereby made

permanent.

SO ORDERED. 20

Upon appeal to the CA, the latter reversed the RTC Order and
rendered a Decision21 dated April 14, 2014, thus:

16
Id. at 64.
i1 Id.
18
Id. at 64-65.
19
ld. at 150-158.

\\
20
Id. at 158.
21
Id. at 58-87.
Decision 4 G.R. No. 215691

WHEREFORE, premises considered, the instant appeal is hereby

GRANTED. The Order dated September 1, 2010 issued by the [RTC] of
Pasig City, Branch 154, in the case for Declaratory Relief and Injunction,
docketed as SCA No. 3270-PSG is hereby REVERSED and SET
ASIDE.

Accordingly, the [MOA] dated December 20, 2007 entered into by

[Metrobank], [PPPC], [Spouses Celones] and [Atty. Dionido], is declared
a Contract of Subrogation which entitles Atty. Dionido to be subrogated to
the rights of Metrobank as a foreclosure buyer. And having failed to
redeem the property within the redemption period, the [Spouses] Celones
are hereby DIRECTED to immediately and voluntarily surrender the
possession of the foreclosed properties to Atty. Dionido in accordance
with the provisions of the said [MOA].

The [Spouses] Celones are ORDERED to pay Atty. Dionido the

loan amount of Two Million Five Hundred Thousand (P2,500,000.00)
Pesos as payment for the loan they contracted from the latter with legal
interest thereon at the rate of six (6%) percent per annum from the time of
its availment, December 20, 2007, until fully paid.

Additionally, the [Spouses] Celones are ordered to pay Atty.

Dionido moral damages in the amount of Five Hundred Thousand
(P500,000.00) Pesos, the amount of Three Hundred Thousand
(P300,000.00) Pesos, as exemplary damages, and Fifty Thousand
(P50,000.00) Pesos by way of attorney's fees. The [Spouses] Celones are
likewise ORDERED to pay Metrobank the amount of Three Hundred
Thousand (P300,000.00) Pesos as exemplary damages and Fifty
Thousand (P50,000.00) Pesos as attorney's fees.

With Costs.

SO ORDERED. 22

The Motion for Reconsideration23 filed by the spouses Celones was

likewise denied by the CA in its Resolution24 dated December 11, 2014.

Hence, this petition.

Issue

Whether or not Spouses Celones were able to redeem the foreclosed

properties from Metrobank using the loan acquired from Atty. Dionido.

22
Id. at 85-86.
23
Id. at 89-111.
24
Id. at 117-120.
\(
Decision 5 G.R. No. 215691

Petitioners' Arguments

Spouses Celones claimed that the transaction between them and Atty.
Dionido was that of a loan. 25 Further, Metrobank's subsequent acts shows
that spouses Celones has redeemed the property, such as the issuance of
payment slips in the name of Spouses Celones and the filing of several
motions to dismiss in the civil cases for issuance of a writ of possession
pending before different courts due to the Spouses Celones' redemption of
the foreclosed properties.

Respondents' Arguments

On the other hand, Metrobank and Atty. Dionido both argued that the
Spouses Celones were not able to redeem the property because the CNAR
has been novated by the MOA executed by the parties on December 20,
2007. Under the MOA, the P55 Million paid by Atty. Dionido to Metrobank
was in consideration of the transfer and assignment of rights of Metrobank
to Atty. Dionido over the foreclosed properties. Metrobank claimed that if
there was indeed a redemption that occurred, it should be Atty. Dionido who
should issue a Certificate of Redemption in view of the transfer and
assignment of its rights to the latter.

Ruling of the Court

The petition is impressed with merit.

It is undisputed that the amount of P55 Million paid to Metrobank

came from Atty. Dionido. The controversy lies as to what transaction
occurred between spouses Celones and Atty. Dionido. Spouses Celones
claimed that it was a loan transaction while Atty. Dionido claimed that it was
in consideration of his subrogation to the rights and interests of Metrobank
over the foreclosed properties.

Under the CNAR dated December 13, 2007, Metrobank approved the
offer of Spouses Celones to redeem the property in the amount of
P55 Million and that the same should be paid on or before December 20,
2007. 26

In order to finance the said amount, Spouses Celones sought the help
of banking and financing institutions to pay off the said amount. Their
search led them to Atty. Dionido who agreed to loan them the amount of
P55 Million. On December 20, 2007, to finalize their transaction and with
25
Id. at 35.

~
26
Id. at 121-122.
Decision 6 G.R. No. 215691

the participation of Metrobank, the parties executed a MOA. Under the

MOA, the following terms are stipulated:

1. DIONIDO shall pay Metrobank the amount of FIFTY-FIVE

MILLION PESOS (P55,000,000.00) upon execution of this Agreement.
The said amount shall be exclusive of all taxes, fees and charges, which
shall likewise be exclusively assumed by DIONIDO that may be incurred
arising from the execution and subsequent consummation of this
Agreement, including friction costs and expenses associated with the
redemption transaction; and all realty taxes, dues and other assessments on
the Subject Properties from date of foreclosure. The payment shall be
made in the form of Manager's Check in the name of METRO BANK and
shall be deposited via METROBANK's bills payment facility.

2. For and in consideration of the said payment by DIONIDO,

METROBANK, PPPC, and SPS. CELONES agree to fully and absolutely
assign and transfer all of METROBANK's rights, interests, and authorities
over the Assumed Obligation and the Subject Properties to DIONIDO,
including those arising from the foreclosure proceedings and foreclosure
sale made by METROBANK over the Subject Properties, and the
authority to sign the Deed of Redemption over the Subject Properties.
METROBANK agree to the full subrogation of its rights in favor of
DIONIDO, and to free PPPC and SPS. CELONES from the Assumed
Obligation. 27

Metrobank and Atty. Dionido claimed that the MOA being of a later
date, superseded and novated the CNAR. As such, the redemption agreed
upon by Metrobank and Spouses Celones was no longer controlling.

Novation is a mode of extinguishing an obligation by changing its

objects or principal obligations, by substituting a new debtor in place of the
old one, or by subrogating a third person to the rights of the creditor. 28 In
order that an obligation may be extinguished by another which substitute the
same, it is imperative that it be so declared in unequivocal terms, or that the
old and the new obligations be on every point incompatible with each
other. 29 Thus, "[n]ovation must be stated in clear and unequivocal terms to
extinguish an obligation. It cannot be presumed and may be implied only if
the old and new contracts are incompatible on every point." 30

27
Id. at 128.
28
Article 1291 of the New Civil Code.
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.
29
Article 1292 of the New Civil Code.
Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it
is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every
point incompatible with each other.

(
30
Arco Pulp and Paper Co., Inc., et al. v. Lim, 737 Phil. 133, 137 (2014).
Decision 7 G.R. No. 215691

As held in the case of Salazar v. J Y. Brothers Marketing Corp. :31

xx x Novation is done by the substitution or change of the obligation by a

subsequent one which extinguishes the first, either by changing the object
or principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor. Novation may:

[E]ither be extinctive or modificatory, much being

dependent on the nature of the change and the intention of
the parties. Extinctive novation is never presumed; there
must be an express intention to novate; in cases where it
is implied, the acts of the parties must clearly
demonstrate their intent to dissolve the old obligation as
the moving consideration for the emergence of the new
one. Implied novation necessitates that the
incompatibility between the old and new obligation be
total on every point such that the old obligation is
completely superceded by the new one. The test of
incompatibility is whether they can stand together, each
one having an independent existence; if they cannot and
are irreconcilable, the subsequent obligation would also
extinguish the first.

An extinctive novation would thus have the twin

effects of, first, extinguishing an existing obligation and,
second, creating a new one in its stead. This kind of
novation presupposes a confluence of four esseutial
requisites: (1) a previous valid obligation, (2) an agreement
of all parties concerned to a new contract, (3) the
extinguishment of the old obligation, and (4) the birth of a
valid new obligation. Novation is merely modificatory
where the change brought about by any subsequent
agreement is merely incidental to the main obligation (e.g.,
a change in interest rates or an extension of time to pay; in
this instance, the new agreement will not have the effect of
extinguishing the first but would merely supplement it or
supplant some but not all of its provisions.) 32 (Emphasis
ours)

Examination of the MOA showed no express stipulation as to the

novation or extinction of the CNAR. Thus, for implied novation to exist, it
is necessary to determine whether the CNAR and the MOA are incompatible
on every point such that they cannot be reconciled and stand together.

31
648 Phil. 314 (2010).
32
Id. at 322-323, citing Foundation Specialists, Inc. v. Betonva/ Ready Concrete, Inc., et al., 613
Phil. 303, 313-314 (2009). ,.,.,...,,,

~
Decision 8 G.R. No. 215691

Under the CNAR, it is provided that Metrobank approved the offer of

Spouses Celones to redeem the property in the amount of P55 Million.
While under the MOA, Metrobank assigned all its rights and interests to
Atty. Dionido over the foreclosed properties including the issuance of a
certificate of redemption.

After careful scrutiny of the records, we find that the CNAR only
deals with the redemption right of Spouses Celones while the MOA deals
with the assignment of credit of Metrobank to Atty. Dionido. As such, the
CNAR and the MOA can be reconciled and can both stand together.

Under the MOA, Metrobank assigned all its rights and interests over
the foreclosed properties to Atty. Dionido. "An assignment of credit has
been defined as the process of transferring the right of the assignor to the
assignee who would then have the right to proceed against the debtor. " 33
Atty. Dionido being an assignee of Metrobank, he merely steps into the
shoes of the assignor, Metrobank. Atty. Dionido can acquire no greater right
than that pertaining to his assignor. Thus, when Atty. Dionido agreed to the
assignment ofMetrobank's rights and interests over the foreclosed properties
under the MOA, he acquires exactly the rights and interests over the
foreclosed properties as of the date of the signing of the MOA.

Unfortunately for Atty. Dionido, he merely acquired what right

Metrobank has, as of the date of the signing of the MOA, which was the
issuance of a Certificate of Redemption, because as of that date, the
foreclosed properties have already been redeemed by Spouses Celones from
Metrobank. The fact that Spouses Celones had already redeemed the
foreclosed properties was evidenced by the fact that as soon as Metrobank
was paid the redemption amount, the latter issued payment slips in the name
of Spouses Celones. Further, after the payment of the P55 Million,
Metrobank caused the dismissal of the civil cases it filed for issuance of writ
of possession due to the fact that the foreclosed properties had already been
redeemed by the Spouses Celones. Had the P55 Million been paid by Atty.
Dionido to Metrobank as a consideration for the assigment of credit, the
receipt should have been under the name of Atty. Dionido and not under the
name of Spouses Celones.

Finding that the foreclosed properties had already been redeemed by

Spouses Celones, the Certificate of Redemption should naturally be issued
by the assignee, Atty. Dionido. To accept his contention that the redemption
period of the foreclosed properties had already lapsed and that Spouses
Celones has lost their right over the foreclosed properties is to go against the

33
Licaros v. Gatmaitan, 414 Phil. 857, 866 (2001).
(
Decision 9 G.R. No. 215691

basic principle of assigment of credit that the assignee cannot acquire no

greater right than the assignor.

Atty. Dionido however is not left without any remedy or recourse

against Spouses Celones. Under Article 1236 of the Civil Code, it is
provided that:

Art. 1236. The creditor is not bound to accept payment or

performance by a third person who has no interest in the fulfillment of the
obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what
he has paid, except that if he paid without the knowledge or against
the will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor. (Emphasis ours)

Thus, Atty. Dionido has the right to demand payment of the amount of
P55 Million from Spouses Celones since it is undisputed that such amount
came from Atty. Dionido. It is unjust enrichment on the part of Spouses
Celones to acquire the amount of P55 Million and not be required to pay the
same. To save on the time and resources of this Court and because of the
possibility that this case will once again reach this Court, although this case
is not an action to recover a sum of money, we deem it proper to rule on the
propriety of Atty. Dionido's right to recover the said sum from Spouses
Celones. Thus, Spouses Celones should pay the amount of P55 Million to
Atty. Dionido with legal interest counted from the date of finality of this
Decision.

WHEREFORE, premises considered, the petition is GRANTED.

The Decision dated April 14, 2014 and the Resolution dated December 11,
2014 of the Court of Appeals in CA-G.R. CV No. 96236 are hereby
REVERSED and SET ASIDE.

Accordingly, a new one is entered ORDERING Atty. Crisolito 0.

Dionido to issue a Certificate of Redemption in favor of Spouses Francis N.
Celones and Felicisima Celones.

The Spouses Francis N. Celones and Felicisima Celones are hereby

ORDERED to pay the amount of P55 Million plus legal interest of six
percent (6%) per annum to Atty. Crisolito 0. Dionido counted from finality
of this Decision until full payment thereof.

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Decision 10 G.R. No. 215691

SO ORDERED.

'~
NOEL Gl\fEN\~
TIJAM
Assoc)ate Justice

WE CONCUR:

-
MARIANO C. DEL CASTILLO
Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

•
- tl ""k>lll.C, ~Justice
J\cting Chairperson, First Division
Decision 11 G.R. No. 215691

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the

Division Acting Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

~
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)