In United Coconut Planters Bank v. Spouses Uy, the Supreme Court clarified the extent of a bank’s liability when it takes over receivables from a property developer. The Court ruled that United Coconut Planters Bank (UCPB), as an assignee of receivables from Prime Town Property Group, Inc. (PPGI), the developer of Kiener Hills Mactan Condominium Project, was only jointly liable with PPGI to refund the payments it actually received from the condominium unit buyers, Spouses Uy, and not the full amount of the purchase price. This decision underscores that the assignment of receivables does not automatically make the assignee liable for the developer’s obligations, setting a crucial precedent for similar real estate transactions.

Kiener Hills Fallout: Who Pays When Condo Dreams Crumble?

The case revolves around the failed Kiener Hills Mactan Condominium Project, a joint venture between Prime Town Property Group, Inc. (PPGI) and E. Ganzon Inc. Spouses Walter and Lily Uy entered into a contract to sell with PPGI for a unit in the condominium. However, PPGI failed to complete the construction of the units despite full payment by the respondents. As part of a debt settlement, PPGI assigned its receivables from Kiener Hills unit buyers to United Coconut Planters Bank (UCPB). The core legal question is: To what extent is UCPB, as the assignee of receivables, liable to the buyers when the developer fails to deliver the promised condominium units?

The legal saga began when Spouses Uy filed a complaint against PPGI and UCPB before the Housing and Land Use Regulatory Board Regional Office (HLURB Regional Office), seeking a refund and damages due to the incomplete construction. The HLURB Regional Office initially ruled that UCPB could not be held solidarily liable, as only the accounts receivables were transferred, not the entire project. However, on appeal, the HLURB Board reversed this decision, finding UCPB solidarity liable as PPGI’s successor-in-interest. The Office of the President (OP) affirmed the HLURB Board’s decision, stating that UCPB had assumed all rights and obligations related to Kiener Hills.

Dissatisfied, UCPB appealed to the Court of Appeals (CA), which partially granted the petition. The CA affirmed the respondents’ entitlement to a refund but modified the ruling, limiting UCPB’s liability to the amount respondents had paid upon UCPB’s assumption as the party entitled to receive payments. The CA relied on its previous ruling in United Coconut Planters Bank v. O’Halloran, which held that the assignment of receivables did not make UCPB the developer of Kiener Hills and, therefore, UCPB could not be held liable for the construction, development, and delivery of the condominium units. UCPB then appealed to the Supreme Court, questioning the applicability of the O’Halloran case and the extent of its liability.

Before delving into the specifics, it’s important to clarify the scope of appellate review. When a case is appealed, the appellate court has the power to review the case in its entirety, not merely the specific issues raised by the appellant. As the Supreme Court explained in Heirs of Alcaraz v. Republic of the Phils., an appellate court can issue a judgment that it deems a just determination of the controversy, with the authority to affirm, reverse, or modify the appealed decision.

One key point of contention was the Court of Appeals’ reliance on its prior decision in O’Halloran. Respondents argued that this decision was not binding under the doctrine of stare decisis. The Supreme Court clarified that stare decisis applies only to decisions of the Supreme Court, which are binding on lower courts. This principle is enshrined in Article 8 of the Civil Code, which states that courts must follow a rule already established in a final decision of the Supreme Court.

The principle of stare decisis et non quieta movere is entrenched in Article 8 of the Civil Code, to wit:

x x x x

It enjoins adherence to judicial precedents. It requires our courts to follow a rule already established in a final decision of the Supreme Court. That decision becomes a judicial precedent to be followed in subsequent cases by all courts in the land. The doctrine of stare decisis is based on the principle that once a question of law has been examined and decided, it should be deemed settled and closed to further argument.

However, while the CA’s reliance on O’Halloran as a binding precedent was misplaced, the Supreme Court ultimately agreed with the CA’s conclusion that UCPB was only jointly liable to PPGI in reimbursing the unit owners. The Supreme Court cited its previous ruling in Spouses Choi v. UCPB, which definitively addressed UCPB’s liability to Kiener Hills purchasers.

In Spouses Choi v. UCPB, the Court emphasized that the agreement between Primetown and UCPB constituted an assignment of credit, not an assumption of liabilities. This means UCPB only acquired the right to collect PPGI’s receivables but did not inherit PPGI’s obligations under the contracts to sell. The agreement explicitly excluded any liabilities and obligations assumed by Primetown under the individual contracts to sell. The Court reiterated this position in Liam v. UCPB, confirming that UCPB was merely an assignee of PPGI’s credit, not subrogated into PPGI’s place as the developer.

The terms of the MOA and Deed of Sale/Assignment between PPGI and UCPB unequivocally show that the parties intended an assignment of PPGI’s credit in favor of UCPB.

x x x x

The provisions of the foregoing agreements between PPGI and UCPB are clear, explicit and unambiguous as to leave no doubt about their objective of executing an assignment of credit instead of subrogation.

The Supreme Court acknowledged the arguments made, pointing out that the demand letters UCPB sent to buyers only assured them of the project’s completion but did not represent UCPB as the new owner or developer. Therefore, the Court held that UCPB was only bound to refund the amount it had unquestionably received from the respondents. This brings to the fore an important part of civil procedure – burden of proof. The general rule is that he who asserts must prove his assertion. The Supreme Court stressed that one who pleads payment has the burden of proving the fact of payment. As such, it was incumbent upon the respondents to prove the actual amount UCPB had unquestionably received.

Furthermore, the Supreme Court addressed the procedural question of whether it could review the factual determination of UCPB’s actual liability. Generally, a petition for review under Rule 45 of the Rules of Court is limited to questions of law. However, exceptions exist, such as when the lower court’s conclusion is based on speculation or a misapprehension of facts. The Court found that such exceptions applied in this case, as the CA’s computation of UCPB’s liability assumed that the entire balance of the purchase price was paid to and received by UCPB. A closer review of the records revealed that the respondents only substantiated the payment of P157,757.82 to UCPB. Therefore, the Supreme Court modified the CA’s decision, limiting UCPB’s liability to this amount, plus legal interest.

FAQs

What was the key issue in this case?	The key issue was determining the extent of UCPB’s liability to Spouses Uy, condominium unit buyers, given UCPB’s role as an assignee of receivables from the developer, PPGI, which failed to complete the condominium project.
What is an assignment of credit?	An assignment of credit is a legal transaction where the owner of a credit (assignor) transfers that credit and its accessory rights to another (assignee), who then has the power to enforce it to the same extent as the assignor. The consent of the debtor is not necessary.
Does an assignment of credit mean the assignee assumes all the assignor’s obligations?	No, an assignment of credit typically does not mean the assignee assumes all the assignor’s obligations. The assignee is primarily entitled to collect the receivables, but not necessarily liable for the assignor’s contractual obligations unless explicitly agreed upon.
What is the doctrine of stare decisis?	The doctrine of stare decisis means that courts should follow precedents set by previous decisions when deciding similar cases. In the Philippines, only decisions of the Supreme Court establish binding precedents that lower courts must follow.
How did the Court determine the amount UCPB was liable for?	The Court limited UCPB’s liability to the amount it had unquestionably received from Spouses Uy, which was substantiated by the evidence as P157,757.82. The Court emphasized that one who pleads payment has the burden of proving the fact of payment.
What was the significance of the MOA and Deed of Sale/Assignment between PPGI and UCPB?	These agreements were crucial because they explicitly showed that the parties intended an assignment of PPGI’s credit in favor of UCPB, rather than a subrogation where UCPB would take over PPGI’s role and obligations as the developer.
What are the exceptions to the rule that the Supreme Court only reviews questions of law?	Exceptions include when the conclusion of the lower court is based on speculation, surmises, or conjectures, or when the judgment is based on a misapprehension of facts.
What was the effect of the Court of Appeals’ previous ruling in United Coconut Planters Bank v. O’Halloran?	While not a binding precedent under the doctrine of stare decisis, the Court of Appeals’ ruling in O’Halloran was considered as persuasive authority, reinforcing the view that UCPB, as an assignee, was not liable for the developer’s failure to complete the project.

The Supreme Court’s decision in United Coconut Planters Bank v. Spouses Uy provides a clear framework for understanding the liabilities of financial institutions that take on receivables from property developers. It reinforces the principle that an assignment of credit does not automatically transfer the assignor’s obligations to the assignee, protecting financial institutions from shouldering liabilities beyond the scope of their agreements. This ruling also highlights the importance of presenting concrete evidence of payments made in claims for refunds.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: United Coconut Planters Bank v. Spouses Uy, G.R. No. 204039, January 10, 2018