G.R. No. 220914 - METROPOLITAN BANK AND TRUST COMPANY, VS. SPOUSES EDMUND CO* AND LILY CO,**.D E C I S I O N - Supreme Court E-Library

Ruling

WHEREFORE, premises considered, judgment is rendered in favor of the plaintiffs and against the defendant bank by: 1. Declaring the extra-judicial foreclosure proceedings NULL and VOID and without any legal effect and the defendants are prohibited to consolidate the titles in the name of the bank without prejudice to the filing of the action for collection or recovery of the sum of money secured by the real estate mortgage in the proper forum; 2. That the titles in the name of defendant bank be cancelled and new titles be issued in favor of Eduardo Rayo. 3. That the subsequent Writ of Possession, if issued in favor of defendant Metrobank be likewise cancelled. 4. That the interest rates on the plaintiffs' indebtedness be reduced to 12% per annum; and the excess be applied to principal. 5. Declaring that the counterclaims and damages being collected by defendant bank to be devoid of any legal basis; 6. Ordering the defendant bank to pay the plaintiffs the following sums, to wit: a) [PHP] 5,000,000.00 loss of capital investment b) [PHP] 5,000,000.00 - expected profits c) [PHP] 150,000 - for actual damages d) [PHP] 50,000 - moral damages e) [PHP] 50,000 - exemplary damages f) Cost of suit. 7. Ordering the dismissal of the counterclaim for lack of merit. SO ORDERED . [95] (Emphasis in the original) The RTC ruled that by extending almost PHP 48 million in loans to the spouses Co between 1997 and 1999, Metrobank had become estopped from denying the existence of the PHP 48 million credit line. The spouses Co relied on Metrobank's repeated extension of credit to finance MBI's operations and expansion. The bank's sudden decision to walk back on what had become an established practice caused prejudice and damage to the spouses Co's finances and business standing. The contracts for the First and Second Credit Line do not embody the parties' agreement, for Metrobank had already loaned almost PHP 43 million to the spouses Co before entering said contracts; and it never waited for the spouses to fully settle their accounts before releasing fresh loans to them. [96] Moreover, the total obligation of the spouses greatly exceeded the combined amount covered by the two Credit Lines. [97] The RTC further observed that Go and the spouses Co were both of Chinese descent, and that it was common practice among the Chinese community to " do business based on trust and confidence, and usually without the burden of cumbersome formalities ." [98] Metrobank thus breached the contract when it cut off the credit line in 1999, for the spouses Co had an outstanding balance below PHP 48 million, and were therefore entitled to the balance of the credit line. [99] The RTC also ruled that Metrobank breached the contract and foreclosed upon the mortgages in bad faith. [100] While the foreclosure was justified by the spouses Co's default, Metrobank should have refrained from doing so, as the spouses were still entitled to the balance of the PHP 48 million credit line and were still