Sps. Pio Dato Vs BPI, G.R. No. 181873, November 27, 2013

Sps. Pio Dato vs BPI, G.R. No. 181873, November 27, 2013- 5.
7M Credit Line Facility
Doctrine: [A] credit line is “that amount of money or merchandise which a banker, merchant, or supplier
agrees to supply to a person on credit and generally agreed to in advance.” It is the fixed limit of credit
granted by a bank, retailer, or credit card issuer to a customer, to the full extent of which the latter may avail
himself of his dealings with the former but which he must not exceed and is usually intended to cover a series
of transactions in which case, when the customer’s line of credit is nearly exhausted, he is expected to reduce
his indebtedness by payments before making any further drawings
Facts: Spouses Dato and Spouses Sia applied for a Php240,000 loan which was granted by BPI with a term of
6 months and secured by a real estate mortgage over a parcel of land owned by Spouses Sia situated in
Labangon, Cebu.
Subsequently, Spouses Sia availed of a Php4M revolving promissory note line with a term of 1 year secured by
the same real estate mortgage. Spouses Sia alleged that their loan was precipitated by the representation of
BPI that the same will be indorsed to IGLF for the spouses to avail a much lower interest rate and longer
payment terms.
Before these loans matured, Spouses Sia approached BPI for additional loans to which they eventually obtain
a Credit Facility of Php5.7M using the same collaterals. From this credit line, Spouses Sia obtained Php800k
credited to their account with BPI after executing a promissory note for the same amount.
Spouses Sia failed to pay the principal amount of their loan Php4,240,000. The Php800k was paid through a
letter of credit. Since the Php240k and Php4M were not yet settled, the Php5.7M credit facility was cancelled.
To facilitate and assist Spouses Sia in paying off their loans, the lots which secured the Php5.7M were
released. They agreed to sell the lots and use the proceeds to make partial payments of their loans. Despite
cancellation of the real estate mortgage, Spouses Sia failed to make good their promise to sell the lots to pay
off their loans.
Spouses Sia filed a complaint praying for the issuance of a temporary restraining order to maintain status
quo. They alleged that BPI deliberately refused to comply with the condition/undertaking of the loan for IGLF
endorsement and approval until the maturity date of the loan lapsed to their great prejudice and irreparable
damage.
Spouses Sia failed to pay after numerous demands leading to the extrajudicial foreclosure of the properties
which were then sold at a public auction with BPI as the sole bidder in the amount of Php10,060,080.20.
In the course of the trial proceedings, Spouses Sia alleged that they discovered that the document embodying
the cancellation of the real estate mortgage presented by BPI (over the four lots previously released by BPI
for the Credit Line Agreement Facility), stated the following:
[T]he consideration for this cancellation being the full and complete payment made by the said
debtor/s- mortgagor/s to the creditor-mortgagee of the obligation secured thereby in the principal
amount of FIVE MILLION SEVEN HUNDRED THOUSAND ONLY PESOS ([P]5,700,000.00) Philippine
Currency, together with the corresponding interest thereon up to this date.
Spouses claimed extinguishment of their obligation. They alleged that as BPI credited the payment of P5.7
Million to their account, which is more than sufficient to cover their promissory notes of P240,000.00 and P4
Million, their obligation with the BPI was totally extinguished as of August 5, 1991 and that the
foreclosure proceedings on TCT No. 102343 is illegal and baseless for they have the right as of August 5,
1991 to secure full release of said lot by such payment of P5.7 Million
Issue: Whether or not the Php5.7M extinguished the obligation of Spouses Sia.
Ruling: No, the Php5.7M did not extinguish the obligation of Spouses Sia.
Another argument posited by Spouses Sia is that, they neither executed any P5.7 Million promissory note nor
did they receive P5.7 Million from BPI. Thus, there is no existing P5.7 Million Credit Line Facility Agreement
as far as they are concerned. It appears from the allegations in their pleadings that Spouses Sia have
misconstrued the concept of a Credit Line Facility Agreement. The Court has previously defined a credit
line as the following:
[A] credit line is “that amount of money or merchandise which a banker, merchant, or supplier agrees
to supply to a person on credit and generally agreed to in advance.” It is the fixed limit of credit
granted by a bank, retailer, or credit card issuer to a customer, to the full extent of which the
latter may avail himself of his dealings with the former but which he must not exceed and is
usually intended to cover a series of transactions in which case, when the customer’s line of
credit is nearly exhausted, he is expected to reduce his indebtedness by payments before
making any further drawings. (Citations omitted and emphasis and underscoring ours)
Thus, contrary to the belief and understanding of Spouses Sia, BPI does not have to require the execution of
promissory note of the entire P5.7 Million since a credit line as stated above, is merely a fixed limit of credit.
Furthermore, still applying the above quoted definition, a credit line usually presupposes a series of
transactions until the credit line is nearly exhausted. BPI is not obliged to release the amount of P5.7 Million
to Spouses Sia all at once, in a single transaction.
In this case, BPI allowed the release only of P800,000.00 out of the P5.7 Million credit line and precluded any
more availments since Spouses Sia have not yet satisfied their obligation to pay their loans of P4 Million and
P240,000.00
In any case, the extrajudicial foreclosure which is the subject of the present case pertains to Spouses Sia’s
failure to pay their P240,000.00 and P4 Million loans. The Court sees no real issue as regards the P5.7
Million credit line since it is as plain as day that the entire P5.7 Million was not availed of by Spouses Sia and
that the real estate mortgages securing such credit line were cancelled in their favor. Spouses Sia thwart the
issue towards the P5.7 Million credit line when the real issue is their non-payment of P4 Million and
P240,000.00 loans, which eventually led to the extrajudicial foreclosure of TCT No. 102434.
It is a settled rule of law that foreclosure is proper when the debtors are in default of the payment of
their obligation. As the CA had appositely considered, due to Spouses Sia’s failure to pay their loans, the
extrajudicial foreclosure of the real estate mortgage is valid and binding against them.
Petition is denied. Decision affirmed with modifications. The prayer for the issuance of a Temporary
Restraining Order/Writ of Preliminary Injunction is denied.

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Sps. Pio Dato vs BPI, G.R. No. 181873, November 27, 2013- 5.

7M Credit Line Facility

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