The Supreme Court has ruled that a bank is not obligated to release mortgaged properties simply because a borrower made a partial payment via a dacion en pago (payment in kind), unless there’s a clear agreement specifying that the partial payment triggers a release of the mortgage. The ruling underscores the importance of having explicit contractual terms detailing the conditions for releasing collateral in loan restructuring agreements.

Forbes Park vs. Rig Trucks: Did RCBC Promise to Release Marcopper’s Assets?

Marcopper Mining Corporation secured a US$13.7 million loan from Rizal Commercial Banking Corporation (RCBC) to acquire essential mining equipment. The loan was secured by a chattel mortgage on mining trucks and a hydraulic excavator, along with a pledge of shares from several exclusive clubs. Facing financial difficulties, Marcopper proposed to RCBC a restructuring plan, offering its Forbes Park property as partial payment. The core of the dispute revolves around whether RCBC agreed to release the mortgage on the mining equipment and the pledge on the club shares in exchange for the Forbes Park property.

The trial court and Court of Appeals sided with Marcopper, ordering RCBC to release the specified assets. However, the Supreme Court reversed these decisions, holding that no binding agreement existed requiring RCBC to release the collateral. The Supreme Court emphasized that in civil cases, the party asserting a claim must present a **preponderance of evidence**, which Marcopper failed to do.

The Supreme Court scrutinized the correspondence between Marcopper and RCBC, particularly the letters where Marcopper proposed restructuring options. While these letters outlined the possibility of assigning the Forbes Park property as partial payment, they lacked a clear, unequivocal agreement from RCBC to release the mortgaged assets upon the property’s transfer. Marcopper’s reliance on verbal assurances and interpretations of meeting discussions was deemed insufficient to establish a legally binding commitment from RCBC.

Further undermining Marcopper’s case was its subsequent actions. After the alleged agreement, Marcopper delivered an additional pledge of shares to RCBC. If RCBC had indeed committed to releasing the pledges as part of the restructuring, the Court reasoned, Marcopper would not have offered further collateral. This act contradicted Marcopper’s claim of a conditional agreement linked to the Forbes Park property assignment.

The Court also pointed out that Marcopper never mentioned the club shares until much later, indicating it wasn’t part of the original discussion. According to the Court, contracts require the mutual consent of both parties. **Obligations arising from contracts have the force of law and must be fulfilled in good faith**. In general, contracts go through negotiation, perfection (agreement on key elements), and finally, consummation (fulfilling the terms).

Marcopper failed to show that RCBC had promised that partial release of the mortgaged properties was dependent on assigning Forbes Park Property, and thus RCBC was within their rights to retain control of these assets as per the original loan agreement. The only point when RCBC offered a conditional release was in its letters dated December 15, 1997, and December 17, 1997, on the condition that Marcopper settles first amortization which fell due on November 24, 1997. Ultimately, the Supreme Court reinforced the principle that mortgage obligations are generally indivisible. Unless explicitly agreed otherwise, a partial payment doesn’t automatically entitle the borrower to a proportional release of the mortgaged properties. The ruling serves as a caution for borrowers and lenders to establish written conditions to avoid disputes over collateral releases during loan restructuring.

FAQs

What was the main legal question in this case?	Did RCBC legally bind itself to release the mortgage and pledge on Marcopper’s assets in exchange for the assignment of the Forbes Park property?
What is a ‘dacion en pago’?	A dacion en pago is a payment in kind, where a debtor transfers ownership of an asset to the creditor to satisfy a debt.
What did the lower courts decide?	Both the Regional Trial Court and the Court of Appeals initially ruled in favor of Marcopper, ordering RCBC to release the assets.
Why did the Supreme Court reverse the lower courts’ decisions?	The Supreme Court found that Marcopper failed to provide sufficient evidence of a binding agreement requiring RCBC to release the mortgage.
What evidence did Marcopper present to support its claim?	Marcopper relied on the testimonies of its officers and correspondence with RCBC, arguing that an agreement was reached during a meeting.
Why wasn’t Marcopper’s evidence enough?	The Court found the evidence insufficient because there was no written agreement and because the subsequent acts of Marcopper contradicted any previous existing binding commitment.
What is the legal concept of ‘preponderance of evidence’?	In civil cases, the party with the burden of proof must present evidence that is more convincing than the opposing party’s evidence.
What is the practical takeaway from this case for borrowers?	It is crucial for borrowers to obtain clear, written agreements specifying the conditions for releasing collateral in loan restructuring arrangements.
What is the practical takeaway from this case for lenders?	Lenders have the right to retain collateral unless specific release provisions are included in their agreements.

This case clarifies that partial payments on a loan, even in the form of property assignments, do not automatically compel a bank to release mortgaged assets. Clear, written agreements are necessary to define such conditions. The absence of such explicit agreements can lead to protracted legal battles and unfavorable outcomes for borrowers expecting a return of their collateral.

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: Rizal Commercial Banking Corporation vs. Marcopper Mining Corporation, G.R. No. 170738, September 12, 2008