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VIRGILIO
C. CRYSTAL and GLYNNA F. CRYSTAL,
Petitioners, - versus - BANK OF THE PHILIPPINE Respondent. |
G.R. No. 180274 Present: QUISUMBING, J., Chairperson, CARPIO MORALES, BRION, ABAD, JJ. Promulgated: September 4, 2009 |
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D E C I S I O N
CARPIO MORALES, J.:
On P3,000,000
loan from Citytrust Banking Corporation (Citytrust) to secure which they
mortgaged a parcel of land located in the Banilad Estate,
In 1996,
the Bank of the Philippine Islands (respondent) merged with and absorbed
Citytrust.
Petitioners
failed to settle their loan, drawing respondent to extra-judicially foreclose
the mortgage. The mortgaged property was
sold at public auction on P5,604,000. The amount was applied to the mortgage
obligation.
Respondent
subsequently filed on
x x
x [O]n the date of the auction the mortgage obligation amounted to P6,490,623.18
so there was a resulting deficiency of P886,623.18
due the plaintiff from the defendants, the same to earn stipulated interest of
27% per annum from July 21, 1997 to January 1, 2001 and at 20% per annum from
January 1, 2001 to March 15, 2001.
After
the auction sale on July 21, 1997, plaintiff incurred expenses for Sheriff’s
commissions, capital gains tax, documentary stamp tax, real estate taxes and
other expenses incidental to the transfer of the certificate of title to the
plaintiff all in all amounting to P1,665,946.69 which defendants are
liable to plaintiff x x x. Plaintiff’s total
claim, therefore, for deficiency as alleged in the preceding paragraph and
for other contractual liability as alleged in this paragraph, is P3,425,386.27
x x x.[1] (Underscoring supplied)
In their Answer,[2]
petitioners contended that respondent violated the Truth in Lending Act by not
disclosing that it was charging them 27% per
annum in interest; and that the extrajudicial foreclosure was illegal
because the mortgaged property was not foreclosed for the correct amount. They thus prayed that the extrajudicial
foreclosure be declared null and void or, in the alternative, that the excess
of their P3,000,000 principal obligation plus interest at 12% per annum be ordered returned to them
and that respondent pay them attorney’s fees and expenses of litigation.
Branch 20 of the Cebu City RTC, by
Decision of September 27, 2004, reduced petitioners’ total outstanding obligation
to P5,284,888.65[3]
after finding that the interests, penalty charges and liquidated damages were
exorbitant and the attorney’s fees unreasonable. After deducting the said reduced amount of P5,284,888.65
from the P5,604,000.00 proceeds of the foreclosure sale to thus yield a
remainder of P319,111.35, the trial court disposed:
WHEREFORE, premises considered, it is
hereby ordered that plaintiff Bank of the Philippine Islands pay Spouses Virgilio and Glynna Crystal
the amount of P319,111.35 representing the excess amount of the proceeds
of the foreclosure sale over the recomputed obligation of the
defendants, plus interest of 12% per annum, from the [sic] July 21, 1997
until the same is fully paid.
SO ORDERED.[4] (Emphasis in the original; italics and underscoring supplied)
On appeal, the Court of Appeals
affirmed the trial court’s decision but deleted the award of interest on the
P319,111.35 to be returned by respondent to petitioners.[5] The parties filed their respective motions
for reconsideration[6] which
were denied.[7] They thereupon filed
their respective petitions for review on certiorari before this Court.
By Resolution of
With respect to herein
petitioners’ petition[9]
subject of the present Decision, petitioners question only the deletion by the
appellate court of the imposition by the trial court of interest on the amount
to be refunded to them by respondent.[10]
Respondent,
in its Comment, posits that it is not obliged to pay petitioners any “surplus,”[11] citing
Dio v. Japor[12] which
held:
We note that the “surplus” was the result of the computation by the Court of Appeals of respondents’ outstanding liability based on a reduced interest rate of 12% per annum and the reduced penalty rate of 1% per month. The court a quo then proceeded to apply our ruling in Sulit v. Court of Appeals, to the effect that in case of surplus in the purchase price, the mortgagee is liable for such surplus as actually comes into his hands, but where he sells on credit instead of cash, he must still account for the proceeds as if the price were paid in cash, for such surplus stands in the place of the land itself with respect to liens thereon or vested rights therein particularly those of the mortgagor or his assigns.
In the instant case, however, there is no “surplus” to speak of. In adjusting the interest and penalty rates to equitable and conscionable levels, what this Court did was merely to reflect the true price of the land in the foreclosure sale. The amount of the petitioner’s bid merely represented the true amount of the mortgagee’s debt. No surplus in the purchase price was thus created to which the respondents as the mortgagors have a vested right.[13] (Emphasis and underscoring supplied)
The petition is impressed
with merit.
Section 4 of Rule 68 of the Rules of
Civil Procedure mandates that:
[t]he
amount realized from the foreclosure sale of the mortgaged property shall,
after deducting the costs of the sale, be paid to the person foreclosing the
mortgage, and when there shall be any balance or residue, after paying off the
mortgage debt due, the same
shall be paid to junior encumbrancers in the order of priority, to be
ascertained by the court, or if there be no encumbrances or there be a
balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled
to it. (Emphasis, italics and underscoring supplied)
In the present case, the
appellate court affirmed the trial court’s finding, after a recomputation-reduction
of the amount of petitioners’ outstanding obligation, that there was an excess
amount of the proceeds of the foreclosure sale that must be returned to petitioners.
Respondent’s reliance on Dio thus fails. It must thus return to petitioners the residue
or excess amount of P319,111.35.
The only issue in the present
case is in fact whether the excess amount of P319,111.35 should earn legal
interest, the judgment directing respondent to refund such excess having been
laid to rest when, as reflected above, the Court denied respondent’s petition
in G.R. No. 180129.
The Court resolves the
issue in the affirmative.
While it is settled that
the imposition of legal interest on monetary awards is subject to the sound
discretion of the court which, if properly exercised, will not be disturbed on
appeal,[14]
the appellate court inexplicably deleted the award in the dispositive portion
of its assailed Decision, without indicating in any portion of the Decision the
reason therefor.
The Court finds well-taken
the imposition by the trial court of legal interest on the excess amount, not,
however, at 12% per annum, but at
6%, and to be computed as LCK Industries Inc. v. Planters Development
Bank[15] teaches,
viz:
Under the principle of
unjust enrichment - nemo cum alterius detrimento locupletari
potest - no person shall be allowed to enrich himself unjustly at the
expense of others. This principle of
equity has been enshrined in our Civil Code, Article 22 of which provides:
Art. 22. Every person who through an act of performance
by another, or any other means, acquires or comes into possession of something
at the expense of the latter without just or legal ground, shall return the
same to him.
We have held that there is
unjust enrichment when a person unjustly retains a benefit to the loss of
another, or when a person retains the money or property of another against the
fundamental principles of justice, equity and good conscience.
x x x x
[T]his Court finds the
respondent bank liable not
only for retaining the excess of the bid
price or the surplus money in the sum of P1,893,916.67, but also for
paying the interest thereon at the rate
of 6% per annum from the time
of the filing of the complaint until finality of judgment. Once the judgment becomes final and
executory, the interest of
12% per annum, should be imposed, to be computed from the time the judgment
becomes final and executory until fully satisfied. (Italics in the
original; emphasis and underscoring supplied)
The imposition of 6%
interest per annum is thus to be
computed from the time the trial court rendered judgment on September 27, 2004,
and not from July 21, 1997 (the date of the auction sale) as held by the trial
court, nor from the filing of the complaint on March 19, 2001 since it was
respondent which filed the complaint (for collection of deficiency of mortgage
obligation).[16] And
after the finality of this Decision, the judgment award inclusive of interest
shall bear interest of 12% per annum until
full satisfaction thereof.
WHEREFORE, the
petition is GRANTED. The Decision of the Court of Appeals in
CA-G.R. CEB CV No. 00546 dated February 28, 2007 is MODIFIED in that respondent, Bank of the Philippine Islands, is ordered
to return to petitioners the amount of P319,111.35
representing the excess amount or residue of the proceeds of the foreclosure
sale, to bear interest at 6% per annum computed from the time the trial
court rendered its judgment on September 27, 2004 until the finality of
this Decision. Legal interest of 12% per
annum shall be imposed on the judgment award inclusive of interest from the
finality of this Decision until full satisfaction thereof.
No pronouncement as to costs.
SO ORDERED.
CONCHITA
CARPIO MORALES
Associate
Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate
Justice
Chairperson
|
ARTURO D. BRION Associate Justice |
MARIANO C. Associate Justice |
ROBERTO A. ABAD
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.
LEONARDO
A. QUISUMBING
Associate
Justice
Chairperson
CERTIFICATION
Pursuant to
Section 13, Article VIII of the Constitution, and the Division 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.
REYNATO
S. PUNO
Chief Justice
[1] Records, pp. 2-3.
[2]
[3]
[4]
[5] Decision of
[6] CA rollo, pp. 67-76.
[7]
[8]
[9] Rollo, pp. 4-14.
[10]
[11]
[12] G.R. No. 154129,
[13]
[14] PAL v. NLRC, 328 Phil. 814, 830 (1996).
[15] G.R. No. 170606,
[16] Vide: Construction Development Corp. of the Phils. v. Estrella, G.R. No. 147791, 501 SCRA 228 (2006). In this case, the Court ruled that the legal interest of 6% shall begin to run when the trial court rendered judgment and not when the complaint was filed. This because at the time of the filing of the complaint, the amount of the damages to which plaintiffs may be entitled remains unliquidated and unknown.