THIRD DIVISION
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SUPREME TRANSLINER, INC., MOISES C. ALVAREZ and
PAULITA S. ALVAREZ, Petitioners, - versus - BPI FAMILY
SAVINGS BANK, INC., Respondent. |
G.R.
No. 165617 |
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BPI FAMILY SAVINGS BANK, INC., Petitioner, - versus - SUPREME
TRANSLINER,
INC., MOISES C. ALVAREZ and PAULITA S. ALVAREZ, Respondents. |
G.R.
No. 165837 Present: BRION,* J., Chairperson, BERSAMIN, ABAD,** VILLARAMA,
JR., and SERENO,
JJ. Promulgated: February
25, 2011 |
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DECISION
VILLARAMA, JR., J.:
This case involves
the question of the correct redemption price payable to a mortgagee bank as
purchaser of the property in a foreclosure sale.
On April 24,
1995, Supreme Transliner, Inc. represented by its Managing Director, Moises C.
Alvarez, and Paulita S. Alvarez, obtained a loan in the amount of P9,853,000.00
from BPI Family Savings Bank with a 714-square meter lot covered by Transfer
Certificate of Title No. T-79193 in the name of Moises C. Alvarez and Paulita
S. Alvarez, as collateral.[1]
For
non-payment of the loan, the mortgage was extrajudicially foreclosed and the
property was sold to the bank as the highest bidder in the public auction
conducted by the Office of the Provincial Sheriff of
Before
the expiration of the one-year redemption period, the mortgagors notified the
bank of their intention to redeem the property.
Accordingly, the following Statement of Account[3] was prepared by
the bank indicating the total amount due under the mortgage loan agreement:
x
x x x
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Balance of Principal Add: Interest Due Late Payment Charges MRI Fire Insurance Foreclosure Expenses |
P
9,551,827.64 1,417,761.24 155,546.25 0.00 0.00 155,817.23 |
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Sub-total Less: Unapplied Payment |
P
11,280,952.36
908,241.01 |
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Total Amount Due As Of |
10,372,711.35 |
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Add: Attorney’s Fees (15%) |
1,555,906.70 |
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Liquidated Damages (15%) |
1,555,906.70 |
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Interest on P 10,372,711.35 from |
1,207,772.58 |
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x x x x Asset Acquired Expenses: |
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Documentary Stamps |
155,595.00 |
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Capital Gains Tax |
518,635.57 |
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Foreclosure Fee |
207,534.23 |
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Registration and Filing Fee |
23,718.00 |
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Add’l. Registration & Filing Fee |
660.00
906,142.79 |
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Interest
on P 906,142.79 from at 17.25% p.a. |
105,509.00 |
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Cancellation
Fee |
300.00 |
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Total Amount Due As Of |
P
15,704,249.12 |
x
x x x
The mortgagors requested for the
elimination of liquidated damages and reduction of attorney’s fees and interest
(1% per month) but the bank refused. On P15,704,249.12. A Certificate of Redemption[4] was issued by the
bank on
On
P5,331,237.77, with prayer for damages and attorney’s fees,
docketed as Civil Case No. 97-72 of the
In
its Answer with Special and Affirmative Defenses and Counterclaim, the bank asserted
that the redemption price reflecting the stipulated interest, charges and/or
expenses, is valid, legal and in accordance with documents duly signed by the
mortgagors. The bank further contended
that the claims are deemed waived and the mortgagors are already estopped from
questioning the terms and conditions of their contract.
On
On
According
to the trial court, plaintiffs-mortgagors are estopped from questioning the
correctness of the redemption price as they had freely and voluntarily signed the
letter-agreement prepared by the defendant bank, and along with Orient Bank
expressed their conformity to the terms and conditions therein, thus:
ORIENT
DEVELOPMENT BANKING CORPORATION
7th
Floor Ever Gotesco Corporate Center
Attention: MS. AIDA C. DELA
Senior
Vice-President
Gentlemen:
This refers to your undertaking to
settle the account of SUPREME TRANS LINER, INC. and spouses MOISES C. ALVAREZ
and PAULITA S. ALVAREZ, covering the real estate property located in the
Poblacion, City of
With regard to the proposed
refinancing of the account, we interpose no objection to the annotation of your
mortgage lien thereon subject to the following conditions:
1. That all
expenses for the registration of the annotation of mortgage and other incidental
registration and cancellation expenses shall be borne by the borrower.
2. That you
will recognize our mortgage liens as first and superior until the loan with
us is fully paid.
3. That you
will annotate your mortgage lien and pay us the full amount to close the loan
within five (5) working days from the receipt of the titles. If within this period, you have not
registered the same and paid us in full, you will immediately and
unconditionally return the titles to us without need of demand, free from
liens/encumbrances other than our lien.
4. That in case
of loss of titles, you will undertake and shoulder the cost of re-issuance of a
new owner’s titles.
5. That we will
issue the Certificate of Redemption after
full payment of P15,704,249.12. representing the outstanding balance of the
loan as of
6. That we will
release the title and the Certificate of Redemption and other pertinent papers
only to your authorized representative with complete authorization and
identification.
7. That all
expenses related to the cancellation of your annotated mortgage lien should the
Bank be not fully paid on the period above indicated shall be charged to you.
If you find the foregoing conditions acceptable,
please indicate your conformity on the space provided below and return to us
the duplicate copy.
Very
truly yours,
BPI
FAMILY BANK
BY:
(SGD.)
LOLITA C. CARRIDO
Manager
C O N F O R M E :
ORIENT DEVELOPMENT BANKING CORPORATION
(SGD.) AIDA C. DELA
Senior Vice President
C O N F O R M E :
SUPREME TRANS LINER, INC.
(SGD.) MOISES C. ALVAREZ/PAULITA S. ALVAREZ
Mortgagors[6]
(Underscoring in the original; emphasis supplied.)
As
to plaintiffs-mortgagors’ contention that the amounts representing attorney’s
fees and liquidated damages were already included in the P10,372,711.35
bid price, the trial court said this was belied by their own evidence, the
Statement of Account showing the breakdown of the redemption price as computed
by the defendant bank.
The mortgagors appealed to the CA (CA-G.R.
CV No. 74761) which, by Decision[7] dated
WHEREFORE, foregoing considered, the appealed decision
is hereby REVERSED and SET ASIDE. A new
one is hereby entered as follows:
1. Plaintiffs-appellants’
complaint for damages against defendant-appellee is hereby REINSTATED;
2. Defendant-appellee
is hereby ORDERED to return to plaintiffs-appellees (sic) the invalidly collected amount of P3,111,813.40 plus six (6)
percent legal interest from May 21, 1997 until fully returned;
3. Defendant-appellee
is hereby ORDERED to pay plaintiffs-appellees (sic) the amount of P100,000.00 as moral damages, P100,000.00 as
exemplary damages and P100,000.00 as attorney’s fees;
4. Costs
against defendant-appellee.
SO ORDERED.[8]
The CA ruled that attorney’s fees and
liquidated damages were already included in the bid price of P10,372,711.35
as per the recitals in the Certificate of Sale that said amount was paid to the
foreclosing mortgagee to satisfy not only the principal loan but also “interest
and penalty charges, cost of publication and expenses of the foreclosure
proceedings.” These “penalty charges”
consist of 15% attorney’s fees and 15% liquidated damages which the bank
imposes as penalty in cases of violation of the terms of the mortgage deed. The
total redemption price thus should only be P12,592,435.72 and the bank
should return the amount of P3,111,813.40 representing attorney’s fees
and liquidated damages. The appellate
court further stated that the mortgagors cannot be deemed estopped to question
the propriety of the charges because from the very start they had repeatedly
questioned the imposition of attorney’s fees and liquidated damages and were
merely constrained to pay the demanded redemption price for fear that the
redemption period will expire without them redeeming their property.[9]
By
Resolution[10]
dated
Hence, these petitions separately filed by the
mortgagors and the bank.
In
G.R. No. 165617, the petitioners-mortgagors raise the single issue of whether
the foreclosing mortgagee should pay capital gains tax upon execution of the
certificate of sale, and if paid by the mortgagee, whether the same should be
shouldered by the redemptioner. They
specifically prayed for the return of all asset-acquired expenses consisting of
documentary stamps tax, capital gains tax, foreclosure fee, registration and
filing fee, and additional registration and filing fee totaling P906,142.79,
with 6% interest thereon from May 21, 1997.[11]
On
the other hand, the petitioner bank in G.R. No. 165837 assails the CA in
holding that –
1. … the Certificate of Sale, the bid price of
P10,372,711.35 includes penalty charges and as such for purposes of computing
the redemption price petitioner can no longer impose upon the private
respondents the penalty charges in the form of 15% attorney’s fees and the 15% liquidated damages in the
aggregate amount of P3,111,813.40, although the evidence presented by the
parties show otherwise.
2. … private
respondents cannot be considered to be under estoppel to question the propriety
of the aforestated penalty charges despite the fact that, as found by the
Honorable Trial Court, “there was very active negotiation between the parties
in the computation of the redemption price” culminating into the signing freely
and voluntarily by the petitioner, the private respondents and Orient Bank,
which financed the redemption of the foreclosed property, of Exhibit “3”,
wherein they mutually agreed that the redemption price is in the sum of
P15,704,249.12.
3. … petitioner
[to] pay private respondents damages in the aggregate amount of P300,000.00 on
the ground that the former acted in bad faith in the imposition upon them of
the aforestated penalty charges, when in truth it is entitled thereto as the
law and the contract expressly provide and that private respondents agreed to
pay the same.[12]
On
the correct computation of the redemption price, Section 78 of Republic Act No. 337, otherwise known as
the General Banking Act, governs in cases where the mortgagee is a bank.[13] Said provision reads:
SEC.
78. x x x In the event of foreclosure, whether judicially or extrajudicially,
of any mortgage on real estate which is security for any loan granted before
the passage of this Act or under the provisions of this Act, the mortgagor or
debtor whose real property has been sold at public auction, judicially or
extrajudicially, for the full or partial payment of an obligation to any bank,
banking or credit institution, within the purview of this Act shall have the
right, within one year after the sale of the real estate as a result of the
foreclosure of the respective mortgage, to redeem the property by paying the
amount fixed by the court in the order of execution, or the amount due under
the mortgage deed, as the case
may be, with interest thereon at the
rate specified in the mortgage, and all the costs, and judicial and
other expenses incurred by the bank or institution concerned by reason of the
execution and sale and as a result of the custody of said property less the
income received from the property. x x x x (Emphasis supplied.)
Under
the Mortgage Loan Agreement,[14]
petitioners-mortgagors undertook to pay the attorney’s fees and the costs of
registration and foreclosure. The
following contract terms would show that the said items are separate and
distinct from the bid price which represents only the outstanding loan balance
with stipulated interest thereon.
23. Application of Proceeds of Foreclosure Sale. The proceeds of sale of the mortgaged property/ies
shall be applied as follows:
a) To the payment of the expenses and cost of
foreclosure and sale, including the attorney’s fees as herein provided;
b) To the satisfaction of all interest and charges
accruing upon the obligations herein and hereby secured.
c) To the satisfaction of the principal amount of the
obligations herein and hereby secured.
d) To the satisfaction of all other obligations then
owed by the Borrower/Mortgagor to the Bank or any of its
subsidiaries/affiliates such as, but not limited to BPI Credit Corporation; or
to Bank of the Philippine Islands or any of its subsidiaries/affiliates such
as, but not limited to BPI Leasing Corporation, BPI Express Card Corporation,
BPI Securities Corporation and BPI Agricultural Development Bank; and
e) The balance, if any, to be due to the
Borrower/Mortgagor.
x x x x
31. Attorney’s Fees: In case the Bank
should engage the services of counsel to enforce its rights under this
Agreement, the Borrower/Mortgagor shall pay an amount equivalent to fifteen
(15%) percent of the total amount claimed by the Bank, which in no case shall
be less than P2,000.00, Philippine currency, plus costs, collection expenses
and disbursements allowed by law, all of which shall be secured by this
mortgage.[15]
Additionally,
the Disclosure Statement on Loan/Credit Transaction[16] also duly signed
by the petitioners-mortgagors provides:
10. ADDITIONAL CHARGES IN CASE CERTAIN STIPULATIONS
ARE NOT MET BY THE BORROWER
a. Post Default Penalty 3.00% per month
b. Attorney’s Services 15% of sum due but not less than
P2,000.00
c. Liquidated Damages 15% of sum due but not less than
P10,000.00
d. Collection & Legal Cost As provided by the Rules of Court
e. Others (Specify)
As
correctly found by the trial court, that attorney’s fees and liquidated damages
were not yet included in the bid price of P10,372,711.35 is clearly
shown by the Statement of Account as of April 4, 1997 prepared by the
petitioner bank and given to
petitioners-mortgagors. On the other
hand, par. 23 of the Mortgage Loan Agreement indicated that asset acquired
expenses were to be added to the redemption price as part of “costs and other expenses incurred”
by the mortgagee bank in connection with the foreclosure sale.
Coming now to
the issue of capital gains tax, we find merit in petitioners-mortgagors’
argument that there is no legal basis for the inclusion of this charge in the
redemption price. Under Revenue
Regulations (RR) No. 13-85 (December 12, 1985), every sale or exchange or other
disposition of real property classified as capital asset under Section 34(a)[17] of the Tax
Code shall be subject to the final capital gains tax. The term sale includes pacto de retro and other forms of conditional sale. Section 2.2 of Revenue Memorandum Order (RMO) No. 29-86 (as
amended by RMO No. 16-88 and as further amended by RMO Nos. 27-89 and 6-92)
states that these conditional sales “necessarily include mortgage foreclosure
sales (judicial and extrajudicial foreclosure sales).” Further, for real
property foreclosed by a bank on or after
Under
Section 63 of Presidential Decree No. 1529 otherwise known as the Property
Registration Decree, if no right of redemption exists, the certificate of
title of the mortgagor shall be cancelled, and a new certificate issued in the
name of the purchaser. But where the
right of redemption exists, the certificate of title of the mortgagor shall not
be cancelled, but the certificate of sale and the order confirming the sale
shall be registered by brief memorandum thereof made by the Register of Deeds
upon the certificate of title. In the
event the property is redeemed, the certificate or deed of redemption shall be
filed with the Register of Deeds, and a brief memorandum thereof shall be made
by the Register of Deeds on the certificate of title.
It is therefore clear that in
foreclosure sale, there is no actual transfer of the mortgaged real property
until after the expiration of the one-year redemption period as provided in Act
No. 3135 and title thereto is consolidated in the name of the mortgagee in case
of non-redemption. In the interim, the
mortgagor is given the option whether or not to redeem the real property. The issuance of the Certificate of Sale does
not by itself transfer ownership.[19]
RR No. 4-99 issued on
SEC. 3. CAPITAL GAINS TAX. –
(1) In case the
mortgagor exercises his right of redemption within one year from the issuance
of the certificate of sale, no capital gains tax shall be imposed because
no capital gains has been derived by the mortgagor and no sale or transfer of
real property was realized. x x x
(2) In case of
non-redemption, the capital gains [tax] on the foreclosure sale imposed under
Secs. 24(D)(1) and 27(D)(5) of the Tax Code of 1997 shall become due based on
the bid price of the highest bidder but only upon the expiration of the
one-year period of redemption provided for under Sec. 6 of Act No. 3135, as
amended by Act No. 4118, and shall be paid within thirty (30) days from the
expiration of the said one-year redemption period.
SEC. 4. DOCUMENTARY STAMP TAX. –
(1) In case the mortgagor exercises his right of
redemption, the transaction shall only
be subject to the P15.00 documentary stamp tax imposed under Sec. 188 of
the Tax Code of 1997 because no land or realty was sold or transferred for a
consideration.
(2) In case of
non-redemption, the corresponding documentary stamp tax shall be levied,
collected and paid by the person making, signing, issuing, accepting, or
transferring the real property wherever the document is made, signed, issued,
accepted or transferred where the property is situated in the Philippines. x x
x (Emphasis supplied.)
Although the subject foreclosure sale
and redemption took place before the effectivity of RR No. 4-99, its provisions
may be given retroactive effect in this case.
Section
246 of the NIRC of 1997 states:
SEC. 246. Non-Retroactivity of Rulings. – Any revocation,
modification, or reversal of any of the rules and regulations promulgated in
accordance with the preceding Sections or any of the rulings or circulars
promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal
will be prejudicial to the taxpayers, except in the following cases:
(a) where the
taxpayer deliberately misstates or omits material facts from his return or in
any document required of him by the Bureau of Internal Revenue;
(b) where the
facts subsequently gathered by the Bureau of Internal Revenue are materially
different from the facts on which the ruling is based; or
(c) where the
taxpayer acted in bad faith.
In this case, the retroactive
application of RR No. 4-99 is more consistent with the policy of aiding the
exercise of the right of redemption. As the Court of Tax Appeals concluded in one
case, RR No. 4-99 “has curbed the inequity of imposing a capital gains tax even
before the expiration of the redemption period [since] there is yet no transfer
of title and no profit or gain is realized by the mortgagor at the time of
foreclosure sale but only upon expiration of the redemption period.”[20] In his commentaries, De Leon expressed the
view that while revenue regulations as a general rule have no retroactive
effect, if the revocation is due to the fact that the regulation is erroneous
or contrary to law, such revocation shall have retroactive operation as to
affect past transactions, because a wrong construction of the law cannot give rise
to a vested right that can be invoked by a taxpayer.[21]
Considering that herein
petitioners-mortgagors exercised their right of redemption before the
expiration of the statutory one-year period, petitioner bank is not liable to
pay the capital gains tax due on the extrajudicial foreclosure sale. There was
no actual transfer of title from the owners-mortgagors to the foreclosing bank.
Hence, the inclusion of the said charge
in the total redemption price was unwarranted and the corresponding amount paid
by the petitioners-mortgagors should be returned to them.
WHEREFORE, premises considered, both
petitions are PARTLY GRANTED.
In G.R. No. 165617, BPI Family
Savings Bank, Inc. is hereby ordered to RETURN
the amounts representing capital gains and documentary stamp taxes as reflected
in the Statement of Account To Redeem as of April 7, 1997, to petitioners
Supreme Transliner, Inc., Moises C. Alvarez and Paulita Alvarez, and to retain
only the sum provided in RR No. 4-99 as documentary stamps tax due on the foreclosure
sale.
In G.R. No. 165837, petitioner BPI
Family Savings Bank, Inc. is hereby declared entitled to the attorney’s fees
and liquidated damages included in the total redemption price paid by Supreme
Transliner, Inc., Moises C. Alvarez and Paulita Alvarez. The sums awarded as moral and exemplary
damages, attorney’s fees and costs in favor of Supreme Transliner, Inc., Moises
C. Alvarez and Paulita Alvarez are DELETED.
The
Decision dated
SO ORDERED.
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MARTIN S. VILLARAMA, JR. Associate Justice |
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WE CONCUR: ARTURO D.
BRION Associate Justice Acting Chairperson |
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LUCAS P. BERSAMIN Associate Justice |
ROBERTO A. ABAD Associate Justice |
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MARIA Associate Justice |
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A T T E S T A T I O N
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.
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ARTURO D. BRION Associate Justice Acting Chairperson, Third
Division |
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the 1987
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.
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RENATO C. CORONA Chief Justice |
*
Designated Acting Chairperson per Special Order No. 925 dated
** Designated additional member per Special
Order No. 926 dated
[1] Records, pp. 48-52.
[2]
[3]
[4]
[5]
[6]
[7] Rollo (G.R. No. 165617), pp. 23-36. Penned by Associate Justice Eugenio S. Labitoria and concurred in by Associate Justices Mercedes Gozo-Dadole and Rosmari D. Carandang.
[8]
[9]
[10]
[11]
[12] Rollo (G.R. No. 165837), pp. 13-14.
[13] Tecklo
v. Rural Bank of Pamplona, Inc., G.R. No. 171201, June 18, 2010, 621 SCRA
262, 273, citing Heirs of Norberto J. Quisumbing v. Philippine National Bank, G.R.
No. 178242, January 20, 2009, 576 SCRA 762, 772; Union
Bank of the Philippines v. Court of Appeals, G.R. No. 134068, June 25,
2001, 359 SCRA 480, 490, citing Ponce de
Leon v. Rehabilitation Finance Corporation, No. L-24571,
[14] Records, pp. 48-51.
[15]
[16]
[17] Now Sec. 39(A) of the National Internal Revenue Code of 1997.
SEC. 39. Capital Gains and Losses. –
(A) Definitions. – As used in this Title –
(1) Capital Assets. – The term “capital assets” means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property used in the trade or business, of a character which is subject to the allowance for depreciation provided in Subsection (F) of Section 34; or real property used in trade or business of the taxpayer.
[18] De Leon and De Leon, Jr., The National Internal Revenue Code Annotated, 2003 Ed., Vol. 1, pp. 130-131, citing BIR Ruling No. 134, July 12, 1990.
[19] BIR Ruling [DA-062-06]
[20] Spouses Alfredo & Imelda Diaz v. BIR,
C.T.A. Case No. 6244,
[21] De Leon and De Leon, Jr., supra, Vol. 2, p. 540.