Republic
of the
Supreme
Court
FIRST
DIVISION
|
BANK
OF THE PHILIPPINE ISLANDS, AS SUCCESSOR-IN-INTEREST OF FAR EAST BANK &
TRUST COMPANY, Petitioner, - versus - CYNTHIA
L. REYES, Respondent. |
|
G.R.
No. 182769 Present: Chairperson, LEONARDO-DE
CASTRO, BERSAMIN, VILLARAMA, JR., JJ. Promulgated: February
1, 2012 |
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LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure of the Decision[1]
dated April 30, 2008 of the Court of Appeals in CA-G.R. CV No. 88004, entitled
Bank of the Philippine Islands, as
successor-in-interest of Far East Bank & Trust Company vs. Cynthia L. Reyes
which reversed the Decision[2]
dated November 3, 2005 of the Regional Trial Court (RTC) of Makati City, Branch
148 in Civil Case No. 03-180.
The
background facts of this case, as summed by the trial court, follow:
This is an action for sum of money filed [b]y [p]laintiff
Bank of the Philippine Islands, hereinafter referred to as BPI, as
successor-in-interest of Far East Bank & Trust Company, referred hereto as
Far East Bank, against defendant Cynthia L. Reyes, hereinafter referred to as
defendant Reyes.
As
alleged in the Complaint, defendant Reyes borrowed, renewed and received from
Far East Bank the principal of Twenty Million Nine Hundred Thousand Pesos [sic]
(P20,950,000.00). In support of such allegation, four promissory notes
were presented during the course of the trial of the case. As security for the
obligation, defendant Reyes executed Real Estate Mortgage Agreements involving
twenty[-]two (22) parcels of land. When the debt became due and demandable, the
defendant failed to settle her obligation and the plaintiff was constrained to
foreclose the properties. As alleged, after due publication, the mortgaged
properties were sold at public auction on December 20, 2001 by the Office of
the Clerk of Court & Ex-Officio Sheriff of the Regional Trial Court of
Malolos, Bulacan.
At
the public auction, the mortgaged properties were awarded to BPI in
consideration of its highest bid price amounting to Nine Million Thirty[-]Two
Thousand Nine Hundred Sixty Pesos (P9,032,960.00). On said date, the
obligation already reached Thirty Million Forty (sic) Hundred Twenty Thousand
Forty[-]One & 67/100 Pesos (P30,420,041.67), inclusive of interest
but excluding attorneys fees, publication and other charges. After applying
the proceeds of the public auction to the outstanding obligation, there remains
to be a deficiency and defendant Reyes is still indebted, as of January 20,
2003, to the plaintiff in the amount of P24,545,094.67, broken down as
follows:
Principal P19,700,000.00
Unsatisfied
Interest 2,244,694.67
Interest 2,383,700.00
Penalty 216,700.00
TOTAL P24,545,094.67
Also included in the prayer of the plaintiff is the
payment of attorneys fees of at least Five Hundred Thousand Pesos and the cost
of suit.
In the Answer, the defendant claims that based on
the plaintiffs appraisal of the properties mortgaged to Far East Bank, the
twenty[-]two properties fetched a total appraisal value of P47,436,000.00
as of January 6, 1998. This appraisal value is evidenced by the Appraisal,
which is attached as Annex 1 of the Answer. Considering the appraisal value and
the outstanding obligation of the defendant, it appears that the mortgaged
properties sold during the public auction are more than enough as payment to
the outstanding obligation of the defendant.[3]
Subsequently, upon petitioners
motion, the trial court issued an Order[4]
dated October 6, 2005 recognizing Asset Pool A (SPV-AMC), Inc. as substitute
plaintiff in lieu of petitioner.
After due trial, the trial court
rendered its Decision dated November 3, 2005, the dispositive portion of which
states:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff BANK OF THE PHILIPPINE ISLANDS, as
successor-in-interest of Far East Bank & Trust Company, and against
defendant CYNTHIA L. REYES. Accordingly, the defendant is ordered:
1.
To pay the plaintiff the amount of
Php22,083,700.00, representing said defendants outstanding obligation, plus interest
at the rate of twelve percent (12%) per annum, computed from January 20, 2003
until the whole amount is fully paid;
2.
To pay plaintiff the amount of
Php200,000.00 as attorneys fees;
3.
Costs of suit against the
defendant.[5]
Respondent filed a motion for
reconsideration but the same was denied by the trial court through an Order[6]
dated January 9, 2006.
An appeal with the Court of Appeals
was filed by respondent. This resulted
in a reversal of the trial courts judgment via
an April 30, 2008 Decision by the Court of Appeals, the dispositive portion of
which states:
WHEREFORE, the instant appeal is GRANTED. The
assailed Decision dated November 3, 2005 is hereby REVERSED AND SET ASIDE.[7]
Aggrieved, petitioner filed the
instant petition in which the following issues were put into consideration:
A. WHETHER OR NOT THERE WAS DEFICIENCY WHEN
RESPONDENTS PROPERTY WHICH SHE SUPPOSEDLY VALUED AT P47,536,000.00 WAS
SOLD AT THE EXTRA-JUDICIAL FORECLOSURE SALE AT ONLY [P9,032,960.00] BY
PETITIONER;
B. WHETHER OR NOT RESPONDENTS PROPERTY WAS OVERVALUED
WHEN IT WAS MORTGAGED TO FEBTC/BPI;
C. WHETHER OR NOT RESPONDENT CAN RAISE THE ISSUE ON THE
NULLITY OF THE EXTRA-JUDICIAL FORECLOSURE SALE IN AN ACTION FILED BY THE
PETITIONER (CREDITOR-MORTGAGEE) FOR THE RECOVERY OF DEFICIENCY AND FOR THE
FIRST TIME ON APPEAL;
D. WHETHER OR NOT THE PRICE OF P9,032,960.00 FOR
RESPONDENTS PROPERTY AT THE EXTRAJUDICIAL FORECLOSURE SALE WAS UNCONCIONABLE
OR SHOCKING TO THE CONSCIENCE OR GROSSLY INADEQUATE.
E. WHETHER OR NOT THE PETITION RAISES QUESTIONS OF LAW
AND THE QUESTIONS OF FACT RAISED FALL WITHIN THE EXCEPTIONS TO THE RULE THAT
ONLY QUESTIONS OF LAW MAY BE REVIEWED BY THIS HONORABLE COURT UNDER RULE 45 OF
THE RULES OF COURT.[8]
On the other hand, respondent
submits the following issues:
Whether or not the Court of Appeals erred in ruling
that there exists no deficiency owed by mortgagor-debtor as the
mortgagee-creditor bank acquired the mortgaged property at the foreclosure sale
worth P47,536,000 at only P9,032,960;
Whether or not the Court of Appeals erred in ruling
that the properties of the respondent were not overvalued at P47,536,000;
Whether or not the Court of Appeals erred in
entertaining the issue that the foreclosure sale was null and void;
Whether or not the Court of Appeals erred in ruling
that the purchase price of P9,032,000 at the foreclosure sale of
respondents mortgaged properties was unconscionable or grossly inadequate.[9]
After consideration of the issues
and arguments raised by the opposing sides, the Court finds the petition
meritorious.
Stripped of surplusage, the
singular issue in this case is whether or not petitioner is entitled to recover
the unpaid balance or deficiency from respondent despite the fact that
respondents property, which were appraised by petitioners
predecessor-in-interest at P47,536,000.00, was sold and later bought by
petitioner in an extrajudicial foreclosure sale for only P9,032,960.00
in order to satisfy respondents outstanding obligation to petitioner which, at
the time of the sale, amounted to P30,420,041.67 inclusive of interest
but excluding attorneys fees, publication and other charges.
There is no dispute with regard to
the total amount of the outstanding loan obligation that respondent owed to
petitioner at the time of the extrajudicial foreclosure sale of the property
subject of the real estate mortgage. Likewise,
it is uncontested that by subtracting the amount obtained at the sale of the
property, a loan balance still remains. Petitioner
merely contends that, contrary to the ruling of the Court of Appeals, it has
the right to collect from the respondent the remainder of her obligation after
deducting the amount obtained from the extrajudicial foreclosure sale. On the other hand, respondent avers that since
petitioners predecessors own valuation of the subject property shows that its
value is more than the amount of respondents outstanding obligation, then
respondent cannot be held liable for the balance especially because it was
petitioner who bought the property at the foreclosure sale.
In the recent case of BPI Family Savings Bank, Inc. v. Avenido,[10]
we reiterated the well-entrenched rule that a creditor is not precluded from
recovering any unpaid balance on the principal obligation if the extrajudicial
foreclosure sale of the property subject of the real estate mortgage results in
a deficiency, to wit:
It is settled that if the proceeds of the sale are
insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the
mortgagee is entitled to claim the deficiency from the debtor. While Act No.
3135, as amended, does not discuss the mortgagees right to recover the
deficiency, neither does it contain any provision expressly or impliedly
prohibiting recovery. If the legislature had intended to deny the creditor the
right to sue for any deficiency resulting from the foreclosure of a security
given to guarantee an obligation, the law would expressly so provide. Absent
such a provision in Act No. 3135, as amended, the creditor is not precluded
from taking action to recover any unpaid balance on the principal obligation
simply because he chose to extrajudicially foreclose the real estate mortgage.[11]
Furthermore, we have also ruled in Suico Rattan & Buri Interiors, Inc. v.
Court of Appeals[12]
that, in deference to the rule that a mortgage is simply a security and cannot
be considered payment of an outstanding obligation, the creditor is not barred
from recovering the deficiency even if it bought the mortgaged property at the
extrajudicial foreclosure sale at a lower price than its market value notwithstanding
the fact that said value is more than or equal to the total amount of the
debtors obligation. We quote from the
relevant portion of said decision:
Hence, it is wrong for petitioners
to conclude that when respondent bank supposedly bought the foreclosed
properties at a very low price, the latter effectively prevented the former
from satisfying their whole obligation. Petitioners still had the option of either
redeeming the properties and, thereafter, selling the same for a price which
corresponds to what they claim as the properties actual market value or by
simply selling their right to redeem for a price which is equivalent to the
difference between the supposed market value of the said properties and the
price obtained during the foreclosure sale.
In either case, petitioners will be able to recoup the loss they claim to have
suffered by reason of the inadequate price obtained at the auction sale and,
thus, enable them to settle their obligation with respondent bank. Moreover, petitioners are not justified in
concluding that they should be considered as having paid their obligations in
full since respondent bank was the one who acquired the mortgaged properties
and that the price it paid was very inadequate. The fact that it is respondent
bank, as the mortgagee, which eventually acquired the mortgaged properties and
that the bid price was low is not a valid reason for petitioners to refuse to
pay the remaining balance of their obligation. Settled is the rule that a
mortgage is simply a security and not a satisfaction of indebtedness.[13]
(Emphases supplied.)
We are aware of our earlier pronouncements
in Cometa v. Court of Appeals[14]
and in Rosales v. Court of Appeals[15]
which were cited by the Court of Appeals in its assailed April 30, 2008
Decision, wherein we declared that a sale price which is equivalent to more or
less twelve percent (12%) of the value of the property is shockingly low,
unconscionable and grossly inadequate, thus, warranting a nullification of the foreclosure
sale. In both cases, we declared that where the inadequacy of the price is
purely shocking to the conscience, such that the mind revolts at it and such
that a reasonable man would neither directly nor indirectly be likely to
consent to it, the sale shall be declared null and void. On the other hand, we are likewise reminded of
our ruling in Cortes v. Intermediate
Appellate Court[16]
and in Ponce De Leon v. Rehabilitation
Finance Corporation[17]
wherein we upheld the validity of foreclosure sales in which the property
subject thereof were sold at 11% and 17%, respectively, of their value.
In the case at bar, the winning bid
price of P9,032,960.00 is nineteen percent (19%) of the appraised value
of the property subject of the extrajudicial foreclosure sale that is pegged at
P47,536,000.00 which amount, notably, is only an arbitrary valuation
made by the appraising officers of petitioners predecessor-in-interest ostensibly
for loan purposes only. Unsettled
questions arise over the correctness of this valuation in light of conflicting evidence
on record.
Notwithstanding the doubtful
validity of the valuation of the property at issue, the resolution of which is
a question of fact that we are precluded from addressing at this juncture of the
litigation, and confronted by the divergent jurisprudential benchmarks which
define what can be considered as shockingly or unconscionably low price in a sale
of property, we, nevertheless, proceed to adjudicate this case on an aspect in
which it is most plain and unambiguous that it involves a forced sale with a
right of redemption.
Throughout a long line of
jurisprudence, we have declared that unlike in an ordinary sale, inadequacy of
the price at a forced sale is immaterial and does not nullify a sale since, in
a forced sale, a low price is more beneficial to the mortgage debtor for it
makes redemption of the property easier.[18]
In the early case of The National Loan and Investment Board v.
Meneses,[19]
we also had the occasion to state that:
As to the inadequacy of the price of the sale,
this court has repeatedly held that the fact that a property is sold at public
auction for a price lower than its alleged value, is not of itself
sufficient to annul said sale, where there has been strict compliance with all
the requisites marked out by law to obtain the highest possible price, and
where there is no showing that a better price is obtainable. (Government of the Philippines vs. De Asis,
G. R. No. 45483, April 12, 1939; Guerrero
vs. Guerrero, 57 Phil., 442; La
Urbana vs. Belando, 54 Phil., 930; Bank
of the Philippine Islands v . Green, 52 Phil., 491.)[20]
(Emphases supplied.)
In Hulst v. PR Builders, Inc.,[21]
we further elaborated on this principle:
[G]ross inadequacy of price does not nullify an
execution sale. In an ordinary sale, for reason of equity, a transaction may be
invalidated on the ground of inadequacy of price, or when such inadequacy
shocks ones conscience as to justify the courts to interfere; such does not
follow when the law gives the owner the right to redeem as when a sale is made
at public auction, upon the theory that the lesser the price, the easier it is
for the owner to effect redemption. When there is a right to redeem,
inadequacy of price should not be material because the judgment debtor may
re-acquire the property or else sell his right to redeem and thus recover any
loss he claims to have suffered by reason of the price obtained at the
execution sale. Thus, respondent stood to gain rather than be harmed by the low
sale value of the auctioned properties because it possesses the right of
redemption. x x x[22]
(Emphasis supplied.)
It bears also to stress that the
mode of forced sale utilized by petitioner was an extrajudicial foreclosure of
real estate mortgage which is governed by Act No. 3135, as amended. An examination of the said law reveals nothing
to the effect that there should be a minimum bid price or that the winning bid
should be equal to the appraised value of the foreclosed property or to the
amount owed by the mortgage debtor. What
is clearly provided, however, is that a mortgage debtor is given the
opportunity to redeem the foreclosed property within the term of one year from
and after the date of sale.[23]
In the case at bar, other than the mere
inadequacy of the bid price at the foreclosure sale, respondent did not allege
any irregularity in the foreclosure proceedings nor did she prove that a better
price could be had for her property under the circumstances.
Thus, even if we assume that the
valuation of the property at issue is correct, we still hold that the
inadequacy of the price at which it was sold at public auction does not
invalidate the foreclosure sale.
Even if we are so inclined out of
sympathy for respondents plight, neither could we temper respondents liability
to the petitioner on the ground of equity. We are barred by our own often repeated
admonition that equity, which has been aptly described as justice outside
legality, is applied only in the absence of, and never against, statutory law
or judicial rules of procedure.[24]
The law and jurisprudence on the matter
is clear enough to close the door on a recourse to equity.
Moreover, we fail to see any unjust
enrichment resulting from upholding the validity of the foreclosure sale and of
the right of the petitioner to collect any deficiency from respondent. Unjust enrichment exists when a person
unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice,
equity and good governance.[25]
As discussed above, there is a strong
legal basis for petitioners claim against respondent for the balance of her
loan obligation.
WHEREFORE, premises considered, the petition is hereby GRANTED.
The assailed Decision
dated April 30, 2008 of the Court of Appeals in CA-G.R. CV No. 88004 is REVERSED and SET ASIDE. The RTCs November 3, 2005 Decision in Civil Case No.
03-180 is hereby REINSTATED.
SO ORDERED.
Associate Justice
WE CONCUR:
Chief Justice
Chairperson
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LUCAS P. BERSAMIN Associate
Justice
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MARIANO C. Associate Justice
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MARTIN S. VILLARAMA, JR. Associate
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[1] Rollo, pp. 9-20; penned by Associate Justice Vicente S.E. Veloso
with Associate Justices Rebecca De Guia-Salvador and Apolinario D. Bruselas,
Jr., concurring.
[2] Id. at 132-137.
[3] Id. at 132-133.
[4] Id. at 131.
[5] Id. at 137.
[6] Id. at 138-140.
[7] Id. at 19.
[8] Id.
at 404-405.
[9] Id.
at 372.
[10] G.R. No. 175816, December 7, 2011.
[11] Id.
[12] G.R. No. 138145, June 15, 2006, 490
SCRA 560.
[13] Id. at 579-580.
[14] 404 Phil. 107 (2001).
[15] 405 Phil. 638 (2001).
[16] 256 Phil. 979 (1989).
[17] 146 Phil. 862 (1970).
[18] New Sampaguita Builders Construction Inc. v.
Philippine National Bank, 479 Phil. 483, 514-515 (2004); The Abaca Corporation of the Phils. v.
Garcia, 338 Phil. 988, 993 (1997); Gomez
v. Gealone, G.R. No. 58281, November 13, 1991, 203 SCRA 474, 486; Prudential Bank v. Martinez, G.R. No.
51768, September 14, 1990, 189 SCRA 612, 617; Francia v. Intermediate Appellate Court, 245 Phil. 717, 726 (1988);
Vda. De Gordon v. Court of Appeals, 196
Phil. 159, 165 (1981).
[19] 67 Phil. 498 (1939).
[20] Id. at 500.
[21] G.R. No. 156364, September 3, 2007,
532 SCRA 74.
[22] Id. at 103-104.
[23] Section
6, Act No. 3135, as amended.
[24] Cheng v. Donini, G.R. No. 167017, June
22, 2009, 590 SCRA 406, 414.
[25] Philippine Realty and Holdings Corporation
v. Ley Construction and Development Corporation, G.R. Nos. 165548 &
167879, June 13, 2011, 651 SCRA 719, 749-750.