G.R. No. 75786. August 31, 1987
COMMUNITY SAVINGS & LOAN ASSOCIATION, INC. AND “HEIRS OF NARCISO MENDIOLA”, PETITIONERS, VS. HON. COURT OF APPEALS, ADORACION ESGUERRA-CRUZ, YOLANDA E. VILLANUEVA, AND EDGARDO E…
GUTIERREZ, JR., J.:
This is a petition for review on certiorari which seeks to
set aside (a) the decision of the Court of Appeals dated June 30, 1986 in
CA-G.R. No. 06502 which reversed the decision of the Regional Trial Court,
Fourth Judicial Region, Branch 71, Antipolo, Rizal, in Civil Case No. 395-A and, (b) respondent court’s
resolution dated August 25, 1986 denying the petitioners’ motion for
reconsideration.
The facts on record are as follows:
On May 4, 1972,
the spouses, Antonio C. Esguerra and Lolita M. Esguerra, predecessors-in-interest of the private
respondents, secured from petitioner Community Savings and Loan Association,
Inc. (CSLA), then known as Taytay Savings and Loan
Association, a loan in the sum of P10,000.00. On June
6, 1972, the Esguerras obtained an
additional loan of P15,000.00. These were secured by a real estate mortgage
and amendment of real estate mortgage over Transfer Certificates of Title Nos.
217509 and 161966, and duly registered with the Registry of Deeds of Rizal.
The loans matured on March
28, 1976. On May 25, 1978,
Antonio C. Esguerra, debtor-mortgagor died. Prior to his death, no action whatsoever was
taken by petitioner CSLA to collect the loan.
No demand or collection letters were sent. But in March 1979, CSLA, through counsel
allegedly sent a demand letter addressed to the deceased informing him
that the loan was long overdue and giving him five (5) days from receipt
thereof to settle his account.
On March 30, 1979,
CSLA filed a petition for extra-judicial foreclosure of real estate mortgage
under Act No. 3135, before the Office of the Sheriff, Pasig, Metro
Manila. Consequently, a Notice of
Sheriff’s Sale dated October 3, 1979 was issued. On November
5, 1979, the disputed realties were sold to CSLA as the highest
bidder, and the corresponding Sheriff’s Certificate of Sale issued. The sale was subsequently registered with the
Registry of Deeds of Rizal on December 19, 1979.
Sometime in October 1980, the private respondents as heirs of the
deceased debtor-mortgagor Antonio Esguerra, inquired from CSLA about the status of the mortgage
indebtedness. CSLA instead of informing
them about the foregoing developments, simply assured
them not to mind the loan as the same was of a very minimal amount, not yet due
and demandable, and that the same could easily be paid as the collateral was
very much bigger in value.
Contrary to these assurances, CSLA executed on December 12, 1980 an affidavit of
consolidation adjudicating to itself the full ownership of the properties. The affidavit of consolidation was thereafter
registered with the Registry of Deeds of Rizal and
Transfer Certificate of Title No. 161966 cancelled. In lieu thereof, Transfer Certificate of
Title No. 503459 was issued in the name of CSLA.
On February 14, 1981,
CSLA sold the foreclosed property to its co-petitioner Narciso
Mendiola for ONE HUNDRED FORTY THOUSAND (P140,000.00) PESOS.
Transfer Certificate of Title 503459 was subsequently cancelled and a
new one issued in Mendiola’s name.
On April 8, 1981,
the aggrieved private respondents filed a verified complaint for cancellation
of foreclosure sale, and damages with prayer for writ of preliminary attachment
alleging among others that:
“13. the foreclosure
proceedings as well as all transactions attendant immediately prior and/or
subsequent thereto, are all void and of no force and effect; the same having
been done contrary to law on the matter, and perpetrated with fraud, collusion,
breach of trust and confidence on the part of the Bank and its accomplices.
“14. The sale in favor
of the defendant Bank was in excess of authority granted Bank and for a
consideration disproportionate to the actual fair market value of the mortgaged
properties and there inadequate, sufficient to shock the conscience of man;
“15. The defendants as
hereinabove shown, deliberately in bad faith and with malice, withheld any
information from the plaintiffs, despite the latters
request and through the use of stealth and strategy allowed the loan to mature,
foreclosed the mortgage without benefit of notice, adjudicate the property
unto itself and even failed to turn over excess of amount realized from sale to
the defendant all of which acts prevented the plaintiffs from exercising their
right of redemption;
“16. Plaintiffs learned
of the fact of sale, consolidation of title and resale to defendant, NARCISO
MENDIOLA, only recently and immediately thereafter confronted the Bank about it
but the Bank officially refused to entertain them and even refused to furnish
the plaintiffs of the documents pertinent to the mortgage and its foreclosure;
“16-A. That defendants are guilty of fraud in
contracting the debt or incurring the obligation, upon which the action is
brought or in concealing or disposing of the property;” (p. 73-74, Rollo)
On February 13, 1985,
the trial court rendered judgment in favor of herein petitioners, to wit:
“Wherefore, in view of the foregoing considerations and on the
strength thereof the Court renders JUDGMENT:
1.
Dismissing the Complaint of
plaintiffs and on the Counterclaim of Defendants;
2.
Declaring the foreclosure of
Mortgage on the property described in Transfer Certificate of Title No. 161966
in the Registry of Deeds for Rizal valid and legal
and further declaring the subsequent Transfer Certificate of Title No. 504964
issued in the name of Narciso Mendiola
legal and valid and ordering forthwith the cancellation therefrom
of any liens or encumbrances;
3.
Condemning plaintiffs jointly and
severally to pay defendant Community Savings and Loan Association, Inc. of Taytay, Rizal, the sum of
P2,534,356.00 representing unearned profits, business losses, damage to the
good name and good will of the said bank including litigation expenses;
4.
Condemning plaintiffs, jointly and
severally to pay defendant Narciso Mendiola P100,000.00 moral damages; and
5.
Condemning further said
plaintiffs, jointly and severally to pay defendants P50,000.00 exemplary
damages; and
6.
Plaintiffs to pay defendants the
sum equivalent to 10% of all the amounts adjudged herein to defendants as
attorney’s fees; and
7.
The Costs of this action.
SO ORDERED.” (pp. 105, Rollo)
Forthwith, the private respondents interposed an appeal to the
Court of Appeals based on the following assignment of errors:
“I
THE LOWER COURT
ERRED IN NOT DECLARING THE EXTRAJUDICIAL FORECLOSURE VOID AND OF NO FORCE AND
EFFECT.
II
GRANTING ARGUENDO THAT THE EXTRAJUDICIAL
FORECLOSURE IS VALID, THE LOWER COURT
ERRED IN NOT GIVING THE PLAINTIFFS–APPELLANTS A CHANCE TO REDEEM THE PROPERTY
IN ACCORDANCE WITH THE RULING IN PEREZ, ET. AL., VS.
PHILIPPINE NATIONAL BANK, ET. AL. (17 SCRA 833).
III
THE LOWER COURT
ERRED IN NOT DECLARING THAT THE PUBLIC AUCTION PRICE IS GROSSLY INADEQUATE,
DISPROPORTIONATE AND SHOCKING TO THE CONSCIENCE OF MAN.
IV
THE LOWER COURT
ERRED IN NOT DECLARING DEFENDANT-APPELLEE NARCISO MENDIOLA A PURCHASER IN BAD
FAITH.
V
THE LOWER COURT
ERRED IN AWARDING EXCESSIVE DAMAGES TO THE DEFENDANTS-APPELLEES.” (pp.
34-35, Rollo)
On June 30, 1986,
respondent appellate court rendered a decision, as follows:
xxx xxx xxx
“x x x. There is
more than enough evidence in the record to conclude that the foreclosure
proceedings conducted on the questioned property is null and void having been
perpetrated thru fraud and that defendant Narciso Mendiola was not a purchaser for value and in good faith.
WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE
and a new one declaring null and void the,
(1)
Notice of the Sheriff’s Sale
dated October 3, 1979;
(2)
Certificate of Sale
in favor of defendant-appellee Mortgagee Community
Savings and Loan Association, Inc. dated November 5, 1979;
(3)
Affidavit of Consolidation
executed by defendant-appellee mortgagee bank; and
(4)
Deed of Absolute Sale dated February 14, 1981 executed by
defendant-appellee mortgagee bank in favor of its
co-defendant-appellee Narciso
Mendiola.
The plaintiffs-appellants herein, as heirs of
Antonio C. Esguerra are entitled to redeem the
property in question by paying or tendering to the defendant-appellee mortgagee bank the capital of the debt of Antonio Esguerra, with the stipulated interest of 12% to the date
of the foreclosure, plus interest
thereafter at 12% per annum. Such
payment is to be made within ninety (90) days after receipt of this
decision. Defendant-Appellee
Community Savings and Loan Association, Inc. is hereby ordered to execute the
corresponding writ of redemption in favor of the plaintiffs-appellees
(sic) after receipt of such payment.
The Register of Deeds of Rizal is ordered
to cancel Transfer Certificate of Titles Nos. 503459 and 504964 in the names of
the Community Savings and Loan Association, Inc. and Narciso
Mendiola respectively, and to issue a new one in the
names of plaintiffs-appellants.
Both defendants-appellees Community
Savings and Loan Association, Inc. and Narciso Mendiola are hereby ordered jointly and severally to pay
the plaintiffs-appellants the sum of Thirty Thousand (P30,000.00)
Pesos as moral and exemplary damages and Fifteen Thousand (P15,000.00) Pesos as
attorney’s fees (ten percent of the indebtedness). No costs.
SO ORDERED.” (pp. 44-46, Rollo)
A motion for reconsideration filed by the petitioners before the
Court of Appeals was denied in a resolution dated August 25, 1986.
Hence, the present petition filed by petitioners on the following
grounds:
“1. THE RESPONDENT HON. COURT OF
APPEALS COMMITTED SERIOUS ERROR OF LAW IN HOLDING THAT PERSONAL NOTICE TO
MORTGAGORS OR HEIRS IS REQUIRED FOR THE VALIDITY OF THE EXTRA-JUDICIAL
FORECLOSURE OF MORTGAGE UNDER ACT 3135” (p. 12, Rollo)
“2. THE RESPONDENT HON. COURT OF
APPEALS COMMITTED SERIOUS ERRORS IN DISREGARDED (sic) CLEAR DOCUMENTED EVIDENCE
OF FACTUAL NOTIFICATION OF THE STATUS OF THE LOAN AND FORECLOSURE WHICH WERE
EVEN ADMITTED BY MORTGAGORS’ CHILDREN” (p. 15, Rollo)
“3. THE COURT OF APPEALS ERRED IN
ALLOWING REDEMPTION OF THE FORECLOSED PROPERTY AFTER THE EXPIRATION OF THE
REDEMPTION PERIOD AND AFTER THE PROPERTY HAS PASSED TO A THIRD PERSON INNOCENT
PURCHASER FOR VALUE AND IN CANCELLATION OF TCT No. 503459 and 504964.
THE COURT OF APPEALS ERRED IN HOLDING
NARCISO MENDIOLA A BUYER IN BAD FAITH” (p. 17, Rollo)
“4. THE
COURT OF APPEALS ERRED IN APPLICATION OF THE RULINGS IN ‘PNB vs. COURT OF
APPEALS’ AND ‘PEREZ vs. PNB'” (p. 20, Rollo)
“5. THE
COURT OF APPEALS ERRED IN REVERSING IN TOTO THE FINDINGS OF THE TRIAL COURT
FULLY SUPPORTED BY PREPONDERANT AND DOCUMENTED EVIDENCE” (p 22, Rollo)
“6. COURT
OF APPEALS ERRED IN AWARDING DAMAGES IN FAVOR OF PRIVATE RESPONDENTS” (p
27. Rollo)
The decisive issue to be determined in this case is whether or
not the extrajudicial foreclosure, consolidation of ownership, and resale of
the subject property were perpetrated with fraud by the petitioners on the
private respondents so as to justify the annulment of the foreclosure and
resale and to entitle the private respondents to damages.
A thorough review of the records shows that the findings and
conclusions of the Court of Appeals are amply supported by the evidence.
As found by the respondent Court of Appeals.
“x x x, it
appears from the evidence that the President of the defendant-appellee motgagee bank himself
admitted that he was aware of the death of debtor-mortgagor Antonio Esguerra (Tsn., November 5, 1980,
p. 21-23), and yet despite this knowledge, the alleged demand letter was still
addressed to the deceased debtor-mortgagor and not to his widow or to his
heirs. Also, the alleged demand letter
was dated March 1, 1979
while the person to whom the same was addressed died on May 25, 1978.” (p. 38, Rollo)
The appellate court also found that the private respondents even
went to CSLA and inquired from it about the status of the mortgage loan and the
balance remaining if any. The petitioner
bank assured respondents that it was going to furnish them the appropriate
statement of accounts, not to worry because the mortgage indebtedness is not
yet due, that it was minimal and that they would be allowed to redeem the
property. The private respondents
justifiably and in good faith relied on these assurances and commitments of
CSLA. Were it not for these
representations, the private respondents could have effected
a seasonable redemption of the property, if not seasonable payment of the
mortgage indebtedness (p. 39, Rollo).
Narciso Mendiola
was obviously a buyer in bad faith based on the following circumstances: He never bothered to investigate the property
which he supposedly bought before purchasing it; even after his purchase of the
property in question, he never made any attempt to visit the same; he did not bother
to inspect nor ask for the title and other documents evidencing the sale from
the bank (see p. 43, Rollo); he never bothered to
inform the persons occupying the land which he bought for P140,000.00, that he
was the new owner; after spending the sum of P140,000.00, he never showed any
interest in occupying the lot; he admitted that Mr. Virgilio
Tamayo, Jr. the president of petitioner bank is his
known acquaintance; and he never made any attempt to employ the legal services
of his own counsel; instead he simply entrusted his defense to the petitioner
bank’s counsel (see p. 44, Rollo).
Thus, the respondent appellate court correctly ruled that:
” x x x,
the buyer of a parcel of land who could not have failed to know or discover
that the land sold to him was in the adverse possession of another, is a buyer
in bad faith (St. Peter Memorial Park, Inc. vs. Cleofas,
92 SCRA 389). In the case at bar,
defendant-appellee Mendiola
could not have failed to know or discover that the subject property sold to him
was in the adverse possession of the plaintiffs-appellants. In such case his knowledge is equivalent to
registration and taints his purchase with bad faith. Hence he does not come under the protective
mantle of the Land Registration Act.
Moreover, in Serrano vs. Court of Appeals
(139 SCRA 179), the Supreme Court noted the following circumstances in finding
the petitioner therein as having acted in bad.
(1) That the supposed buyer in good faith and current owner never showed
the slightest interest in the litigation involving the cancellation of his title
and the reversion of the lot he purchased from Macaraya
to the original vendor; (2) That while the purchaser lives in San Roque, Talisay, Cebu, he has never been to Mati, Davao Oriental (where the land was situated) nor has he
seen the land sold to him by Macaraya; and (3) the
purchaser never bothered to find out what was sold to him for P20,000.00 in
1969, whether or not the land was really worth that much or that it even
existed.
Similar to the case at bar, defendant-appellee
Mendiola never showed any interest in the litigation
in that he never made any attempt to employ the legal services of his own
counsel and simply entrusted his defense to his co-defendant bank’s counsel (Tsn., November 12, 1984, pp. 25-36). Likewise, defendant-appellee
Mendiola never made any attempt to visit the property
which he allegedly bought up to this date (Tsn.,
November 20, 1984, p. 3). Nor did he
bother to investigate the property whether the land really existed or not. Moreover, defendant-appellee
Mendiola,
never bothered to inspect the accompanying documents of the sale nor did he ask
for the title of the land for inspection before or after the sale (Tsn., November 12, 1984, pp. 19-20).” (p. 43, Rollo)
On the basis of the foregoing facts on record, We
cannot but agree with the conclusions of respondent court that:
“All the foregoing circumstances are badges of fraud. If taken collectively, they show an ulterior
motive and a grand design on the part of the defendant-appellee
mortgagee bank to acquire the property in question through that unwarranted
foreclosure proceedings. To deprive the
plaintiffs-appellants of their property in the light of the facts obtaining in
the case at bar would be the height of injustice. x x
x.” (p. 38, Rollo)
The extrajudicial foreclosure in the case at bar having been
tainted with fraud, we hold the same to be null and void ab
initio.
It follows that the consolidation of ownership of subject properties to
petitioner bank as highest bidder, and its subsequent resale to Narciso Mendiola are also without
legal force and effect, and that private respondents are entitled to the
equitable remedy of redemption granted by the respondent appellate court.
Contrary to the petitioners’ arguments, the case of Amparo G. Perez v. Philippine
National Bank (17 SCRA 833) is applicable to the instant
case. In Perez v. PNB
the widow of the deceased debtor-mortgagor inquired from PNB about the status
of her late husband’s loan. Despite said
inquiry and willingness to redeem, the bank without notice caused the mortgaged
properties to be extra-judicially foreclosed and was itself the highest bidder.
In allowing the heirs of the deceased debtor-mortgagor to redeem
the foreclosed properties, the Supreme Court held that:
xxx xxx xxx
“Nevertheless, while upholding the validity of the appellant
Bank’s foreclosure, We cannot close our eyes to the fact that the Bank was
apprised since 1947 of the death of its debtor, Vicente Perez, yet it failed
and neglected to give notice of the foreclosure to the latter’s widow and
heirs, as expressly found by the court a quo.
Such failure, in effect, prevented them from blocking the foreclosure
through seasonable payment, as well as impeded their effectuating a seasonable
redemption. In view of these circumstances,
it is our view that both justice and equity would be served by permitting
herein appellees to redeem the foreclosed property
within a reasonable time, by paying the capital and interest of the
indebtedness up to the time of redemption, plus foreclosure and useful
expenses, less any rents and profits obtained by the Bank from and after the
same entered into its possession.
Wherefore, the judgment appealed from is hereby modified, as
follows:
xxx xxx xxx
(3) Declaring the appellees herein, widow and other heirs of Vicente Perez
entitled to redeem the property in question by paying or tendering to the Bank
the capital of the debt of Vicente Perez, with the stipulated interest to the
date of foreclosure, plus interest thereafter at 12% per annum; and reimbursing
the Bank the value of any useful expenditures on the said property but
deducting from the amounts thus payable the value of any rents and profits
derived by the appellee National Bank from the
property in question. Such payment to be
made within sixty (60) days after the balance is determined by the court of
origin.
Neither party to recover damages or costs.”
In a similar case, Philippine National Bank v.
Court of Appeals (94 SCRA 357), where the bank manager
assured the heirs of the debtor-mortgagor that they will be allowed to pay the
mortgage obligations, and that they acted on these representations, the Supreme
Court ruled that:
“On equitable principles, particularly on the ground of estoppel, we must
rule against petitioner Bank. ‘The
doctrine of estoppel is based upon the grounds of
public policy, fair dealing, good faith and justice, and its purpose is to
forbid one to speak against its own act, representations, or commitments to the
injury of one to whom they were directed and who reasonably relied
thereon. The doctrine of estoppel springs from equitable principles and the equities
in the case. It is designed to aid the
law in the administration of justice where without its aid injustice might
result. It has been applied by this
Court wherever and whenever special circumstances of a case so demand.
xxx xxx xxx
Perez justifiably and reasonably relied upon the assurance of the
Bank’s Manager that he would be allowed to pay the remaining obligation of his
deceased parents and he acted on that basis.
Even fair dealing alone would have required the Bank to abide by its
representations, but it did not.
Clearly, the equities of the case are with Perez.”
Fraud and bad faith having been duly established on the part of
petitioners, it follows that private respondents are necessarily entitled to
the minimal damages awarded. We find the
assessment by the Court of Appeals to be fair and just.
One other important point that militates against the petitioners’
first ground for this petition is the fact that no notice of the foreclosure
proceedings was ever sent by CSLA to the deceased mortgagor Antonio Esguerra or his heirs inspite of an express stipulation in the mortgage agreement
to that effect. Said Real Estate
Mortgage provides, in Sec. 10 thereof that:
“(10) All correspondence
relative to this mortgage, including demand letters, summons,
subpoenas, or notifications of any judicial or
extrajudicial actions shall be sent to
the Mortgagor at the address given above
or at the address that may hereafter be given in writing by the Mortgagor to
the Mortgagee, and the mere act of sending any correspondence by mail or by
personal delivery to the said address shall be valid and
effective notice to the Mortgagor for all
legal purposes, x x x.”
(Underscoring supplied) (p. 50-51, Rollo)
The Court of Appeals, in appreciating the foregoing provision
ruled that it “is an additional stipulation between the parties. As such, it is the law between them and as it
is not contrary to law, morals, good customs and public policy, the same should
be complied with faithfully (Article 1306, New Civil Code of the Philippines). Thus, while publication of the foreclosure
proceedings in the newspaper of general circulation was complied with, personal
notice is still required, as in the case at bar, when the same was mutually
agreed upon by the parties as additional condition of the mortgage
contract. Failure to
comply with this additional stipulation would render illusory Article 1306 of
the New Civil Code of the Philippines” (p. 37, Rollo).
On the issue of whether or not CSLA notified the private
respondents of the extrajudicial foreclosure sale in compliance with Sec. 10 of
the mortgage agreement the Court of Appeals found as follows:
“As the record is bereft of any evidence which even impliedly
indicate that the required notice of the extrajudicial foreclosure was ever
sent to the deceased debtor-mortgagor Antonio Esguerra
or to his heirs, the extrajudicial foreclosure proceedings on the property in
question are fatally defective and are not binding on the deceased
debtor-mortgagor or to his heirs. (p.
37, Rollo)
Hence, even on the premise that there was no attendant fraud in
the proceedings, the failure of the petitioner bank to comply with the
stipulation in the mortgage document is fatal to the petitioners’ cause.
The rule is that “findings of facts of the Court of Appeals
are binding on the Supreme Court” (De Gala-Sison
v. Manalo, 8 SCRA 595; Goduco
v. Court of Appeals, 14 SCRA 282; Ramirez Telephone Corporation v. Bank of
America, 29 SCRA 191; Chan v. Court of Appeals, 33 SCRA 737). This case illustrates our ruling that a
question of non-compliance with notice and publication requirements of an extrajudicial
foreclosure sale is a factual issue binding upon the Supreme Court (Reyes v.
Court of Appeals, 107 SCRA 126).
WHEREFORE, premises considered, the petition is hereby
DISMISSED for lack of merit. The
decision and resolution of the respondent Court of Appeals, dated June 30, 1986 and August 25, 1986 respectively, are
hereby AFFIRMED.
SO ORDERED.
Feliciano, Bidin, and Cortes, JJ., concur.
Fernan, J., (Chairman), no part pursuant to May 13, 1987, Resolution of the
Court’s Division.