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 attorney's 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 attorney's fees of at least Five Hundred Thousand Pesos and the cost of suit.
In the Answer, the defendant claims that based on the plaintiff's 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
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 defendant's 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 attorney's fees;
3. Costs of suit against the defendant.5
WHEREFORE, the instant appeal is GRANTED. The assailed Decision dated November 3, 2005 is hereby REVERSED AND SET ASIDE.7
- WHETHER OR NOT THERE WAS DEFICIENCY WHEN RESPONDENT'S 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;
- WHETHER OR NOT RESPONDENT'S PROPERTY WAS OVERVALUED WHEN IT WAS MORTGAGED TO FEBTC/BPI;
- 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;
- WHETHER OR NOT THE PRICE OF P9,032,960.00 FOR RESPONDENT'S PROPERTY AT THE EXTRAJUDICIAL FORECLOSURE SALE WAS UNCONCIONABLE OR SHOCKING TO THE CONSCIENCE OR GROSSLY INADEQUATE.
- 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
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 respondent's mortgaged properties was unconscionable or grossly inadequate.9
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 mortgagee's 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
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.)
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.)
[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 one's 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 x22 (Emphasis supplied.)
Endnotes:
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.