Case Digest (G.R. No. 182769)
Facts:
The case involves the Bank of the Philippine Islands (BPI), as the successor-in-interest of Far East Bank & Trust Company, as the petitioner, and Cynthia L. Reyes as the respondent. The events leading to the case began when Reyes borrowed a principal amount of Twenty Million Nine Hundred Thousand Pesos (₱20,950,000.00) from Far East Bank, which was secured by Real Estate Mortgage Agreements on twenty-two parcels of land. When the debt became due, Reyes failed to settle her obligation, prompting BPI to foreclose the properties. The properties were sold at a public auction on December 20, 2001, for Nine Million Thirty-Two Thousand Nine Hundred Sixty Pesos (₱9,032,960.00), despite the outstanding obligation amounting to Thirty Million Forty-Two Thousand Forty-One Pesos and 67/100 (₱30,420,041.67), which included interest but excluded attorney's fees and other charges. After applying the auction proceeds to the outstanding obligation, a deficiency of ₱24,545,094.67 remain...
Case Digest (G.R. No. 182769)
Facts:
Loan and Mortgage Agreement:
- Respondent Cynthia L. Reyes borrowed, renewed, and received a principal amount of P20,950,000.00 from Far East Bank & Trust Company (FEBTC), which was later succeeded by Bank of the Philippine Islands (BPI).
- To secure the loan, Reyes executed Real Estate Mortgage Agreements involving 22 parcels of land.
Default and Foreclosure:
- When the debt became due and demandable, Reyes failed to settle her obligation.
- BPI foreclosed the mortgaged properties, which were sold at a public auction on December 20, 2001, for P9,032,960.00.
Outstanding Obligation:
- At the time of the foreclosure, Reyes' total obligation, including interest, amounted to P30,420,041.67.
- After applying the auction proceeds, a deficiency of P24,545,094.67 remained.
Appraisal Value:
- Reyes claimed that the mortgaged properties were appraised at P47,436,000.00 as of January 6, 1998, which she argued was sufficient to cover her obligation.
Trial Court Decision:
- The Regional Trial Court (RTC) ruled in favor of BPI, ordering Reyes to pay the deficiency, plus interest and attorney’s fees.
Court of Appeals Decision:
- The Court of Appeals reversed the RTC decision, ruling that there was no deficiency since the properties were sold at a price significantly lower than their appraised value.
Issue:
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Ruling:
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Ratio:
Legal Basis for Deficiency Recovery:
- Under Act No. 3135, as amended, a creditor is not precluded from recovering any unpaid balance on the principal obligation if the foreclosure sale results in a deficiency.
Mortgage as Security:
- A mortgage is a security, not a payment of the obligation. The creditor’s right to recover the deficiency is not extinguished by the foreclosure sale, even if the creditor buys the property at a low price.
Forced Sale and Right of Redemption:
- In forced sales, inadequacy of price is not a ground to nullify the sale, especially when the debtor has the right to redeem the property. The low price benefits the debtor by making redemption easier.
No Equity Considerations:
- Equity cannot be applied to temper the debtor’s liability when the law and jurisprudence clearly support the creditor’s right to recover the deficiency.
No Unjust Enrichment:
- Upholding the foreclosure sale and allowing the recovery of the deficiency does not result in unjust enrichment, as the creditor’s claim is legally justified.