Title
Fortune Homes, Inc. vs. Court of Appeals
Case
G.R. No. 57617
Decision Date
May 24, 1984
Fortune Homes defaulted on a loan secured by a mortgage, leading to valid foreclosure by NIDC. SC upheld deficiency liability, affirming lower courts' rulings.

Case Digest (G.R. No. 57617)

Facts:

  • The Mortgage and Loan
    • Fortune Homes, Inc. executed a mortgage in 1965 over a 53-hectare lot in Bacolod City to secure a loan of US$1,000,000.
    • National Investment and Development Corporation (NIDC), a subsidiary of the Philippine National Bank, acted as the primary obligor in the said transaction.
    • The mortgage agreement contained an acceleration clause, which allowed the lender to demand immediate payment of all obligations in the event of default.
  • Default and Consequential Liability
    • Fortune Homes failed to pay three scheduled amortizations on the loan.
    • Due to this default, the acceleration clause was triggered, making Fortune Homes liable for the total outstanding amount.
    • NIDC subsequently became responsible for paying a deficiency amounting to P9,850,915.75, with an interest rate of 6% per annum effective from June 30, 1973 until full settlement.
  • Extrajudicial Foreclosure Process
    • With Fortune Homes in default, NIDC sought relief by initiating an extrajudicial foreclosure.
    • The foreclosure was executed on April 13, 1968, following the provisions of the mortgage.
    • On April 29, 1968, the property was publicly auctioned, wherein NIDC submitted the highest bid of P1,446,343.65.
    • As a result, the sheriff issued NIDC a certificate, which was later annotated on the title (TCT-No. T-15305).
  • Legal Challenge and Subsequent Proceedings
    • Fortune Homes attempted to obstruct the foreclosure by filing an injunction suit on July 30, 1969, just two days before the one-year redemption period expired.
    • The suit was later amended with a prayer to annul the foreclosure sale.
    • Despite Fortune Homes’ efforts, NIDC consolidated its title on April 19, 1974, receiving a new title during the pendency of the case.
    • In the 1976 trial court judgment, the foreclosure sale was upheld, and Fortune Homes was ordered to pay the deficiency amount.
  • Contentions Raised by Fortune Homes
    • Fortune Homes argued that the foreclosure sale was void on various grounds:
      • The foreclosure did not disburse the full amount of the loan.
      • A balance of US$200,000 was allegedly withheld by the Philippine National Bank.
      • NIDC’s actions purportedly prevented fulfillment of the contractual obligation.
      • Fortune Homes claimed it was not in default at the time.
      • The foreclosure was deemed premature.
    • Evidence from Fortune Homes’ board chairman and a director indicated that a portion of the “compensating balance” of US$200,000 was credited to its account.
    • The factual disputes, including the claim of non-default, were comprehensively examined by both the trial court and the appellate court.

Issues:

  • Validity of the Extrajudicial Foreclosure
    • Whether the extrajudicial foreclosure on April 13, 1968, was executed in accordance with the terms and conditions of the mortgage agreement.
    • Whether the foreclosure sale was void due to alleged deficiencies in receiving the full proceeds of the loan or due to other alleged procedural lapses.
  • Liability for the Deficiency and Interest Imposition
    • Whether Fortune Homes is liable for the deficiency amounting to P9,850,915.75.
    • Whether the application of 6% interest per annum on this deficiency, as stipulated in the mortgage, is proper and enforceable.
  • Procedural Adequacy and Opportunity for Redemption
    • Whether Fortune Homes was afforded sufficient opportunity to redeem the mortgaged property before NIDC’s consolidation of title.
    • Whether the foreclosure and subsequent issuance of a new title to NIDC complied with all due process requirements.
  • Impact of Loan Disbursement Allegations
    • Whether the allegations regarding the diversion of loan proceeds and the claim that Fortune Homes only received US$800,000 have any bearing on the legitimacy of the foreclosure.
    • Whether these contentions could undermine the contractual provisions that authorized the extrajudicial foreclosure.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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