Case Digest (G.R. No. 206037)
Facts:
Philippine National Bank v. Lilibeth S. Chan, G.R. No. 206037, March 13, 2017, Supreme Court First Division, Del Castillo, J., writing for the Court.Lilibeth S. Chan (respondent) owned a three‑story commercial building in Paco, Manila (TCT No. 208782). On May 10, 2000 she leased the building to Philippine National Bank (PNB, petitioner) for five years (Dec. 15, 1999–Dec. 14, 2004) at a monthly rental of P76,160; after expiration PNB remained on a month‑to‑month basis at P116,788.44 and finally vacated March 23, 2006.
On January 22, 2002 Chan obtained a P1,500,000 loan from PNB, secured by a real estate mortgage over the leased property; the loan was later increased to P7,500,000 and, by an amendment dated March 31, 2004, the mortgage over the leased building was released and substituted with a mortgage on another parcel (TCT No. 209631). Chan also executed a Deed of Assignment of rental payments in favor of PNB.
On August 26, 2005 Chan filed an action for unlawful detainer in the Metropolitan Trial Court (MeTC), Branch 7, Manila, alleging unpaid rentals from October 2004 to August 2005. PNB answered that it had applied rental proceeds (Oct 2004–Jan 15, 2005) to Chan’s indebtedness and that for Jan 16, 2005–Feb 2006 it had been requested by a purported new owner, Lamberto Chua, to pay rent to him; PNB thus deposited those rentals in a non‑drawing savings account for the “benefit of the rightful party.” At an April 25, 2006 MeTC hearing the parties agreed rentals from Oct 2004–Jan 15, 2005 be applied to Chan’s loan, and on May 31, 2006 PNB consigned P1,348,643.92 (rentals for Jan 16, 2005–Feb 2006) with the MeTC clerk.
The MeTC, in an August 9, 2006 decision, ordered PNB to pay Chan P1,348,643.92 with 6% interest per annum from Jan 16, 2005 to March 23, 2006, plus attorney’s fees and costs. PNB appealed to the Regional Trial Court (RTC), Branch 14, Manila.
While the RTC appeal was pending, PNB foreclosed on the substituted mortgaged property (TCT No. 209631) and, as highest bidder, purchased it at public auction on October 31, 2006 for P15,311,000.00; the Certificate of Sale stated an indebtedness of P11,211,283.53 as of May 15 (ref. in record). Chan filed a memorandum claiming her loan was fully paid by reason of the foreclosure sale; PNB claimed a larger outstanding balance (allegedly P18,016,300.71 as of Oct. 31, 2006) and said it was entitled to apply the consigned rental proceeds to a deficiency.
The RTC, in a December 7, 2006 decision, affirmed the MeTC: it found the loan effectively paid by foreclosure sale wrongfully assumed, but nonetheless held PNB had delayed in vacating and was liable for legal interest and attorney’s fees. The RTC issued a writ of execution and the sheriff turned over P1,348,643.92 to Chan on December 20, 2006. The RTC denied PNB’s motions for reconsideration in an order dated February 6, 2007.
PNB sought relief with the Court of Appeals (CA) via a Petition for Review under Rule 42. The CA, in a May 28, 2012 decision, found insufficient evidence to establish PNB’s asserted deficiency after foreclosure and remanded the case to the MeTC to receive evidence and compute (per specified guidelines) whether a deficiency existed; it also held PNB’s deposit in a bank was not a valid consignation and therefor...(Subscriber-Only)
Issues:
- Did PNB validly consign the disputed rental payments (P1,348,643.92) with the MeTC clerk such that it was discharged from liability?
- Did PNB incur delay in payment of rentals, making it liable for legal interest?
- Is PNB entitled to the consigned rental proceeds to apply against any deficiency after the foreclosure sale ...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)