G.R. No. 175697 - Rural Bank of Toboso, Inc. vs. Agtoto

On August 18, 1981, Jean Veniegas Agtoto executed a Special Power of Attorney (SPA) authorizing her husband, Rodney, to secure a loan on her behalf.
Through the SPA, Rodney was empowered not only to secure the loan but also to mortgage the registered land owned by Agtoto.
The SPA contained a broad clause enabling Rodney to make, sign, execute, and deliver all necessary contracts, documents, and agreements, which implicitly included the power to delegate foreclosure responsibilities.

On August 20, 1981, Rodney obtained a loan amounting to P130,500.00 from Rural Bank of Toboso, Inc. (now UCPB Savings Bank).
The loan was divided into two parts:

P61,068.00 was secured by a real estate mortgage on Agtoto’s land.
P69,432.00 was secured by a chattel mortgage over two service boats and one Yanmar Marine engine.

A subsequent payment of only P14,500.00 was made before Agtoto defaulted on the loan.

After several unheeded demands for payment, on August 6, 1990, the Bank initiated an extrajudicial foreclosure on the land.
The foreclosure pegged the debt at the full loan amount of P130,500.00 as of December 31, 1989, with an additional stipulated interest of 14% per annum from the date of default until full payment.
The foreclosure sale process was carried out by the sheriff, who, following notice and publication, sold the land at public auction on September 12, 1990.
The Bank emerged as the highest bidder with a bid of P305,000.00 “as of December 31, 1989” plus the aforementioned interest, and a certificate of sale was subsequently issued in its favor.

Agtoto filed a complaint before the Regional Trial Court (RTC) of Bacolod City seeking:

On July 15, 1996, the RTC ordered the Bank to pay Agtoto P305,000.00 (its bid price) less the amount of P61,068.00 due from her loan.
On November 26, 1997, the RTC modified its ruling to award Agtoto 6% interest per annum on the net award, counted from the auction sale date.
Agtoto appealed to the Court of Appeals (CA), which on October 27, 2005, affirmed the RTC decision but modified it:

The CA awarded Agtoto P189,497.10 plus 12% interest per annum, computed from January 29, 1992 (the date of judicial demand), until full payment.

Agtoto contended that the foreclosure sale was void because she did not authorize her husband to act on her behalf for foreclosure purposes.
The Bank maintained that the SPA’s provision allowed Rodney to appoint the Bank as his attorney-in-fact for foreclosure, thus binding Agtoto.
The case eventually reached the Supreme Court through separate petitions for review:

Whether the Bank validly foreclosed on Agtoto’s mortgaged land given that the mortgage only covered a portion (P61,068.00) of the total loan (P130,500.00).
Whether the powers granted under the SPA included the authority to delegate foreclosure proceedings to the Bank.

Whether the Bank should return to Agtoto the excess bid proceeds amounting to P189,497.10.
Whether the Bank should pay 12% per annum interest on the surplus funds from the date of judicial demand (and later modified to be computed from the CA decision date) until full payment.