Case Digest (G.R. No. 147465)
Facts:
On September 13, 1996, petitioner Security Bank Corporation granted spouses Rodrigo and Erlinda Mercado a revolving credit line of ₱1,000,000, later increased by ₱7,000,000 under the same agreement. The contract provided for interest at Security Bank’s “prevailing lending rate” and a 2% per-month penalty for late payment. To secure the loan, the Mercados executed real estate mortgages on five parcels covered by TCT Nos. T-103519 (Lipa City), T-89822 (San Jose, Batangas), and T-33150, T-34288, T-34289 (Batangas City). After default and a final demand on March 31, 1999, Security Bank filed extrajudicial foreclosure petitions under Act No. 3135 before the RTCs of Lipa City and Batangas City. Notices of sale were published once weekly for three weeks, but contained errors in lot numbers and omitted the parcels’ locations; a single erratum was subsequently issued. Foreclosure sales were held on October 19 and 29, 1999, with certificates of sale registered in November 1999. In SeptembCase Digest (G.R. No. 147465)
Facts:
- Revolving Credit Line Agreement
- On September 13, 1996, Security Bank granted Spouses Rodrigo and Erlinda Mercado a revolving credit line of ₱1,000,000.00.
- The agreement provided:
- Interest on outstanding “Availments” at a per annum rate determined by the Bank and advised monthly; computed daily from date of availment until paid.
- Late‐payment penalty of 2% per month on any amount due and unpaid or in excess of the credit limit.
- Addendum to the Credit Line Agreement
- Interest to be based on an annual rate computed and billed monthly by the Bank on its prevailing monthly rate, not to exceed the total monthly prevailing rate.
- The Mercados gave continuing consent “without need of additional confirmation” to whatever interest rates SBC computed; interests due the first day of every month after availment.
- Mortgages and Security
- July 3, 1996: Real estate mortgage over Mercados’ properties in Lipa City (TCT No. T-103519) and San Jose, Batangas (TCT No. T-89822).
- September 13, 1996: Additional mortgage over three parcels in Batangas City (TCT Nos. T-33150, T-34288, T-34289) to secure an extra ₱7,000,000.00 under the same credit line.
- Default and Extrajudicial Foreclosure
- Mercados defaulted; Bank’s final demand letter dated March 31, 1999.
- Bank filed petitions for extrajudicial foreclosure under Act No. 3135 in RTC Lipa City and RTC Batangas City.
- Notices of sale were published once weekly for three weeks but contained technical description errors. An erratum was published only once, failing to indicate location details.
- Foreclosure Sales and Post‐Sale Events
- October 19, 1999: Foreclosure sale in Lipa City; Bank was highest bidder; Certificate of Sale issued November 3, 1999.
- October 29, 1999: Foreclosure sale in Batangas City and San Jose; Certificate of Sale issued October 29, 1999; registered in the respective Registries of Deeds.
- September 18, 2000: Mercados offered to redeem for ₱10,000,000.00; Bank counter‐offered ₱15,000,000.00.
- November 8, 2000: Mercados filed Civil Case No. 5808 for annulment of foreclosure sale, damages, injunction, specific performance, accounting, with TRO application.
- June 9, 2005: Bank filed ex-parte petition for writ of possession (LRC Case No. N-1685). The two cases were consolidated in Branch 84, RTC Batangas City.
- RTC Proceedings and CA Appeal
- February 26, 2007 RTC Decision:
- Declared foreclosure sales of all five parcels void.
- Declared interest‐rate provisions potestative and void; fixed Mercados’ obligation at ₱8,000,000.00.
- Awarded attorney’s fees and permanent injunction.
- June 19, 2007 Amendatory Order:
- Void only the Batangas City and San Jose sales (no jurisdiction over Lipa City parcel).
- Reduced principal obligation to ₱7,500,000.00; imposed “cost of money” interest at 6% per annum from date of the order.
- July 19, 2010 CA Decision (CA-G.R. CV No. 90031):
- Affirmed invalidity of foreclosure sales for defective notice; single erratum insufficient.
- Held interest provisions violative of mutuality; agreed no valid reference rate.
- Fixed Mercados’ liability at ₱7,516,880.00 (₱8,000,000.00 less ₱483,120.00 bid‐price credit from Lipa sale).
- Imposed 12% legal interest from March 30, 1999; 2% per-month penalty; deleted attorney’s fees.
- Supreme Court Petitions
- Security Bank (G.R. No. 192934) and the Mercados (G.R. No. 197010) separately sought review of the CA decision.
- Issues were framed on (a) validity of foreclosure sales, (b) voidness of interest provisions under mutuality, and (c) period for accrual of interest and penalties under the doctrine of operative facts.
Issues:
- Whether the foreclosure sales of the properties in Batangas City and San Jose, Batangas are valid under Act No. 3135’s publication requirements.
- Whether the interest‐rate provisions in the revolving credit line agreement and its addendum are void for violating the principle of mutuality of contracts.
- Whether interest and penalty are due and demandable from the date of auction sale or from extrajudicial demand until finality under the doctrine of operative facts.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)