G.R. No. L-3517 - People vs. Magno

The petitioners, spouses Jaime Sebastian and Evangeline Sebastian, were employees of BPI Family Bank. Jaime served as a branch manager while Evangeline worked as a bank teller.
On October 30, 1987, they availed themselves of a housing loan amounting to ₱273,000.00 as part of an employment benefit.
The loan was to be paid in 108 equal monthly amortizations of ₱3,277.57, commencing on January 10, 1988, and ending on December 10, 1996.
To secure the loan, a real estate mortgage was executed in favor of BPI Family Bank over a property in Bo. Ibayo, Marilao, Bulacan (TCT No. T-30.827).

The transaction was memorialized by a Loan Agreement specifying the terms of repayment through salary deductions.
Jaime Sebastian also signed an undated letter memorandum authorizing automatic salary deductions for loan repayments.
The memorandum explicitly provided that if Jaime were to leave, resign, or be terminated from the bank, any due salary could be applied to settle the outstanding principal and accrued interest immediately, without any further notice.

Jaime was terminated on December 14, 1989 for alleged wilful non-observance of procedures and loss of trust, while Evangeline was terminated on February 23, 1990 on grounds of abandonment.
Both termination notices contained a clause making the entire outstanding loan demandable upon cessation of their employment.
In response, the petitioners promptly filed a complaint for illegal dismissal before the National Labor Relations Commission (NLRC).

Despite regular salary deductions, after their termination, petitioners received a demand letter on January 28, 1991 for full payment of their outstanding balance amounting to ₱221,534.50.
Shortly thereafter, BPI Family Bank initiated foreclosure proceedings on the mortgaged property, with an extrajudicial foreclosure notice issued on March 6, 1991.
To forestall the foreclosure, the petitioners filed a complaint for injunction and damages in the Regional Trial Court (RTC) in Malolos, Bulacan.

The RTC rendered its decision on June 27, 1995, dismissing both the petition for injunction and the counterclaim by the bank without awarding costs.
The Court of Appeals (CA) on November 21, 2002, affirmed the RTC decision, focusing on whether the foreclosure was justified due to the petitioners’ default in payment.
The petitioners later filed a motion for reconsideration, raising for the first time that their rights under Republic Act No. 6552 (the Realty Installment Buyer Protection Act) had been disregarded, and that the loan agreement must be interpreted as a contract of adhesion. The CA denied this motion on September 18, 2003.

The petitioners argued that the foreclosure was premature because their unpaid amortizations should have been covered by the grace period provided under RA 6552.
They contended that the loan agreement was akin to a contract of adhesion, which should be strictly construed against BPI Family Bank, the drafter.
Additionally, they argued that the bank’s alleged refusal to accept subsequent payments should estop the foreclosure process.
However, the appellate court limited its review to issues already raised in the lower proceedings and rejected the introduction of these new arguments at the appellate level.

Whether the foreclosure of the real estate mortgage on the petitioners’ family home was valid under the terms of the loan and mortgage agreements.
Whether the petitioners’ default in monthly amortizations justified the acceleration of the outstanding balance and subsequent foreclosure.

Whether the petitioners’ arguments invoking the grace period under RA 6552 were applicable in a transaction that constituted a loan granted as an employee benefit rather than a conventional buyer-seller installment purchase.
Whether the loan agreement, by its nature, should be construed as a contract of adhesion, thereby entitling the petitioners to stricter interpretation in their favor.

Whether raising the statutory protection under RA 6552 and the claim of contractual adhesion for the first time on appeal violated fundamental due process rules.
Whether such issues should have been presented in the prior proceedings as a condition for appellate review.