G.R. No. 165617 - Supreme Transliner, Inc. vs. BPI Family Savings Bank, Inc.

On April 24, 1995, Supreme Transliner, Inc., represented by Moises C. Alvarez, and Paulita S. Alvarez obtained a loan of ₱9,853,000.00 from BPI Family Savings Bank, Inc., secured by a 714-sqm lot under TCT No. T-79193.
For non-payment, the mortgage was extrajudicially foreclosed; at the public auction conducted by the Provincial Sheriff of Lucena City, the bank was the highest bidder. A Certificate of Sale was issued on August 7, 1996 and registered on October 1, 1996.

Before the one-year redemption period expired, the mortgagors notified the bank of their intent to redeem. The bank’s Statement of Account (as of April 7, 1997) totaled ₱15,704,249.12, comprising:

Balance of principal, accrued interest, late-payment charges, foreclosure expenses, attorney’s fees (15%) and liquidated damages (15%); and
Asset-acquired expenses—documentary stamps, capital gains tax, foreclosure and registration fees—and interest thereon.

The mortgagors sought elimination of liquidated damages and reduction of attorney’s fees/interest; the bank refused. On May 21, 1997 they paid ₱15,704,249.12 and received a Certificate of Redemption on May 27, 1997.

On June 11, 1997, the mortgagors filed Civil Case No. 97-72 (RTC of Lucena City) to recover ₱5,331,237.77 in alleged unlawful charges, plus damages and attorney’s fees. The bank counterclaimed.
The RTC denied the bank’s motion to dismiss and, on February 14, 2002, dismissed the complaint and counterclaims, holding that the mortgagors were bound by the mortgage‐loan terms (18% interest, 3% post-default penalty, 15% attorney’s fees, 15% liquidated damages) and were estopped from challenging the redemption price.
On April 6, 2004, the Court of Appeals (CA-CV-74761) reversed: it held attorney’s fees and liquidated damages were included in the ₱10,372,711.35 bid price per the Certificate of Sale and ordered the bank to return ₱3,111,813.40 plus ₆% interest, and to pay ₱100,000 moral, ₱100,000 exemplary damages, and ₱100,000 attorney’s fees. The CA denied reconsideration on October 12, 2004.
The mortgagors filed G.R. No. 165617 raising issues on capital gains tax and asset-acquired expenses; the bank filed G.R. No. 165837 challenging the CA’s penalty-charge and damages rulings.

Should the mortgagor-redeemer bear capital gains tax and documentary stamp tax paid upon foreclosure sale?

Does the ₱10,372,711.35 bid price already include 15% attorney’s fees and 15% liquidated damages, precluding their re-imposition in the redemption price?
Are the mortgagors estopped from questioning these penalty charges after freely negotiating and signing the redemption agreement?
Should the CA’s award of moral/exemplary damages and attorney’s fees against the bank be upheld?