Title
Banco de Oro Unibank, Inc. vs. Spouses Locsin
Case
G.R. No. 190445
Decision Date
Jul 23, 2014
BDO failed to prove deficiency claim against Locsins after loan default and foreclosure; SC upheld CA ruling, emphasizing insufficient evidence and procedural leniency.
complaint
deficiency amount
foreclosure
A

Case Summary (G.R. No. 190445)

Facts: Loans, Securities, Acceleration and Cross‑Default

The Locsins obtained a P700,000.00 loan from BDO on 29 September 1995, secured by a real estate mortgage over property covered by TCT No. N-138739; the promissory note contained an acceleration clause. On 6 November 1996 the Locsins obtained a P2.5 million credit line secured by third‑party mortgages on the Evidente properties. The credit line approval contained a cross‑default provision linking defaults under the credit line and the first loan. The Evidente properties proved insufficient as security, but the facility was approved because of the Locsins’ prior good payment record. The Locsins defaulted on the credit line in October 1997; BDO notified them on 7 January 1998 that the cross‑default and acceleration clauses rendered the first loan due. Attempts at restructuring failed.

Foreclosure, Auction and Alleged Deficiency

The Locsins filed suit on 24 August 1998 seeking restructuring and injunctive relief, but injunctive reliefs were denied. BDO extrajudicially foreclosed both the Evidente properties and the property securing the first loan on 23 September 1998. At auction, BDO was the highest bidder with a bid of P3,879,406.80. The Sheriff’s Certificate of Sale indicated an outstanding balance of P3,460,363.97 at foreclosure. On 5 February 1999 BDO demanded payment of an alleged deficiency; its initial demand asserted P1,259,166.21 but a Bid Statement prepared by BDO’s counsel reflected a deficiency of P1,144,089.84. BDO subsequently filed a collection suit on 29 November 1999 praying for recovery of the deficiency (as reflected in its Bid Statement).

Early Procedural Posture and Remand

In the collection action the Locsins moved to dismiss on the ground the deficiency claim was a compulsory counterclaim in the earlier action Q‑98‑35337; the trial court denied the motion. The Locsins sought relief with the CA and prevailed there, but the Supreme Court reversed the CA and ordered remand and continuance of the proceedings; that decision became final on 19 December 2005. After remand the Locsins failed to file an answer to the collection complaint.

Presentation of Evidence After Default and RTC Judgment

BDO moved for reinstatement and to present evidence ex parte due to the respondents’ default; the RTC permitted ex parte presentation on 9 October 2006. BDO’s proffered evidence included: applications for extrajudicial foreclosure (and an amended application), a Bid Statement, a Statement of Account (showing the alleged deficiency had grown to P3,709,961.00 by 24 November 2006), and official receipts for foreclosure expenses. The Statement of Account and Bid Statement were prepared by persons other than BDO’s sole witness in court. BDO’s only witness was its Vice‑President, Agnes C. Tuason. On 20 February 2007 the RTC rendered judgment for BDO, awarding P3,709,961.00 (outstanding obligation as of 25 November 2006), 12% per annum interest from that date, and attorney’s fees.

Appeal to the Court of Appeals and Issues Raised

Respondents appealed to the CA, assigning errors including (1) the RTC’s award of the alleged deficiency and (2) the failure to consider respondents’ claims for damages and attorney’s fees contained in their earlier complaint and asserted in their motion to dismiss. The CA, reviewing the record, reversed the RTC, concluding that BDO failed to prove its claim by a preponderance of evidence; the CA dismissed BDO’s complaint. BDO’s motion for reconsideration was denied by the CA (Resolution dated October 28, 2009). BDO then sought Supreme Court review.

Issues Presented to the Supreme Court

The petition to the Supreme Court raised principally: (1) whether the CA erred in deciding a ground not raised by respondents on appeal (specifically, the sufficiency of BDO’s proof), (2) whether the CA erred in ruling that BDO failed to prove entitlement to the claimed deficiency of P3,709,961.00, and (3) whether the CA erred in not dismissing respondents’ appeal for procedural noncompliance with Rule 44 (failure to serve two copies of the appellant’s brief and alleged noncompliance with Section 13(d) and (e) of Rule 44).

Supreme Court on Consideration of Matters Not Assigned as Error

The Court analyzed Section 8, Rule 51 (questions that may be decided) and reiterated the general rule that only assigned errors are considered on appeal. It further recognized established exceptions where appellate courts may consider unassigned matters (including errors affecting jurisdiction, plain or clerical errors, matters necessary for a just decision, matters raised at trial but omitted on appeal, matters closely related to assigned errors, and matters necessary to resolve the assigned errors). The Court found the CA’s consideration of the sufficiency of BDO’s evidence fell within the exceptions (notably those necessary to reach a just resolution and closely related to the assigned errors) and that the CA did not err in addressing that pivotal issue even though respondents had not expressly framed it as an assigned error.

Supreme Court on Sufficiency and Competency of Evidence

The Court agreed with the CA that BDO’s evidentiary showing was deficient and unreliable. BDO’s submitted documents (applications for foreclosure, bid statement, statement of account, and certain official receipts) were summary documents prepared by individuals not presented to testify or authenticate their preparation. The Court highlighted internal inconsistencies: the principal amount reflected in the foreclosure applications was P3,200,000.00 while the Bid Statement indicated P2,949,035.59, and BDO failed to explain these discrepancies. Costs and legal fees claimed to have been paid by BDO totaling P117,157.00 were not supported by corresponding official receipts except for filing fees of P6,288.32. The sole testimonial evidence (the Vice‑President) did not establish that she prepared, witnessed, or could authenticate the Bid Statement or Statement of Account prepared by others. The Court emphasized the settled rule that the burden of proof rests on the plaintiff to establish its affirmative claim by competent evidence, and that a defendant’s default does not relieve the plaintiff of proving its case. Citing

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