Case Summary (G.R. No. 143135)
Case Context and Procedural History
The complaint was filed by Honesto Bonnevie on January 26, 1971, against Philippine Bank of Commerce seeking annulment of a Deed of Mortgage dated December 6, 1966, and the extrajudicial foreclosure conducted on September 4, 1968. The complaint asserted that the mortgage was without consideration and was executed by one who was not the owner of the property. It also claimed deficiencies in the foreclosure proceedings under Act No. 3135, and petitioners sought equity to redeem the property. The trial court dismissed the complaint on March 29, 1976, and the Court of Appeals affirmed the dismissal on August 11, 1978. After denial of a motion for reconsideration, the petitioners elevated the case to the Supreme Court.
Facts Established by Trial Court and Court of Appeals
The factual findings upheld by both courts revealed that spouses Jose M. Lozano and Josefa P. Lozano owned the property and executed the mortgage to secure a P75,000 loan from the bank. They also executed a Deed of Sale with Assumption of Mortgage to Honesto Bonnevie for P100,000 on December 8, 1966, with P25,000 payable to the Lozanos and P75,000 to the bank. Though the mortgage was executed on December 6, 1966, the actual loan was disbursed only on December 12, 1966. Between April 28, 1967 and July 12, 1968, Bonnevie made partial payments on the mortgage. On May 4, 1968, Bonnevie assigned all his rights to Raoul Bonnevie. The bank initiated foreclosure on June 10, 1968, with notice published and the property auctioned on August 19, 1968, sold to the bank for P84,387. Efforts to repurchase the property by petitioners failed, and an adverse claim was annotated only on October 9, 1969.
Legal Issues for Resolution
- Validity and legality of the real estate mortgage executed by the Lozano spouses in favor of the bank.
- Validity and legality of the extrajudicial foreclosure conducted by the bank.
- Whether petitioners had a right to redeem the foreclosed property.
- Whether the bank was justified in refusing petitioners' offers to repurchase the property.
Validity of the Mortgage Deed
Petitioners contended the mortgage lacked consideration because the loan was not yet disbursed at the time the mortgage was executed. The Court rejected this, holding that the mortgage was executed conditionally on the granting of the loan and that the consensual contract of loan and mortgage were perfected simultaneously. The subsequent promissory note served only as evidence of the loan obligation and did not negate consideration.
Petitioners further argued that renewals of the loan using the same property, which the Lozanos had sold to petitioners without bank consent, nullified the mortgage. The Court affirmed the bank's position citing the mortgage contract clause prohibiting sale or encumbrance without written consent from the mortgagee. The Deed of Sale included an assumption of mortgage, but petitioners failed to secure consent or register their sale. The bank was justified in relying on public records and the title registered in the Lozanos’ name. The doctrine of innocent mortgagee for value was applied, and the mortgage was held valid. The Court also noted the petitioners were estopped from questioning the mortgage’s validity since they assumed it by virtue of the Deed of Sale with Assumption of Mortgage.
Validity of Extrajudicial Foreclosure
Petitioners claimed lack of notice of foreclosure, insufficient publication, and improper posting of the auction sale as grounds to invalidate the foreclosure. The Court held that the bank was not obligated to notify petitioners personally because they were not parties to the mortgage contract and had assigned their rights without notifying the bank.
Under Act No. 3135, only constructive notice by publication and posting in three conspicuous public places in the municipality is required, not personal notice. The notice was correctly published once a week for three consecutive weeks (June 30, July 7, and July 14, 1968) in the Luzon Weekly Courier, a newspaper prima facie established to be of general circulation in Rizal. The Court rejected evidence suggesting otherwise and pointed out that petitioners bore the burden to prove non-compliance which they failed to do.
Posting of notices in five mentioned locations satisfied the posting requirement. Although the bank’s legal officer admitted notices were posted only once, there was no evidence that the postings were removed before the statutory period. The Court cited precedents affirming that a single proper posting suffices.
Petitioners’ Right to Redeem the Property
The Court ruled that since petitioners never secured the bank’s consent to assume mortgage obligations, they were not valid substituted debtors and had no recorded rights to redemption. Only the original mortgagors, the Lozanos, possessed redemption rights.
Case Syllabus (G.R. No. 143135)
Case Background and Procedural History
- Petitioners Raoul S.V. Bonnevie and Honesto V. Bonnevie sought review on certiorari of the intermediate appellate court’s decision in CA-G.R. No. 61193-R, which affirmed the dismissal by the Court of First Instance (CFI) of Rizal of Honesto Bonnevie's complaint.
- Honesto Bonnevie filed the original complaint on January 26, 1971, seeking annulment of the mortgage deed executed on December 6, 1966, and the subsequent extrajudicial foreclosure on September 4, 1968.
- The complaint alleged: (a) absence of consideration for the mortgage; (b) the mortgage was executed by a non-owner of the mortgaged property; (c) non-compliance with the conditions required for extrajudicial foreclosure under Act No. 3135; and (d) the bank’s refusal to accept petitioner’s offer to redeem the property despite validity of foreclosure.
- The respondent bank denied all material allegations and raised affirmative defenses including lack of consent, absence of proper notice, continued non-payment of the loan, and validity of the mortgage as secured by the actual loan.
- After Honesto Bonnevie rested his case, Raoul S.V. Bonnevie intervened, based on an assignment of rights from Honesto Bonnevie over the subject property. This intervention was granted to consolidate related issues.
- The CFI rendered judgment dismissing the complaint with costs in favor of the bank.
- Motion for reconsideration denied, petitioners appealed to the Court of Appeals who affirmed the dismissal.
- Petitioners filed the present petition for review on certiorari before the Supreme Court.
Factual Findings on Mortgage and Property Transaction
- Spouses Jose M. Lozano and Josefa P. Lozano were undisputed owners of the property mortgaged to the Philippine Bank of Commerce to secure a P75,000 loan dated December 6, 1966.
- On December 8, 1966, the Lozano spouses executed a Deed of Sale with Assumption of Mortgage in favor of Honesto Bonnevie for P100,000; P25,000 payable immediately to the Lozanos and the remaining P75,000 representing the mortgage obligation payable to the bank.
- Although the mortgage deed was executed December 6, 1966, the promissory note evidencing the indebtedness was signed only on December 12, 1966.
- Petitioner Honesto Bonnevie made payments totaling P18,944.22 on the mortgage account from April 28, 1967 to July 12, 1968.
- On May 4, 1968, Honesto Bonnevie assigned all his rights and interests under the Deed of Sale with Assumption of Mortgage to his brother, Raoul Bonnevie.
- The bank applied for foreclosure on June 10, 1968; notices were published in the Luzon Weekly Courier on June 30, July 7, and July 14, 1968.
- Auction sale conducted on August 19, 1968; the property sold to the bank for P84,387.
- Petitioner’s offers to redeem the property were unsuccessful; an adverse claim was annotated on the title on October 9, 1969.
Issues Presented for Resolution
- Validity of the real estate mortgage executed by the Lozano spouses in favor of the respondent bank.
- Validity and legality of the extrajudicial foreclosure conducted on the mortgage.
- Whether petitioners had a legal right to redeem the foreclosed property.
- If such right existed,