Case Summary (G.R. No. 199565)
Default and Demand Notices
• After termination in December 1993, Ma. Theresa missed amortizations from January to November 1994.
• HSBC-SRP issued a demand for full payment on November 28, 1994; respondents paid arrears and resumed monthly amortizations December 1994–October 1996.
• Additional overdue reminders and demands followed in December 1994, September 1995, July 1996, and September 1996.
Extrajudicial Foreclosure Proceedings
• On October 10, 1996, HSBC-SRP foreclosed the mortgage for PHP 324,119.59 covering the outstanding balance.
• Manuel Estacion, HSBC Vice-President and trustee, was the highest bidder.
Trial Court’s Dismissal as Premature
• RTC-Pasig (July 24, 2004) dismissed the annulment complaint, ruling resolution of the pending illegal dismissal case was a prejudicial question that could affect default findings and plan rules’ application.
• It held that foreclosure was irregular but that the issue was premature pending resolution of termination validity.
Court of Appeals’ Voiding of Foreclosure
• CA (March 31, 2011) voided the extrajudicial foreclosure, ruling:
– HSBC-SRP could not foreclose while the dismissal’s validity remained undecided because accelerated repayment depended on separation for cause.
– Respondents were not in default after catching up on arrears and making regular payments.
– HSBC was privy to the transactions through its control over the Plan and trusteeship; liability could not be avoided.
Supreme Court’s Standard on Prejudicial Questions
• The doctrine of prejudicial question applies only in criminal procedure to suspend criminal actions; it does not mandate nullification of civil foreclosure proceedings.
• Even if analogous, the proper remedy would have been a temporary injunction or suspension, not dismissal of the annulment case.
Mortgage Agreement and Plan Rules Interpretation
• Under the Mortgage Agreement, HSBC-SRP’s right to foreclose arose upon respondents’ default in 1994.
• Under the Plan Rules, acceleration of the loan obligation also occurred upon termination for cause, later upheld as valid by this Court’s separate ruling that the strike was illegal.
• Both contractual sources independently justified the foreclosure right.
Estoppel Arising from Acceptance of Payments
• Respondents relied on HSBC-SRP’s continuous acceptance of resumed amortizations and issuance of updated installment reminders, believing their account was current.
• By accepting incomplete and late payments without protest, HSBC-SRP was estopped from exercising its foreclosure right, in line with the Court’s ruling in Loquellano v. HSBC Staff Retirement Plan.
Absence of Damages for Respondents
• Award of moral or exemplary damages requires proof
Case Syllabus (G.R. No. 199565)
Parties and Factual Antecedents
- Ma. Theresa Ofelia G. Galang was a regular employee of HSBC and member of its rank‐and‐file union.
- HSBC-SRP (later incorporated as HSBC Retirement Trust Fund, Inc.) administered employee housing loans from internal retirement funds.
- On March 1, 1990, Ma. Theresa secured a ₱400,000 housing loan at 6% per annum, payable over 25 years, with monthly payroll deductions.
- The loan was secured by a real estate mortgage over Spouses Galang’s Mandaluyong property (TCT No. 3340).
- HSBC-SRP Rules and Regulations provided for acceleration of the loan upon termination “for cause” and loss of benefits.
- The Mortgage Agreement empowered HSBC-SRP to demand full payment on default and to extrajudicially foreclose the property.
- In December 1993, a strike by HSBC-EU culminated in Ma. Theresa’s dismissal; she missed amortizations from January to November 1994.
- HSBC-SRP sent demand letters (Nov 28, 1994; Sept 25, 1995; July 19, 1996) and multiple “Installment Overdue Reminders” even after Galangs resumed and continued payments from December 1994 to October 1996.
- On October 10, 1996, HSBC-SRP foreclosed the mortgage for ₱324,119.59; Manuel Estacion emerged as highest bidder.
Procedural History
- December 20, 1996: Spouses Galang sued for Annulment of Sale with Damages and secured a preliminary injunction from RTC–Pasig.
- July 24, 2004: RTC–Pasig dismissed the complaint as premature, finding foreclosure irregular but deferring resolution pending the illegal dismissal case.
- March 31, 2011: CA declared the extr