Title
Luzon Development Bank vs. Spouses Angeles
Case
G.R. No. 150393
Decision Date
Jul 31, 2006
Bank foreclosed property, negotiated redemption; petitioner accepted payments, later refused, sought possession; court upheld new agreement, estopped petitioner.
court ruling
valid agreement
bank

Case Summary (G.R. No. 150393)

Factual Background

In June 1983, respondents obtained a loan of P500,000 from petitioner, secured by a real estate mortgage over their house and lot in North Greenhills, San Juan, Metro Manila. After respondents defaulted due to financial reverses, petitioner initiated extrajudicial foreclosure. Petitioner emerged as the highest bidder at the public auction in August 1984, and a sheriff’s certificate of sale was issued to it. Petitioner registered the certificate on February 4, 1985.

Petitioner claimed that respondents failed to redeem within the one-year redemption period, which petitioner asserted ended on February 4, 1986, one year from the registration of the certificate of sale. It therefore alleged that it consolidated title under its name and became the absolute owner. Conversely, respondents asserted that they negotiated for a repurchase before the expiration of the redemption period and offered to make further payments. Respondents alleged that petitioner acceded and that the parties forged an agreement extending the redemption period and setting the redemption price at P871,182.78. The agreement fixed the redemption price, required a downpayment of P261,354.83 paid partly upon execution (including P100,000) and partly on or before February 21, 1986 (including P161,354.83), and provided that the remaining P609,827.95 would be paid within three years in thirty-six monthly installments at 32% effective interest rate per annum on the declining balance, subject to quarterly upward or downward adjustment based on the prevailing interest rate on loans.

Respondents further alleged that petitioner already received their advance payments of P100,000, then received additional payments of P125,000 and P100,000, and later refused to accept respondents’ tender of P200,000. Respondents then received a letter from petitioner indicating that it would no longer sell the property back to them at book value, but instead would require payment based on the then fair market value, allegedly about P4 million to P8 million. Respondents insisted on paying the balance of the agreed redemption price of P871,182.78, but petitioner refused.

Petition for Writ of Possession and RTC Ruling

In 1988, petitioner filed a petition for the issuance of a writ of possession in the RTC, Branch 69 of Pasig City. Petitioner asserted that because respondents failed to redeem within the one-year redemption period, petitioner became the absolute owner and was entitled to possess the property. The RTC denied the petition. It held that petitioner and respondents had agreed to an “extended redemption period” under which respondents could repurchase the property for P871,182.78. The RTC reasoned that the parties were bound by the agreement and that, absent respondents’ failure to repurchase within the extended period, the writ of possession could not issue. The RTC directed respondents to pay the balance of P346,182.78 within a period of one and a half years, counted from receipt of the decision, payable in ten monthly installments at 32% effective interest per annum on the declining balance, subject to quarterly adjustments, with costs borne by petitioner.

Proceedings in the Court of Appeals

Petitioner challenged the RTC ruling before the CA. It argued that the purported new contract extending the redemption period never took effect because the parties had never signed it. The CA rejected petitioner’s position. It affirmed the RTC and held that petitioner could not deny the validity of the contract after it had unconditionally and unqualifiedly accepted respondents’ payments even after the one-year redemption period allegedly lapsed. The CA also rejected petitioner’s motion for reconsideration, prompting this petition.

Issues Raised

The petition presented two principal issues: (1) whether the parties validly entered into a new contract and (2) whether petitioner was entitled to a writ of possession of the foreclosed property.

The Parties’ Contentions on the Validity of the Alleged New Contract

Petitioner maintained that the “new contract” that purportedly extended the redemption period and fixed the redemption price did not become effective because neither party signed it. Respondents, on the other hand, maintained that the parties had reached a binding agreement and that petitioner recognized and acted upon it by receiving and accepting payments. Respondents insisted that petitioner’s refusal to accept further payment and its demand for a price based on fair market value were inconsistent with the agreed redemption price and extended redemption arrangement.

Legal Basis and Reasoning on Contract Formation and Estoppel

The Court held that petitioner and respondents had a valid and binding agreement that extended the redemption period and fixed the redemption price at P871,182.78. The Court explained that a contract arises from the meeting of minds of two parties who agree on the thing and the cause that constitutes the contract. It also reiterated that a contract may be reduced in writing or may be determined by the contemporaneous and subsequent acts of the parties, unless the law requires a specific form. The Court stressed that both parties admitted the existence of a written contract, even if petitioner disputed its taking effect due to the absence of signatures.

On the signature requirement, the Court ruled that the mere fact that neither party signs a contract does not necessarily prevent it from assuming legal existence. It held that consent may be express or implied unless a statute requires a particular format or manner for expressing consent. It reasoned that the signature of a party is one mode of expressing consent, but tacit or constructive acceptance may also show concurrence of wills. Once there is a manifestation of concurrence, the stage of negotiation ends and the contract is perfected.

The Court further held that petitioner could not belatedly contest the agreement’s efficacy after it accepted the payments. It treated petitioner’s acceptance of respondents’ advance payments as a clear manifestation of consent to the contract, thereby estopping petitioner from rejecting its binding effect. The Court endorsed the CA’s conclusion that petitioner’s unconditional or unqualified acceptance of earlier payments estopped it from denying the validity of the agreement. Applying the doctrine of estoppel, the Court stated that a party who performs affirmative acts on which another relies cannot later refute those acts or avoid the effects of the same to the prejudice of the other. The Court also relied on the principle that an admission or representation by one party is conclusive against that party where another has relied upon it. Thus, by accepting the payments, petitioner led respondents to believe that redemption had been extended and that the redemption price was the amount stated in the agreement. Petitioner could not renege on those obligations merely to resell at a substantially higher price.

Legal Basis and Reasoning on the Writ of Possession

On the second issue, the Court affirmed the RTC’s view that the parties were bound by their new contract and that a writ of possession could not be issued unless respondents failed to fulfill the obligations incumbent upon them under the agreement. The Court discussed RA 3135, noting that after the foreclosure sale or during the redemption period, the purchaser may petition the court to issue the writ of possession. It recognized the general rule that once the writ is sought, the issuance becomes ministerial for the court to the winning bidder.

The Court clarified, however, that the general rule was not absolute. It cited earlier decisions where the Court withheld or recalled issuance under exceptional circumstances, such as Barican v. Intermediate Appellate Court and Cometa v. Intermediate Appellate Court, to illustrate that the writ may be withheld when equitable or factual considerations warrant it. The Court then held that the circumstances of the present case warranted an additional exception. It reasoned that by entering into what was, in effect, a new contract with respondents, petitioner voluntarily withheld the exercise of its rights over the property, including its jus possidendi (right of possession), to gi

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