Case Summary (G.R. No. L-21813)
Background of the Case
The dispute arose from the extra-judicial foreclosure of Lot No. 286-E mortgaged by Vicente Perez to the Philippine National Bank for a loan of P2,500, with outstanding balance remaining after his death in 1942. After failing to notify the widow or heirs about the foreclosure initiated in 1963, the Bank sold the property without giving them the opportunity to settle the mortgage or redeem the property.
Legal Proceedings Initiated
In August 1962, following the Bank's failure to notify them, Vicente Perez's widow and heirs filed a suit against the Bank in the Court of First Instance of Negros Occidental. They sought to annul the extra-judicial foreclosure and requested damages, arguing that the Bank acted in bad faith.
Decision of the Lower Court
On December 15, 1962, the trial court ruled in favor of the plaintiffs based on an interpretation of the legal provisions concerning foreclosure. The court held that the power to sell the mortgaged property terminated upon Vicente Perez's death, necessitating judicial foreclosure. The court ordered the cancellation of the Bank's title and awarded damages to the heirs.
Key Legal Issues on Appeal
The primary legal question pertained to the interpretation of Section 7, Rule 87 (now Section 7, Rule 86) of the Rules of Court, regarding the foreclosure of a mortgage after the death of the mortgagor. The Bank contended that the prior ruling in Pasno v. Ravina established that the right to foreclose could survive the mortgagor’s death, permitting extra-judicial foreclosures without needing judicial proceedings.
The Supreme Court's Analysis
The Supreme Court undertook a comprehensive review of the Pasno v. Ravina case and its implications. It determined that the prevailing interpretation favored the notion that a mortgagor’s death did not extinguish the mortgagee’s power to foreclose extrajudicially, but it acknowledged that due process necessitated notifying the mortgagor’s heirs. The Court stressed that the Bank's failure to notify the heirs violated their rights and hindered their opportunity to redeem the property.
Modifications to the Lower Court’s Judgment
The Supreme Court ultimately validated the extra-judicial foreclosure but modified the lower court's ruling. The Court:
- Confirmed the validity of the Bank’s foreclosure sale,
- Upheld the canc
Case Syllabus (G.R. No. L-21813)
Case Overview
- Court: Supreme Court of the Philippines
- Date: July 30, 1966
- Citation: 124 Phil. 260 [G.R. No. L-21813]
- Parties:
- Plaintiffs/Appellees: Amparo G. Perez, et al.
- Defendants/Appellants: Philippine National Bank, Binalbagan Branch, et al.
- Nature of the Case: Appeal from a decision in Civil Case No. 100 of the Court of First Instance of Negros Occidental, which annulled an extrajudicial foreclosure sale and ordered the Bank to pay damages and attorney's fees.
Background Facts
- Mortgagor: Vicente Perez mortgaged Lot No. 286-E, with Transfer Certificate of Title No. 29530, to the Philippine National Bank (PNB) to secure a loan of P2,500 on August 29, 1939.
- Death of Mortgagor: Vicente Perez died intestate on October 7, 1942, leaving behind a widow and children.
- Outstanding Indebtedness: At the time of his death, an outstanding balance of P1,917.00 remained on the mortgage.
- Estate Proceedings: Vicente Perez's widow initiated Special Proceedings No. 512 for the settlement of the estate, where the Bank failed to file a claim.
- Foreclosure Action: On January 2, 1963, the Bank extrajudicially foreclosed the mortgage without notifying the widow and heirs, subsequently transferring the title to itself.
Legal Issues
- Main Legal Question: The appeal raised the issue of whether the Bank could validly conduct an extrajudicial foreclosure after the death of Vicente Perez without notifying