Case Summary (G.R. No. 194983)
Factual Background and Foreclosure
Rodolfo Bacani was the registered owner of the subject property, which he and his wife, Nellie Bacani, used to secure an ₱80,000 loan from PNB in 1980. After their failure to pay, PNB extrajudicially foreclosed on the property in 1986 and became the highest bidder with ₱148,960.74. The Spouses Bacani did not redeem the property within the one-year redemption period following registration of the sale in 1986. Accordingly, Rodolfo’s title was cancelled, and PNB’s TCT No. T-185028 was issued in 1989, making PNB the absolute owner.
PNB’s Internal Circular and Offers to Repurchase
In November 1989, PNB issued SEL Circular No. 8-7/89, which granted priority to former owners or their heirs to reacquire foreclosed assets on negotiated terms without public bidding, subject to specific conditions (payment of the bank’s claim or higher fair market value, proof of financial capacity, etc.). The Spouses Bacani began negotiations in 1991 to repurchase the property, initially offering ₱150,000 and eventually raising offers to ₱220,000 and then ₱300,000 through a combination of cash and installment payments.
Rejection of Bacanis’ Offers and Sale to Renato
PNB rejected the Bacanis’ offers as they were below the bank’s total claim and the property’s appraised fair market value (ranging from ₱395,520 in 1992 to ₱494,400 in 1993). PNB subsequently notified the Bacanis that the property would be sold through public auction and later sold the property in a negotiated sale to Renato de Leon in January 1996 for ₱1,500,000. Renato’s title was thereafter registered.
Legal Proceedings and Lower Court Decisions
The Bacanis filed a case for annulment of sale and title, claiming fraud by PNB for refusing their repurchase offers and directly selling the property to Renato. The RTC ruled in favor of the Bacanis, nullifying Renato’s title and ordering PNB to convey the property to the Bacanis upon payment of PNB’s total claim. The RTC held that PNB acted in bad faith by selling the property through a negotiated sale instead of honoring its internal policy and the Bacanis’ right to repurchase. The CA affirmed the RTC’s decision, emphasizing the Bacanis’ demonstrated financial capacity by their time deposits with PNB and applying the doctrine of constructive trust to justify reconveyance to them. The CA denied PNB’s motion for reconsideration.
Issues on Appeal to the Supreme Court
PNB challenged the lower courts’ reliance on its internal circular to nullify the sale and title issuance in favor of Renato. It argued that the Bacanis lost their right of redemption after one year from the sale registration, that the bank as owner had the right to dispose of the property at its discretion, and that Renato was an innocent purchaser for value.
Supreme Court’s Analysis on Redemption Rights and Ownership
The Supreme Court emphasized under Act No. 3135 and jurisprudence that a mortgage debtor or successor has a one-year period to redeem the property after registration of the foreclosure sale certificate. Failure to redeem within this period results in the purchaser becoming the absolute owner, with all attributes of ownership, including the right to possess, dispose of, or alienate the property. Since PNB registered the foreclosure sale on October 10, 1986, and the Bacanis failed to redeem within one year, title consolidation in favor of PNB was final by October 1987. From that point, Rodolfo and Nellie Bacani lost all rights to the property.
Effect of PNB SEL Circular No. 8-7/89
The Court ruled that PNB’s internal circular did not create a legally enforceable right in favor of the Bacanis to repurchase the property. The circular was an internal policy intended to guide bank personnel, and no law or contract obliged PNB to honor the Bacanis’ priority or accept offers that did not meet the circular’s conditions. Because the Bacanis’ offers were below PNB’s total claim and the property’s fair market value, PNB properly rejected them. The internal circular could not override the absolute ownership rights of PNB.
Non-Binding Nature of Published Auction Invitation
The Bacanis alleged that PNB’s publication of an Invitation to Bid and scheduled auction imposed an obligation to sell to them. The Court clarified that such advertisements are merely invitations to make proposals and do not bind the seller to accept any bid. Under Article 1326 of the Civil Code, the advertiser is not obliged to accept any particular offer unless otherwise stipulated. Therefore, the published auction did not obligate PNB to sell to the Bacanis or prevent it from negotiating elsewhere, including a direct sale to Renato.
Fraud Allegations and Constructive Trust Doctrine
The Court found no clear and convincing evidence of fraud committed by PNB or Renato. The Bacanis did not attend the scheduled auction, nor was there any assurance from PNB that the property would be sold to them at the auction. The Court rejected the lower courts’ application of the doctrine of constructive trust, holding that Renato acquired the property in good faith, and accordingly, his title should not be annulled.
The Natu
...continue reading
Case Syllabus (G.R. No. 194983)
Facts of the Case
- The Spouses Bacani were original owners of a 618-square meter parcel of land in Centro East, Santiago, Isabela, covered by TCT No. 114296.
- The property was mortgaged to Philippine National Bank (PNB) for a loan of Php 80,000.00 on July 16, 1980.
- Due to failure to pay the loan, PNB extrajudicially foreclosed and became the highest bidder on September 9, 1986, at Php 148,960.74.
- The Spouses Bacani failed to redeem the property within the one-year statutory redemption period.
- Consequently, Rodolfo's title was cancelled on June 6, 1989, and a new title was issued to PNB (TCT No. T-185028).
- PNB issued SEL Circular No. 8-7/89 on November 29, 1989, which prioritized former owners or their heirs for repurchasing foreclosed properties under certain conditions.
- The Spouses Bacani expressed intent to repurchase starting August 26, 1991, but their offers varied from Php 150,000.00 to Php 350,000.00, which were repeatedly deemed low by PNB.
- PNB notified the Spouses Bacani on December 10, 1992, of refusal of the repurchase request, citing offers below fair market value and bank claims.
- The property was later advertised for public auction with a floor price of Php 4,000,000.00 scheduled on February 8, 1996.
- Without the auction, PNB sold the property to Renato de Leon on January 30, 1996, for Php 1,500,000.00, and the title was transferred to Renato.
- Renato filed an ejectment case against respondents, which was granted and led to the respondents vacating and demolishing their houses on the property.
- The respondents then filed for annulment of the sale and Renato’s title, alleging fraud and violation of PNB's internal policies.
Issues Presented
- Whether PNB’s sale of the property to Renato without conducting the scheduled public bidding and without accepting the Bacani’s offer was fraudulent.
- Whether the Spouses Bacani retained a legally enforceable right to repurchase the property after expiration of the redemption period.
- Whether the bank’s internal SEL Circular No. 8-7/89 created an enforceable right for former owners to preferentially reacquire foreclosed properties.
- Whether Renato was a purchaser in good faith.
- Whether the cancellation of Renato’s title and reconveyance to the Spouses Bacani was proper under the doctrine of constructive trust.
- Whether PNB was justified in refusing the Bacani’s offers and in disposing of the property as it did.
Ruling and Reasoning of the Regional Trial Court (RTC)
- The RTC ruled in favor of the respondents, holding that PNB acted in bad faith.
- The sale to Renato was nullified due to preempting the scheduled public auction, which the Spouses Bacani relied on, constituting fraud.
- Renato was not considered a purchaser in good faith due to the published Invitation to Bid.
- PNB failed to observe its own policy (