Case Summary (G.R. No. 233846)
Case Background and Loan Agreements
Petitioners obtained credit lines from BPI Family Savings Bank to finance a build-and-sell business. In 1997, they purchased two real properties using these loans and executed two Mortgage Loan Agreements with BPI under loan accounts totaling Php8,360,000. Despite regular amortization payments, their loan accounts became delinquent over time. They eventually found a prospective buyer, Eloisa Guevarra Co., who agreed to purchase the properties through a sale with assumption of the existing mortgage obligations. A Deed of Sale with Assumption of Mortgage was prepared, indicating Eloisa’s intention to pay a down payment and assume the balance of the loan.
Conflict Over Mortgage Assumption
Respondent Alma De Leon, a BPI employee, informed petitioners that the bank would not recognize the mortgage assumption agreement because Eloisa was not a client of BPI and the bank’s policy prohibited such mortgage assumptions. Nestor pleaded with Alma, citing a previous similar transaction, but she maintained that the assumption arrangement violated bank policy and Section 35 of the Mortgage Loan Agreement. As a result, the transaction between petitioners and Eloisa collapsed, and petitioners claimed lost profits of over Php3 million.
Legal Actions Initiated by Petitioners and BPI
Petitioners filed a civil case for damages and annulment of the extra-judicial foreclosure of the mortgage, as well as an injunction against BPI and Alma. BPI consequently filed an ex-parte petition for issuance of a writ of possession following foreclosure and sale of the mortgaged property due to petitioners’ continued default. The two cases were consolidated by the trial court.
Trial Court’s Ruling
The Regional Trial Court (RTC) dismissed the petitioners’ annulment of foreclosure claim but granted damages against respondents for bad faith and negligence, awarding petitioners approximately Php3.3 million plus moral and exemplary damages, attorney’s fees, and costs. The RTC held that Alma acted in bad faith by mischaracterizing the transaction as illegal without referring petitioners to the proper office. BPI was held vicariously liable for failing to supervise its employee adequately and for including an alleged void stipulation in the mortgage agreement forbidding alienation.
Court of Appeals Decision
The Court of Appeals (CA) affirmed the RTC’s ruling on the issuance of the writ of possession but reversed the damages awarded to petitioners, dismissing their complaint. The CA clarified that Alma’s denial of the assumption was made in good faith, consistent with BPI’s policy and the Mortgage Loan Agreement's Section 35, which prohibits assumption of mortgage to protect the bank’s interests. The CA emphasized the bank’s exercise of prudence and the voluntary contractual nature of the stipulation, which petitioners could have accepted or rejected.
Petitioners’ Arguments on Appeal
Petitioners challenged the CA ruling on the following grounds:
- The CA erred in overturning the trial court’s award of damages based on negligence by Alma and vicarious liability of BPI.
- The CA erred in upholding the writ of possession due to BPI’s alleged breach of contract and justified suspension of payments by petitioners under Articles 1169 and 1191 of the Civil Code, rendering the foreclosure void.
Supreme Court’s Analysis and Holding
The Supreme Court ruled that:
- The petition raised predominantly factual issues, which are generally not subject to review on a Rule 45 petition unless exceptional circumstances are demonstrated, which were lacking here.
- Both RTC and CA correctly agreed BPI was entitled to the writ of possession, which was a ministerial act following consolidation of title after expiration of the redemption period under the law. The writ’s issuance does not require prior hearing or reconsideration of the validity of foreclosure.
- Petitioners’ invocation of breach of contract and suspension of payment due to respondent’s alleged negligence were insufficient to prevent foreclosure.
- Under Article 19 of the Civil Code, the abuse of rights requires bad faith or intent to injure. The burden to prove bad faith is clear and convincing evidence. Mere negligence or bad judgment is insufficient.
- Respondent Alma’s refusal to recognize the mortgage assumption transaction was consistent with BPI policy and contractual provisions. There was no evidence of dishonest purpose or moral obliquity in her conduct. Her statements were factual and based on established bank rules.
- Petitioners failed to convincingly prove that respondent’s conduct caused Eloisa to back out; Eloisa’s absence as witness rendered this claim speculative and unsubstantiated.
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Case Syllabus (G.R. No. 233846)
Background and Nature of the Case
- The case is a petition for review under Rule 45 of the Rules of Court seeking to reverse the Court of Appeals (CA) Decision dated 15 February 2017 and Resolution dated 05 September 2017, which reversed the Regional Trial Court (RTC) Decision dated 1 December 2011.
- The consolidated RTC cases involved claims for damages with annulment of extra-judicial foreclosure of Transfer Certificate of Title No. (35660) 141767, injunction, and ex-parte proceedings for the issuance of writ of possession.
- Spouses Nestor Cabasal and Ma. Belen Cabasal (petitioners) appealed the CA decision that dismissed their damages claim and upheld the issuance of writ of possession in favor of BPI Family Savings Bank, Inc. (BPI) and Alma De Leon (respondent).
Factual Antecedents
- Petitioners obtained a credit line from BPI for their build and sell business and purchased two real properties in 1997, secured by mortgage loan agreements with BPI.
- They consistently paid amortizations but took three years to find a buyer, Eloisa Guevarra Co (Eloisa), to buy the properties by way of sale with assumption of mortgage.
- Nestor requested a statement of accounts, and when he and Eloisa sought to effectuate the mortgage transfer at BPI, respondent Alma De Leon refused, citing bank policy and contractual provisions prohibiting assumption of mortgage by third parties.
- Respondent informed Nestor and Eloisa that BPI would not recognize the transfer as Eloisa was not a client.
- Petitioners claimed the failed transaction caused them a loss of expected profit amounting to Php3,387,773.96.
- Petitioners sent complaints to BPI and stopped payment on their loan under Account No. 0211291311, which eventually led to BPI foreclosing the mortgage and buying the property at public auction.
- Petitioners filed suit for damages and annulment of foreclosure; BPI filed for writ of possession. The cases were consolidated.
Position of the Respondents
- Respondent Alma De Leon asserted she informed Nestor of the bank’s policy prohibiting assumption of mortgage and refused to deal with Eloisa as she was not a client.
- She based her refusal on Section 35 of the Mortgage Loan Agreement and stated that BPI only allows buyers to take separate loans to pay off existing mortgages.
- BPI maintained that the prior sale was different as the buyer took a personal loan, not an assumption of mortgage.
- BPI pursued foreclosure due to petitioners’ delinquent payments, complied with legal requirements, and sought writ of possession following the purchase of the sheriff’s certificate of sale.
- Both denied bad faith or negligence in conducting themselves regarding the transactions.
Findings and Rulings of the Regional Trial Court
- The RTC found the foreclosure and mortgage valid and denied annulment, ordering issuance of writ of possession in favor of BPI.
- Despite this, the RTC ruled in favor of petitioners for damages for the alleged bad faith of respondent Alma De Leon.
- The Court held that respondent acted without good faith in branding the proposed transaction illegal, failing to properly assist by referring to the appropriate bank off