UCPB vs Spouses Beluso

GR No. 159912, August 17, 2007

Ponente: Chico-Nazario, J.

Facts:

1. Petition for Review on Certiorari declaring void the interest rate provided in the promissory notes
executed by the respondents Spouses Samuel and Odette Beluso (spouses Beluso) in favor of
petitioner United Coconut Planters Bank (UCPB)
2. UCPB granted the spouses Beluso a Promissory Notes Line under a Credit Agreement whereby the
latter could avail from the former credit of up to a maximum amount of P1.2 Million pesos for a
term ending on 30 April 1997. The spouses Beluso constituted, other than their promissory notes,
a real estate mortgage over parcels of land in Roxas City, covered by Transfer Certificates of Title
No. T-31539 and T-27828, as additional security for the obligation. The Credit Agreement was
subsequently amended to increase the amount of the Promissory Notes Line to a maximum
of P2.35 Million pesos and to extend the term thereof to 28 February 1998.
3. On 30 April 1997, the payment of the principal and interest of the latter two promissory notes
were debited from the spouses Belusos account with UCPB; yet, a consolidated loan for P1.3
Million was again released to the spouses Beluso under one promissory note with a due date of 28
February 1998. To completely avail themselves of the P2.35 Million credit line extended to them
by UCPB, the spouses Beluso executed two more promissory notes for a total of P350,000.00.
However, the spouses Beluso alleged that the amounts covered by these last two promissory notes
were never released or credited to their account and, thus, claimed that the principal indebtedness
was only P2 Million.
4. The spouses Beluso, however, failed to make any payment of the foregoing amounts.
5. On 2 September 1998, UCPB demanded that the spouses Beluso pay their total obligation
of P2,932,543.00 plus 25% attorneys fees, but the spouses Beluso failed to comply
therewith. On 28 December 1998, UCPB foreclosed the properties mortgaged by the spouses
Beluso to secure their credit line, which, by that time, already ballooned to P3,784,603.00.
6. On 9 February 1999, the spouses Beluso filed a Petition for Annulment, Accounting and Damages
against UCPB with the RTC of Makati City.
7. Trial court declared in its judgment that:
a. the interest rate used by [UCPB] void
b. the foreclosure and Sheriffs Certificate of Sale void
c. UCPB is ordered to return to [the spouses Beluso] the properties subject of the foreclosure
d. UCPB to pay [the spouses Beluso] the amount of P50,000.00 by way of attorneys fees
e. UCPB to pay the costs of suit.
f. Spouses Beluso] are hereby ordered to pay [UCPB] the sum of P1,560,308.00.
8. Court of Appeals affirmed Trial court's decision subject to the modification that defendant-appellant
UCPB is not liable for attorneys fees or the costs of suit.

ISSUES:
1. Whether or not interest rate stipulated was void
Yes, stipulated interest rate is void because it contravenes on the principle of mutuality of contracts and it
violates the Truth in lending Act.

The provision stating that the interest shall be at the rate indicative of DBD retail rate or as determined by the
Branch Head is indeed dependent solely on the will of petitioner UCPB. Under such provision, petitioner UCPB
has two choices on what the interest rate shall be: (1) a rate indicative of the DBD retail rate; or (2) a rate as
determined by the Branch Head. As UCPB is given this choice, the rate should be categorically determinable
in both choices. If either of these two choices presents an opportunity for UCPB to fix the rate at will, the bank
 can easily choose such an option, thus making the entire interest rate provision violative of the principle of
mutuality of contracts.

In addition, the promissory notes, the copies of which were presented to the spouses Beluso after execution,
are not sufficient notification from UCPB. As earlier discussed, the interest rate provision therein does not
sufficiently indicate with particularity the interest rate to be applied to the loan covered by said promissory notes
which is required in TRuth in Lending Act

2. Whether or not Spouses Beluso are subject to 12% interest and compounding interest stipulations even if
declared amount by UCPB was excessive.

Yes. Default commences upon judicial or extrajudicial demand. [26] The excess amount in such a demand does
not nullify the demand itself, which is valid with respect to the proper amount. There being a valid demand on
the part of UCPB, albeit excessive, the spouses Beluso are considered in default with respect to the proper
amount and, therefore, the interests and the penalties began to run at that point. As regards the award of 12%
legal interest in favor of petitioner, the RTC actually recognized that said legal interest should be imposed, thus:
There being no valid stipulation as to interest, the legal rate of interest shall be charged. [27] It seems that the
RTC inadvertently overlooked its non-inclusion in its computation. It must likewise uphold the contract
stipulation providing the compounding of interest. The provisions in the Credit Agreement and in the
promissory notes providing for the compounding of interest were neither nullified by the RTC or the Court of
Appeals, nor assailed by the spouses Beluso in their petition with the RTC. The compounding of interests has
furthermore been declared by this Court to be legal.

3. Whether or not foreclosure was void

No. The foreclosure proceedings are valid since there was a valid demand made by UCPB upon the spouses
Beluso. Despite being excessive, the spouses Beluso are considered in default with respect to the proper amount
of their obligation to UCPB and, thus, the property they mortgaged to secure such amounts may be
foreclosed. Consequently, proceeds of the foreclosure sale should be applied to the extent of the amounts to
which UCPB is rightfully entitled.

Agbada v. Inter-Urban Developers Inc.

FACTS:

(1) Agbada obtained a loan from Inter-Urban. To secure the loan, they executed a REM. The loan
was payable in 6 mos. With 3% interest.

(2) Agbada defaulted. Inter-Urban filed a claim to have REM foreclosed. However, Agbada opposed
claiming that the loan was actually not yet due because the real agreement of the parties was that it was
payable in 5 years with no interest.

(3) RTC rendered summary judgment on the ground that the defense of Agbada was untenable
because it was in conflict with the REM contract which expressly showed that the partied agreed that
the period of the loan was 6 months with 3% interest.

(4) Meanwhile, the property was foreclosed and sold at public action. The court confirmed the sale.
Agbada did not appeal to such confirmation of sale. Instead, they appealed the summary judgment of
the RTC.
(5) CA denied the appeal. Summary judgment was proper. Hence, they appealed with the SC,
claiming that they were denied of due process because they were not given the opportunity to prove
that the loan was not yet due and demandable.

ISSUE: W/N Agbada was denied of due process

HELD: NO.

(1) SC held that Summary Judgment was proper. The mortgage contract expressly showed the
agreement of the parties as to the period and interest of the loan. The defense of Agbada was baseless
and untenable.

(2) SC further held that the proper remedy of a mortgagor in this case was not to appeal the
summary judgment of the RTC but to appeal the confirmation of the foreclosure sale, which the Agbada
spouses did not do in the case at bar.

DOCTRINE: Judgment; Foreclosure; Proper remedy to seek reversal of judgment in an action for
foreclosure of real estate mortgage is not a petition for annulment of judgment but an appeal from the
judgment itself or from the order confirming the sale of the foreclosed real estate.

Agbada v. Inter-Urban Developers Inc. FACTS: (1) Agbada obtained a loan from Inter-Urban. To secure
the loan, they executed a REM. The loan was payable in 6 mos. With 3% interest. (2) Agbada defaulted.
Inter-Urban filed a claim to have REM foreclosed. However, Agbada opposed claiming that the loan was
actually not yet due because the real agreement of the parties was that it was payable in 5 years with no
interest. (3) RTC rendered summary judgment on the ground that the defense of Agbada was untenable
because it was in conflict with the REM contract which expressly showed that the partied agreed that
the period of the loan was 6 months with 3% interest. (4) Meanwhile, the property was foreclosed and
sold at public action. The court confirmed the sale. Agbada did not appeal to such confirmation of sale.
Instead, they appealed the summary judgment of the RTC. (5) CA denied the appeal. Summary judgment
was proper. Hence, they appealed with the SC, claiming that they were denied of due process because
they were not given the opportunity to prove that the loan was not yet due and demandable. ISSUE:
W/N Agbada was denied of due process HELD: NO. (1) SC held that Summary Judgment was proper. The
mortgage contract expressly showed the agreement of the parties as to the period and interest of the
loan. The defense of Agbada was baseless and untenable. (2) SC further held that the proper remedy of
a mortgagor in this case was not to appeal the summary judgment of the RTC but to appeal the
confirmation of the foreclosure sale, which the Agbada spouses did not do in the case at bar. DOCTRINE:
Judgment; Foreclosure; Proper remedy to seek reversal of judgment in an action for foreclosure of real
estate mortgage is not a petition for annulment of judgment but an appeal from the judgment itself or
from the order confirming the sale of the foreclosed real estate.

PHILIPPINE NATIONAL BANK vs. SPOUSES CABATINGANG.R. No. 167058Facts:

Respondent spouses Cabatingan obtained two loans, secured by a real estate mortgage, in thetotal
amount of P421, 200 from petitioner Philippine National Bank. However, they were unableto fully pay
their obligation despite having been granted more than enough time to do so. Thus,on September 25,
1991, petitioner extrajudicially foreclosed on the mortgage pursuant to Act3135. Thereafter, a notice of
extrajudicial sale was issued stating that the foreclosed propertieswould be sold at public auction on
November 5, 1991 between 9:00 a.m. and 4:00 p.m. at themain entrance of the office of the Clerk of
Court on San Pedro St., Ormoc City. Pursuant to thenotice, the properties were sold at public auction on
November 5, 1991. The auction began at9:00 a.m. and was concluded after 20 minutes with petitioner
as the highest bidder.On March 16, 1993, respondent spouses filed a complaint with the RTC of
Ormocfor annulmentof extrajudicial foreclosure of real estate mortgage and the November 5, 1991
auction sale. Theyinvoked Section 4 of Act 3135 which provides:

Section 4. The sale shall be made at public auction,

between the hours of nine in the morning and four in the afternoon

, and shall be under the direction of the sheriff of the province, the justice or auxiliary justice of peace
of the municipality in which such sale has to be made, or of a notary public of said municipality, who
shall be entitled to collect a fee of Five pesos for each day of actual work performed, in addition to his
expenses.

Petitioners claimed that the provision quoted above must be observed strictly. Thus, because the public
auction of the foreclosed properties was held for only 20 minutes (instead of seven hoursas required by
law), the consequent sale was void. The RTC ruled in favor of Sps. Cabatinganand annulled the sale of
public auction.Petitioner moved for reconsideration but it was denied. Hence, this petition. Petitioner
contendsthat the RTC erred in interpreting Section 4 of Act 3135. The law only prohibits the conduct of
asale at any time before nine in the morning and after four in the afternoon. Thus, a sale heldwithin the
intervening period (i.e., at any time between 9:00 a.m. and 4:00 p.m.), regardless of duration, is valid.

Issue:

Whether a sale at public auction, to be valid, must be conducted the whole day from 9:00a.m. until 4:00
p.m. of the scheduled auction day.

Held:

Statutes should be sensibly construed to give effect to the legislative intention. Act 3135regulates the
extrajudicial sale of mortgaged real properties by prescribing a procedure whicheffectively safeguards
the rights of both debtor and creditor. Thus, its construction must beequally and mutually beneficial to
both parties.
The word between ordinarily means in the time interval that separates.

Thus, between the

hours

of nine in the morning and four in the afternoon merely provides a time frame within

which an auction sale may be conducted. Therefore, a sale at public auction held within theintervening
period provided by law (i.e., at any time from 9:00 a.m. until 4:00 p.m.) is valid,without regard to the
duration or length of time it took the auctioneer to conduct the proceedings.In this case, the November
5, 1991 sale at public auction took place from 9:00 a.m. to 9:20 a.m.Since it was conducted within the
time frame provided by law, the sale was valid.

sps certeza vs phil savings bank

Petitioners obtained a loan from Philippine Savings Bank. Due to petitionersfailure to pay their
obligation, an Extrajudicial Foreclosure of the Real EstateMortgage was instituted. During the auction
sale, PS Bank emerged as the sole andhighest bidder. A corresponding Certificate of Sale was then issued
in its favor andwas later registered. A Writ of Possession was then subsequently granted. On January 20,
2005, petitioners filed an Omnibus Motion for Leave to Intervene and toStay Issuance or
Implementation of Writ of Possession. They further sought thenullification of the extrajudicial
foreclosure sale for allegedly having been conductedin contravention of the procedural requirements
prescribed in A.M. No. 99-10-05-0(Re: Procedure in Extrajudicial Foreclosure of Real Estate Mortgages).

Issue

WON the auction sale conducted by virtue of the extrajudicial foreclosure of the mortgage should be
declared null and void for failure to comply with the two-bidder rule.

Ruling

The law governing cases of extrajudicial foreclosure of mortgage is Act No.3135. It is impractical and
burdensome to require the two-bidder rule consideringthat not all auction sales are commercially
attractive to prospective bidders. Thetwo-bidder rule is provided under P.D. No. 1594 with respect to
contracts forgovernment infrastructure projects because of the public interest involved. Inextrajudicial
foreclosure of mortgages however, the private interest is predominant. Therefore, the requirement that
there must be at least two bidders is not as exigentas in the case of contracts for government
infrastructure projects. Circular No. 7-2002 Section 5(a) further states that:

Sec. 5. Conduct of the extra-judicial foreclosure sale

a.

The bidding shall be made through sealed bids which must be submitted tothe Sheriff who shall conduct
the sale between the hours of 9 a.m. and 4 p.m.of the date of the auction (Act 3135, Sec. 4). xxx
 The use of the word "bids" (in plural form) does not make it a mandatoryrequirement to have more
than one bidder for an auction sale to be valid. Therefore, the extra-judicial foreclosure sale conducted
in this case is regular andvalid. Consequently, the subsequent issuance of the writ of possession is
likewiseregular and valid.

GUANCO v. ANTOLO

G.R. No. 150852|July 31, 2006| Callejo, Sr.

, J.

Petitioner:

LUISA GUANCO

Respondent/s:

ISIDRO ANTOLO

DOCTRINE:

Posting of a notice of the foreclosure of the real estate mortgage in at least three of the most
conspicuous public places not only in the municipality but also in the barrio where the land mortgaged is
situated during the 60dayperiod immediately preceding the public land auction is mandatory.

Unless it was made to appear that a sale at public auction was conducted and that the requisite
redemption period had lapsed, no Torrens title over the property can be issued by the Register of
Deeds.

FACTS:

Antolo applied for a loan with Rural bank of Sibalom (RBS) and executed a real estate mortgage to
secure its payment. This was annotated on the title on the same date.

Antolo later transferred due to work but did not leave a forwarding address with RBS.

The bank demanded payment when the loan was due but Antolo failed to pay.


Antolo later inquired on his account status, he found that his account had previously been paid for, that
the owners title had been released, and that the property had been sold to Guanco via a public auction.

post a notice of the foreclosure of the real estate mortgage in at least three of the most conspicuous
public places not only in the municipality but also in the barrio where the land mortgaged is situated
during the 60day period immediately preceding the public auction

The foreclosure of mortgages covering loans granted by rural banks shall be exempt from the
publication in newspapers now required by law where the total amount of the loan, including interests
due and unpaid, does not exceed three thousand pesos. It shall be sufficient publication in such cases if
the notices of foreclosure are posted in at least three of the most conspicuous public places in the
municipality and barrio where the land mortgaged is situated during the period of sixty days
immediately preceding the public auction

In this case, the provincial sheriff failed to comply with the law. It appears on the face of the Final Deed
of Sale executed by Deputy Sheriff that the petition for extrajudicial foreclosure of the real estate
mortgage purportedly filed with the said office was dated

July 21, 1977

. The deputy sheriff set the public auction sale on

August 19, 1977

or less than a month after the filing of the said petition

, short of the 60 day period under Section 5 of Rep. Act No. 720, as amended.

Guanco and the deputy sheriff made it appear that a public auction sale took place on August 19, 1977,
that Guanco purchased the property for P775.00 on said date, that Antolo failed to redeem the property
within the requisite period, and, consequently, a final deed of sale was executed on August 28, 1977.
The only conclusion is that Deputy Sheriff Alvior made it appear in the certificate of sale that a sale at
public auction was conducted on August 19, 1977, and that respondent failed to redeem the property
within one year from registration of the sale. This was clearly done to enable petitioner Luisa Guanco to
secure a Torrens title over the property in her name. Unless it was made to appear that a sale at public
auction was conducted and that the requisite redemption period had lapsed, no Torrens title over the
property can be issued by the Register of Deeds to and under the name of petitioner.

Spouses Yu vs PCIB

Petitioners Vicente Yu and Demetria Lee-Yu mortgaged their title, interest, and participation over
several parcels of land located in Dagupan City and Quezon City, in favor of the Philippine Commercial
International Bank, respondent and highest bidder, as security for the payment of a loan.

As petitioners failed to pay the loan and the interest and penalties due thereon, respondent filed
petition for extra-judicial foreclosure of real estate mortgage on the Dagupan City properties on July 21,
1998. City Sheriff issued notice of extra-judicial sale on August 3, 1998 scheduling the auction sale on
September 10, 1998.

Certificate of Sale was issued on September 14, 1998 in favor of respondent, the highest bidder. The
sale was registered with the Registry of Deeds in Dagupan City on October 1, 1998. After two months
before the expiration of the redemption period, respondent filed an ex-parte petition for writ of
possession before RTC of Dagupan. Petitioners complaint on annulment of certificate of sale and
motion to dismiss and to strike out testimony of Rodante Manuel was denied by said RTC. Motion for
reconsideration was then filed on February 14, 2000 arguing that the complaint on annulment of
certificate of sale is a prejudicial issue to the filed ex-parte petition for writ of possession, the resolution
of which is determinative of propriety of the issuance of a Writ of Possession.

ISSUE: Whether prejudicial question exist in a civil case for annulment of a certificate of sale and a
petition for the issuance of a writ of possession.

HELD:

Supreme Court held that no prejudicial question can arise from the existence of a civil case for
annulment of a certificate of sale and a petition for the issuance of a writ of possession in a special
proceeding since the two cases are both civil in nature which can proceed separately and take their own
direction independently of each other.
A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the
issue involved therein, and the cognizance of which pertains to another tribunal. It generally comes into
play in a situation where a civil action and a criminal action are both pending and there exists in the
former an issue that must be preemptively resolved before the criminal action may proceed because
issue raised in civil action would be determinative de jure of the guilt or innocence of the accused in a
criminal case.