Wednesday, April 9, 2014

Case Digest: Dolefil v. NLRC

DOLE PHILIPPINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Second Division) ALFREDO TARROZA, ROGELIO DE LA PEÑA and LORETO TEJERO, respondents.

G.R. No. L-55413, 25 July 1983.

AQUINO, J.:

Alfredo Tarroza, Rogelio de la Peña and Loreto Tejero ("Respondents") were light-wheel tractor operators in the pineapple field of Dole Philippines, Inc ("Dolefil"). 

On April 29, 1977, landguards of Dolefil spotted two drums containing crude oil in the farmlot of Inocencio Asibal which adjoins Dolefil's pineapple field. 

Asibal and companion Rogelio Odarve were investigated by the police and stated in their sworn statements that they bought the crude oil from Respondents and two other Dolefil employees.

Respondents and their two co-employees were charged with qualified theft in the municipal court. 

While those cases were pending, Dolefil filed with the Department of Labor an application for clearance to terminate the employment of Respondents for "stealing or dishonesty," which was granted.

Eight months later, the municipal court of acquitted Respondents of qualified theft while the two other Dolefil employees were convicted of qualified theft.

After that decision, Respondents filed a complaint for illegal dismissal and for reinstatement with backwages against Dolefil.

The Labor Arbiter dismissed the complaint and declared as valid, lawful and for a just cause the termination from employment of Respondents. The NLRC set aside the decision of the Labor Arbiter. 

ISSUE: W/N Dolefil is justified in dismissing Respondents.

RULING: Yes.

An employer may terminate an employment for "serious misconduct" or for "fraud or willful breach by the employee of the trust reposed in him by his employer or representative".

Loss of confidence as a ground for dismissal does not entail proof beyond reasonable doubt of the employee's misconduct. It is enough that there be some basis for such loss of confidence or that the employer has reasonable grounds to believe that the employee is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position. 

The eventual conviction of an employee who is prosecuted for his misconduct is not indispensable to warrant his dismissal by his employer.

On the other hand, the acquittal of an employee in the criminal case filed against him by his employer does not also guarantee his reinstatement if the employer has lost confidence in him. 

A company has the right to dismiss its erring employees if only as a measure of self-protection against acts inimical to its interest.

Thursday, April 3, 2014

Case Digest: McDonald's Corporation v. L.C. Big Mak Burger, Inc.

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners, vs. L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, respondents.

G.R. No. 143993, August 18, 2004.

CARPIO, J.:

Petitioner McDonald's Corporation ("McDonald's") is a US corporation that operates a global chain of fast-food restaurants, with Petitioner McGeorge Food Industries ("McGeorge"), as the Philippine franchisee.

McDonald's owns the "Big Mac" mark for its "double-decker hamburger sandwich." with the US Trademark Registry on 16 October 1979.

Based on this Home Registration, McDonald's applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology ("PBPTT") (now IPO). On 18 July 1985, the PBPTT allowed registration of the "Big Mac."

Respondent L.C. Big Mak Burger, Inc. is a domestic corporation which operates fast-food outlets and snack vans in Metro Manila and nearby provinces. Respondent corporation's menu includes hamburger sandwiches and other food items.

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big Mak" mark for its hamburger sandwiches, which was opposed by McDonald's. McDonald's also informed LC Big Mak chairman of its exclusive right to the "Big Mac" mark and requested him to desist from using the "Big Mac" mark or any similar mark.

Having received no reply, petitioners sued L.C. Big Mak Burger, Inc. and its directors before Makati RTC Branch 137 ("RTC"), for trademark infringement and unfair competition.

RTC rendered a Decision finding respondent corporation liable for trademark infringement and unfair competition. CA reversed RTC's decision on appeal.

1ST ISSUE:W/N respondent corporation is liable for trademark infringement and unfair competition.

Ruling: Yes
Section 22 of Republic Act No. 166, as amended, defines trademark infringement as follows:
Infringement, what constitutes. - Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.
To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion." Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement.

1st element:

A mark is valid if it is distinctive and not merely generic and descriptive.

The "Big Mac" mark, which should be treated in its entirety and not dissected word for word, is neither generic nor descriptive. Generic marks are commonly used as the name or description of a kind of goods, such as "Lite" for beer. Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists, such as "Arthriticare" for arthritis medication. On the contrary, "Big Mac" falls under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents. As such, it is highly distinctive and thus valid.

2nd element:

Petitioners have duly established McDonald's exclusive ownership of the "Big Mac" mark. Prior valid registrants of the said mark had already assigned his rights to McDonald's.

3rd element:

Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (confusion in which the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other) and confusion of business (though the goods of the parties are different, the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist).

There is confusion of goods in this case since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that petitioners' "Big Mac" mark is used.

There is also confusion of business due to Respondents' use of the "Big Mak" mark in the sale of hamburgers, the same business that petitioners are engaged in, also results in confusion of business. The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business.

Furthermore, In determining likelihood of confusion, the SC has relied on the dominancy test (similarity of the prevalent features of the competing trademarks that might cause confusion) over the holistic test (consideration of the entirety of the marks as applied to the products, including the labels and packaging).

Applying the dominancy test, Respondents' use of the "Big Mak" mark results in likelihood of confusion. Aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters.

Lastly, since Section 22 only requires the less stringent standard of "likelihood of confusion," Petitioners' failure to present proof of actual confusion does not negate their claim of trademark infringement.

2ND ISSUE: W/N Respondents committed Unfair Competition

Ruling: Yes.
Section 29 ("Section 29")73 of RA 166 defines unfair competition, thus:
Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.

In the case at bar, Respondents have applied on their plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. Further, Respondents' goods are hamburgers which are also the goods of petitioners. Moreover, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." This clearly shows respondents' intent to deceive the public.

Wednesday, April 2, 2014

Case Digest: Roxas v. CA

MELANIA A. ROXAS, petitioner, vs. THE HON. COURT OF APPEALS and ANTONIO M. CAYETANO, respondents.

G.R. No. 92245, 26 June 1991.

PARAS, J.:

Petitioner Melania Roxas ("Melania") is married to Antonio Roxas ("Antonio"), although they are already estranged and living separately.

Melania discovered that Antonio leased to Respondent Antonio Cayetano ("Mr. Cayetano") their conjugal lot in Novaliches without her knowledge and consent. 

Thus, Melanie filed a case before the RTC praying for the annulment of the contract of lease between Antonio and Mr. Cayetano.

Mr. Cayetano moved to dismiss the complaint on the sole ground that the complaint states no cause of action.

The RTC Judge resolved said Motion by dismissing Melania's complaint.

ISSUE: W/N a husband, may legally enter into a long-term contract of lease involving conjugal real property without the consent of the wife.

Ruling: No. (Case remanded to the RTC by the SC)

Even if the husband is administrator of the conjugal partnership, administration does not include acts of ownership. For while the husband can administer the conjugal assets unhampered, he cannot alienate or encumber the conjugal realty.

As stated in Black's Law Dictionary, the word "alienation" means "the transfer of the property and possession of lands, tenements, or other things from one person to another ... The act by which the title to real estate is voluntarily assigned by one person to another and accepted by the latter, in the form prescribed by law." While encumbrance "has been defined to be every right to, or interest in, the land which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance; any (act) that impairs the use or transfer of property or real estate..."

The pivotal issue in this case is whether or not a lease is an encumbrance and/or alienation.

Under Art. 1643 of the New Civil Code "In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite...." Thus, lease is a grant of use and possession: it is not only a grant of possession.

In the contract of lease, the lessor transfers his right of use in favor of the lessee. The lessor's right of use is impaired, therein. He may even be ejected by the lessee if the lessor uses the leased realty.

Therefore, lease is a burden on the land, it is an encumbrance on the land. The concept of encumbrance includes lease, thus "an encumbrance is sometimes construed broadly to include not only liens such as mortgages and taxes, but also attachment, LEASES, inchoate dower rights, water rights, easements, and other RESTRICTIONS on USE."

Moreover, lease is not only an encumbrance but also a qualified alienation, with the lessee becoming, for all legal intents and purposes, and subject to its terms, the owner of the thing affected by the lease.

Thus, in case the wife's consent is not secured by the husband as required by law, the wife has the remedy of filing an action for the annulment of the contract.

Thursday, March 27, 2014

Case Digest: Islamic Directorate of the Philippines v. CA

ISLAMIC DIRECTORATE OF THE PHILIPPINES, MANUEL F. PEREA and SECURITIES & EXCHANGE COMMISSION, petitioners, vs.COURT OF APPEALS and IGLESIA NI CRISTO, respondents.
G.R. No. 117897, 14 May 1997.


HERMOSISIMA, JR., J.:

1971, the ISLAMIC DIRECTORATE OF THE PHILIPPINES ("IDP"), was incorporated, the primary purpose of which is to establish of a mosque, school, and other religious infrastructures in Quezon City.
IDP purchased a 49,652-square meter lot in Tandang Sora, QC, which was covered by TCT Nos. RT-26520 (176616) and RT-26521 (170567).

When President Marcos declared martial law in 1972, most of the members of the 1971 Board of Trustees ("Tamano Group")flew to the Middle East to escape political persecution.

Thereafter, two contending groups claiming to be the IDP Board of Trustees sprung: the Carpizo group and Abbas group.

In a suit between the two groups, SEC rendered a decision in 1986 declaring both groups to be null and void. SEC recommeded that the a new by-laws be approved and a new election be conducted upon the approval of the by-laws. However, the SEC recommendation was not heeded.

In 1989, the Carpizo group passed a Board Resolution authorizing the sale of the land to Iglesia Ni Cristo ("INC"), and a Deed of Sale was eventually executed.

In 1991, the Tamano Group filed a petition before the SEC questioning the sale.

Meanwhile, INC filed a suit for specific performance before RTC Branch 81 against the Carpizo group. INC also moved to compel  a certain Leticia Ligon (who is apparently the mortgagee of the lot) to surrender the title.

The Tamano group sought to intervene, but the intervention was denied despite being informed of the pending SEC case. In 1992, the Court subsequently ruled that the INC as the rightful owner of the land, and ordered Ligon to surrender the titles for annotation. Ligon appealed to CA and SC, but her appeals were denied.

In 1993, the SEC ruled that the sale was null and void . On appeal CA reversed the SEC ruling.

MAIN ISSUE: W/N the sale between the Carpizo group and INC is null and void.

RULING: YES.

Since the SEC has declared the Carpizo group as a void Board of Trustees, the sale it entered into with INC is likewise void. Without a valid consent of a contracting party, there can be no valid contract.

In this case, the IDP, never gave its consent, through a legitimate Board of Trustees, to the disputed Deed of Absolute Sale executed in favor of INC. Therefore, this is a case not only of vitiated consent, but one where consent on the part of one of the supposed contracting parties is totally wanting. Ineluctably, the subject sale is void and produces no effect whatsoever.

Further, the Carpizo group failed to comply with Section 40 of the Corporation Code, which provides that: " ... a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets... when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock; or in case of non-stock corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholders' or members' meeting duly called for the purpose...."

The subject lot constitutes the only property of IDP. Hence, its sale to a third-party is a sale or disposition of all the corporate property and assets of IDP. For the sale to be valid, the majority vote of the legitimate Board of Trustees, concurred in by the vote of at least 2/3 of the bona fide members of the corporation should have been obtained. These twin requirements were not met in the case at bar.

ANCILLARY ISSUE: W/N The Ligon ruling constitutes res judicata.

RULING: NO.

Section 49(b), Rule 39 enunciates the first concept of res judicata known as "bar by prior judgment," whereas, Section 49(c), Rule 39 is referred to as "conclusiveness of judgment."

There is "bar by former judgment" when, between the first case where the judgment was rendered, and the second case where such judgment is invoked, there is identity of parties, subject matter and cause of action. When the three identities are present, the judgment on the merits rendered in the first constitutes an absolute bar to the subsequent action. But where between the first case wherein judgment is rendered and the second case wherein such judgment is invoked, there is only identity of parties but there is no identity of cause of action, the judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein. This is what is termed "conclusiveness of judgment."

Neither applies to the case at bar. There is no "bar by former judgment" since while there may be identity of subject matter (IDP property) in both cases, there is no identity of parties.  The principal parties in the first case were Ligon and the Iglesia Ni Cristo. The IDP can not be considered essentially a formal party thereto for the simple reason that it was not duly represented by a legitimate Board of Trustees.

Res Judicata in the form of "conclusiveness of judgment" cannot likewise apply for the reason that the primary issue in the first case is the possession of the titles, and not the sale of the land, as in this case.

Thursday, March 6, 2014

Case Digest: Pagsibigan v. CA

PILAR PAGSIBIGAN, petitioner, vs. COURT OF APPEALS and PLANTERS DEVELOPMENT BANK, respondents.
G.R. No. 90169, April 7, 1993.

CAMPOS, JR., J:

On November 3, 1976, Petitioner Pilar Pagsigiban obtained a loan from Respondent Planters Development Bank ("Bank") for P4,500.00, secured by a mortgage over a parcel of land.

The Promissory Note for the said loan stipulated for the first payment to be made on May 3, 1977 and payments every six months thereafter at P1,018.14 with 19% interest for unpaid amortizations. It also contained an acceleration clause.

Initial payment was made in July 6, 1977, followed by several payments in the total amount of P11,900.00. However, only four of these payments were applied to the loan, while the rest were "temporarily lodged to accounts payable since the account was already past due".

In 1984, the property was foreclosed extrajudicially upon Petition by the bank for failure to pay an outstanding balance of P29,554.81. This resulted in the property being sold to the bank for P8,163.00, and later claimed a deficiency of P21,391.81.

Petitioner filed an action for annulment of sale by Petitioner, which the lower court granted. However, it was overturned by CA.

1st Issue: W/N the auction sale is valid.

Ruling: No.
The respondent bank had the right to foreclose the mortgage upon the first default of petitioner on May 3, 1977, but it did not. When it received payment of petitioner on July 6, 1977, the respondent bank had clearly waived its right under the acceleration clause since instead of claiming penalty charges on the entire amount of P4,500.00, it only computed the penalty based on the defaulted amortization payment which is P1,018.14.

Further, for more than four years, the bank made petitioner believe that it was applying her payment on the loan and interest. It is now bound by estoppel to apply the payments to petitioner's debt and from foreclosing the property.

Accordingly, the legality of the foreclosure cannot be sustained because of substantial performance on the part of petitioner (Article 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee.) and acceptance of payment by the bank (Article 1235: when the creditor accepts performance, knowing its incompleteness and irregularity without protest or objection, the obligation is deemed complied with.).

2nd Issue: W/N Petitioner is entitled to recover damages.

Ruling: Yes.
Moral damages are warranted for the mental anguish, sleepless nights and serious anxiety that the bank's acts have caused petitioner. The bank succeeded in taking advantage of the ignorance of petitioner by lodging the bulk of petitioner's payment to account payable based on the flimsy reason that she had been in default, and then considering the entire debt pursuant to an acceleration clause as earning interest and penalty charges at an exorbitant rate of 19% each from the date of first default up to the date of foreclosure, thus bringing the obligation to an astronomical amount of P29,554.81 instead of just P11,000.00.

Exemplary damages are also proper, to serve as a deterrent for the bank from repeating similar acts and to set an example and correction for the public good.

Wednesday, March 5, 2014

Case Digest: Spouses Ruiz v. Sheriff of Manila

SPOUSES JESUS RUIZ and AMPARO SAMBENITO RUIZ, petitioners-appellants, vs. SHERIFF OF MANILA and THE BANK OF THE PHILIPPINE ISLANDS, respondents-appellees.

G.R. No. L-24016. July 31, 1970.
MAKALINTAL, J.:

Spouses Ruiz ("Appellants") executed in favor of Appellee Bank of the Philippine Islands ("BPI") a real estate mortgage covering a parcel of land in Sta. Ana, Manila, as security for a loan of P15,000.00.

At the heart of the controversy is the following stipulation in the contract:
WHEREAS, the [Appellants]... have applied for and ... obtained from [BPI] ... a loan in the sum of P 15,000.00 ... to be amortized at the rate of not less than P300.00... to be effected at the end of each month. Failure to pay two successive monthly amortizations will cause this loan to be automatically due and payable in its entirety. Notwithstanding the foregoing, this loan shall not run for more than 5 years.
Upon failure of Appellants to pay 12 successive monthly amortizations despite several demands, BPI asked the Sheriff of Manila to foreclose the mortgage extrajudicially. The Sheriff caused the notice of auction to be published in the "Daily Record."

The Sheriff proceeded to sell the mortgaged property, with the BPI as the highest bidder. Since the mortgagee's bid of P15,173.74 represented the total mortgage debt, the Sheriff did not collect cash but merely applied the same to the amount of the bid.

Appellants then filed with the lower court praying for the annulment of the foreclosure sale, but the same was denied.

1st Issue: W/N the foreclosure sale was premature and therefore illegal

Ruling: No.

The acceleration clause is valid. All that the stipulation in issue meant is that while monthly amortizations could be as little as P300.00 the loan should anyway be paid within 5 years; and that failure to pay two successive amortizations would render the entire loan due and payable. Consequently, default leaving been committed for twelve months, the foreclosure of the mortgage was not premature.

2nd Issue: W/N the foreclosure sale was null and void for failure to comply with the requirements prescribed by Act 3135.

Ruling: No.

Re "Daily Record" as a newspaper of general circulation: The party alleging non-compliance with the requisite publication has the burden of proving the same. The appellants did not present evidence to show that the "Daily Record" was not a newspaper of general circulation.

Re Non-payment of cash by BPI as highest bidder: It was not necessary for BPI to pay cash to the sheriff, since the amount of its bid represented the total mortgage debt. It would serve no purpose for the sheriff to go through the ceremony of receiving the money and paying it back to the creditor.

Tuesday, March 4, 2014

Case Digest: DBP v. Licuanan

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner vs.ALEJANDRO and ADELAIDA LICUANAN, Respondents. 

G.R. No. 150097, February 26, 2007. 

CORONA, J.:

In 1974, Respondent spouses Alejandro and Adelaida Licuanan ("Respondents") were granted a P4,700 loan by petitioner Development Bank of the Philippines ("DBP") to mature in 1979, and secured by a real estate mortgage over a 980-square meter property.

In 1975, DBP granted respondents a second loan of P12,000 payable on or before the year 1980, which was secured by a real estate mortgage over four parcels of land.

In 1975, DBP granted Respondents a third loan of P22,000 maturing in 1985, and was secured by a real estate mortgage over three parcels of land.

In 1979, petitioner and respondents restructured the second loan, extending the maturity date to 1982.

In 1981, DBP sent a letter to Respondents informing them that they would institute extrajudicial foreclosure proceedings for breach of the conditions of the mortgage (of the first loan).

After an application for extrajudicial foreclosure, the properties were sold in a public auction, in which DBP was the highest bidder for bidding a total of P16,340.

In 1984, DBP informed Respondents that the properties could be reacquired by negotiated sale. Three days later, however, the properties were sold to one Emelita Peralta for P104,000.

After being informed of the sale, Respondents offered to repurchase the properties, but it was rejected by DBP.

Respondents then filed a complaint for recovery of real properties and damages in RTC of Lingayen against DBP and Peralta.

In its counterclaim, DBP asserts its right to claim for deficiency since the proceeds of the sale (P104,000) did not cover the debt of Petitioners of P131,642.33. Thus, it is entitled to claim the difference (P27,642.33) with interest.

DBP also argues that demand is not necessary as the maturity dates are already known to Respondents, and that Respondents are estopped from questioning the foreclosure sale since they offered to repurchase the property.

The RTC ruled in favor of respondents. It held that there was no demand for payment prior to the extrajudicial foreclosure and ordered Peralta to reconvey the properties to respondents, subject to Peralta’s right to be paid. It also held that petitioner did not deal fairly with respondents making it liable for nominal and moral damages, as well as attorney’s fees and litigation expenses.

CA affirmed RTC's findings.

1st Issue: W/N a demand for payment of the loans was made before the mortgage was foreclosed.  

Ruling: No.
Whether or not demand was made is a question of fact. Both the CA and RTC found that demand was never made, and no compelling reason has been shown by DBP to rule otherwise.

(The issue of whether demand was made before the foreclosure was effected is essential. If demand was made and duly received by the respondents and the latter still did not pay, then they were already in default and foreclosure was proper. However, if demand was not made, then the loans had not yet become due and demandable. This meant that respondents had not defaulted in their payments and the foreclosure by petitioner was premature. Foreclosure is valid only when the debtor is in default in the payment of his obligation.)

2nd Issue: W/N demand is necessary to make respondents guilty of default.
 
Ruling: Yes.
It is only when demand to pay is made and subsequently refused that respondents can be considered in default and DBP obtains the right to file an action to collect the debt or foreclose the mortgage.

The maturity dates only indicate when payment can be demanded. It is the refusal to pay after demand that gives the creditor a cause of action against the debtor.

Since demand was never made by DBP, the foreclosure was premature and therefore null and void.

Further, DBP's argument that respondents are estopped from questioning the validity of the foreclosure sale since they offered to repurchase the foreclosed properties is incorrect.

An offer to repurchase should not be construed as a waiver of the right to question the sale. Instead, it must be taken as an intention to avoid further litigation and thus is in the nature of an offer to compromise. By offering to redeem the properties, respondents can attain their ultimate objective: to pay off their debt and regain ownership of their lands.

3rd Issue: W/N respondents are liable for the deficiency claim of petitioner.

Ruling: No.
While it is true that in extrajudicial foreclosure of mortgage, the mortgagee has the right to recover the deficiency from the debtor, this presupposes that the foreclosure must first be valid.

4th Issue: W/N petitioner is liable for damages.

Ruling: Yes
DBP is liable for moral damages. Apart from the rushed foreclosure proceedings, certain acts of DBP were most certainly ruthless and in bad faith, which caused serious anxiety and wounded feelings to Respondents, to wit -

1st: DBP granted the three loans for a total of P45,740.61 because the market value of the collaterals exceeds P100,000.00. But 6 years later, when the value must have appreciated, DBP bidded for a measly P16,000.00 and claimed a deficiency. That it was measly and shocking to the conscience was conclusively proven by the fact that Peralta  bought the properties for P104,000.00 barely three 3 years later.

2nd: It is odd that DBP restructured the second loan, but not the first. This lulled Respondents into a false sense of security and a feeling of relief that the entire loan accommodation will mature in 1985. Thus, they were blindsided by the foreclosure proceedings, causing them to suffer sleepless nights.

3rd: Respondents also made pleas to repurchase the properties, which fell on deaf ears. It also had the temerity to unconscionably making deficiency claims plus interest.

Further, Respondents’ property rights were invaded or violated, hence the grant of nominal damages was also proper.

Respondents are likewise entitled to the award of attorney’s fees and expenses of litigation since the premature foreclosure by petitioner compelled them to incur expenses to protect their interest.
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