DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner vs.ALEJANDRO and ADELAIDA LICUANAN, Respondents.
G.R. No. 150097, February 26, 2007.
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.
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.
2nd Issue: W/N demand is necessary to make respondents guilty of default.
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.
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.
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.