FIRST DIVISION
[G.R. No. 224339. June 3, 2019.]
SPOUSES CESAR AND LULU JORGE, petitioners, vs. METROPOLITAN BANK AND TRUST COMPANY, ATTY. ELEANOR T. HERNANDEZ, AND THE REGISTRY OF DEEDS FOR MUNTINLUPA CITY, MARCELO G. NAVAL, respondents.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution dated June 3, 2019which reads as follows:
"G.R. No. 224339 (Spouses Cesar and Lulu Jorge v. Metropolitan Bank and Trust Company, Atty. Eleanor T. Hernandez, and the Registry of Deeds for Muntinlupa City, Marcelo G. Naval)
This is an appeal on certiorari seeking to reverse the November 13, 2015 Decision 1 and the April 21, 2016 Resolution 2 of the Court of Appeals (CA) in CA-G.R. CV No. 103427. The CA affirmed with modification the June 11, 2014 Decision 3 of the Regional Trial Court of Muntinlupa City, Branch 206 (RTC) in Civil Case No. 04-169, an action for redemption of mortgage.
The Antecedents
On August 24, 1993, Spouses Zion and Ana Marie Zuñiga (Spouses Zuñiga) obtained a loan from Solidbank (now Metropolitan Bank and Trust Company [Metrobank]) in the amount of P3,200,000.00. Said loan was secured by Real Estate Mortgage (REM) dated August 20, 1993 over a parcel of land with improvements covered by Transfer Certificate of Title (TCT) No. 182336, located at Lot 3, Block 10, Lancaster St., Hillsborough Subdivision, Alabang, Muntinlupa City (subject property). The REM was subsequently amended on December 20, 1993 and on June 20, 1995. 4
Sometime in March 2000, Spouses Zuñiga sold the subject property to Spouses Cesar and Lulu Jorge (petitioners) for the amount of P7,000,000.00. At the time of sale, the subject property was still mortgaged with Metrobank. Accordingly, Spouses Zuñiga executed a Special Power of Attorney (SPA) in favor of petitioners, thereby appointing the latter as their attorney-in-fact and granting them the full authority to do and perform all acts and things related to the ownership and possession of the subject property. Petitioners then moved into the subject property sometime in April 2000. 5 CAIHTE
Thereafter, Lulu Jorge and Anna Marie Zuñiga notified Yolanda Dizon (Dizon), account officer of Metrobank, about the purchase of the subject property and assumption of the loan obligation by petitioners. However, according to Metrobank, it did not formally agree to the substitution of petitioners as its new debtors-mortgagors. Petitioners then continued the payment of Spouses Zuñiga's monthly arrears. However, petitioners failed to pay the monthly arrears in the amount of P422,792.10. Consequently, on June 10, 2003, Metrobank filed a Petition for Foreclosure under Act No. 3135, 6 as amended, before the notary public Atty. Eleonor Hernandez (Atty. Hernandez). 7
A Notice of Extrajudicial Sale on June 18, 2003 was issued by Atty. Hernandez setting the public auction on July 21, 2003 at 10:00 o'clock in the morning. Thereafter, Metrobank complied with all the formalities prescribed by law and posted the Notice of Extrajudicial Sale in three (3) conspicuous places, namely, at the Muntinlupa City Hall, Office of the Clerk of Court of the Regional Trial Court of Muntinlupa City and the Registry of Deeds. 8 The Notice of Extrajudicial Sale was also published in a newspaper of general circulation for three (3) consecutive weeks and a copy thereof was sent to the owner of the subject property through registered mail. Araceli Delayo received the notice sent to the subject property on June 25, 2003.
During the public auction, respondent Marcelo G. Naval (Naval) emerged as the highest bidder. A Certificate of Sale dated July 21, 2003 was then issued in his name that was duly approved by Executive Judge Juanita T. Guerrero.
On July 22, 2004, petitioners filed a Complaint for Annulment of Extrajudicial Foreclosure of Real Estate Mortgage and Certificate of Sale, and in the Alternative, Exercise of Right of Redemption under Act No. 3135, as amended, against Naval, Metrobank, Atty. Hernandez and the Registry of Deeds of Muntinlupa City. 9 In their Complaint, petitioners claimed that the extrajudicial foreclosure of the subject property, as well as the Certificate of Sale issued pursuant thereto were null and void due to non-compliance with the jurisdictional requirements in extrajudicial foreclosure sales. 10 Petitioners alleged that Metrobank and Atty. Hernandez acted in bad faith and were guilty of fraud by deliberately failing to notify them about the overdue amortizations and the foreclosure sale. 11 In the alternative, they prayed that they be allowed to redeem the subject property.
In her Answer with Counterclaim, Atty. Hernandez asserted that petitioners have no cause of action against her. She confirmed that Metrobank complied with the jurisdictional requirements of the posting and publication of the Notice of Extrajudicial Foreclosure. Moreover, Atty. Hernandez related that she sent a Notice of Extrajudicial Sale to the subject property through registered mail. 12
On the other hand, Naval filed a Motion to Dismiss which was denied by the RTC in its Order 13 dated March 9, 2005. In his answer ad cautelam, Naval asserted that he is an innocent purchaser for value and that he participated in the public auction in good faith. He pointed out that the petitioners were not able to validly substitute Spouses Zuñiga as the mortgagors because the Deed of Sale and SPA they executed were invalid since they were notarized only after the death of Zion Zuñiga. 14
The RTC Ruling
In its June 11, 2014 Decision, the RTC ruled that petitioners were not validly substituted as the new debtors-mortgagors of respondent bank in lieu of Spouses Zuñiga because they failed to show any concrete documentary evidence that proved that Metrobank formally agreed to the substitution of petitioners as its new debtors-mortgagors. Consequently, the contractual relations between Metrobank and Spouses Zuñiga as the mortgagee and mortgagors, respectively, must remain. Thus, Metrobank was under no obligation to notify petitioners of the unpaid amortizations and the foreclosure sale. 15 The RTC held that the extrajudicial foreclosure sale of the subject property was valid. 16
The RTC, however, declared that petitioners, as Spouses Zuñiga's successors-in-interest, have the right to redeem the subject property. The RTC opined that a prior tender of payment was not necessary as the redemption price had yet to be determined. 17 The RTC declared that the redemption price should be based on the amount of the purchase price plus one percent (1) per month interest thereon together with the amount of the assessments or taxes which respondent Naval may have paid on the subject property after its purchase, with an interest of 1 per month thereon. 18 In addition, the RTC ordered petitioners to pay for the value of the improvements made by respondent Naval on the subject property from the time the latter purchased the same until the filing of the instant case. 19 Also, the RTC required Metrobank to return to the petitioners the excess of the bid price minus the fees and expenses that it paid. 20 DETACa
Respondent Naval filed a Motion for Reconsideration while petitioners filed an Opposition with Manifestation. 21
On September 4, 2014, the RTC issued an Order 22 amending its decision stating that respondent Naval was not entitled to be reimbursed for the improvements he made on the subject property because they were made with knowledge of the risks involved arising from petitioners' complaint which sought the redemption of the subject property.
Aggrieved, both petitioners and respondent Naval appealed to the CA.
The CA Ruling
In its November 13, 2015 Decision, the CA held that the extrajudicial foreclosure was valid because Metrobank complied with all the requirements imposed by Section 3 23 of Act No. 3135. The CA agreed with the findings of the RTC that petitioners were not validly substituted as the new debtors-mortgagors. The CA opined that petitioners could not seek refuge on Section 14 24 of the REM because the documentary and testimonial evidence show that Spouses Zuñiga remained as the debtors-mortgagors. The CA held that there was no valid novation of the mortgage because there was no consent on the part of Metrobank.
Further, the CA ruled that petitioners have no right to redeem the subject property because the complaint they filed was not instituted in good faith. It noted that the case before the RTC was not filed for the sole purpose of seeking a determination of the redemption price but its main cause of action was for the annulment of the extrajudicial foreclosure sale, with the right of redemption merely sought as an alternative prayer. Thus, the filing of the action for annulment of the foreclosure sale and, in the alternative, exercise the right of redemption did not stop the running of the one-year period, as the complaint was not filed in good faith. 25 Also, the offer to redeem the subject property was not accompanied by a valid tender of payment.
Petitioners' motion for reconsideration was denied by the CA in its Resolution dated April 21, 2016.
Hence, this petition.
The Issues
I. WHETHER OR NOT THE CA ERRED IN DECLARING THAT THE ABSENCE OF NOTICE TO PETITIONERS DID NOT RENDER THE EXTRAJUDICIAL FORECLOSURE VOID BECAUSE PETITIONERS WERE NOT VALIDLY SUBSTITUTED AS DEBTORS-MORTGAGORS;
II. WHETHER OR NOT THE CA ERRED IN RULING THAT PETITIONERS DO NOT HAVE THE RIGHT OF REDEMPTION;
III WHETHER OR NOT THE CA ACTED CONTRARY TO ACT NO. 4118 WHEN IT FAILED TO CORRECT THE FORMULA FOR COMPUTING THE REDEMPTION PRICE;
IV. WHETHER OR NOT THE CA ERRED WHEN IT FAILED TO AWARD INTEREST TO PETITIONERS ON THE AMOUNT DUE TO PETITIONERS FROM METROBANK.
The pivotal issue in this case is whether or not the CA erred in affirming with modification the findings of the RTC and further ruling that petitioners have no right to redeem the subject property.
Petitioners argue that they have been validly substituted as the debtors-mortgagors of Metrobank because the latter had been informed of the sale that took place between petitioners and Spouses Zuñiga and that it had been receiving loan payments from them. As such, they should have been notified of the extrajudicial foreclosure. The lack of notice to petitioners makes the extrajudicial foreclosure null and void. They also claim that they have the right to redeem the property because they filed the action to redeem within the period required by law and that the consignation of the purchase price is not essential for the redemption of the subject property. aDSIHc
In his Comment, 26 respondent Naval argues that the CA correctly found that there was no valid novation in the case at bar because Metrobank did not expressly release Spouses Zuñiga from their obligations under the REM. As such, personal notice of the foreclosure sale to the petitioners is not essential for the sale to be valid as they were never substituted as debtors-mortgagors under the REM. Respondent Naval also alleges that petitioners failed to follow the requisites of redemption of an extrajudicially foreclosed property because they failed to serve a written notice of the redemption on the officer who made the sale and filed a duplicate with the Register of Deeds of the province.
In its Comment, 27 Metrobank alleges that the extrajudicial foreclosure of the mortgage was valid because it complied with the requisites for the foreclosure of mortgage imposed under Act No. 3135. Metrobank also argues that petitioners were not validly substituted as debtors-mortgagors. Metrobank did not give its consent for the novation of the loan contract and it confirmed that Dizon has no capacity to recognize a new borrower or mortgagor unless she is duly authorized to do so by a written document signed by the concerned officer of Metrobank. It also claims that the period to redeem the subject property had already expired because petitioners' action for annulment of mortgage did not suspend the running of the one-year redemption period.
In its Consolidated Reply, 28 petitioners reiterated their arguments in the instant petition that they had been validly substituted as debtors-mortgagors and that they have the right to redeem the subject property.
The Court's Ruling
At the outset, it must be pointed out that the arguments raised by petitioners are a mere rehash of what was already resolved and passed upon by the appellate court and the trial court.
Moreover, the determination of the existence of the consent of Metrobank to the substitution of debtors is a question of fact because it requires the Court to review the evidence on record. As a rule, a petition for review under Rule 45 of the Rules of Court covers only questions of law. Questions of fact are not reviewable and cannot be passed upon by this Court in the exercise of its power to review. The distinction between questions of law and questions of fact is established. A question of law exists when the doubt or difference centers on what the law is on a certain state of facts. A question of fact, on the other hand, exists if the doubt centers on the truth or falsity of the alleged facts. This being so, the findings of fact of the CA are final and conclusive and this Court will not review them on appeal. 29
This rule, however, is not without certain exceptions, such as when (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the Court of Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties. 30
However, the Court finds that petitioners failed to substantiate its claim that the case falls under any of the exceptions. It has been held that the findings of the RTC, especially when affirmed by the CA, are conclusive on this Court when supported by the evidence on record. 31 The Court will not assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties to an appeal, particularly where the findings of both the trial court and the appellate court on the [matter] coincide, as in the instant case. 32
In any event, the petition must still be denied for lack of merit.
There was no valid
Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. 33 It is "the substitution of a new contract, debt, or obligation for an existing one between the same or different parties." 34 Article 1293 of the Civil Code defines novation as follows: ETHIDa
Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237.
Under this provision, there are two forms of novation by substituting the person of the debtor, and they are: (1) expromision and (2) delegacion. In the former, the initiative for the change does not come from the debtor and may even be made without his knowledge, since it consists in a third person assuming the obligation. 35 As such, it logically requires the consent of the third person and the creditor. In the latter, the debtor offers and the creditor accepts a third person who consents to the substitution and assumes the obligation, so that the intervention and the consent of these three persons are necessary. 36 From the foregoing, it is clear that the consent of the creditor is indispensable in both modes of substitution. The reason for this is that the "substitution of one debtor for another may delay or prevent the fulfillment of the obligation by reason of the financial inability or insolvency of the new debtor; hence, the creditor should agree to accept the substitution in order that it may be binding on him." 37
In Ajax Marketing & Development Corporation, et al. v. Court of Appeals, et al., 38 the Court explained how novation could be effective, to wit:
The well[-]settled rule is that novation is never presumed. Novation will not be allowed unless it is clearly shown by express agreement, or by acts of equal import. Thus, to effect an objective novation it is imperative that the new obligation expressly declare that the old obligation is thereby extinguished, or that the new obligation be on every point incompatible with the [old] one. In the same vein, to effect a subjective novation by a change in the person of the debtor it is necessary that the old debtor be released expressly from the obligation, and the third person or new debtor assumes his place in the relation. There is no novation without such release as the third person who has assumed the debtor's obligation becomes merely a co-debtor or surety. 39 (citations omitted)
In the instant case, petitioners were unable to present proof of the clear and unmistakable consent of Metrobank to the substitution of debtors-mortgagors. The Court agrees with the findings of the CA that petitioners were not validly substituted as the new debtors-mortgagors of Metrobank, to wit:
x x x it becomes all too apparent that there was no valid substitution of the Spouses Jorge in place of the Spouses Zuñiga in the Real Estate Mortgage contract. Although the Spouses Jorge continued the payment of the loan, this in itself did not make them the debtors-mortgagors of Metrobank. Notably, the records are bereft of any document issued by Metrobank recognizing the Spouses Jorge as the new debtors, on the one hand, and consequently releasing the Spouses Zuñiga from the contractual relationship, on the other. This dearth of documents was admitted by the Spouses Jorge. In the same vein, neither were there any official receipts acknowledging or recognizing the payment of the Spouses Jorge. On the contrary, their payments were consistently recognized as remitted for the account of the Spouses Zuñiga. At best, all that the Spouses Jorge could present was one single Acknowledgment Receipt for a check issued by Cesar Jorge. However, the same Acknowledgment Receipt was nothing but a provisional receipt showing the acceptance of the check. Moreover, the records show that all correspondences pertinent to the loan obligation were addressed to the Spouses Zuñiga. Albeit mentioned in the letters and schedules of payment, the Spouses Jorge were merely included in a "care of (c/o)" capacity, while the principal addressees were still the Spouses Zuñiga. 40 (citation omitted)
Petitioners do not have right
Anent the issue on petitioners' right of redemption, the RTC found that the instant case for legal redemption must prosper, as the one-year period to redeem had not yet expired when petitioners filed the case on July 22, 2004 which was within one year from the registration of the Certificate of Sale on August 6, 2003. However, the question now is whether such judicial redemption is proper under the circumstances. cSEDTC
In Hi-Yield Realty, Inc. v. Court of Appeals, et al., 41 the Court explained the requisites for judicial redemption, to wit:
What is the redemptioner's option therefore when the redemption period is about to expire and the redemption cannot take place on account of disagreement over the redemption price?
According to jurisprudence, the redemptioner faced with such a problem may preserve his right of redemption through judicial action which in every case must be filed within the one-year period of redemption. The filing of the court action to enforce redemption, being equivalent to a formal offer to redeem, would have the effect of preserving his redemptive rights and "freezing" the expiration of the one-year period. This is a fair interpretation provided the action is filed on time and in good faith, the redemption price is finally determined and paid within a reasonable time, and the rights of the parties are respected.
Stated otherwise, the foregoing interpretation, as applied to the case at bar, has three critical dimensions: (1) timely redemption or redemption by expiration date (or, as what happened in this case, the redemptioner was forced to resort to judicial action to "freeze" the expiration of the redemption period); (2) good faith as always, meaning, the filing of the private respondents action on August 13, 1993 must have been for the sole purpose of determining the redemption price and not to stretch the redemptive period indefinitely; and (3) once the redemption price is determined within a reasonable time, the redemptioner must make prompt payment in full.
Conversely, if private respondent had to resort to judicial action to stall the expiration of the redemptive period on August 13, 1993 because he and the petitioner could not agree on the redemption price which still had to be determined, private respondent could not thereby be expected to tender payment simultaneously with the filing of the action on said date. 42 (citations omitted, emphasis supplied)
Considering the foregoing, the Court agrees with the ruling of the CA that petitioners have no right to redeem the property. Although petitioners filed the complaint within the redemption period, they failed to make a valid tender of payment to the court considering that they know the purchase price of the foreclosed property. Further, it was never the intention of petitioners to consign the payment price to the court. In BPI Family Savings Bank, Inc. v. Sps. Veloso, 43 the Court had occasion to state the importance of tender of payment, to wit:
The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. This constitutes the exercise of the right to repurchase.
In several cases, decided by the Court where the right to repurchase was held to have been properly exercised, there was an unequivocal tender of payment for the full amount of the repurchase price. Otherwise, the offer to redeem is ineffectual. Bona fide redemption necessarily implies a reasonable and valid tender of the entire repurchase price, otherwise the rule on the redemption period fixed by law can easily be circumvented.44 (citations omitted, emphasis supplied)
It is not difficult to understand why the redemption price should either be fully offered in legal tender or else validly consigned in court. 45 Only by such means can the auction winner be assured that the offer to redeem is being made in good faith. 46 As such, the CA correctly ruled that the action filed by petitioners was not instituted in good faith. It was not filed for the purpose of determining the correct redemption price, but to stretch the redemption period indefinitely, which is prohibited by law. 47 Thus, petitioners' insistence on the correct computation of the redemption price becomes unnecessary.
The Court likewise agrees with the ruling of the CA that petitioners are not entitled to collect interest from the surplus proceeds of the extrajudicial foreclosure sale. According to the CA, records show that Metrobank, through Atty. Rufos Venus, notified Cesar Jorge that he may claim the excess bid anytime he wants to but he refused to do so. Hence, there exists no basis to impose interest on the surplus proceeds.
WHEREFORE, the petition is DENIED. The November 13, 2015 Decision and the April 21, 2016 Resolution of the Court of Appeals in CA-G.R. CV No. 103427 are hereby AFFIRMEDin toto.
The urgent ex parte motion of respondent Marcelo G. Naval to resolve, praying that this petition for review on certiorari be resolved and that the same be dismissed for utter lack of merit is NOTED. SDAaTC
SO ORDERED." Carandang, J., on official leave.
Very truly yours,
(SGD.) LIBRADA C. BUENADivision Clerk of Court
Footnotes
1.Rollo, (Vol. 1) pp. 66-91; penned by Presiding Justice Andres B. Reyes, Jr., with Associate Justice Ramon Paul L. Hernando (now both Members of this Court), and Associate Justice Romeo F. Barza, concurring.
2.Id. at 93-96.
3.Id. at 305-329; penned by Judge Patria A. Manalastas-De Leon.
4.Id. at 67.
5.Id. at 67-68.
6.Act No. 3135. An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real-Estate Mortgages.
7.Rollo, (Vol. 1) p. 68.
8.Id.
9.Id. at 69.
10.Id.
11.Id.
12.Id. at 70.
13.Id. at 238-240.
14.Supra note 12.
15.Rollo, pp. 70-71.
16.Id.
17.Id. at 71.
18.Id.
19.Id.
20.Id.
21.Id. at 72.
22.Id. at 346-355.
23.SECTION 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.
24.Rollo, (Vol. 1) p. 79.
14. All correspondence relative to this Mortgage, including demand letters, summons, subpoenas or notification of any judicial or [extrajudicial] action shall be sent to the MORTGAGOR at 288 El Grande Ave., BF Homes, Parañaque, Metro Manila or at the address that may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE. The mere act of sending any correspondence by mail or personal delivery to the said address shall be valid and effective notice to the MORTGAGOR for all legal purposes, and the fact that any communication is not actually received by the MORTGAGOR or that it has been returned unclaimed to the MORTGAGEE, or that no person was found at the address given, or that the address is fictitious or cannot be located, shall not excuse or relieve the MORTGAGOR from the effects of such notice.
25.Rollo, (Vol. 1) p. 90.
26.Rollo, (Vol. II) pp. 1019-1053.
27.Id. at 1056-1101.
28.Id. at 1112-1129.
29.Westmont Investment Corporation v. Amos P. Francia, Jr., et al., 678 Phil. 180, 190-191 (2011).
30.Cabigting v. San Miguel Foods, Inc., 620 Phil. 14, 22 (2009).
31.Viron Transportation Co., Inc. v. Delos Santos, et al., 399 Phil. 243, 250 (2000).
32.Id.
33.S.C. Megaworld Construction and Development Corp. v. Engr. Parada, 717 Phil. 752, 764 (2013).
34.Id.
35.Bank of the Philippine Islands v. Domingo, 757 Phil. 23, 38 (2015); citing 8 Manresa 436-437, cited in CIVIL CODE OF THE PHILIPPINES by Tolentino, Vol. IV, 1962 ed., p. 360.
36.Id.
37.De Cortes, et al. v. Venturanza, et al., 170 Phil. 55, 70 (1977).
38.318 Phil. 268 (1995).
39.Id. at 274-275.
40.Rollo, (Vol. 1) p. 81.
41.437 Phil. 483 (2002).
42.Id. at 493-494.
43.479 Phil. 627, 632-633 (2004).
44.Id.
45.Id. at 634.
46.Id.
47.Allied Banking Corporation v. Mateo, 606 Phil. 535, 547 (2009).