FIRST DIVISION
[G.R. No. 211306. March 13, 2019.]
SPOUSES JIMMY TAN AND MA. VICTORIA TAN, petitioners, vs. PHILIPPINE SAVINGS BANK, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution dated March 13, 2019which reads as follows:
"G.R. No. 211306 (SPOUSES JIMMY TAN and MA. VICTORIA TAN, Petitioners, v. PHILIPPINE SAVINGS BANK, Respondent.) — We DENY this appeal from the October 23, 2013 decision 1 and February 13, 2014 resolution 2 promulgated by the Court of Appeals (CA) in CA-G.R. CV No. 95205 for failure of the petitioners to establish reversible error on the part of the CA in affirming with modification of the decision 3 rendered by the Regional Trial Court (RTC), Branch 63, Makati City in Civil Case No. 00-742, ordering the petitioners to pay, jointly and severally, the respondent the amount of P1,756,635.00 representing deficiency judgment, subject to applicable interests and attorney's fees.
In affirming the RTC, the CA held that the respondent had proved by preponderance of evidence that it was entitled to a deficiency judgment after ascertaining that the proceeds of the foreclosure sale were insufficient to cover the petitioners' loan obligation. However, after lowering the penalty charge from three percent (3%) to one percent (1%) per month or twelve percent (12%) per annum, the CA deemed it proper to modify the amount of loan obligation prior to the sale, thereby decreasing the amount of deficiency balance from P2,385,807.25 to P1,756,635.00.
However, the petitioners argued that the respondent was not entitled to deficiency judgment after foreclosure of the mortgage over the subject properties.
We disagree.
Firstly, there was no dispute about the existence of the loan obligations covered by the five (5) promissory notes 4 as secured by the Real Estate Mortgage contract, 5 and the petitioners' failure to pay when the debt became due which resulted to the foreclosure sale of their properties.
Since the existence of the loan obligation had been established by the respondent, the burden shifted to the petitioners to show that the obligation had already been discharged by payment. 6 However, the petitioners failed in this regard.
The foreclosure sale yielded P769,000.00, an amount lesser than the amount of the principal loan of P1,020,000, exclusive of interest, penalty charges and attorney's fees. It is well-settled that the mortgage creditor has the right to claim the deficiency resulting from the difference between the proceeds of the sale at public auction and the outstanding obligation at the time of the foreclosure proceedings. 7 In Philippine National Bank vs. Court of Appeals, 8 we ruled that: CAIHTE
x x x it is settled that if the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of the mortgage, the mortgagee is entitled to claim the deficiency from the debtor. For when the legislature intends to deny the right of a creditor to sue for any deficiency resulting from foreclosure of security given to guarantee an obligation it expressly provides as in the case of pledges [Civil Code, Art. 2115] and in chattel mortgages of a thing sold on installment basis [Civil Code, Art. 1484(3)]. Act No. 3135, which governs the extrajudicial foreclosure of mortgages while silent as to the mortgagee's right to recover, does not, on the other hand, prohibit recovery of deficiency. Accordingly, it has been held that a deficiency claim arising from the extrajudicial foreclosure is allowed.
Secondly, the petitioners' contention that the valuation made during the auction sale was highly irregular and unjust as the properties were valued at a nominal amount deserves no merit. In fact, a low price of sale in a foreclosure of mortgage was considered more beneficial to the mortgage debtor because this would have made the redemption of the property easier. 9 However, the low amount of sale of the property shall not bar the mortgagee's right of recovery. 10
Lastly, with respect to the accessory charges, it was clear from the Promissory Notes and Real Estate Mortgage contract that the petitioners voluntarily agreed to pay the amounts specified with the corresponding charges. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. 11
Thus, the stipulated interest rate of eighteen percent (18%) per annum and attorney's fees of ten percent (10%) of the total amount due, which We find as both fair and valid, must be honored. However, as to the penalty charges imposed on the promissory notes, We agree with the CA that the interest rate should be reduced from three percent (3%) to one percent (1%) per month to twelve percent (12%) per annum. The penalty charges specified in a loan agreement is in the nature of liquidated damages under Article 2226 of the Civil Code, which is separate and distinct from interest payments. 12 Article 2227 of the same Code provides that liquidated damages shall be equitably reduced if they are iniquitous or unconscionable, as in this case.
In sum, the CA correctly ordered the petitioners to pay, jointly and severally, the deficiency balance of their loan. Hence, the petition should be denied.
WHEREFORE, the Court AFFIRMS the October 23, 2013 decision and February 13, 2014 resolution promulgated by the Court of Appeals (CA) in CA-G.R. CV No. 95205 and ORDERS the petitioners to pay the costs of the suit.
SO ORDERED."
Very truly yours,
(SGD.) LIBRADA C. BUENADivision Clerk of Court
Footnotes
1.Rollo, pp. 57-68; penned by Associate Justice Nina G. Antonio-Valenzuela, with the concurrence of Associate Justice Isaias P. Dicdican and Associate Justice Michael P. Elbinias.
2.Id. at 79-80.
3.Id. at 46-48; penned by Presiding Judge Tranquil P. Salvador, Jr.
4.Id. at 23-27.
5.Id. at 28-29.
6.Bernardo v. People, G.R. No. 182210, October 5, 2015, 772 SCRA 1, 21.
7.Sycamore Ventures Corporation v. Metropolitan Bank and Trust Company, G.R. No. 173183, November 18, 2013, 709 SCRA 559, 568.
8. G.R. No. 121739, June 14, 1999, 308 SCRA 229, 235.
9.Spouses Rabat v. Philippine National Bank, G.R. No. 158755, June 18, 2012, 673 SCRA 383, 394.
10.Spouses Rabat v. Philippine National Bank, G.R. No. 158755, June 18, 2012, 673 SCRA 383, 396.
11. Article 1159, New Civil Code.
12.Metropolitan Bank & Trust Company vs. Chuy Lu Tan, G.R. No. 202176, August 1, 2016, 799 SCRA 74, 87.