GR 165408; (January, 2010) (Digest)
G.R. No. 165408 ; January 15, 2010
JAIME T. TORRES, Petitioner, vs. CHINA BANKING CORPORATION, Respondent.
FACTS
On August 27, 1986, petitioner Jaime T. Torres, owner of St. James School, and respondent China Banking Corporation executed a mortgage agreement over parcels of land to secure a loan of ₱4,600,000.00. The loan was evidenced by a Promissory Note dated August 22, 1986, repayable within five years with 20% interest per annum, payable monthly, and the principal payable in 16 equal quarterly amortizations starting November 23, 1987. Petitioner later requested restructuring of the loan and made partial payments of ₱200,000.00 and ₱654,465.75. Respondent, in a letter dated February 20, 1989, informed petitioner that his request for restructuring was not approved and demanded payment of overdue interest and principal installments within seven days, threatening extrajudicial foreclosure. Petitioner subsequently tendered payments of ₱2,000,000.00 on May 25, 1989, and ₱1,000,000.00 on June 1, 1989. Despite these payments, respondent proceeded with the extrajudicial foreclosure and auction sale on June 7, 1989, selling the properties to itself as the highest bidder for ₱2,466,217.38. Petitioner filed an action for annulment of the foreclosure sale and damages. On May 30, 1990, petitioner tendered ₱2,756,487.77 as redemption price, but respondent protested, claiming the correct amount under Section 78 of the General Banking Act was ₱2,993,219.41. The trial court declared the foreclosure sale null and void, awarded damages and attorney’s fees to petitioner, and reduced the interest rate to 12% per annum. The Court of Appeals modified the decision, upholding the validity of the foreclosure sale, setting the redemption price at ₱2,993,219.41 with legal interest, and deleting the awards for damages and attorney’s fees. Petitioner’s motion for reconsideration was denied, and an Entry of Judgment was issued on November 30, 2001. Petitioner later filed a Motion to Set Aside Entry of Judgment and to Resolve Appellant’s Motion for Reconsideration, which the Court of Appeals denied.
ISSUE
1. Whether the extrajudicial foreclosure sale was valid.
2. Whether the redemption price should be computed under Section 78 of the General Banking Act or Rule 39 of the Rules of Court.
3. Whether the awards for damages and attorney’s fees were proper.
4. Whether the Court of Appeals erred in denying petitioner’s Motion to Set Aside Entry of Judgment.
RULING
1. The extrajudicial foreclosure sale was valid. Petitioner defaulted on his loan obligations, and his request for restructuring was denied by respondent. The foreclosure was conducted in accordance with Act No. 3135 , as amended. The Court of Appeals correctly reversed the trial court’s finding of bad faith and prematurity, as petitioner’s default justified the foreclosure.
2. The redemption price should be computed under Section 78 of the General Banking Act. The applicable law is Section 78 of Republic Act No. 337 (General Banking Act), not Rule 39 of the Rules of Court, as the mortgagee is a banking institution. Under Section 78, the redemption price is the amount due under the mortgage deed, plus interest and expenses. The Court of Appeals correctly set the redemption price at ₱2,993,219.41, representing petitioner’s outstanding balance as of May 30, 1990 after deducting his total payments.
3. The awards for damages and attorney’s fees were improper. Petitioner was at fault for defaulting on his loan, and the foreclosure was lawful. Thus, there was no basis for awarding damages. The trial court also failed to justify the grant of attorney’s fees, warranting its deletion.
4. The Court of Appeals did not err in denying petitioner’s Motion to Set Aside Entry of Judgment. The motion was filed almost eight months after the Entry of Judgment and by a new counsel without the withdrawal of the counsel of record. The Court of Appeals correctly held that the finality of its decision could not be disturbed, as petitioner failed to show fraud, accident, mistake, or excusable negligence warranting relief under Rule 38 or Rule 41 of the Rules of Court. The motion was a belated attempt to revive a final judgment.
The petition was denied, and the Court of Appeals’ decision was affirmed.