G.R. No. 193723; July 20, 2011
GENERAL MILLING CORPORATION, Petitioner, vs. SPS. LIBRADO RAMOS and REMEDIOS RAMOS, Respondents.

FACTS

On August 24, 1989, General Milling Corporation (GMC) entered into a Growers Contract with spouses Librado and Remedios Ramos. To guarantee compliance, the contract was accompanied by a Deed of Real Estate Mortgage over the spouses’ property, extending a maximum credit line of PhP 215,000 payable within an indefinite period with 12% annual interest. The spouses eventually failed to settle their account, alleging business losses due to GMC’s negligence. On March 31, 1997, GMC’s counsel notified the spouses of impending foreclosure. On May 7, 1997, GMC filed a Petition for Extrajudicial Foreclosure. The property was sold at public auction to GMC on June 10, 1997, for PhP 935,882.075. On March 3, 2000, the spouses filed a Complaint for Annulment of the foreclosure sale, arguing non-compliance with posting and publication requirements under Act No. 3135 and that the mortgage had no fixed term. The parties agreed to limit issues to: (1) validity of the Deed of Real Estate Mortgage; (2) validity of the extrajudicial foreclosure; and (3) liability for damages. The Regional Trial Court declared the foreclosure null and void, holding the mortgage valid but the foreclosure premature as the obligation was not yet due due to the indefinite term, and awarded attorney’s fees to the spouses. The Court of Appeals affirmed the nullity of the foreclosure but on a different ground, finding that GMC made no valid demand for payment, rendering the action premature. The CA deleted the award of attorney’s fees.

ISSUE

1. Whether the Court of Appeals erred in considering the issue of lack of demand, which was not alleged or discussed in the lower court nor raised by the parties on appeal.
2. Whether the Court of Appeals erred in ruling that GMC made no demand to the spouses for full payment of their obligation.

RULING

1. On the consideration of unassigned errors: The Supreme Court ruled that an appellate court has broad discretionary power to consider matters not assigned as errors if necessary for a just decision and complete resolution of the case, to serve the interests of justice, or to avoid piecemeal justice. The CA’s consideration of the demand issue was justified as it was indispensable to resolving the validity of the foreclosure.
2. On the existence of a valid demand: The Supreme Court affirmed the CA’s finding that GMC made no valid demand for payment. The letters presented by GMC only requested the spouses to discuss settlement of their account and did not constitute a clear and unequivocal demand for full payment. Since the obligation was payable within an indefinite period, a demand was necessary to place the debtor in default. Without a valid demand, the foreclosure action was premature. The Court upheld the CA’s decision declaring the extrajudicial foreclosure sale null and void and deleting the award of attorney’s fees. The petition was denied.