G.R. No. 196476 , September 28, 2020
Development Bank of the Philippines, Petitioner, vs. Heirs of Julieta L. Danico, namely, Rogelio L. Danico, Corazon D. Emeterio, Nenita D. Ybañez, Rodrigo L. Danico, Danilo L. Danico, Daniel L. Danico, Gloria Escrupulo, Vilma Mosqueda, and National Power Corporation, Respondents.

FACTS

On April 22, 1977, Spouses Daniel and Julieta Danico obtained an agricultural loan from petitioner Development Bank of the Philippines (DBP) in the amount of P150,000.00. The loan was secured by a real estate mortgage over four properties (OCT No. P-1439, TCT No. T-8127, TCT No. T-3278, and OCT No. P-537) and a chattel mortgage over a tractor. On July 12, 1982, the Department of Agrarian Reform issued a Certification seizing three of the mortgaged properties (OCT No. P-1439, TCT No. T-3278, and OCT No. P-537) under Presidential Decree No. 27. On August 6, 1982, DBP extrajudicially foreclosed the remaining property covered by TCT No. T-8127 due to the spouses’ loan default. After the redemption period expired, DBP consolidated ownership, and TCT No. T-19241 was issued in its name.
On September 9, 1985, the National Power Corporation (NPC) bought two of the mortgaged properties from the Spouses Danico: Lot No. 861 (OCT No. P-1439) for P511,290.00 and a portion of Lot No. 857-B (TCT No. T-3278) for P242,644.50. The deeds of sale stipulated that the proceeds, after certain deductions, would be applied to the spouses’ loan obligation with DBP. DBP agreed to the sale on this condition. NPC paid DBP only P92,003.47 from the sale of the TCT No. T-3278 portion but did not remit the P301,350.50 from the sale of OCT No. P-1439.
On October 10, 1985, DBP and Daniel Danico entered into a Deed of Conditional Sale for the foreclosed property (now TCT No. T-19241) for P491,600.00, with a downpayment of P118,021.20 and a balance payable in amortizations.
On January 10, 1999, the heirs of Julieta Danico filed a complaint against DBP and NPC, seeking the release of the mortgage over the four properties, arguing the loan had been fully paid by NPC’s payments totaling P394,069.75. DBP filed a petition for a writ of possession over TCT No. T-19241. The Regional Trial Court (RTC) declared DBP’s foreclosure valid, directed DBP to accept P301,350.50 as full payment for the loan, and declared NPC without liability. The Court of Appeals affirmed the RTC decision in toto.

ISSUE

Whether the Court of Appeals erred in affirming the RTC’s decision which: (a) declared the extrajudicial foreclosure and consolidation by DBP as valid; (b) directed DBP to accept P301,350.50 as full payment for the Spouses Danico’s loan obligation; and (c) declared NPC as without any liability.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ Decision.
1. Validity of the Foreclosure: The extrajudicial foreclosure of TCT No. T-8127 and its subsequent consolidation under TCT No. T-19241 in DBP’s name was declared valid and legal. The foreclosure in 1982 was proper due to the spouses’ default. The Deed of Conditional Sale executed in 1985 for the same property did not invalidate the foreclosure but was a separate contract for repurchase.
2. Loan Obligation and Payment: The Supreme Court held that the Spouses Danico’s total loan obligation to DBP was P393,353.97, as stated in the 1985 Deed of Absolute Sale for OCT No. P-1439. This amount was consistent with the balance stated in the 1985 Deed of Conditional Sale (P373,578.70 principal plus P19,775.17 interest). The Court found that NPC’s obligation under the deed was to pay the remaining proceeds from the sale of OCT No. P-1439, after paying tenants and taxes, directly to DBP to settle this P393,353.97 obligation. Since NPC had already paid DBP P92,003.47 from the sale of the TCT No. T-3278 portion, the remaining balance payable to DBP was P301,350.50. The Court ruled that the RTC correctly ordered DBP to accept this amount as full payment for the loan secured by the mortgaged properties, noting that DBP’s claim of a higher obligation (P509,320.82) referred to a different statement of account and was not the stipulated amount in the binding contract with NPC.
3. Liability of NPC: The Supreme Court affirmed that NPC was without liability to DBP. NPC’s obligation was solely based on the terms of the 1985 deeds of sale with the Spouses Danico, which required it to pay the balance of the proceeds to DBP. NPC had already issued a disbursement voucher and check for P301,350.50 to DBP, but DBP refused to accept it pending compliance with Commission on Audit requirements. The Court held that NPC’s issuance of the voucher and check constituted a valid tender of payment, which DBP was not justified in refusing. Therefore, NPC was not in default, and its obligation was extinguished by its consignation of the payment.