GR 208892; (September, 2019) (Digest)
G.R. No. 208892 , September 18, 2019
Spouses Anthony Rogelio Bernardo and Ma. Martha Bernardo, Petitioners, vs. Union Bank of the Philippines and the Hon. Court of Appeals, Respondents.
FACTS
Petitioners obtained a loan from respondent Union Bank, secured by a real estate mortgage over their family home. They defaulted, leading Union Bank to extrajudicially foreclose the property and become the highest bidder at the sale. Petitioners filed a Complaint for annulment of the foreclosure sale. The parties later executed a Compromise Agreement, approved by the Regional Trial Court (RTC), wherein petitioners agreed to buy back the foreclosed property under a specified payment schedule. The agreement stipulated that failure to comply would entitle Union Bank to remedies including the exercise of its rights under the real estate mortgage. Petitioners again defaulted. Union Bank moved for and was granted a Writ of Execution to consolidate title. Petitioners filed a Motion to Quash and a Motion for Judicial Consignation. The RTC initially granted Union Bank’s motion for reconsideration but later reversed itself, granted the consignation, and ordered Union Bank to execute a deed of sale upon full payment, effectively limiting Union Bank’s remedy to collecting the outstanding balance. The Court of Appeals (CA) granted Union Bank’s Petition for Certiorari, reversing the RTC, finding that the RTC gravely abused its discretion by deviating from the clear terms of the Compromise Agreement, which allowed Union Bank to exercise its rights under the mortgage.
ISSUE
1. Whether the Compromise Agreement novated petitioners’ original loan obligation.
2. Whether Union Bank can resort to its rights and remedies under the real estate mortgage contract upon petitioners’ failure to comply with the Compromise Agreement.
RULING
The Supreme Court DISMISSED the Petition and AFFIRMED the CA Decision and Resolution.
1. No novation occurred. The Compromise Agreement did not extinguish the original loan obligation by novation. Its purpose was the settlement of the outstanding loan, granting a new payment scheme without changing the essence of the original obligation. There was no change in the object or principal conditions, substitution of debtor, or subrogation of a third person to the creditor’s rights.
2. Yes, Union Bank can resort to its rights under the real estate mortgage. The Compromise Agreement explicitly provided that upon petitioners’ default, Union Bank’s remedies included the exercise of its rights and remedies under the Real Estate Mortgage. The RTC gravely abused its discretion by modifying the agreement and limiting Union Bank’s remedies to merely collecting the balance, which contravened the clear, mutually agreed terms. Courts have a ministerial duty to implement compromise agreements strictly according to their terms and cannot impose different conditions.
The Supreme Court also noted that petitioners used the wrong mode of appeal (Rule 65 certiorari instead of Rule 45), but even if treated as a Rule 45 petition, it would be denied for lack of merit.