G.R. No. 214520, June 14, 2021
SPOUSES ROLANDO AND CYNTHIA RODRIGUEZ, PETITIONERS, VS. EXPORT AND INDUSTRY BANK, INC. (FORMERLY, URBAN BANK, INC.), THE CLERK OF COURT AND EX-OFFICIO SHERIFF, REGIONAL TRIAL COURT, CITY OF MAKATI AND THE REGISTER OF DEEDS, CITY OF MAKATI, RESPONDENTS.

FACTS

In 1997, Urban Bank, Inc. granted spouses Rolando and Cynthia Rodriguez individual “Readycheck Mortgage Lines” (RCMLs) secured by different properties. On April 12, 1999, Urban Bank granted Rolando an increased RCML of P6,000,000.00 (1999 RCML), which cancelled both spouses’ individual RCMLs. The 1999 RCML was secured by an Additional Mortgage Agreement over their Makati property (family home), covering P3,656,000.00 (the difference between the new loan and Rolando’s previous individual RCML). The spouses drew checks totaling P2,382,558.11 against the 1999 RCML. Urban Bank later merged with Export and Industry Bank, Inc. (EIB). After the spouses failed to settle their obligation despite demands, EIB filed a petition for extra-judicial foreclosure of the Makati property. The property was sold at public auction to EIB as the highest bidder. The spouses filed a complaint to nullify the foreclosure, alleging unilateral imposition of increased interest rates and penalties, non-compliance with posting and publication requirements for the notice of sale, and improper application of partial payments. The RTC upheld the foreclosure, a decision affirmed by the Court of Appeals.

ISSUE

The primary issue is whether the extra-judicial foreclosure of the Makati property was valid.

RULING

The Supreme Court DENIED the petition and AFFIRMED the CA decision upholding the validity of the extra-judicial foreclosure. The Court held:
1. The foreclosure was based on a valid real estate mortgage. The 1999 RCML and the accompanying Additional Mortgage Agreement were valid contracts. The spouses’ claim that the individual RCMLs were not cancelled was contradicted by the clear terms of the 1999 RCML Letter-Agreement. The mortgage was a continuing security for the 1999 RCML obligation.
2. The spouses were in default. They failed to pay their outstanding obligation upon the expiry of the 1999 RCML on June 30, 2000, despite several written demands from EIB.
3. The extra-judicial foreclosure complied with Act No. 3135. The notice of sheriff’s sale was properly published for three consecutive weeks in a newspaper of general circulation. Personal notice to the mortgagors was not required by law. The fact that the notice was sent to the address they provided in the mortgage contract (the mortgaged property itself) was sufficient.
4. The imposition of interest and penalties was valid. The loan documents stipulated that interest shall be determined by the Bank every month and indicated in the monthly statement. The spouses failed to specifically deny under oath the statements of account presented by EIB, making them admissible as prima facie evidence of the stated balances. Their claim of partial payments was unsubstantiated.
5. The property was a valid subject of foreclosure. The spouses failed to prove it was a constitutionally protected family home at the time of the constitution of the mortgage in 1999. The family home designation requires judicial declaration, which they did not secure.
6. The award of attorney’s fees to EIB was deleted. The basis for the award was not sufficiently explained in the body of the RTC decision, violating the requirement that the reason for attorney’s fees must be stated in the text of the decision.