G.R. No. L-24571 December 18, 1970
JOSE L. PONCE DE LEON, plaintiff-appellant, vs. REHABILITATION FINANCE CORPORATION, defendant-appellant and third-party defendant-appellant, ROSALINA SORIANO, TEOFILA SORIANO and REV. FR. EUGENIO R. SORIANO, third-party plaintiffs-appellants.

FACTS

On August 14, 1945, Jose L. Ponce de Leon and Francisco Soriano obtained a loan from the Philippine National Bank (PNB), mortgaging a parcel of land covered by Original Certificate of Title No. 8094 in the name of Francisco Soriano, married to Tomasa Rodriguez. The loan was later increased. On May 4, 1951, Ponce de Leon applied for an industrial loan from the Rehabilitation Finance Corporation (RFC) for P800,000.00, offering several properties as security, including the Soriano lot. The application was approved for P495,000.00. The mortgage contract and promissory note were executed on October 8, 1951, by Ponce de Leon, his wife Carmelina Russel, and Francisco Soriano. At that time, Soriano’s spouse, Tomasa Rodriguez, was already deceased, leaving as heirs their children Rosalina, Teofila, and Rev. Fr. Eugenio Soriano, none of whom signed the mortgage or note. RFC released funds, paying off prior obligations of Ponce de Leon. Ponce de Leon defaulted on the amortizations and interests. RFC extrajudicially foreclosed the mortgaged properties. The sheriff sold the properties, including the Soriano lot, with RFC as the purchaser. Before the expiration of the redemption period, Francisco Soriano (and later his children after his death) offered to redeem the lot, but RFC rejected the offer. Ponce de Leon filed a complaint against RFC, alleging delays in loan releases, typhoon damages extinguishing his obligations, and nullity of the sheriff’s sales due to grossly inadequate prices and illegal conduct. He sought an injunction to stop RFC’s planned public sale of the foreclosed properties, which was granted. The Soriano heirs filed a third-party complaint against RFC and Ponce de Leon, contending the mortgage and promissory note were void as to Francisco Soriano for lack of consent and consideration, and that the lot was conjugal property. Since Tomasa Rodriguez was deceased and her heirs did not sign the mortgage, at least the one-half share inherited by the children was not legally mortgaged. They sought to redeem their father’s one-half share and recover damages.

ISSUE

The primary issues involved the validity of the mortgage and foreclosure sale concerning the Soriano property, the rights of the Soriano heirs, the claims of Ponce de Leon against RFC, and the determination of liabilities among the parties.

RULING

The Supreme Court modified the trial court’s decision. It held that the mortgage executed by Francisco Soriano was valid only as to his one-half share in the conjugal property. The other one-half share, belonging to the estate of his deceased wife Tomasa Rodriguez and inherited by their children (the Soriano heirs), was not validly mortgaged because the heirs did not sign the contract. Therefore, the sheriff’s sale of that one-half share was null and void. The Soriano heirs were declared owners of an undivided one-half of the lot. However, the Court ruled that by offering to redeem the entire property, Francisco Soriano and his heirs had ratified and affirmed the validity of the foreclosure sale concerning his share, and were thus estopped from challenging its validity. Consequently, they lost their right to redeem his one-half share. The Court further ruled that Ponce de Leon’s claims against RFC (regarding loan delays, typhoon damages, and inadequacy of foreclosure sale price) were without merit. The typhoon did not extinguish his obligation, and the alleged low sale price did not invalidate the sale as he did not exercise his right of redemption. Ponce de Leon was ordered to pay RFC the deficiency judgment after applying the proceeds from the valid foreclosure sales, with interest. He was also ordered to pay rentals for a house and lot he occupied and damages for the wrongful issuance of the preliminary injunction. The Soriano heirs’ claim for damages against Ponce de Leon and RFC was denied.