GR 31456; (January, 1930) (Digest)
G.R. No. 31456, January 21, 1930
THE PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. GREGORIO NATIVIDAD, defendant. LUIS ARNALOT, petitioner-appellant.
FACTS
The Philippine National Bank (PNB) obtained a final judgment against Gregorio Natividad for a mortgage credit. To execute the judgment, a public auction of Natividad’s properties, including a parcel of land covered by TCT No. 227, was scheduled. Luis Arnalot, who held a first mortgage on the same land (with PNB holding a second mortgage), submitted a bid through his attorney, Jose Galan Blanco, offering P32,240the exact amount of his mortgage credit. The sheriff accepted the bid, but Arnalot refused to pay, arguing that his bid was made as a mortgagee. The sheriff moved for court confirmation of the sale, but the court instead ordered Arnalot to pay the bid amount. PNB later petitioned for a resale of the property, holding Arnalot liable for any deficiency, which the court granted. However, PNB itself moved to suspend the resale. Meanwhile, Natividad was declared insolvent. In the insolvency proceedings, PNB petitioned for delivery of the mortgaged properties, and Arnalot, through his attorney, agreed not to oppose this petition in exchange for PNB’s commitment to deliver the specific land to him upon receipt from the insolvent estate. The trial court ordered the sheriff to deliver the properties to PNB. Arnalot appealed the orders requiring him to pay his bid and holding him liable for resale deficiencies.
ISSUE
Whether Luis Arnalot is liable to pay the amount of his bid at the public auction sale or for any damages resulting from the failed sale.
RULING
No. The Supreme Court reversed the trial court’s orders and absolved Arnalot from liability. The Court held that:
1. The sale to Arnalot was ineffective because it was not confirmed by the court as required by Section 257 of the Code of Civil Procedure.
2. Arnalot, as a prior mortgagee not party to PNB’s suit, had no obligation to bid to protect his rights.
3. The resale ordered by the court was suspended upon PNB’s own motion, so no damages could be attributed to Arnalot.
4. The subsequent agreement in the insolvency proceedings, where PNB agreed to deliver the land to Arnalot upon receipt from the estate and Arnalot consented to PNB’s petition, further negated any basis for holding Arnalot liable for his bid.
Thus, Arnalot was relieved from all liability arising from the bid.
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