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27 SPOUSES ESMERALDO AND ELIZABETH SUICO V PNB and CA tantamount to a non-compliance of statutory requisites that could constitute a

CHICO-NAZARIO, J | AUG 28 2007 defect invalidating the sale; SPS MR DENIED

 SPS SUICO obtained a loan from PNB secured by a real estate mortgage on ISSUE: WON the Extrajudicial Foreclosure of the mortgage is null and void? NO
their real properties SPS: 2 REASONS – (1) the alleged defect or misrepresentation in the notice of sheriff’s
 Unable to pay their obligation – PNB extrajudicially foreclosed the mortgage (EJF) sale; and/or (2) failure of PNB to pay and tender the price of its bid or the surplus thereof
before the City Sheriff of Mandaue to the sheriff.
 SPS SUICO filed a complaint for Declaration of Nullity of Extrajudicial
Foreclosure of Mortgage before EJF constituted on the SPS’s properties for an ON ALLEGED DEFECT OR MISREPRESENTATION
outstanding loan obligation amounting to P1,991,770.38 as of MAR 10 1992 RULE: Statutory provisions governing publication of notice of mortgage foreclosure
o SPS SUICO: claims that during the foreclosure sale of the properties on OCT sales must be strictly complied with, and even slight deviations will invalidate the notice
30, PNB (lone bidder) offered a bid in the amount of P8,551,000; Certificate and render the sale at least voidable
of Sale was issued in favor of PNB HOWEVER, PNB did not pay the Sheriff PURPOSE OF PUBLICATION OF NOTICE OF SALE – To inform all interested parties
who conducted the auction sale the amount of its bid (P8,511,00) or give of the date, time and place of the foreclosure sale of the real properties subject thereof
an accounting of how amount was applied against SPS SUICO’s  Not only requires the correct date, but also that any and all interested parties be
outstanding loan which as of MAR 10, amounted only to P1,991,770.38 able to determine that what is about to be sold at the foreclosure sale is the real
o Since amount of bid grossly exceeded amount of outstanding obligation stated property in which they have an interest
in the EJF of mortgage, it was the legal duty of PNB to deliver to the Sheriff IN CASE AT BAR, discrepancy between amount of SPS’s obligation as reflected in the
the bid price of what was left after deducting the amount of outstanding Notice of Sale and the amount actually due and collected at the time of the action of
obligation – PNB failed to deliver said amount sale does not constitute fraud which renders the EJF sale null and void
 1 year after the issuance of the Certificate of Sale, PNB secured a Certificate of  Notices are given for the purpose of securing bidders and to prevent a sacrifice of
Final Sale (PNB transferred registration of all properties to its name) the property – if attained, immaterial errors and mistakes will not affect the
 SPS SUICO filed a complaint praying for the EJF of Mortgage to be declared sufficiency of the notice
null and void; and payment of moral and exemplary damages and attorney’s fees  If mistakes or omissions occur in the notice of sale, which are calculated to deter
from PNB or mislead bidders, to depreciate the value of the property, or to prevent it from
o PNB: Filed a Motion to Dismiss [DENIED] – pendency of another action bringing a fair price, these will be fatal to the validity of the notice, and also the sale
between the same parties before RTC Cebu (where PNB was seeking made pursuant thereto
payment of balance of SPS SUICO’s obligation not covered by the proceeds  IN CASE AT BAR – NOTICE OF SALE IS VALID (SPS failed to show how the
of the auction sale held on OCT 30) difference resulted in discouraging or misleading bidders, depreciating the value
o PNB (Answer): SPS SUICO had other loans which had become due; or preventing it from commanding a fair price)
P1,991,770.38 as of MAR 10 1992 was exclusive of attorney’s fees and other
export related obligation which it did not consider due and demandable as of ON EFFECT ON NON-DELIVERY BY PNB OF BID PRICE OR SURPLUS
said date – outstanding obligation of SPS under their regular and export- SEC 21 RULE 39 ROC - When the purchaser is the judgment obligee, and no third-party claim
related loans was already more than the bid price (no surplus proceeds) has been filed, he need not pay the amount of the bid if it does not exceed the amount of his
judgment. If it does, he shall pay only the excess.
 Claims that SPS were aware that their total principal outstanding
obligation on the date of the auction sale was P5,503,293.21  If amount of loan is equal to amount of the bid, there is no need to pay the amount
 Admitted to non-delivery of bid price to the sheriff and the execution of in cash
the final deed of sale but it claims it had not transferred in it’s name the  In the absence of a third-party claim, the purchaser in an execution sale need not
properties because the petition to register in its name 2 TCTs were still pay his bid if it does not exceed the amount of judgment; otherwise, he shall pay
pending only the excess
 RTC: in favor of SPS SUICO, EJF of Mortgage including certificate of sale and final  RAISON D’ETRE: It would obviously be senseless for the Sheriff or Notary Public
deed of sale are null and void conducting the sale to go through the idle ceremony of receiving the money and
o Given that SPS had other loan obligations which had not yet matured on MAR paying it back to the creditor, under the truism that the lawmaking body did not
10 but became due by the date of auction sale on OCT 30, it does not justify contemplate such pointless application of the law in requiring that the creditor must
the shortcut taken by PNB and will not excuse it from paying to the Sheriff who bid under the same conditions as any other bidder – rule holds true only when
conducted the auction sale the excess bid in the foreclosure sale – to allow the amount of bid represents the total amount of the mortgage debt
would constitute fraud (inadequate filing fee and misrepresentation of amount
of indebtedness to be paid in notice of sale) CONSIDERING THE AMOUNT OF PNB’S BID OF P8,511,000 AS AGAINST THE
admitted outstanding obligation amounted to P5.4M (shown by letters) and even OBLIGED TO DELIVER THE EXCESS? YES
offered to redeem the properties at P6.5M; failure to remit surplus if any, is not
SEC 4 RULE 68 ROC – After payment of the costs of suit and satisfaction of the claim
of the first mortgagee/senior mortgagee, the claim of the second mortgagee/junior
mortgagee may be satisfied from the surplus proceeds
 The application of the proceeds from the sale of the mortgaged property to the
mortgagor’s obligation is an act of payment, not payment by dacion – HENCE, it
is the mortgagee’s duty to return any surplus in the selling price to the
 A mortgagee who exercises the power of sale contained in a mortgage is
considered a custodian of the fund and, being bound to apply it properly, is liable
to the persons entitled thereto if he fails to do so.
 Even though the mortgagee is not strictly considered as a trustee in a purely
equitable sense, as far as concerns the unconsumed balance, the mortgagee is a
trustee for the mortgagor or owner of the equity of redemption
 If the mortgagee is retaining more than he is entitled to, this will not affect
the validity of the sale but simply give the mortgagor a cause of action to
recover such surplus

PNB: Claims that the loan obligation of SPS on the date of the auction sale were more
than the amount in Notice of Sale – P8,511,000
COURT: Evidence on record (SPS’ Statement of Account prepared by PNB attached
to its Answer with counterclaim) – states that the principal obligation with
interest/penalty and attorney’s fees as of OCT 30 already amounted to P6,409,814.92
 SPS merely denied amounts in Statement of Account, did not interpose any
defense to refuse computation
 Statement of Account is the only piece of evidence available for determination of
the outstanding obligations as of the date of the auction sale
 SPS wrote letters to PNB almost 2 years after the auction sale offering to redeem
the property (P9.5M) – cannot be used to support PNB’s claim that the obligation
was more than P8.5M (no showing of how the P9.5M was computed)
 Statement of Account being sole existing documentary evidence – shows
excess in bid price (P8,511,000 – P6,409,814.92) which PNB must return with
interest computed in accordance with guidelines in EASTERN SHIPPING


 Since the responsibility of PNB arises not from a loan or forbearance of money
which bears an interest rate of 12%, the proper rate of interest for the amount
which PNB must return to the petitioners is only 6% - computed from time of filing
of complaint
 Once judgment becomes final and executory, the interim period from finality of
judgment awarding a monetary claim and until payment is deemed to be equivalent
to a forbearance of credit – rate of 12% per annum should be imposed computed
from time of finality of judgment until fully satisfied