Case on the validity of an extrajudicial foreclosure and auction sale of debtor’s property

Petitioner Rosalina Juliet Loquellano used to be a regular employee in the Financial Central Department of respondent Hongkong and Shanghai Banking Corporation, Ltd. (respondent bank). As such, she became an automatic member of respondent Hongkong and Shanghai Banking Corporation-Staff Retirement Plan (HSBC-SRP) that provides retirement, disability and loan benefits to the bank’s employees. In 1988, petitioner Rosalina applied with respondent HSBC-SRP a housing loan in the amount of P400,000.00 payable in twenty-five (25) years at six percent (6%) per annum, through monthly salary deduction from petitioner Rosalina’s salary savings account with respondent HSBC. It was provided in the loan application that the loan was secured by setting-off petitioner Rosalina’s retirement benefits and chattel mortgage. She executed a promissory note for the payment of the said loan.

.
On September 5, 1990, petitioners spouses Gildardo and Rosalina Loquellano and Manuel S. Estacion, the managing trustee for and in behalf of the respondent HSBC-SRP, entered into a contract of real estate mortgage wherein petitioners constituted a mortgage over their house and lot covered by TCT No. 95422 (44867) of the Register of Deeds of Pasay City to secure the payment of their housing loan. Petitioner Rosalina had been religiously paying the monthly installments and interests due on the housing loan through automatic salary deductions.

.
Subsequently, a labor dispute arose between the respondent bank and the bank union, to which petitioner Rosalina was a member, which culminated in a strike staged on December 22, 1993. Petitioner Rosalina, together with other bank employees, were dismissed from the service for abandonment, among others. Petitioner Rosalina and the other dismissed employees filed with the Labor Arbiter (LA) an illegal dismissal case against the respondent bank. The LA declared the strike illegal and dismissed the complaint. The labor case had reached us through a petition for review on certiorari filed by the dismissed concerned employees and had already been decided by us on January 11, 2016. While we declared the strike illegal, we also held that the mere finding of such did not justify the wholesale termination of the strikers from their employment. We found that there was illegal dismissal and ordered the bank, among others, to pay the backwages and separation pay of the 18 employees named in the decision, which included petitioner Rosalina, in lieu of reinstatement.

.
In the meantime, due to petitioner Rosalina’s termination from employment with the bank on December 27, 1993, petitioners were unable to make any payments of the amortizations due in Rosalina’s salary savings account beginning January 1994. Respondent HSBC-SRP sent demand letters dated June 13, 1994 and November 28, 1994, respectively, to petitioner Rosalina for the payment of her outstanding obligation in full. Petitioner Rosalina offered to make partial payment of her housing loan arrears in the amount of P69,205.99, which respondent HSBC-SRP rejected.
.

Subsequently, petitioner Rosalina received an Installment Due Reminder dated July 26, 1995 issued by respondent HSBC-SRP on her housing loan, wherein it was shown that the monthly installment overdue, the interest overdue and the interest accrued on the overdue installment amounted to P55,681.85 and the outstanding loan balance was P315,958.00. On August 11, 1995, petitioner Rosalina, through her salary savings account which was still existing, deposited the payments for all her monthly installment arrears and interests, and penalties from January 1994 up to August 1995. Respondent bank accepted the payments and credited them to her housing loan account. Thereafter, petitioner Rosalina received an Installment Due Reminder dated August 28, 1995, wherein it already reflected the payments she had made as her outstanding housing loan obligation was already reduced to P289,945.00.
.

In a letter dated September 25, 1995 to petitioner Rosalina, respondent HSBC-SRP demanded for the payment of the entire housing loan obligation in the amount of P289,945.00. Notwithstanding, petitioner Rosalina received an Installment Due Reminder dated September 27, 1995, reflecting the then current monthly installment and interest due thereon. Petitioner Rosalina, subsequently, received more installment due reminders showing a reduction in the outstanding balance of her housing loan. She continuously made deposits to her salary savings account with the respondent bank for the payment of her monthly amortizations. Respondent bank debited petitioner Rosalina’s savings account and credited the payments to the balance of the installment and the interest due on the housing loan up to June 1996.
On May 20, 1996, petitioners’ mortgaged property was extrajudicially foreclosed by respondent HSBC-SRP and was sold at public auction for the amount of P324,119.59, with respondent Manuel S. Estacion as the highest bidder. A Certificate of Sale dated June 5, 1996 was issued.

.
On August 22, 1996, petitioners filed with the Regional Trial Court (RTC) of Parañaque City, Branch 274, a Complaint for Annulment of Sale with Damages and Preliminary Injunction against Hongkong and Shanghai Banking Corporation, Ltd.; Manuel S. Estacion; Hongkong and Shanghai Banking Corporation-Staff Retirement Plan, as represented by Atty. Manuel G. Montecillo, Mr. Stuart P. Milne and Mr. Alejandro L. Custodio; Leonarda Leilani Amurao and Benedicto G. Hebron, in their capacities as Clerk of Court/Ex-Officio Sheriff and Sheriff-in-Charge of the RTC of Parañaque. Petitioners alleged, among others, that the foreclosure of their mortgaged property was tainted with bad faith, considering that they had paid all the arrears, interests and penalties due on their housing loan since August 1995, and were updated with their loan obligations up to June 1996.

.
In their Answer, respondents HSBC-SRP and Estacion argued that the entire loan obligations accelerated when petitioner Rosalina was terminated and ceased to be an employee of respondent bank as provided in the HSBC-SRP Rules and Regulations, and she failed to pay the entire balance of the housing loan. Also, petitioners were in default, having failed to pay the amortizations beginning January 1994 up to July 1995; thus, they had the right to extrajudicially foreclose the mortgaged property under their mortgage contract.
.

Respondent bank claimed that it should not have been impleaded in the complaint, since it was not privy to the real estate mortgage nor to the extrajudicial foreclosure proceedings.

xxx

The issues for resolution are (1) whether the extrajudicial foreclosure and auction sale of petitioners’ property by respondent HSBC-SRP on May 20, 1996 was valid; and (2) whether petitioners are entitled to the payment of damages as well as attorney’s fees.
xxx

We find that respondent HSBC-SRP’s filing of the extrajudicial foreclosure proceedings on May 20, 1996 has no basis and, therefore, invalid.
.

It is established that petitioners failed to pay the monthly amortizations of their housing loan secured by a real estate mortgage on their property since January 1994, i.e., after petitioner Rosalina was terminated by the bank on December 27, 1993. Thus, respondent HSBC-SRP sent demand letters dated June 13, 1994 and November 28, 1994 to petitioner Rosalina asking her to pay the outstanding housing loan obligation in full. Petitioner Rosalina’s offer of partial payment was rejected by respondent HSBC-SRP. In the meantime, no foreclosure proceedings was yet filed by respondent HSBC-SRP against petitioners’ mortgaged property. Subsequently, petitioner Rosalina received an Installment Due Reminder dated July 26, 1995, informing her of the overdue monthly amortizations, interests and penalty in the amount of P55,681.85, with an outstanding balance of P315,958.00. On August 11, 1995, petitioner Rosalina then deposited in her salary savings account the payment for all the principal and interest arrearages from January 1994 up to August 1995. The payments she made in her account were accepted by respondent bank and credited them to the payment of the overdue monthly amortizations of her housing loan.

.
While respondent HSBC-SRP wrote petitioner Rosalina a letter dated September 25, 1995 demanding payment of the latter’s entire unpaid housing loan obligation, now with a reduced balance in the amount of P289,945.00, however, petitioner Rosalina still received an Installment Due Reminder dated September 27, 1995 reminding her of her monthly installment and interest due, sans penalty charge, which she paid.

.

Thereafter, petitioner Rosalina continuously received Installment Due Reminders for the housing loan, to wit: dated December 21, 1995, February 26, 1996, March 13, 1996 and April 11, 1996, which showed a diminishing loan balance by reason of respondent HSBC-SRP’s acceptance of payments of her monthly installments and interests due from September 1995 up to June 1996. Therefore, respondent HSBC-SRP is now estopped from foreclosing the mortgage property on May 20, 1996.
.

Article 1431 of the Civil Code defines estoppel as follows:
.

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.
.

And Section 2 (a), Rule 131 of the Rules of Court provides:
.

SEC. 2. Conclusive presumptions. — The following are instances of conclusive presumptions:
(a) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing is true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it.
.

Estoppel is a doctrine that prevents a person from adopting an inconsistent position, attitude, or action if it will result in injury to another. One who, by his acts, representations or admissions, or by his own silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, can no longer deny the existence of such fact as it will prejudice the latter. The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice. It springs from equitable principles and the equities in the case. It is designed to aid the law in the administration of justice where, without its aid, injustice might result.

.
To stress, respondent HSBC-SRP continuously sent out monthly Installment Due Reminders to petitioner Rosalina despite its demand letter dated September 25, 1995 to pay the full amount of the loan obligation within 3 days from receipt of the letter. It, likewise, continuously accepted petitioner Rosalina’s subsequent monthly amortization payments until June 1996; thus, making their default immaterial. Moreover, there was no more demand for the payment of the full obligation afterwards. Consequently, petitioners were made to believe that respondent HSBC-SRP was applying their payments to their monthly loan obligations as it had done before. It is now estopped from enforcing its right to foreclose by reason of its acceptance of the delayed payments.

.
Also, Article 1235 of the Civil Code provides that when the creditor accepts performance, knowing its incompleteness and irregularity without protest or objection, the obligation is deemed complied with. Respondent HSBC-SRP accepted Rosalina’s payment of her housing loan account for almost one year without any objection.
Respondent HSBC-SRP argues that estoppel is not applicable since the payments upon which petitioners rely were made without its knowledge and consent; that the updated balances were automatically generated by the system; that petitioner Rosalina made unilateral payments to her salary savings account knowing that any amount she deposited therein will be automatically credited as payments for her loan obligations.
.

We are not persuaded.
.

It is respondent HSBC-SRP, not petitioner Rosalina, which has access and control of the computer system with regard to the crediting of the housing loan payments. It cannot now deny its action of continuously accepting petitioner Rosalina’s monthly amortizations, coupled with the sending out of installment due reminders, and statements of her updated housing loan account to prejudice petitioners who relied thereon.
.

We find that petitioners are entitled to damages for the invalid foreclosure of their property. The RTC held respondent bank HSBC-SRP and Estacion solidarily liable for the payment of damages. However, we only find respondent HSBC-SRP liable as it was the one which illegally foreclosed petitioners’ mortgaged property. However, respondent HSBC, as correctly pointed out by the CA, was not a party to the real estate mortgage executed between respondent HSBC-SRP and petitioners nor it had participation in the foreclosure proceedings. On the other hand, Estacion was only a trustee of respondent HSBC-SRP acting within the scope of its authority.
.

The RTC awarded moral damages, exemplary damages, attorney’s fees, plus P2,000.00 for every appearance, and costs of litigation.

.
Moral damages are meant to compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injuries unjustly caused. Petitioner Rosalina has adequately established the factual basis for the award of moral damages when she testified that she felt shocked and horrified upon knowing of the foreclosure sale. However, we find the RTC’s award of P2,000,000.00 excessive and unconscionable, and reduce the salve to P100,000.00.

.
Exemplary damages are imposed by way of example for the public good, in addition to moral, temperate, liquidated or compensatory damages. 36 We reduce the RTC’s award of P500,000.00 to P30,000.00.
.

Attorneys fees are allowed when exemplary damages are awarded and when the party to a suit is compelled to incur expenses to protect his interest. We find the RTC’s award of attorney’s fees in the amount of P100,000.00 proper.
xxx

This is from a supreme court case SPOUSES GILDARDO LOQUELLANO and ROSALINA JULIET B. LOQUELLANO, petitioners xxx Tags: Resign Resignation Back wages Backwages Length of service pay benefit employee employer relationship Silay Kabankalan Daan Bantayan Dalaguete Dumanjug Ginatilan Liloan Madridejos Malabuyoc Medellin Minglanilla Moalboal Oslob Pilar Pinamungajan Poro Ronda Samboan San Fernando San Francisco San Remigio Sante Fe Santander Sibonga Sogod Tabogon Tabuelan Tuburan Tudela Camotes General Luna Siargao Cagayan Davao Kidapawan Attorney Abogado Lawyer Architect Real Estate Broker Sales Agent Properties for Sale Looking for Buyers Design Build House and Lot for Sale for Rent Talisay City Mandaue City Lapu Lapu Lapu-Lapu City Yncierto Sesante Villanueva Ruz Jan Edmond Marc Tim Timothy Luz Kristin tct transfer certificate of title tax declaration birth certificate relocation survey surveying judicial titling administrative titling patent title

denr cenro foreshore lease ecc environmental compliance certificate design build architect cebu engineer interior design designer residential commercial cebu property warehouse for rent for lease marc Christian yncierto ruz jan Edmond yncierto ruz Kristin Villanueva ruz Edmond mabalot ruz marriage certificate timber land forest land watershed agricultural lot land use conversion hearing trial illegal drugs trial lawyer business corporate lawyer labor lawyer immigration law bureau of immigration cebu 9g visa search warrant warrant of arrest motion to quash information complaint police officers buy bust extra-judicial extrajudicial foreclosure

Alcantara Alcoy Alegria Aloguinsan Argao Asturias Badian Balamban Bantayan Barili Boljoon Borbon Carmen Catmon Compostela Consolacion Cordova Daanbantayan Dumaguete Bais Sibulan Tampi Bacong Negros Bacolod Separation pay Resign Resignation Back wages Backwages Length of service pay benefit employee employer relationship Silay Kabankalan Daan Bantayan Dalaguete Dumanjug Ginatilan Liloan Madridejos Malabuyoc Medellin Minglanilla Moalboal Oslob Pilar Pinamungajan Poro Ronda Samboan San Fernando San Francisco San Remigio Sante Fe Santander Sibonga Sogod Tabogon Tabuelan Tuburan Tudela Camotes General Luna Siargao Cagayan Davao Kidapawan Attorney Abogado Lawyer Architect Real Estate Broker Sales Agent Properties for Sale Looking for Buyers Design Build House and Lot for Sale for Rent Talisay City Mandaue City Lapu Lapu Lapu-Lapu City Yncierto Sesante Villanueva Ruz Jan Edmond Marc Tim Timothy Luz Kristin tct transfer certificate of title tax declaration

Leave a Reply

Your email address will not be published. Required fields are marked *