De Villa v. Fabricante
REITERATIONFacts
The Antecedents: Plaintiff Felix de Villa filed an action to foreclose a mortgage executed by defendants Cesario A. Fabricante and Maria G. de Fabricante covering two parcels of land. The mortgage was executed on April 18, 1944, for a principal sum of P150,000.00, with a redemption period starting April 19, 1948, and ending April 19, 1950. The loan stipulated that the interest would accumulate and be added to the principal at the end of four years, making the total indebtedness P186,000.00 by April 19, 1948, which would then bear 6% annual interest. Procedural History: After being declared in default, the trial court ordered Cesario A. Fabricante to pay P16,666.66 (as amended) with interest, and to have the property covered by TCT No. RT-29(50) sold for satisfaction. Foreclosure was not decreed for the property covered by TCT No. 15, as it was sold to Jose Jacob and Cecilia Baduria, who were not made parties defendant. Plaintiff appealed to the Court of Appeals, but the case was certified to the Supreme Court due to the amount involved. The Petition: Plaintiff-appellant claims the trial court erred in holding only Cesario A. Fabricante liable and not his wife, in applying the Ballantyne Scale of Values, and in not ordering payment of P150,000.00 instead of P16,666.66. He also questions the exclusion of the property covered by TCT No. 15 from foreclosure.
Issue(s)
Whether Maria G. de Fabricante is liable for the mortgage debt. Whether the Ballantyne Scale of Values should apply in determining the amount due. Whether subsequent purchasers of mortgaged property are necessary parties in a foreclosure action.
Ruling
The decision of the trial court is affirmed with modification. Cesario A. Fabricante is ordered to pay the plaintiff the sum of P150,000.00, plus 6% interest from the filing of the complaint. The foreclosure of the mortgage on the property covered by TCT No. 15 is affirmed as not decreed due to the non-inclusion of the subsequent purchasers.
Ratio Decidendi
On the liability of Maria G. de Fabricante: The Court held that only Cesario A. Fabricante is liable because the deed of mortgage did not show that he was authorized by his wife to contract the obligation in her name. The authority granted was limited to mortgaging the property, not to contracting the debt itself. In the absence of a presented power of attorney, the trial court correctly presumed the limited scope of authority. On the application of the Ballantyne Scale of Values: The Court ruled that the loan, which matured after the liberation of the Philippines, should be paid in accordance with the currency prevailing at the time of maturity, which is the Philippine currency. The Ballantyne Scale of Values was erroneously applied by the trial court. The compounding of interest as stipulated in the contract was also deemed unreasonable and disregarded. On the necessity of including subsequent purchasers: The Court agreed with the trial court that Jose Jacob and Cecilia Baduria, as subsequent purchasers of the mortgaged property, are necessary parties to the foreclosure action. This is in accordance with Section 1, Rule 70 of the Rules of Court, which mandates that all persons claiming an interest subordinate to the mortgage holder must be made defendants. The Court reiterated its holding that if the mortgaged property is sold, both the mortgagor and the buyer must be included as defendants.
Main Doctrine
When a loan matures after liberation, the obligation shall be paid in accordance with the currency then prevailing, Philippine currency, and not according to the Ballantyne Scale of Values. Furthermore, subsequent purchasers of mortgaged property are necessary parties in a foreclosure action.