Philippine National Bank v. Spouses Francisco and Merced Rabat
REITERATIONFacts
The Antecedents: Spouses Francisco and Merced Rabat (RABATs) obtained a medium-term loan of ₱4.0 Million from Philippine National Bank (PNB) on January 14, 1980, with an initial interest rate of 17% per annum, later amended to 21% per annum, plus a 3% penalty charge on unpaid amounts. The loan was secured by real estate mortgages over several parcels of land. The RABATs availed of the loan, reaching an aggregate amount of ₱3,517,380, which was due on March 14, 1983. The RABATs failed to pay their outstanding balance. Procedural History: PNB initiated extrajudicial foreclosure proceedings due to the RABATs' default. The mortgaged properties were sold at public auctions on February 20, 1987, and April 14, 1987, with PNB as the sole and highest bidder. As the proceeds were insufficient, PNB filed a complaint for a sum of money before the Regional Trial Court (RTC) of Manila to recover the remaining balance. The RTC dismissed PNB's complaint but set aside the auction sales due to the gross inadequacy of the bid price. The RTC also ruled that the RABATs should not be liable for interest and penalty charges from May 1987 up to the filing of the case due to PNB's delay. PNB appealed to the Court of Appeals (CA). The Petition: The CA affirmed the RTC's decision, nullifying the auction sales, but on the ground of lack of personal notice to the RABATs, which the CA discovered despite it not being an assigned error by PNB. PNB filed a petition for review before the Supreme Court, arguing that the CA erred in passing upon an issue not raised on appeal and which had attained finality in the trial court.
Issue(s)
Whether the Court of Appeals may review and pass upon the trial court’s finding and conclusion on an issue which was never raised on appeal and had attained finality. Whether personal notice to the mortgagor is required in extrajudicial foreclosure sales under Act No. 3135. Whether the auction sales were void due to gross inadequacy of the bid price. Whether the RABATs are liable for interest and penalty charges after the auction sales up to the filing of the case. Whether the Court of Appeals committed grave abuse of discretion when it reversed the finding and conclusion of the trial court on an issue which had already attained finality.
Ruling
The petition is granted. The decision of the Court of Appeals is set aside, and the case is remanded to the Court of Appeals to decide the appeal based on the errors raised by the petitioner in its Appellant's Brief.
Ratio Decidendi
On the Court of Appeals' review of unassigned errors: The Supreme Court held that the Court of Appeals erred in resolving PNB's appeal on the basis of an issue (lack of personal notice) which was not raised on appeal by PNB and whose resolution by the trial court had become firm and final against the RABATs, who did not appeal. Section 8 of Rule 51 of the 1997 Rules of Civil Procedure limits the appellate court's review to assigned errors, with exceptions for errors affecting jurisdiction or the validity of the judgment, or plain errors. The issue of lack of personal notice did not fall under these exceptions. The Court emphasized that the exceptions are for the benefit of the appellant, not the appellee. Since the RABATs did not appeal, the trial court's rejection of their claim of lack of personal notice had attained finality as against them. On the requirement of personal notice in extrajudicial foreclosure: Even assuming the issue could be raised, the Court found that personal notice to the mortgagor is not required in extrajudicial foreclosure sales under Act No. 3135. Section 3 of Act No. 3135 only mandates notice by posting and publication in a newspaper of general circulation. The Court noted that the trial court found that these requirements were duly complied with. Therefore, the CA's basis for nullifying the auction sales was legally incorrect. On the validity of the auction sales and inadequacy of bid price: The Supreme Court did not rule on the merits of the inadequacy of the bid price or the validity of the auction sales themselves, as the CA's decision was set aside on procedural grounds. The Court directed the CA to decide the appeal based on the assigned errors raised by PNB in its Appellant's Brief, which primarily concerned the trial court's ruling on the inadequacy of the bid price and the liability for post-auction interest and penalties. The Court reiterated that a question of non-compliance with notice and publication requirements is a factual issue, and the trial court's resolution thereof is binding absent grave abuse of discretion. On the liability for interest and penalty charges: Similar to the issue of bid price, the Court did not rule on the liability for interest and penalty charges. This issue was among those raised by PNB in its appeal to the CA and was part of the matters that the CA was directed to decide based on the assigned errors. The Supreme Court held that the Court of Appeals erred in resolving PNB's appeal on the basis of an issue (lack of personal notice) which was not raised on appeal by PNB and whose resolution by the trial court had become firm and final against the RABATs, who did not appeal.
Main Doctrine
The Court of Appeals erred in resolving an issue not raised on appeal, which had attained finality in the trial court, and in nullifying auction sales based on lack of personal notice when such notice is not required under Act No. 3135, and the requirements of posting and publication were duly complied with.