Allandale Sportsline v. Good Development
MODIFICATIONFacts
The Antecedents: Allandale Sportsline, Inc. (ASI), through Melbarose R. Sasot and Allandale R. Sasot, obtained a loan of P204,000.00 from The Good Development Corporation (GDC), with Theresa L. Manipon as co-maker. The loan was payable in daily installments with a high annual interest rate. A Deed of Mortgage was executed by ASI and Melbarose in favor of GDC, covering merchandise, stocks in trade, furniture, fixtures, appliances, equipment, and two vehicles. The mortgage contract stipulated that upon default, GDC would have the right to judicially or extrajudicially foreclose the mortgage. Procedural History: GDC demanded payment of the unpaid account. When ASI and Melbarose failed to pay, GDC filed a Complaint for Replevin and/or Sum of Money with Damages. The RTC issued a Writ of Replevin, and GDC seized some of the mortgaged properties. GDC later amended its complaint to include more items. ASI and Melbarose claimed their obligation was only P171,000.00 after deductions and that GDC refused their tender of payment. Manipon argued she was unaware of her liability as a co-maker. During the trial, GDC disclosed it had sold some seized properties via auction sale, realizing P78,750.00. The RTC rendered a decision ordering ASI, Melbarose, and Manipon to pay GDC P269,611.82 plus interest and liquidated damages. The Court of Appeals (CA) affirmed the RTC decision, and a subsequent motion for reconsideration was denied. The Petition: ASI and Melbarose (petitioners) filed a Petition for Review on Certiorari with the Supreme Court, assailing the CA's decision. They raised issues concerning the validity of their tender of payment, the applicability of the parol evidence rule, their entitlement to the return of properties, and the legal basis for liquidated damages.
Issue(s)
Whether petitioners' tender of payment of P171,000.00, accepted by respondent, discharged their loan obligation. Whether the parol evidence rule applies to the promissory note when co-makers are strangers to each other. Whether petitioners are entitled to the return of their properties pursuant to Section 9, Rule 60 of the Rules of Court. Whether there is a legal basis for the award of liquidated damages.
Ruling
The Supreme Court partly granted the petition, modifying the decisions of the RTC and CA. It deleted the award of P269,611.82 plus interest and awarded P191,111.82 as the deficiency amount, subject to legal interest from September 12, 1997, and 25% of the deficiency as liquidated damages. The claim of petitioners for the return of properties was denied.
Ratio Decidendi
On the issue of tender of payment: The Court held that tender of payment, without more, produces no effect. It must be followed by a valid consignation in order to produce the effect of payment and extinguish an obligation. Petitioners did not allege or prove that they pursued consignation after their tender of payment was refused. Therefore, their tender of payment, not having been followed by a valid consignation, produced no effect whatsoever, least of all the extinguishment of the loan obligation. The issue of the validity of their tender of payment was rendered moot and academic because without consignation, it did not extinguish the debt. On the issue of the parol evidence rule: The Court found this issue to have scant consideration for lack of basis, as Manipon, the party who could have invoked such a defense, did not join the petition. The finding that she was a co-maker was already final and conclusive. The defense that Manipon signed without knowledge of her liability was personal to her and could not be invoked by petitioners, whose defenses were separate and distinct from Manipon's. On the issue of the return of properties: The Court clarified that the reliefs prayed for by GDC were in the alternative: delivery of mortgaged properties for foreclosure or payment of the unpaid loan. By causing the auction sale of the mortgaged properties, GDC effectively elected the remedy of extra-judicial foreclosure. This election waived the remedy of collecting the unpaid loan as a separate action. The claim for the return of properties was denied as GDC had validly foreclosed on them. On the issue of the legal basis for liquidated damages: The Deed of Mortgage stipulated that in case of default, petitioners would be liable for liquidated penalty/collection charge equivalent to 25% of the outstanding obligation. Since it was settled that petitioners defaulted on their loan obligation, they were liable for liquidated damages as per the contract. The Court noted that while the RTC and CA awarded the full amount of the loan, this was an error because GDC had already foreclosed on the mortgaged properties. The Court, in the higher interest of justice and equity, awarded the deficiency amount of P191,111.82, as evidenced by the Statement of Account, and also awarded 25% of this deficiency as liquidated damages, as stipulated in the Deed of Mortgage.
Main Doctrine
A creditor who forecloses on mortgaged properties waives the remedy of collecting the unpaid loan, but may still recover any deficiency remaining after applying the proceeds of the auction sale to the total loan obligation, provided such claim is properly raised or presented.