Dato v. Bank of the Philippine Islands
REITERATIONFacts
The Antecedents: Spouses Pio Dato and Sonia Y. Sia (Spouses Sia) obtained loans from the Bank of the Philippine Islands (BPI), secured by real estate mortgages over their properties. Initially, they secured a ₱240,000.00 loan and a ₱4 Million Revolving Promissory Note Line, both secured by TCT No. 102434. Subsequently, they obtained a Credit Facility of ₱5.7 Million, secured by TCT No. 102434 and four additional lots (TCT Nos. 87010, 102435, 102436, and 102437). Spouses Sia alleged that BPI misrepresented the loan terms regarding endorsement to the Industrial Guarantee and Loan Fund (IGLF). Spouses Sia only availed ₱800,000.00 from the ₱5.7 Million Credit Facility. Despite demands, Spouses Sia failed to pay their outstanding principal loans of ₱4,240,000.00, exclusive of interest and penalties. BPI cancelled the real estate mortgage over the four additional lots to facilitate their sale by Spouses Sia to pay off their loans, but Spouses Sia failed to sell the lots. Consequently, BPI extrajudicially foreclosed the real estate mortgage over TCT No. 102434, which was sold at public auction to BPI as the sole bidder. Spouses Sia filed a complaint alleging breach of contract and falsification of documents related to the ₱5.7 Million Credit Facility, claiming their obligation was extinguished. Procedural History: The Regional Trial Court (RTC) dismissed Spouses Sia’s complaint, declared the extrajudicial foreclosure sale valid, and ordered Spouses Sia to pay damages and attorney's fees. The Court of Appeals (CA) affirmed the RTC decision with modifications, deleting the award of compensatory and exemplary damages. Spouses Sia filed a petition for review on certiorari before the Supreme Court. The Petition: Spouses Sia raised issues concerning BPI's alleged breach of contract regarding the IGLF endorsement and the legal issue surrounding the cancellation of the ₱5.7 Million Credit Facility.
Issue(s)
Whether the Court of Appeals erred in holding that BPI did not breach its contract with Spouses Sia concerning the IGLF endorsement. Whether the cancellation of the ₱5.7 Million Credit Facility of Spouses Sia raises a legal issue. Whether Spouses Sia are entitled to a writ of preliminary injunction to enjoin the enforcement of the notice to vacate.
Ruling
The petition is denied. The Decision of the Court of Appeals is affirmed with modifications. The award of attorney's fees and litigation expenses is reduced. The prayer for the issuance of a Temporary Restraining Order/Writ of Preliminary Injunction is denied.
Ratio Decidendi
On the alleged breach of contract regarding IGLF endorsement: The Court concurred with the CA and RTC that BPI did not commit a breach of contract. Petitioner Pio Dato Sia admitted the execution and genuineness of the notarized real estate mortgage and promissory note. The Court reiterated the principle that admitting the due execution of a document means admitting that it was signed voluntarily or with authority, and admitting its genuineness means admitting that its contents are exactly as stated. Both lower courts found no evidence to support Spouses Sia's claim that the IGLF endorsement was a condition precedent. The alleged verbal agreement regarding the IGLF endorsement was also found to be a violation of the parol evidence rule, as it contradicted the written loan agreements. On the legal issue regarding the cancellation of the ₱5.7 Million Credit Facility: The Court found no legal issue with the cancellation of the ₱5.7 Million Credit Facility. The bases for the extrajudicial foreclosure were the three real estate mortgage contracts, including the one for ₱5.7 Million. Spouses Sia admitted they failed to update interest payments and intentionally stopped servicing them due to the alleged breach by BPI. The Court clarified that a credit line is a fixed limit of credit, not necessarily a lump sum to be released at once. BPI only allowed an ₱800,000.00 availment from the ₱5.7 Million credit line and stopped further availments due to Spouses Sia's default on other loans. The cancellation of the mortgage over the four lots was to assist Spouses Sia in paying their loans, not an acknowledgment of payment of the full ₱5.7 Million. The foreclosure was based on the non-payment of the ₱240,000.00 and ₱4 Million loans. On the entitlement to a writ of preliminary injunction: The Court denied the prayer for a writ of preliminary injunction. The Court distinguished the present case from Cometa v. Intermediate Appellate Court, where the ownership of the property was directly in question. In this case, the property was mortgaged, foreclosed, and sold to BPI, and Spouses Sia failed to redeem it. The Court reiterated that the buyer in a foreclosure sale becomes the absolute owner upon failure to redeem and is entitled to possession, making the issuance of a writ of possession a ministerial duty of the court. The pendency of a suit questioning the validity of the foreclosure does not automatically suspend the issuance of a writ of possession.
Main Doctrine
The extrajudicial foreclosure of a real estate mortgage is valid and binding when the debtors are in default of their loan obligations, and the buyer in a foreclosure sale becomes the absolute owner of the property if it is not redeemed within the redemption period, entitling the buyer to possession as a ministerial duty of the court.