Ang v. Abaldonado
REITERATIONFacts
The Antecedents: Respondent Cristeta Abaldonado obtained a loan of P700,000.00 from petitioner Samuel Ang on August 27, 1998, with a compounded interest rate of four percent per month and another four percent compounded interest as penalty for delay. The loan was secured by a Real Estate Mortgage (REM) over Lot 334-C. Abaldonado failed to pay several installments. On July 18, 2001, Ang sent a demand letter for P2,543,807.64. On August 16, 2002, Ang filed a Petition for Extrajudicial Foreclosure, which did not proceed due to a case filed by Abaldonado's children seeking to nullify the Extrajudicial Adjudication with Waiver of Rights and the REM, alleging forgery. This case was dismissed without prejudice. On December 1, 2005, Ang assigned his mortgage rights to petitioner Fontaine Bleau Finance and Realty Corporation (Fontaine Bleau). Fontaine Bleau filed another Petition for Extrajudicial Foreclosure. A public bidding was conducted on March 28, 2006, where Fontaine Bleau was the winning bidder. A Final Deed of Sale was executed on June 18, 2007, and Fontaine Bleau consolidated its title, leading to the issuance of TCT No. T-161718 on October 2, 2007. Procedural History: On June 18, 2010, Abaldonado filed a Complaint for Declaration of Nullity of Foreclosure Proceedings, Annulment of Interest Rate, Accounting, and Damages, asserting that the interest rate was unconscionable and iniquitous. The Regional Trial Court (RTC), Branch 35, Iloilo City, dismissed Abaldonado's complaint, ruling that while the stipulated interest and penalty were excessive, their nullity did not affect the REM and foreclosure proceedings. The RTC found Abaldonado guilty of laches for sleeping on her rights for twelve years. The Court of Appeals (CA), however, reversed and set aside the RTC decision, agreeing that the interest and penalty were unconscionable. The CA declared the foreclosure proceedings void because the usurious interest prevented Abaldonado from settling her debt at the correct amount. The CA also disagreed with the RTC on laches, finding that not all elements were present and that Abaldonado had exerted efforts to settle. The CA ordered the foreclosure and sale void, annulled the subsequent titles, reinstated Abaldonado's title, declared the interest rate void and subject to legal interest of 6% per annum from July 18, 2001, and remanded the case for accounting and computation. The Petition: Petitioners Samuel Ang and Fontaine Bleau Finance and Realty Corporation filed a petition for review on certiorari, arguing that the CA erred in finding that Abaldonado's alleged settlement efforts negated laches, in declaring the auction sale void, and in failing to consider that Abaldonado had foreclosed her right to redeem. They also argued that the CA erred in imposing a 6% interest rate from July 18, 2001, and in failing to impose penalty charges.
Issue(s)
Whether the Court of Appeals erred in finding that the alleged efforts of respondent Cristeta Abaldonado to amicably settle her unpaid obligations negated the existence of laches, and consequently, declaring the auction sale on Lot 344-C held on March 28, 2006 as void. Whether the respondent Cristeta Abaldonado has foreclosed on her right to redeem or re-acquire Lot No. 344-C because of her failure to validly tender the redemption price prior to the expiration of the period to do so. Whether the Court of Appeals erred in imposing the interest rate of six percent (6%) per annum from July 18, 2001, until its full satisfaction and without imputing penalty charges by way of liquidated damages.
Ruling
The petition is meritorious. The Court REVERSED and SET ASIDE the July 28, 2016 Decision and the April 20, 2017 Resolution of the Court of Appeals, and REINSTATED the September 26, 2013 Decision of the Regional Trial Court, Branch 35, Iloilo City.
Ratio Decidendi
On the issue of laches and the validity of the foreclosure proceedings: The Court found that the CA erred in concluding that Abaldonado was not guilty of laches. The evidence on record, particularly the testimonies of Ang and Lolly Guy Ang, showed that Abaldonado never participated in the negotiations for an amicable settlement, and it was her children who represented her. Abaldonado herself admitted her passivity in paying the loan after one year and her lack of knowledge of what happened to the property after her daughter took over. The Court reiterated that the law protects the vigilant and not those who slumber on their rights. Abaldonado's inaction from the time the loan was contracted until after the foreclosure sale was finalized, spanning twelve years from the loan's execution and three years after the Final Deed of Sale, constituted laches. She failed to question the mortgage contract and the foreclosure proceedings at any opportune time, including when the first foreclosure was initiated or when the second foreclosure commenced. Her belated challenge after the title was transferred to the winning bidder barred her from questioning the contract and proceedings. The Court emphasized that the negotiations between petitioners and Abaldonado's children did not detract from Abaldonado's own inaction and lack of personal participation or authorization for her children to act on her behalf. On the issue of Abaldonado's right to redeem: The Court found that Abaldonado's inaction and failure to question the mortgage contract and foreclosure proceedings for an extended period, coupled with her failure to tender the redemption price or file a legal action to fix it, led to the foreclosure of her right to redeem. She sat idly by while foreclosure proceedings were instituted and only assailed the mortgage contract after the title was transferred to the winning bidder. This conduct demonstrated a lack of diligence in protecting her rights, which, when coupled with the delay and the prejudice to the petitioners who proceeded with the foreclosure based on her apparent acquiescence, constituted laches. On the issue of interest rates and penalty charges: While the Court agreed with the CA that the stipulated interest and penalty rates were unconscionable and iniquitous, it found that Abaldonado's laches precluded her from assailing the mortgage contract and the subsequent foreclosure proceedings. The RTC had already ruled that the nullity of the interest and its reduction did not affect the terms of the REM and the foreclosure proceedings. The Supreme Court, by reinstating the RTC decision, implicitly affirmed that Abaldonado's laches barred her from seeking the annulment of the foreclosure proceedings based on the unconscionable interest rates. Therefore, the CA's directive to apply legal interest of 6% per annum from July 18, 2001, and to remand the case for accounting was set aside due to the overriding finding of laches that validated the foreclosure.
Main Doctrine
The failure to question the validity of a mortgage contract and its stipulated interest rates for an unreasonable and unexplained length of time, despite opportunities to do so, constitutes laches, barring the mortgagor from assailing the contract and subsequent foreclosure proceedings.