Angeles v. Traders Royal Bank
REITERATIONFacts
The Antecedents: Spouses Leonardo and Marilyn Angeles, along with Olympia Bernabe, obtained a P2,000,000.00 loan from Traders Royal Bank (TRB) in 1984, secured by several parcels of land. The loan was subsequently amended and increased multiple times, reaching P26,430,000.00 by October 1997. Despite the loss of TRB's records due to Mt. Pinatubo, the borrowers continued making payments. In 1998, Marilyn and Bernabe executed promissory notes for P26,430,000.00 and P5,451,456.85. In 2001, Bank of Commerce (BOC) acquired TRB. The borrowers defaulted on their loan obligations, prompting BOC to file for extrajudicial foreclosure in 2004. BOC emerged as the highest bidder in the auction sale. During the redemption period, Bernabe repurchased three properties for P4,900,000.00. The remaining properties were consolidated in BOC's name after the redemption period expired. In 2006, the Angeles Family filed a petition for corporate rehabilitation for Many Places, Inc., a close corporation, and a Stay Order was issued. In 2008, the Angeles Family filed a complaint for annulment of the consolidation of ownership and cancellation of titles, and damages against BOC. Procedural History: The Regional Trial Court (RTC) dismissed the Complaint for lack of merit, finding that the mortgaged properties were individually owned and not part of Many Places, Inc.'s assets, thus not covered by the Stay Order. The RTC also ruled that the foreclosure preceded the Stay Order, rendering it inapplicable. The RTC dismissed BOC's counterclaim. The Court of Appeals (CA) affirmed the RTC's Decision, highlighting that issues of accounting and re-computation of interest were raised for the first time on appeal. The CA also upheld the RTC's findings regarding the properties not being covered by the Stay Order and the regularity of the foreclosure proceedings. The Petition: The Angeles Family and Many Places, Inc. filed a Petition for Review on Certiorari before the Supreme Court, arguing that the CA erred in upholding the foreclosure and consolidation of titles, and in failing to delve into the propriety of recomputing their loan obligation. They claimed to have fully paid their loans and that the demand for P26,430,000.00 was baseless. They also asserted that the unilateral increase of interest rates violated the mutuality of contracts and that the consolidation of ownership was illegal due to substantial payments, novation, and the Stay Order.
Issue(s)
Whether or not the Court of Appeals erred in upholding the foreclosure of the mortgaged properties and the consolidation of land titles in favor of respondent Traders Royal Bank, now Bank of Commerce. Whether or not the Court of Appeals erred in failing to delve into the propriety of recomputing the outstanding loan obligation of petitioners Angeles Family and Many Places, Inc.
Ruling
The Petition is denied. The assailed Decision and Resolution of the Court of Appeals are affirmed.
Ratio Decidendi
On the issue of upholding the foreclosure and consolidation of titles: The Court reiterated that an appeal by certiorari under Rule 45 of the Rules of Court is limited to questions of law, and it is not the Court's function to re-examine evidence already passed upon by the lower courts. The petitioners failed to demonstrate that their case fell under any of the recognized exceptions to this rule. The RTC found the foreclosure proceedings to be regular and proper, stemming from the petitioners' failure to pay their loan obligations and redeem the mortgaged properties. Crucially, the foreclosure proceedings were completed even before the petition for rehabilitation was filed. The CA affirmed this, noting that the petitioners never questioned the loan amount during trial, only raising issues of accounting and re-computation of interest for the first time on appeal. The Court emphasized that the Stay Order, issued after the foreclosure proceedings and the issuance of the certificate of sale, could not invalidate these prior actions. Furthermore, the redemption period had already expired before the Stay Order was issued, making the consolidation of ownership a matter of right for the bank. On the issue of recomputing the outstanding loan obligation: The Court held that petitioners could not seek a re-computation of their outstanding liability for the first time on appeal. Allowing parties to change their theory on appeal is contrary to fair play and due process. The petitioners had not challenged the amount of their obligation before the trial court, thus they were barred from raising it on appeal. The CA also found that the petitioners failed to substantiate their claim of full payment and, in fact, acknowledged their debt by executing promissory notes. The Court noted that the bank's records indicated a substantial outstanding obligation, including interest, penalties, and taxes, and that the petitioners had not registered any objection to these amounts at the time of demand or during the foreclosure proceedings. The Court also dismissed the claim of novation, as there was no express agreement to extinguish the original obligation, and the repurchase of three properties was a separate transaction from the loan obligations. The terms of the repurchase were not incompatible with the original obligation, and the bank's proceeding with foreclosure indicated no intent to restructure the loan.
Main Doctrine
A party cannot raise an issue for the first time on appeal, as to allow parties to change their theory on appeal would be offensive to the rules of fair play and due process. Furthermore, foreclosure proceedings that precede the issuance of a Stay Order in a corporate rehabilitation case cannot be invalidated by such order, especially when the redemption period has already lapsed.