Government v. Santos
REITERATIONFacts
The Antecedents: Margarita Torralba Viuda de Santos, personally and as administratrix of the estate of the deceased Epifanio de los Santos y Cristobal, was the defendant in a case filed by the Government of the Philippine Islands. The Court of First Instance of Manila rendered a judgment ordering the defendant to pay the plaintiff the sum of P44,397.94 with interest, plus taxes and insurance premiums paid by the plaintiff after June 30, 1933. The judgment also stipulated that if the defendant failed to pay within ninety (90) days, the mortgaged property would be sold at public auction, and any deficiency could be recovered from the defendant and the estate. Procedural History: The defendant appealed the judgment of the Court of First Instance of Manila. The Petition: The appellant assigned as errors the lower court's holding her liable for any deficiency before the sale of the mortgaged property, sentencing her to pay costs, and denying her motion for a new trial.
Issue(s)
Whether the lower court erred in holding the defendant liable, personally and as administratrix, for any deficiency remaining after the sale of the mortgaged properties. Whether the lower court erred in sentencing the defendant to pay the costs of the action.
Ruling
The appealed judgment is modified by eliminating the authority given the mortgagee to recover from the defendant and the estate of the deceased Epifanio de los Santos y Cristobal any unpaid deficiency before the sale. The mortgagee's right to ask for a deficiency decree after the sale, if the proceeds are insufficient, is preserved. The defendant is liable for the costs of the action.
Ratio Decidendi
On the issue of deficiency judgment before sale: The Court held that Section 260 of the Code of Civil Procedure requires that a sale of the mortgaged property must first be made, and a balance must remain due to the complainant after applying the proceeds of the sale, before a decree for any balance can be issued. The mortgagee must also file a motion for such decree. In this case, the sale had not yet occurred, and it was unknown if a deficiency would exist. Therefore, the lower court exceeded its jurisdiction in authorizing the recovery of a deficiency before the sale and before the existence of such deficiency was established. This authorization is null and void. On the issue of costs: The Court found that the lower court did not err in sentencing the defendant to pay the costs. Although the mortgage contract allowed the Director of Posts to take possession of the mortgaged lands without court proceedings, it also stipulated that judicial proceedings for foreclosure could be instituted. The plaintiff's institution of the foreclosure suit was justified because the conditions imposed by the defendant were prejudicial to the mortgagee. Therefore, the defendant's liability for the costs of the first instance was proper.
Main Doctrine
A court authorizing the mortgagee in a decree of foreclosure of mortgage to recover from the mortgagor the deficiency of the mortgage credit before the sale and before it is known whether or not a deficiency exists, exceeds its jurisdiction, and the authority so given is null and void. The mortgagor is not exempt from payment of costs of suit if the mortgagee brings a foreclosure action.