Asiatrust v. Tuble (G.R. No. 183987. July 25, 2012)
CASE DIGEST: ASIA TRUST DEVELOPMENT BANK, Petitioner, v. CARMELO H. TUBLE, Respondent. Asiatrust v. Tuble (G.R. No. 183987. July 25, 2012).
FACTS: Carmelo Tuble (Tuble), who served as the vice-president of petitioner Asiatrust Development Bank (Asiatrust), availed of himself of the loan privileges offered by the bank. The first loan was secured by a real estate mortgage. The Real Estate Mortgage Contract contained a dragnet clause. The second loan was a consumption loan with an interest at 18% per annum as evidenced by Promissory Note No. 0143.
After his retirement from Asiatrust, Tuble had outstanding obligations of ₱421,800 representing the real estate loan and ₱100,000 as consumption loan. When Tuble refused to settle his loans, Asiatrust filed a Petition for Extra-judicial Foreclosure of real estate mortgage over his property. The Petition was based only on his real estate loan, which at that time amounted to ₱421,800. Asiatrust emerged as the highest bidder. Subsequently, Tuble timely redeemed the property for ₱1,318,401.91.
Despite his payment of the redemption price, Tuble questioned how the foreclosure basis of ₱421,800 ballooned to ₱1,318,401.91 in a matter of one year. Thus, Tuble filed a Complaint for recovery of sum of money against Asiatrust seeking to recover the excess charges on the redemption price. He averred that Asiatrust erroneously imposed an 18% annual interest rate to the real estate loan. Asiatrust countered that the 18% annual interest was supported by Promissory Note No. 0143. Both the RTC and the CA ruled in favor of Tuble.
ISSUE: Did Asiatrust err in applying the 18% annual interest rate to the redemption price?
HELD: In foreclosure proceedings, the mortgaged property is subjected to the proceedings for the satisfaction of the obligation. As a result, payment is effected by abnormal means whereby the debtor is forced by a judicial proceeding to comply with the prestation or to pay indemnity.
Once the proceeds from the sale of the property are applied to the payment of the obligation, the obligation is already extinguished. Thus, in Spouses Romero v. CA, it was held that the mortgage indebtedness was extinguished with the foreclosure and sale of the mortgaged property, and that what remained was the right of redemption granted by law.Consequently, since the Real Estate Mortgage Contract is already extinguished, petitioner can no longer rely on it or invoke its provisions, including the dragnet clause stipulated therein. It follows that the bank cannot refer to the 18% annual interest charged in Promissory Note No. 0143, an obligation allegedly covered by the terms of the Contract.
Neither can the bank use the consummated contract to collect on the rest of the obligations, which were not included when it earlier instituted the foreclosure proceedings. It cannot be allowed to use the same security to collect on the other loans. To do so would be akin to foreclosing an already foreclosed property.
Despite the extinguishment of the Real Estate Mortgage Contract, Tuble had the right to redeem the security by paying the redemption price. The right of redemption of foreclosed properties was a statutory privilege he enjoyed. Redemption is by force of law, and the purchaser at public auction is bound to accept it. Thus, it is the law that provides the terms of the right; the mortgagee cannot dictate them.
Thus, it was held in Rural Bank of San Mateo, Inc. v. IAC that the power to decide whether or not to foreclose is the prerogative of the mortgagee; however, once it has made the decision by filing a petition with the sheriff, the acts of the latter shall thereafter be governed by the provisions of the mortgage laws, and not by the instructions of the mortgagee. In direct contravention of this ruling, though, the bank included numerous charges and loans in the redemption price, which inexplicably ballooned to ₱1,318,401.91. On this error alone, the claims of petitioner covering all the additional charges should be denied.
FACTS: Carmelo Tuble (Tuble), who served as the vice-president of petitioner Asiatrust Development Bank (Asiatrust), availed of himself of the loan privileges offered by the bank. The first loan was secured by a real estate mortgage. The Real Estate Mortgage Contract contained a dragnet clause. The second loan was a consumption loan with an interest at 18% per annum as evidenced by Promissory Note No. 0143.
After his retirement from Asiatrust, Tuble had outstanding obligations of ₱421,800 representing the real estate loan and ₱100,000 as consumption loan. When Tuble refused to settle his loans, Asiatrust filed a Petition for Extra-judicial Foreclosure of real estate mortgage over his property. The Petition was based only on his real estate loan, which at that time amounted to ₱421,800. Asiatrust emerged as the highest bidder. Subsequently, Tuble timely redeemed the property for ₱1,318,401.91.
Despite his payment of the redemption price, Tuble questioned how the foreclosure basis of ₱421,800 ballooned to ₱1,318,401.91 in a matter of one year. Thus, Tuble filed a Complaint for recovery of sum of money against Asiatrust seeking to recover the excess charges on the redemption price. He averred that Asiatrust erroneously imposed an 18% annual interest rate to the real estate loan. Asiatrust countered that the 18% annual interest was supported by Promissory Note No. 0143. Both the RTC and the CA ruled in favor of Tuble.
ISSUE: Did Asiatrust err in applying the 18% annual interest rate to the redemption price?
HELD: In foreclosure proceedings, the mortgaged property is subjected to the proceedings for the satisfaction of the obligation. As a result, payment is effected by abnormal means whereby the debtor is forced by a judicial proceeding to comply with the prestation or to pay indemnity.
Once the proceeds from the sale of the property are applied to the payment of the obligation, the obligation is already extinguished. Thus, in Spouses Romero v. CA, it was held that the mortgage indebtedness was extinguished with the foreclosure and sale of the mortgaged property, and that what remained was the right of redemption granted by law.Consequently, since the Real Estate Mortgage Contract is already extinguished, petitioner can no longer rely on it or invoke its provisions, including the dragnet clause stipulated therein. It follows that the bank cannot refer to the 18% annual interest charged in Promissory Note No. 0143, an obligation allegedly covered by the terms of the Contract.
Neither can the bank use the consummated contract to collect on the rest of the obligations, which were not included when it earlier instituted the foreclosure proceedings. It cannot be allowed to use the same security to collect on the other loans. To do so would be akin to foreclosing an already foreclosed property.
Despite the extinguishment of the Real Estate Mortgage Contract, Tuble had the right to redeem the security by paying the redemption price. The right of redemption of foreclosed properties was a statutory privilege he enjoyed. Redemption is by force of law, and the purchaser at public auction is bound to accept it. Thus, it is the law that provides the terms of the right; the mortgagee cannot dictate them.
Thus, it was held in Rural Bank of San Mateo, Inc. v. IAC that the power to decide whether or not to foreclose is the prerogative of the mortgagee; however, once it has made the decision by filing a petition with the sheriff, the acts of the latter shall thereafter be governed by the provisions of the mortgage laws, and not by the instructions of the mortgagee. In direct contravention of this ruling, though, the bank included numerous charges and loans in the redemption price, which inexplicably ballooned to ₱1,318,401.91. On this error alone, the claims of petitioner covering all the additional charges should be denied.