G.R. No. 187917 : January 19, 2011
METROPOLITAN BANK & TRUST COMPANY, Petitioner, v. SPOUSES EDMUNDO MIRANDA and JULIE MIRANDA, Respondents.
D E C I S I O N
On appeal is the June 30, 2008 Decision1cralaw of the Court of Appeals (CA) in CA-G.R. CV No. 87775, affirming the June
16, 2006 Decision2cralaw of the Regional Trial Court (RTC) of Santiago City, Branch 35, as well as its subsequent
Resolution dated May 7, 2009,3cralaw denying petitioner's motion for reconsideration.
Respondents, spouses Edmundo Miranda and Julie Miranda, applied for and obtained a credit accommodation from petitioner Metropolitan Bank &
Trust Company (Metrobank). On August 27, 1996, respondents obtained a
P 4,000,000.00 loan from Metrobank and executed a real estate mortgage4cralaw over a parcel of land in Poblacion,
Santiago, Isabela, covered by Transfer Certificate of Title (TCT) No. 202288. Upon respondents' request, Metrobank increased the loan from P 4,000,000.00 to P 5,000,000.00. The real estate mortgage executed on August 27, 1996 was thus amended5cralaw to increase the principal
amount of loan secured by the mortgage to P 5,000,000.00.
Subsequently, respondents obtained additional loans from Metrobank -
P 1,000,000.00 on December 3, 1996, and P 1,000,000.00 on May 8, 1997. The additional loans were secured by mortgage6cralaw over lands situated in Dubinan and
Mabini, Santiago, Isabela, covered by TCT Nos. T-202288, T-180503, T-260279, and T-272664.
Respondents encountered difficulties in paying their loans. They requested for a longer period to settle their account and further requested for
the restructuring of their loans, which requests Metrobank granted. Respondents then signed Promissory Note (PN) No. 5997737cralaw for
P 6,400,000.00, and PN No. 5997728cralaw for P 950,000.00, both payable on February 24, 2002, with interest at 17.250% per annum. They also amended the deeds of real estate mortgage they
executed in favor of Metrobank to increase the amount of loans secured by mortgage to P 6,350,000.00. The amendment was inscribed on TCT Nos. T-202288,9cralaw T-260279,10cralaw and T-180503.11cralawredlaw
On August 25, 2000, Metrobank sent respondents a demand letter12cralaw to settle their overdue account of
P 8,512,380.15, inclusive of interest and penalties; otherwise, the bank would initiate " the necessary legal proceedings x x x, without further notice." Respondents, however, failed to settle their account.
Consequently, Metrobank caused the extrajudicial foreclosure and auction sale of the mortgaged properties on November 16, 2000. The Clerk of Court
and Ex-Officio Sheriff of Santiago City sold the mortgaged properties at public auction for the sum of P 9,284,452.00 to Metrobank, as the highest bidder. A Certificate of Sale13cralaw was issued in favor of Metrobank on
November 27, 2000, which was registered with the Registry of Deeds on November 29, 2000.
Claiming that the extrajudicial foreclosure was void, respondents filed a complaint for Nullification of the Foreclosure Proceedings and Damages
with Prayer for Temporary Restraining Order/Injunction14cralaw with the RTC of Santiago City. They alleged
non-compliance with the provisions of Presidential Decree No. 107915cralaw and Act No. 3135,16cralaw particularly the publication requirement. Respondents further asserted that Metrobank required them to sign
blank promissory notes and real estate mortgage, and that they were not furnished with copies of these documents. Later, they discovered that the
terms and conditions of the promissory notes and of the mortgage were entirely different from what was represented to them by the bank. The right
to fix the interest rates, they added, was
exclusively given to the bank. Respondents, thus, prayed for the annulment of the extrajudicial foreclosure proceedings.
Metrobank answered the complaint, denying its material allegations and asserting the validity of the foreclosure proceedings. Specifically, it
averred compliance with the posting and publication requirements. Thus, it prayed for the dismissal of the complaint.17cralawredlaw
Meanwhile, on December 20, 2001, Metrobank caused the cancellation of the TCTs in the name of respondents and the issuance of new ones in its name.
On December 21, 2001, the Ex-Officio Sheriff executed a Final Deed of Sale.18cralawredlaw
On June 16, 2006, the RTC rendered a decision19cralaw annulling the extrajudicial foreclosure proceedings. The RTC
reviewed the records of the foreclosure proceedings and found no proof of publication of the sheriff's notice of sale; there was no affidavit of
publication attached to the records. This fatal defect, it held, invalidated the auction sale and the entire foreclosure proceedings. The RTC
further held that, when Metrobank foreclosed the mortgaged properties, respondents' loan account was still outstanding for there was an overpayment
of interests amounting to
P 1,529,922.00. Thus, the foreclosure proceedings were without factual and legal basis. The RTC further noted that Metrobank consolidated its title
even before the issuance of the sheriff's Final Deed of Sale. The trial court considered it an irregularity sufficient to invalidate the
The dispositive portion of the RTC decision reads: chanrob1esvirtwallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered in favor of [respondents] and against [petitioner] Metrobank as follows: chanrob1esvirtwallawlibrary
1) DECLARING as null and void the Sheriff's Certificate of Sale, dated November 27, 2000, Exhibit "11"; chanroblesvirtualawlibrary
2) DECLARING as null and void the Sheriff's Final Deed of Sale, dated December 21, 2000, Exhibit "12"; chanroblesvirtualawlibrary
3) CANCELLING [Metrobank's] TCT Nos. T-319236 (Exhibit "13"); T-319235 over Lot 6-B-18 (Exhibit "14"); T-T-319235 over Lot 4-F (Exhibit "15"); and
T-319237 (Exhibit "16"); chanroblesvirtualawlibrary
4) RESTORING [respondents'] TCT Nos. T-260279 (Exhibit "E"); T-202288 (Exhibit "F"); T-180503 (Exhibit "G"; and T- 272664 (Annex "E"); and
5) ORDERING x x x Metrobank to pay PHP50,000.00 as attorney's fees, and the cost of suit.
Metrobank filed a motion for reconsideration, but the RTC denied it on July 31, 2006.
Metrobank then appealed to the CA, faulting the RTC for annulling the foreclosure proceedings. It insisted that the bank complied with the
publication requirement. Metrobank also disagreed with the trial court's finding of overpayment of interests amounting to
P 1,529,922.00, claiming that the applicable interest rates on respondents' loans were 17% and not 12% as computed by the trial court. It further
asserted that a final deed of sale is not necessary for purposes of consolidating its ownership over the subject properties. Finally, Metrobank
assailed the award of attorney's fees for lack of basis.
On June 30, 2008, the CA resolved Metrobank's appeal in this wise: chanrob1esvirtwallawlibrary
WHEREFORE, the appeal is DISMISSED. The assailed decision dated June 16, 2006 of the RTC of Santiago City, Branch 35, in Civil
Case No. 35-3022 is AFFIRMED.
Metrobank's motion for reconsideration also suffered the same fate, as the CA denied it on May 7, 2009.22cralawredlaw
Before us, Metrobank insists on the validity of the foreclosure proceedings. Essentially, it argues that foreclosure proceedings enjoy the
presumption of regularity, and the party alleging irregularity has the burden of proving his claim. Metrobank asserts that, in this case, the
presumption of regularity was not disputed because respondents failed to prove that the notice of sale was not published as required by law.
At the outset, it must be stated that only questions of law may be raised before this Court in a Petition for Review under Rule 45 of the Revised
Rules of Civil Procedure. This Court is not a trier of facts, and it is not the function of this Court to reexamine the evidence submitted by the
It has been our consistent ruling that the question of compliance or non-compliance with notice and publication requirements of an extrajudicial
foreclosure sale is a factual issue, and the resolution thereof by the trial court is generally binding on this Court. The matter of sufficiency of
posting and publication of a notice of foreclosure sale need not be resolved by this Court, especially when the findings of the RTC were sustained by the CA. Well-established is the rule that factual findings of the CA are
conclusive on the parties and carry even more weight when the said court affirms the factual findings of the trial court.24cralawredlaw
The unanimity of the CA and the trial court in their factual ascertainment that there was non-compliance with the publication requirement bars us
from supplanting their findings and substituting them with our own. Metrobank has not shown that they are entitled to an
exception to this rule. It has not sufficiently demonstrated any special circumstances to justify a factual review.
Metrobank makes much ado of respondents' failure to present proof of non-compliance with the publication requirement. It insists that respondents
failed to discharge the requisite burden of proof.
Apparently, Metrobank lost sight of our ruling in Spouses Pulido v. CA,25cralaw Sempio v. CA,26cralaw and, recently, in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo,27cralaw viz.: chanrob1esvirtwallawlibrary
While it may be true that the party alleging non-compliance with the requisite publication has the burden of proof, still negative allegations need
not be proved even if essential to one's cause of action or defense if they constitute a denial of the existence of a document the custody of which
belongs to the other party.
It would have been a simple matter for Metrobank to rebut the allegation of non-compliance by producing the required proof of publication. Yet,
Metrobank opted not to rebut the allegation; it simply relied on the presumption of regularity in the performance of official duty.
Unfortunately, Metrobank's reliance on the presumption of regularity must fail because it did not present any proof of publication of the notice of
sale. As held by this Court in Spouses Pulido v. Court of Appeals:28cralawredlaw
[P]etitioners' reliance on the presumption of regularity in the performance of official duties falls in the face of a serious imputation on
non-compliance. The presumption of compliance with official duty is rebutted by failure to present proof of posting.
Further, in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo,29cralaw this Court
rejected a similar contention, viz.: chanrob1esvirtwallawlibrary
Petitioner's invocation of the presumption of regularity in the performance of official duty on the part of Sheriff Castillo is misplaced. While
posting the notice of sale is part of a sheriff's official functions, the actual publication of the notice of sale cannot be considered as such,
since this concerns the publisher's business. Simply put, the sheriff is incompetent to prove that the notice of sale was actually published in a
newspaper of general circulation.
As correctly found by the RTC and the CA, the records30cralaw of the foreclosure proceedings lacked any proof of
publication. This explains why Metrobank could not present any proof of publication.
We take this occasion to reiterate that the object of a notice of sale is to inform the public of the nature and condition of the property to be
sold, and of the time, place, and terms of the sale. Notices are given for the purpose of securing bidders and preventing a sacrifice sale of the
The goal of the notice requirement is to achieve a "reasonably wide publicity" of the auction sale. This is why publication in a newspaper of
general circulation is required. The Court has previously taken judicial notice of the "far-reaching effects" of publishing the notice of sale in a
newspaper of general circulation. Thus, the publication of the notice of sale was held essential to the validity of foreclosure proceedings.31cralaw In this case, Metrobank failed to establish compliance with the publication requirement. The RTC and the CA
cannot, therefore, be faulted for nullifying the foreclosure proceedings.
Metrobank next questions the authority of the RTC and the CA to take cognizance of the records of the foreclosure proceedings as basis for
annulling the auction sale. It claims that the trial court may not take judicial notice of the records of proceedings in another case, unless the
parties themselves agreed to it. Metrobank asserts that it did not give its consent to the trial court's examination of the records of the
extrajudicial foreclosure proceedings. Further, the RTC did not even set a hearing for the purpose of declaring its intention to take judicial
notice of the records of the extrajudicial proceedings, as required by Section 332cralaw of Rule 129. Metrobank, thus,
contends that the RTC exceeded its authority in taking cognizance of the records of the extrajudicial proceedings.
As a rule, courts do not take judicial notice of the evidence presented in other proceedings, even if these have been tried or are pending in the
same court or before the same judge. This rule, however, is not absolute.
In Juaban v. Espina33cralaw and "G" Holdings, Inc. v. National Mines and Allied Workers Union Local 103 (NAMAWU),34cralaw we held that, in
some instances, courts have also taken judicial notice of proceedings in other cases that are closely connected to the matter in controversy. These
cases may be so closely interwoven, or so clearly interdependent, as to invoke a rule of judicial notice.
The RTC, therefore, acted well within its authority in taking cognizance of the records of the extrajudicial foreclosure proceedings, and the CA
cannot be faulted for sustaining the RTC.
Metrobank further questions the trial court's finding of overpayment of interests. But like the issue on compliance with the publication
requirement, the issue on overpayment of interests involves the ascertainment of facts not subject of review by this Court. We reiterate that our
jurisdiction is limited to reviewing and revising errors of law imputed to the lower court, the latter's findings of fact being conclusive and not
reviewable by this Court.35cralawredlaw
Besides, we find nothing erroneous in this factual finding of the RTC. As explained by the RTC in its decision: chanrob1esvirtwallawlibrary
[T]he Court notes that the original promissory notes evidencing the various loans of the plaintiffs were not presented in court by either party;
they are needed to determine the stipulated interest rate. The Court is thus left to determine the same based on the testimony of the plaintiffs
that the agreed interest rate is 12% per annum; amazingly, this was not denied or refuted by the [petitioner] bank, in which case, 12% interest
rate is applied at least for the period beginning 1997 until 1999, when the loan was renewed under the two (2) new promissory notes which indicated
a higher rate of interest of 17.250% per annum. As mentioned above, the interest payments made by the [respondents] were already admitted by
[Metrobank] in its answer to the complaint as well as in its comment to [respondents'] formal offer of evidence, and such interest payments are
duly reflected and contained in the passbook account of the [respondents], Exhibit "H," "H-1" to "H-10." But, in order to determine whether
[respondents'] account has become past due or not, as the [petitioner] bank represents, the Court deems it necessary to undertake some mathematical
computation the result of which would decisively guide the Court to arrive at a rightful conclusion, thus: chanrob1esvirtwallawlibrary
1) Total interest payments by [respondents] from May 7, 1997 to June 30, 1999 -
2) Interest due from May 7, 1997 to June 30, 1999 -
P 1,802,500.00 computed as follows: chanrob1esvirtwallawlibrary
a) 1st year (
P 7 M x 12%), from May 7, 1997 to May 28, 1998 - P 840,000.00
b) 2nd year
i) from June 3, 1998 to Feb. 24, 1999 (8 mos.) -
P 560,000.00 ii) from March, 1999 to June 30, 1999 (4 mos.) - P 402,500.00
3) Total Interest paid -
Less Interest due -
Overpaid interest -
From the foregoing, it is evident that [respondents] overpaid interests for the period of two (2) years, from May 1997 to June 1999, in the total
amount of Php. 1,529,922.00. Thus, the Court is convinced that it is just and equitable that such an overpayment be construed as advance interest
payments which should be applied for the succeeding period or year of their contract. Otherwise, [Metrobank] would unjustly enrich itself at the
expense of [respondents]. In such a case, it was premature then for [Metrobank] to declare [respondents'] account as past due, because at that
juncture[, respondents'] loan obligation was outstanding and in declaring otherwise, [Metrobank's] action was without basis as there was no
violation of their loan contract. Consequently, it follows that the foreclosure proceedings subsequently held on November 26, 2000 was without
factual and legal basis, too. For, indeed, when the foreclosure proceedings in question was conducted, [respondents'] loan account with
[Metrobank], as it is said, was still outstanding, because [respondents] were able to pay the interest due. Therefore, the Court is again convinced
that the nullification prayed for is in order.36cralawredlaw
We need not say more.
In fine, the right of a bank to foreclose a mortgage upon the mortgagor's failure to pay his obligation must be exercised according to its clear
mandate, and every requirement of the law must be complied with, or the valid exercise of the right would end. The exercise of a right ends when
the right disappears, and it disappears when it is abused especially to the prejudice of others.37cralawredlaw
As further declared by this Court in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo:38cralawredlaw
While the law recognizes the right of a bank to foreclose a mortgage upon the mortgagor's failure to pay his obligation, it is
imperative that such right be exercised according to its clear mandate. Each and every requirement of the law must be complied with, lest, the
valid exercise of the right would end. It must be remembered that the exercise of a right ends when the right disappears, and it disappears when it
is abused especially to the prejudice of others.
We, therefore, affirm the CA and sustain the RTC in nullifying the extrajudicial foreclosure of real estate mortgage and sale, including
With this disquisition, we find no necessity to discuss the issue of the validity of the consolidation of title by Metrobank.
WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 87775 are AFFIRMED.
ANTONIO EDUARDO B. NACHURA
CARPIO, J., Chairperson, PERALTA, ABAD, and MENDOZA, JJ.