G.R. No. 120859 - June 26, 2001
METROPOLITAN BANK AND TRUST COMPANY, petitioner, v. FRANCISCO Y. WONG, respondent.
It is bad enough that the mortgagor has no choice but to yield his property in a foreclosure proceeding. It is infinitely worse, if prior thereto, he was denied of his basic right to be informed of the impending loss of his property. This is another instance when law and morals echo the same sentiment.
This is a petition for review on certiorari seeking the reversal and setting aside of the decision dated June 13, 1994 and resolution dated June 14, 1995 of the Court of Appeals in CA-G.R. CV No. 35615 entitled "Francisco Y. Wong versus Metropolitan Bank and Trust Company."1
The essential antecedents are:
Sometime in 1976, the Mindanao Grains, Inc. (MGI for brevity), through its officers Wenceslao Buenaventura and Faustino Go, applied for a credit accommodation with the Metropolitan Bank and Trust Company (herein petitioner) to finance its rice and corn warehousing business. As a security for such credit accommodation, respondent Francisco Y. Wong, and his wife Betty C. Wong executed in favor of petitioner a real estate mortgage over a parcel of land consisting of 31, 292 square meters located at Campo 7, Molave, Zamboanga del Sur and registered in respondent's name under Transfer Certificate of Title (TCT) No. 11758.
On April 11, 1980, due to MGI's failure to pay the obligation secured by the real estate mortgage, petitioner filed an application for extra-judicial foreclosure under Act No. 3135. A notice of foreclosure sale was published in Pagadian Times once, for three consecutive weeks (May 18-25, 1980, May 26-June 2, 1980 and June 2-8, 1980), setting the auction sale of the mortgaged property on June 5, 1980. No notice was posted in the municipality or city where the mortgaged property was situated.
As a consequence, MGI, through its president, Simeon Chang (Chang), requested petitioner to postpone the scheduled auction sale from June 5, 1980 to July 7, 1980. Petitioner granted the request. Thereafter, Chang and petitioner agreed that should MGI pay P20,000.00 on or before the scheduled auction sale, the same would be postponed for a period of 60 days. Chang paid the amount on November 3, 1981. Despite such payment, Sheriff Deo Bontia proceeded with the auction sale on November 23, 1981. Petitioner was adjudged the sole and highest bidder. Thus, a certificate of sale was issued to petitioner. The sale was registered with the Registry of Deeds on the same day. After the expiration of the one (1) year redemption period, ownership over the property was consolidated and TCT No. T-17853 was correspondingly issued in the name of petitioner.
Respondent, unaware of the foregoing developments, applied for a credit accommodation with the Producers Bank of the Philippines, Iloilo City, using as security his TCT No. 11758. It was only then when he learned that his property was already foreclosed by petitioner and no longer in his name.
Feeling aggrieved, respondent filed with the Regional Trial Court, Branch 18, Pagadian City a complaint for reconveyance and damages against petitioner and the Register of Deeds of Zamboanga del Sur. Respondent, in his complaint, assailed the validity of the extra-judicial foreclosure sale basically on the ground that petitioner did not comply with the requirements of Section 3, Act No. 3135 that "notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality and city."
During the pendency of the case, petitioner sold the disputed property to a certain Betty Ong Yu.
After hearing, the trial court decreed:
On appeal by petitioner, the Court of Appeals affirmed the RTC decision with modification in the sense that the monetary awards were reduced, thus:
Twice thwarted, petitioner now comes before us imputing the following errors to the Court of Appeals:
Petitioner places excessive reliance on the case of Olizon v. Court of Appeals3 in justifying its claims: (a) that its failure to comply with the posting requirement under Section 3 of Act No, 3135 did not necessarily result in the nullification of the foreclosure sale since it complied with the publication requirement; and (b) that personal notice of the foreclosure proceedings to respondent is not a condition sine qua non for its validity. In assailing the monetary awards to respondent, petitioner claims it was not guilty of bad faith in selling the disputed property to Betty Ong Yu, the sale having been perfected even before respondent filed his action for reconveyance and damages with the trial court.
For its part, respondent argues that "the unusual nature of the attendant facts and the peculiarity of the confluent circumstances" involved in Olizon are not present in the instant case.
The petition is bereft of merit.
Succinct and unmistakable is the consistent pronouncement of this Court that it is not a trier of facts. And well-entrenched is the doctrine that pure questions of fact may not be the subject of appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as this mode of appeal is generally confined to questions of law. Corollarily, non-compliance with the requirements of notice and publication in an extra-judicial foreclosure is a factual issue. The resolution thereof by the lower courts is binding and conclusive upon this Court.4 Thus, disregarding all factual issues which petitioner interjected in his petition, the only crucial legal queries in this case are: first, is personal notice to respondent a condition sine qua non to the validity of the foreclosure proceedings? and, second, is petitioner's non-compliance with the posting requirement under Section 3, Act No. 3135 fatal to the validity of the foreclosure proceedings?
In resolving the first query, we resort to the fundamental principle that a contract is the law between the parties and, that absent any showing that its provisions are wholly or in part contrary to law, morals, good customs, public order, or public policy, it shall be enforced to the letter by the courts. Section 3, Act No. 3135 reads:
The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation. Personal notice to the mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements.5 In this case, petitioner and respondent in entering into a contract of real estate mortgage, agreed inter alia:
Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action which petitioner might take on the subject property, thus according him the opportunity to safeguard his rights. When petitioner failed to send the notice of foreclosure sale to respondent, he committed a contractual breach sufficient to render the foreclosure sale on November 23, 1981 null and void.
The second query must be answered in the affirmative. An incisive scrutiny of Olizon shows that this Court has not actually dispensed with the posting requirement under Section 3 of Act No. 3135, thus:
x x x
Obviously, as correctly pointed out by respondent, what prompted the Court to dispense with the posting requirement is the "unusual nature of the attendant facts and the peculiarity of the confluent circumstances" involved in Olizon. It bears stressing that in the said case, the extra-judicial foreclosure sale sought to be annulled was conducted more than 15 years ago, thus, even on the equitable ground of laches, the Olizons' action for annulment of foreclosure proceedings and certificate of sale was bound to fail.
Unlike in Olizon where there was a valid publication of the notice of foreclosure sale, the publication in the case at bar was defective. Not only did it fail to conform with the requirement that the notice must be published once a week for at least three consecutive weeks in a newspaper of general circulation, but also, there were substantial errors in the notice of sale published in the Pagadian Times as found by the scrutinizing eyes of the trial court, thus:
And lastly, not to be glossed over is the fact that there was no evidence in Olizon insinuating bad faith or collusion among the Sheriff who conducted the sale, the Register of Deeds and the bank. In the present case, collusion is evident in the precipitate manner the foreclosure sale was conducted by Sheriff Bontia as well as in the sale made by petitioner to Betty Ong Yu during the pendency of the case.
To stress that Olizon is an exception rather than the rule, this Court in the same case held:
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.6
Anent the award of moral damages, both the trial court and the Court of Appeals found that petitioner acted in bad faith in extra-judicially foreclosing the real estate mortgage and in selling the mortgaged property during the pendency of the case in the trial court. To be sure, petitioner bank's bad faith caused serious anxiety, mental anguish and wounded feelings to its client, respondent herein. He is thus entitled to moral damages.
The Court of Appeals made a commendable ratiocination on the fact that petitioner acted in bad faith, thus:
But while the amount of moral damages is a matter left largely to the sound discretion of the trial court, the same when found excessive, should be reduced to more reasonable amounts considering the attendant facts and circumstances. Moral damages, though incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. Moral damages are not intended to enrich a complainant at the expense of a defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral sufferings he has undergone by reason of the defendant's culpable action. The award of moral damages must be proportionate to the sufferings inflicted.7 Taking into consideration the attending circumstances here, we are convinced that the amount awarded by the Court of Appeals is exorbitant. Likewise, we find the exemplary damages and attorney's fees quite excessive.
WHEREFORE, the instant petition is hereby DENIED. The assailed Decision of the Court of Appeals is AFFIRMED subject to the MODIFICATION that the awards of moral damages be reduced to P100,000.00 and the exemplary damages to P50,000.00. The award of attorney's fees is deleted.
Melo, Vitug, Panganiban, Gonzaga-Reyes, JJ., concur.
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