San Pedro Bus G.R. No. L-6291, April 29, 1954. excessive
Decision:
Nicolas Navarro filed a complaint in the Court of First Instance of Rizal
against the San Pedro Bus Line, Paulino de la Cruz and Teodulo Lacdan,
doing business in the name of the San Pedro Bus Line, alleging that the
plaintiff, on April 21, 1949, rode as a passenger in Manila bound bus No.
TPU-7654 owned and operated by the defendants; that while on its way the
bus collided with another vehicle, causing serious physical injuries to the
plaintiff, with subsequent post- traumatic psychosis which might incapacitate
him for life; that as a result thereof the plaintiff suffered damages, for actual
medical and hospital expenses and loss of earning power, in the total sum of
P4,500 which the plaintiff sought to recover from the defendants. In their
answer the defendants admitted the occurrence of the accident and the
injuries received by the plaintiff, but disclaimed responsibility for the accident.
After trial, the court dismissed the complaint on the ground that there was "no
proof whatsoever of the relation of the defendants San Pedro Bus Line and
Paulino de la Cruz with the damages claimed by the plaintiff." The plaintiff
appealed to the Court of Appeals which, on September 29, 1952, rendered a
decision the dispositive part of which reads as follows: "WHEREFORE, it
appearing that the trial court erred as charged, and that the facts and the law
fully warrant a recovery by the appellant, the judgment appealed from is
reversed and another one is entered, holding the appellees liable, jointly and
severally, to said appellant in the total sum of P9,500, with interests thereon
from the date this action was commenced. Costs are charged against the
appellees." The defendants have elevated the case by way of a petition
for certiorari.
It is contended for the herein petitioners that they cannot be held civilly liable
to respondent Nicolas Navarro, for the reason that the Court of First Instance
of Rizal had dismissed the criminal charge against petitioner Paulino de la
Cruz, driver of the bus involved in the accident, citing the case of Martinez v.
Barredo, * 45 Off. Gaz., 4922. In answer to this contention, it is enough to
advert to the conclusion of the Court of Appeals - which is correct - that the
action was not based on tort or quasi delicto, but was one for breach of a
carrier’s contract, there being a clear distinction between culpa as a source
and creator of obligations (aquiliana) and culpa in the performance of an
already existing obligation (contractual). As already held in the case of
Castro v. Acro Taxicab Co. * 46 Off. Gaz., 2023, "para que prosperase la
acci on del demandante pidiendo indemnizaci on de daños y perjuicios
bastaba que probase la existencia del contrato de pasaje esto es, que tom o
el taxi para ser conducido, y el hecho del choque que caus o lesiones y
daños en el pasajero. De acuerdo con la doctrina enunciada, para el éxito de
la acci on de daños no era necesario que se probase la culpa, descuido o
negligencia del chofer que guiaba el taximetro No. 962." The case of
Martinez v. Barredo is not controlling, since it referred to an action based on
criminal negligence.
The other contention of the petitioners is that it was erroneous for the Court
of Appeals to award in favor of respondent Navarro damages in the amount
of P9,500, his claim in the complaint being only for P4,500. It appears,
however, that the complaint prayed for "such further relief as may be deemed
just and equitable," and this of course warranted the granting of a judgment
in excess of that expressly sought in the complaint. Indeed, under section 9,
Rule 35, of the Rules of Court, "the judgment shall grant the relief to which
the party in whose favor it is rendered is entitled, even if the party has not
demanded such relief in his pleadings."cralaw virtua1aw library
It is also urged by counsel for the petitioners that the finding of the Court of
Appeals that respondent Navarro is insane, is not supported by any
evidence, and that on the other hand, in the motion for new trial filed by the
petitioners, accompanied by the affidavits of Marcelo Legaspi and Ceferino
Terello, respondent Navarro is shown not to be insane, with the result that
there is no basis for awarding the additional amount of P5,000. However,
apart from the fact that the finding of the Court of Appeals is factual and
therefore conclusive, the said sum was granted by the Court of Appeals, not
only for the resulting insanity of respondent Navarro but for his pain and
suffering in general; and we are not prepared to hold that the award is
as compensation for moral damages.
Wherefore, the decision complained of is affirmed, and it is so ordered with
costs against petitioners.
Pablo, Bengzon, Reyes, Jugo, Bautista Angelo and Concepcion, JJ., concur.
THE SAN PEDRO BUS LINE, PAULINO DE LA CRUZ, and TEODOLO
LACDAN, doing business under the name of "THE SAN PEDRO BUS
LINE,", Petitioners, v. NICOLAS NAVARRO, and the HON. ASSOCIATE
JUSTICES OF THE FIRST DIVISION, COURT OF
APPEALS, Respondents.
Estanislao R. Bayot, for Petitioners.
Antonio Enrile Inton and Camilo V. Peña for Respondents.
1. —DAMAGES; BREACH OF CONTRACT OF CARRIAGE. — N filed a
complaint against B Bus C and L, doing business under B Bus Line, for
damages due to physical injuries sustained by N while riding in a bus of the
B Bus Line which collided with another bus. After trial, the court dismissed
the complaint. N appealed and the C. A. reversed the decision of the C.F.I.
Defendants contended that they cannot be held civilly liable to plaintiff
because the C.F.I. had dismissed the criminal charge against the driver of
the bus. Held: It is enough to advert to the conclusion of the Court of Appeals
- which is correct that the action was not based on tort or quasi-delicto, but
was one for breach of a carrier’s contract, there being a clear distinction
between culpa as a source and creator of obligations (aquiliana) and culpa in
the performance of an already existing obligation (contractual). As already
held in the case of Castro v. Acro Taxicab Co., 46 Off. Gaz., 2023, "para que
prosperase la accion del demandante pidiendo indemnizaci on de daños y
perjuicios bastaba que probase la existencia del contrato de pasaje esto es,
que tom o el taxi para ser conducido, y el hecho del choque que caus o
lesiones y daños en el pasajero. De acuerdo con la doctrina enunciada, para
el éxito de la acci on de daños no era necesario que se probase la culpa,
descuido o negligencia del chofer que guiaba el taxi-metro No. 962." The
case of Martinez v. Barredo is not controlling, since it referred to an action
based on criminal negligence.
2. ID.; WHAT WARRANTS JUDGMENT IN EXCESS OF THAT SOUGHT
UNDER SEC. 9 RULE 35 OF THE RULES OF THE COURT. — Where it is
contended that the C. A. erred in awarding damages in the amount of P9,500
because his claim in the complaint E prayed for "such further relief as may
be deemed just and equitable" this warranted the granting of a judgment in
excess of that expressly sought in the complaint under section 9, Rule 35 of
the Rules of Court.
-----------------------------------------------------------------------------------------------------
HASHIM & CO. G.R. No. L-6195. January 17, 1911
N.T. HASHIM and CO., Plaintiff-Appellant, v. ROCHA and CO., Defendant-
Appellee.
O’Brien and De Witt, for Appellant.
Chicote and Miranda, for Appellee.
SYLLABUS
1. NEGLIGENCE; DAMAGES. — The defendant company discharged a part of a
large shipment of potatoes into a lorcha, which was then left for two days in the
sum, tightly closed and without ventilation. At the same time several thousand
crates of potatoes from the same shipment were discharged into numerous
cascos. The latter were delivered in the usual condition under the circumstances,
but those in the lorcha were rotted and of no use of value. Held, That the
defendant was guilty of gross negligence with respect to the car of the potatoes
on board the lorcha and is liable for the loss resulting therefrom.
DECISION
There is presented in this appeal simply a question of fact. A careful study of
the evidence presented on the trial leads us to the conclusion that the
judgment should be reversed. We are of the opinion that it is against the
great preponderance of the evidence. That the lorcha containing the
potatoes, the value of which is in controversy, was left for two days in the hot
sun, tightly closed and without ventilation, was due entirely to the wrongful
acts and to the gross carelessness of the employees by the evidence. The
captain of the ship from which the potatoes were being discharged, the first
officer of the same, and the customs inspector who was stationed on board
thereof during the discharge of its cargo, and other witnesses, demonstrate
this fact beyond a reasonable doubt. That the potatoes, when discharged
from the vessel into the lorcha, were in good condition, is demonstrated with
equal conclusiveness. This is shown not only by the testimony of the
witnesses above mentioned, but by all the circumstances of the case. In
addition to the potatoes discharged into the lorcha, there had been
discharged into numerous cascos several thousand crates of potatoes from
the same ship and from the same hold at the same time. It has been shown
by uncontradicted proof that all of the potatoes, except those found in the
lorcha, were in good condition at the time of their discharge. Only those in
the lorcha, after two days of exposure to the heat of the sun, in tightly closed
compartments, without ventilation, were found to be rotted beyond use or
value. From the evidence we are satisfied that the potatoes in question when
discharged from the ship into the lorcha were in good condition. That such
was the case is demonstrated from the evidence beyond cavil or question.
The only witness who seriously questions that fact is the witness Villanueva,
who was an employee of the plaintiff on board the vessel at the time the
potatoes were discharged into the lorcha, and was shortly afterwards
discharged the plaintiff. He testified that when so discharged they were so
badly rotted as to be without value. Yet we find that this same witness, when
he made a written report to the plaintiff, his employer, as to the condition of
the potatoes when discharged, therein stated concerning the condition of
those potatoes that out of the 1,085 crates so discharged into the lorcha only
54 crates were in bad condition and a few were damp. The condition of the
potatoes thus described by the written report which he at the time made to
his employer describes a condition usual with potatoes at that time of the
year and about the same as that of the potatoes discharged into the cascos.
It has been shown by the evidence that the worthless and rotted potatoes of
this cargo constituted about 5 per cent of the whole. This seems from the
evidence to be the usual loss sustained in the transportation of potatoes at
that season of the year. Gross negligence of the defendant in the handling
and care of these potatoes being conclusively demonstrated by the proofs,
he should pay to the plaintiff the value of those lost by such negligence. The
value of the potatoes proved upon the trial was P3.75 a crate, amounting in
all to P4,068.75. Deducting 5 per cent of this sum for the general loss on the
whole cargo, there remains a balance of P3,865.31.
The judgment is reversed and a judgment is hereby given against the
defendant and in favor of the plaintiff for the sum of P3,865.31, with costs of
this appeal. So ordered.
Arellano, C.J., Mapa, Carson and Trent, JJ., concur.
--------------------------------------------------------------------------------------------------
O’LEARY, plaintiff-appelle vs. MACONDRAY and CO., INC, defendant-
appellee [March 24, 1924 L- 21383]
STATEMENT
It is alleged that on January 30, 1920, the plaintiff, who is a resident of
Manila, and the defendant, a domestic corporation, made the following
agreement:
SIRS: Appertaining to the residence to be erected for your firm in Pasay, for
which I have been requested by G. H. Hayward to submit a proposition, I
have the honor to state that I have examined the plans and site and would
undertake the work and complete the building in accordance with the plans
and instructions, and under the supervision of the said architect for the
amount of the actual cost plus twelve and one-half per cent (12 ½%).
Payments to be made monthly on statements supported by vouchers,
approved and certified to by the architect.
It is understood that time is an important provision, and with due
consideration therefor materials suitable for the work are to be purchased in
such quantities and at such times as may appear to be to your best interest.
Very respectfully, (Sgd.) "H. O'LEARY - Accepted for and on behalf of
Macondray & Co. By (Sgd.) "CARLOS YOUNG"
That plaintiff commenced the construction of the building under the
supervision of the architect, and continued the work thereon until near its
completion, and kept and performed all the terms and provisions of the
contract by him to be kept and performed, and that pursuant to such
agreement he paid out for labor and materials the sum of P20,287.03, which
was the actual cost; and that the defendant is indebted to him in the further
sum of P2,535.83, being 12 ½ per cent of the actual cost of such labor and
materials, and for and on account of his services and superintendence of the
building, and he prays judgment for P22,822.86, with interest from the filing
of the complaint and costs.
In its second amended answer, after admitting the making of the contract
and the formal all allegations of the complaint, the defendant denies all other
material allegations, and, as a special defense, alleges that, through
plaintiff's negligence in the construction of the building and the purchase of
materials, the defendant was damaged in the sum of P32,624.25, as
specified in seven different counterclaims. It is then alleged that the plaintiff
was indebted to the Luneta Motor Company in the sum of P702.49, and to
the Insular Lumber Company in the sum P9,766.23, both of which claims are
assigned to the defendant, and it prays judgment against the plaintiff for the
total of all of such claims amounting to P43,092.97.
The parties entered into a stipulation as to certain exhibits, and upon such
issues, the trial court rendered judgment in favor of the plaintiff for
P12,201.99, with legal interest from the filing of the complaint and costs, from
which the defendant appeals, contending that the court erred in allowing
interest from the filing of the complaint, and in its computation and as to the
duplicated item of the Tuason & Sampedro bill, in refusing to receive
evidence of the rental value of the house, in failing to make special findings
of fact, and in failing to find that the delay caused in the completion of the
house was caused by plaintiff's negligence, in finding for the plaintiff on
defendant's second counterclaim for damages in the sum of P797, in finding
for the plaintiff on defendant's third counterclaim for damages in the sum of
P5,440.11, and in finding for the plaintiff on defendant's fourth counterclaim
for damages in the sum of P13,407.25, the amount of the alleged increase in
the cost of labor caused by plaintiff's negligence
JOHNS, J.:
Plaintiff's cause of action is founded upon the contract above quoted, the
making of which defendant admits. By its express terms, plaintiff says that he
"would undertake the work and complete the building in accordance with the
plans and instructions, and under the supervision of the said architect for the
amount of the actual cost plus twelve and one-half per cent (12 ½%)."
Payments are to be made on monthly statements accompanied by vouchers
to be approved and certified by the architect. It then recites:
It is understood that time is an important provision, and with due
consideration therefor materials suitable for the work are to be purchased in
such quantities and at such times as may appear to be to your best interest.
To say the least, the contract was very loosely drawn. No date is specified in
which the building is to be completed, and time is not made the essence of
the contract. It is true that the materials were to be purchased in such
quantities and at such times as may appear to be to the defendant's interest.
The defense is founded upon the theory that the labor was not furnished and
that the materials were not purchased for its best interest. There is no claim
or pretense of fraud, or that the plaintiff was dishonest. In its final analysis,
defendant's counterclaims are founded upon plaintiff's mistakes and errors of
judgment in the employment of labor and the purchase of materials.
Assuming that there were mistakes and errors of judgment only, the plaintiff
would not be liable for them under the contract. The fact that the price of
lumber or of labor went up or down, or was cheaper at a certain time, would
not make the plaintiff liable for a breach of contract, so long as he was
exercising his best judgment and acting in good faith.
It will be noted that the materials were to be purchased "in such quantities
and at such times as may appear to be to your best interest." That vested in
the plaintiff a discretionary power as to the time and manner for the purchase
of materials, for which he would not be liable for honest mistakes or errors of
judgment. The same thing is true as to the employment of labor. It is true that
the contract recites "that time is an important provision." But it does not say
when the building is to be completed, or that time is of the essence of the
contract. In other words, under the terms of the contract, the employment of
labor, the purchase of materials and the completion and construction of the
building were all matters which were largely left to the discretion of the
plaintiff, for which he would not be liable for honest mistakes or errors of
judgment.
Pending the trial the judge of the lower court made a personal inspection of
the building and of the labor and materials used in its construction, and upon
all of such questions, we agree with the trial court.
Although this action is founded upon contract, the amount of plaintiff's claim
was vigorously disputed. In fact the defendant claimed judgment against the
plaintiff for a much larger amount. Upon such a state of facts, and under
recent decisions of this court, plaintiff is only entitled to interest from the date
of the judgment, and defendant's first assignment of error must be sustained.
It also appears that a clerical error was made in computing 12 1/2 per cent
on P1,772.14, and that the amount which should be deducted was P221.52
and not P22.15, as found by the trial court. Correcting this error, the amount
of plaintiff's judgment should be P12,002.63.
The judgment of the lower court will be modified, and instead of P12,201.00,
the amount of plaintiff's judgment will be P12,002.63, which will draw interest
at the rate of 6 per cent per annum from the first day of August, 1923, the
date of the judgment in the lower court. In all other respects, the judgment is
affirmed, with costs in favor of the appellant in this court. So ordered.
Araullo, C.J., Street, Avanceña, Ostrand and Romualdez, JJ., concur.
DECISION
CORONA, J.:
In this petition for review on certiorari,1 petitioner Development Bank of the
Philippines assails the February 9, 2001 decision2 and September 17, 2001
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 37784.
Respondent spouses Alejandro and Adelaida Licuanan were granted a
piggery loan in the amount of ₱4,700 by petitioner, evidenced by a
promissory note dated September 20, 1974 and secured by a real estate
mortgage4 over a 980-square meter parcel of land with a two-storey building.
The loan’s maturity date was September 23, 1979.5
Petitioner granted respondents an additional loan of ₱12,000 evidenced by a
promissory note dated May 29, 1975 payable on or before the year 1980.
This was secured by a real estate mortgage over four parcels of land
situated in Pangasinan covered by TCT Nos. 109825, 109762, 109763 and
109764.6
On October 2, 1975, petitioner granted respondent spouses another loan of
₱22,000 evidenced by a promissory note maturing on October 3, 1985. This
was secured by a real estate mortgage executed in favor of petitioner over
three parcels of land covered by TCT Nos. 112608, 112607 and 112609, all
of the Registry of Deeds of Pangasinan.7
On August 6, 1979, petitioner and respondents restructured the ₱12,000
loan, extending the maturity date from June 22, 1979 to June 22, 1982. On
the same date, respondents executed a promissory note for ₱12,320.73 and
another for ₱6,519.90.8
On July 6, 1981, petitioner sent a letter by registered mail to respondents
informing them that, since the conditions of the mortgage had been
breached, petitioner would have the mortgaged properties sold by the sheriff
under Act 3135. The total amount due from the three loans had by then
ballooned to ₱75,298.32.9
On July 20, 1981, petitioner filed an application for extrajudicial
foreclosure.10 The mortgaged properties were sold in a public auction on
December 16, 1981. Petitioner, as the highest bidder, acquired them for a
total of ₱16,340. The certificate of sale was registered on January 25,
1982.11
On February 4, 1983, petitioner consolidated its ownership over the
properties. After more than a year or on October 16, 1984, petitioner wrote
respondents by registered mail, informing them that the properties (now
acquired assets of the bank) would be disposed of by public auction. On
November 11, 1984, petitioner published an advertisement stating that on
November 14, 1984, the properties would be sold by oral bidding. On this
date, however, there were no bidders.12
On November 16, 1984, petitioner sent respondents a letter informing them
that the properties could be reacquired by negotiated sale for cash or
installment.13 Three days later, however, on November 19, 1984, the
properties were sold through negotiated sale to one Emelita A. Peralta.
Respondents were informed of the sale by petitioner through a letter dated
December 6, 1984.
On the same day, petitioner executed a deed of conditional sale in favor of
Peralta.14 On December 11, 1984, respondents offered to repurchase the
properties from petitioner but they had already been sold to Peralta.15
Respondents then filed a complaint for recovery of real properties and
damages on July 18, 1985 in the Regional Trial Court (RTC) of Lingayen,
Pangasinan, Branch 39 against petitioner and Peralta. 16 The RTC rendered
judgment dated September 17, 1991 in favor of respondents.
The trial court found that there was no demand for payment prior to the
extrajudicial foreclosure. Thus, the foreclosure proceedings were null and
void. It ordered Peralta to reconvey the properties to respondents subject to
Peralta’s right to be paid by respondents the amount of ₱104,000 in
consideration of such reconveyance. It also held that petitioner did not deal
fairly with respondents making it liable for nominal and moral damages to the
latter. The RTC further ordered petitioner to pay respondents attorney’s fees
and litigation expenses.
On appeal, the CA affirmed the RTC but decreased the amount of nominal
damages from ₱75,000 to ₱50,000.17 Hence this petition.18
The main issues to be resolved are the following:
1) Whether a demand for payment of the loans was made before the
mortgage was foreclosed;
2) Whether demand is necessary to make respondents guilty of default;
3) Whether or not respondents are liable for the deficiency claim of petitioner
and
4) Whether or not petitioner is liable for damages.
The issue of whether demand was made before the foreclosure was effected
is essential. If demand was made and duly received by the respondents and
the latter still did not pay, then they were already in default and foreclosure
was proper. However, if demand was not made, then the loans had not yet
become due and demandable. This meant that respondents had not
defaulted in their payments and the foreclosure by petitioner was premature.
Foreclosure is valid only when the debtor is in default in the payment of his
obligation.19
Whether or not demand was made is a question of fact. In petitions for
review on certiorari under Rule 45, only questions of law may be raised by
the parties and passed upon by this Court.20 Factual findings of the trial
court, when adopted and confirmed by the CA, are binding and conclusive on
this Court and will generally not be reviewed on appeal.21 Inquiry into the
veracity of the CA’s factual findings and conclusions is not the function of the
Supreme Court for the Court is not a trier of facts.22 Neither is it our function
to re-examine and weigh anew the respective evidence of the
parties.23 While this Court has recognized several exceptions to this
rule,24 none of these exceptions finds application here.
Both the CA and RTC found that demand was never made. No compelling
reason whatsoever has been shown by petitioner for this Court to review and
reverse the trial court’s findings and conclusions, as affirmed by the CA.
Petitioner asserts that demand was unnecessary because the maturity dates
of all loans were specified, i.e., the notes expressly stated the specific dates
when the amortizations were to fall due.25
We disagree.
Unless demand is proven, one cannot be held in default.26 Petitioner’s cause
of action did not accrue on the maturity dates stated in the promissory notes.
It is only when demand to pay is made and subsequently refused that
respondents can be considered in default and petitioner obtains the right to
file an action to collect the debt or foreclose the mortgage.27 As we held
in China Banking Corporation v. Court of Appeals:28
Well-settled is the rule that since a cause of action requires, as essential
elements, not only a legal right of the plaintiff and a correlative duty of the
defendant but also "an act or omission of the defendant in violation of said
legal right," the cause of action does not accrue until the party obligated
refuses, expressly or impliedly, to comply with its duty.
Otherwise stated, a cause of action has three elements, to wit, (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or
is created; (2) an obligation on the part of the named defendant to respect or
not to violate such right; and (3) an act or omission on the part of such
defendant violative of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff.
It bears stressing that it is only when the last element occurs that a cause of
action arises. Accordingly, a cause of action on a written contract accrues
only when an actual breach or violation thereof occurs.
Applying the foregoing principle to the instant case, we rule that private
respondent’s cause of action accrued only on July 20, 1995, when its
demand for payment of the Home Notes was refused by petitioner. It
was only at that time, and not before that, when the written contract was
breached and private respondent could properly file an action in court.
The cause of action cannot be said to accrue on the uniform maturity
date of the Home Notes as petitioner posits because at that point, the
third essential element of a cause of action, namely, an act or omission
on the part of petitioner violative of the right of private respondent or
constituting a breach of the obligation of petitioner to private
respondent, had not yet occurred.29 (emphasis supplied)
The acceleration clause of the promissory notes stated that "[i]n case of non-
payment of this note or any portion of it on demand, when due, on account
of this note, the entire obligation shall become due and demandable
…."30 Hence, the maturity dates only indicate when payment can be
demanded. It is the refusal to pay after demand that gives the creditor a
cause of action against the debtor.
Since demand, which is necessary to make respondents guilty of default,
was never made on respondents, the CA and RTC correctly ruled that the
foreclosure was premature and therefore null and void.
In arguing that the foreclosure was valid, petitioner also avers that
respondents are estopped from questioning the validity of the foreclosure
sale since they offered to repurchase the foreclosed properties.31 We are not
persuaded. The reason why respondents offered to repurchase the
properties was clearly stated in their letter to petitioner:
I am very much interested in repurchasing back these properties because
they are the only properties which my family have and because our house is
located inside this property and for this matter I am willing to pay [for] these
properties in cash which I already told the bank when I went there.32
Besides, we have already ruled that an offer to repurchase should not be
construed as a waiver of the right to question the sale.33 Instead, it must be
taken as an intention to avoid further litigation and thus is in the nature of an
offer to compromise.34 By offering to redeem the properties, respondents can
attain their ultimate objective: to pay off their debt and regain ownership of
their lands.35
Moreover, it was petitioner, in its November 16, 1984 letter, which informed
respondents that the properties were available for sale. Respondents merely
took up petitioner’s offer for them to reacquire their properties.
Petitioner assigns as error the failure of the CA to rule on its deficiency claim.
It alleged that the price the mortgaged property was sold for (₱104,000) was
less than the amount of respondents’ indebtedness (₱131,642.33), thus it is
entitled to claim the difference (₱27,642.33) with interest. Respondents
cannot be held liable for the deficiency claim. While it is true that in
extrajudicial foreclosure of mortgage, the mortgagee has the right to recover
the deficiency from the debtor,36 this presupposes that the foreclosure must
first be valid.37
The last issue is whether the award of moral and nominal damages,
expenses of litigation and attorney’s fees is proper. Crucial to the
determination of the propriety of the award of damages are the findings of
the RTC, which were affirmed by the CA, on the matter of bad faith:
Apart from the precipitate foreclosure proceedings, the Court observes that
certain acts of [petitioner] were most certainly less than fair and less than
honest, which negates the rehabilitation (prior name of the bank) or
development aspect or purpose of [petitioner]. These certainly caused
serious anxiety and wounded feelings to [respondents]. They are: -
FIRST. – [Petitioner] granted a loan of ₱4,700.00; then a second loan of weight and respect. Said findings are final and conclusive upon the Supreme
₱12,000.00 re-structured to ₱18,840.61; and a third loan of ₱22,200.00, or a Court except, inter alia, where the findings of the Court of Appeals and the
total of ₱45,740.61 during the period from September 1974 to October 2, trial court are contrary to each other.39
1975. Obviously, these loans were granted because the market value of the
collaterals exceeds ₱100,000.00 and [petitioner’s] appraisal value is more or The lower court also found that respondents’ property rights were invaded or
less ₱80,000.00. However, six (6) years later, when the value must have violated,40 hence the grant of nominal damages was also proper.
appreciated in terms of pesos, the [petitioner] bidded for a [measly]
₱16,000.00 and [claimed] a deficiency. That it was [measly] and shocking to
the conscience was conclusively proven by the fact that [Peralta] offered and Respondents are likewise entitled to the award of attorney’s fees and
did in fact buy the properties for ₱104,000.00 barely three (3) years later. To expenses of litigation since the premature foreclosure by petitioner
the mind of the Court, the actuations of the bank must have been revolting to compelled them to incur expenses to protect their interest.41
[respondents] and to honest men, especially considering that [petitioner] is a
government financial institution, capitalized with the money of the people, WHEREFORE, we hereby AFFIRM the decision of the Court of Appeals in
and created principally "to assist agricultural producers xxx in developing CA-G.R. CV No. 37784.
their farms xxx to accelerate national progress", more than to realize profit.
Costs against petitioner.
SECOND. – [Respondents] are simple-minded persons in the country side. It
strikes the court as odd and certainly less than candid WHY on AUGUST 6, SO ORDERED.
1979, [petitioner] restructured the second loan which will mature on May
1980, but did not restructure the first loan which was due to mature
on September 23, 1979 or barely one month hence. It appears that the result
lulled [respondents] into a false sense of security and a feeling of relief that
the entire loan accommodation will mature in 1985. And then like a bolt of
lightning from a clear sky, [respondents] were hit with [foreclosure]
proceedings, causing them to suffer sleepless nights.

THIRD. – A letter dated November 16, 1984 was addressed to [respondents]

informing them practically that they are given the priority to recover their
properties by negotiated sale. And yet before the letter was sent, or on
November 14, 1984 the [petitioner] had already negotiated with [Peralta] for
the latter to buy the assets for ₱104,000.00 in installment and as a matter of
fact the Contract for Conditional Sale was executed on November 19, 1984 –
even before the letter was received by [respondents]. [Heart-rending] was
the plea of [respondents] which we quote: -

"I am very much interested in repurchasing back these properties because

they are the only properties which my family have and because our house is
located inside this property and for this matter I am willing to pay [for] these
properties in cash which I already told the bank when I went there."
(underscoring supplied)

Nevertheless, such supplications fell on deaf ears and did not even merit
sympathy from a heartless [petitioner]. At the very least, the letter of 16
November 1984 was a very bad joke gleefully made in bad taste and foisted
on the hapless [respondents]. It added insult to injury.

And to top it all, [petitioner] even has the temerity to allege in paragraph 2 of
its compulsory counterclaim "that as of November 7, 1984 the total
obligations of [respondents] on account of their loans with [petitioner]
amounted to ₱131,642.33" and making a deficiency claim of ₱27,642.33 plus
daily interest of ₱9.61 beginning November 8, 1984 "which [respondents] are
allegedly still liable to pay the [petitioner]".1avvphi1.net This is
unconscionable.1awphi1.net

Certainly, there is abundant evidence that the rights of [respondents] have

been violated or invaded with unconcerned ruthlessness by the [petitioner].38

Both the RTC and CA found that there was factual basis for the moral
damages adjudged against petitioner. They found that petitioner was guilty of
bad faith in its actuations against respondents. Again, this is a factual matter
binding and conclusive on this Court:

It is settled that bad faith must be duly proved and not merely presumed. The
existence of bad faith, being a factual question, and the Supreme Court not
being a trier of facts, the findings thereon of the trial court as well as of the
Court of Appeals shall not be disturbed on appeal and are entitled to great