Philippine National Bank (PNB) Essay

Published: 2020-02-13 07:40:44
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The petitioners, Spouses Esmeraldo and Elizabeth Suico, obtained a loan from the Philippine National Bank (PNB) secured by a real estate mortgage on real properties in the name of the former. The petitioners were unable to pay their obligation prompting the PNB to extrajudicially foreclose the mortgage over the subject properties.

Subsequently, the petitioners file a Complaint against the PNB before the RTC for Declaration of Nullity of Extrajudicial Foreclosure of Mortgage. The Complaint alleged that PNB filed a petition with the Office of Manadaue City Sheriff for extrajudicial foreclosure on the petitioners properties for an outstanding loan obligation amounting to P 1,991,770.38.

During the foreclosure sale, the petitioners claimed that PNB, as the lone bidder offered a bid amounting to P8, 511,000.00. By the virtue of the said bid, a Certificate of Sale of the subject properties was issued. PNB did not pay to the Sheriff who conducted the auction sale the amount of its bid which was P 8,511,000.00 or give an accounting of how said amount was applied against petitioners outstanding loan amounted only to P 1,991,770.38. Since the amount grossly exceeded the amount of the petitioners obligation, it is the legal duty of the winning bidder, PNB to deliver to the Sheriff the bid price or what was left thereof after deducting the amount of petitioners obligation. PNB failed to deliver the amount of their bid to the Sheriff or the amount of such bid excess.

After a year, the issuance of the Certificate of Sale, PNB secured a Certificate of Final Sale and as a result, PNB transferred registration of all the subject properties to its name. Due to the failure of PNB to deliver to the petitioners the amount of its bid or even just the amount in excess of petitioners obligation, the latter averred that the extrajudicial foreclosure of the said properties and the Certificate of Sale and the Certificate of Finality of Sale, issued by the Sheriff, in favor of PNB, were null and void.

PNB disputed petitioners factual narration and asserted that petitioners had other loans, which had likewise become due. The outstanding balance of P 1,991,770.38 was exclusive of attorneys fees and other related obligations. PNB maintained that the petitioners outstanding obligation was already beyond the bid price of P8, 511,00.00. The RTC rendered its decision in favor of the petitioners. It reasoned that given that petitioners had other loan obligations which had not yet matured but became due by the date of the auction sale, does not justify the shortcut taken by PNB and will not excuse it from paying to the Sheriff the excess bid in the foreclosure sale.

To allow PNB to do so would constitute fraud, for not only is the filing fee in the said foreclosure inadequate but, worse, constitutes a misrepresentation regarding the amount of the indebtedness to be paid in the foreclosure sale posted and published in the notice of sale. The CA reversed and set aside the decision of RTC. It held that even assuming that indeed there was a surplus and the [PNB] is retaining more than the proceeds of the sale than it is entitled, this fact alone will not affect the validity of the sale but simply gives the petitioners a cause of action to recover such surplus. Failure to remit the surplus is not tantamount to a non-compliance of statutory requisites that could constitute a jurisdictional defect invalidating the sale.


Whether or not the extrajudicial foreclosure of the mortgage constituted on the subject properties is null and void. Whether or not should PNB deliver the excess bid in the foreclosure sale.


The petitioners argue that since the Notice of Sheriffs Sale stated that their obligation was only P1, 991,770.38 and PNB bided P8, 551,000.00, the said Notice as well as the consequent sale of the subject properties were null and void. The Court held that the statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the sale at least voidable. Nonetheless, we must not also lose sight of the fact that the purpose of the publication of the Notice of Sheriffs Sale is to inform all interested parties of the date, time and place of the foreclosure sale of the real property subject thereof. Logically, this not only requires that the correct date, time and place of the foreclosure sale appear in the notice, but also that any and all interested parties be able to determine that what is about to be sold at the foreclosure sale is the real property in which they have an interest.

The Court disagree with the finding of RTC behind the Notice of Sheriffs Sale that the discrepancy between the amount of petitioners obligation as reflected in the Notice of Sale and the amount actually due and collected from the petitioners at the time of the auction sale constitute fraud which renders the extrajudicial foreclosure sale null and void. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto.

Thus, we are of the view that the Notice of Sale in this case is valid. With regards to the delivery of the excess bid in the foreclosure sale, the Court said that under Rule 68, Sec. 4 of the Rules of Court, the disposition of the proceeds of the sale in the foreclosure shall be as follows: (a) first, pay the costs, (b) secondly, pay off the mortgage debt, (c) thirdly, pay the junior encumbrancers, if any in the order of priority, (d) fourthly, give the balance to the mortgagor, his agent or the person entitled to it. The application of the proceeds from the sale of the mortgaged property to the mortgagors obligation is an act of payment, not payment by dacion; hence, it is the mortgagees duty to return any surplus in the selling price to the mortgagor.

Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a custodian of the fund and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do so. Thus, the fact that the mortgagee is retaining more of the proceeds than he is entitled into does not affect the validity of the sale but simply give the mortgagor a cause of action to recover the surplus. In this case, given that the Statement of Account from PNB, being the only existing documentary evidence to support its claim, shows that petitioners loan obligations to amounted to P6, 409,814.92, and considering that the amount of PNBs bid is P8, 511,000.00, there is clearly an excess in the bid price which PNB must return, together with the interest computed in accordance with the guidelines laid down by the court.

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