Underhanded tactic  

This is the case of a rich couple, Dante and Dina, who has a valuable residential house in a posh subdivision. One of the issues raised and explained in this case is about the principle of estoppel, where parties to a case can be barred from further filing an action questioning the proceedings that adversely affect them.

The case is about the loans obtained on several dates by Dante and Dina from a commercial bank with an aggregate principal amount of P26,700,000, covered by a credit agreement where the couple executed a Real Estate Mortgage (REM) of their residential house with Transfer Certificate of Title (TCT) No. 287276.

The original loan was only for P10,000,000 but on five different dates in a period of four years, Dante and Dina borrowed other amounts and executed five REMs and five Promissory Notes to cover P25,000,000 of their obligation.

Subsequently, the spouses defaulted on the payment of their loan obligation, prompting the bank to extra-judicially foreclose the subject REMs. Based on the bank’s demand letter, the couple’s obligation amounted to P33,009,745.43 exclusive of stipulated attorney’s fees and other charges.

Thus the Office of the Clerk of Court and ex officio Sheriff of the Regional Trial Court of the city issued and published a Notice of Sherriff’s Sale setting the public auction of the subject mortgaged property in the City Hall at 10 a.m, after one month and one week from date of notice.

One day before the scheduled date of auction, the spouses wrote a letter to the Sheriff requesting postponement of the sale three weeks later without the need of republication. The sale was postponed for three more times upon request of the couple in a similarly worded letter.

Afterwards the auction sale was conducted on the last scheduled date and the subject property was sold to the bank as the highest bidder in the amount of P25, 303,072.21. A certificate of sale was subsequently issued in the name of the bank, which was annotated in the TCT.

Thereafter, Dante and Dina filed a Complaint against the bank, the Register of Deeds and the Clerk of Court ex officio Sheriff seeking the nullification of the foreclosure sale on the ground that it was premature, done in bad faith and with exorbitant interest rates, irregularity in the signing of the Promissory Notes and failure to comply with the requirements of the law on posting and publication of the auction sale.

In the alternative, the spouses prayed that the RTC determine the proper amount of redemption money to be paid within a reasonable time.

In its answer, the bank contended, among others, that posting and publication requirements were duly complied with and the spouses themselves were the ones who requested postponements of the scheduled sale.

After initially deciding in favor of the spouses, the RTC reconsidered its decision and dismissed the complaint of the spouses. This was reversed and set aside by the Court of Appeals (CA), which reinstated the first decision of the RTC declaring the auction sale as void for failure of the bank to comply with the required publication of the notice of the re-scheduled dates of auction sale. Was the CA correct?

The Supreme Court (SC) ruled that the CA is not correct. According to the SC, the spouses Dante and Dina are estopped from questioning the validity of the foreclosure proceedings precisely because they themselves were the ones who requested for several postponements of the auction sale without need of publication. This is the doctrine of estoppel based on the grounds of public policy, fair dealing, good faith and justice in order to forbid one to speak against its own act, representation or commitment, to the injury of another who reasonably relied thereon.

Indeed, herein spouses did not come to court with clean hands. After their request for the rescheduling of the public auction, without republication, was granted, they subsequently went to court to invalidate and nullify said public auction. This request was an underhanded tactic purposely crafted to deceive both the bank and the Clerk of Court to accede to their request and thus lay the ground for the subsequent filing of an action to nullify the public auction proceedings in case they failed to acquire the subject property in said auction.

Moreover, it is evident from respondent spouses’ actuations that they are in bad faith. Their action becomes more detestable because they made the same request three times, which were all granted to accommodate them. This is clearly in violation of Article 19 of the Civil Code, which states that “every person must, in the exercise of his right and in the performance of his duties, act with justice, give everyone his due and observe honesty and good faith.”

So the decision of the CA and its resolution denying the motion for reconsideration of the bank is reversed and set aside and the decision of the RTC dismissing the complaint of Dante and Dina is reinstated. (This ruling is similar to the ruling in the case of Security Bank Corporation vs. Spouses Martel, G.R. 236572, Nov. 10, 2020.)