Suico vs PNB

Petitioner Sps. Suico obtained a loan from PNB secured by a REM on their real properties.

Petitioner spouses were unable to pay their obligation prompting the PNB to extrajudicially foreclose the mortgage
over the subject properties before the City Sheriff of Mandaue City.

Sps. Suico filed for a declaration of nullity of extrajudicial foreclosure of mortgage. They allege that during
foreclosure:
 Outstanding loan obligation as of 10 March 1992 – P1,991,770.38
 PNB’s bid during foreclosure – P8,511,000
 PNB did not pay to the Sheriff who conducted the auction sale the amount of its bid which was
P8,511,000.00 or give an accounting of how said amount was applied against petitioners' outstanding loan
 PNB failed to deliver the amount of their bid to the Mandaue City Sheriff or, at the very least, the amount of
such bid in excess of petitioners' outstanding obligation.

Petitioners averred that the extrajudicial foreclosure conducted over the subject properties by the Mandaue City
Sheriff, as well as the Certificate of Sale and the Certificate of Finality of Sale of the subject properties issued by the
Mandaue City Sheriff, in favor of PNB, were all null and void.

PNB asserted that petitioners had other loans which had likewise become due. Petitioners' outstanding obligation of
P1,991,770.38 as of 10 March 1992 was exclusive of attorney's fees, and other export related obligations which it did
not consider due and demandable as of said date.

PNB maintained that the outstanding obligation of the petitioners under their regular and export-related loans was
already more than the bid price of P8,511,000.00, contradicting the claim of surplus proceeds due the petitioners.
Petitioners were well aware that their total principal outstanding obligation on the date of the auction sale was
P5,503,293.21.

Petitioners argue that since the Notice of Sheriff's Sale stated that their obligation was only P1,991,770.38 and PNB
bided P8,511,000.00, the said Notice as well as the consequent sale of the subject properties were null and void.

Lower Court Decisions:

RTC
 Ruled in favor of petitioner spouses
 Granted nullification of extrajudicial foreclosure of mortgage
 given that petitioners had other loan obligations which had not yet matured on 10 March 1992 but became
due by the date of the auction sale on 30 October 1992, it does not justify the shortcut taken by PNB and will
not excuse it from paying to the Sheriff who conducted the auction sale the excess bid in the foreclosure sale.
To allow PNB to do so would constitute fraud, for not only is the 􏰀ling fee in the said foreclosure inadequate
but, worse, the same constitutes a misrepresentation regarding the amount of the indebtedness to be paid in
the foreclosure sale as posted and published in the notice of sale
 Such misrepresentation is fatal because in an extrajudicial foreclosure of mortgage, notice of sale is
jurisdictional. Any error in the notice of sale is fatal and invalidates the notice

CA
 Reversed RTC decision
 Held that the extrajudicial foreclosure and final deed of sale was valid and binding
 petitioners expressly admitted that their outstanding principal obligation amounted to P5.4 Million and in
fact offered to redeem the properties at P6.5 Million.
  Suico eventually increased their offer at P7.5 Million as evidenced by that letter dated February 4, 1994. And
finally on May 16, 1994, they offered to redeem the foreclosed properties by paying the whole amount of the
obligation by installment in a period of six years
 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.

1st Issue (Extrajudicial Foreclosure – conduct of sale)

 Whether PNB’s bid of P8.5m resulted to a discouraging and misleading bidder which depreciated the value
of the mortgaged properties or prevented from commanding a fair price. (NO)

Held:

The purpose of the publication of the Notice of Sheriff's 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

We disagree with the finding of the RTC 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 sacri􏰀ce of the property. If these objects are
attained, immaterial errors and mistakes will not affect the su􏰀ciency 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

the Notice of Sale in this case is valid. Petitioners failed to convince this Court that the difference between the amount
stated in the Notice of Sale and the amount of PNB's bid resulted in discouraging or misleading bidders, depreciated
the value of the property or prevented it from commanding a fair price.

2nd Issue (Deficiency judgement; surplus)

 Considering the amount of PNB's bid of P8,511,000.00 as against the amount of the petitioners' obligation
of P1,991,770.38 in the Notice of Sale, is the PNB obliged to deliver the excess? (YES)

Held:

Statement of Account prepared by PNB, petitioners' principal obligation with interest/penalty and attorney's fees as
of 30 October 1992 already amounted to P6,409,814.92.
Given that the Statement of Account from PNB, being the only existing documentary evidence to support its claim,
shows that petitioners' loan obligations to PNB as of 30 October 1992 amounted to P6,409,814.92, and considering
that the amount of PNB's bid is P8,511,000.00, there is clearly an excess in the bid price which PNB must return,
together with the interest computed

Since the responsibility of PNB arises not from a loan or forbearance of money which bears an interest rate of 12%,
the proper rate of interest for the amount which PNB must return to the petitioners is only 6%. This interest according
to Eastern Shipping shall be computed from the time of the filing of the complaint. However, once the judgment
becomes final and executory, the "interim period from the finality of judgment awarding a monetary claim and until
payment thereof, is deemed to be equivalent to a forbearance of credit." Thus, in accordance with the pronouncement
in Eastern Shipping, the rate of 12% per annum should be imposed, to be computed from the time the judgment
becomes final and executory until fully satisfied.

It must be emphasized, however, that our holding in this case does not preclude PNB from proving and recovering in
a proper proceeding any deficiency in the amount of petitioners' loan obligation that may have accrued after the date
of the auction sale.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated 12 April 2005 is MODIFIED in that
the PNB is directed to return to the petitioners the amount of P2,101,185.08 with interest computed at 6% per
annum from the time of the filing of the complaint until its full payment before fnality of judgment. Thereafter, if the
amount adjudged remains unpaid, the interest rate shall be 12% per annum computed from the time the judgment
became final and executory until fully satisfied. Costs against private respondent.

N.B. This case cited Eastern Shipping for the computation of interest however due to the BSP Circular No. 799-2013,
it is now 6% for loan and forbearance of money, etc.