PNB Binalbagan Branch v. Tad-Y

 

PNB Binalbagan Branch v. Tad-Y

G.R. No. 214588

September 7, 2022

 

FACTS:

In 1975, the Tad-y spouses obtained a loan from the Philippine National Bank (PNB) secured by a Real Estate Mortgage (REM) on six parcels of land. Two of these parcels were acquired by PNB in an auction in 1988 for failure to pay real property tax thereon. In 1995, the Tad-ys restructured their loan, and in 1996, PNB released the REM, excluding the auctioned lots, claiming that it had already acquired title to said lots by virtue of the auction sale. After unsuccessful negotiations, the Tad-ys filed a complaint for breach of contract and reconveyance. The RTC ruled that PNB should have paid real property taxes on the disputed lots in default of the Tad-ys. Instead, PNB refused to perform its obligation under the REM and allowed the lots to become delinquent so that it may acquire them for a below-market price at the delinquency auction sale. While PNB 's participation in the auction sale was not illegal, it was an actionable abuse of right under Article 19 of the Civil Code. The court ordered PNB to reconvey the lots upon payment of the acquisition price, expenses, and interest. The CA upheld the decision, based on paragraph (d) of the REM, that by virtue of its failure to pay the real estate taxes on Lots 778 and 788, PNB was constituted as attorney-infact of the spouses Tad-y; and, therefore, PNB's acquisition of the disputed lots inures to the benefit of the Tad-ys The CA also established a constructive trust over the disputed lots. PNB's motion for reconsideration was denied, leading PNB to seek redress through the present petition.

ISSUE:

Whether or not par. (d) of the REM empowers PNB to acquire Lots 778 and 788 at a real property tax delinquency auction sale on the spouses Tad-y's behalf.

HELD:

Yes. While the power to buy the mortgaged properties at a public sale is not expressly mentioned in the REM, the SC nevertheless finds that par. (d) gives PNB such power, pursuant to its express provision empowering PNB to "perform any other act which the Mortgagee may deem convenient for the proper administration of the mortgaged property." A real estate mortgage is a contract of real security. Thus, when the Tad-ys fully settled their obligation in 1996, the REM had been rendered functus officio and PNB should have released the properties covered thereunder to the Tad-ys. The grant of power to PNB to "perform any other act which it may deem convenient for the proper administration of the mortgaged property" is a general agency stipulation under Article 1877 of the Civil Code, which expressly pertains to acts of administration. Here, PNB admits that it purchased Lots 778 and 788 for the sole reason of protecting its interest as mortgagee under the REM. Clearly, such act of preserving its mortgage interest over the disputed properties constitutes an act of administration not only under the Civil Code but by the express provision of the general agency provision integrated into the mortgage contract entered into by the parties. We therefore sustain the concurrent conclusions of the RTC and the CA that the purchase of Lots 778 and 788 by PNB at the 1988 delinquency auction sale inures to the benefit of the spouses Tad-y.