PLANTERS DEVELOPMENT BANK (NOW CHINA BANK SAVINGS, INC.) VS. HEIRS OF NILO P. DELOS SANTOS, ET. AL.
- G.R. Number: G.R. No. 252841
- Promulgated: 2025-01-15
- Ponente: INTING, J.
Doctrine
## Facts of the Case On November 9, 1995, Spouses Nilo and Nenita Delos Santos executed a Real Estate Mortgage with Planters Development Bank (PDB) over properties covered by TCT Nos. T-166110 and T-166111 as security for a P1,000,000.00 loan. On May 28, 1998, they executed a Promissory Note for the same amount, payable on November 24, 1998, with 23% interest and a 3% service charge. Upon failure of the Spouses Delos Santos to fully pay their obligation, PDB initiated extrajudicial foreclosure proceedings on January 16, 2001, and the properties were auctioned on May 2, 2001, where PDB was the highest bidder. On the day of the sale, Spouses Delos Santos filed a complaint in Davao City for nullity of mortgage, foreclosure, and damages, alleging the 1995 mortgage could not cover the 1998 loan and lack of detailed accounting. This complaint was dismissed without prejudice for improper venue. Ownership was consolidated by PDB, and TCTs were issued in its name. After Nilo's death in 2005, his heirs (respondents) re-filed the complaint in Makati City in 2012, raising similar arguments, including repeated failure by PDB to provide a detailed accounting and excessive interest and penalty charges. The Regional Trial Court (RTC) dismissed the complaint, finding the mortgage and foreclosure valid. However, the Court of Appeals (CA) reversed the RTC, nullifying the foreclosure sale on the ground that PDB failed to make a demand before foreclosing, citing a stipulation in the Real Estate Mortgage requiring demand letters. ## Issues 1. Did the CA err in nullifying the foreclosure sale on the ground that PDB failed to make a demand before extrajudicially foreclosing the mortgaged properties? 2. Has the action for annulment of foreclosure sale prescribed or is it barred by laches? ## Decision / Rationale **Issue 1:** The Supreme Court ruled that the CA erred in nullifying the foreclosure sale based on the absence of demand. The Court found that **Spouses Delos Santos expressly waived the requirement of demand** in the Promissory Note. The Promissory Note stipulated that in case of non-payment, all amortizations would become immediately due and payable, and PDB was authorized to apply any security without prior notice. It also contained an express waiver of "any requirement for diligence, presentment, demand, notice of non-payment and/or notice of dishonor." Therefore, the moment Spouses Delos Santos failed to pay any amortizations, PDB could declare them in default and consider the entire obligation due without prior demand. The Court differentiated the waiver of demand in the **Promissory Note** from the requirement of personal notice in the **Real Estate Mortgage**. Demand relates to the principal loan obligation, while personal notice relates to the accessory obligation of the mortgage. While the Real Estate Mortgage contained a clause (Paragraph 12) regarding "All correspondence relative to this mortgage, including demand letters, summons, subpoenas, or notification of any judicial or extra-judicial action," this clause referred to personal notice of the foreclosure proceedings, not the demand for payment which triggers default. The Court distinguished this from the demand for payment. Furthermore, even if demand was not waived, the Court found **evidence of prior demand** before PDB initiated foreclosure proceedings. The Petition for Extra-Judicial Foreclosure of Mortgage explicitly stated that PDB had made "several and repeated demands" for payment, and a copy of the demand letter and registry return receipt were claimed to be attached. The Court noted that Spouses Delos Santos never alleged in their initial complaint that they did not receive a demand letter. The Court also took judicial notice of the standard banking practice of sending demand letters and recognized that the respondents' delay in filing the complaint made it difficult for PDB to produce all original documents. The Court also reiterated that **detailed accounting is not…
Keywords
Rule 45 Rules of Court, Act No. 3135, Article 1169 Civil Code, Article 1144(2) Civil Code, Presidential Decree No. 1529 Section 51, Article 1155 Civil Code, Article 1374 Civil Code, Doctrine of Waiver of Demand, Dragnet Clause, Blanket Mortgage Clause, Constructive Trust, Judicial Notice, Laches, Extrajudicial Foreclosure, Annulment of Mortgage, Loan Obligation, Real Estate Mortgage, Prescription of Action, Certiorari, Default