Commercial Law Review | Divina | 2nd Sem AY 2014-2015 |Page 1

Asia Trust Development Bank vs. Ca When Tuble failed to pay, the bank filed a Petition for Extra-judicial
Foreclosure of real estate mortgage. The Petition was based only on his real

rmelo H. Tuble estate loan, which at that time amounted to P421,800. The bank emerged as
the purchaser. Tuble timely redeemed the property for P1,318,401.91. The
July 25, 2012 redemption price increased to this figure, because the bank had unilaterally
Ponente: SERENO, J. imposed additional interest and other charges.
Flores
Tuble questioned how the foreclosure basis of P421,800 ballooned to
SUMMARY: P1,318,401.91. The bank explained that this redemption price included the
Tuble had several outstanding obligations with the bank when he Nissan Vanette's book value, the salary loan, car insurance, 18% annual
resigned as its VP. Among his obligations, only 1 PN had a stipulated interest on the bank's redemption price of P421,800, penalty and interest
interest rate, which was 18%. He also executed a real estate loan of charges on Promissory Note No. 0142, and litigation expenses.
P421,800 which contained a dragnet clause. There was no stipulated
interest in the real estate loan. When he failed to pay, the bank Tuble filed a Complaint for recovery of a sum of money and damages. He
foreclosed the mortgage. Tuble was able to redeem the property for sought to collect P896,602.02 representing the excess charges on the
P1,318,401. According to the bank, it included in the redemption price redemption price.
other charges. It also charged 18% interest on the foreclosure basis of
P421,800. SC ruled in favor of Tuble. The bank has no basis in RTC ruled in favor of Tuble. It held that the redemption price should have
imposing additional charges. excluded the book value of the car considering that the bank had already
recovered it. The obligations from the salary loan and car insurance should
DOCTRINE: have also been excluded, for there was no proof that these debts existed. The
The General Banking Act applies insofar as the redemption price is interest and penalty charges should have been deleted, too, because
concerned, when the mortgagee is a bank and the latter cannot dictate Promissory Note No. 0142 did not indicate any interest or penalty charges.
or alter the terms of redemption by imposing additional charges and
including other loans. The foreclosure and sale of the mortgaged As for the 18% annual interest on the bid price of P421,800, the RTC agreed
property extinguishes the mortgage indebtedness; hence, the bank can with Tuble that this charge was unlawful. Act 3135 only allows the mortgagee
no longer invoke its provisions or even refer to the 18% annual to charge 1% per month if the foreclosed property is redeemed.
interest charged in the promissory note, an obligation allegedly
covered by the terms of the Contract. The bank argued that the 18% interest rate referred to in the mortgage deed
is the proper basis of the interest. Pointing to the Real Estate Mortgage
FACTS: Contract, the bank highlights the blanket security clause or "dragnet clause"
Carmelo Tuble while serving as vice-president of Asiatrust Development that purports to cover all obligations owed by Tuble.
Bank (bank) availed himself of the car incentive plan and loan privileges
offered by the bank. When Tuble resigned he had the following obligations to ISSUES/HELD: WON the bank is entitled to include in the redemption price
the bank:(1)the purchase of the Nissan Vanette; (2)P100,000 as consumption additional interest and charges. No.
loan; (3) P421,800 as real estate loan; and (4) P16,250 as salary loan. Only
the consumption loan had a stipulated interest rate which was 18%. RATIO:
 Commercial Law Review | Divina | 2nd Sem AY 2014-2015 |Page 2

SC stated that the bank only foreclosed the mortgage secured by the real Assuming the Real Estate Mortgage Contract subsists, the dragnet clause still
estate loan of P421,800. It did not seek to include, in the foreclosure, the does not justify the imposition of an 18% annual interest. SC found that the
consumption loan under Promissory Note No. 0143 or the other alleged Real Estate Mortgage Contract itself is silent on the computation of the
obligations of respondent. redemption price.

According to SC, the obligation will be extinguished once the proceeds of the In Philippine Banking Communications v. Court of Appeals, silence or
foreclosure sale are applied to it. In this case, since the Real Estate Mortgage omission of additional charges is strictly construed against the bank.
Contract on the secured property is already extinguished, the bank can no
longer invoke its provisions, including the dragnet clause. It follows that the
bank cannot refer to the 18% annual interest charged in Promissory Note No.
0143, an obligation allegedly covered by the terms of the Contract.

However, despite the extinguishment of the Real Estate Mortgage Contract,

According to the General Banking Act, the redemptioner shall pay the amount
due under the mortgage deed, with interest thereon at rate specified in the
mortgage, and all the costs and expenses incurred by the bank or institution
from the sale and custody of said property less the income derived therefrom.

Consequently, the bank cannot alter that right by imposing additional charges
and including other loans. The freedom to stipulate the terms and conditions
of an agreement is limited by law.

As held in Rural Bank of San Mateo, Inc. v. IAC, the power to decide whether
to foreclose is the prerogative of the mortgagee; however, once it has made
the decision by filing a petition with the sheriff, the acts of the latter shall
thereafter be governed by the provisions of the mortgage laws, and not by the
instructions of the mortgagee. In this case, the bank included numerous
charges and loans in the redemption price, which inexplicably ballooned to
P1,318,401.91. On this error alone, the claims of petitioner covering all the
additional charges should be denied. Thus, considering the undue inclusions
of the additional charges, the bank cannot impose the 18% annual interest on
the redemption price.