THE Supreme Court (SC) has ruled that foreign banks operating in the Philippines have been allowed since 2014 to acquire real properties for non-payment of loans, but their possession of the foreclosed properties is limited to only five years and the titles cannot be transferred to them.
In a decision, the SC stressed that under the 2014 Republic Act No. 10641, the law that allowed entry of foreign banks to the Philippines, possession of foreclosed property is valid for only five years and the right over such properties should be transferred to a qualified Filipino within the period.
According to the high tribunal, during the five-year period of possession of the acquired properties, the titles cannot be transferred in the name of the foreign banks which foreclosed them. Rey E. Requejo
Because of this, the SC through Associate Justice Jhosep Lopez denied the consolidated petitions filed by 4E Steel Builders Corporation (4E Steel) and spouses Filomeno and Virginia Ecraela (spouses Ecraela) and Maybank Philippines, Inc. (Maybank).
Assailed in the petitions were the rulings of the Court of Appeals (CA) which annulled the foreclosure sale and cancelled the registration of the lands in favor of Maybank. The CA rulings also ordered spouses Ecraela to pay Maybank their total loan obligations.
In 1999, Maybank, a foreign bank operating in the Philippines, executed a Credit Agreement in favor of 4E Steel which was represented by spouses Ecraela.
The credit agreement was renewed in 2001 and spouses Ecraela undertook to pay Maybank P4.8 million upon its maturity on June 10, 2002.
In February 2003, when the drawdowns on the credit line became due and demandable, Maybank sent a letter to 4E Steel and spouses Ecraela reminding them to settle their outstanding obligation.
While 4E Steel and spouses Ecraela acknowledged their outstanding loan, they requested for a reconciliation of their account and restructuring of their loan. They did not agree to the statement of account issued by Maybank.
They filed before the trial court a complaint for accounting and reapplication of payments. Maybank, on the other hand, filed a petition for extrajudicial foreclosure of the mortgaged properties. Spouses Ecraela and 4E Steel sought the courtÂ’s issuance of a injunction that would stop the foreclosure said.
The trial court did not issue an injunction that led to foreclosure sale on Nov. 21, 2003 with Maybank as the highest bidder. Thereafter, a certificate of sale was issued in the name of the bank.
The case reached the CA, which in 2016, ruled that Maybank was disqualified to participate in the foreclosure sale since RA 4882, the law in effect at the time of the sale, prohibited banks which are owned and controlled by foreign national.
When the petitioners assailed the CA ruling before the Supreme Court, the SC stressed that since the foreclosure sale took place in 2003, the applicable law is RA 4882, not RA 10641.
Thus, the SC said that while Maybank may possess the mortgaged properties for five years, it cannot participate in the foreclosure sale.
It ruled that sale of the foreclosed properties to Maybank is void.
“ Accordingly, the Petition filed by 4E Steel Builders Corporation and Spouses Filomeno G. Ecraela and Virginia Ecraela in G.R. No. 230013 and the Petition filed by Maybank Philippines, Inc. in G.R. No. 230100 are denied for lack of merit. The Decision of the Court of Appeals dated June 21, 2016 and the Resolution dated Feb. 17, 2017, in CA-G.R. CV No. 101587 are affirmed with modifications . . .” the SC ruled.
The high court said the foreclosure sale of mortgaged parcels of land covered by Transfer of Certificate of Title Nos. 340528, C-316200, 215757, 309070 and C-322693 in favor of Maybank Philippines, Inc. conducted by notary public Atty. Antonio D. Seludo on Nov. 21, 2003 has been annulled.
The SC also resolved that the Certificate of Sale issued in favor of Maybank Philippines, Inc. pursuant to the extrajudicial foreclosure sale and the registration of the same with the respective Registers of Deeds are cancelled.
The SC also ordered Maybank Philippines, Inc., 4E Steel Builders Corporation and Spouses Filomeno and Virginia Ecraela to jointly appoint an independent accountant who will render a full, complete, and accurate accounting of the latter’s outstanding loan obligations under Promissory Note No. 04-004-00-0117-5.
The SC also ordered 4E Steel Builders Corporation and Spouses Filomeno and Virginia Ecraela to pay Maybank Philippines, Inc. the total loan obligations as accurately computed by the independent accountant less the amount already paid by them.
“ The amount computed in number 3 shall earn legal interest at the rate of 12% per annum from Dec. 26, 2001 to June 30, 20 13. From July 1, 2013 until full payment, the outstanding loan obligations under Promissory Note No. 04-004-00-0117-5 shall earn interest at the rate of six percent per annum,” it said.
“ In case of default upon finality of this Decision, 4E Steel and Spouses Ecraela shall pay compensatory interest at the rate of six percent per annum on the total amount due until fully paid. In addition, they shall pay six percent per annum legal interest on the unpaid interest from judicial demand until full satisfaction,” the tribunal added.