LCK INDUSTRIES INC., CHIKO LIM and ELIZABETH T. LIM, vs PLANTERS DEVELOPMENT BANK FACTS: Petitioner LCK obtained a loan from the respondent ban in the amo!nt of P"M as e#iden$ed b% t&o promissor% notes. As a se$!rit% for the loan obli'ation, petitioners(spo!ses Chio and Eli)abeth Lim e*e$!ted a +eal Estate Mort'a'e o#er a par$el of land $o#ered b% a TCT re'istered !nder their names and lo$ated at !e)on Cit% -!e)on Cit% propert%. Later on, to se$!re the same obli'ation, another +eal Estate Mort'a'e &as e*e$!ted o#er another par$el of land, also re'istered !nder the names of the petitioner(spo!ses, lo$ated at Ba'!io Cit% -Ba'!io Cit% propert%. /!bse0!entl%, petitioner LCK in$!rred defa!lt in its pa%ment1 th!s, main' the obli'ation d!e and demandable. /e#eral demands &ere thereafter made b% the respondent ban to no a#ail. Conse0!entl%, respondent ban $a!sed the e*tra2!di$ial fore$los!re of the Ba'!io Cit% propert% &hi$h &as sold at the p!bli$ a!$tion. /in$e the pro$eeds of the fore$losed Ba'!io Cit% propert% &ere not eno!'h to satisf% the entire loan obli'ation, respondent ban f!rther $a!sed the e*tra2!di$ial fore$los!re of the !e)on Cit% propert%. The respondent ban &as the hi'hest bidder on both o$$asions. Prior to the a!$tion sale of the !e)on Cit% propert% petitioners filed &ith the +TC of !e)on Cit% an a$tion for Ann!lment of the 3ore$los!re of Mort'a'e and A!$tion /ale of the !e)on Cit% propert% &ith +estrainin' Order4Preliminar% In2!n$tion and &ith 5ama'es a'ainst respondent ban and Att%. Ani'an. In their Complaint, petitioners alle'ed that respondent ban failed to $ompl% &ith the postin' and p!bli$ation re0!irements as &ell as &ith the filin' of the Petition for the E*tra2!di$ial 3ore$los!re of the +eal Estate Mort'a'e &ith the Cler of Co!rt as re0!ired b% A$t 6o. "7"8. Petitioners pra%ed for the iss!an$e of a T+O in order to en2oin the respondent ban from $ond!$tin' the a!$tion sale, and in the alternati#e, to en2oin the +e'istr% of 5eeds of !e)on Cit% from transferrin' the o&nership of the !e)on Cit% propert% to the p!r$haser at the a!$tion sale. In its Ans&er &ith the Opposition to the Pra%er, respondent ban a#erred that it had f!ll% obser#ed the postin' and p!bli$ation re0!irements of A$t 6o. "7"8. It insisted that the filin' of the Petition for E*tra2!di$ial 3ore$los!re of the Mort'a'e Propert% &ith the 6otar% P!bli$ &as san$tioned b% the same stat!te. +espondent ban th!s pra%ed for the dismissal of petitioners $omplaint for la$ of merit. 3or fail!re of the $o!nsels for both petitioners and respondent ban to appear in the s$hed!led hearin' for the iss!an$e of temporar% restrainin' order, the +TC deemed the pra%er for T+O abandoned. Thereafter, the +TC $ond!$ted a pre(trial $onferen$e. In the Pre(Trial Order the parties made admissions of fa$ts and stip!lations. The $o!rt f!rther defined the iss!es as follo&s9 (1) &hether or not the petition &as filed &ith the Offi$e of the Cler of Co!rt1 (2) &hether or not the e*tra(2!di$ial fore$los!re of real estate mort'a'e b% defendant ban &as made in a$$ordan$e &ith the pro#isions of A$t "7"8, as amended1 and (3) &hether (3) &hether or not the parties are entitled to their respe$ti#e $laims for attorne%s fees and dama'es. The parties &ere 'i#en 78 da%s from re$eipt of the Pre(Trial Order to mae amendments or $orre$tions thereon. The parties a'reed to s!bmit the $ase for the de$ision of the +TC based on the stip!lations and
admissions made at the pre(trial $onferen$e. The parties f!rther manifested that the% &ere &ai#in' their respe$ti#e $laims for attorne%s fees. On the same da%, the +TC re0!ired the parties to s!bmit their respe$ti#e memoranda. In their Memorand!m, petitioners, aside from reiteratin' iss!es pre#io!sl% raised in their Complaint, f!rther $laimed that there &as an o#erpa%ment of the loan obli'ation b% P7,:8;,<7;.;=. As sho&n in the letter(demand re$ei#ed b% petitioner LCK, its o!tstandin' loan obli'ation amo!nted to P>,?;>,8@@.@@. The Ba'!io Cit% propert% &as p!r$hased b% respondent ban at the p!bli$ a!$tion for P>,;>8,@@@.@@, &hile the !e)on Cit% propert% &as p!r$hased for P>,>"7,<7;.;=. 3or its part, respondent ban maintained in its Memorand!m that the $omplaint filed b% petitioners is de#oid of merit. It f!rther asse#erated that petitioners $laim for o#erpa%ment &as not amon' the iss!es s!bmitted for the resol!tion of the +TC. It is $lear from the Pre(Trial Order that the iss!es to be resol#ed are limited to &hether the petition for the fore$los!re of the real estate mort'a'e &as filed before the Cler of Co!rt and &hether or not the e*tra2!di$ial fore$los!re of real estate mort'a'e &as made b% the respondent ban in a$$ordan$e &ith the pro#isions of A$t 6o. "7"8. 3or fail!re of petitioners to promptl% raise the alle'ed o#erpa%ment, the +TC is no& barred from ad2!di$atin' this iss!e. The +TC rendered its 5e$ision de$larin' the fore$los!re and the a!$tion sale of the !e)on Cit% propert% le'al and #alid, b!t ordered respondent ban to ret!rn the o#erpa%ment made b% petitioners in the amo!nt of P7,:8;,<7;.;=. The s!bse0!ent motion for re$onsideration of respondent ban &as denied. A''rie#ed, respondent ban ele#ated the matter to the Co!rt of Appeals b% assailin' the portion of the +TC 5e$ision orderin' it to pa% petitioners the amo!nt of P7,:8;,<7;.;=, the CA 'ranted the appeal of the respondent ban and partiall% re#ersed the +TC 5e$ision insofar as it ordered respondent ban to pa% the o#erpaid amo!nt of P7,:8;,<7;.;= to petitioners. In deletin' the a&ard of o#erpa%ment, the appellate $o!rt emphasi)ed that the primar% p!rpose of pre( trial is to mae $ertain that all iss!es ne$essar% for the disposition of the $ase are properl% raised in order to pre#ent the element of s!rprise. /in$e the alle'ed o#erpa%ment &as onl% raised b% the petitioners lon' after the pre(trial $onferen$e, the $o!rt a 0!o $annot dispose of s!$h iss!e &itho!t depri#in' the respondent ban of its ri'ht to d!e pro$ess. The Motion for +e$onsideration filed b% petitioners &as denied b% the Co!rt of Appeals. Th!s this Petition for +e#ie& on Certiorari !nder +!le <8. ISSUES: -7 hether the e*$ess amo!nt from the a!$tion sale sho!ld be ret!rned -> hether the iss!e of o#erpa%ment &as raised b% the parties and in$l!ded in the pre(trial order. HELD: The $ond!$t of pre(trial in $i#il a$tions has been mandator% as earl% as 7 an!ar% 7?;< !pon the effe$ti#it% of the +e#ised +!les of Co!rt. Pre(trial is a pro$ed!ral de#i$e intended to $larif% and limit the basi$ iss!es bet&een the parties and to tae the trial of $ases o!t of the realm of s!rprise and mane!#erin'. Pre(trial sees to a$hie#e the follo&in'9 -a The possibilit% of an ami$able settlement or of a s!bmission to alternati#e modes of disp!te resol!tion1
-b The simplifi$ation of the iss!es1 -$ The ne$essit% or desirabilit% of amendments to the pleadin's1 -d The possibilit% of obtainin' stip!lations or admissions of fa$ts and of do$!ments to a#oid !nne$essar% proof1 -e The limitation of the n!mber of &itnesses1 -f The ad#isabilit% of a preliminar% referen$e of iss!es to a $ommissioner1 -' The propriet% of renderin' 2!d'ment on the pleadin's, or s!mmar% 2!d'ment, or of dismissin' the a$tion sho!ld a #alid 'ro!nd therefor be fo!nd to e*ist1 -h The ad#isabilit% or ne$essit% of s!spendin' the pro$eedin's1 and -i /!$h other matters as ma% aid in the prompt disposition of the a$tion. The p!rpose of enterin' into a stip!lation of fa$ts is to e*pedite trial and to relie#e the parties and the $o!rt as &ell of the $osts of pro#in' fa$ts &hi$h &ill not be disp!ted on trial and the tr!th of &hi$h $an be as$ertained b% reasonable in0!ir%. Its main ob2e$ti#e is to simplif%, abbre#iate and e*pedite the trial, or totall% dispense &ith it. The parties themsel#es or their representati#e &ith &ritten a!thorit% from them are re0!ired to attend in order to arri#e at a possible ami$able settlement, to s!bmit to alternati#e modes of disp!te resol!tion, and to enter into stip!lations or admissions of fa$ts and do$!ments. All of the matters taen !p d!rin' the pre(trial, in$l!din' the stip!lation of fa$ts and the admissions made b% the parties, are re0!ired to be re$orded in a pre(trial order. Th!s, /e$tion =, +!le 7: of the +e#ised +!les of Co!rt pro#ides9 /EC. =. +e$ord of pre(trial. The pro$eedin's in the pre(trial shall be re$orded. pon the termination thereof, the $o!rt shall iss!e an order &hi$h shall re$ite in detail the matters taen !p in the $onferen$e, the a$tion taen thereon, the amendments allo&ed to the pleadin's, and the a'reements or admissions made b% the parties as to an% of the matters $onsidered. /ho!ld the a$tion pro$eed to trial, the order shall e*pli$itl% define and limit the iss!es to be tried. The $ontents of the order shall $ontrol the s!bse0!ent $o!rse of the a$tion, !nless modified before trial to pre#ent manifest in2!sti$e. Denerall%, pre(trial is primaril% intended to mae $ertain that all iss!es ne$essar% to the disposition of a $ase are properl% raised. Th!s, to ob#iate the element of s!rprise, parties are e*pe$ted to dis$lose at the pre(trial $onferen$e all iss!es of la& and fa$t the% intend to raise at the trial. Ho&e#er, in $ases in &hi$h the iss!e ma% in#ol#e pri#ile'ed or impea$hin' matters, or if the iss!es are impliedl% in$l!ded therein or ma% be inferable therefrom b% ne$essar% impli$ation to be inte'ral parts of the pre(trial order as m!$h as those that are e*pressl% stip!lated, the 'eneral r!le &ill not appl%.Th!s, in elas$o #. Apostol, this Co!rt hi'hli'hted the aforesaid e*$eption and r!led in this &ise9 A pre(trial order is not meant to be a detailed $atalo'!e of ea$h and e#er% iss!e that is to be or ma% be taen !p d!rin' the trial. Iss!es that are impliedl% in$l!ded therein or ma% be inferable therefrom b%
ne$essar% impli$ation are as m!$h inte'ral parts of the pre(trial order as those that are e*pressl% stip!lated. In fa$t, it &o!ld be abs!rd and ine*pli$able for the respondent $ompan% to no&in'l% disre'ard or deliberatel% abandon the iss!e of non(pa%ment of the premi!m on the poli$% $onsiderin' that it is the #er% $ore of its defense. Correspondin'l%, e $annot b!t per$ei#e here an !ndesirable resort to te$hni$alities to e#ade an iss!e determinati#e of a defense d!l% a#erred. Th !"s "# $"% &"''s *% #h+s "%#+!'"% -!#+. pon s$r!p!lo!s e*amination of the Pre(Trial Order, it $an be ded!$ed that the parties stip!lated that the remainin' s!m of petitioner LCKs obli'ation as of 7" O$tober 7??= &as P>,?;>,8@@.@@. In the same Pre(Trial Order, the parties lie&ise stip!lated that the Ba'!io Cit% propert% &as sold at the p!bli$ a!$tion for P>,;>8,@@@.@@ and the !e)on Cit% propert% for P>,>"7,<7;.;=. On both o$$asions, respondent ban emer'ed as the hi'hest bidder. B% appl%in' simple mathemati$al operation, the mort'a'ed properties &ere p!r$hased b% the respondent at the p!bli$ a!$tions for P<,:8;,<7;.;=1 th!s, after ded!$tin' therefrom the balan$e of petitioner LCKs obli'ation in the amo!nt of P>,?;>,8@@.@@, an e*$ess in the s!m of P7,:?",?7;.;= remains. 6eedless to sa%, the fa$t of o#erpa%ment, tho!'h not e*pressl% in$l!ded in the iss!es raised in the Pre( Trial Order dated : /eptember >@@@, $an be e#identl% inferred from the stip!lations and admissions made b% the parties therein. E#en onl% !pon plain readin' of the said Pre(Trial Order, it $an be readil% dis$erned that there &as an o#erpa%ment. The pertinent pro#isions of the +e#ised +!les of Co!rt on e*tra2!di$ial fore$los!re sale pro#ide9 +!le "?. /EC. >7. !d'ment obli'ee as p!r$haser. hen the p!r$haser is the 2!d'ment obli'ee, and no third(part% $laim has been filed, he need not pa% the amo!nt of the bid if it does not e*$eed the amo!nt of the 2!d'ment. If it does, he shall pa% onl% the e*$ess. +!le ;:. /EC. <. 5isposition of pro$eeds of sale.( The amo!nt reali)ed from the fore$los!re sale of the mort'a'ed propert% shall, after ded!$tin' the $osts of the sale, be paid to the person fore$losin' the mort'a'e, and &hen there shall be an% balan$e or resid!e, after pa%in' off the mort'a'e debt d!e, the same shall be paid to 2!nior en$!mbran$ers in the order of their priorit%, to be as$ertained b% the $o!rt, or if there be no s!$h en$!mbran$ers or there be a balan$e or resid!e after pa%ment to them, then to the mort'a'or or his d!l% a!thori)ed a'ent, or to the person entitled to it. -Emphasis s!pplied. The reno&ned 2!rist 3loren) +e'alado, in /!lit #. Co!rt of Appeals, !nders$ored the obli'ation of the mort'a'ee &ith respe$t to the s!rpl!s mone% res!ltin' from a fore$los!re sale of the mort'a'ed propert%9 The appli$ation of the pro$eeds from the sale of the mort'a'ed propert% to the mort'a'ors obli'ation is an a$t of pa%ment, not pa%ment b% dation1 hen$e, it is the mort'a'ees d!t% to ret!rn an% s!rpl!s in the sellin' pri$e to the mort'a'or. Perfor$e, a mort'a'ee &ho e*er$ises the po&er of sale $ontained in a mort'a'e is $onsidered a $!stodian of the f!nd, and, bein' bo!nd to appl% it properl%, is liable to the persons entitled thereto if he fails to do so. And e#en tho!'h the mort'a'ee is not stri$tl% $onsidered a tr!stee in a p!rel% e0!itable sense, b!t as far as $on$erns the !n$ons!med balan$e, the mort'a'ee is deemed a tr!stee for the mort'a'or or o&ner of the e0!it% of redemption. Commentin' on the theor% that a mort'a'ee, &hen he sells !nder a po&er, $annot be $onsidered
other&ise than as a tr!stee, the #i$e($han$ellor in +obertson #. 6orris -7 Diff. <>7 obser#ed9 That e*pression is to be !nderstood in this sense9 that &ith the po&er bein' 'i#en to enable him to re$o#er the mort'a'e mone%, the $o!rt re0!ires that he shall e*er$ise the po&er of sale in a pro#ident &a%, &ith a d!e re'ard to the ri'hts and interests of the mort'a'or in the s!rpl!s mone% to be prod!$ed b% the sale. Petitioner LCKs obli'ation &ith the respondent ban &as alread% f!ll% satisfied after the mort'a'ed properties &ere sold at the p!bli$ a!$tion for more than the amo!nt of petitioner LCKs remainin' debt &ith the respondent ban. As the $!stodian of the pro$eeds from the fore$los!re sale, respondent ban has no le'al ri'ht &hatsoe#er to retain the e*$ess of the bid pri$e in the s!m of P7,:?",?7;.;=, and is !nder $lear obli'ation to ret!rn the same to petitioners. In an% $ase, this Co!rt &o!ld not allo& respondent ban to hide behind the $loa of pro$ed!ral te$hni$alities in order to e#ade its obli'ation to ret!rn the e*$ess of the bid pri$e, for s!$h an a$t $onstit!tes a #iolation of the elementar% prin$iple of !n2!st enri$hment in h!man relations. nder the prin$iple of !n2!st enri$hment ( nemo $!m alteri!s detrimento lo$!pletari potest ( no person shall be allo&ed to enri$h himself !n2!stl% at the e*pense of others.
