REAL MORTGAGE

Velasco vs CA
Facts: November 10, 1965, Alta Farms secured from the GSIS a Three Million Two Hundred
Fifty Five Thousand Pesos (P3,255,000.00) loan and an additional loan of Five Million SixtyTwo Thousand Pesos (P5,062,000.00) on October 5, 1967, to finance a piggery project. Alta
Farms defaulted in the payment because of this that Alta Farms executed a Deed of Sale With
Assumption of Mortgage with Asian Engineering Corporation on July 10, 1969 but without the
previous consent or approval of the GSIS and in direct violation of the provisions of the
mortgage contracts. Even without the approval of the Deed of Sale With Assumption of
Mortgage by the GSIS, Asian Engineering Corporation executed an Exclusive Sales Agency,
Management and Administration Contract in favor of Laigo Realty Corporation, with the
intention of converting the piggery farm into a subdivision. After developing the area, on
December 4, 1969, Laigo entered into a contract with Amable Lumanlan, one of the petitioners,
to construct for the home buyers, 20 houses on the subdivision. Petitioner Lumanlan allegedly
constructed 20 houses for the home buyers and for which he claims a balance of P309,187.76
from the home buyers and Laigo. Out of his claim, petitioner Lumanlan admits that Mrs. Rhody
Laigo paid him in several checks totalling P124,855.00 but which checks were all dishonoured.
On December 29, 1969, Laigo entered into a contract with petitioner Pepito Velasco to construct
houses for the home buyers who agreed with Velasco on the prices and the downpayment.
Petitioner Velasco constructed houses for various home buyers, who individually agreed with
Velasco, as to the prices and the downpayment to be paid by the individual home buyers.When
neither Laigo nor the individual home buyers paid for the home constructed, Velasco wrote the
GSIS to intercede for the unpaid accounts of the home buyers.
Issue: W/N GSIS is liable to the petitioners for the cost of the materials and labor furnished by
them in construction of the 63 houses now owned by the GSIS?
Ruling: Yes. GSIS should pay the petitioners. GSIS assumed ownership of the houses built by
petitioners and was benefited by the same. Art. 2127, the mortgage extends to the natural
accessions, to the improvements, growing fruits, rents.

Fiestan vs CA
Facts: Dionisio Fiestan and Juanita Arconada owners of a parcel of land (Lot No. 2B) situated in
Ilocos Sur covered by TCT T-13218 which they mortgaged to the Development Bank of the
Philippines (DBP) as security for their P22,400.00 loan. Lot No. 2-B was acquired by the DBP as

the highest bidder at a public auction sale on August 6, 1979 after it was extrajudicially
foreclosed by the DBP in accordance with Act No. 3135, as amended by Act No. 4118, for failure
of petitioners to pay their mortgage indebtedness. On April 13,1982, the DBP sold the lot to
Francisco Peria in a Deed of Absolute Sale. Francisco Peria mortgaged said lot to the PNB Vigan
Branch as security for his loan of P115,000.00 as required by the bank to increase his original
loan from P49,000.00 to P66,000.00 until it finally reached the approved amount of P115,000.00.
Since petitioners were still in possession of Lot No. 2-B, the Provincial Sheriff ordered them to
vacate the premises.
Issue: W/N there was a valid extrajudicial foreclosure sale?
Ruling: Yes. The formalities of a levy, as an essential requisite of a valid execution sale under
Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court, are not
basic requirements before an extrajudicially foreclosed property can be sold at public auction.
The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale. Act No. 3135, as
amended by Act No. 4118 otherwise known as "An Act to Regulate the Sale of Property under
Special Powers Inserted in or Annexed to Real Estate Mortgages" applies in cases of
extrajudicial foreclosure sale.