You are on page 1of 123

G.R. Nos.

115981-82
August 12, 1999
RUBEN LAGROSA, petitioner, vs. COURT OF APPEALS, SPOUSES ROMULO & EVELYN A. BANUA, and CESAR
OROLFO, respondents.
Petitioner seeks to review and set aside the Decision1 of respondent Court of Appeals dated January 7, 1994
affirming the July 12, 1993 decision of the Regional Trial Court of Manila (Branch 42) in Civil Case No. 93-65646 (CAG.R. SP No. 31683); and reversing the decision dated March 15, 1993 of the Regional Trial Court of Manila (Branch
12) in Civil Case No. 92-62967 (CA-G.R. SP No. 32070). The two petitions for review of two (2) conflicting decisions
rendered by two different branches of the Regional Trial Court of Manila in ejectment suits involving the same
parties and property were consolidated before the Court of Appeals upon motion of one of herein respondents,
Cesar Orolfo. The consolidation was granted considering the property involved is one and the same in both petitions
and Ruben Lagrosa, petitioner in CA-G.R. SP No. 31683 is the same Ruben Lagrosa, who is the private respondent in
CA-G.R. SP No. 32070; in the same manner that Evelyn Arizapa Banua is the private respondent in CA-G.R. SP No.
31683 while Cesar Orolfo, who is the caretaker of the subject property representing Evelyn Arizapa Banua, is the
petitioner in CA-G.R. SP No. 32070.2
Both petitions involve the possession of sixty-five (65) square meters of residential lot located in Paco, Manila,
originally owned by the City of Manila which, in due course, following its land and housing program for the underprivileged, awarded it to one Julio Arizapa who constructed a house and upholstery shop thereon. The award was in
the nature of a "Contract to Sell" payable monthly for a period of twenty (20) years. Julio Arizapa is the predecessorin-interest of respondent Evelyn Arizapa Banua in CA-G.R. SP No. 31683, while Cesar Orolfo, petitioner in CA-G.R. SP
No. 32070, is the caretaker of the same subject property as authorized and appointed by Evelyn Arizapa Banua, in
whose name Transfer Certificate of Title No. 197603 covering the said property is registered. Cesar Orolfo, as
aforestated, represented Evelyn Arizapa Banua, in CA-G.R. SP No. 32070. 3
As found by the trial court, the title of respondent Evelyn Arizapa Banua to the subject property is evidenced by the
"Deed of Sale" executed by the City of Manila in her favor and the Transfer Certificate of Title No. 197603, issued to
her by the Register of Deeds of Manila.4 Respondent Evelyn Arizapa Banua derived her title as follows Before Julio
Arizapa could make the full payment for the said lot, he died on January 20, 1987, intestate, at the age of 67 and
was survived by his wife, Josefa Albaytar Arizapa and children 5. His wife Josefa Alabaytar Arizapa died intestate on
January 21, 1988. On February 17, 1988, Evelyn Arizapa and her brothers and sisters executed a "Deed of
Extrajudicial Partition" adjudicating unto themselves, as the sole heirs of the deceased, the aforesaid lot and a
"Renunciation" in favor of Evelyn Arizapa under which they renounced and waived all their rights over the aforesaid
lot in favor of Evelyn Arizapa. The "Notice of Extrajudicial Settlement of Estate of Deceased Julio Arizapa and Josefa
Albaytar" was duly published in the "BALITA" in its March 4, 11 and 18, 1988 issues. On March 22, 1988, the heirs of
Julio Arizapa wrote a letter to the City of Manila, through the City Tenants Security Committee, requesting that the
award of said lot be placed under the name of Evelyn Arizapa based on said "Deed of Extrajudicial Partition" and the
"Renunciation". On December 26, 1988, the Committee approved the request by Resolution. On January 8, 1990,
Evelyn Arizapa paid the amount of P29,500.00 to the City of Manila which constituted the full payment of the lot for
which Evelyn Arizapa was issued Official Receipt No. 738608 by the City Treasurer. On April 8, 1991, the City of
Manila executed a "Deed of Sale" over the lot in favor of Evelyn Arizapa and, on the basis thereof, Transfer
Certificate of Title No. 197603 was issued to Evelyn Arizapa.1wphi1.nt
Petitioner Ruben Lagrosa claims to be the lawful possessor of the subject property by virtue of the "Deed of
Assignment of Real Estate Mortgage" executed in his favor by Presentacion Quimbo on the basis of a "Contract of
Real Estate Mortgage" executed by Julio Arizapa in favor of the latter. Lagrosa posits that he cannot be evicted from
the subject property because he had prior possession as assignee of the said "Assignment of Real Estate Mortgage"
executed by Presentacion Quimbo in his favor, and with the consent of Mauricia Albaytar, the sister of the deceased
Josefa Albaytar Arizapa, after the demise of the spouses Julio Arizapa and Josefa Albaytar.
The first petition (CA-G.R. SP No. 31683) sought the review of the decision rendered by the Regional Trial Court of
Manila, Branch 49, with the Honorable Romeo J. Callejo presiding in Civil Case No. 93-65646 entitled "Spouses
Romulo and Evelyn Arizapa-Banua, plaintiffs-appellees, vs. Ruben Lagrosa, et al., defendants-appellants," affirming
in toto the judgment dated March 24, 1993 of the Metropolitan Trial Court of Manila, Branch 2, the dispositive
portion of which reads:
WHEREFORE, judgment is rendered for the PLAINTIFFS.
The DEFENDANTS and all other persons claiming rights under them are hereby ordered:
(a) To vacate the land covered by T.C.T. No. 197603 situated in Paco, Manila;
(b) To pay the amount of P1,000.00 per month as reasonable compensation for the use and
enjoyment of the premises, from the filing of this complaint until possession is restored to the
plaintiffs;
(c) To pay the amount of P2,000.00 as attorney's fees; and costs of suit.
SO ORDERED. (Rollo, 73-74)6
The second petition (CA-G.R. SP No. 32070) sought the review of the decision rendered on March 15, 1993 by the
Regional Trial Court of Manila, Branch 12, with the Honorable Edgardo Sundiam presiding in Civil Case No. 92-62967
entitled "Ruben Lagrosa, plaintiff, versus, Cesar Orolfo, defendant," affirming in toto on appeal the judgment of the
Metropolitan Trial Court of Manila, Branch 5, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendant Cesar Orolfo ordering the said defendant and all the persons claiming rights under him to vacate
Page 1 of 123

the leased premises located at 1765 La Purisima Concepcion, Pedro Gil, Paco, Manila; ordering the
Defendant to pay the plaintiff the sum of P5,950.00 representing the arrears in monthly rental from October
1989 up to February 1991; ordering the defendant to pay the monthly rental of P350.00 starting March
1991 until the defendant actually vacates the leased premises in question and, ordering the defendant to
pay plaintiff the sum of P5,000.00 as attorney's fees plus the costs of suit. 7
In sum, in Civil Case No. 93-65646 (subject of CA-G.R. SP No. 31683), the trial court upheld the rightful possession
of Evelyn Arizapa Banua over the subject lot and accordingly ordered the immediate execution of its judgment
against Ruben Lagrosa, et al. On the other hand, in Civil Case No. 92-62967 (subject of CA-G.R. SP No. 32070), the
trial court opined that a preponderance of evidence tilted on the side of Ruben Lagrosa and gave judgment in his
favor, all because defendant therein, Cesar Orolfo, through utter negligence of his former counsel, failed to submit
countervailing evidence on time, i.e. prior to the rendition of judgment by the Metropolitan Trial Court. 8
After a careful review of the records, the respondent Court of Appeals proceeded to determine which of the two
conflicting decisions should be sustained and given effect, the decision in Civil Case No. 93-65646 in favor of Evelyn
Arizapa Banua, or the decision in Civil Case No. 92-62967 in favor of Ruben Lagrosa. The controlling operative facts
as found by the respondent Court of Appeals are:
1. The subject property involved in both petitions is more particularly described as Lot No. 2, Block No. 29 of
the former Fabmar Estate owned by the City of Manila. Subject property contains an area of 65 square
meters.
2. On June 24, 1977, the City of Manila awarded said lot to Julio Arizapa under its land for the landless
program. It was payable in monthly installments for a period twenty (20) years.
3. Julio Arizapa obtained a loan of P17,000.00 from one Presentacion B. Quimbo and he executed on August
2, 1985 a Contract of Real Estate Mortgage of his right over the subject property in favor of the latter. He
failed to pay his loan and on top of which he borrowed more from Presentacion Quimbo until his account
reached P28,000.00.
4. Julio Arizapa died intestate on January 20, 1987, leaving no other property except the lot in question.
Meanwhile, his wife Josefa Albaytar, on account of her deteriorating health, borrowed P40,000.00 from
Ruben Lagrosa, for which she executed a deed mortgaging her one-half right to the lot. When Quimbo was
poised to foreclose the mortgage, Albaytar convinced her to execute instead a Deed of Assignment of
Mortgage in favor of Ruben Lagrosa for a certain consideration, which she did.
5. Josefa Albaytar died on January 21, 1988. For her burial expenses, Mauricia Albaytar sister of the
deceased, borrowed P65,000.00 from Ruben Lagrosa. In the meantime, Ruben Lagrosa with the permission
of Mauricia Albaytar, allowed his relatives, to occupy and take possession of the subject property. Ruben
Lagrosa himself was never in actual physical possession or occupation of the property.
6. Thus, the tenuous claim of Ruben Lagrosa over the subject property rests on the Deed of Assignment of
Mortgage executed by Presentacion B. Quimbo in his favor. This deed of assignment was correctly declared
illegal by the Honorable Romeo Callejo in SP No. 31683. It was declared illegal for the simple reason that
the Deed of Mortgage executed by the late Julio Arizapa in favor of Presentacion D. Quimbo was fatally
defective in that the property subject thereof was still owned by the City of Manila when said deed of
mortgage was executed.
7. Concerning the issue of possession of the subject property, the rightful possession thereof of Evelyn
Arizapa Banua is traceable to the possession of the City of Manila, then to her father Julio Arizapa; whereas,
the possession claimed by Ruben Lagrosa is founded on that illegal Deed of Assignment of Mortgage (which
was not even notarized), and the permission given him by Mauricia Albaytar after the death of her sister
Josefa Albaytar, a permission which derives no legal authority or validity because Mauricia, apart from her
being a sister of the deceased, was not and has never been appointed as a legal representative or
administratrix of the deceased spouses.9
In light of the foregoing, the respondent Court of Appeals affirmed the decision of the Regional Trial Court of Manila
(Branch 49) in Civil Case No. 93-65646 finding for spouses Romulo and Evelyn Arizapa Banua. The dispositive
portion of said decision reads:
WHEREFORE, considering that respondent court has committed no error of law of fact in the decision under
review, the same is affirmed and the petition is hereby DISMISSED. Costs against petitioner.
On the other hand, the respondent Court of Appeals reversed the decision of Regional Trial Court of Manila (Branch
12) in Civil Case No. 92-62967 which ruled in favor of Ruben Lagrosa. The dispositive portion of said decision reads:
WHEREFORE, the decision under review in SP No. 32070 is reversed and set aside, and another one is
hereby entered dismissing the complaint for ejectment against petitioner Cesar Orolfo. Accordingly, other
writ of execution and notice to vacate issued by respondent court in Civil Case No. 92-12917 11 are hereby
declared null and void and set aside. Costs against private respondents. 12
Thus, the conflict between the two decisions as to who is entitled to the possession of the subject property, Ruben
Lagrosa on the one hand, or Evelyn Arizapa-Banua on the other, with Cesar Orolfo merely representing the latter in
Civil No. 92-62967, was resolved.
Hence, the instant petition on grounds that may be summarized as follows: (1) that the respondent Court of
Appeals erred in declaring the "Contract of Real Estate Mortgage" and the "Assignment of Mortgage" as illegal; (2)
Page 2 of 123

that the respondent Court of Appeals erred in upholding the validity of Transfer Certificate of Title No. 197603 in the
name of Evelyn Arizapa Banua despite the fact that Josefa Arizapa was the only legal wife of Julio Arizapa and that
they were childless; (3) that the respondent Court of Appeal erred in declaring that Cesar Orolfo was appointed
caretaker of the subject property and that he was not given a chance to present his evidence before the lower
court.
The petition is bereft of merit.
The only issue to be resolved in ejectment cases is the question as to who is entitled to the physical or material
possession of the premises or possession de facto.13 In the event the issue ownership is raised in the pleadings,
such issue shall be taken up the limited purpose of determining who between the contending parties has the better
right of possession.14 As it were, herein petitioner Ruben Lagrosa also filed before the Regional Trial Court of Manila
(Branch 32), in Civil Case No. 90-55315 entitled "Ruben Lagrosa, versus, City Tenants Security Committee,
represented by its Chairman, Hon. Gemiliano Lopez, Jr., Intestate Estate of Julio Arizapa represented by Mauricia
Albaytar, Evelyn Arizapa Banua and Register of Deeds of Manila," a "Complaint for Foreclosure of the "Real Estate
Mortgage", Annulment of Awards with Damages, and Cancellation of Title and Reconveyance of Real Property." 15
As mentioned earlier, petitioner Lagrosa claims to be the lawful possessor of the subject property by virtue of the
"Deed of Assignment" of "Real Estate Mortgage" executed by Julio Arizapa in favor of the latter. Lagrosa posits that
he cannot be evicted from the subject property because he had prior possession as assignee of the said
"Assignment of Real Estate Mortgage" executed by Presentacion Quimbo in his favor, and with the consent of
Mauricia Albaytar, the sister of the deceased Josefa Albaytar Arizapa, after the demise of the spouses Julio Arizapa
and Josefa Albaytar.
On the other hand, Evelyn Arizapa Banua's title to the property is evidenced by a "Deed of Sale" executed by the
City of Manila in her favor and the Transfer Certificate of Title No. 197603 issued to her by the Register of Deeds.
Evelyn Arizapa Banua sought to evict Lagrosa from the subject property citing, among others, the need to
repossess the property for her own personal use.
We agree with the respondent Court of Appeals that petitioner Lagrosa's right to possess the subject property is
clearly inferior to or inexistent in relation to Evelyn Arizapa Banua.
As correctly held by the lower courts, the "Deed of Real Estate Mortgage" executed by Julio Arizapa is null and void,
the property mortgaged by Julio Arizapa owned by the City of Manila under Transfer Certificate of Title No. 91120.
For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner thereof as
required by Article 2085 of the Civil Code of the Philippines. 16 Since the mortgage to Presentacion Quimbo of the lot
is null and void, the assignment by Presentacon Quimbo of her rights as mortgage to Lagrosa is likewise void. Even
if the mortgage is valid as insisted by herein petitioner, it is well-settled that a mere mortgagee has not right to
eject the occupants of the property mortgaged.17 This is so, because a mortgage passes no title to the mortgagee.
Indeed, by mortgaging a piece of property, a debtor merely subjects it to lien but ownership thereof is not parted
with.18 Thus, a mortgage is regarded as nothing more than a mere lien, encumbrance, or security for a debt, and
passes no title or estate to the mortgagee and gives him no right or claim to the possession of the property.
Petitioner Lagrosa now contends that what was mortgaged by Julio Arizapa in favor of Presentacion Quimbo was
"his right as an awardee over the homelot in question, and not the homelot itself." Petitioner would have this Court
uphold the validity and legality of the mortgage over the "right as an awardee" rather than the homelot itself. The
agreement between the City of Manila and Julio Arizapa was in the nature of a "contract to sell," the price for the lot
being payable on installment for a period of twenty (20) years which could yet prevent, such as by the nonfulfillment of the condition, the obligation to convey title from acquiring any obligatory force. 19 Hence, there is no
"right" as awardee to speak of, and there is no alienable interest in the property to deal with.
The further allegation in petitioner's memorandum that Evelyn Arizapa Banua is not the lawful owner of the lot and
residential house in question because the "Extrajudicial Partition" and the "Renunciation" on the basis of which the
"Deed of Sale" was executed by the City of Manila and the Transfer Certificate of Title No. 197603 was issued, are
all falsified because Julio Arizapa and Josefa Albaytar Arizapa were childless up to their demise deserves no
prolonged consideration, being factual in nature. Factual findings of the Court of Appeals are conclusive on the
parties and carry even more weight when said court affirms the factual findings of the trial court. 20 We quote the
following findings of the trial court as adopted by the respondent Court of Appeals, to wit:
The Court cannot accord its imprimatur to the stance of the Defendants-Appellants. As borne by the
evidence of the Plaintiff-Appellee, Julio Arizapa and Bernardita Iigo Arizapa were married on May 9, 1963 in
Manila (Exhibit "GG"). Julio Arizapa, during his lifetime, wrote a letter to the Plaintiff-Appellee and her
brothers and sisters and addressing them as his children, thus:
Mahal kong mga anak, magmahalan kayong mabuti at magtulungan habang buhay. Ala-ala ko kayo
kailan mang.
Exhibit "RR."
The bare fact that, after the demise of Bernardita Iigo Arizapa in 1984, Julio Arizapa and Josefa
Albaytar lived together as husband and wife but bore no children does not necessarily mean that
Julio Arizapa was incapable of procreation. Indeed, there is persuasive authority to the effect that "it
is presumed in the absence of evidence to the contrary, that a male person of mature years, is
capable of sexual intercourse and procreation, even though he has reached a very advanced age
(Francisco, The Revised Rules of Court in the Philippines, Volume VII, Part II, at pages 142-143, citing
Love versus Mcdonald, 148 S.W. 2d. 170, 201 Ark. 882). While it is true that in their "Extrajudicial
Partition", the Plaintiff-Appellee and her brothers and sisters called Julio Arizapa and Josefa Arizapa,
as their parents, however, this is not unusual because, after all, after the demise of Bernardita Iigo,
Page 3 of 123

Josefa Albaytar and Julio Arizapa lived together as husband and wife and, in the process, the
Plaintiff-Appellee must have considered Josefa Albaytar as their step-mother in deference and out of
respect to their father. (Resolution, at page 348, Records).21
Moreover, it is a well-known doctrine that the issue as to whether title was procured by falsification or fraud as
advanced by petitioner can only be raised in an action expressly instituted for the purpose. Torrens title can be
attacked only for fraud, within one year after the date of the issuance of the decree of registration. Such attack
must be direct, and not by a collateral proceeding. 22 The title represented by the certificate cannot be changed,
altered, modified, enlarged, or diminished in a collateral proceeding. 23 Thus, the arguments of petitioner Lagrosa in
the ejectment suit are misplaced.1wphi1.nt
As to Lagrosa's prior possession of the subject property, their stay in the property as correctly found by the
respondent Court of Appeals was by mere tolerance or permission. It is well-settled that "a person who occupies the
land of another at the latter's tolerance or permission, without any contract between them is necessarily bound by
an implied promise that he will vacate upon demand, failing which, a summary action for ejectment is the proper
remedy against him.24 The trial court rationalized thus:
On the other hand, the possession of the Plaintiff-Appellee retroacted to the possession of the City of Manila
of the property in question because the Plaintiff-Appellee merely stepped into the shoes of the owner of the
property when she purchased the said property from the Appellants from said property (Caudal versus
Court of Appeals, et al., 175 SCRA 798).
It must be borne in mind that, as mere assignee of the mortgage rights of Presentation Quimbo, the
Defendant-Appellant is not entitled to the physical possession of the mortgaged property. The same is true
even if the Defendant-Appellant was himself the mortgagee. In point of fact, during the lifetime of Julio
Arizapa and Josefa Albaytar, they had possession of the property. The Defendant-Appellant managed to take
possession of the property only because of the alleged consent thereto by Mauricia Albaytar, who was
merely the sister of Josefa Albaytar. By then, the couple, Julio Arizapa and Josefa Albaytar were already
dead. Mauricia Albaytar thus had no lawful authority to allow anybody to enter into and occupy the
property. There is no evidence in the records that Mauricia Albaytar had been appointed by any Court as the
Administratix of the estate of the Spouses.25
By Lagrosa's own admission, he is merely an assignee of the rights of the mortgage of the lot and that,
consequently, the respondent Court of Appeals correctly ruled that the only right of action of Lagrosa as such
assignee of the mortgagee, where the mortgagor is already dead, is that provided for in Section 7 of Rule 86 26 and
Section 5 of Rule 8727 of the Rules of Court. Thus, the mortgagee does not acquire title to the mortgaged real estate
unless and until he purchases the same at public auction and the property is not redeemed within the period
provided for by the Rules of Court.
The issues by petitioner in CA G.R. SP No. 32070 that the respondent Court of Appeals erred in declaring Cesar
Orolfo as the caretaker of the subject property and that he was not given a chance to present his evidence before
the lower courts are also factual. The jurisdiction of this Court is limited to reviewing errors of law unless there is a
showing that the findings complained of are totally devoid of support in the record or that they are so glaringly
erroneous as to constitute serious abuse of discretion. 28 We find no such showing in this case. More importantly,
whether Cesar Orolfo is the caretaker of the property as appointed by Evelyn Arizapa Banua and the representative
of the latter is now beside the point. As was discussed by this Court, petitioner Ruben Lagrosa's right to possess the
subject property is clearly inexistent in relation to herein respondent Evelyn Arizapa Banua.
WHEREFORE, the joint decision of the Court of Appeals in CA-G.R. SP Nos. 31683 and 32070 promulgated on
January 7, 1994 is AFFIRMED in toto.
SO ORDERED.

Page 4 of 123

G.R. No. 130722 December 9, 1999


SPS. REYNALDO K. LITONJUA and ERLINDA P. LITONJUA and PHIL. WHITE HOUSE AUTO SUPPLY, INC.,
petitioners,
vs.
L & R CORPORATION, VICENTE M. COLOYAN in his capacity as Acting Registrar of the Register of Deeds
of Quezon City thru Deputy Sheriff ROBERTO R. GARCIA, respondents.
May a mortgage contract provide: (a) that the mortgagor cannot sell the mortgaged property without first obtaining
the consent of the mortgagee and that, otherwise, the sale made without the mortgagee's consent shall be invalid;
and (b) for a right of first refusal in favor of the mortgagee?
The controversy stems from loans obtained by the spouses Litonjua from L & R Corporation in the aggregate sum of
P400,000.00; P200,000.00 of which was obtained on August 6, 1974 and the remaining P200,000.00 obtained on
March 27, 1978. The loans were secured by a mortgage 1 constituted by the spouses upon their two parcels of land
and the improvements thereon located in Cubao, Quezon City covered by Transfer Certificates of Title No. 197232
and 197233, with an area of 599 and 1,436 square meters, respectively. The mortgage was duly registered with the
Register of Deeds of Quezon City.
On July 14, 1979, the spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels of land
they had previously mortgaged to L & R Corporation for the sum of P430,000.00. 2 The sale was annotated at the
back of the respective certificates of title of the properties. 3
Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L & R Corporation initiated
extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City. On July 23, 1980, the mortgaged
properties were sold at public auction to L & R Corporation as the only bidder for the amount of P221,624.58. 4
When L & R Corporation presented its corresponding Certificate of Sale issued by Deputy Sheriff Roberto B. Garcia,
to the Quezon City Register of Deeds for registration on August 15, 1980, it learned for the first time of the prior
sale of the properties made by the spouses Litonjua to PWHAS upon seeing the inscription at the back of the
certificates of title. Thus, on August 20, 1980, it wrote a letter 5 to the Register of Deeds of Quezon City requesting
for the cancellation of the annotation regarding the sale to PWHAS. L & R Corporation invoked a provision in its
mortgage contract with the spouses Litonjua stating that the mortgagee's prior written consent was necessary in
case of subsequent encumbrance or alienation of the subject properties. Thus, it argued that since the sale to
PWHAS was made without its prior written consent, the same should not have been registered and/or annotated.
On March 10, 1981, or seven months after the foreclosure sale, PWHAS, for the account of the spouses Litonjua,
tendered payment of the full redemption price to L & R Corporation in the form of China Bank Manager's Check No.
HOF-M O12623 in the amount of P238,468.04. 6 L & R Corporation, however, refused to accept the payment, hence,
PWHAS was compelled to redeem the mortgaged properties through the Ex-Oficio Sheriff of Quezon City. On March
31, 1981, it tendered payment of the redemption price to the Deputy Sheriff through China Bank Manager's Check
No. HOF-O14750 in the amount of P240,798.94. 7 The check was deposited with the Branch Clerk of Court who
issued Receipt No. 7522484 8 for the full redemption price of the mortgaged properties. Accordingly, the Deputy
Sheriff issued a Certificate of Redemption in favor of the spouses Litonjua dated March 31, 1981. 9
In a letter of the same date, the Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the full
redemption price and advised it that it can claim the payment upon surrender of its owner's duplicate certificates of
title. 10
On April 2, 1981, the spouses Litonjua presented for registration the Certificate of Redemption issued in their favor
to the Register of Deeds of Quezon City. The Certificate also informed L & R Corporation of the fact of redemption
and directed the latter to surrender the owner's duplicate certificates of title within five days. 11
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the Register of Deeds, stating:
(1) that the sale of the mortgaged properties to PWHAS was without its consent, in contravention of paragraphs 8
and 9 of their Deed of Real Estate Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was
seeking to redeem the foreclosed properties, when under Articles 1236 and 1237 of the New Civil Code, the latter
had no legal personality or capacity to redeem the same. 12
On the other hand, on May 8 and June 8, 1981, the spouses Litonjua asked the Register of Deeds to annotate their
Certificate of Redemption as an adverse claim on the titles of the subject properties on account of the refusal of L &
R Corporation to surrender the owner's duplicate copies of the titles to the subject properties. With the refusal of
the Register of Deeds to annotate their Certificate of Redemption, the Litonjua spouses filed a Petition 13 on July 17,
1981 against L & R Corporation for the surrender of the owner's duplicate of Transfer Certificates of Title No. 197232
and 197233 before the then Court of First Instance of Quezon City, Branch IV, docketed as Civil Case No. 32905.
On August 15, 1981, while the said case was pending, L & R Corporation executed an Affidavit of Consolidation of
Ownership. 14 Thereafter, on August 20, 1981, the Register of Deeds cancelled Transfer Certificates of Title No.
197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title No. 280054 15 and 28055 16 in favor of L
& R Corporation, free of any lien or encumbrance.
With titles issued in its name, L & R Corporation advised the tenants of the apartments situated in the subject
parcels of land that being the new owner, the rental payments should be made to them, and that new lease
contracts will be executed with interested tenants before the end of August, 1981. 17 Upon learning of this incident
from their tenants, the spouses Litonjua filed an adverse claim 18 and a notice of lis pendens 19 with the Register of
Deeds. In the process, they learned that the prior sale of the properties in favor of PWHAS was not annotated on the
titles issued to L & R.
A complaint for Quieting of Title, Annulment of Title and Damages with preliminary injunction was filed by the
spouses Litonjua and PWHAS against herein respondents before the then Court of First Instance of Quezon City,
Page 5 of 123

Branch 9, docketed as Civil Case No. Q-33362. 20 On February 10, 1987, the lower court rendered its Decision 21
dismissing the Complaint upon its finding that the sale between the spouses Litonjua and PWHAS was null and void
and unenforceable against L & R Corporation and that the redemption made was also null and void.
On appeal, the decision of the trial court was set aside by the Court of Appeals in its Decision dated June 22, 1994,
22
on the ground that the sale made to PWHAS as well as the redemption effected by the spouses Litonjua were
valid. However, the same was subsequently reconsidered and set aside in an Amended Decision dated September
11, 1997. 23
Hence, the instant Petition on the following issues:
(1) whether or not paragraphs 8 and 9 of the Real Estate Mortgage are valid and enforceable;
(2) whether or not the sale of the mortgaged properties by the spouses Litonjua to PWHAS, without
the knowledge and consent of L & R Corporation, is valid and enforceable;
(3) whether or not PWHAS had the right to redeem the foreclosed properties on the account of the
spouses Litonjua; and
(4) whether or not there was a valid redemption.
Paragraphs 8 and 9 of the subject Deed of Real Estate Mortgage read as follows
8. That the MORTGAGORS shall not sell, dispose of, mortgage, nor in any other manner encumber
the real property/properties subject of this mortgage without the prior written consent of the
MORTGAGEE;
9. That should the MORTGAGORS decide to sell the real property/properties subject of this
mortgage, the MORTGAGEE shall be duly notified thereof by the MORTGAGORS, and should the
MORTGAGEE be interested to purchase the same, the latter shall be given priority over all the other
prospective buyers; 24
There is no question that the spouses Litonjua violated both the aforesaid provisions, selling the mortgaged
properties to PWHAS without the prior written consent of L & R Corporation and without giving the latter notice of
such sale nor priority over PWHAS.
Re: Validity of prohibition against subsequent sale of mortgaged property without prior written
consent of mortgagee and validity of subsequent sale to PWHAS
Petitioners defend the validity of the sale between them by arguing that paragraph 8 violates Article 2130 of the
New Civil Code which provides that "(A) stipulation forbidding the owner from alienating the immovable mortgaged
shall be void."
In the case of Philippine Industrial Co. v. El Hogar Filipino and
Vallejo, 25 a stipulation prohibiting the mortgagor from entering into second or subsequent mortgages was held
valid. This is clearly not the same as that contained in paragraph 8 of the subject Deed of Real Estate Mortgage
which also forbids any subsequent sale without the written consent of the mortgagee. Yet, in Arancillo v.
Rehabilitation Finance Corporation, 26 the case of Philippine Industrial Co., supra, was erroneously cited to have held
a mortgage contract against the encumbrance, sale or disposal of the property mortgaged without the consent of
the mortgagee is valid. No similar prohibition forbidding the owner of mortgaged property from (subsequently)
mortgaging the immovable mortgaged is found in our laws, making the ruling in Philippine Industrial Co., supra,
perfectly valid. On the other hand, to extend such a ruling to include subsequent sales or alienation runs counter
not only to Philippine Industrial Co., itself, but also to Article 2130 of the New Civil Code.
Meanwhile in De la Paz v. Macondray &; Co., Inc., 27 it was held that while an agreement of such nature does not
nullify the subsequent sale made by the mortgagor, the mortgagee is authorized to bring the foreclosure suit
against the mortgagor without the necessity of either notifying the purchaser or including him as a defendant. At
the same time, the purchaser of the mortgaged property was deemed not to have lost his equitable right of
redemption.
In Bonnevie v. Court of Appeals, 28 where a similar provision appeared in the subject contract of mortgage, the
petitioners therein, to whom the mortgaged property were sold without the written consent of the mortgagee, were
held as without the right to redeem the said property. No consent having been secured from the mortgagee to the
sale with assumption of mortgage by petitioners therein, the latter were not validly substituted as debtors. It was
further held that since their rights were never recorded, the mortgagee was charged with the obligation to
recognize the right of redemption only of the original mortgagors-vendors. Without discussing the validity of the
stipulation in question, the same was, in effect, upheld.
Again, in Cruz v. Court of Appeals, 29 while a similar provision was recognized and applied, no discussion as to its
validity was made since the same was not raised as an issue.
On the other hand, in Tambunting v. Rehabilitation Finance
Corporation, 30 the validity of a similar provision was specifically raised and discussed and found as invalid. It was
there ratiocinated that

Page 6 of 123

To be sure, the deed of second mortgage executed by the Escuetas in favor of Aurora Tambunting,
married to Antonio L. Tambunting, does contain a provision that "the property mortgaged shall not
be . . . the subject of any new or subsequent contracts of agreements, saving and excepting those
having connection with the first mortgage with the RFC, without first securing the written
permission and consent of MORTGAGEE". But the provision can only be construed as directed
against subsequent mortgages or encumbrance, not to an alienation of the immovable itself. For
while covenants prohibiting the owner from constituting a later mortgage over property registered
under the Torrens Act have been held to be legally permissible (Phil. Industrial Co. v. El Hogar
Filipino, et al., 45 Phil. 336, 341-342; Bank of the Philippines v. Ty Camco Sobrino, 57 Phil. 801),
stipulations "forbidding the owner from alienating the immovable mortgaged" are expressly
declared void by law (Art. 2130, Civil Code). It is clear that the stipulation against "subsequent
agreements" above mentioned had not been breached by the assignment by the Escuetas (to the
Hernandezes) of their right of redemption in connection with the mortgage constituted if favor of
the R.F.C. The assignment was not subsequent mortgage or encumbrance, licitly comprehended by
the prohibitory stipulation, but was actually a sale or conveyance of all their rights in the
encumbered real property in truth, an alienation of the immovable which could not lawfully be
forbidden. Moreover, since the subject of the assignment to the Hernandezes had "connection with
the first assignment with the R.F.C.", it did not fall within, but was explicitly excepted from, the
prohibitory stipulation in question. Finally, it should not be forgotten that since the Tambuntings, in
their own deed of conditional sale with the R.F.C., had accepted without demur the provision that
said contract could be revoked within one (1) year from September 16, 1955 at the option of the
RFC, as vendor, should the former owner (Escueta) exercise his right to redeem the property; and
that the redemption of the property within said period by "the former owner or his successor-ininterest" would render their instrument of conditional sale "automatically null and void and without
effect", they cannot now assume a position inconsistent with said provision.
(Emphasis, Ours).
Earlier, in PNB v. Mallorca, 31 it was reiterated that a real mortgage is merely an encumbrance; it does not
extinguish the title of the debtor, whose right to dispose a principal attribute of ownership is not thereby lost.
Thus, a mortgagor had every right to sell his mortgaged property, which right the mortgagee cannot oppose.
In upholding the validity of the stipulation in question, the amended Decision relied on the cases of Cruz v. Court of
Appeals, supra, and Medida v. Court of Appeals. 32 According to the Court of Appeals, said cases, are not only more
recent that of Tambunting, supra, but are also more applicable to the issue at bar.
We are not convinced.
As we have mentioned, although a similar provision was recognized and applied in Cruz v. Court of Appeals, supra,
no discussion as to its validity was made since the same was not raised as an issue. Thus, it cannot be said that the
specific pronouncement in the Tambunting case that such a stipulation can only be construed as against
subsequent mortgages or encumbrances but not to an alienation of the immovable itself, which is prohibited under
Article 2130, was abandoned thereby. On the other hand, the facts in the case of Medida v. Court of Appeals, are
different from those in the present case for what was in issue in the said case was a second mortgage over a
foreclosed property during the period of redemption. Thus, the ruling in Medida quoted in the Amended Decision
that "what is delimited is not the mortgagor's jus dispodendi, as an attribute of ownership, but merely the rights
conferred by such act of disposal which may correspondingly be restricted," actually refers to the fact that the only
rights which a mortgagor can legally transfer, cede and convey after the foreclosure of his properties are the right
to redeem the land, and the possession use and enjoyment of the same during the period of redemption. It has no
connection or reference to the right of a mortgagor to sell his mortgaged property without the required consent of
the mortgagee. To be sure, there is absolutely nothing in Medida that upholds the validity of the stipulation in
controversy.
Insofar as the validity of the questioned stipulation prohibiting the mortgagor from selling his mortgaged property
without the consent of the mortgagee is concerned, therefore, the ruling in the Tambunting case is still the
controlling law. Indeed, we are fully in accord with the pronouncement therein that such a stipulation violates
Article 2130 of the New Civil Code. Both the lower court and the Court of Appeals in its Amended Decision
rationalize that since paragraph 8 of the subject Deed of Real Estate Mortgage contains no absolute prohibition
against the sale of the property mortgaged but only requires the mortgagor to obtain the prior written consent of
the mortgagee before any such sale, Article 2130 is not violated thereby. This observation takes a narrow and
technical view of the stipulation in question without taking into consideration the end result of requiring such prior
written consent. True, the provision does not absolutely prohibit the mortgagor from selling his mortgaged property;
but what it does not outrightly prohibit, it nevertheless achieves. For all intents and purposes, the stipulation
practically gives the mortgagee the sole prerogative to prevent any sale of the mortgaged property to a third party.
The mortgagee can simply withhold its consent and thereby, prevent the mortgagor from selling the property. This
creates an unconscionable advantage for the mortgagee and amounts to a virtual prohibition on the owner to sell
his mortgaged property. In other words, stipulations like those covered by paragraph 8 of the subject Deed of Real
Estate Mortgage circumvent the law, specifically, Article 2130 of the New Civil Code.
Being contrary to law, paragraph 8 of the subject Deed of Real Estate Mortgage is not binding upon the parties.
Accordingly, the sale made by the spouses Litonjua to PWHAS, notwithstanding the lack of prior written consent of L
& R Corporation, is valid.
Re: Validity of redemption effected by PWHAS on the account of the spouses
Litonjua
Coming now to the issue of whether the redemption offered by PWHAS on account of the spouses Litonjua is valid,
we rule in the affirmative. The sale by the spouses Litonjua of the mortgaged properties to PWHAS is valid.
Therefore, PWHAS stepped into the shoes of the spouses Litonjua on account of such sale and was in effect, their
Page 7 of 123

successor-in-interest. As such, it had the right to redeem the property foreclosed by L & R Corporation. Again,
Tambunting, supra, clarifies that
. . .. The acquisition by the Hernandezes of the Escuetas' rights over the property carried with it the
assumption of the obligations burdening the property, as recorded in the Registry of Property, i.e.,
the mortgage debts in favor of the RFC (DBP) and the Tambuntings. The Hernandezes, by stepping
into the Escuetas' shoes as assignees, had the obligation to pay the mortgage debts, otherwise,
these debts would and could be enforced against the property subject of the assignment. Stated
otherwise, the Hernandezes, by the assignment, obtained the right to remove the burdens on the
property subject thereof by paying the obligations thereby secured; that is to say, they had the right
of redemption as regards the first mortgage, to be exercised within the time and in the manner
prescribed by law and the mortgage deed; and as regards the second mortgage, sought to be
judicially foreclosed but yet unforeclosed, they had the so-called equity of redemption.
The right of PWHAS to redeem the subject properties finds support in Section 6 of Act 3135 itself which gives not
only the mortgagor-debtor the right to redeem, but also his successors-in-interest. As vendee of the subject
properties, PWHAS qualifies as such a successor-in-interest of the spouses Litonjua.
Re: Validity of redemption made
It is clear from the records that PWHAS offered to redeem the subject properties seven (7) months after the date of
registration of the foreclosure sale, well within the one year period of redemption.
Re: Validity and enforceability of stipulation granting the mortgagee
the right of first refusal
While petitioners question the validity of paragraph 8 of their mortgage contract, they appear to be silent insofar as
paragraph 9 thereof is concerned. Said paragraph 9 grants upon L & R Corporation the right of first refusal over the
mortgaged property in the event the mortgagor decides to sell the same. We see nothing wrong in this provision.
The right of first refusal has long been recognized as valid in our jurisdiction. The consideration for the loanmortgage includes the consideration for the right of first refusal. L & R Corporation is in effect stating that it
consents to lend out money to the spouses Litonjua provided that in case they decide to sell the property
mortgaged to it, then L & R Corporation shall be given the right to match the offered purchase price and to buy the
property at that price. Thus, while the spouses Litonjua had every right to sell their mortgaged property to PWHAS
without securing the prior written consent of L & R Corporation, they had the obligation under paragraph 9, which is
a perfectly valid provision, to notify the latter of their intention to sell the property and give it priority over other
buyers. It is only upon failure of L & R Corporation to exercise its right of first refusal could the spouses Litonjua
validly sell the subject properties to others, under the same terms and conditions offered to L & R Corporation.
What then is the status of the sale made to PWHAS in violation of L & R Corporation's contractual right of first
refusal? On this score, we agree with the Amended Decision of the Court of Appeals that the sale made to PWHAS is
rescissible. The case of Guzman, Bocaling & Co. v. Bonnevie 33 is instructive on this point
The respondent court correctly held that the Contract of Sale was not voidable but rescissible.
Under Article 1380 to 1381(3) of the Civil Code, a contract otherwise valid may nonetheless be
subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors
could be validly accorded by the Bonnevies for they had substantial interest that were prejudiced
by the sale of the subject property to the Contract of Lease.
According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to
third persons, to secure reparation for damages caused to them by a contract, even if this should be
valid, by means of the restoration of things to their condition at the moment prior to the celebration
of said contract. It is a relief allowed for one of the contracting parties and even third persons from
all injury and damage the contract may cause, or to protect some incompatible and preferential
right created by the contract. Rescission implies a contract which, even if initially valid, produces a
lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity.
(emphasis, Ours)
It was then held that the Contract of Sale there, which violated the right of first refusal, was rescissible.
In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R Corporation over the
subject properties since the Deed of Real Estate Mortgage containing such a provision was duly registered with the
Register of Deeds. As such, PWHAS is presumed to have been notified thereof by registration, which equates to
notice to the whole world.
We note that L & R Corporation had always expressed its willingness to buy the mortgaged properties on equal
terms as PWHAS. Indeed, in its Answer to the Complaint filed, L & R Corporation expressed that it was ready, willing
and able to purchase the subject properties at the same purchase price of P430,000.00, and was agreeable to pay
the difference between such purchase price and the redemption price of P249,918.77, computed as of August 13,
1981, the expiration of the one-year period to redeem. That it did not duly exercise its right of first refusal at the
opportune time cannot be taken against it, precisely because it was not notified by the spouses Litonjua of their
intention to sell the subject property and thereby, to give it priority over other buyers.
All things considered, what then are the relative rights and obligations of the parties? To recapitulate:, the sale
between the spouses Litonjua and PWHAS is valid, notwithstanding the absence of L & R Corporation's prior written
consent thereto. Inasmuch as the sale to PWHAS was valid, its offer to redeem and its tender of the redemption
Page 8 of 123

price, as successor-in-interest of the spouses Litonjua, within the one-year period should have been accepted as
valid by the L & R Corporation. However, while the sale is, indeed, valid, the same is rescissible because it ignored L
& R Corporation's right of first refusal.
Foreseeing a possible rescission of the sale, the spouses Litonjua contend that with the restoration of the original
status quo, with no sale having been made, they should now be allowed to redeem the subject properties, the
period of redemption having been suspended during the period of litigation. In effect, the spouses Litonjua want to
retain ownership of the same. We cannot, however, sanction this belated reversal of the spouses Litonjua's decision
to sell. To do so would afford them undue advantage on account of the appreciation of the value of the subject
properties in the intervening years when they precisely were the ones who violated and ignored the right of first
refusal of L & R Corporation over the same. Moreover, it must be stressed that in rescinding the sale made to
PWHAS, the purpose is to uphold and enforce the right of first refusal of L &R Corporation.
WHEREFORE, the Decision appealed from is hereby AFFIRMED with the following MODIFICATIONS:
(a) Ordering the rescission of the sale of the mortgaged properties between
petitioners spouses Reynaldo and Erlinda Litonjua and Philippine White House Auto
Supply, Inc. and ordering said spouses to return to Philippine White House Auto
Supply, Inc. the purchase price of P430,000.00;
(c) Disallowing, due to the rescission of the sale made in its favor, the redemption
made by Philippine White House Auto Supply, Inc. and ordering Quezon City Sheriff
Roberto Garcia to return to it the "redemption" check of P240,798.94;
(d) Allowing respondent L & R Corporation to retain its consolidated titles to the
foreclosed properties but ordering it to pay to the Litonjua spouses the additional
sum of P189,201.96 representing the difference from the purchase price of
P430,000.00 in the rescinded sale;
(e) Deleting the awards for moral and exemplary damages and attorney's fees to
the respondents.
No pronouncement as to costs.
SO ORDERED.

Page 9 of 123

G.R. No. 139437


December 8, 2000
LANGKAAN REALTY DEVELOPMENT, INC., petitioner, vs. UNITED COCONUT PLANTERS BANK, and HON.
COURT OF APPEALS, respondents.
This is a Petition for Review on Certiorari under Rule 45 seeking to set aside the decision of the Court of Appeals in
CA-G.R. No. CV 53514 which affirmed the decision of the Regional Trial Court of Imus, Cavite, Branch 20, in Civil
Case No. 360-89, and the Resolution of the Court of Appeals denying the petitioner's Motion for Reconsideration.
The antecedent facts are as follows:
Petitioner Langkaan Realty Development Corporation (LANGKAAN, for brevity) was the registered owner of a
631,693 square meter parcel of land covered by Transfer Certificate of Title No. 111322, and located at Langkaan,
Dasmarinas, Cavite.
On April 8, 1983, petitioner LANGKAAN executed a Real Estate Mortgage over the above-mentioned property in
favor of private respondent United Coconut Planter's Bank (UCPB) as a security for a loan obtained from the bank
by Guimaras Agricultural Development, Inc. (GUIMARAS) in the amount of P3,000,000.00. 1 LANGKAAN and
GUIMARAS agreed to share in the total loan proceeds that the latter may obtain from UCPB. 2 Subsequently, another
loan of P2,000,000.00 was obtained by GUIMARAS, totaling its obligation to the bank to P5,000,000.00. The loan
was fully secured by the real estate mortgage which covered all obligations obtained from UCPB by either
GUIMARAS or LANGKAAN "before, during or after the constitution" of the mortgage. 3 Also provided in the mortgage
agreement is an acceleration clause stating that any default in payment of the secured obligations will render all
such obligations due and payable, and that UCPB may immediately foreclose the mortgage. 4
GUIMARAS defaulted in the payment of its loan obligation. 5 On July 28, 1986, private respondent UCPB filed a
"Petition for Sale under Act No. 31356 , as amended", with the Office of the Clerk of Court and Ex-officio Sheriff of
RTC of Imus, Cavite. The "petition" was given due course, and a Notice of Extra-judicial Sale of LANGKAAN's
property was issued by Acting Clerk of Court II and Ex-officio Sheriff Regalado Eusebio on August 4, 1986, setting
the sale on August 29, 1986 at the main entrance of the Office of the Clerk of Court of RTC of Imus. 7 The Notice of
Extra-judicial Sale was published in the "Record Newsweekly", 8 and was certified by Court Deputy Sheriff Nonilon A.
Caniya to have been duly posted.9
On August 29, 1986, the mortgaged property was sold for P3,095,000.00 at public auction to private respondent
UCPB as the highest bidder, and a corresponding Certificate of Sale was issued in favor of the bank.
As petitioner LANGKAAN failed to redeem the foreclosed property within the redemption period, the title of the
property was consolidated in the name of UCPB on December 21, 1987, and a new Transfer Certificate of Title with
no. T-232040 was issued in the latter's favor.
On March 31, 1989, LANGKAAN, through counsel, Atty. Franco L. Loyola wrote UCPB a letter offering to buy back the
foreclosed property for P4,000,000.00.10 This offer was rejected by the bank in a letter dated May 22, 1989, stating
that the current selling price for the property was already P6,500,000.00.11
On May 30, 1989, petitioner LANGKAAN filed a Complaint for Annulment of Extra-judicial Foreclosure and Sale, and
of TCT No. 232040 with Damages, with the RTC of Imus, Cavite, docketed as Civil Case No. 360-89.
After trial, the RTC of Imus ruled in favor of private respondent UCPB, and dismissed the petition of LANGKAAN for
lack of merit. On appeal, the Court of Appeals affirmed en toto the decision of the RTC of Imus. The petitioner filed a
Motion for Reconsideration which was denied by the Court of Appeals in a Resolution dated July 28, 1999. Hence
this petition.
The sole issue in this case, as stated by the petitioner in its Memorandum, is whether or not the extra-judicial
foreclosure sale is valid and legal on account of the alleged non-compliance with the provisions of Act No. 3135 on
venue, posting and publication of the Notice of Sale, and of the alleged defects in such Notice. 12
At the outset, it must be stated that only questions of law may be raised before this Court in a Petition for Review
under Rule 45 of the Revised Rules of Civil Procedure. 13 This Court is not a trier of facts, and it is not the function of
this Court to re-examine the evidences submitted by the parties. 14
After a careful analysis of the issue set forth by the petitioner, we find the same not to involve a pure question of
law15 It has been our consistent ruling that the question of compliance or non-compliance with notice and
publication requirements of an extra-judicial foreclosure sale is a factual issue binding on this Court. 16 In the case of
Reyes vs. Court of Appeals, we declined to entertain the petitioner's argument as to lack of compliance with the
requirements of notice and publication prescribed in Act No. 3135, for being factual. 17 Hence, the matter of
sufficiency of posting and publication of a notice of foreclosure sale need not be resolved by this Court, especially
since the findings of the Regional Trial Court thereon were sustained by the Court of Appeals. Well-established is the
rule that "factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when
the said court affirms the factual findings of the trial court." 18
The RTC found the posting of the Notice of Sale to have been duly complied with, thus:
"As regards the posting of the notices of sale, Deputy Sheriff Nonilon Caniya has categorically declared that he
posted the same in three conspicuous places, to wit: (1) Municipal Hall of Dasmarinas, Cavite, (2) Barangay Hall of
Langkaan, and (3) in the place where the property is located (Exh. "6"). He added gratuitously that he even posted
it at the Dasmarinas Public Market. Such being the case, the negative testimony of Virgilio Mangubat, a retired
sheriff of Trece Martires City, to the effect that he did not see any notice posted in the Bulletin Board of Dasmarinas,
Cavite cannot prevail over the positive testimony of Deputy Sheriff Caniya. In like manner, the general denial
Page 10 of 123

advanced by Barangay Captain Benjamin Sangco of Langkaan that no notice was posted at the bulletin board of
said barangay in August, 1986 cannot take precedence over the positive declaration of Deputy Sheriff Caniya who
is presumed to have performed his duties as such. Credence is generally accorded the testimonies of (sic) sheriff
who is presumed to have performed their (sic) duties in regular manner. xxx
xxx

xxx

xxx

"xxx In another case, Bonnevie vs. Court of Appeals, 125 SCRA 122, it was even ruled that 'a single act of posting
satisfies the requirement of law'."19
Due publication was likewise found by the RTC to have been effected.
"It is beyond dispute that notice of Sheriff's Sale was published in "Record Newsweekly", a newspaper of general
circulation in the Province of Cavite after a raffle among the accredited newspaper thereat. No evidence was
adduced by plaintiff to disprove this fact. Its claim that said newspaper has no subscribers in Cavite is without merit
and belied by the Affidavit of Publication executed by the Publisher of Records Newsweekly (Exh. "5") and by the
Clerk of Court and Ex-Oficio Sheriff of the Multiple Sala of Imus, Cavite. As held in the case of Olizon vs. Court of
Appeals, 236 SCRA 148, 'personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary.
Sec. 3 of Act No. 3135 governing extra-judicial foreclosure of real estate mortgages, as amended by Act No. 4118,
requires only posting of the notice of sale in three public places and the publication of that notice in a newspaper of
general circulation. Hence, the lack of personal notice to the mortgagors is not a ground to set aside the foreclosure
sale.' It was further held thereat (ibid) that 'publication of the notice alone in the newspaper of general circulation is
more than sufficient compliance with the notice-posting requirement of the law.'" 20
On appeal, the findings of the RTC were sustained by the Court of Appeals, to wit:
"Next, appellant contends that the notice of sale was posted, at the very least, at only one [1] public place - the
Municipal Building of Dasmarinas, Cavite - contrary to and in violation of the requirement in Act No. 3135, as
amended, that said notice shall be posted in at least three [3] public places. Deputy Sheriff Nonilon Caniya,
however, has categorically declared that he had posted Notices of Sale in four public places; namely: (1) Municipal
Hall of Dasmarinas, Cavite, (2) Barangay Hall of Langkaan, (3) in the place where the property is located and (4) at
the Dasmarinas Public Market (t.s.n., January 12, 1994, pp. 6-11). We give credence to said Sheriff's testimony and
accord his actions with the presumption of regularity of performance, having come from a public officer to whom no
improper motive to testify has been attributed.
"At any rate, even if it were true that the Notice of Sale was not posted in three public places as required, this would
not invalidate the foreclosure conducted. As explained in Olizon vs. Court of Appeals, 238 SCRA 148, 155-156 'Furthermore, unlike the situation in previous cases where the foreclosure sales were annulled by reason of failure to
comply with the notice requirement under Section 3 of Act 3135, as amended, what is allegedly lacking here is the
posting of the notice in three public places, and not the publication thereof in a newspaper of general circulation.
'We take judicial notice of the fact that newspaper publications have more far-reaching effects than posting on
bulletin boards in public places. There is a greater probability that an announcement or notice published in a
newspaper of general circulation which is distributed nationwide, shall have a readership of more people than that
posted in a public bulletin board, no matter how strategic its location may be, which caters only to a limited few.
Hence the publication of the notice of sale in the newspaper of general circulation alone is more than sufficient
compliance with the notice-posting requirement of the law. By such publication, a reasonably wide publicity had
been effected such that those interested might attend the public sale, and the purpose of the law had been thereby
subserved.
'The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of
the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a
sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency
of the notice; but if mistakes or omissions occur in the notices of sale which are calculated to deter or mislead
bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or
omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto.'
"In the case at bench, this objective was attained considering that there was sufficient publicity of the sale through
the Record Newsweekly.
"Appellant next charges that the certificate of posting executed by Deputy Sheriff Caniya is a falsified document
resulting from the unlawful intercalations made thereon, calculated to change the import and meaning of said
certificate; and contains untruthful statements of facts. A certificate of posting is however not a statutory
requirement and as such, is not considered indispensable for the validity of a foreclosure sale under Act 3135 (see
Bohanan vs. Court of Appeals, 256 SCRA 355)
"Again, We accord a presumption of regularity in the conduct of the raffle whereby publication of the Notice of Sale
was awarded to the Record Newsweekly.
"As to the erroneous designation of Guimaras Agricultural Development, Inc. as a mortgagor as well as the mistakes
in the technical description of the subject property, both appearing in the Notice of Sale, We find these immaterial
errors and mistakes which do not affect the sufficiency of the Notice (Olizon vs. Court of Appeals, supra.) xxx "21
We refuse to disturb the factual findings of the lower courts. The notice of the extra-judicial foreclosure sale was
duly published and posted, and clerical errors therein are not sufficient to invalidate the notice and nullify the sale.
Page 11 of 123

We are left with the issue on the legal propriety of the venue of the extra-judicial foreclosure sale which we deem
proper for determination.
In ascertaining whether or not the venue of the extra-judicial foreclosure sale was improperly laid, it is imperative to
consult Act No. 3135, as amended, the law applicable to such a sale. 22 Act 3135 provides, insofar as pertinent, as
follows:
"SECTION 1. When a sale is made under a special power inserted in or attached to any real estate mortgage
hereafter made as security for the payment of money or the fulfillment of any other obligation, the provisions of the
following sections shall govern as to the manner in which the sale and redemption shall be effected, whether or not
provision for the same is made in the power.
SEC. 2. Said sale cannot be made legally outside of the province which the property sold is situated; and in case the
place within said province in which the sale is to be made is the subject of stipulation, such sale shall be made in
said place or in the municipal building of the municipality in which the property or part thereof is situated."
Thus, the extra-judicial foreclosure sale cannot be held outside the province where the property is situated. Should
a place within the province be a subject of stipulation, the sale shall be held at the stipulated place or in the
municipal building of the municipality where the property or part thereof is situated.
In the case at bar, the Real Estate Mortgage contract contains the following stipulation on the venue of the auction
sale, viz:
"ARTICLE XX
VENUE OF AUCTION SALE
It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, as amended, and Presidential
Decree No. 385, the auction sale shall be held at the capital of the province, if the property is within the territorial
jurisdiction of the province concerned, or shall be held in the city, if the property is within the territorial jurisdiction
of the city concerned."23
The foreclosed property is located in Dasmarinas, a municipality in Cavite. Dasmarinas is within the territorial
jurisdiction of the province of Cavite, but not within that of the provincial capital, Trece Martires City, nor of any
other city in Cavite. The territorial jurisdiction of Dasmarinas is covered by the RTC of Imus, 24 another municipality
in Cavite.
The petitioner contends that the extra-judicial foreclosure sale should have been held in Trece Martires City, the
capital of Cavite, following the above-quoted stipulation in the real estate mortgage contract; or, in the alternative,
Section 2 of Act 3135 should have been applied, and the sale conducted at the municipal building of Dasmarinas
where the property is situated.25 On the other hand, the private respondent argues that the extra-judicial
foreclosure sale was properly held at the main entrance of the Office of the Clerk of Court and Ex-officio Sheriff of
the RTC of Imus which has territorial jurisdiction over Dasmarinas, as provided in the Supreme Court Administrative
Order No. 7 (1983) issued pursuant to Section 18 of B.P. Blg. 129. 26 The private respondent further contends that
Section 18 of B.P. Blg. 129 repealed the provision on venue under Section 2 of Act 3135.
We agree with the petitioner that under the terms of the contract, the extra-judicial foreclosure sale could be held
at Trece Martires, the capital of the province which has territorial jurisdiction over the foreclosed property. The
stipulation of the parties in the real estate mortgage contract is clear, and therefore, should be respected absent
any showing that such stipulation is contrary to law, morals, good customs, public policy or public order. A contract
is the law between the parties.27 However, since the stipulation of the parties lack qualifying or restrictive words to
indicate the exclusivity of the agreed forum, the stipulated place is considered only as an additional, not a limiting
venue.28 Therefore, the stipulated venue and that provided under Act 3135 can be applied alternatively. Now,
applying Act 3135, the venue of the sale should be at the municipal building of Dasmarinas since the foreclosed
property is located in the municipality of Dasmarinas.
We cannot sustain the contention of the private respondent that the proper venue for the sale of the Dasmarinas
property is the RTC of Imus which has territorial jurisdiction thereon as provided under SC Administrative Order No.
7 issued pursuant to Section 18 of B.P. Blg. 129, which allegedly repealed the venue provision under Section 2 of
Act 3135.
Section 18 of B.P. Blg. 12929 provides for the power of the Supreme Court to define the territorial jurisdiction of the
Regional Trial Courts. Pursuant thereto, the Supreme Court issued Administrative Order No. 7 30 , placing the
municipalities of Imus, Dasmarinas and Kawit within the territorial jurisdiction of the RTC of Imus. 31 On the other
hand, Section 2 of Act 3135 refers to the venue of an extra-judicial foreclosure sale. 32
It is difficult to fathom how a general law such as B.P. Blg. 129 can repeal a special law like Act 3135. Aside from
involving two entirely different legal concepts such as jurisdiction (B.P. Blg. 129) and venue (Section 2 of Act
3135),33 this proposition goes against a basic rule in statutory construction that the enactment of a later legislation
which is a general law cannot be construed to have repealed a special law. 34 Much less can the private respondent
invoke Supreme Court administrative issuances35 as having amended or repealed Section 2 of Act 3135. A statute is
superior to an administrative issuance, and the former cannot be repealed or amended by the latter. 36
Notwithstanding the foregoing, however, this Court finds the extra-judicial foreclosure sale held at the RTC of Imus
to be valid and legal.

Page 12 of 123

Well-known is the basic legal principle that venue is waivable. Failure of any party to object to the impropriety of
venue is deemed a waiver of his right to do so. In the case at bar, we find that such waiver was exercised by the
petitioner.
An extra-judicial foreclosure sale is an action in rem, and thus requires only notice by publication and posting to
bind the parties interested in the foreclosed property. No personal notice is necessary. As such, the due publication
and posting of the extra-judicial foreclosure sale of the Dasmarinas property binds the petitioner, and failure of the
latter to object to the venue of the sale constitutes waiver.
In the testimony of the President of LANGKAAN, Alfredo Concepcion, the latter admitted that he was informed
sometime in 1986 by GUIMARAS President Antonio Barredo about the foreclosure sale of the Dasmarinas property
held on August 6, 1986, viz:
"COURT:
Q: ATTORNEY CONCEPCION, YOU SAID THAT YOU CAME TO KNOW THAT THE PROPERTY OF YOUR CORPORATION WAS
SOLD BY COCONUT PLANTERS BANK ONLY IN 1989?
A: At or about the date when Atty. Loyola made that written offer to the bank.
Q: IN THE YEAR 1989 OR PRIOR TO THAT DATE
ATTY. LOYOLA:
I think 1986, Your Honor.
COURT:
1986 WHEN HE LEARNED ABOUT THE SALE?
ATTY. LOYOLA:
Yes, Your Honor.
xxx

xxx

xxx

xxx

xxx

xxx

ATTY CATUBAY:

Q: So you talked to Ex-Justice Barredo?


A: I did.
Q: And of course he informed you about the proposal that took place on August 6, 1986?
A: He told me that he is aware.
Q: And you were also aware of the Certificate of Sale executed by the Sheriff, isn't it? (sic)
A: At that point there was a foreclosure sale and that it was the mortgagee bank that was the highest bidder.
Q: After you were informed there was a foreclosure sale, you did not do anything about it, isn't it? (sic)
A: Well, at that point when I was so informed, I did not take any step yet but on the first opportunity, I consulted
Atty. Loyola.1wphi1
Q: And that was in 1986 also?
A: 1986, correct."37
From 1986 to April 1989, despite knowledge of the foreclosure sale of their property, the President of petitioner
LANGKAAN did not take any step to question the propriety of the venue of the sale. It was only on May 30, 1989
that the petitioner filed a Complaint for Annulment of the foreclosure sale, and only after its offer to repurchase the
foreclosed property, the title to which had been consolidated in the name of private respondent UCPB, had been
rejected by the bank.
In the letter denominated as "Offer to Reacquire by Langkaan Realty Development, Inc. Without Prejudice",
petitioner LANGKAAN, through its counsel Atty. Franco L. Loyola, who is likewise the petitioner's counsel in this case,
acknowledged that the title to the property "then registered" under the name of LANGKAAN has been consolidated
under the name of UCPB, which was the highest bidder in the extra-judicial foreclosure sale conducted by the
sheriff.38 Nowhere can it be found that the petitioner objected to or opposed the holding of the sale at the RTC of
Page 13 of 123

Imus. By neglecting to do so, petitioner LANGKAAN is deemed to have waived its right to object to the venue of the
sale, and cannot belatedly raise its objection in this petition filed before us.
WHEREFORE, premises considered, the petition is hereby DENIED.
SO ORDERED.

Page 14 of 123

G.R. No. L-23493 August 23,1978


DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee, vs. JOVENCIO A. ZARAGOZA and AVELINA E.
ZARAGOZA, defendants-appellants.
This is an appeal from the judgment of the Court of First instance of Manila in Civil Case No. 47325, sentencing
defendants-appellants Jovencio A. Zaragoza and Avelina E. Zaragoza to pay jointly and severally plaintiff-appellee
Development Bank of the Philippines the sum of P7,779.36, with interest thereon at a legal rate from July 10, 1957
until fully paid, plus the sum equivalent to 10% of the amount due as attorney's fees and costs of the suit.
The issues raised in this appeal are: (a) whether or not the mortgagee is entitled to claim the deficiency in
extrajudicial foreclosure of mortgage; and (b) whether or not additional interests are properly chargeable on the
balance of the indebtedness during the period from notice of sale to actual sale.
The following facts are not disputed: Appellants obtained, on July 19, 1949, a loan of P30,000 from the appellee
which was secured by a real estate mortgage. It was stipulated that upon failure of appellants to pay the
amortization due, according to the terms and conditions thereof, appellee shall have the authority to foreclose
extrajudicially the mortgaged property, pursuant to Republic Act No. 3135, as amended. Conformably to this
stipulation, upon breach of the conditions of the mortgage, appellee foreclosed extrajudicially the mortgage on
December 10, 1952, and the Provincial Sheriff of Pangasinan posted the requisite notice of the sale at public
auction of the mortgaged property.
On June 10, 1957, the property was sold at public auction to the appellee, being the highest bidder therein, for the
sum of P21,035.00. After applying the proceeds of the sale to satisfy the outstanding balance of the indebtedness in
the amount of P28,914.36, it was found that appellants still owed the appellee in the amount of P7,779.36. Suit for
the deficiency with preliminary attachment was filed by appellee against appellants on June 20, 1961. In their
answer, appellants averred that after an extrajudicial foreclosure of property, no deficiency judgment would lie and
that from the date of the foreclosure to the sale of said property, the mortgagor is no longer liable for the interest
on the loan. The aforesaid contentions of appellants were overruled by the trial court, who thereupon rendered the
aforesaid judgment in favor of the appellee. Contending that the trial court erred in resolving those issues of law,
appellants appealed directly to this court.
We find the appeal without merit.
The first issue had already been resolved in an earlier case. Thus, in Philippine Bank of Commerce v. Tomas de Vera
1
this Court ruled that in extrajudicial foreclosure of mortgage, where the proceeds of the sale is insufficient to cover
the debt, the mortgagee is entitled to claim the deficiency from the debtor. Explaining the reasons for this rule, the
Court stated:
The sole issue to be resolved in this case is whether the trial court acted correctly in holding
appellee Bank entitled to recover from appellant the sum of P99,033.20 as deficiency arising after
the extrajudicial foreclosure, under Act No. 3135, as amended, of the mortgaged properties in
question. It is urged, on appellant's part, that since Act No. 3135, as amended, is silent as to the
mortgagee's right to recover deficiency arising after an extrajudicial foreclosure sale of mortgage,
he (mortgagee) may not recover the same.
A reading of the provisions of Act No. 3135, as amended (re extrajudicial foreclosure) discuss
nothing, it is true, as to the mortgagee's right to recover such deficiency. But neither do we find any
provision thereunder which expressly or impliedly prohibits such recovery.
Article 2131 of the new Civil Code, on the contrary, expressly provides that 'The form, extent and
consequences of a mortgage, both as to its constitution, modification and extinguishment, and as to
other matters not included in this Chapter, shall be governed by the provisions of the Mortgage Law
and of the Land Registration Law. Under the Mortgage Law, which is still in force, the mortgagee has
the right to claim for the deficiency resulting from the price obtained in the sale of the real property
at public auction and the outstanding obligation at the time of the foreclosure proceedings. (See
Soriano v. Enriquez, 24 Phil. 584; Banco de Islas Filipinos V. Concepcion e Hijos, 53 Phil. 86; Banco
Nacional v. Barreto, 53 Phil. 101). Under the Rules of Court (Sec. 6, Rule 70), 'Upon the sale of any
real property, under an order for a sale to satisfy a mortgage or other incumbrance thereon, if there
be a balance due to the plaintiff after applying the Proceeds of the sale, the court, upon motion,
should render a judgment against the defendant for any such balance for which by the record of the
case, he may be Personally liable to the plaintiff, ...' It is true that this refers to a judicial foreclosure,
but the underlying principle is the same, that the mortgage is but a security and not a satisfaction
of indebtedness.
xxx xxx xxx
Let it be noted that when the legislature intends to foreclose the right of a creditor to sue for any
deficiency resulting from the foreclosure of the security given to guarantee the obligation, it so
expressly provides. Thus, in respect to pledges, Article 2115 of the new Civil Code expressly
states: ... If the Price of the sale is less (than the amount of the principal obligation) neither shall the
creditor be entitled to recover the deficiency, notwithstanding any stipulation to the contrary.'
Likewise, in the event of a foreclosure of a chattel mortgage on the thing sold in installments he
(the vendor) shall have no further action against the purchaser to recover any unpaid balance Of
the price. Any agreement to the contrary shall be void.' (Article 1484, paragraph 3, Ibid.). It is then
clear that in the absence of a similar provision in Act No. 3135, as amended, it can not be concluded
that the creditor loses his right given him under the Mortgage Law and recognized in the Rules Of
Court, to take action for the recovery of any unpaid balance on the Principal obligation, simply
because he has chosen to foreclose his mortgage extra-judically pursuant to a special Power of
Page 15 of 123

attorney given him by the mortgagor in the mortgage contract. As stated by this Court in Medina v.
Philippine National Bank (56 Phil. 651), a case analogous to the one at bar, the step taken by the
mortgagee-bank in resorting to extrajudicial foreclosure under Act 3135, was merely to find a
proceeding for the sale, and its action can not be taken to mean a waiver of its right to demand the
payment of the whole debt. (pp. 1028-1030).
This rule was reiterated in Development Bank of the Philippines v. Vda de Moll.

In connection with the second issue, appellants argue that since the appellee held in abeyance the sale of the
property for a period of four (4) years, they alone should suffer the consequences of such delay. It was further
contended that the debtor's liability in judicial foreclosures is limited to the amount due at the time of the
foreclosure and, therefore, such should also apply to extrajudicial foreclosures. By way of refutation appellee
explained that the seemingly long interval between the date of issuance of the Sheriff's Notice of Sale and the date
of sale was due to the numerous transfers made of the date of the sale upon requests of the appellants themselves.
Each transfer is covered by a corresponding agreement for postponement, executed jointly by appellants and
appellee. Certainly, under such circumstances, appellants cannot take advantage of the delay which was their own
making, to the prejudice of the other party. Apart from this consideration, it must be noted that a foreclosure of
mortgage means the termination of all rights of the mortgagor in the property covered by the mortgage. It denotes
the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the
sale itself. In judicial foreclosures, the "foreclosure" is not complete until the Sheriff's Certificate is executed,
acknowledged and recorded. In the absence of a Certificate of Sale, no title passes by the foreclosure proceedings
to the vendee. 3 It is only when the foreclosure proceedings are completed and the mortgaged property sold to the
purchaser that all interests of the mortgagor are cut off from the property. This principle is applicable to
extrajudicial foreclosures. Consequently, in the case at bar, prior to the completion of the foreclosure, the
mortgagor is, therefore, liable for the interest on the mortgage. 4
ACCORDINGLY, the judgment appealed from is hereby AFFIRMED. Costs against appellants.

Page 16 of 123

G.R. No. 138292


April 10, 2002
KOREA EXCHANGE BANK, petitioner, vs. FILKOR BUSINESS INTEGRATED, INC., KIM EUNG JOE, and LEE
HAN SANG, respondents.
This petition assails the order1 dated April 16, 1999 of the Regional Trial Court of Cavite City, Branch 88, in Civil
Case No. N-6689. Said order denied petitioner's partial motion for reconsideration of the trial court's order 2 dated
March 12, 1999 whereby respondents were ordered to pay petitioner various sums of U.S. dollars as payment of the
former's various loans with interest but omitted to state that the property mortgaged as security for said loans be
foreclosed and sold at public auction in case respondents fail to pay their obligations to petitioner ninety days from
entry of judgment.
The facts are summarized from the findings of the trial court.
On January 9, 1997, respondent Filkor Business Integrated, Inc. (Filkor), borrowed US$140,000 from petitioner Korea
Exchange Bank, payable on July 9, 1997. Of this amount, only US$40,000 was paid by Filkor. 3
In addition, Filkor executed nine trust receipts in favor of petitioner, from June 26, 1997 to September 11, 1997.
However, Filkor failed to turn over to petitioner the proceeds from the sale of the goods, or the goods themselves as
required by the trust receipts in case Filkor could not sell them. 4
In the period from June 9, 1997 to October 1, 1997, Filkor also negotiated to petitioner the proceeds of seventeen
letters of credit issued by the Republic Bank of New York and the Banque Leumi France, S.A. to pay for goods which
Filkor sold to Segerman International, Inc. and Davyco, S.A. When petitioner tried to collect the proceeds of the
letters of credit by presenting the bills of exchange drawn to collect the proceeds, they were dishonored because of
discrepancies.5
Prior to all the foregoing, in order to secure payment of all its obligations, Filkor executed a Real Estate Mortgage on
February 9, 1996. It mortgaged to petitioner the improvements belonging to it constructed on the lot it was leasing
at the Cavite Export Processing Zone Authority.6 Respondents Kim Eung Joe and Lee Han Sang also executed
Continuing Suretyships binding themselves jointly and severally with respondent Filkor to pay for the latter's
obligations to petitioner.7
As respondents failed to make good on their obligations, petitioner filed Civil Case No. N-6689 in the Regional Trial
Court of Cavite City, docketed as "Korea Exchange Bank vs. Filkor Business Integrated, Inc." In its complaint,
petitioner prayed that (a) it be paid by respondents under its twenty-seven causes of action; (b) the property
mortgaged be foreclosed and sold at public auction in case respondents failed to pay petitioner within ninety days
from entry of judgment; and (c) other reliefs just and equitable be granted. 8
Petitioner moved for summary judgment pursuant to Section 1, Rule 35 of the 1997 Rules of Civil Procedure. On
March 12, 1999, the trial court rendered its order granting petitioner's motion, reasoning as follows:
xxx
It appears that the only reason defendants deny all the material allegations in the complaint is because the
documents attached thereto are mere photocopies and not the originals thereof. Section 7, Rule 8 of the
Rules of Court allows copies of documents to be attached to the pleading as an exhibit. Defendants are,
therefore, deemed to have admitted the genuineness and due execution of all actionable documents
attached to the complaint inasmuch as they were not specifically denied, pursuant to Section 8 of the Rule
8 of the Rules of Court.
In the case at bar, there is clearly no substantial triable issue, hence, the motion for summary judgment
filed by plaintiff is proper.
A summary of judgment is one granted by the court upon motion by a party for an expeditious settlement
of the case, there appearing from the pleadings, depositions, admissions and affidavits that there are no
important questions or issues of fact involved (except as to the amount of damages) and that, therefore,
the moving party is entitled to a judgment as a matter of law (Sections 1, 2, 3, Rule 35, 1997 Rules of Civil
Procedure).
The court having taken into account the pleadings of the parties as well as the affidavits attached to the
motion for summary judgment and having found that there is indeed no genuine issue as to any material
fact and that plaintiff is entitled to a summary of judgment as a matter of law, hereby renders judgment for
the plaintiff and against the defendants, ordering said defendants jointly and severally to pay plaintiff, as
follows9
The trial court then rendered judgment in favor of petitioner, granting its prayers under all its twenty-seven causes
of action. It, however, failed to order that the property mortgaged by respondent Filkor be foreclosed and sold at
public auction in the event that Filkor fails to pay its obligations to petitioner.
Petitioner filed a motion for partial reconsideration of the trial court's order, praying that the aforesaid relief of
foreclosure and sale at public auction be granted. In an order dated April 16, 1999, the trial court denied
petitioner's motion, ruling as follows:
Plaintiff, in opting to file a civil action for the collection of defendants obligations, has abandoned its
mortgage lien on the property subject of the real estate mortgage.
Page 17 of 123

The issue has already been resolved in Danao vs. Court of Appeals, 154 SCRA 446, citing Manila Trading
and Supply Co. vs. Co Kim, et al., 71 Phil. 448, where the Supreme Court ruled that:
The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead,
an ordinary action to recover the indebtedness with the right to execute a judgment thereon on all
the properties of the debtor including the subject matter of the mortgage, subject to the
qualification that if he fails in the remedy by him elected, he cannot pursue further the remedy he
has waived.
WHEREFORE, the Partial Motion for Reconsideration filed by the plaintiff of the Court's Order dated March
12, 1999 is hereby denied for lack of merit.
SO ORDERED.10
Hence, the present petition, where petitioner ascribes the following error to the trial court.
THE REGIONAL TRIAL COURT OF CAVITE CITY ERRED IN RULING THAT PETITIONER HAD ABANDONED THE
REAL ESTATE MORTGAGE IN ITS FAVOR, BECAUSE IT FILED A SIMPLE COLLECTION CASE. 11
The resultant issue is whether or not petitioner's complaint before the trial court was an action for foreclosure of a
real estate mortgage, or an action for collection of a sum of money. In addition, we must also determine if the
present appeal was correctly lodged before us rather than with the Court of Appeals.
In petitioner's complaint before the trial court, Paragraph 183 thereof alleges:
183. To secure payment of the obligations of defendant Corporation under the First to the Twenty-Seventh
Cause of Action, on February 9, 1996, defendant Corporation executed a Real Estate Mortgage by virtue of
which it mortgaged to plaintiff the improvements standing on Block 13, Lot 1, Cavite Export Processing
Zone, Rosario, Cavite, belonging to defendant Corporation covered by Tax Declaration No. 5906-1 and
consisting of a one-story building called warehouse and spooling area, the guardhouse, the cutting/sewing
area building and the packing area building. (A copy of the Real Estate Mortgage is attached hereto as
Annex "SS" and made an integral part hereof.)12
This allegation satisfies in part the requirements of Section 1, Rule 68 of the 1997 Rules of Civil Procedure on
foreclosure of real estate mortgage, which provides:
SECTION 1. Complaint in action for foreclosure. In an action for the foreclosure of a mortgage or other
encumbrance upon real estate, the complaint shall set forth the date and due execution of the mortgage;
its assignments, if any; the names and residences of the mortgagor and the mortgagee; a description of the
mortgaged property; a statement of the date of the note or other documentary evidence of the obligation
secured by the mortgage, the amount claimed to be unpaid thereon; and the names and residences of all
persons having or claiming an interest in the property subordinate in right to that of the holder of the
mortgage, all of whom shall be made defendants in the action.
In Paragraph 183 above, the date and due execution of the real estate mortgage are alleged. The properties
mortgaged are stated and described therein as well. In addition, the names and residences of respondent Filkor, as
mortgagor, and of petitioner, as mortgagee, are alleged in paragraphs 1 and 2 of the complaint. 13 The dates of the
obligations secured by the mortgage and the amounts unpaid thereon are alleged in petitioner's first to twentyseventh causes of action.14 Moreover, the very prayer of the complaint before the trial court reads as follows:
WHEREFORE, it is respectfully prayed that judgment be rendered:
xxx
2. Ordering that the property mortgaged be foreclosed and sold at public auction in case defendants fail to
pay plaintiff within ninety (90) days from entry of judgment.
x x x15
Petitioner's allegations in its complaint, and its prayer that the mortgaged property be foreclosed and sold at public
auction, indicate that petitioner's action was one for foreclosure of real estate mortgage. We have consistently ruled
that what determines the nature of an action, as well as which court or body has jurisdiction over it, are the
allegations of the complaint and the character of the relief sought. 16 In addition, we find no indication whatsoever
that petitioner had waived its rights under the real estate mortgage executed in its favor. Thus, the trial court erred
in concluding that petitioner had abandoned its mortgage lien on Filkor's property, and that what it had filed was an
action for collection of a sum of money.
Petitioner's action being one for foreclosure of real estate mortgage, it was incumbent upon the trial court to order
that the mortgaged property be foreclosed and sold at public auction in the event that respondent Filkor fails to pay
its outstanding obligations. This is pursuant to Section 2 of Rule 68 of the 1997 Rules of Civil Procedure, which
provides:
SEC. 2. Judgment on foreclosure for payment or sale.- If upon the trial in such action the court shall find the
facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the
mortgage debt or obligation, including interest and other charges as approved by the court, and costs, and
shall render judgment for the sum so found due and order that the same be paid to the court or to the
Page 18 of 123

judgment obligee within a period of not less than ninety (90) days nor more than one hundred twenty (120)
days from entry of judgment, and that in default of such payment the property shall be sold at public
auction to satisfy the judgment. (Italics supplied.)
Accordingly, the dispositive portion of the decision of the trial court dated March 12, 1999, must be modified to
comply with the provisions of Section 2 of Rule 68 of the 1997 Rules of Civil Procedure. This modification is subject
to any appeal filed by respondents of said decision.
On the propriety of the present appeal, we note that what petitioner impugns is the determination by the trial court
of the nature of action filed by petitioner, based on the allegations in the complaint. Such a determination as to the
correctness of the conclusions drawn from the pleadings undoubtedly involves a question of law. 17 As the present
appeal involves a question of law, petitioner appropriately filed it with this Court, pursuant to Section 1 of Rule 45 of
the 1997 Rules of Civil Procedure, which provides:
SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a judgment
or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of law which must be distinctly set forth. (Italics supplied).
There is no dispute with respect to the fact that when an appeal raises only pure questions of law, this Court has
jurisdiction to entertain the same.18
WHEREFORE, the petition is GRANTED. The Order dated March 12, 1999, of the Regional Trial Court of Cavite City,
Branch 88, in Civil Case No. N-6689 is hereby MODIFIED, to state that the mortgaged property of respondent Filkor
be ordered foreclosed and sold at public auction in the event said respondent fails to pay its obligations to
petitioner within ninety (90) days from entry of judgment.
No pronouncement as to costs.
SO ORDERED.

Page 19 of 123

G.R. No. 128567


September 1, 2000
HUERTA ALBA RESORT INC., petitioner, vs. COURT OF APPEALS and SYNDICATED MANAGEMENT GROUP
INC., respondents.
Litigation must at some time be terminated, even at the risk of occasional errors. Public policy dictates that once a
judgment becomes final, executory and unappealable, the prevailing party should not be denied the fruits of his
victory by some subterfuge devised by the losing party. Unjustified delay in the enforcement of a judgment sets at
naught the role of courts in disposing justiciable controversies with finality.
The Case
At bar is a petition assailing the Decision, dated November 14, 1996, and Resolution, dated March 11, 1997, of the
Court of Appeals in CA-G.R. No. 38747, which set aside the Order, dated July 21, 1995 and Order, dated September
4, 1997, of the Regional Trial Court of Makati City, in Civil Case No. 89-5424. The aforesaid orders of the trial court
held that petitioner had the right to redeem subject pieces of property within the one-year period prescribed by
Section 78 of Republic Act No. 337 otherwise known as the General Banking Act.
Section 78 of R.A. No. 337 provides that "in case of a foreclosure of a mortgage in favor of a bank, banking or credit
institution, whether judicially or extrajudicially, the mortgagor shall have the right, within one year after the sale of
the real estate as a result of the foreclosure of the respective mortgage, to redeem the property."
The Facts
The facts that matter are undisputed:
In a complaint for judicial foreclosure of mortgage with preliminary injunction filed on October 19, 1989, docketed
as Civil Case No. 89-5424 before the Regional Trial Court of Makati City, the herein private respondent sought the
foreclosure of four (4) parcels of land mortgaged by petitioner to Intercon Fund Resource, Inc. ("Intercon").
Private respondent instituted Civil Case No. 89-5424 as mortgagee-assignee of a loan amounting to P8.5 million
obtained by petitioner from Intercon, in whose favor petitioner mortgaged the aforesaid parcels of land as security
for the said loan.
In its answer below, petitioner questioned the assignment by Intercon of its mortgage right thereover to the private
respondent, on the ground that the same was ultra vires. Petitioner also questioned during the trial the correctness
of the charges and interest on the mortgage debt in question.
On April 30, 1992, the trial court, through the then Judge now Court of Appeals Justice Buenaventura J. Guerrero,
came out with its decision "granting herein private respondent SMGI's complaint for judicial foreclosure of
mortgage", disposing as follows:
"WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the following:
(1) P8,500,000.00 representing the principal of the amount due;
(2) P850,000.00 as penalty charges with interest at 6% per annum, until fully paid;
(3) 22% per annum interest on the above principal from September 6, 1998, until fully paid;
(4) 5% of the sum total of the above amounts, as reasonable attorney's fees; and,
(5) Costs.
All the above must be paid within a period of not less than 150 days from receipt hereof by the defendant.
In default of such payment, the four parcels of land subject matter of the suit including its improvements
shall be sold to realize the mortgage debt and costs, in the manner and under the regulations that govern
sales of real estate under execution."1
Petitioner appealed the decision of the trial court to the Court of Appeals, the appeal docketed as CA-G.R. CV No.
39243 before the Sixth Division of the appellate court, which dismissed the case on June 29, 1993 on the ground of
late payment of docket fees.
Dissatisfied with the dismissal of CA-G.R. No. 39243, petitioner came to this Court via a petition for certiorari,
docketed as G.R. No. 112044, which this court resolved to dismiss on December 13, 1993, on the finding that the
Court of Appeals erred not in dismissing the appeal of petitioner.
Petitioner's motion for reconsideration of the dismissal of its petition in G.R. No. 112044 was denied with finality in
this Court's Resolution promulgated on February 16, 1994. On March 10, 1994, leave to present a second motion for
reconsideration in G.R. No. 112044 or to submit the case for hearing by the Court en banc was filed, but to no avail.
The Court resolved to deny the same on May 11, 1994.
On March 14, 1994, the Resolution dated December 13, 1993, in G.R. No. 112044 became final and executory and
was entered in the Book of Entries of Judgment.

Page 20 of 123

On July 4, 1994, private respondent filed with the trial court of origin a motion for execution of the Decision
promulgated on April 30, 1992 in Civil Case No. 89-5424. The said motion was granted on July 15, 1994.
Accordingly, on July 15, 1994 a writ of execution issued and, on July 20, 1994, a Notice of Levy and Execution was
issued by the Sheriff concerned, who issued on August 1, 1994 a Notice of Sheriff's Sale for the auction of subject
properties on September 6, 1994.
On August 23, 1994, petitioner filed with the same trial court an Urgent Motion to Quash and Set Aside Writ of
Execution ascribing to it grave abuse of discretion in issuing the questioned Writ of Execution. To support its motion,
petitioner invited attention and argued that the records of the case were still with the Court of Appeals and
therefore, issuance of the writ of execution was premature since the 150-day period for petitioner to pay the
judgment obligation had not yet lapsed and petitioner had not yet defaulted in the payment thereof since no
demand for its payment was made by the private respondent. In petitioner's own words, the dispute between the
parties was "principally on the issue as to when the 150-day period within which Huerta Alba may exercise its
equity of redemption should be counted."
In its Order of September 2, 1994, the lower court denied petitioner's urgent motion to quash the writ of execution
in Civil Case No. 89-5424, opining that subject judgment had become final and executory and consequently,
execution thereof was a matter of right and the issuance of the corresponding writ of execution became its
ministerial duty.
Challenging the said order granting execution, petitioner filed once more with the Court of Appeals another petition
for certiorari and prohibition with preliminary injunction, docketed as C.A.-G.R. SP No. 35086, predicated on the
same grounds invoked for its Motion to Quash Writ of Execution.
On September 6, 1994, the scheduled auction sale of subject pieces of properties proceeded and the private
respondent was declared the highest bidder. Thus, private respondent was awarded subject bidded pieces of
property. The covering Certificate of Sale issued in its favor was registered with the Registry of Deeds on October
21, 1994.
On September 7, 1994, petitioner presented an Ex-Parte Motion for Clarification asking the trial court to "clarify"
whether or not the twelve (12) month period of redemption for ordinary execution applied in the case.
On September 26, 1994, the trial court ruled that the period of redemption of subject property should be governed
by the rule on the sale of judicially foreclosed property under Rule 68 of the Rules of Court.
Thereafter, petitioner then filed an Exception to the Order dated September 26, 1994 and Motion to Set Aside Said
Order, contending that the said Order materially altered the Decision dated April 30, 1992 "which declared that the
satisfaction of the judgment shall be in the manner and under the regulation that govern sale of real estate under
execution."
Meanwhile, in its Decision of September 30, 1994, the Court of Appeals resolved the issues raised by the petitioner
in C.A.-G.R. SP No. 35086, holding that the one hundred-fifty day period within which petitioner may redeem subject
properties should be computed from the date petitioner was notified of the Entry of Judgment in G.R. No. 112044;
and that the 150-day period within which petitioner may exercise its equity of redemption expired on September
11, 1994.
Thus:
"Petitioner must have received the resolution of the Supreme Court dated February 16, 1994 denying with
finality its motion for reconsideration in G.R. No. 112044 before March 14, 1994, otherwise the Supreme
Court would not have made an entry of judgment on March 14, 1994. While, computing the 150-day period.
Petitioner may have until September 11, 1994. within which to pay the amounts covered by the judgment,
such period has already expired by this time, and therefore, this Court has no more reason to pass upon the
parties' opposing contentions, the same having become moot and academic." 2 (Emphasis supplied).
Petitioner moved for reconsideration of the Decision of the Court of Appeals in C.A.-G.R. SP No. 35086. In its Motion
for Reconsideration dated October 18, 1994, petitioner theorized that the period of one hundred fifty (150) days
should not be reckoned with from Entry of Judgment but from receipt on or before July 29, 1994 by the trial court of
the records of Civil Case No. 89-5424 from the Court of Appeals. So also, petitioner maintained that it may not be
considered in default, even after the expiration of 150 days from July 29, 1994, because prior demand to pay was
never made on it by the private respondent. According to petitioner, it was therefore, premature for the trial court
to issue a writ of execution to enforce the judgment.
The trial court deferred action on the Motion for Confirmation of the Certificate of Sale in view of the pendency of
petitioner's Motion for Reconsideration in CA-G.R. SP No. 35086.
On December 23, 1994, the Court of Appeals denied petitioner's motion for reconsideration in CA-G.R. SP No.
35086. Absent any further action with respect to the denial of the subject motion for reconsideration, private
respondent presented a Second Motion for Confirmation of Certificate of Sale before the trial court.
As regards the Decision rendered on September 30, 1994 by the Court of Appeals in CA G.R. SP No. 35086 it
became final and executory on January 25, 1995.
On February 10, 1995, the lower court confirmed the sale of subject properties to the private respondent. The
pertinent Order declared that all pending incidents relating to the Order dated September 26, 1994 had become
Page 21 of 123

moot and academic. Conformably, the Transfer Certificates of Title to subject pieces of property were then issued to
the private respondent.
On February 27, 1995, petitioner filed with the Court of Appeals a Motion for Clarification seeking "clarification" of
the date of commencement of the one (1) year period for the redemption of the properties in question.
In its Resolution dated March 20, 1995, the Court of Appeals merely noted such Motion for Clarification since its
Decision promulgated on September 30, 1994 had already become final and executory; ratiocinating thus:
"We view the motion for clarification filed by petitioner, purportedly signed by its proprietor, but which we
believe was prepared by a lawyer who wishes to hide under the cloak of anonymity, as a veiled attempt to
buy time and to delay further the disposition of this case.
Our decision of September 30, 1994 never dealt on the right and period of redemption of petitioner, but
was merely circumscribed to the question of whether respondent judge could issue a writ of execution in its
Civil Case No. 89-5424 . . .
We further ruled that the one-hundred fifty day period within which petitioner may exercise its equity of
redemption should be counted, not from the receipt of respondent court of the records of Civil Case No. 895424 but from the date petitioner was notified of the entry of judgment made by the appellate court.
But we never made any pronouncement on the one-year right of redemption of petitioner because, in the
first place, the foreclosure in this case is judicial. and as such the mortgagor has only the equity not the
right of redemption . . . While it may be true that under Section 78 of R.A. 337 as amended, otherwise
known as the General Banking Act, a mortgagor of a bank, banking or credit institution, whether the
foreclosure was done judicially or extrajudicially, has a period of one year from the auction sale within which
to redeem the foreclosed property, the question of whether the Syndicated Management Group,. Inc., is a
bank or credit institution was never brought before us squarely, and it is indeed odd and strange that
petitioner would now sarcastically ask a rhetorical question in its motion for clarification." 3 (Emphasis
supplied).
Indeed, if petitioner did really act in good faith, it would have ventilated before the Court of Appeals in CA-G.R. No.
35086 its pretended right under Section 78 of R.A. No. 337 but it never did so.
At the earliest opportunity, when it filed its answer to the complaint for judicial foreclosure, petitioner should have
averred in its pleading that it was entitled to the beneficial provisions of Section 78 of R.A. No. 337; but again,
petitioner did not make any such allegation in its answer.
From the said Resolution, petitioner took no further step such that on March 31, 1995, the private respondent filed a
Motion for Issuance of Writ of Possession with the trial court.
During the hearing called on April 21, 1995, the counsel of record of petitioner entered appearance and asked for
time to interpose opposition to the Motion for Issuance of Writ of Possession.
On May 2, 1995, in opposition to private respondent's Motion for Issuance of writ of Possession, petitioner filed a
"Motion to Compel Private Respondent to Accept Redemption." It was the first time petitioner ever asserted the
right to redeem subject properties under Section 78 of R.A. No. 337, the General Banking Act; theorizing that the
original mortgagee, being a credit institution, its assignment of the mortgage credit to petitioner did not remove
petitioner from the coverage of Section 78 of R.A. No. 337. Therefore, it should have the right to redeem subject
properties within one year from registration of the auction sale, theorized the petitioner which concluded that in
view of its "right of redemption," the issuance of the titles over subject parcels of land to the private respondent
was irregular and premature.
In its Order of July 21, 1995, the trial court, presided over by Judge Napoleon Inoturan, denied private respondent's
motion for a writ of possession, opining that Section 78 of the General Banking Act was applicable and therefore,
the petitioner had until October 21, 1995 to redeem the said parcels of land, said Order ruled as follows:
"It is undisputed that Intercon is a credit institution from which defendant obtained a loan secured with a
real estate mortgage over four (4) parcels of land. Assuming that the mortgage debt had not been assigned
to plaintiff, there is then no question that defendant would have a right of redemption in case of foreclosure,
judicially or extrajudicially, pursuant to the above quoted Section 78 of RA 337, as amended.
However, the pivotal issue here is whether or not the defendant lost its right of redemption by virtue of the
assignment of its mortgage debt by Intercon to plaintiff, which is not a bank or credit institution. The issue
is resolved in the negative. The right of redemption in this case is vested by law and is therefore an
absolute privilege which defendant may not lose even though plaintiff-assignee is not a bank or credit
institution (Tolentino versus Court of Appeals, 106 SCRA 513). Indeed, a contrary ruling will lead to a
possible circumvention of Section 78 because all that may be needed to deprive a defaulting mortgagor of
his right of redemption is to assign his mortgage debt from a bank or credit institution to one which is not.
Protection of defaulting mortgagors, which is the avowed policy behind the provision, would not be
achieved if the ruling were otherwise. Consequently, defendant still possesses its right of redemption which
it may exercise up to October 21, 1995 only, which is one year from the date of registration of the
certificate of sale of subject properties (GSIS versus Iloilo, 175 SCRA 19, citing Limpin versus IAC, 166 SCRA
87).
Since the period to exercise defendant's right of redemption has not yet expired, the cancellation of
defendant's transfer certificates of title and the issuance of new ones in lieu thereof in favor of plaintiff are
Page 22 of 123

therefore illegal for being premature, thereby necessitating reconveyance (see Sec. 63 (a) PD 1529, as
amended).
WHEREFORE, the Court hereby rules as follows:
(1) The Motion for Issuance of Writ of Possession is hereby denied;
(2) Plaintiff is directed to accept the redemption on or before October 21, 1995 in an amount
computed according to the terms stated in the Writ of Execution dated July 15, 1994 plus all other
related costs and expenses mentioned under Section 78, RA 337, as amended; and
(3) The Register of Deeds of Valenzuela, Bulacan is directed (a) to reconvey to the defendant the
following titles of the four (4) parcels of land, namely TCT Nos. V-38878, V-38879, V-38880, and V38881, now in the name of plaintiff, and (b) to register the certificate of sale dated October 7, 1994
and the Order confirming the sale dated February 10, 1995 by a brief memorandum thereof upon
the transfer certificates of title to be issued in the name of defendant, pursuant to Sec. 63 (a) PD
1529, as amended.
The Omnibus Motion dated June 5, 1995, together with the Opposition thereto, is now deemed resolved.
SO ORDERED."4
Private respondent interposed a Motion for Reconsideration seeking the reversal of the Order but to no avail. In its
Order dated September 4, 1995, the trial court denied the same.
To attack and challenge the aforesaid order of July 21, 1995 and subsequent Order of September 4, 1995 of the trial
court, the private respondent filed with this court a Petition for Certiorari, Prohibition and Mandamus, docketed as
G.R. No. 121893, but absent any special and cogent reason shown for entertaining the same, the Court referred the
petition to the Court of Appeals, for proper determination.
Docketed as G.R. No. 387457 on November 14, 1996, the Court of Appeals gave due course to the petition and set
aside the trial court's Order dated July 21, 1995 and Order dated September 4, 1995.
In its Resolution of March 11, 1997, the Court of Appeals denied petitioner's Motion for Reconsideration of the
Decision promulgated on November 14, 1996 in CA-G.R. No. 38747.
Undaunted, petitioner has come to this Court via the present petition, placing reliance on the assignment of errors,
that:
I
THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT THE COURT OF APPEALS
(TWELFTH DIVISION) IN CA G.R. SP NO. 35086 HAD RESOLVED "WITH FINALITY" THAT PETITIONER HUERTA
ALBA HAD NO RIGHT OF REDEMPTION BUT ONLY THE EQUITY OF REDEMPTION.
II
THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN IGNORING THAT PETITIONER HUERTA ALBA
POSSESSES THE ONE-YEAR RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 (THE GENERAL
BANKING ACT).
III
THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT PRIVATE RESPONDENT
SYNDICATED MANAGEMENT GROUP, INC. IS ENTITLED TO THE ISSUANCE OF A WRIT OF POSSESSION OVER
THE SUBJECT PROPERTY.5
In its comment on the petition, private respondent countered that:
"A. THE HONORABLE COURT OF APPEALS CORRECTLY HELD THAT IT RESOLVED WITH FINALITY IN C.A.-G.R.
SP NO. 35086 THAT PETITIONER ONLY HAD THE RIGHT OF REDEMPTION IN RESPECT OF THE SUBJECT
PROPERTIES.
B. THE PETITION IS AN INSIDIOUS AND UNDERHANDED ATTEMPT TO EVADE THE FINALITY OF VARIOUS
DECISIONS, RESOLUTIONS AND ORDERS WHICH HELD THAT, PETITIONER ONLY POSSESSES THE EQUITY OF
REDEMPTION IN RESPECT OF THE SUBJECT PROPERTIES.
C. PETITIONER IS BARRED BY ESTOPPEL FROM BELATEDLY RAISING THE ISSUE OF ITS ALLEGED 'RIGHT OF
REDEMPTION. HDAECI
D. IN HOLDING THAT THE PETITIONER HAD THE 'RIGHT OF REDEMPTION' OVER THE SUBJECT PROPERTIES,
THE TRIAL COURT MADE A MOCKERY OF THE 'LAW OF THE CASE."' 6
And by way of Reply, petitioner argued, that:
Page 23 of 123

I.
THE COURT OF APPEALS IN CA G.R. SP NO. 35086 COULD NOT HAVE POSSIBLY RESOLVED THEREIN
WHETHER WITH FINALITY OR OTHERWISE - THE ISSUE OF PETITIONER HUERTA ALBA'S RIGHT OF
REDEMPTION UNDER SECTION 78, R.A. NO. 337.
II.
THERE IS NO ESTOPPEL HERE. PETITIONER HUERTA ALBA INVOKED ITS RIGHT OF REDEMPTION UNDER
SECTION 78, R.A. NO. 337 IN TIMELY FASHION, i.e., AFTER CONFIRMATION BY THE COURT OF THE
FORECLOSURE SALE, AND WITHIN ONE (1) YEAR FROM THE DATE OF REGISTRATION OF THE CERTIFICATE OF
SALE.
III.
THE PRINCIPLE OF 'THE LAW OF THE CASE' HAS ABSOLUTELY NO BEARING HERE:
(1)
THE RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 IS IN FACT PREDICATED UPON THE FINALITY
AND CORRECTNESS OF THE DECISION IN CIVIL CASE NO. 89-5424.
(2)
THUS, THE RTC'S ORDER RECOGNIZING PETITIONER HUERTA ALBA'S RIGHT OF REDEMPTION UNDER
SECTION 78, R.A. NO. 37 DOES NOT IN ANY WAY HAVE THE EFFECT OF AMENDING, MODIFYING, OR SETTING
ASIDE THE DECISION IN CIVIL CASE NO. 89-5424.
The above arguments and counter-arguments advanced relate to the pivotal issue of whether or not the petitioner
has the one-year right of redemption of subject properties under Section 78 of Republic Act No. 337 otherwise
known as the General Banking Act.
The petition is not visited by merit.
Petitioner's assertion of right of redemption under Section 78 of Republic Act No. 337 is premised on the submission
that the Court of Appeals did not resolve such issue in CA-G.R. SP No. 35086; contending thus:
(1)
BY NO STRETCH OF LOGIC CAN THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP NO. 35086 BE INTERPRETED
TO MEAN THE COURT OF APPEALS HAD RESOLVED 'WITH FINALITY' THE ISSUE OF WHETHER PETITIONER
HUERTA ALBA HAD THE RIGHT OF REDEMPTION WHEN ALL THAT THE RESOLUTION DID WAS TO MERELY
NOTE THE MOTION FOR CLARIFICATION.
(2)
THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP NO. 35086 IS NOT A FINAL JUDGMENT, ORDER OR DECREE.
IT IS NOT EVEN A JUDGMENT OR ORDER TO BEGIN WITH. IT ORDERS NOTHING; IT ADJUDICATES NOTHING.
(3)
PETITIONER HUERTA ALBA'S RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 37 WAS NOT AN ISSUE
AND WAS NOT IN ISSUE, AND COULD NOT HAVE POSSIBLY BEEN AN ISSUE NOR IN ISSUE, IN CA G.R. SP NO.
35086.
(4)
THE 30 SEPTEMBER 1994 DECISION IN CA G.R. SP NO. 35086 HAVING ALREADY BECOME FINAL EVEN
BEFORE THE FILING OF THE MOTION FOR CLARIFICATION, THE COURT OF APPEALS NO LONGER HAD ANY
JURISDICTION TO ACT OF THE MOTION OR ANY OTHER MATTER IN CA G.R. SP NO. 35086, EXCEPT TO MERELY
NOTE THE MOTION. EASIHa
II.
IN STARK CONTRAST, THE ISSUE OF PETITIONER HUERTA ALBA'S RIGHT OF REDEMPTION UNDER SECTION
78, R.A. NO. 337 WAS DIRECTLY RAISED AND JOINED BY THE PARTIES, AND THE SAME DULY RESOLVED BY
THE TRIAL COURT.
III.
THE RIGHT OF REDEMPTION UNDER SECTION 78 OF R.A. NO. 337 IS MANDATORY AND AUTOMATICALLY
EXISTS BY LAW. THE COURTS ARE DUTY-BOUND TO RECOGNIZE SUCH RIGHT.
Page 24 of 123

IV.
EQUITABLE CONSIDERATIONS WEIGH HEAVILY IN FAVOR OF PETITIONER HUERTA ALBA, NOT THE LEAST OF
WHICH IS THE WELL-SETTLED POLICY OF THE LAW TO AID RATHER THAN DEFEAT THE RIGHT OF
REDEMPTION.
V.
THEREFORE THE 21 JULY 1995 AND 04 SEPTEMBER 1995 ORDERS OF THE TRIAL COURT ARE VALID AND
PROPER IN ACCORDANCE WITH THE MANDATE OF THE LAW.
From the various decisions, resolutions and orders a quo it can be gleaned that what petitioner has been adjudged
to have was only the equity of redemption over subject properties. On the distinction between the equity of
redemption and right of redemption, the case of Gregorio Y. Limpin vs. Intermediate Appellate Court,7 comes to the
fore. Held the Court in the said case:
"The equity of redemption is, to be sure, different from and should not be confused with the right of
redemption.
The right of redemption in relation to a mortgage understood in the sense of a prerogative to re-acquire
mortgaged property after registration of the foreclosure sale exists only in the case of the extrajudicial
foreclosure of the mortgage. No such right is recognized in a judicial foreclosure except only where the
mortgagee is the Philippine National Bank or a bank or banking institution.
Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of redemption
within one (1) year from the registration of the sheriff's certificate of foreclosure sale.
Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The law
declares that a judicial foreclosure sale 'when confirmed be an order of the court. . . . shall operate to divest
the rights of all the parties to the action and to vest their rights in the purchaser, subject to such rights of
redemption as may be allowed by law.' Such rights exceptionally 'allowed by law' (i.e., even after
confirmation by an order of the court) are those granted by the charter of the Philippine National Bank (Acts
No. 2747 and 2938), and the General Banking Act (R.A. 337). These laws confer on the mortgagor, his
successors in interest or any judgment creditor of the mortgagor, the right to redeem the property sold on
foreclosure after confirmation by the court of the foreclosure sale which right may be exercised within
a period of one (1) year, counted from the date of registration of the certificate of sale in the Registry of
Property.
But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the
mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale, 'when
confirmed by an order of the court. . . shall operate to divest the rights of all the parties to the action and to
vest their rights in the purchaser.' There then exists only what is known as the equity of redemption. This is
simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the
property by paying the secured debt within the 90-day period after the judgment becomes final, in
accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation.
Section 2, Rule 68 provides that
'. . If upon the trial . . the court shall find the facts set forth in the complaint to be true, it shall ascertain the
amount due to the plaintiff upon the mortgage debt or obligation, including interest and costs, and shall
render judgment for the sum so found due and order the same to be paid into court within a period of not
less than ninety (90) days from the date of the service of such order, and that in default of such payment
the property be sold to realize the mortgage debt and costs.'
This is the mortgagor's equity (not right) of redemption which, as above stated, may be exercised by him
even beyond the 90-day period 'from the date of service of the order,' and even after the foreclosure sale
itself, provided it be before the order of confirmation of the sale. After such order of confirmation, no
redemption can be effected any longer."8 (Emphasis supplied)
Petitioner failed to seasonably invoke its purported right under Section 78 of R.A. No. 337.
Petitioner avers in its petition that the Intercom, predecessor in interest of the private respondent, is a credit
institution, such that Section 78 of Republic Act No. 337 should apply in this case. Stated differently, it is the
submission of petitioner that it should be allowed to redeem subject properties within one year from the date of
sale as a result of the foreclosure of the mortgage constituted thereon.
The pivot of inquiry here therefore, is whether the petitioner seasonably invoked its asserted right under Section 78
of R.A. No. 337 to redeem subject properties.
Petitioner theorizes that it invoked its "right" in "timely fashion", that is, after confirmation by the court of the
foreclosure sale, and within one (1) year from the date of registration of the certificate of sale. Indeed, the facts
show that it was only on May 2, 1995 when, in opposition to the Motion for Issuance of Writ of Possession, did
petitioner file a Motion to Compel Private Respondent to Accept Redemption, invoking for the very first time its
alleged right to redeem subject properties under to Section 78 of R.A. No. 337.

Page 25 of 123

In light of the aforestated facts, it was too late in the day for petitioner to invoke a right to redeem under Section 78
of R.A. No. 337. Petitioner failed to assert a right to redeem in several crucial stages of the proceedings.
For instance, on September 7, 1994, when it filed with the trial court an Ex-part Motion for Clarification, petitioner
failed to allege and prove that private respondent's predecessor in interest was a credit institution and therefore,
Section 78 of R.A. No. 337 was applicable. Petitioner merely asked the trial court to clarify whether the sale of
subject properties was execution sale or judicial foreclosure sale.
So also, when it presented before the trial court an Exception to the Order and Motion to Set Aside Said Order dated
October 13, 1994, petitioner again was silent on its alleged right under Section 78 of R.A. No. 337, even as it failed
to show that private respondent's predecessor in interest is a credit institution. Petitioner just argued that the
aforementioned Order materially altered the trial court's Decision of April 30, 1992.
Then, too, nothing was heard from petitioner on its alleged right under Section 78 of R.A. No. 337 and of the
predecessor in interest of private respondent as a credit institution, when the trial court came out with an order on
February 10, 1995, confirming the sale of subject properties in favor of private respondent and declaring that all
pending incidents with respect to the Order dated September 26, 1994 had become moot and academic.
Similarly, when petitioner filed on February 27, 1995 a Motion for Clarification with the Court of Appeals, seeking
"clarification" of the date of commencement of the one (1) year redemption period for the subject properties,
petitioner never intimated any alleged right under Section 78 of R.A. No. 337 nor did it invite attention to its present
stance that private respondent's predecessor-in-interest was a credit institution. Consequently, in its Resolution
dated March 20, 1995, the Court of Appeals ruled on the said motion thus:
"But we never made any pronouncement on the one-year right of redemption of petitioner because, in the
first place, the foreclosure in this case is judicial, and as such. the mortgagor has only the equity. not the
right of redemption . . . While it may be true that under Section 78 of R.A. 337 as amended, otherwise
known as the General Banking Act, a mortgagor of a bank, banking or credit institution, whether the
foreclosure was done judicially or extrajudicially, has a period of one year from the auction sale within which
to redeem the foreclosed property, the question of whether the Syndicated Management Group. Inc., is
bank or credit institution was never brought before us squarely, and it is indeed odd and strange that
petitioner would now sarcastically ask a rhetorical question in its motion for clarification." 9 (Emphasis
supplied).
If petitioner were really acting in good faith, it would have ventilated before the Court of Appeals in CA-G.R. No.
35086 its alleged right under Section 78 of R.A. No. 337; but petitioner never did do so.
Indeed, at the earliest opportunity, when it submitted its answer to the complaint for judicial foreclosure, petitioner
should have alleged that it was entitled to the beneficial provisions of Section 78 of R.A. No. 337 but again, it did
not make any allegation in its answer regarding any right thereunder. It bears stressing that the applicability of
Section 78 of R.A. No. 337 hinges on the factual question of whether or not private respondent's predecessor in
interest was a credit institution. As was held in Limpin, a judicial foreclosure sale, "when confirmed by an order of
the court, . . shall operate to divest the rights of all the parties to the action and to vest their rights in the
purchaser, subject to such rights of redemption as may be allowed by law'," 10 which confer on the mortgagor, his
successors in interest or any judgment creditor of the mortgagor, the right to redeem the property sold on
foreclosure after confirmation by the court of the judicial foreclosure sale. Thus, the claim that petitioner is entitled
to the beneficial provisions of Section 78 of R.A. No. 337 since private respondent's predecessor-in-interest is a
credit institution is in the nature of a compulsory counterclaim which should have been averred in petitioner's
answer to the compliant for judicial foreclosure.
". . . A counterclaim is, most broadly, a cause of action existing in favor of the defendant against the
plaintiff. More narrowly, it is a claim which. if established, will defeat or in some way qualify a judgment or
relief to which plaintiff is otherwise entitled It is sometimes defined as any cause of action arising in
contract available against any action also arising in contract and existing at the time of the commencement
of such an action. It is frequently defined by the codes as a cause of action arising out of the contract or
transaction set forth in the complaint as the foundation of the plaintiff's claim, or connected with the
subject of the action."11 (emphasis supplied)
"The counterclaim is in itself a distinct and independent cause of action, so that when properly stated as
such, the defendant becomes, in respect to the matters stated by him, an actor, and there are two
simultaneous actions pending between the same parties, wherein each is at the same time both a plaintiff
and a defendant. Counterclaim is an offensive as well as a defensive plea and is not necessarily confined to
the justice of the plaintiff's claim. It represents the right of the defendant to have the claims of the parties
counterbalanced in whole or in part, and judgment to be entered in excess, if any. A counterclaim stands on
the same footing, and is to be tested be the same rules, as if it were an independent action."12 (emphasis
supplied)
The very purpose of a counterclaim would have been served had petitioner alleged in its answer its purported right
under Section 78 of R.A. No. 337:
". . . The rules of counterclaim are designed to enable the disposition of a whole controversy of interested
parties' conflicting claims, at one time and in one action, provided all parties' be brought before the court
and the matter decided without prejudicing the rights of any party." 13
The failure of petitioner to seasonably assert its alleged right under Section 78 of R.A. No. 337 precludes it from so
doing at this late stage case. Estoppel may be successfully invoked if the party fails to raise the question in the
early stages of the proceedings.14 Thus, "a party to a case who failed to invoked his claim in the main case, while
having the opportunity to do so, will be precluded, subsequently, from invoking his claim, even if it were true, after
Page 26 of 123

the decision has become final, otherwise the judgment may be reduced to a mockery and the administration of
justice may be placed in disrepute."15
All things viewed in proper perspective, it is decisively clear that the trial court erred in still allowing petitioner to
introduce evidence that private respondent's predecessor-in-interest was a credit institution, and to thereafter rule
that the petitioner was entitled to avail of the provisions of Section 78 of R.A. No. 337. In effect, the trial court
permitted the petitioner to accomplish what the latter failed to do before the Court of Appeals, that is, to invoke its
alleged right under Section 78 of R.A. No. 337 although the Court of Appeals in CA-G.R. no. 35086 already found
that 'the question of whether the Syndicated Management Council Group, Inc. is a bank or credit institution was
never brought before (the Court of Appeals) squarely." The said pronouncement by the Court of Appeals unerringly
signified that petitioner did not make a timely assertion of any right under Section 78 of R.A. No. 337 in all the
stages of the proceedings below.
Verily, the petitioner has only itself to blame for not alleging at the outset that the predecessor-in-interest of the
private respondent is a credit institution. Thus, when the trial court, and the Court of Appeals repeatedly passed
upon the issue of whether or not petitioner had the right of redemption or equity of redemption over subject
properties in the decisions, resolutions and orders, particularly in Civil Case no. 89-5424, CA-G.R. CV No. 39243, CAG.R. SP No. 35086, and CA-G.R. SP No. 38747, it was unmistakable that the petitioner was adjudged to just have the
equity of redemption without any qualification whatsoever, that is, without any right of redemption allowed by law.
The "law of case" holds that petitioner has the equity of redemption without any qualification.
There is, therefore, merit in private respondent's contention that to allow petitioner to belatedly invoke its right
under Section 78 of R.A. No. 337 will disturb the "law of the case." However, private respondent's statement of what
constitutes the "law of the case" is not entirely accurate. The "law of the case" is not simply that the defendant
possesses an equity of redemption. As the Court has stated, the "law of the case" holds that petitioner has the
equity of the redemption without any qualification whatsoever, that is, without the right of redemption afforded by
Section 78 of R.A. No. 337. Whether or not the "law of the case" is erroneous is immaterial, it still remains the "law
of the case". A contrary rule will contradict both the letter and spirit of the rulings of the Court of Appeals in CA-G.R.
SP No. 35086, CA-G.R. CV No. 39243, and CA-G.R. 38747, which clearly saw through the repeated attempts of
petitioner to forestall so simple a matter as making the security given for a just debt to answer for its payment.
Hence, in conformity with the ruling in Limpin, the sale of the subject properties, as confirmed by the Order dated
February 10, 1995 of the trial court in Civil Case No. 89-5424 operated to divest the rights of all the parties to the
action and to vest their rights in private respondent. There then existed only what is known as the equity of
redemption, which is simply the right of the petitioner to extinguish the mortgage and retain ownership of the
property by paying the secured debt within the 90-day period after the judgment became final. There being an
explicit finding on the part of the Court of Appeals in its Decision of September 30, 1994 in CA-G.R. No. 35086
that the herein petitioner failed to exercise its equity of redemption within the prescribed period, redemption can no
longer be effected. The confirmation of the sale and the issuance of the transfer certificates of title covering the
subject properties to private respondent was then, in order. The trial court therefore, has the ministerial duty to
place private respondent in the possession of subject properties.
WHEREFORE, the petition is DENIED, and the assailed decision of the Court of Appeals, declaring null and void the
Order dated 21 July 1995 and Order dated 4 September 1997 of the Regional Trial Court of Makati City in Civil Case
No. 89-5424, AFFIRMED. No pronouncement as to costs.
SO ORDERED.

Page 27 of 123

G.R. No. 91779

February 7, 1991

GRAND FARMS, INC. and PHILIPPINE SHARES CORPORATION, petitioners,


vs.
COURT OF APPEALS, JUDGE ADRIAN R. OSORIO, as Presiding Judge of the Regional Trial Court, Branch
171, Valenzuela, Metro Manila; ESPERANZA ECHIVERRI, as Clerk of Court & Ex-Officio Sheriff of the
Regional Trial Court of Valenzuela, Metro Manila; SERGIO CABRERA, as Deputy Sheriff-in-Charge; and
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondents.
The propriety of a summary judgment is raised in issue in the instant petition, with herein petitioners appealing the
decision 1 of respondent court in CA-G.R. SP No. 17535, dated November 29, 1989, which found no grave abuse of
discretion on the part of respondent judge in denying petitioners' motion for summary judgment. 2
The antecedents of this case are clear and undisputed. Sometime on April 15, 1988, petitioners filed Civil Case No.
2816-V88 in the Regional Trial Court of Valenzuela, Metro Manila for annulment and/or declaration of nullity of the
extrajudicial foreclosure proceedings over their mortgaged properties, with damages, against respondents clerk of
court, deputy sheriff and herein private respondent Banco Filipino Savings and Mortgage Bank. 3
Soon after private respondent had filed its answer to the complaint, petitioners filed a request for admission by
private respondent of the allegation, inter alia, that no formal notice of intention to foreclose the real estate
mortgage was sent by private respondent to petitioners. 4
Private respondent, through its deputy liquidator, responded under oath to the request and countered that
petitioners were "notified of the auction sale by the posting of notices and the publication of notice in the
Metropolitan Newsweek, a newspaper of general circulation in the province where the subject properties are located
and in the Philippines on February 13, 20 and 28, 1988." 5
On the basis of the alleged implied admission by private respondent that no formal notice of foreclosure was sent to
petitioners, the latter filed a motion for summary judgment contending that the foreclosure was violative of the
provisions of the mortgage contract, specifically paragraph (k) thereof which provides:
k) All correspondence relative to this Mortgage, including demand letters, summons, subpoena or
notifications of any judicial or extrajudical actions shall be sent to the Mortgagor at the address given above
or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee, and the mere
act of sending any correspondence by mail or by personal delivery to the said address shall be valid and
effective notice to the Mortgagor for all legal purposes, and the fact that any communication is not actually
received by the Mortgagor, or that it has been returned unclaimed to the Mortgagee, or that no person was
found at the address given, or that the address is fictitious, or cannot be located, shall not excuse or relieve
the Mortgagor from the effects of such notice; 6
The motion was opposed by private respondent which argued that petitioners' reliance on said paragraph (k) of the
mortgage contract fails to consider paragraphs (b) and (d) of the same contract, which respectively provide as
follows:
b) . . . For the purpose of extra-judicial foreclosure, the Mortgagor (plaintiff) hereby appoints the Mortgagee
(BF) his attorney-in-fact to sell the property mortgaged, to sign all documents and perform any act requisite
and necessary to accomplish said purpose and to appoint its substitutes as such attorney-in-fact, with the
same powers as above-specified. The Mortgagor hereby expressly waives the term of thirty (30) days or any
other term granted or which may hereafter be granted him by law as the period which must elapse before
the Mortgagee shall be entitled to foreclose this mortgage, it being specifically understood and agreed that
the said Mortgagee may foreclose this mortgage at any time after the breach of any conditions hereof. . . .
xxx

xxx

xxx

d) Effective upon the breach of any conditions of the mortgage and in addition to the remedies herein
stipulated, the Mortgagee is hereby likewise appointed attorney-in-fact of the Mortgagor with full powers
and authority, with the use of force, if necessary, to take actual possession of the mortgaged property,
without the necessity for any judicial order or any permission of power to collect rents, to eject tenants, to
lease or sell the mortgaged property, or any part thereof, at public or private sale without previous notice or
adverstisement of any kind and execute the corresponding bills of sale, lease or other agreement that may
be deemed convenient, to make repairs or improvement to the mortgaged property and pay for the same
and perform any other act which the Mortgagor may deem convenient . . . 7
On February 27, 1989, the trial court issued an order, denying petitioners' motion for summary judgment. 8
Petitioners' motion for reconsideration was likewise denied by respondent-judge on the ground that genuine and
substantial issues exist which require the presentation of evidence during the trial, to wit: (a) whether or not the
loan has matured; (b) whether or not private respondent notified petitioners of the foreclosure of their mortgage;
(c) whether or not the notice by publication of the foreclosure constitutes sufficient notice to petitioners under the
mortgage contract; (d) whether or not the applicant for foreclosure of the mortgage was a duly authorized
representative of private respondent; and (e) whether or not the foreclosure was enjoined by a resolution of this
Court. 9
Petitioners thereafter went on a petition for certiorari to respondent court attacking said orders of denial as having
been issued with grave abuse of discretion. As earlier adverted to, respondent court dismissed the petition, holding
that no personal notice was required to foreclose since private respondent was constituted by petitioners as their
attorney-in-fact to sell the mortgaged property. It further held that paragraph (k) of the mortgage contract merely
Page 28 of 123

specified the address where correspondence should be sent and did not impose an additional condition on the part
of private respondent to notify petitioners personally of the foreclosure. Respondent court also denied petitioners
motion for reconsideration, hence the instant petition.
We rule for petitioners.
The Rules of Court authorize the rendition of a summary judgment if the pleadings, depositions and admissions on
file, together with the affidavits, show that, except as to the amount of damages, there is no issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law. 10 Although an issue may be
raised formally by the pleadings but there is no genuine issue of fact, and all the facts are within the judicial
knowledge of the court, summary judgment may be granted. 11
The real test, therefore, of a motion for summary judgment is whether the pleadings, affidavits and exhibits in
support of the motion are sufficient to overcome the opposing papers and to justify a finding as a matter of law that
there is no defense to the action or that the claim is clearly meritorious. 12
Applying said criteria to the case at bar, we find petitioners' action in the court below for annulment and/or
declaration of nullity of the foreclosure proceedings and damages ripe for summary judgment. Private respondent
tacitly admitted in its answer to petitioners' request for admission that it did not send any formal notice of
foreclosure to petitioners. Stated otherwise, and as is evident from the records, there has been no denial by private
respondent that no personal notice of the extrajudicial foreclosure was ever sent to petitioners prior thereto. This
omission, by itself, rendered the foreclosure defective and irregular for being contrary to the express provisions of
the mortgage contract. There is thus no further necessity to inquire into the other issues cited by the trial court, for
the foreclosure may be annulled solely on the basis of such defect.
While private respondent was constituted as their attorney-in-fact by petitioners, the inclusion of the aforequoted
paragraph (k) in the mortgage contract nonetheless rendered personal notice to the latter indispensable. As we
stated in Community Savings & Loan Association, Inc., et al. vs. Court of Appeals, et al., 13 where we had the
occasion to construe an identical provision:
On the other important point that militates against the petitioners' first ground for this petition is the fact
that no notice of the foreclosure proceedings was ever sent by CSLA to the deceased mortgagor Antonio
Esguerra or his heirs in spite of an express stipulation in the mortgage agreement to that effect. Said Real
Estate Mortgage provides, in Sec. 10 thereof that:
(10) All correspondence relative to this mortgage, including demand letters, summons, subpoenas,
or notifications of any judicial or extrajudicial actions shall be sent to the Mortgagor at the address
given above or at the address that may hereafter be given in writing by the Mortgagor to the
Mortgagee, and the mere act of sending any correspondence by mail or by personal delivery to the
said address shall be valid and effective notice to the Mortgagor for all legal purposes, . . .
(Emphasis in the original text.)
The Court of Appeals, in appreciating the foregoing provision ruled that it is an additional stipulation
between the parties.1wphi1 As such, it is the law between them and as it not contrary to law, morals, good
customs and public policy, the same should be complied with faithfully (Article 1306, New Civil Code of the
Philippines). Thus, while publication of the foreclosure proceedings in the newspaper of general circulation
was complied with, personal notice is still required, as in the case at bar, when the same was mutually
agreed upon by the parties as additional condition of the mortgage contract. Failure to comply with this
additional stipulation would render illusory Article 1306 of the New Civil Code of the Philippines (p. 37,
Rollo).
On the issue of whether or not CSLA notified the private respondents of the extrajudicial foreclosure sale in
compliance with Sec. 10 of the mortgage agreement the Court of Appeals found as follows:
As the record is bereft of any evidence which even impliedly indicate that the required notice of the
extrajudicial foreclosure was ever sent to the deceased debtor-mortgagor Antonio Esguerra or to his
heirs, the extrajudicial foreclosure proceedings on the property in question are fatally defective and
are not binding on the deceased debtor-mortgagor or to his heirs (p. 37, Rollo)
Hence, even on the premise that there was no attendant fraud in the proceedings, the failure of the
petitioner bank to comply with the stipulation in the mortgage document is fatal to the petitioners' cause.
We do not agree with respondent court that paragraph (k) of the mortgage contract in question was intended
merely to indicate the address to which the communications stated therein should be sent. This interpretation is
rejected by the very text of said paragraph as above construed. We do not see any conceivable reason why the
interpretation placed on an identically worded provision in the mortgage contract involved in Community Savings &
Loan Association, Inc. should not be adopted with respect to the same provision involved in the case at bar.
Nor may private respondent validly claim that we are supposedly interpreting paragraph (k) in isolation and without
taking into account paragraphs (b) and (d) of the same contract. There is no irreconcillable conflict between, as in
fact a reconciliation should be made of, the provisions of paragraphs (b) and (d) which appear first in the mortgage
contract and those in paragraph (k) which follow thereafter and necessarily took into account the provisions of the
preceding two paragraphs. 14 The notices respectively mentioned in paragraphs (d) and (k) are addressed to the
particular purposes contemplated therein. Those mentioned in paragraph (k) are specific and additional
requirements intended for the mortgagors so that, thus apprised, they may take the necessary legal steps for the
protection of their interests such as the payment of the loan to prevent foreclosure or to subsequently arrange for
redemption of the property foreclosed.
Page 29 of 123

What private respondent would want is to have paragraph (k) considered as non-existent and consequently
disregarded, a proposition which palpably does not merit consideration. Furthermore, it bears mention that private
respondent having caused the formulation and preparation of the printed mortgage contract in question, any
obscurity that it imputes thereto or which supposedly appears therein should not favor it as a contracting party. 15
Now, as earlier discussed, to still require a trial notwithstanding private respondent's admission of the lack of such
requisite notice would be a superfluity and would work injustice to petitioners whose obtention of the relief to which
they are plainly and patently entitled would be further delayed. That undesirable contingency is obviously one of
the reasons why our procedural rules have provided for summary judgments.
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and this case is REMANDED to the
court of origin for further proceedings in conformity with this decision. This judgment is immediately executory.
SO ORDERED.

Page 30 of 123

G.R. No. 180945

February 12, 2010

PHILIPPINE NATIONAL BANK, AS THE ATTORNEY-IN-FACT OF OPAL PORTFOLIO INVESTMENTS (SPV-AMC),


INC., Petitioner,
vs.
MERCEDES CORPUZ, REPRESENTED BY HER ATTORNEY-IN-FACT VALENTINA CORPUZ, Respondent.
This case is about the need for a mortgagee-bank, faced with suspicious layers of transfers involving a property
presented for mortgage, to exercise proper diligence in ascertaining the bona fide status of those transfers.
The Facts and the Case
On October 4, 1974 respondent Mercedes Corpuz delivered her owners duplicate copy of Transfer Certificate of
Title (TCT) 32815 to Dagupan City Rural Bank as security against any liability she might incur as its cashier. She
later left her job and went to the United States.
On October 24, 1994 the rural bank where she worked cancelled its lien on Corpuzs title, she having incurred no
liability to her employer. Without Corpuzs knowledge and consent, however, Natividad Alano, the rural banks
manager, turned over Corpuzs title to Julita Camacho and Amparo Callejo.
Conniving with someone from the assessors office, Alano, Camacho, and Callejo prepared a falsified deed of sale,
making it appear that on February 23, 1995 Corpuz sold her land to one "Mary Bondoc" for P50,000.00. They
caused the registration of the deed of sale, resulting in the cancellation of TCT 32815 and the issuance of TCT
63262 in Bondocs name. About a month later or on March 27, 1995 the trio executed another fictitious deed of sale
with "Mary Bondoc" selling the property to the spouses Rufo and Teresa Palaganas for only P15,000.00. This sale
resulted in the issuance of TCT 63466 in favor of the Palaganases.
Nine days later or on April 5, 1995 the Palaganases executed a deed of sale in favor of spouses Virgilio and Elena
Songcuan for P50,000.00, resulting in the issuance of TCT 63528. Finally, four months later or on August 10, 1995
the Songcuans took out a loan of P1.1 million from petitioner Philippine National Bank (PNB) and, to secure
payment, they executed a real estate mortgage on their title. Before granting the loan, the PNB had the title
verified and the property inspected.
On November 20, 1995 respondent Corpuz filed, through an attorney-in-fact, a complaint before the Dagupan
Regional Trial Court (RTC) against Mary Bondoc, the Palaganases, the Songcuans, and petitioner PNB, asking for the
annulment of the layers of deeds of sale covering the land, the cancellation of TCTs 63262, 63466, and 63528, and
the reinstatement of TCT 32815 in her name.
On June 29, 1998 the RTC rendered a decision granting respondent Corpuzs prayers. This prompted petitioner PNB
to appeal to the Court of Appeals (CA). On July 31, 2007 the CA affirmed the decision of the RTC and denied the
motion for its reconsideration, prompting PNB to take recourse to this Court.
The Issue Presented
The sole issue presented in this case is whether or not petitioner PNB is a mortgagee in good faith, entitling it to its
lien on the title to the property in dispute.
The Ruling of the Court
Petitioner PNB points out that, since it did a credit investigation, inspected the property, and verified the clean
status of the title before giving out the loan to the Songcuans, it should be regarded as a mortgagee in good faith.
PNB claims that the precautions it took constitute sufficient compliance with the due diligence required of banks
when dealing with registered lands.
As a rule, the Court would not expect a mortgagee to conduct an exhaustive investigation of the history of the
mortgagors title before he extends a loan.1 But petitioner PNB is not an ordinary mortgagee; it is a bank. 2 Banks
are expected to be more cautious than ordinary individuals in dealing with lands, even registered ones, since the
business of banks is imbued with public interest. 3 It is of judicial notice that the standard practice for banks before
approving a loan is to send a staff to the property offered as collateral and verify the genuineness of the title to
determine the real owner or owners.4
One of the CAs findings in this case is that in the course of its verification, petitioner PNB was informed of the
previous TCTs covering the subject property.5 And the PNB has not categorically contested this finding. It is evident
from the faces of those titles that the ownership of the land changed from Corpuz to Bondoc, from Bondoc to the
Palaganases, and from the Palaganases to the Songcuans in less than three months and mortgaged to PNB within
four months of the last transfer.
The above information in turn should have driven the PNB to look at the deeds of sale involved. It would have then
discovered that the property was sold for ridiculously low prices: Corpuz supposedly sold it to Bondoc for just
P50,000.00; Bondoc to the Palaganases for just P15,000.00; and the Palaganases to the Songcuans also for just
P50,000.00. Yet the PNB gave the property an appraised value of P781,760.00. Anyone who deliberately ignores a
significant fact that would create suspicion in an otherwise reasonable person cannot be considered as an innocent
mortgagee for value.6
The Court finds no reason to reverse the CA decision.
Page 31 of 123

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals dated July 31, 2007
and its resolution dated December 17, 2007 in CA-G.R. CV 60616.
SO ORDERED.

Page 32 of 123

G.R. No. 193723


July 20, 2011
GENERAL MILLING CORPORATION, Petitioner, vs. SPS. LIBRADO RAMOS and REMEDIOS RAMOS,
Respondents.
The Case
This is a petition for review of the April 15, 2010 Decision of the Court of Appeals (CA) in CA-G.R. CR-H.C. No. 85400
entitled Spouses Librado Ramos & Remedios Ramos v. General Milling Corporation, et al., which affirmed the May
31, 2005 Decision of the Regional Trial Court (RTC), Branch 12 in Lipa City, in Civil Case No. 00-0129 for Annulment
and/or Declaration of Nullity of Extrajudicial Foreclosure Sale with Damages.
The Facts
On August 24, 1989, General Milling Corporation (GMC) entered into a Growers Contract with spouses Librado and
Remedios Ramos (Spouses Ramos). Under the contract, GMC was to supply broiler chickens for the spouses to raise
on their land in Barangay Banaybanay, Lipa City, Batangas. 1 To guarantee full compliance, the Growers Contract
was accompanied by a Deed of Real Estate Mortgage over a piece of real property upon which their conjugal home
was built. The spouses further agreed to put up a surety bond at the rate of PhP 20,000 per 1,000 chicks delivered
by GMC. The Deed of Real Estate Mortgage extended to Spouses Ramos a maximum credit line of PhP 215,000
payable within an indefinite period with an interest of twelve percent (12%) per annum. 2
The Deed of Real Estate Mortgage contained the following provision:
WHEREAS, the MORTGAGOR/S has/have agreed to guarantee and secure the full and faithful compliance of
[MORTGAGORS] obligation/s with the MORTGAGEE by a First Real Estate Mortgage in favor of the MORTGAGEE, over
a 1 parcel of land and the improvements existing thereon, situated in the Barrio/s of Banaybanay, Municipality of
Lipa City, Province of Batangas, Philippines, his/her/their title/s thereto being evidenced by Transfer Certificate/s
No./s T-9214 of the Registry of Deeds for the Province of Batangas in the amount of TWO HUNDRED FIFTEEN
THOUSAND (P 215,000.00), Philippine Currency, which the maximum credit line payable within a x x x day term and
to secure the payment of the same plus interest of twelve percent (12%) per annum.
Spouses Ramos eventually were unable to settle their account with GMC. They alleged that they suffered business
losses because of the negligence of GMC and its violation of the Growers Contract. 3
On March 31, 1997, the counsel for GMC notified Spouses Ramos that GMC would institute foreclosure proceedings
on their mortgaged property.4
On May 7, 1997, GMC filed a Petition for Extrajudicial Foreclosure of Mortgage. On June 10, 1997, the property
subject of the foreclosure was subsequently sold by public auction to GMC after the required posting and
publication.5 It was foreclosed for PhP 935,882,075, an amount representing the losses on chicks and feeds
exclusive of interest at 12% per annum and attorneys fees. 6 To complicate matters, on October 27, 1997, GMC
informed the spouses that its Agribusiness Division had closed its business and poultry operations. 7
On March 3, 2000, Spouses Ramos filed a Complaint for Annulment and/or Declaration of Nullity of the Extrajudicial
Foreclosure Sale with Damages. They contended that the extrajudicial foreclosure sale on June 10, 1997 was null
and void, since there was no compliance with the requirements of posting and publication of notices under Act No.
3135, as amended, or An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real
Estate Mortgages. They likewise claimed that there was no sheriffs affidavit to prove compliance with the
requirements on posting and publication of notices. It was further alleged that the Deed of Real Estate Mortgage
had no fixed term. A prayer for moral and exemplary damages and attorneys fees was also included in the
complaint.8 Librado Ramos alleged that, when the property was foreclosed, GMC did not notify him at all of the
foreclosure.9
During the trial, the parties agreed to limit the issues to the following: (1) the validity of the Deed of Real Estate
Mortgage; (2) the validity of the extrajudicial foreclosure; and (3) the party liable for damages. 10
In its Answer, GMC argued that it repeatedly reminded Spouses Ramos of their liabilities under the Growers
Contract. It argued that it was compelled to foreclose the mortgage because of Spouses Ramos failure to pay their
obligation. GMC insisted that it had observed all the requirements of posting and publication of notices under Act
No. 3135.11
The Ruling of the Trial Court
Holding in favor of Spouses Ramos, the trial court ruled that the Deed of Real Estate Mortgage was valid even if its
term was not fixed. Since the duration of the term was made to depend exclusively upon the will of the debtorsspouses, the trial court cited jurisprudence and said that "the obligation is not due and payable until an action is
commenced by the mortgagee against the mortgagor for the purpose of having the court fix the date on and after
which the instrument is payable and the date of maturity is fixed in pursuance thereto." 12
The trial court held that the action of GMC in moving for the foreclosure of the spouses properties was premature,
because the latters obligation under their contract was not yet due.
The trial court awarded attorneys fees because of the premature action taken by GMC in filing extrajudicial
foreclosure proceedings before the obligation of the spouses became due.
The RTC ruled, thus:
Page 33 of 123

WHEREFORE, premises considered, judgment is rendered as follows:


1. The Extra-Judicial Foreclosure Proceedings under docket no. 0107-97 is hereby declared null and void;
2. The Deed of Real Estate Mortgage is hereby declared valid and legal for all intents and puposes;
3. Defendant-corporation General Milling Corporation is ordered to pay Spouses Librado and Remedios
Ramos attorneys fees in the total amount of P 57,000.00 representing acceptance fee of P30,000.00 and
P3,000.00 appearance fee for nine (9) trial dates or a total appearance fee of P 27,000.00;
4. The claims for moral and exemplary damages are denied for lack of merit.
IT IS SO ORDERED.13
The Ruling of the Appellate Court
On appeal, GMC argued that the trial court erred in: (1) declaring the extrajudicial foreclosure proceedings null and
void; (2) ordering GMC to pay Spouses Ramos attorneys fees; and (3) not awarding damages in favor of GMC.
The CA sustained the decision of the trial court but anchored its ruling on a different ground. Contrary to the
findings of the trial court, the CA ruled that the requirements of posting and publication of notices under Act No.
3135 were complied with. The CA, however, still found that GMCs action against Spouses Ramos was premature, as
they were not in default when the action was filed on May 7, 1997. 14
The CA ruled:
In this case, a careful scrutiny of the evidence on record shows that defendant-appellant GMC made no demand to
spouses Ramos for the full payment of their obligation. While it was alleged in the Answer as well as in the Affidavit
constituting the direct testimony of Joseph Dominise, the principal witness of defendant-appellant GMC, that
demands were sent to spouses Ramos, the documentary evidence proves otherwise. A perusal of the letters
presented and offered as evidence by defendant-appellant GMC did not "demand" but only request spouses Ramos
to go to the office of GMC to "discuss" the settlement of their account. 15
According to the CA, however, the RTC erroneously awarded attorneys fees to Spouses Ramos, since the
presumption of good faith on the part of GMC was not overturned.
The CA disposed of the case as follows:
WHEREFORE, and in view of the foregoing considerations, the Decision of the Regional Trial Court of Lipa City,
Branch 12, dated May 21, 2005 is hereby AFFIRMED with MODIFICATION by deleting the award of attorneys fees to
plaintiffs-appellees spouses Librado Ramos and Remedios Ramos. 16
Hence, We have this appeal.
The Issues
A. WHETHER [THE CA] MAY CONSIDER ISSUES NOT ALLEGED AND DISCUSSED IN THE LOWER COURT AND
LIKEWISE NOT RAISED BY THE PARTIES ON APPEAL, THEREFORE HAD DECIDED THE CASE NOT IN ACCORD
WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT.
B. WHETHER [THE CA] ERRED IN RULING THAT PETITIONER GMC MADE NO DEMAND TO RESPONDENT
SPOUSES FOR THE FULL PAYMENT OF THEIR OBLIGATION CONSIDERING THAT THE LETTER DATED MARCH
31, 1997 OF PETITIONER GMC TO RESPONDENT SPOUSES IS TANTAMOUNT TO A FINAL DEMAND TO PAY,
THEREFORE IT DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS. 17
The Ruling of this Court
Can the CA consider matters not alleged?
GMC asserts that since the issue on the existence of the demand letter was not raised in the trial court, the CA, by
considering such issue, violated the basic requirements of fair play, justice, and due process. 18
In their Comment,19 respondents-spouses aver that the CA has ample authority to rule on matters not assigned as
errors on appeal if these are indispensable or necessary to the just resolution of the pleaded issues.
In Diamonon v. Department of Labor and Employment,20 We explained that an appellate court has a broad
discretionary power in waiving the lack of assignment of errors in the following instances:
(a) Grounds not assigned as errors but affecting the jurisdiction of the court over the subject matter;
(b) Matters not assigned as errors on appeal but are evidently plain or clerical errors within contemplation
of law;
Page 34 of 123

(c) Matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just
decision and complete resolution of the case or to serve the interests of a justice or to avoid dispensing
piecemeal justice;
(d) Matters not specifically assigned as errors on appeal but raised in the trial court and are matters of
record having some bearing on the issue submitted which the parties failed to raise or which the lower
court ignored;
(e) Matters not assigned as errors on appeal but closely related to an error assigned;
(f) Matters not assigned as errors on appeal but upon which the determination of a question properly
assigned, is dependent.
Paragraph (c) above applies to the instant case, for there would be a just and complete resolution of the appeal if
there is a ruling on whether the Spouses Ramos were actually in default of their obligation to GMC.
Was there sufficient demand?
We now go to the second issue raised by GMC. GMC asserts error on the part of the CA in finding that no demand
was made on Spouses Ramos to pay their obligation. On the contrary, it claims that its March 31, 1997 letter is akin
to a demand.
We disagree.
There are three requisites necessary for a finding of default. First, the obligation is demandable and liquidated;
second, the debtor delays performance; and third, the creditor judicially or extrajudicially requires the debtors
performance.21
According to the CA, GMC did not make a demand on Spouses Ramos but merely requested them to go to GMCs
office to discuss the settlement of their account. In spite of the lack of demand made on the spouses, however,
GMC proceeded with the foreclosure proceedings. Neither was there any provision in the Deed of Real Estate
Mortgage allowing GMC to extrajudicially foreclose the mortgage without need of demand.
Indeed, Article 1169 of the Civil Code on delay requires the following:
Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfilment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declares; x x x
As the contract in the instant case carries no such provision on demand not being necessary for delay to exist, We
agree with the appellate court that GMC should have first made a demand on the spouses before proceeding to
foreclose the real estate mortgage.
Development Bank of the Philippines v. Licuanan finds application to the instant case:
The issue of whether demand was made before the foreclosure was effected is essential.1avvphi1 If demand was
made and duly received by the respondents and the latter still did not pay, then they were already in default and
foreclosure was proper. However, if demand was not made, then the loans had not yet become due and
demandable. This meant that respondents had not defaulted in their payments and the foreclosure by petitioner
was premature. Foreclosure is valid only when the debtor is in default in the payment of his obligation. 22
In turn, whether or not demand was made is a question of fact. 23 This petition filed under Rule 45 of the Rules of
Court shall raise only questions of law. For a question to be one of law, it must not involve an examination of the
probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest
solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of
the evidence presented, the question posed is one of fact. 24 It need not be reiterated that this Court is not a trier of
facts.25 We will defer to the factual findings of the trial court, because petitioner GMC has not shown any
circumstances making this case an exception to the rule.
WHEREFORE, the petition is DENIED. The CA Decision in CA-G.R. CR-H.C. No. 85400 is AFFIRMED.
SO ORDERED.

Page 35 of 123

G.R. No. 160741


March 22, 2007
HERMINIA CANDO, Petitioner, vs. SPS. AURORA OLAZO and CLAUDIO OLAZO, Respondents.
The instant petition for review assails the Decision of the Court of Appeals dated 13 November 2003 in CA G.R. CV
No. 61151 captioned "Herminia Cando v. Spouses Aurora Olazo and Claudio Olazo." 1
The facts of the case are not disputed.
On 27 April 1987, Aurora and Claudio Olazo (respondents) mortgaged to Herminia Cando (petitioner) a parcel of
land with improvements thereon to secure the payment of their P240,000.00 loan. The real estate mortgage was
embodied in a written instrument titled "Mortgage of Realty." In the said instrument, the parties agreed that should
the mortgagors fail to pay the loan within one (1) year from the date of the execution of the document, the
mortgage shall be foreclosed.
Alleging that respondents failed to pay their obligation within the prescribed period despite demands, petitioner
filed a complaint for judicial foreclosure of mortgage before the Regional Trial Court of Olongapo City on 16 February
1998.2 Respondents moved for the dismissal of the complaint, arguing that the action for foreclosure of the
mortgage has already prescribed; that petitioner is barred from filing the complaint under the principle of laches;
and that respondents have already paid the mortgage obligation.
On 25 May 1998, the trial court issued an Order which reads:
Acting on the Motion to Dismiss on the ground that the Action to Foreclose Mortgage of Realty dated April 27, 1987
has prescribed in accordance with Article 1142 of the Civil Code "that the action for foreclosure of mortgage
prescribes after ten (10) years" and it appearing that this Complaint was filed on February
16, 1998 after the expiration of the said period, this case is hereby DISMISSED.
SO ORDERED.3
Petitioner sought reconsideration of the Order but her motion was denied by the trial court, 4 prompting her to
appeal the case before the Court of Appeals.
In her brief as appellant,5 petitioner interposed a lone assignment of error, to wit:
THE LOWER COURT HAD CLEARLY ERRED IN DISMISSING THE PLAINTIFFS COMPLAINT IN THE INSTANT CASE ON THE
GROUND OF PRESCRIPTION OF ACTION.6
The appellate court dismissed the appeal on the ground of lack of jurisdiction. It found that the issue raised in the
appeal is a pure question of law, that is, what is the proper computation of the ten (10) year prescriptive period for
filing an action for foreclosure of mortgage. According to the Court of Appeals, the dismissal was based on Sec. 2,
Rule 50 of the Rules of Civil Procedure which provides that an appeal under Rule 41 taken from the Regional Trial
Court to the Court of Appeals raising only questions of law shall be dismissed. 7
In the present petition for review under Rule 45, petitioner claims that the Court of Appeals erred in holding that her
action to enforce the mortgage obligation had already prescribed. She posits that the ten (10) year period for
foreclosure of the mortgaged property must be counted from the time the stipulated one (1) year period within
which to pay the loan elapsed. Thus, it should be reckoned from 27 April 1988, and not 27 April 1987, or the date of
the mortgage instrument.8 Petitioner thus prays that the Decision of the Court of Appeals be reconsidered and/or
set aside and the case remanded to the court of origin for further proceedings.
On the other hand, respondents point out that the petition is a mere rehash of the issues and arguments raised and
resolved by the lower court and the Court of Appeals. They insist that the ten (10) year period for foreclosure is
counted from the date of the execution of the mortgage deed.9
The trial courts dismissal of the complaint for judicial foreclosure of mortgage is a final order which terminated the
litigation of the case and left nothing more to be done by the lower court. Petitioner had no more remedy but to
appeal the order of dismissal.
There are two modes of appeal from a final order of the trial court in the exercise of its original jurisdiction(1) by
writ of error under Section 2(a), Rule 41 of the Rules of Court if questions of fact or questions of fact and law are
raised or involved; or (2) appeal by certiorari under Section 2(c), Rule 41, in relation to Rule 45, where only
questions of law are raised or involved.10 If the aggrieved party appeals via a writ of error under Rule 41, but it turns
out that only questions of law are raised, the appeal shall be dismissed. 11
There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain
state of facts; there is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged
facts.12
The test of whether a question is one of law or of fact is not the appellation given to such question by the party
raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case, it is a question of law; otherwise, it is a question of fact. 13
Admittedly, petitioners appeal entailed a lone assignment of error, which turned out be a pure question of law. The
appellate court can easily determine the plausibility of the trial courts conclusion that the ten (10) year prescriptive
period for an action for foreclosure of mortgage should be computed from the date of the deed of mortgage without
Page 36 of 123

reviewing or evaluating the evidence, but of course with due regard to the governing case law on the matter. A
strict adherence to the rules leads us to the conclusion that the Court of Appeals is correct in dismissing the appeal
on the ground of lack of jurisdiction. However, equity considerations behoove a different course of action.
Even from a cursory reading of the appeal, it is indelibly clear that the trial court committed an appalling blunder
when it ruled that an action for foreclosure of mortgage prescribes after ten (10) years from the date of the
mortgage contract. Under Article 1142 of the Civil Code, a mortgage action prescribes after ten (10) years.
Jurisprudence, however, has clarified this rule by holding that a mortgage action prescribes after ten (10) years
from the time the right of action accrued,14 which is obviously not the same as the date of the mortgage contract.
Stated differently, an action to enforce a right arising from a mortgage should be enforced within ten (10) years
from the time the right of action accrues; otherwise, it will be barred by prescription and the mortgage creditor will
lose his rights under the mortgage.15 The right of action accrues when the mortgagor defaults in the payment of his
obligation to the mortgagee.16
The foregoing basic principles must have been unknown to the trial court when it reached its erroneous conclusion
that the action to foreclose the mortgage covered by the "Mortgage of Realty dated April 27, 1987 has prescribed in
accordance with Article 1142 of the Civil Code which provides that the action for foreclosure of mortgage
prescribes after ten (10) years and it appearing that this Complaint was filed on February 16, 1998 after the
expiration of the said period x x x. "17
The dismissal of the appeal by the appellate court would have put the instant case to rest. Yet if the Court will affirm
the appellate courts dismissal of the case and disregard the error of the trial court, great injustice and undue
prejudice will be caused petitioner.
We have ruled time and again that litigants should have the amplest opportunity for a proper and just disposition of
their causefree, as much as possible, from the constraints of procedural technicalities. In the interest of its equity
jurisdiction, the Court may disregard procedural lapses so that a case may be resolved on its merits. Rules of
procedure should promote, not defeat, substantial justice. Hence, the Court may opt to apply the Rules liberally to
resolve substantial issues raised by the parties. 18
Rules of procedure ought not to be applied in a very rigid, technical sense, for they are adopted to help secure, not
override, substantial justice, and thereby defeat their very ends. Indeed, rules of procedure are mere tools designed
to expedite the resolution of cases and other matters pending in court. A strict and rigid application of the rules that
would result in technicalities that tend to frustrate rather than promote justice must be avoided. 19
In the instant case, the strict adherence to the rules will definitely cause injustice to petitioner since the erroneous
conclusion of the trial court will bar her from pursuing her right of action against respondents, assuming that the
latter really failed to pay their obligation within the prescribed period.
If procedural lapses on the part of the litigants are sometimes overlooked by the Court in the interest of justice, with
all the more reason will the Court overlook these rules when the injustice will be compounded by the error of the
courts below. Ultimately, the interest of substantial justice must transcend rigid observance of the rules of
procedure. We cannot allow the trial courts egregious error to perpetuate simply because petitioner had pursued
the wrong recourse or erred in drafting her appeal.
WHEREFORE, the petition is GRANTED and the assailed Decision dated 13 November 2003 of the Court of Appeals is
hereby
REVERSED. Let the case be REMANDED to the Regional Trial Court of Olongapo City for further proceedings with
deliberate dispatch.
SO ORDERED.

Page 37 of 123

G.R. No. 74730 August 25, 1989


CALTEX PHILIPPINES, INC., petitioner, vs. THE INTERMEDIATE APPELLATE COURT and HERBERT MANZANA
respondents.
This is a petition for review on certiorari of the resolution of respondent Intermediate Appellate Court (now Court of
Appeals) dated January 31, 1986 vacating its prior decision dated June 29, 1984 and ordering that the records of the
case be remanded to the Court of First Instance (now Regional Trial Court) of Manila, and its resolution dated May
19,1986 denying the motion for reconsideration.
The antecedent facts are as follows:
Private respondent Herbert Manzana purchased on credit petroleum products from petitioner Caltex Philippines, Inc.
(CALTEX, for short). As of August 31, 1969, his indebtedness to CALTEX has amounted to P361,218.66. On October
4, 1969, Manzana executed a Deed a First Mortgage in favor of CALTEX over a parcel of land covered by OCT No. 0274 of the Register of Deeds of the Province of Camarines Norte to secure his debts to the latter. On various
occasions, CALTEX sent to Manzana statements of account and later demanded payment of his entire debts.
Because of Manzana's failure and refusal to pay, CALTEX filed a complaint on August 17, 1970 before the trial court
for the recovery of the whole amount of P361,218.66.
Meanwhile, on September 15, 1970, CALTEX foreclosed extrajudicially the mortgaged property. On October 30,
1970, the mortgaged property was sold at auction to CALTEX, being the only bidder, for P20,000.00 as shown by the
Sheriff s Certificate of Sale. The foreclosure was allegedly known by Manzana only on October 4, 1980 when such
fact was manifested by CALTEX in its reply to the opposition of Manzana to the motion for execution pending
appeal.
On July 23, 1980, the trial court rendered judgment ordering Manzana to pay CALTEX the amount of P353,218.66
after deducting P8,000.00 paid by Traders Insurance and Surety Company on its surety bond, with interest thereon
at 12% per annum from August 17, 1970, plus 20% thereof as attorney's fees (p. 115, Rollo).
Manzana appealed the trial court's decision to the respondent Intermediate Appellate Court raising the following
issues (p. 37, Rollo):
1. THAT PLAINTIFF APPELLEE CANNOT AVAIL BOTH OF A PERSONAL ACTION (THIS CASE) AND AN
EXTRAJUDICIAL FORECLOSURE AT THE SAME TIME AGAINST THE DEFENDANT DEFENDANTAPPELLANT; AND,
2. THAT PLAINTIFF-APPELLEE CANNOT AVAIL OF A DEFICIENCY JUDGMENT AFTER HE HAD
EXTRAJUDICIALLY FORECLOSED ON THE PROPERTY OF DEFENDANT-APPELLANT.
It was the opinion of the respondent court that "a reading of the issues raised by the defendant-appellant shows
that the question that needs resolution is whether or not plaintiff-appellee can still avail of the complaint for the
recovery of the balance of indebtedness after having already foreclosed the property securing the same" (p. 37,
Rollo).lwph1.t
On June 29, 1984, the respondent court rendered a decision (pp. 36-39, Rollo) affirming in toto the appealed
decision after "finding no reversible error" therein. On July 19, 1984, Manzana filed a motion for reconsideration of
said decision. In its comment to the motion for reconsideration, CALTEX prayed that "the judgment sought to be
reconsidered be modified by deducting the amount of P20,000.00 (foreclosure amount) from P353,218.66 thereby
leaving a balance of P333,218.66 representing the deficiency that plaintiff-appellee is entitled to recover from
defendant-appellant plus interest, attorney's fees and costs of suit" (p. 41, Rollo).
Acting on the motion for reconsideration, the respondent court issued a resolution dated January 31, 1986, the
dispositive portion of which reads (p. 59, Rollo):
WHEREFORE, in the interest of justice the decision of this Court promulgated June 29, 1984 is
vacated and the records are ordered remanded for purposes of determining the deficiency due the
plaintiff-appellee and for the trial court to render another and proper judgment based on the
evidence adduced by all the parties. Without pronouncement as to costs.
SO ORDERED.
The respondent court was convinced that the following consideration justified a reconsideration of its prior decision
(pp. 55-56, Rollo): "..., the action (before the trial court) cannot be said to be one for recovery of deficiency
judgment because ... (it) seeks recovery of the whole amount of indebtedness totalling P361,210.66" (should be
P361,218.66).
The motion for reconsideration filed by CALTEX was denied.
Hence, the present petition.
The issues may be limited to the following:
1) Whether or not the respondent court committed an error in giving due course to the question
whether CALTEX can avail at the same time of a personal action in court for collection of a sum of
money and the extrajudicial foreclosure of the deed of first mortgage, which was only raised for the
first time on appeal;
Page 38 of 123

2) Whether or not the mere filing of a collection suit for the recovery of the debt secured by real
estate mortgage constitutes waiver of the other remedy of foreclosure;
3) Whether or not the filing of the complaint for recovery of the amount of indebtedness and the
subsequent extrajudicial foreclosure of the deed of first mortgage constitutes splitting of a single
cause of action.
FIRST ISSUE
CALTEX alleges that the only issue submitted for resolution before the trial court is whether or not Manzana was
indebted and liable to it in the sum of P361,218.66. The issue whether or not CALTEX can avail at the same time of
a personal action in court for collection of a sum of money and the extrajudicial foreclosure of the Deed of First
Mortgage, and the issue whether or not CALTEX can avail of a deficiency judgment were never raised in the
pleadings of the parties nor at any stage of the proceedings before the trial court. These were only raised by
Manzana for the first time on appeal before the respondent court.
We rule that the respondent court did not commit any error in taking cognizance of the aforestated issues, although
not raised before the trial court. The presence of strong consideration of substantial justice has led this Court to
relax the well-entrenched rule that, except questions on jurisdiction, no question will be entertained on appeal
unless it has been raised in the court below and it is within the issues made by the parties in their pleadings
(Cordero v. Cabral, G.R. No. L- 36789, July 25, 1983, 123 SCRA 532). The compassionate spirit behind this rule will
equally apply to the other allegation of CALTEX that Manzana's indebtedness of P 361,218.66 was secured up to the
extent of P120,000.00 only although it appears that this issue is raised for the first time in this present petition.
Thus, the liberal application of the rule will favor both parties.
On the basis of the first condition enumerated in the Deed of First Mortgage, CALTEX submits that Manzana's
indebtedness of P 361,218.66 was secured up to the extent of P120,000.00 only, to wit (p. 50, Rollo):
This Mortgage is subject to the following terms and conditions:
l) The aforementioned indebtedness of THREE HUNDRED SIXTY-ONE THOUSAND TWO HUNDRED
EIGHTEEN & 66/100 (P361,218.66) of the MORTGAGOR shall be paid upon demand by the
MORTGAGEE; it being expressly understood that the limit or maximum amount secured by this
mortgage is ONE HUNDRED TWENTY THOUSAND PESOS (P120,000.00) only.
On the other hand, on the basis of the fourth paragraph of the deed and the fourth condition therein, Manzana
contends that the whole outstanding obligation of P361,218.66 was secured by the mortgage, to wit (pp. 49-50,
Rollo):
NOW, THEREFORE, for and in consideration of the said overdue, payable and demandable
indebtedness of the MORTGAGOR to the MORTGAGEE in the sum of THREE HUNDRED SIXTY-ONE
THOUSAND TWO HUNDRED EIGHTEEN PESOS & 66/100 (P361,218.66), Philippine Currency, the
foregoing premises and other x x x and valuable considerations, and to secure the faithful
performance by the MORTGAGOR of all the terms and conditions hereinafter set forth, particularly
the payment of the obligations hereby secured, the MORTGAGOR does hereby convey BY WAY OF
FIRST MORTGAGE. ...
x x x.
4) This mortgage shall remain in force to cover the afore-mentioned mentioned outstanding
indebtedness of the MORTGAGOR to the MORTGAGEE in the amount of THREE HUNDRED SIDE ONE
THOUSAND TWO HUNDRED EIGHTEEN PESOS & 66/100 (P361,218.66).
Article 1374 of the Civil Code, regarding interpretation of contracts, provides:
ART. 1374. The various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly.
The Deed of First Mortgage seems to contain provisions that contradict one another. However, considering all the
provisions together, the first condition cited by CALTEX is actually a specific provision while the fourth paragraph
and the fourth condition cited by Manzana are general provisions. This interpretation is bolstered by the third
WHEREAS clause and the penultimate paragraph of the deed, to wit (pp. 49-50, Rollo):
WHEREAS, the MORTGAGOR has offered to execute, sign and deliver a First Mortgage over his
property ..., only as partial security for the aforementioned overdue, payable and demandable
indebtedness of the MORTGAGOR to the MORTGAGEE, which offer of the MORTGAGOR is accepted
by the MORTGAGEE. (emphasis supplied)
x x x.
The MORTGAGOR binds himself to complete the securities required by the MORTGAGEE and shall
permit any authorized representative of the MORTGAGEE to inspect the mortgaged property and all
the properties offered to be mortgaged to complete the required security.' (emphasis supplied)
We therefore hold that Manzana's indebtedness of P 361,218.66 was secured up to the extent of P120,000.00 only.
Page 39 of 123

The records show that CALTEX extended to Manzana a continuing credit line, with the result that each transaction
constituted a separate obligation. We affirm the trial court's ruling with respect to the liability of Manzana to CALTEX
in the amount of P233,218.66 (P353,218.66 less P120,000.00) with interest thereon at 12% per annum from August
17, 1970, plus 20% thereof as attorney's fees. The evidence on record, both testimonial and documentary, clearly
support such amount of indebtedness. The trial court said (pp. 114- 115, Rollo):
Plaintiffs claim that as at (sic) termination of agreement on July 27, 1970, Manzana had an
outstanding account totalling P361,218.66, appears to be confirmed by the following:
(1) On September 8, 1970, defendant Manzana, by a letter, acknowledged his indebtedness, but
asked for time to pay the unpaid balance (Exh. 'l" and "M").
(2) To secure as obligation of P 361,218.66, said defendant executed, on October 4, 1969, a Deed of
First Mortgage on a piece of land covered by O.C.T. No. 0274 of the Registry of Deeds for Camarines
Norte (Exh. "N")
Rarely can a confirmation of an account be more definitive than the foregoing.
Defendant Manzana's defenses, set up in his answer, do not appear to have merit. In the first place,
the supposed lack of liquidation is belied by the periodical statements of account showing the
corresponding running balance thru the years 1968 to 1969 (Exhs. "N" to "O-7" inclusive),
effectively constituting a form of liquidation. Secondly, the very terms used repeatedly in the Dealer
Agreement neither pleaded nor in any manner assailed as ambiguous-are peculiar to purchase
and sale transactions and to the relationship of the parties thereto as debtor and creditor. There is
no reasonable way under the provisions thereof that Manzana can be deemed to be either an agent
or a mere collector with plaintiff bearing the risk of non-payment."
Furthermore, this case has been pending since August 17,1970 and to order its remand to the trial court will
necessarily entail additional expenses and unduly delay its disposition and the administration of justice to the
parties.
Remand of the case to the lower court for reception of evidence is not necessary if the Supreme Court can resolve
the dispute on the records before it. The common denominator in cases holding that remand of a case is not
necessary is the fact that the trial court had received all the evidence intended to be presented by both parties
(Hechanova v. Court of Appeals, G.R. No. L-48787 November 14, 1986, 145 SCRA 550).
THE SUCCEEDING DISCUSSION WILL CONCERN THE SECURED INDEBTEDNESS OF P120,000.00.
CALTEX, in effect, has made a mockery of our judicial system when it initially filed a collection suit then, during the
pendency thereof foreclosed extrajudicially the mortgaged property which secured the indebtedness and still
pursued the collection suit to the end. In this light, the actuations of CALTEX are deserving of severe criticism, to
say the least. Of importance is the doctrine laid down by this court in the leading case of Bachrach Motor, Inc. v.
Icarangal et al., 68 Phil. 287, which was applied by the respondent Court in resolving the case, where We ruled that;
... in the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In
other words, he may pursue either of the two remedies, but not both. By such election, his cause of
action can by no means be impaired, for each of the two remedies is complete in itself. Thus, an
election to bring a personal action will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged property itself. And, if he waives such
personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment
thereon would still give him the right to sue for a deficiency judgment, in which case, all the
properties of the defendant, other than the mortgaged property, are again open to him for the
satisfaction of the deficiency. In either case, his remedy is complete, his cause of action
undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely
accidental and are all under his right of election. ...
Thus, where a debt is secured by a mortgage and there is a default in payment on the part of the mortgagor, the
mortgagee has a choice of one (1) of two (2) remedies, but he cannot have both. The mortgagee may:
1) foreclosure the mortgage; or
2) file an ordinary action to collect the debt.
When the mortgagee chooses the foreclosure of the mortgage as a remedy, he enforces his lien by the sale on
foreclosure of the mortgaged property. The proceeds of the sale will be applied to the satisfaction of the debt. With
this remedy, he has a prior lien on the property. In case of a deficiency, the mortgagee has the right to claim for the
deficiency resulting from the price obtained in the sale of the real property at public auction and the outstanding
obligation at the time of the foreclosure proceedings (Soriano v. Enriquez, 24 Phil. 584; Banco de Islas Filipinas v.
Concepcion Hijos, 53 Phil. 86; Banco Nacional v. Barreto, 53 Phil. 101).lwph1.t
On the other hand, if the mortgagee resorts to an action to collect the debt, he thereby waives his mortgage lien.
He will have no more priority over the mortgaged property. If the judgment in the action to collect is favorable to
him, and it becomes final and executory, he can enforce said judgment by execution. He can even levy execution
on the same mortgaged property, but he will not have priority over the latter and there may be other creditors who
have better lien on the properties of the mortgagor.
Page 40 of 123

CALTEX submits that the principles enunciated in the Bachrach case are not applicable nor determinative of the
case at bar for the reason that the factual circumstances obtained in the said case are totally different from the
instant case. In the Bachrach case, the plaintiff instituted an action to foreclose the mortgage after the money
judgment in its favor remained unsatisfied whereas in the present case, CALTEX initially filed a complaint for
collection of the debt and during the pendency thereof foreclosed extrajudicially the mortgage.
We disagree. Although the facts in the Bachrach case and in the present case are not identical, there is similarity in
the fact that the plaintiffs in these two cases availed of both remedies although they are entitled to a choice of only
one.
SECOND ISSUE
CALTEX alleges next that the mere act of filing a collection suit for the recovery of a debt secured by real estate
mortgage is not tantamount to an implied waiver of the mortgage lien. Under Philippine jurisdiction, there is no
statute which prohibits or precludes a mortgagee from subsequently foreclosing the real estate mortgage shortly
after the collection suit has been filed. The real estate mortgage itself does not contain any explicit provision that
the filing of a collection suit would mean waiver of the remedy of foreclosure.
We hold otherwise. The mere act of filing a collection suit for the recovery of a debt secured by a mortgage
constitutes waiver of the other remedy of foreclosure. The rationale behind this was adequately explained in the
Bachrach case, supra:
... a rule that would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would result not
only in multiplicity of suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious
to law and equity (Osorio vs. San Agustin, 25 Phil. 404), but also in subjecting the defendant to the
vexation of being sued in the place of his residence or of the residence of the plaintiff, and then
again in the place where the property lies.
In the present case, however, We shall not follow this rule to the letter but declare that it is the collection suit which
was waived and/or abandoned. This ruling is more in harmony with the principles underlying our judicial system. It
is of no moment that the collection suit was filed ahead, what is determinative is the fact that the foreclosure
proceedings ended even before the decision in the collection suit was rendered. As a matter of fact, CALTEX
informed the trial court that it had already consolidated its ownership over the property, in its reply to the
opposition of Manzana to the motion for execution pending appeal filed by it.
A corollary issue that We might as well resolve now (although not raised as an issue in the present petition, but
applying the rule in Gayos et al. v. Gayos et al., G.R. No. L-27812, September 26, 1975, 67 SCRA 146, that it is a
cherished rule of procedure that a court should always strive to settle the entire controversy in a single proceeding
leaving no root or branch to bear the seeds of future litigation) is whether or not CALTEX can still sue for a
deficiency judgment P100,000.00 (secured debt of P120,000.00 less the foreclosure amount of P20,000.00).
The collection suit filed before the trial court cannot be considered as a deficiency judgment because a deficiency
judgment has been defined as one for the balance of the indebtedness after applying the proceeds of the sale of
the mortgaged property to such indebtedness and is necessarily filed after the foreclosure proceedings. It is
significant to note that the judgment rendered by the trial court was for the full amount of the indebtedness and the
case was filed prior to the foreclosure proceedings.
In general, a deficiency judgment is in the nature of an ordinary money judgment, may constitute a cause of action
and is barred by the statute of limitations applicable to ordinary judgment (59 C.J.S. 1497). The ten (10) year period
provided in Articles 1142 and 1144 of the Civil Code applies to a suit for deficiency judgment, to wit:
Art. 1142. A mortgage action prescribes after ten years. (1964a)
Art. 1144. The following actions must be brought with ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
A suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action
because its purpose is precisely to enforce the mortgage contract; it is upon a written contract and upon an
obligation of Manzana to pay the deficiency which is created by law (see Development Bank of the Philippines v.
Tomeldan et al., G.R. No. 51269, November 17, 1980, 101 SCRA 171). Therefore, since more than ten (10) years
have elapsed from the time the right of action accrued, CALTEX can no longer recover the deficiency from Manzana.
THIRD ISSUE
CALTEX has only one cause of action against Manzana, that is, non-payment of the debt although two choices of
remedies are available to it. As held in the Bachrach case, supra:
For non-payment of a note secured by mortgage, the creditor has a single cause of action against
the debtor. This single cause of action consists in the recovery of the credit with execution of the
Page 41 of 123

security. In other words, the creditor in his action may make two demands, the payment of the debt
and the foreclosure of his mortgage. But both demands arise from the same cause, the nonpayment of the debt, and, for that reason, they constitute a single cause of action. Though the debt
and the mortgage constitute separate agreements, the latter is subsidiary to the former, and both
refer to one and the same obligation. Consequently, there exists only one cause of action for a
single breach of that obligation. Plaintiff, then, by applying the rule above stated, cannot split up his
single cause of action by filing a complaint for payment of the debt, and thereafter another
complaint for foreclosure of the mortgage. If he does so, the filing of the first complaint will bar the
subsequent complaint. By allowing the creditor to file two separate complaint simultaneously or
successively, one to recover his credit and another to foreclose his mortgage, we will, in effect, be
authorizing him plural redress for a single breach of contract at so much cost to the courts and with
so much vexation and oppression to the debtor.
ACCORDINGLY, the resolution of the respondent Intermediate Appellate Court dated January 31,1986 is SET ASIDE.
The decision of the trial court is AFFIRMED with the MODIFICATION that private respondent Herbert Manzana's
liability to petitioner Caltex Philippines, Inc. is only up to the extent of P233,218.66 with interest thereon at 12% per
annum from August 17, 1970, plus 20% thereof as attorney's fees.
SO ORDERED.

Page 42 of 123

G.R. No. 169889


September 29, 2009
SPOUSES SIMON YAP AND MILAGROS GUEVARRA, Petitioners, vs. FIRST e-BANK CORPORATION
(previously known as PDCP DEVELOPMENT BANK, INC.), Respondent.
On August 30, 1990, Sammy Yap obtained a P2 million loan from PDCP Development Bank, Inc.1 (PDCP). As security,
Sammys parents, petitioners Simon Yap and Milagros Guevarra, executed a third-party mortgage on their land 2 and
warehouse standing on it. The mortgage agreement provided that PDCP may extrajudicially foreclose the property
in case Sammy failed to pay the loan.
On November 7, 1990, Sammy issued a promissory note and six postdated checks 3 in favor of PDCP as additional
securities for the loan.
When Sammy defaulted on the payment of his loan, PDCP presented the six checks to the drawee bank but the said
checks were dishonored.4 This prompted PDCP to file a complaint against Sammy for six counts of violation of BP 22
(Bouncing Checks Law) on February 8, 1993.
On May 3, 1993, PDCP filed an application for extrajudicial foreclosure of mortgage on the property of petitioners
which served as principal security for Sammys loan.
On December 16, 1993, on motion of Sammy and without objection from the public prosecutor and PDCP, the BP 22
cases were provisionally dismissed.
On October 26, 1994, pursuant to the petition of PDCP for extrajudicial foreclosure, the extrajudicial sale was set on
December 28, 1994. Copies of the notice of extrajudicial sale were sent by registered mail to Sammy, petitioners,
the Registrar of Deeds of San Carlos City, Pangasinan, the Sangguniang Panglungsod of San Carlos City and the
office of the barangay secretary of Taloy District, San Carlos City, Pangasinan.
The notice was also published in the Sunday Punch, a newspaper of general circulation in Pangasinan on November
27, December 4 and 11, 1994.
On December 20, 1994, petitioners filed in the Regional Trial Court (RTC) of San Carlos City, Pangasinan a complaint
for injunction (with prayer for the issuance of a temporary restraining order/preliminary injunction), damages and
accounting of payments against PDCP. The complaint sought to stop the foreclosure sale on the ground that PDCP
waived its right to foreclose the mortgage on their property when it filed the BP 22 cases against Sammy.
On April 2, 1997, the RTC5 ruled in favor of petitioners. It held that PDCP had three options when Sammy defaulted
in the payment of his loan: enforcement of the promissory note in a collection case, enforcement of the checks
under the Negotiable Instruments Law and/or BP 22, or foreclosure of mortgage. The remedies were alternative and
the choice of one excluded the others. Thus, PDCP was deemed to have waived its right to foreclose on the property
of petitioners when it elected to sue Sammy for violation of BP 22. 6
PDCP appealed to the Court of Appeals (CA). On February 8, 2005, the CA 7 reversed the RTC. It opined that PDCP
was not barred from exercising its right to foreclose on the property of petitioners despite suing Sammy for violation
of BP 22. The purpose of BP 22 was to punish the act of issuing a worthless check, not to force a debtor to pay his
debt.8
Hence, this appeal9 where petitioners argue that, when Sammy was sued for six counts of violation of BP 22, PDCP
should have been deemed to have simultaneously filed for collection of the amount represented by the checks. The
civil aspect of the case was naturally an action for collection of Sammys obligation to PDCP. PDCP clearly elected a
remedy. PDCP should not be allowed to pursue another, like foreclosure of mortgage.
The argument is not convincing.
First, petitioners anchor their position on Supreme Court Circular 57-97, which provides for the rules and guidelines
in the filing and prosecution of criminal cases under BP 22. Pertinent portions of Circular 57-97 provide:
1. The criminal action for violation of [BP] 22 shall be deemed to necessarily include the
corresponding civil action, and no reservation to file such civil action separately shall be
allowed or recognized.
2. Upon the filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the
filing fees based upon the amount of the check involved, which shall be considered as the actual damages
claimed, in accordance with the filing fees in Section 7 (a) and Section 8 (a), Rule 141 of the Rules of Court,
and last amended by Administrative Circular No. 11-94 effective August 1, 1994. Where the offended party
seeks to enforce against the accused civil liability by way of liquidated, moral, nominal, temperate or
exemplary damages, he shall pay the corresponding filing fees therefore based on the amounts thereof as
alleged either in his complaint or in the information. If not so alleged but any of these damages are
awarded by the court, the amount of such fees shall constitute a first lien on the judgment.
3. Where the civil action has heretofore been filed separately and trial thereof has not yet commenced, it
may be consolidated with the criminal action upon application with the court trying the latter case. If the
application is granted, the trial of both actions shall proceed in accordance with the pertinent procedure
outlined in Section 2 (a) of Rule 111 governing the proceedings in the actions as thus consolidated.
(emphasis supplied)
Circular 57-97 has been institutionalized as Section 1(b), Rule 111 of the Rules of Court: 10
Page 43 of 123

Section 1. Institution of criminal and civil actions.xxx


(b) The criminal action for violation of [BP] 22 shall be deemed to include the corresponding civil
action. No reservation to file such civil action separately shall be allowed.
Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the filing fees based
on the amount of the check involved, which shall be considered as the actual damages claimed. Where the
complaint or information also seeks to recover liquidated, moral, nominal, temperate or exemplary damages, the
offended party shall pay additional filing fees based on the amounts alleged therein. If the amounts are not so
alleged but any of these damages are subsequently awarded by the court, the filing fee based on the amount
awarded shall constitute a first lien on the judgment.
Where the civil action has been filed separately and trial thereof has not yet commenced, it may be consolidated
with the criminal action upon application with the court trying the latter case. If the application is granted, the trial
of both actions shall proceed in accordance with section 2 of this Rule governing consolidation of the civil and
criminal actions. (emphasis supplied)
Sad to say, Circular 57-97 (and, it goes without saying, Section 1(b), Rule 111 of the Rules of Court) was not yet in
force11 when PDCP sued Sammy for violation of BP 22 and when it filed a petition for extrajudicial foreclosure on the
mortgaged property of petitioners on February 8, 1993 and May 3, 1993, respectively. In Lo Bun Tiong v. Balboa,12
Circular 57-97 was not applied because the collection suit and the criminal complaints for violation of BP 22 were
filed prior to the adoption of Circular 57-97. The same principle applies here.
Thus, prior to the effectivity of Circular 57-97, the alternative remedies of foreclosure of mortgage and collection
suit were not barred even if a suit for BP 22 had been filed earlier, unless a judgment of conviction had already
been rendered in the BP 22 case finding the accused debtor criminally liable and ordering him to pay the amount of
the check(s).13
In this case, no judgment of conviction (which could have declared the criminal and civil liability of Sammy) was
rendered because Sammy moved for the provisional dismissal of the case. Hence, PDCP could have still foreclosed
on the mortgage or filed a collection suit.
Nonetheless, records show that, during the pendency of the BP 22 case, Sammy had already paid PDCP the total
amount of P1,783,582.14 Thus, to prevent unjust enrichment on the part of the creditor, any foreclosure by PDCP
should only be for the unpaid balance.
Second, it is undisputed that the BP 22 cases were provisionally dismissed at Sammys instance. In other words,
PDCP was prevented from recovering the whole amount by Sammy himself. To bar PDCP from foreclosing on
petitioners property for the balance of the indebtedness would be to penalize PDCP for the act of Sammy. That
would not only be illogical and absurd but would also violate elementary rules of justice and fair play. In sum, PDCP
has not yet effectively availed of and fully exhausted its remedy.
While it can be argued that PDCP may revive the BP 22 cases anytime as their dismissal was only provisional,
suffice it to state that the law gives the right of choice to PDCP, not to Sammy or to petitioners.1avvph!1
Third, petitioners should be mindful that, by being third party mortgagors, they agreed that their property would
stand as collateral to the loan of Sammy until the last centavo is paid to PDCP. That is a risk they willingly assumed.
To release the mortgage just because they find it inconvenient would be the height of injustice against PDCP.
All told, PDCP should not be left without recourse for the unsettled loan of Sammy. Otherwise, an iniquitous situation
will arise where Sammy and petitioners are unjustly enriched at the expense of PDCP. That we cannot sanction.
So as not to create any misunderstanding, however, the point should be underscored that the creditors obvious
purpose when it forecloses on mortgaged property is to obtain payment for a loan which the debtor is unable or
unjustifiably refuses to pay. The rationale is the same if the creditor opts to sue the debtor for collection. Thus, it is
but logical that a creditor who obtains a personal judgment against the debtor on a loan waives his right to
foreclose on the mortgage securing the loan. Otherwise, the creditor becomes guilty of splitting a single cause of
action15 for the debtors inability (or unjustified refusal) to pay his debt. 16 Nemo debet bis vexare pro una et eadem
causa. No man shall be twice vexed for one and the same cause.
In the light of Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court, the same rule applies when the
creditor sues the debtor for BP 22 and thereafter forecloses on the mortgaged property. It is true that BP 22 is a
criminal remedy while foreclosure of mortgage is a civil remedy. It is also true that BP 22 was not enacted to force,
much more penalize a person for his inability (or refusal to pay) his debt. 17 What BP 22 prohibits and penalizes is the
issuance of bum checks because of its pernicious effects on public interest. Congress, in the exercise of police
power, enacted BP 22 in order to maintain public confidence in commercial transactions. 18
At the other end of the spectrum, however, is the fact that a creditors principal purpose in suing the debtor for BP
22 is to be able to collect his debt. (Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court have been drawn
up to address this reality.) It is not so much that the debtor should be imprisoned for issuing a bad check; this is so
specially because a conviction for BP 22 does not necessarily result in imprisonment. 19
Thus, we state the rule at present. If the debtor fails (or unjustly refuses) to pay his debt when it falls due and the
debt is secured by a mortgage and by a check, the creditor has three options against the debtor and the exercise of
one will bar the exercise of the others. He may pursue either of the three but not all or a combination of them.
Page 44 of 123

First, the creditor may file a collection suit against the debtor. This will open up all the properties of the debtor to
attachment and execution, even the mortgaged property itself. Second, the creditor may opt to foreclose on the
mortgaged property. In case the debt is not fully satisfied, he may sue the debtor for deficiency judgment (not a
collection case for the whole indebtedness), in which case, all the properties of the debtor, other than the
mortgaged property, are again opened up for the satisfaction of the deficiency. 20 Lastly, the creditor may opt to sue
the debtor for violation of BP 22 if the checks securing the obligation bounce. Circular 57-97 and Section 1(b), Rule
111 of the Rules of Court both provide that the criminal action for violation of BP 22 shall be deemed to necessarily
include the corresponding civil action, i.e., a collection suit. No reservation to file such civil action separately shall
be allowed or recognized.
Petitioners would have been correct had it not been for the reasons stated earlier.
WHEREFORE, the petition is hereby DENIED. Costs against petitioners. SO ORDERED.

Page 45 of 123

G.R. No. 173976


February 27, 2009
METROPOLITAN BANK AND TRUST COMPANY, INC., Petitioner, vs. EUGENIO PEAFIEL, for himself and as
Attorney-in-Fact of ERLINDA PEAFIEL, Respondents.
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) dated July 29, 2005 and
Resolution dated July 31, 2006. The assailed decision nullified the extrajudicial foreclosure sale of respondents
properties because the notice of sale was published in a newspaper not of general circulation in the place where the
properties were located.
Respondent Erlinda Peafiel and the late Romeo Peafiel are the registered owners of two parcels of land covered
by Transfer Certificate of Title (TCT) No. (350937) 6195 and TCT No. 0085, both issued by the Register of Deeds of
Mandaluyong City. On August 1, 1991, the Peafiel spouses mortgaged their properties in favor of petitioner
Metropolitan Bank and Trust Company, Inc. The mortgage deed was amended on various dates as the amount of
the loan covered by said deed was increased.
The spouses defaulted in the payment of their loan obligation. On July 14, 1999, petitioner instituted an
extrajudicial foreclosure proceeding under Act No. 3135 through Diego A. Allea, Jr., a notary public. Respondent
Erlinda Peafiel received the Notice of Sale, stating that the public auction was to be held on September 7, 1999 at
ten oclock in the morning, at the main entrance of the City Hall of Mandaluyong City. The Notice of Sale was
published in Maharlika Pilipinas on August 5, 12 and 19, 1999, as attested to by its publisher in his Affidavit of
Publication.2 Copies of the said notice were also posted in three conspicuous places in Mandaluyong City. 3
At the auction sale, petitioner emerged as the sole and highest bidder. The subject lots were sold to petitioner for
P6,144,000.00. A certificate of sale4 was subsequently issued in its favor.
On August 8, 2000, respondent Erlinda Peafiel, through her attorney-in-fact, Eugenio Peafiel, filed a Complaint 5
praying that the extrajudicial foreclosure of the properties be declared null and void. They likewise sought (a) to
enjoin petitioner and the Register of Deeds from consolidating ownership, (b) to enjoin petitioner from taking
possession of the properties, and (c) to be paid attorneys fees.
On June 30, 2003, the Regional Trial Court (RTC) rendered judgment in favor of petitioner:
ACCORDINGLY, judgment is hereby rendered as follows:
1. The extrajudicial foreclosure of real estate mortgage instituted by defendants Metrobank and Notary
Public Diego A. Allea, Jr. over the two parcels of land covered by TCT Nos. (350937) 6195 and TCT No. 0085
is hereby declared VALID; and
2. The counterclaim of herein defendants are hereby DISMISSED for insufficiency of evidence.
SO ORDERED.6
Respondents appealed to the CA, raising, among others, the issue of whether petitioner complied with the
publication requirement for an extrajudicial foreclosure sale under Act No. 3135.
On this issue, the CA agreed with respondents. The CA noted that the law requires that publication be made in a
newspaper of general circulation in the municipality or city where the property is situated. Based on the testimony
of the publisher of Maharlika Pilipinas, it concluded that petitioner did not comply with this requirement, since the
newspaper was not circulated in Mandaluyong City where the subject properties were located. Thus, in its Decision
dated July 29, 2005, the CA reversed the RTC Decision, thus:
WHEREFORE, the appealed decision is REVERSED and SET ASIDE. A new one is hereby entered declaring the
extrajudicial foreclosure sale of the properties covered by TCT Nos. (350937) 6195 and 0085 NULL and VOID.
SO ORDERED.7
Petitioner filed a motion for reconsideration8 of the decision which the CA denied on July 31, 2006.
Petitioner now brings before us this petition for review on certiorari, raising the following issues:
I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED TO APPLY THE
PROVISIONS ON THE PUBLICATION OF JUDICIAL NOTICES UNDER SECTION 1 OF P.D. NO. 1079 TO THE
EXTRAJUDICIAL FORECLOSURE OF THE MORTGAGE BY NOTARY PUBLIC OVER THE PROPERTIES COVERED BY TCT NO.
(350927) 6195 AND TCT NO. 0085.
II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED THAT "MAHARLIKA
PILIPINAS" IS NOT A NEWSPAPER OF GENERAL CIRCULATION IN MANDALUYONG CITY.
III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT REVERSED AND SET ASIDE
THE DECISION DATED JUNE 30, 2003 ISSUED BY THE REGIONAL TRIAL COURT OF MANDALUYONG CITY, BRANCH 208
AND DECLARED THE EXTRAJUDICIAL FORECLOSURE SALE OF THE PROPERTIES COVERED BY TCT NO. (350937) 6195
AND TCT NO. 0085 NULL AND VOID.9
This controversy boils down to one simple issue: whether or not petitioner complied with the publication
requirement under Section 3, Act No. 3135, which provides:
Page 46 of 123

SECTION 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public
places of the municipality or city where the property is situated, and if such property is worth more than four
hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a
newspaper of general circulation in the municipality or city. 10
We hold in the negative.
Petitioner insists that Maharlika Pilipinas is a newspaper of general circulation since it is published for the
dissemination of local news and general information, it has a bona fide subscription list of paying subscribers, and it
is published at regular intervals. It asserts that the publishers Affidavit of Publication attesting that Maharlika
Pilipinas is a newspaper of general circulation is sufficient evidence of such fact. 11 Further, the absence of
subscribers in Mandaluyong City does not necessarily mean that Maharlika Pilipinas is not circulated therein; on the
contrary, as testified to by its publisher, the said newspaper is in fact offered to persons other than its subscribers.
Petitioner stresses that the publishers statement that Maharlika Pilipinas is also circulated in Rizal and Cavite was
in response to the question as to where else the newspaper was circulated; hence, such testimony does not
conclusively show that it is not circulated in Mandaluyong City. 12
Petitioner entreats the Court to consider the fact that, in an Order13 dated April 27, 1998, the Executive Judge of the
RTC of Mandaluyong City approved the application for accreditation of Maharlika Pilipinas as one of the newspapers
authorized to participate in the raffle of judicial notices/orders effective March 2, 1998. Nonetheless, petitioner
admits that this was raised for the first time only in its Motion for Reconsideration with the CA. 14
The accreditation of Maharlika Pilipinas by the Presiding Judge of the RTC is not decisive of whether it is a
newspaper of general circulation in Mandaluyong City. This Court is not bound to adopt the Presiding Judges
determination, in connection with the said accreditation, that Maharlika Pilipinas is a newspaper of general
circulation. The court before which a case is pending is bound to make a resolution of the issues based on the
evidence on record.1avvphi1
To prove that Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City, respondents
presented the following documents: (a) Certification15 dated December 7, 2001 of Catherine de Leon Arce, Chief of
the Business Permit and Licensing Office of Mandaluyong City, attesting that Maharlika Pilipinas did not have a
business permit in Mandaluyong City; and (b) List of Subscribers 16 of Maharlika Pilipinas showing that there were no
subscribers from Mandaluyong City.
In addition, respondents also presented Mr. Raymundo Alvarez, publisher of Maharlika Pilipinas, as a witness. During
direct examination, Mr. Alvarez testified as follows:
Atty. Mendoza: And where is your principal place of business? Where you actually publish.
Witness: At No. 80-A St. Mary Avenue, Provident Village, Marikina City.
Atty. Mendoza: Do you have any other place where you actually publish Maharlika Pilipinas?
Witness: At No. 37 Ermin Garcia Street, Cubao, Quezon City.
Atty. Mendoza: And you have a mayors permit to operate?
Witness: Yes.
Atty. Mendoza: From what city?
Witness: Originally, it was from Quezon City, but we did not change anymore our permit.
Atty. Mendoza: And for the year 1996, what city issued you a permit?
Witness: Quezon City.
Atty. Mendoza: What about this current year?
Witness: Still from Quezon City.
Atty. Mendoza: So, you have no mayors permit from Marikina City?
Witness: None, its only our residence there.
Atty. Mendoza: What about for Mandaluyong City?
Witness: We have no office in Mandaluyong City.
Atty. Mendoza: Now, you said that you print and publish Maharlika Pilipinas in Marikina and Quezon City?
Witness: Yes.
Page 47 of 123

Atty. Mendoza: Where else do you circulate your newspaper?


Witness: In Rizal and in Cavite.
Atty. Mendoza: In the subpoena[,] you were ordered to bring the list of subscribers.
Witness: Yes.
xxxx
Atty. Mendoza: How do these subscribers listed here in this document became (sic) regular subscribers?
Witness: They are friends of our friends and I offered them to become subscribers.
Atty. Mendoza: Other than this list of subscribers, you have no other subscribers?
Witness: No more.
Atty. Mendoza: Do you offer your newspaper to other persons other than the subscribers listed here?
Witness: Yes, but we do not just offer it to anybody. 17 (Emphasis supplied.)
It bears emphasis that, for the purpose of extrajudicial foreclosure of mortgage, the party alleging non-compliance
with the requisite publication has the burden of proving the same. 18 Petitioner correctly points out that neither the
publishers statement that Maharlika Pilipinas is being circulated in Rizal and Cavite, nor his admission that there
are no subscribers in Mandaluyong City proves that said newspaper is not circulated in Mandaluyong City.
Nonetheless, the publishers testimony that they "do not just offer [Maharlika Pilipinas] to anybody" implies that the
newspaper is not available to the public in general. This statement, taken in conjunction with the fact that there are
no subscribers in Mandaluyong City, convinces us that Maharlika Pilipinas is, in fact, not a newspaper of general
circulation in Mandaluyong City.
The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of
the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a
sacrifice of the property.19 The goal of the notice requirement is to achieve a "reasonably wide publicity" of the
auction sale. This is why publication in a newspaper of general circulation is required. The Court has previously
taken judicial notice of the "far-reaching effects" of publishing the notice of sale in a newspaper of general
circulation.20
True, to be a newspaper of general circulation, it is enough that it is published for the dissemination of local news
and general information, that it has a bona fide subscription list of paying subscribers, and that it is published at
regular intervals.21 Over and above all these, the newspaper must be available to the public in general, and not just
to a select few chosen by the publisher. Otherwise, the precise objective of publishing the notice of sale in the
newspaper will not be realized.
In fact, to ensure a wide readership of the newspaper, jurisprudence suggests that the newspaper must also be
appealing to the public in general. The Court has, therefore, held in several cases that the newspaper must not be
devoted solely to the interests, or published for the entertainment, of a particular class, profession, trade, calling,
race, or religious denomination. The newspaper need not have the largest circulation so long as it is of general
circulation.22
Thus, the Court doubts that the publication of the notice of sale in Maharlika Pilipinas effectively caused widespread
publicity of the foreclosure sale.
Noticeably, in the Affidavit of Publication, Mr. Alvarez attested that he was the "Publisher of Maharlika Pilipinas, a
newspaper of general circulation, published every Thursday." Nowhere is it stated in the affidavit that Maharlika
Pilipinas is in circulation in Mandaluyong City. To recall, Sec. 3 of Act No. 3135 does not only require that the
newspaper must be of general circulation; it also requires that the newspaper be circulated in the municipality or
city where the property is located. Indeed, in the cases 23 wherein the Court held that the affidavit of the publisher
was sufficient proof of the required publication, the affidavit of the publisher therein distinctly stated that the
newspaper was generally circulated in the place where the property was located.
Finally, petitioner argues that the CA, in effect, applied P.D. No. 1079 24 when it cited Fortune Motors (Phils.) Inc. v.
Metropolitan Bank and Trust Company,25 which involved an extrajudicial foreclosure sale by a sheriff. Petitioner
avers that the general reference to "judicial notices" in P.D. No. 1079, particularly Section 2 26 thereof, clearly shows
that the law applies only to extrajudicial foreclosure proceedings conducted by a sheriff, and not by a notary
public.27 P.D. No. 1079 allegedly applies only to notices and announcements that arise from court litigation. 28
The Court does not agree with petitioner that the CA applied P.D. 1079 to the present case. The appellate court
cited Fortune Motors merely to emphasize that what is important is that the newspaper is actually in general
circulation in the place where the properties to be foreclosed are located.
In any case, petitioners concern that the CA may have applied P.D. 1079 to the present case is trifling. While P.D.
No. 1079 requires the newspaper to be "published, edited and circulated in the same city and/or province where the
requirement of general circulation applies," the Court, in Fortune Motors, did not make a literal interpretation of the
Page 48 of 123

provision. Hence, it brushed aside the argument that New Record, the newspaper where the notice of sale was
published, was not a newspaper of general circulation in Makati since it was not published and edited therein, thus:
The application given by the trial court to the provisions of P.D. No. 1079 is, to our mind, too narrow and restricted
and could not have been the intention of the said law. Were the interpretation of the trial court (sic) to be followed,
even the leading dailies in the country like the "Manila Bulletin," the "Philippine Daily Inquirer," or "The Philippine
Star" which all enjoy a wide circulation throughout the country, cannot publish legal notices that would be honored
outside the place of their publication. But this is not the interpretation given by the courts. For what is important is
that a paper should be in general circulation in the place where the properties to be foreclosed are located in order
that publication may serve the purpose for which it was intended. 29
Therefore, as it stands, there is no distinction as to the publication requirement in extrajudicial foreclosure sales
conducted by a sheriff or a notary public. The key element in both cases is still general circulation of the newspaper
in the place where the property is located.
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated July 29, 2005 and
Resolution dated July 31, 2006 in CA-G.R. CV No. 79862 are AFFIRMED. SO ORDERED.

Page 49 of 123

G.R. No. 184252


September 11, 2009
CHINA BANKING CORPORATION, Petitioner, vs. SPS. WENCESLAO & MARCELINA MARTIR, Respondents.
Assailed is the November 28, 2007 Decision 1 of the Court of Appeals in CA-G.R. CV No. 00477 which reversed the
April 27, 2004 Decision2 of the Regional Trial Court of General Santos City, Branch 23; invalidated the foreclosure;
and ordered the cancellation of the Certificate of Sale in favor of petitioner, China Banking Corporation. Also
assailed is the August 6, 2008 Resolution3 which denied the motion for reconsideration.
In 1994, respondents, spouses Wenceslao and Marcelina Martir, executed real estate mortgages in favor of
petitioner China Banking Corporation over three parcels of land described under TCT No. 50485, OCT No. (P-29452)
(P-11287) P-1897, and OCT No. P-2754, as security for their credit line in the amount of P1,800,000.00. 4 The loan
was released in tranches, and for every amount released, respondents executed the corresponding promissory
note.
On September 12, 1997, respondents failed to pay the monthly interests on the promissory notes, thus a demand
letter dated October 8, 19975 was sent reminding them of their obligation. Respondents still failed to pay; hence,
the promissory notes and the credit line were no longer renewed by petitioner. A final demand letter dated
December 29, 19976 was sent through registered mail to respondents by petitioners counsel. At that time,
respondents total obligation amounted to P1,705,000.00.
On May 20, 1998, upon the application of petitioner, the properties subject of the real estate mortgages were
extrajudicially foreclosed and sold at public auction for P2,400,000.00 with petitioner as the sole bidder. A
Certificate of Sale7 was issued in favor of petitioner on May 21, 1998, and registered with the Register of Deeds on
June 6, 1998.
From March to May 1999, respondents sent series of letters 8 to petitioner inquiring the amount of loan availed from
the credit line, as well as the amount needed to redeem the foreclosed properties. Petitioner, however, failed to
respond to the inquiry. In a letter dated May 11, 1999, 9 respondents formally offered to pay the amount of
P1,300,000.00 to petitioner. Said amount was based on petitioners letter dated October 8, 1997 stating that the
principal obligation amounts to P1,300,000.00.
On May 17, 1999, respondents filed a complaint for nullification of the foreclosure proceedings 10 alleging noncompliance with the jurisdictional requirements of publication, posting, registration, payment of filing fees and
sheriff fees, and failure to report the extrajudicial foreclosure proceedings and sale to the Executive Judge.
Respondents also imputed bad faith on the part of petitioner, which allegedly prevented them from redeeming their
properties.
In a Decision dated April 27, 2004, the Regional Trial Court upheld the validity of the foreclosure proceedings, but
stated that respondents failure to redeem the properties was caused by petitioner. Hence, the trial court granted
respondents the alternative remedy of redeeming the properties. The dispositive portion of the Decision reads: 11
WHEREFORE, considering that the case was filed in 1999, while the requirement for the payment of docket fees, as
well as the registration fees required on the petition for foreclosure of mortgage per the Supreme Court
Administrative Matter 99-10-05 regarding such procedure in extra-judicial foreclosure of mortgage took effect only
on January 15, 2000, the foreclosure could not be invalidated even if there was non-compliance with the Court
Administrative Matter 99-10-05. However, the expiration of the period to redeem being without the plaintiff having
been able to do so, was caused by the defendant bank; therefore, the plaintiff is hereby granted the alternative
remedy of redeeming the properties, in accordance with law and with the mortgage contract entered into by the
parties.
SO ORDERED.
On appeal, the Court of Appeals reversed the decision of the trial court. It invalidated the foreclosure and ordered
the cancellation of the registration of the Certificate of Sale in favor of petitioner. It also ordered respondents to pay
petitioner their loans with interest, without prejudice to the right of petitioner to foreclose the real estate mortgage
upon respondents failure to pay their obligations. The dispositive portion of the November 28, 2007 Decision
reads:12
WHEREFORE, the appealed Decision of the Regional Trial Court of General Santos City, Branch 23 is REVERSED. The
Register of Deeds of General Santos City is hereby ORDERED to cancel the registration of Certificate of Sale in favor
of appellee Bank. Likewise, the appellants are ORDERED to pay the appellee Bank their loans with interest as
stipulated in the contract of loan, without prejudice to the right of the appellee Bank to foreclose the real estate
mortgage upon the appellants failure to pay their obligations.
SO ORDERED.
Petitioner moved for reconsideration but was denied. Hence, the instant petition raising the following issues: 13
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT HELD THAT THE EXTRA-JUDICIAL FORECLOSURE
SALE WAS VOID BASED ON THE GROUND THAT THE NEWSPAPER WHERE THE NOTICE OF AUCTION SALE WAS
PUBLISHED WAS NOT AN "ACCREDITED NEWSPAPER," WHICH CONTENTION IS NOT A REQUIREMENT UNDER
EXISTING LAWS AND JURISPRUDENCE.
II.
Page 50 of 123

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ITS RULING WHEN IT FAILED TO APPRECIATE THE FACT
THAT THERE WAS SUBSTANTIAL COMPLIANCE IN BOTH THE POSTING OF THE NOTICE OF EXTRA-JUDICIAL
FORECLOSURE SALE AS WELL AS THE PUBLICATION OF THE SAME IN A NEWSPAPER OF GENERAL CIRCULATION BY
THE FORECLOSING NOTARY PUBLIC.
The petition is meritorious.
In invalidating the extrajudicial foreclosure and sale, the appellate court found that the posting and publication
requirements were not met, thus:
In this case, the appellee Bank failed to comply with both the requirements of posting and publication. The notice of
extrajudicial foreclosure and sale was posted in the barangay hall and Hall of Justice of General Santos City for only
fourteen (14) days, i.e. from May 6 to May 20, 1998 in violation of the mandated twenty (20) day period. Likewise,
the publication in SUN STAR, a local newspaper, was not valid on the ground that said newspaper is not an
accredited newspaper of general circulation in General Santos City pursuant to P.D. No. 1079. This is confirmed by
the Certification of Mr. Elmer D. Lastimosa, Clerk of Court VI, Office of the Clerk of Court of the Regional Trial Court,
General Santos City, dated January 12, 1999 which states that:
xxxx
THIS IS TO CERTIFY that SUN-STAR, General Santos published by Ang Peryodiko Dabaw, Inc. with editorial and
business address at Halieus Mall, Pendatun Avenue, corner Lukban Street, General Santos City is not an accredited
local newspaper insofar as this Court is concerned and therefore not qualified to publish judicial notices, court
orders and summonses and all similar announcement arising from court litigation required by law to be published,
as provided in Section 1 of P.D. No. 1079.
xxxx
THIS IS TO FURTHER CERTIFY that SUN-STAR General Santos has filed a "Petition for Accreditation" docketed as
Miscellaneous Case No. 1797 now pending consideration before the sala of Honorable Executive Judge Antonio S.
Alano.14
The requirements for posting and publication in extrajudicial foreclosure are set out in Act No. 3135, as amended:
Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public
places of the municipality or city where the property is situated, and if such property is worth more than four
hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a
newspaper of general circulation in the municipality or city.
Jurisprudence, however, has decreed that the publication of the notice of sale in a newspaper of general circulation
alone is more than sufficient compliance with the notice-posting requirements of the law. 15 The Court has elucidated
that:
We take judicial notice of the fact that newspaper publications have more far-reaching effects than posting on
bulletin boards in public places. There is a greater probability that an announcement or notice published in a
newspaper of general circulation, which is distributed nationwide, shall have a readership of more people than that
posted in a public bulletin board, no matter how strategic its location may be, which caters only to a limited few.
Hence, the publication of the notice of sale in the newspaper of general circulation alone is more than sufficient
compliance with the notice-posting requirement of the law. By such publication, a reasonably wide publicity had
been effected such that those interested might attend the public sale, and the purpose of the law had been thereby
subserved.
The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of
the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a
sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency
of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead
bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or
omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. 16
The focal issue, then, is whether the requirement of publication was complied with.
Presidential Decree 1079, the governing law at the time of the subject foreclosure, requires that notices shall be
published in newspapers or publications published, edited and circulated in the same city and/or province where the
requirement of general circulation applies, thus:
Section 1. All notices of auction sales in extra-judicial foreclosure of real estate mortgage under Act No. 3135 as
amended, judicial notices such as notices of sale on execution of real properties, notices in special proceedings,
court orders and summonses and all similar announcements arising from court litigation required by law to be
published in a newspaper or periodical of general circulation in particular provinces and/or cities shall be published
in newspapers or publications published, edited and circulated in the same city and/or province where the
requirement of general circulation applies; Provided, That the province or city where the publications principal
office is located shall be considered the place where it is edited and published: Provided, further, That in the event
there is no newspaper or periodical published in the locality, the same may be published in the newspaper or
periodical published, edited and circulated in the nearest city or province: Provided, finally, That no newspaper or
periodical which has not been authorized by law to publish and which has not been regularly published for at least
one year before the date of publication of the notices or announcements which may be assigned to it shall be
qualified to publish the said notices.
Page 51 of 123

Presidential Decree 1079 requires a newspaper of general circulation. A newspaper of general circulation is
published for the dissemination of local news and general information; it has a bona fide subscription list of paying
subscribers; and it is published at regular intervals. The newspaper must not also be devoted to the interest or
published for the entertainment of a particular class, profession, trade, calling, race or religious denomination. The
newspaper need not have the largest circulation so long as it is of general circulation. 17
Presidential Decree 1079, however, does not require accreditation. The requirement of accreditation was imposed
by the Court only in 2001, through A.M. No. 01-1-07-SC or the Guidelines in the Accreditation of Newspapers and
Periodicals Seeking to Publish Judicial and Legal Notices and Other Similar Announcements and in the Raffle
Thereof. This circular cannot be applied retroactively to the case at bar as it will impair petitioners rights.
Moreover, as held in Metrobank v. Peafiel,18 the accreditation by the presiding judge is not conclusive that a
newspaper is of general circulation, as each case must be decided on its own merits and evidence.
The accreditation of Maharlika Pilipinas by the Presiding Judge of the RTC is not decisive of whether it is a
newspaper of general circulation in Mandaluyong City. This Court is not bound to adopt the Presiding Judges
determination, in connection with the said accreditation, that Maharlika Pilipinas is a newspaper of general
circulation. The court before which a case is pending is bound to make a resolution of the issues based on the
evidence on record.19
In the instant case, the Affidavit of Publication executed by the account executive of Sun Star General Santos
expressly provided that the said newspaper is of general circulation and is published in the City of General Santos. 20
This is prima facie proof that Sun Star General Santos is generally circulated in General Santos City, the place where
the properties are located. Notably, respondents did not claim that the subject newspaper was not generally
circulated in the city, but only that it was not accredited by the court. Hence, there was valid publication and
consequently, the extrajudicial foreclosure and sale are valid.
We now come to the question of whether respondents can redeem their properties on the basis of the alleged bad
faith of petitioner.
The Court rules in the negative.
In effecting redemption, the mortgagor has the duty of tendering payment before the redemption period expires.
While the complaint alleged that respondents made an offer to redeem the subject properties within the period of
redemption, it did not allege that there was an actual tender of payment of the redemption price as required by the
rules.21 The letter dated May 11, 1999 is only a formal offer to redeem, unaccompanied by an actual tender of the
redemption price. The said letter reads:22
May 11, 1999
Aparente-Salvani St.,
Dadiangas Heights
General Santos City
THE CHINA BANKING CORPORATION
General Santos City
Sir:
This is with reference to my letter dated May 4, 1999 which remained unanswered up to the present.
I have been asking for the total amount of the loan with your bank so that the proper amount of redemption can be
determined, as you also refuse to give us the amount of redemption.
Per my computation, the principal obligation is only P1,300,000.00 for which the redemption amount should be
based. Because of your failure and refusal consider this as a formal tender of redemption in the principal amount of
P1,300,000.00. This tender is made without however waiving my right to question the validity of the foreclosure
proceedings.
Your reply is highly appreciated, otherwise your failure to do so within a period of two (2) days will constrain us to
file the necessary action in court to protect my interest.
Very truly yours,
(signed)
WENCESLAO V. MARTIR JR.,
This tender of payment is also made to:
ATTY. LORETO B. ACHARON
Notary Public who conducted the
Extrajudicial Sale

Page 52 of 123

The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do
so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. This
constitutes the exercise of the right to repurchase.23
In several cases decided by the Court where the right to repurchase was held to have been properly exercised,
there was an unequivocal tender of payment for the full amount of the repurchase price. Otherwise, the offer to
redeem is ineffectual. Bona fide redemption necessarily implies a reasonable and valid tender of the entire
repurchase price, otherwise the rule on the redemption period fixed by law can easily be circumvented. 24
Moreover, jurisprudence also characterizes a valid tender of payment as one where the full redemption price is
tendered.
Consequently, in this case, the offer by respondents on July 24, 1986 to redeem the foreclosed properties for
P1,872,935 and the subsequent consignation in court of P1,500,000 on August 27, 1986, while made within the
period of redemption, was ineffective since the amount offered and actually consigned not only did not include the
interest but was in fact also way below the P2,782,554.66 paid by the highest bidder/purchaser of the properties
during the auction sale.
In Bodiongan vs. Court of Appeals, we held:
In order to effect a redemption, the judgment debtor must pay the purchaser the redemption price composed of the
following: (1) the price which the purchaser paid for the property; (2) interest of 1% per month on the purchase
price; (3) the amount of any assessments or taxes which the purchaser may have paid on the property after the
purchase; and (4) interest of 1% per month on such assessments and taxes x x x.
Furthermore, Article 1616 of the Civil Code of the Philippines provides:
The vendor cannot avail himself of the right to repurchase without returning to the vendee the price of the sale x x
x.
It is not difficult to understand why the redemption price should either be fully offered in legal tender or else validly
consigned in court. Only by such means can the auction winner be assured that the offer to redeem is being made
in good faith.25
Respondents repeated requests for information as regards the amount of loan availed from the credit line and the
amount of redemption, and petitioners failure to accede to said requests do not invalidate the foreclosure.
Respondents can find other ways to know the redemption price. For one, they can examine the Certificate of Sale
registered with the Register of Deeds to verify the purchase price, or upon the filing of their complaint, they could
have moved for a computation of the redemption price and consigned the same to the court. At any rate, whether
or not respondents were diligent in asserting their willingness to pay is irrelevant. Redemption within the period
allowed by law is not a matter of intent but a question of payment or valid tender of the full redemption price within
said period. 261avvphi1
Even the complaint instituted by respondents cannot aid their plight because the institution of an action to annul a
foreclosure sale does not suspend the running of the redemption period.
Moreover, the period within which to redeem the property sold at a sheriffs sale is not suspended by the institution
of an action to annul the foreclosure sale. It is clear, then, that petitioners have lost any right or interest over the
subject property primarily because of their failure to redeem the same in the manner and within the period
prescribed by law. Their belated attempts to question the legality and validity of the foreclosure proceedings and
public auction must accordingly fail.27
Indeed, the law allows respondents the right to redeem their foreclosed properties. But in so granting that right, the
law intended that their offer to redeem be valid and effective, accompanied by an actual tender of the redemption
price. Fixing a definite term within which the property should be redeemed is meant to avoid prolonged economic
uncertainty over the ownership of the thing sold.28
WHEREFORE, the petition is GRANTED. The November 28, 2007 Decision and the August 6, 2008 Resolution of the
Court of Appeals in CA-G.R. CV No. 00477 are REVERSED AND SET ASIDE. The April 27, 2004 Decision of the
Regional Trial Court of General Santos City, Branch 23 upholding the validity of the extra-judicial foreclosure sale is
REINSTATED and AFFIRMED with the MODIFICATION that respondents are no longer allowed to redeem their
properties.
SO ORDERED.

Page 53 of 123

G.R. No. 129279


March 4, 2003
ALFREDO M. OUANO, petitioner, vs. COURT OF APPEALS, and HEIRS OF JULIETA M. OUANO, respondents.
Before us is a petition for review on certiorari against the decision and resolution of the Court of Appeals on CA-GR
CV No. 334991 affirming the decision of the Regional Trial Court of Cebu, Branch 19, in Civil Case No. CEB-596,
which set aside the extrajudicial foreclosure proceedings involving respondents' properties.
From the documentary evidence and the Stipulation of Facts2 filed by the parties before the Regional Trial Court of
Cebu, the facts of the case are, as follows:
On June 8, 1977, respondent Julieta M. Ouano (Julieta), now deceased, obtained a loan from the Philippine National
Bank (PNB) in the amount of P104,280.00. As security for said loan, she executed a real estate mortgage over two
parcels of land located at Opao, Mandaue City.3 She defaulted on her obligation. On September 29, 1980, PNB filed
a petition for extrajudicial foreclosure with the City Sheriff of Mandaue City.
On November 4, 1980, the sheriff prepared a notice of sale setting the date of public auction of the two parcels of
land on December 5, 1980 at 9:00 a.m. to 4:00 p.m. 4 He caused the notice to be published in the Cebu Daily Times,
a newspaper of general circulation in Mandaue City, in its issues of November 13, 20 and 27, 1980. 5 He likewise
posted copies thereof in public places in Mandaue City and in the place where the properties are located. 6
However, the sale as scheduled and published did not take place as the parties, on four separate dates, executed
Agreements to Postpone Sale (Agreements).7 These Agreements were addressed to the sheriff, requesting the latter
to defer the auction sale to another date at the same time and place, "without any further republication of the
Notice." The first of the four pro-forma Agreements reads, as follows:
AGREEMENT TO POSTPONE SALE
Provincial Sheriff
Mandaue City
Sir:
In accordance with this agreement of the parties in the above named case, it is respectfully requested that
the auction sale of the properties of the mortgagor, scheduled to take place on December 5 1980 at 9:00
o'clock in the morning at Office of the City Sheriff of Mandaue City be postponed to February 5, 1981, at the
same time and place, without any further republication of the notice of sale as required by law. [italics
supplied]
Cebu City, December 11, 1980.
PHILIPPINE NATIONAL BANK
(Mortgagee)
By:

(SGD.) F.B. Briones


Cebu Branch
Branch Attorney

(SGD.) JULIETA M. OUANO


(Mortgagor)
Address: Opao, Mandaue City
On December 3, 1980, two days prior to the date of the sale as published, the parties executed and filed with the
sheriff the Agreement to Postpone Sale moving the date of sale from December 5, 1980 to February 5, 1981. 8 On
February 5, 1981, however, no sale occurred.
Eight days later, on February 13, 1981, the parties executed and filed for the second time a similar agreement
moving the date of sale to February 28, 1981.9 Again, on February 28, 1981, no sale occurred.
Ten days later, on March 10, 1981, the parties executed and filed for the third time a similar agreement moving the
date of sale to March 30, 1981.10 No sale occurred on this date.
On March 30, 1981, the parties executed for the fourth time a similar agreement moving the date of sale to May 29,
1981.11 This agreement was filed with the sheriff on April 30, 1981.
In all these postponements, no new notice of sale was issued, nor was there any republication or reposting of notice
for the rescheduled dates.

Page 54 of 123

Finally, on May 29, 1981, the sheriff conducted the auction sale, awarding the two parcels of land to PNB, the only
bidder. He executed a Certificate of Sale certifying the sale for and in consideration of P195, 510.50. 12
As Julieta failed to redeem the properties within the one year period from registration of sale, PNB consolidated its
title on February 12, 1983.13 On February 23 of the same year, it conveyed the properties to herein petitioner
Alfredo Ouano, the brother of Julieta, under a Deed of Promise to Sell payable in five years. 14
On March 28, 1983, Julieta sent demand letters to PNB and petitioner, pointing out irregularities in the foreclosure
sale.15 On April 18, 1983, Julieta filed a complaint with the Regional Trial Court (RTC) of Cebu for the nullification of
the May 29, 1981 foreclosure sale.16 Petitioner filed a motion for leave to intervene in said case, and filed his
Answer in Intervention to protect his rights over the properties. 17
While the case was pending, on February 25, 1986, PNB executed a Deed of Sale in favor of petitioner. 18 The
Register of Deeds of Mandaue City accordingly cancelled the TCTs in PNB's name and issued in lieu thereof TCTs in
the name of petitioner over the two parcels of land.19
On January 29, 1990, the Regional Trial Court of Cebu rendered a decision in favor of Julieta, holding that the lack of
republication rendered the foreclosure sale void. The dispositive portion of said decision state:
WHEREFORE, judgment is hereby rendered,
1. declaring as null and void:
a) the auction sale by the City Sheriff of Mandaue City on May 29, 1981 over the aforesaid properties of
plaintiff Julieta Ouano;
b) the Certificate of Sale (Exhibit K) issued by the City Sheriff of Mandaue City on May 29, 1981, in favor of
the Philippine National Bank;
c) the Deed of Sale (Exhibit L) executed by PNB to itself;
d) the Deed of Promise to Sell (Exhibit O) executed by PNB on February 23, 1983 in favor of Alfredo Ouano
e) the Deed of Sale (Exhibit 24) executed by PNB on February 5, 1986 in favor of Alfredo Ouano;
f) TCT No. 17929 (Exhibit M) and TCT No. 17930 (Exhibit N) in the name of PNB;
g) TCT No. 21982 (Exhibit 21) and TCT No. 21987 (Exhibit 22) in the name of Alfredo Ouano;
2. ordering the Register of Deeds of Mandaue City to cancel the aforementioned titles (TCT Nos. 17929 and
17930, as well as TCT Nos. 21982 and 21987), and to reinstate TCT Nos. 15724 (5033) and 24377 (6876) in
the name of Julieta Ouano;
3. ordering the City Sheriff of Mandaue City to conduct a new auction sale strictly complying with the
requirements for publication and posting as required by Act 3135, as amended by Act 4118;
4. ordering PNB to return to Alfredo Ouano all amounts the latter has paid to the said bank;
5. ordering Alfredo Ouano to vacate the premises in question and turn them over to Julieta Ouano;
6. ordering PNB to pay the plaintiff the sum equivalent to 10% of the market value of the properties in
question as indicated in Tax Declaration Nos. 01134 and 00510, as attorney's fees, and to pay the costs.
SO ORDERED.20
Not satisfied, PNB and petitioner brought the case to the Court of Appeals. 21 In its decision dated February 17, 1997,
said court affirmed the trial court's ruling on the same ground that there was no compliance with the mandatory
requirements of posting and publication of notice of sale. 22 Petitioner filed a motion for reconsideration, which was
denied for lack of merit by the same court on April 15, 1997. 23
PNB and petitioner filed their own petitions for review on certiorari before us. PNB's petition however was dismissed
on July 21, 1997 for being filed out of time and for lack of certification of non-forum-shopping. 24 The petition herein
remaining is the one filed by petitioner.
Petitioner assigns the following errors:
I. RESPONDENT COURT OF APPEALS ERRED IN SUSTAINING THE FINDING OF THE LOWER COURT THAT THE
POSTPONED AUCTION SALE OF SUBJECT PROPERTIES HELD ON MAY 29, 1981 UPON WRITTEN AGREEMENT
OF THE PARTIES WAS NULL AND VOID FOR LACK OF PUBLICATION OF NOTICE OF SALE ON THE SAID DATE
ALTHOUGH THE REQUIREMENTS OF PUBLICATION OF NOTICE OF SALE ON THE ORIGINALLY INTENDED DATE
[WERE] FULLY COMPLIED WITH.

Page 55 of 123

II. RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE PROVISION OF SEC. 24, RULE 39 OF THE
RULES OF COURT WHICH ALLOWS THE SHERIFF TO ADJOURN ANY SALE UPON EXECUTION TO ANY DATE
AGREED UPON BY THE PARTIES IS NOT APPLICABLE TO THIS CASE.
III. RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT JULIETA M. OUANO IS NOT ESTOPPED FROM
CHALLENGING THE VALIDITY OF THE AUCTION SALE SINCE THE SALE WAS REPEATEDLY POSTPONED UPON
HER REQUEST AND WRITTEN AGREEMENT[S] THAT THERE WOULD BE NO REPUBLICATION OF THE NOTICE
OF SALE.
IV. RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT ALTHOUGH
JULIETA M. OUANO FILED HER COMPLAINT AFTER ALMOST TWO YEARS FROM THE DATE OF THE AUCTION
SALE.25
The main issue before us is whether or not the requirements of Act No. 3135 were complied with in the May 29,
1981 foreclosure sale.
The governing law for extrajudicial foreclosures is Act No. 3135 as amended by Act No. 4118. The provision relevant
to this case is Section 3, which provides:
SEC. 3. Notice shall be given by posting notices of the sale for not less than twenty (20) days in at least
three public places of the municipality or city where the property is situated, and if such property is worth
more than four hundred pesos, such notice shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality of city.
It is a well-settled rule that statutory provisions governing publication of notice of mortgage foreclosure sales must
be strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the sale at
least voidable.26 In a number of cases, we have consistently held that failure to advertise a mortgage foreclosure
sale in compliance with statutory requirements constitutes a jurisdictional defect invalidating the sale. 27
Consequently, such defect renders the sale absolutely void and no title passes. 28
Petitioner, however, insists that there was substantial compliance with the publication requirement, considering
that prior publication and posting of the notice of the first date were made.
In Tambunting v. Court of Appeals,29 we held that republication in the manner prescribed by Act No. 3135 is
necessary for the validity of a postponed extrajudicial foreclosure sale. Thus we stated:
Where required by the statute or by the terms of the foreclosure decree, public notice of the place and time
of the mortgage foreclosure sale must be given, a statute requiring it being held applicable to subsequent
sales as well as to the first advertised sale of the property. [emphasis supplied].
Petitioner further contends that republication may be waived voluntarily by the parties. 30
This argument has no basis in law. The issue of whether republication may be waived is not novel, as we have
passed upon the same query in Philippine National Bank v. Nepomuceno Productions Inc,.31 Petitioner therein
sought extrajudicial foreclosure of respondent's mortgaged properties with the Sheriff's Office of Pasig, Rizal.
Initially scheduled on August 12, 1976, the auction sale was rescheduled several times without republication of the
notice of sale, as stipulated in their Agreements to Postpone Sale. Finally, the auction sale proceeded on December
20, 1976, with petitioner as the highest bidder. Aggrieved, respondents sued to nullify the foreclosure sale. The trial
court declared the sale void for non-compliance with Act No. 3135. This decision was affirmed in toto by the Court of
Appeals. Upholding the conclusions of the trial and appellate court, we categorically held:
Petitioner and respondents have absolutely no right to waive the posting and publication requirements of Act No.
3135.
In People v. Donato, the Court expounded on what rights and privileges may be waived, viz.:
xxx

xxx

xxx

[T]he principle is recognized that everyone has a right to waive, and agree to waive, the advantage of a law
or rule made solely for the benefit and protection of the individual in his private capacity, if it can be
dispensed with and relinquished without infringing on any public right, and without detriment to the
community at large.
xxx

xxx

xxx

Although the general rule is that any right or privilege conferred by statute or guaranteed by constitution
may be waived, a waiver in derogation of a statutory right is not favored, and a waiver will be inoperative
and void if it infringes on the rights of others, or would be against public policy or morals and the public
interest may be waived.
xxx

xxx

xxx

The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor
as to inform the public generally of the nature and condition of the property to be sold, and of the time,
place, and terms of the sale. Notices are given to secure bidders and prevent a sacrifice of the property.
Page 56 of 123

Clearly, the statutory requirements of posting and publication are mandated, not for the mortgagor's
benefit, but for the public or third persons. In fact, personal notice to the mortgagor in extrajudicial
foreclosure proceedings is not even necessary, unless stipulated. As such, it is imbued with public policy
considerations and any waiver thereon would be inconsistent with the intent and letter of Act No. 3135.
Publication, therefore, is required to give the foreclosure sale a reasonably wide publicity such that those interested
might attend the public sale.32 To allow the parties to waive this jurisdictional requirement would result in converting
into a private sale what ought to be a public auction.
Moreover, assuming arguendo that the written waivers are valid, we find noticeable flaws that would nevertheless
invalidate the foreclosure proceedings. First, the Agreements, as worded, only waived "further republication of the
notice of sale." Nothing in the Agreements indicates that the parties likewise dispensed with the reposting of the
notices of sale. As there was no reposting of notice of the May 29, 1981 sale, the foreclosure fell short of the
requirements of Act No. 3135. Second, we observe that the Agreements were executed and filed with the sheriff
several days after each rescheduled date. As stated in the facts, the first agreement was timely filed, two days prior
to the originally scheduled sale on December 5, 1980. The second agreement, however, was executed and filed
eight days after the rescheduled sale on February 5, 1981. The third agreement was executed and filed ten days
after the rescheduled sale on February 28, 1981. The fourth agreement was timely executed, but was filed with the
sheriff one month after the rescheduled sale on March 30, 1981. On the rescheduled dates, therefore, no public sale
occurred, nor was there any request to postpone filed with the sheriff, except for the first one. In short, the
Agreements are clearly defective for having been belatedly executed and filed with the sheriff. The party who may
be said to be at fault for this failure, and who should bear the consequences, is no other than PNB, the mortgagee
in the case at bar. It is the mortgagee who causes the mortgaged property to be sold, and the date of sale is fixed
upon his instruction.33 We have held that the mortgagee's right to foreclose a mortgage must be exercised
according to the clear mandate of the law. Every requirement of the law must be complied with, lest the valid
exercise of the right would end.34 PNB's inaction on the scheduled date of sale and belated filing of requests to
postpone may be deemed as an abandonment of the petition to foreclose it filed with the sheriff. Consequently, its
right to foreclose the mortgage based on said petition lapsed.
In a vain attempt to uphold the validity of the aforesaid waiver, petitioner asserts that the Court of Appeals should
have applied Rule 39, Section 24 of the Rules of Court, which allows adjournment of execution sales by agreement
of the parties. The said provision provides:
Sec. 24. Adjournment of Sale By written consent of debtor and creditor, the officer may adjourn any sale
upon execution to any date agreed upon in writing by the parties. Without such agreement, he may adjourn
the sale from day to day, if it becomes necessary to do so for lack of time to complete the sale on the day
fixed in the notice.35
Petitioner submits that the language of the abovecited provision implies that the written request of the parties
suffices to authorize the sheriff to reset the sale without republication or reposting. 36
At the outset, distinction should be made of the three different kinds of sales under the law, namely: an ordinary
execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale. An ordinary execution sale is
governed by the pertinent provisions of Rule 39 of the Rules of Court. Rule 68 of the Rules of Court applies in cases
of judicial foreclosure sale. On the other hand, 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. A different set of law applies to each class of sale mentioned. 37 The cited
provision in the Rules of Court hence does not apply to an extrajudicial foreclosure sale.
Moreover, even assuming that the aforecited provision applies, all it authorizes is the adjournment of the execution
sale by agreement of the parties. Nowhere does it state that republication and reposting of notice for the postponed
sale may be waived. Thus, it cannot, by any means, sanction the waiver in the case at bar.
Next, petitioner maintains that Julieta's act of requesting the postponement and repeatedly signing the Agreements
had placed her under estoppel, barring her from challenging the lack of publication of the auction sale. 38
We rule otherwise. Julieta did request for the postponement of the foreclosure sale to extend the period to settle her
obligation.39 However, the records do not show that she requested the postponement without need of republication
and reporting of notice of sale. In Nepomuceno,40 we held:
. . . To request postponement of the sale is one thing; to request it without need of compliance with the
statutory requirements is another. Respondents, therefore, did not commit any act that would have
estopped them from questioning the validity of the foreclosure sale for non-compliance with Act No.
3135. . . .
In addition, we observe herein that the Agreements prepared by the counsel of PNB were in standard forms of the
bank, labeled as "Legal Form No.41." The Nepomuceno41 case likewise involved an "Agreement to Postpone Sale"
that was in a ready-made form, and the only participation of respondents therein was to affix or "adhere" their
signatures thereto. We therefore held that said agreement partakes of the nature of a contract of adhesion, i.e., one
in which one of the contracting parties imposes a ready-made form of contract which the other party may accept or
reject, but cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his
signature or his "adhesion" thereto, giving no room for negotiation, and depriving the latter of the opportunity to
bargain on equal footing.42 As such, their terms are construed strictly against the party who drafted it. 43
More importantly, the waiver being void for being contrary to the express mandate of Act No. 3135, such cannot be
ratified by estoppel.44 Estoppel cannot give validity to an act that is prohibited by law or one that is against public
policy.45 Neither can the defense of illegality be waived.46
Page 57 of 123

Petitioner, moreover, makes much of the fact that Julieta filed her complaint with the trial court after almost two
years from the May 29, 1981 auction sale, thus arguing that the delayed filing was a clear case of laches. 47
Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising
due diligence, could or should have been done earlier. 48 In the case at bar, Julieta only realized the defect in the
foreclosure sale upon conferring with her counsel who discovered the irregularity. 49 Thus, on March 25, 1983, Julieta
filed her adverse claim with the Registrar of Deeds. 50 Three days after, she sent demand letters to PNB and
petitioner.51 Soon after they replied on April 6 and 7, 1983,52 she promptly sued to nullify the foreclosure sale in the
Regional Trial Court of Mandaue City on April 20, 1983.53 She likewise filed a suit for forcible entry against petitioner
in the Municipal Trial Court of Mandaue City.54 Considering all these, we find the delay of almost two years not
unreasonable. Julieta cannot be guilty of laches. Her prompt actions upon discovering her cause of action negate
the claim that she has abandoned her right to claim the properties. Besides, this defense lacks merit in light of the
Civil Code stating that an action or defense for the declaration of the inexistence of a contract does not prescribe. 55
WHEREFORE, premises considered, the Decision dated February 17, 1997 in CA-G.R. CV No. 33499 and the
Resolution therein dated April 15, 1997 are AFFIRMED. No costs.
SO ORDERED.

Page 58 of 123

G.R. No. 187917


January 19, 2011
METROPOLITAN BANK & TRUST COMPANY, Petitioner, vs. SPOUSES EDMUNDO MIRANDA and JULIE
MIRANDA, Respondents.
On appeal is the June 30, 2008 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 87775, affirming the June
16, 2006 Decision2 of the Regional Trial Court (RTC) of Santiago City, Branch 35, as well as its subsequent Resolution
dated May 7, 2009,3 denying petitioners motion for reconsideration.
Respondents, spouses Edmundo Miranda and Julie Miranda, applied for and obtained a credit accommodation from
petitioner Metropolitan Bank & Trust Company (Metrobank). On August 27, 1996, respondents obtained a
P4,000,000.00 loan from Metrobank and executed a real estate mortgage 4 over a parcel of land in Poblacion,
Santiago, Isabela, covered by Transfer Certificate of Title (TCT) No. 202288. Upon respondents request, Metrobank
increased the loan from P4,000,000.00 to P5,000,000.00. The real estate mortgage executed on August 27, 1996
was thus amended5 to increase the principal amount of loan secured by the mortgage to P5,000,000.00.
Subsequently, respondents obtained additional loans from Metrobank - P1,000,000.00 on December 3, 1996, and
P1,000,000.00 on May 8, 1997. The additional loans were secured by mortgage 6 over lands situated in Dubinan and
Mabini, Santiago, Isabela, covered by TCT Nos. T-202288, T-180503, T-260279, and T-272664.
Respondents encountered difficulties in paying their loans. They requested for a longer period to settle their
account and further requested for the restructuring of their loans, which requests Metrobank granted. Respondents
then signed Promissory Note (PN) No. 5997737 for P6,400,000.00, and PN No. 5997728 for P950,000.00, both
payable on February 24, 2002, with interest at 17.250% per annum. They also amended the deeds of real estate
mortgage they executed in favor of Metrobank to increase the amount of loans secured by mortgage to
P6,350,000.00. The amendment was inscribed on TCT Nos. T-202288, 9 T-260279,10 and T-180503.11
On August 25, 2000, Metrobank sent respondents a demand letter 12 to settle their overdue account of
P8,512,380.15, inclusive of interest and penalties; otherwise, the bank would initiate "the necessary legal
proceedings x x x, without further notice." Respondents, however, failed to settle their account. Consequently,
Metrobank caused the extrajudicial foreclosure and auction sale of the mortgaged properties on November 16,
2000. The Clerk of Court and Ex-Officio Sheriff of Santiago City sold the mortgaged properties at public auction for
the sum of P9,284,452.00 to Metrobank, as the highest bidder. A Certificate of Sale13 was issued in favor of
Metrobank on November 27, 2000, which was registered with the Registry of Deeds on November 29, 2000.
Claiming that the extrajudicial foreclosure was void, respondents filed a complaint for Nullification of the
Foreclosure Proceedings and Damages with Prayer for Temporary Restraining Order/Injunction 14 with the RTC of
Santiago City. They alleged non-compliance with the provisions of Presidential Decree No. 1079 15 and Act No.
3135,16 particularly the publication requirement. Respondents further asserted that Metrobank required them to
sign blank promissory notes and real estate mortgage, and that they were not furnished with copies of these
documents. Later, they discovered that the terms and conditions of the promissory notes and of the mortgage were
entirely different from what was represented to them by the bank. The right to fix the interest rates, they added,
was
exclusively given to the bank. Respondents, thus, prayed for the annulment of the extrajudicial foreclosure
proceedings.
Metrobank answered the complaint, denying its material allegations and asserting the validity of the foreclosure
proceedings. Specifically, it averred compliance with the posting and publication requirements. Thus, it prayed for
the dismissal of the complaint.17
Meanwhile, on December 20, 2001, Metrobank caused the cancellation of the TCTs in the name of respondents and
the issuance of new ones in its name. On December 21, 2001, the Ex-Officio Sheriff executed a Final Deed of Sale. 18
On June 16, 2006, the RTC rendered a decision19 annulling the extrajudicial foreclosure proceedings. The RTC
reviewed the records of the foreclosure proceedings and found no proof of publication of the sheriffs notice of sale;
there was no affidavit of publication attached to the records. This fatal defect, it held, invalidated the auction sale
and the entire foreclosure proceedings. The RTC further held that, when Metrobank foreclosed the mortgaged
properties, respondents loan account was still outstanding for there was an overpayment of interests amounting to
P1,529,922.00. Thus, the foreclosure proceedings were without factual and legal basis. The RTC further noted that
Metrobank consolidated its title even before the issuance of the sheriffs Final Deed of Sale. The trial court
considered it an irregularity sufficient to invalidate the consolidation.
The dispositive portion of the RTC decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of [respondents] and against [petitioner]
Metrobank as follows:
1) DECLARING as null and void the Sheriffs Certificate of Sale, dated November 27, 2000, Exhibit "11";
2) DECLARING as null and void the Sheriffs Final Deed of Sale, dated December 21, 2000, Exhibit "12";
3) CANCELLING [Metrobanks] TCT Nos. T-319236 (Exhibit "13"); T-319235 over Lot 6-B-18 (Exhibit "14"); T-T319235 over Lot 4-F (Exhibit "15"); and T-319237 (Exhibit "16");
4) RESTORING [respondents] TCT Nos. T-260279 (Exhibit "E"); T-202288 (Exhibit "F"); T-180503 (Exhibit
"G"; and T- 272664 (Annex "E"); and
Page 59 of 123

5) ORDERING x x x Metrobank to pay PHP50,000.00 as attorneys fees, and the cost of suit.
SO ORDERED.

20

Metrobank filed a motion for reconsideration, but the RTC denied it on July 31, 2006.
Metrobank then appealed to the CA, faulting the RTC for annulling the foreclosure proceedings. It insisted that the
bank complied with the publication requirement. Metrobank also disagreed with the trial courts finding of
overpayment of interests amounting to P1,529,922.00, claiming that the applicable interest rates on respondents
loans were 17% and not 12% as computed by the trial court. It further asserted that a final deed of sale is not
necessary for purposes of consolidating its ownership over the subject properties. Finally, Metrobank assailed the
award of attorneys fees for lack of basis.
On June 30, 2008, the CA resolved Metrobanks appeal in this wise:
WHEREFORE, the appeal is DISMISSED. The assailed decision dated June 16, 2006 of the RTC of Santiago City,
Branch 35, in Civil Case No. 35-3022 is AFFIRMED.
SO ORDERED.21
Metrobanks motion for reconsideration also suffered the same fate, as the CA denied it on May 7, 2009. 22
Before us, Metrobank insists on the validity of the foreclosure proceedings. Essentially, it argues that foreclosure
proceedings enjoy the presumption of regularity, and the party alleging irregularity has the burden of proving his
claim. Metrobank asserts that, in this case, the presumption of regularity was not disputed because respondents
failed to prove that the notice of sale was not published as required by law.
At the outset, it must be stated that only questions of law may be raised before this Court in a Petition for Review
under Rule 45 of the Revised Rules of Civil Procedure. This Court is not a trier of facts, and it is not the function of
this Court to reexamine the evidence submitted by the parties. 23
It has been our consistent ruling that the question of compliance or non-compliance with notice and publication
requirements of an extrajudicial foreclosure sale is a factual issue, and the resolution thereof by the trial court is
generally binding on this Court. The matter of sufficiency of posting and publication of a notice of foreclosure sale
need not be resolved
by this Court, especially when the findings of the RTC were sustained by the CA. Well-established is the rule that
factual findings of the CA are conclusive on the parties and carry even more weight when the said court affirms the
factual findings of the trial court. 24
The unanimity of the CA and the trial court in their factual ascertainment that there was non-compliance with the
publication requirement bars us from supplanting their findings and substituting them with our own. Metrobank has
not shown that they are entitled to an exception to this rule. It has not sufficiently demonstrated any special
circumstances to justify a factual review.
Metrobank makes much ado of respondents failure to present proof of non-compliance with the publication
requirement. It insists that respondents failed to discharge the requisite burden of proof.
Apparently, Metrobank lost sight of our ruling in Spouses Pulido v. CA, 25 Sempio v. CA,26 and, recently, in Philippine
Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo, 27 viz.:
While it may be true that the party alleging non-compliance with the requisite publication has the burden of proof,
still negative allegations need not be proved even if essential to ones cause of action or defense if they constitute
a denial of the existence of a document the custody of which belongs to the other party.
It would have been a simple matter for Metrobank to rebut the allegation of non-compliance by producing the
required proof of publication. Yet, Metrobank opted not to rebut the allegation; it simply relied on the presumption
of regularity in the performance of official duty.
Unfortunately, Metrobanks reliance on the presumption of regularity must fail because it did not present any proof
of publication of the notice of sale. As held by this Court in Spouses Pulido v. Court of Appeals: 28
[P]etitioners' reliance on the presumption of regularity in the performance of official duties falls in the face of a
serious imputation on non-compliance. The presumption of compliance with official duty is rebutted by failure to
present proof of posting.
Further, in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo, 29 this Court rejected a
similar contention, viz.:
Petitioner's invocation of the presumption of regularity in the performance of official duty on the part of Sheriff
Castillo is misplaced. While posting the notice of sale is part of a sheriff's official functions, the actual publication of
the notice of sale cannot be considered as such, since this concerns the publisher's business. Simply put, the sheriff
is incompetent to prove that the notice of sale was actually published in a newspaper of general circulation.

Page 60 of 123

As correctly found by the RTC and the CA, the records 30 of the foreclosure proceedings lacked any proof of
publication. This explains why Metrobank could not present any proof of publication.
We take this occasion to reiterate that the object of a notice of sale is to inform the public of the nature and
condition of the property to be sold, and of the time, place, and terms of the sale. Notices are given for the purpose
of securing bidders and preventing a sacrifice sale of the property.
The goal of the notice requirement is to achieve a "reasonably wide publicity" of the auction sale. This is why
publication in a newspaper of general circulation is required. The Court has previously taken judicial notice of the
"far-reaching effects" of publishing the notice of sale in a newspaper of general circulation. Thus, the publication of
the notice of sale was held essential to the validity of foreclosure proceedings. 31 In this case, Metrobank failed to
establish compliance with the publication requirement. The RTC and the CA cannot, therefore, be faulted for
nullifying the foreclosure proceedings.
Metrobank next questions the authority of the RTC and the CA to take cognizance of the records of the foreclosure
proceedings as basis for annulling the auction sale. It claims that the trial court may not take judicial notice of the
records of proceedings in another case, unless the parties themselves agreed to it. Metrobank asserts that it did not
give its consent to the trial courts examination of the records of the extrajudicial foreclosure proceedings. Further,
the RTC did not even set a hearing for the purpose of declaring its intention to take judicial notice of the records of
the extrajudicial proceedings, as required by Section 332 of Rule 129. Metrobank, thus, contends that the RTC
exceeded its authority in taking cognizance of the records of the extrajudicial proceedings.
We disagree.
As a rule, courts do not take judicial notice of the evidence presented in other proceedings, even if these have been
tried or are pending in the same court or before the same judge. This rule, however, is not absolute.
In Juaban v. Espina33 and "G" Holdings, Inc. v. National Mines and Allied Workers Union Local 103 (NAMAWU), 34 we
held that, in some instances, courts have also taken judicial notice of proceedings in other cases that are closely
connected to the matter in controversy. These cases may be so closely interwoven, or so clearly interdependent, as
to invoke a rule of judicial notice.
The RTC, therefore, acted well within its authority in taking cognizance of the records of the extrajudicial foreclosure
proceedings, and the CA cannot be faulted for sustaining the RTC.
Metrobank further questions the trial courts finding of overpayment of interests. But like the issue on compliance
with the publication requirement, the issue on overpayment of interests involves the ascertainment of facts not
subject of review by this Court. We reiterate that our jurisdiction is limited to reviewing and revising errors of law
imputed to the lower court, the latters findings of fact being conclusive and not reviewable by this Court. 35
Besides, we find nothing erroneous in this factual finding of the RTC. As explained by the RTC in its decision:
[T]he Court notes that the original promissory notes evidencing the various loans of the plaintiffs were not
presented in court by either party; they are needed to determine the stipulated interest rate. The Court is thus left
to determine the same based on the testimony of the plaintiffs that the agreed interest rate is 12% per annum;
amazingly, this was not denied or refuted by the [petitioner] bank, in which case, 12% interest rate is applied at
least for the period beginning 1997 until 1999, when the loan was renewed under the two (2) new promissory notes
which indicated a higher rate of interest of 17.250% per annum. As mentioned above, the interest payments made
by the [respondents] were already admitted by [Metrobank] in its answer to the complaint as well as in its comment
to [respondents] formal offer of evidence, and such interest payments are duly reflected and contained in the
passbook account of the [respondents], Exhibit "H," "H-1" to "H-10." But, in order to determine whether
[respondents] account has become past due or not, as the [petitioner] bank represents, the Court deems it
necessary to undertake some mathematical computation the result of which would decisively guide the Court to
arrive at a rightful conclusion, thus:
1) Total interest payments by [respondents]
from May 7, 1997 to June 30, 1999 -

P3,332,422.
00

2) Interest due
from May 7, 1997 to June 30, 1999 -

P1,802,500.
00

computed as follows:
a) 1st year (P7 M x 12%), from May 7, 1997 to
May 28, 1998 -

P
840,000.00

b) 2nd year
i) from June 3, 1998 to Feb. 24, 1999 (8 mos.) -

P
560,000.00

ii) from March, 1999 to June 30, 1999 (4 mos.) -

P
402,500.00

3) Total Interest paid -

P
3,332,422.0
0

Less Interest due -

P
1,802,500.0
0
Page 61 of 123

Overpaid interest -

P
1,529,922.0
0

From the foregoing, it is evident that [respondents] overpaid interests for the period of two (2) years, from May
1997 to June 1999, in the total amount of Php. 1,529,922.00. Thus, the Court is convinced that it is just and
equitable that such an overpayment be construed as advance interest payments which should be applied for the
succeeding period or year of their contract. Otherwise, [Metrobank] would unjustly enrich itself at the expense of
[respondents]. In such a case, it was premature then for [Metrobank] to declare [respondents] account as past due,
because at that juncture[, respondents] loan obligation was outstanding and in declaring otherwise, [Metrobanks]
action was without basis as there was no violation of their loan contract. Consequently, it follows that the
foreclosure proceedings subsequently held on November 26, 2000 was without factual and legal basis, too. For,
indeed, when the foreclosure proceedings in question was conducted, [respondents] loan account with
[Metrobank], as it is said, was still outstanding, because [respondents] were able to pay the interest due. Therefore,
the Court is again convinced that the nullification prayed for is in order. 36
We need not say more.
In fine, the right of a bank to foreclose a mortgage upon the mortgagor's failure to pay his obligation must be
exercised according to its clear mandate, and every requirement of the law must be complied with, or the valid
exercise of the right would end. The exercise of a right ends when the right disappears, and it disappears when it is
abused especially to the prejudice of others.37
As further declared by this Court in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo: 38
While the law recognizes the right of a bank to foreclose a mortgage upon the mortgagor's failure to pay his
obligation, it is imperative that such right be exercised according to its clear mandate. Each and every requirement
of the law must be complied with, lest, the valid exercise of the right would end. It must be remembered that the
exercise of a right ends when the right disappears, and it disappears when it is abused especially to the prejudice of
others.1avvphi1
We, therefore, affirm the CA and sustain the RTC in nullifying the extrajudicial foreclosure of real estate mortgage
and sale, including Metrobanks title.
With this disquisition, we find no necessity to discuss the issue of the validity of the consolidation of title by
Metrobank.
WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. CV
No. 87775 are AFFIRMED.
SO ORDERED.

Page 62 of 123

G.R. No. 125838


June 10, 2003
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and EMERALD RESORT
HOTEL CORPORATION, respondents.
This petition for review on certiorari1 seeks to reverse the Joint Decision2 of the Court of Appeals in CA-G.R. CV Nos.
38569 and 38604 dated 31 January 1996 and the Resolution dated 30 July 1996 denying the motion for
reconsideration. The Court of Appeals affirmed the Decision3 of the Regional Trial Court of Iriga City, Branch 36,
declaring the foreclosure of the mortgaged properties void for failure to comply with the statutory requisites.
The Facts
Private respondent Emerald Resort Hotel Corporation ("ERHC") obtained a loan from petitioner Development Bank
of the Philippines ("DBP"). DBP released the loan of P3,500,000.00 in three installments: P2,000,000.00 on 27
September 1975, P1,000,000.00 on 14 June 1976 and P500,000.00 on 14 September 1976. To secure the loan,
ERHC mortgaged its personal and real properties to DBP.
On 18 March 1981, DBP approved a restructuring of ERHCs loan subject to certain conditions. 4 On 25 August 1981,
DBP allegedly cancelled the restructuring agreement for ERHCs failure to comply with some of the material
conditions5 of the agreement.
Subsequently, ERHC delivered to DBP three stock certificates of ERHC aggregating 3,477,052 shares with a par
value of P1.00 per share. ERHC first delivered to DBP on 20 October 1981 Stock Certificate No. 30 covering
1,862,148 shares. Then ERHC delivered on 3 November 1981 Stock Certificate No. 31 covering 691,052 shares, and
on 27 November 1981 Stock Certificate No. 32 covering 923,852 shares.
On 5 June 1986, alleging that ERHC failed to pay its loan, DBP filed with the Office of the Sheriff, Regional Trial Court
of Iriga City, an Application for Extra-judicial Foreclosure of Real Estate and Chattel Mortgages.
Deputy Provincial Sheriffs Abel Ramos and Ruperto Galeon issued the required notices of public auction sale of the
personal and real properties. However, Sheriffs Ramos and Galeon failed to execute the corresponding certificates
of posting of the notices. On 10 July 1986, the auction sale of the personal properties proceeded.
The Office of the Sheriff scheduled on 12 August 1986 the public auction sale of the real properties. The Bicol
Tribune published on 18 July 1986, 25 July 1986 and 1 August 1986 the notice of auction sale of the real properties.
However, the Office of the Sheriff postponed the auction sale on 12 August 1986 to 11 September 1986 at the
request of ERHC. DBP did not republish the notice of the rescheduled auction sale because DBP and ERHC signed an
agreement to postpone the 12 August 1986 auction sale. 6 ERHC, however, disputes the authority of Jaime Nuevas
who signed the agreement for ERHC.
In a letter dated 24 November 1986, ERHC informed DBP of its intention to lease the foreclosed properties. 7
On 22 December 1986, ERHC filed with the Regional Trial Court of Iriga City a complaint for annulment of the
foreclosure sale of the personal and real properties. Subsequently, ERHC filed a Supplemental Complaint. ERHC
alleged that the foreclosure was void mainly because (1) DBP failed to comply with the procedural requirements
prescribed by law; and (2) the foreclosure was premature. ERHC maintained that the loan was not yet due and
demandable because the DBP had restructured the loan.
DBP moved to dismiss the complaint because it stated no cause of action and ERHC had waived the alleged
procedural defenses. The trial court denied the motion to dismiss. Consequently, DBP filed its answer, claiming that
it complied with the legal requirements for a valid foreclosure. DBP further claimed that it cancelled the conditional
restructuring of ERHCs loan because ERHC failed to comply with some material conditions of the restructuring
agreement.
Meanwhile, acting on ERHCs application for the issuance of a writ of preliminary injunction, the trial court granted
the writ on 20 August 1990. Accordingly, the trial court enjoined DBP from enforcing the legal effects of the
foreclosure of both the chattel and real estate mortgages.
Thereafter, trial on the merits ensued. After the parties presented their evidence, the trial court rendered a
Decision8 dated 28 January 1992, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff corporation and
against the defendants:
1. Declaring as null and void the foreclosure and auction sale of the personal properties of plaintiff
corporation held on July 10, 1986;
2. Declaring as null and void the foreclosure and auction sale of the real properties of plaintiff corporation
covered by TCT No. RT-1075 (19980); TCT No. RT-1076 (19981); TCT No. RT-1077 (22367) and TCT No. 10244
of the Register of Deeds of Camarines Sur (now Iriga City) in the auction sale thereof held on September 11,
1986, and all the improvements therein;
3. Ordering the Register of Deeds of Camarines Sur (now Iriga City) to cancel the annotations of the
Sheriffs Certificate of Sale on the aforestated titles as null and void and without any legal effect;

Page 63 of 123

4. Ordering the defendant Development Bank of the Philippines to comply with the restructuring of plaintiff
corporations loans retroactively as though the foreclosure had not taken place in the interest of justice and
equity; and
5. Ordering the defendant DBP to pay plaintiff corporation moral damages in the amount of P500,000.00 for
initiating what was a clearly illegal foreclosure and causing the said plaintiff corporation to suffer needlessly
anguish, opprobrium and disrepute as a consequence thereto.
SO ORDERED.
Both ERHC and DBP appealed the trial courts decision to the Court of Appeals. ERHC anchored its appeal on the
insufficiency of the moral damages awarded by the trial court and the absence of any award of temperate, nominal
or exemplary damages. DBPs appeal, on the other hand, assailed the decision as well as the order dismissing its
petition for a writ of possession.
The Court of Appeals, which consolidated the appeals, affirmed the decision of the trial court. 9 DBP filed a Motion for
Reconsideration which the Court of Appeals denied.10
Hence, this petition.
The Ruling of the Court of Appeals
The Court of Appeals sustained the trial courts ruling that the foreclosure was void. The Court of Appeals affirmed
the trial courts finding that DBP failed to comply with the posting and publication requirements under the
applicable laws. The Court of Appeals held that the non-execution of the certificate of posting of the notices of
auction sale and the non-republication of the notice of the rescheduled 11 September 1986 auction sale invalidated
the foreclosure.
The Court of Appeals also found that the parties perfected the restructuring agreement and that ERHC substantially
complied with its conditions based on the following "circumstances":
(a) The transmittal letter dated October 20, 1981 which relates to the progress of the restructuring of the
mortgage account of Emerald Resort Hotel Corporation and that the same has been approved by the SEC
(Exh. "D")
(b) The transfer of shares of stocks to appellant DBP, the value of which are broken as follows:
1. Stock certificate No. 30 for 1,862,148 shares worth P1,862,148.00 (Exhs. "D" and "D-1");
2. Stock certificate No. 32 for 932,852 shares worth P953,852.00 (Exhs. "F" and "F-1");
3. Stock certificate No. 031, for 691,052 shares worth P691,052.00 (Exhs. "M" and "M-5").
(c) The acceptance of the foregoing by the DBP without raising the fact of delay as embodied in condition
no. 7 of Exh. "B".
(d) No rejection was made by the defendant-appellant DBP at the time the shares of stocks were being held
by the latter.
(e) The belated rejection of the shares of stocks was interposed only at the time the instant suit was filed
which was long after the expiration of the 90-day period extended by DBP to Emerald.
(f) No rejection was also made when plaintiff corporation did not avail of the additional loan which was
allegedly part of the package accommodation.11
The Court of Appeals also affirmed the trial courts award of moral damages but denied ERHCs claim for temperate
and exemplary damages. The Court of Appeals found that DBPs intrusion, assisted by sheriffs and several armed
men, into Hotel Ibalon and the sheriffs inventory of the hotels furniture and fixtures caused fear and anxiety to the
hotel owner, staff and guests. These acts, according to the Court of Appeals, debased the hotels goodwill and
undermined its viability warranting the award of moral damages.
Finding the foreclosure void, the Court of Appeals also denied DBPs petition for a deficiency claim and a writ of
possession.
The Issues
DBP presents the following issues for resolution:
1. Whether DBP complied with the posting and publication requirements under applicable laws for a valid
foreclosure.
2. Whether the restructuring agreement between DBP and ERHC was perfected and implemented by the
parties before the foreclosure.
Page 64 of 123

3. Whether ERHCs offer to lease the foreclosed properties constitutes a waiver of its right to question the
validity of the foreclosure.
4. Whether the award of moral damages to ERHC, a juridical person, is proper.
The Courts Ruling
The petition is partly meritorious.
First Issue:
Compliance with the posting and publication requirements under applicable laws
Posting requirement under Acts Nos. 3135 and 1508
In alleging that the foreclosure was valid, DBP maintains that it complied with the mandatory posting requirement
under applicable laws.12 DBP insists that the non-execution of the certificate of posting of the auction sale notices
did not invalidate the foreclosure.
We agree.
This Court ruled in Cristobal v. Court of Appeals13 that a certificate of posting is not required, much less
considered indispensable for the validity of an extrajudicial foreclosure sale of real property under Act No. 3135.
Cristobal merely reiterated the doctrine laid down in Bohanan v. Court of Appeals.14 In the present case, the
foreclosing sheriffs failed to execute the certificate of posting of the auction sale notices. However, this fact alone
does not prove that the sheriffs failed to post the required notices. As held in Bohanan, "the fact alone that there is
no certificate of posting attached to the sheriff's records is not sufficient to prove the lack of posting." 15
Based on the records, DBP presented sufficient evidence to prove that the sheriffs posted the notices of the
extrajudicial sale. The trial and appellate courts glaringly erred and gravely abused its discretion in disregarding the
sheriffs partial report and the sheriffs certificate of sale executed after the auction sale. A careful examination of
these two documents clearly shows that the foreclosing sheriffs posted the required notices of sale.
The partial report dated 10 July 1986 signed by both Sheriff Abel Ramos and Deputy Sheriff Ruperto Galeon states
in part:
That on July 1, 1986, the undersigned sheriffs posted the notice of public auction sale of chattel
mortgage in the conspicuous places, and at the Iriga City Hall Bulletin Board, including Ibalon Hotel, Iriga
City xxx.16 (Emphasis supplied)
Similarly, the certificate of sale of the real properties signed by both Sheriff Ramos and Deputy Sheriff Galeon on 11
September 1986 states in part:
I, FURTHERMORE CERTIFY that the Notice of Sale was published in BICOL TRIBUNE, a newspaper of general
circulation in the province of Camarines Sur, for three (3) consecutive weeks and three (3) copies of the
notices of sale were posted in three (3) public places of the City where the properties are located for
no less than twenty (20) days before the sale. 17 (Emphasis supplied)
Deputy Sheriff Galeon also testified that he, together with Sheriff Ramos, 18 actually posted the notices of sale.19
Indisputably, there is clear and convincing evidence of the posting of the notices of sale. What the law requires is
the posting of the notice of sale, which is present in this case, and not the execution of the certificate of posting.
Moreover, ERHC bore the burden of presenting evidence that the sheriffs failed to post the notices of sale. 20 In the
absence of contrary evidence, as in this case, the presumption prevails that the sheriffs performed their official duty
of posting the notices of sale. Consequently, we hold that the non-execution of the certificate of posting cannot
nullify the foreclosure of the chattel and real estate mortgages in the instant case.
Publication requirement under Act No. 3135
Having shown that there was posting of the notices of auction sale, we shall now resolve whether there was
publication of the notice of sale of the real properties in compliance with Act No. 3135. 21
There is no question that DBP published the notice of auction sale scheduled on 12 August 1986. However, no
auction sale took place on 12 August 1986 because DBP, at the instance of ERHC, agreed to postpone the same to
11 September 1986. DBP contends that the agreement to postpone dispensed with the need to publish again the
notice of auction sale. Thus, DBP did not anymore publish the notice of the 11 September 1986 auction sale. DBP
insists that the law does not require republication of the notice of a rescheduled auction sale. Consequently, DBP
argues vigorously that the extrajudicial foreclosure of the real estate mortgage is valid.
We do not agree.
The Court held recently in Ouano v. Court of Appeals22 that republication in the manner prescribed by Act No.
3135 is necessary for the validity of a postponed extrajudicial foreclosure sale. Another publication is required in
case the auction sale is rescheduled, and the absence of such republication invalidates the foreclosure sale.

Page 65 of 123

The Court also ruled in Ouano that the parties have no right to waive the publication requirement in Act No. 3135.
The Court declared thus:
Petitioner further contends that republication may be waived voluntarily by the parties.
This argument has no basis in law. The issue of whether republication may be waived is not novel, as we
have passed upon the same query in Philippine National Bank v. Nepomuceno Productions Inc. Petitioner
therein sought extrajudicial foreclosure of respondents mortgaged properties with the Sheriffs Office of
Pasig, Rizal. Initially scheduled on August 12, 1976, the auction sale was rescheduled several times without
republication of the notice of sale, as stipulated in their Agreements to Postpone Sale. Finally, the auction
sale proceeded on December 20, 1976, with petitioner as the highest bidder. Aggrieved, respondents sued
to nullify the foreclosure sale. The trial court declared the sale void for non-compliance with Act No. 3135.
This decision was affirmed in toto by the Court of Appeals. Upholding the conclusions of the trial and
appellate courts, we held:
Petitioner and respondents have absolutely no right to waive the posting and publication
requirements of Act No. 3135.
xxx
Publication, therefore, is required to give the foreclosure sale a reasonably wide publicity such that those
interested might attend the public sale. To allow the parties to waive this jurisdictional requirement would
result in converting into a private sale what ought to be a public auction.
DBP further asserts that Section 24, Rule 39 of the Rules of Court, which allows adjournment of execution sales by
agreement of the parties, applies to the present case. Section 24 of Rule 39 provides:
Sec. 24. Adjournment of Sale By written consent of debtor and creditor, the officer may adjourn any sale
upon execution to any date agreed upon in writing by the parties. Without such agreement, he may adjourn
the sale from day to day, if it becomes necessary to do so for lack of time to complete the sale on the day
fixed in the notice.
The Court ruled in Ouano that Section 24 of Rule 39 does not apply to extrajudicial foreclosure sales, thus:
Petitioner submits that the language of the abovecited provision23 implies that the written request of the
parties suffices to authorize the sheriff to reset the sale without republication or reposting.
At the outset, distinction should be made of the three different kinds of sales under the law, namely: an
ordinary execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale. An ordinary
execution sale is governed by the pertinent provisions of Rule 39 of the Rules of Court. Rule 68 of the Rules
of Court applies in cases of judicial foreclosure sale. On the other hand, 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. A different set of law
applies to each class of sale mentioned. The cited provision in the Rules of Court hence does not
apply to an extrajudicial foreclosure sale. (Emphasis supplied)
DBP also maintains that ERHCs act of requesting postponement of the 12 August 1986 auction sale estops ERHC
from challenging the absence of publication of the notice of the rescheduled auction sale.
We do not agree.
ERHC indeed requested postponement of the auction sale scheduled on 12 August 1986. 24 However, the records are
bereft of any evidence that ERHC requested the postponement without need of republication of the notice of sale.
In Philippine National Bank v. Nepomuceno Productions Inc.,25 the Court held that:
x x x To request postponement of the sale is one thing; to request it without need of compliance with the
statutory requirements is another. Respondents, therefore, did not commit any act that would have
estopped them from questioning the validity of the foreclosure sale for non-compliance with Act No. 3135. x
xx
The form of the notice of extrajudicial sale is now prescribed in Circular No. 7-2002 26 issued by the Office of the
Court Administrator on 22 January 2002. Section 4(a) of Circular No. 7-2002 provides that:
Sec. 4. The Sheriff to whom the application for extra-judicial foreclosure of mortgage was raffled shall do
the following:
a. Prepare a Notice of Extra-judicial Sale using the following form:
"NOTICE OF EXTRA-JUDICIAL SALE"
"Upon extra-judicial petition for sale under Act 3135/1508 filed _________ against (name and address of
Mortgagor/s) to satisfy the mortgage indebtedness which as of ___________ amounts to P __________
excluding penalties, charges, attorneys fees and expenses of foreclosure, the undersigned or his duly
authorized deputy will sell at public auction on (date of sale) ________ at 10:00 A.M. or soon thereafter at the
Page 66 of 123

main entrance of the ________ (place of sale) to the highest bidder, for cash or managers check and in
Philippine Currency, the following property with all its improvements, to wit:
"(Description of Property")
"All sealed bids must be submitted to the undersigned on the above stated time and date."
"In the event the public auction should not take place on the said date, it shall be held on
___________,______ without further notice."
__________ (date)
"SHERIFF" (Emphasis supplied)
The last paragraph of the prescribed notice of sale allows the holding of a rescheduled auction sale without
reposting or republication of the notice. However, the rescheduled auction sale will only be valid if the rescheduled
date of auction is clearly specified in the prior notice of sale. The absence of this information in the prior notice of
sale will render the rescheduled auction sale void for lack of reposting or republication. If the notice of auction sale
contains this particular information, whether or not the parties agreed to such rescheduled date, there is no more
need for the reposting or republication of the notice of the rescheduled auction sale.
The Office of the Court Administrator issued Circular No. 7-2002 pursuant to the 14 December 1999 Resolution of
this Court in A.M. No. 99-10-05-0, as amended by the Resolutions of 30 January 2001 and 7 August 2001. The Court
issued these Resolutions for two reasons.
First, the Court seeks to minimize the expenses which the mortgagee incurs in publishing the notice of extrajudicial
sale. With the added information in the notice of sale, the mortgagee need not cause the reposting and
republication of the notice of the rescheduled auction sale. There is no violation of the notice requirements under
Acts Nos. 3135 and 1508 precisely because the interested parties as well as the public are informed of the schedule
of the next auction sale, if the first auction sale does not proceed. Therefore, the purpose of a notice of sale, which
is to notify the mortgagor and the public of the foreclosure sale, is satisfied.
Second, the Court hopes to deter the practice of some mortgagors in requesting postponement of the auction sale
of real properties, then later attacking the validity of the foreclosure for lack of republication. This practice will only
force mortgagees to deny outright requests for postponement by mortgagors since it will only mean added
publication expense on the part of mortgagees. Such development will eventually work against mortgagors because
mortgagees will hesitate to grant postponements to mortgagors.
In the instant case, there is no information in the notice of auction sale of any date of a rescheduled auction sale.
Even if such information were stated in the notice of sale, the reposting and republication of the notice of sale
would still be necessary because Circular No. 7-2002 took effect only on 22 April 2002. There were no such
guidelines in effect during the questioned foreclosure.
Clearly, DBP failed to comply with the publication requirement under Act No. 3135. There was no publication of the
notice of the rescheduled auction sale of the real properties. Therefore, the extrajudicial foreclosure of the real
estate mortgage is void.
DBP, however, complied with the mandatory posting of the notices of the auction sale of the personal properties.
Under the Chattel Mortgage Law,27 the only requirement is posting of the notice of auction sale. There was no
postponement of the auction sale of the personal properties and the foreclosure took place as scheduled. Thus, the
extrajudicial foreclosure of the chattel mortgage in the instant case suffers from no procedural infirmity.
Second Issue:
Perfection and implementation of the restructuring agreement between DBP and ERHC
ERHC consistently argues that its restructuring agreement with DBP was perfected and even implemented by the
parties. ERHC maintains that the delivery of its certificates of stocks to DBP was part of its compliance with the
conditions of the restructuring agreement.
We do not agree.
Contrary to ERHCs allegations and the Court of Appeals findings, the restructuring agreement was never
perfected. ERHC failed to comply with the material conditions for the perfection of the restructuring agreement. As
specified in DBP Resolution No. 956 dated 19 March 1981 28 approving the restructuring agreement, the following
are the conditions for the restructuring agreement:
RESOLUTION NO. 956. Emerald Resort Hotel Corporation (Hotel Ibalon) Conversion Into Common and/or
Preferred Shares of P2,786,000.00 Representing 40% of the Total Outstanding Obligations; a Third Additional
Loan of P679,000.00 and Restructuring of the Account.
xxx
In view thereof and as favorably recommended by the Manager of the Industrial Projects Department III in
her memorandum dated February 24, 1981, the Board, upon motion made and duly seconded, APPROVED
in favor of Emerald Resort Hotel Corporation (Hotel Ibalon) the following:
Page 67 of 123

1. Immediate conversion into common and/or preferred shares at borrowers option, of


P2,786,000.00 representing 40% of the total outstanding obligation as of May 15, 1980,
in the reduced amount of P6,965,000.00 composed of outstanding principal balance of
P3,500,000.00 and total arrearages on interest and other charges of P3,465,000.00, the conversion
price to be equal to the par value of the shares;
2. A third additional loan of Six Hundred Seventy-Nine Thousand Pesos (P679,000.00),
payable quarterly under the same restructured terms of the original and two (2) additional loans, at
18% interest per annum; and
3. Restructuring of the firms total outstanding principal obligation of P3,500,000.00 in the form of
extension of grace period on principal repayment from two (2) years to nine (9) years to make a
maximum loan term of nineteen (19) years, regular amortizations to commence three (3) months
after the end of the extended grace period on October 31, 1985 and payable quarterly at the
following interest rates:
Original Loan

1st Additional Loan

Total

P1,425,800 at 16% interest per


annum

574,200 at 18% interest per annum

1,000,000 at 18% interest per annum

500,000 at 18% interest per


annum

P3,500,000

subject to the following terms and conditions:


A. For the P679,000.00 Additional Loan
a. That subject-firm shall first pay the amount of P473.00 to reduce its total arrearages on interest
and other charges of P3,465,473.00 as of May 15, 1980 to P3,465,000.00; and
b. That the proceeds of this additional loan shall be applied to subject-firms accrued
interest and other charges due DBP as of May 15, 1980 not otherwise covered by the
proposed equity conversion of P2,786,000.00.
B. For Both Additional Loan and Restructuring
a. That a quasi-reorganization shall first be undertaken for the purpose of eliminating
existing deficits, which should be formally authorized by the stockholders of the corporation,
should comply with legal requirements, and should be approved by the Securities and Exchange
Commission which sees to it that the rights of creditors are not prejudiced.
xxx
e. That subject-firm shall apply with SEC for an amendment of its authorized capitalization to
include preferred shares in case immediate conversion into equity of 40% of the total outstanding
obligation as of May 15, 1980 will include preferred shares.
xxx (Emphasis supplied)
A careful review of the facts and the evidence presented by the parties discloses that ERHC failed to comply with
the terms and conditions set forth in DBP Resolution No. 956.
First, ERHC failed to comply with the important condition of converting into equity 40 percent of its outstanding
debt to DBP. ERHC did not present any evidence to show that it complied with this particular requirement. While it is
true that ERHC delivered to DBP certificates of stocks, it was to comply with ERHCs commitment under the
original mortgage contracts.29 ERHC committed to pledge or assign to DBP at least 67 percent of its outstanding
shares to secure the original loan accommodation. The original mortgage contracts contain the following condition:
xxx
c. By an assignment to the Mortgagee of not less than 67% of the total subscribed and outstanding voting
shares of the company. The said percentages of shares assigned shall be maintained at all times and the
said assignment to subsist for as long as the Assignee may deem necessary during the existence of the
Mortgagees approved accommodation. xxx30
On 17 April 1985, DBP informed ERHC that it had not complied with the condition in the original mortgage contract
on the assignment of 67 percent of its outstanding shares to DBP. The letter of DBP states in part:
2. The condition requiring ERHC to assign in favor of DBP at least 67% of the subscribed and
outstanding voting shares of company has not been met.

Page 68 of 123

Of the 4,917,500 outstanding voting shares as of December 31, 1982, only 911,800 shares have been
assigned instead of 3,294,725 (67% of 4,917,000), more of the outstanding voting shares have increased.

31

The deficiency of 2,382,925 shares (3,294,725 - 911,800) may however be covered by the 2,786,000 shares
you transferred in the name of DBP as an alternative compliance with 65% requirement. (Emphasis
supplied)
In its reply letter dated 11 June 1985 to DBP, ERHC signified its readiness to assign 67 percent of its outstanding
shares to DBP. Thus, ERHCs reply letter, signed by its President Atty. Jose C. Reyes, states in part:
With reference to your letter dated 17 April 1985 which could not be seasonably acted upon on account of
my absence from the country for medical reasons, I am pleased to inform your goodself of the action taken
on the various items thereon enumerated, to wit:
1. x x x
2. Assignment of 67% of outstanding voting shares.
We are ready to bring up the assigned shares in favor of DBP to 67% of the corporations outstanding voting
shares of 4,917,500 as of December 31, 1982 or total of 3,294,725 shares.
The corporation will maintain its previous assignment of 911,800 shares.
Moreover, the corporation is agreeable that Stock Certificate No. 030 for 1,862,148 shares which had been
transferred to DBP be considered as an alternative compliance to the raising of DBPs assigned shares to
the full 67% or 3,294,725 shares. Your formal conformity to this arrangement is likewise requested.
Finally, the corporation will further assign to DBP another 520,777 shares in exchange of Stock Certificate
No. 032 for 923,852 shares which was transferred to DBP conditionally. This Stock Certificate has to be
surrendered to the corporation for cancellation before we can issue by way of further assignment the
520,777 shares. In short, the 3 blocks of shares mentioned above would result as follows:
1.
2.
3.
Total

x x x.

911,800 shares
1,862,148 shares
520,777 shares
3,294,725 shares of 67% outstanding voting
shares

32

Clearly, when ERHC delivered the certificates of stocks, it was to comply with ERHCs commitment under the
original mortgage contracts, not the restructuring agreement.
Besides, there is a vast difference between an assignment of shares to DBP by existing stockholders and conversion
of DBPs loan into equity of ERHC. In the first, the paid-up capital of ERHC remains the same. In the latter, the paidup capital of ERHC, as well as its liabilities, changes in that the liabilities are transferred to the capital account to
the extent of the conversion. The latter case, which is the conversion of debt into equity required under the
restructuring agreement, never happened. The delivery to DBP of stock certificates representing 3,294,725 ERHC
shares did not reduce the liabilities of ERHC. The reason for the requirement to convert P2,786,000.00 in liabilities
of ERHC into equity was to reduce ERHCs debt to equity ratio, which the assignment and delivery of the stock
certificates did not and could not have achieved.
Second, ERHC did not avail of the P679,000.00 additional loan, despite this being a material condition of the
restructuring agreement. ERHC could not simply refuse to avail of the additional loan because the proceeds of this
loan were to pay the balance of ERHCs accrued interest and other charges due DBP as of 15 May 1980. Clearly,
ERHCs refusal to avail of the additional loan, intended to up-date ERHCs loan account, prevented the perfection of
the restructuring agreement.
Lastly, ERHC failed to comply with the quasi-reorganization requirement, as clearly admitted in ERHCs letter dated
3 November 1982 to DBP, thus:
3. On July 31, 1981, we once more communicated with your Naga Branch advising of the Emerald Resort
Hotel Corporations Stockholders Resolution approving the quasi-reorganization and the Petition filed with
the Securities and Exchange Commission requesting approval of the corporations resolution on quasireorganization and the transfer of 1,862,148 shares in favor of the DBP, copy whereof is attached as Annex
"C";
4. On September 7, 1981, we received by personal delivery a letter from Manager Mario C. Leao, copy
whereof is attached as Annex "D". In our conversation had on this occasion, I reiterated our request in our
letter dated 19 June 1981 that in view of the circumstances affecting our papers in the Securities and
Exchange Commission there was need to extend our period of compliance.
xxx
Page 69 of 123

It will thus be noted from the foregoing communications that we have exerted our utmost best
to comply with the conditions for the re-structuring of our loan accounts and all have been
complied, with the exception of the quasi-reorganization, for reasons beyond our legal control since
it is the SEC that passes upon the question as to whether or not we meet the SEC guidelines for a quasireorganization. Unfortunately, for the reasons stated in Annex "H" and the enclosures thereto, the SEC felt
that ERHC was not within their guidelines for a quasi-reorganization. 33 (Emphasis supplied)
The quasi-reorganization is required specifically to eliminate ERHCs existing deficits. However, the SEC must first
approve the quasi-reorganization which approval ERHC admittedly failed to secure. Through no fault of DBP, SEC
disapproved ERHCs application for quasi-reorganization.
Considering that ERHC failed to comply with the material conditions of the restructuring agreement, the agreement
was never implemented or even perfected. The perfection and implementation of the restructuring agreement were
expressly subject to the following conditions embodied in DBP Resolution No. 956 and in DBPs notice of approval to
ERHC, respectively:
t. x x x Implementation of the restructuring scheme as approved shall take effect upon compliance with the
terms and conditions and with all the legal and documentation requirements; 34
xxx

xxx

xxx

7. All documents for this loan approval shall be executed and perfected within 90 days from the date of this
notice; otherwise, this accommodation shall be automatically cancelled. 35
The trial and appellate courts gravely misapprehended the facts and made manifestly mistaken inferences in
finding that the parties had perfected the restructuring agreement. Consequently, when DBP filed the application
for extrajudicial foreclosure of the chattel and real estate mortgages, ERHC was already in default in paying its debt
to DBP.
Third Issue:
ERHCs offer to lease the foreclosed properties
ERHC offered to lease from DBP the foreclosed properties after the auction sale. DBP argues that when ERHC
offered to lease from DBP the foreclosed properties, ERHC waived its right to question the validity of the
foreclosure.
We do not agree.
To constitute a waiver, the intent to waive must be shown clearly and convincingly. 36 A mere offer to lease the
foreclosed properties cannot constitute a waiver of ERHCs right to contest the validity of the foreclosure on the
ground of non-compliance with the statutory requisites. ERHCs offer to lease does not relinquish ERHCs right to
challenge the validity of the foreclosure. The offer to lease the foreclosed properties cannot validate or ratify a void
foreclosure. ERHCs intention to lease the foreclosed properties cannot simply outweigh DBPs failure to comply with
the statutory requisite for a valid extrajudicial foreclosure. As the Court of Appeals correctly ruled, "there can be no
waiver of the posting and publication requirements in foreclosure proceedings because the same is contrary to law
and public order."
Fourth Issue:
Award of moral damages
DBP maintains that ERHC, a juridical person, is not entitled to moral damages. ERHC counters that its reputation
was debased when the sheriffs and several armed men intruded into Hotel Ibalons premises and inventoried the
furniture and fixtures in the hotel.
The Court of Appeals erred in awarding moral damages to ERHC. The Court of Appeals sole basis for its ruling is a
quoted portion of the testimony of ERHCs President, Atty. Jose Reyes. The testimony was not even offered to prove
the justification and amount of damages which ERHC claims against DBP. In other words, ERHC failed to present
evidence to warrant the award of moral damages. In a long line of decisions, this Court has held that the claimant
for moral damages must present concrete proof to justify its award, thus:
xxx while no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount
of indemnity being left to the discretion of the court (Art. 2216), it is, nevertheless, essential that the
claimant satisfactorily prove the existence of the factual basis of the damage (Art. 2217) and its causal
relation to defendants acts. This is so because moral damages, though incapable of pecuniary estimation,
are in the category of an award designed to compensate the claimant for actual injury suffered and not to
impose a penalty on the wrongdoer.37 (Emphasis supplied)
In the body of its decision, the trial court gave no basis to justify the award of moral damages. The trial court simply
awarded moral damages in the dispositive portion of its decision. 38
Moreover, as a general rule, moral damages are not awarded to a corporation, thus:
The award of moral damages cannot be granted in favor of a corporation because, being an artificial person
and having existence only in legal contemplation, it has no feelings, no emotions, no senses. It cannot,
therefore, experience physical suffering and mental anguish, which can be experienced only be one having
a nervous system. The statement in People v. Manero and Mambulao Lumber Co. v. PNB that a corporation
Page 70 of 123

may recover moral damages if it "has a good reputation that is debased, resulting in social humiliation" is
an obiter dictum. On this score alone the award for damages must be set aside, since RBS is a corporation. 39
WHEREFORE, the Joint Decision of the Court of Appeals in CA-G.R. CV Nos. 38569 and 38604 is AFFIRMED with
MODIFICATION. The extrajudicial foreclosure of the chattel mortgage is valid whereas the extrajudicial foreclosure
of the real estate mortgage is void. The award of moral damages is deleted for lack of basis. No costs.
SO ORDERED.

Page 71 of 123

G.R. No. 190078

March 5, 2010

SPOUSES NORMAN K. CERTEZA, JR. and MA. ROSANILA V. CERTEZA, AND AMADA P. VILLAMAYOR and
HERMINIO VILLAMAYOR, JR., Petitioners,
vs.
PHILIPPINE SAVINGS BANK, Respondent.
In this Petition for Review on Certiorari,1 petitioners contend that the auction sale conducted by virtue of the
extrajudicial foreclosure of the mortgage should be declared null and void for failure to comply with the two-bidder
rule.
Factual Antecedents
Petitioners obtained a P1,255,000.00 loan from respondent Philippine Savings Bank (PS Bank), 2 secured by two
parcels of land, with all the buildings and improvements existing thereon, covered by Transfer Certificate of Title
Nos. N-208706 and N-208770.3
Petitioners failed to pay their outstanding obligation despite demands hence PS Bank instituted on May 8, 2002, an
action for Extrajudicial Foreclosure of the Real Estate Mortgage pursuant to Act No. 3135, 4 as amended.
During the auction sale conducted on February 18, 2003, PS Bank emerged as the sole and highest bidder. 5 A
corresponding Certificate of Sale dated February 20, 2003 was issued in favor of PS Bank, which was registered with
the Registry of Deeds of Quezon City on March 25, 2003. 6
During the period of redemption, on December 1, 2003, PS Bank filed an Ex-parte Petition 7 for Writ of Possession
with the Regional Trial Court (RTC) of Quezon City, which was granted in an Order 8 dated September 21, 2004, after
the period of redemption for the foreclosed property had already expired.
On January 20, 2005, petitioners filed an Omnibus Motion for Leave to Intervene and to Stay Issuance or
Implementation of Writ of Possession,9 attaching therein their Petition-in-Intervention 10 pursuant to Sec. 8 of Act No.
3135. They sought the nullification of the extrajudicial foreclosure sale for allegedly having been conducted in
contravention of the procedural requirements prescribed in A.M. No. 99-10-05-0 (Re: Procedure in Extrajudicial
Foreclosure of Real Estate Mortgages) and in violation of herein petitioners right to due process.
PS Bank opposed11 the motion citing Manalo v. Court of Appeals 12 where we held that "(T)he issuance of an order
granting the writ of possession is in essence a rendition of judgment within the purview of Section 2, Rule 19 of the
Rules of Court." PS Bank also argued that with the issuance of the trial courts Order on September 21, 2004, the
Motion for Leave to Intervene can no longer be entertained.13
The petitioners filed their Reply14 arguing that the filing of their petition before the court where possession was
requested was pursuant to Sec. 8 of Act No. 3135.
Ruling of the Regional Trial Court
On March 3, 2005, the RTC of Quezon City, Branch 217, issued an Order 15 denying the motion for intervention and
to stay the implementation of the writ, to wit:16
The issuance of writ of possession being ministerial in character, the implementation of such writ by the sheriff is
likewise ministerial. In PNB vs. Adil, 118 SCRA 116 (1982), the Supreme Court held that "once the writ of possession
has been issued, the trial court has no alternative but to enforce the writ without delay." The Court found it gross
error for the judge to have suspended the implementation of the writ of possession on a very dubious ground as
"humanitarian reason."
WHEREFORE, premises considered, the motion to intervene and to stay the implementation of the writ of
possession is hereby denied.
Petitioners filed a motion for reconsideration17 but the motion was denied in the Order dated May 9, 2005.
Ruling of the Court of Appeals
Petitioners filed a Petition for Certiorari with the Court of Appeals (CA) on June 8, 2005 imputing grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the trial court in denying their motion to
intervene and to stay the implementation of the writ. 18 The CA, in its Decision19 dated May 8, 2009, found that (1)
the issuance of a writ of possession is a ministerial function; (2) there was no irregularity in the foreclosure sale; (3)
the denial of the motion to intervene is proper; and (4) certiorari is not the proper remedy. The dispositive portion of
the said Decision reads:20
IN VIEW OF ALL THE FOREGOING, the petition is ordered DISMISSED. The Orders dated March 3, 2005 and May 9,
2005 in LR Case No. Q-17376 (03) are affirmed.
Petitioners filed a timely Motion for Reconsideration, which was denied by the CA in its Resolution dated October 20,
2009.21
Hence, this petition.
Page 72 of 123

Issues
Petitioners advance the following issues:
I. whether x x x the court of appeals erred in ruling that certiorari is not the proper remedy of a party in a
writ of possession case.
II. whether x x x the court of appeals erred in ruling that the denial of petitioners motion to intervene is
proper.
III. whether x x x the court of appeals erred in ruling that there may be only one bidder in a foreclosure sale.
Petitioners allege that the contents of their Omnibus Motion together with the Petition-in-Intervention, although
entitled as such, sought the nullification of the February 18, 2003 extrajudicial foreclosure sale and the cancellation
of both the certificate of sale and the writ of possession issued in favor of PS Bank. 22 They further submit that the
writ of possession is null and void because of patent irregularities in the conduct of the foreclosure sale. 23 In support
of their contention, petitioners argue that A.M. No. 99-10-05-0 which took effect on January 15, 2000, requires that
there must be at least two participating bidders in an auction sale. 24 Thus:
5. No auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale shall be
postponed to another date. If on the new date set for the sale there shall not be at least two bidders, the sale shall
then proceed. The names of the bidders shall be reported by the sheriff or the notary public who conducted the sale
to the Clerk of Court before the issuance of the certificate of sale.
Our Ruling
The petition lacks merit.
The law governing cases of extrajudicial foreclosure of mortgage is Act No. 3135. It provides:
Section 1. When a sale is made under a special power inserted in or attached to any real estate mortgage hereafter
made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following
sections shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision
for the same is made in the power.
xxxx
Sec. 4. The sale shall be made at public auction, between the hours of nine in the morning and four in the
afternoon; and shall be under the direction of the sheriff of the province, the justice or auxiliary justice of peace of
the municipality in which such sale has to be made, or a notary public of said municipality, who shall be entitled to
collect a fee of five pesos for each day of actual work performed, in addition to his expenses.
Sec. 5. At any sale, the creditor, trustee, or other person authorized to act for the creditor, may participate in the
bidding and purchase under the same conditions as any other bidder, unless the contrary has been expressly
provided in the mortgage or trust deed under which the sale is made.
Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the
debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a
lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the
same at any time within the term of one year from and after the date of sale; and such redemption shall be
governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the
Code of Civil Procedure,25 in so far as these are not inconsistent with the provisions of this Act.
The requirement for at least two participating bidders provided in the original version of paragraph 5 of A.M. No. 9910-05-0 is not found in Act No. 3135. Hence, in the Resolution 26 of the Supreme Court en banc dated January 30,
2001, we made the following pronouncements:
It is contended that this requirement is now found in Act No. 3135 and that it is impractical and burdensome,
considering that not all auction sales are commercially attractive to prospective bidders.
The observation is well taken. Neither Act No. 3135 nor the previous circulars issued by the Court governing
extrajudicial foreclosures provide for a similar requirement. The two-bidder rule is provided under P.D. No. 1594 and
its implementing rules with respect to contracts for government infrastructure projects because of the public
interest involved. Although there is a public interest in the regularity of extrajudicial foreclosure of mortgages, the
private interest is predominant. The reason, therefore, for the requirement that there must be at least two bidders
is not as exigent as in the case of contracts for government infrastructure projects.
On the other hand, the new requirement will necessitate republication of the notice of auction sale in case only one
bidder appears at the scheduled auction sale. This is not only costly but, more importantly, it would render naught
the binding effect of the publication of the originally scheduled sale. x x x
Thus, as amended by the January 30, 2001 Resolution, paragraph 5 of A.M. No. 99-10-05-0 now reads:
5. The name/s of the bidder/s shall be reported by the sheriff or the notary public who conducted the sale to the
Clerk of Court before the issuance of the certificate of sale. 27
Page 73 of 123

Hence, the CA correctly ruled that it is no longer required to have at least two bidders in an extrajudicial foreclosure
of mortgage.281avvphi1
Subsequently, on August 7, 2001, we further resolved other matters relating to A.M. No. 99-10-05-0, specifically on:
(1) period of redemption of properties with respect to the change introduced by Republic Act No. 8791 (The General
Banking Law of 2000) to Act No. 3135; (2) ceiling on sheriffs fees; and (3) payment of filing fees prescribed in the
Rules of Court in addition to sheriffs fees.29
Pursuant to A.M. No. 99-10-05-0, as amended by the Resolutions of January 30, 2001 and August 7, 2001, the then
Court Administrator (now Associate Justice of this Court) Presbitero J. Velasco, Jr., issued Circular No. 7-2002 30 dated
January 22, 2002 which became effective on April 22, 2002. 31 Section 5(a) of the said circular states:
Sec. 5. Conduct of the extra-judicial foreclosure sale
a. The bidding shall be made through sealed bids which must be submitted to the Sheriff who shall conduct the sale
between the hours of 9 a.m. and 4 p.m. of the date of the auction (Act 3135, Sec. 4). The property mortgaged shall
be awarded to the party submitting the highest bid and in case of a tie, an open bidding shall be conducted
between the highest bidders. Payment of the winning bid shall be made either in cash or in managers check, in
Philippine currency, within five (5) days from notice.
The use of the word "bids" (in plural form) does not make it a mandatory requirement to have more than one bidder
for an auction sale to be valid. A.M. No. 99-10-05-0, as amended, no longer prescribes the requirement of at least
two bidders for a valid auction sale. We further held that "Except for errors or omissions in the notice of sale which
are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a
fair price, simple mistakes or omissions are not considered fatal to the validity of the notice and the sale made
pursuant thereto".32
In view of the foregoing, the extra-judicial foreclosure sale conducted in this case is regular and valid.
Consequently, the subsequent issuance of the writ of possession is likewise regular and valid.
Hence, it is no longer necessary for this Court to rule on the other issues presented by the petitioners, which are
also grounded on the supposed irregularity in the auction.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals dated May 8, 2009 and
its Resolution dated October 20, 2009 are hereby AFFIRMED.
SO ORDERED.

Page 74 of 123

G.R. No. 170906


November 27, 2009
METROPOLITAN BANK & TRUST CO., Petitioner, vs. LAMB CONSTRUCTION CONSORTIUM CORPORATION,
represented by Victor T. Nubla and Edgardo C. Santos, Respondent.
A petition for the issuance of a writ of possession is ex parte, non-adversarial, and summary in nature because the
only issue involved is the purchasers right to possession. In fact, Section 7 of Act 3135 (1924) 1 expressly provides
that it is the ministerial duty of the cadastral court to issue a writ of possession in favor of the purchaser even
during the redemption period, unless the case falls under the exceptions provided by law 2 and jurisprudence.3 As a
rule, mere inadequacy or surplus in the purchase price does not affect the purchasers entitlement to a writ of
possession. In case there is a surplus, the mortgagor is entitled to receive the same from the purchaser. The failure
or refusal of the mortgagee-purchaser to return the surplus does not affect the validity of the sale but gives the
mortgagor a cause of action against the mortgagee-purchaser.
This Petition for Review4 on Certiorari, under Rule 45 of the Rules of Court, seeks to set aside the September 12,
2005 Decision5 of the Court of Appeals (CA) in CA-G.R. CV No. 72240, insofar as it ordered petitioner to pay
respondent the excess of the bid price in the amount of P488,289.35 with legal interest from January 27, 2000 until
it is fully paid. Likewise assailed is the CAs December 12, 2005 Resolution 6 denying petitioners Motion for Partial
Reconsideration.7
Factual antecedents
On March 6, 1998, respondent Lamb Construction Consortium Corporation obtained a P5.5 million loan from
petitioner Metropolitan Bank & Trust Co., subject to 18% interest per annum. 8 To secure the loan, respondent
executed a Real Estate Mortgage9 in favor of petitioner involving six parcels of land covered by Transfer Certificates
of Title Nos. 101233,10 101234,11 101235,12 101236,13 101238,14 and 101248.15
Respondent failed to pay the loan upon maturity hence petitioner filed a petition for the extra-judicial foreclosure of
the said properties. During the auction sale held on January 27, 2000, petitioner emerged as the highest bidder with
the bid amount of P6,669,765.75 and was accordingly issued a Certificate of Sale.
Proceedings before the Regional Trial Court
On June 23, 2000 and during the period of redemption, petitioner filed a verified petition for issuance of a writ of
possession. Petitioner alleged that notwithstanding its demands, respondent refused and failed to turn over actual
possession of the foreclosed properties. The case was docketed as LRC Case No. 00-0096 and raffled to Branch 257
of the Regional Trial Court (RTC) of Paraaque City. While the petition was pending with the trial court, respondent
redeemed the property covered by Transfer Certificate of Title No. 101234. 16
On May 25, 2001, the RTC rendered a Decision 17 denying petitioners application for the issuance of a writ of
possession because it failed to deposit the surplus proceeds from the foreclosure sale. It ruled that:
While the outstanding obligation of the corporation as of August 25, 1999 is P5,251,705.67 (Exh. C), the property
was sold at public auction for P6,669,756.75 on January 27, 2000. Under the law, the buyer of the property is
obligated to pay the contract price of P6,669,756.75 less the obligation of P5,251,705.67. Hence, the purchaser of
the property should still pay the auctioneer the amount of P1,418,060.08. x x x
Metropolitan Bank and Trust Co. has obligation to pay the amount of P1,418,060.08, which is the difference of the
purchase price to the outstanding obligation. Since the outstanding obligation as of August 25, 1999 was only
P5,251,705.67 while the purchase price is P6,669,765.75, the highest bidder of the property is still obligated to pay
the price difference of P1,418,060.08. The amount should be deposited at the Office of the Clerk of Court in trust for
the mortgagor.
WHEREFORE, for failure of petitioner to deposit the amount of P1,418,060.08 to the Clerk of Court in trust for [the]
mortgagor, the petition for writ of possession is DENIED.
SO ORDERED.18
Petitioner moved for reconsideration but the same was denied in an Order dated July 18, 2001. 19
Proceedings before the Court of Appeals
The CA ruled that petitioner is entitled to a writ of possession, the issuance of which is ministerial upon the court. 20
At the same time, the appellate court ruled that petitioner is also obliged to return the excess of the bid price over
the outstanding obligation, since the application of the proceeds from the sale of the mortgaged property to the
mortgagors obligation is an act of payment, not payment by dation. It then found imperative that an assessment of
the total outstanding debt be made in order to resolve whether there was any surplus proceeds which must be
returned to respondent. Thus, based on its computation, the appellate court held that petitioner must deliver to
respondent the surplus proceeds of P488,289.35.21
The CA disposed of the case in this wise:
WHEREFORE, the foregoing considered, the appeal is GRANTED and the assailed Decision REVERSED and SET
ASIDE. Let [a] writ of possession issue against respondent.

Page 75 of 123

Accordingly, petitioner is ordered to pay respondent, through the notary public, the excess of its bid price in the
sum of P488,289.35 with legal interest from 27 January 2000 until it is paid, which amount represents the balance
of the obligation as well as interest and penalty charges at the time of foreclosure sale.
SO ORDERED.22
Dissatisfied, petitioner filed a Motion for Partial Reconsideration 23 which was denied by the CA in its December 12,
2005 Resolution.24
Issues
Hence, the instant recourse, where petitioner interposes that:
THE COURT A QUO HAS DEPARTED FROM THE USUAL COURSE OF PROCEEDING OR SANCTIONED SUCH DEPARTURE
BY THE LOWER COURT IN THAT THE PROCEEDINGS IN A PETITION FOR ISSUANCE OF WRIT OF POSSESSION FILED IN
ACCORDANCE WITH ACT NO. 3135, AS AMENDED DOES NOT REQUIRE THE PRESENTATION OF EVIDENCE INSOFAR
AS THE EXCESS, IF ANY, OF THE PURCHASE PRICE IS CONCERNED, NOR IS IT AN ISSUE IN THE SAME CASE.
THE COURT A QUO HAS DECIDED A QUESTION IN A WAY NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE HON. SUPREME COURT WHEN IT OVERLOOKED THE FACT THAT NO OTHER MATTER MAY BE
PASSED UPON BY THE LOWER COURT EXCEPT TO HAVE THE WRIT OF POSSESSION ISSUED AND IMPLEMENTED. 25
In essence, petitioner argues that in a petition for the issuance of a writ of possession, it is improper for the RTC and
the CA to rule upon the surplus or excess of the purchase price because the only issue that must be resolved is the
purchasers entitlement to the writ. According to petitioner, if there is any surplus or excess, the remedy of the
respondent is to file an independent action for collection of surplus.
Our Ruling
The petition is meritorious.
As a general rule, the issuance of a writ of possession is ministerial. Nevertheless, in Sulit v. Court of Appeals, we
withheld the issuance of the writ considering the peculiar circumstances prevailing in said case.
In Sulit v. Court of Appeals,26 we withheld the issuance of a writ of possession because the mortgagee failed to
deliver the surplus from the proceeds of the foreclosure sale which is equivalent to approximately 40% of the total
mortgage debt. Sulit was considered as an exception to the general rule that it is ministerial upon the court to issue
a writ of possession even during the period of redemption. We explained that equitable considerations prevailing in
said case demand that a writ of possession should not issue. Thus:
The governing law thus explicitly authorizes the purchaser in a foreclosure sale to apply for a writ of possession
during the redemption period by filing an ex parte motion under oath for that purpose in the corresponding
registration or cadastral proceeding in the case of property with Torrens title. Upon the filing of such motion and the
approval of the corresponding bond, the law also in express terms directs the court to issue the order for a writ of
possession.
No discretion appears to be left to the court. Any question regarding the regularity and validity of the sale, as well
as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8,
and it cannot be raised as a justification for opposing the issuance of the writ of possession since, under the Act, the
proceeding for this is ex parte. Such recourse is available to a mortgagee, who effects the extrajudicial foreclosure
of the mortgage, even before the expiration of the period of redemption provided by law and the Rules of Court.
The rule is, however, not without exception. Under Section 35, Rule 39 of the Rules of Court, which is made
applicable to the extrajudicial foreclosure of real estate mortgages by Section 6 of Act 3135, the possession of the
mortgaged property may be awarded to a purchaser in the extrajudicial foreclosure "unless a third party is actually
holding the property adversely to the judgment debtor."
Thus, in the case of Barican, et al. vs. Intermediate Appellate Court, et al., this Court took into account the
circumstances that long before the mortgagee bank had sold the disputed property to the respondent therein, it
was no longer the judgment debtor who was in possession but the petitioner spouses who had assumed the
mortgage, and that there was a pending civil case involving the rights of third parties. Hence, it was ruled therein
that under the circumstances, the obligation of a court to issue a writ of possession in favor of the purchaser in a
foreclosure of mortgage case ceases to be ministerial.
Now, in forced sales low prices are generally offered and the mere inadequacy of the price obtained at the sheriffs
sale, unless shocking to the conscience, has been held insufficient to set aside a sale. This is because no
disadvantage is caused to the mortgagor. On the contrary, a mortgagor stands to gain with a reduced price because
he possesses the right of redemption. When there is the right to redeem, inadequacy of price becomes immaterial
since the judgment debtor may reacquire the property or sell his right to redeem, and thus recover the loss he
claims to have suffered by reason of the price obtained at the auction sale.
However, also by way of an exception, in Cometa, et al. vs. Intermediate Appellate Court, et al. where the
properties in question were found to have been sold at an unusually lower price than their true value, that is,
properties worth at least P500,000.00 were sold for only P57,396.85, this Court, taking into consideration the
factual milieu obtaining therein as well as the peculiar circumstances attendant thereto, decided to withhold the
Page 76 of 123

issuance of the writ of possession on the ground that it could work injustice because the petitioner might not be
entitled to the same.
The case at bar is quite the reverse, in the sense that instead of an inadequacy in price, there is due in favor of
private respondent, as mortgagor, a surplus from the proceeds of the sale equivalent to approximately 40% of the
total mortgage debt, which excess is indisputably a substantial amount. Nevertheless, it is our considered opinion,
and we so hold, that equitable considerations demand that a writ of possession should also not issue in this case.
Rule 68 of the Rules of Court provides:
Sec. 4. Disposition of proceeds of sale. The money realized from the sale of mortgaged property under the
regulations hereinbefore prescribed shall, after deducting the costs of the sale, be paid to the person foreclosing the
mortgage, and when there shall be any balance or residue, after paying off such mortgage or other incumbrances,
the same shall be paid to the junior incumbrancers in the order of their priority, to be ascertained by the court, or if
there be no such incumbrancers or there be a balance or residue after payment of such incumbrancers, then to the
mortgagor or his agent, or to the person entitled to it.
The application of the proceeds from the sale of the mortgaged property to the mortgagors obligation is an act of
payment, not payment by dation; hence, it is the mortgagees duty to return any surplus in the selling price to the
mortgagor. Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a
custodian of the fund, and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do
so. And even though the mortgagee is deemed a trustee for the mortgagor or owner of the equity of redemption.
Commenting on the theory that a mortgagee, when he sells under a power, cannot be considered otherwise than as
a trustee, the vice-chancellor in Robertson vs. Norris (1 Giff. 421) observed: "That expression is to be understood in
this sense: that with the power being given to enable him to recover the mortgage money, the court requires that
he shall exercise the power of sale in a provident way, with a due regard to the rights and interests of the
mortgagor in the surplus money to be produced by the sale.
The general rule that mere inadequacy of price is not sufficient to set aside a foreclosure sale is based on the
theory that the lesser the price the easier it will be for the owner to effect the redemption. The same thing cannot
be said where the amount of the bid is in excess of the total mortgage debt. The reason is that in case the
mortgagor decides to exercise his right of redemption. Section 30 of Rule 39 provides that the redemption price
should be equivalent to the amount of the purchase price, plus one percent monthly interest up to the time of the
redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon
after purchase, and interest on such last-named amount at the same rate.
Applying this provision to the present case would be highly iniquitous if the amount required for redemption is
based on P7,000,000.00, because that would mean exacting payment at a price unjustifiably higher than the real
amount of the mortgage obligation. We need not elucidate on the obvious. Simply put, such a construction will
undeniably be prejudicial to the substantive rights of private respondent and it could even effectively prevent her
from exercising the right of redemption.27
In the subsequent case of Saguan v. Philippine Bank of Communications, 28 however, we clarified that the exception
made in Sulit does not apply when the period to redeem has already expired or when ownership over the property
has already been consolidated in favor of the mortgagee-purchaser. In other words, even if the mortgageepurchaser fails to return the surplus, a writ of possession must still be issued. In the instant case, the period to
redeem has already lapsed. Thus, following the ruling in Saguan, the issuance of a writ of possession in favor of the
petitioner is in order.
The failure of the mortgagee to deliver the surplus proceeds does not affect the validity of the foreclosure sale. It
gives rise to a cause of action for the mortgagee to file an action to collect the surplus proceeds.
Relatedly, we held in Sulit that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to,
this fact alone will not affect the validity of the sale but simply gives the mortgagor a cause of action to recover
such surplus.29
In the instant case, the cadastral court is without jurisdiction to order petitioner to deliver to respondent the surplus
or excess of the purchase price. The only issue in a petition for the issuance of a writ of possession is the
purchasers entitlement to possession. No documentary or testimonial evidence is even required for the issuance of
the writ as long as the verified petition states the facts sufficient to entitle the purchaser to the relief requested. 30
As held in Saguan, when the mortgagee-purchaser fails to return the surplus, the remedy of a mortgagor "lies in a
separate civil action for collection of a sum of money", thus:
However, petitioners remedy lies in a separate civil action for collection of a sum of money. We have previously
held that where the mortgagee retains more of the proceeds of the sale than he is entitled to, this fact alone will not
affect the validity of the sale but simply gives the mortgagor a cause of action to recover such surplus. In the same
case, both parties can establish their respective rights and obligations to one another, after a proper liquidation of
the expenses of the foreclosure sale, and other interests and claims chargeable to the purchase price of the
foreclosed property. The court can then determine the proper application of compensation with respect to
respondents claim on petitioners remaining unsecured obligations. In this regard, respondent is not precluded from
itself filing a case to collect on petitioners remaining debt. 31
An action to collect the surplus proceeds is improper where there is a pending action for the nullification of the
foreclosure proceedings.1avvphi1

Page 77 of 123

However, unlike in the case of Saguan where the mortgagors did not challenge the validity of the foreclosure but
only demanded the return of the surplus, respondent in this case sought to set aside the foreclosure sale. In fact, a
Complaint for Nullification of Foreclosure Proceedings and Damages was filed before the RTC of Paraaque docketed
as Civil Case No. 00-0513 and raffled to Branch 194. 32 The filing of a separate case for the collection of surplus by
respondent would therefore be improper while the annulment case is still pending.
It bears stressing that the collection of surplus is inconsistent with the annulment of foreclosure because in suing
for the return of the surplus proceeds, the mortgagor is deemed to have affirmed the validity of the sale since
nothing is due if no valid sale has been made.33 It is only after the dismissal of complaint for annulment or when the
foreclosure sale is declared valid that the mortgagor may recover the surplus in an action specifically brought for
that purpose.34 However, to avoid multiplicity of suits, the better recourse is for the mortgagor to file a case for
annulment of foreclosure with an alternative cause of action for the return of the surplus, if any. 35
A similar recourse was done by respondent. In its complaint for nullification of foreclosure proceedings and damages pending
before Branch 194 of the RTC of Paraaque City, it alleged, among others, that "the payments made by the [respondent] on the
interest and principal were misapplied and therefore a re-computation is necessary to determine the amount of the obligation." 36
Consequently, there is no need for respondent to file a separate case for collection of surplus in case the court affirms the validity
of the foreclosure sale. Once the foreclosure is declared valid and a re-computation of the total amount of obligation is made, the
court in the same case may order petitioner to return the surplus, if any, pursuant to the legal maxim, Nemo cum alterius
detrimento locupletari potest no person shall be allowed to enrich himself unjustly at the expense of others.

WHEREFORE, the petition is hereby GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 72240 dated
September 12, 2005 is MODIFIED by deleting the portion ordering petitioner to pay respondent, through the notary
public, the excess of its bid price in the sum of P488,289.35 with legal interest from January 27, 2000 until it is paid.
SO ORDERED.

Page 78 of 123

G.R. No. 171868

July 27, 2011

SPOUSES FRANCISCO D. YAP and WHELMA S. YAP, Petitioners,


vs.
SPOUSES ZOSIMO DY, SR. and NATIVIDAD CHIU DY, SPOUSES MARCELINO MAXINO and REMEDIOS L.
MAXINO, PROVINCIAL SHERIFF OF NEGROS ORIENTAL and DUMAGUETE RURAL BANK, INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171991
DUMAGUETE RURAL BANK, INC. (DRBI) herein represented by Mr. William D.S. Dichoso, Petitioners,
vs.
SPOUSES ZOSIMO DY, SR. and NATIVIDAD CHIU DY, SPOUSES MARCELINO MAXINO and REMEDIOS
MAXINO, and SPOUSES FRANCISCO D. YAP and WHELMA S. YAP, Respondents.
May persons to whom several mortgaged lands were transferred without the knowledge and consent of the creditor
redeem only several parcels if all the lands were sold together for a single price at the foreclosure sale? This is the
principal issue presented to us for resolution in these two petitions for review on certiorari assailing the May 17,
2005 Decision1 and March 15, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. C.V. No. 57205.
The antecedents are as follows:
The spouses Tomas Tirambulo and Salvacion Estorco (Tirambulos) are the registered owners of several parcels of
land located in Ayungon, Negros Oriental, registered under Transfer Certificate of Title (TCT) Nos. T-14794, T-14777,
T-14780, T-14781, T-14783 and T-20301 of the Registry of Deeds of Negros Oriental, and more particularly
designated as follows:
(1) TCT No. T-14777

Lot 1 of Plan Pcs-11728

61,371 sq.m.

(2) TCT No. T-20301

Lot 3 of Plan Psu-124376

17,373 sq.m.

(3) TCT No. T-14780

Lot 4 of Plan Pcs-11728

27,875 sq.m.

(4) TCT No. T-14794

Lot 5 of Plan Psu-124376

2,900 sq.m.

(5) TCT No. T-14781

Lot 6 of Plan Pcs-11728

16,087 sq.m.

(6) TCT No. T-14783

Lot 8 of Plan Pcs-11728

39,888 sq.m

The Tirambulos likewise own a parcel of land denominated as Lot 846, covered by Tax Declaration No. 08109.
On December 3, 1976, the Tirambulos executed a Real Estate Mortgage 3 over Lots 1, 4, 5, 6 and 8 in favor of the
Rural Bank of Dumaguete, Inc., predecessor of Dumaguete Rural Bank, Inc. (DRBI), to secure a P105,000 loan
extended by the latter to them. Later, the Tirambulos obtained a second loan for P28,000 and also executed a Real
Estate Mortgage4 over Lots 3 and 846 in favor of the same bank on August 3, 1978.
Subsequently, on October 27, 1979, the Tirambulos sold all seven mortgaged lots to the spouses Zosimo Dy, Sr. and
Natividad Chiu (the Dys) and the spouses Marcelino C. Maxino and Remedios Lasola (the Maxinos) without the
consent and knowledge of DRBI. This sale, which was embodied in a Deed of Absolute Sale, 5 was followed by a
default on the part of the Tirambulos to pay their loans to DRBI. Thus, DRBI extrajudicially foreclosed the December
3, 1976 mortgage and had Lots 1, 4, 5, 6 and 8 sold at public auction on March 31, 1982.
At the auction sale, DRBI was proclaimed the highest bidder and bought said lots for P216,040.93. The Sheriffs
Certificate of Sale6 stated that the "sale is subject to the rights of redemption of the mortgagor (s) or any other
persons authorized by law so to do, within a period of one (1) year from registration hereof." 7 The certificate of sale,
however, was not registered until almost a year later, or on June 24, 1983.
On July 6, 1983, or twelve (12) days after the sale was registered, DRBI sold Lots 1, 3 and 6 to the spouses
Francisco D. Yap and Whelma D. Yap (the Yaps) under a Deed of Sale with Agreement to Mortgage. 8 It is important to
note, however, that Lot 3 was not among the five properties foreclosed and bought by DRBI at public auction.
On August 8, 1983, or well within the redemption period, the Yaps filed a Motion for Writ of Possession 9 alleging that
they have acquired all the rights and interests of DRBI over the foreclosed properties and are entitled to immediate
possession of the same because the one-year redemption period has lapsed without any redemption being made.
Said motion, however, was ordered withdrawn on August 22, 198310 upon motion of the Yaps, who gave no reason
therefor.11 Three days later, or on August 25, 1983, the Yaps again filed a Motion for Writ of Possession. 12 This time
the motion was granted, and a Writ of Possession 13 over Lots 1, 3 and 6 was issued in favor of the Yaps on
September 5, 1983. They were placed in possession of Lots 1, 3 and 6 seven days later.
On May 22, 1984, roughly a month before the one-year redemption period was set to expire, the Dys and the
Maxinos attempted to redeem Lots 1, 3 and 6. They tendered the amount of P40,000.00 to DRBI and the Yaps,14 but
both refused, contending that the redemption should be for the full amount of the winning bid of P216,040.93 plus
interest for all the foreclosed properties.

Page 79 of 123

Thus, on May 28, 1984, the Dys and the Maxinos went to the Office of the Sheriff of Negros Oriental and paid
P50,625.29 (P40,000.00 for the principal plus P10,625.29 for interests and Sheriffs Commission) to effect the
redemption.15 Noticing that Lot 3 was not included in the foreclosure proceedings, Benjamin V. Diputado, Clerk of
Court and Provincial Sheriff, issued a Certificate of Redemption 16 in favor of the Dys and the Maxinos only for Lots 1
and 6, and stated in said certificate that Lot 3 is not included in the foreclosure proceedings. By letter 17 of even
date, Atty. Diputado also duly notified the Yaps of the redemption of Lots 1 and 6 by the Dys and the Maxinos, as
well as the non-inclusion of Lot 3 among the foreclosed properties. He advised the Yaps to personally claim the
redemption money or send a representative to do so.
In a letter to the Provincial Sheriff on May 31, 1984, the Yaps refused to take delivery of the redemption price
arguing that one of the characteristics of a mortgage is its indivisibility and that one cannot redeem only some of
the lots foreclosed because all the parcels were sold for a single price at the auction sale. 18
On June 1, 1984, the Provincial Sheriff wrote the Dys and the Maxinos informing them of the Yaps refusal to take
delivery of the redemption money and that in view of said development, the tender of the redemption money was
being considered as a consignation.19
On June 15, 1984, the Dys and the Maxinos filed Civil Case No. 8426 with the Regional Trial Court of Negros Oriental
for accounting, injunction, declaration of nullity (with regard to Lot 3) of the Deed of Sale with Agreement to
Mortgage, and damages against the Yaps and DRBI. In their complaint, 20 they prayed
a) That the Deed of Sale With Agreement to Mortgage be declared null and void ab initio;
b) That defendant Yap[s] possession of Lot No. 3, TCT No. T20301 based as it was on a void sale, be
declared illegal from the very beginning;
c) That defendants be ordered to render to plaintiffs a fair accounting of the harvests and income which
defendants made from said Lot No. 3 and, in addition, be ordered to pay to plaintiffs damages for wrongfully
depriving plaintiffs of the use and enjoyment of said property;
d) That the redemption which plaintiffs made of Lot No. 1, TCT No. 14777, and Lot No. 6, TCT No. 14781,
through the Provincial Sheriff of Negros Oriental, be declared valid and binding on the defendants, thereby
releasing and freeing said parcels of land from whatever liens or claims that said defendants might have on
them;
e) That defendants be likewise ordered to render to plaintiffs full and fair accounting of all the harvests,
fruits, and income that they or either of them might have derived from said two parcels of land starting
from the time defendant Yap first took possession thereof and harvested the coconuts in September, 1983;
f) That, after the accounting herein prayed for, defendants be required to deliver to plaintiffs the net
proceeds of the income from the three parcels of land subject of this case, together with interest at the
legal rate;
g) That for his acts of misrepresentation and deceit in obtaining a writ of possession over the three parcels
of land subject of this case, and for the highly irregular and anomalous procedures and maneuvers
employed by defendant Yap in securing said writ, as well as for harvesting the coconuts even after knowing
that plaintiffs had already fully redeemed the properties in question and, with respect to Lot No. 3, after
knowing that the same was not in fact included in the foreclosure and, therefore, could not have been
validly sold by the bank to him, said defendant Yap be condemned to pay plaintiffs moral damages in the
amount of P200,000.00, plus punitive and exemplary damages in the amount of P100,000.00;
h) That for falsifying the Sheriffs Certificate of Sale and selling unlawfully Lot No. 3, TCT No. T-20301, to its
co-defendant Yap, defendant DRBI be condemned to pay to plaintiffs actual damages in the amount of
P50,000.00; moral damages in the amount of P200,000.00; and punitive and exemplary damages in the
amount of P100,000.00;
i) That defendants be condemned to pay solidarily to plaintiffs attorneys fees in the amount of P50,000.00;
other legitimate expenses of litigation in the amount of P30,000.00; and the costs of suit;
j) That pending hearing of this case, a writ of preliminary injunction be issued enjoining and restraining the
defendants, particularly defendant Yap, from disturbing and interfering the plaintiffs possession and other
rights of ownership over the land in question;
k) That pending hearing of the petition for preliminary injunction, a temporary restraining order be issued
against the defendants, particularly against defendant Yap, to serve the same purpose for which the writ of
preliminary injunction is herein prayed for; and
l) That, after hearing of the main case, said preliminary injunction be made permanent.
Furthermore, plaintiffs pray for all other reliefs which may be just and equitable in the premises. 21
Thereafter, on June 19, 1984, the Dys and the Maxinos consigned to the trial court an additional sum of P83,850.50
plus sheriffs commission fee of P419.25 representing the remaining balance of the purchase price that the Yaps still
owed DRBI by virtue of the sale to them by the DRBI of Lots 1, 3 and 6. 22

Page 80 of 123

Meanwhile, by letter23 dated June 27, 1984, the Yaps told DRBI that no redemption has been made by the
Tirambulos or their successors-in-interest and requested DRBI to consolidate its title over the foreclosed properties
by requesting the Provincial Sheriff to execute the final deed of sale in favor of the bank so that the latter can
transfer the titles of the two foreclosed properties to them.
On the same date, the Yaps also wrote the Maxinos informing the latter that during the last harvest of the lots
bought from DRBI, they excluded from the harvest Lot 3 to show their good faith. Also, they told the Maxinos that
they were formally turning over the possession of Lot 3 to the Maxinos, without prejudice to the final determination
of the legal implications concerning Lot 3. As to Lots 1 and 6, however, the Yaps stated that they intended to
consolidate ownership over them since there has been no redemption as contemplated by law. Included in the letter
was a liquidation of the copra proceeds harvested from September 7, 1983 to April 30, 1984 for Lots 1, 3 and 6. 24
Later, on July 5, 1984, the Yaps filed Civil Case No. 8439 for consolidation of ownership, annulment of certificate of
redemption, and damages against the Dys, the Maxinos, the Provincial Sheriff of Negros Oriental and DRBI. In their
complaint,25 the Yaps prayed
1. That [they] be declared the exclusive owners of Lot No. 1 covered by TCT No. T-14777 and Lot No. 6
covered by TCT No. T-14781 for failure on the part of defendants Zosimo Dy, Sr., and Marcelino Maxino to
redeem the properties in question within one (1) year from the auction sale.
2. That defendants be [declared] solidarily liable to pay moral damages in the amount of ONE HUNDRED
THOUSAND PESOS (P100,000.00), THIRTY[-]FIVE THOUSAND PESOS (P35,000.00) as attorneys fees and
FIFTEEN THOUSAND PESOS (P15,000.00) as exemplary damages;
3. That the Provincial Sheriff be required to execute the final Deed of Sale in favor of the bank and the bank
be in turn required to transfer the property to the plaintiffs in accordance with the Deed of Sale with
Mortgage.
4. That the court grant such other relief as may be deemed just and equitable under the premises. 26
Civil Case Nos. 8426 and 8439 were tried jointly.
On October 24, 1985, the Yaps, by counsel, filed a motion to withdraw from the provincial sheriff the redemption
money amounting to P50,373.42.27 Said motion was granted on October 28, 1985 after a Special Power of Attorney
executed by Francisco Yap in favor of his brother Valiente Yap authorizing the latter to receive the P50,373.42
redemption money was presented in court. 28
On February 12, 1997, the trial court rendered decision 29 in favor of the Yaps. The fallo reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Dismissing the complaint of Dy and Maxino spouses in Civil Case No. 8426 as well as the bank and the
Yap spouses counterclaim for lack of factual and legal basis;
2. In Civil Case No. 8439:
a) Declaring the Yap spouses, plaintiffs therein, the exclusive owners of Lot No. 1 covered by TCT
No. T-14777 and Lot No. 6 covered by TCT No. T-14781 for failure on the part of the Dy and Maxino
spouses, defendants therein, to redeem the properties in question within one (1) year from the
auction sale.
b) Directing the Provincial Sheriff of Negros Oriental to execute the Final Deed of Sale in favor of the
bank and the latter to transfer the subject properties to the Yap spouses in accordance with the
Deed of Sale With Mortgage.
SO ORDERED.30
On March 7, 1997, the trial court amended the above dispositive portion upon motion of DRBI, as follows:
Wherefore, judgment is hereby rendered as follows:
1. The Certificate of Redemption issued by the Provincial Sheriff (Exh. "M") is hereby declared null and void;
2. The Provincial Sheriff of Negros Oriental is hereby ordered to execute a Final Deed of Sale of the
foreclosed properties in favor of the defendant Dumaguete Rural Bank, Inc., subject to the rights of the Yap
spouses acquired in accordance with the Deed of Sale with Mortgage;
3. The Deed of Sale dated [October] 27, 1979, made by Tirambulo and Estorco in favor of the Dys and
Maxinos covering all the seven (7) parcels of land in question, is hereby declared null and void;
4. In Civil Case No. 8439, declaring the Yap Spouses, the exclusive owners of Lot No. 1, covered by TCT No.
T-14777, and Lot No. 6, covered by TCT No. T-14781, for failure on the part of the Dy and Maxino Spouses,
to redeem said properties within one (1) year from the date of the registration of the auction sale;
Page 81 of 123

5. All other claims and counterclaims are hereby dismissed for lack of merit.
SO ORDERED.31
The trial court held that the Dys and the Maxinos failed to formally offer their evidence; hence, the court could not
consider the same. It also upheld the Deed of Sale with Agreement to Mortgage between the Yaps and DRBI, ruling
that its genuineness and due execution has been admitted by the Dys and the Maxinos and that it is not contrary to
law, morals, good customs, public policy or public order. Thus, ownership of Lots 1, 3 and 6 was transferred to the
Yaps.
The trial court further held that the Dys and the Maxinos failed to exercise their rights of redemption properly and
timely. They merely deposited the amount of P50,625.29 with the Sheriff, whereas the amount due on the mortgage
deed is P216,040.93.
Aggrieved by the above ruling, the Dys and the Maxinos elevated the case to the CA. They argued that the trial
court erred in:
1) ... failing to consider plaintiffs evidence [testimonial, including the testimony of the Provincial Sheriff of
Negros Oriental (Attorney Benjamin V. Diputado) and plaintiff Attorney Marcelino C. Maxino] and
documentary [Exhibits A through TT (admitted under Order of 3 March 1995)];
2) failing to declare void or annul the purported contract of sale by Dumaguete Rural Bank, Inc. to
Francisco D. Yap and Whelma S. Yap of Lots 1, 3, and 6, during the redemption period [the purported seller
(bank) not being the owner thereof, and Lot 3 not being included in the foreclosure/auction sale and could
not have been acquired by the Bank thereat];
3) not holding that the parcels of land had been properly and validly redeemed in good faith, defendant
Yap, the Provincial Sheriff, the Clerk of Court, and Mr. Mario Dy, having accepted redemption/consignation
(or, in not fixing the redemption price and allowing redemption);
4) not holding that by withdrawing the redemption money consigned/deposited by plaintiffs to the Court,
and turning over possession of the parcels of land to plaintiffs, defendants Yap accepted, ratified, and
confirmed redemption by plaintiffs of the parcels of land acquired at foreclosure/auction sale by the Bank
and purportedly sold by it to and purchased by Yap;
5) not finding and holding that all the parcels of land covered by the foreclosed mortgage held by
Dumaguete Rural Bank had been acquired by and are in the possession of plaintiffs as owners and that
defendants bank and Yap had disposed of and/or lost their rights and interests and/or any cause of action
and their claims had been extinguished and mooted or otherwise settled, waived and/or merged in
plaintiffs-appellants;
6) not holding that defendants Yap have no cause of action to quiet title as they had no title or possession
of the parcels of land in question and in declaring defendants Yap spouses the exclusive owners of Lot No. 1
covered by TCT No. T-14777 and Lot No. 6 covered by TCT No. T-14781 and in directing the Provincial Sheriff
to execute the final deed of sale in favor of the bank and the latter to transfer the subject properties to the
Yap spouses in accordance with the Deed of Sale with Mortgage which included Lot No. 3 which was not
foreclosed by the Sheriff and was not included in the certificate of sale issued by him and despite their
acceptance, ratification, and confirmation of the redemption as well as acknowledgment of possession of
the parcels of land by plaintiffs;
7) issuing an amended decision after perfection of plaintiffs appeal and without waiting for their
comment (declaring the Certificate of Redemption issued by the Provincial Sheriff (Exh. "M") null and void;
ordering the Provincial Sheriff of Negros Oriental to execute a Final Deed of Sale of the foreclosed properties
in favor of the defendant Dumaguete Rural Bank, Inc., subject to the rights of the Yap spouses acquired in
accordance with the Deed of Sale with Mortgage (Exh. "B"-Maxino and Dy; Exh. "1" Yap); declaring null and
void the Deed of Sale dated Oct[ober] 27, 1979, made by Tirambulo and Estorco in favor of the Dys and
Maxinos covering all the seven (7) parcels of land in question; in Civil Case No. 8439, declaring the Yap
spouses, the exclusive owners of Lot No. 1, covered by TCT No. T-14777, and Lot No. 6, covered by TCT No.
T-14781, for failure on the part of the Dy and Maxino spouses, to redeem said properties within (1) year
from the date of registration of the auction sale) after plaintiffs had perfected appeal of the 12 February
1997 decision, without hearing or awaiting plaintiffs comment, and in the face of the records showing that
the issues were never raised, much less litigated, insofar as Tirambulo, as well in the face of the foregoing
circumstances, especially dismissal of defendants claims and counterclaims and acquisition of ownership
and possession of the parcels of land by plaintiffs as well as disposition and/or loss of defendants rights and
interests and cause of action in respect thereof and/or settlement, waiver, and/or extinguishment of their
claims, and merger in plaintiffs-appellants, and without stating clearly the facts and the law upon which it is
based[; and]
8) not finding, holding and ruling that defendants acted in bad faith and in an abusive and oppressive
manner, if not contrary to law; and in not awarding plaintiffs damages. 32
On May 17, 2005, the CA rendered a decision reversing the March 7, 1997 amended decision of the trial court. The
dispositive portion of the assailed CA decision reads:
IN LIGHT OF THE FOREGOING, this appeal is GRANTED. The decision as well as the amended decision of the
Regional Trial Court is REVERSED AND SET ASIDE. In lieu thereof[,] judgment is hereby rendered as follows:
Page 82 of 123

1. Declaring the sale made by Dumaguete Rural Bank Inc. to Sps. Francisco and Whelma Yap with respect to
Lot No. 3 under TCT No. T-20301 as null and void;
2. Declaring the redemption made by Spouses Dy and Spouses Maxino with regards to Lot No. 6 under TCT
No. T-14781 and Lot No. 1 under TCT No. [T-]14777 as valid;
3. Ordering defendants, Sps. Yap, to deliver the possession and ownership thereof to Sps. Dy and Sps.
Maxino; to give a fair accounting of the proceeds of these three parcels of land and to tender and deliver
the corresponding amount of income from October 24, 1985 until the finality of this judgment[; and]
4. Condemning the defendant bank to pay damages to Spouses Dy and Spouses Maxino the amount of
P20,000.00 as moral damages and P200,000.00 as exemplary damages and attorneys fees in the amount
of P50,000.00.
All other claims are dismissed.
Costs against the appellees.
SO ORDERED.33
The CA held that the trial court erred in ruling that it could not consider the evidence for the Dys and the Maxinos
allegedly because they failed to formally offer the same. The CA noted that although the testimonies of Attys.
Marcelino C. Maxino and Benjamin V. Diputado were not formally offered, the procedural lapse was cured when the
opposing counsel cross-examined said witnesses. Also, while the original TSNs of the witnesses for the plaintiffs in
Civil Case No. 8426 were burned, the latters counsel who had copies thereof, furnished the Yaps copies for their
scrutiny and comment. The CA further noted that the trial court also admitted all the documentary exhibits of the
Dys and the Maxinos on March 3, 1995. Unfortunately, however, the trial court simply failed to locate the pertinent
documents in the voluminous records of the cases.
On the merits, the CA ruled that the Dys and the Maxinos had proven their cause of action sufficiently. The CA noted
that their claim that Lot 3 was not among the properties foreclosed was duly corroborated by Atty. Diputado, the
Provincial Sheriff who conducted the foreclosure sale. The Yaps also failed to rebut their contention regarding the
formers acceptance of the redemption money and their delivery of the possession of the three parcels of land to
the Dys and the Maxinos. The CA also noted that not only did the Yaps deliver possession of Lot 3 to the Dys and
the Maxinos, they also filed a Motion to Withdraw the Redemption Money from the Provincial Sheriff and withdrew
the redemption money.
As to the question whether the redemption was valid or not, the CA found no need to discuss the issue. It found that
the bank was in bad faith and therefore cannot insist on the protection of the law regarding the need for compliance
with all the requirements for a valid redemption while estoppel and unjust enrichment operate against the Yaps who
had already withdrawn the redemption money.
Upon motion for reconsideration of the Yaps, however, the CA amended its decision on March 15, 2006 as follows:
IN LIGHT OF THE FOREGOING, this appeal is GRANTED. The decision as well as the amended decision of the
Regional Trial Court is REVERSED AND SET ASIDE. In lieu thereof[,] judgment is hereby rendered as follows:
1.Declaring the sale made by Dumaguete Rural Bank Inc. to Sps. Francisco and Whelma Yap with respect to
Lot No. 3 under TCT No. T-20301 null and void;
2.Declaring the redemption made by Spouses Dy and Spouses Maxino with regards to Lot No. 6 under TCT
No. T-14781 and Lot No. 1 under TCT No. [T-]14777 as valid;
3. Condemning the defendant bank to pay damages to Spouses Dy and Spouses Maxino the amount of
P20,000.00 as moral damages and P200,000.00 as exemplary damages and attorneys fees in the amount
of P50,000.00.
All other claims are dismissed.
Costs against the appellees.
SO ORDERED.34
Hence, the consolidated petitions assailing the appellate courts decision.
The Yaps argue in the main that there is no valid redemption of the properties extrajudicially foreclosed. They
contend that the P40,000.00 cannot be considered a valid tender of redemption since the amount of the auction
sale is P216,040.93. They also argue that a valid tender of payment for redemption can only be made to DRBI since
at that time, their rights were subordinate to the final consolidation of ownership by the bank.
DRBI, aside from insisting that all seven mortgaged properties (which thus includes Lot 3) were validly foreclosed,
argues, for its part, that the appellate court erred in sustaining the redemption made by the Dys and Maxinos. It
anchors its argument on the fact that the sale of the Tirambulos to the Dys and Maxinos was without the banks
consent. The Dys and Maxinos therefore could not have assumed the character of debtors because a novation of
the contract of mortgage between the Tirambulos and DRBI did not take place as such a novation is proscribed by
Page 83 of 123

Article 1293 of the Civil Code. And there being no valid redemption within the contemplation of law and DRBI being
the highest bidder during the auction sale, DRBI has become the absolute owner of the properties mortgaged when
the redemption period expired.
DRBI further argues that it was unfair and unjust for them to be held liable for damages for supposedly wrongfully
foreclosing on Lot 3, depriving the Dys and the Maxinos of the use of the land, and registering the Certificate of Sale
which included Lot 3 when it should have excluded the same. DRBI argues that as a juridical person, it only
authorized and consented, through its Board of Directors, to lawful processes. The unlawful acts of the Sheriff, who
is considered as an agent of the bank in the foreclosure proceedings, cannot bind DRBI. Moreover, DRBI cannot be
liable for damages on the basis of an affidavit that was submitted only before the CA as the bank had no chance to
cross-examine the affiant and determine the veracity and propriety of the statements narrated in said affidavit.
Thus, the issues to be resolved in the instant case are essentially as follows: (1) Is Lot 3 among the foreclosed
properties? (2) To whom should the payment of redemption money be made? (3) Did the Dys and Maxinos validly
redeem Lots 1 and 6? and (4) Is DRBI liable for damages?
As to the first issue, we find that the CA correctly ruled that the Dys and Maxinos were able to prove their claim that
Lot 3 was not among the properties foreclosed and that it was merely inserted by the bank in the Sheriffs
Certificate of Sale. As Atty. Diputado, the Provincial Sheriff, testified, the application for foreclosure was only for five
parcels of land, namely, Lots 1, 4, 5, 6 and 8. Accordingly, only said five parcels of land were included in the
publication and sold at the foreclosure sale. When he was shown a copy of the Sheriffs Certificate of Sale consisting
of three pages, he testified that it was altered because Lot 3 and Lot 846 were included beyond the "xxx" that
marked the end of the enumeration of the lots foreclosed.35 Also, a perusal of DRBIs application for foreclosure of
real estate mortgage36 shows that it explicitly refers to only one deed of mortgage to settle the Tirambulos
indebtedness amounting to P216,040.93. This is consistent with the Notice of Extrajudicial Sale of Mortgaged
Property, published in the Dumaguete Star Informer on February 18, 25 and March 4, 1982, 37 announcing the sale of
Lots 1, 4, 5, 6 and 8 for the satisfaction of the indebtedness amounting to P216,040.93. It is also consistent with the
fact that Lots 1, 4, 5, 6 and 8 are covered by only one real estate mortgage, the Real Estate Mortgage 38 dated
December 3, 1976. Indeed, that the foreclosure sale refers only to Lots 1, 4, 5, 6 and 8 is clear from the fact that
Lots 1, 4, 5, 6 and 8 and Lot 3 are covered by two separate real estate mortgages. DRBI failed to refute these
pieces of evidence against it.
As to the second issue regarding the question as to whom payment of the redemption money should be made,
Section 31,39 Rule 39 of the Rules of Court then applicable provides:
SEC. 31. Effect of redemption by judgment debtor, and a certificate to be delivered and recorded thereupon. To
whom payments on redemption made.If the judgment debtor redeem, he must make the same payments as are
required to effect a redemption by a redemptioner, whereupon the effect of the sale is terminated and he is
restored to his estate, and the person to whom the payment is made must execute and deliver to him a certificate
of redemption acknowledged or approved before a notary public or other officer authorized to take
acknowledgments of conveyances of real property. Such certificate must be filed and recorded in the office of the
registrar of deeds of the province in which the property is situated, and the registrar of deeds must note the record
thereof on the margin of the record of the certificate of sale. The payments mentioned in this and the last preceding
sections may be made to the purchaser or redemptioner, or for him to the officer who made the sale. (Emphasis
supplied.)
Here, the Dys and the Maxinos complied with the above-quoted provision. Well within the redemption period, they
initially attempted to pay the redemption money not only to the purchaser, DRBI, but also to the Yaps. Both DRBI
and the Yaps however refused, insisting that the Dys and Maxinos should pay the whole purchase price at which all
the foreclosed properties were sold during the foreclosure sale. Because of said refusal, the Dys and Maxinos
correctly availed of the alternative remedy by going to the sheriff who made the sale. As held in Natino v.
Intermediate Appellate Court,40 the tender of the redemption money may be made to the purchaser of the land or to
the sheriff. If made to the sheriff, it is his duty to accept the tender and execute the certificate of redemption.
But were the Dys and Maxinos entitled to redeem Lots 1 and 6 in the first place? We rule in the affirmative.
The Dys and the Maxinos have legal personality to redeem the subject properties.
Contrary to petitioners contention, the Dys and Maxinos have legal personality to redeem the subject properties
despite the fact that the sale to the Dys and Maxinos was without DRBIs consent. In Litonjua v. L & R Corporation, 41
this Court declared valid the sale by the mortgagor of mortgaged property to a third person notwithstanding the
lack of written consent by the mortgagee, and likewise recognized the third persons right to redeem the foreclosed
property, to wit:
Coming now to the issue of whether the redemption offered by PWHAS on account of the spouses Litonjua is valid,
we rule in the affirmative. The sale by the spouses Litonjua of the mortgaged properties to PWHAS is valid.
Therefore, PWHAS stepped into the shoes of the spouses Litonjua on account of such sale and was in effect, their
successor-in-interest. As such, it had the right to redeem the property foreclosed by L & R Corporation. Again,
Tambunting, supra, clarifies that
"x x x. The acquisition by the Hernandezes of the Escuetas rights over the property carried with it the assumption
of the obligations burdening the property, as recorded in the Registry of Property, i.e., the mortgage debts in favor
of the RFC (DBP) and the Tambuntings. The Hernandezes, by stepping into the Escuetas shoes as assignees, had
the obligation to pay the mortgage debts, otherwise, these debts would and could be enforced against the property
subject of the assignment. Stated otherwise, the Hernandezes, by the assignment, obtained the right to remove the
burdens on the property subject thereof by paying the obligations thereby secured; that is to say, they had the right
of redemption as regards the first mortgage, to be exercised within the time and in the manner prescribed by law
Page 84 of 123

and the mortgage deed; and as regards the second mortgage, sought to be judicially foreclosed but yet
unforeclosed, they had the so-called equity of redemption."
The right of PWHAS to redeem the subject properties finds support in Section 6 of Act 3135 itself which gives not
only the mortgagor-debtor the right to redeem, but also his successors-in-interest. As vendee of the subject
properties, PWHAS qualifies as such a successor-in-interest of the spouses Litonjua. 42
Likewise, we rule that the Dys and the Maxinos validly redeemed Lots 1 and 6.
The requisites of a valid redemption are present
The requisites for a valid redemption are: (1) the redemption must be made within twelve (12) months from the
time of the registration of the sale in the Office of the Register of Deeds; (2) payment of the purchase price of the
property involved, plus 1% interest per month thereon in addition, up to the time of redemption, together with the
amount of any assessments or taxes which the purchaser may have paid thereon after the purchase, also with 1%
interest on such last named amount; and (3) written notice of the redemption must be served on the officer who
made the sale and a duplicate filed with the Register of Deeds of the province. 43
There is no issue as to the first and third requisites. It is undisputed that the Dys and the Maxinos made the
redemption within the 12-month period from the registration of the sale. The Dys and Maxinos effected the
redemption on May 24, 1984, when they deposited P50,373.42 with the Provincial Sheriff, and on June 19, 1984,
when they deposited an additional P83,850.50. Both dates were well within the one-year redemption period
reckoned from the June 24, 1983 date of registration of the foreclosure sale. Likewise, the Provincial Sheriff who
made the sale was properly notified of the redemption since the Dys and Maxinos deposited with him the
redemption money after both DRBI and the Yaps refused to accept it.
The second requisite, the proper redemption price, is the main subject of contention of the opposing parties.
The Yaps argue that P40,000.00 cannot be a valid tender of redemption since the amount of the auction sale was
P216,040.93. They further contend that the mortgage is indivisible so in order for the tender to be valid and
effectual, it must be for the entire auction price plus legal interest.
We cannot subscribe to the Yaps argument on the indivisibility of the mortgage. As held in the case of Philippine
National Bank v. De los Reyes,44 the doctrine of indivisibility of mortgage does not apply once the mortgage is
extinguished by a complete foreclosure thereof as in the instant case. The Court held:
The parties were accordingly embroiled in a hermeneutic disparity on their aforesaid contending positions. Yet, the
rule on the indivisibility of mortgage finds no application to the case at bar. The particular provision of the Civil
Code referred to provides:
Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the successors in
interest of the debtor or of the creditor.
Therefore, the debtors heir who has paid a part of the debt cannot ask for the proportionate extinguishment of the
pledge or mortgage as long as the debt is not completely satisfied.
Neither can the creditors heir who received his share of the debt return the pledge or cancel the mortgage, to the
prejudice of the other heirs who have not been paid.
From these provisions is excepted the case in which, there being several things given in mortgage or pledge, each
one of these guarantees only a determinate portion of the credit.
The debtor, in this case, shall have a right to the extinguishment of the pledge or mortgage as the portion of the
debt for which each thing is specially answerable is satisfied.
From the foregoing, it is apparent that what the law proscribes is the foreclosure of only a portion of the property or
a number of the several properties mortgaged corresponding to the unpaid portion of the debt where before
foreclosure proceedings partial payment was made by the debtor on his total outstanding loan or obligation. This
also means that the debtor cannot ask for the release of any portion of the mortgaged property or of one or some
of the several lots mortgaged unless and until the loan thus, secured has been fully paid, notwithstanding the fact
that there has been a partial fulfillment of the obligation. Hence, it is provided that the debtor who has paid a part
of the debt cannot ask for the proportionate extinguishment of the mortgage as long as the debt is not completely
satisfied.
That the situation obtaining in the case at bar is not within the purview of the aforesaid rule on indivisibility is
obvious since the aggregate number of the lots which comprise the collaterals for the mortgage had already been
foreclosed and sold at public auction. There is no partial payment nor partial extinguishment of the obligation to
speak of. The aforesaid doctrine, which is actually intended for the protection of the mortgagee, specifically refers
to the release of the mortgage which secures the satisfaction of the indebtedness and naturally presupposes that
the mortgage is existing. Once the mortgage is extinguished by a complete foreclosure thereof, said doctrine of
indivisibility ceases to apply since, with the full payment of the debt, there is nothing more to secure. 45 (Emphasis
supplied.)
Nothing in the law prohibits the piecemeal redemption of properties sold at one foreclosure proceeding. In fact, in
several early cases decided by this Court, the right of the mortgagor or redemptioner to redeem one or some of the
foreclosed properties was recognized.
Page 85 of 123

In the 1962 case of Castillo v. Nagtalon,46 ten parcels of land were sold at public auction. Nagtalon, who owned
three of the ten parcels of land sold, wanted to redeem her properties. Though the amount she tendered was found
as insufficient to effectively release her properties, the Court held that the tender of payment was made timely and
in good faith and thus, in the interest of justice, Nagtalon was given the opportunity to complete the redemption
purchase of three of the ten parcels of land foreclosed.
Also, in the later case of Dulay v. Carriaga,47 wherein Dulay redeemed eight of the seventeen parcels of land sold at
public auction, the trial court declared the piecemeal redemption of Dulay as void. Said order, however, was
annulled and set aside by the Court on certiorari and the Court upheld the redemption of the eight parcels of land
sold at public auction.
Clearly, the Dys and Maxinos can effect the redemption of even only two of the five properties foreclosed. And since
they can effect a partial redemption, they are not required to pay the P216,040.93 considering that it is the
purchase price for all the five properties foreclosed.
So what amount should the Dys and Maxinos pay in order for their redemption of the two properties be deemed
valid considering that when the five properties were auctioned, they were not separately valued?
Contrary to the Yaps contention, the amount paid by the Dys and Maxinos within the redemption period for the
redemption of just two parcels of land was not only P40,000.00 but totaled to P134,223.92 (P50,373.42 paid on May
28, 1984 plus P83,850.50 paid on June 19, 1984). That is more than 60% of the purchase price for the five
foreclosed properties, to think the Dys and Maxinos were only redeeming two properties. We find that it can be
considered a sufficient amount if we were to base the proper purchase price on the proportion of the size of Lots 1
and 6 with the total size of the five foreclosed properties, which had the following respective sizes:
Lot 1
Lot 6
Lot 5
Lot 4
Lot 8
TOTAL

61,371 square meters


16,087 square meters
2,900 square meters
27,875 square meters
39,888 square meters
148,121 square meters

The two subject properties to be redeemed, Lots 1 and 6, have a total area of 77,458 square meters or roughly 52%
of the total area of the foreclosed properties. Even with this rough approximation, we rule that there is no reason to
invalidate the redemption of the Dys and Maxinos since they tendered 60% of the total purchase price for
properties constituting only 52% of the total area. However, there is a need to remand the case for computation of
the pro-rata value of Lots 1 and 6 based on their true values at that time of redemption for the purposes of
determining if there is any deficiency or overpayment on the part of the Dys and Maxinos.
As to the award of damages in favor of the Dys and Maxinos, we agree with the appellate court for granting the
same.
The CA correctly observed that the act of DRBI in falsifying the Sheriffs Certificate of Sale to include Lots 3 and 846,
even if said additional lots were not among the properties foreclosed, was the proximate cause of the pecuniary
loss suffered by the Dys and Maxinos in the form of lost income from Lot 3.
Likewise, the CA also correctly awarded moral damages. Paragraph 10, Article 2219 of the Civil Code provides that
moral damages may be recovered in case of acts and actions referred to in Article 21 of the same Code. Article 21
reads:
ART. 21 Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.
As previously discussed, DRBIs act of maliciously including two additional properties in the Sheriffs Certificate of
Sale even if they were not included in the foreclosed properties caused the Dys and Maxinos pecuniary loss. Hence,
DRBI is liable to pay moral damages.
The award of exemplary damages is similarly proper. Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory
damages.48 We cannot agree more with the following ratio of the appellate court in granting the same:
Additionally, what is alarming to the sensibilities of the Court is the deception employed by the bank in adding other
properties in the certificate of sale under public auction without them being included in the public auction
conducted. It cannot be overemphasized that being a lending institution, prudence dictates that it should employ
good faith and due diligence with the properties entrusted to it. It was the bank which submitted the properties
ought to be foreclosed to the sheriff. It only submitted five (5) properties for foreclosure. Yet, it caused the
registration of the Certificate of Sale under public auction which listed more properties than what was foreclosed.
On this aspect, exemplary damages in the amount of P200,000.00 are in order.49
There being an award of exemplary damages, the award of attorneys fees is likewise proper as provided in
paragraph 1, Article 2208 of the Civil Code.
WHEREFORE, the petitions for review on certiorari are DENIED for lack of merit. The Decision dated May 17, 2005
and Resolution dated March 15, 2006 of the Court of Appeals in CA-G.R. C.V. No. 57205 are hereby AFFIRMED with
the MODIFICATION that the case is REMANDED to the Regional Trial Court of Negros Oriental, Branch 44,
Dumaguete City, for the computation of the pro-rata value of properties covered by TCT No. T-14777 (Lot 1) and
Page 86 of 123

TCT No. T-14781 (Lot 6) of the Registry of Deeds of Negros Oriental at the time of redemption to determine if there
is a deficiency to be settled by or overpayment to be refunded to respondent Spouses Zosimo Dy, Sr. and Natividad
Chiu and Spouses Marcelino C. Maxino and Remedios Lasola with regard to the redemption money they paid.
With costs against the petitioners.
SO ORDERED.

Page 87 of 123

G.R. No. 192877


March 23, 2011
SPOUSES HERMES P. OCHOA and ARACELI D. OCHOA, Petitioners, vs. CHINA BANKING CORPORATION,
Respondent.
For resolution is petitioners motion for reconsideration1 of our January 17, 2011 Resolution2 denying their petition
for review on certiorari3 for failing to sufficiently show any reversible error in the assailed judgment 4 of the Court of
Appeals (CA).
Petitioners insist that it was error for the CA to rule that the stipulated exclusive venue of Makati City is binding only
on petitioners complaint for Annulment of Foreclosure, Sale, and Damages filed before the Regional Trial Court of
Paraaque City, but not on respondent banks Petition for Extrajudicial Foreclosure of Mortgage, which was filed
with the same court.
We disagree.
The extrajudicial foreclosure sale of a real estate mortgage is governed by 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." Sections 1 and 2 thereof clearly state:
Section 1. When a sale is made under a special power inserted in or attached to any real-estate mortgage hereafter
made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following
sections shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision
for the same is made in the power.
Sec. 2. Said sale cannot be made legally outside of the province in which the property sold is situated; and in case
the place within said province in which the sale is to be made is the subject of stipulation, such sale shall be made
in said place or in the municipal building of the municipality in which the property or part thereof is situated. 5
The case at bar involves petitioners mortgaged real property located in Paraaque City over which respondent
bank was granted a special power to foreclose extra-judicially. Thus, by express provision of Section 2, the sale can
only be made in Paraaque City.
The exclusive venue of Makati City, as stipulated by the parties 6 and sanctioned by Section 4, Rule 4 of the Rules of
Court,7 cannot be made to apply to the Petition for Extrajudicial Foreclosure filed by respondent bank because the
provisions of Rule 4 pertain to venue of actions, which an extrajudicial foreclosure is not.
Pertinent are the following disquisitions in Supena v. De la Rosa: 8
Section 1, Rule 2 [of the Rules of Court] defines an action in this wise:
"Action means an ordinary suit in a court of justice, by which one party prosecutes another for the enforcement or
protection of a right, or the prevention or redress of a wrong."
Hagans v. Wislizenus does not depart from this definition when it states that "[A]n action is a formal demand of
one's legal rights in a court of justice in the manner prescribed by the court or by the law. x x x." It is clear that the
determinative or operative fact which converts a claim into an "action or suit" is the filing of the same with a "court
of justice." Filed elsewhere, as with some other body or office not a court of justice, the claim may not be
categorized under either term. Unlike an action, an extrajudicial foreclosure of real estate mortgage is initiated by
filing a petition not with any court of justice but with the office of the sheriff of the province where the sale is to be
made.1avvphi1 By no stretch of the imagination can the office of the sheriff come under the category of a court of
justice. And as aptly observed by the complainant, if ever the executive judge comes into the picture, it is only
because he exercises administrative supervision over the sheriff. But this administrative supervision, however, does
not change the fact that extrajudicial foreclosures are not judicial proceedings, actions or suits. 9
These pronouncements were confirmed on August 7, 2001 through A.M. No. 99-10-05-0, entitled "Procedure in
Extra-Judicial Foreclosure of Mortgage," the significant portions of which provide:
In line with the responsibility of an Executive Judge under Administrative Order No. 6, date[d] June 30, 1975, for the
management of courts within his administrative area, included in which is the task of supervising directly the work
of the Clerk of Court, who is also the Ex-Office Sheriff, and his staff, and the issuance of commissions to notaries
public and enforcement of their duties under the law, the following procedures are hereby prescribed in extrajudicial foreclosure of mortgages:
1. All applications for extrajudicial foreclosure of mortgage whether under the direction of the sheriff or a notary
public, pursuant to Act 3135, as amended by Act 4118, and Act 1508, as amended, shall be filed with the Executive
Judge, through the Clerk of Court who is also the Ex-Officio Sheriff.
Verily then, with respect to the venue of extrajudicial foreclosure sales, Act No. 3135, as amended, applies, it being
a special law dealing particularly with extrajudicial foreclosure sales of real estate mortgages, and not the general
provisions of the Rules of Court on Venue of Actions.
Consequently, the stipulated exclusive venue of Makati City is relevant only to actions arising from or related to the
mortgage, such as petitioners complaint for Annulment of Foreclosure, Sale, and Damages.

Page 88 of 123

The other arguments raised in the motion are a mere reiteration of those already raised in the petition for review.
As declared in this Courts Resolution on January 17, 2011, the same failed to show any sufficient ground to warrant
the exercise of our appellate jurisdiction.
WHEREFORE, premises considered, the motion for reconsideration is hereby DENIED.
SO ORDERED.

Page 89 of 123

G.R. No. 148595

July 12, 2004

SPOUSES ANTONIO S. PAHANG and LOLITA T. PAHANG, petitioners,


vs.
HON. AUGUSTINE A. VESTIL, Presiding Judge of Regional Trial Court- Branch 56, Mandaue City, DEPUTY
SHERIFF, Regional Trial Court-Branch 56 and METROPOLITAN BANK and TRUST COMPANY, respondents.
Before us is a petition for review on certiorari filed by the Spouses Antonio and Lolita Pahang, for the nullification of
the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 59157.
The Antecedents
On January 5, 1996, the petitioners, Spouses Antonio and Lolita Pahang, received a short-term loan of one million
five hundred thousand pesos (P1,500,000.00) from the respondent Metropolitan Bank & Trust Company payable on
December 27, 1996. The loan was covered by Non-Negotiable Promissory Note No. 190601 3 and was, likewise,
secured by a real estate mortgage on a parcel of land covered by Transfer Certificate of Title (TCT) No. 29607. 4 As
the petitioners failed to pay the loan, the interest and the penalties due thereon, the respondent foreclosed the real
estate mortgage extrajudicially. As a consequence, the mortgaged property was sold at public auction on January 8,
1998 to the respondent bank as the highest bidder. A certificate of sale was executed by Pasnonito D. Antiporda as
Ex-Officio Sheriff in favor of the respondent on January 14, 1998 and was registered with the Register of Deeds of
Mandaue City on January 27, 1998.
On December 29, 1998, the respondent wrote the petitioners that the one-year redemption period of the property
would expire on January 27, 1999.5 Instead of redeeming the property, the petitioners filed, on January 19, 1999, a
complaint for annulment of extrajudicial sale against the respondent bank and the Sheriff in the Regional Trial Court
of Cebu (Mandaue City), Branch 56, docketed as Civil Case No. MAN-3454. 6 Therein, the petitioners alleged that the
respondent bloated their obligation of P1,500,000.00 to P2,403,770.73 by including excessive past due interest,
penalty charges, attorneys fees and sheriffs expense. They claimed that such exorbitant charges were made to
frustrate their chance to pay the loan, and to ensure that the respondent bank would be the highest bidder during
the auction sale. They also asserted that the respondent failed to remit to the Sheriff the purchase price of the
property and was, likewise, guilty of fraud, collusion, breach of trust or misconduct in the conduct of the auction
sale of their property. Besides praying for injunctive relief, the petitioners prayed for the following alternative reliefs:
3. After trial on the merits, and after determination of plaintiffs true obligation with defendant bank, to
declare the foreclosure on the subject property as null and void, and to allow the plaintiffs to pay the same;
as alternative prayer, to allow the plaintiffs to redeem the subject real property based on the amount
determined and established as true and exact obligation of plaintiffs to defendant bank. 7
After the expiration of the one-year redemption period, the respondent consolidated its ownership over the
foreclosed property. Consequently, TCT No. 44668 was issued by the Register of Deeds in its name. On July 23,
1999, the respondent filed a Petition for Writ of Possession before the RTC of Mandaue City (Branch 56), docketed as
LRC Case No. 3.8
The petitioners, citing the ruling of this Court in Belisario v. The Intermediate Appellate Court,9 opposed the petition
on the ground that the core issue in their complaint in Civil Case No. MAN-3454 constituted a prejudicial question,
which warranted a suspension of the proceedings before the court. The petitioners averred that the filing of their
complaint within the period to redeem the foreclosed property was equivalent to an offer to redeem the same, and
had the effect of preserving such right. They also asserted that the respondent acted in bad faith in procuring the
title over the property despite the pendency of their complaint in Civil Case No. MAN-3454.
On March 28, 2000, the RTC of Mandaue City, Branch 56, rendered a decision in LRC Case No. 3 granting the
petition and ordering the issuance of a writ of possession in favor of the respondent. 10
Citing the case of Javelosa v. Court of Appeals,11 and Gawaran v. Court of Appeals,12 the RTC ruled that since the
petitioners failed to redeem the property within one year from the foreclosure, the respondent was entitled to a writ
of possession as a necessary consequence of the readjudication of ownership and the corresponding issuance of the
original certificate.13 The petitioners filed a motion for reconsideration of the decision, but the court issued an order
denying the motion, stating that it was merely its ministerial function to issue a writ of possession. 14
The petitioners filed a petition for certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 59157 for the
nullification of the March 28, 2000 Decision and the May 19, 2000 Order of the RTC. Thepetitioners alleged that the
RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in granting the petition of
the respondent bank for a writ of possession in LRC Case No. 3 instead of suspending the proceedings therein based
on the ruling of this Court in Belisario vs. The Intermediate Appellate Court.15
The Ruling of the Court of Appeals
Finding that the RTC did not act with grave abuse of discretion in ordering the issuance of the writ of possession, the
CA rendered a decision on March 2, 2001, dismissing the petition. 16 Citing the rulings of this Court in Vda. de Jacob
v. Court of Appeals17 and Navarra v. Court of Appeals,18 the CA explained that the pendency of a separate
proceeding questioning the validity of the mortgage and the extrajudicial foreclosure thereof cannot bar the
issuance of a writ of possession in favor of the purchaser at public auction. The appellate court ruled that after a
title on the property has been consolidated in the mortgagee, the issuance of a writ of possession becomes a
ministerial act of the trial court. Furthermore, the right of the respondent bank to possess the property was based
on its right of ownership as a purchaser of the properties in the foreclosure sale. The CA explained that the ruling in
the Belisario case was inapplicable because it involved a complaint to enforce the repurchase of the foreclosed
Page 90 of 123

property within the period of redemption, whereas, the complaint filed by the petitioners in Civil Case No. MAN-3454
was for the annulment of the mortgage or extrajudicial sale which was not equivalent to an offer to redeem the
property.19
The Present Petition
The motion for reconsideration of the petitioners of the decision, having been denied by the appellate court, the
petitioners filed this instant petition, assigning the following errors:
1. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS RIGHT OF REDEMPTION OVER
THEIR FORECLOSED PROPERTY AS HAVING EXPIRED ON JANUARY 26, 1999, IN THE LIGHT OF THEIR PENDING
COMPLAINT TO ANNUL THE FORECLOSURE FILED BEFORE THE EXPIRATION OF THE ONE-YEAR REDEMPTION
PERIOD, ON THE GROUND OF FRAUD, AND CONSIDERING FURTHER THEIR SPECIFIC PRAYER THEREOF FOR
DETERMINATION OF THEIR TRUE OBLIGATION WITH PRIVATE RESPONDENT, AND TO ALLOW THEM TO PAY
THE SAME AND/OR TO REDEEM THEIR FORECLOSED PROPERTY. 20
2. PETITIONERS COMPLAINT FOR ANNULMENT OF THE FORECLOSURE OF THEIR PROPERTY WITH A PRAYER
FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION TO STOP THE ISSUANCE OF A DEFINITE DEED OF
SALE AND CONSOLIDATION OF TITLE OF THEIR PROPERTY IN FAVOR OF PRIVATE RESPONDENT, WHILE
GIVING PREFERENCE AND ACTING WITH DISPATCH ON PRIVATE RESPONDENTS PETITION FOR ISSUANCE OF
WRIT OF POSSESSION ON THE SAME PROPERTY, BY GRANTING THE WRIT OF POSSESSION THEREON
THEREBY RENDERING MOOT AND ACADEMIC PETITIONERS PRAYERS IN THEIR COMPLAINT FOR ANNULMENT
OF FORECLOSURE.21
3. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THE DECISION OF THIS HONORABLE SUPREME
COURT IN THE CASE OF BELISARIO VS. THE INTERMEDIATE APPELLATE COURT, G.R. NO. L-73503, WHEREBY
"THE FILING OF THE COMPLAINT TO ENFORCE REPURCHASE WITHIN THE PERIOD FOR REDEMPTION IS
EQUIVALENT TO AN OFFER TO REDEEM AND HAS THE EFFECT OF PRESERVING THE RIGHT OF REDEMPTION"
INAPPLICABLE TO THE CASE OF PETITIONERS. 22
4. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPRECIATING THE FACT THAT THE ISSUE OR ISSUES
JOINED IN THE COMPLAINT FOR ANNULMENT BEFORE RESPONDENT JUDGE DOCKETED AS CIVIL CASE NO.
MAN-4353 (sic) IS A PREJUDICIAL QUESTION TO THE ISSUE RAISED IN THE PETITION FOR WRIT OF
POSSESSION IN LRC CASE NO. 3.23
5. THE HONORABLE COURT OF APPEALS ERRED IN HAVING FAILED TO CONSIDER THE VALID CAUSES OF
ACTION OF PETITIONERS IN THEIR COMPLAINT FOR ANNULMENT IN CIVIL CASE NO. MAN-4354 (sic).24
The threshold issues are as follows: (a) whether or not the complaint of the petitioners in Civil Case No. MAN-3454
for annulment of extrajudicial sale is a prejudicial question to the petition of the respondent bank for the issuance of
a writ of possession in LRC Case No. 3; and, (b) whether or not the RTC committed a grave abuse of its discretion
amounting to excess or lack of jurisdiction in granting the petition of the respondent in LRC Case No. 3 and in
issuing the writ of possession in its favor.
The issues being interrelated, the Court shall resolve the same simultaneously.
The petitioners contend that their complaint in Civil Case No. MAN-3454 and the respondents petition for a writ of
possession in LRC Case No. 3 were raffled to Branch 56 of the RTC. Although their complaint in Civil Case No. MAN3454 was for the nullification of the extrajudicial sale at public auction on the ground of fraud, they also prayed, as
an alternative remedy, that they be allowed to redeem the property based on the amount to be determined by the
court after trial. Hence, they assert, the filing of their complaint before the expiry of the redemption period to
enforce their right of redemption was equivalent to a formal offer to redeem the property and had the effect of
preserving their right of redemption. They argue that the RTC should have suspended the proceedings in LRC Case
No. 3 pending the final resolution of Civil Case No. MAN-3454 so as not to render moot and academic the latter
case, conformably with the ruling of the Court in Belisario vs. The Intermediate Appellate Court,25 after all, the two
cases were pending before the same court. The petitioners, thus, aver that the trial court committed grave abuse of
discretion amounting to excess or lack of jurisdiction in granting the petition of the respondent bank for a writ of
possession in LRC Case No. 3. They, likewise, aver that the Court of Appeals erred when it affirmed the decision of
the trial court and declared, thus:
Further, as to the applicability of the case of Belisario vs. Intermediate Appellate Court (G.R. No. L-73503,
Aug. 30, 1988, 165 SCRA 101, 108), suffice it to say, that the cause of action therein was to enforce the
repurchase of the foreclosed property within the period of redemption, which the Supreme Court held that it
has the effect of preserving the right of redemption. Whereas, Civil Case No. MAN-3454 filed by the
petitioners is for the annulment of mortgage or extrajudicial sale, which is not in effect an offer to redeem.
Verily, the pendency of said civil case does not preserve the right of redemption of the petitioners after the
period of redemption.26
The Courts Ruling
The contentions of the petitioners have no merit.
A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue
involved therein, and the cognizance of which pertains to another tribunal. It generally comes into play in a
situation where a civil action and a criminal action are both pending and there exists in the former an issue that
must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the
Page 91 of 123

civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the
criminal case. The rationale behind the principle of prejudicial question is to avoid two conflicting decisions. 27
In the present case, the complaint of the petitioners for Annulment of Extrajudicial Sale is a civil action and the
respondents petition for the issuance of a writ of possession of Lot No. 3-A, Block 1, Psd-07-021410, TCT No. 44668
is but an incident in the land registration case and, therefore, no prejudicial question can arise from the existence of
the two actions.28 A similar issue was raised in Manalo vs. Court of Appeals,29 where we held that:
At any rate, it taxes our imagination why the questions raised in Case No. 98-0868 must be considered
determinative of Case No. 9011. The basic issue in the former is whether the respondent, as the purchaser
in the extrajudicial foreclosure proceedings, may be compelled to have the property repurchased or resold
to a mortgagors successor-in-interest (petitioner); while that in the latter is merely whether the respondent,
as the purchaser in the extrajudicial foreclosure proceedings, is entitled to a writ of possession after the
statutory period for redemption has expired. The two cases, assuming both are pending, can proceed
separately and take their own direction independent of each other. 30
The focal issue in Civil Case No. MAN-3454 was whether the extrajudicial foreclosure of the real estate mortgage
executed by the petitioners in favor of the respondent bank and the sale of their property at public auction for
P2,403,770.73 are null and void, whereas, the issue in LRC Case No. 3 was whether the respondent bank was
entitled to the possession of the property after the statutory period for redemption had lapsed and title was issued .
Our ruling in Belisario has no application in this case because in the said case, no prejudicial question was involved.
We merely held therein that the filing of an action to enforce redemption within the period of redemption is
equivalent to a formal offer to redeem, and should the Court allow the redemption, the redemptioner should then
pay the amount already determined. In fine, the filing of an action by the redemptioner to enforce his right to
redeem does not suspend the running of the statutory period to redeem the property, nor bar the purchaser at
public auction from procuring a writ of possession after the statutory period of redemption had lapsed, without
prejudice to the final outcome of such complaint to enforce the right of redemption. 31
The remedy of the petitioners from the assailed decision of the RTC in LRC Case No. 3 was to appeal by writ of error
to the Court of Appeals.32 However, instead of appealing by writ of error, the petitioners filed their petition for
certiorari. Certiorari is not proper where the aggrieved party has a plain, speedy and adequate remedy at law.
Moreover, the error of the trial court in granting the respondent bank a writ of possession, if at all, was an error of
judgment correctible only by an ordinary appeal.
It bears stressing that the proceedings in a petition and/or motion for the issuance of a writ of possession, after the
lapse of the statutory period for redemption, is summary in nature. 33 The trial court is mandated to issue a writ of
possession upon a finding of the lapse of the statutory period for redemption without the redemptioner having
redeemed the property. It cannot be validly argued that the trial court abused its discretion when it merely complied
with its ministerial duty to issue the said writ of possession. 34
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED DUE COURSE. The assailed decision of the Court of
Appeals in CA-G.R. SP No. 59157 is AFFIRMED.
Cost against the petitioners.
SO ORDERED.

Page 92 of 123

G.R. No. 70987 September 29, 1988


GREGORIO Y. LIMPIN, and ROGELIO M. SARMIENTO, petitioners, vs. INTERMEDIATE APPELLATE COURT
and GUILLERMO PONCE, respondents.
Once again the parties are before this Court; this time, for a determination of whether or not the equity of
redemption recognized in favor of petitioner Rogelio M. Sarmiento in this Court's judgment promulgated on January
30, 1987, still subsists and may be exercised, more than a year after that judgment had become final and
executory.
The proceedings concern two (2) lots, then covered by TCTs Nos. 92836 and 92837, which, together with two (2)
others, were originally mortgaged in 1973 to herein private respondent Ponce by their former owners, the Spouses
Jose and Marcelina Aquino. These two lots were afterwards sold in 1978 by the same Aquino Spouses to Butuan Bay
Wood Export Corporation. Against this corporation herein petitioner Limpin obtained a money judgment in 1979;
and to satisfy the judgment, the two lots were levied on and sold at public auction in 1980, Limpin being the highest
bidder. Limpin later sold the lots to his co-petitioner, Sarmiento.
Earlier however or a day before levy was made on the two lots in execution of the judgment against Butuan Bay
Wood Export Corporation. Ponce had initiated judicial proceedings for the foreclosure of the mortgage over said two
(2) lots (together with the two (2) others mortgaged to him Judgment was rendered in his favor and became final;
and at the ensuing foreclosure sale, the lots were acquired by Ponce himself as highest bidder. Ponce then moved
for confirmation of the foreclosure sale, but the Court confirmed the sale of only two lots, refusing to do so as
regards the two which had been subject of the execution sale in Limpin's favor (i.e., those covered TCTs Nos. 92836
and 92837).
It was to resolve the resulting dispute that Ponce instituted a special civil action in the Intermediate Appellate Court,
impleading Limpin and Sarmiento a indispensable parties respondents. That Court rendered judgment on February
28, 1985 in Ponce's favor; Limpin and Sarmiento appealed; this Court denied their appeal.
The judgment of this Court of January 30, 1987 dismissed Sarmiento's and Limpin's petition for review on certiorari
of the Appellate Court's decision of February 28, 1985. It in effect affirmed the latter's decision which inter alia
ordered the Trial Court "to confirm the sale (of the lots formerly covered by TCT Nos. 92836 and 92837) and issue a
writ of possession to ... (Guillermo Ponce) with respect to the aforesaid lots, subject to the equity of redemption of
the respondent Rogelio V. Sarmiento 1 Applying the doctrine laid down in Santiago v. Dionisio, a 1953 decision of
this Court 2 the Intermediate Appellate Court's decision declared that "the sale to Ponce, as the highest bidder in
the foreclosure sale of the two lots in question should have been confirmed, subject to Limpin's (and now
Sarmiento's) equity of redemption."
This Court's aforesaid judgment also clearly and categorically sustained the exercise by the Appellate Court of
jurisdiction over the persons of Rogelio M. Sarmiento and Gregorio Limpin. 3 There can thus be no question that the
petitoners herein, said Rogelio Sarmiento and Gregorio Limpin, were affected and are bound by the decision of the
Intermediate Appellate Court, and that of this Court affirming it.
Rogelio M. Sarmiento, particularly, was aware that the Trial Court had the ministerial duty to execute the Appellate
Court's decision, i.e., to confirm the sale and issue a writ of possession as regards the aforesaid lots, subject to the
equity of redemption explicitly recognized in his favor in the decisions mentioned. He knew that he had the
prerogative to exercise his equity of redemption, if not from the moment that the judgment of this Court became
final and executory, 4 at least until the Court a quo, presided over by Hon. Antonio Solano, subsequently confirmed
the sale and issued a writ of possession in favor of Guillermo Ponce in June, 1987. 5
He did not try to exercise that right before, at or about the time of the confirmation of the foreclosure sale by Judge
Solano. Instead, he instituted no less than two (2) actions in the same Regional Trial Court which were assigned to
another branch, presided over by Hon. Teodoro Beltran- attempting to relitigate precisely the same issues which
this Court and the Intermediate Appellate Court had already passed upon and resolved adversely to him. For doing
so for trifling with and abusing the processes of the courts, and thus unwarrantedly delaying execution of the final
and executory judgment against him he and his counsel were both found guilty of contempt and correspondingly
punished by this Court, by Resolution dated May 5, 1988. The same resolution also decreed the dismissal of the
complaints in both cases and the nullification and setting aside of the restraining or injunctive orders of Judge
Beltran.
It was not until March 11, 1988-nine months or so after entry of the judgment recognizing his equity of redemption
as successor-in-interest of the original mortgagors that Sarmiento finally be stirred himself to attempt to exercise
his unforeclosed equity of redemption. On that day he filed a motion with the Court presided over by Hon. Judge
Antonio Solano, manifesting that he would exercise the right and asked the Court to fix the redemption price. 6 The
Court opined that "this should be the subject of the agreement between Ponce and Sarmiento. 7
Sarmiento then wrote to Ponce on March 23, 1988 offering "P 2.6 million as redemption price for the two lots
originally covered by TCTs Nos. 92836 and 92837, now 307100 and 307124. 8 Ponce's answer, dated March 25,
1988, rejected the offer said averred "that the period within which ... (Sarmiento) could have exercised such right ...
(had) lapsed. 9 Sarmiento reacted by filing a motion with the Solano Court, dated March 29, 1988, asking it to "fix
the redemption price ... and that the implementation of the writ of possession be provisionally deferred. 10 An
opposition was promptly filed by Ponce under date of May 4, 1988 11 in which he argued that "Sarmiento's right to
exercise his equity of redemption over those lots had long expired," the opportunity to exercise it having presented
itself but not availed of "(i) after ... default in the performance of the conditions of the mortgage and (ii) before the
Sheriffs sale of the property and the judicial confirmation thereof." According to Ponce, "from October 17, 1982, ...
(when) Sarmiento's predecessors-in-interest defaulted in their obligations over the mortgaged properties, up to June
17, 1987, when this ... (Trial) Court confirmed the auction sale of those properties, Sarmiento could (and should)
have exercised his 'equity of redemption.'" Judge Solano did not share this view, and ruled accordingly. 12
Page 93 of 123

The issue has been brought to this Court for resolution by Ponce's "Motion for Clarification" dated May 27, 1988 and
"Supplemental Motion ..." dated June 13, 1988, as to which Sarmiento has submitted a Comment dated June
17,1988. To the comment a reply has been presented by Ponce under date of August 3, 1988.
Ponce states 13 that the term, equity of redemption, means "the right of the mortgagor to redeem the mortgaged
property after his default in the performance of the conditions of the mortgage but before the sale of the property
or the judicial) confirmation of the (Sheriffs) sale," citing Top Rate International Services, Inc. v. IAC 142 SCRA 473
[1976], or "the right to redeem mortgaged property by paying the amount ordered by the court within a period of
ninety days, or, even thereafter but before the confirmation of the sale, invoking Sun Life Assurance Co. of Canada
v. Diez, 52 Phil. 275 [1928]. 14 On this premise, he postulates that "from October 17, 1982, the date Sarmiento's
predecessors-in-interest defaulted in their obligations over the mortgaged properties, up to June 17, 1987, when the
lower court confirmed the auction sale of those properties, Sarmiento could have exercised his 'equity of
redemption."' Not having done so within that time, his equity of redemption had been extinguished; indeed, by
opting to file "new suits against Ponce ... seeking to annul Ponce's titles over those properties" instead of redeeming
the same, he had "waived his equity of redemption (assuming such right existed at the time the suits were
commenced)."
It is Sarmiento's position, on the other hand, 15 that the "17 June 1987 confirmation of the sale of the two lots could
not have cut off ... (his) equity of redemption;" in fact, "Ponce himself, in his 'Urgent Motion' dated 1 June 1987,
precisely prayed for the issuance of a writ of possession 'subject to the equity of redemption of Rogelio M.
Sarmiento' thereby recognizing Sarmiento's equity of redemption beyond confirmation date," 16 He also argues that
he had not been informed of the time when his right of redemption would be cut-off, 17 because he "never received
a copy of any Motion for Confirmation, much less notice of hearing thereon in violation of his right to due process;"
that to hold otherwise would "render nugatory the decision of the Court of Appeals and this ... Court on the issue;"
and that he is entitled to a reasonable time, e.g., a year, for the exercise of his equity of redemption. 18
The equity of redemption is, to be sure, different from and should not be confused with the right of redemption.

19

The right of redemption in relation to a mortgage-understood in the sense of a prerogative to re-acquire mortgaged
property after registration of the foreclosure sale- exists only in the case of the extrajudicial foreclosure of the
mortgage. No such right is recognized in a judicial foreclosure except only where the mortgagee is the Philippine
National Bank or a bank or banking institution.
Where a mortgage is foreclosed extra-judicially, Act 3135 grants to the mortgagor the right of redemption within
one (1) year from the registration of the sheriffs certificate of foreclosure sale. 20
Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The law 21 declares
that a judicial foreclosure sale, "when confirmed by an order of the court, ... shall operate to divest the rights of all
the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be
allowed by law. 22 Such rights exceptionally "allowed by law" (i.e., even after confirmation by an order of the court)
are those granted by the charter of the Philippine National Bank (Acts No. 2747 and 2938), and the General Banking
Act (R.A. 337). 23 These laws confer on the mortgagor, his successors in interest or any judgment creditor of the
mortgagor, the right to redeem the property sold on foreclosure-after confirmation by the court of the foreclosure
sale-which right may be exercised within a period of one (1) year, counted from the date of registration of the
certificate of sale in the Registry of Property.
But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the mortgagee is
not the PNB or a bank or banking institution. In such a case, the foreclosure sale, "when confirmed by an order of
the court. ... shall operate to divest the rights of all the parties to the action and to vest their rights in the
purchaser." There then exists only what is known as the equity of redemption. This is simply the right of the
defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt
within the 90-day period after the judgment becomes final, in accordance with Rule 68, or even after the foreclosure
sale but prior to its confirmation. Section 2, Rule 68 provides that
... If upon the trial ... the court shag find the facts set forth in the complaint to be true, it shall
ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest
and costs, and shall render judgment for the sum so found due and order the same to be paid into
court within a period of not less than ninety (90) days from the date of the service of such order,
and that in default of such payment the property be sold to realize the mortgage debt and Costs. 24
This is the mortgagor's equity (not right) of redemption which, as above stated, may be exercised by him even
beyond the 90-day period "from the date of service of the order,' and even after the foreclosure sale itself, provided
it be before the order of confirmation of the sale. 25 After such order of confirmation, no redemption can be effected
any longer.
It is this same equity of redemption that is conferred by law on the mortgagor's successors-in-interest, or third
persons acquiring rights over the mortgaged property subsequent, and therefore subordinate, to the mortgagee's
lien. 26 If these subsequent or junior lienholders be not joined in the foreclosure action, the judgment in the
mortgagor's favor is ineffective as to them, of course. In that case, they retain what is known as the "unforeclosed
equity of redemption," and a separate foreclosure proceeding should be brought to require them to redeem from
the first mortgagee, or the party acquiring title to the mortgaged property at the foreclosure sale, within 90 days, 27
under penalty of losing that prerogative to redeem. In the case at bar, however, there is no occasion to speak of
any "unforeclosed equity of redemption' in Sarmiento's favor since he was properly impleaded in the judicial
proceeding where his and Ponce's rights over the mortgaged property were ventilated and specifically adjudicated.
Under the circumstances obtaining in this case, the plain intendment of the Intermediate Appellate Court was to
give to Sarmiento, not the unforeclosed equity of redemption pertaining to a stranger to the foreclosure suit, but
the same equity of redemption possessed by the mortgagor himself. The judgment cannot be construed as
Page 94 of 123

contemplating or requiring the institution of a separate suit by Ponce to compel Sarmiento to exercise his
unforeclosed equity of redemption, or as granting Sarmiento the option to redeem at any time that he pleases,
subject only to prescription. This would give rise to that multiplicity of proceedings which the law eschews. The
judgment plainly intended that Sarmiento exercise his option to redeem, as successor of the mortgagor.
Upon the facts on record, Sarmiento cannot be heard to complain of denial of due process for alleged lack of notice
of any motion or hearing for confirmation of sale. The Decision of the Intermediate Appellate Court which he and his
predecessor, Limpin, had appealed to this Court specifically ordered the Trial Court to confirm 28 the judicial
foreclosure sale in favor of Ponce over the two lots, in these terms. 29
WHEREFORE, the orders dated October 16,1983 and December 19,1983 of the respondent court, so
far as they deny the confirmation of the sale of the lots formerly covered by TCT Nos. 92836 and
92837, are SET ASIDE, and the respondent court is hereby ORDERED to confirm the sale and issue a
writ of possession to the petitioner with respect to the aforesaid lots, subject to the equity of
redemption of the respondent Rogelio V. Sarmiento. Without costs.
Given the fact that said appealed orders of the Trial Court had been issued upon motion for confirmation earlier
made by Ponce-which was duly served and heard-the aforecited Decision of the Intermediate Appellate Court can
be construed in no wise than as a peremptory command to the Trial Court to confirm the sale as directed, motu
proprio, and without the need of any further motion or other action on the part of Ponce. The rejection by this Court
of Sarmiento's and Limpin's appeal in its own Decision of January 30, 1987, which imported nothing less than a total
affirmance of the Decision of the Appellate Court, should therefore have sufficiently alerted Sarmiento that
confirmation could come at any time after this Court's Decision became final, with or without any action from
Ponce. He cannot, in the circumstances, claim unfair surprise. He should, upon being notified of this Court's
Decision, have taken steps to redeem the properties in question or, at the very least, served the Trial Court and
Ponce with notice of his intention to exercise his equity of redemption. There was certainly time enough to do this
the order confirming the foreclosure sale issuing only on June 17, 1987had he not occupied himself with the
fruitless maneuverings to re-litigate the issues already recounted. Indeed, had he made an attempt to redeem,
even belatedly but within a reasonable period of time after learning of the order of confirmation (the record shows
he did learn of it within three [3) days after its issuance), 30 he might perhaps have given the Court some reason to
consider his bid on equitable grounds. He did not. He let nine (9) months pass, to repeat, in carrying out improper
(and contumacious stratagems to negate the judgments against him, before making any such move.
Neither can Sarmiento acceptably claim that Ponce, by moving for a writ of possession subject to his (Sarmiento's)
equity of redemption, recognized the existence and enforceability of that prerogative beyond the prescribed cut-off
date of confirmation of the sale. Such an interpretation of the motion is totally unwarranted, given the fact that said
motion was made at a time (June 1, 1987) when there was as yet no order confirming the sale and, since
Sarmiento's equity of redemption then still unquestionably existed, there was hardly occasion or for that matter,
any reason as far as Ponce was concerned, to provide against its lapsing. Moreover, assuming for the sake of
argument that a resolutory period fixed by law may be extended by act of the party in whose favor its expiration
would operate, that act must bespeak a clear and unequivocal intent to grant such an extension. No such clear
grant can be inferred from the terms of Ponce's motion, which can, and in fact should be, read as a mere affirmation
that there existed at the time an equity of redemption in Sarmiento's favor.
WHEREFORE, the Court hereby rules that the equity of redemption claimed and invoked by Rogelio M. Sarmiento
over the properties originally covered by Transfer Certificates of Title Nos. 92836 and 92837 (now by TCTs
Numbered 307100 and 307124), Registry of Deeds of Quezon City, subject of this case, lapsed and ceased to exist
without having been properly exercised, on June 17, 1987, with the issuance by the Trial Court of the Order
confirming the sheriffs sale (on judicial foreclosure) of said properties in favor of Guillermo Ponce.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Page 95 of 123

G.R. No. 137792


August 12, 2003
SPOUSES RICARDO ROSALES and ERLINDA SIBUG, Petitioners, vs. SPOUSES ALFONSO and LOURDES
SUBA, THE CITY SHERIFF OF MANILA, Respondents.
Challenged in the instant petition for review on certiorari are the Resolutions1 dated November 25, 1998 and
February 26, 1999 of the Court of Appeals dismissing the petition for certiorari in CA G.R. SP No. 49634, "Spouses
Ricardo Rosales and Erlinda Sibug vs. Alfonso and Lourdes Suba."
On June 13, 1997, the Regional Trial Court, Branch 13, Manila rendered a Decision 2 in Civil Cases Nos. 94-72303 and
94-72379, the dispositive portion of which reads:
"WHEREFORE, judgment is rendered:
(1) Declaring the Deed of Sale of Exhibit D, G and I, affecting the property in question, as an equitable
mortgage;
(2) Declaring the parties Erlinda Sibug and Ricardo Rosales, within 90 days from finality of this Decision, to
deposit with the Clerk of Court, for payment to the parties Felicisimo Macaspac and Elena Jiao, the sum of
P65,000.00, with interest at nine (9) percent per annum from September 30, 1982 until payment is made,
plus the sum of P219.76 as reimbursement for real estate taxes;
(3) Directing the parties Felicisimo Macaspac and Elena Jiao, upon the deposit on their behalf of the
amounts specified in the foregoing paragraph, to execute a deed of reconveyance of the property in
question to Erlinda Sibug, married to Ricardo Rosales, and the Register of Deeds of Manila shall cancel
Transfer Certificate of Title No. 150540 in the name of the Macaspacs (Exh. E) and issue new title in the
name of Sibug;
(4) For non-compliance by Sibug and Rosales of the directive in paragraph (2) of this dispositive portion, let
the property be sold in accordance with the Rules of Court for the release of the mortgage debt and the
issuance of title to the purchaser.
"SO ORDERED."3
The decision became final and executory. Spouses Ricardo and Erlinda Rosales, judgment debtors and herein
petitioners, failed to comply with paragraph 2 quoted above, i.e., to deposit with the Clerk of Court, within 90 days
from finality of the Decision, P65,000.00, etc., to be paid to Felicisimo Macaspac and Elena Jiao. This prompted
Macaspac, as judgment creditor, to file with the trial court a motion for execution.
Petitioners opposed the motion for being premature, asserting that the decision has not yet attained finality. On
March 5, 1998, they filed a manifestation and motion informing the court of their difficulty in paying Macaspac as
there is no correct computation of the judgment debt.
On February 23, 1998, Macaspac filed a supplemental motion for execution stating that the amount due him is
P243,864.08.
Petitioners failed to pay the amount. On March 25, 1998, the trial court issued a writ of execution ordering the sale
of the property subject of litigation for the satisfaction of the judgment.
On May 15, 1998, an auction sale of the property was held wherein petitioners participated. However, the property
was sold for P285,000.00 to spouses Alfonso and Lourdes Suba, herein respondents, being the highest bidders. On
July 15, 1998, the trial court issued an order confirming the sale of the property and directing the sheriff to issue a
final deed of sale in their favor.
On July 28, 1998, Macaspac filed a motion praying for the release to him of the amount of P176,176.06 from the
proceeds of the auction sale, prompting petitioners to file a motion praying that an independent certified public
accountant be appointed to settle the exact amount due to movant Macaspac.
Meanwhile, on August 3, 1998, the Register of Deeds of Manila issued a new Transfer Certificate of Title over the
subject property in the names of respondents.
On August 18, 1998, respondents filed with the trial court a motion for a writ of possession, contending that the
confirmation of the sale "effectively cut off petitioners equity of redemption." Petitioners on the other hand, filed a
motion for reconsideration of the order dated July 15, 1998 confirming the sale of the property to respondents.
On October 19, 1998, the trial court, acting upon both motions, issued an order (1) granting respondents prayer for
a writ of possession and (2) denying petitioners motion for reconsideration. The trial court ruled that petitioners
have no right to redeem the property since the case is for judicial foreclosure of mortgage under Rule 68 of the
1997 Rules of Civil Procedure, as amended. Hence, respondents, as purchasers of the property, are entitled to its
possession as a matter of right.
Forthwith, petitioners filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 49634,
alleging that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in
issuing a writ of possession to respondents and in denying their motion for reconsideration of the order dated July
15, 1998 confirming the sale of the property to said respondents.
Page 96 of 123

On November 25, 1998, the CA dismissed outright the petition for lack of merit, holding that there is no right of
redemption in case of judicial foreclosure of mortgage. Petitioners motion for reconsideration was also
denied.
Hence this petition.
In the main, petitioners fault the Appellate Court in applying the rules on judicial foreclosure of mortgage. They
contend that their loan with Macaspac is unsecured, hence, its payment entails an execution of judgment for money
under Section 9 in relation to Section 25, Rule 39 of the 1997 Rules of Civil Procedure, as amended, 4 allowing the
judgment debtor one (1) year from the date of registration of the certificate of sale within which to
redeem the foreclosed property.
Respondents, upon the other hand, insist that petitioners are actually questioning the decision of the trial court
dated June 13, 1997 which has long become final and executory; and that the latter have no right to redeem a
mortgaged property which has been judicially foreclosed.
Petitioners contention lacks merit. The decision of the trial court, which is final and executory, declared the
transaction between petitioners and Macaspac an equitable mortgage. In Matanguihan vs. Court of Appeals, 5 this
Court defined an equitable mortgage as "one which although lacking in some formality, or form or words, or other
requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as
security for a debt, and contains nothing impossible or contrary to law." An equitable mortgage is not different from
a real estate mortgage, and the lien created thereby ought not to be defeated by requiring compliance with the
formalities necessary to the validity of a voluntary real estate mortgage. 6 Since the parties transaction is an
equitable mortgage and that the trial court ordered its foreclosure, execution of judgment is governed by Sections 2
and 3, Rule 68 of the 1997 Rules of Civil Procedure, as amended, quoted as follows:
SEC. 2. Judgment on foreclosure for payment or sale. If upon the trial in such action the court shall find the facts
set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt or
obligation, including interest and other charges as approved by the court, and costs, and shall render judgment
for the sum so found due and order that the same be paid to the court or to the judgment obligee
within a period of not less that ninety (90) days nor more than one hundred twenty (120) days from
the entry of judgment, and that in default of such payment the property shall be sold at public auction
to satisfy the judgment.
SEC. 3. Sale of mortgaged property, effect. When the defendant, after being directed to do so as provided in
the next preceding section, fails to pay the amount of the judgment within the period specified therein,
the court, upon motion, shall order the property to be sold in the manner and under the provisions of Rule
39 and other regulations governing sales of real estate under execution. Such sale shall not effect the rights of
persons holding prior encumbrances upon the property or a part thereof, and when confirmed by an order of the
court, also upon motion, it shall operate to divest the rights in the property of all the parties to the
action and to vest their rights in the purchaser, subject to such rights of redemption as may be
allowed by law.
x x x."
In Huerta Alba Resort, Inc. vs. Court of Appeals,7 we held that the right of redemption is not recognized in a judicial
foreclosure, thus:
"The right of redemption in relation to a mortgageunderstood in the sense of a prerogative to reacquire mortgaged property after registration of the foreclosure saleexists only in the case of the
extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosure except
only where the mortgagee is the Philippine National bank or a bank or a banking institution.
"Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of redemption within
one (1) year from the registration of the sheriffs certificate of foreclosure sale.
"Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The
law declares that a judicial foreclosure sale, when confirmed by an order of the court, x x x shall
operate to divest the rights of all the parties to the action and to vest their rights in the purchaser,
subject to such rights of redemption as may be allowed by law. Such rights exceptionally allowed by law
(i.e., even after the confirmation by an order of the court) are those granted by the charter of the Philippine
National Bank (Act Nos. 2747 and 2938), and the General Banking Act (R.A.337). These laws confer on the
mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right to redeem the property
sold on foreclosureafter confirmation by the court of the foreclosure salewhich right may be exercised within a
period of one (1) year, counted from the date of registration of the certificate of sale in the Registry of Property.
"But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the
mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale, when
confirmed by an order of the court, x x x shall operate to divest the rights of all the parties to the
action and to vest their rights in the purchaser. There then exists only what is known as the equity of
redemption. This is simply the right of the defendant mortgagor to extinguish the mortgage and
retain ownership of the property by paying the secured debt within the 90-day period after the
judgment becomes final, in accordance with Rule 68, or even after the foreclosure sale but prior to its
confirmation.
xxx
Page 97 of 123

"This is the mortgagors equity (not right) of redemption which, as above stated, may be exercised by him even
beyond the 90-day period from the date of service of the order, and even after the foreclosure sale itself, provided
it be before the order of confirmation of the sale. After such order of confirmation, no redemption can be effected
any longer." (Italics supplied)
Clearly, as a general rule, there is no right of redemption in a judicial foreclosure of mortgage. The only exemption
is when the mortgagee is the Philippine National Bank or a bank or a banking institution. Since the mortgagee in
this case is not one of those mentioned, no right of redemption exists in favor of petitioners. They merely have an
equity of redemption, which, to reiterate, is simply their right, as mortgagor, to extinguish the mortgage and retain
ownership of the property by paying the secured debt prior to the confirmation of the foreclosure sale. However,
instead of exercising this equity of redemption, petitioners chose to delay the proceedings by filing several
manifestations with the trial court. Thus, they only have themselves to blame for the consequent loss of their
property.
WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals dated November 25, 1998 and
February 26, 1999 in CA G.R. SP No. 49634 are AFFIRMED.
SO ORDERED.

Page 98 of 123

G.R. No. 98334 May 8, 1992


MANUEL D. MEDIDA, Deputy Sheriff of the Province of Cebu, CITY SAVINGS BANK (formerly Cebu City
Savings and Loan Association, Inc.) and TEOTIMO ABELLANA, petitioners,
vs.
COURT OF APPEALS and SPS. ANDRES DOLINO and PASCUALA DOLINO, respondents.
The core issue in this case is whether or not a mortgagor, whose property has been extrajudicially foreclosed and
sold at the corresponding foreclosure sale, may validly execute a mortgage contract over the same property in
favor of a third party during the period of redemption.
The present appeal by certiorari assails the decision 1 of respondent Court of Appeals in CA-G.R. CV No. 12678
where it answered the question posed by the foregoing issue in the negative and modified the decision 2 of the then
Court of First Instance of Cebu in Civil Case No. R-18616 wherein the validity of said subsequent mortgage was
assumed and the case was otherwise disposed of on other grounds.
The facts which gave rise to the institution of the aforesaid civil case in the trial court, as found by respondent Court
of Appeals, are as follows:
On October 10, 1974 plaintiff spouses, alarmed of losing their right of redemption over lot 4731 of
the Cebu City Cadastre and embraced under TCT No. 14272 from Mr. Juan Gandioncho, purchaser of
the aforesaid lot at the foreclosure sale of the previous mortgage in favor of Cebu City Development
Bank, went to Teotimo Abellana, president of defendant Association, to obtain a loan of P30,000.00.
Prior thereto or on October 3, 1974, their son Teofredo Dolino filed a similar loan application for
Twenty-Five Thousand (P25,000.00) Pesos with lot No. 4731 offered as security for the Thirty
Thousand (P30,000.00) Pesos loan from defendant association. Subsequently, they executed a
promissory note in favor of defendant association. Both documents indicated that the principal
obligation is for Thirty Thousand (P30,000.00) Pesos payable in one year with interest at twelve
(12%) percent per annum.
When the loan became due and demandable without plaintiff paying the same, defendant
association caused the extrajudicial foreclosure of the mortgage on March 16, 1976. After the
posting and publication requirements were complied with, the land was sold at public auction on
April 19, 1976 to defendant association being the highest bidder. The certificate of sale was issued
on April 20, 1976 and registered on May 10, 1976 with the Register of Deeds of Cebu.
On May 24, 1971 (sic, 1977), no redemption having been effected by plaintiff, TCT No. 14272 was
cancelled and in lieu thereof TCT No. 68041 was issued in the name of defendant association. 3
xxx xxx xxx
On October 18, 1979, private respondents filed the aforestated Civil Case No. R-18616 in the court a quo for the
annulment of the sale at public auction conducted on April 19, 1976, as well as the corresponding certificate of sale
issued pursuant thereto.
In their complaint, private respondents, as plaintiffs therein, assailed the validity of the extrajudicial foreclosure sale
of their property, claiming that the same was held in violation of Act No. 3135, as amended, and prayed, inter alia,
for the cancellation of Transfer Certificate of Title No. 68041 issued in favor of therein defendant City Savings and
Loan Association, Inc., now known as City Savings Bank and one of the petitioners herein.
In its answer, the defendant association therein denied the material allegations of the complaint and averred,
among others, that the present private respondent spouses may still avail of their right of redemption over the land
in question.
On January 12, 1983, after trial on the merits, the court below rendered judgment upholding the validity of the loan
and the real estate mortgage, but annulling the extrajudicial foreclosure sale inasmuch as the same failed to
comply with the notice requirements in Act No. 3135, as amended, under the following dispositive part:
WHEREFORE, the foregoing premises considered and upon the view taken by the Court of this case,
judgment is hereby rendered, as follows:
1. Declaring ineffective the extrajudicial foreclosure of the mortgage over Lot No. 4731 of the
Cadastral Survey of Cebu;
2. Ordering the cancellation of Transfer Certificate of Title No. 68041 of the Registry of Deeds of the
City of Cebu in the name of defendant Cebu City Savings and Loan Association, Inc. the
corresponding issuance of a new transfer certificate to contain all the annotations made in TCT No.
14272 of the plaintiffs Pascuala Sabellano, married to Andres Dolino;
3. Ordering the plaintiffs aforenamed to pay the defendant Cebu City Savings and Loan Association,
Inc. the unpaid balance of the loan, plus interest; and reimbursing said defendant the value of any
necessary and useful expenditures on the property after deducting any income derived by said
defendant from the property.

Page 99 of 123

For this purpose, defendant Association is given 15 days from receipt hereof within which to submit
its statement of the amount due it from the plaintiffs Dolino, with notice to them. The payment to
be made by the plaintiffs shall be within ninety (90) days from their receipt of the order approving
the amount due the defendant Cebu City Savings and Loan Association, Inc.
No award of damages or costs to either party.
SO ORDERED.

Not satisfied therewith, herein private respondents interposed a partial appeal to respondent court with respect to
the second and third paragraphs of the aforequoted decretal portion, contending that the lower court erred in (1)
declaring that the mortgage executed by the therein plaintiff spouses Dolino is valid; (2) permitting therein Cebu
City Savings and Loan Association, Inc. to collect interest after the same foreclosure proceedings and auction sale
which are null and void from the beginning; (3) not ordering the forfeiture of the capital or balance of the loan with
usurious interest; and (4) not sentencing therein defendant to pay damages and attorney's fees to plaintiffs. 5
On September 28, 1990, respondent Court of Appeals promulgated its decision modifying the decision of the lower
court, with this adjudication:
WHEREFORE, PREMISES CONSIDERED, the decision appealed from is hereby MODIFIED declaring as
void and ineffective the real estate mortgage executed by plaintiffs in favor of defendant
association. With this modification, the decision is AFFIRMED in other respects. 6
Herein petitioners then filed a motion for reconsideration which was denied by respondent court in its resolution
dated March 5, 1991, hence the present petition which, in synthesis, postulates that respondent court erred in
declaring the real estate mortgage void, and also impugns the judgment of the trial court declaring ineffective the
extrajudicial foreclosure of said mortgage and ordering the cancellation of Transfer Certificate of Title No. 68041
issued in favor of the predecessor of petitioner bank. 7
The first submission assailing the judgment of respondent Court of Appeals is meritorious.
Said respondent court declared the real estate mortgage in question null and void for the reason that the mortgagor
spouses, at the time when the said mortgage was executed, were no longer the owners of the lot, having
supposedly lost the same when the lot was sold to a purchaser in the foreclosure sale under the prior mortgage.
This holding cannot be sustained.
Preliminarily, the issue of ownership of the mortgaged property was never alleged in the complaint nor was the
same raised during the trial, hence that issue should not have been taken cognizance of by the Court of Appeals. An
issue which was neither averred in the complaint nor ventilated during the trial in the court below cannot be raised
for the first time on appeal as it would be offensive to the basic rule of fair play, justice and due process. 8
Nonetheless, since respondent Court took cognizance thereof and, in fact, anchored its modificatory judgment on its
ratiocination of that issue, we are inclined to liberalize the rule so that we can in turn pass upon the correctness of
its conclusion. We may consider such procedure as analogous to the rule that an unassigned error closely related to
an error properly assigned, or upon which the determination of the question properly assigned is dependent, may
be considered by an appellate court. 9 We adopt this approach since, after all, both lower courts agreed upon the
invalidity of the extrajudicial foreclosure but differed only on the matter of the validity of the real estate mortgage
upon which the extrajudicial foreclosure was based.
In arriving at its conclusion, respondent court placed full reliance on what obviously is an obiter dictum laid down in
the course of the disquisition in Dizon vs. Gaborro, et al. which we shall analyze. 10 For, as explicitly stated therein
by the Court, "(t)he basic issue to be resolved in this case is whether the 'Deed of Sale with Assumption of
Mortgage' and the 'Option to Purchase Real Estate,' two instruments executed by and between petitioner Jose P.
Dizon and Alfredo G. Gaborro (defendant below) on the same day, October 6, 1959, constitute in truth and in fact
an absolute sale of the three parcels of land therein described or merely an equitable mortgage or conveyance
thereof by way of security for reimbursement or repayment by petitioner Jose P. Dizon of any and all sums which
may have been paid to the Development Bank of the Philippines and the Philippine National Bank by Alfredo G.
Gaborro . . . ." Said documents were executed by the parties and the payments were made by Gaborro for the debt
of Dizon to said banks after the Development Bank of the Philippines had foreclosed the mortgage executed by
Dizon and during the period of redemption after the foreclosure sale of the mortgaged property to said creditor
bank.
The trial court held that the true agreement between the parties therein was that Gaborro would assume and pay
the indebtedness of Dizon to the banks and, in consideration thereof, Gaborro was given the possession and
enjoyment of the properties in question until Dizon shall have reimbursed him for the amount paid to the creditor
banks. Accordingly, the trial court ordered the reformation of the documents to the extent indicated and such
particular relief was affirmed by the Court of Appeals. This Court held that the agreement between the parties is
one of those innominate contracts under Article 1307 of the Civil Code whereby the parties agreed "to give and to
do" certain rights and obligations, but partaking of the nature of antichresis.
Hence, on appeal to this Court, the judgment of the Court of Appeals in that case was affirmed but with the
following pronouncements:
The two instruments sought to be reformed in this case appear to stipulate rights and obligations
between the parties thereto pertaining to and involving parcels of land that had already been
foreclosed and sold extrajudicially, and purchased by the mortgage creditor, a third party. It
becomes, therefore, necessary, to determine the legality of said rights and obligations arising from
Page 100 of 123

the foreclosure and sale proceedings not only between the two contracting parties to the
instruments executed between them but also in so far as the agreement affects the rights of the
third party, the purchaser Bank.
xxx xxx xxx
Under the Revised Rules of Court, Rule 39, Section 33, the judgment debtor remains in possession
of the property foreclosed and sold, during the period of redemption. If the judgment debtor is in
possession of the property sold, he is entitled to retain it, and receive the fruits, the purchaser not
being entitled to such possession. (Riosa vs. Verzosa, 26 Phil. 86; Velasco vs. Rosenberg's, Inc., 32
Phil. 72; Pabico vs. Pauco, 43 Phil. 572; Power vs. PNB, 54 Phil. 54; Gorospe vs. Gochangco, L-12735,
Oct. 30, 1959).
xxx xxx xxx
Upon foreclosure and sale, the purchaser is entitled to a certificate of sale executed by the sheriff.
(Section 27, Revised Rules of Court). After the termination of the period of redemption and no
redemption having been made, the purchaser is entitled to a deed of conveyance and to the
possession of the properties. (Section 35, Revised Rules of Court). The weight of authority is to the
effect that the purchaser of land sold at public auction under a writ of execution has only an
inchoate right to the property, subject to be defeated and terminated within the period of 12
months from the date of sale, by a redemption on the part of the owner. Therefore, the judgment
debtor in possession of the property is entitled to remain therein during the period for redemption.
(Riosa vs. Verzosa, 26 Phil. 86, 89; Gonzales vs. Calimbas, 51 Phil. 355).
In the case before Us, after the extrajudicial foreclosure and sale of his properties, petitioner Dizon
retained the right to redeem the lands, the possession, use and enjoyment of the same during the
period of redemption. And these are the only rights that Dizon could legally transfer, cede and
convey unto respondent Gaborro under the instrument captioned Deed of Sale with Assumption of
Mortgage (Exh. A-Stipulation), likewise the same rights that said respondent could acquire in
consideration of the latter's promise to pay and assume the loan of petitioner Dizon with DBP and
PNB.
Such an instrument cannot be legally considered a real and unconditional sale of the parcels of
land, firstly, because there was absolutely no money consideration therefor, as admittedly
stipulated, the sum of P131,831.91 mentioned in the document as the consideration "receipt of
which was acknowledged" was not actually paid; and, secondly, because the properties had already
been previously sold by the sheriff at the foreclosure sale, thereby divesting the petitioner of his full
right as owner thereof to dispose and sell the lands. (Emphasis ours.)
It was apparently the second reason stated by the Court in said case which was relied upon by respondent court in
the present case on which to premise its conclusion. Yet, as demonstrated by the relevant excerpts above quoted,
not only was that obiter therein unnecessary since evidently no sale was concluded, but even inaccurate, if not
inconsistent, when considered in the context of the discussion in its entirety. If, as admitted, the purchaser at the
foreclosure sale merely acquired an inchoate right to the property which could ripen into ownership only upon the
lapse of the redemption period without his credit having been discharged, it is illogical to hold that during that same
period of twelve months the mortgagor was "divested" of his ownership, since the absurd result would be that the
land will consequently be without an owner although it remains registered in the name of the mortgagor.
That is why the discussion in said case carefully and felicitously states that what is divested from the mortgagor is
only his "full right as owner thereof to dispose (of) and sell the lands," in effect, merely clarifying that the mortgagor
does not have the unconditional power to absolutely sell the land since the same is encumbered by a lien of a third
person which, if unsatisfied, could result in a consolidation of ownership in the lienholder but only after the lapse of
the period of redemption. Even on that score, it may plausibly be argued that what is delimited is not the
mortgagor's jus dispodendi, as an attribute of ownership, but merely the rights conferred by such act of disposal
which may correspondingly be restricted.
At any rate, even the foregoing considerations and arguments would have no application in the case at bar and
need not here be resolved since what is presently involved is a mortgage, not a sale, to petitioner bank. Such
mortgage does not involve a transfer, cession or conveyance of the property but only constitutes a lien thereon.
There is no obstacle to the legal creation of such a lien even after the auction sale of the property but during the
redemption period, since no distinction is made between a mortgage constituted over the property before or after
the auction sale thereof.
Thus, a redemptioner is defined as a creditor having a lien by attachment, judgment or mortgage on the property
sold, or on some part thereof, subsequent to the judgment under which the property was sold. 11 Of course, while in
extrajudicial foreclosure the sale contemplated is not under a judgment but the proceeding pursuant to which the
mortgaged property was sold, a subsequent mortgage could nevertheless be legally constituted thereafter with the
subsequent mortgagee becoming and acquiring the rights of a redemptioner, aside from his right against the
mortgagor.
In either case, what bears attention is that since the mortgagor remains as the absolute owner of the property
during the redemption period and has the free disposal of his property, there would be compliance with the
requisites of Article 2085 of the Civil Code for the constitution of another mortgage on the property. To hold
otherwise would create the inequitable situation wherein the mortgagor would be deprived of the opportunity,
which may be his last recourse, to raise funds wherewith to timely redeem his property through another mortgage
thereon.
Page 101 of 123

Coming back to the present controversy, it is undisputed that the real estate mortgage in favor of petitioner bank
was executed by respondent spouses during the period of redemption. We reiterate that during said period it
cannot be said that the mortgagor is no longer the owner of the foreclosed property since the rule up to now is that
the right of a purchaser at a foreclosure sale is merely inchoate until after the period of redemption has expired
without the right being exercised. 12 The title to land sold under mortgage foreclosure remains in the mortgagor or
his grantee until the expiration of the redemption period and conveyance by the master's deed. 13 To repeat, the
rule has always been that it is only upon the expiration of the redemption period, without the judgment debtor
having made use of his right of redemption, that the ownership of the land sold becomes consolidated in the
purchaser. 14
Parenthetically, therefore, what actually is effected where redemption is seasonably exercised by the judgment or mortgage
debtor is not the recovery of ownership of his land, which ownership he never lost, but the elimination from his title thereto of the
lien created by the levy on attachment or judgment or the registration of a mortgage thereon. The American rule is similarly to the
effect that the redemption of property sold under a foreclosure sale defeats the inchoate right of the purchaser and restores the
property to the same condition as if no sale had been attempted. Further, it does not give to the mortgagor a new title, but merely
restores to him the title freed of the encumbrance of the lien foreclosed. 15
We cannot rule on the plaint of petitioners that the trial court erred in declaring ineffective the extrajudicial foreclosure and the
sale of the property to petitioner bank. The court below spelled out at length in its decision the facts which it considered as
violative of the provisions of Act No. 3135, as amended, by reason of which it nullified the extrajudicial foreclosure proceeding and
its effects. Such findings and ruling of the trial court are already final and binding on petitioners and can no longer be modified,
petitioners having failed to appeal therefrom.
An appellee who has not himself appealed cannot obtain from the appellate court any affirmative relief other than the ones
granted in the decision of the court below. 16 He cannot impugn the correctness of a judgment not appealed from by him. He
cannot assign such errors as are designed to have the judgment modified. All that said appellee can do is to make a counterassignment of errors or to argue on issues raised at the trial only for the purpose of sustaining the judgment in his favor, even on
grounds not included in the decision of the court a quo nor raised in the appellant's assignment of errors or arguments. 17
WHEREFORE, the decision of respondent Court of Appeals, insofar as it modifies the judgment of the trial court, is REVERSED and
SET ASIDE. The judgment of said trial court in Civil Case No. R-18616, dated January 12, 1983, is hereby REINSTATED.SO
ORDERED.

Page 102 of 123

G.R. No. 170215


August 28, 2007
SPS. ESMERALDO and ELIZABETH SUICO, Petitioners, vs. PHILIPPINE NATIONAL BANK and HON. COURT
OF APPEALS, Respondents.
Herein petitioners, Spouses Esmeraldo and Elizabeth Suico, obtained a loan from the Philippine National Bank (PNB)
secured by a real estate mortgage1 on real properties in the name of the former. The petitioners were unable to pay
their obligation prompting the PNB to extrajudicially foreclose the mortgage over the subject properties before the
City Sheriff of Mandaue City under EJF Case No. 92-5-15.
The petitioners thereafter filed a Complaint against the PNB before the Regional Trial Court (RTC) of Mandaue City,
Branch 55, docketed as Civil Case No. MAN-2793 for Declaration of Nullity of Extrajudicial Foreclosure of Mortgage. 2
The Complaint alleged that on 6 May 1992, PNB filed with the Office of the Mandaue City Sheriff a petition for the
extrajudicial foreclosure of mortgage constituted on the petitioners properties (subject properties) for an
outstanding loan obligation amounting to P1,991,770.38 as of 10 March 1992. The foreclosure case before the
Office of the Mandaue City Sheriff, which was docketed as EJF Case No. 92-5-15, covered the following properties:
TCT NO. 13196
"A parcel of land (Lot 701, plan 11-5121 Amd-2) situated at Mandaue City, bounded on the NE., and SE., by lot no.
700; on the SW. by lots nos. 688 and 702; on the NW. by lot no. 714, containing an area of 2,078 sq. m. more or
less."
TAX DECL. NO. 00553
"A parcel of land situated at Tabok, Mandaue City, Cad. Lot No. 700-C-1; bounded on the North by Lot No. 701 &
700-B; on the South by Lot No. 700-C-3; on the East by lot no. 700-C-3 and on the West by Lot no. 688, containing
an area of 200 square meters, more or less."
TAX DECL. NO. 00721
"Two (2) parcels of land situated at Tabok, Mandaue City, Cad. lot nos. 700-C-3 and 700-C-2; bounded on the North
by Lot Nos. 700-C-1 and 700-B; on the South by Lot No. 700-D; on the East by Lot Nos. 695 and 694; and on the
West by Lot Nos. 688 and 700-C-1, containing an aggregate area of 1,683 sq. m. more or less."
TAX DECL. NO. 0237
"A parcel of land situated at Tabok, Mandaue City, Cad. Lot no. 700-B. Bounded on the NE. by (Lot 699) 109, (Lot No.
69) 110, on the SE (Lot 700-C) 115, on the NW. (Lot 700-A) 112 and on the SW. (Lot 701) 113; containing an area
of .1785 HA more or less."
TAX DECL. NO. 9267
"A parcel of land situated at Tabok, Mandaue City, Cad. Lot no. 700-A. Bounded on the NE. by (Lot 699) 109, on the
South West by (Lot 701) 113, on the SE. by (Lot 700-B) 111, and on the NW. by (lot 714) 040039; containing an area
of .1785 HA more or less."3
Petitioners claimed that during the foreclosure sale of the subject properties held on 30 October 1992, PNB, as the
lone bidder, offered a bid in the amount of P8,511,000.00. By virtue of the said bid, a Certificate of Sale of the
subject properties was issued by the Mandaue City Sheriff in favor of PNB. PNB did not pay to the Sheriff who
conducted the auction sale the amount of its bid which was P8,511,000.00 or give an accounting of how said
amount was applied against petitioners outstanding loan, which, as of 10 March 1992, amounted only to
P1,991,770.38. Since the amount of the bid grossly exceeded the amount of petitioners outstanding obligation as
stated in the extrajudicial foreclosure of mortgage, it was the legal duty of the winning bidder, PNB, to deliver to the
Mandaue City Sheriff the bid price or what was left thereof after deducting the amount of petitioners outstanding
obligation. PNB failed to deliver the amount of their bid to the Mandaue City Sheriff or, at the very least, the amount
of such bid in excess of petitioners outstanding obligation.
One year after the issuance of the Certificate of Sale, PNB secured a Certificate of Final Sale from the Mandaue City
Sheriff and, as a result, PNB transferred registration of all the subject properties to its name.
Owing to the failure of PNB as the winning bidder to deliver to the petitioners the amount of its bid or even just the
amount in excess of petitioners obligation, the latter averred that the extrajudicial foreclosure conducted over the
subject properties by the Mandaue City Sheriff, as well as the Certificate of Sale and the Certificate of Finality of
Sale of the subject properties issued by the Mandaue City Sheriff, in favor of PNB, were all null and void.
Petitioners, in their Complaint in Civil Case No. MAN-2793, prayed for:
a) Declaring the Nullity of Extra-judicial Foreclosure of Mortgage under EJF Case No. 92-5-15 including the
certificate of sale and the final deed of sale of the properties affected;
b) Order[ing] the cancellation of the certificates of titles and tax declaration already in the name of [herein
respondent] PNB and revert the same back to herein [petitioners] name;

Page 103 of 123

c) Ordering the [PNB] to pay [petitioners] moral damages amounting to more than P1,000,000,00;
Exemplary damages of P500,000.00; Litigation expenses of P100,000.00 and attorneys fees of
P300,000.00.4
PNB filed a Motion to Dismiss5 Civil Case No. MAN-2793 citing the pendency of another action between the same
parties, specifically Civil Case No. CEB-15236 before the RTC of Cebu City entitled, PNB v. Sps. Esmeraldo and
Elizabeth Suico where PNB was seeking the payment of the balance of petitioners obligation not covered by the
proceeds of the auction sale held on 30 October 1992. PNB argued that these two cases involve the same parties.
Petitioners opposed the Motion to Dismiss filed by PNB. 6 Subsequently, the Motion to Dismiss Civil Case No. MAN2793 was denied in the Order of the RTC dated 15 July 1997;7 thus, PNB was constrained to file its Answer. 8
PNB disputed petitioners factual narration. PNB asserted that petitioners had other loans which had likewise
become due. Petitioners outstanding obligation of P1,991,770.38 as of 10 March 1992 was exclusive of attorneys
fees, and other export related obligations which it did not consider due and demandable as of said date. PNB
maintained that the outstanding obligation of the petitioners under their regular and export- related loans was
already more than the bid price of P8,511,000.00, contradicting the claim of surplus proceeds due the petitioners.
Petitioners were well aware that their total principal outstanding obligation on the date of the auction sale was
P5,503,293.21.
PNB admitted the non-delivery of the bid price to the sheriff and the execution of the final deed of sale, but claimed
that it had not transferred in its name all the foreclosed properties because the petition to register in its name
Transfer Certificates of Title (TCT) No. 37029 and No. 13196 were still pending.
On 2 February 1999, the RTC rendered its Decision9 in Civil Case No. MAN-2793 for the declaration of nullity of the
extrajudicial foreclosure of mortgage, the dispositive portion of which states:
WHEREFORE, based on the foregoing, judgment is rendered in favor of [herein petitioners] Sps. Esmeraldo &
Elizabeth Suico and against [herein respondent], Philippine National Bank (PNB), declaring the nullity of Extrajudicial
Foreclosure of Mortgage under EJF Case No. 92-5-15, including the certificate of sale and the final deed of sale of
the subject properties; ordering the cancellation of the certificates of titles and tax declaration already in the name
of [respondent] PNB, if any, and revert the same back to the [petitioners] name; ordering [respondent] PNB to
cause a new foreclosure proceeding, either judicially or extra-judicially.
Furnish parties thru counsels copy of this order. 10
In granting the nullification of the extrajudicial foreclosure of mortgage, the RTC reasoned that given that
petitioners had other loan obligations which had not yet matured on 10 March 1992 but became due by the date of
the auction sale on 30 October 1992, it does not justify the shortcut taken by PNB and will not excuse it from paying
to the Sheriff who conducted the auction sale the excess bid in the foreclosure sale. To allow PNB to do so would
constitute fraud, for not only is the filing fee in the said foreclosure inadequate but, worse, the same constitutes a
misrepresentation regarding the amount of the indebtedness to be paid in the foreclosure sale as posted and
published in the notice of sale.11 Such misrepresentation is fatal because in an extrajudicial foreclosure of mortgage,
notice of sale is jurisdictional. Any error in the notice of sale is fatal and invalidates the notice. 12
When the PNB appealed its case to the Court of Appeals, 13 the appellate court rendered a Decision14 dated 12 April
2005, the fallo of which provides:
WHEREFORE, premises considered, the instant appeal is GRANTED. The questioned decision of the Regional Trial
Court of Mandaue City, Branch 55 dated February 2, 1999 is hereby REVERSED and SET ASIDE. Accordingly, the
extra judicial foreclosure of mortgage under EJF 92-5-15 including the certificate of sale and final deed of sale
executed appurtenant thereto are hereby declared to be valid and binding. 15
In justifying reversal, the Court of Appeals held:
A careful scrutiny of the evidence extant on record would show that in a letter dated January 12, 1994, [petitioners]
expressly admitted that their outstanding principal obligation amounted to P5.4 Million and in fact offered to
redeem the properties at P6.5 Million. They eventually increased their offer at P7.5 Million as evidenced by that
letter dated February 4, 1994. And finally on May 16, 1994, they offered to redeem the foreclosed properties by
paying the whole amount of the obligation by installment in a period of six years. All those offers made by the
[petitioners] not only contradicted their very assertion that their obligation is merely that amount appearing on the
petition for foreclosure but are also indicative of the fact that they have admitted the validity of the extra judicial
foreclosure proceedings and in effect have cured the impugned defect. Thus, for the [petitioners] to insist that their
obligation is only over a million is unworthy of belief. Oddly enough, it is evident from their acts that they
themselves likewise believe otherwise.
Even assuming that indeed there was a surplus and the [PNB] is retaining more than the proceeds of the sale than
it is entitled, this fact alone will not affect the validity of the sale but simply gives the [petitioners] a cause of action
to recover such surplus. In fine, the failure of the [PNB] to remit the surplus, if any, is not tantamount to a noncompliance of statutory requisites that could constitute a jurisdictional defect invalidating the sale. This situation
only gives rise to a cause of action on the part of the [petitioners] to recover the alleged surplus from the [PNB].
This ruling is in harmony with the decisional rule that in suing for the return of the surplus proceeds, the mortgagor
is deemed to have affirmed the validity of the sale since nothing is due if no valid sale has been made. 16
Petitioners filed a Motion for Reconsideration17 of the foregoing Decision, but the Court of Appeals was not
persuaded. It maintained the validity of the foreclosure sale and, in its Amended Decision dated 28 September
2005, it merely directed PNB to pay the deficiency in the filing fees, holding thus:
Page 104 of 123

WHEREFORE, Our decision dated April 12, 2005 is hereby AMENDED. [Herein respondent PNB] is hereby required to
pay the deficiency in the filing fees due on the petition for extra judicial foreclosure sale to be based on the actual
amount of mortgage debts at the time of filing thereof. In all other respects, Our decision subject of herein
petitioners] motion for reconsideration is hereby AFFIRMED. 18
Unflinching, petitioners elevated the case before this Court via the present Petition for Review essentially seeking
the nullification of the extrajudicial foreclosure of the mortgage constituted on the subject properties. Petitioners
forward two reasons for declaring null and void the said extrajudicial foreclosure: (1) the alleged defect or
misrepresentation in the notice of sheriffs sale; and/or (2) failure of PNB to pay and tender the price of its bid or the
surplus thereof to the sheriff.
Petitioners argue that since the Notice of Sheriffs Sale stated that their obligation was only P1,991,770.38 and PNB
bidded P8,511,000.00, the said Notice as well as the consequent sale of the subject properties were null and void.
It is true that statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly
complied with, and that even slight deviations therefrom will invalidate the notice and render the sale at least
voidable.19 Nonetheless, we must not also lose sight of the fact that the purpose of the publication of the Notice of
Sheriffs Sale is to inform all interested parties of the date, time and place of the foreclosure sale of the real
property subject thereof. Logically, this not only requires that the correct date, time and place of the foreclosure
sale appear in the notice, but also that any and all interested parties be able to determine that what is about to be
sold at the foreclosure sale is the real property in which they have an interest. 20
Considering the purpose behind the Notice of Sheriffs Sale, we disagree with the finding of the RTC that the
discrepancy between the amount of petitioners obligation as reflected in the Notice of Sale and the amount
actually due and collected from the petitioners at the time of the auction sale constitute fraud which renders the
extrajudicial foreclosure sale null and void.
Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are
attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions
occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the
property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the
notice, and also to the sale made pursuant thereto.21
All these considered, we are of the view that the Notice of Sale in this case is valid. Petitioners failed to convince
this Court that the difference between the amount stated in the Notice of Sale and the amount of PNBs bid resulted
in discouraging or misleading bidders, depreciated the value of the property or prevented it from commanding a fair
price.
The cases cited by the RTC in its Decision do not apply herein. San Jose v. Court of Appeals 22 refers to a Notice of
Sheriffs Sale which did not state the correct number of the transfer certificates of title of the property to be sold.
This Court considered the oversight as a substantial and fatal error which resulted in invalidating the entire notice.
The case of Community Savings and Loan Association, Inc. v. Court of Appeals 23 is also inapplicable, because the
said case refers to an extrajudicial foreclosure tainted with fraud committed by therein petitioners, which denied
therein respondents the right to redeem the property. It actually has no reference to a Notice of Sale.
We now proceed to the effect of the non-delivery by PNB of the bid price or the surplus to the petitioners.
The following antecedents are not disputed:
For failure to pay their loan obligation secured by a real estate mortgage on the subject properties, PNB foreclosed
the said mortgage. In its petition for foreclosure sale under ACT No. 3135 filed before the Mandaue City Sheriff, PNB
stated therein that petitioners total outstanding obligation amounted to P1,991,770.38.24 PNB bidded the amount
of P8,511,000.00. Admittedly, PNB did not pay its bid in cash or deliver the excess either to the City Sheriff who
conducted the bid or to the petitioners after deducting the difference between the amount of its bid and the amount
of petitioners obligation in the Notice of Sale. The petitioners then sought to declare the nullity of the foreclosure,
alleging that their loan obligation amounted only to P1,991,770.38 in the Notice of Sale, and that PNB did not pay
its bid in cash or deliver to petitioner the surplus, which is required under the law. 25
On the other hand, PNB claims that petitioners loan obligation reflected in the Notice of Sale dated 10 March 1992
did not include their other obligations, which became due at the date of the auction sale on 10 October 1992; as
well as interests, penalties, other charges, and attorneys fees due on the said obligation. 26
Pertinent provisions under Rule 39 of the Rules of Court on extrajudicial foreclosure sale provide:
SEC. 21. Judgment obligee as purchaser. When the purchaser is the judgment obligee, and no third-party claim
has been filed, he need not pay the amount of the bid if it does not exceed the amount of his judgment. If it does,
he shall pay only the excess. (Emphasis supplied.)
SEC. 39. Obligor may pay execution against obligee. After a writ of execution against property has been issued, a
person indebted to the judgment obligor may pay to the sheriff holding the writ of execution the amount of his debt
or so much thereof as may be necessary to satisfy the judgment, in the manner prescribed in section 9 of this Rule,
and the sheriffs receipt shall be a sufficient discharge for the amount so paid or directed to be credited by the
judgment obligee on the execution.
Conspicously emphasized under Section 21 of Rule 39 is that if the amount of the loan is equal to the amount of the
bid, there is no need to pay the amount in cash. Same provision mandates that in the absence of a third-party
Page 105 of 123

claim, the purchaser in an execution sale need not pay his bid if it does not exceed the amount of the judgment;
otherwise, he shall pay only the excess.271avvphi1
The raison de etre is that it would obviously be senseless for the Sheriff or the Notary Public conducting the
foreclosure sale to go through the idle ceremony of receiving the money and paying it back to the creditor, under
the truism that the lawmaking body did not contemplate such a pointless application of the law in requiring that the
creditor must bid under the same conditions as any other bidder. It bears stressing that the rule holds true only
where the amount of the bid represents the total amount of the mortgage debt. 28
The question that needs to be addressed in this case is: considering the amount of PNBs bid of P8,511,000.00 as
against the amount of the petitioners obligation of P1,991,770.38 in the Notice of Sale, is the PNB obliged to
deliver the excess?
Petitioners insist that the PNB should deliver the excess. On the other hand PNB counters that on the date of the
auction sale on 30 October 1992, petitioners other loan obligation already exceeded the amount of P1,991,770.38
in the Notice of Sale.
Rule 68, Section 4 of the Rules of Court provides:
SEC. 4. Disposition of proceeds of sale.- The amount realized from the foreclosure sale of the mortgaged property
shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be
any balance or residue, after paying off the mortgage debt due, the same shall be paid to junior encumbrancers in
the order of their priority, to be ascertained by the court, or if there be no such encumbrancers or there be a
balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person
entitled to it.
Under the above rule, the disposition of the proceeds of the sale in foreclosure shall be as follows:
(a) first, pay the costs
(b) secondly, pay off the mortgage debt
(c) thirdly, pay the junior encumbrancers, if any in the order of priority
(d) fourthly, give the balance to the mortgagor, his agent or the person entitled to it. 29
Based on the foregoing, after payment of the costs of suit and satisfaction of the claim of the first mortgagee/senior
mortgagee, the claim of the second mortgagee/junior mortgagee may be satisfied from the surplus proceeds. The
application of the proceeds from the sale of the mortgaged property to the mortgagors obligation is an act of
payment, not payment by dacion; hence, it is the mortgagees duty to return any surplus in the selling price to the
mortgagor. Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a
custodian of the fund and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do
so. And even though the mortgagee is not strictly considered a trustee in a purely equitable sense, but as far as
concerns the unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity of
redemption.30
Thus it has been held that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this
fact alone will not affect the validity of the sale but simply give the mortgagor a cause of action to recover such
surplus.31
In the case before us, PNB claims that petitioners loan obligations on the date of the auction sale were already
more than the amount of P1,991,770.38 in the Notice of Sale. In fact, PNB claims that on the date of the auction
sale, petitioners principal obligation, plus penalties, interests, attorneys fees and other charges were already
beyond the amount of its bid of P8,511,000.00.
After a careful review of the evidence on record, we find that the same is insufficient to support PNBs claim.
Instead, what is available on record is petitioners Statement of Account as prepared by PNB and attached as Annex
A32 to its Answer with counterclaim.33 In this Statement of Account, petitioners principal obligation with
interest/penalty and attorneys fees as of 30 October 1992 already amounted to P6,409,814.92.
Although petitioners denied the amounts reflected in the Statement of Account from PNB, they did not interpose
any defense to refute the computations therein. Petitioners mere denials, far from being compelling, had nothing to
offer by way of evidence. This then enfeebles the foundation of petitioners protestation and will not suffice to
overcome the computation of their loan obligations as presented in the Statement of Account submitted by PNB. 34
Noticeably, this Statement of Account is the only piece of evidence available before us from which we can
determine the outstanding obligations of petitioners to PNB as of the date of the auction sale on 10 October 1992.
It did not escape the attention of this Court that petitioners wrote a number of letters to PNB almost two years after
the auction sale,35 in which they offered to redeem the property. In their last letter, petitioners offered to redeem
their foreclosed properties for P9,500,000.00. However, these letters by themselves cannot be used as bases to
support PNBs claim that petitioners obligation is more than its bid of P8,500,000.00, without any other evidence.
There was no computation presented to show how petitioners obligation already reached P9,500,000.00.
Petitioners could very well have offered such an amount on the basis of the value of the foreclosed properties rather
than their total obligation to PNB. We cannot take petitioners offer to redeem their properties in the amount of
Page 106 of 123

P9,500,000.00 on its face as an admission of the amount of their obligation to PNB without any supporting
evidence.
Given that the Statement of Account from PNB, being the only existing documentary evidence to support its claim,
shows that petitioners loan obligations to PNB as of 30 October 1992 amounted to P6,409,814.92, and considering
that the amount of PNBs bid is P8,511,000.00, there is clearly an excess in the bid price which PNB must return,
together with the interest computed in accordance with the guidelines laid down by the court in Eastern Shipping
Lines v. Court of Appeals,36 regarding the manner of computing legal interest, viz:
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from
such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
In Philippine National Bank v. Court of Appeals,37 it was held that:
The rate of 12% interest referred to in Cir. 416 applies only to:
Loan or forbearance of money, or to cases where money is transferred from one person to another and the
obligation to return the same or a portion thereof is adjudged. Any other monetary judgment which does not involve
or which has nothing to do with loans or forbearance of any, money, goods or credit does not fall within its coverage
for such imposition is not within the ambit of the authority granted to the Central Bank. When an obligation not
constituting a loan or forbearance of money is breached then an interest on the amount of damages awarded may
be imposed at the discretion of the court at the rate of 6% per annum in accordance with Art. 2209 of the Civil
Code. Indeed, the monetary judgment in favor of private respondent does not involve a loan or forbearance of
money, hence the proper imposable rate of interest is six (6%) per cent.
Using the above rule as yardstick, since the responsibility of PNB arises not from a loan or forbearance of money
which bears an interest rate of 12%, the proper rate of interest for the amount which PNB must return to the
petitioners is only 6%. This interest according to Eastern Shipping shall be computed from the time of the filing of
the complaint. However, once the judgment becomes final and executory, the "interim period from the finality of
judgment awarding a monetary claim and until payment thereof, is deemed to be equivalent to a forbearance of
credit." Thus, in accordance with the pronouncement in Eastern Shipping, the rate of 12% per annum should be
imposed, to be computed from the time the judgment becomes final and executory until fully satisfied.
It must be emphasized, however, that our holding in this case does not preclude PNB from proving and recovering
in a proper proceeding any deficiency in the amount of petitioners loan obligation that may have accrued after the
date of the auction sale.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 12 April 2005 is MODIFIED in that the
PNB is directed to return to the petitioners the amount of P2,101,185.08 with interest computed at 6% per annum
from the time of the filing of the complaint until its full payment before finality of judgment. Thereafter, if the
amount adjudged remains unpaid, the interest rate shall be 12% per annum computed from the time the judgment
became final and executory until fully satisfied. Costs against private respondent.
SO ORDERED.

Page 107 of 123

G.R. No. 176019


January 12, 2011
BPI FAMILY SAVINGS BANK, INC., Petitioner, vs. GOLDEN POWER DIESEL SALES CENTER, INC. and RENATO
C. TAN, Respondents.
The Case
This is a petition for review1 of the 13 March 2006 Decision2 and 19 December 2006 Resolution3 of the Court of
Appeals in CA-G.R. SP No. 78626. In its 13 March 2006 Decision, the Court of Appeals denied petitioner BPI Family
Savings Bank, Inc.s (BPI Family) petition for mandamus and certiorari. In its 19 December 2006 Resolution, the
Court of Appeals denied BPI Familys motion for reconsideration.
The Facts
On 26 October 1994, CEDEC Transport, Inc. (CEDEC) mortgaged two parcels of land covered by Transfer Certificate
of Title (TCT) Nos. 134327 and 134328 situated in Malibay, Pasay City, including all the improvements thereon
(properties), in favor of BPI Family to secure a loan of P6,570,000. On the same day, the mortgage was duly
annotated on the titles under Entry No. 94-2878. On 5 April and 27 November 1995, CEDEC obtained from BPI
Family additional loans of P2,160,000 and P1,140,000, respectively, and again mortgaged the same properties.
These latter mortgages were duly annotated on the titles under Entry Nos. 95-6861 and 95-11041, respectively, on
the same day the loans were obtained.
Despite demand, CEDEC defaulted in its mortgage obligations. On 12 October 1998, BPI Family filed with the exofficio sheriff of the Regional Trial Court of Pasay City (RTC) a verified petition for extrajudicial foreclosure of real
estate mortgage over the properties under Act No. 3135, as amended. 4
On 10 December 1998, after due notice and publication, the sheriff sold the properties at public auction. BPI Family,
as the highest bidder, acquired the properties for P13,793,705.31. On 14 May 1999, the Certificate of Sheriffs Sale,
dated 24 February 1999, was duly annotated on the titles covering the properties.
On 15 May 1999, the one-year redemption period expired without CEDEC redeeming the properties. Thus, the titles
to the properties were consolidated in the name of BPI Family. On 13 September 2000, the Registry of Deeds of
Pasay City issued new titles, TCT Nos. 142935 and 142936, in the name of BPI Family.
However, despite several demand letters, CEDEC refused to vacate the properties and to surrender possession to
BPI Family. On 31 January 2002, BPI Family filed an Ex-Parte Petition for Writ of Possession over the properties with
Branch 114 of the Regional Trial Court of Pasay City (trial court). In its 27 June 2002 Decision, the trial court granted
BPI Familys petition.5 On 12 July 2002, the trial court issued the Writ of Possession.
On 29 July 2002, respondents Golden Power Diesel Sales Center, Inc. and Renato C. Tan 6 (respondents) filed a
Motion to Hold Implementation of the Writ of Possession. 7 Respondents alleged that they are in possession of the
properties which they acquired from CEDEC on 10 September 1998 pursuant to the Deed of Absolute Sale with
Assumption of Mortgage (Deed of Sale).8 Respondents argued that they are third persons claiming rights adverse to
CEDEC, the judgment obligor and they cannot be deprived of possession over the properties. Respondents also
disclosed that they filed a complaint before Branch 111 of the Regional Trial Court of Pasay City, docketed as Civil
Case No. 99-0360, for the cancellation of the Sheriffs Certificate of Sale and an order to direct BPI Family to honor
and accept the Deed of Absolute Sale between CEDEC and respondents. 9
On 12 September 2002, the trial court denied respondents motion. 10 Thereafter, the trial court issued an alias writ
of possession which was served upon CEDEC and all other persons claiming rights under them.
However, the writ of possession expired without being implemented. On 22 January 2003, BPI Family filed an Urgent
Ex-Parte Motion to Order the Honorable Branch Clerk of Court to Issue Alias Writ of Possession. In an Order dated 27
January 2003, the trial court granted BPI Familys motion.
Before the alias writ could be implemented, respondent Renato C. Tan filed with the trial court an Affidavit of Third
Party Claim11 on the properties. Instead of implementing the writ, the sheriff referred the matter to the trial court for
resolution.
On 11 February 2003, BPI Family filed an Urgent Motion to Compel Honorable Sheriff and/or his Deputy to Enforce
Writ of Possession and to Break Open the properties. In its 7 March 2003 Resolution, the trial court denied BPI
Familys motion and ordered the sheriff to suspend the implementation of the alias writ of possession. 12 According
to the trial court, "the order granting the alias writ of possession should not affect third persons holding adverse
rights to the judgment obligor." The trial court admitted that in issuing the first writ of possession it failed to take
into consideration respondents complaint before Branch 111 claiming ownership of the property. The trial court
also noted that respondents were in actual possession of the properties and had been updating the payment of
CEDECs loan balances with BPI Family. Thus, the trial court found it necessary to amend its 12 September 2002
Order and suspend the implementation of the writ of possession until Civil Case No. 99-0360 is resolved.
BPI Family filed a motion for reconsideration. In its 20 June 2003 Resolution, the trial court denied the motion. 13
BPI Family then filed a petition for mandamus and certiorari with application for a temporary restraining order or
preliminary injunction before the Court of Appeals. BPI Family argued that the trial court acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when it ordered the suspension of the implementation of the
alias writ of possession. According to BPI Family, it was the ministerial duty of the trial court to grant the writ of
possession in its favor considering that it was now the owner of the properties and that once issued, the writ should
be implemented without delay.
The Court of Appeals dismissed BPI Familys petition. The dispositive portion of the 13 March 2006 Decision reads:
Page 108 of 123

WHEREFORE, the instant Petition for Writ of Mandamus and Writ of Certiorari with Application for a TRO and/or
Preliminary Injunction is hereby DENIED. The twin Resolutions dated March 7, 2003 and June 20, 2003, both issued
by the public respondent in LRC Case No. 02-0003, ordering the sheriff to suspend the implementation of the Alias
Writ of Possession issued in favor of the petitioner, and denying its Urgent Omnibus Motion thereof, respectively,
are hereby AFFIRMED.
SO ORDERED.14
BPI Family filed a motion for reconsideration. In its 19 December 2006 Resolution, the Court of Appeals denied the
motion.
The Ruling of the Court of Appeals
The Court of Appeals ruled that the trial court did not commit grave abuse of discretion in suspending the
implementation of the alias writ of possession because respondents were in actual possession of the properties and
are claiming rights adverse to CEDEC, the judgment obligor. According to the Court of Appeals, the principle that
the implementation of the writ of possession is a mere ministerial function of the trial court is not without exception.
The Court of Appeals held that the obligation of the court to issue an ex parte writ of possession in favor of the
purchaser in an extrajudicial foreclosure sale ceases to be ministerial once it appears that there is a third party in
possession of the property who is claiming a right adverse to that of the debtor or mortgagor.
The Issues
BPI Family raises the following issues:
A.
The Honorable Court of Appeals seriously erred in upholding the finding of the Honorable Regional Trial Court that
despite the fact that private respondents merely stepped into the shoes of mortgagor CEDEC, being the vendee of
the properties in question, they are categorized as third persons in possession thereof who are claiming a right
adverse to that of the debtor/mortgagor CEDEC.
B.
The Honorable Court of Appeals gravely erred in sustaining the aforementioned twin orders suspending the
implementation of the writ of possession on the ground that the annulment case filed by private respondents is still
pending despite the established ruling that pendency of a case questioning the legality of a mortgage or auction
sale cannot be a ground for the non-issuance and/or non-implementation of a writ of possession. 15
The Ruling of the Court
The petition is meritorious.
BPI Family argues that respondents cannot be considered "a third party who is claiming a right adverse to that of
the debtor or mortgagor" because respondents, as vendee, merely stepped into the shoes of CEDEC, the vendor
and judgment obligor. According to BPI Family, respondents are mere extensions or successors-in-interest of CEDEC.
BPI Family also argues that the pendency of an action questioning the validity of a mortgage or auction sale cannot
be a ground to oppose the implementation of a writ of possession.
On the other hand, respondents insist that they are third persons who claim rights over the properties adverse to
CEDEC. Respondents argue that the obligation of the court to issue an ex parte writ of possession in favor of the
purchaser in an extrajudicial foreclosure sale ceases to be ministerial once it appears that there is a third party in
possession of the property who is claiming a right adverse to that of the judgment obligor.
In extrajudicial foreclosures of real estate mortgages, the issuance of a writ of possession is governed by Section 7
of Act No. 3135, as amended, which provides:
SECTION 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First
Instance (Regional Trial Court) of the province or place where the property or any part thereof is situated, to give
him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the
property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without
violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under
oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the property is
registered, or in special proceedings in the case of property registered under the Mortgage Law or under section
one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage
duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk
of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight
hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue,
addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.
This procedure may also be availed of by the purchaser seeking possession of the foreclosed property bought at the
public auction sale after the redemption period has expired without redemption having been made. 16
In China Banking Corporation v. Lozada,17 we ruled:
Page 109 of 123

It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is
not redeemed during the period of one year after the registration of the sale. As such, he is entitled to the
possession of the said property and can demand it at any time following the consolidation of ownership in his name
and the issuance to him of a new transfer certificate of title. The buyer can in fact demand possession of the land
even during the redemption period except that he has to post a bond in accordance with Section 7 of Act No. 3135,
as amended. No such bond is required after the redemption period if the property is not redeemed. Possession of
the land then becomes an absolute right of the purchaser as confirmed owner. Upon proper application
and proof of title, the issuance of the writ of possession becomes a ministerial duty of the court.18
(Emphasis supplied)
Thus, the general rule is that a purchaser in a public auction sale of a foreclosed property is entitled to a writ of
possession and, upon an ex parte petition of the purchaser, it is ministerial upon the trial court to issue the writ of
possession in favor of the purchaser.
There is, however, an exception. Section 33, Rule 39 of the Rules of Court provides:
Section 33. Deed and possession to be given at expiration of redemption period; by whom executed or given. - x x x
Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to and acquire
all the rights, title, interest and claim of the judgment obligor to the property as of the time of the levy. The
possession of the property shall be given to the purchaser or last redemptioner by the same officer unless a third
party is actually holding the property adversely to the judgment obligor. (Emphasis supplied)
Therefore, in an extrajudicial foreclosure of real property, when the foreclosed property is in the possession of a
third party holding the same adversely to the judgment obligor, the issuance by the trial court of a writ of
possession in favor of the purchaser of said real property ceases to be ministerial and may no longer be done ex
parte.19 The procedure is for the trial court to order a hearing to determine the nature of the adverse possession. 20
For the exception to apply, however, the property need not only be possessed by a third party, but also held by the
third party adversely to the judgment obligor.
In this case, BPI Family invokes the general rule that they are entitled to a writ of possession because respondents
are mere successors-in-interest of CEDEC and do not possess the properties adversely to CEDEC. Respondents, on
the other hand, assert the exception and insist that they hold the properties adversely to CEDEC and that their
possession is a sufficient obstacle to the ex parte issuance of a writ of possession in favor of BPI Family.
Respondents argument fails to persuade the Court. It is clear that respondents acquired possession over the
properties pursuant to the Deed of Sale which provides that for P15,000,000 CEDEC will "sell, transfer and convey"
to respondents the properties "free from all liens and encumbrances excepting the mortgage as may be subsisting
in favor of the BPI FAMILY SAVINGS BANK."21 Moreover, the Deed of Sale provides that respondents bind themselves
to assume "the payment of the unpaid balance of the mortgage indebtedness of the VENDOR (CEDEC) amounting
to P7,889,472.48, as of July 31, 1998, in favor of the aforementioned mortgagee (BPI Family) by the mortgage
instruments and does hereby further agree to be bound by the precise terms and conditions therein contained." 22
In Roxas v. Buan,23 we ruled:
It will be recalled that Roxas possession of the property was premised on its alleged sale to him by Valentin for the
amount of P100,000.00. Assuming this to be true, it is readily apparent that Roxas holds title to and possesses the
property as Valentins transferee. Any right he has to the property is necessarily derived from that of Valentin. As
transferee, he steps into the latters shoes. Thus, in the instant case, considering that the property had already
been sold at public auction pursuant to an extrajudicial foreclosure, the only interest that may be transferred by
Valentin to Roxas is the right to redeem it within the period prescribed by law. Roxas is therefore the successor-ininterest of Valentin, to whom the latter had conveyed his interest in the property for the purpose of redemption.
Consequently, Roxas occupancy of the property cannot be considered adverse to Valentin. 24
In this case, respondents possession of the properties was premised on the sale to them by CEDEC for the amount
of P15,000,000. Therefore, respondents hold title to and possess the properties as CEDECs transferees and any
right they have over the properties is derived from CEDEC. As transferees of CEDEC, respondents merely stepped
into CEDECs shoes and are necessarily bound to acknowledge and respect the mortgage CEDEC had earlier
executed in favor of BPI Family.25 Respondents are the successors-in-interest of CEDEC and thus, respondents
occupancy over the properties cannot be considered adverse to CEDEC.
Moreover, in China Bank v. Lozada,26 we discussed the meaning of "a third party who is actually holding the
property adversely to the judgment obligor." We stated:
The exception provided under Section 33 of Rule 39 of the Revised Rules of Court contemplates a situation in which
a third party holds the property by adverse title or right, such as that of a co-owner, tenant or usufructuary. The coowner, agricultural tenant, and usufructuary possess the property in their own right, and they are not merely the
successor or transferee of the right of possession of another co-owner or the owner of the property. 27
In this case, respondents cannot claim that their right to possession over the properties is analogous to any of
these.1avvphi1 Respondents cannot assert that their right of possession is adverse to that of CEDEC when they
have no independent right of possession other than what they acquired from CEDEC. Since respondents are not
holding the properties adversely to CEDEC, being the latters successors-in-interest, there was no reason for the
trial court to order the suspension of the implementation of the writ of possession.
Furthermore, it is settled that a pending action for annulment of mortgage or foreclosure sale does not stay the
issuance of the writ of possession.28 The trial court, where the application for a writ of possession is filed, does not
Page 110 of 123

need to look into the validity of the mortgage or the manner of its foreclosure. 29 The purchaser is entitled to a writ
of possession without prejudice to the outcome of the pending annulment case. 30
In this case, the trial court erred in issuing its 7 March 2003 Order suspending the implementation of the alias writ
of possession. Despite the pendency of Civil Case No. 99-0360, the trial court should not have ordered the sheriff to
suspend the implementation of the writ of possession. BPI Family, as purchaser in the foreclosure sale, is entitled to
a writ of possession without prejudice to the outcome of Civil Case No. 99-0360.
WHEREFORE, we GRANT the petition. We SET ASIDE the 13 March 2006 Decision and the 19 December 2006
Resolution of the Court of Appeals in CA-G.R. SP No. 78626. We SET ASIDE the 7 March and 20 June 2003
Resolutions of the Regional Trial Court, Branch 114, Pasay City. We ORDER the sheriff to proceed with the
implementation of the writ of possession without prejudice to the outcome of Civil Case No. 99-0360.
SO ORDERED.

Page 111 of 123

G.R. No. 158755


June 18, 2012
SPOUSES FRANCISCO and MERCED RABAT, Petitioners, vs. PHILIPPINE NATIONAL BANK, Respondent.
The inadequacy of the bid price in an extrajudicial foreclosure sale of mortgaged properties will not per se
invalidate the sale. Additionally, the foreclosing mortgagee is not precluded from recovering the deficiency should
the proceeds of the sale be insufficient to cover the entire debt.
Antecedents
The parties are before the Court a second time to thresh out an issue relating to the foreclosure sale of the
petitioners mortgaged properties. The first time was in G.R. No. 134406 entitled Philippine National Bank v.
Spouses Francisco and Merced Rabat, decided on November 15, 2000. 1 In G.R. No. 134406, the Court observed that

The RABATs did not appeal from the decision of the trial court. As a matter of fact, in their Appellees Brief filed with
the Court of Appeals they prayed that said decision be affirmed in toto. As against the RABATs the trial courts
findings of fact and conclusion are already settled and final. More specifically, they are deemed to have
unqualifiedly agreed with the trial court that the foreclosure proceedings were valid in all respects, except as to the
bid price.2
Accordingly, we extract the antecedent facts from the narrative of the decision in G.R. No. 134406, as follows:
On 25 August 1979, respondent spouses Francisco and Merced Rabat (hereafter RABATs) applied for a loan with
PNB. Subsequently, the RABATs were granted on 14 January 1980 a medium-term loan of P4.0 Million to mature
three years from the date of implementation.
On 28 January 1980, the RABATs signed a Credit Agreement and executed a Real Estate Mortgage over twelve (12)
parcels of land which stipulated that the loan would be subject to interest at the rate of 17% per annum, plus the
appropriate service charge and penalty charge of 3% per annum on any amount remaining unpaid or not renewed
when due.
On 25 September 1980, the RABATs executed another document denominated as "Amendment to the Credit
Agreement" purposely to increase the interest rate from 17% to 21% per annum, inclusive of service charge and a
penalty charge of 3% per annum to be imposed on any amount remaining unpaid or not renewed when due. They
also executed another Real Estate Mortgage over nine (9) parcels of land as additional security for their mediumterm loan of Four Million (P4.0 M). These parcels of land are agricultural, commercial and residential lots situated in
Mati, Davao Oriental.
The several availments of the loan accommodation on various dates by the RABATs reached the aggregate amount
of THREE MILLION FIVE HUNDRED SEVENTEEN THOUSAND THREE HUNDRED EIGHTY (P3,517,380), as evidenced by
the several promissory notes, all of which were due on 14 March 1983.
The RABATs failed to pay their outstanding balance on due date.
In its letter of 24 July 1986, in response to the letter of the RABATs of 16 June 1986 requesting for more time within
which to arrive at a viable proposal for the settlement of their account, PNB informed the RABATs that their request
has been denied and gave the RABATs until 30 August 1986 to settle their account. The PNB sent the letter to 197
Wilson Street, San Juan, Metro Manila.
For failure of the RABATs to pay their obligation, the PNB filed a petition for the extrajudicial foreclosure of the real
estate mortgage executed by the RABATs. After due notice and publication, the mortgaged parcels of land were sold
at a public auction held on 20 February 1987 and 14 April 1987. The PNB was the lone and highest bidder with a bid
of P3,874,800.00.
As the proceeds of the public auction were not enough to satisfy the entire obligation of the RABATs, the PNB sent
anew demand letters. The letter dated 15 November 1990 was sent to the RABATs at 197 Wilson Street, San Juan,
Metro Manila; while another dated 30 August 1991 was sent to the RABATs at 197 Wilson Street, Greenhills, San
Juan, Metro Manila, and also in Mati, Davao Oriental.
Upon failure of the RABATs to comply with the demand to settle their remaining outstanding obligation which then
stood at P14,745,398.25, including interest, penalties and other charges, PNB eventually filed on 5 May 1992 a
complaint for a sum of money before the Regional Trial Court of Manila. The case was docketed as Civil Case No. 9261122, which was assigned to Branch 14 thereof.
The RABATs filed their answer with counterclaim on 28 July 1992 to which PNB filed its Reply and Answer to
Counterclaim. On 2 January 1993, the RABATs filed an amended answer. The RABATs admitted their loan availments
from PNB and their default in the payment thereof. However, they assailed the validity of the auction sales for want
of notice to them before and after the foreclosure sales.
They further added that as residents of Mati, Davao Oriental since 1970 up to the present, they never received any
notice nor heard about the foreclosure proceeding in spite of the claim of PNB that the foreclosure proceeding had
been duly published in the San Pedro Times, which is not a newspaper of general circulation.
The RABATs likewise averred that the bid price was grossly inadequate and unconscionable.

Page 112 of 123

Lastly, the RABATs attacked the validity of the accumulated interest and penalty charges because since their
properties were sold in 1987, and yet PNB waited until 1992 before filing the case. Consequently, the RABATs
contended that they should not be made to suffer for the interest and penalty charges from May 1987 up to the
present. Otherwise, PNB would be allowed to profit from its questionable scheme.
The PNB filed on 5 February 1993 its Reply to the Amended Answer and Answer to Counterclaim. 3
On June 14, 1994, the Regional Trial Court, Branch 14, in Manila (RTC) rendered its decision in Civil Case No. 9261122,4 disposing thus:
WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered dismissing the complaint.
On the counterclaim, the two (2) auction sales of the mortgaged properties are hereby set aside and ordering the
plaintiff to reconvey to the defendants the remaining properties after the sale [of] sufficient properties for the
satisfaction of the obligation of the defendants.
The parties will bear their respective cost.
So ordered.
Only PNB appealed to the CA (CA-G.R. CV No. 49800), assigning the following two errors to the RTC, 5 to wit:
I
WHETHER OR NOT THE TRIAL COURT ERRED IN NULLIFYING THE SHERIFF'S AUCTION SALE ON THE GROUND
THAT THE PNBS WINNING BID IS VERY LOW.
II
WHETHER OR NOT THE TRIAL COURT ERRED IN RULING THAT THE DEFENDANTS-APPELLEES ARE NOT
LIABLE TO PAY INTEREST AND PENALTY CHARGES AFTER THE AUCTION SALES UP TO THE FILING OF THIS
CASE.
On their part, the Spouses Rabat simply urged in their appellees brief that the decision of the RTC be entirely
affirmed.6
On June 29, 1998, the CA upheld the RTCs decision to nullify the foreclosure sales but rested its ruling upon a
different ground,7 in that the Spouses Rabat could not have known of the foreclosure sales because they had not
actually received personal notices about the foreclosure proceedings. The CA concluded:
An examination of the exhibits show that the defendant-appellees given address is Mati, Davao Oriental and not
197 Wilson Street, Greenhills, San Juan, Metro Manila as alleged by the plaintiff-appellant (Exhibit C to J, pp. 208,
217, 220, 229, 236-239, Records). Records further show that all subsequent communications by plaintiff-appellant
was sent to defendant-appellees address at Wilson Street, Greenhills, San Juan. This was the very reason why
defendant-appellees were not aware of the foreclosure proceedings.
As correctly found out by the trial court, there is a need for the setting aside of the two (2) auction sales hence,
there is yet no deficiency judgment to speak of.
WHEREFORE, the decision of the trial court dated 14 June 1994, is hereby affirmed in toto.
SO ORDERED.
PNB appealed in due course (G.R. No. 134406),8 positing:
WHETHER OR NOT THE COURT OF APPEALS MAY REVIEW AND PASS UPON THE TRIAL COURTS FINDING AND
CONCLUSION ON AN ISSUE WHICH WAS NEVER RAISED ON APPEAL, AND, THEREFORE, HAD ATTAINED FINALITY.
1. THE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT DECIDED AND RESOLVED A QUESTION OR ISSUE NOT RAISED IN PETITIONER PNBS
APPEAL;
2. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT REVERSED THE FINDING
AND CONCLUSION OF THE TRIAL COURT ON AN ISSUE WHICH HAD ALREADY ATTAINED FINALITY.
PNB argued that it had not raised the issue of lack of notice about the foreclosure sales because the fact that the
Spouses Rabat had not appealed the RTCs ruling as regards the lack of notice but had in fact prayed for the
affirmance of the RTCs judgment had rendered final the RTCs rejection of their allegation of lack of personal notice;
and that, consequently, the CA had committed grave abuse of discretion in still resolving the issue of lack of notice
despite its not having been raised during the appeal. 9
On November 15, 2000, the Court promulgated its decision in G.R. No. 134406, decreeing:

Page 113 of 123

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals of 29 July 1998 in CA-G.R. CV No. 49800
is hereby SET ASIDE. The Court of Appeals is directed to DECIDE, with reasonable dispatch, CA-G.R. CV No. 49800
on the basis of the errors raised by petitioner Philippine National Bank in its Appellants Brief.
No pronouncement as to costs.
SO ORDERED.10
To conform to the decision in G.R. No. 134406, the CA amended its decision on January 24, 2003 by resolving the
errors specifically assigned by PNB in its appellants brief. 11 The CA nonetheless affirmed the RTCs decision,
declaring that the bid price had been very low and observing that the mortgaged properties might have been sold
for a higher value had PNB first conducted a reappraisal of the properties.
Upon PNBs motion for reconsideration, however, the CA promulgated its questioned second amended decision on
March 26, 2003,12 holding and ruling as follows:
After a thorough and conscientious review of the records and relevant laws and jurisprudence, We find the motion
for reconsideration to be meritorious.
While indeed no evidence was presented by appellant as to whether a reappraisal of the mortgaged properties was
conducted by it before submitting the bid price of P 3,874,800.00 at the auction sale, said amount approximates the
loan value under its original appraisal in 1980, which was P 4 million.
There is no dispute that mere inadequacy of price per se will not set aside a judicial sale of real property.
Nevertheless, where the inadequacy of the price is purely shocking to the conscience such that the mind revolts at
it and such that a reasonable man would neither directly nor indirectly be likely to consent to it, the sale shall be
declared null and void. Said rule, however, does not strictly apply in the case of extrajudicial foreclosure sales so
that when a supposed "unconscionably low price" paid by the bank-mortgagee for the mortgaged properties at the
public auction sale is assailed, the sale is not thereby readily set aside on account of such low purchase price. It is
well-settled that alleged gross inadequacy of price is not material "when the law gives the owner the right to
redeem as when a sale is made at a public auction, upon the theory that the lesser the price the easier it is for the
owner to effect the redemption." In fact, the property may be sold for less than its fair market value.
Here, it may be that after the lapse of seven (7) years, the mortgaged properties may have indeed appreciated in
value but under the general rule cited above which had been consistently applied to extrajudicial foreclosure sales.
We are not inclined to invalidate the auction sale of appellees mortgaged properties solely on the alleged gross
inadequacy of purchase price of P 3,874,800.00 which is actually almost the equivalent of the loan value of
appellees twenty-one (21) parcels of land under the "Real Estate Mortgage" executed in favor of appellant PNB in
1980. It has been held that no such disadvantage is suffered by the mortgagor as he stands to gain with a reduced
price because he possesses the right of redemption. Thus, the re-appraisal of the mortgaged properties resulting in
the appellant PNBs bid price of approximately the original loan value of their mortgaged properties is beneficial
rather than harmful considering the right of redemption granted to appellees under the law. The claim of financial
hardship or losses in their business is not an excuse for appellees-mortgagors to evade their clear obligation to the
bank-mortgagee.
Further, the fact that the mortgaged property is sold at an amount less than its actual market value should not
militate against the right of appellant PNB to the recovery of the deficiency in the loan obligation of appellees. Our
Supreme Court had ruled in several cases that in extrajudicial foreclosure of mortgage, where the proceeds of the
sale are insufficient to pay the debt, the mortgagee has the right to recover the deficiency from the debtor. A claim
of deficiency arising from the extrajudicial foreclosure sale is allowed. As to appellees claim of allegedly excessive
penalty interest charges, the same is without merit. We note that the promissory notes expressly provide for a
penalty charge of 3% per annum to be imposed on any unpaid amount on due date.
WHEREFORE, premises considered, the present motion for reconsideration is hereby GRANTED. Consequently, Our
Amended Decision of January 24, 2003 is hereby SET ASIDE and a new one is hereby entered GRANTING the appeal
of plaintiff PNB. The decision appealed from in Civil Case No. 92-61122 is hereby REVERSED and SET ASIDE.
Judgment is hereby rendered ordering the appellees to pay, jointly and severally, to appellant PNB: (1) the amount
of P 14,745,398.25 plus accrued interest, service charge and penalty charge of 3% per annum from February 29,
1992 until the same shall have been fully paid; (2) Ten Percent (10%) of the total amount due as attorneys fees;
and (3) the costs of suit.
No pronouncement as to costs.
SO ORDERED.13
The Spouses Rabat thereafter moved for the reconsideration of the second amended decision, but the CA denied
their motion.14
Hence, this appeal by the Spouses Rabat.
Issues
The Spouses Rabat frame the following issues for this appeal, thuswise:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF THE SUBJECT AUCTION
SALES AND ADJUDGING PAYMENT OF DEFICIENCY SUM, INTERESTS, PENALTY AND SERVICE CHARGES AND
Page 114 of 123

ATTORNEYS FEES, IN COMPLETE AND ABSOLUTE DISREGARD OF ITS EARLIER PRONOUNCEMENTS, THE
ARGUMENTS OF HEREIN PETITIONERS AND EVIDENCE BORNE IN THE RECORDS OF THE INSTANT CASE.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DEPARTING FROM ITS FINDING OF FACTS AND
CONCLUSIONS OF LAW AS STATED IN THE EARLIER RENDERED FIRST AMENDED DECISION DATED 24
JANUARY 2003.15
The Spouses Rabat insist that the CAs reversal of the amended decision was unjustified. They pray that the
amended decision of the CA (which affirmed the RTCs judgment) be reinstated. They contend that PNB was not
entitled to recover any deficiency due to the invalidity of the forced sales. 16
In its comment,17 PNB counters that the petition for review does not raise a valid question of law; and that the CAs
second amended decision was regularly promulgated because the CA thereby acted well within its right to correct
itself considering that the amended decision did not yet attain finality under the pertinent rules and jurisprudence.
Accordingly, the Court must pass upon and resolve three distinct issues. The first is whether the inadequacy of the
bid price of PNB invalidated the forced sale of the properties. The second is whether PNB was entitled to recover
any deficiency from the Spouses Rabat. The third is whether the CA validly rendered its second amended decision.
Ruling
The appeal has no merit.
Anent the first issue, we rule against the Spouses Rabat. We have consistently held that the inadequacy of the bid
price at a forced sale, unlike that in an ordinary sale, is immaterial and does not nullify the sale; in fact, in a forced
sale, a low price is considered more beneficial to the mortgage debtor because it makes redemption of the property
easier.18
In Bank of the Philippine Islands, etc. v. Reyes, 19 the Court discoursed on the effect of the inadequacy of the price in
a forced sale, stating:
Throughout a long line of jurisprudence, we have declared that unlike in an ordinary sale, inadequacy of the price at
a forced sale is immaterial and does not nullify a sale since, in a forced sale, a low price is more beneficial to the
mortgage debtor for it makes redemption of the property easier.
In the early case of The National Loan and Investment Board v. Meneses, we also had the occasion to state that:
As to the inadequacy of the price of the sale, this court has repeatedly held that the fact that a property is sold
at public auction for a price lower than its alleged value, is not of itself sufficient to annul said sale, where
there has been strict compliance with all the requisites marked out by law to obtain the highest
possible price, and where there is no showing that a better price is obtainable. (Government of the
Philippines vs. De Asis, G. R. No. 45483, April 12, 1939; Guerrero vs. Guerrero, 57 Phil., 442; La Urbana vs. Belando,
54 Phil., 930; Bank of the Philippine Islands v . Green, 52 Phil., 491.) (Emphases supplied.)
In Hulst v. PR Builders, Inc., we further elaborated on this principle:
[G]ross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a
transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks ones
conscience as to justify the courts to interfere; such does not follow when the law gives the owner the right to
redeem as when a sale is made at public auction, upon the theory that the lesser the price, the easier it is for the
owner to effect redemption. When there is a right to redeem, inadequacy of price should not be material
because the judgment debtor may re-acquire the property or else sell his right to redeem and thus
recover any loss he claims to have suffered by reason of the price obtained at the execution sale.
Thus, respondent stood to gain rather than be harmed by the low sale value of the auctioned
properties because it possesses the right of redemption. x x x (Emphasis supplied.)
It bears also to stress that the mode of forced sale utilized by petitioner was an extrajudicial foreclosure of real
estate mortgage which is governed by Act No. 3135, as amended. An examination of the said law reveals nothing to
the effect that there should be a minimum bid price or that the winning bid should be equal to the appraised value
of the foreclosed property or to the amount owed by the mortgage debtor. What is clearly provided, however, is
that a mortgage debtor is given the opportunity to redeem the foreclosed property "within the term of one year
from and after the date of sale." In the case at bar, other than the mere inadequacy of the bid price at the
foreclosure sale, respondent did not allege any irregularity in the foreclosure proceedings nor did she prove that a
better price could be had for her property under the circumstances.
At any rate, we consider it notable enough that PNBs bid price of P 3,874,800.00 might not even be said to be
outrageously low as to be shocking to the conscience. As the CA cogently noted in the second amended decision, 20
that bid price was almost equal to both the P 4,000,000.00 applied for by the Spouses Rabat as loan, and to the
total sum of P 3,517,380.00 of their actual availment from PNB.
Resolving the second issue, we rule that PNB had the legal right to recover the deficiency amount. In Philippine
National Bank v. Court of Appeals,21 we held that:
xxx it is settled that if the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of the
mortgage, the mortgagee is entitled to claim the deficiency from the debtor. For when the legislature intends to
deny the right of a creditor to sue for any deficiency resulting from foreclosure of security given to guarantee an
Page 115 of 123

obligation it expressly provides as in the case of pledges [Civil Code, Art. 2115] and in chattel mortgages of a thing
sold on installment basis [Civil Code, Art. 1484(3)]. Act No. 3135, which governs the extrajudicial foreclosure of
mortgages, while silent as to the mortgagees right to recover, does not, on the other hand, prohibit recovery of
deficiency. Accordingly, it has been held that a deficiency claim arising from the extrajudicial foreclosure is
allowed.22
Indeed, as we indicated in Prudential Bank v. Martinez, 23 the fact that the mortgaged property was sold at an
amount less than its actual market value should not militate against the right to such recovery. 24
There should be no question that PNB was legally entitled to recover the penalty charge of 3% per annum and
attorneys fees equivalent to 10% of the total amount due. The documents relating to the loan and the real estate
mortgage showed that the Spouses Rabat had expressly conformed to such additional liabilities; hence, they could
not now insist otherwise. To be sure, the law authorizes the contracting parties to make any stipulations in their
covenants provided the stipulations are not contrary to law, morals, good customs, public order or public policy. 25
Equally axiomatic are that a contract is the law between the contracting parties, and that they have the autonomy
to include therein such stipulations, clauses, terms and conditions as they may want to include. 26 Inasmuch as the
Spouses Rabat did not challenge the legitimacy and efficacy of the additional liabilities being charged by PNB, they
could not now bar PNB from recovering the deficiency representing the additional pecuniary liabilities that the
proceeds of the forced sales did not cover.
Lastly, we uphold the CAs promulgation of the second amended decision.1wphi1 Verily, all courts of law have the
unquestioned power to alter, modify, or set aside their decisions before they become final and unalterable. 27 A
judgment that has attained finality becomes immutable and unalterable, and may thereafter no longer be modified
in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it will
be made by the court that rendered it or by the highest court of the land. 28 The reason for the rule of immutability is
that if, on the application of one party, the court could change its judgment to the prejudice of the other, the court
could thereafter, on application of the latter, again change the judgment and continue this practice indefinitely. 29
The equity of a particular case must yield to the overmastering need of certainty and unalterability of judicial
pronouncements.30 The doctrine of immutability and inalterability of a final judgment has a two-fold purpose,
namely: (a) to avoid delay in the administration of justice and, thus, procedurally, to make orderly the discharge of
judicial business; and (b) to put an end to judicial controversies, at the risk of occasional errors, which is precisely
why courts exist. Indeed, controversies cannot drag on indefinitely; the rights and obligations of every litigant must
not hang in suspense for an indefinite period of time. 31 As such, the doctrine of immutability is not a mere
technicality to be easily brushed aside, but a matter of public policy as well as a time-honored principle of
procedural law.
It is no different herein. The amended decision that favored the Spouses Rabat would have attained finality only
after the lapse of 15 days from notice thereof to the parties without a motion for reconsideration being timely filed
or an appeal being seasonably taken.32 Had that happened, the amended decision might have become final and
immutable. However, considering that PNB timely filed its motion for reconsideration vis--vis the amended
decision, the CAs reversal of the amended decision and its promulgation of the second amended decision were
valid and proper.
WHEREFORE, we AFFIRM the SECOND AMENDED DECISION promulgated on March 26, 2003 in CA-G.R. CV No.
49800 entitled Philippine National Bank v. Spouses Francisco and Merced Rabat.
The petitioners shall pay the costs of suit.
SO ORDERED.

Page 116 of 123

G.R. No. 169190


February 11, 2010
CUA LAI CHU, CLARO G. CASTRO, and JUANITA CASTRO, Petitioners, vs. HON. HILARIO L. LAQUI, Presiding
Judge, Regional Trial Court, Branch 218, Quezon City and PHILIPPINE BANK OF COMMUNICATION,
Respondents.
The Case
This is a petition for review1 of the 29 April 2005 and 4 August 2005 Resolutions2 of the Court of Appeals in CA-G.R.
SP No. 88963. In its 29 April 2005 Resolution, the Court of Appeals dismissed the petition for certiorari 3 of petitioner
spouses Claro G. Castro and Juanita Castro and petitioner Cua Lai Chu (petitioners). In its 4 August 2005 Resolution,
the Court of Appeals denied petitioners motion for reconsideration.
The Facts
In November 1994, petitioners obtained a loan in the amount of P3,200,000 from private respondent Philippine
Bank of Communication. To secure the loan, petitioners executed in favor of private respondent a Deed of Real
Estate Mortgage4 over the property of petitioner spouses covered by Transfer Certificate of Title No. 22990. In
August 1997, petitioners executed an Amendment to the Deed of Real Estate Mortgage 5 increasing the amount of
the loan by P1,800,000, bringing the total loan amount to P5,000,000.
For failure of petitioners to pay the full amount of the outstanding loan upon demand, 6 private respondent applied
for the extrajudicial foreclosure of the real estate mortgage. 7 Upon receipt of a notice8 of the extrajudicial
foreclosure sale, petitioners filed a petition to annul the extrajudicial foreclosure sale with a prayer for temporary
restraining order (TRO). The petition for annulment was filed in the Regional Trial Court of Quezon City and docketed
as Q-02-46184.9
The extrajudicial foreclosure sale did not push through as originally scheduled because the trial court granted
petitioners prayer for TRO. The trial court subsequently lifted the TRO and reset the extrajudicial foreclosure sale
on 29 May 2002. At the foreclosure sale, private respondent emerged as the highest bidder. A certificate of sale 10
was executed on 4 June 2002 in favor of private respondent. On 7 June 2002, the certificate of sale was annotated
as Entry No. 185511 on TCT No. 22990 covering the foreclosed property.
After the lapse of the one-year redemption period, private respondent filed in the Registry of Deeds of Quezon City
an affidavit of consolidation to consolidate its ownership and title to the foreclosed property. Forthwith, on 8 July
2003, the Register of Deeds cancelled TCT No. 22990 and issued in its stead TCT No. 251835 12 in the name of
private respondent.
On 18 August 2004, private respondent applied for the issuance of a writ of possession of the foreclosed property. 13
Petitioners filed an opposition.14 The trial court granted private respondents motion for a declaration of general
default and allowed private respondent to present evidence ex parte. The trial court denied petitioners notice of
appeal.
Undeterred, petitioners filed in the Court of Appeals a petition for certiorari. The appellate court dismissed the
petition. It also denied petitioners motion for reconsideration.
The Orders of the Trial Court
The 8 October 2004 Order15 granted private respondents motion for a declaration of general default and allowed
private respondent to present evidence ex parte. The 6 January 2005 Order16 denied petitioners motion for
reconsideration of the prior order. The 24 February 2005 Order 17 denied petitioners notice of appeal.
The Ruling of the Court of Appeals
The Court of Appeals dismissed on both procedural and substantive grounds the petition for certiorari filed by
petitioners. The appellate court noted that the counsel for petitioners failed to indicate in the petition the updated
PTR Number, a ground for outright dismissal of the petition under Bar Matter No. 1132. Ruling on the merits, the
appellate court held that a proceeding for the issuance of a writ of possession is ex parte in nature. As such,
petitioners right to due process was not violated even if they were not given a chance to file their opposition. The
appellate court also ruled that there was no violation of the rule against forum shopping since the application for
the issuance of a writ of possession is not affected by a pending case questioning the validity of the extrajudicial
foreclosure sale.
The Issue
Petitioners raise the question of whether the writ of possession was properly issued despite the pendency of a case
questioning the validity of the extrajudicial foreclosure sale and despite the fact that petitioners were declared in
default in the proceeding for the issuance of a writ of possession.
The Courts Ruling
The petition has no merit.
Petitioners contend they were denied due process of law when they were declared in default despite the fact that
they had filed their opposition to private respondents application for the issuance of a writ of possession. Further,
petitioners point out that the issuance of a writ of possession will deprive them not only of the use and possession
of their property, but also of its ownership. Petitioners cite Bustos v. Court of Appeals 18 and Vda. De Legaspi v.
Page 117 of 123

Avendao19 in asserting that physical possession of the property should not be disturbed pending the final
determination of the more substantial issue of ownership. Petitioners also allege forum shopping on the ground that
the application for the issuance of a writ of possession was filed during the pendency of a case questioning the
validity of the extrajudicial foreclosure sale.
Private respondent, on the other hand, maintains that the application for the issuance of a writ of possession in a
foreclosure proceeding is ex parte in nature. Hence, petitioners right to due process was not violated even if they
were not given a chance to file their opposition. Private respondent argues that the issuance of a writ of possession
may not be stayed by a pending case questioning the validity of the extrajudicial foreclosure sale. It contends that
the former has no bearing on the latter; hence, there is no violation of the rule against forum shopping. Private
respondent asserts that there is no judicial determination involved in the issuance of a writ of possession; thus, the
same cannot be the subject of an appeal.
At the outset, we must point out that the authorities relied upon by petitioners are not in point and have no
application here. In Bustos v. Court of Appeals,20 the Court simply ruled that the issue of possession was intertwined
with the issue of ownership in the consolidated cases of unlawful detainer and accion reinvindicatoria. In Vda. De
Legaspi v. Avendao,21 the Court merely stated that in a case of unlawful detainer, physical possession should not
be disturbed pending the resolution of the issue of ownership. Neither case involved the right to possession of a
purchaser at an extrajudicial foreclosure of a mortgage.
Banco Filipino Savings and Mortgage Bank v. Pardo22 squarely ruled on the right to possession of a purchaser at an
extrajudicial foreclosure of a mortgage. This case involved a real estate mortgage as security for a loan obtained
from a bank. Upon the mortgagors default, the bank extrajudicially foreclosed the mortgage. At the auction sale,
the bank was the highest bidder. A certificate of sale was duly issued and registered. The bank then applied for the
issuance of a writ of possession, which the lower court dismissed. The Court reversed the lower court and held that
the purchaser at the auction sale was entitled to a writ of possession pending the lapse of the redemption period
upon a simple motion and upon the posting of a bond.1avvphi1
In Navarra v. Court of Appeals,23 the purchaser at an extrajudicial foreclosure sale applied for a writ of possession
after the lapse of the one-year redemption period. The Court ruled that the purchaser at an extrajudicial foreclosure
sale has a right to the possession of the property even during the one-year redemption period provided the
purchaser files an indemnity bond. After the lapse of the said period with no redemption having been made, that
right becomes absolute and may be demanded by the purchaser even without the posting of a bond. Possession
may then be obtained under a writ which may be applied for ex parte pursuant to Section 7 of Act No. 3135,24 as
amended by Act No. 4118,25 thus:
SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of
the province or place where the property or any part thereof is situated, to give him possession thereof during the
redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve
months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or
without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an
ex parte motion x x x and the court shall, upon approval of the bond, order that a writ of possession issue,
addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.
(Emphasis supplied)
In the present case, the certificate of sale of the foreclosed property was annotated on TCT No. 22990 on 7 June
2002. The redemption period thus lapsed on 7 June 2003, one year from the registration of the sale. 26 When private
respondent applied for the issuance of a writ of possession on 18 August 2004, the redemption period had long
lapsed. Since the foreclosed property was not redeemed within one year from the registration of the extrajudicial
foreclosure sale, private respondent had acquired an absolute right, as purchaser, to the writ of possession. It had
become the ministerial duty of the lower court to issue the writ of possession upon mere motion pursuant to Section
7 of Act No. 3135, as amended.
Moreover, once ownership has been consolidated, the issuance of the writ of possession becomes a ministerial duty
of the court, upon proper application and proof of title.27 In the present case, when private respondent applied for
the issuance of a writ of possession, it presented a new transfer certificate of title issued in its name dated 8 July
2003. The right of private respondent to the possession of the property was thus founded on its right of ownership.
As the purchaser of the property at the foreclosure sale, in whose name title over the property was already issued,
the right of private respondent over the property had become absolute, vesting in it the corollary right of
possession.
Petitioners are wrong in insisting that they were denied due process of law when they were declared in default
despite the fact that they had filed their opposition to the issuance of a writ of possession. The application for the
issuance of a writ of possession is in the form of an ex parte motion. It issues as a matter of course once the
requirements are fulfilled. No discretion is left to the court. 28
Petitioners cannot oppose or appeal the courts order granting the writ of possession in an ex parte proceeding. The
remedy of petitioners is to have the sale set aside and the writ of possession cancelled in accordance with Section 8
of Act No. 3135, as amended, to wit:
SEC. 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after
the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled,
specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in
accordance with the provisions hereof. x x x
Any question regarding the validity of the extrajudicial foreclosure sale and the resulting cancellation of the writ
may be determined in a subsequent proceeding as outlined in Section 8 of Act No. 3135, as amended. Such
Page 118 of 123

question should not be raised as a justification for opposing the issuance of a writ of possession since under Act No.
3135, as amended, the proceeding for this is ex parte.
Further, the right to possession of a purchaser at an extrajudicial foreclosure sale is not affected by a pending case
questioning the validity of the foreclosure proceeding. The latter is not a bar to the former. Even pending such latter
proceeding, the purchaser at a foreclosure sale is entitled to the possession of the foreclosed property. 29
Lastly, we rule that petitioners claim of forum shopping has no basis. Under Act No. 3135, as amended, a writ of
possession is issued ex parte as a matter of course upon compliance with the requirements. It is not a judgment on
the merits that can amount to res judicata, one of the essential elements in forum shopping. 30
The Court of Appeals correctly dismissed the petition for certiorari filed by petitioners for lack of merit.
WHEREFORE, we DENY the petition for review. We AFFIRM the 29 April 2005 and 4 August 2005 Resolutions of the
Court of Appeals in CA-G.R. SP No. 88963.
SO ORDERED.

Page 119 of 123

G.R. No. 154355

May 20, 2004

Spouses REMPSON SAMSON and MILAGROS SAMSON; and REMPSON REALTY & DEVELOPMENT
CORPORATION petitioners,
vs.
Judge MAURICIO M. RIVERA, in His Capacity as Presiding Judge of the Regional Trial Court of Antipolo
City, Branch 73; Atty. JOSELITA MALIBAGO-SANTOS, in Her Capacity as Ex Officio Sheriff, RTC of
Antipolo City; and LENJUL REALTY CORPORATION, respondents.
In denying the Petition, this Court applies the well-entrenched rule that the buyer in an extrajudicial foreclosure sale
is entitled to possession of the purchased property. Any question regarding the regularity and validity of the
mortgage and foreclosure sale may be determined only after the issuance of the writ of possession.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the March 7, 2002
Resolution2 and the July 18, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 69266. The March 7,
2002 Resolution disposed as follows:
"WHEREFORE, the instant petition is DISMISSED."4
The July 18, 2002 Resolution denied reconsideration.
The Facts
The pertinent facts are undisputed. Petitioner Spouses Rempson and Milagros Samson incurred from Far East Bank
and Trust Company (FEBTC) loan obligations, the principal of which amounted to fifty-five million pesos
(P55,000,000).5 On October 10, 1994 and February 22, 1996, in order to secure the payment of the loan obligations,
Spouses Samson executed in favor of FEBTC two real estate mortgages covering five parcels of commercial
property located at Antipolo City, Rizal.6
Petitioner spouses failed to settle their loan obligations. Thus, on May 16, 2000, FEBTC filed an Application for ExtraJudicial Foreclosure of Real Estate Mortgage7 before the Office of the Clerk of Court and Ex-Officio Sheriff of the
Regional Trial Court (RTC) of Antipolo City.8 In their application, FEBTC requested the said office to foreclose the two
mortgages extrajudicially, in the manner and form prescribed by Act 3135, as amended, to satisfy the debt of
P72,219,158.45, inclusive of interest, penalties and other charges. 9
Acting on the application, the Office of the Clerk of Court and Ex-Officio Sheriff issued a Notice of Sheriff Sale dated
May 19, 2000,10 setting the foreclosure sale on June 22, 2000. 11 There was only one bidder during the foreclosure
sale, so in accordance with AM 99-10-05-0,12 the sheriff postponed the auction to July 5, 2000. 13
On July 5, 2000, the auction sale proceeded with two bidders participating -- FEBTC and Lenjul Realty and
Development Corporation, with the latter declared as the highest bidder in the amount of eighty million pesos
(P80,000,000).14 On July 11, 2000, a Certificate of Sheriffs Sale was issued confirming the sale of the foreclosed
properties to the winning bidder.15 Shortly thereafter, the Certificate of Sale was registered with the Registry of
Deeds of Antipolo City.16 On February 19, 2001, new Certificates of Title over the foreclosed properties were issued
by the Register of Deeds of Antipolo City in favor of Lenjul Realty Corporation. 17
On April 3, 2001, Private Respondent Lenjul Realty filed a Petition for the Issuance of a Writ of Possession, which
sought an ex parte issuance of a writ of possession over the foreclosed properties. 18 The Petition was docketed as
Land Registration Case No. 01-2698 and raffled to Branch 73 presided by Judge Mauricio M. Rivera. 19 On June 11,
2001 and June 15, 2001, Spouses Samson and Rempson Corporation filed their respective Answer/Opposition. 20
While the Petition was pending, Spouses Samson and Rempson Corporation filed with the Antipolo City RTC, an
action for Annulment of Extra-Judicial Foreclosure and/or Nullification of Sale and the Certificates of Title, plus
Reconveyance and Damages with Prayer for a Temporary Restraining Order and/or Writ of Preliminary Injunction.
Petitioners filed it against Lenjul Realty Corporation, FEBTC, Bank of the Philippine Islands, Joselita Malibao-Santos in
her capacity as the clerk of court and ex officio sheriff of the Antipolo City RTC, and the Register of Deeds of
Antipolo City. The case was docketed as Civil Case No. 01-6219 and raffled to Branch 71 presided by Judge Felix S.
Caballes.21 On August 15, 2001, upon motion of Petitioner Rempson Realty and Development Corporation, Judge
Caballes issued an Order directing the consolidation of the civil case with the land registration case. 22
On September 18, 2001, Judge Rivera issued an order denying the consolidation of the Petition for Writ of
Possession and the civil case for annulment of foreclosure. 23 On October 22, 2001 and December 4, 2001,
respectively, Rempson Corporation and Spouses Samson moved for a reconsideration of the September 18, 2001
Order denying consolidation.24
On November 5, 2001, Judge Rivera gave due course to the Petition for the Issuance of a Writ of Possession and
denied the Opposition of Spouses Samson and Rempson Corporation. 25 Thus, they filed their respective Motions for
Reconsideration on December 4, 2001 and December 7, 2001. 26
On February 11, 2002, Judge Rivera denied reconsideration of the Order giving due course to the Petition for the
Issuance of the Writ of Possession and directed the issuance of such writ of possession. 27

Page 120 of 123

On February 20, 2002, Judge Rivera issued an Order granting petitioners Motion for Reconsideration with regard to
the September 18, 2001 Order denying the consolidation of cases. 28
On February 26, 2002, a Writ of Possession29 was issued directing the sheriff of the Antipolo City RTC to place Lenjul
Realty Corporation in physical possession of the foreclosed properties. On the same date, the sheriff issued a Notice
to Vacate30 addressed to Rempson Corporation, ordering it to leave the properties on or before March 2, 2002.
On February 22, 2002, petitioners filed with the Court of Appeals the aforesaid Special Civil Action for Certiorari with
Prohibition/Mandamus under Rule 65 with an Application for Issuance of a Writ of Preliminary Injunction and/or
Temporary Restraining Order to annul the November 5, 2001 and the February 11, 2002 Orders of Judge Rivera. 31
Ruling of the Court of Appeals
The Court of Appeals ruled that certiorari was improper, because there was an adequate remedy in the ordinary
course of law. Citing Section 8 of Act No. 3135, it opined that petitioners remedy was to file a petition to set aside
the foreclosure sale and to cancel the writ of possession in LR Case No. 01-2698. The CA further noted that
certiorari was premature inasmuch as petitioners had failed to file a motion for reconsideration of the Order
directing the issuance of the writ of possession. 32
In denying the Motion for Reconsideration, the Court of Appeals held that the issuance of a writ of possession was a
ministerial function that was done upon the filing of the proper motion and the approval of the corresponding
bond.33 It further ruled that prohibition did not lie to enjoin the implementation of the writ. 34
Hence this Petition.35
The Issues
In their Memorandum, petitioners assign the following issues for our consideration:
"1.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera ordering
the immediate issuance of a writ of possession in favor of private respondent Lenjul Realty Corporation
without first requiring presentation of evidence and formal offer thereof;
"2.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera upholding
the validity of the issuance of new titles over the foreclosed properties in the name of Private Respondent
Lenjul Realty Corporation despite the fact that the consolidation of ownership therein was done prior to the
expiration of the 1-year period of redemption.
"3.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera upholding
the now 3-month period of redemption for juridical mortgagors under the General Banking Act of Year 2000
and the application of said law retroactively as to violate the equal protection clause of the [n]ew
Constitution and the prohibition therein on non-impairment of contracts.
"4.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera refusing
consolidation of the annulment case pending in the sala of Judge Caballes with the case below despite the
fact that petitioners had already contested Private Respondent Lenjul Realty Corporations presumed
ownership over the foreclosed properties so that the issue of such presumed ownership should first be
resolved before the petition for writ of possession is heard.
"5.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera giving
due course to the petition for writ of possession despite the fact that Private Respondent Lenjul Realty
Corporation was not the winning bidder at the foreclosure sale, nor a transferee and/or successor-in-interest
of the rightful winning bidder Lenjul Realty and Development Corporation.
"6.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera ignoring
and disregarding existing rules of procedure and jurisprudence that foreclosed properties, consisting of
separate lots covered by individual transfer certificates of title, should be sold separately and not en masse.
"7.) Whether or not the Court of Appeals had erred in dismissing the special civil action for certiorari on
grounds of perceived technicalities and/or alleged procedural imperfections rather than on its merits." 36
The issues to be addressed in this case are as follows: (1) whether the trial court committed grave abuse of
discretion in granting the Petition for the Issuance of a Writ of Possession; and (2) whether the filing of a Petition for
Certiorari with the Court of Appeals was the proper remedy.
The Courts Ruling
The Petition has no merit.
First Issue:
Writ of Possession
The Court of Appeals correctly sustained the issuance of the Writ of Possession. The issuance of the Writ is explicitly
authorized by Act 313537 (as amended by Act 4118), which regulates the methods of effecting an extrajudicial
foreclosure of mortgage.38 Section 7 thereof provides:
Page 121 of 123

"Section 7. Possession during redemption period. In any sale made under the provisions of this Act, the
purchaser may petition the [Regional Trial Court] where the property or any part thereof is situated, to give
him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of
the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was
made without violating the mortgage or without complying with the requirements of this Act. Such petition
shall be made under oath and filed in form of an ex parte motion in the registration or cadastral
proceedings if the property is registered, or in special proceedings in the case of property registered under
the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other
real property encumbered with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such
petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act
Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six,
and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the
sheriff of the province in which the property is situated, who shall execute said order immediately."
Entitlement to Writ of Possession
Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of possession during the
redemption period by filing for that purpose an ex parte motion under oath, in the corresponding registration or
cadastral proceeding in the case of a property with torrens title. Upon the filing of such motion and the approval of
the corresponding bond, the court is expressly directed to issue the writ. 39
This Court has consistently held that the duty of the trial court to grant a writ of possession is ministerial. 40 Such
writ issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond.
No discretion is left to the trial court.41 Any question regarding the regularity and validity of the sale, as well as the
consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8 of Act
3135.42 Such question cannot be raised to oppose the issuance of the writ, since the proceeding is ex parte. 43 The
recourse is available even before the expiration of the redemption period provided by law and the Rules of Court. 44
The purchaser, who has a right to possession that extends after the expiration of the redemption period, 45 becomes
the absolute owner of the property when no redemption is made. Hence, at any time following the consolidation of
ownership and the issuance of a new transfer certificate of title in the name of the purchaser, he or she is even
more entitled to possession of the property.46 In such a case, the bond required under Section 7 of Act 3135 is no
longer necessary, since possession becomes an absolute right of the purchaser as the confirmed owner. 47
The Petition for Writ of Possession Not Stayed by the Annulment Case
This Court has long settled that a pending action for annulment of mortgage or foreclosure does not stay the
issuance of a writ of possession.48 Therefore, the contention of petitioners that the RTC should have consolidated
Civil Case No. 01-6219 with LR Case No. 01-2698 and resolved the annulment case prior to the issuance of the Writ
of Possession is unavailing.
Their reliance on Active Wood Products Co., Inc. v. Court of Appeals49 is misplaced. In that case, the sole issue was
the consolidation of a civil case regarding the validity of the mortgage and a land registration case for the issuance
of a writ of possession. It did not declare that the writ of possession must be stayed until the questions on the
mortgage or the foreclosure sale were resolved. Moreover, the issue of consolidation in the present case has
become moot, considering that the trial court has already granted it.
Second Issue:
Proper Remedy
The Court of Appeals correctly declared that petitioners pursued the wrong remedy. A special civil action for
certiorari could be availed of only if the lower tribunal has acted without or in excess of jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction; and if there is no appeal or any other plain, speedy,
and adequate remedy in the ordinary course of law.50
No Grave Abuse of Discretion
There is grave abuse when the court -- in the exercise of its judgment -- acts in a capricious, whimsical, arbitrary or
despotic manner equivalent to acting with lack of jurisdiction. 51 Considering that the trial court issued the Writ of
Possession in compliance with the express provisions of Act 3135, it cannot be charged with having acted in excess
of its jurisdiction or with grave abuse of discretion. 52
Since there was no grave abuse of discretion, petitioner should have filed an ordinary appeal instead of a petition
for certiorari. In GSIS v. CA,53 this Court held that "the wisdom or soundness of the x x x order granting [the] writ of
possession x x x is a matter of judgment [in] which the remedy is ordinary appeal." 54 An error of judgment
committed by a court in the exercise of its legitimate jurisdiction is not the same as "grave abuse of discretion." 55
Errors of judgment are correctible by appeal, while those of jurisdiction are reviewable by certiorari. 56
Available Remedy
Section 8 of Act 3135 provides the plain, speedy, and adequate remedy in opposing the issuance of a writ of
possession.57 The provision reads:
"Section 8. Setting aside of sale and writ of possession. The debtor may, in the proceedings in which
possession was requested, but not later than thirty days after the purchaser was given possession,
petition that the sale be set aside and the writ of possession cancelled, specifying the damages
Page 122 of 123

suffered by him, because the mortgage was not violated or the sale was not made in accordance with the
provisions hereof, and the court shall take cognizance of this petition in accordance with the summary
procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninety-six;
and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond
furnished by the person who obtained possession. Either of the parties may appeal from the order of the
judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of
possession shall continue in effect during the pendency of the appeal." (Emphasis supplied)
A party may petition for the setting aside of a foreclosure sale and for the cancellation of a writ of possession in the
same proceedings where the writ of possession was requested. In petitioners case, the filing of the Petition is no
longer necessary because the pendency of Civil Case No. 01-6219 (which was consolidated with the present case)
already challenged the foreclosure sale.
Pending proceedings assailing the issuance of the writ, the purchaser in a foreclosure sale is entitled to possession
of property. If the trial court later finds merit in a petition to set the writ aside, it shall dispose in favor of the
mortgagor the bond furnished by the purchaser.58
It should also be noted that prior to the filing of a petition for certiorari, a motion for reconsideration is generally
required.59 Petitioner may have filed a Motion for Reconsideration with regard to the trial courts Order giving due
course to the Petition, but not with regard to the Order directing the issuance of a writ of possession.
Finally, petitioners allegation that the RTC issued the Writ of Possession despite failing to receive evidence is
unsupported by the record. The documents submitted to this Court show sufficient basis for the trial court to rule
accordingly. Despite the ex parte nature of the proceedings, and aside from the oral arguments, the RTC allowed
petitioners to file pleadings to oppose the Petition for the issuance of the Writ of Possession.
Other Issues
The other issues raised by petitioners are factual matters which, subject to certain exceptions not applicable here, 60
this Court does not review. Moreover, petitioners rely on factual matters on which the trial court has yet to make
any finding. The tenability of their arguments should be ventilated in Civil Case No. 01-6219, an "Annulment of
Extra-Judicial Foreclosure and/or Nullification of Sale and the Certificates of Title, plus Reconveyance and
Damages." Those factual issues cannot be ruled upon in these proceedings.
WHEREFORE, the Petition is DENIED, and the assailed Resolutions of the Court of Appeals AFFIRMED. Costs
against petitioners.
SO ORDERED.

Page 123 of 123