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SPOUSES FRANCISCO and MERCED RABAT

,
Petitioners,
- versus -
PHILIPPINE NATIONAL BANK,
Respondent.

RABAT VS PNB GR. 158755 June 18, 2012

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 medium-term 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. 92-61122, which was
assigned to Branch 14 thereof.

they assailed the validity of the auction sales for want of notice to them before and after the foreclosure sales. which is not a newspaper of general circulation. judgment is hereby rendered dismissing the complaint. the RABATs attacked the validity of the accumulated interest and penalty charges because since their properties were sold in 1987. PNB would be allowed to profit from its questionable scheme. The RABATs admitted their loan availments from PNB and their default in the payment thereof. They further added that as residents of Mati. So ordered. and yet PNB waited until 1992 before filing the case. the RABATs contended that they should not be made to suffer for the interest and penalty charges from May 1987 up to the present.[3] On June 14. The RABATs filed their answer with counterclaim on 28 July 1992 to which PNB filed its Reply and Answer to Counterclaim. and in view of the foregoing considerations. Branch 14. On the counterclaim. 1994. the Regional Trial Court. However. Consequently. The RABATs likewise averred that the bid price was grossly inadequate and unconscionable.[4] disposing thus: WHEREFORE. 92-61122. Davao Oriental since 1970 up to the present. . Otherwise. The parties will bear their respective cost. On 2 January 1993. 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. in Manila (RTC) rendered its decision in Civil Case No. the RABATs filed an amended answer. 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. Lastly. The PNB filed on 5 February 1993 its Reply to the Amended Answer and Answer to Counterclaim.

Greenhills. No. This was the very reason why defendant-appellees were not aware of the foreclosure proceedings. [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. 208.[8] positing: WHETHER OR NOT THE COURT OF APPEALS MAY REVIEW AND PASS UPON THE TRIAL COURTS FINDING AND CONCLUSION ON AN . WHEREFORE. 134406). 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. Greenhills. 1998. Records). there is yet no deficiency judgment to speak of. Davao Oriental and not 197 Wilson Street. 220. The CA concluded: An examination of the exhibits show that the defendant-appellees given address is Mati. there is a need for the setting aside of the two (2) auction sales hence. 229. San Juan. the decision of the trial court dated 14 June 1994.R. Records further show that all subsequent communications by plaintiff-appellant was sent to defendant-appellees address at Wilson Street. On their part. assigning the following two errors to the RTC.[6] On June 29. the CA upheld the RTCs decision to nullify the foreclosure sales but rested its ruling upon a different ground. is hereby affirmed in toto. As correctly found out by the trial court. Metro Manila as alleged by the plaintiff-appellant (Exhibit C to J. pp. 236-239.R. CV No. San Juan. Only PNB appealed to the CA (CA-G. SO ORDERED. the Spouses Rabat simply urged in their appellees brief that the decision of the RTC be entirely affirmed. 217. PNB appealed in due course (G. 49800).[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.

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. 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. CV No. the CA amended its decision on January 24. 49800 on the basis of the errors raised by petitioner Philippine National Bank in its Appellants Brief. No pronouncement as to costs. 49800 is hereby SET ASIDE. with reasonable dispatch. The decision of the Court of Appeals of 29 July 1998 in CA-G. THEREFORE. 2003 by resolving the errors specifically assigned by PNB in its appellants brief. the petition is GRANTED. HAD ATTAINED FINALITY.[11] The CA nonetheless affirmed the RTCs decision. 134406.R. No. decreeing: WHEREFORE. 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. 1. the Court promulgated its decision in G.[10] To conform to the decision in G. AND. 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. 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. 2. CV No.R. The Court of Appeals is directed to DECIDE. ISSUE WHICH WAS NEVER RAISED ON APPEAL. consequently. CA-G.R.R. . 2000. SO ORDERED. 134406. No.

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 ₱3. the sale is not thereby readily set aside on account of such low purchase price. Nevertheless.800. 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. however.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 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. We are not inclined to invalidate the auction sale of appellees mortgaged properties solely on the alleged gross inadequacy of purchase price of ₱3.800. said amount approximates the loan value under its original appraisal in 1980. 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.874. Here. 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. There is no dispute that mere inadequacy of price per se will not set aside a judicial sale of real property. [12] holding and ruling as follows: After a thorough and conscientious review of the records and relevant laws and jurisprudence. In fact.874. the CA promulgated its questioned second amended decision on March 26. Thus. upon the theory that the lesser the price the easier it is for the owner to effect the redemption. . Said rule. which was ₱4 million. it may be that after the lapse of seven (7) years. 2003. 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 shall be declared null and void.00 at the auction sale. 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. 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 property may be sold for less than its fair market value. We find the motion for reconsideration to be meritorious. however. Upon PNBs motion for reconsideration.

The decision appealed from in Civil Case No.25 plus accrued interest. 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. . service charge and penalty charge of 3% per annum from February 29. Further. Our Amended Decision of January 24. 2003 is hereby SET ASIDE and a new one is hereby entered GRANTING the appeal of plaintiff PNB. INTERESTS. THE ARGUMENTS OF HEREIN PETITIONERS AND EVIDENCE BORNE IN THE RECORDS OF THE INSTANT CASE. A claim of deficiency arising from the extrajudicial foreclosure sale is allowed. premises considered. Judgment is hereby rendered ordering the appellees to pay. 92-61122 is hereby REVERSED and SET ASIDE. and (3) the costs of suit. PENALTY AND SERVICE CHARGES AND ATTORNEYS FEES. 1992 until the same shall have been fully paid. the present motion for reconsideration is hereby GRANTED.[13] The Spouses Rabat thereafter moved for the reconsideration of the second amended decision.398. the same is without merit. IN COMPLETE AND ABSOLUTE DISREGARD OF ITS EARLIER PRONOUNCEMENTS. SO ORDERED. (2) Ten Percent (10%) of the total amount due as attorneys fees. 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. [14] Hence. thuswise: WHETHER OR NOT THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF THE SUBJECT AUCTION SALES AND ADJUDGING PAYMENT OF DEFICIENCY SUM. where the proceeds of the sale are insufficient to pay the debt. Issues The Spouses Rabat frame the following issues for this appeal. but the CA denied their motion.745. Our Supreme Court had ruled in several cases that in extrajudicial foreclosure of mortgage. WHEREFORE. this appeal by the Spouses Rabat. to appellant PNB: (1) the amount of ₱14. Consequently. As to appellees claim of allegedly excessive penalty interest charges. No pronouncement as to costs. jointly and severally. the mortgagee has the right to recover the deficiency from the debtor.

in fact. in a forced sale. . [19] the Court discoursed on the effect of the inadequacy of the price in a forced sale. we rule against the Spouses Rabat. Accordingly. Anent the first issue. 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. v. the Court must pass upon and resolve three distinct issues. The second is whether PNB was entitled to recover any deficiency from the Spouses Rabat. is immaterial and does not nullify the sale. They contend that PNB was not entitled to recover any deficiency due to the invalidity of the forced sales. in a forced sale. stating: Throughout a long line of jurisprudence. Reyes. etc. They pray that the amended decision of the CA (which affirmed the RTCs judgment) be reinstated. We have consistently held that the inadequacy of the bid price at a forced sale.[18] In Bank of the Philippine Islands. we have declared that unlike in an ordinary sale.[15] The Spouses Rabat insist that the CAs reversal of the amended decision was unjustified. a low price is considered more beneficial to the mortgage debtor because it makes redemption of the property easier. Ruling The appeal has no merit. unlike that in an ordinary sale. The first is whether the inadequacy of the bid price of PNB invalidated the forced sale of the properties. inadequacy of the price at a forced sale is immaterial and does not nullify a sale since.[17] PNB counters that the petition for review does not raise a valid question of law. The third is whether the CA validly rendered its second amended decision. a low price is more beneficial to the mortgage debtor for it makes redemption of the property easier. [16] In its comment. 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.

PR Builders. 45483. De Asis. respondent stood to gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. 52 Phil. 930. (Government of the Philippines vs. 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. Inc. 3135. Green. La Urbana vs. What is clearly provided. we also had the occasion to state that: As to the inadequacy of the price of the sale. Meneses. is not of itself sufficient to annul said sale. . In the case at bar. Belando. for reason of equity.) (Emphases supplied.. or when such inadequacy shocks ones conscience as to justify the courts to interfere. In an ordinary sale. 1939. In the early case of The National Loan and Investment Board v. upon the theory that the lesser the price. x x x (Emphasis supplied. 54 Phil. however. R. No. this court has repeatedly held that the fact that a property is sold at public auction for a price lower than its alleged value. When there is a right to redeem.. April 12. 57 Phil. the easier it is for the owner to effect redemption. Guerrero. we further elaborated on this principle: [G]ross inadequacy of price does not nullify an execution sale. where there has been strict compliance with all the requisites marked out by law to obtain the highest possible price.) 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. a transaction may be invalidated on the ground of inadequacy of price. other than the mere inadequacy of the bid price at the foreclosure sale. 442. and where there is no showing that a better price is obtainable. 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. 491. Bank of the Philippine Islands v .) In Hulst v. such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction. Thus. 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.. 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. G. Guerrero vs..

[22] Indeed. we consider it notable enough that PNBs bid price of ₱3.517. Martinez. all courts of law have the unquestioned power to alter. Verily. hence. or set aside their . 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 obligation it expressly provides as in the case of pledges [Civil Code. public order or public policy. To be sure. Lastly. we rule that PNB had the legal right to recover the deficiency amount. while silent as to the mortgagees right to recover. morals. prohibit recovery of deficiency. 1484(3)]. on the other hand. Resolving the second issue. Court of Appeals. Act No. Art.00 applied for by the Spouses Rabat as loan.000.00 might not even be said to be outrageously low as to be shocking to the conscience. and to the total sum of ₱3.800. clauses. they could not now insist otherwise. modify. Accordingly.380. we uphold the CAs promulgation of the second amended decision.[25] Equally axiomatic are that a contract is the law between the contracting parties. good customs. which governs the extrajudicial foreclosure of mortgages. [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. does not. 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. In Philippine National Bank v. 3135. Art.874. As the CA cogently noted in the second amended decision. the mortgagee is entitled to claim the deficiency from the debtor. 2115] and in chattel mortgages of a thing sold on installment basis [Civil Code. terms and conditions as they may want to include.[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. it has been held that a deficiency claim arising from the extrajudicial foreclosure is allowed. as we indicated in Prudential Bank v. and that they have the autonomy to include therein such stipulations.00 of their actual availment from PNB.[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. [20] that bid price was almost equal to both the ₱4.[26] Inasmuch as the Spouses Rabat did not challenge the legitimacy and efficacy of the additional liabilities being charged by PNB. The documents relating to the loan and the real estate mortgage showed that the Spouses Rabat had expressly conformed to such additional liabilities. At any rate.000. the law authorizes the contracting parties to make any stipulations in their covenants provided the stipulations are not contrary to law.

the doctrine of immutability is not a mere technicality to be easily brushed aside. the court could change its judgment to the prejudice of the other. [30] The doctrine of immutability and inalterability of a final judgment has a two-fold purpose. [28]The reason for the rule of immutability is that if. and may thereafter no longer be modified in any respecteven 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. [29] The equity of a particular case must yield to the overmastering need of certainty and unalterability of judicial pronouncements. we AFFIRM the SECOND AMENDED DECISION promulgated on March 26. namely: (a) to avoid delay in the administration of justice and. [27] A judgment that has attained finality becomes immutable and unalterable. the amended decision might have become final and immutable. at the risk of occasional errors. controversies cannot drag on indefinitely. .[32] Had that happened. considering that PNB timely filed its motion for reconsideration vis--vis the amended decision. which is precisely why courts exist. CV No. but a matter of public policy as well as a time-honored principle of procedural law. the CAs reversal of the amended decision and its promulgation of the second amended decision were valid and proper. procedurally.decisions before they become final and unalterable. and (b) to put an end to judicial controversies. 2003 in CA-G. However. the rights and obligations of every litigant must not hang in suspense for an indefinite period of time. Indeed. thus. 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. Spouses Francisco and Merced Rabat. 49800 entitled Philippine National Bank v. on application of the latter. to make orderly the discharge of judicial business.R. [31] As such. It is no different herein. SO ORDERED. on the application of one party. WHEREFORE. The petitioners shall pay the costs of suit. again change the judgment and continue this practice indefinitely. the court could thereafter.

Presiding PEREZ. the Court of Appeals dismissed the petition for certiorari [3] of petitioner spouses Claro G. 22990. Judge. Chairperson. petitioners obtained a loan in the amount of P3.versus . SP No.000.. DEL CASTILLO.CUA LAI CHU.000 from private respondent Philippine Bank of Communication. CLARO G.200. No. For failure of petitioners to pay the full amount of the outstanding loan upon demand. and HON.[6] private respondent applied for the extrajudicial foreclosure of the real . . The Facts In November 1994. 2010 The Case This is a petition for review[1] of the 29 April 2005 and 4 August 2005 Resolutions[2] of the Court of Appeals in CA-G. Petitioners.000.000.800. Branch 218. HILARIO L. petitioners executed in favor of private respondent a Deed of Real Estate Mortgage[4] over the property of petitioner spouses covered by Transfer Certificate of Title No.R. Quezon City and PHILIPPINE BANK Promulgated: OF COMMUNICATION. JJ. Regional Trial Court. 2010 CHU VS LAQUI GR 169190 FEBRUARY 11. Castro and Juanita Castro and petitioner Cua Lai Chu (petitioners). 169190 and JUANITA CASTRO. ABAD. February 11. In its 29 April 2005 Resolution.BRION. petitioners executed an Amendment to the Deed of Real Estate Mortgage[5] increasing the amount of the loan by P1. 88963. Present: CARPIO. bringing the total loan amount to P5. Respondents. J. LAQUI. G. the Court of Appeals denied petitioners motion for reconsideration. In its 4 August 2005 Resolution. To secure the loan. In August 1997. CASTRO.R.

The trial court denied petitioners notice of appeal. 22990 covering the foreclosed property.[9] The extrajudicial foreclosure sale did not push through as originally scheduled because the trial court granted petitioners prayer for TRO.estate mortgage. the Register of Deeds cancelled TCT No. petitioners filed in the Court of Appeals a petition for certiorari. the certificate of sale was annotated as Entry No. The petition for annulment was filed in the Regional Trial Court of Quezon City and docketed as Q-02-46184. The 24 February 2005 Order[17] denied petitioners notice of appeal. A certificate of sale[10] was executed on 4 June 2002 in favor of private respondent. 22990 and issued in its stead TCT No. 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. petitioners filed a petition to annul the extrajudicial foreclosure sale with a prayer for temporary restraining order (TRO). It also denied petitioners motion for reconsideration. private respondent applied for the issuance of a writ of possession of the foreclosed property. private respondent emerged as the highest bidder. The 6 January 2005 Order[16] denied petitioners motion for reconsideration of the prior order. After the lapse of the one-year redemption period. on 8 July 2003.[14] The trial court granted private respondents motion for a declaration of general default and allowed private respondent to present evidence ex parte. At the foreclosure sale. 251835[12] in the name of private respondent. Undeterred. On 7 June 2002. The Orders of the Trial Court The 8 October 2004 Order[15] granted private respondents motion for a declaration of general default and allowed private respondent to present evidence ex parte. .[7]Upon receipt of a notice[8] of the extrajudicial foreclosure sale. 1855[11] on TCT No.[13] Petitioners filed an opposition. Forthwith. On 18 August 2004. The trial court subsequently lifted the TRO and reset the extrajudicial foreclosure sale on 29 May 2002. The appellate court dismissed the petition.

a ground for outright dismissal of the petition under Bar Matter No. the appellate court held that a proceeding for the issuance of a writ of possession is ex parte in nature. 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. 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 Courts Ruling The petition has no merit. Ruling on the merits. Further. Petitioners cite Bustos v. The appellate court noted that the counsel for petitioners failed to indicate in the petition the updated PTR Number. . Avendao[19] in asserting that physical possession of the property should not be disturbed pending the final determination of the more substantial issue of ownership. De Legaspi v. As such. petitioners right to due process was not violated even if they were not given a chance to file their opposition. petitioners point out that the issuance of a writ of possession will deprive them not only of the use and possession of their property. 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. but also of its ownership. 1132. 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. Court of Appeals[18] and Vda. 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.

we must point out that the authorities relied upon by petitioners are not in point and have no application here. At the outset. In Vda.[25]thus: . the bank extrajudicially foreclosed the mortgage. After the lapse of the said period with no redemption having been made. on the other hand.[24] as amended by Act No. the same cannot be the subject of an appeal. Private respondent asserts that there is no judicial determination involved in the issuance of a writ of possession. 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. In Bustos v.[23] the purchaser at an extrajudicial foreclosure sale applied for a writ of possession after the lapse of the one-year redemption period.[21] the Court merely stated that in a case of unlawful detainer. 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. It contends that the former has no bearing on the latter. In Navarra v. Neither case involved the right to possession of a purchaser at an extrajudicial foreclosure of a mortgage. thus. A certificate of sale was duly issued and registered. physical possession should not be disturbed pending the resolution of the issue of ownership. petitioners right to due process was not violated even if they were not given a chance to file their opposition. The bank then applied for the issuance of a writ of possession. Banco Filipino Savings and Mortgage Bank v.Private respondent. Court of Appeals. that right becomes absolute and may be demanded by the purchaser even without the posting of a bond. there is no violation of the rule against forum shopping. 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. 4118. Hence. Avendao. which the lower court dismissed.[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. hence. Court of Appeals. This case involved a real estate mortgage as security for a loan obtained from a bank. Pardo[22] squarely ruled on the right to possession of a purchaser at an extrajudicial foreclosure of a mortgage. Possession may then be obtained under a writ which may be applied for ex parte pursuant to Section 7 of Act No. At the auction sale. the bank was the highest bidder. Upon the mortgagors default. De Legaspi v. maintains that the application for the issuance of a writ of possession in a foreclosure proceeding is ex parte in nature. 3135.

as purchaser. one year from the registration of the sale. upon proper application and proof of title. the issuance of the writ of possession becomes a ministerial duty of the court. in whose name title over the property was already issued. who shall execute said order immediately. as amended. 3135. the redemption period had long lapsed. Moreover.Since the foreclosed property was not redeemed within one year from the registration of the extrajudicial foreclosure sale. to the writ of possession. to give him possession thereof during the redemption period. [26] When private respondent applied for the issuance of a writ of possession on 18 August 2004. the right of private respondent over the property had become absolute. . upon approval of the bond. 22990 on 7 June 2002. 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. private respondent had acquired an absolute right. order that a writ of possession issue. it presented a new transfer certificate of title issued in its name dated 8 July 2003. (Emphasis supplied) In the present case. As the purchaser of the property at the foreclosure sale. vesting in it the corollary right 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. The redemption period thus lapsed on 7 June 2003. SEC. the certificate of sale of the foreclosed property was annotated on TCT No. 7. furnishing bond in an amount equivalent to the use of the property for a period of twelve months. the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated. addressed to the sheriff of the province in which the property is situated. Such petition shall be made under oath and filed in form of an ex parte motion x x x and the court shall.[27] In the present case. The right of private respondent to the possession of the property was thus founded on its right of ownership. once ownership has been consolidated. when private respondent applied for the issuance of a writ of possession. In any sale made under the provisions of this Act.

Such question should not be raised as a justification for opposing the issuance of a writ of possession since under Act No. as amended. 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. Further.[29] Lastly. The application for the issuance of a writ of possession is in the form of an ex parte motion.[30] The Court of Appeals correctly dismissed the petition for certiorari filed by petitioners for lack of merit. 3135. as amended. we rule that petitioners claim of forum shopping has no basis. 3135. the purchaser at a foreclosure sale is entitled to the possession of the foreclosed property. The debtor may. The latter is not a bar to the former. as amended. . It is not a judgment on the merits that can amount to res judicata. the proceeding for this is ex parte. specifying the damages suffered by him. Under Act No. 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. one of the essential elements in forum shopping. 3135. 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. No discretion is left to the court. because the mortgage was not violated or the sale was not made in accordance with the provisions hereof. but not later than thirty days after the purchaser was given 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. petition that the sale be set aside and the writ of possession cancelled. as amended. Even pending such latter proceeding. to wit: SEC. in the proceedings in which possession was requested. It issues as a matter of course once the requirements are fulfilled. a writ of possession is issued ex parte as a matter of course upon compliance with the requirements.[28] Petitioners cannot oppose or appeal the courts order granting the writ of possession in an ex parte proceeding. 8. 3135.

WHEREFORE. 88963. SP No. We AFFIRM the 29 April 2005 and 4 August 2005 Resolutions of the Court of Appeals in CA-G. . SO ORDERED. we DENY the petition for review.R.

3135. -TRIAL COURT: Granted respondent’s motion for a declaration of general default and allowed them to present evidence ex parte.M 1132. The court held that a proceeding for the issuance of a writ of possession is ex parte in nature. as amended: SEC.000. HON. 8.000 to the petitioners.Whether the writ of possession was properly issued despite the pendency of a case questioning the validity of the extrajudicial foreclosure sale even when petitioners were declared in default.000. ISSUES: . The debtor may.800. and the loan was increased by P1.” FACTS: -November 1994: Philippine Bank of Communication (respondent) loaned P3.200. -August 1997: the mortgage was amended. but not later than thirty days after the purchaser was given possession. vesting in it the corollary right of possession. However.R. CLARO G. in the proceedings in which possession was requested. 169190 / February 11. making the amount P5. specifying the damages suffered by him. LAQUI G. because the mortgage was not violated or the sale was not made in accordance with the provisions hereof. No. The latter is not a bar to the former. For failure of petitioners to pay the full amount of the outstanding loan upon demand. it was dismissed since the counsel for petitioners failed to indicate the updated PTR Number in the said petition. which is a ground for outright dismissal under B. petition that the sale be set aside and the writ of possession cancelled. -COURT OF APPEALS: Petitioners appealed. -PETITION DISMISSED . 2010 Digest by: Paw “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. -Petitioners cannot oppose or appeal the court’s order granting the writ of possession in an ex parte proceeding. HILARIO L.000. petitioners executed in favor of private respondent a Deed of Real Estate Mortgage. and JUANITA CASTRO vs. HELD/REASON: -The Supreme Court held that since the private respondent had purchased the property at the foreclosure sale. 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. CUA LAI CHU. their right over the said property became absolute. CASTRO. To secure the loan. private respondent applied for the extrajudicial foreclosure of the real estate mortgage.

1980: RABATS executed an “Amendment of the Credit Agreement” to increase interest rate from 17 to 21%. 1979: Spouses Rabat (RABATS) applied. due to failure by RABATS to settle obligation which had already amounted to Php14. (2) executed a real estate mortgage over 12 parcels of land. 1986: PNB responded with a denial to request of RABAT for extension of time for settlement. and another at Davao Oriental) 12. Aug. and other charges). PNB filed with RTC of Manila a complaint for a sum of money. 2. 9.745. FACTS: 1. 25. San Juan. September 25.R. evidenced by several PN’s.398. decided in Nov. and penalty of 3% on amount unpaid or not renewed when due. a medium term loan of Php4M. Np. penalties. Parties are before the court a second time. 11.R. to mature in 3 years. Loan stipulation states interest = 17% per year.874. 8. 1980: (1) RABATS signed a credit agreement. 7. 2000. due 3/14/83. 3. .517. MM. 5. PNB have a deadline of until 4/30/86 for settlement. J. Proceeds were inadequate to satisfy entire obligation. Rabat. and residential) as additiona security for their Php4M loan. Loans of RABATS reached total amount of Php3. and were granted a loan by PNB on 01/14/80. Facts are based on above mentioned case. and 8/30/91. commercial. RABATS failed to pay their outstanding balance when it became due. PNB filed for extrajudicial foreclosure of mortgage executed by RABATS. Parcels of land were sold at Public auction. G. 134406. No. 2012 TOPIC: Extrajudicial Foreclosure – Conduct of Sale PONENTE: BERSAMIN. First case: PNB v.380. PNB G. which they sent to address at Wilson St. 10. 15. 158755 June 18. 6. July 24. so PNB sent additional demand letters to RABAT (2 at Wilson. with PNB as highest bidder at Php3. Also executed another real estate mortgage on 9 parcels of land located in Davao Oriental (agricultura. San Juan on 11/15/90.25 (with interest. 4.SPOUSES FRANCISCO and MERCED RABAT v. plus service charge. January 28.800.

they should not be made to suffer payment of interest and penalty charges from May ’87 to present. 134406). but PNB waited till ’92 to file the case. 16. (5) accumulated interest and penalty charges were invalid because properties were sold in ’87. RATIO: 1. Auction bid was valid. (4) bid price was grossly inadequate and unconscionable. (2) W/N PNB was entitled to recover any deficiency from the RABATS. (3) Latter is not a newspaper of general circulation.13. SC ruled against spouses Rabat. SC granted petition. for want of notice to them before and after the foreclosure sales. PNB is entitled to recover from the RABATS. No. however. RABATS moved for reconsideration. and PNB was ordered to reconvey to RABATS the remaining properties after sufficient sale of properties to satisfy the obligation. because such would allow PNB to profit from its “questionable scheme” 15. hence appeal by them to SC. but was denied. The mode of forced sale utilized by petitioner was an extrajudicial foreclosure of real estate mortgage which is governed by Act No. PNB appealed to SC (G. Auction sales of the properties were set aside. in spite of PNB’s claim of publication in San Pedro Times. RTC dismissed the complaint. ISSUE: (1) W/N the inadequacy of PNB’s bid price renders the forced sale of the properties invalid. which upheld RTC’s decision for nullification of foreclosure sales. (2) received nor heard about the foreclosure proceedings. CA amended its decision. Therefore. but still affirmed RTC decision. 17. 14. RABATS also claim: (1) They have been residents of Mati. HELD: (1) NO. Case was remanded to CA to DECIDE on the basis of the errors raised by petitioner PNB in its brief. (2) YES. RABATS: (1) admitted loan availments and default in payment. as amended. . resolving errors assigned by PNB. Davao Oriental since 1970-present.R. 3135. On MR. CA found for PNB. PNB appealed to CA. 18. but (2) assailed validity of the auction sales.

Hulst v. or when such inadequacy shocks one’s conscience as to justify the courts to interfere. x x x” SECOND ISSUE: 1. PR Builders: “*G+ross inadequacy of price does not nullify an execution sale.PNB was legally entitled to recover the penalty charge of 3% per annum and attorney’s fees equivalent to 10% of the total amount due. respondent stood to gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. to the total sum of P 3. morals. 2.874.380. 2.23 the fact that the mortgaged . v.00 not outrageously low as to be shocking to the conscience. good customs. other than the mere inadequacy of the bid price at the foreclosure sale. 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. they could not now insist otherwise. 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. a transaction may be invalidated on the ground of inadequacy of price. the easier it is for the owner to effect redemption. The documents relating to the loan and the real estate mortgage showed that the Spouses Rabat had expressly conformed to such additional liabilities. Bid price was almost equal to both the P 4M applied for by RABATS. a low price is more beneficial to the mortgage debtor for it makes redemption of the property easier. Reyes: unlike in an ordinary sale. upon the theory that the lesser the price. such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction. What is clearly provided 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.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.In Bank of the Philippine Islands. 3. To be sure. 3. 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." In the case at bar. Inasmuch as the Spouses Rabat did not challenge the legitimacy and efficacy of the additional liabilities being charged by PNB.517. inadequacy of the price at a forced sale is immaterial and does not nullify a sale since. for reason of equity. in a forced sale. Thus. and that they have the autonomy to include therein such stipulations. When there is a right to redeem.00 of their actual availment from PNB. the law authorizes the contracting parties to make any stipulations in their covenants provided the stipulations are not contrary to law. In an ordinary sale. clauses. etc.PNB’s bid price of P 3. terms and conditions as they may want to include. Martinez.Prudential Bank v.800. hence. Equally axiomatic are that a contract is the law between the contracting parties. 4. public order or public policy.

unlike that in an ordinary sale. a low price is considered more beneficial to the mortgage debtor because it makes redemption of the property easier. The inadequacy of the bid price in an extrajudicial foreclosure sale of mortgaged properties will not per se invalidate the sale.property was sold at an amount less than its actual market value should not militate against the right to such recovery. CASE LAW/ DOCTRINE: Inadequacy of the bid price at a forced 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. in a forced sale. . in fact. is immaterial and does not nullify the sale.