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and PHILIPPINE SHARES CORPORATION, accomplish said purpose and to appoint its substitutes as such
petitioners, attorney-in-fact, with the same powers as above-specified. The
vs. Mortgagor hereby expressly waives the term of thirty (30) days or any
COURT OF APPEALS, JUDGE ADRIAN R. OSORIO, as Presiding Judge other term granted or which may hereafter be granted him by law as the
of the Regional Trial Court, Branch 171, Valenzuela, Metro Manila; period which must elapse before the Mortgagee shall be entitled to
ESPERANZA ECHIVERRI, as Clerk of Court & Ex-Officio Sheriff of the foreclose this mortgage, it being specifically understood and agreed that
Regional Trial Court of Valenzuela, Metro Manila; SERGIO the said Mortgagee may foreclose this mortgage at any time after the
CABRERA, as Deputy Sheriff-in-Charge; and BANCO FILIPINO breach of any conditions hereof. . . .
d) Effective upon the breach of any conditions of the
Facts: mortgage and in addition to the remedies herein stipulated, the
Petitioner Grand Farms Inc. filed an annulment and/or declaration of nullity Mortgagee is hereby likewise appointed attorney-in-fact of the
of the extrajudicial foreclosure proceedings over their mortgaged Mortgagor with full powers and authority, with the use of force, if
properties, with damages in RTC Valenzuela, MM against respondents clerk necessary, to take actual possession of the mortgaged property,
of court, deputy sheriff and PR Banco Filipino Savings and Mortgage Bank without the necessity for any judicial order or any permission of
power to collect rents, to eject tenants, to lease or sell the mortgaged
Reason: no formal notice of intention to foreclose the real estate property, or any part thereof, at public or private sale without previous
mortgage was sent by private respondent to petitioners. notice or adverstisement of any kind and execute the corresponding bills of
sale, lease or other agreement that may be deemed convenient, to make
PR (thorugh its deputy liquidator) responded and said petitioners were repairs or improvement to the mortgaged property and pay for the same
"notified of the auction sale by the posting of notices and the and perform any other act which the Mortgagor may deem convenient . . .
publication of notice in the Metropolitan Newsweek, a newspaper of RTC: denied petitioners motion for summary judgment -> genuine and
general circulation in the province where the subject properties are located substantial issues exist which require the presentation of evidence during
and in the Philippines on February 13, 20 and 28, 1988." the trial, to wit:
(a) whether or not the loan has matured;
Because of alleged implied admission by PR Petitioners filed a motion for (b) whether or not private respondent notified petitioners of the foreclosure
summary judgment contending that the foreclosure was violative of the of their mortgage;
provisions of the mortgage contract specifically paragraph (k) (c) whether or not the notice by publication of the foreclosure constitutes
sufficient notice to petitioners under the mortgage contract;
k) All correspondence relative to this Mortgage, including (d) whether or not the applicant for foreclosure of the mortgage was a duly
demand letters, summons, subpoena or notifications of any judicial or authorized representative of private respondent; and
extrajudical actions shall be sent to the Mortgagor at the address (e) whether or not the foreclosure was enjoined by a resolution of this
given above or at the address that may hereafter be given in Court.
writing by the Mortgagor to the Mortgagee, and the mere act of
sending any correspondence by mail or by personal delivery to the Petitioners filed petition for certiorari orders of denial as having been
said address shall be valid and effective notice to the Mortgagor issued with grave abuse of discretion
for all legal purposes, and the fact that any communication is not when it dismissed the petition, holding that no personal
actually received by the Mortgagor, or that it has been returned unclaimed notice was required to foreclose since private respondent
to the Mortgagee, or that no person was found at the address given, or was constituted by petitioners as their attorney-in-fact to
that the address is fictitious, or cannot be located, shall not excuse or sell the mortgaged property.
relieve the Mortgagor from the effects of such notice; When it held that paragraph (k) of the mortgage contract
merely specified the address where correspondence should
PR opposed the motion argued that petitioners' reliance on said be sent and did not impose an additional condition on the
paragraph (k) of the mortgage contract fails to consider part of private respondent to notify petitioners personally
paragraphs (b) and (d) of the same contract, which respectively of the foreclosure.
provide as follows:
WON a summary judgment may be promulgated by the TC, given that
b) . . . For the purpose of extra-judicial foreclosure, the there was no notice of foreclosure sent by the mortgagee to the mortgagor
Mortgagor (plaintiff) hereby appoints the Mortgagee (BF) his YES
attorney-in-fact to sell the property mortgaged, to sign all
documents and perform any act requisite and necessary to
The Rules of Court authorize the rendition of a summary judgment if the in previous jurisprudence no reason to deviate from previous
pleadings, depositions and admissions on file, together with the affidavits, interpretation
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 There is no irreconcillable conflict between, as in fact a reconciliation
judgment as a matter of law. should be made of, the provisions of paragraphs (b) and (d) which
Although an issue may be raised formally by the pleadings but there is no appear first in the mortgage contract and those in paragraph (k)
genuine issue of fact, and all the facts are within the judicial knowledge of which follow thereafter and necessarily took into account the provisions of
the court, summary judgment may be granted. the preceding two paragraphs.
The notices respectively mentioned in paragraphs (d) and (k) are
Real test: whether the pleadings, affidavits and exhibits in support of the addressed to the particular purposes contemplated therein.
motion are sufficient to overcome the opposing papers and to justify Those mentioned in paragraph (k) are specific and additional
a finding as a matter of law that there is no defense to the action or requirements intended for the mortgagors so that, thus apprised,
that the claim is clearly meritorious. 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
Case at bar: petitioners' action in the court below for annulment and/or subsequently arrange for redemption of the property foreclosed.
declaration of nullity of the foreclosure proceedings and damages ripe for
summary judgment. PR having caused the formulation and preparation of the printed
PR tacitly admitted in its answer that it did not send any formal notice of mortgage contract in question, any obscurity that it imputes
foreclosure to petitioners omission (by itself) rendered the foreclosure thereto or which supposedly appears therein should not favor it as
defective and irregular no further necessity to inquire into the a contracting party.
other issues cited by the trial court, for the foreclosure may be
annulled solely on the basis of such defect. Decision: decision appealed from is hereby REVERSED and SET ASIDE
and this case is REMANDED to the court of origin for further
While private respondent was constituted as their attorney-in-fact by proceedings in conformity with this decision. This judgment is immediately
petitioners, the inclusion of the aforequoted paragraph (k) in the executory.
mortgage contract nonetheless rendered personal notice to the
latter indispensable.
Community Savings & Loan Association, Inc., et al. vs. Court of Appeals, et
al.,: CA ruled that provision in the contract1 is an additional stipulation
between the parties. 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 MANUEL D. MEDIDA, Deputy Sheriff of the Province of Cebu, CITY
was mutually agreed upon by the parties as additional condition of SAVINGS BANK (formerly Cebu City Savings and Loan Association,
the mortgage contract. Inc.) and TEOTIMO ABELLANA, petitioners,
Failure to comply with this additional stipulation would render illusory vs.
Article 1306 of the New Civil Code of the Philippines (p. 37, Rollo). COURT OF APPEALS and SPS. ANDRES DOLINO and PASCUALA
DOLINO, respondents.
SC does not agree with CA that paragraph (k) of the mortgage contract in Gines N. Abellana for petitioners.
question was intended merely to indicate the address to which the Dionisio U. Flores for private respondents.
communications stated therein should be sent. already been interpreted
Spouses Dolino (private respondents) mortgaged their lot of the Cebu City
Cadastre to Cebu City Development bank foreclosed Gandioncho
1 (10)All correspondence relative to this mortgage, including demand letters, summons, bought it in a foreclosure sale
subpoenas, or notifications of any judicial or extrajudicial actions shall be sent to the Plaintif spouses, alarmed of losing their right of redemption, went to
Mortgagor at the address given above or at the address that may hereafter be given Abellana (president of Cebu City Savings and Loan Association) to obtain
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 a loan of P30k
notice to the Mortgagor for all legal purposes, Prior to this, their son Dolino filed a similar loan application for P25k
and offered the subject lot as security for the P30k loan from CCSLA
Both documents indicated that the principal obligation is for the P30k
pesos payable in 1 year with 12% per annum interest CA modified the decision of RTC declaring as void and ineffective the
When the loan became due and demandable (Spouses failed to pay) real estate mortgage executed by the spouses in favor of CCSLA
CCSLA extrajudicially foreclosed the mortgage.
After the posting and publication requirements were complied with the Petitioners filed MR denied
land was sold at public auction to CCSLA (being the highest bidder)
The certificate of was issued the day after and registered on May 10 ISSUE:
1976 with the Register of Deeds of Cebu 1) WON respondent court erred in declaring the real estate mortgage
On May 24 1971, no redemption was effected by the spouses so the void
TCT was cancelled and a new TCT in the name of CCSLA was issued 2) WON judgment of the trial court declaring ineffective the
extrajudicial foreclosure of said mortgage and ordering the
On October 18, 1979, Spouses Dolino filed civil case for the annulment of cancellation of TCT issued in favor of CCSLA
the sale at public auction conducted on April 19, 1976, as well as the
corresponding certificate of sale issued pursuant thereto assailed the 1) CA ERRED IN DECLARING THE REAL ESTATE MORTGAGE VOID
validity of the extrajudicial foreclosure sale of their property, CA declared the REM void because the mortgagor spouses, at the time
claiming that the same was held in violation of Act No. 3135, as when the said mortgage was executed, were no longer the owners of the
amended prayed for the cancellation of TCT issued in favor of therein lot, having supposedly lost the same when the lot was sold to a
City Savings and Loan Association, Inc., now known as City Savings Bank purchaser in the foreclosure sale under the prior mortgage.
and one of the petitioners herein.
CCSLA denied the material allegations of the complaint PR spouses Since it wasnt raised in the lower court cannot be raised for the first
may still avail their right of redemption over the land in question time in appeal
BUT since CA took cognizance thereof SC may consider such procedure
Court analogous to the rule that an unassigned error closely related to an error
-held validity of the loan and the REM BUT annulled foreclosure sale properly assigned, or upon which the determination of the question
because they failed to comply with the notice requirements properly assigned is dependent, may be considered by an appellate court.
-Ordered cancellation of TCT in the name of CCSLA and issuance of
new TCT to contain all the annotations made in TCT No. 14272 of the SC adopted this approach since both lower courts agreed upon the
plaintiffs Pascuala Sabellano, married to Andres Dolino; invalidity of the extrajudicial foreclosure but differed only on the
-Ordering the Spouses to pay the defendant Cebu City Savings and matter of the validity of the real estate mortgage upon which the
Loan Association, Inc. the unpaid balance of the loan, plus extrajudicial foreclosure was based.
interest; and reimbursing said defendant the value of any
necessary and useful expenditures on the property after CA relied on an obiter dictum laid down in Dizon vs. Gaborro, et al. which
deducting any income derived by said defendant from the we shall analyze. For, as explicitly stated therein by the Court, "(t)he basic
property. issue to be resolved in this case is whether the 'Deed of Sale with
For this purpose, CCSLA is given 15 days from receipt hereof within Assumption of Mortgage' and the 'Option to Purchase Real Estate,'
which to submit its statement of the amount due it from the two instruments executed by and between petitioner Jose P. Dizon and
spouses Dolino, with notice to them. Alfredo G. Gaborro (defendant below) on the same day, October 6, 1959,
The payment to be made by the plaintiffs shall be within ninety (90) days constitute in truth and in fact an absolute sale of the three parcels
from their receipt of the order approving the amount due the defendant of land therein described or merely an equitable mortgage or
Cebu City Savings and Loan Association, Inc. conveyance thereof by way of security for reimbursement or
repayment by petitioner Jose P. Dizon of any and all sums which may have
PR interposed a partial appeal: lower court erred in been paid to the Development Bank of the Philippines and the Philippine
(1) declaring that the mortgage executed by the therein plaintiff National Bank by Alfredo G. Gaborro . . . ." (BASICALLY IF IT WAS AN
(2) permitting therein Cebu City Savings and Loan Association, Inc. to
collect interest after the same foreclosure proceedings and Said documents were execute and the payments made by Gaborro for the
auction sale which are null and void from the beginning; debt of Dizon to the said banks AFTER DBP had foreclosed the
(3) not ordering the forfeiture of the capital or balance of the loan mortgage executed by Dizon and DURING the period of redemption
with usurious interest; and after the foreclosure sale of the mortgaged property to said
(4) not sentencing therein defendant to pay damages and attorney's fees creditor bank.
to plaintiffs.
RTC said that the true agreement was that Gaborro would assume and Such an instrument cannot be legally considered a real and unconditional
pay the indebtedness of Dizon to the banks and, in consideration sale of the parcels of land,
thereof, Gaborro was given the possession and enjoyment of the 1) because there was absolutely no money consideration therefor, as
properties in question until Dizon shall have reimbursed him for admittedly stipulated, the sum of P131,831.91 mentioned in the document
the amount paid to the creditor banks. as the consideration "receipt of which was acknowledged" was not actually
RTC ordered the reformation of the documents to the extent indicated and paid; and,
such particular relief was affirmed by the Court of Appeals. This Court held 2) because the properties had already been previously sold by the
that the agreement between the parties is one of those innominate sheriff at the foreclosure sale, thereby divesting the petitioner of
contracts under Article 1307 of the Civil Code whereby the parties his full right as owner thereof to dispose and sell the lands.
agreed "to give and to do" certain rights and obligations, but
partaking of the nature of antichresis. Obiter was unnecessary because no sale was concluded and it was also
inaccurate if admitted, purchaser at a foreclosure sale mere acquired an
CA inchoate right to the property which could ripen into ownership only upon
The two instruments sought to be reformed in this case appear to the lapse of the redemption period without his credit having been
stipulate rights and obligations between the parties thereto discharged
pertaining to and involving parcels of land that had already been Illogical to hold that during that same period of twelve months the
foreclosed and sold extrajudicially, and purchased by the mortgage mortgagor was "divested" of his ownership, since the absurd result would
creditor, a third party. necessary, to determine the legality of said be that the land will consequently be without an owner although it
rights and obligations arising from the foreclosure and sale remains registered in the name of the mortgagor.
proceedings not only between the two contracting parties to the
instruments executed between them but also in so far as the What is divested from the mortgagor is only his "full right as owner
agreement affects the rights of the third party, the purchaser thereof to dispose (of) and sell the lands," merely clarifying that
Bank. the mortgagor does not have the unconditional power to
absolutely sell the land since the same is encumbered by a lien of
ROC Rule 39, Section 33, the judgment debtor remains in a third person which, if unsatisfied, could result in a consolidation
possession of the property foreclosed and sold, during the period of ownership in the lienholder but only after the lapse of the
of redemption. If the judgment debtor is in possession of the period of redemption.
property sold, he is entitled to retain it, and receive the fruits, the What is delimited is NOT the mortgagor's jus dispodendi, as an
purchaser not being entitled to such possession. attribute of ownership, but merely the rights conferred by such act of
disposal which may correspondingly be restricted.
Upon foreclosure and sale, the purchaser is entitled to a certificate
of sale executed by the sheriff. (Section 27, Revised Rules of Court). Still not applicable to the case because what is presently involved is a
After the termination of the period of redemption and no mortgage, not a sale, to petitioner bank. does not involve a
redemption having been made, the purchaser is entitled to a deed of transfer, cession or conveyance of the property but only constitutes a lien
conveyance and to the possession of the properties. (Section 35, thereon. no obstacle to the legal creation of such a lien even after the
Revised Rules of Court). auction sale of the property but during the redemption period, since no
distinction is made between a mortgage constituted over the property
The weight of authority is to the effect that the purchaser of land sold before or after the auction sale thereof.
at public auction under a writ of execution has only an inchoate Redemptioner: is defined as a creditor having a lien by attachment,
right to the property, subject to be defeated and terminated judgment or mortgage on the property sold, or on some part
within the period of 12 months from the date of sale, by a thereof, subsequent to the judgment under which the property was
redemption on the part of the owner. sold.

Therefore, the judgment debtor in possession of the property is Of course, while in extrajudicial foreclosure the sale contemplated is not
entitled to remain therein during the period for redemption. under a judgment but the proceeding pursuant to which the mortgaged
property was sold, a subsequent mortgage could nevertheless be legally
after the extrajudicial foreclosure and sale of his properties petitioner constituted thereafter with the subsequent mortgagee becoming and
Dizon retained the right to redeem the lands, the possession, use and acquiring the rights of a redemptioner, aside from his right against the
enjoyment of the same during the period of redemption under mortgagor.
instrument captioned Deed of Sale with Assumption of Mortgage 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 The effect of the exercise of the right of redemption by the mortgage
mortgage on the property. debtor is NOT the recovery of ownership of his land, which
To hold otherwise would create the inequitable situation wherein the ownership he never lost, but the elimination from his title thereto
mortgagor would be deprived of the opportunity, which may be his of the lien created by the levy on attachment or judgment or the
last recourse, to raise funds wherewith to timely redeem his registration of a mortgage thereon.
property through another mortgage thereon. Redemption of property sold under a foreclosure sale DEFEATS the
inchoate right of the purchaser and restores the property to the
IN THE PRESENT CASE same condition as if no sale had been attempted.
REM in favor of petitioner bank was executed during the period of
redemption. Further, it does NOT give to the mortgagor a new title, but merely restores
During the said period, the mortgagor is still the owner of the to him the title freed of the encumbrance of the lien foreclosed.
foreclosed property since the right of the purchaser at a
foreclosure sale is merely inchoate until the period of redemption Lower court already ruled that violation of Act No. 3135, as amended
expires without the right being exercised nullified the extrajudicial foreclosure proceeding and its effects. Such
findings and ruling of the trial court are already final and binding
The title to land sold under mortgage foreclosure remains in the on petitioners and can no longer be modified, petitioners having
mortgagor or his grantee until the expiration of the redemption failed to appeal therefrom.
period and conveyance by the master's deed.
The rule has always been that it is only upon the expiration of the Decision:
redemption period, without the judgment debtor having made use of his CA decision modifying the RTC decision is REVERSED and SET ASIDE. The
right of redemption, that the ownership of the land sold becomes judgment of said trial court REINSTATED.
consolidated in the purchaser.