AUTOZENTRUM ALABANG, INC., Petitioner, v. SPOUSES MIAMAR A. BERNARDO AND GENARO F. BERNARDO, JR.

The Case

This petition for review1 assails the Decision dated 30 June 20142 and Resolution dated 4 September 20143 of the Court of
Appeals (CA) in CA-G.R. SP No. 127748, which affirmed the Decision dated 30 April 20124 of the Department of Trade and
Industry (DTI).

The Facts

On 12 November 2008, respondents Spouses Miamar A. Bernardo and Genaro F. Bernardo, Jr. (Spouses Bernardo) bought a
2008 BMW 320i sports car, in the amount of P2,990,000, from petitioner Autozentrum Alabang, Inc. (Autozentrum), a
domestic corporation and authorized dealer of BMW vehicles. Autozentrum was authorized to deliver a brand new car to
Spouses Bernardo.5 ChanRoblesVirtualawl ibra ry

On 12 October 2009, Spouses Bernardo brought the car to BMW Autohaus, the service center of respondent Asian Carmakers
Corporation (ACC), because its ABS brake system and steering column malfunctioned. On 26 October 2009, six days after
the car's release, Spouses Bernardo returned the car to BMW Autohaus due to the malfunctioning of the electric warning
system and door lock system. Sometime in March 2010, the car was brought again to BMW Autohaus because its air
conditioning unit bogged down. BMW Autohaus repaired the car under its warranty.

In September 2010, Spouses Bernardo brought the car to BMW Autohaus, under an insurance claim, for the replacement of
its two front wheels due to the damage of its wishbone component. BMW Autohaus performed the repairs and discovered
that one of the rear tires did not have Running Flat Technology (RFT), when all of its tires should have RFT. Upon being
informed, Autozentrum replaced the ordinary tire with an RFT tire.

On 13 January 2011, Spouses Bernardo brought the car to ACC because the car's fuel tank was leaking. ACC replaced the
fuel tank without cost to the Spouses Bernardo. On 17 January and 26 January 2011, Spouses Bernardo sent letters to
Autozentrum, demanding for the replacement of the car or the refund of their payment.

In his letter dated 29 January 2011,6 Autozentrum's Aftersales Manager Ron T. Campilan (Campilan) replied that the car
purchased by Spouses Bernardo was certified pre-owned or used, and that Autozentrum's legal department was still
examining their demand.

On 24 February 2011, Spouses Bernardo filed a complaint for refund or replacement of the car and damages with the DTI
against respondents Autozentrum, ACC, and Bayerishe Motoren Werke (BMW) A.G. for violation of Article 50(b) and (c), in
relation to Article 97, of the Consumer Act of the Philippines or Republic Act No. (RA) 7394.

In their Supplemental Complaint dated 23 September 2011, Spouses Bernardo alleged that they brought the car again to
Autozentrum after the electrical system and programming control units malfunctioned on 4 June 2011. The car was released
to them five days later, but was towed to Autozentrum on 8 August 2011, because its engine emitted smoke inside the car.
Autozentrum has custody of the car until now.

The DTI Ruling

In a Decision dated 30 April 2012, DTI Hearing Officer Maria Fatima B. Pacampara (Hearing Officer) ruled that Autozentrum
violated the Consumer Act of the Philippines particularly the provisions on defective products and deceptive sales. In
concluding that the car was defective, the Hearing Officer considered that the major malfunctions in the car do not usually
happen in such a short period of usage, and Autozentrum did not present proof that the malfunctions were caused by
ordinary wear and tear.

The Hearing Officer further held Autozentrum liable for deceptive sales because the car was not brand new at the time of
sale, contrary to what Autozentrum represented to Spouses Bernardo. However, the Hearing Officer exculpated ACC and
BMW, since there was no proof that the defects were due to design and manufacturing, and they were not privy to the sale of
the car.

The dispositive portion of the Decision reads: chanRob lesvi rtua lLawl ibra ry

WHEREFORE, in view of the foregoing, this Honorable Office finds in favor of the Complainant. The Respondent Autozentrum,
having violated the provisions of the Consumer Act particularly on defective products and deceptive sales act, is hereby
ordered to:

1. To pay an administrative fine of ONE HUNDRED SIXTY THOUSAND PESOS (Php 160,000.00) and the additional
administrative fine of not more than One Thousand Pesos (Php 1,000.00) for each day of continuing violation, at the DTI-
NCR Cashier's Office at the 12th Floor, Trafalgar Plaza, HV Dela Costa St., Salcedo Village, Makati City;

2. To refund, in favor of the Complainant, the purchase price of the subject vehicle [in the] amount of Two Million Nine
Hundred and Ninety Thousand Pesos (Php 2,990,000.00) for the amount of the memory stick [sic] bought from the
Respondent.
SO ORDERED.7 cralawred

In a Resolution dated 14 September 2012, the DTI Appeals Committee affirmed the findings of the Hearing Officer, but
modified the amount to be reimbursed to Spouses Bernardo taking into account the depreciation of the car, as follows: c hanRoblesv irtual Lawlib rary

WHEREFORE, premises considered, the instant appeal is hereby dismissed. The decision finding respondent to have violated
the provisions of the Consumer Act is affirmed with modification in paragraph 2 thereof. In view of the fact that the
complainants had made use of the vehicle for two (2) years, the Committee modifies par. 1 of the dispositive portion of the
decision pursuant to the case entitled Sps. Eslao vs. Ford Cars Alabang, Adm. Case No. 07-43. Said decision was appealed to
the Court of Appeals through petition for certiorari (CA-G.R. SP No. 111859) and Supreme Court through petition for review
on certiorari (Ford Cars Alabang vs. Sps. Ike and Mercelita Eslao, et al. (G.R. No. 194250) wherein the Court resolves to
deny the petition for failure to show any reversible error in the challenged resolution. The decision dated 11 March 2009 in
Adm. Case No. 07-43 which was partly modified in the Resolution dated 1 October 2009 of the DTI-Appeals Committee was
then fully implemented. On that basis, the Committee modifies par. 2 of the dispositive portion of the assailed decision to
read as follows:

2. To reimburse the total purchase price of the subject BMW 320i unit less the beneficial use of the vehicle.

Record shows that complainant already used the vehicle for two (2) years before the filing of the complaint. In this regard,
the Committee deems it proper and reasonable to apply COA Circular No. 2003-07 dated 11 December 2003 entitled Revised
Estimated Useful Life in Computing Depreciation for Government Property. By analogy, such circular provides the basis for
computing the depreciation value of a vehicle. Under par. 4 of the said Circular, a residual value equivalent to 10% of the
acquisition cost/ appraised value shall be deducted before dividing the same by the Estimated Useful Life. Annex "A" thereof
provides that the Estimated Useful Life (in years) of motor vehicles is seven (7) years.

Thus, the complainant is entitled to the reimbursement, computed as follows: chanRoble svirtual Lawlib ra ry

Acquisition cost x 10%

Php2,990,000.00 x 10% = Php299,000.00 (Residual Value)

Acquisition cost less the residual value

Php2,990,000.00 - Php299,000.00 = Php2,691,000.00

Php2,691,000.00/7 years (estimated useful life)= Php384,428.57

(depreciated value per year)

Depreciated value x the number of beneficial use

Php384,428.57 x 2 (the no. of years vehicle was used before filing of the complaint)= Php 768,857.14

Acquisition Cost - Depreciation value for 2 years

Php2,990,000.00 - Php 768,857.14 = Php2,221,142.90
(remaining value of the vehicle) c ralaw red

The complainant shall be reimbursed the amount of two million two hundred twenty one thousand one hundred forty two
pesos and ninety centavos (Php 2,221,142.90), however, the subject vehicle shall be returned to the respondent.

SO ORDERED.8 cralawred

Hence, Autozentrum filed an appeal with the CA.

The Decision of the CA

In a Decision dated 30 June 2014, the CA ruled in favor of Spouses Bernardo. The CA found that the car was defective and
not brand new. Thus, the CA held that Autozentrum should be liable under Article 1561, in relation to Article 1567, of the
Civil Code, and not under Articles 97 and 98 of RA 7394. The CA ruled that a two-year depreciation value should not be
deducted from the purchase price of the car, since Autozentrum did not submit proof of depreciation.

The CA also held Autozentrum liable for deceptive sales under Article 50(c) of RA 7394, because it represented an altered
and second-hand vehicle as a brand new one. The dispositive portion of the Decision reads: chanRoble svirtual Lawlib ra ry

WHEREFORE, finding the petition for certiorari bereft of merit, the same is hereby DISMISSED. The assailed resolution of the
DTI is hereby AFFIRMED with MODIFICATION in that as regards the amount of refund/reimbursement of the purchase price
of the subject vehicle, petitioner is hereby ORDERED to pay the full amount of TWO MILLION NINE HUNDRED NINETY
THOUSAND PESOS (Php2,990,000.00).

SO ORDERED.9 cralawred

In a Resolution dated 4 September 2014, the CA denied the motion for reconsideration filed by Autozentrum.
Hence, this petition.
 The Issues

Autozentrum raises the following issues for resolution: chanRob lesvi rtua lLawlibra ry

I. THE HONORABLE ADJUDICATING OFFICER GRAVELY ABUSED HER DISCRETION AND/OR EXCEEDED HER
AUTHORITY IN RULING THAT THE PETITIONER VIOLATED ARTICLE 97 OF THE CONSUMER ACT OF
THE PHILIPPINES WHEN THE LAW AND EVIDENCE CLEARLY SHOW IT DID NOT.

II. THE HONORABLE ADJUDICATING OFFICER GRAVELY ABUSED HER DISCRETION IN RULING THAT THE
PETITIONER HAD VIOLATED ART. 50 OF THE CONSUMER ACT OF THE PHILIPPINES (R.A. 7394)
ON PROHIBITION AGAINST DECEPTIVE SALES ACTS OR PRACTICES WHEN THE FACTS OF THE CASE
POINT THAT IT DID NOT.

III. THE HONORABLE ADJUDICATING OFFICER GRAVELY ABUSED HER DISCRETION AND/OR EXCEEDED HER
AUTHORITY IN ORDERING SOLELY THE PETITIONER TO REFUND THE ENTIRE PURCHASE PRICE OF THE
SUBJECT VEHICLE.

IV. ASSUMING ARGUENDO THAT THE PETITIONER HAS INDEED VIOLATED THE SAID ARTS. 97 AND/OR 50 OF
THE CONSUMER ACT OF THE PHILIPPINES, THE HONORABLE ADJUDICATING OFFICER [GRAVELY] ABUSED
HER DISCRETION AND/OR EXCEEDED HER AUTHORITY IN IMPOSING THE AMOUNT OF THE PENALTIES
IMPOSED.

V. THE OFFICE OF THE DTI SECRETARY THROUGH THE APPEALS COMMITTEE COMMITTED [AN] ERROR IN
AFFIRMING THE DECISION OF THE ADJUDICATING OFFICER.

VI. THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION THE
RESOLUTION/DECISION OF THE OFFICE OF THE DTI SECRETARY AND IN DENYING PETITIONER'S MOTION
FOR RECONSIDERATION.10

The Ruling of the Court

The petition has no merit.

Spouses Bernardo allege that Autozentrum violated Article 50(b) and (c), in relation to Article 97, of RA 7394, when it sold to
them a defective and used car, instead of a brand new one. Autozentrum, however, claims that Spouses Bernardo failed to
prove the elements of deceit or misrepresentation under Article 50, and injury under Article 97.

The relevant provisions of RA 7394 or the Consumer Act of the Philippines are: c hanRoble svirtual Lawlib ra ry

Article 50. Prohibition Against Deceptive Sales Acts or Practices. - A deceptive act or practice by a seller or supplier in
connection with a consumer transaction violates this Act whether it occurs before, during or after the transaction. An act or
practice shall be deemed deceptive whenever the producer, manufacturer, supplier or seller, through concealment, false
representation of fraudulent manipulation, induces a consumer to enter into a sales or lease transaction of any consumer
product or service.

Without limiting the scope of the above paragraph, the act or practice of a seller or supplier is deceptive when it
represents that:

a) a consumer product or service has the sponsorship, approval, performance, characteristics, ingredients, accessories, uses,
or benefits it does not have;

b) a consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is not;

c) a consumer product is new, original or unused, when in fact, it is in a deteriorated, altered, reconditioned,
reclaimed or second-hand state;

d) a consumer product or service is available to the consumer for a reason that is different from the fact;

e) a consumer product or service has been supplied in accordance with the previous representation when in fact it is not;

f) a consumer product or service can be supplied in a quantity greater than the supplier intends;

g) a service, or repair of a consumer product is needed when in fact it is not;

h) a specific price advantage of a consumer product exists when in fact it does not;

i) the sales act or practice involves or does not involve a warranty, a disclaimer of warranties, particular warranty terms or
other rights, remedies or obligations if the indication is false; and
j) the seller or supplier has a sponsorship, approval, or affiliation he does not have.

xxxx

Article 97. Liability for the Defective Products. - Any Filipino or foreign manufacturer, producer, and any importer, shall be
liable for redress, independently of fault, for damages caused to consumers by defects resulting from design, manufacture,
construction, assembly and erection, formulas and handling and making up, presentation or packing of their products, as well
as for the insufficient or inadequate information on the use and hazards thereof.

A product is defective when it does not offer the safety rightfully expected of it, taking relevant circumstances
into consideration, including but not limited to:

a) presentation of product;
b) use and hazards reasonably expected of it;
c) the time it was put into circulation.

A product is not considered defective because another better quality product has been placed in the market.

The manufacturer, builder, producer or importer shall not be held liable when it evidences:

a) that it did not place the product on the market;

b) that although it did place the product on the market such product has no defect;
c) that the consumer or a third party is solely at fault.11 (Emphasis supplied) c ralaw red

RA 7394 specifically provides that an act of a seller is deceptive when it represents to a consumer that a product is new,
original or unused, when in fact, it is deteriorated, altered, reconditioned, reclaimed or second-hand. A representation is not
confined to words or positive assertions; it may consist as well of deeds, acts or artifacts of a nature calculated to mislead
another and thus allow the fraud-feasor to obtain an undue advantage.12 Failure to reveal a fact which the seller is, in good
faith, bound to disclose may generally be classified as a deceptive act due to its inherent capacity to deceive.13 Suppression
of a material fact which a party is bound in good faith to disclose is equivalent to a false representation.14 ChanRobles Vi rtualaw lib rary

A case where the defendant repainted an automobile, worked it over to resemble a new one and represented that the
automobile being sold was new, was found to be "a false representation of an existing fact; and, if it was material and
induced the plaintiff to accept something entirely different from that which he had contracted for, it clearly was a fraud
which, upon its discovery and a tender of the property back to the seller, entitled the plaintiff to rescind the trade and
recover the purchase money."15 ChanRoblesVirt ualawli bra ry

In the present case, both the DTI and the CA found that Autozentrum sold a defective car and represented a second-hand
car as brand new to Spouses Bernardo. In finding that the evidence weighs heavily in favor of Spouses Bernardo, the DTI
and the CA gave considerable weight to the following facts: (1) the condition of the car in just 11 months from the date of
purchase; (2) Autozentrum's Aftersales Manager Campilan's letter declaring that the vehicle was certified pre-owned or used;
(3) one of the tires was not RFT; and (4) the Land Transportation Office (LTO) registration papers stating that Autozentrum
was the previous owner of the car. As public documents, the LTO registration papers are prima facie evidence of the facts
stated therein.16ChanRobles Vi rtua lawlib rary

By reason of the special knowledge and expertise of the DTI over matters falling under its jurisdiction, it is in a better
position to pass judgment on the issues; and its findings of fact in that regard, especially when affirmed by the CA, are
generally accorded respect, if not finality, by this Court.17 ChanRobles Vi rtua lawlib rary

Moreover, by claiming that its initial intention was for the car to be used by one of its executive officers, Autozentrum
effectively admitted ownership of the car prior to its purchase by Spouses Bernardo. Autozentrum failed to present evidence
that its intention did not occur. On the other hand, Autozentrum's registration of the car under its name and Campilan's
letter bolster the fact that the car was pre-owned and used by Autozentrum. For failure to reveal its prior registration of the
car in its name, and for representing an altered and second-hand car as brand new to Spouses Bernardo, Autozentrum
committed a deceptive sales act, in violation of Section 50 of RA 7394.

However, Autozentrum cannot be liable under Article 97 of RA 7394 because Spouses Bernardo failed to present evidence
that Autozentrum is the manufacturer, producer, or importer of the car and that damages were caused to them due to
defects in design, manufacture, construction, assembly and erection, formulas and handling and making up, presentation or
packing of products, as well as for the insufficient or inadequate information on the use and hazards thereof.

RA 7394 provides the penalties for deceptive, unfair, and unconscionable sales acts or practices, as follows: chanRoble svirtual Lawli bra ry

Article 60. Penalties. - a) Any person who shall violate the provisions of Title III, Chapter I, shall upon conviction, be subject
to a fine of not less than Five Hundred Pesos (P500.00) but not more than Ten Thousand Pesos (P10,000.00) or
imprisonment of not less than five (5) months but not more than one (1) year or both, upon the discretion of the court.

b) In addition to the penalty provided for in paragraph (1), the court may grant an injunction restraining the conduct
constituting the contravention of the provisions of Articles 50 and 51 and/or actual damages and such other orders as it
thinks fit to redress injury to the person caused by such conduct.

xxxx

Article 164. Sanctions. - After investigation, any of the following administrative penalties may be imposed even if not
prayed for in the complaint:

a) the issuance of a cease and desist order, Provided, however, That such order shall specify the acts that respondent shall
cease and desist from and shall require him to submit a report of compliance therewith within a reasonable time;

b) the acceptance of a voluntary assurance of compliance or discontinuance from the respondent which may include any or
all of the following terms and conditions:

1) an assurance to comply with the provisions of this Act and its implementing rules and regulations;

2) an assurance to refrain from engaging in unlawful acts and practices or unfair or unethical trade practices subject of the
formal investigation;

3) an assurance to comply with the terms and conditions specified in the consumer transaction subject of the complaint;

4) an assurance to recall, replace, repair, or refund the money value of defective products distributed in commerce;

5) an assurance to reimburse the [complainant] out of any money or property in connection with the complaint, including
expenses in making or pursuing the complaint, if any, and to file a bond to guarantee compliance therewith.

c) restitution or rescission of the contract without damages;

d) condemnation and seizure of the consumer product found to be hazardous to health and safety unless the respondent files
a bond to answer for any damage or injury that may arise from the continued use of the product;

e) the imposition of administrative fines in such amount as deemed reasonable by the Secretary, which shall in
no case be less than Five Hundred Pesos (P500.00) nor more than Three Hundred Thousand Pesos
(P300,000.00) depending on the gravity of the offense, and an additional fine of not more than One Thousand
Pesos (P1,000.00) for each day of continuing violation. 18 (Emphasis supplied) cra lawre d

DTI Department Administrative Order No. 007-06 reiterates the power of the DTI Adjudication Officer to impose the
19

following penalties upon the respondent, if warranted, and even if these have not been prayed for by the complainant: "(3)
The restitution or rescission of the contract without damages; x x x (5) The imposition of an administrative fine in such
amount as deemed reasonable by the Adjudication Officer, which shall in no case be less than Five Hundred Pesos (P500.00)
nor more than Three Hundred Thousand Pesos (P300,000.00) depending on the gravity of the offense, and [an] additional
administrative fine of not more than One Thousand Pesos (P1,000.00) for each day of continuing violation x x x."

The DTI is tasked with protecting the consumer against deceptive, unfair, and unconscionable sales acts or practices.20 Thus,
the DTI can impose restitution or rescission of the contract without damages and payment of administrative fine ranging
from P500 to P300,000, plus P1,000 for each day of continuing violation. Rescission creates the obligation to return the
things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be
carried out only when he who demands rescission can return whatever he may be obliged to restore.21 Rescission abrogates
the contract from its inception and requires a mutual restitution of the benefits received.22 ChanRoble sVirtualawl ibra ry

Records show that Autozentrum already possessed the car since 8 August 2011. Thus, the DTI Hearing Officer and the CA
correctly applied RA 7394 and DTI Department Administrative Order No. 007-06 when they ordered Autozentrum to return to
Spouses Bernardo the value of the car amounting to P2,990,000 and to pay an administrative fine of P160,000 and an
additional administrative fine of not more than P1,000 for each day of continuing violation.
Section 1 of Resolution No. 796 of the Monetary Board of the Bangko Sentral ng Pilipinas dated 16 May 2013 provides: "The
rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence
of an express contract as to such rate of interest, shall be six percent (6%) per annum." Thus, Autozentrum is ordered to
pay the value of the car amounting to P2,990,000, with a legal interest rate of 6% per annum from the finality of this
Decision until the amount is fully paid.
WHEREFORE, we DENY the petition and AFFIRM with MODIFICATION the Decision dated 30 June 2014 and Resolution
dated 4 September 2014 of the Court of Appeals in CA-G.R. SP No. 127748. We ORDER petitioner Autozentrum Alabang,
Inc. to RETURN to respondents Spouses Miamar A. Bernardo and Genaro F. Bernardo, Jr. the value of the car amounting to
P2,990,000, with 6% interest per annum from the finality of this Decision until the amount is fully paid.
 EQUITABLE SAVINGS BANK, (NOW KNOWN AS THE MERGED ENTITY "BDO UNIBANK, INC.") Petitioner,
v. ROSALINDA C. PALCES, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated February 13, 2014 and the Resolution3 dated October
8, 2014 of the Court of Appeals (CA) in CA-G.R. CV No. 96008, which partially affirmed the Decision4 dated May 20, 2010 of
the Regional Trial Court of Pasay City, Branch 114 (RTC) in Civil Case No. 07-03 86-CFM and ordered petitioner Equitable
Savings Bank, now BDO Unibank, Inc. (petitioner), to reimburse respondent Rosalinda C. Palces (respondent) the
installments she made in March 2007 amounting to P103,000.00.

The Facts

On August 15, 2005, respondent purchased a Hyundai Starex GRX Jumbo (subject vehicle) through a loan granted by
petitioner in the amount of P1,196,100.00. In connection therewith, respondent executed a Promissory' Note with Chattel
Mortgage5 in favor of petitioner, stating, inter alia, that: (a) respondent shall pay petitioner the aforesaid amount in 36-
monthly installments of P33,225.00 per month, beginning September 18, 2005 and every 18th of the month thereafter until
full payment of the loan; (b) respondent's default in paying any installment renders the remaining balance due and payable;
and (c) respondent's failure to pay any installments shall give petitioner the right to declare the entire obligation due and
payable and may likewise, at its option, x x x foreclose this mortgage; or file an ordinary civil action for collection and/or
such other action or proceedings as may be allowed under the law.6

From September 18, 2005 to December 21, 2006, respondent paid the monthly installment of P33,225.00 per month.
However, she failed to pay the monthly installments in January and February 2007, thereby triggering the acceleration clause
contained in the Promissory Note with Chattel Mortgage7 and prompting petitioner to send a demand letter8 dated February
22, 2007 to compel respondent to pay the remaining balance of the loan in the amount of P664,500.00.9 As the demand
went unheeded, petitioner filed on March 7, 2007 the instant Complaint for Recovery of Possession with Replevin with
Alternative Prayer for Sum of Money and Damages10 against respondent before the RTC, praying that the court a quo: (a)
issue a writ of replevin ordering the seizure of the subject vehicle and its delivery to petitioner; or (b) in the alternative as
when the recovery of the subject vehicle cannot be effected, to render judgment ordering respondent to pay the remaining
balance of the loan, including penalties, charges, and other costs appurtenant thereto.11

Pending respondent's answer, summons12 and a writ of replevin13 were issued and served to her personally on April 26,
2007, and later on, a Sheriffs Return14 dated May 8, 2007 was submitted as proof of the implementation of such writ.15

In her defense,16 while admitting that she indeed defaulted on her installments for January and February 2007, respondent
nevertheless insisted that she called petitioner regarding such delay in payment and spoke to a bank officer, a certain
Rodrigo Dumagpi, who gave his consent thereto. Respondent then maintained that in order to update her installment
payments, she paid petitioner the amounts of P70,000.00 on March 8, 2007 and P33,000.00 on March 20, 2007, or a total of
P103,000.00. Despite the aforesaid payments, respondent was surprised when petitioner filed the instant complaint,
resulting in the sheriff taking possession of the subject vehicle.17

The RTC Ruling

In a Decision18 dated May 20, 2010, the RTC ruled in petitioner's favor and, accordingly, confirmed petitioner's right and
possession over the subject vehicle and ordered respondent to pay the former the amount of P15,000.00 as attorney's fees
as well as the costs of suit.19

The RTC found that respondent indeed defaulted on her installment payments in January and February 2007, thus, rendering
the entire balance of the loan amounting to P664,500.00 due and demandable. In this relation, the RTC observed that
although respondent made actual payments of the installments due, such payments were all late and irregular, and the same
were not enough to fully pay her outstanding obligation, considering that petitioner had already declared the entire balance
of the loan due and demandable. However, since the writ of replevin over the subject vehicle had already been implemented,
the RTC merely confirmed petitioner's right to possess the same and ruled that it is no longer entitled to its alternative
prayer, i.e., the payment of the remaining balance of the loan, including penalties, charges, and other costs appurtenant
thereto.20

Respondent moved for reconsideration,21 but was denied in an Order22 dated August 31, 2010. Dissatisfied, respondent
appealed23 to the CA, contending that petitioner acted in bad faith in seeking to recover more than what is due by attempting
to collect the balance of the loan and, at the same time, recover the subject vehicle.24

The CA Ruling

In a Decision25 dated February 13, 2014, the CA affirmed the RTC ruling with modification: (a) ordering petitioner to return
the amount of P103,000.00 to respondent; and (b) deleting the award of attorney's fees in favor of petitioner for lack of
sufficient basis. It held that while respondent was indeed liable to petitioner under the Promissory Note with Chattel
Mortgage, petitioner should not have accepted respondent's late partial payments in the aggregate amount of P103,000.00.
In this regard, the CA opined that by choosing to recover the subject vehicle via a writ of replevin, petitioner already waived
its right to recover any unpaid installments, pursuant to Article 1484 of the Civil Code. As such, the CA concluded that
respondent is entitled to the recovery of the aforesaid amount.26

Aggrieved, petitioner moved for partial reconsideration27 - specifically praying for the setting aside of the order to return the
amount of P103,000.00 to respondent - which was, however, denied in a Resolution28 dated October 8, 2014; hence, this
petition.

The Issues Before The Court

The issues raised for the Court's resolution are whether or not the CA correctly: (a) ordered petitioner to return to
respondent the amount of P103,000.00 representing the latter's late installment payments; and (b) deleted the award of
attorney's fees in favor of petitioner.

The Court's Ruling

The petition is partly meritorious.

Citing Article 1484 of the Civil Code, specifically paragraph 3 thereof, the CA ruled that petitioner had already waived its right
to recover any unpaid installments when it sought - and was granted - a writ of replevin in order to regain possession of the
subject vehicle. As such, petitioner is no longer entitled to receive respondent's late partial payments in the aggregate
amount of P103,000.00.

The CA is mistaken on this point.

Article 1484 of the Civil Code, which governs the sale of personal properties in installments, states in full:
chanRoble svirtual Lawlib ra ry

Article 1484. In a contract of sale of personal property the price of which is payable in installments,
the vendor may exercise any of the following remedies:

(1) Exact fulfilment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover
two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void. (Emphases and underscoring supplied)
In this case, there was no vendor-vendee relationship between respondent and petitioner. A judicious perusal of the records
would reveal that respondent never bought the subject vehicle from petitioner but from a third party, and merely sought
financing from petitioner for its full purchase price. In order to document the loan transaction between petitioner and
respondent, a Promissory Note with Chattel Mortgage29 dated August 18, 2005 was executed wherein, inter alia, respondent
acknowledged her indebtedness to petitioner in the amount of P1,196,100.00 and placed the subject vehicle as a security for
the loan.30 Indubitably, a loan contract with the accessory chattel mortgage contract - and not a contract of sale of personal
property in installments - was entered into by the parties with respondent standing as the debtor-mortgagor and petitioner
as the creditor-mortgagee. Therefore, the conclusion of the CA that Article 1484 finds application in this case is misplaced,
and thus, must be set aside.

The Promissory Note with Chattel Mortgage subject of this case expressly stipulated, among others, that: (a) monthly
installments shall be paid on due date without prior notice or demand;31 (b) in case of default, the total unpaid principal sum
plus the agreed charges shall become immediately due and payable;32 and (c) the mortgagor's default will allow the
mortgagee to exercise the remedies available to it under the law. In light of the foregoing provisions, petitioner is justified in
filing his Complaint33 before the RTC seeking for either the recovery of possession of the subject vehicle so that it can
exercise its rights as a mortgagee, i.e., to conduct foreclosure proceedings over said vehicle;34 or in the event that the
subject vehicle cannot be recovered, to compel respondent to pay the outstanding balance of her loan.35 Since it is
undisputed that petitioner had regained possession of the subject vehicle, it is only appropriate that foreclosure proceedings,
if none yet has been conducted/concluded, be commenced in accordance with the provisions of Act No. 1508,36 otherwise
known as "The Chattel Mortgage Law," as intended. Otherwise, respondent will be placed in an unjust position where she is
deprived of possession of the subject vehicle while her outstanding debt remains unpaid, either in full or in part, all to the
undue advantage of petitioner - a situation which law and equity will never permit.37

Further, there is nothing in the Promissory Note with Chattel Mortgage that bars petitioner from receiving any late partial
payments from respondent. If at all, petitioner's acceptance of respondent's late partial payments in the aggregate amount
of P103,000.00 will only operate to reduce her outstanding obligation to petitioner from P664,500.00 to P561,500.00. Such a
reduction in respondent's outstanding obligation should be accounted for when petitioner conducts the impending foreclosure
sale of the subject vehicle. Once such foreclosure sale has been made, the proceeds thereof should be applied to the reduced
amount of respondent's outstanding obligation, and the excess of said proceeds, if any, should be returned to her.38
In sum, the CA erred in ordering petitioner to return the amount of P103,000.00 to respondent. In view of petitioner's prayer
for and subsequent possession of the subject vehicle in preparation for its foreclosure, it is only proper that petitioner be
ordered to commence foreclosure proceedings, if none yet has been conducted/concluded, over the vehicle in accordance
with the provisions of the Chattel Mortgage Law, i.e., within thirty (30) days from the finality of this Decision.39

Finally, anent the issue of attorney's fees, it is settled that attorney's fees "cannot be recovered as part of damages because
of the policy that no premium should be placed on the right to litigate. They are not to be awarded every time a party wins a
suit. The power of the court to award attorney's fees under Article 220840 of the Civil Code demands factual, legal, and
equitable justification. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his
rights, still, attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a party's
persistence in a case other than an erroneous conviction of the righteousness of his cause."41 In this case, suffice it to say
that the CA correctly ruled that the award of attorney's fees and costs of suit should be deleted for lack of sufficient basis.
chanrob leslaw

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated February 13, 2014 and the Resolution dated October
8, 2014 of the Court of Appeals in CA-G.R. CV No. 96008 are hereby SET ASIDE. In case foreclosure proceedings on the
subject chattel mortgage has not yet been conducted/concluded, petitioner Equitable Savings Bank, now BDO Unibank, Inc.,
is ORDERED to commence foreclosure proceedings on the subject vehicle in accordance with the Chattel Mortgage Law, i.e.,
within thirty (30) days from the finality of this Decision. The proceeds therefrom should be applied to the reduced
outstanding balance of respondent Rosalinda C. Palces in the amount of P561,500.00, and the excess, if any, should be
returned to her.

SO ORDERED. cralawlawlibra ry

URBANO F. ESTRELLA, Petitioner, v. PRISCILLA P. FRANCISCO, Respondent.

This petition for review on certiorari seeks to reverse and set aside the November 28, 2012 resolution1 of the Court of
Appeals (CA) in CA-G.R. SP No. 121519.2 The CA dismissed petitioner Urbano F. Estrella's (Estrella) appeal from the
Department of Agrarian Reform Adjudication Board's (DARAB) February 23, 2009 decision3 in DARAB Case No.
13185 which denied Estrella's right of redemption over an agricultural landholding.

ANTECEDENTS

Lope Cristobal (Cristobal) was the owner of a twenty-three thousand nine hundred and thirty-three square meter (23,933
sqm.) parcel of agricultural riceland (subject landholding) in Cacarong Matanda, Pandi, Bulacan, covered by Transfer
Certificate of Title (TCT) No. T-248106 of the Register of Deeds of Bulacan. Estrella was the registered agricultural tenant-
lessee of the subject landholding.

On September 22, 1997, Cristobal sold the subject landholding to respondent Priscilla Francisco (Francisco) for five hundred
thousand pesos (P500,000.00),4 without notifying Estrella.

Upon discovering the sale, Estrella sent Cristobal a demand letter dated March 31, 1998, for the return of the subject
landholding.5 He also sent Francisco a similar demand letter dated July 31, 1998. Neither Cristobal nor Francisco responded
to Estrella's demands.6 chanrob leslaw

On February 12, 2001, Estrella filed a complaint7 against Cristobal and Francisco for legal redemption, recovery, and
maintenance of peaceful possession before the Office of the Provincial Agrarian Reform Adjudicator (PARAD). His complaint
was docketed as DCN. R-03-02-2930'01.

Estrella alleged that the sale between Cristobal and Francisco was made secretly and in bad faith, in violation of Republic Act
No. (R.A.) 3844, the Agricultural Land Reform Code (the Code).8 He insisted that he never waived his rights as a registered
tenant over the property and that he was willing to match the sale price. Estrella concluded that as the registered tenant, he
is entitled to legally redeem the property from Francisco. He also manifested his ability and willingness to deposit the amount
of P500,000.00 with the PARAD as the redemption price.9 chan robles law

Cristobal did not file an answer while Francisco denied all the allegations in the complaint except for the fact of the
sale.10 Francisco claimed that she was an innocent purchaser in good faith because she only bought the property after: (1)
Cristobal assured her that there would be no problems regarding the transfer of the property; and (2) Cristobal personally
undertook to compensate Estrella. Therefore, Estrella had no cause of action against her.
On June 23, 2002, the PARAD rendered its decision recognizing Estrella's right of redemption.11 The PARAD found that
neither Cristobal nor Francisco notified Estrella in writing of the sale. In the absence of such notice, an agricultural lessee has
a right to redeem the landholding from the buyer pursuant to Section 12 of the Code.12 chan roble slaw

Francisco appealed the PARAD's decision to the DARAB where it was docketed as DARAB Case No. 13185.

On February 23, 2009, the DARAB reversed the PARAD's decision and denied Estrella the right of redemption.13 Citing
Section 12 of the Code as amended, the DARAB held that the right of redemption may be exercised within 180 days from
written notice of the sale. Considering that more than three years had lapsed between Estrella's discovery of the sale and his
filing of the case for redemption, the DARAB concluded that Estrella slept on his rights and lost the right to redeem the
landholding.

Estrella moved for reconsideration but the DARAB denied the motion.

On September 30, 2011, Estrella filed a motion before the CA to declare himself as a pauper litigant and manifested his
intention to file a petition for review of the DARAB's decision.14 He alleged that he was living below the poverty line and did
not have sufficient money or property for food, shelter, and other basic necessities.

On October 17, 2011, Estrella filed a petition for review15 of the DARAB's decision before the CA. The petition was docketed
as CA-G.R. SP No. 121519.

Estrella emphasized that the purpose of the State in enacting the agrarian reform laws is to protect the welfare of landless
farmers and to promote social justice towards establishing ownership over the agricultural land by the tenant-lessees.16 He
insisted that the DARAB erred in denying him the right of redemption based on a technicality and that the redemption period
in Sec. 12 of the Code does not apply in his case because neither the lessor nor the vendee notified him in writing of the
sale.17
chan robles law

On November 28, 2012, the CA dismissed Estrella's petition for review for failure to show any reversible error in the DARAB's
decision.18 Estrella received a copy of the CA's resolution on April 10, 2013.19 chan robles law

On April 11, 2013, Estrella filed a motion for a twenty-day extension of time (or until April 31, 2013) to file his motion for
reconsideration of the November 28, 2012 resolution.20 c hanro bleslaw

On April 30, 2013, Estrella requested another ten-day extension of time (or until May 9, 2013) to file his motion for
reconsideration.21 cha nro bleslaw

On May 9, 2013, Estrella filed his Motion for Reconsideration arguing that his right of redemption had not yet prescribed
because he was not given written notice of the sale to Francisco.22 chanrob leslaw

On May 30, 2013, the CA denied Estrelia's motions for extension of time, citing the rule that the reglementary period to file a
motion for reconsideration is non-extendible.23 The CA likewise denied Estrelia's Motion for Reconsideration.

Hence, the present recourse to this Court.

On August 23, 2013, Estrella filed a motion for extension of time to file his petition for review and a motion to be declared as
a pauper litigant.24 We granted both motions on October 13, 2013.

THE PARTIES' ARGUMENTS

Estrella argues that an agricultural tenant's right of redemption over the landholding cannot prescribe when neither the
lessor-seller nor the buyer has given him written notice of the sale.

On the other hand, Francisco counters that Estrella failed to make a formal tender of or to consign with the PARAD the
redemption price as required in Quiño v. Court of Appeals.25 She also questioned the genuineness of Estrelia's claim to be a
cra lawred

pauper litigant. Francisco points out that a person who claims to be willing to pay the redemption price of P500,000.00 is not,
by any stretch of the imagination, a pauper.26 chanro bles law

OUR RULING

We find no merit in the petition.

The use and ownership of property bears a social function, and all economic agents are expected to contribute to the
common good.27 To this end, property ownership and economic activity are always subject to the duty of the State to
promote distributive justice and intervene when the common good requires.28 c hanrobles law

As early as 1973, the Philippines has already declared our goal of emancipating agricultural tenants from the bondage of the
soil.29 The State adopts a policy of promoting social justice, establishing owner cultivatorship of economic-size farms as the
basis of Philippine agriculture, and providing a vigorous and systematic land resettlement and redistribution program.30 chanro bleslaw

In pursuit of land reform, the State enacted the Agricultural Land Reform Code in 1963. The Code established an agricultural
leasehold system that replaced all existing agricultural share tenancy systems at that point.

The existence of an agricultural tenancy relationship between the lessor and the lessee gives the latter rights that attach to
the landholding, regardless of whoever may subsequently become its owner.31 This strengthens the security of tenure of the
tenants and protects them from being dispossessed of the landholding or ejected from their leasehold by the death of either
the lessor or of the tenant, the expiration of a term/period in the leasehold contract, or the alienation of the landholding by
the lessor.32 If either party dies, the leasehold continues to bind the lessor (or his heirs) in favor of the tenant (or his
surviving spouse/descendants). In case the lessor alienates the land, the transferee is subrogated to the rights and
substituted to the obligations of the lessor-transferor. The agricultural leasehold subsists, notwithstanding the resulting
change in ownership of the landholding, and the lessee's rights are made enforceable against the transferee or other
successor-in-interest of the original lessor.

To protect the lessee's security of tenure, the Code grants him the right of pre-emption - the preferential right to buy the
landholding under reasonable terms and conditions if ever the agricultural lessor decides to sell it.33 As an added layer of
protection, the Code also grants him the right to redeem the landholding from the vendee in the event that the lessor sells it
without the lessee's knowledge.34 chan rob leslaw

Originally, the lessee had a redemption period of two years from registration of the sale: ChanRobles Vi rtua lawlib rary

Sec. 12. Lessee's Right of Redemption - In case the landholding is sold to a third person without the knowledge of the
agricultural lessee, the latter shall have the right to redeem the same at a reasonable price and consideration: Provided, That
the entire landholding sold must be redeemed: Provided, further, That where there are two or more agricultural lessees, each
shall be entitled to said right of redemption only to the extent of the area actually cultivated by him. The right of redemption
under this Section may be exercised within two years from the registration of the sale, and shall have priority over any other
right of legal redemption.35 c hanro blesvi rtual lawlib rary

In Padasas v. Court of Appeals,36 we held that a lessee's actual knowledge of the sale of the landholding is immaterial
because the Code specifically and definitively provides that the redemption period must be counted from the registration of
the sale. This ruling was subsequently affirmed in Manuel v. Court of Appeals.37 chanrob leslaw

In 1971, R.A. 6389 amended Section 12 of the Code and shortened the redemption period: Cha nRobles Vi rtua lawlib rary

Sec. 12. Lessee's right of Redemption. - In case the landholding is sold to a third person without the knowledge of the
agricultural lessee, the latter shall have the right to redeem the same at a reasonable price and consideration: Provided, That
where there are two or more agricultural lessees, each shall be entitled to said right of redemption only to the extent of the
area actually cultivated by him. The right of redemption under this Section may be exercised within one hundred eighty
days from notice in writing which shall be served by the vendee on all lessees affected and the Department of
Agrarian Reform upon the registration of the sale, and shall have priority over any other right of legal redemption. The
redemption price shall be the reasonable price of the land at the time of the sale.

Upon the filing of the corresponding petition or request with the department or corresponding case in court by the
agricultural lessee or lessees, the period of one hundred and eighty days shall cease to run.

Any petition or request for redemption shall be resolved within sixty days from the filing thereof; otherwise, the said period
shall start to run again.

The Department of Agrarian Reform shall initiate, while the Land Bank shall finance, said redemption as in the case of pre-
emption.38 [emphases and underscoring supplied]
In Mallari v. Court of Appeals,39 we held that the lessee's right of redemption will not prescribe if he is not served written
notice of the sale. We affirmed this ruling in Springsun Management Systems v. Camerino40 and Planters Development Bank
v. Garcia.41 chanrobles law

More recently in Po v. Dampal,42 we held that the failure of the vendee to serve written notice of the sale to the lessee and
the DAR prevents the running of the 180-day redemption period; the lessee's constructive knowledge of the sale does not
dispense with the vendee's duty to give written notice.

Simply put, Section 12 expressly states that the 180-day period must be reckoned from written notice of sale. If the
agricultural lessee was never notified in writing of the sale of the landholding, there is yet no prescription period to speak
of.43
chanro bles law

As the vendee, respondent Francisco had the express duty to serve written notice on Estrella, the agricultural lessee, and on
the DAR. Her failure to discharge this legal duty prevented the commencement of the 180-day redemption period. Francisco
only gave written notice of the sale in her answer44 before the PARAD wherein she admitted the fact of the sale.45 Thus,
Estrella timely exercised his right of redemption. To hold otherwise would allow Francisco to profit from her own neglect to
perform a legally mandated duty.

However, despite the timely filing of the redemption suit, Estrella did not validly exercise his right to redeem the property. As
early as 1969 in Basbas v. Entena,46 this Court had already held that the valid exercise of the right of redemption requires
either tender of the purchase price or valid consignation thereof in Court: ChanRobles Virtualawl ibra ry

x x x the right of legal redemption must be exercised within specified time limits: and the statutory periods would be
rendered meaningless and of easy evasion unless the redemptioner is required to make an actual tender in good faith of
what he believed to be the reasonable price of the land sought to be redeemed. The existence of the right of redemption
operates to depress the market value of the land until the period expires, and to render that period indefinite by permitting
the tenant to file a suit for redemption, with either party unable to foresee when final judgment will terminate the action,
would render nugatory the period of two years [now 180 days] fixed by the statute for making the redemption and virtually
paralyze any efforts of the landowner to realize the value of his land. No buyer can be expected to acquire it without any
certainty as to the amount for which it may be redeemed, so that he can recover at least his investment in case of
redemption. In the meantime, the landowner's needs and obligations cannot be met. It is doubtful if any such result was
intended by the statute, absent clear wording to that effect.

The situation becomes worse when, as shown by the evidence in this case, the redemptioner has no funds and must apply
for them to the Land Authority, which, in turn, must depend on the availability of funds from the Land Bank. It then becomes
practically certain that the landowner will not be able to realize the value of his property for an indefinite time beyond the
two years redemption period.47 chan roblesv irtuallaw lib rary

After the amendment of Section 12 of the Code, a certification from the Land Bank that it will finance the redemption will
also suffice in lieu of tender of payment or consignation.48 chan roble slaw

In the present case, Estrella manifested his willingness to pay the redemption price but failed to tender payment or consign it
with the PARAD when he filed his complaint. To be sure, a tenant's failure to tender payment or consign it in court upon filing
the redemption suit is not necessarily fatal; he can still cure the defect and complete his act of redemption by consigning his
payment with the court within the remaining prescriptive period.49 chan roble slaw

Ordinarily, the 180-day redemption period begins to run from the date that the vendee furnishes written notice of the sale to
the lessee. The filing of a petition or request for redemption with the DAR (through the PARAD) suspends the running of the
redemption period.

However, as the cases of Basbas and Almeda v. Court of Appeals50 - as well the amendment to Section 12 of the Code -
evidently show, Congress did not intend the redemption period to be indefinite. This 180-day period resumes running if the
petition is not resolved within sixty days.51 chanroble slaw

Because Francisco failed to serve Estrella written notice of the sale, Estrella's 180-day redemption period was intact when he
filed the complaint before the PARAD. The filing of the complaint prevented the running of the prescription period and gave
Estrella time to cure the defect of his redemption through consignment of the redemption price.

After the lapse of sixty days, Estrella's 180-day redemption period began running pursuant to Section 12 of the Code.
Nevertheless, Estrella could still have consigned payment within this 180-day period.

The exercise of the right of redemption must be made in accordance with the law. Tender of the redemption price or its valid
consignation must be made within the prescribed redemption period.52 The reason for this rule is simple: Cha nRobles Vi rtua lawlib rary

xxx Only by such means can the buyer become certain that the offer to redeem is one made seriously and in
good faith. A buyer cannot be expected to entertain an offer of redemption without attendant evidence that the
redemptioner can, and is willing to accomplish the repurchase immediately. A different rule would leave the
buyer open to harassment by speculators or crackpots as well as to unnecessary prolongation of the redemption
period, contrary to the policy of the law. While consignation of the tendered price is not always necessary because legal
redemption is not made to discharge a pre-existing debt, a valid tender is indispensable, for the reasons already stated. Of
course, consignation of the price would remove all controversy as to the redemptioner's ability to pay at the proper
time.53 [Emphasis supplied]
Unfortunately, even after the lapse of the 240 days (the 60-day freeze period and the 180-day redemption period), there
was neither tender nor judicial consignation of the redemption price. Even though Estrella repeatedly manifested his
willingness to consign the redemption price, he never actually did.

While Estrella exercised his right of redemption in a timely manner, the redemption was ineffective because he failed to
exercise this right in accordance with the law. Notably, he had also repeatedly manifested his inability to even pay judicial
costs and docket fees. He has been declared (twice) as a pauper litigant who was "living below the poverty threshold level
because of limited income."54 This casts considerable doubt on Estrella's ability to pay the full price of the property. In sum,
we have no choice but to deny the petition.

The Agricultural Land Reform Code is a social legislation designed to promote economic and social stability. It must be
interpreted liberally to give full force and effect to its clear intent, which is "to achieve a dignified existence for the small
farmers" and to make them "more independent, self-reliant and responsible citizens, and a source of genuine strength in our
democratic society."55 Nevertheless, while we endeavor to protect the rights of agricultural lessees, we must be mindful not
to do so at the expense of trampling upon the landowners' rights which are likewise protected by law.

WHEREFORE, we hereby DENY the petition for lack of merit; accordingly, we AFFIRM the November 28, 2012 resolution of
the Court of Appeals in CA-G.R. SP No. 121519. No costs. SO ORDERED.
WHITE MARKETING DEVELOPMENT CORPORATION, PETITIONER, VS. GRANDWOOD
FURNITURE & WOODWORK, INC., RESPONDENT.

DECISION

MENDOZA, J.:
This Petition for Review on Certiorari seeks to reverse and set aside the June 22, 2015 Decision[1] and the
December 28, 2015 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV No. 103488, which reversed and
set aside the July 21, 2014 Decision[3] of the Regional Trial Court, Branch 166, Pasig City (RTC), in a case
involving the issue on the applicable redemption period.

On May 26, 1995, respondent Grandwood Furniture & Woodwork, Inc. (Grandwood) obtained a loan in the
amount of P40,000,000.00 from Metropolitan Bank and Trust Company (Metrobank). The loan was secured
by a real estate mortgage over a parcel of land covered by Transfer Certificate of Title (TCT) No. 63678.
Metrobank eventually sold its rights and interests over the loan and mortgage contract to Asia Recovery
Corporation (ARC). The latter then assigned the same rights and interests to Cameron Granville 3 Asset
Management, Inc. (CGAM3).[4]

On July 24, 2013, after Grandwood failed to pay the loan which already amounted to P68,941,239.46, CGAM3
initiated extrajudicial foreclosure proceedings of the real estate mortgage. During the September 17, 2013
Auction Sale, petitioner White Marketing Development Corporation (White Marketing) was declared the
highest bidder and a certificate of sale was issued in its favor.[5]

On September 30, 2013, the certificate of sale was registered and annotated on TCT No. 63678. On November
21, 2013, White Marketing received a letter from the sheriff informing it that Grandwood intended to redeem
the foreclosed property. In response, White Marketing sent a letter informing the sheriff that Grandwood no
longer had the right to redeem.[6]

Insisting on its right to redeem the property, Grandwood sent a letter, dated December 3, 2013, to the Office of
the Clerk of Court of the RTC (OCC-RTC) insisting that it was the latter's ministerial duty to recognize its right
of redemption, to accept the tender of payment and to issue a certificate of redemption. The OCC-RTC,
however, refused to accept the tender of payment on the ground that it was confronted with the conflicting
applicable laws on the matter of the redemption period. Thus, Grandwood was prompted to file its Petition for
Consignation, Mandamus and Damages before the RTC. It reiterated its right to redeem the property subject of
the foreclosure sale under Act No. 3135 in relation to Republic Act (R.A.) No. 337 and Sections 27 and 28 of
Rule 39 of the Rules of Court.[7]

The RTC Decision

In its July 21, 2014 Decision, the RTC dismissed the petition for mandamus. The trial court ruled that the
redemption period applicable in the mortgage between Metrobank and Grandwood was Section 47[8] of R.A.
No. 8791 or the "General Banking Law of 2000." The RTC wrote that by virtue of the said law, Grandwood
should have redeemed the property before the registration of the certificate of sale on September 30, 2013,
which was an earlier date than December 17, 2013, or three months after the foreclosure on September 17,
2013. It further stressed that White Marketing acquired all the rights of Metrobank in the mortgage contract,
which was eventually assigned to CGAM3. The dispositive portion of the RTC decision reads:

WHEREFORE, premises considered, the petition for consignation and mandamus is hereby DISMISSED, for
lack of merit. Petitioner's claim is DENIED, for lack of legal basis.

Private Respondent's counterclaims are likewise DENIED, for lack of sufficient basis.

No pronouncement as to costs.

SO ORDERED.[9]
Aggrieved, Grandwood moved for reconsideration but its motion was denied by the RTC in the Order, [10] dated
September 11, 2014. Hence, it appealed before the CA.

The CA Decision

In its June 22, 2015 Decision, the CA reversed the RTC ruling and remanded the case to the latter for the
determination of the amount of the redemption price. It ordered the OCC-RTC to accept the consigned amount
and to issue the corresponding certificate of redemption in Grandwood's favor. It emphasized that Section 47 of
R.A. No. 8791 applied only in cases of foreclosure of real estate by a mortgagee bank in order to provide
sufficient legal remedies to banks in case of unpaid debts or loans. As White Marketing was not privy to the
contract of loan and the accessory contract of mortgage, it considered the limitation on the right of redemption
on juridical persons as inapplicable. It was of the view that in case of doubt on the issue of the right of
redemption, it should be resolved in favor of the mortgagor. Thus, the CA disposed:

WHEREFORE, premises considered, the instant appeal is GRANTED. Accordingly, the Decision dated July 21,
2014 of the Regional Trial Court of Pasig City, Branch 166, in SCA No. 3915, is hereby REVERSED AND SET
ASIDE and a new one is rendered by allowing petitioner-appellant Grandwood Furniture & Woodwork, Inc. to
consign to the court a quo the amount corresponding to the redemption of its foreclosed property covered by
TCT No. 63678 of the Register of Deeds of Pasig. Furthermore, the Court hereby directs the following:

remand this case to the court a quo and the latter is ordered to reinstate SCA Case No. 3915 into its
(a)
docket;
for the court a quo to determine the entire amount of redemption price together with interest and other
(b)
legal fees;
for the Office of the Clerk of Court and Ex-Officio Sheriff of RTC Pasig City to forthwith accept the
(c)
consigned amounts and issue the corresponding Certificate of Redemption in favor petitionerappellant.
SO ORDERED.[11]
White Marketing moved for reconsideration but the CA denied its motion in the assailed December 28, 2015
Resolution.

Hence, this petition.

SOLE ISSUE

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE
COURT A QUO WHEN IT DECLARED THAT SEC. 47 of R.A. NO. 8791 OR THE GENERAL
BANKING LAW IS NOT APPLICABLE IN THE CASE AT BAR.[12]
Petitioner White Marketing insisted that Grandwood's right of redemption had lapsed because, under the
mortgage contract, the parties agreed that the same would be governed by R.A. No. 8791. It argued that
because the parties voluntarily stipulated on the governing law, the same was binding on them. White
Marketing asserted that when Metrobank assigned its rights, its assignees acquired whatever rights the former
had under the Real Estate Mortgage.

It reiterated that Section 47 of R.A. No. 8791 was the applicable law with regard to the period of redemption.
For said reason, Grandwood should have redeemed the foreclosed property before the registration of the
certificate of sale on September 30, 2013.

In its March 14, 2016 Resolution,[13] the Court resolved to deny the petition. White Marketing moved for
reconsideration. In its June 15, 2016 Resolution,[14] the Court granted the motion, reinstated the petition, and
required respondent Grandwood to file its comment.

In its Comment,[15] dated July 22, 2016, Grandwood argued that the provisions of the real estate mortgage
were pro forma as the original mortgagee, Metrobank, was a banking institution; and so, the contract would
necessarily contain a provision indicating that the mortgagor would be bound by R.A. No. 8791.
Grandwood, however, explained that White Marketing could not enjoy the provision of R.A. No. 8791 on the
redemption period because it was not a banking institution. It asserted that its exercise of redemption rights
was not against Metrobank in accordance with the real estate mortgage, but against White Marketing as the
highest bidder in the foreclosure sale.

Grandwood further reiterated that pursuant to the spirit and intent of R.A No. 8791, the shorter redemption
period applied in favor of banking institutions only. In its view, R.A. No. 8791 would apply only when the
mortgagee bank itself would foreclose the property and not when the same had already assigned or conveyed
its mortgage rights for a consideration.

In its Reply,[16] dated August 10,2016, White Marketing countered that Grandwood was bound by the
provisions of the real estate mortgage. It added that the fact that Metrobank assigned its rights to CGAM3
neither modified the terms of the mortgage contract nor excluded Grandwood from the provisions thereof.
Thus, it insisted that Grandwood was bound by the redemption period under R.A. No. 8791 and should suffer
the consequences for its failure to redeem the mortgaged property within the allotted time.

The Court's Ruling

The Court finds merit in the petition.

In the case at bench, it is undisputed that Metrobank assigned its rights in the mortgage to ARC, which later
assigned the same to CGAM3. After Grandwood defaulted in its loan obligation, CGAM3 foreclosed the
mortgaged property. As earlier stated, White Marketing emerged as the winning bidder in the foreclosure sale.
Thus, White Marketing, stepped into the shoes of Metrobank.

In Fort Bonifacio v. Fong,[17] the Court explained the effects of assignment of credit, to wit:

The reason that a contracting party's assignees, although seemingly a third party to the transaction, remain
bound by the original party's transaction under the relativity principle further lies in the concept of
subrogation, which inheres in assignment.

Case law states that when a person assigns his credit to another person, the latter is deemed subrogated to the
rights as well as to the obligations of the former. By virtue of the Deed of Assignment, the assignee is
deemed subrogated to the rights and obligations of the assignor and is bound by exactly the
same conditions as those which bound the assignor. Accordingly, an assignee cannot acquire
greater rights than those pertaining to the assignor. The general rule is that an assignee of a non-
negotiable chose in action acquires no greater right than what was possessed by his assignor and simply stands
into the shoes of the latter. [Emphasis and underlining supplied]
In an assignment of credit, the assignee is subrogated to the rights of the original creditor, such that he
acquires the power to enforce it, to the same extent as the assignor could have enforced it against the
debtor.[18] Through the assignment of credit, the new creditor is entitled to the rights and remedies
available to the previous creditor, and includes accessory rights such as mortgage or
pledge.[19] Consequently, ARC acquired all the rights, benefits and obligations of Metrobank under its
mortgage contract with Grandwood. The same could be said for subsequent assignees or successors-in-interest
after ARC like White Marketing.

The mortgage between Grandwood and Metrobank, as the original mortgagee, was subject to the provisions of
Section 47 of R.A. No. 8791. Section 47 provides that when a property of a juridical person is sold pursuant to
an extrajudicial foreclosure, it "shall have the right to redeem the property in accordance with this provision
until, but not after, the registration of the Certificate of foreclosure sale with the applicable Register of Deeds
which in no case shall be more than three (3) months after foreclosure, whichever is earlier."

Applied in the present case, Grandwood had three months from the foreclosure or before the certificate of
foreclosure sale was registered to redeem the foreclosed property. This holds true even when Metrobank ceased
to be the mortgagee in view of its assignment to ARC of its credit, because the latter acquired all the rights of
the former under the mortgage contract-including the shorter redemption period. The shorter redemption
period should also redound to the benefit of White Marketing as the highest bidder in the foreclosure sale as it
stepped into the shoes of the assigneemortgagee.

Measured by the foregoing parameters, the Court finds that Grandwood's redemption was made out of time as
it was done after the certificate of sale was registered on September 30, 2013. Pursuant to Section 47 of R.A.
No. 8791, it only had three (3) months from foreclosure or before the registration of the certificate of
foreclosure sale, whichever came first, to redeem the property sole in the extrajudicial sale.

Such interpretation is in harmony with the avowed purpose of R.A. No. 8791 in providing for a shorter
redemption period for juridical persons. In Goldenway Merchandising Corporation v. Equitable PCI
Bank,[20] the Court explained that the shortened period under Section 47 of R.A. No. 8791 served as additional
security for banks to maintain their solvency and liquidity, to wit:

The difference in the treatment of juridical persons and natural persons was based on the nature of the
properties foreclosed - whether these are used as residence, for which the more liberal one-year redemption
period is retained, or used for industrial or commercial purposes, in which case a shorter term is deemed
necessary to reduce the period of uncertainty in the ownership of property and enable
mortgagee-banks to dispose sooner of these acquired assets. It must be underscored that the
General Banking Law of 2000, crafted in the aftermath of the 1997 Southeast Asian financial
crisis, sought to reform the General Banking Act of 1949 by fashioning a legal framework for
maintaining a safe and sound banking system. In this context, the amendment introduced by
Section 47 embodied one of such safe and sound practices aimed at ensuring the solvency and
liquidity of our banks. It cannot therefore be disputed that the said provision amending the redemption
period in Act 3135 was based on a reasonable classification and germane to the purpose of the law. [Emphasis
supplied]
To adopt Grandwood's position that Section 47 of R.A. No. 8791 no longer applies would defeat its very purpose
to provide additional security to mortgagee-banks. The shorter redemption period is an incentive which
mortgagee-banks may use to encourage prospective assignees to accept the assignment of credit for a
consideration. If the redemption period under R.A. No. 8791 would be extended upon the assignment by the
bank of its rights under a mortgage contract, then it would be tedious for banks to find willing parties to be
subrogated in its place. Thus, it would adversely limit the bank's opportunities to quickly dispose of its hard
assets, and maintain its solvency and liquidity.

Although it is true that, generally, redemption is liberally construed in favor of the mortgagor, the rule cannot
be applied in the present case. In City of Davao v. The Intestate Estate of Amado S. Dalisay,[21] the Court
eruditely explained that the liberal construction of the redemption period is not a panacea readily invoked by
mortgagors whose right to redeem had been justifiably defeated, viz:

The Court need not belabor the existence of this rule in jurisprudence. In a long line of cases, the Court has
indeed been copious in its stance to allow the redemption of property where in doing so, the ends of justice are
better realized. x x x

Nonetheless, the Court's agreement with the CA decision ends here. The above rulings now beget a more
important question for the resolution of this case: Does a simplistic application of the liberal construction of
redemption laws provide a just resolution of this case? The Court answers this question in the negative.

While it is a given that redemption by property owners is looked upon with favor, it is equally
true that the right to redeem properties remains to be a statutory privilege. Redemption is by force
of law, and the purchaser at public auction is bound to accept it. Further, the right to redeem property sold as
security for the satisfaction of an unpaid obligation does not exist preternaturally. Neither is it predicated on
proprietary right, which, after the sale of the property on execution, leaves the judgment debtor and vests in the
purchaser. Instead, it is a bare statutory privilege to be exercised only by the persons named in the statute.

In other words, a valid redemption of property must appropriately be based on the law which is
the very source of this substantive right. It is, therefore, necessary that compliance with the
rules set forth by Jaw and jurisprudence should be shown in order to render validity to the
exercise of this right. Hence, when the Court is beckoned to rule on this validity, a hasty resort to
elementary rules on construction proves inadequate. Especially so, when there are deeper underpinnings
involved, not only as to the right of the owner to take back his property, but equally important, as to the right of
the purchaser to acquire the property after deficient compliance with statutory requirements, including the
exercise of the right within the period prescribed by law.

The Court cannot close its eyes and automatically rule in favor of the redemptioner at all
times. The right acquired by the purchaser at an execution sale is inchoate and does not become absolute until
after the expiration of the redemption period without the right of redemption having been exercised. "But
inchoate though it be, it is, like any other right, entitled to protection and must be respected until extinguished
by redemption." Suffice it to say, the liberal application of redemption laws in favor of the
property owner is not an austere solution to a controversy, where there are remarkable factors
that lead to a more sound and reasonable interpretation of the law. Here, the proper focus of the CA
should have been the just and fair interpretation of the law, instead of an automatic and constricted view on its
liberal application. [Emphases supplied]
To reiterate, the shortened period of redemption provided in Section 47 of R.A. No. 8791 serves as additional
security and protection to mortgagee-banks in order for them to maintain a solvent and liquid financial status.
The period is not extended by the mere fact that the bank assigned its interest to the mortgage to a non-
banking institution because the assignee merely steps into the shoes of the mortgagee bank and acquires all its
rights, interests and benefits under the mortgage-including the shortened redemption period. Moreover, to
extend the redemption period would prejudice the ability of the banks to quickly dispose of its hard assets to
maintain solvency and liquidity.

WHEREFORE, the June 22, 2015 Decision of the Court of Appeals and its December 28, 2015 Resolution, in
CA-G.R. CV No. 103488 are REVERSED and SET ASIDE. The July 21, 2014 Decision of the Regional Trial
Court, Branch 166, Pasig City is REINSTATED. SO ORDERED.

G.R. No. L-30150 August 31, 1971

NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, petitioner,

vs.
HONORABLE WALFRIDO DE LOS ANGELES, in his capacity as Judge of the Court of First Instance of Rizal,
Branch IV (Quezon City),

CASTRO, J.:

By the instant petition for certiorari and mandamus with preliminary injunction, the petitioner National Investment
and Development Corporation (hereinafter referred to as the NIDC) impugns three orders issued by the respondent
Court of First Instance of Rizal in civil case Q-8407, namely, (1) an order dated May 28, 1968 dismissing the appeal
of the NIDC from that court's order dated March 31, 1967 which directed the cancellation of the annotation, on
several certificates of title involved in the said case, of the assignment of mortgage rights made by the Philippine
Commercial and Industrial Bank (hereinafter referred to as the PCIB), a defendant in the said civil case, in favor of
the NIDC, the respondent Judge stating that since the NIDC had not been properly substituted for PCIB and latter
had failed to perfect an appeal from the order of March 31, 1967, therefore, the appeal which was taken by the
NIDC was ineffective, and moreover filed out of time; (2) an order dated November 9, 1968 directing the NIDC to
surrender to the Register of Deeds of Quezon City the certificates of title over parcels of land involved in the said
civil case which the lower court, in a judgment rendered therein which had already become final and executory,
ordered reconveyed to the herein private respondents (the spouses Basilisa Roque and Francisco Bautista, Leonila
Sanchez and Benjamin N. Bonus, Aurora Sanchez and Bonifacio Eugenio, Carmelita Sanchez and Francisco
Ignacio, Bienvenido Sanchez, Leonardo Sanchez and Roque Village Subdivision), plaintiffs in the case below,
subject, however, to the mortgage executed in favor of the PCIB by the defendant therein, Araceli W. Vda. de Del
Rosario; and (3) an order dated January 27, 1969 declaring as cancelled and null and void the certificates of title
involved in the mentioned civil case which were then held by the NIDC, for failure of the latter to comply with the
respondent Judge's order of November 9, 1968 requiring the NIDC to surrender the said title certificates to the
Register of Deeds of Quezon City.1

The essential facts are undisputed.

Sometime in July, 1963 the private respondents herein sold several lots registered in their names to Araceli W. Vda.
de Del Rosario who, after securing registration of the said lots in her name, mortgaged them to the PCIB. Del
Rosario failed to complete payment of the purchase price agreed upon, for which reason, on November 17, 1964,
the herein private respondents filed a complaint against her and the PCIB for reconveyance to them of the said lots
or rescission of the contracts of sale executed thereon and the cancellation of the mortgages held by the PCIB.

On January 25, 1965 the court a quo rendered summary judgment directing the rescission of the contracts of sale
adverted to above and the reconveyance of the lots in dispute covered by TCTs 70809, 70813, 70814 and 76401 to
76472. The rescission of the purchase contracts on the lots was, however, declared to be without prejudice to the
rights of the PCIB thereon which was adjudged as mortgaged in good faith. The lower court reserved for a separate
hearing the parties' respective claims for damages.

This decision of the trial court was appealed to this Court by del Rosario in
L-24873. The appeal was, however, dismissed on September 23, 1966 because it was taken out of time. No appeal
was interposed by the private respondents herein with respect to the portion of the lower court's decision in favor of
the PCIB.

On June 16, 1965 the PCIB foreclosed its mortgage on the lots covered by TCTs 70809, 70813 and 70814. At the
auction sale, it appeared as the highest bidder; on December 2, 1965 the certificate of sale issued in its favor was
duly registered.

On May 4, 1966 the PCIB assigned its mortgage rights over the lots covered by TCTs 70809, 70813, 70814 and
76401 to 76472 to the NIDC, as well as its rights as highest bidder for the lots covered by the first three titles
mentioned. This assignment was duly inscribed and annotated at the back of the certificates of the title concerned
on May 16, 1966.

On November 16, 1966 the private respondents filed with the trial court, in the same civil case Q-8407, a motion to
cancel time encumbrance held by the NIDC appearing at the back of TCTs 76401 to 76472 and 70809. The private
respondents alleged in their motion that del Rosario had negotiated a loan with the NIDC by virtue of which the latter
assumed the payment of, and did pay, del Rosario's mortgage indebtedness to the PCIB. For this reason, and for
the further reason that there was no privity of contract between them and del Rosario and the PCIB concerning the
said indebtedness, the private respondents maintained that the mortgage lien of the PCIB over the lots subject of
their motion was thereby discharged. They further argued that the mortgage lien has been extinguished because
when it assumed payment of the indebtedness of del Rosario to the PCIB, the NIDC was aware of the respondents'
claim over the lots in question which was annotated at the back of the certificates of title in dispute. Lastly, the
respondents contended that their claim is superior to that of the NIDC under the provisions of articles 2242(2) and
2243 of the new Civil Code. The respondents served a copy of this motion on the NIDC.

On November 19, 1966, at the hearing on the above motion, the NIDC, through counsel, having been notified
thereof, entered its appearance. The respondent Judge at the said hearing gave the NIDC opportunity to file its
written opposition to the motion.

On December 20, 1966 the NIDC filed its written opposition, claiming that it merely stepped into the shoes of the
PCIB as an assignee and that the private respondents must respect its rights as such assignee in the same manner
that they would respect the rights of the PCIB the adjudication regarding which, it was alleged, had already long
become final when they were acquired by the NIDC, citing article 1625 of the new Civil Code.

On January 5, 1967 the private respondents filed a rejoinder to the above opposition, furnishing the NIDC a copy of
the same.

On March 31, 1967 the respondent Judge issued an order granting the private respondents' motion to cancel the
encumbrance of the NIDC from the certificates of title in dispute, reasoning as follows:

... There is no question that the deed of assignment in question is valid between the defendant Bank
and the National Investment & Development Corporation. But this Court, however, is not inclined to
sustain incumbrancer's view; first, it should have submitted the deed of assignment for approval of
the Court knowing that the subject-matter of the said deed of assignment is in custodia legis, and so
that the consent of all the parties plaintiffs could be taken; second, the payment of the mortgage debt
of defendant Del Rosario by the National Investment & Development Corporation to the PCI Bank
extinguished the plaintiff's obligation to respect the mortgage lien of the PCI Bank; and third, the
NIDC could ask for reimbursement of its expenses and the amount it has paid to the PCI Bank from
defendant Del Rosario. Moreover, it is more on equity and justice as well as in law that the
incumbrancer should not enforce its rights against the plaintiffs who, in the first place; were not
benefited by the mortgage debt incurred by defendant Del Rosario.

A copy of this order was, however, not furnished the NIDC, although the PCIB was served a copy thereof.

On April 22, 1967 the respondent Judge issued another order directing the NIDC to surrender the certificates of title
in dispute to the Register of Deeds of Quezon City in order that its order of March 31, 1967 could be implemented.
The NIDC filed a motion for reconsideration on the ground that the issuance of the order was premature for it had
not yet received a copy of the court's order of March 31, 1967. The private respondents opposed the said motion.

On September 19, 1967 the NIDC received a copy of the respondent court's order dated March 31, 1967. The NIDC
then filed, on October 16, 1967, or 27 days from its receipt of the said order, a motion for reconsideration thereof.
On January 8, 1968 the NIDC received another order from the respondent court dated December 29, 1967 denying
its motion for reconsideration "for lack of merit."

On January, 9 1968 the NIDC filed with the court below a notice of appeal on "purely questions of law" from the
order of March 31, 1967 and an appeal bond; on January 11, 1968 it filed its record on appeal.

On February 7, 1968 the private respondents filed with the lower court a motion to dismiss the appeal of the NIDC
stating (a) that the appeal was filed out of time since the PCIB did not appeal from the appealed order and the NIDC
had not been properly substituted for the PCIB as a party in the case (citing section 20, Rule 3 of the Rules of Court
and Oria Hermanos vs. Gutierrez Hermanos, 52 Phil. 156 [1928] and Feltalino vs. Sanz , 44 Phil. [1923]); and (b)
that the appeal is frivolous and dilatory because the trial court's decision ordering reconveyance to the private
respondents of the lots in dispute by del Rosario had long become final and executory. The NIDC opposed this
motion, contending that it had acquired the necessary personality in civil case Q-8407 by virtue of the respondents'
and the lower court's recognition thereof.

On May 28, 1968 the respondent Judge issued an order dismissing the appeal interposed by the NIDC for reasons
substantially identical to those adduced by the private respondents in their motion to dismiss the appeal.

On July 3, 1968 the NIDC filed a motion for reconsideration of the dismissal of its appeal. This motion was denied
on December 18, 1968.

Meanwhile, on September 12, 1968, the NIDC received a copy of a petition of the private respondents to declare
TCTs 70809, 70813, 70814 and 76401 to 76472 null and void for failure of the NIDC to surrender the certificates of
title in question to the Register of Deeds of Quezon City "in order that the deeds of reconveyance executed by the
Clerk of Court and orders of this Honorable Court may be given due course for registration ..."
The NIDC opposed this petition, alleging that to grant it will amount to enforcement of the lower court's order of
March 31, 1967 which had not yet become final and executory as the NIDC had appealed within the prescribed
period. It was also pointed out by the NIDC that its motion for reconsideration of the order dismissing its appeal had
not as yet been resolved.

On November 9, 1968 the respondent Judge issued another order requiring the NIDC to surrender the certificates of
title in dispute to the Register of Deeds of Quezon City within five days, otherwise the said certificates would be
declared null and void. The NIDC filed a motion for reconsideration of this order on the ground that its motion for
reconsideration of the order dismissing its appeal had not up to that time been resolved.

On January 27, 1969, the NIDC received a copy of a "Manifestation" dated January 21, 1969 wherein the private
respondents prayed for the cancellation of the mentioned certificates of title on the ground that the NIDC had
already received a copy of the order of the respondent Judge dated December 18, 1968 denying the motion for
reconsideration of the NIDC dated November 19, 1968. It turned out, however (as explained by the NIDC in one of
its pleadings filed with this Court), that while the NIDC did receive on January 13, 1969 the said order dated
December 18, 1968, the same was overlooked because the copy of the said order sent by the respondent Judge
was stapled beneath two other orders also dated December 18, 1968. One of these orders which was stapled on
top of the others, was in connection with another case (civil case 10636) involving the same parties herein.
According to the NIDC, it was thought that the papers stapled beneath were mere copies of the order in the said civil
case. The third order, similarly dated, was an order denying the NIDC's motion for reconsideration of the respondent
Judge's order dismissing its appeal from the order of March 31, 1967.

On January 30, 1969 the counsel of the NIDC went to the lower court to inquire if it had already acted upon the said
"Manifestation"; and there and then he was served a copy of an order dated January 27, 1969, declaring TCTs
70809, 70813, 70814 and 76401 to 76472 null and void and cancelled.

The submission of the parties for resolution by this Court involves mainly the question of whether the petitioner has
legal personality to appeal the order a quo dated March 31, 1967. If the answer be in the affirmative, then the order
of the respondent Judge dismissing the appeal and all subsequent orders adverse to the petitioner will not avail the
private respondents any.

We do not think, however, that this is the real issue that should first be resolved in order to bundle properly the
contending claims of the parties. Of basic crucial importance, in our opinion, is an inquiry into, and resolution of,
whether, in the first place, the lower court had jurisdiction to entertain the motion of the private respondents that led
to the issuance of the order of March 31, 1967. Obviously, it will not be necessary to resolve the question posited by
the parties if, from the facts which the instant petition opened for inquiry by this Court, it will be determined that the
lower court was devoid of jurisdiction to take cognizance of the mentioned motion of the private respondents.

After a painstaking study of the matter, we reach the view and we so hold that the respondent Judge's assumption
of jurisdiction over the private respondents' motion that led to the order of March 31, 1967 dismissing the appeal of
the NIDC, is completely devoid of legal authority. The judgment of the court a quo in civil case Q-8407, on the
matter of the recognition of the mortgage rights of the PCIB over the lots in question, had already become final and
executory when the said bank assigned its rights to the NIDC. It had, in fact, foreclosed its mortgage rights over
some of the lots and had purchased them at an auction sale before it executed the deed of assignment to the NIDC.
Such being the case, the lower court no longer had jurisdiction in the said case to resolve, by a mere motion therein,
issues having to do with the disposition made by the PCIB of its rights over the lots in question, which rights were
then no longer in litigation as they had been adjudged with finality.

An independent action, or any other appropriate remedy, securing to all the real parties in interest the proceses and
due opportunities afforded by the Rules of Court will be of the essence if the private respondents, as the judicially
declared owners of the lots in question by final judgment prior to the present controversy, believe that they have a
right of action to cause the extinguishment by judicial fiat of the mortgage constituted over those lots on account of
the assignment by the mortgagee and/or purchaser at public auction of its rights to the parcels in question.

The necessity for such an independent action or other appropriate remedy becomes more patent, as a matter of due
process, when it is considered that the NIDC, as assignee after a final adjudication of the rights of the PCIB over the
said lots, will be the real party to be affected directly by any action which the private respondents will commence
whose object is to render inutile the legal efficacy of the PCIB's assignment of its rights thereon. In such an action,
the NIDC will clearly be an indispensable party, which it will be the duty of the private respondent to include as a
party in the case, otherwise, it will not be bound by any adjudication which will adversely affect its rights over the lots
in dispute.

It would appear, however, from the facts admitted by the parties, that a valid assignment, binding upon the private
respondents, has been made by the PCIB to the NIDC of its mortgage rights as well as its rights as purchaser of the
lots in question. There does not appear to be anything in our statutes or jurisprudence which prohibits a creditor
without the consent of the debtor from making an assignment of his credit and the rights accessory thereto; and,
certainly, an assignment of credit and its accessory rights does not at all obliterate the obligation of the debtor to
pay, but merely puts the assignee in the place of his assignor. Indeed, article 1634 of the new Civil Code definitely
recognizes the likelihood that credits and other incorporeal rights in litigation may be assigned pendente lite, and, in
such event, provides that the debtor may extinguish his obligation by making appropriate reimbursement to the
assignee.2 In other words, an assignment of credit pendente lite, contrary to the respondent Judge's opinion of
March 31, 1967, under which it was construed that the mortgage rights and rights as purchaser of the PCIB over the
lots in question were still in custodia legis at the time of their assignment to the NIDC, does not extinguish the credit
or accessory rights assigned, but simply changes the bag into which the debtor must empty his money in payment.

ACCORDINGLY, the order of the court a quo dated March 31, 1967, and its subsequent orders dated May 28, 1968,
November 9, 1968 and January 27, 1969, and all related orders are hereby declared null and void and without legal
effect, for having been issued without jurisdiction. The preliminary injunction issued by this Court on March 11, 1970
is hereby made permanent. No pronouncement as to costs.

G.R. No. 162333, December 23, 2008

BIENVENIDO C. TEOCO and JUAN C. TEOCO, JR., Petitioners, vs. METROPOLITAN BANK AND TRUST COMPANY,
Respondent.

Facts: Lydia T. Co, married to Ramon Co, was the registered owner of two parcels of land. Ramon Co mortgaged the said
parcels of land to Metrobank for a sum of P200,000.00.

The properties were sold to Metrobank in an extrajudicial foreclosure sale under Act No. 3135. One year after the registration
of the Certificates of Sale, the titles to the properties were consolidated in the name of Metrobank for failure of Ramon Co
to redeem the same within the one year period provided for by law.

Metrobank filed a petition for the issuance of a writ of possession against Ramon Co and Lydia Co (the spouses Co).

The brothers Teoco filed an answer-in-intervention alleging that they are the successors-in-interest of the spouses Co, and
that they had duly and validly redeemed the subject properties within the reglementary period provided by law. Teoco had
deposited the amount of P356,297.57 to the clerk of court of the RTC. Metrobank refused to accept the amount deposited
by the brothers Teoco, alleging that they are obligated to pay the spouses Co’s subsequent obligations to Metrobank as
well.

Issues:
1. WON petitioners need to pay not only the P200,000 principal obligation but also that previously extended.
2. WON additional loan granted by Metrobank to Sps. Co were secured by the real estate mortgage.
Held:

No. But without prejudice to the right of Metrobank to foreclose anew the mortgage. Neither petitioners, the brothers Teoco,
nor respondent, Metrobank, were able to present sufficient evidence to prove whether the additional loans granted to the
spouses Co by Metrobank were covered by the mortgage agreement between them. While we agree with Metrobank that
 mortgages intended to secure future advancements are valid and legal contracts,[13]entering into such mortgage contracts
does not necessarily put within its coverage all loan agreements that may be subsequently entered into by the parties.

In order to prevent any injustice to, or unjust enrichment of, any of the parties, this Court holds that the fairest resolution is
to allow the brothers Teoco to redeem the foreclosed properties based on the amount for which it was foreclosed
(P255,441.14 plus interest). This is subject, however, to the right of Metrobank to foreclose the same property anew in order
to satisfy the succeeding loans entered into by the spouses Co, if they were, indeed, covered by the mortgage contract.

In the case at bar, Metrobank would not be prejudiced by the assignment by the spouses Co of their right of redemption in
favor of the brothers Teoco. As conceded by Metrobank, the assignees, the brothers Teoco, would merely step into the
shoes of the assignors, the spouses Co.

WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The decision of the Regional Trial Court in Catbalogan,
Samar is REINSTATED with the following MODIFICATION: the redemption by Bienvenido C. Teoco and Juan C. Teoco,
Jr. of the properties covered by TCT Nos. T-6910 and T-6220 shall be without prejudice to the subsequent foreclosure of
same properties by Metropolitan Bank and Trust Company to satisfy other loans covered by the Real Estate Mortgage.

LICAROS vs GATMAITAN

Doctrine

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." Under our Rules of Court, it is mandated that "(I)n the construction of an instrument where there are several
provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all." Contracts should be so construed as
to harmonize and give effect to the different provisions thereof.

contested provision

"WHEREAS, the parties herein have come to an agreement on the nature, form and extent of their mutual prestations which hey now
record herein with the express conformity of the third parties concerned"

facts

 The Anglo-Asean Bank is a bank somewhere in Cat Heaven which receive fund placements from different parts of the world and invest
such deposits in money market placements in HK, Europe and the United States.

 Licaros decided to make a fund placement (USD 150K) with said bank sometime in the 1980's. Licaros encountered tremendous
difficulties in retrieving the investments he had put in.

 Licaros then decide to seek the counsel of Antonio P. Gatmaitan (banker). Gatmaitan voluntarily offered to assume the payment of
Anglo-Asean's indebtedness to Licaros subject to certain terms and conditions. The two executed a notarized MOA. Gatmaitan
presented to Anglo-Asean the MOA for the purpose of collecting. No formal response was ever made by said bank.

 Gatmaitan did not bother anymore to make good his promise to pay Licaros the PN. Licaros felt that he had a right to collect on the
basis of the PN regardless of the outcome of Gatmaitan's recovery efforts.

lower courts

 RTC found Gatmaitan liable under the MOA and PN for P3,150K plus 12% interest pa. (assignment of credit.

 CA reversed and held that Gatmaitan did not at any point become obligated to pay to Licaros the amount stated in the
PN. (conventional subrogation)

petitioner arguments

1. MOA did not create a new obligation and, as such, the same cannot be a conventional subrogation;

2. the consent of Anglo-Asean Bank was not necessary for the validity of the MOA;

3. assuming that such consent was necessary, respondent failed to secure the same as was incumbent upon him;

4. respondent himself admitted that the transaction was one of assignment of credit.
 issue: Whether the MOA is one of assignment of credit or one of conventional subrogation.

difference of assignment of credit and conventional subrogation

Assignment of Credit Conventional Subrogation

process of transferring the right of the assignor to transfer of all the rights of the creditor to a third
the assignee who would then have the right to person, who substitutes him in all his rights.
proceed against the debtor.

Debtor’s consent is not necessary Debtor’s consent is necessary

nullity of an old obligation may be cured by nullity of an obligation is not remedied by the
subrogation, such that a new obligation will be assignment of the creditor's right to another.
perfectly valid

moa was a conventional subrogation (whereas clause and “with our conforme”)
 Gatmaitan and Licaros had intended to treat their agreement as one of conventional subrogation: "WHEREAS, the parties herein have
come to an agreement on the nature, form and extent of their mutual prestations which hey now record herein with the express
conformity of the third parties concerned"

 Had the intention been merely to confer the status of a mere "assignee", there is simply no sense for them to have stipulated that the
same is conditioned on the "express conformity" thereto of Anglo-Asean Bank.

 On the signature page, right under the place reserve for the signatures of Peaches and respondent, there is, typewritten, the words
"WITH OUR CONFORME." Under this notation, the words "ANGLO-ASEAN BANK AND TRUST" were written by hand.

 This provision which contemplates the signed conformity of Anglo-Asean Bank, taken together with the preambulatory clause leads to
the conclusion that both parties intended that Anglo-Asean Bank should signify its agreement to the MOA.

EXTINGUISHMENT Of the old obligation is the effect not the requisite

 Peaches: Considering that the old obligation of Anglo-Asean Bank was never extinguished under the MOA, it is contended that the
same could not be considered as a conventional subrogation.

 SC: The extinguishment of the old obligation is the effect of the establishment of a contract for conventional subrogation. It is not a
requisite without which a contract for conventional subrogation may not be created.

provisions may not simply be disregarded or dismissed as superfluous

 Peaches: the preambulatory clause requiring the express conformity of third parties is a mere surplusage which is not
necessary to the validity of the agreement.

 SC: the intention of the parties to treat the MOA as embodying a conventional subrogation is shown not only by the "whereas clause"
but also by "WITH OUR CONFORME" reserved for Anglo-Asean Bank. These provisions may not simply be dismissed as
superfluous. 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." It is mandated that "(I)n the construction of an instrument where there are several
provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all." Contracts should be so construed as
to harmonize and give effect to the different provisions thereof.

irrelevant on who was required of obtaining the consent

Peaches: it was incumbent on the part of the respondent to secure the conformity of Anglo-Asean

SC: irrelevant. The determinative fact is that such consent was not secured by either Peaches or respondent which consequently
resulted in the invalidity of the said memo.

use of the word “assignment” during testimony

 Pet: respondent himself admitted that the transaction was one of assignment of credit in his testimony

 SC: respondent apparently used the word "assignment" in his testimony in the general sense. Respondent is not a lawyer and as such,
he is no so well versed in law that he would be able to distinguish between the concepts of conventional subrogation and of assignment
of credit.