UNIVERSITY OF SAN JOSE RECOLETOS

SCHOOL OF LAW
Magallanes St., Cebu City, Cebu

COMPILATION OF CASE DIGESTS UNDER CREDIT TRANSACTION

(2015-2019)

In Partial Fulfillment of the Requirements in Credit Transactions

Submitted To:
Atty. Christian C. Fernandez

Submitted By:

T-Th Class 5:30- 7:30

TABLE OF CONTENTS
Magno, Carmille Fatima A.

Sps. Baysa vs Sps. Pantilla

GR. 159271 July 13, 2015

Topic : Real Estate Mortgage

Principle: To enable the extrajudicial foreclosure of the REM of the

petitioners, the special power to sell should have been either inserted in the
REM itself or embodied in a separate instrument attached to the REM. The
omission of the special power to sell the property subject of the mortgage was
fatal to the validity and efficacy of the extrajudicial foreclosure

FACTS:
Petitioners entered into a real estate mortgage (REM) involving a parcel of
land in Quezon City to secure the payment of their obligation amounting to
P2.3M in favor of the respondent spouses. Based on the terms of the REM,
the petitioners agreed to pay interest on the principal amount at the rate of
2.5% per month or P57,500 per month.

Respondent spouses commenced the extrajudicial foreclosure of the REM

to recover the total liability of P3,579,100 (inclusive of the principal and the
unpaid interest) upon the default of the petitioners.

Petitioner sued the respondent spouses in the RTC to annul the

extrajudicial foreclosure of the REM and the public auction conducted.
Petitioner alleged that all the proceedings relevant to the extrajudicial
foreclosure were null and void. They pointed out that there had been no
power or authority to sell inserted in the REM as required by Section of Act
No. 3135 and the interest of 8% was unconscionable.

RTC dismissed the petitioners’ complaint. The petitioner appealed to the

CA, the CA affirmed the validity of the foreclosure proceedings but invalidating
the 8% additional interest for lack of legal basis considering that the REM did
not contain a stipulation to that effect.

ISSUE:
1. WON the CA erred in affirming the RTCs declaration that the
extrajudicial foreclosure was valid.
2. WON the CA erred in not declaring the 2.5% monthly interest illegal
and usurious.

RULING:
1. YES. In the extrajudicial foreclosure of property subject of a real estate
mortgage, an Act No. 3135 is quite explicit and definite about the special
 power to sell the property being required to be either inserted in or
attached to the deed of mortgage.

Section 1 of Act No. 3135 provides: Section 1. When a sale is made

under a special power inserted in or attached to any real estate mortgage
hereafter made as security for the payment of money or the fulfillment of any
other obligation, the provisions of the following section shall govern as to the
manner in which the sale and redemption shall be effected, whether or not
provision for the same is made in the power.

To enable the extrajudicial foreclosure of the REM of the petitioners, the

special power to sell should have been either inserted in the REM itself or
embodied in a separate instrument attached to the REM. There was no
special power to sell was either inserted in the REM or attached to the
REM. Hence, the respondent spouses as the foreclosing mortgagees could
not initiate the extrajudicial foreclosure, but must resort to judicial foreclosure
pursuant to the procedure set forth in Rule 68 of the Rules of Court.
The omission of the special power to sell the property subject of the
mortgage was fatal to the validity and efficacy of the extrajudicial foreclosure,
and warranted the invalidation of the entire proceedings conducted by the
sheriff.

Based on the text of paragraph 13, supra, the petitioners evidently agreed
only to the holding of the extrajudicial foreclosure should they default in their
obligations. Their agreement was a mere expression of their amenability to
extrajudicial foreclosure as the means of foreclosing the mortgage, and did
not constitute the special power or authority to sell the mortgaged
property to enable the mortgagees to recover the unpaid obligations. What
was necessary was the special power or authority to sell — whether inserted
in the REM itself, or annexed thereto — that authorized the respondent
spouses to sell in the public auction their mortgaged property.

2. NO. The petitioners are now estopped from assailing the validity of the
monthly interest payments made.

They expressly consented to be liable to pay 2.5%/month on the principal

loan of P2.3 Million, and actually made several payments of interest at that
rate. Secondly, they did not assail the rate of 2.5%/month as interest in the
lower courts, doing so only in this appeal.

Hence, they cannot be permitted to bring the issue for the first time in this
Court, for that would be unfair not only to the adverse parties but also to the
lower courts by depriving the latter of the opportunity to pass upon the issue.
And, thirdly, the invalidation by the CA of the 8% compounded interest does
not justify deleting the stipulation on the 2.5%/month interest that was really
separate and distinct from the former.
 Maybank (formerly PNB) vs Spouses Tarrosa
GR No. 213014 October 14, 2015

Topic : Real Estate Mortgage

Principle: An action to enforce a right arising from a mortgage should be

enforced within ten (10) years from the time the right of action accrues, i.e.,
when the mortgagor defaults in the payment of his obligation to the
mortgagee; otherwise, it will be barred by prescription and the mortgagee will
lose his rights under the mortgage.

FACTS:
Respondent Spouses Tarrosa obtained from the petitioner a loan in the
amount of P91,000. The loan was secured by the Real Estate Mortgage over
a 500-sq parcel of land in Negros Occidental.

After paying the loan, Sps. Tarrosa obtained another loan from Maybank
in the amount of P60,000. Sps. Tarrosa failed to settle the second loan upon
maturity. They received a Final Demand Letter from Maybank requiring them
to settle their outstanding loan in the aggregate amount of P564,579.91. They
offered to pay a lesser amount, which Maybank refused.

Maybank commenced extrajudicial foreclosure. The property was

eventually sold in a public auction sale for a total bid price of P600,000, to
Philmay Property Inc.

Sps. Tarrosa filed a complaint for declaration of nullity and invalidity of the
foreclosure of real estate and of public auction sale proceedings and
damages with prayer for preliminary injunction against Maybank, PPI, Sheriff
and the Registry of Deeds before the RTC.

Sps. Tarrosa averred that: (a) the second loan was a clean or unsecured
loan; (b) after receiving the final demand letter, they tried to pay the second
loan, including the agreed interests and charges, but Maybank unjustly
refused their offers of payment; and (c) Maybank's right to foreclose had
prescribed or is barred by laches.

RTC ruled that Maybank’s right to foreclose, reckoned from the time the
mortgage indebtedness became due and payable had already prescribed.
Accordingly, it declared the extrajudicial foreclosure proceedings affecting the
subject property as null and void, and ordered Maybank to pay Sps. Tarrosa
moral and exemplary damages, as well as attorney's fees and litigation
expenses. Maybank filed a motion for reconsideration but was denied.
Petitioner appealed to the CA. CA affirmed the RTC ruling.
ISSUE:
Whether or not the CA committed reversible error in finding that
Maybank's right to foreclose the real estate mortgage over the subject
property was barred by prescription

RULING:
YES.
An action to enforce a right arising from a mortgage should be enforced
within ten (10) years from the time the right of action accrues, i.e., when the
mortgagor defaults in the payment of his obligation to the mortgagee;
otherwise, it will be barred by prescription and the mortgagee will lose his
rights under the mortgage.

In order that the debtor may be in default, it is necessary that: (a) the
obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially, unless demand is not necessary.

Thus, it is only when demand to pay is unnecessary in case of the

aforementioned circumstances, or when required, such demand is made and
subsequently refused that the mortgagor can be considered in default and the
mortgagee obtains the right to file an action to collect the debt or foreclose the
mortgage.

However, this provision merely articulated Maybank's right to elect

foreclosure upon Sps. Tarrosa's failure or refusal to comply with the obligation
secured, which is one of the rights duly accorded to mortgagees in a similar
situation. In no way did it affect the general parameters of default, particularly
the need of prior demand under Article 1169 of the Civil Code, considering
that it did not expressly declare: (a) that demand shall not be necessary in
order that the mortgagor may be in default; or (b) that default shall commence
upon mere failure to pay on the maturity date of the loan. Hence, the CA erred
in construing the above provision as one through which the parties had
dispensed with demand as a condition sine qua non for the accrual of
Maybank's right to foreclose the real estate mortgage over the subject
property, and thereby, mistakenly reckoned such right from the maturity date
of the loan on March 11, 1984.

In the absence of showing that demand is unnecessary for the loan

obligation to become due and demandable, Maybank's right to foreclose
the real estate mortgage accrued only after the lapse of the period
indicated in its final demand letter for Sps. Tarrosa to pay, i.e., after the
lapse of five (5) days from receipt of the final demand letter dated March 4,
1998.

Consequently, both the CA and the RTC committed reversible error in

declaring that Maybank's right to foreclose the real estate mortgage had
already prescribed. Thus, considering that the existence of the loan had been
admitted, the default on the part of the debtors-mortgagors had been duly
established, and the foreclosure proceedings had been initiated within the
prescriptive period as afore-discussed, the Court finds no reason to nullify the
extrajudicial foreclosure sale of the subject property.

Paw , Arthur Ryan Y.

GE Money Bank Inc. (formerly Keppel Bank Philippines Inc) vs SPS

Dizon

Topic:

Principle: The Period of redemption starts to run from the time of the
registration of the foreclosure sale.

Facts:
Spouses Dizon obtained a loan for Php. 100,000 from Monte de Piedad
and Savings Bank (now GE Money Bank) on September 18, 1991. As
security, the spouses executed a real estate mortgage on two of their lots in
Sampaloc, Manila. The Spouses defaulted in the payment of their loan, and a
statement of foreclosure was issued by the bank on March 26, 1993, showing
that they had an outstanding liability of Php. 143,049.54

On July and August 1993, the spouses paid the bank 12,000 and 10,000
respectively, and requested the postponement of the foreclosure sale for at
least 60 days. The properties were extra-judicially foreclosed on September
13, 1993 and the bank was the highest bidder.

The sale was registered with the register of deeds on October 18, 1993,
but the spouses were only able to pay 90,000, which was less than the total
redemption price, despite acceptance by the bank.

Issue: W/N the Spouses may avail of the redemption.

Ruling:
Yes.
Since it is allowed by law. The period allowed by law is not a matter of intent
but rather a question of payment or valid tender of payment of the full
redemption price from the time of the registration of the foreclosure sale and
not of the date of the actual sale.
 United Overseas Bank of the Philippines vs HLURB

Principle: One void mortgage of a property does not void the entire Real
Estate Mortgage if it involves multiple properties.

Facts:
JOS Managing Builders owns and develops a condominium project
named Aurora Milestones Tower. EDUPLAN entered into a contract to sell
with JOS covering UNIT E, Aurora Milestones Tower, after full payment in
August 1998, a deed of absolute sale was issued on December 1998

JOS failed to issue the Condominium Certificate of Title in favor of

EDUPLAN. EDUPLAN later found out that the lots of Aurora had been
mortgaged by JOS to United Overseas Bank without prior approval of the
HLURB.

Due to the failure of delivering the condominium certificate of title,

EDUPLAN filed a complaint for specific performance against JOS and the
HLURB.

United Overseas Bank file a petition with the HLURB to void the
mortgage and compel the issuance of the condominium certificate of title

Issue: W/N the HLURB can declare the entire mortgage as null and void.

Ruling:
No.
The SC ruled that, while a mortgage may be nullified there is a violation of
Sec 18 of PD 957 (or the Subdivision and Condominium Buyers Protective
Decree), such may only be availed by the complaining buyer and only to his
proportionate interests therein. Since EDUPLAN has interest only in the one
unit, then HLURB is incorrect when it voided the entire mortgage.
Salang , Donald C.

PLANTERS DEVELOPMENT BANK V. LUBIYA AGRO

INDUSTRIAL CORPORATION
Gr. No. 207972 November 14, 2018

Topic : Real Estate Mortgage

Principle : Section 3 of Act No. 3135 governing extra-judicial foreclosure of

real estate mortgages only requires the posting of the notice of extrajudicial
foreclosure sale in three public places, and publication of the said notice in a
newspaper of general circulation.

Facts: Respondent Lubiya Agro Industrial Corporation made two loans from
petitioner Planters Development Bank in the amounts of P6,500,000.00 and
P5,000,000.00. The said loans were secured by real estate mortgages over
two parcels of land with improvements.
Planters Bank sent a letter to Lubiya, when the latter defaulted, demanding
payment and informing Lubiya that failure to give attention to such demand
shall prompt Planters Bank to institute a legal action against it. 
Due to Libuya's failure to settle its obligation, Planters Bank extra-judicially
foreclosed the properties offered as security by Lubiya. A public auction was
held and Planters Bank emerged as the sole and highest bidder. A Certificate
of Sale was issued in its favor and recorded with the Registry of Deeds.
Ownership over the properties was consolidated and titles were
correspondingly issued in the name of Planters Bank after the expiration of
redemption period.
Lubiya filed a complaint for nullification of the loan agreement, foreclosure
proceedings, damages, and attorney's fees, with application for the issuance
of a temporary restraining order and injunction against Planters Bank. The
ground of the complaint was on Planters Bank's alleged failure to furnish
Lubiya with notices regarding the foreclosure and sale of the mortgaged
properties despite being obligated in their mortgage contract to do so.
The RTC dismissed the complaint. On appeal, the CA reversed the decision
of the RTC.

Issue: Whether or not the lack of personal notice of the extrajudicial

foreclosure proceedings upon the mortgagor renders the same null and void.
Ruling: No. As a general rule, personal notice to the mortgagor in
extrajudicial foreclosure proceedings is not necessary. Section 3 of Act No.
3135 governing extra-judicial foreclosure of real estate mortgages only
requires the 1) posting of the notice of extrajudicial foreclosure sale in three
public places; and 2) publication of the said notice in a newspaper of general
circulation, viz:
Sec. 3. Notice shall be given by posting notices of the sale for not less
than twenty days in at least three public places of the municipality or
city where the property is situated, and if such property is worth more
than four hundred pesos, such notice shall also be published once a
week for at least three consecutive weeks in a newspaper of general
circulation in the municipality and city.

The petition is denied and the decision of the Court of Appeals is affirmed.

Norlinda Marilag vs. Marcelino Martinez

G.R. No. 201892  ,July 22, 2015

Topic : Real Estate Mortgage

Principle: The rule in loan contracts secured by a real estate mortgage is that
the creditor-mortgagee has a single cause of action against the debtor-
mortgagor: to recover the debt, through the filing of a personal action for
collection of sum of money or the institution of a real action to foreclose on the
mortgage security. The two remedies are alternative, not cumulative or
successive, and each remedy is complete by itself.

Facts: Rafael Martinez, respondent's father, obtained from petitioner Norlinda

Marilag a loan in the amount of ₱160,000.00, with a stipulated monthly
interest of five percent (5%), payable within a period of six months. The loan
was secured by a real estate mortgage over a parcel of land.
Rafael failed to settle his obligation upon maturity and despite repeated
demands. Petitioner filed a Complaint for Judicial Foreclosure of Real Estate
Mortgage before the RTC.
Rafael failed to file his answer and, upon petitioner's motion, was declared in
default. After presentation of petitioner's evidence, the RTC of Imus issued a
Decision dated January 30, 1998, in the foreclosure case, declaring the
stipulated 5% monthly interest to be usurious and reducing the same to 12%
per annum.
Before to Rafael's notice of the RTC decision, respondent agreed to pay
Rafael's obligation to petitioner which was at ₱689,000.00. After making a
total payment of ₱400,000.00, he executed a promissory note, binding himself
to pay on or before March 31, 1998 the amount of ₱289,000.00.
After learning of the January 30, 1998 Decision, respondent refused to pay
the amount covered by the subject promissory note despite demands,
prompting petitioner to file a complaint for sum of money and damages before
the court.
The court denied the recovery of the amount. The CA recalled and set aside
the court’s order.
Issue: Whether or not the dismissal of the collection case is proper.

Ruling: Yes, the dismissal of the collection case is proper.

In loan contracts secured by a real estate mortgage, the rule is that the
creditor-mortgagee has a single cause of action against the debtor-mortgagor:
to recover the debt, through the filing of a personal action for collection of sum
of money or the institution of a real action to foreclose on the mortgage
security.

The two remedies are alternative, not cumulative or successive, and each

remedy is complete by itself. If the creditor-mortgagee opts to foreclose the
real estate mortgage, he waives the action for the collection of the unpaid
debt, except only for the recovery of whatever deficiency may remain in the
outstanding obligation of the debtor-mortgagor after deducting the bid price in
the public auction sale of the mortgaged properties.  A deficiency judgment
shall only issue after it is established that the mortgaged property was sold at
public auction for an amount less than the outstanding obligation.

In the present case, records show that petitioner, as creditor-mortgagee,

instituted an action for judicial foreclosure pursuant to the provisions of Rule
68 of the Rules of Court in order to recover on Rafael's debt. The availment of
such remedy thus bars recourse to the subsequent filing of a personal action
for collection of the same debt, in this case, under the principle of litis
pendentia, considering that the foreclosure case only remains pending as it
was not shown to have attained finality.
Marave , Jeremy S.

VICENTE D. CABANTING and LALAINE V. CABANTING, Petitioners,

vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.

G.R. No. 201927 February 17, 2016

PERALTA, J.:

Topic : Chattel Mortgage

Principles:
SECTION 14. Sale of property at public auction; Officer’s return; Fees;
Disposition of proceeds. The mortgagee, his executor, administrator, or
assign, may, after thirty days from the time of condition broken, cause the
mortgaged property, or any part thereof, to be sold at public auction by a
public officer at a public place in the municipality where the mortgagor
resides, or where the property is situated, provided at least ten days’ notice of
the time, place, and purpose of such sale has been posted at two or more
public places in such municipality, and the mortgagee, his executor,
administrator, or assign, shall notify the mortgagor or person holding under
him and the persons holding subsequent mortgages of the time and place of
sale, either by notice in writing directed to him or left at his abode, if within the
municipality, or sent by mail if he does not reside in such municipality, at least
ten days previous to the sale.
Notice may be waived or demand may be waived.
Art. 1169. Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment
of their obligation.
However, the demand by the creditor shall not be necessary in order that
delay may exist:
(1) When the obligation or the law expressly so declare;

Facts:
On January 14, 2003, petitioners bought on installment basis from
Diamond Motors Corporation a 2002 Mitsubishi Adventure SS MT and for
value received, petitioners also signed, executed and delivered to Diamond
Motors a Promissory Note with Chattel Mortgage. Therein, petitioners jointly
and severally obligated themselves to pay Diamond Motors the sum of
P836,032.00, payable in monthly installments in accordance with the
schedule of payment indicated therein, and which obligation is secured by a
chattel mortgage on the aforementioned motor vehicle. On the day of the
execution of the document, Diamond Motors, with notice to petitioners,
executed a Deed of Assignment, thereby assigning to BPI Family Savings
Bank, Inc. (BPI Family) all its rights, title and interest to the Promissory Note
with Chattel Mortgage.
Come October 16, 2003, however, a Complaint was filed by BPI Family
against petitioners for Replevin and damages before the Regional Trial Court
of Manila (RTC), praying that petitioners be ordered to pay the unpaid portion
of the vehicle's purchase price, accrued interest rate of 36% per 25%
attorney's fees and 25% liquidated damages, as stipulated on the Promissory
Note with Chattel Mortgage. BPI Family likewise prayed for the issuance of a
writ of replevin but it failed to file a bond therefor, hence, the writ was never
issued. BPI Family alleged that petitioners failed to pay three (3) consecutive
installments and despite written demand sent to petitioners through registered
mail, petitioners failed to comply with said demand to pay or to surrender
possession of the vehicle to BPI Family.
In their Answer, petitioners alleged that they sold the subject vehicle to
one Victor S. Abalos, with the agreement that the latter shall assume the
obligation to pay the remaining monthly installments. It was then Abalos who
made payments to BPI Family through his personal checks, and BPI Family
accepted the post-dated checks delivered to it by Abalos. The checks issued
by Abalos for the months of May 2003 to October 2003 were made good, but
subsequent checks were dishonored and not paid. Petitioners pointed out that
BPI Family should have sued Abalos instead of them.
On April 14, 2008, the RTC rendered a decision rendered in favor of
the plaintiff BPI Family Savings Bank, Inc. and against the by ordering the
latter to pay the plaintiff Bank. Aggrieved, petitioners appealed to the CA.
However CA dismissed the case.

Issue:
Whether or not respondent bank may be held entitled to the
possession of the motor vehicle subject of the instant case for replevin, or the
payment of its value and damages, without proof of prior demand.

Ruling:

Petitioners are bound by the aforementioned stipulation in the

Promissory Note with Chattel Mortgage waiving the necessity of notice and
demand to make the obligation due and payable. Agner v. BPI Family
Savings Bank, Inc., which is closely similar to the present case, is squarely
applicable. Petitioners therein also executed a Promissory Note with Chattel
Mortgage containing the stipulation waiving the need for notice and demand.
The Court ruled:
Even assuming, for argument's sake, that no demand letter was sent
by respondent, there is really no need for it because petitioners legally waived
the necessity of notice or demand in the Promissory Note with Chattel
Mortgage, which they voluntarily and knowingly signed in favor of
respondent's predecessor-in-interest. Said contract expressly stipulates:
In case of my/our failure to pay when due and payable, any sum which
I/We are obliged to pay under this note and/or any other obligation which I/We
or any of us may now or in the future owe to the holder of this note or to any
other party whether as principal or guarantor x x x then the entire sum
outstanding under this note shall, without prior notice or demand, immediately
become due and payable. (Emphasis and underscoring supplied)
A provision on waiver of notice or demand has been recognized as
legal and valid in Bank of the Philippine Islands v. Court of Appeals, wherein
We held:
The Civil Code in Article 1169 provides that one incurs in delay or is in
default from the time the obligor demands the fulfillment of the obligation from
the obligee. However, the law expressly provides that demand is not
necessary under certain circumstances, and one of these circumstances is
when the parties expressly waive demand. Hence, since the co-signors
expressly waived demand in the promissory notes, demand was unnecessary
for them to be in default.
Further, the Court even ruled in Navarro v. Escobido that prior demand
is not a condition precedent to an action for a writ of replevin, since there is
nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant
to make a demand on the possessor of the property before an action for a writ
of replein could be filed.
Clearly, as stated above, Article 1169 (1) of the Civil Code allows a party to
waive the need for notice and demand. Petitioners' argument that their liability
cannot be deemed due and payable for lack of proof of demand must be
struck down.

UNION BANK OF THE PHILIPPINES,

vs.
ALAIN* JUNIAT, WINWOOD APPAREL, INC., WINGYAN APPAREL, INC.,
NONWOVEN FABRIC PHILIPPINES, Respondents.
G.R. No. 171569               August 1, 2011

DEL CASTILLO, J.:

Topic : Chattel Mortgage

Principle: Act 1508 An Act Providing For The Mortgaging Of Personal

Property And For The Registration Of The Mortgages So Executed

Sec. 5. Form. — A chattel mortgage shall be deemed to be sufficient when

made substantially in accordance with the following form, and shall be signed
by the person or persons executing the same, in the presence of two
witnesses, who shall sign the mortgage as witnesses to the execution thereof,
and each mortgagor and mortgagee, or, in the absence of the mortgagee, his
agent or attorney, shall make and subscribe an affidavit in substance as
hereinafter set forth, which affidavit, signed by the parties to the mortgage as
above stated, and the certificate of the oath signed by the authority
administering the same, shall be appended to such mortgage and recorded
therewith.

Facts:
Petitioner Union Bank of the Philippines (Union Bank) is a universal
banking corporation organized and existing under Philippine laws.
Respondents Winwood Apparel, Inc. (Winwood) and Wingyan Apparel,
Inc. (Wingyan) are domestic corporations engaged in the business of apparel
manufacturing.
Both respondent corporations are owned and operated by respondent
Alain Juniat (Juniat), a French national based in Hongkong. Respondent
Nonwoven Fabric Philippines, Inc. (Nonwoven) is a Philippine corporation
engaged in the manufacture and sale of various types of nonwoven fabrics.
On September 3, 1992, petitioner filed with the Regional Trial Court
(RTC) of Makati, Branch 57, a Complaint with prayer for the issuance of ex-
parte writs of preliminary attachment and replevin against Juniat, Winwood,
Wingyan, and the person in possession of the mortgaged motorized sewing
machines and equipment. Petitioner alleged that Juniat, acting for and in
behalf of Winwood and Wingyan, executed a promissory note dated April 11,
1992 and a Chattel Mortgage dated March 27, 1992 over several motorized
sewing machines and other allied equipment to secure their obligation arising
from export bills transactions to petitioner in the amount of
₱1,131,134.35; that as additional security for the obligation, Juniat executed a
Continuing Surety Agreement dated April 11, 1992 in favor of petitioner; that
the loan remains unpaid; and that the mortgaged motorized sewing machines
are insufficient to answer for the obligation.
On September 10, 1992, the RTC issued writs of preliminary
attachment and replevin in favor of petitioner. The writs were served by the
Sheriff upon Nonwoven as it was in possession of the motorized sewing
machines and equipment.
On September 28, 1992, Nonwoven filed an Answer, contending that
the unnotarized Chattel Mortgage executed in favor of petitioner has no
binding effect on Nonwoven and that it has a better title over the motorized
sewing machines and equipment because these were assigned to it by Juniat
pursuant to their Agreement dated May 9, 1992.
On November 23, 1992, petitioner filed a Motion to Sell Chattels
Seized by Replevin, praying that the motorized sewing machines and
equipment be sold to avoid depreciation and deterioration. However, on May
18, 1993, before the RTC could act on the motion, petitioner sold the attached
properties for the amount of ₱1,350,000.00.
RTC ruled in favor of petitioner. Respondents appealed to CA and CA
reversed the ruling of the RTC. The CA ruled that the contract of pledge
entered into between Juniat and Nonwoven is valid and binding, and that the
motorized sewing machines and equipment were ceded to Nonwoven by
Juniat by virtue of a dacion en pago. Thus, the CA declared Nonwoven
entitled to the proceeds of the sale of the attached properties
Ruling of the Court of Appeals

Issue:
1. Whether Union Bank of the Philippines had a better right over the
machineries seized/levied upon
2. Whether Nonwoven has a valid claim over the subject sewing machines.
Petitioner’s Arguments
Echoing the reasoning of the RTC, petitioner insists that it has a better
title to the proceeds of the sale. Although the Chattel Mortgage executed in its
favor was not notarized, petitioner insists that it is nevertheless valid, and
thus, has preference over a subsequent unnotarized agreement. Petitioner
further claims that except for the said agreement, no other evidence was
presented by Nonwoven to show that the motorized sewing machines and
equipment were indeed transferred to them by Juniat/Winwood/Wingyan.
Respondent Nonwoven’s Arguments
Nonwoven, on the other hand, claims ownership over the proceeds of
the sale under Article 1544 of the Civil Code on double sale, which it claims
can be applied by analogy in the instant case. Nonwoven contends that since
its prior possession over the motorized sewing machines and equipment was
in good faith, it has a better title over the proceeds of the sale. Nonwoven
likewise maintains that petitioner has no right over the proceeds of the sale
because the Chattel Mortgage executed in its favor was unnotarized,
unregistered, and without an affidavit of good faith.

Ruling:
The unnotarized Chattel Mortgage executed by Juniat, for and in behalf
of Wingyan and Winwood, in favor of petitioner does not bind
Nonwoven. However, it must be pointed out that petitioner’s primary cause of
action is for a sum of money with prayer for the issuance of ex-parte writs of
attachment and replevin against Juniat, Winwood, Wingyan, and the person in
possession of the motorized sewing machines and equipment. Thus, the fact
that the Chattel Mortgage executed in favor of petitioner was not notarized
does not affect petitioner’s cause of action. Petitioner only needed to show
that the loan of Juniat, Wingyan and Winwood remains unpaid and that it is
entitled to the issuance of the writs prayed for. Considering that writs of
attachment and replevin were issued by the RTC, Nonwoven had to prove
that it has a better right of possession or ownership over the attached
properties.This it failed to do.
A perusal of the Agreement dated May 9, 1992 clearly shows that the
sewing machines, snap machines and boilers were pledged to Nonwoven by
Juniat to guarantee his obligation. However, under Article 2096 of the Civil
Code, "[a] pledge shall not take effect against third persons if a description of
the thing pledged and the date of the pledge do not appear in a public
instrument." Hence, just like the chattel mortgage executed in favor of
petitioner, the pledge executed by Juniat in favor of Nonwoven cannot bind
petitioner.
No evidence was presented by Nonwoven to show that the attached
properties were subsequently sold to it by way of a dacion en pago. Also,
there is nothing in the Agreement dated May 9, 1992 to indicate that the
motorized sewing machines, snap machines and boilers were ceded to
Nonwoven as payment for the Wingyan’s and Winwood’s obligation. It bears
stressing that there can be no transfer of ownership if the delivery of the
property to the creditor is by way of security. In fact, in case of doubt as to
whether a transaction is one of pledge or dacion en pago, the presumption is
that it is a pledge as this involves a lesser transmission of rights and interests.
Pepito , Victoria Ashley P.

Central Visayas Finance Corporation vs. Spouses Eliezer S.

Adlawan and Leila Adlawan, and spouses Eliezer Adlawan S.R and
Elena Adlawan

Ponente :Del Castillo., J

Topic : Chattel Mortage
Principle : In case of a loan by a mortgage, the creditor has a single cause of
action against the debtor-the recovery of the credit with execution upon
security

Facts :
Respondents in this case obtained a loan worth Php 3 669, 685.00 from
the petitioner Central Visayas Finance Corporation over a Komatsu Highway
Dump Truck , and a continuing guaranty executed by the respondents.

The respondents failed to pay the loan , prompting petitioner to file an

action against the respondents .
Regional Trial Court ruled in favor of the petitoner. Hence , respondents
were ordered to deliver the possession of the dump truck to Petitioner.
Petitioner then foreclosed on the chattel mortgage and caused the sale at
public auction of the dump truck, which was then sold to it as the highest
bidder of Php 500 , 000. 00

Issue: Whether or not the creditor has a single cause of action against the
debtor

Ruling :
Yes.
In case of loan secured by a mortgage , the creditor has a single cause of
action against the debtor. For the recovery of the credit with execution upon
the security.
The creditor cannot split his single cause of action by filing a complaint on
the loan, and thereafter another separate complaint for foreclosure of the
mortgage.
Also , invoking the principle in the case “Bachrach Motor Co.,Inc vs.
Icarangal , the creditor in his action may make two demands. The payment of
the debt and the foreclosure of his mortgage. But two demands arise from the
same cause , the non-payment of debt,and for that reason , they constitute a
single cause of action. Though the debt and the mortgage constitute
agreements, the latter is subsidiary liable tot he former. And both refer to one
and the same obligation.
 Nunelon R. Marquez vs. Elisan Credit Corporation
GR No. 194642 , April 6, 2015

Ponente : Brion J.
Topic : Chattel Morgage
Principle : The mortgage is made for the purpose of securing the
obligation specified in the conditions and for no other purpose.

Facts : On December 16, 1991 , petitioner obtained a first loan form Elisan
Credit Corporation for Fifty Three Thousand Pesos payable in 180 days.

The petitioner signed a promissory note which provided that it is payable

in weekly installments and is subject to 26 % annual interests. In case of non-
payment, te petitioner agreed to pay 10% monthly penalty based on the total
amount of unpaid and another 25% of such amount of Attorney’s fees
exclusive of costs, and judicial and extra judicial expenses.
To secure payment of the loan, the petitioner executed a chattel
mortgage over a motor vehicle. The contract of chattel mortgage provided
among others, that the motor vehicle shall stand as a security for the first loan
and other obligations of every kind already incurred or which may hereafter be
incurred.
Both the petitioner and respondents acknowledged the full payment of the
first loan. Subsequently , the petitioner obtained another loan which is the
second loan from the respondent for fifty thousand pesos evidenced by a
promissory note and a cash voucher dated June 15 , 1992.
The promissory note covering the second loan contained exactly the
same terms and conditions as the first promissory note.
The second loan matured but the petitioner in unable to pay the amount of
Php 25 , 040. Hence , the petitioner asked the respondent if he could pay in
daily installments. The latter granted the request. After the second maturity of
the loan , the petitioner had already paid a total Php 56440, an amount
greater than the principal.
Despite such receipt , respondent filed a complaint for judicial foreclosure
of the chattel mortgage because the petitioner allegedly failed to settle the
balance of the second loan despite the demand.

Issue : Whether or not the Chattel Mortgage could cover the second loan

Ruling : NO
The chattel mortgage could not cover the second loan , the order of
foreclosure was without legal and factual basis.
Invoking the principle in the case of ACME Shoes Rubber and Plastic
Corporation vs. CA.,the debtor executed a chattel mortgage, which had a
provision to this effect ;
“In the case the mortgagor executes subsequent promissory note or notes
either as renewal of the former note or notes either as a renewal of the former
note , as an extension thereof , as a new loan, or is given any other kind of
accommodations. This mortgage shall also stand as security for the payment
of said promissory notes without the necessity of executing a new contract
and the mortgage shall have the same force and effect as if the said
promissory note were existing on the date thereof.
Also, a chattel mortgage can only cover obligations existing at the time of
mortgage. Although a promise expressed in an chattel mortgage to include
debts that are yet to be contracted can be a binding commitment that can be
compelled upon, the security itself does not come into existence or arise until
after a chattel mortgage agreement covering the newly contracted debt is
executed either by a fresh chattel mortgage or by amending the old contract
conformably with the form prescribed by the chattel mortgage law.
In this case , the only obligation specified in the chattel mortgage contract
is the first loan. Such fulfillment of the obligation on the first loan makes the
chattel terminated. Hence , the chattel mortgage does not cover on the said
loan.

Bustamante , Iris D.

NUNELON R. MARQUEZ v. ELISAN CREDIT CORPORATION

G. R. No. 194642, April 06, 2015

Ponente: BRION, J.:

Topic: Chattel Mortgage Law

Principle:

Section 3 of the Chattel Mortgage Law, the payment of the obligation

automatically rendered the chattel mortgage terminated; the chattel mortgage
had ceased to exist upon full payment of the first loan. Being merely an
accessory in nature, it cannot exist independently of the principal obligation.
The parties did not execute a fresh chattel mortgage nor did they amend the
chattel mortgage to comply with the Chattel Mortgage Law which requires that
the obligation must be specified in the affidavit of good faith.

Facts:
Marquez obtained a loan from Elisan Credit Corporation payable in weekly
installments and nd subject to twenty-six percent (26%) annual interest. In
case ofnon-payment, the petitioner agreed to pay ten percent (10%) monthly
penalty based onthe total amount unpaid and another twenty-five percent
(25%) of such amount forattorney's fees exclusive of costs, and judicial and
extrajudicial expenses.
A chattel mortgage was also executed stipulating that “the motor vehicle shall
stand as a security for all other obligations of every kind already incurred or
which hereafter may be incurred”.The payment of that loan was
acknowledged by both parties.
Subsequently, Marquez obtained another loan evidenced by a promissory
note with the same terms and conditions as the first loan. When the second
loan matured, there still remained an unpaid balance of twenty five thousand
forty pesos (P25,040.00). Marquez requested the creditor to pay the unpaid
balance by daily installments until the loan is paid; the creditor agreed. Thus,
several months after the maturity of the loan, Marquez had already paid a
total amount which is greater than the amount of the principal.
Despite such, the creditor filed a complaint for the foreclosure of the Chattel
Mortgage on the ground that Marquez allegedly failed to pay the principal of
the second loan despite demand. It was also prayed that the unpaid balance
plus accrued penalties and interest be paid, because of Marquez’ failure to
pay upon maturity triggered the imposition of monthly penalties and attorney’s
fees.
Marquez, citing Article 1176 and 1235 of the Civil Code, insisting that his daily
payments should be deemed to have been credited against the principal, as
the official receipts issued by the creditor were silent with respect to the
payment of interest and penalties.

Issue(s):

1. Whether or not the creditor waived the payment of the interest.

2. Whether or not the daily payments made by the debtor be applied to the
interest.
3. Whether or not and order for foreclosure of Chattel Mortgage is proper.
Ruling(s):
1. No. The fact that the official receipts did not indicate whether the payments
were made for the principal or the interest does not prove that the creditor
waived the interest. There is no presumption of waiver of interest without any
evidence showing that the creditor accepted the daily instruments as
payments for the principal.

2. Yes. Notwithstanding the fact it was not indicated in the receipts whether
the payments were applied to the principal or the interest, such failure should
not be taken against the creditor. Under Article 1253 of the Civil Code, if the
debt produces interest, payment of the principal shall be deemed to have
been made until the interests have been covered. Thus, the creditor in this
case has a right to credit the payments to the interest first.

3. No. The chattel mortgage could not validly cover the second loan. The
order for foreclosure was without legal and factual basis.
A Chattel Mortgage can only cover obligations existing at the time the
mortgage is constituted. For a Chattel Mortgage to cover debts yet to be
contracted, a fresh chattel mortgage may be executed or the old contract be
amended conformably to the form prescribed by the Chattel Mortgage law.
Here, since there was no showing that a new agreement was executed, the
security can no longer apply to the second loan. The chattel mortgage was
already extinguished because being merely an accessory in nature, it cannot
exist independently of the principal obligation.

Although a promise expressed in a chattel mortgage to include debts that are

yet to be contracted can be a binding commitment that can be compelled upon,
the security itself, however, does not come into existence or arise until after a
chattel mortgage agreement covering the newly contracted debt is executed
either by concluding a fresh chattel mortgage or by amending the old
contract conformably with the form prescribed by the Chattel Mortgage Law. 
Refusal on the part of the borrower to execute the agreement so as to cover
the after-incurred obligation can constitute an act of default on the part of the
borrower of the financing agreement whereon the promise is written but, of
course, the remedy of foreclosure can only cover the debts extant at the time
of constitution and during the life of the chattel mortgage sought to be
foreclosed.

The Chattel Mortgage Law requires the parties to the contract to attach an

affidavit of good faith and execute an oath that -
….(the) mortgage is made for the purpose of securing
the obligation specified in the conditions thereof, and for no
other purposes, and that the same is a just and valid obligation,
and one not entered into for the purposes of fraud.
It is obvious therefore that the debt referred in the law is a current, not an
obligation that is yet merely contemplated.

The only obligation specified in the chattel mortgage contract was the first

loan which the petitioner later fully paid. By virtue of Section 3 of the Chattel
Mortgage Law, the payment of the obligation automatically rendered the
chattel mortgage terminated; the chattel mortgage had ceased to exist upon
full payment of the first loan. Being merely an accessory in nature, it cannot
exist independently of the principal obligation.

The parties did not execute a fresh chattel mortgage nor did they amend the
chattel mortgage to comply with the Chattel Mortgage Law which requires that
the obligation must be specified in the affidavit of good faith. Simply put, there
no longer was any chattel mortgage that could cover the second loan upon full
payment of the first loan. The order to foreclose the motor vehicle therefore
had no legal basis.
 EQUITABLE SAVINGS BANK v. PALCES
G.R. No. 214752 March 9, 2016

Ponente: Perlas-Bernabe, J.

Topic: Chattel Mortgage

Principle:
Article 1484 of the Civil Code, which governs the sale of personal properties
in installments, states in full: 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.

Facts:
Rosalinda Palces 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
Mortgage in favor of Equitabble, stating, inter alia, that:
(a) Palce’s 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) Palce’s default in paying any installment renders the remaining balance
due and payable; and
(c) Palce’s failure to pay any installments shall give Equitable the right to
declare the entire obligation due and payable and may likewise, at its option,
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.

From September 18, 2005 to December 21, 2006, Palce’s 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 Mortgage and prompting
petitioner to send a demand letter dated Equitable Savings Bank. As the
demand went unheeded,Equitable filed a Complaint For Recovery of
Possession with Replevin with Alternative Prayer for Sum of Money and
Damages against Palces. In her defense, Palces claimed that she spoke to an
officer of the bank regarding the delay in payment and the officer gave his
consent thereto. Palces also alleged that she paid a total of P103,000 during
the month after her default.

The Regional Trial Court ruled in favor of Equitable and confirmed the latter’s
right to possess the vehicle to be foreclosed and held 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.
However, the Court of Appeals modified the Regional Trial Court decision and
ordered Equitable to return the amount of P103,000 to Palces. It held that
while Palces was indeed liable to Equitable under the Promissory Note with
Chattel Mortgage , Equitable should not have accepted Palce’s late partial
payments in the aggregate amount of P103,000. In this regard, the CA opined
that by choosing to recover the subject vehicle via a writ of replevin, Equitable
already waived its right to recover any unpaid installments, pursuant to Article
1484 of the Civil Code.

Issue:

Whether or not the CA correctly ordered Equitable to return to Palces the

amount of P103,000.00 representing the latter’s late installment payments.

Ruling:
No.
Article 1484 of the Civil Code, which governs the sale of personal properties
in installments, states in full:
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.
In case at bar, there was no vendor-vendee relationship between Equitable
and Palces. The records reveal that Palces never bought the subject vehicle
from Equitable but from a third party, and merely sought financing from
Equitable for its full purchase price. 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 Palces standing as the
debtor-mortgagor and Equitable as the creditor-mortgagee.Therefore, the
conclusion of the CA that Article 1484 finds application in this case was
misplaced.
There was nothing in the Promissory Note with Chattel Mortgage that bars
Equitable from receiving any late partial payments from Palces. If at all,
Equitable’s acceptance of Palce’s late partial payments in the aggregate
amount of P103,000 will only operate to reduce her outstanding obligation to
Equitable from P664,500 to P561,500. Such a reduction in Palce’s
outstanding obligation should be accounted for when Equitable conducts the
impending foreclosure sale of the vehicle. One such foreclosure sale has
been made, the proceeds thereof should be applied to the reduced amount of
Palce;s outstanding obligation, and the excess of said proceeds, if any,
should returned to her.

Conag , Noemi A.

SPOUSES REYES v. SPOUSES CHUNG

G.R. No. 228112, September 13, 2017

Ponente: Velasco Jr., J.

Principle: Third parties have a right to a writ of possession even though they
were not the purchasers in the foreclosure proceedings. The remedy of a writ
of possession, a remedy that is available to the mortgagee-purchaser to
acquire possession of the foreclosed property from the mortgagor, is made
available to a subsequent purchaser, but only after hearing and after
determining that the subject property is still in the possession of the
mortgagor.

Facts:

Petitioner spouses Rosalino Jr. and Sylvia Reyes obtained from Export and
Industry Bank Inc. (EIBI), formerly Urban Bank, Inc., a loan secured by a
Deed of Real Estate Mortgage on a lot in Quezon City. The subject property
was registered in petitioners' name. When the petitioners defaulted in the
payment of their loan obligation, the subject property was extrajudicially
foreclosed and sold at public auction, with EIBI as the highest bidder. The
corresponding Certificate of Sale was then issued and registered with the
Registry of Deeds.

After the petitioners' failure to redeem the subject property within the one-year
redemption period, the title thereto was consolidated in EIBI' s name. The
certificate of title in the petitioners' names was accordingly cancelled and a
new certificate of title was issued to EIBI. Later, EIBI sold the subject property
to LNC. Thus, the certificate of title in the name of EIBI was likewise cancelled
and a new one in the name of LNC was issued. In turn, by a Deed of Absolute
Sale and a Deed of Assignment, LNC sold and assigned to respondent-
spouses Herbert Bun Hong and Wienna Chung the subject property.
Consequently, LNC' s certificate of title was cancelled, and in lieu thereof, a
new title was issued in the respondents' names.

To acquire possession of the subject property, the respondents made several

demands on the petitioners to vacate the same and surrender its possession.
The demands, however, went unheeded. Thus, the respondents lodged a
Complaint for Ejectment against the petitioners before the Metropolitan Trial
Court (MeTC) of Quezon City. However, the Complaint for Ejectment was
dismissed for insufficiency of evidence. The dismissal was appealed by the
respondents to R TC-Quezon City.

Pending resolution of the appeal, the respondents filed an "Ex-Parte Petition

for Issuance of Writ of Possession under Act No. 3135" before the RTC-Br.
226. The following day, or on August 29, 2013, the respondents withdrew their
appeal before RTC-Br. 223. The trial court allowed the withdrawal.

Thereafter, RTC-Br. 226 granted the respondents' Ex-Parte Petition for

Issuance of Writ of Possession. Upon the service of the writ of possession
and the notice to vacate on the petitioners, the latter refused to sign them.
Thus, the respondents filed an "Urgent ExParte Omnibus Motion" praying for
the issuance of a Break Open Order to properly implement the writ of
possession and to place them in possession of the subject property.

Conversely, the petitioners filed a Motion to Quash anchored on the following

ground, among others: (1) RTC-Br. 226 has no jurisdiction to issue the writ of
possession since the respondents did not purchase the subject property via a
foreclosure sale under Act No. 3135.

RTC-Br. 226 denied the petitioners' Motion to Quash, holding that the
respondents could validly file the "Ex-Parte Petition for Issuance of Writ of
Possession" as, by their purchase of the subject property, the respondents
were deemed to have stepped into the shoes of their predecessors-in-interest
and so acquired all the rights of the previous owner/buyer in the foreclosure
sale, including the right to ask for the writ of possession.

On appeal to the Court of Appeals (CA), it pronounced that the respondents

rightfully availed of the remedy of applying for the issuance of a writ of
possession even though they were not the actual purchaser in the foreclosure
sale. The remedy of a writ of possession of the mortgagee-purchaser to
acquire possession of the foreclosed property from the mortgagor is made
available to a subsequent purchaser. The CA went on to stress that the
respondents acquired the absolute right, as purchaser and successors-in-
interest of EIBI and LNC, to apply for the issuance of a writ of possession
pursuant to Section 7 of Act No. 3135, as amended.

Issue:
Whether or not respondents’ have a right to a writ of possession even though
they were not the purchasers in the foreclosure proceedings.
Ruling:

This Court upholds the respondents' right to a writ of possession even though
they were not the purchasers in the foreclosure proceedings.

A writ of possession is a writ of execution employed to enforce a judgment to

recover the possession of land. It commands the sheriff to enter the land and
give its possession to the person entitled under the judgment. It may be
issued under the following instances: (1) in land registration proceedings
under Section 17 of Act 496; (2) in a judicial foreclosure, provided the debtor
is in possession of the mortgaged realty and no third person, not a party to the
foreclosure suit, had intervened; (3) in an extrajudicial foreclosure of a real
estate mortgage under Section 7 of Act No. 3135, as amended; and (4) in
execution sales (last paragraph of Section 33, Rule 39 of the Rules of Court).

In an extrajudicial foreclosure of real property, the purchaser becomes the

absolute owner thereof if no redemption is made within one year from the
registration of the certificate of sale by those entitled to redeem. Being the
absolute owner, he is entitled to all the rights of ownership over a property
recognized in Article 428 of the New Civil Code, not the least of which is
possession, or jus possidendi.

In the case under consideration, the original right to file a Petition for Issuance
of Writ of Possession belonged to EIBI, being the mortgagee-purchaser at the
extrajudicial foreclosure sale. But, instead of seeking the issuance of a writ of
possession, it sold the subject property to LNC, which, in tum, sold the same
to the respondents. As such, by the sale, the respondents became the new
owners of the subject property and were vested with all the rights and
interests of their predecessors EIBI and LNC, including the right to the
possession of the property. Undoubtedly, the respondents can apply for the
issuance of a writ of possession even though they were not the purchasers at
the foreclosure proceedings.

However, unlike the original mortgagee-purchaser, the respondents' right to

apply for the issuance of a writ of possession is circumscribed and cannot be
made ex parte; the issuance of a writ of possession in favor of a subsequent
purchaser must be made only "after hearing and after determining that the
subject property is still in the possession of the mortgagor."
Conag, Noemi A.

SPOUSES REYES v. SPOUSES CHUNG

G.R. No. 228112, September 13, 2017

Ponente: Velasco Jr., J.

Principle: Third parties have a right to a writ of possession even though they
were not the purchasers in the foreclosure proceedings. The remedy of a writ
of possession, a remedy that is available to the mortgagee-purchaser to
acquire possession of the foreclosed property from the mortgagor, is made
available to a subsequent purchaser, but only after hearing and after
determining that the subject property is still in the possession of the
mortgagor.

Facts:

Petitioner spouses Rosalino Jr. and Sylvia Reyes obtained from Export and
Industry Bank Inc. (EIBI), formerly Urban Bank, Inc., a loan secured by a
Deed of Real Estate Mortgage on a lot in Quezon City. The subject property
was registered in petitioners' name. When the petitioners defaulted in the
payment of their loan obligation, the subject property was extrajudicially
foreclosed and sold at public auction, with EIBI as the highest bidder. The
corresponding Certificate of Sale was then issued and registered with the
Registry of Deeds.

After the petitioners' failure to redeem the subject property within the one-year
redemption period, the title thereto was consolidated in EIBI' s name. The
certificate of title in the petitioners' names was accordingly cancelled and a
new certificate of title was issued to EIBI. Later, EIBI sold the subject property
to LNC. Thus, the certificate of title in the name of EIBI was likewise cancelled
and a new one in the name of LNC was issued. In turn, by a Deed of Absolute
Sale and a Deed of Assignment, LNC sold and assigned to respondent-
spouses Herbert Bun Hong and Wienna Chung the subject property.
Consequently, LNC' s certificate of title was cancelled, and in lieu thereof, a
new title was issued in the respondents' names.

To acquire possession of the subject property, the respondents made several

demands on the petitioners to vacate the same and surrender its possession.
The demands, however, went unheeded. Thus, the respondents lodged a
Complaint for Ejectment against the petitioners before the Metropolitan Trial
Court (MeTC) of Quezon City. However, the Complaint for Ejectment was
dismissed for insufficiency of evidence. The dismissal was appealed by the
respondents to R TC-Quezon City.
Pending resolution of the appeal, the respondents filed an "Ex-Parte Petition
for Issuance of Writ of Possession under Act No. 3135" before the RTC-Br.
226. The following day, or on August 29, 2013, the respondents withdrew their
appeal before RTC-Br. 223. The trial court allowed the withdrawal.

Thereafter, RTC-Br. 226 granted the respondents' Ex-Parte Petition for

Issuance of Writ of Possession. Upon the service of the writ of possession
and the notice to vacate on the petitioners, the latter refused to sign them.
Thus, the respondents filed an "Urgent ExParte Omnibus Motion" praying for
the issuance of a Break Open Order to properly implement the writ of
possession and to place them in possession of the subject property.

Conversely, the petitioners filed a Motion to Quash anchored on the following

ground, among others: (1) RTC-Br. 226 has no jurisdiction to issue the writ of
possession since the respondents did not purchase the subject property via a
foreclosure sale under Act No. 3135.

RTC-Br. 226 denied the petitioners' Motion to Quash, holding that the
respondents could validly file the "Ex-Parte Petition for Issuance of Writ of
Possession" as, by their purchase of the subject property, the respondents
were deemed to have stepped into the shoes of their predecessors-in-interest
and so acquired all the rights of the previous owner/buyer in the foreclosure
sale, including the right to ask for the writ of possession.

On appeal to the Court of Appeals (CA), it pronounced that the respondents

rightfully availed of the remedy of applying for the issuance of a writ of
possession even though they were not the actual purchaser in the foreclosure
sale. The remedy of a writ of possession of the mortgagee-purchaser to
acquire possession of the foreclosed property from the mortgagor is made
available to a subsequent purchaser. The CA went on to stress that the
respondents acquired the absolute right, as purchaser and successors-in-
interest of EIBI and LNC, to apply for the issuance of a writ of possession
pursuant to Section 7 of Act No. 3135, as amended.

Issue:
Whether or not respondents’ have a right to a writ of possession even though
they were not the purchasers in the foreclosure proceedings.
Ruling:

This Court upholds the respondents' right to a writ of possession even though
they were not the purchasers in the foreclosure proceedings.

A writ of possession is a writ of execution employed to enforce a judgment to

recover the possession of land. It commands the sheriff to enter the land and
give its possession to the person entitled under the judgment. It may be
issued under the following instances: (1) in land registration proceedings
under Section 17 of Act 496; (2) in a judicial foreclosure, provided the debtor
is in possession of the mortgaged realty and no third person, not a party to the
foreclosure suit, had intervened; (3) in an extrajudicial foreclosure of a real
estate mortgage under Section 7 of Act No. 3135, as amended; and (4) in
execution sales (last paragraph of Section 33, Rule 39 of the Rules of Court).

In an extrajudicial foreclosure of real property, the purchaser becomes the

absolute owner thereof if no redemption is made within one year from the
registration of the certificate of sale by those entitled to redeem. Being the
absolute owner, he is entitled to all the rights of ownership over a property
recognized in Article 428 of the New Civil Code, not the least of which is
possession, or jus possidendi.

In the case under consideration, the original right to file a Petition for Issuance
of Writ of Possession belonged to EIBI, being the mortgagee-purchaser at the
extrajudicial foreclosure sale. But, instead of seeking the issuance of a writ of
possession, it sold the subject property to LNC, which, in tum, sold the same
to the respondents. As such, by the sale, the respondents became the new
owners of the subject property and were vested with all the rights and
interests of their predecessors EIBI and LNC, including the right to the
possession of the property. Undoubtedly, the respondents can apply for the
issuance of a writ of possession even though they were not the purchasers at
the foreclosure proceedings.

However, unlike the original mortgagee-purchaser, the respondents' right to

apply for the issuance of a writ of possession is circumscribed and cannot be
made ex parte; the issuance of a writ of possession in favor of a subsequent
purchaser must be made only "after hearing and after determining that the
subject property is still in the possession of the mortgagor."
Conag, Noemi A.

SECURITY BANK CORPORATION v. SPOUSES MERCADO

G.R. No. 192934, June 27, 2018

Ponente: Jardeleza, J.

Topic: Foreclosure

Principle: Failure to advertise a mortgage foreclosure sale in compliance with

statutory requirements constitutes a jurisdictional defect which invalidates the
sale. This jurisdictional requirement may not be waived by the parties; to allow
them to do so would convert the required public sale into a private sale. Thus,
the statutory provisions governing publication of notice of mortgage
foreclosure sale must be strictly complied with and that even slight deviations
therefrom will invalidate the notice and render the sale at least voidable.

Facts:

Petitioner Security Bank granted respondent spouses Mercado a revolving

credit line in the amount of P1,000,000.00. To secure the credit line, the
spouses Mercado executed a Real Estate Mortgage in favor of Security Bank
over their properties located in Lipa City and San Jose, Batangas. The
spouses Mercado executed another Real Estate Mortgage in favor of Security
Bank this time over their properties located in Batangas City to secure an
additional amount of P7,000,000.00 under the same revolving credit
agreement.

Subsequently, the spouses Mercado defaulted in their payment under the

revolving credit line agreement. Security Bank requested the spouses
Mercado to update their account, and sent a final demand letter. Thereafter, it
filed a petition for extrajudicial foreclosure pursuant to Act No. 3135, as
amended, with respect to the parcel of land situated in Lipa City. Security
Bank likewise filed a similar petition with the RTC of Batangas City with
respect to the parcels of land located in San Jose and Batangas City.

The respective notices of the foreclosure sales of the properties were

published in newspapers of general circulation once a week for three
consecutive weeks as required by Act No. 3135, as amended. However, the
publication of the notices of the foreclosure of the properties in Batangas City
and San Jose, Batangas contained errors with respect to their technical
description. Security Bank caused the publication of an erratum in a
newspaper to correct these errors. The erratum was published only once, and
did not correct the lack of indication of location in both cases.

The foreclosure sale of the subject parcels of land was held wherein Security
Bank was adjudged as the winning bidder. The spouses Mercado offered to
redeem the foreclosed properties for P10,000,000.00. However, Security
Bank allegedly refused the offer and made a counter-offer in the amount of
P15,000,000.00.

The spouses Mercado filed a complaint for annulment of foreclosure sale,

damages, injunction, specific performance, and accounting with application for
temporary restraining order and/or preliminary injunction with the RTC of
Batangas City. The spouses Mercado averred, among others that: (2) the
requirements of posting and publication of the notice under Act No. 3135, as
amended, were not complied with.

The RTC declared the foreclosure sales void because "the act of making only
one corrective publication is a fatal omission committed by the mortgagee
bank." The CA, on appeal, affirmed with modifications the RTC Amended
Decision. It agreed that the error in the technical description of the property
rendered the notice of foreclosure sale defective. Security Bank's subsequent
single publication of an erratum will not cure the defective notice; it is as if no
valid publication of the notice of the foreclosure sale was made.

Issue:

Whether the foreclosure sales of the parcels of land in Batangas City and San
Jose, Batangas are valid.

Ruling:

The foreclosure sales of the properties in Batangas City and San Jose,
Batangas are void for noncompliance with the publication requirement of the
notice of sale.

Act No. 3135, as amended, provides that for a valid extrajudicial foreclosure
sale, a valid notice of sale is required. Section 3, as amended, requires that
when the value of the property reaches a threshold, the notice of sale must be
published once a week for at least three consecutive weeks in a newspaper of
general circulation. Failure to advertise a mortgage foreclosure sale in
compliance with statutory requirements constitutes a jurisdictional defect
which invalidates the sale. This jurisdictional requirement may not be waived
by the parties; to allow them to do so would convert the required public sale
into a private sale. Thus, the statutory provisions governing publication of
notice of mortgage foreclosure sale must be strictly complied with and that
even slight deviations therefrom will invalidate the notice and render the sale
at least voidable. Nevertheless, the validity of a notice of sale is not affected
by immaterial errors. Only a substantial error or omission in a notice of sale
will render the notice insufficient and vitiate the sale. An error is substantial if it
will deter or mislead bidders, depreciate the value of the property or prevent it
from bringing a fair price.

First, the published notice misidentified the identity of the properties. Since the
lot numbers are misstated, the notice effectively identified lots other than the
ones sought
to be sold. Second, the published notice omitted the exact locations of the
properties. With the properties misidentified and their locations omitted, the
properties' sizes and ultimately, the determination of their probable market
prices, are consequently compromised. The errors are of such nature that
they will significantly affect the public's decision on whether to participate in
the public auction. We find that the errors can deter or mislead bidders,
depreciate the value of the properties or prevent the process from fetching a
fair price.

The publication of a single erratum, however, does not cure the defect. As
correctly pointed out by the RTC, "[t]he act of making only one corrective
publication in the publication requirement, instead of three (3) corrections is a
fatal omission committed by the mortgagee bank." To reiterate, the published
notices that contain fatal errors are nullities. Thus, the erratum is considered
as a new notice that is subject to the publication requirement for once a week
for at least three consecutive weeks in a newspaper of general circulation in
the municipality or city where the property is located. Here, however, it was
published only once.

Pacana , Honey Cates C.

Mercene v. GSIS

January 10, 2018 G.R. No. 192971

Topic:Foreclosure
Principle:
FACTS:

On January 1965, petitioner Floro Mercene (Mercene) obtained a loan

from respondent Government Service Insurance System (GSIS) in the
amount of ₱29,50. As security, a real estate mortgage was executed over
Mercene's property in Quezon City.. The mortgage was registered and
annotated on the title on 24 March 1965.

On May 1968, Mercene contracted another loan with GSIS for the
amount of ₱14,500. The loan was likewise secured by a real estate mortgage
on the same parcel of land. The following day, the loan was registered and
duly annotated on the title.

On 11 June 2004, Mercene opted to file a complaint for Quieting of

Title against GSIS. He alleged that: since 1968 until the time the complaint
was filed, GSIS never exercised its rights as a mortgagee; the real estate
mortgage over his property constituted a cloud on the title; GSIS' right to
foreclose had prescribed. In its answer, GSIS assailed that the complaint
failed to state a cause of action and that prescription does not run against it
because it is a government entity.

The RTC ruled that GSIS’s right to foreclose the mortgage has
prescribed. The CA reversed this decision because Mercene's complaint
neither alleged the maturity date of the loans, nor the fact that a demand for
payment was made. The CA further explained that prescription commences
only upon the accrual of the cause of action, and that a cause of action in a
written contract accrues only when there is an actual breach or violation.
Thus, the appellate court surmised that no prescription had set in against
GSIS because it has not made a demand to Mercene.

Hence, Mercene went to the SC. Mercene insists that GSIS had
judicially admitted that its right to foreclose the mortgage had prescribed when
GSIS failed to specifically deny the allegations in his complaint. GSIS raised
the affirmative defense that the complaint failed to state a cause of action. In
turn, the CA then ruled that Mercene's complaint did not state a cause of
action because the maturity date of the loans, or the demand for the
satisfaction of the obligation, was never alleged.

ISSUE:

Whether or not GSIS’s right to foreclose the said property has already
prescribed.

RULING:
 No. In Maybank Philippines, Inc. v. Spouses Tarrosa, the Court explained
that the right to foreclose prescribes after ten (10) years from the time a
demand for payment is made, or when then loan becomes due and
demandable in cases where demand is unnecessary. Thus, applying the
pronouncements of the Court regarding prescription on the right to foreclose
mortgages, SC finds that the CA did not err in concluding that Mercene's
complaint failed to state a cause of action. It is undisputed that his complaint
merely stated the dates when the loan was contracted and when the
mortgages were annotated on the title of the lot used as a security.
Conspicuously lacking were allegations concerning: the maturity date of the
loan contracted and whether demand was necessary under the terms and
conditions of the loan.

As such, the RTC erred in ruling that GSIS' right to foreclose had
prescribed because the allegations in Mercene's complaint were insufficient to
establish prescription against GSIS. The only information the trial court had
were the dates of the execution of the loan, and the annotation of the
mortgages on the title. As elucidated in the above-mentioned decisions,
prescription of the right to foreclose mortgages is not reckoned from the date
of execution of the contract. Rather, prescription commences from the time
the cause of action accrues; in other words, from the time the obligation
becomes due and demandable, or upon demand by the creditor/mortgagor,
as the case may be.

In addition, there was no judicial admission on the part of GSIS with

regard to prescription because treating the obligation as prescribed, was
merely a conclusion of law. It would have been different if Mercene's
complaint alleged details necessary to determine when GSIS' right to
foreclose arose, i.e., date of maturity and whether demand was necessary.
 Spouses Baysa v. Spouses Plantanilla
G.R. No. 159271 July 13, 2015
Topic : Foreclosure
Principle :

FACTS:
The case involves a real estate mortgage (REM) entered into by Sps.
Baysa involving their parcel of land to secure the payment of their obligation
amounting to P2.3 Million in favor of spouses Plantanilla. Based on the terms
of the REM, the petitioners agreed to pay interest on the principal amount at
the rate of 2.5%/month, or P57,500.00/month. The interest at the rate of
P57,500.00 from September 1992 up to May 1993 were regularly paid. They
suffered business reverses and difficulty in collection so they became irregular
in the monthly payment of the agreed interest and for late payment they were
charged 8% interest per month. When 8% interest sur-charge was imposed,
they stopped paying the monthly interest because of some difficulty in their
business and high interest rate which overburdened them. Then the
defendants filed an extrajudicial foreclosure. A certain Mrs. de la Cruz
approaching them as representative of the defendants collecting the unpaid
balance of P3,123,830.00 and they told her that they were willing to pay
whatever be the balance but the interest has to be recomputed not on the
basis of 8% interest per month. They received a notice of sheriffs sale that the
property will be foreclosed. The amount of mortgage indebtedness was
P3,579, 100.00. Their principal loan was P2,300,000.00 and they have paid
Pl,032,599.88 for interest of the loan. When he received the notice of sheriffs
sale he was surprised because they have an agreement with the
representative that they were asking for a period of six (6) months to pay after
knowing the correct amount of their balance.
The defendants' evidence shows that no payment was made by the
plaintiffs on the principal loan of P2,300,000.00. Only the monthly interest of
2.5% of the principal or P57,500.00 were paid by the plaintiffs regularly from
August 1992 until June 1993. The interest paid for the months of July, August,
September and October, 1993 were paid late and after that no payments were
made on the monthly interest from November 1993 until the property was
foreclosed. When plaintiffs defaulted in the payment of the monthly interest,
Emilia de la Cruz, certified public accountant, was consulted by the mother of
the defendants who advised the latter to hire the services of counsel to file a
petition for foreclosure of the mortgage. They then sent a letter of demand
addressed to plaintiffs-spouses Baysa to pay the principal loan and interest
due. Despite the receipt of the said letter of demand, plaintiffs did not pay their
indebtedness to the defendants, hence, a petition for foreclosure was filed
which prayed that in view of the non payment of the indebtedness of the
plaintiffs in the amount of P3,579, 100.00 (principal and unpaid interest) that
the mortgaged property be foreclosed at a public auction.
The petitioners sued the respondent spouses in the RTC to annul the
extrajudicial foreclosure of the REM and the public auction conducted
pursuant to the extrajudicial foredosure. They alleged that all the proceedings
relevant to the extrajudicial foreclosure were null and void, pointing out that
there had been no power or authority to sell inserted in the REM or attached
thereto as required by Section 1 Act No. 3135; and that the interest rate of 8%
was unconscionable and violative of the Anti-Usury Law.
RTC dismissed the complaint for lack of cause of action, ordering the plaintiffs
to pay the defendants.
Petitioners then appealed to the CA, questioning whether or not the
extrajudicial foreclosure is valid despite the lack of provision in the mortgage
deed granting special power to sell to the mortgagee; and If valid, whether the
procedure taken thereon complies with the provisions of Act No. 3135. CA
affirmed the validity of the foreclosure proceedings.
ISSUES:
1. Whether or not the extrajudicial foreclosure was valid despite the lack of
provision in the mortgage deed granting special power to sell to the
mortgagee;
2. Whether or not the Court of Appeals erred when it concluded that
consenting to the extrajudicial foreclosure of the property, by necessary
implication, carries with it the grant of power to sell the property at public
action;

RULING:
1. NO. 2. YES. In the extrajudicial foreclosure of property subject of a real
estate mortgage, Act No. 3135 (An Act to Regulate the Sale of Property
Under Special Powers Inserted in or Annexed to Real Estate Mortgages) is
quite explicit and definite about the special power to sell the property being
required to be either inserted in or attached to the deed of mortgage. Section
1 of Act No. 3135 provides:
Section 1. When a sale is made under a special power inserted in or
attached to any real estate mortgage hereafter made as security for the
payment of money or the fulfillment of any other obligation, the provisions of
the following section shall govern as to the manner in which the sale and
redemption shall be effected, whether or not provision for the same is made in
the power.
Accordingly, to enable the extra judicial foreclosure of the REM of the
petitioners, the special power to sell should have been either inserted in the
REM itself or embodied in a separate instrument attached to the REM. But it
is not disputed that no special power to sell was either inserted in the REM or
attached to the REM. Hence, the respondent spouses as the foreclosing
mortgagees could not initiate the extrajudicial foreclosure, but must resort to
judicial foreclosure pursuant to the procedure set forth in Rule 68 of the Rules
of Court. The omission of the special power to sell the property subject of the
mortgage was fatal to the validity and efficacy of the extrajudicial foreclosure,
and warranted the invalidation of the entire proceedings conducted by the
sheriff.
The petitioners evidently agreed only to the holding of the extrajudicial
foreclosure should they default in their obligations. Their agreement was a
mere expression of their amenability to extrajudicial foreclosure as the means
of foreclosing the mortgage, and did not constitute the special power or
authority to sell the mortgaged property to enable the mortgagees to recover
the unpaid obligations. What was necessary was the special power or
authority to sell - whether inserted in the REM itself, or annexed thereto - that
authorized the respondent spouses to sell in the public auction their
mortgaged property.
Ragay, Christdell D.

G.R. No. 184076

ST. RAPHAEL MONTESSORI SCHOOL, INC., represented by TERESITA

G. BADIOLA vs. BANK OF THE PHILIPPINE ISLANDS

Topic : Foreclosure

PRINCIPLE:
Upon the lapse of the redemption period, a writ of possession may be issued
in favor of the purchaser in a foreclosure sale, also upon a proper ex
parte motion. No bond is necessary for its issuance; the mortgagor is now
considered to have lost any interest over the foreclosed property.

FACTS:

Spouses Rolando and Josefina Andaya (Sps. Andaya) are the President and
Vice-President, respectively, of St. Raphael Montessori, Inc. (St. Raphael).
They obtained a loan for themselves and on behalf of St. Raphael, from the
Far East Bank and Trust company, (now BPI). When they defaulted on their
obligation, their property was extrajudicially foreclosed.

Spouses asked for deferment of the implementation of the writ of possession

which BPI heeded to. They still failed to vacate the subject property despite
BPI’s reminder and extension of number of days. They claimed that BPI had
no longer had a right to possess the property because writ of possession had
already been implemented. St. Raphael filed a motion to quash alleging it was
not a party to the real estate mortgage. Affidavit of 3 rd party claim was also
filed by attorney in fact of St. Raphael.

ISSUE:

Whether a writ of possession that was issued ex-parte as a result of the

foreclosure of the mortgages executed by the Spouses Andaya on the subject
property can be enforced and utilized by BPI to oust St. Raphael from the
physical possession of its school buildings built on the same subject property.

RULING:

The real estate mortgage agreement entered into by BPI and the Spouses
Andaya is the law between them. Suffice it to say that in all of the real
mortgage agreements executed by BPI and the Spouses Andaya in favor of
St. Raphael, it was clearly and commonly stipulated that the parties intend to
include the improvements or buildings erected or to be erected in the subject
lot.

The issuance of a writ of possession to a purchaser in a public auction is a

ministerial function of the court, which cannot be enjoined or restrained, even
by the filing of a civil case for the declaration of nullity of the foreclosure and
consequent auction sale. Once title to the property has been consolidated in
the buyer’s name upon failure of the mortgagor to redeem the property within
the one year redemption period, the writ of possession becomes a matter of
right belonging to the buyer. Consequently, the buyer can demand possession
of the property at anytime. Its right to possession has then ripened into the
right of a confirmed absolute owner and the issuance of the writ becomes a
ministerial function that does not admit of the exercise of the court’s
discretion. The court, acting on an application for its issuance, should issue
the writ as a matter of course and without any delay.

Upon the lapse of the redemption period, a writ of possession may be issued
in favor of the purchaser in a foreclosure sale, also upon a proper ex
parte motion. No bond is necessary for its issuance; the mortgagor is now
considered to have lost any interest over the foreclosed property. The
purchaser then becomes the owner of the foreclosed property, and he can
demand possession at any time following the consolidation of ownership of
the property and the issuance of the corresponding TCT in his/her name.

G.R. No. 203949

SPOUSES GEORGE A. GALLENT, SR. and MERCEDES M. GALLENT vs.

JUAN G. VELASQUEZ

x-----------------------x

G.R. No. 205071

JUAN G. VELASQUEZ, vs. SPOUSES GEORGE A. GALLENT, SR. and

MERCEDES M. GALLENT

Topic : Foreclosure

PRINCIPLE:

When the thing purchased at a foreclosure sale is in turn sold or transferred,

the right to the possession thereof, along with all other rights of ownership,
follows the thing sold to its new owner.

FACTS:

Spouses George and Mercedes Gallent (Spouses Gallent) mortgaged the

said property to Allied Banking Corporation (Allied Bank) as security for a loan
of Pl.5 Million. The Spouses Gallent failed to pay their loan, which had
ballooned to P4,631,97 4.66; thus, Allied Bank extrajudicially foreclosed the
mortgaged property. At the public auction, Allied Bank emerged as the highest
bidder and was issued a corresponding certificate of sale. Since the Spouses
Gallent failed to redeem the subject property after one year, Allied Bank
consolidated its ownership over the subject property Allied Bank agreed to sell
back the foreclosed property to the Spouses Gallent for P4 Million, as
evidenced by an Agreement to Sell and the balance thereof was payable in 12
monthly amortizations.

Spouses Gallent executed a Deed of Assignment of Rights whereby they

assigned to Velasquez all their rights, interests, and obligations under their
Agreement to Sell with Allied Bank. Velasquez paid Allied Bank the remaining
balance. Allied Bank and Velasquez executed a Deed of Absolute Sale over
the subject property for the price of P4 Million. However, the said instrument
was not registered. Subsequently, Velasquez caused another Deed of Sale.
After more than four years, Velasquez sent a demand letter to the Spouses
Gallent to vacate the subject property, but the latter refused to do so.
Velasquez filed an ex parte petition for issuance of a writ of possession

RULING:

The general rule in extrajudicial foreclosure of mortgage is that after the

consolidation of the title over the foreclosed property in the buyer, it is
the ministerial duty of the court to issue a writ of possession upon an ex
parte petition by the new owner as a matter of right.

It is well-settled that the purchaser in an extrajudicial foreclosure of real

property becomes the absolute owner of the property if no redemption is
made within one year from the registration of the certificate of sale by those
entitled to redeem.  As absolute owner, he is entitled to all the rights of
ownership over a property recognized in Article 428 of the New Civil Code,
not least of which is possession, or jus possidendi.

When the thing purchased at a foreclosure sale is in turn sold or

transferred, the right to the possession thereof, along with all other
rights of ownership, follows
the thing sold to its new owner.

As an exception, the ministerial duty of the court to issue an ex

parte writ of possession ceases once it appears that a third party, not
the debtor-mortgagor, is in possession of the property under a claim of
title adverse to that of the applicant.

Section 33 of Rule 39 of the Rules of Court provides that in an execution sale,

the possession of the property shall be given to the purchaser or last
redemptioner, unless a third party is actually holding the property
adversely to the judgment obligor.

Tomilap , Bhenz Bryle Nino M.

 Mahinay vs. Dura Tire & Rubber Industries (GR No.
194952)

Topic : Foreclosure
LEGAL PRINCIPLE: A right of redemption of an extrajudicially foreclosed
property arises from the time the mortgaged property was foreclosed and sold
at public auction.

FACTS:

The case involves a parcel of land located in Barrio Kiot, Cebu City under
the name of A&A Swiss International Commercial, Inc. The land was
mortgaged to Dura Tire and Rubber Industries, a corporation engaged in the
supply of raw materials for tire processing, as security for credit purchases to
be made by Move Overland Venture, Inc. Under the mortgage agreement,
Dura Tire was given express authority to foreclose the property upon Move
Overland’s failure to pay its purchases.
Eventually, A&A Swiss sold the said property to Mahinay. Mahinay then
sought to pay Move Overland’s obligation so that the property may be
released from mortgage. Mahinay’s request was ignored. Move Overland
failed to pay its credit purchases, which prompted Dura Tire to extrajudicially
foreclose the land. The property was bought by Dura Tire itself.
Mahinay filed a complaint to annul the action sale. He argued that Dura
Tire deliberately deprived him of the opportunity to release the property from
the mortgage by failing to furnish Move Overland’s statement of account. Dura
Tire therefore had no right to foreclose the mortgage, making the foreclosure
void. Dura Tire argued that Mahinay has no cause of action since he was not
privy to the agreement.
RTC dismissed the Complaint. Upon appeal, CA dismissed the same,
holding that Mahinay had no right to question the foreclosure, and that he was
fully aware that the subject property was previously mortgaged. Mahinay filed
for a judicial declaration of right to redeem, which was granted by RTC. It
ruled that Mahinay was a successor-in-interest even before the foreclosure
sale. However, considering that the one year period of redemption had
expired, he could no longer exercise his right of redemption.
Mahinay contends that the one year period of redemption should be
counted from the time CA’s June 16, 2006 Decision became final and
executory, which was on August 8, 2007. Mahinay argues that his right of
redemption only arose when he was judicially declared “entitled to redeem the
property” in the said decision. On the other hand, Dura Tire argued that
Mahinay could already exercise the right within one year from the registration
of the Certificate of Sale.

ISSUE: Whether the one year period of redemption was tolled when Mahinay
filed his Complaint for annulment of foreclosure sale

RULING:
No. Mahinay’s right to redeem did not arise from the Court of Appeal’s
decision that he was a substitute mortgagor, since the present case involves
the redemption of an extrajudicially foreclosed property. The right of
redemption involved in this case is governed by Section 6 of Act No. 3135.
Under said provision, his right to redeem arose when the mortgaged property
was extrajudicially foreclosed and sold at public auction. Sec. 6 provides: “In
all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial
creditor or judgment creditor of said debtor, or any person having a lien on the
property subsequent to the mortgage or deed of trust under which the
property is sold, may redeem the same at any time within the term of one
year from and after the date of the sale; and such redemption shall be
governed by the provisions of sections four hundred and sixty-four to four
hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as
these are not inconsistent with the provisions of this Act.”
The "date of the sale" indicated in Section 6 is the date the certificate of
sale is registered with the Register of Deeds. The sale of registered land does
not take effect as a conveyance, or bind the land' until it is registered. The
mortgagor may compel the purchaser to sell back the property within the one-
year period under Act No. 3135. If the purchaser refuses, the mortgagor may
tender payment to the Sheriff who conducted the foreclosure sale. Here,
Mahinay should have tendered payment to Sheriff Laurel instead of insisting
on directly paying Move Overland's unpaid credit purchases to Dura Tire.
Since the period of redemption is fixed, it cannot be tolled or interrupted by
the filing of cases to annul the foreclosure sale or to enforce the right of
redemption. To rule otherwise would constitute a dangerous precedent. A
likely result of such a ruling is the institution of frivolous suits for annulment of
mortgage intended merely to give the mortgagor more time to redeem the
mortgaged property.
The Certificate of Sale in favor of Dura Tire was registered on February
20, 1995. Mahinay, as the successor-in-interest of previous owner A&A
Swiss, had one year from February 20, 1995, or on February 20, 1996, to
exercise the right of redemption and buy back the property from Dura Tire.
However, Mahinay failed to redeem the property within the one-year period of
redemption, hence his right to redeem had already lapsed. The pendency of
an action to annul the foreclosure sale or to enforce the right to redeem does
not toll the running of the period of redemption.

Mercene vs. GSIS (GR No. 192971)

Topic : Foreclosure
LEGAL PRINCIPLE: A cause of action by a mortgagor against a mortgagee
may only arise if the following are present: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate such
right; and (3) an act or omission on the part of such defendant violative of the
right of the plaintiff or constituting a breach of obligation of the defendant to
the plaintiff.

FACTS:
Petitioner Mercene obtained a loan from GSIS amounting P 29,500.00
which was secured by a real estate mortgage of his property in Quezon.
Mercene contracted another loan with GSIS, this time amounting P 14,500.00.
It was also secured with the same parcel of land. Both loans were registered
and duly annotated on the title.
Eventually, Mercene filed an action for Quieting of Title against GSIS. He
argued that GSIS never exercised its right as mortgagee; the mortgage
constituted a cloud on his title; and that GSIS’s right to foreclose had already
prescribed. On the other hand, GSIS argued that the complaint failed to state
a cause of action and that prescription does not run against it because it is a
government entity.
RTC granted Mercene’s petition and ordered the cancellation of
mortgages. Meanwhile, CA reversed RTC’s decision. CA explained that
prescription commences only upon the accrual of the cause of action, and that
a cause of action in a written contract accrues only when there is an actual
breach or violation. CA ruled that Mercene's complaint did not state a cause of
action because the maturity date of the loans, or the demand for the
satisfaction of the obligation, was never alleged. Thus, the appellate court
surmised that no prescription had set in against GSIS because it has not
made a demand to Mercene.

ISSUE: Whether or not Mercene had a cause of action against GSIS

RULING:
No. In order for cause of action to arise, the following elements must be
present: (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on
the part of such defendant violative of the right of the plaintiff or constituting a
breach of obligation of the defendant to the plaintiff.
Pescriptive period neither runs from the date of the execution of a contract
nor does the prescriptive period necessarily run on the date when the loan
becomes due and demandable. Prescriptive period runs from the date of
demand, subject to certain exceptions.
An action to enforce a right arising from a mortgage should be enforced
within ten (10) years from the time the right of action accrues, i.e., when the
mortgagor defaults in the payment of his obligation to the mortgagee;
otherwise, it will be barred by prescription and the mortgagee will lose his
rights under the mortgage. However, mere delinquency in payment does not
necessarily mean delay in the legal concept. To be in default is different from
mere delay in the grammatical sense, because it involves the beginning of a
special condition or status which has its own peculiar effects or results.
 In order that the debtor may be in default, it is necessary that: (a) the
obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially, unless demand is not necessary - i.e., when there is an
express stipulation to that effect; where the law so provides; when the period
is the controlling motive or the principal inducement for the creation of the
obligation; and where demand would be useless. Moreover, it is not sufficient
that the law or obligation fixes a date for performance; it must further state
expressly that after the period lapses, default will commence. Thus, it is only
when demand to pay is unnecessary in case of the aforementioned
circumstances, or when required, such demand is made and subsequently
refused that the mortgagor can be considered in default and the mortgagee
obtains the right to file an action to collect the debt or foreclose the mortgage.
CA did not err in concluding that Mercene's complaint failed to state a
cause of action. It is undisputed that his complaint merely stated the dates
when the loan was contracted and when the mortgages were annotated on
the title of the lot used as a security. Conspicuously lacking were allegations
concerning: the maturity date of the loan contracted and whether demand was
necessary under the terms and conditions of the loan. Prescription of the right
to foreclose mortgages is not reckoned from the date of execution of the
contract. Rather, prescription commences from the time the cause of action
accrues; in other words, from the time the obligation becomes due and
demandable, or upon demand by the creditor/mortgagor, as the case may be.
 There was no judicial admission on the part of GSIS with regard to
prescription because treating the obligation as prescribed, was merely a
conclusion of law. It would have been different if Mercene's complaint alleged
details necessary to determine when GSIS' right to foreclose arose, i.e., date
of maturity and whether demand was necessary.

Paler . Elaine Marie

Amada Cotoner - Zacarias vs. Spouses Alfredo Revilla and The Heirs of
Paz Revilla
Topic : Antichresis

Principle : By the contract of antichresis, the creditor acquires the right to

receive the fruits of an immovable of his debtor , with the obligation to apply
them to the payment of the interest, if owing, and thereafter to the principal of
his credit

Fact:
Alfredo Revilla and Paz Castillo-Revilla are owners in fee simple of a 15k sqm
unregistered parcel of land covered by a tax declaration
To fund Alfredo’s deployment for Saudi Arabia, Paz borrowed money from
Amada Cotoner-Zacarias, petitioner. As security for the load, they verbally
agreed that Amada would take physical possession of the property, cultivate it
and then use the earnings to pay the load and realty taxes. Upon full
payment, Amada would return the property.
Unknown to Revilla spouses, Amada presented a fictitious document entitled
“Kasulatan ng Bilihhan ng Lupa” before the Provincial Assessor, which
purports the Revilla spouses as sellers and Amada as buyer. A tax
declaration was then issued in the name of Amada.
Amada sold the property to Spouses Casorla. A tax declaration was issued in
their name.
Spouse Casorla then sold the property to Spouses Sun. A tax declaration was
issued in their name.
Spouses Revilla discovered that the property’s tax declaration was already in
the name of Spouses Sun.
Spouses Revilla filed a complaint for the annulment of sales and transfers of
title and reconveyance of property with damages against Amada before the
Tagaytay RTC.
The RTC ruled in favour of Spouses Revilla and found the Kasulatan ng
Bilihan ng Lupa to be a fictitious document based on the NBI report.
The CA dismissed the appeal by Amada
Amada argues that respondents were able to prove that the contract is an
antichresis and that the contract is void because it was not reduced to writing.

Issues:
1. whether respondents Revilla spouses‘ cause of action is barred by
prescription or laches;
2. whether the Court of Appeals erred in upholding the reinstatement and
reconveyance of the property in favor of respondents Revilla spouses.

Ruling:
The Court rules in favour of Spouses Revilla
1. There is no delay by the respondents.
a. The lower courts found that respondent only came to know
about the Kasulatan in February 1995 after having been served
a copy of the pleading in the land registration case by Sun
Spouses. They later filed that complaint on November 1995.
b. Doctrines of equity such as laches apply only in the absence of
statutory law. The Civil Code clearly provides that ―[t]he action
 or defense for the declaration of the inexistence of a contract
does not prescribe.
2. The SC affirms the lower courts‘ order of reinstatement and
reconveyance of the property in favor of respondents Revilla spouses
a. The respondents in their complaint only sought for the
annulment of sales and transfers. They did not ask to declare
the contract of sale as antichresis but instead focused on the
annulment of contract on the ground of forgery.
b. Article 2132 of the Civil Code provides that ―[b]y the contract of
antichresis the creditor acquires the right to receive the fruits of
an immovable of his debtor, with the obligation to apply them to
the payment of the interest, if owing, and thereafter to the
principal of his credit.
i. Thus, antichresis involves an express agreement
between parties such that the creditor will have
possession of the debtor‘s real property given as security,
and such creditor will apply the fruits of the property to
the interest owed by the debtor, if any, then to the
principal amount.
ii. Antichresis requires delivery of the property to the
antichretic creditor, but the latter cannot ordinarily acquire
this immovable property in his or her possession by
prescription.
iii. Similar to the prohibition against pactum
commissorium83 since creditors cannot ―appropriate the
things given by way of pledge or mortgage, or dispose of
them,‖84 an antichretic creditor also cannot appropriate
the real property in his or her favor upon the non-payment
of the debt.
iv. Antichresis also requires that the amount of the principal
and the interest be in writing for the contract to be valid
c. The question of forgery has been settled by the lower courts in
finding that the signatures of respondents had been forged in
the Kasulatan
d. Petitioner’s argument that Paz’s signature had not been
declared forged by the lower court which would then result to the
validity of ½ of the sale cannot hold
i. In the event that one spouse is incapacitated or otherwise
unable to participate in the administration of the common
properties, the other spouse may assume sole powers of
administration. These powers do not include disposition
or encumbrance without authority of the court or the
written consent of the other spouse. In the absence of
such authority or consent, the disposition or
encumbrance shall be void.
e. Petitioner’s argument that Spouses Sun are buyers in good faith
do not have merits as the notion of good faith or bad faith in
buyers only apply in registered lands. The land in this case is
unregistered.
ANICETO BANGIS substituted by his heirs, namely: RODOLFO B. BANGIS,
RONNIE B. BANGIS, ROGELIO B. BANGIS, RAQUEL B. QUILLO, ROMULO
B. BANGIS, ROSALINA B. PARAN, ROSARIO B. REDDY, REYNALDO B.
BANGIS, and REMEDIOS B. LASTRE
vs.
HEIRS OF SERAFIN AND SALUD ADOLFO, namely: LUZ A. BANNISTER,
SERAFIN ADOLFO, JR., and ELEUTERIO ADOLFO rep. by his Heirs,
namely: MILAGROS, JOEL, MELCHOR, LEA, MILA, NELSON, JIMMY and
MARISSA, all surnamed ADOLFO

Topic : Antichresis
Principle: For a contract of antichresis to be valid Article 2134 of the Civil
Code requires that the amount of the principal and of the interest shall be
specified in writing ; otherwise the contract of antichresis shall be void.

Facts:
Spoouses Serafin Sr and Saludada Adolfo were original registered owners of
a lot covered by an OCT.
The property had been previously mortagaged to DBP and was foreclosed.
Serafin Sr was able to repurchase it and was issued a TCT
Serafin Sr allegedly mortgaged the property for P12,500.00 to Aniceto Bangis
who took possession of the land. This transaction was not reduced to writing.

Serafin Sr died. His heirs executed a Deed of Extrajudicial Partition of the

property and a TCT was issued to them.
The heirs of Adolfo expressed their intention to redeem the mortgaged
property but Bangis refused claiming that the transaction had been a sale.
The Heirs of Adolfo filed a complaint before the RTC for annulment of sale
and declaration of purported sale as antichresis.
The RTC ruled in favour of Heirs of Adolfo and declared that the contract had
been a mere mortgage or antichresis and that the TCT issued for Bangis is
cancelled
The CA affirmed the RTC in finding that the contract between the party was a
mortgage not a sale. It however deleted the RTC order cancelling the TCT of
Bangis, it being a collateral attack

Issues:
Whether the transaction between the parties was one of sale and not a
mortgage or antichresis

Ruling
The SC ruled in favour of respondents
1. There was neither an antichresis nor sale
a. For a contract of antrichresis to be valid Article 2134 of the Civil
Code requires that "the amount of the principal and of the
interest shall be specified in writing; otherwise the contract of
antichresis shall be void."
b. In this case, the Heirs of Adolfo were indisputably unable to
produce any document in support of their claim that the contract
between Adolfo and Bangis was an antichresis, hence, the CA
properly held that no such relationship existed between the
parties.
c. It also cannot be rules as a sale as the petitioners were not able
to present the document required by the Rules of Court. Only a
photocopy of the document was presented without justification
for presentation of secondary evidence
2. The TCT in the name of Aniceto Bangis cannot prevail of the titles of
the Heirs of Adolfo
a. The title is dubious as there is nothing to show a valid transfer.
Transfer Certificate of Title No. T-10567 as shown on the title
was derived from Transfer Certificate of Title No. T-10566 but
[sic] title is not existing in the office. It bore no relation to the
OCT in the name of Spouses Adolfo.
3. TCT in the name of Aniceto Bangis can be validly cancelled in the
same case.
a. The prayer for the cancellation the Bangis TCT is contained in
the counterclaim of the petitioners.
b. A Counterclaim is considered an original complaint and as such,
the attack on the title in a case originally for recovery of
possession cannot be considered as a collateral attack on the
title. A counterclaim is considered a complaint, only this time, it
is the original defendant who becomes the plaintiff. It stands on
the same footing and is to be tested by the same rules as if it
were an independent action.
4. The Heirs of Bangis have not yet acquired the land by prescription
a. The TCT remained with Adolfo and upon his demise transferred
to his heirs. Settled is the rule that no title in derogation of that of
the registered owner can be acquired by prescription or adverse
possession.
b. Even if acquisitive prescription is applicable, 30 years have not
lapsed yet.
Riconalla , Claudine Faye C.

SPOUSES CHARITO M. REYES and ROBERTO REYES, and SPOUSES

VILMA M. MARAVILLO and DOMINGO MARAVILLO, JR. vs. HEIRS OF
BENJAMIN
MALANCE, namely: ROSALINA M. MALANCE, BERNABE M. MALANCE,
BIENVENIDO M. MALANCE, and DOMINGA M. MALANCE, represented
by BIENVENIDO M. MALANCE
G.R. No. 219071; August 24, 2016

Ponente: Perlas-Bernabe, J.

TOPIC: ANTICHRESIS

PRINCIPLE:

Art. 2132. By the contract of antichresis the creditor acquires the right to
receive the fruits of an immovable of his debtor, with the obligation to apply
them to the payment of the interest, if owing, and thereafter to the principal of
his credit.

FACTS:

Benjamin Malance was the owner of a 1.4017-hectare parcel of agricultural

land. During his lifetime, Benjamin obtained from the Magtalas sisters, who
are distant relatives, a loan in the amount of P600,000.00, as evidenced by a
Kasulatan Ng Ukol sa Utang. Under the Kasulatan, the Magtalas sisters shall
have the right to the fruits of the subject land for six (6) years or until the loan
is fully paid.

After Benjamin passed away, his siblings, the Malance heirs, inspected the
subject land and discovered that the Magtalas sisters, their respective
husbands and their father, were cultivating the same on the basis of the
Kasulatan. Doubting the authenticity of the said Kasulatan, the Malance heirs
filed a Complaint against petitioners, which the Malance heirs subsequently
amended. They claimed that: a. during his lifetime, Benjamin accumulated
enough wealth to sustain himself, was unmarried and had no children to
support; b. the Kasulatan was executed during the time when Benjamin was
seriously ill and mentally incapacitated due to his illness and advanced age;
and c. the Kasulatan was simulated as the signature of Benjamin appearing
thereon was not his signature.

Petitioners denied that Benjamin had accumulated enough wealth to sustain

himself as his only source of income was his farm, and averred, inter alia,
that: a. when Benjamin became sickly, he leased the subject land to different
people who cultivated the same with the petitioners help; b. the Kasulatan
was executed before a notary public at the time when Benjamin was of sound
mind, though sickly; c. they were cultivating the subject land in accordance
with the said Kasulatan; d. the case involved an agrarian conflict within the
jurisdiction of the DARAB; and e. the Malance heirs must pay Benjamin’s
indebtedness prior to recovery of possession.

The RTC dismissed the complaint and upheld the validity of the Kasulatan on
the ground that it is a notarized document which enjoys the presumption of
regularity in its execution. It declared it as a contract of antichresis binding
upon Benjamin's heirs - the Malance heirs – and conferring on the Magtalas
sisters the right to retain the subject land until the debt is paid. The CA upheld
the RTC’s findings. Dissatisfied, petitioners moved for reconsideration but
however, the same was denied.

ISSUE:

Whether or not the Kasulatan is a contract of antichresis.

RULING:

YES. The Supreme Court ruled that the Kasulatan is a contract of

antichresis.

Article 2132 of the Civil Code provides:

Art. 2132. By the contract of antichresis the creditor acquires the right
to receive the fruits of an immovable of his debtor, with the obligation to
apply them to the payment of the interest, if owing, and thereafter to
the principal of his credit.
Thus, antichresis involves an express agreement between parties whereby:
(a) the creditor will have possession of the debtor's real property given
as security; (b) such creditor will apply the fruits of the said property to
the interest owed by the debtor, if any, then to the principal amount; (c)
the creditor retains enjoyment of such property until the debtor has
totally paid what he owes; and (d) should the obligation be duly paid,
then the contract is automatically extinguished proceeding from the
accessory character of the agreement.

The evidence on record shows that the parties intended to enter into a
contract of antichresis. The document specifically authorizes the Magtalas
sisters to receive the fruits of the subject landholding with the obligation to
apply them as payment to his P600,000.00 principal loan for a period of six (6)
years. While the Kasulatan did not provide for the transfer of possession of
the subject land, the contemporaneous and subsequent acts of the parties
show that such possession was intended to be transferred. Atty. Navarro
testified that while the Kasulatan only shows that the harvest and the fruits
shall answer for Benjamin's indebtedness, the parties agreed among
themselves that the lenders would be the one to take possession of the
subject land in order for them to get the harvest. Indeed, such arrangement
would be the most reasonable under the premises since at that time,
Benjamin's medical condition necessitated hospitalization, hence, his physical
inability to cultivate and harvest the fruits thereon.

As antichretic creditors, the Magtalas sisters are entitled to retain enjoyment

of the subject land until the debt has been totally paid. Article 2136 of the Civil
Code reads:

Art. 2136. The debtor cannot reacquire the enjoyment of the

immovable without first having totally paid what he owes the creditor.

The debt not having been totally paid, petitioners are entitled to retain
enjoyment of the subject land. In the meantime, the Magtalas sisters, as
antichretic creditors, are directed to henceforth render an annual accounting
to the Malance heirs of the annual net yield from the subject land, until such
time that they have completely collected the outstanding balance of said debt.
Villa , Prince Albert C.
SPS. ZOTOMAYOR vs. PEDRO RUBIO, et al
G.R. No. 153710.September 2, 2002

Ponente: JULIETA Y. CARREON

Topic: Antichresis

Principle:
Article 2132 ofthe Civil Code, a contract is one of antichresis when "the
creditor acquires the right to receive the fruits of an immovable of his debtor,
with the obligation to apply them to the payment of the interest of the loan,if
owing, and thereafter to the principal of his credit."Thus, when a contract of
loan with security does not stipulate that the creditor would apply the fruits of
his debtor's "immovable" to the interestof the loan when owing, and thereafter
to the principal, the contract is not a contract of antichresis but a contract of
mortgage.

Facts:

On May 15, 1979, petitioner spouses Vivencio and Feliza Javier secured two
loans from a certain Tito Santos (now deceased), husband of Rufina Santos,
now also deceased, who are both predecessors-in-interest of herein private
respondents, all surnamed Rubio. The two loans granted by Tito Santos were
in the total amount of One Hundred Three Thousand Eight Hundred Nine and
Fifty-Six Centavos (P103,809.56) as evidenced by a promissory note which
was to mature on May 15, 1980.
According to the agreement of the parties in their "Kasunduan," Sixty-Three
Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos (P63,809.56) of
the loan was to be paid in the form of gravel and sand to be extracted by Tito
Santos from the quarry-concession of the then debtors and herein petitioners
Javier, granted to them by the Bureau of Mines. Under the terms of their
"Kasunduan," Tito Santos was to avail of the concession of petitioner-spouses
until the value of the gravel and sand extracted reached the amount of Sixty-
Three Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos
(P63,809.56). The other loan amounting to Forty Thousand Pesos
(P40,000.00) was to be paid within a period of one (1) year and was secured
by a real estate mortgage on petitioners' property consisting of Ten Thousand
Two Hundred Eleven (10,211) square meters situated at Bo. Oogong, Sta.
Cruz, Laguna and covered by TCT No. T-84259.
The parties also agreed that, despite full payment of Sixty-Three Thousand
Eight Hundred Nine Pesos and Fifty-Six Centavos (P63,809.56) in the form of
gravel and sand, if the other loan of Forty Thousand Pesos (P40,000.00)
remained unpaid after one year, then Tito Santos (predecessor-in-interest of
private respondents) had the option to either continue extracting from the
quarry until such time as the value of the extracted materials reached Forty
Thousand Pesos (P40,000.00) or foreclose the property covered by the
mortgage. In any case, it was agreed that once the loan was fully paid, the
real estate mortgage, executed on May 16, 1979, was to be discharged.
[2]
cralaw
However, Tito Santos failed to extract quarry materials from petitioners'
concession since the latter's permit from the Bureau of Mines had already
expired on April 26, 1979. For petitioners' failure to pay the first loan of Sixty-
Three Thousand Eight Hundred Nine Pesos and Fifty-Six Centavos
(P63,809.56), Tito Santos commenced a collection suit docketed as Civil
Case SC-2096 against the spouses Javier.
Before the case could be decided on the merits, however, the parties
executed a compromise agreement wherein the spouses Javier admitted their
indebtedness of Sixty-Three Thousand Eight Hundred Nine Pesos and Fifty-
Six Centavos (P63,809.56) and obligated themselves to pay the same.
On April 24, 1986, the trial court rendered judgment based on the compromise
agreement. When petitioners again failed to comply with the judgment within
the specified time, a writ of execution was issued. Petitioners, in partial
satisfaction thereof, issued a check in the amount of Fifty Thousand Pesos
(P50,000.00).
In the meantime, in 1981, since petitioners also reneged on their obligation to
pay their second loan of Forty Thousand Pesos (P40,000.00) which was
secured by the real estate mortgage, Tito Santos foreclosed on petitioners'
property. The foreclosure was annotated on petitioners' TCT No. T-84259.
In 1984, Tito Santos died. In 1989, Rufina Santos, his surviving spouse, had
petitioners' TCT No. T-84259 cancelled and a new title (TCT No. T-116652)
issued in her name.
.

Issue(s):

1. Whether or not the Contract entered into is one of Antichrises.

Ruling(s):
No.
Only in the Court of Appeals was the contract of Antichresis was discussed.
The Court of Appeals assailed the conclusion of the trial court on the
existence of a contract of antichresis. In ruling for the private respondents, the
appellate court reasoned out:
“In any event, the conclusion of the trial court that the contract entered into by
Tito Santos and  appellee-spouses is a contract of antichresis is without
factual and legal basis. Under Article 2132 of  the Civil Code, a contract is one
of antichresis when “the creditor acquires the right to receive the fruits of an
immovable of his debtor, with the obligation to apply them to the payment of
the interest of the loan,  if owing, and thereafter to the principal of his
credit.”  Thus, when a contract of loan with security does not stipulate that the
creditor would apply the fruits of his debtor’s “immovable” to the interest of the
loan when owing, and thereafter to the principal, the contract is not a contract
of antichresis but a contract of mortgage.
To be sure, the “Kasunduan” which supplemented the Deed of Real Estate
Mortgage executed by appellee-spouses and Tito Santos gave the latter the
option to extract quarry materials from the concession of the former and apply
the value thereof to the payment of the P40,000.00 portion of appellee-
spouses’ loan. The aforesaid agreement, however, does not qualify the
subject contract of mortgage as one of antichresis. First, the use of the
concession is not the “immovable” contemplated by law, the fruits of which is
to be applied towards the payment of the interest of the loan, if owing, and
thereafter to the principal. Second, the concession for quarry extraction is
merely a privilege granted to appellee-spouses by the government. It is not an
immovable property that can be used as security for the payment of an
obligation. Third, and more importantly, the concession was in fact not used
as security for appellee-spouses’ loan. Rather, it is the property of appellee-
spouses as a collateral for the P40,000.00 portion of the loan. Thus, the
“Kasunduan” was merely a mode of payment, separate and distinct from the
real estate mortgage.”
 JOSE P. DIZON vs. ALFREDO G. GABORRO et al.
G.R. No. L-36821 June 22, 1978
Ponente: GUERRERO, J.

Topic: Antichresis

Principle:
Rule 39, Section 33, the judgment debtor remains in possession of the
property foreclosed and sold, during the period of redemption. If the judgment
debtor is in possession of the property sold, he is entitled to retain it and
receive the fruits, the purchaser not being entitled to such possession.
A judgment debtor, whose property is levied on execution, may transfer his
right of redemption to any one whom he may desire. The right to redeem land
sold under execution within 12 months is a property right and may be sold
voluntarily by its owner and may also be attached.
Upon foreclosure and sale, the purchaser is entitled to a certificate of sale
executed by the sheriff.
After the termination of the period of redemption and no redemption having
been made, the purchaser is entitled to a deed of conveyance and to the
possession of the properties. These are the only rights that the owner could
legally transfer which could partake the nature of a contract of Antichresis.
Facts:
Petitioner, Jose P. Dizon, was the owner of the three parcels of land, in
Mabalacat, Pampanga. He constituted a first mortgage to DBP to secure a
loan of P38,000.00 and a second mortgage to PNB amounting P93,831.91.
Dizon however, defaulted in the payment of his debt. So, Development Bank
of the Philippines foreclosed the mortgage extrajudicially. 
Gaborro became interested in the lands of Dizon. Dizon originally intended to
lease to Gaborro the property which had been lying idle for some time. But as
the mortgage was already foreclosed by the DPB trial the bank in fact
purchased the lands at the foreclosure sale on May 26, 1959, they abandoned
the projected lease.
A contract was then entered by the petitioner and respondent entitled “Deed
of sale with assumption of mortgage” and then a subsequent one was then
contracted which is entitled “Option to Purchase Real Estate”
Then after the execution of said contracts, Alfredo G. Gaborro took
possession of the three parcels of land.
After the execution of the contract and its conditions to him, Gaborro made
several payments to the DBP and PNB. He improved, cultivated the kinds
raised sugarcane and other crops produce.
Jose P. Dizon through his lawyer, Atty. Leonardo Abola, wrote a letter to
Gaborro informing him that he is formally offering reimburse Gaborro Of what
he paid to the banks but without, however, tendering any cash, and
demanding an accounting of the income and of the pro contending that the
transaction they entered into was one of antichresis.
Gaborro, however, did not agree to the same which prompted Jose P. Dizon
to institute an action in the Court of First Instance of Pampanga, alleging that
the documents Deed of Sale With Assumption of Mortgage and the Option to
Purchase Real Estate did not express the true intention and agreement
between the parties.
Petitioner, states that the two deeds constitute in fact a single transaction that
their real agreement was not an absolute sale of the land but merely an
equitable mortgage or conveyance by way of security for the reimbursement
or refund by Dizon to Gaborro of any and all sums which the latter may have
paid on account of the mortgage debts in favor of the DBP and the PNB.

Issue:
1. Whether or not the contract was a contract of Antichresis
Ruling:
No. As to the issue on Antichresis, the court ruled that in law and
Jurisprudence, and the facts establishedit finds that the agreement between
petitioner Dizon and respondent Gaborro is one of those inanimate contracts
under Art. 1307 of the New Civil Code whereby petitioner and respondent
agreed "to give and to do" certain rights and obligations respecting the lands
and the mortgage debts of petitioner which would be acceptable to the bank.
but partaking of the nature of the antichresis insofar as the principal parties,
petitioner Dizon and respondent Gaborro, are concerned.
Also, as to the intent of the parties in entering into a contract, “mistake” is a
ground for the reformation of an instrument which there having been a
meeting of the minds of the parties o a contract, their true intention is not
expressed in the instrument purporting to embody the agreement, and one of
the parries may ask for such reformation to the end that such true intention
may be expressed. (Art. 1359, New Civil code). When a mutual mistake of the
parties causes the failure of the instrument to disclose their real agreement,
said instrument may be reformed. (Art. 1361, New Civil Code.) It was a
mistake for the parties to execute the Deed of Sale With Assumption of
Mortgage and the Option to Purchase Real Estate and stand on the literal
meaning of the file and stipulations used therein.