G.R. No.

74730 August 25, 1989 appellee and for the trial court to render another and proper judgment based on the evidence adduced
by all the parties. Without pronouncement as to costs.

CALTEX PHILIPPINES, INC., petitioner,

vs. The respondent court was convinced that the following consideration justified a reconsideration of its prior
THE INTERMEDIATE APPELLATE COURT and HERBERT MANZANA respondents. decision (pp. 55-56, Rollo): "..., the action (before the trial court) cannot be said to be one for recovery
of deficiency judgment because ... (it) seeks recovery of the whole amount of indebtedness totalling
P361,210.66" (should be P361,218.66).
Private respondent Herbert Manzana purchased on credit petroleum products from petitioner Caltex
Philippines, Inc. (CALTEX, for short). As of August 31, 1969, his indebtedness to CALTEX has amounted
to P361,218.66. On October 4, 1969, Manzana executed a Deed a First Mortgage in favor of CALTEX over The motion for reconsideration filed by CALTEX was denied.
a parcel of land covered by OCT No. 0-274 of the Register of Deeds of the Province of Camarines Norte to
secure his debts to the latter. On various occasions, CALTEX sent to Manzana statements of account and
Hence, the present petition.
later demanded payment of his entire debts. Because of Manzana's failure and refusal to pay, CALTEX
filed a complaint on August 17, 1970 before the trial court for the recovery of the whole amount of
P361,218.66. The issues may be limited to the following:
1) Whether or not the respondent court committed an error in giving due course to the question
whether CALTEX can avail at the same time of a personal action in court for collection of a sum of
Meanwhile, on September 15, 1970, CALTEX foreclosed extrajudicially the mortgaged property. On
money and the extrajudicial foreclosure of the deed of first mortgage, which was only raised for the
October 30, 1970, the mortgaged property was sold at auction to CALTEX, being the only bidder, for
first time on appeal;
P20,000.00 as shown by the Sheriff s Certificate of Sale. The foreclosure was allegedly known by
2) Whether or not the mere filing of a collection suit for the recovery of the debt secured by real estate
Manzana only on October 4, 1980 when such fact was manifested by CALTEX in its reply to the opposition
mortgage constitutes waiver of the other remedy of foreclosure;
of Manzana to the motion for execution pending appeal.
3) Whether or not the filing of the complaint for recovery of the amount of indebtedness and the
subsequent extrajudicial foreclosure of the deed of first mortgage constitutes splitting of a single cause
On July 23, 1980, the trial court rendered judgment ordering Manzana to pay CALTEX the amount of of action.
P353,218.66 after deducting P8,000.00 paid by Traders Insurance and Surety Company on its surety
bond, with interest thereon at 12% per annum from August 17, 1970, plus 20% thereof as attorney's
FIRST ISSUE
fees (p. 115, Rollo).

CALTEX alleges that the only issue submitted for resolution before the trial court is whether or not
Manzana appealed the trial court's decision to the respondent Intermediate Appellate Court raising the
Manzana was indebted and liable to it in the sum of P361,218.66. The issue whether or not CALTEX can
following issues (p. 37, Rollo):
avail at the same time of a personal action in court for collection of a sum of money and the extrajudicial
1. THAT PLAINTIFF APPELLEE CANNOT AVAIL BOTH OF A PERSONAL ACTION (THIS CASE) AND AN
foreclosure of the Deed of First Mortgage, and the issue whether or not CALTEX can avail of a deficiency
EXTRAJUDICIAL FORECLOSURE AT THE SAME TIME AGAINST THE DEFENDANT DEFENDANT-
judgment were never raised in the pleadings of the parties nor at any stage of the proceedings before the
APPELLANT;
trial court. These were only raised by Manzana for the first time on appeal before the respondent court.
2. THAT PLAINTIFF-APPELLEE CANNOT AVAIL OF A DEFICIENCY JUDGMENT AFTER HE HAD
EXTRAJUDICIALLY FORECLOSED ON THE PROPERTY OF DEFENDANT-APPELLANT.
We rule that the respondent court did not commit any error in taking cognizance of the aforestated
issues, although not raised before the trial court. The presence of strong consideration of substantial
It was the opinion of the respondent court that "a reading of the issues raised by the defendant-appellant
justice has led this Court to relax the well-entrenched rule that, except questions on jurisdiction, no
shows that the question that needs resolution is whether or not plaintiff-appellee can still avail of the
question will be entertained on appeal unless it has been raised in the court below and it is within the
complaint for the recovery of the balance of indebtedness after having already foreclosed the property
issues made by the parties in their pleadings (Cordero v. Cabral, G.R. No. L- 36789, July 25, 1983, 123
securing the same"
SCRA 532). The compassionate spirit behind this rule will equally apply to the other allegation of CALTEX
that Manzana's indebtedness of P 361,218.66 was secured up to the extent of P120,000.00 only although
On June 29, 1984, the respondent court rendered a decision (pp. 36-39, Rollo) affirming in toto the it appears that this issue is raised for the first time in this present petition. Thus, the liberal application of
appealed decision after "finding no reversible error" therein. On July 19, 1984, Manzana filed a motion for the rule will favor both parties.
reconsideration of said decision. In its comment to the motion for reconsideration, CALTEX prayed that
"the judgment sought to be reconsidered be modified by deducting the amount of P20,000.00
On the basis of the first condition enumerated in the Deed of First Mortgage, CALTEX submits that
(foreclosure amount) from P353,218.66 thereby leaving a balance of P333,218.66 representing the
Manzana's indebtedness of P 361,218.66 was secured up to the extent of P120,000.00 only, to wit (p.
deficiency that plaintiff-appellee is entitled to recover from defendant-appellant plus interest, attorney's
50, Rollo):
fees and costs of suit" (p. 41, Rollo).
This Mortgage is subject to the following terms and conditions:
l) The aforementioned indebtedness of THREE HUNDRED SIXTY-ONE THOUSAND TWO HUNDRED
Acting on the motion for reconsideration, the respondent court issued a resolution dated January 31, EIGHTEEN & 66/100 (P361,218.66) of the MORTGAGOR shall be paid upon demand by the
1986, the dispositive portion of which reads (p. 59, Rollo): MORTGAGEE; it being expressly understood that the limit or maximum amount secured by this
WHEREFORE, in the interest of justice the decision of this Court promulgated June 29, 1984 is vacated mortgage is ONE HUNDRED TWENTY THOUSAND PESOS (P120,000.00) only.
and the records are ordered remanded for purposes of determining the deficiency due the plaintiff-
On the other hand, on the basis of the fourth paragraph of the deed and the fourth condition therein,
Manzana contends that the whole outstanding obligation of P361,218.66 was secured by the mortgage, to
wit (pp. 49-50, Rollo):
NOW, THEREFORE, for and in consideration of the said overdue, payable and demandable indebtedness
of the MORTGAGOR to the MORTGAGEE in the sum of THREE HUNDRED SIXTY-ONE THOUSAND TWO
HUNDRED EIGHTEEN PESOS & 66/100 (P361,218.66), Philippine Currency, the foregoing premises and
other x x x and valuable considerations, and to secure the faithful performance by the MORTGAGOR of
all the terms and conditions hereinafter set forth, particularly the payment of the obligations hereby
secured, the MORTGAGOR does hereby convey BY WAY OF FIRST MORTGAGE. ...
x x x.
4) This mortgage shall remain in force to cover the afore-mentioned mentioned outstanding
indebtedness of the MORTGAGOR to the MORTGAGEE in the amount of THREE HUNDRED SIDE ONE
THOUSAND TWO HUNDRED EIGHTEEN PESOS & 66/100 (P361,218.66).
Article 1374 of the Civil Code, regarding interpretation of contracts, provides:
ART. 1374. The various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly.
The Deed of First Mortgage seems to contain provisions that contradict one another. However,
considering all the provisions together, the first condition cited by CALTEX is actually a specific provision
while the fourth paragraph and the fourth condition cited by Manzana are general provisions. This
interpretation is bolstered by the third WHEREAS clause and the penultimate paragraph of the deed, to
wit (pp. 49-50, Rollo):
WHEREAS, the MORTGAGOR has offered to execute, sign and deliver a First Mortgage over his property
..., only as partial security for the aforementioned overdue, payable and demandable indebtedness of
the MORTGAGOR to the MORTGAGEE, which offer of the MORTGAGOR is accepted by the MORTGAGEE.
(emphasis supplied)
x x x.
The MORTGAGOR binds himself to complete the securities  required by the MORTGAGEE and shall
permit any authorized representative of the MORTGAGEE to inspect the mortgaged property and all the
properties offered to be mortgaged to complete the required security.' (emphasis supplied)
We therefore hold that Manzana's indebtedness of P 361,218.66 was secured  up to the extent of
P120,000.00 only.
The records show that CALTEX extended to Manzana a continuing credit line, with the result that each
transaction constituted a separate obligation. We affirm the trial court's ruling with respect to the liability
of Manzana to CALTEX in the amount of P233,218.66 (P353,218.66 less P120,000.00) with interest
thereon at 12% per annum from August 17, 1970, plus 20% thereof as attorney's fees. The evidence on
record, both testimonial and documentary, clearly support such amount of indebtedness. The trial court
said (pp. 114- 115, Rollo):
Plaintiffs claim that as at (sic) termination of agreement on July 27, 1970, Manzana had an outstanding
account totalling P361,218.66, appears to be confirmed by the following:
(1) On September 8, 1970, defendant Manzana, by a letter, acknowledged his indebtedness, but
asked for time to pay the unpaid balance (Exh. 'l" and "M").
(2) To secure as obligation of P 361,218.66, said defendant executed, on October 4, 1969, a Deed of
First Mortgage on a piece of land covered by O.C.T. No. 0274 of the Registry of Deeds for Camarines
Norte (Exh. "N")
Rarely can a confirmation of an account be more definitive than the foregoing.
Defendant Manzana's defenses, set up in his answer, do not appear to have merit. In the first place, the
supposed lack of liquidation is belied by the periodical statements of account showing the corresponding
running balance thru the years 1968 to 1969 (Exhs. "N" to "O-7"  inclusive), effectively constituting a
form of liquidation. Secondly, the very terms used repeatedly in the Dealer Agreement — neither
pleaded nor in any manner assailed as ambiguous-are peculiar to purchase and sale transactions and to
the relationship of the parties thereto as debtor and creditor. There is no reasonable way under the
provisions thereof that Manzana can be deemed to be either an agent or a mere collector with plaintiff
bearing the risk of non-payment."
Furthermore, this case has been pending since August 17,1970 and to order its remand to the trial court
will necessarily entail additional expenses and unduly delay its disposition and the administration of
justice to the parties.
Remand of the case to the lower court for reception of evidence is not necessary if the Supreme Court
can resolve the dispute on the records before it. The common denominator in cases holding that remand
of a case is not necessary is the fact that the trial court had received all the evidence intended to be
presented by both parties (Hechanova v. Court of Appeals, G.R. No. L-48787 November 14, 1986, 145
SCRA 550).
THE SUCCEEDING DISCUSSION WILL CONCERN THE SECURED INDEBTEDNESS OF P120,000.00.
CALTEX, in effect, has made a mockery of our judicial system when it initially filed a collection suit then,
during the pendency thereof foreclosed extrajudicially the mortgaged property which secured the
indebtedness and still pursued the collection suit to the end. In this light, the actuations of CALTEX are
deserving of severe criticism, to say the least. Of importance is the doctrine laid down by this court in the
leading case of Bachrach Motor, Inc. v. Icarangal et al., 68 Phil. 287, which was applied by the
respondent Court in resolving the case, where We ruled that;
... in the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other
words, he may pursue either of the two remedies, but not both. By such election, his cause of action
can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to
bring a personal action will leave open to him all the properties of the debtor for attachment and
execution, even including the mortgaged property itself. And, if he waives such personal action and
pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give
him the right to sue for a deficiency judgment, in which case, all the properties of the defendant, other
than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either
case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the
pursuit of one or the other remedy are purely accidental and are all under his right of election. ...
Thus, where a debt is secured by a mortgage and there is a default in payment on the part of the
mortgagor, the mortgagee has a choice of one (1) of two (2) remedies, but he cannot have both. The
mortgagee may:
1) foreclosure the mortgage; or
2) file an ordinary action to collect the debt.
When the mortgagee chooses the foreclosure of the mortgage as a remedy, he enforces his lien by the
sale on foreclosure of the mortgaged property. The proceeds of the sale will be applied to the satisfaction
of the debt. With this remedy, he has a prior lien on the property. In case of a deficiency, the mortgagee
has the right to claim for the deficiency resulting from the price obtained in the sale of the real property
at public auction and the outstanding obligation at the time of the foreclosure proceedings (Soriano v.
Enriquez, 24 Phil. 584; Banco de Islas Filipinas v. Concepcion Hijos, 53 Phil. 86; Banco Nacional v.
Barreto, 53 Phil. 101).lâwphî1.ñèt
On the other hand, if the mortgagee resorts to an action to collect the debt, he thereby waives his
mortgage lien. He will have no more priority over the mortgaged property. If the judgment in the action
to collect is favorable to him, and it becomes final and executory, he can enforce said judgment by
execution. He can even levy execution on the same mortgaged property, but he will not have priority
over the latter and there may be other creditors who have better lien on the properties of the mortgagor.
CALTEX submits that the principles enunciated in the Bachrach case are not applicable nor determinative
of the case at bar for the reason that the factual circumstances obtained in the said case are totally
different from the instant case. In the Bachrach case, the plaintiff instituted an action to foreclose the
mortgage after the money judgment in its favor remained unsatisfied whereas in the present case,
CALTEX initially filed a complaint for collection of the debt and during the pendency thereof foreclosed
extrajudicially the mortgage.
We disagree. Although the facts in the Bachrach case and in the present case are not identical, there is
similarity in the fact that the plaintiffs in these two cases availed of both remedies although they are
entitled to a choice of only one.
SECOND ISSUE
CALTEX alleges next that the mere act of filing a collection suit for the recovery of a debt secured by real
estate mortgage is not tantamount to an implied waiver of the mortgage lien. Under Philippine
jurisdiction, there is no statute which prohibits or precludes a mortgagee from subsequently foreclosing
the real estate mortgage shortly after the collection suit has been filed. The real estate mortgage itself
does not contain any explicit provision that the filing of a collection suit would mean waiver of the remedy
of foreclosure.
We hold otherwise. The mere act of filing a collection suit for the recovery of a debt secured by a
mortgage constitutes waiver of the other remedy of foreclosure. The rationale behind this was adequately
explained in the Bachrach case, supra:
... a rule that would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would result not only in
multiplicity of suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and
equity (Osorio vs. San Agustin, 25 Phil. 404), but also in subjecting the defendant to the vexation of
being sued in the place of his residence or of the residence of the plaintiff, and then again in the place
where the property lies.
In the present case, however, We shall not follow this rule to the letter but declare that it is the collection
suit which was waived and/or abandoned. This ruling is more in harmony with the principles underlying
our judicial system. It is of no moment that the collection suit was filed ahead, what is determinative is
the fact that the foreclosure proceedings ended even before the decision in the collection suit was
rendered. As a matter of fact, CALTEX informed the trial court that it had already consolidated its
ownership over the property, in its reply to the opposition of Manzana to the motion for execution
pending appeal filed by it.
A corollary issue that We might as well resolve now (although not raised as an issue in the present
petition, but applying the rule in Gayos et al. v. Gayos et al., G.R. No. L-27812, September 26, 1975, 67
SCRA 146, that it is a cherished rule of procedure that a court should always strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation) is
whether or not CALTEX can still sue for a deficiency judgment P100,000.00 (secured debt of P120,000.00
less the foreclosure amount of P20,000.00).
The collection suit filed before the trial court cannot be considered as a deficiency judgment because a
deficiency judgment has been defined as one for the balance of the indebtedness after applying the
proceeds of the sale of the mortgaged property to such indebtedness and is necessarily filed after the
foreclosure proceedings. It is significant to note that the judgment rendered by the trial court was for the
full amount of the indebtedness and the case was filed prior to the foreclosure proceedings.
In general, a deficiency judgment is in the nature of an ordinary money judgment, may constitute a
cause of action and is barred by the statute of limitations applicable to ordinary judgment (59 C.J.S.
1497). The ten (10) year period provided in Articles 1142 and 1144 of the Civil Code applies to a suit for
deficiency judgment, to wit:
Art. 1142. A mortgage action prescribes after ten years. (1964a)
Art. 1144. The following actions must be brought with ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
A suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage
action because its purpose is precisely to enforce the mortgage contract; it is upon a written contract and
upon an obligation of Manzana to pay the deficiency which is created by law (see Development Bank of
the Philippines v. Tomeldan et al., G.R. No. 51269, November 17, 1980, 101 SCRA 171). Therefore, since
more than ten (10) years have elapsed from the time the right of action accrued, CALTEX can no longer
recover the deficiency from Manzana.
THIRD ISSUE
CALTEX has only one cause of action against Manzana, that is, non-payment of the debt although two
choices of remedies are available to it. As held in the Bachrach case, supra:
For non-payment of a note secured by mortgage, the creditor has a single cause of action against the
debtor. This single cause of action consists in the recovery of the credit with execution of the security.
In other words, the creditor in his action may make two demands, the payment of the debt and the
foreclosure of his mortgage. But both demands arise from the same cause, the non-payment of the
debt, and, for that reason, they constitute a single cause of action. Though the debt and the mortgage
constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the
same obligation. Consequently, there exists only one cause of action for a single breach of that
obligation. Plaintiff, then, by applying the rule above stated, cannot split up his single cause of action
by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing
the creditor to file two separate complaint simultaneously or successively, one to recover his credit and
another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single
breach of contract at so much cost to the courts and with so much vexation and oppression to the
debtor.
ACCORDINGLY, the resolution of the respondent Intermediate Appellate Court dated January 31,1986 is
SET ASIDE. The decision of the trial court is AFFIRMED with the MODIFICATION that private respondent
Herbert Manzana's liability to petitioner Caltex Philippines, Inc. is only up to the extent of P233,218.66
with interest thereon at 12% per annum from August 17, 1970, plus 20% thereof as attorney's fees.

G.R. No. 133876 December 29, 1999
BANK OF AMERICA, NT and SA, petitioner,
vs.
AMERICAN REALTY CORPORATION and COURT OF APPEALS, respondents.
Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted over a third
party mortgagor's property situated in the Philippines by filing an action for the collection of the principal
loan before foreign courts?
Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the Rules of Court
are the decision 1 of public respondent Court of Appeals in CA G.R. CV No. 51094, promulgated on 30
September 1997 and its resolution, 2 dated 22 May 1998, denying petitioner's motion for reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing institution duly
licensed to do business in the Philippines, organized and existing under and by virtue of the laws of the
State of California, United States of America while private respondent American Realty Corporation (ARC)
is a domestic corporation.
Bank of America International Limited (BAIL), on the other hand, is a limited liability company organized
and existing under the laws of England.
As borne by the records, BANTSA and BAIL on several occasions granted three major multi-million United
States (US) Dollar loans to the following corporate borrowers: (1) Liberian Transport Navigation, S.A.; (2)
El Challenger S.A. and (3) Eshley Compania Naviera S.A. (hereinafter collectively referred to as
"borrowers"), all of which are existing under and by virtue of the laws of the Republic of Panama and are
foreign affiliates of private respondent. 3
Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed
and entered into restructuring agreements. As additional security for the restructured loans, private
respondent ARC as third party mortgagor executed two real estate mortgages, 4 dated 17 February 1983
and 20 July 1984, over its parcels of land including improvements thereon, located at Barrio Sto. Cristo,
San Jose Del Monte, Bulacan, and which are covered by Transfer Certificate of Title Nos. T-78759, T-
78760, T-78761, T-78762 and T-78763.
Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting
petitioner BANTSA to file civil actions 5 before foreign courts for the collection of the principal loan, to wit:
a) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-Folio No
2098) against Liberian Transport Navigation S.A., Eshley Compania Naviera S.A., El Challenger S.A.,
Espriona Shipping Company S.A., Eddie Navigation Corp., S.A., Eduardo Katipunan Litonjua and Aurelio
Katipunan Litonjua on June 17, 1992.
b) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-Folio No.
2245) against El Challenger S.A., Espriona Shipping Company S.A., Eduardo Katipuan Litonjua &
Aurelio Katipunan Litonjua on July 2, 1992;
c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992) against
Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A. Pacific Navigators
Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering (Edyship) Co., Inc., Aurelio
Katipunan Litonjua, Jr. and Eduardo Katipunan Litonjua on November 19, 1992; and
d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of 1992) against
Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company, S.A., Pacific Navigators
Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering (Edyship) Co., Jr. and Eduardo
Katipunan Litonjua on November 21, 1992.
In the civil suits instituted before the foreign courts, private respondent ARC, being a third party
mortgagor, was private not impleaded as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan,
Philippines an application for extrajudicial foreclosure 6 of real estate mortgage.
On 22 January 1993, after due publication and notice, the mortgaged real properties were sold at public
auction in an extrajudicial foreclosure sale, with Integrated Credit and Corporation Services Co (ICCS) as
the highest bidder for the sum of Twenty four Million Pesos (P24,000.000.00). 7
On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an
action for damages 8 against the petitioner, for the latter's act of foreclosing extrajudicially the real estate
mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan.
In its answer 9 petitioner alleged that the rule prohibiting the mortgagee from foreclosing the mortgage
after an ordinary suit for collection has been filed, is not applicable in the present case, claiming that:
a) The plaintiff, being a mere third party mortgagor and not a party to the principal restructuring
agreements, was never made a party defendant in the civil cases filed in Hongkong and England;
b) There is actually no civil suit for sum of money filed in the Philippines since the civil actions were
filed in Hongkong and England. As such, any decisions (sic) which may be rendered in the
abovementioned courts are not (sic) enforceable in the Philippines unless a separate action to enforce
the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50 of the Revised
Rules of Court.
c) Under English Law, which is the governing law under the principal agreements, the mortgagee does
not lose its security interest by filing civil actions for sums of money.
On 14 December 1993, private respondent filed a motion for suspension  10 of the redemption period on
the ground that "it cannot exercise said right of redemption without at the same time waiving or
contradicting its contentions in the case that the foreclosure of the mortgage on its properties is legally
improper and therefore invalid."
In an order 11 dated 28 January 1994, the trial court granted the private respondent's motion for
suspension after which a copy of said order was duly received by the Register of Deeds of Meycauayan,
Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale,
consolidated its ownership over the real properties, resulting to the issuance of Transfer Certificate of
Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name.
On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties to
Stateland Investment Corporation for the amount of Thirty Nine Million Pesos (P39,000,000.00).
Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-187782(m), T-187783(m), T-16653P(m)
and T-16652P(m) were issued in the latter's name.
After trial, the lower court rendered a decision 13 in favor of private respondent ARC dated 12 May 1993,
the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by the defendant of
collection suits against the principal debtors operated as a waiver of the security of the mortgages.
Consequently, the plaintiff's rights as owner and possessor of the properties then covered by Transfer
Certificates of Title Nos. T-78759, T-78762, T-78763, T-78760 and T-78761, all of the Register of
Deeds of Meycauayan, Bulacan, Philippines, were violated when the defendant caused the extrajudicial
foreclosure of the mortgages constituted thereon.
Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with legal
interest thereon from the date of the filing of the complaint up to the date of actual payment:
1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos (P99,000,000.00);
2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and
3) Costs of suit.
On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner to
file a motion for reconsideration which the appellate court denied.
Hence, the instant petition for review 14 on certiorari where herein petitioner BANTSA ascribes to the
Court of Appeals the following assignment of errors:
1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon. Supreme Court in
the cases of Caltex Philippines, Inc. vs. Intermediate Appellate Court docketed as G.R. No. 74730
promulgated on August 25, 1989 and Philippine Commercial International Bank vs. IAC, 196 SCRA 29
(1991 case), although said cases were duly cited, extensively discussed and specifically mentioned, as
one of the issues in the assignment of errors found on page 5 of the decision dated September 30,
1997.
2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the private
respondent actual and exemplary damages totalling P171,600,000.00, as of July 12, 1998 although
such huge amount was not asked nor prayed for in private respondent's complaint, is contrary to law
and is totally unsupported by evidence (sic).
In fine, this Court is called upon to resolve two main issues:
1. Whether or not the petitioner's act of filing a collection suit against the principal debtors for the
recovery of the loan before foreign courts constituted a waiver of the remedy of foreclosure.
2. Whether or not the award by the lower court of actual and exemplary damages in favor of private
respondent ARC, as third-party mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of
foreclosure requires the concurrence of two requisites: an ordinary civil action for collection should be
filed and subsequently a final judgment be correspondingly rendered therein.
According to petitioner, the mere filing of a personal action to collect the principal loan does not suffice; a
final judgment must be secured and obtained in the personal action so that waiver of the remedy of
foreclosure may be appreciated. To put it differently, absent any of the two requisites, the mortgagee-
creditor is deemed not to have waived the remedy of foreclosure.
We do not agree.
Certainly, this Court finds petitioner's arguments untenable and upholds the jurisprudence laid down in
Bachrach 15 and similar cases adjudicated thereafter, thus:
In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage
debtor either a personal action or debt or a real action to foreclose the mortgage. In other words, he
may he may pursue either of the two remedies, but not both. By such election, his cause of action can
by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to bring
a personal action will leave open to him all the properties of the debtor for attachment and execution,
even including the mortgaged property itself. And, if he waives such personal action and pursues his
remedy against the mortgaged property, an unsatisfied judgment thereon would still give him the right
to sue for a deficiency judgment, in which case, all the properties of the defendant, other than the
mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his
remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of
one or the other remedy are purely accidental and are all under his right of election. On the other hand,
a rule that would authorize the plaintiff to bring a personal action against the debtor and simultaneously
or successively another action against the mortgaged property, would result not only in multiplicity of
suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and equity
(Osorio vs. San Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of being
sued in the place of his residence or of the residence of the plaintiff, and then again in the place where
the property lies.
In Danao vs. Court of Appeals, 16 this Court, reiterating jurisprudence enunciated in Manila Trading and
Supply Co vs. Co Kim 17 and Movido vs. RFC, 18 invariably held:
. . . The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead,
an ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the
properties of the debtor, including the subject matter of the mortgage . . . , subject to the qualification
that if he fails in the remedy by him elected, he cannot pursue further the remedy he has waived.
Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may
institute against the mortgage debtor either a personal action for debt or a real action to foreclose the
mortgage. 19
In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not
cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a
remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in an
action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the of the 1997 Rules of Civil
Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon
filing of the petition not with any court of justice but with the Office of the Sheriff of the province where
the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by Act No. 4118.
In the case at bench, private respondent ARC constituted real estate mortgages over its properties as
security for the debt of the principal debtors. By doing so, private respondent subjected itself to the
liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may
secure the latter by pledging or mortgaging their own property. 20
Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third
person who secures the fulfillment of another's obligation by mortgaging his own property, to be solidarily
bound with the principal obligor. The signatory to the principal contract—loan—remains to be primarily
bound. It is only upon default of the latter that the creditor may have recourse on the mortgagors by
foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. 21
In the instant case, petitioner's contention that the requisites of filing the action for collection and
rendition of final judgment therein should concur, is untenable.
Thus, in Cerna vs. Court of Appeals,   we agreed with the petitioner in said case, that the filing of a
22
collection suit barred the foreclosure of the mortgage:
A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage
constituted over the personal property as security for the debt or value of the promissory note when he
seeks to recover in the said collection suit.
. . . When the mortgagee elects to  file a suit for collection, not foreclosure, thereby abandoning the
chattel mortgage as basis for relief, he clearly manifests his lack of desire and interest to go after the
mortgaged property as security for the promissory note . . . .
Contrary to petitioner's arguments, we therefore reiterate the rule, for clarity and emphasis, that the
mere act of filing of an ordinary action for collection operates as a waiver of the mortgage-creditor's
remedy to foreclose the mortgage. By the mere filing of the ordinary action for collection against the
principal debtors, the petitioner in the present case is deemed to have elected a remedy, as a result of
which a waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is
required for the rule on waiver to apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court, 23 a case relied upon by petitioner,
supposedly to buttress its contention, this Court had occasion to rule that the mere act of filing a
collection suit for the recovery of a debt secured by a mortgage constitutes waiver of the other remedy of
foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt.
Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt
to exercise only one of two remedies so as not to violate the rule against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc, vs. Icarangal. 24
For non-payment of a note secured by mortgage, the creditor has a single cause of action against the
debtor. This single cause of action consists in the recovery of the credit with execution of the security.
In other words, the creditor in his action may make two demands, the payment of the debt and the
foreclosure of his mortgage. But both demands arise from the same cause, the non-payment of the
debt, and for that reason, they constitute a single cause of action. Though the debt and the mortgage
constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the
same obligation. Consequently, there exists only one cause of action for a single breach of that
obligation. Plaintiff, then, by applying the rules above stated, cannot split up his single cause of action
by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing
the creditor to file two separate complaints simultaneously or successively, one to recover his credit
and another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single
breach of contract at so much cost to the courts and with so much vexation and oppression to the
debtor.
Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine enunciated in Caltex
wherein this High Court relaxed the application of the general rules to wit:
In the present case, however, we shall not follow this rule to the letter but declare that it is the
collection suit which was waived and/or abandoned. This ruling is more in harmony with the principles
underlying our judicial system. It is of no moment that the collection suit was filed ahead, what is
determinative is the fact that the foreclosure proceedings ended even before the decision in the
collection suit was rendered. . . .
Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex case was
never intended to overrule the well-entrenched doctrine enunciated Bachrach, which to our mind still
finds applicability in cases of this sort. To reiterate, Bachrach is still good law.
We then quote the decision 25 of the trial court, in the present case, thus:
The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar
circumstances obtaining therein. In the said case, the Supreme Court chastised Caltex for
making ". . . a mockery of our judicial system when it initially filed a collection suit then, during the
pendency thereof, foreclosed extrajudicially the mortgaged property which secured the indebtedness,
and still pursued the collection suit to the end." Thus, to prevent a mockery of our judicial system", the
collection suit had to be nullified because the foreclosure proceedings have already been pursued to
their end and can no longer be undone.
In the case at bar, it has not been shown whether the defendant pursued to the end or are still
pursuing the collection suits filed in foreign courts. There is no occasion, therefore, for this court to
apply the exception laid down by the Supreme Court in Caltex by nullifying the collection suits. Quite
obviously, too, the aforesaid collection suits are beyond the reach of this Court. Thus the only way the
court may prevent the spector of a creditor having "plural redress for a single breach of contract" is by
holding, as the Court hereby holds, that the defendant has waived the right to foreclose the mortgages
constituted by the plaintiff on its properties originally covered by Transfer Certificates of Title Nos. T-
78759, T-78762, T-78760 and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe criticism, to say the least. 26
Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC. 27 Again, petitioner
tried to fit a square peg in a round hole. It must be stressed that far from overturning the doctrine laid
down in Bachrach, this Court in PCIB buttressed its firm stand on this issue by declaring:
While the law allows a mortgage creditor to either institute a personal action for the debt or a real
action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or successively as
was done by PCIB in this case.
Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million promissory note
secured by real estate mortgages and subsequently filed a petition for extrajudicial foreclosure, it
violates the rule against splitting a cause of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil
suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages
constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover, by
filing the four civil actions and by eventually foreclosing extrajudicially the mortgages, petitioner in effect
transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute
books.
In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection suit
was filed, considering that the creditor should not be afforded "plural redress for a single breach of
contract." For cause of action should not be confused with the remedy created for its enforcement. 28
Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen in
addressing the creditor's cause. Hence, a suit brought before a foreign court having competence and
jurisdiction to entertain the action is deemed, for this purpose, to be within the contemplation of the
remedy available to the mortgagee-creditor. This pronouncement would best serve the interest of justice
and fair play and further discourage the noxious practice of splitting up a lone cause of action.
Incidentally, BANTSA alleges that under English Law, which according to petitioner is the governing law
with regard to the principal agreements, the mortgagee does not lose its security interest by simply filing
civil actions for sums of money. 29
We rule in the negative.
This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case at
bench, Philippine law shall apply notwithstanding the evidence presented by petitioner to prove the
English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that there is
no judicial notice of any foreign law. A foreign law must be properly pleaded and proved as a
fact. 30 Thus, if the foreign law involved is not properly pleaded and proved, our courts will presume that
the foreign law is the same as our local or domestic or internal law. 31 This is what we refer to as the
doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and
proved in accordance with Section 24, Rule 132 of the Rules of Court and the jurisprudence laid down
in Yao Kee, et al. vs. Sy-Gonzales, 32 said foreign law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of
the forum, the said foreign law, judgment or order shall not be applied. 33
Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their
object public order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determinations or conventions agreed upon in a foreign country. 34
The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction
proscribing the splitting up of a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent —
If two or more suits are instituted on the basis of the same cause of action, the filing of one or a
judgment upon the merits in any one is available as a ground for the dismissal of the others.
Moreover, foreign law should not be applied when its application would work undeniable injustice to the
citizens or residents of the forum. To give justice is the most important function of law; hence, a law, or
judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws. 35
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual or
compensatory damages inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing the real
estate mortgages constituted a clear violation of the rights of herein private respondent ARC, as third-
party mortgagor.
Actual or compensatory damages are those recoverable because of pecuniary loss in business, trade,
property, profession, job or occupation and the same must be proved, otherwise if the proof is flimsy and
non-substantial, no damages will be given. 36 Indeed, the question of the value of property is always a
difficult one to settle as valuation of real property is an imprecise process since real estate has no
inherent value readily ascertainable by an appraiser or by the court. 37 The opinions of men vary so much
concerning the real value of property that the best the courts can do is hear all of the witnesses which the
respective parties desire to present, and then, by carefully weighing that testimony, arrive at a conclusion
which is just and equitable. 38
In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation made by
Philippine Appraisal Company. In effect, BANTSA questions the act of the appellate court in giving due
weight to the appraisal report composed of twenty three pages, signed by Mr. Lauro Marquez and
submitted as evidence by private respondent. The appraisal report, as the records would readily show,
was corroborated by the testimony of Mr. Reynaldo Flores, witness for private respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal report dated
March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty three (23) pages which set out in
detail the valuation of the property to determine its fair market value (TSN, April 22, 1994, p. 4), in the
amount of P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony of one Mr.
Reynaldo F. Flores, an appraiser and director of Philippine Appraisal Company, Inc. (TSN, ibid., p. 3).
The latter's testimony was subjected to extensive cross-examination by counsel for defendant-appellant
(TSN, April 22, 1994, pp. 6-22). 39
In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched rule that
the factual findings of the trial court should be respected. 40 The time-tested jurisprudence is that the
findings and conclusions of the trial court on the credibility of witnesses enjoy a badge of respect for the
reason that trial courts have the advantage of observing the demeanor of witnesses as they testify. 41
This Court will not alter the findings of the trial court on the credibility of witnesses, principally because
they are in a better position to assess the same than the appellate court. 42 Besides, trial courts are in a
better position to examine real evidence as well as observe the demeanor of witnesses. 43
Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest primarily
with the trial court. 44 In the case at bar, we see no reason that would justify this Court to disturb the
factual findings of the trial court, as affirmed by the Court of Appeals, with regard to the award of actual
damages.
In arriving at the amount of actual damages, the trial court justified the award by presenting the
following ratiocination in its assailed decision 45, to wit:
Indeed, the Court has its own mind in the matter of valuation. The size of the subject real properties
are (sic) set forth in their individuals titles, and the Court itself has seen the character and nature of
said properties during the ocular inspection it conducted. Based principally on the foregoing, the Court
makes the following observations:
 1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte, Bulacan, which
is (sic) not distant from Metro Manila — the biggest urban center in the Philippines — and are easily
accessible through well-paved roads;
2. The properties are suitable for development into a subdivision for low cost housing, as admitted by
defendant's own appraiser (TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already been demolished. Houses of strong
materials are found in the vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a growing
community. It has even been shown that the house of the Barangay Chairman is located adjacent to
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultures de Talisay-
the property in question (Exh. 27), and the only remaining piggery (named Cherry Farm) in the
Silay, Inc. 49 citing Northern Cement Corporation vs. Intermediate Appellate Court 50 is enlightening:
vicinity is about 2 kilometers away from the western boundary of the property in question (TSN,
November 19, p. 3);
4. It will not be hard to find interested buyers of the property, as indubitably shown by the fact that
on March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the consolidated real estate
properties to Stateland Investment Corporation, in whose favor new titles were issued,  i.e., TCT Nos.
T-187781(m); T-187782(m), T-187783(m); T-16653P(m) and T-166521(m) by the Register of Deeds
of Meycauayan (sic), Bulacan;
5. The fact that ICCS was able to sell the subject properties to Stateland Investment Corporation for
Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple defendant's appraisal (Exh. 2)
clearly shows that the Court cannot rely on defendant's aforesaid estimate (Decision, Records, p.
603).
It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of witnesses
command great respect and consideration especially when the conclusions are supported by the evidence
on record. 46 Applying the foregoing principle, we therefore hold that the trial court committed no palpable
error in giving credence to the testimony of Reynaldo Flores, who according to the records, is a licensed
real estate broker, appraiser and director of Philippine Appraisal Company, Inc. since 1990. 47 As the
records show, Flores had been with the company for 26 years at the time of his testimony.
Of equal importance is the fact that the trial court did not confine itself to the appraisal report dated 29
March 1993, and the testimony given by Mr. Reynaldo Flores, in determining the fair market value of the
real property. Above all these, the record would likewise show that the trial judge in order to appraise
himself of the characteristics and condition of the property, conducted an ocular inspection where the
opposing parties appeared and were duly represented.
Based on these considerations and the evidence submitted, we affirm the ruling of the trial court as
regards the valuation of the property —
. . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties ( sic)
translates to just about Two Hundred Fifty Four Pesos (P254.00) per square meter. This appears to be,
as the court so holds, a better approximation of the fair market value of the subject properties. This is
the amount which should be restituted by the defendant to the plaintiff by way of actual or
compensatory damages . . . . 48
Further, petitioner ascribes error to the lower court awarding an amount allegedly not asked nor prayed
for in private respondent's complaint.
Notwithstanding the fact that the award of actual and compensatory damages by the lower court
exceeded that prayed for in the complaint, the same is nonetheless valid, subject to certain qualifications.
On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:
Sec. 5. Amendment to conform to or authorize presentation of evidence. — When issues not raised by
the pleadings are tried with the express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgement; but failure to amend does not affect the result
of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with
liberality if the presentation of the merits of the action and the ends of substantial justice will be
subserved thereby. The court may grant a continuance to enable the amendment to be made.
There have been instances where the Court has held that even without the necessary amendment, the
amount proved at the trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we
said that if the facts shown entitled plaintiff to relief other than that asked for, no amendment to the
complaint was necessary, especially where defendant had himself raised the point on which recovery
was based. The appellate court could treat the pleading as amended to conform to the evidence
although the pleadings were actually not amended. Amendment is also unnecessary when only clerical
error or non substantial matters are involved, as we held in Bank of the Philippine Islands vs.
Laguna (48 Phil. 5). In Co Tiamco vs. Diaz (75 Phil. 672), we stressed that the rule on amendment
need not be applied rigidly, particularly where no surprise or prejudice is caused the objecting party.
And in the recent case of National Power Corporation vs. Court of Appeals (113 SCRA 556), we held
that where there is a variance in the defendant's pleadings and the evidence adduced by it at the trial,
the Court may treat the pleading as amended to conform with the evidence.
It is the view of the Court that pursuant to the above-mentioned rule and in light of the decisions cited,
the trial court should not be precluded from awarding an amount higher than that claimed in the
pleading notwithstanding the absence of the required amendment. But it is upon the condition that the
evidence of such higher amount has been presented properly, with full opportunity on the part of the
opposing parties to support their respective contentions and to refute each other's evidence.
The failure of a party to amend a pleading to conform to the evidence adduced during trial does not
preclude an adjudication by the court on the basis of such evidence which may embody new issues not
raised in the pleadings, or serve as a basis for a higher award of damages. Although the pleading may
not have been amended to conform to the evidence submitted during trial, judgment may nonetheless
be rendered, not simply on the basis of the issues alleged but also the basis of issues discussed and the
assertions of fact proved in the course of trial. The court may treat the pleading as if it had been
amended to conform to the evidence, although it had not been actually so amended. Former Chief
Justice Moran put the matter in this way:
When evidence is presented by one party, with the expressed or implied consent of the
adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards
those issues, which shall be considered as if they have been raised in the pleadings. There is implied
consent to the evidence thus presented when the adverse party fails to object thereto.
Clearly, a court may rule and render judgment on the basis of the evidence before it even though the
relevant pleading had not been previously amended, so long as no surprise or prejudice is thereby
caused to the adverse party. Put a little differently, so long as the basis requirements of fair play had
been met, as where litigants were given full opportunity to support their respective contentions and to
object to or refute each other's evidence, the court may validly treat the pleadings as if they had been
amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before
it.
In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and object to the
evidence, both documentary and testimonial, formally offered by private respondent, the rudiments of
fair play are deemed satisfied. In fact, the testimony of Reynaldo Flores was put under scrutiny during
the course of the cross-examination. Under these circumstances, the court acted within the bounds of its
jurisdiction and committed no reversible error in awarding actual damages the amount of which is higher
than that prayed for. Verily, the lower court's actuations are sanctioned by the Rules and supported by
jurisprudence.
Similarly, we affirm the grant of exemplary damages although the amount of Five Million Pesos
(P5,000,000.00) awarded, being excessive, is subject to reduction. Exemplary or corrective damages are
imposed, by way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages. 51 Considering its purpose, it must be fair and reasonable in every
case and should not be awarded to unjustly enrich a prevailing party. 52 In our view, an award of
P50,000.00 as exemplary damages in the present case qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The decision of the
Court of Appeals is hereby AFFIRMED with MODIFICATION of the amount awarded as exemplary
damages. According, petitioner is hereby ordered to pay private respondent the sum of P99,000,000.00
as actual or compensatory damages; P50,000.00 as exemplary damage and the costs of suit.
G.R. No. 106953 August 19, 1993
CESAR SAN JOSE AND MARGARITA BATONGBAKAL, petitioners,
vs.
HON. COURT OF APPEALS, SPS. MARCOS DE GUZMAN AND GLORIA DE GUZMAN, respondents.
Petitioner-spouses filed a complaint to annul the extra-judicial foreclosure sale conducted by the
Provincial Sheriff of Bulacan of the property covered by T.C.T. No. T-159703 located in Duhat, Bocaue,
Bulacan.
The land was mortgaged by the petitioner-spouses to private respondent-spouses Marcos and Gloria de
Guzman on 14 April 1972 as security for the payment of a loan of P12,000.00. For allegedly failing to
comply with the conditions of the mortgage, the private respondent-spouses extra-judicially foreclosed
the mortgage and the land was sold at a sheriff's sale held on 25 November 1975 with respondent-
spouses as purchasers thereof. Consequently, TCT No. T-159703 was cancelled and TCT No. T-30,762(M)
was issued in the name of respondent-spouses.
That there was failure to pay the loan obtained from the respondent-spouses and that the latter had the
right to foreclose the mortgage either judicially or extrajudicially are not disputed. The only issue to be
resolved in this case is whether or not the extra-judicial foreclosure sale complied with the requirements
of Act No. 3135 as amended by Act No. 4118 which governs the extra-judicial foreclosure of real estate
mortgage.
Petitioner-spouses contend that the extra-judicial foreclosure sale was null and void for the following
reasons:
1) The Petitioner-spouses were not notified of the extra-judicial foreclosure;
2) The Sheriff's certificate of posting of notice was not presented;
3) There was no proof that the newspaper in which the notice of extra-judicial foreclosure sale was
made was one of general circulation; and
4) The property mentioned in the Notice of Sheriff's Sale and in the minutes of auction sale was
covered by TCT No. T-169705 not by TCT No. T-159703, the title to the mortgaged property subject of
the foreclosure sale.
The trial court upheld the validity of the foreclosure sale. *** On appeal, the Court of Appeals in its
aforecited decision dated 20 March 1992 likewise held that the foreclosure sale was valid. A Motion for
Reconsideration was denied on 26 August 1992. Hence this petition for review.
The provision of Act No. 3135 as amended by Act No. 4118 relevant to the issues in this case is Section 3
which states:
Sec. 3. Notice shall be given by posting notices of sale for not less that twenty (20) days in at least
three public places of the municipality or city where the property is situated, and if such property is
worth more than four hundred pesos, such notice shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality or city.
In Tambunting v. Court of Appeals,1 the Court stressed that the statutory provisions governing publication
of notice of mortgage foreclosure sales must be strictly complied with, and that even the slightest
deviations therefrom will invalidate the notice. In the case at bar, the Notice of Sheriff's sale referred to
the property covered by TCT No. T-169705. This was the notice actually published in "The New Record"
as shown by the Affidavit of Publication executed by the Business Manager of the aforementioned
publication. The trial court and the Court of Appeals upheld the validity of the Notice based on the theory
that although the property to be sold pursuant to the foreclosure of mortgage was indeed covered by TCT
No. T-159703 and not by TCT No. T-169705, the technical description, however, in the notice was the
actual and correct technical description of the property. Both the trial court and the Court of Appeals held
that the discrepancy in the title number was "purely a typographical error" which "did not render null and
void the public auction sale held by the Sheriff. The number of the transfer certificate as an identification
of real property is not controlling. What controls is the technical description." 2
We disagree and consequently we reverse the decision of the Court of Appeals.
In the Tambunting case, 3 this Court stated that the failure to advertise a mortgage foreclosure sale in
compliance with statutory requirements constitutes a jurisdictional defect invalidating the sale and that a
substantial error or omission in a notice of sale will render the notice insufficient and vitiate the sale.
The notice of Sheriff's Sale, in this case, did not state the correct number of the transfer certificate of title
of the property to be sold. This is a substantial and fatal error which resulted in invalidating
the entire Notice. That the correct technical description appeared on the Notice does not constitute
substantial compliance with the statutory requirements. The purpose of the publication of the Notice of
Sheriff's Sale is to inform all interested parties of the date, time and place of the foreclosure sale of the
real property subject thereof. Logically, this not only requires that the correct date, time and place of the
foreclosure sale appear in the notice but also that any and all interested parties be able to determine that
what is about to be sold at the foreclosure sale is the real property in which they have an interest.
The Court is not unaware of the fact that the majority of the population do not have the necessary
knowledge to be able to understand the technical descriptions in certificates of title. It is to be noted and
stressed that the Notice is not meant only for individuals with the training to understand technical
descriptions of property but also for the layman with an interest in the property to be sold, who normally
relies on the number of the certificate of title. To hold that the publication of the correct technical
description, with an incorrect title number, of the property to be sold constitutes substantial compliance
would certainly defeat the purpose of the Notice. This is not to say that a correct statement of the title
number but with an incorrect technical description in the notice of sale constitutes a valid notice of sale.
The Notice of Sheriff's Sale, to be valid, must contain the correct title number and the correct technical
description of the property to be sold.
We need not discuss the other grounds for nullifying the foreclosure sale having found that there was no
compliance with the statutory notice requirement.
WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and a new decision rendered:
1) Declaring the Extra-judicial Foreclosure Sale of the property of the petitioner-spouses null and void.
2) Ordering the appropriate Register of Deeds to reinstate Transfer Certificate of Title No. T-159703 in
the name of petitioner Margarita Batongbakal married to petitioner Cesar San Joso, giving it full force
and effect as though it had never been cancelled.
3) Ordering the cancellation of Transfer Certificate of Title No. T-30.762 (M) in the name of private
respondent spouses Marcos and Gloria de Guzman for being void ab initio.
With costs against the private respondents.
G.R. No. 107075 September 1, 1994
ARMANDO S. OLIZON and ILUMINADA C. OLIZON, petitioners,
vs.
COURT OF APPEALS and PRUDENTIAL BANK, respondents.
The factual alpha of the present dispute was sometime in 1967 when the spouses Armando and
Iluminada Olizon obtained a loan from respondent Prudential Bank in the amount of P25,000.00 and, as
security therefor, they executed in favor of respondent bank a real estate mortgage over a parcel of land
consisting of 1,000 square meters located at Barrio Calaanan, Kalookan City and registered in their
names under Transfer Certificate of Title No. 24604 of the Registry of Deeds of Kalookan City.
Unfortunately, that transaction spawned the succeeding events hereunder chronologically narrated,
eventuating in this appeal wherein we are now expected to pen the judicial omega.
It appears from the records that the Olizon spouses failed to pay their aforestated obligation upon its
maturity, so private respondent extrajudicially foreclosed the real estate mortgage. At a public auction
thereafter held on March 11, 1975, the subject property was sold to respondent bank as the highest
bidder, pursuant to which it was issued a certificate of sale as of the same date. On March 12, 1974, the
said certificate of sale was duly annotated at the back of petitioner's Transfer Certificate of Title No.
24604.
On June 5, 1978, again due to the failure of petitioner spouses to redeem the foreclosed property within
the period of redemption, title to the property was consolidated in favor of respondent bank. 1
On January 14, 1986, respondent bank filed with the Regional Trial Court of Kalookan City a petition to
reconstitute Transfer Certificate of Title No. 24604, which was lost in the Office of the Registry of Deeds
of Kalookan City, the said proceeding being docketed as Case No. C-2746. 2
On June 11, 1986, the Regional Trial Court of Kalookan City ordered the reconstitution prayed for. As a
consequence, Transfer of Certificate of Title No. 24604 in the name of the Olizon spouses was cancelled
and, in lieu thereof, Transfer Certificate of Title No. 149858 was issued on June 5, 1987 in the name of
respondent bank. 3
On November 27, 1989, respondent bank this time filed with the Regional Trial Court of Kalookan City, a
petition for the issuance of a writ of possession against petitioner spouses, docketed as LRC Case No. C-
3094, 4 and which petition was granted by the trial court on February 8, 1990. 5
On March 8, 1990, a petition, by way of opposition, was filed by petitioner spouses wherein they sought
the cancellation of the writ of possession, the nullification of the certificate of sale dated March 11, 1974,
and/or the nullification of the foreclosure proceedings. In support thereof, they alleged lack of notice of
the auction sale and lack of posting of the notice of sale as required by Section 3 of Act No. 3135, as
amended.6
After trial, the court a quo issued an order dated July 16, 1990, with the following dispositive portion:
WHEREFORE, the Court hereby declares that:
1. The foreclosure of the real estate mortgage executed by the spouses Olizons, as well as the
certificate of sale dated March 11, 1974 as (sic) null and void;
2. The writ of possession is hereby set aside; and
3. Ordering the Register of Deeds of Caloocan City to cancel Transfer Certificate of Title No. 149858
issued in the name of Prudential Bank and to reinstate Transfer Certificate of Title No. 24604 to (sic)
spouses Armando S. Olizon and Iluminada C. Olizon.
Private respondent appealed the said decision to the Court of Appeals which rendered its questioned
decision in CA—G.R. CV No. 29482, dated September 9, 1992, with a disposition of reversal, thus:
WHEREFORE, the Decision (sic) dated July 16, 1990 of the Regional Trial Court of Caloocan in LRC Case
No. 3094 is hereby REVERSED and SET ASIDE and another rendered upholding the validity of the
foreclosure sale of the real estate mortgage and the writ of possession dated February 8, 1990. 8
Petitioners have now come to us through the present petition wherein they contend that:
1. The Court of Appeals erred in reversing the trial court since there is evidence to show that the
requirements of Sec. 3, Act No. 3135, as amended, were not complied with.
2. The Court of Appeals erred in holding that petitioners had notice of the foreclosure sale.
3. The Court of Appeals erred in holding that petitioners had totally abandoned the subject property, as
this is not supported by the evidence. 9
We do not find substantial merit in the petition.
Herein petitioners are now seeking the annulment of the extrajudicial foreclosure sale conducted more
than 20 years ago, invoking therefor two grounds, namely, lack of personal notice to the mortgagors
about the foreclosure sale, and the failure of the mortgagee bank to comply with the posting requirement
under Section 3 of Act No. 3135, as amended.
It is now a well-settled rule that personal notice to the mortgagor in extrajudicial foreclosure proceedings
is not necessary. 10 Section 3 of Act No. 3135 governing extrajudicial foreclosure of real estate
mortgages, as amended by Act No. 4118, requires only the posting of the notice of sale in three public
places and the publication of that notice in a newspaper of general circulation. Hence, the lack of personal
notice to the mortgagors, herein petitioners, is not a ground to set aside the foreclosure sale.
Neither can the supposed failure of respondent bank to comply with the posting requirement as provided
under the aforesaid Section 3, under the factual ambiance and circumstances which obtained in this case,
be considered a sufficient ground for annulling the aforementioned sale. We are not unaware of the
rulings in some cases that, under normal situations, the statutory provisions governing publication of
notice of extrajudicial foreclosure sales must be strictly complied with and that failure to publish the
notice of auction sale as required by the statute constitutes a jurisdictional defect which invalidates the
sale. However, the unusual nature of the attendant facts and the peculiarity of the confluent
circumstances involved in this case require that we rule otherwise.
Petitioners' cited authority on the requisite publication of notices is not so all-embracing as to deny
justified exceptions thereto under appropriate situations. Petitioners quote this passage from Tambunting
et al. vs. Court of Appeals, et al. 11 which is not conclusive hereon for not being exactly in point, based as
it is on different facts, thus:
The rule is that statutory provisions governing publication of notice of mortgage foreclosure sales must
be strictly complied with, and that even slight deviations therefrom will invalidate the notice and render
the sale at least voidable. Interpreting Sec. 457 of the Code of Civil Procedure (reproduced in Sec.
18[c] of Rule 39, Rules of Court and in Sec. 3 of Act No. 3135) in   Campomanes vs. Bartolome and
German & Co.  (38 Phil. 8081), this Court held that if a sheriff sells without the notice prescribed by the
Code of Civil Procedure induced thereto by the judgment creditor, the sale is absolutely void and no
title passes. . . . (Emphasis supplied.)
At any rate, respondent Court of Appeals has this commendable ratiocination on the aforestated twin
errors assigned by petitioners:
The decisive issue which must be resolved is whether or not the statutory requirements of notice have
been complied with in this case. Section 12 of the mortgage contract reads:
"12. All correspondence relative to this mortgage, including demand letters, summonses, subpoenas
or notifications of any judicial or extrajudicial action shall be sent to the Mortgagor at No. 82 Naval
Street, Malabon, Rizal or at the address that may hereafter be given in writing by the Mortgagor to
the Mortgagee. The mere act of sending any correspondence by mail or by personal delivery to the
said address shall be valid and effective notice to the Mortgagor for all legal purposes, and . . . shall
not excuse or relieve the mortgagor from the effects of such notice." (Emphasis supplied.)
The foregoing stipulation is the law between petitioner and oppositors-spouses and should be complied
with faithfully.
That the mortgagors were actually notified by appellant bank of the foreclosure proceedings is shown
by its letters to the Olizons before the actual sale at public auction of the subject property, to wit: (1)
Letter dated January 16, 1973 of Atty. Octavio D. Fule, Legal Officer of appellant bank to the Olizons
informing the latter that their failure to pay their obligations will constrain appellant bank to institute
appropriate legal action against them; (2) Letter dated January 31, 1974 of Atty. Octavio D. Fule, Legal
Officer of appellant bank, informing the Olizons that Prudential Bank has filed foreclosure proceedings
under Act 3135, as amended.
Furthermore, notice of sale was duly published in accordance with law and furnished the Olizons. The
evidence presented during the trial of the case show that the then Clerk of Court, Emma Ona, sent a
printed letter dated February 18, 1974 informing the Olizons that appellant bank had filed an
application to foreclosure their real estate mortgage and the public auction of the mortgaged parcel of
land was sent on March 11, 1974, together with a copy of the Notice of Sale. The document is more
than ten (10) years old and the absence of a registry receipt in the case folder of the foreclosure
records of the Sheriff of the City of Caloocan, does not indicate that the Olizons did not receive a copy
of the aforesaid notice of sale, it being presumed that the sheriff performed her duties and that
foreclosure proceedings are regular. . .
Furthermore, unlike the situation in previous cases 13 where the foreclosure sales were annulled by reason
of failure to comply with the notice requirement under Section 3 of Act No. 3135, as amended, what is
allegedly lacking here is the posting of the notice in three public places, and not the publication thereof in
a newspaper of general circulation.
We take judicial notice of the fact that newspaper publications have more far-reaching effects than
posting on bulletin boards in public places. There is a greater probability that an announcement or notice
published in a newspaper of general circulation, which is distributed nationwide, shall have a readership
of more people than that posted in a public bulletin board, no matter how strategic its location may be,
which caters only to a limited few. Hence, the publication of the notice of sale in the newspaper of general
circulation alone is more than sufficient compliance with the notice-posting requirement of the law. By
such publication, a reasonably wide publicity had been effected such that those interested might attend
the public sale, and the purpose of the law had been thereby subserved.
The object of a notice of sale is to inform the public of the nature and condition of the property to be sold,
and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to
prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not
affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are
calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from
bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the
sale made pursuant thereto. 14
In the instant case, the aforesaid objective was attained since there was sufficient publicity of the sale
through the newspaper publication. There is completely no showing that the property was sold for a price
far below its value as to insinuate any bad faith, nor was there any showing or even an intimation of
collusion between the sheriff who conducted the sale and respondent bank. This being so, the alleged
non-compliance with the posting requirement, even if true, will not justify the setting aside of the sale.
Moreover, herein petitioners failed to discharge the burden of proving by convincing evidence their
allegation that there was actually no compliance with the posting requirement. The foreclosure
proceeding has in its favor the presumption of regularity, 15 and the burden of evidence to rebut the same
is on petitioners. Where the allegation is an essential part of the cause of action or defense in a civil case,
whether posited in an affirmative or negative form, the burden of evidence thereon lies with the
pleader. 16 Besides, the fact alone that there was no certificate of posting  attached to the sheriff's records
of the extrajudicial foreclosure sale is not sufficient to prove the lack of posting, especially in this case
where the questioned act and the record thereof are already 16 years old. It is quite unfair to now shift to
respondent bank the burden of proving the fact of posting considering the length of time that has
elapsed, aside from the fact that the sheriff who conducted the public sale and who was responsible for
the posting of the notice of sale is already out of the country, with the records being silent on his present
whereabouts or the possibility of his returning here.
Indeed, even on equitable considerations alone, the presumption of regularity in the performance of
official duty must stand. As aptly found by the Court of Appeals:
. . . It is not a matter of lack of compliance with the requirements of the law, rather, it is a matter of
unavailability of certain documents due to the loss thereof, considering that more than sixteen (16)
 years had lapsed from the date of the extra-judicial foreclosure of the real estate mortgage. Indeed,
the presumption of regularity in the performance of official duty by the sheriff, more particularly,
compliance with the provisions of Act 3135, as amended, has not been overturned by the Olizons. 17
Nor are these all that we wish to expound hereon, for this is one case where we find the necessity for the
application of the equitable principle of estoppel by laches in order to avoid an injustice.
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to
do that which by exercising due diligence could nor should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it. 18
In the case at bar, petitioners are already considered estopped through laches from questioning the
regularity of the sale as well as the ownership of the land in question. It is evident from the records that
the petition to annul the foreclosure sale was filed by herein petitioners only after 16 long years from the
date of sale and only after a transfer certificate of title over the subject property had long been issued to
respondent bank. Herein petitioners failed to advance any justification for their prolonged inaction. It
would be inequitable to allow petitioners, after the lapse of an almost interminable period of time, to
defeat an otherwise indefeasible title by the simple and dubious expedient of invoking a purported
irregularity in the foreclosure proceedings.
Although a sale under a power contained in a mortgage or trust deed has been defectively executed and
the mortgagor has the right to disaffirm the same, he may, by laches or by acts amounting to an estoppel
or ratification, cure the defect and render the sale valid. 19 Where a sale under a power is voidable at the
election of the mortgagor for some irregularity — such as that the mortgagee purchased without
authority, or that there was an inadequacy in the price obtained, a want of sufficient or proper notice, or
the like — the mortgagor must institute proceedings for avoidance within apt and reasonable time, or his
laches will bar him of relief. 20 Thus, a party seeking to set aside a foreclosure sale made under a power
of sale must bring his action without unreasonable delay. The court generally will refuse to grant relief
when there has been great and unreasonable delay, amounting to laches, in seeking its aid. 21
Besides, it has been said that in seeking to set aside a foreclosure sale, the moving party must act
promptly after he becomes aware of the facts on which he bases his complaint, and in this connection,
notice of an irregularity may be presumed from the fact that the mortgagor has knowledge of the sale, as
he is thereby put on inquiry, and is bound to use diligence in discovering any defects in the
proceedings. 22 Having failed to do so, petitioners cannot now be heard on their much belated plaints.
Moreover, it is an entrenched doctrine in our jurisdiction that registration in a public registry is notice to
the whole world. The record is a constructive notice of its contents as well as of all interest, legal and
equitable, included therein. All persons are charged with knowledge of what it contains.  23 Therefore, in
the case at bar, the annotation of the certificate of sale on petitioners' Transfer Certificate of Title No.
24604 and the filing of the affidavit of consolidation with the Register of Deeds constituted constructive
notice of both acts to herein petitioners. Consequently, as early as March 11, 1974 24 when the certificate
of sale was annotated at the back of their title, petitioners were already charged with knowledge of the
foreclosure sale, yet they still failed or refused to take the necessary steps to protect their rights over the
subject property.
It also bears stressing that petitioners entered their appearance in the Regional Trial Court of Kalookan
City where the petition for reconstitution of Transfer Certificate of Title No. 24604 was filed by respondent
bank, as shown by said court's order dated June 11, 1986. 25 It was then incumbent on petitioners to
have filed an objection or opposition to the reconstitution if they sincerely believed that the property
rightfully belongs to them. Significantly, petitioners neither moved for the reconsideration of nor appealed
from the order of the lower court granting reconstitution of title in the name of respondent bank.
Finally, the negligence or omission to assert a right within a reasonable time warrants not only a
presumption that the party entitled to assert it either had abandoned it or declined to assert it, but also
casts doubt on the validity of the claim of ownership. Such neglect to assert a right taken in conjunction
with the lapse of time, more or less great, and other circumstances causing prejudice to the adverse
party, operates as a bar in a court of equity. 26 In the present case, at no time after the debt became due
and demandable and the mortgage property had been foreclosed, or even thereafter, did petitioners offer
to pay their mortgage obligation to redeem their property. Petitioners' collective acts are, therefore,
indicative of their acquiescence to and acknowledgment of the validity of the foreclosure proceedings and
the sale, as well as a recognition of respondent bank's just and legal title over the property acquired
thereby.
We, therefore, cannot but concur in these observations of respondent Court:
The evidence on record, likewise show that after the foreclosure proceedings in 1974, the Olizons had
totally abandoned actual ownership over the subject property in favor of appellant bank, leaving it to
appellant bank to pay the real estate taxes over the subject property. In fact, in the reconstitution of
the owner's title in Case No. C-2746, while the Olizons entered their appearance before the Regional
Trial Court of Caloocan, they did not oppose the petition of appellant bank, despite the fact that the
certificate of sale and final deed of sale as well as consolidation of the ownership were submitted as
evidence by appellant bank in the reconstitution process. It was only after they noticed the lack of
certain documents in the possession of the sheriff that they thought of raising technicalities. . . . 27
WHEREFORE, the instant petition is DENIED for lack of merit and the assailed judgment of respondent
Court of Appeals is hereby AFFIRMED in toto.
G.R. No. 170215               August 28, 2007
SPS. ESMERALDO and ELIZABETH SUICO, Petitioners,
vs.
PHILIPPINE NATIONAL BANK and HON. COURT OF APPEALS, Respondents.
Herein petitioners, Spouses Esmeraldo and Elizabeth Suico, obtained a loan from the Philippine National
Bank (PNB) secured by a real estate mortgage1 on real properties in the name of the former. The
petitioners were unable to pay their obligation prompting the PNB to extrajudicially foreclose the
mortgage over the subject properties before the City Sheriff of Mandaue City under EJF Case No. 92-5-
15.
The petitioners thereafter filed a Complaint against the PNB before the Regional Trial Court (RTC) of
Mandaue City, Branch 55, docketed as Civil Case No. MAN-2793 for Declaration of Nullity of Extrajudicial
Foreclosure of Mortgage.2
The Complaint alleged that on 6 May 1992, PNB filed with the Office of the Mandaue City Sheriff a petition
for the extrajudicial foreclosure of mortgage constituted on the petitioners’ properties (subject properties)
for an outstanding loan obligation amounting to ₱1,991,770.38 as of 10 March 1992. The foreclosure case
before the Office of the Mandaue City Sheriff, which was docketed as EJF Case No. 92-5-15, covered the
following properties:
 TCT NO. 13196
"A parcel of land (Lot 701, plan 11-5121 Amd-2) situated at Mandaue City, bounded on the NE., and SE., by lot no. 700;
on the SW. by lots nos. 688 and 702; on the NW. by lot no. 714, containing an area of 2,078 sq. m. more or less."
TAX DECL. NO. 00553
"A parcel of land situated at Tabok, Mandaue City, Cad. Lot No. 700-C-1; bounded on the North by Lot No. 701 & 700-B;
on the South by Lot No. 700-C-3; on the East by lot no. 700-C-3 and on the West by Lot no. 688, containing an area of
200 square meters, more or less."
TAX DECL. NO. 00721
"Two (2) parcels of land situated at Tabok, Mandaue City, Cad. lot nos. 700-C-3 and 700-C-2; bounded on the North by
Lot Nos. 700-C-1 and 700-B; on the South by Lot No. 700-D; on the East by Lot Nos. 695 and 694; and on the West by
Lot Nos. 688 and 700-C-1, containing an aggregate area of 1,683 sq. m. more or less."
TAX DECL. NO. 0237
"A parcel of land situated at Tabok, Mandaue City, Cad. Lot no. 700-B. Bounded on the NE. by (Lot 699) 109, (Lot No.
69) 110, on the SE (Lot 700-C) 115, on the NW. (Lot 700-A) 112 and on the SW. (Lot 701) 113; containing an area of .
1785 HA more or less."
TAX DECL. NO. 9267
"A parcel of land situated at Tabok, Mandaue City, Cad. Lot no. 700-A. Bounded on the NE. by (Lot 699) 109, on the
South West by (Lot 701) 113, on the SE. by (Lot 700-B) 111, and on the NW. by (lot 714) 040039; containing an area of
.1785 HA more or less."3
Petitioners claimed that during the foreclosure sale of the subject properties held on 30 October 1992,
PNB, as the lone bidder, offered a bid in the amount of ₱8,511,000.00. By virtue of the said bid, a
Certificate of Sale of the subject properties was issued by the Mandaue City Sheriff in favor of PNB. PNB
did not pay to the Sheriff who conducted the auction sale the amount of its bid which was ₱8,511,000.00
or give an accounting of how said amount was applied against petitioners’ outstanding loan, which, as of
10 March 1992, amounted only to ₱1,991,770.38. Since the amount of the bid grossly exceeded the
amount of petitioners’ outstanding obligation as stated in the extrajudicial foreclosure of mortgage, it was
the legal duty of the winning bidder, PNB, to deliver to the Mandaue City Sheriff the bid price or what was
left thereof after deducting the amount of petitioners’ outstanding obligation. PNB failed to deliver the
amount of their bid to the Mandaue City Sheriff or, at the very least, the amount of such bid in excess of
petitioners’ outstanding obligation.
One year after the issuance of the Certificate of Sale, PNB secured a Certificate of Final Sale from the
Mandaue City Sheriff and, as a result, PNB transferred registration of all the subject properties to its
name.
Owing to the failure of PNB as the winning bidder to deliver to the petitioners the amount of its bid or
even just the amount in excess of petitioners’ obligation, the latter averred that the extrajudicial
foreclosure conducted over the subject properties by the Mandaue City Sheriff, as well as the Certificate
of Sale and the Certificate of Finality of Sale of the subject properties issued by the Mandaue City Sheriff,
in favor of PNB, were all null and void.
Petitioners, in their Complaint in Civil Case No. MAN-2793, prayed for:
a) Declaring the Nullity of Extra-judicial Foreclosure of Mortgage under EJF Case No. 92-5-15 including
the certificate of sale and the final deed of sale of the properties affected;
b) Order[ing] the cancellation of the certificates of titles and tax declaration already in the name of
[herein respondent] PNB and revert the same back to herein [petitioners’] name;
c) Ordering the [PNB] to pay [petitioners] moral damages amounting to more than ₱1,000,000,00;
Exemplary damages of ₱500,000.00; Litigation expenses of ₱100,000.00 and attorney’s fees of
₱300,000.00.4
PNB filed a Motion to Dismiss 5 Civil Case No. MAN-2793 citing the pendency of another action between
the same parties, specifically Civil Case No. CEB-15236 before the RTC of Cebu City entitled, PNB v. Sps.
Esmeraldo and Elizabeth Suico where PNB was seeking the payment of the balance of petitioners’
obligation not covered by the proceeds of the auction sale held on 30 October 1992. PNB argued that
these two cases involve the same parties. Petitioners opposed the Motion to Dismiss filed by
PNB.6 Subsequently, the Motion to Dismiss Civil Case No. MAN-2793 was denied in the Order of the RTC
dated 15 July 1997;7 thus, PNB was constrained to file its Answer.8
PNB disputed petitioners’ factual narration. PNB asserted that petitioners had other loans which had
likewise become due. Petitioners’ outstanding obligation of ₱1,991,770.38 as of 10 March 1992 was
exclusive of attorney’s fees, and other export related obligations which it did not consider due and
demandable as of said date. PNB maintained that the outstanding obligation of the petitioners under their
regular and export- related loans was already more than the bid price of ₱8,511,000.00, contradicting the
claim of surplus proceeds due the petitioners. Petitioners were well aware that their total principal
outstanding obligation on the date of the auction sale was ₱5,503,293.21.
PNB admitted the non-delivery of the bid price to the sheriff and the execution of the final deed of sale,
but claimed that it had not transferred in its name all the foreclosed properties because the petition to
register in its name Transfer Certificates of Title (TCT) No. 37029 and No. 13196 were still pending.
On 2 February 1999, the RTC rendered its Decision 9 in Civil Case No. MAN-2793 for the declaration of
nullity of the extrajudicial foreclosure of mortgage, the dispositive portion of which states:
WHEREFORE, based on the foregoing, judgment is rendered in favor of [herein petitioners] Sps.
Esmeraldo & Elizabeth Suico and against [herein respondent], Philippine National Bank (PNB), declaring
the nullity of Extrajudicial Foreclosure of Mortgage under EJF Case No. 92-5-15, including the certificate
of sale and the final deed of sale of the subject properties; ordering the cancellation of the certificates
of titles and tax declaration already in the name of [respondent] PNB, if any, and revert the same back
to the [petitioners’] name; ordering [respondent] PNB to cause a new foreclosure proceeding, either
judicially or extra-judicially.
Furnish parties thru counsels copy of this order. 10
In granting the nullification of the extrajudicial foreclosure of mortgage, the RTC reasoned that given that
petitioners had other loan obligations which had not yet matured on 10 March 1992 but became due by
the date of the auction sale on 30 October 1992, it does not justify the shortcut taken by PNB and will not
excuse it from paying to the Sheriff who conducted the auction sale the excess bid in the foreclosure sale.
To allow PNB to do so would constitute fraud, for not only is the filing fee in the said foreclosure
inadequate but, worse, the same constitutes a misrepresentation regarding the amount of the
indebtedness to be paid in the foreclosure sale as posted and published in the notice of sale. 11 Such
misrepresentation is fatal because in an extrajudicial foreclosure of mortgage, notice of sale is
jurisdictional. Any error in the notice of sale is fatal and invalidates the notice. 12
When the PNB appealed its case to the Court of Appeals, 13 the appellate court rendered a Decision 14 dated
12 April 2005, the fallo of which provides:
WHEREFORE, premises considered, the instant appeal is GRANTED. The questioned decision of the
Regional Trial Court of Mandaue City, Branch 55 dated February 2, 1999 is hereby REVERSED and SET
ASIDE. Accordingly, the extra judicial foreclosure of mortgage under EJF 92-5-15 including the
certificate of sale and final deed of sale executed appurtenant thereto are hereby declared to be valid
and binding.15
In justifying reversal, the Court of Appeals held:
 A careful scrutiny of the evidence extant on record would show that in a letter dated January 12, 1994,
[petitioners] expressly admitted that their outstanding principal obligation amounted to ₱5.4 Million and
in fact offered to redeem the properties at ₱6.5 Million. They eventually increased their offer at ₱7.5
Million as evidenced by that letter dated February 4, 1994. And finally on May 16, 1994, they offered to
redeem the foreclosed properties by paying the whole amount of the obligation by installment in a
period of six years. All those offers made by the [petitioners] not only contradicted their very assertion
that their obligation is merely that amount appearing on the petition for foreclosure but are also
indicative of the fact that they have admitted the validity of the extra judicial foreclosure proceedings
and in effect have cured the impugned defect. Thus, for the [petitioners] to insist that their obligation is
only over a million is unworthy of belief. Oddly enough, it is evident from their acts that they
themselves likewise believe otherwise.
Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these
objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if
mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to
depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or
omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. 21
All these considered, we are of the view that the Notice of Sale in this case is valid. Petitioners failed to
convince this Court that the difference between the amount stated in the Notice of Sale and the amount
of PNB’s bid resulted in discouraging or misleading bidders, depreciated the value of the property or
prevented it from commanding a fair price.

The cases cited by the RTC in its Decision do not apply herein. San Jose v. Court of Appeals 22 refers to a
Even assuming that indeed there was a surplus and the [PNB] is retaining more than the proceeds of the
Notice of Sheriff’s Sale which did not state the correct number of the transfer certificates of title of the
sale than it is entitled, this fact alone will not affect the validity of the sale but simply gives the
property to be sold. This Court considered the oversight as a substantial and fatal error which resulted in
[petitioners] a cause of action to recover such surplus. In fine, the failure of the [PNB] to remit the
invalidating the entire notice. The case of Community Savings and Loan Association, Inc. v. Court of
surplus, if any, is not tantamount to a non-compliance of statutory requisites that could constitute a
Appeals23 is also inapplicable, because the said case refers to an extrajudicial foreclosure tainted with
jurisdictional defect invalidating the sale. This situation only gives rise to a cause of action on the part of
fraud committed by therein petitioners, which denied therein respondents the right to redeem the
the [petitioners] to recover the alleged surplus from the [PNB]. This ruling is in harmony with the
property. It actually has no reference to a Notice of Sale.
decisional rule that in suing for the return of the surplus proceeds, the mortgagor is deemed to have
affirmed the validity of the sale since nothing is due if no valid sale has been made. 16
We now proceed to the effect of the non-delivery by PNB of the bid price or the surplus to the petitioners.

Petitioners filed a Motion for Reconsideration  of the foregoing Decision, but the Court of Appeals was not
17

persuaded. It maintained the validity of the foreclosure sale and, in its Amended Decision dated 28
September 2005, it merely directed PNB to pay the deficiency in the filing fees, holding thus:
WHEREFORE, Our decision dated April 12, 2005 is hereby AMENDED. [Herein respondent PNB] is
hereby required to pay the deficiency in the filing fees due on the petition for extra judicial foreclosure
sale to be based on the actual amount of mortgage debts at the time of filing thereof. In all other
respects, Our decision subject of herein petitioners’] motion for reconsideration is hereby AFFIRMED. 18
Unflinching, petitioners elevated the case before this Court via the present Petition for Review essentially
seeking the nullification of the extrajudicial foreclosure of the mortgage constituted on the subject
properties. Petitioners forward two reasons for declaring null and void the said extrajudicial foreclosure:
(1) the alleged defect or misrepresentation in the notice of sheriff’s sale; and/or (2) failure of PNB to pay
and tender the price of its bid or the surplus thereof to the sheriff.
Petitioners argue that since the Notice of Sheriff’s Sale stated that their obligation was only
₱1,991,770.38 and PNB bidded ₱8,511,000.00, the said Notice as well as the consequent sale of the
subject properties were null and void.
It is true that statutory provisions governing publication of notice of mortgage foreclosure sales must be
strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the
sale at least voidable.19 Nonetheless, we must not also lose sight of the fact that the purpose of the
publication of the Notice of Sheriff’s Sale is to inform all interested parties of the date, time and place of
the foreclosure sale of the real property subject thereof. Logically, this not only requires that the correct
date, time and place of the foreclosure sale appear in the notice, but also that any and all interested
parties be able to determine that what is about to be sold at the foreclosure sale is the real property in
which they have an interest.20
The following antecedents are not disputed:
For failure to pay their loan obligation secured by a real estate mortgage on the subject properties, PNB
foreclosed the said mortgage. In its petition for foreclosure sale under ACT No. 3135 filed before the
Mandaue City Sheriff, PNB stated therein that petitioners’ total outstanding obligation amounted to
₱1,991,770.38.24 PNB bidded the amount of ₱8,511,000.00. Admittedly, PNB did not pay its bid in cash
or deliver the excess either to the City Sheriff who conducted the bid or to the petitioners after
deducting the difference between the amount of its bid and the amount of petitioners’ obligation in the
Notice of Sale. The petitioners then sought to declare the nullity of the foreclosure, alleging that their
loan obligation amounted only to ₱1,991,770.38 in the Notice of Sale, and that PNB did not pay its bid
in cash or deliver to petitioner the surplus, which is required under the law. 25
On the other hand, PNB claims that petitioners’ loan obligation reflected in the Notice of Sale dated 10
March 1992 did not include their other obligations, which became due at the date of the auction sale on
10 October 1992; as well as interests, penalties, other charges, and attorney’s fees due on the said
obligation.26
Pertinent provisions under Rule 39 of the Rules of Court on extrajudicial foreclosure sale provide:
SEC. 21. Judgment obligee as purchaser. – When the purchaser is the judgment obligee, and no third-
party claim has been filed, he need not pay the amount of the bid if it does not exceed the amount of
his judgment. If it does, he shall pay only the excess. (Emphasis supplied.)
SEC. 39. Obligor may pay execution against obligee. – After a writ of execution against property has
been issued, a person indebted to the judgment obligor may pay to the sheriff holding the writ of
execution the amount of his debt or so much thereof as may be necessary to satisfy the judgment, in
the manner prescribed in section 9 of this Rule, and the sheriff’s receipt shall be a sufficient discharge
for the amount so paid or directed to be credited by the judgment obligee on the execution.

Conspicously emphasized under Section 21 of Rule 39 is that if the amount of the loan is equal to the
Considering the purpose behind the Notice of Sheriff’s Sale, we disagree with the finding of the RTC that
amount of the bid, there is no need to pay the amount in cash. Same provision mandates that in the
the discrepancy between the amount of petitioners’ obligation as reflected in the Notice of Sale and the
absence of a third-party claim, the purchaser in an execution sale need not pay his bid if it does not
amount actually due and collected from the petitioners at the time of the auction sale constitute fraud
exceed the amount of the judgment; otherwise, he shall pay only the excess. 271avvphi1
which renders the extrajudicial foreclosure sale null and void.
The raison de etre is that it would obviously be senseless for the Sheriff or the Notary Public conducting
the foreclosure sale to go through the idle ceremony of receiving the money and paying it back to the
creditor, under the truism that the lawmaking body did not contemplate such a pointless application of
the law in requiring that the creditor must bid under the same conditions as any other bidder. It bears
stressing that the rule holds true only where the amount of the bid represents the total amount of the
mortgage debt.28
The question that needs to be addressed in this case is: considering the amount of PNB’s bid of
₱8,511,000.00 as against the amount of the petitioners’ obligation of ₱1,991,770.38 in the Notice of Sale,
is the PNB obliged to deliver the excess?
Petitioners insist that the PNB should deliver the excess. On the other hand PNB counters that on the date
of the auction sale on 30 October 1992, petitioners’ other loan obligation already exceeded the amount of
₱1,991,770.38 in the Notice of Sale.
Rule 68, Section 4 of the Rules of Court provides:
SEC. 4. Disposition of proceeds of sale.- The amount realized from the foreclosure sale of the
mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the
mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due, the
same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court,
or if there be no such encumbrancers or there be a balance or residue after payment to them, then to
the mortgagor or his duly authorized agent, or to the person entitled to it.
Under the above rule, the disposition of the proceeds of the sale in foreclosure shall be as follows:
(a) first, pay the costs
(b) secondly, pay off the mortgage debt
(c) thirdly, pay the junior encumbrancers, if any in the order of priority
(d) fourthly, give the balance to the mortgagor, his agent or the person entitled to it. 29
Based on the foregoing, after payment of the costs of suit and satisfaction of the claim of the first
mortgagee/senior mortgagee, the claim of the second mortgagee/junior mortgagee may be satisfied from
the surplus proceeds. The application of the proceeds from the sale of the mortgaged property to the
mortgagor’s obligation is an act of payment, not payment by dacion; hence, it is the mortgagee’s duty to
return any surplus in the selling price to the mortgagor. Perforce, a mortgagee who exercises the power
of sale contained in a mortgage is considered a custodian of the fund and, being bound to apply it
properly, is liable to the persons entitled thereto if he fails to do so. And even though the mortgagee is
not strictly considered a trustee in a purely equitable sense, but as far as concerns the unconsumed
balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity of redemption. 30
Thus it has been held that if the mortgagee is retaining more of the proceeds of the sale than he is
entitled to, this fact alone will not affect the validity of the sale but simply give the mortgagor a cause of
action to recover such surplus. 31
In the case before us, PNB claims that petitioners’ loan obligations on the date of the auction sale were
already more than the amount of ₱1,991,770.38 in the Notice of Sale. In fact, PNB claims that on the
date of the auction sale, petitioners’ principal obligation, plus penalties, interests, attorneys fees and
other charges were already beyond the amount of its bid of ₱8,511,000.00.
After a careful review of the evidence on record, we find that the same is insufficient to support PNB’s
claim. Instead, what is available on record is petitioner’s Statement of Account as prepared by PNB and
attached as Annex A32 to its Answer with counterclaim. 33 In this Statement of Account, petitioners’
principal obligation with interest/penalty and attorney’s fees as of 30 October 1992 already amounted to
₱6,409,814.92.
Although petitioners denied the amounts reflected in the Statement of Account from PNB, they did not
interpose any defense to refute the computations therein. Petitioners’ mere denials, far from being
compelling, had nothing to offer by way of evidence. This then enfeebles the foundation of petitioners’
protestation and will not suffice to overcome the computation of their loan obligations as presented in the
Statement of Account submitted by PNB.34
Noticeably, this Statement of Account is the only piece of evidence available before us from which we can
determine the outstanding obligations of petitioners to PNB as of the date of the auction sale on 10
October 1992.
It did not escape the attention of this Court that petitioners wrote a number of letters to PNB almost two
years after the auction sale,35 in which they offered to redeem the property. In their last letter, petitioners
offered to redeem their foreclosed properties for ₱9,500,000.00. However, these letters by themselves
cannot be used as bases to support PNB’s claim that petitioners’ obligation is more than its bid of
₱8,500,000.00, without any other evidence. There was no computation presented to show how
petitioners’ obligation already reached ₱9,500,000.00. Petitioners could very well have offered such an
amount on the basis of the value of the foreclosed properties rather than their total obligation to PNB. We
cannot take petitioners’ offer to redeem their properties in the amount of ₱9,500,000.00 on its face as an
admission of the amount of their obligation to PNB without any supporting evidence.
Given that the Statement of Account from PNB, being the only existing documentary evidence to support
its claim, shows that petitioners’ loan obligations to PNB as of 30 October 1992 amounted to
₱6,409,814.92, and considering that the amount of PNB’s bid is ₱8,511,000.00, there is clearly an excess
in the bid price which PNB must return, together with the interest computed in accordance with the
guidelines laid down by the court in Eastern Shipping Lines v. Court of Appeals, 36 regarding the manner of
computing legal interest, viz:
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
In Philippine National Bank v. Court of Appeals,37 it was held that:
The rate of 12% interest referred to in Cir. 416 applies only to:
Loan or forbearance of money, or to cases where money is transferred from one person to another
and the obligation to return the same or a portion thereof is adjudged. Any other monetary judgment
which does not involve or which has nothing to do with loans or forbearance of any, money, goods or
credit does not fall within its coverage for such imposition is not within the ambit of the authority
granted to the Central Bank. When an obligation not constituting a loan or forbearance of money is
breached then an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum in accordance with Art. 2209 of the Civil Code. Indeed, the
monetary judgment in favor of private respondent does not involve a loan or forbearance of money,
hence the proper imposable rate of interest is six (6%) per cent.
Using the above rule as yardstick, since the responsibility of PNB arises not from a loan or forbearance of
money which bears an interest rate of 12%, the proper rate of interest for the amount which PNB must
return to the petitioners is only 6%. This interest according to Eastern Shipping shall be computed from
the time of the filing of the complaint. However, once the judgment becomes final and executory, the
"interim period from the finality of judgment awarding a monetary claim and until payment thereof, is
deemed to be equivalent to a forbearance of credit." Thus, in accordance with the pronouncement in
Eastern Shipping, the rate of 12% per annum should be imposed, to be computed from the time the
judgment becomes final and executory until fully satisfied.
It must be emphasized, however, that our holding in this case does not preclude PNB from proving and
recovering in a proper proceeding any deficiency in the amount of petitioners’ loan obligation that may
have accrued after the date of the auction sale.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 12 April 2005 is MODIFIED
in that the PNB is directed to return to the petitioners the amount of ₱2,101,185.08 with interest
computed at 6% per annum from the time of the filing of the complaint until its full payment before
finality of judgment. Thereafter, if the amount adjudged remains unpaid, the interest rate shall be 12%
per annum computed from the time the judgment became final and executory until fully satisfied. Costs
against private respondent.
G.R. No. 121739 June 14, 1999
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS, and SPOUSES EDILBERTO and ELENA NATIVIDAD, respondents.
Material facts culled from the records reveal that on December 29, 1975, [respondent spouses] were
granted by the [petitioner] bank a one-year Time Loan Commercial (TLC) of THIRTY-FOUR THOUSAND
PESOS (P34,000.00). To secure the payment of said loan, [respondent spouses] executed in favor of
[petitioner] PNB a real estate mortgage over nine (9) parcels of individually titled lands located in Sta.
Maria, Pangasinan with an aggregate area of THREE THOUSAND TWO HUNDRED NINETY-TWO (2,292)
square meters. These properties were declared for taxation purposes in the names of [respondent
spouses] (Exh. 4) with the Municipal Treasurer of Sta. Maria, Pangasinan. As a pre-requisite for the
approval of [respondent spouses'] loan application, [petitioner] thru its duly authorized inspector
conducted an ocular inspection of the premises of the mortgaged properties to ascertain the marker value
thereof. The properties after due inspection and evaluation was appraised by [petitioner] PNB for loan
purposes in the total amount of FORTY-NINE THOUSAND PESOS (P49,000.00) thereby justifying the grant
of the loan applied for.
Due to dire financial constraints, [respondent spouses] after paying FIFTEEN THOUSAND PESOS
(P15,000.00) (Exhs. "5" and "5-A") failed to pay the balance despite repeated demands by [petitioner
PNB] (Exhs. "E," "F," "G," "M," "N," and "O"). Thereafter, [petitioner] bank as a recourse foreclosed the
mortgaged properties extrajudicially, after compliance with the required publications of notices (Exhs. "K"
and "K-1").
On November 26, 1982, the public auction sale of the said properties were conducted in Pangasinan,
where the properties are located, by the provincial sheriff. [Petitioner] bank as the highest bidder for
SEVEN THOUSAND PESOS (P7,000.00), (Exh. "L") was thus awarded the herein properties. This amount,
however, was short of SIXTY-FOUR THOUSAND SIX HUNDRED TWENTY-FOUR and 31/100 (P64,624.31)
representing the balance on the principal obligation, accrued interest, penalties, attorney's fees, and
expenses of litigations (Exhs. "D" and "D-2"). For failure to redeem the properties within the statutory
period allowed by law, [petitioner] filed the instant deficiency claim.
[Respondent spouses] on the other hand interposed as justification of their inability to redeem the
properties their continuing financial hardships. More than this, they professed that they should not be
made to pay the deficit among other grounds as the aforesaid public auctication sale was with fraud and
similar irregularities.2
On the basis of these facts, the trail court rendered its decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the deficiency claim is hereby DENIED and the total obligation of
the defendants is hereby considered fully paid. This action is DISMISSED which costs against the
plaintiff.
The RTC justified its decision, thus:
. . . The peculiar circumstances of this case is such that [petitioner] is estopped from recovering alleged deficiency
judgment from the [respondents]. It must be noted from the records that prior to the approval of the [respondents']
loan application and as a pre-requisite therefor, [petitioner] thru its duly authorized inspector, conducted an inspection
and evaluation of the properties offered as security for the purpose of determining its fair market value and came out
with a report dated December 10, 1975 (Exh. 1) with an appraisal thereof of FORTY-NINE THOUSAND PESOS
(P49,000.00). Asked on the general practice of all banks, on cross-examination, Elizabeth Gonzales, [petitioner's]
employee testified that banks get sixty or seventy per cent (60% or 70%) of market value of the properties (TSN, May
29, 1986, Exh. "P") as the loan value thereof; hence, the amount of THIRTY-FOUR THOUSAND PESOS (P34,000.00) was
assigned and approved by [petitioner] unilaterally [as] its loanable worth. Apparently, with the high expectancy that [it]
may be the lone bidder of the properties in the public auction sale in the event of foreclosure proceedings, [petitioner]
re-appraised the same by assigning thereto the value of TWO THOUSAND PESOS (P2,000.00) as basis for fixing the bid
price thereof, thus the herein properties were reclassified as plain agricultural lands without giving due regard to the
certification of the Municipal Treasurer of Sta. Maria, Pangasinan that the subject lots were assessed as residential
concerns on the basis of the subdivision plan of the premises duly approved by the Land Registration Commission (now
Land Registration Authority).
Hence, it can thus be deduced from the foregoing that the downward valuation of the mortgaged property is
questionable and unjust, if not dubiously schemed. The act of the [petitioner] in re-classifying the land for the purpose of
deriving therefrom a lower valuation and establishing the basis for a deficiency claim to the detriment of the
[respondents] can not be countenanced. Real estate properties almost always appreciate in value considering the high
rate of inflation. It is thus quite improbable that after six (6) years, the assessed value of the nine (9) parcels of land
could have depreciated drastically from FORTY-NINE THOUSAND PESOS (P49,000.00) to TWO THOUSAND PESOS
(P2,000.00) according to [petitioner's] self-serving re-appraisal. We cannot gainsay the fact that had there been no
reclassification nor re-assessment of the mortgaged properties, there could have been no deficiency liability to speak of.
Were it not for the residential assessments of the properties, [petitioner] would not have granted the loan transaction of
the properties, likewise, [respondents] would not have pushed through with their loan application. The [petitioner] in the
instant case, through its act and declarations, intentionally led the [respondents] to believe that the valuation it assigned
to the properties as security is its real market value, and the [respondents] relying upon such legitimate belief, acted in
good faith with strong reliance on [petitioner's] aforesaid policy on real estate loan.
 It is very evident, therefore, as in this case, that the principle of estoppel applies to the [petitioner]. Consequently, the
[respondents] should not be made to suffer for [petitioner's] own doing by downgrading the price of the properties which
resulted to an undue advantage over the [respondents] at the auction sale. Necessarily, in the spirit of fair play and
observance of equity, [petitioner] bank must bear the loss it sustained as a consequence of its failure to justify its act
which is diametrically opposed to sound business dealings. [Respondents] who are innocent of the scheme adopted by
the [petitioner] bank in reducing the value of the properties resulting to its unwarranted gains shall not be permitted to
suffer from unmeritorious claim.4
On appeal, the Court of Appeals affirmed, stating:
It is, therefore, very evident to this Court the dubious scheme perpetrated by [petitioner] bank on [respondent spouses]
was not only to keep the latter's P15,000.00 initial payments, but also to grab ownership of mortgaged properties
through self-serving appraisal prejudicial to the rights of [respondent spouses], and much more still to hold [respondent
spouses] liable for the deficiency amount of the extrajudicial foreclosure of mortgage. Such practice cannot be
countenanced by the Court.5
Hence, this petition. Petitioner contends that —
I. The ca erred in holding that pnb cannot recover its deficiency claim against spouses edilberto and elena natividad
arising from extrajudicial foreclosure despite clear jurisprudence allowing the same.
II. The ca erred in holding that peculiar circumstances exist in the instant case rendering petitioner bank estopped from
recovering its deficiency claim.
III. The ca erred in not holding, assuming arguendo that the mortgaged property was sold at an amount less than its fair
or actual market value, that there was no disadvantage going for the mortgagors. On the contrary, the natividads stand
to gain with a reduced price because they possess the right of redemption.6
To begin with, it is settled that if the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of the mortgage, the mortgagee is entitled to claim the deficiency from the
debtor. For when the legislature intends to deny the right of a creditor to sue for any deficiency resulting
from foreclosure of security given to guarantee an obligation it expressly provides as in the case of
pledges [Civil Code, Art. 2115] and in chattel mortgages of a thing sold on installment basis [Civil Code,
Art. 1484(3)]. Act No. 3135, which governs the extrajudicial foreclosure of mortgages, while silent as to
the mortgagee's right to recover, does not, on the other hand, prohibit recovery of deficiency.
Accordingly, it has been held that a deficiency claim arising from the extrajudicial foreclosure is allowed.7
The question in this case is whether, as held by both the trial and appellate courts, petitioner is estopped
from pursuing its deficiency claim arising from the extrajudicial foreclosure against respondent spouses'
properties.
The essential elements of estoppel are: (1) conduct amounting to false representation or concealment of
material facts or at least calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least
expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (3)
knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, the
essential elements are: (1) lack of knowledge and of the means of knowledge of the truth as to the
question; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; (3)
action or inaction based thereon of such character as to change the position or status of the party
claiming the estoppel, to his injury, detriment, or prejudice.8
Both the trial court and the Court of Appeals held petitioner to be estopped from pursuing its deficiency
claim on the ground that the deficiency arose from petitioner bank's reappraisal of the properties in
question for purposes of fixing the bid price thereof. From its initial appraisal of P49,000.00 nearly seven
years earlier, petitioner substantially downgraded its appraisal of the value of the properties prior to
foreclosure and purchased the properties at auction for only P7,000.00 as the sole bidder (Exh. L).9 Both
courts held that petitioner had lowered its appraisal of the properties for the purpose of acquiring the
properties and still collecting from respondent spouses a deficiency claim. In their view, respondent
spouses relied in good faith on petitioner's initial appraisal of their properties as worth P49,000.00 in
mortgaging their properties on the theory that in case of their failure to pay their loan, their properties
can answer for their obligation.
There are, however, several factors militating against this view.
First. Based on the evidence presented, it does appear that the reappraisal of the properties was their fair
value. As stated in the report (Exh. R), 10 dated January 17, 1980, of petitioner's credit investigator
Dionsio C. Damasco, Jr., who reappraised the properties at P7,000.00 only:
Per titles and current tax declarations, the collateral is situated in Bo. San Mariano, Sta. Maria, Pang.,
but actual location is in Bo. Balloy, Sta. Maria, Pang. These are two adjacent barrios. Distance of the
property from the Bo. Boundary is about 250 m.
The property with a former area of 7,926 sq. ms. was bought by Mr. Edilberto Natividad from Mr.
Esperidion Cabanayan, Sr. for P10,000.00 in 1975 and was later subdivided in the same year into
Blocks 1 and 2 and 3 Road lots. These 3 road lots are nonexistent when inspected.
Lot 9 when plotted will not close & may be due to typographical error in point 4 to 1.
Though declared as residential per separate Tax Declarations, I am valuing it as agricultural for the
following reasons:
1. Per our Bank Appraiser's Manual prepared by the Credit Dept. (2nd Edition-1976, p. 62) [Exh.
S 11], it states that if a residential subdivision is less than 60% of the projected development, it
should be considered as raw land value. The collateral has no improvement at all (except for the
agricultural crops). The current market value of agricultural lands in Bo. Balloy surrounding the
property ranges from P15,000 to P25,000 per ha. or an ave. of P20,000, hence its pertinent market
value is P7,000 (20,000 x 2392/10000 = P6,584.00 rounded to P7,000).
2. Actual use is agricultural planted to palay, mongo & beans
3. No visible concrete stone monuments to properly identify its subdivision into several lots
4. Distance from residential houses: N., about 860 ms.; S., about 250 ms.; E & W., even within a
radius of one km. are agricultural lands. Surroundings are planted to palay and other secondary
crops.
5. It is about 1.2 ms. below road level. It needs refilling to be fit for residential purposes and in order
not to be flooded.
However, the provincial road leading to it is currently undergoing widening, elevation, leveling, and will
possibly be asphalted. 12
Damasco, Jr. testified:
I observed that the property was plainly agricultural. There were no concrete stones, monuments or
pavements to indicate that the property was subdivided. It was planted with palay and corn. And the
property is below road level, surroundings to the property were purely agricultural lands. . . The surface
of the area was plain soil, ideal for rice or palay. 13
Damasco, Jr.'s findings were corroborated by another PNB inspector, Romeo A. Taganas, Jr., who in his
report, dated October 9, 1981 (Ehx. Q), 14 stated that the properties were situated in a sparsely
populated area, "being cultivated by Juaning Sison," and that the palay harvested thereon had to be
transported 1.5 kilometers in order to be brought for sale to the Sta. Maria town. Taganas, Jr. in fact
appraised the properties at P2,000.00, which was P5,000.00 less than Damasco, Jr.'s appraisal and the
winning bid of petitioner bank.
Edilberto Natividad himself impliedly admitted that the properties were actually agricultural land when he
told the court that "these are classified as residential lots by the Assessor's Office in the meantime that
they are not yet used as residential lots they will still be used as agricultural as in accordance with the
decree of the President to produce palay or any productive use of the land." 15
There is thus no basis for supposing that respondent spouses did not know the true worth of their
properties which were agricultural rather than residential with improvements thereon. Respondents could
not, therefore, have been misled by any statement made by petitioner. 16 Indeed, respondent spouses
offered no evidence as to the worth of their properties, limiting themselves to their self-serving
allegations that their properties were worth substantially more than petitioner bank's reappraisal and
even its original appraisal.
Second. Moreover, it appears that rather than being passive bystanders in the original appraisal of their
properties, respondent spouses actually played an active part in the valuation.
According to the report of PNB credit investigator Dionisio C. Damasco, Jr. (Exh. R), 17 when respondent
Edilberto Natividad bought the properties in 1975 (the year respondent spouses mortgaged them to the
bank), he did so for only P10,000.00. Yet, a few months later, Edilberto Natividad obtained a loan from
petitioner PNB for P34,000.00, 18 giving the same properties as collateral, now appraised at P49,000.00.
The loan obtained was thus 69% of the appraised value of the collateral.
It seems that the increase in value of the properties from P10,000.00 to P49,000.00 in one year was due
to their reclassification from agricultural to residential. 19 In his testimony, respondent Edilberto
Natividad facetiously denied any knowledge why the Assessors' Office made a change in the classification
of his properties from agricultural to residential. 20
As the person most likely to benefit from the reclassification, it is probable that he was the one who in
fact declared the properties as residential to the Municipal Assessor's Office and had them assessed as
such. Edilberto Natividad was formerly an appraiser of petitioner PNB. 21 More than anyone else,
therefore, he knew that his chances of obtaining a substantial loan were directly related to the value of
the properties he offered as collateral. In fact, he admitted that he subdivided the lots after acquiring
them from Esperidion Cabanayan, Sr. and because of that the same were classified as residential. 22 The
following testimony of Edilberto Natividad is revealing:
That the properties were classified as residential way back in 1975 but until 1989 not a single house had
been built thereon and that they continued to be planted to agricultural crops like the surrounding areas
which were agricultural 24 highlight the irregularity of the first appraisal report (Exh, 1) 25 by PNB
appraiser D.A. Candoc. This is in fact evident on the face of said report, which states "The propert[ies
are] planted to tobacco . . . although [they are] ideal for residential site." Thus, if there appears to be a
reason to question the reduced appraisal of the properties when they were offered for sale at auction,
there is greater reason to question their original appraisal at P49,000.00 which persuaded the bank to
give Edilberto Natividad and his wife a loan of P34,000.00 which was three times the amount he paid for
the properties just months earlier.
Third. Respondent spouses were benefited rather than harmed by the substantially lower reappraised
value of their properties. As held in Velasquez v. Coronel: 26
. . . However, while in ordinary sales for reasons of equity a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the
courts to interfere, such does not follow when the law gives to the owner the right to redeem, as when
a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner
to effect the redemption. And so it was aptly said; "When there is the right to redeem, inadequacy of
price should not be material, because the judgment debtor may reacquire the property or also sell his
right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at
the auction
sale." 27
Indeed, as pointed out by petitioner bank, respondents had several options. They could have participated
in the public bidding or exercised their right of redemption or sold such right to redeem or simply settled
their debt. However, they did none of these things despite due notice to them. Respondents are thus to
blame for their predicament. Their claim of financial distress is not an excuse to evade their clear
obligation to the bank. 28
As to the amount for which respondent spouses should be held liable, the Court of Appeals said that "the
remaining balance of [respondents'] loan before [petitioner] bank decided to foreclose their
properties was P64,624.31, including interest, penalties, attorney's fees, and expenses of litigation." 29
This is not correct. The amount of P64,624.31 is the amount of the deficiency claim of the bank as of
March 31, 1983 (Exh. D) 30 before the filing of the present complaint on April 21, 1983. 31 To the
balance of P60,635.63 left after applying petitioner bank's winning bid of P7,000.00, the bank added
interest, penalties, attorney's fees, and other charges totalling P3,988.68. This is in accordance with the
terms of the promissory note. 32
Petitioner also asked in its complaint 33 for attorney's fees equal to 10% of the total amount due as of
the time of payment, litigation expenses, and costs for purposes of the present action. The claim is
proper. The proceedings for foreclosure is extrajudicial and summary in nature, while that for the
deficiency is judicial. Hence, the efforts exerted by the lawyer in both should be recognized.  34 Both the
deed of mortgage (Exh. B) 35 and the promissory note (Exh. A) 36 provide for recovery of attorney's
fees. Indeed, the latter provides that
Should it become necessary to collect this note through an attorney-at-law, I/we hereby expressly
agree to pay, jointly and severally ten per cent (10%) of the total amount due on this note as
attorney's fees which in no case shall be less than P100.00 exclusive of all fees allowed by law
stipulated in the contract of real estate mortgage. 37
WHEREFORE, the decision of the Court of Appeals is REVERSED and respondent spouses Edilberto and
Elena Natividad are ordered to pay petitioner Philippine National Bank the amount of P64,624.31 with
interest thereon at the legal rate of twelve per cent (12%)  per annum from March 31, 1983 until fully
paid and P6,462.43 in attorney's fees and expenses of litigation. No pronouncement as to
costs.1âwphi1.nêt
G.R. No. L-23493 August 23,1978
DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee,
vs.
JOVENCIO A. ZARAGOZA and AVELINA E. ZARAGOZA, defendants-appellants.
The issues raised in this appeal are: (a) whether or not the mortgagee is entitled to claim the deficiency
in extrajudicial foreclosure of mortgage; and (b) whether or not additional interests are properly
chargeable on the balance of the indebtedness during the period from notice of sale to actual sale.
The following facts are not disputed: Appellants obtained, on July 19, 1949, a loan of P30,000 from the
appellee which was secured by a real estate mortgage. It was stipulated that upon failure of appellants to
pay the amortization due, according to the terms and conditions thereof, appellee shall have the authority
to foreclose extrajudicially the mortgaged property, pursuant to Republic Act No. 3135, as amended.
Conformably to this stipulation, upon breach of the conditions of the mortgage, appellee foreclosed
extrajudicially the mortgage on December 10, 1952, and the Provincial Sheriff of Pangasinan posted the
requisite notice of the sale at public auction of the mortgaged property.
On June 10, 1957, the property was sold at public auction to the appellee, being the highest bidder
therein, for the sum of P21,035.00. After applying the proceeds of the sale to satisfy the outstanding
balance of the indebtedness in the amount of P28,914.36, it was found that appellants still owed the
appellee in the amount of P7,779.36. Suit for the deficiency with preliminary attachment was filed by
appellee against appellants on June 20, 1961. In their answer, appellants averred that after an
extrajudicial foreclosure of property, no deficiency judgment would lie and that from the date of the
foreclosure to the sale of said property, the mortgagor is no longer liable for the interest on the loan. The
aforesaid contentions of appellants were overruled by the trial court, who thereupon rendered the
aforesaid judgment in favor of the appellee. Contending that the trial court erred in resolving those issues
of law, appellants appealed directly to this court.
We find the appeal without merit.
The first issue had already been resolved in an earlier case. Thus, in Philippine Bank of Commerce v.
Tomas de Vera  1 this Court ruled that in extrajudicial foreclosure of mortgage, where the proceeds of the
sale is insufficient to cover the debt, the mortgagee is entitled to claim the deficiency from the debtor.
Explaining the reasons for this rule, the Court stated:
The sole issue to be resolved in this case is whether the trial court acted correctly in holding appellee
Bank entitled to recover from appellant the sum of P99,033.20 as deficiency arising after the
extrajudicial foreclosure, under Act No. 3135, as amended, of the mortgaged properties in question. It
is urged, on appellant's part, that since Act No. 3135, as amended, is silent as to the mortgagee's right
to recover deficiency arising after an extrajudicial foreclosure sale of mortgage, he (mortgagee) may
not recover the same.
A reading of the provisions of Act No. 3135, as amended (re extrajudicial foreclosure) discuss nothing,
it is true, as to the mortgagee's right to recover such deficiency. But neither do we find any provision
thereunder which expressly or impliedly prohibits such recovery.
Article 2131 of the new Civil Code, on the contrary, expressly provides that 'The form, extent and
consequences of a mortgage, both as to its constitution, modification and extinguishment, and as to
other matters not included in this Chapter, shall be governed by the provisions of the Mortgage Law
and of the Land Registration Law. Under the Mortgage Law, which is still in force, the mortgagee has
the right to claim for the deficiency resulting from the price obtained in the sale of the real property at
public auction and the outstanding obligation at the time of the foreclosure proceedings. (See Soriano
v. Enriquez, 24 Phil. 584; Banco de Islas Filipinos V. Concepcion e Hijos, 53 Phil. 86; Banco Nacional v.
Barreto, 53 Phil. 101). Under the Rules of Court (Sec. 6, Rule 70), 'Upon the sale of any real property,
under an order for a sale to satisfy a mortgage or other incumbrance thereon, if there be a balance due
to the plaintiff after applying the Proceeds of the sale, the court, upon motion, should render a
judgment against the defendant for any such balance for which by the record of the case, he may be
Personally liable to the plaintiff, ...' It is true that this refers to a judicial foreclosure, but the underlying
principle is the same, that the mortgage is but a security and not a satisfaction of indebtedness.
Let it be noted that when the legislature intends to foreclose the right of a creditor to sue for any
deficiency resulting from the foreclosure of the security given to guarantee the obligation, it so
expressly provides. Thus, in respect to pledges, Article 2115 of the new Civil Code expressly states: ...
If the Price of the sale is less (than the amount of the principal obligation) neither shall the creditor be
entitled to recover the deficiency, notwithstanding any stipulation to the contrary.' Likewise, in the
event of a foreclosure of a chattel mortgage on the thing sold in installments he (the vendor) shall have
no further action against the purchaser to recover any unpaid balance Of the price. Any agreement to
the contrary shall be void.' (Article 1484, paragraph 3, Ibid.). It is then clear that in the absence of a
similar provision in Act No. 3135, as amended, it can not be concluded that the creditor loses his right
given him under the Mortgage Law and recognized in the Rules Of Court, to take action for the recovery
of any unpaid balance on the Principal obligation, simply because he has chosen to foreclose his
mortgage extra-judically pursuant to a special Power of attorney given him by the mortgagor in the
mortgage contract. As stated by this Court in Medina v. Philippine National Bank (56 Phil. 651), a case
analogous to the one at bar, the step taken by the mortgagee-bank in resorting to extrajudicial
foreclosure under Act 3135, was merely to find a proceeding for the sale, and its action can not be
taken to mean a waiver of its right to demand the payment of the whole debt. (pp. 1028-1030).
This rule was reiterated in Development Bank of the Philippines v. Vda de Moll. 2
In connection with the second issue, appellants argue that since the appellee held in abeyance the sale of
the property for a period of four (4) years, they alone should suffer the consequences of such delay. It
was further contended that the debtor's liability in judicial foreclosures is limited to the amount due at the
time of the foreclosure and, therefore, such should also apply to extrajudicial foreclosures. By way of
refutation appellee explained that the seemingly long interval between the date of issuance of the
Sheriff's Notice of Sale and the date of sale was due to the numerous transfers made of the date of the
sale upon requests of the appellants themselves. Each transfer is covered by a corresponding agreement
for postponement, executed jointly by appellants and appellee. Certainly, under such circumstances,
appellants cannot take advantage of the delay which was their own making, to the prejudice of the other
party. Apart from this consideration, it must be noted that a foreclosure of mortgage means the
termination of all rights of the mortgagor in the property covered by the mortgage. It denotes the
procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and
includes the sale itself. In judicial foreclosures, the "foreclosure" is not complete until the Sheriff's
Certificate is executed, acknowledged and recorded. In the absence of a Certificate of Sale, no title
passes by the foreclosure proceedings to the vendee. 3 It is only when the foreclosure proceedings are
completed and the mortgaged property sold to the purchaser that all interests of the mortgagor are cut
off from the property. This principle is applicable to extrajudicial foreclosures. Consequently, in the case
at bar, prior to the completion of the foreclosure, the mortgagor is, therefore, liable for the interest on
the mortgage. 4
ACCORDINGLY, the judgment appealed from is hereby AFFIRMED. Costs against appellants.
G.R. No. 70987 September 29, 1988
GREGORIO Y. LIMPIN, and ROGELIO M. SARMIENTO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and GUILLERMO PONCE, respondents.
Once again the parties are before this Court; this time, for a determination of whether or not the  equity
of redemption recognized in favor of petitioner Rogelio M. Sarmiento in this Court's judgment
promulgated on January 30, 1987, still subsists and may be exercised, more than a year after that
judgment had become final and executory.
The proceedings concern two (2) lots, then covered by TCTs Nos. 92836 and 92837, which, together with
two (2) others, were originally mortgaged in 1973 to herein private respondent Ponce by their former
owners, the Spouses Jose and Marcelina Aquino. These two lots were afterwards sold in 1978 by the
same Aquino Spouses to Butuan Bay Wood Export Corporation. Against this corporation herein petitioner
Limpin obtained a money judgment in 1979; and to satisfy the judgment, the two lots were levied on and
sold at public auction in 1980, Limpin being the highest bidder. Limpin later sold the lots to his co-
petitioner, Sarmiento.
Earlier however or a day before levy was made on the two lots in execution of the judgment against
Butuan Bay Wood Export Corporation. Ponce had initiated judicial proceedings for the foreclosure of the
mortgage over said two (2) lots (together with the two (2) others mortgaged to him Judgment was
rendered in his favor and became final; and at the ensuing foreclosure sale, the lots were acquired by
Ponce himself as highest bidder. Ponce then moved for confirmation of the foreclosure sale, but the Court
confirmed the sale of only two lots, refusing to do so as regards the two which had been subject of the
execution sale in Limpin's favor (i.e., those covered TCTs Nos. 92836 and 92837).
It was to resolve the resulting dispute that Ponce instituted a special civil action in the Intermediate
Appellate Court, impleading Limpin and Sarmiento a indispensable parties respondents. That Court
rendered judgment on February 28, 1985 in Ponce's favor; Limpin and Sarmiento appealed; this Court
denied their appeal.
The judgment of this Court of January 30, 1987 dismissed Sarmiento's and Limpin's petition for review on
certiorari of the Appellate Court's decision of February 28, 1985. It in effect affirmed the latter's decision
which inter alia ordered the Trial Court "to confirm the sale (of the lots formerly covered by TCT Nos.
92836 and 92837) and issue a writ of possession to ... (Guillermo Ponce) with respect to the aforesaid
lots, subject to the equity of redemption of the respondent Rogelio V. Sarmiento  1 Applying the doctrine
laid down in Santiago v. Dionisio, a 1953 decision of this Court 2 the Intermediate Appellate Court's
decision declared that "the sale to Ponce, as the highest bidder in the foreclosure sale of the two lots in
question should have been confirmed, subject to Limpin's (and now Sarmiento's) equity of redemption."
This Court's aforesaid judgment also clearly and categorically sustained the exercise by the Appellate
Court of jurisdiction over the persons of Rogelio M. Sarmiento and Gregorio Limpin. 3 There can thus be
no question that the petitoners herein, said Rogelio Sarmiento and Gregorio Limpin, were affected and
are bound by the decision of the Intermediate Appellate Court, and that of this Court affirming it.
Rogelio M. Sarmiento, particularly, was aware that the Trial Court had the ministerial duty to execute the
Appellate Court's decision, i.e., to confirm the sale and issue a writ of possession as regards the aforesaid
lots, subject to the equity of redemption explicitly recognized in his favor in the decisions mentioned. He
knew that he had the prerogative to exercise his equity of redemption, if not from the moment that the
judgment of this Court became final and executory, 4 at least until the Court a quo, presided over by Hon.
Antonio Solano, subsequently confirmed the sale and issued a writ of possession in favor of Guillermo
Ponce in June, 1987. 5
He did not try to exercise that right before, at or about the time of the confirmation of the foreclosure
sale by Judge Solano. Instead, he instituted no less than two (2) actions in the same Regional Trial Court
which were assigned to another branch, presided over by Hon. Teodoro Beltran- attempting to relitigate
precisely the same issues which this Court and the Intermediate Appellate Court had already passed upon
and resolved adversely to him. For doing so for trifling with and abusing the processes of the courts, and
thus unwarrantedly delaying execution of the final and executory judgment against him he and his
counsel were both found guilty of contempt and correspondingly punished by this Court, by Resolution
dated May 5, 1988. The same resolution also decreed the dismissal of the complaints in both cases and
the nullification and setting aside of the restraining or injunctive orders of Judge Beltran.
It was not until March 11, 1988-nine months or so after entry of the judgment recognizing his equity of
redemption as successor-in-interest of the original mortgagors that Sarmiento finally be stirred himself to
attempt to exercise his unforeclosed equity of redemption. On that day he filed a motion with the Court
presided over by Hon. Judge Antonio Solano, manifesting that he would exercise the right and asked the
Court to fix the redemption price. 6 The Court opined that "this should be the subject of the agreement
between Ponce and Sarmiento. 7
Sarmiento then wrote to Ponce on March 23, 1988 offering "P 2.6 million as redemption price for the two
lots originally covered by TCTs Nos. 92836 and 92837, now 307100 and 307124. 8 Ponce's answer, dated
March 25, 1988, rejected the offer said averred "that the period within which ... (Sarmiento) could have
exercised such right ... (had) lapsed. 9 Sarmiento reacted by filing a motion with the Solano Court, dated
March 29, 1988, asking it to "fix the redemption price ... and that the implementation of the writ of
possession be provisionally deferred. 10 An opposition was promptly filed by Ponce under date of May 4,
1988 11 in which he argued that "Sarmiento's right to exercise his equity of redemption over those lots
had long expired," the opportunity to exercise it having presented itself but not availed of "(i) after ...
default in the performance of the conditions of the mortgage and (ii) before the Sheriffs sale of the
property and the judicial confirmation thereof." According to Ponce, "from October 17, 1982, ... (when)
Sarmiento's predecessors-in-interest defaulted in their obligations over the mortgaged properties, up to
June 17, 1987, when this ... (Trial) Court confirmed the auction sale of those properties, Sarmiento could
(and should) have exercised his 'equity of redemption.'" Judge Solano did not share this view, and ruled
accordingly. 12
The issue has been brought to this Court for resolution by Ponce's "Motion for Clarification" dated May 27,
1988 and "Supplemental Motion ..." dated June 13, 1988, as to which Sarmiento has submitted a
Comment dated June 17,1988. To the comment a reply has been presented by Ponce under date of
August 3, 1988.
Ponce states 13 that the term, equity of redemption, means "the right of the mortgagor to redeem the
mortgaged property after his default in the performance of the conditions of the mortgage but before the
sale of the property or the judicial) confirmation of the (Sheriffs) sale," citing Top Rate International
Services, Inc. v. IAC 142 SCRA 473 [1976], or "the right to redeem mortgaged property by paying the
amount ordered by the court within a period of ninety days, or, even thereafter but before the
confirmation of the sale, invoking Sun Life Assurance Co. of Canada v. Diez, 52 Phil. 275 [1928]. 14 On
this premise, he postulates that "from October 17, 1982, the date Sarmiento's predecessors-in-interest
defaulted in their obligations over the mortgaged properties, up to June 17, 1987, when the lower court
confirmed the auction sale of those properties, Sarmiento could have exercised his 'equity of
redemption."' Not having done so within that time, his equity of redemption had been extinguished;
indeed, by opting to file "new suits against Ponce ... seeking to annul Ponce's titles over those properties"
instead of redeeming the same, he had "waived his equity of redemption (assuming such right existed at
the time the suits were commenced)."
It is Sarmiento's position, on the other hand, 15 that the "17 June 1987 confirmation of the sale of the two
lots could not have cut off ... (his) equity of redemption;" in fact, "Ponce himself, in his 'Urgent Motion'
dated 1 June 1987, precisely prayed for the issuance of a writ of possession 'subject to the equity of
redemption of Rogelio M. Sarmiento' thereby recognizing Sarmiento's equity of redemption beyond
confirmation date," 16 He also argues that he had not been informed of the time when his right of
redemption would be cut-off, 17 because he "never received a copy of any Motion for Confirmation, much
less notice of hearing thereon in violation of his right to due process;" that to hold otherwise would
"render nugatory the decision of the Court of Appeals and this ... Court on the issue;" and that he is
entitled to a reasonable time, e.g., a year, for the exercise of his equity of redemption. 18
The equity of redemption is, to be sure, different from and should not be confused with the right of
redemption. 19
The right of redemption in relation to a mortgage-understood in the sense of a prerogative to re-acquire
mortgaged property after registration of the foreclosure sale- exists only in the case of
the extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosure except
only where the mortgagee is the Philippine National Bank or a bank or banking institution.
Where a mortgage is foreclosed extra-judicially, Act 3135 grants to the mortgagor the right of redemption
within one (1) year from the registration of the sheriffs certificate of foreclosure sale. 20
Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The
law 21 declares that a judicial foreclosure sale, "when confirmed by an order of the court, ... shall operate
to divest the rights of all the parties to the action and to vest their rights in the purchaser,  subject to
such rights of redemption as may be allowed by law. 22 Such rights exceptionally "allowed by law" (i.e.,
even after confirmation by an order of the court) are those granted by the charter of the Philippine
National Bank (Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). 23 These laws confer on
the mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right to redeem
the property sold on foreclosure-after confirmation by the court of the foreclosure sale-which right may
be exercised within a period of one (1) year, counted from the date of registration of the certificate of
sale in the Registry of Property.
But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the
mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale, "when
confirmed by an order of the court. ... shall operate to divest the rights of all the parties to the action and
to vest their rights in the purchaser." There then exists only what is known as the equity of redemption.
This is simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of
the property by paying the secured debt within the 90-day period after the judgment becomes final, in
accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation. Section 2, Rule
68 provides that—
... If upon the trial ... the court shag find the facts set forth in the complaint to be true, it shall
ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and
costs, and shall render judgment for the sum so found due and order the same to be paid into court
within a period of not less than ninety (90) days from the date of the service of such order, and that in
default of such payment the property be sold to realize the mortgage debt and Costs. 24
This is the mortgagor's equity (not right) of redemption which, as above stated, may be exercised by him
even beyond the 90-day period "from the date of service of the order,' and even after the foreclosure sale
itself, provided it be before the order of confirmation of the sale. 25 After such order of confirmation, no
redemption can be effected any longer.
It is this same equity of redemption that is conferred by law on the mortgagor's successors-in-interest, or
third persons acquiring rights over the mortgaged property subsequent, and therefore subordinate, to the
mortgagee's lien. 26 If these subsequent or junior lienholders be not joined in the foreclosure action, the
judgment in the mortgagor's favor is ineffective as to them, of course. In that case, they retain what is
known as the "unforeclosed equity of redemption," and a separate foreclosure proceeding should be
brought to require them to redeem from the first mortgagee, or the party acquiring title to the mortgaged
property at the foreclosure sale, within 90 days, 27 under penalty of losing that prerogative to redeem. In
the case at bar, however, there is no occasion to speak of any "unforeclosed equity of redemption' in
Sarmiento's favor since he was properly impleaded in the judicial proceeding where his and Ponce's rights
over the mortgaged property were ventilated and specifically adjudicated.
Under the circumstances obtaining in this case, the plain intendment of the Intermediate Appellate Court
was to give to Sarmiento, not the unforeclosed equity of redemption pertaining to a stranger to the
foreclosure suit, but the same equity of redemption possessed by the mortgagor himself. The judgment
cannot be construed as contemplating or requiring the institution of a separate suit by Ponce to compel
Sarmiento to exercise his unforeclosed equity of redemption, or as granting Sarmiento the option to
redeem at any time that he pleases, subject only to prescription. This would give rise to that multiplicity
of proceedings which the law eschews. The judgment plainly intended that Sarmiento exercise his option
to redeem, as successor of the mortgagor.
Upon the facts on record, Sarmiento cannot be heard to complain of denial of due process for alleged lack
of notice of any motion or hearing for confirmation of sale. The Decision of the Intermediate Appellate
Court which he and his predecessor, Limpin, had appealed to this Court specifically ordered the Trial
Court to confirm 28 the judicial foreclosure sale in favor of Ponce over the two lots, in these terms. 29
WHEREFORE, the orders dated October 16,1983 and December 19,1983 of the respondent court, so far
as they deny the confirmation of the sale of the lots formerly covered by TCT Nos. 92836 and 92837,
are SET ASIDE, and the respondent court is hereby ORDERED to confirm the sale and issue a writ of
possession to the petitioner with respect to the aforesaid lots, subject to the equity of redemption of
the respondent Rogelio V. Sarmiento. Without costs.
Given the fact that said appealed orders of the Trial Court had been issued upon motion for confirmation
earlier made by Ponce-which was duly served and heard-the aforecited Decision of the Intermediate
Appellate Court can be construed in no wise than as a peremptory command to the Trial Court to confirm
the sale as directed, motu proprio, and without the need of any further motion or other action on the part
of Ponce. The rejection by this Court of Sarmiento's and Limpin's appeal in its own Decision of January
30, 1987, which imported nothing less than a total affirmance of the Decision of the Appellate Court,
should therefore have sufficiently alerted Sarmiento that confirmation could come at any time after this
Court's Decision became final, with or without any action from Ponce. He cannot, in the circumstances,
claim unfair surprise. He should, upon being notified of this Court's Decision, have taken steps to redeem
the properties in question or, at the very least, served the Trial Court and Ponce with notice of his
intention to exercise his equity of redemption. There was certainly time enough to do this the order
confirming the foreclosure sale issuing only on June 17, 1987—had he not occupied himself with the
fruitless maneuverings to re-litigate the issues already recounted. Indeed, had he made an attempt to
redeem, even belatedly but within a reasonable period of time after learning of the order of confirmation
(the record shows he did learn of it within three [3) days after its issuance), 30 he might perhaps have
given the Court some reason to consider his bid on equitable grounds. He did not. He let nine (9) months
pass, to repeat, in carrying out improper (and contumacious stratagems to negate the judgments against
him, before making any such move.
Neither can Sarmiento acceptably claim that Ponce, by moving for a writ of possession subject to his
(Sarmiento's) equity of redemption, recognized the existence and enforceability of that
prerogative beyond the prescribed cut-off date of confirmation of the sale. Such an interpretation of the
motion is totally unwarranted, given the fact that said motion was made at a time (June 1, 1987) when
there was as yet no order confirming the sale and, since Sarmiento's equity of redemption then still
unquestionably existed, there was hardly occasion or for that matter, any reason as far as Ponce was G.R. No. 133079. August 9, 2005]
concerned, to provide against its lapsing. Moreover, assuming for the sake of argument that a resolutory
period fixed by law may be extended by act of the party in whose favor its expiration would operate, that SPS. MAXIMO LANDRITO, JR. and PACITA EDGALANI, Petitioners,
act must bespeak a clear and unequivocal intent to grant such an extension. No such clear grant can be vs.
inferred from the terms of Ponce's motion, which can, and in fact should be, read as a mere affirmation THE HONORABLE COURT OF APPEALS; SPS. BENJAMIN SAN DIEGO and CARMENCITA SAN
that there existed at the time an equity of redemption in Sarmiento's favor. DIEGO; The EX-OFFICIO SHERIFF and CLERK OF COURT of the Regional Trial Court, Makati
City; and the REGISTER OF DEEDS, Makati City, Respondent.
WHEREFORE, the Court hereby rules that the equity of redemption claimed and invoked by Rogelio M.
Sarmiento over the properties originally covered by Transfer Certificates of Title Nos. 92836 and 92837 Herein petitioners, the spouses Maximo Landrito, Jr. and Pacita Landrito, have come to this Court  via this petition for
(now by TCTs Numbered 307100 and 307124), Registry of Deeds of Quezon City, subject of this case, review on certiorari under Rule 45 of the Rules of Court to seek the reversal and setting aside of the decision dated 12
lapsed and ceased to exist without having been properly exercised, on June 17, 1987, with the issuance December 19971 and resolution dated 10 March 1998 2 of the Court of Appeals in CA-G.R. CV No. 48896, affirming an earlier
by the Trial Court of the Order confirming the sheriffs sale (on judicial foreclosure) of said properties in order of the Regional Trial Court at Makati City which granted the motion to dismiss filed by the herein private respondents,
the spouses Benjamin San Diego and Carmencita San Diego, in its Civil Case No. 94-2950, a complaint for annulment of
favor of Guillermo Ponce.
extrajudicial foreclosure and auction sale, thereat commenced by them against the San Diegos, the  ex-officio sheriff and
the Register of Deeds of Makati City.

In July 1990, petitioners obtained a loan of ₱350,000.00 from respondent Carmencita San Diego. To
secure payment thereof, petitioners executed on 02 August 1990 in favor of the same respondent a deed
of real estate mortgage over their parcel of land located at Bayanan, Muntinlupa, Rizal and registered in
their names under Transfer Certificate of Title No. (432281) S-21000.

After making substantial payments, petitioners again obtained and were granted by Carmencita San
Diego an additional loan of One Million Pesos (₱1,000,000.00). To secure this additional loan, the parties
executed on 13 September 1991 an "Amendment of Real Estate Mortgage", whereunder they stipulated
that the loan shall be paid within six (6) months from 16 September 1991, and if not paid within said
period, the mortgagee shall have the right to declare the mortgage due and may immediately foreclose
the same judicially or extrajudicially, in accordance with law.

It appears that petitioners defaulted in paying their loan and continuously refused to comply with their
obligation despite repeated demands therefor, prompting respondent Carmencita San Diego to send them
on 27 April 1993, a final notice of demand requiring them to settle their financial obligation which, by
then, already amounted to ₱1,950,000.00.

On 30 June 1993, after her efforts to collect proved futile, respondent Carmencita San Diego filed with
the Office of the Clerk of Court and Ex-Officio Sheriff of RTC-Makati, a petition for the extrajudicial
foreclosure of the mortgage.

On 06 July 1993, said office sent to the parties a Notice of Sheriff’s Sale, therein announcing that
petitioners’ mortgaged property will be sold in a public auction to be conducted on 11 August 1993 at
10:00 o’clock in the morning, copies of which notice were posted in several conspicuous places within the
sheriff’s territorial jurisdiction.

As announced, on 11 August 1993, at 10:00 o’clock in the morning, the public auction sale was held and
the mortgaged property sold to respondent Carmencita San Diego as the highest bidder for
₱2,000,000.00, as evidenced by the Sheriff’s Certificate of Sale issued in her favor on 07 October 1993.
On 29 October 1993, respondent San Diego caused the registration of the same sheriff’s certificate of sale
with the Office of the Register of Deeds, Makati City, and duly inscribed on the same date at the dorsal
side of the petitioners’ TCT No. (432281) S-21000.
With the petitioners having failed to redeem their property within the 1-year redemption period from the
date of inscription of the sheriff’s certificate of sale, as provided for in Act No. 3135, as amended, the San
Diegos caused the consolidation of title over the foreclosed property in their names.
Then, on 09 November 1994, before the Regional Trial Court at Makati City, petitioners filed their
complaint for annulment of the extrajudicial foreclosure and auction sale, with damages. In their
complaint, thereat docketed as Civil Case No. 94-2950, petitioners alleged that (1) said foreclosure and
auction sale were null and void for failure to comply with the requirements of notice and publication, as
mandated by Act 3135, as amended; (2) the mortgaged property was illegally foreclosed in the light of
the settled rule that an action to foreclose a mortgage must be limited to the amount mentioned in the
mortgage document, in this case, ₱1,000,000.00, which amount was allegedly bloated by respondent
Carmencita San Diego to ₱1,950,000.00; and (3) the San Diegos’ application for consolidation of title was
premature because the husband, Benjamin San Diego, allegedly granted them an extension of the period
of redemption up to 11 November 1994.
To the complaint, respondents interposed a Motion to Dismiss, therein alleging that said complaint failed
to state a cause of action as no primary right of the petitioners had been violated since they actually
failed to exercise their right of redemption within the one-year redemption period, adding that petitioners
never took any action which may stall the running of the same period, thereby leaving them no further
right or interest in the property in question.
In an order dated 13 January 1995, the trial court granted respondents’ motion to dismiss and
accordingly dismissed petitioners’ complaint, saying that the latter’s cause of action, if any, is already
barred by laches on account of their failure or neglect for an unreasonable length of time to do that
which, by exercising due diligence, could or should have been done earlier. Further, the trial court ruled
that petitioners’ inaction constituted a waiver on their part.
Therefrom, petitioners went on appeal to the Court of Appeals in CA-G.R. CV No. 48896.
As stated at the outset hereof, the appellate court, in its decision of 12 December 1997, dismissed
petitioners’ appeal and affirmed in toto  the trial court’s order of dismissal. With their motion for
reconsideration having been denied by the same court in its resolution of 10 March 1998, 3 petitioners are
now with us via the present recourse, faulting the Court of Appeals, as follows:
1. The Court of Appeals gravely erred in avoiding to resolve in the assailed Decision and in the
questioned Resolution the basic issue as to whether or not the extra-judicial foreclosure and public
auction sale of the subject parcel of land are valid and lawful when the amount stated in letter-request
or the petition for extra-judicial foreclosure and in the notice of sheriff sale doubled the amount
stipulated in the Amendment of Real Estate Mortgage;
2. The Court of Appeals has similarly committed serious error in considering that the complaint of the
petitioner is a complaint for redemption when in the caption; in the body; and in the prayer of the
complaint, petitioner spouses have sought the nullity as void ab initio the extra-judicial foreclosure and
auction sale of the subject property;
3. The respondent Appellate Court likewise incredulously erred to have resolved the admissibility and
probative value of the statement of account attached as Annex "E" of the complaint when it was not yet
presented in evidence; because the stage of the case at the time the assailed dismissal order was
issued, was yet in the period of pleadings;
4. The Court of Appeals has grievously erred in affirming the assailed dismissal order by declaring
petitioner spouses to have been guilty of laches in failing to redeem during the legal period of
redemption the foreclosed parcel of land; when the cause of the failure to redeem was the illegal
increase by 100% of the original obligation, stated in the Amendment of Real Estate Mortgage and
bloating of the redemption price from Two Million Pesos (P2,000,000.00) to Three Million Four Hundred
Ninety One Thousand Two Hundred Twenty Five & 98/100 Pesos (P3,491,225.98).
We DENY.
The records indubitably show that at the time of the foreclosure sale on 11 August 1993, petitioners were
already in default in their loan obligation to respondent Carmencita San Diego.
Much earlier, or on 27 April 1993, a final notice of demand for payment had been sent to them, despite
which they still failed to pay. Hence, respondent Carmencita San Diego’s resort to extrajudicial
foreclosure, provided no less in the parties’ "Amendment of Real Estate Mortgage".
The rule has been, and still is, that in real estate mortgage, when the principal obligation is not paid when
due, the mortgagee has the right to foreclose on the mortgage and to have the mortgaged property
seized and sold with the view of applying the proceeds thereof to the payment of the obligation. 4
Here, the validity of the extrajudicial foreclosure on 11 August 1993 was virtually confirmed by the trial
court when it dismissed petitioners’ complaint, and rightly so, what with the fact that petitioners failed to
exercise their right of redemption within the 1-year period therefor counted from the registration of the
sheriff’s certificate of sale.
It is petitioners’ main submission, however, that the very reason why they did not avail of their
redemption right is because Mrs. San Diego bloated their original loan of ₱1,000,000.00 to
₱1,950,000.00, an issue supposedly not considered and/or addressed by the appellate court in the
decision under review. In this regard, petitioners argue that the Court of Appeals, in sustaining the
extrajudicial foreclosure proceedings, thereby go against the established jurisprudence that an action for
foreclosure must be limited to the amount mentioned in the mortgage document, ₱1,000,000.00 in this
case.
We do not take issue with petitioners’ submission that a mortgage may be foreclosed only for the amount
appearing in the mortgage document, more so where, as here, the mortgage contract entered into by the
parties is evidently silent on the payment of interest.
However, contrary to petitioners’ claim, the appellate court did pass upon the legal issue raised by
them, albeit ruling that petitioners had been barred by laches from raising the same. We quote from the
challenged decision:
[Petitioners] next argued that the mortgaged property was illegally foreclosed since it is a well settled
rule that an action to foreclose a mortgage must be limited to the amount mentioned in the mortgage.
The argument is without merit.
It appears from the evidence on record that despite due notice and publication of the same in a
newspaper of general circulation (Exhs. "5", "5-A" and "5-B", pp. 53-55, Record), [petitioners] did not
bother to attend the foreclosure sale nor raise any question regarding the propriety of the sale. It was
only on November 9, 1994, or more than one year from the registration of the Sheriff’s Certificate of
Sale, that [petitioners] filed the instant complaint. Clearly, [petitioners] had slept on their rights and are
therefore guilty of laches, which is defined as the failure or neglect for an unreasonable or explained
length of time to do that which, by exercising due diligence, could or should have been done earlier, commitment by the debtor to pay the redemption price at a fixed date , will the concept of legal
failure of which gives rise to the presumption that the person possessed of the right or privilege has redemption be converted into one of conventional redemption.
abandoned or has declined to assert the same. (Words in bracket added.)

For sure, in the very petition they filed in this case, petitioners have not offered any valid excuse why,
despite notice to them of the petition for extrajudicial foreclosure filed by the respondents, they failed to
attend the proceedings and there voiced out what they are now claiming. Truly, laches has worked
against them.
The law on redemption of mortgaged property is clear. Republic Act No. 3135 (An Act to Regulate the
Sale of Property Under Special Powers Inserted In Or Annexed to Real Estate Mortgages), as amended by
Republic Act No. 4118, provides in Section 6 thereof, thus:
"Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under
which the property is sold, may redeem the same at any time within the term of one year from
and after the date of the sale; xxx" (Emphasis supplied)
In a long line of cases 5 , this Court has consistently ruled that the one-year redemption period should be
counted not from the date of foreclosure sale, but from the time the certificate of sale is registered with
the Register of Deeds. Here, it is not disputed that the sheriff’s certificate of sale was registered on 29
October 1993.
Here, there is no showing whatsoever that petitioners agreed to pay the redemption price on or before 11
November 1994, as allegedly set by Mrs. San Diego’s husband. On the contrary, their act of filing their
complaint on 09 November 1994 to declare the nullity of the foreclosure sale is indicative of their refusal
to pay the redemption price on the alleged deadline set by the husband. At the very least, if they so
believed that their loan obligation was only for ₱1,000,000.00, petitioners should have made an offer to
redeem within one (1) year from the registration of the sheriff’s certificate of sale, together with a tender
of the same amount. This, they never did.
It must be remembered that the period of redemption is not a prescriptive period but a condition
precedent provided by law to restrict the right of the person exercising redemption. Correspondingly, if a
person exercising the right of redemption has offered to redeem the property within the period fixed, he
is considered to have complied with the condition precedent prescribed by law and may thereafter bring
an action to enforce redemption. If, on the other hand, the period is allowed to lapse before the right of
redemption is exercised, then the action to enforce redemption will not prosper, even if the action is
brought within the ordinary prescriptive period. Moreover, the period within which to redeem the property
sold at a sheriff’s sale is not suspended by the institution of an action to annul the foreclosure sale. 9 It is
clear, then, that petitioners have lost any right or interest over the subject property primarily because of
their failure to redeem the same in the manner and within the period prescribed by law. Their belated
attempts to question the legality and validity of the foreclosure proceedings and public auction must
accordingly fail.

And under Article 13 of the New Civil Code 6 , a year is understood to have three hundred sixty-five (365)
WHEREFORE, the instant petition is DENIED and the challenged decision and resolution of the Court of
days each. Thus, excluding the first day and counting from 30 October 1993 (under paragraph 3 of Article
Appeals AFFIRMED.
13 of the New Civil Code), and bearing in mind that 1994 was a leap year, petitioners had only until 29
October 1994, the 365th day after registration of the sheriff’s certificate of sale on 29 October 1993,
within which to redeem the foreclosed property in accordance with law. And since 29 October 1994 fell on
a Saturday, petitioners had until the following working day, 31 October 1994, within which to exercise
their right of redemption.

From the foregoing, it is clear as day that even the complaint filed by the petitioners with the trial court
on 09 November 1994 was instituted beyond the 1-year redemption period. In fact, petitioners no less
acknowledged that their complaint for annulment of extrajudicial foreclosure and auction sale was filed
about eleven (11) days after the redemption period had already expired on 29 October 1994 7 . They
merely harp on the alleged increase in the redemption price of the mortgaged property as the reason for
their failure to redeem the same. However, and as already pointed out herein, they chose not, despite
notice, to appear during the foreclosure proceedings.

Of course, petitioners presently insist that they requested for and were granted an extension of time
within which to redeem their property, relying on a handwritten note allegedly written by Mrs. San
Diego’s husband on petitioners’ statement of account, indicating therein the date 11 November 1994 as
the last day to pay their outstanding account in full. Even assuming, in gratia argumenti,  that they were
indeed granted such an extension, the hard reality, however, is that at no time at all did petitioners
make a valid offer to redeem coupled with a tender of the redemption price.

Even on this score, petitioners’ case must fall.

For, in Lazo v. Republic Surety & Insurance Co., Inc. 8 , this Court has made it clear that it is only where,
by voluntary agreement of the parties, consisting of extensions of the redemption period,  followed by

EDUARDO L. RAYO, Petitioner,
vs.
METROPOLITAN BANK AND TRUST COMPANY AND BRANCH 223 OF THE REGIONAL TRIAL
COURT OF QUEZON CITY, Respondents.
Midas Diversified Export Corp. (Midas), thru its president, Mr. Samuel U. Lee, obtained six (6) loans from
private respondent Metropolitan Bank and Trust Company (Metrobank), amounting to ₱588,870,000 as
evidenced by promissory notes. To secure the payment of an ₱8,000,000 loan, Louisville Realty &
Development Corporation (Louisville), thru its president, Mr. Samuel U. Lee, executed in favor of
Metrobank, a real estate mortgage over three parcels of land situated at No. 40 Timog Ave., Brgy. Laging
Handa, Quezon City, with all the buildings and improvements thereon. The properties are covered by
Transfer Certificates of Title (TCT) Nos. N-163455, N-166349 and N-166350 issued by the Registry of
Deeds of Quezon City.
When the debtor-mortgagor failed to pay, Metrobank extra-judicially foreclosed the real estate mortgage
in accordance with Act No. 3135,3 as amended. Thereafter, in a public auction, Metrobank was the highest
bidder. A Certificate of Sale 4 dated December 11, 2000 was duly registered with the Registry of Deeds of
Quezon City on December 13, 2000. When Louisville refused to turn over the real properties, on March
17, 2001, Metrobank filed before the Regional Trial Court (RTC), Branch 223, Quezon City, an  ex
parte petition5 for the issuance of a writ of possession docketed as LRC Case No. Q-13915(01). After
presentation of evidence ex parte, the RTC granted the petition in an Order 6 dated July 5, 2001, the
dispositive portion of which reads as follows:
WHEREFORE, in consideration of the foregoing premises, the instant petition is hereby GRANTED. Upon
the filing of a bond in the amount of ONE HUNDRED THOUSAND PESOS ([₱]100,000.00), let a Writ of
Possession over the properties covered by Transfer Certificates of Title Nos. N-163455, N-166349 & N-
166350 issue in favor of the petitioner METROPOLITAN BANK & TRUST COMPANY to be implemented by
the Deputy Sheriff of Branch 223, Regional Trial Court of Quezon City by placing the petitioner in
possession over the parcels of land with all its improvements.
On September 24, 2001, Metrobank posted the required bond. Consequently, a writ of possession was
issued on October 9, 2001. This was partially implemented as to TCT No. N-163455, as evidenced by the
Turn-Over Receipt8 dated December 13, 2002. The writ over the two remaining properties, under TCT
Nos. N-166349 and N-166350, were subsequently implemented as evidenced by the Turn-Over
Receipt9 dated December 3, 2003.
Meanwhile, on April 3, 2002, petitioner Eduardo L. Rayo filed a complaint 10 docketed as Civil Case No.
Q02-46514 against Metrobank for Nullification of Real Estate Mortgage Contract(s) and Extrajudicial
Foreclosure Sale, in the RTC, Branch 99, Quezon City.
On May 13, 2004, petitioner Rayo filed with the Court of Appeals a Petition 11 for Annulment of Judgment
on the ground of "absolute lack of due process." Petitioner alleged that his predecessor, Louisville, was
not notified of the proceedings and that Section 7 12 (ex parte motion or petition for the issuance of a writ
of possession) of Act No. 3135 is unconstitutional.
On June 15, 2004, the Court of Appeals denied the petition for lack of merit. The Court of Appeals ruled
that petitioner is neither the registered owner nor the successor-in-interest of the registered owner;
hence, not a real party-in-interest. It also ruled that there is no basis to challenge the constitutionality of
Section 7 of Act No. 3135, as amended as it constitutes a collateral attack against said provision. Further,
petitioner availed of the wrong remedy in filing Civil Case No. Q02-46514. Petitioner sought
reconsideration, but was likewise denied.
Petitioner now comes before us raising the following as primary issue:
WHETHER OR NOT SECTION 7 OF ACT NO. 3135 IS CONTRARY TO THE DUE PROCESS
PROVISION OF THE PHILIPPINE CONSTITUTION CONSIDERING THAT SUCH SECTION 7 OF
THE LAW PROVIDES OR ALLOWS, ACCORDING TO THIS HONORABLE COURT, FOR AN EX-
PARTE PROCEEDING WHICH IS A "JUDICIAL PROCEEDING BROUGHT FOR THE BENEFIT OF
ONE PARTY ONLY, AND WITHOUT NOTICE TO, OR CONSENT BY ANY PERSON ADVERSELY
INTERESTED" "OR A PROCEEDING WHEREIN RELIEF IS GRANTED WITHOUT AN
OPPORTUNITY FOR THE PERSON AGAINST WHOM THE RELIEF IS SOUGHT TO BE HEARD," AS
HELD IN THE CASE OF GOVERNMENT SERVICE INSURANCE SYSTEM VS. COURT OF APPEALS, 169
SCRA 244 @ 255, JANUARY 20, 1989.13
He also raises the following as secondary issues:
I. WHETHER OR NOT THE PETITIONER HAS THE LEGAL PERSONALITY TO SEEK THE ANNULMENT OF
JUDGMENT IN [THE] SUBJECT LRC CASE NO. Q-13915(01).
II. WHETHER OR NOT PRIVATE RESPONDENT VIOLATED THE RULE AGAINST FORUM-SHOPPING WHEN
IT DID NOT INFORM THE HONORABLE BRANCH 223 OF THE REGIONAL TRIAL COURT OF QUEZON CITY
REGARDING THE FILING OF CIVIL CASE NO. Q-02-46514 FOR NULLIFICATION OF REAL ESTATE
MORTGAGE CONTRACT AND THE EXTRA-JUDICIAL FORECLOSURE SALE OF THE SAME SUBJECT REAL
PROPERTIES AND THE PENDENCY OF THE SAME BEFORE THE HONORABLE BRANCH 99 OF THE SAME
REGIONAL TRIAL COURT.14
Stated simply, the issues raised are: (1) Does petitioner have the legal personality in the annulment of
judgment proceedings? (2) Is Section 7 of Act No. 3135, as amended, unconstitutional? (3) Is respondent
guilty of forum-shopping?
Petitioner insists that contrary to the ruling of the Court of Appeals, he has the legal personality to
institute the annulment of judgment case against Metrobank, considering that the March 25, 2002 deed
of assignment he entered into with Louisville and Winston Linwy L. Chua makes him a co-assignee over
the subject real properties.
For its part, Metrobank claims that it was not a party to the deed of assignment among Louisville, Chua
and petitioner, hence, it has no privity of contract with petitioner Rayo. Moreover, Metrobank points out
that the real properties had already been extrajudicially foreclosed when petitioner and his assignors
executed the deed of assignment.
Under Section 2,15 Rule 3 of the Rules of Court, every action must be prosecuted or defended in the name
of the real party-in-interest, or one "who stands to be benefited or injured by the judgment in the
suit."16 A real party-in-interest is one with "a present substantial interest" which means such interest of a
party in the subject matter of the action as will entitle him, under the substantive law, to recover if the
evidence is sufficient, or that he has the legal title to demand. 17
Now, is petitioner Rayo a real party-in-interest? Initially, we recognized herein petitioner as the co-
assignee of the subject real properties as shown in the March 25, 2002 deed of assignment. However,
while petitioner would be injured by the judgment in this suit, we find that petitioner has no present
substantial interest to institute the annulment of judgment proceedings and nullify the order granting the
writ of possession.
First, there was no violation of petitioner’s right to constitutional due process. In a long line of cases, 18 we
have consistently ruled that the issuance of a writ of possession in favor of the purchaser in a foreclosure
sale of a mortgaged property under Section 7 of Act No. 3135, as amended is a ministerial duty of the
court. The purchaser of the foreclosed property, upon ex parte application and the posting of the required
bond, has the right to acquire possession of the foreclosed property during the 12-month redemption
period and with more reason, after the expiration of the redemption period.
An ex parte petition for the issuance of a writ of possession under Section 7 of Act No. 3135 is not,
strictly speaking, a "judicial process" as contemplated in Article 433 19 of the Civil Code. It is a judicial
proceeding for the enforcement of one’s right of possession as purchaser in a foreclosure sale. It is not an
ordinary suit filed in court, by which one party "sues another for the enforcement of a wrong or protection
of a right, or the prevention or redress of a wrong." It is a non-litigious proceeding authorized in an
extrajudicial foreclosure of mortgage pursuant to Act No. 3135, as amended, and is brought for the
benefit of one party only, and without notice to, or consent by any person adversely interested. It is a
proceeding where the relief is granted without requiring an opportunity for the person against whom the
relief is sought to be heard. No notice is needed to be served upon persons interested in the subject
property.20
Second, in the deed of assignment, petitioner also acknowledged that the subject real properties were
already sold at various extrajudicial foreclosure sales and bought by Metrobank. Clearly, petitioner
recognized the prior existing right of Metrobank as the mortgagee-purchaser over the subject real
properties.21 Actual knowledge of a prior mortgage with Metrobank is equivalent to notice of
registration22 in accordance with Article 212523 of the Civil Code. Conformably with Articles 1312 24 and
212625 of the Civil Code, a real right or lien in favor of Metrobank had already been established, subsisting
over the properties until the discharge of the principal obligation, whoever the possessor(s) of the land
might be.26 As petitioner is not a party whose interest is adverse to that of Louisville, there was no bar to
the issuance of a writ of possession to Metrobank. It does not matter that petitioner was not specifically
named in the writ of possession nor notified of such proceedings.1avvphi1
Third, we also note that petitioner availed of the wrong remedy in filing Civil Case No. Q02-46514, for
nullification of real estate mortgage and extrajudicial foreclosure sale, more than six (6) months after the
issuance of the writ of possession considering the mandate of Section 8 27 of Act No. 3135, as amended.
Hence, even petitioner’s action for annulment of judgment cannot prosper as it cannot be a substitute for
a lost remedy.
Now, petitioner is challenging the constitutionality of Section 7 of Act No. 3135, as amended. He avers
that Section 7 violates the due process clause because, by the mere filing of an ex parte motion in the
proper cadastral court, the purchaser in a foreclosure sale is allowed to obtain possession of the
foreclosed property during the redemption period.
The Court of Appeals ruled that petitioner’s attempt to challenge the constitutionality of Section 7 of Act
No. 3135, as amended, constitutes a collateral attack that is not allowed. We fully agree with the
appellate court’s ruling. For reasons of public policy, the constitutionality of a law cannot be attacked
collaterally.28
With regard to forum-shopping; forum-shopping is the filing of multiple suits involving the same parties
for the same cause of action, either simultaneously or successively, for the purpose of obtaining a
favorable judgment. It exists where the elements of litis pendentia are present or where a final judgment
in one case will amount to res judicata in another.29 The issuance of the writ of possession being a
ministerial function, and summary in nature, it cannot be said to be a judgment on the merits. It is only
an incident in the transfer of title. Hence, a separate case for annulment of mortgage and foreclosure sale
cannot be barred by litis pendentia or res judicata.30 Clearly, insofar as LRC Case No. Q-13915(01) and
Civil Case No. Q02-46514 are concerned, Metrobank is not guilty of forum-shopping.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Resolutions dated June 15, 2004 and
August 23, 2004 of the Court of Appeals in CA-G.R. SP No. 83895 are hereby AFFIRMED. Costs against
the petitioner.
G.R. No. 121943            March 24, 2003
CHINA BANKING CORPORATION, petitioner,
vs.
SPOUSES OSCAR and LOLITA ORDINARIO, respondents.
Records show that, on various dates, petitioner China Banking Corporation granted three (3) loans in the
total sum of P27,353,000.00 to TransAmerican Sales and Exposition, Inc. (TransAmerican) owned and
controlled by spouses Jesus and Lorelie Garcia. The loans were secured by real estate mortgages
constituted by Jesus Garcia (with the consent of his wife) on his forty-five (45) parcels of land covered by
TCT Nos. 7289 to 7291, 7613 to 7615, 7617, 7618, and 7621 to 7657, all of the Registry of Deeds of
Quezon City. The contracts of mortgage were all registered in the same Registry.
For failure of TransAmerican to pay its loans, petitioner bank foreclosed extrajudicially the three real
estate mortgages. On August 27, 1990, the mortgaged properties were sold at public auction for
P38,004,205.01 to petitioner bank, being the highest bidder. On September 3, 1990, the Certificate of
Sale was registered in the Registry of Deeds of Quezon City.
On October 4, 1990, petitioner bank filed with the Regional Trial Court (RTC) of Quezon City, Branch 90,
an ex parte verified petition for issuance of a writ of possession, docketed as LRC Case No. Q-4534(90).
On April 10, 1991, the trial court issued an order granting the petition and placing petitioner bank in
possession of the 45 parcels of land, thus:
"ACCORDINGLY, upon posting by the petitioner China Banking Corporation of the requisite bond in the
amount of P792,000.00, let a writ of possession be issued commanding the placing in possession of
said petitioner over those parcels of land covered by Transfer Certificate of Title Nos. 7289, 7290, 7291,
7613, 7614, 7615, 7617, 7618, 7621, 7622, 7623, 7624, 7625, 7626, 7627, 7628, 7629, 7630, 7631,
7632, 7633, 7634, 7635, 7636, 7637, 7638, 7639, 7640, 7641, 7642, 7643, 7644, 7645, 7646, 7647,
7648, 7649, 7650, 7651, 7652, 7653, 7654, 7655, 7656, and 7657, all of the Registry of Deeds of
Quezon City, together with all the improvements thereon, ejecting therefrom Jesus V. Garcia and all
persons claiming right under him."
On July 19, 1991, petitioner posted the required surety bond which was approved by the RTC.
On August 16, 1991, spouses Oscar and Lolita Ordinario, herein respondents, filed a motion for
reconsideration praying that the parcel of land with its improvement covered by TCT No. 7637 be
excluded from the above order. They alleged, among others, that they are indispensable parties in the
case, claiming that in November 1989, they purchased the land covered by TCT No. 7637 on which was
constructed their townhouse; that the petition for a writ of possession does not bind them for lack of
notice; that petitioner bank should have filed an action for recovery of possession, not an ex-
parte petition for a writ of possession since there are parties in actual possession of the lots involved;
that they filed with the Housing and Land Use Regulatory Board (HLURB) a complaint for the delivery of
title and damages against petitioner bank, Jesus Garcia and TransAmerican; and that the mortgage
foreclosure cannot prevail over their superior right as legitimate buyers of the area covered by TCT No.
7637.
On August 23, 1991, petitioner bank filed its opposition to respondents’ motion for reconsideration. It
alleged that the trial court, acting as a land registration court with limited jurisdiction, cannot pass upon
the merits of respondents’ motion; that respondents should have filed a separate action; that the assailed
order dated April 10, 1991 directing the issuance of a writ of possession had become final; and that the
proceedings, being in rem, bind herein respondents.
On September 21, 1992, the trial court issued an order denying respondents’ motion for reconsideration.
On appeal by respondents, the Court of Appeals rendered the assailed Decision dated March 20, 1995,
the dispositive portion of which reads:
"WHEREFORE, the appealed order dated September 21, 1992 of the lower court in LRC Case No. Q-
4534 is SET ASIDE, and a new judgment is issued by the Court granting movants-appellants’ motion for
reconsideration to the effect of excluding from the lower court’s orders dated April 10, 1991 and
September 21, 1992, movants-appellants’ property covered by Transfer Certificate of Title No. 7637 as
the same property should not have been covered by the writ of possession issued in the said orders of
the lower court."
Petitioner bank moved for a reconsideration but it was denied by the Appellate Court in a Resolution
dated September 6, 1995.
Hence, the instant recourse, petitioner raising the following assignments of error :
"First. Respondent Court gravely erred in setting aside the order dated September 21, 1992 in LRC
Case No. Q-4534 which granted the petition ex-parte for a writ of possession of the forty-five parcels of
land to include the property covered by Transfer Certificate of Title No. 7637.
"Second. Respondent Court committed a grave error when it failed to consider that the third party
referred to in the case of PNB vs. Adil, 118 SCRA 110, is a third party actually holding the
property adversely to the owner.
"Third. Respondent Court committed a grave error when it failed to consider that the April 10, 1991
order is already final and executory, hence, can no longer be disturbed."
Under Section 7 of Act No. 3135, the purchaser in a foreclosure sale is entitled to possession of the
property.2 Thus the writ prayed for by petitioner granting it possession has to be issued  as a matter of
course.3 This Court has consistently ruled that it is a ministerial duty of the trial court to grant such
writ of possession. 4 No discretion is left for the trial court. Any question regarding the cancellation of
the writ or in respect of the validity and regularity of the public sale should be determined in a
subsequent proceeding as outlined in Section 8 of Act No. 3135. 5 Consequently, respondents’ motion for
reconsideration of the trial court’s order dated April 10, 1991 granting the writ of possession must be
denied being bereft of merit.
Section 7 of Act No. 3135, as amended,6 provides:
"Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First
Instance (now RTC) of the province or place where the property or any part thereof is situated, to give
him possession thereof during the redemption period, furnishing bond in an amount equivalent to the
use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the
sale was made without violating the mortgage or without complying with the requirements of this Act.
Such petition shall be made under oath and filed in the form of an ex parte motion in the registration or
cadastral proceedings if the property is registered, or in special proceedings in the case of property
registered under the Mortgage Law xxx, and in each case the clerk of the court shall, upon the filing of
such petition, collect the fees specified xxx, and the court shall upon approval of the bond, order that a
writ of possession issue, addressed to the sheriff of the province in which the property is situated, who
shall execute said order immediately." (underscoring supplied).
The above provision is not without exception. Under Section 33, Rule 39 of the 1997 Rules of Civil
Procedure, as amended, the possession of the foreclosed property may be awarded to the purchaser or
highest bidder "unless a third party is actually holding the property adversely to the judgment
debtor."7 Assuming arguendo that respondent spouses are adverse third parties, as they so averred,
Section 16 of the same Rule reserves to them the remedies of (1)  terceria to determine whether the
sheriff has rightly or wrongly taken hold of the property not belonging to the judgment debtor or obligor
and (2) an independent "separate action" to vindicate their claim of ownership and/or possession over the
foreclosed property.8 Section 16 of Rule 39 provides:
"Sec. 16. Proceedings where property claimed by third person. – If property levied on is claimed by any
person other than the judgment obligor or his agent, and such person makes an affidavit of his title
thereto or right to the possession thereof, stating the grounds of such right or title, and serves the
same upon the officer making the levy, and copy thereof upon the judgment obligee, the officer shall
not be bound to keep the property, unless such judgment obligee, on demand of the officer, files a
bond approved by the court to indemnify the third-party claimant in a sum not less than the value of
the property levied on. In case of disagreement as to such value, the same shall be determined by the
court issuing the writ of execution. No claim for damages for the taking or keeping of the property may
be enforced against the bond unless the action therefor is filed within one hundred twenty (120) days
from the date of the filing of the bond.
"The officer shall not be liable for damages for the taking or keeping of the property, to any third party
claimant if such bond is filed. Nothing herein contained shall prevent such claimant or any third person
from vindicating his claim to the property in a separate action, or prevent the judgment obligee from
claiming damages in the same or a separate action against a third-party claimant who filed a frivolous
or plainly spurious claim. xxx."
Under the above Rule, a third-party claimant or a stranger to the foreclosure suit, like respondents
herein, can opt to file a remedy known as terceria against the sheriff or officer effecting the writ by
serving on him an affidavit of his title and a copy thereof upon the judgment creditor. By the  terceria, the
officer shall not be bound to keep the property and could be answerable for damages. A third-party
claimant may also resort to an independent "separate action," the object of which is the recovery of
ownership or possession of the property seized by the sheriff, as well as damages arising from wrongful
seizure and detention of the property despite the third-party claim. If a "separate action" is the recourse,
the third-party claimant must institute in a forum of competent jurisdiction an action, distinct and
separate from the action in which the judgment is being enforced, even before or without need of filing a
claim in the court that issued the writ. Both remedies are cumulative and may be availed of
independently of or separately from the other. Availment of the terceria is not a condition sine qua non to
the institution of a "separate action."9
Thus, respondents’ resort to a motion for reconsideration is obviously a procedural misstep.
We thus hold that the Court of Appeals committed palpable error when it granted respondent’s motion for
reconsideration and set aside the orders dated April 10, 1991 and September 21, 1992 of the RTC in LRC
Case No. Q-4534 (90), thus excluding the land covered by TCT No. 7637 from the coverage of the writ of
possession issued in favor of petitioner bank.
WHEREFORE, the instant petition is GRANTED. The appealed Decision and Resolution of the Court of
Appeals dated March 20, 1995 and September 6, 1995 in CA-G.R. CV No. 40953 are REVERSED and SET
ASIDE. The orders of the RTC, Branch 90, Quezon City, in LRC Case No. Q-4534 (90) directing the
issuance of a writ of possession in favor of petitioner bank are AFFIRMED.
G.R. No. L-53798 November 8, 1988
ALBERTO C. ROXAS and NENITA DE GUIA, petitioners,
vs.
MARINA BUAN, COURT OF FIRST INSTANCE OF ZAMBALES, BRANCH 1 AND THE PROVINCIAL
SHERIFF OF ZAMBALES THRU HIS DEPUTY, ATILANO G. NANQUIL, respondents.
The antecedent facts are as follows: On August 19, 1975, Arcadio Valentin constituted a Deed of Real
Estate Mortgage on a two-storey residential house and lot in favor of private respondent, Marina Buan, to
secure the loan of P78,328.08 granted by the latter to the former.
Upon failure of Valentin to pay the loan on its maturity date, Buan applied for an extrajudicial foreclosure
of mortgage which was duly published and advertised for public auction by Olongapo City Sheriff Ramon
Y. Pardo on September 29, 1977. Private respondent was the winning bidder in the auction sale and the
City Sheriff issued a Certificate of Sale duly registered with the Office of the Register of Deeds on October
26, 1977. Valentin had a period of one (1) year from the date of registration within which to redeem the
mortgaged properties. The period for the redemption of the property in question having expired without
the property being redeemed by Valentin, a Final Bill of Sale was thereafter issued by the City Sheriff or,
November 3, 1978.
After Valentin failed to deliver possession of the properties, Buan filed before the Court of First Instance
of Zambales a "Petition for the Issuance of a Writ of Possession." As this was not contested, a decision
was rendered by respondent court on June 19, 1979, the dispositive portion of which reads:
WHEREFORE, let the corresponding writ of possession be issued ordering the Provincial Sheriff of
Zambales or any of his lawful deputies to remove the respondent or any person claiming interest under
him from said house and lot located at No. 9-B Katipunan St., East Bajac-Bajac, Olongapo City, and to
place the petitioner in possession thereon. The respondent is also ordered to pay the petitioner the
amount of P1,000.00 as reasonable attorney's fees, plus costs of suit.
A writ of possession addressed to the Provincial Sheriff of Zambales was issued on August 22, 1979. The
return on the writ as embodied in the Sheriff's Report dated August 28, 1979 showed that when Deputy
Sheriff Atilano G. Nanquil tried to execute the writ of possession, he found that petitioners were
occupying the premises and refused to vacate the same, on the alleged claim of Atty. Roxas that he
bought the house and lot in question from Valentin in the amount of P100,00.00. Atty. Roxas also told
Sheriff Nanquil that he introduced improvements consisting of one bungalow house and one store and
that Valentin is no longer residing in the premises [See Petition, Annex "F", p. 20, Rollo].
In view of the petitioners' refusal to abide by the writ of possession, private respondent filed on August
30, 1979 a "Motion for Contempt" against Alberto Roxas and Nenita de Guia. On September 12, 1979, the
petitioners through counsel filed with the respondent court their answer thereto arguing that they cannot
be held guilty of contempt of court because they were not made parties to the main action.
On January 16, 1980, the respondent trial court, finding merit in petitioners' position that they could not
be declared in contempt, issued an order the dispositive portion of which reads as follows:
WHEREFORE, the petition for contempt of Court against the adverse claimant Atty. Alberto Roxas and
Mrs. Nenita de Guia is DISMISSED. The respondents Atty. Alberto Roxas and Mrs. Nenita de Guia are,
however, ordered to immediately vacate the disputed house and lot in question within a period of
fifteen (15) days from receipt of this Order under pain of contempt of Court. [p. 31, Rollo.]
Disagreeing with the portion of the order directing them to vacate the property, petitioners filed a Motion
for Reconsideration on January 28, 1980. However, the respondent court, denied their motion on
February 28, 1980.
Thus, petitioners filed the instant petition for certiorari and prohibition on April 12, 1979. This Court
issued a Temporary Restraining Order on May 19, 1980.
The petitioners maintain that the respondent court gravely abused its discretion amounting to lack of
jurisdiction in issuing the order complained of, upon the theory that it was predicated upon a writ of
possession which was ineffective as against them, being third parties. Thus, the order is null and void.
They also insist that the private respondent should file an independent action to recover the property,
otherwise, there will be a violation of due process of law if they are not given their day in court to prove
their adverse claim.
The Court finds petitioners' contention without any legal or factual basis.
In the extrajudicial foreclosure of real estate mortgages, possession of the property may be awarded to
the purchaser at the foreclosure sale during the pendency of the period of redemption under the terms
provided in Sec. 6 of Act 3135, as amended (An Act to Regulate the Sale of Property Under Special
Powers Inserted In or Annexed to Real Estate Mortgages), or after the lapse of the redemption period,
without need of a separate and independent action [IFC Service Leasing and Acceptance Corp. v. Nera,
G.R. No.
L-21720, January 30, 1967, 19 SCRA 181]. This is founded on his right of ownership over the property
which he purchased at the auction sale and his consequent right to be placed in possession thereof.
This rule is, however, not without exception. Under Sec. 35, Rule 39 of the Revised Rules of Court, which
was made applicable to the extrajudicial foreclosure of real estate mortgages by Sec. 6 Act No. 3135, the
possession of the mortgaged property may be awarded to a purchaser in extrajudicial foreclosures
"unless a third party is actually holding the property adversely to the judgment debtor ." As explained by
the Court in IFC Service Leasing and Acceptance Corp. v. Nera, supra:
... The applicable provision of Act No. 3135 is Section 6 which provides that, in cases in which an
extrajudicial sale is made, "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." Sections 464-466 of the Code of Civil Procedure
 were superseded by Sections 25-27 and Section 31 of Rule 39 of the Rules of Court which in turn were
replaced by Sections 29-31 and Section 35 of Rule 39 of the Revised Rules of Court. Section 35 of the
Revised Rules of Court expressly states that "If no redemption be made within twelve (12) months after
the sale, the purchaser, or his assignee, is entitled to a conveyance and possession of the
property ..." The possession of the property shall be given to the purchaser or last redemptioner by the
officer unless a party is actually holding the property adversely to the judgment debtor.
In the instant case, respondent Deputy Sheriff Atilano G. Nanquil reported the following in his return on
the writ of possession:
This certifies that I have personally served a copy of the Writ of Possession together with a copy of the
Notice to vacate issued in the above-entitled case upon the defendant Arcadio Valentin and upon the
adverse occupants Atty. Alberto Roxas and Mrs. Nenita de Guia on August 23, 1979.
That undersigned had explained to them the contents of said writ;
That I ordered the adverse occupants Atty. Alberto Roxas to vacate the premises of the house and lot in
question on or before August 27, 1979;
That up to the present, Atty. Alberto Roxas and Mrs. Nenita de Guia refused to vacate the same,
claiming that the house and lot in question was bought by the former from the said defendant in the
amount of P100,000.00 and he also introduced improvements thereon consisting of one (1) bungalow
house and one (1) store;
That defendant Arcadio Valentin is no longer residing on the properties in question. [p. 20, Rollo.]
Contending that petitioner Roxas is a party actually holding the property adversely to the debtor, Arcadio
Valentin, petitioners argue that under the provisions of Act No. 3135 they cannot be ordered to vacate
the property. Hence, the question of whether, under the circumstances, petitioner Roxas indeed is a party
actually holding the property adversely to Valentin.
It will be recalled that Roxas' possession of the property was premised on its alleged sale to him by
Valentin for the amount of P100,000.00. Assuming this to be true, it is readily apparent that Roxas holds
title to and possesses the property as Valentin's transferee. Any right he has to the property is
necessarily derived from that of Valentin. As transferee, he steps into the latter's shoes. Thus, in the
instant case, considering that the property had already been sold at public auction pursuant to an
extrajudicial foreclosure, the only interest that may be transferred by Valentin to Roxas is the right to
redeem it within the period prescribed by law. Roxas is therefore the  successor-in-interest of Valentin, to
whom the latter had conveyed his interest in the property for the purpose of redemption [Rule 39, Sec.
29 (a) of the Revised Rules of Court; Magno v. Viola, 61 Phil. 80 (1934); Rosete v. Prov. Sheriff of
Zambales, 95 Phil. 560 (1954).] Consequently, Roxas' occupancy of the property cannot be considered
adverse to Valentin.
Thus, in Belleza v. Zandaga [98 Phil. 702 (1956)], the Court held that where the purchaser in an
execution sale has already received the definitive deed of sale, he becomes the owner of the property
bought and, as absolute owner, he is entitled to its possession and cannot be excluded therefrom by one
who merely claims to be a "successor-in-interest of the judgment debtor," unless it is adjudged that the
alleged successor has a better right to the property than the purchaser at the execution sale. Stated
differently, the purchaser's right of possession is recognized only as against the judgment debtor and his
successor-in-interest but not against persons whose right of possession is adverse to the latter. The rule
was reiterated in Guevara v. Ramos [G.R. No. L-24358, March 31, 1971, 38 SCRA 194].
The rule in Belleza, although relating to the possession of property sold in execution sales under what is
now Sec. 35, Rule 39 of the Revised Rules of Court, is also applicable to the possession of property sold
at extrajudicial foreclosure sales pursuant to Sec. 6 of Act No. 3135 [see IFC Service Leasing and
Acceptance Corp. v. Nera, supra]. Thus, as petitioner Roxas is not a party holding the property adversely
to Valentin, being the latter's successor-in-interest, there was no bar to the respondent trial court's
issuance of a w.-it of possession upon private respondent Buan's application.
It does not matter that petitioner Roxas was not specifically named in the writ of possession, as he
merely stepped into the shoes of Valentin, being the latter's successor-in-interest. On the other hand,
petitioner de Guia was occupying the house as Roxas' alleged tenant [Rollo, p. 24]. Moreover, respondent
court's decision granting private respondent Buan's petition for the issuance of a writ of possession
ordered the Provincial Sheriff of Zambales or any of his deputies to remove Valentin or any person
claiming interest under him" from the property [Rollo, p. 16]. Undeniably, petitioners fell under this
category.
As petitioners have failed to establish that grave abuse of discretion, as would warrant the issuance of the
writ of certiorari and prohibition prayed for, tainted the issuance of the assailed order, the petition must
fail.
WHEREFORE, the petition is hereby DISMISSED and the Temporary Restraining Order issued by the Court
on May 19, 1980 is LIFTED.
G.R. No. 154355             May 20, 2004
Spouses REMPSON SAMSON and MILAGROS SAMSON; and REMPSON REALTY & DEVELOPMENT
CORPORATION petitioners,
vs.
Judge MAURICIO M. RIVERA, in His Capacity as Presiding Judge of the Regional Trial Court of
Antipolo City, Branch 73; Atty. JOSELITA MALIBAGO-SANTOS, in Her Capacity as Ex Officio
Sheriff, RTC of Antipolo City; and LENJUL REALTY CORPORATION, respondents.
In denying the Petition, this Court applies the well-entrenched rule that the buyer in an extrajudicial
foreclosure sale is entitled to possession of the purchased property. Any question regarding the regularity
and validity of the mortgage and foreclosure sale may be determined only after the issuance of the writ of
possession.
The Facts
The pertinent facts are undisputed. Petitioner Spouses Rempson and Milagros Samson incurred from Far
East Bank and Trust Company (FEBTC) loan obligations, the principal of which amounted to fifty-five
million pesos (₱55,000,000).5 On October 10, 1994 and February 22, 1996, in order to secure the
payment of the loan obligations, Spouses Samson executed in favor of FEBTC two real estate mortgages
covering five parcels of commercial property located at Antipolo City, Rizal. 6
Petitioner spouses failed to settle their loan obligations. Thus, on May 16, 2000, FEBTC filed an
Application for Extra-Judicial Foreclosure of Real Estate Mortgage 7 before the Office of the Clerk of Court
and Ex-Officio Sheriff of the Regional Trial Court (RTC) of Antipolo City. 8 In their application, FEBTC
requested the said office to foreclose the two mortgages extrajudicially, in the manner and form
prescribed by Act 3135, as amended, to satisfy the debt of ₱72,219,158.45, inclusive of interest,
penalties and other charges.9
Acting on the application, the Office of the Clerk of Court and Ex-Officio Sheriff issued a Notice of Sheriff
Sale dated May 19, 2000, 10 setting the foreclosure sale on June 22, 2000. 11 There was only one bidder
during the foreclosure sale, so in accordance with AM 99-10-05-0,12 the sheriff postponed the auction to
July 5, 2000.13
On July 5, 2000, the auction sale proceeded with two bidders participating -- FEBTC and Lenjul Realty and
Development Corporation, with the latter declared as the highest bidder in the amount of eighty million
pesos (₱80,000,000).14 On July 11, 2000, a Certificate of Sheriff’s Sale was issued confirming the sale of
the foreclosed properties to the winning bidder. 15 Shortly thereafter, the Certificate of Sale was registered
with the Registry of Deeds of Antipolo City. 16 On February 19, 2001, new Certificates of Title over the
foreclosed properties were issued by the Register of Deeds of Antipolo City in favor of Lenjul Realty
Corporation.17
On April 3, 2001, Private Respondent Lenjul Realty filed a Petition for the Issuance of a Writ of
Possession, which sought an ex parte issuance of a writ of possession over the foreclosed
properties.18 The Petition was docketed as Land Registration Case No. 01-2698 and raffled to Branch 73
presided by Judge Mauricio M. Rivera. 19 On June 11, 2001 and June 15, 2001, Spouses Samson and
Rempson Corporation filed their respective Answer/Opposition. 20
While the Petition was pending, Spouses Samson and Rempson Corporation filed with the Antipolo City
RTC, an action for Annulment of Extra-Judicial Foreclosure and/or Nullification of Sale and the Certificates
of Title, plus Reconveyance and Damages with Prayer for a Temporary Restraining Order and/or Writ of
Preliminary Injunction. Petitioners filed it against Lenjul Realty Corporation, FEBTC, Bank of the Philippine
Islands, Joselita Malibao-Santos in her capacity as the clerk of court and ex officio sheriff of the Antipolo
City RTC, and the Register of Deeds of Antipolo City. The case was docketed as Civil Case No. 01-6219
and raffled to Branch 71 presided by Judge Felix S. Caballes. 21 On August 15, 2001, upon motion of
Petitioner Rempson Realty and Development Corporation, Judge Caballes issued an Order directing the
consolidation of the civil case with the land registration case. 22
On September 18, 2001, Judge Rivera issued an order denying the consolidation of the Petition for Writ of Possession and
the civil case for annulment of foreclosure. 23 On October 22, 2001 and December 4, 2001, respectively, Rempson
Corporation and Spouses Samson moved for a reconsideration of the September 18, 2001 Order denying consolidation. 24
On November 5, 2001, Judge Rivera gave due course to the Petition for the Issuance of a Writ of Possession and denied the
Opposition of Spouses Samson and Rempson Corporation. 25 Thus, they filed their respective Motions for Reconsideration on
December 4, 2001 and December 7, 2001. 26
On February 11, 2002, Judge Rivera denied reconsideration of the Order giving due course to the Petition for the Issuance
of the Writ of Possession and directed the issuance of such writ of possession. 27
On February 20, 2002, Judge Rivera issued an Order granting petitioners’ Motion for Reconsideration with regard to the
September 18, 2001 Order denying the consolidation of cases.28
On February 26, 2002, a Writ of Possession 29 was issued directing the sheriff of the Antipolo City RTC to place Lenjul Realty
Corporation in physical possession of the foreclosed properties. On the same date, the sheriff issued a Notice to
Vacate30 addressed to Rempson Corporation, ordering it to leave the properties on or before March 2, 2002.
On February 22, 2002, petitioners filed with the Court of Appeals the aforesaid Special Civil Action for Certiorari with
Prohibition/Mandamus under Rule 65 with an Application for Issuance of a Writ of Preliminary Injunction and/or Temporary
Restraining Order to annul the November 5, 2001 and the February 11, 2002 Orders of Judge Rivera. 31
Ruling of the Court of Appeals
The Court of Appeals ruled that certiorari was improper, because there was an adequate remedy in the ordinary course of
law. Citing Section 8 of Act No. 3135, it opined that petitioners’ remedy was to file a petition to set aside the foreclosure
sale and to cancel the writ of possession in LR Case No. 01-2698. The CA further noted that certiorari was premature
inasmuch as petitioners had failed to file a motion for reconsideration of the Order directing the issuance of the writ of
possession. 32
In denying the Motion for Reconsideration, the Court of Appeals held that the issuance of a writ of possession was a
ministerial function that was done upon the filing of the proper motion and the approval of the corresponding bond. 33 It
further ruled that prohibition did not lie to enjoin the implementation of the writ. 34
Hence this Petition. 35
The Issues
In their Memorandum, petitioners assign the following issues for our consideration:
"1.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera
ordering the immediate issuance of a writ of possession in favor of private respondent Lenjul Realty
Corporation without first requiring presentation of evidence and formal offer thereof;
"2.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera
upholding the validity of the issuance of new titles over the foreclosed properties in the name of Private
Respondent Lenjul Realty Corporation despite the fact that the consolidation of ownership therein was
done prior to the expiration of the 1-year period of redemption.
"3.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera
upholding the now 3-month period of redemption for juridical mortgagors under the General Banking
Act of Year 2000 and the application of said law retroactively as to violate the equal protection clause of
the [n]ew Constitution and the prohibition therein on non-impairment of contracts.
"4.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera
refusing consolidation of the annulment case pending in the sala of Judge Caballes with the case below
despite the fact that petitioners had already contested Private Respondent Lenjul Realty Corporation’s
presumed ownership over the foreclosed properties so that the issue of such presumed ownership
should first be resolved before the petition for writ of possession is heard.
"5.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera
giving due course to the petition for writ of possession despite the fact that Private Respondent Lenjul
Realty Corporation was not the winning bidder at the foreclosure sale, nor a transferee and/or
successor-in-interest of the rightful winning bidder Lenjul Realty and Development Corporation.
"6.) Whether or not the Court of Appeals had erroneously affirmed the ruling of x x x Judge Rivera
ignoring and disregarding existing rules of procedure and jurisprudence that foreclosed properties,
consisting of separate lots covered by individual transfer certificates of title, should be sold separately
and not en masse.
"7.) Whether or not the Court of Appeals had erred in dismissing the special civil action for certiorari on
grounds of perceived technicalities and/or alleged procedural imperfections rather than on its merits." 36
The issues to be addressed in this case are as follows: (1) whether the trial court committed grave abuse
of discretion in granting the Petition for the Issuance of a Writ of Possession; and (2) whether the filing of
a Petition for Certiorari with the Court of Appeals was the proper remedy.
The Court’s Ruling
The Petition has no merit.
First Issue: Writ of Possession
The Court of Appeals correctly sustained the issuance of the Writ of Possession. The issuance of the Writ
is explicitly authorized by Act 313537 (as amended by Act 4118), which regulates the methods of effecting
an extrajudicial foreclosure of mortgage.38 Section 7 thereof provides:
"Section 7. Possession during redemption period. – In any sale made under the provisions of this Act,
the purchaser may petition the [Regional Trial Court] where the property or any part thereof is
situated, to give him possession thereof during the redemption period, furnishing bond in an amount
equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it
be shown that the sale was made without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion
in the registration or cadastral proceedings if the property is registered, or in special proceedings in the
case of property registered under the Mortgage Law or under section one hundred and ninety-four of
the Administrative Code, or of any other real property encumbered with a mortgage duly registered in
the office of any register of deeds in accordance with any existing law, and in each case the clerk of the
court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered
Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of
possession issue, addressed to the sheriff of the province in which the property is situated, who shall
execute said order immediately."
Entitlement to Writ of Possession
Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of possession
during the redemption period by filing for that purpose an ex parte motion under oath, in the
corresponding registration or cadastral proceeding in the case of a property with torrens title. Upon the
filing of such motion and the approval of the corresponding bond, the court is expressly directed to issue
the writ.39
This Court has consistently held that the duty of the trial court to grant a writ of possession is
ministerial.40 Such writ issues as a matter of course upon the filing of the proper motion and the approval
of the corresponding bond. No discretion is left to the trial court. 41 Any question regarding the regularity
and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a
subsequent proceeding as outlined in Section 8 of Act 3135. 42 Such question cannot be raised to oppose
the issuance of the writ, since the proceeding is ex parte.43 The recourse is available even before the
expiration of the redemption period provided by law and the Rules of Court.44
The purchaser, who has a right to possession that extends after the expiration of the redemption
period,45 becomes the absolute owner of the property when no redemption is made. Hence, at any time
following the consolidation of ownership and the issuance of a new transfer certificate of title in the name
of the purchaser, he or she is even more entitled to possession of the property. 46 In such a case, the bond
required under Section 7 of Act 3135 is no longer necessary, since possession becomes an absolute right
of the purchaser as the confirmed owner. 47
The Petition for Writ of Possession Not Stayed by the Annulment Case
This Court has long settled that a pending action for annulment of mortgage or foreclosure does not stay
the issuance of a writ of possession. 48 Therefore, the contention of petitioners that the RTC should have
consolidated Civil Case No. 01-6219 with LR Case No. 01-2698 and resolved the annulment case prior to
the issuance of the Writ of Possession is unavailing.
Their reliance on Active Wood Products Co., Inc. v. Court of Appeals 49 is misplaced. In that case, the sole
issue was the consolidation of a civil case regarding the validity of the mortgage and a land registration
case for the issuance of a writ of possession. It did not declare that the writ of possession must be stayed
until the questions on the mortgage or the foreclosure sale were resolved. Moreover, the issue of
consolidation in the present case has become moot, considering that the trial court has already granted
it.
Second Issue: Proper Remedy
The Court of Appeals correctly declared that petitioners pursued the wrong remedy. A special civil action
for certiorari could be availed of only if the lower tribunal has acted without or in excess of jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction; and if there is no appeal or any
other plain, speedy, and adequate remedy in the ordinary course of law. 50
No Grave Abuse of Discretion
There is grave abuse when the court -- in the exercise of its judgment -- acts in a capricious, whimsical,
arbitrary or despotic manner equivalent to acting with lack of jurisdiction. 51 Considering that the trial
court issued the Writ of Possession in compliance with the express provisions of Act 3135, it cannot be
charged with having acted in excess of its jurisdiction or with grave abuse of discretion. 52
Since there was no grave abuse of discretion, petitioner should have filed an ordinary appeal instead of a
petition for certiorari. In GSIS v. CA,53 this Court held that "the wisdom or soundness of the x x x order
granting [the] writ of possession x x x is a matter of judgment [in] which the remedy is ordinary
appeal."54 An error of judgment committed by a court in the exercise of its legitimate jurisdiction is not
the same as "grave abuse of discretion." 55 Errors of judgment are correctible by appeal, while those of
jurisdiction are reviewable by certiorari.56
Available Remedy
Section 8 of Act 3135 provides the plain, speedy, and adequate remedy in opposing the issuance of a writ
of possession.57 The provision reads:
"Section 8. Setting aside of sale and writ of possession. – The debtor may, in the proceedings in
which possession was requested, but not later than thirty days after the purchaser was given
possession, petition that the sale be set aside and the writ of possession cancelled,  specifying
the damages suffered by him, because the mortgage was not violated or the sale was not made in
accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance
with the summary procedure provided for in section one hundred and twelve of Act Numbered Four
hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in his favor
of all or part of the bond furnished by the person who obtained possession. Either of the parties may
appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred
and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal."
A party may petition for the setting aside of a foreclosure sale and for the cancellation of a writ of
possession in the same proceedings where the writ of possession was requested. In petitioners’ case, the
filing of the Petition is no longer necessary because the pendency of Civil Case No. 01-6219 (which was
consolidated with the present case) already challenged the foreclosure sale.
Pending proceedings assailing the issuance of the writ, the purchaser in a foreclosure sale is entitled to
possession of property. If the trial court later finds merit in a petition to set the writ aside, it shall dispose
in favor of the mortgagor the bond furnished by the purchaser. 58
It should also be noted that prior to the filing of a petition for certiorari, a motion for reconsideration is
generally required.59 Petitioner may have filed a Motion for Reconsideration with regard to the trial court’s
Order giving due course to the Petition, but not with regard to the Order directing the issuance of a writ
of possession.
Finally, petitioners’ allegation that the RTC issued the Writ of Possession despite failing to receive
evidence is unsupported by the record. The documents submitted to this Court show sufficient basis for
the trial court to rule accordingly. Despite the ex parte nature of the proceedings, and aside from the oral
arguments, the RTC allowed petitioners to file pleadings to oppose the Petition for the issuance of the
Writ of Possession.
Other Issues
The other issues raised by petitioners are factual matters which, subject to certain exceptions not
applicable here,60 this Court does not review. Moreover, petitioners rely on factual matters on which the
trial court has yet to make any finding. The tenability of their arguments should be ventilated in Civil
Case No. 01-6219, an "Annulment of Extra-Judicial Foreclosure and/or Nullification of Sale and the
Certificates of Title, plus Reconveyance and Damages." Those factual issues cannot be ruled upon in
these proceedings.
WHEREFORE, the Petition is DENIED, and the assailed Resolutions of the Court of Appeals AFFIRMED.
Costs against petitioners.
G.R. No. L-24797             March 16, 1926
DOMICIANO TIZON, plaintiff-appellant,
vs.
EMILIANO J. VALDEZ and LUIS MORALES, sheriff of the Province of Tarlac, defendants-appellees.
This action was instituted in the Court of First Instance of the Province of Tarlac by Domiciano Tizon
against Emiliano J. Valdez and Luis Morales, the latter in the character of sheriff of Tarlac Province, for
the purpose of obtaining a declaration to the effect that the plaintiff is the owner of certain chattels,
consisting chiefly of a steam engine and boiler, described in the complaint, and to require the defendants
to deliver the same to the plaintiff, with damages for the detention thereof and costs. The trial court
having absolved the defendants from the complaint, the plaintiff appealed.
It appears that the personal property which is the subject of this action formerly belonged to one Leon
Sibal, Sr., by whom it was mortgaged, on September 14, 1920, to the defendant Valdez. On October 7,
1920, this mortgage was filed in the office of the register of the Province of Tarlac and was thereupon
duly registered in the registry of chattel mortgages. On May 18, 1921, Sibal again mortgaged the same
chattels to the plaintiff, Domiciano Tizon, whose mortgage was likewise duly registered in the chattel
mortgage registry of Tarlac in June, 1921. No question is made with respect to the validity or good faith
of either of these mortgages, but it should be stated that the mortgage to Valdez covered other property
in addition to the engine and boiler in question and the debt secured in said mortgage is recited therein to
be in the amount of P12,833.30, payable December 31, 1920, with interest from date of maturity at the
rate of 12 ½ per centum per annum, with a stipulation for 25 per centum of principal and interest to be
added in compensation for attorney's fee and expenses in case of the nonpayment of the debt at
maturity. When the stipulated date of payment arrived Sibal defaulted in the making of payment, and
Valdez thereupon instituted a civil action (case No. 2301) to recover the indebtedness, in connection with
which he sued out a writ of attachment and on June 24, 1921, caused the same to be levied upon the
property which is the subject of this action. The property, however, was not retained by the attaching
officer for the reason that Tizon gave a counter bond and lifted the attachment. The end of this civil
action was that, on March 7, 1923, Valdez recovered of Sibal the sum of P19,026.24, with interest at 12
_«_ per centum per annum on P15,187.12 from August 1, 1921. Upon this judgment Valdez caused an
execution to be issued, which, on April 24, 1924, was levied upon the property now in question, being the
same property included in Valdez's chattel mortgage.
Meanwhile Domiciano Tizon, proceeding under his own mortgage, had caused the sheriff to sell the same
property in a foreclosure proceeding conducted in conformity with the provisions of the Chattel Mortgage
law (Act No. 1508, sec. 14). The sale in these proceedings was effected on June 28, 1923, Tizon
becoming purchaser for the consideration of P1,000. As purchaser at his own foreclosure sale, Tizon
assumed possession of the property, and it was found in his possession when the sheriff levied upon it by
virtue of the execution issued in the civil case No. 2301, above mentioned. At the time this levy was
made, or soon thereafter, Tizon filed a claim with the sheriff, asserting that the property belonged to him
and was not liable to be taken upon an execution directed against Sibal. The sheriff, however, under
indemnity from Valdez, retained the property and sold it in due course at an execution sale, Valdez
becoming purchaser at the price of P500. Pursuant to this sale Valdez now took possession, and Tizon
presently instituted the present action for the purpose stated in the first paragraph of this opinion.
The facts of the case are not in dispute and the question presented is one of law purely. The trial court
correctly observed that the relation between Valdez and Tizon is that of two rival mortgagees under first
and second mortgages. In the appellant's brief attention is directed to the fact that — contrary to the
requirement of the Chattel Mortgage Law — Tizon's mortgage does not set forth the fact of the existence
of the previous mortgage; and from this the conclusion seems to be drawn that Tizon's mortgage should
not be denominated a second mortgage. But it is certainly not a first mortgage, and it is inferior to
Valdez's mortgage because executed subsequent to the date when Valdez's mortgage was put of record.
The violation of law by the mortgagor in failing to mention in the second mortgage the existence of the
prior mortgage made him amenable to the penal provision contained in section 12 of the Chattel
Mortgage Law but could not affect the priority of the earlier mortgage.
The main contention of the appellant is directed to the supposed effect of the institution of a civil action
by Valdez upon the mortgage debt, and the suing out of an attachment and execution by him against the
property which was the subject of the mortgage, instead of his proceeding to foreclose his first mortgage
under the provisions of the Chattel Mortgage Law. In this connection it is claimed for the appellant that
the election of Valdez to proceed against the debtor in an ordinary civil action constituted a waiver of his
rights under the mortgage, and it is said that by this waiver the rights of Tizon under the second
mortgage became superior. This argument is based on the supposed inconsistency of the remedies by
civil action and by extrajudicial foreclosure, and in particular it is contended that the attachment lien is
incompatible with the lien of the mortgage. In support of this proposition reference is made to a line of
decision from certain American courts holding that a mortgage creditor loses his lien by attaching the
property which is subject to the mortgage. (Dix vs. Smith [Okla.], 50 L. R. A. 714.) But, as shown by the
author of the annotation appended to that case in the volume cited, that doctrine rests upon strictly
technical grounds and can only be maintained by adhering to two common-law rules neither of which
prevails in this jurisdiction, namely, first, that after the default of the mortgagor in the payment of the
debt the mortgagee has the legal title to the mortgaged property; and, secondly, that the equity of
redemption which pertains to the mortgagor is not subject to be taken in execution at the instance of his
creditor. Accordingly we find that it is only in those American jurisdictions where these antiquated ideas
prevail that the courts have adopted the rule stated in Dix vs. Smith, supra. (5 R. C. L., 459; 11 C. J.,
687, 688.)
But it is the settled doctrine of this court that a chattel mortgage, though written in the form of a
conditional sale defeasible upon performance of a condition subsequent, is really no more than a mere
security for a debt and creates only a lien in favor of the creditor. (Bachrach Motor Co. vs. Summers, 42
Phil., 3.) At the same time a writ of execution in this jurisdiction reaches both legal and equitable
interests, with the result that the equity of redemption of the mortgagor will pass to the purchaser at an
execution sale. The better rule, we think, and the rule which is certainly more in accord with other
doctrines here prevailing is that announced by the Supreme Court of Ohio in Green vs. Bass (83 Ohio St.,
378; Ann. Cas. [1912], 828). It was there declared that the owner of a senior mortgage does not, by
recovering a judgment on the note which it secures and causing execution to be levied on the mortgaged
chattels, waive the priority of his lien. And the authorities cited in the note to this case a printed in
Annotated Cases show that this doctrine generally prevails in America.

But it is suggested that the suing out of an attachment by Valdez at the beginning of his civil action to
recover upon the debt secured by his mortgage introduces a vital difference; and attention is directed to
the fact that upon suing out on attachment under section 426 of the Code of Civil Procedure the creditor
is required to make oath that he has no other sufficient security for the claim sought to be enforced by
the action. The making of such affidavit shows an election on the part of the creditor, so it is contended,
to waive the mortgage lien. This argument in our opinion is not valid for two reasons, first, because the
creditor is not required to state peremptorily under oath that he has no other security at all but only that
he has no other sufficient security; and, secondly, because this court has held that the provision which
prohibits the issuance of an attachment when there is other sufficient security has no application where
the attachment is levied upon the property constituting the security in an action to recover the debt so
secured. (Pepperell vs. Taylor, 5 Phil., 536.) From whatever angle the matter be viewed we can discover
no sound reason for holding that either the suing out of the attachment or the subsequent sale of the
property under execution had the effect of destroying the prior mortgage lien, that is, as between the
parties to this lawsuit. What Valdez may have obtained by purchasing at the execution sale, and whether
he obtained anything at all, is a different question, and one that is really not necessary to be here
decided. It is enough to say that the first mortgage in favor of Valdez continues to subsist unaffected by
what happened as a result of the civil action. If anybody had been misled to his prejudice as a
consequence of the course pursued by Valdez, this would have constituted a ground of estoppel; but
nothing of the sort appears.

We have before us then the simple situation of a first mortgagee in possession attacked by the second
mortgagee after foreclosure of the second mortgage; and a little reflection will show, we think, that the
second mortgagee cannot prevail. After a first mortgage is executed there remains in the mortgagor a
mere right of redemption, and only this right passes to the second mortgagee by virtue of the second
mortgage. As between the first and second mortgagees, therefore, the second mortgagee has at most
only the right to redeem, and even when the second mortgagee goes through the formality of an
extrajudicial foreclosure, the purchaser acquires no more than the right of redemption from the first
mortgagee.

The remedy of the plaintiff in this case must therefore be limited to the right to redeem by paying off the
debt secured by the first mortgage. But the action is not directed to this end, and in the controversy over
the title the purchaser at the foreclosure sale under the second mortgage must fail. Valdez, as first
mortgagee, even supposing that he acquired nothing by his purchase at his own execution sale, is yet
entitled to possession for the purpose at least of foreclosing his first mortgage (Bachrach Motor Co., vs.
Summers, 42 Phil., 3), the lien of which, as we have already demonstrated, still subsists; and since
Valdez is entitled to possession Tizon cannot maintain an action to recover the property.

For the reasons stated the judgment appealed from must be affirmed, and it so ordered, with costs
against the appellant.