Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. NO. 144435 February 6, 2007
GUILLERMINA BALUYUT, Petitioner,
vs.
EULOGIO POBLETE, SALUD POBLETE and THE HON.COURT OF APPEALS,
Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeking to reverse the Decision1 of the Court of Appeals (CA) dated December
21, 1999 and its Resolution2 of August 4, 2000 in CA-G.R. CV No. 51534. The assailed
CA Decision affirmed the Decision of the Regional Trial Court (RTC) of Pasig, Branch
167 which dismissed herein petitioner’s Complaint in Civil Case No. 52268, while the
questioned Resolution denied petitioner’s Motion for Reconsideration.
The facts of the case are as follows:
On July 20, 1981, herein petitioner, Guillermina Baluyut (Baluyut), loaned from the
spouses Eulogio and Salud Poblete the sum of ₱850,000.00. As evidence of her
indebtedness, Baluyut signed, on even date, a promissory note for the amount
borrowed. Under the promissory note, the loan shall mature in one month. To secure
the payment of her obligation, she conveyed to the Poblete spouses, by way of a real
estate mortgage contract, a house and lot she owns, covered by Transfer Certificate of
Title (TCT) No. 137129 and located in Barrio Mapuntod, then Municipality of
Mandaluyong, Province of Rizal.4 Upon maturity of the loan, Baluyut failed to pay her
indebtedness. The Poblete spouses subsequently decided to extrajudicially foreclose
the real estate mortgage. On August 27, 1982, the mortgaged property was sold on
auction by the Provincial Sheriff of Rizal to the Poblete spouses who were the highest
bidders, as evidenced by a Certificate of Sale issued pursuant thereto.5 Baluyut failed
to redeem the subject property within the period required by law prompting Eulogio
Poblete to execute an Affidavit of Consolidation of Title.6 Subsequently, TCT No. 43445
was issued in the name of Eulogio and the heirs of Salud, who in the meantime, died.7
However, Baluyut remained in possession of the subject property and refused to vacate
the same. Hence, Eulogio and the heirs of Salud filed a Petition for the issuance of a
writ of possession with the RTC of Pasig. The case was docketed as Case No. R-3457.
Subsequently, the trial court issued an order granting the writ of possession. However,
before Eulogio and the heirs of Salud could take possession of the property, Baluyut
filed an action for annulment of mortgage, extrajudicial foreclosure and sale of the
subject property, as well as cancellation of the title issued in the name of Eulogio and
the heirs of Salud, plus damages. The case was docketed as Civil Case No. 52268 and
was subsequently consolidated with Case No. R-3457. In the meantime, Eulogio died
and was substituted by his heirs. After trial on the merits, the trial court issued a
Decision on September 13, 1995 dismissing Baluyut’s complaint.8

Aggrieved by the trial court’s Decision, herein petitioner filed an appeal with the CA.

On December 21, 1999, the CA promulgated the presently assailed Decision affirming
the judgment of the trial court.9

Petitioner filed a Motion for Reconsideration but the same was denied in a Resolution
issued by the CA on August 4, 2000.10

Hence, the present petition with the following assignment of errors:

The decision and the resolution are both palpably infirm in holding that no prior demand
to pay is necessary for a loan to mature when there is conflict between the date of
maturity of the loan as stated in the Deed of Real Estate Mortgage and the Promissory
Note on the one hand and the real date of its maturity on the other.
II

The decision and the resolution are both palpably infirm in holding that the sheriff who
conducted the foreclosure proceedings should be presumed to have regularly
performed his duty in conducting the foreclosure proceedings despite the inability of the
Office of the Provincial Sheriff who had been ordered by the trial court to produce the
records of the foreclosure in question and show that there was compliance with the
required posting of notices in three public places and with the required publication for
three consecutive weeks in a newspaper of general circulation.
III

That the Decision and Resolution are legally infirm in holding that because the
Petitioner-Appellant failed to invoke her right to be sent an Assessment Notice by the
highest bidder thirty days before the expiration of the right of legal redemption during
the trial and on appeal, it should be deemed that she had waived her right to this benefit
under the law despite a clear showing that the said mandatory requirement should have
been strictly observed before title could be consolidated in favor of the highest bidder as
provided for in the certificate of sale issued by the sheriff.
In her first assigned error, petitioner contends that herein private respondents’ witness,
a certain Atty. Edwina Mendoza, is a competent witness and that her testimony, that the
maturity of the loan is one year, is acceptable proof of the existence of collateral
agreements which were entered into by the parties who executed the Promissory Note
and the Real Estate Mortgage prior, contemporaneous and subsequent to the execution
of these documents. Petitioner also argues that the issue of the real date of the maturity
of the loan can be settled only by a formal letter of demand indicating the sum due and
the specific date of payment which is the duty of the private respondents to give; that
absent said letter of demand, the loan may not be considered to have matured; that, as
a consequence, the property given as a collateral may not be foreclosed and the
subsequent consolidation of title over the subject property should be annulled. Petitioner
further contends that even if the issue on the term of the loan was first brought up in
petitioner’s Addendum to the Motion for Reconsideration filed with the CA, the appellate
court may still properly consider this issue in the interest of justice and equity
considering that this is a matter of record and has some bearing on the other issues
submitted for resolution.
Anent her second assignment of error, petitioner contends that the CA erred in relying
on the rule on presumption of regularity in the sheriff’s performance of his duties relative
to the foreclosure of the questioned property absent any evidence presented by
petitioner to prove that the sheriff failed to comply with the legal requirements in the sale
of the foreclosed properties. Petitioner argues that under the law, the sheriff is required
to submit an Affidavit of Posting of Notices to the clerk of court and to the judge before
he is allowed to schedule an auction sale. However, per letter from the Office of the
Clerk of Court, there are no records of the foreclosure proceedings involving the subject
property. Based on this premise, petitioner concludes that since the existence of these
documents is supposed to be in the custody of the sheriff’s office and that the private
respondents are supposed to have copies of these documents, being the ones who
prosecuted the foreclosure proceedings, petitioner’s contention that there was non-
compliance with the legal requirements for the validity of the foreclosure proceedings
partakes of a negative allegation which she need not prove. Petitioner argues that in the
absence of documents evidencing the foreclosure proceedings over the subject
property, the lower court should have acted judiciously by annulling the foreclosure and
ordering the repeat of the proceedings.
As to her third assigned error, petitioner asserts that despite the fact that she is entitled
under the law to an Assessment Notice or Notice of Redemption coming from the
highest bidder 30 days before the expiration of the period to redeem apprising her of the
principal amount, the interest, taxes and other lawful fees due in case she opts to
exercise her right of redemption, she did not receive any notice of this kind. Petitioner
contends that her right to this notice is not subject to waiver and that her failure to
invoke the same during trial and on appeal does not preclude her from invoking such
right in her motion for reconsideration filed with the CA and in the present petition.

In their Motion to Dismiss, which the Court treated as their comment on the petition,
private respondents contend that the petition should be dismissed on the ground that no
question of law was raised therein. Private respondents argue that the issue as to the
supposed conflict between the date of maturity of the loan as stated in the Deed of Real
Estate Mortgage and the Promissory Note, on one hand, and the real date of maturity
as agreed upon by the parties, on the other, as well as the question of whether or not
the sheriff who conducted the foreclosure proceedings involving the subject property
complied with the legal requirements of posting and publication are questions of fact
which are not proper subjects of a petition for review on certiorari. Furthermore, private
respondents also assert in their Memorandum that the questions of fact being raised by
petitioner had already been ruled upon by the RTC and the CA in favor of private
respondents; that the findings of fact of the RTC and the CA are binding on this Court.
The Court finds the petition without merit.
Petitioner admits that the issue regarding the date of maturity of the loan which she
incurred from the Poblete spouses was first brought up only in her Addendum to the
Motion for Reconsideration filed before the CA. In an effort to clothe her argument with
merit, petitioner contends that the CA should have properly considered this issue in the
interest of justice and equity. The Court is not persuaded. It is settled that an issue not
raised during trial could not be raised for the first time on appeal as to do so would be
offensive to the basic rules of fair play, justice, and due process.12 Contrary to
petitioner’s contention, it would be the height of injustice if the CA allowed her to raise
an issue at a very late stage of the proceedings. It would be unfair to the adverse party
who would have no opportunity to present evidence in contra to the new theory, which it
could have done had it been aware of it at the time of the hearing before the trial
court.13 It is true that this rule admits of exceptions as in cases of lack of jurisdiction,
where the lower court committed plain error, where there are jurisprudential
developments affecting the issues, or when the issues raised present a matter of public
policy.14 However, the Court finds that none of these exceptions are present in the
instant case.
In addition, the issue regarding the date of maturity of the loan is factual and settled is
the rule that only questions of law may be raised in a petition for review on certiorari
under Rule 45 of the Rules of Court, as the Supreme Court is not a trier of facts.15 It is
not the function of this Court to review, examine and evaluate or weigh the probative
value of the evidence presented.16 While there are also exceptions to this rule such as
when the factual findings of the trial court and the CA are contradictory; when the
inference made by the CA is manifestly mistaken or absurd; when the judgment of the
CA is premised on its misapprehension of facts; and, when the CA failed to resolve
relevant facts which, if properly considered, would justify a modification or reversal of
the decision of the appellate court,17 this Court finds that the present case does not fall
under any of these exceptions.
Even if petitioner had properly raised the issue regarding the real date of maturity of the
loan, it is a long-held cardinal rule that when the terms of an agreement are reduced to
writing, it is deemed to contain all the terms agreed upon and no evidence of such terms
can be admitted other than the contents of the agreement itself.18 In the present case,
the promissory note and the real estate mortgage are the law between petitioner and
private respondents. It is not disputed that under the Promissory Note dated July 20,
1981, the loan shall mature in one month from date of the said Promissory Note.
Petitioner makes much of the testimony of Atty. Edwina Mendoza that the maturity of
the loan which petitioner incurred is one year. However, evidence of a prior or
contemporaneous verbal agreement is generally not admissible to vary, contradict or
defeat the operation of a valid contract.19 While parol evidence is admissible to explain
the meaning of written contracts, it cannot serve the purpose of incorporating into the
contract additional contemporaneous conditions which are not mentioned at all in
writing, unless there has been fraud or mistake.20 In the instant case, aside from the
testimony of Atty. Mendoza, no other evidence was presented to prove that the real
date of maturity of the loan is one year. In fact there was not even any allegation in the
Complaint and in the Memorandum filed by petitioner with the trial court to the effect
that there has been fraud or mistake as to the date of the loan’s maturity as contained in
the Promissory Note of July 20, 1981.
Moreover, during her cross-examination, petitioner herself never claimed that the loan
shall mature in one year despite being questioned regarding its maturity. She testified
thus:
Q You said that you borrowed ₱850,000.00 to [sic] Mrs. Poblete, is that correct?
A Yes sir.
Q In fact, you signed a Real Estate Mortgage marked as Exhibit "B"?
A Yes sir.
Q When you signed this Deed of Real Estate Mortgage, you also signed a Promisory
[sic] Note, is that correct?
RECORD: Witness did not answer.
Q Did you sign or not a Promisory [sic] note in relation to this Real Estate Mortgage.
A I don’t remember sir.’

Q You don’t remember. I am showing to you a Promisory Note with your signature, did
you not sign this dated July 20, 1981?

A Yes sir.

Q Now, according to this Promisory [sic] Note, the loan is for one (1) month from July
20, 1981, did you pay for that loan on its maturity date?

A I did not sir.

Q Up to now, you have not paid that loan?

A I have not sir.

Q What happen [sic] to the mortgage when you did not paid [sic] that loan from one (1)
month after July 20, 1981?

A None sir.21

In sum, petitioner failed to present clear and convincing evidence to prove her allegation
that the real agreement of the parties is for the loan to mature in one year.
As to the second assigned error, the prevailing jurisprudence is that foreclosure
proceedings have in their favor the presumption of regularity and the burden of
evidence to rebut the same is on the petitioner.22 Moreover, the Court agrees with the
CA that a mortgagor who alleges absence of a requisite has the burden of establishing
that fact.23 Petitioner failed in this respect as she did not present any evidence to prove
her allegations.

Moreover, the fact that the records of the foreclosure proceedings involving the subject
property could not be found does not necessarily mean that the legal requirements of
posting and publication had not been complied with. Private respondents were able to
present the Affidavit of Publication24 executed by the publisher of Nuevo Horizonte, a
newspaper of general circulation, together with a clipping25 of the published notice
attached thereto, to prove that notices of the sale of the subject property were validly
published in accordance with law. The affidavit of publication executed by the publisher
of a newspaper stating therein that said newspaper is of general circulation and that the
requisite notice of foreclosure sale was published in said paper in accordance with law
constitutes prima facie evidence of compliance with the required publication.26

As to the alleged lack of posting of the notices of sale in at least three public places,
herein petitioner failed to discharge her burden of proving by convincing evidence her
allegation that there was actually no compliance with the posting requirement. Hence, in
the absence of contrary evidence, the presumption prevails that the sheriff performed
his official duty of posting the notices of sale.27

The Court’s ruling in Olizon v. Court of Appeals,28 insofar as posting and publication
requirements in mortgage foreclosure sales are concerned, is instructive:

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 [a] 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.

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.29
1awphi1.net

In the present case, there was sufficient evidence to prove that notices of the
foreclosure sale of the subject property were published in accordance with law and that
there was no allegation, much less proof, that the property was sold for a price which is
considerably lower than its value as to show collusion between the sheriff and herein
private respondents. Hence, even granting that the sheriff failed to post the notices of
foreclosure in at least three public places, such failure, pursuant to Olizon, is not a
sufficient basis in nullifying the auction sale and the subsequent issuance of title in favor
of private respondents.

As to petitioner’s argument that the sheriff in charge of the auction sale is required to
execute an affidavit of posting of notices, the Court agrees with private respondents’
contention that petitioner’s reliance on the provisions of Section 5, Republic Act (R.A.)
No. 720, as amended by R.A. No. 593930 , as well as on the cases of Roxas v. Court of
Appeals,31 Pulido v. Court of Appeals32 and Tambunting v. Court of Appeals,33 is
misplaced as the said provision of law refers specifically and exclusively to the
foreclosure of mortgages covering loans granted by rural banks. In the present case,
the contracts of loan and mortgage are between private individuals. The governing law,
insofar as the extrajudicial foreclosure proceedings are concerned, is Act No. 3135, as
amended by Act No. 4118.34 Section 3 of the said law reads as follows:

Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days
in at least three public places of the municipality or city where the property is situated
and if such property is worth more than four hundred pesos, such notice shall also be
published once a week for at least three consecutive weeks in a newspaper of general
circulation in the municipality or city.

Unlike in the amended provisions of Section 5, R.A. No. 720, nowhere in the above-
quoted provision of Act No. 3135, as amended, or in any Section thereof, is it required
that the sheriff must execute an affidavit to prove that he published notices of
foreclosure in accordance with the requirements of law.

As to the last assigned error, suffice it to say that the Court agrees with the findings of
the CA that the issue regarding petitioner’s right to receive an Assessment Notice or
Notice of Redemption from private respondents as the highest bidders during the
auction sale was raised only in her Addendum to Motion for Reconsideration of the
Decision of the CA. The Court reiterates the rule that points of law, theories, issues and
arguments not brought to the attention of the lower court need not be, and ordinarily will
not be, considered by a reviewing court, as these cannot be raised for the first time on
appeal.35

Moreover, like the issue regarding the date of maturity of the loan, the question of
whether or not petitioner received a copy of an Assessment Notice or Notice of
Redemption from private respondents is also factual. As earlier explained, questions of
fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of Court
as this mode of appeal is confined to questions of law.36

Besides, there is nothing under Act No. 3135 which requires the highest bidder or
purchaser to furnish the mortgagor or redemptioner an Assessment Notice or Notice of
Redemption prior to the expiration of the period of redemption. Even the pertinent
provisions of Section 30, Rule 3937 of the old Rules of Court, which are the rules
applicable in the present case, do not require that the mortgagor or redemptioner be
furnished by the purchaser notice of any assessments or taxes which the latter may
have paid after the purchase of the auctioned property, thus:

Sec. 30. Time and manner of, and amounts payable on, successive redemptions, notice
to be given and filed. – The judgment debtor or redemptioner may redeem the property
from the purchaser at any time within twelve (12) months after the sale, on paying the
purchaser the amount of his purchase with one per centum per month interest thereon
in addition, up to the time of redemption, together with the amount of any assessments
or taxes which the purchaser may have paid thereon after purchase and interest on
such last named amount at the same rate; and if the purchaser be also a creditor having
a prior lien to that of the redemptioner, other than the judgment under which such
purchase was made, and the amount of such other lien, with interest. Property so
redeemed may again be redeemed within sixty (60) days after the last redemption upon
payment of the sum paid on the last redemption, with two per centum thereon in
addition, and the amount of any assessments or taxes which the last redemptioner may
have paid thereon after redemption by him, with interest of such last-named amount,
and in addition, the amount of any liens held by said last redemptioner prior to his own,
with interest. The property may be again, and as often as a redemptioner is so
disposed, redeemed from any previous redemptioner within sixty (60) days after the last
redemption, on paying the sum paid on the last previous redemption, with two per
centum thereon in addition, and the amounts of any assessments or taxes which the
last previous redemptioner paid after the redemption thereon, with interest thereon, and
the amount of any liens held by the last redemptioner prior to his own, with interest.
Written notice of any redemption must be given to the officer who made the sale and a
duplicate filed with the Registrar of Deeds of the province, and if any assessment of
taxes are paid by the redemptioner or if he has or acquires any lien other than that upon
which the redemption was made, notice thereof must in like manner be given to the
officer and filed with the Registrar of Deeds; if such notice be not filed, the property may
be redeemed without paying such assessments, taxes, or liens. (emphasis supplied)
Hence, even granting, for the sake of argument, that private respondents failed to
comply with the directive in the Certificate of Sale issued by the Ex-Officio Provincial
Sheriff of Rizal and the Deputy Sheriff In-Charge by giving a copy of statements of the
amount of assessments or taxes which they may have paid on account of the purchase
of the subject property, such failure would not invalidate the auction sale and the
subsequent transfer of title over the subject property in their favor.

It bears to note that the purpose for requiring the purchaser to furnish copies of the
amounts of assessments or taxes which he may have paid is to inform the mortgagor or
redemptioner of the actual amount which he should pay in case he chooses to exercise
his right of redemption. If no such notice is given, the only effect is that the property may
be redeemed without paying such assessments or taxes.38 In fact, it would have been
beneficial on the part of herein petitioner if private respondents failed to submit to the
office of the sheriff and furnish her a copy of the statements of the taxes and
assessments they paid because in such a case petitioner would have been excused
from reimbursing such assessments and taxes if she redeemed the property. The fact
remains, however, that petitioner failed to redeem the subject property.

WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution
of the Court of Appeals are AFFIRMED in toto.
Costs against petitioner.

G.R. No. 175816 : December 07, 2011] BPI FAMILY SAVINGS BANK, INC.,
PETITIONER, VS. MA. ARLYN T. AVENIDO & PACIFICO A. AVENIDO,
RESPONDENTS. :

FIRST DIVISION

[G.R. No. 175816 : December 07, 2011]

BPI FAMILY SAVINGS BANK, INC., PETITIONER, VS. MA. ARLYN T. AVENIDO &
PACIFICO A. AVENIDO, RESPONDENTS.

DECISION

LEONARDO-DE CASTRO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision [1] dated March 31, 2006 of the Court of Appeals in CA-G.R. CV No. 79008,
which affirmed the Decision [2] dated November 13, 2002 of the Regional Trial Court
(RTC), Branch 58 of Cebu City, in Civil Case No. CEB-25629. The RTC dismissed the
Complaint for Collection of Deficiency of Mortgage Obligation with Damages filed by
petitioner BPI Family Savings Bank (BPI Family) against respondent spouses Pacifico
A. Avenido and Ma. Arlyn T. Avenido (spouses Avenido), following the extrajudicial
foreclosure of the property given by the latter as security for their loan. The instant
Petition likewise challenges the Resolution [3] dated November 16, 2006 of the Court of
Appeals in the same case denying the Motion for Reconsideration of BPI Family.cralaw

The controversy arose from the following facts.

On September 20, 2000, BPI Family filed with the RTC a Complaint for Collection of
Deficiency of Mortgage Obligation with Damages against the spouses Avenido,
docketed as Civil Case No. CEB-25629.

BPI Family alleged in its Complaint that pursuant to a Mortgage Loan Agreement [4]
dated April 25, 1996, the spouses Avenido obtained from the bank a loan in the amount
of P2,000,000.00, secured by a real estate mortgage on a parcel of land situated in Bais
City, which is covered by Transfer Certificate of Title (TCT) No. T-1216
(mortgaged/foreclosed property). The spouses Avenido failed to pay their loan
obligation despite demand, prompting BPI Family to institute before the Sheriff of Bais
City extrajudicial foreclosure proceedings over the mortgaged property, in accordance
with Act No. 3135, otherwise known as an Act to Regulate the Sale of Property under
Special Powers Inserted in or Annexed to Real Estate Mortgages. At the public auction
sale held on March 8, 1999, BPI Family was the highest bidder for the foreclosed
property. The bid price of P2,142,616.00 of BPI Family was applied as partial payment
of the mortgage obligation of the spouses Avenido, which had amounted to
P2,917,381.43 on the date of the public auction sale, thus, still leaving an unpaid
amount of P794,765.43. The Certificate of Sale dated March 8, 1999 was registered
on TCT No. T-1216 on May 25, 1999. [5]

BPI Family prayed that the RTC order the spouses Avenido to pay the deficiency of
their mortgage obligation amounting to P794,765.43, plus legal interest thereon from the
date of the filing of the Complaint until full payment; 15% as contractual attorney's fees;
P50,000.00 as litigation expenses; and costs of the suit. [6]

The spouses Avenido filed their Answer with Special/Affirmative Defenses and
Counterclaims on September 18, 2001. The spouses Avenido averred therein that they
had already paid a substantial amount to BPI Family, which could not be less than
P1,000,000.00, but due to the imposition by BPI Family of unreasonable charges and
penalties on their principal obligation, their payments seemed insignificant. Per the
Notice of Extrajudicial Sale dated February 4, 1999, the spouses Avenido's
indebtedness to BPI Family only amounted to less than P2,000,000.00, and such
amount was already fully covered when the foreclosed property was sold at the public
auction for P2,142,616.00. The spouses Avenido sought the dismissal of the Complaint
for lack of merit, plus the award of P500,000.00 as moral damages and P300,000.00 as
exemplary damages given the prejudice and unnecessary expenses they suffered
because of the unjustified suit of BPI Family. [7]

Failing to reach an amicable settlement during the pre-trial conference, trial ensued.
BPI Family submitted the following computation in support of its claim for deficiency
mortgage obligation from the spouses Avenido:

AUCTION SALE: MARCH 8, 1999

Principal Balance
P 1,918,722.47
Interest
266,754.66
Fire Insurance 1997-1998
6,725.00
1998-1999
6,725.00
Unpaid MRI
10,720.00
Late Charges
37,425.46
Less: Unapplied
(0.18)

Sub-total
2,247,072.41

Foreclosure Expenses

Filing Fee P 5,719.60

Sheriff’s Fee 1,500.00
Cost of Publication 5,000.00
Interest on Litigation Expenses 232.17
12,451.77

2,259,524.18

Contractual Penalties

Attorney’s fees
338,928.63
Liquidated Damages
338,928.63

Total
2,937,381.43

Total Appraised Value as of 03/05/99

2,678,270.00
80% of TAV
2,142,616.00

Summary:

Total Exposure as of 03/08/99

Bid Price
2,937,381.43
(lower amt. between total exposure or 80% of TAV)
2,142,616.00
Deficiency
794,765.43

Portion of Principal covered by bid price to be retained in IL

0.00
[8]

BPI Family presented as witness Alfred Rason (Rason), the Assistant Manager for
Operation, who was in charge of keeping track and collecting unpaid obligations of the
bank. Rason testified that in the Petition for Extrajudicial Foreclosure, BPI Family
reported that the loan obligation of the spouses Avenido amounted to P1,918,722.47,
inclusive of interest, penalty charges, insurance, foreclosure expenses, and others, as
of November 16, 1998. However, as of the public auction sale of the foreclosed
property on March 8, 1999, the total loan obligation of the spouses Avenido already
reached P2,937,381.43. The foreclosed property was awarded to BPI Family as the
highest bidder at the public auction sale for P2,142,616.00. The bid price was arrived at
by BPI Family following bank policy, i.e., total exposure of claim or 80% of the total
appraised value of the foreclosed property, whichever is lower. In a letter dated July 8,
2000, sent to the spouses Avenido through registered mail, counsel for BPI family
demanded payment of the deficiency balance of P794,766.43 on the loan obligation of
said spouses. [9]

When respondent Ma. Arlyn T. Avenido (Arlyn) took the witness stand, she admitted
that she and her husband, co-respondent Pacifico A. Avenido (Pacifico), obtained from
BPI Family a Motor Vehicle Loan in 1995 and a Home Mortgage Loan in 1996. The
Home Mortgage Loan was for P2,000,000.00, payable in 15 years through debit memos
(or automatic debit arrangement), instead of post-dated checks. The spouses Avenido
failed to make some payments in 1998. The spouses Avenido subsequently deposited
with their account at BPI Family branch in Bais City, Negros Occidental, the amount of
P250,000.00, which would have been sufficient to cover their arrears; as well as made
arrangements with Dumaguete City Rural Bank to buy out their loan from BPI Family.
Yet, in February 1999, the spouses Avenido learned of the foreclosure proceedings
over their mortgaged property only from court personnel. BPI Family never
communicated with the spouses Avenido about the foreclosure proceedings except
when the former sent the latter a demand letter in July 2000 for the P700,000.00
deficiency. Counsel for the spouses Avenido answered BPI Family through a letter
dated August 2, 2000, stating that the demand of the bank for deficiency was not only
surprising, but lacked basis in fact and in law, for the mortgaged property was already
foreclosed and sold at the public auction for P2,142,616.00, which was more than the
P1,918,722.47 loan obligation of the spouses Avenido. Next thing the spouses Avenido
knew, BPI Family had filed Civil Case No. CEB-25629 against them. In addition, the
spouses Avenido had already fully paid their Motor Vehicle Loan in 1999, but BPI
Family refused to release the Hi-Lux from the mortgage constituted thereon. BPI Family
attached the Hi-Lux to cover the deficiency of the spouses Avenido on their home loan
obligation. Due to the aforementioned acts of BPI Family, Arlyn suffered sleepless
nights and humiliation. Hence, she prayed for the award of moral and exemplary
damages and attorney's fees and the release of the Hi-Lux. [10]

The RTC rendered its Decision on November 13, 2002.

According to the RTC, the principal issue to be resolved was “whether or not [BPI
Family] is entitled to deficiency judgment," which includes “a determination of the
existence of the right to recover deficiency, and how much, if any." [11]cralaw
At the outset, the RTC recognized that in an extrajudicial foreclosure, the mortgagee
has a right to recover deficiency where the proceeds of the sale are insufficient to cover
the debt:
Although Act 3135 is silent on the mortgagee's right to recover the deficiency where the
proceeds of the sale is insufficient to cover the debt, it is now well-settled that said
mortgagee has the right to recover the deficiency. (PB Com v. De Vera, 6 SCRA 1026;
DBP v. Vda. de Noel, 43 SCRA 82; DBP v. Zaragosa, 84 SCRA 668.). The reasons
advanced are 1) Although Act 3135 discusses nothing as to the mortgagee's right to
recover such deficiency, neither is there any provision thereunder which expressly or
impliedly prohibits such recovery; and 2) now Rule 68 on judicial foreclosure expressly
grants to the mortgagee the right to recover deficiency and the underlying principle is
the same for extra-judicial foreclosure that the mortgage is but a security and not a
satisfaction of indebtedness.

In the case of DBP v. Tomeldon, 101 SCRA 171, the Supreme Court ruled that the
action to recover the deficiency prescribes after ten (10) years from the time the right to
action accrues x x x.

Thus, in the case at bar the mortgagee's right and the period the said right is enforced
are not contested. What is essentially in controversy is whether there is a deficiency
and how much. [12]
The RTC then determined the total amount of the loan obligation of the spouses
Avenido as follows:
In the Mortgage Loan Agreement (Exhibits A and I) the due execution and genuineness
of which are admitted by both parties, the [spouses Avenido] obligated themselves as
Borrower-Mortgagor to pay [BPI Family] the aggregate principal amount of TWO
HUNDRED TWO MILLION PESOS (P202,000,000.00) and interest on the unpaid
balance from the date thereof until paid in full on the repayment dates. It further
provides that in case the mortgagee fails to pay any of the sums secured, the mortgagor
has the right to declare the entire obligation due and payable and to foreclose the
mortgage. Moreover, Exhibit "A-2" shows that the proceeds of sale of the mortgaged
property shall be applied as follows: ") to the payment of the expenses and cost of
foreclosure and sale, including the attorney's fees as herein provided; b) to the
satisfaction of all interest and charges accruing upon the obligation herein and hereby
secured; c) to the satisfaction of the principal amount of the obligation herein and
hereby secured; d) to the satisfaction of all other obligation then owed to the bank or
any of its subsidiaries. The balance, if any, to be due to the mortgagor." Finally, the
attorney's fees stipulated is 15% of the total amount claimed by the bank (Exhibit A-3).
The Court, however, finds no stipulation as regards liquidated damages.

xxxx
This Court is not convinced that [spouses Avenido's] total indebtedness should only be
ONE MILLION NINE HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED
TWENTY[-]TWO [PESOS] AND FORTY[-]SEVEN [CENTAVOS] (P1,918,722.47)
because the Notice of Extra-Judicial Sale (Exhibit "3") itself states "x x x to satisfy the
mortgaged indebtedness which as of November 16, 1998 amount to ONE MILLION
NINE HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED TWENTY[-]TWO AND
FORTY[-]SEVEN CENTAVOS (P1,918,722.47) plus interest and penalty charges
thereon from June 30, 1998 to date of the foreclosure sale, attorney's fees and
necessary expenses for foreclosure x x x."

Foreclosure is not a single process and it is not therefore correct to conclude that what
is material is the petition for extra-judicial sale nor the date of the filing of the
application.
Thus, the Court gives credence to [BPI Family's] Exhibit “C" but not including the
claim for liquidated damages in the sum of THREE HUNDRED THIRTY[-]EIGHT
THOUSAND NINE HUNDRED TWENTY PESOS AND SIXTY[-]THREE CENTAVOS
(P330,920.63) because it has no basis whatsoever. Thus the total amount due is TWO
MILLION FIVE HUNDRED NINETY[-]EIGHT THOUSAND FOUR HUNDRED
FIFTY[-]TWO PESOS AND EIGHTY CENTAVOS (P2,598,452.80). x x x. [13]
More than just reducing the total loan obligation of the spouses Avenido to
P2,598,452.80, the RTC, in the end, denied the claim for deficiency of BPI Family based
on the following ratiocination:
[T]he Court finds very significant the admission by [BPI Family's] witness that the
appraised value of the foreclosed property is actually TWO MILLION SIX HUNDRED
SEVENTY[-]EIGHT THOUSAND TWO HUNDRED SEVENTY PESOS (P2,678,270.00)
but [BPI Family] bidded only for 80% of the value as a matter of bank policy (TSN
Afredo Rason, Aug. 6, 2002, p. 17). In other words, the actual market value of the
property is more than the amount of TWO MILLION FIVE HUNDRED NINETY[-]EIGHT
THOUSAND FOUR HUNDRED FIFTY[-]TWO PESOS AND EIGHTY CENTAVOS
(P2,598,452.80).

Under this circumstance, it would be inequitable to still grant the [BPI Family's] prayer
for deficiency as it will be in effect allowing it to unjustly enrich itself at the expense of
the [spouses Avenido]. [14]

Hence, the RTC decreed:

Accordingly, the [BPI Family's] complaint and [spouses Avenido's] counterclaim are
DISMISSED. [15]

Aggrieved by the RTC judgment, BPI Family filed an appeal before the Court of
Appeals, docketed as CA-G.R. CV No. 79008, with a lone assignment of error, to wit:

THE LOWER COURT ERRED IN NOT HOLDING [THE SPOUSES AVENIDO] LIABLE
TO [BPI FAMILY] FOR DEFICIENCY OF THE MORTGAGE OBLIGATION. [16]

In its Decision promulgated on March 31, 2006, the Court of Appeals ruled:

A careful scrutiny of the arguments presented in the case at bar yields no substantial
and convincing reason for us to depart from the ruling found by the trial court x x x.
xxxx

Indubitably, mortgagors whose properties a foreclosed and are purchased by the

mortgagee as highest bidder at the auction sale are decidedly at a great disadvantage
because almost invariably, mortgagors forfeit their properties at a great loss as they are
purchased at a nominal cost by the mortgagee himself, who ordinarily bids in no more
than his credit or the balance thereof at the auction sale.

More importantly, the mortgage contract is also one of adhesion as it was prepared
solely by [BPI Family] and the only participation of the [spouses Avenido] was the
affixing of their signatures or adhesion thereto. Under such contracts, which are
common in the Philippines and elsewhere, the lending institutions are free to require
borrowers to provide assets, like real property, of much higher value than the desired
loan amount, as collateral. Being a contract of adhesion, the mortgage is to be strictly
construed against [BPI Family], the party which prepared the agreement.

In the case at bar, the intent of [BPI Family] is manifest that the [spouses Avenido] shall
assume liability not only for the entire obligation mentioned in the mortgage but beyond,
which is improper, as it will defeat the purpose of the foreclosure proceedings which is
to answer or satisfy the principal obligation in case of default or non payment thereof.

Moreover, for all intents and purposes, we hold that [spouses Avenido] shall not be
liable to pay for the deficiency of their mortgage obligation because it will be at their
great disadvantage considering that their property was purchased at a nominal cost by
[BPI Family] at the auction sale. As a matter [of] fact, there was an admission made by
[BPI Family's] witness that the amount of the bid was only 80% of the actual price of the
property. This is unfair on the part of the [spouses Avenido].

Besides, if mortgagees were allowed such right, the debtors would be at the mercy of
their creditors considering the summary nature of extrajudicial foreclosure proceedings.
It is also worthy to note the limited readership of auction sale notices which lead to the
sale.

Accordingly, We upheld the ruling of the court a quo in absolving the [spouses Avenido]
from any liability corresponding to the amount of deficiency of mortgage obligation as it
will in effect be allowing [BPI Family] to unjustly enrich itself at the expense of the
[spouses Avenido]. [17]

The dispositive of the Court of Appeals judgment reads:

WHEREFORE, premises considered, the assailed Decision dated November 13, 2002
of the Regional Trial Court, Cebu City, 7th Judicial Region, Branch 58, in Civil Case No.
CEB-25629, is hereby AFFIRMED. No pronouncement as to costs. [18]

In its Resolution dated November 16, 2006, the Court of Appeals denied the Motion for
Reconsideration of BPI Family since the arguments set forth therein were but a rehash,
repetition and/or reinstatement of the arguments/matters already passed upon and
extensively discussed by the appellate court in its earlier decision.

Hence, the present Petition for Review of BPI Family with the following assignment of
errors:

I
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN RENDERING ITS DECISION (ANNEX “A") AND
RESOLUTION (ANNEX "B") DECLARING THAT [BPI FAMILY] IS NOT ENTITLED TO
ITS CLAIM AGAINST THE [SPOUSES AVENIDO] FOR DEFICIENCY OF MORTGAGE
OBLIGATION DESPITE THE EXPRESS PROVISIONS OF THE MORTGAGE LAW
AND NUMEROUS JURISPRUDENCE ENTITLING THE MORTGAGEE-[BPI FAMILY]
TO THE SAME.

II

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED A

REVERSIBLE ERROR WHEN IT BASED ITS FINDING THAT THERE IS NO MORE
DEFICIENCY OF MORTGAGE OBLIGATION BY COMPARING THE MARKET VALUE
OF THE FORECLOSED PROPERTY AGAINST THE LOAN OBLIGATION OF THE
MORTGAGORS-RESPONDENTS INSTEAD OF COMPARING THE ACTUAL BID
PRICE AT THE AUCTION SALE AGAINST THE LOAN OBLIGATION OF THE
MORTGAGORS-[SPOUSES AVENIDO]. [19]
The primary issue posed before us is whether or not BPI Family is still entitled to collect
the deficiency mortgage obligation from the spouses Avenido in the amount of
P455,836.80, plus interest.

We answer in the affirmative.

It is settled that if “the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency
from the debtor. While Act No. 3135, as amended, does not discuss the mortgagee's
right to recover the deficiency, neither does it contain any provision expressly or
impliedly prohibiting recovery. If the legislature had intended to deny the creditor the
right to sue for any deficiency resulting from the foreclosure of a security given to
guarantee an obligation, the law would expressly so provide. Absent such a provision in
Act No. 3135, as amended, the creditor is not precluded from taking action to recover
any unpaid balance on the principal obligation simply because he chose to
extrajudicially foreclose the real estate mortgage." [20]
It is no longer challenged before us that the outstanding loan obligation of the spouses
Avenido amounted to P2,598,452.80, inclusive of interests, penalties, and charges, by
March 8, 1999. The controversy herein now only revolves around the value to be
attributed to the foreclosed property, which would be applied against the outstanding
loan obligation of the spouses Avenido to BPI Family. BPI Family insists that it should
be P2,142,616.00, its winning bid price for the foreclosed property at the public auction
sale, which, being less than the outstanding loan obligation of the spouses Avenido, will
still leave a deficiency collectible by BPI Family from the spouses Avenido in the amount
of P455,836.80. The spouses Avenido maintain that, as the RTC and the Court of
Appeals ruled, it should be P2,678,270.00, the fair market value of the foreclosed
property, which, being more than the outstanding loan obligation of the spouses
Avenido, will already fully settle their indebtedness.
The spouses Avenido, the RTC, and the Court of Appeals may not have said it outright,
but they actually consider the winning bid of BPI Family for the foreclosed property at
the public auction sale to be insufficient. They took exception to the fact that the
winning bid of BPI Family was equivalent to “only" 80% of the appraised value of the
mortgaged property. The RTC and the Court of Appeals even went as far as to refer to
the amount of the winning bid of BPI Family as “nominal" and “unfair" and would
“unjustly enrich" the bank at the expense of the spouses Avenido. So the RTC and
the Court of Appeals disregarded the winning bid of BPI Family and applied instead the
fair market value of the foreclosed property against the outstanding loan obligation of
the spouses Avenido.
According to Section 4 of Act No. 3135, an extrajudicial foreclosure sale of a mortgaged
real property shall be conducted as follows:

SEC. 4. Public Auction. - The sale shall be made at public auction, between the hours
of nine in the morning and four in the afternoon; and shall be under the direction of the
sheriff of the province, the justice or auxiliary justice of the peace of the municipality in
which such sale has to be made, or a notary public of said municipality, who shall be
entitled to collect a fee of five pesos for each day of actual work performed, in addition
to his expenses.

Notably, the aforequoted provision does not mention any minimum bid at the public
auction sale. There is no legal basis for requiring that the bid should at least be equal to
the market value of the foreclosed property or the outstanding obligation of the
mortgage debtor.

We have consistently held in previous cases that unlike in an ordinary sale, inadequacy
of the price at a forced sale is immaterial and does not nullify the sale. In fact, in a
forced sale, a low price is more beneficial to the mortgage debtor for it makes
redemption of the property easier.

Section 6 of Act No. 3135 provides for the redemption of an extrajudicially foreclosed
property within a one-year period, to wit:

Sec. 6. Redemption. – In all cases in which an extrajudicial sale is made under the
special power herein before referred to, the debtor, his successors-in-interest or any
judicial creditor or judgment creditor of said debtor, or any person having a lien on the
property subsequent to the mortgage or deed of trust under which the property is sold,
may redeem the same at any time within the term of one year from and after the date of
the sale; and such redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil
Procedure, in so far as these are not inconsistent with the provisions of this Act.
(Emphasis ours.)

Republic Act No. 337, the General Banking Act, as amended, in force at the time of the
herein transactions, had a specific provision on the redemption of property
extrajudicially foreclosed by banks, which reads:
Sec. 78. Loans against real estate security shall not exceed seventy percent (70%) of
the appraised value of the respective real estate security, plus seventy percent (70%) of
the appraised value of the insured improvements, and such loans shall not be made
unless title to the real estate shall be in the mortgagor. In the event of foreclosure,
whether judicially or extrajudicially, of any mortgage on real estate which is security for
any loan granted before the passage of this Act or under the provisions of this Act, the
mortgagor or debtor whose real property has been sold at public auction, judicially or
extrajudicially, for the full or partial payment of an obligation to any bank, banking or
credit institution, within the purview of this Act shall have the right, within one year after
the sale of the real estate as a result of the foreclosure of the respective mortgage, to
redeem the property by paying the amount fixed by the court in order of execution, or
the amount due under the mortgage deed, as the case may be, with interest thereon at
the rate specified in the mortgage, and all the costs, and judicial and other expenses
incurred by the bank or institution concerned by reason of the execution and sale and
as a result of the custody of said property less the income received from the property.
However, the purchaser at the auction sale concerned in a judicial foreclosure shall
have the right to enter upon and take possession of such property immediately after the
date of the confirmation of the auction sale by the court and administer the same in
accordance with law. (Emphasis ours.)

If the foreclosed property is registered, the mortgagor has one year within which to
redeem the property from and after registration of sale with the Register of Deeds.
[21]
We explained in Prudential Bank v. Martinez [22] that:
[T]he fact that the mortgaged property is sold at an amount less than its actual market
value should not militate against the right to such recovery. We fail to see any
disadvantage going for the mortgagor. On the contrary, a mortgagor stands to gain with
a reduced price because he possesses the right of redemption. 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 the reason of the price obtained at the auction sale.
Generally, in forced sales, low prices are usually offered and the mere inadequacy of
the price obtained at the sheriff’s sale unless shocking to the conscience will not be
sufficient to set aside a sale if there is no showing that in the event of a regular sale, a
better price can be obtained. [23] (Citations omitted.)
We elucidated further in New Sampaguita Builders Construction Inc. v. Philippine
National Bank [24] that:
In the accessory contract of real mortgage, in which immovable property or real rights
thereto are used as security for the fulfillment of the principal loan obligation, the bid
price may be lower than the property’s fair market value. In fact, the loan value
itself is only 70 percent of the appraised value. As correctly emphasized by the
appellate court, a low bid price will make it easier for the owner to effect redemption by
subsequently reacquiring the property or by selling the right to redeem and thus recover
alleged losses. x x x. [25]
In Hulst v. PR Builders, Inc., [26] we reiterated that:
[G]ross inadequacy of price does not nullify an execution sale. In an ordinary sale, for
reason 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 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 redemption. When there is a right to redeem,
inadequacy of price should not be material because the judgment debtor may re-acquire
the property or else sell his right to redeem and thus recover any loss he claims to have
suffered by reason of the price obtained at the execution sale. Thus, respondent stood
to gain rather than be harmed by the low sale value of the auctioned properties because
it possesses the right of redemption. x x x. [27]
In line with the foregoing jurisprudence, we refuse to consider the question of sufficiency
of the winning bid price of BPI Family for the foreclosed property; and affirm the
application of said winning bid in the amount of P2,142,616.00 against the total
outstanding loan obligation of the spouses Avenido by March 8, 1999 in the sum of
P2,598,452.80,
thus, leaving a deficiency of P455,836.80. BPI Family may still collect the said
deficiency without violating the principle of unjust enrichment, as opined by the Court of
Appeals.
There is unjust enrichment when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience. Article 22 of the Civil
Code provides that every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him. The principle of unjust
enrichment under Article 22 requires two conditions: (1) that a person is benefited
without a valid basis or justification, and (2) that such benefit is derived at another’s
expense or damage." [28] There is no unjust enrichment to speak of in this case.
There is strong legal basis for the claim of BPI Family against the spouses Avenido for
the deficiency of their loan obligation.
BPI Family made an extrajudicial demand upon the spouses Avenido for the deficiency
mortgage obligation in a letter dated July 8, 2000 and received by the spouses Avenido
on July 17, 2000. Consequently, we impose the legal interest of 12% per annum on the
deficiency mortgage obligation amounting to P455,836.80 from July 17, 2000 until the
finality of this Decision. Thereafter, if the amount adjudged remains unpaid, it will be
subject to interest at the rate of 12% per annum computed from the time the judgment
became final and executory until fully satisfied.
WHEREFORE, the Petition is hereby GRANTED. The assailed Decision dated March
31, 2006 and Resolution dated November 16, 2006 of the Court of Appeals in CA-G.R.
CV No. 79008, affirming the Decision dated November 13, 2002 of the Regional Trial
Court, Branch 58 of Cebu City, in Civil Case No. CEB-25629, is REVERSED and SET
ASIDE. Respondent spouses Ma. Arlyn T. Avenido and Pacifico A. Avenido are
ORDERED to pay petitioner BPI Family Savings Bank, Inc. the deficiency of their
mortgage obligation in the amount of P455,836.80, plus legal interest of 12% per annum
from July 17, 2000 until the finality of this Decision. Thereafter, the amount adjudged
shall be subject to legal interest of 12% per annum from the finality of this Decision up
to its satisfaction. No cost.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 182769 February 1, 2012

BANK OF THE PHILIPPINE ISLANDS, AS SUCCESSOR-IN-INTEREST OF FAR

EAST BANK & TRUST COMPANY, Petitioner,
vs.
CYNTHIA L. REYES, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure of the Decision1 dated April 30, 2008 of the Court of Appeals in CA-G.R. CV
No. 88004, entitled "Bank of the Philippine Islands, as successor-in-interest of Far East
Bank & Trust Company vs. Cynthia L. Reyes" which reversed the Decision2 dated
November 3, 2005 of the Regional Trial Court (RTC) of Makati City, Branch 148 in Civil
Case No. 03-180.

The background facts of this case, as summed by the trial court, follow:

This is an action for sum of money filed [b]y [p]laintiff Bank of the Philippine Islands,
hereinafter referred to as BPI, as successor-in-interest of Far East Bank & Trust
Company, referred hereto as Far East Bank, against defendant Cynthia L. Reyes,
hereinafter referred to as defendant Reyes.

As alleged in the Complaint, defendant Reyes borrowed, renewed and received from
Far East Bank the principal of Twenty Million Nine Hundred Thousand Pesos [sic]
(₱20,950,000.00). In support of such allegation, four promissory notes were presented
during the course of the trial of the case. As security for the obligation, defendant Reyes
executed Real Estate Mortgage Agreements involving twenty[-]two (22) parcels of land.
When the debt became due and demandable, the defendant failed to settle her
obligation and the plaintiff was constrained to foreclose the properties. As alleged, after
due publication, the mortgaged properties were sold at public auction on December 20,
2001 by the Office of the Clerk of Court & Ex-Officio Sheriff of the Regional Trial Court
of Malolos, Bulacan.

At the public auction, the mortgaged properties were awarded to BPI in consideration of
its highest bid price amounting to Nine Million Thirty[-]Two Thousand Nine Hundred
Sixty Pesos (₱9,032,960.00). On said date, the obligation already reached Thirty Million
Forty (sic) Hundred Twenty Thousand Forty[-]One & 67/100 Pesos (₱30,420,041.67),
inclusive of interest but excluding attorney’s fees, publication and other charges. After
applying the proceeds of the public auction to the outstanding obligation, there remains
to be a deficiency and defendant Reyes is still indebted, as of January 20, 2003, to the
plaintiff in the amount of ₱24,545,094.67, broken down as follows:

Principal ₱19,700,000.00
Unsatisfied Interest 2,244,694.67
Interest 2,383,700.00
Penalty 216,700.00
TOTAL ₱24,545,094.67
Also included in the prayer of the plaintiff is the payment of attorney’s fees of at least
Five Hundred Thousand Pesos and the cost of suit.

In the Answer, the defendant claims that based on the plaintiff’s appraisal of the
properties mortgaged to Far East Bank, the twenty[-]two properties fetched a total
appraisal value of ₱47,436,000.00 as of January 6, 1998. This appraisal value is
evidenced by the Appraisal, which is attached as Annex 1 of the Answer. Considering
the appraisal value and the outstanding obligation of the defendant, it appears that the
mortgaged properties sold during the public auction are more than enough as payment
to the outstanding obligation of the defendant.3

Subsequently, upon petitioner’s motion, the trial court issued an Order4 dated October
6, 2005 recognizing Asset Pool A (SPV-AMC), Inc. as substitute plaintiff in lieu of
petitioner.

After due trial, the trial court rendered its Decision dated November 3, 2005, the
dispositive portion of which states:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff

BANK OF THE PHILIPPINE ISLANDS, as successor-in-interest of Far East Bank &
Trust Company, and against defendant CYNTHIA L. REYES. Accordingly, the
defendant is ordered:

1. To pay the plaintiff the amount of Php22,083,700.00, representing said defendant’s

outstanding obligation, plus interest at the rate of twelve percent (12%) per annum,
computed from January 20, 2003 until the whole amount is fully paid;

2. To pay plaintiff the amount of Php200,000.00 as attorney’s fees;

3. Costs of suit against the defendant.5

Respondent filed a motion for reconsideration but the same was denied by the trial court
through an Order6 dated January 9, 2006.

An appeal with the Court of Appeals was filed by respondent. This resulted in a reversal
of the trial court’s judgment via an April 30, 2008 Decision by the Court of Appeals, the
dispositive portion of which states:

WHEREFORE, the instant appeal is GRANTED. The assailed Decision dated

November 3, 2005 is hereby REVERSED AND SET ASIDE.7

Aggrieved, petitioner filed the instant petition in which the following issues were put into
consideration:

A. WHETHER OR NOT THERE WAS DEFICIENCY WHEN RESPONDENT’S

PROPERTY WHICH SHE SUPPOSEDLY VALUED AT ₱47,536,000.00 WAS SOLD AT
THE EXTRA-JUDICIAL FORECLOSURE SALE AT ONLY [₱9,032,960.00] BY
PETITIONER;

B. WHETHER OR NOT RESPONDENT’S PROPERTY WAS OVERVALUED WHEN IT

WAS MORTGAGED TO FEBTC/BPI;

C. WHETHER OR NOT RESPONDENT CAN RAISE THE ISSUE ON THE NULLITY

OF THE EXTRA-JUDICIAL FORECLOSURE SALE IN AN ACTION FILED BY THE
PETITIONER (CREDITOR-MORTGAGEE) FOR THE RECOVERY OF DEFICIENCY
AND FOR THE FIRST TIME ON APPEAL;

D. WHETHER OR NOT THE PRICE OF ₱9,032,960.00 FOR RESPONDENT’S

PROPERTY AT THE EXTRAJUDICIAL FORECLOSURE SALE WAS
UNCONCIONABLE OR SHOCKING TO THE CONSCIENCE OR GROSSLY
INADEQUATE.

E. WHETHER OR NOT THE PETITION RAISES QUESTIONS OF LAW AND THE

QUESTIONS OF FACT RAISED FALL WITHIN THE EXCEPTIONS TO THE RULE
THAT ONLY QUESTIONS OF LAW MAY BE REVIEWED BY THIS HONORABLE
COURT UNDER RULE 45 OF THE RULES OF COURT.8

On the other hand, respondent submits the following issues:

Whether or not the Court of Appeals erred in ruling that there exists no deficiency owed
by mortgagor-debtor as the mortgagee-creditor bank acquired the mortgaged property
at the foreclosure sale worth ₱47,536,000 at only ₱9,032,960;

Whether or not the Court of Appeals erred in ruling that the properties of the respondent
were not overvalued at ₱47,536,000;

Whether or not the Court of Appeals erred in entertaining the issue that the foreclosure
sale was null and void;

Whether or not the Court of Appeals erred in ruling that the purchase price of
₱9,032,000 at the foreclosure sale of respondent’s mortgaged properties was
unconscionable or grossly inadequate.9

After consideration of the issues and arguments raised by the opposing sides, the Court
finds the petition meritorious.

Stripped of surplusage, the singular issue in this case is whether or not petitioner is
entitled to recover the unpaid balance or deficiency from respondent despite the fact
that respondent’s property, which were appraised by petitioner’s predecessor-in-interest
at ₱47,536,000.00, was sold and later bought by petitioner in an extrajudicial
foreclosure sale for only ₱9,032,960.00 in order to satisfy respondent’s outstanding
obligation to petitioner which, at the time of the sale, amounted to ₱30,420,041.67
inclusive of interest but excluding attorney’s fees, publication and other charges.

There is no dispute with regard to the total amount of the outstanding loan obligation
that respondent owed to petitioner at the time of the extrajudicial foreclosure sale of the
property subject of the real estate mortgage. Likewise, it is uncontested that by
subtracting the amount obtained at the sale of the property, a loan balance still remains.
Petitioner merely contends that, contrary to the ruling of the Court of Appeals, it has the
right to collect from the respondent the remainder of her obligation after deducting the
amount obtained from the extrajudicial foreclosure sale. On the other hand, respondent
avers that since petitioner’s predecessor’s own valuation of the subject property shows
that its value is more than the amount of respondent’s outstanding obligation, then
respondent cannot be held liable for the balance especially because it was petitioner
who bought the property at the foreclosure sale.

In the recent case of BPI Family Savings Bank, Inc. v. Avenido,10 we reiterated the
well-entrenched rule that a creditor is not precluded from recovering any unpaid balance
on the principal obligation if the extrajudicial foreclosure sale of the property subject of
the real estate mortgage results in a deficiency, to wit:

It is settled that if "the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency
from the debtor. While Act No. 3135, as amended, does not discuss the mortgagee’s
right to recover the deficiency, neither does it contain any provision expressly or
impliedly prohibiting recovery. If the legislature had intended to deny the creditor the
right to sue for any deficiency resulting from the foreclosure of a security given to
guarantee an obligation, the law would expressly so provide. Absent such a provision in
Act No. 3135, as amended, the creditor is not precluded from taking action to recover
any unpaid balance on the principal obligation simply because he chose to
extrajudicially foreclose the real estate mortgage."11

Furthermore, we have also ruled in Suico Rattan & Buri Interiors, Inc. v. Court of
Appeals12 that, in deference to the rule that a mortgage is simply a security and cannot
be considered payment of an outstanding obligation, the creditor is not barred from
recovering the deficiency even if it bought the mortgaged property at the extrajudicial
foreclosure sale at a lower price than its market value notwithstanding the fact that said
value is more than or equal to the total amount of the debtor’s obligation. We quote from
the relevant portion of said decision:

Hence, it is wrong for petitioners to conclude that when respondent bank supposedly
bought the foreclosed properties at a very low price, the latter effectively prevented the
former from satisfying their whole obligation. Petitioners still had the option of either
redeeming the properties and, thereafter, selling the same for a price which
corresponds to what they claim as the properties’ actual market value or by simply
selling their right to redeem for a price which is equivalent to the difference between the
supposed market value of the said properties and the price obtained during the
foreclosure sale. In either case, petitioners will be able to recoup the loss they claim to
have suffered by reason of the inadequate price obtained at the auction sale and, thus,
enable them to settle their obligation with respondent bank. Moreover, petitioners are
not justified in concluding that they should be considered as having paid their
obligations in full since respondent bank was the one who acquired the mortgaged
properties and that the price it paid was very inadequate. The fact that it is respondent
bank, as the mortgagee, which eventually acquired the mortgaged properties and that
the bid price was low is not a valid reason for petitioners to refuse to pay the remaining
balance of their obligation. Settled is the rule that a mortgage is simply a security and
not a satisfaction of indebtedness.13 (Emphases supplied.)

We are aware of our earlier pronouncements in Cometa v. Court of Appeals14 and in

Rosales v. Court of Appeals15 which were cited by the Court of Appeals in its assailed
April 30, 2008 Decision, wherein we declared that a sale price which is equivalent to
more or less twelve percent (12%) of the value of the property is shockingly low,
unconscionable and grossly inadequate, thus, warranting a nullification of the
foreclosure sale. In both cases, we declared that where the inadequacy of the price is
purely shocking to the conscience, such that the mind revolts at it and such that a
reasonable man would neither directly nor indirectly be likely to consent to it, the sale
shall be declared null and void. On the other hand, we are likewise reminded of our
ruling in Cortes v. Intermediate Appellate Court16 and in Ponce De Leon v.
Rehabilitation Finance Corporation17 wherein we upheld the validity of foreclosure
sales in which the property subject thereof were sold at 11% and 17%, respectively, of
their value.

In the case at bar, the winning bid price of ₱9,032,960.00 is nineteen percent (19%) of
the appraised value of the property subject of the extrajudicial foreclosure sale that is
pegged at ₱47,536,000.00 which amount, notably, is only an arbitrary valuation made
by the appraising officers of petitioner’s predecessor-in-interest ostensibly for loan
purposes only. Unsettled questions arise over the correctness of this valuation in light of
conflicting evidence on record.

Notwithstanding the doubtful validity of the valuation of the property at issue, the
resolution of which is a question of fact that we are precluded from addressing at this
juncture of the litigation, and confronted by the divergent jurisprudential benchmarks
which define what can be considered as shockingly or unconscionably low price in a
sale of property, we, nevertheless, proceed to adjudicate this case on an aspect in
which it is most plain and unambiguous – that it involves a forced sale with a right of
redemption.
Throughout a long line of jurisprudence, we have declared that unlike in an ordinary
sale, inadequacy of the price at a forced sale is immaterial and does not nullify a sale
since, in a forced sale, a low price is more beneficial to the mortgage debtor for it makes
redemption of the property easier.18

In the early case of The National Loan and Investment Board v. Meneses,19 we also
had the occasion to state that:

As to the inadequacy of the price of the sale, this court has repeatedly held that the fact
that a property is sold at public auction for a price lower than its alleged value, is not of
itself sufficient to annul said sale, where there has been strict compliance with all the
requisites marked out by law to obtain the highest possible price, and where there is no
showing that a better price is obtainable. (Government of the Philippines vs. De Asis, G.
R. No. 45483, April 12, 1939; Guerrero vs. Guerrero, 57 Phil., 442; La Urbana vs.
Belando, 54 Phil., 930; Bank of the Philippine Islands v . Green, 52 Phil., 491.)20
(Emphases supplied.)

In Hulst v. PR Builders, Inc.,21 we further elaborated on this principle:

[G]ross inadequacy of price does not nullify an execution sale. In an ordinary sale, for
reason 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 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 redemption. When there is a right to redeem, inadequacy of price
should not be material because the judgment debtor may re-acquire the property or else
sell his right to redeem and thus recover any loss he claims to have suffered by reason
of the price obtained at the execution sale. Thus, respondent stood to gain rather than
be harmed by the low sale value of the auctioned properties because it possesses the
right of redemption. x x x22 (Emphasis supplied.)1âwphi1

It bears also to stress that the mode of forced sale utilized by petitioner was an
extrajudicial foreclosure of real estate mortgage which is governed by Act No. 3135, as
amended. An examination of the said law reveals nothing to the effect that there should
be a minimum bid price or that the winning bid should be equal to the appraised value of
the foreclosed property or to the amount owed by the mortgage debtor. What is clearly
provided, however, is that a mortgage debtor is given the opportunity to redeem the
foreclosed property "within the term of one year from and after the date of sale."23 In
the case at bar, other than the mere inadequacy of the bid price at the foreclosure sale,
respondent did not allege any irregularity in the foreclosure proceedings nor did she
prove that a better price could be had for her property under the circumstances.

Thus, even if we assume that the valuation of the property at issue is correct, we still
hold that the inadequacy of the price at which it was sold at public auction does not
invalidate the foreclosure sale.

Even if we are so inclined out of sympathy for respondent’s plight, neither could we
temper respondent’s liability to the petitioner on the ground of equity. We are barred by
our own often repeated admonition that equity, which has been aptly described as
"justice outside legality," is applied only in the absence of, and never against, statutory
law or judicial rules of procedure.24 The law and jurisprudence on the matter is clear
enough to close the door on a recourse to equity.

Moreover, we fail to see any unjust enrichment resulting from upholding the validity of
the foreclosure sale and of the right of the petitioner to collect any deficiency from
respondent. Unjust enrichment exists "when a person unjustly retains a benefit to the
loss of another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good governance."25 As discussed above,
there is a strong legal basis for petitioner’s claim against respondent for the balance of
her loan obligation.

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed

Decision dated April 30, 2008 of the Court of Appeals in CA-G.R. CV No. 88004 is
REVERSED and SET ASIDE. The RTC’s November 3, 2005 Decision in Civil Case No.
03-180 is hereby REINSTATED.

SO ORDERED.

SECOND DIVISION
G.R. No. 233774, April 10, 2019

MA. LUISA A. PINEDA, PETITIONER, v. VIRGINIA ZUÑIGA VDA. DE VEGA,

RESPONDENT.

DECISION

CAGUIOA, J.:

This is a Petition for Review on Certiorari1 (Petition) under Rule 45 of the Rules of Court
(Rules) assailing the Decision2 dated March 21, 2017 and the Resolution3 dated
August 30, 2017 of the Court of Appeals4 (CA) in CA-G.R. CV No. 106404. The CA
Decision reversed and set aside the Decision dated April 30, 2015 and the Resolution
dated October 14, 2015 of the Regional Trial Court of Malolos City, Bulacan, Branch 17
(RTC) in Civil Case No. 526-M-2005. The RTC Decision ruled in favor of petitioner Ma.
Luisa Pineda (petitioner) and the RTC Resolution denied the motion for reconsideration
of respondent Virginia Zuñiga vda. de Vega (respondent). The CA Decision also
dismissed petitioner's complaint. The CA Resolution denied petitioner's motion for
reconsideration.
Facts and Antecedent Proceedings
Petitioner filed a complaint dated June 10, 2005 against respondent, praying for the
payment of the latter's principal obligation and the interest thereon or, in default of such
payment, the foreclosure of the property subject of a real estate mortgage.5

In her complaint, petitioner alleged that, on March 25, 2003, respondent borrowed from
her P500,000.00 payable within one year with an interest rate of 8% per month.6 To
secure the loan, respondent executed a real estate mortgage (2003 Agreement) over a
parcel of land covered by Transfer Certificate of Title No. T-339215, together with all the
buildings and improvements existing thereon (Property), in petitioner's favor.7 On the
loan's maturity, respondent failed to pay her loan despite demand.8 As of May 2005, the
unpaid accumulated interest amounted to P232,000.00.9

In her answer, respondent denied petitioner's material allegations and countered that
the complaint was dismissible for lack of prior barangay conciliation proceeding and for
failure to join her husband as a party.10 She also argued that the interest rate agreed
upon was excessive and unconscionable, thus illegal.11 She further denied receiving
P500,000.00 from petitioner and claimed that the said amount was the accumulated
amount of another obligation she earlier secured from petitioner.12

In her reply, petitioner averred that respondent's husband did not need to be joined
because the transaction did not involve him and although the agreement was to charge
an interest rate of 8% per month, what was actually charged was just 4% per month.13
Petitioner admitted that the original loan which respondent obtained in 2000 was only
P200,000.00 with an undertaking to pay 3% interest per month.14

In the written interrogatories addressed to petitioner, she admitted that the P500,000.00
indicated in the 2003 Agreement referred to a previously executed undated real estate
mortgage (undated Agreement) between the parties which secured respondent's loan of
P200,000.00 from her.15

After the parties underwent mediation proceedings, which turned out to be

unsuccessful, the case was set for hearing.16 Despite the leeway provided by the RTC,
respondent failed to formally offer her evidence.17

On April 30, 2015, the RTC rendered a Decision finding that (1) the existence of the
loan and the real estate mortgage had been established and, thus, judicial foreclosure
would be proper given respondent's non-compliance therewith; (2) since the undated
Agreement had no provision on the payment of interest, the legal interest of 12% per
annum should be imposed; (3) the 2003 Agreement's interest rate was unconscionable;
(4) the non-joinder of respondent's husband was not a jurisdictional defect and did not
warrant the complaint's dismissal; and (5) the non-referral to the barangay conciliation
proceeding did not prevent the court from exercising its jurisdiction given that the parties
had already undergone several conciliation and mediation proceedings.18

RTC Ruling

The dispositive portion of the RTC Decision states:

WHEREFORE, in the light of the foregoing, the defendant is hereby ordered to pay
plaintiff the loaned amount of P200,000 plus the interest of 12% per annum from
September 3, 2004, the date the defendant received the demand letter from the plaintiff,
dated August 2004, until the finality of the decision and the satisfaction of the amount
due. She is also ordered to pay the plaintiff the amount of P50,000 as nominal damages
and P30,000 as attorney's fees.

In default of payment, the mortgaged property, together with all the buildings and
improvements existing thereon, shall be foreclosed and sold and the proceeds of their
sale shall be applied to the payment of the amounts due the plaintiff, including damages
and attorney's fees.

SO ORDERED.
Respondent's motion for reconsideration having been denied by the RTC, she appealed
the RTC Decision to the CA, which the latter granted in its Decision20 dated March 21,
2017. The CA Decision reversed and set aside the RTC Decision and dismissed the
complaint.21 The CA found that petitioner failed to prove that prior demand had been
made upon respondent for the full payment of the latter's obligation.22 While the
complaint alleged and petitioner testified that demand was sent to respondent by
registered mail and received on September 7, 2004, the registry return card evidencing
such receipt was not specifically and formally offered in evidence.23 The CA noted that
what petitioner presented was a copy of the said demand letter with only a photocopy of
the face of a registry return card which was claimed to refer to the said letter.24
According to the CA, it thoroughly reviewed petitioner's formal offer and found no
reference to the registry receipt card or any competent proof, like a postman certificate
or the testimony of the postman, that respondent actually received the demand letter.25
The CA concluded that for failing to prove the requisite demand under Article 116926 of
the Civil Code, respondent could not be considered in default and petitioner's case must
fail.27

The CA having arrived at the above conclusion, it found that it would no longer be
necessary to discuss the other issues presented by the parties.28

CA Ruling

The dispositive portion of the CA Decision states:

WHEREFORE, the appeal is GRANTED. The assailed Decision and Resolution of the
Regional Trial Court, Third Judicial Region, Branch 17, City of Malolos, Bulacan, in Civil
Case No. 526-M-2005 are REVERSED and SET ASIDE. Accordingly, the complaint is
DISMISSED.

SO ORDERED.29

Petitioner filed a motion for reconsideration, which was denied by the CA in its
Resolution30 dated August 30, 2017.

Hence, the Petition. Respondent filed a Comment/Opposition Ad Cautelam31 dated

November 3, 2017, which the Court notes.

Issues

Petitioner, invoking several exceptions to the rule that only questions of law may be
raised in a Rule 45 certiorari petition, submits for resolution the following factual issues:
Was a demand letter sent by petitioner to respondent and was it received by the latter?
32

The Court's Ruling

Petitioner recognizes that only questions of law may be raised in a Rule 45 certiorari
petition, and factual issues are entertained only in exceptional cases. To justify the
Court's review of the CA's factual findings, petitioner cites the following exceptions to
the general rule: (1) the judgment is based on misapprehension of facts; (2) the
inference is manifestly mistaken, absurd or impossible; (3) the findings of the CA are
contrary to those of the trial court; (4) the CA manifestly overlooked certain relevant and
undisputed facts that, if properly considered, would justify a different conclusion; and (5)
the findings of the CA are contrary to the admission of the parties.33
Respondent in her Comment prays for the outright dismissal of the Petition based on
these procedural matters: (1) the belated filing of the Petition, and (2) the failure of
petitioner to pose a question of law.34

As to the first ground raised by respondent, the Petition was seasonably filed within the
30-day extension that the Court granted in its September 27, 2017 Resolution.35
Petitioner's motion for extension of time to file the Petition was filed within the 15-day
period provided in Section 2, Rule 45 of the Rules.

As to the second ground, even if it is conceded that the exceptions cited by petitioner
are applicable, the Court is not persuaded by her argument that respondent had
admitted in her answer and pre-trial brief that respondent received on September 3,
200436 the demand letter dated August 4, 2004.

Petitioner stresses that in respondent's answer and pre-trial brief, the latter admitted
Annex "C", which is a copy of the demand letter. Petitioner also points out that in the
complaint, it was alleged:

"7. The time for the payment of the subject loan is long overdue and the defendant,
despite repeated demands by the plaintiff to pay, has continuously failed and refused to
pay both the principal obligation and the accumulated interest. A copy of the demand
letter is appended as Annex "C" and made [integral] part hereof." (Underscoring
supplied)37

The admission by respondent of Annex "C" is at most an admission of the demand

letter's existence and due execution. Since there was no allegation of receipt by
respondent of Annex "C" in the complaint, such fact had to be established by petitioner.

On this point, the Court agrees with the CA, to wit:

It was, indeed, alleged in the complaint, as well as in her testimony, that demand was
sent to [respondent] by registered mail and was received on September 7, 2004.
However, the registry return card evidencing such receipt was not specifically and
formally offered in evidence. What she presented, instead, was a copy of the said
demand letter with only a photocopy of the face of a registry return card claimed to refer
to the said letter. Thus, in her formal offer of evidence:

Exhibit "C" – Demand Letter sent by plaintiff's lawyer to the defendant, demanding that
the latter comply with the terms and conditions of the [R]eal Estate Mortgage (REM)
between them within three (3) months from receipt: otherwise, the former will be
constrained to enforce the REM.

Purpose: To prove that when the defendant failed to comply with the terms and
conditions of the said Real Estate Mortgage, a letter was sent to her demanding
compliance; otherwise, the former will enforce the mortgage contract.

[Respondent] properly opposed the said evidence as it does not prove that she, in fact,
received the letter. We have thoroughly reviewed her formal offer as well and found no
reference to the registry receipt card or any other competent proof i.e., postman
certificate or the testimony of the postman, that [respondent] actually received the said
demand letter.

[Petitioner] could have simply presented and offered in evidence the registry receipt or
the registry return card accompanying the demand letter. However, she offered no
explanation why she failed to do so. There is, thus, no satisfactory proof that the letter
was received by [respondent].

In emphasizing further that the registry return card is the best evidence of actual receipt
of [respondent], We find the High Court's discussion in Mangahas v. Court of
Appeals,38 apt, viz[.]:

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION
G.R. No. 174581 February 4, 2015

ATTY. LEO N. CAUBANG, Petitioner,

vs.
JESUS G. CRISOLOGO and NANETTE B. CRISOLOGO, Respondents.

DECISION

PERALTA, J.:

For the Court's resolution is a Petition for Review under Rule 45 of the Rules of Court
which petitioner Atty. Leo N. Caubang filed, questioning the Decision1 of the Court of
Appeals (CA), dated May 22, 2006, and its Resolution2 dated August 16, 2006 in CA-
G.R. CV. No. 68365. The CA affirmed the Decision3 of the Regional Trial Court (RTC)
of Davao City, Branch 12, dated August 1, 2000, with modifications, in Civil Case No.
27168-99.

The facts, as gathered from the records, are as follows:

On December 17, 1993, respondents spouses Jesus and Nannette Crisologo (the
Spouses Crisologo) obtained an Express Loan in the amount of ₱200,000.00 from
PDCP Development Bank Inc. (PDCP Bank). On January 26, 1994, the Spouses
Crisologo acquired another loan from the same bank, this time a Term Loan of
₱1,500,000.00 covered by a Loan Agreement. As security for both loans,the spouses
mortgaged their property covered by Transfer Certificate of Title (TCT) No. T-181103.
Upon release of the Term Loan, they were given two (2) promissory notes, for the
amount of ₱500,000.00 on February 9, 1994 and ₱1,000,000.00 on February 21, 1994.

Under the promissory notes, the Spouses Crisologo agreed to pay the principal amount
of the loan over a periodof three (3) years in twelve (12) equal quarterly amortizations.
Although they were able to pay the Express Loan, starting August 22, 1994, however, or
after payment of the first few installments on the other loans, the spouses defaulted in
the amortizations. Despite several demands made by the bank,the spouses still failed to
pay.
On May 31, 1996, the spouses received a detailed breakdown of their outstanding
obligation. Finding the charges to be excessive, they wrote a letter to the bank
proposing to pay their loan in full with a request that the interest and penalty charges be
waived. The manager of PDCP Bank, Davao Branch, advised them to deposit their
₱1,500,000.00 obligation as manifestation of their intent to pay the loan. As a counter-
offer, the spouses agreed to deposit the amount but on the condition that the bank
should first return to them the title over the mortgaged property. The bank did not reply
until July 7, 1997, where they senta letter denying the spouses’ counteroffer and
demanding payment of the loan already amounting to ₱2,822,469.90. By October 20,
1997, the debt had ballooned to ₱3,041,287.00. For failure to settle the account, the
Davao branch of the bank recommended the foreclosure of the mortgage to its head
office. On March 20, 1998, PDCP Bank filed a Petition for the Extrajudicial Foreclosure
of the Mortgage.

On June 8, 1998, petitioner Leo Caubang, as Notary Public, prepared the Notices of
Sale, announcing the foreclosure of the real estate mortgage and the sale of the
mortgaged property at public auction on July 15, 1998. He caused the posting of said
notices in three (3) public places: the Barangay Hall of Matina, City Hall of Davao,and
Bangkerohan Public Market. Publication was, likewise, made in the Oriental Daily
Examiner, one of the local newspapers in Davao City.

On July 15, 1998, Caubang conducted the auction sale of the mortgaged property, with
the bank as the only bidder.1âwphi1 The bank bidded for ₱1,331,460.00, leaving a
deficiencyof ₱2,207,349.97. Thereafter, a Certificate of Sale in favor of the bank was
issued.

Later, the Spouses Crisologo were surprised to learn that their mortgaged property had
already been soldto the bank. Thus, they filed a Complaint for Nullity of Extrajudicial
Foreclosure and Auction Sale and Damages against PDCP Bank and Caubang.

On August 1, 2000, the Davao RTC rendered a Decision nullifying the extrajudicial
foreclosure of the real estate mortgage for failure to comply with the publication
requirement, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Declaring the Extra-Judicial Foreclosure sale of plaintiffs’ property, covered by TCT
No. T-181103, null and void.

2. Ordering the Register of Deeds for the City of Davao to cancel Entry No. 113255 on
TCT No. T-181103, the entry relative to the Certificate of Sale executed by Atty. Leo
Caubang on August 5, 1998, and if a new title has been issued to defendant PDCP, to
cancel the same, and to reinstate TCT No. T-181103 in the name of Nannette B.
Crisologo, of legal age, Filipino, married to Jesus Crisologo, and a resident of Davao
City, Philippines.

All the other claims of the parties are disallowed.

No pronouncement as to costs.

SO ORDERED.4

The Spouses Crisologo appealed before the CA, seeking a partial modification of the
RTC Decision, insofar as their claims for moral and exemplary damages, attorney’s
fees, and costs of suit were concerned. On May 22, 2006, the appellate court modified
the decretal portion to read: WHEREFORE, judgment is hereby rendered:

1. Declaring the Extra-Judicial Foreclosure sale of plaintiffs’ property, covered by TCT #

T-181103, null and void.

2. Ordering the Register of Deeds for the City of Davao to cancel Entry No. T-181103,
the entry relative to the Certificate of Sale executed by Atty. Leo Caubang on August 5,
1998, and if a new title has been issued to defendant PDCP, to cancel the same, and to
reinstate TCT No. T-181103 in the name of Nannette B. Crisologo, of legal age, Filipino,
married to Jesus Crisologo, and a resident of Davao City, Philippines; and

3. Atty. Caubang is ordered to pay appellants the sum of ₱41,500.00 as attorney’s fees
and ₱30,248.50 as litigation expenses.
All other claims of the parties are disallowed.

SO ORDERED.5

Caubang filed a Motion for Reconsideration, but the same was denied. Hence, he filed
the present petition.

Caubang mainly assails the CA’s ruling on the publication of the notices in the Oriental
Daily Examiner. He firmly contends that the CA’s finding was based on assumptions
and speculations.

The petition lacks merit.

Under Section 3 of Act No. 3135:6

Section 3. Notice of sale; posting; when publication required.– Notice shall be given by
posting notices ofthe sale for not less than twenty days in at least three public places
ofthe municipality or city where the property is situated, and if such property is worth
more than four hundred pesos, such notices shall also be published once a week for at
least three consecutive weeksin a newspaper of general circulation in the municipality
or city.7

Caubang never made an effort toinquire as to whether the Oriental Daily Examinerwas
indeed a newspaper of general circulation, as required by law. It was shown that the
Oriental Daily Examineris not even on the list of newspapers accredited to publish legal
notices, as recorded in the Davao RTC’s Office of the Clerk of Court. It also has no
paying subscribers and it would only publish whenever there are customers. Since there
was no proper publication of the notice of sale, the Spouses Crisologo, as well as the
rest of the general public, were never informed thatthe mortgaged property was about to
be foreclosed and auctioned. As a result,PDCP Bank became the sole bidder. This
allowed the bank to bid for a very low price (₱1,331,460.00) and go after the spouses
for a bigger amount as deficiency.1âwphi1
The principal object of a notice of sale in a foreclosure of mortgage is not so much to
notify the mortgagor as to inform the public generally of the nature and condition of the
property to be sold, and of the time, place, and terms of the sale. Notices are given to
secure bidders and prevent a sacrifice of the property. Therefore, statutory provisions
governing publication of notice of mortgage foreclosure sales must be strictly complied
with and slight deviations therefrom will invalidate the notice and render the sale, at the
very least, voidable. Certainly, the statutory requirements of posting and publication are
mandated and imbued with public policy considerations. Failure to advertise a mortgage
foreclosure sale in compliance with the statutory requirements constitutes a
jurisdictional defect, and any substantial error in a notice of sale will render the notice
insufficient and will consequently vitiate the sale.8

Since it was Caubang who caused the improper publication of the notices which, in turn,
compelled the Spouses Crisologo to litigate and incur expenses involving the
declaration of nullity of the auction sale for the protection of their interest on the
property, the CA aptly held that Caubang shall be the one liable for the spouses' claim
for litigation expenses and attorney's fees.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals, dated
May 22, 2006, and its Resolution dated August 16, 2006, in CA-G.R. CV. No. 68365,
are hereby AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

MARTIN S. VILLARAMA, JR.

Associate Justice BIENVENIDO L. REYES
Associate Justice
FRANCIS H. JARDELEZA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.

[ G.R. No. 247229, September 03, 2020 ]

LUZ V. FALLARME, PETITIONER, VS. ROMEO PAGEDPED, RESPONDENT.

DECISION

REYES, J. JR., J.:

Before the Court is a petition for review on certiorari seeking the reversal of the
Decision1 dated May 2, 2018 and the Resolution2 dated February 14, 2019 of the Court
of Appeals (CA) in CA-G.R. CV No. 108155 which granted the appeal and reversed the
ruling of the Regional Trial Court (RTC) in Civil Case No.7821-R.

Property claimed by Pagedped

The subject matter of this case is a 1,862-square meter land in Baguio City, formerly
covered by Transfer Certificate of Title (TCT) No. T-61200 issued in the name of
Spouses Rudy and Nena Avila (Avilas).
On May 2, 1999, the Avilas obtained a P200,000.00 loan from Romeo Pagedped
(Pagedped) secured by a real estate mortgage (REM) over the property. The Avilas
delivered to Pagedped the owner's duplicate copy of TCT No. T-61200, and the REM
was annotated on the title, as Entry No. 257381-29-86 on June 1, 1999.

Upon the failure of the Avilas to settle their obligation despite repeated demands,
Pagedped judicially foreclosed the REM and the property was sold at a public auction
on October 5, 2005 with Pagedped emerging as the highest bidder. The Sheriff's
Certificate of Sale was registered and entered with the Register of Deeds on November
22, 2005 and annotated on TCT No. T-61200, as Entry No. 6809-36-178.

After a year from the time the Sheriff's Certificate of Sale was recorded, Pagedped
consolidated his ownership over the parcel of land and was issued TCT No. T-91349
over the same on November 24, 2006, thereby cancelling TCT No. T-61200. All the
annotations on TCT No. T-61200 were carried over to TCT No. T-91349.

According to Pagedped, it was only then that he discovered that several annotations
were made on TCT No. T-61200 in the name of Fallarme.3

Fallarme's claim to 1/2 A of the property

Luz V. Fallarme (Fallarme) instituted a case before the RTC, docketed as Civil Case
No. 5045-R, against the Avilas. A Notice of Attachment dated April 4, 2003 and later a
Notice of Levy upon Realty dated May 20, 2005, were issued by the court involving one-
half (Yi) portion of the subject parcel of land. The notices were annotated on TCT No. T-
61200 as Entry Nos. 14015-33-118 and 590-36-16, respectively.

Subsequently, Fallarme caused the sale at public auction of the Vz portion on July 12,
2005. At the public auction, Fallarme emerged as the highest bidder, for P528,000.00,
for which reason, she was issued a Sheriff's Certificate of Sale. The Sheriff's Certificate
of Sale was annotated on TCT No. T-61200, on June 9, 2006, as Entry No. 13687-37-
108.4

RTC, Baguio City, Branch 6

LRC Adm. Case No. 1967-R

On May 26, 2010, Pagedped filed a petition for the cancellation of all annotations
appearing on TCT No. T-91349, docketed as LRC Adm. Case No. 1967-R, before the
RTC of Baguio City, Branch 6. Fallarme was joined as a respondent in the case.

In his petition, Pagedped alleged that he was surprised to discover that a Notice of
Attachment dated April 4, 2003 and a Notice of Levy upon Realty dated May 20, 2005
by Sheriff Oliver N. Landingin involving the case of Fallarme were annotated at the back
of his TCT No. T-91349, and that thereafter a Sheriff's Certificate of Sale dated July 12,
2005 issued by Sheriff Landingin in favor of Fallarme was also registered and entered
with the Office of the Register of Deeds on June 9, 2006, and annotated on the same
title. Pagedped was neither notified nor impleaded as a party to the foreclosure
proceedings initiated by Fallarme, even though the Deed of REM executed in his favor
was entered and annotated earlier than Fallarme's. He alleged that Fallarme knew of
the encumbrance in his favor as appearing in the title, yet she failed to notify him of her
foreclosure to his damage and prejudice.5

RTC Ruling in LRC Adm. Case No. 1967-R

On January 10, 2013, the RTC granted Pagedped's petition and the Register of Deeds
of Baguio City was directed to cancel all entries mentioned therein.6

The fallo reads:

WHEREFORE, the instant petition is granted. The Register of Deeds, Baguio City, is
directed to cancel Entry No. 14015-33-118 (Notice of Attachment), Entry No. 590-36-16
(Notice of Levy upon realty) and Entry No. 13687-37-108 (Sheriff's Certificate of Sale) in
the Transfer Certificate of Title No. T-91349 of the Registry of Deeds of Baguio City in
the name of Romeo Pagedped.

SO ORDERED.7
Fallarme filed a notice of appeal on January 31, 2013, and the case was elevated to the
Court of Appeals, docketed as CA-G.R. CV No. 100279.

CA-G.R. CV No. 100279

On November 24, 2017, the appellate court8 ruled:

WHEREFORE, the appeal is GRANTED. The decision of the Regional Trial Court of
Baguio City, Branch 6 dated January 10, 2013 in LRC Case No. 1967-R is REVERSED
and SET ASIDE. A new decision is entered DISMISSING the petition for cancellation of
encumbrances on Transfer Certificate of Title No. T-91349.

SO ORDERED.9

The CA, through the Special Sixteenth Division, held that the RTC correctly held that
the encumbrances in favor of Fallarme are inferior to that of Pagedped. This is because
any subsequent lien annotated at the back of a certificate of title cannot, in any way,
prejudice a mortgage previously registered even if the sale took place after the
annotation of the subsequent lien or encumbrance. While the subject encumbrances
were already existing when the auction sale was held on October 5, 2005, the rights of
Pagedped as the original mortgagee and purchaser at the auction sale, takes
precedence.

The CA further held, however, that the RTC committed reversible error in ordering the
cancellation of the subject encumbrances because the record shows that Fallarme was
not impleaded in the judicial foreclosure proceedings initiated by Pagedped. A
subsequent lien holder who was not impleaded as a party in the foreclosure suit is not
bound by the judgment in favor of the foreclosing mortgagee. Thus, the subsequent lien
holder's equity of redemption remains unforeclosed and a separate foreclosure
proceeding must be brought to require her to redeem from the party acquiring title.
Without the conduct of a separate foreclosure proceeding, Fallarme's equity of
redemption remained unforeclosed and Pagedped acquired title to the property subject
to the encumbrances annotated at the back of TCT No. T-91349. Thus, the
encumbrances cannot be ordered cancelled until it is shown that Fallarme failed to
exercise her equity of redemption as provided for by law.10
The CA Decision in CA G.R. CV No. 100279 acquired finality on June 30,2018.11

Meanwhile, shortly after she filed her appeal to the CA, above mentioned, Fallarme sent
Pagedped a letter on February 21, 2013, through counsel, saying that the judgment in
the case to judicially foreclose the REM is ineffective to her since she was not made a
party to said case. Also, since she has 1/2 interest in the property, P100,000.00, (which
is half of the P200,000.00 for which the property covered by TCT No. T-61200 was sold)
should be taken into consideration in the computation of the redemption amount plus
the legal rate of interest due thereon, computed from the time of the foreclosure sale up
to the date when the property is redeemed.

Pagedped refused the offer to redeem 1/2 portion of the property which prompted
Fallarme to file on April 18, 2013, a complaint for redemption and consignation before
the RTC of Baguio City, Branch 7 docketed as Civil Case No. 7821-R.

RTC Baguio City, Branch 7

Civil Case No. 7821-R

In her complaint, Fallarme alleged that since she was not made a party in the case for
judicial foreclosure of the real estate mortgage constituted over the subject parcel of
land filed by Pagedped, her supposed equity of redemption remained valid and
subsisting.

Pagedped, in his Answer, meanwhile maintained that the publication of the notice of
foreclosure sale was a notice to the whole world, and since no redemption was made
within one year from the registration of the foreclosure sale to him, redemption was no
longer possible notwithstanding the consignation of the redemption price.

At the pre-trial, Pagedped and Fallarme stipulated on the following: (1) that Fallarme is
the subsequent lien holder of 1/2 portion of the property covered by TCT No. T-91349;
(2) that prior to the filing of Pagedped's judicial foreclosure of real estate mortgage
constituted on the subject real property, Fallarme already caused the annotation of a
notice of attachment and a notice of levy, but Pagedped learned of these annotations
only after the release of the title in his favor; (3) that Fallarme was not joined as a party
to the foreclosure action over the subject real property which Pagedped instituted
against the Avilas because the latter never knew of the transaction between the Avilas
and Fallarme and he was not a party to their contract; (5) that there was an offer from
Fallarme for the redemption of the Vz portion of the subject property; (6) that Pagedped
was informed of Fallarme's intention to consign the redemption price and the actual
consignation of the redemption price; (7) that Pagedped refused Fallarme's offer to
redeem the Vz portion of the subject real property; (8) that the owner's copy of TCT No.
T-61200 had always been with Pagedped; (9) that in Civil Case No. 5045-R, Pagedped
was never impleaded with the qualification that said case is a personal action by
Fallarme against the Avilas; and (10) that the subject lot is now registered in the name
of Pagedped under TCT No. T-91349.12

RTC Branch 7 Ruling in Civil Case No. 7821-R

On November 4, 2016, the RTC of Baguio City, Branch 7 held:

WHEREFORE, as prayed for, plaintiff Luz Fallarme is hereby declared to be entitled to

redeem 1/2 portion of the property registered under Transfer Certificate of Title No. T-
91349 of the Register of Deeds of Baguio City from defendant Romeo Pagedped who is
hereby given thirty (30) days from notice to claim the consigned redemption price of
Phpl88,000.00 from the Office of the Executive Judge through the RTC Clerk of Court
and immediately thereafter, surrender the Owner's Duplicate Certificate of the said title
to the Register of Deeds of Baguio City for cancellation and for the issuance in lieu
thereof, of another title registered in the names of Luz Fallarme and Romeo Pagedped
as co-owners of the lot covered by the said title.

SO ORDERED.13

The RTC, in ruling for Fallarme, held that since she was not joined as a party in the
case instituted by Pagedped for the judicial foreclosure of real estate mortgage
constituted upon the subject land, her right to redeem the Vi portion thereof as a
subordinate lien holder remained unforeclosed and unaffected. The RTC then fixed the
redemption price at P188,000.00, representing 1/2 of the purchase price plus 12%
annual interest computed from the registration of the foreclosure sale to Romeo on
November 22, 2005 to the filing of the instant case on April 18, 2013.

Pagedped filed an appeal with the CA docketed as CA-G.R. CV No. 108155 arguing
that he was not notified of the notices of attachment and levy annotated on the copy of
TCT No. T-61200 on file with the Office of the Register of Deeds, thus, such annotations
were not binding on him. This also justifies why Fallarme was not impleaded in the
judicial foreclosure of real estate mortgage which he instituted against the Avilas. In
addition, Fallarme cannot demand for equity of redemption as she was neither the
mortgagor nor a transferee of such mortgagor. She also failed to exercise her equity of
redemption within a reasonable time.14

CA Ruling in CA-GR CV No. 108155

On May 2, 2018, the CA, this time through Ninth Division, granted the appeal and
reversed and set aside RTC Branch 7 in Civil Case No. 7821-R:

WHEREFORE, the instant appeal is GRANTED. The assailed Decision of the Regional
Trial Court of Baguio City, Branch 7, in Civil Case No. 7821-R, is REVERSED and SET
ASIDE. Judgment is rendered dismissing the case.

SO ORDERED.15

The CA held that since what was involved in this case was a judicial foreclosure of
mortgage, there is only equity of redemption in accordance with Rule 68 of the Rules of
Court. When Fallarme purchased the 1/2 portion of the subject parcel of land at the
execution sale held on July 12, 2006, she acquired the same subject to the
encumbrance (real estate mortgage constituted in favor of Pagedped) annotated on
TCT No. T-61200 on June 1, 1999. The equity of redemption which Fallarme acquired
over the lA portion of the subject land subsequent to the real estate mortgage in favor of
Pagedped may be divested or barred only by making Fallarme a party to the
proceedings to foreclose.16

Still, the C A ruled that it was reversible error on the part of the RTC in allowing
Fallarme to redeem 1/2 portion of the subject parcel of land. The CA noted that while
she was not impleaded as a defendant in the judicial foreclosure of the real estate
mortgage instituted by Pagedped, she was, however, joined as a respondent in the
subsequent case for cancellation of encumbrances, docketed as LRC Adm. Case No.
167-R, filed in 2010 before RTC Baguio City, Branch 6. In said case, while Fallarme
initially filed an Opposition, she later withdrew the same giving both Pagedped and the
RTC the impression that there was no legal impediment to the cancellation of the
annotations sought and that she was abandoning or waiving whatever rights she might
have acquired in connection therewith.17

It was only after the January 10, 2013 Decision of the RTC that Fallarme, through a
letter, informed Pagedped that she intended to redeem the lA portion of the subject
property. When Pagedped rejected her offer, it was only then that she filed the case
before the RTC. The CA held that for failure of Fallarme to seasonably invoke her equity
of redemption, she is precluded from doing so by reason of estoppel.18

Fallarme filed a Motion for Reconsideration which the CA denied on February 14,
2019.19

Hence, the present petition.

Issues

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT

PETITIONER FAILED TO INVOKE HER EQUITY OF REDEMPTION SEASONABLY
AND IS PRECLUDED FROM DOING SO BECAUSE SHE WITHDREW HER
OPPOSITION TO TFIE PETITION OF RESPONDENT FOR THE CANCELLATION OF
HER NOTICES OF LEVY AND ATTACHMENT

II

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT

PETITIONER IS ESTOPPED FROM INVOKING HER EQUITY OF REDEMPTION
DESPITE THE ABSENCE OF ANY LEGAL AND FACTUAL BASIS AND DESPITE THE
FACT THAT SUCH ISSUE ON ESTOPPEL WAS NOT RAISED BY THE
RESPONDENT BEFORE THE TRIAL COURT AND EVEN ON APPEAL.20
Fallarme argues that, contrary to the findings of the CA, she did not withdraw her
Opposition to the petition filed by Pagedped, docketed as LRC Adm. Case No. 1967-R.
Nowhere in the RTC Decision of Branch 6 did the trial court rule that she waived or
abandoned any of her rights which she might have acquired in connection with the
encumbrances annotated on the certificate of title issued in Pagedped's name.

Consistent with her claim over the 1/2 portion of the property, she appealed the
Decision of RTC Branch 6, arguing among others that since her equity of redemption is
unforeclosed, the encumbrances in her favor should not be cancelled yet.

The appeal she filed in LRC Adm. Case No. 1967-R was docketed as CA G.R. CV No.
100279 and was decided in her favor.21 It ruled that without the conduct of a separate
foreclosure proceeding, Fallarme's equity of redemption remains unforeclosed and
Pagedped acquired title to the property subject to the encumbrances annotated at the
back of TCT No. T-91349. Thus, the encumbrances cannot be ordered cancelled until it
is shown that she failed to exercise her equity of redemption as provided for by law. The
said decision became final and executory on June 30, 2018.

Fallarme further asserts that estoppel is not applicable in this case as it was not made
an issue in the lower court or even on appeal by Pagedped.22

Pagedped for his part asserts in his Comment that Fallarme was well aware of the prior
mortgage which can result at any time to a foreclosure, yet she did nothing to notify him.
Worse, when LRC Adm. Case No. 1967-R was filed on May 26, 2010, where she was
impleaded, she never offered to redeem one-half of the property. She waited for the
decision in LRC Adm. Case No. 1967-R to be issued which decision was adverse to her
and even appealed the same to the CA before she filed with the RTC a case for
redemption and consignation. Equity of redemption must be exercised within the 90-day
period after the judgment becomes final or after the foreclosure sale but prior to its
confirmation. The sale in Pagedped's favor was long confirmed. To allow Fallarme to
exercise her equity of redemption this late would be stretching too much the redemption
laws to his damage and prejudice. It took Fallarme almost three years from the time she
was aware of the consolidation of the title in the name of Pagedped to offer to
redeem.23

The Court's Ruling

We find merit in the petition.

While redemption is looked upon with favor, it is equally true that the right to redeem
properties remains to be a statutory privilege. Redemption is by force of law, and the
purchaser at the public auction is bound to accept it. The right to redeem property sold
as security for the satisfaction of an unpaid obligation does not exist preternaturally;
neither is it predicated on proprietary right, which after the sale of the property on
execution, leaves the judgment debtor and vests in the purchaser. It is a bare statutory
privilege to be exercised only by the persons named in the statute. A valid redemption
of property must be appropriately based on the law which is the very source of this
substantive right. It is, therefore, necessary that compliance with the rules set forth by
law and jurisprudence should be shown in order to render validity to the exercise of this
right.24

Section 1, Rule 68 of the Rules of Court provides:

Section 1. Complaint in action for foreclosure. — In an action for the foreclosure of a

mortgage or other encumbrance upon real estate, the complaint shall set forth the date
and due execution of the mortgage; its assignments, if any; the names and residences
of the mortgagor and the mortgagee; a description of the mortgaged property; a
statement of the date of the note or other documentary evidence of the obligation
secured by the mortgage, the amount claimed to be unpaid thereon; and the names and
residences of all persons having or claiming an interest in the property subordinate in
right to that of the holder of the mortgage, all of whom shall be made defendants in the
action, (la)

The rules require that all persons having or claiming an interest in the premises
subordinate in right to that of the holder of the mortgage should be made defendants in
the action for foreclosure. Such requirement for joinder of the person claiming an
interest subordinate to the mortgage sought to be foreclosed, however, is not
mandatory in character but merely directory, such that failure to comply therewith will
not invalidate the foreclosure proceedings.25

As correctly held by the CA, in both CA-G.R. CV No. 108155 and CA-G.R. CV No.
100279, the effect of the failure of the mortgagee to make the subordinate lien holder a
defendant is that the decree entered in the foreclosure proceeding would not deprive
the subordinate lien holder of his right of redemption. A decree of foreclosure in a suit to
which the holders of a second lien are not parties leaves the equity of redemption in
favor of the lien holders unforeclosed and unaffected.26

Here, since Fallarme was not impleaded as a defendant in the foreclosure proceedings
initiated by Pagedped in 2005, as subordinate lienholder, however, she acquired an
equity of redemption.

In Looyuko v. Court of Appeals,27 citing the earlier case of Limpin v. Intermediate

Appellate Court, we explained:

Section 2, Rule 68 provides that —

". . . If upon the trial ... the court shall 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 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."

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. 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 right over the mortgaged property
subsequent, and therefore subordinate to the mortgagee's lien [e.g., by second
mortgage or subsequent attachment or judgment]. If these subsequent or junior lien-
holders 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, [the period fixed in
Section 2, Rule 68 for the mortgagor himself to redeem], under penalty of losing that
prerogative to redeem, x x x (Emphasis supplied)
Clearly, failure of the mortgagee to join a subordinate lien holder as defendant in the
foreclosure proceeding does not nullify the foreclosure proceeding, but kept alive the
equity of redemption acquired by said junior lien-holder.

The equity of redemption also does not constitute as a bar to the registration of the
property in the name of the mortgagee. Registration may be granted in the name of the
motgagee but subject to the subordinate lien holders' equity of redemption, which
should be exercised within 90 days from the date the decision becomes final. Such
registration is but a necessary consequence of the execution of the final deed of sale in
the foreclosure proceedings.28

In this case, Pagedped judicially foreclosed the REM and the subject property was sold
at public auction on October 5, 2005, with Pagedped emerging as the highest
bidder.Ꮮαwρhi ৷ The Sheriffs Certificate of Sale was registered and entered with the RD
on November 22, 2005. A year later, TCT No. T-61200 was cancelled and TCT No. T-
91349 was issued in Pagedped's name.

On May 26, 2010, Pagedped filed a petition for the cancellation of all annotations on
TCT No. T-91349 before the trial court, where Fallarme was joined as a respondent.
According to the appellate court in CA G.R. CV No. 108155, while Fallarme initially filed
an Opposition, she later withdrew the same giving the RTC and Pagedped the
impression that she was abandoning or waiving her rights.

Fallarme denies this before this Court and maintains that she did not withdraw her
Opposition to Pagedped's petition.

A reading of the RTC decision would reveal that it did not categorically specify that it
was Fallarme who moved for the withdrawal of the Opposition. To quote:

Further, Oppositors Spouses Romeo, Cadias and Victoria Cadias, Oliver Awal, Spouses
Julio Labnas, Jr. and Dolores Labnas, Spouses Christopher Caput and Shirdellah
Caput, Spouses Ligon Aguinaldo and Brenda Aguinaldo, Spouses Clarito Pacot and
Josephine Pacot, Spouses Renato Tapay and Mary Tapay, Spouses Ernesto Wabe and
Judith Wabe, Spouses Diego Bilar and Jennelyn Bilar, and Spouses Anton Awal and
Laurena Awal filed their opposition on September 27, 2010. The said oppositors
acquired through purchase one-half (1/2) portion of the subject property from
respondent Luz Fallarme. x x x
On October 15, 2010 petitioner filed a Reply to the Opposition of Private Respondent
and the Oppositors. In a hearing dated October 26, 2010, the oppositors and the
petitioner manifested to settle the matter between them amicably. The parties were
given ample time to reach a compromise agreement. Thus, in an Order dated February
7, 2012, on motion of oppositor's counsel, the Opposition was withdrawn.29 (Emphasis
supplied)

In any event, what is clear is that Pagedped has not yet filed a separate foreclosure
proceeding to require Fallarme, as subsequent lien holder to redeem from him
contested property. What Pagedped filed before RTC Branch 6 in 2010 was a petition
for the cancellation of all annotations on his title, TCT No. T-91349.

Case law has clarified that if the subsequent or junior lien-holders are not joined in the
foreclosure action, the judgment in the mortgagor's favor is ineffective as to them. What
they retain is 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, under penalty of losing that prerogative to redeem.30

Note should also be taken of the fact that on November 24, 2017, the CA rendered a
decision granting Fallarme's appeal which reversed and set aside the ruling of the RTC
Baguio City, Branch 6, dated January 10, 2013. The CA dismissed the petition for
cancellation of encumbrances on TCT No. T-91349.31 Pagedped did not file any
petition to question said CA ruling. Thus, on June 30, 2018, the Decision in CA G.R. CV
No. 100279 became final and executory.32

Having acquired finality, Pagedped is bound to abide by said decision.

WHEREFORE, the petition is GRANTED. The Decision dated May 2, 2018 and the
Resolution dated February 14, 2019 of the Court of Appeals in CA-G.R. CV No. 108155
are REVERSED and SET ASIDE. The Decision of the Regional Trial Court, Branch 7 of
Baguio City in Civil Case No. 7821-R is REINSTATED.

SO ORDERED.
GR. No. 184301, March 23, 2015

GE MONEY BANK, INC. (FORMERLY KEPPEL BANK PHILIPPINES, INC.), Petitioner,

v. SPOUSES VICTORINO M. DIZON AND ROSALINA L. DIZON, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Revised Rules on
Civil Procedure (Rules) seeking to reverse and set aside the May 13, 2008 Decision1
and August 27, 2008 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No.
82307, which affirmed the April 29, 2004 Decision3 of Regional Trial Court (RTC),
Branch 26, Manila, in Civil Case No. 98-88228. The dispositive portion of the RTC
Decision states:

PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs and

against defendant, to wit:
Allowing the plaintiffs to redeem the mortgaged properties by paying the remaining
balance of P113,791.52 at 12% per annum until fully paid;

The consolidation of title and ownership already instituted by defendant be annulled,

cancelled and declared null and void.

The Transfer Certificate of Title (TCT) No. 222186 in the name of the defendant be
cancelled and in lieu thereof another Transfer Certificate of Title be issued in the name
of herein plaintiffs.

All other claims and counterclaims that the parties may have against each other in
connection with this case are hereby DISMISSED.
No pronouncements as to costs.

SO ORDERED.4

The facts are uncomplicated.

On September 18, 1991, the spouses Victorino M. Dizon and Rosalina L. Dizon
(Spouses Dizon) obtained a loan in the amount of P100,000.00 from Monte de Piedad
and Savings Bank, the predecessor-in-interest of Keppel Monte Bank, Inc., which is
now known as GE Money Bank, Inc. (Bank). By way of security for the loan, they
executed a real estate mortgage5 over their two (2) lots located at 856 Sisa Street,
Sampaloc, Manila, covered by Transfer Certificate of Title (TCT) No. 1641936 and Tax
Declaration No. 96-526-0037, and with a total land area of 150 square meters.

The Spouses Dizon defaulted in the payment of their loan obligation. As of March 26,
1993, the Statement of Foreclosure issued by the Bank showed that their outstanding
liability was P143,049.54.7 On July 19, 1993 and August 4, 1993, they paid the Bank
P12,000.00 and P10,000.00, respectively.8 In a letter dated August 10, 1993, they also
requested for the postponement of the foreclosure sale for at least 60 days.9

On September 13, 1993, the mortgaged properties were extra-judicially foreclosed. The
Bank was the highest bidder in the amount of P181,956.72, which was the total
obligation of the Spouses Dizon at the time of the public auction.10 The Certificate of
Sale was registered with the Register of Deeds for Manila on October 18, 1993. Hence,
the Spouses Dizon had one (1) year therefrom, or until October 18, 1994, within which
to redeem the subject properties.

Within the redemption period, the Spouses Dizon were only able to pay the sum of
P90,000.00,11 which, despite acceptance by the Bank, was less than the total
redemption price.12 The Bank then consolidated its title over the subject property. On
July 6, 1995, TCT No. 22218613 was issued in its name upon the cancellation of TCT
No. 164193.
The Spouses Dizon manifested their desire to re-acquire the subject property, but the
Bank declined to entertain the same as they still failed to tender the full amount of the
redemption price. Later, on April 3, 1998, they filed a case for Redemption and
Recovery of Ownership, Title and Possession of Real Properties (Nullify Consolidation
of Ownership, Cancellation of Transfer Certificate of Title [TCT] No. 222186), Issuance
of New Transfer Certificate of Title; and Damages; and With Notice of Lis Pendens with
the Manila RTC.14 The complaint, docketed as Civil Case No. 98-88228, was
amended on April 14, 1998.15

After trial on the merits, the RTC ruled in favor of the Spouses Dizon. In its April 29,
2004 Decision, the trial court held:

The statement of foreclosure issued by defendant Bank showed that the total amount
due as of March 26, 1993 was only P143,049.54 (Exhibit “B”) and plaintiff Spouses paid
in good faith their outstanding obligation with herein defendant Bank in the total amount
of P112,000.00 (Exhibits “C” to “G”). There is already substantial compliance on the part
of herein plaintiffs, considering that they already paid at least 75% of their outstanding
obligation. By accepting the said amount, defendant Bank is now estopped from
denying herein plaintiffs’ right to redeem the subject properties. Otherwise, defendants
would be enriching itself at the expense of herein plaintiffs.

As ruled by the High Court in Ysmael vs. CA, G.R. No. 132497, 11-16-99, “Although it is
required that full payment of the redemption price must be made within the redemption
period, the rule on redemption is actually liberally construed in favor of the original
owner of the property. The policy of the law is to aid rather than to defeat him in the
exercise of his right of redemption. As the Court of Appeals observed, this Court has
allowed parties in several cases to perfect their right of redemption beyond the period
prescribed therefor.” Otherwise, the defendant would be enriching itself at the expense
of herein plaintiffs.

As clearly borne out by the records of the instant case, defendant’s application for
extrajudicial foreclosure and public auction sale of plaintiffs’ mortgaged property was
filed under Act No. 3135.

Moreover, the real estate mortgage (Exhibit “6”) explicitly provides that “... the
mortgagee may immediately foreclose this mortgage judicially or extrajudicially under
Act No. 3135, as amended.” Since the mortgage contract in this case is in the nature of
a contract of adhesion as it was prepared solely by defendant, it has to be interpreted in
favor of herein plaintiffs. However, defendant tries to renege on this contractual
commitment by seeking refuge in the 1989 case of Sy vs. Court of Appeals (G.R. No.
83139, 04-12-89), wherein the High Court ruled that “the redemption price is equal to
the total amount of indebtedness to the bank’s claim inasmuch as Section 78 of the
General Banking Act is an amendment to Section 6 of Act No. 3135, despite the fact
that the extrajudicial foreclosure procedure followed by the PNB was explicitly under or
in accordance with Act No. 3135.” Defendant is hereby estopped from invoking Section
78 of the General Banking Act in as much as it would be unfair to the other contracting
party (herein plaintiffs) who, in good faith, believed that defendant would comply with
[its] contractual agreement. Hence, it is only just that plaintiffs be allowed to redeem
their mortgaged property by paying only the winning bid price, which is P181,956.72
plus interest at the rate of 1% per month until fully paid. Since the period of redemption
begins only from the date of the registration of the certificate of sale in the Registry of
Deeds, the computation of the interest on the purchase price should also be made to
commence from that date. Hence, the interest due on the auction price for 12 month,
i.e., October 18, 1993 to October 18, 1994, is only P21,834.806 (P181,956.72 x 1% x
12 months). The total redemption price therefore is P203,791.52. Considering the
payments already paid by herein plaintiffs in the total amount of P90,000.00, the same
shall be deducted to the total redemption price of P203,791.52, i.e., P203,791.52 –
P90,000.00 = P113,791.52. Plaintiffs [are] hereby allowed to redeem the property by
paying the remaining balance which is P113,791.52 at 1% per month until fully paid.16

On appeal, the RTC Decision was affirmed by the CA, which opined:

In the case at bar, [Spouses] Dizon continuously paid Keppel Bank the amount of [the]
loan. As a matter of fact, Simplicio Tapia, Jr., Assistant Manager of Keppel Bank,
corroborated plaintiff-appellee Rosalina Dizon with regard to the amount of Ninety
Thousand Pesos (P90,000.00) paid by the latter during the redemption period. Keppel
Bank even assured [Spouses] Dizon that they could still redeem the subject property,
which prompted [Spouses] Dizon to pay a total amount of Ninety Thousand Pesos
during the redemption period. There can be no doubt of the earnest intent of [Spouses]
Dizon to exercise their right of redemption. Their tender of payment during the
redemption period should therefore be considered an affirmation of the timely notice to
redeem.

Spouses Dizon have demonstrated a serious and sincere desire to redeem the subject
property when they continuously paid their loan during the redemption period.

xxxx
Keppel Bank argues that [Spouses] Dizon have not fully paid [their] loan obligation,
hence, the trial court erred in declaring null and void the consolidation of title and
ownership of mortgaged property.

Although [Spouses] Dizon have not fully paid their loan obligation, nevertheless, we
agree with the trial court that there was substantial compliance. As a matter of fact,
[Spouses] Dizon have paid Seventy-Eight percent (78%) of the loan obligation.

xxxx

Moreover, the doctrine of estoppel will apply in this case. This is because Keppel Bank
accepted loan payment, albeit less than the full amount due, from [Spouses] Dizon
during the redemption period giving assurance to the latter that they could still redeem
the mortgaged property. Such assurance from Keppel [Bank] led [Spouses] Dizon to
pay the former the amount of Ninety Thousand Pesos (P90,000.00) during the
redemption period.17

Now before Us, the Bank raises the following alleged errors:

5.1
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENTS CAN STILL VALIDLY REDEEM THE SUBJECT PROPERTIES EVEN
AFTER THE EXPIRATION OF THE REDEMPTION PERIOD.
5.2
ASSUMING ARGUENDO THAT RESPONDENTS CAN STILL REDEEM THE
SUBJECT PROPERTIES, THE HONORABLE COURT OF APPEALS ERRED IN
ANNULLING, CANCELLING, AND DECLARING NULL AND VOID PETITIONER’S
TITLE OVER THE SUBJECT PROPERTIES EVEN BEFORE RESPONDENTS COULD
VALIDLY REDEEM THEM IN FULL.
5.3
ASSUMING ARGUENDO THAT RESPONDENTS CAN STILL REDEEM THE
SUBJECT PROPERTIES, THE HONORABLE COURT OF APPEALS ERRED IN
ALLOWING RESPONDENTS TO PAY THE BALANCE OF THE REDEMPTION PRICE
COMPUTED ON THE BASIS OF SECTION 6 OF ACT NO. 3135 WITHIN AN
INDEFINITE PERIOD OF TIME.18

The petition is meritorious.

Section 6 of Act No. 3135,19 as amended by Act No. 4118,20 provides:

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 sale;
and such redemption shall be governed by the provisions of sections four hundred and
sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, insofar
as these are not inconsistent with the provisions of this Act.

The right of redemption should be exercised within the period required by law, which
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.21 Fixing a definite term within which a
property should be redeemed is meant to avoid prolonged economic uncertainty over
the ownership of the thing sold.22

In this case, considering that the creditor-mortgagee is a banking institution, the

determination of the redemption price is governed by Section 7823 of Republic Act No.
337 or “The General Banking Act,” as amended by Presidential Decree No. 1828.

x x x In Ponce de Leon v. Rehabilitation Finance Corporation, this Court had occasion

to rule that Section 78 of the General Banking Act had the effect of amending Section 6
of Act No. 3135 insofar as the redemption price is concerned when the mortgagee is a
bank, as in this case, or a banking or credit institution. The apparent conflict between
the provisions of Act No. 3135 and the General Banking Act was, therefore, resolved in
favor of the latter, being a special and subsequent legislation. This pronouncement was
reiterated in the case of Sy v. Court of Appeals where we held that the amount at which
the foreclosed property is redeemable is the amount due under the mortgage deed, or
the outstanding obligation of the mortgagor plus interest and expenses in accordance
with Section 78 of the General Banking Act. It was, therefore, manifest error on the part
of the Court of Appeals to apply in the case at bar the provisions of Section 30, Rule 39
of the Rules of Court in fixing the redemption price of the subject foreclosed property.24

Redemption within the period allowed by law is not a matter of intent but a question of
payment or valid tender of the full redemption price.25 It is irrelevant whether the
mortgagor is diligent in asserting his or her willingness to pay. What counts is that the
full amount of the redemption price must be actually paid; otherwise, the offer to redeem
will be ineffectual and the purchaser may justly refuse acceptance of any sum that is
less than the entire amount.26 In Metropolitan Bank and Trust Co. v. Spouses Tan, et
al.,27 We held:

The general rule in redemption is that it is not sufficient that a person offering to redeem
manifests his/her desire to do so. The statement of intention must be accompanied by
an actual and simultaneous tender of payment. This constitutes the exercise of the right
to repurchase. Bona fide redemption necessarily implies a reasonable and valid tender
of the entire purchase price, otherwise, the rule on the redemption period fixed by law
can easily be circumvented. There is no cogent reason for requiring the vendee to
accept payment by installments from the redemptioner, as it would ultimately result in
an indefinite extension of the redemption period.28

To be valid and effective, the offer to redeem must be accompanied by an actual tender
of the redemption price. Redemption price should either be fully offered in legal tender
or validly consigned in court. Only by such means can the auction winner be assured
that the offer to redeem is being made in good faith.29

Nevertheless, it has been the policy of the law to aid rather than defeat the right of
redemption.30 Where no injury will follow, a liberal construction is given to our
redemption laws as well as to the exercise of the right of redemption.31 Thus, in the
following cases, the Court favorably ruled for the original owner, successor-in-interest or
redemptioner:

1. Voluntary agreement of the parties

The one-year period of redemption provided in Act No. 3135, as amended, is only
directory and can be extended by agreement of the parties.32 When the parties
voluntarily agree to extend the redemption period, the concept of legal redemption is
converted into conventional redemption.33 However, two (2) requisites must be
established, to wit: (a) voluntary agreement of the parties to extend the redemption
period; and (b) the debtor's commitment to pay the redemption price on a fixed date.34

2. Mortgagee is estopped from asserting that the one-year redemption period already
elapsed

In Ibaan Rural Bank Inc. v. Court of Appeals,35 the sheriff unilaterally and arbitrarily
extended the period of redemption to two years. The parties were not even privy to the
extension made by the sheriff. However, We ruled that the bank cannot, after two years
had elapsed, insist that the redemption period was only one year. When it received a
copy of the certificate of sale registered in the Office of the Register of Deeds, it was
deemed to have actual and constructive knowledge of the certificate and its contents.
The bank was found guilty of estoppel in pais. By its silence and inaction, it was
considered that the mortgagors were misled to believe that they had two years within
which to redeem the subject lots.

3. Substantial compliance by the mortgagor/successor-in-interest/ redemptioner

In Doronilla v. Vasquez36 the third-party claimant offered to redeem the property

despite the expiration of the period provided by law and, at the same time, deposited
with the provincial sheriff a sum covering the full amount of the purchase price at the
auction sale plus the corresponding interest. It was admitted that if the time during
which the civil case (to set aside the auction sale and to declare the third-party claimant
as absolute owner of the property) was pending is not deducted, the exercise of the
right to redeem was beyond the twelve-month period. However, equitable consideration
was invoked, arguing that it would be unfair to count the period of pendency of the civil
case because the third-party claimant could not be expected to assert merely the right
of redemption when in said action he specifically sought to be declared as the absolute
owner of the property. To promote justice and avoid injustice, the Court allowed the
exercise of the right of redemption.

On the last day of the one-year redemption period, one of the judgment debtors in
Castillo, et al. v. Nagtalon, et al.37 deposited with the deputy sheriff a sum which
represented 1/12 of the consideration of the execution sale plus 1% interest thereon.
Said amount was found to be insufficient to effectively release the subject properties.
Nonetheless, because the tender of payment was timely made and in good faith (since
it was based on the honest mistake that the obligation under the judgment is merely
"joint"), We gave the opportunity to complete the redemption within 15 days from the
time the decision becomes final and executory.

Similarly, in Rosario, et al. v. Tayug Rural Bank, Inc., et al.,38 the decision of the court a
quo was affirmed, which allowed the redemption to be done within 30 days from the
time the decision becomes final and executory. In this case, because the sum tendered
was the amount of the purchase price paid at the auction sale and that the tender was
timely made and in good faith, the Court believed that the ends of justice would be
better served by affording the opportunity to redeem the property by paying the bank the
auction purchase price plus 1% interest per month thereon.

In Tolentino v. Court of Appeals,39 the certificate of sale was registered with the
Register of Deeds on April 2, 1969. On March 31, 1970, the mortgagor consigned to the
city sheriff a crossed check as payment for the redemption price. The following day,
however, the mortgagor issued a stop-payment order against the crossed check
purportedly to protect her rights and to prevent the bank from encashing the check with-
out returning all the properties which it foreclosed and purchased. We upheld the
mortgagor’s right to redeem, opining that when the action to redeem was filed, a simul-
taneous deposit of the redemption money was tendered to the sheriff, which was
allowed under the Rules of Court; that the check, as a medium of payment in
commercial transactions, is too firmly established by usage; and that it was not clearly
shown that the stop-payment order was made in bad faith.

The Court also set aside in De los Reyes v. Intermediate Appellate Court40 the decision
of the trial court insofar as it denies the mortgagor’s right of redemption. In said case,
the mortgagees were directed to allow the mortgagor to redeem the disputed property
for the amount of P6,107.00, which was previously deposited with the trial court. It
appeared from the records that the certificate of sale was registered with the Register of
Deeds on May 4, 1977 and that the mortgagor wrote a letter to the provincial sheriff
sometime in April 1978 tendering the amount of P4,925.00, which was the purchase
price in the public auction as well as one percent monthly interest up to the time of
redemption.

Like the earlier cases of Castillo, et al. and Rosario, et al., We allowed the mortgagor in
Bodiongan v. Court of Appeals41 to complete the redemption price by paying to the
mortgagee the difference of P8,500.00 at 1% interest per month until full payment
thereof within 15 days from the time the decision becomes final and executory. Records
disclosed that, within the redemption period, the mortgagor offered to redeem her
properties and tendered to the provincial sheriff a check in the amount of P337,580.00.
The amount was based on a tentative computation by the sheriff. The check was
received by the mortgagee and the sheriff issued a certificate of redemption. Later,
however, the mortgagee claimed that the redemption price should be P351,080.00. We
disagreed, ruling that the redemption price was only P346,080.00 because the
attorney's fees awarded by the trial court must not be added thereto as the amount
payable is no longer the judgment debt but that which is stated in Section 30 of Rule 39
of the Rules of Court.

In Ysmael v. Court of Appeal,42 the subject properties were sold at public auction after
being levied on execution. The winning bid was P700,000.00. Prior to the expiration of
the redemption period, the co-owners asked for the computation of the redemption
price. The deputy sheriff and the counsel for the highest bidder, however, did not bother
to reply. Six days after the expiration of the period to redeem, the co-owners tendered
cashier’s checks in the total amount of P784,000.00, representing the purchase price at
the execution sale and the interest thereon of 1% per month for 12 months. Since the
counsel for the highest bidder refused to accept payment, the co-owners filed a motion
for consignation in the trial court, which was granted. The Court ruled that there was an
earnest intent to exercise the right of redemption. The tender of payment was
considered an affirmation of the timely notice to redeem, even if it was made six days
after the expiration of the redemption period.

The facts obtaining in Cometa v. Court of Appeals43 reveal that the subject properties,
which was conservatively valued at P500,000.00, were levied on execution and later
sold en masse at a public auction for only P57,396.85, which was the amount of the
judgment debt. We considered this a compelling justification to allow the redemption
even beyond the prescribed period. It was noted that, albeit belated, there was an
earnest and sincere desire to redeem the subject properties when the amounts of
P38,761.05 as purchase price for the lots, P78,762.69 as interest, and P1,175.25 as
realty tax, were consigned with the clerk of court.

In Cayton, et al. v. Zeonnix Trading Corporation, et al.,44 the property was sold at public
auction in the amount of P95,000.00. On April 25, 1984, the Certificate of Sale was
annotated on the land title. A judgment creditor offered to redeem the property on April
18, 1985 by tendering to the clerk of court P106,400.00 through a manager's check
dated April 15, 1985. The amount tendered represented the purchase price of the
property and interest that had accrued thereon. It was argued, among others, that such
amount was insufficient to effect a valid redemption because it failed to include the
amount of real estate taxes paid amounting to P2,175.00. On June 4, 1985, the
judgment creditor tendered to the clerk of court the additional amount. Citing Spouses
Estanislao, Jr. v. Court of Appeals,45 the Court said that the payment of the full
purchase price and interest thereon by a judgment creditor, who had not been apprised
of the amount of taxes paid by the purchaser, should already be considered sufficient
for purposes of redemption if there was immediate payment of the additional amount
upon notification of the deficiency.

The Cayton, et al. ruling was subsequently reiterated in Torres, et al. v. Sps. Alamag
and Ngoju,46 wherein We restated the opinion in Baluyut v. Poblete47 that the
purchaser is required to furnish copies of the amounts of assessments or taxes which
he may have paid to inform the mortgagor or redemptioner of the actual amount which
he should pay in case he chooses to exercise his right of redemption and that if no such
notice is given, the property may be redeemed without paying such assessments or
taxes.

None of the foregoing compelling justifications are present in this case to exempt it from
the application of the general rules on redemption. Here, the offer of the Spouses Dizon
was an invalid and ineffectual exercise of their right of redemption; hence, the refusal of
the offer by the Bank was completely justified.

An insufficient sum was tendered by the Spouses Dizon during the redemption period.
Whether the total redemption price is P251,849.77 as stated in the Petition for
Review,48 or P232,904.60 as stated in the Bank’s Motion for Reconsideration of the CA
Decision,49 or P428,019.16 as stated in its Appellant’s Brief,50 is immaterial. What
cannot be denied is that the amount of P90,000.00 paid by the Spouses Dizon during
the redemption period is less than half of P181,956.72 paid by the Bank at the
extrajudicial foreclosure sale held on September 13, 1993. If only to prove their
willingness and ability to pay, the Spouses Dizon could have tendered a redemption
price that they believe as the correct amount or consigned the same. Seventeen long
years passed since the filing of the complaint but they did not do either. Indeed, they
manifestly failed to show good faith.

The Spouses Dizon’s own evidence show that, after payment of P90,000.00, the
earliest date they exerted a semblance of effort to re-acquire the subject property was
on October 15, 1996.51 Apart from being way too late, the tender was not accompanied
by the remaining balance of the redemption price. The same is true with respect to their
letter dated February 27, 1998,52 wherein they were still making proposals to the Bank.
The court’s intervention was resorted to only on April 3, 1998 after the redemption
period expired on October 18, 1994, making it too obvious that such recourse was
merely a delayed afterthought to recover a right already lost.
The official receipts issued by the Bank cannot be relied upon by the Spouses Dizon. As
pointed out by the Bank, the receipts issued categorically stated that the partial
payments were without prejudice to the foreclosure proceedings already instituted and
without prejudice to the consolidation of title. Thus, the Bank never really intended to
waive its rights to foreclose and to consolidate its ownership over the subject property in
case of the Spouses Dizon’s failure to fully and effectively pay their outstanding
obligation. With the disclaimer noticeably expressed on the official receipts and as
admitted53 during the trial by petitioner Rosalina L. Dizon, who solely testified for the
plaintiffs, the Bank cannot be held guilty of estoppel. Estoppel in pais arises when one,
by his acts, representations or admissions, or by his own silence when he ought to
speak out, intentionally or through culpable negligence, induces another to believe
certain facts to exist and such other rightfully relies and acts on such belief, so that he
will be prejudiced if the former is permitted to deny the existence of such facts.54 The
principle of estoppel would step in to prevent one party from going back on his or her
own acts and representations to the prejudice of the other party who relied upon them. It
is a principle of equity and natural justice, expressly adopted in Article 143155 of the
New Civil Code and articulated as one of the conclusive presumptions in Rule 131,
Section 2 (a)56 of our Rules of Court.

The Spouses Dizon claimed that they negotiated with the Bank for the extension of the
period to redeem and that the latter granted the same. Aside from the Bank’s vehement
denial of the allegation, the Court cannot give credence to their assertions as they failed
to present any documentary evidence to prove the conferment of the purported
extension. Assuming, but without admitting, that an additional period was granted to
them, the extension would constitute a mere offer on the part of the Bank to re-sell the
subject property; it does not constitute a binding contract.57 The right to redeem of the
Spouses Dizon already expired on October 18, 1994. Thereafter, their offer should aptly
be termed as a repurchase, not redemption. The Bank is not bound by the bid price, at
the very least, and has the discretion to even set a higher price. As We explained:

The right to redeem becomes functus officio on the date of its expiry, and its exercise
after the period is not really one of redemption but a repurchase. Distinction must be
made because redemption is by force of law; the purchaser at public auction is bound to
accept redemption. Repurchase, however, of foreclosed property, after redemption
period, imposes no such obligation. After expiry, the purchaser may or may not re-sell
the property but no law will compel him to do so. And, he is not bound by the bid price; it
is entirely within his discretion to set a higher price, for after all, the property already
belongs to him as owner.58
All told, the Spouses Dizon cannot, therefore, argue that equity should prevail. “Equity
has been defined as justice outside law, being ethical rather than jural and belonging to
the sphere of morals than of law. It is grounded on the precepts of conscience and not
on any sanction of positive law.”59 Yet equity applies only in the absence of, and never
against, statutory law or judicial rules of procedure.60

In view of the Court’s categorical finding that the Spouses Dizon failed to effect a valid
redemption of the subject property, there is no more necessity to pass upon the merits
of the second and third issues presented in the instant petition.

WHEREFORE, the foregoing considered, the instant petition for review on certiorari is
GRANTED. The May 13, 2008 Decision and August 27, 2008 Resolution of the Court of
Appeals in CA-G.R. CV No. 82307 are REVERSED and SET ASIDE and the complaint
in Civil Case No. 98-88228 filed before the Regional Trial Court, Branch 26, Manila, is
DISMISSED.

G.R. No. 191540, January 21, 2015

SPOUSES JOSE O. GATUSLAO AND ERMILA LEONILA LIMSIACO-GATUSLAO,

Petitioners, v. LEO RAY V. YANSON, Respondent.

DECISION

DEL CASTILLO, J.:

Petitioners spouses Jose O. Gatuslao and Ermila Leonila Limsiaco-Gatuslao

(petitioners) are assailing the December 8, 20091 Order of the Regional Trial Court
(RTC) of Bacolod City, Branch 49 in Cad. Case No. 09-2802 which granted respondent
Leo Ray2 Yanson’s (respondent) Ex Parte Motion for the Issuance of Writ of
Possession over the properties being occupied by petitioners, as well as the February
26, 2010 RTC Order3 denying petitioners’ motion for reconsideration thereto.

Factual Antecedents
Petitioner Ermila Leonila Limsiaco-Gatuslao is the daughter of the late Felicisimo
Limsiaco (Limsiaco) who died intestate on February 7, 1989. Limsiaco was the
registered owner of two parcels of land with improvements in the City of Bacolod
described as Lots 10 and 11, Block 8 of the subdivision plan Psd-38577 and covered by
Transfer Certificates of Title (TCT) Nos. T-334294 and T-
24331.5chanRoblesvirtualLawlibrary

Limsiaco mortgaged the said lots along with the house standing thereon to Philippine
National Bank (PNB). Upon Limsiaco’s failure to pay, PNB extrajudicially foreclosed on
the mortgage and caused the properties’ sale at a public auction on June 24, 1991
where it emerged as the highest bidder. When the one-year redemption period expired
without Limsiaco’s estate redeeming the properties, PNB caused the consolidation of
titles in its name. Ultimately, the Registry of Deeds of Bacolod City cancelled TCT Nos.
T-33429 and T-24331 and in lieu thereof issued TCT Nos. T-3088186 and T-3088197 in
PNB’s name on October 25, 2006.

On November 10, 2006, a Deed of Absolute Sale8 was executed by PNB conveying the
subject properties in favor of respondent. As a consequence thereof, the Registry of
Deeds of Bacolod City issued TCT Nos. T-3111259 and T-31112610 in respondent’s
name in lieu of PNB’s titles.

Then, as a registered owner in fee simple of the contested properties, respondent filed
with the RTC an Ex-Parte Motion for Writ of Possession11 pursuant to Section 7 of Act
No. 3135,12 as amended by Act No. 4118 (Act No. 3135, as amended),13 docketed as
Cad. Case No. 09-2802.

In their Opposition,14 petitioners argued that the respondent is not entitled to the
issuance of an ex-parte writ of possession under Section 7 of Act No. 3135 since he
was not the buyer of the subject properties at the public auction sale and only
purchased the same through a subsequent sale made by PNB. Not being the
purchaser at the public auction sale, respondent cannot file and be granted an ex parte
motion for a writ of possession. Petitioners also asserted that the intestate estate of
Limsiaco has already instituted an action for annulment of foreclosure of mortgage and
auction sale affecting the contested properties.15 They argued that the existence of the
said civil suit bars the issuance of the writ of possession and that whatever rights and
interests respondent may have acquired from PNB by virtue of the sale are still subject
to the outcome of the said case.
Ruling of the Regional Trial Court

The RTC granted the issuance of the writ of possession in an Order16 dated December
8, 2009. It cited the Court’s pronouncement in China Banking Corporation v.
Lozada,17viz:chanroblesvirtuallawlibrary

The Court recognizes the rights acquired by the purchaser of the foreclosed property at
the public auction sale upon the consolidation of his title when no timely redemption of
the property was made, x x x.

It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the
property purchased if it is not redeemed during the period of one year after the
registration of the sale. As such, he is entitled to the possession of the said property and
can demand it at any time following the consolidation of ownership in his name and the
issuance to him of a new transfer certificate of title. x x x Possession of the land then
becomes an absolute right of the purchaser as confirmed owner. Upon proper
application and proof of title, the issuance of the writ of possession becomes a
ministerial duty of the court.

The purchaser, therefore, in the public auction sale of a foreclosed property is entitled to
a writ of possession x x x.18

PNB, therefore, as the absolute owner of the properties is entitled to a writ of

possession. And since respondent purchased the properties from PNB, the former has
necessarily stepped into the shoes of the latter. Otherwise stated, respondent, by
subrogation, has the right to pursue PNB’s claims against petitioners as though they
were his own.

The dispositive portion of the above Order reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the Court hereby issues a writ of possession in

favor of movant Leo Ray V. Yanson ordering Spouses Jose and Mila Gatuslao, their
heirs, assigns, successors-in-interest, agents, representatives and/or any and all other
occupants or persons claiming any interest or title of the subject property to deliver the
possession of said property to the herein movant/ petitioner.
SO ORDERED.19
Petitioners moved for reconsideration20 which was denied in an Order21 dated
February 26, 2010, thus:chanroblesvirtuallawlibrary

WHEREFORE, the Motion for Reconsideration filed by Oppositors is hereby DENIED.

Thus, the Order dated December 8, 2009 stands.

SO ORDERED.22

Respondent on March 19, 2010 moved to execute the possessory writ23 while
petitioners on April 15, 2010 filed with this Court the present Petition for Review on
Certiorari.

On September 30, 2010, the RTC issued an Order24 directing the implementation of
the writ. And per Sheriff’s Return of Service,25 the same was fully implemented on
March 14, 2011.cralawred

Issues

According to petitioners, the pending action for annulment of foreclosure of mortgage

and the corresponding sale at public auction of the subject properties operates as a bar
to the issuance of a writ of possession;

Claiming violation of their right to due process, petitioners likewise assert that as they
were not parties to the foreclosure and are, thus, strangers or third parties thereto, they
may not be evicted by a mere ex parte writ of possession; and

Lastly, petitioners argue that respondent, a mere purchaser of the contested properties
by way of a negotiated sale between him and PNB, may not avail of a writ of possession
pursuant to Section 7 of Act No. 3135, as amended, as he is not the purchaser at the
public auction sale. Petitioners further contend that respondent has no right to avail of
the writ even by way of subrogation.
Our Ruling

Preliminarily, we note that petitioners’ direct resort to this Court from the assailed
Orders of the RTC violates the rule on hierarchy of courts. Their remedy lies with the
Court of Appeals. Considering however the length of time this case has been pending
and in view of our January 26, 2011 Resolution26 giving due course to the Petition, we
deem it proper to adjudicate the case on its merits.

The Petition is denied.

It is settled that the issuance of a Writ of

Possession may not be stayed by a pending
action for annulment of mortgage or the
foreclosure itself.

It is petitioners’ stand that the pending action for annulment of foreclosure of mortgage
and of the corresponding sale at public auction of the subject properties operates as a
bar to the issuance of a writ of possession.

The Court rules in the negative. BPI Family Savings Bank, Inc. v. Golden Power Diesel
Sales Center, Inc.27 reiterates the long-standing rule that:chanroblesvirtuallawlibrary

[I]t is settled that a pending action for annulment of mortgage or foreclosure sale does
not stay the issuance of the writ of possession. The trial court, where the application for
a writ of possession is filed, does not need to look into the validity of the mortgage or
the manner of its foreclosure. The purchaser is entitled to a writ of possession without
prejudice to the outcome of the pending annulment case.

This is in line with the ministerial character of the possessory writ. Thus, in Bank of the
Philippine Islands v. Tarampi,28 it was held:chanroblesvirtuallawlibrary
To stress the ministerial character of the writ of possession, the Court has disallowed
injunction to prohibit its issuance, just as it has held that its issuance may not be stayed
by a pending action for annulment of mortgage or the foreclosure itself.

Clearly then, until the foreclosure sale of the property in question is annulled by a court
of competent jurisdiction, the issuance of a writ of possession remains the ministerial
duty of the trial court. The same is true with its implementation; otherwise, the writ will
be a useless paper judgment – a result inimical to the mandate of Act No. 3135 to vest
possession in the purchaser immediately.29 (Emphases supplied)

Clearly, petitioners’ argument is devoid of merit.

Petitioners are not strangers or third

parties to the foreclosure sale; they
were not deprived of due process.

Section 7 of Act No. 3135, as amended, sets forth the following procedure in the
availment of and issuance of a writ of possession in cases of extrajudicial foreclosures,
viz:chanroblesvirtuallawlibrary

SECTION 7. In any sale made under the provisions of this Act, the purchaser may
petition the Court of First Instance (Regional Trial Court) 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 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.
Although the above provision clearly pertains to a writ of possession availed of and
issued within the redemption period of the foreclosure sale, the same procedure also
applies to a situation where a purchaser is seeking possession of the foreclosed
property bought at the public auction sale after the redemption period has expired
without redemption having been made.30 The only difference is that in the latter case,
no bond is required therefor, as held in China Banking Corporation v. Lozada,31
thus:chanroblesvirtuallawlibrary

It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the
property purchased if it is not redeemed during the period of one year after the
registration of the sale. As such, he is entitled to the possession of the said property and
can demand it at any time following the consolidation of ownership in his name and the
issuance to him of a new transfer certificate of title. The buyer can in fact demand
possession of the land even during the redemption period except that he has to post a
bond in accordance with Section 7 of Act No. 3135, as amended. No such bond is
required after the redemption period if the property is not redeemed. x x x32 (Emphasis
supplied)

Upon the expiration of the period to redeem and no redemption was made, the
purchaser, as confirmed owner, has the absolute right to possess the land and the
issuance of the writ of possession becomes a ministerial duty of the court upon proper
application and proof of title.33chanRoblesvirtualLawlibrary

Nevertheless, where the extrajudicially foreclosed real property is in the possession of a

third party who is holding the same adversely to the judgment debtor or mortgagor, the
RTC’s duty to issue a writ of possession in favor of the purchaser of said real property
ceases to be ministerial and, as such, may no longer proceed ex parte.34 In such a
case, the trial court must order a hearing to determine the nature of the adverse
possession.35 For this exception to apply, however, it is not enough that the property is
in the possession of a third party, the property must also be held by the third party
adversely to the judgment debtor or mortgagor,36 such as a co-owner, agricultural
tenant or usufructuary.37chanRoblesvirtualLawlibrary

In this case, petitioners do not fall under any of the above examples of such a third party
holding the subject properties adversely to the mortgagor; nor is their claim to their right
of possession analogous to the foregoing situations. Admittedly, they are the mortgagor
Limsiaco’s heirs. It was precisely because of Limsiaco’s death that petitioners obtained
the right to possess the subject properties and, as such, are considered transferees or
successors-in-interest of the right of possession of the latter. As Limsiaco’s successors-
in-interest, petitioners merely stepped into his shoes and are, thus, compelled not only
to acknowledge but, more importantly, to respect the mortgage he had earlier executed
in favor of respondent.38 They cannot effectively assert that their right of possession is
adverse to that of Limsiaco as they do not have an independent right of possession
other than what they acquired from him.39 Not being third parties who have a right
contrary to that of the mortgagor, the trial court was thus justified in issuing the writ and
in ordering its implementation.

Petitioners’ claim that their right to due process was violated by the mere issuance of
the writ of possession must likewise fail. As explained, petitioners were not occupying
the properties adversely to the mortgagor, hence, a writ of possession may be issued ex
parte. And precisely because of this ex parte nature of the proceedings no notice is
needed to be served40 upon them. It has been stressed time and again that “the ex
parte nature of the proceeding does not deny due process to the petitioners because
the issuance of the writ of possession does not prevent a separate case for annulment
of mortgage and foreclosure sale.”41 Consequently, the RTC may grant the petition
even without petitioners’ participation. Nevertheless, even if the proceedings in this
case was supposed to be ex parte, the records of the case would show that petitioners’
side on this controversy was actually heard as evidenced by the numerous pleadings42
filed by them in the lower court. In fact, in its July 27, 2009 Order,43 the RTC expressly
directed respondent, “in observance of equity and fair play x x x to furnish [petitioners]
with a copy of his motion/petition and to show x x x proof of compliance thereof x x x.”44
Then and now, the Court holds that a party cannot invoke denial of due process when
he was given an opportunity to present his side.45chanRoblesvirtualLawlibrary

Respondent is entitled to the

issuance of writ of possession.

Petitioners insist that respondent is not entitled to the issuance of the writ of possession
under Section 7 of Act No. 3135 as he is only a buyer of the subject properties in a
contract of sale subsequently executed in his favor by the actual purchaser, PNB. To
them, it is only the actual purchaser of a property at the public auction sale who can ask
the court and be granted a writ of possession.

This argument is not tenable. Respondent, as a transferee or successor-in-interest of

PNB by virtue of the contract of sale between them, is considered to have stepped into
the shoes of PNB. As such, he is necessarily entitled to avail of the provisions of
Section 7 of Act No. 3135, as amended, as if he is PNB. This is apparent in the Deed of
Absolute Sale46 between the two, viz:

The Vendor hereby sells, transfer[s] and convey[s] unto[, and] in favor of the Vendee,
and the latter’s assigns and successors-in-interest, all of the former’s rights and title to,
interests and participation in the Property on an “AS IS, WHERE IS” basis. It is thus
understood that the Vendee has inspected the Property and has ascertained its
condition.
xxxx
The Vendor is selling only whatever rights and title to, interests and participation it has
acquired over the Property, and the Vendee hereby acknowledges full knowledge of the
nature and extent of the Vendor’s rights and title to, [and] interests and participation in
the Property.

x x x The Vendee further agrees to undertake, at its/his/her expense, the ejectment of

any occupant of the Property.47 (Emphases in the original)

Verily, one of the rights that PNB acquired as purchaser of the subject properties at the
public auction sale, which it could validly convey by way of its subsequent sale of the
same to respondent, is the availment of a writ of possession. This can be deduced from
the above-quoted stipulation that “[t]he [v]endee further agrees to undertake, at xxx his
expense, the ejectment of any occupant of the [p]roperty.” Accordingly, respondent filed
the contentious ex parte motion for a writ of possession to eject petitioners therefrom
and take possession of the subject properties.

Further, respondent may rightfully take possession of the subject properties through a
writ of possession, even if he was not the actual buyer thereof at the public auction sale,
in consonance with our ruling in Ermitaño v. Paglas.48 In the said case, therein
respondent was petitioner’s lessee in a residential property owned by the latter. During
the lifetime of the lease, respondent learned that petitioner mortgaged the subject
property in favor of Charlie Yap (Yap) who eventually foreclosed the same. Yap was
the purchaser thereof in an extrajudicial foreclosure sale. Respondent ultimately bought
the property from Yap. However, it was stipulated in the deed of sale that the property
was still subject to petitioner’s right of redemption. Subsequently and despite written
demands to pay the amounts corresponding to her monthly rental of the subject
property, respondent did not anymore pay rents. Meanwhile, petitioner’s period to
redeem the foreclosed property expired on February 23, 2001. Several months after,
petitioner filed a case for unlawful detainer against respondent. When the case reached
this Court, it ruled that therein respondent’s basis for denying petitioner’s claim for rent
was insufficient as the latter, during the period for which payment of rent was being
demanded, was still the owner of the foreclosed property. This is because at that time,
the period of redemption has not yet expired. Thus, petitioner was still entitled to the
physical possession thereof subject, however, to the purchaser’s right to petition the
court to give him possession and to file a bond pursuant to the provisions of Section 7 of
Act No. 3135, as amended. However, after the expiration of the redemption period
without redemption having been made by petitioner, respondent became the owner
thereof and consolidation of title becomes a right. Being already then the owner,
respondent became entitled to possession. Consequently, petitioner’s ejectment suit
was held to have been rendered moot by the expiration of the period of redemption
without petitioner redeeming the properties. This is considering that petitioner already
lost his possessory right over the property after the expiration of the said period.

Although the main issue in Ermitaño was whether respondent was correct in refusing to
pay rent to petitioner on the basis of her having bought the latter’s foreclosed property
from whom it was mortgaged, the case is enlightening as it acknowledged respondent’s
right, as a subsequent buyer of the properties from the actual purchaser of the same in
the public auction sale, to possess the property after the expiration of the period to
redeem sans any redemption. Verily, Ermitaño demonstrates the applicability of the
provisions of Section 7 of Act No. 3135 to such a subsequent purchaser like respondent
in the present case.

All told, the Court affirms the RTC’s issuance of the Writ of Possession in favor of
respondent.chanrobleslaw

WHEREFORE, the Petition is hereby DENIED. The December 8, 2009 and February
26, 2010 Orders of the Regional Trial Court of Bacolod City, Branch 49 in Cad. Case
No. 09-2802 are AFFIRMED

G.R. No. 213736, June 17, 2020

ALFREDO F. SY AND RODOLFO F. SY, PETITIONERS, V. CHINA BANKING

CORPORATION, RESPONDENT.

DECISION

CARANDANG, J.:
Before this Court is a Petition for Review on Certiorari with Prayer for Issuance of
Temporary Restraining Order and/or Preliminary Injunction 1 under Rule 45 of the Rules
of Court, assailing the Decision 2 dated September 18, 2013 and the Resolution 3 dated
July 1, 2014 of the Court of Appeals (CA) in CA-G.R. CEB SP No. 05994 filed by Alfredo
F. Sy (Alfredo) and Rodolfo F. Sy (Rodolfo; collectively, petitioners) against China
Banking Corporation (China Bank).

This case involves Lot No. 4740 (subject property), which is located in Linao-Lipata,
Minglanilla, Cebu City with an area of 8,371 square meters. It is covered by Transfer
Certificate of Title (TCT) No. 5235 4 in the name of Bernandina Fernandez (Bernandina),
married to Sy Thian Un. The spouses had eight children, namely: Petra, Priscilo, Elena,
Rogelio, Dulcee, Alfredo, Manuel, and Rodolfo. 5

On July 18, 1969, Bernandina simulated a Deed of Absolute Sale 6 over the subject
property in favor of her son, Priscilo, to enable the latter to start a livestock-poultry
business. Because of this, Priscilo caused the issuance of TCT No. 21283 7 over the
subject property in his name. Subsequently, Priscilo mortgaged the subject property to
the Development Bank of the Philippines (DBP) but he was not able to pay the
indebtedness, hence, the subject property was foreclosed. Priscilo then migrated to the
United States and executed a Special Power of Attorney 8 (SPA) authorizing his sister,
Elena, to redeem the subject property in favor of their younger brothers, herein
petitioners, who are the actual occupants of the subject property. However, after
redeeming the subject property, Elena allegedly forged the signatures of Priscilo and
the latter's wife, and, through the forged signatures, she executed a Deed of Waiver
and Relinquishment of Rights9 dated November 22, 1993 and a Deed of
Donation10 dated February 21, 1994 in favor of her children, Eleazar Jr. and Elaine
Adlawan. As a result, TCT No. T-83948 11 was issued in the names of Eleazar Jr. and
Elaine.12

Thereafter, Eleazar Jr. and Elaine (mortgagors) mortgaged the property to China Bank
as security for their loan which amounted to P3,700,000.00. Due to their inability to
pay, China Bank foreclosed the property and in the public auction dated September 28,
1988, China Bank was declared the highest bidder for the amount of P4,200,000.00.
The mortgagors failed to redeem the subject property within the one-year redemption
period. Accordingly, China Bank consolidated its title over the subject property and on
December 16, 1999, TCT No. 111058 13 was issued in its name.14

On December 11, 2000, China Bank filed before the Regional Trial Court (RTC), of Cebu
City, Branch 15, a Petition for the Issuance of a Writ of Possession. 15 On December 30,
2000, the RTC issued the Writ of Possession 16 and corresponding Notice to
Vacate17 dated January 5, 2001 in China Bank's favor. 18

Aggrieved, petitioners filed a motion before the RTC for the dissolution of the Writ of
Possession on the ground that they were the actual possessors of the subject property.
Petitioners further alleged that the mortgagors of the property fraudulently caused the
title to be transferred to their names through falsification of public documents. 19 The
RTC granted petitioners' motion and issued an Order 20 dissolving the Writ of Possession.
China Bank appealed but it was dismissed through a Resolution 21 dated October 23,
2003 for failure to pay the required docket fees. China Bank's motion for
reconsideration was likewise denied on November 21, 2002. 22
Meanwhile, on August 21, 1998, petitioners filed an action for recovery of ownership,
possession and partition docketed as Civil Case No. CEB-22570 as well as criminal
cases for Estafa through Falsification of Public Documents against the mortgagors under
I.S Nos. 99-13219-13220.23

On the other hand, insistent of its claim, China Bank filed before the RTC a second
petition for issuance of a Writ of Possession 24 on January 22, 2009. The same was
granted by the RTC on January 4, 2010, and a new Writ of Possession was issued in
favor of China Bank.25 The second Writ of Possession did not mention the previous Writ
of Possession which was dissolved and the China Bank, in its second application, did not
also mention the fact that the first Writ of Possession was dissolved and that the
dissolution has become final.

Petitioners again opposed China Bank's second Writ of Possession through an Omnibus
Motion,26 but this time the RTC denied petitioners' Omnibus Motion through an
Order27 dated April 7, 2010, which is being assailed in this petition for review
on certiorari.

In denying petitioners' Omnibus Motion, the RTC ruled that possession of the subject
property is an absolute right of the purchaser in a foreclosure proceeding, and that
upon consolidation of the purchaser's title, the issuance of the writ of possession
becomes a ministerial duty of the court. 28 Further, the RTC held that an application for
the writ of possession is ex parte in nature.29 The RTC also noted that in the Sheriffs
Report, there was an attached Undertaking signed by petitioners stating that they
recognized the superior right of China Bank to possess the subject property such that
they requested for a non-extendible period of seven (7) days to extend their stay in the
property purely for humanitarian reasons.30 Lastly, the RTC determined that petitioners
who hold the subject property adversely to the defaulted mortgagors are given by the
law other remedies like terceria, to determine whether the Sheriff had rightly or
wrongly taken hold of the foreclosed property that does not belong to the judgment
debtor, or an independent action to vindicate their claim of ownership or possession
over the foreclosed property.31

Petitioners moved for reconsideration of the RTC's Order but the same was denied
through an Order32 dated May 25, 2011. Undaunted, they filed a Petition
for Certiorari33 under Rule 65 of the Rules of Court to the Court of Appeals (CA).

On September 18, 2013, the CA rendered its Decision 34 denying the petition.
Preliminarily, the CA discussed that the remedy of certiorari used by petitioners in
questioning the RTC's orders was improper because the issuance of the Writ of
Possession was ministerial in nature, which does not involve any discretion. 35 Secondly,
the CA held that the initial dissolution of the first Writ of Possession issued by the RTC
was not binding and did not bar China Bank from praying for another writ of
possession.36 The CA determined that res judicata is not applicable in this case because
an ex parte petition for the issuance of a possessory writ is not a litigious judicial
process under the Rules of Court. 37 Lastly, the CA gave probative value to the
Undertaking signed by petitioners because the latter failed to present contrary evidence
thereto.38
On reconsideration, the CA maintained its ruling against petitioners in its
Resolution39 dated July 1, 2014.

Petitioners now seek this Court's review in this Petition for Review on Certiorari40 that
China Bank counters in its Comment.41 cralawred

Issue

The issue in this case is whether the issuance of the Writ of Possession, in favor of
China Bank and against petitioners, was proper.

Ruling of the Court

The petition is meritorious.

China Bank argues that it is the RTC's ministerial duty to issue the Writ of Possession in
its favor after title over the property has been consolidated in its name. It maintains
that an application for the issuance of a writ of possession is ex parte in nature, and
that there is even no need to notify the adverse party of the application.

Indeed, the ex parte application for writ of possession is a non-litigious summary

proceeding without need of posting a bond, except when possession is being sought
during the redemption period. It is a time-honored legal precept that after the
consolidation of titles in the buyer's name, for failure of the mortgagor to redeem,
entitlement to a writ of possession becomes a matter of right. As the confirmed owner,
the purchaser's right to possession becomes absolute. There is even no need for him to
post a bond, and it is the ministerial duty of the courts to issue the same upon proper
application and proof of title.42

Therefore, the general rule is that the court possesses no discretion to deny an
application for writ of possession if the judgment debtor failed to redeem the foreclosed
property within the legal redemption period and hence, ownership is consolidated to the
purchaser in the extrajudicial foreclosure sale. The purchaser's possessory right is a
legal outgrowth of his or her consolidated ownership — or right of ownership over the
foreclosed property — and shall accordingly be recognized by the court through the
grant of possessory writ in favor of the purchaser.

However, this general rule is not without exception, and We are convinced that the
exception, rather than the general rule, shall apply in this case.

The exception is found in Section 33, Rule 39 of the Rules of Court, viz.:  ChanRoblesVirtualawlibrary

Section 33. Deed and possession to be given at expiration of redemption period; by

whom executed or given. —

x x x x

Upon the expiration of the right of redemption, the purchaser or redemptioner shall

be substituted to and acquire all the rights, title, interest and claim of the judgment
obligor to the property as of the time of the levy. The possession of the property
shall be given to the purchaser or last redemptioner by the same officer unless a
third party is actually holding the property adversely to the judgment
obligor.43 (Italics, emphasis, and underscoring supplied)
Pursuant to Section 6 of Act No. 3135, 44 the application of Section 33, Rule 39 of the
Rules of Court has been extended to extra-judicial foreclosure sales, such as the one
involved in this case, thus: 
ChanRoblesVirtualawlibrary

Sec. 6. In all cases in which an extrajudicial sale is made under the special power
herein before referred to, the debtor, his successors in interest or any judicial creditor
or judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of the
sale; and such redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of
Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.
(Emphasis supplied)
Foregoing considered, the court's obligation to issue an ex parte writ of possession in
favor of the purchaser, in an extra-judicial foreclosure sale, ceases to be ministerial in
those exceptional cases where a third party is claiming the property adversely to that of
the judgment debtor/mortgagor, and where such third party is a stranger to the
foreclosure proceedings wherefrom the ex parte writ of possession was applied for.
Understandably, the third party adversely possessing the foreclosed property cannot be
dispossessed by a mere ex parte possessory writ in favor of the purchaser, because to
do so would be tantamount to a summary ejectment of the third party in violation of
the latter's right to due process.45 Besides, the purchaser's possessory right in an extra-
judicial foreclosure of real property is recognized only as against the judgment debtor
and his successor-in-interest, but not as against persons whose right of possession is
adverse to the latter.46

In Okabe v. Saturnino (Okabe),47 the property bought by the purchaser in a foreclosure

sale is being claimed and possessed by a third party adverse to the defaulting
mortgagor. Outlining the procedure to be followed, We ruled in Okabe that a hearing
must be conducted to determine whether possession over the foreclosed property is still
with the defaulting mortgagor or if it is already with the third party adversely holding
the same against the defaulting mortgagor. We held that if the foreclosed property is in
the possession of the defaulting mortgagor, a writ of possession could thus be issued.
Otherwise, if the foreclosed property is being possessed by the third party, the
purchaser cannot obtain a writ of possession ex parte, however, it is within the
purchaser's right to obtain possession over the foreclosed property through the
summary action of ejectment.

In this case, petitioners are sourcing their possessory and ownership rights over the
subject property from the title of their mother, Bernandina. However, the title to the
subject property was transferred through a simulated deed of absolute sale executed by
Bernandina in favor of Priscilo, who mortgaged the subject property to DBP and who
constituted Elena as his agent to redeem the subject property supposedly in favor of
petitioners. However, through Elena's forgery of the Deed of Donation and Deed of
Waiver and Relinquishment of Rights, she was able to transfer the title to the names of
Eleazar Jr. and Elaine, the herein defaulting mortgagors who thereafter mortgaged the
subject property in favor of China Bank. Petitioners assert that they are the real owners
of the subject property who are entitled to possession thereof. To back up their
assertion, petitioners presented a certification 48 from a document examiner of the
Philippine National Police Crime Laboratory, which shows that the signatures of Priscilo
and his wife in the Deed of Donation and Deed of Waiver and Relinquishment of Rights
were indeed forged.

Moreover, petitioners have filed an independent civil action for recovery of ownership,
possession and partition involving the subject property before another RTC on August
21, 1998. The fact that petitioners are the actual possessors of the property under
claim of ownership raises a disputable presumption of ownership in their favor. Hence,
the true owner must resort to judicial process for the recovery of the property. 49

The record shows that China Bank already instituted a forcible entry case against
petitioners on August 3, 2012, which was however dismissed on the merits for lack of
cause of action and for violation of the rule against forum shopping. 50 The forcible entry
case was filed after the writ of possession granted in favor of China Bank. The said
application for the writ of possession was implemented by Sheriff Jessie A. Belarmino.
Upon the implementation thereof, petitioners were forced to leave the subject property,
but later on they returned and repossessed it. 51 The dismissal of the forcible entry case
by the Municipal Trial Court (MTC) which was subsequently affirmed by the RTC 52 was
grounded on the fact that China Bank has no prior physical possession over the subject
property. In the forcible entry case, the MTC found that contrary to the claim of China
Bank, petitioners have prior physical possession over the subject property before the
writ of possession was issued to China Bank pursuant to the consolidation of its title as
the highest bidder in the auction sale. Hence, the first requisite for forcible entry case
to prosper is not present.53]

It is relevant to add that the writ of possession granted in favor of China Bank was the
result of a second application for the writ of possession instituted by it. The first
application was initially granted but then dissolved upon opposition from petitioners.
The dissolution of the first writ of possession was appealed by China Bank but it was
dismissed by the CA. There was even no mention of the dissolution of the first writ of
possession in the second application by China Bank. We cannot countenance such
action undertaken by China Bank. The fact that the first writ of possession was
dissolved and such dissolution has become final, China Bank should have made use of
other judicial remedies at its disposal to vindicate its claim of possession and ownership
over the subject property. It was improper for China Bank to wait for another nine
years from the filing of the first application for a writ of possession to institute another
application with the same contents and arguments as the first. The institution of the
second application for the writ of possession makes a mockery of the judicial process.
China Bank seems to be soliciting a much friendly forum as to get what it prays for
considering that it waited for so long and after the judge who dissolved the first writ of
possession retired before instituting the second application for the writ of possession.

Lastly, China Bank, as a banking institution must be reminded of the oft-repeated

principle that a purchaser or mortgagee cannot close its eyes to facts which should put
a reasonable man upon his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor or mortgagor. Banks, their
business being impressed with public interest, are expected to exercise more care and
prudence than private individuals in their dealings, even those involving registered
lands.54
WHEREFORE, the petition is GRANTED. The assailed Decision dated September 18,
2013 and the Resolution dated July 1, 2014 of the Court of Appeals in CA-G.R. CEB SP
No. 05994 are hereby REVERSED and SET ASIDE. The Writ of Possession dated
January 4, 2010 addressed to Sheriff Generoso Regalado is
hereby RECALLED and DISSOLVED.

In addition, petitioners could have easily presented the original Registry Receipt No. A-
2094. It would have constituted the best evidence of tile fact of mailing on 7 February
2006, even if a different date had been stamped on the envelope of the subject
registered mail. Regrettably, petitioners have not seen fit to present such original. Their
continued failure to present tile original receipt can only lead one to remember the well-
settled rule that when the evidence tends to prove a material fact which imposes a
liability on a party, and he has it in his power to produce evidence which from its very
nature must overthrow the case made against him if it is not founded on fact, and he
refuses to produce such evidence, the presumption arises that the evidence, if
produced, would operate to his prejudice, and support the case of his adversary. Mere
photocopy of Registry Receipt No. A-2094 militates against their position as there is no
indicium of its authenticity. A mere photocopy lacks assurance of its genuineness,
considering that photocopies can easily be tampered with. (Emphasis supplied.)39
After the CA found that petitioner failed to prove that extrajudicial demand was made
upon respondent as required by law and after it had observed that petitioner had not
asserted any of the exceptions to the requisite demand under Article 1169 of the Civil
Code, the CA concluded that respondent could not be considered in default.
Necessarily, petitioner's case should fail.40
While the CA is correct on its factual finding, its legal conclusion is, however, flawed.
What petitioner seeks to enforce against respondent is a contract of loan, which is
secured by a real estate mortgage. Based on the sources of obligations enumerated
under Article 1157 of the Civil Code, the obligation that petitioner seeks to make
respondent liable for is one which arises from contract. Liability for damages arises
pursuant to Article 1170 of the Civil Code against "[t]hose who in the performance of
their obligations are guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof." Delay or mora is governed by Article 1169 of the Civil
Code, which provides:
ART. 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may
exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to be rendered
was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his
power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the other begins. (1100a)
Default or mora, which is a kind of voluntary breach of an obligation, signifies the idea of
delay in the fulfillment of an obligation with respect to time.41 In positive obligations, like
an obligation to give, the obligor or debtor incurs in delay from the time the obligee or
creditor demands from him the fulfillment of the obligation.42 Demand may be judicial
— if the creditor files a complaint against the debtor for the fulfillment of the obligation
— or extrajudicial — if the creditor demands from the debtor the fulfillment of the
obligation either orally. or in writing.43 Whether the demand is judicial or extrajudicial, if
the obligor or debtor fails to fulfill or perform his obligations, like payment of a loan, as in
this case, he is in mora solvendi, and, thus, liable for damages. 44
While delay on the part of respondent was not triggered by an extrajudicial demand
because petitioner had failed to so establish receipt of her demand letter, this delay was
triggered when petitioner judicially demanded the payment of respondent's loan from
petitioner. While the CA was correct in observing that default generally begins from the
moment the creditor demands the performance of the obligation, and without such
demand, judicial or extrajudicial, the effects of default will not arise,45 it failed to
acknowledge that when petitioner filed her complaint dated June 10, 2005,46 such filing
constituted the judicial demand upon respondent to pay the latter's principal obligation
and the interest thereon. Respondent, having thus incurred in delay (counted from the
filing of the complaint), is liable for damages pursuant to Article 1170 of the Civil Code.

Consequently, the reversal of the assailed CA Decision and Resolution is justified and
to that extent, the Petition is meritorious.

Even with the reversal of the CA's ruling, the Court cannot, however, uphold in toto the
RTC's ruling.
To recall, the dispositive portion of the RTC Decision states:

WHEREFORE, in the light of the foregoing, the defimdant is hereby ordered to pay
plaintiff the loaned amount of P200,000 plus the interest of 12% per annum from
September 3, 2004, the date the defendant received the demand letter from the plaintiff,
dated August 2004, until the finality of the decision and the satisfaction of the amount
due. She is also ordered to pay the plaintiff the amount of P50,000 as nominal damages
and P30,000 as attorney's fees.

In default of payment, the mortgaged property, together with all the buildings and
improvements existing thereon, shall be foreclosed and sold and the proceeds of their
sale shall be applied to the payment of the amounts due the plaintiff, including damages
and attorney's fees.

SO ORDERED.47 (Italics in the original)

Firstly, the RTC erred in granting petitioner's remedies or demands of collection and
foreclosure of mortgage successively. The settled rule is that these remedies of
collection and foreclosure are mutually exclusive. The invocation or grant of one remedy
precludes the other.

Since Bachrach Motor Co., Inc. v. Icarañgal,48 the Court has consistently ruled49 that:

We hold, therefore, 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. 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.50
The rationale as to the exclusive effect of the remedies or options is explained, thus:
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 the 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
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.

xxxx

x x x But, as we have heretofore stated, the creditor's cause of action is not only single
but indivisible, although the agreements of the parties, evidenced by the note and the
deed of mortgage, may give rise to different remedies. x x x The cause of action should
not be confused with the remedy created for its enforcement. And considering, as we
have shown, that one of the two remedies available to the creditor is as complete as the
other, he cannot be allowed to pursue both in violation of those principles of procedure
intended to secure simple, speedy and unexpensive administration of justice.51
In Cerna v. CA,52 the Court ruled that the filing of a collection suit barred the
foreclosure of the mortgage.
Given the foregoing, the Court sustains the RTC's ruling which orders respondent to pay
petitioner the loaned amount of P200,000.00. However, the RTC's ruling that in default
of respondent's payment, petitioner can foreclose on the mortgage is erroneous.
Secondly, the RTC erred on the rate of interest that it imposed. The 12% per annum
rate of interest should be revised in the light of Nacar v. Gallery Frames.53 Since the
RTC found that the undated Agreement contained no stipulation on interest54 and the
2003 Agreement's interest rate was unconscionable,55 the rate of interest on the loan of
respondent should be 12% per annum from judicial demand or filing of the original
complaint with the RTC until June 30, 2013 and 6% per annum from July 1, 2013 until
finality of this Decision. The total amount due as of such date of finality shall bear an
interest of 6% per annum until its full satisfaction.

Thirdly, as already pointed above, the RTC erred in reckoning the imposition of interest
from extrajudicial demand because the finding of the CA in this respect is upheld.
Fourthly, the award of P50,000.00 nominal damages is deleted. As reiterated in Robes-
Francisco Realty & Development Corp. v. Court of First Instance of Rizal (Branch
XXXIV),56 "nominal damages cannot coexist with compensatory damages."57

As to the award of attorney's fees, the same is sustained. Attorney's fees are
recoverable under Article 2208 of the Civil Code when the defendant's act has
compelled the plaintiff to incur expenses to protect his interest and when the court
deems it just and equitable.

WHEREFORE, the Petition is hereby PARTLY GRANTED. The Decision of the Court of
Appeals dated March 21, 2017 and its Resolution dated August 30, 2017 in CA-G.R. CV
No. 106404 are REVERSED and SET ASIDE. The Decision dated April 30, 2015 of the
Regional Trial Court of Malolos City, Bulacan, Branch 17 in Civil Case No. 526-M-2005
is PARTLY REINSTATED insofar as the order against respondent Virginia Zuñiga vda.
de Vega to pay petitioner Ma. Luisa A. Pineda the loaned amount of P200,000.00 and
P30,000.00 as attorney's fees is concerned. Respondent Virginia Zuniga vda. de Vega
is also ordered to pay petitioner Ma. Luisa A. Pineda interest on the loaned amount at
the rate of 12% per annum from the filing of the original complaint up to June 30, 2013
and 6% per annum from July 1, 2013 until the finality of this Decision; and on the total
amount due on the Decision's finality, interest of 6% per annum from such date of
finality until full payment thereof