Jacob vs.

CA184 SCRA 294; April 6, 1990 *

[G.R. No. 88602. April 6, 1990.]

TOMASA VDA. DE JACOB, as Special Administratrix of the Estate of the Deceased ALFREDO E.
JACOB, Petitioner, v. HONORABLE COURT OF APPEALS, BICOL SAVINGS & LOAN ASSOCIATION,
JORGE CENTENERA, AND LORENZO C. ROSALES, Respondents.

[G.R. No. 89544. April 6, 1990.]

THE ESTATE OF THE LATE ALFREDO JACOB, represented by its Administrator, TOMASA VDA. DE
JACOB, Petitioner, v. HONORABLE COURT OF APPEALS, AND UNITED BICOL SAVINGS
BANK, Respondents.

Benito P. Fabie for Petitioner.

Contreras & Associates for Private Respondents.

Rosales & Associates Law Office for private respondent Rosales.

Ramon Quisumbing, Jr. for private respondent Centenera.

SYLLABUS

1. REMEDIAL LAW; SPECIAL PROCEEDING; CLAIMS AGAINST ESTATE; REMEDIES AVAILABLE TO

MORTGAGEE. — Section 7, Rule 86 of the Rules of Court clearly recognized that a mortgagee has three
remedies that may be alternately availed of in case the mortgagor dies, to wit: (1) to waive the mortgage
and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the
mortgage judicially and prove the deficiency as an ordinary claim; and (3) to rely on the mortgage
exclusively, or other security and foreclose the same at anytime, before it is barred by prescription,
without the right to file a claim for any deficiency. From the foregoing it is clear that the mortgagee does
not lose its right to extrajudicially foreclose the mortgage even after the death of the mortgagor as a third
alternative under Section 7, Rule 86 of the Rules of Court.

2. ID.; ID.; ID.; ID.; EXIST INDEPENDENTLY FROM THE DEED OF MORTGAGE. — The power to foreclose a
mortgage is not an ordinary agency that contemplated exclusively the representation of the principal by
the agent but is primarily an authority conferred upon the mortgagee for the latter’s own protection. That
power survives the death of the mortgagor, acting through his attorney-in-fact, did not depend on the
authority in the deed of mortgage executed by the latter. That right existed independently of said
stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of Court.

3. ID.; ID.; ID.; EXTRAJUDICIAL FORECLOSURE AND AUCTION SALE; FOUND REGULAR AND IN
ACCORDANCE WITH LAW IN CASE AT BAR. — The petition is premised on the assumption that the
extrajudicial foreclosure and auction sale was patently void and was without basis. On the contrary the
appellate court found and so does this Court, that the extrajudicial foreclosure and auction sale was
regular and in accordance with law. While it is true that the question of the validity of said mortgage and
consequently the extrajudicial foreclosure thereof was raised in a separate proceeding before the trial
court, the pendency of such separate civil suit can be no obstacle to the issuance of the writ of possession
which is a ministerial act of the trial court after a title on the property has been consolidated in the
mortgagee.

DECISION

GANCAYCO, J.:

The question of and whether or not a petition for the issuance of a writ of possession may be barred by
estoppel, are the issues presented in this petition.
DEVELOPMENT BANK OF THE PHILIPPINES vs. ALEJANDRO and ADELAIDA LICUANANG.R. No. 150097,
February 26, 2007 *
G.R. No. 150097             February 26, 2007
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner
vs.
ALEJANDRO and ADELAIDA LICUANAN, Respondents.
DECISION
CORONA, J.:
In this petition for review on certiorari, 1 petitioner Development Bank of the Philippines assails the
February 9, 2001 decision2 and September 17, 2001 resolution3 of the Court of Appeals (CA) in CA-G.R. CV
No. 37784.
Respondent spouses Alejandro and Adelaida Licuanan were granted a piggery loan in the amount of
₱4,700 by petitioner, evidenced by a promissory note dated September 20, 1974 and secured by a real
estate mortgage4 over a 980-square meter parcel of land with a two-storey building. The loan’s maturity
date was September 23, 1979.5
Petitioner granted respondents an additional loan of ₱12,000 evidenced by a promissory note dated May
29, 1975 payable on or before the year 1980. This was secured by a real estate mortgage over four
parcels of land situated in Pangasinan covered by TCT Nos. 109825, 109762, 109763 and 109764. 6
On October 2, 1975, petitioner granted respondent spouses another loan of ₱22,000 evidenced by a
promissory note maturing on October 3, 1985. This was secured by a real estate mortgage executed in
favor of petitioner over three parcels of land covered by TCT Nos. 112608, 112607 and 112609, all of the
Registry of Deeds of Pangasinan.7
On August 6, 1979, petitioner and respondents restructured the ₱12,000 loan, extending the maturity
date from June 22, 1979 to June 22, 1982. On the same date, respondents executed a promissory note for
₱12,320.73 and another for ₱6,519.90.8
On July 6, 1981, petitioner sent a letter by registered mail to respondents informing them that, since the
conditions of the mortgage had been breached, petitioner would have the mortgaged properties sold by
the sheriff under Act 3135. The total amount due from the three loans had by then ballooned to
₱75,298.32.9
On July 20, 1981, petitioner filed an application for extrajudicial foreclosure. 10 The mortgaged properties
were sold in a public auction on December 16, 1981. Petitioner, as the highest bidder, acquired them for a
total of ₱16,340. The certificate of sale was registered on January 25, 1982. 11
On February 4, 1983, petitioner consolidated its ownership over the properties. After more than a year or
on October 16, 1984, petitioner wrote respondents by registered mail, informing them that the
properties (now acquired assets of the bank) would be disposed of by public auction. On November 11,
1984, petitioner published an advertisement stating that on November 14, 1984, the properties would be
sold by oral bidding. On this date, however, there were no bidders. 12
On November 16, 1984, petitioner sent respondents a letter informing them that the properties could be
reacquired by negotiated sale for cash or installment. 13 Three days later, however, on November 19,
1984, the properties were sold through negotiated sale to one Emelita A. Peralta. Respondents were
informed of the sale by petitioner through a letter dated December 6, 1984.
On the same day, petitioner executed a deed of conditional sale in favor of Peralta. 14 On December 11,
1984, respondents offered to repurchase the properties from petitioner but they had already been sold to
Peralta.15
Respondents then filed a complaint for recovery of real properties and damages on July 18, 1985 in the
Regional Trial Court (RTC) of Lingayen, Pangasinan, Branch 39 against petitioner and Peralta. 16 The RTC
rendered judgment dated September 17, 1991 in favor of respondents.
The trial court found that there was no demand for payment prior to the extrajudicial foreclosure. Thus,
the foreclosure proceedings were null and void. It ordered Peralta to reconvey the properties to
respondents subject to Peralta’s right to be paid by respondents the amount of ₱104,000 in consideration
of such reconveyance. It also held that petitioner did not deal fairly with respondents making it liable for
nominal and moral damages to the latter. The RTC further ordered petitioner to pay respondents
attorney’s fees and litigation expenses.
On appeal, the CA affirmed the RTC but decreased the amount of nominal damages from ₱75,000 to
₱50,000.17
Hence this petition.18
The main issues to be resolved are the following:
1) whether a demand for payment of the loans was made before the mortgage was foreclosed;
2) whether demand is necessary to make respondents guilty of default;
3) whether or not respondents are liable for the deficiency claim of petitioner and
4) whether or not petitioner is liable for damages.
The issue of whether demand was made before the foreclosure was effected is essential. If demand was
made and duly received by the respondents and the latter still did not pay, then they were already in
default and foreclosure was proper. However, if demand was not made, then the loans had not yet
become due and demandable. This meant that respondents had not defaulted in their payments and the
foreclosure by petitioner was premature. Foreclosure is valid only when the debtor is in default in the
payment of his obligation.19
Whether or not demand was made is a question of fact. In petitions for review on certiorari under Rule
45, only questions of law may be raised by the parties and passed upon by this Court. 20 Factual findings of
the trial court, when adopted and confirmed by the CA, are binding and conclusive on this Court and will
generally not be reviewed on appeal.21 Inquiry into the veracity of the CA’s factual findings and
conclusions is not the function of the Supreme Court for the Court is not a trier of facts. 22 Neither is it our
function to re-examine and weigh anew the respective evidence of the parties. 23 While this Court has
recognized several exceptions to this rule,24 none of these exceptions finds application here.
Both the CA and RTC found that demand was never made. No compelling reason whatsoever has been
shown by petitioner for this Court to review and reverse the trial court’s findings and conclusions, as
affirmed by the CA.
Petitioner asserts that demand was unnecessary because the maturity dates of all loans were
specified, i.e., the notes expressly stated the specific dates when the amortizations were to fall due. 25
We disagree.
Unless demand is proven, one cannot be held in default. 26 Petitioner’s cause of action did not accrue on
the maturity dates stated in the promissory notes. It is only when demand to pay is made and
subsequently refused that respondents can be considered in default and petitioner obtains the right to
file an action to collect the debt or foreclose the mortgage. 27 As we held in China Banking Corporation v.
Court of Appeals:28
Well-settled is the rule that since a cause of action requires, as essential elements, not only a legal right of
the plaintiff and a correlative duty of the defendant but also "an act or omission of the defendant in
violation of said legal right," the cause of action does not accrue until the party obligated refuses,
expressly or impliedly, to comply with its duty.
Otherwise stated, a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and (3) an act or omission on the part of such
defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant
to the plaintiff.
It bears stressing that it is only when the last element occurs that a cause of action arises. Accordingly, a
cause of action on a written contract accrues only when an actual breach or violation thereof occurs.
Applying the foregoing principle to the instant case, we rule that private respondent’s cause of action
accrued only on July 20, 1995, when its demand for payment of the Home Notes was refused by
petitioner. It was only at that time, and not before that, when the written contract was breached and
private respondent could properly file an action in court.
The cause of action cannot be said to accrue on the uniform maturity date of the Home Notes as
petitioner posits because at that point, the third essential element of a cause of action, namely, an
act or omission on the part of petitioner violative of the right of private respondent or
constituting a breach of the obligation of petitioner to private respondent, had not yet
occurred.29 (emphasis supplied)
The acceleration clause of the promissory notes stated that "[i]n case of non-payment of this note or any
portion of it on demand, when due, on account of this note, the entire obligation shall become due and
demandable …."30 Hence, the maturity dates only indicate when payment can be demanded. It is the
refusal to pay after demand that gives the creditor a cause of action against the debtor.
Since demand, which is necessary to make respondents guilty of default, was never made on respondents,
the CA and RTC correctly ruled that the foreclosure was premature and therefore null and void.
In arguing that the foreclosure was valid, petitioner also avers that respondents are estopped from
questioning the validity of the foreclosure sale since they offered to repurchase the foreclosed
properties.31 We are not persuaded. The reason why respondents offered to repurchase the properties
was clearly stated in their letter to petitioner:
I am very much interested in repurchasing back these properties because they are the only properties
which my family have and because our house is located inside this property and for this matter I am
willing to pay [for] these properties in cash which I already told the bank when I went there. 32
Besides, we have already ruled that an offer to repurchase should not be construed as a waiver of the
right to question the sale.33 Instead, it must be taken as an intention to avoid further litigation and thus is
in the nature of an offer to compromise.34 By offering to redeem the properties, respondents can attain
their ultimate objective: to pay off their debt and regain ownership of their lands. 35
Moreover, it was petitioner, in its November 16, 1984 letter, which informed respondents that the
properties were available for sale. Respondents merely took up petitioner’s offer for them to reacquire
their properties.
Petitioner assigns as error the failure of the CA to rule on its deficiency claim. It alleged that the price the
mortgaged property was sold for (₱104,000) was less than the amount of respondents’ indebtedness
(₱131,642.33), thus it is entitled to claim the difference (₱27,642.33) with interest. Respondents cannot
be held liable for the deficiency claim. While it is true that in extrajudicial foreclosure of mortgage, the
mortgagee has the right to recover the deficiency from the debtor, 36 this presupposes that the foreclosure
must first be valid.37
The last issue is whether the award of moral and nominal damages, expenses of litigation and attorney’s
fees is proper. Crucial to the determination of the propriety of the award of damages are the findings of
the RTC, which were affirmed by the CA, on the matter of bad faith:
Apart from the precipitate foreclosure proceedings, the Court observes that certain acts of [petitioner]
were most certainly less than fair and less than honest, which negates the rehabilitation (prior name of
the bank) or development aspect or purpose of [petitioner]. These certainly caused serious anxiety and
wounded feelings to [respondents]. They are: -
FIRST. – [Petitioner] granted a loan of ₱4,700.00; then a second loan of ₱12,000.00 re-structured to
₱18,840.61; and a third loan of ₱22,200.00, or a total of ₱45,740.61 during the period from September
1974 to October 2, 1975. Obviously, these loans were granted because the market value of the collaterals
exceeds ₱100,000.00 and [petitioner’s] appraisal value is more or less ₱80,000.00. However, six (6) years
later, when the value must have appreciated in terms of pesos, the [petitioner] bidded for a [measly]
₱16,000.00 and [claimed] a deficiency. That it was [measly] and shocking to the conscience was
conclusively proven by the fact that [Peralta] offered and did in fact buy the properties for ₱104,000.00
barely three (3) years later. To the mind of the Court, the actuations of the bank must have been revolting
to [respondents] and to honest men, especially considering that [petitioner] is a government financial
institution, capitalized with the money of the people, and created principally "to assist agricultural
producers xxx in developing their farms xxx to accelerate national progress", more than to realize profit.
SECOND. – [Respondents] are simple-minded persons in the country side. It strikes the court as odd and
certainly less than candid WHY on AUGUST 6, 1979, [petitioner] restructured the second loan which will
mature on May 1980, but did not restructure the first loan which was due to mature on September 23,
1979 or barely one month hence. It appears that the result lulled [respondents] into a false sense of
security and a feeling of relief that the entire loan accommodation will mature in 1985. And then like a
bolt of lightning from a clear sky, [respondents] were hit with [foreclosure] proceedings, causing them to
suffer sleepless nights.
THIRD. – A letter dated November 16, 1984 was addressed to [respondents] informing them practically
that they are given the priority to recover their properties by negotiated sale. And yet before the letter
was sent, or on November 14, 1984 the [petitioner] had already negotiated with [Peralta] for the latter to
buy the assets for ₱104,000.00 in installment and as a matter of fact the Contract for Conditional Sale was
executed on November 19, 1984 – even before the letter was received by [respondents]. [Heart-rending]
was the plea of [respondents] which we quote: -
"I am very much interested in repurchasing back these properties because they are the only properties
which my family have and because our house is located inside this property and for this matter I am
willing to pay [for] these properties in cash which I already told the bank when I went there."
(underscoring supplied)
Nevertheless, such supplications fell on deaf ears and did not even merit sympathy from a heartless
[petitioner]. At the very least, the letter of 16 November 1984 was a very bad joke gleefully made in bad
taste and foisted on the hapless [respondents]. It added insult to injury.
And to top it all, [petitioner] even has the temerity to allege in paragraph 2 of its compulsory
counterclaim "that as of November 7, 1984 the total obligations of [respondents] on account of their
loans with [petitioner] amounted to ₱131,642.33" and making a deficiency claim of ₱27,642.33 plus daily
interest of ₱9.61 beginning November 8, 1984 "which [respondents] are allegedly still liable to pay the
[petitioner]".1avvphi1.net This is unconscionable.1awphi1.net
Certainly, there is abundant evidence that the rights of [respondents] have been violated or invaded with
unconcerned ruthlessness by the [petitioner].38
Both the RTC and CA found that there was factual basis for the moral damages adjudged against
petitioner. They found that petitioner was guilty of bad faith in its actuations against respondents. Again,
this is a factual matter binding and conclusive on this Court:
It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith, being
a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial court
as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight and
respect. Said findings are final and conclusive upon the Supreme Court except, inter alia, where the
findings of the Court of Appeals and the trial court are contrary to each other. 39
The lower court also found that respondents’ property rights were invaded or violated, 40 hence the grant
of nominal damages was also proper.
Respondents are likewise entitled to the award of attorney’s fees and expenses of litigation since the
premature foreclosure by petitioner compelled them to incur expenses to protect their interest. 41
WHEREFORE, we hereby AFFIRM the decision of the Court of Appeals in CA-G.R. CV No. 37784.
Costs against petitioner.
SO ORDERED.
RENATO C. CORONA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
On official leave.
ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA
Associate Justice Asscociate Justice
CANCIO C. GARCIA
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify 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.
REYNATO S. PUNO
Chief Justice

Footnotes
1
 Under Rule 45 of the Rules of Court.
2
 Penned by Associate Justice Ramon A. Barcelona (retired) and concurred in by Associate Justices
Rodrigo V. Cosico and Alicia L. Santos (retired) of the Eighth Division of the Court of Appeals;  rollo, pp.
34-46.
3
 Associate Justice Bienvenido L. Reyes replaced Associate Justice Alicia L. Santos in the Special Former
Eighth Division of the Court of Appeals; id., pp. 32-33.
4
 Also dated September 20, 1974.
5
 Rollo, pp. 9-10, 19.
6
 Id.
7
 Id.
8
 Id., p. 162.
9
 Id., p. 19.
10
 Id., p. 20.
11
 Id., pp. 21 and 44.
12
 Id.
13
 Id., pp. 21-22.
14
 Id., pp. 22 and 45.
15
 Id., p. 54.
16
 Docketed as Civil Case No. 16245; rollo, p. 9.
17
 Id., p. 30.
18
 The petition is anchored on the following grounds:
19

I
THE [CA] HAD DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH AND IN PATENT DISREGARD OF
THE PROVISIONS OF SECTION 4, RULE 29, OF THE REVISED RULES OF COURT, WHEN IT DISREGARDED
THE ADMISSIONS OF THE RESPONDENTS THAT [PETITIONER] MADE VARIOUS DEMANDS FOR
PAYMENT.
II
THE [CA] COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT FAILED TO NOTICE THE RELEVANT
FACT THAT THE RESPONDENTS OFFERED TO REPURCHASE THE FORECLOSED PROPERTY WHICH
WILL LEAD TO THE LOGICAL CONCLUSION THAT THEY IMPLIEDLY ADMIT THE OWNERSHIP OF
[PETITIONER] OF THE SAME PROPERTY ROOTED ON THE FORECLOSURE PROCEEDINGS IN QUESTION,
AND WITH THIS RESPONDENTS ARE IN ESTOPPEL TO ASSAIL THE SAME PROCEEDINGS.
III
THE [CA] HAD DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH AND IN PATENT DISREGARD OF
THE PROVISIONS OF ARTICLE 1169 OF THE NEW CIVIL CODE WHEN IT FAILED TO NOTICE THE
RELEVANT FACT THAT THE PROMISSORY NOTES AND THE MORTGAGE CONTRACT AS WELL AS THE
DEED OF RESTRUCTURING EXECUTED BY THE RESPONDENTS IN FAVOR OF [PETITIONER] EXPRESSLY
STIPULATED THE TIME WHEN THE AMORTIZATIONS WOULD FALL DUE WHICH WILL LEAD TO THE
LOGICAL CONCLUSION THAT THE MORTGAGORS (RESPONDENTS HEREIN) INCURRED DELAY
WITHOUT NEED OF FURTHER DEMAND WHEN THE DUE DATES FELL AND NO PAYMENTS WERE MADE
ON THE ACCOUNT.
IV
THE [CA] GRAVELY ERRED AND DECIDED THE CASE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
WHEN IT ANNULLED THE FORECLOSURE PROCEEDINGS WITHOUT LEGAL AND FACTUAL BASIS AND
DENIED [PETITIONER’S] CLAIM FOR DEFICIENCY OBLIGATION.
V
ASSUMING ARGUENDO THAT THE FORECLOSURE WAS LEGALLY FLAWED, THE [CA] GRAVELY ERRED
AND DECIDED THE CASE NOT IN ACCORD WITH LAW AND JURISPRUDENCE WHEN IT FAILED TO
CONSIDER THAT [PETITIONER] IS ENTITLED, UNDER THE LAW, TO THE PAYMENT OF THE BALANCE
OF THE LOANS OBTAINED, RECEIVED AND USED BY THE [RESPONDENTS], OR TO DECLARE
RESPONDENTS STILL INDEBTED TO CONFORMABLY WITH THE PROMISSORY NOTES AND LOAN
DOCUMENTS THEY EXECUTED IN FAVOR OF [PETITIONER].
VI
THE [RTC] GRAVELY ERRED AND DECIDED THE CASE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE, WHEN IT FAILED TO CONSIDER THAT [PETITIONER] WAS IN GOOD FAITH IN
SELLING THE PROPERTY AFTER TITLE OF OWNERSHIP THEREON WAS CONSOLIDATED IN ITS FAVOR,
AND FURTHER WHEN IT FAILED TO CONSIDER THAT [PERALTA IS A BUYER] IN GOOD FAITH OF THE
PROPERTY INVOLVED IN THE CASE AND IS THEREFORE ENTITLED UNDER THE LAW TO RETAIN
OWNERSHIP OF THE SAME.
VII
THE [RTC] GRAVELY ERRED AND DECIDED THE CASE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE WHEN IT AWARDED DAMAGES IN FAVOR OF RESPONDENTS IN THE ABSENCE OF
LEGAL OR FACTUAL BASIS. (Rollo, pp. 49-50.)
19
 State Investment House, Inc. v. Court of Appeals, G.R. No. 99308, 13 November 1992, 215 SCRA 734, 744,
citation omitted.
20
 Pleyto v. Lomboy, G.R. No. 148737, 16 June 2004, 432 SCRA 329, 336; Metropolitan Bank and Trust Co. v.
Wong, 412 Phil. 207, 216 (2001).
21
 Lazaro v. Court of Appeals, 423 Phil. 554, 558 (2001); Garrido v. Court of Appeals, 421 Phil. 872, 881
(2001); Santos v. Spouses Reyes, 420 Phil. 313, 317 (2001); Yu Bun Guan v. Ong, 419 Phil. 845, 854
(2001); Fernandez v. Fernandez, 416 Phil. 322, 337 (2001); Nagkakaisang Kapisanan Kapitbahayan sa
Commonwealth Avenue v. Court of Appeals, 414 Phil. 146, 153-154 (2001).
22
 First Metro Investment Corp. v. Este del Sol Mountain Reserve, Inc., 420 Phil. 902, 914 (2001).
23
 Jose v. People, G.R. No. 148371, 12 August 2004, 436 SCRA 294, 302.
24
 The exceptions are:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts
are conflicting; (6) when in making its findings, the CA went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary
to the trial court; (8) when the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply
briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly considered, will justify a
different conclusion; Langkaan Realty Development, Inc. v. United Coconut Planters Bank, G.R. No. 139437,
8 December 2000, 347 SCRA 542, 549; Nokom v. National Labor Relations Commission, 390 Phil. 1228,
1242 (2000); CIR v. Embroidery and Garments Industries (Phil.), Inc., 364 Phil. 541, 546-547 (1999); Sta.
Maria v. Court of Appeals, 349 Phil. 275, 282-283 (1998).
25
 Rollo, pp. 55-57, 239-241.
26
 Nuñez v. GSIS Family Bank (Formerly ComSavings Bank), G.R. No. 163988, 17 November 2005.
27
 Caltex Philippines, Inc. v. Intermediate Appellate Court, G.R. No. 74730, 25 August 1989, 176 SCRA 741,
751.
28
 G.R. No. 153267, 23 June 2005, 461 SCRA 162.
29
 Id., pp. 167-168, citations omitted.
30
 Rollo, pp. 12 and 26, emphasis supplied.
31
 Id., pp. 53-54.
32
 Id., p. 14.
33
 Rosales v. Court of Appeals, G.R. No. 137566, 28 February 2001, 353 SCRA 179, 191.
34
 Id.
35
 Id., pp. 191-192.
36
 Prudential Bank v. Martinez, G.R. No. 51768, 14 September 1990, 189 SCRA 612, 615.
37
 See Delta Motor Sales Corporation v. Mangosing, G.R. No. L-41667, 30 April 1976, 70 SCRA 598, 602.
38
 Rollo, pp. 13-14, citations omitted.
39
 PAL, Inc. v. CA, 326 Phil. 824, 835 (1996), citations omitted.
40
 Art. 2221, Civil Code.
41
 Art. 2208; rollo, p. 29.
HUERTA ALBA RESORT INC. vs. COURT OF APPEALS and SYNDICATED MANAGEMENT GROUP INCG.R.
No. 128567, September 1, 2000 *
Litigation must at some time be terminated, even at the risk of occasional errors. Public policy dictates
that once a judgment becomes final, executory and unappealable, the prevailing party should not be
denied the fruits of his victory by some subterfuge devised by the losing party. Unjustified delay in the
enforcement of a judgment sets at naught the role of courts in disposing justiciable controversies with
finality.

The Case

FACTS:
At bar is a petition assailing the Decision, dated November 14, 1996, and Resolution, dated March 11,
1997, of the Court of Appeals in CA-G.R. No. 38747, which set aside the Order, dated July 21, 1995 and
Order, dated September 4, 1997, of the Regional Trial Court of Makati City, in Civil Case No. 89-5424. The
aforesaid orders of the trial court held that petitioner had the right to redeem subject pieces of property
within the one-year period prescribed by Section 78 of Republic Act No. 337 otherwise known as the
General Banking Act.

Section 78 of R.A. No. 337 provides that "in case of a foreclosure of a mortgage in favor of a bank, banking
or credit institution, whether judicially or extrajudicially, the mortgagor 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."

The Facts:

In a complaint for judicial foreclosure of mortgage with preliminary injunction filed on October 19, 1989,
docketed as Civil Case No. 89-5424 before the Regional Trial Court of Makati City, the herein private
respondent sought the foreclosure of four (4) parcels of land mortgaged by petitioner to Intercon Fund
Resource, Inc. ("Intercon").

Private respondent instituted Civil Case No. 89-5424 as mortgagee-assignee of a loan amounting to P8.5
million obtained by petitioner from Intercon, in whose favor petitioner mortgaged the aforesaid parcels
of land as security for the said loan.

In its answer below, petitioner questioned the assignment by Intercon of its mortgage right thereover to
the private respondent, on the ground that the same was ultra vires. Petitioner also questioned during
the trial the correctness of the charges and interest on the mortgage debt in question.

On April 30, 1992, the trial court, through the then Judge now Court of Appeals Justice Buenaventura J.
Guerrero, came out with its decision "granting herein private respondent SMGI’s complaint for judicial
foreclosure of mortgage", disposing as follows:

"WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the following:
(1) P8,500,000.00 representing the principal of the amount due;

(2) P850,000.00 as penalty charges with interest at 6% per annum, until fully paid;

(3) 22% per annum interest on the above principal from September 6, 1998, until fully paid;

(4) 5% of the sum total of the above amounts, as reasonable attorney’s fees; and,

(5) Costs.

All the above must be paid within a period of not less than 150 days from receipt hereof by the defendant.
In default of such payment, the four parcels of land subject matter of the suit including its improvements
shall be sold to realize the mortgage debt and costs, in the manner and under the regulations that govern
sales of real estate under execution."

Petitioner appealed the decision of the trial court to the Court of Appeals, the appeal docketed as CA-G.R.
CV No. 39243 before the Sixth Division of the appellate court, which dismissed the case on June 29, 1993
on the ground of late payment of docket fees.

Dissatisfied with the dismissal of CA-G.R. No. 39243, petitioner came to this Court via a petition
for certiorari, docketed as G.R. No. 112044, which this court resolved to dismiss on December 13, 1993,
on the finding that the Court of Appeals erred not in dismissing the appeal of petitioner.

Petitioner’s motion for reconsideration of the dismissal of its petition in G.R. No. 112044 was denied with
finality in this Court’s Resolution promulgated on February 16, 1994. On March 10, 1994, leave to present
a second motion for reconsideration in G.R. No. 112044 or to submit the case for hearing by the Court en
banc was filed, but to no avail. The Court resolved to deny the same on May 11, 1994.

On March 14, 1994, the Resolution dated December 13, 1993, in G.R. No. 112044 became final and
executory and was entered in the Book of Entries of Judgment.

On July 4, 1994, private respondent filed with the trial court of origin a motion for execution of the
Decision promulgated on April 30, 1992 in Civil Case No. 89-5424. The said motion was granted on July
15, 1994.

Accordingly, on July 15, 1994 a writ of execution issued and, on July 20, 1994, a Notice of Levy and
Execution was issued by the Sheriff concerned, who issued on August 1, 1994 a Notice of Sheriff’s Sale for
the auction of subject properties on September 6, 1994.

On August 23, 1994, petitioner filed with the same trial court an Urgent Motion to Quash and Set Aside
Writ of Execution ascribing to it grave abuse of discretion in issuing the questioned Writ of Execution. To
support its motion, petitioner invited attention and argued that the records of the case were still with the
Court of Appeals and therefore, issuance of the writ of execution was premature since the 150-day period
for petitioner to pay the judgment obligation had not yet lapsed and petitioner had not yet defaulted in
the payment thereof since no demand for its payment was made by the private Respondent. In
petitioner’s own words, the dispute between the parties was "principally on the issue as to when the 150-
day period within which Huerta Alba may exercise its equity of redemption should be counted."cralaw
virtua1aw library

In its Order of September 2, 1994, the lower court denied petitioner’s urgent motion to quash the writ of
execution in Civil Case No. 89-5424, opining that subject judgment had become final and executory and
consequently, execution thereof was a matter of right and the issuance of the corresponding writ of
execution became its ministerial duty.

Challenging the said order granting execution, petitioner filed once more with the Court of Appeals
another petition for certiorari and prohibition with preliminary injunction, docketed as C.A.-G.R. SP No.
35086, predicated on the same grounds invoked for its Motion to Quash Writ of Execution.

On September 6, 1994, the scheduled auction sale of subject pieces of properties proceeded and the
private respondent was declared the highest bidder. Thus, private respondent was awarded subject
bidded pieces of property. The covering Certificate of Sale issued in its favor was registered with the
Registry of Deeds on October 21, 1994.chanrob1es virtua1 1aw 1ibrary

On September 7, 1994, petitioner presented an Ex-Parte Motion for Clarification asking the trial court to
"clarify" whether or not the twelve (12) month period of redemption for ordinary execution applied in
the case.

On September 26, 1994, the trial court ruled that the period of redemption of subject property should be
governed by the rule on the sale of judicially foreclosed property under Rule 68 of the Rules of Court.

Thereafter, petitioner then filed an Exception to the Order dated September 26, 1994 and Motion to Set
Aside Said Order, contending that the said Order materially altered the Decision dated April 30, 1992
"which declared that the satisfaction of the judgment shall be in the manner and under the regulation that
govern sale of real estate under execution."cralaw virtua1aw library

Meanwhile, in its Decision of September 30, 1994, the Court of Appeals resolved the issues raised by the
petitioner in C.A.-G.R. SP No. 35086, holding that the one hundred-fifty day period within which
petitioner may redeem subject properties should be computed from the date petitioner was notified of
the Entry of Judgment in G.R. No. 112044; and that the 150-day period within which petitioner may
exercise its equity of redemption expired on September 11, 1994.

Thus:

"Petitioner must have received the resolution of the Supreme Court dated February 16, 1994 denying
with finality its motion for reconsideration in G.R. No. 112044 before March 14, 1994, otherwise the
Supreme Court would not have made an entry of judgment on March 14, 1994. While, computing the 150-
day period. Petitioner may have until September 11, 1994. within which to pay the amounts covered by
the judgment, such period has already expired by this time, and therefore, this Court has no more reason
to pass upon the parties’ opposing contentions, the same having become moot and academic." 2
(Emphasis supplied).

Petitioner moved for reconsideration of the Decision of the Court of Appeals in C.A.-G.R. SP No. 35086. In
its Motion for Reconsideration dated October 18, 1994, petitioner theorized that the period of one
hundred fifty (150) days should not be reckoned with from Entry of Judgment but from receipt on or
before July 29, 1994 by the trial court of the records of Civil Case No. 89-5424 from the Court of Appeals.
So also, petitioner maintained that it may not be considered in default, even after the expiration of 150
days from July 29, 1994, because prior demand to pay was never made on it by the private Respondent.
According to petitioner, it was therefore, premature for the trial court to issue a writ of execution to
enforce the judgment.

The trial court deferred action on the Motion for Confirmation of the Certificate of Sale in view of the
pendency of petitioner’s Motion for Reconsideration in CA-G.R. SP No. 35086.

On December 23, 1994, the Court of Appeals denied petitioner’s motion for reconsideration in CA-G.R. SP
No. 35086. Absent any further action with respect to the denial of the subject motion for reconsideration,
private respondent presented a Second Motion for Confirmation of Certificate of Sale before the trial
court.

As regards the Decision rendered on September 30, 1994 by the Court of Appeals in CA G.R. SP No. 35086
it became final and executory on January 25, 1995.

On February 10, 1995, the lower court confirmed the sale of subject properties to the private Respondent.
The pertinent Order declared that all pending incidents relating to the Order dated September 26, 1994
had become moot and academic. Conformably, the Transfer Certificates of Title to subject pieces of
property were then issued to the private Respondent.

On February 27, 1995, petitioner filed with the Court of Appeals a Motion for Clarification seeking
"clarification" of the date of commencement of the one (1) year period for the redemption of the
properties in question.

In its Resolution dated March 20, 1995, the Court of Appeals merely noted such Motion for Clarification
since its Decision promulgated on September 30, 1994 had already become final and executory;
ratiocinating thus:chanrob1es virtua1 1aw 1ibrary

"We view the motion for clarification filed by petitioner, purportedly signed by its proprietor, but which
we believe was prepared by a lawyer who wishes to hide under the cloak of anonymity, as a veiled
attempt to buy time and to delay further the disposition of this case.

Our decision of September 30, 1994 never dealt on the right and period of redemption of petitioner, but
was merely circumscribed to the question of whether respondent judge could issue a writ of execution in
its Civil Case No. 89-5424 . . .

We further ruled that the one-hundred fifty day period within which petitioner may exercise its equity of
redemption should be counted, not from the receipt of respondent court of the records of Civil Case No.
89-5424 but from the date petitioner was notified of the entry of judgment made by the appellate court.

But we never made any pronouncement on the one-year right of redemption of petitioner because, in the
first place, the foreclosure in this case is judicial. and as such the mortgagor has only the equity not the
right of redemption . . . While it may be true that under Section 78 of R.A. 337 as amended, otherwise
known as the General Banking Act, a mortgagor of a bank, banking or credit institution, whether the
foreclosure was done judicially or extrajudicially, has a period of one year from the auction sale within
which to redeem the foreclosed property, the question of whether the Syndicated Management Group,.
Inc., is a bank or credit institution was never brought before us squarely, and it is indeed odd and strange
that petitioner would now sarcastically ask a rhetorical question in its motion for clarification." 3
(Emphasis supplied).

Indeed, if petitioner did really act in good faith, it would have ventilated before the Court of Appeals in
CA-G.R. No. 35086 its pretended right under Section 78 of R.A. No. 337 but it never did so.

At the earliest opportunity, when it filed its answer to the complaint for judicial foreclosure, petitioner
should have averred in its pleading that it was entitled to the beneficial provisions of Section 78 of R.A.
No. 337; but again, petitioner did not make any such allegation in its answer.

From the said Resolution, petitioner took no further step such that on March 31, 1995, the private
respondent filed a Motion for Issuance of Writ of Possession with the trial court.chanrob1es virtua1 1aw
1ibrary

During the hearing called on April 21, 1995, the counsel of record of petitioner entered appearance and
asked for time to interpose opposition to the Motion for Issuance of Writ of Possession.

On May 2, 1995, in opposition to private respondent’s Motion for Issuance of writ of Possession,
petitioner filed a "Motion to Compel Private Respondent to Accept Redemption." It was the first time
petitioner ever asserted the right to redeem subject properties under Section 78 of R.A. No. 337, the
General Banking Act; theorizing that the original mortgagee, being a credit institution, its assignment of
the mortgage credit to petitioner did not remove petitioner from the coverage of Section 78 of R.A. No.
337. Therefore, it should have the right to redeem subject properties within one year from registration of
the auction sale, theorized the petitioner which concluded that in view of its "right of redemption," the
issuance of the titles over subject parcels of land to the private respondent was irregular and premature.

In its Order of July 21, 1995, the trial court, presided over by Judge Napoleon Inoturan, denied private
respondent’s motion for a writ of possession, opining that Section 78 of the General Banking Act was
applicable and therefore, the petitioner had until October 21, 1995 to redeem the said parcels of land,
said Order ruled as follows:

"It is undisputed that Intercon is a credit institution from which defendant obtained a loan secured with a
real estate mortgage over four (4) parcels of land. Assuming that the mortgage debt had not been
assigned to plaintiff, there is then no question that defendant would have a right of redemption in case of
foreclosure, judicially or extrajudicially, pursuant to the above quoted Section 78 of RA 337, as amended.

ISSUE: Whether or not the defendant lost its right of redemption by virtue of the assignment of its
mortgage debt by Intercon to plaintiff, which is not a bank or credit institution.

RULING: NO. The right of redemption in this case is vested by law and is therefore an absolute privilege
which defendant may not lose even though plaintiff-assignee is not a bank or credit institution (Tolentino
versus Court of Appeals, 106 SCRA 513). Indeed, a contrary ruling will lead to a possible circumvention of
Section 78 because all that may be needed to deprive a defaulting mortgagor of his right of redemption is
to assign his mortgage debt from a bank or credit institution to one which is not. Protection of defaulting
mortgagors, which is the avowed policy behind the provision, would not be achieved if the ruling were
otherwise. Consequently, defendant still possesses its right of redemption which it may exercise up to
October 21, 1995 only, which is one year from the date of registration of the certificate of sale of subject
properties (GSIS versus Iloilo, 175 SCRA 19, citing Limpin versus IAC, 166 SCRA 87).chanrob1es virtua1
1aw 1ibrary

Since the period to exercise defendant’s right of redemption has not yet expired, the cancellation of
defendant’s transfer certificates of title and the issuance of new ones in lieu thereof in favor of plaintiff
are therefore illegal for being premature, thereby necessitating reconveyance (see Sec. 63 (a) PD 1529, as
amended).

WHEREFORE, the Court hereby rules as follows:chanrob1es virtual 1aw library

(1) The Motion for Issuance of Writ of Possession is hereby denied;

(2) Plaintiff is directed to accept the redemption on or before October 21, 1995 in an amount computed
according to the terms stated in the Writ of Execution dated July 15, 1994 plus all other related costs and
expenses mentioned under Section 78, RA 337, as amended; and

(3) The Register of Deeds of Valenzuela, Bulacan is directed (a) to reconvey to the defendant the
following titles of the four (4) parcels of land, namely TCT Nos. V-38878, V-38879, V-38880, and V-38881,
now in the name of plaintiff, and (b) to register the certificate of sale dated October 7, 1994 and the Order
confirming the sale dated February 10, 1995 by a brief memorandum thereof upon the transfer
certificates of title to be issued in the name of defendant, pursuant to Sec. 63 (a) PD 1529, as amended.

The Omnibus Motion dated June 5, 1995, together with the Opposition thereto, is now deemed resolved.

SO ORDERED." 4

Private respondent interposed a Motion for Reconsideration seeking the reversal of the Order but to no
avail. In its Order dated September 4, 1995, the trial court denied the same.

To attack and challenge the aforesaid order of July 21, 1995 and subsequent Order of September 4, 1995
of the trial court, the private respondent filed with this court a Petition for Certiorari, Prohibition and
Mandamus, docketed as G.R. No. 121893, but absent any special and cogent reason shown for
entertaining the same, the Court referred the petition to the Court of Appeals, for proper determination.

Docketed as G.R. No. 387457 on November 14, 1996, the Court of Appeals gave due course to the petition
and set aside the trial court’s Order dated July 21, 1995 and Order dated September 4, 1995.

In its Resolution of March 11, 1997, the Court of Appeals denied petitioner’s Motion for Reconsideration
of the Decision promulgated on November 14, 1996 in CA-G.R. No. 38747.chanrob1es virtua1 1aw
1ibrary

Undaunted, petitioner has come to this Court via the present petition, placing reliance on the assignment
of errors, that:chanrob1es virtual 1aw library
I

THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT THE COURT OF APPEALS
(TWELFTH DIVISION) IN CA G.R. SP NO. 35086 HAD RESOLVED "WITH FINALITY" THAT PETITIONER
HUERTA ALBA HAD NO RIGHT OF REDEMPTION BUT ONLY THE EQUITY OF REDEMPTION.
II

THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN IGNORING THAT PETITIONER HUERTA
ALBA POSSESSES THE ONE-YEAR RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 (THE
GENERAL BANKING ACT).
III

THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT PRIVATE RESPONDENT
SYNDICATED MANAGEMENT GROUP, INC. IS ENTITLED TO THE ISSUANCE OF A WRIT OF POSSESSION
OVER THE SUBJECT PROPERTY. 5

In its comment on the petition, private respondent countered that:jgc:chanrobles.com.ph

"A. THE HONORABLE COURT OF APPEALS CORRECTLY HELD THAT IT RESOLVED WITH FINALITY IN
C.A.-G.R. SP NO. 35086 THAT PETITIONER ONLY HAD THE RIGHT OF REDEMPTION IN RESPECT OF THE
SUBJECT PROPERTIES.

B. THE PETITION IS AN INSIDIOUS AND UNDERHANDED ATTEMPT TO EVADE THE FINALITY OF

VARIOUS DECISIONS, RESOLUTIONS AND ORDERS WHICH HELD THAT, PETITIONER ONLY POSSESSES
THE EQUITY OF REDEMPTION IN RESPECT OF THE SUBJECT PROPERTIES.
C. PETITIONER IS BARRED BY ESTOPPEL FROM BELATEDLY RAISING THE ISSUE OF ITS ALLEGED
‘RIGHT OF REDEMPTION.chanrob1es virtua1 1aw 1ibrary

D. IN HOLDING THAT THE PETITIONER HAD THE ‘RIGHT OF REDEMPTION’ OVER THE SUBJECT
PROPERTIES, THE TRIAL COURT MADE A MOCKERY OF THE ‘LAW OF THE CASE." ‘ 6

And by way of Reply, petitioner argued, that:chanrob1es virtual 1aw library

I.

THE COURT OF APPEALS IN CA G.R. SP NO. 35086 COULD NOT HAVE POSSIBLY RESOLVED THEREIN —
WHETHER WITH FINALITY OR OTHERWISE - THE ISSUE OF PETITIONER HUERTA ALBA’S RIGHT OF
REDEMPTION UNDER SECTION 78, R.A. NO. 337.
II.

THERE IS NO ESTOPPEL HERE. PETITIONER HUERTA ALBA INVOKED ITS RIGHT OF REDEMPTION
UNDER SECTION 78, R.A. NO. 337 IN TIMELY FASHION, i.e., AFTER CONFIRMATION BY THE COURT OF
THE FORECLOSURE SALE, AND WITHIN ONE (1) YEAR FROM THE DATE OF REGISTRATION OF THE
CERTIFICATE OF SALE.
III.

THE PRINCIPLE OF ‘THE LAW OF THE CASE’ HAS ABSOLUTELY NO BEARING HERE:chanrob1es virtual
1aw library

(1)

THE RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 IS IN FACT PREDICATED UPON THE
FINALITY AND CORRECTNESS OF THE DECISION IN CIVIL CASE NO. 89-5424.chanrob1es virtua1 1aw
1ibrary

(2)

THUS, THE RTC’S ORDER RECOGNIZING PETITIONER HUERTA ALBA’S RIGHT OF REDEMPTION UNDER
SECTION 78, R.A. NO. 37 DOES NOT IN ANY WAY HAVE THE EFFECT OF AMENDING, MODIFYING, OR
SETTING ASIDE THE DECISION IN CIVIL CASE NO. 89-5424.

The above arguments and counter-arguments advanced relate to the pivotal issue of whether or not the
petitioner has the one-year right of redemption of subject properties under Section 78 of Republic Act No.
337 otherwise known as the General Banking Act.

The petition is not visited by merit.

Petitioner’s assertion of right of redemption under Section 78 of Republic Act No. 337 is premised on the
submission that the Court of Appeals did not resolve such issue in CA-G.R. SP No. 35086; contending
thus:chanrob1es virtual 1aw library

(1)

BY NO STRETCH OF LOGIC CAN THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP NO. 35086 BE
INTERPRETED TO MEAN THE COURT OF APPEALS HAD RESOLVED ‘WITH FINALITY’ THE ISSUE OF
WHETHER PETITIONER HUERTA ALBA HAD THE RIGHT OF REDEMPTION WHEN ALL THAT THE
RESOLUTION DID WAS TO MERELY NOTE THE MOTION FOR CLARIFICATION.

(2)

THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP NO. 35086 IS NOT A FINAL JUDGMENT, ORDER OR
DECREE. IT IS NOT EVEN A JUDGMENT OR ORDER TO BEGIN WITH. IT ORDERS NOTHING; IT
ADJUDICATES NOTHING.
(3)

PETITIONER HUERTA ALBA’S RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 37 WAS NOT AN
ISSUE AND WAS NOT IN ISSUE, AND COULD NOT HAVE POSSIBLY BEEN AN ISSUE NOR IN ISSUE, IN CA
G.R. SP NO. 35086.

(4)

THE 30 SEPTEMBER 1994 DECISION IN CA G.R. SP NO. 35086 HAVING ALREADY BECOME FINAL EVEN
BEFORE THE FILING OF THE MOTION FOR CLARIFICATION, THE COURT OF APPEALS NO LONGER HAD
ANY JURISDICTION TO ACT OF THE MOTION OR ANY OTHER MATTER IN CA G.R. SP NO. 35086, EXCEPT
TO MERELY NOTE THE MOTION.chanrob1es virtua1 1aw 1ibrary
II.

IN STARK CONTRAST, THE ISSUE OF PETITIONER HUERTA ALBA’S RIGHT OF REDEMPTION UNDER
SECTION 78, R.A. NO. 337 WAS DIRECTLY RAISED AND JOINED BY THE PARTIES, AND THE SAME DULY
RESOLVED BY THE TRIAL COURT.
III.

THE RIGHT OF REDEMPTION UNDER SECTION 78 OF R.A. NO. 337 IS MANDATORY AND
AUTOMATICALLY EXISTS BY LAW. THE COURTS ARE DUTY-BOUND TO RECOGNIZE SUCH RIGHT.
IV.

EQUITABLE CONSIDERATIONS WEIGH HEAVILY IN FAVOR OF PETITIONER HUERTA ALBA, NOT THE
LEAST OF WHICH IS THE WELL-SETTLED POLICY OF THE LAW TO AID RATHER THAN DEFEAT THE
RIGHT OF REDEMPTION.
V.

THEREFORE THE 21 JULY 1995 AND 04 SEPTEMBER 1995 ORDERS OF THE TRIAL COURT ARE VALID
AND PROPER IN ACCORDANCE WITH THE MANDATE OF THE LAW.

From the various decisions, resolutions and orders a quo it can be gleaned that what petitioner has been
adjudged to have was only the equity of redemption over subject properties. On the distinction between
the equity of redemption and right of redemption, the case of Gregorio Y. Limpin v. Intermediate
Appellate Court, 7 comes to the fore. Held the Court in the said case:jgc:chanrobles.com.ph

"The equity of redemption is, to be sure, different from and should not be confused with the right of
redemption.

The right of redemption in relation to a mortgage – understood in the sense of a prerogative to re-acquire
mortgaged property after registration of the foreclosure sale – exists only in the case of the extrajudicial
foreclosure of the mortgage. No such right is recognized in a judicial foreclosure except only where the
mortgagee is the Philippine National Bank or a bank or banking institution.

Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of redemption
within one (1) year from the registration of the sheriff’s certificate of foreclosure sale.

Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The law
declares that a judicial foreclosure sale ‘when confirmed be an order of the court. . . . shall operate to
divest the rights of all the parties to the action and to vest their rights in the purchaser, subject to such
rights of redemption as may be allowed by law.’ Such rights exceptionally ‘allowed by law’ (i.e., even after
confirmation by an order of the court) are those granted by the charter of the Philippine National Bank
(Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). These laws confer on the mortgagor,
his successors in interest or any judgment creditor of the mortgagor, the right to redeem the property
sold on foreclosure — after confirmation by the court of the foreclosure sale — which right may be
exercised within a period of one (1) year, counted from the date of registration of the certificate of sale in
the Registry of Property.

But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the
mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale, ‘when
confirmed by an order of the court. . . shall operate to divest the rights of all the parties to the action and
to vest their rights in the purchaser.’ There then exists only what is known as the equity of redemption.
This is simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of
the property by paying the secured debt within the 90-day period after the judgment becomes final, in
accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation.

Section 2, Rule 68 provides that —

‘. . If upon the trial . . the court 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 for the sum so found due and order the same to be paid into court within a period
of not less than ninety (90) days from the date of the service of such order, and that in default of such
payment the property be sold to realize the mortgage debt and costs.’

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." 8 (Emphasis supplied)chanrob1es virtua1 1aw 1ibrary

Petitioner failed to seasonably invoke its purported right under Section 78 of R.A. No. 337.

Petitioner avers in its petition that the Intercom, predecessor in interest of the private respondent, is a
credit institution, such that Section 78 of Republic Act No. 337 should apply in this case. Stated
differently, it is the submission of petitioner that it should be allowed to redeem subject properties within
one year from the date of sale as a result of the foreclosure of the mortgage constituted thereon.

The pivot of inquiry here therefore, is whether the petitioner seasonably invoked its asserted right under
Section 78 of R.A. No. 337 to redeem subject properties.

Petitioner theorizes that it invoked its "right" in "timely fashion", that is, after confirmation by the court
of the foreclosure sale, and within one (1) year from the date of registration of the certificate of sale.
Indeed, the facts show that it was only on May 2, 1995 when, in opposition to the Motion for Issuance of
Writ of Possession, did petitioner file a Motion to Compel Private Respondent to Accept Redemption,
invoking for the very first time its alleged right to redeem subject properties under to Section 78 of R.A.
No. 337.

In light of the aforestated facts, it was too late in the day for petitioner to invoke a right to redeem under
Section 78 of R.A. No. 337. Petitioner failed to assert a right to redeem in several crucial stages of the
proceedings.

For instance, on September 7, 1994, when it filed with the trial court an Ex-part Motion for Clarification,
petitioner failed to allege and prove that private respondent’s predecessor in interest was a credit
institution and therefore, Section 78 of R.A. No. 337 was applicable. Petitioner merely asked the trial
court to clarify whether the sale of subject properties was execution sale or judicial foreclosure sale.

So also, when it presented before the trial court an Exception to the Order and Motion to Set Aside Said
Order dated October 13, 1994, petitioner again was silent on its alleged right under Section 78 of R.A. No.
337, even as it failed to show that private respondent’s predecessor in interest is a credit institution.
Petitioner just argued that the aforementioned Order materially altered the trial court’s Decision of April
30, 1992.

Then, too, nothing was heard from petitioner on its alleged right under Section 78 of R.A. No. 337 and of
the predecessor in interest of private respondent as a credit institution, when the trial court came out
with an order on February 10, 1995, confirming the sale of subject properties in favor of private
respondent and declaring that all pending incidents with respect to the Order dated September 26, 1994
had become moot and academic.
Similarly, when petitioner filed on February 27, 1995 a Motion for Clarification with the Court of Appeals,
seeking "clarification" of the date of commencement of the one (1) year redemption period for the subject
properties, petitioner never intimated any alleged right under Section 78 of R.A. No. 337 nor did it invite
attention to its present stance that private respondent’s predecessor-in-interest was a credit institution.
Consequently, in its Resolution dated March 20, 1995, the Court of Appeals ruled on the said motion
thus:jgc:chanrobles.com.ph

"But we never made any pronouncement on the one-year right of redemption of petitioner because, in
the first place, the foreclosure in this case is judicial, and as such. the mortgagor has only the equity. not
the right of redemption . . . While it may be true that under Section 78 of R.A. 337 as amended, otherwise
known as the General Banking Act, a mortgagor of a bank, banking or credit institution, whether the
foreclosure was done judicially or extrajudicially, has a period of one year from the auction sale within
which to redeem the foreclosed property, the question of whether the Syndicated Management Group.
Inc., is bank or credit institution was never brought before us squarely, and it is indeed odd and strange
that petitioner would now sarcastically ask a rhetorical question in its motion for clarification." 9
(Emphasis supplied).chanrob1es virtua1 1aw 1ibrary

If petitioner were really acting in good faith, it would have ventilated before the Court of Appeals in CA-
G.R. No. 35086 its alleged right under Section 78 of R.A. No. 337; but petitioner never did do so.

Indeed, at the earliest opportunity, when it submitted its answer to the complaint for judicial foreclosure,
petitioner should have alleged that it was entitled to the beneficial provisions of Section 78 of R.A. No.
337 but again, it did not make any allegation in its answer regarding any right thereunder. It bears
stressing that the applicability of Section 78 of R.A. No. 337 hinges on the factual question of whether or
not private respondent’s predecessor in interest was a credit institution. As was held in Limpin, a judicial
foreclosure sale, "when confirmed by an order of the court, . . shall operate to divest the rights of all the
parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may
be allowed by law’," 10 which confer on the mortgagor, his successors in interest or any judgment
creditor of the mortgagor, the right to redeem the property sold on foreclosure after confirmation by the
court of the judicial foreclosure sale. Thus, the claim that petitioner is entitled to the beneficial provisions
of Section 78 of R.A. No. 337 —since private respondent’s predecessor-in-interest is a credit institution
— is in the nature of a compulsory counterclaim which should have been averred in petitioner’s answer
to the compliant for judicial foreclosure.

". . . A counterclaim is, most broadly, a cause of action existing in favor of the defendant against the
plaintiff. More narrowly, it is a claim which. if established, will defeat or in some way qualify a judgment
or relief to which plaintiff is otherwise entitled It is sometimes defined as any cause of action arising in
contract available against any action also arising in contract and existing at the time of the
commencement of such an action. It is frequently defined by the codes as a cause of action arising out of
the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim, or
connected with the subject of the action." 11 (Emphasis supplied)

"The counterclaim is in itself a distinct and independent cause of action, so that when properly stated as
such, the defendant becomes, in respect to the matters stated by him, an actor, and there are two
simultaneous actions pending between the same parties, wherein each is at the same time both a plaintiff
and a defendant. Counterclaim is an offensive as well as a defensive plea and is not necessarily confined
to the justice of the plaintiff’s claim. It represents the right of the defendant to have the claims of the
parties counterbalanced in whole or in part, and judgment to be entered in excess, if any. A counterclaim
stands on the same footing, and is to be tested be the same rules, as if it were an independent action." 12
(Emphasis supplied)chanrob1es virtua1 1aw 1ibrary

The very purpose of a counterclaim would have been served had petitioner alleged in its answer its
purported right under Section 78 of R.A. No. 337:jgc:chanrobles.com.ph

". . . The rules of counterclaim are designed to enable the disposition of a whole controversy of interested
parties’ conflicting claims, at one time and in one action, provided all parties’ be brought before the court
and the matter decided without prejudicing the rights of any party." 13

The failure of petitioner to seasonably assert its alleged right under Section 78 of R.A. No. 337 precludes
it from so doing at this late stage case. Estoppel may be successfully invoked if the party fails to raise the
question in the early stages of the proceedings. 14 Thus, "a party to a case who failed to invoked his claim
in the main case, while having the opportunity to do so, will be precluded, subsequently, from invoking
his claim, even if it were true, after the decision has become final, otherwise the judgment may be
reduced to a mockery and the administration of justice may be placed in disrepute." 15

All things viewed in proper perspective, it is decisively clear that the trial court erred in still allowing
petitioner to introduce evidence that private respondent’s predecessor-in-interest was a credit
institution, and to thereafter rule that the petitioner was entitled to avail of the provisions of Section 78
of R.A. No. 337. In effect, the trial court permitted the petitioner to accomplish what the latter failed to do
before the Court of Appeals, that is, to invoke its alleged right under Section 78 of R.A. No. 337 although
the Court of Appeals in CA-G.R. no. 35086 already found that ‘the question of whether the Syndicated
Management Council Group, Inc. is a bank or credit institution was never brought before (the Court of
Appeals) squarely." The said pronouncement by the Court of Appeals unerringly signified that petitioner
did not make a timely assertion of any right under Section 78 of R.A. No. 337 in all the stages of the
proceedings below.

Verily, the petitioner has only itself to blame for not alleging at the outset that the predecessor-in-interest
of the private respondent is a credit institution. Thus, when the trial court, and the Court of Appeals
repeatedly passed upon the issue of whether or not petitioner had the right of redemption or equity of
redemption over subject properties in the decisions, resolutions and orders, particularly in Civil Case no.
89-5424, CA-G.R. CV No. 39243, CA-G.R. SP No. 35086, and CA-G.R. SP No. 38747, it was unmistakable that
the petitioner was adjudged to just have the equity of redemption without any qualification whatsoever,
that is, without any right of redemption allowed by law. chanrob1es virtua1 1aw library

The "law of case" holds that petitioner has the equity of redemption without any qualification.

There is, therefore, merit in private respondent’s contention that to allow petitioner to belatedly invoke
its right under Section 78 of R.A. No. 337 will disturb the "law of the case." However, private respondent’s
statement of what constitutes the "law of the case" is not entirely accurate. The "law of the case" is not
simply that the defendant possesses an equity of redemption. As the Court has stated, the "law of the
case" holds that petitioner has the equity of the redemption without any qualification whatsoever, that is,
without the right of redemption afforded by Section 78 of R.A. No. 337. Whether or not the "law of the
case" is erroneous is immaterial, it still remains the "law of the case." A contrary rule will contradict both
the letter and spirit of the rulings of the Court of Appeals in CA-G.R. SP No. 35086, CA-G.R. CV No. 39243,
and CA-G.R. 38747, which clearly saw through the repeated attempts of petitioner to forestall so simple a
matter as making the security given for a just debt to answer for its payment.

Hence, in conformity with the ruling in Limpin, the sale of the subject properties, as confirmed by the
Order dated February 10, 1995 of the trial court in Civil Case No. 89-5424 operated to divest the rights of
all the parties to the action and to vest their rights in private Respondent. There then existed only what is
known as the equity of redemption, which is simply the right of the petitioner to extinguish the mortgage
and retain ownership of the property by paying the secured debt within the 90-day period after the
judgment became final. There being an explicit finding on the part of the Court of Appeals in its Decision
of September 30, 1994 in CA-G.R. No. 35086 — that the herein petitioner failed to exercise its equity of
redemption within the prescribed period, redemption can no longer be effected. The confirmation of the
sale and the issuance of the transfer certificates of title covering the subject properties to private
respondent was then, in order. The trial court therefore, has the ministerial duty to place private
respondent in the possession of subject properties.chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the petition is DENIED, and the assailed decision of the Court of Appeals, declaring null and
void the Order dated 21 July 1995 and Order dated 4 September 1997 of the Regional Trial Court of
Makati City in Civil Case No. 89-5424, AFFIRMED. No pronouncement as to costs.

SO ORDERED.