BPI Family Savings Bank Inc. v.

Margarita Cascolluela
G.R. No. 167724

Facts:
1. Coscolluela Sps. each obtained an agricultural sugar crop loan from FEBTC, now BPI
totalling 13.5 million, evidenced by 67 promissory notes.
2. The Sps. executed a REM in favor of BPI over their parcel of land as security of the loans
on credit accommodation and those that may be obtained, fixed at 7 million, and those
that may be extended by BPI.
a. Failure to pay the mortgage obligation or any portion, the entire principal,
interest, penalties, and other charges shall become immediately due.
b. BPI is also granted the right to extrajudicially foreclose and take actual possess
3. Loan matured, sps. failed to settle their outstanding balance, hence BPI filed for
extrajudicial foreclosure of the mortgaged property only for 4.6 million
4. While the foreclosure proceedings were pending, BPI filed another complaint for
collection of the principal amount of 8.7 million
5. Sps. filed a demurrer claiming that BPI is barred from instituting the personal action for
collection after the extrajudicial foreclosure.
6. RTC denied the demurrer, however, it was granted on appeal, hence this appeal.
Issue: W/N BPI can institute an extrajudicial foreclose and action for collection
simultaneously? (NO)

Held:
The action of the creditor is anchored on one and the same cause: the nonpayment by the debtor
of the debt to the creditor-mortgagee. Though the debt may be covered by a promissory note or
several promissory notes and is covered by a real estate mortgage, the latter is subsidiary to the
former and both refer to one and the same obligation.
A mortgage creditor may institute two alternative remedies against the mortgage debtor, either a
personal action for the collection of debt, or a real action to foreclose the mortgage, but not both.
Each remedy is complete by itself.
“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 v. Enriques, 24 Phil. 584) and
obnoxious to law and equity (Osorio v. San Agustin, 25 Phil. 404), but also in subjecting the
defendant to the vexation of being sued in the place of his residence or of the residence of the
plaintiff, and then again in the place where the property lies.”
In the present case, petitioner opted to file a petition for extrajudicial foreclosure of the real
estate mortgage but only for the principal amount of P4,687,006.08 or in the total amount of
P7,755,733.64 covering only 31 of the 67 promissory notes. By resorting to the extrajudicial
foreclosure of the real estate mortgage, petitioner thereby waived its personal action to recover
the amount covered not only by said promissory notes but also of the rest of the promissory
notes.
By limiting the account for which the real estate mortgage was being foreclosed to the principal
amount of P4,687,006.68, exclusive of interest and penalties, petitioner thereby waived recovery
of the rest of respondent’s agricultural loan account.
G.R. 130722
Sps. Litonjua v. L&R Corporation
Facts:
1. Sps. Litonjua obtained loans from L&R Corporation totalling 400,000 which were
secured by REM covering 2 parcels of land.
2. Unbeknownst to L&R Corporation, Sps. Litonjua subsequently sold the mortgaged
properties to PHWAS for 430,000.
3. Sps. Litonjua defaulted from payment of the loans.
4. L&R Corporation initiated extrajudicial foreclosure proceedings, properties were sold in
a public auction wherein L&R Corp. as highest bidder. Upon registering the with
Register of Deeds, L&R Corp. found of the subsequent sale. To PHWAS.
5. PHWAS sought to redeem the properties from L&R Corp. which the latter refused
arguing that Sps. Litonjua violated the clause which required prior written consent of
L&R was necessary for subsequent encumbrances or alienation.
6. Register of Deeds refused the Certificate of Redemption offered by Sps.
Litonjua/PHWAS and accepted the Affidavit of Consolidation of Ownership by L&R
Corp issuing new TCTs in its favor.
7. Sps. Litonjua then filed a complaint for Quieting of Title and Annulment of Title, which
RTC dismissed. CA reversed, but in MR was set aside. Hence this appeal.
Issue: W/N the sale between Sps. Litonjua and PHWAS was valid? (YES)
W/N the redemption of PHWAS was valid? (YES)
Held:
Stipulation prohibiting the mortgagor from selling his mortgaged property without the consent of
the mortgagee violates Article 2130 of the New Civil Code; The sale made by the spouses
Litonjua to PWHAS, notwithstanding the lack of prior written consent of L & R Corporation, is
valid.
Coming now to the issue of whether the redemption offered by PWHAS on account of the
spouses Litonjua is valid, we rule in the affirmative. The sale by the spouses Litonjua of the
mortgaged properties to PWHAS is valid. Therefore, PWHAS stepped into the shoes of the
spouses Litonjua on account of such sale and was in effect, their successor-in-interest. As such, it
had the right to redeem the property foreclosed by L & R Corporation. x x x The right of
PWHAS to redeem the subject properties finds support in Section 6 of Act 3135 itself which
gives not only the mortgagor-debtor the right to redeem, but also his successors-in-interest. As
vendee of the subject properties, PWHAS qualifies as such a successor-in-interest of the spouses
Litonjua.
In the case of Philippine Industrial Co. v. El Hogar Filipino and Vallejo, a stipulation
prohibiting the mortgagor from entering into second or subsequent mortgages was held
valid.
Sps. Baysa v. Sps. Plantilla
G.R. No. 159271

Facts:
1. Sps. Baysa executed a REM in favor of Sps. Plantilla for an indebtedness totalling 2.3
million.
2. Failing to settle their obligations after extensions and recomputations, because of
increasing interest, Sps. Plantilla initiated the extrajudicial foreclosure of the REM.
3. Sps. Baysa contest the validity of the extrajudicial foreclosure and the public auction
contending that there had been no power or authority to sell attached to the contract the
REM as required by Sec. 1 of Act 3135, which the RTC and CA denied.
Issue:
W/N the extrajudicial foreclosure was valid? (NO)
2.) Whether or not the Court of Appeals erred when it concluded that consenting to the
extrajudicial foreclosure of the property, by necessary implication, carries with it the grant of
power to sell the property at public action;
Held:
On the first and second issues, we hold the CA in error for affirming the RTC's declaration of the
extra judicial foreclosure as valid. In the extrajudicial foreclosure of property subject of a real
estate mortgage, Act No. 3135 (An Act to Regulate the Sale of Property Under Special Powers
Inserted in or Annexed to Real Estate Mortgages) is quite explicit and definite about the special
power to sell the property being required to be either inserted in or attached to the deed of
mortgage. Section 1 of Act No. 3135 provides:
Section 1. When a sale is made under a special power inserted in or attached to any real
estate mortgage hereafter made as security for the payment of money or the fulfillment of
any other obligation, the provisions of the following section shall govern as to the manner
in which the sale and redemption shall be effected, whether or not provision for the same
is made in the power.
Accordingly, to enable the extra judicial foreclosure of the REM of the petitioners, the special
power to sell should have been either inserted in the REM itself or embodied in a separate
instrument attached to the REM. But it is not disputed that no special power to sell was either
inserted in the REM or attached to the REM. Hence, the respondent spouses as the foreclosing
mortgagees could not initiate the extrajudicial foreclosure, but must resort to judicial foreclosure
pursuant to the procedure set forth in Rule 68 of the Rules of Court. The omission of the special
power to sell the property subject of the mortgage was fatal to the validity and efficacy of the
extrajudicial foreclosure, and warranted the invalidation of the entire proceedings conducted by
the sheriff.
2nd issue:
Based on the text of paragraph 13, supra, the petitioners evidently agreed only to the holding of
the extrajudicial foreclosure should they default in their obligations. Their agreement was a mere
expression of their amenability to extrajudicial foreclosure as the means of foreclosing the
mortgage, and did not constitute the special power or authority to sell the mortgaged property to
enable the mortgagees to recover the unpaid obligations. What was necessary was the special
power or authority to sell - whether inserted in the REM itself, or annexed thereto - that
authorized the respondent spouses to sell in the public auction their mortgaged property.
The requirement for the special power or authority to sell finds support in the civil law. To begin
with, because the sale of the property by virtue of the extrajudicial foreclosure would be made
through the sheriff by the respondent spouses as the mortgagees acting as the agents of the
petitioners as the mortgagors-owners, there must be a written authority from the latter in favor of
the former as their agents; otherwise, the sale would be void.15 And, secondly, considering that,
pursuant to Article 1878, (5), of the Civil Code, a special power of attorney was necessary for
entering "into any contract by which the ownership of an immovable is transmitted or acquired
either gratuitously or for a valuable consideration," the written authority must be a special power
of attorney to sell. 16 Contrary to the CA's opinion, therefore, the power or authority to sell by
virtue of the extrajudicial foreclosure of the REM could not be necessarily implied from the text
of paragraph 13, supra, expressing the petitioners' agreement to the extrajudicial foreclosure.
Sps. Pen v. Sps. Julian
G.R. No. 160408
Facts:
1. Sps. Julian obtained loans from Sps. Pen accumulating to 120,000 which were secured by
REM over titles of Sps. Julian.
2. Sps. Julian failed to pay when the loans became due and demandable. Sps. Pen attempted
to institute foreclosure proceedings but Sps. Julian asked them not to foreclose the
property to save face and litigation costs.
3. They offered the mortgaged property as payment in kind. After inspection they valued the
property at 70,000, executed a deed of sale and a reconstituted title was issued on behalf
of Sps. Pen.
4. Sps. Julian offered to repurchase the property but Sps. Pen valued the property at
436,115. After disagreements on the price for repurchase
5. After discovering several declarations of real property and a deed of sale. Sps. Julian filed
a suit for cancellation of sale, title, and recovery of possession. RTC and CA held in
favor of Sps. Julian hence the present petition.
Issue:
W/N the subsequent sale between Sps. Pen and Julian were valid? (NO)
Held:
Article 2088 of the Civil Code prohibits the creditor from appropriating the things given by way
of pledge or mortgage, or from disposing of them; any stipulation to the contrary is null and
void. The elements for pactum commissorium to exist are as follows, to wit:
(a) that there should be a pledge or mortgage wherein property is pledged or mortgaged by way
of security for the payment of the principal obligation; and
(b) that there should be a stipulation for an automatic appropriation by the creditor of the thing
pledged or mortgaged in the event of non-payment of the principal obligation within the
stipulated period.
The first element was present considering that the property of the respondents was mortgaged by
Linda in favor of Adelaida as security for the farmer's indebtedness. As to the second, the
authorization for Adelaida to appropriate the property subject of the mortgage upon Linda's
default was implied from Linda's having signed the blank deed of sale simultaneously with her
signing of the real estate mortgage.
The haste with which the transfer of property was made upon the default by Linda on her
obligation, and the eventual transfer of the property in a manner not in the form of a valid dacion
en pago ultimately confirmed the nature of the transaction as a pactum commissorium.
It is notable that in reaching its conclusion that Linda's deed of sale had been executed
simultaneously with the real estate mortgage, the CA first compared the unfilled deed of sale
presented by Linda with the notarized deed of sale adduced by Adelaida. The CA justly deduced
that the completion and execution of the deed of sale had been conditioned on the non-payment
of the debt by Linda, and reasonably pronounced that such circumstances rendered the
transaction pactum commissorium. The Court should not disturb or undo the CA's conclusion in
the absence of the clear showing of abuse, arbitrariness or capriciousness on the part of the CA.
The petitioners have theorized that their transaction with the respondents was a valid dacion en
pago by highlighting that it was Linda who had offered to sell her property upon her default.
Their theory cannot stand scrutiny. Dacion en pago is in the nature of a sale because property is
alienated in favor of the creditor in satisfaction of a debt in money.11 For a valid dacion en pago
to transpire, however, the attendance of the following elements must be established, namely:
(a) the existence of a money obligation;
(b) the alienation to the creditor of a property by the debtor with the consent of the former; and
(c) the satisfaction of the money obligation of the debtor.
To have a valid dacion en pago, therefore, the alienation of the property must fully extinguish the
debt. Yet, the debt of the respondents subsisted despite the transfer of the property in favor of
Adelaida.