ADDITIONAL CASES

FORECLOSURE

HEIRS OF JOSEFINA GABRIEL, VS. SECUNDINA CEBRERO, CELSO LAVIÑA, AND

MANUEL C. CHUA, G.R. NO. 222737. NOVEMBER 12, 2018, PERALTA, J.

FACTS:
Segundina Cebrero, through her attorney-in-fact, executed a real estate mortgage over the subject
property located in Sampaloc, Manila with an area of 2,281 sq. m. registered under the name of
Cebrero's late husband Virgilio Cebrero as security for the payment of the amount of
P8,000,000.00, pursuant to an amicable settlement dated January 11, 1991 entered into by the
parties in the case of annulment of revocation of donation. In the said settlement, Josefina
Gabriel recognized Cebrero's absolute ownership of the subject property and relinquished all her
claims over the property in consideration of the payment of the said P8,000,000.00.

Upon Cebrero's failure to pay the amount within the period of extension, Gabriel filed an action
for foreclosure of the real estate mortgage. In a Decision, the RTC of Manila, ruled in Gabriel's
favor and ordered Cebrero to pay the P8,000,000.00 and interest, or the subject property shall be
sold at public auction in default of payment.

The sheriff initiated the necessary proceedings for the public auction sale when no appeal was
filed and the decision became final. Gabriel, being the sole bidder, purchased Cebrero's
undivided share of one-half (1/2) conjugal share, plus her inheritance consisting of one-ninth
(1/9) of the subject property in the amount of P13,690,574.00. The sheriff issued the Final Deed
of Sale when Cebrero failed to redeem the property.

However, Gabriel had not registered the Final Deed of Sale since she disputed the Bureau of
Internal Revenue's estate tax assessment on the subject property considering that she claimed
only a portion thereof. It was also during this time that she discovered the registration of a Deed
of Absolute Sale executed by respondent Celso Laviña, Cebrero's attorney-in-fact, purportedly
conveying the entire property in favor of Progressive Trade & Services Enterprises for and in
consideration of P27,000,000.00.

Eduardo Cañiza, allegedly in behalf of Gabriel, instituted a Complaint for declaration of nullity
of sale and of the Transfer Certificate of Title of the subject property registered under
Progressive, a single proprietorship represented by its President and Chairman, respondent
Manuel C. Chua.

In their Answer, respondents alleged that as a mere creditor, Gabriel cannot annul the sale of the
subject property to Progressive, especially when there was a judicial consignment of the payment
of lien.

In the Decision, the RTC ruled in favor of Gabriel. It held that Chua cannot be considered the
true and lawful owner of the subject property as he was not a purchaser in good faith. At the time
of sale on September 27, 1994, the mortgage pertaining to Gabriel remained annotated on the
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TCT registered in the name of Cebrero. Thus, Chua had notice of Gabriel's existing interest over
a portion of the property, which should have prompted him to investigate the status of the
mortgage.

On appeal, the CA reversed and set aside the Decision of the RTC. As the awardee of the
foreclosure proceedings, Gabriel is the real party-in-interest in the case. Since the trial court
never acquired jurisdiction over the complaint, all proceedings subsequent thereto are considered
null and void, and can never attain finality.

Upon denial of their Motion for Reconsideration, petitioners are now before this Court.

ISSUE:
Whether or not Chua cannot be considered the true and lawful owner of the subject property as
he was not a purchaser in good faith.

RULING:
The real estate mortgage over a portion of the property was annotated on the transfer certificate
of titles. A mortgage is a real right, which follows the property, even after subsequent transfers
by the mortgagor. "A registered mortgage lien is considered inseparable from the property
inasmuch as it is a right in rem." The sale or transfer of the mortgaged property cannot affect or
release the mortgage; thus, the purchaser or transferee is necessarily bound to acknowledge and
respect the encumbrance.

The implication in buying the property, with notice that it was mortgaged, was that Progressive
necessarily undertook to allow the subject property to be sold upon failure of Gabriel to obtain
payment from Cebrero once the indebtedness matured. Thus, it cannot invoke being a buyer in
good faith to exclude the property from being claimed by virtue of foreclosure of the mortgage
over the said property. This, however, does not mean that the Court rules in favor of the
petitioners. Considering that the complaint was filed by Cañiza, who has failed to prove that he
was validly authorized to do so, the complaint does not produce any legal effect. The RTC never
validly acquired jurisdiction over the case. Thus, the instant petition must be dismissed.

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 ISABEL OCAMPO, VS. IGNACIO DOMALANTA, G.R. No. L-21011. August 30, 1967,
SANCHEZ, J.
FACTS:
A contested case to foreclose a real estate and chattel mortgage resulted in judgment ordering
appellant Isabel Ocampo to pay appellee Ignacio Domalanta P2,000.00, with 1% interest per
month from December 5, 1958 until full payment, and P500.00 as attorney’s fees, and directing
that after failure to pay the above amounts in ninety days, the properties mortgaged be sold at
public auction, subject to a first mortgage in favor of the Philippine National Bank in reference
to appellant's land (located in Tanza, Cavite) mortgaged.

The judgment debt remained unpaid. The court, on Domalanta's motion, issued a
writ of execution. Pursuant thereto, appellee sheriff sold at public auction the mortgaged land of
32,558 square meters to the highest bidder, appellee Ignacio Domalanta, for
P3,537.00. Domalanta moved to confirm the sale. Over appellant's objection, the court
confirmed.

After the order had become final, appellant started the present suit to annul the sheriff's
sale. Grounds: Appellant mortgagor was not properly notified of the foreclosure sale; and the
price for which the property was sold was "very much lower than the actual market value" and
shocking to the conscience, and thus invalid. Appellee Domalanta moved to dismiss the
complaint below. His reason, inter alia: res judicata. The court dismissed the case "with
prejudice and with costs against the plaintiff." A move to reconsider was thwarted below in the
order of November 21, 1962. Hence, this appeal.

ISSUE:
Whether or not a court order confirming a sheriff's sale upon a judgment in a real estate
foreclosure case a bar to a subsequent action by the judgment debtor to annul the sale upon
grounds which were raised in said foreclosure proceedings.

RULING:
The present action is barred by the conclusiveness of judgment in the anterior suit. This case
must be dismissed.

Except for the Provincial Sheriff who is a nominal defendant here, the parties in the two suits
below are the same: Isabel Ocampo and Ignacio Domalanta. Subject matter is the same
land. The judgment and order of confirmation of that sheriff's sale in the first suit have both
become final.

The first suit is a judicial foreclosure of mortgage; the second, annulment of the foreclosure sale
conducted in the first suit. A proceeding for judicial foreclosure of mortgage is an
action quasi in rem. It is based on a personal claim sought to be enforced against a specific
property of a person named party defendant. And, its purpose is to have the property seized and
sold by court order to the end that the proceeds thereof be applied to the payment of plaintiff's
claim.

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Here, the first suit was an action quasi in rem. A judgment therein "is conclusive only between
the parties." Directly applicable is paragraph (b), Section 49, Rule 39 of the old Rules of Court,
which provides that in other cases the judgment or order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto, conclusive
between the parties and their successors in interest by title subsequent to the commencement of
the action or special proceeding, litigating for the same thing and under the same title and in the
same capacity. By that provision, the confirmation order in the foreclosure case is, "with respect
to the matter directly adjudged or as to any other matter that could have been raised in relation
thereto, conclusive between the parties" and their privies.

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 RURAL BANK OF OROQUIETA (MIS. OCC.), INC., VS. COURT OF APPEALS, G.R.
No. 53466. November 10, 1980, AQUINO, J.

FACTS:
In Civil Case "Rural Bank of Oroquieta (Mis. Occ.), Inc. vs. Procopio Serrano and Maria
Cueme", a case of foreclosure of mortgage, Judge Melecio A. Genato rendered a decision,
ordering the defendants to pay plaintiff bank within a period of "not less than ninety (90) days
nor more than one hundred (100) days from" the receipt of the decision the loan of P1,500 with
twelve percent interest per annum from January 16, 1972 plus ten percent of the principal as
attorney's fees.

In case of nonpayment within that period, the trial court, in order to satisfy that obligation,
ordered the sheriff to sell at public auction the mortgaged lot, a parcel of coconut land with an
area of 2.8 hectares. That judgment became final and executory. The Serrano spouses did not
pay their mortgage debt. A writ of execution was issued. The sheriff levied upon the mortgaged
lot and advertised its sale at public auction to satisfy the mortgage obligation which, together
with the sheriff's fees and costs, amounted to P2,223.60.

At the auction sale held, the mortgaged lot was sold to the bank as the only bidder. The sheriff
issued a certificate of sale. There being no redemption within the one-year period, the sheriff
issued a final certificate of sale.

Judge Genato issued an order directing the issuance of a writ of possession to the bank. The
mortgagors or judgment debtors filed a motion for the reconsideration of that order on the
grounds that, because there was no judicial confirmation of the auction sale, they still have an
equity of redemption and could still pay the mortgage debt (alleged to be usurious) and that the
auction sale was fraudulent and irregular. They averred that the bank rejected their offer to
redeem the mortgaged lot and that the issuance of the writ of possession was premature.

Judge Genato granted the motion for reconsideration in his order. The bank filed a manifestation
and motion wherein it revealed that the land had already been sold to Eufemia Mejos and,
therefore, its acceptance of the redemption price amounting to P2,820.60 would not produce any
legal effect.

The trial court denied the motion. The bank filed a notice of appeal. The Serrano spouses filed a
motion to dismiss the appeal on the ground that they had already deposited with the clerk of
court the redemption price.

The trial court in its order dismissed the appeal on the ground that the order sought to be
appealed is interlocutory or not appealable. The bank assailed that order in the Court of Appeals
by means of certiorari which was really a mandamus action to compel the trial court to give due
course to its appeal.

The Court of Appeals dismissed the petition. It sustained the trial court's position that the order

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sought to be appealed is interlocutory because the trial court had not yet confirmed the
foreclosure sale. The bank appealed to this Court.

ISSUE:
Whether or not the mortgagors still have an equity of redemption and could still pay the
mortgage debt.

RULING:
After the execution of a real estate mortgage, the mortgagor has an equity of redemption,
exercisable within the period stipulated in the mortgage deed. In case of judicial foreclosure,
that equity of redemption subsists after the sale and before it is confirmed by the court. However,
in case of a judicial foreclosure of a mortgage in favor of a banking institution, section 78 of the
General Banking Law grants the mortgagor a right of redemption which may be exercised within
one year from the sale.

Under section 3, Rule 68 of the Rules of Court, it is the confirmation by the court of the auction
sale that would divest the Serrano spouses of their rights to the mortgaged lot and that would vest
such rights in the bank as purchaser at the auction sale.

The clause "subject to such rights of redemption as may be allowed by law", found in the last
part of section 3, has no application to this case because the mortgagor did not exercise his right
of redemption under section 78 of the General Banking Law.

What applies to this case is the settled rule that "a foreclosure sale is not complete until it is
confirmed, and before said confirmation, the court retains control of the proceedings by
exercising a sound discretion in regard to it, either granting or withholding confirmation as the
rights and interests of the parties and the ends of justice may require.” "In order that a
foreclosure sale may be validly confirmed by the court, it is necessary that a hearing be given the
interested parties, at which they may have an opportunity to show cause why the sale should not
be confirmed." "The acceptance of a bid at the foreclosure sale confers no title on the purchaser.
Until the sale has been validly confirmed by the court, he is nothing more than a preferred
bidder. Title vests only when the sale has been validly confirmed by the court." The
confirmation retroacts to the date of the sale.

A hearing should be held for the confirmation of the sale. The mortgagor should be notified of
that hearing. Lack of notice vitiates the confirmation of the sale. The mortgagor may still
redeem the mortgaged lot after the rendition of the order confirming the sale which is void for
lack of hearing and notice to the mortgagor. Notice and hearing of a motion for confirmation of
sale are essential to the validity of the order of confirmation, not only to enable the interested
parties to resist the motion but also to inform them of the time when their right of redemption is
cut off.

It is equally settled that after the foreclosure sale but before its confirmation, the court may grant
the judgment debtor or mortgagor an opportunity to pay the proceeds of the sale and thus refrain
from confirming it. If after the foreclosure sale and before the confirmation thereof, the
mortgagee, as purchaser at the auction sale, sold the mortgaged property to another person, that
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subsequent sale does not render the foreclosure sale more effective. That subsequent sale does
not prevent the trial court from granting the mortgagor a period within which to redeem the
mortgaged lot by paying the judgment debt and the expenses of the sale and costs.

After the confirmation of the sale, made after hearing and with due notice to the mortgagor, the
latter cannot redeem anymore the mortgaged lot (unless the mortgagee is a banking institution).
It is after the confirmation of the sale that the mortgagor loses all interest in the mortgaged
property.

In the instant case, where the foreclosure sale has not yet been confirmed but the statutory one-
year period for redemption expired and the mortgaged lot was sold by the mortgagee (as the only
bidder at the auction sale) to a third person, the trial court should give the purchaser a chance to
be heard before requiring the mortgagee-bank to accept the redemption price tendered by the
mortgagors.

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 PATRICIA CABRIETO DELA TORRE, V. PRIMETOWN PROPERTY GROUP, INC.,
G.R. No. 221932. February 14, 2018, PERALTA, J.

FACTS:
Respondent Primetown Property Group, Inc. filed a petition for corporate rehabilitation with
prayer for suspension of payments and actions with the Regional Trial Court of Makati City, the
rehabilitation court issued a Stay Order.
On October 15, 2004, petitioner Patricia Cabrieto dela Torre filed a Motion for Leave to
Intervene seeking judicial order for specific performance, i.e., for respondent to execute in her
favor a deed of sale covering Unit 3306, Makati Prime Citadel Condominium which she bought
from the former as she had allegedly fully paid the purchase price. Respondent opposed the
motion arguing that it was filed out of time considering that the Stay Order was issued on August
15, 2003 and under the Interim Rules of Procedure on Corporate Rehabilitation, any claimants
and creditors shall file their claim before the rehabilitation court not later than ten days before the
date of the initial hearing; and that since the Stay Order was issued on August 15, 2003 and the
publication thereof was done in September 2003 with the initial hearing on the petition set on
September 24 2003, the motion for intervention should have been filed on or before September
14, 2003.
The RTC issued an Order granting petitioner's motion for intervention. Respondent filed a
motion for reconsideration alleging that intervenor is still liable to pay P1,902,210.48 as unpaid
interest and penalty charges; and it is the Housing and Land Use Regulatory Board (HLURB)
which has exclusive and original jurisdiction over the controversies involving condominium
units and not the RTC. The RTC denied the motion for reconsideration in an Order. Aggrieved,
respondent filed with the CA a petition for certiorari. The CA issued its assailed Decision,
granting the petition denying the Motion for Intervention filed by private respondent. In a
Resolution, the CA denied petitioner's motion for reconsideration. Dissatisfied, petitioner filed
the instant petition for review on certiorari.

ISSUE:
Whether or not petitioner’s claim against respondent was suspended with the issuance of the Stay
Order.

RULING:
The RTC had already issued a Stay Order on August 15, 2003. Petitioner is prohibited (a) from
selling, encumbering, transferring or disposing in any manner of any of its properties, except in
the ordinary course of business and (b) from making any payment of its liabilities, outstanding as
of July 2, 2003, the date of the filing of the petition.
Clearly, while the respondent is undergoing rehabilitation, the enforcement of all claims against
it is stayed. Rule 2, Section 1 of the Interim Rules defines a claim as referring to all claims or
demands of whatever nature or character against a debtor or its property, whether for money or
otherwise. The definition is all-encompassing as it refers to all actions whether for money or
otherwise. There are no distinctions or exemptions.
Petitioner's prayer in intervention for respondent to execute the deed of sale in her favor for the
condominium unit is a claim as defined under the Interim Rules which is already stayed as early
as August 15, 2003. In fact, the same order also prohibited respondent from selling,
encumbering, transferring or disposing in any manner of any of its properties, except in the
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ordinary course of business. The RTC's Order granting petitioner's intervention and directing
respondent to execute a deed of sale in her favor and to deliver the copy of the owner's duplicate
copy of the condominium certificate, with all the pertinent documents needed to effect
registration of the deed of sale and issuance of a new title in petitioner's name, is a violation of
the law. And the RTC gave undue preference to the petitioner over respondent's other creditors
and claimants.

Furthermore, Petitioner's ownership of the condominium unit alleging that she had fully paid the
purchase price was disputed by respondent based on their Memorandum of Agreement where
petitioner acknowledged that she had paid the principal obligation on the condominium unit but
had yet to pay respondent for penalty charges and interest by reason of the delay in the payment
of the monthly amortizations. Consequently, when the RTC issued the Stay Order which
suspended all claims against respondent, without distinction, petitioner's prayer for the execution
of a deed of sale is a claim covered by the Stay Order issued by the RTC.

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 COCA-COLA BOTTLERS PHILS., INC., V. SPOUSES EFREN AND LOLITA
SORIANO, G.R. No. 211232. April 11, 2018, TIJAM, J.

FACTS:
Plaintiffs spouses Efren and Lolita Soriano are engaged in the business of selling defendant
Coca-Cola products. Defendant thru Cipriano informed plaintiffs that the former required
security for the continuation of their business. Plaintiffs were convinced to hand over two (2)
certificates of titles over their property and were made to sign a document. Defendant Cipriano
assured plaintiffs that it will be a mere formality and will never be notarized.

Subsequently, plaintiffs informed defendant Coca-Cola of their intention to stop selling Coca-
Cola products due to their advanced age. Thus, plaintiffs verbally demanded from the defendant
the return of their certificates of titles. However, the titles were not given back to them.

When plaintiffs were contemplating on filing a petition for the issuance of new titles, they
discovered for the first time that their land was mortgaged in favor of defendant Coca-Cola.
Worse, the mortgage land was already foreclosed. Hence, plaintiffs filed a complaint for
annulment of sheriff's foreclosure sale. They alleged that they never signed a mortgaged
document and that they were never notified of the foreclosure sale. In addition, plaintiffs aver
that they never had monetary obligations or debts with the defendant. They always paid their
product deliveries in cash.

On their part, the defendant alleged that plaintiffs are indebted to them. Plaintiffs' admission that
they signed the real estate mortgage document in Tuguegarao, Cagayan indicates that the
mortgage agreement was duly executed. The failure of the parties to appear before the notary
public for the execution of the document does not render the same null and void or
unenforceable.
The RTC rendered its decision nullifying the real estate mortgage and the foreclosure
proceedings. Aggrieved, the petitioner appealed to the CA. The CA rendered the assailed
decision affirming the RTC decision in toto. The CA ruled that the Real Estate Mortgage deed
failed to comply substantially with the required form. Hence, the instant petition before Us.

ISSUE:
Whether or not the foreclosure proceedings are valid.

RULING:
Unless the parties stipulate, personal notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary because Section 3 of Act No. 3135 only requires the posting of the
notice of sale in three public places and the publication of that notice in a newspaper of general
circulation. Moreover, the same was not put into issue in this case. The foreclosure proceedings
were nullified by the courts a quo merely as a consequence of the nullification of the REM deed.
Consequently, We find that the foreclosure proceedings are likewise valid.

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 CONCHITA GLORIA AND MARIA LOURDES GLORIA-PAYDUAN, VS. BUILDERS
SAVINGS AND LOAN ASSOCIATION, INC., G.R. No. 202324. June 04, 2018, DEL
CASTILLO, J.

FACTS:
Spouses Juan and herein petitioner Conchita Gloria are registered owners of a parcel of land
located covered by Transfer Certificate of Title. Petitioner Maria Lourdes Gloria-Payduan is
their daughter. Juan passed away.

Conchita and Lourdes filed before the RTC a Second Amended Complaint against respondent
Builders Savings and Loan Association, Inc., Benildo Biag, and Manuel F. Lorenzo for
"declaration of null and void real estate mortgage, promissory note, cancellation of notation in
the transfer certificate of title, and damages" with prayer for injunctive relief.

Petitioners claimed that Biag duped them into surrendering TCT to him under the pretense that
Biag would verify the title, which he claimed might have been fraudulently transferred to another
on account of a fire that gutted the Quezon City Registry of Deeds; Biag instead used the title to
mortgage the Kamuning property to respondent Builders Savings; that Conchita was fraudulently
made to sign the subject loan and mortgage documents by Biag, who deceived Conchita into
believing that it was actually Lourdes who requested that these documents be signed; that the
subject Mortgage and Promissory Note contained the signature not only of Conchita, but of Juan,
who was by then already long deceased, as mortgagor and co-maker; that at the time the loan and
mortgage documents were supposedly executed, Conchita was already sickly and senile, and
could no longer leave her house; that Biag and Builders Savings conspired in the execution of the
forged loan and mortgage documents, that the forged loan and mortgage documents were not
signed/affirmed before a notary public; that on account of Biag and Builders Savings' collusion,
the subject property was foreclosed and sold at auction to the latter; and that the loan and
mortgage documents, as well as the foreclosure and sale proceedings, were null and void and
should he annulled. Petitioners thus prayed that the Mortgage and Promissory Note be declared
null and void; that the encumbrances/annotations in the subject title be cancelled; that the
certificate of title be returned to them.

The RTC issued its Decision dismissing petitioners' complaint for lack of merit. The
counterclaims and crossclaims were likewise dismissed. Petitioners moved to reconsider. The
RTC issued its Order granting petitioners' motion for reconsideration. Respondent interposed an
appeal before the CA. The CA issued the assailed Decision, dismissing plaintiffs' complaint.
Petitioners moved to reconsider, but in a Resolution, the CA held its ground. Hence, the present
Petition.

ISSUE:
Whether or not the mortgage and promissory note are null and void.

RULING:
The mortgage and promissory note are null and void.

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The evidence indicates that these documents were indeed simulated; as far as petitioners were
concerned, they merely entrusted the title to the subject property to Biag for the purpose of
reconstituting the same as he claimed that the title on file with the Registrar of Deeds of Quezon
City may have been lost by fire. Petitioners did not intend for Biag to mortgage the subject
property in 1991 to secure a loan; yet the latter, without petitioners' knowledge and consent,
proceeded to do just that, and in the process, he falsified the loan and mortgage documents and
the accompanying promissory note by securing Conchita's signatures thereon through fraud and
misrepresentation and taking advantage of her advanced age and naivete and forged Juan's
signature and made it appear that the latter was still alive at the time, when in truth and in fact, he
had passed away in 1987. A Certificate of Death issued by the Quezon City Local Civil Registrar
and marked as Exhibit "D" and admitted by the trial court proves this fact. Under the Civil Code,
An absolutely simulated or fictitious contract is void. (Art. 1346). Furthermore, those which are
absolutely simulated or fictitious are in existence and void from the beginning. (Art. 1409).

As a consequence of Biag's fraud and forgery of the loan and mortgage documents, the same
were rendered null and void. This proceeds from the fact that Biag was not the Owner of the
subject property and may not thus validly mortgage it, as well as the well-entrenched rule that a
forged or fraudulent deed is a nullity and conveys no title. "In a real estate mortgage contract, it
is essential that the mortgagor be the absolute owner of the property to be mortgaged; otherwise,
the mortgage is void." And "when the instrument presented for registration is forged, even if
accompanied by the owner's duplicate certificate of title, the registered owner does not thereby
lose his title, and neither does the mortgagee acquire any right or title to the property. In such a
case, the mortgagee under the forged instrument is not a mortgagee protected by Law." Lastly,
when "the person applying for the loan is other than the registered owner of the real property
being mortgaged[,it] should have already raised a red flag and x x x should have induced the
[mortgagee] to make inquiries into and confirm [the authority of the mortgagor]."

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 SOFIA TABUADA, ET. AL., V. ELEANOR TABUADA, ET. AL., G.R. No. 196510.
September 12, 2018, BERSAMIN, J.

FACTS:
The petitioners commenced a civil case in the RTC against respondents Spouses Bernan and
Eleanor Certeza, Eleanor Tabuada, Julieta Trabuco and Laureta Redondo. The complainant
included a prayer for a temporary restraining order and for the issuance of the writ of preliminary
injunction.

At the ex parte hearing held to receive their evidence, the petitioners presented Sofia Tabuada,
who testified that she received the notice sent by the Spouses Certeza regarding their land,
known as Lot 4272-B-2, that her husband had inherited from his mother, Loreta Tabuada, and
where they were residing, informing them that the land had been mortgaged to them (Spouses
Certeza); that she immediately inquired from Eleanor Tabuada and Trabuco about the mortgage,
and both admitted that they had mortgaged the property to the Spouses Certeza; that she was
puzzled to see the signature purportedly of Loreta Tabuada on top of the name Loreta Tabuada
printed on the Mortgage of Real Rights dated July 1, 1994 and the Promissory Note dated July 4,
1994 despite Loreta Tabuada having died on April 16, 1990; that the property under mortgage
was the where she and her daughters were residing.

The petitioners offered for admission the following exhibits, namely: (a) the death certificate of
Loreta Yulo Tabuada that indicated April 16, 1990 as the date of death; (b) Transfer Certificate
of Title (TCT) No. T-82868 of the Register of Deeds of Iloilo City covering Lot No. 4272-B-2
situated in Jaro, Iloilo City and registered in the name of Loreta Tabuada; (c) the Promissory
Note dated July 4, 1994 for P68,000.00 executed by Loreta Tabuada; (d) the Mortgage of Real
Rights dated July 1, 1994 involving Lot No. 4272-B-2 under TCT No. T-82868 executed by
Loreta Tabuada as the mortgagor; (e) the list of payments of the principal obligation subject of
the real estate mortgage and the interests; and (f) the demand letter dated August 12, 2004 from
the Spouses Certeza addressed to Loreta Tabuada demanding the payment of the total obligation
of P415, 452.94.

The RTC rendered judgment in favor of the petitioners. The RTC declared the Mortgage of Real
Rights null and void for not complying with the essential requisites of a real estate mortgage. The
respondents appealed. The CA promulgated its decision, reversing and setting aside the judgment
of the RTC, and dismissing the civil case instead. The petitioners moved for reconsideration, but
the CA denied their motion for reconsideration.

ISSUE:
Whether or not the Real Estate Mortgage was valid.

RULING:
Real estate mortgage was null and void
It is uncontested that the late Loreta Tabuada had died in 1990, or four years before the mortgage
was constituted; and that Eleanor Tabuada and Trabuco admitted to petitioner Sofia Tabuada that
they had mortgaged the property to the Spouses Certezas. Accordingly, Eleanor Tabuada had
fraudulently represented herself to the Spouses Certeza as the late Loreta Tabuada, the
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titleholder. That the titleholder had been dead when the mortgage was constituted on the property
by Eleanor Tabuada was not even contested by Eleanor Tabuada and Tabuco. In any event,
Eleanor Tabuada had not been legally authorized to mortgage the lot to the Spouses Certeza.

ISSUE:
Whether or not Spouses Certeza were mortgagees in good faith.

RULING:
The contention of the Spouses Certeza lacks persuasion.

The Spouses Certeza admitted that the petitioners were the relatives by blood or affinity of their
co-defendants Eleanor Tabuada, et al.; and that Sofia Tabuada, et al. and the petitioners had been
living in their respective residences built on the property subject of the mortgage. Such
admissions belied the Spouses Certeza's contention of being mortgagees in good faith. At the
very least, they should have been prudent and cautious enough as to have inquired about Eleanor
Tabuada's assertion of her capacity and authority to mortgage in view of the actual presence of
other persons like the petitioners herein on the property. Such prudence and caution were
demanded of persons like them who are about to deal with realty; they should not close their
eyes to facts that should put a reasonable man on his guard and still claim he acted in good
faith. Indeed, the status of a mortgagee in good faith does not apply where the title is still in the
name of the rightful owner and the mortgagor is a different person pretending to be the owner. In
such a case, the mortgagee is not an innocent mortgagee for value and the registered owner will
generally not lose his title.

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PHILIPPINE NATIONAL BANK, VS. ELENITA V. ABELLO, ET. AL., G.R. No. 242570.
September 18, 2019, REYES, A., JR., J.

FACTS:
A Complaint for Cancellation/Discharge of Mortgage/Mortgage Liens was filed by the
respondents against the petitioner before the RTC of Bacolod City.

The complaint involves three parcels of land, all located at Bacolod City, registered under the
names of Manuel and Elenita Abello. Inscribed on the TCTs were various encumbrances.
Manuel died, consequently, his heirs, herein respondents, executed a Declaration of Heirship
authorizing Elenita to act as administrator of the estate.

In their complaint, the respondents sought for the cancellation of the inscriptions claiming that
since the petitioner made no action against them since 1975, the action has already prescribed.
Accordingly, the respondents argued that they should be discharged as a matter of right and the
encumbrances cancelled.

After trial, the RTC rendered its Decision, in favor of the Plaintiffs and against the Defendants.
The parties herein separately filed their appeal via petitions for certiorari with the CA. On
appeal to the CA, the latter dismissed the petition in its Decision. The petitioner filed a Motion
for Reconsideration of the said decision, but the same was denied by the CA in its Resolution.
Thus, this petition for review for certiorari.

ISSUE:
Whether or not the Real Estate Mortgage has been prescribed.

RULING:
Prescription runs in a mortgage contract not from the time of its execution, but rather a) when the
loan became due and demandable, for instances covered under the exceptions set forth under
Article 1169 of the New Civil Code, or b) from the date of demand.

A REM is an accessory contract constituted to protect the creditor's interest to ensure the
fulfillment of the principal contract of loan. By its nature, therefore, the enforcement of a
mortgage contract is dependent on whether or not there has been a violation of the principal
obligation. Simply, it is the debtor's failure to pay that sets the mortgage contract into operation.
Prior to that, the creditor-mortgagee has no right to speak of under the REM as it remains
contingent upon the debtor's failure to pay his or her loan obligation.

Thus, for an action to foreclose REM to prosper, it is crucial that the creditor-mortgagee
establishes his right by alleging the terms and conditions of the mortgage contract, particularly
the maturity of the loan which it secures. The respondents' failure to allege, much more prove
these information, renders the action dismissible for failure to prove their cause of action.

In this controversy, the respondents pray for the cancellation of the encumbrances on the TCTs
which refer to the REMs constituted on the property. Consequently, the cancellation of these
annotations is dependent on whether the action for REM has already prescribed. Therefore, an
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allegation of the date of maturity of the loan is also vital in this case as it signifies the
commencement of the running of the period of prescription for an action for foreclosure REM.

Stated otherwise, the mortgagor would be unable to establish his or her right to pray for the
cancellation of the encumbrances without first establishing that the debt has already become due,
as it is only at that time that the debtor's right to foreclose the property arise and the prescriptive
period begins to run.

Pertinent to the REM, it is evident from a cursory reading of the allegations that the respondents
made no mention of the particulars of the mortgage. In arguing the prescription, the respondents
instead anchor on the fact that the latest entry related to the loan from the petitioner was in 1975.
But, the date of annotation is irrelevant on the issue of whether the institution of a mortgage
action has already prescribed. Instead, as previously elucidated, what is crucial is the date of
maturity of the loan in instances when demand is not necessary, or the date of demand. Without
these crucial details, the information supplied is insufficient to enable the court to grant relief to
the respondents. With this, the complaint could have been dismissed by the court a quo on the
ground of the complaint's failure to state cause of action. However, the parties proceeded to trial,
which, therefore, means that the period within which the dismissal for failure to state a cause of
action would have already lapsed.

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 ENGR. FELIPE A. VIRTUDAZO AND SPOUSE ESTELITA M. VIRTUDAZO, V.
ALIPIO LABUGUEN AND HIS SPOUSE DAMIANA MABUTI AND GENARA
LABUGUEN, G.R. No. 229693. December 10, 2019. REYES, J. JR., J.

FACTS:
A parcel of land owned by Spouses Maurin under Original Certificate Title with an area of 600
square meters was mortgaged, together with its improvements, to the Development Bank of the
Philippines as security for their loan.

After Gavina Sadili-Maurin's death, Florentino Maurin agreed to convey a 270-sq m portion of
the land and its improvements to respondent Alipio S. Labuguen under an instrument
denominated as a Memorandum of Agreement. Alipio S. Labuguen agreed to pay and, in fact,
paid P120,000.00, and undertook to assume the obligations of spouses Maurin to DBP.
Thereupon, the Labuguens occupied said portion. DBP, however, refused Alipio S. Labuguen's
offer to assume the loan obligation.
Nevertheless, and while the mortgage loan with the DBP was still outstanding, the heirs of
Gavina Sadili-Maurin executed an Extrajudicial Settlement of the Estate of Gavina Sadili-
Maurin with Sale wherein they conveyed the 270-sq m portion of the land, with the building
erected on it, to Alipio S. Labuguen. Unlike the previous MOA, the EJS with Sale did not
contain any obligation for Alipio S. Labuguen to assume spouses Maurins' loan with the DBP.
Neither the MOA nor the EJS with Sale were registered.
Upon failure of spouses Maurin to pay their loan obligations, DBP extrajudicially foreclosed the
entire property and was declared the highest bidder at the auction sale.

Later, Florentino Maurin offered the entire property for sale to petitioner Engr. Felipe A.
Virtudazo. Felipe Virtudazo agreed to purchase the lot from DBP. It turned out, however, that
Florentino Maurin used Felipe Virtudazo's check to redeem the foreclosed lot in his name.
This led Felipe Virtudazo to file a complaint for Specific Performance or Recovery of Sum of
Money, Damages and Attorney's Fees with Preliminary Injunction against DBP, with spouses
Maurin later on included as intervenors.
Meanwhile, Alipio Labuguen filed a complaint for Annulment of Deeds and Damages with
Request for Issuance of Writ of Preliminary Attachment against the heirs of Gavina Sadili-
Maurin. He prayed that the EJS with Sale be annulled as it allegedly contravenes the 10-year
prohibition against conveyances of land covered by a free patent.

Felipe Virtudazo’s complaint for Specific Performance or Recovery of Sum of Money was
resolved in his favor with the RTC finding that Florentino Maurin benefited from Felipe
Virtudazo’s money which the former used in settling his loan obligations with the DBP. Thus,
the trial court ordered Florentino Maurin to return to Felipe Virtudazo the amount of
P625,000.00. The trial court also ordered DBP to deliver the Deed of Reconveyance and the
OCT over the subject property to Florentino Maurin. Pursuant to this decision, DBP executed
a Deed of Redemption in favor of Florentino Maurin. Florentino Maurin, however, failed to pay
the amount of P625,000.00 to Felipe Virtudazo. Consequently, the subject property was levied
upon for auction. At the auction, the entire property was sold in favor of spouses Felipe A.
Virtudazo and Estelita. Meantime, spouses Labuguen complaint for Annulment of Deeds was
dismissed by the RTC.
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Because spouses Labuguen refused to vacate the 270-sq m portion of the property and to pay the
accumulated rents, spouses Virtudazo filed the complaint a quo for Quieting of Title, Recovery
of Possession, Attorney’s Fees and Damages against them.

In ruling that spouses Virtudazo had a better right over the 270-sq m portion of the property, the
court a quo reasoned that the MOA and the EJS with Sale were a conditional sale that was not
perfected because spouses Labuguen failed to comply with the assumption of mortgage therein
contained.

Spouses Labuguen appealed to the CA arguing in the main that the EJS with Sale was an
absolute sale making them lawful owners of the 270- sq m portion of the property. In granting
spouses Labuguen’s appeal, the CA ruled that the EJS with Sale was an absolute sale by virtue of
which they became owners of the 270-sq m portion of the lot together with the building. The CA
further held that the foreclosure of the entire property and the subsequent redemption thereof by
Florentino Maurin did not extinguish spouses Labuguen’s ownership over the 270-sq m portion.
It held that Florentino Maurin’s act of redeeming the entire property served to discharge the
mortgage, and, thus restored spouses Labuguen’s right of ownership sans any lien.

The denial of spouses Virtudazo’s motion for reconsideration led to the filing of the instant
petition raising the following:

ISSUE:
Whether or not spouses Labuguen's ownership was not perfected since the mortgage was
eventually foreclosed by DBP.

RULING:
The EJS with Sale is a perfected contract of sale.

Article 1181 of the Civil Code provides that "[i]n conditional obligations, the acquisition of
rights, as well as the extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition." A sale is conditional where the efficacy
or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of
a future and uncertain event, so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed.

The MOA required spouses Labuguen's assumption of the mortgage with the DBP. The
assumption of mortgage is a condition to the seller's consent. It is not disputed that such
assumption of mortgage did not take place because DBP did not give its consent thereto. Because
spouses Labuguen did not comply with the condition to assume the mortgage, the sale as
embodied under the MOA was not perfected.

Nevertheless, it appears that the Maurins and Labuguens intended to push thru with the sale of
the 270-sq m portion of the property, thus, they entered into the EJS with Sale. While the MOA
required that spouses Labuguen assume Florentino Maurin's obligation with the DBP, the EJS
with Sale no longer required such assumption of obligation.
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It is likewise clear from the terms of the EJS with Sale that the payment of the mortgage
obligation was not a condition that suspended the transfer of title over the 270-sq m portion of
the property. Far from being a conditional sale, the EJS with Sale has all the elements of a
contract of sale. There is consent to transfer ownership over the 270-sq m portion of the property
in exchange for the price of P120,000.00. The EJS with Sale between Florentino Maurin and
spouses Labuguen is therefore valid and binding as between them.

The fact that the property was mortgaged to DBP at the time the sale was perfected is of no
moment. A mortgage does not pass title or estate to the mortgagee as it is nothing more than a
lien, encumbrance, or security for a debt. In a contract of mortgage, the mortgagor remains to be
the owner of the property although the property is subjected to a lien. As such, the mortgagor
retains the right to dispose of the property as an attribute of ownership. Thus, Florentino Maurin
had the right to sell the mortgaged property, or a portion thereof, which he, in fact, did through
the EJS with Sale.

The effect of the sale of the 270-sq m portion of the property while the mortgage in favor of DBP
subsists is not to suspend the efficacy of such sale, but that the property right which spouses
Labuguen have acquired is made subject to DBP's mortgage right. The sale or transfer of the
mortgaged property cannot affect or release the mortgage; thus, the purchaser or transferee is
necessarily bound to acknowledge and respect the encumbrance.

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