Civil Procedure Case Digest AY 13-14

134 Limpin v IAC G.R. No. 70987 September 29, 1988 TOPIC: Foreclosure of Real Estate Mortgage PONENTE: Narvasa, J. FACTS: 1. 1973: Two lots (TCTs Nos. 92836 and 92837) were mortgaged (plus 2 other lots, 4 in all) in 1973 to private respondent Ponce by their former owners, the Spouses Jose and Marcelina Aquino. 2. 1978: The said 2 lots were sold by the Aquino spouses to Butuan Bay Wood Export Corporation. 3. Petitioner Limpin obtained a money judgment in 1979 against the corporation and to satisfy the judgment, the two lots were levied on and sold at public auction in 1980; Limpin was the highest bidder. Limpin later sold the lots to his copetitioner, Sarmiento. 4. Before the levy was made on the two lots in execution of the judgment against the corporation, Ponce had initiated judicial proceedings for the foreclosure of the mortgage over said two (2) lots (together with the 2 others mortgaged to him. 5. Judgment was rendered in his favor and became final; and at the ensuing foreclosure sale, the lots were acquired by Ponce himself as highest bidder. 6. Ponce then moved for confirmation of the foreclosure sale, but the Court confirmed the sale of only two lots, refusing to do so as regards the two which had been subject of the execution sale in Limpin's favor (those covered TCTs Nos. 92836 and 92837). 7. Ponce instituted a special civil action in the Intermediate Appellate Court, impleading Limpin and Sarmiento a indispensable parties respondents. That Court rendered judgment in Ponce's favor; Limpin and Sarmiento appealed; this Court denied their appeal. 8. SC affirmed appellate courts decision and ordered the trial Court "to confirm the sale (of the lots formerly covered by TCT Nos. 92836 and 92837) and issue a writ of possession to Ponce with respect to the aforesaid lots, subject to the equity of redemption of Sarmiento. 9. Sarmiento knew that he had the prerogative to exercise his equity of redemption but he did not try to exercise that right before the confirmation of the foreclosure sale by Judge Solano. Instead, he instituted no less than two (2) actions in the RTC attempting to relitigate precisely the same issues which this Court and the IAC had already passed upon and resolved adversely to him. The cases were dismissed. 10. March 11, 1988: nine months or so after entry of the judgment recognizing his equity of redemption as successor-ininterest of the original mortgagors that Sarmiento finally attempted to exercise his unforeclosed equity of redemption. He filed a motion with the Court manifesting that he would exercise the right and asked the Court to fix the redemption price. The Court opined that "this should be the subject of the agreement between Ponce and Sarmiento. 11. Sarmiento then wrote to Ponce offering P2.6 million as redemption price for the two lots. Ponce rejected the offer said averred "that the period within which Sarmiento could have exercised such right had lapsed. According to Ponce, from October 17, 1982, when Sarmiento's predecessors-in-interest defaulted in their obligations over the mortgaged properties, up to June 17, 1987, when the trial court confirmed the auction sale of those properties, Sarmiento could (and should) have exercised his equity of redemption. ISSUE: WON the equity of redemption recognized in favor of petitioner Sarmiento still subsists and may be exercised, more than a year after that judgment had become final and executory. HELD: No. The equity of redemption lapsed and ceased to exist without having been properly exercised. After such order of confirmation of the foreclosure sale, no redemption can be effected any longer. RATIO: 1. The equity of redemption is, to be sure, different from and should not be confused with the right of

Civil Procedure Case Digest AY 13-14

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 extra-judicially, Act 3135 grants to the mortgagor the right of redemption within one (1) year from the registration of the sheriffs certificate of foreclosure sale.

Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The law declares that a judicial foreclosure sale, "when confirmed by an order of the court, shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be allowed by law. 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. 2. But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale, "when confirmed by an order of the court shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser." There then exists only what is known as the equity of redemption. This is simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment becomes final, in accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation. Section 2, Rule 68 provides that
... If upon the trial ... the court shag find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and costs, and shall render judgment for the sum so found due and order the same to be paid into court within a period of not less than ninety (90) days from the date of the service of such order, and that in default of such payment the property be sold to realize the mortgage debt and Costs.

After such order of confirmation, no redemption can be effected any longer. 3. It is this same equity of redemption that is conferred by law on the mortgagor's successors-in-interest, or third persons acquiring rights over the mortgaged property subsequent, and therefore subordinate, to the mortgagee's lien. If these subsequent or junior lienholders be not joined in the foreclosure action, the judgment in the mortgagor's favor is ineffective as to them, of course. In that case, they retain what is known as the "unforeclosed equity of redemption," and a separate foreclosure proceeding should be brought to require them to redeem from the first mortgagee, or the party acquiring title to the mortgaged property at the foreclosure sale, within 90 days. In the case at bar, however, there is no occasion to speak of any "unforeclosed equity of redemption' in Sarmiento's favor since he was properly impleaded in the judicial proceeding where his and Ponce's rights over the mortgaged property were ventilated and specifically adjudicated. 4. Under the circumstances obtaining in this case, the plain intendment of the IAC was to give to Sarmiento, not the unforeclosed equity of redemption pertaining to a stranger to the foreclosure suit, but the same equity of redemption possessed by the mortgagor himself. The judgment cannot be construed as contemplating or requiring the institution of a separate suit by Ponce to compel Sarmiento to exercise his unforeclosed equity of redemption, or as granting Sarmiento the option to redeem at any time that he pleases, subject only to prescription. This would give rise to that multiplicity of proceedings which the law eschews. The judgment plainly intended that Sarmiento exercise his option to redeem, as successor of the mortgagor. CASE LAW/ DOCTRINE: see highlighted words in the ratio part (Limpin v IAC)

Civil Procedure Case Digest AY 13-14