G.R. No.

158891

June 27, 2012

PABLO P. GARCIA, Petitioner, vs. YOLANDA VALDEZ VILLAR, Respondent.

This is a petition for review on certiorari1 of the February 27, 2003 Decision2 and July 2, 2003 Resolution3 of the Court of
Appeals in CA-G.R. SP No. 72714, which reversed the May 27, 2002 Decision 4 of the Regional Trial Court (RTC), Branch
92 of Quezon City in Civil Case No. Q-99-39139.
Lourdes V. Galas (Galas) was the original owner of a piece of property (subject property) located at Malindang St.,
Quezon City, covered by Transfer Certificate of Title (TCT) No. RT-67970(253279). 5
On July 6, 1993, Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker, mortgaged the subject property to
Yolanda Valdez Villar (Villar) as security for a loan in the amount of Two Million Two Hundred Thousand Pesos
(P2,200,000.00).6
On October 10, 1994, Galas, again with Pingol as her co-maker, mortgaged the same subject property to Pablo P. Garcia
(Garcia) to secure her loan of One Million Eight Hundred Thousand Pesos (P1,800,000.00).7
Both mortgages were annotated at the back of TCT No. RT-67970 (253279), to wit:
REAL ESTATE MORTGAGE
Entry No. 6537/T-RT-67970(253279) MORTGAGE In favor of Yolanda Valdez Villar m/to Jaime Villar to guarantee a
principal obligation in the sum of P2,200,000- mortgagees consent necessary in case of subsequent encumbrance or
alienation of the property; Other conditions set forth in Doc. No. 97, Book No. VI, Page No. 20 of the Not. Pub. of Diana P.
Magpantay
Date of Instrument: 7-6-93
Date of Inscription: 7-7-93
SECOND REAL ESTATE MORTGAGE
Entry No. 821/T-RT-67970(253279) MORTGAGE In favor of Pablo Garcia m/to Isabela Garcia to guarantee a principal
obligation in the sum of P1,800,000.00 mortgagees consent necessary in case of subsequent encumbrance or alienation
of the property; Other conditions set forth in Doc. No. 08, Book No. VII, Page No. 03 of the Not. Pub. of Azucena Espejo
Lozada
Date of Instrument: 10/10/94
Date of Inscription: 10/11/94
LRC Consulta No. 1698
On November 21, 1996, Galas sold the subject property to Villar for One Million Five Hundred Thousand Pesos
(P1,500,000.00), and declared in the Deed of Sale9 that such property was "free and clear of all liens and encumbrances
of any kind whatsoever."10
On December 3, 1996, the Deed of Sale was registered and, consequently, TCT No. RT-67970(253279) was cancelled
and TCT No. N-16836111 was issued in the name of Villar. Both Villars and Garcias mortgages were carried over and
annotated at the back of Villars new TCT.12

On October 27, 1999, Garcia filed a Petition for Mandamus with Damages 13 against Villar before the RTC, Branch 92 of
Quezon City. Garcia subsequently amended his petition to a Complaint for Foreclosure of Real Estate Mortgage with
Damages.14 Garcia alleged that when Villar purchased the subject property, she acted in bad faith and with malice as she
knowingly and willfully disregarded the provisions on laws on judicial and extrajudicial foreclosure of mortgaged property.
Garcia further claimed that when Villar purchased the subject property, Galas was relieved of her contractual obligation
and the characters of creditor and debtor were merged in the person of Villar. Therefore, Garcia argued, he, as the second
mortgagee, was subrogated to Villars original status as first mortgagee, which is the creditor with the right to foreclose.
Garcia further asserted that he had demanded payment from Villar,15 whose refusal compelled him to incur expenses in
filing an action in court.16
Villar, in her Answer,17 claimed that the complaint stated no cause of action and that the second mortgage was done in bad
faith as it was without her consent and knowledge. Villar alleged that she only discovered the second mortgage when she
had the Deed of Sale registered. Villar blamed Garcia for the controversy as he accepted the second mortgage without
prior consent from her. She averred that there could be no subrogation as the assignment of credit was done with neither
her knowledge nor prior consent. Villar added that Garcia should seek recourse against Galas and Pingol, with whom he
had privity insofar as the second mortgage of property is concerned.
On May 23, 2000, the RTC issued a Pre-Trial Order18 wherein the parties agreed on the following facts and issue:
STIPULATIONS OF FACTS/ADMISSIONS
The following are admitted:
1. the defendant admits the second mortgage annotated at the back of TCT No. RT-67970 of Lourdes V. Galas
with the qualification that the existence of said mortgage was discovered only in 1996 after the sale;
2. the defendant admits the existence of the annotation of the second mortgage at the back of the title despite the
transfer of the title in the name of the defendant;
3. the plaintiff admits that defendant Yolanda Valdez Villar is the first mortgagee;
4. the plaintiff admits that the first mortgage was annotated at the back of the title of the mortgagor Lourdes V.
Galas; and
5. the plaintiff admits that by virtue of the deed of sale the title of the property was transferred from the previous
owner in favor of defendant Yolanda Valdez Villar.
ISSUE
Whether or not the plaintiff, at this point in time, could judicially foreclose the property in question.
On June 8, 2000, upon Garcias manifestation, in open court, of his intention to file a Motion for Summary Judgment, 19 the
RTC issued an Order20 directing the parties to simultaneously file their respective memoranda within 20 days.
On June 26, 2000, Garcia filed a Motion for Summary Judgment with Affidavit of Merit 21 on the grounds that there was no
genuine issue as to any of the material facts of the case and that he was entitled to a judgment as a matter of law.
On June 28, 2000, Garcia filed his Memorandum22 in support of his Motion for Summary Judgment and in compliance with
the RTCs June 8, 2000 Order. Garcia alleged that his equity of redemption had not yet been claimed since Villar did not
foreclose the mortgaged property to satisfy her claim.

On August 13, 2000, Villar filed an Urgent Ex-Parte Motion for Extension of Time to File Her Memorandum. 23This, however,
was denied24 by the RTC in view of Garcias Opposition.25
On May 27, 2002, the RTC rendered its Decision, the dispositive portion of which reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered in favor of the plaintiff Pablo P. Garcia
and against the defendant Yolanda V. Villar, who is ordered to pay to the former within a period of not less than ninety (90)
days nor more than one hundred twenty (120) days from entry of judgment, the sum ofP1,800,000.00 plus legal interest
from October 27, 1999 and upon failure of the defendant to pay the said amount within the prescribed period, the property
subject matter of the 2nd Real Estate Mortgage dated October 10, 1994 shall, upon motion of the plaintiff, be sold at public
auction in the manner and under the provisions of Rules 39 and 68 of the 1997 Revised Rules of Civil Procedure and
other regulations governing sale of real estate under execution in order to satisfy the judgment in this case. The defendant
is further ordered to pay costs.26
The RTC declared that the direct sale of the subject property to Villar, the first mortgagee, could not operate to deprive
Garcia of his right as a second mortgagee. The RTC said that upon Galass failure to pay her obligation, Villar should have
foreclosed the subject property pursuant to Act No. 3135 as amended, to provide junior mortgagees like Garcia, the
opportunity to satisfy their claims from the residue, if any, of the foreclosure sale proceeds. This, the RTC added, would
have resulted in the extinguishment of the mortgages.27
The RTC held that the second mortgage constituted in Garcias favor had not been discharged, and that Villar, as the new
registered owner of the subject property with a subsisting mortgage, was liable for it. 28
Villar appealed29 this Decision to the Court of Appeals based on the arguments that Garcia had no valid cause of action
against her; that he was in bad faith when he entered into a contract of mortgage with Galas, in light of the restriction
imposed by the first mortgage; and that Garcia, as the one who gave the occasion for the commission of fraud, should
suffer. Villar further asseverated that the second mortgage is a void and inexistent contract considering that its cause or
object is contrary to law, moral, good customs, and public order or public policy, insofar as she was concerned. 30
Garcia, in his Memorandum,31 reiterated his position that his equity of redemption remained "unforeclosed" since Villar did
not institute foreclosure proceedings. Garcia added that "the mortgage, until discharged, follows the property to whomever
it may be transferred no matter how many times over it changes hands as long as the annotation is carried over." 32
The Court of Appeals reversed the RTC in a Decision dated February 27, 2003, to wit:
WHEREFORE, the decision appealed from is REVERSED and another one entered DISMISSING the complaint for
judicial foreclosure of real estate mortgage with damages.33
The Court of Appeals declared that Galas was free to mortgage the subject property even without Villars consent as the
restriction that the mortgagees consent was necessary in case of a subsequent encumbrance was absent in the Deed of
Real Estate Mortgage. In the same vein, the Court of Appeals said that the sale of the subject property to Villar was valid
as it found nothing in the records that would show that Galas violated the Deed of Real Estate Mortgage prior to the sale. 34
In dismissing the complaint for judicial foreclosure of real estate mortgage with damages, the Court of Appeals held that
Garcia had no cause of action against Villar "in the absence of evidence showing that the second mortgage executed in
his favor by Lourdes V. Galas [had] been violated and that he [had] made a demand on the latter for the payment of the
obligation secured by said mortgage prior to the institution of his complaint against Villar." 35
On March 20, 2003, Garcia filed a Motion for Reconsideration 36 on the ground that the Court of Appeals failed to resolve
the main issue of the case, which was whether or not Garcia, as the second mortgagee, could still foreclose the mortgage
after the subject property had been sold by Galas, the mortgage debtor, to Villar, the mortgage creditor.

This motion was denied for lack of merit by the Court of Appeals in its July 2, 2003 Resolution.
Garcia is now before this Court, with the same arguments he posited before the lower courts. In his Memorandum, 37 he
added that the Deed of Real Estate Mortgage contained a stipulation, which is violative of the prohibition on pactum
commissorium.
Issues
The crux of the controversy before us boils down to the propriety of Garcias demand upon Villar to either pay Galass debt
of P1,800,000.00, or to judicially foreclose the subject property to satisfy the aforesaid debt. This Court will, however,
address the following issues in seriatim:
1. Whether or not the second mortgage to Garcia was valid;
2. Whether or not the sale of the subject property to Villar was valid;
3. Whether or not the sale of the subject property to Villar was in violation of the prohibition on pactum
commissorium;
4. Whether or not Garcias action for foreclosure of mortgage on the subject property can prosper.
Discussion
Validity of second mortgage to Garcia
and sale of subject property to Villar
At the onset, this Court would like to address the validity of the second mortgage to Garcia and the sale of the subject
property to Villar. We agree with the Court of Appeals that both are valid under the terms and conditions of the Deed of
Real Estate Mortgage executed by Galas and Villar.
While it is true that the annotation of the first mortgage to Villar on Galass TCT contained a restriction on further
encumbrances without the mortgagees prior consent, this restriction was nowhere to be found in the Deed of Real Estate
Mortgage. As this Deed became the basis for the annotation on Galass title, its terms and conditions take precedence
over the standard, stamped annotation placed on her title. If it were the intention of the parties to impose such restriction,
they would have and should have stipulated such in the Deed of Real Estate Mortgage itself.
Neither did this Deed proscribe the sale or alienation of the subject property during the life of the mortgages. Garcias
insistence that Villar should have judicially or extrajudicially foreclosed the mortgage to satisfy Galass debt is misplaced.
The Deed of Real Estate Mortgage merely provided for the options Villar may undertake in case Galas or Pingol fail to pay
their loan. Nowhere was it stated in the Deed that Galas could not opt to sell the subject property to Villar, or to any other
person. Such stipulation would have been void anyway, as it is not allowed under Article 2130 of the Civil Code, to wit:
Art. 2130. A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.
Prohibition on pactum commissorium
Garcia claims that the stipulation appointing Villar, the mortgagee, as the mortgagors attorney-in-fact, to sell the property
in case of default in the payment of the loan, is in violation of the prohibition on pactum commissorium, as stated under
Article 2088 of the Civil Code, viz:
Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.

The power of attorney provision in the Deed of Real Estate Mortgage reads:
5. Power of Attorney of MORTGAGEE. Effective upon the breach of any condition of this Mortgage, and in addition to the
remedies herein stipulated, the MORTGAGEE is likewise appointed attorney-in-fact of the MORTGAGOR with full power
and authority to take actual possession of the mortgaged properties, to sell, lease any of the mortgaged properties, to
collect rents, to execute deeds of sale, lease, or agreement that may be deemed convenient, to make repairs or
improvements on the mortgaged properties and to pay the same, and perform any other act which the MORTGAGEE may
deem convenient for the proper administration of the mortgaged properties. The payment of any expenses advanced by
the MORTGAGEE in connection with the purpose indicated herein is also secured by this Mortgage. Any amount received
from the sale, disposal or administration abovementioned maybe applied by assessments and other incidental expenses
and obligations and to the payment of original indebtedness including interest and penalties thereon. The power herein
granted shall not be revoked during the life of this Mortgage and all acts which may be executed by the MORTGAGEE by
virtue of said power are hereby ratified.38
The following are the elements of pactum commissorium:
(1) There should be a property mortgaged by way of security for the payment of the principal obligation; and
(2) There should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of nonpayment of the principal obligation within the stipulated period.39
Villars purchase of the subject property did not violate the prohibition on pactum commissorium. The power of attorney
provision above did not provide that the ownership over the subject property would automatically pass to Villar upon
Galass failure to pay the loan on time. What it granted was the mere appointment of Villar as attorney-in-fact, with
authority to sell or otherwise dispose of the subject property, and to apply the proceeds to the payment of the loan. 40 This
provision is customary in mortgage contracts, and is in conformity with Article 2087 of the Civil Code, which reads:
Art. 2087. It is also of the essence of these contracts that when the principal obligation becomes due, the things in which
the pledge or mortgage consists may be alienated for the payment to the creditor.
Galass decision to eventually sell the subject property to Villar for an additional P1,500,000.00 was well within the scope
of her rights as the owner of the subject property. The subject property was transferred to Villar by virtue of another and
separate contract, which is the Deed of Sale. Garcia never alleged that the transfer of the subject property to Villar was
automatic upon Galass failure to discharge her debt, or that the sale was simulated to cover up such automatic transfer.
Propriety of Garcias action
for foreclosure of mortgage
The real nature of a mortgage is described in Article 2126 of the Civil Code, to wit:
Art. 2126. The mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor
may be, to the fulfillment of the obligation for whose security it was constituted.
Simply put, 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." 41
1wphi1

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. 42 In fact, under Article 2129 of the Civil Code, the
mortgage on the property may still be foreclosed despite the transfer, viz:

Art. 2129. The creditor may claim from a third person in possession of the mortgaged property, the payment of the part of
the credit secured by the property which said third person possesses, in terms and with the formalities which the law
establishes.
While we agree with Garcia that since the second mortgage, of which he is the mortgagee, has not yet been discharged,
we find that said mortgage subsists and is still enforceable. However, Villar, in buying the subject property with notice that
it was mortgaged, only undertook to pay such mortgage or allow the subject property to be sold upon failure of the
mortgage creditor to obtain payment from the principal debtor once the debt matures. Villar did not obligate herself to
replace the debtor in the principal obligation, and could not do so in law without the creditors consent. 43 Article 1293 of the
Civil Code provides:
Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without
the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives
him the rights mentioned in articles 1236 and 1237.
Therefore, the obligation to pay the mortgage indebtedness remains with the original debtors Galas and Pingol. 44The case
of E.C. McCullough & Co. v. Veloso and Serna45 is square on this point:
The effects of a transfer of a mortgaged property to a third person are well determined by the Civil Code. According to
article 187946 of this Code, the creditor may demand of the third person in possession of the property mortgaged payment
of such part of the debt, as is secured by the property in his possession, in the manner and form established by the law.
The Mortgage Law in force at the promulgation of the Civil Code and referred to in the latter, provided, among other things,
that the debtor should not pay the debt upon its maturity after judicial or notarial demand, for payment has been made by
the creditor upon him. (Art. 135 of the Mortgage Law of the Philippines of 1889.) According to this, the obligation of the
new possessor to pay the debt originated only from the right of the creditor to demand payment of him, it being necessary
that a demand for payment should have previously been made upon the debtor and the latter should have failed to pay.
And even if these requirements were complied with, still the third possessor might abandon the property mortgaged, and
in that case it is considered to be in the possession of the debtor. (Art. 136 of the same law.) This clearly shows that the
spirit of the Civil Code is to let the obligation of the debtor to pay the debt stand although the property mortgaged to secure
the payment of said debt may have been transferred to a third person. While the Mortgage Law of 1893 eliminated these
provisions, it contained nothing indicating any change in the spirit of the law in this respect. Article 129 of this law, which
provides the substitution of the debtor by the third person in possession of the property, for the purposes of the giving of
notice, does not show this change and has reference to a case where the action is directed only against the property
burdened with the mortgage. (Art. 168 of the Regulation.) 47
1wphi1

This pronouncement was reiterated in Rodriguez v. Reyes 48 wherein this Court, even before quoting the same above
portion in E.C. McCullough & Co. v. Veloso and Serna, held:
We find the stand of petitioners-appellants to be unmeritorious and untenable. The maxim "caveat emptor" applies only to
execution sales, and this was not one such. The mere fact that the purchaser of an immovable has notice that the
acquired realty is encumbered with a mortgage does not render him liable for the payment of the debt guaranteed by the
mortgage, in the absence of stipulation or condition that he is to assume payment of the mortgage debt. The reason is
plain: the mortgage is merely an encumbrance on the property, entitling the mortgagee to have the property foreclosed,
i.e., sold, in case the principal obligor does not pay the mortgage debt, and apply the proceeds of the sale to the
satisfaction of his credit. Mortgage is merely an accessory undertaking for the convenience and security of the mortgage
creditor, and exists independently of the obligation to pay the debt secured by it. The mortgagee, if he is so minded, can
waive the mortgage security and proceed to collect the principal debt by personal action against the original mortgagor. 49
In view of the foregoing, Garcia has no cause of action against Villar in the absence of evidence to show that the second
mortgage executed in favor of Garcia has been violated by his debtors, Galas and Pingol, i.e., specifically that Garcia has
made a demand on said debtors for the payment of the obligation secured by the second mortgage and they have failed to
pay.

WHEREFORE, this Court hereby AFFIRMS the February 27, 2003 Decision and March 8, 2003 Resolution of the Court of
Appeals in CA-G.R. SP No. 72714.

[G.R. No. 158755 : June 18, 2012]

SPOUSES FRANCISCO AND MERCED RABAT, PETITIONERS, VS. PHILIPPINE NATIONAL BANK, RESPONDENT.
The inadequacy of the bid price in an extrajudicial foreclosure sale of mortgaged properties will not per se invalidate the
sale. Additionally, the foreclosing mortgagee is not precluded from recovering the deficiency should the proceeds of the sale
be insufficient to cover the entire debt.

cralaw

Antecedents
The parties are before the Court a second time to thresh out an issue relating to the foreclosure sale of the petitioners
mortgaged properties. The first time was in G.R. No. 134406 entitled Philippine National Bank v. Spouses Francisco and
Merced Rabat, decided on November 15, 2000.1 In G.R. No. 134406, the Court observed that The RABATs did not appeal from the decision of the trial court. As a matter of fact, in their Appellees Brief filed with the
Court of Appeals they prayed that said decision be affirmed in toto. As against the RABATs the trial courts findings of fact
and conclusion are already settled and final. More specifically, they are deemed to have unqualifiedly agreed with the trial
court that the foreclosure proceedings were valid in all respects, except as to the bid price. 2
Accordingly, we extract the antecedent facts from the narrative of the decision in G.R. No. 134406, as follows:

On 25 August 1979, respondent spouses Francisco and Merced Rabat (hereafter RABATs) applied for a loan with PNB.
Subsequently, the RABATs were granted on 14 January 1980 a medium-term loan of P4.0 Million to mature three years from
the date of implementation.
On 28 January 1980, the RABATs signed a Credit Agreement and executed a Real Estate Mortgage over twelve (12) parcels
of land which stipulated that the loan would be subject to interest at the rate of 17% per annum, plus the appropriate
service charge and penalty charge of 3% per annum on any amount remaining unpaid or not renewed when due.
On 25 September 1980, the RABATs executed another document denominated as "Amendment to the Credit Agreement"
purposely to increase the interest rate from 17% to 21% per annum, inclusive of service charge and a penalty charge of 3%
per annum to be imposed on any amount remaining unpaid or not renewed when due. They also executed another Real
Estate Mortgage over nine (9) parcels of land as additional security for their medium-term loan of Four Million (P4.0 M).
These parcels of land are agricultural, commercial and residential lots situated in Mati, Davao Oriental.
The several availments of the loan accommodation on various dates by the RABATs reached the aggregate amount of THREE
MILLION FIVE HUNDRED SEVENTEEN THOUSAND THREE HUNDRED EIGHTY (P3,517,380), as evidenced by the several
promissory notes, all of which were due on 14 March 1983.
The RABATs failed to pay their outstanding balance on due date.
In its letter of 24 July 1986, in response to the letter of the RABATs of 16 June 1986 requesting for more time within which
to arrive at a viable proposal for the settlement of their account, PNB informed the RABATs that their request has been
denied and gave the RABATs until 30 August 1986 to settle their account. The PNB sent the letter to 197 Wilson Street, San
Juan, Metro Manila.
For failure of the RABATs to pay their obligation, the PNB filed a petition for the extrajudicial foreclosure of the real estate
mortgage executed by the RABATs. After due notice and publication, the mortgaged parcels of land were sold at a public
auction held on 20 February 1987 and 14 April 1987. The PNB was the lone and highest bidder with a bid of P3,874,800.00.
As the proceeds of the public auction were not enough to satisfy the entire obligation of the RABATs, the PNB sent anew
demand letters. The letter dated 15 November 1990 was sent to the RABATs at 197 Wilson Street, San Juan, Metro Manila;
while another dated 30 August 1991 was sent to the RABATs at 197 Wilson Street, Greenhills, San Juan, Metro Manila, and
also in Mati, Davao Oriental.
Upon failure of the RABATs to comply with the demand to settle their remaining outstanding obligation which then stood at
P14,745,398.25, including interest, penalties and other charges, PNB eventually filed on 5 May 1992 a complaint for a sum
of money before the Regional Trial Court of Manila. The case was docketed as Civil Case No. 92-61122, which was assigned
to Branch 14 thereof.
The RABATs filed their answer with counterclaim on 28 July 1992 to which PNB filed its Reply and Answer to Counterclaim.
On 2 January 1993, the RABATs filed an amended answer. The RABATs admitted their loan availments from PNB and their
default in the payment thereof. However, they assailed the validity of the auction sales for want of notice to them before
and after the foreclosure sales.
They further added that as residents of Mati, Davao Oriental since 1970 up to the present, they never received any notice
nor heard about the foreclosure proceeding in spite of the claim of PNB that the foreclosure proceeding had been duly
published in the San Pedro Times, which is not a newspaper of general circulation.

The RABATs likewise averred that the bid price was grossly inadequate and unconscionable.
Lastly, the RABATs attacked the validity of the accumulated interest and penalty charges because since their properties were
sold in 1987, and yet PNB waited until 1992 before filing the case. Consequently, the RABATs contended that they should not
be made to suffer for the interest and penalty charges from May 1987 up to the present. Otherwise, PNB would be allowed
to profit from its questionable scheme.
The PNB filed on 5 February 1993 its Reply to the Amended Answer and Answer to Counterclaim. 3
On June 14, 1994, the Regional Trial Court, Branch 14, in Manila (RTC) rendered its decision in Civil Case No. 92-61122,sup
style="color: rgb(255, 0, 0);">[4 disposing thus:
WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered dismissing the complaint.
On the counterclaim, the two (2) auction sales of the mortgaged properties are hereby set aside and ordering the plaintiff to
reconvey to the defendants the remaining properties after the sale [of] sufficient properties for the satisfaction of the
obligation of the defendants.
The parties will bear their respective cost. So ordered.
Only PNB appealed to the CA (CA-G.R. CV No. 49800), assigning the following two errors to the RTC, 5 to wit:
I
WHETHER OR NOT THE TRIAL COURT ERRED IN NULLIFYING THE SHERIFF'S AUCTION SALE ON THE GROUND THAT THE
PNBS WINNING BID IS VERY LOW.
II
WHETHER OR NOT THE TRIAL COURT ERRED IN RULING THAT THE DEFENDANTS-APPELLEES ARE NOT LIABLE TO PAY
INTEREST AND PENALTY CHARGES AFTER THE AUCTION SALES UP TO THE FILING OF THIS CASE.
On their part, the Spouses Rabat simply urged in their appellees brief that the decision of the RTC be entirely affirmed. 6
On June 29, 1998, the CA upheld the RTCs decision to nullify the foreclosure sales but rested its ruling upon a different
ground,7 in that the Spouses Rabat could not have known of the foreclosure sales because they had not actually received
personal notices about the foreclosure proceedings. The CA concluded:
An examination of the exhibits show that the defendant-appellees given address is Mati, Davao Oriental and not 197 Wilson
Street, Greenhills, San Juan, Metro Manila as alleged by the plaintiff-appellant (Exhibit C to J, pp. 208, 217, 220, 229, 236239, Records). Records further show that all subsequent communications by plaintiff-appellant was sent to defendantappellees address at Wilson Street, Greenhills, San Juan. This was the very reason why defendant-appellees were not aware
of the foreclosure proceedings.
As correctly found out by the trial court, there is a need for the setting aside of the two (2) auction sales hence, there is yet
no deficiency judgment to speak of.
WHEREFORE, the decision of the trial court dated 14 June 1994, is hereby affirmed in toto. SO ORDERED.
PNB appealed in due course (G.R. No. 134406),8 positing:
WHETHER OR NOT THE COURT OF APPEALS MAY REVIEW AND PASS UPON THE TRIAL COURTS FINDING AND CONCLUSION
ON AN ISSUE WHICH WAS NEVER RAISED ON APPEAL, AND, THEREFORE, HAD ATTAINED FINALITY.

1.

THE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT DECIDED AND RESOLVED A QUESTION OR ISSUE NOT RAISED IN PETITIONER PNBS APPEAL;

2.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT REVERSED THE FINDING AND
CONCLUSION OF THE TRIAL COURT ON AN ISSUE WHICH HAD ALREADY ATTAINED FINALITY.

PNB argued that it had not raised the issue of lack of notice about the foreclosure sales because the fact that the Spouses
Rabat had not appealed the RTCs ruling as regards the lack of notice but had in fact prayed for the affirmance of the RTCs
judgment had rendered final the RTCs rejection of their allegation of lack of personal notice; and that, consequently, the CA
had committed grave abuse of discretion in still resolving the issue of lack of notice despite its not having been raised during
the appeal.9
On November 15, 2000, the Court promulgated its decision in G.R. No. 134406, decreeing:
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals of 29 July 1998 in CA-G.R. CV No. 49800 is
hereby SET ASIDE. The Court of Appeals is directed to DECIDE, with reasonable dispatch, CA-G.R. CV No. 49800 on the
basis of the errors raised by petitioner Philippine National Bank in its Appellants Brief. No pronouncement as to costs. SO
ORDERED.10
To conform to the decision in G.R. No. 134406, the CA amended its decision on January 24, 2003 by resolving the errors
specifically assigned by PNB in its appellants brief.11 The CA nonetheless affirmed the RTCs decision, declaring that the bid
price had been very low and observing that the mortgaged properties might have been sold for a higher value had PNB first
conducted a reappraisal of the properties.
Upon PNBs motion for reconsideration, however, the CA promulgated its questioned second amended decision on March 26,
2003,12 holding and ruling as follows:
After a thorough and conscientious review of the records and relevant laws and jurisprudence, We find the motion for
reconsideration to be meritorious.
While indeed no evidence was presented by appellant as to whether a reappraisal of the mortgaged properties was
conducted by it before submitting the bid price of P3,874,800.00 at the auction sale, said amount approximates the loan
value under its original appraisal in 1980, which was P4 million.
There is no dispute that mere inadequacy of price per se will not set aside a judicial sale of real property. Nevertheless,
where the inadequacy of the price is purely shocking to the conscience such that the mind revolts at it and such that a
reasonable man would neither directly nor indirectly be likely to consent to it, the sale shall be declared null and void. Said
rule, however, does not strictly apply in the case of extrajudicial foreclosure sales so that when a supposed unconscionably
low price paid by the bank-mortgagee for the mortgaged properties at the public auction sale is assailed, the sale is not
thereby readily set aside on account of such low purchase price. It is well-settled that alleged gross inadequacy of price is
not material when the law gives the owner the right to redeem as when a sale is made at a public auction, upon the theory
that the lesser the price the easier it is for the owner to effect the redemption. In fact, the property may be sold for less
than its fair market value.
Here, it may be that after the lapse of seven (7) years, the mortgaged properties may have indeed appreciated in value but
under the general rule cited above which had been consistently applied to extrajudicial foreclosure sales. We are not inclined
to invalidate the auction sale of appellees mortgaged properties solely on the alleged gross inadequacy of purchase price of
P3,874,800.00 which is actually almost the equivalent of the loan value of appellees twenty-one (21) parcels of land under
the Real Estate Mortgage executed in favor of appellant PNB in 1980. It has been held that no such disadvantage is

suffered by the mortgagor as he stands to gain with a reduced price because he possesses the right of redemption. Thus,
the re-appraisal of the mortgaged properties resulting in the appellant PNBs bid price of approximately the original loan
value of their mortgaged properties is beneficial rather than harmful considering the right of redemption granted to
appellees under the law. The claim of financial hardship or losses in their business is not an excuse for appellees-mortgagors
to evade their clear obligation to the bank-mortgagee.
Further, the fact that the mortgaged property is sold at an amount less than its actual market value should not militate
against the right of appellant PNB to the recovery of the deficiency in the loan obligation of appellees. Our Supreme Court
had ruled in several cases that in extrajudicial foreclosure of mortgage, where the proceeds of the sale are insufficient to pay
the debt, the mortgagee has the right to recover the deficiency from the debtor. A claim of deficiency arising from the
extrajudicial foreclosure sale is allowed. As to appellees claim of allegedly excessive penalty interest charges, the same is
without merit. We note that the promissory notes expressly provide for a penalty charge of 3% per annum to be imposed on
any unpaid amount on due date.
WHEREFORE, premises considered, the present motion for reconsideration is hereby GRANTED. Consequently, Our Amended
Decision of January 24, 2003 is hereby SET ASIDE and a new one is hereby entered GRANTING the appeal of plaintiff PNB.
The decision appealed from in Civil Case No. 92-61122 is hereby REVERSED and SET ASIDE. Judgment is hereby rendered
ordering the appellees to pay, jointly and severally, to appellant PNB: (1) the amount of P14,745,398.25 plus accrued
interest, service charge and penalty charge of 3% per annum from February 29, 1992 until the same shall have been fully
paid; (2) Ten Percent (10%) of the total amount due as attorneys fees; and (3) the costs of suit.
No pronouncement as to costs. SO ORDERED.13
The Spouses Rabat thereafter moved for the reconsideration of the second amended decision, but the CA denied their
motion.14
Hence, this appeal by the Spouses Rabat.
Issues
The Spouses Rabat frame the following issues for this appeal, thuswise:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF THE SUBJECT AUCTION SALES AND
ADJUDGING PAYMENT OF DEFICIENCY SUM, INTERESTS, PENALTY AND SERVICE CHARGES AND ATTORNEYS FEES, IN
COMPLETE AND ABSOLUTE DISREGARD OF ITS EARLIER PRONOUNCEMENTS, THE ARGUMENTS OF HEREIN PETITIONERS
AND EVIDENCE BORNE IN THE RECORDS OF THE INSTANT CASE.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DEPARTING FROM ITS FINDING OF FACTS AND CONCLUSIONS OF
LAW AS STATED IN THE EARLIER RENDERED FIRST AMENDED DECISION DATED 24 JANUARY 2003. 15
The Spouses Rabat insist that the CAs reversal of the amended decision was unjustified. They pray that the amended
decision of the CA (which affirmed the RTCs judgment) be reinstated. They contend that PNB was not entitled to recover
any deficiency due to the invalidity of the forced sales. 16
In its comment,17 PNB counters that the petition for review does not raise a valid question of law; and that the CAs second
amended decision was regularly promulgated because the CA thereby acted well within its right to correct itself considering
that the amended decision did not yet attain finality under the pertinent rules and jurisprudence.

Accordingly, the Court must pass upon and resolve three distinct issues. The first is whether the inadequacy of the bid price
of PNB invalidated the forced sale of the properties. The second is whether PNB was entitled to recover any deficiency from
the Spouses Rabat. The third is whether the CA validly rendered its second amended decision.
Ruling
The appeal has no merit.
Anent the first issue, we rule against the Spouses Rabat. We have consistently held that the inadequacy of the bid price at a
forced sale, unlike that in an ordinary sale, is immaterial and does not nullify the sale; in fact, in a forced sale, a low price is
considered more beneficial to the mortgage debtor because it makes redemption of the property easier.18
In Bank of the Philippine Islands, etc. v. Reyes,19 the Court discoursed on the effect of the inadequacy of the price in a forced
sale, stating:
Throughout a long line of jurisprudence, we have declared that unlike in an ordinary sale, inadequacy of the price at a forced
sale is immaterial and does not nullify a sale since, in a forced sale, a low price is more beneficial to the mortgage debtor for
it makes redemption of the property easier.
In the early case of The National Loan and Investment Board v. Meneses, we also had the occasion to state that:
As to the inadequacy of the price of the sale, this court has repeatedly held that the fact that a property is sold at public
auction for a price lower than its alleged value, is not of itself sufficient to annul said sale, where there has been
strict compliance with all the requisites marked out by law to obtain the highest possible price, and where there
is no showing that a better price is obtainable. (Government of the Philippines vs. De Asis, G. R. No. 45483, April 12,
1939; Guerrero vs. Guerrero, 57 Phil., 442;La Urbana vs. Belando, 54 Phil., 930; Bank of the Philippine Islands v . Green, 52
Phil., 491.) (Emphases supplied.)
In Hulst v. PR Builders, Inc., we further elaborated on this principle:
[G]ross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction may be
invalidated on the ground of inadequacy of price, or when such inadequacy shocks ones conscience as to justify the courts
to interfere; such does not follow when the law gives the owner the right to redeem as when a sale is made at public
auction, upon the theory that the lesser the price, the easier it is for the owner to effect redemption. When there is a right
to redeem, inadequacy of price should not be material because the judgment debtor may re-acquire the
property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the
price obtained at the execution sale. Thus, respondent stood to gain rather than be harmed by the low sale
value of the auctioned properties because it possesses the right of redemption. x x x (Emphasis supplied.)
It bears also to stress that the mode of forced sale utilized by petitioner was an extrajudicial foreclosure of real estate
mortgage which is governed by Act No. 3135, as amended. An examination of the said law reveals nothing to the effect that
there should be a minimum bid price or that the winning bid should be equal to the appraised value of the foreclosed
property or to the amount owed by the mortgage debtor. What is clearly provided, however, is that a mortgage debtor is
given the opportunity to redeem the foreclosed property within the term of one year from and after the date of sale. In the
case at bar, other than the mere inadequacy of the bid price at the foreclosure sale, respondent did not allege any
irregularity in the foreclosure proceedings nor did she prove that a better price could be had for her property under the
circumstances.
At any rate, we consider it notable enough that PNBs bid price of P3,874,800.00 might not even be said to be outrageously

low as to be shocking to the conscience. As the CA cogently noted in the second amended decision, 20 that bid price was
almost equal to both the P4,000,000.00 applied for by the Spouses Rabat as loan, and to the total sum of P3,517,380.00 of
their actual availment from PNB.
Resolving the second issue, we rule that PNB had the legal right to recover the deficiency amount. In Philippine National
Bank v. Court of Appeals,21 we held that:
xxx it is settled that if the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of the
mortgage, the mortgagee is entitled to claim the deficiency from the debtor. For when the legislature intends to deny the
right of a creditor to sue for any deficiency resulting from foreclosure of security given to guarantee an obligation it
expressly provides as in the case of pledges [Civil Code, Art. 2115] and in chattel mortgages of a thing sold on installment
basis [Civil Code, Art. 1484(3)]. Act No. 3135, which governs the extrajudicial foreclosure of mortgages, while silent as to
the mortgagees right to recover, does not, on the other hand, prohibit recovery of deficiency. Accordingly, it has been held
that a deficiency claim arising from the extrajudicial foreclosure is allowed. 22
Indeed, as we indicated in Prudential Bank v. Martinez,23 the fact that the mortgaged property was sold at an amount less
than its actual market value should not militate against the right to such recovery.24
There should be no question that PNB was legally entitled to recover the penalty charge of 3% per annum and attorneys
fees equivalent to 10% of the total amount due. The documents relating to the loan and the real estate mortgage showed
that the Spouses Rabat had expressly conformed to such additional liabilities; hence, they could not now insist otherwise. To
be sure, the law authorizes the contracting parties to make any stipulations in their covenants provided the stipulations are
not contrary to law, morals, good customs, public order or public policy.25 Equally axiomatic are that a contract is the law
between the contracting parties, and that they have the autonomy to include therein such stipulations, clauses, terms and
conditions as they may want to include.26 Inasmuch as the Spouses Rabat did not challenge the legitimacy and efficacy of the
additional liabilities being charged by PNB, they could not now bar PNB from recovering the deficiency representing the
additional pecuniary liabilities that the proceeds of the forced sales did not cover.
Lastly, we uphold the CAs promulgation of the second amended decision. Verily, all courts of law have the unquestioned
power to alter, modify, or set aside their decisions before they become final and unalterable. 27 A judgment that has attained
finality becomes immutable and unalterable, and may thereafter no longer be modified in any respect even if the
modification is meant to correct erroneous conclusions of fact or law and whether it will be made by the court that rendered
it or by the highest court of the land.28 The reason for the rule of immutability is that if, on the application of one party, the
court could change its judgment to the prejudice of the other, the court could thereafter, on application of the latter, again
change the judgment and continue this practice indefinitely.

29

The equity of a particular case must yield to the

overmastering need of certainty and unalterability of judicial pronouncements. 30 The doctrine of immutability and
inalterability of a final judgment has a two-fold purpose, namely: (a) to avoid delay in the administration of justice and,
thus, procedurally, to make orderly the discharge of judicial business; and (b) to put an end to judicial controversies, at the
risk of occasional errors, which is precisely why courts exist. Indeed, controversies cannot drag on indefinitely; the rights
and obligations of every litigant must not hang in suspense for an indefinite period of time. 31 As such, the doctrine of
immutability is not a mere technicality to be easily brushed aside, but a matter of public policy as well as a time-honored
principle of procedural law.
It is no different herein. The amended decision that favored the Spouses Rabat would have attained finality only after the
lapse of 15 days from notice thereof to the parties without a motion for reconsideration being timely filed or an appeal being
seasonably taken.32 Had that happened, the amended decision might have become final and immutable. However,
considering that PNB timely filed its motion for reconsideration vis--vis the amended decision, the CAs reversal of the
amended decision and its promulgation of the second amended decision were valid and proper.

cralaw

WHEREFORE, we AFFIRM the SECOND AMENDED DECISION promulgated on March 26, 2003 in CA-G.R. CV No. 49800
entitled Philippine National Bank v. Spouses Francisco and Merced Rabat.
The petitioners shall pay the costs of suit.

G.R. NO. 195540 : March 13, 2013

GOLDENWAY MERCHANDISING CORPORATION, Petitioner, v.EQUITABLE PCI BANK, Respondent.
Before the Court is a petition for review on certiorari which seeks to reverse and set aside the Decision 1 dated November 19,
2010 and Resolution2 dated January 31, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 91120. The CA affirmed the
Decision3 dated January 8, 2007 of the Regional Trial Court (RTC) of- Valenzuela City, Branch 171 dismissing the complaint in
Civil Case No. 295-V -01.
The facts are undisputed.
On November 29, 1985, Goldenway Merchandising Corporation (petitioner) executed a Real Estate Mortgage in favor of
Equitable PCI Bank (respondent) over its real properties situated in Valenzuela, Bulacan (now Valenzuela City) and covered
by Transfer Certificate of Title (TCT) Nos. T-152630, T-151655 and T-214528 of the Registry of Deeds for the Province of
Bulacan. The mortgage secured the Two Million Pesos (P2,000,000.00) loan granted by respondent to petitioner and was
duly registered.4

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As petitioner failed to settle its loan obligation, respondent extrajudicially foreclosed the mortgage on December 13, 2000.
During the public auction, the mortgaged properties were sold for P3,500,000.00 to respondent. Accordingly, a Certificate of
Sale was issued to respondent on January 26, 2001. On February 16, 2001, the Certificate of Sale was registered and
inscribed on TCT Nos. T-152630, T-151655 and T-214528. 5

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In a letter dated March 8, 2001, petitioner's counsel offered to redeem the foreclosed properties by tendering a check in the
amount of P3,500,000.00. On March 12, 2001, petitioner's counsel met with respondent's counsel reiterating petitioner's
intention to exercise the right of redemption.6 However, petitioner was told that such redemption is no longer possible

because the certificate of sale had already been registered. Petitioner also verified with the Registry of Deeds that title to the
foreclosed properties had already been consolidated in favor of respondent and that new certificates of title were issued in
the name of respondent on March 9, 2001.
On December 7, 2001, petitioner filed a complaint7 for specific performance and damages against the respondent, asserting
that it is the one-year period of redemption under Act No. 3135 which should apply and not the shorter redemption period
provided in Republic Act (R.A.) No. 8791. Petitioner argued that applying Section 47 of R.A. 8791 to the real estate
mortgage executed in 1985 would result in the impairment of obligation of contracts and violation of the equal protection
clause under the Constitution. Additionally, petitioner faulted the respondent for allegedly failing to furnish it and the Office
of the Clerk of Court, RTC of Valenzuela City with a Statement of Account as directed in the Certificate of Sale, due to which
petitioner was not apprised of the assessment and fees incurred by respondent, thus depriving petitioner of the opportunity
to exercise its right of redemption prior to the registration of the certificate of sale.
In its Answer with Counterclaim,8 respondent pointed out that petitioner cannot claim that it was unaware of the redemption
price which is clearly provided in Section 47 of R.A. No. 8791, and that petitioner had all the opportune time to redeem the
foreclosed properties from the time it received the letter of demand and the notice of sale before the registration of the
certificate of sale. As to the check payment tendered by petitioner, respondent said that even assuming arguendo such
redemption was timely made, it was not for the amount as required by law.
On January 8, 2007, the trial court rendered its decision dismissing the complaint as well as the counterclaim. It noted that
the issue of constitutionality of Sec. 47 of R.A. No. 8791 was never raised by the petitioner during the pre-trial and the trial.
Aside from the fact that petitioner's attempt to redeem was already late, there was no valid redemption made because Atty.
Judy Ann Abat-Vera who talked to Atty. Joseph E. Mabilog of the Legal Division of respondent bank, was not properly
authorized by petitioner's Board of Directors to transact for and in its behalf; it was only a certain Chan Guan Pue, the
alleged President of petitioner corporation, who gave instruction to Atty. Abat-Vera to redeem the foreclosed properties. 9

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Aggrieved, petitioner appealed to the CA which affirmed the trial court's decision. According to the CA, petitioner failed to
justify why Section 47 of R.A. No. 8791 should be declared unconstitutional. Furthermore, the appellate court concluded that
a reading of Section 47 plainly reveals the intention to shorten the period of redemption for juridical persons and that the
foreclosure of the mortgaged properties in this case when R.A. No. 8791 was already in effect clearly falls within the purview
of the said provision.10

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Petitioner's motion for reconsideration was likewise denied by the CA.

In the present petition, it is contended that Section 47 of R.A. No. 8791 is inapplicable considering that the contracting
parties expressly and categorically agreed that the foreclosure of the real estate mortgage shall be in accordance with Act
No. 3135. Citing Co v. Philippine National Bank11 petitioner contended that the right of redemption is part and parcel of the
Deed of Real Estate Mortgage itself and attaches thereto upon its execution, a vested right flowing out of and made
dependent upon the law governing the contract of mortgage and not on the mortgagee's act of extrajudicially foreclosing the
mortgaged properties. This Court thus held in said case that "Under the terms of the mortgage contract, the terms and
conditions under which redemption may be exercised are deemed part and parcel thereof whether the same be merely
conventional or imposed by law."
Petitioner then argues that applying Section 47 of R.A. No. 8791 to the present case would be a substantial impairment of its
vested right of redemption under the real estate mortgage contract. Such impairment would be violative of the constitutional
proscription against impairment of obligations of contract, a patent derogation of petitioner's vested right and clearly
changes the intention of the contracting parties. Moreover, citing this Court's ruling in Rural Bank of Davao City, Inc. v. Court

of Appeals12 where it was held that "Section 119 prevails over statutes which provide for a shorter period of redemption in
extrajudicial foreclosure sales", and in Sulit
v. Court of Appeals,13 petitioner stresses that it has always been the policy of this Court to aid rather than defeat the
mortgagor's right to redeem his property.
Petitioner further argues that since R.A. No. 8791 does not provide for its retroactive application, courts therefore cannot
retroactively apply its provisions to contracts executed and consummated before its effectivity. Also, since R.A. 8791 is a
general law pertaining to the banking industry while Act No. 3135 is a special law specifically governing real estate mortgage
and foreclosure, under the rules of statutory construction that in case of conflict a special law prevails over a general law
regardless of the dates of enactment of both laws, Act No. 3135 clearly should prevail on the redemption period to be
applied in this case.
The constitutional issue having been squarely raised in the pleadings filed in the trial and appellate courts, we shall proceed
to resolve the same.
The law governing cases of extrajudicial foreclosure of mortgage is Act No. 3135, 14 as amended by Act No. 4118. Section 6
thereof provides:

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SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his
successors-in-interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the
property subsequent to the mortgage or deed of
trust under which the property is sold, may redeem the same at any time within the term of one year from and after the
date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four
hundred and sixty-six, inclusive, of the Code of
Civil Procedure,15 in so far as these are not inconsistent with the provisions of this Act.
The one-year period of redemption is counted from the date of the registration of the certificate of sale. In this case, the
parties provided in their real estate mortgage contract that upon petitioner's default and the latter's entire loan obligation
becoming due, respondent may immediately foreclose the mortgage judicially in accordance with the Rules of Court, or
extrajudicially in accordance with Act No. 3135, as amended.
However, Section 47 of R.A. No. 8791 otherwise known as "The General Banking Law of 2000" which took effect on June 13,
2000, amended Act No. 3135. Said provision reads:

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SECTION 47. Foreclosure of Real Estate Mortgage. In the event of foreclosure, whether judicially or extrajudicially, of any
mortgage on real estate which is security for any loan or other credit accommodation granted, the mortgagor or debtor
whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after
the sale of the real estate, to redeem the property by paying the amount due under the mortgage deed, with interest
thereon at the rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from the
sale and custody of said property less the income derived therefrom. However, the purchaser at the auction sale concerned
whether in a judicial or extrajudicial foreclosure shall have the right to enter upon and take possession of such property
immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. Any
petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be
given due course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will pay
all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding.

Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have
the right to redeem the property in accordance with this provision until, but not after, the registration of the certificate of
foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after
foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this
Act shall retain their redemption rights until their expiration. (Emphasis supplied.)
Under the new law, an exception is thus made in the case of juridical persons which are allowed to exercise the right of
redemption only "until, but not after, the registration of the certificate of foreclosure sale" and in no case more than three
(3) months after foreclosure, whichever comes first. 16

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May the foregoing amendment be validly applied in this case when the real estate mortgage contract was executed in 1985
and the mortgage foreclosed when R.A. No. 8791 was already in effect?
We answer in the affirmative.
When confronted with a constitutional question, it is elementary that every court must approach it with grave care and
considerable caution bearing in mind that every statute is presumed valid and every reasonable doubt should be resolved in
favor of its constitutionality.17 For a law to be nullified, it must be shown that there is a clear and unequivocal breach of the
Constitution. The ground for nullity must be clear and beyond reasonable doubt. 18 Indeed, those who petition this Court to
declare a law, or parts thereof, unconstitutional must clearly establish the basis therefor. Otherwise, the petition must
fail.19

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Petitioner's contention that Section 47 of R.A. 8791 violates the constitutional proscription against impairment of the
obligation of contract has no basis.
The purpose of the non-impairment clause of the Constitution 20 is to safeguard the integrity of contracts against unwarranted
interference by the State. As a rule, contracts should not be tampered with by subsequent laws that would change or modify
the rights and obligations of the parties.21 Impairment is anything that diminishes the efficacy of the contract. There is an
impairment if a subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses
with those agreed upon or withdraws remedies for the enforcement of the rights of the parties. 22

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Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only modified the time for
the exercise of such right by reducing the one-year period originally provided in Act No. 3135. The new redemption period
commences from the date of foreclosure sale, and expires upon registration of the certificate of sale or three months after
foreclosure, whichever is earlier. There is likewise no retroactive application of the new redemption period because Section
47 exempts from its operation those properties foreclosed prior to its effectivity and whose owners shall retain their
redemption rights under Act No. 3135.
Petitioner's claim that Section 47 infringes the equal protection clause as it discriminates mortgagors/property owners who
are juridical persons is equally bereft of merit.
The equal protection clause is directed principally against undue favor and individual or class privilege. It is not intended to
prohibit legislation which is limited to the object to which it is directed or by the territory in which it is to operate. It does not
require absolute equality, but merely that all persons be treated alike under like conditions both as to privileges conferred
and liabilities imposed.23 Equal protection permits of reasonable classification. 24 We have ruled that one class may be treated
differently from another where the groupings are based on reasonable and real distinctions. 25 If classification is germane to
the purpose of the law, concerns all members of the class, and applies equally to present and future conditions, the
classification does not violate the equal protection guarantee. 26

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We agree with the CA that the legislature clearly intended to shorten the period of redemption for juridical persons whose
properties were foreclosed and sold in accordance with the provisions of Act No. 3135. 27

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The difference in the treatment of juridical persons and natural persons was based on the nature of the properties foreclosed
whether these are used as residence, for which the more liberal one-year redemption period is retained, or used for
industrial or commercial purposes, in which case a shorter term is deemed necessary to reduce the period of uncertainty in
the ownership of property and enable mortgagee-banks to dispose sooner of these acquired assets. It must be underscored
that the General Banking Law of 2000, crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to reform
the General Banking Act of 1949 by fashioning a legal framework for maintaining a safe and sound banking system. 28 In this
context, the amendment introduced by Section 47 embodied one of such safe and sound practices aimed at ensuring the
solvency and liquidity of our banks. It cannot therefore be disputed that the said provision amending the redemption period
in Act 3135 was based on a reasonable classification and germane to the purpose of the law.
This legitimate public interest pursued by the legislature further enfeebles petitioner's impairment of contract theory.
The right of redemption being statutory, it must be exercised in the manner prescribed by the statute, 29 and within the
prescribed time limit, to make it effective. Furthermore, as with other individual rights to contract and to property, it has to
give way to police power exercised for public welfare. 30 The concept of police power is well-established in this jurisdiction. It
has been defined as the "state authority to enact legislation that may interfere with personal liberty or property in order to
promote the general welfare." Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future
where it could be done, provides enough room for an efficient and flexible response to conditions and circumstances thus
assuming the greatest benefits.31

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The freedom to contract is not absolute; all contracts and all rights are subject to the police power of the State and not only
may regulations which affect them be established by the State, but all such regulations must be subject to change from time
to time, as the general well-being of the community may require, or as the circumstances may change, or as experience
may demonstrate the necessity.32 Settled is the rule that the non-impairment clause of the Constitution must yield to the
loftier purposes targeted by the Government. The right granted by this provision must submit to the demands and
necessities of the State's power of regulation. 33 Such authority to regulate businesses extends to the banking industry which,
as this Court has time and again emphasized, is undeniably imbued with public interest. 34

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Having ruled that the assailed Section 47 of R.A. No. 8791 is constitutional, we find no reversible error committed by the CA
in holding that petitioner can no longer exercise the right of redemption over its foreclosed properties after the certificate of
sale in favor of respondent had been registered.
WHEREFORE, the petition for review on certiorari is DENIED for lack of merit. The Decision dated November 19, 2010 and
Resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. CV No. 91120 are hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.

[G.R. No. 171868 : July 27, 2011]

SPOUSES FRANCISCO D. YAP AND WHELMA S. YAP, PETITIONERS, VS. SPOUSES ZOSIMO DY, SR.
[G.R. NO. 171991]
DUMAGUETE RURAL BANK, INC. (DRBI) HEREIN REPRESENTED BY MR. WILLIAM D.S. DICHOSO, PETITIONERS,
VS. SPOUSES ZOSIMO DY,
May persons to whom several mortgaged lands were transferred without the knowledge and consent of the creditor redeem
only several parcels if all the lands were sold together for a single price at the foreclosure sale? This is the principal issue
presented to us for resolution in these two petitions for review on certiorari assailing the May 17, 2005 Decision 1 and March
15, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. C.V. No. 57205.
The antecedents are as follows:
The spouses Tomas Tirambulo and Salvacion Estorco (Tirambulos) are the registered owners of several parcels of land
located in Ayungon, Negros Oriental, registered under Transfer Certificate of Title (TCT) Nos. T-14794, T-14777, T-14780, T14781, T-14783 and T-20301 of the Registry of Deeds of Negros Oriental, and more particularlydesignated as follows:

(1) TCT No. T-14777

Lot 1 of Plan Pcs-11728

61,371 sq.m.

(2)
(3)
(4)
(5)
(6)

TCT No. T-20301

TCT No. T-14780
TCT No. T-14794
TCT No. T-14781
TCT No. T-14783

Lot 3 of Plan Psu-124376

Lot 4 of Plan Pcs-11728
Lot 5 of Plan Psu-124376
Lot 6 of Plan Pcs-11728
Lot 8 of Plan Pcs-11728

17,373 sq.m.
27,875 sq.m.
2,900 sq.m.
16,087 sq.m.
39,888 sq.m

The Tirambulos likewise own a parcel of land denominated as Lot 846, covered by Tax Declaration No. 08109.
On December 3, 1976, the Tirambulos executed a Real Estate Mortgage 3 over Lots 1, 4, 5, 6 and 8 in favor of the Rural Bank
of Dumaguete, Inc., predecessor of Dumaguete Rural Bank, Inc. (DRBI), to secure a P105,000 loan extended by the latter to
them. Later, the Tirambulos obtained a second loan for P28,000 and also executed a Real Estate Mortgage 4 over Lots 3 and
846 in favor of the same bank on August 3, 1978.
Subsequently, on October 27, 1979, the Tirambulos sold all seven mortgaged lots to the spouses Zosimo Dy, Sr. and
Natividad Chiu (the Dys) and the spouses Marcelino C. Maxino and Remedios Lasola (the Maxinos) without the consent and
knowledge of DRBI. This sale, which was embodied in a Deed of Absolute Sale, 5 was followed by a default on the part of the
Tirambulos to pay their loans to DRBI. Thus, DRBI extrajudicially foreclosed the December 3, 1976 mortgage and had Lots
1, 4, 5, 6 and 8 sold at public auction on March 31, 1982.
At the auction sale, DRBI was proclaimed the highest bidder and bought said lots for P216,040.93. The Sheriff's Certificate
of Sale6 stated that the "sale is subject to the rights of redemption of the mortgagor (s) or any other persons authorized by
law so to do, within a period of one (1) year from registration hereof." 7 The certificate of sale, however, was not registered
until almost a year later, or on June 24, 1983.
On July 6, 1983, or twelve (12) days after the sale was registered, DRBI sold Lots 1, 3 and 6 to the spouses Francisco D.
Yap and Whelma D. Yap (the Yaps) under a Deed of Sale with Agreement to Mortgage. 8 It is important to note, however,
that Lot 3 was not among the five properties foreclosed and bought by DRBI at public auction.
On August 8, 1983, or well within the redemption period, the Yaps filed a Motion for Writ of Possession 9 alleging that they
have acquired all the rights and interests of DRBI over the foreclosed properties and are entitled to immediate possession of
the same because the one-year redemption period has lapsed without any redemption being made. Said motion, however,
was ordered withdrawn on August 22, 1983 10 upon motion of the Yaps, who gave no reason therefor.11 Three days later, or
on August 25, 1983, the Yaps again filed a Motion for Writ of Possession. 12 This time the motion was granted, and a Writ of
Possession13 over Lots 1, 3 and 6 was issued in favor of the Yaps on September 5, 1983. They were placed in possession of
Lots 1, 3 and 6 seven days later.
On May 22, 1984, roughly a month before the one-year redemption period was set to expire, the Dys and the Maxinos
attempted to redeem Lots 1, 3 and 6. They tendered the amount of P40,000.00 to DRBI and the Yaps, 14 but both refused,
contending that the redemption should be for the full amount of the winning bid of P216,040.93 plus interest for all the
foreclosed properties.
Thus, on May 28, 1984, the Dys and the Maxinos went to the Office of the Sheriff of Negros Oriental and paid P50,625.29
(P40,000.00 for the principal plus P10,625.29 for interests and Sheriff's Commission) to effect the redemption. 15 Noticing
that Lot 3 was not included in the foreclosure proceedings, Benjamin V. Diputado, Clerk of Court and Provincial Sheriff,
issued a Certificate of Redemption16 in favor of the Dys and the Maxinos only for Lots 1 and 6, and stated in said certificate
that Lot 3 is not included in the foreclosure proceedings. By letter 17 of even date, Atty. Diputado also duly notified the Yaps of
the redemption of Lots 1 and 6 by the Dys and the Maxinos, as well as the non-inclusion of Lot 3 among the foreclosed
properties. He advised the Yaps to personally claim the redemption money or send a representative to do so.

In a letter to the Provincial Sheriff on May 31, 1984, the Yaps refused to take delivery of the redemption price arguing that
one of the characteristics of a mortgage is its indivisibility and that one cannot redeem only some of the lots foreclosed
because all the parcels were sold for a single price at the auction sale. 18
On June 1, 1984, the Provincial Sheriff wrote the Dys and the Maxinos informing them of the Yaps' refusal to take delivery of
the redemption money and that in view of said development, the tender of the redemption money was being considered as a
consignation.19
On June 15, 1984, the Dys and the Maxinos filed Civil Case No. 8426 with the Regional Trial Court of Negros Oriental for
accounting, injunction, declaration of nullity (with regard to Lot 3) of the Deed of Sale with Agreement to Mortgage, and
damages against the Yaps and DRBI. In their complaint, 20 they prayed
a) That the Deed of Sale With Agreement to Mortgage ... be declared null and void ab initio;
b) That defendant Yap[s'] possession of Lot No. 3, TCT No. T20301 based as it was on a void sale, be declared illegal from
the very beginning;
c) That defendants be ordered to render to plaintiffs a fair accounting of the harvests and income which defendants made
from said Lot No. 3 and, in addition, be ordered to pay to plaintiffs damages for wrongfully depriving plaintiffs of the use and
enjoyment of said property;
d) That the redemption which plaintiffs made of Lot No. 1, TCT No. 14777, and Lot No. 6, TCT No. 14781, through the
Provincial Sheriff of Negros Oriental, be declared valid and binding on the defendants, thereby releasing and freeing said
parcels of land from whatever liens or claims that said defendants might have on them;
e) That defendants be likewise ordered to render to plaintiffs full and fair accounting of all the harvests, fruits, and income
that they or either of them might have derived from said two parcels of land starting from the time defendant Yap first took
possession thereof and harvested the coconuts in September, 1983;
f) That, after the accounting herein prayed for, defendants be required to deliver to plaintiffs the net proceeds of the income
from the three parcels of land subject of this case, together with interest at the legal rate;
g) That for his acts of misrepresentation and deceit in obtaining a writ of possession over the three parcels of land subject of
this case, and for the highly irregular and anomalous procedures and maneuvers employed by defendant Yap in securing
said writ, as well as for harvesting the coconuts even after knowing that plaintiffs had already fully redeemed the properties
in question and, with respect to Lot No. 3, after knowing that the same was not in fact included in the foreclosure and,
therefore, could not have been validly sold by the bank to him, said defendant Yap be condemned to pay plaintiffs moral
damages in the amount of P200,000.00, plus punitive and exemplary damages in the amount of P100,000.00;
h) That for falsifying the Sheriff's Certificate of Sale and selling unlawfully Lot No. 3, TCT No. T-20301, to its co-defendant
Yap, defendant DRBI be condemned to pay to plaintiffs actual damages in the amount of P50,000.00; moral damages in the
amount of P200,000.00; and punitive and exemplary damages in the amount of P100,000.00;
i) That defendants be condemned to pay solidarily to plaintiffs attorney's fees in the amount of P50,000.00; other legitimate
expenses of litigation in the amount of P30,000.00; and the costs of suit;
j) That pending hearing of this case, a writ of preliminary injunction be issued enjoining and restraining the defendants,

particularly defendant Yap, from disturbing and interfering the plaintiffs' possession and other rights of ownership over the
land in question;
k) That pending hearing of the petition for preliminary injunction, a temporary restraining order be issued against the
defendants, particularly against defendant Yap, to serve the same purpose for which the writ of preliminary injunction is
herein prayed for; and
l) That, after hearing of the main case, said preliminary injunction be made permanent.
Furthermore, plaintiffs pray for all other reliefs which may be just and equitable in the premises. 21
Thereafter, on June 19, 1984, the Dys and the Maxinos consigned to the trial court an additional sum of P83,850.50 plus
sheriff's commission fee of P419.25 representing the remaining balance of the purchase price that the Yaps still owed DRBI
by virtue of the sale to them by the DRBI of Lots 1, 3 and 6. 22
Meanwhile, by letter23 dated June 27, 1984, the Yaps told DRBI that no redemption has been made by the Tirambulos or
their successors-in-interest and requested DRBI to consolidate its title over the foreclosed properties by requesting the
Provincial Sheriff to execute the final deed of sale in favor of the bank so that the latter can transfer the titles of the two
foreclosed properties to them.
On the same date, the Yaps also wrote the Maxinos informing the latter that during the last harvest of the lots bought from
DRBI, they excluded from the harvest Lot 3 to show their good faith. Also, they told the Maxinos that they were formally
turning over the possession of Lot 3 to the Maxinos, without prejudice to the final determination of the legal implications
concerning Lot 3. As to Lots 1 and 6, however, the Yaps stated that they intended to consolidate ownership over them since
there has been no redemption as contemplated by law. Included in the letter was a liquidation of the copra proceeds
harvested from September 7, 1983 to April 30, 1984 for Lots 1, 3 and 6. 24
Later, on July 5, 1984, the Yaps filed Civil Case No. 8439 for consolidation of ownership, annulment of certificate of
redemption, and damages against the Dys, the Maxinos, the Provincial Sheriff of Negros Oriental and DRBI. In their
complaint,25 the Yaps prayed
1. That [they] be declared the exclusive owners of Lot No. 1 covered by TCT No. T-14777 and Lot No. 6 covered by TCT No.
T-14781 for failure on the part of defendants Zosimo Dy, Sr., and Marcelino Maxino to redeem the properties in question
within one (1) year from the auction sale.
2. That defendants be [declared] solidarily liable to pay moral damages in the amount of ONE HUNDRED THOUSAND PESOS
(P100,000.00), THIRTY[-]FIVE THOUSAND PESOS (P35,000.00) as attorney's fees and FIFTEEN THOUSAND PESOS
(P15,000.00) as exemplary damages;
3. That the Provincial Sheriff be required to execute the final Deed of Sale in favor of the bank and the bank be in turn
required to transfer the property to the plaintiffs in accordance with the Deed of Sale with Mortgage.
4. That the court grant such other relief as may be deemed just and equitable under the premises. 26
Civil Case Nos. 8426 and 8439 were tried jointly.
On October 24, 1985, the Yaps, by counsel, filed a motion to withdraw from the provincial sheriff the redemption money
amounting to P50,373.42.27 Said motion was granted on October 28, 1985 after a Special Power of Attorney executed by

Francisco Yap in favor of his brother Valiente Yap authorizing the latter to receive the P50,373.42 redemption money was
presented in court.28
On February 12, 1997, the trial court rendered decision29 in favor of the Yaps. The fallo reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Dismissing the complaint of Dy and Maxino spouses in Civil Case No. 8426 as well as the bank and the Yap spouses
counterclaim for lack of factual and legal basis;
2. In Civil Case No. 8439:

a)
b)

Declaring the Yap spouses, plaintiffs therein, the exclusive owners of Lot No. 1 covered by TCT No. T-14777
and Lot No. 6 covered by TCT No. T-14781 for failure on the part of the Dy and Maxino spouses, defendants
therein, to redeem the properties in question within one (1) year from the auction sale.
Directing the Provincial Sheriff of Negros Oriental to execute the Final Deed of Sale in favor of the bank and
the latter to transfer the subject properties to the Yap spouses in accordance with the Deed of Sale With
Mortgage....

SO ORDERED.30
On March 7, 1997, the trial court amended the above dispositive portion upon motion of DRBI, as follows:
Wherefore, judgment is hereby rendered as follows:
1. The Certificate of Redemption issued by the Provincial Sheriff (Exh. "M") is hereby declared null and void;
2. The Provincial Sheriff of Negros Oriental is hereby ordered to execute a Final Deed of Sale of the foreclosed properties in
favor of the defendant Dumaguete Rural Bank, Inc., subject to the rights of the Yap spouses acquired in accordance with the
Deed of Sale with Mortgage...;
3. The Deed of Sale dated [October] 27, 1979, made by Tirambulo and Estorco in favor of the Dys and Maxinos covering all
the seven (7) parcels of land in question, is hereby declared null and void;
4. In Civil Case No. 8439, declaring the Yap Spouses, the exclusive owners of Lot No. 1, covered by TCT No. T-14777, and
Lot No. 6, covered by TCT No. T-14781, for failure on the part of the Dy and Maxino Spouses, to redeem said properties
within one (1) year from the date of the registration of the auction sale;
5. All other claims and counterclaims are hereby dismissed for lack of merit.
SO ORDERED.31
The trial court held that the Dys and the Maxinos failed to formally offer their evidence; hence, the court could not consider
the same. It also upheld the Deed of Sale with Agreement to Mortgage between the Yaps and DRBI, ruling that its
genuineness and due execution has been admitted by the Dys and the Maxinos and that it is not contrary to law, morals,
good customs, public policy or public order. Thus, ownership of Lots 1, 3 and 6 was transferred to the Yaps.
The trial court further held that the Dys and the Maxinos failed to exercise their rights of redemption properly and timely.
They merely deposited the amount of P50,625.29 with the Sheriff, whereas the amount due on the mortgage deed is

P216,040.93.
Aggrieved by the above ruling, the Dys and the Maxinos elevated the case to the CA. They argued that the trial court erred
in:

1)
2)

3)
4)

5)

6)

... failing to consider plaintiffs' evidence, and documentary [Exhibits A through TT (admitted under Order of 3
March 1995)];
...failing to declare void or annul the purported contract of sale by Dumaguete Rural Bank, Inc. to Francisco D.
Yap and Whelma S. Yap of Lots 1, 3, and 6, during the redemption period [the purported seller (bank) not being
the owner thereof, and Lot 3 not being included in the foreclosure/auction sale and could not have been acquired
by the Bank thereat];
...not holding that the parcels of land had been properly and validly redeemed in good faith, defendant Yap, the
Provincial Sheriff, the Clerk of Court, and Mr. Mario Dy, having accepted redemption/consignation (or, in not
fixing the redemption price and allowing redemption);
...not holding that by withdrawing the redemption money consigned/deposited by plaintiffs to the Court, and
turning over possession of the parcels of land to plaintiffs, defendants Yap accepted, ratified, and confirmed
redemption by plaintiffs of the parcels of land acquired at foreclosure/auction sale by the Bank and purportedly
sold by it to and purchased by Yap;
...not finding and holding that all the parcels of land covered by the foreclosed mortgage held by Dumaguete
Rural Bank had been acquired by and are in the possession of plaintiffs as owners and that defendants bank and
Yap had disposed of and/or lost their rights and interests and/or any cause of action and their claims had been
extinguished and mooted or otherwise settled, waived and/or merged in plaintiffs-appellants;
...not holding that defendants Yap have no cause of action to quiet title as they had no title or possession of the
parcels of land in question and in declaring defendants Yap spouses the exclusive owners of Lot No. 1 covered
by TCT No. T-14777 and Lot No. 6 covered by TCT No. T-14781 and in directing the Provincial Sheriff to
execute the final deed of sale in favor of the bank and the latter to transfer the subject properties to the Yap
spouses in accordance with the Deed of Sale with Mortgage which included Lot No. 3 which was not foreclosed
by the Sheriff and was not included in the certificate of sale issued by him and despite their acceptance,
ratification, and confirmation of the redemption as well as acknowledgment of possession of the parcels of land
by plaintiffs;

7)
...issuing an amended decision after perfection of plaintiff's appeal and without waiting for their comment
(declaring the Certificate of Redemption issued by the Provincial Sheriff (Exh. "M") null and void; ordering the
Provincial Sheriff of Negros Oriental to execute a Final Deed of Sale of the foreclosed properties in favor of the
defendant Dumaguete Rural Bank, Inc., subject to the rights of the Yap spouses acquired in accordance with the
Deed of Sale with Mortgage (Exh. "B"-Maxino and Dy; Exh. "1" -Yap); declaring null and void the Deed of
Sale dated Oct[ober] 27, 1979, made by Tirambulo and Estorco in favor of the Dys and Maxinos covering all
the seven (7) parcels of land in question; in Civil Case No. 8439, declaring the Yap spouses, the exclusive
owners of Lot No. 1, covered by TCT No. T-14777, and Lot No. 6, covered by TCT No. T-14781, for failure on
the part of the Dy and Maxino spouses, to redeem said properties within (1) year from the date of registration of
the auction sale) after plaintiffs had perfected appeal of the 12 February 1997 decision, without hearing or
awaiting plaintiffs' comment, and in the face of the records showing that the issues were never raised, much less
litigated, insofar as Tirambulo, as well in the face of the foregoing circumstances, especially dismissal of
defendants' claims and counterclaims and acquisition of ownership and possession of the parcels of land by
plaintiffs as well as disposition and/or loss of defendants rights and interests and cause of action in respect
thereof and/or settlement, waiver, and/or extinguishment of their claims, and merger in plaintiffs-appellants, and

8)

without stating clearly the facts and the law upon which it is based[; and]
...not finding, holding and ruling that defendants acted in bad faith and in an abusive and oppressive manner, if
not contrary to law; and in not awarding plaintiffs damages.
32

On May 17, 2005, the CA rendered a decision reversing the March 7, 1997 amended decision of the trial court. The
dispositive portion of the assailed CA decision reads:
IN LIGHT OF THE FOREGOING, this appeal is GRANTED. The decision as well as the amended decision of the Regional Trial
Court is REVERSED AND SET ASIDE. In lieu thereof[,] judgment is hereby rendered as follows:
1. Declaring the sale made by Dumaguete Rural Bank Inc. to Sps. Francisco and Whelma Yap with respect to Lot No. 3 under
TCT No. T-20301 as null and void;
2. Declaring the redemption made by Spouses Dy and Spouses Maxino with regards to Lot No. 6 under TCT No. T-14781 and
Lot No. 1 under TCT No. [T-]14777 as valid;
3. Ordering defendants, Sps. Yap, to deliver the possession and ownership thereof to Sps. Dy and Sps. Maxino; to give a fair
accounting of the proceeds of these three parcels of land and to tender and deliver the corresponding amount of income
from October 24, 1985 until the finality of this judgment[; and]
4. Condemning the defendant bank to pay damages to Spouses Dy and Spouses Maxino the amount of P20,000.00 as moral
damages and P200,000.00 as exemplary damages and attorney's fees in the amount of P50,000.00.
All other claims are dismissed. Costs against the appellees. SO ORDERED.33
The CA held that the trial court erred in ruling that it could not consider the evidence for the Dys and the Maxinos allegedly
because they failed to formally offer the same. The CA noted that although the testimonies of Attys. Marcelino C. Maxino
and Benjamin V. Diputado were not formally offered, the procedural lapse was cured when the opposing counsel crossexamined said witnesses. Also, while the original TSNs of the witnesses for the plaintiffs in Civil Case No. 8426 were burned,
the latter's counsel who had copies thereof, furnished the Yaps copies for their scrutiny and comment. The CA further noted
that the trial court also admitted all the documentary exhibits of the Dys and the Maxinos on March 3, 1995. Unfortunately,
however, the trial court simply failed to locate the pertinent documents in the voluminous records of the cases.
On the merits, the CA ruled that the Dys and the Maxinos had proven their cause of action sufficiently. The CA noted that
their claim that Lot 3 was not among the properties foreclosed was duly corroborated by Atty. Diputado, the Provincial
Sheriff who conducted the foreclosure sale. The Yaps also failed to rebut their contention regarding the former's acceptance
of the redemption money and their delivery of the possession of the three parcels of land to the Dys and the Maxinos. The
CA also noted that not only did the Yaps deliver possession of Lot 3 to the Dys and the Maxinos, they also filed a Motion to
Withdraw the Redemption Money from the Provincial Sheriff and withdrew the redemption money.
As to the question whether the redemption was valid or not, the CA found no need to discuss the issue. It found that the
bank was in bad faith and therefore cannot insist on the protection of the law regarding the need for compliance with all the
requirements for a valid redemption while estoppel and unjust enrichment operate against the Yaps who had already
withdrawn the redemption money.
Upon motion for reconsideration of the Yaps, however, the CA amended its decision on March 15, 2006 as follows:

IN LIGHT OF THE FOREGOING, this appeal is GRANTED. The decision as well as the amended decision of the Regional Trial
Court is REVERSED AND SET ASIDE. In lieu thereof[,] judgment is hereby rendered as follows:
1.Declaring the sale made by Dumaguete Rural Bank Inc. to Sps. Francisco and Whelma Yap with respect to Lot No. 3 under
TCT No. T-20301 null and void;
2.Declaring the redemption made by Spouses Dy and Spouses Maxino with regards to Lot No. 6 under TCT No. T-14781 and
Lot No. 1 under TCT No. [T-]14777 as valid;
3. Condemning the defendant bank to pay damages to Spouses Dy and Spouses Maxino the amount of P20,000.00 as moral
damages and P200,000.00 as exemplary damages and attorney's fees in the amount of P50,000.00.
All other claims are dismissed. Costs against the appellees. SO ORDERED.34
Hence, the consolidated petitions assailing the appellate court's decision.
The Yaps argue in the main that there is no valid redemption of the properties extrajudicially foreclosed. They contend that
the P40,000.00 cannot be considered a valid tender of redemption since the amount of the auction sale is P216,040.93.
They also argue that a valid tender of payment for redemption can only be made to DRBI since at that time, their rights
were subordinate to the final consolidation of ownership by the bank.
DRBI, aside from insisting that all seven mortgaged properties (which thus includes Lot 3) were validly foreclosed, argues,
for its part, that the appellate court erred in sustaining the redemption made by the Dys and Maxinos. It anchors its
argument on the fact that the sale of the Tirambulos to the Dys and Maxinos was without the bank's consent. The Dys and
Maxinos therefore could not have assumed the character of debtors because a novation of the contract of mortgage between
the Tirambulos and DRBI did not take place as such a novation is proscribed by Article 1293 of the Civil Code. And there
being no valid redemption within the contemplation of law and DRBI being the highest bidder during the auction sale, DRBI
has become the absolute owner of the properties mortgaged when the redemption period expired.
DRBI further argues that it was unfair and unjust for them to be held liable for damages for supposedly wrongfully
foreclosing on Lot 3, depriving the Dys and the Maxinos of the use of the land, and registering the Certificate of Sale which
included Lot 3 when it should have excluded the same. DRBI argues that as a juridical person, it only authorized and
consented, through its Board of Directors, to lawful processes. The unlawful acts of the Sheriff, who is considered as an
agent of the bank in the foreclosure proceedings, cannot bind DRBI. Moreover, DRBI cannot be liable for damages on the
basis of an affidavit that was submitted only before the CA as the bank had no chance to cross-examine the affiant and
determine the veracity and propriety of the statements narrated in said affidavit.
Thus, the issues to be resolved in the instant case are essentially as follows: (1) Is Lot 3 among the foreclosed properties?
(2) To whom should the payment of redemption money be made? (3) Did the Dys and Maxinos validly redeem Lots 1 and 6?
and (4) Is DRBI liable for damages?
As to the first issue, we find that the CA correctly ruled that the Dys and Maxinos were able to prove their claim that Lot 3
was not among the properties foreclosed and that it was merely inserted by the bank in the Sheriff's Certificate of Sale. As
Atty. Diputado, the Provincial Sheriff, testified, the application for foreclosure was only for five parcels of land, namely, Lots
1, 4, 5, 6 and 8. Accordingly, only said five parcels of land were included in the publication and sold at the foreclosure sale.
When he was shown a copy of the Sheriff's Certificate of Sale consisting of three pages, he testified that it was altered
because Lot 3 and Lot 846 were included beyond the "xxx" that marked the end of the enumeration of the lots
foreclosed.35 Also, a perusal of DRBI's application for foreclosure of real estate mortgage 36 shows that it explicitly refers to

only one deed of mortgage to settle the Tirambulos' indebtedness amounting to P216,040.93. This is consistent with the
Notice of Extrajudicial Sale of Mortgaged Property, published in the Dumaguete Star Informer on February 18, 25 and March
4, 1982,37announcing the sale of Lots 1, 4, 5, 6 and 8 for the satisfaction of the indebtedness amounting to P216,040.93. It
is also consistent with the fact that Lots 1, 4, 5, 6 and 8 are covered by only one real estate mortgage, the Real Estate
Mortgage38 dated December 3, 1976. Indeed, that the foreclosure sale refers only to Lots 1, 4, 5, 6 and 8 is clear from the
fact that Lots 1, 4, 5, 6 and 8 and Lot 3 are covered by two separate real estate mortgages. DRBI failed to refute these
pieces of evidence against it.
As to the second issue regarding the question as to whom payment of the redemption money should be made, Section
31,39 Rule 39 of the Rules of Court then applicable provides:
SEC. 31. Effect of redemption by judgment debtor, and a certificate to be delivered and recorded thereupon. To whom
payments on redemption made.--If the judgment debtor redeem, he must make the same payments as are required to
effect a redemption by a redemptioner, whereupon the effect of the sale is terminated and he is restored to his estate, and
the person to whom the payment is made must execute and deliver to him a certificate of redemption acknowledged or
approved before a notary public or other officer authorized to take acknowledgments of conveyances of real property. Such
certificate must be filed and recorded in the office of the registrar of deeds of the province in which the property is situated,
and the registrar of deeds must note the record thereof on the margin of the record of the certificate of sale. The payments
mentioned in this and the last preceding sections may be made to the purchaser or redemptioner, or for him to
the officer who made the sale. (Emphasis supplied.)
Here, the Dys and the Maxinos complied with the above-quoted provision. Well within the redemption period, they initially
attempted to pay the redemption money not only to the purchaser, DRBI, but also to the Yaps. Both DRBI and the Yaps
however refused, insisting that the Dys and Maxinos should pay the whole purchase price at which all the foreclosed
properties were sold during the foreclosure sale. Because of said refusal, the Dys and Maxinos correctly availed of the
alternative remedy by going to the sheriff who made the sale. As held in Natino v. Intermediate Appellate Court, 40 the tender
of the redemption money may be made to the purchaser of the land or to the sheriff. If made to the sheriff, it is his duty to
accept the tender and execute the certificate of redemption.
But were the Dys and Maxinos entitled to redeem Lots 1 and 6 in the first place? We rule in the affirmative.
The Dys and the Maxinos have legal personality to redeem the subject properties.
Contrary to petitioners' contention, the Dys and Maxinos have legal personality to redeem the subject properties despite the
fact that the sale to the Dys and Maxinos was without DRBI's consent. In Litonjua v. L & R Corporation,41 this Court declared
valid the sale by the mortgagor of mortgaged property to a third person notwithstanding the lack of written consent by the
mortgagee, and likewise recognized the third person's right to redeem the foreclosed property, to wit:
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. Again, Tambunting, supra, clarifies that "x x x. The acquisition by the Hernandezes of the Escuetas' rights over the property carried with it the assumption of the
obligations burdening the property, as recorded in the Registry of Property, i.e., the mortgage debts in favor of the RFC
(DBP) and the Tambuntings. The Hernandezes, by stepping into the Escuetas' shoes as assignees, had the obligation to pay
the mortgage debts, otherwise, these debts would and could be enforced against the property subject of the assignment.
Stated otherwise, the Hernandezes, by the assignment, obtained the right to remove the burdens on the property subject
thereof by paying the obligations thereby secured; that is to say, they had the right of redemption as regards the first

mortgage, to be exercised within the time and in the manner prescribed by law and the mortgage deed; and as regards the
second mortgage, sought to be judicially foreclosed but yet unforeclosed, they had the so-called equity of redemption."
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. 42
Likewise, we rule that the Dys and the Maxinos validly redeemed Lots 1 and 6.
The requisites of a valid redemption are present
The requisites for a valid redemption are: (1) the redemption must be made within twelve (12) months from the time of the
registration of the sale in the Office of the Register of Deeds; (2) payment of the purchase price of the property involved,
plus 1% interest per month thereon in addition, up to the time of redemption, together with the amount of any assessments
or taxes which the purchaser may have paid thereon after the purchase, also with 1% interest on such last named amount;
and (3) written notice of the redemption must be served on the officer who made the sale and a duplicate filed with the
Register of Deeds of the province.43
There is no issue as to the first and third requisites. It is undisputed that the Dys and the Maxinos made the redemption
within the 12-month period from the registration of the sale. The Dys and Maxinos effected the redemption on May 24,
1984, when they deposited P50,373.42 with the Provincial Sheriff, and on June 19, 1984, when they deposited an additional
P83,850.50. Both dates were well within the one-year redemption period reckoned from the June 24, 1983 date of
registration of the foreclosure sale. Likewise, the Provincial Sheriff who made the sale was properly notified of the
redemption since the Dys and Maxinos deposited with him the redemption money after both DRBI and the Yaps refused to
accept it.
The second requisite, the proper redemption price, is the main subject of contention of the opposing parties.
The Yaps argue that P40,000.00 cannot be a valid tender of redemption since the amount of the auction sale was
P216,040.93. They further contend that the mortgage is indivisible so in order for the tender to be valid and effectual, it
must be for the entire auction price plus legal interest.
We cannot subscribe to the Yaps' argument on the indivisibility of the mortgage. As held in the case of Philippine National
Bank v. De los Reyes,44 the doctrine of indivisibility of mortgage does not apply once the mortgage is extinguished by a
complete foreclosure thereof as in the instant case. The Court held:
The parties were accordingly embroiled in a hermeneutic disparity on their aforesaid contending positions. Yet, the rule on
the indivisibility of mortgage finds no application to the case at bar. The particular provision of the Civil Code referred to
provides:
Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the successors in interest of the
debtor or of the creditor.
Therefore, the debtor's heir who has paid a part of the debt cannot ask for the proportionate extinguishment of the pledge
or mortgage as long as the debt is not completely satisfied.
Neither can the creditor's heir who received his share of the debt return the pledge or cancel the mortgage, to the prejudice
of the other heirs who have not been paid.

From these provisions is excepted the case in which, there being several things given in mortgage or pledge, each one of
these guarantees only a determinate portion of the credit.
The debtor, in this case, shall have a right to the extinguishment of the pledge or mortgage as the portion of the debt for
which each thing is specially answerable is satisfied.
From the foregoing, it is apparent that what the law proscribes is the foreclosure of only a portion of the property or a
number of the several properties mortgaged corresponding to the unpaid portion of the debt where before foreclosure
proceedings partial payment was made by the debtor on his total outstanding loan or obligation. This also means that the
debtor cannot ask for the release of any portion of the mortgaged property or of one or some of the several lots mortgaged
unless and until the loan thus, secured has been fully paid, notwithstanding the fact that there has been a partial fulfillment
of the obligation. Hence, it is provided that the debtor who has paid a part of the debt cannot ask for the proportionate
extinguishment of the mortgage as long as the debt is not completely satisfied.
That the situation obtaining in the case at bar is not within the purview of the aforesaid rule on indivisibility is obvious since
the aggregate number of the lots which comprise the collaterals for the mortgage had already been foreclosed and sold at
public auction. There is no partial payment nor partial extinguishment of the obligation to speak of. The aforesaid doctrine,
which is actually intended for the protection of the mortgagee, specifically refers to the release of the mortgage which
secures the satisfaction of the indebtedness and naturally presupposes that the mortgage is existing. Once the mortgage
is extinguished by a complete foreclosure thereof, said doctrine of indivisibility ceases to apply since, with the
full payment of the debt, there is nothing more to secure.45 (Emphasis supplied.)
Nothing in the law prohibits the piecemeal redemption of properties sold at one foreclosure proceeding. In fact, in several
early cases decided by this Court, the right of the mortgagor or redemptioner to redeem one or some of the foreclosed
properties was recognized.
In the 1962 case of Castillo v. Nagtalon,46 ten parcels of land were sold at public auction. Nagtalon, who owned three of the
ten parcels of land sold, wanted to redeem her properties. Though the amount she tendered was found as insufficient to
effectively release her properties, the Court held that the tender of payment was made timely and in good faith and thus, in
the interest of justice, Nagtalon was given the opportunity to complete the redemption purchase of three of the ten parcels
of land foreclosed.
Also, in the later case of Dulay v. Carriaga,47 wherein Dulay redeemed eight of the seventeen parcels of land sold at public
auction, the trial court declared the piecemeal redemption of Dulay as void. Said order, however, was annulled and set aside
by the Court on certiorari and the Court upheld the redemption of the eight parcels of land sold at public auction.
Clearly, the Dys and Maxinos can effect the redemption of even only two of the five properties foreclosed. And since they can
effect a partial redemption, they are not required to pay the P216,040.93 considering that it is the purchase price for all the
five properties foreclosed.
So what amount should the Dys and Maxinos pay in order for their redemption of the two properties be deemed valid
considering that when the five properties were auctioned, they were not separately valued?
Contrary to the Yaps' contention, the amount paid by the Dys and Maxinos within the redemption period for the
redemption of just two parcels of land was not only P40,000.00 but totaled to P134,223.92 (P50,373.42 paid on
May 28, 1984 plus P83,850.50 paid on June 19, 1984). That is more than 60% of the purchase price for the five
foreclosed properties, to think the Dys and Maxinos were only redeeming two properties. We find that it can be

considered a sufficient amount if we were to base the proper purchase price on the proportion of the size of Lots 1 and 6
with the total size of the five foreclosed properties, which had the following respective sizes:

Lot 1
Lot 6
Lot 5
Lot 4
Lot 8
TOTAL

61,371 square meters

16,087 square meters
2,900 square meters
27,875 square meters
39,888 square meters
148,121 square meters

The two subject properties to be redeemed, Lots 1 and 6, have a total area of 77,458 square meters or roughly 52% of the
total area of the foreclosed properties. Even with this rough approximation, we rule that there is no reason to invalidate the
redemption of the Dys and Maxinos since they tendered 60% of the total purchase price for properties constituting only 52%
of the total area. However, there is a need to remand the case for computation of the pro-rata value of Lots 1 and 6 based
on their true values at that time of redemption for the purposes of determining if there is any deficiency or overpayment on
the part of the Dys and Maxinos.
As to the award of damages in favor of the Dys and Maxinos, we agree with the appellate court for granting the same.
The CA correctly observed that the act of DRBI in falsifying the Sheriff's Certificate of Sale to include Lots 3 and 846, even if
said additional lots were not among the properties foreclosed, was the proximate cause of the pecuniary loss suffered by the
Dys and Maxinos in the form of lost income from Lot 3.
Likewise, the CA also correctly awarded moral damages. Paragraph 10, Article 2219 of the Civil Code provides that moral
damages may be recovered in case of acts and actions referred to in Article 21 of the same Code. Article 21 reads:
ART. 21 Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage.
As previously discussed, DRBI's act of maliciously including two additional properties in the Sheriff's Certificate of Sale even
if they were not included in the foreclosed properties caused the Dys and Maxinos pecuniary loss. Hence, DRBI is liable to
pay moral damages.
The award of exemplary damages is similarly proper. Exemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. 48 We cannot agree
more with the following ratio of the appellate court in granting the same:
Additionally, what is alarming to the sensibilities of the Court is the deception employed by the bank in adding other
properties in the certificate of sale under public auction without them being included in the public auction conducted. It
cannot be overemphasized that being a lending institution, prudence dictates that it should employ good faith and due
diligence with the properties entrusted to it. It was the bank which submitted the properties ought to be foreclosed to the
sheriff. It only submitted five (5) properties for foreclosure. Yet, it caused the registration of the Certificate of Sale under
public auction which listed more properties than what was foreclosed. On this aspect, exemplary damages in the amount of
P200,000.00 are in order.49
There being an award of exemplary damages, the award of attorney's fees is likewise proper as provided in paragraph 1,
Article 2208 of the Civil Code.

WHEREFORE, the petitions for review on certiorari are DENIED for lack of merit. The Decision dated May 17, 2005 and
Resolution dated March 15, 2006 of the Court of Appeals in CA-G.R. C.V. No. 57205 are hereby AFFIRMED with the
MODIFICATION that the case is REMANDED to the Regional Trial Court of Negros Oriental, Branch 44, Dumaguete City,
for the computation of the pro-rata value of properties covered by TCT No. T-14777 (Lot 1) and TCT No. T-14781 (Lot 6) of
the Registry of Deeds of Negros Oriental at the time of redemption to determine if there is a deficiency to be settled by or
overpayment to be refunded to respondent Spouses Zosimo Dy, Sr. and Natividad Chiu and Spouses Marcelino C. Maxino and
Remedios Lasola with regard to the redemption money they paid.
With costs against the petitioners.

G.R. No. 171206, September 23, 2013

HEIRS OF THE LATE SPOUSES FLAVIANO MAGLASANG AND SALUD ADAZA-MAGLASANG, v. MANILA BANKING
CORPORATION

Assailed in this petition for review on certiorari1 are the Decision2 dated July 20, 2005 and Resolution3 dated January 4, 2006
of the Court of Appeals (CA) in CA-G.R. CV No. 50410 which dismissed petitioners appeal and affirmed the Decision 4 dated
April 6, 1987 of the Regional Trial Court of Ormoc City, Branch 12 (RTC) directing petitioners to jointly and severally pay
respondent Manila Banking Corporation the amount of P434,742.36, with applicable interests, representing the deficiency of
the formers total loan obligation to the latter after the extra-judicial foreclosure of the real estate mortgage subject of this
case, including attorneys fees and costs of suit.
The Facts
On June 16, 1975, spouses Flaviano and Salud Maglasang (Sps. Maglasang) obtained a credit line from respondent 5 in the
amount of P350,000.00 which was secured by a real estate mortgage 6 executed over seven of their properties7 located in

Ormoc City and the Municipality of Kananga, Province of Leyte. 8 They availed of their credit line by securing loans in the
amounts of P209,790.50 and P139,805.83 on October 24, 1975 and March 15, 1976, respectively,9 both of which becoming
due and demandable within a period of one year. Further, the parties agreed that the said loans would earn interest at 12%
per annum (p.a.) and an additional 4% penalty would be charged upon default. 10

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After Flaviano Maglasang (Flaviano) died intestate on February 14, 1977, his widow Salud Maglasang (Salud) and their
surviving children, herein petitioners Oscar (Oscar), Concepcion Chona, Lerma, Felma, Fe Doris, Leolino, Margie Leila, Ma.
Milalie, Salud and Ma. Flasalie, all surnamed Maglasang, and Glenda Maglasang-Arnaiz, appointed 11 their brother petitioner
Edgar Maglasang (Edgar) as their attorney-in-fact.12 Thus, on March 30, 1977, Edgar filed a verified petition for letters of
administration of the intestate estate of Flaviano before the then Court of First Instance of Leyte, Ormoc City, Branch 5
(probate court), docketed as Sp. Proc. No. 1604-0.13 On August 9, 1977, the probate court issued an Order 14 granting the
petition, thereby appointing Edgar as the administrator 15 of Flavianos estate.
In view of the issuance of letters of administration, the probate court, on August 30, 1977, issued a Notice to Creditors 16 for
the filing of money claims against Flavianos estate. Accordingly, as one of the creditors of Flaviano, respondent notified 17 the
probate court of its claim in the amount of P382,753.19 as of October 11, 1978, exclusive of interests and charges.
During the pendency of the intestate proceedings, Edgar and Oscar were able to obtain several loans from respondent,
secured by promissory notes18 which they signed.
In an Order19 dated December 14, 1978 (December 14, 1978 Order), the probate court terminated the proceedings with the
surviving heirs executing an extra-judicial partition of the properties of Flavianos estate. The loan obligations owed by the
estate to respondent, however, remained unsatisfied due to respondents certification that Flavianos account was
undergoing a restructuring. Nonetheless, the probate court expressly recognized the rights of respondent under the
mortgage and promissory notes executed by the Sps. Maglasang, specifically, its right to foreclose the same within the
statutory period.20

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In this light, respondent proceeded to extra-judicially foreclose the mortgage covering the Sps. Maglasangs properties and
emerged as the highest bidder at the public auction for the amount of P350,000.00. 21 There, however, remained a deficiency
on Sps. Maglasangs obligation to respondent. Thus, on June 24, 1981, respondent filed a suit to recover the deficiency
amount of P250,601.05 as of May 31, 1981 against the estate of Flaviano, his widow Salud and petitioners, docketed as Civil
Case No. 1998-0.22

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The RTC Ruling and Subsequent Proceedings

After trial on the merits, the RTC (formerly, the probate court) 23 rendered a Decision24 on April 6, 1987 directing the
petitioners to pay respondent, jointly and severally, the amount of P434,742.36 with interest at the rate of 12% p.a., plus a
4% penalty charge, reckoned from September 5, 1984 until fully paid. 25 The RTC found that it was shown, by a
preponderance of evidence, that petitioners, after the extra-judicial foreclosure of all the properties mortgaged, still have an
outstanding obligation in the amount and as of the date as above-stated. The RTC also found in order the payment of
interests and penalty charges as above-mentioned as well as attorneys fees equivalent to 10% of the outstanding
obligation.26

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Dissatisfied, petitioners elevated the case to the CA on appeal, contending, 27inter alia, that the remedies available to
respondent under Section 7, Rule 86 of the Rules of Court (Rules) are alternative and exclusive, such that the election of one
operates as a waiver or abandonment of the others. Thus, when respondent filed its claim against the estate of Flaviano in
the proceedings before the probate court, it effectively abandoned its right to foreclose on the mortgage. Moreover, even on
the assumption that it has not so waived its right to foreclose, it is nonetheless barred from filing any claim for any

deficiency amount.
During the pendency of the appeal, Flavianos widow, Salud, passed away on July 25, 1997. 28

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The CA Ruling
In a Decision29 dated July 20, 2005, the CA denied the petitioners appeal and affirmed the RTCs Decision. At the outset, it
pointed out that the probate court erred when it, through the December 14, 1978 Order, closed and terminated the
proceedings in Sp. Proc. No. 1604-0 without first satisfying the claims of the creditors of the estate in particular,
respondent in violation of Section 1, Rule 90 of the Rules. 30 As a consequence, respondent was not able to collect from the
petitioners and thereby was left with the option of foreclosing the real estate mortgage. 31 Further, the CA held that Section 7,
Rule 86 of the Rules does not apply to the present case since the same does not involve a mortgage made by the
administrator over any property belonging to the estate of the decedent. 32 According to the CA, what should apply is Act No.
313533 which entitles respondent to claim the deficiency amount after the extra-judicial foreclosure of the real estate
mortgage of Sps. Maglasangs properties.34

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Petitioners motion for reconsideration was subsequently denied in a Resolution 35 dated January 4, 2006. Hence, the present
recourse.
The Issue Before the Court
The essential issue in this case is whether or not the CA erred in affirming the RTCs award of the deficiency amount in favor
of respondent.
Petitioners assert36 that it is not Act No. 3135 but Section 7, Rule 86 of the Rules which applies in this case. The latter
provision provides alternative and exclusive remedies for the satisfaction of respondents claim against the estate of
Flaviano.37 Corollarily, having filed its claim against the estate during the intestate proceedings, petitioners argue that
respondent had effectively waived the remedy of foreclosure and, even assuming that it still had the right to do so, it was
precluded from filing a suit for the recovery of the deficiency obligation. 38

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Likewise, petitioners maintain that the extra-judicial foreclosure of the subject properties was null and void, not having been
conducted in the capital of the Province of Leyte in violation of the stipulations in the real estate mortgage contract. 39 They
likewise deny any personal liability for the loans taken by their deceased parents. 40

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The Courts Ruling

The petition is partly meritorious.
Claims against deceased persons should be filed during the settlement proceedings of their estate. 41 Such proceedings are
primarily governed by special rules found under Rules 73 to 90 of the Rules, although rules governing ordinary actions may,
as far as practicable, apply suppletorily.42

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Among these special rules, Section 7, Rule 86 of the Rules (Section 7, Rule 86) provides the rule in dealing with secured
claims against the estate:

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SEC. 7. Mortgage debt due from estate. A creditor holding a claim against the deceased secured by a mortgage or
other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share
in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by
action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the
sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security,

he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage or
other security alone, and foreclose the same at any time within the period of the statute of limitations, and in that event he
shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but
nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by
paying the debt for which it is held as security, under the direction of the court, if the court shall adjudged it to be for the
best interest of the estate that such redemption shall be made. (Emphasis and underscoring supplied)
As the foregoing generally speaks of [a] creditor holding a claim against the deceased secured by a mortgage or other
collateral security as above-highlighted, it may be reasonably concluded that the aforementioned section covers all secured
claims, whether by mortgage or any other form of collateral, which a creditor may enforce against the estate of the
deceased debtor. On the contrary, nowhere from its language can it be fairly deducible that the said section would as the
CA interpreted narrowly apply only to mortgages made by the administrator over any property belonging to the estate of
the decedent. To note, mortgages of estate property executed by the administrator, are also governed by Rule 89 of the
Rules, captioned as Sales, Mortgages, and Other Encumbrances of Property of Decedent.
In this accord, it bears to stress that the CAs reliance on Philippine National Bank v. CA43 (PNB) was misplaced as the said
case did not, in any manner, limit the scope of Section 7, Rule 86. It only stated that the aforesaid section equally applies to
cases where the administrator mortgages the property of the estate to secure the loan he obtained. 44 Clearly, the
pronouncement was a ruling of inclusion and not one which created a distinction. It cannot, therefore, be doubted that it is
Section 7, Rule 86 which remains applicable in dealing with a creditors claim against the mortgaged property of the
deceased debtor, as in this case, as well as mortgages made by the administrator, as that in the PNB case.
Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured creditor has three
remedies/options that he may alternatively adopt for the satisfaction of his indebtedness. In particular, he may choose to:
(a) waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (b) foreclose the
mortgage judicially and prove the deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other security
and foreclose the same before it is barred by prescription, without the right to file a claim for any deficiency.45 It must,
however, be emphasized that these remedies are distinct, independent and mutually exclusive from each other; thus, the
election of one effectively bars the exercise of the others. With respect to real properties, the Court in Bank of America v.
American Realty Corporation46 pronounced:

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In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably,
an election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the
filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the
provision of Rule 68 of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by
the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province
where the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by Act No. 4118. 47(Emphasis
supplied)
Anent the third remedy, it must be mentioned that the same includes the option of extra-judicially foreclosing the mortgage
under Act No. 3135, as availed of by respondent in this case. However, the plain result of adopting the last mode of
foreclosure is that the creditor waives his right to recover any deficiency from the estate. 48 These precepts were discussed in
thePNB case, citing Perez v. Philippine National Bank49 which overturned the earlier Pasno v. Ravina ruling:50
Case law now holds that this rule grants to the mortgagee three distinct, independent and mutually exclusive remedies that
can be alternatively pursued by the mortgage creditor for the satisfaction of his credit in case the mortgagor dies, among
them:

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(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 any deficiency as an ordinary claim; and

(3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription without right to
file a claim for any deficiency.
In Perez v. Philippine National Bank, reversing Pasno vs. Ravina, we held:
The ruling in Pasno v. Ravina not having been reiterated in any other case, we have carefully reexamined the same, and
after mature deliberation have reached the conclusion that the dissenting opinion is more in conformity with reason and law.
Of the three alternative courses that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) to waive the
mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) foreclose the mortgage
judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at
any time before it is barred by prescription, without right to file a claim for any deficiency, the majority opinion inPasno
v. Ravina, in requiring a judicial foreclosure, virtually wipes out the third alternative conceded by the Rules to the mortgage
creditor, and which would precisely include extra-judicial foreclosures by contrast with the second alternative.
The plain result of adopting the last mode of foreclosure is that the creditor waives his right to recover any
deficiency from the estate. Following the Perez ruling that the third mode includes extrajudicial foreclosure
sales, the result of extrajudicial foreclosure is that the creditor waives any further deficiency claim. x x
x.51(Emphases and underscoring supplied; italics in the original)
To obviate any confusion, the Court observes that the operation of Act No. 3135 does not entirely discount the application of
Section 7, Rule 86, or vice-versa. Rather, the two complement each other within their respective spheres of operation. On
the one hand, Section 7, Rule 86 lays down the options for the secured creditor to claim against the estate and, according to
jurisprudence, the availment of the third option bars him from claiming any deficiency amount. On the other hand, after the
third option is chosen, the procedure governing the manner in which the extra-judicial foreclosure should proceed would still
be governed by the provisions of Act No. 3135. Simply put, Section 7, Rule 86 governs the parameters and the extent to
which a claim may be advanced against the estate, whereas Act No. 3135 sets out the specific procedure to be followed
when the creditor subsequently chooses the third option specifically, that of extra-judicially foreclosing real property
belonging to the estate. The application of the procedure under Act No. 3135 must be concordant with Section 7, Rule 86 as
the latter is a special rule applicable to claims against the estate, and at the same time, since Section 7, Rule 86 does not
detail the procedure for extra-judicial foreclosures, the formalities governing the manner of availing of the third option
such as the place where the application for extra-judicial foreclosure is filed, the requirements of publication and posting and
the place of sale must be governed by Act No. 3135.
In this case, respondent sought to extra-judicially foreclose the mortgage of the properties previously belonging to Sps.
Maglasang (and now, their estates) and, therefore, availed of the third option. Lest it be misunderstood, it did not exercise
the first option of directly filing a claim against the estate, as petitioners assert, since it merely notified 52 the probate court of
the outstanding amount of its claim against the estate of Flaviano and that it was currently restructuring the account. 53 Thus,
having unequivocally opted to exercise the third option of extra-judicial foreclosure under Section 7, Rule 86, respondent is
now precluded from filing a suit to recover any deficiency amount as earlier discussed.
As a final point, petitioners maintain that the extra-judicial foreclosure of the subject properties was null and void since the
same was conducted in violation of the stipulation in the real estate mortgage contract stating that the auction sale should
be held in the capital of the province where the properties are located, i.e., the Province of Leyte.
The Court disagrees.
As may be gleaned from the records, the stipulation under the real estate mortgage 54 executed by Sps. Maglasang which
fixed the place of the foreclosure sale at Tacloban City lacks words of exclusivity which would bar any other acceptable fora
wherein the said sale may be conducted, to wit:

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It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, the auction sale shall be held at the capital
of the province if the property is within the territorial jurisdiction of the province concerned, or shall be held in the city if the
property is within the territorial jurisdiction of the city concerned; x x x. 55
Case law states that absent such qualifying or restrictive words to indicate the exclusivity of the agreed forum, the stipulated
place should only be as an additional, not a limiting venue. 56As a consequence, the stipulated venue and that provided under
Act No. 3135 can be applied alternatively.
In particular, Section 2 of Act No. 3135 allows the foreclosure sale to be done within the province where the property to be
sold is situated, viz.:

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SEC. 2. Said sale cannot be made legally outside of the province which the property sold is situated; and in case the place
within said province in which the sale is to be made is subject to stipulation, such sale shall be made in said place or in the
municipal building of the municipality in which the property or part thereof is situated. (Italics supplied)
In this regard, since the auction sale was conducted in Ormoc City, which is within the territorial jurisdiction of the Province
of Leyte, then the Court finds sufficient compliance with the above-cited requirement.
All told, finding that the extra-judicial foreclosure subject of this case was properly conducted in accordance with the
formalities of Act No. 3135, the Court upholds the same as a valid exercise of respondent's third option under Section 7,
Rule 86. To reiterate, respondent cannot, however, file any suit to recover any deficiency amount since it effectively waived
its right thereto when it chose to avail of extra-judicial foreclosure as jurisprudence instructs.
WHEREFORE, the petition is PARTLY GRANTED. The complaint for the recovery of the deficiency amount after extrajudicial foreclosure filed by respondent Manila Banking Corporation is hereby DISMISSED. The extra-judicial foreclosure of
the mortgaged properties, however, stands.

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[G.R. No. 169190 : February 11, 2010]

CUA LAI CHU, CLARO G. CASTRO, AND JUANITA CASTRO, PETITIONERS, VS. HON. HILARIO L. LAQUI,
The Case
This is a petition for review1 of the 29 April 2005 and 4 August 2005 Resolutions2 of the Court of Appeals in CA-G.R. SP No.
88963. In its 29 April 2005 Resolution, the Court of Appeals dismissed the petition for certiorari 3 of petitioner spouses Claro
G. Castro and Juanita Castro and petitioner Cua Lai Chu (petitioners). In its 4 August 2005 Resolution, the Court of Appeals
denied petitioners' motion for reconsideration.
The Facts
In November 1994, petitioners obtained a loan in the amount of P3,200,000 from private respondent Philippine Bank of
Communication. To secure the loan, petitioners executed in favor of private respondent a Deed of Real Estate Mortgage 4 over

the property of petitioner spouses covered by Transfer Certificate of Title No. 22990. In August 1997, petitioners executed
an Amendment to the Deed of Real Estate Mortgage5 increasing the amount of the loan by P1,800,000, bringing the total
loan amount to P5,000,000.
For failure of petitioners to pay the full amount of the outstanding loan upon demand, 6 private respondent applied for the
extrajudicial foreclosure of the real estate mortgage. 7 Upon receipt of a notice8 of the extrajudicial foreclosure sale,
petitioners filed a petition to annul the extrajudicial foreclosure sale with a prayer for temporary restraining order (TRO). The
petition for annulment was filed in the Regional Trial Court of Quezon City and docketed as Q-02-46184. 9
The extrajudicial foreclosure sale did not push through as originally scheduled because the trial court granted petitioners'
prayer for TRO. The trial court subsequently lifted the TRO and reset the extrajudicial foreclosure sale on 29 May 2002. At
the foreclosure sale, private respondent emerged as the highest bidder. A certificate of sale 10 was executed on 4 June 2002 in
favor of private respondent. On 7 June 2002, the certificate of sale was annotated as Entry No. 1855 11 on TCT No. 22990
covering the foreclosed property.
After the lapse of the one-year redemption period, private respondent filed in the Registry of Deeds of Quezon City an
affidavit of consolidation to consolidate its ownership and title to the foreclosed property. Forthwith, on 8 July 2003, the
Register of Deeds cancelled TCT No. 22990 and issued in its stead TCT No. 251835 12 in the name of private respondent.
On 18 August 2004, private respondent applied for the issuance of a writ of possession of the foreclosed
property.13 Petitioners filed an opposition.14 The trial court granted private respondent's motion for a declaration of general
default and allowed private respondent to present evidence ex parte. The trial court denied petitioners' notice of appeal.
Undeterred, petitioners filed in the Court of Appeals a petition for certiorari. The appellate court dismissed the petition. It
also denied petitioners' motion for reconsideration.
The Orders of the Trial Court
The 8 October 2004 Order15 granted private respondent's motion for a declaration of general default and allowed private
respondent to present evidence ex parte. The 6 January 2005 Order16 denied petitioners' motion for reconsideration of the
prior order. The 24 February 2005 Order17 denied petitioners' notice of appeal.
The Ruling of the Court of Appeals
The Court of Appeals dismissed on both procedural and substantive grounds the petition for certiorari filed by petitioners.
The appellate court noted that the counsel for petitioners failed to indicate in the petition the updated PTR Number, a ground
for outright dismissal of the petition under Bar Matter No. 1132. Ruling on the merits, the appellate court held that a
proceeding for the issuance of a writ of possession is ex parte in nature. As such, petitioners' right to due process was not
violated even if they were not given a chance to file their opposition. The appellate court also ruled that there was no
violation of the rule against forum shopping since the application for the issuance of a writ of possession is not affected by a
pending case questioning the validity of the extrajudicial foreclosure sale.
The Issue

Petitioners raise the question of whether the writ of possession was properly issued despite the pendency of a case
questioning the validity of the extrajudicial foreclosure sale and despite the fact that petitioners were declared in default in
the proceeding for the issuance of a writ of possession.

The Court's Ruling

The petition has no merit.
Petitioners contend they were denied due process of law when they were declared in default despite the fact that they had
filed their opposition to private respondent's application for the issuance of a writ of possession. Further, petitioners point
out that the issuance of a writ of possession will deprive them not only of the use and possession of their property, but also
of its ownership. Petitioners cite Bustos v. Court of Appeals18 and Vda. De Legaspi v. Avendao19 in asserting that physical
possession of the property should not be disturbed pending the final determination of the more substantial issue of
ownership. Petitioners also allege forum shopping on the ground that the application for the issuance of a writ of possession
was filed during the pendency of a case questioning the validity of the extrajudicial foreclosure sale.
Private respondent, on the other hand, maintains that the application for the issuance of a writ of possession in a foreclosure
proceeding is ex parte in nature. Hence, petitioners' right to due process was not violated even if they were not given a
chance to file their opposition. Private respondent argues that the issuance of a writ of possession may not be stayed by a
pending case questioning the validity of the extrajudicial foreclosure sale. It contends that the former has no bearing on the
latter; hence, there is no violation of the rule against forum shopping. Private respondent asserts that there is no judicial
determination involved in the issuance of a writ of possession; thus, the same cannot be the subject of an appeal.
At the outset, we must point out that the authorities relied upon by petitioners are not in point and have no application here.
In Bustos v. Court of Appeals,20 the Court simply ruled that the issue of possession was intertwined with the issue of
ownership in the consolidated cases of unlawful detainer and accion reinvindicatoria. In Vda. De Legaspi v. Avendao,21 the
Court merely stated that in a case of unlawful detainer, physical possession should not be disturbed pending the resolution of
the issue of ownership. Neither case involved the right to possession of a purchaser at an extrajudicial foreclosure of a
mortgage.
Banco Filipino Savings and Mortgage Bank v. Pardo 22 squarely ruled on the right to possession of a purchaser at an
extrajudicial foreclosure of a mortgage. This case involved a real estate mortgage as security for a loan obtained from a
bank. Upon the mortgagor's default, the bank extrajudicially foreclosed the mortgage. At the auction sale, the bank was the
highest bidder. A certificate of sale was duly issued and registered. The bank then applied for the issuance of a writ of
possession, which the lower court dismissed. The Court reversed the lower court and held that the purchaser at the auction
sale was entitled to a writ of possession pending the lapse of the redemption period upon a simple motion and upon the
posting of a bond.
In Navarra v. Court of Appeals,23 the purchaser at an extrajudicial foreclosure sale applied for a writ of possession after the
lapse of the one-year redemption period. The Court ruled that the purchaser at an extrajudicial foreclosure sale has a right
to the possession of the property even during the one-year redemption period provided the purchaser files an indemnity
bond. After the lapse of the said period with no redemption having been made, that right becomes absolute and may be
demanded by the purchaser even without the posting of a bond. Possession may then be obtained under a writ which may
be applied for ex parte pursuant to Section 7 of Act No. 3135,24 as amended by Act No. 4118,25 thus:
SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the
province or place where the property or any part thereof is situated, to give him possession thereof during the redemption
period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the
debtor in case it be shown that the sale was made without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion x x x and the
court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the
province in which the property is situated, who shall execute said order immediately. (Emphasis supplied)

In the present case, the certificate of sale of the foreclosed property was annotated on TCT No. 22990 on 7 June 2002. The
redemption period thus lapsed on 7 June 2003, one year from the registration of the sale. 26 When private respondent applied
for the issuance of a writ of possession on 18 August 2004, the redemption period had long lapsed. Since the foreclosed
property was not redeemed within one year from the registration of the extrajudicial foreclosure sale, private respondent
had acquired an absolute right, as purchaser, to the writ of possession. It had become the ministerial duty of the lower court
to issue the writ of possession upon mere motion pursuant to Section 7 of Act No. 3135, as amended.
Moreover, once ownership has been consolidated, the issuance of the writ of possession becomes a ministerial duty of the
court, upon proper application and proof of title. 27 In the present case, when private respondent applied for the issuance of a
writ of possession, it presented a new transfer certificate of title issued in its name dated 8 July 2003. The right of private
respondent to the possession of the property was thus founded on its right of ownership. As the purchaser of the property at
the foreclosure sale, in whose name title over the property was already issued, the right of private respondent over the
property had become absolute, vesting in it the corollary right of possession.
Petitioners are wrong in insisting that they were denied due process of law when they were declared in default despite the
fact that they had filed their opposition to the issuance of a writ of possession. The application for the issuance of a writ of
possession is in the form of an ex parte motion. It issues as a matter of course once the requirements are fulfilled. No
discretion is left to the court. 28
Petitioners cannot oppose or appeal the court's order granting the writ of possession in an ex parte proceeding. The remedy
of petitioners is to have the sale set aside and the writ of possession cancelled in accordance with Section 8 of Act No. 3135,
as amended, to wit:
SEC. 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after the
purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the
damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the
provisions hereof. x x x
Any question regarding the validity of the extrajudicial foreclosure sale and the resulting cancellation of the writ may be
determined in a subsequent proceeding as outlined in Section 8 of Act No. 3135, as amended. Such question should not be
raised as a justification for opposing the issuance of a writ of possession since under Act No. 3135, as amended, the
proceeding for this is ex parte.
Further, the right to possession of a purchaser at an extrajudicial foreclosure sale is not affected by a pending case
questioning the validity of the foreclosure proceeding. The latter is not a bar to the former. Even pending such latter
proceeding, the purchaser at a foreclosure sale is entitled to the possession of the foreclosed property.29
Lastly, we rule that petitioners' claim of forum shopping has no basis. Under Act No. 3135, as amended, a writ of possession
is issued ex parte as a matter of course upon compliance with the requirements. It is not a judgment on the merits that can
amount to res judicata, one of the essential elements in forum shopping. 30
The Court of Appeals correctly dismissed the petition for certiorari filed by petitioners for lack of merit.
WHEREFORE, we DENY the petition for review. We AFFIRM the 29 April 2005 and 4 August 2005 Resolutions of the Court
of Appeals in CA-G.R. SP No. 88963.

[G.R. No. 168672 : August 08, 2010]

EQUITABLE PCI BANK, INC., PETITIONER, VS. DNG REALTY AND DEVELOPMENT CORPORATION, RESPONDENT.
Before us is a petition for review on certiorari with prayer for the issuance of a temporary restraining order and/or writ of
preliminary injunction filed by petitioner Equitable PCI Bank, Inc., seeking to set aside the June 23, 2005 Decision 1 of the
Court of Appeals (CA) in CA-G.R. SP No. 86950.
The undisputed facts, as found by the CA, are as follows:
(Respondent) DNG Realty and Development Corporation (DNG) obtained a loan of P20M from x x x Equitable PCI Bank
(EPCIB) secured by a real estate mortgage over the 63,380 sq. meter land of the former situated in Cabanatuan City. Due to
the Asian Economic Crisis, DNG experienced liquidity problems disenabling DNG from paying its loan on time. For this
reason, EPCIB sought the extrajudicial foreclosure of the said mortgage by filing a petition for sale on 30 June 2003 before
the Office of the Ex-Officio Sheriff. On 4 September 2003, the mortgage property was sold at public auction, which was
eventually awarded to EPCIB as the highest bidder. That same day, the Sheriff executed a Certificate of Sale in favor of
EPCIB.

On October 21, 2003, DNG filed a petition for rehabilitation under Rule 4 of the Interim Rules of Procedure on Corporate
Rehabilitation before the Regional Trial Court, Branch 28, docketed as Special Proceeding No. 125. Pursuant to this, a Stay
Order was issued by RTC Branch 28 on 27 October 2003. The petition for rehabilitation was then published in a newspaper of
general circulation on 19 and 26 November 2003.
On the other hand, EPCIB caused the recording of the Sheriff's Certificate of Sale on 3 December 2003 with the Registry of
Deeds of Cabanatuan City. EPCIB executed an Affidavit of Consolidation of Ownership and had the same annotated on the
title of DNG (TCT No. 57143). Consequently, the Register of Deeds cancelled DNG's title and issued TCT No. T-109482 in the
name of EPCIB on 10 December 2003. This prompted DNG to file Civil Case No. 4631 with RTC-Br. 28 for annulment of the
foreclosure proceeding before the Office of the Ex-Officio Sheriff. This case was dismissed for failure to prosecute.
In order to gain possession of the foreclosed property, EPCIB on 17 March 2004 filed an Ex-Parte Petition for Issuance of
Writ of Possession docketed as Cadastral Case No. 2414-AF before RTC Br. 23 in Cabanatuan City. After hearing, RTC-Br. 23
on 6 September 2004 issued an order directing the issuance of a writ of possession. On 4 October 2004, RTC-Br. 23 issued
the Writ of Possession. Consequently, the Office of the Ex-Officio Sheriff issued the Notice to Vacate dated 6 October 2004. 2
On October 15, 2004, respondent filed with the CA a petition for certiorari, prohibition and mandamus with prayer for the
issuance of temporary restraining order/ preliminary injunction entitled DNG Realty and Development Corporation v. Hon.
LYDIA BAUTO HIPOLITO, in her capacity as the Presiding Judge of Branch 23, Regional Trial Court, Third Judicial Region,
Cabanatuan City; the OFFICE OF THE EX-OFFICIO SHERIFF of the Regional Trial Court, Third Judicial Region, Cabanatuan
City; the OFFICE OF THE REGISTER OF DEEDS OF CABANATUAN CITY; and EQUITABLE PCIBANK, INC. The petition
for certiorari sought to nullify (1) the affidavit of consolidation of ownership dated December 2, 2003; (2) the cancellation
of DNG's TCT No. T-57143 covering the mortgaged property and the issuance of TCT No. T-109482 in favor of petitioner
EPCIB by the Register of Deeds of Cabanatuan City; (3) the Order dated September 6, 2004 issued by the RTC, Branch 23,
directing the issuance of the writ of possession and the writ of possession issued pursuant thereto; and (4) the sheriff's
Notice to Vacate dated October 6, 2004, while the petition for prohibition sought to enjoin petitioner EPCIB, their agents and
representatives from enforcing and implementing the above-mentioned actions. And the petition for mandamus sought to
require petitioner EPCIB to cease and desist from taking further action both in the foreclosure proceedings as well as in
Cadastral Case No. 2414-AF, where the writ of possession was issued until the petition for rehabilitation pending before
Branch 28 of the Regional Trial Court (RTC) of Cabanatuan City has been terminated or dismissed.
On October 22, 2004, the CA issued a temporary restraining order (TRO). 3
After the parties filed their respective pleadings, the CA issued its assailed Decision, the dispositive portion of which reads:
WHEREFORE, the instant petition is GRANTED. The Order of 6 September 2004 directing the issuance of a writ of
possession; the Writ of Possession issued pursuant thereto; and the Notice to Vacate are all REVERSED and SET ASIDE for
being premature and untimely issued. Lastly, the Transfer Certificate of Title No. T-109482 under the name of Equitable PCI
Bank is hereby ordered CANCELLED for equally being issued prematurely and untimely, and in lieu thereof the Transfer
Certificate of Title No. 57143 is ordered REINSTATED.

In finding the petition meritorious, the CA stated that under A.M. No. 00-8-10-SC adopting the Interim Rules of Procedure
on Corporate Rehabilitation, all petitions for rehabilitation by corporations, partnerships and associations under Presidential
Decree (PD) 902-A, as amended by Republic Act (RA) 8799, were directed to be transferred from the Securities and
Exchange Commission (SEC) to the RTCs, and allowed the RTCs to issue a stay order, i.e., staying enforcements of all
claims, whether for money or otherwise, and whether such enforcement is by court action or otherwise, against the debtor.
And under Section 6 (c) of PD 902-A, the Commission (now the RTC) upon appointment of a management committee,
rehabilitation receiver, board or body, all actions or claims against the corporations, partnerships or associations under

management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. The CA,
relying in Bank of the Philippine Islands v. Court of Appeals (BPI v. CA) 5 found no merit to petitioner EPCIB's claim that the
foreclosure sale of the property was made prior to the issuance of the Stay Order and was, therefore, fait accompli; and that
with the consummation of the extrajudicial foreclosure sale, all the valid and legal consequences of such could no longer be
stayed. The CA ruled that after the issuance of the Stay Order, effective from the date of its issuance, all subsequent actions
pertaining to respondent DNG's Cabanatuan property should have been held in abeyance. Petitioner EPCIB should have
refrained from executing its Affidavit of Consolidation of ownership or filing its ex-parte petition for issuance of a writ of
possession before the RTC Branch 23; respondent Office of the Register of Deeds of Cabanatuan City should not have
cancelled respondent DNG's title and issued a new one in petitioner EPCIB's name; and that respondent Judge and the ExOfficio Sheriff should have abstained from issuing the writ of possession and the notice to vacate, respectively.
The CA found no forum shopping committed by respondent DNG as Civil Case No. 4631 filed before Branch 28 sought to
annul the foreclosure sale and the certificate of sale over respondent DNG's property, while Cadastral Case No. 2414-AF
instituted by petitioner EPCIB, was an ex-parte petition to wrest possession of the same property from respondent DNG. On
the other hand, the present petition sought only to stay all proceedings on respondent DNG's property after the Stay Order
was issued. Thus, the causes of action and the reliefs sought in each of those proceedings were not identical.
The CA also found that, despite the Stay Order issued, petitioner EPCIB's over-zealousness in consolidating its title and
taking possession of the respondent's property left the latter without any plain, speedy and adequate remedy but to file the
petition.
Dissatisfied, petitioner EPCIB filed the instant petition where it raises the errors committed by the CA as follows:
THE COURT OF APPEALS COMMITTED GRAVE, PALPABLE, AND REVERSIBLE ERRORS IN TAKING COGNIZANCE OF AN
ORIGINAL PETITION FOR CERTIORARI, PROHIBITION AND MANDAMUS, AND IN ISSUING A TEMPORARY RESTRAINING
ORDER, AGAINST THE MINISTERIAL IMPLEMENTATION OF A WRIT OF POSSESSION.
THE COURT OF APPEALS COMMITTED A GRAVE, PALPABLE AND REVERSIBLE ERROR IN HOLDING THAT THE 1994 CASE OF
BPI VS. CA IS SQUARELY IN POINT IN THE PRESENT CONTROVERSY.
THE COURT OF APPEALS GRAVELY AND SERIOUSLY ERRED IN HOLDING THAT SINCE THE CONSOLIDATION OF TITLE, THE
APPLICATION FOR THE ISSUANCE OF A WRIT OF POSSESSION, THE CANCELLATION OF RESPONDENT'S TITLE AND THE
ISSUANCE OF A NEW ONE UNDER EPCIBANKS'S NAME, THE ISSUANCE OF THE WRIT OF POSSESSION, AND THE SERVICE
OF A NOTICE TO VACATE HAVE BEEN MADE AFTER THE ISSUANCE OF THE STAY ORDER, THE SAME WERE UNTIMELY AND
PREMATURE.
THE COURT OF APPEALS COMMITTED A GRAVE, PALPABLE AND REVERSIBLE ERROR IN HOLDING THAT THE RESPONDENT
HAD NO OTHER PLAIN, SPEEDY AND ADEQUATE REMEDY.6
Petitioner contends that upon failure to redeem the foreclosed property, consolidation of title becomes a matter of right on
the part of the auction buyer, and the issuance of a certificate of title in favor of the purchaser becomes ministerial upon the
Register of Deeds; that the issuance and implementation of a writ of possession are both ministerial in character, thus, a writ
of certiorari, prohibition and mandamus which respondent DNG filed with the CA and which were all directed to address the
abuse of discretion allegedly committed by the cadastral court and the sheriff will not lie; and that the CA erred in finding
grave abuse of discretion or excess of jurisdiction upon the cadastral court which issued the writ of possession and the
sheriff who implemented the same, as they acted in compliance with the express provision of Act 3135 as amended.
Petitioner claims that the CA's reliance in BPI v. CA in ruling that all subsequent actions pertaining to respondent DNG's

Cabanatuan property, i.e., consolidation of ownership, cancellation of respondent's title and the issuance of a new title in
petitioner's name and the issuance of a writ of possession by Branch 23 of the RTC in Cadastral Case No. 2414-F, and the
notice to vacate, which were all made after the issuance of the Stay Order by the rehabilitation court, should have been held
in abeyance is erroneous. Petitioner EPCIB cites the case of Rizal Commercial Banking Corporation v. Intermediate Appellate
Court (RCBC v. IAC)7 as the applicable jurisprudence in this case. Petitioner argues that since the extrajudicial foreclosure
sale of respondent DNG's property was conducted on September 4, 2003, or prior to the filing of the petition for
rehabilitation on October 21, 2003 and the issuance of the Stay Order on October 27, 2003, the enforcement of a creditor
claim via an extrajudicial foreclosure sale conducted on September 4, 2003 could no longer be stayed for having been fully
consummated prior to the issuance of the Stay Order.
Petitioner argues that the CA erred in its finding that there was no other plain, speedy and adequate remedy available to
respondent but to file the petition for certiorari, prohibition and mandamus with the CA, since Section 8 of Act 3135 provides
for the proper remedy against an order granting the issuance of a writ of possession.
In its Comment, respondent echoed the findings made by the CA. Petitioner filed its Reply.
The issues for resolution are (1) whether respondent DNG's petition for certiorari, prohibition and mandamus filed in the CA
was a proper remedy; (2) whether the CA correctly held that all subsequent actions pertaining to respondent DNG's
Cabanatuan property should have been held in abeyance after the Stay Order was issued by the rehabilitation court.
We answer both issues in the negative.
Anent the first issue, respondent DNG filed before the CA a petition for certiorari, prohibition and mandamus with prayer for
the issuance of a TRO and a writ of preliminary injunction seeking to annul the RTC Order dated September 6, 2004 issued
in Cadastral Case No. 2414-AF, i.e., in re ex-parte petition filed by petitioner EPCIB for the issuance of a writ of possession,
which ordered the issuance of the writ of possession in petitioner EPCIB's favor as the new registered owner of the property
covered by TCT No. T-109482. We find that the CA erred in acting on the petition. Act 3135, as amended by Act 4118,
which regulates the methods of effecting an extrajudicial foreclosure of mortgage explicitly authorizes the issuance of such
writ of possession.8 Section 7 of Act 3135 as amended provides:
Section 7. Possession during redemption period. - In any sale made under the provisions of this Act, the purchaser may
petition the [Regional Trial Court] of the province or place where the property or any part thereof is situated, to give him
possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a
period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage
or without complying with the requirements of this Act. Such petition shall be made under oath and filed in the form of
an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the
case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative
Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of court shall, upon the filing of such petition, collect the fees
specified in paragraph eleven of section one hundred and fourteen of Act Numbered Twenty-eight hundred and sixty-six, and
the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in
which the property is situated, who shall execute said order immediately.
Section 7 of Act 3135, as amended, refers to a situation wherein the purchaser seeks possession of the foreclosed property
during the redemption period. Upon the purchaser's filing of theex parte petition and posting of the appropriate bond, the
RTC shall, as a matter of course, order the issuance of the writ of possession in the purchaser's favor.9 But equally well
settled is the rule that a writ of possession will issue as a matter of course, even without the filing and approval of a bond,
after consolidation of ownership and the issuance of a new TCT in the name of the purchaser.10 Thus, if under Section 7 of

Act 3135 as amended, the RTC has the power during the period of redemption to issue a writ of possession on the ex
parteapplication of the purchaser, there is no reason why it should not also have the same power after the expiration of the
redemption period, especially where a new title had already been issued in the name of the purchaser.11 Thus, after the
consolidation of title in the buyer's name for failure of the mortgagor to redeem, the writ of possession becomes a matter of
right and the issuance of such writ of possession to a purchaser in an extrajudicial foreclosure is merely a ministerial
function.12 The basis of this right to possession is the purchaser's ownership of the property.13
Respondent's petition for certiorari, prohibition and mandamus filed with the CA was not the proper remedy. A special civil
action for certiorari and prohibition could be availed of only if a tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and if there is no appeal or other plain, speedy, and adequate remedy in the ordinary course of law. 14
In this case, respondent DNG failed to redeem the foreclosed property within the reglementary period; thus, petitioner
EPCIB consolidated its ownership over the property in its favor and annotated the same in respondent's title. Thus,
respondent DNG's title was cancelled and a new title was issued in petitioner EPCIB's name. The RTC's issuance of a writ of
possession in favor of petitioner EPCIB as the new registered owner of the subject property was in compliance with the
express provisions of Act 3135 as amended. It cannot, therefore, be charged with grave abuse of discretion as there is no
showing that, in the exercise of its judgment, it acted in a capricious, whimsical, arbitrary or despotic manner tantamount to
lack of jurisdiction.15
In Santiago v. Merchants Rural Bank of Talavera, Inc.,16 we said that:
Case law has it that after the consolidation of title in the name of the respondent as the buyer of the property, upon failure
of the mortgagor to redeem the property, the writ of possession becomes a matter of right. Its issuance to the purchaser is
merely a ministerial function. As such, the court neither exercises its discretion nor judgment. Indeed, in an avuncular case,
we held that:
The right of the petitioner to the possession of the property is clearly unassailable. It is founded on its right of ownership. As
the purchaser of the properties in the foreclosure sale, and to which the respective titles thereto have already been issued,
petitioner's right over the property has become absolute, vesting upon him the right of possession over an enjoyment of the
property which the Court must aid in effecting its delivery. After such delivery, the purchaser becomes the absolute owner of
the property. As We said in Tan Soo Huat vs. Ongwico, the deed of conveyance entitled the purchaser to have and to hold
the purchased property. This means, that the purchaser is entitled to go immediately upon the real property, and that it is
the Sheriff's inescapable duty to place him in such possession. 17
Thus, in Philippine National Bank v. Sanao Marketing Corporation,18 we ruled that:
x x x The judge issuing the order following these express provisions of [Act 3135] cannot be charged with having acted
without jurisdiction or with grave abuse of discretion. If only to stress the writ's ministerial character, we have, in previous
cases, disallowed injunction to prohibit its issuance, just as we have held that the issuance of the same may not be stayed
by a pending action for annulment of mortgage or the foreclosure itself.19
Moreover, a writ of certiorari, prohibition and mandamus will only be issued if there is neither appeal nor any plain, speedy
or adequate relief in the ordinary course of law. However, Section 8 of Act 3135 provides the plain, speedy, and adequate
remedy in opposing the issuance of a writ of possession. 20 The provision reads:
Section 8. Setting aside of sale and writ of possession. The debtor may, in the proceedings in which possession was
requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and
the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale

was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance
with the summary procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninety-six;
and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the
person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section
fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the
pendency of the appeal.
Clearly, a party may file a petition to set aside the foreclosure sale and to cancel the writ of possession in the same
proceedings where the writ of possession was requested. 21 The aggrieved party may thereafter appeal from any disposition
by the court on the matter.22
In this case, respondent DNG had the right to file a petition to set aside the sale and writ of possession issued by the RTC
and to file an appeal in case of an adverse ruling. However, respondent DNG did not file such petition and, instead, filed the
petition for certiorari, prohibition and mandamus with the CA. Hence, they were barred from filing such petition from the
RTC Order and the writ of possession issued by it.23 Respondent's recourse to the CA via Rule 65 was inappropriate even
though the Sheriff had demanded that they vacate the property.24 Section 8 of Act No. 3135 mandates that even if an appeal
is interposed from an order granting a petition for a writ of possession, such order shall continue to be in effect during the
pendency of an appeal.25
As to the second issue of whether the CA correctly held that after the issuance of the Stay Order by the rehabilitation court,
all subsequent actions in this case pertaining to respondent's Cabanatuan property should have been held in abeyance is
devoid of merit.
Respondent DNG's petition for rehabilitation filed in Branch 28 of the RTC of Cabanatuan City on October 21, 2003 was made
pursuant to the 2000 Interim Rules of Procedure on Corporate Rehabilitation, which was the applicable law on rehabilitation
petitions filed by corporations, partnerships or associations, including rehabilitation cases transferred from the SEC to the
RTCs pursuant to RA 8799 or the Securities Regulation Code.26
Section 6 of the Interim Rules of Procedure on Corporate Rehabilitation 27 provides:
SEC. 6.Stay Order. -- If the court finds the petition to be sufficient in form and substance, it shall, not later than five (5)
days from the filing of the petition, issue an Order (a) appointing a Rehabilitation Receiver and fixing his bond; (b) staying
enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise,
against the debtor, its guarantors and sureties not solidarily liable with the debtor; (c) prohibiting the debtor from selling,
encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (d)
prohibiting the debtor from making any payment of its liabilities outstanding as of the date of filing of the petition; (e)
prohibiting the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course
of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay
order; (f) directing the payment in full of all administrative expenses incurred after the issuance of the stay order; (g) fixing
the initial hearing on the petition not earlier than forty five (45) days but not later than sixty (60) days from the filing
thereof; (h) directing the petitioner to publish the Order in a newspaper of general circulation in the Philippines once a week
for two (2) consecutive weeks; (i) directing all creditors and all interested parties (including the Securities and Exchange
Commission) to file and serve on the debtor a verified comment on or opposition to the petition, with supporting affidavits
and documents, not later than ten (10) days before the date of the initial hearing and putting them on notice that their
failure to do so will bar them from participating in the proceedings; and (j) directing the creditors and interested parties to
secure from the court copies of the petition and its annexes within such time as to enable themselves to file their comment
on or opposition to the petition and to prepare for the initial hearing of the petition.

The suspension of the enforcement of all claims against the corporation is subject to the rule that it shall commence only
from the time the Rehabilitation Receiver is appointed.28
The CA annulled the RTC Order dated September 6, 2004 directing the issuance of a writ of possession, as well as the writ
of possession issued pursuant thereto on October 4, 2004, and the notice to vacate issued by the Sheriff for being
premature and untimely and ordered the cancellation of TCT No. T-109482 in the name of petitioner EPCIB as they were all
done after the Stay Order was issued on October 27, 2003 by the rehabilitation court. In so ruling, the CA relied on BPI v.
CA.29
In BPI v. CA, BPI filed with the RTC a complaint for foreclosure of real estate mortgage against Ruby Industrial Corporation
(RUBY). After RUBY filed its Answer with Counterclaim, it submitted a motion for suspension of proceedings, since the SEC
had earlier issued an Order placing RUBY under a rehabilitation plan, pursuant to Section 6 par. (c) of PD 902-A which also
declared that with the creation of the Management Committee, all actions or claims against RUBY pending before any court,
tribunal, branch or body were suspended. Thus, the RTC suspended the proceedings. BPI moved for the reopening of the
proceedings; however, the RTC denied it, citing the case of Alemar's Sibal and Sons, Inc v. Elbinias where we held that
suspension of payments applied to all creditors, whether secured or unsecured, in order to place them on equal footing. As
BPI's motion for reconsideration was denied, it went to the CA in a petition for certiorari and mandamus alleging grave
abuse of discretion on the RTC in refusing to reopen the case, which was dismissed by the CA. BPI filed its appeal with Us
wherein the issue presented was whether BPI, a secured creditor of RUBY, may still judicially enforce its claim against RUBY
which had already been placed by the SEC under Rehabilitation. We denied the petition and found that BPI"s action for
foreclosure of real estate mortgage had been filed against RUBY and was pending with the RTC when RUBY was placed by
the SEC under rehabilitation through the creation of a management committee. Thus, with the SEC order, which directed
that all actions or claims against RUBY pending before any court, tribunal, branch or body be deemed suspended, the RTC's
jurisdiction over the foreclosure case was also considered suspended; and that SEC had acquired jurisdiction with the
appointment of a rehabilitation receiver for the distressed corporation and had directed all proceedings or claims against
Ruby suspended. We then ruled that:
x x x whenever a distressed corporation asks [the] SEC for rehabilitation and suspension of payments, preferred creditors
may no longer assert such preference, but x x x stand on equal footing with other creditors. Foreclosure shall be disallowed
so as not to prejudice other creditors, or cause discrimination among them. If foreclosure is undertaken despite the fact that
a petition for rehabilitation has been filed, the certificate of sale shall not be delivered pending rehabilitation. If this has
already been done, no transfer certificate of title shall likewise be effected within the period of rehabilitation. The rationale
behind PD 902-A, as amended, is to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is
preferred over the others.30
BPI case is not in all fours with the instant case. Notably, in BPI, the action for judicial foreclosure of the real estate
mortgage was still pending with the RTC when the stay order was issued; thus, there was no judgment on the foreclosure
for payment and the sale of the mortgaged property at a public auction. In contrast to this case, herein respondent's
mortgaged property had already been extrajudicially foreclosed and sold to petitioner as the highest bidder and a Certificate
of Sale was issued on September 4, 2003, which was prior to the issuance of the Stay Order on October 27, 2003.
We find merit in petitioner EPCIB's argument on the applicability of RCBC v. IAC,31 an en banc case decided in 1999, to the
instant case. There, we ruled that RCBC can rightfully move for the extrajudicial foreclosure of the mortgage on the BF
Home properties on October 16, 1984, because a management committee was not appointed by the SEC until March 18,
1985. Such ruling was a reversal of our earlier decision in the same case where we found that the prohibition against
foreclosure attaches as soon as a petition for rehabilitation was filed.

In RCBC v. IAC, BF Homes filed a petition for rehabilitation and for suspension of payments with the SEC on September 28,
1984. On October 26, 1984, RCBC requested the Provincial Sheriff to extrajudicially foreclose its real estate mortgage on
some of BF Homes' properties; thus, notices were sent to the parties. BF Homes filed a motion with the SEC for the issuance
of a TRO to enjoin RCBC and the sheriff from proceeding with the auction sale, which the SEC granted by issuing a TRO for
twenty days. The sale was rescheduled to January 29, 1985. On January 25, 1985, the SEC ordered the issuance of a writ of
preliminary injunction conditioned upon BF Homes' filing of a bond which the latter failed to do not until January 29, the day
of the auction sale. As the sheriff was not aware of the filing of the bond, he proceeded with the auction on January 29,
wherein RCBC emerged as the highest bidder.
On February 5, 1985, BF Homes filed with the SEC a consolidated motion to annul the auction sale and to cite RCBC and the
sheriff for contempt. The sheriff then withheld the delivery of a certificate of sale to the RCBC due to the SEC proceedings.
On March 13, 1985, RCBC filed with the RTC of Rizal, Branch 140, an action for mandamus against the Provincial Sheriff of
Rizal and his deputy to compel them to execute in its favor a certificate of sale of the auctioned properties. The sheriffs filed
their answer saying that they proceeded with the sale since no writ of preliminary injunction was issued as of the auction
sale, but they informed the SEC that they would suspend the issuance of the certificate of sale.
On March 18, 1985, the SEC appointed a management committee for BF Homes.
On May 8, 1985, the RTC, Branch 140, rendered a judgment on the pleading in the mandamus case filed by RCBC which
ordered the sheriff to execute and deliver to RCBC the certificate of sale of January 29, 1984. BF Homes filed with the IAC
an original complaint for annulment of the RTC judgment. The IAC set aside the RTC decision by dismissing the mandamus
case and ordered the suspension of the issuance to RCBC of new land titles 32 until the SEC had resolved the petition for
rehabilitation.
RCBC filed an appeal with us. During the pendency of the appeal, RCBC filed a manifestation informing us that the SEC
issued an Order on October 16, 1986 denying the motion to annul the auction sale and to cite RCBC and the sheriff for
contempt. Thus, by virtue of the said SEC Order, the Register of Deeds of Pasay effected transfer of titles over the auctioned
properties to RCBC and the issuance of new titles in its name. Thereafter, RCBC presented with us a motion for the
dismissal of its petition, since the issuance of new titles in its name rendered the petition moot and academic. In our original
decision dated September 14, 1992, we denied petitioner's motion to dismiss, finding basis for nullifying and setting aside
the TCTs in the name of RCBC. We dismissed the RCBC petition and upheld the IAC decision dismissing the mandamus case
filed by RCBC. We ordered the nullification of the new titles already issued in RCBC's name and reinstated the old titles in
the name of BF Homes. In setting aside RCBC's acquisition of title and nullifying the TCTs issued to it, we held that
prohibition against foreclosure attaches as soon as a petition for rehabilitation was filed.
However, as we have said earlier, upon RCBC's motion for reconsideration, we reversed our previous decision and granted
reconsideration for the cogent reason that suspension of actions for claims commenced only from the time a management
committee or receiver was appointed by the SEC. We said that RCBC, therefore, could have rightfully, as it did, move for the
extrajudicial foreclosure of its mortgage on October 26, 1984, because a management committee was not appointed by the
SEC until March 18, 1985.
In RCBC, we upheld the extrajudicial foreclosure sale of the mortgage properties of BF Homes wherein RCBC emerged as the
highest bidder as it was done before the appointment of the management committee. Noteworthy to mention was the fact
that the issuance of the certificate of sale in RCBC's favor, the consolidation of title, and the issuance of the new titles in
RCBC's name had also been upheld notwithstanding that the same were all done after the management committee had
already been appointed and there was already a suspension of claims. Thus, applying RCBC v. IAC in this case, since the
foreclosure of respondent DNG's mortgage and the issuance of the certificate of sale in petitioner EPCIB's favor were done
prior to the appointment of a Rehabilitation Receiver and the Stay Order, all the actions taken with respect to the foreclosed

mortgage property which were subsequent to the issuance of the Stay Order were not affected by the Stay Order. Thus,
after the redemption period expired without respondent redeeming the foreclosed property, petitioner becomes the absolute
owner of the property and it was within its right to ask for the consolidation of title and the issuance of new title in its name
as a consequence of ownership; thus, it is entitled to the possession and enjoyment of the property.
WHEREFORE, the petition is GRANTED. The Decision dated June 23, 2005 of the Court of Appeals in CA-G.R. SP No. 86950
is hereby REVERSED and SET ASIDE.

G.R. No. 176019 : January 12, 2011

BPI FAMILY SAVINGS BANK, INC. v. GOLDEN POWER DIESEL SALES CENTER, INC. and RENATO C. TAN

The Case
This is a petition for review

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of the 13 March 2006 Decision

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and 19 December 2006 Resolution

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of the Court of Appeals

in CA-G.R.SP No. 78626. In its 13 March 2006 Decision, the Court of Appeals denied petitioner BPI Family Savings Bank,
Inc.s (BPI Family) petition for mandamus and certiorari. In its 19 December 2006 Resolution, the Court of Appeals denied
BPI Familys motion for reconsideration.
The Facts
On 26 October 1994, CEDEC Transport, Inc. (CEDEC) mortgaged two parcels of land covered by Transfer Certificate of Title
(TCT) Nos. 134327 and 134328 situated in Malibay, Pasay City, including all the improvements thereon (properties), in favor
of BPI Family to secure a loan ofP6, 570, 000. On the same day, the mortgage was duly annotated on the titles under Entry
No. 94-2878. On 5 April and 27 November 1995, CEDEC obtained from BPI Family additional loans ofP2, 160, 000 andP1,
140, 000, respectively, and again mortgaged the same properties. These latter mortgages were duly annotated on the titles
under Entry Nos. 95-6861 and 95-11041, respectively, on the same day the loans were obtained.

Despite demand, CEDEC defaulted in its mortgage obligations. On 12 October 1998, BPI Family filed with the ex-officio
sheriff of the Regional Trial Court of Pasay City (RTC) a verified petition for extrajudicial foreclosure of real estate mortgage
over the properties under Act No. 3135, as amended.

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On 10 December 1998, after due notice and publication, the sheriff sold the properties at public auction. BPI Family, as the
highest bidder, acquired the properties forP13, 793, 705.31. On 14 May 1999, the Certificate of Sheriffs Sale, dated 24
February 1999, was duly annotated on the titles covering the properties.
On 15 May 1999, the one-year redemption period expired without CEDEC redeeming the properties. Thus, the titles to the
properties were consolidated in the name of BPI Family. On 13 September 2000, the Registry of Deeds of Pasay City issued
new titles, TCT Nos. 142935 and 142936, in the name of BPI Family.
However, despite several demand letters, CEDEC refused to vacate the properties and to surrender possession to BPI Family.
On 31 January 2002, BPI Family filed an Ex-Parte Petition for Writ of Possession over the properties with Branch 114 of the
Regional Trial Court of Pasay City (trial court). In its 27 June 2002 Decision, the trial court granted BPI Familys petition.

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12 July 2002, the trial court issued the Writ of Possession.

On 29 July 2002, respondents Golden Power Diesel Sales Center, Inc. and Renato C. Tan
Hold Implementation of the Writ of Possession.

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(respondents) filed a Motion to

Respondents alleged that they are in possession of the properties which

they acquired from CEDEC on 10 September 1998 pursuant to the Deed of Absolute Sale with Assumption of Mortgage
(Deed of Sale).

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Respondents argued that they are third persons claiming rights adverse to CEDEC, the judgment obligor

and they cannot be deprived of possession over the properties. Respondents also disclosed that they filed a complaint before
Branch 111 of the Regional Trial Court of Pasay City, docketed as Civil Case No. 99-0360, for the cancellation of the Sheriffs
Certificate of Sale and an order to direct BPI Family to honor and accept the Deed of Absolute Sale between CEDEC and
respondents.

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On 12 September 2002, the trial court denied respondents' motion.

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Thereafter, the trial court issued an alias writ of

possession which was served upon CEDEC and all other persons claiming rights under them.
However, the writ of possession expired without being implemented. On 22 January 2003, BPI Family filed an Urgent ExParte Motion to Order the Honorable Branch Clerk of Court to Issue Alias Writ of Possession. In an Order dated 27 January
2003, the trial court granted BPI Familys motion.
Before the alias writ could be implemented, respondent Renato C. Tan filed with the trial court an Affidavit of Third Party
Claim

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on the properties. Instead of implementing the writ, the sheriff referred the matter to the trial court for resolution.

On 11 February 2003, BPI Family filed an Urgent Motion to Compel Honorable Sheriff and/or his Deputy to Enforce Writ of
Possession and to Break Open the properties. In its 7 March 2003 Resolution, the trial court denied BPI Familys motion and
ordered the sheriff to suspend the implementation of the alias writ of possession.

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According to the trial court, "the order

granting the alias writ of possession should not affect third persons holding adverse rights to the judgment obligor." The trial
court admitted that in issuing the first writ of possession it failed to take into consideration respondents' complaint before
Branch 111 claiming ownership of the property. The trial court also noted that respondents were in actual possession of the
properties and had been updating the payment of CEDECs loan balances with BPI Family. Thus, the trial court found it
necessary to amend its 12 September 2002 Order and suspend the implementation of the writ of possession until Civil Case
No. 99-0360 is resolved.
BPI Family filed a motion for reconsideration. In its 20 June 2003 Resolution, the trial court denied the motion.

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BPI Family then filed a petition for mandamus and certiorari with application for a temporary restraining order or preliminary
injunction before the Court of Appeals. BPI Family argued that the trial court acted with grave abuse of discretion amounting
to lack or excess of jurisdiction when it ordered the suspension of the implementation of the alias writ of possession.
According to BPI Family, it was the ministerial duty of the trial court to grant the writ of possession in its favor considering
that it was now the owner of the properties and that once issued, the writ should be implemented without delay.
The Court of Appeals dismissed BPI Familys petition. The dispositive portion of the 13 March 2006 Decision reads:

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WHEREFORE , the instant Petition for Writ of Mandamus and Writ of Certiorari with Application for a TRO and/or
Preliminary Injunction is hereby DENIED. The twin Resolutions dated March 7, 2003 and June 20, 2003, both issued by the
public respondent in LRC Case No. 02-0003, ordering the sheriff to suspend the implementation of the Alias Writ of
Possessionissued in favor of the petitioner, and denying its Urgent Omnibus Motion thereof, respectively, are
herebyAFFIRMED. SO ORDERED .

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BPI Family filed a motion for reconsideration. In its 19 December 2006 Resolution, the Court of Appeals denied the motion.
The Ruling of the Court of Appeals
The Court of Appeals ruled that the trial court did not commit grave abuse of discretion in suspending the implementation of
the alias writ of possession because respondents were in actual possession of the properties and are claiming rights adverse
to CEDEC, the judgment obligor.According to the Court of Appeals, the principle that the implementation of the writ of
possession is a mere ministerial function of the trial court is not without exception. The Court of Appeals held that the
obligation of the court to issue an ex parte writ of possession in favor of the purchaser in an extrajudicial foreclosure sale
ceases to be ministerial once it appears that there is a third party in possession of the property who is claiming a right
adverse to that of the debtor or mortgagor.
The Issues
BPI Family raises the following issues:

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A.
The Honorable Court of Appeals seriously erred in upholding the finding of the Honorable Regional Trial Court that despite
the fact that private respondents merely stepped into the shoes of mortgagor CEDEC, being the vendee of the properties in
question, they are categorized as third persons in possession thereof who are claiming a right adverse to that of the
debtor/mortgagor CEDEC.

B.
The Honorable Court of Appeals gravely erred in sustaining the aforementioned twin orders suspending the implementation
of the writ of possession on the ground that the annulment case filed by private respondents is still pending despite the
established ruling that pendency of a case questioning the legality of a mortgage or auction sale cannot be a ground for the
non-issuance and/or non-implementation of a writ of possession.

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The Ruling of the Court

The petition is meritorious.

BPI Family argues that respondents cannot be considered "a third party who is claiming a right adverse to that of the debtor
or mortgagor" because respondents, as vendee, merely stepped into the shoes of CEDEC, the vendor and judgment obligor.
According to BPI Family, respondents are mere extensions or successors-in-interest of CEDEC. BPI Family also argues that
the pendency of an action questioning the validity of a mortgage or auction sale cannot be a ground to oppose the
implementation of a writ of possession.
On the other hand, respondents insist that they are third persons who claim rights over the properties adverse to CEDEC.
Respondents argue that the obligation of the court to issue anex parte writ of possession in favor of the purchaser in an
extrajudicial foreclosure sale ceases to be ministerial once it appears that there is a third party in possession of the property
who is claiming a right adverse to that of the judgment obligor.
In extrajudicial foreclosures of real estate mortgages, the issuance of a writ of possession is governed by Section 7 of Act
No. 3135, as amended, which provides:

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SECTION 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance
(Regional Trial Court) of the province or place where the property or any part thereof is situated, to give him possession
thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of
twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or
without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte
motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of
property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of
any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance
with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified
in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act
Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of
possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order
immediately.
This procedure may also be availed of by the purchaser seeking possession of the foreclosed property bought at the public
auction sale after the redemption period has expired without redemption having been made.
In China Banking Corporation v. Lozada,

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we ruled:

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It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not
redeemed during the period of one year after the registration of the sale. As such, he is entitled to the possession of the said
property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a
new transfer certificate of title. The buyer can in fact demand possession of the land even during the redemption period
except that he has to post a bond in accordance with Section 7 of Act No. 3135, as amended. No such bond is required after
the redemption period if the property is not redeemed. Possession of the land then becomes an absolute right of the
purchaser as confirmed owner. Upon proper application and proof of title, the issuance of the writ of possession
becomes a ministerial duty of the court .

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Thus, the general rule is that a purchaser in a public auction sale of a foreclosed property is entitled to a writ of possession
and, upon an ex parte petition of the purchaser, it is ministerial upon the trial court to issue the writ of possession in favor of
the purchaser.
There is, however, an exception. Section 33, Rule 39 of the Rules of Court provides:

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Section 33. Deed and possession to be given at expiration of redemption period; by whom executed or given. - x x x
Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to and acquire all the
rights, title, interest and claim of the judgment obligor to the property as of the time of the levy. The possession of the
property shall be given to the purchaser or last redemptioner by the same officer unless a third party is actually holding
the property adversely to the judgment obligor.(Emphasis supplied)
Therefore, in an extrajudicial foreclosure of real property, when the foreclosed property is in the possession of a third party
holding the same adversely to the judgment obligor, the issuance by the trial court of a writ of possession in favor of the
purchaser of said real property ceases to be ministerial and may no longer be done ex parte.
court to order a hearing to determine the nature of the adverse possession.

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The procedure is for the trial

For the exception to apply, however, the

property need not only be possessed by a third party, but also held by the third party adversely to the judgment obligor.
In this case, BPI Family invokes the general rule that they are entitled to a writ of possession because respondents are mere
successors-in-interest of CEDEC and do not possess the properties adversely to CEDEC. Respondents, on the other hand,
assert the exception and insist that they hold the properties adversely to CEDEC and that their possession is a sufficient
obstacle to the ex parte issuance of a writ of possession in favor of BPI Family.
Respondents argument fails to persuade the Court. It is clear that respondents acquired possession over the properties
pursuant to the Deed of Sale which provides that forP15, 000, 000 CEDEC will "sell, transfer and convey" to respondents the
properties "free from all liens and encumbrances excepting the mortgage as may be subsisting in favor of the BPI FAMILY
SAVINGS BANK."

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Moreover, the Deed of Sale provides that respondents bind themselves to assume "the payment of the

unpaid balance of the mortgage indebtedness of the VENDOR (CEDEC) amounting toP7, 889, 472.48, as of July 31, 1998, in
favor of the aforementioned mortgagee (BPI Family) by the mortgage instruments and does hereby further agree to be
bound by the precise terms and conditions therein contained."
In Roxas v. Buan,

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we ruled:

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It will be recalled that Roxas possession of the property was premised on its alleged sale to him by Valentin for the amount
of P 100, 000.00. Assuming this to be true, it is readily apparent that Roxas holds title to and possesses the property as
Valentins transferee.Any right he has to the property is necessarily derived from that of Valentin. As transferee, he steps
into the latters shoes. Thus, in the instant case, considering that the property had already been sold at public auction
pursuant to an extrajudicial foreclosure, the only interest that may be transferred by Valentin to Roxas is the right to redeem
it within the period prescribed by law. Roxas is therefore the successor-in-interest of Valentin, to whom the latter had
conveyed his interest in the property for the purpose of redemption. Consequently, Roxas occupancy of the property cannot
be considered adverse to Valentin.

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In this case, respondents possession of the properties was premised on the sale to them by CEDEC for the amount of P15,
000, 000. Therefore, respondents hold title to and possess the properties as CEDECs transferees and any right they have

over the properties is derived from CEDEC.As transferees of CEDEC, respondents merely stepped into CEDEC's shoes and
are necessarily bound to acknowledge and respect the mortgage CEDEC had earlier executed in favor of BPI
Family.

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Respondents are the successors-in-interest of CEDEC and thus, respondents occupancy over the properties

cannot be considered adverse to CEDEC.

Moreover, in China Bank v. Lozada,

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we discussed the meaning of "a third party who is actually holding the property

adversely to the judgment obligor." We stated:

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The exception provided under Section 33 of Rule 39 of the Revised Rules of Court contemplates a situation in which a third
party holds the property by adverse title or right, such as that of a co-owner, tenant or usufructuary. The co-owner,
agricultural tenant, and usufructuary possess the property in their own right, and they are not merely the successor or
transferee of the right of possession of another co-owner or the owner of the property.

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In this case, respondents cannot claim that their right to possession over the properties is analogous to any of these.
Respondents cannot assert that their right of possession is adverse to that of CEDEC when they have no independent right of
possession other than what they acquired from CEDEC. Since respondents are not holding the properties adversely to
CEDEC, being the latters successors-in-interest, there was no reason for the trial court to order the suspension of the
implementation of the writ of possession.
Furthermore, it is settled that a pending action for annulment of mortgage or foreclosure sale does not stay the issuance of
the writ of possession.

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The trial court, where the application for a writ of possession is filed, does not need to look into the

validity of the mortgage or the manner of its foreclosure.

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prejudice to the outcome of the pending annulment case.

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In this case, the trial court erred in issuing its 7 March 2003 Order suspending the implementation of the alias writ of
possession. Despite the pendency of Civil Case No. 99-0360, the trial court should not have ordered the sheriff to suspend
the implementation of the writ of possession.BPI Family, as purchaser in the foreclosure sale, is entitled to a writ of
possession without prejudice to the outcome of Civil Case No. 99-0360.
WHEREFORE, we GRANT the petition. We SET ASIDE the 13 March 2006 Decision and the 19 December 2006 Resolution
of the Court of Appeals in CA-G.R. SP No. 78626. We SET ASIDE the 7 March and 20 June 2003 Resolutions of the Regional
Trial Court, Branch 114, Pasay City. We ORDER the sheriff to proceed with the implementation of the writ of possession
without prejudice to the outcome of Civil Case No. 99-0360.

G.R. NO. 183058 : April 3, 2013

SPOUSES MONTANO T. TOLOSA and MERLINDA TOLOSA, v.UNITED COCONUT PLANTERS BANK,

A purchaser at an extrajudicial foreclosure sale is entitled to a writ of possession as a matter of right after consolidation of
ownership for failure of the mortgagor to redeem the property.1The exceptions to this rule are at the heart of this petition for

review filed pursuant to Rule 45 of the Rules of Court, primarily assailing the 31 May 2007 Decision 2 rendered by the
Nineteenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 00593, 3 the decretal portion of which states:

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WHEREFORE, in view of all the foregoing premises, the Orders dated December 1, 2004, and January 31, 2005, issued by
the Honorable public respondent are hereby ANNULLED and SET ASIDE, and a new one is issued granting the issuance of
writ of possession in favor of petitioner UCPB for the properties now covered by TCT Nos. T-30403 and T-30404 and Tax
Declaration Nos. ARP/TD No. 2054 (PIN 038-12-006-04-050) and ARP/TD No. 2056 (PIN 038-12-006-04-051). SO
ORDERED.4

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The Facts
On 7 April 1997, petitioners Spouses Montano and Merlinda Tolosa (Spouses Tolosa) entered into a Credit Agreement with
respondent United Coconut Planters Bank (UCPB) for the purpose of availing of the latter's credit facilities. 5 To secure their
credit availments, the Spouses Tolosa executed deeds of real estate mortgage over four properties in Barangay Caticlan,
Malay, Aklan, which were registered and/or declared for taxation purposes in their names under the following certificates of
title and/or tax declarations, to wit: (a) Transfer Certificate of Title (TCT) Nos. T-23589; (b) Original Certificate of Title (OCT)
No. P-14743; (c) Tax Declaration No. ARP-TD 1561 (038-12-006-04-051); and Tax Declaration No. ARP-TD 93-006-0362
(038-12-006-04-050).6 For failure of the Spouses Tolosa to pay their principal obligation which amounted to P13,300,000.00,
exclusive of interests, penalties and other charges, UCPB foreclosed the mortgage on the aforesaid realties and filed a
petition for the extra-judicial sale thereof with the Office of the Clerk of Court and Ex-Officio Sheriff of Kalibo, Aklan on 22
October 1999.7

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After the due notice and publication, the mortgaged properties were sold on 4 January 2000 at a public auction where UCPB
tendered the highest bid of P17,240,000.00. The proceeds of the sale were credited towards the partial satisfaction of the
Spouses Tolosa's mortgage obligation which, inclusive of interests, penalties and other charges, was pegged
atP24,253,847.64.8 Issued the corresponding certificate of sale, 9 UCPB caused the same to be registered with the Office of
the Register of Deeds of Aklan on 5 January 2000.10 For failure of the Spouses Tolosa to exercise their right of redemption
within the prescribed one year period, UCPB went on to consolidate its ownership over the subject realties on 22 January
2001.11With the cancellation of those in the name of the Spouses Tolosa, the following certificates of title and tax
declarations were subsequently issued in the name of UCPB, to wit: (a) TCT No. T-30403; (b) TCT No. T-30404; (c) Tax
Declaration No. ARP-TD 2054 (038-12-006-04-050); and (d) Tax Declaration No. ARP-TD 2056 (038-12-006-04-051). 12

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On 2 September 2004, UCPB filed an ex-parte petition for issuance of a writ of possession in the cadastral case docketed as
Cadastral Case No. 3028 before the Regional Trial Court (RTC), Branch 5, Kalibo Aklan. 13 Notified of the filing of the
petition,14 the Spouses Tolosa filed their 8 November 2004 Opposition, calling the RTC's attention to the pendency of the
complaint for declaration of nullity of promissory notes, foreclosure of mortgage and certificate of sale as well as accounting
and damages which they instituted against UCPB. Docketed as Civil Case No. 6180 before Branch 8 of the RTC, the
complaint alleged that the Spouses Tolosa were misled by UCPB into signing the Credit Agreement, Promissory Notes and
Real Estate Mortgage sued upon. In addition to not releasing the full amount of their loans, UCPB was likewise faulted for
supposedly failing to disclose the actual interests it charged and for causing the extrajudicial foreclosure of the mortgage
despite the Spouses Tolosa's overpayment of their loans. 15 Claiming that there was prima facie showing of invalidity of their
mortgage obligation, the foreclosure of the mortgage and the sale of their properties, the Spouses Tolosa prayed that the
issuance of the writ of possession be held in abeyance and that UCPB's petition therefor be consolidated with Civil Case No.
6180.16

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On 1 December 2004, the RTC issued an order, holding in abeyance the issuance of the writ of possession sought by UCPB.
Citing equity and substantial justice as reasons for its disposition, the RTC ruled that the pendency of Civil Case No. 6180

necessitated the suspension of the grant of UCPB's petition since there was a possibility that the latter's foreclosure of the
mortgage may be adjudged violative of the Spouses Tolosa's rights as mortgagors. While conceding that the issuance of a
writ of possession is ministerial as a general rule, the RTC held that said function ceases to be of said nature where the grant
of the writ "will prejudice another pending case for the nullification of the auction sale" and "might work inequity and
injustice to mortgagors."17 With its motion for reconsideration of the foregoing order 18 further denied for lack of merit in the
RTC's Order dated 31 January 2005, 19 UCPB filed its Rule 65 petition for certiorari which was docketed as CA-G.R. SP No.
00593 before the CA.20

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On 31 May 2007, the CA rendered the herein assailed decision, nullifying the RTC's 1 December 2004 Decision and granting
the writ of possession sought by UCPB. Finding that the ministerial nature of the issuance of a writ of possession left no
discretion on the part of the RTC insofar as the grant of UCPB's application is concerned, the CA ruled that questions
regarding the validity of the foreclosure sale as well as the propriety of the grant of writ can be raised by the Spouses Tolosa
in the same proceedings pursuant to Section 8 of Act 3135. The fact that the Credit Agreement, Promissory Notes and Real
Estate Mortgage executed by the Spouses Tolosa had yet to be declared invalid also led the CA to enunciate that the mere
pendency of Civil Case No. 6180 cannot defeat the right to a writ of possession the law grants to UCPB as the absolute and
registered owners of the subject realties.21 The Spouses Tolosa's motions for reconsideration 22 of this decision were denied for
lack of merit in the CA's second assailed Resolution dated 21 May 2008, 23 hence, this petition.
The Issues
The Spouses Tolosa seek the reversal of the CA's assailed decision and resolution on the following grounds, to wit:

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I. THE CA REVERSIBLY ERRED IN NOT FINDING THAT THE PRIMA FACIE NULLITY OF THE MORTGAGE OBLIGATION AND THE
FORECLOSURE SALE JUSTIFIED THE RTC'S ORDER TO HOLD IN ABEYANCE THE ISSUANCE OF THE WRIT OF POSSESSION
SOUGHT BY UCPB.
II. THE CA REVERSIBLY ERRED IN ORDERING THE GRANT OF THE WRIT OF POSSESSION SOUGHT BY UCPB DESPITE THE
RULE THAT THE SURPLUS IN THE BID PRICE SHOULD FIRST BE PAID TO THE MORTGAGOR BEFORE HE CAN BE DEPRIVED
OF POSSESSION OF THE PROPERTY MORTGAGED.24

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The Court's Ruling

The petition is bereft of merit.
A writ of possession is simply an order by which the sheriff is commanded by the court to place a person in possession of a
real or personal property.25 Under Section 7 of Act No. 3135, as amended, a writ of possession may be issued in favor of a
purchaser in a foreclosure sale either (1) within the one-year redemption period, upon the filing of a bond; or (2) after the
lapse of the redemption period, without need of a bond. Within the one-year redemption period, the purchaser may apply for
a writ of possession by filing a petition in the form of an ex parte motion under oath, 26 in the registration or cadastral
proceedings of the registered property.27 The law requires only that the proper motion be filed, the bond approved and no
third person is involved.28 After the consolidation of title in the buyer's name for failure of the mortgagor to redeem the
property, entitlement to the writ of possession becomes a matter of right. 29 In the latter case, the right of possession
becomes absolute because the basis thereof is the purchaser's ownership of the property.30

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The rule is likewise settled that the proceeding in a petition for a writ of possession is ex-parte and summary in nature. 31 As
one brought for the benefit of one party only and without notice by the court to any person adverse of interest, it is a judicial
proceeding wherein relief is granted without giving the person against whom the relief is sought an opportunity to be

heard.32 The issuance of the writ of possession is, in turn, a ministerial function in the exercise of which trial courts are not
granted any discretion.33 Since the judge to whom the application for writ of possession is filed need not look into the validity
of the mortgage or the manner of its foreclosure, 34 it has been ruled that the ministerial duty of the trial court does not
become discretionary upon the filing of a complaint questioning the mortgage. 35 Corollarily, any question regarding the
validity of the extrajudicial foreclosure sale and the resulting cancellation of the writ may, likewise, be determined in a
subsequent proceeding as outlined in Section 8 36 of Act No. 3135.37

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Gauged from the foregoing principles, we find that the CA committed no reversible error in ordering the issuance of the writ
of possession sought by UCPB. The record shows that UCPB caused the extrajudicial foreclosure of the mortgage on the
subject realties as a consequence of the Spouses Tolosa's default on their mortgage obligation. As the highest bidder at the
4 January 2000 foreclosure sale, UCPB consolidated its ownership on 22 January 2001 or upon failure of the Spouses Tolosa
to exercise their right of redemption within the one-year period therefor prescribed. Subsequent to the issuance of the
certificates of title and tax declarations over the same properties in its name, UCPB complied with the requirements under
Act 3135 by filing its ex-parte petition for issuance of a writ of possession before the RTC on 2 September 2004. Since UCPB
had already become the absolute and registered owner of said properties, the CA correctly ruled that it was the ministerial
duty of the RTC to issue the writ of possession in favor of the former.
In urging the reversal of the assailed decision and resolution, the Spouses Tolosa argue that the prima facie merit of their
complaint in Civil Case No. 6180 justified, at the very least, the deferment of the issuance of the writ of possession. For this
purpose, they call our attention to the supposed fact that UCPB not only failed to release the entirety of the proceeds of their
loans but also violated Republic Act No. 376538 by failing to specify the rates of interest it charged on their mortgage
obligation. Insisting that they were misled by UCPB into signing the Credit Agreement, Promissory Notes and Real Estate
Mortgage which they impugned in Civil Case No. 6180, the Spouses Tolosa also claim that, discounting the illegal interests
and charges imposed thereon, their mortgage obligation only amounted to P14,041,000.00 and was more than amply
discharged by the P17,240,000.00 proceeds realized at the foreclosure sale.
Given the ministerial nature of the RTC's duty to issue the writ of possession after the purchaser has consolidated its
ownership, it has been ruled, moreover, that any question regarding the regularity and validity of the mortgage or its
foreclosure cannot be raised as justification for opposing the issuance of the writ. 39 More to the point, a pending action for
annulment of mortgage or foreclosure does not stay the issuance of a writ of possession. 40 Regardless of the pendency of
such suit, the purchaser remains entitled to a writ of possession, without prejudice, of course, to the eventual outcome of
the pending annulment case.41 Otherwise stated, the issuance of the writ of possession remains the ministerial duty of the
RTC until the issues raised in the annulment case are, once and for all, decided by a court of competent jurisdiction. 42

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To be sure, the foregoing rule admits of a few jurisprudential exceptions. In Cometa v. Intermediate Appellate Court, 43 the
judgment debtor filed a separate action to invalidate the auction sale of properties approximately worth P500,000.00 for the
unusually low price of P57,396.85. Citing equitable considerations, this Court upheld the deferment of the issuance of the
writ of possession sought by the judgment creditor on the ground that the validity of the auction sale is an issue that
requires pre-emptive resolution to avoid injustice. In the case of Barican v. Intermediate Appellate Court, 44 on the other
hand, the Court ruled that the duty ceases to be ministerial where the property mortgaged had been, in the meantime, sold
to third parties who had assumed the mortgagor's indebtedness and took possession of the property. In Sulit v. Court of
Appeals,45 the mortgagee's failure to deliver the surplus from the proceeds of the foreclosure sale equivalent to at least 40%
of the mortgage debt was likewise found sufficient justification for the non-issuance of the writ of possession sought.
The Spouses Tolosa invoked the Court's ruling in Barican which is not, however, on all fours with the case at bench. Aside
from the fact that the Spouses Tolosa appear to have remained in possession of the subject realties, there is no showing in
the record these properties have, in the meantime, been acquired or transferred to third persons whose adverse possession
and/or interest would have justified the non-issuance of the writ of possession sought by UCPB. Absent showing that the

mortgaged properties had been sold at an unusually low price or that the foreclosure sale had been attended with
irregularities, the ruling in Cometa is also of little utility to the Spouses Tolosa's cause. Despite the latter's insistence on the
supposed prima facie invalidity of their mortgage obligation and the foreclosure proceedings, we find that the CA correctly
steered clear from said issues since they have yet to be definitively resolved in Case No. 6180.
The Spouses Tolosa are similarly out on a limb in relying on Sulit which was premised on the existence of surplus from the
proceeds realized in the foreclosure sale. Considering that their mortgage obligation was computed by UCPB at an aggregate
of P24,253,847.64, inclusive of interests, penalties and other charges, the P17,240,000.00 realized at the foreclosure sale of
the properties mortgaged clearly left no surplus to speak of in the case. The Spouses Tolosa would, of course, have us
believe that, without the invalid interests and charges imposed by the UCPB, their obligation would have only amounted
to P14,041,000.00 and would have meant a surplus of P3,199,000.00 from the proceeds realized at the foreclosure
sale.46 Like the matter of the invalidity of their mortgage obligation to which it is inextricably linked, however, this issue has
yet to be resolved in Case No. 6180 and, for said reason, cannot justify the non-issuance of the writ of possession in favor of
UCPB.
At any rate, the exception made in Sulit had been held inapplicable where, as here, the period to redeem has already
expired or when the ownership over the property had already been consolidated in favor of the mortgageepurchaser.47 Having consolidated its ownership over the subject properties after the Spouses Tolosa failed to exercise their
right of redemption, UCPB was correctly found by the CA entitled to a writ of possession. Since any question regarding the
validity of the mortgage or its foreclosure cannot be a legal ground for refusing a writ of possession, 48 the RTC's ministerial
duty to issue the same writ was by no means rendered discretionary by the pendency of Civil Case No. 6180. While there
are, concededly, exceptions to the foregoing rules as above-discussed, none of them was adequately established in the
Spouses Tolosa' s petition.
WHEREFORE, premises considered, the petition is DENIED for lack of merit. Accordingly, the CA' s assailed 31 May 2007
Decision and 21 May 2008 Resolution are AFFIRMED in toto.

G.R. No. 172504, July 31, 2013

DONNA C. NAGTALON, Petitioner, v. UNITED COCONUT PLANTERS BANK, Respondent.

Before the Court is the petition for review on certiorari,1 filed by Donna C. Nagtalon (petitioner), assailing the decision2 dated
September 23, 2005 and the resolution3 dated April 21, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 82631. The CA
reversed and set aside the orders4 dated November 3, 2003 and December 19, 2003 of the Regional Trial Court (RTC),
Kalibo, Aklan, Branch 5, in CAD Case No. 2895.
The Factual Antecedents
Roman Nagtalon and the petitioner (Spouses Nagtalon) entered into a credit accommodation agreement (credit agreement)
with respondent United Coconut Planters Bank. In order to secure the credit agreement, Spouses Nagtalon, together with
the Spouses Vicente and Rosita Lao, executed deeds of real estate mortgage over several properties in Kalibo, Aklan. After
the Spouses Nagtalon failed to abide and comply with the terms and conditions of the credit agreement and the mortgage,
the respondent filed with the Ex-Officio Provincial Sheriff a verified petition 5 for extrajudicial foreclosure of the mortgage,
pursuant to Act 3135, as amended.6

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The mortgaged properties were consequently foreclosed and sold at public auction for the sum of P3,215,880.30 to the
respondent which emerged as the sole and highest bidder. After the issuance of the sheriffs certificate of sale, the
respondent caused the entry of the sale in the records of the Registry of Deeds of Kalibo, Aklan and its annotation on the
transfer certificates of titles (TCTs) on January 6, 1999. 7 With the lapse of the one year redemption period and the
petitioners failure to exercise her right to redeem the foreclosed properties, the respondent consolidated the ownership over
the properties, resulting in the cancellation of the titles in the name of the petitioner and the issuance of TCTs in the name of
the respondent, to wit: (a) TCT No. T-29470; (b) TCT No. T-29472; (c) TCT No. T-29471; (d) TCT No. T-29469; (e) TCT No.
T-29474; (f) TCT No. T-29475; and (g) TCT No. T-29473.8 The new TCTs were registered with the Register of Deeds of
Kalibo, Aklan on April 28, 2000.9

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On April 30, 2003, the respondent filed an ex parte petition for the issuance of a writ of possession with the RTC, docketed
as CAD Case No. 2895. In the petition, the respondent alleged that it had been issued the corresponding TCTs to the
properties it purchased, and has the right to acquire the possession of the subject properties as the current registered owner
of these properties.
The petitioner opposed the petition, citing mainly the pendency of Civil Case No. 6602 10 (for declaration of nullity of
foreclosure, fixing of true indebtedness, redemption, damages and injunction with temporary restraining order) still pending
with the RTC. In this civil case, the petitioner challenged the alleged nullity of the provisions in the credit agreement,
particularly the rate of interest in the promissory notes. She also sought the nullification of the foreclosure and the sale that
followed. To the petitioner, the issuance of a writ of possession was no longer a ministerial duty on the part of the court in
view of the pendency of the case.
The RTC Ruling
On November 3, 2003, the RTC issued an order,11 holding in abeyance the issuance of the writ of possession of the properties
covered by TCT Nos. T-29470, T-29472, T-29471, T-29469 and T-29474 on the ground of prematurity. The RTC ruled that
due to the pendency of Civil Case No. 6602 where the issue on nullity of the credit agreement and foreclosure have yet to
be resolved the obligation of the court to issue a writ of possession in favor of the purchaser in a foreclosure of mortgage
property ceases to be ministerial.

The respondent filed a motion for reconsideration, but the RTC denied the motion, citing equitable grounds and substantial
justice as reasons.12

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The respondent then filed a petition for certiorari13 with the CA.
The CA Ruling
In its September 23, 2005 decision,14 the CA reversed and set aside the RTC orders, noting that while it is the ministerial
duty of the court to issue a writ of possession after the lapse of the one-year period of redemption, the rule admits of
exceptions and the present case at bar was not one of them.
The CA held that equitable and peculiar circumstances must first be shown to exist before the issuance of a writ of
possession may be deferred. The CA then ruled that the petitioner failed to prove that these equitable circumstances are
present in this case, citing for this purpose the ruling in Vaca v. Court of Appeals.15 Based on the Vaca ruling, the CA ordered
the RTC to issue the corresponding writ of possession.
The Petition
The petitioner submits that the CA erred in its findings; the equitable circumstances present in the case fully justified the
RTCs order16 to hold in abeyance the issuance of the writ of possession. The petitioner contends that the RTC found prima
facie merit in the allegations in Civil Case No. 6602 that the foreclosure and the mortgage were void. The petitioner adds
that the CAs reliance on the Vaca case, in support of its decision, is misplaced because no peculiar circumstances were
present in this cited case which are applicable to the present case.
The petitioner lastly maintains that the CA decision violated her constitutional right to due process of law, as it deprived her
of the possession of her properties without the opportunity of hearing.
The Case for the Respondent
The respondent essentially echoes the pronouncement of this Court in the Vaca case that the CA adopted and maintains
that: (1) the pendency of a civil case challenging the validity of the mortgage cannot bar the issuance of the writ of
possession because such issuance is a ministerial act; (2) the peculiar and equitable circumstances, which would justify an
exception to the rule, are not present in the present case; and (3) contrary to the allegation of the petitioner, it is the
respondent who was deprived of possession of the properties due to the petitioners persistent efforts to frustrate the
respondents claim.
The Issue
The case presents to us the issue of whether the pendency of a civil case challenging the validity of the credit agreement,
the promissory notes and the mortgage can bar the issuance of a writ of possession after the foreclosure and sale of the
mortgaged properties and the lapse of the one-year redemption period.
Our Ruling
We see no merit in the petition, and rule that the CA did not commit any reversible error in the assailed decision.
The issuance of a writ of possession is
a ministerial function of the court

The issue this Court is mainly called upon to resolve is far from novel; jurisprudence is replete with cases holding that the
issuance of a writ of possession to a purchaser in a public auction is a ministerial function of the court, which cannot be
enjoined or restrained, even by the filing of a civil case for the declaration of nullity of the foreclosure and consequent
auction sale.
We have long recognized the rule that once title to the property has been consolidated in the buyers name upon failure of
the mortgagor to redeem the property within the one-year redemption period, the writ of possession becomes a matter of
right belonging to the buyer. Consequently, the buyer can demand possession of the property at anytime. Its right to
possession has then ripened into the right of a confirmed absolute owner 17 and the issuance of the writ becomes a ministerial
function that does not admit of the exercise of the courts discretion. 18 The court, acting on an application for its issuance,
should issue the writ as a matter of course and without any delay.
The right to the issuance of a writ of possession is outlined in Sections 6 and 7 of Act 3135, as amended by Act 4118, to
wit:

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Sec. 6. In all cases in which an extrajudicial sale is made x x x, the debtor, his successors in interest or any judicial creditor
or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year from and after the date of
the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred
and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.
Sec 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the
province or place where the property or any part thereof is situated, to give him possession thereof during the redemption
period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the
debtor in case it be shown that the sale was made without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion x x x and the court
shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the
property is situated, who shall execute said order immediately. [emphasis and underscore ours]
In Spouses Ruben and Violeta Sagun v. Philippine Bank of Communications and Court of Appeals,19 the Court laid down the
established rule on the issuance of a writ of possession, pursuant to Act 3135, as amended. The Court said that a writ of
possession may be issued either (1) within the one-year redemption period, upon the filing of a bond, or (2) after the lapse
of the redemption period, without need of a bond.
During the one-year redemption period, as contemplated by Section 7 of the above-mentioned law, a purchaser may apply
for a writ of possession by filing an ex parte motion under oath in the registration or cadastral proceedings if the property is
registered, or in special proceedings in case the property is registered under the Mortgage Law. In this case, a bond is
required before the court may issue a writ of possession.
On the other hand, upon the lapse of the redemption period, a writ of possession may be issued in favor of the purchaser in
a foreclosure sale, also upon a proper ex parte motion. This time, no bond is necessary for its issuance; the mortgagor is
now considered to have lost any interest over the foreclosed property.20 The purchaser then becomes the owner of the
foreclosed property, and he can demand possession at any time following the consolidation of ownership of the property and
the issuance of the corresponding TCT in his/her name. It is at this point that the right of possession of the purchaser can be
considered to have ripened into the absolute right of a confirmed owner. The issuance of the writ, upon proper application, is
a ministerial function that effectively forbids the exercise by the court of any discretion. This second scenario is governed by
Section 6 of Act 3135, in relation to Section 35, Rule 39 of the Revised Rules of Court. 21

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The correctness of the issuance of the writ in the second scenario is strengthened by the fact that after the consolidation of
ownership and issuance of titles to the purchaser, the latters right to possession not only finds support in Section 7 of Act
3135, but also on its right to possession as an incident of ownership. 22 The Court, in Espinoza v. United Overseas Bank
Philippines,23 noted that the basis of the right to possession is the purchasers ownership of the property.
Moreover, if the court has the ministerial power to issue a writ of possession even during the redemption period, upon proper
motion and posting of the required bond, as clearly provided by Section 7 of Act 3135, then with more reason should the
court issue the writ of possession after the expiration of the redemption period, as the purchaser has already acquired an
absolute right to possession on the basis of his ownership of the property.24 The right to possess a property follows
ownership.25

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Based on these rulings, we find it clear that the law directs in express terms that the court issue a writ of possession without
delay to the purchaser after the latter has consolidated ownership and has been issued a new TCT over the property. The law
then does not provide any room for discretion as the issuance has become a mere ministerial function of the court.
The petitioner resists the above views with the argument that the nullity of the loan documents due to the unilateral fixing of
the interest and her failure to receive the proceeds of the loan, among others, are peculiar circumstances that would
necessitate the deferment of the issuance of the writ of possession. These are the same arguments the petitioner
propounded in the civil case she filed to question the nullity of the foreclosure.
We do not find the argument convincing. Pendency of a civil case questioning the mortgage and foreclosure not
a bar to the issuance of a writ of execution
The petitioners submitted arguments on the presence of peculiar and equitable circumstances are of no moment. These
peculiar circumstances are nothing but mere allegations raised by the petitioner in support of her complaint for annulment of
mortgage and foreclosure. We have ruled in the past that any question regarding the validity of the mortgage or its
foreclosure is not a legal ground for refusing the issuance of a writ of execution/writ of possession. 26

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In the case of Spouses Montano T. Tolosa and Merlinda Tolosa v. United Coconut Planters Bank,27 a case closely similar to
the present petition, the Court explained that a pending action for annulment of mortgage or foreclosure (where the nullity
of the loan documents and mortgage had been alleged) does not stay the issuance of a writ of possession. It reiterated the
well-established rule that as a ministerial function of the court, the judge need not look into the validity of the mortgage or
the manner of its foreclosure, as these are the questions that should be properly decided by a court of competent
jurisdiction in the pending case filed before it. It added that questions on the regularity and the validity of the mortgage and
foreclosure cannot be invoked as justification for opposing the issuance of a writ of possession in favor of the new owner.
In the cited case, the petitioner, in opposition to the respondents ex parte application for a writ of possession, likewise
pointed to the prima facie merit of the allegations in her complaint for annulment of mortgage, foreclosure and sale. She
alleged that the apparent nullity of the mortgage obligation and the sale of the properties justify, at the very least, the
deferment of the issuance of the writ of possession.
We pointedly ruled in this cited case that no reason existed to depart from our previous pronouncements. That the issuance
of a writ of possession remains a ministerial duty of the court until the issues raised in the civil case for annulment of
mortgage and/or foreclosure are decided by a court of competent jurisdiction 28 has long been settled. While conceding that
the general rule on the ministerial duty of the courts to issue a writ of possession is not without exceptions, the Court was
quick to add that the Tolosa case29 does not fall under the exceptions.
Exceptions to the rule that issuance of a writ of possession is a ministerial function

A review of the Courts ruling in the Tolosa case would reveal a discussion of the few jurisprudential exceptions worth
reiterating.
(1) Gross inadequacy of purchase price
In Cometa v. Intermediate Appellate Court30 which involved an execution sale, the court took exception to the general rule in
view of the unusually lower price (P57,396.85 in contrast to its true value of P500,000.00) for which the subject property
was sold at public auction. The Court perceived that injustice could result in issuing a writ of possession under the given
factual scenario and upheld the deferment of the issuance of the writ.
(2) Third party claiming right adverse to debtor/mortgagor
In Barican v. Intermediate Appellate Court,31 consistent with Section 35, Rule 39 of the Rules of Court, the Court held that
the obligation of a court to issue a writ of possession in favor of the purchaser in a foreclosure of mortgage case ceases to
be ministerial when a third-party in possession of the property claims a right adverse to that of the debtor-mortgagor. In
this case, there was a pending civil suit involving the rights of third parties who claimed ownership over the disputed
property. The Court found the circumstances to be peculiar, necessitating an exception to the general rule. It thus ruled that
where such third party claim and possession exist, the trial court should conduct a hearing to determine the nature of the
adverse possession.
(3) Failure to pay the surplus proceeds of the sale to mortgagor
We also deemed it proper to defer the issuance of a writ in Sulit v. Court of Appeals32 in light of the given facts, particularly
the mortgagees failure to return to the mortgagor the surplus from the proceeds of the sale (equivalent to an excess of
approximately 40% of the total mortgage debt). We ruled that equitable considerations demanded the deferment of the
issuance of the writ as it would be highly unfair and iniquitous for the mortgagor, who as a redemptioner might choose to
redeem the foreclosed property, to pay the equivalent amount of the bid clearly in excess of the total mortgage debt.
We stress that the petitioners present case is not analogous to any of the above-mentioned exceptions. The facts are not
only different from those cited above; the alleged peculiar circumstances pertain to the validity of the mortgage, a matter
that may be determined by a competent court after the issuance of the writ of possession. 33

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In these lights, we hold that the CA correctly ruled that the present case does not present peculiar circumstances that would
merit an exception from the well-entrenched rule on the issuance of the writ.
Petitioner was accorded due process
The petitioner lastly argues that the issuance of a writ of possession, despite its prima-facie meritorious claim of nullity of
loan and mortgage,34 constitutes a violation of her constitutional right to due process of law.
The petitioners contention is unmeritorious. We note that the ex parte petition for the issuance of a writ of possession under
Sections 6 and 7 of Act 3135 is not, strictly speaking, a judicial process. As discussed in Idolor v. Court of appeals,35 it is
not an ordinary suit by which one party sues another for the enforcement of a wrong or protection of a right, or the
prevention or redress of a wrong.36 Being ex parte, it is a non-litigious proceeding where the relief is granted without
requiring an opportunity for the person against whom the relief is sought to be heard.
That the petitioner would or could be denied due process if the writ of possession would be issued before she is given the

opportunity to be heard on her prima facie defense of nullity of the loan and mortgage is clearly out of the question. The law
does not require that the writ of possession be granted only after the issues raised in a civil case on nullity of the loan and
mortgage are resolved and decided with finality. To do so would completely defeat the purpose of an ex parte petition under
Sections 6 and 7 of Act 3135 that, by its nature, should be summary; we stress that it would render nugatory the right given
to a purchaser to acquire possession of the property after the expiration of the redemption period.
At any rate, the petitioner is not left without a remedy as the same law provides the mortgagor the right to petition for the
nullification of the sale and the cancellation of the writ of possession under Section 8 of Act. No. 3135, which remedy the
petitioner was aware of. In her petition for review, she averred that [t]he said Act 3135 x x x does not however prohibit or
negate the filing of a separate civil case for the nullification of loan indebtedness x x x or x x x mortgage contract[.] 37 Thus,
she cannot claim that she has been denied of due process merely on the basis of the ex parte nature of the respondents
petition.
WHEREFORE, all premises considered, the instant petition is DENIED for lack of merit. Accordingly, the decision dated
September 23, 2005 and the resolution dated April 21, 2006 of the Court of Appeals in CA-G.R. SP No. 82631
are AFIRMED in toto.