7. GRAND FARMS, INC.
AND PHILIPPINE The private respondents, on the other hand, argued that
SHARES CORPORATION VS. CA
Doctrine: In case of extra-judicial foreclosure, personal
notice to the mortgagor is required to have a valid
foreclosure if such was embodied in their agreement.
FACTS:
Petitioners filed Civil Case for annulment and/or
declaration of nullity of the extrajudicial foreclosure
proceedings over their mortgaged properties, with
damages, against respondents clerk of court, deputy
sheriff and herein private respondent Banco Filipino
Savings and Mortgage Bank.
Petitioners filed a request for admission by private
respondent of the allegation, inter alia, that no formal
notice of intention to foreclose the real estate mortgage
was sent by private respondent to petitioners.
Private respondent, through its deputy liquidator,
responded under oath to the request and countered that
petitioners were "notified of the auction sale by the
posting of notices and the publication of notice in the
Metropolitan Newsweek, a newspaper of general
circulation in the province where the subject properties
are located and in the Philippines on February 13, 20 and
28, 1988."
On the basis of the alleged implied admission by private
respondent that no formal notice of foreclosure was sent
to petitioners, the latter filed a motion for summary
judgment contending that the foreclosure was violative of
the provisions of the mortgage contract, specifically
paragraph (k) thereof which provides:
k) All correspondence relative to this Mortgage,
including demand letters, summons, subpoena or
notifications of any judicial or extrajudical
actions shall be sent to the Mortgagor at the
address given above or at the address that may
hereafter be given in writing by the Mortgagor to
the Mortgagee, and the mere act of sending any
correspondence by mail or by personal delivery
to the said address shall be valid and effective
notice to the Mortgagor for all legal purposes,
and the fact that any communication is not
actually received by the Mortgagor, or that it has
been returned unclaimed to the Mortgagee, or
that no person was found at the address given, or
that the address is fictitious, or cannot be located,
shall not excuse or relieve the Mortgagor from
the effects of such notice;
based on their contract, the latter was constituted as the
attorney-in-fact by mortgagor which possess full powers
to foreclose the property in case of breach of contract.
Thus, according to them, no personal notice is required.
RTC ruled against the petitioners and denied the latter’s
motion for summary judgement on the basis that there are
genuine issues in this case.
The CA ruled in favor of the private respondents holding
that no personal notice is required as the latter is the
attorney-in-fact designated by the petitioners and that
paragraph K, as embodied in their mortgage contract, only
designates where correspondence should be sent.
Hence, this petition.
ISSUE:
W/N there was a valid extra-judicial foreclosure made by
the private respondents.
RULING:
NO.
The Rules of Court authorize the rendition of a summary
judgment if the pleadings, depositions and admissions on
file, together with the affidavits, show that, except as to
the amount of damages, there is no issue as to any material
fact and that the moving party is entitled to a judgment as
a matter of law.
Applying said criteria to the case at bar, we find
petitioners' action in the court below for annulment and/or
declaration of nullity of the foreclosure proceedings and
damages ripe for summary judgment.
Private respondent tacitly admitted in its answer to
petitioners' request for admission that it did not send any
formal notice of foreclosure to petitioners. Stated
otherwise, and as is evident from the records, there has
been no denial by private respondent that no personal
notice of the extrajudicial foreclosure was ever sent to
petitioners prior thereto. This omission, by itself, rendered
the foreclosure defective and irregular for being contrary
to the express provisions of the mortgage contract. There
is thus no further necessity to inquire into the other issues
cited by the trial court, for the foreclosure may be
annulled solely on the basis of such defect.
While private respondent was constituted as their
attorney-in-fact by petitioners, the inclusion of the
aforequoted paragraph (k) in the mortgage contract
nonetheless rendered personal notice to the latter
indispensable.
As such, it is the law between them and as it not contrary
to law, morals, good customs and public policy, the same
should be complied with faithfully.
Thus, while publication of the foreclosure proceedings in
the newspaper of general circulation was complied with,
personal notice is still required, as in the case at bar, when
the same was mutually agreed upon by the parties as
additional condition of the mortgage contract. Failure to
comply with this additional stipulation would render
illusory Article 1306 of the New Civil Code of the
Philippines.
WHEREFORE, the decision appealed from is hereby
REVERSED and SET ASIDE and this case is
REMANDED to the court of origin for further
proceedings in conformity with this decision. This
judgment is immediately executory.
8. MEDIDA VS. CA
Doctrine: A mortgagor, whose property has been
extrajudicially foreclosed and sold at the corresponding
foreclosure sale, may validly execute a mortgage contract
over the same property in favor of a third party during the
period of redemption.
FACTS:
On October 10, 1974 plaintiff spouses, alarmed of losing
their right of redemption over lot 4731 of the Cebu City
Cadastre and embraced under TCT No. 14272 from Mr.
Juan Gandioncho, purchaser of the aforesaid lot at the
foreclosure sale of the previous mortgage in favor of Cebu
City Development Bank, went to Teotimo Abellana,
president of defendant Association, to obtain a loan of
P30,000.00.
When the loan became due and demandable without
plaintiff paying the same, defendant association caused
the extrajudicial foreclosure of the mortgage on March 16,
1976. After the posting and publication requirements
were complied with, the land was sold at public auction
on April 19, 1976 to defendant association being the
highest bidder. The certificate of sale was issued on April
20, 1976 and registered on May 10, 1976 with the
Register of Deeds of Cebu.
No redemption having been effected by plaintiff, TCT
No. 14272 was cancelled and in lieu thereof TCT No.
68041 was issued in the name of defendant association
Private respondents filed a case for the annulment of the
sale at public auction conducted on April 19, 1976, as well
as the corresponding certificate of sale issued pursuant
thereto.
In their complaint, private respondents, as plaintiffs
therein, assailed the validity of the extrajudicial
foreclosure sale of their property, claiming that the same
was held in violation of Act No. 3135
RTC ruled upholding the validity of the loan and the real
estate mortgage, but annulling the extrajudicial
foreclosure sale inasmuch as the same failed to comply
with the notice requirements in Act No. 3135.
CA declared as void and ineffective the real estate
mortgage executed by plaintiffs in favor of defendant
association because the plaintiffs were no longer the
owner of the lot in question.
ISSUE:
W/N a mortgagor, whose property has been
extrajudicially foreclosed and sold at the corresponding
foreclosure sale, may validly execute a mortgage contract
over the same property in favor of a third party during the
period of redemption.
RULING:
YES.
A redemptioner is defined as a creditor having a lien by
attachment, judgment or mortgage on the property sold,
or on some part thereof, subsequent to the judgment under
which the property was sold.
Of course, while in extrajudicial foreclosure the sale
contemplated is not under a judgment but the proceeding
pursuant to which the mortgaged property was sold, a
subsequent mortgage could nevertheless be legally
constituted thereafter with the subsequent mortgagee
becoming and acquiring the rights of a redemptioner,
aside from his right against the mortgagor.
Since the mortgagor remains as the absolute owner of the
property during the redemption period and has the free
disposal of his property, there would be compliance with
the requisites of Article 2085 of the Civil Code for the
constitution of another mortgage on the property. To hold
otherwise would create the inequitable situation wherein
the mortgagor would be deprived of the opportunity,
which may be his last recourse, to raise funds wherewith
to timely redeem his property through another mortgage
thereon.
It is undisputed that the real estate mortgage in favor of
petitioner bank was executed by respondent spouses
during the period of redemption. We reiterate that during
said period it cannot be said that the mortgagor is no
longer the owner of the foreclosed property since the rule
up to now is that the right of a purchaser at a foreclosure
sale is merely inchoate until after the period of redemption
has expired without the right being exercised.
The title to land sold under mortgage foreclosure remains
in the mortgagor or his grantee until the expiration of the
redemption period and conveyance by the master's
deed. To repeat, the rule has always been that it is only
upon the expiration of the redemption period, without the
judgment debtor having made use of his right of
redemption, that the ownership of the land sold becomes
consolidated in the purchaser.
What actually is effected where redemption is seasonably
exercised by the judgment or mortgage debtor is not the
recovery of ownership of his land, which ownership he
never lost, but the elimination from his title thereto of the
lien created by the levy on attachment or judgment or the
registration of a mortgage thereon.
The American rule is similarly to the effect that the
redemption of property sold under a foreclosure sale
defeats the inchoate right of the purchaser and restores the
property to the same condition as if no sale had been
attempted. Further, it does not give to the mortgagor a
new title, but merely restores to him the title freed of the
encumbrance of the lien foreclosed.
We cannot rule on the plaint of petitioners that the trial
court erred in declaring ineffective the extrajudicial
foreclosure and the sale of the property to petitioner bank.
The court below spelled out at length in its decision the
facts which it considered as violative of the provisions of
Act No. 3135, as amended, by reason of which it nullified
the extrajudicial foreclosure proceeding and its effects.
Such findings and ruling of the trial court are already final
and binding on petitioners and can no longer be modified,
petitioners having failed to appeal therefrom.
WHEREFORE, the decision of respondent Court of
Appeals, insofar as it modifies the judgment of the trial
court, is REVERSED and SET ASIDE. The judgment of
said trial court in Civil Case No. R-18616, dated January
12, 1983, is hereby REINSTATED
9. SPOUSES YAP VS. SPOUSES DY
Doctrine: 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 persons right to redeem the
foreclosed property, is valid.
FACTS:
The spouses Tirambulo are the registered owners of
several parcels of land located in Ayungon, Negros
Oriental. The Tirambulos executed a Real Estate
Mortgage over their 5 lots 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 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 Dy and Maxino
without the consent and knowledge of DRBI. This sale
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
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 Yap
under a Deed of Sale with Agreement to Mortgage. 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 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. This motion was first denied but later on
granted by the court.
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, 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 Sheriffs Commission) to
effect the redemption.
Noticing that Lot 3 was not included in the foreclosure
proceedings, Benjamin V. Diputado, Clerk of Court and
Provincial Sheriff, issued a Certificate of Redemption 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.
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.
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.
Thereafter, on June 19, 1984, the Dys and the Maxinos
consigned to the trial court an additional sum
of P83,850.50 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.
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.
Both cases were tried jointly. The trial court ruled in favor
of the Yaps. Aggrieved by the above ruling, the Dys and
the Maxinos elevated the case to the CA. The CA reversed
the decision of the lower court and ruled in favor of the
Dys and Maxinos.
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 sheriff, it is his duty to accept the tender and execute the
properties (which thus includes Lot 3) were validly certificate of redemption.
foreclosed, argues, for its part, that the appellate court
Here, the Dys and the Maxinos complied with the above-
erred in sustaining the redemption made by the Dys and
quoted provision. Well within the redemption period, they
Maxinos. It anchors its argument on the fact that the sale
initially attempted to pay the redemption money not only
of the Tirambulos to the Dys and Maxinos was without
to the purchaser, DRBI, but also to the Yaps. Both DRBI
the banks consent. The Dys and Maxinos therefore could
and the Yaps however refused, insisting that the Dys and
not have assumed the character of debtors because a
Maxinos should pay the whole purchase price at which all
novation of the contract of mortgage between the
the foreclosed properties were sold during the foreclosure
Tirambulos and DRBI did not take place as such a
sale. Because of said refusal, the Dys and Maxinos
novation is proscribed by Article 1293 of the Civil Code.
correctly availed of the alternative remedy by going to the
And there being no valid redemption within the
sheriff who made the sale.
contemplation of law and DRBI being the highest bidder
during the auction sale, DRBI has become the absolute (3)
owner of the properties mortgaged when the redemption
period expired. YES.

ISSUES: The Dys and the Maxinos have legal personality to

redeem the subject properties.
(1) Is Lot 3 among the foreclosed properties?
In Litonjua v. L & R Corporation, this Court declared
(2) To whom should the payment of redemption money valid the sale by the mortgagor of mortgaged property to
be made? a third person notwithstanding the lack of written consent
by the mortgagee, and likewise recognized the third
(3) Did the Dys and Maxinos validly redeem Lots 1 and
persons right to redeem the foreclosed property.
6? and
The Dys and the Maxinos validly redeemed Lots 1 and 6.
(4) Is DRBI liable for damages?
The requisites for a valid redemption are:
RULING:
(1) the redemption must be made within twelve
(1)
(12) months from the time of the registration of the sale
As to the first issue, we find that the CA correctly ruled in the Office of the Register of Deeds;
that the Dys and Maxinos were able to prove their claim
(2) payment of the purchase price of the property
that Lot 3 was not among the properties foreclosed and
involved, plus 1% interest per month thereon in addition,
that it was merely inserted by the bank in the Sheriffs
up to the time of redemption, together with the amount of
Certificate of Sale.
any assessments or taxes which the purchaser may have
As Atty. Diputado, the Provincial Sheriff, testified, the paid thereon after the purchase, also with 1% interest on
application for foreclosure was only for five parcels of such last named amount; and
land, namely, Lots 1, 4, 5, 6 and 8. Accordingly, only said
(3) written notice of the redemption must be
five parcels of land were included in the publication and
served on the officer who made the sale and a duplicate
sold at the foreclosure sale.
filed with the Register of Deeds of the province
When he was shown a copy of the Sheriffs Certificate of
There is no issue as to the first and third requisites. It is
Sale consisting of three pages, he testified that it was
undisputed that the Dys and the Maxinos made the
altered because Lot 3 and Lot 846 were included beyond
redemption within the 12-month period from the
the xxx that marked the end of the enumeration of the lots
registration of the sale. The Dys and Maxinos effected the
foreclosed.
redemption on May 24, 1984, when they
(2) deposited P50,373.42 with the Provincial Sheriff, and
on June 19, 1984, when they deposited an
As held in Natino v. Intermediate Appellate Court, the
additional P83,850.50. Both dates were well within the
tender of the redemption money may be made to the
one-year redemption period reckoned from the June 24,
purchaser of the land or to the sheriff. If made to the
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 The CA correctly observed that the act of DRBI in
deposited with him the redemption money after both falsifying the Sheriffs Certificate of Sale to include Lots
DRBI and the Yaps refused to accept it. 3 and 846, even if said additional lots were not among the
properties foreclosed, was the proximate cause of the
The second requisite, the proper redemption price, is the
pecuniary loss suffered by the Dys and Maxinos in the
main subject of contention of the opposing parties.
form of lost income from Lot 3.
it is apparent that what the law proscribes is the
As previously discussed, DRBIs act of maliciously
foreclosure of only a portion of the property or a number
including two additional properties in the Sheriffs
of the several properties mortgaged corresponding to the
Certificate of Sale even if they were not included in the
unpaid portion of the debt where before foreclosure
foreclosed properties caused the Dys and Maxinos
proceedings partial payment was made by the debtor on
pecuniary loss. Hence, DRBI is liable to pay moral
his total outstanding loan or obligation. This also means
damages.
that the debtor cannot ask for the release of any portion of
the mortgaged property or of one or some of the several WHEREFORE, the petitions for review on certiorari
lots mortgaged unless and until the loan thus, secured has are DENIED for lack of merit. The Decision dated May
been fully paid, notwithstanding the fact that there has 17, 2005 and Resolution dated March 15, 2006 of the
been a partial fulfillment of the obligation. Hence, it is Court of Appeals in CA-G.R. C.V. No. 57205 are
provided that the debtor who has paid a part of the debt hereby AFFIRMED with the MODIFICATION that
cannot ask for the proportionate extinguishment of the the case is REMANDED to the Regional Trial Court of
mortgage as long as the debt is not completely satisfied. Negros Oriental, Branch 44, Dumaguete City, for the
computation of the pro-rata value of properties covered
That the situation obtaining in the case at bar is not within
by TCT No. T-14777 (Lot 1) and TCT No. T-14781 (Lot
the purview of the aforesaid rule on indivisibility is
6) of the Registry of Deeds of Negros Oriental at the time
obvious since the aggregate number of the lots which
of redemption to determine if there is a deficiency to be
comprise the collaterals for the mortgage had already
settled by or overpayment to be refunded to respondent
been foreclosed and sold at public auction. There is no
Spouses Zosimo Dy, Sr. and Natividad Chiu and Spouses
partial payment nor partial extinguishment of the
Marcelino C. Maxino and Remedios Lasola with regard
obligation to speak of. The aforesaid doctrine, which is
to the redemption money they paid.
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.
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.
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.
(4)
As to the award of damages in favor of the Dys and
Maxinos, we agree with the appellate court for granting
the same.