Week 10

VOL.
380, APRIL 10, 2002 Exchange

381Bank, payable on July 9, 1997. Of this amount, only
US$40,000 was paid by Filkor.3
Korea Exchange Bank vs. Filkor Business Integrated, Inc.
______________
G.R. No. 138292. April 10, 2002.*
KOREA EXCHANGE BANK, petitioner, vs. FILKOR 1
Rollo, p. 155.
BUSINESS INTEGRATED, INC., KIM EUNG JOE, and LEE 2
Id., at 141-151.
HAN SANG, respondents. 3
Id., at 141.
Remedial Law; Actions; Jurisdiction; Court has 383
consistently ruled that what determines the nature of an action, VOL. 380, APRIL 10, 2002
as well as which court or body has jurisdiction over it, are the
allegations of the complaint and the character of the relief Korea Exchange Bank vs. Filkor Business Integrated, Inc.
sought.—Petitioner’s allegations in its complaint, and its prayer In addition, Filkor executed nine trust receipts in favor of
that the mortgaged property be foreclosed and sold at public petitioner, from June 26, 1997 to September 11, 1997.
auction, indicate that petitioner’s action was one for foreclosure However, Filkor failed to turn over to petitioner the proceeds
of real estate mortgage. We have consistently ruled that what from the sale of the goods, or the goods themselves as required
determines the nature of an action, as well as which court or by the trust receipts in case Filkor could not sell them.4
body has jurisdiction over it, are the allegations of the complaint In the period from June 9, 1997 to October 1, 1997, Filkor
and the character of the relief sought. In addition, we find no also negotiated to petitioner the proceeds of seventeen letters of
indication whatsoever that petitioner had waived its rights under credit issued by the Republic Bank of New York and the
the real estate mortgage executed in its favor. Thus, the Banque Leumi France, S.A. to pay for goods which Filkor sold
______________ to Segerman International, Inc. and Davyco, S.A. When
petitioner tried to collect the proceeds of the letters of credit by
*
SECOND DIVISION. presenting the bills of exchange drawn to collect the proceeds,
they were dishonored because of discrepancies.5
382 Prior to all the foregoing, in order to secure payment of all
its obligations, Filkor executed a Real Estate Mortgage on
382 SUPREME COURT REPORTS ANNOTATED February 9, 1996. It mortgaged to petitioner the improvements
Korea Exchange Bank vs. Filkor Business Integrated, Inc.belonging to it constructed on the lot it was leasing at the Cavite
trial court erred in concluding that petitioner had Export Processing Zone Authority.6 Respondents Kim Eung
abandoned its mortgage lien on Filkor’s property, and that what Joe and Lee Han Sang also executed Continuing Suretyships
it had filed was an action for collection of a sum of money. binding themselves jointly and severally with respondent Filkor
Same; Same; Same; When an appeal raises only pure to pay for the latter’s obligations to petitioner.7
questions of law, Court has jurisdiction to entertain the same.— As respondents failed to make good on their obligations,
There is no dispute with respect to the fact that when an appeal petitioner filed Civil Case No. N-6689 in the Regional Trial
raises only pure questions of law, this Court has jurisdiction to Court of Cavite City, docketed as “Korea Exchange Bank vs.
entertain the same. Filkor Business Integrated, Inc.” In its complaint, petitioner
prayed that (a) it be paid by respondents under its twenty-seven
PETITION for review on certiorari of a decision of the causes of action; (b) the property mortgaged be foreclosed and
Regional Trial Court of Cavite City, Branch 88. sold at public auction in case respondents failed to pay
petitioner within ninety days from entry of judgment; and (c)
The facts are stated in the opinion of the Court. other reliefs just and equitable be granted.8
Romulo, Mabanta, Buenaventura, Sayoc & Delos Petitioner moved for summary judgment pursuant to
Angeles for petitioner. Section 1, Rule 35 of the 1997 Rules of Civil Procedure. On
Donardo R. Paglinawan for private respondents. March 12, 1999,
______________
QUISUMBING, J.: 4
Id., at 141-142.
5
1
This petition assails the order dated April 16, 1999 of the Id., at 142-145.
6
Regional Trial Court of Cavite City, Branch 88, in Civil Case Id., at 146.
7
No. N-6689. Said order denied petitioner’s partial motion for Ibid.
8
reconsideration of the trial court’s order2 dated March 12, 1999 Id., at 56-61.
whereby respondents were ordered to pay petitioner various 384
sums of U.S. dollars as payment of the former’s various loans
384 SUPREME COURT REPORTS ANNOTATED
with interest but omitted to state that the property mortgaged as
security for said loans be foreclosed and sold at public auction Korea Exchange Bank vs. Filkor Business Integrated, Inc.
in case respondents fail to pay their obligations to petitioner the trial court rendered its order granting petitioner’s motion,
ninety days from entry of judgment. reasoning as follows:
The facts are summarized from the findings of the trial xxx
court. It appears that the only reason defendants deny all the
On January 9, 1997, respondent Filkor Business Integrated, material allegations in the complaint is because the documents
Inc. (Filkor), borrowed US$140,000 from petitioner Korea attached thereto are mere photocopies and not the originals
thereof. Section 7, Rule 8 of the Rules of Court allows copies SO ORDERED.10
of documents to be attached to the pleading as an exhibit.
Defendants are, therefore, deemed to have admitted the Hence, the present petition, where petitioner ascribes the
genuineness and due execution of all actionable documents following error to the trial court.
attached to the complaint inasmuch as they were not THE REGIONAL TRIAL COURT OF CAVITE CITY
specifically denied, pursuant to Section 8 of the Rule 8 of the ERRED IN RULING THAT PETITIONER HAD
Rules of Court. ABANDONED THE REAL ESTATE MORTGAGE IN ITS
In the case at bar, there is clearly no substantial triable issue, FAVOR, BECAUSE IT FILED A SIMPLE COLLECTION
hence, the motion for summary judgment filed by plaintiff is CASE.11
proper. The resultant issue is whether or not petitioner’s complaint
A summary of judgment is one granted by the court upon before the trial court was an action for foreclosure of a real
motion by a party for an expeditious settlement of the case, estate mortgage, or an action for collection of a sum of money.
there appearing from the pleadings, depositions, admissions and In addition, we must also determine if the present appeal was
affidavits that there are no important questions or issues of fact correctly lodged before us rather than with the Court of
involved (except as to the amount of damages) and that, Appeals.
therefore, the moving party is entitled to a judgment as a matter In petitioner’s complaint before the trial court, Paragraph
of law (Sections 1, 2, 3, Rule 35, 1997 Rules of Civil 183 thereof alleges:
Procedure). 183. To secure payment of the obligations of defendant
The court having taken into account the pleadings of the Corporation under the First to the Twenty-Seventh Cause of
parties as well as the affidavits attached to the motion for Action, on February 9, 1996, defendant Corporation executed a
summary judgment and having found that there is indeed no Real Estate Mortgage by virtue of which it mortgaged to
genuine issue as to any material fact and that plaintiff is entitled plaintiff the improvements standing on Block 13,
to a summary of judgment as a matter of law, hereby renders ______________
judgment for the plaintiff and against the defendants, ordering
said defendants jointly and severally to pay plaintiff, as follows 10
Id., at 155.
. . .9 11
Id., at 4.
The trial court then rendered judgment in favor of petitioner,
386
granting its prayers under all its twenty-seven causes of action.
It, however, failed to order that the property mortgaged by 386 SUPREME COURT REPORTS ANNOTATED
respondent Filkor be foreclosed and sold at public auction in the Korea Exchange Bank vs. Filkor Business Integrated, Inc.
event that Filkor fails to pay its obligations to petitioner. Lot 1, Cavite Export Processing Zone, Rosario, Cavite,
Petitioner filed a motion for partial reconsideration of the belonging to defendant Corporation covered by Tax
trial court’s order, praying that the aforesaid relief of Declaration No. 5906-1 and consisting of a one-story building
foreclosure and sale at public auction be granted. In an order called warehouse and spooling area, the guardhouse, the
dated April 16, 1999, the trial court denied petitioner’s motion, cutting/sewing area building and the packing area building. (A
ruling as follows: copy of the Real Estate Mortgage is attached hereto as Annex
______________ “SS” and made an integral part hereof.)12
9
Id., at 147-148. This allegation satisfies in part the requirements of Section 1,
Rule 68 of the 1997 Rules of Civil Procedure on foreclosure of
385 real estate mortgage, which provides:
VOL. 380, APRIL 10, 2002 SECTION 385 1. Complaint in action for foreclosure.—In an action
for the foreclosure of a mortgage or other encumbrance upon
Korea Exchange Bank vs. Filkor Business Integrated, Inc.
real estate, the complaint shall set forth the date and due
Plaintiff, in opting to file a civil action for the collection of execution of the mortgage; its assignments, if any; the names
defendants obligations, has abandoned its mortgage lien on the and residences of the mortgagor and the mortgagee; a
property subject of the real estate mortgage. description of the mortgaged property; a statement of the date
The issue has already been resolved in Danao vs. Court of of the note or other documentary evidence of the obligation
Appeals, 154 SCRA 446 (1987), citing Manila Trading and secured by the mortgage, the amount claimed to be unpaid
Supply Co. vs. Co Kim, et al., 71 Phil. 448, where the Supreme thereon; and the names and residences of all persons having or
Court ruled that: claiming an interest in the property subordinate in right to that
The rule is now settled that a mortgage creditor may elect to of the holder of the mortgage, all of whom shall be made
waive his security and bring, instead, an ordinary action to defendants in the action.
recover the indebtedness with the right to execute a judgment
thereon on all the properties of the debtor including the subject In Paragraph 183 above, the date and due execution of the real
matter of the mortgage, subject to the qualification that if he estate mortgage are alleged. The properties mortgaged are
fails in the remedy by him elected, he cannot pursue further the stated and described therein as well. In addition, the names and
remedy he has waived. residences of respondent Filkor, as mortgagor, and of petitioner,
as mortgagee, are alleged in paragraphs 1 and 2 of the
WHEREFORE, the Partial Motion for Reconsideration complaint.13 The dates of the obligations secured by the
filed by the plaintiff of the Court’s Order dated March 12, 1999 mortgage and the amounts unpaid thereon are alleged in
is hereby denied for lack of merit. petitioner’s first to twenty-seventh causes of
action.14 Moreover, the very prayer of the complaint before the 388
trial court reads as follows: 388 SUPREME COURT REPORTS ANNOTATED
WHEREFORE, it is respectfully prayed that judgment be
rendered: Korea Exchange Bank vs. Filkor Business Integrated, Inc.
xxx Accordingly, the dispositive portion of the decision of the trial
2. Ordering that the property mortgaged be foreclosed and court dated March 12, 1999, must be modified to comply with
sold at public auction in case defendants fail to pay plaintiff the provisions of Section 2 of Rule 68 of the 1997 Rules of Civil
within ninety (90) days from entry of judgment. Procedure. This modification is subject to any appeal filed by
respondents of said decision.
______________ On the propriety of the present appeal, we note that what
petitioner impugns is the determination by the trial court of the
12
Id., at 54. nature of action filed by petitioner, based on the allegations in
13
Id., at 12. the complaint. Such a determination as to the correctness of the
14
Id., at 13-54. conclusions drawn from the pleadings undoubtedly involves a
question of law.17 As the present appeal involves a question of
387 law, petitioner appropriately filed it with this Court, pursuant to
VOL. 380, APRIL 10, 2002 Section387 1 of Rule 45 of the 1997 Rules of Civil Procedure,
Korea Exchange Bank vs. Filkor Business Integrated, Inc. which provides:
SECTION 1. Filing of petition with Supreme Court.—A party
x x x15
desiring to appeal by certiorari from a judgment or final order
Petitioner’s allegations in its complaint, and its prayer that the or resolution of the Court of Appeals, the Sandiganbayan, the
mortgaged property be foreclosed and sold at public auction, Regional Trial Court or other courts whenever authorized by
indicate that petitioner’s action was one for foreclosure of real law, may file with the Supreme Court a verified petition for
estate mortgage. We have consistently ruled that what review on certiorari. The petition shall raise only questions of
determines the nature of an action, as well as which court or law which must be distinctly set forth. (Italics supplied).
body has jurisdiction over it, are the allegations of the complaint
There is no dispute with respect to the fact that when an appeal
and the character of the relief sought.16 In addition, we find no
raises only pure questions of law, this Court has jurisdiction to
indication whatsoever that petitioner had waived its rights under
entertain the same.18
the real estate mortgage executed in its favor. Thus, the trial
court erred in concluding that petitioner had abandoned its WHEREFORE, the petition is GRANTED. The Order
mortgage lien on Filkor’s property, and that what it had filed dated March 12, 1999, of the Regional Trial Court of Cavite
City, Branch 88, in Civil Case No. N-6689 is hereby
was an action for collection of a sum of money.
MODIFIED, to state that the mortgaged property of respondent
Petitioner’s action being one for foreclosure of real estate
Filkor be ordered foreclosed and sold at public auction in the
mortgage, it was incumbent upon the trial court to order that the
event said respondent fails to pay its obligations to petitioner
mortgaged property be foreclosed and sold at public auction in
the event that respondent Filkor fails to pay its outstanding within ninety (90) days from entry of judgment.
obligations. This is pursuant to Section 2 of Rule 68 of the 1997 No pronouncement as to costs.
______________
Rules of Civil Procedure, which provides:
SEC. 2. Judgment on foreclosure for payment or sale.—If upon 17
the trial in such action the court shall find the facts set forth in Martin, RULES OF COURT OF THE PHILIPPINES,
the complaint to be true, it shall ascertain the amount due to the Vol. 1, 945 (1989 ed.).
18
plaintiff upon the mortgage debt or obligation, including Far East Marble (Phils.) Inc. vs. Court of Appeals, G.R.
interest and other charges as approved by the court, and costs, No. 94093, 225 SCRA 249, 255 (1993).
and shall render judgment for the sum so found due and order 389
that the same be paid to the court or to the judgment obligee
VOL. 380, APRIL 10, 2002
within a period of not less than ninety (90) days nor more than
one hundred twenty (120) days from entry of judgment, and that Magdaluyo vs. Quimpo
in default of such payment the property shall be sold at public SO ORDERED.
auction to satisfy the judgment. (Italics supplied.) Bellosillo (Chairman), Mendoza and De Leon, Jr.,
JJ., concur.
______________
Petition granted, judgment modified.
15
Id., at 56-61. Note.—What determines the nature of an action and
16
Union Bank of the Philippines vs. Court of Appeals, G.R. correspondingly the court or body has jurisdiction over it are
No. 131729, 290 SCRA 198, 218 (1998); Javelosa vs. Court of the allegations made by the plaintiff. (Tamano vs. Ortiz, 291
Appeals, G.R. No. 124292, 265 SCRA 493 (1996); Amigo vs. SCRA 584 [1998])
Court of Appeals, et al., |G.R. No. 102833, 253 SCRA
382 (1996); Cañiza vs. Court of Appeals, G.R. No. 110427, 268 ——o0o——
SCRA 640 (1997); Bernarte vs. Court of Appeals, et al., G.R.
No. 107741, 263 SCRA 323 (1996); Bernardo Sr., et al. vs. SUPREME COURT REPORTS ANNOTATED
Court of Appeals, et al., G.R. No. 120730, 263 SCRA
Huerta Alba Resort, Inc. vs. Court of Appeals
660 (1996).
G.R. No. 128567. September 1, 2000.*
HUERTA ALBA RESORT, INC., petitioner, vs. COURT OF whether the petitioner seasonably invoked its asserted right
APPEALS and SYNDICATED MANAGEMENT GROUP, under Section 78 of R.A. No. 337 to redeem subject properties.
INC., respondents. Petitioner theorizes that it invoked its “right” in “timely
Mortgages; Judicial Foreclosures of Mortgage; fashion,” that is, after confirmation by the court of the
Redemption; Words and Phrases; “Equity of Redemption” and foreclosure sale, and within one (1) year from the date of
“Right of Redemption,” Distinguished.—From the various registration of the certificate of sale. Indeed, the facts show that
decisions, resolutions and orders a quo it can be gleaned that it was only on May 2, 1995 when, in opposition to the Motion
what petitioner has been adjudged to have was only for Issuance of Writ of Possession, did petitioner file a Motion
the equity of redemption over subject properties. On the to Compel Private Respondent to Accept Redemption, invoking
distinction between the equity of redemption and right of for the very first time its alleged right to redeem subject
redemption, the case of Gregorio Y. Limpin vs. Intermediate properties under to Section 78 of R.A. No. 337. In light of the
Appellate Court, comes to the fore. Held the Court in the said aforestated facts, it was too late in the day for petitioner to
case: “The equity of redemption is, to be sure, different from invoke a right to redeem under Section 78 of R.A. No. 337.
and should not be confused with the right of redemption. Petitioner failed to assert a right to redeem in several crucial
The right of redemption in relation to a mortgage—understood stages of the proceedings.
in the sense of a prerogative to re-acquire mortgaged property Same; Same; Same; Actions; Pleadings and
after registration of the foreclosure sale—exists only in the case Practice; Counterclaims; The claim that a mortgagor is
of the extrajudicial foreclosure of the mortgage. No such right entitled to the beneficial provisions of Section 78 of RA. No. 337
is recognized in a judicial foreclosure except only where the is in the nature of a compulsory counterclaim which should be
mortgagee is the Philippine National Bank or a bank or banking averred in the answer to the complaint for judicial
institution. Where a mortgage is foreclosed extrajudicially, Act foreclosure.—Indeed, at the earliest opportunity, when it
3135 grants to the mortgagor the right of redemption within one submitted its answer to the complaint for judicial foreclosure,
(1) year from the registration of the sheriff’s certificate of petitioner should have alleged that it was entitled to the
foreclosure sale. Where the foreclosure is judicially beneficial provisions of Section 78 of R.A. No. 337 but again,
effected, however, no equivalent right of redemption exists. The it did not make any allegation in its answer regarding any right
law declares that a judicial foreclosure sale, ‘when confirmed thereunder. It bears stressing that the applicability of Section 78
by an order of the court, x x shall operate to divest the rights of of R.A. No. 337 hinges on the factual question of whether or
all the parties to the action and to vest their rights in the not private respondent’s predecessor in interest was a credit
purchaser, subject to such rights of redemption as may be institution. As was held in Limpin, a judicial foreclosure sale,
allowed by law.’ Such rights exceptionally ‘allowed by law’ “when confirmed by an order of the court, x x shall operate to
(i.e., even after confirmation by an order of the court) are those divest the rights of all the parties to the action and to vest their
granted by the charter of the Philippine National Bank (Acts rights in the purchaser, subject to such rights of redemption as
No. 2747 and 2938), and the General Banking Act (R.A. may be allowed by law,” which confer on the mortgagor, his
337). These laws confer on the mortgagor, his successors in successors in interest or any judgment creditor of the
interest or any judgment creditor of the mortgagor, the right to mortgagor, the right to redeem the property sold on foreclosure
redeem the property sold on foreclosure—after confirmation by after confirmation by the court of the judicial foreclosure sale.
the court of the foreclosure sale—which right may be exercised Thus, the claim that petitioner is entitled to the beneficial
within a period of one (1) year, counted from the date of provisions of Section 78 of R.A. No. 337—since private
registration of the certificate of sale in the Registry of Property. respondent’s predecessor-in-interest is a credit institution—is in
Same; Same; Same; Banks and Banking; General the nature
Banking Act (R.A. 337); Where a party failed to assert a right 536
to redeem under the Section 78 of R.A. 337 in several crucial 536 SUPREME COURT REPORTS ANNOTAT
stages of the proceedings invoke, it is too late
_______________ of a compulsory counterclaim which should have been
averred in petitioner’s answer to the complaint for judicial
* foreclosure.
THIRD DIVISION.
Counterclaims; The rules of counterclaim are designed to
535
enable the disposition of a whole controversy of interested
VOL. 339, SEPTEMBER 1, 2000 parties’535
conflicting claims, at one time and in one action,
Huerta Alba Resort, Inc. vs. Court of Appeals provided all parties be brought before the court and the matter
in the day for it to subsequently invoke such right in decided without prejudicing the rights of any party.—The very
opposition to a motion for issuance of a writ of possession after purpose of a counterclaim would have been served had
confirmation by the court of the foreclosure sale and the petitioner alleged in its answer its purported right under Section
registration of the certificate of sale.—Petitioner avers in its 78 of R.A. No. 337: “x x x The rules of counterclaim are
petition that the Intercon, predecessor in interest of the private designed to enable the disposition of a whole controversy of
respondent, is a credit institution, such that Section 78 of interested parties’ conflicting claims, at one time and in one
Republic Act No. 337 should apply in this case. Stated action, provided all parties be brought before the court and the
differently, it is the submission of petitioner that it should be matter decided without prejudicing the rights of any party.”
allowed to redeem subject properties within one year from the Estoppel; Estoppel may be successfully invoked only if
date of sale as a result of the foreclosure of the mortgage the party fails to raise the question in the early stages of the
constituted thereon. The pivot of inquiry here therefore, is proceedings.—The failure of petitioner to seasonably assert its
alleged right under Section 78 of R.A. No. 337 precludes it from all the parties to the action and to vest their rights in private
so doing at this late stage of the case. Estoppel may be respondent. There then existed only what is known as the equity
successfully invoked if the party fails to raise the question in the of redemption, which is simply the right of the petitioner to
early stages of the proceedings. Thus, “a party to a case who extinguish the mortgage and retain ownership of the property
failed to invoke his claim in the main case, while having the by paying the secured debt within the 90-day period after the
opportunity to do so, will be precluded, subsequently, from judgment became final. There being an explicit finding on the
invoking his claim, even if it were true, after the decision has part of the Court of Appeals in its Decision of September 30,
become final, otherwise the judgment may be reduced to a 1994 in CA-G.R. No. 35086—that the herein petitioner failed
mockery and the administration of justice may be placed in to exercise its equity of redemption within the prescribed
disrepute.” period, redemption can no longer be effected. The confirmation
Courts; It is error for a trial court in still allowing a party of the sale and the issuance of the transfer certificates of title
to introduce evidence to accomplish what the latter failed to do covering the subject properties to private respondent was then,
before the Court of Appeals, that is, to invoke its alleged right in order. The trial court therefore, has the ministerial duty to
under Section 78 of R.A. No. 337 although the said appellate place private respondent in the possession of subject properties.
court already found that said question was never brought
before it squarely.—All things viewed in proper perspective, it PETITION for review on certiorari of a decision of the Court
is decisively clear that the trial court erred in still allowing of Appeals.
petitioner to introduce evidence that private respondent’s
predecessor-in-interest was a credit institution, and to thereafter 538
rule that the petitioner was entitled to avail of the provisions of 538 SUPREME COURT REPORTS ANNOTATED
Section 78 of R.A. No. 337. In effect, the trial court permitted
the petitioner to accomplish what the latter failed to do before Huerta Alba Resort, Inc. vs. Court of Appeals
the Court of Appeals, that is, to invoke its alleged right under The facts are stated in the opinion of the Court. Benjamin C.
Section 78 of R.A. No. 337 although the Court of Appeals in Santos & Ofelia Calcetas-Santos Law
CA-G.R. No. 35086 already found that “the question of whether Offices; Santos, Parungao, Aquino &
the Syndicated Management Council Group, Inc. is a bank or Santos and Oben, Ventura, Defensor, Abola & Associates for
credit institution was never brought before (the Court of petitioner.
Appeals) squarely.” The said pronouncement by the Court of Atienza, Tabora, Del Rosario & Castillo Law Office for
Appeals unerringly signified that petitioner did not make private respondent.
537
PURISIMA, J.:
VOL. 339, SEPTEMBER 1, 2000 537
Huerta Alba Resort, Inc. vs. Court of Appeals Litigation must at some time be terminated, even at the risk of
a timely assertion of any right under Section 78 of R.A. occasional errors. Public policy dictates that once a judgment
No. 337 in all the stages of the proceedings below. becomes final, executory and unappealable, the prevailing party
Actions; Judgments; Law of the Case; Whether or not the should not be denied the fruits of his victory by some subterfuge
“law of the case” is erroneous is immaterial—it still remains to devised by the losing party. Unjustified delay in the
be the “law of the case.”—There is, therefore, merit in private enforcement of a judgment sets at naught the role of courts in
respondent’s contention that to allow petitioner to belatedly disposing justiciable controversies with finality.
invoke its right under Section 78 of R.A. No. 337 will disturb The Case
the “law of the case.” However, private respondent’s statement At bar is a petition assailing the Decision, dated November 14,
of what constitutes the “law of the case” is not entirely accurate. 1996, and Resolution, dated March 11, 1997, of the Court of
The “law of the case” is not simply that the defendant possesses Appeals in CA-G.R. No. 38747, which set aside the Order,
an equity of redemption. As the Court has stated, the “law of dated July 21, 1995, and Order, dated September 4, 1997, of the
the case” holds that petitioner has the equity of the redemption Regional Trial Court of Makati City, in Civil Case No. 89-5424.
without any qualification whatsoever, that is, without the right The aforesaid orders of the trial court held that petitioner had
of redemption afforded by Section 78 of R.A. No. 337. Whether the right to redeem subject pieces of property within the one-
or not the “law of the case” is erroneous is immaterial, it still year period prescribed by Section 78 of Republic Act No. 337
remains the “law of the case.” A contrary rule will contradict otherwise known as the General Banking Act.
both the letter and spirit of the rulings of the Court of Appeals Section 78 of R.A. No. 337 provides that “in case of a
in CA-G.R. SP No. 35086, CA-G.R. CV No. 39243, and CA- foreclosure of a mortgage in favor of a bank, banking or credit
G.R. 38747, which clearly saw through the repeated attempts of institution, whether judicially or extrajudicially, the mortgagor
petitioner to forestall so simple a matter as making the security shall have the right, within one year after the sale of the real
given for a just debt to answer for its payment. estate as a result of the foreclosure of the respective mortgage,
Mortgages; Equity of Redemption; Words and to redeem the property.”
Phrases; Equity of redemption is simply the right of the
mortgagor to extinguish the mortgage and retain ownership of The Facts
the property by paying the secured debt within the 90-day The facts that matter are undisputed:
period after the judgment became final.—In conformity with In a complaint for judicial foreclosure of mortgage with
the ruling in Limpin, the sale of the subject properties, as preliminary injunction filed on October 19, 1989, docketed as
confirmed by the Order dated February 10, 1995 of the trial Civil Case No. 89-5424 before the Regional Trial Court of
court in Civil Case No. 89-5424 operated to divest the rights of Makati City, the
539
VOL. 339, SEPTEMBER 1, 2000 reconsideration
539 in G.R. No. 112044 or to submit the case for
hearing by the Court en banc was filed, but to no avail. The
Court resolved to deny the same on May 11, 1994.
herein private respondent sought the foreclosure of four (4) On March 14, 1994, the Resolution dated December 13,
parcels of land mortgaged by petitioner to Intercon Fund 1993, in G.R. No. 112044 became final and executory and was
Resource, Inc. (“Intercon”). entered in the Book of Entries of Judgment.
Private respondent instituted Civil Case No. 89-5424 as On July 4, 1994, private respondent filed with the trial court
mortgagee-assignee of a loan amounting to P8.5 million of origin a motion for execution of the Decision promulgated
obtained by petitioner from Intercon, in whose favor petitioner on April 30, 1992 in Civil Case No. 89-5424. The said motion
mortgaged the aforesaid parcels of land as security for the said was granted on July 13, 1994.
loan. Accordingly, on July 15, 1994 a writ of execution issued
In its answer below, petitioner questioned the assignment and, on July 20, 1994, a Notice of Levy and Execution was
by Intercon of its mortgage right thereover to the private issued by the Sheriff concerned, who issued on August 1, 1994
respondent, on the ground that the same was ultra a Notice of Sheriff’s Sale for the auction of subject properties
vires. Petitioner also questioned during the trial the correctness on September 6, 1994.
of the charges and interest on the mortgage debt in question. On August 23, 1994, petitioner filed with the same trial
On April 30, 1992, the trial court, through the then Judge court an Urgent Motion to Quash and Set Aside Writ of
now Court of Appeals Justice Buenaventura J. Guerrero, came Execution ascribing to it grave abuse of discretion in issuing the
out with its decision “granting herein private respondent questioned Writ of Execution. To support its motion, petitioner
SMGI’s complaint for judicial foreclosure of mortgage,” invited attention and argued that the records of the case were
disposing as follows: still with the Court of Appeals and therefore, issuance of the
“WHEREFORE, judgment is hereby rendered ordering writ of execution was premature since the 150-day period for
defendant to pay plaintiff the following: petitioner to pay the judgment obligation had not yet lapsed and
petitioner had not yet defaulted in the payment thereof since no
1. (1)P8,500,000.00 representing the principal of the demand for its payment was made by the private respondent. In
amount due; petitioner’s own words, the dispute between the parties was
2. (2)P850,000.00 as penalty charges with interest at 6% “principally on the issue as to when the 150-day period within
per annum, until fully paid; which Huerta Alba may exercise its equity of redemption
3. (3)22% per annum interest on the above principal from should be counted.”
September 6, 1998, until fully paid; 541
4. (4)5% of the sum total of the above amounts, as VOL. 339, SEPTEMBER 1, 2000
reasonable attorney’s fees; and,
5. (5)Costs. Huerta Alba Resort, Inc. vs. Court of Appeals
In its Order of September 2, 1994, the lower court denied
petitioner’s urgent motion to quash the writ of execution
All the above must be paid within a period of not less than
in Civil Case No. 89-5424, opining that subject judgment had
150 days from receipt hereof by the defendant. In default of
such payment, the four parcels of land subject matter of the suit become final and executory and consequently, execution
including its improvements shall be sold to realize the mortgage thereof was a matter of right and the issuance of the
corresponding writ of execution became its ministerial duty.
debt and costs, in the manner and under the regulations that
Challenging the said order granting execution, petitioner
govern sales of real estate under execution.” 1
filed once more with the Court of Appeals another petition for
Petitioner appealed the decision of the trial court to the Court of
certiorari and prohibition with preliminary injunction, docketed
Appeals, the appeal docketed as CA-G.R. CV No. 39243 before
the Sixth Division of the appellate court, which dismissed the as C.A.-G.R. SP No. 35086, predicated on the same grounds
case on June 29, 1993 on the ground of late payment of docket invoked for its Motion to Quash Writ of Execution.
On September 6, 1994, the scheduled auction sale of subject
fees.
pieces of properties proceeded and the private respondent was
declared the highest bidder. Thus, private respondent was
_______________
awarded subject bidded pieces of property. The covering
1 Certificate of Sale issued in its favor was registered with the
Rollo, pp. 87-88.
Registry of Deeds on October 21, 1994.
540
On September 7, 1994, petitioner presented an Ex-Parte
540 SUPREME COURT REPORTS ANNOTATED Motion for Clarification asking the trial court to “clarify”
Huerta Alba Resort, Inc. vs. Court of Appeals whether or not the twelve (12) month period of redemption for
Dissatisfied with the dismissal of CA-G.R. No. 39243, ordinary execution applied in the case.
petitioner came to this Court via a petition for certiorari, On September 26, 1994, the trial court ruled that the period
docketed as G.R. No. 112044, which this court resolved to of redemption of subject property should be governed by the
dismiss on December 13, 1993, on the finding that the Court of rule on the sale of judicially foreclosed property under Rule 68
Appeals erred not in dismissing the appeal of petitioner. of the Rules of Court.
Petitioner’s motion for reconsideration of the dismissal of Thereafter, petitioner then filed an Exception to the Order
its petition in G.R. No. 112044 was denied with finality in this dated September 26, 1994 and Motion to Set Aside Said Order,
Court’s Resolution promulgated on February 16, 1994. On contending that the said Order materially altered the Decision
March 10, 1994, leave to present a second motion for dated April 30, 1992 “which declared that the satisfaction of the
judgment shall be in the manner and under the regulation that September 26, 1994 had become moot and academic.
govern sale of real estate under execution.” Conformably, the Transfer Certificates of Title to subject pieces
Meanwhile, in its Decision of September 30, 1994, the of property were then issued to the private respondent.
Court of Appeals resolved the issues raised by the petitioner On February 27, 1995, petitioner filed with the Court of
in C.A.-G.R. SP No. 35086, holding that the one hundred-fifty Appeals a Motion for Clarification seeking “clarification” of the
day period within which petitioner may redeem subject date of commencement of the one (1) year period for the
properties should be computed from the date petitioner was redemption of the properties in question.
notified of the Entry of Judgment in G.R. No. 112044; and that In its Resolution dated March 20, 1995, the Court of
the 150-day period within which Appeals merely noted such Motion for Clarification since its
542 Decision promulgated on September 30, 1994 had already
542 SUPREME COURT REPORTS ANNOTATED become final and executory; ratiocinating thus:
“We view the motion for clarification filed by petitioner,
Huerta Alba Resort, Inc. vs. Court of Appeals purportedly signed by its proprietor, but which we believe was
petitioner may exercise its equity of redemption expired on prepared by a lawyer who wishes to hide under the cloak of
September 11, 1994. Thus: anonymity, as a veiled attempt to buy time and to delay further
“Petitioner must have received the resolution of the Supreme the disposition of this case.
Court dated February 16, 1994 denying with finality its motion Our decision of September 30, 1994 never dealt on the right
for reconsideration in G.R. No. 112044 before March 14, and period of redemption of petitioner, but was merely
1994, otherwise the Supreme Court would not have made an circumscribed to the question of whether respondent judge
entry of judgment on March 14, 1994. While, computing the could issue a writ of execution in its Civil Case No. 89-5424 x
150-day period, petitioner may have until September 11, 1994, x x.
within which to pay the amounts covered by the judgment, such We further ruled that the one-hundred fifty day period
period has already expired by this time, and therefore, this within which petitioner may exercise its equity of
Court has no more reason to pass upon the parties’ opposing redemption should be counted, not from the receipt of
contentions, the same having become moot and respondent court of the records of Civil Case No. 895424 but
academic.”2 (Italics supplied). from the date petitioner was notified of the entry of
Petitioner moved for reconsideration of the Decision of the judgment made by the appellate court.
Court of Appeals in C.A.-G.R. SP No. 35086. In its Motion for But we never made any pronouncement on the one-
Reconsideration dated October 18, 1994, petitioner theorized year right of redemption of petitioner because, in the first
that the period of one hundred fifty (150) days should not be place, the foreclosure in this case is judicial, and as such, the
reckoned with from Entry of Judgment but from receipt on or mortgagor has only the equity, not the right of redemption x x
before July 29, 1994 by the trial court of the records of Civil x. While it may be true that under Section 78 of R.A. 337 as
Case No. 89-5424 from the Court of Appeals. So also, amended, otherwise known as the General Banking Act, a
petitioner maintained that it may not be considered in default, mortgagor of a bank, banking or credit institution, whether the
even after the expiration of 150 days from July 29, 1994, foreclosure was done judicially or extrajudicially, has a period
because prior demand to pay was never made on it by the of one year from the auction sale within which to redeem the
private respondent. According to petitioner, it was therefore, foreclosed property, the question of whether the Syndicated
premature for the trial court to issue a writ of execution to Management Group, Inc., is a bank or credit institution was
enforce the judgment. never brought before us squarely, and it is indeed odd and
The trial court deferred action on the Motion for 544
Confirmation of the Certificate of Sale in view of the pendency
of petitioner’s Motion for Reconsideration in CA-G.R. SP No. 544 SUPREME COURT REPORTS ANNOTATED
35086. Huerta Alba Resort, Inc. vs. Court of Appeals
On December 23, 1994, the Court of Appeals denied strange that petitioner would now sarcastically ask a rhetorical
petitioner’s motion for reconsideration in CA-G.R. SP No. question in its motion for clarification.”3 (Italics supplied).
35086. Absent any further action with respect to the denial of Indeed, if petitioner did really act in good faith, it would have
the subject motion for reconsideration, private respondent ventilated before the Court of Appeals in CA-G.R. No.
presented a Second Motion for Confirmation of Certificate of 35086 its pretended right under Section 78 of R.A. No. 337 but
Sale before the trial court. it never did so.
As regards the Decision rendered on September 30, 1994 by At the earliest opportunity, when it filed its answer to the
the Court of Appeals in CA-G.R. SP No. 35086 it became final complaint for judicial foreclosure, petitioner should have
and executory on January 25, 1995. averred in its pleading that it was entitled to the beneficial
provisions of Section 78 of R.A. No. 337; but again, petitioner
________________ did not make any such allegation in its answer.
From the said Resolution, petitioner took no further step
2 such that on March 31, 1995, the private respondent filed a
Decision, p. 5; Rollo, p. 93.
543 Motion for Issuance of Writ of Possession with the trial court.
VOL. 339, SEPTEMBER 1, 2000 During
543 the hearing called on April 21, 1995, the counsel of
record of petitioner entered appearance and asked for time to
Huerta Alba Resort, Inc. vs. Court of Appeals interpose opposition to the Motion for Issuance of Writ of
On February 10, 1995, the lower court confirmed the sale of Possession.
subject properties to the private respondent. The pertinent Order
declared that all pending incidents relating to the Order dated
On May 2, 1995, in opposition to private respondent’s 1. (1)The Motion for Issuance of Writ of Possession is
Motion for Issuance of Writ of Possession, petitioner filed a hereby denied;
“Motion to Compel Private Respondent to Accept 2. (2)Plaintiff is directed to accept the redemption on or
Redemption.” It was the first time petitioner ever asserted the before October 21, 1995 in an amount computed
right to redeem subject properties under Section 78 of R.A. No. according to the terms stated in the Writ of Execution
337, the General Banking Act; theorizing that the original dated July 15, 1994 plus all other related costs and
mortgagee, being a credit institution, its assignment of the expenses mentioned under Section 78, RA 337, as
mortgage credit to petitioner did not remove petitioner from the amended; and
coverage of Section 78 of R.A. No. 337. Therefore, it should 3. (3)The Register of Deeds of Valenzuela, Bulacan is
have the right to redeem subject properties within one year from directed (a) to reconvey to the defendant the
registration of the auction sale, theorized the petitioner which following titles of the four (4) parcels of land, namely
concluded that in view of its “right of redemption,” the issuance TCT Nos. V-38878, V-38879, V-38880, and V-
of the titles over subject parcels of land to the private respondent 38881, now in the name of plaintiff, and (b) to
was irregular and premature. register the certificate of sale dated October 7, 1994
In its Order of July 21, 1995, the trial court, presided over and the Order confirming the sale dated February 10,
by Judge Napoleon Inoturan, denied private respondent’s 1995 by
motion for a writ of possession, opining that Section 78 of the
General Banking Act was applicable and therefore, the 546
petitioner had until October
_______________ Huerta Alba Resort, Inc. vs. Court of Appeals
3 1. a brief memorandum thereof upon the transfer

Resolution, pp. 1-2; Rollo, pp. 366-367.
545 certificates of title to be issued in the name of
VOL. 339, SEPTEMBER 1, 2000 545defendant, pursuant to Sec. 63 (a) PD 1529, as
amended.
21, 1995 to redeem the said parcels of land, said Order ruled as
follows: The Omnibus Motion dated June 5, 1995, together with the
“It is undisputed that Intercon is a credit institution from which Opposition thereto, is now deemed resolved. SO ORDERED.”4
Private respondent interposed a Motion for Reconsideration
defendant obtained a loan secured with a real estate mortgage
seeking the reversal of the Order but to no avail. In its Order
over four (4) parcels of land. Assuming that the mortgage debt
dated September 4, 1995, the trial court denied the same.
had not been assigned to plaintiff, there is then no question that
To attack and challenge the aforesaid order of July 21, 1995
defendant would have a right of redemption in case of
foreclosure, judicially or extrajudicially, pursuant to the above and subsequent Order of September 4, 1995 of the trial court,
quoted Section 78 of RA 337, as amended. the private respondent filed with this court a Petition for
Certiorari, Prohibition and Mandamus, docketed as G.R. No.
However, the pivotal issue here is whether or not the
121893, but absent any special and cogent reason shown for
defendant lost its right of redemption by virtue of the
entertaining the same, the Court referred the petition to the
assignment of its mortgage debt by Intercon to plaintiff, which
Court of Appeals, for proper determination.
is not a bank or credit institution. The issue is resolved in the
negative. The right of redemption in this case is vested by law Docketed as G.R. No. 387457 on November 14, 1996, the
and is therefore an absolute privilege which defendant may not Court of Appeals gave due course to the petition and set aside
the trial court’s Order dated July 21, 1995 and Order dated
lose even though plaintiff-assignee is not a bank or credit
September 4, 1995.
institution (Tolentino versus Court of Appeals, 106 SCRA 513).
In its Resolution of March 11, 1997, the Court of Appeals
Indeed, a contrary ruling will lead to a possible circumvention
denied petitioner’s Motion for Reconsideration of the Decision
of Section 78 because all that may be needed to deprive a
defaulting mortgagor of his right of redemption is to assign his promulgated on November 14, 1996 in CA-G.R. No. 38747.
mortgage debt from a bank or credit institution to one which is Undaunted, petitioner has come to this Court via the present
petition, placing reliance on the assignment of errors, that:
not. Protection of defaulting mortgagors, which is the avowed
policy behind the provision, would not be achieved if the ruling
were otherwise. Consequently, defendant still possesses its I
right of redemption which it may exercise up to October 21,
1995 only, which is one year from the date of registration of the THE RESPONDENT COURT OF APPEALS ERRED
certificate of sale of subject properties (GSIS versus Iloilo, 175 GRAVELY IN HOLDING THAT THE COURT OF
SCRA 19, citing Limpin versus IAC, 166 SCRA 87). APPEALS (TWELFTH DIVISION) IN CA G.R. SP NO.
Since the period to exercise defendant’s right of redemption 35086 HAD RESOLVED “WITH FINALITY” THAT
has not yet expired, the cancellation of defendant’s transfer PETITIONER HUERTA ALBA HAD NO RIGHT OF
certificates of title and the issuance of new ones in lieu thereof REDEMPTION BUT ONLY THE EQUITY OF
in favor of plaintiff are therefore illegal for being premature, REDEMPTION.
thereby necessitating reconveyance (see Sec 63 [a], PD 1529,
as amended). ________________
WHEREFORE, the Court hereby rules as follows:
4
Rollo, pp. 14-15.
547 OR OTHERWISE—THE ISSUE OF PETITIONER HUERTA
VOL. 339, SEPTEMBER 1, 2000 ALBA’S547RIGHT OF REDEMPTION UNDER SECTION 78,
R.A. NO. 337.
II.
II
THERE IS NO ESTOPPEL HERE. PETITIONER
THE RESPONDENT COURT OF APPEALS ERRED HUERTA ALBA INVOKED ITS RIGHT OF REDEMPTION
GRAVELY IN IGNORING THAT PETITIONER HUERTA UNDER SECTION 78, R.A. NO. 337 IN TIMELY
ALBA POSSESSES THE ONEYEAR RIGHT OF FASHION, i.e., AFTER CONFIRMATION BY THE COURT
REDEMPTION UNDER SECTION 78, R.A. NO. 337 (THE OF THE FORECLOSURE SALE, AND WITHIN ONE (1)
GENERAL BANKING ACT). YEAR FROM THE DATE OF REGISTRATION OF THE
CERTIFICATE OF SALE.
III
III.
THE RESPONDENT COURT OF APPEALS ERRED
GRAVELY IN HOLDING THAT PRIVATE RESPONDENT THE PRINCIPLE OF ‘THE LAW OF THE CASE’ HAS
SYNDICATED MANAGEMENT GROUP, INC. IS ABSOLUTELY NO BEARING HERE:
ENTITLED TO THE ISSUANCE OF A WRIT OF
POSSESSION OVER THE SUBJECT PROPERTY.5 (1)
In its comment on the petition, private respondent countered
that:
THE RIGHT OF REDEMPTION UNDER SECTION 78, R.A.
NO. 337 IS IN FACT PREDICATED UPON THE FINALITY
1. “A.THE HONORABLE COURT OF APPEALS AND CORRECTNESS OF THE DECISION IN CIVIL CASE
CORRECTLY HELD THAT IT RESOLVED WITH NO. 89-5424.
FINALITY IN C.A.-G.R. SP NO. 35086 THAT
PETITIONER ONLY HAD THE RIGHT OF (2)
REDEMPTION IN RESPECT OF THE SUBJECT
PROPERTIES. THUS, THE RTC’S ORDER RECOGNIZING
2. B.THE PETITION IS AN INSIDIOUS AND PETITIONER HUERTA ALBA’S RIGHT OF REDEMPTION
UNDERHANDED ATTEMPT TO EVADE THE UNDER SECTION 78, R.A. NO. 37 DOES NOT IN ANY
FINALITY OF VARIOUS DECISIONS, WAY HAVE THE EFFECT OF AMENDING, MODIFYING,
RESOLUTIONS AND ORDERS WHICH HELD OR SETTING ASIDE THE DECISION IN CIVIL CASE NO.
THAT PETITIONER ONLY POSSESSES THE 89-5424.
EQUITY OF REDEMPTION IN RESPECT OF The above arguments and counter-arguments advanced relate to
THE SUBJECT PROPERTIES. the pivotal issue of whether or not the petitioner has the one-
3. C.PETITIONER IS BARRED BY ESTOPPEL year right of redemption of subject properties under Section 78
FROM BELATEDLY RAISING THE ISSUE OF of Republic Act No. 337 otherwise known as the General
ITS ALLEGED ‘RIGHT OF REDEMPTION.’ Banking Act.
4. D.IN HOLDING THAT THE PETITIONER HAD The petition is not visited by merit.
THE ‘RIGHT OF REDEMPTION’ OVER THE Petitioner’s assertion of right of redemption under Section
SUBJECT PROPERTIES, THE TRIAL COURT 78 of Republic Act No. 337 is premised on the submission that
MADE A MOCKERY OF THE ‘LAW OF THE the Court of Appeals did not resolve such issue in CA-G.R. SP
CASE.’ ”6 No. 35086; contending thus:
And by way of Reply, petitioner argued, that: (1)
I. BY NO STRETCH OF LOGIC CAN THE 20 MARCH 1995

RESOLUTION IN CA G.R. SP NO. 35086 BE
THE COURT OF APPEALS IN CA-G.R. SP NO. 35086 INTERPRETED TO MEAN THE COURT
COULD NOT HAVE POSSIBLY RESOLVED THEREIN— 549
WHETHER WITH FINALITY VOL. 339, SEPTEMBER 1, 2000
_______________ Huerta Alba Resort, Inc. vs. Court of Appeals
OF APPEALS HAD RESOLVED WITH FINALITY’ THE
5
Rollo, p. 4. ISSUE OF WHETHER PETITIONER HUERTA ALBA HAD
6
Rollo, p. 390. THE RIGHT OF REDEMPTION WHEN ALL THAT THE
548 RESOLUTION DID WAS TO MERELY NOTE THE
MOTION FOR CLARIFICATION.
Huerta Alba Resort, Inc. vs. Court of Appeals (2)
THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP Appellate Court,7 comes to the fore. Held the Court in the said
NO. 35086 IS NOT A FINAL JUDGMENT, ORDER OR case:
DECREE. IT IS NOT EVEN A JUDGMENT OR ORDER TO “The equity of redemption is, to be sure, different from and
BEGIN WITH; IT ORDERS NOTHING; IT ADJUDICATES should not be confused with the right of redemption.
NOTHING. The right of redemption in relation to a mortgage—
understood in the sense of a prerogative to re-acquire
(3) mortgaged property after registration of the foreclosure sale—
exists only in the case of the extrajudicial foreclosure of the
PETITIONER HUERTA ALBA’S RIGHT OF mortgage. No such right is recognized in a judicial foreclosure
REDEMPTION UNDER SECTION 78, R.A. NO. 37 WAS except only where the mortgagee is the Philippine National
NOT AN ISSUE, AND COULD NOT HAVE POSSIBLY Bank or a bank or banking institution.
BEEN AN ISSUE, IN CA G.R. SP NO. 35086. Where a mortgage is foreclosed extrajudicially, Act 3135
grants to the mortgagor the right of redemption within one (1)
(4) year from the registration of the sheriff’s certificate of
foreclosure sale.
THE 30 SEPTEMBER 1994 DECISION IN CA G.R. SP Where the foreclosure is judicially effected, however, no
NO. 35086 HAVING ALREADY BECOME FINAL EVEN equivalent right of redemption exists. The law declares that a
BEFORE THE FILING OF THE MOTION FOR judicial foreclosure sale, ‘when confirmed by an order of the
CLARIFICATION, THE COURT OF APPEALS NO court, x x shall operate to divest the rights of all the parties to
LONGER HAD ANY JURISDICTION TO ACT OF THE the action and to vest their rights in the purchaser, subject to
MOTION OR ANY OTHER MATTER IN CA G.R. SP NO. such rights of redemption as may be allowed by law.’ Such
35086, EXCEPT TO MERELY NOTE THE MOTION. rights exceptionally ‘allowed by law’ (i.e., even after
confirmation by an order of the court) are those granted by the
II. charter of the Philippine National Bank (Acts No. 2747 and
2938), and the General Banking Act (R.A. 337). These laws
IN STARK CONTRAST, THE ISSUE OF PETITIONER confer on the mortgagor, his successors in interest or any
HUERTA ALBA’S RIGHT OF REDEMPTION UNDER judgment creditor of the mortgagor, the right to redeem the
SECTION 78, R.A. NO. 337 WAS DIRECTLY RAISED AND property sold on foreclosure—after confirmation by the court
JOINED BY THE PARTIES, AND THE SAME DULY of the foreclosure sale—which right may be exercised within a
RESOLVED BY THE TRIAL COURT. period of one (1) year, counted from the date of registration of
the certificate of sale in the Registry of Property.
III.
_______________
THE RIGHT OF REDEMPTION UNDER SECTION 78 7
OF R.A. NO. 337 IS MANDATORY AND 166 SCRA 87.
AUTOMATICALLY EXISTS BY LAW. THE COURTS ARE 551
DUTY-BOUND TO RECOGNIZE SUCH RIGHT. VOL. 339, SEPTEMBER 1, 2000
IV. But, to repeat, no such right of redemption exists in case
of judicial foreclosure of a mortgage if the mortgagee is not the
EQUITABLE CONSIDERATIONS WEIGH HEAVILY PNB or a bank or banking institution. In such a case, the
IN FAVOR OF PETITIONER HUERTA ALBA, NOT THE foreclosure sale, ‘when confirmed by an order of the court. x x
LEAST OF WHICH IS THE WELL-SETTLED POLICY OF shall operate to divest the rights of all the parties to the action
THE LAW TO AID RATHER THAN DEFEAT THE RIGHT and to vest their rights in the purchaser.’ There then exists only
OF REDEMPTION. what is known as the equity of redemption. This is simply the
550 right of the defendant mortgagor to extinguish the mortgage
550 SUPREME COURT REPORTS ANNOTATED and retain ownership of the property by paying the secured debt
Huerta Alba Resort, Inc. vs. Court of Appeals within the 90-day period after the judgment becomes final, in
accordance with Rule 68, or even after the foreclosure sale but
V. prior to its confirmation. Section 2, Rule 68 provides that—
‘x x If upon the trial x x the court shall find the facts set
forth in the complaint to be true, it shall ascertain the amount
THEREFORE THE 21 JULY 1995 AND 04 SEPTEMBER
due to the plaintiff upon the mortgage debt or obligation,
1995 ORDERS OF THE TRIAL COURT ARE VALID AND
including interest and costs, and shall render judgment for the
PROPER IN ACCORDANCE WITH THE MANDATE OF
sum so found due and order the same to be paid into court within
THE LAW.
From the various decisions, resolutions and orders a quo it can a period of not less than ninety (90) days from the date of the
service of such order, and that in default of such payment the
be gleaned that what petitioner has been adjudged to have was
property be sold to realize the mortgage debt and costs.’
only the equity of redemption over subject properties. On the
This is the mortgagor’s equity (not right) of
distinction between the equity of redemption and right of
redemption which, as above stated, may be exercised by him
redemption, the case of Gregorio Y. Limpin vs. Intermediate
even beyond the 90-day period ‘from the date of service of the
order,’ and even after the foreclosure sale itself, provided it be “clarification” of the date of commencement of the one (1) year
before the order of confirmation of the sale. After such order of redemption period
confirmation, no redemption can be effected any 553
longer.”8 (Italics supplied) VOL. 339, SEPTEMBER 1, 2000
Petitioner failed to seasonably invoke its purported right under
Section 78 of R.A. No. 337. Huerta Alba Resort, Inc. vs. Court of Appeals
Petitioner avers in its petition that the Intercon, predecessor for the subject properties, petitioner never intimated any alleged
in interest of the private respondent, is a credit institution, such right under Section 78 of R.A. No. 337 nor did it invite attention
that Section 78 of Republic Act No. 337 should apply in this to its present stance that private respondent’s predecessor-in-
case. Stated differently, it is the submission of petitioner that it interest was a credit institution. Consequently, in its Resolution
should be allowed to redeem subject properties within one year dated March 20, 1995, the Court of Appeals ruled on the said
from the date of sale as a result of the foreclosure of the motion thus:
mortgage constituted thereon. “But we never made any pronouncement on the one-year right
The pivot of inquiry here therefore, is whether the petitioner of redemption of petitioner because, in the first place, the
seasonably invoked its asserted right under Section 78 of R.A. foreclosure in this case is judicial, and as such, the mortgagor
No. 337 to redeem subject properties. has only the equity, not the right of redemption x x x. While it
may be true that under Section 78 of R.A. 337 as amended,
________________ otherwise known as the General Banking Act, a mortgagor of a
bank, banking or credit institution, whether the foreclosure was
8 done judicially or extrajudicially, has a period of one year from
Ibid., pp. 93-95.
the auction sale within which to redeem the foreclosed
552
property, the question of whether the Syndicated Management
552 SUPREME COURT REPORTS ANNOTATED Group, Inc., is bank or credit institution was never brought
Huerta Alba Resort, Inc. vs. Court of Appeals before us squarely, and it is indeed odd and strange that
Petitioner theorizes that it invoked its “right” in “timely petitioner would now sarcastically ask a rhetorical question in
fashion,” that is, after confirmation by the court of the its motion for clarification.”9 (Italics supplied).
foreclosure sale, and within one (1) year from the date of If petitioner were really acting in good faith, it would have
registration of the certificate of sale. Indeed, the facts show that ventilated before the Court of Appeals in CA-G.R. No.
it was only on May 2, 1995 when, in opposition to the Motion 35086 its alleged right under Section 78 of R.A. No. 337; but
for Issuance of Writ of Possession, did petitioner file a Motion petitioner never did do so.
to Compel Private Respondent to Accept Redemption, invoking Indeed, at the earliest opportunity, when it submitted its
for the very first time its alleged right to redeem subject answer to the complaint for judicial foreclosure, petitioner
properties under to Section 78 of R.A. No. 337. should have alleged that it was entitled to the beneficial
In light of the aforestated facts, it was too late in the day for provisions of Section 78 of R.A. No. 337 but again, it did not
petitioner to invoke a right to redeem under Section 78 of R.A. make any allegation in its answer regarding any right
No. 337. Petitioner failed to assert a right to redeem in several thereunder. It bears stressing that the applicability of Section 78
crucial stages of the proceedings. of R.A. No. 337 hinges on the factual question of whether or
For instance, on September 7, 1994, when it filed with the not private respondent’s predecessor in interest was a credit
trial court an Ex-parte Motion for Clarification, petitioner failed institution. As was held in Limpin, a judicial foreclosure sale,
to allege and prove that private respondent’s predecessor in “when confirmed by an order of the court, x x shall operate to
interest was a credit institution and therefore, Section 78 of R.A. divest the rights of all the parties to the action and to vest their
No. 337 was applicable. Petitioner merely asked the trial court rights in the purchaser, subject to such rights of redemption as
to clarify whether the sale of subject properties was execution may be allowed by law,”10 which confer on the mortgagor,
sale or judicial foreclosure sale.
So also, when it presented before the trial court an ________________
Exception to the Order and Motion to Set Aside Said Order
9
dated October 13, 1994, petitioner again was silent on its Rollo, pp. 366-367.
10
alleged right under Section 78 of R.A. No. 337, even as it failed Limpin vs. Intermediate Appellate Court, supra, p. 94.
to show that private respondent’s predecessor in interest is a 554
credit institution. Petitioner just argued that the aforementioned 554 SUPREME COURT REPORTS ANNOTATED
Order materially altered the trial court’s Decision of April 30,
1992. Huerta Alba Resort, Inc. vs. Court of Appeals
Then, too, nothing was heard from petitioner on its alleged his successors in interest or any judgment creditor of the
right under Section 78 of R.A. No. 337 and of the predecessor mortgagor, the right to redeem the property sold on foreclosure
in interest of private respondent as a credit institution, when the after confirmation by the court of the judicial foreclosure sale.
trial court came out with an order on February 10, 1995, Thus, the claim that petitioner is entitled to the beneficial
confirming the sale of subject properties in favor of private provisions of Section 78 of R.A. No. 337—since private
respondent and declaring that all pending incidents with respect respondent’s predecessor-ininterest is a credit institution—is in
to the Order dated September 26, 1994 had become moot and the nature of a compulsory counterclaim which should have
academic. been averred in petitioner’s answer to the complaint for judicial
Similarly, when petitioner filed on February 27, 1995 a foreclosure.
Motion for Clarification with the Court of Appeals, seeking “x x x A counterclaim is, most broadly, a cause of action
existing in favor of the defendant against the plaintiff. More
narrowly, it is a claim which, if established, will defeat or in Syndicated Management Council Group, Inc. is a bank or credit
some way qualify a judgment or relief to which plaintiff is institution was never brought before (the Court of Appeals)
otherwise entitled. It is sometimes defined as any cause of squarely.” The said pronouncement by the Court of Appeals
action arising in contract available against any action also unerringly signified that petitioner did not make a timely
arising in contract and existing at the time of the assertion of any right under Section 78 of R.A. No. 337 in all
commencement of such an action. It is frequently defined by the the stages of the proceedings below.
codes as a cause of action arising out of the contract or Verily, the petitioner has only itself to blame for not
transaction set forth in the complaint as the foundation of the alleging at the outset that the predecessor-in-interest of the
plaintiff’s claim, or connected with the subject of the private respondent is a credit institution. Thus, when the trial
action.”11 (italics supplied) court, and the Court of Appeals repeatedly passed upon the
“The counterclaim is in itself a distinct and independent issue of whether or
cause of action, so that when properly stated as such, the
defendant becomes, in respect to the matters stated by him, an ________________
actor, and there are two simultaneous actions pending between
the same parties, wherein each is at the same time both a 13
Ibid., p. 463 citing: Kuenzel vs. Universal Carloading
plaintiff and a defendant. Counterclaim is an offensive as well and Distributing Co., (1939) 29 F. Supp. 407.
as a defensive plea and is not necessarily confined to the justice 14
Corona vs. Court of Appeals, 214 SCRA 378, 392.
of the plaintiff’s claim. It represents the right of the defendant 15
Applications of Estoppel in Litigation, 216 SCRA 826,
to have the claims of the parties counterbalanced in whole or in 834 citing: Tuazon vs. Arca, 23 SCRA 1308, 1312.
part, and judgment to be entered in excess, if any. A 556
counterclaim stands on the same footing, and is to be tested by 556 SUPREME COURT REPORTS ANNOTATED
the same rules, as if it were an independent action.”12 (italics
supplied) Huerta Alba Resort, Inc. vs. Court of Appeals
The very purpose of a counterclaim would have been served had not petitioner had the right of redemption or equity of
petitioner alleged in its answer its purported right under Section redemption over subject properties in the decisions, resolutions
78 of R.A. No. 337: and orders, particularly in Civil Case No. 89-5424, CA-G.R.
“x x x The rules of counterclaim are designed to enable the CV No. 39243, CAG.R. SP No. 35086, and CA-G.R. SP No.
disposition of a whole controversy of interested parties’ 38747, it was unmistakable that the petitioner was adjudged to
conflicting claims, at one just have the equity of redemption without any qualification
whatsoever, that is, without any right of redemption allowed by
________________ law.
The “law of the case” holds that petitioner has the equity of
11
The Revised Rules of Court in the Philippines, Volume I, redemption without any qualification.
Francisco, Vicente J., p. 462 citing: 47 Am. Jur. 709-710. There is, therefore, merit in private respondent’s contention that
12
Ibid., p. 464 citing: 47 Am. Jur. 717. to allow petitioner to belatedly invoke its right under Section 78
555 of R.A. No. 337 will disturb the “law of the case.” However,
private respondent’s statement of what constitutes the “law of
VOL. 339, SEPTEMBER 1, 2000 555is not entirely accurate. The “law of the case” is not
the case”
Huerta Alba Resort, Inc. vs. Court of Appeals simply that the defendant possesses an equity of redemption. As
time and in one action, provided all parties be brought before the Court has stated, the “law of the case” holds that petitioner
the court and the matter decided without prejudicing the rights has the equity of the redemption without any qualification
of any party.”13 whatsoever, that is, without the right of redemption afforded by
The failure of petitioner to seasonably assert its alleged right Section 78 of R.A. No. 337. Whether or not the “law of the
under Section 78 of R.A. No. 337 precludes it from so doing at case” is erroneous is immaterial, it still remains the “law of the
this late stage of the case. Estoppel may be successfully invoked case.” A contrary rule will contradict both the letter and spirit
if the party fails to raise the question in the early stages of the of the rulings of the Court of Appeals in CA-G.R. SP No.
proceedings.14 Thus, “a party to a case who failed to invoke his 35086, CA-G.R. CV No. 39243, and CAG.R. 38747, which
claim in the main case, while having the opportunity to do so, clearly saw through the repeated attempts of petitioner to
will be precluded, subsequently, from invoking his claim, even forestall so simple a matter as making the security given for a
if it were true, after the decision has become final, otherwise the just debt to answer for its payment.
judgment may be reduced to a mockery and the administration Hence, in conformity with the ruling in Limpin, the sale of
of justice may be placed in disrepute.”15 the subject properties, as confirmed by the Order dated
All things viewed in proper perspective, it is decisively February 10, 1995 of the trial court in Civil Case No. 89-
clear that the trial court erred in still allowing petitioner to 5424 operated to divest the rights of all the parties to the action
introduce evidence that private respondent’s predecessor-in- and to vest their rights in private respondent. There then existed
interest was a credit institution, and to thereafter rule that the only what is known as the equity of redemption, which is simply
petitioner was entitled to avail of the provisions of Section 78 the right of the petitioner to extinguish the mortgage and retain
of R.A. No. 337. In effect, the trial court permitted the petitioner ownership of the property by paying the secured debt within the
to accomplish what the latter failed to do before the Court of 90-day period after the judgment became final. There being an
Appeals, that is, to invoke its alleged right under Section 78 of explicit finding on the part of the Court of Appeals in its
R.A. No. 337 although the Court of Appeals in CA-G.R. No. Decision of September 30, 1994 in CAG.R. No. 35086—that
35086 already found that “the question of whether the
the herein petitioner failed to exercise its equity of redemption question properly assigned is dependent may be considered by
within the prescribed period, redemption can an appellate court.—Nonetheless, since respondent Court took
557 cognizance thereof and, in fact, anchored its modificatory
VOL. 339, SEPTEMBER 1, 2000 judgment557on its ratiocination of that issue, we are inclined to
liberalize the rule so that we can in turn pass upon the
Huerta Alba Resort, Inc. vs. Court of Appeals correctness of its conclusion. We may consider such procedure
no longer be effected. The confirmation of the sale and the as analogous to the rule that an unassigned error closely related
issuance of the transfer certificates of title covering the subject to an error properly assigned, or upon which the determination
properties to private respondent was then, in order. The trial of the question properly assigned is dependent, may be
court therefore, has the ministerial duty to place private considered by an appellate court.
respondent in the possession of subject properties. Same; Same; An appellee who has not himself appealed
WHEREFORE, the petition is DENIED, and the assailed cannot obtain from the appellate court any affirmative relief
decision of the Court of Appeals, declaring null and void the other than the ones granted in the decision of the court below.—
Order dated 21 July 1995 and Order dated 4 September 1997 of An appellee who has not himself appealed cannot obtain from
the Regional Trial Court of Makati City in Civil Case No. 89- the appellate court any affirmative relief other than the ones
5424, AFFIRMED. No pronouncement as to costs. granted in the decision of the court below. He cannot impugn
SO ORDERED. the correctness of a judgment not appealed from by him. He
Melo (Chairman), Vitug, Panganiban and Gonzaga- cannot assign such errors as are designed to have the judgment
Reyes, JJ., concur. modified. All that said appellee can do is to make a
Petition denied, judgment affirmed.
Notes.—A mortgagee who exercises the power of sale ___________
contained in a mortgage is considered a custodian of the fund,
and, being bound to apply it properly, is liable to the persons *
SECOND DIVISION.
entitled thereto if he fails to do so—as far as concerns the
888
unconsumed balance, the mortgagee is deemed a trustee for the
mortgagor or owner of the equity of redemption. (Sulit vs. Court 888 SUPREME COURT REPORTS ANNOTAT
of Appeals, 268 SCRA 441 [1997]) Medida vs. Court of Appeals
The issuance of a writ of possession is not a judgment on counter-assignment of errors or to argue on issues raised
the merits, and the issuance of a writ of possession to a at the trial only for the purpose of sustaining the judgment in his
purchaser in an extra-judicial foreclosure is merely a ministerial favor, even on grounds not included in the decision of the
function. (A.G. Development Corporation vs. Court of court a quo nor raised in the appellant’s assignment of errors or
Appeals, 281 SCRA 155 [1997]) arguments.
The issuance of a writ of possession to a purchaser in an Civil Law; Mortgage; What is divested from the
extrajudicial foreclosure is merely a ministerial function—the Mortgagor is only his full right as owner thereof to dispose (of)
Court neither exercises its official discretion nor judgment. and sell the lands.—That is why the discussion in said case
(Suico Industrial Corporation vs. Court of Appeals, 301 SCRA carefully and felicitously states that what is divested from the
212 [1999]) mortgagor is only his “full right as owner thereof to dispose (of)
and sell the lands,” in effect, merely clarifying that the
——o0o—— mortgagor does not have the unconditional power to absolutely
sell the land since the same is encumbered by a lien of a third
VOL. 208, MAY 8, 1992 person 887
which, if unsatisfied, could result in a consolidation of
ownership in the lienholder but only after the lapse of the period
Medida vs. Court of Appeals of redemption. Even on that score, it may plausibly be argued
G.R. No. 98334. May 8, 1992.* that what is delimited is not the mortgagor’s jus dispodendi, as
MANUEL D. MEDIDA, Deputy Sheriff of the Province of an attribute of ownership, but merely the rights conferred by
Cebu, CITY SAVINGS BANK (formerly Cebu City Savings such act of disposal which may correspondingly be restricted.
and Loan Association, Inc.) and TEOTIMO ABELLANA, Same; Same; Redemption; A redemptioner is defined as a
petitioners, vs. COURT OF APPEALS and SPS. ANDRES creditor having a lien by attachment, judgment or mortgage on
DOLINO and PASCUALA DOLINO, respondents. the property sold, or on some part thereof subsequent to the
Civil Procedure; Appeal; An issue which was neither judgment under which the property was sold.—Thus, a
owned in the complaint nor ventilated during the trial in the redemptioner is defined as a creditor having a lien by
court below cannot be raised for the first time on appeal as it attachment, judgment or mortgage on the property sold, or on
would be offensive to the basic rule of fair play, justice and due some part thereof, subsequent to the judgment under which the
process.—Preliminarily, the issue of ownership of the property was sold.
mortgaged property was never alleged in the complaint nor was Same; Same; Same; The mortgagor remains as the
the same raised during the trial, hence that issue should not have absolute owner of the property during the redemption period
been taken cognizance of by the Court of Appeal. An issue and has the free disposal of his property, there would be
which was neither averred in the complaint nor ventilated compliance with the requisites of Article 2085 of the Civil Code
during the trial in the court below cannot be raised for the first for the constitution of another mortgage on the property.—In
time on appeal as it would be offensive to the basic rule of fair either case, what bears attention is that since the mortgagor
play, justice and due process. remains as the absolute owner of the property during the
Same; Same; An unassigned error closely related to an redemption period and has the free disposal of his property,
error properly assigned or upon which the determination of the
there would be compliance with the requisites of Article 2085 Medida vs. Court of Appeals
of the Civil Code for the constitution of another mortgage on during the period of redemption.
the property. To hold otherwise would create the inequitable The present appeal by certiorari assails the decision1 of
situation wherein the mortgagor would be deprived of the respondent Court of Appeals in CA-G.R. CV No. 12678 where
opportunity, which may be his last recourse, to raise funds it answered the question posed by the foregoing issue in the
wherewith to timely redeem his property through another negative and modified the decision2 of the then Court of First
mortgage thereon. Instance of Cebu in Civil Case No. R-18616 wherein the
Same; Same; Same; The rule has always been that it is validity of said subsequent mortgage was assumed and the case
only upon the expiration of the redemption period, without the was otherwise disposed of on other grounds.
judgment debtor having made use of his right of redemption, The facts which gave rise to the institution of the aforesaid
that the ownership of the civil case in the trial court, as found by respondent Court of
889 Appeals, are as follows:
VOL. 208, MAY 8, 1992 “On October
889 10, 1974 plaintiff spouses, alarmed of losing their
Medida vs. Court of Appeals right of redemption over lot 4731 of the Cebu City Cadastre and
land sold becomes consolidated in the purchaser.—We embraced under TCT No. 14272 from Mr. Juan Gandioncho,
reiterate that during said period it cannot be said that the purchaser of the aforesaid lot at the foreclosure sale of the
mortgagor is no longer the owner of the foreclosed property previous mortgage in favor of Cebu City Development Bank,
since the rule up to now is that the right of a purchaser at a went to Teotimo Abellana, president of defendant Association,
foreclosure sale is merely inchoate until after the period of to obtain a loan of P30,000.00. Prior thereto or on October 3,
redemption has expired without the right being exercised. The 1974, their son Teofredo Dolino filed a similar loan application
title to land sold under mortgage foreclosure remains in the for Twenty-Five Thousand (P25,000.00) Pesos with lot No.
mortgagor or his grantee until the expiration of the redemption 4731 offered as security for the Thirty Thousand (P30,000.00)
period and conveyance by the master’s deed. To repeat, the rule Pesos loan from defendant association. Subsequently, they
has always been that it is only upon the expiration of the executed a promissory note in favor of defendant association.
redemption period, without the judgment debtor having made Both documents indicated that the principal obligation is for
use of his right of redemption, that the ownership of the land Thirty Thousand (P30,000.00) Pesos payable in one year with
sold becomes consolidated in the purchaser. interest at twelve (12%) percent per annum.
Same; Same; Same; What actually is effected where “When the loan became due and demandable without
redemption is seasonably exercised by the judgment or plaintiff paying the same, defendant association caused the
mortgage debtor is not the recovery of ownership of his land, extrajudicial foreclosure of the mortgage on March 16, 1976.
which ownership he never lost, but the elimination from his title After the posting and publication requirements were complied
thereto of the lien created by the levy on attachment or judgment with, the land was sold at public auction on April 19, 1976 to
or the registration of a mortgage thereon.—Parenthetically, defendant association being the highest bidder. The certificate
therefore, what actually is effected where redemption is of sale was issued on April 20, 1976 and registered on May 10,
seasonably exercised by the judgment or mortgage debtor is not 1976 with the Register of Deeds of Cebu. “On May 24, 1971
the recovery of ownership of his land, which ownership he (sic, 1977), no redemption having been effected by plaintiff,
never lost, but the elimination from his title thereto of the lien TCT No. 14272 was cancelled and in lieu thereof TCT No.
created by the levy on attachment or judgment or the 68041 was issued in the name of defendant association.”3
registration of a mortgage thereon. The American rule is xxx
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
1
attempted. Further, it does not give to the mortgagor a new title, Justice Manuel C. Herrera, ponente; Justices Eduardo R.
but merely restores to him the title freed of the encumbrance of Bengson and Jainal D. Rasul, concurring.
2
the lien foreclosed. Per Judge Valeriano P. Tomol, Jr., presiding over Branch
I.
3
APPEAL by certiorari to review the decision of the Court of Rollo, 61.
Appeals. Herrera, J. 891
VOL. 208, MAY 8, 1992
The facts are stated in the opinion of the Court. Medida vs. Court of Appeals
Gines N. Abellana for petitioners. On October 18, 1979, private respondents filed the
Dionisio U. Flores for private respondents. aforestated Civil Case No. R-18616 in the court a quo for the
annulment of the sale at public auction conducted on April 19,
REGALADO, J.: 1976, as well as the corresponding certificate of sale issued
pursuant thereto.
The core issue in this case is whether or not a mortgagor, whose In their complaint, private respondents, as plaintiffs therein,
property has been extrajudicially foreclosed and sold at the assailed the validity of the extrajudicial foreclosure sale of their
corresponding foreclosure sale, may validly execute a mortgage property, claiming that the same was held in violation of Act
contract over the same property in favor of a third party No. 3135, as amended, and prayed, inter alia, for the
890 cancellation of Transfer Certificate of Title No. 68041 issued in
890 SUPREME COURT REPORTS ANNOTATED favor of therein defendant City Savings and Loan Association,
Inc., now known as City Savings Bank and one of the “WHEREFORE, PREMISES CONSIDERED, the decision
petitioners herein. appealed from is hereby MODIFIED declaring as void and
In its answer, the defendant association therein denied the ineffective the real estate mortgage executed by plaintiffs in
material allegations of the complaint and averred, among favor of defendant association. With this modification, the
others, that the present private respondent spouses may still decision is AFFIRMED in other respects.”6
avail of their right of redemption over the land in question. Herein petitioners then filed a motion for reconsideration which
On January 12, 1983, after trial on the merits, the court was denied by respondent court in its resolution dated March 5,
below rendered judgment upholding the validity of the loan and 1991, hence the present petition which, in synthesis, postulates
the real estate mortgage, but annulling the extrajudicial that respondent court erred in declaring the real estate mortgage
foreclosure sale inasmuch as the same failed to comply with the void, and also impugns the judgment of the trial court declaring
notice requirements in Act No. 3135, as amended, under the ineffective the extrajudicial foreclosure of said mortgage and
following dispositive part: ordering the cancellation of Transfer Certificate of Title No.
“WHEREFORE, the foregoing premises considered and upon 68041 issued in favor of the predecessor of
the view taken by the Court of this case, judgment is hereby
rendered, as follows: _____________
4
1. 1.Declaring ineffective the extrajudicial foreclosure of Ibid., 57-58.
5
the mortgage over Lot No. 4731 of the Cadastral Ibid., 63.
6
Survey of Cebu; Ibid., 65.
2. 2.Ordering the cancellation of Transfer Certificate of 893
Title No. 68041 of the Registry of Deeds of the City VOL. 208, MAY 8, 1992
of Cebu in the name of defendant Cebu City Savings
Medida vs. Court of Appeals
and Loan Association, Inc. and the corresponding
petitioner bank.7
issuance of a new transfer certificate to contain all
The first submission assailing the judgment of respondent
the annotations made in TCT No. 14272 of the
Court of Appeals is meritorious.
plaintiffs Pascuala Sabellano, married to Andres
Said respondent court declared the real estate mortgage in
Dolino;
question null and void for the reason that the mortgagor
3. 3.Ordering the plaintiffs aforenamed to pay the
spouses, at the time when the said mortgage was executed, were
defendant Cebu City Savings and Loan Association,
no longer the owners of the lot, having supposedly lost the same
Inc. the unpaid balance of the loan, plus interest; and
when the lot was sold to a purchaser in the foreclosure sale
reimbursing said defendant the value of any
under the prior mortgage. This holding cannot be sustained.
necessary and useful expenditures on the property
Preliminarily, the issue of ownership of the mortgaged
after deducting any income derived by said defendant
property was never alleged in the complaint nor was the same
from the property.
raised during the trial, hence that issue should not have been
taken cognizance of by the Court of Appeals. An issue which
For this purpose, defendant Association is given 15 days was neither averred in the complaint nor ventilated during the
from receipt hereof within which to submit its statement of the trial in the court below cannot be raised for the first time on
amount due appeal as it would be offensive to the basic rule of fair play,
892 justice and due process.8
892 SUPREME COURT REPORTS ANNOTATED Nonetheless, since respondent Court took cognizance
Medida vs. Court of Appeals thereof and, in fact, anchored its modificatory judgment on its
it from the plaintiffs Dolino, with notice to them. The payment ratiocination of that issue, we are inclined to liberalize the rule
to be made by the plaintiffs shall be within ninety (90) days so that we can in turn pass upon the correctness of its
from their receipt of the order approving the amount due the conclusion. We may consider such procedure as analogous to
defendant Cebu City Savings and Loan Association, Inc. the rule that an unassigned error closely related to an error
No award of damages or costs to either party. properly assigned, or upon which the determination of the
SO ORDERED.” 4 question properly assigned is dependent, may be considered by
Not satisfied therewith, herein private respondents interposed a an appellate court.9 We adopt this approach since, after all, both
partial appeal to respondent court with respect to the second and lower courts agreed upon the invalidity of the extrajudicial
third paragraphs of the aforequoted decretal portion, contending foreclosure but differed only on the matter of the validity of the
that the lower court erred in (1) declaring that the mortgage real estate mortgage upon which the extrajudicial foreclosure
executed by the therein plaintiff spouses Dolino is valid; (2) was based.
permitting therein Cebu City Savings and Loan Association, In arriving at its conclusion, respondent court placed full
Inc. to collect interest after the same foreclosure proceedings reliance on what obviously is an obiter dictum laid down in the
and auction sale which are null and void from the beginning; course of the disquisition in Dizon vs. Gaborro, et al. which we
(3) not ordering the forfeiture of the capital or balance of the
loan with usurious interest; and (4) not sentencing therein _______________
defendant to pay damages and attorney’s fees to plaintiffs. 5
7
On September 28, 1990, respondent Court of Appeals Ibid., 4-6.
promulgated its decision modifying the decision of the lower
court, with this adjudication:
8
Vencilao, et al. vs. Vano, et al., 182 SCRA executed between them but also in so far as the agreement
491 (1990); Gevero, et al., vs. Intermediate Appellate Court, et affects the rights of the third party, the purchaser Bank.
al.,189 SCRA 201 (1990). xxx
9
Philippine Commercial and Industrial Bank vs. Court of “Under the Revised Rules of Court, Rule 39, Section 33, the
Appeals, et al., 159 SCRA 24 (1988); Roman Catholic judgment debtor remains in possession of the property
Archbishop of Manila, et al. vs. Court of Appeals, et al., 198 foreclosed and sold, during the period of redemption. If the
SCRA 300 (1991). judgment debtor is in possession of the property sold, he is
894 entitled to retain it, and receive the fruits, the purchaser not
894 SUPREME COURT REPORTS ANNOTATED being entitled to such possession. (Riosa vs. Verzosa, 26 Phil.
86; Velasco vs. Rosenberg’s, Inc., 32 Phil. 72; Pabico vs.
Medida vs. Court of Appeals Pauco, 43 Phil. 572; Power vs. PNB, 54 Phil. 54; Gorospe vs.
shall analyze.10 For, as explicitly stated therein by the Court, Gochangco, L-12735, Oct. 30, 1959).
“(t)he basic issue to be resolved in this case is whether the xxx
‘Deed of Sale with Assumption of Mortgage’ and the ‘Option “Upon foreclosure and sale, the purchaser is entitled to a
to Purchase Real Estate,’ two instruments executed by and certificate of sale executed by the sheriff. (Section 27, Revised
between petitioner Jose P. Dizon and Alfredo G. Gaborro Rules of Court). After the termination of the period of
(defendant below) on the same day, October 6, 1959, constitute redemption and no redemption having been made, the purchaser
in truth and in fact an absolute sale of the three parcels of land is entitled to a deed of conveyance and to the possession of the
therein described or merely an equitable mortgage or properties. (Section 35, Revised Rules of Court). The weight of
conveyance thereof by way of security for reimbursement or authority is to the effect that the purchaser of land sold at public
repayment by petitioner Jose P. Dizon of any and all sums auction under a writ of execution has only an inchoate right to
which may have been paid to the Development Bank of the the property, subject to be defeated and terminated within the
Philippines and the Philippine National Bank by Alfredo G. period of 12 months from the date of sale, by a redemption on
Gaborro x x x.” Said documents were executed by the parties the part of the owner. Therefore, the judgment debtor in
and the payments were made by Gaborro for the debt of Dizon possession of the property is entitled to remain therein during
to said banks after the Development Bank of the Philippines had the period for redemption. (Riosa vs. Verzosa, 26 Phil. 86,
foreclosed the mortgage executed by Dizon and during the 89; Gonzales vs. Calimbas, 51 Phil. 355).
period of redemption after the foreclosure sale of the mortgaged “In the case before Us, after the extrajudicial foreclosure
property to said creditor bank. and sale of his properties, petitioner Dizon retained the right to
The trial court held that the true agreement between the redeem the lands, the possession, use and enjoyment of the
parties therein was that Gaborro would assume and pay the same during the period of redemption. And these are the only
indebtedness of Dizon to the banks and, in consideration rights that Dizon could legally transfer, cede and convey unto
thereof, Gaborro was given the possession and enjoyment of the respondent Gaborro under the instrument captioned Deed of
properties in question until Dizon shall have reimbursed him for Sale with Assumption of Mortgage (Exh. A-Stipulation),
the amount paid to the creditor banks. Accordingly, the trial likewise the same rights that said respondent could acquire in
court ordered the reformation of the documents to the extent consideration of the latter’s promise to pay and assume the loan
indicated and such particular relief was affirmed by the Court of petitioner Dizon with DBP and PNB.
of Appeals. This Court held that the agreement between the “Such an instrument cannot be legally considered a real and
parties is one of those innominate contracts under Article 1307 unconditional sale of the parcels of land, firstly, because there
of the Civil Code whereby the parties agreed “to give and to do” was absolutely no money consideration therefor, as admittedly
certain rights and obligations, but partaking of the nature of stipulated, the sum of P131,831.91 mentioned in the document
antichresis. as the considera-
Hence, on appeal to this Court, the judgment of the Court 896
of Appeals in that case was affirmed but with the following
pronouncements: 896 SUPREME COURT REPORTS ANNOTATED
“The two instruments sought to be ref ormed in this case appear Medida vs. Court of Appeals
to stipulate rights and obligations between the parties thereto tion ‘receipt of which was acknowledged’ was not actually
pertain- paid; and, secondly, because the properties had already been
previously sold by the sheriff at the foreclosure sale, thereby
___________ divesting the petitioner of his full right as owner thereof to
dispose and sell the lands.” (Emphasis ours.)
10 It was apparently the second reason stated by the Court in said
83 SCRA 688 (1978).
895 case which was relied upon by respondent court in the present
VOL. 208, MAY 8, 1992 case on895
which to premise its conclusion. Yet, as demonstrated
by the relevant excerpts above quoted, not only was
Medida vs. Court of Appeals that obiter therein unnecessary since evidently no sale was
ing to and involving parcels of land that had already been concluded, but even inaccurate, if not inconsistent, when
foreclosed and sold extrajudicially, and purchased by the considered in the context of the discussion in its entirety. If, as
mortgage creditor, a third party. It becomes, therefore, admitted, the purchaser at the foreclosure sale merely acquired
necessary, to determine the legality of said rights and an inchoate right to the property which could ripen into
obligations arising from the foreclosure and sale proceedings ownership only upon the lapse of the redemption period without
not only between the two contracting parties to the instruments his credit having been discharged, it is illogical to hold that
during that same period of twelve months the mortgagor was _____________
“divested” of his ownership, since the absurd result would be
that the land will consequently be without an owner although it 11
Sec. 29 (b), Rule 39, Rules of Court.
remains registered in the name of the mortgagor. 12
De Castro vs. Intermediate Appellate Court, et al., 165
That is why the discussion in said case carefully and SCRA 654 (1988).
felicitously states that what is divested from the mortgagor is 13
Kling vs. Ghilarducci, 3 Ill. 2d 454, 121 NE2d 752, 46
only his “full right as owner thereof to dispose (of) and sell the ALR 2d 1189.
lands,” in effect, merely clarifying that the mortgagor does not 898
have the unconditional power to absolutely sell the land since 898 SUPREME COURT REPORTS ANNOTATED
the same is encumbered by a lien of a third person which, if
unsatisfied, could result in a consolidation of ownership in the Medida vs. Court of Appeals
lienholder but only after the lapse of the period of redemption. rule has always been that it is only upon the expiration of the
Even on that score, it may plausibly be argued that what is redemption period, without the judgment debtor having made
delimited is not the mortgagor’s jus dispodendi, as an attribute use of his right of redemption, that the ownership of the land
of ownership, but merely the rights conferred by such act of sold becomes consolidated in the purchaser.14
disposal which may correspondingly be restricted. Parenthetically, therefore, what actually is effected where
At any rate, even the foregoing considerations and redemption is seasonably exercised by the judgment or
arguments would have no application in the case at bar and need mortgage debtor is not the recovery of ownership of his land,
not here be resolved since what is presently involved is a which ownership he never lost, but the elimination from his title
mortgage, not a sale, to petitioner bank. Such mortgage does not thereto of the lien created by the levy on attachment or judgment
involve a transfer, cession or conveyance of the property but or the registration of a mortgage thereon. The American rule is
only constitutes a lien thereon. There is no obstacle to the legal similarly to the effect that the redemption of property sold under
creation of such a lien even after the auction sale of the property a foreclosure sale defeats the inchoate right of the purchaser and
but during restores the property to the same condition as if no sale had been
897 attempted. Further, it does not give to the mortgagor a new title,
but merely restores to him the title freed of the encumbrance of
VOL. 208, MAY 8, 1992 the lien897
foreclosed.15
Medida vs. Court of Appeals We cannot rule on the plaint of petitioners that the trial court
the redemption period, since no distinction is made between a erred in declaring ineffective the extrajudicial foreclosure and
mortgage constituted over the property before or after the the sale of the property to petitioner bank. The court below
auction sale thereof. spelled out at length in its decision the facts which it considered
Thus, a redemptioner is defined as a creditor having a lien as violative of the provisions of Act No. 3135, as amended, by
by attachment, judgment or mortgage on the property sold, or reason of which it nullified the extrajudicial foreclosure
on some part thereof, subsequent to the judgment under which proceeding and its effects. Such findings and ruling of the trial
the property was sold.11 Of course, while in extrajudicial court are already final and binding on petitioners and can no
foreclosure the sale contemplated is not under a judgment but longer be modified, petitioners having failed to appeal
the proceeding pursuant to which the mortgaged property was therefrom.
sold, a subsequent mortgage could nevertheless be legally An appellee who has not himself appealed cannot obtain
constituted thereafter with the subsequent mortgagee becoming from the appellate court any affirmative relief other than the
and acquiring the rights of a redemptioner, aside from his right ones granted in the decision of the court below.16 He cannot
against the mortgagor. impugn the correctness of a judgment not appealed from by
In either case, what bears attention is that since the him. He cannot assign such errors as are designed to have the
mortgagor remains as the absolute owner of the property during judgment modified. All that said appellee can do is to make a
the redemption period and has the free disposal of his property, counter-assignment of errors or to argue on issues raised at the
there would be compliance with the requisites of Article 2085 trial only for the purpose of sustaining the judgment in his favor,
of the Civil Code for the constitution of another mortgage on even on grounds not included in the decision of the court
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 14
Mateo vs. Court of Appeals, et al., 99 Phil. 1042 (1956).
mortgage thereon. 15
55 Am. Jur. 2d, Mortgages 781.
Coming back to the present controversy, it is undisputed 16
Alba vs. Santander, et al., 160 SCRA 8 (1988).
that the real estate mortgage in favor of petitioner bank was 899
executed by respondent spouses during the period of VOL. 208, MAY 8, 1992
redemption. We reiterate that during said period it cannot be
said that the mortgagor is no longer the owner of the foreclosed Abejaron vs. Court of Appeals
property since the rule up to now is that the right of a purchaser a quo nor raised in the appellant’s assignment of errors or
at a foreclosure sale is merely inchoate until after the period of arguments.17
redemption has expired without the right being exercised.12 The WHEREFORE, the decision of respondent Court of
title to land sold under mortgage foreclosure remains in the Appeals, insofar as it modifies the judgment of the trial court,
mortgagor or his grantee until the expiration of the redemption is REVERSED and SET ASIDE. The judgment of said trial
period and conveyance by the master’s deed.13 To repeat, the court in Civil Case No. R-18616, dated January 12, 1983, is
hereby REINSTATED.
SO ORDERED. successors in interest of the Mañoscas. However, their supposed
Melencio- title or right over the property is unregistered and, as such, the
Herrera (Chairman), Paras, Padilla and Nocon, JJ., concur. same cannot affect third persons. This is because it is
Decision reversed and set aside. registration that is the operative act to convey or affect the land
Note.—The one-year period to redeem a mortgage of land insofar as third persons are concerned. A deed, mortgage, lease,
covered by Torrens Title is not stopped or suspended by any or other voluntary instrument, except a will, purporting to
TRO issued by the courts (People’s Financing Corporation vs. convey or affect conveyance involving registered land, shall not
Court of Appeals, 192 SCRA 34.) take effect as a conveyance or bind the land but shall operate
only as a contract between the parties and as evidence of
——o0o—— authority of the Register of Deeds to make registration.
Same; Same; Sales; When a conveyance has been
G.R. No. 169541. October 9, 2009.* properly recorded, such record is constructive notice of its
GERMAN CAYTON and the HEIRS OF THE DECEASED contents and all interests, legal and equitable, included therein,
SPOUSE CECILIA CAYTON, petitioners, vs. ZEONNIX and under the rule of notice, it is presumed that the purchaser
TRADING CORPORATION; SPOUSES VICENTE MA- has examined every instrument of record affecting the title; The
ÑOSCA and LOURDES MAÑOSCA; MAXIMO rule that all persons must take notice of the facts that the public
CONTRERAS, Ex Officio Sheriff; and PABLO L. SY, Senior record contains is a rule of law.—When a conveyance has been
Sheriff for Makati, Metro Manila, respondents. properly recorded, such record is constructive notice of its
Redemption; Words and Phrases; “Successor-in- contents and all interests, legal and equitable, included therein.
Interest” and “Redemptioner,” Explained; Right of redemption Under the rule of notice, it is presumed that the purchaser has
is the prerogative to reacquire a mortgaged property after examined every instrument of record affecting the title. Such
registration of the foreclosure sale, and exists only in the case presumption is irrefutable. He is charged with notice of every
of the extrajudicial foreclosure of the mortgage; There is no fact shown by the record and is presumed to know every fact
right of redemption in a judicial foreclosure unless the which an examination of the record would have disclosed. This
mortgagee is a bank.—Right of redemption is the prerogative pre-
to reacquire a mortgaged property after registration of the
foreclosure sale. It exists only in the case of the extrajudicial
foreclosure of the mortgage. No such right is recognized in a 143
judicial foreclosure unless the mortgagee is a bank. An sumption may not be overcome by proof of innocence or
attaching creditor acquires the right to redeem the debtor’s good faith. Otherwise, the very purpose and object of the law
attached property subsequently foreclosed extrajudicially by a requiring a record would be destroyed. Such presumption may
third party. The “successor-in-interest” of a judgment debtor not be defeated by proof of want of knowledge of what the
includes one to whom the debtor has transferred his statutory record contains, any more than one may be permitted to show
right of redemption; one to whom the debtor has conveyed his that he was ignorant of the provisions of the law. The rule that
interest in the property for the purpose of redemption; one who all persons must take notice of the facts that the public record
succeeds to the interest of the debtor by operation of law; one contains is a rule of law. The rule must be absolute. Any
or variation would lead to endless confusion and useless litigation.
Same; Same; Writs of Attachment; A writ of attachment
_______________ that has been levied on real property or any interest therein
belonging to the judgment debtor creates a lien which nothing
* THIRD DIVISION. can destroy but its dissolution.—The writ of attachment entitled
the attaching creditor to exercise the right to redeem the
foreclosed properties. A writ of attachment that has been levied
142 on real property or any interest therein belonging to the
more joint debtors who were joint owners of the property judgment debtor creates a lien which nothing can destroy but its
sold; or his spouse or heirs. A “redemptioner,” on the other dissolution.
hand, is a creditor with a lien subsequent to the judgment which Same; Requisites for Valid Redemption; In exercising the
was the basis of the execution sale. If the lien of the creditor is right of redemption, the tender of payment must be for the full
prior to the judgment under which the property was sold, he is amount of the purchase price.—To constitute valid redemption,
not a redemptioner and, therefore, cannot redeem because his the amount tendered must comply with the following
interests in his lien are fully protected, since any purchase at requirements: (1) it should constitute the full amount paid by
public auction of said property takes the same subject to such the purchaser; (2) with one percent per month interest on the
prior lien which he has to satisfy. Unlike the judgment debtor, purchase price in addition, up to the time of redemption; (3)
a redemptioner must prove his right to redeem by producing the together with the amount of any assessments or taxes which the
documents called for by Section 30, Rule 39 of the Rules of purchaser may have paid thereon after purchase; (4) interest on
Court. the taxes paid by the purchaser at the rate of one percent per
Same; Land Titles; A deed, mortgage, lease, or other month, up to the time of the redemption; and (5) if the purchaser
voluntary instrument, except a will, purporting to convey or be also a creditor having a prior lien to that of the redemptioner,
affect conveyance involving registered land, shall not take other than the judgment under which such purchase was made,
effect as a conveyance or bind the land but shall operate only the amount of such other lien, with interest. In exercising the
as a contract between the parties and as evidence of authority right of redemption, the tender of payment must be for the full
of the Register of Deeds to make registration.—They are amount of the purchase price. Otherwise, to allow payment by
installments would be to allow the indefinite extension of the On September 1, 1981, a Deed of Absolute Sale with
redemption period. Assumption of Mortgage6 was executed between the Mañoscas
Same; Same; The amount tendered by the redemptioner and the spouses German G. Cayton and Cecilia R. Cayton
may be considered sufficient for purposes of redemption, even (Caytons) over the subject house and lot for the amount of one
if it failed to include the amount of taxes paid by the purchaser hundred sixty thousand pesos (P160,000.00). As part of the
where the former immediately paid the amount of taxes when consideration, the Caytons assumed payment to FSB of the real
apprised of the deficiency.—The amount tendered by Zeonnix estate mortgage amortizations on the property. The Caytons
may be considered sufficient for purposes of redemption, also paid the real estate taxes on the property beginning in
although it failed to include the 1982.7 The Deed of Absolute Sale with Assumption of
Mortgage contained the following stipulations:
“2. That the Vendee shall pay Vendors the sum of ONE
144 HUNDRED SIXTY THOUSAND (P160,000.00) PESOS, the
amount of taxes paid by the Caytons. The payment of the amount of ONE HUNDRED EIGHTEEN THOUSAND FIVE
full amount of the purchase price and interest thereon should be HUNDRED SIXTY THREE PESOS and SIXTEEN
deemed as substantial compliance, considering that Zeonnix CENTAVOS (P118,563.16) of which have been paid by the
immediately paid the amount of taxes when apprised of the former unto the latter and the balance of FORTY ONE
deficiency. THOUSAND FOUR HUNDRED THIRTY SIX PESOS and
PETITION for review on certiorari of the decision and EIGHTY FOUR CENTAVOS (P41,436.84) to be paid by the
resolution of the Court of Appeals. Vendee unto the Vendors within six (6) months in six equal
The facts are stated in the opinion of the Court. monthly installments commencing December 7, 1981 and every
International Legal Advocates for petitioners. 7th of the
Antonio M. Chavez for respondent Zeonnix Trading
Corporation. _______________
M.R. Villaluz & Associates for respondents.
NACHURA, J.: 4 Rollo, p. 125.
5 Id.
Before the Court is a petition for review 6 RTC Records, Vol. III, pp. 726-728.
on certiorari assailing the Decision1 dated September 27, 2004 7 Rollo, p. 124.
and the Resolution2 dated September 5, 2005 of the Court of
Appeals (CA) in CA-G.R. CV No. 71294.
At the heart of the controversy is a three hundred fifty-seven 146
(357) square meter residential house and lot located in BF month thereafter until fully paid, said installments shall be
Homes, Phase III, Sucat, Parañaque, covered by Transfer covered by postdated checks of the Vendee.
Certificate of Title (TCT) No. S-90836 of the Registry of Deeds 3. That as part of the consideration of this sale, the Vendee
of Manila in the name of Vicente Mañosca, married to Lourdes agrees to assume as [he] hereby assumes, all the duties and
Mañosca (Mañoscas).3 obligations of the Vendors imposed upon the latter on the Deed
On May 24, 1980, the Mañoscas executed a deed of real of Real Estate Mortgage executed by the Vendors in favor of
estate mortgage over the house and lot as security for the loan Family Savings Bank denominated as Doc. 388; Page No. 79;
of one hundred fifty thousand pesos (P150,000.00) that they Book No. V; Series of 1980 of the Notarial Registry of Notary
Public Fe Tengco Becina; that Vendee’s assumption of the
_______________ mortgage obligation shall be limited only to the amortization
that will fall due [in] September 1981 and that all arrears in the
1 Penned by Associate Justice Roberto A. Barrios, with amortizations, penalties and charges that have accrued before
Associate Justices Amelita G. Tolentino and Vicente S. E. said date shall be borne and paid by the Vendors.
Veloso, concurring; Rollo, pp. 8-19. xxxx
2 Id., at pp. 21-23. 7. That Vendors hereby warrant that save to the
3 Id., at pp. 8, 124. restrictions annotated in the Transfer of Title, the said property
is free from any lien and encumbrance and that Vendors
undertake to defend title to the same from whatever claim.”8
145
obtained from Family Savings Bank (FSB). On June 2, 1980, The Caytons failed to register the deed of absolute sale with
the real estate mortgage was annotated on TCT No. S-90836.4 assumption of mortgage because the owner’s duplicate copy of
On July 21, 1981, a levy on attachment was annotated on TCT No. S-90836 was in the possession of FSB in view of the
TCT No. S-90836 in favor of Zeonnix Trading Corporation loan of the Mañoscas wherein the property was used as
(Zeonnix) pursuant to a writ of preliminary attachment issued security.9
by the Court of First Instance of Pasay City in Civil Case No. Meanwhile, on February 3, 1984, a Decision10 was rendered
9225-P, a case for recovery of a sum of money, entitled by the RTC in Civil Case No. 2173, the dispositive portion of
“Zeonnix Trading Corporation v. Vicente D. Mañosca, doing which reads:
business under the name and style of Vic D. Mañosca “WHEREFORE, judgment is hereby rendered sentencing
Brokerage.” The case was re-raffled to the Regional Trial Court defendant Vicente D. Mañosca, doing business under the name
(RTC) of Makati and re-docketed as Civil Case No. 2173, due and style “Vic D. Mañosca Brokerage” to pay plaintiff
to the judicial reorganization in 1983.5
[Zeonnix] the amount of P167,037.00, with interest thereon at include the amount of real estate taxes paid by them, amounting
the rate of 12% per annum from May 12, 1981, until fully paid. to two thousand one hundred seventy-five pesos (P2,175.00).18
On June 4, 1985, Zeonnix tendered to the Clerk of Court of
_______________ Makati the additional amount of P2,175.00 to cover the real
estate taxes paid by the Caytons. The latter, however,
8 RTC Records, Vol. III, pp. 727-728. maintained that the tender of the deficiency amount
9 Rollo, p. 126. representing the real estate taxes did not cure the defect because
10 Penned by Judge Ansberto P. Paredes, Regional Trial the payment was done beyond the period of redemption, which
Court, Makati City, Branch 140; RTC Records, Vol. I, pp. 140- lapsed on April 26, 1985.19
141. On March 20, 2001, the RTC rendered a Decision in Civil
Case No. 10316, the dispositive portion of which reads:
“WHEREFORE, in view of the foregoing, the Court hereby
147 renders judgment in favor of the plaintiffs [Caytons] and against
Defendant is likewise ordered to pay plaintiff the amount of the defendant [Zeonnix], holding that:
P20,000.00 as and for attorney’s fees and the costs of suit. 1) defendant Zeonnix Trading Corporation has no right of
SO ORDERED.”11 redemption over the property in question as against the
plaintiffs [Caytons];
Subsequently, the Caytons defaulted in the payment to FSB 2) plaintiffs [Caytons] are the legitimate owners of the
of the monthly amortizations, and the property was property in question.
extrajudicially foreclosed. On April 23, 1984, the property was SO ORDERED.”20
sold at public auction. The Caytons were declared as the highest
bidder, in the amount of ninety-five thousand pesos Zeonnix filed an appeal with the CA, assigning the
(P95,000.00). A Certificate of Sale12 was issued by the Ex following errors of the trial court: (1) the RTC erred in
Officio Sheriff, and the same was annotated on TCT No. S- considering the Caytons as owner-bidders in the foreclosure
90836 on April 25, 1984.13 sale of the
On April 15, 1985, the Caytons filed before the RTC of
Makati a civil case for quieting of title and/or removal/pre- _______________
vention of cloud on title against Zeonnix. The case was
docketed as Civil Case No. 10316.14 The Caytons claimed that, 17 Id., at pp. 10-11; RTC Records, Vol. I, p. 89.
with the execution of the deed of absolute sale with assumption 18 Rollo, p. 127.
of mortgage, all the rights, interests and participation over the 19 Id., at p. 11.
property had been transferred to them by the Mañoscas, 20 Id., at p. 130.
including the right of redemption. Thus, Zeonnix had no more
right of redemption to speak of.15
On April 17, 1985, the Caytons filed an amended complaint, 149
in which they impleaded the Mañoscas and the then Clerk of property and not as ordinary bidders or buyers; (2) the RTC
Court and the Senior Deputy Sheriff of Makati City, as erred in ruling that Zeonnix was not entitled to redeem the
additional defendants.16 property, which was foreclosed by FSB; (3) the RTC erred in
On April 18, 1985, Zeonnix, as judgment creditor of the not finding that Zeonnix had a superior or better right, by virtue
Mañoscas in Civil Case No. 2173, offered to redeem the of the prior attachment/lien on the subject property, than the
property by tendering to the Clerk of Court of the RTC of Caytons who were negligent in buying it despite the recorded
Makati one hundred six thousand four hundred pesos or existing attachment lien thereon by Zeonnix; (4) the RTC
(P106,400.00) through Manager’s Check No. DV008913 dated erred in ruling that the deed of sale with assumption of mortgage
April 15, was not spurious or fictitious in character; and (5) the RTC erred
in not ruling that Zeonnix was entitled to damages and
_______________ attorney’s fees.21
On September 27, 2004, the CA rendered a
11 Id., at p. 141. Decision,22 the fallo of which reads:
12 RTC Records, Vol. I, p. 91. “WHEREFORE, the appeal [is] GRANTED and the
13 Rollo, pp. 10, 127. appealed Decision is REVERSED and SET ASIDE. In its
14 Id., at p. 10. place judgment is rendered dismissing the complaint, and
15 Id. ordering the ex officio Sheriff of Makati to accept and receipt
16 Id., at p. 127. for the redemption price paid and to issue the corresponding
certificate and other papers of redemption to Zeonnix.
SO ORDERED.”23
148
1985. The amount tendered represented the purchase price of In reversing the decision of the trial court, the CA
the property and interest that had accrued thereon.17 ratiocinated that:
On May 7, 1985, the Caytons filed a supplemental “The levy on attachment was duly annotated and registered
complaint in which they alleged that assuming that Zeonnix had in the title of the property on July 21, 1981[,] while the deed of
the right of redemption, still the amount it tendered was sale with assumption of mortgage was executed on September
insufficient to effect a valid redemption because it failed to 1, 1981. The registration of the levy created a constructive
notice to the whole world and served to protect the interest of “Sec. 27. Who may redeem real property so sold.
Zeonnix. The Caytons therefore could not raise their mere Real property sold as provided in the last preceding section,
childlike reliance on the real estate agent to justify their or any part thereof sold separately, may be redeemed in the
ignorance of the recorded levy for they should have checked the manner hereinafter provided, by the following persons:
title with the Register of Deeds (tsn Oct. 3, 1986, p. 28). The (a) The judgment obligor, or his successor in interest in
Caytons did not even cause the registration of the deed of sale the whole or any part of the property;
with assumption of mortgage. Notable too are the pay- (b) A creditor having a lien by virtue of an attachment,
judgment or mortgage on the property sold, or on some part
_______________ thereof, subsequent to the lien under which the property was
sold. Such redeeming creditor is termed a redemptioner.”
21 Id., at pp. 13-14.
22 Supra note 1. Right of redemption is the prerogative to reacquire a
23 Id., at p. 18. mortgaged property after registration of the foreclosure sale. It
exists only in the case of the extrajudicial foreclosure of the
mortgage. No such right is recognized in a judicial foreclosure
150 unless the mortgagee is a bank.27 An attaching creditor acquires
ments of the monthly amortizations by the Caytons with FSB the right to redeem the debtor’s attached property subsequently
wherein the bank in its receipts simply acknowledged payments foreclosed extra-judicially by a third party.
in the following manner: “Paid by Cecilia Cayton for the The “successor-in-interest” of a judgment debtor includes
account of Vicente Mañosca” x x x. This means that the bank one to whom the debtor has transferred his statutory right of
while it received payments from the Caytons, however it did not redemption; one to whom the debtor has conveyed his interest
fully recognize them as the new owners.”24 in the property for the purpose of redemption; one who succeeds
to the interest of the debtor by operation of law; one or more
The Caytons filed a motion for reconsideration. However, joint debtors who were joint owners of the property sold; or his
the CA denied the same in a Resolution25 dated September 5, spouse or heirs.28
2005. A “redemptioner,” on the other hand, is a creditor with a
Hence, this petition. lien subsequent to the judgment which was the basis of the
The Caytons submitted the following grounds in support of execution sale. If the lien of the creditor is prior to the judgment
the petition: under which the property was sold, he is not a redemptioner and,
therefore, cannot redeem because his interests in his lien are
I fully protected, since any purchase at public auction of said
THE COURT OF APPEALS ERRED IN RULING THAT property takes the same subject to such prior lien which he has
PETITIONER GERMAN CAYTON AND DECEASED to satisfy. Unlike the judgment debtor, a re-
SPOUSE ARE NOT SUCCESSORS-IN-INTEREST WHO
HAVE PREFERENTIAL RIGHT OVER THE SUBJECT _______________
PROPERTY THAN A REDEMPTIONER WHOSE RIGHT
TO CLAIM AROSE FROM A MONEY JUDGMENT. 27 Huerta Alba Resort, Inc. v. Court of Appeals, G.R. No.
128567, September 1, 2000, 339 SCRA 534.
II 28 Magno v. Viola and Sotto, 61 Phil. 80 (1934).
THE COURT OF APPEALS ERRED IN RULING THAT THE
PAYMENT OF THE INSUFFICIENT REDEMPTION PRICE
BY ZEONNIX AS REDEMPTIONER DID NOT RESULT IN 152
ITS FAILURE TO PERFECT ITS RIGHT OF REDEMPTION demptioner must prove his right to redeem by producing the
OVER THE SUBJECT PROPERTY.26 documents called for by Section 30, Rule 39 29 of the Rules of
Court.30
The petition is without merit and must be denied. In the instant case, the Caytons aver that as successor-in-
interest of the Mañoscas by virtue of the deed of absolute sale
with assumption of mortgage, they have a better right than
I Zeonnix to redeem the property. This stance deserves scant
consideration.
Indeed, they are successors in interest of the Mañoscas.
However, their supposed title or right over the property is
Section 27, Rule 39 of the Rules of Court provides: unregistered and, as such, the same cannot affect third persons.
This is because it is registration that is the operative act to
_______________ convey or affect the land insofar as third persons are concerned.
A deed, mortgage, lease, or other voluntary instrument, except
24 Id., at p. 14. a will, purporting to convey or affect conveyance involving
25 Supra note 2. registered land, shall not take effect as a conveyance or bind the
26 Rollo, p. 34. land but shall operate only as a contract between the parties and
as evidence of authority of the Register of Deeds to make
registration.31
151
_______________ registered, filed or entered in the office of the Register of Deeds
for the province or city where the land to which it relates lies,
29 Sec. 30. Proof required of redemptioner.—A be constructive notice to all persons from the time of such
redemptioner must produce to the officer, or person from whom registering, filing or entering.
he seeks to redeem, and serve with his notice to the officer a 33 Garcia v. Court of Appeals, G.R. Nos. L-48971 &
copy of the judgment or final order under which he claims the 49011, January 22, 1980, 95 SCRA 380, 389.
right to redeem, certified by the clerk of the court wherein the
judgment or final order is entered; or, if he redeems upon a
mortgage or other lien, a memorandum of the record thereof, 154
certified by the registrar of deeds; or an original or certified amination of the record would have disclosed. This
copy of any assignment necessary to establish his claim; and an presumption may not be overcome by proof of innocence or
affidavit executed by him or his agent, showing the amount then good faith. Otherwise, the very purpose and object of the law
actually due on the lien. requiring a record would be destroyed. Such presumption may
30 Regalado, Florenz D., Remedial Law Compendium, Vol. not be defeated by proof of want of knowledge of what the
I, 8th Revised Edition (2002). record contains, any more than one may be permitted to show
31 PRESIDENTIAL DECREE NO. 1529. that he was ignorant of the provisions of the law. The rule that
SECTION 51. Conveyance and other dealings by all persons must take notice of the facts that the public record
registered owner.—An owner of registered land may convey, contains is a rule of law. The rule must be absolute. Any
mortgage, lease, charge or otherwise deal with the same in variation would lead to endless confusion and useless
accordance with existing laws. He may use such forms of deeds, litigation.34
mortgages, leases or other voluntary instruments as are Zeonnix has acquired by operation of law the right of
sufficient in law. But no deed, mort- redemption over the foreclosed properties. By virtue of the RTC
decision in Civil Case No. 2173, it had the right to redeem the
property. This is pursuant to Section 6 of Act No. 3135, 35 as
153 amended by Act No. 4118, which provides:
The unregistered sale of the house and lot to the Caytons by “SECTION 6. In all cases in which an extrajudicial sale
the Mañoscas cannot prejudice the right of redemption granted is made under the special power hereinbefore referred to, the
by law in favor of Zeonnix. The levy on attachment of Zeonnix debtor, his successors in interest or any judicial creditor or
on the subject property was duly recorded on TCT No. S-90836. judgment creditor of said debtor, or any person having a lien on
Thus, the levy on attachment created a constructive notice to all the property subsequent to the mortgage or deed of trust under
persons from the time of such registration.32 The record is which the property is sold, may redeem the same at any time
notice to the entire world. All persons are charged with the within the term of one year from and after the date of the sale;
knowledge of what it contains. All persons dealing with the land and such redemption shall be governed by the provisions of
so recorded, or any portion of it, must be charged with notice of sections four hundred and sixty-four to four hundred and sixty-
whatever it contains. The purchaser is charged with notice of six, inclusive, of the Code of Civil Procedure, in so far as these
every fact shown by the record and is presumed to know every are not inconsistent with the provisions of this Act.”
fact which the record discloses.33
When a conveyance has been properly recorded, such The writ of attachment entitled the attaching creditor to
record is constructive notice of its contents and all interests, exercise the right to redeem the foreclosed properties. A writ of
legal and equitable, included therein. Under the rule of notice, attachment that has been levied on real property or any
it is presumed that the purchaser has examined every instrument
of record affecting the title. Such presumption is irrefutable. He _______________
is charged with notice of every fact shown by the record and is
presumed to know every fact which an ex- 34 Id.
35 AN ACT TO REGULATE THE SALE OF PROPERTY UNDER
_______________ SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE
MORTGAGES.
gage, lease, or other voluntary instrument, except a will
purporting to convey or affect registered land shall take effect
as a conveyance or bind the land, but shall operate only as a 155
contract between the parties and as evidence of authority to the interest therein belonging to the judgment debtor creates a lien
Register of Deeds to make registration. which nothing can destroy but its dissolution.36
The act of registration shall be the operative act to convey

or affect the land insofar as third persons are concerned, and in
all cases under this Decree, the registration shall be made in the II
office of the Register of Deeds for the province or city where
the land lies.
32 PRESIDENTIAL DECREE NO. 1529.
SECTION 52. Constructive notice upon registration.— Section 28, Rule 39 of the Rules of Court provides for the
Every conveyance, mortgage, lease, lien, attachment, order, manner of payment in redemption:
judgment, instrument or entry affecting registered land shall, if
“Section 28. Time and manner of, and amounts payable allow payment by installments would be to allow the indefinite
on, successive redemptions; notice to be given and filed.— extension of the redemption period.37
The judgment obligor, or redemptioner, may redeem the The amount tendered by Zeonnix may be considered
property from the purchaser, at any time within one (1) year sufficient for purposes of redemption, although it failed to
from the date of the registration of the certificate of sale, by include the amount of taxes paid by the Caytons. The payment
paying the purchaser the amount of his purchase, with one per of the full amount of the purchase price and interest thereon
centum per month interest thereon in addition, up to the time of should be deemed as substantial compliance, considering that
redemption, together with the amount of any assessments or Zeonnix immediately paid the amount of taxes when apprised
taxes which the purchaser may have paid thereon after of the deficiency.
purchase, and interest on such last named amount at the same
rate; and if the purchaser be also a creditor having a prior lien _______________
to that of the redemptioner, other than the judgment under
which such purchase was made, the amount of such lien, with 37 Estanislao, Jr. v. Court of Appeals, G.R. No. 143687,
interest. July 31, 2001, 362 SCRA 229.
Property so redeemed may again be redeemed within sixty
(60) days after the last redemption upon payment of the sum
paid on the last redemption, with two per centum thereon in 157
addition, and the amount of any assessments or taxes which the In Estanislao, Jr. v. Court of Appeals,38 the Court relaxed
last redemptioner may have paid thereon after redemption by its rules on the redemptioner’s failure to pay the taxes paid by
him, with interest on such last-named amount, and in addition, the purchaser. The Court ruled in this wise, viz.:
the amount of any liens held by said last redemptioner prior to “There are additional amounts to be made in order to effect
his own, with interest. The property may be again, and as often a valid redemption required by law, but, as respondent Hi-Yield
as a redemptioner is so disposed, redeemed from any previous Realty, Inc. failed to comply with certain requirements,
redemptioner within sixty (60) days after the last redemption, petitioners’ failure to pay these additional amounts may be
on paying the sum paid on the last previous redemption, with considered excused. As provided in Rule 39, §30 of the 1964
two per centum thereon in addition, and the amounts of any Rules of Court, the redemptioner must also pay the assessment
assessments or taxes which the last previous redemptioner paid or taxes paid by the purchaser. However, the latter must give
after the redemption thereon, with interest thereon, and the notice to the officer who conducted the sale of the assessments
amount of any liens held by the last redemptioner prior to his or taxes paid by him and file the same with the Registry of
own, with interest. Deeds. x x x.
xxxx
_______________ Petitioners were not furnished by respondent Hi-Yield
Realty, Inc. such statement of account. Neither was such
36 Consolidated Bank and Trust Corporation (Solidbank) statement filed with the Registry of Deeds. Respondent Hi-
v. Intermediate Appellate Court, G.R. No. L-73976, May 29, Yield Realty, Inc. claimed that a statement of account (Exh. “8-
1987, 150 SCRA 591. C” and Exh. “8-D”) was furnished the office of Atty. Basco, the
notary public who had conducted the sale, as received by
Elizabeth Roque, an employee therein. However, Atty. Basco
156 denied having received the statement. Petitioners were therefore
Written notice of any redemption must be given to the justified in not paying any assessments or taxes which
officer who made the sale and a duplicate filed with the registry respondent Hi-Yield Realty, Inc. may have paid.”39
of deeds of the place, and if any assessments or taxes are paid
by the redemptioner or if he has or acquires any lien other than Likewise, in Rosales v. Yboa,40 the Court ruled that the
that upon which the redemption was made, notice thereof must failure to pay the delinquent real estate taxes on the property
in like manner be given to the officer and filed with the registry will not render the redemption void. This is in consonance with
of deeds; if such notice be not filed, the property may be the policy of the law to aid rather than to defeat the right of
redeemed without paying such assessments, taxes, or liens.” redemption. The pertinent portion of the decision reads:
“In fine, We hold that the failure of the mortgagor Pedro
Accordingly, to constitute valid redemption, the amount Oliverio to tender the amount of P745.47 representing the
tendered must comply with the following requirements: (1) it delinquent real estate taxes of the subject property, the
should constitute the full amount paid by the purchaser; (2) with registration fee of P3.00 and the interest thereon of P0.04, the
one percent per month interest on the purchase price in addition, Sheriff's Commission in the
up to the time of redemption; (3) together with the amount of
any assessments or taxes which the purchaser may have paid _______________
thereon after purchase; (4) interest on the taxes paid by the
purchaser at the rate of one percent per month, up to the time of 38 Id.
the redemption; and (5) if the purchaser be also a creditor 39 Id., at p. 239.
having a prior lien to that of the redemptioner, other than the 40 G.R. No. L-42282, February 28, 1983, 120 SCRA 869,
judgment under which such purchase was made, the amount of 877.
such other lien, with interest.
In exercising the right of redemption, the tender of payment
must be for the full amount of the purchase price. Otherwise, to 158
sum of P99.82, and the deficiency interest on the purchase price further reiterates and states all terms, covenants, and
of the subject property, will not render the redemption in conditions stipulated in the promissory note or notes covering
question null and void, it having been established that he has the proceeds of this loan, making said promissory note or notes,
substantially complied with the requirements of the law to to all intent and purposes, an integral part hereof.”
effect a valid redemption, with his tender of payment of the Same; Same; Same; Same; Cession; There is no payment
purchase price and the interest thereon within twelve (12) by cession under Article 1255 of the Civil Code where there is
months from the date of the registration of the sale. This ruling only one creditor.—Neither did the assignment amount to
is in obedience of the policy of the law to aid rather than to payment by cession
defeat the right of redemption.”
______________________
WHEREFORE, in light of the foregoing, the Decision dated
September 27, 2004 and the Resolution dated September 5, *
FIRST DIVISION.
2005 of the Court of Appeals in CA-G.R. CV No. 71294 are 15
hereby AFFIRMED. Costs against petitioners. VOL. 284, JANUARY 5, 1998
SO ORDERED.
Carpio (Chairperson), Carpio-Morales,** Velasco, Development Bank of the Philippines vs. Court of Appeals
Jr. and Peralta, JJ., concur. under Article 1255 of the Civil Code for the plain and
Judgment and resolution affirmed. simple reason that there was only one creditor, the DBP. Article
Notes.—A third person, within the meaning of Article 1620 1255 contemplates the existence of two or more creditors and
of the Civil Code (on the right of legal redemption of a co- involves the assignment of all the debtor’s property.
owner) is anyone who is not a co-owner. (Pilapil vs. Court of Same; Same; Same; Same; Dation; An assignment which
Appeals, 250 SCRA 566 [1995]) is essentially a mortgage cannot constitute dation in payment
Public policy favors redemption regardless of whether the under Article 1245 of the Civil Code.—Nor did the assignment
redemptioner is a co-owner or mortgagor, although perhaps constitute dation in payment under Article 1245 of the Civil
with unequal force and effect since each is given a fixed but Code, which reads: “Dation in payment, whereby property is
different period. (Lee Chuy Realty Corporation vs. Court of alienated to the creditor in satisfaction of a debt in money, shall
Appeals, 250 SCRA 596 [1995]) be governed by the law on sales.” It bears stressing that the
assignment, being in its essence a mortgage, was but a security
——o0o—— and not a satisfaction of indebtedness.
Same; Same; Same; Same; Pactum
SUPREME COURT REPORTS ANNOTATED
Commissorium; Elements.—The elements of pactum
Development Bank of the Philippines vs. Court of Appeals commissorium are as follows: (1) there should be a property
G.R. No. 118342. January 5, 1998.* mortgaged by way of security for the payment of the principal
DEVELOPMENT BANK OF THE PHILIPPINES, obligation, and (2) there should be a stipulation for automatic
petitioner, vs. COURT OF APPEALS and LYDIA CUBA, appropriation by the creditor of the thing mortgaged in case of
respondents. non-payment of the principal obligation within the stipulated
G.R. No. 118367. January 5, 1998. * period.
LYDIA P. CUBA, petitioner, vs. COURT OF APPEALS, Same; Same; Same; Same; Same; A condition in a deed
DEVELOPMENT BANK OF THE PHILIPPINES and of assignment providing for the appointment of the assignee as
AGRIPINA P. CAPERAL, respondents. attorney-in-fact with authority, among other things, to sell or
Contracts; Loans; Mortgages; Assignments; An otherwise dispose of real rights, in case of default by the
assignment to guarantee an obligation is in effect a assignor, and to apply the proceeds to the payment of the loan
mortgage.—In People’s Bank & Trust Co. vs. Odom, this Court does not constitute pactum commissorium.—Condition No. 12
had the occasion to rule that an assignment to guarantee an did not provide that the ownership over the leasehold rights
obligation is in effect a mortgage. would automatically pass to DBP upon CUBA’s failure to pay
Same; Same; Same; Same; Novations; There is no the loan on time. It merely provided for the appointment of DBP
novation where the obligation to pay a sum of money remained, as attorney-in-fact with authority, among other things, to sell or
and the assignment merely served as security for the loans otherwise dispose of the said real rights, in case of default by
covered by the promissory notes.—We find no merit in DBP’s CUBA, and to apply the proceeds to the payment of the loan.
contention that the assignment novated the promissory notes in This provision is a standard condition in mortgage contracts and
that the obligation to pay a sum of money the loans (under the is in conformity with Article 2087 of the Civil Code, which
promissory notes) was substituted by the assignment of the authorizes the mortgagee to foreclose the mortgage and alienate
rights over the fishpond (under the deed of assignment). As the mortgaged property for the payment of the principal
correctly pointed out by CUBA, the said assignment merely obligation.
complemented or supplemented the notes; both could stand Same; Same; Same; Same; An assignment to guarantee
together. The former was only an accessory to the latter. an obligation is virtually a mortgage and not an absolute
Contrary to DBP’s submission, the obligation to pay a sum of conveyance of title which confers ownership on the assignee.—
money remained, and the assignment merely served as security DBP cannot take refuge in condition No. 12 of the deed of
for the loans covered by the promissory notes. Significantly, assignment to justify its act
both the deeds of assignment and the promissory notes were 16
executed on the same dates the loans were granted. Also, the 16 SUPREME COURT REPORTS ANNOTAT
last paragraph of the assignment stated: “The assignor Development Bank of the Philippines vs. Court of Appeals
of appropriating the leasehold rights. As stated earlier, 1. 1.Plaintiff Lydia P. Cuba is a grantee of a Fishpond
condition No. 12 did not provide that CUBA’s default would Lease Agreement No. 2083 (new) dated May 13,
operate to vest in DBP ownership of the said rights. Besides, an 1974 from the Government;
assignment to guarantee an obligation, as in the present case, is 2. 2.Plaintiff Lydia P. Cuba obtained loans from the
virtually a mortgage and not an absolute conveyance of Development Bank of the Philippines in the amounts
title which confers ownership on the assignee. of P109,000.00; P109,000.00; and P98,700.00 under
Same; Same; Same; Same; Estoppel; Estoppel cannot the terms stated in the Promissory Notes dated
give validity to an act that is prohibited by law or against public September 6, 1974; August 11, 1975; and April 4,
policy.—The fact that CUBA offered and agreed to repurchase 1977;
her leasehold rights from DBP did not estop her from 3. 3.As security for said loans, plaintiff Lydia P. Cuba
questioning DBP’s act of appropriation. Estoppel is unavailing executed two Deeds of Assignment of her Leasehold
in this case. As held by this Court in some cases, estoppel Rights;
cannot give validity to an act that is prohibited by law or against
public policy. Hence, the appropriation of the leasehold rights, 4.Plaintiff failed to pay her loan on the scheduled dates
being contrary to Article 2088 of the Civil Code and to public thereof in accordance with the terms of the Promissory
policy, cannot be deemed validated by estoppel. Notes;
Damages; A court cannot rely on speculations,
conjectures, or guesswork as to the fact and amount of _____________________
damages, but must depend upon competent proof that they have
been suffered by the injured party and on the best obtainable 1
Original Record (OR), 1-7.
evidence of the actual amount thereof.—Actual or 2
OR, 168-170.
compensatory damages cannot be presumed, but must be 18
proved with reasonable degree of certainty. A court cannot rely
on speculations, conjectures, or guesswork as to the fact and
amount of damages, but must depend upon competent proof that Development Bank of the Philippines vs. Court of Appeals
they have been suffered by the injured party and on the best
obtainable evidence of the actual amount thereof. It must point 1. 5.Without foreclosure proceedings, whether judicial or
out specific facts which could afford a basis for measuring extra-judicial, defendant DBP appropriated the
whatever compensatory or actual damages are borne. Leasehold Rights of plaintiff Lydia Cuba over the
fishpond in question;
PETITIONS for review of a decision of the Court of Appeals. 2. 6.After defendant DBP has appropriated the Leasehold
Rights of plaintiff Lydia Cuba over the fishpond in
The facts are stated in the opinion of the Court. question, defendant DBP, in turn, executed a Deed of
Office of the Legal Counsel for petitioner DBP. Conditional Sale of the Leasehold Rights in favor of
J.C. Calida & Associates for petitioner Lydia P. Cuba. plaintiff Lydia Cuba over the same fishpond in
Virgilio C. Leynes for Agripina Caperal. question;
17 3. 7.In the negotiation for repurchase, plaintiff Lydia
VOL. 284, JANUARY 5, 1998 17Cuba ad-dressed two letters to the Manager DBP,
Dagupan City dated November 6, 1979 and
Development Bank of the Philippines vs. Court of Appeals
December 20, 1979. DBP thereafter accepted the
offer to repurchase in a letter addressed to plaintiff
DAVIDE, JR., J.: dated February 1, 1982;
4. 8.After the Deed of Conditional Sale was executed in
These two consolidated cases stemmed from a complaint1 filed favor of plaintiff Lydia Cuba, a new Fishpond Lease
against the Development Bank of the Philippines (hereafter Agreement No. 2083-A dated March 24, 1980 was
DBP) and Agripina Caperal filed by Lydia Cuba (hereafter issued by the Ministry of Agriculture and Food in
CUBA) on 21 May 1985 with the Regional Trial Court of favor of plaintiff Lydia Cuba only, excluding her
Pangasinan, Branch 54. The said complaint sought (1) the husband;
declaration of nullity of DBP’s appropriation of CUBA’s rights, 5. 9.Plaintiff Lydia Cuba failed to pay the amortizations
title, and interests over a 44-hectare fishpond located in stipulated in the Deed of Conditional Sale;
Bolinao, Pangasinan, for being violative of Article 2088 of the 6. 10.After plaintiff Lydia Cuba failed to pay the
Civil Code; (2) the annulment of the Deed of Conditional Sale amortization as stated in Deed of Conditional Sale,
executed in her favor by DBP; (3) the annulment of DBP’s sale she entered with the DBP a temporary arrangement
of the subject fishpond to Caperal; (4) the restoration of her whereby in consideration for the deferment of the
rights, title, and interests over the fishpond; and (5) the recovery Notarial Rescission of Deed of Conditional Sale,
of damages, attorney’s fees, and expenses of litigation. plaintiff Lydia Cuba promised to make certain
After the joinder of issues following the filing by the parties payments as stated in Temporary Arrangement dated
of their respective pleadings, the trial court conducted a pre-trial February 23, 1982;
where CUBA and DBP agreed on the following facts, which 7. 11.Defendant DBP thereafter sent a Notice of
were embodied in the pre-trial order:2 Rescission thru Notarial Act dated March 13, 1984,
and which was received by plaintiff Lydia Cuba;
8. 12.After the Notice of Rescission, defendant DBP took leasehold rights, all acts of ownership and possession by the
possession of the Leasehold Rights of the fishpond in said bank were void. Accordingly, the Deed of Conditional Sale
question; in favor of CUBA, the notarial rescission of such sale, and the
9. 13.That after defendant DBP took possession of the Deed of Conditional Sale in favor of defendant Caperal, as well
Leasehold Rights over the fishpond in question, DBP as the Assignment of Leasehold Rights executed by Caperal in
advertised in the SUNDAY PUNCH the public favor of DBP, were also void and ineffective.
bidding dated June 24, 1984, to dispose of the As to damages, the trial court found “ample evidence on
property; record” that in 1984 the representatives of DBP ejected CUBA
10. 14.That the DBP thereafter executed a Deed of and her caretakers not only from the fishpond area but also from
Conditional Sale in favor of defendant Agripina the adjoining big house; and that when CUBA’s son and
Caperal on August 16, 1984; caretaker went there on 15 September 1985, they found the said
11. 15.Thereafter, defendant Caperal was awarded house unoccupied and destroyed and CUBA’s personal
Fishpond Lease Agreement No. 2083-A on belongings, machineries, equipment, tools, and other articles
December 28, 1984 by the Ministry of Agriculture used in fishpond operation which were kept in the house were
and Food. missing. The missing items were valued at about P550,000. It
further found that when CUBA and her men were ejected by
19 DBP for the first time in 1979, CUBA had stocked the fishpond
with 250,000 pieces of bangus fish (milkfish), all of which died
VOL. 284, JANUARY 5, 1998 19
because the DBP representatives prevented CUBA’s men from
Development Bank of the Philippines vs. Court of Appeals feeding the fish. At the conservative price of P3.00 per fish, the
Defendant Caperal admitted only the facts stated in paragraphs gross value would have been P690,000, and after deducting
14 and 15 of the pre-trial order.3 25% of said value as reasonable allowance for the cost of feeds,
Trial was thereafter had on other matters. CUBA suffered a loss of P517,500. It then set the aggregate of
The principal issue presented was whether the act of DBP the actual damages sustained by CUBA at P1,067,500.
in appropriating to itself CUBA’s leasehold rights over the The trial court further found that DBP was guilty of gross
fishpond in question without foreclosure proceedings was bad faith in falsely representing to the Bureau of Fisheries that
contrary to Article 2088 of the Civil Code and, therefore, it had foreclosed its mortgage on CUBA’s leasehold rights.
invalid. CUBA insisted on an affirmative resolution. DBP Such representation induced the said Bureau to terminate
stressed that it merely exercised its contractual right under the CUBA’s leasehold rights and to approve the Deed of
Assignments of Leasehold Rights, which was not a contract of Conditional Sale in favor of CUBA. And considering that by
mortgage. Defendant Caperal sided with DBP. reason of her unlawful ejectment by DBP, CUBA “suffered
The trial court resolved the issue in favor of CUBA by moral shock, degradation, social humiliation, and serious
declaring that DBP’s taking possession and ownership of the anxieties for which she became sick and had to be hospitalized”
property without foreclosure was plainly violative of Article the trial court found her entitled to moral and exemplary
2088 of the Civil Code which provides as follows: damages. The trial court also held that CUBA was entitled to
ART. 2088. The creditor cannot appropriate the things given by P100,000 attorney’s fees in view of the considerable
way of pledge or mortgage, or dispose of them. Any stipulation 21
to the contrary is null and void. VOL. 284, JANUARY 5, 1998
It disagreed with DBP’s stand that the Assignments of
Leasehold Rights were not contracts of mortgage because (1) Development Bank of the Philippines vs. Court of Appeals
they were given as security for loans, (2) although the “fishpond expenses she incurred for lawyers’ fees and in view of the
land” in question is still a public land, CUBA’s leasehold rights finding that she was entitled to exemplary damages.
and interest thereon are alienable rights which can be the proper In its decision of 31 January 1990,4 the trial court disposed
subject of a mortgage; and (3) the intention of the contracting as follows:
parties to treat the Assignment of Leasehold Rights as a WHEREFORE, judgment is hereby rendered in favor of
mortgage was obvious and unmistakable; hence, upon CUBA’s plaintiff:
default, DBP’s only right was to foreclose the Assignment in
accordance with law. 1. 1.DECLARING null and void and without any legal
The trial court also declared invalid condition No. 12 of the effect the act of defendant Development Bank of the
Assignment of Leasehold Rights for being a clear case Philippines in appropriating for its own interest,
of pactum commissorium expressly prohibited and declared without any judicial or extra-judicial foreclosure,
null and void by Article 2088 of the Civil Code. It then plaintiff’s leasehold rights and interest over the
concluded that since DBP never acquired lawful ownership of fishpond land in question under her Fishpond Lease
CUBA’s Agreement No. 2083 (new);
2. 2.DECLARING the Deed of Conditional Sale dated
___________________ February 21, 1980 by and between the defendant
Development Bank of the Philippines and plaintiff
3 (Exh. E and Exh. 1) and the acts of notarial rescission
See OR, 169.
20 of the Development Bank of the Philippines relative
20 SUPREME COURT REPORTS ANNOTATED to said sale (Exhs. 16 and 26) as void and ineffective;
3. 3.DECLARING the Deed of Conditional Sale dated
Development Bank of the Philippines vs. Court of Appeals August 16, 1984 by and between the Development
Bank of the Philippines and defendant Agripina payment of her debts, which amounted to a novation of the
Caperal (Exh. F and Exh. 21), the Fishpond Lease promissory notes executed by CUBA in favor of DBP; (4)
Agreement No. 2083-A dated December 28, 1984 of CUBA was estopped from questioning the assignment of the
defendant Agripina Caperal (Exh. 23) and the leasehold rights, since she agreed to repurchase the said rights
Assignment of Leasehold Rights dated February 12, under a deed of conditional sale; and (5) condition No. 12 of the
1985 executed by defendant Agripina Caperal in deed of assignment was an express authority from CUBA for
favor of the defendant Development Bank of the DBP to sell whatever right she had over
Philippines (Exh. 24) as void ab initio;
4. 4.ORDERING defendant Development Bank of the ______________________
Philippines and defendant Agripina Caperal, jointly
and severally, to restore to plaintiff the latter’s 5
Per Manuel C. Herrera, J., with Artemon D. Luna and
leasehold rights and interests and right of possession Alfredo J. Lagamon, JJ., concurring. Rollo, G.R. No. 118342,
over the fishpond land in question, without prejudice 21-41; Rollo, G.R. No. 118367, 33-53.
to the right of defendant Development Bank of the 23
Philippines to foreclose the securities given by VOL. 284, JANUARY 5, 1998
plaintiff;
5. 5.ORDERING defendant Development Bank of the Development Bank of the Philippines vs. Court of Appeals
Philippines to pay to plaintiff the following amounts: the fishpond. It also ruled that CUBA was not entitled to loss of
profits for lack of evidence, but agreed with the trial court as to
the actual damages of P1,067,500. It, however, deleted the
1. a)The sum of ONE MILLION SIXTY-SEVEN
amount of exemplary damages and reduced the award of moral
THOUSAND FIVE HUNDRED PESOS
damages from P100,000 to P50,000 and attorney’s fees, from
(P1,067,500.00), as and for actual damages;
P100,000 to P50,000.
The Court of Appeals thus declared as valid the following:
___________________ (1) the act of DBP in appropriating Cuba’s leasehold rights and
interest under Fishpond Lease Agreement No. 2083; (2) the
4
Per Judge Artemio R. Corpus. OR, 686-705. deeds of assignment executed by Cuba in favor of DBP; (3) the
22 deed of conditional sale between CUBA and DBP; and (4) the
22 SUPREME COURT REPORTS ANNOTATED deed of conditional sale between DBP and Caperal, the
Development Bank of the Philippines vs. Court of Appeals Fishpond Lease Agreement in favor of Caperal, and the
assignment of leasehold rights executed by Caperal in favor of
DBP. It then ordered DBP to turn over possession of the
1. b)The sum of ONE HUNDRED THOUSAND property to Caperal as lawful holder of the leasehold rights and
(P100,000.00) PESOS as moral damages; to pay CUBA the following amounts: (a) P1,067,500 as actual
2. c)The sum of FIFTY THOUSAND (P50,000.00) damages; P50,000 as moral damages; and P50,000 as attorney’s
PESOS, as and for exemplary damages; fees.
3. d)And the sum of ONE HUNDRED THOUSAND Since their motions for reconsideration were denied,6 DBP
(P100,000.00) PESOS, as and for attorney’s fees; and CUBA filed separate petitions for review.
In its petition (G.R. No. 118342), DBP assails the award of
1. 6.And ORDERING defendant Development Bank of actual and moral damages and attorney’s fees in favor of
the Philippines to reimburse and pay to defendant CUBA.
Agripina Caperal the sum of ONE MILLION FIVE Upon the other hand, in her petition (G.R. No. 118367),
HUNDRED THIRTY-TWO THOUSAND SIX CUBA contends that the Court of Appeals erred (1) in not
HUNDRED TEN PESOS AND SEVENTY-FIVE holding that the questioned deed of assignment was a pactum
CENTAVOS (P1,532,610.75) representing the commissorium contrary to Article 2088 of the Civil Code; (b)
amounts paid by defendant Agripina Caperal to in holding that the deed of assignment effected a novation of the
defendant Development Bank of the Philippines promissory notes; (c) in holding that CUBA was estopped from
under their Deed of Conditional Sale. questioning the validity of the deed of assignment when she
agreed to repurchase her leasehold rights under a deed of
CUBA and DBP interposed separate appeals from the decision conditional sale; and (d) in reducing the amounts of moral
to the Court of Appeals. The former sought an increase in the damages and attorney’s fees, in deleting the award of exemplary
amount of damages, while the latter questioned the findings of damages, and in not increasing the amount of damages.
fact and law of the lower court.
In its decision5 of 25 May 1994, the Court of Appeals ruled ____________________
that (1) the trial court erred in declaring that the deed of
assignment was null and void and that defendant Caperal could 6
Rollo, G.R. No. 118342, 43; Rollo, G.R. No. 118367f, 55.
not validly acquire the leasehold rights from DBP; (2) contrary 24
to the claim of DBP, the assignment was not a cession under 24 SUPREME COURT REPORTS ANNOTATED
Article 1255 of the Civil Code because DBP appeared to be the
sole creditor to CUBA—cession presupposes plurality of debts Development Bank of the Philippines vs. Court of Appeals
and creditors; (3) the deeds of assignment represented the We agree with CUBA that the assignment of leasehold rights
voluntary act of CUBA in assigning her property rights in was a mortgage contract.
It is undisputed that CUBA obtained from DBP three creditors and involves the assignment of all the debtor’s
separate loans totalling P335,000, each of which was covered property.
by a promissory note. In all of these notes, there was a provision Nor did the assignment constitute dation in payment under
that: “In the event of foreclosure of the mortgage securing this Article 1245 of the Civil Code, which reads: “Dation in
notes, I/We further bind myself/ourselves, jointly and severally, payment, whereby property is alienated to the creditor in
to pay the deficiency, if any.”7 satisfaction of a debt in money, shall be governed by the law on
Simultaneous with the execution of the notes was the sales.” It bears stressing that the assignment, being in its essence
execution of “Assignments of Leasehold Rights”8 where a mortgage, was but a security and not a satisfaction of
CUBA assigned her leasehold rights and interest on a 44- indebtedness.10
hectare fishpond, together with the improvements thereon. As We do not, however, buy CUBA’s argument that condition
pointed out by CUBA, the deeds of assignment constantly No. 12 of the deed of assignment constituted pactum
referred to the assignor (CUBA) as “borrower”; the assigned commissorium. Said condition reads:
rights, as mortgaged properties; and the instrument itself, as
mortgage contract. Moreover, under condition No. 22 of the ______________________
deed, it was provided that “failure to comply with the terms and
condition of any of the loans shall cause all other loans to 10
Philippine Bank of Commerce v. De Vera, 6 SCRA 1026,
become due and demandable and all mortgages shall be 1029 [1962].
foreclosed.” And, condition No. 33 provided that if 26
“foreclosure is actually accomplished, the usual 10% attorney’s 26 SUPREME COURT REPORTS ANNOTATED
fees and 10% liquidated damages of the total obligation shall be
imposed.” There is, therefore, no shred of doubt that a mortgage Development Bank of the Philippines vs. Court of Appeals
was intended. 12. That effective upon the breach of any condition of this
Besides, in their stipulation of facts the parties admitted thatassignment, the Assignor hereby appoints the Assignee his
the assignment was by way of security for the payment of the Attorney-in-fact with full power and authority to take actual
loans; thus: possession of the property above-described, together with all
3. As security for said loans, plaintiff Lydia P. Cuba executed improvements thereon, subject to the approval of the Secretary
two Deeds of Assignment of her Leasehold Rights. of Agriculture and Natural Resources, to lease the same or any
In People’s Bank & Trust Co. vs. Odom,9 this Court had the portion thereof and collect rentals, to make repairs or
occasion to rule that an assignment to guarantee an obligation improvements thereon and pay the same, to sell or otherwise
is in effect a mortgage. dispose of whatever rights the Assignor has or might have over
said property and/or its improvements and perform any other
______________________ act which the Assignee may deem convenient to protect its
interest. All expenses advanced by the Assignee in connection
7
Exhibits “B,” “C,” and “D”; OR, 37-39. with purpose above indicated which shall bear the same rate of
8
Exhibits “B-1,” “C-1,” and “D-1.” interest aforementioned are also guaranteed by this Assignment.
9
64 Phil. 126, 132 [1937]. Any amount received from rents, administration, sale or
25 disposal of said property may be supplied by the Assignee to
the payment of repairs, improvements, taxes, assessments and
VOL. 284, JANUARY 5, 1998 25
other incidental expenses and obligations and the balance, if
Development Bank of the Philippines vs. Court of Appeals any, to the payment of interest and then on the capital of the
We find no merit in DBP’s contention that the assignment indebtedness secured hereby. If after disposal or sale of said
novated the promissory notes in that the obligation to pay a sum property and upon application of total amounts received there
of money the loans (under the promissory notes) was shall remain a deficiency, said Assignor hereby binds himself
substituted by the assignment of the rights over the fishpond to pay the same to the Assignee upon demand, together with all
(under the deed of assignment). As correctly pointed out by interest thereon until fully paid. The power herein granted shall
CUBA, the said assignment merely complemented or not be revoked as long as the Assignor is indebted to the
supplemented the notes; both could stand together. The former Assignee and all acts that may be executed by the Assignee by
was only an accessory to the latter. Contrary to DBP’s virtue of said power are hereby ratified.
submission, the obligation to pay a sum of money remained, and The elements of pactum commissorium are as follows: (1) there
the assignment merely served as security for the loans covered should be a property mortgaged by way of security for the
by the promissory notes. Significantly, both the deeds of payment of the principal obligation, and (2) there should be a
assignment and the promissory notes were executed on the stipulation for automatic appropriation by the creditor of the
same dates the loans were granted. Also, the last paragraph of thing mortgaged in case of non-payment of the principal
the assignment stated: “The assignor further reiterates and obligation within the stipulated period.11
states all terms, covenants, and conditions stipulated in the Condition No. 12 did not provide that the ownership over
promissory note or notes covering the proceeds of this loan, the leasehold rights would automatically pass to DBP upon
making said promissory note or notes, to all intent and purposes, CUBA’s failure to pay the loan on time. It merely provided for
an integral part hereof.” the appointment of DBP as attorney-in-fact with authority,
Neither did the assignment amount to payment
by cession under Article 1255 of the Civil Code for the plain _____________________
and simple reason that there was only one creditor, the DBP.
Article 1255 contemplates the existence of two or more
11
V TOLENTINO, ARTURO M., COMMENTARIES & Instead of taking ownership of the questioned real rights
JURISPRUDENCE ON THE CIVIL CODE OF THE upon default by CUBA, DBP should have foreclosed the
PHILIPPINES, 536-537 [1992] citing Uy Tong v. Court of mortgage, as has been stipulated in condition No. 22 of the deed
Appeals, 161 SCRA 383 [1988]. of assignment. But, as admitted by DBP, there was no such
27 forclosure. Yet, in its letter dated 26 October 1979, addressed
VOL. 284, JANUARY 5, 1998 to the Minister
27 of Agriculture and Natural Resources and
coursed through the Director of the Bureau of Fisheries and
Aquatic Resources, DBP declared that it “had foreclosed the
among other things, to sell or otherwise dispose of the said real mortgage and enforced the assignment of leasehold rights on
rights, in case of default by CUBA, and to apply the proceeds March 21, 1979 for failure of said spouses [Cuba spouses] to
to the payment of the loan. This provision is a standard pay their loan amortizations.”14 This only goes to show that
condition in mortgage contracts and is in conformity with DBP was aware of the necessity of foreclosure proceedings.
Article 2087 of the Civil Code, which authorizes the mortgagee In view of the false representation of DBP that it had already
to foreclose the mortgage and alienate the mortgaged property foreclosed the mortgage, the Bureau of Fisheries cancelled
for the payment of the principal obligation. CUBA’s original lease permit, approved the deed of conditional
DBP, however, exceeded the authority vested by condition sale, and issued a new permit in favor of CUBA. Said acts
No. 12 of the deed of assignment. As admitted by it during the which were predicated on such false representation, as well as
pre-trial, it had “[w]ithout foreclosure proceedings, whether the subsequent acts emanating from DBP’s appropriation of the
judicial or extrajudicial, . . . appropriated the [l]easehold leasehold rights, should therefore be set aside. To validate these
[r]ights of plaintiff Lydia Cuba over the fishpond in question.” acts would open the floodgates to circumvention of Article
Its contention that it limited itself to mere administration by 2088 of the Civil Code.
posting caretakers is further belied by the deed of conditional
sale it executed in favor of CUBA. The deed stated: ____________________
WHEREAS, the Vendor [DBP] by virtue of a deed of
assignment executed in its favor by the herein vendees [Cuba 13
Eugenio v. Perdido, 97 Phil. 41, 44 [1955]; Republic v.
spouses] the former acquired all the rights and interest of the
Go Bon Lee, 1 SCRA 1166, 1170 [1961]; Hian v. Court of Tax
latter over the above-described property;
Appeals, 59 SCRA 110, 124 [1974].
... 14
Exhibit “N-1-A”; OR, 454.
The title to the real estate property [sic] and all
29
improvements thereon shall remain in the name of the
Vendor until after the purchase price, advances and interest VOL. 284, JANUARY 5, 1998
shall have been fully paid. (Emphasis supplied). Development Bank of the Philippines vs. Court of Appeals
It is obvious from the above-quoted paragraphs that DBP had Even in cases where foreclosure proceedings were had, this
appropriated and taken ownership of CUBA’s leasehold rights Court had not hesitated to nullify the consequent auction sale
merely on the strength of the deed of assignment. for failure to comply with the requirements laid down by law,
DBP cannot take refuge in condition No. 12 of the deed of such as Act No. 3135, as amended.15 With more reason that the
assignment to justify its act of appropriating the leasehold sale of property given as security for the payment of a debt be
rights. As stated earlier, condition No. 12 did not provide that set aside if there was no prior foreclosure proceeding.
CUBA’s default would operate to vest in DBP ownership of the Hence, DBP should render an accounting of the income de-
said rights. Besides, an assignment to guarantee an obligation, rived from the operation of the fishpond in question and apply
as in the present case, is virtually a mortgage and not an the said income in accordance with condition No. 12 of the deed
absolute conveyance of title which confers ownership on the of assignment which provided: “Any amount received from
assignee.12 rents, administration, . . . may be applied to the payment of
repairs, improvements, taxes, assessment, and other incidental
____________________ expenses and obligations and the balance, if any, to the payment
of interest and then on the capital of the indebtedness . . . .”
12
Philippine Bank of Commerce v. De Vera, supra note 10. We shall now take up the issue of damages.
28 Article 2199 provides:
28 SUPREME COURT REPORTS ANNOTATED Except as provided by law or by stipulation, one is entitled to
an adequate compensation only for such pecuniary loss suffered
by him as he has duly proved. Such compensation is referred to
At any rate, DBP’s act of appropriating CUBA’s leasehold as actual or compensatory damages.
rights was violative of Article 2088 of the Civil Code, which Actual or compensatory damages cannot be presumed, but must
forbids a creditor from appropriating, or disposing of, the thing be proved with reasonable degree of certainty.16 A court cannot
given as security for the payment of a debt. rely on speculations, conjectures, or guesswork as to the fact
The fact that CUBA offered and agreed to repurchase her and amount of damages, but must depend upon competent proof
leasehold rights from DBP did not estop her from questioning that they have been suffered by the injured party and on the best
DBP’s act of appropriation. Estoppel is unavailing in this case. obtainable evidence of the actual amount
As held by this Court in some cases,13 estoppel cannot give
validity to an act that is prohibited by law or against public __________________
policy. Hence, the appropriation of the leasehold rights, being
contrary to Article 2088 of the Civil Code and to public policy,
cannot be deemed validated by estoppel.
15
Roxas v. Court of Appeals, 221 SCRA 1. That from February to May 1978, I was then seriously ill in
729 [1993]; Sempio v. Court of Appeals, 263 SCRA Manila and within the same period I neglected the management
617 [1996]. and supervision of the cultivation and harvest of the produce of
16
Del Mundo v. Court of Appeals, 240 SCRA the aforesaid fishpond thereby resulting to the irreparable loss
348 [1995]; Luf-thansa German Airlines v. Court of in the produce of the same in the amount of about P500,000.00
Appeals, 243 SCRA 600 [1995]; Development Bank of the to my great damage and prejudice due to fraudulent acts of some
Philippines v. Court of Appeals, 249 SCRA 331 [1995]; Del of my fishpond workers.
Rosario v. Court of Appeals, G.R. No. 118325, 29 January Nowhere in the said letter, which was written seven months
1997. after DBP took possession of the fishpond, did CUBA intimate
30 that upon DBP’s takeover there was a total of 230,000 pieces of
30 SUPREME COURT REPORTS ANNOTATED bangus, but all of which died because of DBP’s representatives
prevented her men from feeding the fish.
Development Bank of the Philippines vs. Court of Appeals The award of actual damages should, therefore, be struck
thereof.17 It must point out specific facts which could afford a down for lack of sufficient basis.
basis for measuring whatever compensatory or actual damages In view, however, of DBP’s act of appropriating CUBA’s
are borne.18 leasehold rights which was contrary to law and public policy,
In the present case, the trial court awarded in favor of as well as its false representation to the then Ministry of
CUBA P1,067,500 as actual damages consisting of P550,000 Agriculture and Natural Resources that it had “foreclosed the
which represented the value of the alleged lost articles of CUBA mortgage,” an award of moral damages in the amount of
and P517,500 which represented the value of the 230,000 pieces P50,000 is in order conformably with Article 2219(10), in
of bangus allegedly stocked in 1979 when DBP first ejected relation to Article 21, of the Civil Code. Exemplary or
CUBA from the fishpond and the adjoining house. This award corrective damages in the amount of P25,000 should likewise
was affirmed by the Court of Appeals. be awarded by way of example or correction for the public
We find that the alleged loss of personal belongings and good.20 There being an award of exemplary damages, attorney’s
equipment was not proved by clear evidence. Other than the fees are also recoverable.21
testimony of CUBA and her caretaker, there was no proof as to
the existence of those items before DBP took over the fishpond ____________________
in question. As pointed out by DBP, there was no “inventory of
the alleged lost items before the loss which is normal in a 19
Exhibit 4, OR, 560.
project which sometimes, if not most often, is left to the care of 20
Article 2229, Civil Code.
other persons.” Neither was a single receipt or record of 21
Article 2208(1), Civil Code.
acquisition presented.
32
Curiously, in her complaint dated 17 May 1985, CUBA
included “losses of property” as among the damages resulting 32 SUPREME COURT REPORTS ANNOTATED
from DBP’s take-over of the fishpond. Yet, it was only in Development Bank of the Philippines vs. Court of Appeals
September 1985 when her son and a caretaker went to the WHEREFORE, the 25 May 1994 Decision of the Court of
fishpond and the adjoining house that she came to know of the Appeals in CA-G.R. CV No. 26535 is hereby REVERSED,
alleged loss of several articles. Such claim for “losses of except as to the award of P50,000 as moral damages, which is
property,” having been made before knowledge of the alleged hereby sustained. The 31 January 1990 Decision of the
actual loss, was therefore speculative. The alleged loss could Regional Trial Court of Pangasinan, Branch 54, in Civil Case
have been a mere afterthought or subterfuge to justify her claim No. A-1574 is MODIFIED setting aside the finding that
for actual damages. condition No. 12 of the deed of assignment constituted pactum
With regard to the award of P517,000 representing the value commis-sorium and the award of actual damages; and by
of the alleged 230,000 pieces of bangus which died when reducing the amounts of moral damages from P100,000 to
P50,000; the exemplary damages, from P50,000 to P25,000;
_____________________ and the attorney’s fees, from P100,000 to P20,000. The
Development Bank of the Philippines is hereby ordered to
17
Lufthansa German Airlines v. Court of render an accounting of the income derived from the operation
Appeals, supra note 16; People v. Rosario, 246 SCRA of the fishpond in question.
658 [1995]; Del Rosario v. Court of Appeals, supra note Let this case be REMANDED to the trial court for the
16; Sumalpong v. Court of Appeals, G.R. No. 123404, 26 reception of the income statement of DBP, as well as the
February 1997. statement of the account of Lydia P. Cuba, and for the
18
Del Mundo v. Court of Appeals, supra note 16. determination of each party’s financial obligation to one
31 another.
VOL. 284, JANUARY 5, 1998 SO ORDERED.
31
Bellosillo, Vitug and Kapunan, JJ., concur.
Decision in CA-G.R. CV No. 26535 reversed; Decision in
DBP took possession of the fishpond in March 1979, the same Civil Case No. A-1574 modified.
was not called for. Such loss was not duly proved; besides, the Notes.—The Government is never estopped by mistakes or
claim therefor was delayed unreasonably. From 1979 until after errors on the part of its agents. (People vs. Ventura, 4 SCRA
the filing of her complaint in court in May 1985, CUBA did not 208 [1962])
bring to the attention of DBP the alleged loss. In fact, in her
letter dated 24 October 1979,19 she declared:
There can be no novation unless two distinct and successive Same; Same; Same; The rule is that a mortgage
binding contracts take place, with the latter one designed to annotated on a void title is valid if the mortgagee registered the
replace the preceding convention. Modifications introduced mortgage in good faith.—After the sale of the Property to her,
before a bargain becomes obligatory can in no sense constitute Mojica obtained a loan from Gonzales secured by a real estate
novation in law. (Montelibano vs. Bacolod-Murcia Co., Inc., 5 mortgage over the Property. Gonzales registered this mortgage
SCRA 36 [1962]) on 22 February 1985 with the Register of Deeds who annotated
the mortgage on the void TCT 13138 in Mojica’s name. The
——o0o—— nullity of TCT 13138 did not automatically carry with it the
nullity of the annotation of Gonzales’ mortgage. The rule is that
SUPREME COURT REPORTS ANNOTATED a mortgage annotated on a void title is valid if the mortgagee
registered the mortgage in good faith.
Pineda vs. Court of Appeals Same; Same; Same; To bind third parties to an
G.R. No. 114172. August 25, 2003.* unregistered encumbrance, the law requires actual notice.—
JUANITA P. PINEDA, assisted by her husband, CRISPIN Gonzales registered her mortgage in good faith. Gonzales had
PINEDA, and LILIA SAYOC, petitioners, vs. COURT OF no actual notice of the prior unregistered mortgage in favor of
APPEALS and TERESITA A. GONZALES, assisted by her Pineda and Sayoc. To bind third parties to an unregistered
husband, FRANCISCO G. GONZALES, respondents. encumbrance, the law requires actual notice. The fact that
Civil Law; Property; Land Titles; No valid transfer Mojica, who sold the Property to Gonzales, had actual notice of
certificate of title can issue from a void transfer certificate of the unregistered mortgage did not constitute actual notice to
title unless an innocent purchaser for value has intervened.— Gonzales, absent proof that Gonzales herself had actual notice
Mojica registered with the Register of Deeds the deed of sale of the prior mortgage. Thus, Gonzales acquired her rights as a
executed by the Spouses Benitez conveying the Property to her. mortgagee in good faith.
Mojica also presented to the Register of Deeds the second Same; Same; Same; The settled rule is that the auction
owner’s duplicate of TCT 8361. The Register of Deeds sale retroacts to the date of the registration of the mortgage
cancelled TCT 8361 and issued on 14 December 1983 TCT putting the auction sale beyond the reach of any intervening lis
13138 in the name of Mojica. However, since TCT 13138 is pendens, sale or attachment.—When Gonzales purchased the
derived from the void second owner’s duplicate of TCT 8361, Property at the auction sale, Pineda and Sayoc had already
TCT 13138 is also void. No valid transfer certificate of title can annotated the lis pendens on the original of TCT 8361, which
issue from a void transfer certificate of title, unless an innocent remained valid. However, the mortgage of Gonzales was
purchaser for value has intervened. validly registered prior to the notation of the lis pendens. The
Same; Same; Same; Title refers to the ownership of the subsequent annotation of the lis pendens could not defeat the
Property covered by the transfer certificate of title while the rights of the mortgagee or the purchaser at the auction sale who
transfer certificate of title merely evidences that ownership.— derived their rights under a prior mortgage validly registered.
Therefore, TCT 13138 issued in the name of Mojica is void. The settled rule is that the auction sale retroacts to the date of
However, what is void is the transfer certificate of title the registration of the mortgage, putting the auction sale beyond
and not the title over the Property. The title refers to the the reach of any intervening lis pendens, sale or attachment.
ownership of the Property covered by the transfer certificate of
title while the transfer certificate of title merely evidences that PETITION for review on certiorari of the decision and
ownership. A certificate of title is not equivalent to title as the resolution of the Court of Appeals.
Court explained in Lee Tek Sheng v. Court of Appeals.
Same; Same; Mortgage; A mortgage is merely an The facts are stated in the opinion of the Court.
encumbrance on the property and does not extinguish the title Bayani L. Bernardo for petitioners.
of the debtor who does not lose his principal attribute as owner The Law Firm of Miguel R. Armovit for private
to dispose of the property; The law even considers void a respondents.
stipulation forbidding the owner of the property from alienating 440
the mortgaged immovable.—The prior mortgage of the 440 SUPREME COURT REPORTS ANNOTATED
Property by the Spouses Benitez to Pineda and Sayoc did not
prevent the Spouses Benitez, as owners of the Property, from Pineda vs. Court of Appeals
selling the Property to Mojica. A mortgage is merely an
encumbrance on the property and does not extinguish the title CARPIO, J.:
of the debtor who does not lose his principal attribute as owner
to dispose of the property. The law even considers void a The Case
stipulation forbidding the owner of the property from alienating This petition for review on certiorari1 seeks to reverse the
the mortgaged immovable. Decision2 of the Court of Appeals dated 26 August 1993 in CA-
G.R. SP No. 28651 as well as the Resolution dated 4 March
_______________ 1994 denying the motion for reconsideration. In its assailed
decision, the Court of Appeals declared void the orders3 of the
*
FIRST DIVISION. Regional Trial Court4 of Cavite City dated 10 January 1992, 5
439 February 1992 and 30 April 1992, and made the preliminary
VOL. 409, AUGUST 25, 2003 injunction
439permanent. In the first order, the trial court declared
that Teresita A. Gonzales, despite notice, failed to appear at the
Pineda vs. Court of Appeals hearing of the motion to surrender Transfer Certificate of Title
No. T-16084 and to file opposition to the motion. In the second In their answer, the Spouses Benitez admitted selling to
order, the trial court declared void the original and owner’s Mojica the Property which was already subject to a previous
duplicate of Transfer Certificate of Title No. T-16084 and mortgage in favor of Pineda and Sayoc. The Spouses Benitez
ordered the reinstatement of Transfer Certificate of Title No. T- claimed that under the Acknowledgment of
8361. In the third order, the trial court denied the motions to lift Indebtedness,11 Mojica, with the conformity of Pineda and
the first order and to reconsider the second order. Sayoc, agreed to assume the balance of the mortgage debt of the
The Facts Spouses Benitez to Pineda and Sayoc.
On 4 January 1982, the Spouses Virgilio and Adorita Benitez The Spouses Benitez denied any knowledge of Mojica’s
(“Spouses Benitez”) mortgaged a house and lot (“Property”) petition for the issuance of a second owner’s duplicate of TCT
covered by Transfer Certificate of Title No. T-8361 (“TCT 8361. The Spouses Benitez prayed for the dismissal of the
8361”) in favor of Juanita P. Pineda (“Pineda”) and Leila P. complaint and the award of moral damages and attorney’s fees.
Sayoc (“Sayoc”). The real estate mortgage secured the Spouses The Spouses Benitez
Benitez’s loan of P243,000 with a one-year maturity
period.5 Pineda and Sayoc did not register the mortgage with _______________
the Register of Deeds. The Spouses Benitez delivered the
7
owner’s duplicate of TCT 8361 to Pineda. Records, p. 8.
8
On 9 November 1983, with the consent of Pineda, the Ibid.
Spouses Benitez sold the house,6 which was part of the
9
Exhibit “C,” ibid., p. 56.
10
Property, to Olivia Branch 17.
11
Records, p. 34.
_______________ 442
1
Under Rule 45 of the Rules of Court. Pineda vs. Court of Appeals
2
Penned by Associate Justice Buenaventura J. Guerrero, also prayed that in case the court would render judgment in
with Associate Justices Lourdes K. Tayao-Jaguros, Gloria C. favor of Pineda and Sayoc, only Mojica should be held liable.
Paras and Alfredo J. Lagamon concurring, and Associate On the other hand, Mojica denied conspiring with the
Justice Artemon D. Luna dissenting. Spouses Benitez and committing fraud in filing the petition for
3
Penned by Judge Rolando D. Diaz. the issuance of a second owner’s duplicate of TCT 8361.
4
Branch 17. Mojica stated that the Spouses Benitez sold to her the Property.
5
Paragraph 1 of the Deed of Real Estate Mortgage, Exhibit Mojica claimed that upon the execution of the deed of sale, the
“B,” Records, p. 5. Spouses Benitez delivered to her the owner’s duplicate of TCT
6
Exhibit “D,” ibid., p. 9. 8361. However, Mojica alleged that the owner’s duplicate
441 of TCT 8361 was lost.
VOL. 409, AUGUST 25, 2003 441 also asserted that she verified with the Register of
Mojica
Pineda vs. Court of Appeals Deeds of Cavite City the provision in the deed of sale that the
G. Mojica (“Mojica”). On the same date, Mojica filed a petition Property was free from all liens and encumbrances and found
for the issuance of a second owner’s duplicate of TCT the same to be true. Mojica added that on learning of the
8361 alleging that she “purchased a parcel of land”7 and the Spouses Benitez’s mortgage with Pineda and Sayoc, she signed
“owner’s duplicate copy of TCT No. T-8361 was lost.”8 the Acknowledgment of Indebtedness. Mojica contended that
On 7 December 1983, the trial court granted the petition. since Pineda, for herself and Sayoc, conformed to this
The Register of Deeds of Cavite City issued the second owner’s agreement, Pineda and Sayoc had no personality to file the
duplicate of TCT 8361 in the name of the Spouses Benitez. complaint. Mojica further alleged that Pineda and Sayoc were
On 12 December 1983, the Spouses Benitez sold the in estoppel from challenging the validity of the second owner’s
lot9 covered by TCT 8361 to Mojica. With the registration of duplicate of TCT 8361 because Pineda and Sayoc, despite
the deed of sale and presentation of the second owner’s notice, failed to oppose the reconstitution of the title.
duplicate of TCT 8361, the Register of Deeds cancelled TCT Mojica maintained that the Spouses Benitez are
8361 and issued Transfer Certificate of Title No. T-13138 indispensable parties because TCT 8361 was in their name.
(“TCT 13138”) in the name of Mojica. Mojica also asserted that she did not breach
On 22 February 1985, Mojica obtained a loan of P290,000 the Acknowledgment of Indebtedness since she had paid the
from Teresita A. Gonzales (“Gonzales”). Mojica executed a Spouses Benitez an amount more than their debt to Pineda and
promissory note and a deed of mortgage over the Property in Sayoc. Mojica contended that had the Spouses Benitez paid the
favor of Gonzales. Gonzales registered this deed of mortgage amount to Pineda and Sayoc, there would have been no
with the Register of Deeds of Cavite City who annotated the obligation to assume. Mojica prayed for the dismissal of the
mortgage on TCT 13138 as Entry No. 33209. complaint and the award of moral and exemplary damages and
Meanwhile, on 8 May 1985, Pineda and Sayoc filed a attorney’s fees.
complaint before the Regional Trial Court10 of Cavite City, During the pendency of the case, Pineda caused the
docketed as Civil Case No. 4654, against the Spouses Benitez annotation on 18 August 1986 of a notice of lis pendens on the
and Mojica. The complaint prayed for the cancellation of the original of TCT 8361 with the Register of Deeds.
second owner’s duplicate of TCT 8361 and the award of moral After trial, the trial court rendered a Decision dated 15 June
damages and attorney’s fees. 1987, the dispositive portion of which reads:
“WHEREFORE, in view of the foregoing, the Court hereby Consequently, on 6 December 1991, Pineda and Sayoc filed a
renders judgment declaring the second owner’s duplicate motion with the trial court for the issuance of an order requiring
of TCT No. T-8361 of the land records of Cavite as null and Gonzales to surrender the owner’s duplicate of TCT 16084 to
void and the Register of Deeds of Cavite City is hereby ordered the Register of Deeds of Cavite City.
upon payment of the corresponding legal fees the annotation of In its Order dated 10 January 1992 (“first order”), the trial
this pronouncement in its record and the revival of the first court declared that Gonzales, despite notice, failed to appear at
owner’s duplicate with the same faith and credit before its the hearing and to oppose the motion to surrender TCT 16084.
alleged loss. In the same order, the trial court directed Gonzales to file a
443 memorandum. Gonzales received this order on 20 January
VOL. 409, AUGUST 25, 2003 1992. 443
Subsequently, Gonzales filed a motion to lift the first order
Pineda vs. Court of Appeals alleging that since she was not a party in Civil Case No. 4654,
The counterclaim of defendants Benitezes is hereby dismissed. the decision did not bind her. Gonzales also claimed that she did
No pronouncement as to costs. not receive notice of the hearing, copy of the motion to
SO ORDERED.”12 surrender TCT 16084 and the order resetting the hearing
On 7 December 1987, Mojica defaulted in paying her obligation because she was in the United States of America. Gonzales
to Gonzales. Hence, Gonzales extrajudicially foreclosed the finally alleged that she was an innocent purchaser for value.
mortgage. On 27 January 1988, Gonzales purchased at public In an Order dated 5 February 1992 (“second order”), the
auction the Property for P423,244.88. trial court declared void the original and the owner’s duplicate
For failure of Mojica to redeem the Property, Gonzales of TCT 16084 in the name of Gonzales. The trial court ordered
consolidated the title to the Property. On 29 March 1989, the reinstatement of TCT 8361 in the name of the Spouses
Gonzales executed the corresponding Affidavit of Benitez.
Consolidation. Gonzales filed a motion for reconsideration of the second
On 30 March 1989, the Register of Deeds of Cavite City order. On 30 April 1992, the trial court issued an Order (“third
cancelled TCT 13138, which was in Mojica’s name, and issued order”) denying Gonzales’ motions to lift the first order and to
Transfer Certificate of Title No. T-16084 (“TCT 16084”) in the reconsider the second order.
name of Gonzales. TCT 16084 contained Entry No. 35520, the Aggrieved by the trial court’s orders, Gonzales filed with
notice of lis pendens dated 18 August 1986 in relation to Civil the Court of Appeals a petition for the issuance of a writ of
Case No. 4654.13 The Register of Deeds annotated on TCT prohibitory injunction.
16084 the notice of lis pendens, even though TCT 13138 did On 26 August 1993, the Court of Appeals rendered a
not contain such annotation. decision disposing as follows:
Meanwhile, dissatisfied with the trial court’s decision, the “WHEREFORE, the petition is granted. The assailed orders
Spouses Benitez and Mojica appealed to the Court of Appeals, dated 10 January 1992, 5 February 1992, and 30 April 1992 are
docketed as CA-G.R. CV No. 15417. On 29 January 1991, the hereby declared NULL and VOID, and the preliminary
Court of Appeals rendered a Decision14 affirming the trial prohibitory injunction is made permanent.
court’s decision declaring void the second owner’s duplicate SO ORDERED.”15
of TCT 8361. The decision of the Court of Appeals became Hence, the instant petition.
final and was entered in the Book of Entries of Judgments on
17 June 1991. _______________
The Court of Appeals returned the records of the case to the
trial court on 10 July 1991. On motion of Pineda and Sayoc, the 15
Rollo, pp. 75-82.
trial court issued a writ of execution to enforce the judgment.
445
However, the writ of execution was returned unsatisfied.
The Sheriffs Return of 12 September 1991 stated that the VOL. 409, AUGUST 25, 2003
Register of Deeds could not implement the writ of execution. Pineda vs. Court of Appeals
The Sheriffs Return showed that the Register of Deeds had The Ruling of the Court of Appeals
already cancelled TCT 8361 and issued TCT 16084 in the name In the Court of Appeals, Gonzales maintained that the trial court
of Gonzales by virtue of the consolidation of title dated 29had no jurisdiction over her person and property because Pineda
March 1989. and Sayoc did not implead her as a party in Civil Case No. 4654.
Insisting that the questioned orders were procured through
_______________ extrinsic or collateral fraud, Gonzales claimed that the orders of
the trial court were void. Gonzales further alleged that she was
12
Rollo, pp. 29-32. an innocent purchaser for value making her title to the Property
13
In TCT 16084, the notice of lis pendens erroneously indefeasible and imprescriptible.
referred to Civil Case No. 4554. Pineda and Sayoc, on the other hand, argued that the notice
14
Penned by Associate Justice Alfredo L. Benipayo with of lis pendens annotated on the title of the Property bound
Associate Justices Manuel C. Herrera and Regina G. Ordoñez- Gonzales, as subsequent purchaser of the Property, to the
Benitez concurring. outcome of the case. Pineda and Sayoc contended that Gonzales
444 was not a purchaser in good faith because Gonzales had
444 SUPREME COURT REPORTS ANNOTATED constructive notice of the pending litigation when she
Pineda vs. Court of Appeals purchased the Property.
Moreover, Pineda and Sayoc argued that no separate action Validity of TCT 13138 and TCT 16084
is necessary to cancel the title because Gonzales is bound by the Mojica filed a petition for reconstitution17 of the owner’s
outcome of the litigation. They contended that there was no duplicate of TCT 8361 claiming that this owner’s duplicate was
extrinsic fraud because the notice of lis pendens warned lost.
Gonzales of the pendency of Civil Case No. 4654 where she
could have intervened. Pineda and Sayoc further alleged that _______________
foreclosure and sale, not a mortgage, vest title on a mortgagee.
Foreclosure and sale, however, are always subject to a notice of 17
Sec. 109 of PD 1529 provides:
lis pendens. “SEC. 109. Notice and replacement of lost duplicate
In granting the petition, the Court of Appeals ruled that the certificate.—In case of loss or theft of an owner’s duplicate
trial court erred when it voided TCT 16084 upon a mere motion certificate of title, due notice under oath shall be sent by the
for the surrender of the owner’s duplicate of TCT 16084. The owner or by someone in his behalf to the Register of Deeds of
Court of Appeals further held that the trial court erred in the province or city where the land lies as soon as the loss or
ordering the reinstatement of TCT 8361 in the name of the theft is discovered. If a duplicate certificate is lost or destroyed,
Spouses Benitez. or cannot be produced by a person applying for the entry of a
The Court of Appeals held that Pineda and Sayoc should new certificate to him or for the registration of any instrument,
have filed the petition to surrender TCT 16084 in the original a sworn statement of the fact of such loss or de-
case where the decree of registration of TCT 16084 was entered 447
and not in Civil Case No. 4654. The second paragraph of
Section 108 of Presidential Decree No. 1529 16 (“PD 1529”) VOL. 409, AUGUST 25, 2003
requires the filing of such separate petition. The appellate court Pineda vs. Court of Appeals
However, contrary to Mojica’s claims, the owner’s duplicate
stated that it was beyond the trial court’s authority to act on the
matter on a mere motion to surrender TCT 16084. of TCT 8361 was not lost but in Pineda’s possession. Since the
owner’s duplicate of TCT 8361 was in fact not lost or
_______________ destroyed, there was obviously nothing to reconstitute or
replace. Therefore, the trial court correctly ruled that the
16
Otherwise known as the “Property Registration Decree.” reconstitution proceedings and the second owner’s duplicate
446 of TCT 8361 are void.18 As the Court held in New Durawood
19
446 SUPREME COURT REPORTS ANNOTATED Co., Inc. v. Court of Appeals:
In the instant case, the owner’s duplicate certificates of title
Pineda vs. Court of Appeals were in the possession of Dy Quim Pong, the petitioner’s
The Court of Appeals likewise ruled that the trial court did not chairman of the board and whose family controls the petitioner-
acquire jurisdiction over the person of Gonzales because she corporation. Since said certificates were not in fact “lost or
was not a party in Civil Case No. 4654. The appellate court destroyed”, there was no necessity for the petition filed in the
found that Gonzales could not have known of, and appeared at, trial court for the “Issuance of New Owner’s Duplicate
the hearing of the motion to surrender TCT 16084 because Certificates of Title . . .” In fact, the said court never acquired
Gonzales was then out of the country. jurisdiction to order the issuance of new certificates. Hence, the
Assuming that the trial court could validly act on the motion newly issued duplicates are themselves null and void.
of Pineda and Sayoc, the Court of Appeals declared that the (Emphasis supplied)
orders nevertheless contravened Section 107 of PD 1529. This Mojica registered with the Register of Deeds the deed of sale
provision of law requires a hearing before the court can act on executed by the Spouses Benitez conveying the Property to her.
a petition to surrender a duplicate certificate of title. Mojica also presented to the Register of Deeds the second
The Issues owner’s duplicate of TCT 8361. The Register of Deeds
Petitioners raise the following issues for resolution: cancelled TCT 8361 and issued on 14 December 1983 TCT
13138 in the name of Mojica. However, since TCT 13138 is
1. 1.Whether a notice of lis pendens binds a subsequent derived from the void second owner’s duplicate of TCT
purchaser of the property to the outcome of the 8361, TCT 13138 is also void. No valid transfer certificate of
pending case. title can issue from a void transfer certificate of title, unless an
2. 2.Whether TCT 13138 and TCT 16084, being derived innocent purchaser for value has intervened.20
from the void second owner’s duplicate of TCT
8361, are also void. _______________
3. 3.Whether a separate action should be filed to
cancel TCT 16084. struction may be filed by the registered owner or other person
4. 4.Whether Gonzales was an innocent purchaser for in interest and registered.
value. Upon the petition of the registered owner or other person in
5. 5.Whether Gonzales was denied due process of law. interest, the court may, after notice and due hearing, direct the
issuance of a new duplicate certificate, which shall contain a
memorandum of the fact that it is issued in place of the lost
The Ruling of the Court duplicate certificate, but shall in all respects be entitled to like
We deny the petition. faith and credit as the original duplicate, and shall thereafter be
regarded as such for all purposes of this decree.”
18
Demetriou v. Court of Appeals, G.R. No. 115595, 14 Pineda vs. Court of Appeals
November 1994, 238 SCRA 158; Serra Serra v. Court of is not the equivalent of title, but is only the best evidence
Appeals, G.R. No. 34080, 22 March 1991, 195 SCRA 482. thereof. Title, as a concept of ownership, should not be confused
19
324 Phil. 109; 253 SCRA 740 (1996). with the certificate of title as evidence of such ownership
20
Sps. Eduarte v. Court of Appeals, 323 Phil. 462; 253 although both are interchangeable. x x x (Emphasis supplied)
SCRA 391 (1996); Temo-Obsequio v. Court of Appeals, G.R.
No. 107967, 1 March 1994, 230 SCRA 550; Jose v. Court of Mojica’s Title
Appeals, G.R. No. 85157, 26 Decem The prior mortgage of the Property by the Spouses Benitez to
Pineda and Sayoc did not prevent the Spouses Benitez, as
448
owners of the Property, from selling the Property to Mojica. A
448 SUPREME COURT REPORTS ANNOTATED mortgage is merely an encumbrance on the property and does
Pineda vs. Court of Appeals not extinguish the title of the debtor who does not lose his
Mojica was not a purchaser in good faith. Mojica alleged that principal attribute as owner to dispose of the property. 22 The
the Spouses Benitez gave her the owner’s duplicate of TCT law even considers void a stipulation forbidding the owner of
8361 on 9 November 1983, the day the Spouses Benitez sold to the property from alienating the mortgaged immovable. 23
her the house. However, in her petition for reconstitution, which Since the Spouses Benitez were the undisputed owners of
she also filed on the same day, 9 November 1983, Mojica the Property, they could validly sell and deliver the Property to
claimed that the owner’s duplicate of TCT 8361 was lost. In Mojica. The execution of the notarized deed of sale between the
effect, Mojica claimed that she received the owner’s duplicate Spouses Benitez and Mojica had the legal effect of actual or
of TCT 8361 from the Spouses Benitez, lost the same, and filed physical delivery. Ownership of the Property passed from the
the petition for reconstitution, all on the same day, 9 November Spouses Benitez to Mojica.24 The nullity of the second owner’s
1983. duplicate of TCT 8361 did not affect the validity of the sale as
In her petition for reconstitution, Mojica also claimed that between the Spouses Benitez and Mojica.
she “purchased a parcel of land” when in fact she only
purchased on 9 November 1983 the house, and not the lot _______________
covered by TCT 8361. Obviously, Mojica procured the
reconstitution of the second owner’s duplicate of TCT 22
E. C. McCullough & Co. v. Veloso and Serna, 46 Phil.
8361 through misrepresentation. Hence, Mojica was not a 1 (1924).
purchaser in good faith when she later purchased on 12 23
Article 2130 of the Civil Code.
December 1983 the lot since she knew of the irregularity in the 24
Articles 1496 and 1498 of the Civil Code provide,
reconstitution of the second owner’s duplicate of TCT 8361. respectively:
Therefore, TCT 13138 issued in the name of Mojica is void. “Art. 1496. The ownership of the thing sold is acquired by the
However, what is void is the transfer certificate of title vendee from the moment it is delivered to him, in any of the
and not the title over the Property. The title refers to the ways specified in Articles 1497 to 1501, or in any other manner
ownership of the Property covered by the transfer certificate of signifying an agreement that the possession is transferred from
title while the transfer certificate of title merely evidences that the vendor to the vendee.
ownership. A certificate of title is not equivalent to title as the xxx
Court explained in Lee Tek Sheng v. Court of Appeals:21 Art. 1498. When the sale is made through a public
x x x The certificate referred to is that document issued by the instrument, the execution thereof shall be equivalent to the
Register of Deeds known as the Transfer Certificate of Title delivery of the thing which is the object of the contract, if from
(TCT). By title, the law refers to ownership which is represented the deed the contrary does not appear or cannot clearly be
by that document. Petitioner apparently confuses certificate inferred.
with title. Placing a parcel of land under the mantle of the x x x.”
Torrens system does not mean that ownership thereof can no 450
longer be disputed. Ownership is different from a certificate of 450 SUPREME COURT REPORTS ANNOTATED
title. The TCT is only the best proof of ownership of a piece of
land. Besides, the certificate cannot always be considered as Pineda vs. Court of Appeals
conclusive evidence of ownership. Mere issuance of the Gonzales’ Title
certificate of title in the name of any person does not foreclose After the sale of the Property to her, Mojica obtained a loan
the possibility that the real property may be under co-ownership from Gonzales secured by a real estate mortgage over the
with persons not named in the certificate or that the registrant Property. Gonzales registered this mortgage on 22 February
may only be a trustee or that other parties may have acquired 1985 with the Register of Deeds who annotated the mortgage
interest subsequent to the issuance of the certificate of title. To on the void TCT 13138 in Mojica’s name. The nullity of TCT
repeat, registration 13138 did not automatically carry with it the nullity of the
annotation of Gonzales’ mortgage. The rule is that a mortgage
_______________ annotated on a void title is valid if the mortgagee registered the
mortgage in good faith.25 In Blanco v. Esquierdo,26 the Court
ber 1990, 192 SCRA 735; Duran v. Intermediate Appellate held:
Court, G.R. No. L-64159, 10 September 1985, 138 SCRA 489. That the certificate of title issued in the name of Fructuosa
21
G.R. No. 115402, 15 July 1998, 292 SCRA 544. Esquierdo is a nullity, the same having been secured thru fraud,
449 is not here in question. The only question for determination is
VOL. 409, AUGUST 25, 2003 whether449the defendant bank is entitled to the protection
accorded to “innocent purchasers for value”, which phrase,
according to sec. 38 of the Land Registration Law, includes an auction sale retroacts to the date of the registration of the
innocent mortgagee for value. The question, in our opinion, mortgage,28 putting the auction sale beyond the reach of any
must be answered in the affirmative. intervening lis pendens, sale or attachment. As the Court
The trial court, in the decision complained of, made no explained in Caviles, Jr. v. Bautista:29
finding that the defendant mortgagee bank was a party to the We have also consistently ruled that an auction or execution
fraudulent transfer of the land to Fructuosa Esquierdo. Indeed, sale retroacts to the date of levy of the lien of attachment. When
there is nothing alleged in the complaint which may implicate the subject property was sold on execution to the petitioners,
said defendant mortgagee in the fraud, or justify a finding that this sale retroacted to the date of inscription of petitioners’
it acted in bad faith. On the other hand, the certificate of title notice of attachment on October 6, 1982. The earlier
was in the name of the mortgagor Fructuosa Esquierdo when registration of the petitioners’ levy on preliminary attachment
the land was mortgaged by her to the defendant bank. Such gave them superiority and preference in rights over the attached
being the case, the said defendant bank, as mortgagee, had the property as against respondents.
right to rely on what appeared in the certificate and, in the
absence of anything to excite suspicion, was under no _______________
obligation to look beyond the certificate and investigate the title
of the mortgagor appearing on the face of said certificate. (De 27
See note 20.
Lara, et al. vs. Ayroso, 95 Phil., 185; 50 Off. Gaz., [10] 28
Dr. Caviles, Jr. v. Bautista, 377 Phil. 25; 319 SCRA
4838, Joaquin vs. Madrid, et al., 106 Phil., 1060). Being thus 24 (1999).
an innocent mortgagee for value, its right or lien upon the land 29
Ibid.
mortgaged must be respected and protected, even if the 452
mortgagor obtained her title thereto thru fraud. The remedy of 452 SUPREME COURT REPORTS ANNOTATED
the persons prejudiced is to bring an action for damages against
those causing the fraud, x x x. (Emphasis supplied) Pineda vs. Court of Appeals
Thus, the annotation of Gonzales’ mortgage on TCT 13138 was Accordingly, we rule that the execution sale in favor of the
valid and operated to bind the Property and the world, despite petitioner Caviles spouses was anterior and superior to the sale
the invalidity of TCT 13138. of the same property to the respondent Bautista spouses on
October 18, 1982. The right of petitioners to the surrender of
_______________ the owner’s duplicate copy of TCT No. 57006 covering the
subject property for inscription of the certificate of sale, and for
25
Penullar v. PNB, 205 Phil. 127; 120 SCRA 171 (1983). the cancellation of said certificate of title and the issuance of a
26
110 Phil. 494 (1960). new title in favor of petitioners cannot be gainsaid.
451 A contrary rule would make a prior registration of a mortgage
or any lien meaningless.30 The prior registered mortgage of
VOL. 409, AUGUST 25, 2003 Gonzales451prevails over the subsequent notice of lis pendens,
Pineda vs. Court of Appeals even if the auction sale took place after the notation of the lis
Gonzales registered her mortgage in good faith. Gonzales had pendens. Consequently, TCT 16084, issued to Gonzales after
no actual notice of the prior unregistered mortgage in favor of she presented the sheriff’s certificate of sale and her affidavit of
Pineda and Sayoc. To bind third parties to an unregistered consolidation, is valid.
encumbrance, the law requires actual notice.27 The fact that What remained with Pineda and Sayoc after the foreclosure
Mojica, who sold the Property to Gonzales, had actual notice of was the mortgagor’s residual rights over the foreclosed
the unregistered mortgage did not constitute actual notice to Property, which rights are the equity of redemption31 and a
Gonzales, absent proof that Gonzales herself had actual notice share in the surplus fund, if any.32 Since Mojica was not a
of the prior mortgage. Thus, Gonzales acquired her rights as a purchaser in good faith, the residual rights of Mojica were
mortgagee in good faith. subject to the claim of Pineda and Sayoc. Of course, Pineda and
When Mojica defaulted in paying her debt, Gonzales caused Sayoc may still file an action to recover the outstanding debt of
the extra-judicial foreclosure of the mortgaged Property. the Spouses Benitez, and even go after Mojica for her
Gonzales purchased the mortgaged Property as the sole bidder assumption of obligation under the Acknowledgment of
at the public auction sale. For Mojica’s failure to redeem the Indebtedness.
foreclosed Property within the prescribed period, Gonzales The Equities Favor Gonzales over Pineda and Sayoc
consolidated her title to the Property. Absent any evidence to Pineda and Sayoc were negligent in not registering their
the contrary, the sale at public auction of the Property to mortgage, which ultimately led to this controversy. Had Pineda
Gonzales was valid. Thus, the title or ownership of the Property and Sayoc registered their mortgage, their rights as prior
passed from Mojica to Gonzales. At this point, therefore, mortgagees would have prevailed over that of Gonzales. Pineda
Gonzales became the owner of the Property. and Sayoc were also negligent in not foreclosing their mortgage
When Gonzales purchased the Property at the auction sale, ahead of Gonzales, when they could have done so as early as 4
Pineda and Sayoc had already annotated the lis pendens on the January 1983 after the Spouses Benitez defaulted on their
original of TCT 8361, which remained valid. However, the loan.33 In contrast, the loan of Mojica fell due only on 7
mortgage of Gonzales was validly registered prior to the December 1987.
notation of the lis pendens. The subsequent annotation of the lis
pendens could not defeat the rights of the mortgagee or the _______________
purchaser at the auction sale who derived their rights under a
prior mortgage validly registered. The settled rule is that the 30
Capistrano v. PNB, 101 Phil. 1117 (1957).
31
Looyuko v. Court of Appeals, 413 Phil. 445; 361 SCRA WHEREFORE, the petition is DENIED. The Decision
150 (2001). dated 26 August 1993 and the Resolution dated 4 March 1994
32
Sulit v. Court of Appeals, G.R. No. 119247, 14 February of the Court of Appeals in CA-G.R. SP No. 28651 are
1997, 268 SCRA 441. AFFIRMED. Petitioners Juanita P. Pineda and Lilia Sayoc are
33
See note 5. directed to surrender the owner’s duplicate of Transfer
453 Certificate of Title No. 8361 to the Register of Deeds of Cavite
VOL. 409, AUGUST 25, 2003 City for453
cancellation. Transfer Certificate of Title No. 16084 in
the name of Teresita A. Gonzales is declared valid. This is
Pineda vs. Court of Appeals
without prejudice to any action petitioners Juanita P. Pineda and
Since Gonzales vigilantly exercised her right to foreclose the Lilia Sayoc may file against the Spouses Virgilio and Adorita
mortgaged Property ahead of Pineda and Sayoc, Gonzales’ Benitez as well as Olivia G. Mojica. No pronouncement as to
mortgage would still prevail over the mortgage of Pineda and costs.
Sayoc even if Gonzales’ mortgage was not validly registered. SO ORDERED.
The unregistered mortgage of Pineda and Sayoc was Davide, Jr. (C.J.), Vitug, Ynares-
extinguished upon foreclosure of Gonzales’ mortgage even Santiago and Azcuna, JJ., concur.
assuming for the sake of argument that the latter mortgage was Petition denied, judgment and resolution affirmed.
unregistered. Between two unregistered mortgagees, both being Note.—Registration does not confer ownership, it is merely
in good faith, the first to foreclose his mortgage prevails over evidence of such ownership over a particular property. (Garcia
the other. vs. Court of Appeals, 312 SCRA 180 [1999])
Even assuming that Gonzales’ mortgage was not validly
registered, the notice of lis pendens could still not defeat ——o0o——
Gonzales’ right under the foreclosure sale. The effect of the
notice of lis pendens was to subject Gonzales, as the subsequent
G.R. No. 171868. July 27, 2011.*
purchaser of the Property, to the outcome of the case. The
SPOUSES FRANCISCO D. YAP and WHELMA S. YAP,
outcome of the case is the cancellation of the second owner’s
petitioners, vs. SPOUSES ZOSIMO DY, SR. and
duplicate of TCT 8361. The complaint of Pineda and Sayoc
NATIVIDAD CHIU DY, SPOUSES MARCELINO MAXINO
simply prayed for the cancellation of the second owner’s
and REMEDIOS L. MAXINO, PROVINCIAL SHERIFF OF
duplicate of TCT 8361 and the award of damages.34
NEGROS ORIENTAL and DUMAGUETE RURAL BANK,
The notice of lis pendens would only bind Gonzales to the
INC., respondents.
declaration of nullity of the second owner’s duplicate of TCT
G.R. No. 171991. July 27, 2011.*
8361. Gonzales could not use TCT 13138, as a void issue of the
DUMAGUETE RURAL BANK, INC. (DRBI) herein
void second owner’s duplicate of TCT 8361, to secure a new
represented by Mr. William D.S. Dichoso,
TCT in her name. This is the legal consequence of the notice
petitioners, vs. SPOUSES ZOSIMO DY, SR. and
of lis pendens, which would have bound Gonzales had the
NATIVIDAD CHIU DY, SPOUSES MARCELINO MAXINO
registration of her mortgage been void. However, the
and REMEDIOS MAXINO, and SPOUSES FRANCISCO D.
declaration of nullity of TCT 13138 would still not make the
YAP and WHELMA S.
mortgage of Pineda and Sayoc preferred over that of Gonzales.
_______________
Since Gonzales foreclosed her mortgage ahead of Pineda and
* FIRST DIVISION.
Sayoc, she would still have a better right than Pineda and Sayoc
594
who slept on their rights as mortgagees.
Conclusion
The nullity of TCT 13138 did not affect the validity of the title Yap vs. Dy, Sr.
or ownership of Mojica or Gonzales as subsequent transferees YAP, respondents.
of the Property. What is void is the transfer certificate of title, Civil Law; Mortgages; Redemption; The tender of the
not the title or ownership itself of Mojica or Gonzales. The redemption money may be made to the purchaser of the land or
notice of lis pendens could not defeat Gonzales’ rights over the to the sheriff; If made to the sheriff, it is his duty to accept the
Property for two reasons. First, Gonzales registered in good tender and execute the certificate of redemption.—Here, the
faith her mortgage before the notation of the lis pendens, Dys and the Maxinos complied with the above-quoted
making the registration of 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
34
Records, pp. 1-4. the whole purchase price at which all the foreclosed properties
454 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.
Pineda vs. Court of Appeals Intermediate Appellate Court, 197 SCRA 323 (1991), the
her mortgage valid despite the invalidity of TCT 13138. tender of the redemption money may be made to the purchaser
Second, since Gonzales’ mortgage was valid, the auction sale of the land or to the sheriff. If made to the sheriff, it is his duty
retroacted to the date of registration of her mortgage, making to accept the tender and execute the certificate of redemption.
the auction sale prior in time to the notice of lis pendens. Thus, Same; Same; Same; The court declared valid the sale by
TCT 16084, issued to Gonzales as a result of the foreclosure the mortgagor of mortgaged property to a third person
sale, is valid.
notwithstanding the lack of written consent by the mortgagee, review on certiorari assailing the May 17, 2005 Decision1 and
and likewise recognized the third person’s right to redeem the March 15, 2006 Resolution2 of the Court of Appeals (CA) in
foreclosed property.—Contrary to petitioners’ contention, the CA-G.R. C.V. No. 57205.
Dys and Maxinos have legal personality to redeem the subject The antecedents are as follows:
properties despite the fact that the sale to the Dys and Maxinos The spouses Tomas Tirambulo and Salvacion Estorco
was without DRBI’s consent. In Litonjua v. L & R Corporation, (Tirambulos) are the registered owners of several parcels of
320 SCRA 405 (1999), this Court declared valid the sale by the land located in Ayungon, Negros Oriental, registered under
mortgagor of mortgaged property to a third person Transfer Certificate of Title (TCT) Nos. T-14794, T-14777, T-
notwithstanding the lack of written consent by the mortgagee, 14780, T-14781, T-14783 and T-20301 of the Registry of
and likewise recognized the third person’s right to redeem the Deeds of Negros Oriental, and more particularly designated as
foreclosed property. follows:
Same; Same; Same; Requisites for a Valid Redemption.— (1) TCT No. T-14777 Lot 1 of Plan Pcs-11728 61,371
The requisites for a valid redemption are: (1) the redemption
must be made within twelve (12) months from the time of the (2) TCT No. T-20301 Lot 3 of Plan Psu-124376 17,373
registration of the sale in the Office of the Register of Deeds;
(2) payment of the purchase price of the property involved, plus (3) TCT No. T-14780 Lot 4 of Plan Pcs-11728 27,875
1% interest per month thereon in addition, up to the time of
redemption, together with the amount of any assessments or (4) TCT No. T-14794 Lot 5 of Plan Psu-124376 2,900
taxes which the purchaser may have paid thereon after the
purchase, also with 1% interest on such last named amount; and (5) TCT No. T-14781 Lot 6 of Plan Pcs-11728 16,087
(3) written notice of the redemption must be
595 (6) TCT No. T-14783 Lot 8 of Plan Pcs-11728 39,888
VOL. 654, JULY 27, 2011 595
The Tirambulos likewise own a parcel of land denominated
Yap vs. Dy, Sr. as Lot 846, covered by Tax Declaration No. 08109.
served on the officer who made the sale and a duplicate On December 3, 1976, the Tirambulos executed a Real
filed with the Register of Deeds of the province. Estate Mortgage3 over Lots 1, 4, 5, 6 and 8 in favor of the Rural
Same; Same; Indivisibility of Mortgage; The doctrine of Bank of Dumaguete, Inc., predecessor of Dumaguete Rural
indivisibility of mortgage does not apply once the mortgage is Bank, Inc. (DRBI), to secure a P105,000 loan extended by the
extinguished by a complete foreclosure thereof.—The Yaps latter to them. Later, the Tirambulos obtained a second loan for
argue that P40,000.00 cannot be a valid tender of redemption P28,000 and also executed a Real Estate Mortgage4 over Lots 3
since the amount of the auction sale was P216,040.93. They and 846 in favor of the same bank on August 3, 1978.
further contend that the mortgage is indivisible so in order for _______________
the tender to be valid and effectual, it must be for the entire 1 Rollo (G.R. No. 171991), pp. 27-41. Penned by Associate
auction price plus legal interest. We cannot subscribe to the Justice Pampio A. Abarintos with Associate Justices Mercedes
Yaps’ argument on the indivisibility of the mortgage. As held Gozo-Dadole and Sesinando E. Villon concurring.
in the case of Philippine National Bank v. De los Reyes, 179 2 Id., at pp. 53-61. Penned by Associate Justice Pampio A.
SCRA 619 (1989), the doctrine of indivisibility of mortgage Abarintos with Associate Justices Enrico A. Lanzanas and
does not apply once the mortgage is extinguished by a complete Apolinario D. Bruselas, Jr. concurring.
foreclosure thereof as in the instant case. 3 Records (Civil Case No. 8439), Vol. 1, p. 9.
Same; Same; Same; Nothing in the law prohibits the 4 Id., at p. 10.
piecemeal redemption of properties sold at one foreclosure 597
proceeding.—Nothing in the law prohibits the piecemeal VOL. 654, JULY 27, 2011
redemption of properties sold at one foreclosure proceeding. In
fact, in several early cases decided by this Court, the right of the Yap vs. Dy, Sr.
mortgagor or redemptioner to redeem one or some of the Subsequently, on October 27, 1979, the Tirambulos sold all
foreclosed properties was recognized. seven mortgaged lots to the spouses Zosimo Dy, Sr. and
PETITIONS for review on certiorari of the decision and Natividad Chiu (the Dys) and the spouses Marcelino C. Maxino
resolution of the Court of Appeals. and Remedios Lasola (the Maxinos) without the consent and
The facts are stated in the opinion of the Court. knowledge of DRBI. This sale, which was embodied in a Deed
Yap-Siton Law Offices for petitioners Spouses Yap. of Absolute Sale,5 was followed by a default on the part of the
Joel Cadiogan Obar for Dumaguete Rural Bank, Inc. Tirambulos to pay their loans to DRBI. Thus, DRBI
Augusto Gatmaytan for Spouses Maxino and Spouses Dy. extrajudicially foreclosed the December 3, 1976 mortgage and
VILLARAMA, JR. J.: had Lots 1, 4, 5, 6 and 8 sold at public auction on March 31,
May persons to whom several mortgaged lands were 1982.
transferred without the knowledge and consent of the creditor At the auction sale, DRBI was proclaimed the highest
redeem only several parcels if all the lands were sold together bidder and bought said lots for P216,040.93. The Sheriff’s
for a single price at the foreclosure sale? This is the principal Certificate of Sale6 stated that the “sale is subject to the rights
issue presented to us for resolution in these two petitions for of redemption of the mortgagor (s) or any other persons
596 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.
Yap vs. Dy, Sr.
On July 6, 1983, or twelve (12) days after the sale was In a letter to the Provincial Sheriff on May 31, 1984, the
registered, DRBI sold Lots 1, 3 and 6 to the spouses Francisco Yaps refused to take delivery of the redemption price arguing
D. Yap and Whelma D. Yap (the Yaps) under a Deed of Sale that one of the characteristics of a mortgage is its indivisibility
with Agreement to Mortgage.8 It is important to note, however, and that one cannot redeem only some of the lots foreclosed
that Lot 3 was not among the five properties foreclosed and because all the parcels were sold for a single price at the auction
bought by DRBI at public auction. sale.18
On August 8, 1983, or well within the redemption period, On June 1, 1984, the Provincial Sheriff wrote the Dys and
the Yaps filed a Motion for Writ of Possession9 alleging that the Maxinos informing them of the Yaps’ refusal to take
they have acquired all the rights and interests of DRBI over the delivery of the redemption money and that in view of said
foreclosed properties and are entitled to immediate possession development, the tender of the redemption money was being
of the same because the one-year redemption period has lapsed considered as a consignation.19
without any redemption being made. Said motion, however, On June 15, 1984, the Dys and the Maxinos filed Civil Case
was ordered withdrawn on August 22, 1983 10 upon No. 8426 with the Regional Trial Court of Negros Oriental for
_______________ accounting, injunction, declaration of nullity (with regard to Lot
5 Id., at pp. 14-17. 3) of the Deed of Sale with Agreement to Mortgage, and
6 Id., at pp. 18-20. damages against the Yaps and DRBI. In their complaint,20 they
7 Id., at p. 20. prayed
8 Records (Civil Case No. 8426), Vol. I, pp. 23-25. a) That the Deed of Sale With Agreement to Mortgage …
9 Id., at pp. 26-28. be declared null and void ab initio;
10 Id., at p. 30. b) That defendant Yap[s’] possession of Lot No. 3, TCT
598 No. T20301 based as it was on a void sale, be declared illegal
598 SUPREME COURT REPORTS ANNOTATED from the very beginning;
c) That defendants be ordered to render to plaintiffs a fair
Yap vs. Dy, Sr. accounting of the harvests and income which defendants made
motion of the Yaps, who gave no reason therefor. 11 Three days from said Lot No. 3 and, in addition, be ordered to pay to
later, or on August 25, 1983, the Yaps again filed a Motion for plaintiffs damages for wrongfully depriving plaintiffs of the use
Writ of Possession.12 This time the motion was granted, and a and enjoyment of said property;
Writ of Possession13 over Lots 1, 3 and 6 was issued in favor of d) That the redemption which plaintiffs made of Lot No.
the Yaps on September 5, 1983. They were placed in possession 1, TCT No. 14777, and Lot No. 6, TCT No. 14781, through the
of Lots 1, 3 and 6 seven days later. Provincial Sheriff of Negros Oriental, be declared valid and
On May 22, 1984, roughly a month before the one-year binding on the defendants, thereby releasing and freeing said
redemption period was set to expire, the Dys and the Maxinos parcels of land from whatever liens or claims that said
attempted to redeem Lots 1, 3 and 6. They tendered the amount defendants might have on them;
of P40,000.00 to DRBI and the Yaps,14 but both refused, _______________
contending that the redemption should be for the full amount of 18 Id., at pp. 47-48.
the winning bid of P216,040.93 plus interest for all the 19 Id., at p. 50.
foreclosed properties. 20 Id., at pp. 1-17.
Thus, on May 28, 1984, the Dys and the Maxinos went to 600
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 600 SUPREME COURT REPORTS ANNOTATED
Sheriff’s Commission) to effect the redemption.15 Noticing that Yap vs. Dy, Sr.
Lot 3 was not included in the foreclosure proceedings, e) That defendants be likewise ordered to render to
Benjamin V. Diputado, Clerk of Court and Provincial Sheriff, plaintiffs full and fair accounting of all the harvests, fruits, and
issued a Certificate of Redemption16 in favor of the Dys and the income that they or either of them might have derived from said
Maxinos only for Lots 1 and 6, and stated in said certificate that two parcels of land starting from the time defendant Yap first
Lot 3 is not included in the foreclosure proceedings. By took possession thereof and harvested the coconuts in
letter17 of even date, Atty. Diputado also duly notified the Yaps September, 1983;
of the redemption of Lots 1 and 6 by the Dys and the Maxinos, f) That, after the accounting herein prayed for, defendants
as well as the non-inclusion of Lot 3 among the foreclosed be required to deliver to plaintiffs the net proceeds of the
properties. He advised the Yaps to personally claim the income from the three parcels of land subject of this case,
redemption money or send a representative to do so. together with interest at the legal rate;
_______________ g) That for his acts of misrepresentation and deceit in
11 Id., at p. 29. obtaining a writ of possession over the three parcels of land
12 Id., at pp. 31-33. subject of this case, and for the highly irregular and anomalous
13 Id., at pp. 34-35. procedures and maneuvers employed by defendant Yap in
14 Id., at pp. 36-37. securing said writ, as well as for harvesting the coconuts even
15 Id., at pp. 38-39. after knowing that plaintiffs had already fully redeemed the
16 Id., at pp. 43-45. properties in question and, with respect to Lot No. 3, after
17 Id., at p. 46. knowing that the same was not in fact included in the
599 foreclosure and, therefore, could not have been validly sold by
VOL. 654, JULY 27, 2011 the bank599to him, said defendant Yap be condemned to pay
Yap vs. Dy, Sr.
plaintiffs moral damages in the amount of P200,000.00, plus Later, on July 5, 1984, the Yaps filed Civil Case No. 8439
punitive and exemplary damages in the amount of P100,000.00; for consolidation of ownership, annulment of certificate of
h) That for falsifying the Sheriff’s Certificate of Sale and redemption, and damages against the Dys, the Maxinos, the
selling unlawfully Lot No. 3, TCT No. T-20301, to its co- Provincial Sheriff of Negros Oriental and DRBI. In their
defendant Yap, defendant DRBI be condemned to pay to complaint,25 the Yaps prayed
plaintiffs actual damages in the amount of P50,000.00; moral 1. That [they] be declared the exclusive owners of Lot No.
damages in the amount of P200,000.00; and punitive and 1 covered by TCT No. T-14777 and Lot No. 6 covered by TCT
exemplary damages in the amount of P100,000.00; No. T-14781 for failure on the part of defendants Zosimo Dy,
i) That defendants be condemned to pay solidarily to Sr., and Marcelino Maxino to redeem the properties in question
plaintiffs attorney’s fees in the amount of P50,000.00; other within one (1) year from the auction sale.
legitimate expenses of litigation in the amount of P30,000.00; 2. That defendants be [declared] solidarily liable to pay
and the costs of suit; moral damages in the amount of ONE HUNDRED
j) That pending hearing of this case, a writ of preliminary THOUSAND PESOS (P100,000.00), THIRTY[-]FIVE
injunction be issued enjoining and restraining the defendants, THOUSAND PESOS (P35,000.00) as attorney’s fees and
particularly defendant Yap, from disturbing and interfering the FIFTEEN THOUSAND PESOS (P15,000.00) as exemplary
plaintiffs’ possession and other rights of ownership over the damages;
land in question; 3. That the Provincial Sheriff be required to execute the
k) That pending hearing of the petition for preliminary final Deed of Sale in favor of the bank and the bank be in turn
injunction, a temporary restraining order be issued against the required to transfer the property to the plaintiffs in accordance
defendants, particularly against defendant Yap, to serve the with the Deed of Sale with Mortgage.
same purpose for which the writ of preliminary injunction is 4. That the court grant such other relief as may be deemed
herein prayed for; and601 just and equitable under the premises.26
VOL. 654, JULY 27, 2011 Civil
601Case Nos. 8426 and 8439 were tried jointly.
On October 24, 1985, the Yaps, by counsel, filed a motion
Yap vs. Dy, Sr.
to withdraw from the provincial sheriff the redemption money
l) That, after hearing of the main case, said preliminary amounting to P50,373.42.27 Said motion was granted on
injunction be made permanent. October 28, 1985 after a Special Power of Attorney executed
Furthermore, plaintiffs pray for all other reliefs which may by Francisco Yap in favor of his brother Valiente Yap
be just and equitable in the premises.”21 authorizing the latter to receive the P50,373.42 redemption
Thereafter, on June 19, 1984, the Dys and the Maxinos money was presented in court.28
consigned to the trial court an additional sum of P83,850.50 _______________
plus sheriff’s commission fee of P419.25 representing the 25 Id., at pp. 2-8.
remaining balance of the purchase price that the Yaps still owed 26 Id., at pp. 7-8.
DRBI by virtue of the sale to them by the DRBI of Lots 1, 3 and 27 Records (Civil Case No. 8426), Vol. I, pp. 346-347.
6.22 28 Id., at p. 348.
Meanwhile, by letter23 dated June 27, 1984, the Yaps told 603
DRBI that no redemption has been made by the Tirambulos or
their successors-in-interest and requested DRBI to consolidate VOL. 654, JULY 27, 2011
its title over the foreclosed properties by requesting the Yap vs. Dy, Sr.
Provincial Sheriff to execute the final deed of sale in favor of On February 12, 1997, the trial court rendered decision29 in
the bank so that the latter can transfer the titles of the two favor of the Yaps. The fallo reads:
foreclosed properties to them. “WHEREFORE, judgment is hereby rendered as follows:
On the same date, the Yaps also wrote the Maxinos 1. Dismissing the complaint of Dy and Maxino spouses in
informing the latter that during the last harvest of the lots bought Civil Case No. 8426 as well as the bank and the Yap spouses
from DRBI, they excluded from the harvest Lot 3 to show their counterclaim for lack of factual and legal basis;
good faith. Also, they told the Maxinos that they were formally 2. In Civil Case No. 8439:
turning over the possession of Lot 3 to the Maxinos, without a) Declaring the Yap spouses, plaintiffs therein, the
prejudice to the final determination of the legal implications exclusive owners of Lot No. 1 covered by TCT No. T-
concerning Lot 3. As to Lots 1 and 6, however, the Yaps stated 14777 and Lot No. 6 covered by TCT No. T-14781 for
that they intended to consolidate ownership over them since failure on the part of the Dy and Maxino spouses,
there has been no redemption as contemplated by law. Included defendants therein, to redeem the properties in question
in the letter was a liquidation of the copra proceeds harvested within one (1) year from the auction sale.
from September 7, 1983 to April 30, 1984 for Lots 1, 3 and 6. 24 b) Directing the Provincial Sheriff of Negros Oriental to
_______________ execute the Final Deed of Sale in favor of the bank and
21 Id., at pp. 15-16. the latter to transfer the subject properties to the Yap
22 Id., at pp. 56-58. spouses in accordance with the Deed of Sale With
23 Records (Civil Case No. 8439), p. 32. Mortgage….
24 Id., at pp. 33-34. SO ORDERED.”30
602 On March 7, 1997, the trial court amended the above
602 SUPREME COURT REPORTS ANNOTATED dispositive portion upon motion of DRBI, as follows:
“Wherefore, judgment is hereby rendered as follows:
Yap vs. Dy, Sr.
1. The Certificate of Redemption issued by the foreclosure/auction sale and could not have been
Provincial Sheriff (Exh. “M”) is hereby declared null acquired by the Bank thereat];
and void; 3) …not holding that the parcels of land had been properly
2. The Provincial Sheriff of Negros Oriental is hereby and validly redeemed in good faith, defendant Yap, the
ordered to execute a Final Deed of Sale of the foreclosed Provincial Sheriff, the Clerk of Court, and Mr. Mario
properties in favor of the defendant Dumaguete Rural Dy, having accepted redemption/consignation (or, in not
Bank, Inc., subject to the rights of the Yap spouses fixing the redemption price and allowing redemption);
acquired in accordance with the Deed of Sale with 4) …not holding that by withdrawing the redemption
Mortgage…; money consigned/deposited by plaintiffs to the Court,
3. The Deed of Sale dated [October] 27, 1979, made and turning over possession of the parcels of land to
by Tirambulo and Estorco in favor of the Dys and plaintiffs, defendants Yap accepted, ratified, and
Maxinos covering confirmed redemption by plaintiffs of the parcels of land
_______________ acquired at foreclosure/auction sale by the Bank and
29 Rollo (G.R. No. 171991), pp. 93-109. purportedly sold by it to and purchased by Yap;
30 Id., at pp. 108-109. 5) …not finding and holding that all the parcels of land
604 covered by the foreclosed mortgage held by Dumaguete
604 SUPREME COURT REPORTS ANNOTATED Rural Bank had been acquired by and are in the
possession of plaintiffs as owners and that defendants
Yap vs. Dy, Sr.
bank and Yap had disposed of and/or lost their rights
all the seven (7) parcels of land in question, is hereby and interests and/or any cause of action and their claims
declared null and void; had been extinguished and mooted or otherwise settled,
4. In Civil Case No. 8439, declaring the Yap Spouses, waived and/or merged in plaintiffs-appellants;
the exclusive owners of Lot No. 1, covered by TCT No. 6) …not holding that defendants Yap have no cause of
T-14777, and Lot No. 6, covered by TCT No. T-14781, action to quiet title as they had no title or possession of
for failure on the part of the Dy and Maxino Spouses, to the parcels of land in question and in declaring
redeem said properties within one (1) year from the date defendants Yap spouses the exclusive owners of Lot No.
of the registration of the auction sale; 1 covered by TCT No. T-14777 and Lot No. 6 covered
5. All other claims and counterclaims are hereby by TCT No. T-14781 and in directing the Provincial
dismissed for lack of merit. Sheriff to execute the final deed of sale in favor of the
SO ORDERED.”31 bank and the latter to transfer the subject properties to
The trial court held that the Dys and the Maxinos failed to the Yap spouses in accordance with the Deed of Sale
formally offer their evidence; hence, the court could not with Mortgage which included Lot No. 3 which was not
consider the same. It also upheld the Deed of Sale with foreclosed by the Sheriff and was not included in the
Agreement to Mortgage between the Yaps and DRBI, ruling certificate of sale issued by him and despite their
that its genuineness and due execution has been admitted by the acceptance, ratification, and
Dys and the Maxinos and that it is not contrary to law, morals, 606
good customs, public policy or public order. Thus, ownership
of Lots 1, 3 and 6 was transferred to the Yaps. 606 SUPREME COURT REPORTS ANNOTATED
The trial court further held that the Dys and the Maxinos Yap vs. Dy, Sr.
failed to exercise their rights of redemption properly and timely. confirmation of the redemption as well as acknowledgment of
They merely deposited the amount of P50,625.29 with the possession of the parcels of land by plaintiffs;
Sheriff, whereas the amount due on the mortgage deed is
P216,040.93. 7) …issuing an amended decision after perfection of
Aggrieved by the above ruling, the Dys and the Maxinos plaintiff’s appeal and without waiting for their comment
elevated the case to the CA. They argued that the trial court (declaring the Certificate of Redemption issued by the
erred in: Provincial Sheriff (Exh. “M”) null and void; ordering
1) ... failing to consider plaintiffs’ evidence [testimonial, the Provincial Sheriff of Negros Oriental to execute a
including the testimony of the Provincial Sheriff of Final Deed of Sale of the foreclosed properties in favor
Negros Oriental (Attorney Benjamin V. Diputado) and of the defendant Dumaguete Rural Bank, Inc., subject to
plaintiff Attorney Marcelino C. Maxino] and the rights of the Yap spouses acquired in accordance
documentary [Exhibits A through TT (admitted under with the Deed of Sale with Mortgage (Exh. “B” –
Order of 3 March 1995)]; Maxino and Dy; Exh. “1” – Yap); declaring null and
_______________ void the Deed of Sale dated Oct[ober] 27, 1979, made
31 Id., at pp. 110-111. by Tirambulo and Estorco in favor of the Dys and
605 Maxinos covering all the seven (7) parcels of land in
question; in Civil Case No. 8439, declaring the Yap
VOL. 654, JULY 27, 2011 605
spouses, the exclusive owners of Lot No. 1, covered by
Yap vs. Dy, Sr. TCT No. T-14777, and Lot No. 6, covered by TCT No.
2) …failing to declare void or annul the purported contract T-14781, for failure on the part of the Dy and Maxino
of sale by Dumaguete Rural Bank, Inc. to Francisco D. spouses, to redeem said properties within (1) year from
Yap and Whelma S. Yap of Lots 1, 3, and 6, during the the date of registration of the auction sale) after
redemption period [the purported seller (bank) not being plaintiffs had perfected appeal of the 12 February 1997
the owner thereof, and Lot 3 not being included in the decision, without hearing or awaiting plaintiffs’
comment, and in the face of the records showing that the burned, the latter’s counsel who had copies thereof, furnished
issues were never raised, much less litigated, insofar as the Yaps copies for their scrutiny and comment. The CA further
Tirambulo, as well in the face of the foregoing noted that the trial court also admitted all the documentary
circumstances, especially dismissal of defendants’ exhibits of the Dys and the Maxinos on March 3, 1995.
claims and counterclaims and acquisition of ownership Unfortunately, however, the trial court simply failed to locate
and possession of the parcels of land by plaintiffs as well the pertinent documents in the voluminous records of the cases.
as disposition and/or loss of defendants rights and On the merits, the CA ruled that the Dys and the Maxinos
interests and cause of action in respect thereof and/or had proven their cause of action sufficiently. The CA noted that
settlement, waiver, and/or extinguishment of their their claim that Lot 3 was not among the properties foreclosed
claims, and merger in plaintiffs-appellants, and without was duly corroborated by Atty. Diputado, the Provincial Sheriff
stating clearly the facts and the law upon which it is who conducted the foreclosure sale. The Yaps also failed to
based[; and] rebut their contention regarding the former’s acceptance of the
8) …not finding, holding and ruling that defendants acted redemption money and their delivery of the possession of the
in bad faith and in an abusive and oppressive manner, if three parcels of land to the Dys and the Maxinos. The CA also
not contrary to law; and in not awarding plaintiffs noted that not only did the Yaps deliver possession of Lot 3 to
damages.32 the Dys and the Maxinos, they also filed a Motion to Withdraw
_______________ the Redemption Money from the Provincial Sheriff and
32 CA Rollo, pp. 45-48. withdrew the redemption money.
607 As to the question whether the redemption was valid or not,
VOL. 654, JULY 27, 2011 the CA607
found no need to discuss the issue. It found that the bank
was in bad faith and therefore cannot insist on the protection of
Yap vs. Dy, Sr. the law regarding the need for compliance with all the
On May 17, 2005, the CA rendered a decision reversing the requirements for a valid redemption while estoppel and unjust
March 7, 1997 amended decision of the trial court. The enrichment operate against the Yaps who had already
dispositive portion of the assailed CA decision reads: withdrawn the redemption money.
“IN LIGHT OF THE FOREGOING, this appeal is Upon motion for reconsideration of the Yaps, however, the
GRANTED. The decision as well as the amended decision of CA amended its decision on March 15, 2006 as follows:
the Regional Trial Court is REVERSED AND SET ASIDE. In “IN LIGHT OF THE FOREGOING, this appeal is
lieu thereof[,] judgment is hereby rendered as follows: GRANTED. The decision as well as the amended decision of
1. Declaring the sale made by Dumaguete Rural Bank Inc. the Regional Trial Court is REVERSED AND SET ASIDE. In
to Sps. Francisco and Whelma Yap with respect to Lot No. 3 lieu thereof[,] judgment is hereby rendered as follows:
under TCT No. T-20301 as null and void; 1. Declaring the sale made by Dumaguete Rural Bank Inc.
2. Declaring the redemption made by Spouses Dy and to Sps. Francisco and Whelma Yap with respect to Lot No. 3
Spouses Maxino with regards to Lot No. 6 under TCT No. T- under TCT No. T-20301 null and void;
14781 and Lot No. 1 under TCT No. [T-]14777 as valid; _______________
3. Ordering defendants, Sps. Yap, to deliver the 35 TSN, August 30, 1985, pp. 4-6.
possession and ownership thereof to Sps. Dy and Sps. Maxino; 609
to give a fair accounting of the proceeds of these three parcels
of land and to tender and deliver the corresponding amount of VOL. 654, JULY 27, 2011
income from October 24, 1985 until the finality of this Yap vs. Dy, Sr.
judgment[; and] 2. Declaring the redemption made by Spouses Dy and
4. Condemning the defendant bank to pay damages to Spouses Maxino with regards to Lot No. 6 under TCT No. T-
Spouses Dy and Spouses Maxino the amount of P20,000.00 as 14781 and Lot No. 1 under TCT No. [T-]14777 as valid;
moral damages and P200,000.00 as exemplary damages and 3. Condemning the defendant bank to pay damages to
attorney’s fees in the amount of P50,000.00. Spouses Dy and Spouses Maxino the amount of P20,000.00 as
All other claims are dismissed. moral damages and P200,000.00 as exemplary damages and
Costs against the appellees. attorney’s fees in the amount of P50,000.00.
SO ORDERED.”33 All other claims are dismissed.
The CA held that the trial court erred in ruling that it could Costs against the appellees.
not consider the evidence for the Dys and the Maxinos allegedly SO ORDERED.”34
because they failed to formally offer the same. The CA noted Hence, the consolidated petitions assailing the appellate
that although the testimonies of Attys. Marcelino C. Maxino court’s decision.
and Benjamin V. Diputado were not formally offered, the The Yaps argue in the main that there is no valid redemption
procedural lapse was cured when the opposing counsel cross- of the properties extrajudicially foreclosed. They contend that
examined said witnesses. Also, while the original TSNs of the the P40,000.00 cannot be considered a valid tender of
witnesses for the plaintiffs in Civil Case No. 8426 were redemption since the amount of the auction sale is P216,040.93.
_______________ They also argue that a valid tender of payment for redemption
33 Rollo (G.R. No. 171991), pp. 40-41. can only be made to DRBI since at that time, their rights were
608 subordinate to the final consolidation of ownership by the bank.
608 SUPREME COURT REPORTS ANNOTATED DRBI, aside from insisting that all seven mortgaged
properties (which thus includes Lot 3) were validly foreclosed,
Yap vs. Dy, Sr. argues, for its part, that the appellate court erred in sustaining
the redemption made by the Dys and Maxinos. It anchors its 6 and 8 are covered by only one real estate mortgage, the Real
argument on the fact that the sale of the Tirambulos to the Dys Estate Mortgage38 dated December 3, 1976. Indeed, that the
and Maxinos was without the bank’s consent. The Dys and foreclosure sale refers only to Lots 1, 4, 5, 6 and 8 is clear from
Maxinos therefore could not have assumed the character of the fact that Lots 1, 4, 5, 6 and 8 and Lot 3 are covered
debtors because a novation of the contract of mortgage between by two separate real estate mortgages. DRBI failed to refute
the Tirambulos and DRBI did not take place as such a novation these pieces of evidence against it.
is proscribed by Article 1293 of the Civil Code. And there being As to the second issue regarding the question as to whom
no valid redemption within the contemplation of law and DRBI payment of the redemption money should be made, Section
being the highest bidder during the auction 31,39 Rule 39 of the Rules of Court then applicable provides:
_______________ _______________
34 Id., at p. 61. 36 Records (Civil Case No. 8426), Vol. I, p. 245.
610 37 Id., at pp. 246-248.
610 SUPREME COURT REPORTS ANNOTATED 38 Records (Civil Case No. 8439), Vol. I, p. 9.
39 Now Section 29, Rule 39 of the 1997 Rules of Civil
Yap vs. Dy, Sr.
Procedure, as amended. Section 29 provides as follows:
sale, DRBI has become the absolute owner of the properties SEC. 29. Effect of redemption by judgment obligor, and
mortgaged when the redemption period expired. a certificate to be delivered and recorded thereupon; to whom
DRBI further argues that it was unfair and unjust for them payments on redemption made.—If the judgment obligor
to be held liable for damages for supposedly wrongfully redeems, he must make the same payments as are required to
foreclosing on Lot 3, depriving the Dys and the Maxinos of the effect a redemption by a redemptioner, whereupon, no further
use of the land, and registering the Certificate of Sale which redemption shall, be allowed and he is restored to his estate. The
included Lot 3 when it should have excluded the same. DRBI person to whom the redemption payment is made must execute
argues that as a juridical person, it only authorized and and deliver to him a certificate of redemption acknowledged
consented, through its Board of Directors, to lawful processes. before a notary public or other officer authorized to take
The unlawful acts of the Sheriff, who is considered as an agent acknowledgments of conveyances of real property. Such
of the bank in the foreclosure proceedings, cannot bind DRBI. certificate must be filed and recorded in the registry of deeds of
Moreover, DRBI cannot be liable for damages on the basis of the place in which the property is situated, and the registrar of
an affidavit that was submitted only before the CA as the bank deeds must note the record thereof on the margin of the record
had no chance to cross-examine the affiant and determine the of the certificate of sale. The payments mentioned in this and
veracity and propriety of the statements narrated in said the last preceding sections may be made to the purchaser or
affidavit. redemptioner, or for him to the officer who made the sale.
Thus, the issues to be resolved in the instant case are 612
essentially as follows: (1) Is Lot 3 among the foreclosed
properties? (2) To whom should the payment of redemption 612 SUPREME COURT REPORTS ANNOTATED
money be made? (3) Did the Dys and Maxinos validly redeem Yap vs. Dy, Sr.
Lots 1 and 6? and (4) Is DRBI liable for damages? “SEC. 31. Effect of redemption by judgment debtor, and
As to the first issue, we find that the CA correctly ruled that a certificate to be delivered and recorded thereupon. To whom
the Dys and Maxinos were able to prove their claim that Lot 3 payments on redemption made.—If the judgment debtor
was not among the properties foreclosed and that it was merely redeem, he must make the same payments as are required to
inserted by the bank in the Sheriff’s Certificate of Sale. As Atty. effect a redemption by a redemptioner, whereupon the effect of
Diputado, the Provincial Sheriff, testified, the application for the sale is terminated and he is restored to his estate, and the
foreclosure was only for five parcels of land, namely, Lots 1, 4, person to whom the payment is made must execute and deliver
5, 6 and 8. Accordingly, only said five parcels of land were to him a certificate of redemption acknowledged or approved
included in the publication and sold at the foreclosure sale. before a notary public or other officer authorized to take
When he was shown a copy of the Sheriff’s Certificate of Sale acknowledgments of conveyances of real property. Such
consisting of three pages, he testified that it was altered because certificate must be filed and recorded in the office of the
Lot 3 and Lot 846 were included beyond the “xxx” that marked registrar of deeds of the province in which the property is
the end of the enumeration of the lots foreclosed.35 Also, a situated, and the registrar of deeds must note the record thereof
perusal of DRBI’s application for on the margin of the record of the certificate of sale. The
_______________ payments mentioned in this and the last preceding sections
35 TNS, August 30, 1985, pp. 4-6. may be made to the purchaser or redemptioner, or for him
611 to the officer who made the sale.” (Emphasis supplied.)
VOL. 654, JULY 27, 2011 Here,
611the Dys and the Maxinos complied with the above-
quoted provision. Well within the redemption period, they
Yap vs. Dy, Sr.
initially attempted to pay the redemption money not only to the
foreclosure of real estate mortgage36 shows that it explicitly purchaser, DRBI, but also to the Yaps. Both DRBI and the Yaps
refers to only one deed of mortgage to settle the Tirambulos’ however refused, insisting that the Dys and Maxinos should pay
indebtedness amounting to P216,040.93. This is consistent with the whole purchase price at which all the foreclosed properties
the Notice of Extrajudicial Sale of Mortgaged Property, were sold during the foreclosure sale. Because of said refusal,
published in the Dumaguete Star Informer on February 18, 25 the Dys and Maxinos correctly availed of the alternative remedy
and March 4, 1982,37 announcing the sale of Lots 1, 4, 5, 6 and by going to the sheriff who made the sale. As held in Natino v.
8 for the satisfaction of the indebtedness amounting to Intermediate Appellate Court,40 the tender of the redemption
P216,040.93. It is also consistent with the fact that Lots 1, 4, 5,
money may be made to the purchaser of the land or to the The requisites of a valid
sheriff. If made to the sheriff, it is his duty to accept the tender redemption are present
and execute the certificate of redemption. The requisites for a valid redemption are: (1) the
But were the Dys and Maxinos entitled to redeem Lots 1 redemption must be made within twelve (12) months from the
and 6 in the first place? We rule in the affirmative. time of the registration of the sale in the Office of the Register
_______________ of Deeds; (2) payment of the purchase price of the property
40 G.R. No. 73573, May 23, 1991, 197 SCRA 323, 332. involved, plus 1% interest per month thereon in addition, up to
613 the time of redemption, together with the amount of any
VOL. 654, JULY 27, 2011 assessments
613 or taxes which the purchaser may have paid
thereon after the purchase, also with 1% interest on such last
Yap vs. Dy, Sr. named amount; and (3) written notice of the redemption must
The Dys and the Maxinos have be served on the officer who made the sale and a duplicate filed
legal personality to redeem the with the Register of Deeds of the province.43
subject properties. There is no issue as to the first and third requisites. It is
Contrary to petitioners’ contention, the Dys and Maxinos undisputed that the Dys and the Maxinos made the redemption
have legal personality to redeem the subject properties despite within the 12-month period from the registration of the sale. The
the fact that the sale to the Dys and Maxinos was without Dys and Maxinos effected the redemption on May 24, 1984,
DRBI’s consent. In Litonjua v. L & R Corporation,41 this Court when they deposited P50,373.42 with the Provincial Sheriff,
declared valid the sale by the mortgagor of mortgaged property and on June 19, 1984, when they deposited an additional
to a third person notwithstanding the lack of written consent by P83,850.50. Both dates were well within the one-year
the mortgagee, and likewise recognized the third person’s right redemption period reckoned from the June 24, 1983 date of
to redeem the foreclosed property, to wit: registration of the foreclosure sale. Likewise, the Provincial
“Coming now to the issue of whether the redemption Sheriff who made the sale was properly notified of the
offered by PWHAS on account of the spouses Litonjua is valid, redemption since the Dys and Maxinos deposited with him the
we rule in the affirmative. The sale by the spouses Litonjua of _______________
the mortgaged properties to PWHAS is valid. Therefore, 42 Id., at pp. 418-419.
PWHAS stepped into the shoes of the spouses Litonjua on 43 Rosales v. Yboa, No. L-42282, February 28, 1983, 120
account of such sale and was in effect, their successor-in- SCRA 869, 874.
interest. As such, it had the right to redeem the property 615
foreclosed by L & R Corporation. Again, Tambunting, supra,
clarifies that— VOL. 654, JULY 27, 2011
“x x x. The acquisition by the Hernandezes of the Yap vs. Dy, Sr.
Escuetas’ rights over the property carried with it the redemption money after both DRBI and the Yaps refused to
assumption of the obligations burdening the property, as accept it.
recorded in the Registry of Property, i.e., the mortgage The second requisite, the proper redemption price, is the
debts in favor of the RFC (DBP) and the Tambuntings. main subject of contention of the opposing parties.
The Hernandezes, by stepping into the Escuetas’ shoes The Yaps argue that P40,000.00 cannot be a valid tender of
as assignees, had the obligation to pay the mortgage redemption since the amount of the auction sale was
debts, otherwise, these debts would and could be P216,040.93. They further contend that the mortgage is
enforced against the property subject of the assignment. indivisible so in order for the tender to be valid and effectual, it
Stated otherwise, the Hernandezes, by the assignment, must be for the entire auction price plus legal interest.
obtained the right to remove the burdens on the property We cannot subscribe to the Yaps’ argument on the
subject thereof by paying the obligations thereby indivisibility of the mortgage. As held in the case of Philippine
secured; that is to say, they had the right of redemption National Bank v. De los Reyes,44 the doctrine of indivisibility of
as regards the first mortgage, to be exercised within the mortgage does not apply once the mortgage is extinguished by
time and in the manner prescribed by law and the a complete foreclosure thereof as in the instant case. The Court
mortgage deed; and as regards the second mortgage, held:
sought to be judicially foreclosed but yet unforeclosed, “The parties were accordingly embroiled in a hermeneutic
they had the so-called equity of redemption.” disparity on their aforesaid contending positions. Yet, the rule
_______________ on the indivisibility of mortgage finds no application to the case
41 G.R. No. 130722, December 9, 1999, 320 SCRA 405. at bar. The particular provision of the Civil Code referred to
614 provides:
614 SUPREME COURT REPORTS ANNOTATED Art. 2089. A pledge or mortgage is indivisible,
even though the debt may be divided among the
Yap vs. Dy, Sr.
successors in interest of the debtor or of the creditor.
The right of PWHAS to redeem the subject properties finds Therefore, the debtor’s heir who has paid a part of
support in Section 6 of Act 3135 itself which gives not only the the debt cannot ask for the proportionate extinguishment
mortgagor-debtor the right to redeem, but also his successors- of the pledge or mortgage as long as the debt is not
in-interest. As vendee of the subject properties, PWHAS completely satisfied.
qualifies as such a successor-in-interest of the spouses Neither can the creditor’s heir who received his
Litonjua.”42 share of the debt return the pledge or cancel the
Likewise, we rule that the Dys and the Maxinos validly
redeemed Lots 1 and 6.
mortgage, to the prejudice of the other heirs who have interest of justice, Nagtalon was given the opportunity to
not been paid. complete the redemption purchase of three of the ten parcels of
From these provisions is excepted the case in which, land foreclosed.
there being several things given in mortgage or pledge, Also, in the later case of Dulay v. Carriaga,47 wherein
each one of these guarantees only a determinate portion Dulay redeemed eight of the seventeen parcels of land sold at
of the credit. public auction, the trial court declared the piecemeal
_______________ redemption of Dulay as void. Said order, however, was annulled
44 G.R. Nos. 46898-99, November 28, 1989, 179 SCRA and set aside by the Court on certiorari and the Court upheld
619. the redemption of the eight parcels of land sold at public
616 auction.
616 SUPREME COURT REPORTS ANNOTATED Clearly, the Dys and Maxinos can effect the redemption of
even only two of the five properties foreclosed. And since they
Yap vs. Dy, Sr. can effect a partial redemption, they are not required to pay the
The debtor, in this case, shall have a right to the P216,040.93 considering that it is the purchase price for all the
extinguishment of the pledge or mortgage as the portion five properties foreclosed.
of the debt for which each thing is specially answerable So what amount should the Dys and Maxinos pay in order
is satisfied. for their redemption of the two properties be deemed valid
From the foregoing, it is apparent that what the law considering that when the five properties were auctioned, they
proscribes is the foreclosure of only a portion of the property or were not separately valued?
a number of the several properties mortgaged corresponding to Contrary to the Yaps’ contention, the amount paid by the
the unpaid portion of the debt where before foreclosure Dys and Maxinos within the redemption period for the
proceedings partial payment was made by the debtor on his total redemption of just two parcels of land was not only
outstanding loan or obligation. This also means that the debtor P40,000.00 but totaled to P134,223.92 (P50,373.42 paid on
cannot ask for the release of any portion of the mortgaged May 28, 1984 plus P83,850.50 paid on June 19, 1984). That is
property or of one or some of the several lots mortgaged unless more than 60% of the purchase price for the five foreclosed
and until the loan thus, secured has been fully paid, properties, to think the Dys and Maxinos were only
notwithstanding the fact that there has been a partial fulfillment redeeming two properties. We find that it can be considered a
of the obligation. Hence, it is provided that the debtor who has sufficient amount if we were to base the proper purchase price
paid a part of the debt cannot ask for the proportionate on the proportion of the size of Lots 1 and 6
extinguishment of the mortgage as long as the debt is not _______________
completely satisfied. 47 No. L-52831, July 29, 1983, 123 SCRA 794.
That the situation obtaining in the case at bar is not within 618
the purview of the aforesaid rule on indivisibility is obvious
since the aggregate number of the lots which comprise the 618 SUPREME COURT REPORTS ANNOTATED
collaterals for the mortgage had already been foreclosed and Yap vs. Dy, Sr.
sold at public auction. There is no partial payment nor partial with the total size of the five foreclosed properties, which had
extinguishment of the obligation to speak of. The aforesaid the following respective sizes:
doctrine, which is actually intended for the protection of the Lot 1 61,371 square meters
mortgagee, specifically refers to the release of the mortgage
which secures the satisfaction of the indebtedness and naturally Lot 6 16,087 square meters
presupposes that the mortgage is existing. Once the mortgage
is extinguished by a complete foreclosure thereof, said Lot 5 2,900 square meters
doctrine of indivisibility ceases to apply since, with the full
payment of the debt, there is nothing more to Lot 4 27,875 square meters
secure.”45 (Emphasis supplied.)
Nothing in the law prohibits the piecemeal redemption of Lot 8 39,888 square meters
properties sold at one foreclosure proceeding. In fact, in several
early cases decided by this Court, the right of the mortgagor or TOTAL 148,121 square meters
redemptioner to redeem one or some of the foreclosed
properties was recognized. The two subject properties to be redeemed, Lots 1 and 6, have
In the 1962 case of Castillo v. Nagtalon,46 ten parcels of a total area of 77,458 square meters or roughly 52% of the total
land were sold at public auction. Nagtalon, who owned three area of the foreclosed properties. Even with this rough
_______________ approximation, we rule that there is no reason to invalidate the
45 Id., at pp. 625-627. redemption of the Dys and Maxinos since they tendered 60% of
46 No. L-17079, January 29, 1962, 4 SCRA 48, 54. the total purchase price for properties constituting only 52% of
617 the total area. However, there is a need to remand the case for
VOL. 654, JULY 27, 2011 computation
617 of the pro-rata value of Lots 1 and 6 based on their
true values at that time of redemption for the purposes of
Yap vs. Dy, Sr. determining if there is any deficiency or overpayment on the
of the ten parcels of land sold, wanted to redeem her properties. part of the Dys and Maxinos.
Though the amount she tendered was found as insufficient to As to the award of damages in favor of the Dys and
effectively release her properties, the Court held that the tender Maxinos, we agree with the appellate court for granting the
of payment was made timely and in good faith and thus, in the same.
The CA correctly observed that the act of DRBI in Remedios Lasola with regard to the redemption money they
falsifying the Sheriff’s Certificate of Sale to include Lots 3 and paid.
846, even if said additional lots were not among the properties With costs against the petitioners.
foreclosed, was the proximate cause of the pecuniary loss SO ORDERED.
suffered by the Dys and Maxinos in the form of lost income Corona (C.J., Chairperson), Leonardo-De Castro,
from Lot 3. Bersamin and Del Castillo, JJ., concur.
Likewise, the CA also correctly awarded moral damages. Petitions denied, judgment and resolution affirmed with
Paragraph 10, Article 2219 of the Civil Code provides that modification.
moral damages may be recovered in case of acts and actions Note.—Upon the expiration of the redemption period, the
referred to in Article 21 of the same Code. Article 21 reads:619 right of the purchaser to the possession of the foreclosed
VOL. 654, JULY 27, 2011 property
619becomes absolute. (Fernandez vs. Espinoza, 551
SCRA 136 [2008])
Yap vs. Dy, Sr. ——o0o——
“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 G.R. No. 183058. April 3, 2013.*
damage.” SPOUSES MONTANO T. TOLOSA and MERLINDA
As previously discussed, DRBI’s act of maliciously TOLOSA, petitioners, vs. UNITED COCONUT PLANTERS
including two additional properties in the Sheriff’s Certificate BANK, respondent.
of Sale even if they were not included in the foreclosed Remedial Law; Special Civil Actions; Writ of Possession;
properties caused the Dys and Maxinos pecuniary loss. Hence, Foreclosure of Mortgage; Under Section 7 of Act No. 3135, as
DRBI is liable to pay moral damages. amended, a writ of possession may be issued in favor of a
The award of exemplary damages is similarly proper. purchaser in a foreclosure sale either (1) within the one-year
Exemplary or corrective damages are imposed, by way of redemption period, upon the filing of a bond; or (2) after the
example or correction for the public good, in addition to the lapse of the redemption period, without need of a bond. Within
moral, temperate, liquidated or compensatory damages.48 We the one-year redemption period, the purchaser may apply for a
cannot agree more with the following ratio of the appellate court writ of possession by filing a petition in the form of an ex parte
in granting the same: motion under oath, in the registration or cadastral proceedings
“Additionally, what is alarming to the sensibilities of the of the registered property.—A writ of possession is simply an
Court is the deception employed by the bank in adding other order by which the sheriff is commanded by the court to place
properties in the certificate of sale under public auction without a person in possession of a real or personal property. Under
them being included in the public auction conducted. It cannot Section 7 of Act No. 3135, as amended, a writ of possession
be overemphasized that being a lending institution, prudence may be issued in favor of a purchaser in a foreclosure sale either
dictates that it should employ good faith and due diligence with (1) within the one-year redemption period, upon the filing of a
the properties entrusted to it. It was the bank which submitted bond; or (2) after the lapse of the redemption period, without
the properties ought to be foreclosed to the sheriff. It only need of a bond. Within the one-year redemption period, the
submitted five (5) properties for foreclosure. Yet, it caused the purchaser may apply for a writ of possession by filing a petition
registration of the Certificate of Sale under public auction in the form of an ex parte motion under oath, in the registration
which listed more properties than what was foreclosed. On this or cadastral proceedings of the registered property. The law
aspect, exemplary damages in the amount of P200,000.00 are requires only that the proper motion be filed, the bond approved
in order.”49 and no third person is involved. After the consolidation of title
There being an award of exemplary damages, the award of in the buyer’s name for failure of the mortgagor to redeem the
attorney’s fees is likewise proper as provided in paragraph 1, property, entitlement to the writ of possession becomes a matter
Article 2208 of the Civil Code. of right. In the latter case, the right of possession becomes
WHEREFORE, the petitions for review on certiorari are absolute because the basis thereof is the purchaser’s ownership
DENIED for lack of merit. The Decision dated May 17, 2005 of the property.
and Resolution dated March 15, 2006 of the Court of Appeals Same; Same; Same; The proceeding in a petition for a
_______________ writ of possession is ex-parte and summary in nature; The
48 Article 2229, CIVIL CODE OF THE PHILIPPINES. issuance of the writ of possession is, in turn, a ministerial
49 Rollo (G.R. No. 171991), pp. 39-40. function in the exercise of which trial courts are not granted
620 any discretion.—The rule is likewise settled that the proceeding
620 SUPREME COURT REPORTS ANNOTATED in a petition for a writ of possession
Yap vs. Dy, Sr. _______________
* SECOND DIVISION.
in CA-G.R. C.V. No. 57205 are hereby AFFIRMED with the
139
MODIFICATION that the case is REMANDED to the Regional
Trial Court of Negros Oriental, Branch 44, Dumaguete City, for VOL. 695, APRIL 3, 2013
the computation of the pro-rata value of properties covered by Tolosa vs. United Coconut Planters Bank
TCT No. T-14777 (Lot 1) and TCT No. T-14781 (Lot 6) of the is ex parte and summary in nature. As one brought for the
Registry of Deeds of Negros Oriental at the time of redemption benefit of one party only and without notice by the court to any
to determine if there is a deficiency to be settled by or person adverse of interest, it is a judicial proceeding wherein
overpayment to be refunded to respondent Spouses Zosimo Dy, relief is granted without giving the person against whom the
Sr. and Natividad Chiu and Spouses Marcelino C. Maxino and relief is sought an opportunity to be heard. The issuance of the
writ of possession is, in turn, a ministerial function in the PETITION for review on certiorari of the decision and
exercise of which trial courts are not granted any discretion. resolution of the Court of Appeals.
Since the judge to whom the application for writ of possession The facts are stated in the opinion of the Court.
is filed need not look into the validity of the mortgage or the Stephen Arceño for petitioners.
manner of its foreclosure, it has been ruled that the ministerial Jose Barcelon and Associates for respondent.
duty of the trial court does not become discretionary upon the PEREZ, J.:
filing of a complaint questioning the mortgage. Corollarily, any A purchaser at an extrajudicial foreclosure sale is entitled to
question regarding the validity of the extrajudicial foreclosure a writ of possession as a matter of right after consolidation of
sale and the resulting cancellation of the writ may, likewise, be ownership for failure of the mortgagor to redeem the
determined in a subsequent proceeding as outlined in Section 8 property.1 The exceptions to this rule are at the heart of this
of Act No. 3135. petition for review filed pursuant to Rule 45 of the Rules of
Same; Same; Same; Given the ministerial nature of the Court,
Regional Trial Court’s duty to issue the writ of possession after _______________
the purchaser has consolidated its ownership, it has been ruled, 1 Lam v. Metropolitan Bank and Trust Company, G.R. No.
moreover, that any question regarding the regularity and 178881, 18 February 2008, 546 SCRA 200, 206.
validity of the mortgage or its foreclosure cannot be raised as 141
justification for opposing the issuance of the writ; Regardless VOL. 695, APRIL 3, 2013
of the pendency of such suit, the purchaser remains entitled to
Tolosa vs. United Coconut Planters Bank
a writ of possession, without prejudice, of course, to the
eventual outcome of the pending annulment case.—Given the primarily assailing the 31 May 2007 Decision2 rendered by the
ministerial nature of the RTC’s duty to issue the writ of Nineteenth Division of the Court of Appeals (CA) in CA-G.R.
possession after the purchaser has consolidated its ownership, it SP No. 00593,3 the decretal portion of which states:
has been ruled, moreover, that any question regarding the WHEREFORE, in view of all the foregoing premises, the
regularity and validity of the mortgage or its foreclosure cannot Orders dated December 1, 2004, and January 31, 2005, issued
be raised as justification for opposing the issuance of the writ. by the Honorable public respondent are hereby ANNULLED
More to the point, a pending action for annulment of mortgage and SET ASIDE, and a new one is issued granting the issuance
or foreclosure does not stay the issuance of a writ of possession. of writ of possession in favor of petitioner UCPB for the
Regardless of the pendency of such suit, the purchaser remains properties now covered by TCT Nos. T-30403 and T-30404 and
entitled to a writ of possession, without prejudice, of course, to Tax Declaration Nos. ARP/TD No. 2054 (PIN 038-12-006-04-
the eventual outcome of the pending annulment case. Otherwise 050) and ARP/TD No. 2056 (PIN 038-12-006-04-051).
stated, the issuance of the writ of possession remains the SO ORDERED.4
ministerial duty of the RTC until the issues raised in the
annulment case are, once and for all, decided by a court of The Facts
competent jurisdiction.
Same; Same; Same; The Supreme Court ruled that the On 7 April 1997, petitioners Spouses Montano and
duty to issue writ of possession ceases to be ministerial where Merlinda Tolosa (Spouses Tolosa) entered into a Credit
the property mortgaged had been, in the meantime, sold to third Agreement with respondent United Coconut Planters Bank
parties who had (UCPB) for the purpose of availing of the latter’s credit
140 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
Tolosa vs. United Coconut Planters Bank and/or declared for taxation purposes in their names under the
assumed the mortgagor’s indebtedness and took following certificates of title and/or tax declarations, to wit: (a)
possession of the property.—In Cometa v. Intermediate Transfer Certificate of Title (TCT) Nos. T-23589; (b) Original
Appellate Court, 151 SCRA 563 (1987), the judgment debtor Certificate of Title (OCT) No. P-14743; (c) Tax Declaration
filed a separate action to invalidate the auction sale of properties No. ARP-TD 1561 (038-12-006-04-051); and Tax Declaration
approximately worth P500,000.00 for the unusually low price No.
of P57,396.85. Citing equitable considerations, this Court _______________
upheld the deferment of the issuance of the writ of possession 2 Penned by CA Associate Justice Stephen C. Cruz and
sought by the judgment creditor on the ground that the validity concurred in by Associate Justices Isaias P. Dicdican and
of the auction sale is an issue that requires preemptive Antonio L. Villamor.
resolution to avoid injustice. In the case of Barican v. 3 CA Rollo, 31 May 2007 Decision in CA-G.R. SP No.
Intermediate Appellate Court, 162 SCRA 358 (1988), on the 00593, pp. 226-235.
other hand, the Court ruled that the duty ceases to be ministerial 4 Id., at p. 234.
where the property mortgaged had been, in the meantime, sold 5 Records, CAD Case No. 3028, Parties’ 7 April 1997
to third parties who had assumed the mortgagor’s indebtedness Credit Agreement, pp. 38-44.
and took possession of the property. In Sulit v. Court of 142
Appeals, 268 SCRA 441 (1997), the mortgagee’s failure to 142 SUPREME COURT REPORTS ANNOTATED
deliver the surplus from the proceeds of the foreclosure sale
equivalent to at least 40% of the mortgage debt was likewise Tolosa vs. United Coconut Planters Bank
6
found sufficient justification for the non-issuance of the writ of ARP-TD 93-006-0362 (038-12-006-04-050). For failure of the
possession sought. 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 disposition, the RTC ruled that the pendency of Civil Case No.
aforesaid realties and filed a petition for the extrajudicial sale 6180 necessitated the suspension of the grant of UCPB’s
thereof with the Office of the Clerk of Court and Ex- petition since there was a possibility that the latter’s foreclosure
Officio Sheriff of Kalibo, Aklan on 22 October 1999. 7 of the mortgage may be adjudged violative of the Spouses
After the due notice and publication, the mortgaged Tolosa’s rights as mortgagors. While conceding that the
properties were sold on 4 January 2000 at a public auction issuance of a writ of possession is ministerial as a general rule,
where UCPB tendered the highest bid of P17,240,000.00. The _______________
proceeds of the sale were credited towards the partial 13 UCPB’s 30 July 2004 Ex-Parte Petition, id., at pp. 2-5.
satisfaction of the Spouses Tolosa’s mortgage obligation which, 14 RTC’s 23 September 2004 Notice of hearing, id., at p.
inclusive of interests, penalties and other charges, was pegged 16.
at P24,253,847.64.8 Issued the corresponding certificate of 15 Spouses Tolosa’s 29 May 2002 Amended
sale,9 UCPB caused the same to be registered with the Office of Complaint, id., at pp. 24-34.
the Register of Deeds of Aklan on 5 January 2000.10 For failure 16 Spouses Tolosa’s 8 November 2004 Opposition, id., at
of the Spouses Tolosa to exercise their right of redemption pp. 20-23.
within the prescribed one year period, UCPB went on to 144
consolidate its ownership over the subject realties on 22 January 144 SUPREME COURT REPORTS ANNOTATED
2001.11 With the cancellation of those in the name of the
Spouses Tolosa, the following certificates of title and tax Tolosa vs. United Coconut Planters Bank
declarations were subsequently issued in the name of UCPB, to the RTC held that said function ceases to be of said nature
wit: (a) TCT No. T-30403; (b) TCT No. T-30404; (c) Tax where the grant of the writ “will prejudice another pending case
Declaration No. ARP-TD 2054 (038-12-006-04-050); and (d) for the nullification of the auction sale” and “might work
Tax Declaration No. ARP-TD 2056 (038-12-006-04-051).12 inequity and injustice to mortgagors.”17 With its motion for
On 2 September 2004, UCPB filed an ex-parte petition for reconsideration of the foregoing order18 further denied for lack
issuance of a writ of possession in the cadastral case docketed of merit in the RTC’s Order dated 31 January 2005, 19 UCPB
_______________ filed its Rule 65 petition for certiorari which was docketed as
6 Deeds of Real Estate Mortgage, id., at pp. 57-67. CA-G.R. SP No. 00593 before the CA.20
7 UCPB’s 9 August 1999 Petition for Sale Under Act No. On 31 May 2007, the CA rendered the herein assailed
3135, As Amended, id., at pp. 53-55. decision, nullifying the RTC’s 1 December 2004 Decision and
8 Spouses Tolosa’s 16 June 2000 Letter, id., at p. 72. granting the writ of possession sought by UCPB. Finding that
9 4 January 2000 Certificate of Sale, id., at pp. 6-8. the ministerial nature of the issuance of a writ of possession left
10 Id., at p. 163. no discretion on the part of the RTC insofar as the grant of
11 UCPB’s 22 January 2001 Affidavit of UCPB’s application is concerned, the CA ruled that questions
Consolidation, id., at pp. 163-164. regarding the validity of the foreclosure sale as well as the
12 UCPB’s TCTs and Tax Declarations, id., at pp. 9-12. propriety of the grant of writ can be raised by the Spouses
143 Tolosa in the same proceedings pursuant to Section 8 of Act
3135. The fact that the Credit Agreement, Promissory Notes
VOL. 695, APRIL 3, 2013 and Real143Estate Mortgage executed by the Spouses Tolosa had
Tolosa vs. United Coconut Planters Bank yet to be declared invalid also led the CA to enunciate that the
as Cadastral Case No. 3028 before the Regional Trial Court mere pendency of Civil Case No. 6180 cannot defeat the right
(RTC), Branch 5, Kalibo Aklan.13 Notified of the filing of the to a writ of possession the law grants to UCPB as the absolute
petition,14 the Spouses Tolosa filed their 8 November 2004 and registered owners of the subject realties.21 The Spouses
Opposition, calling the RTC’s attention to the pendency of the Tolosa’s motions for reconsideration22 of this decision were
complaint for declaration of nullity of promissory notes, denied for lack of merit in the CA’s second assailed Resolution
foreclosure of mortgage and certificate of sale as well as dated 21 May 2008,23 hence, this petition.
accounting and damages which they instituted against UCPB. _______________
Docketed as Civil Case No. 6180 before Branch 8 of the RTC, 17 RTC’s 1 December 2004 Order, id., at pp. 75-76.
the complaint alleged that the Spouses Tolosa were misled by 18 UCPB’s 28 December 2004 Motion for
UCPB into signing the Credit Agreement, Promissory Notes Reconsideration, id., at pp. 84-87.
and Real Estate Mortgage sued upon. In addition to not 19 RTC’s 31 January 2005 Order, id., at p. 88.
releasing the full amount of their loans, UCPB was likewise 20 CA Rollo, CA-G.R. SP No. 00593, UCPB’s 14 April
faulted for supposedly failing to disclose the actual interests it 2005 Petition for Certiorari, pp. 2-11.
charged and for causing the extrajudicial foreclosure of the 21 CA’s 31 May 2007 Decision, id., at pp. 226-235.
mortgage despite the Spouses Tolosa’s overpayment of their 22 Spouses Tolosa’s 22 June 2007 Motions for
loans.15 Claiming that there was prima facie showing of Reconsideration, id., at pp. 242-255; 280-297.
invalidity of their mortgage obligation, the foreclosure of the 23 CA’s 21 May 2008 Resolution, id., at pp. 343-345.
mortgage and the sale of their properties, the Spouses Tolosa 145
prayed that the issuance of the writ of possession be held in VOL. 695, APRIL 3, 2013
abeyance and that UCPB’s petition therefor be consolidated
with Civil Case No. 6180.16
On 1 December 2004, the RTC issued an order, holding in
abeyance the issuance of the writ of possession sought by The Issues
UCPB. Citing equity and substantial justice as reasons for its
The Spouses Tolosa seek the reversal of the CA’s assailed 27 Metropolitan Bank & Trust Company v. Santos, G.R.
decision and resolution on the following grounds, to wit: No. 157867, 15 December 2009, 608 SCRA 222, 233.
I. THE CA REVERSIBLY ERRED IN NOT FINDING 28 Motos v. Real Bank (A Thrift Bank), Inc., supra, note 25
THAT THE PRIMA FACIE NULLITY OF THE at p. 225 citing Metropolitan Bank and Trust Company v. Tan,
MORTGAGE OBLIGATION AND THE G.R. No. 159934, 26 June 2008, 555 SCRA 502, 512.
FORECLOSURE SALE JUSTIFIED THE RTC’S 29 Spouses Alex and Julie Lam v. Metropolitan Bank &
ORDER TO HOLD IN ABEYANCE THE Trust Company, G.R. No. 178881, 18 February 2008, 546
ISSUANCE OF THE WRIT OF POSSESSION SCRA 200, 206.
SOUGHT BY UCPB. 30 Torbela v. Rosario, G.R. No. 140528, 7 December 2011,
II. THE CA REVERSIBLY ERRED IN ORDERING 661 SCRA 633, 683.
THE GRANT OF THE WRIT OF POSSESSION 31 Fernandez v. Espinoza, G.R. No. 156421, 14 April 2008,
SOUGHT BY UCPB DESPITE THE RULE THAT 551 SCRA 136, 150.
THE SURPLUS IN THE BID PRICE SHOULD 32 Oliveros v. The Hon. Presiding Judge, RTC, Branch 24,
FIRST BE PAID TO THE MORTGAGOR Biñan, Laguna, G.R. No. 165963, 3 September 2007, 532
BEFORE HE CAN BE DEPRIVED OF SCRA 109, 119.
POSSESSION OF THE PROPERTY 33 Esperidion v. Court of Appeals, 523 Phil. 664, 667-668;
MORTGAGED.24 490 SCRA 273, 276 (2006).
147
The Court’s Ruling VOL. 695, APRIL 3, 2013
The petition is bereft of merit.
look into the validity of the mortgage or the manner of its
A writ of possession is simply an order by which the sheriff
foreclosure,34 it has been ruled that the ministerial duty of the
is commanded by the court to place a person in possession of a
trial court does not become discretionary upon the filing of a
real or personal property.25 Under Section 7 of Act No. 3135, as
complaint questioning the mortgage.35 Corollarily, any question
amended, a writ of possession may be issued in favor of a
regarding the validity of the extrajudicial foreclosure sale and
purchaser in a foreclosure sale either (1) within the one-year
the resulting cancellation of the writ may, likewise, be
redemption period, upon the filing of a bond; or (2) after the
determined in a subsequent proceeding as outlined in Section
lapse of the redemption period, without need of a bond. Within
836 of Act No. 3135.37
the one-year redemption period, the purchaser may apply for a
Gauged from the foregoing principles, we find that the CA
writ of possession by filing a petition in the form of
committed no reversible error in ordering the issuance of the
_______________
writ of possession sought by UCPB. The record shows that
24 Rollo, Spouses Tolosa’s 21 July 2008 Petition for
UCPB caused the extrajudicial foreclosure of the mortgage on
Review, pp. 20-21.
the subject realties as a consequence of the Spouses Tolosa’s
25 Motos v. Real Bank (A Thrift Bank), Inc., G.R. No.
default on their mortgage obligation. As the highest bidder at
171386, 17 July 2009, 593 SCRA 216, 224.
the 4 January 2000 foreclosure sale, UCPB consolidated its
146
ownership on 22 January 2001 or upon failure of the Spouses
146 SUPREME COURT REPORTS ANNOTATED _______________
Tolosa vs. United Coconut Planters Bank 34 Idolor v. Court of Appeals, 490 Phil. 808, 814; 450
an ex parte motion under oath,26 in the registration or cadastral SCRA 396, 402 (2005).
proceedings of the registered property.27 The law requires only 35 Metropolitan Bank and Trust Company v. Tan, G.R. No.
that the proper motion be filed, the bond approved and no third 159934, 26 June 2008, 555 SCRA 502, 512.
person is involved.28 After the consolidation of title in the 36 SECTION 8. The debtor may, in the proceedings in
buyer’s name for failure of the mortgagor to redeem the which possession was requested, but not later than thirty days
property, entitlement to the writ of possession becomes a matter after the purchaser was given possession, petition that the sale
of right.29 In the latter case, the right of possession becomes be set aside and the writ of possession cancelled, specifying the
absolute because the basis thereof is the purchaser’s ownership damages suffered by him, because the mortgage was not
of the property.30 violated or the sale was not made in accordance with the
The rule is likewise settled that the proceeding in a petition provisions hereof, and the court shall take cognizance of this
for a writ of possession is ex parte and summary in nature.31 As petition in accordance with the summary procedure provided
one brought for the benefit of one party only and without notice for in section one hundred and twelve of Act Numbered Four
by the court to any person adverse of interest, it is a judicial hundred and ninety-six; and if it finds the complaint of the
proceeding wherein relief is granted without giving the person debtor justified, it shall dispose in his favor of all or part of the
against whom the relief is sought an opportunity to be bond furnished by the person who obtained possession. Either
heard.32 The issuance of the writ of possession is, in turn, a of the parties may appeal from the order of the judge in
ministerial function in the exercise of which trial courts are not accordance with section fourteen of Act Numbered Four
granted any discretion.33 Since the judge to whom the hundred and ninety-six; but the order of possession shall
application for writ of possession is filed need not continue in effect during the pendency of the appeal.
_______________ 37 Cua Lai Chu v. Laqui, G.R. No. 169190, 11 February
26 Sagarbarria v. Philippine Business Bank, G.R. No. 2010, 612 SCRA 227, 235.
178330, 23 July 2009, 593 SCRA 645, 651-652. 148
Tolosa vs. United Coconut Planters Bank and took possession of the property. In Sulit v. Court of
Tolosa to exercise their right of redemption within the one- Appeals,45 the mortgagee’s failure to deliver the surplus from
year period therefor prescribed. Subsequent to the issuance of the proceeds of the foreclosure sale equivalent to at least 40%
the certificates of title and tax declarations over the same of the mortgage debt was likewise found sufficient justification
properties in its name, UCPB complied with the requirements for the non-issuance of the writ of possession sought.
under Act 3135 by filing its ex parte petition for issuance of a _______________
writ of possession before the RTC on 2 September 2004. Since 40 Spouses Rempson & Milagros Samson v. Judge
UCPB had already become the absolute and registered owner Mauricio M. Rivera, G.R. No. 154355, 20 May 2004, 428
of said properties, the CA correctly ruled that it was the SCRA 759, 769.
ministerial duty of the RTC to issue the writ of possession in 41 Torbela v. Spouses Andres Rosario and Lena Duque-
favor of the former. Rosario, supra, note 30.
In urging the reversal of the assailed decision and 42 Fortaleza v. Lapitan, supra, note 39 at p. 485.
resolution, the Spouses Tolosa argue that the prima facie merit 43 235 Phil. 569; 151 SCRA 563 (1987).
of their complaint in Civil Case No. 6180 justified, at the very 44 245 Phil. 316; 162 SCRA 358 (1988).
least, the deferment of the issuance of the writ of possession. 45 335 Phil. 914; 268 SCRA 441 (1997).
For this purpose, they call our attention to the supposed fact that 150
UCPB not only failed to release the entirety of the proceeds of 150 SUPREME COURT REPORTS ANNOTATED
their loans but also violated Republic Act No. 376538 by failing Tolosa vs. United Coconut Planters Bank
to specify the rates of interest it charged on their mortgage The Spouses Tolosa invoked the Court’s ruling in Barican
obligation. Insisting that they were misled by UCPB into which is not, however, on all fours with the case at bench. Aside
signing the Credit Agreement, Promissory Notes and Real from the fact that the Spouses Tolosa appear to have remained
Estate Mortgage which they impugned in Civil Case No. 6180, in possession of the subject realties, there is no showing in the
the Spouses Tolosa also claim that, discounting the illegal record these properties have, in the meantime, been acquired or
interests and charges imposed thereon, their mortgage transferred to third persons whose adverse possession and/or
obligation only amounted to P14,041,000.00 and was more than interest would have justified the non-issuance of the writ of
amply discharged by the P17,240,000.00 proceeds realized at possession sought by UCPB. Absent showing that the
the foreclosure sale. mortgaged properties had been sold at an unusually low price
Given the ministerial nature of the RTC’s duty to issue the or that the foreclosure sale had been attended with irregularities,
writ of possession after the purchaser has consolidated its the ruling in Cometa is also of little utility to the Spouses
ownership, it has been ruled, moreover, that any question Tolosa’s cause. Despite the latter’s insistence on the
regarding the regularity and validity of the mortgage or its supposed prima facie invalidity of their mortgage obligation
foreclosure cannot be raised as justification for opposing the and the foreclosure proceedings, we find that the CA correctly
issuance of the writ.39 More to the point, a pending action for steered clear from said issues since they have yet to be
_______________ definitively resolved in Case No. 6180.
38 The Truth in Lending Act. The Spouses Tolosa are similarly out on a limb in relying
39 Fortaleza v. Lapitan, G.R. No. 178288, 15 August 2012, on Sulit which was premised on the existence of surplus from
678 SCRA 469, 484. the proceeds realized in the foreclosure sale. Considering that
149 their mortgage obligation was computed by UCPB at an
VOL. 695, APRIL 3, 2013 149of P24,253,847.64, inclusive of interests, penalties
aggregate
Tolosa vs. United Coconut Planters Bank and other charges, the P17,240,000.00 realized at the
annulment of mortgage or foreclosure does not stay the issuance foreclosure sale of the properties mortgaged clearly left no
of a writ of possession.40 Regardless of the pendency of such surplus to speak of in the case. The Spouses Tolosa would, of
suit, the purchaser remains entitled to a writ of possession, course, have us believe that, without the invalid interests and
without prejudice, of course, to the eventual outcome of the charges imposed by the UCPB, their obligation would have
pending annulment case.41 Otherwise stated, the issuance of the only amounted to P14,041,000.00 and would have meant a
writ of possession remains the ministerial duty of the RTC until surplus of P3,199,000.00 from the proceeds realized at the
the issues raised in the annulment case are, once and for all, foreclosure sale.46 Like the matter of the invalidity of their
decided by a court of competent jurisdiction.42 mortgage obligation to which it is inextricably linked, however,
To be sure, the foregoing rule admits of a few this issue has yet to be resolved in Case No. 6180 and, for said
jurisprudential exceptions. In Cometa v. Intermediate Appellate reason, cannot justify the non-issuance of the writ of possession
Court,43 the judgment debtor filed a separate action to in favor of UCPB.
invalidate the auction sale of properties approximately worth _______________
P500,000.00 for the unusually low price of P57,396.85. Citing 46 Rollo, pp. 38-39.
equitable considerations, this Court upheld the deferment of the 151
issuance of the writ of possession sought by the judgment VOL. 695, APRIL 3, 2013
creditor on the ground that the validity of the auction sale is an Tolosa vs. United Coconut Planters Bank
issue that requires preemptive resolution to avoid injustice. In At any rate, the exception made in Sulit had been held
the case of Barican v. Intermediate Appellate Court,44 on the inapplicable where, as here, the period to redeem has already
other hand, the Court ruled that the duty ceases to be ministerial expired or when the ownership over the property had already
where the property mortgaged had been, in the meantime, sold been consolidated in favor of the mortgagee-
to third parties who had assumed the mortgagor’s indebtedness purchaser.47 Having consolidated its ownership over the subject
properties after the Spouses Tolosa failed to exercise their right Moreover, sound public policy demands that courts
of redemption, UCPB was correctly found by the CA entitled to disregard stipulations for counsel fees whenever they
a writ of possession. Since any question regarding the validity appear to be a source of speculative profit at the
of the mortgage or its foreclosure cannot be a legal ground for expense of the debtor or mortgagor.
refusing a writ of possession,48 the RTC’s ministerial duty to
issue the same writ was by no means rendered discretionary by 1. 2.CONTRACTS; IF CONTRARY TO LAW OR
the pendency of Civil Case No. 6180. While there are, PUBLIC POLICY, VALIDITY CANNOT BE
concededly, exceptions to the foregoing rules as above- GIVEN BY ESTOPPEL.—As between the parties to
discussed, none of them was adequately established in the a contract, validity cannot be given to it by estoppel
Spouses Tolosa’s petition. if it is prohibited by law or against public
WHEREFORE, premises considered, the petition is policy (Eugenio, et al. vs. Perdido, et al. 97 Phil.,
DENIED for lack of merit. Accordingly, the CA’s assailed 31 41).
May 2007 Decision and 21 May 2008 Resolution are
AFFIRMED in toto. 1. 3.FORECLOSURE OF MORTGAGES; EXCESS IN
SO ORDERED. SELLING PRICE; DUTY OF MORTGAGEE TO
Carpio (Chairperson), Velasco, Jr.,** Brion and Del
RETURN SURPLUS TO MORTGAGOR.—The
Castillo, JJ., concur.
application of the proceeds from the sale of
Petition denied, judgment and resolution affirmed in toto.
mortgaged property to the mortgagor's obligation is
Notes.—It is settled that questions regarding the validity of
an act of payment, not payment by dation, and is
mortgage or its foreclosure as well as the sale of the property governed by the provision? of Section 4, Rule 70 of
covered by the mortgage cannot be raised as ground to deny the the Rules of Court. Under said section, it is the
issuance of a writ of possession. Any such questions
mortgagee's duty to return any surplus in the selling
_______________
price to the mortgagor.
47 Metropolitan Bank & Trust Co. v. Lamb Construction
Consortium Corporation, G.R. No. 170906, 27 November
2009, 606 SCRA 159, 171, citing Saguan v. Philippine Bank of 1. 4.ID.; REDEMPTION PERIOD; RIGHTS OF A
Communications, G.R. No. 159882, 23 November 2007, 538 JUDGMENT DEBTOR WHO is IN POSSESSION
SCRA 390. OF PROPERTY.—Where the judgment debtor is in
48 Torbela v. Spouses Rosario, supra note 30. possession of the property sold, he is entitled to
** Per Special Order No. 1437 dated 25 March 2013. remain in possession and to collect rents and profits
152 of the same during the period of
redemption. (Riosa vs. Verzosa, 26 Phil.,
152 SUPREME COURT REPORTS ANNOTATED 86; Velasco vs. Rosenberg's Inc., 32 Phil.,
Tolosa vs. United Coconut Planters Bank 72; Powell vs. Philippine National Bank, 54 Phil.,
must be determined in a subsequent proceeding. (Planters 54).
Development Bank vs. Ng, 620 SCRA 292 [2010])
The judge to whom an application for a writ of possession APPEAL from a judgment of the Court of First Instance of
is filed need not look into the validity of the mortgage or the Manila. Concepción, J.
manner of its foreclosure. Until the foreclosure sale is annulled, The facts are stated in the opinion of the Court.
the issuance of the writ of possession is ministerial. (Ibid.) Fernando Gorospe and Pablo R. Suárez for appellees.
Nicanor S. Sison for appellant.
——o0o——
REYES, J. B. L., J.:
[No. L-12735. October 30, 1959]
LUCIA GOROSPE AND JUAN M. SEBASTIAN, plaintiffs Certified to us by the Court of Appeals for the reason that only
and appellees, vs. EPHRAIM G. GOCHANGCO, defendant questions of law are therein involved, this appeal was taken
and appellant. from a judgment of the Court of First Instance of Manila,
426 ordering appellant Ephraim C. Go-
426 PHILIPPINE REPORTS ANNOTATED 427
Gorospe and Sebastian vs. Gochango VOL. 106, OCTOBER 20, 1959
Gorospe and Sebastian vs. Gochango
1. 1.ATTORNEY AND CLIENT; ATTORNEY'S changco to pay to the spouses Juan M. Sebastian and
FEES; UNCONSCIONABLE STIPULATIONS Lucia Gorospe the sum of P4,741.98, with legal interest from
NOT TO BE LITERALLY ENFORCED; Quantum the date of the filing of the complaint until the sum is fully paid,
Meruit BASIS.—Whenever the attorney's fees plus the sum of P500.00 as attorney's fees and costs.
stipulated appear excessive, unconscionable, or It appears that on October 12, 1951, plaintiffs-appellees, the
unreasonable, the same should be fixed on a quantum spouses Juan M. Sebastian and Lucia Gorospe, obtained from
meruit basis, because a lawyer is primarily a court the defendant-appellant a loan of P15,000.00 at 12 per cent
officer charged with the duty of assisting the court in interest per annum, payable within one year from said date. As
administering impartial justice between the parties, security for the payment of the loan, plaintiffs-appellees
and his fee should be subject to judicial control. mortgaged in favor of appellant their two lots described under
Transfer Certificates of Title Nos. 9173 and 24465 of the Office
of the Register of Deeds of Manila, including the improvements of the amount claimed by the mortgagee but in no case shall it
thereon (Exh. 7; Annex of Answer, Rec. App. pp. 15-28). On be less than P200.00, Philippine Currency; * * *." (Appellant's
October 16, 1952, four days after the loan had become due and Brief, pp. 28-29)
demandable, plaintiffs-appellees obtained an additional loan of 429
P2,000.00 to pay the interest due and other charges, at the same VOL. 106, OCTOBER 30, 1959
time extending the mortgage for a period of six months from
October 14, 1952 to April 14, 1953. This time, the loan Gorospe and Sebastian vs. Gochango
amounted to P17,000.00 with the same mortgaged properties as A stipulation fixing the attorney's fees does not necessarily
security (Exh. 8, Annex 2 of Answer, Rec. App. pp. 29-33). imply that it must be literally enforced no matter how injurious
When the obligation of the mortgagors fell due, they failed or oppressive it may be.
to make payment in whole or in part. However, defendant- From Bachrach vs. Golingco, 39 Phil., 138 (rendered in
appellant gave them an extension of time to pay for another six 1918) to Sison vs. Suntay, 102 Phil., 769, December 28, 1957,
months, from April 5, 1953 to October 16, 1953, with the this Court has repeatedly fixed counsel fees on a quantum
condition that the interest of ?1,020.00 for six months would be meruit basis whenever the fees stipulated appear excessive,
added to P17,000.00, so that the mortgage debt amounted to unconscionable, or unreasonable, because a lawyer is primarily
P18,020.00 as of October 16, 1953. Upon failure to pay the a court officer charged with the duty of assisting the court in
obligation on the due date, the mortgaged properties were administering impartial justice between the parties, and hence,
extrajudicially sold at; public auction on March 8, 1954 to the his fees should be subject to judicial control. Nor should it be
mortgagee for P22,978.98, under the provisions of Act 3135. ignored that sound public policy demands that courts disregard
Claiming that the selling price of the mortgaged properties stipulations for counsel fees whenever they appear to be a
was more than the obligation incurred, plaintiffsappellees filed source of speculative profit at the expense of the debtor or
a complaint on March 9, 1955, to recover mortgagor.
428 It is not material that the present action is between debtor
and creditor, and not between client and counsel. This Court has
428 PHILIPPINE REPORTS ANNOTATED previously ruled that:
Gorospe and Sebastian vs. Gochango "We are not unmindful of the fact that the question as to the
the excess amount and asking the court to order the appellant to propriety of the stipulation for attorney's fees does not here arise
pay the sum of P4,633.82, with monthly interest at 1 per cent directly between the creditor in this note and the attorney into
from the filing of the complaint, plus the sum of P500.00 as whose hands he might place the note for collection. The
attorney's fees. stipulation is contained in the contract between the creditor and
At the hearing on October 27, 1955, his debtor; and the attorney could not be held bound thereby.
Lucia Gorospe testified, but for lack of material time, the Nevertheless we think the same rule applies as if the question
hearing was postponed to January 19, 1956. On this last had arisen between the attorney and client. As the court had
mentioned date, however, the parties instead of adducing power to fix the fee as between attorney and client, it must
further evidence, submitted to the court a stipulation of facts. necessarily have the right to say whether a stipulation like this,
On the basis of the trial court's evaluation of the oral inserted in a promissory note, is valid. A different ruling, as may
evidence adduced during the hearing, the stipulation of facts, be readily seen, would make it exceedingly easy to evade the
and the documentary evidence submitted by the parties, a usury laws," Bachrach vs. Golingco, supra.)
decision was rendered in favor of Lucia Gorospe and Juan M. The claim that plaintiffs-appellees are now estopped to assail
Sebastian, declaring the mortgagee, Ephraim C. Gochangco, the legality of the attorney's fees in question on the ground of
entitled to collect no more than P200.00 attorney's fees, and untimely protest can not be seriously entertained. The records
ordering him to turn over the excess over the debt, interest, show that before the expiration of the period for redemption on
costs, and counsel fees. The trial court ruled: March 8, 1955, plaintiffs-appellees on
"Considering that the work of said attorney consisted of sending February 28, 1955, wrote the defendant-appellant protest-
written demand to plaintiff for the payment of their 430
indebtedness to defendant after said indebtedness became due, 430 PHILIPPINE REPORTS ANNOTATED
sending a written communication to the sheriff requesting sale
Gorospe and Sebastian vs. Gochango
of the properties mortgaged, being present at the auction sale
conducted by the sheriff and receiving from the sheriff the ing against the amount of attorney's fees, stating among other
certificate of sale, the court sincerely thinks that the amount of things, that "such fees are not only excessive, exorbitant,
P200.00 is reasonable attorney's fees of the defendant's lawyer." oppressive, unjust and against the law, but also there was no
(Rec. app. pp. 92-93) need for you (Gochangco) to engage the services of a lawyer in
The decisive issue that should be threshed out in the instant case the sale at public auction of the property." (Exh. 6, Rec. App. p.
is whether the trial court had the authority to fix the amount of 38). This protest was on time, and undoubtedly, to sanction the
attorney's fees which the mortgagee could charge the exorbitant charge of attorney's fees would not be a sound public
mortgagors, notwithstanding the stipulated amount by the policy. Besides, as between the parties to a contract, validity
parties in the mortgage contract. cannot be given to it by estoppel if it is prohibited by law or
"8. In case of mortgagee should secure the services of a lawyer, against public policy. (Eugenio, et al. vs. Perdido, et al., 97
to secure his right under this contract, the mortgagors shall pay Phil., 41).
the attorney's fees of the same, and all other expenses incurred We do believe, however, that in fixing the counsel fees, the
by the mortgagee, together with the legal costs; and the trial court erred in considering solely the lawyer's external acts
attorney's fees are hereby fixed in an amount equivalent to 20% of sending letters of demand, requesting the sheriff to proceed
with the sale, and receiving the corresponding certification,
without taking into account the study made of the case, simply 432
as it was. We conclude that a fair allowance should entitle the 432 PHILIPPINE REPORTS ANNOTATED
creditor to collect P500.00 for counsel fees.
The next point to be determined is the amount of the excess Saavedra, et al., vs. Siari Valley Estate Inc. et al.
in the selling price of the mortgaged properties. For this to the appellees. The governing rule is found in Secs. 29 and 30,
purpose, we have to consider the following items: Rule 39 of the Rules of Court Construing said sections in a
number of cases, this Court has held that where the judgment
Original obligations of the plaintiffs-appellee P15,000.00
debtor is in possession of the property sold, he is entitled to
Additional obligation ................................................................ remain 2,000.00
in possession and to collect rents and profits of the same
Interest of P17,000.00 at the rate of 12% a during the period of redemption. (Riosa vs. Verzosa, 26 Phil.,
year for 6 months from April 15, to Oct. 86; Velasco vs. Rosenberg's Inc., 32 Phil.,
72; Powell vs. Philippine National Bank, 54 Phil., 54) It is to be
16, 1953 ................................................................................ 1,020.00
noted that the appellant himself admitted and so stated in his
Total principal as of Oct 10, 1953 .......................................... counterclaim that "theP18,020.00
plaintiffs (mortgagors) remained in the
Proceeds of the sale at public auction on March 8, 1954 material and actual possession
22,978.98 of the said properties during the
Interest on P18,020.00 for 4 months and 22 period of one year redemption from March 8, 1954 up to March
9, 1955 and until June 10, 1955 when plaintiffs were actually
days from Oct. 16, 1953 to March 8, 1954 ejected therefrom, and during said period rendered and
at 12% a year ......................................................................... P852.95
collected the rents on the house which were rented by said
Attorney's fee ............................................................................ plaintiffs *
500.00* *." (Rec. App. pp. 67-68) In view of such an
Filing fee, sheriff's office ............................................................ admission, we
6.00have no other alternative than to uphold the right
of appellees over the fruits (civil and natural) of the property
Sheriff's fee ................................................................................. during the11.00 time that they were in possession within the
Total obligation as of March 8, 1954 ..................................... redemption period.P19,389.95
Surplus or excess ..................................................................... Wherefore, modified as above indicated with respect to the
P3,389.03
431 attorney's fees and interest on the indebtedness, the decision
VOL. 106, OCTOBER 30, 1959 appealed431from is affirmed. Costs against defendant-appellant.
So ordered.
Gorospe and. Sebastian vs. Gochango Parás, C. J., Padilla, Montemayor, Bautista
It is argued that, in effect, there is no excess in the selling price Angelo, Labrador, Endencia, Barrera, and Gutiérrez
because the surplus should be governed by the rules on dation David JJ., concur.
in payment. This argument is untenable. The application of the Judgment affirmed with modification.
proceeds from the sale of mortgaged property to the mortgagor's
obligation is an act of payment, not payment by dation, and is ____________
governed by the provisions of Sec. 4, Rule 70 of the Rules of
Court Under said section, it is appellant Gochangco's duty to
return such surplus to the plaintiffs-appellees who, as
mortgagors, were the persons entitled to
it. (See Caparas us. Yatco, et al., 89 Phil., 10). [No. L-15128. August 25, 1960]
To this surplus should now be added the P500.00 awarded CECILIO DIEGO, plaintiff and
by the lower court as attorney's fees for the plaintiffsappellees, appellee, vs. SEGUNDO FERNANDO defendant and
and which are here uncontested. appellant.
The claim of appellant for P630.70 interest from October
16, 1953 to January 31, 1954, under his eighth assignment of 1. 1.CONTRACTS; MORTGAGE NOT
error, is misleading, because this amount is already included in ANTICHRESIS; LOAN WlTHOUT
the P852.95 interest from October 16, 1953 to March 8, 1954 INTEREST; POSSESSION TRANSFERRED TO
on the sum of P18,020.00 at the rate of 12 per cent per annum. MORTGAGEE; CASE AT BAR.—If a contract of
The insurance premiums and taxes claimed by appellant were loan with security does not stipulate the payment of
likewise paid from the P2,000.00 additional loan. (Paragraph interest like in the case at bar, and possession of the
18, Stipulation of Facts, Rec. App. pp. 87-88). The amount of mortgaged property is delivered to the mortgagee in
P120.00 for the publication of the notice of sale was properly order that the latter may gather its fruits, but without
disallowed because it was not supported by the evidence on stating that said fruits are to be applied to the
record. Anent the registration fee of P63.00 for recording the payment of interest, if any, and afterwards that of the
certificate of sale, it is incumbent on the purchaser to pay it, as principal, the contract is a mortgage and not
it is for his benefit, and it is not covered by the mortgage antichresis (Legaspi and Salcedo vs. Celestial, 66
contract or mentioned in the Stipulation of Facts. As regards the Phil., 372).
sheriff's fees of P11.00 and the filing fee of P6.00 (P17.00), they
should be disallowed because they were already taken into 1. 2.ID.; ID.; LEGAL INTEREST; PAYMENT OF.—
account and deducted from the excess selling price. The court did not err in so holding that appellant is
There is no merit in the counterclaim of appellant that the liable to pay legal interest to appellee from the filing
rents collected by plaintiffs-appellees from the tenants during of the complaint, because appellant has not up to the
the period of redemption totalling P1,168.00 should be present discharged his indebtedness, and the law
deducted from the recoverable sum that may be due (Art. 2209, New Civil Code; Art. 1108, old) allows a
creditor, in the absence of stipulation as to payment mortgage, contends that the admitted fact that the loan was
of interest, to collect legal interest from the time of without interest, coupled with the transfer of the possession of
the debtor's default. the properties mortgaged to the mortgagee, reveals that the true
transaction between him and appellee was one of antichresis.
APPEAL from a judgment of the Court of First Instance of As correctly pointed out by appellee and the lower court,
Nueva Ecija. Montesa, J. however, it is not an essential requisite of a mortgage that
The facts are stated in the opinion of the Court. possession of the mortgaged premises be retained by the
Espinosa Law Offices for appellant. mortgagor (Legaspi and Salcedo vs. Celestial, 66 Phil., 372).
N. L. Dasig and C. L. Francisco for appellee. To be antichresis, it must be expressly agreed between creditor
and debtor that the former, having been given possession of the
REYES, J. B. L., J.: properties given as security, is to apply their fruits to the
payment of the interest, if owing, and thereafter to the principal
Appeal by defendant Segundo Fernando from the judgment of of his credit (Art. 2132, Civil Code, Barretto vs. Barretto, 37
the Court of First Instance of Nueva Ecija in its Civil Case No. Phil., 234; Diaz vs. De Mendezona, 48 Phil., 666); so that if a
1694 for foreclosure of mortgage. The contract of loan with security does not stipulate the payment of
144 interest but provides for the delivery to the creditor by the
debtor of the property given as security, in order that the latter
144 PHILIPPINE REPORTS ANNOTATED
may gather its fruits, without stating that said fruits are to be
Diego vs. Fernando applied to the payment of interest, if any, and afterwards that of
appeal was originally brought to the Court of Appeals, but was the principal, the contract is a mortgage and not antichresis
certified to us by that tribunal because it raises only questions (Legaspi vs. Celestial, supra). The court below, therefore, did
of law. not err in holding that the contract Exhibit "A" is a true
The facts are not disputed. On May 26, 1950, the mortgage and not an antichresis.
defendant Segundo Fernando executed a deed of mortgage in The above conclusion does not mean, however, that
favor of plaintiff Cecilio Diego over two parcels of land appellee, having received the fruits of the properties mortgaged,
registered in his name, to secure a loan of P2,000, without will be allowed to appropriate them for himself and not be
interest, payable within four years from the date of the mortgage required to account for them to the appellant. For the contract
(Exhibit "A"). After the execution of the deed, possession of the of mortgage Exhibit "A" clearly provides
mortgaged properties were turned over to the mortgagee. 146
The debtor having failed to pay the loan after four years, the 146 PHILIPPINE REPORTS ANNOTATED
mortgagee Diego made several demands upon him for
payment; and as the demands were unheeded, Diego filed this Diego vs. Fernando
action for foreclosure of mortgage. that the loan of P2,000 was "without interest within four (4)
Defendant Fernando's defense was that the true transaction years from date of this instrument"; and there being no evidence
between him and plaintiff was one of antichresis and not of to show that the parties had intended to supersede such
mortgage; and that as plaintiff had allegedly received a total of stipulation when the possession of the mortgaged properties
120 cavans of palay from the properties given as security, were turned over to the appellee by another allowing the latter
which, at the rate of P10 a cavan, represented a value of P5,200, to collect, the f ruits thereof as interest on the loan, the trial court
his debt had already been paid, with plaintiff still owing him a is not authorized to infer from this transfer of possession alone
refund of some P2,720.00. that the parties had verbally modified their written agreement
The Court below, however, found that there was nothing in that the loan was to be without interest for four years, and
the deed of mortgage Exhibit "A" to show that it was not a true substituted another giving appellee the right to receive the fruits
contract of mortgage, and that the fact that possession of the of the mortgaged properties as interests.
mortgaged properties were turned over to the mortgagee did not The true position of appellee herein under his contract with
alter the transaction; that the parties must have intended that the appellant is a "mortgage in possession" as that term is
mortgagee would collect the fruits of the mortgaged properties understood in American equity jurisprudence; that is, "one who
as interest on his loan, which agreement is not uncommon; and has lawfully acquired actual or constructive possession of the
that the evidence showed that plaintiff had already received 55 premises mortgaged to him, standing upon his rights as
cavans of palay from the properties during the period of his mortgagee and not claiming under another title, for the purpose
possession. Whereupon, judgment was rendered for plaintiff in of enforcing his security upon such property or making its
the amount of P2,000, the loan he gave the defendant, with legal income help to pay his debt" (Diaz vs. De Mendezona, citing 27
interest from the filing of the action until full payment, plus Cyc. 1237, 48 Phil., 666). As such mortgagee in possession, his
P500 as attorney's fees rights and obligations are, as pointed out by this Court
145 in Macapinlac vs. Gutierrez Repide (43 Phil., 770), similar to
those of an antichretic creditor:
VOL. 109, AUGUST 25, 1960 145
"The respective rights and obligations of the parties to a contract
Diego vs. Fernando of antichresis, under the Civil Code, appear to be similar and in
and the costs; and in case of default in payment, for the many respects identical with those recognized in the equity
foreclosure of the mortgage. From this judgment, defendant jurisprudence of England and America as incident to the
took the present appeal. position of a mortgagee in possession, in reference to which the
The main issue raised is whether the contract between the following propositions may be taken to be established, namely,
parties is one of mortgage or of antichresis. Appellant, while that if the mortgagee acquires possession in any lawful manner,
admitting that the contract Exhibit "A" shows a deed of
he is entitled to retain such possession until the indebtedness is Wherefore, the judgment of the court below is modified in
satisfied and the property redeemed; that the non-payment of the sense that the amount of appellee's principal recovery is
the debt within the term agreed does not vest the ownership of reduced to P1,505, with an obligation on the part of appellee to
the property in the creditor; that the general duty of the render an accounting of all the fruits received by him from the
mortgagee in possession towards the premises is that of the properties in question from the time of the filing of this action
ordinary prudent owner; that the mortgagee must account for until full payment, or in case of appellant's failure to pay, until
the rents and profits of the land, or its value for purposes of use foreclosure of the mortgage thereon, the value of which fruits
and occupation, any amount thus shall be deducted from the total amount of his recovery. No
147 costs in this instance.
VOL. 109, AUGUST 25, 1960 Parás,
147 C. J., Bengzon, Padilla, Bautista
Angelo, Labrador, Concepción, Barrera, and Gutierrez David,
Diego vs. Fernando JJ., concur.
realized going towards the discharge on the mortgage debt; that Judgment modified.
if the mortgagee remains in possession after the mortgage debt
has been satisfied, he becomes a trustee for the mortgagor as to ______________
the excess of the rents and profits over such debt; and lastly,
that the mortgagor can only enforce his rights to the land by an
equitable action for an account and to redeem. (3 Pom. Eq. Jur.
secs. 1215–1218)"
Similarly, in Enriquez vs. National Bank, 55 Phil., 414, we
ruled that a creditor with a lien on real property who took
possession thereof with the consent of the debtor, held it as an
"antichretic creditor with the right to collect the credit with
interest from the fruits, returning to the antichretic debtor the
balance, if any, after deducting the expenses", because the fact
that the debtor consented and asked the creditor to take charge
of managing his property "does not entitle the latter to
appropriate to itself the fruits thereof unless the former has
expressly waived his right thereto".
In the present case, the parties having agreed that the loan
was to be without interest, and the appellant not having
expressly waived his right to the fruits of the properties
mortgaged during the time they were in appellee's possession,
the latter, like an antichretic creditor, must account for the value
of the fruits received by him, and deduct it from the loan
obtained by appellant. According to the findings of the trial
court, appellee had received a net share of 55 cavans of palay
out of the mortgaged properties up to the time he filed the
present action; at the rate of P9.00 per cavan (a rate admitted by
the parties), the total value of the fruits received by appellee is
P495.00. Deducting this amount from the loan of P2,000
received by appellant from appellee, the former has only
P1,505.00 left to pay the latter.
Appellant also claims that the lower court erred in ordering
him to pay legal interest on his indebtedness to plaintiff from
the filing of the action, since the latter is, up to the present, still
in the possession of the properties mort-
148
148 PHILIPPINE REPORTS ANNOTATED
Baito vs. Sarmiento
gaged and still enjoying its fruits. The court did not err in so
holding, since at the time the action was filed and up to the
present, appellant has not discharged his indebtedness to
appellee, and the law allows the latter, in the absence of
stipulation as to payment of interest, legal interest from the time
of the debtor's default (Art. 2209, New Civil Code, Art. 1108,
old). However, appellee should be made to account for the fruits
he received from the properties mortgaged from the time of the
filing of this action until full payment by appellant, which fruits
should be deducted from the total amount due him from
appellant under this judgment.

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Copyright:

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Week 10

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Copyright:

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VOL.

380, APRIL 10, 2002 Exchange

3 1. a brief memorandum thereof upon the transfer

And by way of Reply, petitioner argued, that: (1)

I. BY NO STRETCH OF LOGIC CAN THE 20 MARCH 1995

The act of registration shall be the operative act to convey

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