Goldenway Merchandising Corp. vs. Equitable PCI Bank

5/6/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 693
G.R. No. 195540. March 13, 2013.*
GOLDENWAY MERCHANDISING CORPORATION,

petitioner, vs. EQUITABLE PCI BANK, respondent.
Remedial Law; Special Civil Actions; Extrajudicial

Foreclosure of Mortgage; The law governing cases of extrajudicial
foreclosure of mortgage is Act No. 3135, as amended by Act No.
4118.―The law
_______________
** Designated Acting Member in lieu of Associate Justice Presbitero J.

Velasco, Jr., per Special Order No. 1430 dated March 12, 2013.
*** Per Special Order No. 1429 dated March 12, 2013.
* FIRST DIVISION.
440
440 SUPREME COURT REPORTS ANNOTATED
Goldenway Merchandising Corporation vs. Equitable PCI Bank
governing cases of extrajudicial foreclosure of mortgage is Act No.

3135, as amended by Act No. 4118. Section 6 thereof provides:
SEC. 6. In all cases in which an extrajudicial sale is made under
the special power hereinbefore referred to, the debtor, his
successors-in-interest or any judicial creditor or judgment creditor
of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the
property is sold, may redeem the same at any time within the
term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of
the Code of Civil Procedure, in so far as these are not inconsistent
with the provisions of this Act.
Same; Same; Same; Redemption; The one-year period of
redemption is counted from the date of the registration of the
certificate of sale.―The one-year period of redemption is counted
from the date of the registration of the certificate of sale. In this
www.central.com.ph/sfsreader/session/00000171e7b14dabc3cb76da003600fb002c009e/t/?o=False 1/17
case, the parties provided in their real estate mortgage contract

that upon petitioner’s default and the latter’s entire loan
obligation becoming due, respondent may immediately foreclose
the mortgage judicially in accordance with the Rules of Court, or
extrajudicially in accordance with Act No. 3135, as amended.
Same; Same; Same; General Banking Law (R.A. No. 8791);
Act No. 3135; Section 47 of R.A. No. 8791 otherwise known as “The
General Banking Law of 2000” which took effect on June 13, 2000,
amended Act No. 3135.―Section 47 of R.A. No. 8791 otherwise
known as “The General Banking Law of 2000” which took effect
on June 13, 2000, amended Act No. 3135. Under the new law, an
exception is thus made in the case of juridical persons which are
allowed to exercise the right of redemption only “until, but not
after, the registration of the certificate of foreclosure sale” and in
no case more than three (3) months after foreclosure, whichever
comes first.
Statutes; For a law to be nullified, it must be shown that there
is a clear and unequivocal breach of the Constitution.―When
confronted with a constitutional question, it is elementary that
every court must approach it with grave care and considerable
caution bearing in mind that every statute is presumed valid and
every reasonable doubt should be resolved in favor of its
constitutionality. For a law to be nullified, it must be shown that
there is a clear and unequivocal breach of the Constitution. The
ground for nullity must be clear and
441
VOL. 693, MARCH 13, 2013 441
beyond reasonable doubt. Indeed, those who petition this Court to

declare a law, or parts thereof, unconstitutional must clearly
establish the basis therefor. Otherwise, the petition must fail.
Constitutional Law; Civil Law; Obligations; Contracts; Non-
Impairment of Obligation of Contracts; The purpose of the non-
impairment clause of the Constitution is to safeguard the integrity
of contracts against unwarranted interference by the State. As a
rule, contracts should not be tampered with by subsequent laws
that would change or modify the rights and obligations of the
parties.―The purpose of the non-impairment clause of the
Constitution is to safeguard the integrity of contracts against
unwarranted interference by the State. As a rule, contracts
should not be tampered with by subsequent laws that would
change or modify the rights and obligations of the parties.
Impairment is anything that diminishes the efficacy of the
contract. There is an impairment if a subsequent law changes the

terms of a contract between the parties, imposes new conditions,
dispenses with those agreed upon or withdraws remedies for the
enforcement of the rights of the parties. Section 47 did not divest
juridical persons of the right to redeem their foreclosed properties
but only modified the time for the exercise of such right by
reducing the one-year period originally provided in Act No. 3135.
The new redemption period commences from the date of
foreclosure sale, and expires upon registration of the certificate of
sale or three months after foreclosure, whichever is earlier. There
is likewise no retroactive application of the new redemption
period because Section 47 exempts from its operation those
properties foreclosed prior to its effectivity and whose owners
shall retain their redemption rights under Act No. 3135.
Same; Equal Protection of the Laws; If classification is
germane to the purpose of the law, concerns all members of the
class, and applies equally to present and future conditions, the
classification does not violate the equal protection guarantee.―The
equal protection clause is directed principally against undue favor
and individual or class privilege. It is not intended to prohibit
legislation which is limited to the object to which it is directed or
by the territory in which it is to operate. It does not require
absolute equality, but merely that all persons be treated alike
under like conditions both as to privileges conferred and liabilities
imposed. Equal protection
442
permits of reasonable classification. We have ruled that one class

may be treated differently from another where the groupings are
based on reasonable and real distinctions. If classification is
germane to the purpose of the law, concerns all members of the
class, and applies equally to present and future conditions, the
classification does not violate the equal protection guarantee.
Same; Same; The difference in the treatment of juridical
persons and natural persons was based on the nature of the
properties foreclosed―whether these are used as residence, for
which the more liberal one-year redemption period is retained, or
used for industrial or commercial purposes, in which case a
shorter term is deemed necessary to reduce the period of
uncertainty in the ownership of property and enable mortgagee-
banks to dispose sooner of these acquired assets.―The difference in
the treatment of juridical persons and natural persons was based
on the nature of the properties foreclosed―whether these are used

as residence, for which the more liberal one-year redemption
period is retained, or used for industrial or commercial purposes,
in which case a shorter term is deemed necessary to reduce the
period of uncertainty in the ownership of property and enable
mortgagee-banks to dispose sooner of these acquired assets. It
must be underscored that the General Banking Law of 2000,
crafted in the aftermath of the 1997 Southeast Asian financial
crisis, sought to reform the General Banking Act of 1949 by
fashioning a legal framework for maintaining a safe and sound
banking system. In this context, the amendment introduced by
Section 47 embodied one of such safe and sound practices aimed
at ensuring the solvency and liquidity of our banks. It cannot
therefore be disputed that the said provision amending the
redemption period in Act 3135 was based on a reasonable
classification and germane to the purpose of the law.
Remedial Law; Special Civil Actions; Extrajudicial
Foreclosure of Mortgage; Redemption; The right of redemption
being statutory, it must be exercised in the manner prescribed by
the statute, and within the prescribed time limit, to make it
effective.―The right of redemption being statutory, it must be
exercised in the manner prescribed by the statute, and within the
prescribed time limit, to make it effective. Furthermore, as with
other individual rights to contract and to property, it has to give
way to police power exercised for public welfare. The concept of
police power is well-established in this jurisdic-
443
VOL. 693, MARCH 13, 2013 443
tion. It has been defined as the “state authority to enact

legislation that may interfere with personal liberty or property in
order to promote the general welfare.” Its scope, ever-expanding
to meet the exigencies of the times, even to anticipate the future
where it could be done, provides enough room for an efficient and
flexible response to conditions and circumstances thus assuming
the greatest benefits.
Constitutional Law; Civil Law; Contracts; Non-Impairment of
Obligation of Contracts; The non-impairment clause of the
Constitution must yield to the loftier purposes targeted by the
Government.―The freedom to contract is not absolute; all
contracts and all rights are subject to the police power of the State
and not only may regulations which affect them be established by
the State, but all such regulations must be subject to change from
time to time, as the general well-being of the community may

require, or as the circumstances may change, or as experience
may demonstrate the necessity. Settled is the rule that the non-
impairment clause of the Constitution must yield to the loftier
purposes targeted by the Government. The right granted by this
provision must submit to the demands and necessities of the
State’s power of regulation. Such authority to regulate businesses
extends to the banking industry which, as this Court has time
and again emphasized, is undeniably imbued with public interest.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Ortega, Del Castillo, Bacorro, Odulio, Calma &
Carbonell for petitioner.
Isip, San Juan, Guirnalda & Associates for respondent.
VILLARAMA, JR., J.:

Before the Court is a petition for review on certiorari
which seeks to reverse and set aside the Decision1 dated
November
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1 Rollo, pp. 36-47. Penned by Associate Justice Isaias P. Dicdican with
Associate Justices Stephen C. Cruz and Amy C. Lazaro-Javier, concurring.
444

Goldenway Merchandising Corporation vs. Equitable PCI
Bank
19, 2010 and Resolution2 dated January 31, 2011 of the

Court of Appeals (CA) in CA-G.R. CV No. 91120. The CA
affirmed the Decision3 dated January 8, 2007 of the
Regional Trial Court (RTC) of Valenzuela City, Branch 171
dismissing the complaint in Civil Case No. 295-V-01.
The facts are undisputed.
On November 29, 1985, Goldenway Merchandising
Corporation (petitioner) executed a Real Estate Mortgage
in favor of Equitable PCI Bank (respondent) over its real
properties situated in Valenzuela, Bulacan (now
Valenzuela City) and covered by Transfer Certificate of
Title (TCT) Nos. T-152630, T-151655 and T-214528 of the
Registry of Deeds for the Province of Bulacan. The
mortgage secured the Two Million Pesos (P2,000,000.00)
loan granted by respondent to petitioner and was duly
registered.4
As petitioner failed to settle its loan obligation,

respondent extrajudicially foreclosed the mortgage on
December 13, 2000. During the public auction, the
mortgaged properties were sold for P3,500,000.00 to
respondent. Accordingly, a Certificate of Sale was issued to
respondent on January 26, 2001. On February 16, 2001,
the Certificate of Sale was registered and inscribed on TCT
Nos. T-152630, T-151655 and T-214528.5
In a letter dated March 8, 2001, petitioner’s counsel
offered to redeem the foreclosed properties by tendering a
check in the amount of P3,500,000.00. On March 12, 2001,
petitioner’s counsel met with respondent’s counsel
reiterating petitioner’s intention to exercise the right of
redemption.6 However, petitioner was told that such
redemption is no longer possible because the certificate of
sale had already been registered. Petitioner also verified
with the Registry of Deeds that title to
_______________
2 Id., at pp. 86-87.
3 Id., at pp. 240-245. Penned by Judge Maria Nena J. Santos.
4 Id., at pp. 192-197, 236.
5 Id., at pp. 198-200, 236.
6 Id., at pp. 236-237.
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VOL. 693, MARCH 13, 2013 445

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the foreclosed properties had already been consolidated in

favor of respondent and that new certificates of title were
issued in the name of respondent on March 9, 2001.
On December 7, 2001, petitioner filed a complaint7 for
specific performance and damages against the respondent,
asserting that it is the one-year period of redemption under
Act No. 3135 which should apply and not the shorter
redemption period provided in Republic Act (R.A.) No.
8791. Petitioner argued that applying Section 47 of R.A.
8791 to the real estate mortgage executed in 1985 would
result in the impairment of obligation of contracts and
violation of the equal protection clause under the
Constitution. Additionally, petitioner faulted the
respondent for allegedly failing to furnish it and the Office
of the Clerk of Court, RTC of Valenzuela City with a
Statement of Account as directed in the Certificate of Sale,
due to which petitioner was not apprised of the assessment

and fees incurred by respondent, thus depriving petitioner
of the opportunity to exercise its right of redemption prior
to the registration of the certificate of sale.
In its Answer with Counterclaim,8 respondent pointed
out that petitioner cannot claim that it was unaware of the
redemption price which is clearly provided in Section 47 of
R.A. No. 8791, and that petitioner had all the opportune
time to redeem the foreclosed properties from the time it
received the letter of demand and the notice of sale before
the registration of the certificate of sale. As to the check
payment tendered by petitioner, respondent said that even
assuming arguendo such redemption was timely made, it
was not for the amount as required by law.
On January 8, 2007, the trial court rendered its decision
dismissing the complaint as well as the counterclaim. It
noted that the issue of constitutionality of Sec. 47 of R.A.
No. 8791 was never raised by the petitioner during the pre-
trial and
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7 Id., at pp. 183-191.
8 Id., at pp. 211-215.
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the trial. Aside from the fact that petitioner’s attempt to

redeem was already late, there was no valid redemption
made because Atty. Judy Ann Abat-Vera who talked to
Atty. Joseph E. Mabilog of the Legal Division of respondent
bank, was not properly authorized by petitioner’s Board of
Directors to transact for and in its behalf; it was only a
certain Chan Guan Pue, the alleged President of petitioner
corporation, who gave instruction to Atty. Abat-Vera to
redeem the foreclosed properties.9
Aggrieved, petitioner appealed to the CA which affirmed
the trial court’s decision. According to the CA, petitioner
failed to justify why Section 47 of R.A. No. 8791 should be
declared unconstitutional. Furthermore, the appellate
court concluded that a reading of Section 47 plainly reveals
the intention to shorten the period of redemption for
juridical persons and that the foreclosure of the mortgaged
properties in this case when R.A. No. 8791 was already in
effect clearly falls within the purview of the said

provision.10
Petitioner’s motion for reconsideration was likewise
denied by the CA.
In the present petition, it is contended that Section 47 of
R.A. No. 8791 is inapplicable considering that the
contracting parties expressly and categorically agreed that
the foreclosure of the real estate mortgage shall be in
accordance with Act No. 3135. Citing Co v. Philippine
National Bank11 petitioner contended that the right of
redemption is part and parcel of the Deed of Real Estate
Mortgage itself and attaches thereto upon its execution, a
vested right flowing out of and made dependent upon the
law governing the contract of mortgage and not on the
mortgagee’s act of extrajudicially foreclosing the mortgaged
properties. This Court thus held in said case that “Under
the terms of the mortgage contract, the terms
_______________
9 Id., at pp. 243-245.
10 Id., at pp. 44-47.
11 200 Phil. 333, 347; 114 SCRA 842, 858 (1982).
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VOL. 693, MARCH 13, 2013 447

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and conditions under which redemption may be exercised

are deemed part and parcel thereof whether the same be
merely conventional or imposed by law.”
Petitioner then argues that applying Section 47 of R.A.
No. 8791 to the present case would be a substantial
impairment of its vested right of redemption under the real
estate mortgage contract. Such impairment would be
violative of the constitutional proscription against
impairment of obligations of contract, a patent derogation
of petitioner’s vested right and clearly changes the
intention of the contracting parties. Moreover, citing this
Court’s ruling in Rural Bank of Davao City, Inc. v. Court of
Appeals12 where it was held that “Section 119 prevails over
statutes which provide for a shorter period of redemption in
extrajudicial foreclosure sales”, and in Sulit v. Court of
Appeals,13 petitioner stresses that it has always been the
policy of this Court to aid rather than defeat the
mortgagor’s right to redeem his property.
Petitioner further argues that since R.A. No. 8791 does

not provide for its retroactive application, courts therefore
cannot retroactively apply its provisions to contracts
executed and consummated before its effectivity. Also,
since R.A. 8791 is a general law pertaining to the banking
industry while Act No. 3135 is a special law specifically
governing real estate mortgage and foreclosure, under the
rules of statutory construction that in case of conflict a
special law prevails over a general law regardless of the
dates of enactment of both laws, Act No. 3135 clearly
should prevail on the redemption period to be applied in
this case.
The constitutional issue having been squarely raised in
the pleadings filed in the trial and appellate courts, we
shall proceed to resolve the same.
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12 G.R. No. 83992, January 27, 1993, 217 SCRA 554, 565.
13 335 Phil. 914, 928; 268 SCRA 441, 454 (1997).
448

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The law governing cases of extrajudicial foreclosure of

mortgage is Act No. 3135,14 as amended by Act No. 4118.
Section 6 thereof provides:
SEC. 6. In all cases in which an extrajudicial sale is made

under the special power hereinbefore referred to, the debtor, his
successors-in-interest or any judicial creditor or judgment creditor
of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the
property is sold, may redeem the same at any time within the
term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of
the Code of Civil Procedure,15 in so far as these are not
inconsistent with the provisions of this Act.
The one-year period of redemption is counted from the

date of the registration of the certificate of sale. In this
case, the parties provided in their real estate mortgage
contract that upon petitioner’s default and the latter’s
entire loan obligation becoming due, respondent may
immediately foreclose the mortgage judicially in accordance
with the Rules of Court, or extrajudicially in accordance

with Act No. 3135, as amended.
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14 AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERS
INSERTED IN OR ANNEXED TO REAL ESTATE MORTGAGES, approved on March 6,
1924.
15 Now Section 28 of Rule 39, 1997 Rules on Civil Procedure.
SEC. 28. Time and manner of, and amounts payable on, successive
redemptions; notice to be given and filed.―The judgment obligor, or
redemptioner, may redeem the property from the purchaser, at any time
within one (1) year from the date of the registration of the certificate of
sale, by paying the purchaser the amount of his purchase, with one per
centum per month interest thereon in addition, up to the time of
redemption, together with the amount of any assessments or taxes which
the purchaser may have paid thereon after purchase, and interest on such
last named amount of 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 other
lien, with interest.
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VOL. 693, MARCH 13, 2013 449

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However, Section 47 of R.A. No. 8791 otherwise known

as “The General Banking Law of 2000” which took effect on
June 13, 2000, amended Act No. 3135. Said provision
reads:
SECTION 47. Foreclosure of Real Estate Mortgage.―In the

event of foreclosure, whether judicially or extrajudicially, of any
mortgage on real estate which is security for any loan or other
credit accommodation granted, the mortgagor or debtor whose
real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of
the real estate, to redeem the property by paying the amount due
under the mortgage deed, with interest thereon at the rate
specified in the mortgage, and all the costs and expenses incurred
by the bank or institution from the sale and custody of said
property less the income derived therefrom. However, the
purchaser at the auction sale concerned whether in a judicial or
extrajudicial foreclosure shall have the right to enter upon and
take possession of such property immediately after the date of the
confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain
the conduct of foreclosure proceedings instituted pursuant to this

provision shall be given due course only upon the filing by the
petitioner of a bond in an amount fixed by the court conditioned
that he will pay all the damages which the bank may suffer by the
enjoining or the restraint of the foreclosure proceeding.
Notwithstanding Act 3135, juridical persons whose
property is being sold pursuant to an extrajudicial foreclosure,
shall have the right to redeem the property in accordance with
this provision until, but not after, the registration of the
certificate of foreclosure sale with the applicable Register of
Deeds which in no case shall be more than three (3) months
after foreclosure, whichever is earlier. Owners of property
that has been sold in a foreclosure sale prior to the effectivity of
this Act shall retain their redemption rights until their
expiration. (Emphasis supplied.)
Under the new law, an exception is thus made in the

case of juridical persons which are allowed to exercise the
right of redemption only “until, but not after, the
registration of the
450

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certificate of foreclosure sale” and in no case more than

three (3) months after foreclosure, whichever comes first.16
May the foregoing amendment be validly applied in this
case when the real estate mortgage contract was executed
in 1985 and the mortgage foreclosed when R.A. No. 8791
was already in effect?
We answer in the affirmative.
When confronted with a constitutional question, it is
elementary that every court must approach it with grave
care and considerable caution bearing in mind that every
statute is presumed valid and every reasonable doubt
should be resolved in favor of its constitutionality.17 For a
law to be nullified, it must be shown that there is a clear
and unequivocal breach of the Constitution. The ground for
nullity must be clear and beyond reasonable doubt.18
Indeed, those who petition this Court to declare a law, or
parts thereof, unconstitutional must clearly establish the
basis therefor. Otherwise, the petition must fail.19
Petitioner’s contention that Section 47 of R.A. 8791
violates the constitutional proscription against impairment
of the obligation of contract has no basis.
The purpose of the non-impairment clause of the

Constitution20 is to safeguard the integrity of contracts
against unwar-
_______________
16 See A.M. No. 99-10-05-0 Re: Procedure in Extrajudicial Foreclosure
of Mortgages, August 7, 2001 (Unsigned Resolution).
17 People v. Siton, G.R. No. 169364, September 18, 2009, 600 SCRA
476, 479, citing Lacson v. Executive Secretary, G.R. No. 128096, January
20, 1999, 301 SCRA 298.
18 Beltran v. Secretary of Health, 512 Phil. 560, 588; 476 SCRA 168,
199-200 (2005), citing Basco v. Philippine Amusements and Gaming
Corporation, G.R. No. 91649, May 14, 1991, 197 SCRA 52, 68 and Yu Cong
Eng v. Trinidad, 47 Phil. 385 (1925).
19 Id.
20 Art. III, Sec. 10 of the 1987 Constitution reads:
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ranted interference by the State. As a rule, contracts

should not be tampered with by subsequent laws that
would change or modify the rights and obligations of the
parties.21 Impairment is anything that diminishes the
efficacy of the contract. There is an impairment if a
subsequent law changes the terms of a contract between
the parties, imposes new conditions, dispenses with those
agreed upon or withdraws remedies for the enforcement of
the rights of the parties.22
Section 47 did not divest juridical persons of the right to
redeem their foreclosed properties but only modified the
time for the exercise of such right by reducing the one-year
period originally provided in Act No. 3135. The new
redemption period commences from the date of foreclosure
sale, and expires upon registration of the certificate of sale
or three months after foreclosure, whichever is earlier.
There is likewise no retroactive application of the new
redemption period because Section 47 exempts from its
operation those properties foreclosed prior to its effectivity
and whose owners shall retain their redemption rights
under Act No. 3135.
Petitioner’s claim that Section 47 infringes the equal
protection clause as it discriminates mortgagors/property
owners who are juridical persons is equally bereft of merit.
The equal protection clause is directed principally

against undue favor and individual or class privilege. It is
not intended to prohibit legislation which is limited to the
object to which it is directed or by the territory in which it
is to operate. It does not require absolute equality, but
merely that all persons be treated alike under like
conditions both as to privi-
_______________
“Sec. 10. No law impairing the obligation of contracts shall be
passed.”
21 Siska Development Corporation v. Office of the President of the
Phils., G.R. No. 93176, April 22, 1994, 231 SCRA 674, 680.
22 Id., citing Clemons v. Nolting, 42 Phil. 702, 717 (1922).
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leges conferred and liabilities imposed.23 Equal protection

permits of reasonable classification.24 We have ruled that
one class may be treated differently from another where
the groupings are based on reasonable and real
distinctions.25 If classification is germane to the purpose of
the law, concerns all members of the class, and applies
equally to present and future conditions, the classification
does not violate the equal protection guarantee.26
We agree with the CA that the legislature clearly
intended to shorten the period of redemption for juridical
persons whose properties were foreclosed and sold in
accordance with the provisions of Act No. 3135.27
_______________
23 JMM Promotion and Management, Inc. v. Court of Appeals, G.R. No.
120095, August 5, 1996, 260 SCRA 319, 331, citing Itchong v. Hernandez,
101 Phil. 1155, 1164 (1957).
24 Abbas v. Commission on Elections, 258 Phil. 870, 882; 179 SCRA
287, 299 (1989), citing People v. Vera, 65 Phil. 56 (1937); Laurel v. Misa,
76 Phil. 372 (1946); J.M. Tuason and Co., Inc. v. Land Tenure
Administration, No. L-21064, February 18, 1970, 31 SCRA 413.
25 Id., citing Dumlao v. Commission on Elections, No. L-52245,
January 22, 1980, 95 SCRA 392, 404.
26 JMM Promotion and Management, Inc. v. Court of Appeals, supra
note 23, at p. 332.
27 Records of the Eleventh Congress showed that the consolidated

House Bill No. 6814 and Senate Bill No. 1519 under Conference
Committee Report submitted on April 28, 2000 contained the reconciled
Sec 47 that was approved and signed into law by the President of the
Philippines, and became R.A. 8791. Said final version of Sec. 47 was based
on the recommendation made by Senator Franklin Drilon during the
Second Reading of SB 1519 that a distinction be made in the foreclosure of
properties used for residence and those used for business purposes. We
quote from the Record of the Senate during the session of September 14,
1999:
“Senator Drilon. x x x
Maybe, the sponsor can consider, at the appropriate time, a provision
which would allow this one-year redemption period by whatever liberal
provisions and which may be incorporated in cases
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The difference in the treatment of juridical persons and

natural persons was based on the nature of the properties
foreclosed―whether these are used as residence, for which
the more liberal one-year redemption period is retained, or
used for industrial or commercial purposes, in which case a
shorter term is deemed necessary to reduce the period of
uncertainty in the ownership of property and enable
mortgagee-banks to dispose sooner of these acquired assets.
It must be underscored that the General Banking Law of
2000, crafted in the aftermath of the 1997 Southeast Asian
financial crisis, sought to reform the General Banking Act
of 1949 by fashioning a legal framework for maintaining a
safe and sound banking system.28 In this context, the
amendment introduced by Section 47 embodied one of such
safe and sound practices aimed at ensuring the solvency
and liquidity of our banks. It cannot therefore be disputed
that the said provision amending the redemption period in
Act 3135 was based on a reasonable classification and
germane to the purpose of the law.
This legitimate public interest pursued by the
legislature further enfeebles petitioner’s impairment of
contract theory.
The right of redemption being statutory, it must be
exercised in the manner prescribed by the statute,29 and
within the prescribed time limit, to make it effective.
Furthermore, as with other individual rights to contract
and to property, it
_______________
of properties used for residence. But for properties for commercial or
industrial purposes, we may wish to review even the one-year redemption
period because such inability to generate economic activity out of the
foreclosed property for a period of one year can tie up a lot of assets.
Maybe, the committee can consider making distinctions between
foreclosure of properties used for residence and properties used for
business.” (Record of the Senate, Vol. I, No. 22, p. 569)
28 Sponsorship speech of the late Senator Raul S. Roco, Record of the
Senate, March 17, 1999, Vol. III, No. 76, pp. 552-559.
29 See Mateo v. Court of Appeals, 99 Phil. 1042 (1956).
454

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has to give way to police power exercised for public

welfare.30 The concept of police power is well-established in
this jurisdiction. It has been defined as the “state authority
to enact legislation that may interfere with personal liberty
or property in order to promote the general welfare.” Its
scope, ever-expanding to meet the exigencies of the times,
even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response
to conditions and circumstances thus assuming the
greatest benefits.31
The freedom to contract is not absolute; all contracts and
all rights are subject to the police power of the State and
not only may regulations which affect them be established
by the State, but all such regulations must be subject to
change from time to time, as the general well-being of the
community may require, or as the circumstances may
change, or as experience may demonstrate the necessity.32
Settled is the rule that the non-impairment clause of the
Constitution must yield to the loftier purposes targeted by
the Government. The right granted by this provision must
submit to the demands and necessities of the State’s power
of regulation.33 Such authority to regulate businesses
extends to the banking industry which, as this Court has
time and again emphasized, is undeniably imbued with
public interest.34
_______________
30 Beltran v. Secretary of Health, supra note 18, at p. 587; p. 198, citing
Vda. de Genuino v. Court of Agrarian Relations, No. L-25035, February
26, 1968, 22 SCRA 792, 796-797.

31 Basco v. Philippine Amusement and Gaming Corporation, supra
note 18, at p. 61, citing Edu v. Ericta, No. L-32096, October 24, 1970, 35
SCRA 481, 487 & 488.
32 Beltran v. Secretary of Health, supra note 30, citing Ongsiako v.
Gamboa, 86 Phil. 50 (1950).
33 Id., citing Philippine Association of Service Exporters, Inc. v. Drilon,
No. L-81958, June 30, 1988, 163 SCRA 386, 397.
34 Asiatrust Development Bank v. First Aikka Development, Inc., G.R.
No. 179558, June 11, 2011, 650 SCRA 172, 190, citing Banco de Oro-EPCI,
Inc. v. JAPRL Development Corporation, G.R. No. 179901, April 14, 2008,
551 SCRA 342, 356.
455
VOL. 693, MARCH 13, 2013 455

Bank
Having ruled that the assailed Section 47 of R.A. No.

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

Bersamin and Reyes, JJ., concur.
Petition denied, judgment and resolution affirmed.
Notes.―It is settled that if the proceeds of the sale are

insufficient to cover the debt in an extrajudicial foreclosure
of mortgage, the mortgage is entitled to claim the
deficiency from the debtor; While Act No. 3135 as amended
does not discuss the mortgagee’s right to recover the
deficiency, neither does it contain any provision expressly
or impliedly prohibiting recovery. (BPI Family Savings
Bank, Inc. vs. Avenido, 661 SCRA 758 [2011])
An ex parte petition for writ of possession under Act
3135 is, strictly speaking, not a judicial, or litigious,
proceeding, for the reason that an extrajudicial foreclosure

of mortgage is accomplished by filing a petition, not with
any court of justice, but with the office of the sheriff of the
place where the sale is to be made. (Madriaga, Jr. vs.
China Banking Corporation, 677 SCRA 560 [2012])
――o0o――
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5/6/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 693

G.R. No. 195540. March 13, 2013.*

GOLDENWAY MERCHANDISING CORPORATION,

Remedial Law; Special Civil Actions; Extrajudicial

** Designated Acting Member in lieu of Associate Justice Presbitero J.

440 SUPREME COURT REPORTS ANNOTATED

Goldenway Merchandising Corporation vs. Equitable PCI Bank

governing cases of extrajudicial foreclosure of mortgage is Act No.

case, the parties provided in their real estate mortgage contract

VOL. 693, MARCH 13, 2013 441

Goldenway Merchandising Corporation vs. Equitable PCI Bank

beyond reasonable doubt. Indeed, those who petition this Court to

contract. There is an impairment if a subsequent law changes the

442 SUPREME COURT REPORTS ANNOTATED

Goldenway Merchandising Corporation vs. Equitable PCI Bank

permits of reasonable classification. We have ruled that one class

on the nature of the properties foreclosed―whether these are used

VOL. 693, MARCH 13, 2013 443

Goldenway Merchandising Corporation vs. Equitable PCI Bank

tion. It has been defined as the “state authority to enact

time to time, as the general well-being of the community may

PETITION for review on certiorari of the decision and

VILLARAMA, JR., J.:

444 SUPREME COURT REPORTS ANNOTATED

19, 2010 and Resolution2 dated January 31, 2011 of the

As petitioner failed to settle its loan obligation,

VOL. 693, MARCH 13, 2013 445

the foreclosed properties had already been consolidated in

due to which petitioner was not apprised of the assessment

446 SUPREME COURT REPORTS ANNOTATED

the trial. Aside from the fact that petitioner’s attempt to

effect clearly falls within the purview of the said

VOL. 693, MARCH 13, 2013 447

and conditions under which redemption may be exercised

Petitioner further argues that since R.A. No. 8791 does

448 SUPREME COURT REPORTS ANNOTATED

The law governing cases of extrajudicial foreclosure of

SEC. 6. In all cases in which an extrajudicial sale is made

The one-year period of redemption is counted from the

with the Rules of Court, or extrajudicially in accordance

VOL. 693, MARCH 13, 2013 449

However, Section 47 of R.A. No. 8791 otherwise known

SECTION 47. Foreclosure of Real Estate Mortgage.―In the

the conduct of foreclosure proceedings instituted pursuant to this

Under the new law, an exception is thus made in the

450 SUPREME COURT REPORTS ANNOTATED

certificate of foreclosure sale” and in no case more than

The purpose of the non-impairment clause of the

VOL. 693, MARCH 13, 2013 451

ranted interference by the State. As a rule, contracts

The equal protection clause is directed principally

452 SUPREME COURT REPORTS ANNOTATED

leges conferred and liabilities imposed.23 Equal protection

27 Records of the Eleventh Congress showed that the consolidated

VOL. 693, MARCH 13, 2013 453

The difference in the treatment of juridical persons and

454 SUPREME COURT REPORTS ANNOTATED

has to give way to police power exercised for public

26, 1968, 22 SCRA 792, 796-797.