CREDTRANS-Digest-5.5.17.pdf

Caltex v. IAC and Herbert Manzana Facts: Manzana purchased on credit petroleum products from Caltex. Manzana’s indebtedness amounted to P361,218.66. Manzana executed a Deed of First Mortgage in favour of Caltex over a parcel of land in Province of Camarines Norte. Caltex sent Manzana statements of account and later demanded payment of his entire debts. Manzana failed to pay, Caltex filed a complaint before the RTC for the entire amount due. Caltex extrajudicially foreclosed the mortgaged property. The mortgaged property was sold at auction to Caltex, who was the only bidder, for P20,000. The foreclosure was allegedly known by Manzana only 10 years later when such fact was manifested by Caltex in its reply to the opposition of Manzana to the motion for execution pending appeal. RTC ordered Manzana to pay Caltex the amount of P353,218.66 after deducting the amount paid by Traders Insurance and Surety Company on its surety bond. IAC affirmed the RTC decision in toto. Manzana filed an MR. IAC issued a resolution ordering that the recors are remanded to trial court for purposes of determining the deficiency due to plaintiff. It also said that the action in the trial court cannot be said for recovery of deficiency because it was for the whole amount and not deficiency. MR filed by Caltex was denied. Hence, this petition. Issue: Whether or not the mere filing of a collection suit for the recovery of the debt secured by real estate mortgage constitutes waiver of the other remedy of foreclosure. Held: It is of no moment that the collection suit was filed ahead, what is determinative is the fact that the foreclosure proceedings ended even before the decision in the collection suit was rendered. As a matter of fact, CALTEX informed the trial court that it had already consolidated its ownership over the property, in its reply to the opposition of Manzana to the motion for execution pending appeal filed by it. The collection suit filed before the trial court cannot be considered as a deficiency judgment because a deficiency judgment has been defined as one for the balance of the indebtedness after applying the proceeds of the sale of the mortgaged property to such indebtedness and is necessarily filed after the foreclosure proceedings. It is significant to note that the judgment rendered by the trial court was for the full amount of the indebtedness and the case was filed prior to the foreclosure proceedings. A suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action because its purpose is precisely to enforce the mortgage contract; it is upon a written contract and upon an obligation of Manzana to pay the deficiency which is created by law (see Development Bank of the Philippines v. Tomeldan et al., G.R. No. 51269, November 17, 1980, 101 SCRA 171). Therefore, since more than ten (10) years have elapsed from the time the right of action accrued, CALTEX can no longer recover the deficiency from Manzana.

Page 1 of 23

Bank Of America v. American Realty corp (Short title) GR # 133876 | 321 SCRA 659 | Date December 29, 1999 Petition: For certiorari Petitioner: BANK OF AMERICA, NT and SA Respondent: AMERICAN REALTY CORPORATION and COURT OF APPEALS DOCTRINE Remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province where the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by Act No. 4118. FACTS Bank of America NT & SA (BANTSA) is an international banking and financing institution duly licensed to do business in the Philippines, organized and existing under and by virtue of the laws of the State of California, United States of America while private respondent American Realty Corporation (ARC) is a domestic corporation. Bank of America International Limited (BAIL), on the other hand, is a limited liability company organized and existing under the laws of England. BANTSA and BAIL on several occasions granted three major multi-million United States (US) Dollar loans to the following corporate borrowers: (1) Liberian Transport Navigation, S.A.; (2) El Challenger S.A.; and (3) Eshley Compania Naviera S.A. o all of which are existing under and by virtue of the laws of the Republic of Panama and are foreign affiliates of private respondent. Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed and entered into restructuring agreements. As additional security for the restructured loans, private respondent ARC as third party mortgagor executed two real estate mortgages,4 dated 17 February 1983 and 20 July 1984, over its parcels of land including improvements thereon, located at Barrio Sto. Cristo, San Jose Del Monte, Bulacan Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting petitioner BANTSA to file civil actions5 before foreign courts for the collection of the principal loan. On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan, Philippines, an application for extrajudicial foreclosure6 of real estate mortgage. On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an action for damages8 against the petitioner, for the latter’s act of foreclosing extrajudicially the real estate mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan.

Petitioners answer by saying that “The plaintiff, being a mere third party mortgagor and not a party to the principal restructuring agreements, was never made a party defendant in the civil cases filed in Hongkong and England”, “ There is actually no civil suit for sum of money filed in the Philippines since the civil actions were filed in Hongkong and England. As such, any decisions (sic) which may be rendered in the abovementioned courts are not (sic) enforceable in the Philippines unless aseparate action to enforce the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50 of the Revised Rules of Cour”.

ISSUE/S 1. W/N a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted over a third party mortgagor’s property situated in the Philippines by filing an action for the collection of the principal loan before foreign courts – YES PROVISIONS Palagay nalang nung provision RULING & RATIO 1. YES Contrary to petitioner’s arguments, we therefore reiterate the rule, for clarity and emphasis, that the mere act of filing of an ordinary action for collection operates as a waiver of the mortgage-creditor’s remedy to foreclose the mortgage. By the mere filing of the ordinary action for collection against the principal debtors, the petitioner in the present case is deemed to have elected a remedy, as a result of which a waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is required for the rule on waiver to apply. In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province where the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by Act No. 4118. Private respondent ARC constituted real estate mortgages over its properties as security for the debt of the principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may secure the latter by pledging or mortgaging their own property. Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of another’s obligation by mortgaging his own property, to be solidarily bound with the principal obligor. The signatory to the principal contract—loan—remains to be primarily bound. It is only upon default of the latter that the creditor may have recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. Page 2 of 23

-

In this case, the petitioners are have deemed to have waied their claim over the third party mortgage by filing collection suits against the principal debtors.

DISPOSITION WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION of the amount awarded as exemplary damages. Accordingly, petitioner is hereby ordered to pay private respondent the sum of P99,000,000.00 as actual or compensatory damages; P50,000.00 as exemplary damage and the costs of suit. SO ORDERED.

Page 3 of 23

San Jose v. Court of Appeals Petitioner: Cesar San Jose and Margarita Batongbakal Respondent: Court of Appeals and Sps. De Guzman 225 SCRA 450 | G.R. No. 106953 DOCTRINE Notice of Sheriff’s Sale must contain the correct title number and technical description of property foreclosed to be valid. FACTS

-

San Jose filed a complaint to annul the extra-judicial foreclosure sale conducted by the Sheriff. o Apparently the land mortgaged by San Jose to De Guzman as security for payment of a 12k loan. They allegedly failed to comply to the conditions of the mortgage and the land was sold at public auction, De Guzman being the purchaser. o San Jose contends that the foreclosure sale was null and void for failure to comply with the requirements of the law that governs extra-judicial foreclosure sale on real estate mortgage. - San Jose contends that the foreclosure sale was null and void for failure to comply with the requirements of the law that governs extra-judicial foreclosure sale on real estate mortgage. o Particularly, his failure to give notice to San Jose of the extrajudicial foreclosure. o Pertinent contention is, “The property mentioned in the Notice of Sheriff’s sale and in the minutes of the auction sale was covered by TCT no. T-169705 NOT by T-159703, the title to the mortgaged property subject of the foreclosure sale. - The Trial Court and the Court of Appeal upheld the validity of the extrajudicial foreclosure. Hence, this petition.

that a substantial error or omission in a notice of sale will render the notice insufficient and vitiate the sale. o The Notice of Sheriffs Sale, in this case, did not state the correct number of the transfer certificate of title of the property to be sold. This is a substantial and fatal error which resulted in invalidating the entire Notice. o That the correct technical description appeared on the Notice does not constitute substantial compliance with the statutory requirements. o The purpose of the publication of the Notice of Sheriffs Sale is to inform all interested parties of the date, time and place of the foreclosure sale of the real property subject thereof. Logically, this not only requires that the correct date, time and place of the foreclosure sale appear in the notice but also that any and all interested parties be able to determine that what is about to be sold at the foreclosure sale is the real property in which they have an interest. DISPOSITION WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and a new decision rendered: 1) Declaring the Extra-judicial Foreclosure Sale of the property of the petitionerspouses null and void. 2) Ordering the appropriate Register of Deeds to reinstate Transfer Certificate of Title No. T-159703 in the name of petitioner Margarita Batongbakal married to petitioner Cesar San Jose, giving it full force and effect as though it had never been cancelled. 3) Ordering the cancellation of Transfer Certificate of Title No. T-30.762(M) in the name of private respondent spouses Marcos and Gloria de Guzman for being void ab initio. With costs against the private respondents. SO ORDERED.

ISSUE/S 1. W/N the requirements of notice in extrajudicial foreclosure has been complied with – NO PROVISIONS Sec. 3. Notice shall be given by posting notices of sale for not less that twenty (20) days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. RULING & RATIO 1. YES - Failure to advertise a mortgage foreclosure sale in compliance with statutory requirements constitutes a jurisdictional defect invalidating the sale and Page 4 of 23

OLIZON vs COURT OF APPEALS GR No. 107075 September 1, 1994 Petition: PETITION TO ANNUL THE EXTRAJUDICIAL FORECLOSURE SALE Petitioner: ARMANDO S. OLIZON and ILUMINADA C. OLIZON Respondent: COURT OF APPEALS and PRUDENTIAL BANK

Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.

DOCTRINE: EXTRAJUDICIAL FORECLOSURE

RULING:

FACTS:

1.NO

1)

2) 3)

4) 5)

6)

7) 8) 9)

Spouses Armando and Iluminada Olizon obtained a loan from Prudential Bank in the amount of P25,000.00 and as security, they executed in favor of the bank a real estate mortgage (REM) over a parcel of land consisting of 1,000 square meters. Olizon spouses failed to pay their obligation upon its maturity so the bank extrajudicially foreclosed the real estate mortgage (REM). At a public auction thereafter held on March 11, 1975, the subject property was sold to respondent bank as the highest bidder, pursuant to which it was issued a certificate of sale as of the same date. On March 12, 1975, the said certificate of sale was duly annotated at the back of Olizon's TCT. On June 5, 1978, due to the failure of the spouses to redeem the foreclosed property within the period of redemption, title to the property was consolidated in favor of the bank. On January 14, 1986, the bank filed with the RTC of Kalookan City a petition to reconstitute TCT which was lost in the Office of the Registry of Deeds of Kalookan City. It was granted. Old TCT in the name of the spouses was cancelled and a new TCT was issued in the name of the bank. On November 27, 1989, the bank filed with the RTC of Kalookan City a petition for the issuance of a writ of possession against the spouses. On March 8, 1990, a petition, by way of opposition, was filed by the spouses wherein they sought the cancellation of the writ of possession, the nullification of the certificate of sale, and the nullification of the foreclosure proceedings. They alleged lack of notice of the auction sale and lack of posting of the notice of sale as required by Section 3 of Act No. 3135, as amended.

RTC DECISION: The foreclosure of the real estate mortgage executed by the bank and the certificate of sale as null and void CA DECISION: Reversed the RTC’s decision ISSUES: 1. 2.

W/N personal notice to the mortgagors about the foreclosure sale is necessary. W/N the requirement on posting the notice of sale as required in Act No. 3135 was not complied with.

PROVISION: (Act No. 3135, as amended)

It is now a well-settled rule that personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary. Section 3 of Act No. 3135 governing extrajudicial foreclosure of real estate mortgages, as amended by Act No. 4118, requires only the posting of the notice of sale in three public places and the publication of that notice in a newspaper of general circulation. Hence, the lack of personal notice to the mortgagors, herein petitioners, is not a ground to set aside the foreclosure sale. Assuming arguendo that personal notice to the mortgagor in extrajudicial foreclosure is necessary, the court concurred with the finding of the CA that the mortgagors were actually notified by the bank of the foreclosure proceedings based on the letters of Atty. Fule, Legal Officer of the bank, to Olizon spouses regarding their failure to pay their obligations and their filing of foreclosure proceedings. The Clerk of Court also sent a letter informing the Olizon spouses that the bank filed an application of foreclosure to their REM and the public auction of the mortgaged parcel of land together with a copy of the Notice of Sale. 2.NO There was sufficient publicity of the sale through the newspaper publication. There is completely no showing that the property was sold for a price far below its value as to insinuate any bad faith, nor was there any showing or even an intimation of collusion between the sheriff who conducted the sale and respondent bank. This being so, the alleged non-compliance with the posting requirement, even if true, will not justify the setting aside of the sale. Failure of spouses to discharge the burden of proving by convincing evidence their allegation that there was actually no compliance with the posting requirement The foreclosure proceeding has in its favor the presumption of regularity and the burden of evidence to rebut the same is on petitioners. Where the allegation is an essential part of the cause of action or defense in a civil case, whether posited in an affirmative or negative form, the burden of evidence thereon lies with the pleader. Besides, the fact alone that there was no certificate of posting attached to the sheriff's records of the extrajudicial foreclosure sale is not sufficient to prove the lack of posting, especially in this case where the questioned act and the record thereof are already 16 years old. It is quite unfair to now shift to respondent bank the burden of proving the fact of posting considering the length of time that has elapsed, aside from the fact that the sheriff who conducted the public sale and who was responsible for Page 5 of 23

the posting of the notice of sale is already out of the country, with the records being silent on his present whereabouts or the possibility of his returning here.

of respondent bank. Negligence or omission to assert a right within a reasonable time

Presumption of regularity in the performance of official duty must stand It is not a matter of lack of compliance with the requirements of the law, rather, it is a matter of unavailability of certain documents due to the loss thereof, considering that more than sixteen (16) years had lapsed from the date of the extra-judicial foreclosure of the real estate mortgage. Indeed, the presumption of regularity in the performance of official duty by the sheriff, more particularly, compliance with the provisions of Act 3135, as amended, has not been overturned by the Olizons.

At no time after the debt became due and demandable and the mortgage property had been foreclosed, or even thereafter, did petitioners offer to pay their mortgage obligation to redeem their property. Petitioners' collective acts are, therefore, indicative of their acquiescence to and acknowledgment of the validity of the foreclosure proceedings and the sale, as well as a recognition of respondent bank's just and legal title over the property acquired thereby.

Spouses are already considered estopped

DISPOSITION:

They are estopped through laches from questioning the regularity of the sale as well as the ownership of the land in question. It is evident from the records that the petition to annul the foreclosure sale was filed by herein petitioners only after 16 long years from the date of sale and only after a transfer certificate of title over the subject property had long been issued to respondent bank. Herein petitioners failed to advance any justification for their prolonged inaction. It would be inequitable to allow petitioners, after the lapse of an almost interminable period of time, to defeat an otherwise indefeasible title by the simple and dubious expedient of invoking a purported irregularity in the foreclosure proceedings.

WHEREFORE, the instant petition is DENIED for lack of merit and the assailed judgment of respondent Court of Appeals is hereby AFFIRMED in toto.

Besides, it has been said that in seeking to set aside a foreclosure sale, the moving party must act promptly after he becomes aware of the facts on which he bases his complaint, and in this connection, notice of an irregularity may be presumed from the fact that the mortgagor has knowledge of the sale, as he is thereby put on inquiry, and is bound to use diligence in discovering any defects in the proceedings. Having failed to do so, petitioners cannot now be heard on their much belated plaints. Registration in a public registry is notice to the whole world The annotation of the certificate of sale on petitioners' Transfer Certificate of Title No. 24604 and the filing of the affidavit of consolidation with the Register of Deeds constituted constructive notice of both acts to herein petitioners. Consequently, as early as March 11, 1974 24 when the certificate of sale was annotated at the back of their title, petitioners were already charged with knowledge of the foreclosure sale, yet they still failed or refused to take the necessary steps to protect their rights over the subject property. Failure of the spouses to object to the reconstitution It also bears stressing that petitioners entered their appearance in the Regional Trial Court of Kalookan City where the petition for reconstitution of Transfer Certificate of Title No. 24604 was filed by respondent bank, as shown by said court's order dated June 11, 1986. 25 It was then incumbent on petitioners to have filed an objection or opposition to the reconstitution if they sincerely believed that the property rightfully belongs to them. Significantly, petitioners neither moved for the reconsideration of nor appealed from the order of the lower court granting reconstitution of title in the name Page 6 of 23

SPS. SUICO v PNB G.R. No. 170215 | AUGUST 28, 2017 PETITION for REVIEW PETITIONER: SPS. ESMERALDO and ELIZABETH SUICO RESPONDENT: PHILIPPINE NATIONAL BANK and COURT Of APPEALS (ACT no. 3135 – EXTRAJUDICIAL FORECLOSURE) DOCTRINE It is true that statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the sale at least voidable. It has been held that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply give the mortgagor a cause of action to recover such surplus.

obligations which had not yet matured on 10 March 1992 but became due by the date of the auction sale on 30 October 1992, it does not justify the shortcut taken by PNB and will not excuse it from paying to the Sheriff who conducted the auction sale the excess bid in the foreclosure sale. Such misrepresentation is fatal because in an extrajudicial foreclosure of mortgage, notice of sale is jurisdictional. Any error in the notice of sale is fatal and invalidates the notice (5) Court of Appeals reversed the decision of the RTC. Based on records there were several letters sent by the spouses to PnB expressly admitting that their obligation amounted to P5.4M and ever made several offers to purchase back the properties at higher amounts. All those offers made by the spouses not only contradicted their very assertion but are also indicative of the fact that they have admitted the validity of the extra judicial foreclosure proceedings and in effect have cured the impugned defect. Even assuming that there is a surplus this fact alone will not affect the validity of the sale but rather gives the Spouses a cause of action to recover the surplus.

FACTS ISSUES (1) Sps. Suico obtained a loan from PNB secured by a real estate mortgage over their five properties. They were unable to pay this obligation leading to the extrajudicial foreclosure of the mortgaged property. (2) Thereafter Sps. Suico filed this present complaint to Declare Nullity of the Extrajudicial Foreclosure. Their contentions are: (a) The notice of foreclosure sales stated that their outstanding loan obligation amounts to P1,991,770.38 as of March 10, 1992. During the public sale, the lone bid of PNB amounted to P 8,511,000. The bid grossly exceeded the amount of Sps. Suico’s outstanding obligation as stated in the extrajudicial foreclosure of mortgage. This clearly indicates a defect or misrepresentation in the notice of sheriffs sale thus foreclosure sale is null and void. (b) PNB as the winning bidder failed to deliver to the spouses the amount of its bid or even just the amount in excess of their obligation stated in the notice. Owing to this failure the extrajudicial foreclosure conducted over the subject properties by the Mandaue City Sheriff, as well as the Certificate of Sale and the Certificate of Finality of Sale of the subject properties issued by the Mandaue City Sheriff, in favor of PNB, were all null and void. (3) PNB asserted that the spouses Suico had other loans which had likewise become due. The outstanding obligation of P1,991,770.38 as of 10 March 1992 was exclusive of attorneys fees, and other export related obligations which it did not consider due and demandable as of said date. (a) There is no surplus or excess since the souse’s regular and exportrelated loans was already more than the bid price of P8,511,000.00. They were well aware that their total principal outstanding obligation on the date of the auction sale was P5,503,293.21. (b) PNB admitted the non-delivery of the bid price though to the sheriff (4) RTC ruled in favor of Sps. Suico. Given that the spouses had other loan

(1) WON there was a defect or misrepresentation in the notice leading to its nullification? – NO (2) WON the failure of PNB to pay and tender the price of its bid or the surplus leads to nullity? – NO PROVISION RULE 39 of the RULES of COURT: SEC. 21. Judgment obligee as purchaser. When the purchaser is the judgment obligee, and no third-party claim has been filed, he need not pay the amount of the bid if it does not exceed the amount of his judgment. If it does, he shall pay only the excess. (Emphasis supplied.)

SEC. 39. Obligor may pay execution against obligee. After a writ of execution against property has been issued, a person indebted to the judgment obligor may pay to the sheriff holding the writ of execution the amount of his debt or so much thereof as may be necessary to satisfy the judgment, in the manner prescribed in section 9 of this Rule, and the sheriffs receipt shall be a sufficient discharge for the amount so paid or directed to be credited by the judgment obligee on the execution. Rule 68, Section 4 of the Rules of Court provides: SEC. 4. Disposition of proceeds of sale.- The amount realized from the foreclosure sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the Page 7 of 23

mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be no such encumbrancers or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled to it.

RULING & RATIO:

NOTE: Atty. Llaguno might ask the hierarchy of the disposition of the proceeds of the sale in foreclosure. Accdg to Rule 68 Sec 4, it is as follows: (a) first, pay the costs (b) secondly, pay off the mortgage debt (c) thirdly, pay the junior encumbrancers, if any in the order of priority (d) fourthly, give the balance to the mortgagor, his agent or the person entitled to it

(1) NO. The notice of sale in this case is valid. Petitioners failed to convince this Court that the difference between the amount stated in the Notice of Sale and the amount of PNBs bid resulted in discouraging or misleading bidders, depreciated the value of the property or prevented it from commanding a fair price. It is true that statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the sale at least voidable.[19] Nonetheless, we must not also lose sight of the fact that the purpose of the publication of the Notice of Sheriffs Saleis to inform all interested parties of the date, time and place of the foreclosure sale of the real property subject thereof. Logically, this not only requires that the correct date, time and place of the foreclosure sale appear in the notice, but also that any and all interested parties be able to determine that what is about to be sold at the foreclosure sale is the real property in which they have an interest.[20] Considering the purpose behind the Notice of Sheriffs Sale, we disagree with the finding of the RTC that the discrepancy between the amount of petitioners obligation as reflected in the Notice of Sale and the amount actually due and collected from the petitioners at the time of the auction sale constitute fraud which renders the extrajudicial foreclosure sale null and void. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. (2) NO. It has been held that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply give the mortgagor a cause of action to recover such surplus. Based on Rule 39 and Rules 68 of the Rules of Court there was no mention of the validity of the extrajudicial foreclosure being affected by the retention of the proceeds of the sales. Page 8 of 23

PNB vs CA GR # 121739 | June 14, 1999 Petition: Petition for Review Petitioner: PHILIPPINE NATIONAL BANK Respondent: COURT OF APPEALS, and SPOUSES EDILBERTO and ELENA NATIVIDAD

-

DOCTRINE FACTS Sps Natividad were granted by PNB a one-year Time Loan Commercial (TLC) of P34,000.00. To secure the payment, Sps natividad executed REMs over 9 parcels of land in Pangasinan. The properties were assessed and valued at P49,000.00, justifying the loan. Due to financial constraints, Sps Natividad were only able to pay P15,000.00 but failed to pay the balance despite repeated demands. PNB foreclosed the mortgage extra judicially, after compliance with the required publications of notices. Public Auction sale happened, and PNB was the highest bidder at P7,000.00. This was short of P64,000.00 representing the balance and when Sps failed to redeem the properties, PNB filed a deficiency claim. Spouses interposed that they were unable to redeem the properties because of financial hardships and that they should not be made to pay the deficit among other grounds as the aforesaid public auction sale was tainted with fraud and similar irregularities. RTC: Deficiency claim is denied and the total obligation considered fully paid. o Properties were valued at P49,000.00, but PNB expected to be the lone bidder, and reclassified the lands which were residential, as agricultural. o the downward valuation of the mortgaged property is questionable and unjust o There is estoppel on the part of PNB as its downgrading of the price of the properties to get an undue advantage over the Spouses, and it must suffer the losses it incurred by such classification. CA: Affirmed RTC ruling. o It is, therefore, very evident to this Court the dubious scheme perpetrated by PNB was not only to keep the Sps’ P15,000.00 initial payments, but also to grab ownership of mortgaged properties through self-serving appraisal prejudicial to the rights of Spouses. Hence, this petition. ISSUE/S 1. W/N PNB is estopped from pursuing its deficiency claim arising from the extrajudicial foreclosure against respondent spouses properties RULING & RATIO 1. YES

Both courts held that petitioner had lowered its appraisal of the properties for the purpose of acquiring the properties and still collecting from respondent spouses a deficiency claim. In their view, respondent spouses relied in good faith on petitioners initial appraisal of their properties as worth P49,000.00 in mortgaging their properties on the theory that in case of their failure to pay their loan, their properties can answer for their obligation. Several Factors militate against this view: o First. Based on the evidence presented, it does appear that the reappraisal of the properties was their fair value. PNB credit investigator, Damasco, reported:  Actual use is agricultural planted to palay, mongo & beans  No visible concrete stone monuments to properly identify its subdivision into several lots  Distance from residential houses: N., about 860 ms.; S., about 250 ms.; E & W., even within a radius of one km. are agricultural lands. Surroundings are planted to palay and other secondary crops.  It is about 1.2 ms. below road level. It needs refilling to be fit for residential purposes and in order not to be flooded. o These findings were corroborated by other inspectors. o Second. Moreover, it appears that rather than being passive bystanders in the original appraisal of their properties, respondent spouses actually played an active part in the valuation.  According to the report of PNB credit investigator Damasco, when Edilberto Natividad bought the properties in 1975 (the year respondent spouses mortgaged them to the bank), he did so for only P10,000.00. Yet, a few months later, Edilberto Natividad obtained a loan from petitioner PNB for P34,000.00, giving the same properties as collateral, now appraised at P49,000.00. The loan obtained was thus 69% of the appraised value of the collateral.  It seems that the increase in value of the properties from P10,000.00 to P49,000.00 in one year was due to their reclassification from agricultural to residential. In his testimony, respondent Edilberto Natividad facetiously denied any knowledge why the Assessors Office made a change in the classification of his properties from agricultural to residential.  As the person most likely to benefit from the reclassification, it is probable that he was the one who in fact declared the properties as residential to the Municipal Assessors Office and had them assessed as such. Edilberto Natividad was formerly an appraiser of petitioner PNB. More than anyone else, therefore, he knew that his chances of obtaining a substantial loan were directly related to the value of the properties he offered as collateral. In fact, he admitted that he subdivided the lots after acquiring them from Esperidion Cabanayan, Sr. and because of that the same were classified as residential. Page 9 of 23

o

Third. Respondent spouses were benefited rather than harmed by the substantially lower reappraised value of their properties.  while in ordinary sales for reasons of equity a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks ones conscience as to justify the courts to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption. And so it was aptly said: When there is the right to redeem, inadequacy of price should not be material, because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale.

DISPOSITION WHEREFORE, the decision of the Court of Appeals is REVERSED and respondent spouses Edilberto and Elena Natividad are ordered to pay petitioner Philippine National Bank the amount of P64,624.31 with interest thereon at the legal rate of twelve percent (12%) per annum from March 31, 1983 until fully paid and P6,462.43 in attorneys fees and expenses of litigation. No pronouncement as to costs. SO ORDERED.

Page 10 of 23

China Banking Corporation v. Ordinario (Short title) G.R. No. 121943 | 399 SCRA 430 | March 24, 2003 Petition: PETITION FOR REVIEW on certiorari Petitioner: CHINA BANKING CORPORATION Respondent: SPOUSES OSCAR and LOLITA ORDINARIO DOCTRINE The purchaser in a foreclosure sale is entitled to possession of the property. However, the possession of the foreclosed property may be awarded to the purchaser arguendo. The adverse third party have 2 remedies. (1) terceria (2) independent separate action to vindicate their claim of ownership over the foreclosed property.

-

-

-

-

that the assailed order the issuance of a writ of possession had become final; and o that the proceedings, being in rem, bind SPS. ORDINARIO. RTC denied the MR.

CA: Set Aside the order of the RTC and GRANTED the MR of SPS. ORDINARIO CHINA BANK filed a MR but denied. Hence, this petition. ISSUE/S 1.

FACTS -

o

CHINA BANK granted 3 loans total of P27,353,000 to Trans American owned by SPS. Jesus and Lorelie GARCIA. o The loans were secured by real estate mortgages constituted by Jesus Garcia on his 45 parcels of lands. For failure of TransAmerican to pay its loans, CHINA BANK foreclosed extrajudicially the real estate mortgages. o mortgaged properties were sold at public auction for P38,004,205.01 to CHINA BANK, being the highest bidder CHINA BANK filed with the RTC, an ex parte verified petition for issuance of a writ of possession. o RTC granted the petition and placing CHINA BANK in possession of the 45 parcels of land. SPS. ORDINARIO filed a motion for reconsideration praying that their land be excluded from the order of the RTC. o They alleged that: ▪ They are indispensable parties in the case because they purchased the land. ▪ the petition for a writ of possession does not bind them for lack of notice ▪ that petitioner bank should have filed an action for recovery of possession, not an ex-parte petition for a writ of possession since there are parties in actual possession of the lots involved; ▪ that they filed with the HLURB a complaint for the delivery of title and damages against CHINA BANK, SPS. GARCIA and TransAmerican CHINA BANK filed its opposition to the MR. it alleged that: o trial court, acting as a land registration court with limited jurisdiction, cannot pass upon the merits of respondents’ motion; o that respondents should have filed a separate action;

W/N CHINA BANK is entitled to the possession of the property.

RULING & RATIO YES ●

Under Section 7 of Act No. 3135, the purchaser in a foreclosure sale is entitled to possession of the property. Thus, the writ prayed for by CHINA BANK granting its possession must be issued as a matter of course. ● it is a ministerial duty of the trial court to grant such writ of possession. No discretion is left for the trial court. ● Any question regarding the cancellation of the writ or in respect of the validity and regularity of the public sale should be determined in a subsequent proceeding as outlined in Section 8 of Act No. 3135 ● HOWEVER, under Section 33, Rule 39 of the 1997 Rules of Civil Procedure, as amended, the possession of the foreclosed property may be awarded to the purchaser arguendo. The same Rule provide remedies. o (1) terceria to determine whether the sheriff has rightly or wrongly taken hold of the property not belonging to the judgment debtor or obligor and o (2) an independent “separate action” to vindicate their claim of ownership and/or possession over the foreclosed property ● Thus, SPS. ORDINARIO’s resort to a motion for reconsideration is obviously a procedural misstep. DISPOSITION WHEREFORE, the instant petition is GRANTED. The appealed Decision and Resolution of the Court of Appeals dated March 20, 1995 and September 6, 1995 in CA-G.R. CV No. 40953 are REVERSED and SET ASIDE. The orders of the RTC, Branch 90, Quezon City, in LRC Case No. Q4534 (90) directing the issuance of a writ of possession in favor of petitioner bank are AFFIRMED. Page 11 of 23

Development Bank of the Philippines v. Zaragoza GR # L-23493 | 84 SCRA 668 | August 23, 1978 Petitioner: Development Bank of the Philippines Respondent: Jovencio A. Zaragoza and Avelina E. Zaragoza DOCTRINE In extrajudicial foreclosure of mortgage when the proceeds of the sale is insufficient to cover the debt, mortgagee is entitled to claim the deficiency from the debtor. FACTS -

-

-

-

Spouses Zaragoza obtained a loan of P30,000 from DBP secured by real estate mortgage; to foreclose extrajudicially upon failure to pay amortization due Upon failure of spouses to pay, DBP foreclosed extrajudicially the mortgage; Provincial Sheriff of Pangasinan posted the requisite notice of the sale at public auction of the mortgaged property Property was sold at public auction to DBP being the highest bidder for P21,035.00. After applying the proceeds of the sale to satisfy the outstanding balance of the indebtedness in the amount of P28,914.36, it was found that spouses still owed DBP in the amount of P7,779.36. Suit for the deficiency with preliminary attachment was filed by DBP against spouses. Spouses averred that after an extrajudicial foreclosure of property, no deficiency judgment would lie Trial Court ruled for DBP Spouses went straight to SC being a question of law.

ISSUE/S Whether or not the mortgagee is entitled to claim the deficiency in extrajudicial foreclosure of mortgage - YES RULING & RATIO YES. In extrajudicial foreclosure of mortgage, where the proceeds of the sale is insufficient to cover the debt, the mortgagee is entitled to claim the deficiency from the debtor. Citing Philippine Bank of Commerce v. Tomas de Vera “A reading of the provisions of Act No. 3135, as amended (re extrajudicial foreclosure) discuss nothing, it is true, as to the mortgagee’s right to recover such deficiency. But neither do we find any provision thereunder which expressly or impliedly

prohibits such recovery. “Article 2131 of the new Civil Code, on the contrary, expressly provides that ‘The form, extent and consequences of a mortgage, both as to its constitution, modification and extinguishment, and as to other matters not included in this Chapter, shall be governed by the provisions of the Mortgage Law and of the Land Registration Law.’ Under the Mortgage Law, which is still in force, the mortgagee has the right to claim for the deficiency resulting from the price obtained in the sale of the real property at public auction and the outstanding obligation at the time of the foreclosure proceedings. Under the Rules of Court (Sec. 6, Rule 70), ‘Upon the sale of any real property, under an order for a sale to satisfy a mortgage or other incumbrance thereon, if there be a balance due to the plaintiff after applying the proceeds of the sale, the court, upon motion, should render a judgment against the defendant for any such balance for which by the record of the case, he may be personally liable to the plaintiff, x x x.’ It is true that this refers to a judicial foreclosure, but the underlying principle is the same, that the mortgage is but a security and not a satisfaction of indebtedness. Thus, in respect to pledges, Article 2115 of the new Civil Code expressly states: ‘x x x. If the price of the sale is less (than the amount of the principal obligation) neither shall the creditor be entitled to recover the deficiency, notwithstanding any stipulation to the contrary.’ Likewise, in the event of a foreclosure of a chattel mortgage on the thing sold in installments ‘he (the vendor) shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.’ (Article 1484, paragraph 3, ibid.). It is then clear that in the absence of a similar provision in Act No. 3135, as amended, it cannot be concluded that the creditor loses his right given him under the Mortgage Law and recognized in the Rules of Court, to take action for the recovery of any unpaid balance on the principal obligation, simply because he has chosen to foreclose his mortgage extrajudically x x x” DISPOSITION ACCORDINGLY, the judgment appealed from is hereby AFFIRMED. Costs against appellants NOTES ADDITIONAL MATTER Extrajudicial forclosure was done on Dec 10, 1952, but actual sale was only done on June 10, 1957. Page 12 of 23

Additional issue: whether or not additional interests are properly chargeable on the balance of the indebtedness during the period from notice of sale to actual sale YES. The seemingly long interval between the date of issuance of the Sheriffs Notice of Sale and the date of sale was due to the numerous transfers made of the date of the sale upon requests of the appellants themselves Each transfer is covered by a corresponding agreement for postponement, executed jointly by DBP and spouses. Certainly, under such circumstances, spouses cannot take advantage of the delay which was their own making, to the prejudice of the other party. Apart from this consideration, it must be noted that a foreclosure of mortgage means the termination of all rights of the mortgagor in the property covered by the mortgage. It denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. In judicial foreclosures, the “foreclosure” is not complete until the Sheriff’s Certificate is executed, acknowledged and recorded. In the absence of a Certificate of Sale, no title passes by the foreclosure proceedings to the vendee.3 It is only when the foreclosure proceedings are completed and the mortgaged property sold to the purchaser that all interests of the mortgagor are cut off from the property. This principle is applicable to extrajudicial foreclosures. Consequently, in the case at bar, prior to the completion of the foreclosure, the mortgagor is, therefore, liable for the interest on the mortgage.

Page 13 of 23

LIMPIN vs. INTERMEDIATE APPELLATE COURT G.R. No. L-70987 SEPTEMBER 29, 1988 PETITIONERS: Limpin and Sarmiento PRIVATE RESPONDENT: Ponce FACTS: Two lots were mortgaged together with another two lots (4 in all), were originally mortgaged in 1973 to private respondent Ponce by their former owners, the spouses Aquino. These two lots were afterwards sold in 1978 by spouses Aquino to Butuan Bay Wood Export Corporation. Against this corporation herein petitioner Limpin obtained a money judgment in 1979. In order to satisfy the judgment, the two lots were levied on and sold to a public auction in 1980. Limpin as the highest bidder. Limpin later sold the lot to his copetitioner Sarmiento. Before the levy was made on the two lots, Ponce had initiated judicial proceedings for the foreclosure of the mortgage over said two lots together with the two others mortgaged to him. Judgment was rendered in favor of Ponce and became final and at the ensuing foreclosure sale, the lots were acquired by Ponce himself as highest bidder. Ponce then moved for confirmation of the foreclosure sale, but the Court confirmed the sale of only two lots, refusing to do so as regards the two which had been subject of the execution sale in Limpin’s favor. Ponce instituted a special civil action in the IAC, impleading Limpin and Sarmiento as indispensable parties. The Court rendered judgment in favor of Ponce. On appeal, the Supreme Court affirmed the IAC decision and ordered the trial court to issue a writ of possession in favor of Ponce subject to equity of redemption of Sarmiento Sarmiento did not try to exercise his right to equity of redemption before the confirmation of the foreclosure sale. Instead he instituted no less than two actions in the RTC attempting to relitigate the same issues which the court and the IAC had already passed upon and resolved. After nine months or so after entry of the judgment recognizing his equity of redemption as successor-in-interest of the original mortgagors, Sarmiento finally attempt to exercise his unforeclosed equity of redemption. He also filed a motion with the Court manifesting that he would exercise the right and asked the Court to fix the redemption price.

Sarmiento then wrote to Ponce offering P2.6 million as redemption price for the two lots. Ponce refused and averred that the period within which could have exercised such right had lapsed. According to Ponce, from October 17, 1982, when Sarmiento’s predecessor-in-interest defaulted in their obligations over the mortgaged properties up to June 17, 1987, when the trial court confirmed the auction sale of those properties. ISSUE: Whether or not the equity of redemption recognized in favor of petitioner Rogelio M. Sarmiento in this Court’s judgment promulgated on January 30, 1987, still subsists and may be exercised, more than a year after that judgment had become final and executory. HELD/DISPOSITION: No, the equity redemption claimed and invoked by Sarmiento over the properties had already lapsed and ceased to exist without having been properly exercised. On June 17, 1987 with the issuance of the trial court of the order confirming the sheriffs sale of said properties, in favor of Ponce. RATIO: The equity of redemption is, to be sure, different from and should not be confused with the right of redemption. The right of redemption in relation to a mortgage understood in the sense of a prerogative to re-acquire mortgaged property after registration of the foreclosure sale exists only in the case of the extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosure except only where the mortgagee is the Philippine National Bank or a bank or banking institution. Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of redemption within one (1) year from the registration of the sheriffs certificate of foreclosure sale. Where the foreclosure is judicially effected, no equivalent right of redemption exists. The law declares that a judicial foreclosure sale, “when confirmed by an order of the court, shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may he allowed by law.” Such rights exceptionally “allowed by law” (i.e., even after confirmation by an order of the court) are those granted by the charter of the Philippine National Bank (Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). These laws confer on the mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right to redeem the property sold on foreclosure after confirmation by the court of the foreclosure sale which right may be exercised within a period of one (1) year, counted from the date of registration of the certificate of sale in the Registry of Property. But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale, “when confirmed by an order of the court, shall Page 14 of 23

operate to divest the rights of all the parties to the action and to vest their rights in the purchaser.” There then exists only what is known as the equity of redemption. This is simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment becomes final in accordance with the Rule 68 or even after the foreclosure sale but prior to its confirmation. Under the circumstances obtaining in this case, the plain intendment of the Intermediate Appellate Court was to give to Sarmiento, not the unforeclosed equity of redemption pertaining to a stranger to the foreclosure suit, but the same equity of redemption possessed by the mortgagor himself. The judgment cannot be construed as contemplating or requiring the institution of a separate suit by Ponce to compel Sarmiento to exercise his unforeclosed equity of redemption, or as granting Sarmiento the option to redeem at any time that he pleases, subject only to prescription. This would give rise to that multiplicity of proceedings which the law eschews. The judgment plainly intended that Sarmiento exercise his option to redeem, as successor of the mortgagor. Upon the facts on record, Sarmiento cannot be heard to complain of denial of due process for alleged lack of notice of any motion or hearing for confirmation of sale. The Decision of the Intermediate Appellate Court which he and his predecessor, Limpin, had appealed to this Court specifically ordered the Trial Court to confirm the judicial foreclosure sale in favor of Ponce over the two lots.

Page 15 of 23

Sps. Landrito v. CA (Short title) GR # 133079 | August 9, 2005 Petition: Petition for Review on Certiorari under Rule 45 Petitioner: Sps. Maximo Landrito, Jr. and Pacita Edgalani Respondent: The Honorable Court of Appeals; Sps. Benjamin San Diego and Carmencita San Diego; The Ex-Officio Sheriff and Clerk of Court of the Regional Trial Court, Makati City; and The Register Of Deeds, Makati City FACTS Sps. Landrito obtained a loan of P350K from San Diego with a deed of real estate mortgage over their parcel of land located at Muntinlupa, Rizal. After making substantial payments, they again obtained and were granted by San Diego an additional loan of P1M and the parties executed an Amendment of REM, where they stipulated that the loan shall be paid within 6 months or the mortgagee shall have the right to declare the mortgage due and may immediately foreclose the same judicially or extrajudicially. They defaulted in paying their loan and continuously refused to comply with their obligation despite repeated demands prompting San Diego to send a final notice requiring them to settle their obligation amounting to P1.9M After efforts to collect proved futile, San Diego filed with the Office of the Clerk of Court and Ex-Officio Sheriff of RTC-Makati, a petition for the extrajudicial foreclosure of the mortgage. The office sent to the parties a Notice of Sheriffs Sale, therein announcing that the mortgaged property will be sold in a public auction and copies of which notice were posted in several conspicuous places. The public auction sale was held and the property was sold to San Diego as the highest bidder for P2M as evidenced by the Sheriffs Certificate of Sale. San Diego then caused the registration of the certificate of sale with the Office of the Register of Deeds and duly inscribed on the same date at the dorsal side of the Lanrdito's TCT. With the Sps. Landrito having failed to redeem their property within the 1year redemption period from the date of inscription of the sheriffs certificate of sale, as provided for in Act No. 3135, as amended, the San Diegos caused the consolidation of title over the foreclosed property in their names. Sps. Landrito then filed before the RTC Makati a complaint for annulment of the extrajudicial foreclosure and auction sale, with damages. o They alleged that (1) said foreclosure and auction sale were null and void for failure to comply with the requirements of notice and publication (2) the mortgaged property was illegally foreclosed based on the settled rule that an action to foreclose a mortgage must be limited to the amount mentioned in the mortgage which was allegedly bloated by respondent Carmencita San Diego and (3) the application for consolidation of title was premature because Benjamin San Diego granted them an extension for redemption. Sps. San Diego interposed a Motion to Dismiss alleging that said complaint failed to state a cause of action as no primary right of the petitioners had been violated since they actually failed to exercise their right of redemption within the one-year redemption period, adding that Sps. Landrito never took any action which may stall the running of the same period, thereby leaving them no further right or interest in the property in question.

-

-

RTC: Granted the motion to dismiss and accordingly dismissed the complaint, saying that the cause of action, if any, is already barred by laches on account of their failure or neglect for an unreasonable length of time to do that which, by exercising due diligence, could or should have been done earlier and that Sps. Landrito's inaction constituted a waiver on their part. CA: Affirmed in toto the trial courts order of dismissal and denied the MR. Thus, this petition

ISSUE/S 2. W/N CA erred in dismissing the complaint RULING & RATIO 2. NO The records show that at the time of the foreclosure sale, Sps. Landrito were already in default in their loan obligation and that much earlier, a final notice of demand for payment had been sent to them, despite which they still failed to pay which resulted to to the extrajudicial foreclosure. The rule is that in real estate mortgage, when the principal obligation is not paid when due, the mortgagee has the right to foreclose on the mortgage and to have the mortgaged property seized and sold with the view of applying the proceeds thereof to the payment of the obligation. In this case, the validity of the extrajudicial foreclosure was virtually confirmed by the RTC when it dismissed the complaint coupled with the fact that Sps. Landrito failed to exercise their right of redemption within the 1year period. Sps. Landrito however alleged that they did not avail of their redemption right because San Diego bloated their original loan of P1M to P1.9M and that the CA, in sustaining the extrajudicial foreclosure proceedings, thereby go against the established jurisprudence that an action for foreclosure must be limited to the amount mentioned in the mortgage document (P1M). SC do not take issue with such submission that a mortgage may be foreclosed only for the amount appearing in the mortgage document, more so the mortgage contract is evidently silent on the payment of interest. The law on redemption of mortgaged property is clear. Section 6 of RA 3135 provides that in all cases in which an extrajudicial sale is made, 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 (1 year redemption) Jurisprudence provide that the one-year redemption period should be counted not from the date of foreclosure sale, but from the time the certificate of sale is registered with the Register of Deeds. It is clear that even the complaint filed by Sps. Landrito with the trial court on was instituted beyond the 1-year redemption period. In fact, they acknowledged that their complaint for annulment of extrajudicial foreclosure and auction sale was filed about eleven (11) days after the redemption period had already expired. They merely harp on the alleged increase in the redemption price of the mortgaged property as the reason for their failure to redeem the same. Page 16 of 23

-

-

-

-

-

However, and as already pointed out herein, they chose not, despite notice, to appear during the foreclosure proceedings. Even assuming that an extension was given to them, no time at all did they make a valid offer to redeem coupled with a tender of the redemption price. Jurisprudence made it clear that it is only where, by voluntary agreement of the parties, consisting of extensions of the redemption period, followed by commitment by the debtor to pay the redemption price at a fixed date, will the concept of legal redemption be converted into one of conventional redemption. Here, there is no showing whatsoever tht Spouse Landrito agreed to pay the redemption price as allegedly set by Mrs. San Diegos husband. On the contrary, their act of filing their complaint to declare the nullity of the foreclosure sale is indicative of their refusal to pay the redemption price on the alleged deadline set by the husband. At the very least, if they so believed that their loan obligation was only for P1M, they should have made an offer to redeem within 1 year from the registration of the sheriffs certificate of sale, together with a tender of the same amount. The period of redemption is not a prescriptive period but a condition precedent provided by law to restrict the right of the person exercising redemption. Correspondingly, if a person exercising the right of redemption has offered to redeem the property within the period fixed, he is considered to have complied with the condition precedent prescribed by law and may thereafter bring an action to enforce redemption. The period within which to redeem the property sold at a sheriffs sale is not suspended by the institution of an action to annul the foreclosure sale. It is clearthat Spouses Landrito have lost any right or interest over the subject property primarily because of their failure to redeem the same in the manner and within the period prescribed by law.

DISPOSITION WHEREFORE, the instant petition is DENIED and the challenged decision and resolution of the Court of Appeals AFFIRMED. No pronouncement as to costs. SO ORDERED.

Page 17 of 23

Uypitching v. Quiamco Petitioner: Ernesto Ramas Uypitching and Ramas Uypitching Sons, Inc. Respondent: Ernesto Quiamco 510 SCRA 172 | G.R. No. 146322 DOCTRINE There is a well-defined procedure for the recovery of possession of mortgaged property: if a mortgagee is unable to obtain possession of a mortgaged property for its sale of foreclosure, he must bring a civil action either to recover such possession as a preliminary step to the sale, or to obtain judicial foreclosure. FACTS • In 1982, respondent Ernesto C. Quiamco was approached by Juan Davalan,2 Josefino Gabutero and Raul Generoso to amicably settle the civil aspect of a criminal case for robbery3 filed by Quiamco against them. o They surrendered to him a red Honda motorcycle and a photocopy of its certificate of registration. Respondent asked for the original certificate of registration but the three accused never came to see him again. Meanwhile, the motorcycle was parked in an open space inside respondent‘s business establishment, where it was visible and accessible to the public. o It turned out that, in October 1981, the motorcycle had been sold on installment basis to Gabutero by Uypitching Sons, Inc. And to secure its payment, the motorcycle was mortgaged to petitioner corporation. When Gabutero could no longer pay the installments, Davalan assumed the • obligation and continued the payments. o In September 1982, however, Davalan stopped paying the remaining installments. Nine years later, petitioner Uypitching, accompanied by policemen, went to Avesco-AVNE Enterprises to recover the motorcycle. o The leader of the police team talked to the clerk in charge and asked for respondent. While P/Lt. Vendiola and the clerk were talking, petitioner Uypitching paced back and forth inside the establishment uttering "Quiamco is a thief of a motorcycle." o Unable to find respondent, the policemen on petitioner Uypitching’s instructionand over the clerk‘s objection, took the motorcycle. Petitioner Uypitching filed a criminal complaint for qualified theft and/or violation of the Anti-Fencing Law against respondent but was dismissed. • Respondent filed an action for damages against petitioners in the RTC o The trial court rendered a decision finding that petitioner Uypitching was motivated with malice and ill will when he called respondent a thief, took the motorcycle in an abusive manner and filed a baseless complaint for qualified theft and/or violation of the AntiFencing Law

o Petitioners appealed the RTC decision but the CA affirmed the trial court‘s decision. Hence, this petition. ISSUE/S W/N the filing of a complaint for qualified theft and/or violation of the AntiFencing Law warranted the award of moral damages, exemplary damages, attorney‘s fees and costs in favor of respondent. - YES PROVISIONS Art. 19. Every person must in the exercise of his rights and in the performance of his duties, act with justice, give every one his due, and observe honesty and good faith. RULING & RATIO YES - They were held liable for damages not only for instituting a groundless complaint against respondent but also for making a slanderous remark and for taking the motorcycle from respondent’s establishment in an abusive manner . Petitioners Abused Their Right of Recovery as Mortgagee(s) o A mortgagee may take steps to recover the mortgaged property to enable it to enforce or protect its foreclosure right there on. There is, however, a well-defined procedure for the recovery of possession of mortgaged property: if a mortgagee is unable to obtain possession of a mortgaged property for its sale on foreclosure, he must bring a civil action either to recover such possession as a preliminary step to the sale, or to obtain judicial foreclosure. o Petitioner corporation failed to bring the proper civil action necessary to acquire legal possession of the motorcycle. Instead, petitioner Uypitching descended on respondent‘s establishment with his policemen and ordered the seizure of the motorcycle without a search warrant or court order. Worse, in the course of the illegal seizure of the motorcycle, petitioner Uypitching even mouthed a slanderous statement. - Petitioners‘ acts violated the law as well as public morals, and transgressed the proper norms of human relations. a. The basic principle of human relations, embodied in Article 19 of the Civil Code .Article 19, also known as the "principle of abuse of right," prescribes that a person should not use his right unjustly or contrary to honesty and good faith ,otherwise he opens himself to liability. There is an abuse of right when it is exercised solely to prejudice or injure another. 2. In this case, the manner by which the motorcycle was taken at petitioners‘ instance was not only attended by bad faith but also contrary to the procedure laid down by law. Considered in conjunction with the defamatory statement, petitioners’ exercise of the right to recover the mortgaged vehicle was utterly prejudicial and injurious to respondent. Page 18 of 23

RAYO vs METROBANK G.R. No. 165142 December 10, 2007 Petition: PETITION FOR ANNULMENT OF JUDGMENT Petitioner: EDUARDO L. RAYO Respondent: METROPOLITAN BANK AND TRUST COMPANY AND BRANCH 223 OF THE REGIONAL TRIAL COURT OF QUEZON CITY DOCTRINE: EXTRAJUDICIAL FORECLOSURE FACTS: 1) Midas, thru its president, Mr. Samuel U. Lee, obtained six loans from Metrobank amounting to P588, 870,000 as evidenced by promissory notes. To secure the payment of an P8, 000,000 loan, Louisville Realty, thru its president, Mr. Samuel U. Lee, executed in favor of Metrobank, a real estate mortgage over three parcels of land. 2) When the debtor-mortgagor failed to pay, Metrobank extra-judicially foreclosed the real estate mortgage. Thereafter, in a public auction, Metrobank was the highest bidder. When Louisville refused to turn over the real properties, on March 17, 2001, Metrobank filed before the RTC Branch 223, Quezon City, an ex parte-petition for the issuance of a writ of possession and the same was granted. 3) Metrobank posted the required bond. Consequently, a writ of possession was issued on October 9, 2001. 4) On April 3, 2002, petitioner Eduardo L. Rayo filed a complaint against Metrobank for Nullification of Real Estate Mortgage Contract(s) and Extrajudicial Foreclosure Sale. 5) On May 13, 2004, Rayo filed with the Court of Appeals a Petition for Annulment of Judgment on the ground of absolute lack of due process. Petitioner alleged that his predecessor, Louisville, was not notified of the proceedings and that Section 7 of Act No. 3135 is unconstitutional. CA RULING: It denied the petition for lack of merit. Petitioner is neither the registered owner nor the successor-in-interest of the registered owner; hence, not a real partyin-interest. It also ruled that there is no basis to challenge the constitutionality of Section 7 of Act No. 3135, as amended as it constitutes a collateral attack against said provision. Petitioner sought reconsideration, but was likewise denied. Rayo insists he has legal personality to institute annulment of judgment case against Metrobank because he is a co-assignee over the subject real properties. Metrobank claims that it was not a party to the deed of assignment among Louisville, Chua and petitioner, hence, it has no privity of contract with petitioner Rayo. Moreover, Metrobank points out that the real properties had already been extrajudicially foreclosed when petitioner and his assignors executed the deed of assignment.

ISSUE: 1.

W/N Section 7 of Act No. 3135 is in violation of the constitutional guaranty to due process.

RULING: 1. No. There was no violation of petitioners right to constitutional due process. The issuance of a writ of possession in favor of the purchaser in a foreclosure sale of a mortgaged property under Section 7 of Act No. 3135, as amended is a ministerial duty of the court. The purchaser of the foreclosed property, upon ex parte application and the posting of the required bond, has the right to acquire possession of the foreclosed property during the 12-month redemption period and with more reason, after the expiration of the redemption period. An ex parte petition for the issuance of a writ of possession under Section 7 of Act No. 3135 is not, strictly speaking, a judicial process as contemplated in Article 433 of the Civil Code. It is a judicial proceeding for the enforcement of ones right of possession as purchaser in a foreclosure sale. It is a non-litigious proceeding authorized in an extrajudicial foreclosure of mortgage pursuant to Act No. 3135, as amended, and is brought for the benefit of one party only, and without notice to, or consent by any person adversely interested. It is a proceeding where the relief is granted without requiring an opportunity for the person against whom the relief is sought to be heard. No notice is needed to be served upon persons interested in the subject property. Just in case Atty. Llaguno ask for the remedial issue on W/N Rayo is a real party-ininterest. The court ruled that petitioner has no present substantial interest to institute the annulment of judgment proceedings and nullify the order granting the writ of possession. The court recognized Rayo as the co-assignee of the subject real properties as shown in the March 25, 2002 deed of assignment. However, while petitioner would be injured by the judgment in this suit, the court found that petitioner has no present substantial interest to institute the annulment of judgment proceedings and nullify the order granting the writ of possession. DISPOSITION: WHEREFORE, the petition is DENIED for lack of merit. The assailed Resolutions dated June 15, 2004 and August 23, 2004 of the Court of Appeals in CA-G.R. SP No. 83895 are hereby AFFIRMED. Costs against the petitioner.

Page 19 of 23

ROXAS v BUAN G.R. No. L-53798 I NOVEMBER 8, 1988 PETITION for CERTIORARI and PROHIBITION with PRELIMINARY INJUNCTION PETITIONER: ALBERTO C. ROXAS and NENITA DE GUIA RESPONDENT: MARINA BUAN (PRIVATE) COURT OF FIRST INSTANCE OF ZAMBALES, BRANCH 1 THE PROVINCIAL SHERIFF OF ZAMBALES THRU HIS DEPUTY, ATILANO G. NANQUIL (ACT no. 3135 – EXTRAJUDICIAL FORECLOSURE) DOCTRINE In the extrajudicial foreclosure of real estate mortgages, possession of the property may be awarded to the purchaser at the foreclosure sale during the pendency of the period of redemption under the terms provided in Sec. 6 of Act 3135, as amended (An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages), or after the lapse of the redemption period, without need of a separate and independent action. Under Sec. 35, Rule 39 of the Revised Rules of Court, which was made applicable to the extrajudicial foreclosure of real estate mortgages by Sec. 6 Act No. 3135, the possession of the mortgaged property may be awarded to a purchaser in extrajudicial foreclosures "unless a third party is actually holding the property adversely to the judgment debtor." FACTS (1) Arcadio Valentin and Marina Buan entered into a contract of loan secured by a REM on Valentin’s residential house. Upon failure of Valentin to pay, an extrajudicial proceeding was instituted, Marian Buan being the highest bidder. (2) Valentin had a period of one (1) year from the date of registration within which to redeem the mortgaged properties. The period for the redemption of the property in question having expired without the property being redeemed by Valentin. (3) Despite expiration of the redemption period, Valentin failed to deliver possession prompting Buan to file for a “Petition for the issuance of a Writ of Possession” which was not contested and thus granted by the court. (4) Execution of the writ of possession was not successful since it was found out that Atty. Roxas and De Guia is occupying the property and refused to vacate. Roxas alleged that they had purchased the property from Valentin. (5) In the present case, Buan filed a “Motion for Contempt” for Roxas and De Guia’s refusal to abide by the writ of possession. Roxas argued that they cannot be held guilty of contempt of court because they were not made parties to the main action.

property, Roxas filed a Motion for Reconsideration and subsequently the present petition. CONTENTION of ROXAS: The respondent court gravely abused its discretion amounting to lack of jurisdiction in issuing the order complained of, upon the theory that it was predicated upon a writ of possession which was ineffective as against them, being third parties. Thus, the order is null and void. They also insist that the private respondent should file an independent action to recover the property, otherwise, there will be a violation of due process of law if they are not given their day in court to prove their adverse claim ISSUES (1) WON the Buan should file an independent action to recover the property? NO RULING & RATIO: (1) No. Roxas is not a party actually holding the property adversely to the debtor, Arcadio Valentin. Roxas' possession of the property was premised on its alleged sale to him by Valentin for the amount of P100,000.00. Assuming this to be true, it is readily apparent that Roxas holds title to and possesses the property as Valentin's transferee. Any right he has to the property is necessarily derived from that of Valentin. As transferee, he steps into the latter's shoes. Roxas is therefore the successor-in-interest of Valentin, to whom the latter had conveyed his interest in the property for the purpose of redemption. In the extrajudicial foreclosure of real estate mortgages, possession of the property may be awarded to the purchaser at the foreclosure sale during the pendency of the period of redemption under the terms provided in Sec. 6 of Act 3135, as amended (An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages), or after the lapse of the redemption period, without need of a separate and independent action.This is founded on his right of ownership over the property which he purchased at the auction sale and his consequent right to be placed in possession thereof. This rule is, however, not without exception. Under Sec. 35, Rule 39 of the Revised Rules of Court, which was made applicable to the extrajudicial foreclosure of real estate mortgages by Sec. 6 Act No. 3135, the possession of the mortgaged property may be awarded to a purchaser in extrajudicial foreclosures "unless a third party is actually holding the property adversely to the judgment debtor."

RTC: Denied the “Motion for Contempt” but ordered Roxas and De Guia to vacate the premises under pain of contempt. (6) Disagreeing with the portion of the order directing them to vacate the Page 20 of 23

Sps Samson vs Rivera GR # 154355 | May 20,2004 Petition: Petition for Review Petitioner: Spouses REMPSON SAMSON and MILAGROS SAMSON; and REMPSON REALTY & DEVELOPMENT CORPORATION Respondent: Judge MAURICIO M. RIVERA, in His Capacity as Presiding Judge of the Regional Trial Court of Antipolo City, Branch 73; Atty. JOSELITA MALIBAGOSANTOS, in Her Capacity as Ex Officio Sheriff, RTC of Antipolo City; and LENJUL REALTY CORPORATION

-

Sps Samson and Rempson Realty filed with the CA a Petition for certiorari, with prohibition and mandamus. CA: Denied o there was an adequate remedy in the ordinary course of law. Citing Section 8 of Act No. 3135, it opined that petitioners’ remedy was to file a petition to set aside the foreclosure sale and to cancel the writ of possession in LR Case o certiorari was premature inasmuch as petitioners had failed to file a motion for reconsideration of the Order directing the issuance of the writ of possession.

DOCTRINE Hence, this petition. FACTS Spouses Rempson and Milagros Samson incurred from Far East Bank and Trust Company (FEBTC) loan obligations, amounting to P55 million. To secure the payment of the loan obligations, Spouses Samson executed in favor of FEBTC two real estate mortgages covering five parcels of commercial property located at Antipolo City, Rizal. They failed to pay. FEBTC filed an Application for Extra-Judicial Foreclosure of Real Estate Mortgage in the clerk of Court of the RTC in Antipolo, to satisfy the debt amounting to P72 million inclusive of charges and penalties. The clerk of court issued a Notice of Sheriff Sale. There was only one bidder during the foreclosure sale, and so the sheriff postponed the auction. On July 5, 2000, the auction sale proceeded with two bidders participating -FEBTC and Lenjul Realty and Development Corporation, with the latter declared as the highest bidder in the amount of eighty million pesos (P80,000,000). Certificate of Sheriff’s Sale was issued and registered with the registry of deeds, and new certificates of title were issued. Lenjul Realty filed a Petition for the Issuance of a Writ of Possession, which sought an ex parte issuance of a writ of possession over the foreclosed properties. While the Petition was pending, Spouses Samson and Rempson Corporation filed with the Antipolo City RTC, an action for Annulment of Extra-Judicial Foreclosure and/or Nullification of Sale and the Certificates of Title, plus Reconveyance and Damages with Prayer for a Temporary Restraining Order and/or Writ of Preliminary Injunction. Judge Caballes (judge in the annulment) issued an Order directing the consolidation of the civil case with the land registration case. Judge Rivera (judge in the possession petition) issued an order denying the consolidation of the Petition for Writ of Possession and the civil case for annulment of foreclosure. Judge Rivera gave due course to the Petition for the Issuance of a Writ of Possession and denied the Opposition of Spouses Samson and Rempson Corporation. Judge Rivera denied reconsideration. Judge Rivera issued an Order granting petitioners’ Motion for Reconsideration with regard to the September 18, 2001 Order denying the consolidation of cases. Writ of possession was issued by the sheriff of Antipolo RTC to place Lenjul in physical possession.

ISSUE/S 3. W/N the issuance of the writ of possession was proper PROVISIONS RULING & RATIO 3. YES a. The issuance of the Writ is explicitly authorized by Act 3135, which regulates the methods of effecting an extrajudicial foreclosure of mortgage. i. Section 7 of the Act provides: In any sale made under the provisions of this Act, the purchaser may petition the [Regional Trial Court] where the property or any part thereof is situated, to give him possession thereof during the redemption period….. b. Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of possession during the redemption period by filing for that purpose an ex parte motion under oath, in the corresponding registration or cadastral proceeding in the case of a property with torrens title. Upon the filing of such motion and the approval of the corresponding bond, the court is expressly directed to issue the writ. c. This Court has consistently held that the duty of the trial court to grant a writ of possession is ministerial. Such writ issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No discretion is left to the trial court. d. Questions regarding the validity of the sale cannot be raised to oppose the issuance of the writ. e. At any time following the consolidation of ownership and the issuance of a new transfer certificate of title in the name of the purchaser (which happened in the case), he or she is even more entitled to possession of the property. f. This Court has long settled that a pending action for annulment of mortgage or foreclosure does not stay the issuance of a writ of possession. Therefore, the contention of petitioners that the RTC should have consolidated Civil Case No. 01-6219 with LR Case No. 01-2698 and resolved the annulment case prior to the issuance of the Writ of Possession is unavailing. Page 21 of 23

Tizon v. Valdez (Short title) G.R. No. 24797 | 48 Phil. 910 | March 16, 1926 Petition: APPEAL from a judgment of the Court of First Instance of Tarlac. Petitioner: DOMICIANO TIZON Respondent: EMILIANO J. VALDEZ and LUIS MORALES, sheriff of the Province of Tarlac,

TIZON contentions: -

-

Tizons mortgage does not set forth the fact of the existence of the previous mortgage. Thus, TIZON’s mortgage should not be denominated a second mortgage The election of VALDEZ to proceed against the SIBAL in an ordinary civil action constituted a waiver of his rights under the mortgage

DOCTRINE ISSUE/S After a first mortgage is executed there remains in the mortgagor a mere right of redemption, and only this right passes to the second mortgagee by virtue of the second mortgage.

1. 2.

FACTS -

The personal property of Leon SIBAL was mortgaged to VALDEZ and was duly registered in the registry of chattel mortgage. SIBAL then again mortgaged the same chattels to TIZON SIBAL defaulted in the making of payment, and VALDEZ thereupon instituted a civil action to recover the indebtedness, in connection with which he sued out a writ of attachment and caused the same to be levied upon the property. o However, the property was not retained by the attaching office because TIZON gave a counter bond and lifted the attachment. o VALDEZ won the civil action. Thus, he caused an execution to be issued and levied the property in question. Meanwhile, TIZON in a foreclosure proceeding conducted in conformity with the provisions of the chattel mortgage law, foreclosed the property. o TIZON becoming purchaser for the consideration of P1,000. As purchaser at his own foreclosure sale, TIZON assumed possession of the property. When the sheriff levied upon the property, the property was in the possession of TIZON. o TIZON filed a claim with the sheriff, asserting that the property belonged to him and was not liable to be taken upon an execution directed against SIBAL. The sheriff, under indemnity from VALDEZ, retained the property and sold it in due course at an execution sale, VALDEZ becoming purchaser at the price of P500. o Pursuant to this sale VALDEZ now took possession. Hence, this petition.

W/N TIZON’s mortgage is superior to VALDEZ’s by not stating the fact of the existence of a previous mortgage. W/N VALDEZ by instituting a Civil action constitutes a waiver of his right under the mortgage.

RULING & RATIO 1. NO. ●

●

TIZON’s mortgage does not set forth the fact of the existence of the previous mortgage. Thus, mortgage should not be denominated a second mortgage. But it is certainly not a first mortgage, and it is inferior to VALDEZ’s mortgage because executed subsequent to the date when VALDEZ’s mortgage was put of record. The violation of law by the mortgagor in failing to mention in the second mortgage the existence of the prior mortgage made him amenable to the penal provision contained in section 12 of the Chattel Mortgage Law but could not affect the priority of the earlier mortgage.

2. NO ●

●

●

In Green v. Bass Supreme Court of Ohio, held that: o “the owner of a senior mortgage does not waive the priority of his lien by recovering a judgment on the note which it secures and causing execution to be levied on the mortgaged chattels.” Upon suing out an attachment under section 426 of the Code of Civil Procedure the creditor is required to make oath that he has no other sufficient security for the claim sought to be enforced by the action. o the creditor is not required to state peremptorily under oath that he has no other security at all but only that he has no other sufficient security. Thus, such affidavit does not waive the mortgage lien. The first mortgage in favor of Valdez continues to subsist unaffected by what happened because of the civil action. Page 22 of 23

NOTE: Effect of foreclosure on second mortgage -

-

After a first mortgage is executed there remains in the mortgagor a mere right of redemption, and only this right passes to the second mortgagee by virtue of the second mortgage. As between the first and second mortgagees, therefore, the second mortgagee has at most only the right to redeem, and even when the second mortgagee goes through the formality of an extrajudicial foreclosure, the purchaser acquires no more than the right of redemption from the first mortgagee.

DISPOSITION For the reasons stated the judgment appealed from must be affirmed, and it is so ordered, with costs against the appellant.

Page 23 of 23