ANTICHRESIS

G.R. No. L-36821 June 22, 1978

JOSE P. DIZON, petitioner,
vs.
ALFREDO G. GABORRO (Substituted by PACITA DE GUZMAN GABORRO as Judicial Administratrix of the
Estate of Alfredo G. Gaborro) and the DEVELOPMENT BANK OF THE PHILIPPINES, respondents.
Leonardo Abola for petitioner.
Carlos J. Antiporda for respondents.

GUERRERO, J.:
Petition for review on certiorari of the decision of the Court Appeals 1 in CA-G.R. No. 46975-R entitled "Jose P. Dizon,
Plaintiff-Appellant, vs. Alfredo G. Gaborro (substituted by Pacita de Guzman Gaborro as Judicial Administratrix of the
Estate of Alfredo G, Gaborro) trial the Development Bank of the Philippines, Defendants-Appellees," affirming with
modification the decision of the Court of First Instance of Pampanga, Branch II in Civil Case No. 2184.
The dispositive portion of the decision sought to be reviewed reads:
IN VIEW OF THE FOREGOING, the judgment appealed therefrom is hereby affirmed with modification
that the plaintiff-appellant has the right to refund or reimburse the defendant- appellees he sum of
P131,831.91 with interest at 8% per annum from October 6, 1959 until full payment, said right to be
exercised within one year from the date this judgment becomes final, with the understanding that, if
he fails to do so within the said period, then he is deemed to have lost his right over the lands forever.
With costs against the appellant. 2
MODIFIED.
The basic issue to be resolved in this case is whether the 'Deed of Sale with Assumption of Mortgage', trial Option to
Purchase Real Estate". two instruments executed by trial between Petitioner Jose P. Dizon trial Alfredo G. Gaborro
(defendant below) on the same day, October 6, 1959 constitute in truth trial in fact an absolute sale of the three
parcels of land therein described or merely an equitable mortgage or conveyance thereof by way of security for
reimbursement, refund or repayment by petitioner Jose P. Dizon of any trial all sums which may have been paid to the
Development Bank of the Philippines trial the Philippine National Bank by Alfredo G. Gaborro (later substituted herein
by his wife Pacita de Guzman Gaborro as administratrix of the estate of Alfredo G. Gaborro) who had died during the
pendency of the case.
A supplementary issue raised is whether or not Gaborro or the respondent administratrix of the estate should account
for all the fruits produced trial income received by them from the lands mentioned trial described in the aforesaid
"Deed of Sale with Assumption of Mortgage."
The antecedent facts established in the record are not disputed. Petitioner Jose P. Dizon was the owner of the three (3)
parcels of land, subject matter of this litigation, situated in Mabalacat, Pampanga with an aggregate area of 130.58
hectares, as evidenced by Transfer Certificate of Title No. 15679. He constituted a first mortgage lien in favor of the
Develop. ment Bank of the Philippines in order to secure a loan in the sum of P38,000.00 trial a second mortgage lien
in favor of the Philippine National Bank to cure his indebtedness to said bank in the amount of P93,831.91.
Petitioner Dizon having defaulted in the payment of his debt, the Development Bank of the Philippines foreclosed the
mortgage extrajudicially pursuant to the provisions of Act No. 3135. On May 26, 1959, the hinds were sold to the DBP
for- P31,459.21, which amount covered the loan, interest trial expenses, trial the corresponding "Certificate of Sale,"
(Exhibit A-2, Exhibit 1b was executed in favor of the said On November 12, 1959, Dizon himself executed the deed of
sale (Exhibit Al over the properties in favor of the DBP which deed was recorded in the Office of the Register of Deeds
on October 6, 1960.
Sometime prior to October 6, 1959 Alfredo G. Gaborro trial Jose P. Dizon met. Gaborro became interested in the lands
of Dizon. Dizon originally intended to lease to Gaborro the property which had been lying idle for some time. But as the
mortgage was already foreclosed by the DPB trial the bank in fact purchased the lands at the foreclosure sale on May
26, 1959, they abandoned the projected lease. They then entered into the following contract on October 6, 1959
captioned trial quoted, to wit:
DEED OF SALE WITH ASSUMPTION
OF MORTGAGE

KNOW ALL MEN BY THESE PRESENTS:

This DEED OF SALE WITH ASSUMPTION OF MORTGAGE, made trial executed at the City of Manila,
Philippines, on this 6th day of October, 1959 by trial between
JOSE P. DIZON, of legal age, Filipino, married to Norberta Torres, with residence trial postal address at
Mabalacat, Pampanga, hereinafter referred to as the VENDOR.
ALFREDO G. GABORRO, likewise of legal age, Filipino, married to Pacita de Guzman, with residence trial
postal address at 46, 7th St., Gilmore Avenue, Quezon City, hereinafter referred to as the VENDEE,
W I T N E S S E T H: That
WHEREAS, the VENDOR is the registered owner of three (3) parcels of land covered by Transfer
Certificate of Title No. 15679 of the land records of Pampanga. situated in the Municipality of
Mabalacat, Province of Pampanga, trial more particularly described trial bounded as follows:
1. A parcel of land (Lot No. 188 of the Cadastral Survey of Mabalacat), with the improvements thereon,
situated in the Municipality of Mabalacat, Bounded on the NE by Lot No 187: on the SE., by Lots Nos.
183, 189, 191 trial 192; on the SW by Lot No. 192 trial on the NW by the unimproved provincial road to
Magalang. Containing an area of TWO HUNDRED AND TWENTY ONE THOUSAND ONE HUNDRED
SEVENTY TWO SQUARE METERS (221,172), more or less.
2. A parcel of land (Lot No. 193 of the Cadastral Survey of Mabalacat), with the improvements thereon,
situated in the Municipality of Mabalacat. Bounded on the NE., by a road trial Lots Nos. 569,570 trial
571; on the SE., by Lot No. 571 trial the unimproved road to Magalang, on the SW by a road; trial on
the NE., by a road trial the Sapang Pritil Containing an area of NINE HUNDRED SEVENTY EIGHT
THOUSAND SEVEN HUNDRED AND SEVENTEEN SQUARE METERS (978,717), more or less.
3. A parcel of land (Lot No. 568 of the Cadastral Survey of Mabalacat), with the improvements thereon,
situated in the Municipality of Mabalacat. Bounded on the NE., by Lot No. 570, on the SE SW trial NW
by roads. Containing an area of ONE HUNDRED FIVE THOUSAND NINE HUNDRED AND TWENTY ONE
SQUARE METERS (105,921), more or less,
WHEREAS, the above-described properties are presently mortgaged (first mortgage) to the
Development Bank of the Philippines (,formerly Rehabilitation Finance Corporation) to secure the
payment of a loan, plus interest, of THIRTY EIGHT THOUSAND PESOS ONLY (P38,000.00), Philippine
currency, as evidenced by a deed of mortgage for- P... dated ... which deed was ratified trial
acknowledged before Notary Public of Manila, Mr. ... as Doc. No. Page No. Reg. No. Series of 196 ... ;
WHEREAS, the aforesaid properties are likewise mortgage (second mortgage) to the Philippine National
Bank to secure the payment of a loan of NINETY THREE THOUSAND EIGHT HUNDRED THIRTY ONE
PESOS & 91/100 (P93,831.91), Philippine Currency, plus interest up to August 13, 1957, as evidenced
by deed of Mortgage for P............. dated................... which deed was ratified trial acknowledged before
Notary Public of Manila, Mr, I . I as Doc. No............ Page No.......... Reg. No. Series of 196........... ;
WHEREAS, the VENDOR, has offered to sell trial the VENDEE is willing to purchase the above-described
properties for ONE HUNDRED THIRTY ONE THOUSAND EIGHT HUNDRED THIRTY ONE PESOS & 91 /100
(P131,831.91), Philippine Currency, under the terms trial conditions herein below set forth;
NOW, THEREFORE, for- trial in consideration of the above premises trial the amount of ONE HUNDRED
THIRTY ONE THOUSAND EIGHT HUNDRED THIRTY ONE PESOS & 91/100 (P131,831.91), Philippine
Currency, in hand paid in cash by the VENDEE unto the VENDOR, receipt whereof is hereby
acknowledged by the VENDOR to his entire trial full satisfaction, trial the assumption by the VENDEE of
the entire mortgage indebtedness, both with the Development Bank of the Philippines trial the
Philippine National Bank above mentioned, the VENDOR does by these presents, sell, transfer trial
convey, as he had sold, transferred, trial conveyed, by way of absolute sale, perpetually trial forever,
unto the VENDEE, his heirs, successors trial assigns. above-described properties, with all the
improvements thereon, free from all liens trial encumbrances of whatever nature. except the preexisting mortgage obligations with the Development Bank of the Philippines trial the Philippine
National Bank aforementioned. The VENDOR does hereby warrant title, ownership trial possession over
the properties herein sold trial conveyed, trial binds himself to defend the same from any trial all
claimants.
That the VENDEE, does by these presents, assume as he has assumed, under the same terms trial
conditions of the mortgage contracts dated ... and ... of the mortgage indebtedness of the VENDOR in
favor of the Development Bank of the Philippines trial the Philippine National Bank, respectively, as if
the aforesaid documents were personally executed by the VENDEE trial states trial reiterates all the
terms trial conditions stipulated in said both documents, making them to all intent trial purposes, parts
hereof by reference.

IN WITNESS WHEREOF, the VENDOR and the VENDEE together with their instrumental witnesses, have
signed this deed of the place, date, month trial year first above written.
(Sgd.) JOSE P. DIZON (Sgd.) ALFREDO G. GABORRO
Vendor Vendee
Signed in the Presence of:
(Sgd.) (Illegible) (Sgd.) (Illegible)
(Acknowledgment Omitted)
The second contract executed the same day, October 6, 1959 is called Option to Purchase Real Estate, trial is in the
following wise trial manner:
OPTION TO PURCHASE REAL ESTATE
KNOW ALL MEN BY THESE PRESENTS:
That 1, ALFREDO G. GABORRO, of legal age, Filipino, married to Pacita de Guzman, with residence trial
postal address at 46, 7th St., Gilmore Ave., Quezon City, for- valuable consideration, do hereby give to
JOSE P. DIZON, of legal age, Filipino, married to Norberta Torres, resident of Mabalacat, Pampanga, his
heirs, successors and assigns, the option of repurchasing the following described properties:
TRANSFER CERTIFICATE OF TITLE
NO. 15679, PROVINCE OF PAMPANGA
1. A parcel of land (Lot No. 188 of Cadastral Survey of Mabalacat, Pampanga containing an area of
(211,172) more or less.
2. A parcel of land (Lot No. 193 of the Cadastral Survey of Mabalacat, Pampanga), containing an area
of (978,172) more or less.
3. A parcel of land (Lot No. 568 of the Cadastral Survey of Mabalacat, Pampanga containing an area of
(105,921), more or less. which I acquired from the said Jose P. Dizon by purchase by virtue of that
document entitled "Deed of Sale with Assumption of Mortgage" dated October 6, 1959, acknowledged
by both of us before Notary Public of Manila GREGORIO SUMBILIO as DOC. No. 342, Page No. 70, Reg.
No. VII Series of 1959.
Said option shall be valid trial effective within the period comprises from January, 1965 to December
31, 1970, inclusive, upon payment of the amount of ONE HUNDRED THIRTY ONE THOUSAND EIGHT
HUNDRED THIRTY ONE PESOS & 91/100 (?131,831.91), Philippine Currency, plus an interest of eight
per centum (8%) thereof, per annum. This is without prejudice at any time to the payment by Mr. Dizon
of any partial amount to be applied to the principal obligation, without any way disturbing the
possession and/or ownership of the above properties since only full payment can effect the necessary
change.
In the event that Mr. Jose P. Dizon may be able to find a purchaser for- the foregoing properties on or
the fifth year from the date the execution of this document, the GRANTEE, Mr. JOSE P. DIZON, may do
so provided that the aggregate amount which was Paid to Development Bank of the Philippines trial to
the Philippine National Bank together with the interests thereon at the rate of 8% shall be refunded to
the undersigned.
Furthermore, in case Mr. Jose P. Dizon shall be able to find a purchaser for- the said properties, it shall
be his duty to first notify the undersigned of the contemplated sale, naming the price trial the
purchaser therefor, trial awarding the first preference in the sale hereof to the undersigned.
IN WITNESS WHEREOF, I have hereunto signed these presents at the City of Manila, on this 6th day of
October, 1959.
(Sgd.) ALFREDO G. GABORRO
CONFORME:
(Sgd.) JOSE P. DIZON

SIGNED IN THE PRESENCE OF:

(Acknowledgment Omit)
The sum of P131,813.91 which purports to be the consideration of the sale was not actually paid by Alfredo G. Gaborro
to the petitioner. The said amount represents the aggregate debts of the petitioner with the Development Bank of the
Philippines trial the Philippine National Bank.
After the execution of said contracts, Alfredo G. Gaborro took possession of the three parcels of land in question.
On October 7, 1959, Gaborro wrote the Development Bank of the Philippines a letter (Exh. J), as follows:
Sir:
This is with reference to your mortgage lien of P38,000.00 more or less over the properties more
particularly described in TCT No. 15679 of the land records of Pampanga in the name of Jose P. Dizon.
In this connection, we have the honor to inform you that pursuant to a Deed of Sale with Assumption of
Mortgage executed on October 6, 1959 by Jose P. Dizon in my favor, copy of which is hereto attached,
the ownership of the same has been transferred to me subject of course to your conformity to the
assumption of mortgage. As a consequence of the foregoing document, the obligation therefore of
paying your goodselves the total amount of indebtedness has shifted to me
Considering that these agricultural properties have not been under cultivation for- quite a long time, I
would therefore request that, on the premise that the assumption of mortgage would be agreeable to
you, that I be allowed to pay the outstanding obligation, under the same terms trial conditions as
embodied in the original contract of mortgage within ten (10) years to be divided in 10 equal annual
amortizations. I am enclosing herewith a check in the amount of P3,609.95 representing 10% of the
indebtedness of Jose P. Dizon to show my honest intention in assuming the mortgage obligation to
you ...
The Board of Governors of the DBP, in its Resolution No. 7066 dated October 21, 1959 approved the offer of Gaborro
but said Board required him to pay 20% of the purchase price as initial payment, (Exh. D) Accordingly, on July 11,
1960, the DBP trial Gaborro executed a conditional sale of the properties in consideration of the sum of P36,090.95
(Exh. C) payable 20% down trial the balance in 10 years in the yearly amortization plan at 8% per annum.
On January 7, 1960, Dizon assigned his right of redemption Lo Gaborro in an instrument (Exh. 9) entitled:
ASSIGNMENT OF RIGHT OF REDEMPTION
AND ASSUMPTION OF OBLIGATION
KNOW ALL MEN BY THESE PRESENTS:
This instrument, made trial executed by trial between JOSE P. DIZON, married to Norberta P. Torres,
Filipino, of legal age, with residence trial postal address at Mabalacat, Pampanga. hereinafter referred
to as the ASSIGNOR trial ALFREDO G. GABORRO, married to Pacita de Guzman, likewise of legal age,
Filipino, with residence trial postal address at 46, 7th Street, Gilmore Ave., Quezon City, hereinafter
referred to as the ASSIGNEE,
WITNESSETH:
WHEREAS, the Assignor is the owner trial mortgagor of three (3) parcels agricultural land together with
all the improvements existing thereon trial more particularly described trial bounded as follows:
TRANSFER CERTIFICATE OF TITLE NO. 1567
PROVINCE OF PAMPANGA
1. A parcel of land (Lot No. 188 of the Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the Municipality of Mabalacat. Bounded on the NE
by Lot No. 187: on the SE. by Lots Nos. 183, 189, 191 trial 192; on the SW. by Lot No.
192; trial on the NW by the unimproved provincial road to Magalan. Containing an area
of two hundred twenty-one thousand one hundred trial seventy two square meters
(221,172), more or less.
2. A parcel of land (Lot No. 193 of the Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the Municipality of Mabalacat. Bounded on the NE.
by a road trial Lots Nos. 569, 570 trial 571; on the SE. by Lot No. 571 trial the

unimproved road to Magalan-, on the SW. by a road; trial on the NW by a road trial the
Sapang Pritil Containing an area of nine hundred seventy eight thousand seven
hundred and seven hundred square meters (978,717), more or less.
3. A parcel of Land (Lot No. 568 of the Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the Municipality of Mabalacat, Bounded on the NE.
by Lot No. 570; and on the SE., SW. and NW. by roads. Containing an area of one
hundred five thousand nine hundred and twenty-one square meters (105,921), more or
less.
WHEREAS, the above described properties were mortgaged with the Rehabilitation Finance
Corporation, now Development Bank of the Philippines, which mortgage has been foreclosed on May
26, 1959;
AND WHEREAS, the herein Assignor has still the right to redeem the said properties from the said
Development Bank of the Philippines within a period of one (1) year counted from the date of
foreclosure of the said mortgage.
NOW, THEREFORE, for ......................................... trial other valuable considerations, receipt whereof is
hereby acknowledged by the Assignor from the Assignee, The herein Assignor does hereby transfer
trial assign to the herein Assignee, his heirs, successors trial assigns the aforesaid right to redeem the
aforementioned properties above described.
That with this document the herein Assignor relinquishes any and all rights to the said properties
including the improvements existing thereon.
That the Assignee, by these presents, hereby assumes the obligation in favor of the d Development
Bank of the Philippines, as Paying whatever legal indebtedness the Assignor has with the d B in
connection with the transaction regarding the hove mentioned Properties subject to the file and
conditions that the said Bank may require and further recognizes the second mortgage in favor Of the
Philippine National Bank.
IN WITNESS WHEREOF, the parties have hereunto set their hands in the City of Manila, Philippines this
--------- day of - - - - - -1959.
(Sgd-) JOSE P. DIZON (Sgd.) ALFREDO G. GABORRO
Assignor (Assignee)
(Acknowledgment Omitted)
After the execution of the conditional e to him Gaborro made several payments to the DBP and PNB. He introduced
improvements, cultivated the kinds raised sugarcane and other crops and appropriated the produce to himself. He will
paid the land taxes thereon.
On July 5, 1961, Jose P. Dizon through his lawyer, Atty. Leonardo Abola, wrote a letter to Gaborro informing him that he
is formally offering reimburse Gaborro Of what he paid to the banks but without, however, tendering any cash, and
demanding an accounting of the income and of the pro contending that the transaction they entered into was one of
antichresis. Gaborro did not accede to the demands of the petitioner, whereupon, on JULY 30, 1962, Jose P. Dizon
instituted a complaint in the Court of First Instance of Pampanga, Gaborro, alleging that the documents Deed of Sale
With Assumption of Mortgage and the Option to Purchase Real Estate did not express the true intention and agreement
bet. between the parties. Petitioner Dizon, as Plaintiff below, contended that the two deeds constitute in fact a single
transaction that their real agreement was not an absolute e of the d of land but merely an equitable mortgage or
conveyance by way of security for the reimbursement or refund by Dizon to Gaborro of any and all sums which the
latter may have paid on account of the mortgage debts in favor of the DBP and the PNB. Plaintiff prayed that
defendant Gaborro be ordered to accept plaintiff's offer to reimburse him of what he paid to the banks; to surrender
the possession of the lands to plaintiff; to make an accounting of all the fruits, produce, harvest and other income
which he had received from the three (3) parcels of land; and to pay the plaintiff for the loss of two barns and for
damages.
In its answer, the DBP specifically denied the material averments of the complaint and stated that on October 6, 1959,
the plaintiff Dizon was no longer the owner of the land in question because the DBP acquired them at the extrajudicial
foreclosure sale held on May 26, 1959, and that the only right which plaintiff possessed was a mere right to redeem
the lands under Act 3135 as amended.
Defendant Alfredo G. Gaborro also answer, denying the material averments of the complaint, stating that the "Deed of
Sale with Assumption of Mortgage" expresses the true agreement of the parties "fully, truthfully and religiously" but
the Option to Purchase Real Estate" does not express the true intention of the parties because it was made only to

protect the reputation of the plaintiff among his townmates, and even in the supposition that said option is valid, the
action is premature. He also filed a counterclaim for damages, which plaintiff denied.
The issues having been joined, a pre-trial was held and the following stipulation of facts admitted by the parties was
approved by the Court in the following order dated February 22, 1963:
ORDER
At today's initial trial the following were present: Mr. Leonardo Abola, for the plaintiff; Mr. Carlos
Antiporda, for the defendant Alfredo Gaborro; and Mr. Virgillo Fugoso, for the Development Bank of the
Philippines:
The parties brave stipulated on the following facts:
1. That Annex A attached to the complaint is marked Exhibit
A- Stipulation. The parties have admitted the due execution, authenticity and genuineness of said
Exhibit A-Stipulation. This fact has been admitted by all the three parties.
2. That the defendant Gaborro executed Annex B, which is marked Exhibit B-Stipulation. This fact has
been admitted only between plaintiff and defendant Gaborro.
3. That the three parcels of land referred to in paragraph 3 of the complaint, on or before October 6,
1959, were subject to a first mortgage lien in favor of the Development Bank of the Philippines,
formerly Rehabilitation Finance Corporation, to secure payment of a loan obtained by the plaintiff Jose
P. Dizon in the original sum of P38,000.00 plus interest, which has been assumed by defendant
Gaborro by virtue of a document, Exhibit A-Stipulation, and also subject to a second mortgage lien in
favor of the Philippine National Bank to secure the payment of a loan in the sum of P93,831.91 plus
interest up to August 30, 1951, which mortgage liens were duly annotated on TCT 15679. This fact has
been admitted by the plaintiff and defendant Gaborro.
4. In respect to the foreclosure of the first mortgage referred to above, it was admit that the same was
foreclosed on May 26, 1959, the second mortgage has not been admitted nor foreclosed.
5. That the Development Bank of the Philippines admits that the first mortgage referred to above was
foreclosed on May 26, 1959 under the provision,,; of Public Act No- 3135, as amended.
6. That subsequently the Development Bank and the defendant Gaborro executed a document entitled
Conditional Sale over the same parcels of land referred to in paragraph 3 of the complaint, and copy
thereof will be furnished by the Development Bank of the Philippines and marked Exhibit C-Stipulation.
7. That on or before October 6, 1960, TCT No. 15679 of the Register of D of Pampanga in the name of
Jose P. Dizon covering the three parcels of land referred to in the complaint was cancelled and in lieu
thereof TCT NO. 24292 of the Register of Deeds of Pampanga was issued in the name of the
Development Bank of the Philippines. This fact has been admitted by all the parties.
8. That after the execution of the deed of conditional sale, certain payments were made by the
defendant Gaborro to the Development Bank, the exact amount to be determined later and receipts of
payments to be also exhibited later. This fact has been admitted by all the three parties.
9. That since October 6, 1959, the defendant Gaborro has made several payments to the PNB in the
amounts appearing on the receipts which will be shown later, such payments being made on account
of the sum of P38,831.91. The payment was assumed by said - defendant Gaborro. This fact has been
admitted by plaintiff and defendant Gaborro only.
10. That since the execution of Exhibits A and B-Stipulation, it,, defendant Gaborro has been and still is
in the actual possession f the three parcels of land in question and he is actually cultivating the same
and that the land taxes thereon have been paid by said defendant Gaborro, the amounts of said taxes
appearing on the official receipts to be shown later. This fact has been admitted by plaintiff and
defendant Gaborro only.
11. That since defendant Gaborro took possession of the lands in question, he has been appropriating
all the fruits produced and income of said lands without giving to the plaintiff any share hereof. This
fact has been admitted by plaintiff and defendant Gaborro only.
Let a copy of this order be served upon the plaintiff, defendant Gaborro and the Development Bank of
the Philippines with the understanding that, if, within fifteen (15) days, none of the parties questions
the correctness of The facts set forth above. this stipulation of facts shall be conclusive upon the
parties interested in this case.

Set the trial on the controversial facts on April 18, 1963 at 13:00 clock in the morning.
Paragraphs 3 and 10 of the above quoted order were deleted in an order dated July 26, 1963.
The records disclose that during the pendency of the case in the trial court, motions were filed by the plaintiff for the
appointment of a receiver of the properties but all were denied. plaintiff also reiterated the same motion before the
appellate court which, however, dismissed the same, reserving to him the right to file in the trial court. Plaintiff did file
but with the same result. certiorari proceedings were resorted to in the Court of Appeals in CA-G.R. No. SP-01403
entitled "Jose P. Dizon vs. Hon. Felipe Buencamino, et al." which the respondent court denied.
After trial the court held that the true agreement between Jose P. Dizon, the plaintiff therein, and the defendant Alfredo
G. Gaborro is that the defendant would assume and pay the indebtedness of the plaintiff to the Development Bank of
the Philippines and the Philippine National Bank, and in consideration therefor, the defendant was given the possession
and enjoyment of the properties in question until the plaintiff shall have reimbursed to defendant fully the amount of
P131,831.91 plus 8% interest per annum.
Accordingly, on March 14, 1970, the lower court rendered judgment, the dispositive part of which reads:
IN VIEW OF THE FOREGOING, the documents entitled 'Deed of Sale with Assumption of
Mortgage'(Exhibit A-Stipulation) and 'Option to Purchase Real Estate' (Exhibit B-Stipulation) are hereby
reformed to the extent indicated above. However, since this action was filed before the period allowed
the plaintiff to redeem his property, the prematurity of this action aside from not being principally
alleged in the complaint, deters this Court from ordering further reliefs and remedies. The counterclaim
of the defendant is dismissed.
The plaintiff's motion for new trial and for reconsideration and motion for admission of supplemental complaint having
been denied for lack of merit, on June 6, 1970, plaintiff appealed to the Court of Appeals, which. however, affirmed the
decision with the modification that the plaintiff-appellant has the right to refund or reimburse the defendant-appellee
the sum of P131,831.91 with interest at 8% per annum from October 6, 1959 until full payment, said right to be
exercised within one (1) year from the date the judgment becomes final, with the understanding that, if he fails to do
so within the said period, then he is deemed to have lost his right over the lands forever.
Petitioner's motion for reconsideration and/or rehearing having been denied by the Court of Appeals, hence the
present petition for review on certiorari. The petitioner assigns the following errors, to wit:
I. The Court of Appeals, like the lower court, erred in not holding that upon established facts and
undisputed documentary evidence, the deed of sale with assumption of mortgage (Exhibit AStipulation) constitutes an equitable mortgage or conveyance to secure petitioner's obligation to
reimburse or refund to defendant Alfredo Gaborro any and all sums to the extent of P131,831.91, paid
by said defendant in total or partial satisfaction of petitioner's mortgage debts to the DBP and the PNB.
In this connection, the Court of Appeals erred:
(A) In not finding that the petitioner was the lawful owner of the lands in question:
(B) In not finding that the deed of sale in question is not a real and unconditional sale;
and
(C) In not holding that the option to purchase real estate (Exhibit B-Stipulation is
conclusive evidence that the transaction in question is in fact an equitable mortgage.
II. The Court of Appeals also erred in finding that the instrument entitled 'Assignment of Right of
Redemption and Assumption of Obligation' is conclusive evidence that the real transaction Evidenced
by the 'Deed of Sale with Assumption of Mortgage' is not an equitable mortgage. In this connection the
said court also erred or at least committed a grave abuse of discretion:
(A) In not finding that the said deed of assignment is in fact a mere reiteration of the
terms and condition of the deed of sale;
(B) In finding that the price or consideration of The aforesaid assignment. of right of
redemption consisted of 300 cavans of palay delivered by Mrs. Gaborro to the
petitioner; and
(C) In finding that defendant Gaborro purchased the lands in question by virtue of the
aforementioned deed of assignment.
III. The, Court of Appeals, like the trial court, also erred in not finding that the estate of Alfredo G.
Gaborro is under obligation to render an accounting of all the produce, fruits and other income of the
lands in question from October 6, 1959, and to reconvey the said lands to the herein petitioner. In to
connection, the said court also erred:

(A) In not holding that as a mortgagee in possession the Gaborro estate has the
obligation to either render an accounting of the produce or fruits of the lands, or to pay
rentals for the occupation of said lands;
(B) In not finding that the Gaborro estate has the obligations to reconvey the lands in
controversy to the herein petitioner, upon payment of the balance due from him after
deducting either the net value of the produce or fruits of the Said lands or the rentals
thereof,
(C) In not finding that further reliefs or remedies may be granted the herein petitioner;
and
(D) In not ordering the admission of herein petitioners 'Supplemental Complaint' dated
April 30, 1970.
IV. The Court of Appeals finally erred in not reversing the decision of the trial court, and in not
rendering judgment declaring that the deed of sale with assumption of mortgage (Exhibit A Stipulation)
is in fact an equitable mortgage; and in not ordering the Gaborro estate either to render an accounting
of all the produce or fruits of the lands in question or to pay rentals for the occupation thereof, from
October 6, 1959; and in not ordering the estate of Alfredo G. Gaborro to reconvey, transfer and assign
unto the petitioner the aforementioned lands.
The two instruments sought to be reformed in this case ap pear to stipulate rights and obligations between the parties
thereto Pertaining to and involving parcels of land that had already beer foreclosed and sold extrajudicially, and
purchased by the mortgage creditor, a degree party. It becomes, therefore, necessary to determine the legality of said
rights and obligation arising from the foreclosure and e pro. proceedings only between the two contracting parties to
the instruments executed between them but also in the so far a agreement affects the rights of the degree panty, the
purchase Bank.
Act 3135, Section 6 as amended by Act 4118, under which the Properties were extrajudicially foreclosed and sold,
provides that:
Sec. 6. In all cases in which an extrajudicial rule is made under the special power hereinbefore referred
to, the debtor, his successors in interest or any judicial creditor or judgment creditor of e 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 or 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 consistent with the provisions of this Act.
Under the Revised Rules of Court, Rule 39, Section 33, the judgment debtor remains in possession of the property
foreclosed and sold, during the period of redemption. If the judgment debtor is in possession of the property sold, he is
entitled to retain it and receive the fruits, the purchaser not being entitled to such possession. (Riosa v. Verzosa, 26
Phil. 86; Velasco v. Rosenberg's Inc., 32 Phil. 72; Pabico v. Pauco 43 Phil. 572; Power v. PNB, 54 Phil. 54; Gorospe v.
Gochangco L-12735, Oct. 30, 1959).
A judgment debtor, whose property is levied on execution, may transfer his right of redemption to any one whom he
may desire. The right to redeem land sold under execution within 12 months is a property right and may be sold
voluntarily by its owner and may also be attached and sold under execution (Magno v. Viola and Sotto, 61 Phil. 80).
Upon foreclosure and sale, the purchaser is entitled to a certificate of sale executed by the sheriff. (Section 27, Revised
Rules of Court) After the termination of the period of redemption and no redemption having been made, the purchaser
is entitled to a deed of conveyance and to the possession of the properties. (Section 35, Revised Rules of Court). The
weight of authority is to the effect that the purchaser of land sold at public auction under a writ of execution only has
an inchoate right in the property, subject to be defeated and terminated within the period of 12 months from the date
of sale, by a redemption on the part of the owner. Therefore, the judgment debtor in possession of the property is
entitled to remain therein during the period allowed for redemption. (Riosa v. Verzosa. 26 Phil, 86; 89; Gonzales v.
Calimbas, 51 Phil. 355.)
In the case before Us, after the extrajudicial foreclosure and sale of his properties, petitioner Dizon retained the right to
redeem the lands, the possession, use and enjoyment of the same during the period of redemption. And these are the
only rights that Dizon could legally transfer, cede and convey unto respondent Gaborro under the instrument
captioned Deed of Sale with Assumption of Mortgage (Exh. A-Stipulation), likewise the same rights that said
respondent could acquire in consideration of the latter's promise to pay and assume the loan of petitioner Dizon with
DBP and PNB.
Such an instrument cannot be legally considered a real and unconditional sale of the parcels of land, firstly, because
there was absolutely no money consideration therefor, as admittedly stipulated the sum of P131,831.91 mentioned in
the document as the consideration "receipt of which was acknowledged" was not actually paid; and secondly, because

the properties had already been previously sold by the sheriff at the foreclosure sale, thereby divesting the petitioner
of his full right as owner thereof to dispose and sell the lands.
In legal consequence thereby, respondent Gaborro as transferee of these certain limited rights or interests under Exh.
A-Stipulation, cannot grant to petitioner Dizon more that said rights, such ac the option Co purchase the lands as
stipulated in the document called Option to Purchase Real Estate (Exhibit B-Stipulation), This is necessarily so for the
reason that respondent Gaborro did not purchase or acquire the full title and ownership of the properties by virtue of
the Deed of Sale With Assumption of Mortgage (Exh. A Stipulation), earlier executed between them which We have
ruled out as an absolute sale. The only legal effect of this Option Deed is the grant to petitioner the right to recover the
properties upon reimbursing respondent Gaborro of the total sums of money that the latter may have paid to DBP and
PNB on account of the mortgage debts, the said right to be exercised within the stipulated 5 years period.
In the light of the foreclosure proceedings and sale of the properties, a legal point of primary importance here, as well
as other relevant facts and circumstances, We agree with the findings of the trial and appellate courts that the true
intention of the parties is that respondent Gaborro would assume and pay the indebtedness of petitioner Dizon to DBP
and PNB, and in consideration therefor, respondent Gaborro was given the possession, the enjoyment and use of the
lands until petitioner can reimburse fully the respondent the amounts paid by the latter to DBP and PNB, to accomplish
the following ends: (a) payment of the bank obligations; (b) make the lands productive for the benefit of the possessor,
respondent Gaborro, (c) assure the return of the land to the original owner, petitioner Dizon, thus rendering equity and
fairness to all parties concerned.
In view of all these considerations, the law and Jurisprudence, and the facts established. We find that the agreement
between petitioner Dizon and respondent Gaborro is one of those inanimate contracts under Art. 1307 of the New Civil
Code whereby petitioner and respondent agreed "to give and to do" certain rights and obligations respecting the lands
and the mortgage debts of petitioner which would be acceptable to the bank. but partaking of the nature of the
antichresis insofar as the principal parties, petitioner Dizon and respondent Gaborro, are concerned.
Mistake is a ground for the reformation of an instrument which there having been a meeting of the minds of The
parties o a contract, their true intention is not expressed in the instrument purporting to embody the agreement, and
one of the parries may ask for such reformation to the end that such true intention may be expressed. (Art. 1359, New
Civil code). When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement,
said instrument may be reformed. (Art. 1361, New Civil Code.) It was a mistake for the parties to execute the Deed of
Sale With Assumption of Mortgage and the Option to Purchase Real Estate and stand on the literal meaning of the file
and stipulations used therein.
The instruments must, therefore, be reformed in accordance with the intention and legal rights and obligations of the
parties the petitioner, the respondent and the Banks. We agree with the reformation decreed by the trial and
appellate courts, but in the sense that petitioner Jose P. Dizon has the right to reacquire the three parcels of land within
the one-year period indicated below by refunding or reimbursing to respondent Alfredo G. Gaborro or the Judicial
Administratrix of his Estate whatever amount the latter has actually paid on account of the principalonly, of the loans
of Dizon with the DBP and PNB, excluding the interests and land taxes that may have been paid or may have accrued,
on duly certified financial statements issued by the said banks.
On the issue of the accounting of the fruits, harvests and other income received from the three parcels of land from
October 6, 1959 up to the present, prayed and demanded by Dizon of Gaborro or the Judicial Administratrix of the
latter's estate, We hold that in fairness and equity and in the interests of justice that since We have ruled out the
obligation of petitioner Dizon to reimburse respondent Gaborro of any interests and land taxes that have accrued or
been paid by the latter on the loans of Dizon with DBP and PNB, petitioner Dizon in turn is not entitled to an accounting
of the fruits, harvests and other income received by respondent Gaborro from the lands, for certainly, petitioner cannot
have both benefits and the two may be said to offset each other.
By virtue of the Option to Purchase Real Estate (Exh. B Stipulation) which on its face granted Dizon the option to
purchase the properties which must be exercise within the period from January, 1960 to December 31, 1965 but which
We held to be simply the grant of the right to petitioner Dizon to recover his properties within the said period, although
already expired by reasons and circumstances beyond his control, petitioner is entitled to a reconveyance of the
properties within a reasonable period The period of one year from the date of the finality of this judgment as laid down
by the Court of Appeals for the exercise of such right by petitioner Dizon appears fair and reasonable and We approve
the same.
Since We are not informed of the status of Dizon's loan of P93,831.91 with the Philippine National Bank which appears
to be on a subsisting basis, it is proper to indicate here how petitioner Dizon may exercise the right to a reconveyance
of the properties as herein affirmed, as follows:
(a) Dizon is granted the right to a reconveyance of the properties by reimbursing Gaborro (or his
estate) whatever amounts) the latter has actually paid on account of the principal only, of Dizon's
loans of P38,000.00 and P93,831.91 which the DBP and PNB, respectively, exclusive of the interests
that may have accrued thereon or may have been paid by Gaborro, on the basis of duly certified
statements issued by said banks;

(b) Any outstanding balance due on Dizon's original principal loan of P38,000.00 with the Development
Bank of the Philippines assumed by Gaborro and on Dizon's original principal loan of 93,831.91 with
the PNB shag be deducted from the above-fixed reconveyance price payable to Gaborro, in order to
enable Dizon to pay off the said mortgage loans directly to the said banks, in accordance with file
mutually agreed upon with them by Dizon;
(c) In other words, the maximum reconveyance price that Dizon is obligated to pay is the total sum of ?
131,831.91 (the sum total of the principals of his two original loans with the DBP and PNB), and should
the amounts due to the said banks exceed this total of P131,831.91 (because of delinquent interests
and other charges), nothing shall be due Gaborro by way of reimbursement and Dizon will thereupon
step into the shoes of Gaborro as owner-mortgagor of the properties and directly arrange with the
banks for the settlement of the amounts still due and payable to them, subject to the right of Dizon to
recover such amounts in excess of P131,831.91 from Gaborro by writ of execution in this case; and
(d) As already stated, Dizon is not entitled to an accounting of the fruits, harvests and other income
received by Gaborro from the land while Gaborro in turn is not entitled to the payment of any interests
on any amounts paid by him on account of the principal loans to the banks nor reimbursement of any
interests paid by him to the banks.
WHEREFORE, the judgment appealed from is hereby affirmed with the modification that petitioner Dizon is granted the
right within one year from finality of this decision to a reconveyance of the properties in litigation upon payment and
reimbursement to respondent estate of o G. Gaborro of the amounts actually paid by Gaborro or his estate on account
of the principal only of Dizon's original loans with the Development Bank of the Philippines and Philippine National
Bank in and up to the total amount of P131,831.91, under the terms and conditions set forth in the preceding
paragraph with subparagraphs (a) to (d), which are hereby incorporated by reference as an integral part of this
judgment, and upon the exercise of such right, respondent estate shall forthwith execute the corresponding deed of
reconveyance in favor of petitioner Dizon and deliver possession of the properties to him. Without pronouncement as
to costs.

CHATTEL MORTGAGE
G.R. No. 179756

October 2, 2009

RIZAL COMMERCIAL BANKING CORPORATION, Petitioner,

vs.
ROYAL CARGO CORPORATION, Respondent.
DECISION
CARPIO MORALES, J.:
Terrymanila, Inc.1 (Terrymanila) filed a petition for voluntary insolvency with the Regional Trial Court (RTC) of Bataan on
February 13, 1991.2 One of its creditors was Rizal Commercial Banking Corporation (petitioner) with which it had an
obligation of P3 Million that was secured by a chattel mortgage executed on February 16, 1989. The chattel mortgage
was duly recorded in the notarial register of Amado Castano, a notary public for and in the Province of Bataan. 3

Royal Cargo Corporation (respondent), another creditor of Terrymanila, filed an action before the RTC of Manilafor
collection of sum of money and preliminarily attached "some" of Terrymanilas personal properties on March 5, 1991 to
secure the satisfaction of a judgment award of P296,662.16, exclusive of interests and attorneys fees. 4
On April 12, 1991, the Bataan RTC declared Terrymanila insolvent.
On June 11, 1991,5 the Manila RTC, by Decision of even date, rendered judgment in the collection case in favor of
respondent.
In the meantime, petitioner sought in the insolvency proceedings at the Bataan RTC permission to extrajudicially
foreclose the chattel mortgage which was granted by Order of February 3, 1992. 6 It appears that respondent, together
with its employees union, moved to have this Order reconsidered but the motion was denied by Order of March 20,
1992 Order.7
The provincial sheriff of Bataan thereupon scheduled on June 16, 1992 the public auction sale of the mortgaged
personal properties at the Municipal Building of Mariveles, Bataan. At the auction sale, petitioner, the sole bidder of the
properties, purchased them for P1.5 Million. Eventually, petitioner sold the properties to Domingo Bondoc and
Victoriano See.8
Respondent later filed on July 30, 1992 a petition before the RTC of Manila, docketed as Civil Case No. 92-62106,
against the Provincial Sheriff of the RTC Bataan and petitioner, for annulment of the auction sale(annulment of sale
case). Apart from questioning the inclusion in the auction sale 9 of some of the properties which it had attached,
respondent questioned the failure to duly notify it of the sale at least 10 days before the sale, citing Section 14 of Act
No. 1508 or the Chattel Mortgage Law which reads:
Sec. 14. The mortgagee, his executor, administrator or assign, may, after thirty days, from the time of condition
broken, cause the mortgaged property, or any part thereof, to be sold at public auction by a public officer at a public
place in the municipality where the mortgagor resides, or where the property is situated, provided at least ten days
notice of the time, place, and purpose of such sale has been posted at two or more public places in such municipality,
and the mortgagee, his executor, administrator or assignee shall notify the mortgagor or person holding under him
and the persons holding subsequent mortgages of the time and place of sale, either by notice in writing directed to
him or left at his abode, if within the municipality, or sent by mail if he does not reside in such municipality, at least
ten days previous to the date. (Emphasis and underscoring supplied),
it claiming that its counsel received a notice only on the day of the sale. 10
Petitioner, alleging that the annulment of sale case filed by respondent stated no cause of action, filed on December 3,
1992 a Motion to Dismiss11 which was, however, denied by Branch 16 of the Manila RTC. 12
Petitioner appealed the denial of the Motion to Dismiss via certiorari to the Court of Appeals, docketed as CA-G.R. SP
No. 31125. The appellate court dismissed the petition, by Decision of February 21, 1994, it holding that respondents
petition for annulment "prima facie states a sufficient cause of action and that the [trial court] in denying [herein
petitioner RCBCs] motion to dismiss, had acted advisedly and well within its powers and authority."13
Petitioner thereupon filed before the Manila RTC its Answer Ex Abundante Cautelam 14 in the annulment of sale case in
which it lodged a Compulsory Counterclaim by seeking P1 Million for moral damages, P500,000 for exemplary
damages, and P250,000 for attorneys fees. It thereafter elevated the case to this Court via petition for review
on certiorari, docketed as G.R. 115662. This Court by minute Resolution of November 7, 1994, 15 denied the petition for
failure to show that a reversible error was committed by the appellate court. 16
Trial on the merits of the annulment of sale case thereupon ensued. By Decision 17 of October 15, 1997, Branch 16 of
the Manila RTC rendered judgment in favor of respondent, disposing as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
1. ORDERING . . . RCBC to pay plaintiff [heein respondent Royal Cargo] the amount of P296,662.16
andP8,000.00 as reasonable attorneys fees.
2. No pronouncement as to costs.
3. DISMISSING the petition as to respondents Provincial Sheriff of Balanga, Bataan RTC;
SO ORDERED.
Both parties appealed to the Court of Appeals which, by Decision 18 of April 17, 2007, denied herein petitioners appeal
and partly granted herein respondents by increasing to P50,000 the attorneys fees awarded to it and additionally
awarding it exemplary damages and imposing interest on the principal amount payable to it. Thus it disposed:

WHEREFORE, the foregoing considered, the appeal instituted by appellant RCBC is hereby DENIED for lack of merit
while the appeal of appellant Royal Cargo is PARTLY GRANTED in that the amount of attorneys fees awarded by the
RTC is increased to P50,000.00.
In addition, RCBC is ordered to pay Royal Cargo the amount of P100,000.00 as exemplary damages. The principal
amount of P296,662.18 [sic] to be paid by RCBC to Royal Cargo shall likewise earn 12% interest per annum from the
time the petition was filed in the court a quo until fully paid. The rest of the decision is AFFIRMED.
SO ORDERED. (Emphasis and underscoring supplied)
In partly granting respondents appeal from the Decision of Br. 16 of RTC Manila, the appellate court ratiocinated that
respondent had a right to be "timely informed" of the foreclosure sale.
RCBCs citations [sic] of numerous rulings on the matter more than supports the fact that as mortgagee, it had
preferential right over the chattels subject of the foreclosure sale. This however is not at issue in this case. What is
being contested is the right of Royal Cargo to be timely informed of the foreclosure sale as it too had interests over the
mortgagee Terrymanila, Inc.s assets. We note that this matter had already been passed upon by this Court on
February 21, 1994 in CA-G.R. SP No. 31125 as well as by the Supreme Court on November 7, 1994 in G.R. No.
[1]15662. RCBC, by arguing about its preferential right as mortgagee in the instant appeal merelyreiterates what had
already been considered and ruled upon in earlier proceedings.
xxxx
Moreover, Section 14 of the Chattel Mortgage Law pertaining to the procedure in the foreclosure of chattel mortgages
provides, to wit:
xxxx
The above-quoted provision clearly requires that the mortgagee should notify in writing the mortgagor or person
holding under him of the time and place of the sale by personal delivery of the notice. Thus, RCBCs failure to comply
with this requirement warranted a ruling against it by the RTC. (Italics in the original; emphasis partly in the original;
underscoring supplied)
Its motion for reconsideration having been denied by the appellate court, 19 petitioner lodged the present petition for
review which raises the following issues:
I
WHETHER OR NOT RESPONDENT SHOULD HAVE BEEN GIVEN A TEN(10)-DAY PRIOR NOTICEOF THE JUNE 16, 1992
FORECLOSURE SALE
II
WHETHER OR NOT THE TRIAL COURT AND THE COURT OF APPEALS GRAVELY ERRED IN DECLARING PETITIONER GUILTY
OF CONSTRUCTIVE FRAUD IN FAILING TO PROVIDE RESPONDENT A TEN (10)-DAY PRIOR NOTICE OF THE FORECLOSURE
SALE.
III
WHETHER OR NOT THE PETITIONER WAS CORRECTLY HELD LIABLE TO PAY RESPONDENT P296,662.[16] PLUS
INTEREST THEREON, EXEMPLARY DAMAGES AND ATTORNEYS FEES.
IV
WHETHER OR NOT PETITIONER IS ENTITLED TO AN AWARD OF ATTORNEYS FEES.20(Underscoring supplied)
Petitioner faults the appellate court in applying res judicata by holding that respondents entitlement to notice of the
auction sale had already been settled in its Decision in CA G.R. SP No. 31125 and in this Courts Decision in G.R. No.
115662. For, so it contends, the decisions in these cases dealt on interlocutory issues, viz: the issue ofwhether
respondents petition for annulment of the sale stated a cause of action, and the issue of whether petitioners motion
to dismiss was properly denied.21
Arguing against respondents position that it was entitled to notice of the auction sale, petitioner cites the Chattel
Mortgage Law which enumerates who are entitled to be notified under Section 14 thereof. It posits that "[h]ad the law
intended to include in said Section an attaching creditor or a judgment creditor [like herein respondent], it could have
so specifically stated therein, since in the preceding section, Section 13, it already mentioned that a subsequent
attaching creditor may redeem."22

Petitioner goes on to fault the appellate court in echoing its ruling in CA-G.R. SP No. 31125 that Sections 1323and 14 of
the Chattel Mortgage Law should be read in tandem since the right given to the attaching creditor under Section 13
"would not serve its purpose if we were to exclude the subsequent attaching creditor from those who under Section 14
need to be notified of the foreclosure sale ten days before it is held." 24
Petitioner likewise posits that Section 13 permits a subsequent attaching creditor to "redeem" the mortgage
onlybefore the holding of the auction sale, drawing attention to Paray v. Rodriguez 25 which instructs that no right of
redemption exists over personal property as the Chattel Mortgage Law is silent thereon.26
Even assuming arguendo, petitioner contends, that there exists an obligation to furnish respondent a notice of the
auction sale 10 days prior thereto, "respondents judgment award of P296,662.16 with interest thereon at the legal
rate from the date of filing of the [c]omplaint and P10,000.00 as reasonable attorneys fees is very much less than the
P1.5 [m]illion bid of petitioner"27
As for the issue of constructive fraud-basis of the award of damages to respondent, petitioner maintains that both the
trial and appellate courts erred in concluding that it (petitioner) was the one which sent the notice of sheriffs sale to,
which was received on the day of the sale by, the counsel for respondent for, so it contends, it had absolutely no
participation in the preparation and sending of such notice. 28
In its Comment,29 respondent reiterates that the respective decisions of the appellate court and this Court in CA G.R.
SP No. 31125 and G.R. No. 115662 are conclusive between the parties, hence, "the right of [respondent] to a [ten-day]
notice has a binding effect and must be adopted in any other controversy between the same parties in which the very
same question is raised."30
And respondent maintains that the obligation to notify the mortgagor or person holding under him and the persons
holding subsequent mortgages falls upon petitioner as the mortgagee.
The petition is MERITORIOUS.
The respective decisions of the appellate court in CA G.R. SP No. 31125 and this Court in G.R. No. 115662 did not
conclusively settle the issue on the need to give a 10-day notice to respondent of the holding of the public auction sale
of the chattels.
The elements of res judicata are: (1) the judgment sought to bar the new action must be final; (2) the decision must
have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the disposition of the
case must be a judgment on the merits; and (4) there must be as between the first and second action, identity of
parties, subject matter, and causes of action.31
Res judicata has two concepts: (1) bar by prior judgment as enunciated in Rule 39, Section 47 (b) of the Rules of Civil
Procedure; and (2) conclusiveness of judgment in Rule 39, Section 47 (c).32
There is bar by prior judgment when, as between the first case where the judgment was rendered, and the second
case that is sought to be barred, there is identity of parties, subject matter, and causes of action. Where there is
identity of parties and subject matter in the first and second cases, but no identity of causes of action, there is
conclusiveness of judgment. 33 The first judgment is conclusive only as to those matters actually and directly
controverted and determined, not as to matters merely involved therein.
The Court of Appeals, in CA G.R. SP No. 31125, resolved only the interlocutory issue of whether the trial courts Order
of April 12, 1993 denying petitioners motion to dismiss respondents petition for annulment was attended by grave
abuse of discretion. The appellate court did not rule on the merits of the petition as to establish a controlling legal rule
which has to be subsequently followed by the parties in the same case. It merely held that respondents petition in the
trial court stated a sufficient cause of action. Its determination of respondents entitlement to notice of the public
auction sale was at best prima facie. Thus, the appellate court held:
In view of the above, We are of the considered view that the private respondents petition in the court a quo prima
facie states a sufficient cause of action and that the public respondent in denying the petitioners motion to dismiss,
had acted advisedly and well within its powers and authority. We, therefore, find no cause to annul the challenged
order issued by the respondent court in Civil Case No. 92-62106. (Underscoring in the original; emphasis and italics
supplied)34
An order denying a motion to dismiss is merely interlocutory and cannot give rise to res judicata, hence, it is subject to
amendments until the rendition of the final judgment.35
On respondents contention that petitioner, as mortgagee, had the duty to notify it of the public auction sale, the Court
finds the same immaterial to the case.
Section 13 of the Chattel Mortgage Law allows the would-be redemptioner thereunder to redeem the mortgaged
property only before its sale. Consider the following pronouncement in Paray: 36

[T]here is no law in our statute books which vests the right of redemption over personal property. Act No. 1508, or the
Chattel Mortgage Law, ostensibly could have served as the vehicle for any legislative intent to bestow a right of
redemption over personal property, since that law governs the extrajudicial sale of mortgaged personal property, but
the statute is definitely silent on the point. And Section 39 of the 1997 Rules of Civil Procedure, extensively relied upon
by the Court of Appeals, starkly utters that the right of redemption applies to real properties, not personal properties,
sold on execution. (Emphasis, italics and underscoring supplied)
Unmistakably, the redemption cited in Section 13 partakes of an equity of redemption, which is the right of the
mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage
but before the sale of the property37 to clear it from the encumbrance of the mortgage.38 It is not the same as right of
redemption which is the right of the mortgagor to redeem the mortgaged property after registration of the foreclosure
sale,39 and even after confirmation of the sale.40
While respondent had attached some of Terrymanilas assets to secure the satisfaction of a P296,662.16 judgment
rendered in another case, what it effectively attached was Terrymanilas equity of redemption. That respondents claim
is much lower than the P1.5 million actual bid of petitioner at the auction sale does not defeat respondents equity of
redemption. Top Rate International Services, Inc. v. IAC41 enlightens:
It is, therefore, error on the part of the petitioner to say that since private respondents lien is only a
total of P343,227.40, they cannot be entitled to the equity of redemption because the exercise of such
right would require the payment of an amount which cannot be less than P40,000,000.00.
When herein private respondents prayed for the attachment of the properties to secure their respective claims against
Consolidated Mines, Inc., the properties had already been mortgaged to the consortium of twelve banks to secure an
obligation of US$62,062,720.66. Thus, like subsequent mortgagees, the respondents liens on such properties became
inferior to that of banks, which claims in the event of foreclosure proceedings, must first be satisfied. The appellate
court, therefore, was correct in holding that in reality, what was attached by the respondents was
merely Consolidated Mines . . . equity of redemption. x x x x
xxxx
We, therefore, hold that the appellate court did not commit any error in ruling that there was no over-levy on the
disputed properties. What was actually attached by respondents was Consolidated Mines right or equity of
redemption, an incorporeal and intangible right, the value of which can neither be quantified nor equated with the
actual value of the properties upon which it may be exercised.42 (Emphasis, italics and underscoring supplied)
Having thus attached Terrymanilas equity of redemption, respondent had to be informed of the date of sale of the
mortgaged assets for it to exercise such equity of redemption over some of those foreclosed properties, as provided
for in Section 13.
Recall, however, that respondent filed a motion to reconsider the February 3, 1992 Order of the RTC Bataan-insolvency
court which granted leave to petitioner to foreclose the chattel mortgage, which motion was denied. Notably,
respondent failed to allege this incident in his annulment of sale case before the RTC of Manila.
Thus, even prior to receiving, through counsel, a mailed notice of the auction sale on the date of the auction sale itself
on June 16, 1992, respondent was already put on notice of the impending foreclosure sale of the mortgaged chattels. It
could thus have expediently exercised its equity of redemption, at the earliest when it received the insolvency courts
Order of March 20, 1992 denying its Motion for Reconsideration of the February 3, 1992 Order.
Despite its window of opportunity to exercise its equity of redemption, however, respondent chose to be technically
shrewd about its chances, preferring instead to seek annulment of the auction sale, which was the result of the
foreclosure of the mortgage, permission to conduct which it had early on opposed before the insolvency court. Its
negligence or omission to exercise its equity of redemption within a reasonable time, or even on the day of the auction
sale, warrants a presumption that it had either abandoned it or opted not to assert it. 43Equitable considerations thus
sway against it.
It is also not lost on the Court that as early as April 12, 1991, Terrymanila had been judicially declared insolvent.
Respondents recourse was thus to demand the satisfaction of its judgment award before the insolvency court as its
judgment award is a preferred credit under Article 224444 of the Civil Code. To now allow respondent have its way in
annulling the auction sale and at the same time let it proceed with its claims before the insolvency court would neither
rhyme with reason nor with justice.
Parenthetically, respondent has not shown that it was prejudiced by the auction sale since the insolvency court already
determined that even if the mortgaged properties were foreclosed, there were still sufficient, unencumbered assets of
Terrymanila to cover the obligations owing to other creditors, including that of respondents. 45
In any event, even if respondent would have participated in the auction sale and matched petitioners bid, the
superiority of petitioners lien over the mortgaged assets would preclude respondent from recovering the
chattels.1avvphi1

It has long been settled by this Court that "the right of those who acquire said properties should not and can
not be superior to that of the creditor who has in his favor an instrument of mortgage executed with the
formalities of the law, in good faith, and without the least indication of fraud. x x x. In purchasing it, with full
knowledge that such circumstances existed, it should be presumed that he did so, very much willing to respect the lien
existing thereon, since he should not have expected that with the purchase, he would acquire a better right than that
which the vendor then had. (Emphasis and underscoring supplied) 46
It bears noting that the chattel mortgage in favor of petitioner was registered more than two years before the issuance
of a writ of attachment over some of Terrymanilas chattels in favor of respondent. This is significant in determining
who between petitioner and respondent should be given preference over the subject properties. Since the registration
of a chattel mortgage is an effective and binding notice to other creditors of its existence and creates a real right or
lien that follows the property wherever it may be,47 the right of respondent, as an attaching creditor or as purchaser,
had it purchased the mortgaged chattel at the auction sale, is subordinate to the lien of the mortgagee who has in his
favor a valid chattel mortgage.48
Contrary then to the appellate courts ruling, petitioner is not liable for constructive fraud for proceeding with the
auction sale. Nor for subsequently selling the chattel. For foreclosure suits may be initiated even during insolvency
proceedings, as long as leave must first be obtained from the insolvency court 49 as what petitioner did.
The appellate courts award of exemplary damages and attorneys fees for respondent, given petitioners good faith, is
thus not warranted.
As for petitioners prayer for attorneys fees in its Compulsory Counterclaim, the same is in order, the dismissal of
respondents Complaint nowithstanding.50 Perkin Elmer Singapore v. Dakila Trading,51 citing Pinga v. Heirs of German
Santiago,52 enlightens:
It bears to emphasize that petitioners counterclaim against respondent is for damages and attorneys fees arising
from the unfounded suit. While respondents Complaint against petitioner is already dismissed, petitioner may have
very well incurred damages and litigation expenses such as attorneys fees since it was forced to engage legal
representation in the Philippines to protect its rights and to assert lack of jurisdiction of the courts over its person by
virtue of the improper service of summons upon it. Hence, the cause of action of petitioners counterclaim is not
eliminated by the mere dismissal of respondents complaint.53 (Underscoring supplied)
To the Court, the amount of P250,000 prayed for by petitioner in its Counterclaim is just and equitable, given the
nature and extent of legal services employed in controverting respondents unfounded claim.
WHEREFORE, the petition for review is GRANTED. The challenged Decision and Resolution of the Court of Appeals are
REVERSED and SET ASIDE. Civil Case No. 92-62106 lodged before the Regional Trial Court of Manila, Branch 16, is
DISMISSED for lack of merit.
Respondent, Royal Cargo Corporation, is ORDERED to pay petitioner, Rizal Commercial Banking Corporation,P250,000
as and for attorneys fees.
No costs.

G.R. No. 171132

August 15, 2012

MANUEL D. YNGSON, JR. (in his capacity as the Liquidator of ARCAM & COMPANY, INC.), Petitioner,
vs.
PHILIPPINE NATIONAL BANK, Respondent.
DECISION
VILLARAMA, JR., J.:
On appeal are the Resolutions dated April 14, 20051 and January 24, 20062 of the Court of Appeals (CA) in CA-G.R. SP
No. 88735. The CA dismissed petitioner's petition for review of the January 4, 2005 Resolution 3 and February 9, 2000
Order4 of the Securities and Exchange Commission (SEC) for failure of petitioner to attach to the petition copies of
material portions of the records and other relevant or pertinent documents.
The facts follow:
ARCAM & Company, Inc. (ARCAM) is engaged in the operation of a sugar mill in Pampanga. 5 Between 1991 and 1993,
ARCAM applied for and was granted a loan by respondent Philippine National Bank (PNB). 6 To secure the loan, ARCAM
executed a Real Estate Mortgage over a 350,004-square meter parcel of land covered by TCT No. 340592-R and a
Chattel Mortgage over various personal properties consisting of machinery, generators, field transportation and heavy
equipment.
ARCAM, however, defaulted on its obligations to PNB. Thus, on November 25, 1993, pursuant to the provisions of the
Real Estate Mortgage and Chattel Mortgage, PNB initiated extrajudicial foreclosure proceedings in the Office of the
Clerk of Court/Ex Officio Sheriff of the Regional Trial
Court (RTC) of Guagua, Pampanga.7 The public auction was scheduled on December 29, 1993 for the mortgaged real
properties and December 8, 1993 for the mortgaged personal properties.
On December 7, 1993, ARCAM filed before the SEC a Petition for Suspension of Payments, Appointment of a
Management or Rehabilitation Committee, and Approval of Rehabilitation Plan, with application for issuance of a
temporary restraining order (TRO) and writ of preliminary injunction. The SEC issued a TRO and subsequently a writ of
preliminary injunction, enjoining PNB and the Sheriff of the RTC of Guagua, Pampanga from proceeding with the
foreclosure sale of the mortgaged properties.8 An interim management committee was also created.
On February 9, 2000, the SEC ruled that ARCAM can no longer be rehabilitated. The SEC noted that the petition for
suspension of payment was filed in December 1993 and six years had passed but the potential white knight" investor
had not infused the much needed capital to bail out ARCAM from its financial difficulties. 9 Thus, the SEC decreed that
ARCAM be dissolved and placed under liquidation. 10 The SEC Hearing Panel also granted PNBs motion to dissolve the
preliminary injunction and appointed Atty. Manuel D. Yngson, Jr. & Associates as Liquidator for
ARCAM.11 With this development, PNB revived the foreclosure case and requested the RTC Clerk of Court to re-schedule
the sale at public auction of the mortgaged properties.
Contending that foreclosure during liquidation was improper, petitioner filed with the SEC a Motion for the Issuance of
a Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the foreclosure sale of ARCAMs assets.
The SEC en banc issued a TRO effective for seventy-two (72) hours, but said TRO lapsed without any writ of
preliminary injunction being issued by the SEC. Consequently, on July 28, 2000, PNB resumed the proceedings for the

extrajudicial foreclosure sale of the mortgaged properties.12 PNB emerged as the highest winning bidder in the auction
sale, and certificates of sale were issued in its favor.
On November 16, 2000, petitioner filed with the SEC a motion to nullify the auction sale. 13 Petitioner posited that all
actions against companies which are under liquidation, like ARCAM, are suspended because liquidation is a
continuation of the petition for suspension proceedings. Petitioner argued that the prohibition against foreclosure
subsisted during liquidation because payment of all of ARCAMs obligations was proscribed except those authorized by
the Commission. Moreover, petitioner asserted that the mortgaged assets should be included in the liquidation and the
proceeds shared with the unsecured creditors.
In its Opposition, PNB asserted that neither Presidential Decree (P.D.) No. 902-A nor the SEC rules prohibits secured
creditors from foreclosing on their mortgages to satisfy the mortgagors debt after the termination of the rehabilitation
proceedings and during liquidation proceedings. 14
On January 4, 2005, the SEC issued a Resolution 15 denying petitioners motion to nullify the auction sale. It held that
PNB was not legally barred from foreclosing on the mortgages. Aggrieved, petitioner filed on February 28, 2005, a
petition for review in the CA questioning the January 4, 2005 Resolution of the SEC. 16
By Resolution dated April 14, 2005, the CA dismissed the petition on the ground that petitioner failed to attach
material portions of the record and other documents relevant to the petition as required in Rule 46, Section 3 of
the 1997 Rules of Civil Procedure, as amended. The CA likewise denied ARCAMs motion for reconsideration in its
Resolution dated January 24, 2006.
Hence this petition under Rule 45 arguing that:
4.1. THE SEC ERRED IN FAILING TO APPLY THE RULES OF CONCURRENCE AND PREFERENCE OF CREDITS UNDER THE
CIVIL CODE AND JURISPRUDENCE WHEN PD 902-A PROVIDES THAT THE SAME BE APPLIED IN INSTANCES WHEREBY AN
ENTITY IS ORDERED DISSOLVED AND PLACED UNDER LIQUIDATION ON ACCOUNT OF FAILURE TO REHABILITATE DUE TO
INSOLVENCY.17
4.2. IT WAS GROSSLY ERRONEOUS FOR THE SEC TO HAVE ALLOWED PNB TO FORECLOSE THE MORTGAGE WITHOUT
FIRST ALLOWING THE ARCAM LIQUIDATOR TO
MAKE A DETERMINATION OF THE LIENS OVER THE ARCAM REAL PROPERTIES, SINCE THE LIQUIDATOR HAD INITIALLY
DETERMINED THAT ASIDE FROM PNB, SOME ARCAM WORKERS MAY ALSO HAVE A LEGAL LIEN OVER THE SAID
PROPERTY AS REGARDS THEIR CLAIMS FOR UNPAID WAGES. THESE LIENS OVER THE SAME MOVABLE OR REAL
PROPERTY ARE TO BE SATISFIED PRO-RATA WITH THE CONTRACTUAL LIENS PURSUANT TO 2247 AND 2249 OF THE
CIVIL CODE, IN RELATION TO 2241 TO 2242 RESPECTIVELY. ALSO, THERE MAY BE SOME TAX ASSESSMENTS THAT THE
LIQUIDATOR DOES NOT KNOW ABOUT, AND IF THERE WERE, THESE COULD COMPRISE TAX LIENS, WHICH UNDER
ARTICLE 2243 OF THE CIVIL CODE ARE CLEARLY GIVEN PRIORITY OVER OTHER PREFERRED CLAIMS SINCE SUCH ARE
TO BE SATISFIED FIRST, OVER OTHER LIENS PROVIDED UNDER ARTICLES 2241 AND 2242 OF THE CIVIL CODE, SUCH AS
MORTGAGE LIENS.18
4.3. THE SEC LABORED UNDER THE MISTAKEN IMPRESSION THAT AFTER AN ENTITY IS DISSOLVED AND PLACED UNDER
LIQUIDATION DUE TO INSOLVENCY, SECURED CREDITORS ARE AUTOMATICALLY ALLOWED TO FORECLOSE OR EXECUTE
OR OTHERWISE MAKE GOOD ON THEIR CREDITS AGAINST THE DEBTOR. 19
4.4. JURISPRUDENCE ON THE MATTER ALSO NEGATES THE SECS HOLDING THAT THE FORECLOSURE BY PNB WAS
LEGAL. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT PNB IS THE SOLE AND ONLY LIEN HOLDER, IT STILL
CANNOT FORECLOSE UNLESS THE LIQUIDATOR AGREES TO SUCH OR THAT THE SEC GAVE PNB PRIOR PERMISSION TO
INSTITUTE THE SEPARATE FORECLOSURE PROCEEDINGS. 20
4.5. RESPONDENT PNB SHOULD BE MADE TO PAY DAMAGES FOR THE REASON THAT THE FORECLOSURE PROCEEDINGS
WERE ATTENDED WITH BAD FAITH.21
The issues to be resolved are: (1) whether the CA correctly dismissed the petition for failure to attach material
documents referred to in the petition; and (2) whether PNB, as a secured creditor, can foreclose on the mortgaged
properties of a corporation under liquidation without the knowledge and prior approval of the liquidator or the SEC.
On the procedural issue, the Court finds that the CA erred in dismissing the petition for review before it on the ground
of failure to attach material portions of the record and other documents relevant to the petition. A perusal of the
petition for review filed with the CA, and as admitted by PNB, 22 reveals that certified true copies of the assailed January
4, 2005 SEC Resolution and the February 9, 2000 SEC Order appointing petitioner Atty. Manuel D. Yngson, Jr. as
liquidator were annexed therein.
We find the foregoing attached documents sufficient for the appellate court to decide the case at bar considering that
the SEC resolution contains statements of the factual antecedents material to the case. The Resolution also contains
the SECs findings on the legality of PNBs foreclosure of the mortgages. The SEC held that when the rehabilitation
proceeding was terminated and the suspensive effect of the order staying the enforcement of claims was lifted, PNB

could already assert its preference over unsecured creditors, and the secured asset and the proceeds need not be
included in the liquidation and shared with the unsecured creditors. 23 Before the CA, petitioner raised only the same
legal questions as there was no controversy involving factual matters. Petitioner claimed that the SEC erred in not
applying the rules on concurrence and preference of credits, and in denying its motion to nullify the auction sale of the
secured properties.24 Therefore, the assailed SEC Resolution is the only material portion of the record that should be
annexed with the petition for the CA to decide on the correctness of the SECs interpretation of the law and
jurisprudence on the matter before it.
Having so ruled, this Court would normally order the remand of the case to the CA for resolution of the substantive
issues. However, we find it more appropriate to decide the merits of the case in the interest of speedy justice
considering that the parties have adequately argued all points and issues raised. It is the policy of the Court to strive
to settle an entire controversy in a single proceeding, and to leave no root or branch to bear the seeds of future
litigation.25 The ends of speedy justice would not be served by a remand of this case to the CA especially since any
ruling of the CA on the matter could end up being appealed to this Court.
Did the SEC then err in ruling that PNB was not barred from foreclosing on the mortgages? We answer in the negative.
In the case of Consuelo Metal Corporation v. Planters Development Bank,26 which involved factual antecedents similar
to the present case, the court has already settled the above question and upheld the right of the secured creditor to
foreclose the mortgages in its favor during the liquidation of a debtor corporation. In that case, Consuelo Metal
Corporation (CMC) filed with the SEC a petition to be declared in a state of suspension of payment, for rehabilitation,
and for the appointment of a rehabilitation receiver or management committee under Section 5(d) of P.D. No. 902-A.
On April 2, 1996, the SEC, finding the petition sufficient in form and substance, declared that "all actions for claims
against CMC pending before any court, tribunal, office, board, body and/or commission are deemed suspended
immediately until further orders" from the SEC. Then on November 29, 2000, upon the management committees
recommendation, the SEC issued an Omnibus Order directing the dissolution and liquidation of CMC. Thereafter,
respondent Planters Development Bank (Planters Bank), one of CMCs creditors, commenced the extrajudicial
foreclosure of CMCs real estate mortgage. Planters Bank extrajudicially foreclosed on the real estate mortgage as CMC
failed to secure a TRO. CMC questioned the validity of the foreclosure because it was done without the knowledge and
approval of the liquidator. The Court ruled in favor of the respondent bank, as follows:
In Rizal Commercial Banking Corporation v. Intermediate Appellate Court, we held that if rehabilitation is no longer
feasible and the assets of the corporation are finally liquidated, secured creditors shall enjoy preference over
unsecured creditors, subject only to the provisions of the Civil Code on concurrence and preference of credits.
Creditors of secured obligations may pursue their security interest or lien, or they may choose to abandon the
preference and prove their credits as ordinary claims.
Moreover, Section 2248 of the Civil Code provides:
"Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the extent
of the value of the immovable or real right to which the preference refers."
In this case, Planters Bank, as a secured creditor, enjoys preference over a specific mortgaged property and has a right
to foreclose the mortgage under Section 2248 of the Civil Code. The creditor-mortgagee has the right to foreclose the
mortgage over a specific real property whether or not the debtor-mortgagor is under insolvency or liquidation
proceedings. The right to foreclose such mortgage is merely suspended upon the appointment of a management
committee or rehabilitation receiver or upon the issuance of a stay order by the trial court. However, the creditormortgagee may exercise his right to foreclose the mortgage upon the termination of the rehabilitation proceedings or
upon the lifting of the stay order. 27 (Emphasis supplied)
It is worth mentioning that under Republic Act No. 10142, otherwise known as the Financial Rehabilitation and
Insolvency Act (FRIA) of 2010, the right of a secured creditor to enforce his lien during liquidation proceedings is
retained. Section 114 of said law thus provides:
SEC. 114. Rights of Secured Creditors. The Liquidation Order shall not affect the right of a secured creditor to enforce
his lien in accordance with the applicable contract or law. A secured creditor may:
(a) waive his rights under the security or lien, prove his claim in the liquidation proceedings and share in the
distribution of the assets of the debtor; or
(b) maintain his rights under his security or lien;
If the secured creditor maintains his rights under the security or lien:
(1) the value of the property may be fixed in a manner agreed upon by the creditor and the liquidator.1wphi1 When
the value of the property is less than the claim it secures, the liquidator may convey the property to the secured
creditor and the latter will be admitted in the liquidation proceedings as a creditor for the balance; if its value exceeds
the claim secured, the liquidator may convey the property to the creditor and waive the debtors right of redemption
upon receiving the excess from the creditor;

(2) the liquidator may sell the property and satisfy the secured creditors entire claim from the proceeds of the sale; or
(3) the secured creditor may enforce the lien or foreclose on the property pursuant to applicable laws. (Emphasis
supplied)
In this case, PNB elected to maintain its rights under the security or lien; hence, its right to foreclose the mortgaged
properties should be respected, in line with our pronouncement in Consuelo Metal Corporation.
As to petitioner's argument on the right of first preference as regards unpaid wages, the Court has elucidated in the
case of Development Bank of the Philippines v. NLRC28 that a distinction should be made between a preference of
credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge
on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 of the Labor
Code, does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of
credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which
credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference
in the discharge of the funds of the judgment debtor. Consequently, the right of first preference for unpaid wages may
not be invoked in this case to nullify the foreclosure sales conducted pursuant to PNB 's right as a secured creditor to
enforce its lien on specific properties of its debtor, ARCAM.
WHEREFORE, the petition for review on certiorari is DENIED.
With costs against the petitioner.