G.R. No. L-78519 September 26, 1989 VICTORIA YAU C U, !""#"te$ b% &er &'"b!($ )IC A*L C U, petitioners, vs.

ON. COURT O+ A,,*ALS, +A)ILY SAVINGS -AN. !($/or CA)S TRA0ING *NT*R,RIS*S, INC., respondents. Francisco A. Lara, Jr. for petitioner. D. T. Ramos and Associates for respondent Family Savings Bank. Romulo T. Santos for respondent A!S Trading.

GRINO-A1UINO, J.: This is a petition for review on certiorari to annul and set aside the Court of Appeals' decision dated October 28, 1986 in CA !.". C# $o. %&269 which affir'ed the decision of the trial court in favor of the private respondents in an action to recover the petitioners' ti'e deposits in the respondent (a'il) *avin+s ,an-. *ince 198%, the petitioner, #ictoria .au Chu, had been purchasin+ ce'ent on credit fro' CA/* Tradin+ 0nterprises, 1nc. 2hereafter 3CA/* Tradin+3 for brevit)4. To +uarant) pa)'ent for her ce'ent withdrawals, she e5ecuted in favor of Ca's Tradin+ deeds of assi+n'ent of her ti'e deposits in the total su' of 6&2%,%%% in the (a'il) *avin+s ,an- 2hereafter the ,an-4. 05cept for the serial nu'bers and the dates of the ti'e deposit certificates, the deeds of assi+n'ent, which were prepared b) her own law)er, unifor'l) provided 7 ... That the assi+n'ent serves as a collateral or +uarantee for the pa)'ent of ') obli+ation with the said CA/* T"A81$! 0$T0"6"1*0*, 1$C. on account of ') ce'ent withdrawal fro' said co'pan), per separate contract e5ecuted between us. On 9ul) 2:,198%, Ca's Tradin+ notified the ,an- that /rs. Chu had an unpaid account with it in the su' of 6&1:,6&9.;<. 1t as-ed that it be allowed to encash the ti'e deposit certificates which had been assi+ned to it b) /rs. Chu. 1t sub'itted to the ,an- a letter dated 9ul) 18, 198% of /rs. Chu ad'ittin+ that her outstandin+ account with Ca's Tradin+ was 6:%:,<%%. After verball) advisin+ /rs. Chu of the assi+nee's re=uest to encash her ti'e deposit certificates and obtainin+ her verbal confor'it) thereto, the ,an- a+reed to encash the certificates.1t delivered to Ca's Tradin+ the su' of 628&,;&;.;< onl), as one ti'e deposit certificate 2$o. %%:812%9<:4 lac-ed the proper si+natures. >pon bein+ infor'ed of the encash'ent, /rs. Chu de'anded fro' the ,an- and Ca's Tradin+ that her ti'e deposit be restored. ?hen neither co'plied, she filed a co'plaint to recover the su' of 628&,;&;.;< fro' the'. The case was doc-eted in the "e+ional Trial Court of /a-ati, /etro /anila 2then C(1 of "i@al, 6asi+ ,ranch A1A4, as Civil Case $o. &8861. 1n a decision dated 8ece'ber 12, 198&, the trial court dis'issed the co'plaint for lac- of 'erit. Chu appealed to the Court of Appeals 2CA !.". C# $o. %&2694 which affir'ed the dis'issal of her co'plaint. 1n this petition for review, she alle+es that the Court of Appeals erredB

1. 1n not annullin+ the encash'ent of her ti'e deposit certificates as a pactum commissoriumC and 2. 1n not findin+ that the obli+ations secured b) her ti'e deposits had alread) been paid. ?e find no 'erit in the petition for review. The Court of Appeals found that the deeds of assi+n'ent were contracts of pled+e, but, as the collateral was also 'one) or an e5chan+e of 3peso for peso,3 the provision in Article 2112 of the Civil Code for the sale of the thin+ pled+ed at public auction to convert it into 'one) to satisf) the pled+or's obli+ation, did not have to be followed. All that had to be done to convert the pled+or's ti'e deposit certificates into cash was to present the' to the ban- for encash'ent after due notice to the debtor. The encash'ent of the deposit certificates was not a pacto commissorio which is prohibited under Art. 2%88 of the Civil Code. A pacto commissorio is a provision for the automatic appropriation of the pled+ed or 'ort+a+ed propert) b) the creditor in pa)'ent of the loan upon its 'aturit). The prohibition a+ainst a pacto commissorio is intended to protect the obli+or, pled+or, or 'ort+a+or a+ainst bein+ overreached b) his creditor who holds a pled+e or 'ort+a+e over propert) whose value is 'uch 'ore than the debt. ?here, as in this case, the securit) for the debt is also 'one) deposited in a ban-, the a'ount of which is even less than the debt, it was not ille+al for the creditor to encash the ti'e deposit certificates to pa) the debtors' overdue obli+ation, with the latter's consent. ?hether the debt had alread) been paid as now alle+ed b) the debtor, is a factual =uestion which the Court of Appeals found not to have been proven for the evidence which the debtor sou+ht to present on appeal, were receipts for pa)'ents 'ade prior to July "#, "$#%. *ince the petitioner si+ned on 9ul) 18, 198% a letter ad'ittin+ her indebtedness to be in the su' of 6:%:,<%%, and there is no proof of pa)'ent 'ade b) her thereafter to reduce or e5tin+uish her debt, the application of her ti'e deposits, which she had assi+ned to the creditor to secure the pa)'ent of her debt, was proper. The Court of Appeals did not co''it a reversible error in holdin+ that it was so. ?D0"0(O"0, the petition for review is denied. Costs a+ainst the appellant. *O O"80"08. &arvasa, ru' and !edialdea, JJ., concur.

(ancayco, J., took no part.

The Eawphil 6roFect Arellano Eaw (oundation COURT HOTEL OF APPEALS AND EMERALD CORPORATION, Respondents. DECISION RESORT

CARPIO, J.:chan o!"es#$ t%a""a&"$! a ' The Case

Th$s Pet$t$on (o Re#$e& on Ce t$o a $ )*+ see,s to e#e se the -o$nt dec$s$on ).+ o( the Co% t o( Appea"s $n CA/0.R. C1 Nos. 23456 and 23578 dated 2* Jan%a ' *665 and the Reso"%t$on dated 27 J%"' *665 den'$n9 the :ot$on (o econs$de at$on. The Co% t o( Appea"s a(($ :ed the dec$s$on )2+ o( the Re9$ona" T $a" Co% t o( I $9a C$t', ; anch 25, dec"a $n9 the (o ec"os% e o( the :o t9a9ed p ope t$es #o$d (o (a$"% e to co:p"' &$th the stat%to ' e<%$s$tes. chan o!"es #$ t%a" "a& "$! a ' The Facts P $#ate espondent E:e a"d Reso t Hote" Co po at$on =>ERHC>? o!ta$ned a "oan ( o: pet$t$one De#e"op:ent ;an, o( the Ph$"$pp$nes =>D;P>?. D;P e"eased the "oan o( P2,477,777.77 $n th ee $nsta"":ents: P.,777,777.77 on .@ Septe:!e *6@4, P*,777,777.77 on *8 J%ne *6@5 and P477,777.77 on *8 Septe:!e *6@5. To sec% e the "oan, ERHC :o t9a9ed $ts pe sona" and ea" p ope t$es to D;P. On *3 Ma ch *63*, D;P app o#ed a est %ct% $n9 o( ERHCAs "oan s%!-ect to ce ta$n cond$t$ons. )8+ On .4 A%9%st *63*, D;P a""e9ed"' cance""ed the est %ct% $n9 a9 ee:ent (o ERHCAs (a$"% e to co:p"' &$th so:e o( the :ate $a" cond$t$ons )4+ o( the a9 ee:ent. S%!se<%ent"', ERHC de"$#e ed to D;P th ee stoc, ce t$($cates o( ERHC a99 e9at$n9 2,8@@,74. sha es &$th a pa #a"%e o( P*.77 pe sha e. ERHC ($ st de"$#e ed to D;P on .7 Octo!e *63* Stoc, Ce t$($cate No. 27 co#e $n9 *,35.,*83 sha es. Then ERHC de"$#e ed on 2 No#e:!e *63* Stoc, Ce t$($cate No. 2* co#e $n9 56*,74. sha es, and on .@ No#e:!e *63* Stoc, Ce t$($cate No. 2. co#e $n9 6.2,34. sha es. On 4 J%ne *635, a""e9$n9 that ERHC (a$"ed to pa' $ts "oan, D;P ($"ed &$th the O(($ce o( the She $((, Re9$ona" T $a" Co% t o( I $9a C$t', an App"$cat$on (o EBt a/-%d$c$a" Fo ec"os% e o( Rea" Estate and Chatte" Mo t9a9es. chan o!"es #$ t%a" "a& "$! a ' Dep%t' P o#$nc$a" She $((s A!e" Ra:os and R%pe to 0a"eon $ss%ed the e<%$ ed not$ces o( p%!"$c a%ct$on sa"e o( the pe sona" and ea" p ope t$es. Ho&e#e , She $((s Ra:os and 0a"eon (a$"ed to eBec%te the co espond$n9 ce t$($cates o( post$n9 o( the not$ces. On *7 J%"' *635, the a%ct$on sa"e o( the pe sona" p ope t$es p oceeded. The O(($ce o( the She $(( sched%"ed on *. A%9%st *635 the p%!"$c a%ct$on sa"e o( the ea" p ope t$es. The ;$co" T $!%ne p%!"$shed on *3 J%"' *635, .4 J%"' *635 and * A%9%st *635 the not$ce o( a%ct$on sa"e o( the ea" p ope t$es. Ho&e#e , the O(($ce o( the She $(( postponed the a%ct$on sa"e on *. A%9%st *635 to ** Septe:!e *635 at the e<%est o( ERHC. D;P d$d not ep%!"$sh the not$ce o( the esched%"ed a%ct$on sa"e !eca%se D;P and ERHC s$9ned an a9 ee:ent to postpone the *. A%9%st *635 a%ct$on sa"e. )5+ ERHC, ho&e#e , d$sp%tes the a%tho $t' o( Ja$:e N%e#as &ho s$9ned the a9 ee:ent (o ERHC. In a "ette dated .8 No#e:!e *635, ERHC $n(o :ed D;P o( $ts $ntent$on to "ease the (o ec"osed p ope t$es. )@+ On .. Dece:!e *635, ERHC ($"ed &$th the Re9$ona" T $a" Co% t o( I $9a C$t' a co:p"a$nt (o ann%":ent o( the (o ec"os% e sa"e o( the pe sona" and ea"

p ope t$es. S%!se<%ent"', ERHC ($"ed a S%pp"e:enta" Co:p"a$nt. ERHC a""e9ed that the (o ec"os% e &as #o$d :a$n"' !eca%se =*? D;P (a$"ed to co:p"' &$th the p oced% a" e<%$ e:ents p esc $!ed !' "a&C and =.? the (o ec"os% e &as p e:at% e. ERHC :a$nta$ned that the "oan &as not 'et d%e and de:anda!"e !eca%se the D;P had est %ct% ed the "oan. D;P :o#ed to d$s:$ss the co:p"a$nt !eca%se $t stated no ca%se o( act$on and ERHC had &a$#ed the a""e9ed p oced% a" de(enses. The t $a" co% t den$ed the :ot$on to d$s:$ss. Conse<%ent"', D;P ($"ed $ts ans&e , c"a$:$n9 that $t co:p"$ed &$th the "e9a" e<%$ e:ents (o a #a"$d (o ec"os% e. D;P (% the c"a$:ed that $t cance""ed the cond$t$ona" est %ct% $n9 o( ERHCAs "oan !eca%se ERHC (a$"ed to co:p"' &$th so:e :ate $a" cond$t$ons o( the est %ct% $n9 a9 ee:ent. Mean&h$"e, act$n9 on ERHCAs app"$cat$on (o the $ss%ance o( a & $t o( p e"$:$na ' $n-%nct$on, the t $a" co% t 9 anted the & $t on .7 A%9%st *667. Acco d$n9"', the t $a" co% t en-o$ned D;P ( o: en(o c$n9 the "e9a" e((ects o( the (o ec"os% e o( !oth the chatte" and ea" estate :o t9a9es. The ea(te , t $a" on the :e $ts ens%ed. A(te the pa t$es p esented the$ e#$dence, the t $a" co% t ende ed a dec$s$on )3+ dated .3 Jan%a ' *66., the d$spos$t$#e po t$on o( &h$ch eads: DHEREFORE, p e:$ses cons$de ed, -%d9:ent $s he e!' p"a$nt$(( co po at$on and a9a$nst the de(endants: ende ed $n (a#o o( the

*. Dec"a $n9 as n%"" and #o$d the (o ec"os% e and a%ct$on sa"e o( the pe sona" p ope t$es o( p"a$nt$(( co po at$on he"d on J%"' *7, *635C .. Dec"a $n9 as n%"" and #o$d the (o ec"os% e and a%ct$on sa"e o( the ea" p ope t$es o( p"a$nt$(( co po at$on co#e ed !' TCT No. RT/*7@4 =*6637?C TCT No. RT/*7@5 =*663*?C TCT No. RT/*7@@ =..25@? and TCT No. *7.88 o( the Re9$ste o( Deeds o( Ca:a $nes S% =no& I $9a C$t'? $n the a%ct$on sa"e the eo( he"d on Septe:!e **, *635, and a"" the $:p o#e:ents the e$nC chan o!"es #$ t%a" "a& "$! a ' 2. O de $n9 the Re9$ste o( Deeds o( Ca:a $nes S% =no& I $9a C$t'? to cance" the annotat$ons o( the She $((As Ce t$($cate o( Sa"e on the a(o estated t$t"es as n%"" and #o$d and &$tho%t an' "e9a" e((ectC 8. O de $n9 the de(endant De#e"op:ent ;an, o( the Ph$"$pp$nes to co:p"' &$th the est %ct% $n9 o( p"a$nt$(( co po at$onAs "oans et oact$#e"' as tho%9h the (o ec"os% e had not ta,en p"ace $n the $nte est o( -%st$ce and e<%$t'C and 4. O de $n9 the de(endant D;P to pa' p"a$nt$(( co po at$on :o a" da:a9es $n the a:o%nt o( P477,777.77 (o $n$t$at$n9 &hat &as a c"ea "' $""e9a" (o ec"os% e and ca%s$n9 the sa$d p"a$nt$(( co po at$on to s%((e need"ess"' an9%$sh, opp o! $%: and d$s ep%te as a conse<%ence the eto. SO ORDERED. ;oth ERHC and D;P appea"ed the t $a" co% tAs dec$s$on to the Co% t o( Appea"s. ERHC ancho ed $ts appea" on the $ns%(($c$enc' o( the :o a" da:a9es a&a ded !'

the t $a" co% t and the a!sence o( an' a&a d o( te:pe ate, no:$na" o eBe:p"a ' da:a9es. D;PAs appea", on the othe hand, assa$"ed the dec$s$on as &e"" as the o de d$s:$ss$n9 $ts pet$t$on (o a & $t o( possess$on. The Co% t o( Appea"s, &h$ch conso"$dated the appea"s, a(($ :ed the dec$s$on o( the t $a" co% t. )6+ D;P ($"ed a Mot$on (o Recons$de at$on &h$ch the Co% t o( Appea"s den$ed. )*7+ Hence, th$s pet$t$on. The R%"$n9 o( the Co% t o( Appea"s The Co% t o( Appea"s s%sta$ned the t $a" co% tAs %"$n9 that the (o ec"os% e &as #o$d. The Co% t o( Appea"s a(($ :ed the t $a" co% tAs ($nd$n9 that D;P (a$"ed to co:p"' &$th the post$n9 and p%!"$cat$on e<%$ e:ents %nde the app"$ca!"e "a&s. The Co% t o( Appea"s he"d that the non/eBec%t$on o( the ce t$($cate o( post$n9 o( the not$ces o( a%ct$on sa"e and the non/ ep%!"$cat$on o( the not$ce o( the esched%"ed ** Septe:!e *635 a%ct$on sa"e $n#a"$dated the (o ec"os% e. chan o!"es #$ t%a" "a& "$! a ' The Co% t o( Appea"s a"so (o%nd that the pa t$es pe (ected the est %ct% $n9 a9 ee:ent and that ERHC s%!stant$a""' co:p"$ed &$th $ts cond$t$ons !ased on the (o""o&$n9 >c$ c%:stances>: =a? The t ans:$tta" "ette dated Octo!e .7, *63* &h$ch e"ates to the p o9 ess o( the est %ct% $n9 o( the :o t9a9e acco%nt o( E:e a"d Reso t Hote" Co po at$on and that the sa:e has !een app o#ed !' the SEC =EBh. >D>? =!? The t ans(e o( sha es o( stoc,s to appe""ant D;P, the #a"%e o( &h$ch a e ! o,en as (o""o&s: *. Stoc, ce t$($cate No. 27 (o *,35.,*83 sha es &o th P*,35.,*83.77 =EBhs. >D> and >D/*>?C .. Stoc, ce t$($cate No. 2. (o 62.,34. sha es &o th P642,34..77 =EBhs. >F> and >F/*>?C 2. Stoc, ce t$($cate No. 72*, (o 56*,74. sha es &o th P56*,74..77 =EBhs. >M> and >M/4>?. =c? The acceptance o( the (o e9o$n9 !' the D;P &$tho%t a$s$n9 the (act o( de"a' as e:!od$ed $n cond$t$on no. @ o( EBh. >;>. =d? No e-ect$on &as :ade !' the de(endant/appe""ant D;P at the t$:e the sha es o( stoc,s &e e !e$n9 he"d !' the "atte . =e? The !e"ated e-ect$on o( the sha es o( stoc,s &as $nte posed on"' at the t$:e the $nstant s%$t &as ($"ed &h$ch &as "on9 a(te the eBp$ at$on o( the 67/da' pe $od eBtended !' D;P to E:e a"d. chan o!"es #$ t%a" "a& "$! a '

=(? No e-ect$on &as a"so :ade &hen p"a$nt$(( co po at$on d$d not a#a$" o( the add$t$ona" "oan &h$ch &as a""e9ed"' pa t o( the pac,a9e acco::odat$on. )**+ The Co% t o( Appea"s a"so a(($ :ed the t $a" co% tAs a&a d o( :o a" da:a9es !%t den$ed ERHCAs c"a$: (o te:pe ate and eBe:p"a ' da:a9es. The Co% t o( Appea"s (o%nd that D;PAs $nt %s$on, ass$sted !' she $((s and se#e a" a :ed :en, $nto Hote" I!a"on and the she $((sA $n#ento ' o( the hote"As (% n$t% e and ($Bt% es ca%sed (ea and anB$et' to the hote" o&ne , sta(( and 9%ests. These acts, acco d$n9 to the Co% t o( Appea"s, de!ased the hote"As 9ood&$"" and %nde :$ned $ts #$a!$"$t' &a ant$n9 the a&a d o( :o a" da:a9es. F$nd$n9 the (o ec"os% e #o$d, the Co% t o( Appea"s a"so den$ed D;PAs pet$t$on (o a de($c$enc' c"a$: and a & $t o( possess$on. The Iss%es D;P p esents the (o""o&$n9 $ss%es (o eso"%t$on:

*. Dhethe D;P co:p"$ed &$th the post$n9 and p%!"$cat$on e<%$ e:ents %nde app"$ca!"e "a&s (o a #a"$d (o ec"os% e. chan o!"es #$ t%a" "a& "$! a ' .. Dhethe the est %ct% $n9 a9 ee:ent !et&een D;P and ERHC &as pe (ected and $:p"e:ented !' the pa t$es !e(o e the (o ec"os% e. 2. Dhethe ERHCAs o((e to "ease the (o ec"osed p ope t$es const$t%tes a &a$#e o( $ts $9ht to <%est$on the #a"$d$t' o( the (o ec"os% e. 8. Dhethe the a&a d o( :o a" da:a9es to ERHC, a -% $d$ca" pe son, $s p ope . The Co% tAs R%"$n9 The pet$t$on $s pa t"' :e $to $o%s. F$ st Iss%e: Co:p"$ance &$th the post$n9 and p%!"$cat$on app"$ca!"e "a&s Post$n9 e<%$ e:ent %nde Acts Nos. 2*24 and *473 In a""e9$n9 that the (o ec"os% e &as #a"$d, D;P :a$nta$ns that $t co:p"$ed &$th the :andato ' post$n9 e<%$ e:ent %nde app"$ca!"e "a&s. )*.+ D;P $ns$sts that the non/eBec%t$on o( the ce t$($cate o( post$n9 o( the a%ct$on sa"e not$ces d$d not $n#a"$date the (o ec"os% e. De a9 ee. Th$s Co% t %"ed $n C $sto!a" #. Co% t o( Appea"s )*2+ that a ce t$($cate o( post$n9 $s not e<%$ ed, :%ch "ess cons$de ed $nd$spensa!"e (o the #a"$d$t' o( an eBt a-%d$c$a" (o ec"os% e sa"e o( ea" p ope t' %nde Act No. 2*24. C $sto!a" :e e"' e$te ated the doct $ne "a$d do&n $n ;ohanan #. Co% t o( Appea"s. )*8+ In the p esent case, the (o ec"os$n9 she $((s (a$"ed to eBec%te the ce t$($cate o( post$n9 o( the a%ct$on sa"e not$ces. Ho&e#e , th$s (act a"one does not p o#e that the she $((s e<%$ e:ents %nde

(a$"ed to post the e<%$ ed not$ces. As he"d $n ;ohanan, >the (act a"one that the e $s no ce t$($cate o( post$n9 attached to the she $((Es eco ds $s not s%(($c$ent to p o#e the "ac, o( post$n9.> )*4+ ;ased on the eco ds, D;P p esented s%(($c$ent e#$dence to p o#e that the she $((s posted the not$ces o( the eBt a-%d$c$a" sa"e. The t $a" and appe""ate co% ts 9"a $n9"' e ed and 9 a#e"' a!%sed $ts d$sc et$on $n d$s e9a d$n9 the she $((sA pa t$a" epo t and the she $((sA ce t$($cate o( sa"e eBec%ted a(te the a%ct$on sa"e. A ca e(%" eBa:$nat$on o( these t&o doc%:ents c"ea "' sho&s that the (o ec"os$n9 she $((s posted the e<%$ ed not$ces o( sa"e. chan o!"es #$ t%a" "a& "$! a ' The pa t$a" epo t dated *7 J%"' *635 s$9ned !' !oth She $(( A!e" Ra:os and Dep%t' She $(( R%pe to 0a"eon states $n pa t: That on J%"' *, *635, the %nde s$9ned she $((s posted the not$ce o( p%!"$c a%ct$on sa"e o( chatte" :o t9a9e $n the consp$c%o%s p"aces, and at the I $9a C$t' Ha"" ;%""et$n ;oa d, $nc"%d$n9 I!a"on Hote", I $9a C$t' B B B. )*5+ =E:phas$s s%pp"$ed? S$:$"a "', the ce t$($cate o( sa"e o( the ea" p ope t$es s$9ned !' !oth She $(( Ra:os and Dep%t' She $(( 0a"eon on ** Septe:!e *635 states $n pa t: I, FURTHERMORE CERTIFF that the Not$ce o( Sa"e &as p%!"$shed $n ;ICOL TRI;UNE, a ne&spape o( 9ene a" c$ c%"at$on $n the p o#$nce o( Ca:a $nes S% , (o th ee =2? consec%t$#e &ee,s and th ee =2? cop$es o( the not$ces o( sa"e &e e posted $n th ee =2? p%!"$c p"aces o( the C$t' &he e the p ope t$es a e "ocated (o no "ess than t&ent' =.7? da's !e(o e the sa"e. )*@+ =E:phas$s s%pp"$ed? Dep%t' She $(( 0a"eon a"so test$($ed that he, to9ethe &$th She $(( Ra:os, )*3+ act%a""' posted the not$ces o( sa"e. )*6+ Ind$sp%ta!"', the e $s c"ea and con#$nc$n9 e#$dence o( the post$n9 o( the not$ces o( sa"e. Dhat the "a& e<%$ es $s the post$n9 o( the not$ce o( sa"e, &h$ch $s p esent $n th$s case, and not the eBec%t$on o( the ce t$($cate o( post$n9. Mo eo#e , ERHC !o e the !% den o( p esent$n9 e#$dence that the she $((s (a$"ed to post the not$ces o( sa"e. ).7+ In the a!sence o( cont a ' e#$dence, as $n th$s case, the p es%:pt$on p e#a$"s that the she $((s pe (o :ed the$ o(($c$a" d%t' o( post$n9 the not$ces o( sa"e. Conse<%ent"', &e ho"d that the non/eBec%t$on o( the ce t$($cate o( post$n9 cannot n%""$(' the (o ec"os% e o( the chatte" and ea" estate :o t9a9es $n the $nstant case. chan o!"es #$ t%a" "a& "$! a ' P%!"$cat$on e<%$ e:ent %nde Act No. 2*24 Ha#$n9 sho&n that the e &as post$n9 o( the not$ces o( a%ct$on sa"e, &e sha"" no& eso"#e &hethe the e &as p%!"$cat$on o( the not$ce o( sa"e o( the ea" p ope t$es $n co:p"$ance &$th Act No. 2*24. ).*+ The e $s no <%est$on that D;P p%!"$shed the not$ce o( a%ct$on sa"e sched%"ed on *. A%9%st *635. Ho&e#e , no a%ct$on sa"e too, p"ace on *. A%9%st *635 !eca%se D;P, at the $nstance o( ERHC, a9 eed to postpone the sa:e to ** Septe:!e *635. D;P contends that the a9 ee:ent to postpone d$spensed &$th the need to p%!"$sh a9a$n the not$ce o( a%ct$on sa"e. Th%s, D;P d$d not an':o e p%!"$sh the not$ce o(

the ** Septe:!e *635 a%ct$on sa"e. D;P $ns$sts that the "a& does not e<%$ e ep%!"$cat$on o( the not$ce o( a esched%"ed a%ct$on sa"e. Conse<%ent"', D;P a 9%es #$9o o%s"' that the eBt a-%d$c$a" (o ec"os% e o( the ea" estate :o t9a9e $s #a"$d. De do not a9 ee. The Co% t he"d ecent"' $n O%ano #. Co% t o( Appea"s )..+ that ep%!"$cat$on $n the :anne p esc $!ed !' Act No. 2*24 $s necessa ' (o the #a"$d$t' o( a postponed eBt a-%d$c$a" (o ec"os% e sa"e. Anothe p%!"$cat$on $s e<%$ ed $n case the a%ct$on sa"e $s esched%"ed, and the a!sence o( s%ch ep%!"$cat$on $n#a"$dates the (o ec"os% e sa"e. The Co% t a"so %"ed $n O%ano that the pa t$es ha#e no $9ht to &a$#e the p%!"$cat$on e<%$ e:ent $n Act No. 2*24. The Co% t dec"a ed th%s: Pet$t$one pa t$es. (% the contends that ep%!"$cat$on :a' !e &a$#ed #o"%nta $"' !' the

Th$s a 9%:ent has no !as$s $n "a&. The $ss%e o( &hethe ep%!"$cat$on :a' !e &a$#ed $s not no#e", as &e ha#e passed %pon the sa:e <%e ' $n Ph$"$pp$ne Nat$ona" ;an, #. Nepo:%ceno P od%ct$ons Inc. Pet$t$one the e$n so%9ht eBt a-%d$c$a" (o ec"os% e o( espondentAs :o t9a9ed p ope t$es &$th the She $((As O(($ce o( Pas$9, R$Ga". In$t$a""' sched%"ed on A%9%st *., *6@5, the a%ct$on sa"e &as esched%"ed se#e a" t$:es &$tho%t ep%!"$cat$on o( the not$ce o( sa"e, as st$p%"ated $n the$ A9 ee:ents to Postpone Sa"e. F$na""', the a%ct$on sa"e p oceeded on Dece:!e .7, *6@5, &$th pet$t$one as the h$9hest !$dde . A99 $e#ed, espondents s%ed to n%""$(' the (o ec"os% e sa"e. The t $a" co% t dec"a ed the sa"e #o$d (o non/ co:p"$ance &$th Act No. 2*24. Th$s dec$s$on &as a(($ :ed $n toto !' the Co% t o( Appea"s. Upho"d$n9 the conc"%s$ons o( the t $a" and appe""ate co% ts, &e he"d: chan o!"es Pet$t$one and espondents ha#e a!so"%te"' no p%!"$cat$on e<%$ e:ents o( Act No. 2*24. B B B $9ht to &a$#e the post$n9 and

P%!"$cat$on, the e(o e, $s e<%$ ed to 9$#e the (o ec"os% e sa"e a easona!"' &$de p%!"$c$t' s%ch that those $nte ested :$9ht attend the p%!"$c sa"e. To a""o& the pa t$es to &a$#e th$s -% $sd$ct$ona" e<%$ e:ent &o%"d es%"t $n con#e t$n9 $nto a p $#ate sa"e &hat o%9ht to !e a p%!"$c a%ct$on. D;P (% the asse ts that Sect$on .8, R%"e 26 o( the R%"es o( Co% t, &h$ch a""o&s ad-o% n:ent o( eBec%t$on sa"es !' a9 ee:ent o( the pa t$es, app"$es to the p esent case. Sect$on .8 o( R%"e 26 p o#$des: Sec. .8. Ad-o% n:ent o( Sa"e / ;' & $tten consent o( de!to and c ed$to , the o(($ce :a' ad-o% n an' sa"e %pon eBec%t$on to an' date a9 eed %pon $n & $t$n9 !' the pa t$es. D$tho%t s%ch a9 ee:ent, he :a' ad-o% n the sa"e ( o: da' to da', $( $t !eco:es necessa ' to do so (o "ac, o( t$:e to co:p"ete the sa"e on the da' ($Bed $n the not$ce.

The Co% t %"ed $n O%ano that Sect$on .8 o( R%"e 26 does not app"' to eBt a-%d$c$a" (o ec"os% e sa"es, th%s: Pet$t$one s%!:$ts that the "an9%a9e o( the a!o#ec$ted p o#$s$on ).2+ $:p"$es that the & $tten e<%est o( the pa t$es s%(($ces to a%tho $Ge the she $(( to eset the sa"e &$tho%t ep%!"$cat$on o epost$n9. At the o%tset, d$st$nct$on sho%"d !e :ade o( the th ee d$((e ent ,$nds o( sa"es %nde the "a&, na:e"': an o d$na ' eBec%t$on sa"e, a -%d$c$a" (o ec"os% e sa"e, and an eBt a-%d$c$a" (o ec"os% e sa"e. An o d$na ' eBec%t$on sa"e $s 9o#e ned !' the pe t$nent p o#$s$ons o( R%"e 26 o( the R%"es o( Co% t. R%"e 53 o( the R%"es o( Co% t app"$es $n cases o( -%d$c$a" (o ec"os% e sa"e. On the othe hand, Act No. 2*24, as a:ended !' Act No. 8**3 othe &$se ,no&n as >An Act to Re9%"ate the Sa"e o( P ope t' %nde Spec$a" Po&e s Inse ted $n o AnneBed to Rea" Estate Mo t9a9es> app"$es $n cases o( eBt a-%d$c$a" (o ec"os% e sa"e. A d$((e ent set o( "a& app"$es to each c"ass o( sa"e :ent$oned. The c$ted p o#$s$on $n the R%"es o( Co% t hence does not app"' to an eBt a-%d$c$a" (o ec"os% e sa"e. =E:phas$s s%pp"$ed? D;P a"so :a$nta$ns that ERHCAs act o( e<%est$n9 postpone:ent o( the *. A%9%st *635 a%ct$on sa"e estops ERHC ( o: cha""en9$n9 the a!sence o( p%!"$cat$on o( the not$ce o( the esched%"ed a%ct$on sa"e. De do not a9 ee. chan o!"es #$ t%a" "a& "$! a ' ERHC $ndeed e<%ested postpone:ent o( the a%ct$on sa"e sched%"ed on *. A%9%st *635. ).8+ Ho&e#e , the eco ds a e !e e(t o( an' e#$dence that ERHC e<%ested the postpone:ent &$tho%t need o( ep%!"$cat$on o( the not$ce o( sa"e. In Ph$"$pp$ne Nat$ona" ;an, #. Nepo:%ceno P od%ct$ons Inc., ).4+ the Co% t he"d that: B B B To e<%est postpone:ent o( the sa"e $s one th$n9C to e<%est $t &$tho%t need o( co:p"$ance &$th the stat%to ' e<%$ e:ents $s anothe . Respondents, the e(o e, d$d not co::$t an' act that &o%"d ha#e estopped the: ( o: <%est$on$n9 the #a"$d$t' o( the (o ec"os% e sa"e (o non/co:p"$ance &$th Act No. 2*24. B B B The (o : o( the not$ce o( eBt a-%d$c$a" sa"e $s no& p esc $!ed $n C$ c%"a No. @/ .77. ).5+ $ss%ed !' the O(($ce o( the Co% t Ad:$n$st ato on .. Jan%a ' .77.. Sect$on 8=a? o( C$ c%"a No. @/.77. p o#$des that: Sec. 8. The She $(( to &ho: the app"$cat$on (o :o t9a9e &as a(("ed sha"" do the (o""o&$n9: a. eBt a/-%d$c$a" (o ec"os% e o(

P epa e a Not$ce o( EBt a/-%d$c$a" Sa"e %s$n9 the (o""o&$n9 (o ::

>NOTICE OF EHTRA/JUDICIAL SALE> >Upon eBt a/-%d$c$a" pet$t$on (o sa"e %nde Act 2*24I*473 ($"ed JJJJJJJJJ a9a$nst =na:e and add ess o( Mo t9a9o Is? to sat$s(' the :o t9a9e $nde!tedness &h$ch as o( JJJJJJJJJJJ a:o%nts to P JJJJJJJJJJ eBc"%d$n9 pena"t$es, cha 9es, atto ne'As (ees and eBpenses o( (o ec"os% e, the %nde s$9ned o h$s d%"'

a%tho $Ged dep%t' &$"" se"" at p%!"$c a%ct$on on =date o( sa"e? JJJJJJJJ at *7:77 A.M. o soon the ea(te at the :a$n ent ance o( the JJJJJJJJ =p"ace o( sa"e? to the h$9hest !$dde , (o cash o :ana9e As chec, and $n Ph$"$pp$ne C% enc', the (o""o&$n9 p ope t' &$th a"" $ts $:p o#e:ents, to &$t: >=Desc $pt$on o( P ope t'>? >A"" sea"ed !$ds :%st !e s%!:$tted to the %nde s$9ned on the a!o#e stated t$:e and date.> >In the e#ent the p%!"$c a%ct$on sho%"d not ta,e p"ace on the sa$d date, $t sha"" !e he"d on JJJJJJJJJJJ,JJJJJJ &$tho%t (% the not$ce.> JJJJJJJJJJ =date? >SHERIFF> =E:phas$s s%pp"$ed? chan o!"es #$ t%a" "a& "$! a ' The "ast pa a9 aph o( the p esc $!ed not$ce o( sa"e a""o&s the ho"d$n9 o( a esched%"ed a%ct$on sa"e &$tho%t epost$n9 o ep%!"$cat$on o( the not$ce. Ho&e#e , the esched%"ed a%ct$on sa"e &$"" on"' !e #a"$d $( the esched%"ed date o( a%ct$on $s c"ea "' spec$($ed $n the p $o not$ce o( sa"e. The a!sence o( th$s $n(o :at$on $n the p $o not$ce o( sa"e &$"" ende the esched%"ed a%ct$on sa"e #o$d (o "ac, o( epost$n9 o ep%!"$cat$on. I( the not$ce o( a%ct$on sa"e conta$ns th$s pa t$c%"a $n(o :at$on, &hethe o not the pa t$es a9 eed to s%ch esched%"ed date, the e $s no :o e need (o the epost$n9 o ep%!"$cat$on o( the not$ce o( the esched%"ed a%ct$on sa"e. The O(($ce o( the Co% t Ad:$n$st ato $ss%ed C$ c%"a No. @/.77. p% s%ant to the *8 Dece:!e *666 Reso"%t$on o( th$s Co% t $n A.M. No. 66/*7/74/7, as a:ended !' the Reso"%t$ons o( 27 Jan%a ' .77* and @ A%9%st .77*. The Co% t $ss%ed these Reso"%t$ons (o t&o easons. F$ st, the Co% t see,s to :$n$:$Ge the eBpenses &h$ch the :o t9a9ee $nc% s $n p%!"$sh$n9 the not$ce o( eBt a-%d$c$a" sa"e. D$th the added $n(o :at$on $n the not$ce o( sa"e, the :o t9a9ee need not ca%se the epost$n9 and ep%!"$cat$on o( the not$ce o( the esched%"ed a%ct$on sa"e. The e $s no #$o"at$on o( the not$ce e<%$ e:ents %nde Acts Nos. 2*24 and *473 p ec$se"' !eca%se the $nte ested pa t$es as &e"" as the p%!"$c a e $n(o :ed o( the sched%"e o( the neBt a%ct$on sa"e, $( the ($ st a%ct$on sa"e does not p oceed. The e(o e, the p% pose o( a not$ce o( sa"e, &h$ch $s to not$(' the :o t9a9o and the p%!"$c o( the (o ec"os% e sa"e, $s sat$s($ed. Second, the Co% t hopes to dete the p act$ce o( so:e :o t9a9o s $n e<%est$n9 postpone:ent o( the a%ct$on sa"e o( ea" p ope t$es, then "ate attac,$n9 the #a"$d$t' o( the (o ec"os% e (o "ac, o( ep%!"$cat$on. Th$s p act$ce &$"" on"' (o ce :o t9a9ees to den' o%t $9ht e<%ests (o postpone:ent !' :o t9a9o s s$nce $t &$"" on"' :ean added p%!"$cat$on eBpense on the pa t o( :o t9a9ees. S%ch de#e"op:ent &$"" e#ent%a""' &o , a9a$nst :o t9a9o s !eca%se :o t9a9ees &$"" hes$tate to 9 ant postpone:ents to :o t9a9o s.

In the $nstant case, the e $s no $n(o :at$on $n the not$ce o( a%ct$on sa"e o( an' date o( a esched%"ed a%ct$on sa"e. E#en $( s%ch $n(o :at$on &e e stated $n the not$ce o( sa"e, the epost$n9 and ep%!"$cat$on o( the not$ce o( sa"e &o%"d st$"" !e necessa ' !eca%se C$ c%"a No. @/.77. too, e((ect on"' on .. Ap $" .77.. The e &e e no s%ch 9%$de"$nes $n e((ect d% $n9 the <%est$oned (o ec"os% e. chan o!"es #$ t%a" "a& "$! a ' C"ea "', D;P (a$"ed to co:p"' &$th the p%!"$cat$on e<%$ e:ent %nde Act No. 2*24. The e &as no p%!"$cat$on o( the not$ce o( the esched%"ed a%ct$on sa"e o( the ea" p ope t$es. The e(o e, the eBt a-%d$c$a" (o ec"os% e o( the ea" estate :o t9a9e $s #o$d. D;P, ho&e#e , co:p"$ed &$th the :andato ' post$n9 o( the not$ces o( the a%ct$on sa"e o( the pe sona" p ope t$es. Unde the Chatte" Mo t9a9e La&, ).@+ the on"' e<%$ e:ent $s post$n9 o( the not$ce o( a%ct$on sa"e. The e &as no postpone:ent o( the a%ct$on sa"e o( the pe sona" p ope t$es and the (o ec"os% e too, p"ace as sched%"ed. Th%s, the eBt a-%d$c$a" (o ec"os% e o( the chatte" :o t9a9e $n the $nstant case s%((e s ( o: no p oced% a" $n($ :$t'. Second Iss%e: Pe (ect$on and $:p"e:entat$on o( the !et&een D;P and ERHC est %ct% $n9 a9 ee:ent

ERHC cons$stent"' a 9%es that $ts est %ct% $n9 a9 ee:ent &$th D;P &as pe (ected and e#en $:p"e:ented !' the pa t$es. ERHC :a$nta$ns that the de"$#e ' o( $ts ce t$($cates o( stoc,s to D;P &as pa t o( $ts co:p"$ance &$th the cond$t$ons o( the est %ct% $n9 a9 ee:ent. De do not a9 ee. Cont a ' to ERHCAs a""e9at$ons and the Co% t o( Appea"sA ($nd$n9s, est %ct% $n9 a9 ee:ent &as ne#e pe (ected. ERHC (a$"ed to co:p"' &$th :ate $a" cond$t$ons (o the pe (ect$on o( the est %ct% $n9 a9 ee:ent. spec$($ed $n D;P Reso"%t$on No. 645 dated *6 Ma ch *63* ).3+ app o#$n9 est %ct% $n9 a9 ee:ent, the (o""o&$n9 a e the cond$t$ons (o the est %ct% a9 ee:ent: the the As the $n9

RESOLUTION NO. 645. E:e a"d Reso t Hote" Co po at$on =Hote" I!a"on? / Con#e s$on Into Co::on andIo P e(e ed Sha es o( P.,@35,777.77 Rep esent$n9 87K o( the Tota" O%tstand$n9 O!"$9at$onsC a Th$ d Add$t$ona" Loan o( P5@6,777.77 and Rest %ct% $n9 o( the Acco%nt. B B B

In #$e& the eo( and as (a#o a!"' eco::ended !' the Mana9e o( the Ind%st $a" P o-ects Depa t:ent III $n he :e:o and%: dated Fe! %a ' .8, *63*, the ;oa d, %pon :ot$on :ade and d%"' seconded, APPRO1ED $n (a#o o( E:e a"d Reso t Hote" Co po at$on =Hote" I!a"on? the (o""o&$n9: *. I::ed$ate con#e s$on $nto co::on andIo p e(e ed sha es at !o o&e As opt$on, o( P.,@35,777.77 ep esent$n9 87K o( the tota" o%tstand$n9 o!"$9at$on as o( Ma' *4, *637, $n the ed%ced a:o%nt o( P5,654,777.77 co:posed o(

o%tstand$n9 p $nc$pa" !a"ance o( P2,477,777.77 and tota" a ea a9es on $nte est and othe cha 9es o( P2,854,777.77, the con#e s$on p $ce to !e e<%a" to the pa #a"%e o( the sha esC .. A th$ d add$t$ona" "oan o( S$B H%nd ed Se#ent'/N$ne Tho%sand Pesos =P5@6,777.77?, pa'a!"e <%a te "' %nde the sa:e est %ct% ed te :s o( the o $9$na" and t&o =.? add$t$ona" "oans, at *3K $nte est pe ann%:C and chan o!"es #$ t%a" "a& "$! a ' 2. Rest %ct% $n9 o( the ($ :As tota" o%tstand$n9 p $nc$pa" o!"$9at$on o( P2,477,777.77 $n the (o : o( eBtens$on o( 9 ace pe $od on p $nc$pa" epa':ent ( o: t&o =.? 'ea s to n$ne =6? 'ea s to :a,e a :aB$:%: "oan te : o( n$neteen =*6? 'ea s, e9%"a a:o t$Gat$ons to co::ence th ee =2? :onths a(te the end o( the eBtended 9 ace pe $od on Octo!e 2*, *634 and pa'a!"e <%a te "' at the (o""o&$n9 $nte est ates: O $9$na" Loan / / P*,8.4,377 at *5K $nte est pe ann%:

4@8,.77 at *3K $nte est pe ann%: / *,777,777 at *3K $nte est pe ann%:

*st Add$t$ona" Loan / Tota" /

JJ 477,777 at *3K $nte est pe ann%: P2,477,777

s%!-ect to the (o""o&$n9 te :s and cond$t$ons: A. Fo the P5@6,777.77 Add$t$ona" Loan chan o!"es #$ t%a" "a& "$! a ' a. That s%!-ect/($ : sha"" ($ st pa' the a:o%nt o( P8@2.77 to ed%ce $ts tota" a ea a9es on $nte est and othe cha 9es o( P2,854,8@2.77 as o( Ma' *4, *637 to P2,854,777.77C and !. That the p oceeds o( th$s add$t$ona" "oan sha"" !e app"$ed to s%!-ect/($ :As acc %ed $nte est and othe cha 9es d%e D;P as o( Ma' *4, *637 not othe &$se co#e ed !' the p oposed e<%$t' con#e s$on o( P.,@35,777.77. ;. Fo ;oth Add$t$ona" Loan and Rest %ct% $n9 a. That a <%as$/ eo 9an$Gat$on sha"" ($ st !e %nde ta,en (o the p% pose o( e"$:$nat$n9 eB$st$n9 de($c$ts, &h$ch sho%"d !e (o :a""' a%tho $Ged !' the stoc,ho"de s o( the co po at$on, sho%"d co:p"' &$th "e9a" e<%$ e:ents, and sho%"d !e app o#ed !' the Sec% $t$es and EBchan9e Co::$ss$on &h$ch sees to $t that the $9hts o( c ed$to s a e not p e-%d$ced. B B B

e. That s%!-ect/($ : sha"" app"' &$th SEC (o an a:end:ent o( $ts a%tho $Ged cap$ta"$Gat$on to $nc"%de p e(e ed sha es $n case $::ed$ate con#e s$on $nto e<%$t'

o( 87K o( the tota" o%tstand$n9 o!"$9at$on as o( Ma' *4, *637 &$"" $nc"%de p e(e ed sha es. chan o!"es #$ t%a" "a& "$! a ' B B B E:phas$s s%pp"$ed?

A ca e(%" e#$e& o( the (acts and the e#$dence p esented !' the pa t$es d$sc"oses that ERHC (a$"ed to co:p"' &$th the te :s and cond$t$ons set (o th $n D;P Reso"%t$on No. 645. F$ st, ERHC (a$"ed to co:p"' &$th the $:po tant cond$t$on o( con#e t$n9 $nto e<%$t' 87 pe cent o( $ts o%tstand$n9 de!t to D;P. ERHC d$d not p esent an' e#$dence to sho& that $t co:p"$ed &$th th$s pa t$c%"a e<%$ e:ent. Dh$"e $t $s t %e that ERHC de"$#e ed to D;P ce t$($cates o( stoc,s, $t &as to co:p"' &$th ERHCAs co::$t:ent %nde the o $9$na" :o t9a9e cont acts. ).6+ ERHC co::$tted to p"ed9e o ass$9n to D;P at "east 5@ pe cent o( $ts o%tstand$n9 sha es to sec% e the o $9$na" "oan acco::odat$on. The o $9$na" :o t9a9e cont acts conta$n the (o""o&$n9 cond$t$on: B B B

c. ;' an ass$9n:ent to the Mo t9a9ee o( not "ess than 5@K o( the tota" s%!sc $!ed and o%tstand$n9 #ot$n9 sha es o( the co:pan'. The sa$d pe centa9es o( sha es ass$9ned sha"" !e :a$nta$ned at a"" t$:es and the sa$d ass$9n:ent to s%!s$st (o as "on9 as the Ass$9nee :a' dee: necessa ' d% $n9 the eB$stence o( the Mo t9a9eeAs app o#ed acco::odat$on. B B B )27+ On *@ Ap $" *634, D;P $n(o :ed ERHC that $t had not co:p"$ed &$th the cond$t$on $n the o $9$na" :o t9a9e cont act on the ass$9n:ent o( 5@ pe cent o( $ts o%tstand$n9 sha es to D;P. The "ette o( D;P states $n pa t: .. The cond$t$on e<%$ $n9 ERHC to ass$9n $n (a#o o( D;P at "east 5@K o( the s%!sc $!ed and o%tstand$n9 #ot$n9 sha es o( co:pan' has not !een :et. O( the 8,6*@,477 o%tstand$n9 #ot$n9 sha es as o( Dece:!e 2*, *63., on"' 6**,377 sha es ha#e !een ass$9ned $nstead o( 2,.68,@.4 =5@K o( 8,6*@,777?, :o e o( the o%tstand$n9 #ot$n9 sha es ha#e $nc eased. )2*+ The de($c$enc' o( .,23.,6.4 sha es =2,.68,@.4 / 6**,377? :a' ho&e#e !e co#e ed !' the .,@35,777 sha es 'o% t ans(e ed $n the na:e o( D;P as an a"te nat$#e co:p"$ance &$th 54K e<%$ e:ent. =E:phas$s s%pp"$ed? chan o!"es #$ t%a" "a& "$! a ' In $ts ep"' "ette dated ** J%ne *634 to D;P, ERHC s$9n$($ed $ts ead$ness to ass$9n 5@ pe cent o( $ts o%tstand$n9 sha es to D;P. Th%s, ERHCAs ep"' "ette , s$9ned !' $ts P es$dent Att'. Jose C. Re'es, states $n pa t: D$th e(e ence to 'o% "ette dated *@ Ap $" *634 &h$ch co%"d not !e seasona!"' acted %pon on acco%nt o( :' a!sence ( o: the co%nt ' (o :ed$ca" easons, I a: p"eased to $n(o : 'o% 9oodse"( o( the act$on ta,en on the #a $o%s $te:s the eon en%:e ated, to &$t: *. B B B

.. Ass$9n:ent o( 5@K o( o%tstand$n9 #ot$n9 sha es. chan o!"es #$ t%a" "a& "$! a ' De a e ead' to ! $n9 %p the ass$9ned sha es $n (a#o o( D;P to 5@K o( the co po at$onAs o%tstand$n9 #ot$n9 sha es o( 8,6*@,477 as o( Dece:!e 2*, *63. o tota" o( 2,.68,@.4 sha es. The co po at$on &$"" :a$nta$n $ts p e#$o%s ass$9n:ent o( 6**,377 sha es. Mo eo#e , *,35.,*83 a"te nat$#e 2,.68,@.4 e<%ested. the co po at$on $s a9 eea!"e that Stoc, Ce t$($cate No. 727 (o sha es &h$ch had !een t ans(e ed to D;P !e cons$de ed as an co:p"$ance to the a$s$n9 o( D;PAs ass$9ned sha es to the (%"" 5@K o sha es. Fo% (o :a" con(o :$t' to th$s a an9e:ent $s "$,e&$se

F$na""', the co po at$on &$"" (% the ass$9n to D;P anothe 4.7,@@@ sha es $n eBchan9e o( Stoc, Ce t$($cate No. 72. (o 6.2,34. sha es &h$ch &as t ans(e ed to D;P cond$t$ona""'. Th$s Stoc, Ce t$($cate has to !e s% ende ed to the co po at$on (o cance""at$on !e(o e &e can $ss%e !' &a' o( (% the ass$9n:ent the 4.7,@@@ sha es. In sho t, the 2 !"oc,s o( sha es :ent$oned a!o#e &o%"d es%"t as (o""o&s: *. 6**,377 sha es

.. *,35.,*83 sha es 2. 4.7,@@@ sha es

JJJJJJJJ Tota" / 2,.68,@.4 sha es o( 5@K o%tstand$n9 chan o!"es #$ t%a" "a& "$! a ' #ot$n9 sha es B B B. )2.+

C"ea "', &hen ERHC de"$#e ed the ce t$($cates o( stoc,s, $t &as to co:p"' &$th ERHCAs co::$t:ent %nde the o $9$na" :o t9a9e cont acts, not the est %ct% $n9 a9 ee:ent. ;es$des, the e $s a #ast d$((e ence !et&een an ass$9n:ent o( sha es to D;P !' eB$st$n9 stoc,ho"de s and con#e s$on o( D;PAs "oan $nto e<%$t' o( ERHC. In the ($ st, the pa$d/%p cap$ta" o( ERHC e:a$ns the sa:e. In the "atte , the pa$d/%p cap$ta" o( ERHC, as &e"" as $ts "$a!$"$t$es, chan9es $n that the "$a!$"$t$es a e t ans(e ed to the cap$ta" acco%nt to the eBtent o( the con#e s$on. The "atte case, &h$ch $s the con#e s$on o( de!t $nto e<%$t' e<%$ ed %nde the est %ct% $n9 a9 ee:ent, ne#e happened. The de"$#e ' to D;P o( stoc, ce t$($cates ep esent$n9 2,.68,@.4 ERHC sha es d$d not ed%ce the "$a!$"$t$es o( ERHC. The eason (o the e<%$ e:ent to con#e t P.,@35,777.77 $n "$a!$"$t$es o( ERHC $nto e<%$t' &as to ed%ce ERHCAs de!t to e<%$t' at$o, &h$ch the ass$9n:ent and de"$#e ' o( the stoc, ce t$($cates d$d not and co%"d not ha#e ach$e#ed.

Second, ERHC d$d not a#a$" o( the P5@6,777.77 add$t$ona" "oan, desp$te th$s !e$n9 a :ate $a" cond$t$on o( the est %ct% $n9 a9 ee:ent. ERHC co%"d not s$:p"' e(%se to a#a$" o( the add$t$ona" "oan !eca%se the p oceeds o( th$s "oan &e e to pa' the !a"ance o( ERHCAs acc %ed $nte est and othe cha 9es d%e D;P as o( *4 Ma' *637. C"ea "', ERHCAs e(%sa" to a#a$" o( the add$t$ona" "oan, $ntended to %p/date ERHCAs "oan acco%nt, p e#ented the pe (ect$on o( the est %ct% $n9 a9 ee:ent. Last"', ERHC (a$"ed to co:p"' &$th the <%as$/ eo 9an$Gat$on e<%$ e:ent, as c"ea "' ad:$tted $n ERHCAs "ette dated 2 No#e:!e *63. to D;P, th%s: 2. On J%"' 2*, *63*, &e once :o e co::%n$cated &$th 'o% Na9a ; anch ad#$s$n9 o( the E:e a"d Reso t Hote" Co po at$onAs Stoc,ho"de s Reso"%t$on app o#$n9 the <%as$/ eo 9an$Gat$on and the Pet$t$on ($"ed &$th the Sec% $t$es and EBchan9e Co::$ss$on e<%est$n9 app o#a" o( the co po at$onAs eso"%t$on on <%as$/ eo 9an$Gat$on and the t ans(e o( *,35.,*83 sha es $n (a#o o( the D;P, cop' &he eo( $s attached as AnneB >C>C chan o!"es #$ t%a" "a& "$! a ' 8. On Septe:!e @, *63*, &e ece$#ed !' pe sona" de"$#e ' a "ette ( o: Mana9e Ma $o C. LeaLo, cop' &he eo( $s attached as AnneB >D>. In o% con#e sat$on had on th$s occas$on, I e$te ated o% e<%est $n o% "ette dated *6 J%ne *63* that $n #$e& o( the c$ c%:stances a((ect$n9 o% pape s $n the Sec% $t$es and EBchan9e Co::$ss$on the e &as need to eBtend o% pe $od o( co:p"$ance. B B B

It &$"" th%s !e noted ( o: the (o e9o$n9 co::%n$cat$ons that &e ha#e eBe ted o% %t:ost !est to co:p"' &$th the cond$t$ons (o the e/st %ct% $n9 o( o% "oan acco%nts and a"" ha#e !een co:p"$ed, &$th the eBcept$on o( the <%as$/ eo 9an$Gat$on, (o easons !e'ond o% "e9a" cont o" s$nce $t $s the SEC that passes %pon the <%est$on as to &hethe o not &e :eet the SEC 9%$de"$nes (o a <%as$/ eo 9an$Gat$on. Un(o t%nate"', (o the easons stated $n AnneB >H> and the enc"os% es the eto, the SEC (e"t that ERHC &as not &$th$n the$ 9%$de"$nes (o a <%as$/ eo 9an$Gat$on. )22+ =E:phas$s s%pp"$ed? The <%as$/ eo 9an$Gat$on $s e<%$ ed spec$($ca""' to e"$:$nate ERHCAs eB$st$n9 de($c$ts. Ho&e#e , the SEC :%st ($ st app o#e the <%as$/ eo 9an$Gat$on &h$ch app o#a" ERHC ad:$tted"' (a$"ed to sec% e. Th o%9h no (a%"t o( D;P, SEC d$sapp o#ed ERHCAs app"$cat$on (o <%as$/ eo 9an$Gat$on. Cons$de $n9 that ERHC (a$"ed to co:p"' &$th the :ate $a" cond$t$ons o( the est %ct% $n9 a9 ee:ent, the a9 ee:ent &as ne#e $:p"e:ented o e#en pe (ected. The pe (ect$on and $:p"e:entat$on o( the est %ct% $n9 a9 ee:ent &e e eBp ess"' s%!-ect to the (o""o&$n9 cond$t$ons e:!od$ed $n D;P Reso"%t$on No. 645 and $n D;PAs not$ce o( app o#a" to ERHC, espect$#e"': t. B B B I:p"e:entat$on o( the est %ct% $n9 sche:e as app o#ed sha"" ta,e e((ect %pon co:p"$ance &$th the te :s and cond$t$ons and &$th a"" the "e9a" and doc%:entat$on e<%$ e:entsC )28+ BBB BBB BBB

@. A"" doc%:ents (o th$s "oan app o#a" sha"" !e eBec%ted and pe (ected &$th$n 67 da's ( o: the date o( th$s not$ceC othe &$se, th$s acco::odat$on sha"" !e a%to:at$ca""' cance""ed. )24+ chan o!"es #$ t%a" "a& "$! a ' The t $a" and appe""ate co% ts 9 a#e"' :$sapp ehended the (acts and :ade :an$(est"' :$sta,en $n(e ences $n ($nd$n9 that the pa t$es had pe (ected the est %ct% $n9 a9 ee:ent. Conse<%ent"', &hen D;P ($"ed the app"$cat$on (o eBt a-%d$c$a" (o ec"os% e o( the chatte" and ea" estate :o t9a9es, ERHC &as a" ead' $n de(a%"t $n pa'$n9 $ts de!t to D;P. Th$ d Iss%e: ERHCAs o((e to "ease the (o ec"osed p ope t$es ERHC o((e ed to "ease ( o: D;P the (o ec"osed p ope t$es a(te the a%ct$on sa"e. D;P a 9%es that &hen ERHC o((e ed to "ease ( o: D;P the (o ec"osed p ope t$es, ERHC &a$#ed $ts $9ht to <%est$on the #a"$d$t' o( the (o ec"os% e. De do not a9 ee. To const$t%te a &a$#e , the $ntent to &a$#e :%st !e sho&n c"ea "' and con#$nc$n9"'. )25+ A :e e o((e to "ease the (o ec"osed p ope t$es cannot const$t%te a &a$#e o( ERHCAs $9ht to contest the #a"$d$t' o( the (o ec"os% e on the 9 o%nd o( non/co:p"$ance &$th the stat%to ' e<%$s$tes. ERHCAs o((e to "ease does not e"$n<%$sh ERHCAs $9ht to cha""en9e the #a"$d$t' o( the (o ec"os% e. The o((e to "ease the (o ec"osed p ope t$es cannot #a"$date o at$(' a #o$d (o ec"os% e. ERHCAs $ntent$on to "ease the (o ec"osed p ope t$es cannot s$:p"' o%t&e$9h D;PAs (a$"% e to co:p"' &$th the stat%to ' e<%$s$te (o a #a"$d eBt a-%d$c$a" (o ec"os% e. As the Co% t o( Appea"s co ect"' %"ed, >the e can !e no &a$#e o( the post$n9 and p%!"$cat$on e<%$ e:ents $n (o ec"os% e p oceed$n9s !eca%se the sa:e $s cont a ' to "a& and p%!"$c o de .> chan o!"es #$ t%a" "a& "$! a ' Fo% th Iss%e: A&a d o( :o a" da:a9es D;P :a$nta$ns that ERHC, a -% $d$ca" pe son, $s not ent$t"ed to :o a" da:a9es. ERHC co%nte s that $ts ep%tat$on &as de!ased &hen the she $((s and se#e a" a :ed :en $nt %ded $nto Hote" I!a"onAs p e:$ses and $n#ento $ed the (% n$t% e and ($Bt% es $n the hote". The Co% t o( Appea"s e ed $n a&a d$n9 :o a" da:a9es to ERHC. The Co% t o( Appea"sA so"e !as$s (o $ts %"$n9 $s a <%oted po t$on o( the test$:on' o( ERHCAs P es$dent, Att'. Jose Re'es. The test$:on' &as not e#en o((e ed to p o#e the -%st$($cat$on and a:o%nt o( da:a9es &h$ch ERHC c"a$:s a9a$nst D;P. In othe &o ds, ERHC (a$"ed to p esent e#$dence to &a ant the a&a d o( :o a" da:a9es. In a "on9 "$ne o( dec$s$ons, th$s Co% t has he"d that the c"a$:ant (o :o a" da:a9es :%st p esent conc ete p oo( to -%st$(' $ts a&a d, th%s: BBB &h$"e no p oo( o( pec%n$a ' "oss $s necessa ' $n o de that :o a" da:a9es :a' !e a&a ded, the a:o%nt o( $nde:n$t' !e$n9 "e(t to the d$sc et$on o( the co% t =A t. ..*5?, $t $s, ne#e the"ess, essent$a" that the c"a$:ant sat$s(acto $"' p o#e the eB$stence o( the (act%a" !as$s o( the da:a9e =A t. ..*@? and $ts ca%sa" e"at$on to de(endantAs acts. Th$s $s so !eca%se :o a" da:a9es, tho%9h $ncapa!"e o( pec%n$a ' est$:at$on, a e $n the cate9o ' o( an a&a d des$9ned to co:pensate the

c"a$:ant (o act%a" $n-% ' s%((e ed and not to $:pose a pena"t' on the & on9doe . )2@+ =E:phas$s s%pp"$ed? chan o!"es #$ t%a" "a& "$! a ' In the !od' o( $ts dec$s$on, the t $a" co% t 9a#e no !as$s to -%st$(' the a&a d o( :o a" da:a9es. The t $a" co% t s$:p"' a&a ded :o a" da:a9es $n the d$spos$t$#e po t$on o( $ts dec$s$on. )23+ Mo eo#e , as a 9ene a" th%s: %"e, :o a" da:a9es a e not a&a ded to a co po at$on,

The a&a d o( :o a" da:a9es cannot !e 9 anted $n (a#o o( a co po at$on !eca%se, !e$n9 an a t$($c$a" pe son and ha#$n9 eB$stence on"' $n "e9a" conte:p"at$on, $t has no (ee"$n9s, no e:ot$ons, no senses. It cannot, the e(o e, eBpe $ence ph's$ca" s%((e $n9 and :enta" an9%$sh, &h$ch can !e eBpe $enced on"' !e one ha#$n9 a ne #o%s s'ste:. The state:ent $n Peop"e #. Mane o and Ma:!%"ao L%:!e Co. #. PN; that a co po at$on :a' eco#e :o a" da:a9es $( $t >has a 9ood ep%tat$on that $s de!ased, es%"t$n9 $n soc$a" h%:$"$at$on> $s an o!$te d$ct%:. On th$s sco e a"one the a&a d (o da:a9es :%st !e set as$de, s$nce R;S $s a co po at$on. )26+ DHEREFORE, the Jo$nt Dec$s$on o( the Co% t o( Appea"s $n CA/0.R. C1 Nos. 23456 and 23578 $s AFFIRMED &$th MODIFICATION. The eBt a-%d$c$a" (o ec"os% e o( the chatte" :o t9a9e $s #a"$d &he eas the eBt a-%d$c$a" (o ec"os% e o( the ea" estate :o t9a9e $s #o$d. The a&a d o( :o a" da:a9es $s de"eted (o "ac, o( !as$s. No costs. SO ORDERED. Da#$de, J ., C.J., =Cha$ :an?, 1$t%9, Fna es/Sant$a9o, and AGc%na, JJ., conc% . [G. R. No. 126800. November 29, 1999] NATALIA P. BUSTAMANTE, petitioner vs. SPOUSES RO ITO !. ROSEL "#$ NORMA A. ROSEL, Respondents. RESOLUTION PAR O, J.% T&e '"(e be)ore *&e +o,r* -( " .e*-*-o# )or rev-e/ o# 'er*-or"r- 1 *o "##,0 *&e $e'-(-o# o) *&e +o,r* o) A..e"0(,2 rever(-#1 "#$ (e**-#1 "(-$e *&e $e'-(-o# o) *&e Re1-o#"0 Tr-"0 +o,r*, 2, $"*e$ November 10, 1992, 3,$1e Teo$oro P. Re1-#o. 2 4,e5o# +-*6, Br"#'& 87, -# "# "'*-o# )or (.e'-)-' .er)orm"#'e /-*& 'o#(-1#"*-o#. O# M"r'& 8, 1988, "* 4,e5o# +-*6, Norm" Ro(e0 e#*ere$ -#*o " 0o"# "1reeme#* /-*& .e*-*-o#er N"*"0-" B,(*"m"#*e "#$ &er 0"*e &,(b"#$ I(m"e0 +. B,(*"m"#*e, ,#$er *&e )o00o/-#1 *erm( "#$ 'o#$-*-o#(% 1. T&"* *&e borro/er( "re *&e re1-(*ere$ o/#er( o) " ."r'e0 o) 0"#$, ev-$e#'e$ b6 TRANS!ER +ERTI!I+ATE O! TITLE No. 80668, 'o#*"-#-#1 "# "re" o) !OUR 9UN RE T:ENT; T9REE <722= S4UARE Me*er(, more or 0e((, (-*,"*e$ "0o#1 +o#1re((-o#"0 Ave#,e. 2. T&"* *&e borro/er( /ere $e(-ro,( *o borro/ *&e (,m o) ONE 9UN RE T9OUSAN <P100,000.00= PESOS )rom *&e LEN ER, )or " .er-o$ o) */o <2= 6e"r(, 'o,#*e$ )rom M"r'& 1, 1988, /-*& "# -#*ere(* o)

EIG9TEEN <18>= PER+ENT .er "##,m, "#$ *o 1,"r"#*6 *&e ."6me#* *&ereo), *&e6 "re .,**-#1 "( " 'o00"*er"0 SE?ENT; <80= S4UARE METERS .or*-o#, -#'0,(-ve o) *&e "."r*me#* *&ere-#, o) *&e ")ore(*"*e$ ."r'e0 o) 0"#$, &o/ever, -# *&e eve#* *&e borro/er( )"-0 *o ."6, *&e 0e#$er &"( *&e o.*-o# *o b,6 or .,r'&"(e *&e 'o00"*er"0 )or " *o*"0 'o#(-$er"*-o# o) T:O 9UN RE T9OUSAN <P200,000.00= PESOS, -#'0,(-ve o) *&e borro/e$ "mo,#* "#$ -#*ere(* *&ere-#@ 2. T&"* *&e 0e#$er $o &ereb6 m"#-)e(* &er "1reeme#* "#$ 'o#)orm-*6 *o *&e .re'e$-#1 ."r"1r".&, /&-0e *&e borro/er( $o &ereb6 'o#)e(( re'e-.* o) *&e borro/e$ "mo,#*.7 :&e# *&e 0o"# /"( "bo,* *o m"*,re o# M"r'& 1, 1989, re(.o#$e#*( .ro.o(e$ *o b,6 "* *&e .reA(e* .r-'e o) P200,000.00, *&e (eve#*6 <80= (B,"re me*er( ."r'e0 o) 0"#$ 'overe$ b6 T+T No. 80668, 1-ve# "( 'o00"*er"0 *o 1,"r"#*ee ."6me#* o) *&e 0o"#. Pe*-*-o#er, &o/ever, re),(e$ *o (e00 "#$ reB,e(*e$ )or eC*e#(-o# o) *-me *o ."6 *&e 0o"# "#$ o))ere$ *o (e00 *o re(.o#$e#*( "#o*&er re(-$e#*-"0 0o* 0o'"*e$ "* Ro"$ 20, ProDe'* 8, 4,e5o# +-*6, /-*& *&e .r-#'-."0 0o"# .0,( -#*ere(* *o be ,(e$ "( $o/# ."6me#*. Re(.o#$e#*( re),(e$ *o eC*e#$ *&e ."6me#* o) *&e 0o"# "#$ *o "''e.* *&e 0o* -# Ro"$ 20 "( -* /"( o'',.-e$ b6 (B,"**er( "#$ .e*-*-o#er "#$ &er &,(b"#$ /ere #o* *&e o/#er( *&ereo) b,* /ere mere 0"#$ $eve0o.er( e#*-*0e$ *o (,b$-v-(-o# (&"re( or 'omm-((-o# -) "#$ /&e# *&e6 $eve0o.e$ "* 0e"(* o#e &"0) o) *&e (,b$-v-(-o# "re". E 9e#'e, o# M"r'& 1, 1989, .e*-*-o#er *e#$ere$ ."6me#* o) *&e 0o"# *o re(.o#$e#*( /&-'& *&e 0"**er re),(e$ *o "''e.*, -#(-(*-#1 o# .e*-*-o#er( (-1#-#1 " .re."re$ $ee$ o) "b(o0,*e ("0e o) *&e 'o00"*er"0. O# !ebr,"r6 28, 1990, re(.o#$e#*( )-0e$ /-*& *&e Re1-o#"0 Tr-"0 +o,r*, 4,e5o# +-*6, Br"#'& 87, " 'om.0"-#* )or (.e'-)-' .er)orm"#'e /-*& 'o#(-1#"*-o# "1"-#(* .e*-*-o#er "#$ &er (.o,(e. 6 Never*&e0e((, o# M"r'& 7, 1990, re(.o#$e#*( (e#* " $em"#$ 0e**er "(F-#1 .e*-*-o#er *o (e00 *&e 'o00"*er"0 .,r(,"#* *o *&e o.*-o# *o b,6 embo$-e$ -# *&e 0o"# "1reeme#*. O# *&e o*&er &"#$, o# M"r'& E, 1990, .e*-*-o#er )-0e$ -# *&e Re1-o#"0 Tr-"0 +o,r*, 4,e5o# +-*6 " .e*-*-o# )or 'o#(-1#"*-o#, "#$ $e.o(-*e$ *&e "mo,#* o) P1E2,000.00 /-*& *&e +-*6 Tre"(,rer o) 4,e5o# +-*6 o# A,1,(* 10, 1990.8 :&e# .e*-*-o#er re),(e$ *o (e00 *&e 'o00"*er"0 "#$ b"r"#1"6 'o#'-0-"*-o# )"-0e$, re(.o#$e#*( 'o#(-1#e$ *&e "mo,#* o) P78,E00.00 /-*& *&e *r-"0 'o,r*.8 I# "rr-v-#1 "* *&e "mo,#* $e.o(-*e$, re(.o#$e#*( 'o#(-$ere$ *&e .r-#'-."0 0o"# o) P100,000.00 "#$ 18> -#*ere(* .er "##,m *&ereo#, /&-'& "mo,#*e$ *o PE2,E00.00.9 T&e .r-#'-."0 0o"# "#$ *&e -#*ere(* *"Fe# *o1e*&er "mo,#*e$ *o P1E2,E00.00, 0e"v-#1 " b"0"#'e o) P 78,E00.00.10 A)*er $,e *r-"0, o# November 10, 1992, *&e *r-"0 'o,r* re#$ere$ $e'-(-o# &o0$-#1% :9ERE!ORE, .rem-(e( 'o#(-$ere$, D,$1me#* -( &ereb6 re#$ere$ "( )o00o/(% 1. e#6-#1 *&e .0"-#*-))( .r"6er )or *&e $e)e#$"#*( eCe',*-o# o) *&e ee$ o) S"0e *o +o#ve6 *&e 'o00"*er"0 -# .0"-#*-))( )"vor@ 2. Or$er-#1 *&e $e)e#$"#*( *o ."6 *&e 0o"# o) P100,000.00 /-*& -#*ere(* *&ereo# "* 18> .er "##,m 'omme#'-#1 o# M"r'& 2, 1989, ,. *o "#$ ,#*-0 A,1,(* 10, 1990, /&e# $e)e#$"#*( $e.o(-*e$ *&e "mo,#* /-*& *&e O))-'e o) *&e +-*6 Tre"(,rer ,#$er O))-'-"0 Re'e-.* No. 0116E78 <EC&-b-* 2=@ "#$ 2. To ."6 A**or#e6( !ee( -# *&e "mo,#* o) P E,000.00, .0,( 'o(*( o) (,-*. SO OR ERE . 4,e5o# +-*6, P&-0-..-#e(, November 10, 1992.

TEO ORO P. REGINO 3,$1e11 O# November 16, 1992, re(.o#$e#*( "..e"0e$ )rom *&e $e'-(-o# *o *&e +o,r* o) A..e"0(. 12 O# 3,06 8, 1996, *&e +o,r* o) A..e"0( re#$ere$ $e'-(-o# rever(-#1 *&e r,0-#1 o) *&e Re1-o#"0 Tr-"0 +o,r*. T&e $-(.o(-*-ve .or*-o# o) *&e +o,r* o) A..e"0( $e'-(-o# re"$(% IN ?IE: O! T9E !OREGOING, *&e D,$1me#* "..e"0 <(-'= )rom -( RE?ERSE "#$ SET ASI E "#$ " #e/ o#e e#*ere$ -# )"vor o) *&e .0"-#*-))( or$er-#1 *&e $e)e#$"#*( *o "''e.* *&e "mo,#* o) P 78,000.00 $e.o(-*e$ /-*& *&e +0erF o) +o,r* o) Re1-o#"0 Tr-"0 +o,r* o) 4,e5o# +-*6 ,#$er O))-'-"0 Re'e-.* No. 0819878, "#$ )or $e)e#$"#*( *o eCe',*e *&e #e'e(("r6 ee$ o) S"0e -# )"vor o) *&e .0"-#*-))( over *&e 80 S4UARE METER .or*-o# "#$ *&e "."r*me#* (*"#$-#1 *&ereo# be-#1 o'',.-e$ b6 *&e .0"-#*-))( "#$ 'overe$ b6 T+T No. 80668 /-*&-# )-)*ee# <1E= $"6( )rom )-#"0-*6 &ereo). e)e#$"#*(, -# *,r#, "re "00o/e$ *o /-*&$r"/ *&e "mo,#* o) P1E2,000.00 $e.o(-*e$ b6 *&em ,#$er O))-'-"0 Re'e-.* No. 0116E78 o) *&e +-*6 Tre"(,rer( O))-'e o) 4,e5o# +-*6. A00 o*&er '0"-m( "#$ 'o,#*er'0"-m( "re ISMISSE , )or 0"'F o) (,))-'-e#* b"(-(. No 'o(*(. SO OR ERE .12 9e#'e, *&-( .e*-*-o#.17 O# 3"#,"r6 20, 1998, /e reB,-re$ re(.o#$e#*( *o 'omme#* o# *&e .e*-*-o# /-*&-# *e# <10= $"6( )rom #o*-'e. 1E O# !ebr,"r6 28, 1998, re(.o#$e#*( )-0e$ *&e-r 'omme#*. 16 O# !ebr,"r6 9, 1998, /e re(o0ve$ *o $e#6 *&e .e*-*-o# o# *&e 1ro,#$ *&"* *&ere /"( #o rever(-b0e error o# *&e ."r* o) re(.o#$e#* 'o,r* -# or$er-#1 *&e eCe',*-o# o) *&e #e'e(("r6 $ee$ o) ("0e -# 'o#)orm-*6 *&e /-*& *&e ."r*-e( (*-.,0"*e$ "1reeme#*. T&e 'o#*r"'* -( *&e 0"/ be*/ee# *&e ."r*-e( *&ereo) < Syjuco v. Court of Appeals, 182 S+RA 111, 118, '-*-#1 Phil. American General Insurance v. Mutuc, 61 S+RA 22@ errera v. Petrophil Corporation, 176 S+RA 260=.18 O# M"r'& 18, 1998, .e*-*-o#er )-0e$ /-*& *&-( +o,r* " mo*-o# )or re'o#(-$er"*-o# o) *&e $e#-"0 "00e1-#1 *&"* *&e re"0 -#*e#*-o# o) *&e ."r*-e( *o *&e 0o"# /"( *o .,* ,. *&e 'o00"*er"0 "( 1,"r"#*ee (-m-0"r *o "# eB,-*"b0e mor*1"1e "''or$-#1 *o Ar*-'0e 1602 o) *&e +-v-0 +o$e.18 O# A.r-0 21, 1998, re(.o#$e#*( )-0e$ "# o..o(-*-o# *o .e*-*-o#er( mo*-o# )or re'o#(-$er"*-o#. T&e6 'o#*e#$ *&"* *&e "1reeme#* be*/ee# *&e ."r*-e( /"( #o* " ("0e /-*& r-1&* o) reA.,r'&"(e, b,* " 0o"# /-*& -#*ere(* "* 18> .er "##,m )or " .er-o$ o) */o 6e"r( "#$ -) .e*-*-o#er )"-0( *o ."6, *&e re(.o#$e#* /"( 1-ve# *&e r-1&* *o .,r'&"(e *&e .ro.er*6 or "."r*me#* )or P200,000.00, /&-'& -( #o* 'o#*r"r6 *o 0"/, mor"0(, 1oo$ ',(*om(, .,b0-' or$er or .,b0-' .o0-'6. 19 U.o# $,e 'o#(-$er"*-o# o) .e*-*-o#er( mo*-o#, /e #o/ re(o0ve *o 1r"#* *&e mo*-o# )or re'o#(-$er"*-o#. T&e B,e(*-o#( .re(e#*e$ "re /&e*&er .e*-*-o#er )"-0e$ *o ."6 *&e 0o"# "* -*( m"*,r-*6 $"*e "#$ /&e*&er *&e (*-.,0"*-o# -# *&e 0o"# 'o#*r"'* /"( v"0-$ "#$ e#)or'e"b0e. :e r,0e *&"* .e*-*-o#er $-$ #o* )"-0 *o ."6 *&e 0o"#. T&e 0o"# /"( $,e )or ."6me#* o# M"r'& 1, 1989. O# ("-$ $"*e, .e*-*-o#er *e#$ere$ ."6me#* *o (e**0e *&e 0o"# /&-'& re(.o#$e#*( re),(e$ *o "''e.*, -#(-(*-#1 *&"* .e*-*-o#er (e00 *o *&em *&e 'o00"*er"0 o) *&e 0o"#. :&e# re(.o#$e#*( re),(e$ *o "''e.* ."6me#*, .e*-*-o#er 'o#(-1#e$ *&e "mo,#* /-*& *&e *r-"0 'o,r*.

:e #o*e *&e e"1er#e(( o) re(.o#$e#*( *o "'B,-re *&e .ro.er*6 1-ve# "( 'o00"*er"0 *o 1,"r"#*ee *&e 0o"#. T&e ("0e o) *&e 'o00"*er"0 -( "# ob0-1"*-o# /-*& " (,(.e#(-ve 'o#$-*-o#.20 I* -( $e.e#$e#* ,.o# *&e &"..e#-#1 o) "# eve#*, /-*&o,* /&-'& *&e ob0-1"*-o# *o (e00 $oe( #o* "r-(e. S-#'e *&e eve#* $-$ #o* o'',r, re(.o#$e#*( $o #o* &"ve *&e r-1&* *o $em"#$ ),0)-00me#* o) .e*-*-o#er( ob0-1"*-o#, e(.e'-"006 /&ere *&e ("me /o,0$ #o* o#06 be $-("$v"#*"1eo,( *o .e*-*-o#er b,* /o,0$ "0(o ,#D,(*06 e#r-'& re(.o#$e#*( 'o#(-$er-#1 *&e -#"$eB,"*e 'o#(-$er"*-o# <P200,000.00= )or " 80 (B,"re me*er .ro.er*6 (-*,"*e$ "* +o#1re((-o#"0 Ave#,e, 4,e5o# +-*6. Re(.o#$e#*( "r1,e *&"* 'o#*r"'*( &"ve *&e )or'e o) 0"/ be*/ee# *&e 'o#*r"'*-#1 ."r*-e( "#$ m,(* be 'om.0-e$ /-*& -# 1oo$ )"-*&.21 T&ere "re, &o/ever, 'er*"-# eC'e.*-o#( *o *&e r,0e, (.e'-)-'"006 Ar*-'0e 1206 o) *&e +-v-0 +o$e, /&-'& .rov-$e(% Article !"#$. T&e 'o#*r"'*-#1 ."r*-e( m"6 e(*"b0-(& (,'& (*-.,0"*-o#(, '0",(e(, *erm( "#$ 'o#$-*-o#( "( *&e6 m"6 $eem 'o#ve#-e#*, .rov-$e$ *&e6 "re #o* 'o#*r"r6 *o 0"/, mor"0(, 1oo$ ',(*om(, .,b0-' or$er, or .,b0-' .o0-'6. A ('r,*-#6 o) *&e (*-.,0"*-o# o) *&e ."r*-e( reve"0( " (,b*0e -#*e#*-o# o) *&e 're$-*or *o "'B,-re *&e .ro.er*6 1-ve# "( (e',r-*6 )or *&e 0o"#. T&-( -( embr"'e$ -# *&e 'o#'e.* o) pactum commissorium, /&-'& -( .ro('r-be$ b6 0"/.22 T&e e0eme#*( o) pactum commissorium "re "( )o00o/(% <1= *&ere (&o,0$ be " .ro.er*6 mor*1"1e$ b6 /"6 o) (e',r-*6 )or *&e ."6me#* o) *&e .r-#'-."0 ob0-1"*-o#, "#$ <2= *&ere (&o,0$ be " (*-.,0"*-o# )or ",*om"*-' "..ro.r-"*-o# b6 *&e 're$-*or o) *&e *&-#1 mor*1"1e$ -# '"(e o) #o#A."6me#* o) *&e .r-#'-."0 ob0-1"*-o# /-*&-# *&e (*-.,0"*e$ .er-o$.22 I# N"F.-0 v(. I#*erme$-"*e A..e00"*e +o,r*,27 /e ("-$% T&e "rr"#1eme#* e#*ere$ -#*o be*/ee# *&e ."r*-e(, /&ereb6 Pulon% Maulap /"( *o be 'o#(-$ere$ (o0$ *o &-m <re(.o#$e#*= CCC -# '"(e .e*-*-o#er )"-0( *o re-mb,r(e ?"0$e(, m,(* *&e# be 'o#(*r,e$ "( *"#*"mo,#* *o pactum commissorium /&-'& -( eC.re((06 .ro&-b-*e$ b6 Ar*. 2088 o) *&e +-v-0 +o$e. !or, *&ere /"( *o be ",*om"*-' "..ro.r-"*-o# o) *&e .ro.er*6 b6 ?"0$e( -# *&e eve#* o) )"-0,re o) .e*-*-o#er *o ."6 *&e v"0,e o) *&e "$v"#'e(. T&,(, 'o#*r"r6 *o re(.o#$e#*( m"#-)e(*"*-o#, "00 *&e e0eme#*( o) " ."'*,m 'omm-((or-,m /ere .re(e#*% *&ere /"( " 're$-*orA$eb*or re0"*-o#(&-. be*/ee# *&e ."r*-e(@ *&e .ro.er*6 /"( ,(e$ "( (e',r-*6 )or *&e 0o"#@ "#$ *&ere /"( ",*om"*-' "..ro.r-"*-o# b6 re(.o#$e#* o) Pulon% Maulap -# '"(e o) $e)",0* o) .e*-*-o#er. A (-1#-)-'"#* *"(F -# 'o#*r"'* -#*er.re*"*-o# -( *&e "('er*"-#me#* o) *&e -#*e#*-o# o) *&e ."r*-e( "#$ 0ooF-#1 -#*o *&e /or$( ,(e$ b6 *&e ."r*-e( *o .roDe'* *&"* -#*e#*-o#. I# *&-( '"(e, *&e -#*e#* *o "..ro.r-"*e *&e .ro.er*6 1-ve# "( 'o00"*er"0 -# )"vor o) *&e 're$-*or "..e"r( *o be ev-$e#*, )or *&e $eb*or -( ob0-1e$ *o $-(.o(e o) *&e 'o00"*er"0 "* *&e .reA"1ree$ 'o#(-$er"*-o# "mo,#*-#1 *o .r"'*-'"006 *&e ("me "mo,#* "( *&e 0o"#. I# e))e'*, *&e 're$-*or "'B,-re( *&e 'o00"*er"0 -# *&e eve#* o) #o# ."6me#* o) *&e 0o"#. T&-( -( /-*&-# *&e 'o#'e.* o) pactum commissorium. S,'& (*-.,0"*-o# -( vo-$.2E A00 .er(o#( -# #ee$ o) mo#e6 "re 0-"b0e *o e#*er -#*o 'o#*r"'*,"0 re0"*-o#(&-.( /&"*ever *&e 'o#$-*-o# -) o#06 *o "00ev-"*e *&e-r )-#"#'-"0 b,r$e# "0be-* *em.or"r-06. 9e#'e, 'o,r*( "re $,*6 bo,#$ *o eCer'-(e '",*-o# -# *&e -#*er.re*"*-o# "#$ re(o0,*-o# o) 'o#*r"'*( 0e(* *&e 0e#$er( $evo,r *&e borro/er( 0-Fe v,0*,re( $o /-*& *&e-r .re6. :9ERE!ORE, /e GRANT .e*-*-o#er( mo*-o# )or re'o#(-$er"*-o# "#$ SET ASI E *&e +o,r*( re(o0,*-o# o) !ebr,"r6 9, 1998. :e RE?ERSE *&e $e'-(-o# o) *&e +o,r* o) A..e"0( -# +AAG. R. +? No. 70192. I# 0-e, *&ereo), /e &ereb6 ISMISS *&e 'om.0"-#* -# +-v-0 +"(e No. 4A90A7812. No 'o(*(.

SO OR ERE . &avide, Jr., C.J., Puno, 'apunan, and (nares)Santia%o, JJ., concur.

2G.R. No. 132287

January 24, 2006

SPOUSES BONIFACIO an FAUS!INA PARA", an #I$A% ESPE%E!A, Petitioners, vs. $RA. AB$U%IA C. RO$RIGUE&, 'IGUE%A R. JARIO% a(()(*+ ,y -+r -u(,an AN!O%IN JARIO%, SR., %EONORA NO%ASCO a(()(*+ ,y -+r -u(,an FE%ICIANO NO%ASCO, $O%ORES SOBERANO a(()(*+ ,y -+r -u(,an JOSE SOBERANO, JR., JU%IA R. GENEROSO, !ERESI!A R. NA!I#I$A$ an GENO#E#A R. SORONIO a(()(*+ ,y -+r -u(,an A%FONSO SORONIO, Respondents. DECISION !INGA, J.: The assailed decision of the Court of Appeals too off on the pre!ise that pled"ed shares of stoc auctioned off in a notarial sale could still #e redee!ed #$ their o%ners. This notion is %ron", and %e thus reverse. The facts, as culled fro! the record, follo%. &espondents %ere the o%ners, in their respective personal capacities, of shares of stoc in a corporation no%n as the 'uirino()eonor(&odri"ue* &ealt$ Inc. 1 So!eti!e durin" the $ears 1+,+ to 1+-., respondents secured #$ %a$ of pled"e of so!e of their shares of stoc to petitioners /onifacio and 0austina Para$ 12Para$s23 the pa$!ent of certain loan o#li"ations. The shares pled"ed are listed #elo%4 5i"uel &odri"ue* 6ariol 7.1,... shares covered #$ Stoc Certifi( cates No. .11, .8., .81 9 .82: A#dulia C. &odri"ue* 7. ;.. shares covered #$ Stoc Certificates No. .2; 9 .+;: )eonora &. Nolasco 7.. <., shares covered #$ Stoc Certificates No. .+1 9 .+2: =enoveva Soronio7. 8++ shares covered #$ Stoc Certificates No. .2>, .>+ 9 .++: Dolores &. So#erano7. 8++ shares covered #$ Stoc Certificates

No. .21, .>;, .22 9 .+,: 6ulia =eneroso 7.. 1,1.. shares covered #$ Stoc Certificates No. .->, .>1, .-8 9 .-<: Teresita Natividad7.. <<. shares covered #$ Stoc Certificates Nos. .>< 9 .>>2 ?hen the Para$s atte!pted to foreclose the pled"es on account of respondents@ failure to pa$ their loans, respondents filed co!plaints %ith the &e"ional Trial Court 1&TC3 of Ce#u Cit$. The actions, %hich %ere consolidated and tried #efore &TC /ranch 1<, Ce#u Cit$, sou"ht the declaration of nullit$ of the pled"e a"ree!ents, a!on" others. Ao%ever the &TC, in its decision; dated 1< Octo#er 1+--, dis!issed the co!plaint and "ave 2due course to the foreclosure and sale at pu#lic auction of the various pled"es su#Bect of these t%o cases.2< This decision attained finalit$ after it %as affir!ed #$ the Court of Appeals and the Supre!e Court. The Entr$ of 6ud"!ent %as issued on 1< Au"ust 1++1. &espondents then received Notices of Sale %hich indicated that the pled"ed shares %ere to #e sold at pu#lic auction on < Nove!#er 1++1. Ao%ever, #efore the scheduled date of auction, all of respondents caused the consi"nation %ith the &TC Cler of Court of various a!ounts. It %as clai!ed that respondents had atte!pted to tender these pa$!ents to the Para$s, #ut had #een re#uffed. The deposited a!ounts %ere as follo%s4 A#dulia C. &odri"ue*.. P 12.,.88.88 .. 1< Oct. 1++1 )eonora &. Nolasco 7. 2,,,;-1.-2 .. 1< Oct. 1++1 =enoveva &. Soronio 7 <2>,;>;.>. .. 1< Oct. 1++1 ;-,;->.<< .. 1< Oct. 1++1 6ulia &. =eneroso 77.. 8;-,;->... .. 2> Oct. 1++1 Teresita &. Natividad 7. 28<,;,>... .. 11 Nov. 1++1 Dolores &. So#erano 7.. 12,.;1.81.. 2> Oct. 1++1 >2.,218.;+ ..11 Nov. 1++1 5i"uela 6ariol 7. <+.,........ 1- Oct. 1++1 --,...... ..1- Oct. 1++1>

Not%ithstandin" the consi"nations, the pu#lic auction too place as scheduled, %ith petitioner Cidal Espeleta successfull$ #iddin" the a!ount of P8,2..,...... for all of the pled"ed shares. None of respondents participated or appeared at the auction of < Nove!#er 1++1. &espondents instead filed on 1; Nove!#er 1++1 a co!plaint see in" the declaration of nullit$ of the concluded pu#lic auction. The co!plaint, doc eted as Civil Case No. CE/(1.+28, %as assi"ned to /ranch 18 of the Ce#u Cit$ &TC. &espondents ar"ued that their tender of pa$!ent and su#seDuent consi"nations served to eEtin"uish their loan o#li"ations and dischar"ed the pled"e contracts. Petitioners countered that the auction sale %as conducted pursuant to the final and eEecutor$ Bud"!ent in Civil Cases Nos. &(2.12. and 2.1;1, and that the tender of pa$!ent and consi"nations %ere !ade lon" after their o#li"ations had fallen due. The Ce#u Cit$ &TC dis!issed the co!plaint, eEpressin" a"ree!ent %ith the position of the Para$s.8 It held, a!on" others that respondents had failed to tender or consi"n pa$!ents %ithin a reasona#le period after default and that the proper re!ed$ of respondents %as to have participated in the auction sale., The Court of Appeals Ei"hth Division ho%ever reversed the &TC on appeal, rulin" that the consi"nations eEtin"uished the loan o#li"ations and the su#Bect pled"e contracts: and the auction sale of < Nove!#er 1++1 as null and void.- 5ost cruciall$, the appellate court chose to uphold the sufficienc$ of the consi"nations o%in" to an i!puted polic$ of the la% that favored rede!ption and !andated a li#eral construction to rede!ption la%s. The atte!pts at pa$!ent #$ respondents %ere characteri*ed as !ade in the eEercise of the ri"ht of rede!ption. The Court of Appeals li e%ise found fault %ith the auction sale, holdin" that there %as a need to individuall$ sell the various shares of stoc as the$ had #elon"ed to different pled"ors. Thus, it %as o#served that the !inutes of the auction sale should have specified in detail the #ids su#!itted for each of the shares of the pled"ors for the purpose of no%in" the price to #e paid #$ the different pled"ors upon rede!ption of the auctioned sales of stoc . Petitioners no% ar"ue #efore this Court that the$ %ere authori*ed to refuse as the$ did the tender of pa$!ent since the$ %ere underta in" the auction sale pursuant to the final and eEecutor$ decision in Civil Cases Nos. &(2.12. and 2.1;1, %hich did not authori*e the pa$!ent of the principal o#li"ation #$ respondents. The$ point out that the a!ounts consi"ned could not eEtin"uish the principal loan o#li"ations of respondents since the$ %ere not sufficient to cover the interests due on the de#t. The$ li e%ise ar"ue that the essential procedural reDuisites for the auction sale had #een satisfied. ?e rule in favor of petitioners. The funda!ental pre!ise fro! %hich the appellate court proceeded %as that the consi"nations !ade #$ respondents should #e construed in li"ht of the rules of

rede!ption, as if respondents %ere eEercisin" such ri"ht. In that perspective, the Court of Appeals !ade three crucial conclusions favora#le to respondents4 that their act of consi"nin" the pa$!ents %ith the &TC should #e dee!ed done in the eEercise of their ri"ht of rede!ption: that the #u$er at pu#lic auction does not ipso facto #eco!e the o%ner of the pled"ed shares pendin" the lapse of the one( $ear rede!ptive period: and that the collective sale of the shares of stoc #elon"in" to several individual o%ners %ithout specification of the apportion!ent in the applications of pa$!ent deprives the individual o%ners of the opportunit$ to no% of the price the$ %ould have to pa$ for the purpose of eEercisin" the ri"ht of rede!ption. The appellate court@s d%ellin" on the ri"ht of rede!ption is utterl$ off(tan"ent. The ri"ht of rede!ption involves pa$!ents !ade #$ de#tors after the foreclosure of their properties, and not those !ade or atte!pted to #e !ade, as in this case, #efore the foreclosure sale. The proper focus of the Court of Appeals should have #een %hether the consi"nations !ade #$ respondents sufficientl$ acDuitted the! of their principal o#li"ations. A pled"e contract is an accessor$ contract, and is necessaril$ dischar"ed if the principal o#li"ation is eEtin"uished. Nonetheless, the Court is no% confronted %ith this rather ne% fan"led theor$, as propounded #$ the Court of Appeals, involvin" the ri"ht of rede!ption over pled"ed properties. ?e have no hesitation in pronouncin" such theor$ as discredita#le. Preli!inaril$, it !ust #e clarified that the su#Bect sale of pled"ed shares %as an eEtraBudicial sale, specificall$ a notarial sale, as distin"uished fro! a Budicial sale as t$pified #$ an eEecution sale. Fnder the Civil Code, the foreclosure of a pled"e occurs eEtraBudiciall$, %ithout intervention #$ the courts. All the creditor needs to do, if the credit has not #een satisfied in due ti!e, is to proceed #efore a Notar$ Pu#lic to the sale of the thin" pled"ed.+ In this case, petitioners atte!pted as earl$ as 1+-. to proceed eEtraBudiciall$ %ith the sale of the pled"ed shares #$ pu#lic auction. Ao%ever, eEtraBudicial sale %as sta$ed %ith the filin" of Civil Cases No. &(2.12. and 2.1;1, %hich sou"ht to annul the pled"e contracts. The final and eEecutor$ Bud"!ent in those cases affir!ed the pled"e contracts and disposed the! in the follo%in" fashion4 ?AE&E0O&E, pre!ises considered, Bud"!ent is here#$ rendered dis!issin" the co!plaints at #ar, and G 113 Declarin" the various pled"es covered in Civil Cases Nos. &(2.12. and &(2.1;1 valid and effective: and 123 =ivin" due course to the foreclosure and sale at pu#lic auction of the various pled"es su#Bect of these t%o cases. Costs a"ainst the plaintiffs.

SO O&DE&ED.1. The phrase 2"ivin" due course to the foreclosure and sale at pu#lic auction of the various pled"es su#Bect of these t%o cases2 !a$ "ive rise to the i!pression that such sale is Budicial in character. ?hile the decision did authori*e the sale #$ pu#lic auction, such declaration could not detract fro! the fact that the sale so authori*ed is actuall$ eEtraBudicial in character. Note that the final Bud"!ent in said cases eEpressl$ did not direct the sale #$ pu#lic auction of the pled"ed shares, #ut instead upheld the ri"ht of the Para$s to conduct such sale at their o%n volition. Indeed, as affir!ed #$ the Civil Code,11 the decision to proceed %ith the sale #$ pu#lic auction re!ains in the sole discretion of the Para$s, %ho could ver$ %ell choose not to hold the sale %ithout violatin" the final Bud"!ents in the afore!entioned civil cases. If the sale %ere trul$ in co!pliance %ith a final Bud"!ent or order, the Para$s %ould have no choice #ut to sta"e the sale for then the order directin" the sale arises fro! Budicial co!pulsion. /ut nothin" in the dispositive portion directed the sale at pu#lic auction as a !andator$ recourse, and properl$ so since the sale of pled"ed propert$ in pu#lic auction is, #$ virtue of the Civil Code, eEtraBudicial in character. The ri"ht of rede!ption as affir!ed under &ule ;+ of the &ules of Court applies onl$ to eEecution sales, !ore precisel$ eEecution sales of real propert$. The Court of Appeals eEpressl$ asserted the notion that pled"ed propert$, necessaril$ personal in character, !a$ #e redee!ed #$ the creditor after #ein" sold at pu#lic auction. Het, as a funda!ental !atter, does the ri"ht of rede!ption eEist over personal propert$I No la% or Burisprudence esta#lishes or affir!s such ri"ht. Indeed, no such ri"ht eEists. The ri"ht to redee! propert$ sold as securit$ for the satisfaction of an unpaid o#li"ation does not eEist preternaturall$. Neither is it predicated on proprietar$ ri"ht, %hich, after the sale of propert$ on eEecution, leaves the Bud"!ent de#tor and vests in the purchaser. Instead, it is a #are statutor$ privile"e to #e eEercised onl$ #$ the persons na!ed in the statute.12 The ri"ht of rede!ption over !ort"a"ed real propert$ sold eEtraBudiciall$ is esta#lished #$ Act No. ;1;>, as a!ended. The said la% does not eEtend the sa!e #enefit to personal propert$. In fact, there is no la% in our statute #oo s %hich vests the ri"ht of rede!ption over personal propert$. Act No. 1>.-, or the Chattel 5ort"a"e )a%, ostensi#l$ could have served as the vehicle for an$ le"islative intent to #esto% a ri"ht of rede!ption over personal propert$, since that la% "overns the eEtraBudicial sale of !ort"a"ed personal propert$, #ut the statute is definitel$ silent on the point. And Section ;+ of the 1++, &ules of Civil Procedure, eEtensivel$ relied upon #$ the Court of Appeals, star l$ utters that the ri"ht of rede!ption applies to real properties, not personal properties, sold on eEecution.

Tellin"l$, this Court, as earl$ as 1+2,, reBected the proposition that personal propert$ !a$ #e covered #$ the ri"ht of rede!ption. In Sibal 1. v. Valdez,1; the Court ruled that su"ar cane crops are personal propert$, and thus, not su#Bect to the ri"ht of rede!ption.1< No countervailin" statute has #een enacted since then that %ould accord the ri"ht of rede!ption over personal propert$, hence the Court can affir! this decades(old rulin" as effective to date. Since the pled"ed shares in this case are not su#Bect to rede!ption, the Court of Appeals had no #usiness invo in" and appl$in" the ineEistent ri"ht of rede!ption. ?e cannot thus a"ree that the consi"ned pa$!ents should #e treated %ith li#eralit$, or so!eho% construed as havin" #een !ade in the eEercise of the ri"ht of rede!ption. ?e also !ust reBect the appellate court@s declaration that the #u$er of at the pu#lic auction is not 2ipso facto2 rendered the o%ner of the auctioned shares, since the de#tor enBo$s the one($ear rede!ptive period to redee! the propert$. O#viousl$, since there is no ri"ht to redee! personal propert$, the ri"hts of o%nership vested unto the purchaser at the foreclosure sale are not entan"led in an$ suspensive condition that is i!plicit in a rede!ptive period. The Court of Appeals also found fault %ith the apparent sale in #ul of the pled"ed shares, not%ithstandin" the fact that these shares %ere o%ned #$ several people, on the pre!ise the pled"ors %ould #e denied the opportunit$ to no% eEactl$ ho% !uch the$ %ould need to shoulder to eEercise the ri"ht to rede!ption. This concern is o#viousl$ rendered a non(issue #$ the fact that there can #e no ri"ht to rede!ption in the first place. &ule ;+ of the &ules of Court does provide for instances %hen properties foreclosed at the sa!e ti!e !ust #e sold separatel$, such as in the case of lot sales for real propert$ under Section 1+. Ao%ever, these instances a"ain pertain to eEecution sales and not eEtraBudicial sales. No provision in the &ules of Court or in an$ la% reDuires that pled"ed properties sold at auction #e sold separatel$. On the other hand, under the Civil Code, it is the pled"ee, and not the pled"or, %ho is "iven the ri"ht to choose %hich of the ite!s should #e sold if t%o or !ore thin"s are pled"ed.1> No si!ilar option is "iven to pled"ors under the Civil Code. 5oreover, there is nothin" in the Civil Code provisions "overnin" the eEtraBudicial sale of pled"ed properties that prohi#its the pled"ee of several different pled"e contracts fro! auctionin" all of the pled"ed properties on a sin"le occasion, or fro! the #u$er at the auction sale in purchasin" all the pled"ed properties %ith a sin"le purchase price. The relative insi"nificance of ascertainin" the definite apportion!ents of the sale price to the individual shares lies in the fact that once a pled"ed ite! is sold at auction, neither the pled"ee nor the pled"or can recover %hatever deficienc$ or eEcess there !a$ #e #et%een the purchase price and the a!ount of the principal o#li"ation.18 A different rulin" thou"h %ould o#tain if at the auction, a #idder eEpressed the desire to #id on a deter!inate nu!#er or portion of the pled"ed shares. In such a case, there !a$ lie the need to ascertain %ith particularit$ %hich of the shares are

covered #$ the #id price, since not all of the shares !a$ #e sold at the auction and correspondin"l$ not all of the pled"e contracts eEtin"uished. The sa!e situation also %ould lie if one or so!e of the o%ners of the pled"ed shares participated in the auction, #iddin" onl$ on their respective pled"ed shares. Ao%ever, in this case, none of the pled"ors participated in the auction, and the sole #idder cast his #id for all of the shares. There o#viousl$ is no lon"er an$ practical reason to apportion the #id price to the respective shares, since no !atter ho% sli"ht or si"nificant the value of the purchase price for the individual share is, the sale is co!pleted, %ith the pled"or and the pled"ee not entitled to recover the eEcess or the deficienc$, as the case !a$ #e. To invalidate the su#Bect auction solel$ on this point serves no cause other than to cele#rate for!alit$ for for!alit$@s sa e. Clearl$, the theor$ adopted #$ the Court of Appeals is in sha!#les, and cannot #e resurrected. The Duestion thou"h $et re!ains %hether the consi"nations !ade #$ respondents eEtin"uished their respective pled"e contracts in favor of the Para$s so as to enBoin the latter fro! auctionin" the pled"ed shares. There is no dou#t that if the principal o#li"ation is satisfied, the pled"es should #e ter!inated as %ell. Article 2.+- of the Civil Code provides that the ri"ht of the creditor to retain possession of the pled"ed ite! eEists onl$ until the de#t is paid. Article 21.> of the Civil Code further clarifies that the de#tor cannot as for the return of the thin" pled"ed a"ainst the %ill of the creditor, unless and until he has paid the de#t and its interest. At the sa!e ti!e, the ri"ht of the pled"ee to foreclose the pled"e is also esta#lished under the Civil Code. ?hen the credit has not #een satisfied in due ti!e, the creditor !a$ proceed %ith the sale #$ pu#lic auction under the procedure provided under Article 2112 of the Code. &espondents ar"ue that their various consi"nations !ade prior to the auction sale dischar"ed the! fro! the loan and the pled"e a"ree!ents. The$ are !ista en. Petitioners point out that %hile the a!ounts consi"ned #$ respondents could ans%er for their respective principal loan o#li"ations, the$ %ere not sufficient to cover the interests due on these loans, %hich %ere pe""ed at the rate of >J per !onth or 8.J per annu!. /efore this Court, respondents, save for Dolores So#erano, do not contest this interest rate as alle"ed #$ petitioners. So#erano, on the other hand, challen"es this interest rate as 2usurious.21, The particular pled"e contracts did not for! part of the records elevated to this Court. Ao%ever, the >J !onthl$ interest rate %as noted in the state!ent of facts in the 1< Octo#er 1+-- &TC Decision %hich had since #eco!e final. 5oreover, the said decision pronounced that even assu!in" that the interest rates of the various loans %ere >J per !onth, 2it is dou#tful %hether the interests so char"ed %ere eEor#itantl$ or eEcessivel$ usurious. This is #ecause for so!eti!e no%, usur$ has #eco!e Kle"all$ ineEistent.@21- The finalit$ of this 1+-- Decision is a settled fact, and thus the ti!e to challen"e the validit$ of the >J !onthl$ interest rate had lon" passed. ?ith that in !ind, there is no reason for the Court to

disa"ree %ith petitioners that in order that the consi"nation could have the effect of eEtin"uishin" the pled"e contracts, such a!ounts should cover not Bust the principal loans, #ut also the >J !onthl$ interests thereon. It #ears notin" that the Court of Appeals also ruled that respondents had satisfied the reDuire!ents under Section 1-, &ule ;+, %hich provides that the Bud"!ent o#li"or !a$ prevent the sale #$ pa$in" the a!ount reDuired #$ the eEecution and the costs that have #een incurred therein.1+ Ao%ever, the provision applies onl$ to eEecution sales, and not eEtra(Budicial sales, as evidenced #$ the use of the phrases 2sale of propert$ on eEecution2 and 2Bud"!ent o#li"or.2 The reference is inapropos, and even if it %ere applica#le, the failure of the pa$!ent to cover the interests due renders it insufficient to sta$ the sale. The effect of the finalit$ of the Bud"!ents in Civil Cases Nos. &(2.12. and &( 2.1;1 should also not #e discounted. Petitioners@ ri"ht to proceed %ith the auction sale %as affir!ed not onl$ #$ la%, #ut also #$ a final court Bud"!ent. An$ su#seDuent court rulin" that %ould enBoin the petitioners fro! eEercisin" such ri"ht %ould have the effect of supersedin" a final and eEecutor$ Bud"!ent. 0inall$, %e cannot help #ut o#serve that respondents !a$ have saved the!selves !uch trou#le if the$ si!pl$ participated in the auction sale, as the$ are per!itted to #id the!selves on their pled"ed properties.2. 5oreover, the$ %ould have had a #etter ri"ht had the$ !atched the ter!s of the hi"hest #idder.21 Fnder the circu!stances, %ith the hi"h interest pa$!ents that accrued after several $ears, respondents %ere even placed in a favora#le position #$ the pled"e a"ree!ents, since the creditor %ould #e una#le to recover an$ deficienc$ fro! the de#tors should the sale price #e insufficient to cover the principal a!ounts %ith interests. Certainl$, had respondents participated in the auction, there %ould have #een a chance for the! to recover the shares at a price lo%er than the a!ount that %as actuall$ due fro! the! to the Para$s. That respondents failed to avail of this #eneficial resort %holl$ accorded the! #$ la% is their loss. No%, all respondents can recover is the a!ounts the$ had consi"ned. ?AE&E0O&E, the petition is =&ANTED. The assailed decision of the Court of Appeals is SET ASIDE and the decision of the Ce#u Cit$ &TC, /ranch 18, dated 1Nove!#er 1++2 is &EINSTATED. Costs a"ainst respondents. SO O&DE&ED.

; < >

8 , + 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2