Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-22331

June 6, 1967

IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE

VENDEES OF A HOUSE AND THE RIGHTS TO A LOT.
MARIA BAUTISTA VDA. DE REYES, ET AL., vendeespetitioners-appellees.
RODOLFO LANUZA, vendor,
vs.
MARTIN DE LEON, intervenor-appellant.
Erasmo R. Cruz and C. R. Pascual for intervenorappellant.
Augusto J. Salas for vendees-petitioners-appellees.
REGALA, J.:
Rodolfo Lanuza and his wife Belen were the owners of a
two-story house built on a lot of the Maria Guizon
Subdivision in Tondo, Manila, which the spouses leased
from the Consolidated Asiatic Co. On January 12, 1961,
Lanuza executed a document entitled "Deed of Sale
with Right to Repurchase" whereby he conveyed to
Maria Bautista Vda. de Reyes and Aurelia R. Navarro
the house, together with the leasehold rights to the lot,
a television set and a refrigerator in consideration of
the sum of P3,000. The deed reads:
DEED OF SALE WITH RIGHT TO REPURCHASE KNOW
ALL MEN BY THESE PRESENTS:
That I, RODOLFO LANUZA, Filipino, of legal age,
married to Belen Geronimo, and residing at 783-D
Interior 14 Maria Guizon, Gagalangin, Tondo, Manila,
hereby declare that I am the true and absolute owner
of a new two storey house of strong materials,
constructed on a rented lot Lot No. 12 of the Maria
Guizon Subdivision, owned by the Consolidated Asiatic
Co. as evidenced by the attached Receipt No. 292,
and the plan of the subdivision, owned by said
company.
That for and in consideration of the sum of THREE
THOUSAND PESOS (P3,000.00) which I have received
this day from Mrs. Maria Bautista Vda. de Reyes,
Filipino, of legal age, widow; and Aurelia Reyes,
married to Jose S. Navarro, Filipinos, of legal ages, and
residing at 1112 Antipolo St., Tondo, Manila, I hereby
SELL, CEDE, TRANSFER, AND CONVEY unto said Maria
Bautista Vda. de Reyes, her heirs, succesors,
administrators and assigns said house, including my
right to the lot on which it was constructed, and also
my television, and frigidaire "Kelvinator" of nine cubic
feet in size, under the following conditions:
I hereby reserve for myself, my heirs, successors,
administrators, and assigns the right to repurchase the
above mentioned properties for the same amount of
P3,000.00, without interest, within the stipulated
period of three (3) months from the date hereof. If I fail
to pay said amount of P3,000.00, within the stipulated
period of three months, my right to repurchase the said
properties shall be forfeited and the ownership thereto
shall automatically pass to Mrs. Maria Bautista Vda. de
Reyes, her heirs, successors, administrators, and
assigns, without any Court intervention, and they can
take possession of the same.1wph1.t
IN WITNESS WHEREOF, we have signed this contract in
the City of Manila, this 12th day of January, 1961.
s/t RODOLFO LANUZA
Vendor s/t MARIA BAUTISTA VDA. DE REYES
Vendee
s/t AURELIA REYES
Vendee WITH MY MARITAL CONSENT:
s/t JOSE S. NAVARRO

When the original period of redemption expired, the

parties extended it to July 12, 1961 by an annotation to
this effect on the left margin of the instrument.
Lanuza's wife, who did not sign the deed, this time
signed her name below the annotation.
It appears that after the execution of this instrument,
Lanuza and his wife mortgaged the same house in
favor of Martin de Leon to secure the payment of
P2,720 within one year. This mortgage was executed
on October 4, 1961 and recorded in the Office of the
Register of Deeds of Manila on November 8, 1961
under the provisions of Act No. 3344.
As the Lanuzas failed to pay their obligation, De Leon
filed in the sheriff's office on October 5, 1962 a petition
for the extra-judicial foreclosure of the mortgage. On
the other hand, Reyes and Navarro followed suit by
filing in the Court of First Instance of Manila a petition
for the consolidation of ownership of the house on the
ground that the period of redemption expired on July
12, 1961 without the vendees exercising their right of
repurchase. The petition for consolidation of ownership
was filed on October 19. On October 23, the house was
sold to De Leon as the only bidder at the sheriffs sale.
De Leon immediately took possession of the house,
secured a discharge of the mortgage on the house in
favor of a rural bank by paying P2,000 and, on October
29, intervened in court and asked for the dismissal of
the petition filed by Reyes and Navarro on the ground
that the unrecorded pacto de retro sale could not affect
his rights as a third party.
The parties1 thereafter entered into a stipulation of
facts on which this opinion is mainly based and
submitted the case for decision. In confirming the
ownership of Reyes and Navarro in the house and the
leasehold right to the lot, the court said:
It is true that the original deed of sale with pacto de
retro, dated January 12, 1961, was not signed by Belen
Geronimo-Lanuza, wife of the vendor a retro, Rodolfo
Lanuza, at the time of its execution. It appears,
however, that on the occasion of the extension of the
period for repurchase to July 12, 1961, Belen
Geronimo-Lanuza signed giving her approval and
conformity. This act, in effect, constitutes ratification or
confirmation of the contract (Annex "A" Stipulation) by
Belen Geronimo-Lanuza, which ratification validated
the act of Rodolfo Lanuza from the moment of the
execution of the said contract. In short, such
ratification had the effect of purging the contract
(Annex "A" Stipulation) of any defect which it might
have had from the moment of its execution. (Article
1396, New Civil Code of the Philippines; Tang Ah Chan
and Kwong Koon vs. Gonzales, 52 Phil. 180)
Again, it is to be noted that while it is true that the
original contract of sale with right to repurchase in
favor of the petitioners (Annex "A" Stipulation) was not
signed by Belen Geronimo-Lanuza, such failure to sign,
to the mind of the Court, made the contract merely
voidable, if at all, and, therefore, susceptible of
ratification. Hence, the subsequent ratification of the
said contract by Belen Geronimo-Lanuza validated the
said contract even before the property in question was
mortgaged in favor of the intervenor.
It is also contended by the intervenor that the contract
of sale with right to repurchase should be interpreted
as a mere equitable mortgage. Consequently, it is
argued that the same cannot form the basis for a
judicial petition for consolidation of title over the
property in litigation. This argument is based on the
fact that the vendors a retro continued in possession of
the property after the execution of the deed of sale
with pacto de retro. The mere fact, however, that the
vendors a retro continued in the possession of the
property in question cannot justify an outright
declaration that the sale should be construed as an
equitable mortgage and not a sale with right to
repurchase. The terms of the deed of sale with right to

repurchase (Annex "A" Stipulation) relied upon by the

petitioners must be considered as merely an equitable
mortgage for the reason that after the expiration of the
period of repurchase of three months from January 12,
1961.
Article 1602 of the New Civil Code provides:
"ART. 1602. The contract shall be presumed to be in
equitable mortgage, in any of the following cases;
xxx

xxx

xxx

"(3) When upon or after the expiration of the right to

repurchase another instrument extending the period of
redemption or granting a new period is executed.
xxx

xxx

xxx

In the present case, it appears, however, that no other

instrument was executed between the parties
extending the period of redemption. What was done
was simply to annotate on the deed of sale with right
to repurchase (Annex "A" Stipulation) that "the period
to repurchase, extended as requested until July 12,
1961." Needless to say, the purchasers a retro, in the
exercise of their freedom to make contracts, have the
power to extend the period of repurchase. Such
extension is valid and effective as it is not contrary to
any provision of law. (Umale vs. Fernandez, 28 Phil. 89,
93)
The deed of sale with right to repurchase (Annex "A"
Stipulation) is embodied in a public document.
Consequently, the same is sufficient for the purpose of
transferring the rights of the vendors a retro over the
property in question in favor of the petitioners. It is to
be noted that the deed of sale with right to repurchase
(Annex "A" Stipulation) was executed on January 12,
1961, which was very much ahead in point of time to
the execution of the real estate mortgage on October
4, 1961, in favor of intervenor (Annex "B" Stipulation).
It is obvious, therefore, that when the mortgagors,
Rodolfo Lanuza and Belen Geronimo Lanuza, executed
the real estate mortgage in favor of the intervenor,
they were no longer the absolute owners of the
property since the same had already been sold a retro
to the petitioners. The spouses Lanuza, therefore,
could no longer constitute a valid mortgage over the
property inasmuch as they did not have any free
disposition of the property mortgaged. (Article 2085,
New Civil Code.) For a valid mortgage to exist,
ownership of the property mortgaged is an essential
requisite. A mortgage executed by one who is not the
owner of the property mortgaged is without legal
existence and the registration cannot validate.
(Philippine National Bank vs. Rocha, 55 Phil. 497).
The intervenor invokes the provisions of article 1544 of
the New Civil Code for the reason that while the real
estate mortgage in his favor (Annex "B" Stipulation)
has been registered with the Register of Deeds of
Manila under the provisions of Act No. 3344 on
November 3, 1961, the deed of sale with right to
repurchase (Annex "A" Stipulation) however, has not
been duly registered. Article 1544 of the New Civil
Code, however, refers to the sale of the same property
to two or more vendees. This provision of law,
therefore, is not applicable to the present case which
does not involve sale of the same property to two or
more vendees. Furthermore, the mere registration of
the property mortgaged in favor of the intervenor
under Act No. 3344 does not prejudice the interests of
the petitioners who have a better right over the
property in question under the old principle of first in
time, better in right. (Gallardo vs. Gallardo, C.B., 46
O.G. 5568)
De Leon appealed directly to this Court, contending (1)
that the sale in question is not only voidable but void
ab initio for having been made by Lanuza without the
consent of his wife; (2) that the pacto de retro sale is in

reality an equitable mortgage and therefore can not be

the basis of a petition for consolidation of ownership;
and (3) that at any rate the sale, being unrecorded,
cannot affect third parties.
We are in accord with the trial court's ruling that a
conveyance of real property of the conjugal partnership
made by the husband without the consent of his wife is
merely voidable. This is clear from article 173 of the
Civil Code which gives the wife ten years within which
to bring an action for annulment. As such it can be
ratified as Lanuza's wife in effect did in this case when
she gave her conformity to the extension of the period
of redemption by signing the annotation on the margin
of the deed. We may add that actions for the
annulment of voidable contracts can be brought only
by those who are bound under it, either principally or
subsidiarily (art. 1397), so that if there was anyone
who could have questioned the sale on this ground it
was Lanuza's wife alone.
We also agree with the lower court that between an
unrecorded sale of a prior date and a recorded
mortgage of a later date the former is preferred to the
latter for the reason that if the original owner had
parted with his ownership of the thing sold then he no
longer had the ownership and free disposal of that
thing so as to be able to mortgage it again.
Registration of the mortgage under Act No. 3344
would, in such case, be of no moment since it is
understood to be without prejudice to the better right
of third parties.2 Nor would it avail the mortgagee any
to assert that he is in actual possession of the property
for the execution of the conveyance in a public
instrument earlier was equivalent to the delivery of the
thing sold to the vendee.3
But there is one aspect of this case which leads us to a
different conclusion. It is a point which neither the
parties nor the trial court appear to have sufficiently
considered. We refer to the nature of the so-called
"Deed of Sale with Right to Repurchase" and the claim
that it is in reality an equitable mortgage. While De
Leon raised the question below and again in this Court
in his second assignment of error, he has not
demonstrated his point; neither has he pursued the
logical implication of his argument beyond stating that
a petition for consolidation of ownership is an
inappropriate remedy to enforce a mortgage.
De Leon based his claim that the pacto de retro sale is
actually an equitable mortgage on the fact that, first,
the supposed vendors (the Lanuzas) remained in
possession of the thing sold and, second, when the
three-month period of redemption expired the parties
extended it. These are circumstances which indeed
indicate an equitable mortgage.4 But their relevance
emerges only when they are seen in the perspective of
other circumstances which indubitably show that what
was intended was a mortgage and not a sale.These
circumstances are:
1. The gross inadequacy of the price. In the discussion
in the briefs of the parties as well as in the decision of
the trial court, the fact has not been mentioned that for
the price of P3,000, the supposed vendors "sold" not
only their house, which they described as new and as
being made of strong materials and which alone had
an assessed value of P4,000, but also their leasehold
right television set and refrigerator, "Kelvinator of nine
cubic feet in size." indeed, the petition for
consolidation of ownership is limited to the house and
the leasehold right, while the stipulation of facts of the
parties merely referred to the object of the sale as "the
property in question." The failure to highlight this point,
that is, the gross inadequacy of the price paid,
accounts for the error in determining the true
agreement of the parties to the deed.
2. The non-transmission of ownership to the vendees.
The Lanuzas, the supposed vendors did not really
transfer their ownership of the properties in question to

Reyes and Navarro. What was agreed was that

ownership of the things supposedly sold would vest in
the vendees only if the vendors failed to pay P3,000. In
fact the emphasis is on the vendors payment of the
amount rather than on the redemption of the things
supposedly sold. Thus, the deed recites that
If I (Lanuza) fail to pay said amount of P3,000.00 within
the stipulated period of three months, my right to
repurchase the said properties shall be forfeited and
the ownership thereto automatically pass to Mrs. Maria
Bautista Vda. de Reyes . . . without any Court
intervention and they can take possession of the same.
This stipulation is contrary to the nature of a true pacto
de retro sale under which a vendee acquires ownership
of the thing sold immediately upon execution of the
sale, subject only to the vendor's right of redemption.5
Indeed, what the parties established by this stipulation
is an odious pactum commissorium which enables the
mortgages to acquire ownership of the mortgaged
properties without need of foreclosure proceedings.
Needless to say, such a stipulation is a nullity, being
contrary to the provisions of article 2088 of the Civil
Code.6 Its insertion in the contract of the parties is an
avowal of an intention to mortgage rather than to sell.7
3. The delay in the filing of the petition for
consolidation. Still another point obviously overlooked
in the consideration of this case is the fact that the
period of redemption expired on July 12, 1961 and yet
this action was not brought until October 19, 1962 and
only after De Leon had asked on October 5, 1962 for
the extra-judicial for closure of his mortgage. All the
while, the Lanuzas remained in possession of the
properties they were supposed to have sold and they
remained in possession even long after they had lost
their right of redemption.
Under these circumstances we cannot but conclude
that the deed in question is in reality a mortgage. This
conclusion is of far-reaching consequence because it
means not only that this action for consolidation of
ownership is improper, as De Leon claims, but, what is
more that between the unrecorded deed of Reyes and
Navarro which we hold to be an equitable mortgage,
and the registered mortgage of De Leon, the latter
must be preferred. Preference of mortgage credits is
determined by the priority of registration of the
mortgages,8 following the maxim "Prior tempore potior
jure" (He who is first in time is preferred in right.)9
Under article 2125 of the Civil Code, the equitable
mortgage, while valid between Reyes and Navarro, on
the one hand, and the Lanuzas, on the other, as the
immediate parties thereto, cannot prevail over the
registered mortgage of De Leon.
Wherefore, the decision appealed from is reversed,
hence, the petition for consolidation is dismissed. Costs
against Reyes and Navarro.
Concepcion, C.J., Dizon, Bengzon, J.P., Sanchez and
Castro, JJ., concur.
Reyes, J.B.L., and Zaldivar, JJ., reserved their votes.
Makalintal, J., concurs in the result.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-55739

June 22, 1984

CARLO LEZAMA BUNDALIAN and JOSE R. BUNDALIAN,

petitioners,
vs.
THE HON. COURT OF APPEALS, JUANITO LITTAWA and
EDNA CAMCAM, respondents.
Francisco A. Lava, Jr. for petitioners.
Benjamin B. Bernardino for private respondents.

GUTIERREZ, JR., J.:

This is a petition for review of the decision of the Court
of Appeals, now Intermediate Appellate Court, affirming
a judgment of the then Court of First Instance of Rizal
dismissing the petition for declaratory relief and/or
reformation of instrument filed by the petitioners
against the respondents and ordering the petitioners to
pay jointly and severally the amounts of P200,000.00
for respondent Edna Camcam and P50,000.00 for
respondent Littawa, as moral damages; the amount of
P50,000.00 for both respondents as exemplary
damages; the amount of P30,000.00 for and as
attorney's fees, and to pay the costs of the suit.
On July 1, 1975, the petitioners purchased from the
Estate of the Deceased Agapita Sarao Vda. de Virata
three (3) contiguous parcels of land located at San
Juan, Rizal, containing an aggregate area of 3,328
square meters, more or less, for and in consideration of
the amount of P499,200.00.
The following day, July 2, 1975, the petitioners, in a
contract denominated as Deed of Sale with Right to
Repurchase, sold to the private respondents the same
three contiguous parcels of land for the same amount
of P499,200.00 under specified terms and conditions.
One of the terms and conditions was that the
repurchase price would escalate month after month,
depending on when repurchase would be effected. The
price would be P532,480.66 computed at P160.00 per
square meter after the first month; P565,760.00
computed at P170.00 per square meter after the
second month; P599,040.00 computed at P180.00 per
square meter after the third month; and P632,320.00
computed at P190.00 per square meter after the fourth
month, from and after the date of the instrument. It
was also stipulated in the same contract that the
vendor shall have the right to possess, use, and build
on, the property during the period pending redemption.
On August 26, 1976, the petitioners filed a petition for
declaratory relief and/or reformation of instrument
before the Court of First Instance of Rizal at Pasig,
Metro Manila to declare the Deed of Sale with Right to
Repurchase an equitable mortgage and the entire
portion of the same deed referring to the accelerating
repurchase price null and void for being usurious, and
to reduce the loan obligation to P474,200.00,
contending that the amount actually loaned was only
P474,200.00 and the petitioners put up P25,000.00 of
the wife's money when the purchase from the estate of
Mrs. Virata was consummated.
On August 27, 1976, the private respondents, in turn,
filed a petition for the consolidation of ownership on
the ground that "more than a year has elapsed since
the execution of the Deed of Sale with Right to
Repurchase by the vendor on July 2, 1975." The private
respondents contended that "notwithstanding which
the vendor has failed to avail of its rights under the
provisions of Article 1607 in relation to Article 1616 of

the New Civil Code, the vendor has lost all his rights to
avail himself of the right to consolidate ownership of
the property subject of the Deed of Sale." To this
petition for consolidation of ownership, the petitioners
filed their opposition upon the following grounds: (a)
there is a pending suit between the same parties
involving the same cause and subject matter; (b)
consolidation will be improper considering that the
basic document upon which it is being sought is in fact
and in law only an equitable mortgage; and (c)
consolidation cannot be effected thru the instant
petition. Accordingly, the Court of First Instance of Rizal
ordered the transfer of the petition for consolidation of
ownership to Branch XXIV of the same Court where the
petition for declaratory relief and/or reformation of
instrument was pending in order that the two cases
may be considered together.
A supplemental petition was subsequently filed by the
petitioners alleging that the private respondents'
petition for consolidation of ownership was made in
order to frustrate and render nugatory whatever orders
or judgment may be issued by the trial court in the
petition for declaration relief/or reformation of
instrument.
After the trial and presentation of the parties'
respective memoranda the trial court rendered the
decision in favor of the private respondents.
The petitioners appealed to the Court of Appeals. The
appellate court affirmed in toto the decision of the trial
court. Two motions for reconsideration having been
denied, the petitioners filed the present petition based
on the following grounds:
A.
RESPONDENT COURT OF APPEALS ERRED GRAVELY, TO
THE EXTENT OF GRAVE ABUSE OF DISCRETION, AND IN
VIOLATION OF PETITIONERS' RIGHT TO DUE PROCESS
OF LAW AT APPELLATE LEVEL, WHEN IT AFFIRMED THE
APPEALED DECISION WITHOUT ANY DISCUSSION OF
THE QUESTIONS RAISED IN THE APPEAL AND BY SIMPLY
ADOPTING THE POSITION OF THE TRIAL WHICH IS
PRECISELY QUESTIONED IN THE APPEAL.
B.
RESPONDENT COURT OF APPEAL ERRED GRAVELY TO
THE EXTENT OF GRAVE ABUSE OF DISCRETION IN
ADOPTING TOTALLY AND UNCRITICALLY THE GROSSLY
ERRONEOUS REASON AND POSITION OF THE TRIAL
COURT.
C.
RESPONDENT COURT OF APPEALS ERRED GRAVELY TO
THE EXTENT OF GRAVE ABUSE OF DISCRETION, IN
UNCERMONIOUSLY, DENYING PETITIONERS' FIRST
MOTION FOR RECONSIDERATION, MOTION FOR ORAL
ARGUMENT, MOTION TO INVITE AMICUS CURIAE, AND
SECOND MOTION FOR RECONSIDERATION.
E.
RESPONDENT COURT OF APPEALS ERRED GRAVELY TO
THE EXTENT OF GRVE ABUSE OF DISCREATION, IN NOT
REVERSING THE APPEALED JUDGMENT AND GRANTING
THE PRAYERS OF PETITIONERS-APPELLANTS,
FOREMOST OF WHICH IS TO DECLARE THE DEED OF
SALE WITH RIGHT TO REPURCHASE TO BE AN
EQUITABLE MORTGAGE.
Tell issue is this case is whether or not the deed of sale
with right to repurchase should be declared as an
equitable mortgage.
We find meritorious the petitioners' contention that
under Article 1602 of the Civil Code the deed of sale
with right to repurchase should be presumed to be an
equitable mortgage due to the following reasons.

(1)
The contracts involving the subject properties
came one after another in the space of two (2) days.
The Deed of Absolute Sale between petitioner Jose R.
Bundalian as vendee and Romeo S. Geluz, in his
capacity as Administratorf of the Estate of the
deceased Agapita Sarao Vda. de Virata, as vendor, was
executed on July 1, 1975 (pp. 19-26, Annex "A"). The
purported Deed of Sale with Right to Repurchase
between petitioner, Jose R. Bundalian as vendor and
respondents Juanito Littawa and Edna Camcam as
vendees was executed on July 2, 1975 (pp. 26- 32,
Annex "A").lwphl@it This already indicates, at a very
early stage, that the two transactions must be
intimately related.
(2)
Such intimate relation between the
aforementioned Deed of Absolute Sale and Deed of
Sale with Right to Repurchase is already clear in the
statement in the latter instrument that the subject
property had just been purchased by Jose R. Bundalian
from the estate of the deceased Agapita Sarao Vda. de
Virata, 'with funds loaned to him by the herein
VENDEES' the latter being no other than respondents
Littawa and Camcam (p. 28, Annex "A"). Patently,
petitioner Jose R. Bundalian was funded by private
respondents to enable him to purchase the property
from the said estate.
(3)
Having just purchased the property from the
estate by way of Deed of Absolute Sale on July 1, 1975,
for which he had just paid P499,200.00 as purchase
price, it would have been utterly senseless for
petitioner Jose R. Bundalian to sell the same property
to private respondents the very next day, July 2, 1975,
with or without the right of repurchase. No other
conclusion is possible except that the Deed of Sale with
Right to Repurchase is precisely the security the
equitable mortgage to petitioner Jose R. Bundalian
to enable the latter to purchase the property from the
aforementioned estate.
(4)
It would have been more senseless for
petitioner Jose R. Bundalian to sell the property to
private respondents at the same price of P499,200.00
he had paid the estate of the deceased Agapita Sarao
Vda. de Virata, without profit and at a sure loss. By the
terms of the Deed of Sale with Right to Repurchase he
would have to repurchase the property at a continually
increasing price, from Pl 50.00 per square meter to
P190.00 per square meter, that is, up to P133,120.00
over and above the original price of P499,200.00, in
only four (4) months. Again, no other conclusion is
possible but that the contract is an equitable
mortgage, not a sale.
(5)
It is provided in the Deed of Sale with Right to
Repurchase that 'It is agreed that the vendor (Jose R.
Bundalian) shall have the right to possess, use, and
build on, the property during the period of redemption'
(p. 30, Annex "A"). It has been held that there is a 'loan
with security' rather than a pacto de retro sale where
by agreement the vendor was to remain in possession
of the lands (Escoto vs. Arcilla, 89 Phil. 199, 204).
Where there was an acknowledgment of the vendor's
right to retain possession of the property, as in the
case at bar, the contract was one of "loan guaranteed
by a mortgage" rather than a conditional sale (Macoy
vs. Trinidad, 95 Phil. 192, 202). Indeed, there can be no
question that petitioner Jose R. Bundalian remained
legally in possession of the subject property. Again, the
conclusion is ineluctable that the Deed of Sale with
Right to Repurchase was executed as security for the
loan extended by private respondents to petitioner Jose
R. Bundalian, i.e., as equitable mortgage.
(6)
The increase per month in the alleged
redemption price is very compatible with the Idea that
the transaction was really intended by the parties to be
a mortgage. It bears emphasis, at this juncture, that
the supposed repurchase price is in the same amount
as the original "price" of P499,200.00 should

"repurchase" be effected during the first month from

and after the date of the instrument; P532,480.00
computed at P160.00 per square meter should
"repurchase" be effected after the first month;
P565,760.00 computed at P170.00 per square meter
should "repurchase" be after the second month;
P599,040.00 computed at P180.00 per square meter
should "repurchase" be after the third month; or
P632,320.00 computed at P190.00 per square meter
should "repurchase" be effected even "after the fourth
month" (pp. 29-30, Annex "A"). The monthly increases
in the alleged "redemption price"clearly represent
nothing but interest. It is well-settled that provision for
interest payments is a clear indication that the
supposed sale is actually an equitable mortgage
(Macoy vs. Trinidad, 95 Phil. 192, 202; Escoto vs.
Arcilla, 89 Phil. 199, 204). This would fall under the
legal situation "where it may be fairly inferred that the
real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of
any other obligation" (No. 6), Art. 1062, Civil Code). To
make matters worse, the monthly increase in the
supposed "redemption price", meaning the interest of
course, are clearly usurious, precisely one of the evils
sought to be negated by the provisions of Articles
1602, 1603 and 1604 of the Civil Code, as noted
previously herein.
(7)
While the Deed of Sale with Right to
Repurchase supposedly provided for a "redemption"
period of "four (4) months from and after the date of
this instrument" (p. 29, Annex "A"), it later necessarily
provided for a built-in extension of the period of
'redemption' by providing for payment of the amount
of P632,320.00 computed at P190.00 per square meter
should "repurchase" be effected "after the fourth
month" (p. 30, Annex "A"). In other words, it was
implicitly agreed that the period of 'repurchase' was
not limited to 4 months from and after the date of
execution of the instrument, in as much as said
"repurchase" could be effected even "after the fourth
month". It is well settled that extension of the period
of "redemption" is indicative of equitable mortgage
(Nos.(3) and (6), Art. 1602, Civil Code; Reyes vs. De
Leon, 20 SCRA 369, 370).lwphl@it
(8)
It may be argued, as private respondents have
argued, that normally a loan does not exceed 60% of
the price of the land given as security, so that private
respondents could not have loaned P499,200.00 on the
land the value of which was claimed to be also
P499,200.00. However, such reasoning is clearly
unsound. It loses sight of the fact that private
respondents precisely funded or financed petitioner
Jose R. Bundalian's acquisition of the property from the
estate of the deceased Agapita Sarao Vda. de Virata. In
other words, petitioner Jose R. Bundalian could not
have acquired the land to serve as security for the
repayment of the loan unless private respondents had
extended the loan in the first place. Surely, private
respondents stood to benefit enormously from such
financing transaction in view of the patently usurious
monthly interests transparently disguised as the
accelerating or increasing monthly 'repurchase' price.
At any rate, in the event that petitioner Jose R.
Bundalian ultimately failed to pay the loan, the rapid
increase in the price of the land, which was estimated
to be worth at least P632,320.00 after 4 months (from
the initial P499,200.00), practically guaranteed a very
good return on the money investment of private
respondents as money- lenders.
(9)
It cannot be questioned that petitioner Jose R.
Bundalian paid taxes on the land, even after the
supposed 4 month period of "redemption". Payment of
taxes after expiration of the supposed "redemption"
period has been considered as indicative of equitable
mortgage (Escoto vs. Arcilla, supra).
(10)
It is an admitted fact that private respondents
took some time before filing their petition for
consolidation of ownership. Private respondents

admitted in said petition that "more than a year has

elapsed since the execution of the Deed of Sale with
Right to Repurchase" (p. 34, par. 3, Annex "A").
Reckoning 4 months from July 2, 1975, it would appear
that the "repurchase" period expired supposedly on
November 2, 1975. As private respondents filed their
petition for consolidation on August 27, 1976, it is clear
that they delayed filing said petition by more than 9
months. A similar delay in the filing of the supposed
"vendee's" petition for consolidation was considered as
indicative of equitable mortgage (Reyes vs. de Leon,
20 SCRA 369, 378).
(11)
If the Deed of Sale with Right to Repurchase
would not be considered as an equitable mortgage, it
would result that there was actually no security for the
loan of P499,200.00 extended by private respondents
to petitioners Jose R. Bundalian, which would make no
sense at all considering the enormity of the loan. There
was, to be sure, a security for said loan, none other
than the equitable mortgage tainted with usury and
disguised as the Deed of Sale with Right to
Repurchase.
The private respondents argued that the petitioners'
contention is true only in cases where the contract or
instrument is not reflective of the true intentions of the
contracting parties as would warrant reformation of the
same. They stated that if the intention of the parties is
to execute a deed of sale with pacto de retro, the
contract should be held as such. The petitioners were
allegedly fully aware that the deed of sale with pacto
de retro is what it purports to be and nothing else.
Furthermore, the petitioners waited for the period of
redemption to expire before availing of the relief
granted by the Civil Code of reformation of contracts.
We find the stand of the private respondents without
merit. The intent of the parties to circumvent the
provision discouraging pacto de retro transactions is
very apparent from the records. Article 1602 of the
Civil Code states:
Article 1602.
The contract shall be presumed to be
an equitable mortgage, in any of the following cases:
(1)
When the price of a sale with right to
repurchase is unusually inadequate;
(2)
When the vendor remains in possession as
lessee or otherwise;
(3)
When upon or after the expiration of the right
to repurchase another instrument extending the period
of redemption or granting a new period is executed;
(4)
When the purchaser retains for himself a part
of the purchase price;
(5)
When the vendor binds himself to pay the
taxes on the thing sold;
(6)
In any other eases where it may be fairly
inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or
performance of any other obligation.
In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be
subject to the usury laws.
Significantly, a portion of the document in question
reads:
(The vendor) having just purchased the same from the
Intestate estate of the deceased Agapita Sarao Vda. de
Virata (Special Proceedings No. B-710 of the Court of
First Instance of Cavite), with funds loaned to him by
the herein VENDEES. (Emphasis supplied).

This statement appearing in the supposed pacto de

retro sale confirms the real intention of the parties to
secure the payment of the loan acquired by the
petitioners from the private respondents. The sale with
the right to repurchase of the three parcels of land was
for P499,200.00, which was exactly the same amount
paid to the estate of the deceased Agapita Sarao Vda.
de Virata- After having purchased the three lots for
P499,200.00, the vendors should at least have earned
a little profit or interest if they really intended to resell
the lots the following day. Instead, they suffered a loss
of P25,000.00 because the amount borrowed, and we
find grounds to believe their statement of having
advanced P25,000.00 of their own funds as earnest
money, was actually only P474,000.00. The petitioners
also bound themselves to pay exceedingly stiff prices
for the privilege of repurchase. The intent of the parties
is further shown by the fact that the Bundalians
P500,000.00 collectibles due from the government for
completed construction contracts could not be
collected on time to pay for the lots advertised for sale
in Bulletin Today. The petitioners had to run to the
private respondents who had money to lend. The
Bundalians received the accounts due from the
government only in 1977 after the proceedings in the
trial court were well underway.
The stipulation in the contract sharply escalating the
repurchase price every month enhances the
presumption that the transaction is an equitable
mortgage. Its purpose is to secure the return of the
money invested with substantial profit or interest, a
common characteristic of loans.
The private respondents try to capitalize on an
admission by Mrs. Bundalian that she "accepted" the
transaction knowing it to be a contract of sale with
right of repurchase. The reliance is grounded on shaky
foundations. The Bundalians were in the construction
business and knew quite well what they were signing.
But vendors covered by Article 1602 of the Civil Code
are usually in no position to bargain with the vendees
and will sign onerous contracts to get the money they
need. It is precisely this evil which the Civil Code
guards against. It is not the knowledge of the vendors
that they are executing a contract of sale pacto de
retro which is the issue but whether or not the real
contract was one of sale or a loan disguised as a pacto
de retro sale.
The contract also provides that "it is agreed that the
vendor shall have the right to possess, use, and build
on, the property during the period of redemption."
When the vendee acknowledged the right of the
vendor to retain possession of the property the
contract is one of loan guaranteed by mortgage, not a
conditional sale or an option to repurchase. (Macoy vs.
Trinidad, et al., 95 Phil. 192).
The respondents' contention that the right to possess,
use, or build on the lots embodied in the contract was
a mere "right" and not actual possession appears to be
sophistry. The records show that the Bundalians
construction equipment such as tractors, payloaders,
and bulldozers were on the lots. A shop was built on
the premises. Mr. Bundalian testified that from the time
he purchased the property from the estate of Mrs.
Virata up to the "minute" he testified, he never lost
possession. The Bundalians paid the real estate taxes
on the lots. As against the express provision of the
contract and the actual possession by the petitioners,
the private respondents come up with a far fetched
argument that since the titles to the lots were in their
hands, they were the ones in legal possession.
Parenthetically, the titles in their hands were still in the
name of the estate of Agapita Sarao Vda. de Virata, the
original vendor-owner.
IN VIEW OF THE FOREGOING, the decisions of' the
respondent Court of Appeals and the trial court are
hereby REVERSED; and SET ASIDE. The deed of sale
with right to repurchase is declared as an equitable

mortgage. The petitioners are ordered to pay their debt

to the private respondents with legal rate of interest
from the time they acquired the loan until it is fully
paid.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-42282

February 28, 1983

HERMENEGILDO R. ROSALES, plaintiff-appellant,

vs.
PEREGRIN YBOA, Provincial Deputy Sheriff of Samar
and the REGISTER OF DEEDS for the Province of Samar,
defendants-appellees.

DE CASTRO, J.:
This case was certified to this Court by the former
Court of Appeals per its Resolution of November 13,
1975 the appeal thereto made having raised purely
legal question, which is whether or not the Court of
First Instance of Samar, in Civil Case No. 5325 entitled
"Hermenegildo Rosales vs. Peregrin Yboa, et al., " erred
in declaring the legality and validity of the redemption
made by the mortgagor Pedro Oliverio of his titled
property.
It appears that by virtue of the foreclosure of real
estate mortgage duly executed by the mortgagor Pedro
Oliverio in favor of the Development Bank of the
Philippines, as security for the payment of the amount
of P12,000.00, and after giving notice of the date, time
and place of sale as required by law, defendantappellee Deputy Sheriff of Samar Peregrin Yboa, sold at
public auction on January 28, 1970 to plaintiff-appellant
Rosales, the highest bidder, for the total amount of
fourteen thousand five hundred pesos (P14,500.00),
the parcel of land covered by T.C.T. No. T-646 of the
Register of Deeds for the Province of Samar. The
corresponding Sheriff's certificate of sale was issued in
favor of plaintiff-appellant, which certificate was
registered in the Office of the Register of Deeds for the
Province of Samar on February 3, 1970.
On January 23, 1971, after the mortgagor Pedro
Oliverio had served notice in writing of the redemption
and had paid on said date to defendant-appellee
Deputy Sheriff the principal amount of P14,500.00 plus
P1,691.00 representing the one (1 %) per centum
interest per month, the latter executed a Deed of
Certificate of Redemption restoring, conveying and
assigning unto the said mortgagor, his heirs and
assigns all the estate, right, title and interest on said
foreclosed property.
On March 10, 1971, plaintiff-appellant filed the instant
complaint for cancellation of certificate of redemption
alleging that no valid redemption was effected because
while the mortgagor had paid within the period of
redemption the purchase price in the sum of
P14,500.00 plus P1,691.00 representing 1 % interest
per month, he, however, failed to tender payment of 1)
the full interest on the purchase price, while should be
P1,715.84, instead of Pl,691.00 actually paid by the
mortgagor, thereby leaving a deficiency in the sum of
P24.84; 2) the sum of P3.00 representing the
registration fee of the certificate of sale, plus interest
thereon of P0.04; 3) the delinquent real estate taxes of
the subject property for the years 1960 to 1970
amounting to P745.47; and 4) the Sheriff's commission
in the sum of P99.82.
On March 22, 1971, defendants-appellees filed an
answer alleging that while it is true that mortgagor
Pedro Oliverio has tendered to defendant- appellee
Deputy Sheriff the amount of P14,500.00 plus
Pl,691.00 for redemption purpose, the sum tendered
being the amount of the auction purchase price plus
1% interest per month thereon up to the time of
redemption and the tender being timely made and in
good faith, the same is a valid one according to Section

30, Rule 39 of the Rules of Court; that granting in

arguendo, that the property subject of redemption is
delinquent in the payment of real estate taxes for the
years 1960 to 1970 in the total amount of P745,47, it
will not in anyway affect the regularity and validity of
the redemption for no written notice that any such
assessments or taxes are paid by the plaintiff-appellant
as purchaser, was given to defendant appellee Deputy
Sheriff who made the sale thereof and such not have
filed, the property may be redeemed even without
paying such assessments or taxes.
On August 16, 1971, the trial court conducted a pretrial of the case. After such pre-trial and upon motion of
-plaintiff-appellant, the trial court rendered a summary
judgment, pursuant to Rule 34 of the Rules of Court,
since the answer of defendants-appellees raises no
genuine issue of material facts, as well as their
admission of the genuineness and due execution of the
Certificate of Sale executed by defendant-appellee
Deputy Sheriff in favor of plaintiff-appellant; the
payment of entry fee and annotation on TCT No. T-640
of the Certificate of Sale in the sum of P3.00; the
Certificate of Redemption executed by defendantappellee Deputy Sheriff in favor of mortgagor Pedro
Oliverio; the Certificate of Delinquency of real estate
taxes of the subject property in the amount of P745.47;
and the non-payment of sheriff's commission in the
sum of P99.82. In the summary judgment the trial
court dismissed the plaintiff-appellant's complaint and
declared that the Certificate of Redemption of the
property sold at public auction is valid and legal
"without prejudice to the right of the plaintiff-appellant
to recover from the redemptioner the sum of P0.67
representing the deficiencies in the 1 % monthly
interest 1 and the sum of P3.00 representing the entry
and annotation fees of the Register of Deed of Samar
for the registration of the Certificate of Sale together
with the sum of P0.04 representing interest on the last
stated amount from February 3, 1970 to January 23,
1971."
On December 13, 1971, plaintiff-appellant, after receipt
of the Summary Judgment, filed his Record on Appeal,
Notice of Appeal and Appeal Bond. On May 12,1972,
the trial court approved the Record on Appeal and
ordered the transmittal of the records of the case to
the Court of Appeals. As aforementioned, the Court of
Appeals certified the case to this Court on the ground
that it involves the purely legal question of whether or
not a valid and legal redemption was made by the
mortgagor Pedro Oliverio of his titled property.
There is no question that Pedro Oliverio has the right to
redeem the subject property, in view of the provisions
of section 6 of Act 3135, as amended by Act No. 4148.
2 The procedure for effecting such redemption is
contained in section 30, Rule 39 of the Rules of Court,
the pertinent portion of which provides:
Sec. 30. Time and manner of, and amounts payable on
successive redemptions. Notice to be given and filed
.The judgment debtor, or redemptioner, may redeem
the property from the purchaser, at anytime within
twelve (12) months after the sale, on paying the
purchaser the amount of his purchase, with one per
centum per month interest thereon in addition, up to
the time of redemption, together with the amount of
any assessments or taxes which the purchaser may
have paid thereon after purchase, and interest on such
last roamed amount at the same rate; ...
xxx

xxx

xxx

Written notice of any redemption must be given to the

Officer who made the sale and a duplicate filed with
the register of deeds in the province; ...
Pursuant to the above-cited provision, the requisites for
a valid redemption are: 1) the redemption must be
made within twelve (12) months from the time of the

registration of the sale in the Office of the Register of

Deeds (Gorospe vs. Santos, 69 SCRA 191; Agbulos vs.
Alberto, 5 SCRA 790; Santos vs. Rehabilitation Finance
Corporation, et al., 101 Phil. 980; 2) payment of the
purchase price of the property involved, plus 1%
interest per month thereon, if any, paid by the
purchaser after the sale with the same rate of interests
(Rosario vs. Tayug Rural Bank, 22 SCRA 1220 cited in
Tolentino vs. Court of Appeals, 106 SCRA 513); and 3)
written notice of the redemption must be served on the
officer who made the sale and a duplicate filed with the
Register of Deeds of the province.
There is no dispute, that in the case at bar, the
mortgagor Pedro Oliverio tendered payment of the
purchase price on January 23, 1971, well within the
redemption period of twelve (12) months after the
registration of the sale on February 3,1970 and that
defendants-appellees Deputy Sheriff of Samar and the
Register of Deeds of Samar were duly notified in
writing of the mortgagor's desire to redeem the subject
property. Equally beyond question is the fact that
mortgagor Pedro Oliverio tendered the sum of
P14,500.00 corresponding to the purchase of the
property, and the amount of P1,691.00 representing
the 1% monthly interest thereon, although the trial
court found a deficiency of P0.67 due and owing to the
plaintiff-appellant. The mortgagor, therefor, has
substantially complied with the requirements of the law
to effect redemption, for which reason a Certificate of
Redemption was issued in his favor by defendantappellee Deputy Sheriff.
But plaintiff-appellant would insist that although
mortgagor Pedro Oliverio had tendered payment of the
purchase price of P14,500.00 and the interest of
P1,691.00, nevertheless, no valid redemption was
effected by the latter, since there are still four
deficiencies which the mortgagor failed to pay. Firstly,
plaintiff-appellant would contend that there is still a
deficiency interest of P24.84 on the purchase price
since the interest thereon should be computed from
the date of the auction sale, that is, January 28, 1970,
and not from the date of the registration thereof on
February 3, 1970. The contention is without merit.
Plaintiff-appellant has not cited any authority to
support his theory that the interest on the purchase
price should be computed from the date of the sale
and not from the registration thereof. We rule that
since the period of redemption begins only from the
date of the registration of the certificate of sale in the
Office of the Register of Deeds, it being only then that
the certificate takes effect as a conveyance, 3 the
computation of the interest on the purchase price
should also be made to commence from that date.
Secondly, although the amount of P3.00 representing
the registration fee incurred by plaintiff-appellant may
be considered as any assessments or taxes which the
purchaser may have paid thereon after purchase," still
the non-payment of this amount by the mortgagor
Pedro Oliverio will not render invalid his redemption,
since, as discussed above, he has substantially
complied with the legal requirements for a valid
redemption.
Thirdly, as to the non-payment of real estate taxes of
the subject property for the years 1960 to 1970
amounting to P745.47, the same should not affect the
regularity and validity of the redemption made by the
mortgagor Pedro Oliverio. The latter is not legally
bound to pay such amount to plaintiff-appellant as
purchaser, for Section 30, Rule 39 clearly provides that
"the judgment debtor, or redemptioner, may redeem
the property... on paying the purchaser ... the amount
of any assessments or taxes which the purchaser may
have paid thereon after purchase; and interest on such
last-named amount at the same rate." Nowhere in the
Records is it shown that plaintiff-appellant had paid
such amount. On the contrary, defendants-appellees in
their Answer 4 to plaintiff-appellant's complaint, have
averred that no written notice that any assessments or

taxes are paid by the latter as purchaser, was given to

defendant-appellee Deputy Sheriff of Samar who made
the sale thereof. In fact, the Solicitor-General, in his
Brief filed in behalf of the defendants-appellees, has
made the following observation. 5
We are indeed surprised how appellant was able to
secure the registration of his certificate of sale without
first paying the delinquent taxes as required by Section
1, Republic Act No. 456.
An extra judicial foreclosure sale being in the nature of
a voluntary transaction, appellant should have been
required by the Register of Deeds of Samar to pay the
delinquent land taxes on the subject property before
registering his certificate of sale. Payment of
delinquent land taxes being a condition precedent to
the registration of appellant's Certificate of Sale, but
which, somehow, he was able to evade, he cannot now
avail of the issue of such delinquent land taxes to
defeat the mortgagor's right of redemption.
Finally, the non-payment of the Sheriff's Commission in
the sum of P99.82 will not, likewise, affect the validity
of redemption since such amount is not included in the
payments required of a redemptioner as set forth in
said Section 30 of Rule 39.
In fine, We hold that the failure of the mortgagor Pedro
Oliverio to tender the amount of P745.47 representing
the delinquent real estate taxes of the subject
property, the registration fee of P3.00 and the interest
thereon of P0.04, the Sheriff's Commission in the sum
of P99.82, and the deficiency interest on the purchase
price of the subject property, will not render the
redemption in question null and void, it having been
established that he has substantially complied with the
requirements of the law to effect a valid redemption,
with his tender of payment of the purchase price and
the interest thereon within twelve (12) months from
the date of the registration of the sale. This ruling is in
obedience of the policy of the law to aid rather than to
defeat the right of redemption. 6
WHEREFORE, the decision of the court a quo is hereby
affirmed, without costs.
SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Guerrero, Abad
Santos and Escolin, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-66597

August 29, 1986

LEONARDO TIOSECO, petitioner,

vs.
HONORABLE COURT OF APPEALS JOSE P. VILLANUEVA
and TIMOTEA P. VILLANUEVA, respondents.
Jose T. Sumat for petitioner.
Amado F. Nera for respondents.

PARAS, J.:
A petition for review by certiorari of the decision of the
respondent Intermediate Appellate Court in AC-G.R. CV
No. 68888 promulgated on December 27, 1983, as well
as of the Resolution of said appellate court
promulgated on February 13, 1984 denying the Motion
for Reconsideration of the aforesaid decision.
The facts of this case are as follows: The respondent
spouses Jose P. Villanueva and Timotea P. Villanueva
mortgaged to the Tarlac Branch of the Philippine
National Bank three lots described in OCT No. C-542
issued by the Register of Deeds of Tarlac to secure
payment of a loan of EIGHT THOUSAND SIX HUNDRED
(P8,600.00) PESOS. When they failed to comply with
the mortgage contract, the Philippine National Bank
petitioned the Provincial Sheriff of Tarlac to foreclose
upon the properties extrajudicially. The Provincial
Sheriff in the public auction he conducted on March 7,
1977 sold the lots to Leonardo Tioseco, herein
petitioner, as the highest bidder for the amount of
EIGHTEEN THOUSAND NINE HUNDRED AND SEVENTY
FIVE (P18,975.00) PESOS.
The certificate of sale dated March 7, 1977 issued by
the Provincial Sheriff to Tioseco was registered in the
Office of the Register of Deeds of Tarlac on March 8,
1977. Tioseco's ownership over the properties was
consolidated, the title of the spouses Villanueva was
cancelled and TCT No. 141194 was issued to Tioseco
by the Register of Deeds on March 7, 1978.
It is claimed by Tioseco that sometime before March 9,
1978 respondents Villanueva visited him in his house
and offered to pay the amount he had paid for the
three lots auctioned off on March 7, 1977. Tioseco told
them that they could redeem the three lots by paying
to him the amount he paid at the auction sale plus
interest. The respondents promised to return, but
never did.
Upon the other hand, it is claimed by the respondents
that they offered to redeem the three lots within the
period of redemption but Tioseco allegedly demanded
TWENTY TWO THOUSAND SIX HUNDRED FORTY ONE
PESOS AND EIGHT CENTAVOS (P22,641.08) as
redemption price. Finding the amount demanded
excessive, the respondents Villanueva filed a suit on
March 7, 1978 to annul the sale in favor of Tioseco on
the ground that it was irregular and to require both the
Philippine National Bank and Tioseco to determine the
amount they should pay to be able to redeem the three
lots.
The Philippine National Bank stated in its answer that
at the time of the auction sale of the three lots on
March 7, 1977 the amount of EIGHTEEN THOUSAND
NINE HUNDRED SEVENTY FIVE (P18,975.00) PESOS was
due from the respondents. The amount included the
principal of the loan, accrued interest, service charges,
expenses of foreclosure, and attorney's fees. The
answer also stated that the auction sale conducted by

the Provincial Sheriff was in accordance with the

formalities and other requirements prescribed by law.
In his answer, Tioseco denied having demanded the
sum of TWENTY TWO THOUSAND SIX HUNDRED FORTY
ONE PESOS AND EIGHT CENTAVOS (P22,641-08) from
the respondents.
After trial the lower court rendered its decision, the
dispositive portion of which readsWHEREFORE, the plaintiffs are allowed to redeem the
properties covered by TCT No. 141194 of the Register
of Deeds of Tarlac by the payment to the defendant
Tioseco of the amount of EIGHTEEN THOUSAND NINE
HUNDRED SEVENTY FIVE (P 18,975.00) PESOS plus 1%
per month interest thereon in addition from the time of
the sale on March 7, 1977 to the time of redemption,
plus any assessment for taxation which defendant
Tioseco may have paid thereon and the interest on
such amount at the same rate and all other expenses
specified in Sec. 30, Rule 39 of the Rules of Court
within 30 days from the finality of this judgment,
without pronouncement as to costs,
On appeal by petitioner, the Intermediate Appellate
Court affirmed in toto the decision of the lower court.
With the denial of his motion for reconsideration, the
petitioner filed this petition for review of the decision of
the appellate court.
Petitioner made the following assignment of errors:
I
THE TRIAL COURT ERRED IN HOLDING THAT
DEFENDANT LEONARDO TIOSECO PUT UP AN AMOUNT
BIGGER THAN WHAT WAS PROPER TO PREVENT THE
PLAINTIFFS FROM EXERCISING THEIR RIGHTS OF
REDEMPTION.
II
THE TRIAL COURT ERRED IN HOLDING THAT THE
FAILURE OF THE PLAINTIFFS TO MAKE A VALID TENDER
AND TO CONSIGN THE AMOUNT IN COURT ASSUMES
SUBORDINATE IMPORTANCE AND THE PLAINTIFFS
DESPITE SUCH FAILURE TO COMPLY BY THE STATUTORY
REQUIREMENTS FOR LEGAL REDEMPTION, ARE STILL
ENTITLED TO MAKE THE REDEMPTION.
III
THE TRIAL COURT ERRED IN ALLOWING THE PLAINTIFFS
TO REDEEM THE PROPERTIES COVERED BY TCT NO.
141194 OF THE REGISTER OF DEEDS OF TARLAC AFTER
TIOSECO'S OWNERSHIP TO THE PROPERTIES WAS
CONSOLIDATED. (pp. 9-10, Rollo).
We prescind from the assignment of errors raised and
proceed directly to the question presented before this
Court: Have the respondents exercised their right of
redemption effectively? We answer in the affirmative.
There is no question that the respondents have the
right to redeem the subject property in view of the
provision of Section 25, P.D. No. 694 (Revised Charter
of PNB):
SEC. 25. Right of redemption of property-Right of
possession during redemption period.Within one year
from the registration of the foreclosure sale of real
estate, the mortgagor shall have the right to redeem
the property by paying all claims of the Bank against
him on the date of the sale including all the costs and
other expenses incurred by reason of the foreclosure
sale and custody of the property, as well as charges
and accrued interests.
xxx

xxx

xxx

When the respondents chose to enforce their right of

redemption thru a court action on March 7, 1978 they
were well within their right as the action was filed
within one year from the registration of the foreclosure
sale of the real estate on March 9, 1977. P.D. No. 694 is
silent as to any formal tender of repurchase price as a
pre-condition to a valid exercise of the right of
redemption. It does not even require any previous
notice to the vendee, nor a meeting between him and
the redemptioner, much less a previous formal tender
before any action is begun in court to enforce the right
of redemption. In any case, the lack of funds which
may render the right inefficacious cannot affect the
existence of the right. In fact, the filing of the action
itself, within the period of redemption, is equivalent to
a formal offer to redeem (see Reoveros v. Abel and
Sandoval, 48 O.G. 5318). And in this connection, a
formal offer to redeem, accompanied by a bona fide
tender of the redemption price, altho proper, is not
even essential where, as in the instant case, the right
to redeem is exercised thru the filing of judicial action.
In the instant case, the ends of justice would be better
served by affording the respondents the opportunity to
redeem the subject property. This ruling is in obedience
to the policy of the law to aid rather than to defeat the
right of redemption. (Javellana v. Mirasol and Nunez, 40
Phil. 761).
WHEREFORE, the petition for certiorari is DENIED and
the judgment appealed from is AFFIRMED. Costs
against the petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

Sec. 26, Rule 39 of the Rules of Court, within 15 days

from the time this decision becomes final and
executory.

SECOND DIVISION

Should appellee fail to complete the redemption price,

the sheriff may either release to appellee the 2 smaller
lots and return the entire deposit without releasing any
of the 3 lots, as the appellee may elect.

G.R. No. L-52831

July 29, 1983

MANUEL R. DULAY, petitioner,

vs.
HON. JUDGE GLICERIO V. CARRIAGA, Judge of the Court
of First Instance of Cotabato, and EUSEBIO C.
TANGHAL, respondents.
Fructuoso S, Villarin for petitioner.
Miguel B. Albar for private respondent.

CONCEPCION JR., J.:

Petition for certiorari, with preliminary injunction, to
annul and set aside the order of the respondent judge
which annulled the redemption of several parcels of
land levied upon and sold at an execution sale.
In Civil Case No. 2152 of the Court of First Instance of
Cotabato, an action for the recovery of a sum of
money, the trial court rendered a decision ordering the
defendant, Manuel R. Dulay, the petitioner herein, to
pay the plaintiff, Eusebio C. Tanghal, the herein private
respondent, the sum of P143,980.00. Seventeen (17)
parcels of land belonging to the defendant were,
consequently, levied upon then sold at a public auction
sale to the plaintiff, as the highest bidder thereof, at
prices profferred and fixed for each parcel, for the sum
of P82,598.00. 1 Within the reglementary period for
redemption, the defendant redeemed eight (8) of the
levied properties by paying the prices at which they
were actually sold in the auction sale, for the sum of
P17,017.00, and was issued a Certificate of
Redemption. 2 Upon motion of the plaintiff, however,
the trial court citing the case of Development Bank of
the Philippines vs. Dionisio Mirang, 3 declared the
redemption as null and void on the ground that piecemeal redemption is not allowed by law and that for
redemption to be valid, the judgment debtor should
pay the entire judgment debt and not the purchase
price. 4 Hence, this petition for certiorari with
preliminary injunction, to annul and set aside the order
of the respondent judge. As prayed for, the Court
issued a temporary restraining order, restraining the
respondents from enforcing the questioned order. 5
There is merit in the petition. In the redemption of
properties sold at an execution sale, the amount
payable is no longer the judgment debt, but the
purchase price. In the case of Castillo vs. Nagtalon, 6
the Court said:
The procedure for the redemption of properties sold at
execution sale is prescribed in Sec. 26, Rule 39 of the
Rules of Court. Thereunder, the judgment debtor or
redemptioner may redeem the property from the
purchaser within 12 months after the sale, by paying
the purchaser the amount of his purchase, with I % per
month interest thereon up to the time of redemption,
together with the taxes paid by the purchaser after the
purchase, if any. In other words, in the redemption of
properties sold at an execution sale, the amount
payable is no longer the judgment debt but the
purchase price. Considering that appellee tendered
payment only of the sum of P317.44, whereas the 3
parcels of land she was seeking to redeem were sold
for the sums of P1,240.00, P24.00 and P30.00,
respectively, the aforementioned amount of P317.44 is
insufficient to effectively release the properties.
However, as the tender of payment was timely made
and in good faith, in the interest of justice We incline to
give the appellee opportunity to complete the
redemption purchase of the 3 parcels as provided in

The case of DBP vs. Mirang, relied upon by the

respondent judge, wherein the Court ruled that the
mortgagor whose property has been sold at public
auction, either judicially or extrajudicially, shall have
the right to redeem the property by paying an the
amounts owed to the mortgage on the date of the sale,
with interest thereon at the rate specified in the
contract and not the amount for which the property
was acquired at the foreclosure sale is not controlling
because of different factual settings. The Mirang case
involves the redemption of mortgaged property sold at
a foreclosure sale and the mortgagor was ordered to
pay his entire indebtedness to the mortgagee, plus the
agreed interests thereon, before redemption can be
effected, because the charter of the mortgagee (DBP)
required the payment of such amount. The Court said:
The third issue has likewise been resolved by this Court
in a similar case. The issue posed there involved the
price at which the mortgagor should redeem his
property after the same had been sold at public
auction whether the amount for which the property
was sold, as contended by the mortgagor, or the
balance of the loan obtained from the banking
institution, as contended by the mortgagee RFC. Cited
in that case was Section 31 of Com. Act No. 459, which
was the special law applicable exclusively to properties
mortgaged with the RFC, as follows:
The mortgagor or debtor to the Agricultural and
Industrial Bank whose real property has been sold at
public auction, judicially or extra-judicially, for the full
or partial payment of an obligation to said Bank, shall,
within one year from the date of the auction sale, have
the right to redeem the real property by paying to the
Bank an the amount he owed the latter on the date of
the sale, with interest on the total indebtedness at the
rate agreed upon in the obligation from said date,
unless the bidder has taken material possession of the
property or unless this has been delivered to him, in
which case the proceeds of the property shall
compensate the interest. ...
The same provision applies in the instant case. The
unavoidable conclusion is that the appellant, in
redeeming the foreclosed property, should pay the
entire amount he owed to the Bank on the date of the
sale, with interest thereon at the rate agreed upon.
The instant case, on the other hand, involves the
redemption of property levied upon and sold at public
auction to satisfy a judgment and, unlike the Mirang
case, there is no charter that requires the payment of
sums of money other than those provided for in
Section 30 of Rule 39, Revised Rules of Court.
Redemption of properties mortgaged with the
Philippine National Bank and the Development Bank of
the Philippines and foreclosed either judicially or
extrajudicially are governed by special laws which
provide for the payment of all the amounts owed by
the debtor. This special protection given to government
lending institutions is not accorded to judgment
creditors in ordinary civil actions,
WHEREFORE, the writ prayed for is GRANTED and the
order issued on January 11, 1978 should be, as it is
hereby, ANNULLED and SET ASIDE. The temporary
restraining order heretofore issued is hereby. made
permanent. With costs against the private respondent
Eusebio C. Tanghal.
SOORDERED.

Makasiar (Chairman), Aquino, Guerrero, Abad Santos

and Escolin, JJ., concur.
De Castro, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-60208 December 5, 1985
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE HONORABLE COURT OF APPEALS AND DIVINA
ALIM, respondents.
Juan J. Diaz, Benjamin C. del Rosario and Cesar Basa for
petitioner.

ALAMPAY J.:
Civil Case No. 7927 which is an action for Annulment of
Extrajudicial Foreclosure and Sale of Real Properties
and for Damages with Prayer for Preliminary Injunction
was filed on April 26, 1975 by the private respondent
herein against the Philippine National Bank (PNB) in the
Court of First Instance of Quezon Province. On
November 27. 1979 a decision was rendered by said
court enjoining defendant Philippine National Bank
from consolidating its title over the mortgaged
properties and directing said bank to allow the private
respondent, Divina B. Alim, to redeem the mortgaged
properties by accepting payment from the latter; and
dismissing all the claims and counterclaims that the
parties may have against each other in connection with
the case.
This decision which was appealed by the defendant
PNB was affirmed on March 25, 1982 by the First
Division of the Court of Appeals in CA-G.R. No. 67131R.
As succinctly stated in the decision of the Court of
Appeals, the following material facts are not disputed.
These appear to be as follows:
... On February 2, 1968 plaintiff Divina Alim obtained a
loan in the total amount of P40,000 from defendant
Philippine National Bank secured by three (3) parcels of
land registered in the name of herein plaintiff and
covered by the following title(a) Transfer Certificate of Title No.8384 of the Register
of Deeds of Lucena City comprising a house of strong
materials located along the National Highway, Iyam
District, Lucena City, and a lot with an area of 540
square meters, more or less;
(b) Transfer Certificate of Title Nos. T-79631 and T79632 of the Registry of Deeds for the Province of
Quezon, containing an area of 58 hectares each of a
total of 116 hectares, planted with coconut trees.
For failure of the plaintiff to pay her total obligation
upon maturity date, defendant Philippine National Bank
extrajudicially foreclosed the mortgage properties and
the Provincial Sheriff of Quezon sold the properties at
public auction on February 12, 1973. The defendant
Philippine National Bank being the only bidder in said
auction sale, all the aforementioned mortgaged
properties were sold to the bank for the amount of
P59,320.00 which was the total obligation of the
plaintiff as of the date of the sale. The said amount
already included the principal obligation, attorney's
fees and other charges, interests on said amounts plus
costs of publication of the Sheriff's notice of auction
sale. "On April 26, 1975, plaintiff instituted the present
case for the annulment of the aforesaid extrajudicial
foreclosure and sale and for damages with prayer for
preliminary injunction."
From the decision rendered by the Court of First
Instance of Quezon Province, it can be noted that

during the pendency of the case in the said court the

parties attempted to confer with the end in view of
settling this case amicably and in the course thereof
the plaintiff deposited with defendant bank a sufficient
amount to cover the loan and interest thereon as of
February 12, 1973 including reimbursement for costs of
publication. Thus at the pre-trial, the parties agreed to
submit the case for decision only upon the issue as to
whether or not the plaintiff should still pay interest
specified in the mortgage after the auction sale on
February 12, 1973.
The defendant Philippine National Bank contends that
the plaintiff is still obligated to pay the said interest
citing the provisions of Presidential Decree No. 694, as
amended by Presidential Decree No. 1478, particularly
Section 25, paragraph 2 thereof.
On the other hand, plaintiff Divina Alim, the private
respondent herein cites the case of the Development
Bank of the Philippines versus Jovencio A. Zaragosa, et
al., 84 SCRA 668, where it was therein ruled that when
the foreclosure proceedings are completed all interests
of the mortgagor are cut off from the property and that
this principle is applicable to an extrajudicial
foreclosure.
In rendering the decision in favor of plaintiff Divina
Alim, The trial court reasoned out
... In the case at bar, the foreclosure and subsequent
sale of the properties were valid, but because of the
timely filing of this case and in view of the Order of
June 9, 1975, the consolidated sale could not be made.
In the light, therefore, of the above cited ruling of the
Supreme Court, (DBP vs. Zaragosa, et al., supra) after
the public auction sale on February 12, 1973, the
defendant Philippine National Bank can no longer
demand payment of interest on the property should
the mortgagor exercise her right of redemption."
(Annex "B" of Petition, Record on Appeal, p. 101:
parenthesis supplied)
This ruling which was sustained by the then Court of
Appeals is now the subject of the Petition for Review on
certiorari presented to this Court by the Philippine
National Bank.
In its petition, the PNB assails the decision of the
defunct appellate court and contends that the interests
specified in the mortgage should still be added to the
bid or purchase price computed from the time of the
auction sale up to the date the mortgaged properties
are redeemed as clearly authorized by law. Petitioner
invokes Republic Act No. 1300, the original Charter of
the PNB, Presidential Decree No. 694 (1975), Republic
Act No. 337 known as the General Banking Law and
Rule 39 of the Rules of Court, all of which petitioner
PNB claims authorize the imposition of the interest
specified in the mortgage.
What appears from the case records is that the
extrajudicial foreclosure proceedings instituted by the
PNB was commenced on May 25, 1972, pursuant to a
petition for sale under Act No. 3135 filed by its counsel
with the Provincial Sheriff for Quezon Province. But this
PNB sought the freclosure and sale of the properties of
the herein private respondent and directed said Sheriff
to publish the Notice of Sale in the Quezon Times,
Lucena City. In consequence of said petition the
Provincial Sheriff sold at public auction the properties
of herein private respondent to the Philippine National
Bank, upon the latter's bid of P59,320.00. The
corresponding Certificate of Sale was executed by the
Sheriff in favor of the Philippine National Bank on
February 16, 1973.
Considering that the very step initiated by the
Petitioner was a petition for Sale under Act No. 3135
(Annex F. Complaint, Record on Appeal, Rollo, p. 26),
the applicable law then would be no other than the
said statute. Act No. 3135 being a special law that

governs particularly extrajudicial foreclosures, it

necessarily excludes the application in this instance of
the General Banking Act and the provisions on
redemption under the Revised Charter of PNB,
Presidential Decree No. 694, which was enacted only in
1975. In the case at bar the mortgage contract was
entered into in 1968. In 1968, the governing law on
PNB operations was Republic Act No. 1300 but it has
been held that "Republic Act 1300 does not
contemplate extrajudicial foreclosure" (Co vs. PNB, L51767, June 29, 1982, 114 SCRA 842, 855).
Since the applicable law is Act 3135, the provisions of
Section 30, Rule 39, Rules of Court shall be
determinative of the sole issue presented in this case.
Section 6 of Act 3135, as amended by Act 4018,
provides:
Sec. 6. In all cases in which an extrajudicial sale is
made under the special power hereinbefore referred to,
the debtro, his successors in interest or any judicial
creditor or judgment creditor of said debtor, or any
person ahving a lein on the proeprty subsequent to the
mortgage or deed of trust under which the property is
old, may redeem the same at any time within the term
of one year from and after the date of the sale; and
such redemption shall be governed by the provisions of
sections four hundred and sixty-four, inclusive, of the
Code of Civil Procedure, in so far as these are not
incosistent with the provision of this Act. (emphasis
supplied.)
Section hundred sixty-four to four hundred sixty-six
inclusive, of the Code of Civil Procedure, became
Sections 29, 30, and 34 of Rule 39 of our Rules of
Court. The same secitons were reiterated in the
Revised Rules of Court in July 1964 (Co vs. PNB, supra).
Pursuant to Section 30 of Rule 39, the redemptioner,
who is the private respondent herein, "may redeeem
the property from the purchaser at any time within
twelve (12) months after the sale, on paying the
prchaser the amount of his purchase, with one per
centum per month interest thereon in addition, up to
the time of redemption, togethere with the amount of
any assessments or taxes which the purchaser may
have paid therein after purchase and interest on such
last named amount at the same interest rate; ..."
This would rightfully be so because, as stated in the
case of DBP vs. Zaragosa, supra, when the foreclosure
proceedings are completed and the mortgaged
property is sold to the purchaser then all interest of the
mortgagor are cut off from the property Prior to the
completion of the foreclosure, the mortgagor is liable
for the interests on the mortgage. However, after the
foreclosure proceedings and the execution of the
corresponding certificate of sale of the property sold at
public auction in favor of the successful bidder, the
redemptioner mortgagor would be bound to pay only
for the amount of the purchase price with interests
thereon at the rate of one per centum per month in
addition up to the time of redemption, together with
the amount of any assessments or taxes which the
purchaser may have paid thereon after the purchase
and interest on such last named amount at the same
rate.
WHEREFORE, the petition in this case is hereby
granted. The decision appealed from is affirmed with
modification, so as to read as follows:
(a)
Making the writ of preliminary injunction issued
by this Court in its Order of June 9, 1985, permanent
and irrevocable;
(b)
Allowing the plaintiff to redeem the mortgaged
properties by paying the amount of the purchase with
interests thereon at the rate of one per centum per
month up to the date of her deposit of the redemption
price and ordering the defendant to accept payment
from the plaintiff;

(c)
Dismissing all the claims and counterclaims
that the parties may have against each other in
connection with this case.
No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-29130

August 8, 1975

DEVELOPMENT BANK OF THE PHILIPPINES, plaintiffappellee,

vs.
DIONISIO MIRANG, defendant-appellant.
Jesus A. Avancea and Lualhati Estrella-Hilario for
plaintiff-appellee.
Roque V. Desquitado for defendant-appellant.

MAKALINTAL, C.J.:
This appeal was originally taken to the Court of
Appeals, which certified it here because it involves
purely legal questions. The appealed decision was
rendered by the Court of First Instance of Davao on
May 14, 1963 in its Civil Case No. 3762, and modified
by its Order of July 1, 1963. It directed the defendant,
now appellant, to pay the plaintiff Development Bank
of the Philippines, now appellee, the sum of P16,013.13
plus 6% interest per annum from July 30, 1957 1 up to
the date of payment, but deducting therefrom the sum
of P360.00 representing the value of an engine,
referred to in paragraph 11 of the stipulation of facts.
The defendant was likewise ordered to pay P500.00 as
attorney's fees, plus the costs of the suit.
From the stipulation submitted to the trial court it
appears that on September 7, 1950 the appellant
obtained approval of a loan of P14,000.00 from the
Rehabilitation Finance Corporation, 2 secured by a first
mortgage on defendant's homestead, for the following
purposes:
P1,000 for purchase of work animals and farm
implements;
P1,500 for construction of farmhouse and laborers'
quarters; and
P11,500 for development and maintenance of 18.5
hectares of abaca land.
The loan was released gradually to the appellant up to
a total of P13,000.00. Thereafter the appellee refused
to make any further releases because the plantation
which was being financed was attacked by mosaic
disease, which destroyed the abaca plants. The
appellant, on his part, failed to pay the yearly
amortizations; so in accordance with the terms of the
promissory notes he had signed and the mortgage
contract itself, the provincial sheriff of Davao, upon
request of the appellee, foreclosed the mortgage
extrajudicially under the provisions of Act 3135, as
amended, and sold the mortgaged property at public
auction on July 30, 1957. By that time the appellant's
indebtedness, including interest, had reached
P19,714.35, besides the expenses of the auction sale
and registration fees, which amounted to P101.00. The
appellee, as the highest bidder for P2,010.00, acquired
ownership of the mortgaged property. The appellant
was duly advised of the sale, with the information that
the same was subject to his right of redemption within
one year from July 30, 1957. This right he had not
exercised when the complaint was filed by the appellee
on May 29, 1962.
In his brief the appellant assigns five (5) errors, which
may be condensed into the following issues:

(1)
Whether or not the creditor Development Bank
of the Philippines has a right to recover the balance of
the indebtedness after the mortgaged property was
sold for less than the amount thereof under
extrajudicial foreclosure pursuant to Act 3135, as
amended:
(2)
Whether or not the debtor, appellant Mirang,
may be exempted from paying the loan on the ground
that it had been granted to him for the purpose of
developing his homestead by planting it to abaca, and
that said abaca was destroyed by mosaic disease; or,
failing that, whether or not his obligation may be
reduced by this Court; and
(3)
Whether or not the mortgage debtor who
wishes to repurchase his homestead should pay
therefor only the price paid by the purchaser at the
auction sale, or the total obligation incurred by him and
still outstanding.
On the first issue, the appellant contends that because
the mortgage was extrajudicially foreclosed and sold at
less than the mortgage debt under Act 3135 the
appellee is not entitled to recover the deficiency
because neither this Act, as amended, nor the
mortgage contract itself, contains any provision giving
such right to the mortgagee.
The same question has been settled by this Court in
the case of Philippine Bank of Commerce vs. Tomas de
Vera, 3 where We held:
The sole issue to be resolved in this case is whether
the trial Court acted correctly in holding appellee Bank
entitled to recover from appellant the sum of
P99,033.20 as deficiency arising after the extrajudicial
foreclosure, under Act No. 3135, as amended, of the
mortgaged properties in question. It is urged, on
appellant's part, that since Act No. 3135, as amended,
is silent as to the mortgagee's right to recover
deficiency arising after an extrajudicial foreclosure sale
of mortgage, he (Mortgagee) may not recover the
same.
A reading of the provisions of Act No. 3135, as
amended, (re extrajudicial foreclosure) discloses
nothing, it is true, as to mortgagee's right to recover
such deficiency. But neither do we find any provision
thereunder which expressly or impliedly prohibits such
recovery.
Article 2131 of the new Civil Code, on the contrary,
expressly provides that 'The form, extent and
consequences of a mortgage, both as to its
constitution, modification and extinguishment, and as
to other matters not included in this Chapter, shall be
governed by the provisions of the Mortgage Law and of
the Land Registration Law.' Under the Mortgage Law,
which is still in force, the mortgagee has the right to
claim for the deficiency resulting from the price
obtained in the sale of the real property at public
auction and the outstanding obligation at the time of
the foreclosure proceedings. (See Soriano vs. Enriquez,
24 Phil. 584; Banco de las Islas Filipinas vs. Concepcion
e Hijos, 53 Phil. 806; Banco Nacional vs. Barreto, 53
Phil. 955.) Under the Rules of Court (Section 6, Rule 70
* ), 'Upon the sale of property, under an order for a sale
to satisfy a mortgage or other incumbrance thereon, if
there be a balance due to the plaintiff after applying
the proceeds of the sale, the Court, upon motion,
should render a judgment against the defendant for
any such balance for which, by the record of the case,
he may be personally liable to the plaintiff, ....' It is true
that this refers to a judicial foreclosure, but the
underlying principle is the same, that the mortgage is
but a security and not a satisfaction of indebtedness.
Appellant invites the attention of this Court to the new
provisions of the Civil Code on pledge, particularly
Article 2115, which provides:

The sale of the thing pledged shall extinguish the

principal obligation, whether or not the proceeds of the
sale are equal to the amount of the principal obligation,
interest and expenses in a proper case. ... If the price
of the sale is less, neither shall the creditor be entitled
to the deficiency, notwithstanding any stipulation to
the contrary.
as well as to the fact that in chattel mortgage under
Art. 1484, paragraph 3, the creditor shall have no
further action to recover any unpaid balance if he has
chosen to foreclose the chattel mortgage. These
provisions, far from supporting the appellant's stand,
militate against it, because they show that when the
Legislature intends to bar or occlude a creditor from
suing for any deficiency after foreclosing and selling
the security given for the obligation, it makes express
provision to that effect. In the same case of Philippine
Bank of Commerce vs. De Vera, supra, this Court said
apropos:
It is then clear that in the absence of a similar provision
in Act 3135, as amended, it cannot be concluded that
the creditor loses his right given him under the
Mortgage Law and recognized in the Rules of Court, to
take action for the recovery of any unpaid balance on
the principal obligation, simply because he has chosen
to foreclose his mortgage extra-judicially, pursuant to a
special power of attorney given him by the mortgagor
in the mortgage contract. As stated by this Court in
Medina vs. Philippine National Bank (56 Phil. 651), a
case analogous to the one at bar, the step taken by the
mortgagee-bank in resorting to extra-judicial
foreclosure under Act No. 3135, was 'merely to find a
proceeding for the sale, and its action cannot be taken
to mean a waiver of its right to demand the payment of
the whole debt.'
On the second issue the appellant asks that if he
cannot be completely absolved he should at least be
given a reduction of his indebtedness because of his
inability to realize any income from the abaca he
planted. His predicament may evoke sympathy, but it
does not justify a disregard of the terms of the contract
he entered into. His obligation thereunder is neither
conditional nor aleatory its terms are clear and subject
to no exception.
The third issue has likewise been resolved by this Court
in a similar case. 4 The issue posed there involved the
price at which the mortgagor should redeem his
property after the same had been sold at public
auction whether the amount for which the property
was sold, as contended by the mortgagor, or the
balance of the loan obtained from the banking
institution, as contended by the mortgagee RFC. Cited
in that case was Section 31 of Com. Act No. 459, which
was the special law applicable exclusively to properties
mortgaged with the RFC, as follows:
The mortgagor or debtor to the Agricultural and
Industrial Bank * , whose real property has been sold at
public auction, judicially or extra-judicially, for the full
or partial payment of an obligation to said Bank, shall,
within one year from the date of the auction sale, have
the right to redeem the real property by paying to the
Bank all the amount he owed the latter on the date of
the sale, with interest on the total indebtedness at the
rate agreed upon in the obligation from said date,
unless the bidder has taken material possession of the
property or unless this has been delivered to him, in
which case the proceeds of the property shall
compensate the interest. ...
The same provision applies in the instant case. The
unavoidable conclusion is that the appellant, in
redeeming the foreclosed property, should pay the
entire amount he owed to the Bank on the date of the
sale, with interest thereon at the rate agreed upon.
WHEREFORE, the decision appealed from is affirmed,
with costs.

Teehankee, Esguerra and Muoz Palma, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-51767

June 29, 1982

LETICIA CO, assisted by her husband MUI YUK KONG, in

substitution of CITADEL INSURANCE & SURETY CO.,
INC., plaintiff-appellee,
vs.
PHILIPPINE NATIONAL BANK, defendant-appellant.

BARREDO, J:
Direct appeal to this Supreme Court pursuant to
Republic Act 5440 from the decision of the Court of
First Instance of Rizal, Branch XXI in its Civil Case No.
23101 entitled "Citadel Insurance & Surety Co., Inc. vs.
Philippine National Bank", the dispositive portion of
which reads:
WHEREFORE, this Court finds that plaintiff has validly
exercised the right of redemption herein-before
discussed and orders the defendant to:
(a)
Accept the amount consigned and deposited
pursuant to the Order of this Court on March 11, 1976;
(b)
Execute and specifically comply to the effects
of the exercise of the right of redemption so that
whatever title is due to the plaintiff after redemption
may properly accrue to plaintiff;
(c)
Deliver and surrender to plaintiff possession
over the property in question.
Considering that this case has been submitted for
decision based upon four (4) limited questions of law
and there being no evidence presented and submitted
to support any claim for damages, there is no
pronouncement and award of damages as well as
costs.
SO ORDERED. (Pp. 180-181, Record on Appeal.)
It goes without saying that under the Act
aforementioned by virtue of which this appeal is before
Us, the issues We are called upon to resolve are only
questions of law.
Briefly stated, the undisputed material facts of this
case, as may be culled from the decision of the trial
court and elsewhere in the record, are as follows:
On November 10, 1961, the Standard Parts
Manufacturing Corporation, hereinafter to be referred
to simply as STANDARD, executed a real estate
mortgage in favor of herein defendant-appellant
Philippine National Bank, hereinafter to be referred to
simply as PNB, over properties covered by Transfer
Certificates of Title Nos. T-5108 and T-5320, both
situated in Baguio City, as collateral for a loan
consideration of P500,000.00. On February 20, 1963,
the same debtor corporation executed an amended
real estate mortgage to include as collateral for the
increase of the above loan to P1,000,000.00 a property
located at Pasong Tamo Extension within the
Municipality of Makati (then part of Rizal Province and
now of Metro Manila) covered by Transfer Certificate of
Title No. 54474. Additionally, on February 20, 1963, the
same corporation executed in favor of PNB a chattel
mortgage of its personal properties listed on pages 96
to 108 of the Record on Appeal. On pages 6-7 of
appellant's brief it is stated that as of July 19, 1974, the
"borrowed loan" of STANDARD totalled P4,296,803.56,
and that the said obligation was secured, as
aforementioned, by the mortgages on the Baguio and

Makati real estates of STANDARD and the chattel

mortgage on its personal properties above referred to.
When STANDARD failed to pay its obligation, PNB
extrajudicially foreclosed the mortgage on the Baguio
properties as well as the chattel mortgage on July 19,
1974, with PNB as the highest bidder for
P1,514,305.00. Subsequently, on August 8, 1974, PNB
also foreclosed the mortgage on the Makati property
and purchased the same, as highest bidder, for
P1,363,000.00.
We quote further from appellant's brief:
When Standard Parts failed to pay its obligation, PNB
foreclosed the Baguio properties and chattels on July
19, 1974 with it as the highest bidder for
P1,514,305.00 and the Pasong Tamo property on
August 8, 1974 also with it as the highest bidder for
P1,363,000.00. Hence, after foreclosure of the abovementioned mortgage, the deficiency claim of the Bank
against Standard Parts as of August 8, 1974 amounted
to P1,434,521.07. Subsequently, a Certificate of Sale
dated July 19, 1974 was issued by the Sheriff of Baguio
City covering TCT Nos. T-5708 and T-5320 (Annex "C",
P.S.F.). A Certificate of Sale dated August 8, 1974
covering TCT No. 54474 was also issued by the Sheriff
of Rizal (Annex "D", P.S.F.) and registered on March 14,
1976 in the Registry of Deeds. Upon failure of Standard
Parts to redeem the foreclosed properties within the
reglementary period, the PNB consolidated titles to the
Baguio properties and TCT Nos. 26080 and 26081
(Annexes "E" and "E-1", respectively, P.S.F.) were
issued by the Register of Deeds of Baguio City on May
5, 1976 in the name of the Bank. On May 14, 1976, TCT
No. 54474 was cancelled and TCT No. S-28133 issued
in the name of the PNB.
Meantime, on March 5, 1976, Citadel wrote PNB a letter
(Annex "H", P.S.F.) stating therein its desire to redeem
the property covered by TCT No. 54474, it being the
alleged assignee of the right of redemption of Standard
Parts with respect only to said property. Citadel,
however, offered to redeem the property for only
P1,621,970.00. In its reply to said letter, PNB, in a
letter dated March 5, 1976 (Annex "I", P.S.F.), justifiably
refused to accept the tender of payment of Citadel
considering that the amount of P1,621,970.00 was very
much lower than the Bank's total amount of
P3,366,546.42 as of March 5, 1976 per the Statement
of Account of Standard Parts (Annex "G", P.S.F.). (Pp. 79, Brief of PNB)
To Our mind then, the facts that are decisive herein are
the following:
1.
The mortgages here in question were
constituted way back in 1961 to 1963.
2.
The foreclosure sale of the Baguio properties
and the chattels took place on July 19, 1974 and that of
the Makati estate on August 8, 1974.
3.
Citadel Insurance & Surety Co., Inc. (CITADEL,
for short) to whom STANDARD had in the meanwhile
(or on February 20, 1976) transferred its rights in the
mortgages here in issue, wrote PNB on March 5, 1976
stating that it was redeeming the Makati property,
offering to pay therefor as redemption price
P1,621,970.00. The letter of CITADEL in this regard
reads thus:
CITADEL INSURANCE & SURETY CO., INC.
Suite 202 Sikatuna Bldg., Ayala Ave.
Makati, Rizal
Tel. No. 87-33-07 & 87-34-44
March 5, 1976
PHILIPPINE NATIONAL BANK
Escolta, Manila

Re: Legal Redemption of Extra-Judicial

Foreclosed Property of Standard
Parts Manufacturing Corporation
Under Act No. 3135, As amended
Gentlemen:

Andres L. Africa or Asst. Vice Pres. Raul Leveriza on

Monday March 8,1976.
Very truly yours,
(Sgd.) ARTEMIO S. TIPON
Senior Supervising Atty.

In connection with the above-mentioned property

which is covered by TCT No. 54474 of the Register of
Deeds For the Province of Rizal we wish to inform you
that the CITADEL INSURANCE & SURETY CO., INC., is
the Assignee of the right of redemption, which will
expire on March 11, 1976, by virtue of a "Deed of
Assignment and Waiver of Redemption Rights" dated
February 29, 1976, photostat copy of which is attached
to this letter as Annex "A".

(Pp. 133-134, Record on Appeal.)

As assignee of the aforementioned Right of

Redemption, our Company is now exercising the same
by tendering to you the redemption price computed as
follows:

6.
On March 11, 1976, CITADEL filed the instant
action in the court below with the following prayer:

P1,363,000.00 total bid of the PNB per its letter to

the Sheriff dated August 8, 1974;

WHEREFORE, it is respectfully prayed that upon the

filing of this complaint this Honorable Court forthwith
issue an order authorizing its Branch Clerk to accept a
Manager's Check in the amount of P1,621,970.00 and
deposit the same with the Rizal Commercial Banking
Corporation under a Savings Account in order that the
same shall not remain Idle, and in the name, of
defendant PNB, subject to the control and disposition of
this Honorable Court; and after hearing, judgment be
rendered;

P 258,970.00 interest at the rate of 1% a month

from the date of auction, August 8, 1974, up to the
time of redemption;
P1,621,970.00 TOTAL
as evidenced by RCBC Manager's Check No. MC
194188 dated March 4, 1976, which is attached to this
letter as Annex "B".
In view of the foregoing, kindly acknowledge the
receipt of the redemption amount and cause the
issuance of the corresponding Certificate of
Redemption in favor of our Company.
Thank you.
Very truly yours,

5.
The Certificate of Sale dated August 8, 1974
covering TCT No. 54474 was issued by the Sheriff of
Rizal and registered on March 14, 1976 in the Registry
of Deeds. (Page 8, PNB's brief) Notably, however,
according to the decision of the trial court, the
certificate of sale was registered on March 11, 1976.
(Page 176, Record on Appeal.)

PRAYER

(a)
Ordering defendant to accept the amount so
deposited, and/or such amount as may be found by
this Honorable Court to be the lawful redemption price
for the particular property in question;
(b)
Ordering defendant to turn over the title and
possession of the property in question to plaintiff
together with its fruits from March 11, 1976 up to the
time possession is actually surrendered to the plaintiff,
plus the interests thereon counted from the date of
filing of this complaint;

(Sgd.) FRANCISCO S. CORPUS

President
Atty.: a/s (Pages 131-133, Record on Appeal)
4.
Immediately or on even date PNB rejected the
above tender, contending that the offered price was
much lower than P3,366,546.42, 1 as of said date
March 5, 1976, which PNB maintained was the correct
redemption price. The following was the reply of PNB:

(c)
Ordering defendant to execute such documents
and papers that may be necessary for the transfer of
the title and possession of the property in question to
plaintiff;
(d)
Ordering defendant to pay plaintiff damages in
the form of attorney's fees and expenses of litigation,
the amount of which is left to the sound discretion of
this Honorable Court;
(e)

PHILIPPINE NATIONAL BANK

LEGAL DEPARTMENT
March 5, 1976
Mr. Francisco S. Corpus
President
Citadel Insurance & Surety Co., Inc.
202 Sikatuna Bldg., Ayala Ave.
Makati, Rizal
Dear Mr. Corpus:
This refers to your letter of March 5, 1976 wherein you
expressed your desire to redeem the property covered
by TCT No. 54474 of the Register of Deeds of Rizal
which we acquired from Standard Parts Manufacturing
Corp. in the amount of P1,621,970.00 in the form of
RCBC Manager's Check No. MC 194188 dated March 4,
1976.
We feel that the Legal Department is in no position to
decide the acceptance of your offer because it appears
that the amount offered is less than our total claim. We
suggest, therefore, that you see either Vice President

Ordering the defendant to pay the costs of suit.

PLAINTIFF FURTHER PRAYS for such other relief as may

be found just and equitable in the premises. (Pp. 6-8,
Record on Appeal.)
7.
There is no dispute that a manager's check of
the Rizal Commercial Banking Corporation No. MC
194188 dated March 4, 1976 and in the amount of
P1,621,970.00 (Pp. 14-15, Record on Appeal)
accompanied the complaint and was actually deposited
under a savings account with the same bank by order
of the trial court of the same date "in the name of the
PNB subject to the control and disposition of the
Court." (p. 20, Record on Appeal.)
In the light of the foregoing facts, the parties stipulated
in the partial stipulation facts they submitted to the
trial court that:
B.

Limitation of issues

The parties agreed that the issues raised by the

pleadings are one of law, to wit:
1.

Whether the redemption period has expired.

2.
What is the correct redemption amount
required under the law?
3.
Whether there was a valid and effective tender
of payment.
4.
Whether the Deed of Assignment is binding
and enforceable against
5.

defendant PNB. (P. 151, Record on Appeal)

Timeliness of the redemption

To be sure, We find the opposing postures of the parties
on the timeliness of the redemption here in question a
little blurred and confusing. So, rather than to try to
extricate Ourselves out of such maze, We feel it is
sufficient to point out that according to the brief of
appellant, the foreclosure sale of the subject property
was made on August 8, 1974 (pp. 7-8) and the
corresponding certificate of sale was issued by sheriff
on the same day and "registered on March 14, 1976 in
the Register of Deeds." (p. 8, Record on Appeal.) "On
May 14, 1976 TCT 54474 was cancelled and TCT No. S28133 issued in the name of
PNB". (id.) 2
In such ambiguous premises, We have no alternative
than to use March 11, 1975 3 as point of reference
regarding the date of the registration of the certificate
of sale. Appellant assumes that on this basis the period
of redemption was up to March 10, 1976. Well, the
truth of the matter is that this detail is tied up
inextricably to the main question of law that pervades
the whole of this controversy.
What is the law applicable to this case as to the period
of redemption?
Let us not forget that the mortgage at issue was
executed in 1963. True it is that as underscored by
counsel for PNB, STANDARD, the predecessor-ininterest of CITADEL, who signed the deed of mortgage
agreed, and CITADEL is bound by such agreement, "to
abide and to be bound by the provisions of the Charter
of the PNB ". Specifically paragraph (g) of said real
estate mortgage provides:
(g)
The mortgagor hereby waives the right granted
him under Section 119 of Commonwealth Act No. 141,
known as the Public Land Act, as amended and agrees
to abide to be bound by the provisions of Act No. 3135
or Act No. 2933, which amended Act No. 1612, or
Republic Act No. 1300, as amended, known as the New
Charter." (Page 15, PNB's Brief.)
Going by the literal terms of this quoted provision,
STANDARD/CITADEL stand bound by the same. In other
words, paragraph (g) of the mortgage contract made
the provisions of Act No. 3135 or Act 2933, which
amended Act No. 1612, or Republic Act 1300, as
amended, known as the new Charter part and parcel of
the mortgage contract. Now, what is the legal import or
consequence of such express incorporation of and
submission to Act 3135 and Republic Act 1300 by
STANDARD/CITADEL?
Republic Act 1300 entitled "An Act Revising the Charter
of the Philippine National Bank" was approved and
made effective on June 16, 1955. It was therefore the
law when in 1963 the mortgage here in dispute was
executed. It was the very law that the
above-quoted paragraph (g) of the mortgage contract
made reference to. In this connection, evidently
overlooked by counsel for PNB is that Republic Act
1300 does not contemplate extrajudicial procedure.
Clearly indicative of this is Section 20 thereof which
provides:
Sec. 20.
Right of redemption of property
foreclosed. The mortgagor shall have the right,
within the year after the sale of real estate as a result

of the foreclosure of a mortgage, to redeem the

property by paying the amount fixed by the court in
the order of execution, with interest thereon at the rate
specified in the mortgage, and all the costs and other
judicial expenses incurred by the Bank by reason of the
execution and sale and for the custody of said property.
Indeed, conventional legal and banking business sense
dictates that it must have been because of such
omission that paragraph (g) above had to expressly
incorporate Act 3135 which provides for extrajudicial
foreclosure. We cannot, therefore, escape the
conclusion that what STANDARD agreed to in respect to
the possible foreclosure of its mortgage was to subject
the same to the provisions of Act 3135 should the PNB
opt to utilize said law instead of Republic Act 1300.
On the other hand, Act 3135, as amended by Act 4018,
is of 1924 vintage. Its Section 6 very clearly governs
the right of redemption in extrajudicial foreclosures
thus:
Sec. 6. In an cases in which an extrajudicial sale is
made under the special power hereinbefore referred to,
the debtor, his successors in interest or any judicial
creditor or judgment creditor of said debtor, or any
person having a lien on the property subsequent to the
mortgage or deed of trust under which the property is
sold, may redeem the same at any time within the
term of one year from and after the date of the sale;
and such redemption shall be governed by the
provisions of sections four hundred and sixty-four to
four hundred and sixty-six, inclusive, of the Code of
Civil Procedure, in so far as these are not inconsistent
with the provisions of this Act.
Sections four hundred sixty-four to four hundred sixtysix, inclusive, of the Code of Civil Procedure, since the
promulgation of the Rules of Court of 1940, became
Sections 29, 30 and 34 of Rule 39. The same sections
were reiterated in the Revised Rules of Court in July
1964.
From all the foregoing, We are of the considered
opinion and so hold that STANDARD'S/CITADEL'S period
of redemption was up to March 10, 1976. 4 That
CITADEL filed its complaint to compel PNB to accept its
redemption only on March 11, 1976 is of no moment.
The unequivocal tender of redemption was made in the
letter of Francisco S. Corpus, its President, of March 5,
1976 accompanied by a manager's check of the Rizal
Commercial Banking Corporation a well known, big and
reputable banking institution, for the amount it
believed it should pay as redemption price. PNB
rejected it on the sole and only ground that it
considered the amount insufficient. The Court,
therefore, holds that the redemption was made on
time, that is, within one year (or even twelve months)
from the date appearing as the date of the registration
of the certificate of sale.
How about the amount needed for such redemption?
On this score, PNB insists on p. 9 et. seq. of its brief on
the applicability to this case of "Section 25 of
Presidential Decree No. 694, otherwise known as the
new PNB Charter" which provides:
Section 25.
Right of Redemption of Foreclosed
Property Right of Possession During Redemption
Period Within one year from the registration of the
foreclosure sale of real estate, the mortgagor shall
have the right to redeem the property by paying all
claims of the Bank against him on the date of the sale
including all the costs and other expenses incurred by
reason of the foreclosure sale and custody of the
property, as well as charges and accrued interests.
But P.D. 694 took effect only on May 8, 1975. PNB's
counsel himself has, as already mentioned above,
taken the position that it was the old PNB Charter,
Republic Act 1300, that was expressly made part of the

contract. In other words, it was by virtue of such

contractual stipulation and not ex propio vigore that
the provisions of the bank's then current charter bound
the mortgagor STANDARD. But prescinding from
possible legal flaw in such pose and that all provisions
of the charter are enforceable and must be read into all
mortgages with the PNB as integral parts thereof, in
this instant case, the Court finds its hands inert and
shackled in the face of the constitutional proscription
against the impairment of contracts. (Sec. 11, Art. IV,
New Constitution) Stated otherwise, since the contract
of mortgage herein was entered into under a specific
law, Republic Act 1300, even the principle that no law
is unamendable nor unrepealable cannot hold, when
the subsequent legislative enactment, P.D. 694, would
alter and modify to the prejudice of any of the parties
the terms of the contract under the aegis of the prior
law. Indisputably, the application of P.D. 694 to the
mortgage herein involved would violate the
Constitution. Hence, it simply cannot apply.
Stated otherwise, by virtue of the provision of the
mortgage contract precisely cited by PNB, namely, its
paragraph (g), quoted earlier, PNB had the
contractually acquired option to resort either to its
Charter, Republic Act 1300 or to Act 3135. When it
foreclosed the mortgage at issue, it chose Act 3135.
That was an option it freely exercised without the least
intervention of appellee. And it was exercised before
P.D. 694 came into being. In fact, the foreclosure sales
took place in 1974 yet. And so, to make the
redemption subject to a subsequent law would be
obviously prejudicial to the party exercising the right to
redeem. Without considering the date the loan was
secured and the date of the mortgage contract, and
taking into account only the dates of the foreclosures
and auction sales, it is quite obvious that any change
in the law governing redemption that would make it
more difficult than under the law at the time of the sale
cannot be given retroactive effect. Under the terms of
the mortgage contract, the terms and conditions under
which redemption may be exercised are deemed part
and parcel thereof whether the same be merely
conventional or imposed by law. To alter those terms in
a manner prejudicial to the mortgagor or the person
redeeming the property as his successor-in-interest
after the foreclosures and sales would definitely come
within the constitutional proscription against
impairment of the obligations of contracts.
Having thus come to the ineludible conclusion that Act
3135 and Sections 29 to 32 of Rule 39 of the Rules of
Court rather than P.D. 694 are the laws applicable to
the right of redemption invoked by appellee in this
case, 5 it would appear that all that remains for Us to
do is to apply the said legal precepts. Pursuant to
Section 30 of Rule 39, "the judgment debtor (or his
successor-in-interest per Section 29, here Leticia Co,)
may redeem the property from the purchaser, (here
PNB) at any time within twelve months after the sale,
on paying the purchaser the amount of his purchase,
with one per centum per month interest thereon in
addition, up to the time of redemption, together with
the amount of any assessments or taxes which the
purchaser may have paid thereon after the purchase,
and interest on such last named amount at the same
rate; ..."
In this connection, lest it be argued that CITADEL did
not include in its tender the amount of assessments or
taxes PNB might have paid before the redemption, His
Honor, We note that the trial judge, has pointed out
that in spite of the requirement in the certificate of sale
issued by the sheriff that the purchaser or highest
bidder submits within 30 days immediately preceding
the expiration of the period of redemption, an
appropriate statement of the amount of such
assessments or taxes, PNB failed to comply with such
requirement, hence it would be unfair to fault CITADEL
for the non- inclusion thereof in its tender. PNB argues,
however, that it did furnish CITADEL on March 5, 1976
the required data. We note, however, that the

statement of P3,366,546.42 specified by PNB in its

reply of March 5, 1976 is not clear enough to show the
details on taxes and assessments under discussion. In
any event, considering that as earlier pointed out by
Us, there could be a possibility that March 5, 1976
should be considered as the last day of redemption,
the explanation of PNB is, at least in equity, unavailing.
There was no more time for CITADEL to have a
breakdown of the P3,366,546.42 to find out what items
were included therein. Anyway, this discussion is
practically academic because in the manner We are
resolving this case, this point would be of no moment.
Before passing to another aspect of this case, it may
not be amiss to mention here that in Moran's
Comments on the Rules of Court (p. 326-327, 1979
ed.), it is stated that where the judgment debtor, which
necessarily includes his successor-in-interest (Section
29, a, Rule 39) validly tenders the necessary payment
for the redemption and the tender is refused, it is not
necessary that it be followed by the deposit of the
money in court or elsewhere (Enage vs. Vda. de
Escano, 38 Phil. 687) and no interest after such tender
is demandable on the redemption money. (Martinez vs.
Campbell, 10 Phil. 626; Fabros vs. Agustin, 18 Phil.
336).
The jurisprudence cited by PNB are not applicable
Even as We have so far focused Our discussion and
resolution of the issues herein on the pertinent
statutory provisions, We have not really closed Our
eyes to the jurisprudence cited by PNB in its brief, four
of which are worthy of mention, namely Medina vs.
PNB, 56 Phil. 655. Nepomuceno vs. RFC, G.R. No. L14877, Nov. 23,1960; Perez vs. PNB, 17 SCRA 833 and
DBP vs. Mirang 66 SCRA 141.
The case of Perez, supra, did not involve a redemption
in the sense that it is in issue in this case. In fact, the
point involved in the instant case is not even touched
in the syllabus thereof in SCRA. This is because what
was fundamentally the problem therein was whether or
not it was obligatory on the part of the bankmortgagee to foreclose judicially the mortgage
inasmuch as the mortgagor died. As the Court said,
"the main issue in this appeal is the application of
Section 7, Rule 87 of the Rules of 1940 (now Section 7
of Rule 68), a reproduction of Section 708 of the Code
of Civil Procedure". Hence, anything said therein at
issue may be deemed as obiter. If anything in that
opinion is relevant hereto, it is that portion thereof that
justly and equitably holds that from whatever amount
should be payable to the mortgagee Bank, should be
deducted "the value of any rents and profits derived by
the (said) bank from the property in question". (at p.
840)
In the Nepomuceno case, supra, what confronted the
Court was a question relative to a mortgage with the
Rehabilitation Finance Corporation (RFC for short, now
the Development Bank of the Philippines). The Court
found no difficulty in not applying Section 6 of Act 3135
because it found that there is in Section 31 of the
Charter of the RFC a provision basically similar to
Section 25 of Presidential Decree 694, now being
invoked here by PNB. Naturally, the Court upheld the
RFC's contention that the whole amount of the
mortgagor's indebtedness should be paid. But in the
instant case, as already discussed earlier, P.D. 694
came too late.
DBP vs. Mirang supra, follows in principle the
Nepomuceno ruling that the special provisions in the
charter of DBP govern in matters of redemption of
property acquired by it in a foreclosure sale. So, We
need not elucidate any further on its inapplicability
hereto.
It is the earlier case of Medina vs. PNB, supra, that
nearly approximates the position PNB is pressing on Us
now, because in a portion of the opinion thereof, Chief

Justice Avencea as correctly underlined by PNB in its

brief, stated:
As we have indicated above, there is no question with
regard to the plaintiffs' right, as successors of the
Manila Commercial Company, to repurchase the
parcels covered by the transfer certificates of title Nos.
137 and 139. The question is whether, as the bank
contends and the trial court has held, the redemption
should be made by paying to the bank the entire
amount owned to it by the Manila Commercial
Company. The appellants contend that this redemption
may be made by only reimbursing the bank what it has
paid for the sale made to it. In this respect we are also
of the opinion that the judgment appealed from is
correct. (Page 655)
But this statement needs clarification. Towards the
concluding portion of the opinion, he explained that:
It will be remembered that the mortgage contract
between the bank and the Manila Commercial
Company was executed on October 30, 1920, before
the approval of Act No. 3135 in March, 1924. If, before
Act No. 3135 took effect, the Manila Commercial
Company had violated the contract, beyond all doubt
the bank would have been able to sell the mortgaged
property, without the necessity of a judicial action, and
the sale thus made would carry the right of repurchase
on the part of the debtor through the payment of the
entire amount of the debt.
When the bank's right to foreclose the mortgage of the
Manila Commercial Company accrued, Act No. 3135
was already in force. Of course, this law, being general,
did not affect the charter of the bank, which was a
special law. Thus, when the bank, in order to sell the
mortgaged property extrajudicially, resorted to Act No.
3135, it did so merely to find a proceeding for the sale;
but that action cannot be taken to mean a waiver of its
right to demand the payment of the whole debt before
the property can be redeemed. The record contains
nothing to show that the bank made this waiver of said
right. (Pp 656-657)
There is here an implication that in undertaking the
foreclosure therein involved, the PNB relied on Act
3135. This is not quite accurate, for in the opening
paragraph of the same opinion, it is stated that:
On October 30, 1920 the Manila Commercial Co. and La
Yebana Co. mortgaged four parcels of land with Torrens
titles, described in the complaint, to the Philippine
National Bank, the first and fourth parcels being in the
name of the La Yebana Co. and the second and third in
the name of the Manila Commercial Co. The mortgage
was given to secure the payment of P680,000 or for
whatever amount the Manila Commercial Co. might be
indebted to the Philippine National Bank. One of the
clauses of the mortgage provides that in case of a
violation by the Manila Commercial Co. of any of the
conditions of the contract the Philippine National Bank
may take possession of the mortgaged property and
sell or dispose of it by public or private sale, without
first having to file a complaint or to give any notice,
and at such sale, if public, it may acquire for itself all or
any of the parcels of land. (Page 651) (Emphasis
supplied)
Thus, it is to Our mind closer to the truth that it was by
virtue of such contractual clause, rather than Act 3135,
even if the request to the sheriff did mention said Act
that PNB foreclosed. In any event, the Court did take
into account that the mortgage at issue in that case
was executed before the approval of Act 3135 and
observed that without such Act, the right of the bank to
full payment would have been indisputable. This is the
same principle of non-impairment of the contracts by
subsequent legislative action We have made reference
to above in precluding the applicability hereto of P.D.
694.

On the minor issues

We are not impressed that PNB is really serious in its
pose that the tender by manager's check by CITADEL
was inefficacious. For one thing, that obligation was
waived when in its letter of rejection, the bank did not
invoke it. (Gregorio Araneta, Inc. vs. De Paterno and
Vidal, 91 Phil. 786) More importantly, this Court has
already sanctioned redemption by check. (Javellana vs.
Mirasol, 40 Phil. 761)
Neither do We find any substantial weight in PNB's
pose that the transfer or conveyance of STANDARD'S
right of redemption to CITADEL and the latter to Leticia
Co is not binding on it. In Lichauco vs. Olegario, et al.,
43 Phil. 540, this Court held that "whether or not ... an
execution debtor was legally authorized to sell his right
of redemption, is a question already decided by this
Court in the affirmative in numerous decisions on the
precepts of Sections 463 and 464 and other sections
related thereto, of the Code of Civil Procedure. " (The
mentioned provisions are carried over in Rule 39 of the
Revised Rules of Court.) That the transfers or con.
conveyances in question were not registered is of
miniscule significance, there being no showing that
PNB was damaged or could be damaged by such
omission, When CITADEL made its tender on May 5,
1976, PNB did not question the personality of CITADEL
at all. It is now too late and purely technical to raise
such an innocuous failure to comply with Article 1625
of the Civil Code.
The foregoing discussion inexorably points to the
conclusion that the price of redemption of
P1,621,970.00 tendered by CITADEL on March 5, 1976
was the correct amount. Since PNB refused to allow the
redemption thus legally tendered, applying the law
strictly, it would stand to lose P1,744,576.42 of what it
claims was the total indebtedness or outstanding
obligation of CITADEL as of March 11, 1976.
To avoid this loss, PNB invokes, as already stated
above, P.D. No. 694, but We have also pointed out
earlier that to apply said decree would result in the
impairment of the contractual obligation of CITADEL,
which cannot be allowed under the Constitution.
However, We are persuaded that all such
considerations would render the result of this case
short of what appears to be substantial justice in the
light of the situation on hand. It strikes Us as rather
unconscionable that by a literal application of the law
and perhaps due to a mistake in the amount of the bid
made by PNB, 6 the bank would not get full satisfaction
of its credit. Indeed, there would be unjust enrichment
on the part of the debtor- mortgagor in such an
eventuality. Our sense of justice cannot permit such
inequitous advantage.
With this point in mind, We deem it fairer and so hold
that considering the unique factual milieu of this case,
Articles 22 and 2142 of the Civil Code should be the
guideposts of Our decision here. Said articles provide:
ART. 22.
Every person who through an act of
performance by another, or any other means, acquires
or comes into possession of something at the expense
of the latter without just or legal ground, shall return
the same to him.
xxx

xxx

xxx

ART. 2142.
Certain lawful, voluntary and unilateral
acts give rise to the juridical relation of quasi-contract
to the end that no one shall be unjustly enriched or
benefited at the expense of another.
Although the report of the Code Commission states
that:

Another rule is expressed in article 22 which compels

the return of a thing acquired "without just or legal
ground." This provision embodies the doctrine that no
person should unjustly enrich himself at the expense of
another, which has been one of the mainstays of every
legal system for centuries. It is most needful that this
ancient principle be clearly and specifically
consecrated in the proposed Civil Code to the end that
in cases not foreseen by the lawmaker, no one may
unjustly benefit himself to the prejudice of another. The
German Civil Code has a similar provision (art. 812).

WHEREFORE, the judgment of the trial court against

the Philippine National Bank herein on appeal is hereby
modified and another one is hereby rendered in favor
of the said defendant-appellant bank in accordance
with the formula herein above stated, and, accordingly,
upon payment by LETICIA CO of the amount due it
pursuant to the above computation, PNB is hereby
ordered to transfer the title to the property in question
to LETICIA CO. This payment must be made within ten
(10) days from the finality of this judgment.
No costs.

it may be said that whatever of the principle of unjust

enrichment may not be covered by Article 22, Article
2142 makes its enhancement in this jurisdiction most
comprehensive

Concepcion, Jr., Guerrero, De Castro and Escolin, JJ.,

concur.
Aquino and Abad Santos, JJ., took no part.

Consequently, it is but just and proper that PNB should

be paid the full amount of P3,366,546.42 without any
interest as of March 11, 1976, when it refused a
redemption legally and validly tendered. On the other
hand, the amount of P1,621,970.00 tendered by
CITADEL on March 5, 1976 and which was deposited in
a savings account, drawing interest apparently less
than 12% p.a., in the name of PNB by order of the trial
court should be computed to have earned legal interest
or 12% p.a., compounded annually, since March 11,
1976, provided however that should such amount
including the compounded interest at 12% p.a. so
earned be less than P3,366,546.42, petitioner herein
should pay PNB such difference, and provided, on the
other hand, that with this arrangement, PNB does not
have to account to CITADEL/LETICIA CO for any of the
rentals it had earned from the time it took possession
of the property. In the final analysis, instead of PNB
losing P1,744,576.42, under strict technical legal
reasoning, as explained above, applying hereto the
principle of unjust enrichment, which We deem in the
peculiar circumstances at this instant case to be the
fairest way of resolving this controversy, it would still
be paid by petitioner a certain amount, not to mention
what must be quite substantial and considerable, the
rentals the said bank it has earned, which it does not
have to account for.
In closing, We may add that in Escano, supra, this
Court laid down as a policy that "redemptions are
looked upon with favor, and when an injury is to follow,
a liberal construction will be given to our redemption
laws to the end that the property of the debtor may
pay as many of the debtor's liabilities", PNB having
foreclosed on the Baguio properties and the chattels of
STANDARD for what appears could have been a fairer
price, it is but in consonance with the Escano policy
that the redemption herein involved be allowed on the
basis of the injunction against unjust enrichment. 7 We
may add here the observation, taught by common
business experience, that when a bank grants a loan,
secured by any collateral, what is of uppermost
consideration to such lender is the borrower's capacity
to pay according to the terms stipulated, and not really
the acquisition of the collateral, if only to maintain the
bank's liquidity position as conveniently as possible.
Acquired assets generally add to liquidity problems of
banks. The foreclosure of the security is a measure of
last resort, hence when by the exercise of the right of
redemption, the bank can recover the money it has
loaned, nothing could be more proper than to allow the
borrower to retain his property. Of course, peculiar
instances are naturally excepted. That is why this
decision cannot be invoked as a precedent for other
parties not exactly similarly situated as the appellee in
this case. Should there be any thought that Our
resolution of this case is not strictly according to legal
principles, let everyone be reminded that this Court
has inherent equity jurisdiction it can always exercise
in settings attended by unusual circumstances to
prevent manifest injustice that could result from bare
technical adherence to the letter of the law and
unprecise jurisprudence under it.

SECOND DIVISION
[G.R. No. L-26274 : July 31, 1981.]
ALPHA INSURANCE AND SURETY CO., INC., PlaintiffAppellant, vs. ESPERANZA C. REYES, ARTURO R. REYES
and DEVELOPMENT BANK OF THE PHILIPPINES,
Defendants-Appellees.

DECISION

BARREDO, J.:

An appeal from the decision of the Court of First

Instance of Manila in Civil Case No. 49980, Alpha
Insurance and Surety Co., Inc. vs. Esperanza C. Reyes,
et al., certified by the Court of Appeals to this Court for
the reason that the sole assignment of error of
appellant raises purely a legal question.
The following facts are undisputed:
The spouses Esperanza C. Reyes and Arturo R. Reyes
executed on November 15, 1958 in favor of Alpha
Insurance and Surety Co., Inc. a second mortgage over
their two parcels of land cranad(with a total area of
540 square meters) and the buildings thereon, located
at Makati, Rizal, in consideration of Alpha Insurances
undertaking to act as surety of the said spouses in
certain loans cranad(not to exceed P10,000.00) to be
obtained from banks or financial institutions. The two
lots were previously mortgaged to the Development
Bank of the Philippines as security for a loan of
P17,000.00.
In 1958, Esperanza C. Reyes borrowed P5,000.00 from
the Prudential Bank and Trust Company. In 1959, she
borrowed also P5,000.00 from the Philippine Banking
Corporation. Alpha Insurance was her surety and comaker in two promissory notes covering the said loans.
She and her husband executed indemnity agreements
in favor of Alpha Insurance in addition to the second
mortgage.
Due to the default of Esperanza C. Reyes, Alpha
Insurance, as solidary debtor, was constrained to pay
the two loans total balance of which as of November
21, 1961 was P7,575.00, plus 12% interest per annum.
As the Reyes spouses did not make any reimbursement
to Alpha Insurance, the latter filed on March 27, 1962
in the Court of First Instance of Manila the foreclosure
action above-mentioned against the spouses and the
DBP.
The DBP in its answer alleged that it had a first
mortgage on the two lots which was superior to Alpha
Insurances mortgage. It prayed that, in case of
foreclosure, the proceeds of the sale be first applied to
its credit. The Reyes spouses did not file an answer.
They were declared in default.
Judge Jose L. Moya in his decision dated February 1,
1963, simply ordered the Reyes spouses to pay Alpha
Insurance the sum of P7,575.00 with 12% interest a
year from November 22, 1961.
Because the judge had ignored the prayer in Alpha
Insurances complaint for the foreclosure of its second
mortgage, it filed a motion for reconsideration, praying
that the foreclosure of the second mortgage be ordered
and that the Reyes spouses be required to pay
attorneys fees.

Judge Moya in his order of February 19, 1963 awarded

P757.50 as attorneys fees, but he held that the second
mortgage could not be recognized as an encumbrance
because the DBP did not consent to its execution.
Judge Moya relied on the ruling in Associated Insurance
& Surety Co., Inc. vs. Register of Deeds of Pampanga,
105 Phil. 123, which construed the following provisions
of Commonwealth Act No. 459, the law creating the
Agricultural and Industrial Bank:
SEC. 26. Securities on loans granted by the
Agricultural and Industrial Bank shall not be subject to
attachment nor can they be included in the property of
insolvent persons or institutions, unless all debts and
obligations of the debtor to the Agricultural and
Industrial Bank have been previously paid, including
accrued interest, collection expenses, and other
charges.1
This Court held therein that this section embraces
levy on execution or any other encumbrance, unless
the same is created with the consent of the bank and
that (A) different interpretation would defeat the very
purpose of the law which is to maintain unhampered
the value of the property until the encumbrance shall
have been released.
Alpha Insurance filed a motion for reconsideration
wherein it alleged that the second mortgage was
approved by DBP Governor Roberto S. Benedicto
cranad(Exh. A-2) and that the second mortgage was
registered because of that approval and because the
DBP delivered the owners duplicate of the title to
Alpha Insurance in order to effect the registration.
Nevertheless, Judge Moya denied the motion. Alpha
Insurance appealed to this Court.
Controversies of this nature should not even be
litigated, much less reach this Supreme Court, adding
to its already almost unmanageable docket. The issue
between the parties is so insubstantial that a little
more effort on the part of respective counsels of the
parties and the trial court to get together as to what
should be done would have cleared up matters in a
manner We are certain would have been satisfactory to
all concerned. To think that a litigation like this should
last since March 27, 1962 or more than almost two
decades ago when plaintiff-appellant filed its action of
foreclosure is a black spot in the administration of
justice in this country. This situation is intolerable and
the members of the Bar and the trial judges ought to
change their attitudes and direct their efforts towards
more important and substantial legal matters, thereby
serving public interest to the utmost within their
expected capabilities.
Deciding the legal question before Us, even if the DBP
were just an ordinary first mortgagee without any
preferential liens under Republic Act No. 85 or
Commonwealth Act 459, the statutes mentioned in the
Associated Insurance case relied upon by the trial
court, it would be unquestionable that nothing may be
done to favor plaintiff-appellant, a mere second
mortgagee, until after the obligations of the debtorsappellees with the first mortgagee have been fully
satisfied and settled. In law, strictly speaking, what was
mortgaged by the Reyeses to Alpha was no more than
their equity of redemption.
Thus, what We perceive to be most appropriate to do
at this late stage is to see to it that the obligations in
question are paid soonest. However, to insist now, after
so many wasted years, on following in this case the
ordinary foreclosure procedure provided by law would
only cause further unnecessary delay in the
termination of the insubstantial controversy among the
parties herein.
In De la Riva vs. Reynoso, 61 Phil. 734, Antonio de la
Riva, the second mortgagee, filed an action against the

mortgagor Marceliano Reynoso to foreclose the second

realty mortgage. La Urbana Mutual Building and Loan
Association, the first mortgagee, was joined as a codefendant.
This Court held that La Urbana was properly joined as a
co-defendant and affirmed the lower courts judgment
ordering Reynoso to pay within ninety days the
amounts due to La Urbana and De la Riva, and, in case
of failure to do so, ordering the sale at public auction of
the mortgaged property and the application of the
proceeds of the sale to the two mortgage debts.
Within this precedent, the Court is of the considered
opinion and so holds that to avoid further delay in
writing finis to the instant case which started way back
in 1962, without any more ado, all that has to be done
here is to have the property herein involved ordered by
the trial court sold at public auction immediately, the
proceeds thereof to be used to pay the outstanding
obligation, if still there be any, of the defendantsappellees Esperanza Reyes and Arturo Reyes to the
Development Bank of the Philippines; if there be any
excess thereafter, the same be used to pay their
obligation to the plaintiff-appellant, and should there
still be any further excess, the same should be given to
the said Defendants-Appellees.
ACCORDINGLY, judgment is hereby rendered modifying
the decision of the trial court to conform with the
procedure herein outlined. No costs.
Aquino, Concepcion Jr., Abad Santos and De Castro, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. Nos. L-34317 and L-34335 November 28, 1973

MARCELO STEEL CORPORATION, HON. WALFRIDO DE
LOS ANGELES, in his capacity as Judge, Court of First
Instance of Rizal, Branch IV, Quezon City, and THE
SHERIFF OF QUEZON CITY, petitioners,
vs.
COURT OF APPEALS, PETRA R. FARIN and BENJAMIN
FARIN, respondents.
Florentino I. Capco for petitioners.
Ramon M. de Claro for respondents.

BARREDO, J.:
Petitions for review of the decision of the Court of
Appeals in CA-G. R. No. 47519-R, entitled Petra Farin, et
al., vs. Hon. Walfrido de los Angeles, etc. et al.,
granting a petition for certiorari of herein private
respondents, the spouses Benjamin and Petra Farin,
and annulling and setting aside the orders separately
issued by the Court of First Instance of Quezon City in
its Civil Case No. Q-9384 and in L. R. C. Record No.
7681, the first being an order dated December 9, 1970
denying private respondents' motion to stop the Sheriff
of Quezon City from proceeding with the extrajudicial
foreclosure sale of the properties herein involved which
said private respondents had mortgaged to herein
petitioner Marcelo Steel Corporation, after the said
court had already rendered judgment dismissing the
complaint for prohibition to enjoin said foreclosure, but
pending the appeal thereof, and the second being the
order dated February 4, 1971 granting the same
petitioner's motion for a writ of possession of the said
properties which it had acquired in the foreclosure sale
which the court had refused to restrain in the other
case.
The background facts are stated in the decision of the
Court of Appeals thus:
This is a petition for certiorari to annul the order dated
December 9, 1970, issued in Civil Case No. Q-9384 of
the Court of First Instance of Quezon City, Branch IV,
and the writ of possession issued in L.R.C. Rec. No.
7681 of said court.
It appears that on October 30, 1964, the petitioner
spouses executed a deed of real estate mortgage, in
favor of respondent Marcelo Steel Corporation,
hereinafter referred to as respondent corporation over
a parcel of land covered by T.C.T. No. 42689 of the
Register of Deeds of Quezon City, as security for the
payment of a promissory note in the sum of
P600,000.00.
On July 24, 1965, the respondent corporation filed with
the Sheriff of Quezon City a verified letter-petition for
the extra-judicial foreclosure of the afore-mentioned
real estate mortgage. Accordingly, the respondent
Sheriff of Quezon City advertised and scheduled the
extra-judicial foreclosure sale of the mortgaged
property for August 26, 1965.
On August 21, 1965, the petitioners filed against the
respondent corporation and the respondent Sheriff of
Quezon City a petition captioned "Prohibition with
Injunction and Damages" docketed as Civil Case No. Q9384 of the Court of First Instance of Rizal, wherein
they prayed that the respondent sheriff be

permanently enjoined from proceeding with the

scheduled sale at public auction of the mortgaged
property, and that the respondent corporation be
condemned to pay the petitioners P200,000.00 as
actual and moral damages and P50,000.00 as penal
and compensatory damage and P30,000.00 as
attorney's fees, on the ground that they have not been
in default in the payment of their obligation.
On August 21, 1965, the respondent judge issued an
order commanding the respondent Sheriff and the
respondent corporation to desist from proceeding with
the public auction sale of the mortgage property
scheduled on August 26, 1965.
After trial, the respondent judge rendered a decision on
October 3, 1970, the dispositive portion of which reads
as follows:
"WHEREFORE, judgment is hereby rendered as follows:
1.
The above-entitled case is hereby ordered
DISMISSED, for lack of sufficient basis;
2.
Ordering the petitioners, jointly and severally,
to pay the sum equivalent to 15% of the total
obligation due, as reasonable attorney's fees;
3.
Ordering petitioners to pay respondent Marcelo
Steel Corporation, jointly and severally, the sum of
P50,000.00 as actual exemplary damages;
4.
Ordering the petitioners, jointly and severally,
to pay the costs of the suit.
The order of status quo issued by the Court under date
of August 21, 1965 is hereby LIFTED and SET ASIDE,
and the Sheriff of Quezon City may now proceed with
the extrajudicial foreclosure of the mortgage."
Petitioners received a copy of the decision on October
15, 1970.
On October 19, 1970, respondent corporation filed with
respondent Sheriff another verified letter-petition
informing the latter of the decision rendered in Civil
Case No. Q-9384 and praying for the extra-judicial
foreclosure of the real estate mortgage. Acting on said
letter-petition, the respondent Sheriff issued the
necessary notices setting the public auction sale of the
mortgaged property on December 9, 1970.
On October 30, 1970, petitioners filed their notice of
appeal, appeal bond and record on appeal.
On December 4, 1970, petitioners riled an "Urgent
Motion to Require Respondents to Desist From
Proceeding With The Public Auction Sale of Petitioners'
Properties."
After respondent corporation filed its opposition to said
motion, the respondent judge issued on December 9,
1970, an order denying petitioners' aforementioned
motion to stop respondent Sheriff from proceeding with
the scheduled auction sale of petitioners' mortgaged
property. On the same date, the respondent Sheriff
proceeded with the auction sale of the mortgaged
property, respondent corporation being the successful
bidder, and issued the correspondent certificate of sale
dated December 9, 1970.
On the same date, December 9, 1970, the respondent
Judge issued an order approving petitioners record on
appeal.
On January 12, 1971, the respondent corporation filed
in L.R.C. Rec. No. 7681 an independent petition for the
issuance of a writ of possession entitled "In the Matter
of the Petition For Issuance of Writ of Possession Over a
Parcel of Land Covered By Transfer Certificate of Title
No. 42589 of The Office of The Register Of Deeds of
Quezon City In The Name Of Mortgagor Petra R. Farin

Married To Benjamin Farin; Marcelo Steel Corporation

(Mortgage) Petitioner". This petition was also assigned
to the respondent Judge. Petitioners did not file an
opposition to said petition.
On January 18, 1971, the respondent Judge issued an
order directing the presentation and submission of
evidence before the Branch Clerk of Court. After the
respondent corporation had submitted its evidence in
support of its petition, the respondent Judge issued an
order on February 4, 1971, granting the petition for the
issuance of a writ of possession.
Thereupon, the petitioners filed the present petition.
Upon these facts, the Court of Appeals held the trial
court exceeded its jurisdiction when it denied the
motion of the Farins seeking to enjoin the foreclosure
sale of their mortgaged properties inasmuch as they
had already perfected their appeal from the decision
dismissing their petition for prohibition against said
sale. According to the appellate court, since the
remedy pursued by the Farins was not an ordinary
action of injunction within the contemplation of Section
4 of Rule 39 nor one for the annulment of mortgage,
but a special civil action of prohibition, the decision
therein is not immediately executory as a matter of
right but only of sound judicial discretion under Section
2 of the same rule, and considering that the prevailing
party had not even moved for immediate execution,
the trial court could not have availed of its powers
under this last mentioned provision.
It is quite obvious that the Court of Appeals has missed
the point. As a matter of fact, it is plain that the trial
court did not issue any order of execution. The sheriff's
act of proceeding with the foreclosure sale was not
done by virtue of any such order of execution, but
pursuant to his authority and duty under Act 3135 as
amended by Act 4118 governing the extrajudicial
foreclosure of mortgages, which is simply to sell the
mortgaged properties at public auction to the highest
bidder, upon verified petition of the mortgagee and
without the need of any judicial order. In other words,
the sheriff went ahead not because he was so ordered
by the court, but precisely because the court refused to
restrain him by dismissing respondents' petition for
prohibition and lifting the status quo order it had
preliminarily issued upon the filing of the complaint.
Under these circumstances, the perfection of
respondents' appeal could not by itself have had the
effect of restoring the status quo order, without an
express order in that sense, which, of course, the court
had the power to issue. The Court has so held as early
as November 13, 1902 in Watson & Co. vs. Enriquez,
found in Volume I of the Philippine Reports at pages
480 to 484. The ruling therein made which is very
illuminating applies four-square to the case at bar.
The plaintiff, at the commencement of this action
obtained a preliminary injunction as prayed for in its
complaint. The case was afterwards tried, and in
September, 1902, a final judgment therein was entered
in favor of the defendants and the temporary injunction
was dissolved.
On the 20th of September a bill of exceptions was
perfected and signed by the judge, and a certified copy
thereof was then transmitted to this court. In this court
the plaintiff has presented a motion asking that the
preliminary injunction be continued.
Before discussing the power of this court to grant a
preliminary injunction, under these circumstances, it
seems necessary to determine whether or not the
preliminary injunction granted below was continued in
force by the filing of the bill of exceptions. Article 144
of the Law of Civil Procedure, now in force, says: "But
the filing of a bill of exceptions shall of itself stay
execution until the final determination of the action,
unless," etc. Article 1007 of the Revised Statutes of the
United States states the manner of obtaining a

supersedeas in cases pending in the Federal courts.

The meaning of the word "supersedeas" as used in that
section has been defined as follows: "A supersedeas,
properly so called, is a suspension of the power of the
court below to issue an execution on the judgment or
decree appealed from; or, if a writ of execution has
issued, it is a prohibition emanating from the court of
appeals against the execution of the writ. (Hovey vs.
McDonald, 109 U.S. 150.)
As so construed, article 1007 of the Revised Statutes of
the United States is substantially the equivalent of our
article 144. This question as to whether a supersedeas
has, in the Federal courts, the effect of continuing in
force an injunction dissolved by the lower court has
frequently been passed upon by the Supreme Court.
That court has said: "The general ruling is well settled
that an appeal from a decree granting, refusing, or
dissolving an injunction does not disturb its operative
effect. (Hovey vs. McDonald, 109 U.S. 150-161;
Slaughterhouse Cases, 10 Wall., 273-297; Leonard vs.
Ozark Land Company, 115 U.S., 465-468.) When an
injunction has been dissolved it can not be revived
except by a new exercise of judicial power, and no
appeal by a dissatisfied party can of itself revive it.
(Knox Co. vs. Harshman, 132 U.S., 14.)
The truth is that the case is not governed by the
ordinary rules that relate to a supersedeas of
execution, but by those principles and rules which
relate to chancery proceedings exclusively. ... In this
country the matter is usually regulated by statutes or
rules of court, and, generally speaking, an appeal,
upon giving the security required law, when security is
required, suspends further proceedings and operates
as a supersedeas of execution. ... But the decree itself
may have an intrinsic effect which can only be
suspended by an affirmative order either of the court
which makes the decree or of the appellate tribunal.
This court, in the Slaughterhouse Cases, 10 Wall., 273,
decided that an appeal from a decree granting,
refusing, or dissolving an injunction does not disturb its
operative effect. Mr. Justice Clifford, delivering the
opinion of the court, says: "It is quite certain that
neither an injunction nor a decree dissolving an
injunction passed in circuit court is reversed or nullified
by an appeal or writ of error before the cause is heard
in this court." It was decided that neither a decree for
an injunction nor a decree dissolving an injunction was
suspended in its effect by the writ of error, though all
the requisites for supersedeas were complied with. It
was not decided that the court below had no power, if
the purpose of justice required it, to order a
continuance of the status quo until a decision should
be made by the appellate court, or until that court
should order the contrary. This power undoubtedly
exists, and should always be exercised when any
irremediable injury may result from the decree as
rendered. ( Hovey vs. McDonald, 109, U.S., 159.)
In Minnesota the supersedeas statute provided that the
appeal from the order of judgment should "stay all
proceedings thereon and save all rights affected
thereby." The court of this State, relying upon the last
of the two clauses quoted, held that an appeal from an
order dissolving an injunction continued the injunction
in force. The evils which would result from such a
holding are forcibly pointed out by Judge Mitchell in a
dissenting opinion. He said: "Although a plaintiffs
papers are so insufficient on their face or so false in
their allegations that if he should apply on notice for an
injunction, any court would, on a hearing, promptly
refuse to grant one, yet, if he can find anywhere in the
State a judge or court commissioner who will
improvidently grant one ex parte, which the court on
the first and only hearing ever had dissolves, he can,
by appealing and filing bond, make the ex parte
injunction impervious to all judicial interference until
the appeal is determined in this court. ... Such result is
so unjust and so utterly inconsistent with all known
rules equity practice that no court should adopt such a
construction unless absolutely shut up to it by the clear

and unequivocal language of the statute. (State vs.

Duluth St. Ry. Co., 47 Minn., 369.)
The supreme court of that State afterwards, although
adhering to that decision on the ground of stare
decisis, stated that in their opinion it was unsound.
(State ex rel. Leary vs. District Court, 78 Minn., 464.)
We have in these Islands no appeal from orders
granting or dissolving preliminary injunctions, yet what
was said by Justice Mitchell applies to a case where,
upon a full trial in a court below, the judge has decided
that neither upon the facts nor the law is the plaintiff
entitled to any relief. To allow a plaintiff in such a case,
by taking an appeal and giving a supersedeas bond, to
continue an injunction in force would be manifestly
unjust.
We adopt the rule announced by the Supreme Court of
the United States and hold that the filing of the bill of
exceptions in the case at bar did not operate to revive
the preliminary injunction which was dissolved in and
by the final judgment.
We also adopt the other conclusion of that court to the
effect that the judge below has the power, if the
purposes of justice require it, to order a continuance of
the status quo until a decision should be made by the
appellate court or until that court should order to the
contrary. We have already in effect declared that
principle in the case of Maximo Cortes vs. Palanca
Yutivo, decided August 6, 1902.
This doctrine was reiterated a few days later in Sitia
Teco vs. Ventura, 1 Phil. 497 thus:
During the pendency of the suit the plaintiff applied for
a preliminary injunction on the ground, as stated in the
oral argument of counsel, that the house placed by the
plaintiff upon the lot having been destroyed by order of
the municipality the defendants repossessed
themselves of the premises and were preparing to
build a house thereon.
Upon a trial of the case judgment was rendered against
the plaintiff on the merits of the suit, and the injunction
was dissolved. The plaintiff has appealed the case by a
bill of exceptions and has made application to this
court to restore the injunction on the ground that the
operative effect of the judgment by which the
injunction was dissolved has, by virtue of the appeal
taken and the giving of a supersedeas bond, been lost,
and that the judgment in the case should not have the
effect of disturbing the interlocutory injunction. In the
case of Watson & Co. vs. Enriquez, decided by this
court October 26, 1902, it is held that an appeal from
an order dissolving an injunction does not suspend the
operation of the decision so as to revive the
interlocutory injunction.
We had occasion to reaffirm the same ruling in Aguilar
vs. Tan, G. R. No. L-23600, rendered in January 30,
1970 31 SCRA 205-214.
Now, in connection with the issuance by the trial court,
upon motion of petitioner and without objection of the
Farins, of the writ of possession in the L.R.C. case, the
appellate court ruled that the same amounted to an
execution of the decision in the civil case, and such
being the case, the trial court should have desisted
from doing it in view of the respondents' appeal. We do
not agree. It is Our considered opinion that the writ of
possession was properly issued, since, as already
discussed above, the foreclosure proceeding conducted
by the sheriff was not predicated on any judicial order.
Again, the erroneous pose of the Court of Appeals runs
counter to standing jurisprudence on the matter. In De
Gracia vs. San Jose, 94 Phil. 623, which is likewise on
all fours with the situation presently before Us, the
Court held:

Petitioner is the registered owner of the real property

described in Transfer Certificate of Title No. 3731 of the
Land Records of the city of Manila, which, by way of
extrajudicial foreclosure of a mortgage constituted
upon the same in favor of the Rehabilitation Finance
Corporation, was on November 14, 1952, sold to the
Republic Surety & insurance Co., Inc., as the highest
bidder at a public auction conducted by the sheriff of
said city under a special power of attorney attached to
the mortgage deed and pursuant Act. No. 3135, as
amended by Act No. 4118. Three days after the sale,
the purchaser filed an ex parte motion, duly verified, in
the four branch of the Court of First Instance of Manila
as authorized section 7 of the same Act, as amended,
praying that it be given possession of the property
during the redemption period and offering to furnish
the corresponding bond. But before the motion could
acted upon, herein petitioner filed an opposition
thereto and followed it with a complaint for the
annulment of the sale and a motion dismiss the
petition for a writ of possession or to postpone
consideration thereof until the complaint for annulment
could be decided. Being specifically empowered by the
Act to grant such writ on an ex parte motion by the
purchaser, the court refused to be side tracked and
authorized the issuance of the writ upon the filing of a
bond without prejudice to the right of the oppositor to
question the validity of the sale in the manner provided
by law.
Contending that the lower court acted without
jurisdiction and with grave abuse of discretion in
authorizing the issuance of the writ, petitioner has
come to this Court for a writ of certiorari and
prohibition.
The petition is without merit.
Sections 7 and 8 of Act No. 3L35, as amended, provide:
SEC. 7. In any sale made under the provisions of this
Act, the purchaser may petition the Court of First
Instance of the province or place where the property or
any part thereof is situated, to give him possession
thereof during the redemption period, furnishing bond
in an amount equivalent to the use of the property for
a period of twelve months, to indemnify the debtor in
case it be shown that the sale was made without
violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made
under oath and filed in form or an ex parte motion in
the registration or cadastral proceedings if the property
is registered, or in special proceedings in the case of
property registered under the Mortgage Law or under
section one hundred and ninety-four of the
Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the
office of any register of deeds in accordance with any
existing law, and in each case the clerk of court shall,
upon the filing of such petition, collect the fees
specified in paragraph eleven of section one hundred
and fourteen of Act Numbered Four hundred and ninety
six, as amended by Act Numbered Twenty-eight
hundred and sixty-six, and the court shall, upon
approval of the bond, order that a writ of possession
issue addressed to the sheriff of the province in which
the property is situated, who shall execute said order
immediately.
SEC. 8. The debtor may, in the proceedings in which
possession was requested but not later than thirty days
after the purchaser was given possession, petition that
the sale be set aside and the writ of possession
cancelled, specifying the damages suffered by him,
because the mortgage was not violated or the sale was
not made in accordance with the provisions hereof, and
the court shall take cognizance of this petition in
accordance with the summary procedure provided for
in section one hundred and twelve of Act Numbered
Four hundred and ninety-six; and if it finds the
complaint of the debtor justified, it shall dispose in his
favor of all or part of the bond furnished by the person

who obtained possession. Either of the parties may

appeal from the order of the judge in accordance with
section fourteen of Act Numbered Four hundred and
ninety-six; but the order of possession shall continue in
effect during the pendency of the appeal.
As may be seen, the law expressly authorizes the
purchaser to petition for a writ of possession during the
redemption period by filing an ex parte motion under
oath for that purpose in the corresponding registration
or cadastral proceeding in the case of property with
Torrens title; and upon the filing of such motion and the
approval of the corresponding bond, the law also in
express terms directs the court to issue the order for a
writ of possession. Under the legal provisions above
copied, the order for a writ of possession issues as a
matter of course upon the filing of the proper motion
and the approval of the corresponding bond. No
discretion is left to the court. And any question
regarding the regularity and validity of the sale (and
the consequent cancellation of the writ) is left to be
determined in a subsequent proceeding as outlined in
section 8. Such question is not to be raised as a
justification for opposing the issuance of the writ of
possession, since, under the Act, the proceeding for
this is ex parte.
It thus appear that the respondent Judge, in ordering
the issuance of a writ of possession in this case, merely
obeyed an express mandate of the law in the manner
and upon the terms therein provided, and petitioner
may not complain that he has been deprived of a
substantial right without due process, because the
order states that it is to be "without prejudice to the
rights of the oppositor to question the validity of the
above mentioned sale in the manner provided by law.
Having merely followed an express provision of the
law, whose validity is not questioned, the Judge cannot
be charged with having acted without jurisdiction or
with grave abuse of discretion. The rule that the
purchaser at a judicial public auction is not entitled to
possession during the period of redemption is not
applicable to a sale under Act No. 3135 where the
granting of said possession expressly authorized. ...
As may be gleaned from the foregoing dissertation of
Justice Alex Reyes for the Court, even the main remedy
of prohibition sought by the Farins was uncalled for.
The plain, speedy and adequate and even more
expeditious remedy available to them was that
specifically provided for in Section 8 of Act 3135, as
amended, quoted in the opinion, which is by the
summary petition under Section 112 of Act 496, the
Land Registration Act. We surmise that the issue of
alleged usury raised by respondents must have been
considered by the trial judge who also decided the civil
case in which said defense was raised as not
substantial enough to warrant its being taken up in an
ordinary action outside of the land court.
PREMISES CONSIDERED, the decision of the Court of
Appeals under review is reversed and the petition for
certiorari filed by the respondent Farins therein is
dismissed, with costs against said respondents.
Zaldivar (Chairman), Fernando, Antonio, Fernandez and
Aquino, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-52823 November 2, 1982
PHILIPPINE NATIONAL BANK, petitioner,
vs.
Hon. MIDPANTAO ADIL, in his capacity as Presiding
Judge of the CFI Iloilo, Branch II, and the HEIRS OF THE
LATE TEODORO MELLIZA Composed of ANGELINA
LOBATON VDA. DE MELLIZA, etc., ROSEMARIE CHANG,
RAYMUNDO TEODORO MELLIZA, JR., MARILYN MELLIZA,
JOSE TEODORO MELLIZA, et al., respondents.
Juan L. Diaz, Ramon F. Aviado and Isidro F. Real, Jr., for
petitioner.
Eugenio O. Original for respondents.

DE CASTRO, J:
This is a special civil action for certiorari which seeks to
annul the several injunctive orders issued by
respondent judge, and praying that, instead, the writ of
possession issued in favor of petitioner, as purchaser in
the foreclosure sale, dated April 20, 1979, be
immediately enforced.
It appears that on 'August 2, 1974, respondent
Angelina Lobaton Melliza, for herself and as judicial
administratrix of the estate of Teodoro Uy Melliza,
obtained a loan from petitioner in the amount of
P80,000.00 which was secured by a mortgage over two
parcels of land covered by TCT Nos. 8266 and T-8267,
For failure of said respondent to pay the loan on
maturity, the mortgage was foreclosed extrajudicially
on February 16, 1976 at which foreclosure sale,
petitioner purchased the properties for P97,923.73. The
properties were not redeemed within the period, hence
the title over the same were consolidated in the name
of petitioner, and consequently TCT .Nos. T-50422 and
T-50423 were issued in its name on June 26, 1978.
On April 19, 1979, petitioner filed an ex-parte petition
for issuance of a writ of possession before the Court of
First Instance of Iloilo, Branch II, which was granted by
an order dated April 20, 1979. Upon issuance of the
writ, the Deputy Sheriff served the same upon private
respondents, but the latter requested for a grace
period of seven (7) days to vacate the premises in
question to which the Sheriff agreed. On May 8, 1979,
the Sheriff returned to the premises in question and
finding that private respondents are still staying in the
premises and had not complied with the writ of
possession, immediately ordered their ejectment. At
around one o'clock in the afternoon, before the
ejectment was completed, the Sheriff received an order
dated May 8, 1979, issued motu proprio by respondent
judge, suspending the implementation of the writ of
possession for "humanitarian reasons" for a period of
fifteen (15) days. Before the expiration of the fifteen
(15) day period, private respondents filed a complaint
dated May 14, 1979 for the annulment of the
extrajudicial foreclosure, writ of possession and
consolidation of ownership on ground that the
properties were foreclosed without personal notice to
any of the private respondents. The complaint was
docketed as Civil Case No. 12894 and was assigned to
the Court of First Instance of Iloilo, Branch V. Upon
motion of private respondents "to consolidate the trial
of the two cases," the Presiding Judge of said Branch, in
an order dated May 24, 1979, transferred the case of
Branch II, presided by respondent judge.
In the proceeding for the writ of possession, private
respondents filed a motion for reconsideration of the
order granting the writ of possession, while petitioner
filed a motion to declare private respondents in

contempt for refusal to vacate the premises, which

motions were ordered by respondent judge held in
abeyance pending the resolution of the prejudicial
question raised by private respondents in Civil Case
No. 12894.
On June 1, 1979, respondent judge, acting on private
respondents' prayer for injunction, issued an order
restraining petitioner from disturbing the status quo,
and on July 5, 1979, respondent judge issued an order
granting the writ of preliminary injunction.
Subsequently, petitioner filed the following: 1) Motion
to Require Plaintiff to Deposit Income/Fruits of the
Disputed Property dated July 6, 1979; 2) Motion for
Reconsideration of the order of July 5, 1979 dated July
17, 1979; and 3) Motion to Dismiss, the Complaint
dated August 2, 1979. The first two motions were
denied by, respondent judge on August 13, 1979, and
the last motion, on November 22, 1979.
As could readily be seen, the main question is whether
or not respondent judge grave abused his discretion,
amounting to lack of jurisdiction. in issuing the orders
dated May 8, 1979, June 1, 1979, July 5, 1979 and
August 13, 1979 all of which, in effect, enjoined the
enforcement of the writ of possession. The petitioner
sustains the affirmative, contending that since
pursuant to De los Angeles vs. Court of Appeals, et al.
1 citing De Gracia vs. San Jose, 94 Phil. 675, it is
ministerial upon the court to issue a writ of possession
in favor of the purchaser in a foreclosure sale of a
mortgaged property, it follows that the execution of the
writ of possession cannot be suspended, much less,
restrained by respondent judge. It also contends that,
as purchaser, it becomes the owner of the property
entitled to jus possidendi as provided in Article 428 of
the Civil Code.
It is, however, claimed by private respondents that
respondent judge, contrary to petitioner's submission,
acted within his authority, alleging that pursuant to
Section 5 of Rule 135 of the Rules of Court, the court
has inherent power to "amend and control (the court's)
processes and order so as to make them conformable
to law and justice." They further claimed that the case
cited by petitioner is not applicable because in the
instant case the writ has already been issued. Petition
should be granted.
Section 4 of P.D. No. 385 "requiring governmental
financial institutions to foreclosure mandatorily all
loans with arrearages, including interest and charges
amounting to at least 20 % of the total outstanding
obligations," provides:
Section 4. As a result of foreclosure or any other legal
proceedings wherein the properties of the debtor which
are foreclosed, attached, or levied upon in satisfaction
of a judgment are sold to a government financial
institution, the said properties shall be placed in the
possession and control of the financial institution
concerned, with the assistance of the Armed Forces of
the Philippines whenever necessary. The Petition for
Writ of Possession shall be acted upon by the court
within fifteen (15) days from the date of filing.
Pursuant to the above provision, it is mandatory for the
court to place the government financial institution,
which petitioner is, in the possession and control of the
property. As stated, the said decree was enacted "in
order to effect the early collection of delinquent loans
from government financial institutions and enable
them to continue effectively financing the development
needs of the country" without being hampered by
actions brought to the courts by borrowers.
Also, Section 6 of Act No. 3135, as amended by Act
4118, the law that regulates the methods affecting
extrajudicial foreclosure of mortgage provides that in
cases in which an extrajudicial sale is made,
"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
insofar as these are not inconsistent with the
provisions of this Act." (Sections 464-466 of the Code
of Civil Procedure were superseded by Sections 25-27
and Section 31 of Rule 39 of the Rules of Court which in
turn were replaced by Sections 29 to 31 and Section 35
of Rule 39 of the Revised Rules of Court. 2 Section 35
which is one of the specific provisions applicable to the
case at bar provides that "if no redemption be made
within twelve (12) months after the sale, the
purchaser, or his assignee, is entitled to a conveyance
and possession of property. ... . The possession of the
property shall be given to the purchaser or last
redemptioner by the officer unless a third party is
actually holding the property adversely to the
judgment debtor."
The rule, therefore, is that after the redemption period
has expired, the purchaser of the property has the right
to be placed in possession thereof. Accordingly, it is the
inescapable duty of the Sheriff to enforce the writ of
possession, especially, as in this case, a new title has
already been issued in the name of the purchaser, In
fact, under Section 7 of the said Act 3135, upon which
the de los Angeles and de Gracia cases were based,
even before the redemption period, it is ministerial
upon the court to issue a writ of possession in favor of
a purchaser, provided that a proper motion has been
filed, a bond approved, and no third person is involved.
The right of the purchaser to be placed in the
possession of the property is bolstered by Section 8 of
the aforecited Act which provides that if the judge finds
the complaint assailing the legality of the foreclosure
sale justified, it shall not transfer the possession of the
property, even on appeal, but will only proceed against
the bond posted by the purchaser. Section 8 reads:
The debtor may, in the proceedings in which
possession was requested; but not later than thirty
days after the purchaser was given possession, petition
that the sale be set aside and the writ of possession
cancelled, specifying the damages suffered by him,
because the mortgage was not violated or the sale was
not made in accordance with the provisions thereof,
and the court shall take cognizance of this petition in
accordance with the summary procedure provided for
in section one hundred and twelve of Act Numbered
Four Hundred and Ninety-Six, and if it finds the
complaint of the debtor justified, it shall dispose in his
favor of all or part of the bond furnished by the person
who obtained possession. Either of the parties may
appeal from the order of the judge in accordance with
sections fourteen of act numbered Four Hundred and
Ninety-Six.
In the case at bar, the writ of possession was issued
but its enforcement was suspended by the grace
period given by the Sheriff who has no authority to do
so, and later by the order of the judge on a very
dubious ground as "humanitarian reason." If the
applicable laws clearly allow the purchaser to have
possession of the property foreclosed and mandate the
court to give effect to such right, it would be a gross
error for the judge to suspend the implementation of
the writ of possession, which, as shown, should issue
as a matter of course. We are of the opinion that once
the writ of possession has been issued, the Court has
no alternative but to enforce the writ without delay,
especially as in this case, no motion for the suspension
of the enforcement was filed.
The right of the petitioner to the possession of the
property is clearly unassailable. It is founded on its
right of ownership. As the purchaser of the properties
in the foreclosure sale, and to which the respective
titles thereto have already been issued, petitioner's
right o-,,er the property has become absolute, vesting
upon him the right of possession over an enjoyment of
the property which the Court must aid in effecting its
delivery. After such delivery, the purchaser becomes

the absolute owner of the property. As We said , in Tan

Soo Huat vs. Ongwico, 3 the deed of conveyance
entitled the purchaser to have and to hold the
purchased property, this means, that the purchaser is
entitled to go immediately upon the real property, and
that it is the Sheriff's inescapable duty to place him in
such possession.
Respondents cannot claim that the writ of possession
was suspended under the authority set forth in Rule
1135 of the Rules of Court. To invoke the power
granted therein, the court must act within the law and
with justice. When the reason given by the judge in
issuing the order of suspension was not specified in the
order, but stated only in general term, as
"humanitarian reasons," the Court did not act within
the bounds of the law. The order was, furthermore,
issued motu proprio and without the petitioner being
afforded the right to present its side. We cannot give
Our approval to the actuation of respondent judge, for
an order suspending the implementation of an earlier
order is like an injunction which must be issued always
with circumspection, and upon proper motion of the
party concerned.
As it is, the suspension order has a far-reaching effect.
It enabled private respondents to withhold the
possession from petitioner and file the complaint where
an injunction was sought. Had not respondent judge
issued such order, petitioner could have already taken
possession of the property, thereby acquiring an
absolute ownership over the property, and injunction
could no longer have been issued. A prohibitory
injunction cannot be issued when the act sought to be
enjoined has already been committed. 4 Neither can a
mandatory injunction issue, for it is a well-settled rule
that injunction will not lie to take the property out of
control of the party in possession. 5
The orders of the judge enjoining the enforcement of
the writ of possession are vulnerable to attack. Firstly,
the right of private respondents to injunctive order is,
at least, doubtful, and it is a settled rule that to be
entitled to the injunction, the applicant's right or title
must be clear and unquestioned.
In the instant case, the ground relied upon by private
respondents is not indubitable, while the foreclosure
proceeding has in its favor the presumption of
regularity. And secondly, P.D. No. 385, as aforestated,
makes it mandatory for the court to place a
government financial institution in possession of the
property. To enjoin PTB from taking possession of the
property would be to render nugatory the provisions of
said decree, particularly Section 2 thereof:
Section 2. No restraining order, temporary or
permanent in. junction shall be issued by the court
against any government financial institution in any
action taken by such institution in compliance with the
mandatory foreclosure provided in Section 1 hereof,
whether such restraining order, temporary or
permanent injunction is sought by the borrower(s) or
any third party or parties, except after due hearing in
which it is established by the borrower and admitted by
the government financial institution concerned that
twenty percent (20%) of the outstanding arrearages
has been paid after the firing of foreclosure
proceedings.
In case a restraining order or injunction is issued the
borrower shall nevertheless be legally obligated to
liquidate the remaining balance of the arrearages,
paying ten percent (10%) of the arrearages
outstanding as of the time of foreclosure, plus interest
and other charges, on every succeeding thirtieth (30th)
day after the issuance of such restraining order or
injunction until the entire arrearages have been
liquidated. These shall be in addition to the payment of
amortizations currently maturing. The restraining order
or injunction shall automatically be dissolved should
the borrower fail to make any of the above-mentioned

payments on due dates, and no restraining order or

injunction shall be issued thereafter. This shall be
without prejudice to the exercise by the government
financial institutions of such rights and/or remedies
available to them under their respective charters and
their respective contracts with their debtors, nor should
this provision be construed as restricting the
government financial institutions concerned from
approving, solely at its own discretion, any
restructuring, recapitalization, or any other
arrangement that would place the entire account on a
current basis, provided, however, that at least twenty
percent (20%) of the arrearages outstanding at the
time of the foreclosure is paid.
All restraining orders and injunctions existing as of the
date of this Decree on foreclosure proceedings filed by
said government financial institutions shall be
considered lifted unless finally resolved by the court
within sixty (60) days from date hereof.
WHEREFORE, judgment is hereby rendered annulling
and setting aside all the injunctive orders issued by
respondent judge dated May 8, 1979, June 1, 1979, July
5, 1979 and August 13, 1979; and ordering respondent
judge to place petitioner in possession of the
purchased property without delay. Without cost.
SO ORDERED.
Makasiar, Concepcion, Jr., Guerrero and Escolin, JJ.,
concur.
Abad Santos, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

after the order of June 2, 1962 in the first case (Civil

Case 45778), attempt was ever made by appellant to
cure the defects so pointedly expressed by the court in
that order.

EN BANC
G.R. No. L-21011

August 30, 1967

ISABEL OCAMPO, plaintiff-appellant,

vs.
IGNACIO DOMALANTA and PONCIANO MARTINEZ, in his
capacity as Provincial Sheriff of Cavite, defendantsappellees.
Arturo M. Topacio, Jr. for plaintiff-appellant.
Teodoro O. Domalanta for defendant-appellee.
SANCHEZ, J.:
Sole question raised on appeal is this: Is a court order
confirming a sheriff's sale upon a judgment in a real
estate foreclosure case a bar to a subsequent action by
the judgment debtor to annul the sale upon grounds
which were raised in said foreclosure proceedings?
First, to the background facts. A contested case to
foreclose a real estate and chattel mortgage [Civil Case
45778, Court of First Instance of Manila, "Ignacio
Domalanta, plaintiff vs. Isabel O. Vda. de Chi Chioco, et
al., defendants"], resulted in judgment ordering
appellant Isabel O. Vda. de Chi Chioco (now known as
Isabel Ocampo) to pay appellee Ignacio Domalanta
P2,000.00, with 1% interest per month from December
5, 1958 until full payment, and P500.00 as attorneys'
fees, and directing that after failure to pay the above
amounts in ninety days, the properties mortgaged be
sold at public auction, subject to a first mortgage in
favor of the Philippine National Bank in reference to
appellant's land (located in Tanza, Cavite) mortgaged.1
The judgment debt remained unpaid. The court, on
Domalanta's motion, issued a writ of execution.
Pursuant thereto, on May 8, 1962, appellee sheriff sold
at public auction the mortgaged land of 32,558 square
meters to the highest bidder, appellee Ignacio
Domalanta, for P3,537.00. Domalanta moved to
confirm the sale. Over appellant's objection, the court,
on June 2, 1962, confirmed.
After the June 2, 1962 order had become final,
appellant started the present suit (Civil Case N-496 of
the Court of First Instance of Cavite, entitled "Isabel
Ocampo, plaintiff vs. Ignacio Domalanta and Ponciano
Martinez an his capacity as Provincial Sheriff of Cavite,
defendants") to annul the sheriff's sale. Grounds:
Appellant mortgagor was not properly notified of the
forecloseure sale; and the price for which the property
was sold was "very much lower than the actual market
value" and shocking to the conscience, and thus
invalid. Appellee Domalanta moved to dismiss the
complaint below. His reason, inter alia: res judicata.
The court, on November 9, 1962, dismissed the case
"with prejudice and with costs against the plaintiff." A
move to reconsider was thwarted below in the order of
November 21, 1962. Hence, this appeal.
1. Adverted to earlier is that the June 2, 1962 order of
confirmation of the sheriff's sale in the first case
Case 45778 was issued over appellant's opposition.
That objection projected before the court the very
same grounds relied upon in the complaint herein
the second case to wit, lack of notice by the
Provincial Sheriff to appellant of the foreclosure sale,
and irregularities in the auction sale and nonconformity thereof to the rules of court. According to
the order of confirmation, the thrust of appellant's said
objection is that she "was not notified of the sheriff's
sale and that the price for which the property was sold
is unconscionable." But these factual allegations, so
the same in order of June 2, 1962 stresses, "have not
been established by any evidence," nor was appellant's
opposition verified. Nothing in the record suggests that

2. Law and jurisprudence have formulated the rule that

confirmation of sale of real estate in judicial foreclosure
proceedings cuts off all interests of the mortgagor in
the real estate sold and vests them in the purchaser.
Confirmation retroacts to the date of the sale.2 An
order of confirmation in court foreclosure proceedings
is a final order, not merely interlocutory. The right to
appeal therefrom has long been recognized.3 In fact, it
is the final order from which appeal may be taken in
judicial foreclosure proceedings.4 No appeal was taken.
It follows that said order is final, binding.
3. Not that the disputed order of confirmation may be
labelled null and void, as appellant would want it to be.
The presumption that the notice of sale of real estate
in foreclosure proceedings has been given, holds true
here. For, indeed, a legal tenet of long standing is that
official duty presumptively has been regularly
performed.5 Appellant pleaded such lack of notice. Her
duty it was to prove it in court. She did not.1wph1.t
And if the notice that appellant here complains of is
personal notice to her, she is wrong. Because, personal
notice is not required by Section 16 of Rule 39 of the
1940 Rules of Court, now Section 18, Rule 39 of the
new Rules. This legal provision was given judicial nod
as early as 1930 in La Urbana vs. Belando, 54 Phil. 930,
932 a case of foreclosure of real estate mortgage
where we pronounced that "[t]he law does not require
that such notification be given personally to the party
upon whose property execution is levied."
Nor was there an averment in the complaint now
before us that if a resale should take place, "the realty
would bring a higher price" thereat, a circumstance
"essential to rescind a sale regularly made and
confirmed by a competent court, on the ground of
inadequacy of price."6 The mere averment that the
price is unconscionable is nothing more than a
conclusion of law. The value of such allegation is
further downgraded by the lack of proof. This is one
case which epitomizes the fatal distance between
allegation and proof.
4. Properly to be pointed out here is that the dismissal
order of November 9, 1962 now on appeal, states that
the legality of the foreclosure sale questioned in this
action "was an issue that could have been, and was in
fact, raised and litigated in the anterior suit" (Civil Case
45778). Except for the Provincial Sheriff who is a
nominal defendant here, the parties in the two suits
below are the same: Isabel Ocampo and Ignacio
Domalanta. Subject matter is the same land. The
judgment and order of confirmation of the sheriff's sale
in the first suit have both become final.
The first suit is a judicial foreclosure of mortgage; the
second, annulment of the foreclosure sale conducted in
the first suit. A proceeding for judicial foreclosure of
mortgage is an action quasi in rem. It is based on a
personal claim sought to be enforced against a specific
property of a person named party defendant. And, its
purpose is to have the property seized and sold by
court order to the end that the proceeds thereof be
applied to the payment of plaintiff's claim.7
To be read as controlling here are Sections 44 and 45,
Rule 39 of the Rules of Court which is now
substantially embodied in Section 49, Rule 39 of the
new Rules of Court, viz:
Sec. 49. Effect of judgments.The effect of a judgment
or final order rendered by a court or judge of the
Philippines, having jurisdiction to pronounce the
judgment or order, may be as follows:

(a) In case of a judgment or order against a specific

thing, or in respect to the probate of a will, or the
administration of the estate of a deceased person, or in
respect to the personal, political or legal condition or
status of a particular person or his relationship to
another, the judgment or order is conclusive upon the
title to the thing, the will or administration, or the
condition, status or relationship of the person;
however, the probate of a will or granting of letters of
administration shall only be prima facie evidence of the
death of the testator or intestate;
(b) In other cases the judgment or order is, with
respect to the matter directly adjudged or as to any
other matter that could have been raised in relation
thereto, conclusive between the parties and their
successors in interest by title subsequent to the
commencement of the action or special proceeding,
litigating for the same thing and under the same title
and in the same capacity;
(c) In any other litigation between the same parties or
their successors in interest, that only is deemed to
have been adjudged in a former judgment which
appears upon its face to have been so adjudged, or
which was actually and necessarily included therein or
necessary thereto.
Paragraph (a) of the foregoing rule is commonly known
to speak of judgments in rem; paragraph (b) is said to
refer to judgments in personam; and paragraph (c) is
the concept understood in law as "conclusiveness of
judgment." 8
Here, the first suit was an action quasi in rem. A
judgment therein "is conclusive only between the

parties."9 Directly applicable is paragraph (b) abovequoted. By that provision, the confirmation order in the
foreclosure case is, "with respect to the matter directly
adjudged or as to any other matter that could have
been raised in relation thereto, conclusive between the
parties" and their privies.
As we view this case from another standpoint, we
reach the same result. It is true that the cause of action
in the first suit is not exactly identical to the cause of
action in the second. For, the latter merely challenges
the legality of the sheriff's sale in the first proceeding.
We do say, however, that such legality of sale is an
issue which could have been, and was in fact raised
and rejected in the first case. Thus, coming into play
also is paragraph (c) above-quoted. Therefore, the
question raised by appellant in the present suit should
be "deemed to have been adjudged in a former
judgment which appears upon its face to have been so
adjudged, or which was actually and necessarily
included therein or necessary thereto."
It is thus beyond doubt that the present action is
barred by the conclusiveness of judgment in the
anterior suit. 10 This case must be dismissed.
Conformably to the foregoing, the lower court's order
of November 9, 1962 dismissing this case, and the
order of November 21, 1962 denying reconsideration
thereof, are hereby affirmed.
Costs against plaintiff-appellant. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,
Bengzon, J.P., Sanchez, Castro, Angeles and Fernando,
JJ., concur.