94. Ocejo Perez v.

International Bank, 37 Phil 631 (1918)

FACTS:
1) On March 7, 1914, Chua Teng Chong, executed to the International Banking
Corporation a promissory note, payable one month after date, for the sum of
P20,000 which note was also attached to another private document, signed
by Chua, which stated that he had deposited with the bank, as security for
the said note, 5,000 piculs of sugar, which were said stored in a warehouse in
Binondo, Manila.
2) The bank made no effort to exercise any active ownership over said
merchandise until the April 16, when it discovered that the amount of sugar
stored in the said warehouse was much less than what was mentioned in the
contract. The agreement between the bank and Chua Teng Chong with
respect to the alleged pledge of the sugar was never recorded in a public
instrument.
3) On March 24, 1914, the plaintiff partnership Ocejo, Perez and Co., entered
into contract with Chua for the sale to him of sugar where the delivery should
be made in April. The delivery was completed April 16, 1914, and the sugar
was stored in the buyer's warehouse situated at Muelle de la Industria. On
this same date, the bank sent an employee to inspect the sugar described in
the pledge agreement, which should have been stored in the Calle Toneleros
warehouse. It was discovered that the amount of sugar in that warehouse did
not exceed 1,800 piculs, it was supposed to have 5,000 piculs of sugar.
Eventually, the employee was informed that the rest of the sugar covered by
the pledge agreement was stored in the warehouse at No. 119, Muelle de la
Industria. The bank's representative immediately went to this warehouse,
found 3,200 piculs of sugar, of which he took immediate possession, closing
the warehouse with the bank's padlocks.
4) On April 17, 1914, partnership Ocejo presented, for collection, its account
for the purchase price of the sugar, but chua refused to make payment, and
up to the present time the sellers have been unable to collect the purchase
price of the merchandise in question.
5) The partnership Ocejo made a demand on the bank for the delivery of the
sugar, to which demand the bank refused to accede. A suit was filed by Ocejo
alleging that said defendant was unlawfully holding the seized sugar, the
property of the plaintiff firm Ocejo, which the bank had received from Chua
Teng Chong, and prayed for the judgment for the possession of said sugar.
6) Subsequently, by agreement of the parties, the sugar was sold and the
proceeds of the deposited in the bank. Afterwards, a complaint in intervention
was filed by Chua Seco, the assignee of the insolvency of Chua Teng Chong,
asserting a preferential right to the sugar, or to the proceeds of its sale
contending that the sugar is the property of the insolvent estate represented
by him. The lower court rendered judgment in favor of the Oceja

ISSUES:
(a) Did title to the sugar pass to the buyer upon its delivery to him (chua
seco)?
(b) Assuming to pay that the title passed to the buyer, did his failure to pay
the purchase price authorize the seller to rescind the sale?
(c) Can the pledge of the sugar to the bank be sustained upon the evidence
as to the circumstances under which it obtained physical possession thereof?
HELD:
A) The SC agreed with Chuas contention that he was entitled to demand
payment of the sugar at any time after the delivery. No term having been
stipulated within which the payment should be made, payment was
demandable at the time and place of the delivery of the thing sold. The seller
did not avail himself of his right to demand payment as soon as the right to
such payment arose, but as no term for payment was stipulated, he was
entitled, to require payment to be made at any time after delivery, and it was
the duty of the buyer to pay the price immediately upon demand. In essence,
the delivery had the effect of transmitting the title of the sugar to the buyer.
B) Failure on the part of the buyer to pay the price on demand: Article 1506 of
the Civil Code provides that the contract of sale may be rescinded for the
same causes as all other obligations, in addition to the special causes
enumerated in the preceding articles. It is also observed that the article does
not distinguish the consummated sale from the merely perfected sale. In the
contract of the sale the obligation to pay the price is correlative to the
obligation to deliver the thing sold. Nonperformance by one of the parties
authorizes the other to exercise the right, conferred upon him by the law, to
elect to demand the performance of the obligation or its rescission.
C) The sugar here in question could not be possibly have been the subject
matter of the contract of pledge which the parties undertook to create by the
private document, inasmuch as it was not at the time the property of the
bank, and this constitutes an indispensable requisite for the creation of a
pledge.
D) It is not shown that an effort was made to pledge the sugar, the subject
matter of this case. Though it happened that the day the sugar was delivered,
the Chua gave the bank's representative the keys of the warehouse on the
Muelle de la Industria in which the sugar was stored, it was not because of an
agreement concerning the pledge of the sugar. From the facts, no attempt
was made to enter into any agreement for the pledge of the sugar here in
question. The bank took possession of that sugar under the erroneous belief,
based upon the false statement of Chua Teng Chong, that it was a part of the
lot mentioned in the private document. Even assuming that an attempt was
made to pledge the sugar and that delivery was made in accordance with the

agreement, the pledge so established would be void as against third persons

since it is provided Article 1865 of the Civil Code that a pledge is without
effect as against third persons "if the certainty of the date does not appear by
public instrument."
E) As to assignee Chua Seco: He filed a complaint in intervention in this suit,
in which he contends that by reason of its sale and delivery by plaintiff to the
insolvent, title to the sugar passed to the latter and that the pledge set up by
the bank is void as to third persons. The title to the sugar having been
commenced against him before the declaration of insolvency, the assignee,
Chua Seco, has a better right to its possession or to the product of its sale
during the pendency of this action. The decision of the court below is
therefore reversed, and it is decided that the assignee of the bankruptcy of
Chua Teng Chong is entitled to the product of the sale of the sugar here in
question, to wit, P10,826.76, together with the interest accruing thereon,
reserving proceedings. So ordered.
95. Cruz v. Lee, 54 Phil 10 (1929)
96. Sarmiento v. Javellana, 43 Phil 880 (1922)
Facts:

Spouses Villasenor obtained a loan from Javellana to be paid within one year with
an interest of 25% p.a. evidenced by to documents.
They pledged 4,000 worth of jewels.
Upon maturity, the Spouses requested for an extension.
After 7 years, Villasenor offered to pay the loan and redeem the jewels.
Javellana refused on the ground that redemption period has already expired and
he has already bought the jewels from the wife of Villasenor.
Villasenor brought an action against Javellana to compel the return of the jewels
pledged.

Issues:
1) WON Villasenor can still redeem the jewels?
2) WON the right to redeem has already expired?
Held:
1) Yes. As the jewels in question were in the possession of the defendant to secure
the payment of a loan of 1,500 with interest thereon and for having subsequently
extended the term of the loan indefinitely, and so long as the value of the jewels
pledged was sufficient to secure the payment of the capital and the accrued
interest, the defendant is bound to return the jewels or their value to the
plaintiffs, and the plaintiffs have the right to demand the same upon the payment
by them of the sum of 1,500 plus interest.
2) An action for recovery of the goods which were pledged to secure the payment of
a loan evidenced by a document is an action on a written contract which has a
prescriptive period of 10 years from the date on which the debtor may have paid
the debt and demanded the return of the goods pledged.

In this case, the expiration of the contract was in 1912 and the action to recover
was filed in 1920, therefore, the action has not yet prescribed.

97. Manila Surety v. Velayo, 21 SCRA 515 (1967)

F: Manila Surety & Fidelity Co., upon request of Rodolfo Velayo, executed a
bond for P2,800.00 for the dissolution of a writ of attachment obtained by one
Jovita Granados in a suit against Rodolfo Velayo in the Court of First Instance
of Manila. Velayo undertook to pay the surety company an annual premium of
P112.00 and provided collateral jewelry with the authority to sell in case
Manila Surety will be obliged to pay. Judgment having been rendered in favor
of Jovita Granados and against Rodolfo Velayo, and execution having been
returned unsatisfied, the surety company was forced to pay P2,800.00 that it
later sought to recoup from Velayo; and upon the latter's failure to do so, the
surety caused the pledged jewelry to be sold, realizing therefrom a net
product of P235.00 only The surety files a claim against Velayo because the
security Is insufficient. Velayo claims the sale of the jewelry even if
insufficient extinguishes the principal obligation.
Issue: Won Velayos contention is correct
Ruling: Yes! The sale of the thing pledged shall extinguish the principal
obligation, whther or not the proceeds of the sale are equal to the amount of
the principal obligation, interest and expenses in a proper case.
98. Dilag v. Heirs of Ressurection, 76 Phil 650 (1946)
FACTS:
BEFORE 1936: Laureano Marquez (LM) was indebted to Fortunato
Resurreccion (FR) in the sum of P5k as the balance of purchase price of a
parcel of land which LM bought and received from FR.
FR was in turn indebted to Luzon Surety Company in the same amt, secured
by a mortgage on 3 parcels of land one of which was bought by LM from him
AS EARLY AS 193: LM had agreed to pay FRs indebtedness to Luzon Surety
Company by way of satisfaction of his own indebtedness to FR in the same
amt
LM failed to pay indebtedness of FR to the Luzon Surety Company, and the
latter foreclosed judicially the mortgage executed in its favour by FR
Since LM did not fulfil his promise, FR commenced an action against LM to
recover the value of lost properties
LM sale at public auction of 5 parcels of land mentioned in FRs complaint is
invalid because they are not specifically described in the mortgage deed. LM
acquired those parcels of land subsequent to the execution of mortgage deed.
In the fifth clause of said document Laureano Marquez stipulated that
inasmuch as the five parcels of land described in the fourth clause were not
sufficient to cover all his obligations in favor of Fortunato Resurreccion, he also
constituted a mortgage in favor of the latter and his assignees on any other
property he then might have and on those he might acquire in the future.
ISSUE: WON such a stipulation constitute a valid mortgage on the 5 other parcels of
land which LM subsequently acquired?

HELD: NO
LM could not legally mortgage any property he did not yet own. In order that a
mortgage may be validly constituted the instrument by which it is created
must be recorded in the Registry of Deeds and so far as the additional parcels
of land are concerned, the registration of Deed of Mortgage did not affect and
could not have affected them because they were not specifically described
therein.

99. Phil. Bank of Commerce v. Macadaeg, 109 Phil 981 (1960)

FACTS:
On September 30, 1950, respondents Pedro B. Bautista, Dativa Corrales
Bautista, Inocencio C. Campos, and the Flash Taxi Company jointly and
severally applied for and obtained a credit accommodation from the
petitioner bank in the sum of P100,000.00, and as a security therefor
executed in favor of the bank, in one single document, a real estate mortgage
over four parcels of land, and a chattel mortgage on some movie equipment
and thirty taxicabs. Respondents having failed to pay the total amount of
P128,902.42 due on the credit accommodation referred to, the petitioner
bank procured the extrajudicial foreclosure of the real estate mortgage in
accordance with Act No. 3135, as amended, and at the foreclosure sale on
January 9, 1956, the bank acquired the properties mortgaged as the highest
bidder for the sum of P68,365.60.
Claiming a balance of P62, 749.72 still due, the petitioner bank, instead of
foreclosing respondents' chattel mortgage, filed against them on may 22,
1956, Civil Case No. 29752 for the collection of said balance. The lower court,
on June 30, 1956, rendered judgment ordering defendants to pay the plaintiff
bank, jointly and severally, the sum of P62, 749.72, with interest thereon at
the rate of 7% per annum from May 22, 1956 until the said amount is fully
paid.
On September 18,1956, the court issued an order to execute said judgment;
it does not appear, though, that plaintiff sought the enforcement of the writ of
execution.
On April 24, 1957, the court issued another order for the execution of the
judgement, pursuant to which the sheriff of Manila published a "Notice of
Sale," setting for sale at public auction on May 13, 1957 the rights, interest or
participation of respondents on the certificate of public convenience
registered in the name of the Flash Taxi Co. in cases Nos. 32578 of the Public
Service Commission.
On May 13, 1957, the sheriff sold the rights, interests, or participation of
respondents in the certificate of public convenience in question to the plaintiff
bank as the highest bidder for the amount of P60,371.25, and two days later,
on May 15, the sheriff issued to plaintiff the corresponding certificate of sale.

Respondents Pedro B. Bautista, et al., filed in the court below a "Petition To

Set Aside Order dated June 8, 1957, Confirming Sheriffs Sale of may 15, 1957
and to Declare its Nullity," claiming, as grounds for the petitions, that they
had other properties which they had pointed out to the plaintiff bank with
which the judgement could be satisfied that the law grants to the judgement
debtor the right to direct which of his properties should be sold in execution
of a judgement; that the sale of the certificate of public convenience in
question would mean irreparable damage to them and would prove of work
about forth drivers employed in their taxicab business; and that defendants
had no objection to bearing the expenses of the sale sought to be revoked
and of any subsequent execution sales in satisfaction of the judgement.
Plaintiff bank opposed the petition, contending that there was no showing
that the sheriff's sale in question was irregular or not in accordance with law;
that the subject of the execution sale being personal property, and a
certificate of sale having already been delivered to it by the sheriff, the court
could no longer set aside said sale
ISSUE: W/N the sheriffs sale was irregular and therefore null and void.
HELD:
The alleged nullity is claimed to arise from the fact that the real estate and
chattel mortgage executed by respondents to secure their credit
accommodation with the petitioner bank was indivisible, and that
consequently, the bank had no legal right to extra judicially foreclose only the
real estate mortgage and leave out the chattel mortgage, and then sue
respondents for a supposed deficiency judgement; and for this reason,
respondents assert that the judgement in the bank's favor for such deficiency
in Civil Case No. 29752 is a nullity.
The argument is fallacious because the mere embodiment of the real estate
mortgage and the chattel mortgage in one document does not fuse both
securities into an indivisible whole. Both remain distinct agreements, differing
not only in the subject-matter of the contract but in the but in the governing
legal provisions. Petitioner bank, therefore, had every right to foreclose the
real estate mortgage and waive the chattel mortgage, and maintain instead a
personal action for the recovery of the unpaid balance of its credit (De la
Rama vs. Sajo, 45 Phil., 703; Salomon vs. Dantees, 63 Phil., 522; Brancharch
Motor Co. vs. Rangal, et al., 68 Phil., 287, 290). This petitioner did by filing
civil Case No. 29752 for the collection of the unpaid balance of respondents'
indebtedness; and the validity and correctness of the action was admitted by
respondents themselves when they confessed judgement thereto. The court
in fact decision pursuant to such confession of judgement, and the decision
has long since been final and executory.
100. Peoples Bank v. Dahican Lumber, 20 SCRA 84 (1967)
Facts:

On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West

Virginia corporation licensed to do business in the Philippines sold and
assigned all its rights in the Dahican Lumber concession to Dahican Lumber
Company - hereinafter referred to as DALCO - for the total sum of
$500,000.00, of which only the amount of $50,000.00 was paid. Thereafter,
to develop the concession, DALCO obtained various loans from the People's
Bank & Trust Company amounting, as of July 13, 1950, to P200,000.00. In
addition, DALCO obtained, through the BANK, a loan of $250,000.00 from the
Export-Import Bank of Washington D.C., evidenced by five promissory notes
of $50,000.00 each, maturing on different dates, executed by both DALCO
and the Dahican America Lumber Corporation, a foreign corporation and a
stockholder of DALCO,
As security for the payment of the abovementioned loans, on July 13, 1950
DALCO executed in favor of the BANK a deed of mortgage covering five
parcels of land situated in the province of Camarines Norte together with all
the buildings and other improvements existing thereon and all the personal
properties of the mortgagor located in its place of business in the
municipalities of Mambulao and Capalonga, Camarines Norte. On the same
date, DALCO executed a second mortgage on the same properties in favor of
ATLANTIC to secure payment of the unpaid balance of the sale price of the
lumber concession amounting to the sum of $450,000.00. Both deeds
contained a provision extending the mortgage lien to properties to be
subsequently acquired by the mortgagor.
Both mortgages were registered in the Office of the Register of Deeds of
Camarines Norte. In addition thereto DALCO and DAMCO pledged to the BANK
7,296 shares of stock of DALCO and 9,286 shares of DAMCO to secure the
same obligation.
Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its
maturity, the BANK paid the same to the Export-Import Bank of Washington
D.C., and the latter assigned to the former its credit and the first mortgage
securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1,
1953 to pay the overdue promissory note.c
After July 13, 1950 - the date of execution of the mortgages mentioned above
- DALCO purchased various machineries, equipment, spare parts and supplies
in addition to, or in replacement of some of those already owned and used by
it on the date aforesaid. Pursuant to the provision of the mortgage deeds
quoted theretofore regarding "after acquired properties," the BANK requested
DALCO to submit complete lists of said properties but the latter failed to do
so. In connection with these purchases, there appeared in the books of
DALCO as due to Connell Bros. Company (Philippines) - a domestic
corporation who was acting as the general purchasing agent of DALCO -the
sum of P452,860.55 and to DAMCO, the sum of P2,151,678.34.chan
On December 16, 1952, the Board of Directors of DALCO, in a special meeting
called for the purpose, passed a resolution agreeing to rescind the alleged
sales of equipment, spare parts and supplies by CONNELL and DAMCO to it.

On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC,
demanded that said agreements be cancelled but CONNELL and DAMCO
refused to do so. As a result, on February 12, 1953; ATLANTIC and the BANK,
commenced foreclosure proceedings in the Court of First Instance of
Camarines Norte against DALCO and DAMCO.
Upon motion of the parties the Court, on September 30, 1953, issued an
order transferring the venue of the action to the Court of First Instance of
Manila.
On August 30, 1958, upon motion of all the parties, the Court ordered the
sale of all the machineries, equipment and supplies of DALCO, and the same
were subsequently sold for a total consideration of P175,000.00 which was
deposited in court pending final determination of the action. By a similar
agreement one-half (P87,500.00) of this amount was considered as
representing the proceeds obtained from the sale of the "undebated
properties" (those not claimed by DAMCO and CONNELL), and the other half
as representing those obtained from the sale of the "after acquired
properties".
ISSUE:
WON the "after acquired properties" were subject to the deeds of mortgage
mentioned heretofore. Assuming that they are subject thereto,
WON the mortgages are valid and binding on the properties aforesaid inspite
of the fact that they were not registered in accordance with the provisions of
the Chattel Mortgage Law.
HELD:
Under the fourth paragraph of both deeds of mortgage, it is crystal clear that
all property of every nature and description taken in exchange or
replacement, as well as all buildings, machineries, fixtures, tools, equipments,
and other property that the mortgagor may acquire, construct, install, attach;
or use in, to upon, or in connection with the premises - that is, its lumber
concession - "shall immediately be and become subject to the lien" of both
mortgages in the same manner and to the same extent as if already included
therein at the time of their execution. Such stipulation is neither unlawful nor
immoral, its obvious purpose being to maintain, to the extent allowed by
circumstances, the original value of the properties given as security.
Article 415 does not define real property but enumerates what are considered
as such, among them being machinery, receptacles, instruments or
replacements intended by owner of the tenement for an industry or works
which may be carried on in a building or on a piece of land, and shall tend
directly to meet the needs of the said industry or works. On the strength of
the above-quoted legal provisions, the lower court held that inasmuch as "the
chattels were placed in the real properties mortgaged to plaintiffs, they came
within the operation of Art. 415, paragraph 5 and Art. 2127 of the New Civil
Code". In the present case, the characterization of the "after acquired

properties" as real property was made not only by one but by both interested
parties. There is, therefore, more reason to hold that such consensus
impresses upon the properties the character determined by the parties who
must now be held in estoppel to question it.
101. Prudential Bank v. Panis, 153 SCRA 390 (1987)
FACTS:

Spouses Magcale secured a loan from Prudential Bank.

To secure
payment, they executed a real estate mortgage over a residential building.
The mortgage included also the right to occupy the lot and the information
about the sales patent applied for by the spouses for the lot to which the
building stood. After securing the first loan, the spouses secured another
from the same bank.
To secure payment, another real estate
mortgage was executed over the same properties.
The Secretary of Agriculture then issued a Miscellaneous Sales Patent over
the land which was later on mortgaged to the bank.
The spouses then failed to pay for the loan and the REM was extrajudicially
foreclosed and sold in public auction despite opposition from the spouses.
The respondent court held that the REM was null and void.
HELD:
A real estate mortgage can be constituted on the building erected on the
land belonging to another.
The inclusion of building distinct and separate from the land in the
Civil Code can only mean that the building itself is an immovable property.
While it is true that a mortgage of land necessarily includes in the absence of
stipulation of the improvements thereon, buildings, still a building in
itself may be mortgaged by itself apart from the land on which it is built.
Such a mortgage would still be considered as a REM for the building would
still be considered as immovable property even if dealt with separately and
apart from the land.
The original mortgage on the building and right to occupancy of the land was
executed before the issuance of the sales patent and before the
government was divested of title to the land. Under the foregoing, it
is evident that the mortgage executed by private respondent on his
own building was a valid mortgage.
As to the second mortgage, it was done after the sales patent was issued and
thus prohibits pertinent provisions of the Public Land Act.
102. Samanilla v. Cajucom, 107 SCRA 432 (1960)

103. Mobil Philippines v. Diocares, 29 SCRA 656 (1969)

FACTS:
The parties Mobil and Diocares entered an agreement wherein on cash basis, Mobil
will deliver minimum of 50k liters of petroleum a month. To secure this, diocares
executed a Real Mortgage. Diocares failed to pay the balance of their indebtedness
and Mobil filed an action for the collection of the balance of the purchase amount or
that the Real Property mortgaged by Diocares be sold to a public auction and the
proceeds be applied to the payment of the obligation. LC did not grant foreclosure on
the ground that the mortgage was not validly executed (not registered).
ISSUE: WON failure to register the Real Mortgage would render it invalid
SC: NO!
- If the instrument is not recorded, the mortgage is nevertheless binding
between the parties. Its conclusion, however, is that what was thus created
was merely a personal obligation but did not establish a real estate
mortgage.
- The mere fact that there is as yet no compliance with the requirement that it
be recorded cannot be a bar to foreclosure

FACTS:
The plaintiff and defendants Diocares entered into a contract of loan and real
estate mortgage. In the contract, it was stipulated that the defendants will
repay the said loan in monthly installments for a period of five (5) years. To
secure the payment of the loan, a mortgage was executed on the two parcels
of lands. The agreement further provided that in case of failure of the
defendants to pay any of the installment due from the plaintiff, the latter has
the right to foreclose the mortgage or recover the payment of the entire
obligation or its remaining unpaid balance. However, defendant failed to pay
the balance excluding interest on their indebtedness. The plaintiff, therefore,
prayed that the defendants be ordered to pay their obligations plus interest
from the date it fell due, and in default of such payment that the mortgaged
properties be foreclosed. Defendants admitted their indebtedness as set forth
above, denying merely the alleged refusal to pay, the truth, according to
them, being that they sought for an extension of time to do so, inasmuch as
they were not in a position to comply with their obligation. The trial court
ordered the defendant to pay the loan but denied the foreclosure of the
mortgage for the reason that the mortgage was not registered and that no
real estate mortgage was established.
ISSUE:
Whether or not the mortgage properties be foreclosed even though the same
were not registered.
RULING:
The lower court should not have held that no real estate mortgage was
established and should have ordered its foreclosure.

The law may go further and require that certain formalities be executed.
Thus, for a mortgage to be validly constituted, "it is indispensable, that the
document in which it appears be recorded in the Registry of Property." The
same codal provision goes on: "If the instrument is not recorded, the
mortgage is nevertheless binding between the parties.
The codal provision is clear and explicit. Even if the instrument were not
recorded, "the mortgage is nevertheless binding between the parties." The
law cannot be any clearer. Effect must be given to it as written. The mortgage
subsists; the parties are bound. As between them, the mere fact that there is
as yet no compliance with the requirement that it be recorded cannot be a
bar to foreclosure.
The lower court order is affirmed with the modification that in default of the
payment of the obligation with interests from filing of the complaint, the
mortgage be foreclosed with the properties subject thereof being sold and the
proceeds of the sale applied to the payment of the amounts due the plaintiff
in accordance with law.
104. McCullough v. Veloso, 46 Phil 1 (1924)
FACTS:
1) On March 23, 1920, the plaintiff McCullough & Co., sold to Mariano Veloso
the "McCullough Building," and the land thereon, for the price of P700,000.
Veloso paid P50,000 cash on account at the execution of the contract, leaving
a balance of P650,000 to be paid.
2) Veloso assumed also the obligation to insure the property for not less than
P500,000, as well as to pay all legal taxes that might be imposed upon the
property, and in the event of his failure to do so, the plaintiff should pay said
taxes at the expense of Veloso, with the right to recover of him the amounts
thus paid, with interest at 7 per cent per year. To secure the payment of these
amounts, Veloso mortgaged the property purchased
3) It was, also, stipulated that in case of failure on the part of Veloso to
comply with any of the stipulations contained in the mortgage deed, all the
installments with the interest thereon shall become due, and the creditor
shall then have the right to bring the proper action for the collection of the
unpaid part of the debt.
4) On August 21, 1920, Mariano Veloso, in turn, sold the property, with the
improvements thereon for P100,00 to Joaquin Serna, who agreed to respect
the mortgage of the property in favor of the plaintiff and to assume Mariano
Veloso's obligation to pay the plaintiff the balance due of the price of the
estate on the respective dates when payments should be made according to
the contract between Mariano Veloso and the plaintiff.
5) Veloso paid P50,000 on account of the P650,000, and Serna made several
payments up to the total sum of P250,000. Subsequently, however, neither
Veloso, nor Serna, made any payment upon the last installments, by virtue of

which delay, the whole obligation became due, and Veloso lost the right to
the installments stipulated in his contract with the plaintiff.
6) Upon a liquidation of the debt of Mariano Veloso in favor of the plaintiff,
including the interest due, with the result that Veloso owed exactly
P510,047.34. Thus, the plaintiff brings this action to recover of the defendant
the sum due of P510,047.34. The defendant contends however that having
sold the property to Serna, and the latter having assumed the obligation to
pay the plaintiff the unpaid balance of the price secured by the mortgage
upon the property, he no more obligation and it is upon Serna to pay the
plaintiff.
HELD:
A) The mortgage is merely an encumbrance upon the property and does not
extinguish the title of the debtor, who does not, therefore, lose his principal
attribute as owner, that is, the right to dispose. the fact that the plaintiff
recognized the efficaciousness of that sale cannot prejudice him, which sale
the defendant had the right to make and the plaintiff cannot oppose and
which, at all events, could not affect the mortgage, since it follows the
property whoever the possessor may be.
B) The Mortgage Law in force at the promulgation of the Civil Code and
referred to in the latter, provided, among other things, that the debtor should
not pay the debt upon its maturity after a judicial or notarial demand for
payment has been made by the creditor upon him. Accordingly, the obligation
of the new possessor to pay the debt originated only from the right of the
creditor to demand payment of him, it being necessary that a demand for
payment should have previously been made upon the debtor and the latter
should have failed to pay.
C) The Civil Code imposes the obligation of the debtor to pay the debt stand
although the property mortgaged to secure the payment of said debt may
have been transferred to a third person.
105. Santiago v. Dionisio, 92 Phil 495 (1953)
DOCTRINE: All persons having or claiming an interest in the mortgaged
premises subordinate in right to that of the holder of the mortgage should be
made defendants in the action for the foreclosure of the mortgage.
Intervening as a subordinate lienholder in a foreclosure case merely to
oppose the confirmation of the sale upon learning that such a sale had been
made, is no the same as being a party to the suit to the extent of being
bound by the judgement in the foreclosure suit.
The effect of the failure to implead a subordinate lienholder or
subsequent purchaser or both is to render the foreclosure ineffective as
against them, with the result that there remains in their favor the
unforeclosed equity of redemption.
106. Phil. Sugar Estate v. Camps, 36 Phil 85 (1917)

FACTS:
Defendant executed and delivered to Plaintiff a mortgage on certain real
estate, which is particularly described therein, including the building erected
thereon, in order to guarantee the payment of certain sum of money;
Another mortgage upon the same property to secure the payment of an
additional sum of money
Plaintiff commenced an action to recover said sums and to foreclose said
mortgages when neither of said sums of money secured by said mortgages
was fully paid and satisfied
Def denied; alleged that the sum of P3k included in said mortgages for the
payment of expenses was excessive
TC Judge Ostrand ordered foreclosure of said mortgages
While Sheriff tried to sell the property included in said mortgages, Def
interposed an objection that a certain cinematograph which had been
constructed upon the property mortgaged was not included therein and that it
should not, therefore, be sold under said execution.
Despite objection, Sheriff sold the property mortgaged together with the
buildings erected thereon
Def objected to the confirmation of said sale; said cinematograph in question
was created by simply reforming a building located on the land at the time
said mortgage was executed and delivered; that it was not a new structure on
said land; that it was the result of changing and altering a building already
upon the land, for the purpose of making it into a cinematograph

TC Judge Harvey confirmed said sale

ISSUE: WON the sale under execution by the sheriff of certain real property including
the buildings thereon should be confirmed?
HELD: YES
Questions presented by Camps have been discussed by this court and decided
against his contention in the case of Bischoff v. Pomar and Compania General
de Tabacos.
In that case, this court discussed the very articles of the Mortgage Law upon
which Camps now seeks relief. In that case the Court said:
So that even though no mention had been made of said machinery and
tramway in the mortgage instrument, the mortgage of the property
whereon they are located in understood by law to extend to them and
they must be considered as included therein, as well as all other
improvements, unless there was an express stipulation between the
parties that they should be excluded.

IN THIS CASE: the buildings erected thereon" were expressly included in the
mortgage. Nothing in the form of buildings was exclude. The buildings,
therefore, were manifestly included in the mortgage.

107. Afable v. Belando, 55 Phil 64 (1930)

Afable brought a suit against Belando for an unpaid promissory note. Judgment was
rendered in favor of him and because Belando has no money, the rents in her
property was given to Afable. It turns out, before Afable filed a case for the collection
of money, another creditor of Belando, La Urbana, already had a lien on the property
because Belando borrowed money from La Urbana and as a security, Belando
mortgaged the property being rented to La Urbana. La Urbana filed a petition to

intervene in the case of Afable v Belando and claims that since the property was
mortgaged to them, they also own the rents and the rents cannot be given to Afable.
Issue: Won the contention of La Urbana is valid
Ruling: Yes. The mortgage extends to the rents not yet received when the obligation
becomes due. In this case, because the property was mortgaged to La Urbana, they
also own the rents of the mortgaged property.
Bank of America v American Realty

F: Petitioner Bank of America NT & SA (BANTSA) is an international banking

and financing institution Bank of America International Limited (BAIL), on the
other hand, is a limited liability company organized and existing under the
laws of England.
BANTSA and BAIL on several occasions granted three major multi-million
United States (US) Dollar loans to the following corporate borrowers and
which are foreign affiliates of private respondent. 3
Due to the default in the payment of the loan amortizations, BANTSA and the
corporate borrowers signed and entered into restructuring agreements. As
additional security for the restructured loans, private respondent ARC
(American Realty) as third party mortgagor executed two real estate
mortgages, over its parcels of land including improvements thereon, located
at Bulacan.
Eventually, the corporate borrowers defaulted in the payment of the
restructured loans prompting petitioner BANTSA to file civil actions before
foreign courts for the collection. This includes the property of American
Realty. Petitioners already filed collection cases in foreign courts. It also filed
an extrajudicial foreclosure on the property in Bulacan in which American
Realty question because the petitioners cannot file a case for collection and a
case for extrajudicial foreclosure at the same time.
Issue: Won the contention of respondents are valid
Ruling: yes! The mortgagee cannot have both remedies. He has only one cause of
action, i.e., non-payment of the mortgage debt; hence, he cannot split up his cause
of action by filing a compliant for payment of the and another complaint for
foreclosure.

108. Tady-Y v. PNB, 12 SCRA 616 (1980)

109. Velasco v. CA, 95 SCRA 616 (1980)

Facts: November 10, 1965, Alta Farms secured from the GSIS a Three Million Two
Hundred Fifty Five Thousand Pesos (P3,255,000.00) loan and an additional loan of Five
Million Sixty-Two Thousand Pesos (P5,062,000.00) on October 5, 1967, to finance a
piggery project. Alta Farms defaulted in the payment because of this that Alta Farms
executed a Deed of Sale With Assumption of Mortgage with Asian Engineering

Corporation on July 10, 1969 but without the previous consent or approval of the GSIS
and in direct violation of the provisions of the mortgage contracts. Even without the
approval of the Deed of Sale With Assumption of Mortgage by the GSIS, Asian
Engineering Corporation executed an Exclusive Sales Agency, Management and
Administration Contract in favor of Laigo Realty Corporation, with the intention of
converting the piggery farm into a subdivision. After developing the area, on December
4, 1969, Laigo entered into a contract with Amable Lumanlan, one of the petitioners, to
construct for the home buyers, 20 houses on the subdivision. Petitioner Lumanlan
allegedly constructed 20 houses for the home buyers and for which he claims a balance of
P309,187.76 from the home buyers and Laigo. Out of his claim, petitioner Lumanlan
admits that Mrs. Rhody Laigo paid him in several checks totalling P124,855.00 but which
checks were all dishonoured. On December 29, 1969, Laigo entered into a contract with
petitioner Pepito Velasco to construct houses for the home buyers who agreed with
Velasco on the prices and the downpayment. Petitioner Velasco constructed houses for
various home buyers, who individually agreed with Velasco, as to the prices and the
downpayment to be paid by the individual home buyers.When neither Laigo nor the
individual home buyers paid for the home constructed, Velasco wrote the GSIS to
intercede for the unpaid accounts of the home buyers.
Issue: W/N GSIS is liable to the petitioners for the cost of the materials and labor
furnished by them in construction of the 63 houses now owned by the GSIS?
Ruling: Yes. GSIS should pay the petitioners. GSIS assumed ownership of the houses
built by petitioners and was benefited by the same. Art. 2127, the mortgage extends to the
natural accessions, to the improvements, growing fruits, rents.
110. Lopez v. Alvarez, 9 Phil 28 (1907)
FACTS: Appellee Evaristo holds a lien over the estate of one Vicente Lopez as the
latter executed a mortgage deed in favor of Evaristo. On April 5, 1904, Evaristo
assigned his lien on the estate to appellant Manuel Lopez through a public instrument
but the same was not registered in the Registry of Deeds. Appellee Grindrod is a
creditor of Evaristo, to whom the latter promised to pay his obligation through the
sugar yielded by the hacienda, said agreement was entered into July 7, 1900. But
the hacienda was not able to increase the sugar it yielded and defendant On August
5, 1904, Grindrod who feared of not getting paid obtained a preliminary attachment
over all the property of Evaristo including the lien that was assigned to appellant. The
same was registered on August 12, 1904. A dispute arised over the rightful owner of
the lien, defendants main contention is that since the assignment made to Lopez
was not registered it is not binding and has no effect.
ISSUE: WON THE ASSIGNMENT OF A MORTGAGE CREDIT NEED TO BE REGISTERED
FOR IT TO BE VALID AND EFFECTIVE?
HELD: NO. Although the Civil Code provides that A mortgage credit may be
alienated or assigned to a third person, wholly or partially, with the formalities
required by law, the fact that such assignment was not registered in the property
register is no obstacle to the transfer of the dominion or ownership of said credit in
the sum therein stated in favor of Lopez. In as much as the assignment or alienation

of a credit, made by the owner thereof in favor of another, is prior to the act of its
registration, and entirely independent of such formality to such an extent that, if any
question should arise over the contract between the assignor and the assignee, it
would have to be decided according to common law without need of previous
registration of the title, which shows that a credit secured by a mortgage may be
assigned or alienated, and is a perfectly valid contract even if it were not registered.
Also, the registration of the assignment or alienation of a credit secured by mortgage,
required, among others, of the Mortgage Law, is only necessary in order that it may
be effectual as against third parties.

111. BPI v. Concepcion, 53 Phil 806 (1920)

Facts: The Concepcions had a parcel of land mortgaged to BPI. Since they
could not pay up the loan, they accepted the proposal of Elser to have the
latter subrogated to their obligations to BPI, in exchange for getting the land.
The bank exhibited neither approval nor disapproval of said agreement, but
later moved for the inclusion of Elser as defendant in the foreclosure
proceeding. The Concepcions contended that the case should be dismissed as
to them. Elser contended that he could not be held liable for the debt
because the agreement to subrogate himself in place of the Concepcions was
never approved by the bank. BPI contended that both the Concepcions and
Elser should be held solidarily liable for the debt. While the case was going
on, Elser died. BPI moved for the substitution of Elser with Rosenstock, the
administrator of his estate. This was granted by the court. The trial court
absolved the Elser estate from any liability for the deficiency between the
foreclosure price and the amount of debt, since the deficiency was not
presented to the committee which processes claims against the estate. BPI
filed a bill of exceptions with the Supreme Court. It contended that since it
could not ascertain the deficiency of the proceeds of the mortgage sale and
the actual debt before the foreclosure sale, it could not present the claim for
deficiency with the committee which processes claims against the Elser
estate.
Issue: Whether or not it is necessary that the foreclosure proceeding is
already terminated for a mortgagee to claim a deficiency judgment against
the estate.
Ruling: Negative. For a mortgagee to claim a deficiency judgment on the
estate, he must file a claim for the deficiency within the period provided,
even if the foreclosure proceedings have not yet been terminated. Until the
foreclosure sale is made, the demand for the payment of deficiency is a
contingent claim. The committee does not then pass upon the validity of the
claim but reports it to the court. If the court from the report of the committee
or from the proofs exhibited to it is satisfied that the contingent claim is valid,
the executor or administrator may be required to retain in his possession
sufficient assets to pay the claim when it becomes absolute, or enough to pay
the creditor his proportionate share if the assets of the estate are insufficient
to pay the debts. The bank could and should have presented its claim to the
committee within the time prescribed by the law. But it did not, hence, it
could not recover anymore from the estate.

112. Litonjua v. L&R Corporation, 320 SCRA 405 (1999)

FACTS:
Spouses Litonjua (P) obtained a loan from L & R Corporation (R) Aug 6, 1974
(P200k) and Mar 27, 1978 (P200k) which are secured by a mortgage on 2
parcels of land owned by P
However, P sold to Phil White House Auto Supply (PWHAS) the subject parcels
of land, without prior written consent of R, pursuant to the Mortgage
agreement that they have.
Upon default of P, R initiated an extrajudicial sale and won the bidding.
P later on filed for redemption of the property but R refused to do accept the
payment contending that P violated the contract
R informed the Sheriff and Register of Deeds, stating: (1) that the sale of the
mortgaged properties to PWHAS was without its consent, in contravention of
their Deed of Real Estate Mortgage; and (2) that it was not the spouses
Litonjua, but PWHAS, who was seeking to redeem the foreclosed properties,
Register of Deeds issued TCT in favor of R
A complaint for Quieting of Title, Annulment of Title and Damages with
preliminary injunction was filed by the spouses Litonjua and PWHAS against R
LC ruled in favor of R and affirmed by CA
ISSUE: WON paragraphs 8 and 9 of the Real Estate Mortgage are valid and
enforceable;
SC: NO!
Art. 2130 stipulation forbidding alienation of mortgaged property is VOID
A real mortgage is merely an encumbrance; it does not extinguish the title of
the debtor, whose right to dispose a principal attribute of ownership is
not thereby lost. Thus, a mortgagor had every right to sell his mortgaged
property, which right the mortgagee cannot oppose.
Although the provision does not absolutely prohibit the mortgagor from
selling his mortgaged property; but what it does not outrightly prohibit, it
nevertheless achieves.
For all intents and purposes, the stipulation practically gives the mortgagee
the sole prerogative to prevent any sale of the mortgaged property to a third
party.
The mortgagee can simply withhold its consent and thereby, prevent the
mortgagor from selling the property. This creates an unconscionable

advantage for the mortgagee and amounts to a virtual prohibition on the

owner to sell his mortgaged property. In other words, stipulations like those
covered by paragraph 8 (requiring P to acquire prior consent of R before
alienating the property) of the subject Deed of Real Estate Mortgage
circumvent the law, specifically, Article 2130 of the New Civil Code.
Being contrary to law, paragraph 8 of the subject Deed of Real Estate
Mortgage is not binding upon the parties.
113. Lucena v. CA, 313 SCRA 47 (1999)
One who purchases real property which is in the actual possession of another
should, at least make some inquiry concerning the right of those in
possession. The actual possession by a person other than the vendor should,
at least put the purchaser upon inquiry. He can scarcely, in the absence of
such inquiry, be regarded as a bona fide purchaser as against such
possessors. (Lucena vs. CA, G.R. No. 77468, August 25, 1999).
Petitioners allege they are the registered owners of a parcel of land located at
the barrio of Mag-asawang Tubig, Municipality of Naujan, Oriental Mindoro,
covered by Transfer Certificate of Title No. T-41512 of the Registry of Deeds of
Oriental Mindoro. On October 29, 1969, petitioner Eduardo Lucena obtained a
loan from the private respondent Rural Bank of Naujan, Inc. in the amount of
three-thousand pesos (P3,000.00) secured by a real estate mortgage
constituted on said parcel of land. On October 1, 1970, after the loan had
matured, petitioners paid to the Rural Bank of Naujan, Inc., the sum of twothousand six pesos and ninety centavos (P2,006.90) in partial satisfaction of
their debt, thereby leaving a balance of one-thousand pesos (P1,000.00) in its
favor.1wphi1.nt
On May 7, 1974, after previous demand by the rural bank for the petitioners
to settle the balance of their matured loan went unheeded, the subject
property was extrajudicially foreclosed and sold at public auction where the
rural bank as highest bidder acquired the property. Prior to the auction sale,
notices of foreclosure were posted in at least three conspicuous public places
in the municipality where the subject property was located, as indicated in
the affidavit of posting dated May 6, 1974.3 No notices were posted in the
barrio where the property was located, nor were any published in a
newspaper of general circulation. The Certificate of Sale dated May 7, 1974
issued by private respondent Deputy Sheriff Braulio Bagus was registered
with the Registry of Deeds of Oriental Mindoro only on January 9, 1975.4
On June 26, 1975, an affidavit of consolidation of ownership was executed by
the Rural Bank of Naujan through its manager, private respondent Rogelio P.
Pineda. The affidavit of consolidation was subsequently registered by private
respondent Reynaldo Mambil in his capacity as acting Register of Deeds on
July 8, 1975, under Entry No. 134351. Transfer Certificate of Title No. T-41512
in the name of the petitioners was thus cancelled and Transfer Certificate of
Title No. T-68547 of the Registry of Deeds of Oriental Mindoro was then issued
in favor of the rural bank also on July 8, 1975. Thereafter, on July 14, 1975, a

deed of sale was executed by the rural bank through its manager whereby
the subject property was sold to private respondent spouses Marianito Baja
and Patricia Araja, resulting in the cancellation of TCT No. T-68547 and the
subsequent issuance of TCT No. T-68680 in the name of said respondents.
Said deed of sale dated July 14, 1975 was accepted and registered by private
respondent Ramon G. Garcia, then acting Register of Deeds of Oriental
Mindoro.5
On January 12, 1977, petitioners filed a complaint for reconveyance and
damages against private respondents before the then Court of First Instance
of Oriental Mindoro, to recover the subject property from private respondents
and to compel the latter to compensate them for damages and losses
suffered.6 After trial, the court a quo promulgated its decision dated
September 12, 1978, ruling in sum that there was no valid foreclosure sale of
the subject property.
Not satisfied with the judgment, both petitioners and private respondents
elevated the case to the Court of Appeals. On January 20, 1987, the
respondent court rendered its decision reversing and setting aside the trial
court's judgment. It ruled in sum that (a) posting of notices in the barrio
where the property is situated is not required, as all the law requires is
posting in the municipality or city where the property is located; (b) there is
no need to publish the notice of auction sale in a newspaper of general
circulation, because the balance of the loan was only one-thousand pesos
(P1,000.00); (c) personal notice of the auction sale to the petitioners was not
required; (d) the trial court was correct in holding that the date of registration
of the sheriff's certificate of sale and not the date of the sale itself was the
reckoning point for the start of the one-year redemption period of the
petitioners; and (e) the petitioners did not redeem their property within the
one-year period from the date of registration of the certificate of sale, and
having lost their right of redemption, cannot squirm their way out of their
predicament by asking for reconveyance of the subject property.
With respect to the first issue, this Court has ruled that failure to comply with
statutory requirements as to publication of notice of auction sale constitutes
a jurisdictional defect which invalidates the sale.10 Even slight deviations
therefrom are not allowed.11 Section 5 of Republic Act No. 720 as amended
by Republic Act No. 5939 provides:12
In the case at bar, the affidavit of posting executed by the sheriff states that
notices of the public auction sale were posted in three (3) conspicuous public
places in the municipality such as (1) the bulletin board of the Municipal
Building (2) the Public Market and (3) the Bus Station. There is no indication
that notices were posted in the barrio where the subject property lies. Clearly,
there was a failure to publish the notices of auction sale as required by law.
In Roxas vs. Court of Appeals,13 this Court has ruled that the foreclosure and
public auction sale of a parcel of land foreclosed by a rural bank were null and
void when there was failure to post notices of auction sale in the barrio where
the subject property was located. This Court finds that the same situation

obtains in the case at bar. Further still, there was a failure on the part of
private respondents to publish notices of foreclosure sale in a newspaper of
general circulation. Section 5 of R.A. 720 as amended by R.A. 5939 provides
that such foreclosures are exempt from the publication requirement when the
total amount of the loan including interests due and unpaid does not exceed
three-thousand pesos (P3,000.00). The law clearly refers to the total amount
of the loan along with interests and not merely the balance thereof, as
stressed by the use of the word "total." At the time of foreclosure, the total
amount of petitioners' loan including interests due and unpaid was P3,006.90.
Publication of notices of auction sale in a newspaper was thus necessary.
n light of private respondents' failure to comply with the statutory
requirements of notice and publication, we rule that the foreclosure and
public auction sale of petitioners' property are null and void. Hence, the Rural
Bank of Naujan did not acquire valid title to the property in question. This
reversal of the Court of Appeals disposes of the other errors assigned by
petitioners.
Anent the second issue, the above conclusion requires a determination of
whether or not petitioners are entitled to a reconveyance of their property. If
the property has not yet passed to an innocent purchaser for value, an action
for reconveyance is still available.14 It is a condition sine qua non for an
action for reconveyance to prosper that the property should not have passed
to the hands of an innocent purchaser for value.15 He is considered an
innocent purchaser who acquired the property for a valuable consideration
not knowing that the title of the vendor or grantor was null and void.16 Good
faith or its absence must thus be established on the part of spouses Marianito
Baja and Patricia Araja at the time that they purchased the subject property
from the Rural Bank of Naujan.
All things considered, Marianito Baja did not make any reasonable inquiry
regarding the status of the land in question, despite being aware that the
property was still in the possession of the petitioners. He did not even make
any effort to communicate directly with petitioner Eduardo Lucena. All he did
was to instruct Victor Atienza to inform Lucena of the proposed sale of the
property. He did not instruct Atienza, however, to make inquiries concerning
the status of the property. Furthermore, Baja's claim that he saw that title to
the property was in the name of the rural bank prior to the sale is not
credible. Granting arguendo that the title was in the name of the rural bank
when he first saw it, he nonetheless had notice that the possession of the
property was with persons other than the vendors thereof. It was thus
incumbent upon him to look beyond the title to the subject property and
make the necessary inquiries. This he neglected to do.
When the Baja spouses purchased the subject property from the rural bank
on July 14, 1975, they did so well within the one-year redemption period of
petitioners. In doing so, not only did said respondents have notice of a defect
in the title of the rural bank over the subject property, but by purchasing the
latter, they also closed the door on the petitioners' right to redeem it.
Accordingly, we adopt the finding of the lower court that said respondents

purchased the subject property in bad faith. We rule that petitioners are
entitled to a reconveyance of the property as it has not yet passed to an
innocent purchaser for value.
We find that there is no substantial reason to modify the trial court's award of
damages. There is no convincing proof to support petitioners' allegations that
private respondents Braulio Bagus, Reynaldo Mambil and Ramon Garcia
performed their duties as Deputy Provincial Sheriff and Registers of Deeds
with unlawful intent and in bad faith. Furthermore, petitioners' allegations as
to the amount of unrealized rentals due them as actual damages are mere
assertions unsupported by factual evidence. In determining actual damages,
the court cannot rely on mere assertions, speculations, conjectures or
guesswork but must depend on competent proof and on the best evidence
obtainable regarding the actual amount of loss.32
There is also no sound basis for increasing the award of moral damages
114. Cristobal v. CA, 328 SCRA 256 (2000)
Petitioners are engaged in the buying and selling of palay. To augment their
capital, they applied and were granted a loan by the respondent bank in the
amount of P30,000.00 payable in 270 days. The loan was secured by a
mortgage over a parcel of land situated in Barrio Concepcion, Baliwag,
Bulacan and covered by TCT No. T-64721. Because petitioners failed to pay
their obligation on the date the loan fell due, the bank caused the mortgaged
property, to be foreclosed extrajudicially. At the foreclosure sale on November
16, 1981, the bank was the sole and highest bidder. The sheriff of Bulacan,
who conducted the sale, then executed a certificate of sale in the name of the
bank. In turn the bank caused the registration of the sale in the Office of the
Registry of Deeds of Bulacan (Exh. "17-a"). Petitioners failed to redeem the
property, hence, the title was consolidated in the name of the bank.
Thereafter, a new transfer certificate of title (TCT No. T-275695) was issued in
the name of the bank. Misoedp
Through their attorney-in-fact Pacita Cristobal, petitioners were granted
another loan by the bank in the amount of P70,000.00, secured by another
real estate mortgage over four (4) parcels of land covered by TCT Nos. T235811, T-174185, T-146185 and T-174186 payable in 180 days. When the
obligation fell due without plaintiffs paying their indebtedness, the bank
extrajudicially foreclosed the mortgage. As the highest bidder in the auction
sale of subject parcels, titles were consolidated in its favor when petitioners
failed to redeem the land. Consequently, new transfer certificates of title
were issued in the bank's name.
On November 29, 1984, petitioners filed an action for annulment of
extrajudicial foreclosure of mortgage and sale of property and for
reconveyance with damages.
Petitioners, as plaintiffs below, impugned the validity of the extrajudicial
foreclosure sales on the grounds that they were not furnished a copy of the

application for foreclosure by the bank and a notice of the foreclosure sale;
that the bank did not comply with the requirements of Act No. 3135 with
respect to posting of the notice of sale and the publication of the sale in a
newspaper of general circulation; that they were not notified of the expiration
of the period of redemption; and that the interest due on the principal
obligation was bloated. Edp mis
The bank, as defendant below, claimed in its answer that it complied with the
requirements of posting and publication required under Act 3135 and that it
had not charged nor increased the interest rate of the principal obligations. It
contended that the computation attached to the complaint was not the
amount of redemption but the amount at which the bank may sell back, the
property to the petitioners.
On January 24, 1985, the trial court issued a writ of preliminary injunction
enjoining the bank from taking the possession of the property covered by TCT
No. 64721.
After trial on the merits, the trial court rendered its decision on April 21, 1992,
disposing as follows:
"WHEREFORE, in view of the foregoing, judgment is rendered by the Court as
follows:
a) Declaring the annulment of the extrajudicial foreclosure of mortgages, the
sale of the properties at public auction, the issuance of titles to the properties
in the name of the defendant bank and the reconveyance of the same to the
plaintiffs.
Finding the decision unacceptable, the bank timely appealed to respondent
Court of Appeals. It subsequently reversed and set aside the judgment of the
trial court.
At issue is whether respondent Court of Appeals erred in finding that private
respondents had complied substantially with Section 3 of Act 3135, which
provides that:

"Sec. 3. Notice shall be given by posting notices of the sale for not less than
twenty days in at least three public places of the municipality or city where
the property is situated, and if such property is worth more than four hundred
pesos, such notice shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality
or city."
Non-compliance with the requirements of notice and publication in an
extrajudicial foreclosure sale is a factual issue. The resolution thereof by the
lower courts is binding and conclusive upon this Court.[3] However, this rule
is subject to exceptions, as when the findings of trial court and the Court of
Appeals are in conflict.[4] Also, it must be noted that non-compliance with the

statutory requisites could constitute a jurisdictional defect that would

invalidate the sale. Sj cj
Petitioners claim that respondent Court of Appeals erred when it admitted the
testimony of one Pedro Agustin, who evidently had no personal knowledge of
the actual postings of the notice of sale. Following Section 36, Rule 130 of the
Revised Rules of Court, such testimony could be hearsay. According to
petitioners, it is not based on the personal knowledge of the witness but on
the knowledge of some other person. Hearsay evidence, whether objected to
or not, has no probative value unless the proponent can show that the
evidence falls within the exceptions to the hearsay evidence rule. Petitioners
argue that respondent bank not only failed to submit the certificate of posting
but also failed to present before the court the Deputy Sheriff who allegedly
did the postings.
As therein held, "a certificate of posting is not required, much less considered
indispensable, for the validity of a foreclosure sale" under Act 3135.
Supreme
Further, as respondent bank asserts, a mortgagor who alleges absence of a
requisite has the burden of establishing that fact. Petitioners failed in this
regard. Foreclosure proceedings have in their favor the presumption of
regularity and the burden of evidence to rebut the same is on the petitioners.
Petitioners also claim that the Court of Appeals erred when it held that
publication in the Mabuhay newspaper is a substantial compliance with the
requirement of the law. However, the records show that the sheriff's notice of
sale was published in the Mabuhay newspaper generally circulated in the
Province of Bulacan.
the publication of the notice of sale in a newspaper of general circulation
alone is more than sufficient compliance with the notice-posting requirements
of the law. Clearly, the respondent appellate court did not err in finding that
respondent bank had substantially complied with those requirements.
115. Metrobank v. Penafel, G.R. No. 173976 (27 Feb 2009)
Respondent Erlinda Peafiel and the late Romeo Peafiel are the registered
owners of two parcels of land covered by Transfer Certificate of Title (TCT) No.
(350937) 6195 and TCT No. 0085, both issued by the Register of Deeds of
Mandaluyong City. On August 1, 1991, the Peafiel spouses mortgaged their
properties in favor of petitioner Metropolitan Bank and Trust Company, Inc.
The mortgage deed was amended on various dates as the amount of the loan
covered by said deed was increased.

The spouses defaulted in the payment of their loan obligation. On July 14,
1999, petitioner instituted an extrajudicial foreclosure proceeding under Act
No. 3135 through Diego A. Allea, Jr., a notary public. Respondent Erlinda
Peafiel received the Notice of Sale, stating that the public auction was to be

held on September 7, 1999 at ten oclock in the morning, at the main

entrance of the City Hall of Mandaluyong City. The Notice of Sale was
published in Maharlika Pilipinas on August 5, 12 and 19, 1999, as attested to
by its publisher in his Affidavit of Publication.2 Copies of the said notice were
also posted in three conspicuous places in Mandaluyong City.3
At the auction sale, petitioner emerged as the sole and highest bidder. The
subject lots were sold to petitioner for P6,144,000.00. A certificate of sale4
was subsequently issued in its favor.
On August 8, 2000, respondent Erlinda Peafiel, through her attorney-in-fact,
Eugenio Peafiel, filed a Complaint5 praying that the extrajudicial foreclosure
of the properties be declared null and void. They likewise sought (a) to enjoin
petitioner and the Register of Deeds from consolidating ownership, (b) to
enjoin petitioner from taking possession of the properties, and (c) to be paid
attorneys fees.
On June 30, 2003, the Regional Trial Court (RTC) rendered judgment in favor
of petitioner:
ACCORDINGLY, judgment is hereby rendered as follows:
1. The extrajudicial foreclosure of real estate mortgage instituted by
defendants Metrobank and Notary Public Diego A. Allea, Jr. over the two
parcels of land covered by TCT Nos. (350937) 6195 and TCT No. 0085 is
hereby declared VALID;
On this issue, the CA agreed with respondents. The CA noted that the law
requires that publication be made in a newspaper of general circulation in the
municipality or city where the property is situated. Based on the testimony of
the publisher of Maharlika Pilipinas, it concluded that petitioner did not
comply with this requirement, since the newspaper was not circulated in
Mandaluyong City where the subject properties were located. Thus, in its
Decision dated July 29, 2005, the CA reversed the RTC Decision, thus:
This controversy boils down to one simple issue: whether or not petitioner
complied with the publication requirement under Section 3, Act No. 3135,
which provides:
SECTION 3. Notice shall be given by posting notices of the sale for not less
than twenty days in at least three public places of the municipality or city
where the property is situated, and if such property is worth more than four
hundred pesos, such notice shall also be published once a week for at least
three consecutive weeks in a newspaper of general circulation in the
municipality or city.10
We hold in the negative.
The accreditation of Maharlika Pilipinas by the Presiding Judge of the RTC is
not decisive of whether it is a newspaper of general circulation in
Mandaluyong City. This Court is not bound to adopt the Presiding Judges

determination, in connection with the said accreditation, that Maharlika

Pilipinas is a newspaper of general circulation. The court before which a case
is pending is bound to make a resolution of the issues based on the evidence
on record.1avvphi1
To prove that Maharlika Pilipinas was not a newspaper of general circulation in
Mandaluyong City, respondents presented the following documents: (a)
Certification15 dated December 7, 2001 of Catherine de Leon Arce, Chief of
the Business Permit and Licensing Office of Mandaluyong City, attesting that
Maharlika Pilipinas did not have a business permit in Mandaluyong City; and
(b) List of Subscribers16 of Maharlika Pilipinas showing that there were no
subscribers from Mandaluyong City.
It bears emphasis that, for the purpose of extrajudicial foreclosure of
mortgage, the party alleging non-compliance with the requisite publication
has the burden of proving the same.18 Petitioner correctly points out that
neither the publishers statement that Maharlika Pilipinas is being circulated
in Rizal and Cavite, nor his admission that there are no subscribers in
Mandaluyong City proves that said newspaper is not circulated in
Mandaluyong City.
Nonetheless, the publishers testimony that they "do not just offer [Maharlika
Pilipinas] to anybody" implies that the newspaper is not available to the
public in general. This statement, taken in conjunction with the fact that there
are no subscribers in Mandaluyong City, convinces us that Maharlika Pilipinas
is, in fact, not a newspaper of general circulation in Mandaluyong City.
The object of a notice of sale is to inform the public of the nature and
condition of the property to be sold, and of the time, place and terms of the
sale. Notices are given for the purpose of securing bidders and to prevent a
sacrifice of the property.19 The goal of the notice requirement is to achieve a
"reasonably wide publicity" of the auction sale. This is why publication in a
newspaper of general circulation is required. The Court has previously taken
judicial notice of the "far-reaching effects" of publishing the notice of sale in a
newspaper of general circulation.20
True, to be a newspaper of general circulation, it is enough that it is published
for the dissemination of local news and general information, that it has a
bona fide subscription list of paying subscribers, and that it is published at
regular intervals.21 Over and above all these, the newspaper must be
available to the public in general, and not just to a select few chosen by the
publisher. Otherwise, the precise objective of publishing the notice of sale in
the newspaper will not be realized.
In fact, to ensure a wide readership of the newspaper, jurisprudence suggests
that the newspaper must also be appealing to the public in general. The
Court has, therefore, held in several cases that the newspaper must not be
devoted solely to the interests, or published for the entertainment, of a
particular class, profession, trade, calling, race, or religious denomination.

The newspaper need not have the largest circulation so long as it is of

general circulation.22
Noticeably, in the Affidavit of Publication, Mr. Alvarez attested that he was the
"Publisher of Maharlika Pilipinas, a newspaper of general circulation,
published every Thursday." Nowhere is it stated in the affidavit that Maharlika
Pilipinas is in circulation in Mandaluyong City. To recall, Sec. 3 of Act No. 3135
does not only require that the newspaper must be of general circulation; it
also requires that the newspaper be circulated in the municipality or city
where the property is located.
116. PNB v. Nepomuceno, 394 SCRA 405 (2002)
FACTS:
PNB granted respondents (R) a credit line to finance the filming of the movie Pacific
Connection. The loan was secured by mortgages on Rs real and personal properties
(Malugay property, Forbes Park Property and motion picture equipments). However, R
defaulted in their obligation. PNB sought foreclosure of the mortgaged properties
where pNB was the highest bidder. R filed for annulment of foreclosure sale since it is
null and void for lack of publication of the notice of sale. LC annulled foreclosure.
*During completion stage of the appeal, the appellate court issued a

Resolution on January 31, 1996 dismissing petitioners appeal with regard to

the Forbes Park property as the same was already the subject of a Deed of
Reconveyance executed by petitioner in favor of respondents on November
22, 1994, as well as a Compromise Agreement dated September 13, 1994
between the same parties.13 Said Resolution having become final and
executory on February 26, 1996, entry of judgment was made on March 27,
1996.14 Hence, resolution of the appeal in the Court of Appeals pertained
only to the Malugay property.
ISSUE: WoN the foreclosure sale was valid despite lack of publication
SC: NO!
- Act 3135, governing EJF of mortgages on real property is specific with regard
to the posting and publication requirements of the notice of sale, which
requires:
o Posting of notices of sale in 3 public places
o Publication of the same in a newspaper of general circulation.
o FAILURE TO PUBLISH the notice of sale constitutes a jurisdictional
defect, which INVALIDATES the sale.
- RE: WAIVER OF PUBLICATION REQUIREMENTS
o PNB and R have absolutely NO RIGHT to waive the posting and
publication requirements of the law.
o The principal object of a notice of sale in a foreclosure of mortgage is
not so much to notify the mortgagor as to inform the public generally
of the nature and condition of the property to be sold, and of the time,
place and terms of the sale
- Notice is given to secure bidders and prevent a sacrifice of the property
- Statutory requirement of Publication is mandatory not for the mortgagors
benefit, but for the public or 3rd persons.
-

*Thus, in the recent case of Development Bank of the Philippines v.

Aguirre,27 the foreclosure sale held more than two (2) months after the
published date of sale was considered void for lack of republication.28
Similarly, in the instant case, the lack of republication of the notice of the
December 20, 1976 foreclosure sale renders it void.
*Records show that respondents, indeed, requested for the postponement of
the foreclosure sale.31 That, however, is all that respondents sought.
Nowhere in the records was it shown that respondents purposely sought rescheduling of the sale without need of republication and reposting of the
notice of sale. To request postponement of the sale is one thing; to request it
without need of compliance with the statutory requirements is another.
Respondents, therefore, did not commit any act that would have estopped
them from questioning the validity of the foreclosure sale for non-compliance
with Act No. 3135. In addition, the "Agreement to Postpone Sale" signed by
respondents was obviously prepared solely by petitioner.32 A scrutiny of the
agreement discloses that it is in a ready-made form and the only participation
of respondents is to affix or "adhere" their signature thereto.
117. DBP v. Aguirre, 364 SCRA 755 (2001)
A certificate of posting is not required, much less considered indispensable,
for the validity of a foreclosure sale under Act 3135 it is significant only in
the matter of providing compliance with the required posting of notice
(Bohanan v. CA, 256 SCRA 355; Olizon v. CA, 256 SCRA 355; Cristobal v. CA,
328 SCRA 256 [2000]; DBP v. CA, GR No. 125838, 10 June 2003). The failure
to post a notice is not per se a ground for invalidating the sale provided that
the notice thereof is duly published in a newspaper of general circulation
(DBP v. Aguirre, GR No. 144877, 07 September 2001).
In 1980, petitioner DBP granted a loan to Veronica Aguirre in the amount of
P99,500.00, with interest at 14% per annum, payable in 25 years at monthly
installments of P1,147.92. To secure the loan, respondent Aguirre executed a
mortgage over a 180-square meter lot in Paraaque and issued two
promissory notes covering the amount of the loan. As respondent Aguirre
defaulted, petitioner took steps in 1982 to foreclose the mortgage. Upon
request of respondent Aguirre, petitioner offered to restructure her loan upon
payment of P25,333.79, or, in the alternative, upon payment of at least 10%
of the arrears coupled with the execution of additional collateral to cover the
remaining obligation. Respondent was given seven days to accept or reject
the offer. As respondent did not respond to the offer, petitioner proceeded
with the foreclosure of the mortgage. Respondent Aguirre made two
payments on September 24 and October 10, 1986 in the amounts of
P9,000.00 and P22,000.00, respectively, which petitioner deducted from
respondent's outstanding balance.
The notice for the foreclosure sale, to be held on September 25, 1985 in the
municipal building of the Paraaque, was published in Mabuhay, a newspaper
of general circulation in Bulacan and Metro Manila, in its issues of August 25,
September 1, and 8, 1985. For some reason, however, the foreclosure sale

scheduled on September 25, 1985 did not take place on the said date but on
January 7, 1986, during which petitioner was the highest bidder for
P99,300.00. As of the time of the sale, respondent Aguirre's total outstanding
obligation was P247,740.70. The certificate of sale was registered in the
Office of the Registrar of Paraaque on July 16, 1987.
As respondent Aguirre failed to redeem the property, DBP consolidated its
title and advertised the sale of the foreclosed lot through a public auction
scheduled on December 6, 1988. On the day of the bidding, respondent
Aguirre brought suit against DBP in the Regional Trial Court, Branch 134,
Makati City to enjoin the scheduled auction sale and to annul the extrajudicial
sale of January 7, 1986. Respondent claimed that her loan was not yet due
because it had been restructured and that she had not been personally
notified of the foreclosure sale. The trial court issued a restraining order and,
subsequently, a writ of preliminary injunction, to restrain the auction sale
pending the resolution of the case.
Petitioner DBP denied respondent Aguirre's contention that the loan had been
restructured and claimed that it had personally notified her of the sale. It
contended that respondent Aguirre failed to redeem the property, for which
reason it consolidated its title. As counterclaim, DBP sought payment of the
deficiency claim in the amount of P241,658.39 computed as of December 30,
1988.
On May 9, 1996, the trial court rendered its decision. It found that DBP had
complied with the publication requirement in the foreclosure of the mortgage
in question and that respondent Aguirre failed to overcome the presumption
of regularity of performance of official duty with regard to the posting of the
notice of sale; that respondent had defaulted in the payment of its loan; and
that although there were negotiations for the restructuring of respondent
Aguirre's loan, no agreement was reached by the parties. On the other hand,
the trial court found no merit in DBP's counterclaim. Consequently, it vacated
the writ of preliminary injunction and dismissed respondent Aguirre's
complaint as well as DBP's counterclaim.
Both petitioner and respondent Aguirre appealed to the Court of Appeals
which, on December 29, 1999, reversed the decision of the trial court insofar
as the appeal of respondent Aguirre was concerned and invalidated the
foreclosure sale on the ground that petitioner's failure to present proof of
posting of the notice of sale rendered the foreclosure proceedings invalid.
We find the petition to be without merit.
Under Act No. 3135, 3, 3 if the value of the property subject of the
foreclosure is more than P400.00, the notice of sale must be posted and
published. The failure to post a notice is not per se a ground for invalidating
the sale provided that the notice thereof is duly published in a newspaper of
general circulation.

In this case, a notice of extrajudicial foreclosure sale was published on August

25, September 1, and 8, 1985 in a newspaper of general circulation in Metro
Manila in accordance with 3.
However, although the notice of foreclosure sale was duly published, the sale
did not take place as scheduled on September 25, 1985. Instead, it was held
more than two months after the published date of the sale or on January 7,
1986. This renders the sale void.
The foregoing ruling squarely applies in this case. Although the lack of
republication of the notice of sale has not been raised in this case, this Court
is possessed of ample power to look into a relevant issue, such as the lack of
jurisdiction to hold the foreclosure sale.9
Considering that her loan remains unpaid, respondent Aguirre should be
ordered to pay her outstanding obligation in the amount of P247,740.70 with
interest at the rate stipulated in the contract of loan to be computed as of
January 7, 1986, subject to the right of petitioner to foreclose the mortgage
upon respondent Aguirre's failure to settle her obligation.
WHEREFORE, the decision of the Court of Appeals, dated December 29, 1999,
is AFFIRMED with the MODIFICATION that private respondent Veronica Aguirre
is ordered to pay petitioner the amount of P247,740.70 with interest as
stipulated in the contract of loan, as of January 7, 1986, without prejudice to
the right of petitioner to foreclose the real estate mortgage executed by
respondent Aguirre on April 21, 1980 upon failure of respondent Aguirre to
pay the said amount.

118. Piano v. Cayanong, 7 SCRA 397 (1963)

FACTS: On March 17, 1952, the plaintiffs commenced an action to foreclose a
mortgage executed by the defendant in favor of the plaintiffs upon a parcel of land.
The parties-litigant submitted a compromise agreement.
The defendant failed to pay the obligation within the period set by the Court; so the
property in question was sold at public auction on Jan. 30, 1952(should be 1953) per
order of the court, by the deputy sheriff of Maasin, Leyte, to the plaintiffs, they being
the only bidders for P2,475.
The certificate of sheriff's sale contained the provision that the said property is
subject "to redemption within one year from the date hereof in the manner provided
by the law applicable to the case." On March 11, 1953, the plaintiffs filed a motion for
the confirmation of the sale executed by the sheriff, which was unopposed by the
defendant. The sale was confirmed by the Court on March 21, 1953.
Thereafter, the plaintiffs filed a petition for writ of possession; by virtue of such
petition the court adjudicated possession to the plaintiffs on Aug. 15, 1953. On Aug.
20, 1953, the deputy clerk issued the writ of possesion prayed for by the plaintiffs.
On Jan. 26, 1954, the defendant deposited with the court the sum of P2,783.93,
P2,772 of which was in the concept of redemption deposit to be delivered to
Generosa Cayanong and her husband.
The oppositor Francisco Pilapil, on Feb. 11, 1954, filed an opposition to the
defendants' motion of Jan. 26, 1954, claiming that the property, subject of

foreclosure, having been sold at a judicial foreclosure sale, was not subject to
redemption after the judicial sale was confirmed, title thereto having been fully
vested and consolidated in favor of Cayanong and Bellones, their assignees and
successors-in-interest.
ISSUE: Whether the property subject of foreclosure, having been sold at a judicial
foreclosure sale is subject to redemption after the judicial sale was confirmed.
RULING:
In a foreclosure of mortgage under Rule 70 of the Rules of Court, there is no right of
redemption after the sale is confirmed, although there is an equity of redemption in
favor of the mortgagor or junior encumbrancer, consisting in the right to redeem the
mortgaged property within the 90-day period, or even thereafter, but before the
confirmation of the sale.
It is only in cases of foreclosures of mortgages in favor of banking and credit
institutions (Sec. 76, General Banking Act [Rep. Act 337]), to the Philippine National
Bank (Acts Nos. 2747, and 2938), and in extrajudicial foreclosures (Act 3135 as
amended by Act 4118), where, by express provision, the law allows redemption. In all
other foreclosure cases, there is no legal redemption.
The sheriff, therefore, has no authority to grant or insert a period of redemption in
the certificate of sale, when the same is conducted pursuant to Rule 70 and, wanting
in said authority, any insertion therein has no validity and effect. Once the judicial
sale is confirmed by the court, the rights are vested in the purchaser (Sec. 3, Rule
70).

119. Union Bank v CA, 311 SCRA 795 (1999)

FACTS:
1) A real estate mortgage was executed on December 1991 by spouses Dario
(hereafter mortgagors) in favor of UNIONBANK to secure a P3 million loan
which covered a Quezon City property in Leopoldo Dario's name and was
annotated on the title. For non-payment of the principal obligation,
UNIONBANK extrajudicially foreclosed the property mortgaged on August
1993 and sold the same at public auction, with itself posting the highest bid.
2) One week before the one-year redemption period expired, private
respondents filed a complaint with the RTC against the mortgagors,
UNIONBANK and the Register of Deeds annulment of sale and real estate
mortgage reconveyance and prayer for restraining notice of lis pendens was
annotated on the title.
3) On October 1994, the RTC issued a TRO enjoining the redemption of
property within the statutory period and its consolidation under UNIONBANK's
name.
4) Without notifying private respondents, UNIONBANK consolidated its title
over the foreclosed property on October 1994, UNIONBANK's name was
issued in the new TCT.

5) Private respondents filed an amended complaint, alleging that they, not

the mortgagors, are the true owners of the property mortgaged and insisting
on the invalidity of both the mortgage and its subsequent extrajudicial
foreclosure. They claimed that the original title, was entrusted to a certain
Atty. Reynaldo Singson preparatory to its administrative reconstitution after a
fire gutted the Quezon City Hall building. Mortgagor Leopoldo, private
respondent Fermina's son, obtained the property from Atty. Singson, had the
title reconstituted under his name without private respondents' knowledge,
executed an ante-dated deed of sale in his favor and mortgaged the property
to UNIONBANK.
6) On December 1994, the RTC admitted the aforementioned amended
complaint. UNIONBANK filed its answer ad cautelam asserting its status as an
innocent mortgagee for value whose right or lien upon the property
mortgaged must be respected even if, the mortgagor obtained his title
through fraud. It also averred that the action had become "moot and
academic by the consolidation of the foreclosed property on 24 October
1994" in its name.
7) On appeal, the CA nullified the consolidation of ownership, which was the
prior judgment in the RTC, ordered the Register of Deeds to cancel the
certificate of title in UNIONBANK's name and to reinstate TCT of respondents.
ISSUE: Whether UNIONBANK is a mortgagee in good faith and for value with a
right to consolidate ownership over the foreclosed property with the
redemption period having expired and there having been no redemptioners.
HELD:
A) The SC disagrees with the CAs judgment that consolidation deprived
private respondents of their property without due process. Because the buyer
in a foreclosure sale becomes the absolute owner of the property purchased if
it is not redeemed during the period of one year after the registration of the
sale. In effect, consolidation took place as a matter of right since there was
no redemption of the foreclosed property and the TRO expired upon dismissal
of the complaint.
C) UNIONBANK need not have informed private respondent that it was
consolidaint its title over the property, upon the expiration of the redemption
period, without the judgment debtor having made use of his right of
redemption, the ownership of the property sold becomes consolidated in the
purchaser. Upon failure to redeem foreclosed realty, consolidation of title
becomes a matter of right on the part of the auction buyer, and the issuance
of a certificate of title in favor of the purchaser becomes ministerial upon the
Register of Deeds.
C) At any rate, the consolidation of ownership over the mortgaged property in
favor of UNIONBANK and the issuance of a new title in its name during the
pendency of an action for annulment and reconveyance will not cause injury

to private respondents because as purchaser at a public auction, UNIONBANK

is only substituted to and acquires the right, title, interest and claim of the
judgment debtors or mortgagors to the property at the time of levy. With the
main action for reconveyance pending before the RTC, the notice of lis
pendens, sufficiently protects private respondents interest over the property.
Thus the Decision of the Court of Appeals is REVERSED and SET ASIDE. The
order of the trial court dated 7 August 1999, declaring UNIONBANK's prayer
for writ of preliminary injunction moot and academic, is hereby REINSTATED.
Let this case be remanded to the Regional Trial Court for trial on the merits.
120. Cometa v. Court of Appeals, 351 SCRA 294 (2001)
On July 2, 1976, the quondam Court of First Instance (CFI) of Rizal, Branch
153 at Makati rendered a Decision in Civil Case No. 17585 for Damages,
entitled "Jose Franco v. Zacarias Cometa," awarding to herein private
respondent Jose Franco, the sum of P 57,396.85.4
The judgment became final on March 9, 1978. Subsequently, a writ of
execution was issued. Pursuant thereto, the sheriff levied on execution three
(3) commercial lots of petitioner Zacarias Cometa5 located at Guadalupe,
Makati.
On October 17, 1978, two (2) of the lots were sold to respondent Franco at
public auction for the amount of P57,396.85. The sheriffs return was made on
March 12, 1981.6
On November 17, 1981, petitioner Herco Realty & Agricultural Development
Corporation (Herco) filed Civil Case No. 43846 with the same CFI Rizal, Branch
15, to annul the levy on execution and sale at public auction of the real
properties.7 The complaint alleged that the ownership of the lots had been
transferred by Cometa to Herco before the execution sale. It assailed the
validity of the levy and sale on the ground that the sheriff, in disregard of the
proper procedural practice, immediately proceeded against Cometa's real
properties without first exhausting his personal properties; that the lots were
sold en masse and not by parcel; and that the said properties which are
commercial lots situated in Guadalupe, Makati, and are conservatively valued
at P500,000.00, were sold only for P57,396.85, the amount of the judgment.8
Meanwhile, on March 22, 1982, the same court, now designated as Regional
Trial Court, Branch 60, issued an order in Civil Case No. 17585 directing the
Register of Deeds of Rizal to cancel petitioner Cometa's certificates of title to
the lots and to issue new ones in favor of respondent Franco. Cometa, who
died during the pendency of the proceedings, was substituted by his heirs,
who filed before this Court a petition for certiorari questioning the said order.
The petition was, however, dismissed on February 28, 1983.9
On May 13, 1983, Franco filed with the Regional Trial Court of Makati, Branch
140, a motion for issuance of writ of possession. Cometa opposed the motion
on the ground that there was pending before another Regional Trial Court an
action for annulment of levy and sale of the properties in question.10

On August 12, 1983, the trial court issued an order granting the motion; but
the same was reconsidered and set aside on November 18, 1983 on the
ground that the issuance of the writ of possession was premature,11
considering that the RTC of Makati, Branch 60, had not yet decided the case
filed by Herco and Cometa for the annulment of the levy and sale of the
properties.

Franco then instituted a special civil action for certiorari with this Court on
June 27, 1984, but the case was referred to the Intermediate Appellate Court,
which subsequently reversed the ruling of the RTC, Branch 140, on October 4,
1984, and granted the issuance of the writ of possession' in Franco's favor.12
Cometa and Herco elevated their cause to this Court, where the same was
docketed as G.R. No. L-69294 and entitled, "Zacarias Cometa and Herco
Realty and Agricultural Development Corporation v. IAC and Jose Franco." In a
Decision dated June 30, 1987,13 this Court reversed the appellate court and
withheld the granting of the writ of possession pending the promulgation of
the resolution of the RTC, Branch 60, on the issue of whether or not the levy
and sale of Cometa's properties are valid.
hereafter, in Civil Case No. 43846, Branch 60 of the Makati RTC issued an
order dated July 21, 1993 dismissing the case on the ground of "lack of
interest in the prosecution of the complaint" for failure of the representatives
of Corneta and Herco to appear.1wphi1.nt
The order of dismissal was affirmed by the Court of Appeals on July 16, 1996
and by this Court on January 20, 1997 in G.R. No. 126760. On February 26,
1997, this Court's Resolution which, in effect, upheld the validity of the
assailed levy and sale, became final and executory.
In May 2, 1997, Franco again filed, this time with Branch 60 of the RTC of
Makati City, a motion for issuance of writ of possession and cancellation of lis
pendens. The heirs of Cometa opposed the motion claiming that they
intended to redeem the properties.
On December 4, 1997, Cometa's heirs consigned with the Office of the Clerk
of Court, RTC, Makati City, the sum of P38,761.05 as purchase price for the
lots, plus interest of P78,762.69 and P1,175.25 as realty tax.
11. What may be inferred from the aforesaid decisions (except Sumerariz v.
DBP) is that the running of the period of redemption is suspended if the
validity of the sale is questioned at any time within the said period of
redemption.
12. When the validity of the sale is questioned after the period of redemption
has expired, the rule that the filing of the action questioning such validity
suspends the running of the period for redemption no longer applies. This is
only logical - for there would no longer be any period to be suspended - it has
already expired. Where the sale is declared void in such action, there would

be no right of redemption to speak of thereafter; for legally speaking, there

was no sale at all. Avoid sale would be inconsistent with a right of
redemption. For in such case, the buyer has not acquired any right over the
property sold to him. Hence, there is nothing that could be redeemed by the
owner of the property.
13. The certificate of sale of the two (2) lots was registered and annotated in
the corresponding certificates of title on January 25, 1980. The period of
redemption expired twelve (12) months thereafter (Section 30, Rule 39, Rules
of Court) - or on January 20, 1981. Civil Case No. 43846 was filed on
November 27, 1981 - or more than ten (10) months after the period of
redemption expired. Hence, when Civil Case No.43846 was filed, there was no
longer any period of redemption that could be suspended.
The appellate court's 10th Division thereafter promulgated a Decision dated
January 25, 1999,16 affirming the order of respondent presiding Judge of
Branch 60, Makati City RTC, and denying due course to the petition.
We disagree.
Paraphrasing what we trenchantly pointed out in Hermoso v. CA,21 we test a
law by its result. A law should not be interpreted so as to cause an injustice.
As judges, we are not automatons. We do not and must not unfeelingly apply
the law as it is worded, yielding like robots to the literal command without
regard to its cause and consequence.
The spirit rather than the letter of the statute determines its construction,
hence, a statute must be read according to its spirit or intent. For what is
within the spirit is within the statute although it is not within the letter
thereof, and that which is within the letter but not within the spirit is not
within the statute.
In short, the statute, being remedial, is to be construed liberally to effectuate
the remedy and carry out its evident spirit and purpose.25 Thus, the Court
allowed parties in several cases to perfect their right of redemption even
beyond the period prescribed therefor.26 We can do no less vis--vis the
prevailing facts of this case for the following reasons:

First, we are confronted with the grossly and patently iniquitous spectacle of
petitioners being made to pay a money judgment amounting to P57,396.85
with their two (2) parcels of prime land conservatively valued at that time at
P500,000.00,
Second, while there is no dispute that mere inadequacy of the price per se
will not set aside a judicial sale of real property, nevertheless, where the
inadequacy of the price is purely shocking to the conscience,41 such that the
mind revolts at it and such that a reasonable man would neither directly or
indirectly be likely to consent to it,42 the same will be set aside.

Third, the questionable manner in which the said lots were levied upon and
sold at public auction has, likewise, caught the attention of the Court.
n the case at bar, the subject lots were sold en masse, not separately as
above provided. The unusually low price for which they were sold to the
vendee, not to mention his vehement unwillingness to allow redemption
therein, only serves to heighten the dubiousness of the transfer.

Fourth, with regard to the applicability of prescription and laches, there can
be no question that they operate as a bar in equity. However, it must be
pointed out that the question of prescription or laches can not work to defeat
justice or to perpetrate fraud and injustice.
Lastly, petitioners have demonstrated, albeit tardily, an earnest and sincere
desire to redeem the subject properties when Cometa's heirs, on December
4, 1997, consigned with the Office of the Clerk of Court, RTC Makati, the sum
of P38,761.05 as purchase price for the lots, plus interest of P78,762.69 and
P1,175.25 as realty tax.
WHEREFORE, in view of all the foregoing, the challenged Decision of the
Court of Appeals dated January 25, 1999, which affirmed the trial court's
denial of petitioners' right of redemption, as well as the subsequent
Resolution dated January 27, 2000, in CA-G.R. SP No. 48227 entitled "Zacarias
Cometa, et al. v. Ron. Pedro Laggui, et al.," are REVERSED and SET ASIDE;
and another one hereby rendered ordering respondent Jose Franco to accept
the tender of redemption made by petitioners and to deliver the proper
certificate of redemption to the latter.1wphi1.nt