SPOUSES FRANCISCO and MERCED RABAT,

Petitioners,
- versus -
PHILIPPINE NATIONAL BANK,
Respondent.

RABAT VS PNB GR. 158755 June 18, 2012

The inadequacy of the bid price in an extrajudicial foreclosure sale of mortgaged

properties will not per se invalidate the sale. Additionally, the foreclosing mortgagee is
not precluded from recovering the deficiency should the proceeds of the sale be
insufficient to cover the entire debt.
Antecedents

The parties are before the Court a second time to thresh out an issue relating to
the foreclosure sale of the petitioners mortgaged properties. The first time was in G.R.
No. 134406 entitled Philippine National Bank v. Spouses Francisco and Merced
Rabat, decided on November 15, 2000.[1] In G.R. No. 134406, the Court observed that

The RABATs did not appeal from the decision of the trial court. As a
matter of fact, in their Appellees Brief filed with the Court of Appeals they
prayed that said decision be affirmed in toto. As against the RABATs the
trial courts findings of fact and conclusion are already settled and final.
More specifically, they are deemed to have unqualifiedly agreed with the
trial court that the foreclosure proceedings were valid in all respects,
except as to the bid price.[2]

Accordingly, we extract the antecedent facts from the narrative of the decision in
G.R. No. 134406, as follows:

On 25 August 1979, respondent spouses Francisco and Merced

Rabat (hereafter RABATs) applied for a loan with PNB. Subsequently, the
RABATs were granted on 14 January 1980 a medium-term loan of P4.0
Million to mature three years from the date of implementation.

On 28 January 1980, the RABATs signed a Credit Agreement and

executed a Real Estate Mortgage over twelve (12) parcels of land which
stipulated that the loan would be subject to interest at the rate of 17% per
annum, plus the appropriate service charge and penalty charge of 3% per
annum on any amount remaining unpaid or not renewed when due.
 On 25 September 1980, the RABATs executed another document
denominated as "Amendment to the Credit Agreement" purposely to
increase the interest rate from 17% to 21% per annum, inclusive of service
charge and a penalty charge of 3% per annum to be imposed on any
amount remaining unpaid or not renewed when due. They also executed
another Real Estate Mortgage over nine (9) parcels of land as additional
security for their medium-term loan of Four Million (P4.0 M). These parcels
of land are agricultural, commercial and residential lots situated in Mati,
Davao Oriental.

The several availments of the loan accommodation on various dates

by the RABATs reached the aggregate amount of THREE MILLION FIVE
HUNDRED SEVENTEEN THOUSAND THREE HUNDRED EIGHTY
(P3,517,380), as evidenced by the several promissory notes, all of which
were due on 14 March 1983.

The RABATs failed to pay their outstanding balance on due date.

In its letter of 24 July 1986, in response to the letter of the RABATs of

16 June 1986 requesting for more time within which to arrive at a viable
proposal for the settlement of their account, PNB informed the RABATs
that their request has been denied and gave the RABATs until 30 August
1986 to settle their account. The PNB sent the letter to 197 Wilson Street,
San Juan, Metro Manila.
For failure of the RABATs to pay their obligation, the PNB filed a
petition for the extrajudicial foreclosure of the real estate mortgage
executed by the RABATs. After due notice and publication, the mortgaged
parcels of land were sold at a public auction held on 20 February 1987
and 14 April 1987. The PNB was the lone and highest bidder with a bid
of P3,874,800.00.

As the proceeds of the public auction were not enough to satisfy the
entire obligation of the RABATs, the PNB sent anew demand letters. The
letter dated 15 November 1990 was sent to the RABATs at 197 Wilson
Street, San Juan, Metro Manila; while another dated 30 August 1991 was
sent to the RABATs at 197 Wilson Street, Greenhills, San Juan, Metro
Manila, and also in Mati, Davao Oriental.

Upon failure of the RABATs to comply with the demand to settle their
remaining outstanding obligation which then stood at P14,745,398.25,
including interest, penalties and other charges, PNB eventually filed on 5
May 1992 a complaint for a sum of money before the Regional Trial Court
of Manila. The case was docketed as Civil Case No. 92-61122, which was
assigned to Branch 14 thereof.
 The RABATs filed their answer with counterclaim on 28 July 1992 to
which PNB filed its Reply and Answer to Counterclaim. On 2 January
1993, the RABATs filed an amended answer. The RABATs admitted their
loan availments from PNB and their default in the payment
thereof. However, they assailed the validity of the auction sales for want of
notice to them before and after the foreclosure sales.

They further added that as residents of Mati, Davao Oriental since

1970 up to the present, they never received any notice nor heard about
the foreclosure proceeding in spite of the claim of PNB that the foreclosure
proceeding had been duly published in the San Pedro Times, which is not
a newspaper of general circulation.

The RABATs likewise averred that the bid price was grossly
inadequate and unconscionable.

Lastly, the RABATs attacked the validity of the accumulated interest

and penalty charges because since their properties were sold in 1987, and
yet PNB waited until 1992 before filing the case. Consequently, the
RABATs contended that they should not be made to suffer for the interest
and penalty charges from May 1987 up to the present. Otherwise, PNB
would be allowed to profit from its questionable scheme.

The PNB filed on 5 February 1993 its Reply to the Amended Answer
and Answer to Counterclaim.[3]

On June 14, 1994, the Regional Trial Court, Branch 14, in Manila (RTC) rendered
its decision in Civil Case No. 92-61122,[4] disposing thus:

WHEREFORE, and in view of the foregoing considerations, judgment

is hereby rendered dismissing the complaint.

On the counterclaim, the two (2) auction sales of the mortgaged

properties are hereby set aside and ordering the plaintiff to reconvey to
the defendants the remaining properties after the sale [of] sufficient
properties for the satisfaction of the obligation of the defendants.

The parties will bear their respective cost.

So ordered.
 Only PNB appealed to the CA (CA-G.R. CV No. 49800), assigning the following
two errors to the RTC,[5] to wit:

I
WHETHER OR NOT THE TRIAL COURT ERRED IN NULLIFYING THE
SHERIFF'S AUCTION SALE ON THE GROUND THAT THE PNBS
WINNING BID IS VERY LOW.

II
WHETHER OR NOT THE TRIAL COURT ERRED IN RULING THAT THE
DEFENDANTS-APPELLEES ARE NOT LIABLE TO PAY INTEREST AND
PENALTY CHARGES AFTER THE AUCTION SALES UP TO THE FILING
OF THIS CASE.

On their part, the Spouses Rabat simply urged in their appellees brief that the
decision of the RTC be entirely affirmed.[6]

On June 29, 1998, the CA upheld the RTCs decision to nullify the foreclosure
sales but rested its ruling upon a different ground, [7] in that the Spouses Rabat could not
have known of the foreclosure sales because they had not actually received personal
notices about the foreclosure proceedings. The CA concluded:

An examination of the exhibits show that the defendant-appellees

given address is Mati, Davao Oriental and not 197 Wilson Street,
Greenhills, San Juan, Metro Manila as alleged by the plaintiff-appellant
(Exhibit C to J, pp. 208, 217, 220, 229, 236-239, Records). Records
further show that all subsequent communications by plaintiff-appellant was
sent to defendant-appellees address at Wilson Street, Greenhills, San
Juan. This was the very reason why defendant-appellees were not aware
of the foreclosure proceedings.

As correctly found out by the trial court, there is a need for the setting
aside of the two (2) auction sales hence, there is yet no deficiency
judgment to speak of.

WHEREFORE, the decision of the trial court dated 14 June 1994, is

hereby affirmed in toto.

SO ORDERED.

PNB appealed in due course (G.R. No. 134406),[8] positing:

WHETHER OR NOT THE COURT OF APPEALS MAY REVIEW AND

PASS UPON THE TRIAL COURTS FINDING AND CONCLUSION ON AN
 ISSUE WHICH WAS NEVER RAISED ON APPEAL, AND, THEREFORE,
HAD ATTAINED FINALITY.

1. THE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE

ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
WHEN IT DECIDED AND RESOLVED A QUESTION OR ISSUE NOT
RAISED IN PETITIONER PNBS APPEAL;

2. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT REVERSED THE FINDING AND
CONCLUSION OF THE TRIAL COURT ON AN ISSUE WHICH HAD
ALREADY ATTAINED FINALITY.

PNB argued that it had not raised the issue of lack of notice about the foreclosure
sales because the fact that the Spouses Rabat had not appealed the RTCs ruling as
regards the lack of notice but had in fact prayed for the affirmance of the RTCs
judgment had rendered final the RTCs rejection of their allegation of lack of personal
notice; and that, consequently, the CA had committed grave abuse of discretion in still
resolving the issue of lack of notice despite its not having been raised during the appeal.
[9]

On November 15, 2000, the Court promulgated its decision in G.R. No. 134406,
decreeing:

WHEREFORE, the petition is GRANTED. The decision of the Court

of Appeals of 29 July 1998 in CA-G.R. CV No. 49800 is hereby SET
ASIDE. The Court of Appeals is directed to DECIDE, with reasonable
dispatch, CA-G.R. CV No. 49800 on the basis of the errors raised by
petitioner Philippine National Bank in its Appellants Brief.

No pronouncement as to costs.

SO ORDERED.[10]

To conform to the decision in G.R. No. 134406, the CA amended its decision on
January 24, 2003 by resolving the errors specifically assigned by PNB in its appellants
brief.[11] The CA nonetheless affirmed the RTCs decision, declaring that the bid price had
been very low and observing that the mortgaged properties might have been sold for a
higher value had PNB first conducted a reappraisal of the properties.
 Upon PNBs motion for reconsideration, however, the CA promulgated its
questioned second amended decision on March 26, 2003, [12] holding and ruling as
follows:

After a thorough and conscientious review of the records and

relevant laws and jurisprudence, We find the motion for reconsideration to
be meritorious.

While indeed no evidence was presented by appellant as to whether

a reappraisal of the mortgaged properties was conducted by it before
submitting the bid price of 3,874,800.00 at the auction sale, said amount
approximates the loan value under its original appraisal in 1980, which
was 4 million.

There is no dispute that mere inadequacy of 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 such that the mind revolts
at it and such that a reasonable man would neither directly nor indirectly
be likely to consent to it, the sale shall be declared null and void. Said rule,
however, does not strictly apply in the case of extrajudicial foreclosure
sales so that when a supposed unconscionably low price paid by the
bank-mortgagee for the mortgaged properties at the public auction sale is
assailed, the sale is not thereby readily set aside on account of such low
purchase price. It is well-settled that alleged gross inadequacy of price is
not material when the law gives the owner the right to redeem as when a
sale is made at a public auction, upon the theory that the lesser the price
the easier it is for the owner to effect the redemption. In fact, the property
may be sold for less than its fair market value.

Here, it may be that after the lapse of seven (7) years, the mortgaged
properties may have indeed appreciated in value but under the general
rule cited above which had been consistently applied to extrajudicial
foreclosure sales. We are not inclined to invalidate the auction sale of
appellees mortgaged properties solely on the alleged gross inadequacy of
purchase price of 3,874,800.00 which is actually almost the equivalent of
the loan value of appellees twenty-one (21) parcels of land under the Real
Estate Mortgage executed in favor of appellant PNB in 1980. It has been
held that no such disadvantage is suffered by the mortgagor as he stands
to gain with a reduced price because he possesses the right of
redemption. Thus, the re-appraisal of the mortgaged properties resulting in
the appellant PNBs bid price of approximately the original loan value of
their mortgaged properties is beneficial rather than harmful considering
the right of redemption granted to appellees under the law. The claim of
financial hardship or losses in their business is not an excuse for
appellees-mortgagors to evade their clear obligation to the bank-
mortgagee.
 Further, the fact that the mortgaged property is sold at an amount
less than its actual market value should not militate against the right of
appellant PNB to the recovery of the deficiency in the loan obligation of
appellees. Our Supreme Court had ruled in several cases that in
extrajudicial foreclosure of mortgage, where the proceeds of the sale are
insufficient to pay the debt, the mortgagee has the right to recover the
deficiency from the debtor. A claim of deficiency arising from the
extrajudicial foreclosure sale is allowed. As to appellees claim of allegedly
excessive penalty interest charges, the same is without merit. We note
that the promissory notes expressly provide for a penalty charge of 3% per
annum to be imposed on any unpaid amount on due date.

WHEREFORE, premises considered, the present motion for

reconsideration is hereby GRANTED. Consequently, Our Amended
Decision of January 24, 2003 is hereby SET ASIDE and a new one is
hereby entered GRANTING the appeal of plaintiff PNB. The decision
appealed from in Civil Case No. 92-61122 is hereby REVERSED and SET
ASIDE. Judgment is hereby rendered ordering the appellees to pay, jointly
and severally, to appellant PNB: (1) the amount of 14,745,398.25 plus
accrued interest, service charge and penalty charge of 3% per
annum from February 29, 1992 until the same shall have been fully paid;
(2) Ten Percent (10%) of the total amount due as attorneys fees; and (3)
the costs of suit.

No pronouncement as to costs.

SO ORDERED.[13]

The Spouses Rabat thereafter moved for the reconsideration of the second
amended decision, but the CA denied their motion. [14]

Hence, this appeal by the Spouses Rabat.

Issues

The Spouses Rabat frame the following issues for this appeal, thuswise:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN UPHOLDING

THE VALIDITY OF THE SUBJECT AUCTION SALES AND ADJUDGING
PAYMENT OF DEFICIENCY SUM, INTERESTS, PENALTY AND
SERVICE CHARGES AND ATTORNEYS FEES, IN COMPLETE AND
ABSOLUTE DISREGARD OF ITS EARLIER PRONOUNCEMENTS, THE
ARGUMENTS OF HEREIN PETITIONERS AND EVIDENCE BORNE IN
THE RECORDS OF THE INSTANT CASE.
 WHETHER OR NOT THE COURT OF APPEALS ERRED IN DEPARTING
FROM ITS FINDING OF FACTS AND CONCLUSIONS OF LAW AS
STATED IN THE EARLIER RENDERED FIRST AMENDED DECISION
DATED 24 JANUARY 2003.[15]

The Spouses Rabat insist that the CAs reversal of the amended decision was
unjustified. They pray that the amended decision of the CA (which affirmed the RTCs
judgment) be reinstated. They contend that PNB was not entitled to recover any
deficiency due to the invalidity of the forced sales. [16]

In its comment,[17] PNB counters that the petition for review does not raise a valid
question of law; and that the CAs second amended decision was regularly promulgated
because the CA thereby acted well within its right to correct itself considering that the
amended decision did not yet attain finality under the pertinent rules and jurisprudence.

Accordingly, the Court must pass upon and resolve three distinct issues. The first
is whether the inadequacy of the bid price of PNB invalidated the forced sale of the
properties. The second is whether PNB was entitled to recover any deficiency from the
Spouses Rabat. The third is whether the CA validly rendered its second amended
decision.

Ruling

The appeal has no merit.

Anent the first issue, we rule against the Spouses Rabat. We have consistently
held that the inadequacy of the bid price at a forced sale, unlike that in an ordinary sale,
is immaterial and does not nullify the sale; in fact, in a forced sale, a low price is
considered more beneficial to the mortgage debtor because it makes redemption of the
property easier.[18]

In Bank of the Philippine Islands, etc. v. Reyes, [19] the Court discoursed on the
effect of the inadequacy of the price in a forced sale, stating:

Throughout a long line of jurisprudence, we have declared that unlike

in an ordinary sale, inadequacy of the price at a forced sale is immaterial
and does not nullify a sale since, in a forced sale, a low price is more
beneficial to the mortgage debtor for it makes redemption of the property
easier.
 In the early case of The National Loan and Investment Board v.
Meneses, we also had the occasion to state that:

As to the inadequacy of the price of the sale, this court has

repeatedly held that the fact that a property is sold at public
auction for a price lower than its alleged value, is not of itself
sufficient to annul said sale, where there has been strict
compliance with all the requisites marked out by law to
obtain the highest possible price, and where there is no
showing that a better price is obtainable. (Government of the
Philippines vs. De Asis, G. R. No. 45483, April 12, 1939; Guerrero
vs. Guerrero, 57 Phil., 442; La Urbana vs. Belando, 54 Phil.,
930; Bank of the Philippine Islands v . Green, 52 Phil., 491.)
(Emphases supplied.)

In Hulst v. PR Builders, Inc., we further elaborated on this principle:

[G]ross inadequacy of price does not nullify an execution sale.

In an ordinary sale, for reason of equity, a transaction may be
invalidated on the ground of inadequacy of price, or when such
inadequacy shocks ones conscience as to justify the courts to
interfere; such does not follow when the law gives the owner the
right to redeem as when a sale is made at public auction, upon
the theory that the lesser the price, the easier it is for the owner to
effect redemption. When there is a right to redeem,
inadequacy of price should not be material because the
judgment debtor may re-acquire the property or else sell his
right to redeem and thus recover any loss he claims to have
suffered by reason of the price obtained at the execution
sale. Thus, respondent stood to gain rather than be harmed
by the low sale value of the auctioned properties because it
possesses the right of redemption. x x x (Emphasis supplied.)

It bears also to stress that the mode of forced sale utilized by

petitioner was an extrajudicial foreclosure of real estate mortgage which is
governed by Act No. 3135, as amended. An examination of the said law
reveals nothing to the effect that there should be a minimum bid price or
that the winning bid should be equal to the appraised value of the
foreclosed property or to the amount owed by the mortgage debtor. What
is clearly provided, however, is that a mortgage debtor is given the
opportunity to redeem the foreclosed property within the term of one year
from and after the date of sale. In the case at bar, other than the mere
inadequacy of the bid price at the foreclosure sale, respondent did not
allege any irregularity in the foreclosure proceedings nor did she prove
that a better price could be had for her property under the circumstances.
 At any rate, we consider it notable enough that PNBs bid price of 3,874,800.00
might not even be said to be outrageously low as to be shocking to the conscience. As
the CA cogently noted in the second amended decision, [20] that bid price was almost
equal to both the 4,000,000.00 applied for by the Spouses Rabat as loan, and to the
total sum of 3,517,380.00 of their actual availment from PNB.

Resolving the second issue, we rule that PNB had the legal right to recover the
deficiency amount. In Philippine National Bank v. Court of Appeals,[21] we held that:

xxx it is settled that if the proceeds of the sale are insufficient to cover
the debt in an extrajudicial foreclosure of the mortgage, the mortgagee is
entitled to claim the deficiency from the debtor. For when the legislature
intends to deny the right of a creditor to sue for any deficiency resulting
from foreclosure of security given to guarantee an obligation it expressly
provides as in the case of pledges [Civil Code, Art. 2115] and in chattel
mortgages of a thing sold on installment basis [Civil Code, Art. 1484(3)].
Act No. 3135, which governs the extrajudicial foreclosure of mortgages,
while silent as to the mortgagees right to recover, does not, on the other
hand, prohibit recovery of deficiency. Accordingly, it has been held that a
deficiency claim arising from the extrajudicial foreclosure is allowed. [22]

Indeed, as we indicated in Prudential Bank v. Martinez, [23] the fact that the mortgaged
property was sold at an amount less than its actual market value should not militate
against the right to such recovery.[24]

There should be no question that PNB was legally entitled to recover the penalty
charge of 3% per annum and attorneys fees equivalent to 10% of the total amount due.
The documents relating to the loan and the real estate mortgage showed that the
Spouses Rabat had expressly conformed to such additional liabilities; hence, they could
not now insist otherwise. To be sure, the law authorizes the contracting parties to make
any stipulations in their covenants provided the stipulations are not contrary to law,
morals, good customs, public order or public policy.[25] Equally axiomatic are that a
contract is the law between the contracting parties, and that they have the autonomy to
include therein such stipulations, clauses, terms and conditions as they may want to
include.[26] Inasmuch as the Spouses Rabat did not challenge the legitimacy and efficacy
of the additional liabilities being charged by PNB, they could not now bar PNB from
recovering the deficiency representing the additional pecuniary liabilities that the
proceeds of the forced sales did not cover.

Lastly, we uphold the CAs promulgation of the second amended decision. Verily,
all courts of law have the unquestioned power to alter, modify, or set aside their
decisions before they become final and unalterable. [27] A judgment that has attained
finality becomes immutable and unalterable, and may thereafter no longer be
modified in any respecteven if the modification is meant to correct erroneous
conclusions of fact or law and whether it will be made by the court that rendered it or by
the highest court of the land. [28]The reason for the rule of immutability is that if, on the
application of one party, the court could change its judgment to the prejudice of the
other, the court could thereafter, on application of the latter, again change the judgment
and continue this practice indefinitely. [29] The equity of a particular case must yield to the
overmastering need of certainty and unalterability of judicial pronouncements. [30] The
doctrine of immutability and inalterability of a final judgment has a two-fold purpose,
namely: (a) to avoid delay in the administration of justice and, thus, procedurally, to
make orderly the discharge of judicial business; and (b) to put an end to judicial
controversies, at the risk of occasional errors, which is precisely why courts exist.
Indeed, controversies cannot drag on indefinitely; the rights and obligations of every
litigant must not hang in suspense for an indefinite period of time. [31] As such, the
doctrine of immutability is not a mere technicality to be easily brushed aside, but a
matter of public policy as well as a time-honored principle of procedural law.

It is no different herein. The amended decision that favored the Spouses Rabat
would have attained finality only after the lapse of 15 days from notice thereof to the
parties without a motion for reconsideration being timely filed or an appeal being
seasonably taken.[32] Had that happened, the amended decision might have become
final and immutable. However, considering that PNB timely filed its motion for
reconsideration vis--vis the amended decision, the CAs reversal of the amended
decision and its promulgation of the second amended decision were valid and proper.

WHEREFORE, we AFFIRM the SECOND AMENDED DECISION promulgated

on March 26, 2003 in CA-G.R. CV No. 49800 entitled Philippine National Bank v.
Spouses Francisco and Merced Rabat.

The petitioners shall pay the costs of suit.

SO ORDERED.
CUA LAI CHU, CLARO G. CASTRO, G.R. No. 169190
and JUANITA CASTRO,
Petitioners, Present:

CARPIO, J., Chairperson,

- versus - BRION,
DEL CASTILLO,
ABAD, and
HON. HILARIO L. LAQUI, Presiding PEREZ, JJ.
Judge, Regional Trial Court, Branch 218,
Quezon City and PHILIPPINE BANK Promulgated:
OF COMMUNICATION,
Respondents. February 11, 2010

CHU VS LAQUI GR 169190 FEBRUARY 11, 2010

The Case

This is a petition for review[1] of the 29 April 2005 and 4 August 2005
Resolutions[2] of the Court of Appeals in CA-G.R. SP No. 88963. In its 29 April
2005 Resolution, the Court of Appeals dismissed the petition for certiorari [3] of
petitioner spouses Claro G. Castro and Juanita Castro and petitioner Cua Lai Chu
(petitioners). In its 4 August 2005 Resolution, the Court of Appeals denied
petitioners motion for reconsideration.

The Facts

In November 1994, petitioners obtained a loan in the amount of P3,200,000 from

private respondent Philippine Bank of Communication. To secure the loan,
petitioners executed in favor of private respondent a Deed of Real Estate
Mortgage[4] over the property of petitioner spouses covered by Transfer Certificate
of Title No. 22990. In August 1997, petitioners executed an Amendment to the
Deed of Real Estate Mortgage[5] increasing the amount of the loan by P1,800,000,
bringing the total loan amount to P5,000,000.

For failure of petitioners to pay the full amount of the outstanding loan upon
demand,[6] private respondent applied for the extrajudicial foreclosure of the real
estate mortgage.[7]Upon receipt of a notice[8] of the extrajudicial foreclosure sale,
petitioners filed a petition to annul the extrajudicial foreclosure sale with a prayer
for temporary restraining order (TRO). The petition for annulment was filed in the
Regional Trial Court of Quezon City and docketed as Q-02-46184.[9]

The extrajudicial foreclosure sale did not push through as originally scheduled
because the trial court granted petitioners prayer for TRO. The trial court
subsequently lifted the TRO and reset the extrajudicial foreclosure sale on 29 May
2002. At the foreclosure sale, private respondent emerged as the highest bidder. A
certificate of sale[10] was executed on 4 June 2002 in favor of private
respondent. On 7 June 2002, the certificate of sale was annotated as Entry No.
1855[11] on TCT No. 22990 covering the foreclosed property.
After the lapse of the one-year redemption period, private respondent filed in the
Registry of Deeds of Quezon City an affidavit of consolidation to consolidate its
ownership and title to the foreclosed property. Forthwith, on 8 July 2003, the
Register of Deeds cancelled TCT No. 22990 and issued in its stead TCT No.
251835[12] in the name of private respondent.

On 18 August 2004, private respondent applied for the issuance of a writ of

possession of the foreclosed property.[13] Petitioners filed an opposition.[14] The trial
court granted private respondents motion for a declaration of general default and
allowed private respondent to present evidence ex parte. The trial court denied
petitioners notice of appeal.

Undeterred, petitioners filed in the Court of Appeals a petition for certiorari. The
appellate court dismissed the petition. It also denied petitioners motion for
reconsideration.

The Orders of the Trial Court

The 8 October 2004 Order[15] granted private respondents motion for a declaration
of general default and allowed private respondent to present evidence ex parte. The
6 January 2005 Order[16] denied petitioners motion for reconsideration of the prior
order. The 24 February 2005 Order[17] denied petitioners notice of appeal.
 The Ruling of the Court of Appeals

The Court of Appeals dismissed on both procedural and substantive grounds the
petition for certiorari filed by petitioners. The appellate court noted that the counsel
for petitioners failed to indicate in the petition the updated PTR Number, a ground
for outright dismissal of the petition under Bar Matter No. 1132. Ruling on the
merits, the appellate court held that a proceeding for the issuance of a writ of
possession is ex parte in nature. As such, petitioners right to due process was not
violated even if they were not given a chance to file their opposition. The appellate
court also ruled that there was no violation of the rule against forum shopping
since the application for the issuance of a writ of possession is not affected by a
pending case questioning the validity of the extrajudicial foreclosure sale.

The Issue
Petitioners raise the question of whether the writ of possession was properly issued
despite the pendency of a case questioning the validity of the extrajudicial
foreclosure sale and despite the fact that petitioners were declared in default in
the proceeding for the issuance of a writ of possession.

The Courts Ruling

The petition has no merit.

Petitioners contend they were denied due process of law when they were declared
in default despite the fact that they had filed their opposition to private respondents
application for the issuance of a writ of possession. Further, petitioners point out
that the issuance of a writ of possession will deprive them not only of the use and
possession of their property, but also of its ownership. Petitioners cite Bustos v.
Court of Appeals[18] and Vda. De Legaspi v. Avendao[19] in asserting that physical
possession of the property should not be disturbed pending the final determination
of the more substantial issue of ownership. Petitioners also allege forum shopping
on the ground that the application for the issuance of a writ of possession was filed
during the pendency of a case questioning the validity of the extrajudicial
foreclosure sale.
Private respondent, on the other hand, maintains that the application for the
issuance of a writ of possession in a foreclosure proceeding is ex parte in nature.
Hence, petitioners right to due process was not violated even if they were not given
a chance to file their opposition. Private respondent argues that the issuance of a
writ of possession may not be stayed by a pending case questioning the validity of
the extrajudicial foreclosure sale. It contends that the former has no bearing on the
latter; hence, there is no violation of the rule against forum shopping. Private
respondent asserts that there is no judicial determination involved in the issuance
of a writ of possession; thus, the same cannot be the subject of an appeal.

At the outset, we must point out that the authorities relied upon by petitioners are
not in point and have no application here. In Bustos v. Court of Appeals,[20] the
Court simply ruled that the issue of possession was intertwined with the issue of
ownership in the consolidated cases of unlawful detainer and accion
reinvindicatoria. In Vda. De Legaspi v. Avendao,[21] the Court merely stated that in
a case of unlawful detainer, physical possession should not be disturbed pending
the resolution of the issue of ownership. Neither case involved the right to
possession of a purchaser at an extrajudicial foreclosure of a mortgage.

Banco Filipino Savings and Mortgage Bank v. Pardo[22] squarely ruled on the right
to possession of a purchaser at an extrajudicial foreclosure of a mortgage. This case
involved a real estate mortgage as security for a loan obtained from a bank. Upon
the mortgagors default, the bank extrajudicially foreclosed the mortgage. At the
auction sale, the bank was the highest bidder. A certificate of sale was duly issued
and registered. The bank then applied for the issuance of a writ of possession,
which the lower court dismissed. The Court reversed the lower court and held that
the purchaser at the auction sale was entitled to a writ of possession pending the
lapse of the redemption period upon a simple motion and upon the posting of a
bond.

In Navarra v. Court of Appeals,[23] the purchaser at an extrajudicial foreclosure sale

applied for a writ of possession after the lapse of the one-year redemption period.
The Court ruled that the purchaser at an extrajudicial foreclosure sale has a right to
the possession of the property even during the one-year redemption period
provided the purchaser files an indemnity bond. After the lapse of the said period
with no redemption having been made, that right becomes absolute and may be
demanded by the purchaser even without the posting of a bond. Possession may
then be obtained under a writ which may be applied for ex parte pursuant to
Section 7 of Act No. 3135,[24] as amended by Act No. 4118,[25]thus:
 SEC. 7. In any sale made under the provisions of this Act, the
purchaser may petition the Court of First Instance of the province or
place where the property or any part thereof is situated, to give him
possession thereof during the redemption period, furnishing bond in
an amount equivalent to the use of the property for a period of twelve
months, to indemnify the debtor in case it be shown that the sale was
made without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath
and filed in form of an ex parte motion x x x and the court shall,
upon approval of the bond, order that a writ of possession issue,
addressed to the sheriff of the province in which the property is
situated, who shall execute said order immediately. (Emphasis
supplied)

In the present case, the certificate of sale of the foreclosed property was annotated
on TCT No. 22990 on 7 June 2002. The redemption period thus lapsed on 7 June
2003, one year from the registration of the sale. [26] When private respondent applied
for the issuance of a writ of possession on 18 August 2004, the redemption period
had long lapsed.Since the foreclosed property was not redeemed within one year
from the registration of the extrajudicial foreclosure sale, private respondent had
acquired an absolute right, as purchaser, to the writ of possession. It had become
the ministerial duty of the lower court to issue the writ of possession upon mere
motion pursuant to Section 7 of Act No. 3135, as amended.

Moreover, once ownership has been consolidated, the issuance of the writ of
possession becomes a ministerial duty of the court, upon proper application and
proof of title.[27] In the present case, when private respondent applied for the
issuance of a writ of possession, it presented a new transfer certificate of title
issued in its name dated 8 July 2003. The right of private respondent to the
possession of the property was thus founded on its right of ownership. As the
purchaser of the property at the foreclosure sale, in whose name title over the
property was already issued, the right of private respondent over the property had
become absolute, vesting in it the corollary right of possession.
Petitioners are wrong in insisting that they were denied due process of law when
they were declared in default despite the fact that they had filed their opposition to
the issuance of a writ of possession. The application for the issuance of a writ of
possession is in the form of an ex parte motion. It issues as a matter of course once
the requirements are fulfilled. No discretion is left to the court.[28]
Petitioners cannot oppose or appeal the courts order granting the writ of possession
in an ex parte proceeding. The remedy of petitioners is to have the sale set aside
and the writ of possession cancelled in accordance with Section 8 of Act No. 3135,
as amended, to wit:

SEC. 8. The debtor may, in the proceedings in which possession was

requested, but not later than thirty days after the purchaser was given
possession, petition that the sale be set aside and the writ of
possession cancelled, specifying the damages suffered by him,
because the mortgage was not violated or the sale was not made in
accordance with the provisions hereof. x x x

Any question regarding the validity of the extrajudicial foreclosure sale and the
resulting cancellation of the writ may be determined in a subsequent proceeding as
outlined in Section 8 of Act No. 3135, as amended. Such question should not be
raised as a justification for opposing the issuance of a writ of possession since
under Act No. 3135, as amended, the proceeding for this is ex parte.

Further, the right to possession of a purchaser at an extrajudicial foreclosure sale is

not affected by a pending case questioning the validity of the foreclosure
proceeding. The latter is not a bar to the former. Even pending such latter
proceeding, the purchaser at a foreclosure sale is entitled to the possession of the
foreclosed property.[29]

Lastly, we rule that petitioners claim of forum shopping has no basis. Under Act
No. 3135, as amended, a writ of possession is issued ex parte as a matter of course
upon compliance with the requirements. It is not a judgment on the merits that can
amount to res judicata, one of the essential elements in forum shopping.[30]

The Court of Appeals correctly dismissed the petition for certiorari filed by
petitioners for lack of merit.
WHEREFORE, we DENY the petition for review. We AFFIRM the 29 April
2005 and 4 August 2005 Resolutions of the Court of Appeals in CA-G.R. SP No.
88963.

SO ORDERED.
 CUA LAI CHU, CLARO G. CASTRO, and JUANITA CASTRO vs. HON. HILARIO L.
LAQUI G.R. No. 169190 / February 11, 2010 Digest by: Paw The right to
possession of a purchaser at an extrajudicial foreclosure sale is not affected by a
pending case questioning the validity of the foreclosure proceeding. The latter is
not a bar to the former.

FACTS: -November 1994: Philippine Bank of Communication (respondent) loaned

P3,200,000 to the petitioners. To secure the loan, petitioners executed in favor of private
respondent a Deed of Real Estate Mortgage. -August 1997: the mortgage was
amended, and the loan was increased by P1,800,000, making the amount P5,000,000.
For failure of petitioners to pay the full amount of the outstanding loan upon demand,
private respondent applied for the extrajudicial foreclosure of the real estate mortgage.
-TRIAL COURT: Granted respondents motion for a declaration of general default and
allowed them to present evidence ex parte. -COURT OF APPEALS: Petitioners
appealed. However, it was dismissed since the counsel for petitioners failed to indicate
the updated PTR Number in the said petition, which is a ground for outright dismissal
under B.M 1132. The court held that a proceeding for the issuance of a writ of
possession is ex parte in nature.

ISSUES: - Whether the writ of possession was properly issued despite the pendency of
a case questioning the validity of the extrajudicial foreclosure sale even when
petitioners were declared in default.

HELD/REASON: -The Supreme Court held that since the private respondent had
purchased the property at the foreclosure sale, their right over the said property became
absolute, vesting in it the corollary right of possession. -Petitioners cannot oppose or
appeal the courts order granting the writ of possession in an ex parte proceeding. The
remedy of petitioners is to have the sale set aside and the writ of possession cancelled
in accordance with Section 8 of Act No. 3135, as amended: SEC. 8. The debtor may, in
the proceedings in which possession was requested, but not later than thirty days after
the purchaser was given possession, petition that the sale be set aside and the writ of
possession cancelled, specifying the damages suffered by him, because the mortgage
was not violated or the sale was not made in accordance with the provisions hereof.
-PETITION DISMISSED
SPOUSES FRANCISCO and MERCED RABAT v. PNB G.R. No. 158755
June 18, 2012 TOPIC: Extrajudicial Foreclosure Conduct of Sale
PONENTE: BERSAMIN, J.
FACTS:

1. Parties are before the court a second time. First case: PNB v. Rabat, decided in Nov.
15, 2000, G.R. Np. 134406. Facts are based on above mentioned case.

2. Aug. 25, 1979: Spouses Rabat (RABATS) applied, and were granted a loan by PNB
on 01/14/80, a medium term loan of Php4M, to mature in 3 years.

3. January 28, 1980: (1) RABATS signed a credit agreement; (2) executed a real estate
mortgage over 12 parcels of land.

4. Loan stipulation states interest = 17% per year, plus service charge, and penalty of
3% on amount unpaid or not renewed when due.

5. September 25, 1980: RABATS executed an Amendment of the Credit Agreement to

increase interest rate from 17 to 21%. Also executed another real estate mortgage on 9
parcels of land located in Davao Oriental (agricultura, commercial, and residential) as
additiona security for their Php4M loan.

6. Loans of RABATS reached total amount of Php3,517,380, due 3/14/83, evidenced by

several PNs.

7. RABATS failed to pay their outstanding balance when it became due.

8. July 24, 1986: PNB responded with a denial to request of RABAT for extension of
time for settlement. PNB have a deadline of until 4/30/86 for settlement, which they sent
to address at Wilson St, San Juan, MM.

9. PNB filed for extrajudicial foreclosure of mortgage executed by RABATS.

10. Parcels of land were sold at Public auction, with PNB as highest bidder at
Php3,874,800.

11. Proceeds were inadequate to satisfy entire obligation, so PNB sent additional
demand letters to RABAT (2 at Wilson, San Juan on 11/15/90, and 8/30/91, and another
at Davao Oriental)

12. PNB filed with RTC of Manila a complaint for a sum of money, due to failure by
RABATS to settle obligation which had already amounted to Php14,745,398.25 (with
interest, penalties, and other charges).
13. RABATS: (1) admitted loan availments and default in payment, but (2) assailed
validity of the auction sales, for want of notice to them before and after the foreclosure
sales.

14. RABATS also claim: (1) They have been residents of Mati, Davao Oriental since
1970-present; (2) received nor heard about the foreclosure proceedings, in spite of
PNBs claim of publication in San Pedro Times; (3) Latter is not a newspaper of general
circulation; (4) bid price was grossly inadequate and unconscionable; (5) accumulated
interest and penalty charges were invalid because properties were sold in 87, but PNB
waited till 92 to file the case. Therefore, they should not be made to suffer payment of
interest and penalty charges from May 87 to present, because such would allow PNB to
profit from its questionable scheme

15. RTC dismissed the complaint; Auction sales of the properties were set aside, and
PNB was ordered to reconvey to RABATS the remaining properties after sufficient sale
of properties to satisfy the obligation.

16. PNB appealed to CA, which upheld RTCs decision for nullification of foreclosure
sales.

17. PNB appealed to SC (G.R. No. 134406). SC granted petition. Case was remanded
to CA to DECIDE on the basis of the errors raised by petitioner PNB in its brief. CA
amended its decision, resolving errors assigned by PNB, but still affirmed RTC decision.
On MR, however, CA found for PNB.

18. RABATS moved for reconsideration, but was denied, hence appeal by them to SC.

ISSUE:

(1) W/N the inadequacy of PNBs bid price renders the forced sale of the properties
invalid;

(2) W/N PNB was entitled to recover any deficiency from the RABATS.

HELD:

(1) NO; SC ruled against spouses Rabat. Auction bid was valid. (2) YES; PNB is entitled
to recover from the RABATS.

RATIO: 1. The mode of forced sale utilized by petitioner was an extrajudicial

foreclosure of real estate mortgage which is governed by Act No. 3135, as amended.
Law reveals nothing to the effect that there should be a minimum bid price or that the
winning bid should be equal to the appraised value of the foreclosed property or to the
amount owed by the mortgage debtor. What is clearly provided is that a mortgage
debtor is given the opportunity to redeem the foreclosed property "within the term of one
year from and after the date of sale." In the case at bar, other than the mere inadequacy
of the bid price at the foreclosure sale, respondent did not allege any irregularity in the
foreclosure proceedings nor did she prove that a better price could be had for her
property under the circumstances. 2.PNBs bid price of P 3,874,800.00 not outrageously
low as to be shocking to the conscience. Bid price was almost equal to both the P 4M
applied for by RABATS, to the total sum of P 3,517,380.00 of their actual availment from
PNB. 3.In Bank of the Philippine Islands, etc. v. Reyes: unlike in an ordinary sale,
inadequacy of the price at a forced sale is immaterial and does not nullify a sale since,
in a forced sale, a low price is more beneficial to the mortgage debtor for it makes
redemption of the property easier. 4.Hulst v. PR Builders: *G+ross inadequacy of price
does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction
may be invalidated on the ground of inadequacy of price, or when such inadequacy
shocks ones conscience as to justify the courts to interfere; such does not follow when
the law gives the owner the right to redeem as when a sale is made at public auction,
upon the theory that the lesser the price, the easier it is for the owner to effect
redemption. When there is a right to redeem, inadequacy of price should not be material
because the judgment debtor may re-acquire the property or else sell his right to
redeem and thus recover any loss he claims to have suffered by reason of the price
obtained at the execution sale. Thus, respondent stood to gain rather than be harmed
by the low sale value of the auctioned properties because it possesses the right of
redemption. x x x

SECOND ISSUE:

1.PNB was legally entitled to recover the penalty charge of 3% per annum and
attorneys fees equivalent to 10% of the total amount due. The documents relating to the
loan and the real estate mortgage showed that the Spouses Rabat had expressly
conformed to such additional liabilities; hence, they could not now insist otherwise. To
be sure, the law authorizes the contracting parties to make any stipulations in their
covenants provided the stipulations are not contrary to law, morals, good customs,
public order or public policy. Equally axiomatic are that a contract is the law between the
contracting parties, and that they have the autonomy to include therein such
stipulations, clauses, terms and conditions as they may want to include. 2. Inasmuch as
the Spouses Rabat did not challenge the legitimacy and efficacy of the additional
liabilities being charged by PNB, they could not now bar PNB from recovering the
deficiency representing the additional pecuniary liabilities that the proceeds of the
forced sales did not cover. 3.Prudential Bank v. Martinez,23 the fact that the mortgaged
property was sold at an amount less than its actual market value should not militate
against the right to such recovery.

CASE LAW/ DOCTRINE: Inadequacy of the bid price at a forced sale, unlike that in an
ordinary sale, is immaterial and does not nullify the sale; in fact, in a forced sale, a low
price is considered more beneficial to the mortgage debtor because it makes
redemption of the property easier.

The inadequacy of the bid price in an extrajudicial foreclosure sale of mortgaged

properties will not per se invalidate the sale. Additionally, the foreclosing mortgagee is
not precluded from recovering the deficiency should the proceeds of the sale be
insufficient to cover the entire debt.