Lanuza vs.

de Leon, 20 SCRA 369

Rodolfo Lanuza and his wife Belen were the owners of a two-story house built on a lot of the Maria
Guizon Subdivision in Tondo, Manila, which the spouses leased from the Consolidated Asiatic Co. On
January 12, 1961, Lanuza executed a document entitled "Deed of Sale with Right to Repurchase"
whereby he conveyed to Maria Bautista Vda. de Reyes and Aurelia R. Navarro the house, together with
the leasehold rights to the lot, a television set and a refrigerator in consideration of the sum of P3,000.
The deed reads:

DEED OF SALE WITH RIGHT TO REPURCHASE KNOW ALL MEN BY THESE

PRESENTS:

That I, RODOLFO LANUZA, Filipino, of legal age, married to Belen Geronimo, and
residing at 783-D Interior 14 Maria Guizon, Gagalangin, Tondo, Manila, hereby declare
that I am the true and absolute owner of a new two storey house of strong materials,
constructed on a rented lot Lot No. 12 of the Maria Guizon Subdivision, owned by the
Consolidated Asiatic Co. as evidenced by the attached Receipt No. 292, and the plan
of the subdivision, owned by said company.

That for and in consideration of the sum of THREE THOUSAND PESOS (P3,000.00)
which I have received this day from Mrs. Maria Bautista Vda. de Reyes, Filipino, of legal
age, widow; and Aurelia Reyes, married to Jose S. Navarro, Filipinos, of legal ages, and
residing at 1112 Antipolo St., Tondo, Manila, I hereby SELL, CEDE, TRANSFER, AND
CONVEY unto said Maria Bautista Vda. de Reyes, her heirs, succesors, administrators
and assigns said house, including my right to the lot on which it was constructed, and also
my television, and frigidaire "Kelvinator" of nine cubic feet in size, under the following
conditions:

I hereby reserve for myself, my heirs, successors, administrators, and assigns the right to
repurchase the above mentioned properties for the same amount of P3,000.00, without
interest, within the stipulated period of three (3) months from the date hereof. If I fail to
pay said amount of P3,000.00, within the stipulated period of three months, my right to
repurchase the said properties shall be forfeited and the ownership thereto shall
automatically pass to Mrs. Maria Bautista Vda. de Reyes, her heirs, successors,
administrators, and assigns, without any Court intervention, and they can take possession
of the same.1wph1.t

IN WITNESS WHEREOF, we have signed this contract in the City of Manila, this 12th
day of January, 1961.

s/t RODOLFO s/t MARIA BAUTISTA VDA. DE

LANUZA REYES
Vendor Vendee

s/t AURELIA REYES WITH MY MARITAL CONSENT:

Vendee s/t JOSE S. NAVARRO
When the original period of redemption expired, the parties extended it to July 12, 1961 by an
annotation to this effect on the left margin of the instrument. Lanuza's wife, who did not sign the deed,
this time signed her name below the annotation.

It appears that after the execution of this instrument, Lanuza and his wife mortgaged the same house in
favor of Martin de Leon to secure the payment of P2,720 within one year. This mortgage was executed
on October 4, 1961 and recorded in the Office of the Register of Deeds of Manila on November 8, 1961
under the provisions of Act No. 3344.

As the Lanuzas failed to pay their obligation, De Leon filed in the sheriff's office on October 5, 1962 a
petition for the extra-judicial foreclosure of the mortgage. On the other hand, Reyes and Navarro
followed suit by filing in the Court of First Instance of Manila a petition for the consolidation of
ownership of the house on the ground that the period of redemption expired on July 12, 1961 without the
vendees exercising their right of repurchase. The petition for consolidation of ownership was filed on
October 19. On October 23, the house was sold to De Leon as the only bidder at the sheriffs sale. De
Leon immediately took possession of the house, secured a discharge of the mortgage on the house in
favor of a rural bank by paying P2,000 and, on October 29, intervened in court and asked for the
dismissal of the petition filed by Reyes and Navarro on the ground that the unrecorded pacto de
retro sale could not affect his rights as a third party.

The parties1 thereafter entered into a stipulation of facts on which this opinion is mainly based and
submitted the case for decision. In confirming the ownership of Reyes and Navarro in the house and the
leasehold right to the lot, the court said:

It is true that the original deed of sale with pacto de retro, dated January 12, 1961, was not
signed by Belen Geronimo-Lanuza, wife of the vendor a retro, Rodolfo Lanuza, at the time of its
execution. It appears, however, that on the occasion of the extension of the period for repurchase
to July 12, 1961, Belen Geronimo-Lanuza signed giving her approval and conformity. This act,
in effect, constitutes ratification or confirmation of the contract (Annex "A" Stipulation) by
Belen Geronimo-Lanuza, which ratification validated the act of Rodolfo Lanuza from the
moment of the execution of the said contract. In short, such ratification had the effect of purging
the contract (Annex "A" Stipulation) of any defect which it might have had from the moment of
its execution. (Article 1396, New Civil Code of the Philippines; Tang Ah Chan and Kwong
Koon vs. Gonzales, 52 Phil. 180)

Again, it is to be noted that while it is true that the original contract of sale with right to
repurchase in favor of the petitioners (Annex "A" Stipulation) was not signed by Belen
Geronimo-Lanuza, such failure to sign, to the mind of the Court, made the contract merely
voidable, if at all, and, therefore, susceptible of ratification. Hence, the subsequent ratification of
the said contract by Belen Geronimo-Lanuza validated the said contract even before the property
in question was mortgaged in favor of the intervenor.

It is also contended by the intervenor that the contract of sale with right to repurchase should be
interpreted as a mere equitable mortgage. Consequently, it is argued that the same cannot form
the basis for a judicial petition for consolidation of title over the property in litigation. This
argument is based on the fact that the vendors a retro continued in possession of the property
after the execution of the deed of sale with pacto de retro. The mere fact, however, that the
vendors a retro continued in the possession of the property in question cannot justify an outright
declaration that the sale should be construed as an equitable mortgage and not a sale with right to
repurchase. The terms of the deed of sale with right to repurchase (Annex "A" Stipulation) relied
upon by the petitioners must be considered as merely an equitable mortgage for the reason that
after the expiration of the period of repurchase of three months from January 12, 1961.

Article 1602 of the New Civil Code provides:

"ART. 1602. The contract shall be presumed to be in equitable mortgage, in any of the
following cases;

xxx xxx xxx

"(3) When upon or after the expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed.

xxx xxx xxx

In the present case, it appears, however, that no other instrument was executed between the
parties extending the period of redemption. What was done was simply to annotate on the deed
of sale with right to repurchase (Annex "A" Stipulation) that "the period to repurchase, extended
as requested until July 12, 1961." Needless to say, the purchasers a retro, in the exercise of their
freedom to make contracts, have the power to extend the period of repurchase. Such extension is
valid and effective as it is not contrary to any provision of law. (Umale vs. Fernandez, 28 Phil.
89, 93)

The deed of sale with right to repurchase (Annex "A" Stipulation) is embodied in a public
document. Consequently, the same is sufficient for the purpose of transferring the rights of the
vendors a retro over the property in question in favor of the petitioners. It is to be noted that the
deed of sale with right to repurchase (Annex "A" Stipulation) was executed on January 12, 1961,
which was very much ahead in point of time to the execution of the real estate mortgage on
October 4, 1961, in favor of intervenor (Annex "B" Stipulation). It is obvious, therefore, that
when the mortgagors, Rodolfo Lanuza and Belen Geronimo Lanuza, executed the real estate
mortgage in favor of the intervenor, they were no longer the absolute owners of the property
since the same had already been sold a retro to the petitioners. The spouses Lanuza, therefore,
could no longer constitute a valid mortgage over the property inasmuch as they did not have any
free disposition of the property mortgaged. (Article 2085, New Civil Code.) For a valid mortgage
to exist, ownership of the property mortgaged is an essential requisite. A mortgage executed by
one who is not the owner of the property mortgaged is without legal existence and the
registration cannot validate. (Philippine National Bank vs. Rocha, 55 Phil. 497).

The intervenor invokes the provisions of article 1544 of the New Civil Code for the reason that
while the real estate mortgage in his favor (Annex "B" Stipulation) has been registered with the
Register of Deeds of Manila under the provisions of Act No. 3344 on November 3, 1961, the
deed of sale with right to repurchase (Annex "A" Stipulation) however, has not been duly
registered. Article 1544 of the New Civil Code, however, refers to the sale of the same property
to two or more vendees. This provision of law, therefore, is not applicable to the present case
which does not involve sale of the same property to two or more vendees. Furthermore, the mere
registration of the property mortgaged in favor of the intervenor under Act No. 3344 does not
prejudice the interests of the petitioners who have a better right over the property in question
 under the old principle of first in time, better in right. (Gallardo vs. Gallardo, C.B., 46 O.G.
5568)

De Leon appealed directly to this Court, contending (1) that the sale in question is not only voidable but
void ab initio for having been made by Lanuza without the consent of his wife; (2) that the pacto de
retro sale is in reality an equitable mortgage and therefore can not be the basis of a petition for
consolidation of ownership; and (3) that at any rate the sale, being unrecorded, cannot affect third
parties.

We are in accord with the trial court's ruling that a conveyance of real property of the conjugal
partnership made by the husband without the consent of his wife is merely voidable. This is clear from
article 173 of the Civil Code which gives the wife ten years within which to bring an action for
annulment. As such it can be ratified as Lanuza's wife in effect did in this case when she gave her
conformity to the extension of the period of redemption by signing the annotation on the margin of the
deed. We may add that actions for the annulment of voidable contracts can be brought only by those
who are bound under it, either principally or subsidiarily (art. 1397), so that if there was anyone who
could have questioned the sale on this ground it was Lanuza's wife alone.

We also agree with the lower court that between an unrecorded sale of a prior date and a recorded
mortgage of a later date the former is preferred to the latter for the reason that if the original owner had
parted with his ownership of the thing sold then he no longer had the ownership and free disposal of that
thing so as to be able to mortgage it again. Registration of the mortgage under Act No. 3344 would, in
such case, be of no moment since it is understood to be without prejudice to the better right of third
parties.2 Nor would it avail the mortgagee any to assert that he is in actual possession of the property for
the execution of the conveyance in a public instrument earlier was equivalent to the delivery of the thing
sold to the vendee.3

But there is one aspect of this case which leads us to a different conclusion. It is a point which neither
the parties nor the trial court appear to have sufficiently considered. We refer to the nature of the so-
called "Deed of Sale with Right to Repurchase" and the claim that it is in reality an equitable mortgage.
While De Leon raised the question below and again in this Court in his second assignment of error, he
has not demonstrated his point; neither has he pursued the logical implication of his argument beyond
stating that a petition for consolidation of ownership is an inappropriate remedy to enforce a mortgage.

De Leon based his claim that the pacto de retro sale is actually an equitable mortgage on the fact that,
first, the supposed vendors (the Lanuzas) remained in possession of the thing sold and, second, when the
three-month period of redemption expired the parties extended it. These are circumstances which indeed
indicate an equitable mortgage.4 But their relevance emerges only when they are seen in the perspective
of other circumstances which indubitably show that what was intended was a mortgage and not a
sale.These circumstances are:

1. The gross inadequacy of the price. In the discussion in the briefs of the parties as well as in the
decision of the trial court, the fact has not been mentioned that for the price of P3,000, the supposed
vendors "sold" not only their house, which they described as new and as being made of strong materials
and which alone had an assessed value of P4,000, but also their leasehold right television set and
refrigerator, "Kelvinator of nine cubic feet in size." indeed, the petition for consolidation of ownership is
limited to the house and the leasehold right, while the stipulation of facts of the parties merely referred
to the object of the sale as "the property in question." The failure to highlight this point, that is, the gross
inadequacy of the price paid, accounts for the error in determining the true agreement of the parties to
the deed.

2. The non-transmission of ownership to the vendees. The Lanuzas, the supposed vendors did not really
transfer their ownership of the properties in question to Reyes and Navarro. What was agreed was that
ownership of the things supposedly sold would vest in the vendees only if the vendors failed to pay
P3,000. In fact the emphasis is on the vendors payment of the amount rather than on the redemption of
the things supposedly sold. Thus, the deed recites that

If I (Lanuza) fail to pay said amount of P3,000.00 within the stipulated period of three months,
my right to repurchase the said properties shall be forfeited and the ownership thereto
automatically pass to Mrs. Maria Bautista Vda. de Reyes . . . without any Court intervention and
they can take possession of the same.

This stipulation is contrary to the nature of a true pacto de retro sale under which a vendee acquires
ownership of the thing sold immediately upon execution of the sale, subject only to the vendor's right of
redemption.5 Indeed, what the parties established by this stipulation is an odious pactum
commissorium which enables the mortgages to acquire ownership of the mortgaged properties without
need of foreclosure proceedings. Needless to say, such a stipulation is a nullity, being contrary to the
provisions of article 2088 of the Civil Code.6 Its insertion in the contract of the parties is an avowal of an
intention to mortgage rather than to sell.7

3. The delay in the filing of the petition for consolidation. Still another point obviously overlooked in the
consideration of this case is the fact that the period of redemption expired on July 12, 1961 and yet this
action was not brought until October 19, 1962 and only after De Leon had asked on October 5, 1962 for
the extra-judicial for closure of his mortgage. All the while, the Lanuzas remained in possession of the
properties they were supposed to have sold and they remained in possession even long after they had
lost their right of redemption.

Under these circumstances we cannot but conclude that the deed in question is in reality a mortgage.
This conclusion is of far-reaching consequence because it means not only that this action for
consolidation of ownership is improper, as De Leon claims, but, what is more that between the
unrecorded deed of Reyes and Navarro which we hold to be an equitable mortgage, and the registered
mortgage of De Leon, the latter must be preferred. Preference of mortgage credits is determined by the
priority of registration of the mortgages,8 following the maxim "Prior tempore potior jure" (He who is
first in time is preferred in right.)9 Under article 2125 of the Civil Code, the equitable mortgage, while
valid between Reyes and Navarro, on the one hand, and the Lanuzas, on the other, as the immediate
parties thereto, cannot prevail over the registered mortgage of De Leon.

Wherefore, the decision appealed from is reversed, hence, the petition for consolidation is dismissed.
Costs against Reyes and Navarro.

Bundalian vs. CA, 129 SCRA 645

This is a petition for review of the decision of the Court of Appeals, now Intermediate Appellate Court,
affirming a judgment of the then Court of First Instance of Rizal dismissing the petition for declaratory
relief and/or reformation of instrument filed by the petitioners against the respondents and ordering the
petitioners to pay jointly and severally the amounts of P200,000.00 for respondent Edna Camcam and
P50,000.00 for respondent Littawa, as moral damages; the amount of P50,000.00 for both respondents
as exemplary damages; the amount of P30,000.00 for and as attorney's fees, and to pay the costs of the
suit.

On July 1, 1975, the petitioners purchased from the Estate of the Deceased Agapita Sarao Vda. de Virata
three (3) contiguous parcels of land located at San Juan, Rizal, containing an aggregate area of 3,328
square meters, more or less, for and in consideration of the amount of P499,200.00.

The following day, July 2, 1975, the petitioners, in a contract denominated as Deed of Sale with Right to
Repurchase, sold to the private respondents the same three contiguous parcels of land for the same
amount of P499,200.00 under specified terms and conditions. One of the terms and conditions was that
the repurchase price would escalate month after month, depending on when repurchase would be
effected. The price would be P532,480.66 computed at P160.00 per square meter after the first month;
P565,760.00 computed at P170.00 per square meter after the second month; P599,040.00 computed at
P180.00 per square meter after the third month; and P632,320.00 computed at P190.00 per square meter
after the fourth month, from and after the date of the instrument. It was also stipulated in the same
contract that the vendor shall have the right to possess, use, and build on, the property during the period
pending redemption.

On August 26, 1976, the petitioners filed a petition for declaratory relief and/or reformation of
instrument before the Court of First Instance of Rizal at Pasig, Metro Manila to declare the Deed of Sale
with Right to Repurchase an equitable mortgage and the entire portion of the same deed referring to the
accelerating repurchase price null and void for being usurious, and to reduce the loan obligation to
P474,200.00, contending that the amount actually loaned was only P474,200.00 and the petitioners put
up P25,000.00 of the wife's money when the purchase from the estate of Mrs. Virata was consummated.

On August 27, 1976, the private respondents, in turn, filed a petition for the consolidation of ownership
on the ground that "more than a year has elapsed since the execution of the Deed of Sale with Right to
Repurchase by the vendor on July 2, 1975." The private respondents contended that "notwithstanding
which the vendor has failed to avail of its rights under the provisions of Article 1607 in relation to
Article 1616 of the New Civil Code, the vendor has lost all his rights to avail himself of the right to
consolidate ownership of the property subject of the Deed of Sale." To this petition for consolidation of
ownership, the petitioners filed their opposition upon the following grounds: (a) there is a pending suit
between the same parties involving the same cause and subject matter; (b) consolidation will be
improper considering that the basic document upon which it is being sought is in fact and in law only an
equitable mortgage; and (c) consolidation cannot be effected thru the instant petition. Accordingly, the
Court of First Instance of Rizal ordered the transfer of the petition for consolidation of ownership to
Branch XXIV of the same Court where the petition for declaratory relief and/or reformation of
instrument was pending in order that the two cases may be considered together.

A supplemental petition was subsequently filed by the petitioners alleging that the private respondents'
petition for consolidation of ownership was made in order to frustrate and render nugatory whatever
orders or judgment may be issued by the trial court in the petition for declaration relief/or reformation of
instrument.

After the trial and presentation of the parties' respective memoranda the trial court rendered the decision
in favor of the private respondents.
The petitioners appealed to the Court of Appeals. The appellate court affirmed in toto the decision of the
trial court. Two motions for reconsideration having been denied, the petitioners filed the present petition
based on the following grounds:

A.

RESPONDENT COURT OF APPEALS ERRED GRAVELY, TO THE EXTENT OF

GRAVE ABUSE OF DISCRETION, AND IN VIOLATION OF PETITIONERS'
RIGHT TO DUE PROCESS OF LAW AT APPELLATE LEVEL, WHEN IT
AFFIRMED THE APPEALED DECISION WITHOUT ANY DISCUSSION OF THE
QUESTIONS RAISED IN THE APPEAL AND BY SIMPLY ADOPTING THE
POSITION OF THE TRIAL WHICH IS PRECISELY QUESTIONED IN THE
APPEAL.

B.

RESPONDENT COURT OF APPEAL ERRED GRAVELY TO THE EXTENT OF

GRAVE ABUSE OF DISCRETION IN ADOPTING TOTALLY AND
UNCRITICALLY THE GROSSLY ERRONEOUS REASON AND POSITION OF THE
TRIAL COURT.

C.

RESPONDENT COURT OF APPEALS ERRED GRAVELY TO THE EXTENT OF

GRAVE ABUSE OF DISCRETION, IN UNCERMONIOUSLY, DENYING
PETITIONERS' FIRST MOTION FOR RECONSIDERATION, MOTION FOR ORAL
ARGUMENT, MOTION TO INVITE AMICUS CURIAE, AND SECOND MOTION
FOR RECONSIDERATION.

E.

RESPONDENT COURT OF APPEALS ERRED GRAVELY TO THE EXTENT OF

GRVE ABUSE OF DISCREATION, IN NOT REVERSING THE APPEALED
JUDGMENT AND GRANTING THE PRAYERS OF PETITIONERS-APPELLANTS,
FOREMOST OF WHICH IS TO DECLARE THE DEED OF SALE WITH RIGHT TO
REPURCHASE TO BE AN EQUITABLE MORTGAGE.

Tell issue is this case is whether or not the deed of sale with right to repurchase should be declared as an
equitable mortgage.

We find meritorious the petitioners' contention that under Article 1602 of the Civil Code the deed of sale
with right to repurchase should be presumed to be an equitable mortgage due to the following reasons.

(1) The contracts involving the subject properties came one after another in the space of
two (2) days. The Deed of Absolute Sale between petitioner Jose R. Bundalian as vendee
and Romeo S. Geluz, in his capacity as Administratorf of the Estate of the deceased
Agapita Sarao Vda. de Virata, as vendor, was executed on July 1, 1975 (pp. 19-26,
Annex "A"). The purported Deed of Sale with Right to Repurchase between petitioner,
Jose R. Bundalian as vendor and respondents Juanito Littawa and Edna Camcam as
vendees was executed on July 2, 1975 (pp. 26- 32, Annex "A").lwphl@it This already
indicates, at a very early stage, that the two transactions must be intimately related.

(2) Such intimate relation between the aforementioned Deed of Absolute Sale and Deed
of Sale with Right to Repurchase is already clear in the statement in the latter instrument
that the subject property had just been purchased by Jose R. Bundalian from the estate of
the deceased Agapita Sarao Vda. de Virata, 'with funds loaned to him by the herein
VENDEES' the latter being no other than respondents Littawa and Camcam (p. 28,
Annex "A"). Patently, petitioner Jose R. Bundalian was funded by private respondents to
enable him to purchase the property from the said estate.

(3) Having just purchased the property from the estate by way of Deed of Absolute Sale
on July 1, 1975, for which he had just paid P499,200.00 as purchase price, it would have
been utterly senseless for petitioner Jose R. Bundalian to sell the same property to private
respondents the very next day, July 2, 1975, with or without the right of repurchase. No
other conclusion is possible except that the Deed of Sale with Right to Repurchase is
precisely the security the equitable mortgage to petitioner Jose R. Bundalian to enable
the latter to purchase the property from the aforementioned estate.

(4) It would have been more senseless for petitioner Jose R. Bundalian to sell the
property to private respondents at the same price of P499,200.00 he had paid the estate of
the deceased Agapita Sarao Vda. de Virata, without profit and at a sure loss. By the terms
of the Deed of Sale with Right to Repurchase he would have to repurchase the property at
a continually increasing price, from Pl 50.00 per square meter to P190.00 per square
meter, that is, up to P133,120.00 over and above the original price of P499,200.00, in
only four (4) months. Again, no other conclusion is possible but that the contract is an
equitable mortgage, not a sale.

(5) It is provided in the Deed of Sale with Right to Repurchase that 'It is agreed that the
vendor (Jose R. Bundalian) shall have the right to possess, use, and build on, the property
during the period of redemption' (p. 30, Annex "A"). It has been held that there is a 'loan
with security' rather than a pacto de retro sale where by agreement the vendor was to
remain in possession of the lands (Escoto vs. Arcilla, 89 Phil. 199, 204). Where there was
an acknowledgment of the vendor's right to retain possession of the property, as in the
case at bar, the contract was one of "loan guaranteed by a mortgage" rather than a
conditional sale (Macoy vs. Trinidad, 95 Phil. 192, 202). Indeed, there can be no question
that petitioner Jose R. Bundalian remained legally in possession of the subject property.
Again, the conclusion is ineluctable that the Deed of Sale with Right to Repurchase was
executed as security for the loan extended by private respondents to petitioner Jose R.
Bundalian, i.e., as equitable mortgage.

(6) The increase per month in the alleged redemption price is very compatible with the
Idea that the transaction was really intended by the parties to be a mortgage. It bears
emphasis, at this juncture, that the supposed repurchase price is in the same amount as the
original "price" of P499,200.00 should "repurchase" be effected during the first
month from and after the date of the instrument; P532,480.00 computed at P160.00 per
square meter should "repurchase" be effected after the first month; P565,760.00
computed at P170.00 per square meter should "repurchase" be after the second month;
P599,040.00 computed at P180.00 per square meter should "repurchase" be after the third
month; or P632,320.00 computed at P190.00 per square meter should "repurchase" be
effected even "after the fourth month" (pp. 29-30, Annex "A"). The monthly increases in
the alleged "redemption price"clearly represent nothing but interest. It is well-settled that
provision for interest payments is a clear indication that the supposed sale is actually an
equitable mortgage (Macoy vs. Trinidad, 95 Phil. 192, 202; Escoto vs. Arcilla, 89 Phil.
199, 204). This would fall under the legal situation "where it may be fairly inferred that
the real intention of the parties is that the transaction shall secure the payment of a debt or
the performance of any other obligation" (No. 6), Art. 1062, Civil Code). To make
matters worse, the monthly increase in the supposed "redemption price", meaning the
interest of course, are clearly usurious, precisely one of the evils sought to be negated by
the provisions of Articles 1602, 1603 and 1604 of the Civil Code, as noted previously
herein.

(7) While the Deed of Sale with Right to Repurchase supposedly provided for a
"redemption" period of "four (4) months from and after the date of this instrument" (p.
29, Annex "A"), it later necessarily provided for a built-in extension of the period of
'redemption' by providing for payment of the amount of P632,320.00 computed at
P190.00 per square meter should "repurchase" be effected "after the fourth month" (p. 30,
Annex "A"). In other words, it was implicitly agreed that the period of 'repurchase' was
not limited to 4 months from and after the date of execution of the instrument, in as much
as said "repurchase" could be effected even "after the fourth month". It is well settled
that extension of the period of "redemption" is indicative of equitable mortgage (Nos.(3)
and (6), Art. 1602, Civil Code; Reyes vs. De Leon, 20 SCRA 369, 370).lwphl@it

(8) It may be argued, as private respondents have argued, that normally a loan does not
exceed 60% of the price of the land given as security, so that private respondents could
not have loaned P499,200.00 on the land the value of which was claimed to be also
P499,200.00. However, such reasoning is clearly unsound. It loses sight of the fact that
private respondents precisely funded or financed petitioner Jose R. Bundalian's
acquisition of the property from the estate of the deceased Agapita Sarao Vda. de Virata.
In other words, petitioner Jose R. Bundalian could not have acquired the land to serve as
security for the repayment of the loan unless private respondents had extended the loan in
the first place. Surely, private respondents stood to benefit enormously from such
financing transaction in view of the patently usurious monthly interests transparently
disguised as the accelerating or increasing monthly 'repurchase' price. At any rate, in the
event that petitioner Jose R. Bundalian ultimately failed to pay the loan, the rapid
increase in the price of the land, which was estimated to be worth at least P632,320.00
after 4 months (from the initial P499,200.00), practically guaranteed a very good return
on the money investment of private respondents as money- lenders.

(9) It cannot be questioned that petitioner Jose R. Bundalian paid taxes on the land, even
after the supposed 4 month period of "redemption". Payment of taxes after expiration of
the supposed "redemption" period has been considered as indicative of equitable
mortgage (Escoto vs. Arcilla, supra).

(10) It is an admitted fact that private respondents took some time before filing their
petition for consolidation of ownership. Private respondents admitted in said petition that
"more than a year has elapsed since the execution of the Deed of Sale with Right to
Repurchase" (p. 34, par. 3, Annex "A"). Reckoning 4 months from July 2, 1975, it would
 appear that the "repurchase" period expired supposedly on November 2, 1975. As private
respondents filed their petition for consolidation on August 27, 1976, it is clear that
they delayed filing said petition by more than 9 months. A similar delay in the filing of
the supposed "vendee's" petition for consolidation was considered as indicative of
equitable mortgage (Reyes vs. de Leon, 20 SCRA 369, 378).

(11) If the Deed of Sale with Right to Repurchase would not be considered as an
equitable mortgage, it would result that there was actually no security for the loan of
P499,200.00 extended by private respondents to petitioners Jose R. Bundalian, which
would make no sense at all considering the enormity of the loan. There was, to be sure, a
security for said loan, none other than the equitable mortgage tainted with usury and
disguised as the Deed of Sale with Right to Repurchase.

The private respondents argued that the petitioners' contention is true only in cases where the contract or
instrument is not reflective of the true intentions of the contracting parties as would warrant reformation
of the same. They stated that if the intention of the parties is to execute a deed of sale with pacto de
retro, the contract should be held as such. The petitioners were allegedly fully aware that the deed of
sale with pacto de retro is what it purports to be and nothing else. Furthermore, the petitioners waited for
the period of redemption to expire before availing of the relief granted by the Civil Code of reformation
of contracts.

We find the stand of the private respondents without merit. The intent of the parties to circumvent the
provision discouraging pacto de retro transactions is very apparent from the records. Article 1602 of the
Civil Code states:

Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other eases where it may be fairly inferred that the real intention of the parties
is that the transaction shall secure the payment of a debt or performance of any other
obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to the
usury laws.

Significantly, a portion of the document in question reads:

 (The vendor) having just purchased the same from the Intestate estate of the deceased
Agapita Sarao Vda. de Virata (Special Proceedings No. B-710 of the Court of First
Instance of Cavite), with funds loaned to him by the herein VENDEES. (Emphasis
supplied).

This statement appearing in the supposed pacto de retro sale confirms the real intention of the parties to
secure the payment of the loan acquired by the petitioners from the private respondents. The sale with
the right to repurchase of the three parcels of land was for P499,200.00, which was exactly the same
amount paid to the estate of the deceased Agapita Sarao Vda. de Virata- After having purchased the
three lots for P499,200.00, the vendors should at least have earned a little profit or interest if they really
intended to resell the lots the following day. Instead, they suffered a loss of P25,000.00 because the
amount borrowed, and we find grounds to believe their statement of having advanced P25,000.00 of
their own funds as earnest money, was actually only P474,000.00. The petitioners also bound
themselves to pay exceedingly stiff prices for the privilege of repurchase. The intent of the parties is
further shown by the fact that the Bundalians P500,000.00 collectibles due from the government for
completed construction contracts could not be collected on time to pay for the lots advertised for sale
in Bulletin Today. The petitioners had to run to the private respondents who had money to lend. The
Bundalians received the accounts due from the government only in 1977 after the proceedings in the
trial court were well underway.

The stipulation in the contract sharply escalating the repurchase price every month enhances the
presumption that the transaction is an equitable mortgage. Its purpose is to secure the return of the
money invested with substantial profit or interest, a common characteristic of loans.

The private respondents try to capitalize on an admission by Mrs. Bundalian that she "accepted" the
transaction knowing it to be a contract of sale with right of repurchase. The reliance is grounded on
shaky foundations. The Bundalians were in the construction business and knew quite well what they
were signing. But vendors covered by Article 1602 of the Civil Code are usually in no position to
bargain with the vendees and will sign onerous contracts to get the money they need. It is precisely this
evil which the Civil Code guards against. It is not the knowledge of the vendors that they are executing a
contract of sale pacto de retro which is the issue but whether or not the real contract was one of sale or a
loan disguised as a pacto de retro sale.

The contract also provides that "it is agreed that the vendor shall have the right to possess, use, and build
on, the property during the period of redemption." When the vendee acknowledged the right of the
vendor to retain possession of the property the contract is one of loan guaranteed by mortgage, not a
conditional sale or an option to repurchase. (Macoy vs. Trinidad, et al., 95 Phil. 192).

The respondents' contention that the right to possess, use, or build on the lots embodied in the contract
was a mere "right" and not actual possession appears to be sophistry. The records show that the
Bundalians construction equipment such as tractors, payloaders, and bulldozers were on the lots. A shop
was built on the premises. Mr. Bundalian testified that from the time he purchased the property from the
estate of Mrs. Virata up to the "minute" he testified, he never lost possession. The Bundalians paid the
real estate taxes on the lots. As against the express provision of the contract and the actual possession by
the petitioners, the private respondents come up with a far fetched argument that since the titles to the
lots were in their hands, they were the ones in legal possession. Parenthetically, the titles in their hands
were still in the name of the estate of Agapita Sarao Vda. de Virata, the original vendor-owner.
IN VIEW OF THE FOREGOING, the decisions of' the respondent Court of Appeals and the trial court
are hereby REVERSED; and SET ASIDE. The deed of sale with right to repurchase is declared as an
equitable mortgage. The petitioners are ordered to pay their debt to the private respondents with legal
rate of interest from the time they acquired the loan until it is fully paid.

SO ORDERED.

Tioseco vs. CA, 143 SCRA 705

T his case was certified to this Court by the former Court of Appeals per its Resolution of November 13,
1975 the appeal thereto made having raised purely legal question, which is whether or not the Court of
First Instance of Samar, in Civil Case No. 5325 entitled"Hermenegildo Rosales vs. Peregrin Yboa, et al.,
" erred in declaring the legality and validity of the redemption made by the mortgagor Pedro Oliverio of
his titled property.

It appears that by virtue of the foreclosure of real estate mortgage duly executed by the mortgagor Pedro
Oliverio in favor of the Development Bank of the Philippines, as security for the payment of the amount
of P12,000.00, and after giving notice of the date, time and place of sale as required by law, defendant-
appellee Deputy Sheriff of Samar Peregrin Yboa, sold at public auction on January 28, 1970 to plaintiff-
appellant Rosales, the highest bidder, for the total amount of fourteen thousand five hundred pesos
(P14,500.00), the parcel of land covered by T.C.T. No. T-646 of the Register of Deeds for the Province
of Samar. The corresponding Sheriff's certificate of sale was issued in favor of plaintiff-appellant, which
certificate was registered in the Office of the Register of Deeds for the Province of Samar on February 3,
1970.
On January 23, 1971, after the mortgagor Pedro Oliverio had served notice in writing of the redemption
and had paid on said date to defendant-appellee Deputy Sheriff the principal amount of P14,500.00 plus
P1,691.00 representing the one (1 %) per centum interest per month, the latter executed a Deed of
Certificate of Redemption restoring, conveying and assigning unto the said mortgagor, his heirs and
assigns all the estate, right, title and interest on said foreclosed property.
On March 10, 1971, plaintiff-appellant filed the instant complaint for cancellation of certificate of
redemption alleging that no valid redemption was effected because while the mortgagor had paid within
the period of redemption the purchase price in the sum of P14,500.00 plus P1,691.00 representing 1 %
interest per month, he, however, failed to tender payment of 1) the full interest on the purchase price,
while should be P1,715.84, instead of Pl,691.00 actually paid by the mortgagor, thereby leaving a
deficiency in the sum of P24.84; 2) the sum of P3.00 representing the registration fee of the certificate of
sale, plus interest thereon of P0.04; 3) the delinquent real estate taxes of the subject property for the
years 1960 to 1970 amounting to P745.47; and 4) the Sheriff's commission in the sum of P99.82.
On March 22, 1971, defendants-appellees filed an answer alleging that while it is true that mortgagor
Pedro Oliverio has tendered to defendant- appellee Deputy Sheriff the amount of P14,500.00 plus
Pl,691.00 for redemption purpose, the sum tendered being the amount of the auction purchase price plus
1% interest per month thereon up to the time of redemption and the tender being timely made and in
good faith, the same is a valid one according to Section 30, Rule 39 of the Rules of Court; that granting
in arguendo, that the property subject of redemption is delinquent in the payment of real estate taxes for
the years 1960 to 1970 in the total amount of P745,47, it will not in anyway affect the regularity and
validity of the redemption for no written notice that any such assessments or taxes are paid by the
plaintiff-appellant as purchaser, was given to defendant appellee Deputy Sheriff who made the sale
thereof and such not have filed, the property may be redeemed even without paying such assessments or
taxes.
On August 16, 1971, the trial court conducted a pre-trial of the case. After such pre-trial and upon
motion of -plaintiff-appellant, the trial court rendered a summary judgment, pursuant to Rule 34 of the
Rules of Court, since the answer of defendants-appellees raises no genuine issue of material facts, as
well as their admission of the genuineness and due execution of the Certificate of Sale executed by
defendant-appellee Deputy Sheriff in favor of plaintiff-appellant; the payment of entry fee and
annotation on TCT No. T-640 of the Certificate of Sale in the sum of P3.00; the Certificate of
Redemption executed by defendant-appellee Deputy Sheriff in favor of mortgagor Pedro Oliverio; the
Certificate of Delinquency of real estate taxes of the subject property in the amount of P745.47; and the
non-payment of sheriff's commission in the sum of P99.82. In the summary judgment the trial court
dismissed the plaintiff-appellant's complaint and declared that the Certificate of Redemption of the
property sold at public auction is valid and legal "without prejudice to the right of the plaintiff-appellant
to recover from the redemptioner the sum of P0.67 representing the deficiencies in the 1 % monthly
interest 1 and the sum of P3.00 representing the entry and annotation fees of the Register of Deed of
Samar for the registration of the Certificate of Sale together with the sum of P0.04 representing interest
on the last stated amount from February 3, 1970 to January 23, 1971."
On December 13, 1971, plaintiff-appellant, after receipt of the Summary Judgment, filed his Record on
Appeal, Notice of Appeal and Appeal Bond. On May 12,1972, the trial court approved the Record on
Appeal and ordered the transmittal of the records of the case to the Court of Appeals. As
aforementioned, the Court of Appeals certified the case to this Court on the ground that it involves the
purely legal question of whether or not a valid and legal redemption was made by the mortgagor Pedro
Oliverio of his titled property.
There is no question that Pedro Oliverio has the right to redeem the subject property, in view of the
provisions of section 6 of Act 3135, as amended by Act No. 4148. 2 The procedure for effecting such
redemption is contained in section 30, Rule 39 of the Rules of Court, the pertinent portion of which
provides:
Sec. 30. Time and manner of, and amounts payable on successive redemptions. Notice to be given and
filed .The judgment debtor, or redemptioner, may redeem the property from the purchaser, at anytime
within twelve (12) months after the sale, on paying the purchaser the amount of his purchase, with one
per centum per month interest thereon in addition, up to the time of redemption, together with the
amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and
interest on such last roamed amount at the same rate; ...
xxx xxx xxx
Written notice of any redemption must be given to the Officer who made the sale and a duplicate filed
with the register of deeds in the province; ...
Pursuant to the above-cited provision, the requisites for a valid redemption are: 1) the redemption must
be made within twelve (12) months from the time of the registration of the sale in the Office of the
Register of Deeds (Gorospe vs. Santos, 69 SCRA 191; Agbulos vs. Alberto, 5 SCRA 790; Santos vs.
Rehabilitation Finance Corporation, et al., 101 Phil. 980; 2) payment of the purchase price of the
property involved, plus 1% interest per month thereon, if any, paid by the purchaser after the sale with
the same rate of interests (Rosario vs. Tayug Rural Bank, 22 SCRA 1220 cited in Tolentino vs. Court of
Appeals, 106 SCRA 513); and 3) written notice of the redemption must be served on the officer who
made the sale and a duplicate filed with the Register of Deeds of the province.
There is no dispute, that in the case at bar, the mortgagor Pedro Oliverio tendered payment of the
purchase price on January 23, 1971, well within the redemption period of twelve (12) months after the
registration of the sale on February 3,1970 and that defendants-appellees Deputy Sheriff of Samar and
the Register of Deeds of Samar were duly notified in writing of the mortgagor's desire to redeem the
subject property. Equally beyond question is the fact that mortgagor Pedro Oliverio tendered the sum of
P14,500.00 corresponding to the purchase of the property, and the amount of P1,691.00 representing the
1% monthly interest thereon, although the trial court found a deficiency of P0.67 due and owing to the
plaintiff-appellant. The mortgagor, therefor, has substantially complied with the requirements of the law
to effect redemption, for which reason a Certificate of Redemption was issued in his favor by defendant-
appellee Deputy Sheriff.
But plaintiff-appellant would insist that although mortgagor Pedro Oliverio had tendered payment of the
purchase price of P14,500.00 and the interest of P1,691.00, nevertheless, no valid redemption was
effected by the latter, since there are still four deficiencies which the mortgagor failed to pay. Firstly,
plaintiff-appellant would contend that there is still a deficiency interest of P24.84 on the purchase price
since the interest thereon should be computed from the date of the auction sale, that is, January 28, 1970,
and not from the date of the registration thereof on February 3, 1970. The contention is without merit.
Plaintiff-appellant has not cited any authority to support his theory that the interest on the purchase price
should be computed from the date of the sale and not from the registration thereof. We rule that since the
period of redemption begins only from the date of the registration of the certificate of sale in the Office
of the Register of Deeds, it being only then that the certificate takes effect as a conveyance, 3 the
computation of the interest on the purchase price should also be made to commence from that date.
Secondly, although the amount of P3.00 representing the registration fee incurred by plaintiff-appellant
may be considered as any assessments or taxes which the purchaser may have paid thereon after
purchase," still the non-payment of this amount by the mortgagor Pedro Oliverio will not render invalid
his redemption, since, as discussed above, he has substantially complied with the legal requirements for
a valid redemption.
Thirdly, as to the non-payment of real estate taxes of the subject property for the years 1960 to 1970
amounting to P745.47, the same should not affect the regularity and validity of the redemption made by
the mortgagor Pedro Oliverio. The latter is not legally bound to pay such amount to plaintiff-appellant as
purchaser, for Section 30, Rule 39 clearly provides that "the judgment debtor, or redemptioner, may
redeem the property... on paying the purchaser ... the amount of any assessments or taxes which the
purchaser may have paid thereon after purchase; and interest on such last-named amount at the same
rate." Nowhere in the Records is it shown that plaintiff-appellant had paid such amount. On the contrary,
defendants-appellees in their Answer 4 to plaintiff-appellant's complaint, have averred that no written
notice that any assessments or taxes are paid by the latter as purchaser, was given to defendant-appellee
Deputy Sheriff of Samar who made the sale thereof. In fact, the Solicitor-General, in his Brief filed in
behalf of the defendants-appellees, has made the following observation. 5
We are indeed surprised how appellant was able to secure the registration of his certificate of sale
without first paying the delinquent taxes as required by Section 1, Republic Act No. 456.
An extra judicial foreclosure sale being in the nature of a voluntary transaction, appellant should have
been required by the Register of Deeds of Samar to pay the delinquent land taxes on the subject property
before registering his certificate of sale. Payment of delinquent land taxes being a condition precedent to
the registration of appellant's Certificate of Sale, but which, somehow, he was able to evade, he cannot
now avail of the issue of such delinquent land taxes to defeat the mortgagor's right of redemption.
Finally, the non-payment of the Sheriff's Commission in the sum of P99.82 will not, likewise, affect the
validity of redemption since such amount is not included in the payments required of a redemptioner as
set forth in said Section 30 of Rule 39.
In fine, We hold that the failure of the mortgagor Pedro Oliverio to tender the amount of P745.47
representing the delinquent real estate taxes of the subject property, the registration fee of P3.00 and the
interest thereon of P0.04, the Sheriff's Commission in the sum of P99.82, and the deficiency interest on
the purchase price of the subject property, will not render the redemption in question null and void, it
having been established that he has substantially complied with the requirements of the law to effect a
valid redemption, with his tender of payment of the purchase price and the interest thereon within twelve
(12) months from the date of the registration of the sale. This ruling is in obedience of the policy of the
law to aid rather than to defeat the right of redemption. 6
WHEREFORE, the decision of the court a quo is hereby affirmed, without costs.
SO ORDERED.

Dulay vs. Cariaga, 123 SCRA 794

Petition for certiorari, with preliminary injunction, to annul and set aside the order of the
respondent judge which annulled the redemption of several parcels of land levied upon and sold at
an execution sale.

In Civil Case No. 2152 of the Court of First Instance of Cotabato, an action for the recovery of a
sum of money, the trial court rendered a decision ordering the defendant, Manuel R. Dulay, the
petitioner herein, to pay the plaintiff, Eusebio C. Tanghal, the herein private respondent, the sum
of P143,980.00. Seventeen (17) parcels of land belonging to the defendant were, consequently,
levied upon then sold at a public auction sale to the plaintiff, as the highest bidder thereof, at
prices profferred and fixed for each parcel, for the sum of P82,598.00. 1 Within the reglementary
period for redemption, the defendant redeemed eight (8) of the levied properties by paying the prices at
which they were actually sold in the auction sale, for the sum of P17,017.00, and was issued a
Certificate of Redemption. 2 Upon motion of the plaintiff, however, the trial court citing the case
of Development Bank of the Philippines vs. Dionisio Mirang, 3 declared the redemption as null and void
on the ground that piece-meal redemption is not allowed by law and that for redemption to be valid, the
judgment debtor should pay the entire judgment debt and not the purchase price. 4 Hence, this petition
for certiorari with preliminary injunction, to annul and set aside the order of the respondent judge. As
prayed for, the Court issued a temporary restraining order, restraining the respondents from enforcing
the questioned order. 5

There is merit in the petition. In the redemption of properties sold at an execution sale, the amount
payable is no longer the judgment debt, but the purchase price. In the case of Castillo vs. Nagtalon, 6 the
Court said:

The procedure for the redemption of properties sold at execution sale is prescribed in Sec.
26, Rule 39 of the Rules of Court. Thereunder, the judgment debtor or redemptioner may
redeem the property from the purchaser within 12 months after the sale, by paying the
purchaser the amount of his purchase, with I % per month interest thereon up to the time
of redemption, together with the taxes paid by the purchaser after the purchase, if any. In
other words, in the redemption of properties sold at an execution sale, the amount payable
is no longer the judgment debt but the purchase price. Considering that appellee tendered
payment only of the sum of P317.44, whereas the 3 parcels of land she was seeking to
redeem were sold for the sums of P1,240.00, P24.00 and P30.00, respectively, the
aforementioned amount of P317.44 is insufficient to effectively release the properties.
However, as the tender of payment was timely made and in good faith, in the interest of
justice We incline to give the appellee opportunity to complete the redemption purchase
of the 3 parcels as provided in Sec. 26, Rule 39 of the Rules of Court, within 15 days
from the time this decision becomes final and executory.
 Should appellee fail to complete the redemption price, the sheriff may either release to
appellee the 2 smaller lots and return the entire deposit without releasing any of the 3
lots, as the appellee may elect.

The case of DBP vs. Mirang, relied upon by the respondent judge, wherein the Court ruled that the
mortgagor whose property has been sold at public auction, either judicially or extrajudicially, shall have
the right to redeem the property by paying an the amounts owed to the mortgage on the date of the sale,
with interest thereon at the rate specified in the contract and not the amount for which the property was
acquired at the foreclosure sale is not controlling because of different factual settings. The Mirang
case involves the redemption of mortgaged property sold at a foreclosure sale and the mortgagor was
ordered to pay his entire indebtedness to the mortgagee, plus the agreed interests thereon, before
redemption can be effected, because the charter of the mortgagee (DBP) required the payment of such
amount. The Court said:

The third issue has likewise been resolved by this Court in a similar case. The issue posed
there involved the price at which the mortgagor should redeem his property after the
same had been sold at public auction whether the amount for which the property was
sold, as contended by the mortgagor, or the balance of the loan obtained from the banking
institution, as contended by the mortgagee RFC. Cited in that case was Section 31 of
Com. Act No. 459, which was the special law applicable exclusively to properties
mortgaged with the RFC, as follows:

The mortgagor or debtor to the Agricultural and Industrial Bank whose real property has
been sold at public auction, judicially or extra-judicially, for the full or partial payment of
an obligation to said Bank, shall, within one year from the date of the auction sale, have
the right to redeem the real property by paying to the Bank an the amount he owed the
latter on the date of the sale, with interest on the total indebtedness at the rate agreed
upon in the obligation from said date, unless the bidder has taken material possession of
the property or unless this has been delivered to him, in which case the proceeds of the
property shall compensate the interest. ...

The same provision applies in the instant case. The unavoidable conclusion is that the
appellant, in redeeming the foreclosed property, should pay the entire amount he owed to
the Bank on the date of the sale, with interest thereon at the rate agreed upon.

The instant case, on the other hand, involves the redemption of property levied upon and sold at public
auction to satisfy a judgment and, unlike the Mirang case, there is no charter that requires the payment
of sums of money other than those provided for in Section 30 of Rule 39, Revised Rules of Court.

Redemption of properties mortgaged with the Philippine National Bank and the Development Bank of
the Philippines and foreclosed either judicially or extrajudicially are governed by special laws which
provide for the payment of all the amounts owed by the debtor. This special protection given to
government lending institutions is not accorded to judgment creditors in ordinary civil actions,

WHEREFORE, the writ prayed for is GRANTED and the order issued on January 11, 1978 should be,
as it is hereby, ANNULLED and SET ASIDE. The temporary restraining order heretofore issued is
hereby. made permanent. With costs against the private respondent Eusebio C. Tanghal.

SOORDERED.
PNB vs. CA, 140 SCRA 360

Civil Case No. 7927 which is an action for Annulment of Extrajudicial Foreclosure and Sale of Real
Properties and for Damages with Prayer for Preliminary Injunction was filed on April 26, 1975 by the
private respondent herein against the Philippine National Bank (PNB) in the Court of First Instance of
Quezon Province. On November 27. 1979 a decision was rendered by said court enjoining defendant
Philippine National Bank from consolidating its title over the mortgaged properties and directing said
bank to allow the private respondent, Divina B. Alim, to redeem the mortgaged properties by accepting
payment from the latter; and dismissing all the claims and counterclaims that the parties may have
against each other in connection with the case.

This decision which was appealed by the defendant PNB was affirmed on March 25, 1982 by the First
Division of the Court of Appeals in CA-G.R. No. 67131-R.

As succinctly stated in the decision of the Court of Appeals, the following material facts are not
disputed. These appear to be as follows:

... On February 2, 1968 plaintiff Divina Alim obtained a loan in the total amount of
P40,000 from defendant Philippine National Bank secured by three (3) parcels of land
registered in the name of herein plaintiff and covered by the following title-

(a) Transfer Certificate of Title No.8384 of the Register of Deeds of Lucena City
comprising a house of strong materials located along the National Highway, Iyam
District, Lucena City, and a lot with an area of 540 square meters, more or less;

(b) Transfer Certificate of Title Nos. T-79631 and T-79632 of the Registry of Deeds for
the Province of Quezon, containing an area of 58 hectares each of a total of 116 hectares,
planted with coconut trees.

For failure of the plaintiff to pay her total obligation upon maturity date, defendant
Philippine National Bank extrajudicially foreclosed the mortgage properties and the
Provincial Sheriff of Quezon sold the properties at public auction on February 12, 1973.
The defendant Philippine National Bank being the only bidder in said auction sale, all the
aforementioned mortgaged properties were sold to the bank for the amount of P59,320.00
which was the total obligation of the plaintiff as of the date of the sale. The said amount
already included the principal obligation, attorney's fees and other charges, interests on
said amounts plus costs of publication of the Sheriff's notice of auction sale. "On April
26, 1975, plaintiff instituted the present case for the annulment of the aforesaid
extrajudicial foreclosure and sale and for damages with prayer for preliminary
injunction."

From the decision rendered by the Court of First Instance of Quezon Province, it can be noted that
during the pendency of the case in the said court the parties attempted to confer with the end in view of
settling this case amicably and in the course thereof the plaintiff deposited with defendant bank a
sufficient amount to cover the loan and interest thereon as of February 12, 1973 including
reimbursement for costs of publication. Thus at the pre-trial, the parties agreed to submit the case for
decision only upon the issue as to whether or not the plaintiff should still pay interest specified in the
mortgage after the auction sale on February 12, 1973.
The defendant Philippine National Bank contends that the plaintiff is still obligated to pay the said
interest citing the provisions of Presidential Decree No. 694, as amended by Presidential Decree No.
1478, particularly Section 25, paragraph 2 thereof.

On the other hand, plaintiff Divina Alim, the private respondent herein cites the case of the
Development Bank of the Philippines versus Jovencio A. Zaragosa, et al., 84 SCRA 668, where it was
therein ruled that when the foreclosure proceedings are completed all interests of the mortgagor are cut
off from the property and that this principle is applicable to an extrajudicial foreclosure.

In rendering the decision in favor of plaintiff Divina Alim, The trial court reasoned out

... In the case at bar, the foreclosure and subsequent sale of the properties were valid, but
because of the timely filing of this case and in view of the Order of June 9, 1975, the
consolidated sale could not be made. In the light, therefore, of the above cited ruling of
the Supreme Court, (DBP vs. Zaragosa, et al., supra) after the public auction sale on
February 12, 1973, the defendant Philippine National Bank can no longer demand
payment of interest on the property should the mortgagor exercise her right of
redemption." (Annex "B" of Petition, Record on Appeal, p. 101: parenthesis supplied)

This ruling which was sustained by the then Court of Appeals is now the subject of the Petition for
Review on certiorari presented to this Court by the Philippine National Bank.

In its petition, the PNB assails the decision of the defunct appellate court and contends that the interests
specified in the mortgage should still be added to the bid or purchase price computed from the time of
the auction sale up to the date the mortgaged properties are redeemed as clearly authorized by law.
Petitioner invokes Republic Act No. 1300, the original Charter of the PNB, Presidential Decree No. 694
(1975), Republic Act No. 337 known as the General Banking Law and Rule 39 of the Rules of Court, all
of which petitioner PNB claims authorize the imposition of the interest specified in the mortgage.

What appears from the case records is that the extrajudicial foreclosure proceedings instituted by the
PNB was commenced on May 25, 1972, pursuant to a petition for sale under Act No. 3135 filed by its
counsel with the Provincial Sheriff for Quezon Province. But this PNB sought the freclosure and sale
of the properties of the herein private respondent and directed said Sheriff to publish the Notice of Sale
in the Quezon Times, Lucena City. In consequence of said petition the Provincial Sheriff sold at public
auction the properties of herein private respondent to the Philippine National Bank, upon the latter's bid
of P59,320.00. The corresponding Certificate of Sale was executed by the Sheriff in favor of the
Philippine National Bank on February 16, 1973.

Considering that the very step initiated by the Petitioner was a petition for Sale under Act No.
3135 (Annex F. Complaint, Record on Appeal, Rollo, p. 26), the applicable law then would be no other
than the said statute. Act No. 3135 being a special law that governs particularly extrajudicial
foreclosures, it necessarily excludes the application in this instance of the General Banking Act and the
provisions on redemption under the Revised Charter of PNB, Presidential Decree No. 694, which was
enacted only in 1975. In the case at bar the mortgage contract was entered into in 1968. In 1968, the
governing law on PNB operations was Republic Act No. 1300 but it has been held that "Republic Act
1300 does not contemplate extrajudicial foreclosure" (Co vs. PNB, L-51767, June 29, 1982, 114 SCRA
842, 855).
Since the applicable law is Act 3135, the provisions of Section 30, Rule 39, Rules of Court shall be
determinative of the sole issue presented in this case. Section 6 of Act 3135, as amended by Act 4018,
provides:

Sec. 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtro, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person ahving a lein on the proeprty subsequent
to the mortgage or deed of trust under which the property is old, may redeem the same at
any time within the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four hundred and sixty-four,
inclusive, of the Code of Civil Procedure, in so far as these are not incosistent with the
provision of this Act. (emphasis supplied.)

Section hundred sixty-four to four hundred sixty-six inclusive, of the Code of Civil Procedure, became
Sections 29, 30, and 34 of Rule 39 of our Rules of Court. The same secitons were reiterated in the
Revised Rules of Court in July 1964 (Co vs. PNB, supra).

Pursuant to Section 30 of Rule 39, the redemptioner, who is the private respondent herein, "may
redeeem the property from the purchaser at any time within twelve (12) months after the sale, on paying
the prchaser the amount of his purchase, with one per centum per month interest thereon in addition, up
to the time of redemption, togethere with the amount of any assessments or taxes which the purchaser
may have paid therein after purchase and interest on such last named amount at the same interest rate;
..."

This would rightfully be so because, as stated in the case of DBP vs. Zaragosa, supra, when the
foreclosure proceedings are completed and the mortgaged property is sold to the purchaser then all
interest of the mortgagor are cut off from the property Prior to the completion of the foreclosure, the
mortgagor is liable for the interests on the mortgage. However, after the foreclosure proceedings and the
execution of the corresponding certificate of sale of the property sold at public auction in favor of the
successful bidder, the redemptioner mortgagor would be bound to pay only for the amount of the
purchase price with interests thereon at the rate of one per centum per month in addition up to the time
of redemption, together with the amount of any assessments or taxes which the purchaser may have paid
thereon after the purchase and interest on such last named amount at the same rate.

WHEREFORE, the petition in this case is hereby granted. The decision appealed from is affirmed with
modification, so as to read as follows:

(a) Making the writ of preliminary injunction issued by this Court in its Order of June 9,
1985, permanent and irrevocable;

(b) Allowing the plaintiff to redeem the mortgaged properties by paying the amount of the
purchase with interests thereon at the rate of one per centum per month up to the date of
her deposit of the redemption price and ordering the defendant to accept payment from
the plaintiff;

(c) Dismissing all the claims and counterclaims that the parties may have against each
other in connection with this case.

No costs.
SO ORDERED.

DBP vs. Mirang, 66 SCRA 141

How much should a mortgagor pay to redeem a real property mortgaged to and foreclosed
extrajudicially by the Development Bank of the Philippines? Must he pay to the bank the entire amount
he owed the latter on the date of the sale with interest on the total indebtedness at the rate agreed upon in
the obligation, or is it enough for purposes of redemption that he reimburse the amount of purchase with
one per cent (1%) monthly interest thereon including other expenses defrayed by the purchaser at the
extrajudicial sale?

Bacolod Medical Center (BMC) was the registered owner of Lots Nos. 1397-A and 1397-B-1 covered
by Transfer Certificates of Title Nos. T-25053 and T-29169, respectively. On 12 December 1967 BMC
obtained a loan for building and operating a hospital from petitioner Development Bank of the
Philippines (DBP) worth P2,400,000.00. The loan was secured by a mortgage on the two (2) parcels of
land, the hospital building to be constructed thereon, and the medical equipment to be used for the
intended hospital. The mortgage was expressly constituted subject to the provisions of RA 85 (1946)
creating the Rehabilitation Finance Corporation, a predecessor agency of petitioner DBP. From the
loan P1,935,200.00 was immediately applied to pay for the old accounts of BMC and only P464,800.00
was actually released in cash.

On 30 January 1989, for failure of BMC to pay the loan, DBP instituted an extrajudicial foreclosure of
the mortgage under Act 3135 (1924).1 On 24 August 1989 the mortgaged properties were sold at public
auction where DBP emerged as the highest and only bidder for the sum of P4,090,117.36. As of the date
of the public auction, the outstanding loan balance of BMC was P32,526,133.62. On 25 August 1989 the
ex-officio Provincial Sheriff of Bacolod City executed the certificate of sale in favor of DBP; on 11 July
1990 the sale was registered in the Registry of Deeds as Entry No. 166752 annotated on the transfer
certificates of title of the mortgaged properties.

Prior to the expiration of the redemption period on 11 July 1991, BMC and the Bacolod branch office of
DBP agreed to peg the redemption price at P21,500,000.00 representing the compromise settlement of
the outstanding account, and BMC further resolved to pay an installment of twenty percent (20%) of the
compromise amount, or P4,300,000.00, on or before 31 August 1991. The agreement was however made
subject to the approval of the head office of DBP. After several extensions of the deadline to pay the
installment, BMC finally settled the amount in three (3) separate payments.

On 10 July 1991, during the process of paying for the twenty percent (20%) installment, BMC and
respondent West Negros College executed a "Deed of Assignment" which assigned to the latter the
interests of BMC in the properties foreclosed by petitioner DBP and vested upon the assignee the right
to redeem them. On 27 October 1991, while acknowledging that redemption should be based on the
outstanding loan obligation of BMC to petitioner, West Negros College demanded the reduction of the
redemption price from P21,500,000.00 to P12,768,432.90 allegedly because of excessive interest
charges.

On 27 October 1991 the head office of DBP rejected the compromise amount of P21,500,000.00 since
the amount was way below the re-appraised value of the foreclosed parcels of land at P28,895,500.00 as
of 31 May 1991.
On 8 November 1991 respondent West Negros College requested the Ex-Officio Provincial Sheriff to
issue the certificate of redemption in view of the payment to petitioner DBP of the amount
of P4,300,000.00 comprising the amount of purchase with one per cent (1%) monthly interest thereon
including other expenses defrayed by DBP at the extrajudicial sale. The computation of the redemption
price made by West Negros College was based on Sec. 30, Rule 39 of the Rules of Court 2 and Act
3135.3 The Ex-Officio Provincial Sheriff concurred with respondent's basis for the redemption price but
responded that the amount paid was still short of P358,128.58. In a letter of even date to the DBP, the
Ex-Officio Provincial Sheriff informed petitioner of the request for a certificate of redemption and the
amount pegged for the full redemption of the foreclosed properties based on Sec. 30, Rule 39 of the
Rules of Court, and requested the surrender of the transfer certificates of title covering the redeemed
properties.

On 12 November 1991 West Negros College settled the deficit of P358,128.58. On 14 November 1991
DBP objected to the issuance of the certificate of redemption and argued that the redemption price must
be based on the charter of the DBP requiring payment of the amount owed as of the date of the
foreclosure sale with interest on the total indebtedness at the rate agreed upon in the obligation. DBP
also refused to hand over the transfer certificates of title of the foreclosed properties. On 3 December
1991 possession of the foreclosed properties was vested in West Negros College. On 5 December 1991
petitioner DBP caused the registration of its adverse claim on the foreclosed properties.

On 10 December 1991 West Negros College filed a petition with RTC-Br. 50, Bacolod City against
DBP, docketed as Cad. Case No. 2, GLRO CAD. REC. No. 55, for the surrender of the transfer
certificates of title covering the foreclosed properties or in the alternative the cancellation of the existing
certificates of title and the issuance of new ones. West Negros College alleged full payment of the
redemption price under Sec. 30, Rule 39 of the Rules of Court and Act 3135, i.e., the amount of
purchase with one per cent (1%) monthly interest thereon including other expenses defrayed by the
purchaser at the extrajudicial sale. Petitioner DBP, on the other hand, claimed that proper redemption
under its charter could only take place when the total outstanding loan had been satisfied. On 12
December 1991 DBP asked for the annotation of a notice of lis pendens on the certificates of title in
question.

On 7 February 1992 the trial court found merit in the petition and ordered the DBP through the Ex-
Officio Provincial Sheriff to surrender the transfer certificates of title covering the foreclosed parcels of
land and, in case of failure to turn them over, instructed the Register of Deeds to issue new transfer
certificates of title for the foreclosed properties.4 Because DBP manifested that it was not relinquishing
the documents, new transfer certificates of title over the foreclosed parcels of land, designated as TCT
Nos. T-165262 and T-165261, were issued in the name of West Negros College. On 14 February 1992,
upon an ex-parte motion of West Negros College, the trial court also canceled the adverse claim and
notice lis pendens in favor of DBP.5 On 28 April 1992 the trial court denied DBP's separate motions for
reconsideration of the two (2) orders.6

Petitioner DBP appealed the adverse orders of the trial court to the Court of Appeals docketed as CA-
GR CV No. 38277. The contention in essence was that redemption could take place only if West Negros
College settled the total outstanding obligation of BMC in favor of DBP. West Negros College argued
otherwise claiming that according to Act 3135 in relation to Sec. 30, Rule 39 of the Rules of Court and
the rulings in Co v. Philippine National Bank7 and Philippine National Bank v. Court of Appeals8 it only
had to pay the purchase price at the foreclosure sale plus interests and other charges to effect redemption
of the foreclosed properties which it had already done.
On 7 August 2001 the Court of Appeals denied the appeal of DBP and ruled that the applicable legal
provisions were Sec. 30, Rule 39 of the Rules of Court and Act 3135 as interpreted by Philippine
National Bank v. Court of Appeals9 so that the redemption price must be the amount of purchase with
one per cent (1%) monthly interest thereon including other expenses defrayed by the purchaser at the
extrajudicial sale.10 On 21 February 2002 a Special Division of Five of the appellate court denied the
motion for reconsideration of the Decision,11 hence, this petition.

The petition is meritorious. It has long been settled that where the real property is mortgaged to and
foreclosed judicially or extrajudicially by the Development Bank of the Philippines, the right of
redemption may be exercised only by paying to "the Bank all the amount he owed the latter on the date
of the sale, with interest on the total indebtedness at the rate agreed upon in the obligation from said
date, unless the bidder has taken material possession of the property or unless this had been delivered to
him, in which case the proceeds of the property shall compensate the interest."12 This rule applies
whether the foreclosed property is sold to the DBP or another person at the public auction, provided of
course that the property was mortgaged to DBP.13 Where the property is sold to persons other than the
mortgagee, the procedure is for the DBP "in case of redemption, [to] return to the bidder the amount it
received from him as a result of the auction sale with the corresponding interest paid by the debtor."14

The foregoing rule is embodied consistently in the charters of petitioner DBP and its predecessor
agencies. Section 31 of CA 459 creating the Agricultural and Industrial Bank explicitly set the
redemption price at the total indebtedness plus contractual interest as of the date of the auction
sale.15 Under RA 85 the powers vested in and the duties conferred upon the Agricultural and Industrial
Bank by CA 459 as well as its capital, assets, accounts, contracts, and choses in action were transferred
to the Rehabilitation Finance Corporation.16 It has been held that among the salutary provisions of CA
459 ceded to the Rehabilitation Finance Corporation by RA 85 was Sec. 31 defining the manner of
redeeming properties mortgaged with the corporation.17 Subsequently, by virtue of RA 2081 (1958), the
powers, assets, liabilities and personnel of the Rehabilitation Finance Corporation under RA 85 and CA
459, particularly Sec. 31 thereof, were transferred to petitioner DBP.18 Significantly, Sec. 31 of CA 459
has been reenacted substantially in Sec. 16 of the present charter of the DBP, i.e., EO 81 (1986) as
amended by RA 8523 (1998).19

Development Bank of the Philippines v. Court of Appeals notes the impressive consistency of the
successive charters of the DBP with respect to the manner of redeeming properties mortgaged to it

Prior to the enactment of EO 81, the redemption price for property foreclosed by the Development Bank
of the Philippines (DBP), whether judicially or extrajudicially, was determined by Commonwealth Act
No. 459 (CA 459), which contained a provision substantially similar to Section 16 of EO 81 insofar as
the redemption price was concerned x x x x Thus, in DBP v. Mirang [66 SCRA 141 (1975)], the Court
held that appellant could redeem the subject property by paying the entire amount he owed to the Bank
on the date of the foreclosure sale, with interest thereon at the rate agreed upon, pursuant to Section 31
of CA 459. The ruling herein was reiterated by the Court in the more recent case of Dulay v. Cariaga
[123 SCRA 794 (1983)]. In the earlier case of Nepomuceno v. Rehabilitation Finance Corporation [110
Phil 42 (1960)], the Court explained that Section 31 of CA 459, being a special law applicable only to
properties mortgaged to the Rehabilitation Finance Corporation - the predecessor of DBP - should
prevail over Section 6 of Act No. 3135, which is a more general law applicable to all mortgaged
properties extrajudicially foreclosed, regardless of the mortgagee.20

In Development Bank of the Philippines v. Jimenez this Court clarified the proper applications of Sec.
31 of CA 459 and Sec. 30, Rule 39 of the Rules of Court21 when we held that "Section 31 of
Commonwealth Act No. 459, and not Section 26, Rule 39, of the Rules of Court, is applicable in case of
redemption of real estate mortgaged to the DBP to secure a loan. As such, the redemption price to be
paid by the mortgagor or debtor to the DBP is 'all the amount he owes the latter on the date of the sale,
with interest on the total indebtedness at the rate agreed upon, and not merely the amount paid for by
the purchaser at the public auction, pursuant to Section 26, Rule 39, of the Rules of Court."22 Clearly the
redemption of properties mortgaged with the Development Bank of the Philippines and foreclosed either
judicially or extrajudicially is governed by special laws which provide for the payment of all the
amounts owed by the debtor. This special protection given to a government lending institution is not
accorded to judgment creditors in ordinary civil actions.23

It is worth noting that the mortgage contract between petitioner DBP and Bacolod Medical Center as
assignor of respondent West Negros College was expressly constituted subject to the provisions of RA
85 which by explicit reference include Sec. 31 of CA 459 requiring for purposes of redemption the
payment of all the amount the mortgagor owed to DBP, with interest on the total indebtedness at the rate
agreed upon in the obligation, reckoned from the date of the public auction. Respondent cannot evade
the application of this provision because it is part of its undertaking as assignee of the mortgagor
Bacolod Medical Center.

The cases of Co v. Philippine National Bank24 and Philippine National Bank v. Court of Appeals25 are
not controlling. These involve the redemption of property levied upon and sold at public auction to
satisfy a judgment and unlike the instant case there is no charter that requires the payment of sums of
money other than those stipulated in Sec. 30 of Rule 39, Rules of Court. In the cited cases the mortgage
contracts were executed when the then charter of the Philippine National Bank under RA 1300
(1955)26 did not provide for extrajudicial foreclosure nor the amount necessary to redeem the property
foreclosed extra-judicially. In effecting an extrajudicial foreclosure, the Philippine National Bank has
then no other recourse but to rely wholly upon Act 3135 in relation to Sec. 30 of Rule 39, Rules of Court
for all matters related thereto including the amount of redemption. It is thus fairly evident that at all the
times relevant to the cited cases the bank did not resort to Act 3135 merely to find a proceeding for the
sale but to secure basic authority for its actions.

The import of the citations is further clarified by our statement in Co v. Philippine National Bank
differentiating the latter from Nepomuceno v. Rehabilitation Finance Corporation27 in light of the
enactment of PD 694 (1975 Revised Charter of the Philippine National Bank) which provided for
extrajudicial foreclosure and redemption price similar to the standard provisions in the charters of the
Development Bank of the Philippines. In Co we said unmistakably

In the Nepomuceno case, what confronted the Court was a question relative to a mortgage with the
Rehabilitation Finance Corporation (RFC for short, now the Development Bank of the Philippines). The
Court found no difficulty in not applying Section 6 of Act 3135 because it found that there is in Section
31 of the Charter of the RFC a provision basically similar to Section 25 of Presidential Decree 694, now
being invoked here by PNB. Naturally, the Court upheld the RFC's contention that the whole amount of
the mortgagor's indebtedness should be paid. But in the instant case, as already discussed earlier, P.D.
694 came too late.28

Quite obviously the pivotal circumstance that distinguishes Co v. Philippine National Bank and
Philippine National Bank v. Court of Appeals from the instant case is the existence of provisions in the
charter of the government bank authorizing extrajudicial foreclosure and determining the amount
required to redeem the foreclosed property. The charter provisions constitute a special law exclusively
applicable to properties mortgaged to the government bank in question, and as such they prevail over
Sec. 30 of Rule 39, Rules of Court which represents a general law.29 In Dulay v. Cariaga30 we said that a
mortgagor must pay his entire indebtedness to the mortgagee plus the agreed interest thereon before
redemption can be effected, because the charter of the mortgagee (DBP) required the payment of such
amount. Thus, while the charter of petitioner DBP authorized the extrajudicial foreclosure of mortgaged
property and its redemption effective only upon payment of the outstanding indebtedness and interest,
the charter of the Philippine National Bank involved in the citations in question did not supply similar
privileges and would not therefore properly control the disposition of the instant case.

The unavoidable conclusion is that in redeeming the foreclosed property respondent West Negros
College as assignee of Bacolod Medical Center should pay the balance of the amount owed by the latter
to petitioner DBP with interest thereon at the rate agreed upon as of the date of the public auction on 24
August 1989.

WHEREFORE, the instant Petition for Review is GRANTED. The 7 August 2001 Decision and the 21
February 2002 Resolution of the Court of Appeals in CA-GR CV No. 38277 are REVERSED and SET
ASIDE. The appealed Orders of RTC-Br. 50 in Cad. Case No. 2, GLRO CAD. REC. No. 55, dated 7
February 1992, 14 February 1992 and 28 April 1992, ordering petitioner Development Bank of the
Philippines through the Ex-Officio Provincial Sheriff to surrender the transfer certificates of title
covering the foreclosed parcels of land and, in case of the failure to turn them over, instructing the
Register of Deeds to issue new transfer certificates of title for the foreclosed properties, as it did issue
new transfer certificates of title designated as TCT Nos. T-165261 and T-165262 in the name of West
Negros College; canceling the adverse claim and notice lis pendens in favor of petitioner Development
Bank of the Philippines; and denying the separate motions for reconsideration of petitioner Development
Bank of the Philippines, are also REVERSED and SET ASIDE.

The Certificate of Redemption dated 13 November 1991 in favor of respondent West Negros College is
DECLARED VOID AND OF NO EFFECT. Respondent is given however a grace period of sixty (60)
calendar days from notice of the finality of this Decision within which to redeem the mortgaged
properties (Lots Nos. 1397-A and 1397-B-1 originally covered by Transfer Certificates of Title Nos. T-
25053 and T-29169, respectively, improvements thereon and other properties subject of the mortgage
and the extrajudicial foreclosure) if respondent so desires by paying petitioner Development Bank of the
Philippines the balance of the credit of Bacolod Medical Center (as assumed by respondent West Negros
College under a deed of assignment) secured by the properties plus the expenses and the agreed rate of
interest, to be computed as of the date of the public auction on 24 August 1989, unless petitioner
Development Bank of the Philippines has taken material possession of the properties in which case the
proceeds of the properties shall compensate the interest but only during the period of their possession.

In the event that respondent West Negros College is not interested in redeeming mortgaged properties at
the statutory redemption price, or that the redemption period of sixty (60) days expires without any
redemption having been undertaken or without a compromise agreement for such purpose having been
reached and perfected, respondent West Negros College shall yield possession of the properties in
question to petitioner Development Bank of the Philippines as TCT No. T-165261 for Lot No. 1397-A
and TCT No. T-165262 for Lot No. 1397-B-1 issued in the name of West Negros College are
DECLARED VOID and OF NO EFFECT and the Register of Deeds of Bacolod City is ORDERED TO
ISSUE new transfer certificates of title over the mortgaged properties in the name of the Development
Bank of the Philippines. No costs.

SO ORDERED.
Co. vs. PNB, 114 SCRA 842

Direct appeal to this Supreme Court pursuant to Republic Act 5440 from the decision of the Court of
First Instance of Rizal, Branch XXI in its Civil Case No. 23101 entitled "Citadel Insurance & Surety
Co., Inc. vs. Philippine National Bank", the dispositive portion of which reads:
WHEREFORE, this Court finds that plaintiff has validly exercised the right of redemption herein-before
discussed and orders the defendant to:
(a) Accept the amount consigned and deposited pursuant to the Order of this Court on March 11, 1976;
(b) Execute and specifically comply to the effects of the exercise of the right of redemption so that
whatever title is due to the plaintiff after redemption may properly accrue to plaintiff;
(c) Deliver and surrender to plaintiff possession over the property in question.
Considering that this case has been submitted for decision based upon four (4) limited questions of law
and there being no evidence presented and submitted to support any claim for damages, there is no
pronouncement and award of damages as well as costs.
SO ORDERED. (Pp. 180-181, Record on Appeal.)
It goes without saying that under the Act aforementioned by virtue of which this appeal is before Us, the
issues We are called upon to resolve are only questions of law.
Briefly stated, the undisputed material facts of this case, as may be culled from the decision of the trial
court and elsewhere in the record, are as follows:
On November 10, 1961, the Standard Parts Manufacturing Corporation, hereinafter to be referred to
simply as STANDARD, executed a real estate mortgage in favor of herein defendant-appellant
Philippine National Bank, hereinafter to be referred to simply as PNB, over properties covered by
Transfer Certificates of Title Nos. T-5108 and T-5320, both situated in Baguio City, as collateral for a
loan consideration of P500,000.00. On February 20, 1963, the same debtor corporation executed an
amended real estate mortgage to include as collateral for the increase of the above loan to P1,000,000.00
a property located at Pasong Tamo Extension within the Municipality of Makati (then part of Rizal
Province and now of Metro Manila) covered by Transfer Certificate of Title No. 54474. Additionally, on
February 20, 1963, the same corporation executed in favor of PNB a chattel mortgage of its personal
properties listed on pages 96 to 108 of the Record on Appeal. On pages 6-7 of appellant's brief it is
stated that as of July 19, 1974, the "borrowed loan" of STANDARD totalled P4,296,803.56, and that the
said obligation was secured, as aforementioned, by the mortgages on the Baguio and Makati real estates
of STANDARD and the chattel mortgage on its personal properties above referred to.
When STANDARD failed to pay its obligation, PNB extrajudicially foreclosed the mortgage on the
Baguio properties as well as the chattel mortgage on July 19, 1974, with PNB as the highest bidder for
P1,514,305.00. Subsequently, on August 8, 1974, PNB also foreclosed the mortgage on the Makati
property and purchased the same, as highest bidder, for P1,363,000.00.
We quote further from appellant's brief:
When Standard Parts failed to pay its obligation, PNB foreclosed the Baguio properties and chattels on
July 19, 1974 with it as the highest bidder for P1,514,305.00 and the Pasong Tamo property on August
8, 1974 also with it as the highest bidder for P1,363,000.00. Hence, after foreclosure of the above-
mentioned mortgage, the deficiency claim of the Bank against Standard Parts as of August 8, 1974
amounted to P1,434,521.07. Subsequently, a Certificate of Sale dated July 19, 1974 was issued by the
Sheriff of Baguio City covering TCT Nos. T-5708 and T-5320 (Annex "C", P.S.F.). A Certificate of
Sale dated August 8, 1974 covering TCT No. 54474 was also issued by the Sheriff of Rizal (Annex "D",
P.S.F.) and registered on March 14, 1976 in the Registry of Deeds. Upon failure of Standard Parts to
redeem the foreclosed properties within the reglementary period, the PNB consolidated titles to the
Baguio properties and TCT Nos. 26080 and 26081 (Annexes "E" and "E-1", respectively, P.S.F.) were
issued by the Register of Deeds of Baguio City on May 5, 1976 in the name of the Bank. On May 14,
1976, TCT No. 54474 was cancelled and TCT No. S-28133 issued in the name of the PNB.
Meantime, on March 5, 1976, Citadel wrote PNB a letter (Annex "H", P.S.F.) stating therein its desire to
redeem the property covered by TCT No. 54474, it being the alleged assignee of the right of redemption
of Standard Parts with respect only to said property. Citadel, however, offered to redeem the property
for only P1,621,970.00. In its reply to said letter, PNB, in a letter dated March 5, 1976 (Annex "I",
P.S.F.), justifiably refused to accept the tender of payment of Citadel considering that the amount of
P1,621,970.00 was very much lower than the Bank's total amount of P3,366,546.42 as of March 5, 1976
per the Statement of Account of Standard Parts (Annex "G", P.S.F.). (Pp. 7-9, Brief of PNB)
To Our mind then, the facts that are decisive herein are the following:
1. The mortgages here in question were constituted way back in 1961 to 1963.
2. The foreclosure sale of the Baguio properties and the chattels took place on July 19, 1974 and that of
the Makati estate on August 8, 1974.
3. Citadel Insurance & Surety Co., Inc. (CITADEL, for short) to whom STANDARD had in the
meanwhile (or on February 20, 1976) transferred its rights in the mortgages here in issue, wrote PNB on
March 5, 1976 stating that it was redeeming the Makati property, offering to pay therefor as redemption
price P1,621,970.00. The letter of CITADEL in this regard reads thus:
CITADEL INSURANCE & SURETY CO., INC.
Suite 202 Sikatuna Bldg., Ayala Ave.
Makati, Rizal
Tel. No. 87-33-07 & 87-34-44
March 5, 1976
PHILIPPINE NATIONAL BANK
Escolta, Manila
Re: Legal Redemption of Extra-Judicial
Foreclosed Property of Standard
Parts Manufacturing Corporation
Under Act No. 3135, As amended
Gentlemen:
In connection with the above-mentioned property which is covered by TCT No. 54474 of the Register of
Deeds For the Province of Rizal we wish to inform you that the CITADEL INSURANCE & SURETY
CO., INC., is the Assignee of the right of redemption, which will expire on March 11, 1976, by virtue of
a "Deed of Assignment and Waiver of Redemption Rights" dated February 29, 1976, photostat copy of
which is attached to this letter as Annex "A".
As assignee of the aforementioned Right of Redemption, our Company is now exercising the same by
tendering to you the redemption price computed as follows:
P1,363,000.00 total bid of the PNB per its letter to the Sheriff dated August 8, 1974;
P 258,970.00 interest at the rate of 1% a month from the date of auction, August 8, 1974, up to the
time of redemption;
P1,621,970.00 TOTAL
as evidenced by RCBC Manager's Check No. MC 194188 dated March 4, 1976, which is attached to this
letter as Annex "B".
In view of the foregoing, kindly acknowledge the receipt of the redemption amount and cause the
issuance of the corresponding Certificate of Redemption in favor of our Company.
Thank you.
Very truly yours,
(Sgd.) FRANCISCO S. CORPUS
President
Atty.: a/s (Pages 131-133, Record on Appeal)
4. Immediately or on even date PNB rejected the above tender, contending that the offered price was
much lower than P3,366,546.42, 1 as of said date March 5, 1976, which PNB maintained was the correct
redemption price. The following was the reply of PNB:
PHILIPPINE NATIONAL BANK
LEGAL DEPARTMENT
March 5, 1976
Mr. Francisco S. Corpus
President
Citadel Insurance & Surety Co., Inc.
202 Sikatuna Bldg., Ayala Ave.
Makati, Rizal
Dear Mr. Corpus:
This refers to your letter of March 5, 1976 wherein you expressed your desire to redeem the property
covered by TCT No. 54474 of the Register of Deeds of Rizal which we acquired from Standard Parts
Manufacturing Corp. in the amount of P1,621,970.00 in the form of RCBC Manager's Check No. MC
194188 dated March 4, 1976.
We feel that the Legal Department is in no position to decide the acceptance of your offer because it
appears that the amount offered is less than our total claim. We suggest, therefore, that you see either
Vice President Andres L. Africa or Asst. Vice Pres. Raul Leveriza on Monday March 8,1976.
Very truly yours,
(Sgd.) ARTEMIO S. TIPON
Senior Supervising Atty.
(Pp. 133-134, Record on Appeal.)
5. The Certificate of Sale dated August 8, 1974 covering TCT No. 54474 was issued by the Sheriff of
Rizal and registered on March 14, 1976 in the Registry of Deeds. (Page 8, PNB's brief) Notably,
however, according to the decision of the trial court, the certificate of sale was registered on March 11,
1976. (Page 176, Record on Appeal.)
6. On March 11, 1976, CITADEL filed the instant action in the court below with the following prayer:
PRAYER
WHEREFORE, it is respectfully prayed that upon the filing of this complaint this Honorable Court
forthwith issue an order authorizing its Branch Clerk to accept a Manager's Check in the amount of
P1,621,970.00 and deposit the same with the Rizal Commercial Banking Corporation under a Savings
Account in order that the same shall not remain Idle, and in the name, of defendant PNB, subject to the
control and disposition of this Honorable Court; and after hearing, judgment be rendered;
(a) Ordering defendant to accept the amount so deposited, and/or such amount as may be found by this
Honorable Court to be the lawful redemption price for the particular property in question;
(b) Ordering defendant to turn over the title and possession of the property in question to plaintiff
together with its fruits from March 11, 1976 up to the time possession is actually surrendered to the
plaintiff, plus the interests thereon counted from the date of filing of this complaint;
(c) Ordering defendant to execute such documents and papers that may be necessary for the transfer of
the title and possession of the property in question to plaintiff;
(d) Ordering defendant to pay plaintiff damages in the form of attorney's fees and expenses of litigation,
the amount of which is left to the sound discretion of this Honorable Court;
(e) Ordering the defendant to pay the costs of suit.
PLAINTIFF FURTHER PRAYS for such other relief as may be found just and equitable in the
premises. (Pp. 6-8, Record on Appeal.)
7. There is no dispute that a manager's check of the Rizal Commercial Banking Corporation No. MC
194188 dated March 4, 1976 and in the amount of P1,621,970.00 (Pp. 14-15, Record on Appeal)
accompanied the complaint and was actually deposited under a savings account with the same bank by
order of the trial court of the same date "in the name of the PNB subject to the control and disposition of
the Court." (p. 20, Record on Appeal.)
In the light of the foregoing facts, the parties stipulated in the partial stipulation facts they submitted to
the trial court that:
B. Limitation of issues
The parties agreed that the issues raised by the pleadings are one of law, to wit:
1. Whether the redemption period has expired.
2. What is the correct redemption amount required under the law?
3. Whether there was a valid and effective tender of payment.
4. Whether the Deed of Assignment is binding and enforceable against
5. defendant PNB. (P. 151, Record on Appeal)
Timeliness of the redemption
To be sure, We find the opposing postures of the parties on the timeliness of the redemption here in
question a little blurred and confusing. So, rather than to try to extricate Ourselves out of such maze, We
feel it is sufficient to point out that according to the brief of appellant, the foreclosure sale of the subject
property was made on August 8, 1974 (pp. 7-8) and the corresponding certificate of sale was issued by
sheriff on the same day and "registered on March 14, 1976 in the Register of Deeds." (p. 8, Record on
Appeal.) "On May 14, 1976 TCT 54474 was cancelled and TCT No. S-28133 issued in the name of
PNB". (id.) 2
In such ambiguous premises, We have no alternative than to use March 11, 1975 3 as point of reference
regarding the date of the registration of the certificate of sale. Appellant assumes that on this basis the
period of redemption was up to March 10, 1976. Well, the truth of the matter is that this detail is tied up
inextricably to the main question of law that pervades the whole of this controversy.
What is the law applicable to this case as to the period of redemption?
Let us not forget that the mortgage at issue was executed in 1963. True it is that as underscored by
counsel for PNB, STANDARD, the predecessor-in-interest of CITADEL, who signed the deed of
mortgage agreed, and CITADEL is bound by such agreement, "to abide and to be bound by the
provisions of the Charter of the PNB ". Specifically paragraph (g) of said real estate mortgage provides:
(g) The mortgagor hereby waives the right granted him under Section 119 of Commonwealth Act No.
141, known as the Public Land Act, as amended and agrees to abide to be bound by the provisions of
Act No. 3135 or Act No. 2933, which amended Act No. 1612, or Republic Act No. 1300, as amended,
known as the New Charter." (Page 15, PNB's Brief.)
Going by the literal terms of this quoted provision, STANDARD/CITADEL stand bound by the same.
In other words, paragraph (g) of the mortgage contract made the provisions of Act No. 3135 or Act
2933, which amended Act No. 1612, or Republic Act 1300, as amended, known as the new Charter part
and parcel of the mortgage contract. Now, what is the legal import or consequence of such express
incorporation of and submission to Act 3135 and Republic Act 1300 by STANDARD/CITADEL?
Republic Act 1300 entitled "An Act Revising the Charter of the Philippine National Bank" was
approved and made effective on June 16, 1955. It was therefore the law when in 1963 the mortgage here
in dispute was executed. It was the very law that the
above-quoted paragraph (g) of the mortgage contract made reference to. In this connection, evidently
overlooked by counsel for PNB is that Republic Act 1300 does not contemplate extrajudicial procedure.
Clearly indicative of this is Section 20 thereof which provides:
Sec. 20. Right of redemption of property foreclosed. The mortgagor shall have the right, within the
year after the sale of real estate as a result of the foreclosure of a mortgage, to redeem the property by
paying the amount fixed by the court in the order of execution, with interest thereon at the rate specified
in the mortgage, and all the costs and other judicial expenses incurred by the Bank by reason of the
execution and sale and for the custody of said property.
Indeed, conventional legal and banking business sense dictates that it must have been because of such
omission that paragraph (g) above had to expressly incorporate Act 3135 which provides for
extrajudicial foreclosure. We cannot, therefore, escape the conclusion that what STANDARD agreed to
in respect to the possible foreclosure of its mortgage was to subject the same to the provisions of Act
3135 should the PNB opt to utilize said law instead of Republic Act 1300.
On the other hand, Act 3135, as amended by Act 4018, is of 1924 vintage. Its Section 6 very clearly
governs the right of redemption in extrajudicial foreclosures thus:
Sec. 6. In an cases in which an extrajudicial sale is made under the special power hereinbefore referred
to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or
any person having a lien on the property subsequent to the mortgage or deed of trust under which the
property is sold, may redeem the same at any time within the term of one year from and after the date of
the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-
four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not
inconsistent with the provisions of this Act.
Sections four hundred sixty-four to four hundred sixty-six, inclusive, of the Code of Civil Procedure,
since the promulgation of the Rules of Court of 1940, became Sections 29, 30 and 34 of Rule 39. The
same sections were reiterated in the Revised Rules of Court in July 1964.
From all the foregoing, We are of the considered opinion and so hold that STANDARD'S/CITADEL'S
period of redemption was up to March 10, 1976. 4 That CITADEL filed its complaint to compel PNB to
accept its redemption only on March 11, 1976 is of no moment. The unequivocal tender of redemption
was made in the letter of Francisco S. Corpus, its President, of March 5, 1976 accompanied by a
manager's check of the Rizal Commercial Banking Corporation a well known, big and reputable banking
institution, for the amount it believed it should pay as redemption price. PNB rejected it on the sole and
only ground that it considered the amount insufficient. The Court, therefore, holds that the redemption
was made on time, that is, within one year (or even twelve months) from the date appearing as the date
of the registration of the certificate of sale.
How about the amount needed for such redemption?
On this score, PNB insists on p. 9 et. seq. of its brief on the applicability to this case of "Section 25 of
Presidential Decree No. 694, otherwise known as the new PNB Charter" which provides:
Section 25. Right of Redemption of Foreclosed Property Right of Possession During Redemption
Period Within one year from the registration of the foreclosure sale of real estate, the mortgagor shall
have the right to redeem the property by paying all claims of the Bank against him on the date of the sale
including all the costs and other expenses incurred by reason of the foreclosure sale and custody of the
property, as well as charges and accrued interests.
But P.D. 694 took effect only on May 8, 1975. PNB's counsel himself has, as already mentioned above,
taken the position that it was the old PNB Charter, Republic Act 1300, that was expressly made part of
the contract. In other words, it was by virtue of such contractual stipulation and not ex propio vigore that
the provisions of the bank's then current charter bound the mortgagor STANDARD. But prescinding
from possible legal flaw in such pose and that all provisions of the charter are enforceable and must be
read into all mortgages with the PNB as integral parts thereof, in this instant case, the Court finds its
hands inert and shackled in the face of the constitutional proscription against the impairment of
contracts. (Sec. 11, Art. IV, New Constitution) Stated otherwise, since the contract of mortgage herein
was entered into under a specific law, Republic Act 1300, even the principle that no law is unamendable
nor unrepealable cannot hold, when the subsequent legislative enactment, P.D. 694, would alter and
modify to the prejudice of any of the parties the terms of the contract under the aegis of the prior law.
Indisputably, the application of P.D. 694 to the mortgage herein involved would violate the Constitution.
Hence, it simply cannot apply.
Stated otherwise, by virtue of the provision of the mortgage contract precisely cited by PNB, namely, its
paragraph (g), quoted earlier, PNB had the contractually acquired option to resort either to its Charter,
Republic Act 1300 or to Act 3135. When it foreclosed the mortgage at issue, it chose Act 3135. That
was an option it freely exercised without the least intervention of appellee. And it was exercised before
P.D. 694 came into being. In fact, the foreclosure sales took place in 1974 yet. And so, to make the
redemption subject to a subsequent law would be obviously prejudicial to the party exercising the right
to redeem. Without considering the date the loan was secured and the date of the mortgage contract, and
taking into account only the dates of the foreclosures and auction sales, it is quite obvious that any
change in the law governing redemption that would make it more difficult than under the law at the time
of the sale cannot be given retroactive effect. Under the terms of the mortgage contract, the terms and
conditions under which redemption may be exercised are deemed part and parcel thereof whether the
same be merely conventional or imposed by law. To alter those terms in a manner prejudicial to the
mortgagor or the person redeeming the property as his successor-in-interest after the foreclosures and
sales would definitely come within the constitutional proscription against impairment of the obligations
of contracts.
Having thus come to the ineludible conclusion that Act 3135 and Sections 29 to 32 of Rule 39 of the
Rules of Court rather than P.D. 694 are the laws applicable to the right of redemption invoked by
appellee in this case, 5 it would appear that all that remains for Us to do is to apply the said legal
precepts. Pursuant to Section 30 of Rule 39, "the judgment debtor (or his successor-in-interest per
Section 29, here Leticia Co,) may redeem the property from the purchaser, (here PNB) at any time
within twelve months after the sale, on paying the purchaser the amount of his purchase, with one per
centum per month interest thereon in addition, up to the time of redemption, together with the amount of
any assessments or taxes which the purchaser may have paid thereon after the purchase, and interest on
such last named amount at the same rate; ..."
In this connection, lest it be argued that CITADEL did not include in its tender the amount of
assessments or taxes PNB might have paid before the redemption, His Honor, We note that the trial
judge, has pointed out that in spite of the requirement in the certificate of sale issued by the sheriff that
the purchaser or highest bidder submits within 30 days immediately preceding the expiration of the
period of redemption, an appropriate statement of the amount of such assessments or taxes, PNB failed
to comply with such requirement, hence it would be unfair to fault CITADEL for the non- inclusion
thereof in its tender. PNB argues, however, that it did furnish CITADEL on March 5, 1976 the required
data. We note, however, that the statement of P3,366,546.42 specified by PNB in its reply of March 5,
1976 is not clear enough to show the details on taxes and assessments under discussion. In any event,
considering that as earlier pointed out by Us, there could be a possibility that March 5, 1976 should be
considered as the last day of redemption, the explanation of PNB is, at least in equity, unavailing. There
was no more time for CITADEL to have a breakdown of the P3,366,546.42 to find out what items were
included therein. Anyway, this discussion is practically academic because in the manner We are
resolving this case, this point would be of no moment.
Before passing to another aspect of this case, it may not be amiss to mention here that in Moran's
Comments on the Rules of Court (p. 326-327, 1979 ed.), it is stated that where the judgment debtor,
which necessarily includes his successor-in-interest (Section 29, a, Rule 39) validly tenders the
necessary payment for the redemption and the tender is refused, it is not necessary that it be followed by
the deposit of the money in court or elsewhere (Enage vs. Vda. de Escano, 38 Phil. 687) and no interest
after such tender is demandable on the redemption money. (Martinez vs. Campbell, 10 Phil. 626; Fabros
vs. Agustin, 18 Phil. 336).
The jurisprudence cited by PNB are not applicable
Even as We have so far focused Our discussion and resolution of the issues herein on the pertinent
statutory provisions, We have not really closed Our eyes to the jurisprudence cited by PNB in its brief,
four of which are worthy of mention, namely Medina vs. PNB, 56 Phil. 655. Nepomuceno vs. RFC, G.R.
No. L-14877, Nov. 23,1960; Perez vs. PNB, 17 SCRA 833 and DBP vs. Mirang 66 SCRA 141.
The case of Perez, supra, did not involve a redemption in the sense that it is in issue in this case. In fact,
the point involved in the instant case is not even touched in the syllabus thereof in SCRA. This is
because what was fundamentally the problem therein was whether or not it was obligatory on the part of
the bank-mortgagee to foreclose judicially the mortgage inasmuch as the mortgagor died. As the Court
said, "the main issue in this appeal is the application of Section 7, Rule 87 of the Rules of 1940 (now
Section 7 of Rule 68), a reproduction of Section 708 of the Code of Civil Procedure". Hence, anything
said therein at issue may be deemed as obiter. If anything in that opinion is relevant hereto, it is that
portion thereof that justly and equitably holds that from whatever amount should be payable to the
mortgagee Bank, should be deducted "the value of any rents and profits derived by the (said) bank from
the property in question". (at p. 840)
In the Nepomuceno case, supra, what confronted the Court was a question relative to a mortgage with
the Rehabilitation Finance Corporation (RFC for short, now the Development Bank of the Philippines).
The Court found no difficulty in not applying Section 6 of Act 3135 because it found that there is in
Section 31 of the Charter of the RFC a provision basically similar to Section 25 of Presidential Decree
694, now being invoked here by PNB. Naturally, the Court upheld the RFC's contention that the whole
amount of the mortgagor's indebtedness should be paid. But in the instant case, as already discussed
earlier, P.D. 694 came too late.
DBP vs. Mirang supra, follows in principle the Nepomuceno ruling that the special provisions in the
charter of DBP govern in matters of redemption of property acquired by it in a foreclosure sale. So, We
need not elucidate any further on its inapplicability hereto.
It is the earlier case of Medina vs. PNB, supra, that nearly approximates the position PNB is pressing on
Us now, because in a portion of the opinion thereof, Chief Justice Avencea as correctly underlined by
PNB in its brief, stated:
As we have indicated above, there is no question with regard to the plaintiffs' right, as successors of the
Manila Commercial Company, to repurchase the parcels covered by the transfer certificates of title Nos.
137 and 139. The question is whether, as the bank contends and the trial court has held, the redemption
should be made by paying to the bank the entire amount owned to it by the Manila Commercial
Company. The appellants contend that this redemption may be made by only reimbursing the bank what
it has paid for the sale made to it. In this respect we are also of the opinion that the judgment appealed
from is correct. (Page 655)
But this statement needs clarification. Towards the concluding portion of the opinion, he explained that:
It will be remembered that the mortgage contract between the bank and the Manila Commercial
Company was executed on October 30, 1920, before the approval of Act No. 3135 in March, 1924. If,
before Act No. 3135 took effect, the Manila Commercial Company had violated the contract, beyond all
doubt the bank would have been able to sell the mortgaged property, without the necessity of a judicial
action, and the sale thus made would carry the right of repurchase on the part of the debtor through the
payment of the entire amount of the debt.
When the bank's right to foreclose the mortgage of the Manila Commercial Company accrued, Act No.
3135 was already in force. Of course, this law, being general, did not affect the charter of the bank,
which was a special law. Thus, when the bank, in order to sell the mortgaged property extrajudicially,
resorted to Act No. 3135, it did so merely to find a proceeding for the sale; but that action cannot be
taken to mean a waiver of its right to demand the payment of the whole debt before the property can be
redeemed. The record contains nothing to show that the bank made this waiver of said right. (Pp 656-
657)
There is here an implication that in undertaking the foreclosure therein involved, the PNB relied on Act
3135. This is not quite accurate, for in the opening paragraph of the same opinion, it is stated that:
On October 30, 1920 the Manila Commercial Co. and La Yebana Co. mortgaged four parcels of land
with Torrens titles, described in the complaint, to the Philippine National Bank, the first and fourth
parcels being in the name of the La Yebana Co. and the second and third in the name of the Manila
Commercial Co. The mortgage was given to secure the payment of P680,000 or for whatever amount the
Manila Commercial Co. might be indebted to the Philippine National Bank. One of the clauses of the
mortgage provides that in case of a violation by the Manila Commercial Co. of any of the conditions of
the contract the Philippine National Bank may take possession of the mortgaged property and sell or
dispose of it by public or private sale, without first having to file a complaint or to give any notice, and
at such sale, if public, it may acquire for itself all or any of the parcels of land. (Page 651) (Emphasis
supplied)
Thus, it is to Our mind closer to the truth that it was by virtue of such contractual clause, rather than Act
3135, even if the request to the sheriff did mention said Act that PNB foreclosed. In any event, the Court
did take into account that the mortgage at issue in that case was executed before the approval of Act
3135 and observed that without such Act, the right of the bank to full payment would have been
indisputable. This is the same principle of non-impairment of the contracts by subsequent legislative
action We have made reference to above in precluding the applicability hereto of P.D. 694.
On the minor issues
We are not impressed that PNB is really serious in its pose that the tender by manager's check by
CITADEL was inefficacious. For one thing, that obligation was waived when in its letter of rejection,
the bank did not invoke it. (Gregorio Araneta, Inc. vs. De Paterno and Vidal, 91 Phil. 786) More
importantly, this Court has already sanctioned redemption by check. (Javellana vs. Mirasol, 40 Phil.
761)
Neither do We find any substantial weight in PNB's pose that the transfer or conveyance of
STANDARD'S right of redemption to CITADEL and the latter to Leticia Co is not binding on it. In
Lichauco vs. Olegario, et al., 43 Phil. 540, this Court held that "whether or not ... an execution debtor
was legally authorized to sell his right of redemption, is a question already decided by this Court in the
affirmative in numerous decisions on the precepts of Sections 463 and 464 and other sections related
thereto, of the Code of Civil Procedure. " (The mentioned provisions are carried over in Rule 39 of the
Revised Rules of Court.) That the transfers or con. conveyances in question were not registered is of
miniscule significance, there being no showing that PNB was damaged or could be damaged by such
omission, When CITADEL made its tender on May 5, 1976, PNB did not question the personality of
CITADEL at all. It is now too late and purely technical to raise such an innocuous failure to comply
with Article 1625 of the Civil Code.
The foregoing discussion inexorably points to the conclusion that the price of redemption of
P1,621,970.00 tendered by CITADEL on March 5, 1976 was the correct amount. Since PNB refused to
allow the redemption thus legally tendered, applying the law strictly, it would stand to lose
P1,744,576.42 of what it claims was the total indebtedness or outstanding obligation of CITADEL as of
March 11, 1976.
To avoid this loss, PNB invokes, as already stated above, P.D. No. 694, but We have also pointed out
earlier that to apply said decree would result in the impairment of the contractual obligation of
CITADEL, which cannot be allowed under the Constitution.
However, We are persuaded that all such considerations would render the result of this case short of
what appears to be substantial justice in the light of the situation on hand. It strikes Us as rather
unconscionable that by a literal application of the law and perhaps due to a mistake in the amount of the
bid made by PNB, 6 the bank would not get full satisfaction of its credit. Indeed, there would be unjust
enrichment on the part of the debtor- mortgagor in such an eventuality. Our sense of justice cannot
permit such inequitous advantage.
With this point in mind, We deem it fairer and so hold that considering the unique factual milieu of this
case, Articles 22 and 2142 of the Civil Code should be the guideposts of Our decision here. Said articles
provide:
ART. 22. Every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall return
the same to him.
xxx xxx xxx
ART. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-
contract to the end that no one shall be unjustly enriched or benefited at the expense of another.
Although the report of the Code Commission states that:
Another rule is expressed in article 22 which compels the return of a thing acquired "without just or
legal ground." This provision embodies the doctrine that no person should unjustly enrich himself at the
expense of another, which has been one of the mainstays of every legal system for centuries. It is most
needful that this ancient principle be clearly and specifically consecrated in the proposed Civil Code to
the end that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the prejudice
of another. The German Civil Code has a similar provision (art. 812).
it may be said that whatever of the principle of unjust enrichment may not be covered by Article 22,
Article 2142 makes its enhancement in this jurisdiction most comprehensive
Consequently, it is but just and proper that PNB should be paid the full amount of P3,366,546.42
without any interest as of March 11, 1976, when it refused a redemption legally and validly tendered. On
the other hand, the amount of P1,621,970.00 tendered by CITADEL on March 5, 1976 and which was
deposited in a savings account, drawing interest apparently less than 12% p.a., in the name of PNB by
order of the trial court should be computed to have earned legal interest or 12% p.a., compounded
annually, since March 11, 1976, provided however that should such amount including the compounded
interest at 12% p.a. so earned be less than P3,366,546.42, petitioner herein should pay PNB such
difference, and provided, on the other hand, that with this arrangement, PNB does not have to account to
CITADEL/LETICIA CO for any of the rentals it had earned from the time it took possession of the
property. In the final analysis, instead of PNB losing P1,744,576.42, under strict technical legal
reasoning, as explained above, applying hereto the principle of unjust enrichment, which We deem in
the peculiar circumstances at this instant case to be the fairest way of resolving this controversy, it
would still be paid by petitioner a certain amount, not to mention what must be quite substantial and
considerable, the rentals the said bank it has earned, which it does not have to account for.
In closing, We may add that in Escano, supra, this Court laid down as a policy that "redemptions are
looked upon with favor, and when an injury is to follow, a liberal construction will be given to our
redemption laws to the end that the property of the debtor may pay as many of the debtor's liabilities",
PNB having foreclosed on the Baguio properties and the chattels of STANDARD for what appears
could have been a fairer price, it is but in consonance with the Escano policy that the redemption herein
involved be allowed on the basis of the injunction against unjust enrichment. 7 We may add here the
observation, taught by common business experience, that when a bank grants a loan, secured by any
collateral, what is of uppermost consideration to such lender is the borrower's capacity to pay according
to the terms stipulated, and not really the acquisition of the collateral, if only to maintain the bank's
liquidity position as conveniently as possible. Acquired assets generally add to liquidity problems of
banks. The foreclosure of the security is a measure of last resort, hence when by the exercise of the right
of redemption, the bank can recover the money it has loaned, nothing could be more proper than to
allow the borrower to retain his property. Of course, peculiar instances are naturally excepted. That is
why this decision cannot be invoked as a precedent for other parties not exactly similarly situated as the
appellee in this case. Should there be any thought that Our resolution of this case is not strictly
according to legal principles, let everyone be reminded that this Court has inherent equity jurisdiction it
can always exercise in settings attended by unusual circumstances to prevent manifest injustice that
could result from bare technical adherence to the letter of the law and unprecise jurisprudence under it.
WHEREFORE, the judgment of the trial court against the Philippine National Bank herein on appeal is
hereby modified and another one is hereby rendered in favor of the said defendant-appellant bank in
accordance with the formula herein above stated, and, accordingly, upon payment by LETICIA CO of
the amount due it pursuant to the above computation, PNB is hereby ordered to transfer the title to the
property in question to LETICIA CO. This payment must be made within ten (10) days from the finality
of this judgment.
No costs.

Alpha Insurance and Surety vs. Reyes, 106 SCRA 274

An appeal from the decision of the Court of First Instance of Manila in Civil Case No. 49980, Alpha
Insurance and Surety Co., Inc. vs. Esperanza C. Reyes, et al., certified by the Court of Appeals to this
Court for the reason that the sole assignment of error of appellant raises purely a legal question.
The following facts are undisputed:
The spouses Esperanza C. Reyes and Arturo R. Reyes executed on November 15, 1958 in favor of
Alpha Insurance and Surety Co., Inc. a second mortgage over their two parcels of land cranad(with a
total area of 540 square meters) and the buildings thereon, located at Makati, Rizal, in consideration of
Alpha Insurances undertaking to act as surety of the said spouses in certain loans cranad(not to exceed
P10,000.00) to be obtained from banks or financial institutions. The two lots were previously mortgaged
to the Development Bank of the Philippines as security for a loan of P17,000.00.
In 1958, Esperanza C. Reyes borrowed P5,000.00 from the Prudential Bank and Trust Company. In
1959, she borrowed also P5,000.00 from the Philippine Banking Corporation. Alpha Insurance was her
surety and co-maker in two promissory notes covering the said loans. She and her husband executed
indemnity agreements in favor of Alpha Insurance in addition to the second mortgage.
Due to the default of Esperanza C. Reyes, Alpha Insurance, as solidary debtor, was constrained to pay
the two loans total balance of which as of November 21, 1961 was P7,575.00, plus 12% interest per
annum.
As the Reyes spouses did not make any reimbursement to Alpha Insurance, the latter filed on March 27,
1962 in the Court of First Instance of Manila the foreclosure action above-mentioned against the spouses
and the DBP.
The DBP in its answer alleged that it had a first mortgage on the two lots which was superior to Alpha
Insurances mortgage. It prayed that, in case of foreclosure, the proceeds of the sale be first applied to its
credit. The Reyes spouses did not file an answer. They were declared in default.
Judge Jose L. Moya in his decision dated February 1, 1963, simply ordered the Reyes spouses to pay
Alpha Insurance the sum of P7,575.00 with 12% interest a year from November 22, 1961.
Because the judge had ignored the prayer in Alpha Insurances complaint for the foreclosure of its
second mortgage, it filed a motion for reconsideration, praying that the foreclosure of the second
mortgage be ordered and that the Reyes spouses be required to pay attorneys fees.
Judge Moya in his order of February 19, 1963 awarded P757.50 as attorneys fees, but he held that the
second mortgage could not be recognized as an encumbrance because the DBP did not consent to its
execution.
Judge Moya relied on the ruling in Associated Insurance & Surety Co., Inc. vs. Register of Deeds of
Pampanga, 105 Phil. 123, which construed the following provisions of Commonwealth Act No. 459, the
law creating the Agricultural and Industrial Bank:
 SEC. 26. Securities on loans granted by the Agricultural and Industrial Bank shall not be
subject to attachment nor can they be included in the property of insolvent persons or
institutions, unless all debts and obligations of the debtor to the Agricultural and Industrial Bank
have been previously paid, including accrued interest, collection expenses, and other charges.1
This Court held therein that this section embraces levy on execution or any other encumbrance, unless
the same is created with the consent of the bank and that (A) different interpretation would defeat the
very purpose of the law which is to maintain unhampered the value of the property until the
encumbrance shall have been released.
Alpha Insurance filed a motion for reconsideration wherein it alleged that the second mortgage was
approved by DBP Governor Roberto S. Benedicto cranad(Exh. A-2) and that the second mortgage was
registered because of that approval and because the DBP delivered the owners duplicate of the title to
Alpha Insurance in order to effect the registration.
Nevertheless, Judge Moya denied the motion. Alpha Insurance appealed to this Court.
Controversies of this nature should not even be litigated, much less reach this Supreme Court, adding to
its already almost unmanageable docket. The issue between the parties is so insubstantial that a little
more effort on the part of respective counsels of the parties and the trial court to get together as to what
should be done would have cleared up matters in a manner We are certain would have been satisfactory
to all concerned. To think that a litigation like this should last since March 27, 1962 or more than almost
two decades ago when plaintiff-appellant filed its action of foreclosure is a black spot in the
administration of justice in this country. This situation is intolerable and the members of the Bar and the
trial judges ought to change their attitudes and direct their efforts towards more important and
substantial legal matters, thereby serving public interest to the utmost within their expected capabilities.
Deciding the legal question before Us, even if the DBP were just an ordinary first mortgagee without
any preferential liens under Republic Act No. 85 or Commonwealth Act 459, the statutes mentioned in
the Associated Insurance case relied upon by the trial court, it would be unquestionable that nothing may
be done to favor plaintiff-appellant, a mere second mortgagee, until after the obligations of the debtors-
appellees with the first mortgagee have been fully satisfied and settled. In law, strictly speaking, what
was mortgaged by the Reyeses to Alpha was no more than their equity of redemption.
Thus, what We perceive to be most appropriate to do at this late stage is to see to it that the obligations
in question are paid soonest. However, to insist now, after so many wasted years, on following in this
case the ordinary foreclosure procedure provided by law would only cause further unnecessary delay in
the termination of the insubstantial controversy among the parties herein.
In De la Riva vs. Reynoso, 61 Phil. 734, Antonio de la Riva, the second mortgagee, filed an action
against the mortgagor Marceliano Reynoso to foreclose the second realty mortgage. La Urbana Mutual
Building and Loan Association, the first mortgagee, was joined as a co-defendant.
This Court held that La Urbana was properly joined as a co-defendant and affirmed the lower courts
judgment ordering Reynoso to pay within ninety days the amounts due to La Urbana and De la Riva,
and, in case of failure to do so, ordering the sale at public auction of the mortgaged property and the
application of the proceeds of the sale to the two mortgage debts.
Within this precedent, the Court is of the considered opinion and so holds that to avoid further delay in
writing finis to the instant case which started way back in 1962, without any more ado, all that has to be
done here is to have the property herein involved ordered by the trial court sold at public auction
immediately, the proceeds thereof to be used to pay the outstanding obligation, if still there be any, of
the defendants-appellees Esperanza Reyes and Arturo Reyes to the Development Bank of the
Philippines; if there be any excess thereafter, the same be used to pay their obligation to the plaintiff-
appellant, and should there still be any further excess, the same should be given to the said Defendants-
Appellees.
ACCORDINGLY, judgment is hereby rendered modifying the decision of the trial court to conform
with the procedure herein outlined. No costs.

Marcelo Steel Corp. vs. CA, 54 SCRA 89

Petitions for review of the decision of the Court of Appeals in CA-G. R. No. 47519-R, entitled Petra
Farin, et al., vs. Hon. Walfrido de los Angeles, etc. et al., granting a petition for certiorari of herein
private respondents, the spouses Benjamin and Petra Farin, and annulling and setting aside the orders
separately issued by the Court of First Instance of Quezon City in its Civil Case No. Q-9384 and in L. R.
C. Record No. 7681, the first being an order dated December 9, 1970 denying private respondents'
motion to stop the Sheriff of Quezon City from proceeding with the extrajudicial foreclosure sale of the
properties herein involved which said private respondents had mortgaged to herein petitioner Marcelo
Steel Corporation, after the said court had already rendered judgment dismissing the complaint for
prohibition to enjoin said foreclosure, but pending the appeal thereof, and the second being the order
dated February 4, 1971 granting the same petitioner's motion for a writ of possession of the said
properties which it had acquired in the foreclosure sale which the court had refused to restrain in the
other case.

The background facts are stated in the decision of the Court of Appeals thus:

This is a petition for certiorari to annul the order dated December 9, 1970, issued in Civil
Case No. Q-9384 of the Court of First Instance of Quezon City, Branch IV, and the writ
of possession issued in L.R.C. Rec. No. 7681 of said court.

It appears that on October 30, 1964, the petitioner spouses executed a deed of real estate
mortgage, in favor of respondent Marcelo Steel Corporation, hereinafter referred to as
respondent corporation over a parcel of land covered by T.C.T. No. 42689 of the Register
of Deeds of Quezon City, as security for the payment of a promissory note in the sum of
P600,000.00.

On July 24, 1965, the respondent corporation filed with the Sheriff of Quezon City a
verified letter-petition for the extra-judicial foreclosure of the afore-mentioned real estate
mortgage. Accordingly, the respondent Sheriff of Quezon City advertised and scheduled
the extra-judicial foreclosure sale of the mortgaged property for August 26, 1965.

On August 21, 1965, the petitioners filed against the respondent corporation and the
respondent Sheriff of Quezon City a petition captioned "Prohibition with Injunction and
Damages" docketed as Civil Case No. Q-9384 of the Court of First Instance of Rizal,
wherein they prayed that the respondent sheriff be permanently enjoined from proceeding
with the scheduled sale at public auction of the mortgaged property, and that the
respondent corporation be condemned to pay the petitioners P200,000.00 as actual and
moral damages and P50,000.00 as penal and compensatory damage and P30,000.00 as
attorney's fees, on the ground that they have not been in default in the payment of their
obligation.
On August 21, 1965, the respondent judge issued an order commanding the respondent
Sheriff and the respondent corporation to desist from proceeding with the public auction
sale of the mortgage property scheduled on August 26, 1965.

After trial, the respondent judge rendered a decision on October 3, 1970, the dispositive
portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered as follows:

1. The above-entitled case is hereby ordered DISMISSED, for lack of sufficient basis;

2. Ordering the petitioners, jointly and severally, to pay the sum equivalent to 15% of the
total obligation due, as reasonable attorney's fees;

3. Ordering petitioners to pay respondent Marcelo Steel Corporation, jointly and

severally, the sum of P50,000.00 as actual exemplary damages;

4. Ordering the petitioners, jointly and severally, to pay the costs of the suit.

The order of status quo issued by the Court under date of August 21, 1965 is hereby
LIFTED and SET ASIDE, and the Sheriff of Quezon City may now proceed with the
extrajudicial foreclosure of the mortgage."

Petitioners received a copy of the decision on October 15, 1970.

On October 19, 1970, respondent corporation filed with respondent Sheriff another
verified letter-petition informing the latter of the decision rendered in Civil Case No. Q-
9384 and praying for the extra-judicial foreclosure of the real estate mortgage. Acting on
said letter-petition, the respondent Sheriff issued the necessary notices setting the public
auction sale of the mortgaged property on December 9, 1970.

On October 30, 1970, petitioners filed their notice of appeal, appeal bond and record on
appeal.

On December 4, 1970, petitioners riled an "Urgent Motion to Require Respondents to

Desist From Proceeding With The Public Auction Sale of Petitioners' Properties."

After respondent corporation filed its opposition to said motion, the respondent judge
issued on December 9, 1970, an order denying petitioners' aforementioned motion to stop
respondent Sheriff from proceeding with the scheduled auction sale of petitioners'
mortgaged property. On the same date, the respondent Sheriff proceeded with the auction
sale of the mortgaged property, respondent corporation being the successful bidder, and
issued the correspondent certificate of sale dated December 9, 1970.

On the same date, December 9, 1970, the respondent Judge issued an order approving
petitioners record on appeal.

On January 12, 1971, the respondent corporation filed in L.R.C. Rec. No. 7681 an
independent petition for the issuance of a writ of possession entitled "In the Matter of the
 Petition For Issuance of Writ of Possession Over a Parcel of Land Covered By Transfer
Certificate of Title No. 42589 of The Office of The Register Of Deeds of Quezon City In
The Name Of Mortgagor Petra R. Farin Married To Benjamin Farin; Marcelo Steel
Corporation (Mortgage) Petitioner". This petition was also assigned to the respondent
Judge. Petitioners did not file an opposition to said petition.

On January 18, 1971, the respondent Judge issued an order directing the presentation and
submission of evidence before the Branch Clerk of Court. After the respondent
corporation had submitted its evidence in support of its petition, the respondent Judge
issued an order on February 4, 1971, granting the petition for the issuance of a writ of
possession.

Thereupon, the petitioners filed the present petition.

Upon these facts, the Court of Appeals held the trial court exceeded its jurisdiction when it denied the
motion of the Farins seeking to enjoin the foreclosure sale of their mortgaged properties inasmuch as
they had already perfected their appeal from the decision dismissing their petition for prohibition against
said sale. According to the appellate court, since the remedy pursued by the Farins was not an ordinary
action of injunction within the contemplation of Section 4 of Rule 39 nor one for the annulment of
mortgage, but a special civil action of prohibition, the decision therein is not immediately executory as a
matter of right but only of sound judicial discretion under Section 2 of the same rule, and considering
that the prevailing party had not even moved for immediate execution, the trial court could not have
availed of its powers under this last mentioned provision.

It is quite obvious that the Court of Appeals has missed the point. As a matter of fact, it is plain that the
trial court did not issue any order of execution. The sheriff's act of proceeding with the foreclosure sale
was not done by virtue of any such order of execution, but pursuant to his authority and duty under Act
3135 as amended by Act 4118 governing the extrajudicial foreclosure of mortgages, which is simply to
sell the mortgaged properties at public auction to the highest bidder, upon verified petition of the
mortgagee and without the need of any judicial order. In other words, the sheriff went ahead not because
he was so ordered by the court, but precisely because the court refused to restrain him by dismissing
respondents' petition for prohibition and lifting the status quo order it had preliminarily issued upon the
filing of the complaint. Under these circumstances, the perfection of respondents' appeal could not by
itself have had the effect of restoring the status quo order, without an express order in that sense, which,
of course, the court had the power to issue. The Court has so held as early as November 13, 1902
in Watson & Co. vs. Enriquez, found in Volume I of the Philippine Reports at pages 480 to 484. The
ruling therein made which is very illuminating applies four-square to the case at bar.

The plaintiff, at the commencement of this action obtained a preliminary injunction as

prayed for in its complaint. The case was afterwards tried, and in September, 1902, a
final judgment therein was entered in favor of the defendants and the temporary
injunction was dissolved.

On the 20th of September a bill of exceptions was perfected and signed by the judge, and
a certified copy thereof was then transmitted to this court. In this court the plaintiff has
presented a motion asking that the preliminary injunction be continued.

Before discussing the power of this court to grant a preliminary injunction, under these
circumstances, it seems necessary to determine whether or not the preliminary injunction
granted below was continued in force by the filing of the bill of exceptions. Article 144
of the Law of Civil Procedure, now in force, says: "But the filing of a bill of exceptions
shall of itself stay execution until the final determination of the action, unless," etc.
Article 1007 of the Revised Statutes of the United States states the manner of obtaining a
supersedeas in cases pending in the Federal courts. The meaning of the word
"supersedeas" as used in that section has been defined as follows: "A supersedeas,
properly so called, is a suspension of the power of the court below to issue an execution
on the judgment or decree appealed from; or, if a writ of execution has issued, it is a
prohibition emanating from the court of appeals against the execution of the writ. (Hovey
vs. McDonald, 109 U.S. 150.)

As so construed, article 1007 of the Revised Statutes of the United States is substantially
the equivalent of our article 144. This question as to whether a supersedeas has, in the
Federal courts, the effect of continuing in force an injunction dissolved by the lower court
has frequently been passed upon by the Supreme Court. That court has said: "The general
ruling is well settled that an appeal from a decree granting, refusing, or dissolving an
injunction does not disturb its operative effect. (Hovey vs. McDonald, 109 U.S. 150-161;
Slaughterhouse Cases, 10 Wall., 273-297; Leonard vs. Ozark Land Company, 115 U.S.,
465-468.) When an injunction has been dissolved it can not be revived except by a new
exercise of judicial power, and no appeal by a dissatisfied party can of itself revive it.
(Knox Co. vs. Harshman, 132 U.S., 14.)

The truth is that the case is not governed by the ordinary rules that relate to a supersedeas
of execution, but by those principles and rules which relate to chancery proceedings
exclusively. ... In this country the matter is usually regulated by statutes or rules of court,
and, generally speaking, an appeal, upon giving the security required law, when security
is required, suspends further proceedings and operates as a supersedeas of execution. ...
But the decree itself may have an intrinsic effect which can only be suspended by an
affirmative order either of the court which makes the decree or of the appellate tribunal.
This court, in the Slaughterhouse Cases, 10 Wall., 273, decided that an appeal from a
decree granting, refusing, or dissolving an injunction does not disturb its operative effect.
Mr. Justice Clifford, delivering the opinion of the court, says: "It is quite certain that
neither an injunction nor a decree dissolving an injunction passed in circuit court is
reversed or nullified by an appeal or writ of error before the cause is heard in this court."
It was decided that neither a decree for an injunction nor a decree dissolving an
injunction was suspended in its effect by the writ of error, though all the requisites for
supersedeas were complied with. It was not decided that the court below had no power, if
the purpose of justice required it, to order a continuance of the status quo until a decision
should be made by the appellate court, or until that court should order the contrary. This
power undoubtedly exists, and should always be exercised when any irremediable injury
may result from the decree as rendered. ( Hovey vs. McDonald, 109, U.S., 159.)

In Minnesota the supersedeas statute provided that the appeal from the order of judgment
should "stay all proceedings thereon and save all rights affected thereby." The court of
this State, relying upon the last of the two clauses quoted, held that an appeal from an
order dissolving an injunction continued the injunction in force. The evils which would
result from such a holding are forcibly pointed out by Judge Mitchell in a dissenting
opinion. He said: "Although a plaintiffs papers are so insufficient on their face or so false
in their allegations that if he should apply on notice for an injunction, any court would, on
 a hearing, promptly refuse to grant one, yet, if he can find anywhere in the State a judge
or court commissioner who will improvidently grant one ex parte, which the court on the
first and only hearing ever had dissolves, he can, by appealing and filing bond, make the
ex parte injunction impervious to all judicial interference until the appeal is determined in
this court. ... Such result is so unjust and so utterly inconsistent with all known rules
equity practice that no court should adopt such a construction unless absolutely shut up to
it by the clear and unequivocal language of the statute. (State vs. Duluth St. Ry. Co., 47
Minn., 369.)

The supreme court of that State afterwards, although adhering to that decision on the
ground of stare decisis, stated that in their opinion it was unsound. (State ex rel. Leary vs.
District Court, 78 Minn., 464.)

We have in these Islands no appeal from orders granting or dissolving preliminary

injunctions, yet what was said by Justice Mitchell applies to a case where, upon a full
trial in a court below, the judge has decided that neither upon the facts nor the law is the
plaintiff entitled to any relief. To allow a plaintiff in such a case, by taking an appeal and
giving a supersedeas bond, to continue an injunction in force would be manifestly unjust.

We adopt the rule announced by the Supreme Court of the United States and hold that the
filing of the bill of exceptions in the case at bar did not operate to revive the preliminary
injunction which was dissolved in and by the final judgment.

We also adopt the other conclusion of that court to the effect that the judge below has the
power, if the purposes of justice require it, to order a continuance of the status quo until a
decision should be made by the appellate court or until that court should order to the
contrary. We have already in effect declared that principle in the case of Maximo Cortes
vs. Palanca Yutivo, decided August 6, 1902.

This doctrine was reiterated a few days later in Sitia Teco vs. Ventura, 1 Phil. 497 thus:

During the pendency of the suit the plaintiff applied for a preliminary injunction on the
ground, as stated in the oral argument of counsel, that the house placed by the plaintiff
upon the lot having been destroyed by order of the municipality the defendants
repossessed themselves of the premises and were preparing to build a house thereon.

Upon a trial of the case judgment was rendered against the plaintiff on the merits of the
suit, and the injunction was dissolved. The plaintiff has appealed the case by a bill of
exceptions and has made application to this court to restore the injunction on the ground
that the operative effect of the judgment by which the injunction was dissolved has, by
virtue of the appeal taken and the giving of a supersedeas bond, been lost, and that the
judgment in the case should not have the effect of disturbing the interlocutory injunction.
In the case of Watson & Co. vs. Enriquez, decided by this court October 26, 1902, it is
held that an appeal from an order dissolving an injunction does not suspend the operation
of the decision so as to revive the interlocutory injunction.

We had occasion to reaffirm the same ruling in Aguilar vs. Tan, G. R. No. L-23600, rendered in January
30, 1970 31 SCRA 205-214.
Now, in connection with the issuance by the trial court, upon motion of petitioner and without objection
of the Farins, of the writ of possession in the L.R.C. case, the appellate court ruled that the same
amounted to an execution of the decision in the civil case, and such being the case, the trial court should
have desisted from doing it in view of the respondents' appeal. We do not agree. It is Our considered
opinion that the writ of possession was properly issued, since, as already discussed above, the
foreclosure proceeding conducted by the sheriff was not predicated on any judicial order. Again, the
erroneous pose of the Court of Appeals runs counter to standing jurisprudence on the matter. In De
Gracia vs. San Jose, 94 Phil. 623, which is likewise on all fours with the situation presently before Us,
the Court held:

Petitioner is the registered owner of the real property described in Transfer Certificate of
Title No. 3731 of the Land Records of the city of Manila, which, by way of extrajudicial
foreclosure of a mortgage constituted upon the same in favor of the Rehabilitation
Finance Corporation, was on November 14, 1952, sold to the Republic Surety &
insurance Co., Inc., as the highest bidder at a public auction conducted by the sheriff of
said city under a special power of attorney attached to the mortgage deed and pursuant
Act. No. 3135, as amended by Act No. 4118. Three days after the sale, the purchaser filed
an ex parte motion, duly verified, in the four branch of the Court of First Instance of
Manila as authorized section 7 of the same Act, as amended, praying that it be given
possession of the property during the redemption period and offering to furnish the
corresponding bond. But before the motion could acted upon, herein petitioner filed an
opposition thereto and followed it with a complaint for the annulment of the sale and a
motion dismiss the petition for a writ of possession or to postpone consideration thereof
until the complaint for annulment could be decided. Being specifically empowered by the
Act to grant such writ on an ex parte motion by the purchaser, the court refused to be side
tracked and authorized the issuance of the writ upon the filing of a bond without
prejudice to the right of the oppositor to question the validity of the sale in the manner
provided by law.

Contending that the lower court acted without jurisdiction and with grave abuse of
discretion in authorizing the issuance of the writ, petitioner has come to this Court for a
writ of certiorari and prohibition.

The petition is without merit.

Sections 7 and 8 of Act No. 3L35, as amended, provide:

SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the
Court of First Instance of the province or place where the property or any part thereof is
situated, to give him possession thereof during the redemption period, furnishing bond in
an amount equivalent to the use of the property for a period of twelve months, to
indemnify the debtor in case it be shown that the sale was made without violating the
mortgage or without complying with the requirements of this Act. Such petition shall be
made under oath and filed in form or an ex parte motion in the registration or cadastral
proceedings if the property is registered, or in special proceedings in the case of property
registered under the Mortgage Law or under section one hundred and ninety-four of the
Administrative Code, or of any other real property encumbered with a mortgage duly
registered in the office of any register of deeds in accordance with any existing law, and
in each case the clerk of court shall, upon the filing of such petition, collect the fees
 specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four
hundred and ninety six, as amended by Act Numbered Twenty-eight hundred and sixty-
six, and the court shall, upon approval of the bond, order that a writ of possession issue
addressed to the sheriff of the province in which the property is situated, who shall
execute said order immediately.

SEC. 8. The debtor may, in the proceedings in which possession was requested but not
later than thirty days after the purchaser was given possession, petition that the sale be set
aside and the writ of possession cancelled, specifying the damages suffered by him,
because the mortgage was not violated or the sale was not made in accordance with the
provisions hereof, and the court shall take cognizance of this petition in accordance with
the summary procedure provided for in section one hundred and twelve of Act Numbered
Four hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall
dispose in his favor of all or part of the bond furnished by the person who obtained
possession. Either of the parties may appeal from the order of the judge in accordance
with section fourteen of Act Numbered Four hundred and ninety-six; but the order of
possession shall continue in effect during the pendency of the appeal.

As may be seen, the law expressly authorizes the purchaser to petition for a writ of
possession during the redemption period by filing an ex parte motion under oath for that
purpose in the corresponding registration or cadastral proceeding in the case of property
with Torrens title; and upon the filing of such motion and the approval of the
corresponding bond, the law also in express terms directs the court to issue the order for a
writ of possession. Under the legal provisions above copied, the order for a writ of
possession issues as a matter of course upon the filing of the proper motion and the
approval of the corresponding bond. No discretion is left to the court. And any question
regarding the regularity and validity of the sale (and the consequent cancellation of the
writ) is left to be determined in a subsequent proceeding as outlined in section 8. Such
question is not to be raised as a justification for opposing the issuance of the writ of
possession, since, under the Act, the proceeding for this is ex parte.

It thus appear that the respondent Judge, in ordering the issuance of a writ of possession
in this case, merely obeyed an express mandate of the law in the manner and upon the
terms therein provided, and petitioner may not complain that he has been deprived of a
substantial right without due process, because the order states that it is to be "without
prejudice to the rights of the oppositor to question the validity of the above mentioned
sale in the manner provided by law.

Having merely followed an express provision of the law, whose validity is not
questioned, the Judge cannot be charged with having acted without jurisdiction or with
grave abuse of discretion. The rule that the purchaser at a judicial public auction is not
entitled to possession during the period of redemption is not applicable to a sale under
Act No. 3135 where the granting of said possession expressly authorized. ...

As may be gleaned from the foregoing dissertation of Justice Alex Reyes for the Court, even the main
remedy of prohibition sought by the Farins was uncalled for. The plain, speedy and adequate and even
more expeditious remedy available to them was that specifically provided for in Section 8 of Act 3135,
as amended, quoted in the opinion, which is by the summary petition under Section 112 of Act 496, the
Land Registration Act. We surmise that the issue of alleged usury raised by respondents must have been
considered by the trial judge who also decided the civil case in which said defense was raised as not
substantial enough to warrant its being taken up in an ordinary action outside of the land court.

PREMISES CONSIDERED, the decision of the Court of Appeals under review is reversed and the
petition for certiorari filed by the respondent Farins therein is dismissed, with costs against said
respondents.

PNB vs. Adil, 118 SCRA 110

This is a special civil action for certiorari which seeks to annul the several injunctive orders issued by
respondent judge, and praying that, instead, the writ of possession issued in favor of petitioner, as
purchaser in the foreclosure sale, dated April 20, 1979, be immediately enforced.
It appears that on 'August 2, 1974, respondent Angelina Lobaton Melliza, for herself and as judicial
administratrix of the estate of Teodoro Uy Melliza, obtained a loan from petitioner in the amount of
P80,000.00 which was secured by a mortgage over two parcels of land covered by TCT Nos. 8266 and
T-8267, For failure of said respondent to pay the loan on maturity, the mortgage was foreclosed
extrajudicially on February 16, 1976 at which foreclosure sale, petitioner purchased the properties for
P97,923.73. The properties were not redeemed within the period, hence the title over the same were
consolidated in the name of petitioner, and consequently TCT .Nos. T-50422 and T-50423 were issued
in its name on June 26, 1978.
On April 19, 1979, petitioner filed an ex-parte petition for issuance of a writ of possession before the
Court of First Instance of Iloilo, Branch II, which was granted by an order dated April 20, 1979. Upon
issuance of the writ, the Deputy Sheriff served the same upon private respondents, but the latter
requested for a grace period of seven (7) days to vacate the premises in question to which the Sheriff
agreed. On May 8, 1979, the Sheriff returned to the premises in question and finding that private
respondents are still staying in the premises and had not complied with the writ of possession,
immediately ordered their ejectment. At around one o'clock in the afternoon, before the ejectment was
completed, the Sheriff received an order dated May 8, 1979, issued motu proprio by respondent judge,
suspending the implementation of the writ of possession for "humanitarian reasons" for a period of
fifteen (15) days. Before the expiration of the fifteen (15) day period, private respondents filed a
complaint dated May 14, 1979 for the annulment of the extrajudicial foreclosure, writ of possession and
consolidation of ownership on ground that the properties were foreclosed without personal notice to any
of the private respondents. The complaint was docketed as Civil Case No. 12894 and was assigned to
the Court of First Instance of Iloilo, Branch V. Upon motion of private respondents "to consolidate the
trial of the two cases," the Presiding Judge of said Branch, in an order dated May 24, 1979, transferred
the case of Branch II, presided by respondent judge.
In the proceeding for the writ of possession, private respondents filed a motion for reconsideration of the
order granting the writ of possession, while petitioner filed a motion to declare private respondents in
contempt for refusal to vacate the premises, which motions were ordered by respondent judge held in
abeyance pending the resolution of the prejudicial question raised by private respondents in Civil Case
No. 12894.
On June 1, 1979, respondent judge, acting on private respondents' prayer for injunction, issued an order
restraining petitioner from disturbing the status quo, and on July 5, 1979, respondent judge issued an
order granting the writ of preliminary injunction.
Subsequently, petitioner filed the following: 1) Motion to Require Plaintiff to Deposit Income/Fruits of
the Disputed Property dated July 6, 1979; 2) Motion for Reconsideration of the order of July 5, 1979
dated July 17, 1979; and 3) Motion to Dismiss, the Complaint dated August 2, 1979. The first two
motions were denied by, respondent judge on August 13, 1979, and the last motion, on November 22,
1979.
As could readily be seen, the main question is whether or not respondent judge grave abused his
discretion, amounting to lack of jurisdiction. in issuing the orders dated May 8, 1979, June 1, 1979, July
5, 1979 and August 13, 1979 all of which, in effect, enjoined the enforcement of the writ of possession.
The petitioner sustains the affirmative, contending that since pursuant to De los Angeles vs. Court of
Appeals, et al. 1 citing De Gracia vs. San Jose, 94 Phil. 675, it is ministerial upon the court to issue a
writ of possession in favor of the purchaser in a foreclosure sale of a mortgaged property, it follows that
the execution of the writ of possession cannot be suspended, much less, restrained by respondent judge.
It also contends that, as purchaser, it becomes the owner of the property entitled to jus possidendi as
provided in Article 428 of the Civil Code.
It is, however, claimed by private respondents that respondent judge, contrary to petitioner's submission,
acted within his authority, alleging that pursuant to Section 5 of Rule 135 of the Rules of Court, the
court has inherent power to "amend and control (the court's) processes and order so as to make them
conformable to law and justice." They further claimed that the case cited by petitioner is not applicable
because in the instant case the writ has already been issued. Petition should be granted.
Section 4 of P.D. No. 385 "requiring governmental financial institutions to foreclosure mandatorily all
loans with arrearages, including interest and charges amounting to at least 20 % of the total outstanding
obligations," provides:
Section 4. As a result of foreclosure or any other legal proceedings wherein the properties of the debtor
which are foreclosed, attached, or levied upon in satisfaction of a judgment are sold to a government
financial institution, the said properties shall be placed in the possession and control of the financial
institution concerned, with the assistance of the Armed Forces of the Philippines whenever necessary.
The Petition for Writ of Possession shall be acted upon by the court within fifteen (15) days from the
date of filing.
Pursuant to the above provision, it is mandatory for the court to place the government financial
institution, which petitioner is, in the possession and control of the property. As stated, the said decree
was enacted "in order to effect the early collection of delinquent loans from government financial
institutions and enable them to continue effectively financing the development needs of the country"
without being hampered by actions brought to the courts by borrowers.
Also, Section 6 of Act No. 3135, as amended by Act 4118, the law that regulates the methods affecting
extrajudicial foreclosure of mortgage provides that in cases in which an extrajudicial sale is made,
"redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred
and sixty-six, inclusive, of the Code of Civil Procedure insofar as these are not inconsistent with the
provisions of this Act." (Sections 464-466 of the Code of Civil Procedure were superseded by Sections
25-27 and Section 31 of Rule 39 of the Rules of Court which in turn were replaced by Sections 29 to 31
and Section 35 of Rule 39 of the Revised Rules of Court. 2 Section 35 which is one of the specific
provisions applicable to the case at bar provides that "if no redemption be made within twelve (12)
months after the sale, the purchaser, or his assignee, is entitled to a conveyance and possession of
property. ... . The possession of the property shall be given to the purchaser or last redemptioner by the
officer unless a third party is actually holding the property adversely to the judgment debtor."
The rule, therefore, is that after the redemption period has expired, the purchaser of the property has the
right to be placed in possession thereof. Accordingly, it is the inescapable duty of the Sheriff to enforce
the writ of possession, especially, as in this case, a new title has already been issued in the name of the
purchaser, In fact, under Section 7 of the said Act 3135, upon which the de los Angeles and de Gracia
cases were based, even before the redemption period, it is ministerial upon the court to issue a writ of
possession in favor of a purchaser, provided that a proper motion has been filed, a bond approved, and
no third person is involved.
The right of the purchaser to be placed in the possession of the property is bolstered by Section 8 of the
aforecited Act which provides that if the judge finds the complaint assailing the legality of the
foreclosure sale justified, it shall not transfer the possession of the property, even on appeal, but will
only proceed against the bond posted by the purchaser. Section 8 reads:
The debtor may, in the proceedings in which possession was requested; but not later than thirty days
after the purchaser was given possession, petition that the sale be set aside and the writ of possession
cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale
was not made in accordance with the provisions thereof, and the court shall take cognizance of this
petition in accordance with the summary procedure provided for in section one hundred and twelve of
Act Numbered Four Hundred and Ninety-Six, and if it finds the complaint of the debtor justified, it shall
dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of
the parties may appeal from the order of the judge in accordance with sections fourteen of act numbered
Four Hundred and Ninety-Six.
In the case at bar, the writ of possession was issued but its enforcement was suspended by the grace
period given by the Sheriff who has no authority to do so, and later by the order of the judge on a very
dubious ground as "humanitarian reason." If the applicable laws clearly allow the purchaser to have
possession of the property foreclosed and mandate the court to give effect to such right, it would be a
gross error for the judge to suspend the implementation of the writ of possession, which, as shown,
should issue as a matter of course. We are of the opinion that once the writ of possession has been
issued, the Court has no alternative but to enforce the writ without delay, especially as in this case, no
motion for the suspension of the enforcement was filed.
The right of the petitioner to the possession of the property is clearly unassailable. It is founded on its
right of ownership. As the purchaser of the properties in the foreclosure sale, and to which the respective
titles thereto have already been issued, petitioner's right o-,,er the property has become absolute, vesting
upon him the right of possession over an enjoyment of the property which the Court must aid in
effecting its delivery. After such delivery, the purchaser becomes the absolute owner of the property. As
We said , in Tan Soo Huat vs. Ongwico, 3 the deed of conveyance entitled the purchaser to have and to
hold the purchased property, this means, that the purchaser is entitled to go immediately upon the real
property, and that it is the Sheriff's inescapable duty to place him in such possession.
Respondents cannot claim that the writ of possession was suspended under the authority set forth in Rule
1135 of the Rules of Court. To invoke the power granted therein, the court must act within the law and
with justice. When the reason given by the judge in issuing the order of suspension was not specified in
the order, but stated only in general term, as "humanitarian reasons," the Court did not act within the
bounds of the law. The order was, furthermore, issued motu proprio and without the petitioner being
afforded the right to present its side. We cannot give Our approval to the actuation of respondent judge,
for an order suspending the implementation of an earlier order is like an injunction which must be issued
always with circumspection, and upon proper motion of the party concerned.
As it is, the suspension order has a far-reaching effect. It enabled private respondents to withhold the
possession from petitioner and file the complaint where an injunction was sought. Had not respondent
judge issued such order, petitioner could have already taken possession of the property, thereby
acquiring an absolute ownership over the property, and injunction could no longer have been issued. A
prohibitory injunction cannot be issued when the act sought to be enjoined has already been
committed. 4 Neither can a mandatory injunction issue, for it is a well-settled rule that injunction will not
lie to take the property out of control of the party in possession. 5
The orders of the judge enjoining the enforcement of the writ of possession are vulnerable to attack.
Firstly, the right of private respondents to injunctive order is, at least, doubtful, and it is a settled rule
that to be entitled to the injunction, the applicant's right or title must be clear and unquestioned.
In the instant case, the ground relied upon by private respondents is not indubitable, while the
foreclosure proceeding has in its favor the presumption of regularity. Andsecondly, P.D. No. 385, as
aforestated, makes it mandatory for the court to place a government financial institution in possession of
the property. To enjoin PTB from taking possession of the property would be to render nugatory the
provisions of said decree, particularly Section 2 thereof:
Section 2. No restraining order, temporary or permanent in. junction shall be issued by the court against
any government financial institution in any action taken by such institution in compliance with the
mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or
permanent injunction is sought by the borrower(s) or any third party or parties, except after due hearing
in which it is established by the borrower and admitted by the government financial institution
concerned that twenty percent (20%) of the outstanding arrearages has been paid after the firing of
foreclosure proceedings.
In case a restraining order or injunction is issued the borrower shall nevertheless be legally obligated to
liquidate the remaining balance of the arrearages, paying ten percent (10%) of the arrearages outstanding
as of the time of foreclosure, plus interest and other charges, on every succeeding thirtieth (30th) day
after the issuance of such restraining order or injunction until the entire arrearages have been liquidated.
These shall be in addition to the payment of amortizations currently maturing. The restraining order or
injunction shall automatically be dissolved should the borrower fail to make any of the above-mentioned
payments on due dates, and no restraining order or injunction shall be issued thereafter. This shall be
without prejudice to the exercise by the government financial institutions of such rights and/or remedies
available to them under their respective charters and their respective contracts with their debtors, nor
should this provision be construed as restricting the government financial institutions concerned from
approving, solely at its own discretion, any restructuring, recapitalization, or any other arrangement that
would place the entire account on a current basis, provided, however, that at least twenty percent (20%)
of the arrearages outstanding at the time of the foreclosure is paid.
All restraining orders and injunctions existing as of the date of this Decree on foreclosure proceedings
filed by said government financial institutions shall be considered lifted unless finally resolved by the
court within sixty (60) days from date hereof.
WHEREFORE, judgment is hereby rendered annulling and setting aside all the injunctive orders issued
by respondent judge dated May 8, 1979, June 1, 1979, July 5, 1979 and August 13, 1979; and ordering
respondent judge to place petitioner in possession of the purchased property without delay. Without cost.
SO ORDERED.
Ocampo vs. Domalanta, 20 SCRA 1136

Sole question raised on appeal is this: Is a court order confirming a sheriff 's sale upon a judgment in a
real estate foreclosure case a bar to a subsequent action by the judgment debtor to annul the sale upon
grounds which were raised in said foreclosure proceedings? First, to the background facts. A contested
case to foreclose a real estate and chattel mortgage [Civil Case 45778, Court of First Instance of Manila,
"Ignacio Domalanta, plaintiff vs. Isabel O. Vda. de Chi Chioco, et al., defendants"], resulted in judgment
ordering appellant Isabel O. Vda. de Chi Chioco (now known as Isabel Ocampo) to pay appellee Ignacio
Domalanta ?2,000.00, with 1% interest per month from December 5, 1958 until full payment, and
P500.00 as attorneys' fees, and directing that after failure to pay the above amounts in ninety days, the
properties mortgaged be sold at public auction, subject to a first mortgage in favor of the Philippine
National Bank in reference to appellant's land (located in Tanza, Cavite) mortgaged.1

The judgment debt remained unpaid. The court, on Domalanta's motion, issued a writ of execution.
Pursuant thereto, on May 8, 1962, appellee sheriff sold at public auction the mortgaged land of 32,558
square meters to the highest bidder, appellee Ignacio Domalanta, for P3,537.00. Domalanta moved to
confirm the sale. Over appellant's Objection, the court, on June 2, 1962, confirmed.

After the June 2, 1962 order had become final, appellant started the present suit (Civil Case N-496 of the
Court of First Instance of Cavite, entitled "Isabel Ocampo, plaintiff vs. Ignacio Domalanta and Ponciano
Martinez, in his capacity as Provincial Sheriff of Cavite, defendants") to annul the sheriff's sale.
Grounds: Appellant mortgagor was not properly notified of the foreclosure sale; and the price for which
the property was sold was "very much lower than the actual market value" and shocking to the
conscience, and thus invalid. Appellee Domalanta moved to dismiss the complaint below. His reason,
inter alia: res judicata. The court, on November 9, 1962, dismissed the case "with prejudice and with
costs against the plaintiff." A move to reconsider was thwarted below in the order of November 21,
1962. Hence, this appeal.

The foreclosure action was filed in Manila upon a stipulation in the Deed of Real Estate and Chattel
Mortgage which reads: "[P]rovided further that in case of litigation arising out of this mortgage contract
the Court of First Instance of Manila shall decide the case x x x."

1. Adverted to earlier is that the June 2, 1962 order of confirmation of the sheriff s sale in the first
caseCase 45778was issued over appellant's opposition. That objection projected before the court
the very same grounds relied upon in the complaint hereinthe second caseto wit, lack of notice by
the Provincial Sheriff to appellant of the foreclosure sale, and irregularities in the auction sale and non-
conformity thereof to the rules of court. According to the order of confirmation, the thrust of appellant's
said objection is that she "was not notified of the sheriff's sale and that the price for which the property
was sold is unconscionable." But these f actual allegations, so the same order of June 2, 1962 stresses,
"have not been established by any evidence," nor was appellant's opposition verified. Nothing in the
record suggests that after the order of June 2, 1962 in the first case (Civil Case 45778), attempt was ever
made by appellant to cure the defects so pointedly expressed by the court in that order.

2. Law and jurisprudence have f ormulated the rule that confirmation of sale of real estate in judicial
foreclosure proceedings cuts off all interests of the mortgagor in the real estate sold and vests them in
the purchaser. Confirmation retroacts to the date of the sale.2 An order of confirmation in court
foreclosure proceedings is a final order, not merely interlocutory. The right to appeal therefrom has long
been recognized.3 In fact, it is the final order from which appeal may be taken in judicial foreclosure
proceedings.4 No appeal was taken. It follows that said order is final, binding.

3. Not that the disputed order of confirmation may be labelled null and void, as appellant would want it
to be. The presumption that the notice of sale of real estate in foreclosure proceedings has been given,
holds true here. For, indeed, a legal tenet of long standing is that official Binalbagan Estate, Inc. vs.
Gatuslao, 74 Phil. 128, 131; Clemente vs. H. E. Heacock Co., L-12786, October 29, 1959; Piano vs.
Cayanong, L-18603, February 28, 1963.

3 Warner, Barnes & Co., Ltd. vs. Santos, 14 Phil. 446; Raymundo vs. Sunico, 25 Phil. 365; Philippine
Sugar Estates Development Co. vs. Camps, 34 Phil. 426; duty presumptively has been regularly
performed.5 Appellant pleaded such lack of notice. Her duty it was to prove it in court. She did not.

And if the notice that appellant here complains of is personal notice to her, she is wrong. Because,
personal notice is not required by Section 16 of Rule 39 of the 1940 Rules of Court, now Section 18,
Rule 39 of the new Rules. This legal provision was given judicial nod as early as 1930 in La Urbana vs.
Belando, 54 Phil. 930, 932a case of foreclosure of real estate mortgagewhere we pronounced that
"[t]he law does not require that such notification be given personally to the party upon whose property
execution is levied."

Nor was there an averment in the complaint now before us that if a resale should take place, "the realty
would bring a higher price" thereat, a circumstance "essential to rescind a sale regularly made and
confirmed by a competent court, on the ground of inadequacy of price."6 The mere averment that the
price is unconscionable is nothing more than a conclusion of law. The value of such allegation is further
downgraded by the lack of proof. This is one case which epitomizes the fatal distance between
allegation and proof.

4. Properly to be pointed out here is that the dismissal order of November 9, 1962 now on appeal, states
that the legality of the foreclosure sale questioned in this action "was an issue that could have been, and
was in fact, raised and litigated in the anterior suit" (Civil Case 45778). Except for the Provincial Sheriff
who is a nominal defendant here, the parties in the two suits below are the same: Isabel Ocampo and
Ignacio Domalanta. Subject matter is the same land. The judgment and order of confirmation of the
sheriff s sale in the first suit have both become final.

The first suit is a judicial foreclosure of mortgage; the second, annulment of the foreclosure sale
conducted in the first suit. A proceeding for judicial foreclosure of mortgage is an action quasi in rem. It
is based on a personal claim sought to be enforced against a specific property of a person named party
defendant. And, its purpose is to have the property seized and sold by court order to the end that the
proceeds thereof be applied to the payment of plaintiff's claim.

To be read as controlling here are Sections 44 and 45, Rule 39 of the Rules of Courtwhich is now
substantially embodied in Section 49, Rule 39 of the new Rules of Court, viz:
"SEC. 49. Effect of judgments.The effect of a judgment or final order rendered by a court or judge of
the Philippines, having jurisdiction to pronounce the judgment or order, may be as follows:

(a) In case of a judgment or order against a specific thing, or in respect to the probate of a will, or the
administration of the estate of a deceased person, or in respect to the personal, political, or legal
condition or status of a particular person or his relationship to another, the judgment or order is
conclusive upon the title to the thing, the will or administration', or the condition, status or relationship
of the person; however, the probate of a will or granting of letters of administration shall only be prima
facie evidence of the death of the testator or intestate;

(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other
matter that could have been raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement 01 the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity;

(c) In any other litigation between the same parties or their successors. in interest, that only is deemed to
have been adjudged in a former judgment which appears upon its face to have been so adjudged, or
which was actually and necessarily included therein or necessary thereto."

Paragraph(a) of the foregoing rule is commonly known to speak of judgments in rem; paragraph (b) is
said to refer to judgments in personam; and paragraph (c) is the concept understood in law as
"conclusiveness of judgment."8

Here, the first suit was an action quasi in rem. A judgment therein "is conclusive only between the
parties."9 Directly applicable is paragraph (b) above-quoted. By that provision, the confirmation order in
the foreclosure case is, "with respect to the matter directly adjudged or as to any other matter that could
have been raised in relation thereto, conclusive between the parties" and their privies.

As we view this case from another standpoint, we reach the same result. It is true that the cause of action
in the first suit is not exactly identical to the cause of action in the second. For, the latter merely
challenges the legality of the sheriff's sale in the first proceeding. We do say, however, that such legality
of sale is an issue which could have been, and was in fact raised and rejected in the first case. Thus,
coming into play also is paragraph (c) abovequoted. Therefore, the question raised by appellant in the
present suit should be "deemed to have been adjudged in a former judgment which appears upon its face
to have been so adjudged, or which was actually and necessarily included therein or necessary thereto."

It is thus beyond doubt that the present action is barred by the conclusiveness of judgment in the anterior
suit. This case must be dismissed.

Conformably to the foregoing, the lower court's order of November 9, 1962 dismissing this case, and the
order of November 21, 1962 denying reconsideration thereof, are hereby affirmed.

Costs against plaintiff-appellant. So ordered.