NAVA, Maria Carlina J.

Credit Transactions
Case Digests
V. Provisions common to Pledge and Mortgage

1. Rural Bank of Caloocan, Inc. v. CA, 104 SCRA 151 (1981)

2. Vda. De Bautista v. Marcos, 3 SCRA 434 (1961)
3. Dayrit v. CA, 36 SCRA 549 (1970)
4. Cavite Development Bank vs. Lim, 324 SCRA 346
5. GSIS vs CA, 170 SCRA 533
6. Bank of America vs. AmericanRealty Corporation, 321 SCRA 659
7. Phil. Bank ofCommerce vs. Macadaeg, 109 Phil981
8. Montevirgin vs.CA, 112 SCRA 641

VI. Pledge
Essential Requisites
Formal Requisite

9. Yuliongsiu v. PNB, 22 SCRA 585 (1968)

10. ManilaSurety&Fidelityv.Velayo,21SCRA515(1967)

VII. Chattel Mortgage

Essential Requisites
Formal Requisite;
Affidavit of Good Faith

11. Piansay v. David, 12 SCRA 227 (1964)

12. Makati Leasing and Finance Corp v. Wearever Textile, 122 SCRA 296 (1983)

Rights and Obligations of the Mortgagee

13. Northern Motors, Inc. v. Coquia, 68 SCRA 374 (1975)

VIII. Real Estate Mortgage

14. People’s Bank and Trust Co. vs.Dahican Lumber Co., 20 SCRA 84
15. Sulit vs. CA, 268 SCRA 441
 16. Lanuza v. de Leon, 20 SCRA 369 (1967)
17. Bundalian v. CA, 129 SCRA 645 (1984)
18. Rosales v. Yboa, 120 SCRA 869 (1983)
19. Tioseco v. CA, 143 SCRA 705 (1986)
20. Dulay v. Cariaga, 123 SCRA 794 (1983)
21. PNB v. CA, 140 SCRA 360 (1985

D. Rights and Obligations of the Mortgagee

22. DBP v. Mirang, 66 SCRA 141 (1975)

23. Co v. PNB, 114 SCRA 842 (1982)
24. Alpha Insurance and Surety v. Reyes, 106 SCRA 274 (1981)
25. BPI vs Concepcion & Hijos, Inc., 53 Phil906

E. Rights and Obligations of the Purchaser

26. Marcelo Steel Corp. v. CA, 54 SCRA 89 (1973)

27. PNBv.Adil,118SCRA110(1982)
28. Ocampo v. Domalanta, 20 SCRA 1136 (1967)

Foreclosure
29. DBP vs Zaragoza, 84 SCRA 668
30. Gobonseng, Jr. vs CA, 246 SCRA 472
31. BPI vs Yulo,31 Phil 476

Redemption
32. Bonnevie vs. CA, 125 SCRA 122
33. Ramirez vs CA, 219 SCRA 598

IX. Antichresis
B. Rights and Obligations of the Debtor and Creditor

34. Samontev.CA,141SCRA189(1986)
35. Ramirez v. CA, 144 SCRA 292 (1986)
 36. Tavera vs. El Hogar Filipino, Inc.,68 Phil 712

IX. Concurrence and Preference of Credit

37. Roman v. Asia Banking Corp., 46 Phil 705 (1922)

38. Central Bank v. Morfe, 63 SCRA 114 (1975
 RURAL BANK OF CALOOCAN, INC. and JOSE O. DESIDERIO, JR. v. THE COURT OF
APPEALS and MAXIMA CASTRO
G.R. No. L-32116, April 21, 1981
FACTS:
Maxima Castro, accompanied by Severino Valencia, went to the Rural Bank of Caloocan
to apply for a loan. Valencia arranged everything about the loan with the bank. He supplied to
the latter the personal data required for Castro's loan application. After the bank approved the
loan for the amount of P3,000.00, Castro, accompanied by the Valencia spouses, signed a
promissory note corresponding to her loan in favor of the bank. On the same day, the Valencia
spouses obtained from the bank an equal amount of loan for P3,000.00. They signed another
promissory note corresponding to their loan in favor of the bank and had Castro affixed thereon
her signature as co-maker. Both loans were secured by a real-estate mortgage on Castro's
house and lot. Later, the sheriff of Manila sent a notice to Castro, saying that her property would
be sold at public auction to satisfy the obligation covering the two promissory notes plus interest
and attorney's fees. Upon request by Castro and the Valencias and with conformity of the bank,
the auction sale was postponed, but was nevertheless auctioned at a later date. Castro claimed
that she is a 70-year old widow who cannot read and write in English. According to her, she has
only finished second grade. She needed money in the amount of P3,000.00 to invest in the
business of the defendant spouses Valencia, who accompanied her to the bank to secure a loan
of P3,000.00. While at the bank, an employee handed to her several forms already prepared
which she was asked to sign, with no one explaining to her the nature and contents of the
documents. She also alleged that it was only when she received the letter from the sheriff that
she learned that the mortgage contract which was an encumbrance on her property was for
P6.000.00 and not for P3,000.00 and that she was made to sign as co-maker of the promissory
note without her being informed. Castro filed a suit against petitioners contending that thru
mistake on her part or fraud on the part of Valencias she was induced to sign as co-maker of a
promissory note and to constitute a mortgage on her house and lot to secure the questioned
note. At the time of filing her complaint, respondent Castro deposited the amount of P3,383.00
with the court a quo in full payment of her personal loan plus interest. Castro prayed for: (1)the
annulment as far as she is concerned of the promissory note and mortgage insofar as it
exceeds P3,000.00; and(2)for the discharge of her personal obligation with the bank by reason
of a deposit of P3,383.00 with the court a quo upon the filing of her complaint.

ISSUE:
 Whether or not the respondent court correctly affirmed the lower court in declaring the
promissory note invalid insofar as they affect respondent Castro vis-à-vis petitioner bank, and
the mortgage contract valid up to the amount of P3,000.00 only.

RULING:
Yes. While the Valencias defrauded Castro by making her sign the promissory note and
the mortgage contract, they also misrepresented to the bank Castro's personal qualifications in
order to secure its consent to the loan. Thus, as a result of the fraud upon Castro and the
misrepresentation to the bank inflicted by the Valencias both Castro and the bank committed
mistake in giving their consents to the contracts. In other words, substantial mistake vitiated
their consents given. For if Castro had been aware of what she signed and the bank of the true
qualifications of the loan applicants, it is evident that they would not have given their consents
to the contracts. Article 1342 of the Civil Code provides: Art. 1342. Misrepresentation by a third
person does not vitiate consent, unless such misrepresentation has created substantial mistake
and the same is mutual. The Court cannot declare the promissory note valid between the bank
and Castro and the mortgage contract binding on Castro beyond the amount of P3, 000.00, for
while the contracts may not be invalidated insofar as they affect the bank and Castro on the
ground of fraud because the bank was not a participant thereto, such may however be
invalidated on the ground of substantial mistake mutually committed by them as a consequence
of the fraud and misrepresentation inflicted by the Valencias. Thus, in the case of Hill vs.
Veloso, this Court declared that a contract may be annulled on the ground of vitiated consent if
deceit by a third person, even without connivance or complicity with one of the contracting
parties, resulted in mutual error on the part of the parties to the contract. The fraud particularly
averred in the complaint, having been proven, is deemed sufficient basis for the declaration of
the promissory note invalid insofar as it affects Castro vis-a-vis the bank, and the mortgage
contract valid only up to the amount of P3, 000.00.
 CRISTINA MARCELO VDA. DE BAUTISTA v. BRIGIDA MARCOS, ET AL.
G.R. No. L-17072, October 31, 1961

FACTS:

Marcos obtained a loan from Bautista secured by a mortgage of an unregistered

parcel of land. It was to last for 3 years and the possession of the land mortgaged was to be
turned over to Bautista by way of usufruct. Marcos filed an application for the issuance of a free
patent over the land. The free patent was issued to her and the land was registered in her
name. Marcos was unable to pay her debt to Bautista so the latter filed for the foreclosure of her
mortgage on the land given as a security.

ISSUE:
Whether or not Bautista can foreclose the land made as a security for the debt.

RULING:
No, the mortgage is void and ineffective because Marcos was not yet the owner of the
land when the mortgage was executed. Hence, Marcos could not encumber the same to
Bautista. Neither could the subsequent acquisition by Marcos of title over the land through the
issuance of a free patent validate and legalize the mortgage since upon the issuance of the said
patent, the land was brought under the operations of the Public Land Law that prohibits the
taking of said land for the satisfaction of debts contracted prior to the expiration of 5 years from
the issuance of the patent. Marcos had possessory rights over the land before the title was
vested in her name, and these possessory rights could validly be transferred to Bautista, as
Marcos did in the deed of mortgage.
VINCENT P. DAYRIT v. THE COURT OF APPEALS, HON. FRANCISCO ARCA, Judge of the
Court of First Instance of Manila, Branch I, MOBIL OIL PHILIPPINES, INC., and ELADIO
YLAGAN, Special Sheriff
G.R. No. L-29388, December 28, 1970

FACTS:
Defendants Vincent Dayrit, Leonila T. Sumbillo and, Reynaldo Angeles entered into a
contract with the Mobil Oil Philippines, Inc., entitled "LOAN & MORTGAGE AGREEMENT,"
providing, among others, that: "(a) For and in consideration of Sales Agreement dated July 21,
1965, among the parties herein, Mobil grants a loan of P150,000 to borrowers; "(b) Defendants-
Borrowers shall repay Mobil the whole amount of P150,000 plus 10% interest per annum on the
diminishing balance for 48 months; "(c) To secure the prompt repayment of such loan by
defendants-borrowers to Mobil and the faithful performance by Borrowers of that Sales
Agreement, Defendants-Borrowers hereby transfer in favor of Mobil by way of first mortgage
lands covered by TCT No. 45169 and TCT No. 45170, together with the improvements existing
in said two (2) parcels of land; "(d) In case of default of Defendants-Borrowers in payment of
any of the installments and/or their failure to purchase the quantity of products stated therein
Mobil shall have the right to foreclose this mortgage; "(e) Mobil, in case of default and
foreclosure shall be entitled to attorney's fees and cost of collection equivalent to not less than
25% of total indebtedness remaining unpaid; "(f) All expenses in connection with the preparation
and registration of this mortgage as well as cancellation of same shall be for the account of
Defendants-Borrowers;" and (g) If Defendants-Borrowers shall perform the full obligation above
stated according to the terms thereof, then this obligation shall be null and void, otherwise, it
shall remain in full force and effect."The defendants violated the Loan & Mortgage Agreement,
they having paid but one installment in the amount of P 3,816, of which P1,250 was applied to
interest, and the remaining P2,566 to the principal obligation. The defendants likewise failed to
buy the quantities of products as required in the Sales Agreement. The plaintiff made due
demand which the defendant Dayrit answered, acknowledging his liability in his letter.

ISSUE:
Whether or not the CFI of Manila erred in ordering the sale at public auction of the
mortgaged properties to answer for the entire P147,434 principal obligation after the defendants
failed to pay their respective one-third shares of the obligation to the respondent.
RULING:
The decision which the petitioner describes as a simple money judgment orders the
defendants Vincent Dayrit, Leonila T. Sumbillo and Reynaldo Angeles to pay the plaintiff the
sum of P147,434, and in default of such payment, the properties put up in collateral shall be
sold in foreclosure sale in accordance with law, the proceeds to be applied in payment of the
amount due to the plaintiff from the defendants as claimed in the complaint. While it is true that
the obligation is merely joint and each of the defendants is obliged to pay only his/her 1/3 share
of the joint obligation, the undisputed fact remains that the intent and purpose of the Loan and
Mortgage Agreement was to secure, inter alia, the entire loan of P150,000 that the respondent
Mobil extended to the defendants. The defendants had violated the Loan and Mortgage
Agreement, they having paid but one installment. Petitioner alone benefited from the proceeds
of the loan of P150,000, the said amount having been paid directly to the Bank of the
Philippines to bail out the same properties from a mortgage that was about to be foreclosed. In
effect, Mobil merely stepped into the shares of the Bank of the Philippines.
 CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST COMPANY v.
SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS
G.R. No. 131679, February 1, 2000

FACTS:
Petitioners are banking institutions duly organized and existing under Philippine laws.
Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to secure which he
mortgaged a parcel of land situated at La Loma, Quezon City and registered in his name. As
Guansing defaulted in the payment of his loan, CDB foreclosed the mortgage. At the foreclosure
sale, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to
redeem, CDB consolidated title to the property in its name. The TCT in the name of Guansing
was cancelled and, in lieu thereof, it was issued in the name of CDB. Private respondent Lolita
Chan Lim, assisted by a broker named Remedios Gatpandan, offered to purchase the property
from CDB. Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB
P30,000.00 as Option Money, for which she was issued Official Receipt by CDB. However, after
some time following up the sale, Lim discovered that the subject property was originally
registered in the name of Perfecto Guansing. Aggrieved by what she considered a serious
misrepresentation by CDB and its mother-company, FEBTC, on their ability to sell the subject
property, Lim filed an action for specific performance and damages against petitioners.

ISSUE:
Whether or not there was a valid sale.

RULING:
No. The sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing
must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be
sure, CDB never acquired a valid title to the property because the foreclosure sale, by virtue of
which, the property had been awarded to CDB as highest bidder, is likewise void since the
mortgagor was not the owner of the property foreclosed. A foreclosure sale, though essentially a
"forced sale," is still a sale in accordance with Art. 1458 of the Civil Code, under which the
mortgagor in default, the forced seller, becomes obliged to transfer the ownership of the thing
sold to the highest bidder who, in turn, is obliged to pay therefor the bid price in money or its
equivalent. Being a sale, the rule that the seller must be the owner of the thing sold also applies
in a foreclosure sale. This is the reason Art. 2085 of the Civil Code, in providing for the essential
requisites of the contract of mortgage and pledge, requires, among other things, that the
mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in anticipation of
a possible foreclosure sale should the mortgagor default in the payment of the loan. There is,
however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. This is the doctrine of "the
mortgagee in good faith" based on the rule that all persons dealing with property covered by a
Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what
appears on the face of the title. The public interest in upholding the indefeasibility of a certificate
of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects
a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate
of title. This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not
required to make a detailed investigation of the history of the title of the property given as
security before accepting a mortgage. We are not convinced, however, that under the
circumstances of this case, CDB can be considered a mortgagee in good faith. While petitioners
are not expected to conduct an exhaustive investigation on the history of the mortgagor's title,
they cannot be excused from the duty of exercising the due diligence required of banking
institutions. In Tomas v. Tomas, we noted that it is standard practice for banks, before
approving a loan, to send representatives to the premises of the land offered as collateral and to
investigate who are real owners thereof, noting that banks are expected to exercise more care
and prudence than private individuals in their dealings, even those involving registered lands,
for their business is affected with public interest.
GOVERNMENT SERVICE INSURANCE SYSTEM v. COURT OF APPEALS and MR. & MRS.
ISABELO R. RACHO
G.R. No. L-40824, February 23, 1989

FACTS:
Spouses Racho, together with the spouses Lagasca, executed a deed of mortgage in
favor of petitioner GSIS and subsequently, another deed of mortgage, in connection with two
loans. A parcel of land co-owned by said mortgagor spouses was given as security under the
aforesaid two deeds. The Lagasca spouses executed an instrument obligating themselves in
the assumption of the aforesaid obligation and to secure the release of the mortgage. Failing to
comply with the conditions of the mortgage, GSIS extra judicially foreclosed the mortgage and
caused the property to be sold at public auction. Spouses Racho filed a complaint more than
two (2) years against GSIS and Spouses Lagasca praying that the extrajudicial foreclosure be
declared null and void. They allege that they signed the mortgage contracts not as sureties for
the Lagasca spouses but merely as accommodation party.

ISSUE:
Whether or not the promissory note and mortgage deeds are negotiable.

RULING:
No. Section 29 of the NIL provides that an accommodation party is one who has signed
an instrument as maker, drawer, acceptor of indorser without receiving value therefore, but is
held liable on the instrument to a holder for value although the latter knew him to be only an
accommodation party. Both parties appear to be misdirected and their reliance misplaced. The
promissory note, as well as the mortgage deeds subject of this case, are clearly not negotiable
instrument because it did not comply with the fourth requisite to be considered as negotiable-
they are neither payable to order nor to bearer. The note is payable to a specified party which is
the GSIS.
 BANK OF AMERICA, NT and SA v. AMERICAN REALTY CORPORATION and COURT OF
APPEALS
G.R. No. 133876, December 29, 1999

FACTS:
Petitioner granted loans to 3 foreign corporations. As security, the latter mortgaged a
property located in the Philippines owned by herein respondent ARC. ARC is a third party
mortgagor who pledged its own property in favor of the 3 debtor-foreign corporations. The
debtors failed to pay. Thus, petitioner filed collection suits in foreign courts to enforce the loan.
Subsequently, it filed a petition to extra-judicially foreclose the said mortgage, which was
granted. Private respondent filed an action for damages against the petitioner, for the latter’s act
of foreclosing extra-judicially the real estate mortgages despite the pendency of civil suits before
foreign courts for the collection of the principal loan.

ISSUE:
Whether or not petitioner’s act of filing a collection suit against the principal debtors for
the recovery of the loan before foreign courts constituted a waiver of the remedy of foreclosure.

RULING:
Yes. A mortgage creditor may institute against the mortgage debtor either a personal
action or debt or a real action to foreclose the mortgage. In other words, he may pursue either of
the two remedies, but not both. By such election, his cause of action can by no means be
impaired, for each of the two remedies is complete in itself. The remedies available to the
mortgage creditor are deemed alternative and not cumulative. Notably, an election of one
remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon
the filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of
mortgage. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage
creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of
the province where the sale is to be made. Petitioner only has one cause of action which is non-
payment of the debt. Nevertheless, alternative remedies are available for its enjoyment and
exercise. Petitioner then may opt to exercise only one of two remedies so as not to violate the
rule against splitting a cause of action. Accordingly, applying the foregoing rules, we hold that
petitioner, by the expediency of filing four civil suits before foreign courts, necessarily
abandoned the remedy to foreclose the real estate mortgages constituted over the properties of
third-party mortgagor and herein private respondent ARC. Moreover, by filing the four civil
actions and by eventually foreclosing extra-judicially the mortgages, petitioner in effect
transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and
our statute books.
THE PHILIPPINE BANK OF COMMERCE v. HIGINIO B. MACADAEG, Judge of the Court of
First Instance of Manila, ET AL.
G.R. No. L-14174, October 31, 1960

FACTS:
Respondents Pedro Bautista, Dativa Bautista, Innocencio Campos, and the Flash Taxi
Company jointly and severally applied for and obtained a credit accommodation from the
PBCOM in the sum of P100, 000. As security, respondents executed in favor of the bank, in one
single document, a real estate mortgage over 4 parcels of land, and a chattel mortgage on
some movie equipment and 30 taxicabs. Respondents having failed to pay the total amount of
P129, 000 due on the credit accommodation, the PBCOM procured the extrajudicial foreclosure
of the real estate mortgage and the bank acquired the properties mortgaged as the highest
bidder for the amount of around P68, 000.Claiming a balance of P63, 000 still due from
respondents, the petitioner bank, instead of foreclosing respondents' chattel mortgage, filed
against them for the collection of said balance. The lower court then rendered judgment
ordering respondents to pay PBCOM, jointly and severally, the sum of P63, 000 with interest
thereon until fully paid. The court issued an order to execute said judgment, pursuant to which
the sheriff of Manila published a "Notice of Sale," setting for sale at public auction the rights,
interests or participation of respondents on the certificate of public convenience registered in the
name of the Flash Taxi Co. In the said auction, PBCOM was the highest bidder at P60, 000.
The sale was confirmed and was evidenced by certificate of sale. PBCOM sold all its rights,
interests, or participation in the certificate of public convenience over to Alberto Cruz. Public
Service Commission provisionally approved the sale of said certificate from respondents to
PBCOM, and PBCOM to Alberto Cruz. Pursuant to the provisional authority granted him by the
Commission to operate said certificate, Alberto Cruz acquired and purchased twenty taxicabs
and has since then been operating said franchise.

ISSUE:
Whether or not the execution sale of the certificate of public interest on the taxicabs
was valid.

RULING:
Yes. The alleged nullity is claimed to arise from the fact that the real estate and chattel
mortgage executed by respondents to secure their credit accommodation with the petitioner
bank was indivisible, and that consequently, the bank had no legal right to extra judicially
foreclose only the real estate mortgage and leave out the chattel mortgage, and then sue
respondents for a supposed deficiency judgment. The execution sale and delivered by the
sheriff to the petitioner bank of the certificate of sale over respondents' rights over the franchise
in question made the bank the owner thereof from the time of such sale and delivered. There
was actually no need for the confirmation of such sale, since in this jurisdiction, no confirmation
of an ordinary execution sale is required. It is thus clear that after such sale and the satisfaction
of the judgment, the jurisdiction of the lower court in the case had been exhausted, and
thereafter, it could no longer set aside said sale except for reasons of illegality or irregularity that
would render it null and void, which in the present case do not exist. Especially is this so
because the petitioner had already transferred its rights to the franchise in question to a third
person, and the sale had already been provisionally approved by the Public Service
Commission, with the result that the buyer from the bank has already made a substantial
investment on said franchise when, upon order of the Commission, he bought and acquired new
taxicabs to operate said franchise provisionally.
 SOCORRO MONTEVIRGEN, et. al. v. COURT OF APPEALS, SPOUSES SERAFIN ABUTIN
and CARMEN SENIR
G.R. No. L-44943, March 17, 1982

FACTS:
Petitioners filed an action against respondent-spouses Serafin Abutin and Carmen Senir,
for the annulment of a deed of sale with pacto de retro, over a parcel of land, title to which was
transferred to respondents upon the registration of the deed of pacto de retro sale. The trial
court rendered a decision declaring the transaction an equitable mortgage and fixing a period of
ten (10) months within which the petitioners must pay their obligation with legal interest,
otherwise execution would follow. Petitioners failed to pay their obligation so execution follows.
Petitioners opposed the motion for execution. The Clerk of Court issued two writs of execution,
to levy on the properties of petitioners to satisfy the sum of P57,500.00 plus legal interest of
12% and sum of P11,104.32 plus legal interest of 12%; and second, directing the Provincial
Sheriff to sell at public auction the described properties with all the improvements existing
thereon. The Provincial Sheriff accordingly executed the writs. Upon motion filed by
respondents, the sale was confirmed by the trial court. Petitioners filed a Motion to Annul the
Sheriff's Certificate of Sale. In an order dated October 20, 1972, the trial court granted
petitioner's Motion and ordered the writ of execution to be amended so that the new
construction may not be the object of the occupation by the defendant and that the interest
mentioned therein which is legal interest, must be 6%.

ISSUE:
Whether or not the contract is an equitable mortgage.

RULING:
Yes. It has been said that the consolidation of ownership in the person of the mortgagee
in equity, merely upon failure of the mortgagor in equity to pay the obligation, would amount to a
pactum commissorium. It was further articulated that an action for consolidation of ownership is
an inappropriate remedy on the part of the mortgagee in equity. The only proper remedy is to
cause the foreclosure of the mortgagee in equity. And if the mortgagee in equity desires to
obtain title to the mortgaged property, the mortgagee in equity may buy it at the foreclosure
sale. Where the contract was adjudged to be an equitable mortgage rather than a pacto de retro
sale, it is not proper for the trial court to declare the property in question as already owned by
mortgagee upon mortgagor’s failure to pay his obligations within required period. Property
should be foreclosed and sold in a public auction.
 DIOSDADO YULIONGSIU v. PHILIPPINE NATIONAL BANK (Cebu Branch)
G.R. No. L-19227, February 17, 1968

FACTS:
Yuliongsiu was the owner of two vessels, purchased by installment or on account.
Plaintiff, however, failed to pay for the vessels. Thereafter, plaintiff obtained a loan of P50, 00.00
from PNB wherein he pledge his vessels to guarantee its payment. Subsequently, plaintiff
effected partial payment of loan in the sum of P20, 000.00. The remaining balance was renewed
by the execution of two promissory notes in the bank’s favor. These two notes were never paid
at all by plaintiff on their respective dates. Meanwhile defendant bank took physical possession
of three pledged vessels after the first note fell due and was not paid. The FS-203 was
subsequently surrendered by the defendant bank to the Philippine Shipping Commission which
rescinded the sale to plaintiff for failure to pay the remaining installments on the purchase price
thereof. The other two boats, the M/S Surigao and the M/S Don Dino were sold by defendant
bank to third parties. Plaintiff commenced action to recover the three vessels or their value
damages from the defendant bank. The lower court rendered its decision in favor of the
defendant bank.

ISSUE:
Whether or not the taking of physical possession of the vessels by the bank was justified
by the contract of pledge.

RULING:
Yes. The defendant bank as pledgee was therefore entitled to the actual possession of
the vessels. While it is true that plaintiff continued operating the vessels after the pledge
contract was entered into, his possession was expressly made subject to the order of the
pledgee. The provision of Article 2110 of the present Civil Code cannot apply to the pledge
contract here which was entered into on June 30, 1947. On the other hand, there is an authority
supporting the proposition that the pledgee can temporarily entrust the physical possession of
the chattels pledged to the pledgor without invalidating the pledge. In such a case, the pledgor
is regarded as holding the pledged property merely as trustee for the pledgee. Since the
defendant bank was, pursuant to the terms of pledge contract, in full control of the vessels thru
the plaintiff, the former could take actual possession at any time during the life of the pledge to
make more effective its security. Its taking of the vessels therefore on April 6, 1948, was not
unlawful. Nor was it unjustified considering that plaintiff had just defrauded the defendant bank
in the huge sum of P184, 000.
 MANILA SURETY and FIDELITY COMPANY, INC. v. RODOLFO R. VELAYO
G.R. No. L-21069, October 26, 1967

FACTS:
Manila Surety and Fidelity Co., upon request of Rodolfo Velayo, executed a bond for
P2,800.00 for the dissolution of a writ of attachment obtained by one Jovita Granados in a suit
against Velayo. Velayo undertook to pay the Surety Company on annual premium of P112.00
and provided collateral jewelry with the authority to sell in case Manila Surety will be obliged to
pay. Judgment having been rendered in favor of Jovita Granados and against Rodolfo Velayo,
and execution having been returned unsatisfied, the surety company was forced to pay
P2,800.00 that it later sought to recoup from Velayo; and upon the latter’s failure to do so, the
surety caused the pledged jewelry to be sold, realizing therefrom a net product of P235.00 only.
The Surety files a claim against Velayo because the security is insufficient.

ISSUE:
Whether or not the sale of the jewelry even is insufficient extinguishes the principal
obligation.

RULING:
Yes. The sale of the thing extinguishes the principal obligation, whether the proceeds of
the sale are equal to the amount of the principal obligation, interest and expenses in a proper
case. The accessory character is of the essence of pledge and mortgage. As stated in Article
2085 of the 1950 Civil Code, an essential requisite of these contracts is that they be constituted
to secure the fulfillment of a principal obligation, which in the present case is Velayo's
undertaking to indemnify the surety company for any disbursements made on account of its
attachment counter bond. Hence, the fact that the pledge is not the principal agreement is of no
significance nor is it an obstacle to the application of Article 2115 of the Civil Code. It is well to
note that the rule of Article 2115 is by no means unique. It is but an extension of the legal
prescription contained in Article 1484(3) of the same Code, concerning the effect of a
foreclosure of a chattel mortgage constituted to secure the price of the personal property sold in
installments, and which originated in Act 4110 promulgated by the Philippine Legislature in
1933.
 SALVADOR PIANSAY and CLAUDIA V. VDA. DE UY KIM v. CONRADO S. DAVID and
MARCOS MANGUBAT
G.R. No. L-19468, October 30, 1964

FACTS:
Conrado S. David received a loan of P3,000 with interest at 12% per annum from
Claudia B. Vda. de Uy Kim, one of the plaintiffs, and to secure the payment of the same,
Conrado S. David executed a chattel mortgage on a house situated at 1259 Sande Street,
Tondo, Manila. The mortgage was foreclosed and was sold to Kim to satisfy the debt. 2 years
later after the foreclosure, the house was sold by Kim to Marcos Magubat. The latter then filed
to collect the loan from David and to declare the sale issued by Kim in favour of Piansay null
and void. (It appears that Kim sold the house to two people, namely Piansay and Magubat) The
trial court approved of the collection of the loan from David but dismissed the complaint
regarding the questioned sale between Kim and Piansay, declaring the latter as rightful owner of
the house and awarding damages to him. CA reversed the decision making David the rightful
owner and him and his co-defendant, Mangubat, to levy the house. Now Petitioners are trying to
release the said property from the aforementioned levy by claiming that Piansay is the rightful
owner of the house.

ISSUE:
Whether or not the sale between Kim and Piansay was valid.

RULING:
Since it is a rule in our law that buildings and constructions are regarded as mere
accessories to the land (following the Roman maxim omne quod solo inaedificatur solo credit) it
is logical that said accessories should partake of the nature of the principal thing, which is the
land forming, as they do, but a single object (res) with it in contemplation of law. A mortgage
creditor who purchases real properties at an extra-judicial foreclosure sale thereof by virtue of a
chattel mortgage constituted in his favor, which mortgage has been declared null and void with
respect to said real properties acquires no right thereto by virtue of said sale Thus, Mrs. Uy Kim
had no right to foreclose the alleged chattel mortgage constituted in her favor, because it was in
reality a mere contract of an unsecured loan. It follows that the Sheriff was not authorized to sell
the house as a result of the foreclosure of such chattel mortgage. And as Mrs. Uy Kim could not
have acquired the house when the Sheriff sold it at public auction, she could not, in the same
token, it validly to Salvador Piansay. Conceding that the contract of sale between Mrs. Uy Kim
and Salvador Piansay was of no effect, we cannot nevertheless set it aside upon instance of
Mangubat because, as the court below opined, he is not a party thereto nor has he any interest
in the subject matter therein, as it was never sold or mortgaged to him At any rate, regardless of
the validity of a contract constituting a chattel mortgage on a house, as between the parties to
said contract, the same cannot and does not bind third persons, who are not parties to the
aforementioned contract or their privies. As a consequence, the sale of the house in question in
the proceedings for the extrajudicial foreclosure of said chattel mortgage, is null and void insofar
as defendant Mangubat is concerned, and did not confer upon Mrs. Uy Kim, as buyer in said
sale, any dominical right in and to said house, so that she could not have transmitted to her
assignee, plaintiff Piansay any such right as against defendant Mangubat. In short plaintiffs
have no cause of action against the defendants herein.
 MAKATI LEASING and FINANCE CORPORATION v. WEAREVER TEXTILE MILLS, INC.,
and HONORABLE COURT OF APPEALS
G.R. No. L-58469, May 16, 1983

FACTS:
Wearever Textile Mills, Inc., discounted and assigned several receivables with the
former under a Receivable Purchase Agreement in favor of Makati Leasing and Finance
Corporation in order to obtain financial accommodations. To secure the collection of the
receivables assigned, Wearever executed a Chattel Mortgage over certain raw materials
inventory as well as the machinery described as an Artos Aero Dryer Stentering Range. Upon
Wearever’s default, Makati Leasing filed a petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain
entry into premises of Wearever and was not able to effect the seizure of the afore-described
machinery. Makati Leasing thereafter filed a complaint for judicial foreclosure. Acting on Makati
Leasing's application for replevin, the lower court issued a writ of seizure, the enforcement of
which was however subsequently restrained upon Wearever’s filing of a motion for
reconsideration. After several incidents, the lower court finally issued an order lifting the
restraining order for the enforcement of the writ of seizure and an order to break open the
premises of Wearever’s to enforce said writ. The lower court reaffirmed its stand upon
Wearever’s filing of a further motion for reconsideration. The sheriff enforcing the seizure order,
repaired to the premises Wearever’s and removed the main drive motor of the subject
machinery.

ISSUE:
Whether or not the subject machinery is a real property or a personal property to subject
it to chattel mortgage.

RULING:
Where a chattel mortgage is constituted on machinery attached to the ground the
machinery is to be considered as a personal property and the chattel mortgage constituted
thereon is not null and void regardless of who owns the land.- A property attached to the ground
like a house of strong materials, may be considered as personal property for purposes of
executing a chattel mortgage thereon as long as the parties to the contract so agree and no
innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery,
which is movable in its nature and becomes immobilized only by destination or purpose, may
not be likewise treated as such. This is really because one who has so agreed is estopped from
denying the existence of the chattel mortgage.
 NORTHERN MOTORS, INC. v. HON. JORGE R. COQUIA, etc., et al., FILINVEST CREDIT
CORPORATION
G.R. No. L-40018, December 15, 1975

FACTS:
Manila Yellow Taxicab, executed a chattel mortgage over several taxicabs in favor of
Northern Motors. TROPICAL is a judgment creditor of Yellow Taxicab who assigned the
judgment to ONG. On December 12 1974, Sheriff then levied upon 20 taxicabs, 8 of which
are security for the chattel mortgage. Northern Motors filed an intervention on December 18,
1974; however, the levied taxicabs were sold the same day at 2pm although agreement shows
that it should have happened at 4pm.Indemnity bond was posted by TROPICAL, but the bond
was cancelled after the sale without notice to Northern Motors. The petitioner now seeks
reconsideration also on the reinstatement of the bond. A second levy was made upon 35
taxicabs, 7 of which are mortgaged to Northern Motors. This is a motion for reconsideration in
the SC decision pronouncing that the Mortgagee has a better right than the judgment debtor
over the taxicabs. The taxies were levied and sold at an auction sale. Ong argues admits that
the mortgagee has a better right that the judgment creditor, but argues that the purchaser from
the auction sale must have a right superior to that of the mortgagee. The auction sale
proceeded and the purchasers were of unknown addresses, hence the 8 taxicabs cannot be
recovered. The proceeds of the auction were in contest and the sheriff is deducting the
expenses of the execution sale from the proceeds.

ISSUE/S:
Whether or not the expenses for the execution sale should be deducted from the
proceeds thereof.
Whether or not the purchaser has a better right than the creditor.

RULING:
No, it was already established that the levy on the property was illegal, it is therefore
improper to deduct the expenses of an illegal auction from the proceeds thereof. The mortgagee
can only able to collect the proceeds from the auction sale because the purchasers are of
unknown addresses. The full proceeds of the sale are due to the mortgagee without
any unreasonable and illegal deductions.
No, the purchaser of the auction sale merely steps in the shoes of the judgment creditor
as they have been aware of the claim of the mortgagee. The mortgagee has a better right to
the possession of the taxicabs; however, since the addresses of the purchasers are unknown,
the proceeds of the sale must be delivered to the mortgagee.
PEOPLE'S BANK AND TRUST CO. and ATLANTIC GULF AND PACIFIC CO. OF MANILA v.
DAHICAN LUMBER COMPANY, DAHICAN AMERICAN LUMBER CORPORATION and
CONNELL BROS. CO.
G.R. No. L-17500, May 16, 1967

FACTS:
ATLANTIC sold and assigned all its right in the DALCO for the total sum of P500,
000.00. DALCO obtained various loans from the People's Bank & Trust Company amounting to
P200, 000.00. DALCO also obtained a loan of $250,000.00 from the Export-Import Bank of
Washington D.C., maturing on different dates, payable to the BANK or its order. As security for
the payment of the abovementioned loans, DALCO executed in favor of the BANK a deed of
mortgage covering live parcels of land situated in the province of Camarines Norte,
together with all the buildings and other improvements existing thereon and all the personal
properties of the mortgagor located in its place of business. DALCO executed a 2nd mortgage
on the same properties in favor of ATLANTIC to secure payment of the unpaid balance of the
sale price of the lumber concession amounting to the sum of $450,000.00. Both deeds
contained a provision which stated that it included essential after acquired properties such as
machineries, fixtures, tools and equipments. Both mortgages were registered in the Office of the
Register of Deeds of Camarines Norte. Upon DALCO's and DAMCO's failure to pay the fifth
promissory note upon its maturity, the BANK paid the same to the Export-Import Bank of
Washington D.C. and the latter assigned to the former its credit and the first mortgage securing
it. The BANK gave DALCO and DAMCO to pay the overdue promissory note. DALCO
purchased various machineries, equipment, spare parts and supplies in addition to, or in
replacement of some of those already owned and used by it on the date aforesaid. The BANK,
in its own behalf and that of ATLANTIC, demanded that said agreements be cancelled but
CONNELL and DAMCO refused to do so. As a result, ATLANTIC and the BANK, commenced
foreclosure proceedings against DALCO and DAMCO.

ISSUE:
Whether or not the deed also be registered in the Chattel Mortgage Registry in so far as
it covered the after-acquired machinery, fixtures, tools and equipments.

RULING:
 No more, since under Articles 415 the new Civil Code, the properties in question being
machinery, receptacles, instruments or replacements intended by the owner of the tenement for
an industry or works which may be carried on in a building or on a piece of land, and shall tend
directly to meet the needs of the said industry or works, are classified as immovable properties,
therefore not covered by the Chattel Mortgage Law.
 CESAR SULIT v. COURT OF APPEALS and ILUMINADA CAYCO
G.R. No. 119247, February 17, 1997

FACTS:
Iluminada Cayco executed a Real Estate Mortgage over the subject Lot covered by TCT
in favor Cesar Sulit, to secure a loan of P4 Million. Upon petitioner’s failure to pay said loan
within the stipulated period, private respondent resorted to extrajudicial foreclosure of the
mortgage as authorized in the contract. In a public auction, the lot was sold to the mortgagee,
who submitted a winning bid of P7 Million. As stated in the Certificate of Sale, the mortgaged
property was sold at public auction to satisfy the mortgage indebtedness of P4 Million. Private
respondent petitioned for the issuance of a writ of possession in his favor. Petitioner filed a
Motion to have the auction sale of the mortgaged property set aside and to defer the issuance of
the writ of possession. She invited the attention of the court a quo to some procedural infirmities
in the said proceeding and further questioned the sufficiency of the amount of bond. In the same
Motion petitioner prayed as an alternative relief that private respondent be directed to pay the
sum of P3 Million which represents the balance of his winning bid of P7 Million less the
mortgage indebtedness of P4 Million.

ISSUE:
Whether or not the mortgagee or purchaser in an extrajudicial foreclosure sale is entitled
to the issuance of a writ of possession over the mortgaged property despite his failure to pay the
surplus proceeds of the sale to the mortgagor or the person entitled thereto.

RULING:
In case of a surplus in the purchase price, there is jurisprudence to the effect that while
the mortgagee ordinarily is liable only for such surplus as actually comes into his hands, but he
sells on credit instead of for cash, he must still account for the proceeds as if the price were paid
in cash, and in an action against the mortgagee to recover the surplus, the latter cannot raise
the defense that no actual cash was received. Surplus money, in case of a foreclosure sale,
gains much significance where there are junior encumbrancers on the mortgaged
property. Jurisprudence has it that when there are several liens upon the premises, the surplus
money must be applied to their discharge in the order of their priority. A junior mortgagee may
have his rights protected by an appropriate decree as to the application of the surplus, if there
be any, after satisfying the prior mortgage. His lien on the land is transferred to the surplus fund.
And a senior mortgagee, realizing more than the amount of his debt on a foreclosure sale, is
regarded as a trustee for the benefit of junior encumbrancers. Upon the strength of the
foregoing considerations, we cannot countenance the apparent paltriness that petitioner
persistently accords the right of private respondent over the surplus proceeds. It must be
emphasized that petitioner failed to present the receipts or any other proof of the alleged costs
or expenses incurred by him in the foreclosure sale. Even the trial court failed or refused to
resolve this issue, notwithstanding the fact that this was one of the grounds raised in the motion
filed by private respondent before it to set aside the sale. Since it has never been denied that
the bid price greatly exceeded the mortgage debt, petitioner cannot be allowed to unjustly enrich
himself at the expense of private respondent.
 IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE VENDEES OF A HOUSE AND
THE RIGHTS TO A LOT. MARIA BAUTISTA VDA. DE REYES, et. al., RODOLFO LANUZA v.
MARTIN DE LEON
G.R. No. L-22331, June 6, 1967

FACTS:
Rodolfo Lnuza and his wife sold their house, leasehold rights to the lot, television set
and a refrigerator to Reyes and Navarro in consideration of the sum of P3, 000.00. It was
executed under a Deed of Sale with Right to repurchase. The parties extended the term for the
redemption with the original expired. Subsequently, the Lanuzas mortgages the property to the
intervenor, De Leon and upon failure to pay of the former, the latter filed in the sheriff’s office
petition for the extrajudicial foreclosure. De Leon won as the sole bidder. Meanwhile, petitioners
Reyes and Navarro filed a petition for consolidation of ownership of the house on the ground
that the vendees failed to redeem their property upon the expiration of the redemption period.
De Leon argued that the pacto de retro sale could affect his right as third party. The lower court
decided in favor of Reyes and Navarro wherein Lanuzas lose the right to mortgage their
property because they were not the absolute owners of the property that time.

ISSUE:
Whether or not De Leon has a better right.

RULING:
Yes. Article 2088 of the New Civil Code states that the creditor cannot appropriate the
things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is
null and void. There were no transmission of ownership between the Lanuzas and Reyes and
Navarro. In truth, there was a provision regarding automatic transfer of ownership which was a
Pactum Commissorium and it is prohibited under the law. Hence, the intention of the parties
was deemed as a mortgage rather than of a sale. The court held that it was in reality an
equitable mortgage and the claims of De Leon are preferred because his mortgage was
registered under Article 2125, NCC. In addition to the requisites stated in Article 2085, it is
indispensable, in order that a mortgage may be validly constituted, that the document in which it
appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage
is nevertheless binding between the parties.
 CARLO LEZAMA BUNDALIAN and JOSE R. BUNDALIAN v. THE HON. COURT OF
APPEALS, JUANITO LITTAWA and EDNA CAMCAM
G.R. No. L-55739, June 22, 1984

FACTS:
Petitioners purchased from the Estate of the Deceased Agapita Sarao Vda. de Virata
three (3) contiguous parcels of land in consideration of the amount of P499,200.00. 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. Moreover,
petitioners filed a petition for declaratory relief and/or reformation of instrument 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. 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. 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.

ISSUE:
Whether or not the deed of sale with right to repurchase should be declared as an
equitable mortgage.
RULING:
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
 HERMENEGILDO R. ROSALES v. PEREGRIN YBOA, Provincial Deputy Sheriff of Samar
and the REGISTER OF DEEDS for the Province of Samar
G.R. No. L-42282, February 28, 1983

FACTS:
By virtue of the foreclosure of real estate mortgage duly executed by the mortgagor
Pedro Oliverio in favor of the DBP, 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 P14,500.00, the parcel of
land covered by T.C.T. No. T-646. 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. 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 1 % 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 a 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 P1,691.00 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.

ISSUE:
Whether or not a valid and legal redemption was made by the mortgagor Pedro Oliverio
of his titled property.

RULING:
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. Pursuant to the
above-cited provision, the requisites for a valid redemption are: 1) the redemption must be
made within 12 months from the time of the registration of the sale in the Office of the Register
of Deeds; 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; 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 12 months after the registration of the sale on February 3,
1970 and that defendants-appellees Deputy Sheriff 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. 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.
An extra judicial foreclosure sale being in the nature of a voluntary transaction, appellant should
have been required by the Register of Deeds 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. The Supreme Court holds 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 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.
LEONARDO TIOSECO v. HONORABLE COURT OF APPEALS JOSE P. VILLANUEVA and
TIMOTEA P. VILLANUEVA
G.R. No. L-66597, August 29, 1986

FACTS:
The spouses Jose P. Villanueva and Timotea P. Villanueva mortgaged to the Tarlac
Branch of the PNB three lots to secure payment of a loan of P8,600.00. When they failed to
comply with the mortgage contract, the PNB petitioned the Provincial Sheriff of Tarlac to
foreclose upon the properties extrajudicially. The Provincial Sheriff in the public auction he
conducted on March 7, 1977 sold the lots to Leonardo Tioseco, petitioner, as the highest bidder
for the amount of P18,975.00. The certificate of sale dated March 7, 1977 issued by the
Provincial Sheriff to Tioseco was registered in the Office of the Register of Deeds on March 8,
1977. Tioseco's ownership over the properties was consolidated, the title of the spouses
Villanueva was cancelled and TCT No. 141194 was issued to Tioseco by the Register of Deeds
on March 7, 1978. It is claimed by Tioseco that sometime before March 9, 1978 respondents
Villanueva visited him in his house and offered to pay the amount he had paid for the three lots
auctioned off on March 7, 1977. Tioseco told them that they could redeem the three lots by
paying to him the amount he paid at the auction sale plus interest. The respondents promised to
return, but never did. Upon the other hand, it is claimed by the respondents that they offered to
redeem the three lots within the period of redemption but Tioseco allegedly demanded
P22,641.08 as redemption price. Finding the amount demanded excessive, the respondents
Villanueva filed a suit on March 7, 1978 to annul the sale in favor of Tioseco on the ground that
it was irregular and to require both the PNB and Tioseco to determine the amount they should
pay to be able to redeem the three lots. The PNB stated in its answer that at the time of the
auction sale of the three lots on March 7, 1977 the amount of P18,975.00 was due from the
respondents. The amount included the principal of the loan, accrued interest, service charges,
expenses of foreclosure, and attorney's fees. The answer also stated that the auction sale
conducted by the Provincial Sheriff was in accordance with the formalities and other
requirements prescribed by law. In his answer, Tioseco denied having demanded the sum of
P22,641.08 from the respondents.

ISSUE:
Whether or not the respondents exercised their right of redemption effectively.
RULING:
Yes. There is no question that the respondents have the right to redeem the subject
property in view of the provision of Section 25, P.D. No. 694 (Revised Charter of PNB): SEC.
25. Right of redemption of property-Right of possession during redemption period.—Within one
year from the registration of the foreclosure sale of real estate, the mortgagor shall have the
right to redeem the property by paying all claims of the Bank against him on the date of the sale
including all the costs and other expenses incurred by reason of the foreclosure sale and
custody of the property, as well as charges and accrued interests. When the respondents chose
to enforce their right of redemption thru a court action on March 7, 1978 they were well within
their right as the action was filed within one year from the registration of the foreclosure sale of
the real estate on March 9, 1977. P.D. No. 694 is silent as to any formal tender of repurchase
price as a pre-condition to a valid exercise of the right of redemption. It does not even require
any previous notice to the vendee, nor a meeting between him and the redemptioner, much less
a previous formal tender before any action is begun in court to enforce the right of redemption.
In any case, the lack of funds which may render the right inefficacious cannot affect the
existence of the right. In fact, the filing of the action itself, within the period of redemption, is
equivalent to a formal offer to redeem. And in this connection, a formal offer to redeem,
accompanied by a bona fide tender of the redemption price, although proper, is not even
essential where, as in the instant case, the right to redeem is exercised thru the filing of judicial
action. In the instant case, the ends of justice would be better served by affording the
respondents the opportunity to redeem the subject property. This ruling is in obedience to the
policy of the law to aid rather than to defeat the right of redemption.
MANUEL R. DULAY v. HON. JUDGE GLICERIO V. CARRIAGA, Judge of the Court of First
Instance of Cotabato, and EUSEBIO C. TANGHAL
G.R. No. L-52831, July 29, 1983

FACTS:
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 Manuel R. Dulay to pay
Eusebio C. Tanghal the sum of P143,980.00. Seventeen 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 proffered and fixed for each parcel, for the sum of
P82,598.00. Within the reglementary period for redemption, the defendant redeemed 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. Upon motion of the
plaintiff, however, the trial court 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. Hence, this petition for
certiorari with preliminary injunction, to annul and set aside the order of the respondent judge.

ISSUE:
Whether or not for redemption to be valid, the judgment debtor should pay the entire
judgment debt and not the purchase price.

RULING:
In the redemption of properties sold at an execution sale, the amount payable is no
longer the judgment debt, but the purchase price. The Court said that 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 1% 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.
The instant case involves the redemption of property levied upon and sold at public auction to
satisfy a judgment. 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 PNB and the DBP 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 government lending institutions is not accorded to judgment
creditors in ordinary civil actions.
 PHILIPPINE NATIONAL BANK v. THE HONORABLE COURT OF APPEALS AND DIVINA
ALIM
G.R. No. L-60208, December 5, 1985

FACTS:
On February 2, 1968, Divina Alim obtained a loan in the total amount of P40,000 from
PNB secured by three parcels of land registered in her name and covered by TCTs. For failure
of Alim to pay her total obligation upon maturity date, PNB extrajudicially foreclosed the
mortgage properties and the Provincial Sheriff of Quezon sold the properties at public auction
on February 12, 1973. PNB 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 Alim 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, Alim instituted the case for the
annulment of the aforesaid extrajudicial foreclosure and sale and for damages with prayer for
preliminary injunction.

ISSUE:
Whether or not Alim may redeem the mortgaged properties by paying the amount of the
purchase.

RULING:
Yes. 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: In all 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 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 inconsistent with the
provision of this Act. Pursuant to Section 30 of Rule 39, the redemptioner, who is the private
respondent herein, may redeem the property from the purchaser at any time within 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 therein after purchase and interest
on such last named amount at the same interest rate. This would rightfully be so because 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.
 DEVELOPMENT BANK OF THE PHILIPPINES v. DIONISIO MIRANG
G.R. No. L-29130, August 8, 1975

FACTS:
On September 7, 1950 the appellant obtained approval of a loan of P14,000.00 from the
Rehabilitation Finance Corporation, secured by a first mortgage on defendant's homestead, for
the following purposes: P1,000 for purchase of work animals and farm implements; P1,500 for
construction of farmhouse and laborers' quarters; and P11,500 for development and
maintenance of 18.5 hectares of abaca land. The loan was released gradually to the appellant
up to a total of P13,000.00. Thereafter the appellee refused to make any further releases
because the plantation which was being financed was attacked by mosaic disease, which
destroyed the abaca plants. The appellant, on his part, failed to pay the yearly amortizations; so
in accordance with the terms of the promissory notes he had signed and the mortgage contract
itself, the provincial sheriff of Davao, upon request of the appellee, foreclosed the mortgage
extrajudicially under the provisions of Act 3135, as amended, and sold the mortgaged property
at public auction on July 30, 1957. By that time the appellant's indebtedness, including interest,
had reached P19,714.35, besides the expenses of the auction sale and registration fees, which
amounted to P101.00. The appellee, as the highest bidder for P2,010.00, acquired ownership of
the mortgaged property. The appellant was duly advised of the sale, with the information that
the same was subject to his right of redemption within one year from July 30, 1957. This right he
had not exercised when the complaint was filed by the appellee on May 29, 1962.

ISSUE:
Whether or not the creditor Development Bank of the Philippines has a right to recover
the balance of the indebtedness after the mortgaged property was sold for less than the amount
thereof under extrajudicial foreclosure pursuant to Act 3135, as amended.

RULING:
Article 2131 of the new Civil Code expressly provides that the form, extent and
consequences of a mortgage, both as to its constitution, modification and extinguishment, and
as to other matters not included, shall be governed by the provisions of the Mortgage Law and
of the Land Registration Law. Under the Mortgage Law, which is still in force, the mortgagee
has the right to claim for the deficiency resulting from the price obtained in the sale of the real
property at public auction and the outstanding obligation at the time of the foreclosure
proceedings. Under the Rules of Court (Section 6, Rule 70), upon the sale of property, under an
order for a sale to satisfy a mortgage or other encumbrance thereon, if there be a balance due
to the plaintiff after applying the proceeds of the sale, the Court, upon motion, should render a
judgment against the defendant for any such balance for which, by the record of the case, he
may be personally liable to the plaintiff. It is true that this refers to a judicial foreclosure, but the
underlying principle is the same, that the mortgage is but a security and not a satisfaction of
indebtedness. It is clear that in the absence of a similar provision in Act 3135, as amended, it
cannot be concluded that the creditor loses his right given him under the Mortgage Law and
recognized in the Rules of Court, to take action for the recovery of any unpaid balance on the
principal obligation, simply because he has chosen to foreclose his mortgage extrajudicially,
pursuant to a special power of attorney given him by the mortgagor in the mortgage.
 LETICIA CO, assisted by her husband MUI YUK KONG, in substitution of CITADEL
INSURANCE & SURETY CO., INC. v. PHILIPPINE NATIONAL BANK
G.R. No. L-51767, June 29, 1982

FACTS:
In 1962, Standard Parts Manufacturing Corporation (Standard) executed a real estate
mortgage covering properties situated in Baguio City, in favor of PNB, as security for a
P500,000 loan. In 1960, Standard amended the real estate mortgage to include a property in
Makati as security to the increased loan amount of P1,000,000.00. In the same year, it also
executed a chattel mortgage for its personal properties. The total loan of Standard amounted to
P4,296,803.56. Standard defaulted on its loan obligations thus PNB foreclosed the mortgages.
PNB purchased the foreclosed properties. It also consolidated titles to the properties located in
Baguio when Standard failed to redeem the properties within the redemption period. The title
was issued on May 5, 1976. On May 14, 1976, title to the Makati property was also transferred
to PNB. In the meantime, on March 5, 1976, Citadel wrote PNB a letter expressing its desire to
redeem the Makati property, it alleging to be assignee of the right of redemption of Standard
(assignment was made on February 20, 1976) with respect to the said property. PNB refused
considering that its total claim of P3,366,546.42 is much higher than Citadel's offer of only
P1,621,970 as redemption price. On March 11, 1976, Citadel consigned the payment to the trial
court in an action. The trial court ruled in favor of Citadel thus this appeal.

ISSUE:
Whether or not PNB should be paid the full amount of P3,366,546.42 without any
interest when it refused a redemption legally and validly tendered.

RULING:
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 the Court deems 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.
PNB having foreclosed on the Baguio properties and the chattels of Standard for what appears
could have been a fairer price, the redemption herein involved be allowed on the basis of the
injunction against unjust enrichment. 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.
 ALPHA INSURANCE AND SURETY CO., INC. v. ESPERANZA C. REYES, ARTURO R.
REYES and DEVELOPMENT BANK OF THE PHILIPPINES
G.R. No. L-26274, July 31, 1981

FACTS:
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 (with a total area of 540 square meters) and the buildings thereon, located at Makati,
Rizal, in consideration of Alpha Insurance’s undertaking to act as surety of the said spouses in
certain loans (not to exceed P10,000.00 to be obtained from banks or financial institutions. The
two lots were previously mortgaged to the DBP 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 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
Insurance’s 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.

ISSUE:
Whether or not foreclosure of the second mortgage be ordered.

RULING:
Nothing may be done to favor plaintiff-appellant Alpha Insurance and Surety, 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 the Supreme Court
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.
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 DBP; 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.
 THE BANK OF THE PHILIPPINE ISLANDS v. V. CONCEPCION E HIJOS, INC., and
VENANCIO CONCEPCION, HENRY W. ELSER
G.R. No. L-27701, July 21, 1928

FACTS:
On July 6, 1921, the Concepcion executed a promissory note in favor of the plaintiff for
the sum of P342,372.64, payable on demand, and as security for payment, deposited 700
shares of the PNB as collateral with the plaintiff and gave it a mortgage on 5,680 square meters
of land, with improvements. The defendants Concepcion defaulted in the payment of the note,
and on February 3, 1922, the plaintiff bank instituted the present foreclosure proceedings.
Shortly afterwards, Henry W. Elser entered into negotiations with the Concepcions and offered
to take over the mortgaged property and assume the mortgage debt. To this the Concepcions
agreed on the condition that they be relieved of all liability for the debt. On March 23, 1922,
Elser wrote the plaintiff bank a letter. No answer to the letter was given by the bank, and it
clearly appears from the allegations in its amended complaint, and from the evidence, that it
was unwilling to release the Concepcions from their liability for the mortgage debt and insisted
on their confessing a judgment in the foreclosure proceedings. This the Concepcions refused to
do unless the bank would agree to bid in the mortgage property for the full amount of the
judgment. After further conversations with the representatives of the plaintiff bank, Elser on April
21, 1922, wrote another letter. It must be inferred from this letter that Elser had been led to
understand that the bank would bid in the land at the foreclosure sale for the full amount of the
judgment and sell it to him for the same price. It will be readily seen that this proposition is
entirely different from that contained in the letter of March 23. The plaintiff made no direct reply
to the letter. The bank never gave notice of its conformity with the agreement but of June 15,
1922, it petitioned the court to include Henry W. Elser as defendant in the complaint. Elser died
on June 18, 1923, and on January 4, 1924, the plaintiff suggested the death of the defendant
Elser, and asked that the administrator of the estate, C. W. Rosenstock, be substituted in his
place as defendants, and that the action be continued against Rosenstock in the capacity on the
ground that this action is for the foreclosure of a mortgage.

ISSUE:
Whether or not the substitution of the Administrator for Elser is proper.
RULING:
 No. The effects of transfer of a mortgaged property to a third person are well determined
by the Civil Code. According to article 1879 of this Code, the creditor may demand of the third
person in possession of the property mortgaged payment of such part of the debt, as is secured
by the property in his possession, in the manner and form established by law. The Mortgage
Law in force at the promulgation of the Civil Code and referred to in the latter, exacted, among
other conditions, also the circumstance that after judicial or notarial demand, the original debtor
had failed to make payment of the debt at maturity. According to this, the obligation of the new
possessor to pay the debt originated from the right of the creditor to demand payment of him, it
being necessary that a demand for payment should have previously been made upon the debtor
and the latter should have failed to pay. And even if these requirements were complied with, still
the third possessor might abandon the property mortgaged, and in that case it is considered to
be in the possession of the debtor. This clearly shows that the spirit of the Civil Code is to let the
obligation of the debtor to pay the debt stand although the property mortgaged to secure
payment of said debt may have been transferred to a third person. While the Mortgage Law of
1893 eliminated these provisions, it contained nothing indicating any change in the spirit of the
law in this respect. Article 129 of this law, which provides for the substitution of the debtor by the
third person in possession of the property, for the purposes of giving notice, does not show this
change and has reference to a case where the action is directed only against the property
burdened with the mortgage. It follows that the plaintiff can have no cause of action against
Elser, or rather against his estate. The mortgagee has the election of one out of three courses:
(1) He may abandon his security and share in the general distribution of the assets of the
estate, or (2) he may foreclose, secure a deficiency judgment and prove his deficiency judgment
before the committee, or (3) he may rely upon his security alone, in which case he can receive
no share in the distribution of the assets of the estate. In this case the bank did not abandon the
security and took no steps of any sort before the committee within the time limit provided by the
sections 689 and 690 of the Code of Civil Procedure. The committed ceased to function long
ago, and the bank has now nothing to rely on except the mortgage. Internationally or not, it has
bought itself within the third course provided for in section 708; it has no alternative. Until the
foreclosure sale is made, the demand for the payment of deficiency is a contingent claim within
the meaning of sections 746, 747, and 748 of the Code of Civil Procedure. These sections are
in entire harmony with section 708; the amount of the deficiency cannot be ascertained or
proven until the foreclosure proceedings have terminated, but the claim for the deficiency must
be presented to the committee within the period fixed by sections 689 and 690 of the Code. The
committee does not then pass upon the validity of the claim but reports it to the court. If the
court "from the report of the committee" or from "the proofs exhibited to it" is satisfied that the
contingent claim is valid, the executor or administrator may be required to retain in his
possession sufficient assets to pay the claim when it becomes absolute, or enough to pay the
creditor his proportionate share if the assets of the estate are insufficient to pay the debts. When
the contingent claim has become absolute, its amount may be ascertained and established in
the manner indicated by sections 748 and 749. As will be seen, the bank both could and should
have presented its claim to the committee within the time prescribed by the law.
 MARCELO STEEL CORPORATION, HON. WALFRIDO DE LOS ANGELES, in his capacity
as Judge, Court of First Instance of Rizal, Branch IV, Quezon City, and THE SHERIFF OF
QUEZON CITY v. COURT OF APPEALS, PETRA R. FARIN and BENJAMIN FARIN
G.R. Nos. L-34317 and L-34335, November 28, 1973

FACTS:
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. On October 30, 1964, spouses Farin
executed a deed of real estate mortgage, in favor of Marcelo Steel 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 Marcelo Steel
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 Sheriff advertised and
scheduled the extra-judicial foreclosure sale of the mortgaged property for August 26, 1965. On
August 21, 1965, the spouses Farin filed against the corporation and the Sheriff of a petition
captioned "Prohibition with Injunction and Damages" in the Court of First Instance of Rizal,
wherein they prayed that the sheriff be permanently enjoined from proceeding with the
scheduled sale at public auction of the mortgaged property, and that the corporation be
condemned to pay the spouses Farin 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 judge issued an order commanding the Sheriff and the corporation to desist from
proceeding with the public auction sale of the mortgage property scheduled on August 26, 1965.

ISSUE:
Whether or not the purchaser is authorized to petition for a writ of possession during the
redemption period.

RULING:
The writ of possession was properly issued, since the foreclosure proceeding conducted
by the sheriff was not predicated on any judicial order. 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, 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. Such question is not to be raised as a justification for opposing the issuance of the
writ of possession, since the proceeding for this is ex parte. It thus appear that the 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.
 PHILIPPINE NATIONAL BANK v. Hon. MIDPANTAO ADIL, in his capacity as Presiding
Judge of the CFI Iloilo, Branch II, and the HEIRS OF THE LATE TEODORO MELLIZA
Composed of ANGELINA LOBATON VDA. DE MELLIZA, etc., ROSEMARIE CHANG,
RAYMUNDO TEODORO MELLIZA, JR., MARILYN MELLIZA, JOSE TEODORO MELLIZA
G.R. No. L-52823, November 2, 1982

FACTS:
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, PNB 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 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 15 days. Before the expiration of the 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.

ISSUE:
Whether or not Hon. CFI Judge Adil committed grave abuse of discretion when he
issued the restraining orders dated May 8, 1979, June 1, 1979, July 5, 1979 and August 13,
1979, which prevented the writ of possession issued in favor of PNB from being enforced.
RULING:
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, PNB. Thus, its right of possession of
property is clearly unassailable. Respondents cannot claim that the writ of possession was
suspended under the authority -- the order was issued motu proprio and without the PNB being
afforded the right to present its side. The court did not act within the bounds of the law when
Judge Adil reasoned in issuing the suspension order humanitarian reasons without giving
specific reasons for writ's issuance. The Court said that a suspension order which suspends
implementation of an earlier order is like an injunction, which must be issued always with
circumspection, and upon proper motion of the party concerned. Moreover, such suspension
order has a far-reaching effect. It enabled the respondents to withhold possession from
petitioner and file a complaint where an injunction was sought. Also, a prohibitory injunction
cannot be issued when the act sought to be enjoined has already been committed. 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. in possession. In the present case, Melliza
and her cp-heirs' right to relief via injunctive order is, at least, doubtful. The applicant's right or
title must be clear and unquestioned. The ground they relied upon is not indubitable, while the
foreclosure proceeding has in its favor the presumption of regularity.
 ISABEL OCAMPO v. IGNACIO DOMALANTA and PONCIANO MARTINEZ, in his capacity
as Provincial Sheriff of Cavite
G.R. No. L-21011, August 30, 1967

FACTS:
A case of foreclosure of real estate and chattel mortgage was filed in the CFI. In the first
case, a judgment was rendered ordering petitioner-appellant Ocampo to pay respondent-
appellee Domalanta to pay P2000 with 1% interest from Dec. 5, 1958 full payment, and
attorney’s fees of P500 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.
However, 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 to the highest bidder, appellee Ignacio Domalanta, for P3,537.00. Domalanta
moved to confirm the sale. Subsequently, the court ordered confirmed such sale on June 2,
1962. After the said order became final and executory, a civil case was instituted by petitioner
Ocampo to annul the sheriff sale on the grounds that respondent-mortgagor Domalanta 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.
Respondent Domalanta moved to dismiss the complaint on the ground of res judicata. Then, the
court dismissed the case with prejudice.

ISSUE:
Whether or not 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.

RULING:
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. An order of confirmation in court foreclosure proceedings is a final order,
not merely interlocutory. The right to appeal therefrom has long been recognized. In fact, it is
the final order from which appeal may be taken in judicial foreclosure proceedings. No appeal
was taken. It follows that said order is final, binding. 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. In the present case, the
first suit was an action quasi in rem. A judgment therein is conclusive only between the parties.
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. 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. However, such legality of sale is an issue
which could have been, and was in fact raised and rejected in the first case. 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. The presumption that the
notice of sale of real estate in foreclosure proceedings has been given, holds true here. For,
indeed, a legal tenet of long standing is that official duty presumptively has been regularly
performed. 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. The Court held that a case of foreclosure of real
estate mortgage, where we pronounced that the law does not require that such notification be
given personally to the party upon whose property execution is levied.
 DEVELOPMENT BANK OF THE PHILIPPINES v. JOVENCIO A. ZARAGOZA and AVELINA
E. ZARAGOZA
G.R. No. L-23493, August 23,1978

FACTS:
Jovencio A. Zaragoza and Avelina E. Zaragoza obtained, on July 19, 1949, a loan of
P30,000 from DBP which was secured by a real estate mortgage. It was stipulated that upon
failure of appellants to pay the amortization due, according to the terms and conditions thereof,
PNB shall have the authority to foreclose extrajudicially the mortgaged property, pursuant to
Republic Act No. 3135, as amended. Conformably to this stipulation, upon breach of the
conditions of the mortgage, PNB foreclosed extrajudicially the mortgage on December 10, 1952,
and the Provincial Sheriff of Pangasinan posted the requisite notice of the sale at public auction
of the mortgaged property. On June 10, 1957, the property was sold at public auction to the
PNB, being the highest bidder therein, for the sum of P21,035.00. After applying the proceeds of
the sale to satisfy the outstanding balance of the indebtedness in the amount of P28,914.36, it
was found that appellants still owed PNB in the amount of P7,779.36. Suit for the deficiency with
preliminary attachment was filed by PNB against appellants on June 20, 1961. In their answer,
appellants averred that after an extrajudicial foreclosure of property, no deficiency judgment
would lie and that from the date of the foreclosure to the sale of said property, the mortgagor is
no longer liable for the interest on the loan. The aforesaid contentions of appellants were
overruled by the trial court, who thereupon rendered the aforesaid judgment in favor of PNB.
Contending that the trial court erred in resolving those issues of law, appellants appealed
directly to the Supreme Court.

ISSUE:
Whether or not the mortgagee is entitled to claim the deficiency in extrajudicial
foreclosure of mortgage.
Whether or not additional interests are properly chargeable on the balance of the
indebtedness during the period from notice of sale to actual sale.

RULING:
In extrajudicial foreclosure of mortgage, where the proceeds of the sale is insufficient to
cover the debt, the mortgagee is entitled to claim the deficiency from the debtor. Under the
Mortgage Law, which is still in force, the mortgagee has the right to claim for the deficiency
resulting from the price obtained in the sale of the real property at public auction and the
outstanding obligation at the time of the foreclosure proceedings. Upon the sale of any real
property, under an order for a sale to satisfy a mortgage or other encumbrance thereon, if there
be a balance due to the plaintiff after applying the proceeds of the sale, the court, upon motion,
should render a judgment against the defendant for any such balance for which by the record of
the case, he may be Personally liable to the plaintiff. It is true that this refers to a judicial
foreclosure, but the underlying principle is the same, that the mortgage is but a security and not
a satisfaction of indebtedness. As to the second issue, appellants cannot take advantage of the
delay which was their own making, to the prejudice of the other party. Apart from this
consideration, it must be noted that a foreclosure of mortgage means the termination of all rights
of the mortgagor in the property covered by the mortgage. It denotes the procedure adopted by
the mortgagee to terminate the rights of the mortgagor on the property and includes the sale
itself. In judicial foreclosures, the "foreclosure" is not complete until the Sheriff's Certificate is
executed, acknowledged and recorded. In the absence of a Certificate of Sale, no title passes
by the foreclosure proceedings to the vendee. It is only when the foreclosure proceedings are
completed and the mortgaged property sold to the purchaser that all interests of the mortgagor
are cut off from the property. This principle is applicable to extrajudicial foreclosures.
Consequently, in the case at bar, prior to the completion of the foreclosure, the mortgagor is,
therefore, liable for the interest on the mortgage.
 CARLOS ANG GOBONSENG, JR. and THERESITA MIMIE ONG-GOBONSENG v.
HON. COURT OF APPEALS, STATE INVESTMENT HOUSE, INC., and BENJAMIN V.
DISPUTADO, in his capacity as the Clerk of Court of the Regional Trial Court and Sheriff
of the Province of Negros Oriental
G.R. No. 111797 July 17, 1995

FACTS:
The credit line granted to the Gobonsengs was for a period longer than sixty days but is
not six years as asserted by the Gobonsengs. The credit line was availed of by promissory
notes with interest duration of, normally, sixty days, and that for as long as the interests were
paid, roll-overs of the promissory notes within the term of the credit line were automatic since it
was SIHI itself which filled up for the purpose the unfilled promissory notes signed by the
Gobonsengs. Sometime in December, 1982, spouses Carlos A. Gobonseng, Jr. and Theresita
Mimie P. Gobonseng filed with the State Investment House, Inc. at its Branch Office in Cebu
City an application for a P2-million loan. Whereupon, the parties executed a Credit Agreement
whereby SIHI granted the Gobonsengs a credit line or accommodation in the sum of P2-million.
Accordingly, the Gobonsengs constituted a Real Estate Mortgage over their three parcels of
land in Dumaguete as collaterals. The mortgage contract was annotated at the back of said
titles. On January 19, 1983, the parties agreed to reduce the amount of the loan from P2-million
to P900,000.00. An Amended Real Estate Mortgage was executed by the parties to reflect the
said amount. Later, the Gobonsengs again applied for an additional loan of P800,000.00. SIHI
approved the application under the same terms and conditions as the first loan but with an
additional collateral. Pursuant to their Credit Agreement, SIHI granted the Gobonsengs credit
lines for such amounts which they desire to avail of. The availments of such amounts,
renewable from time to time, have an average term of 60 days each. On January 21, 1983, the
Gobonsengs availed of the full amount of P900,000.00 which they renewed from time to time.
With respect to the loan of P800,000.00, the Gobonsengs obtained various amounts in
installments. The term of each loan granted has an average of 60 days. For each renewal, a
corresponding promissory note was executed by the Gobonsengs. On January 21, 1983, SIHI
and the Gobonsengs executed a Consultancy Contract whereby the Gobonsengs agreed to pay
SIHI for its consultancy services and professional advice. Claiming that the Gobonsengs failed
to pay the two loans on their due date on May 2, 1984 and that despite demands, failed to remit
the payment due, SIHI instituted an extrajudicial foreclosure proceedings with defendant
Provincial Sheriff Benjamin V. Diputado, who scheduled the auction sale of the spouses'
properties on July 18, 1984. On June 21, 1984, before the scheduled date of the foreclosure
sale, the Gobonsengs filed with the court a quo a complaint for annulment/reformation of
documents and damages with prayer for a temporary restraining order and preliminary
injunction against SIHI and Benjamin V. Diputado, in his capacity as Clerk of Court of the
Regional Trial Court and Sheriff of Negros Oriental.

ISSUE:
Whether or not the term of the two loans is 6 years instead of the terms reflected in the
loan documents.

RULING:
The application for foreclosure of the mortgage on 9 June 1984 was premature because
by then, the Gobonsengs had not yet defaulted on the payments of either the principal or the
interest of their loans. As the Gobonsengs stated in their 25 May 1994 letter to Shirley Uy, the
interest on the P800,000.00 loan for the period ending 2 July 1994 had already been pre-paid
on 2 May 1994, and the payment for the interest on the P900,000.00 loan was due at the end of
the next term which was 13 July 1994 yet. SIHI never controverted these claims by the
Gobonsengs and so the Court is constrained to accept them as true. Nevertheless, because the
Gobonsengs did not pay the remaining unpaid portion of the principal and the interests due
thereon every sixty days thereafter at any time after the foreclosure proceedings were initiated,
the real estate mortgages could have been validly foreclosed after the Gobonsengs failed to
make payments and even if the Gobonsengs are correct and the term of the credit line was six
years, which then expired on 19 January 1989. Likewise, there is no evidence that the
Gobonsengs had made any payment on the interest and on the unpaid balance of the principal
even after the filing of the civil case. The payment therefor has long become overdue. Justice
end equity demand that they be required to pay them within thirty days from their receipt of this
decision, otherwise the real estate mortgages may be foreclosed.
 BANK OF THE PHILIPPINE ISLANDS v. GREGORIO YULO
G.R. No. 9358, September 24, 1915

FACTS:
On the 7th of October, 1912, BPI filed its complaint in the Court of First Instance of the
Province of Iloilo, for the purpose of recovering of the defendant the sum of P43,212.95,
together with interest at 8 per cent, and P2,000 as costs. BPI also alleged that, to secure the
payment of said sum, the defendant, on the 26th of June, 1907, had executed and delivered a
mortgage upon certain property particularly described therein, and prayed for a judgment for the
amount above stated. To the petition of BPI the defendant filed a general denial. Upon the issue
thus presented, the cause was brought on for trial. After hearing the evidence, the Honorable
James S. Powell, judge, rendered a judgment in favor of BPI and against the defendant for the
sum of P41,275.18 with interest, from the 21st of January, 1913, at 8 per cent until paid and for
the further sum of P2,000 as attorney’s fees, as provided in said mortgage, and costs. The
lower court further ordered that the said sums be paid into this court by the defendant on or
before the first day of the next term of this court immediately succeeding this January term,
1913, said principal and interest and costs, and, in default of such payment, the land and other
improvements named in said mortgage will be sold to realize the amount due on said mortgage,
with the costs.

ISSUE:
Whether or not the sale of the various properties for the aliquot parts of the debt as
provided for in the mortgage be ordered.
Whether or not the judgment against the defendant for the fees of counsel for the plaintiff
is proper.

RULING:
Even though a clause be inserted in a mortgage fixing a tipo or upset price to become
operative in the event of foreclosure, nevertheless, the sale must take place and the property
must be awarded to the highest bidder. Parties cannot, by agreement, contravene the statutes
and interfere with the lawful procedure of the courts. Paragraph 7 of the mortgage expressly
provides that, even though the mortgage contains an "upset price," the defendant expressly
gave his consent to have the property sold. With reference to the second assignment of error,
that the lower court should not have imposed a judgment upon the defendant for P2,000 as
attorney’s fees, it may be said, that the mortgage contains a provision for the payment of
P2,000, in case the plaintiff is compelled to resort to the courts to recover the amount due on
said mortgage. In view of that provision, we are of the opinion that it was only intended that the
plaintiff should recover of the defendant, in case an action was brought for the foreclosure of
said mortgage, his costs and expenses necessarily incurred in the foreclosure of the mortgage.
The Court does not believe that it was an absolute promise to pay P2,000 as attorney’s fees.
The mortgage does not contain a stipulation to that effect. The Court holds that the purpose of
said clause in the mortgage was simply to permit the plaintiff to recover his expenses and costs,
in case an action was brought. There is no proof in the record to show what were the expenses
incurred by virtue of the present action by the plaintiff. Therefore, that part of the judgment of the
lower court should be modified, and the plaintiff should be permitted to recover, in addition to
the sum for which judgment was rendered by the lower court, his costs only.
 RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE v. THE HONORABLE COURT OF
APPEALS and THE PHILIPPINE BANK OF COMMERCE
G.R. No. L-49101, October 24, 1983

FACTS:
The complaint filed on January 26, 1971 by petitioner Honesto Bonnevie with the Court
of First Instance of Rizal against respondent Philippine Bank of Commerce sought the
annulment of the Deed of Mortgage dated December 6, 1966 executed in favor of the Philippine
Bank of Commerce by the spouses Jose M. Lozano and Josefa P. Lozano as well as the
extrajudicial foreclosure made on September 4, 1968. It alleged among others that (a) the Deed
of Mortgage lacks consideration and (b) the mortgage was executed by one who was not the
owner of the mortgaged property. It further alleged that the property in question was foreclosed
pursuant to Act No. 3135 as amended, without, however, complying with the condition imposed
for a valid foreclosure. Granting the validity of the mortgage and the extrajudicial foreclosure, it
finally alleged that respondent Bank should have accepted petitioner's offer to redeem the
property under the principle of equity said justice.

ISSUE:
Whether or not petitioners had a right to redeem the foreclosed property, and granting
that petitioners had such a right, whether or not respondent was justified in refusing their offers
to repurchase the property.

RULING:
The Court holds that the Court of Appeals did not err in ruling that they had no right to
redeem. No consent having been secured from respondent Bank to the sale with assumption of
mortgage by petitioners, the latter were not validly substituted as debtors. In fact, their rights
were never recorded and hence, respondent Bank is charged with the obligation to recognize
the right of redemption only of the Lozano spouses. But even granting that as purchaser or
assignee of the property, as the case may be, the petitioners had acquired a right to redeem the
property, petitioners failed to exercise said right within the period granted by law. Thru certificate
of sale in favor of appellee was registered on September 2, 1968 and the one year redemption
period expired on September 3, 1969. It was not until September 29, 1969 that petitioner
Honesto Bonnevie first wrote respondent and offered to redeem the property. Moreover, on
September 29, 1969, Honesto had at that time already transferred his rights to intervenor Raoul
Bonnevie.
NIMFA G. RAMIREZ and FELITO S. RAMIREZ v. COURT OF APPEALS, HON. INOCENCIO
D. MAILIAMAN, in his capacity as Presiding Judge of Branch 14 of the Regional Trial
Court of Manila, TEODORO MARMETO, THE REGISTER OF DEEDS FOR THE CITY OF
MANILA, and REGIO B. RUEFA, in his capacity as Deputy Sheriff of the Regional Trial
Court of Manila
G.R. No. 98147, March 5, 1993

FACTS:
On 16 February 1976, PNB for brevity granted a loan/credit accommodation in favor of
Ronnie Garcia in the amount of P30,000.00, secured by a first mortgage over a parcel of land
covered by TCT No. 120745, Register of Deeds of Manila. The loan was increased to
P40,000.00 on 1 April 1976. The deed of real estate mortgage and amendment to the same
were duly registered with the Register of Deeds of Manila and annotated on TCT No. 120745 on
17 February 1976 and 12 April 1976 respectively. PNB extra-judicially foreclosed the mortgage
upon failure of Ronnie Garcia to comply with the conditions of the mortgage. A Certificate of
Sale was issued to PNB on 8 November 1977 having been the sole and highest bidder. The
sale was annotated on TCT No. 120745 on 12 February 1979. Prior to the foreclosure by PNB,
Ronnie Garcia executed a Deed of Second Mortgage over the same property on 18 August
1977 in favor of Teodoro Marmeto herein private respondent, for and in consideration of
P100,000.00 payable within three months from date of execution. The encumbrance was
recorded on the title on 20 April 1978. The second mortgage was also extra-judicially
foreclosed, and in a public auction sale on 27 June 1978, Teodoro Marmeto was issued a
Certificate of Sale for the property being the highest bidder at P125,000.00. The sale was
annotated on 28 June 1978. On 1 February 1980, Ronnie Garcia executed a Waiver and
Renunciation of Rights," with respect to the first mortgage, particularly his right of redemption of
the property, in favor of his father, Jesus Garcia, who in turn later assigned his right to Nimfa
Garcia Ramirez, herein petitioner. Neither of the two assignments was registered with the
Register of Deeds. On 9 August 1980, Nimfa Ramirez paid the total redemption price to PNB
which accepted it. Since no redemption had been made vis-a-vis the second mortgage, Teodoro
Marmeto filed with the Regional Trial Court of Manila, a Petition for Consolidation of Ownership
against Ronnie Garcia and PNB. On 19 October 1989, PNB filed a Motion to Dismiss on the
ground that Nimfa Ramirez had paid to PNB the redemption price in the first mortgage, and
since PNB had no more interest or lien on the property, the plaintiff Teodoro Marmeto had no
cause of action against PNB. On 6 November 1989, the trial court dismissed the case against
PNB. Ronnie Garcia was later declared in default and on 20 December 1989, the trial court
directed the consolidation of ownership of the property in favor of Teodoro Marmeto and
ordered the Register of Deeds to register the consolidated ownership. On 12 March 1990, a writ
of execution of the 20 December 1989 order was issued directing the defendant Ronnie Garcia
to surrender TCT No. 120745 to Teodoro Marmeto. On 22 May 1990, the trial court directed the
Register of Deeds of Manila to cancel TCT No. 120745 in the possession of Ronnie Garcia and
to issue another one, covering the same property, in the name of Teodoro Marmeto and further
ordered Ronnie Garcia and all other persons claiming rights under him to surrender possession
of the property to Marmeto. On 29 May 1990, petitioner Nimfa G. Ramirez filed a Third-
Party/Adverse Claim over the property covered by TCT No. 120745 alleging that she became
the legal owner of the same when she paid the redemption price of the first mortgage to PNB.

ISSUE:
Whether or not Ramirez had acquired any right by virtue of her having redeemed the
property in question.

RULING:
By accepting the redemption price after the statutory period for redemption had expired,
PNB is considered to have waived the one year period within which Ramirez could redeem the
property. There is nothing in the law which prevents such a waiver. Allowing a redemption after
the lapse of the statutory period, when the buyer at the foreclosure does not object but even
consents to the redemption, will uphold the policy of the law which is to aid rather than defeat
the right of redemption. Thus, there is no doubt that the redemption made by petitioner Ramirez
is valid. The next question to be answered is what will be the effect of the redemption by
Ramirez on private respondent Marmeto? The rule is well settled that a second mortgagee
merely takes what is called an equity of redemption and thus a second mortgagee has to wait
until after the debtor's obligation to the first mortgagee has been fully settled. The rights of a
second mortgagee are strictly subordinate to the superior lien of the first mortgagee. In the case
at bar, the proper foreclosure of the first mortgage gave not only the first mortgagor, but also
subsequent lien holders like Marmeto, the right to redeem the property within the statutory
period. Marmeto failed to make the redemption but instead it was the petitioner who made such
redemption. The recording of the deeds of assignment of the right to redeem in the first
mortgage, would be immaterial since it cannot be denied that the foreclosure was recorded and
thus private respondent Marmeto is charged with knowledge of his right to redeem. Having
failed to redeem the property from PNB, he cannot now allege that title to the property would be
consolidated in his name on the ground that the first mortgagor failed to redeem the property
within the one year statutory period. As earlier discussed, PNB validly waived the period by
accepting the redemption money from petitioner Nimfa Ramirez. Nothing in the records shows
that private respondent tried to make the redemption by paying the debt secured by the first
mortgage. The trial court clearly erred in consolidating the title in the name of Marmeto and
allowing him to assume the first mortgage obligation. Such a conclusion is clearly without basis
in law or jurisprudence and would be contrary to the basic principle that a subsequent mortgage
over the same property is subordinate to a prior one. From the foregoing, it is clear that
petitioner Nimfa Ramirez validly acquired title to the subject property by virtue of the redemption
from PNB. This however is without prejudice to private respondent's right to payment from his
debtor-obligor of the debt secured by the second mortgage.
 CIPRIANO E. SAMONTE, FROILAN E. SAMONTE, LORENZO E. SAMONTE, TEODULA E.
SAMONTE, CONSTANCIA E. SAMONTE, and the late MIGUEL SAMONTE as represented
by his heirs REMEDIOS B. SAMONTE, NENITA E. SAMONTE, DIONICIO B. SAMONTE, and
ANTONIO SAMONTE v. THE HONORABLE COURT OF APPEALS, BENILDA C. ACOSTA,
and SALVADOR C. ACOSTA
G.R. No. L-44841, January 27, 1986

FACTS:
In 1930, Placida Espiritu was the owner of five parcels of rice land situated in Dingras,
Ilocos Norte. Sometime during the last days of 1930, according to petitioners, or on September
7, 1931, according to private respondents, those five parcels were transferred from Placida to
Victoria Mendoza. Two of the five parcels were subsequently washed away by a river. The
remaining three parcels constitute the property subject of this case. Placida passed away in
December, 1941, the petitioners herein being her heirs. Victoria died on April 19, 1937,
succeeded by her mother Salvadora Feri who died in 1947, succeeded by her daughter Benilda
Mendoza (sister of Victoria) who died on 11 November 1962, and was succeeded by her
adopted children, the private respondents herein. There is documentary evidence that Benilda
had claimed ownership of the disputed property on May 23, 1947, reiterated on December 2,
1952. On April 3, 1970, petitioners instituted Case No. 456911 of the then Court of First
Instance of Ilocos Norte, which started the present proceedings, their claim being for the return
to them of the disputed property for the reason that possession thereof was transferred to
Victoria by their mother Placida only by way of antichresis. Private respondents defended,
stating that Victoria had purchased the disputed property on September 7, 1931.

ISSUE:
Whether or not the disputed property should be returned to the petitioners for the reason
that possession thereof was transferred to Victoria by their mother Placida only by way of
antichresis.

RULING:
No. The CA correctly affirmed the decision of the trial court based on ordinary acquisitive
prescription, except that the required period should have been stated as starting from May 23,
1947 when Benilda executed the Affidavit, before Judge Simeon Ramos of the then Court of
First Instance of Ilocos Norte. In that Affidavit, Benilda claimed ownership over the didputed
property. No judicial summons, which could interrupt possession for purposes of prescription
had been served on Benilda. Neither have private respondents been served with judicial
summons prior to the institution, on April 3, 1970, of Case No. 4569-11 of the then Court of First
Instance of Ilocos Norte. Private respondents should now be deemed the owners of the
disputed property. Petitioners' claim that an instrument of antichresis had been executed by
Placida and Victoria in the later part of 1930, based on testimonial evidence, cannot be
considered legally sufficient. An unregistered lease for 50 years, enforceable against the
successors-in-interest of the lessee, could have been as easily alleged. A comment which the
Court might make is that on or about 1930, an express contract of antichresis would have been
unusual. As to respondent Court's indirect finding of latches, it is equally unbelievable that in the
span of time from December 1941 up to the date that Civil Case No. 2187 was filed on January
7, 1969, a period of more than twenty-seven years, the petitioners would not have taken any
step to verify the status of the land of their father which had been in the possession of the
private respondents during all the time, particularly as to the possibility of redeeming the
supposed mortgage their father had constituted thereon. Their inaction for such a considerable
period of time reflects on the credibility of their pretense that they merely intended to confirm an
oral mortgage, instead of a sale of the land in question.
 HILARIO RAMIREZ and VALENTINA BONIFACIO v. HONORABLE COURT OF APPEALS,
FRANCISCA MEDINA, MATILDE MARTIN, EMILIO MARTIN, DELFIN GUINTO, TEOFILO
GUINTO, PRUDENCIO GUINTO and MARGARITA GUINTO
G.R. No. L-38185, September 24, 1986

FACTS:
On September 15,1959, petitioners-spouses Hilario Ramirez and Valentina Bonifacio
filed an application for registration of a parcel of riceland in Pamplona, Las Pinas Rizal. After
notice and publication nobody appeared to oppose the application. An order of general default
was issued and the court allowed the petitioners to present evidence in support of their claim.
Thereafter, the petitioners presented parol evidence that they acquired the land in question by
purchase from Gregorio Pascual during the early part of the American regime but the
corresponding contract of sale was lost and no copy or record of the same was available. On
January 30, 1960, the court ordered the issuance of the decree of registration and
consequently: Original Certificate of Title No. 2273 of the Registry of Deeds of Rizal was issued
in the petitioners' names. On March 30, 1960, the private respondents Francisca Medina,
Basilio Martin, Matilde Martin, Delfin Guinto, Teofilo Guinto, Prudencio Guinto and Margarita
Guinto, petitioners' nephews and nieces, filed a petition to review the decree of registration on
the ground of fraud. The private respondents based their claim to the land on the following
allegations: that they are the legal heirs of the deceased Agapita Bonifacio who died intestate
on March 11, 1936; that Valentina Bonifacio is a sister of the deceased Agapita Bonifacio, they
being the children of one Gregoria Pascual; that Gregoria Pascual previously owned the land in
question as evidenced by Tax Declaration No. 6611 of Las Pinas Rizal issued on December 8,
1920; that Agapita Bonifacio acquired the property in question by purchase from Gregoria
Pascual for which reason Tax Declaration No. 8777 was issued in her name on May 21, 1928;
that Gregoria Pascual during her lifetime, from 1916, possessed the said property in the concept
of owner, publicly and uninterruptedly, which possession was continued by Agapita Bonifacio in
1928; that in 1938 respondents obtained a loan of P400.00 from the petitioners which they
secured with a mortgage on the land in question by way of antichresis; that for this reason, Tax
Declaration No. 8777 was cancelled and substituted by Tax Declaration Nos. 9522 and 2385
issued in the names of the petitioners; that, thereafter, the petitioners began paying taxes on the
land; that after several attempts to redeem the land were refused by the petitioners, the
respondents filed a complaint in the Court of First Instance of Pasay City docketed as Civil Case
No. 272-R for the recovery of the possession and ownership of the said property; that when they
learned of the issuance of the certificate of title to the land in the petitioners' names, they also
filed the instant petition for review.

ISSUE:
Whether or not petitioners are not the owners of the land sought to be registered and
they are in possession thereof only as antichretic creditors.

RULING:
Yes. The petition alleged that the applicants Hilario Ramirez and Valentina Bonifacio
willfully and fraudulently suppressed the facts that the petitioners are the legal and rightful
owners of the ricefield in question and that they possess the said ricefield merely as antichretic
creditors as security for the loan of P400.00; that the applicants are guilty of fraudulent
misrepresentation and concealment when they declared in their application, in the case at bar,
that no other person had any claim or interest in the said land. These the Court believes are
sufficient allegations of extrinsic fraud. In the applicant's application for registration, which
followed the form required by the Land Registration Act, the applicants alleged that to the best
of their knowledge and belief, there is no mortgage or encumbrance of any kind whatsoever
affecting said land, nor any other person having any estate or interest therein, legal or equitable,
in possession, remainder, reversion or expectancy. This allegation is false and made in bad
faith, for, as the Court has found, the applicants are not the owners of the land sought to be
registered and they are in possession thereof only as antichretic creditors. The court below
found that the petitioners are merely antichretic creditors. This finding and its factual bases were
affirmed by the Court of Appeals. On the basis of the evidence supporting this conclusion, this
finding is binding. The Court has on several occasions held that the antichretic creditor cannot
ordinarily acquire by prescription the land surrendered to him by the debtor. The petitioners are
not possessors in the concept of owner but mere holders placed in possession of the land by its
owners. Thus, their possession cannot serve as a title for acquiring dominion.
 CARLOS PARDO DE TAVERA and CARMEN PARDO DE TAVERA MANZANO, plaintiffs-
appellants v. EL HOGAR FILIPINO, INC., defendant-appellee.
TAVERA-LUNA, INC., VICENTE MADRIGAL
G.R. No. L-45963, October 12, 1939

FACTS:
On January 17, 1931, defendant corporation, Tavera-Luna Inc., for the purpose of
constructing the Crystal Arcade building on its premises at Escolta, Manila. To secure this loan,
the corporation executed a first mortgage on said premises and on the building proposed to be
erected thereon. On February 11, 1932, Tavera-Luna, Inc., secured from El Hogar Filipino an
additional loan of P300,000 with the same security executed for the original loan. The Tavera-
Luna, Inc., thereafter, defaulted in the payment of the monthly amortizations on the loan:
whereupon, El Hogar Filipino foreclosed the mortgage proceeded with the extra-judicial sale of
the Crystal Arcade building, at which it was the highest bidder for P1,363,555.36. One day
before the expiration of the period of redemption, Carlos Pardo de Tavera and Carmen Pardo
de Tavera Manzano, in their capacity as stockholders of the Tavera-Luna, Inc., and El Hogar
Filipino, Inc., to annul the two secured loans as well as extra-judicial sale made in favor of the
latter. Vicente Madrigal was included as party defendant because of his having signed the
second contract of loans aforementioned. From the judgment dismissing the complaint and
cross-complaint, plaintiffs and cross-complainant took the present appeal.

ISSUE:
Whether or not the contracts in question are of antichresis.

RULING:
The most important question raised by appellant is whether or not the two secured loans
are null and void. It is contended that they are, on the ground that the Crystal Arcade building,
given as security form the loans, is a public building. It is contended that the contracts in
question are not of mortgage, but of antichresis. The distinction, however, is immaterial, for
even if the contracts are of antichresis, the extra-judicial foreclosure of the security is valid.
Stipulations in a contract of antichresis for the extra-judicial foreclosure of the security may be
allowed in the same manner as they are allowed in contracts of mortgage and of pledge.
 In the matter of the involuntary insolvency of U. DE POLI. FELISA ROMAN v. ASIA
BANKING CORPORATION
G.R. No. L-17825, June 26, 1922

FACTS:
This is an appeal from an order entered by the Court of First Instance of Manila, the
insolvency of Umberto de Poli, and declaring the lien claimed by the appellee Felisa Roman
upon a lot of leaf tobacco, consisting of 576 bales, and found in the possession of said
insolvent, superior to that claimed by the appellant, the Asia Banking Corporation. Felisa Roman
claims the 576 bultos of tobacco under and by virtue of the instrument. That on November 25,
1920, said Felisa Roman notified the said Asia Banking Corporation of her contention. On
November 29, 1920, said Asia Banking Corporation replied. At the time the above entitled
insolvency proceedings were filed the 576 bultos of tobacco were in possession of U. de Poli
and now are in possession of the assignee. On November 18, 1920, U. de Poli, for value
received, issued a quedan, covering aforesaid 576 bultos of tobacco, to the Asia Banking
Corporation. The aforesaid 576 bultos of tobacco are part and parcel of the 2,777 bultos
purchased by U. de Poli from Felisa Roman. The parties further stipulate and agree that any
further evidence that either of the parties desire to submit shall be taken into consideration
together with this stipulation. Though it is stated that tobacco should remain in the warehouse of
U. de Poli as a deposit until the price was paid, it appears clearly that it evidences a contract of
sale and the recitals in order of the Court of First Instance, dated January 18, 1921, which form
part of the printed record, show that De Poli received from Felisa Roman, under this contract,
2,777 bales of tobacco of the total value of P78,815.69, of which he paid P15,000 in cash and
executed four notes of P15,953.92 each for the balance. The sale having been thus
consummated, the only lien upon the tobacco which Felisa Roman can claim is a vendor's lien.
The order appealed from is based upon the theory that the tobacco was transferred to the Asia
Banking Corporation as security for a loan and that as the transfer neither fulfilled the
requirements of the Civil Code for a pledge nor constituted a chattel mortgage under Act No.
1508, the vendor's lien of Felisa Roman should be accorded preference over it.

ISSUE:
Whether or not the rights of the endorsee of the negotiable instrument, the appellant, are
superior to the vendor's lien of the appellee and should be given preference over the latter.
RULING:
There can be no doubt whatever that if the warehouse receipt in question is negotiable,
the vendor's lien of Felisa Roman cannot prevail against the rights of the Asia Banking
Corporation as the indorse of the receipt. The only question of importance to be determined in
this case is, therefore, whether the receipt is negotiable. The matter is not entirely free from
doubt. The receipt is not perfect: It recites that the merchandise is deposited in the warehouse
"por orden" instead of "a la orden" or "sujeto a la orden" of the depositor and it contain no other
direct statement showing whether the goods received are to be delivered to the bearer, to a
specified person, or to a specified person or his order. It must be considered a negotiable
receipt. A warehouse receipt, like any other document, must be interpreted according to its
evident intent and it is quite obvious that the deposit evidenced by the receipt in this case was
intended to be made subject to the order of the depositor and therefore negotiable. That the
words "por orden" are used instead of "a la orden" is very evidently merely a clerical or
grammatical error. If any intelligent meaning is to be attacked to the phrase "Quedan
depositados en estos almacenes por orden del Sr. U. de Poli" it must be held to mean "Quedan
depositados en estos almacenes a la orden del Sr. U. de Poli." The phrase must be construed
to mean that U. de Poli was the person authorized to endorse and deliver the receipts; any other
interpretation would mean that no one had such power and the clause, as well as the entire
receipts, would be rendered nugatory. Moreover, the endorsement in blank of the receipt in
controversy together with its delivery by U. de Poli to the appellant bank took place on the very
of the issuance of the warehouse receipt, thereby immediately demonstrating the intention of U.
de Poli and of the appellant bank, by the employment of the phrase "por orden del Sr. U. de
Poli" to make the receipt negotiable and subject to the very transfer which he then and there
made by such endorsement in blank and delivery of the receipt to the blank. The Supreme
Court holds that the warehouse receipts in controversy was negotiable and that the rights of the
endorsee thereof, the appellant, are superior to the vendor's lien of the appellee and should be
given preference over the latter.
CENTRAL BANK OF THE PHILIPPINES as Liquidator of the FIDELITY SAVINGS BANK v.
HONORABLE JUDGE JESUS P. MORFE, as Presiding Judge of Branch XIII, Court of First
Instance of Manila, Spouses AUGUSTO and ADELAIDA PADILLA and Spouses
MARCELA and JOB ELIZES
G.R. No. L-38427, March 12, 1975

FACTS:
On February 18, 1969 the Monetary Board found the Fidelity Savings Bank to be
insolvent. The Board directed the Superintendent of Banks to take charge of its assets, forbade
it to do business and instructed the Central Bank Legal Counsel to take legal actions. On
December 9, 1969 the Board involved to seek the court's assistant and supervision in the
liquidation of the ban. The resolution implemented only on January 25, 1972, when his Central
Bank of the Philippines filed the corresponding petition for assistance and supervision in the
Court of First Instance of Manila. Prior to the institution of the liquidation proceeding but after the
declaration of insolvency, or, specifically, sometime in March, 1971, the spouses Job Elizes and
Marcela P. Elizes filed a complaint in the Court of First Instance of Manila against the Fidelity
Savings Bank for the recovery of the sum of P50, 584 as the balance of their time deposits. In
the judgment rendered in that case on December 13, 1972 the Fidelity Savings Bank was
ordered to pay the Elizes spouses the sum of P50,584 plus accumulated interest. In another
case, the spouses Augusta A. Padilla and Adelaida Padilla secured on April 14, 1972 a
judgment against the Fidelity Savings Bank for the sums of P80,000 as the balance of their time
deposits, plus interests, P70,000 as moral and exemplary damages and P9,600 as attorney's
fees. In its orders of August 20, 1973 and February 25, 1974, the lower court, upon motions of
the Elizes and Padilla spouses and over the opposition of the Central Bank, directed the latter
as liquidator, to pay their time deposits as preferred judgments, evidenced by final judgments,
within the meaning of article 2244(14)(b) of the Civil Code, if there are enough funds in the
liquidator's custody in excess of the credits more preferred under section 30 of the Central Bank
Law in relation to articles 2244 and 2251 of the Civil Code. From the said order, the Central
Bank appealed to the Supreme Court.

ISSUE:
Whether or not a final judgment for the payment of a time deposit in a savings bank
which judgment was obtained after the bank was declared insolvent, is a preferred claim against
the bank.
RULING:
When a bank is found to be insolvent, the Monetary Board shall forbid it to do business
and shall take charge of its assets. The Board in its Resolution No. 350 dated February 18,1969
banned the Fidelity Savings Bank from doing business. It took charge of the bank's assets.
Evidently, one purpose in prohibiting the insolvent bank from doing business is to prevent some
depositors from having an undue or fraudulent preference over other creditors and depositors.
That purpose would be nullified if, as in this case, after the bank is declared insolvent, suits by
some depositors could be maintained and judgments would be rendered for the payment of their
deposits and then such judgments would be considered preferred credits under article 2244 (14)
(b) of the Civil Code. Such judgments cannot be considered preferred and that article
2244(14)(b) does not apply to judgments for the payment of the deposits in an insolvent savings
bank which were obtained after the declaration of insolvency. A contrary rule or practice would
be productive of injustice, mischief and confusion. To recognize such judgments as entitled to
priority would mean that depositors in insolvent banks, after learning that the bank is insolvent
as shown by the fact that it can no longer pay withdrawals or that it has closed its doors or has
been enjoined by the Monetary Board from doing business, would rush to the courts to secure
judgments for the payment of their deposits. In such an eventuality, the courts would be
swamped with suits of that character. Some of the judgments would be default judgments.
Depositors armed with such judgments would pester the liquidation court with claims for
preference on the basis of article 2244(14)(b). Less alert depositors would be prejudiced. And
with respect to a national bank under voluntary liquidation, the court noted that the assets of
such a bank become a trust fund, to be administered for the benefit of all creditors pro rata and,
while the bank retains its corporate existence, and may be sued, the effect of a judgment
obtained against it by a creditor is only to fix the amount of debt. He can acquire no lien which
will give him any preference or advantage over other general creditors. Considering that the
deposits in question, in their inception, were not preferred credits, it does not seem logical and
just that they should be raised to the category of preferred credits simply because the
depositors, taking advantage of the long interval between the declaration of insolvency and the
filing of the petition for judicial assistance and supervision, were able to secure judgments for
the payment of their time deposits. The judicial declaration that the said deposits were payable
to the depositors, as indisputably they were due, could not have given the Elizes and Padilla
spouses a priority over the other depositors whose deposits were likewise indisputably due and
owing from the insolvent bank but who did not want to incur litigation expenses in securing a
judgment for the payment of the deposits. It is noteworthy that in the trial court's order, it
indicated the procedure for processing the claims against the insolvent bank. The court directed
the Central Bank, as liquidator, to submit a Project of Distribution which should include a list of
the preferred credits to be paid in full in the order of priorities established in Articles 2241, 2242,
2243, 2246 and 2247 of the Civil Code. There is no cogent reason why the Elizes and Padilla
spouses should not adhere to the procedure outlined in the said rules and regulations.