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G.R. No. L-14303 March 24, 1960
REHABILITATION FINANCE CORPORATION, plaintiff-appellant,
vs.
ALTO SURETY and INSURANCE COMPANY, INC., oppositor-appellee.
BARRERA, J.:
This is an appeal from an order of the Court of First Instance of Camarines
Sur, sitting as a land registration court (in Special Proceeding No. 781—
G.L.R.O. Rec. No. 14837) denying appellant's petition under Section 112 of
Act No. 496 for cancellation of the annotation of appellee's second mortgage
on appellant's transfer certificate of title No. 1155 of the Register of Deeds of
Camarines Sur.
Eustaquio Palma registered owner of a parcel of land with its improvements,
located in San Agustin, Iriga, Camarines Sur, covered by Transfer Certificate
of Title No. 12—Camarines Sur, executed a first mortgage to secure a loan of
P20,000.00, in favor of the Rehabilitation Finance Corporation (RFC), and
subsequently, with the consent of the RFC, a second mortgage over the same
property, in favor of Alto Surety & Insurance Company, Inc. (Alto). Both
mortgages were duly registered in the Office of the Register of Deeds of
Camarines Sur and annotated on the corresponding certificate of title. Upon
failure of the mortgagor to settle the P20,000.00 loan on its maturity, RFC
foreclosed the mortgage extrajudicially under Act 3135 as authorized in the
deed of mortgage and the property was sold in public auction under the
direction of the Provincial Sheriff of Camarines Sur on April 17, 1951 in favor
of mortgagee RFC as the highest bidder for the sum of P11,211.68.
Six months later, mortgagor Palma, by a deed of assignment dated October
15, 1951, transferred and conveyed all his rights, title and interest in and to
the mortgaged property to the spouses Anacleto Trinidad and Rosa S. de
Trinidad, the assignees assuming the obligation of paying the repurchase
price of the auctioned property. Within the year of redemption, that is, on
December 29, 1951, the assignee-spouses and the RFC executed a "Deed of
Resale" whereby the mortgaged property was resold and reconveyed in favor
of the "redemptioners, their heirs, assignees and successors in interest".
However, instead of paying the whole redemption price, only P5,500 was paid
on hand and the sum of P21,505.11, balance of the total indebtedness
including 6% interest was agreed to be paid in ten annual amortizations.
On April 3, 1952, Alto, as junior encumbrancer, wrote the RFC inquiring as to
the actual status of the property subject to redemption expiring on April 17,
1
1952. In its reply dated April 9, 1952, RFC advised Alto that the auctioned
property had already been sold to the Trinidad spouses "under a deed of
redemption on the installment plan".
This notwithstanding, the RFC, on October 2, 1952, executed an affidavit
consolidating ownership on the purchased property, stating therein that the
period of redemption had expired on April 18, 1952 without the debtor or any
lien-holder thereon exercising said right of redemption or repurchase. This
affidavit, together with the deed of sale evidencing its (RFC's) purchase of the
property at public auction were registered on December 16, 1953, by virtue of
which, RFC was able to secure the cancellation of Transfer Certificate of Title
No. 12, in the name of the owner-mortgagor Eustaquio Palma, and the
issuance of a new title in its name (T.C.T. No. 1155). The second mortgage in
favor of Alto, however, was carried and annotated at the back of the new title.
It is this annotation on its certificate of title No. 1155 that the RFC sought to
have cancelled, alleging that with the consolidation and transfer to it as the
first mortgagee of the mortgagee's rights on the property, the junior
encumbrancer's lien on the same property had ceased. Alto, the second
mortgagee, opposed the petition contending that with the execution of the
Deed of Resale between RFC and the spouses Anacleto Trinidad and Rosa
S. de Trinidad, assignees of the mortgagor, the mortgaged property had been
completely released from the first mortgage and the second mortgage had
been automatically transformed into a first lien on the property.
From the order denying the petition for cancellation, RFC appealed to the
Court of Appeals. The case, however, was certified to this Court, the
questions raised therein being purely of law.
As stated by the lower court: "The only question at issue is whether the
annotation of the second mortgage in favor of the oppositor on the back of
Transfer Certificate of Title No. 1155 was made in accordance with law". The
petition for cancellation was filed by the RFC and the original registration
case, under Section 112 of Act 496, on the alleged ground that the lien in
favor of Alto had already ceased. In opposing this petition, Alto claimed that
with the execution of the deed of resale between RFC and the Spouses
Anacleto and Rosa S. de Trinidad, (Exhibit J), there had been a valid exercise
by the latter, as the mortgagor's successors-in-interest, of the right of
redemption, thus justifying the retention of the encumbrance in favor of the
junior mortgagee in the certificate of title covering the property.
The court a quo acted correctly in denying, under the circumstances, the
petition to cancel the annotation of the second mortgage at the back of the
title covering the property originally owned by Eustaquio Palma. It has been
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consistently held by this Court, that the relief afforded by Section 112 of the back of Transfer Certificate of Title No. 1155, is hereby affirmed, without
Land Registration Act may only be allowed if "there is a unanimity among the prejudice to the proper adjudication, in an appropriate ordinary action, of the
parties, or there is no adverse claim or serious objection on the part of any respective rights of the parties herein as a result of the execution of the Deed
party in interest; otherwise, the case becomes controversial and should be of Resale, Exhibit J. The petitioner-appellant shall pay the costs. It is so
threshed out in an ordinary case.1 In another case, this Court2 has held that ordered.
"Section 112 authorizes, in our opinion, only alterations which do not impair
rights recorded in the decree, or alterations which, if they do prejudice such
rights, are consented to by all parties concerned or alterations to correct
obvious mistakes". This doctrine is but sound and proper. The proceedings
provided in the Land Registration Act being summary in nature, they are
inadequate for the litigation of issues properly pertaining to ordinary civil
actions,3 thus, questions involving ownership of or title to a real property, 4 or
relating to the validity or cancellation or discharge of a mortgage should
properly be ventilated in an ordinary proceeding." 5

There is another reason why the petition must be denied. Granting arguendo
that the extrajudicial foreclosure proceeding instituted by the RFC is proper
and justified, since the junior encumbrancer was admittedly not notified
thereof, the foreclosure of the first mortgage cannot be considered to have
terminated or extinguished the rights of said junior encumbrancer over the
property.

An interest in the mortgaged property acquired subsequent to the (first)

mortgage may be divested or barred only by making the holder thereof a party
to the proceedings to foreclose (Kurz vs. Pappas, 146 So. 100, 107 Fla. 861;
Mediterranean Corp. vs. Pappas, 146 So. 106, 107 Fla. 876). (Emphasis
supplied.)

While as a general rule, the junior encumbrancer is not a necessary party to a

suit to foreclose by a senior mortgagee, it is always proper and prudent to join
him as a defendant, both to give an opportunity to defend and to extinguish
his right of redemption (Lee vs. Slemons, 150 So. 792, 112 Fla. 675;
Woodward vs. Householder, 289 S.W. 571, 315 Mo. 1155).

When a senior mortgagee forecloses and becomes the purchaser at his own
foreclosure sale, but the holder of a subsequent mortgage or other
subordinate interest has not been joined or has been eliminated from the
proceeding, equity will keep the senior mortgage alive against the subsequent
encumbrance and the senior mortgagee will be entitled to an action de novo
to reforeclose the mortgage as to the omitted persons (Van Meter vs. Field,
159 P. 2d 546, 195 Okl. 55; Rives vs. Stanford, 106 P. 2d 1101).

In view of the foregoing, the decision appealed from denying the first
mortgagee's petition to cancel the annotation of the second mortgage at the
2

G.R. No. L-29027 October 25, 1928
SUN LIFE ASSURANCE COMPANY OF CANADA, plaintiff-appellee,
vs.
FLORENCIO GONZALEZ DIEZ, defendant-appellant.
Jose Ma. Cavanna for appellant.
Ross, Lawrence and Selph and Antonio T. Carrascoso, Jr., for appellee.
STREET, J.:
This case is supplemental to a mortgage foreclosure proceeding conducted by
the same plaintiff, the Sun Life Assurance Company of Canada, as assignee
of the original mortgagee under a first mortgage, against Joaquin Serna et al.
(civil case No. 28009, of the Court of First Instance of Manila), a proceeding
which has already been concluded by the sale of the mortgaged property and
the purchase of the same by the plaintiff as mortgage creditor. The defendant
in the present proceeding is Florencio Gonzalez Diez, holder of a second
mortgage on the same property which was the subject of foreclosure in that
case, but who was not there named as a defendant; and the purpose of the
present proceeding is to foreclose the equity of redemption vested in
Gonzalez Diez by the second mortgage.
Upon hearing the cause the trial gave judgment in favor of the plaintiff,
requiring second mortgage to pay the entire mortgage debt, with costs,
otherwise to be debarred from any right as second mortgagee, with
appropriate provision for the cancellation of the second mortgage. From this
judgment the defendant appealed.
It appears that on May 17, 1920, one Joaquin Serna mortgaged the property
which is the subject of this action to the Shanghai Life Insurance Company,
Ltd., to secure a promissory note payable to said corporation in the amount of
P20,000, subject to certain stipulations not necessary to be here specified. On
the same day Serna executed a second mortgage on the same property in
favor of the herein defendant, Florencio Gonzalez Diez, to secure a debt in
the amount of P6,000. The promissory note secured by the first mortgage,
together with the rights of the original first mortgagee, was afterwards
transferred to the Sun Life Assurance Company of Canada, the plaintiff in this
case. Also, after mortgaging the property, as above stated, Serna transferred
the mortgaged property for a valuable consideration to Paulino Francisco. The
note secured by the first mortgage was not paid at maturity; and the holder,
the Sun Life Assurance Company of Canada, therefore instituted a
proceeding (No. 28009 in the Court of First Instance of Manila) to foreclose
3
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said first mortgage. In this proceeding only Joaquin Serna and Paulino
Francisco were named as defendants, no account being taken of Gonzalez
Diez, the holder of the second mortgage. The action proceeded, however, to
finality, and the property was ultimately sold in regular course and bought in
by the plaintiff, the mortgage creditor.
After foreclosure had been effected, as above stated, the present proceeding
was instituted by the plaintiff against Gonzalez Diez for the purpose of
foreclosing the mortgage as against him in his character as second
mortgagee. This proceeding appears to have been started by a supplemental
motion in the original foreclosure case, but upon objection by the adversary
part, the court required the plaintiff to pay the filing fee, and the proceeding
was thus given the status of an independent proceeding. Upon hearing the
cause the trial court declared the indebtedness under the first mortgage to be
in the total amount stated in its original decree of foreclosure, with interest and
costs added, and entered an order to the effect that in case the defendant
should not redeem from the first mortgage by paying the amount stated, within
three months from the date of the decision, he would be debarred of all right
as second mortgagee.
In the present appeal question is made as to the right of the first mortgage
creditor to maintain this action. We are of the opinion, however, that the
criticism directed against the appealed decision on this point is not well
founded. A second mortgage acquires only a mortgag e lien upon what is
called the equity of redemption vested in the mortgagor, and his rights are
strictly subordinate to the superior lien on the first mortgagee. Having acquired
this right the second mortgagee is a proper and in a sense even a necessary
party to a foreclosure proceeding brought by the first mortgagee; for, in the
closing words of section 225 of our Code of Civil Procedure, it is expressly
provided that all persons having or claiming an interest in the mortgaged
premises subordinate in right to that of the holder of the foreclosing mortgage
creditor shall be made defendants in the foreclosure proceeding. Accordingly,
if in the original foreclosure proceeding the attention of the court had been
directed to the fact that a second mortgage had been executed in favor of
Gonzalez Diez, it would have been peremptorily required that the second
mortgagee should be made a party. 1awph!l.net
But the second mortgagee was not an indespensable party to the proceeding
to foreclosure the first mortgage, because appropriate relief could be granted
by the court to the first mortgagee, in the original foreclosure proceeding,
without affecting the rights of the second mortgagee. But the failure on the
part of the first mortgagee to make the second mortgagee a defendant was
that the decree entered in the original foreclosure proceeding did not have the
effect of depriving the second mortgagee of his right of redemption. It is well
 4
recognized doctrine that a decree of foreclosure in a suit to which the holders
of a second lien are not parties leaves the equity of redemption in favor of
such lien holders unforeclosed and unaffected. (Sioux City etc. R. Co. vs.
Trust Co., 82 Fed., 124; 173 U. S., 99; 43 Law. ed., 628.) From this
circumstance arises the necessity, which confronted the plaintiff in this case,
of bringing an independent foreclosure proceeding against the second
mortgagee; and the fact that the plaintiff, as first mortgagee, has already
foreclosed as against the original debtor and his transferee, is obstacle
whatever to the maintenance of such action against the second mortgagee.
The purpose of the second proceeding is not to obtain a second decree
against the second mortgagee for the same relief covered by the first decree
but to secure the foreclosure of an equity of redemption which was not
touched by the first suit (Curtis vs. Gooding, 99 Ind., 45; Shirk vs. Andrews, 92
Ind., 509; Morey vs. City of Duluth, 69 Minn., 5). The right of a court to
entertain such a proceeding as that now before us is recognized in a standard
encyclopedic work in the following words: "After completed foreclosure under
a senior mortgage, a junior encumbrancer may be given, by the court, the
right to redeem the senior mortgage and protect his own lien. Where a junior
encumbrancer has been given, by the court, the right to redeem after the
completed foreclosure under a senior mortgage, he must exercise his right
within the time limited or be barred thereof." (Mortgages, 42 C. J., 374.)

In the case before us the trial court conceded to the defendant the same
period of time, i. e., three months, within which to redeem, as is allowed to any
mortgage debtor; and amount which the court fixed as necessary to effect
redemption is that which was found to be the amount due to the creditor in the
original foreclosure decree.

There being no error in the judgment appealed from, the same must be
affirmed, and it is so ordered, with costs against the appellant.

4

G.R. No. L-3619 October 29, 1951
BERNARDO TIGLAO, plaintiff-appellee,
vs.
ENGRACIO BOTONES, defendant-appellant.
Barrera, Calanog and Alafriz for appellant.
Enrico I. de la Cruz for appellee.
PARAS, C.J.:,
In civil case No. 5115 of the Court of First Instance of Tarlac in which
Bernardo Tiglao was the plaintiff and Engracio Botones the defendant,
judgment was rendered on March 24, 1943, the dispositive part of which
reads as follows: "El Juzgado, de acuerdo con dicho convenio, condena al
demandado al pago de la catidad de P4,000 con los intereses de 12 por
ciento al año desde el 29 de Noviembre de 1937 hasta su pago completo y se
le ordena que deposite esta cantidad en poder del Escribano dentro del plazo
de 90 dias, de lo contrario se ordenara la ejecucion de la sentencia vendiendo
en publica subasta los bienes hipotecados, con las costas a cargo del
demandado."
Upon motion of the plaintiff, the Court of First Instance of Tarlac on July 20,
1943, ordered the issuance of a writ of execution. Accordingly, on October 9,
1943, the provincial sheriff sold at public auction the mortgaged properties to
the plaintiff as the highest bidder. On March 7, 1944, the plaintiff filed an ex
parte motion with the Court of First Instance of Tarlac, for the confirmation of
the sale in his favor. On March 22, 1944, the court issued the following order:
" As prayed for in the "Motion for confirmation of the sheriff's sale dated
October 9, 1943, of lots Nos. 784 and 1146 of the cadastral survey of
Concepcion, executed by the Provincial Sheriff of Tarlac in favor of Bernardo
Tiglao, pursuant to the order of execution entered herein, the said sale is
hereby APPROVED."
On May 7, 1948, the plaintiff filed with the Court of First Instance of Tarlac a
motion for the issuance of a writ of possession. The defendant filed an
opposition alleging (1) that the judgment of March 24, 1943, is null and void,
because the defendant's former counsel had no special authority to settle the
case in the manner stated in said judgment, and (2) that the sheriff's sale was
not legally confirmed, because the defendant was not given notice of the
motion for confirmation or its hearing. On June 30, 1948, the court granted
plaintiff's motion for the issuance of a writ of possession. The defendant filed
on July 7, 1948, a motion for reconsideration and under date of September 9,
5
5
1948, a motion invoking moratorium under Republic Act No. 342 and praying
that all proceedings be suspended. In its order of October 12, 1948, the Court
of First Instance of Tarlac denied the motion for reconsideration. The
defendant appealed.
Appellant's first contention is that the trial court erred in sustaining the order
confirming the sheriff's sale and in issuing the corresponding writ of
possession in favor of the appellee. Under section 3 of rule 70 of the Rules of
Court, the sale of mortgaged property "when confirmed by an order of the
court . . . shall operate to divest the rights of all the parties to the action and to
vest their rights in the purchaser, subject to such rights of redemption as may
be allowed by law." The effect of confirmation was more elaborately explained
in the case of Raymundo vs. Sunico, 25 Phil., 365, 368-369, as follows: "As
the title to mortgaged real property does not vest in the purchaser until after
the confirmation of the sale, he has, prior to that time, no right to the
possession of such property, and no legal cause of complaint against the
defendants, who remain in possession, exercising the rights of ownership. On
the other hand, the mortgagors have no means, until the confirmation of
compelling the purchaser to comply with the terms of the sale. Should the
mortgagors attempt to compel a purchaser to pay in his money, an answer on
the part of the purchaser to the effect that the sale had not been confirmed
would be sufficient. The confirmation operates to divest the title out of the
former owner and to vest it in the purchaser. It is at this time when the rights
or title passes, and not before. Sales of mortgaged real estate should be more
strictly scrutinized than ordinary sales under execution. In the former the title,
as we have said, passes to the purchaser upon confirmation by the court, and
the defendant or debtor has no right to redeem within the statutory period
granted in cases ordinary execution sales. In some of the States of the
American Union there are statutes permitting the mortgagor to redeem after
the foreclosure sale has been confirmed. There is no such privilege extended
to him by statute in the Philippine Islands. The right of the mortgagor and
those claiming under him to redeem for mortgagee is extinguished by the
foreclosure when the same has been properly made. But, up to the time of
confirmation the title remains in the mortgagor." In said case this Court held
that a hearing "is a very essential part of those proceedings because the
hearing gives the interested parties an opportunity to lay before the court their
reasons why the sale should or should not be confirmed, and it is the result of
this hearing which diverts the title if the sale is confirmed."
In the case of Grimalt vs. Velasquez, 36 Phil., 936, 938, this Court, relying
upon its decision in Raymundo vs. Sunico, supra, ruled that "in order that a
foreclosure sale may be validly confirmed by the court, it is necessary that a
hearing be given the interested parties at which they may have an opportunity

to show cause why the sale should not be confirmed; that a failure to give
notice is good cause for setting aside the sale."
In the cases of La Urbana vs. Belando, 54 Phil. 930, and Anderson vs. Reyes,
54 Phil. 944, it was held, following the decision in Grimalt vs. Velasquez,
supra, that after the sale of mortgaged property and before its confirmation,
the court may still grant the judgment debtor an opportunity to pay the amount
of the judgment. In other words, until a sheriff's sale is validly confirmed, the
judgment debtor may exercise a right of redemption.
Notice and hearing of motion for confirmation are therefore essential to the
validity of the order of confirmation, not only to enable the interested parties to
resist the motion but also to inform them of the time when their right of
redemption is cut off.
It is argued for the appellee that because section 3 of Rule 70 does not carry
the last part of section 257 of Act 190 to the effect that "should the court
decline to confirm the sale, for good cause shown, and should set it aside, it
shall order a resale in accordance with law," the cases hereinabove cited are
no longer efficacious. We disagree. The fact that the present rules still require
confirmation of the sheriff's sale implies the power of the court to either
confirm the same or not, when asked. And the court may properly exercise its
judgment on the matter only after hearing both parties. Indeed, there is reason
to suppose that the omitted provision is superflous.
The case of Commonwealth of the Philippines vs. Ching yap, 70 Phil., 116,
citing So Chu vs. Nepomuceno, 29 Phil., 208, Jaranillo vs. Jacinto, 43 Phil.
588, Price vs. Sontua, 60 Phil. 410, and National Investment Board vs. Peña,
G.R. No. 46448, May 29, 1939, invoked by the appellee, is obviously not
controlling. In said case this Court found that notice of the motion for
confirmation was sent to the judgment debtors at their address of record and
when said notice was returned to the judgment creditor, the latter filed it with
the clerk of court in accordance with Rule 20 of the Rules of Court of First
Instance. What the creditor did was held sufficient, because if the debtors
failed to receive the notice sent to their address appearing in the record, it was
their fault. The statement in said case, therefore, that lack of notice does not
deprive the court of its jurisdiction to approve a sheriff's sale, was purely an
obiter dictum. Moreover, the cases of So Chu vs. Nepomuceno, Jaranillo vs.
Jacinto, Price vs. Sontua, and National Investment Board vs. Peña, did not
involve situations in which confirmation of sheriff's sale was upheld although
there was no notice or hearing. .
In the more recent case of Somera vs. Navarro, 42 Off. Gaz., 2106, it was
contended that no 3-day notice of the motion for confirmation was given,
6
6
because the hearing of the motion was set for July 26, 1941, the notice was
mailed to the appellants on July 23 and was received by them on July 26, the
appellants were present and at their instance said hearing was postponed to
August 9. Other postponements were conceded and the motion was not heard
until December 4, 1942. This Court held: "Resulta evidente, por tanto, que la
regla sobre notificaciones se cumplio substancialmente, y que toda discusion
ahora sobre el particularveine a ser meramente academica, porque, aun
suponiendo que la primera notificacion haya sido irregular, de ella no se
siquio ningun perjuicio para los apelantes, toda vez que la mocion no se
considero y resolvio sino despues de varias transferencias, de los cuales
aquellos habian sido debidamente avisados." We have thus inferentially
recognized the essential need for notice of motion for confirmation of a
sheriff's sale, for, on the contrary supposition. we would have summarily
dismissed appellant's contention and held that notice and hearing were
unnecessary.
In the case at bar, the lower court undoubtedly had acquired jurisdiction over
the foreclosure proceedings but, in confirming the sheriff's sale without the
essential requisite as to notice of the motion for confirmation, it exceeded its
power, with the result that the order of confirmation is null and void. As stated
by Mr. Justice Feria in Caluag et al.,* 46 Off. Gaz., 514. "a wrong, or for that
matter a correct, decision is void, and may be set aside either directly or
collaterally, where the court exceeds its jurisdiction and power in rendering it."
In Ang Lam vs. Rosillosa,** 47 Off. Gaz., Supp.(12), 103, it was held that "a
void judgment may be assailed or impugned at any time either directly or
collaterally, by means of a petition filed in the same case or by means of a
separate action, or by resisting such judgment in any action or proceeding
wherein it is invoked." Hence there is no merit in appellee's contention that the
order of confirmation had become final and cannot be set aside after the 6-
month period provided in rule 38 of the Rules of Court, within which relief
could be asked, had expire.
The second contention of the appellant is that the trial court erred in not
suspending the proceedings because of the Moratorium Law (Republic Act
No. 342). This contention is untenable. The foreclosure judgment had long
become final. By his motion for confirmation of the sheriff's sale and his
motion for a writ of possession, the appellee sought to recover, not a
monetary obligation, but the properties sold to him at public auction. What was
held in Barrozo vs. Macaraeg, 46 Off. Gaz., 4932, is decisive against
appellant's position. "The debt moratorium merely prohibited the enforcement
by action of the debts therein included; and in this case no one is attempting
to force anybody to pay his debt. The judgment debtor whose property has
been sold is not in debt for the redemption money. He could not be required
by action to redeem. Hence, he is not entitled to invoke the suspension."
 7
Wherefore the order of March 22, 1944, confirming the sheriff's sale of the
mortgaged properties, being null and void, the order of June 30, 1948,
granting appellee's motion for the issuance of a writ of possession is hereby
set aside, without prejudice to appellee's right to move anew for the
confirmation of the sheriff's sale in his favor, with due notice and hearing. So
ordered without costs.

7

G.R. No. 72806 January 9, 1989
EPIFANIO CRUZ and EVELINA CRUZ, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, CALIXTRO O. ADRIATICO,
RUFINO J. SANTIAGO and GODOFREDO VALMEO, respondents.
REGALADO, J.:
Petitioners seek herein the review and reversal of the decision of the
respondent Intermediate Appellate Court in AC-G.R. No. SP-06317 1 which
dismissed their petition for certiorari questioning, inter alia, the judicial
foreclosure and the judicial confirmation of the subsequent sale of their
property pursuant to the judgment of the therein respondent Regional Trial
Court of Bulacan, Malolos Branch VIII; 2 as well as the resolution 3 of the
herein respondent court denying their motion for reconsideration.
The challenged decision of the respondent court provides the factual
background of this case, thus:
The relevant and undisputed facts indicate that petitioners
mortgaged certain properties to private respondents who
eventually sued them for non-payment and for the judicial
foreclosure of aforementioned mortgages under Rule 68 of
the Rules of Court. In the course of the proceedings a
compromise agreement was reached and this became the
basis of the Judgment on Compromise issued by the
respondent Judge of the Regional Trial Court (RTC) of
Bulacan.
Pertinent parts of the Agreement, as embodied in the
decision, reads:
3. Upon full payment of the sums of P55,000.00 and
P320,000.00 within the period agreed upon, the plaintiff shall
deliver to the defendants Transfer Certificate of Title No. T-
32286 (M) of the Registry of Deeds of Bulacan, Meycauayan
Branch, together with all the documents submitted to the
plaintiff;
4. Should the defendants fail to pay the sums agreed upon
within the period stipulated, the defendants shall pay plaintiff
the entire sum of P92,149.00 under the Deed of Real Estate
8
8
Mortgage attached to the complaint as Annex 'C' and an
additional sum of P44,700.00 as attorney's fees;
5. Upon failure of the defendants to pay the sums agreed
upon within the period stipulated, plaintiff shall be entitled to a
writ of execution directing the foreclosure of all the mortgages
subject matter of this litigation and to the principal sum of
P300,000.00 in the Deed of Real Estate Mortgage attached to
the complaint as Annex 'B shall be added the sum of
P44,700.00 as attorney's fees.
For failure of the petitioners to comply with certain provisions
of the agreement, private respondent moved for a writ of
execution. The mortgaged properties were foreclosed upon in
an auction sale and were purchased by the private
respondents as the highest bidder. The sale was latter
judicially confirmed. 4
Preliminarily, We dispose of the procedural issue raised by petitioners over
the statement of respondent court that appeal should have been their proper
remedy in said court at that juncture, since their objections to the judicial
foreclosure proceeding and the subsequent confirmation of the sale, if correct,
would constitute errors of judgment and not of jurisdiction. Petitioners'
justification of their remedy, contending that the compromise agreement was
null and void and that the writ of execution thereafter issued and enforced was
invalid, as well as their arguments thereon, are pointless at this stage. The
fact remains that, obviously in the broader interests of justice, the respondent
court nevertheless proceeded to decide the petition for certiorari and ruled on
the specific points raised therein in a manner akin to what would have been
done on assignments of error in a regular appeal. The petition therein was,
therefore, disposed of on the merits and not on a dismissal due to erroneous
choice of remedies or technicalities.
Central to the controversy as the vital issue for resolution, instead, is the
submission of petitioners that the aforestated judgment on compromise was
null and void ab initio because it allegedly "denied them their equity of
redemption under Sec. 2, Rule 68 of the Rules of Court, by not allowing the
petitioners to pay 'into court within a period of not less than ninety (90) days
from the date of the service of said order,' and that it is only if the petitioners
default in said payment that the property should be sold to pay the judgment
debt." 5
The provision relied upon reads as follows:

Sec. 2. Judgment on foreclosure for payment or sale. — If
upon the trial in such action the court shall find the facts set
forth in the complaint to be true, it shall ascertain the amount
due to the plaintiff upon the mortgage debt or obligation,
including interest and costs, and shall render judgment for the
sum so found due and order the same to be paid into court
within a period of ninety (90) days from the date of the service
of such order, and that in default of such payment the
property be sold to realize the mortgage debt and costs.
The procedure outlined therein obviously refers to the situation where a full-
blown trial, with the introduction of evidence is entailed, such that the trial
court has to thereafter determine whether the allegations in the complaint
have been proved, then ascertain the total amount due to the plaintiff, and
thereafter render judgment for such amount with an order for the payment
thereof in accordance with the prescription of the aforequoted section, sans
the agreement of the parties on those particulars. There being no such
agreement, the specified procedure has necessarily to be followed and the
minimum period of ninety (90) days for payment, also referred to as the period
for the exercise of the equity, as distinguished from the right, of redemption
has to be observed and provided for in the judgment in the foreclosure suit.
Jurisprudentially, it has also been held that the exercise of the equity of
redemption may be made beyond the 90-days period but before the
foreclosure sale is confirmed by the court. 6
It stands to reason, however, that the aforesaid procedure cannot be of
substantial application to, and can be modified by, a valid agreement of the
parties, such as in the compromise agreement subject of and constituting the
basis for the judgment on compromise rendered in Civil Case No. 7418-M of
the Regional Trial Court of Bulacan, as hereinbefore stated. The dispositions
of Section 2 of Rule 68 clearly cannot apply since the parties therein had
specifically agreed on the amounts to be paid, when they should be paid and
the effects of non-payment or violation of the terms of their agreement. Thus,
the petitioners undertook to pay on the obligation subject of the compromise
agreement, P55,000.00 on or before August 20, 1984 and P320,000.00 on or
before September 30, 1984 7 and, in case of default on their part, the
consequences are spelled out in Paragraphs 3, 4 and 5 of their aforequoted
compromise agreement, 8 all of which are premised on the precise
contingency of failure by the petitioners to comply within the period stipulated.
Paragraph 5 lucidly provides that, upon the happening of the aforesaid
contingency contemplated therein, private respondent Godofredo Valmeo
shall be entitled to a writ of execution directing the foreclosure of all the
mortgages subject matter of said litigation. It is noteworthy that this particular
9
9
proviso is what distinguishes this case from other judicial foreclosure cases
decided on the bases of compromise agreements but which did not have the
same specification. Ineluctably, therefore, the petitioners herein thereby
waived their so called equity of redemption and the case was necessarily
removed from the operation of Section 2, Rule 68 insofar as its provisions are
inconsistent with the judgment on compromise.
This is not an isolated proposition as it may initially appear. True, the
procedural requirement in Section 2 grants a substantive right to the
mortgagor, consisting of the so-called equity of redemption, which after the
ordinary adversarial course of a controverted trial of a case may not be
omitted in the relief to be awarded in the judgment therein. 9 The same,
however, may be waived, as already demonstrated.
In the same manner, the procedural requirements for the appointment of and
proceedings by commissioners in actions for expropriation 10 and judicial
partition11 may be said to likewise confer substantive rights on the party
defendants therein, which procedural steps may not be omitted over their
objection but can likewise be waived or dispensed with on mutual agreement.
In these three special civil actions, although dissimilar in the specific
procedure in their special features, their rationale and specific objectives are
congruent in that they afford added protection to proprietary rights, but which
additional protection may be waived, as by stipulations to that effect in
compromise agreements.
It is hornbook knowledge that a judgment on compromise has the effect of res
judicata on the parties and should not be disturbed except for vices of consent
or forgery. 12 To challenge the same, a party must move in the trial court to
set aside the said judgment and also to annul the compromise agreement
itself, before be can appeal from that judgment. 13 Definitely, the petitioners
have ignored these remedial avenues.
There can be no pretension that the compromise agreement as formulated
and approved is contrary to law, public policy or morals or that the same was
tainted with circumstances vitiating consent. The petitioners entered into the
same duly assisted by competent counsel and the entire judicial proceeding
was under judicial scrutiny and supervision.
Hence, as correctly observed by the respondent court:
(1) Re the 'equity of redemption'. It is true that under Rule 68
of the Rules of Court, the debtor-mortgagor is allowed a
period of 90 days within which to pay his debt, to prevent

foreclosure, but this right, to Our mind was impliedly waived
when the parties signed the compromise agreement, which
was later embodied in the Judgment. The agreement in effect
says that upon breach of the same (and this fact is not
disputed), foreclosure should be resorted to. The agreement
was clear that payment had to be made within the stipulated
period. It would be absurd to say that after said stipulated
period, petitioners would still be given an additional 90-day
period for the 'equity'. Had petitioners intended still an
exercise in 'equity', they should have insisted on a
clarificatory provision in the agreement. 14
Petitioners next shift to the writ of execution pursuant to which the foreclosure
sale was conducted by respondent sheriff, stigmatizing it as a falsified writ of
execution. This is unwarranted and baseless.
What actually transpired was that the respondent Branch Clerk of Court
issued a writ of execution on October 9, 1984 containing the following
directives:
NOW THEREFORE, you are hereby commanded to execute
and make effective the aforequoted decision of this
Honorable Court dated August 20, 1984 and make a return of
this writ within sixty (60) days from receipt hereof. But if
sufficient property cannot be found thereon, then we
command you that of the land and building of said defendants
you make the said sum of money. 15
This honest and inconsequential mistake on the part of the respondent clerk,
subsequently rectified by the respondent sheriff, was satisfactorily explained
by the court a quo in its order resolving several motions on May 27, 1985 16
as follows:
As to the alleged defect in the writ of execution, the
mortgagors could have moved to have the writ quashed
before the confirmation of the sale, but they failed to raise that
point or any point for that matter. He alleged defect in the writ
of execution is that it differs from that quoted in the notice of
sale. The writ issued by the Branch Clerk of Court included an
extra sentence which reads: 'But if sufficient personal
property cannot be found thereon, then we command you that
of the land and buildings of said defendants you make the
said sum of money.' The surplusage is understandable and
excusable as these wordings are usually included in the
10
10
standard form copied by the stenographer in ordinary writs of
execution. It has been held that if the writ of execution does
not conform to the judgment, the writ may be amended so
that the judgment may be properly satisfied. In fact, the slight
difference between the writ handed by the Branch Clerk and
that reproduced in the notice of sale was for the reason that
the Deputy Sheriff, realizing the imperfection of the original
writ, rectified it by eliminating the surplusage to make it
conform to the terms of the judgment. Although the better
step that should have been taken by the sheriff was to inform
the Branch Clerk about it for the proper amendment, the
rectification done by said sheriff, in effect, was confirmed and
adopted by the court when it confirmed the sale without any
objection from the herein movants. At any rate, there is no
showing of any detriment to the interest of the mortgagee
resulting from this rectification. 17
Petitioners' complaints about the supposed irregularity in the publication of the
notice of sale involve questions of fact which cannot be resolved by this Court.
Furthermore, petitioners had all the opportunity, in the several motions filed in
and heard by the trial court and especially in the hearing for the confirmation
of sale, to ventilate the alleged irregularities but they never did so.
Neither are We inclined to nor justified in disturbing the factual findings of the
respondent court debunking petitioners' claim that private respondent Valmeo
had, subsequent to the foreclosure sale of the property, agreed to allow
petitioners to redeem the property. In reliance upon the findings of the trial
court in its orders of October 8, 1984 18 and March 20, 1985, 19 the
respondent court categorically declared:
(5) Re the 'new agreement to redeem'. There was actually
NO SUCH AGREEMENT. True, petitioners had been
informed in Court by private respondents' previous counsel
(Atty. Cecilio de la Merced) that he was allowing petitioners
'to redeem'. BUT this was without any authorization from the
private respondents. In fact, in due time, private respondents
were able to inform the respondent Judge of this non-
authorization and the Judge was able to rectify her previous
order allowing such 'redemption'. Be it noted that
aforementioned previous counsel's services were
TERMINATED by the private respondents. 20
Petitioners close their jeremiad by an appeal for consideration on ground of
equity. However, We also recognize the principle of countervailing equity in
 11
favor of the adverse party, opposed to that which petitioners seek to be
recognized, and which should not be subordinated because it is of equal
strength and equally deserving of consideration.

WHEREFORE, the petition at bar is hereby DENIED, with costs against the
petitioners.

SO ORDERED.

11

G.R. No. L-25802 January 31, 1972
DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee,
vs.
LEONOR R. VDA. DE MOLL, SEBASTIAN MOLL, JR., BACILISO MOLL,
ERIBERTO MOLL, ESTRELLA MOLL, SALVADOR MOLL, SEGUNDO
MOLL and AURORA MOLL, defendants-appellants.
BARREDO, J.:p
Appeal from the decision of the Court of First Instance of Manila in its Civil
Case No. 56037 sentencing appellants to jointly and severally pay to the
appellee Development Bank of the Philippines the sum of P1,648,591.45,
claimed by the said Bank to be the deficiency or unpaid balance of appellants'
overdue obligation under certain agricultural and industrial loans it had
granted to appellants after applying to the said loans the proceeds of the
extrajudicial foreclosure and public auction sale of the properties mortgaged to
secure their payment, plus attorney's fees and costs.
It appears that on April 12, 1947 and December 15, 1947, the appellee
Development Bank of the Philippines (then known as the Rehabilitation
Finance Corporation) granted agricultural loans in the amounts of
P120,000.00 and P22,000.00, respectively, in favor of one Sebastian Moll, Sr.
who, to secure the payment of said loans, mortgaged in favor of the appellee
Bank fourteen (14) parcels of land — comprising the property known as
"Hacienda Moll" — covered by certificates of title and tax declarations issued
by the land registry of the province of Camarines Sur. Said Sebastian Moll, Sr.
having subsequently died, his heirs (appellants) executed on May 14, 1949 an
extrajudicial partition of his estate, including the properties above-mentioned,
adjudicating the same to themselves, albeit binding themselves, jointly and
severally, to assume payment of the indebtedness of the deceased with the
appellee Bank; and starting from the said date, appellants themselves applied
for and were granted by the appellee Bank new and additional loans, to wit:
May 14, 1949 — an industrial loan of P150,000.00; May 28, 1951 — an
additional agricultural loan of P100,000.00; and May 31, 1951 — another
industrial loan of P580,000.00. The additional agricultural loan was granted by
the appellee Bank on the security of the same properties already mortgaged
to the appellee Bank by appellants' predecessor in interest, earlier stated;
while the new industrial loans were secured by mortgages on machineries,
equipment and some other real estate.
Appellants thereafter failed to comply with the terms of the loan contracts as
they fell due. Consequently, the above-mentioned mortgages on their
properties were extrajudicially foreclosed under the provisions of Act 3135, as
12
12
amended; and in the public auction sale thereof subsequently conducted by
the Provincial Sheriff of Camarines Sur on June 30, 1962, the 14 parcels of
land mortgaged to secure payment of the agricultural loans and the
machineries, equipment and other real estate mortgaged to secure payment
of the industrial loans were awarded in favor of the appellee Bank — as the
sole and highest bidder — for the amounts of P176,174.50 and P19,750.00,
respectively, which were accordingly applied to the payment of the
corresponding portions of the said loans.
As the proceeds of the foreclosure sales aforesaid were not sufficient to cover
the loan indebtedness of appellants, the appellee Bank then instituted the
present case in the Court of First Instance of Manila on January 23, 1964, for
the purpose of recovering so the complaint alleges, the sums of P173,117.55,
on account of the agricultural loans, and P1,475,473.90, on account of the
industrial loans, which it claims to be the outstanding balances or deficiencies
under the two types of loans obtained by appellants.
In their answer, appellants admit the existence of their indebtedness to the
appellee Bank under the loan contracts mentioned in the latter's complaint;
but they deny and dispute, among others, the deficiency claims of the
appellee Bank, contending at the same time, by way of affirmative and special
defenses, that the extrajudicial foreclosure and public auction sales of the
properties mortgaged had been carried out by the sheriff irregularly and
improperly in violation of the pertinent provisions of Rule 39 of the Rules of
Court and had thus resulted in the sale for unconscionable prices of their
mortgaged properties which, according to appellants' own estimate, have a
total actual value of not less than P5,000,000.00.
It appears, further, that the corresponding deeds and certificates of sale
issued in favor of the appellee Bank in consequence of the disputed
foreclosure proceeding and public auction sales were registered with the
Register of Deeds concerned only on November 11, 1964 and December 7,
1964 — some ten (10) months later than the commencement of the present
action for collection of the deficiency claim of the appellee Bank. .
After trial, the court below rendered the decision appealed from which, as
stated earlier in the opening paragraph hereof, sustains the above-mentioned
deficiency claims of the appellee Development Bank of the Philippines. .
In this appeal, appellants assail the said judgment thus: .
"I. THE HONORABLE COURT A QUO ERRED IN NOT
SETTING ASIDE THE ALLEGED AUCTION SALE ON JUNE

30,1962, OF THE MORTGAGED PROPERTIES BY THE
DEFENDANTS-APPELLANTS TO THE PLAINTIFF-
APPELLEE, ON THE GROUND THAT THE SELLING
AUCTION PRICES OF SAID PROPERTIES WERE UNJUST,
DISPROPORTIONATE AND UNCONSCIONABLE IN THE
LIGHT OF THE FAIR AND CURRENT MARKET VALUE OF
THE SAME PROPERTIES AT THE TIME OF SAID AUCTION
SALE. .
"II. THE HONORABLE COURT A QUO ERRED IN NOT
DISMISSING THE COMPLAINT AT BAR FOR RECOVERY
OF A DEFICIENCY CLAIM, ON THE GROUND THAT SAID
COMPLAINT WAS OR IS, PREMATURE, FOR THE
REASON THAT IT HAD BEEN FILED DURING THE PERIOD
OF LEGAL REDEMPTION GRANTED BY LAW TO
DEFENDANTS-APPELLANTS AS MORTGAGE-DEBTORS."
. But, mere inadequacy of the price obtained at the sheriff's
The thrust of appellants' argument in respect of the first assignment of error is
to the effect that if in 1947 and 1951 when the agricultural and industrial loans
herein involved were obtained by appellants, the appellee Bank, after due
inspection and appraisal of the securities they offered therefor, had granted
them a total agricultural loan of P242,000.00 upon the security of the 14
parcels of land they mortgaged and a total industrial loan of P770,000.00
upon the security of other lands and machineries and equipment they also
mortgaged, hence, it is inconceivable that after the lapse of more than ten
years and the fast and steadily increasing real estate values these past years,
the same properties would command, in the extrajudicial foreclosure sales
conducted by the provincial sheriff of Camarines Sur in 1962, only the measly
sums of P176,174.50 and P19,750.00, respectively, considering that pursuant
to consistent banking practice, the aforesaid amounts of loans granted would
represent only 60% of the actual and current market value of the securities at
the time of the grant of said loans. In short, it is the position of appellants that
the foreclosure sales aforesaid should be set aside because "the total auction
selling price of P195,924.50 for both the collateral securities to the agro-
industrial loans, is so inadequate, disproportionate and shocking to
conscience." .
It does appear that the purchase prices in question are considerably out of
proportion to the possible actual market value of appellants' securities.
Considering, however, that the impugned sales were made subject to
appellants' right of redemption, the following ruling in Ponce de Leon vs.
Rehabilitation Finance Corporation,1 sufficiently disposes of their contention: .
13
13
In support of their second assignment of error, the Sorianos
maintain that the sum of P10,000.00, for which the
Parañaque property was sold to the RFC, is ridiculously
inadequate, considering that said property had been
assessed at P59,647.05. This presense is devoid of merit, for
said property was subject to redemption and:
... where there is the right to redeem ... — inadequacy of price
should not be material, because the judgment debtor may re-
acquire the property or else sell his right to redeem and thus
recover any loss he claims to have suffered by reason of the
price obtained at the execution sale (Barrozo vs. Macaraig,
83 Phil. 378, 381, Emphasis Ours.)
Then, again, as the trial court had correctly observed:
sale unless shocking to the conscience will not be sufficient to
set aside the sale if there is no showing that, in the event of a
regular sale, a better price can be obtained. The reason is
that, generally, and, in forced sales, low prices are usually
offered (1 Moran's Rules of Court, 834-835). Considering that
in Gov't. of P.I. vs. Soriano, G.R. No. 32196, wherein property
worth P120,000.00 was sold for only P15,000.00, in
Philippine National Bank vs. Gonzales, 45 Phil. 693, wherein
property valued at P45,000.00 was sold for P15,000.00 and in
Cu Unjieng & Sons v. Mabalacat Sugar Co., 58 Phil. 439,
property worth P300,000.00 to P400,000.00 was sold for
P177,000.00, the Court cannot consider the sale of the
Bacolod properties, the Taft Avenue house and lot and the
Parañaque property of the Sorianos null and void for having
been sold at inadequate prices shocking to the conscience
and there being no showing that in the event of a resale,
better prices can be obtained.'
This ruling was reiterated in the more recent case of De Leon vs. Salvador, et
al.,2
... (w)hile in ordinary sales for reasons of equity a transaction
may be invalidated on the ground of inadequacy of price, or
when such inadequacy shocks one's conscience as to justify
the courts to interfere, such does not follow when the law
gives to the owner the right to redeem, as when a sale is
made at public auction, upon the theory that the lesser the

price the easier it is for the owner to effect the redemption.
And so it was aptly said: "When there is the right to redeem,
inadequacy of price should not be material, because the
judgment debtor may reacquire the property or also sell his
right to redeem and thus recover the loss he claims to have
suffered by reason of the price obtained at the auction sale.
At this juncture, it may not be amiss to make it clear that appellants' period to
redeem the properties sold in the extrajudicial foreclosure sales in question is
one year, "computed from the date of the registration of the certificates of
sales of the mortgaged properties," since registered lands are involved in this
case, and, as explained lately by this Court in Quimson, et al. vs. Philippine
National Bank, 3 "this Court has uniformly ruled that redemption from
execution sales under ordinary judgments pursuant to Section 30, Rule 39 of
the Rules of Court should be made within twelve (12) months from the
registration of the same and We have uniformly applied the same rule to sales
upon extrajudicial foreclosure of registered lands.".
On the other hand, it may also be stressed that actions seeking to set aside
auction sales do not toll the running of the period of redemption; and this We
have to emphasize now, if only to forestall the possibility of the parties' coming
up here in the future and praying for a definite ruling on the matter. This
question was resolved in Sumerariz vs. Development Bank of the Philippines,
L-23764, December 26, 1967, 21 SCRA 1374, thus: .
Under the second assignment of error, plaintiffs maintain that
the period of one (1) year to redeem the property in question
was suspended by the institution of Case No. 29306
(commenced by Sumerariz and his wife against the DBP and
the Sheriff of Manila to set aside the foreclosure sale involved
therein) on March 26, 1956, or three (3) days before the
expiration of said period. We have not found, however, any
statute or decision in support of this pretense. Moreover, up
to now plaintiffs have not exercised the right of redemption.
Indeed, although they have intimated their wish to redeem the
property in question, they have not deposited the amount
necessary therefor. It may not be amiss to note that, unlike
Section 30 of Rule 39 of the Rules of Court, which permits the
extension of the period of redemption of mortgaged
properties, (Enage vs. Vda. e Hijas de F. Escano, 38 Phil.
657) Section 3 of Commonwealth Act No. 459, in relation to
Section 9 of Republic Act No. 85, which governs the
redemption of property mortgaged to the Bank, does not
contain a similar provision (Nepomuceno vs. Rehabilitation
14
14
Finance Corporation, L-14897, November 23, 1960). Again
this question has been definitely settled by the decision in the
previous case declaring that plaintiffs' right of redemption has
already been extinguished in view of their failure to exercise it
within the statutory period.
Perforce then We must hold that the foreclosure sales here involved cannot
be set aside on the ground, vigorously alleged by appellants, that the prices
obtained therein are grossly inadequate and unconscionable. Corollarily, We
do not deem it necessary to discuss further and rule upon appellants' claim
that the foreclosure sales referred to were improperly and irregularly
conducted by the provincial sheriff of Camarines Sur because the latter sold
the mortgaged properties here involved in mass and within a single day,
although the record appears to be bereft of any concrete showing, other than
appellants' claim that better prices could had been obtained for the said
mortgaged securities had the above-mentioned provincial sheriff conducted
the sales in question otherwise.4
Anent appellants' second assignment of error to the effect that the present
case was prematurely instituted on the ground that an action for recovery of
an alleged deficiency claim cannot be legally entertained during the period of
redemption, appellants argue in their brief (pp. 16-18), as follows: .
In the case at bar, the suit to recover deficiency claim was
instituted on January 23, 1964, (page 1 Record on Appeal),
but, the Certificate of Sale by the Provincial Sheriff of
Camarines Sur in connection with the auction sale of the
collateral securities on the industrial loans was registered in
the Office of the Register of Deeds of said province on
November 11, 1964, and, the Certificate of Sale of said
provincial sheriff in connection with the auction sale of the
collateral securities on the agricultural loans, was registered
in the same office on December 7, 1964. Therefore, the
present action for recovery of deficiency claim was filed even
before the registration of both Certificates of Sale, as shown
by Exhibit '2' for appellants (pp. 33-34, Record on Appeal). As
the running of the period of one year of the right of
redemption commenced from the date and/or dates of
registration of the Certificate of Sale, it is too clear and
unassailable that the filing of the case at bar on January 23,
1964, was improper and premature. For indeed, the filing of a
suit for recovery of a deficiency claim before the
commencement or, during the period of the right of
redemption, constitutes a clever anticipation that the auction
 15
sale arising from the effects of extrajudicial foreclosure had Under the provisions of section 6 of Rule 70 — now section 6 of Rule 68 of
been conducted with all the earmarks of validity, even if it the revised Rules of Court — above-cited, it is expressly provided that "if there
were not. Suppose an auction sale were declared illegal due be a balance due to the plaintiff after applying the proceeds of the sale, the
to irregularities and violation of the mandate of the law, what court, upon motion, shall render judgment against the defendant for any such
would be the effect of such pronouncement in an action for balance for which, by the record of the case, he may be personally liable to
deficiency claim when such action has no legal basis? If a suit the plaintiff, upon which execution may issue immediately if the balance is all
for recovery of a deficiency judgment or deficiency claim is a due at the time of the rendition of the judgment." Said provisions are
legal consequence of an auction sale arising from judicial or equivalent to those of section 260 of the old Code of Civil Procedure, under
extrajudicial foreclosure, then such suit should await for the which it was held in a case,6 "that in order that a decree for any balance for
expiration period of the right of redemption within which which the mortgagor may be personally liable to the mortgagee may be
period, precisely, the redemptioner may ordinarily institute an issued, it is necessary that the sale of the mortgaged real property has been
action to assail the manner with which the auction sale was made according to the decree for said sale to satisfy the judgment; that there
conducted. ... . has remained a balance due the mortgagee after applying the proceeds of the
sale to the debt; (and) that the mortgagee presents a motion for the issuance
In the case of Philippine Bank of Commerce vs. De Vera,5 We held: . of a decree for said balance", while in another case, 7 it was said that "Section
260 requires the rendition and entry of a judgment for the deficiency against
the defendant, who shall be personally liable to the plaintiff, and execution
"A reading of the provisions of Act No. 3135, as amended (re extrajudicial
may issue on said judgment at once." We believe it is apparent from the
foreclosure) discloses nothing, it is true, as to the mortgagee's right to recover
provisions and decisions above-quoted that once the auction sale of the
such deficiency. But neither do we find any provision thereunder which
mortgaged property is effected and the resulting deficiency in the mortgage
expressly or impliedly prohibits such recovery. .
debt is ascertained, the mortgagee-creditor is then and there entitled to
secure a deficiency judgment which may immediately be executed, whether or
Article 2131 of the new Civil Code, on the contrary, expressly not the mortgagor is still entitled to redeem the property sold. We hold then
provides that "The form, extent and consequences of a that appellants' right to redeem their auctioned properties could not be a bar
mortgage, both as to its constitution, modification and to the present action of appellee to recover the deficiencies which it claims to
extinguishment, and as to other matters not included in this have resulted after applying the proceeds of the foreclosure sales here
Chapter, shall be governed by the provisions of the Mortgage involved in payment of appellants' mortgage debt. .
Law and of the Land Registration Law." Under the Mortgage
Law, which is still in force, the mortgagee has the right to
WHEREFORE, the decision appealed from is affirmed, with costs against
claim for the deficiency resulting from the price obtained in
appellants.
the sale of the real property at public auction and the
outstanding obligation at the time of the foreclosure
proceedings. (See Soriano vs. Enriquez, 24 Phil. 584; Banco
de Islas Filipinas v. Concepcion e Hijos, 53 Phil. 86; Banco
Nacional v. Barreto, 53 Phil. 101). Under the Rules of Court
(Sec. 6, Rule 70), "Upon the sale of any real property, under
an order for a sale to satisfy a mortgage or other incumbrance
thereon, if there be a balance due to the plaintiff after
applying the proceeds of the sale, the court, upon motion,
should render a judgment against the defendant for any such
balance for which, by the record of the case, he may be
personally liable to the plaintiff,... ." It is true that this refers to
a judicial foreclosure, but the underlying principle is the same,
that the mortgage is but a security and not a satisfaction of
indebtedness. ... .
15

G.R. No. 91779 February 7, 1991
GRAND FARMS, INC. and PHILIPPINE SHARES CORPORATION,
petitioners,
vs.
COURT OF APPEALS, JUDGE ADRIAN R. OSORIO, as Presiding Judge
of the Regional Trial Court, Branch 171, Valenzuela, Metro Manila;
ESPERANZA ECHIVERRI, as Clerk of Court & Ex-Officio Sheriff of the
Regional Trial Court of Valenzuela, Metro Manila; SERGIO CABRERA, as
Deputy Sheriff-in-Charge; and BANCO FILIPINO SAVINGS AND
MORTGAGE BANK, respondents.
REGALADO, J.:
The propriety of a summary judgment is raised in issue in the instant petition,
with herein petitioners appealing the decision1 of respondent court in CA-G.R.
SP No. 17535, dated November 29, 1989, which found no grave abuse of
discretion on the part of respondent judge in denying petitioners' motion for
summary judgment.2
The antecedents of this case are clear and undisputed. Sometime on April 15,
1988, petitioners filed Civil Case No. 2816-V88 in the Regional Trial Court of
Valenzuela, Metro Manila for annulment and/or declaration of nullity of the
extrajudicial foreclosure proceedings over their mortgaged properties, with
damages, against respondents clerk of court, deputy sheriff and herein private
respondent Banco Filipino Savings and Mortgage Bank.3
Soon after private respondent had filed its answer to the complaint, petitioners
filed a request for admission by private respondent of the allegation, inter alia,
that no formal notice of intention to foreclose the real estate mortgage was
sent by private respondent to petitioners.4
Private respondent, through its deputy liquidator, responded under oath to the
request and countered that petitioners were "notified of the auction sale by the
posting of notices and the publication of notice in the Metropolitan Newsweek,
a newspaper of general circulation in the province where the subject
properties are located and in the Philippines on February 13, 20 and 28,
1988."5
On the basis of the alleged implied admission by private respondent that no
formal notice of foreclosure was sent to petitioners, the latter filed a motion for
summary judgment contending that the foreclosure was violative of the
16
16
provisions of the mortgage contract, specifically paragraph (k) thereof which
provides:
k) All correspondence relative to this Mortgage, including demand
letters, summons, subpoena or notifications of any judicial or
extrajudical actions shall be sent to the Mortgagor at the address
given above or at the address that may hereafter be given in writing
by the Mortgagor to the Mortgagee, and the mere act of sending any
correspondence by mail or by personal delivery to the said address
shall be valid and effective notice to the Mortgagor for all legal
purposes, and the fact that any communication is not actually
received by the Mortgagor, or that it has been returned unclaimed to
the Mortgagee, or that no person was found at the address given, or
that the address is fictitious, or cannot be located, shall not excuse or
relieve the Mortgagor from the effects of such notice;6
The motion was opposed by private respondent which argued that petitioners'
reliance on said paragraph (k) of the mortgage contract fails to consider
paragraphs (b) and (d) of the same contract, which respectively provide as
follows:
b) . . . For the purpose of extra-judicial foreclosure, the Mortgagor
(plaintiff) hereby appoints the Mortgagee (BF) his attorney-in-fact to
sell the property mortgaged, to sign all documents and perform any
act requisite and necessary to accomplish said purpose and to
appoint its substitutes as such attorney-in-fact, with the same powers
as above-specified. The Mortgagor hereby expressly waives the term
of thirty (30) days or any other term granted or which may hereafter
be granted him by law as the period which must elapse before the
Mortgagee shall be entitled to foreclose this mortgage, it being
specifically understood and agreed that the said Mortgagee may
foreclose this mortgage at any time after the breach of any conditions
hereof. . . .
xxx xxx xxx
d) Effective upon the breach of any conditions of the mortgage and in
addition to the remedies herein stipulated, the Mortgagee is hereby
likewise appointed attorney-in-fact of the Mortgagor with full powers
and authority, with the use of force, if necessary, to take actual
possession of the mortgaged property, without the necessity for any
judicial order or any permission of power to collect rents, to eject
tenants, to lease or sell the mortgaged property, or any part thereof,
at public or private sale without previous notice or adverstisement of

any kind and execute the corresponding bills of sale, lease or other
agreement that may be deemed convenient, to make repairs or
improvement to the mortgaged property and pay for the same and
perform any other act which the Mortgagor may deem convenient . .
.7
On February 27, 1989, the trial court issued an order, denying petitioners'
motion for summary judgment.8 Petitioners' motion for reconsideration was
likewise denied by respondent-judge on the ground that genuine and
substantial issues exist which require the presentation of evidence during the
trial, to wit: (a) whether or not the loan has matured; (b) whether or not private
respondent notified petitioners of the foreclosure of their mortgage; (c)
whether or not the notice by publication of the foreclosure constitutes
sufficient notice to petitioners under the mortgage contract; (d) whether or not
the applicant for foreclosure of the mortgage was a duly authorized
representative of private respondent; and (e) whether or not the foreclosure
was enjoined by a resolution of this Court.9
Petitioners thereafter went on a petition for certiorari to respondent court
attacking said orders of denial as having been issued with grave abuse of
discretion. As earlier adverted to, respondent court dismissed the petition,
holding that no personal notice was required to foreclose since private
respondent was constituted by petitioners as their attorney-in-fact to sell the
mortgaged property. It further held that paragraph (k) of the mortgage contract
merely specified the address where correspondence should be sent and did
not impose an additional condition on the part of private respondent to notify
petitioners personally of the foreclosure. Respondent court also denied
petitioners motion for reconsideration, hence the instant petition.
We rule for petitioners.
The Rules of Court authorize the rendition of a summary judgment if the
pleadings, depositions and admissions on file, together with the affidavits,
show that, except as to the amount of damages, there is no issue as to any
material fact and that the moving party is entitled to a judgment as a matter of
law.10 Although an issue may be raised formally by the pleadings but there is
no genuine issue of fact, and all the facts are within the judicial knowledge of
the court, summary judgment may be granted.11
The real test, therefore, of a motion for summary judgment is whether the
pleadings, affidavits and exhibits in support of the motion are sufficient to
overcome the opposing papers and to justify a finding as a matter of law that
there is no defense to the action or that the claim is clearly meritorious.12
17
17
Applying said criteria to the case at bar, we find petitioners' action in the court
below for annulment and/or declaration of nullity of the foreclosure
proceedings and damages ripe for summary judgment. Private respondent
tacitly admitted in its answer to petitioners' request for admission that it did not
send any formal notice of foreclosure to petitioners. Stated otherwise, and as
is evident from the records, there has been no denial by private respondent
that no personal notice of the extrajudicial foreclosure was ever sent to
petitioners prior thereto. This omission, by itself, rendered the foreclosure
defective and irregular for being contrary to the express provisions of the
mortgage contract. There is thus no further necessity to inquire into the other
issues cited by the trial court, for the foreclosure may be annulled solely on
the basis of such defect.
While private respondent was constituted as their attorney-in-fact by
petitioners, the inclusion of the aforequoted paragraph (k) in the mortgage
contract nonetheless rendered personal notice to the latter indispensable. As
we stated in Community Savings & Loan Association, Inc., et al. vs. Court of
Appeals, et al.,13 where we had the occasion to construe an identical
provision:
On the other important point that militates against the petitioners' first
ground for this petition is the fact that no notice of the foreclosure
proceedings was ever sent by CSLA to the deceased mortgagor
Antonio Esguerra or his heirs in spite of an express stipulation in the
mortgage agreement to that effect. Said Real Estate Mortgage
provides, in Sec. 10 thereof that:
(10) All correspondence relative to this mortgage, including
demand letters, summons, subpoenas, or notifications of any
judicial or extrajudicial actions shall be sent to the Mortgagor
at the address given above or at the address that may
hereafter be given in writing by the Mortgagor to the
Mortgagee, and the mere act of sending any correspondence
by mail or by personal delivery to the said address shall be
valid and effective notice to the Mortgagor for all legal
purposes, . . . (Emphasis in the original text.)
The Court of Appeals, in appreciating the foregoing provision ruled
that it is an additional stipulation between the parties.1âwphi1 As
such, it is the law between them and as it not contrary to law, morals,
good customs and public policy, the same should be complied with
faithfully (Article 1306, New Civil Code of the Philippines). Thus, while
publication of the foreclosure proceedings in the newspaper of
general circulation was complied with, personal notice is still required,

as in the case at bar, when the same was mutually agreed upon by
the parties as additional condition of the mortgage contract. Failure to
comply with this additional stipulation would render illusory Article
1306 of the New Civil Code of the Philippines (p. 37, Rollo).
On the issue of whether or not CSLA notified the private respondents
of the extrajudicial foreclosure sale in compliance with Sec. 10 of the
mortgage agreement the Court of Appeals found as follows:
As the record is bereft of any evidence which even impliedly
indicate that the required notice of the extrajudicial
foreclosure was ever sent to the deceased debtor-mortgagor
Antonio Esguerra or to his heirs, the extrajudicial foreclosure
proceedings on the property in question are fatally defective
and are not binding on the deceased debtor-mortgagor or to
his heirs (p. 37, Rollo)
Hence, even on the premise that there was no attendant fraud in the
proceedings, the failure of the petitioner bank to comply with the
stipulation in the mortgage document is fatal to the petitioners' cause.
18
What private respondent would want is to have paragraph (k) considered as
non-existent and consequently disregarded, a proposition which palpably
does not merit consideration. Furthermore, it bears mention that private
respondent having caused the formulation and preparation of the printed
mortgage contract in question, any obscurity that it imputes thereto or which
supposedly appears therein should not favor it as a contracting party.15
Now, as earlier discussed, to still require a trial notwithstanding private
respondent's admission of the lack of such requisite notice would be a
superfluity and would work injustice to petitioners whose obtention of the relief
to which they are plainly and patently entitled would be further delayed. That
undesirable contingency is obviously one of the reasons why our procedural
rules have provided for summary judgments.
WHEREFORE, the decision appealed from is hereby REVERSED and SET
ASIDE and this case is REMANDED to the court of origin for further
proceedings in conformity with this decision. This judgment is immediately
executory.
SO ORDERED.

We do not agree with respondent court that paragraph (k) of the mortgage
contract in question was intended merely to indicate the address to which the
communications stated therein should be sent. This interpretation is rejected
by the very text of said paragraph as above construed. We do not see any
conceivable reason why the interpretation placed on an identically worded
provision in the mortgage contract involved in Community Savings & Loan
Association, Inc. should not be adopted with respect to the same provision
involved in the case at bar.

Nor may private respondent validly claim that we are supposedly interpreting
paragraph (k) in isolation and without taking into account paragraphs (b) and
(d) of the same contract. There is no irreconcillable conflict between, as in fact
a reconciliation should be made of, the provisions of paragraphs (b) and (d)
which appear first in the mortgage contract and those in paragraph (k) which
follow thereafter and necessarily took into account the provisions of the
preceding two paragraphs.14 The notices respectively mentioned in
paragraphs (d) and (k) are addressed to the particular purposes contemplated
therein. Those mentioned in paragraph (k) are specific and additional
requirements intended for the mortgagors so that, thus apprised, they may
take the necessary legal steps for the protection of their interests such as the
payment of the loan to prevent foreclosure or to subsequently arrange for
redemption of the property foreclosed.

18

G.R. No. 100480 May 1, 1993
BLANCA CONSUELO ROXAS, petitioner,
vs.
COURT OF APPEALS and RURAL BANK OF DUMALAG, INC.,
respondents.
NOCON, J.:
This is a petition for review on certiorari seeking reversal of the decision of
public respondent Court of Appeals in CA-G.R. CV No. 21140, dated May 23,
1991,1 which set aside the decision of the Regional Trial Court of Roxas City,
Sixth Judicial Riegion, Branch 18, in Civil Case No. V-4543, dated January 20,
1989.
The antecedent facts are, as follows:
Petitioner Blanca Consuelo Roxas is the owner of a parcel of land (Lot No.
3108) located at Tanza Norte, Panay, Capiz, containing an area of 14.7238
hectares and covered by Tax Declaration No. 5129. On December 22, 1969,
she executed a special power of attorney appointing her brother, the late
Manuel Roxas, as her attorney-in-fact for the purpose of applying for an
agricultural loan with private respondent Rural Bank of Dumalag, Inc. using
said land as collateral. Armed with said special power of attorney, Manuel
Roxas applied for, was granted and received an agricultural loan in the
amount of P2,000.00 from private respondent on December 26, 1969. As
security for the loan, he executed the corresponding real estate mortgage
over the subject land.
On October 24, 1973, private respondent foreclosed the real estate mortgage
for failure to pay the loan on maturity. On January 7, 1974, the subject land
was sold at public auction to private respondent, being the highest bidder for
P3,009.37. For failure to exercise the right of redemption, private respondent
consilidated its ownership over the subject land. On October 4, 1982,
possession thereof was taken from Jennifer Roxas, daughter of Manuel
Roxas, and delivered by the sheriff to private respondent.
On September 2, 1981, petitioner filed a complaint for cancellation of
foreclosure of mortgage and annulment of auction sale against private
respondent before the Regional Trial Court of Roxas City, docketed as Civil
Case No. V-4543.
19
19
In her complaint, petitioner claimed that Manuel Roxas never informed her
about the approval of the loan. When the loan matured, she did not received
any demand for payment from private respondent nor was there any
information from Manuel Roxas about the maturity of the loan. The foreclosure
did not comply with the requirement of giving written notices to all possible
redemptioners, neither did Manuel Roxas inform her about the foreclosure. In
1974, she learned of the foreclosure for a certain Rosario Pelobello. In that
same year, she went to private respondent to inquire about the status of her
loan, that is, the amount of her total account and for that matter, she asked for
a statement of account. Her request was refused or ignored. After repeated
requests therefor went unheeded, she consulted her lawyer, who sent a letter
to private respondent, requesting for said statement of account. On May 10,
1981, she wrote another letter to private respondent, reiterating her previous
request. Private respondent finally replied, informing petitioner that it already
foreclosed the subject land and it can no longer be redeemed since the
redemption period has expired on March 6, 1975. Petitioner was able to
obtain her statement of account only on August 19, 1981. She consigned with
the trial court the amount of P4,194.50 as redemption price of the subject
land.
Refuting the claims of petitioner, private respondent contended in its answer
that petitioner never cared about the payment of her loan although she knew
of the status of her account; that she was duly notified of the foreclosure and
public auction sale since notice to Manuel Roxas, her agent, was notice to the
principal; that the sheriff duly posted copies of the notice of foreclosure sale in
conspicuous public places before the actual auction sale; and that she acted
negligently in not taking steps to redeem the subject land.
On January 20, 1989, the trial court rendered judgment in favor of petitioner.
The dispositive portion of its decision reads:
WHEREFORE, a decision is rendered declaring:
1. As null and void the public auction sale of Lot 3108
mortgaged by plaintiff Consuelo D. Roxas thru her
attorney-in-fact Manuel D. Roxas in favor of the
defendant Rural Bank of Dumalag, (Capiz) Inc. conducted
by the Provincial Sheriff Ex-Officio of Capiz on January 7,
1974, and all proceedings connected therewith, or related
to the sale at public auction of Lot 3108 situated at Tanza
Norte, Panay, Capiz, including the cancellation of the
Certificate of Public Auction;
2. Allowing plaintiff Consuelo D. Roxas to redeem the land
from the defendant Rural Bank of Dumalag (Capiz) Inc.,

for the amount of P4,194.50 as consigned by plaintiff with
this court;
3. Ordering defendant Riral Bank to reconvey the
mortgaged premises to plaintiff Consuelo D. Roxas or her
representative;
4. Costs against the defendants. SO ORDERED.2
The trial court ratiocinated that private respondent failed to give notice of
foreclosure to petitioner as owner of the property and there was no
compliance with the requirements of Section 5 of Republic Act No. 720,3 as
amended by Republic Act No. 5939, the pertinent portion of which, provides:
The foreclosure of mortgages covering loans granted by rural
banks shall be exempt from the publication in newspapers
now required by law where the total amount of the loan,
including interests due and unpaid, does not exceed three
thousand pesos. It shall be sufficient publication in such
cases if the notices of foreclosure are posted in at least three
of the most conspicuous public places in the municipality and
barrio where the land mortgaged is situated during the period
of sixty days immediately preceding the public auction. Proof
of publication as required herein shall be accomplished by
affidavit of the sheriff or officer conducting the foreclosure
sale and shall be attached with the records of the case:. . . .
(emphasis supplied)
The notices of foreclosure were posted in the municipality where the subject
land was located and in Roxas City, but not in the barrio. Moreover, there was
no affidavit of the sheriff who conducted the sale, attached to the records of
the case.
On elevating the matter to the Court of Appeals, said court reversed the
decision of the trial court.4 According to the appellate court, Section 5 of R.A.
NO. 720 does not require personal notification to the martgagor in case of
foreclosure and there was substantial compliance with the requirements of
said law.
Hence, the present petition seeking reversal by petitioner of respondent
court's and raising as issues whether or not respondent court acted correctly:
1) in reversing the decision of the trial court, despite failure to post
notices in the barrio where the land lies;
20
20
2) in not allowing redemption or recovery of the land on equitable, if not
legal ground; and
3) in not passing upon the issue of gross inadequacy of price.
Elaborating on these issues, petitioners asserts that the failure to post the
notice in the barrio where the mortgaged property is situated rendered the
foreclosure and sale by public auction void. She invokes Our ruling in the case
of Tambunting, et al. v. Court of Appeals, et al.,5 which held that the statutory
provisions governing publication of notice of mortgage foreclosure sales must
be strictly complied with, and that a slight deviation therefrom will invalidate
the notice and render the sale voidable. If recovery cannot be had under the
strict provisions of law, it must be allowed under the liberal consideration of
equity in view of the special circumstances in this case: first, private
respondent admitted that it was always its paractice of notifying mortgagors of
the maturity of their loans, yet, in the case of petitioner, it did not do so;
second, despite earlier requests, private respondent gave the statement of
account only in 1981; third, even after the supposed foreclosure of the land in
1974, private respondent allowed petitioner to have possession thereof,
paying the taxes in her name until 1982, when private respondent started to
demand possession. The price paid by private respondent was only
P3,009.37 while the total area of the subject land is more than fourteen
hectares and a fishpond at the time of the sale in 1974.
The dcision of respondent court is set aside.
The basic issue in this petition is easy to resolve by refering to Our previous
decisions.
It is settled doctrine that failure to publish notice of auction sale as required by
the statute constitutes a jurisdiction defects with invalidates the sale.6 Even
slight deviations therefrom are not allowed.7
Section 5 of R.A. No. 720, as amended by R.A. No. 5939, provides that
notices of foreclosure should be posted in at least three (3) of the most
conspicuous public places in the municipality and barrio where the land
mortgaged is situated.
In the case at bar, the Certificate of Posting which was executed by the sheriff
states that he posted three (3) copies of the notice of public auction sale in
three (3) conspicuous public places in the municipality of Panay, where the
subject land was situated and in like manner in Roxas City, where the public
auction sale took place.8 It is beyond despute that there was a failure to
publish the notices of auction sale as required by law. Section 5 provides
 21
further that proof of publication shall be accomplished by an affidavit of the
sheriff or officer conducting the foreclosure sale. In this case, the sheriff
executed a certificate of posting, which is not the affidavit required by law. The
rationale behind this is simple: an affidavit is a sworn statement in writing.
Strict compliance with the aforementioned provisions is mandated. We,
therefore, cannot sustain the view of respondent court that there was
substantial compliance with Section 5 of R.A. No. 720, as amended, with
respect to the affidavit of posting by the sheriff and the non-posting of the
required notice in the barrio where the land mortgaged is situated. Instead,
We declare the foreclosure and public auction sale of the subject land void.

With the conclusion thus reached, We find it unnecessary to resolve the other
issues raised by petitioner.

WHEREFORE, the petitioner is hereby GRANTED. The decision of the Court

of Appeals dated May 23, 1991 is SET ASIDE. The decision of the trial court
is AFFIRMED, subject to the MODIFICATION that paragraphs 2 and 3 are
deleted. In lieu thereof: 2) petitioner is required to pay forthwith private
respondent the principal amount of her loan which is P2,000.00 plus interest
thereon at the rate stipulated upon or in the anbsence thereof, at the legal rate
per annum computed from the date the loan was obtained until the date of
consignation with the trial court; 3) declaring private respondent as entitled, in
case of failure of petitioner to pay in full her obligation with interest as
aforementioned within sixty (60) days from notice hereof, to foreclose its
mortgage on Lot No. 3108, after due compliance with the publication
requirements of Section 5 of R.A. No. 720, as amended by R.A. No. 5939, at
public auction sale. SO ORDERED.

21

G.R. No. 70987 September 29, 1988
GREGORIO Y. LIMPIN, and ROGELIO M. SARMIENTO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and GUILLERMO PONCE,
respondents.
NARVASA, J.:
Once again the parties are before this Court; this time, for a determination of
whether or not the equity of redemption recognized in favor of petitioner
Rogelio M. Sarmiento in this Court's judgment promulgated on January 30,
1987, still subsists and may be exercised, more than a year after that
judgment had become final and executory.
The proceedings concern two (2) lots, then covered by TCTs Nos. 92836 and
92837, which, together with two (2) others, were originally mortgaged in 1973
to herein private respondent Ponce by their former owners, the Spouses Jose
and Marcelina Aquino. These two lots were afterwards sold in 1978 by the
same Aquino Spouses to Butuan Bay Wood Export Corporation. Against this
corporation herein petitioner Limpin obtained a money judgment in 1979; and
to satisfy the judgment, the two lots were levied on and sold at public auction
in 1980, Limpin being the highest bidder. Limpin later sold the lots to his co-
petitioner, Sarmiento.
Earlier however or a day before levy was made on the two lots in execution of
the judgment against Butuan Bay Wood Export Corporation. Ponce had
initiated judicial proceedings for the foreclosure of the mortgage over said two
(2) lots (together with the two (2) others mortgaged to him Judgment was
rendered in his favor and became final; and at the ensuing foreclosure sale,
the lots were acquired by Ponce himself as highest bidder. Ponce then moved
for confirmation of the foreclosure sale, but the Court confirmed the sale of
only two lots, refusing to do so as regards the two which had been subject of
the execution sale in Limpin's favor (i.e., those covered TCTs Nos. 92836 and
92837).
It was to resolve the resulting dispute that Ponce instituted a special civil
action in the Intermediate Appellate Court, impleading Limpin and Sarmiento a
indispensable parties respondents. That Court rendered judgment on
February 28, 1985 in Ponce's favor; Limpin and Sarmiento appealed; this
Court denied their appeal.
22
22
The judgment of this Court of January 30, 1987 dismissed Sarmiento's and
Limpin's petition for review on certiorari of the Appellate Court's decision of
February 28, 1985. It in effect affirmed the latter's decision which inter alia
ordered the Trial Court "to confirm the sale (of the lots formerly covered by
TCT Nos. 92836 and 92837) and issue a writ of possession to ... (Guillermo
Ponce) with respect to the aforesaid lots, subject to the equity of redemption
of the respondent Rogelio V. Sarmiento 1 Applying the doctrine laid down in
Santiago v. Dionisio, a 1953 decision of this Court 2 the Intermediate
Appellate Court's decision declared that "the sale to Ponce, as the highest
bidder in the foreclosure sale of the two lots in question should have been
confirmed, subject to Limpin's (and now Sarmiento's) equity of redemption."
This Court's aforesaid judgment also clearly and categorically sustained the
exercise by the Appellate Court of jurisdiction over the persons of Rogelio M.
Sarmiento and Gregorio Limpin. 3 There can thus be no question that the
petitoners herein, said Rogelio Sarmiento and Gregorio Limpin, were affected
and are bound by the decision of the Intermediate Appellate Court, and that of
this Court affirming it.
Rogelio M. Sarmiento, particularly, was aware that the Trial Court had the
ministerial duty to execute the Appellate Court's decision, i.e., to confirm the
sale and issue a writ of possession as regards the aforesaid lots, subject to
the equity of redemption explicitly recognized in his favor in the decisions
mentioned. He knew that he had the prerogative to exercise his equity of
redemption, if not from the moment that the judgment of this Court became
final and executory, 4 at least until the Court a quo, presided over by Hon.
Antonio Solano, subsequently confirmed the sale and issued a writ of
possession in favor of Guillermo Ponce in June, 1987. 5
He did not try to exercise that right before, at or about the time of the
confirmation of the foreclosure sale by Judge Solano. Instead, he instituted no
less than two (2) actions in the same Regional Trial Court which were
assigned to another branch, presided over by Hon. Teodoro Beltran-
attempting to relitigate precisely the same issues which this Court and the
Intermediate Appellate Court had already passed upon and resolved
adversely to him. For doing so for trifling with and abusing the processes of
the courts, and thus unwarrantedly delaying execution of the final and
executory judgment against him he and his counsel were both found guilty of
contempt and correspondingly punished by this Court, by Resolution dated
May 5, 1988. The same resolution also decreed the dismissal of the
complaints in both cases and the nullification and setting aside of the
restraining or injunctive orders of Judge Beltran.

It was not until March 11, 1988-nine months or so after entry of the judgment
recognizing his equity of redemption as successor-in-interest of the original
mortgagors that Sarmiento finally be stirred himself to attempt to exercise his
unforeclosed equity of redemption. On that day he filed a motion with the
Court presided over by Hon. Judge Antonio Solano, manifesting that he would
exercise the right and asked the Court to fix the redemption price. 6 The Court
opined that "this should be the subject of the agreement between Ponce and
Sarmiento. 7
Sarmiento then wrote to Ponce on March 23, 1988 offering "P 2.6 million as
redemption price for the two lots originally covered by TCTs Nos. 92836 and
92837, now 307100 and 307124. 8 Ponce's answer, dated March 25, 1988,
rejected the offer said averred "that the period within which ... (Sarmiento)
could have exercised such right ... (had) lapsed. 9 Sarmiento reacted by filing
a motion with the Solano Court, dated March 29, 1988, asking it to "fix the
redemption price ... and that the implementation of the writ of possession be
provisionally deferred. 10 An opposition was promptly filed by Ponce under
date of May 4, 1988 11 in which he argued that "Sarmiento's right to exercise
his equity of redemption over those lots had long expired," the opportunity to
exercise it having presented itself but not availed of "(i) after ... default in the
performance of the conditions of the mortgage and (ii) before the Sheriffs sale
of the property and the judicial confirmation thereof." According to Ponce,
"from October 17, 1982, ... (when) Sarmiento's predecessors-in-interest
defaulted in their obligations over the mortgaged properties, up to June 17,
1987, when this ... (Trial) Court confirmed the auction sale of those properties,
Sarmiento could (and should) have exercised his 'equity of redemption.'"
Judge Solano did not share this view, and ruled accordingly. 12
The issue has been brought to this Court for resolution by Ponce's "Motion for
Clarification" dated May 27, 1988 and "Supplemental Motion ..." dated June
13, 1988, as to which Sarmiento has submitted a Comment dated June
17,1988. To the comment a reply has been presented by Ponce under date of
August 3, 1988.
Ponce states 13 that the term, equity of redemption, means "the right of the
mortgagor to redeem the mortgaged property after his default in the
performance of the conditions of the mortgage but before the sale of the
property or the judicial) confirmation of the (Sheriffs) sale," citing Top Rate
International Services, Inc. v. IAC 142 SCRA 473 [1976], or "the right to
redeem mortgaged property by paying the amount ordered by the court within
a period of ninety days, or, even thereafter but before the confirmation of the
sale, invoking Sun Life Assurance Co. of Canada v. Diez, 52 Phil. 275 [1928].
14 On this premise, he postulates that "from October 17, 1982, the date
Sarmiento's predecessors-in-interest defaulted in their obligations over the
23
23
mortgaged properties, up to June 17, 1987, when the lower court confirmed
the auction sale of those properties, Sarmiento could have exercised his
'equity of redemption."' Not having done so within that time, his equity of
redemption had been extinguished; indeed, by opting to file "new suits against
Ponce ... seeking to annul Ponce's titles over those properties" instead of
redeeming the same, he had "waived his equity of redemption (assuming
such right existed at the time the suits were commenced)."
It is Sarmiento's position, on the other hand, 15 that the "17 June 1987
confirmation of the sale of the two lots could not have cut off ... (his) equity of
redemption;" in fact, "Ponce himself, in his 'Urgent Motion' dated 1 June 1987,
precisely prayed for the issuance of a writ of possession 'subject to the equity
of redemption of Rogelio M. Sarmiento' thereby recognizing Sarmiento's
equity of redemption beyond confirmation date," 16 He also argues that he
had not been informed of the time when his right of redemption would be cut-
off, 17 because he "never received a copy of any Motion for Confirmation,
much less notice of hearing thereon in violation of his right to due process;"
that to hold otherwise would "render nugatory the decision of the Court of
Appeals and this ... Court on the issue;" and that he is entitled to a reasonable
time, e.g., a year, for the exercise of his equity of redemption. 18
The equity of redemption is, to be sure, different from and should not be
confused with the right of redemption. 19
The right of redemption in relation to a mortgage-understood in the sense of a
prerogative to re-acquire mortgaged property after registration of the
foreclosure sale- exists only in the case of the extrajudicial foreclosure of the
mortgage. No such right is recognized in a judicial foreclosure except only
where the mortgagee is the Philippine National Bank or a bank or banking
institution.
Where a mortgage is foreclosed extra-judicially, Act 3135 grants to the
mortgagor the right of redemption within one (1) year from the registration of
the sheriffs certificate of foreclosure sale. 20
Where the foreclosure is judicially effected, however, no equivalent right of
redemption exists. The law 21 declares that a judicial foreclosure sale, "when
confirmed by an order of the court, ... shall operate to divest the rights of all
the parties to the action and to vest their rights in the purchaser, subject to
such rights of redemption as may be allowed by law. 22 Such rights
exceptionally "allowed by law" (i.e., even after confirmation by an order of the
court) are those granted by the charter of the Philippine National Bank (Acts
No. 2747 and 2938), and the General Banking Act (R.A. 337). 23 These laws
confer on the mortgagor, his successors in interest or any judgment creditor of

the mortgagor, the right to redeem the property sold on foreclosure-after
confirmation by the court of the foreclosure sale-which right may be exercised
within a period of one (1) year, counted from the date of registration of the
certificate of sale in the Registry of Property.
But, to repeat, no such right of redemption exists in case of judicial foreclosure
of a mortgage if the mortgagee is not the PNB or a bank or banking institution.
In such a case, the foreclosure sale, "when confirmed by an order of the court.
... shall operate to divest the rights of all the parties to the action and to vest
their rights in the purchaser." There then exists only what is known as the
equity of redemption. This is simply the right of the defendant mortgagor to
extinguish the mortgage and retain ownership of the property by paying the
secured debt within the 90-day period after the judgment becomes final, in
accordance with Rule 68, or even after the foreclosure sale but prior to its
confirmation. Section 2, Rule 68 provides that—
... If upon the trial ... the court shag find the facts set forth in
the complaint to be true, it shall ascertain the amount due to
the plaintiff upon the mortgage debt or obligation, including
interest and costs, and shall render judgment for the sum so
found due and order the same to be paid into court within a
period of not less than ninety (90) days from the date of the
service of such order, and that in default of such payment the
property be sold to realize the mortgage debt and Costs. 24
This is the mortgagor's equity (not right) of redemption which, as above
stated, may be exercised by him even beyond the 90-day period "from the
date of service of the order,' and even after the foreclosure sale itself,
provided it be before the order of confirmation of the sale. 25 After such order
of confirmation, no redemption can be effected any longer.
It is this same equity of redemption that is conferred by law on the mortgagor's
successors-in-interest, or third persons acquiring rights over the mortgaged
property subsequent, and therefore subordinate, to the mortgagee's lien. 26 If
these subsequent or junior lienholders be not joined in the foreclosure action,
the judgment in the mortgagor's favor is ineffective as to them, of course. In
that case, they retain what is known as the "unforeclosed equity of
redemption," and a separate foreclosure proceeding should be brought to
require them to redeem from the first mortgagee, or the party acquiring title to
the mortgaged property at the foreclosure sale, within 90 days, 27 under
penalty of losing that prerogative to redeem. In the case at bar, however,
there is no occasion to speak of any "unforeclosed equity of redemption' in
Sarmiento's favor since he was properly impleaded in the judicial proceeding
24
24
where his and Ponce's rights over the mortgaged property were ventilated and
specifically adjudicated.
Under the circumstances obtaining in this case, the plain intendment of the
Intermediate Appellate Court was to give to Sarmiento, not the unforeclosed
equity of redemption pertaining to a stranger to the foreclosure suit, but the
same equity of redemption possessed by the mortgagor himself. The
judgment cannot be construed as contemplating or requiring the institution of
a separate suit by Ponce to compel Sarmiento to exercise his unforeclosed
equity of redemption, or as granting Sarmiento the option to redeem at any
time that he pleases, subject only to prescription. This would give rise to that
multiplicity of proceedings which the law eschews. The judgment plainly
intended that Sarmiento exercise his option to redeem, as successor of the
mortgagor.
Upon the facts on record, Sarmiento cannot be heard to complain of denial of
due process for alleged lack of notice of any motion or hearing for
confirmation of sale. The Decision of the Intermediate Appellate Court which
he and his predecessor, Limpin, had appealed to this Court specifically
ordered the Trial Court to confirm 28 the judicial foreclosure sale in favor of
Ponce over the two lots, in these terms. 29
WHEREFORE, the orders dated October 16,1983 and
December 19,1983 of the respondent court, so far as they
deny the confirmation of the sale of the lots formerly covered
by TCT Nos. 92836 and 92837, are SET ASIDE, and the
respondent court is hereby ORDERED to confirm the sale
and issue a writ of possession to the petitioner with respect to
the aforesaid lots, subject to the equity of redemption of the
respondent Rogelio V. Sarmiento. Without costs.
Given the fact that said appealed orders of the Trial Court had been issued
upon motion for confirmation earlier made by Ponce-which was duly served
and heard-the aforecited Decision of the Intermediate Appellate Court can be
construed in no wise than as a peremptory command to the Trial Court to
confirm the sale as directed, motu proprio, and without the need of any further
motion or other action on the part of Ponce. The rejection by this Court of
Sarmiento's and Limpin's appeal in its own Decision of January 30, 1987,
which imported nothing less than a total affirmance of the Decision of the
Appellate Court, should therefore have sufficiently alerted Sarmiento that
confirmation could come at any time after this Court's Decision became final,
with or without any action from Ponce. He cannot, in the circumstances, claim
unfair surprise. He should, upon being notified of this Court's Decision, have
taken steps to redeem the properties in question or, at the very least, served
 25
the Trial Court and Ponce with notice of his intention to exercise his equity of
redemption. There was certainly time enough to do this the order confirming
the foreclosure sale issuing only on June 17, 1987—had he not occupied
himself with the fruitless maneuverings to re-litigate the issues already
recounted. Indeed, had he made an attempt to redeem, even belatedly but
within a reasonable period of time after learning of the order of confirmation
(the record shows he did learn of it within three [3) days after its issuance), 30
he might perhaps have given the Court some reason to consider his bid on
equitable grounds. He did not. He let nine (9) months pass, to repeat, in
carrying out improper (and contumacious stratagems to negate the judgments
against him, before making any such move.

Neither can Sarmiento acceptably claim that Ponce, by moving for a writ of
possession subject to his (Sarmiento's) equity of redemption, recognized the
existence and enforceability of that prerogative beyond the prescribed cut-off
date of confirmation of the sale. Such an interpretation of the motion is totally
unwarranted, given the fact that said motion was made at a time (June 1,
1987) when there was as yet no order confirming the sale and, since
Sarmiento's equity of redemption then still unquestionably existed, there was
hardly occasion or for that matter, any reason as far as Ponce was concerned,
to provide against its lapsing. Moreover, assuming for the sake of argument
that a resolutory period fixed by law may be extended by act of the party in
whose favor its expiration would operate, that act must bespeak a clear and
unequivocal intent to grant such an extension. No such clear grant can be
inferred from the terms of Ponce's motion, which can, and in fact should be,
read as a mere affirmation that there existed at the time an equity of
redemption in Sarmiento's favor.

WHEREFORE, the Court hereby rules that the equity of redemption claimed
and invoked by Rogelio M. Sarmiento over the properties originally covered by
Transfer Certificates of Title Nos. 92836 and 92837 (now by TCTs Numbered
307100 and 307124), Registry of Deeds of Quezon City, subject of this case,
lapsed and ceased to exist without having been properly exercised, on June
17, 1987, with the issuance by the Trial Court of the Order confirming the
sheriffs sale (on judicial foreclosure) of said properties in favor of Guillermo
Ponce.

25

G.R. No. 106953 August 19, 1993
CESAR SAN JOSE AND MARGARITA BATONGBAKAL, petitioners,
vs.
HON. COURT OF APPEALS, SPS. MARCOS DE GUZMAN AND GLORIA
DE GUZMAN, respondents.
PADILLA, J.:
In this Petition for Review, Cesar San Jose and Margarita Batongbakal
(hereinafter referred to as petitioner-spouses), seek to set aside the decision
of the Court of Appeals ** in C.A. G.R. No. 30769-CV entitled "Spouses Cesar
San Jose and Margarita Batongbakal vs. Spouses Marcos de Guzman and
Gloria de Guzman".
The relevant facts in this case are as follows:
Petitioner-spouses filed a complaint to annul the extra-judicial foreclosure sale
conducted by the Provincial Sheriff of Bulacan of the property covered by
T.C.T. No. T-159703 located in Duhat, Bocaue, Bulacan.
The land was mortgaged by the petitioner-spouses to private respondent-
spouses Marcos and Gloria de Guzman on 14 April 1972 as security for the
payment of a loan of P12,000.00. For allegedly failing to comply with the
conditions of the mortgage, the private respondent-spouses extra-judicially
foreclosed the mortgage and the land was sold at a sheriff's sale held on 25
November 1975 with respondent-spouses as purchasers thereof.
Consequently, TCT No. T-159703 was cancelled and TCT No. T-30,762(M)
was issued in the name of respondent-spouses.
That there was failure to pay the loan obtained from the respondent-spouses
and that the latter had the right to foreclose the mortgage either judicially or
extrajudicially are not disputed. The only issue to be resolved in this case is
whether or not the extra-judicial foreclosure sale complied with the
requirements of Act No. 3135 as amended by Act No. 4118 which governs the
extra-judicial foreclosure of real estate mortgage.
Petitioner-spouses contend that the extra-judicial foreclosure sale was null
and void for the following reasons:
1) The Petitioner-spouses were not notified of the extra-judicial foreclosure;
2) The Sheriff's certificate of posting of notice was not presented;
26
26
3) There was no proof that the newspaper in which the notice of extra-judicial
foreclosure sale was made was one of general circulation; and
4) The property mentioned in the Notice of Sheriff's Sale and in the minutes of
auction sale was covered by TCT No. T-169705 not by TCT No.
T-159703, the title to the mortgaged property subject of the foreclosure sale.
The trial court upheld the validity of the foreclosure sale. *** On appeal, the
Court of Appeals in its aforecited decision dated 20 March 1992 likewise held
that the foreclosure sale was valid. A Motion for Reconsideration was denied
on 26 August 1992. Hence this petition for review.
The provision of Act No. 3135 as amended by Act No. 4118 relevant to the
issues in this case is Section 3 which states:
Sec. 3. Notice shall be given by posting notices of sale for not
less that twenty (20) days in at least three public places of the
municipality or city where the property is situated, and if such
property is worth more than four hundred pesos, such notice
shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in
the municipality or city.
In Tambunting v. Court of Appeals,1 the Court stressed that the statutory
provisions governing publication of notice of mortgage foreclosure sales must
be strictly complied with, and that even the slightest deviations therefrom will
invalidate the notice. In the case at bar, the Notice of Sheriff's sale referred to
the property covered by TCT No. T-169705. This was the notice actually
published in "The New Record" as shown by the Affidavit of Publication
executed by the Business Manager of the aforementioned publication. The
trial court and the Court of Appeals upheld the validity of the Notice based on
the theory that although the property to be sold pursuant to the foreclosure of
mortgage was indeed covered by TCT No. T-159703 and not by TCT No.
T-169705, the technical description, however, in the notice was the actual and
correct technical description of the property. Both the trial court and the Court
of Appeals held that the discrepancy in the title number was "purely a
typographical error" which "did not render null and void the public auction sale
held by the Sheriff. The number of the transfer certificate as an identification
of real property is not controlling. What controls is the technical description."2
We disagree and consequently we reverse the decision of the Court of
Appeals.
 27
In the Tambunting case, 3 this Court stated that the failure to advertise a 2) Ordering the appropriate Register of Deeds to reinstate Transfer Certificate
mortgage foreclosure sale in compliance with statutory requirements of Title No. T-159703 in the name of petitioner Margarita Batongbakal married
constitutes a jurisdictional defect invalidating the sale and that a substantial to petitioner Cesar San Joso, giving it full force and effect as though it had
error or omission in a notice of sale will render the notice insufficient and never been cancelled.
vitiate the sale.
3) Ordering the cancellation of Transfer Certificate of Title No.
The notice of Sheriff's Sale, in this case, did not state the correct number of T-30.762 (M) in the name of private respondent spouses Marcos and Gloria
the transfer certificate of title of the property to be sold. This is a substantial de Guzman for being void ab initio.
and fatal error which resulted in invalidating the entire Notice. That the correct
technical description appeared on the Notice does not constitute substantial With costs against the private respondents.
compliance with the statutory requirements. The purpose of the publication of
the Notice of Sheriff's Sale is to inform all interested parties of the date, time SO ORDERED.
and place of the foreclosure sale of the real property subject thereof.
Logically, this not only requires that the correct date, time and place of the
foreclosure sale appear in the notice but also that any and all interested
parties be able to determine that what is about to be sold at the foreclosure
sale is the real property in which they have an interest.

The Court is not unaware of the fact that the majority of the population do not
have the necessary knowledge to be able to understand the technical
descriptions in certificates of title. It is to be noted and stressed that the Notice
is not meant only for individuals with the training to understand technical
descriptions of property but also for the layman with an interest in the property
to be sold, who normally relies on the number of the certificate of title. To hold
that the publication of the correct technical description, with an incorrect title
number, of the property to be sold constitutes substantial compliance would
certainly defeat the purpose of the Notice. This is not to say that a correct
statement of the title number but with an incorrect technical description in the
notice of sale constitutes a valid notice of sale. The Notice of Sheriff's Sale, to
be valid, must contain the correct title number and the correct technical
description of the property to be sold.

We need not discuss the other grounds for nullifying the foreclosure sale
having found that there was no compliance with the statutory notice
requirement.

WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE

and a new decision rendered:

1) Declaring the Extra-judicial Foreclosure Sale of the property of the

petitioner-spouses null and void.

27

G.R. No. L-45322 July 5, 1989
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), petitioner,
vs.
THE COURT OF FIRST INSTANCE OF ILOILO, BRANCH III, ILOILO CITY
and NELITA M. VDA. DE BACALING & MARIA TERESA INTEGRATED
DEVELOPMENT CORPORATION, respondents.
GRIÑO-AQUINO, J.:
The legal issue presented in this appeal by certiorari is whether, after the
judicial foreclosure of a real estate mortgage and the confirmation of the sale,
the trial court may grant or fix another period for the redemption of the
foreclosed property by the assignee of the mortgagor's equity of redemption.
In 1957, a real estate loan of P600,000 payable in monthly installments within
a period of ten (10) years with 7% interest per annum, was granted to the
spouses Ramon and Nelita Bacaling by the petitioner, Government Service
Insurance System (hereafter GSIS) for the development of the Bacaling-
Moreno subdivision. To secure the repayment of the loan, the Bacalings
executed in favor of the GSIS a real estate mortgage on four (4) lots owned by
them. Out of the approved loan of P600,000, only P240,000 had been
released to them by the GSIS as of November 11, 1957.
The Bacalings failed to finish the subdivision project and pay the amortizations
on the loan so the GSIS, on May 22, 1959, filed in the Court of First Instance
of Iloilo a complaint for judicial foreclosure of the mortgage (Civil Case No.
5233). During the pendency of the case, Ramon Bacaling passed away.
In a decision dated October 5, 1960, the court ordered the widow, for herself
and as administratrix of the estate of Ramon Bacaling, to pay the GSIS:
(1) P240,000 with interest at 7% per annum from May 22,
1959 until the amount was fully paid;
(2) to pay the sum of P21,879.56 as accumulated interests on
the debt up to February 11, 1959 plus 7% interest per annum,
from February 12,1959 until fully paid;
(3) to pay l0% of the judgment as attorney's fees and costs;
and
28
28
(4) should she fail to pay, or deposit with the Clerk of Court,
the above amounts within a period of ninety (90) days from
receipt of a copy of the decision, the four mortgaged lots
would be sold at public auction to satisfy the mortgage debt,
and the surplus if any should be delivered to the defendant
Nelita Vda. de Bacaling. (pp. 12-13, Record on Appeal,)
Mrs. Bacaling failed to pay the judgment debt within 90 days after receipt of
the decision of the court. Consequently, the mortgaged lots were sold at
public auction on February 28, 1961. The GSIS was the highest bidder at the
sale.
On March 1, 1961, the GSIS filed a motion for confirmation of the sale of the
property to it (p. 25, Record on Appeal). On October 10, 1961, it reiterated
said motion and further asked for a deficiency judgment against the
mortgagor, its bid of P74,558.25 being inadequate to cover the judgment debt
which had swelled to P339,302.58 as of August 31, 1961 (p. 30, Record on
Appeal).
On December 18, 1972, respondent Maria Teresa Integrated Development
Corporation (MTIDC), as alleged assignee of the mortgagor's "right of
redemption," filed a "Motion to Exercise the Right of Redemption" (p. 34,
Record on Appeal). The motion was granted by the trial court in an order
dated December 20, 1972. Check No. MK-45594 of the China Banking
Corporation in the amount of P l,100,000 was delivered by MTIDC to the GSIS
as payment of the redemption price. However, the check was dishonored by
the drawee bank because it was drawn against a closed account.
On motion of the GSIS the court issued on February 3, 1973 an order
declaring null and void the redemption of the property by respondent MTIDC.
Thereafter, written proposals were sent by said respondent to the GSIS for the
redemption of the foreclosed property, but the GSIS required cash payment of
the redemption price.
On October 25, 1975, respondent Nelita Bacaling filed a motion to re-open the
case so she could prove the inadequacy of the price of the sale of the
mortgaged property (p. 63, Record on Appeal). The GSIS filed an opposition.
In an order dated December 8, 1975, respondent court denied Nelita's motion,
confirmed the sale of the mortgaged property, and rendered a deficiency
judgment in favor of GSIS (p. 76, Record on Appeal).

On December 19, 1975, fourteen (14) years after the foreclosure sale on
February 28, 1961 and almost three (3) years after the court had annulled on
February 3, 1973 its redemption of the foreclosed property, respondent
MTIDC filed a motion for reconsideration of the court's order and sought the
restoration of its right of redemption. The court, over the strong opposition of
the GSIS, reconsidered on January 19, 1976 its order of December 8, 1975
and granted MTIDC a period of one year after the finality of its order of
January 19, 1976 to redeem the Bacaling properties (p. 94, Record on
Appeal).
The GSIS sought a reconsideration of that order on the ground that the court
may not extend the period for the redemption of the property (p. 95, Record
on Appeal).
On February 12,1976, the court modified its order of January 19, 1976 by
giving MTIDC one (1) year from January 19, 1976 within which to redeem the
Bacaling property, instead of one year from the finality of the January 19,
1976 order (p. 101, Record on Appeal). Petitioner received a copy of this last
order on February 12,1976.
On March 1, 1976, the GSIS appealed by certiorari to this Court raising purely
legal questions (p. 102, Record on Appeal).
In her Comment on the petition for review, Nelita Vda. de Bacaling asked for
the dismissal of GSIS petition on the grounds that: (1) the appeal has become
moot and academic because the one-year redemption period fixed by the trial
court had expired without the properties being redeemed; and (2) the
questioned order (dated February 12, 1976) is also pending appeal in the
Court of Appeals (CA-G.R. No. 60842) hence, this case should be remanded
to that Court.
The respondent MTIDC, in its Comment, alleged the same grounds for the
dismissal of the appeal, and further argued the legality of the lower court's
order because anyway the GSIS entertained and encouraged its overtures for
the redemption of the foreclosed property.
On May 30,1977, this Court, through the First Division, gave due course to the
petition.
On October 21, 1977, We denied the motion to remand this appeal to the
Court of Appeals.
29
29
After the respondents had filed their Comments, the case was declared
submitted for decision on January 27, 1978.
Considering the long lapse of the time that this case has been awaiting
adjudication, and apprehensive that supervening events may have rendered
the issues moot and academic, this Court on September 21, 1988 gave the
parties ten (10) days from notice to manifest whether they are still interested
in prosecuting the case. In a Manifestation filed November 16, 1988, the GSIS
declared that it is still interested in prosecuting its appeal.
We find merit in the appeal. Sections 2 and 3, Rule 68 of the Rules of Court
provide:
SEC. 2. Judgment on foreclosure for payment or sale. — if
upon the trial in such action the court shall find the facts set
forth in the complaint to be true, it shall ascertain the amount
due to the plaintiff upon the mortgage debt or obligation,
including interest and costs, and shall render judgment for the
sum so found due and order that the same be paid into court
within a period of not less than ninety (90) days from the date
of the service of such order, and that in default of such
payment the property be sold to realize the mortgage debt
and costs.
SEC. 3. Sale of mortgaged property; effect. — When the
defendant, after being directed to do so as provided in the last
preceding section, fails to pay the principal, interest, and
costs at the time directed in the order, the court shall order
the property to be sold in the manner and under the
regulations that govern sales of real estate under execution.
Such sale shall not affect the rights of persons holding prior
encumbrances upon the property or a part thereof, and when
confirmed by an order of the court, it shall operate to divest
the rights of all the parties to the action and to vest their rights
in the purchaser, subject to such rights of redemption as may
be allowed by law. (Emphasis supplied.)
There is no right of redemption from a judicial foreclosure sale after the
confirmation of the sale, except those granted by banks or banking institutions
as provided by the General Banking Act (Limpin vs. Intermediate Appellate
Court, G.R. No. 70987, Sept. 29,1988). This has been the consistent
interpretation of Rule 68 in a long line of decisions of this Court.

We may say, furthermore, that this Court has already held
that in mortgage foreclosures the rights of the mortgagee and
persons holding under him are cut off by the sale when duly
confirmed, and with them the equity of redemption. The
reason for that holding is that the right of redemption being
purely statutory, and there being no statute conferring that
right, it does not exist. (Benedicto vs. Yulo, 26 Phil. 166;
Emphasis supplied.)
... When the foreclosure sale is validly confirmed by the court
title vests upon the purchaser in the foreclosure sale, and the
confirmation retroacts to the date of the sale (Binalbagan
Estate, Inc. vs. Gatuslao, et al., 74 Phil. 128). Only
foreclosure of mortgages to banking institutions (including the
Rehabilitation Finance Corporation) and those made
extrajudicially are subject to legal redemption, by express
provision of statute, and the present case does not come
under exceptions. (Villar vs. Javier de Paderanga, 97 Phil.
608-609;Emphasis ours.)
Where the foreclosure is judicially effected, however, no
equivalent right of redemption exists. The law (Sec. 3, Rule
68, Rules of Court) declares that a judicial foreclosure sale,
'when confirmed by an order of the court, ... shall operate to
divest the rights of all the parties to the action and to vest
their rights in the purchaser, subject to such rights of
redemption as may be allowed by law.' Such rights
exceptionally 'allowed by law' (i.e., even after confirmation by
an order of the court) are those granted by the charter of the
Philippine National Bank (Acts No. 2747 and 2938), and the
General Banking Act (R.A. 337) (See Moran, Comments on
the Rules, 1970 Ed., Vol. 3, p. 273, citing Gonzales vs. PNB,
48 Phil. 824,828; and Martin, Rules of Court, etc., 3rd Ed.,
Vol. 3, p. 289, citing Villar vs. Javier de Paderanga, 97 Phil.
64; Piano vs. Cayanong 7 SCRA 397). These laws confer on
the mortgagor, his successors in interest or any judgment
creditor of the mortgagor, the right to redeem the property
sold on the foreclosure-after confirmation by the court of the
foreclosure sale — which right may be exercised within a
period of one (1) year, counted from the date of registration of
the certificate of sale in the Registry of Property.
30
PNB or a bank or banking institution. In such a case, the
foreclosure sale when confirmed by an order of the court, ...
shall operate to divest the rights of all the parties to the action
and to vest their rights in the purchaser.' There then exists
only what is known as the equity of redemption. This is simply
the right of the defendant mortgagor to extinguish the
mortgage and retain ownership of the property by paying the
secured debt within the 90-day period after the judgment
becomes final, in accordance with Rule 68, or even after the
foreclosure sale but prior to its confirmation. (Limpin vs.
Intermediate Appellate Court, G.R. No. 70987, September 29,
1988.)
Since the GSIS is not a bank or banking institution, its mortgage is covered by
the general rule that there is no right of redemption after the judicial
foreclosure sale has been confirmed. Hence, Judge Numeriano Estenzo
exceeded his jurisdiction and acted with grave abuse of discretion in granting
the respondent, MTIDC, another one-year period to redeem the Bacaling
properties over the opposition of petitioner GSIS as mortgagee- purchaser
thereof at the public sale. His orders dated January 19, 1976 and February
12, 1976 are null and void.
WHEREFORE, the petition for certiorari is granted. The appealed orders
dated January 19, 1976 and February 12, 1976 of Judge Numeriano Estenzo
in Civil Case No. 5233 are hereby annulled and set aside.
Costs against the private respondents.
SO ORDERED.

But, to repeat, no such right of redemption exists in case of

judicial foreclosure of a mortgage if the mortgagee is not the
30

G.R. No. 83498 October 22, 1991
SPS. MIGUEL S. KHO and JUANITA KHO, petitioners,
vs.
COURT OF APPEALS and BANCO FILIPINO, respondents.
PARAS, J.:
Petitioners are assailing the propriety of the lifting of the writ of preliminary
injunction by respondent Court of Appeals 1 which writ was issued by
Branches IX and XIV of the Regional Trial Court of Cebu City, alleging that in
doing so, respondent Court acted with grave abuse of discretion amounting to
lack of jurisdiction 2 and virtually preempted the lower court from determining
the merits of the issues raised by the petitioners in Civil Case No. CEB-759
now pending before Branch XIV of the Regional Trial Court of Cebu City. 3
The facts of the case are as follows: —
On January 31, 1978, the spouses Kho (private respondents herein)
constituted in favor of herein petitioner Banco Filipino a real estate
mortgage over a parcel of land registered in the name of plaintiff
Miguel Kho and covered by Transfer Certificate of Title No. 63021 of
the Register of Deeds of Cebu City, located at Juan Luna St., Cebu
City, with an area of 750.72 sq. meters, more or less, to guarantee a
loan granted them by petitioner bank. The real estate mortgage
underwent amendments on June 7, 1978, March 5, 1979 and finally,
on September 24, 1980, when it was made to secure private
respondents' obligation with the bank in the total amount of TWO
MILLION EIGHT HUNDRED SIXTY NINE THOUSAND PESOS
(P2,869,000) Philippine Currency, payable on or before September
29, 1995.
After managing to pay the sum of P688,060.00, the Kho spouses
defaulted in the payment of some amortizations. Hence, on May 13,
1982, Banco Filipino extrajudicially foreclosed the mortgage. As the
sole and highest bidder in the auction sale, the petitioner bank
31
31
purchased the mortgaged property for the sum of P4,153,865.47
covering the plaintiff's obligations, interests, penalties and attorney's
fees as agreed in the mortgage contract. The certificate of sale was
then duly registered on June 17, 1982. 4
Counting one year from June 17, 1982, the petitioners had until June 17,
1983, within which to redeem the property. In the meantime, the foreclosed
property was leased out to third parties and the rentals (fruits thereof) were
remitted monthly by petitioners to respondent bank, being the purchaser in the
extrajudicial foreclosure. The end of the redemption period was then fast
approaching but still petitioners had not made any move to redeem the
foreclosed property. Then just about ten (10) days before the end of the
redemption period, on June 7, 1983 to be exact, petitioners filed with the
Regional Trial Court of Cebu (raffled off to Branch IX) a complaint for:
"Annulment of Specific Performance with Preliminary Injunction, etc." against
Banco Filipino, The Provincial Sheriff of Cebu and the Register of Deeds of
Cebu Province later docketed as Civil Case No. CEB-759 which action was
actually for the annulment of the extrajudicial foreclosure of mortgage. The
verified complaint of petitioners specifically prayed for:
. . . the Honorable Court before judgment and after heaving to issue a
writ of preliminary injunction restraining and enjoining the defendants
jointly and severally from obtaining a writ of possession or a final deed
of conveyance over plaintiffs' land and restrain the defendants from
registering the same; as well as restraining and enjoining the
defendants from collecting any rentals of the properties of the
plaintiffs. (p. 129, Rollo)
On November 4, 1983, Judge Candido C. Aguinaldo of Branch IX, Regional
Trial Court, Cebu, granted the prayer of petitioners to which respondent bank
strongly objected and in its Urgent Motion to Lift Injunction prayed, to wit: —
. . . to forthwith lift the order of injunction dated 4 November 1983, and
require plaintiffs to turn over to defendant bank all the income and
rents they have received on the subject property during the
redemption period up to and including the date of their actual
remittance of the same.

It is likewise prayed that the scheduled pre-trial conference on
17 May 1983 at 8:30 a.m. be cancelled and held in abeyance
pending final determination of defendant bank's motion to lift
injunction. (pp. 144-145, Rollo)
In the meantime, present counsel of record for respondent bank
entered his appearance. Judge Aguinaldo claimed some relationship
with him. Hence, the reraffle of the case to another sala, Branch XIV
— presided over by Judge Juan Y. Reyes. After more than 5 months'
series of extensions, particularly on October 26, 1984, the petitioners
finally submitted their Memorandum in support of their opposition to
the respondent bank's aforestated Motion to Lift Injunction. On April
30, 1985, respondent bank's motion was denied and a motion for
reconsideration was thereafter immediately filed. While the motion for
reconsideration was pending, Judge Reyes retired and again there
was a reraffle of the case which resulted in its being assigned to
Judge Meinrado P. Paredes, of RTC XIII who denied on April 29,
1987, respondent bank's aforestated motion for reconsideration.
32
The law and jurisprudence are clear that both during and after the
period of redemption, the purchaser at the foreclosure sale is entitled
as of right to a writ of possession, regardless of whether or not there
is a pending suit for annulment of the mortgage or the foreclosure
itself (without prejudice of course to the eventual outcome of said
case). Hence, an injunction to prohibit the issuance of the writ of
possession is entirely out of place (See Act 3135)
WHEREFORE, the instant petition is DENIED for lack of merit. The
assailed decision of respondent Court of Appeals lifting the writ of
preliminary injunction is hereby AFFIRMED. Let this case be
REMANDED to the Regional Trial Court of Cebu City, Branch XIV for
further proceedings on Civil Case CEB-759.
SO ORDERED.

Finally the three (3) above mentioned orders of November 4, 1983

(granting writ of injunction); April 30, 1985 (denying respondent bank's
motion to lift injunction), and April 29, 1987 (denying respondent
bank's motion for reconsideration) were all reversed by respondent
Court in its decision dated February 17, 1988.

Petitioners then filed a motion for reconsideration on February 29,

1988 which was denied thru a Court of Appeals resolution dated
March 17, 1988, hence, this petition dated March 25 1988 with the
following prayer —

WHEREFORE, petitioners most respectfully pray that the

decision of respondent Court of Appeals dated February 17,
1988 be reversed and the Orders of the lower court dated
November 4, 1983 and April 30,1985 be restored and further,
that preliminary restraining order and preliminary injunction be
issued restraining and enjoining the defendants jointly and
severally from obtaining a writ of possession or a final deed of
conveyance over petitioners' land and to restrain the
defendants from registering the same as well as restraining
and enjoining the defendants from collecting any rentals of
the properties of petitioners. (pp. 21-22, Rollo)

This petition is completely without merit.

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