BENGUET MANAGEMENT CORPORATION v.
CA the right to recover the deficiency from the debtor,36 this
FORUM SHOPPING ISSUE
Under the Procedure on Extra-Judicial Foreclosure of
Mortgage (A.M. No. 99-10-05-0),[25] the applicant in an
extra-judicial foreclosure covering properties located in
different provinces is required to pay only one filing fee
regardless of the number of properties to be foreclosed so
long as the application covers only one transaction or
indebtedness. The venue, however, of the extra-judicial
foreclosure proceedings is the place where each of the
mortgaged property is located.
In Spouses Caviles v. Court of Appeals,we recognized the
predicament that confronts a mortgagor seeking to restrain
the extra-judicial foreclosure of mortgages arising from a
single transaction but concerning properties found in
different provinces. Thus:
[W]e find it necessary to dwell on the issue of whether or not
the act of petitioners in filing three civil actions - one with
the RTC of Makati, another with the RTC of Bian, Laguna
(Branch 24) and the third one, with the Bian Assisting Court,
constitutes forum shopping.
The problem of petitioners is an off-shoot of the express
provisions of B.P. Blg. 129, to wit:
Sec. 21. Original jurisdiction in other cases. - Regional Trial
Courts shall exercise original jurisdiction:
(1) In the issuance of writs of certiorari, prohibition,
mandamus, quo warranto, habeas corpus and injunction
which may be enforced in any part of their respective
regions; (Emphasis, supplied)
and Section 3, Rule 2 of the Rules of Court which provides
that a party may not institute more than one suit for a single
cause of action. (Emphasis supplied)
In the said case, the mortgagors filed separate actions for
breach of mortgage contract with injunction to restrain the
extra-judicial foreclosure proceedings commenced by the
mortgagee in Makati and Bian, Laguna where the properties
were situated. The Court did not find the mortgagors guilty
of forum shopping insofar as the cases filed with the Makati
and Bian, Laguna (Branch 24) courts were concerned. The
obvious reason is that since injunction is enforceable only
within the territorial limits of the trial court, the mortgagor is
left without remedy as to the properties located outside the
jurisdiction of the issuing court, unless an application for
injunction is made with another court which has jurisdiction
over the latter properties.
In the case at bar, BMC is not guilty of forum shopping
precisely because the remedy available to them under the
law was the filing of separate injunction suits. It is mandated
to file only one case for a single cause of action, e.g., breach
of mortgage contract, yet, it cannot enforce any injunctive
writ issued by the court to protect its properties situated
outside the jurisdiction of said court. Besides, BMC was
honest enough to inform the Zambales court in the
certification of its complaint that it has a pending request
not to give due course to the foreclosure proceedings with
the San Pablo court, in the same manner that its petition for
certiorari with the Court of Appeals notified the appellate
court of the pendency of its complaint with the Zambales
court.[28] It would therefore be unfair to dismiss the cases
filed by BMC on the ground of forum shopping where under
the circumstances the law gives it no other remedy..
DBP VS. SPS. LICUANAN
Overview: Deficiency rule- While it is true that in
extrajudicial foreclosure of mortgage, the mortgagee has
presupposes that the foreclosure must first be valid. 37
Facts:
- Respondent spouses Alejandro and Adelaida
Licuanan were granted a piggery loan and
subsequent loans by petitioner DBP, evidenced by a
promissory notes and secured by a real estate
mortgage4 over a 980-square meter parcel of land
with a two-storey building and several parcels of
land.
- On July 6, 1981, petitioner sent a letter by registered
mail to respondents informing them that, since the
conditions of the mortgage had been breached,
petitioner would have the mortgaged properties sold
by the sheriff under Act 3135. The total amount due
from the three loans had by then ballooned
to P75,298.32.9
- petitioner filed an application for extrajudicial
foreclosure.10 The mortgaged properties were sold in
a public auction and Petitioner, as the highest
bidder, acquired them for a total of P16,340.
Petitioner consolidated its ownership over the
properties. After more than a year or on October 16,
1984, petitioner wrote respondents by registered
mail, informing them that the properties (now
acquired assets of the bank) would be disposed of by
public auction. On November 11, 1984, petitioner
published an advertisement stating that on
November 14, 1984, the properties would be sold by
oral bidding.
- On November 16, 1984, petitioner sent respondents
a letter informing them that the properties could be
reacquired by negotiated sale for cash or
installment.13 Three days later, however, the
properties were sold through negotiated sale to one
Emelita A. Peralta.
- Respondents were informed of the sale by petitioner
through a letter dated December 6, 1984. On
December 11, 1984, respondents offered to
repurchase the properties from petitioner but they
had already been sold to Peralta. Hence they filed a
complaint for recovery of real properties and
damages in the Regional Trial Court against
petitioner and Peralta. 16
RTC:
- The RTC rendered judgment in favor of respondents.
The court found that there was no demand for
payment prior to the extrajudicial foreclosure. Thus,
the foreclosure proceedings were null and void. It
ordered Peralta to reconvey the properties to
respondents subject to Peraltas right to be paid by
respondents the amount of P104,000 in
consideration of such reconveyance.
- CA affirmed the RTC. Hence this petition.
1) whether demand is necessary to make respondents guilty
of default despite the fact that the maturity dates had
already been stipulated on the contracts.
Ruling:
Demand made before the foreclosure is effected is essential.
If demand was made and duly received by the respondents
and the latter still did not pay, then they were already in
default and foreclosure was proper. However, if demand was
not made, then the loans had not yet become due and
demandable. This meant that respondents had not defaulted
in their payments and the foreclosure by petitioner was
premature. Foreclosure is valid only when the debtor is in
default in the payment of his obligation.19
Whether or not demand was made is a question of fact. In
petitions for review on certiorari under Rule 45, only
questions of law may be raised by the parties and passed
upon by this Court.20 Factual findings of the trial court, when
adopted and confirmed by the CA, are binding and
conclusive on this Court and will generally not be reviewed
on appeal. Both the CA and RTC found that demand was
never made.
Petitioners contention: asserts that demand was
unnecessary because the maturity dates of all loans were
specified.
SC: disagreed and ruled that unless demand is proven, one
cannot be held in default.26 Petitioners cause of action did
not accrue on the maturity dates stated in the promissory
notes. It is only when demand to pay is made and
subsequently refused that respondents can be considered in
default and petitioner obtains the right to file an action to
collect the debt or foreclose the mortgage.27
A cause of action has three elements, to wit, (1) a right in
favor of the plaintiff by whatever means and under whatever
law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and
(3) an act or omission on the part of such defendant violative
of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff. A cause of action
on a written contract accrues only when an actual breach or
violation thereof occurs.
Applying the foregoing principle to the instant case, we rule
that private respondents cause of action accrued
only on July 20, 1995, when its demand for payment
of the Home Notes was refused by petitioner. It was
only at that time, and not before that, when the written
contract was breached and private respondent could
properly file an action in court.
The cause of action cannot be said to accrue on the
uniform maturity date of the Home Notes as
petitioner posits because at that point, the third
essential element of a cause of action, namely, an act
or omission on the part of petitioner violative of the
right of private respondent or constituting a breach
of the obligation of petitioner to private respondent,
had not yet occurred.29 (emphasis supplied)
The acceleration clause of the promissory notes stated that
"[i]n case of non-payment of this note or any portion of it on
demand, when due, on account of this note, the entire
obligation shall become due and demandable ."30Hence,
the maturity dates only indicate when payment can be
demanded. It is the refusal to pay after demand that gives
the creditor a cause of action against the debtor. Since
demand was never made on the spouses, the foreclosure
was premature and therefore null and void.
Petitioners contention: avers that respondents are
estopped from questioning the validity of the foreclosure
sale since they offered to repurchase the foreclosed
properties.31
SC: Not persuaded. The reason why respondents offered to
repurchase the properties was clearly stated in their letter to
petitioner:
I am very much interested in repurchasing
back these properties because they are the
only properties which my family have and
because our house is located inside this
property and for this matter I am willing to
pay [for] these properties in cash which I
already told the bank when I went there.32
SC already ruled that an offer to repurchase should not be
construed as a waiver of the right to question the
sale.33 Instead, it must be taken as an intention to avoid
further litigation and thus is in the nature of an offer to
compromise.34 By offering to redeem the properties,
respondents can attain their ultimate objective: to pay off
their debt and regain ownership of their lands.35
2) whether or not respondents are liable for the deficiency
claim of petitioner.
Petitioners contention: assigns as error the failure of the
CA to rule on its deficiency claim. It alleged that the price
the mortgaged property was sold for (P104,000) was less
than the amount of respondents indebtedness
(P131,642.33), thus it is entitled to claim the difference
(P27,642.33) with interest.
SC: Respondents cannot be held liable for the deficiency
claim. While it is true that in extrajudicial foreclosure of
mortgage, the mortgagee has the right to recover the
deficiency from the debtor,36 this presupposes that the
foreclosure must first be valid.37
PNB vs Rocamora
Facts:
On September 25, 1981, the spouses Rocamora obtained a
loan from PNB in the aggregate amount of P100,000.00. In
addition to the principal amount, the spouses Rocamora
agreed to pay interest at the rate of 12% per annum, plus a
penalty fee of 5% per annum in case of delayed
payments. To secure their loan obligations, the spouses
Rocamora executed two mortgages: a real estate
mortgage over a property in the amount of P10,000, and a
chattel mortgage over various machineries in the amount
of P25,000. Payment of the remaining P65,000 was under
the CIGLF guarantee, with the spouses Rocamora paying the
required guarantee fee.
Both the promissory note and the real estate mortgage deed
contained an escalation clause that allowed PNB to increase
the 12% interest rate at anytime without notice, within the
limits allowed by law.
The spouses Rocamora only paid a total of P32,383.65 on
the loan. Hence, the PNB commenced foreclosure
proceedings and it yielded P75,500.00 as total proceeds.
The complaint:
After the foreclosure, PNB found that the recovered proceeds
and the amounts the spouses Rocamora previously paid
were not sufficient to satisfy the loan obligations. PNB thus
filed a complaint for deficiency judgment before the Regional
Trial Court (RTC) of Puerto Princesa City, claiming that the
outstanding principal balance as of foreclosure date
(September 19, 1990) was P79,484.65, plus interest and
penalties, for a total due and demandable obligation
of P250,812.10. Allegedly, after deducting the P75,500
proceeds of the foreclosure sale, the spouses Rocamora still
owed the bank P206,297.47.
The Defense:
The spouses Rocamora refused to pay the amount claimed
as deficiency. They alleged that the PNB practically created
the deficiency by (a) increasing the interest rates from 12%
to 42% per annum, and (b) failing to immediately foreclose
the mortgage pursuant to Presidential Decree No. 385 (the
Mandatory Foreclosure Law) to prevent the interest and
penalty charges from accruing.
RTC Ruling:
The RTC dismissed PNBs complaint. The trial court the foreclosure, the PNB has already received a total
invalidated the escalation clause in the promissory note and of P107,883.68 as payment for the spouses
the resulting increased interest rates. The court also rejected Rocamoras P100,000.00 loan; the claimed P206,297.47
PNBs reason for the delay in commencing foreclosure deficiency consisted mainly of interests and penalty charges
proceedings, ruling that the delay was contrary to the (or about 61.5% of the amount claimed).
immediate and mandatory foreclosure that PD 385 required.
Escalation clauses do not authorize the unilateral
CA Ruling: increase of interest rates

Except for modifications in the awarded damages, the CA Escalation clauses are valid and do not contravene public
affirmed the RTC ruling. The CA held that the PNB effectively policy. To avoid any resulting one-sided situation that
negated the principle of mutuality of contracts when it escalation clauses may bring, we required in Banco Filipino
increased the interest rates without the spouses Rocamoras the inclusion in the parties agreement of a de-escalation
conformity. The CA also found the long delay in the clause that would authorize a reduction in the interest rates
foreclosure of the mortgage, apparently a management corresponding to downward changes made by law or by the
lapse, prejudicial to the spouses Rocamoras interests and Monetary Board.
contrary as well to law and justice. More importantly, the CA
found insufficient evidence to support the P206,297.47 The validity of escalation clauses notwithstanding, we
deficiency claim; the banks testimonial and documentary cautioned that these clauses do not give creditors the
evidence did not support the deficiency claim that, unbridled right to adjust interest rates unilaterally. As we
moreover, was computed based on bloated interest rates. said in the same Banco Filipino case, any increase in the rate
of interest made pursuant to an escalation clause must be
The Petition before SC: the result of an agreement between the parties. Thus, any
change must be mutually agreed upon, otherwise, the
PNB argued that it fully complied with the requirements for a change carries no binding effect.
valid escalation clause under this Courts
pronouncement in Banco Filipino Savings and Mortgage Evidently, PNBs failure to secure the spouses Rocamoras
Bank v. Navarro: consent to the increased interest rates prompted the lower
courts to declare excessive and illegal the interest rates
Escalation clauses, to be valid, should specifically provide: imposed.
(1) that there can be an increase in interest if increased by
law or by the Monetary Board; and (2) in order for such PD 385 mandates immediate foreclosure of collaterals
stipulation to be valid, it must include a provision for and securities when the arrearages amount to at
reduction of the stipulated interest "in the event that the least 20% of the total outstanding obligation
applicable maximum rate of interest is reduced by law or by
the Monetary Board. Another reason that militates against the deficiency claim is
PNBs own admitted delay in instituting the foreclosure
The PNB posits that the presence of a de-escalation clause proceedings.
(referring to the second of the above requirements) in the
real estate mortgage deed rules out any violation of the Under PD 385, government financial institutions which was
principle of mutuality of contracts. The PNB also contends PNBs status prior to its full privatization in 1996
that it did not unreasonably delay the institution of are mandated to immediately foreclose the securities given
foreclosure proceedings by acting three years after the for any loan when the arrearages amount to at least 20% of
spouses Rocamora defaulted on their obligation. Under the total outstanding obligation.
Article 1142 of the Civil Code, a mortgage action prescribes
PNB argued that its right to foreclose should not be affected
in 10 years. Additionally, the PNB claims that the decision to
by the mandatory tenor of PD 385, since it exercised its right
foreclose is entirely the banks prerogative..
still within the 10-year prescription period allowed under
Issue: Articles 1142 and 1144 (1) of the Civil Code.

Whether or not PNB validly complied with the requirements PNBs argument completely misses the point. The issue
for a valid escalation clause, thereby giving it the right to before us is the effect of the delay in commencing
demand for deficiency. foreclosure proceedings on PNBs right to recover the
deficiency, not on its right to foreclose. The delay in
THE COURTS RULING: commencing foreclosure proceedings bears a significant
function in the deficiency amount being claimed, as the
We find no basis to reverse the CAs decision and, amount undoubtedly includes interest and penalty charges
consequently, deny the petition. which accrued during the period covered by the delay. The
depreciation of the mortgaged properties during the period
Proof of Deficiency Claim Necessary
of delay must also be factored in, as this affects the
As in any claim for payment of money, a mortgagee must be proceeds that the mortgagee can recover in the foreclosure
able to prove the basis for the deficiency judgment it sale, which in turn affects its deficiency claim. There was
seeks. The right of the mortgagee to pursue the debtor also, in this case, the four-year gap between the foreclosure
arises only when the proceeds of the foreclosure sale are proceedings and the filing of the complaint for deficiency
ascertained to be insufficient to cover the obligation and the judgment. For the Court to grant the PNBs deficiency claim
other costs at the time of the sale. Thus, the amount of the would be to award it for its delay and its undisputed
obligation prior to foreclosure and the proceeds of the disregard of PD 385.
foreclosure are material in a claim for deficiency.

In this case, both the RTC and the CA found that PNB failed
BANCO FILIPINO v. CA
to prove the claimed deficiency; its own testimonial and
documentary evidence in fact contradicted one another. The The basic issue is whether private respondents complaint for
PNB alleged that the spouses Rocamoras obligation at the redemption and specific performance states a cause of
time of foreclosure (September 19, 1990) amounted action against petitioner.
to P250,812.10, yet its own documentary evidence showed
that, as of that date, the total obligation was
only P206,664.34.
Based on the allegations in the complaint, we find that
We find it significant that PNB has been consistently unable private respondent has no cause of action for redemption
to provide a detailed and credible accounting of the claimed against petitioner.
deficiency. What appears clear is that after adding up the
spouses Rocamoras partial payments and the proceeds of Paragraph 4 of the complaint states:
4. That due to the failure of plaintiff to pay the
aforementioned loan, defendant foreclosed the mortgage
and in consequence thereof Sheriff David R. Medina of this
Honorable Court issued a SHERIFFS CERTIFICATE OF SALE in
favor of defendant which is dated October 9, 1990 and which
instrument was inscribed at the back of TCT T-128647 of
Isabela on January 21, 1991;
The sheriffs certificate of sale was registered on January 21, The general rule in redemption is that it is not sufficient that
1991. Section 6 of Act 3135 provides for the requisites for a a person offering to redeem manifests his desire to do so.
valid redemption, thus:
SEC. 6. In all cases in which an extrajudicial sale is made the exercise of the right to repurchase.
under the special power hereinbefore referred to, the debtor,
his successors in interest or any judicial creditor or judgment Whether or not respondents were diligent in asserting their
creditor of said debtor, or any person having a lien on the willingness to pay is irrelevant. Redemption within the period
property subsequent to the mortgage or deed of trust under allowed by law is not a matter of intent but a question of
which the property is sold, may redeem the same at any payment or valid tender of the full redemption price within
time within the term of one year from and after the date of said period.
sale; and such redemption shall be governed by the
provisions of sections four hundred and sixty-four to four
hundred and sixty-six, inclusive, of the Code of Civil
Procedure,[11] insofar as these are not inconsistent with the
provisions of this Act.
However, considering that petitioner is a banking institution,
the determination of the redemption price is governed by
Section 78 of the General Banking Act which provides:
In the event of foreclosure, whether judicially or
extrajudicially, of any mortgage on real estate which is
security for any loan granted before the passage of this Act
or under the provisions of this Act, the mortgagor or debtor
whose real property has been sold at public auction,
judicially or extrajudicially, for the full or partial payment of
an obligation to any bank, banking or credit institution,
within the purview of this Act shall have the right, within one
year after the sale of the real estate as a result of the
foreclosure of the respective mortgage, to redeem the
property by paying the amount fixed by the court in the
order of execution, or the amount due under the mortgage
deed, as the case may be, with interest thereon at the rate
specified in the mortgage, and all the costs, and judicial and
other expenses incurred by the bank or institution concerned
by reason of the execution and sale and as a result of the
custody of said property less the income received from the
property.
Clearly, the right of redemption should be exercised within
the specified time limit, which is one year from the date of
registration of the certificate of sale. The redemptioner
should make an actual tender in good faith of the full
amount of the purchase price as provided above, i.e., the
amount fixed by the court in the order of execution or the
amount due under the mortgage deed, as the case may be,
with interest thereon at the rate specified in the mortgage,
and all the costs, and judicial and other expenses incurred
by the bank or institution concerned by reason of the
execution and sale and as a result of the custody of said
property less the income received from the property.
In case of disagreement over the redemption price, the
redemptioner may preserve his right of redemption through
judicial action which in every case must be filed within the
one-year period of redemption. The filing of the court action
to enforce redemption, being equivalent to a formal offer to
redeem, would have the effect of preserving his redemptive
rights and freezing the expiration of the one-year period. In
this case, the period of redemption expired on January 21,
1992. The complaint was filed on December 20, 1992.
Moreover, while the complaint alleges that private
respondent made an offer to redeem the subject property on
August 6, 1991, which was within the period of redemption,
it is not alleged in the complaint that there was an actual
tender of payment of the redemption price as required by
the rules. It was alleged that private respondent merely
made an offer of P700,000.00 as redemption price, which
however, as stated under paragraph 13 of the same
complaint, the redemption money was the total bank claim
of P925,448.17 plus lawful interest and other allowable
expenses incident to the foreclosure proceedings. Thus, the
offer was even very much lower than the price paid by
petitioner as the highest bidder in the auction sale.
In BPI Family Savings Bank, Inc. vs. Veloso,[13] we held:
The statement of intention must be accompanied by an
actual and simultaneous tender of payment. This constitutes
Although the letter dated January 23, 1992 gave private
respondent up to the end of March 1992, to negotiate and
make special arrangement for a satisfactory plan of payment
for the redemption, there was no categorical allegation in
the complaint that the original period of redemption had
been extended. Assuming arguendo that the period for
redemption had been extended, i.e., up to end of March
1992, still private respondent failed to exercise its right
within said period. This is shown by private respondents
allegation under paragraph 8 of its complaint that in a letter
dated January 20, 1993, private respondents President
amended his first offer and made an offer of P1 million as
redemption price. Notably, such offer was made beyond the
end of the March 1992 alleged extended period. Thus,
private respondent has no more right to seek redemption by
force of law which petitioner was bound to accept.
We find that the CA also erred in stating that assuming
appellant is now barred from exercising its right of
redemption, it can still repurchase the property in question
based on a new contract entered into between the parties
extending the period within which to purchase the property.
The allegations in the complaint do not show that a new
contract was entered into between the parties. The March
12, 1992 letter referred to by the CA as well as in the
complaint only directed private respondent to remit at least
P50,000.00 to petitioner as a manifestation of the formers
interest and willingness to redeem the property. Thus, the
P50,000.00 remitted by private respondent was only the first
step to show its interest in redeeming the property. In no
way did it establish that a contract of sale, as found by the
CA, had been perfected and that the P50,000.00 remitted by
private respondent is considered as earnest money.
Article 1475 of the Civil Code provides: The contract of sale
is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the
price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts.
There was no showing in the complaint that private
respondent and petitioner had already agreed on the
purchase price of the foreclosed property. In fact, the
allegations in paragraphs 8 to 10 of the complaint show
otherwise, thus:
8. That in a letter of the President of plaintiff dated January
20, 1993, plaintiff amended its first offer and made an offer
of P1,000,000.00 as redemption which offer included a plan
of payment;
9. That between January 20, 1993 to November 1993,
plaintiff exerted earnest efforts in order to finally effect the
redemption, but defendant dilly dallied on the matter.
10. That in a letter of Atty. ORLANDO O. SAMSON, Senior
Vice President of defendant, dated November 5, 1993, there
is a turn-around by defendant and is now demanding
P5,830,000.00 as purchase price of the property, instead of payment by installments as there would have necessarily
the original agreed redemption; been an indefinite extension of the redemption period. If a
partial payment can bind the winning bidder or purchaser in
The complaint does not allege that there was already a an auction sale, by what rule can the payment of the
meeting of the minds of the parties. balance be determined? Petitioner could not be expected to
entertain an offer of redemption without any assurance that
respondents could pay the repurchase price immediately. A
BPI vs. SPOUSES VELOSO contrary rule would leave the buyers at foreclosure sales
open to harassment by expectedly angry debtors and cause
The sole question therefore that remains to be resolved is: unnecessary prolongation of the redemption period, contrary
did respondent spouses comply with all the requirements for to the policy of the law.
the redemption of the subject properties?
Whether or not respondents were diligent in asserting their
We answer in the negative. willingness to pay is irrelevant. Redemption within the period
allowed by law is not a matter of intent but a question of
The general rule in redemption is that it is not sufficient that
payment or valid tender of the full redemption price within
a person offering to redeem manifests his desire to do so.
said period.
The statement of intention must be accompanied by an
actual and simultaneous tender of payment. This constitutes The disposition of the instant case in the trial court
the exercise of the right to repurchase. unnecessarily dragged for almost a decade. Now, it is on its
18th year and still respondents have not tendered the full
In several cases decided by the Court where the right to
redemption price. Nor have they consigned the full amount,
repurchase was held to have been properly exercised, there
if only to prove their willingness and ability to pay. This
was an unequivocal tender of payment for the full amount of
would have evidenced their good faith.
the repurchase price. Otherwise, the offer to redeem is
ineffectual. Bona fide redemption necessarily implies a
reasonable and valid tender of the entire repurchase price,
otherwise the rule on the redemption period fixed by law can The law granted respondents the right of redemption. But in
easily be circumvented. As explained by this Court in Basbas so granting that right, the law intended that their offer to
vs. Entena: redeem be valid and effective, accompanied by an actual
tender of the redemption price. Fixing a definite term within
x x x the existence of the right of redemption operates to which the property should be redeemed is meant to avoid
depress the market value of the land until the period expires, prolonged economic uncertainty over the ownership of the
and to render that period indefinite by permitting the tenant thing sold. In the case at bar, the offer was not a legal and
to file a suit for redemption, with either party unable to effective exercise of the right of redemption contemplated
foresee when final judgment will terminate the action, would by law, hence, refusal of the offer by petitioner was
render nugatory the period of two years fixed by the statute completely justified.
for making the redemption and virtually paralyze any efforts
of the landowner to realize the value of his land. No buyer
can be expected to acquire it without any certainty as to the
Finally, respondents cannot argue that the law on equity
amount for which it may be redeemed, so that he can
should prevail. Equity applies only in the absence of, and
recover at least his investment in case of redemption. In the
never against, statutory law or judicial rules of procedure.
meantime, the landowners needs and obligations cannot be
met. It is doubtful if any such result was intended by the
statute, absent clear wording to that effect. DIEGO v. FERNANDO, 109 PHIL 143 (1960)
Foreclosure of Antichresis, Art. 2137
Consequently, in this case, the offer by respondents on July
24, 1986 to redeem the foreclosed properties for P1,872,935
and the subsequent consignation in court of P1,500,000 on Issue: Whether the contract between the parties is one of
August 27, 1986, while made within the period of mortgage or of antichresis. MORTGAGE.
redemption, was ineffective since the amount offered and Appellant, while admitting that the contract Exhibit "A" shows
a deed of mortgage, contends that the admitted fact that
actually consigned not only did not include the interest but
the loan was without interest, coupled with the transfer of
was in fact also way below the P2,782,554.66 paid by the
the possession of the properties mortgaged to the
highest bidder/purchaser of the properties during the auction mortgagee, reveals that the true transaction between him
sale. and appellee was one of antichresis.
In Bodiongan vs. Court of Appeals,[11] we held:
Held: It is not an essential requisite of a mortgage that
In order to effect a redemption, the judgment debtor must possession of the mortgaged premises be retained by the
pay the purchaser the redemption price composed of the mortagagor. To be antichresis, it must be expressly agreed
following: (1) the price which the purchaser paid for the between creditor and debtor that the former, having been
property; (2) interest of 1% per month on the purchase given possession of the properties given as security, is to
price; (3) the amount of any assessments or taxes which the apply their fruits to the payment of the interest, if owing,
purchaser may have paid on the property after the purchase; and thereafter to the principal of his credit (Art. 2132, Civil
and (4) interest of 1% per month on such assessments and Code); so that if a contract of loan with security does not
stipulate the payment of interest but provides for the
taxes x x x.
delivery to the creditor by the debtor of the property given
Furthermore, Article 1616 of the Civil Code of the Philippines as security, in order that the latter may gather its fruits,
provides: The vendor cannot avail himself of the right to without stating that said fruits are to be applied to the
payment of interest, if any, and afterwards that of the
repurchase without returning to the vendee the price of the
principal, the contract is a mortgage and not antichresis.
sale x x x.

It is not difficult to understand why the redemption price As such mortgagee in possession, his rights and
should either be fully offered in legal tender or else validlyobligations are similar to those of an antichretic creditor:
consigned in court. Only by such means can the auction If the mortgagee acquires possession in any lawful
winner be assured that the offer to redeem is being made in manner, he is entitled to retain such possession until the
good faith. indebtedness is satisfied and the property redeemed;
that the non-payment of the debt within the term agreed
The sum of P1,400,000 consigned by respondents in Branch does not vest the ownership of the property in the creditor;
94 was subsequently withdrawn by them, leaving only that the general duty of the mortgagee in possession
P100,000 to take the place of the injunction bond. This would towards the premises is that of the ordinary prudent owner;
have been tantamount to requiring petitioner to accept
4. that the mortgagee must account for the rents and profits
of the land, or its value for purposes of use and occupation,
any amount thus realized going towards the discharge on
the mortgage debt;
5. that if the mortgage remains in possession after the
mortgage debt has been satisfied, he becomes a trustee for
the mortgagor as to the excess of the rents and profits over
such debt; and lastly,
6. that the mortgagor can only enforce his rights to the land
by an equitable action for an account and to redeem.
A creditor with a lien on real property who took possession
thereof with the consent of the debtor, held it as
an "antichretic creditor with the right to collect the credit
with interest from the fruits, returning to the antichretic
creditor the balance, if any, after deducting the expenses,"
because the fact that the debtor consented and asked the
creditor to take charge of managing his property "does not
entitle the latter to appropriate to itself the fruits thereof
unless the former has expressly waived his right thereto."
In the present case, the parties having agreed that the loan
was to be without interest, and the appellant not having
expressly waived his right to the fruits of the properties
mortgaged during the time they were in appellee's
possession, the latter, like an antichretic creditor, must
account for the value of the fruits received by him, and
deduct it from the loan obtained by appellant. The appellee
should be made to account for the fruits he received from
the properties mortgaged from the time of the filing of this
action until full payment by appellant, which fruits should be
deducted from the total amount due him from appellant
under this judgment. (deficiency should be recovered)