CHU, et al.

v Lacqui & Phil Bank of Communications

Facts
Spouses Claro and Juanita Castro and Cua Lai Chu obtained a loan in from Philippine Bank of
Communication. To secure the loan they executed in favor of PBC a Deed of Real Estate Mortgage over
the property of the spouses.The failure of the spouses and Chu to pay the full amount of the
outstanding loan in which PBC applied for the extrajudicial foreclosure of the real estate mortgage. The
Spouses Castro and Chu filed a petition to annul the extrajudicial foreclosure sale with a prayer for
temporary restraining order before the Regional Trial Court. The trial court granted the spouses and Chu
the TRO but subsequently lifted the TRO and reset the extrajudicial foreclosure sale. At the foreclosure
sale, PBC emerged as the highest bidder. A certificate of sale was executed in favor of PBC. PBC applied
for the issuance of a writ of possession of the foreclosed property. Spouses Castro and Chu filed an
opposition.The trial court granted PBC motion for a declaration of general default and allowed to
present evidence ex parte.Undeterred, Spouses Castro and Chu filed in the Court of Appeals a petition
for certiorari. The appellate court dismissed the petition.

Issue: whether the writ of possession was properly issued despite the pendency of a case questioning
the validity of the extrajudicial foreclosure sale.

Held:
No, the spouses and Chu cannot oppose or appeal the courts order granting the writ of possession in an
ex parte proceeding. The remedy of petitioners is to have the sale set aside and the writ of possession
cancelled in accordance with Section 8 of Act No. 3135 which states “The debtor may, in the
proceedings in which possession was requested, but not later than thirty days after the purchaser was
given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the
damages suffered by him, because the mortgage was not violated or the sale was not made in
accordance with the provisions hereof”.

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

MANUEL D. YNGSON, JR. vs. PHILIPPINE NATIONAL BANK

Facts
ARCAM & Company, Inc. applied for and was granted a loan by Philippine National Bank. To secure the
loan, ARCAM executed a Real Estate Mortgage over a parcel of land and a Chattel Mortgage over various
personal properties.ARCAM, however, defaulted on its obligations to PNB. PNB initiated extrajudicial
foreclosure proceedings. ARCAM filed before the SEC a Petition for Suspension of Payments and
Approval of Rehabilitation Plan, with application for issuance of a temporary restraining order and writ
of preliminary injunction. The SEC issued a TRO and subsequently a writ of preliminary injunction,
enjoining PNB and the Sheriff from proceeding with the foreclosure sale of the mortgaged
properties.The SEC ruled that ARCAM can no longer be rehabilitated. With this development, PNB
revived the foreclosure case and requested the RTC Clerk of Court to re-schedule the sale at public
auction of the mortgaged properties. ARCAM filed with the SEC a motion to nullify the auction sale
where they argued that the prohibition against foreclosure subsisted during liquidation because
payment of all of ARCAM's obligations was proscribed except those authorized by the Commission.The
SEC issued a Resolution denying ARCAM motion to nullify the auction sale. It held that PNB was not
legally barred from foreclosing on the mortgages.Aggrieved, ARCAM filed a petition for review in the CA
questioning the January 4, 2005 Resolution of the SEC. The CA dismissed the petition on the ground that
ARCAM failed to attach material portions of the record and other documents relevant to the petition
hence this petition.

Issue: whether PNB, as a secured creditor, can foreclose on the mortgaged properties of a corporation
under liquidation without the knowledge and prior approval of the liquidator or the SEC.

Held:
Yes,Secured creditor enjoys preference over a specific mortgaged property and has a right to foreclose
the mortgage under Section 2248 of the Civil Code. The creditor-mortgagee has the right to foreclose
the mortgage over a specific real property whether or not the debtor-mortgagor is under insolvency or
liquidation proceedings. The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or upon the issuance of a stay order
by the trial court. However, the creditor-mortgagee may exercise his right to foreclose the mortgage
upon the termination of the rehabilitation proceedings or upon the lifting of the stay order.