EN BANC Six months later, mortgagor Palma, by a deed of assignment dated October 15,
[G.R. No. L-14303. March 24, 1960.] 1951, transferred and conveyed all his rights, title and interest in and to the
REHABILITATION FINANCE CORPORATION, plaintiff and appellant, v.
ALTO SURETY & INSURANCE COMPANY, INC., oppositor and appellee.
SYLLABUS
1. LAND TITLES AND DEEDS; RELIEF UNDER SECTION 112 OF LAND
REGISTRATION ACT, WHEN ALLOWED. — The relief afforded by Section 112 of
the Land Registration Act may only be allowed if there is a unanimity among the
parties, or there is no adverse claim or serious objection the part of any party in
interest; otherwise, the case becomes controversial and should be threshed out
in an ordinary case. (Tanguman v. Republic, 94 Phil., 171; Angeles v. Razon,
106 Phil., 384; See also Fidelity & Surety Co. v. Court of Appeals, 85 Phil., 485,
47 Off. Gaz., 4084.)
2. MORTGAGES; HOW INTEREST IN MORTGAGED PROPERTY SUBSEQUENTLY
ACQUIRED MAY BE DIVESTED OR BARRED. — 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
v. Pappas, 146 So. 100, 107 Fla. 861; Mediterranean Corp. v. Pappas, 146 So.
106, 107 Fla. 876).
DECISION
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 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 mortgage RFC as the
highest bidder for the sum of P11,211.68.
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,
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 there one 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 in the original registration case,
under Section 112 of Act 496, on the alleged ground that the lien in favor of the senior mortgagee will be entitled to an action de novo to reforeclose the
Alto had already ceased. In opposing this petition, Alto claimed that with the mortgage as to the omitted persons (Van Meter v. Field, 159 P. 2d 546, 195
execution of the deed of resale between RFC and the Spouses Anacleto and Okl. 55; Rives v. Stanford, 106 P. 2d 1101).
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 In view of the foregoing, the decision appealed from denying the first
justifying the retention of the encumbrance in favor of the junior mortgagee in mortgagee’s petition to cancel the annotation of the second mortgage at the
the certificate of title covering the property. back of Transfer Certificate of Title No. 1155, is hereby affirmed, without
prejudice to the proper adjudication, in an appropriate ordinary action, of the
The court a quo acted correctly in denying, under the circumstances, the respective rights of the parties herein as a result of the execution of the Deed of
petition to cancel the annotation of the second mortgage at the back of the title Resale, Exhibit J. The petitioner-appellant shall pay the costs. It is so ordered.
covering the property originally owned by Eustaquio Palma. It has been
consistently held by this Court, that the relief afforded by Section 112 of the
Land Registration Act may only be allowed if "there is a unanimity among the
parties, or there is no adverse claim or serious objection on the part of any
party in interest; otherwise, the case becomes controversial and should be
threshed out in an ordinary case. 1 In another case, this Court 2 has held that
"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 v. Pappas, 146 So. 100, 107 Fla. 861;
Mediterranean Corp. v. Pappas, 146 So. 106, 107 Fla. 876). (Italics 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 v. Slemons, 150 So. 792, 112 Fla. 675; Woodward v.
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
 EN BANC
[G.R. No. 29027. October 25, 1928.]
SUN LIFE ASSURANCE COMPANY OF CANADA, Plaintiff-Appellee, v.
FLORENCIO GONZALEZ DIEZ, Defendant-Appellant.
SYLLABUS
1. MORTGAGES; FORECLOSURE; PARTIES TO FORECLOSURE OF FIRST
MORTGAGE — While a second mortgagee is a proper and in a sense even a
necessary party to a proceeding to foreclose a first mortgage on real property, he
is not an indispensable party, because a valid decree may be made, as between
the mortgagor and first mortgagee, without regard to the second mortgage; but
the consequence of a failure to make the second mortgagee a party to such
proceeding is that the lien of the second mortgagee on the equity of redemption
is not affected by the decree of foreclosure.
2. ID; ID.; ID.; FORECLOSURE OF SECOND MORTGAGE WHERE SECOND
MORTGAGEE NOT MADE PARTY TO FIRST PROCEEDING. — Where the second
mortgagee is not made a party to a proceeding to foreclose the first mortgage,
an independent foreclosure proceeding may be maintained against him by the
creditor in the first mortgage, in which proceeding the court should require the
second mortgagee to redeem from the first mortgage within three months, under
penalty of being debarred from the exercise of his right to redeem.
DECISION
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 court gave judgment in favor of the plaintiff,
requiring the second mortgagee 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 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 party, 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 mortgagee acquires only a mortgage lien upon what is called the
equity of redemption vested in the mortgagor, and his rights are strictly
subordinate to the superior lien of 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 255 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.

But the second mortgagee was not an indispensable party to the proceeding to
foreclose 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 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. v. 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 no 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 v. Gooding, 99 Ind.,
45; Shirk v. Andrews, 92 Ind., 509; Morey v. 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 the 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.
 EN BANC
[G.R. No. L-3619. October 29, 1951.]
BERNARDO TIGLAO, Plaintiff-Appellee, v. ENGRACIO
BOTONES, Defendant-Appellant.
SYLLABUS
1. MORTGAGE; CONFIRMATION OF SHERIFF’S SALE; NOTICE AND HEARING OF
MOTION FOR CONFIRMATION, ESSENTIAL. — Notice and hearing of a notice for
confirmation of a sheriff’s sale is essential to the validity of the order of
confirmation.
2. ID.; ID.; ID.; FINAL ORDER OF CONFIRMATION, IF VOID, MAY BE SET ASIDE
AT ANY TIME. — An order of confirmation, void for lack of notice and hearing,
may be set aside at any time.
3. OBLIGATIONS AND CONTRACTS; MORATORIUM; PROCEEDINGS FOR
CONFIRMATION OF SHERIFF’S SALE AND WRIT OF POSSESSION BY VIRTUE OF
FINAL FORECLOSURE JUDGMENT, NOT COVERED BY MORATORIUM. —
Moratorium cannot be invoked against a motion for confirmation of sheriff’s sale
and corresponding motion for writ of possession filed pursuant to a final
foreclosure judgment.
DECISION
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
cantidad 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, 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 v. Sunico, 25 Phil., 365, 368-369, as follows: "As the title to
mortgaged real property does not vest in 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 after 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 of 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 from the 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 already 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 divests the
title if the sale is confirmed."
In the case of Grimalt v. Velasquez, 36 Phil., 936, 938, this Court, relying upon
its decision in Raymundo v. 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 v. Belando, 54 Phil. 930, and Anderson v. Reyes, 54
Phil. 944, it was held, following the decision in Grimalt v. 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 a 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 superfluous.
The case of Commonwealth of the Philippines v. Ching Yap, 70 Phil., 116, citing
So Chu v. Nepomuceno, 29 Phil., 208, Jaranillo v. Jacinto, 43 Phil. 588, Price v.
Sontua, 60 Phil. 410, and National Investment Board v. 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 Courts 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 v. Nepomuceno, Jaranillo v. Jacinto, Price v. Sontua, and National
Investment Board v. Peña, did not involve situations in which confirmation of
sheriff’s sales was upheld although there was no notice or hearing.
In the more recent case of Somera v. Navarro, 42 Off. Gaz., 2106, it was
contended that no 3-day notice of the motion for confirmation was given,
because the hearing of the motion was set for July 26, 1941, the notice was
mailed to the appellants on July 23 and received by them on July 24. It appears,
however, that at the hearing 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 particular viene
a ser meramente academica, porque, aun suponiendo que la primera
notificacion haya sido irregular, de ella no se siguio ningún 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 recognize the essential need for notice of a 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. v. Pecson 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 v. 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 expired.
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 v.
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."
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.
 SECOND DIVISION
[G.R. No. 72806. January 9, 1989.]
EPIFANIO CRUZ and EVELINA CRUZ, Petitioners, v. INTERMEDIATE
APPELLANT COURT, CALIXTRO O. ADRIATICO, RUFINO J. SANTIAGO
and GODOFREDO VALMEO, Respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; FORECLOSURE OF MORTGAGE;
PERIOD FOR EXERCISE OF EQUITY, OBSERVED IN THE ABSENCE OF
AGREEMENT OF THE PARTIES. — The parties outlined in Section 2, Rule 68 of
the Rules of Court 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.
2. ID.; ID.; ID.; EXERCISE OF EQUITY OF REDEMPTION BEYOND
REGLEMENTARY PERIOD, BUT BEFORE CONFIRMATION OF FORECLOSURE SALE.
— 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.
3. ID.; ID.; ID.; PROCEDURE IN SECTION 2, RULE 68, SUBJECT TO
MODIFICATION BY A VALID AGREEMENT OF THE PARTIES. — The dispositions of
Section 2 of Rule 68, Rules of Court, cannot be 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, 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 agreements.
4. ID.; ID.; ID.; WAIVER OF EQUITY OF REDEMPTION. — Paragraph 5 of the
compromise agreement 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
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.
5. ID.; ID.; OTHER SPECIAL CIVIL ACTIONS THAT ACCORD ADDITIONAL
PROPRIETARY RIGHTS, BUT WHICH MAY BE WAIVED LIKEWISE. — In the same
manner, the procedural requirements for the appointment of and proceedings
by commissioners in actions for expropriation and judicial partition 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.
6. ID.; CIVIL PROCEDURE; A JUDGMENT ON COMPROMISE BEING A RES
JUDICATA DECISION, A PARTY MUST MOVE TO SET ASIDE AND ANNUL THE
SAME IN TRIAL COURT BEFORE AN APPEAL MAY BE TAKEN FROM THAT
JUDGMENT. — 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. 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 he can appeal from that judgment.
DECISION
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 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."
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."
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.
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 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
partition 11 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 he can appeal from that judgment. 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. The 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 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."
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
respondent 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."

Petitioners close their jeremiad by an appeal for consideration on ground of

equity. However, We also recognize the principle of countervailing equity in
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.
 FIRST DIVISION
[G.R. No. L-25802. January 31, 1972.]
DEVELOPMENT BANK OF THE PHILIPPINES, Plaintiff-Appellee, v.
LEONOR R. VDA. DE MOLL, SEBASTIAN MOLL, JR., BACILISO MOLL,
ERIBERTO MOLL, ESTRELLA MOLL, SALVADOR MOLL, SEGUNDO MOLL
and AURORA MOLL, Defendants-Appellants.
SYLLABUS
1. CIVIL LAW; MORTGAGES; EXTRAJUDICIAL FORECLOSURE; INADEQUACY OF
PRICE NOT MATERIAL IF THERE IS RIGHT OF REDEMPTION. — Where, as in the
instant case, the impugned sales were made subject to appellants’ right of
redemption, the contention or the fact that the purchase prices in question,
were considerably out of proportion to the possible actual market value of the
properties involved, are immaterial. "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 v.
Macaraig, 83 Phil. 378, 381)."
2. ID.; ID.; ID.; ID.; LESSER PRICE MAKES REDEMPTION EASIER. —." . . While
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. . . . (De Leon v. Salvador, Et. Al.)
3. ID.; ID.; ID.; REDEMPTION; PERIOD, 12 MONTHS FROM REGISTRATION OF
SALE. — 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 the same rule applies to sales
upon extrajudicial foreclosure of registered land.
4. ID.; ID.; ID.; ID.; ACTION TO ANNUL SALES DOES NOT SUSPEND RUNNING
OF REDEMPTION PERIOD. — Actions seeking to set aside auction sales do not
toll the running of the period of redemption.
5. ID.; ID.; ID.; ID.; EXTENSION OF PERIOD TO REDEEM, NOT APPLICABLE TO
BANKS. — Unlike Section 3 of Rule 39 of the Rules of Court, which permits the
extension of the period of redemption of mortgaged properties, 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 (DBP), does
not contain a similar provision.
6. ID.; ID.; ID.; ID.; DEFICIENCY JUDGMENT; CREDITOR ENTITLED TO
IMMEDIATE EXECUTION. — Once the auction sale of the mortgaged property is
effected and the resulting deficiency in the mortgage debt is ascertained, the
mortgage creditor is then and there entitled to secure a deficiency judgment
which may immediately be executed, whether or not the mortgagor is still
entitled to redeem the property sold. Appellants’ right, in the case at bar, to
redeem their auctioned properties could not be a bar to the present action of
appellee to recover the deficiencies which it claims to have resulted after
applying the proceeds of the foreclosure sales involved in payment of
appellants’ mortgage debt.
7. ID.; ID.; ID.; ID.; ID.; SECTION 6, RULE 68, REVISED RULES OF COURT. —
Section 6 of Rule 68 of the Revised Rules of Court provides that "if there be a
balance due to the plaintiff after applying the proceeds of the sale, the court,
upon motion, shall render judgment against the defendant for any such balance
for which, by the record of the case, he may be personally liable to the plaintiff,
upon which execution may issue immediately if the balance is all due at the time
of the rendition of the judgment."
DECISION
BARREDO, J.:
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 580,000.00. 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 extra-judicially foreclosed under the provisions of Act 3135, as 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."
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 v.
Rehabilitation Finance Corporation, 1 sufficiently disposes of their contention:
"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 presence 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 v. Macaraig, 83 Phil.
378, 381, Italics Ours.)’
"Then, again, as the trial court had correctly observed:
‘But, mere inadequacy of the price obtained at the sheriff’s 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. v. Sorna,
G.R. No. 32196, wherein property worth P120,000.00 was sold for only
P15,000.00, in Philippine National Bank v. 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 v. 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. v. 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 v. 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 v. Vda. e
Hijas de F. Escaño, 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 v. Rehabilitation 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 Certificates 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 sale arising from
the effects of extrajudicial foreclosure had been conducted with all the earmarks
of validity, even if it were not. Suppose an auction sale were declared illegal due
to irregularities and violation of the mandate of the law, what would be the
effect of such pronouncement in an action for deficiency claim when such action
has no legal basis? If a suit for recovery of a deficiency judgment or deficiency
claim is a legal consequence of an auction sale arising from judicial or
extrajudicial foreclosure, then such suit should await for the expiration period of
the right of redemption within which period, precisely, the redemptioner may
ordinarily institute an action to assail the manner with which the auction sale
was conducted. . . ."
In the case of Philippine Bank of Commerce v. De Vera, 5 We held:
"A reading of the provisions of Act No. 3135, as amended (re extrajudicial
foreclosure) discloses nothing, it is true, as to the mortgagee’s right to recover
such deficiency. But neither do we find any provision thereunder which
expressly or impliedly prohibits such recovery.
"Article 2131 of the new Civil Code, on the contrary, expressly provides that
‘The form, extent and consequences of a mortgage, both as to its constitution,
modification and extinguishment, and as to other matters not included in this
Chapter, shall be governed by the provisions of the Mortgage Law, and of the
Land Registration Law.’ Under the Mortgage Law, which is still in force, the
mortgagee has the right to claim for the deficiency resulting from the price
obtained in the sale of the real property at public auction and the outstanding
obligation at the time of the foreclosure proceedings. (See Soriano v. 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. . . ."
balance due to the plaintiff after applying the proceeds of the sale, the court,
upon motion, shall render judgment against the defendant for any such balance
for which, by the record of the case, he may be personally liable to the plaintiff,
upon which execution may issue immediately if the balance is all due at the time
of the rendition of the judgment." Said provisions are equivalent to those of
section 260 of the old Code of Civil Procedure, under which it was held in a
case, 6 "that in order that a decree for any balance for which the mortgagor
may be personally liable to the mortgagee may be issued, it is necessary that
the sale of the mortgaged real property has been made according to the decree
for said sale to satisfy the judgment; that there 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 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 may issue on said judgment at
once." We believe it is apparent from the provisions and decisions above-quoted
that once the auction sale of the mortgaged property is effected and the
resulting deficiency in the mortgage debt is ascertained, the mortgagee-creditor
is then and there entitled to secure a deficiency judgment which may
immediately be executed, whether or not the mortgagor is still entitled to
redeem the property sold. We hold then that appellants right to redeem their
auctioned properties could not be a bar to the present action of appellee to
recover the deficiencies which it claims to have resulted after applying the
proceeds of the foreclosure sales here involved in payment of appellants’
mortgage debt.
WHEREFORE, the decision appealed from is affirmed, with costs against
appellants.

Under the provisions of section 6 of Rule 70 — now section 6 of Rule 68 of the

revised Rules of Court — abovecited, it is expressly provided that "if there be a
 SECOND DIVISION
[G.R. No. 91779. February 7, 1991.]
GRAND FARMS, INC. and PHILIPPINE SHARES
CORPORATION, Petitioners, v. 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.
DECISION
REGALADO, J.:
The propriety of a summary judgment is raised in issue in the instant petition,
with herein petitioners appealing the decision 1 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-V-88 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
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 . . ."
x x x
"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 advertisement 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
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. v. Court of
Appeals, at 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. 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."
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 irreconcilable 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.

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.
 FIRST DIVISION
[G.R. No. L-70987. September 29, 1988.]
GREGORIO Y. LIMPIN, and ROGELIO M. SARMIENTO, Petitioners, v.
INTERMEDIATE APPELLATE COURT and GUILLERMO
PONCE, Respondents.
SYLLABUS
1. CIVIL LAW; CIVIL CODE; CREDIT TRANSACTIONS; MORTGAGE RIGHT OF
REDEMPTION EXISTS IN EXTRAJUDICIAL FORECLOSURE. — Under Act 3135,
after an extrajudicial foreclosure, a mortgager has the right of redemption which
he may exercise within one year from the registration of the sheriff’s certificate
of sale.
2. SPECIAL LAW; SPECIAL CIVIL ACTION; FORECLOSURE OF MORTGAGE; NO
RIGHT OF REDEMPTION EXISTS; EXCEPTION. — There is no right of redemption
in judicial foreclosure, except where the mortgagee is the Philippine National
Bank, or a bank or banking institution (Rule 68, Sec. 3, Rules of Court; Acts
Nos. 2747 and 2938; Republic Act No. 337).
3. ID.; ID.; ID.; ID.; EQUITY REDEMPTION, IN JUDICIAL FORECLOSURE;
PERIOD TO REDEEM. — While there is no right of redemption in judicial
foreclosure, there is in favor of the mortgagor an equity of redemption. An
equity of redemption is the right of the 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.
4. ID.; ID.; ID.; ID.; JUNIOR ENCUMBRANCES HAVE RIGHT OF EQUITY OF
REDEMPTION. — The equity of redemption pertaining to the mortgagor is the
same right that may be exercised by the mortgagor’s successor in interest or
third persons acquiring rights over the mortgaged property subordinate to the
mortgagee’s lien.
5. ID.; ID.; ID.; ID.; ID.; UNFORECLOSED EQUITY OF REDEMPTION, RETAINED
BY PARTIES NOT IMPLEADED. — Where a subsequent or junior lienholder is not
impleaded in the foreclosure proceedings, any judgment in favor of the
mortgagee is not binding upon him, he retains what is known as an
unforeclosed equity of redemption and a separate foreclosure proceeding should
be brought to require him to redeem from the first mortgagee or the party
acquiring title to the mortgaged property at the foreclosure sale within 90 days
under penalty of losing said prerogative.
6. ID.; ID.; ID.; EQUITY OF REDEMPTION; GRANT OF EXTENSION MUST BE
CLEAR AND UNEQUIVOCAL. — The fact that private respondent recognized
petitioners’ equity of redemption does not prevent the redemption from lapsing
where such recognition was made when there was as yet no order confirming
the sale and private respondent’s equity of redemption still existed. Moreover,
even assuming that a period to redeem may be extended by the act of the party
who would have been benefited by the expiration, the grant of such extension
must be clear and unequivocal.
7. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; PETITIONER WHO
APPEALED THE QUESTIONED DECISION CANNOT CLAIM DENIAL OF DUE
PROCESS. — Since petitioner has appealed to this court the decision of the
court of appeals ordering the trial court to confirm the judicial foreclosure, he
cannot now claim that he was denied due process for alleged lack of notice. The
denial of the appeal sufficiently alerted him that confirmation could come at any
time after the finality of this Court’s decision.
DECISION
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 by 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 as
indispensable parties respondents. That Court rendered judgment on February
28, 1985 in Ponce’s favor; Limpin and Sarmiento appealed; this Court denied
their appeal.
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
petitioners 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 bestirred 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 "P2.6 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 and averred "that the period within which x x (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 Sheriff s 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 (Sheriff s) sale," citing Top Rate
International Services, Inc. v. I.A.C., 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
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 extrajudicially, 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.chanrobles law library
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 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 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 lien-holders 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 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. equity of redemption then still unquestionably existed, there was hardly
occasion or for that matter, any reason as far as Ponce was concerned, to
Upon the facts on record, Sarmiento cannot be heard to complain of denial of provide against its lapsing. Moreover, assuming for the sake of argument that a
due process for alleged lack of notice of any motion or hearing for confirmation resolutory period fixed by law may be extended by act of the party in whose
of sale. The Decision of the Intermediate Appellate Court which he and his favor its expiration would operate, that act must bespeak a clear and
predecessor, Limpin, had appealed to this Court specifically ordered the Trial unequivocal intent to grant such an extension. No such clear grant can be
Court to confirm 28 the judicial foreclosure sale in favor of Ponce over the two inferred from the terms of Ponce’s motion, which can, and in fact should be,
lots, in these terms: read as a mere affirmation that there existed at the time an equity of
redemption in Sarmiento’s favor.
"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 WHEREFORE, the Court hereby rules that the equity of redemption claimed and
formerly covered by TCT Nos. 92836 and 92837, are SET ASIDE, and the invoked by Rogelio M. Sarmiento over the properties originally covered by
respondent court is hereby ORDERED to confirm the sale and issue a writ of Transfer Certificates of Title Nos. 92836 and 92837 (now by TCTs Numbered
possession to the petitioner with respect to the aforesaid lots, subject to the 307100 and 307124), Registry of Deeds of Quezon City, subject of this case,
equity of redemption of the respondent Rogelio V. Sarmiento. Without costs." 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 sheriff’s
Given the fact that said appealed orders of the Trial Court had been issued upon sale (on judicial foreclosure) of said, properties in favor of Guillermo Ponce.
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 nowise 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 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
 SECOND DIVISION
[G.R. No. 106953. August 19, 1993.]
CESAR SAN JOSE AND MARGARITA BATONGBAKAL, Petitioners, v. HON.
COURT OF APPEALS, SPS. MARCOS DE GUZMAN AND GLORIA DE
GUZMAN, Respondents.
SYLLABUS
1. CIVIL LAW; EXTRAJUDICIAL FORECLOSURE OF MORTGAGE; (ACT NO. 3135
AS AMENDED BY ACT NO. 4118); REQUIREMENT OF PUBLICATION OF NOTICE;
MUST BE SUBSTANTIALLY COMPLIED WITH. — 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 than
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 of
city." In Tambunting v. Court of Appeals, (167 SCRA 16 [1988]) 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. This Court stated that
the failure to advertise a mortgage foreclosure sale in compliance with statutory
requirements constitutes a jurisdictional defect invalidating the sale and that a
substantial error or omission in a notice of sale will render the notice insufficient
and vitiate the sale.
2. ID.; ID.; ID.; INCORRECT AND TECHNICAL DESCRIPTION APPEARING
THEREIN; DOES NOT CONSTITUTE SUBSTANTIAL COMPLIANCE; CASE AT BAR.
— The Notice of Sheriff’s Sale, in this case, did not state the correct number of
the transfer certificate of title of the property to be sold. This is a substantial
and fatal error which resulted in invalidating the entire Notice. That the correct
technical description appeared on the Notice does not constitute substantial
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
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 that real
property in which they have an interest.
3. ID.; ID.; ID.; ID.; ID.; PURPOSE. — 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 that 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.
DECISION
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 v. 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;
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.
In the Tambunting case, 3 this Court stated that the failure to advertise a
mortgage foreclosure sale in compliance with statutory requirements constitutes
a jurisdictional defect invalidating the sale and that a substantial error or
omission in a notice of sale will render the notice insufficient and vitiate the
sale.
The Notice of Sheriff’s Sale, in this case, did not state the correct number of the
transfer certificate of title of the property to be sold. This is a substantial and
fatal error which resulted in invalidating the entire Notice. That the correct
technical description appeared on the Notice does not constitute substantial
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
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.
2) Ordering the appropriate Register of Deeds to reinstate Transfer Certificate of
Title No. T-159703 in the name of petitioner Margarita Batongbakal married to
petitioner Cesar San Jose, giving it full force and effect as though it had never
been cancelled.
3) Ordering the cancellation of Transfer Certificate of Title No. T-30.762 (M) in
the name of private respondent spouses Marcos and Gloria de Guzman for being
void ab initio.
With costs against the private respondents.
SO ORDERED.
 FIRST DIVISION
[G.R. No. 45322. July 5, 1989.]
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner, v. THE
COURT OF FIRST INSTANCE OF ILOILO BRANCH III, ILOILO CITY and
NELITA M. VDA. DE BACALING & MARIA TERESA INTEGRATED
DEVELOPMENT CORPORATION, Respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; FORECLOSURE OF MORTGAGE; NO
RIGHT OF REDEMPTION EXISTS AFTER A JUDICIAL FORECLOSURE SALE;
GOVERNMENT SERVICE INSURANCE SYSTEM, NOT A BANK OR BANKING
INSTITUTION. — 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 v. 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. 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.
DECISION
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 10% of the judgment as attorney’s fees and costs; and
(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 P1,100,000 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.
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 v. 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 v. Yulo, 26 Phil. 166; Emphasis ours.)
". . . 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. v. 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 v. Javier de Paderanga, 97 Phil. 608-
609; Emphasis ours.)

"Where the foreclosure is judicially affected, 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 v. PNB, 48 Phil. 824, 828; and Martin, Rules of Court, etc., 3rd Ed.,
Vol. 3, p. 289, citing Villar v. Javier de Paderanga, 97 Phil. 64; Piano v.
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.

"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." (Limpin
v. 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.
 SECOND DIVISION
[G.R. No. 83498. October 22, 1991.]
SPS. MIGUEL S. KHO and JUANITA KHO, Petitioners, v. COURT OF
APPEALS and BANCO FILIPINO, Respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; FORECLOSURE OF MORTGAGE;
RIGHT OF PURCHASER DURING AND AFTER THE PERIOD OF REDEMPTION. —
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).
DECISION
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 (P2,869,000.00) 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 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 hearing 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.

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.

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