credit trans real estate mortgage cases

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-22331 June 6, 1967

IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE VENDEES OF A HOUSE AND THE RIGHTS TO A LOT.MARIA BAUTISTA VDA. DE REYES, ET AL., vendees-petitioners-appellees. RODOLFO LANUZA, vendor, vs.MARTIN DE LEON, intervenor-appellant.

Erasmo R. Cruz and C. R. Pascual for intervenor-appellant.Augusto J. Salas for vendees-petitioners-appellees.

REGALA, J.:

Rodolfo Lanuza and his wife Belen were the owners of a two-story house built on a lot of the Maria Guizon Subdivision in Tondo, Manila, which the spouses leased from the Consolidated Asiatic Co. On January 12, 1961, Lanuza executed a document entitled "Deed of Sale with Right to Repurchase" whereby he conveyed to Maria Bautista Vda. de Reyes and Aurelia R. Navarro the house, together with the leasehold rights to the lot, a television set and a refrigerator in consideration of the sum of P3,000. The deed reads:

DEED OF SALE WITH RIGHT TO REPURCHASE KNOW ALL MEN BY THESE PRESENTS:

That I, RODOLFO LANUZA, Filipino, of legal age, married to Belen Geronimo, and residing at 783-D Interior 14 Maria Guizon, Gagalangin, Tondo, Manila, hereby declare that I am the true and absolute owner of a new two storey house of strong materials, constructed on a rented lot — Lot No. 12 of the Maria Guizon Subdivision, owned by the Consolidated Asiatic Co. — as evidenced by the attached Receipt No. 292, and the plan of the subdivision, owned by said company.

That for and in consideration of the sum of THREE THOUSAND PESOS (P3,000.00) which I have received this day from Mrs. Maria Bautista Vda. de Reyes, Filipino, of legal age, widow; and Aurelia Reyes, married to Jose S. Navarro, Filipinos, of legal ages, and residing at 1112 Antipolo St., Tondo, Manila, I hereby SELL, CEDE, TRANSFER, AND CONVEY unto said Maria Bautista Vda. de Reyes, her heirs, succesors, administrators and assigns said house, including my right to the lot on which it was constructed, and also my television, and frigidaire "Kelvinator" of nine cubic feet in size, under the following conditions:

I hereby reserve for myself, my heirs, successors, administrators, and assigns the right to repurchase the above mentioned properties for the same amount of P3,000.00, without interest, within the stipulated period of three (3) months from the date hereof. If I fail to pay said amount of P3,000.00, within the stipulated period of three months, my right to repurchase the said properties shall be forfeited and the ownership thereto shall automatically pass to Mrs. Maria Bautista Vda. de Reyes, her heirs, successors, administrators, and assigns, without any Court intervention, and they can take possession of the same.1äwphï1.ñët

IN WITNESS WHEREOF, we have signed this contract in the City of Manila, this 12th day of January, 1961.

s/t RODOLFO LANUZA Vendor s/t MARIA BAUTISTA VDA. DE REYESVendees/t AURELIA REYES Vendee WITH MY MARITAL CONSENT: s/t JOSE S. NAVARROWhen the original period of redemption expired, the parties extended it to July 12, 1961 by an annotation to this effect on the left margin of the instrument. Lanuza's wife, who did not sign the deed, this time signed her name below the annotation.

It appears that after the execution of this instrument, Lanuza and his wife mortgaged the same house in favor of Martin de Leon to secure the payment of P2,720 within one year. This mortgage was executed on October 4, 1961 and recorded in the Office of the Register of Deeds of Manila on November 8, 1961 under the provisions of Act No. 3344.

As the Lanuzas failed to pay their obligation, De Leon filed in the sheriff's office on October 5, 1962 a petition for the extra-judicial foreclosure of the mortgage. On the other hand, Reyes and Navarro followed suit by filing in the Court of First Instance of Manila a petition for the consolidation of ownership of the house on the ground that the period of redemption expired on July 12, 1961 without the vendees exercising their right of repurchase. The petition for consolidation of ownership was filed on October 19. On October 23, the house was sold to De Leon as the only bidder at the sheriffs sale. De Leon immediately took possession of the house, secured a discharge of the mortgage on the house in favor of a rural bank by paying P2,000 and, on October 29, intervened in court and asked for the dismissal of the petition filed by Reyes and Navarro on the ground that the unrecorded pacto de retro sale could not affect his rights as a third party.

The parties1 thereafter entered into a stipulation of facts on which this opinion is mainly based and submitted the case for decision. In confirming the ownership of Reyes and Navarro in the house and the leasehold right to the lot, the court said:

It is true that the original deed of sale with pacto de retro, dated January 12, 1961, was not signed by Belen Geronimo-Lanuza, wife of the vendor a retro, Rodolfo Lanuza, at the time of its execution. It appears, however, that on the occasion of the extension of the period for repurchase to July 12, 1961, Belen Geronimo-Lanuza signed giving her approval and conformity. This act, in effect, constitutes ratification or confirmation of the contract (Annex "A" Stipulation) by Belen Geronimo-Lanuza, which ratification validated the act of Rodolfo Lanuza from the moment of the execution of the said contract. In short, such ratification had the effect of purging the contract (Annex "A" Stipulation) of any defect which it might have had from the moment of its execution. (Article 1396, New Civil Code of the Philippines; Tang Ah Chan and Kwong Koon vs. Gonzales, 52 Phil. 180)

Again, it is to be noted that while it is true that the original contract of sale with right to repurchase in favor of the petitioners (Annex "A" Stipulation) was not signed by Belen Geronimo-Lanuza, such failure to sign, to the mind of the Court, made the contract merely voidable, if at all, and, therefore, susceptible of ratification. Hence, the subsequent ratification of the said contract by Belen Geronimo-Lanuza validated the said contract even before the property in question was mortgaged in favor of the intervenor.

It is also contended by the intervenor that the contract of sale with right to repurchase should be interpreted as a mere equitable mortgage. Consequently, it is argued that the same cannot form the basis for a judicial petition for consolidation of title over the property in litigation. This argument is based on the fact that the vendors a retro continued in possession of the property after the execution of the deed of sale with pacto de retro. The mere fact, however, that the vendors a retro continued in the possession of the property in question cannot justify an outright declaration that the sale should be construed as an equitable mortgage and not a sale with right to repurchase. The terms of the deed of sale with right to repurchase (Annex "A" Stipulation) relied upon by the petitioners must be considered as merely an equitable mortgage for the reason that after the expiration of the period of repurchase of three months from January 12, 1961.

Article 1602 of the New Civil Code provides:

"ART. 1602. The contract shall be presumed to be in equitable mortgage, in any of the following cases;

x x x x x x x x x

"(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed.

x x x x x x x x x

In the present case, it appears, however, that no other instrument was executed between the parties extending the period of redemption. What was done was simply to annotate on the deed of sale with right to repurchase (Annex "A" Stipulation) that "the period to repurchase, extended as requested until July 12, 1961." Needless to say, the purchasers a retro, in the exercise of their freedom to make contracts, have the power to extend the period of repurchase. Such extension is valid and effective as it is not contrary to any provision of law. (Umale vs. Fernandez, 28 Phil. 89, 93)

The deed of sale with right to repurchase (Annex "A" Stipulation) is embodied in a public document. Consequently, the same is sufficient for the purpose of transferring the rights of the vendors a retro over the property in question in favor of the petitioners. It is to be noted that the deed of sale with right to repurchase (Annex "A" Stipulation) was executed on January 12, 1961, which was very much ahead in point of time to the execution of the real estate mortgage on October 4, 1961, in favor of intervenor (Annex "B" Stipulation). It is obvious, therefore, that when the mortgagors, Rodolfo Lanuza and Belen Geronimo Lanuza, executed the real estate mortgage in favor of the intervenor, they were no longer the absolute owners of the property since the same had already been sold a retro to the petitioners. The spouses Lanuza, therefore, could no longer constitute a valid mortgage over the property inasmuch as they did not have any free disposition of the property mortgaged. (Article 2085, New Civil Code.) For a valid mortgage to exist, ownership of the property mortgaged is an essential requisite. A mortgage executed by one who is not the owner of the property mortgaged is without legal existence and the registration cannot validate. (Philippine National Bank vs. Rocha, 55 Phil. 497).

The intervenor invokes the provisions of article 1544 of the New Civil Code for the reason that while the real estate mortgage in his favor (Annex "B" Stipulation) has been registered with the Register of Deeds of Manila under the provisions of Act No. 3344 on November 3, 1961, the deed of sale with right to repurchase (Annex "A" Stipulation) however, has not been duly registered. Article 1544 of the New Civil Code, however, refers to the sale of the same property to two or more vendees. This provision of law, therefore, is not applicable to the present case which does not involve sale of the same property to two or more vendees. Furthermore, the mere registration of the property mortgaged in favor of the intervenor under Act No. 3344 does not prejudice the interests of the petitioners who have a better right over the property in question under the old principle of first in time, better in right. (Gallardo vs. Gallardo, C.B., 46 O.G. 5568)

De Leon appealed directly to this Court, contending (1) that the sale in question is not only voidable but void ab initio for having been made by Lanuza without the consent of his wife; (2) that the pacto de retro sale is in reality an equitable mortgage and therefore can not be the basis of a petition for consolidation of ownership; and (3) that at any rate the sale, being unrecorded, cannot affect third parties.

We are in accord with the trial court's ruling that a conveyance of real property of the conjugal partnership made by the husband without the consent of his wife is merely voidable. This is clear from article 173 of the Civil Code which gives the wife ten years within which to bring an action for annulment. As such it can be ratified as Lanuza's wife in effect did in this case when she gave her conformity to the extension of the period of redemption by signing the annotation on the margin of the deed. We may add that actions for the annulment of voidable contracts can be brought only by those who are bound under it, either principally or subsidiarily (art. 1397), so that if there was anyone who could have questioned the sale on this ground it was Lanuza's wife alone.

We also agree with the lower court that between an unrecorded sale of a prior date and a recorded mortgage of a later date the former is preferred to the latter for the reason that if the original owner had parted with his ownership of the thing sold then he no longer had the ownership and free disposal of that thing so as to be able to mortgage it again. Registration of the mortgage under Act No. 3344 would, in such case, be of no moment since it is

understood to be without prejudice to the better right of third parties.2 Nor would it avail the mortgagee any to assert that he is in actual possession of the property for the execution of the conveyance in a public instrument earlier was equivalent to the delivery of the thing sold to the vendee.3

But there is one aspect of this case which leads us to a different conclusion. It is a point which neither the parties nor the trial court appear to have sufficiently considered. We refer to the nature of the so-called "Deed of Sale with Right to Repurchase" and the claim that it is in reality an equitable mortgage. While De Leon raised the question below and again in this Court in his second assignment of error, he has not demonstrated his point; neither has he pursued the logical implication of his argument beyond stating that a petition for consolidation of ownership is an inappropriate remedy to enforce a mortgage.

De Leon based his claim that the pacto de retro sale is actually an equitable mortgage on the fact that, first, the supposed vendors (the Lanuzas) remained in possession of the thing sold and, second, when the three-month period of redemption expired the parties extended it. These are circumstances which indeed indicate an equitable mortgage.4 But their relevance emerges only when they are seen in the perspective of other circumstances which indubitably show that what was intended was a mortgage and not a sale.These circumstances are:

1. The gross inadequacy of the price. In the discussion in the briefs of the parties as well as in the decision of the trial court, the fact has not been mentioned that for the price of P3,000, the supposed vendors "sold" not only their house, which they described as new and as being made of strong materials and which alone had an assessed value of P4,000, but also their leasehold right television set and refrigerator, "Kelvinator of nine cubic feet in size." indeed, the petition for consolidation of ownership is limited to the house and the leasehold right, while the stipulation of facts of the parties merely referred to the object of the sale as "the property in question." The failure to highlight this point, that is, the gross inadequacy of the price paid, accounts for the error in determining the true agreement of the parties to the deed.

2. The non-transmission of ownership to the vendees. The Lanuzas, the supposed vendors did not really transfer their ownership of the properties in question to Reyes and Navarro. What was agreed was that ownership of the things supposedly sold would vest in the vendees only if the vendors failed to pay P3,000. In fact the emphasis is on the vendors payment of the amount rather than on the redemption of the things supposedly sold. Thus, the deed recites that —

If I (Lanuza) fail to pay said amount of P3,000.00 within the stipulated period of three months, my right to repurchase the said properties shall be forfeited and the ownership thereto automatically pass to Mrs. Maria Bautista Vda. de Reyes . . . without any Court intervention and they can take possession of the same.

This stipulation is contrary to the nature of a true pacto de retro sale under which a vendee acquires ownership of the thing sold immediately upon execution of the sale, subject only to the vendor's right of redemption.5 Indeed, what the parties established by this stipulation is an odious pactum commissorium which enables the mortgages to acquire ownership of the mortgaged properties without need of foreclosure proceedings. Needless to say, such a stipulation is a nullity, being contrary to the provisions of article 2088 of the Civil Code.6 Its insertion in the contract of the parties is an avowal of an intention to mortgage rather than to sell.7

3. The delay in the filing of the petition for consolidation. Still another point obviously overlooked in the consideration of this case is the fact that the period of redemption expired on July 12, 1961 and yet this action was not brought until October 19, 1962 and only after De Leon had asked on October 5, 1962 for the extra-judicial for closure of his mortgage. All the while, the Lanuzas remained in possession of the properties they were supposed to have sold and they remained in possession even long after they had lost their right of redemption.

Under these circumstances we cannot but conclude that the deed in question is in reality a mortgage. This conclusion is of far-reaching consequence because it means not only that this action for consolidation of ownership is improper, as De Leon claims, but, what is more that between the unrecorded deed of Reyes and Navarro which we hold to be an equitable mortgage, and the registered mortgage of De Leon, the latter must be preferred. Preference of mortgage credits is determined by the priority of registration of the mortgages,8 following the maxim "Prior tempore potior jure" (He who is first in time is preferred in right.)9 Under article 2125 of the Civil Code, the equitable mortgage, while valid between Reyes and Navarro, on the one hand, and the Lanuzas, on the other, as the immediate parties thereto, cannot prevail over the registered mortgage of De Leon.

Wherefore, the decision appealed from is reversed, hence, the petition for consolidation is dismissed. Costs against Reyes and Navarro.

Concepcion, C.J., Dizon, Bengzon, J.P., Sanchez and Castro, JJ., concur.Reyes, J.B.L., and Zaldivar, JJ., reserved their votes.Makalintal, J., concurs in the result.


FIRST DIVISION

G.R. No. L-55739 June 22, 1984

CARLO LEZAMA BUNDALIAN and JOSE R. BUNDALIAN, petitioners, vs.THE HON. COURT OF APPEALS, JUANITO LITTAWA and EDNA CAMCAM, respondents.

Francisco A. Lava, Jr. for petitioners.

Benjamin B. Bernardino for private respondents.

GUTIERREZ, JR., J.:

This is a petition for review of the decision of the Court of Appeals, now Intermediate Appellate Court, affirming a judgment of the then Court of First Instance of Rizal dismissing the petition for declaratory relief and/or reformation of instrument filed by the petitioners against the respondents and ordering the petitioners to pay jointly and severally the amounts of P200,000.00 for respondent Edna Camcam and P50,000.00 for respondent Littawa, as moral damages; the amount of P50,000.00 for both respondents as exemplary damages; the amount of P30,000.00 for and as attorney's fees, and to pay the costs of the suit.

On July 1, 1975, the petitioners purchased from the Estate of the Deceased Agapita Sarao Vda. de Virata three (3) contiguous parcels of land located at San Juan, Rizal, containing an aggregate area of 3,328 square meters, more or less, for and in consideration of the amount of P499,200.00.

The following day, July 2, 1975, the petitioners, in a contract denominated as Deed of Sale with Right to Repurchase, sold to the private respondents the same three contiguous parcels of land for the same amount of P499,200.00 under specified terms and conditions. One of the terms and conditions was that the repurchase price would escalate month after month, depending on when repurchase would be effected. The price would be P532,480.66 computed at P160.00 per square meter after the first month; P565,760.00 computed at P170.00 per square meter after the second month; P599,040.00 computed at P180.00 per square meter after the third month; and P632,320.00 computed at P190.00 per square meter after the fourth month, from and after the date of the instrument. It was also stipulated in the same contract that the vendor shall have the right to possess, use, and build on, the property during the period pending redemption.

On August 26, 1976, the petitioners filed a petition for declaratory relief and/or reformation of instrument before the Court of First Instance of Rizal at Pasig, Metro Manila to declare the Deed of Sale with Right to Repurchase an equitable mortgage and the entire portion of the same deed referring to the accelerating repurchase price null and void for being usurious, and to reduce the loan obligation to P474,200.00, contending that the amount actually loaned was only P474,200.00 and the petitioners put up P25,000.00 of the wife's money when the purchase from the estate of Mrs. Virata was consummated.

On August 27, 1976, the private respondents, in turn, filed a petition for the consolidation of ownership on the ground that "more than a year has elapsed since the execution of the Deed of Sale with Right to Repurchase by the vendor on July 2, 1975." The private respondents contended that "notwithstanding which the vendor has failed to avail of its rights under the provisions of Article 1607 in relation to Article 1616 of the New Civil Code, the vendor has lost all his rights to avail himself of the right to consolidate ownership of the property subject of the Deed of Sale." To this petition for consolidation of ownership, the petitioners filed their opposition upon the following grounds: (a) there is a pending suit between the same parties involving the same cause and subject matter; (b) consolidation will be improper considering that the basic document

upon which it is being sought is in fact and in law only an equitable mortgage; and (c) consolidation cannot be effected thru the instant petition. Accordingly, the Court of First Instance of Rizal ordered the transfer of the petition for consolidation of ownership to Branch XXIV of the same Court where the petition for declaratory relief and/or reformation of instrument was pending in order that the two cases may be considered together.

A supplemental petition was subsequently filed by the petitioners alleging that the private respondents' petition for consolidation of ownership was made in order to frustrate and render nugatory whatever orders or judgment may be issued by the trial court in the petition for declaration relief/or reformation of instrument.

After the trial and presentation of the parties' respective memoranda the trial court rendered the decision in favor of the private respondents.

The petitioners appealed to the Court of Appeals. The appellate court affirmed in toto the decision of the trial court. Two motions for reconsideration having been denied, the petitioners filed the present petition based on the following grounds:

A.

RESPONDENT COURT OF APPEALS ERRED GRAVELY, TO THE EXTENT OF GRAVE ABUSE OF DISCRETION, AND IN VIOLATION OF PETITIONERS' RIGHT TO DUE PROCESS OF LAW AT APPELLATE LEVEL, WHEN IT AFFIRMED THE APPEALED DECISION WITHOUT ANY DISCUSSION OF THE QUESTIONS RAISED IN THE APPEAL AND BY SIMPLY ADOPTING THE POSITION OF THE TRIAL WHICH IS PRECISELY QUESTIONED IN THE APPEAL.

B.

RESPONDENT COURT OF APPEAL ERRED GRAVELY TO THE EXTENT OF GRAVE ABUSE OF DISCRETION IN ADOPTING TOTALLY AND UNCRITICALLY THE GROSSLY ERRONEOUS REASON AND POSITION OF THE TRIAL COURT.

C.

RESPONDENT COURT OF APPEALS ERRED GRAVELY TO THE EXTENT OF GRAVE ABUSE OF DISCRETION, IN UNCERMONIOUSLY, DENYING PETITIONERS' FIRST MOTION FOR RECONSIDERATION, MOTION FOR ORAL ARGUMENT, MOTION TO INVITE AMICUS CURIAE, AND SECOND MOTION FOR RECONSIDERATION.

E.

RESPONDENT COURT OF APPEALS ERRED GRAVELY TO THE EXTENT OF GRVE ABUSE OF DISCREATION, IN NOT REVERSING THE APPEALED JUDGMENT AND GRANTING THE PRAYERS OF PETITIONERS-APPELLANTS, FOREMOST OF WHICH IS TO DECLARE THE DEED OF SALE WITH RIGHT TO REPURCHASE TO BE AN EQUITABLE MORTGAGE.

Tell issue is this case is whether or not the deed of sale with right to repurchase should be declared as an equitable mortgage.

We find meritorious the petitioners' contention that under Article 1602 of the Civil Code the deed of sale with right to repurchase should be presumed to be an equitable mortgage due to the following reasons.

(1) The contracts involving the subject properties came one after another in the space of two (2) days. The Deed of Absolute Sale between petitioner Jose R. Bundalian as vendee and Romeo S. Geluz, in his capacity as Administratorf of the Estate of the deceased Agapita Sarao Vda. de Virata, as vendor, was executed on July 1, 1975 (pp. 19-26, Annex "A"). The purported Deed of Sale with Right to Repurchase between petitioner, Jose R. Bundalian as vendor and respondents Juanito Littawa and Edna Camcam as vendees was executed on July 2, 1975 (pp. 26- 32, Annex "A").lwphl@itç This already indicates, at a very early stage, that the two transactions must be intimately related.

(2) Such intimate relation between the aforementioned Deed of Absolute Sale and Deed of Sale with Right to Repurchase is already clear in the statement in the latter instrument that the subject property had just been purchased by Jose R. Bundalian from the estate of the deceased Agapita Sarao Vda. de Virata, 'with funds loaned to him by the herein VENDEES' the latter being no other than respondents Littawa and Camcam (p. 28, Annex "A"). Patently, petitioner Jose R. Bundalian was funded by private respondents to enable him to purchase the property from the said estate.

(3) Having just purchased the property from the estate by way of Deed of Absolute Sale on July 1, 1975, for which he had just paid P499,200.00 as purchase price, it would have been utterly senseless for petitioner Jose R. Bundalian to sell the same property to private respondents the very next day, July 2, 1975, with or without the right of repurchase. No other conclusion is possible except that the Deed of Sale with Right to Repurchase is precisely the security the equitable mortgage — to petitioner Jose R. Bundalian to enable the latter to purchase the property from the aforementioned estate.

(4) It would have been more senseless for petitioner Jose R. Bundalian to sell the property to private respondents at the same price of P499,200.00 he had paid the estate of the deceased Agapita Sarao Vda. de Virata, without profit and at a sure loss. By the terms of the Deed of Sale with Right to Repurchase he would have to repurchase the property at a continually increasing price, from Pl 50.00 per square meter to P190.00 per square meter, that is, up to P133,120.00 over and above the original price of P499,200.00, in only four (4) months. Again, no other conclusion is possible but that the contract is an equitable mortgage, not a sale.

(5) It is provided in the Deed of Sale with Right to Repurchase that 'It is agreed that the vendor (Jose R. Bundalian) shall have the right to possess, use, and build on, the property during the period of redemption' (p. 30, Annex "A"). It has been held that there is a 'loan with security' rather than a pacto de retro sale where by agreement the vendor was to remain in possession of the lands (Escoto vs. Arcilla, 89 Phil. 199, 204). Where there was an acknowledgment of the vendor's right to retain possession of the property, as in the case at bar, the contract was one of "loan guaranteed by a mortgage" rather than a conditional sale (Macoy vs. Trinidad, 95 Phil. 192, 202). Indeed, there can be no question that petitioner Jose R. Bundalian remained legally in possession of the subject property. Again, the conclusion is ineluctable that the Deed of Sale with Right to Repurchase was executed as security for the loan extended by private respondents to petitioner Jose R. Bundalian, i.e., as equitable mortgage.

(6) The increase per month in the alleged redemption price is very compatible with the Idea that the transaction was really intended by the parties to be a mortgage. It bears emphasis, at this juncture, that the supposed repurchase price is in the same amount as the original "price" of P499,200.00 should "repurchase" be effected during the first month from and after the date of the instrument; P532,480.00 computed at P160.00 per square meter should "repurchase" be effected after the first month; P565,760.00 computed at P170.00 per square meter should "repurchase" be after the second month; P599,040.00 computed at P180.00 per square meter should "repurchase" be after the third month; or P632,320.00 computed at P190.00 per square meter should "repurchase" be effected even "after the fourth month" (pp. 29-30, Annex "A"). The monthly increases in the alleged "redemption price"clearly represent nothing but interest. It is well-settled that provision for interest payments is a clear indication that the supposed sale is actually an equitable mortgage (Macoy vs. Trinidad, 95 Phil. 192, 202; Escoto vs. Arcilla, 89 Phil. 199, 204). This would fall under the legal situation "where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation" (No. 6), Art. 1062, Civil Code). To make matters worse, the monthly increase in the supposed "redemption price", meaning the interest of course, are clearly usurious, precisely one of the evils sought to be negated by the provisions of Articles 1602, 1603 and 1604 of the Civil Code, as noted previously herein.

(7) While the Deed of Sale with Right to Repurchase supposedly provided for a "redemption" period of "four (4) months from and after the date of this instrument" (p. 29, Annex "A"), it

later necessarily provided for a built-in extension of the period of 'redemption' by providing for payment of the amount of P632,320.00 computed at P190.00 per square meter should "repurchase" be effected "after the fourth month" (p. 30, Annex "A"). In other words, it was implicitly agreed that the period of 'repurchase' was not limited to 4 months from and after the date of execution of the instrument, in as much as said "repurchase" could be effected even "after the fourth month". It is well — settled that extension of the period of "redemption" is indicative of equitable mortgage (Nos.(3) and (6), Art. 1602, Civil Code; Reyes vs. De Leon, 20 SCRA 369, 370).lwphl@itç

(8) It may be argued, as private respondents have argued, that normally a loan does not exceed 60% of the price of the land given as security, so that private respondents could not have loaned P499,200.00 on the land the value of which was claimed to be also P499,200.00. However, such reasoning is clearly unsound. It loses sight of the fact that private respondents precisely funded or financed petitioner Jose R. Bundalian's acquisition of the property from the estate of the deceased Agapita Sarao Vda. de Virata. In other words, petitioner Jose R. Bundalian could not have acquired the land to serve as security for the repayment of the loan unless private respondents had extended the loan in the first place. Surely, private respondents stood to benefit enormously from such financing transaction in view of the patently usurious monthly interests transparently disguised as the accelerating or increasing monthly 'repurchase' price. At any rate, in the event that petitioner Jose R. Bundalian ultimately failed to pay the loan, the rapid increase in the price of the land, which was estimated to be worth at least P632,320.00 after 4 months (from the initial P499,200.00), practically guaranteed a very good return on the money investment of private respondents as money- lenders.

(9) It cannot be questioned that petitioner Jose R. Bundalian paid taxes on the land, even after the supposed 4 month period of "redemption". Payment of taxes after expiration of the supposed "redemption" period has been considered as indicative of equitable mortgage (Escoto vs. Arcilla, supra).

(10) It is an admitted fact that private respondents took some time before filing their petition for consolidation of ownership. Private respondents admitted in said petition that "more than a year has elapsed since the execution of the Deed of Sale with Right to Repurchase" (p. 34, par. 3, Annex "A"). Reckoning 4 months from July 2, 1975, it would appear that the "repurchase" period expired supposedly on November 2, 1975. As private respondents filed their petition for consolidation on August 27, 1976, it is clear that they delayed filing said petition by more than 9 months. A similar delay in the filing of the supposed "vendee's" petition for consolidation was considered as indicative of equitable mortgage (Reyes vs. de Leon, 20 SCRA 369, 378).

(11) If the Deed of Sale with Right to Repurchase would not be considered as an equitable mortgage, it would result that there was actually no security for the loan of P499,200.00 extended by private respondents to petitioners Jose R. Bundalian, which would make no sense at all considering the enormity of the loan. There was, to be sure, a security for said loan, none other than the equitable mortgage tainted with usury and disguised as the Deed of Sale with Right to Repurchase.

The private respondents argued that the petitioners' contention is true only in cases where the contract or instrument is not reflective of the true intentions of the contracting parties as would warrant reformation of the same. They stated that if the intention of the parties is to execute a deed of sale with pacto de retro, the contract should be held as such. The petitioners were allegedly fully aware that the deed of sale with pacto de retro is what it purports to be and nothing else. Furthermore, the petitioners waited for the period of redemption to expire before availing of the relief granted by the Civil Code of reformation of contracts.

We find the stand of the private respondents without merit. The intent of the parties to circumvent the provision discouraging pacto de retro transactions is very apparent from the records. Article 1602 of the Civil Code states:

Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other eases where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.

Significantly, a portion of the document in question reads:

(The vendor) having just purchased the same from the Intestate estate of the deceased Agapita Sarao Vda. de Virata (Special Proceedings No. B-710 of the Court of First Instance of Cavite), with funds loaned to him by the herein VENDEES. (Emphasis supplied).

This statement appearing in the supposed pacto de retro sale confirms the real intention of the parties to secure the payment of the loan acquired by the petitioners from the private respondents. The sale with the right to repurchase of the three parcels of land was for P499,200.00, which was exactly the same amount paid to the estate of the deceased Agapita Sarao Vda. de Virata- After having purchased the three lots for P499,200.00, the vendors should at least have earned a little profit or interest if they really intended to resell the lots the following day. Instead, they suffered a loss of P25,000.00 because the amount borrowed, and we find grounds to believe their statement of having advanced P25,000.00 of their own funds as earnest money, was actually only P474,000.00. The petitioners also bound themselves to pay exceedingly stiff prices for the privilege of repurchase. The intent of the parties is further shown by the fact that the Bundalians P500,000.00 collectibles due from the government for completed construction contracts could not be collected on time to pay for the lots advertised for sale in Bulletin Today. The petitioners had to run to the private respondents who had money to lend. The Bundalians received the accounts due from the government only in 1977 after the proceedings in the trial court were well underway.

The stipulation in the contract sharply escalating the repurchase price every month enhances the presumption that the transaction is an equitable mortgage. Its purpose is to secure the return of the money invested with substantial profit or interest, a common characteristic of loans.

The private respondents try to capitalize on an admission by Mrs. Bundalian that she "accepted" the transaction knowing it to be a contract of sale with right of repurchase. The reliance is grounded on shaky foundations. The Bundalians were in the construction business and knew quite well what they were signing. But vendors covered by Article 1602 of the Civil Code are usually in no position to bargain with the vendees and will sign onerous contracts to get the money they need. It is precisely this evil which the Civil Code guards against. It is not the knowledge of the vendors that they are executing a contract of sale pacto de retro which is the issue but whether or not the real contract was one of sale or a loan disguised as a pacto de retro sale.

The contract also provides that "it is agreed that the vendor shall have the right to possess, use, and build on, the property during the period of redemption." When the vendee acknowledged the right of

the vendor to retain possession of the property the contract is one of loan guaranteed by mortgage, not a conditional sale or an option to repurchase. (Macoy vs. Trinidad, et al., 95 Phil. 192).

The respondents' contention that the right to possess, use, or build on the lots embodied in the contract was a mere "right" and not actual possession appears to be sophistry. The records show that the Bundalians construction equipment such as tractors, payloaders, and bulldozers were on the lots. A shop was built on the premises. Mr. Bundalian testified that from the time he purchased the property from the estate of Mrs. Virata up to the "minute" he testified, he never lost possession. The Bundalians paid the real estate taxes on the lots. As against the express provision of the contract and the actual possession by the petitioners, the private respondents come up with a far fetched argument that since the titles to the lots were in their hands, they were the ones in legal possession. Parenthetically, the titles in their hands were still in the name of the estate of Agapita Sarao Vda. de Virata, the original vendor-owner.

IN VIEW OF THE FOREGOING, the decisions of' the respondent Court of Appeals and the trial court are hereby REVERSED; and SET ASIDE. The deed of sale with right to repurchase is declared as an equitable mortgage. The petitioners are ordered to pay their debt to the private respondents with legal rate of interest from the time they acquired the loan until it is fully paid.

SO ORDERED.


SECOND DIVISION

G.R. No. L-42282 February 28, 1983

HERMENEGILDO R. ROSALES, plaintiff-appellant, vs.PEREGRIN YBOA, Provincial Deputy Sheriff of Samar and the REGISTER OF DEEDS for the Province of Samar, defendants-appellees.

DE CASTRO, J.:

This case was certified to this Court by the former Court of Appeals per its Resolution of November 13, 1975 the appeal thereto made having raised purely legal question, which is whether or not the Court of First Instance of Samar, in Civil Case No. 5325 entitled "Hermenegildo Rosales vs. Peregrin Yboa, et al., " erred in declaring the legality and validity of the redemption made by the mortgagor Pedro Oliverio of his titled property.

It appears that by virtue of the foreclosure of real estate mortgage duly executed by the mortgagor Pedro Oliverio in favor of the Development Bank of the Philippines, as security for the payment of the amount of P12,000.00, and after giving notice of the date, time and place of sale as required by law, defendant-appellee Deputy Sheriff of Samar Peregrin Yboa, sold at public auction on January 28, 1970 to plaintiff-appellant Rosales, the highest bidder, for the total amount of fourteen thousand five hundred pesos (P14,500.00), the parcel of land covered by T.C.T. No. T-646 of the Register of Deeds for the Province of Samar. The corresponding Sheriff's certificate of sale was issued in favor of plaintiff-appellant, which certificate was registered in the Office of the Register of Deeds for the Province of Samar on February 3, 1970.

On January 23, 1971, after the mortgagor Pedro Oliverio had served notice in writing of the redemption and had paid on said date to defendant-appellee Deputy Sheriff the principal amount of P14,500.00 plus P1,691.00 representing the one (1 %) per centum interest per month, the latter executed a Deed of Certificate of Redemption restoring, conveying and assigning unto the said mortgagor, his heirs and assigns all the estate, right, title and interest on said foreclosed property.

On March 10, 1971, plaintiff-appellant filed the instant complaint for cancellation of certificate of redemption alleging that no valid redemption was effected because while the mortgagor had paid within the period of redemption the purchase price in the sum of P14,500.00 plus P1,691.00 representing 1 % interest per month, he, however, failed to tender payment of 1) the full interest on the purchase price, while should be P1,715.84, instead of Pl,691.00 actually paid by the mortgagor, thereby leaving a deficiency in the sum of P24.84; 2) the sum of P3.00 representing the registration fee of the certificate of sale, plus interest thereon of P0.04; 3) the delinquent real estate taxes of the subject property for the years 1960 to 1970 amounting to P745.47; and 4) the Sheriff's commission in the sum of P99.82.

On March 22, 1971, defendants-appellees filed an answer alleging that while it is true that mortgagor Pedro Oliverio has tendered to defendant- appellee Deputy Sheriff the amount of P14,500.00 plus Pl,691.00 for redemption purpose, the sum tendered being the amount of the auction purchase price plus 1% interest per month thereon up to the time of redemption and the tender being timely made and in good faith, the same is a valid one according to Section 30, Rule 39 of the Rules of Court; that granting in arguendo, that the property subject of redemption is delinquent in the payment of real estate taxes for the years 1960 to 1970 in the total amount of P745,47, it will not in anyway affect the regularity and validity of the redemption for no written notice that any such assessments or taxes are paid by the plaintiff-appellant as purchaser, was given to defendant appellee Deputy Sheriff who made the sale thereof and such not have filed, the property may be redeemed even without

paying such assessments or taxes.

On August 16, 1971, the trial court conducted a pre-trial of the case. After such pre-trial and upon motion of -plaintiff-appellant, the trial court rendered a summary judgment, pursuant to Rule 34 of the Rules of Court, since the answer of defendants-appellees raises no genuine issue of material facts, as well as their admission of the genuineness and due execution of the Certificate of Sale executed by defendant-appellee Deputy Sheriff in favor of plaintiff-appellant; the payment of entry fee and annotation on TCT No. T-640 of the Certificate of Sale in the sum of P3.00; the Certificate of Redemption executed by defendant-appellee Deputy Sheriff in favor of mortgagor Pedro Oliverio; the Certificate of Delinquency of real estate taxes of the subject property in the amount of P745.47; and the non-payment of sheriff's commission in the sum of P99.82. In the summary judgment the trial court dismissed the plaintiff-appellant's complaint and declared that the Certificate of Redemption of the property sold at public auction is valid and legal "without prejudice to the right of the plaintiff-appellant to recover from the redemptioner the sum of P0.67 representing the deficiencies in the 1 % monthly interest 1 and the sum of P3.00 representing the entry and annotation fees of the Register of Deed of Samar for the registration of the Certificate of Sale together with the sum of P0.04 representing interest on the last stated amount from February 3, 1970 to January 23, 1971."

On December 13, 1971, plaintiff-appellant, after receipt of the Summary Judgment, filed his Record on Appeal, Notice of Appeal and Appeal Bond. On May 12,1972, the trial court approved the Record on Appeal and ordered the transmittal of the records of the case to the Court of Appeals. As aforementioned, the Court of Appeals certified the case to this Court on the ground that it involves the purely legal question of whether or not a valid and legal redemption was made by the mortgagor Pedro Oliverio of his titled property.

There is no question that Pedro Oliverio has the right to redeem the subject property, in view of the provisions of section 6 of Act 3135, as amended by Act No. 4148. 2 The procedure for effecting such redemption is contained in section 30, Rule 39 of the Rules of Court, the pertinent portion of which provides:

Sec. 30. Time and manner of, and amounts payable on successive redemptions. Notice to be given and filed .The judgment debtor, or redemptioner, may redeem the property from the purchaser, at anytime within twelve (12) months after the sale, on paying the purchaser the amount of his purchase, with one per centum per month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last roamed amount at the same rate; ...

xxx xxx xxx

Written notice of any redemption must be given to the Officer who made the sale and a duplicate filed with the register of deeds in the province; ...

Pursuant to the above-cited provision, the requisites for a valid redemption are: 1) the redemption must be made within twelve (12) months from the time of the registration of the sale in the Office of the Register of Deeds (Gorospe vs. Santos, 69 SCRA 191; Agbulos vs. Alberto, 5 SCRA 790; Santos vs. Rehabilitation Finance Corporation, et al., 101 Phil. 980; 2) payment of the purchase price of the property involved, plus 1% interest per month thereon, if any, paid by the purchaser after the sale with the same rate of interests (Rosario vs. Tayug Rural Bank, 22 SCRA 1220 cited in Tolentino vs. Court of Appeals, 106 SCRA 513); and 3) written notice of the redemption must be served on the officer who made the sale and a duplicate filed with the Register of Deeds of the province.

There is no dispute, that in the case at bar, the mortgagor Pedro Oliverio tendered payment of the purchase price on January 23, 1971, well within the redemption period of twelve (12) months after the registration of the sale on February 3,1970 and that defendants-appellees Deputy Sheriff of Samar and the Register of Deeds of Samar were duly notified in writing of the mortgagor's desire to

redeem the subject property. Equally beyond question is the fact that mortgagor Pedro Oliverio tendered the sum of P14,500.00 corresponding to the purchase of the property, and the amount of P1,691.00 representing the 1% monthly interest thereon, although the trial court found a deficiency of P0.67 due and owing to the plaintiff-appellant. The mortgagor, therefor, has substantially complied with the requirements of the law to effect redemption, for which reason a Certificate of Redemption was issued in his favor by defendant-appellee Deputy Sheriff.

But plaintiff-appellant would insist that although mortgagor Pedro Oliverio had tendered payment of the purchase price of P14,500.00 and the interest of P1,691.00, nevertheless, no valid redemption was effected by the latter, since there are still four deficiencies which the mortgagor failed to pay. Firstly, plaintiff-appellant would contend that there is still a deficiency interest of P24.84 on the purchase price since the interest thereon should be computed from the date of the auction sale, that is, January 28, 1970, and not from the date of the registration thereof on February 3, 1970. The contention is without merit. Plaintiff-appellant has not cited any authority to support his theory that the interest on the purchase price should be computed from the date of the sale and not from the registration thereof. We rule that since the period of redemption begins only from the date of the registration of the certificate of sale in the Office of the Register of Deeds, it being only then that the certificate takes effect as a conveyance, 3 the computation of the interest on the purchase price should also be made to commence from that date.

Secondly, although the amount of P3.00 representing the registration fee incurred by plaintiff-appellant may be considered as any assessments or taxes which the purchaser may have paid thereon after purchase," still the non-payment of this amount by the mortgagor Pedro Oliverio will not render invalid his redemption, since, as discussed above, he has substantially complied with the legal requirements for a valid redemption.

Thirdly, as to the non-payment of real estate taxes of the subject property for the years 1960 to 1970 amounting to P745.47, the same should not affect the regularity and validity of the redemption made by the mortgagor Pedro Oliverio. The latter is not legally bound to pay such amount to plaintiff-appellant as purchaser, for Section 30, Rule 39 clearly provides that "the judgment debtor, or redemptioner, may redeem the property... on paying the purchaser ... the amount of any assessments or taxes which the purchaser may have paid thereon after purchase; and interest on such last-named amount at the same rate." Nowhere in the Records is it shown that plaintiff-appellant had paid such amount. On the contrary, defendants-appellees in their Answer 4 to plaintiff-appellant's complaint, have averred that no written notice that any assessments or taxes are paid by the latter as purchaser, was given to defendant-appellee Deputy Sheriff of Samar who made the sale thereof. In fact, the Solicitor-General, in his Brief filed in behalf of the defendants-appellees, has made the following observation. 5

We are indeed surprised how appellant was able to secure the registration of his certificate of sale without first paying the delinquent taxes as required by Section 1, Republic Act No. 456.

An extra judicial foreclosure sale being in the nature of a voluntary transaction, appellant should have been required by the Register of Deeds of Samar to pay the delinquent land taxes on the subject property before registering his certificate of sale. Payment of delinquent land taxes being a condition precedent to the registration of appellant's Certificate of Sale, but which, somehow, he was able to evade, he cannot now avail of the issue of such delinquent land taxes to defeat the mortgagor's right of redemption.

Finally, the non-payment of the Sheriff's Commission in the sum of P99.82 will not, likewise, affect the validity of redemption since such amount is not included in the payments required of a redemptioner as set forth in said Section 30 of Rule 39.

In fine, We hold that the failure of the mortgagor Pedro Oliverio to tender the amount of P745.47 representing the delinquent real estate taxes of the subject property, the registration fee of P3.00 and the interest thereon of P0.04, the Sheriff's Commission in the sum of P99.82, and the deficiency interest on the purchase price of

the subject property, will not render the redemption in question null and void, it having been established that he has substantially complied with the requirements of the law to effect a valid redemption, with his tender of payment of the purchase price and the interest thereon within twelve (12) months from the date of the registration of the sale. This ruling is in obedience of the policy of the law to aid rather than to defeat the right of redemption. 6

WHEREFORE, the decision of the court a quo is hereby affirmed, without costs.

SO ORDERED.

Makasiar (Chairman), Concepcion, Jr., Guerrero, Abad Santos and Escolin, JJ., concur.


SECOND DIVISION

G.R. No. L-66597 August 29, 1986

LEONARDO TIOSECO, petitioner, vs.HONORABLE COURT OF APPEALS JOSE P. VILLANUEVA and TIMOTEA P. VILLANUEVA, respondents.

Jose T. Sumat for petitioner.

Amado F. Nera for respondents.

PARAS, J.:

A petition for review by certiorari of the decision of the respondent Intermediate Appellate Court in AC-G.R. CV No. 68888 promulgated on December 27, 1983, as well as of the Resolution of said appellate court promulgated on February 13, 1984 denying the Motion for Reconsideration of the aforesaid decision.

The facts of this case are as follows: The respondent spouses Jose P. Villanueva and Timotea P. Villanueva mortgaged to the Tarlac Branch of the Philippine National Bank three lots described in OCT No. C-542 issued by the Register of Deeds of Tarlac to secure payment of a loan of EIGHT THOUSAND SIX HUNDRED (P8,600.00) PESOS. When they failed to comply with the mortgage contract, the Philippine National Bank petitioned the Provincial Sheriff of Tarlac to foreclose upon the properties extrajudicially. The Provincial Sheriff in the public auction he conducted on March 7, 1977 sold the lots to Leonardo Tioseco, herein petitioner, as the highest bidder for the amount of EIGHTEEN THOUSAND NINE HUNDRED AND SEVENTY FIVE (P18,975.00) PESOS.

The certificate of sale dated March 7, 1977 issued by the Provincial Sheriff to Tioseco was registered in the Office of the Register of Deeds of Tarlac on March 8, 1977. Tioseco's ownership over the properties was consolidated, the title of the spouses Villanueva was cancelled and TCT No. 141194 was issued to Tioseco by the Register of Deeds on March 7, 1978.

It is claimed by Tioseco that sometime before March 9, 1978 respondents Villanueva visited him in his house and offered to pay the amount he had paid for the three lots auctioned off on March 7, 1977. Tioseco told them that they could redeem the three lots by paying to him the amount he paid at the auction sale plus interest. The respondents promised to return, but never did.

Upon the other hand, it is claimed by the respondents that they offered to redeem the three lots within the period of redemption but Tioseco allegedly demanded TWENTY TWO THOUSAND SIX HUNDRED FORTY ONE PESOS AND EIGHT CENTAVOS (P22,641.08) as redemption price. Finding the amount demanded excessive, the respondents Villanueva filed a suit on March 7, 1978 to annul the sale in favor of Tioseco on the ground that it was irregular and to require both the Philippine National Bank and Tioseco to determine the amount they should pay to be able to redeem the three lots.

The Philippine National Bank stated in its answer that at the time of the auction sale of the three lots on March 7, 1977 the amount of EIGHTEEN THOUSAND NINE HUNDRED SEVENTY FIVE (P18,975.00) PESOS was due from the respondents. The amount included the principal of the loan, accrued interest, service charges, expenses of foreclosure, and attorney's fees. The answer also stated that the auction sale conducted by the Provincial Sheriff was in accordance with the formalities and other requirements prescribed by law.

In his answer, Tioseco denied having demanded the sum of TWENTY TWO THOUSAND SIX HUNDRED FORTY ONE PESOS AND EIGHT CENTAVOS (P22,641-08) from the respondents.

After trial the lower court rendered its decision, the dispositive portion of which reads-

WHEREFORE, the plaintiffs are allowed to redeem the properties covered by TCT No. 141194 of the Register of Deeds of Tarlac by the payment to the defendant Tioseco of the amount of EIGHTEEN THOUSAND NINE HUNDRED SEVENTY FIVE (P 18,975.00) PESOS plus 1% per month interest thereon in addition from the time of the sale on March 7, 1977 to the time of redemption, plus any assessment for taxation which defendant Tioseco may have paid thereon and the interest on such amount at the same rate and all other expenses specified in Sec. 30, Rule 39 of the Rules of Court within 30 days from the finality of this judgment, without pronouncement as to costs,

On appeal by petitioner, the Intermediate Appellate Court affirmed in toto the decision of the lower court. With the denial of his motion for reconsideration, the petitioner filed this petition for review of the decision of the appellate court.

Petitioner made the following assignment of errors:

I

THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT LEONARDO TIOSECO PUT UP AN AMOUNT BIGGER THAN WHAT WAS PROPER TO PREVENT THE PLAINTIFFS FROM EXERCISING THEIR RIGHTS OF REDEMPTION.

II

THE TRIAL COURT ERRED IN HOLDING THAT THE FAILURE OF THE PLAINTIFFS TO MAKE A VALID TENDER AND TO CONSIGN THE AMOUNT IN COURT ASSUMES SUBORDINATE IMPORTANCE AND THE PLAINTIFFS DESPITE SUCH FAILURE TO COMPLY BY THE STATUTORY REQUIREMENTS FOR LEGAL REDEMPTION, ARE STILL ENTITLED TO MAKE THE REDEMPTION.

III

THE TRIAL COURT ERRED IN ALLOWING THE PLAINTIFFS TO REDEEM THE PROPERTIES COVERED BY TCT NO. 141194 OF THE REGISTER OF DEEDS OF TARLAC AFTER TIOSECO'S OWNERSHIP TO THE PROPERTIES WAS CONSOLIDATED. (pp. 9-10, Rollo).

We prescind from the assignment of errors raised and proceed directly to the question presented before this Court: Have the respondents exercised their right of redemption effectively? We answer in the affirmative.

There is no question that the respondents have the right to redeem the subject property in view of the provision of Section 25, P.D. No. 694 (Revised Charter of PNB):

SEC. 25. Right of redemption of property-Right of possession during redemption period.—Within one year from the registration of the foreclosure sale of real estate, the mortgagor shall have the right to redeem the property by paying all claims of the Bank against him on the date of the sale including all the costs and other expenses incurred by reason of the foreclosure sale and custody of the property, as well as charges and accrued interests.

xxx xxx xxx

When the respondents chose to enforce their right of redemption thru a court action on March 7, 1978 they were well within their right as the action was filed within one year from the registration of the foreclosure sale of the real estate on March 9, 1977. P.D. No. 694 is silent as to any formal tender of repurchase price as a pre-condition to a valid exercise of the right of redemption. It does not even require any previous notice to the vendee, nor a meeting between him and the redemptioner, much less a previous formal tender before any action is begun in court to enforce the right of redemption. In any case, the lack of funds which may render the right inefficacious cannot affect the existence of the right. In fact, the filing of the action itself, within the period of redemption, is equivalent to a formal offer to redeem (see Reoveros v. Abel and Sandoval, 48 O.G. 5318). And in this connection, a formal offer to

redeem, accompanied by a bona fide tender of the redemption price, altho proper, is not even essential where, as in the instant case, the right to redeem is exercised thru the filing of judicial action.

In the instant case, the ends of justice would be better served by affording the respondents the opportunity to redeem the subject property. This ruling is in obedience to the policy of the law to aid rather than to defeat the right of redemption. (Javellana v. Mirasol and Nunez, 40 Phil. 761).

WHEREFORE, the petition for certiorari is DENIED and the judgment appealed from is AFFIRMED. Costs against the petitioner.

SO ORDERED.


SECOND DIVISION

G.R. No. L-52831 July 29, 1983

MANUEL R. DULAY, petitioner, vs.HON. JUDGE GLICERIO V. CARRIAGA, Judge of the Court of First Instance of Cotabato, and EUSEBIO C. TANGHAL, respondents.

Fructuoso S, Villarin for petitioner.

Miguel B. Albar for private respondent.

CONCEPCION JR., J.:

Petition for certiorari, with preliminary injunction, to annul and set aside the order of the respondent judge which annulled the redemption of several parcels of land levied upon and sold at an execution sale.

In Civil Case No. 2152 of the Court of First Instance of Cotabato, an action for the recovery of a sum of money, the trial court rendered a decision ordering the defendant, Manuel R. Dulay, the petitioner herein, to pay the plaintiff, Eusebio C. Tanghal, the herein private respondent, the sum of P143,980.00. Seventeen (17) parcels of land belonging to the defendant were, consequently, levied upon then sold at a public auction sale to the plaintiff, as the highest bidder thereof, at prices profferred and fixed for each parcel, for the sum of P82,598.00. 1 Within the reglementary period for redemption, the defendant redeemed eight (8) of the levied properties by paying the prices at which they were actually sold in the auction sale, for the sum of P17,017.00, and was issued a Certificate of Redemption. 2 Upon motion of the plaintiff, however, the trial court citing the case of Development Bank of the Philippines vs. Dionisio Mirang, 3 declared the redemption as null and void on the ground that piece-meal redemption is not allowed by law and that for redemption to be valid, the judgment debtor should pay the entire judgment debt and not the purchase price. 4 Hence, this petition for certiorari with preliminary injunction, to annul and set aside the order of the respondent judge. As prayed for, the Court issued a temporary restraining order, restraining the respondents from enforcing the questioned order. 5

There is merit in the petition. In the redemption of properties sold at an execution sale, the amount payable is no longer the judgment debt, but the purchase price. In the case of Castillo vs. Nagtalon, 6 the Court said:

The procedure for the redemption of properties sold at execution sale is prescribed in Sec. 26, Rule 39 of the Rules of Court. Thereunder, the judgment debtor or redemptioner may redeem the property from the purchaser within 12 months after the sale, by paying the purchaser the amount of his purchase, with I % per month interest thereon up to the time of redemption, together with the taxes paid by the purchaser after the purchase, if any. In other words, in the redemption of properties sold at an execution sale, the amount payable is no longer the judgment debt but the purchase price. Considering that appellee tendered payment only of the sum of P317.44, whereas the 3 parcels of land she was seeking to redeem were sold for the sums of P1,240.00, P24.00 and P30.00, respectively, the aforementioned amount of P317.44 is insufficient to effectively release the properties. However, as the tender of payment was timely made and in good faith, in the interest of justice We incline to give the appellee opportunity to complete the redemption purchase of the 3 parcels as provided in Sec. 26, Rule 39 of the Rules of Court, within 15 days from the time this decision becomes final and executory.

Should appellee fail to complete the redemption price, the sheriff may either release to appellee the 2 smaller lots and return the entire deposit without releasing any of the 3 lots, as the appellee may elect.

The case of DBP vs. Mirang, relied upon by the respondent judge, wherein the Court ruled that the mortgagor whose property has been sold at public auction, either judicially or extrajudicially, shall have the right to redeem the property by paying an the amounts owed to the mortgage on the date of the sale, with interest thereon at the rate specified in the contract and not the amount for which the property was acquired at the foreclosure sale is not controlling because of different factual settings. The Mirang case involves the redemption of mortgaged property sold at a foreclosure sale and the mortgagor was ordered to pay his entire indebtedness to the mortgagee, plus the agreed interests thereon, before redemption can be effected, because the charter of the mortgagee (DBP) required the payment of such amount. The Court said:

The third issue has likewise been resolved by this Court in a similar case. The issue posed there involved the price at which the mortgagor should redeem his property after the same had been sold at public auction — whether the amount for which the property was sold, as contended by the mortgagor, or the balance of the loan obtained from the banking institution, as contended by the mortgagee RFC. Cited in that case was Section 31 of Com. Act No. 459, which was the special law applicable exclusively to properties mortgaged with the RFC, as follows:

The mortgagor or debtor to the Agricultural and Industrial Bank whose real property has been sold at public auction, judicially or extra-judicially, for the full or partial payment of an obligation to said Bank, shall, within one year from the date of the auction sale, have the right to redeem the real property by paying to the Bank an the amount he owed the latter on the date of the sale, with interest on the total indebtedness at the rate agreed upon in the obligation from said date, unless the bidder has taken material possession of the property or unless this has been delivered to him, in which case the proceeds of the property shall compensate the interest. ...

The same provision applies in the instant case. The unavoidable conclusion is that the appellant, in redeeming the foreclosed property, should pay the entire amount he owed to the Bank on the date of the sale, with interest thereon at the rate agreed upon.

The instant case, on the other hand, involves the redemption of property levied upon and sold at public auction to satisfy a judgment and, unlike the Mirang case, there is no charter that requires the payment of sums of money other than those provided for in Section 30 of Rule 39, Revised Rules of Court.

Redemption of properties mortgaged with the Philippine National Bank and the Development Bank of the Philippines and foreclosed either judicially or extrajudicially are governed by special laws which provide for the payment of all the amounts owed by the debtor. This special protection given to government lending institutions is not accorded to judgment creditors in ordinary civil actions,

WHEREFORE, the writ prayed for is GRANTED and the order issued on January 11, 1978 should be, as it is hereby, ANNULLED and SET ASIDE. The temporary restraining order heretofore issued is hereby. made permanent. With costs against the private respondent Eusebio C. Tanghal.

SOORDERED.

Makasiar (Chairman), Aquino, Guerrero, Abad Santos and Escolin, JJ., concur.

De Castro, J., is on leave.


EN BANC

G.R. No. L-60208 December 5, 1985

PHILIPPINE NATIONAL BANK, petitioner, vs.THE HONORABLE COURT OF APPEALS AND DIVINA ALIM, respondents.

Juan J. Diaz, Benjamin C. del Rosario and Cesar Basa for petitioner.

ALAMPAY J.:

Civil Case No. 7927 which is an action for Annulment of Extrajudicial Foreclosure and Sale of Real Properties and for Damages with Prayer for Preliminary Injunction was filed on April 26, 1975 by the private respondent herein against the Philippine National Bank (PNB) in the Court of First Instance of Quezon Province. On November 27. 1979 a decision was rendered by said court enjoining defendant Philippine National Bank from consolidating its title over the mortgaged properties and directing said bank to allow the private respondent, Divina B. Alim, to redeem the mortgaged properties by accepting payment from the latter; and dismissing all the claims and counterclaims that the parties may have against each other in connection with the case.

This decision which was appealed by the defendant PNB was affirmed on March 25, 1982 by the First Division of the Court of Appeals in CA-G.R. No. 67131-R.

As succinctly stated in the decision of the Court of Appeals, the following material facts are not disputed. These appear to be as follows:

... On February 2, 1968 plaintiff Divina Alim obtained a loan in the total amount of P40,000 from defendant Philippine National Bank secured by three (3) parcels of land registered in the name of herein plaintiff and covered by the following title-

(a) Transfer Certificate of Title No.8384 of the Register of Deeds of Lucena City comprising a house of strong materials located along the National Highway, Iyam District, Lucena City, and a lot with an area of 540 square meters, more or less;

(b) Transfer Certificate of Title Nos. T-79631 and T-79632 of the Registry of Deeds for the Province of Quezon, containing an area of 58 hectares each of a total of 116 hectares, planted with coconut trees.

For failure of the plaintiff to pay her total obligation upon maturity date, defendant Philippine National Bank extrajudicially foreclosed the mortgage properties and the Provincial Sheriff of Quezon sold the properties at public auction on February 12, 1973. The defendant Philippine National Bank being the only bidder in said auction sale, all the aforementioned mortgaged properties were sold to the bank for the amount of P59,320.00 which was the total obligation of the plaintiff as of the date of the sale. The said amount already included the principal obligation, attorney's fees and other charges, interests on said amounts plus costs of publication of the Sheriff's notice of auction sale. "On April 26, 1975, plaintiff instituted the present case for the annulment of the aforesaid extrajudicial foreclosure and sale and for damages with prayer for preliminary injunction."

From the decision rendered by the Court of First Instance of Quezon Province, it can be noted that during the pendency of the case in the said court the parties attempted to confer with the end in view of settling this case amicably and in the course thereof the plaintiff deposited with defendant bank a sufficient amount to cover the loan and interest thereon as of February 12, 1973 including reimbursement for costs of publication. Thus at the pre-trial, the parties agreed to submit the case for decision only upon the issue as

to whether or not the plaintiff should still pay interest specified in the mortgage after the auction sale on February 12, 1973.

The defendant Philippine National Bank contends that the plaintiff is still obligated to pay the said interest citing the provisions of Presidential Decree No. 694, as amended by Presidential Decree No. 1478, particularly Section 25, paragraph 2 thereof.

On the other hand, plaintiff Divina Alim, the private respondent herein cites the case of the Development Bank of the Philippines versus Jovencio A. Zaragosa, et al., 84 SCRA 668, where it was therein ruled that when the foreclosure proceedings are completed all interests of the mortgagor are cut off from the property and that this principle is applicable to an extrajudicial foreclosure.

In rendering the decision in favor of plaintiff Divina Alim, The trial court reasoned out—

... In the case at bar, the foreclosure and subsequent sale of the properties were valid, but because of the timely filing of this case and in view of the Order of June 9, 1975, the consolidated sale could not be made. In the light, therefore, of the above cited ruling of the Supreme Court, (DBP vs. Zaragosa, et al., supra) after the public auction sale on February 12, 1973, the defendant Philippine National Bank can no longer demand payment of interest on the property should the mortgagor exercise her right of redemption." (Annex "B" of Petition, Record on Appeal, p. 101: parenthesis supplied)

This ruling which was sustained by the then Court of Appeals is now the subject of the Petition for Review on certiorari presented to this Court by the Philippine National Bank.

In its petition, the PNB assails the decision of the defunct appellate court and contends that the interests specified in the mortgage should still be added to the bid or purchase price computed from the time of the auction sale up to the date the mortgaged properties are redeemed as clearly authorized by law. Petitioner invokes Republic Act No. 1300, the original Charter of the PNB, Presidential Decree No. 694 (1975), Republic Act No. 337 known as the General Banking Law and Rule 39 of the Rules of Court, all of which petitioner PNB claims authorize the imposition of the interest specified in the mortgage.

What appears from the case records is that the extrajudicial foreclosure proceedings instituted by the PNB was commenced on May 25, 1972, pursuant to a petition for sale under Act No. 3135 filed by its counsel with the Provincial Sheriff for Quezon Province. But this PNB sought the freclosure and sale of the properties of the �herein private respondent and directed said Sheriff to publish the Notice of Sale in the Quezon Times, Lucena City. In consequence of said petition the Provincial Sheriff sold at public auction the properties of herein private respondent to the Philippine National Bank, upon the latter's bid of P59,320.00. The corresponding Certificate of Sale was executed by the Sheriff in favor of the Philippine National Bank on February 16, 1973.

Considering that the very step initiated by the Petitioner was a petition for Sale under Act No. 3135 (Annex F. Complaint, Record on Appeal, Rollo, p. 26), the applicable law then would be no other than the said statute. Act No. 3135 being a special law that governs particularly extrajudicial foreclosures, it necessarily excludes the application in this instance of the General Banking Act and the provisions on redemption under the Revised Charter of PNB, Presidential Decree No. 694, which was enacted only in 1975. In the case at bar the mortgage contract was entered into in 1968. In 1968, the governing law on PNB operations was Republic Act No. 1300 but it has been held that "Republic Act 1300 does not contemplate extrajudicial foreclosure" (Co vs. PNB, L-51767, June 29, 1982, 114 SCRA 842, 855).

Since the applicable law is Act 3135, the provisions of Section 30, Rule 39, Rules of Court shall be determinative of the sole issue presented in this case. Section 6 of Act 3135, as amended by Act 4018, provides:

Sec. 6. — In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtro, his successors in interest or any judicial creditor or judgment creditor of said debtor,

or any person ahving a lein on the proeprty subsequent to the mortgage or deed of trust under which the property is old, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four, inclusive, of the Code of Civil Procedure, in so far as these are not incosistent with the provision of this Act. (emphasis supplied.)

Section hundred sixty-four to four hundred sixty-six inclusive, of the Code of Civil Procedure, became Sections 29, 30, and 34 of Rule 39 of our Rules of Court. The same secitons were reiterated in the Revised Rules of Court in July 1964 (Co vs. PNB, supra).

Pursuant to Section 30 of Rule 39, the redemptioner, who is the private respondent herein, "may redeeem the property from the purchaser at any time within twelve (12) months after the sale, on paying the prchaser the amount of his purchase, with one per centum per month interest thereon in addition, up to the time of redemption, togethere with the amount of any assessments or taxes which the purchaser may have paid therein after purchase and interest on such last named amount at the same interest rate; ..."

This would rightfully be so because, as stated in the case of DBP vs. Zaragosa, supra, when the foreclosure proceedings are completed and the mortgaged property is sold to the purchaser then all interest of the mortgagor are cut off from the property Prior to the completion of the foreclosure, the mortgagor is liable for the interests on the mortgage. However, after the foreclosure proceedings and the execution of the corresponding certificate of sale of the property sold at public auction in favor of the successful bidder, the redemptioner mortgagor would be bound to pay only for the amount of the purchase price with interests thereon at the rate of one per centum per month in addition up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after the purchase and interest on such last named amount at the same rate.

WHEREFORE, the petition in this case is hereby granted. The decision appealed from is affirmed with modification, so as to read as follows:

(a) Making the writ of preliminary injunction issued by this Court in its Order of June 9, 1985, permanent and irrevocable;

(b) Allowing the plaintiff to redeem the mortgaged properties by paying the amount of the purchase with interests thereon at the rate of one per centum per month up to the date of her deposit of the redemption price and ordering the defendant to accept payment from the plaintiff;

(c) Dismissing all the claims and counterclaims that the parties may have against each other in connection with this case.

No costs.

SO ORDERED.


FIRST DIVISION

G.R. No. L-29130 August 8, 1975

DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee, vs.DIONISIO MIRANG, defendant-appellant.

Jesus A. Avanceña and Lualhati Estrella-Hilario for plaintiff-appellee.

Roque V. Desquitado for defendant-appellant.

MAKALINTAL, C.J.:

This appeal was originally taken to the Court of Appeals, which certified it here because it involves purely legal questions. The appealed decision was rendered by the Court of First Instance of Davao on May 14, 1963 in its Civil Case No. 3762, and modified by its Order of July 1, 1963. It directed the defendant, now appellant, to pay the plaintiff Development Bank of the Philippines, now appellee, the sum of P16,013.13 plus 6% interest per annum from July 30, 1957 1 up to the date of payment, but deducting therefrom the sum of P360.00 representing the value of an engine, referred to in paragraph 11 of the stipulation of facts. The defendant was likewise ordered to pay P500.00 as attorney's fees, plus the costs of the suit.

From the stipulation submitted to the trial court it appears that on September 7, 1950 the appellant obtained approval of a loan of P14,000.00 from the Rehabilitation Finance Corporation, 2 secured by a first mortgage on defendant's homestead, for the following purposes:

P1,000 for purchase of work animals and farm implements; P1,500 for construction of farmhouse and laborers' quarters; and P11,500 for development and maintenance of 18.5 hectares of abaca land.

The loan was released gradually to the appellant up to a total of P13,000.00. Thereafter the appellee refused to make any further releases because the plantation which was being financed was attacked by mosaic disease, which destroyed the abaca plants. The appellant, on his part, failed to pay the yearly amortizations; so in accordance with the terms of the promissory notes he had signed and the mortgage contract itself, the provincial sheriff of Davao, upon request of the appellee, foreclosed the mortgage extrajudicially under the provisions of Act 3135, as amended, and sold the mortgaged property at public auction on July 30, 1957. By that time the appellant's indebtedness, including interest, had reached P19,714.35, besides the expenses of the auction sale and registration fees, which amounted to P101.00. The appellee, as the highest bidder for P2,010.00, acquired ownership of the mortgaged property. The appellant was duly advised of the sale, with the information that the same was subject to his right of redemption within one year from July 30, 1957. This right he had not exercised when the complaint was filed by the appellee on May 29, 1962.

In his brief the appellant assigns five (5) errors, which may be condensed into the following issues:

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

(2) Whether or not the debtor, appellant Mirang, may be exempted from paying the loan on the ground that it had been granted to him for the purpose of developing his homestead by planting it to abaca, and that said abaca was destroyed by mosaic

disease; or, failing that, whether or not his obligation may be reduced by this Court; and

(3) Whether or not the mortgage debtor who wishes to repurchase his homestead should pay therefor only the price paid by the purchaser at the auction sale, or the total obligation incurred by him and still outstanding.

On the first issue, the appellant contends that because the mortgage was extrajudicially foreclosed and sold at less than the mortgage debt under Act 3135 the appellee is not entitled to recover the deficiency because neither this Act, as amended, nor the mortgage contract itself, contains any provision giving such right to the mortgagee.

The same question has been settled by this Court in the case of Philippine Bank of Commerce vs. Tomas de Vera, 3 where We held:

The sole issue to be resolved in this case is whether the trial Court acted correctly in holding appellee Bank entitled to recover from appellant the sum of P99,033.20 as deficiency arising after the extrajudicial foreclosure, under Act No. 3135, as amended, of the mortgaged properties in question. It is urged, on appellant's part, that since Act No. 3135, as amended, is silent as to the mortgagee's right to recover deficiency arising after an extrajudicial foreclosure sale of mortgage, he (Mortgagee) may not recover the same.

A reading of the provisions of Act No. 3135, as amended, (re extrajudicial foreclosure) discloses nothing, it is true, as to 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 vs. Enriquez, 24 Phil. 584; Banco de las Islas Filipinas vs. Concepcion e Hijos, 53 Phil. 806; Banco Nacional vs. Barreto, 53 Phil. 955.) Under the Rules of Court (Section 6, Rule 70 * ), 'Upon the sale of property, under an order for a sale to satisfy a mortgage or other 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.

Appellant invites the attention of this Court to the new provisions of the Civil Code on pledge, particularly Article 2115, which provides:

The sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount of the principal obligation, interest and expenses in a proper case. ... If the price of the sale is less, neither shall the creditor be entitled to the deficiency, notwithstanding any stipulation to the contrary.

as well as to the fact that in chattel mortgage under Art. 1484, paragraph 3, the creditor shall have no further action to recover any unpaid balance if he has chosen to foreclose the chattel mortgage. These provisions, far from supporting the appellant's stand, militate against it, because they show that when the Legislature intends to bar or occlude a creditor from suing for any deficiency after foreclosing and selling the security given for the obligation, it makes express provision to that effect. In the same case of Philippine Bank of Commerce vs. De Vera, supra, this Court said apropos:

It is then clear that in the absence of a similar provision in Act 3135, as amended, it cannot be concluded that the creditor loses his right given him under the Mortgage Law and recognized in the Rules of Court, to take action for the recovery of any unpaid balance on the

principal obligation, simply because he has chosen to foreclose his mortgage extra-judicially, pursuant to a special power of attorney given him by the mortgagor in the mortgage contract. As stated by this Court in Medina vs. Philippine National Bank (56 Phil. 651), a case analogous to the one at bar, the step taken by the mortgagee-bank in resorting to extra-judicial foreclosure under Act No. 3135, was 'merely to find a proceeding for the sale, and its action cannot be taken to mean a waiver of its right to demand the payment of the whole debt.'

On the second issue the appellant asks that if he cannot be completely absolved he should at least be given a reduction of his indebtedness because of his inability to realize any income from the abaca he planted. His predicament may evoke sympathy, but it does not justify a disregard of the terms of the contract he entered into. His obligation thereunder is neither conditional nor aleatory its terms are clear and subject to no exception.

The third issue has likewise been resolved by this Court in a similar case. 4 The issue posed there involved the price at which the mortgagor should redeem his property after the same had been sold at public auction whether the amount for which the property was sold, as contended by the mortgagor, or the balance of the loan obtained from the banking institution, as contended by the mortgagee RFC. Cited in that case was Section 31 of Com. Act No. 459, which was the special law applicable exclusively to properties mortgaged with the RFC, as follows:

The mortgagor or debtor to the Agricultural and Industrial Bank * , whose real property has been sold at public auction, judicially or extra-judicially, for the full or partial payment of an obligation to said Bank, shall, within one year from the date of the auction sale, have the right to redeem the real property by paying to the Bank all the amount he owed the latter on the date of the sale, with interest on the total indebtedness at the rate agreed upon in the obligation from said date, unless the bidder has taken material possession of the property or unless this has been delivered to him, in which case the proceeds of the property shall compensate the interest. ...

The same provision applies in the instant case. The unavoidable conclusion is that the appellant, in redeeming the foreclosed property, should pay the entire amount he owed to the Bank on the date of the sale, with interest thereon at the rate agreed upon.

WHEREFORE, the decision appealed from is affirmed, with costs.

Teehankee, Esguerra and Muñoz Palma, JJ., concur.


SECOND DIVISION

G.R. No. L-51767 June 29, 1982

LETICIA CO, assisted by her husband MUI YUK KONG, in substitution of CITADEL INSURANCE & SURETY CO., INC., plaintiff-appellee, vs.PHILIPPINE NATIONAL BANK, defendant-appellant.

BARREDO, J:

Direct appeal to this Supreme Court pursuant to Republic Act 5440 from the decision of the Court of First Instance of Rizal, Branch XXI in its Civil Case No. 23101 entitled "Citadel Insurance & Surety Co., Inc. vs. Philippine National Bank", the dispositive portion of which reads:

WHEREFORE, this Court finds that plaintiff has validly exercised the right of redemption herein-before discussed and orders the defendant to:

(a) Accept the amount consigned and deposited pursuant to the Order of this Court on March 11, 1976;

(b) Execute and specifically comply to the effects of the exercise of the right of redemption so that whatever title is due to the plaintiff after redemption may properly accrue to plaintiff;

(c) Deliver and surrender to plaintiff possession over the property in question.

Considering that this case has been submitted for decision based upon four (4) limited questions of law and there being no evidence presented and submitted to support any claim for damages, there is no pronouncement and award of damages as well as costs.

SO ORDERED. (Pp. 180-181, Record on Appeal.)

It goes without saying that under the Act aforementioned by virtue of which this appeal is before Us, the issues We are called upon to resolve are only questions of law.

Briefly stated, the undisputed material facts of this case, as may be culled from the decision of the trial court and elsewhere in the record, are as follows:

On November 10, 1961, the Standard Parts Manufacturing Corporation, hereinafter to be referred to simply as STANDARD, executed a real estate mortgage in favor of herein defendant-appellant Philippine National Bank, hereinafter to be referred to simply as PNB, over properties covered by Transfer Certificates of Title Nos. T-5108 and T-5320, both situated in Baguio City, as collateral for a loan consideration of P500,000.00. On February 20, 1963, the same debtor corporation executed an amended real estate mortgage to include as collateral for the increase of the above loan to P1,000,000.00 a property located at Pasong Tamo Extension within the Municipality of Makati (then part of Rizal Province and now of Metro Manila) covered by Transfer Certificate of Title No. 54474. Additionally, on February 20, 1963, the same corporation executed in favor of PNB a chattel mortgage of its personal properties listed on pages 96 to 108 of the Record on Appeal. On pages 6-7 of appellant's brief it is stated that as of July 19, 1974, the "borrowed loan" of STANDARD totalled P4,296,803.56, and that the said obligation was secured, as aforementioned, by the mortgages on the Baguio and Makati real estates of STANDARD and the chattel mortgage on its personal properties above referred to.

When STANDARD failed to pay its obligation, PNB extrajudicially foreclosed the mortgage on the Baguio properties as well as the chattel mortgage on July 19, 1974, with PNB as the highest bidder for P1,514,305.00. Subsequently, on August 8, 1974, PNB also foreclosed the mortgage on the Makati property and purchased the same, as highest bidder, for P1,363,000.00.

We quote further from appellant's brief:

When Standard Parts failed to pay its obligation, PNB foreclosed the Baguio properties and chattels on July 19, 1974 with it as the highest bidder for P1,514,305.00 and the Pasong Tamo property on August 8, 1974 also with it as the highest bidder for P1,363,000.00. Hence, after foreclosure of the above-mentioned mortgage, the deficiency claim of the Bank against Standard Parts as of August 8, 1974 amounted to P1,434,521.07. Subsequently, a Certificate of Sale dated July 19, 1974 was issued by the Sheriff of Baguio City covering TCT Nos. T-5708 and T-5320 (Annex "C", P.S.F.). A Certificate of Sale dated August 8, 1974 covering TCT No. 54474 was also issued by the Sheriff of Rizal (Annex "D", P.S.F.) and registered on March 14, 1976 in the Registry of Deeds. Upon failure of Standard Parts to redeem the foreclosed properties within the reglementary period, the PNB consolidated titles to the Baguio properties and TCT Nos. 26080 and 26081 (Annexes "E" and "E-1", respectively, P.S.F.) were issued by the Register of Deeds of Baguio City on May 5, 1976 in the name of the Bank. On May 14, 1976, TCT No. 54474 was cancelled and TCT No. S-28133 issued in the name of the PNB.

Meantime, on March 5, 1976, Citadel wrote PNB a letter (Annex "H", P.S.F.) stating therein its desire to redeem the property covered by TCT No. 54474, it being the alleged assignee of the right of redemption of Standard Parts with respect only to said property. Citadel, however, offered to redeem the property for only P1,621,970.00. In its reply to said letter, PNB, in a letter dated March 5, 1976 (Annex "I", P.S.F.), justifiably refused to accept the tender of payment of Citadel considering that the amount of P1,621,970.00 was very much lower than the Bank's total amount of P3,366,546.42 as of March 5, 1976 per the Statement of Account of Standard Parts (Annex "G", P.S.F.). (Pp. 7-9, Brief of PNB)

To Our mind then, the facts that are decisive herein are the following:

1. The mortgages here in question were constituted way back in 1961 to 1963.

2. The foreclosure sale of the Baguio properties and the chattels took place on July 19, 1974 and that of the Makati estate on August 8, 1974.

3. Citadel Insurance & Surety Co., Inc. (CITADEL, for short) to whom STANDARD had in the meanwhile (or on February 20, 1976) transferred its rights in the mortgages here in issue, wrote PNB on March 5, 1976 stating that it was redeeming the Makati property, offering to pay therefor as redemption price P1,621,970.00. The letter of CITADEL in this regard reads thus:

CITADEL INSURANCE & SURETY CO., INC. Suite 202 Sikatuna Bldg., Ayala Ave.Makati, RizalTel. No. 87-33-07 & 87-34-44

March 5, 1976

PHILIPPINE NATIONAL BANK Escolta, Manila

Re: Legal Redemption of Extra-Judicial Foreclosed Property of Standard Parts Manufacturing Corporation Under Act No. 3135, As amended

Gentlemen:

In connection with the above-mentioned property which is covered by TCT No. 54474 of the Register of Deeds For the Province of Rizal we wish to inform you that the CITADEL INSURANCE & SURETY CO., INC., is the Assignee of the right of redemption, which will expire on March 11, 1976, by virtue of a "Deed of Assignment and Waiver of Redemption Rights" dated February 29, 1976, photostat copy of which is attached to this letter as Annex "A".

As assignee of the aforementioned Right of Redemption, our Company is now exercising the same by tendering to you the redemption price computed as follows:

P1,363,000.00 — total bid of the PNB per its letter to the Sheriff dated August 8, 1974;

P 258,970.00 — interest at the rate of 1% a month from the date of auction, August 8, 1974, up to the time of redemption;

P1,621,970.00 — TOTAL

as evidenced by RCBC Manager's Check No. MC 194188 dated March 4, 1976, which is attached to this letter as Annex "B".

In view of the foregoing, kindly acknowledge the receipt of the redemption amount and cause the issuance of the corresponding Certificate of Redemption in favor of our Company.

Thank you.

Very truly yours,

(Sgd.) FRANCISCO S. CORPUS

President

Atty.: a/s (Pages 131-133, Record on Appeal)

4. Immediately or on even date PNB rejected the above tender, contending that the offered price was much lower than P3,366,546.42, 1 as of said date March 5, 1976, which PNB maintained was the correct redemption price. The following was the reply of PNB:

PHILIPPINE NATIONAL BANKLEGAL DEPARTMENT

March 5, 1976

Mr. Francisco S. CorpusPresidentCitadel Insurance & Surety Co., Inc.202 Sikatuna Bldg., Ayala Ave. Makati, Rizal

Dear Mr. Corpus:

This refers to your letter of March 5, 1976 wherein you expressed your desire to redeem the property covered by TCT No. 54474 of the Register of Deeds of Rizal which we acquired from Standard Parts Manufacturing Corp. in the amount of P1,621,970.00 in the form of RCBC Manager's Check No. MC 194188 dated March 4, 1976.

We feel that the Legal Department is in no position to decide the acceptance of your offer because it appears that the amount offered is less than our total claim. We suggest, therefore, that you see either Vice President Andres L. Africa or Asst. Vice Pres. Raul Leveriza on Monday March 8,1976.

Very truly yours, (Sgd.) ARTEMIO S. TIPONSenior Supervising Atty.

(Pp. 133-134, Record on Appeal.)

5. The Certificate of Sale dated August 8, 1974 covering TCT No. 54474 was issued by the Sheriff of Rizal and registered on March 14, 1976 in the Registry of Deeds. (Page 8, PNB's brief) Notably, however, according to the decision of the trial court, the certificate of sale was registered on March 11, 1976. (6, Record on Appeal.)

6. On March 11, 1976, CITADEL filed the instant action in the court below with the following prayer:

P R A Y E R

WHEREFORE, it is respectfully prayed that upon the filing of this complaint this Honorable Court forthwith issue an order authorizing its Branch Clerk to accept a Manager's Check in the amount of P1,621,970.00 and deposit the same with the Rizal Commercial Banking Corporation under a Savings Account in order that the same shall not remain Idle, and in the name, of defendant PNB, subject to the control and disposition of this Honorable Court; and after hearing, judgment be rendered;

(a) Ordering defendant to accept the amount so deposited, and/or such amount as may be found by this Honorable Court to be the lawful redemption price for the particular property in question;

(b) Ordering defendant to turn over the title and possession of the property in question to plaintiff together with its fruits from March 11, 1976 up to the time possession is actually surrendered to the plaintiff, plus the interests thereon counted from the date of filing of this complaint;

(c) Ordering defendant to execute such documents and papers that may be necessary for the transfer of the title and possession of the property in question to plaintiff;

(d) Ordering defendant to pay plaintiff damages in the form of attorney's fees and expenses of litigation, the amount of which is left to the sound discretion of this Honorable Court;

(e) Ordering the defendant to pay the costs of suit.

PLAINTIFF FURTHER PRAYS for such other relief as may be found just and equitable in the premises. (Pp. 6-8, Record on Appeal.)

7. There is no dispute that a manager's check of the Rizal Commercial Banking Corporation No. MC 194188 dated March 4, 1976 and in the amount of P1,621,970.00 (Pp. 14-15, Record on Appeal) accompanied the complaint and was actually deposited under a savings account with the same bank by order of the trial court of the same date "in the name of the PNB subject to the control and disposition of the Court." (p. 20, Record on Appeal.)

In the light of the foregoing facts, the parties stipulated in the partial stipulation facts they submitted to the trial court that:

B. Limitation of issues

The parties agreed that the issues raised by the pleadings are one of law, to wit:

1. Whether the redemption period has expired.

2. What is the correct redemption amount required under the law?

3. Whether there was a valid and effective tender of payment.

4. Whether the Deed of Assignment is binding and enforceable against

5. defendant PNB. (P. 151, Record on Appeal)

Timeliness of the redemption

To be sure, We find the opposing postures of the parties on the timeliness of the redemption here in question a little blurred and confusing. So, rather than to try to extricate Ourselves out of such maze, We feel it is sufficient to point out that according to the brief of appellant, the foreclosure sale of the subject property was made on August 8, 1974 (pp. 7-8) and the corresponding certificate of sale was issued by sheriff on the same day and "registered on March 14, 1976 in the Register of Deeds." (p. 8, Record on Appeal.) "On May 14, 1976 TCT 54474 was cancelled and TCT No. S-28133 issued in the name of PNB". (id.) 2

In such ambiguous premises, We have no alternative than to use March 11, 1975 3 as point of reference regarding the date of the registration of the certificate of sale. Appellant assumes that on this

basis the period of redemption was up to March 10, 1976. Well, the truth of the matter is that this detail is tied up inextricably to the main question of law that pervades the whole of this controversy.

What is the law applicable to this case as to the period of redemption?

Let us not forget that the mortgage at issue was executed in 1963. True it is that as underscored by counsel for PNB, STANDARD, the predecessor-in-interest of CITADEL, who signed the deed of mortgage agreed, and CITADEL is bound by such agreement, "to abide and to be bound by the provisions of the Charter of the PNB ". Specifically paragraph (g) of said real estate mortgage provides:

(g) The mortgagor hereby waives the right granted him under Section 119 of Commonwealth Act No. 141, known as the Public Land Act, as amended and agrees to abide to be bound by the provisions of Act No. 3135 or Act No. 2933, which amended Act No. 1612, or Republic Act No. 1300, as amended, known as the New Charter." (Page 15, PNB's Brief.)

Going by the literal terms of this quoted provision, STANDARD/CITADEL stand bound by the same. In other words, paragraph (g) of the mortgage contract made the provisions of Act No. 3135 or Act 2933, which amended Act No. 1612, or Republic Act 1300, as amended, known as the new Charter part and parcel of the mortgage contract. Now, what is the legal import or consequence of such express incorporation of and submission to Act 3135 and Republic Act 1300 by STANDARD/CITADEL?

Republic Act 1300 entitled "An Act Revising the Charter of the Philippine National Bank" was approved and made effective on June 16, 1955. It was therefore the law when in 1963 the mortgage here in dispute was executed. It was the very law that the above-quoted paragraph (g) of the mortgage contract made reference to. In this connection, evidently overlooked by counsel for PNB is that Republic Act 1300 does not contemplate extrajudicial procedure. Clearly indicative of this is Section 20 thereof which provides:

Sec. 20. Right of redemption of property foreclosed. — The mortgagor shall have the right, within the year after the sale of real estate as a result of the foreclosure of a mortgage, to redeem the property by paying the amount fixed by the court in the order of execution, with interest thereon at the rate specified in the mortgage, and all the costs and other judicial expenses incurred by the Bank by reason of the execution and sale and for the custody of said property.

Indeed, conventional legal and banking business sense dictates that it must have been because of such omission that paragraph (g) above had to expressly incorporate Act 3135 which provides for extrajudicial foreclosure. We cannot, therefore, escape the conclusion that what STANDARD agreed to in respect to the possible foreclosure of its mortgage was to subject the same to the provisions of Act 3135 should the PNB opt to utilize said law instead of Republic Act 1300.

On the other hand, Act 3135, as amended by Act 4018, is of 1924 vintage. Its Section 6 very clearly governs the right of redemption in extrajudicial foreclosures thus:

Sec. 6. In an cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.

Sections four hundred sixty-four to four hundred sixty-six, inclusive, of the Code of Civil Procedure, since the promulgation of the Rules of Court of 1940, became Sections 29, 30 and 34 of Rule 39. The same sections were reiterated in the Revised Rules of Court in July 1964.

From all the foregoing, We are of the considered opinion and so hold that STANDARD'S/CITADEL'S period of redemption was up to March 10, 1976. 4 That CITADEL filed its complaint to compel PNB to accept its redemption only on March 11, 1976 is of no moment. The unequivocal tender of redemption was made in the letter of Francisco S. Corpus, its President, of March 5, 1976 accompanied by a manager's check of the Rizal Commercial Banking Corporation a well known, big and reputable banking institution, for the amount it believed it should pay as redemption price. PNB rejected it on the sole and only ground that it considered the amount insufficient. The Court, therefore, holds that the redemption was made on time, that is, within one year (or even twelve months) from the date appearing as the date of the registration of the certificate of sale.

How about the amount needed for such redemption?

On this score, PNB insists on p. 9 et. seq. of its brief on the applicability to this case of "Section 25 of Presidential Decree No. 694, otherwise known as the new PNB Charter" which provides:

Section 25. Right of Redemption of Foreclosed Property — Right of Possession During Redemption Period — Within one year from the registration of the foreclosure sale of real estate, the mortgagor shall have the right to redeem the property by paying all claims of the Bank against him on the date of the sale including all the costs and other expenses incurred by reason of the foreclosure sale and custody of the property, as well as charges and accrued interests.

But P.D. 694 took effect only on May 8, 1975. PNB's counsel himself has, as already mentioned above, taken the position that it was the old PNB Charter, Republic Act 1300, that was expressly made part of the contract. In other words, it was by virtue of such contractual stipulation and not ex propio vigore that the provisions of the bank's then current charter bound the mortgagor STANDARD. But prescinding from possible legal flaw in such pose and that all provisions of the charter are enforceable and must be read into all mortgages with the PNB as integral parts thereof, in this instant case, the Court finds its hands inert and shackled in the face of the constitutional proscription against the impairment of contracts. (Sec. 11, Art. IV, New Constitution) Stated otherwise, since the contract of mortgage herein was entered into under a specific law, Republic Act 1300, even the principle that no law is unamendable nor unrepealable cannot hold, when the subsequent legislative enactment, P.D. 694, would alter and modify to the prejudice of any of the parties the terms of the contract under the aegis of the prior law. Indisputably, the application of P.D. 694 to the mortgage herein involved would violate the Constitution. Hence, it simply cannot apply.

Stated otherwise, by virtue of the provision of the mortgage contract precisely cited by PNB, namely, its paragraph (g), quoted earlier, PNB had the contractually acquired option to resort either to its Charter, Republic Act 1300 or to Act 3135. When it foreclosed the mortgage at issue, it chose Act 3135. That was an option it freely exercised without the least intervention of appellee. And it was exercised before P.D. 694 came into being. In fact, the foreclosure sales took place in 1974 yet. And so, to make the redemption subject to a subsequent law would be obviously prejudicial to the party exercising the right to redeem. Without considering the date the loan was secured and the date of the mortgage contract, and taking into account only the dates of the foreclosures and auction sales, it is quite obvious that any change in the law governing redemption that would make it more difficult than under the law at the time of the sale cannot be given retroactive effect. Under the terms of the mortgage contract, the terms and conditions under which redemption may be exercised are deemed part and parcel thereof whether the same be merely conventional or imposed by law. To alter those terms in a manner prejudicial to the mortgagor or the person redeeming the property as his successor-in-interest after the foreclosures and sales would definitely come within the constitutional proscription against impairment of the obligations of contracts.

Having thus come to the ineludible conclusion that Act 3135 and Sections 29 to 32 of Rule 39 of the Rules of Court rather than P.D. 694 are the laws applicable to the right of redemption invoked by

appellee in this case, 5 it would appear that all that remains for Us to do is to apply the said legal precepts. Pursuant to Section 30 of Rule 39, "the judgment debtor — (or his successor-in-interest per Section 29, here Leticia Co,) may redeem the property from the purchaser, (here PNB) at any time within twelve months after the sale, on paying the purchaser the amount of his purchase, with one per centum per month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after the purchase, and interest on such last named amount at the same rate; ..."

In this connection, lest it be argued that CITADEL did not include in its tender the amount of assessments or taxes PNB might have paid before the redemption, His Honor, We note that the trial judge, has pointed out that in spite of the requirement in the certificate of sale issued by the sheriff that the purchaser or highest bidder submits within 30 days immediately preceding the expiration of the period of redemption, an appropriate statement of the amount of such assessments or taxes, PNB failed to comply with such requirement, hence it would be unfair to fault CITADEL for the non- inclusion thereof in its tender. PNB argues, however, that it did furnish CITADEL on March 5, 1976 the required data. We note, however, that the statement of P3,366,546.42 specified by PNB in its reply of March 5, 1976 is not clear enough to show the details on taxes and assessments under discussion. In any event, considering that as earlier pointed out by Us, there could be a possibility that March 5, 1976 should be considered as the last day of redemption, the explanation of PNB is, at least in equity, unavailing. There was no more time for CITADEL to have a breakdown of the P3,366,546.42 to find out what items were included therein. Anyway, this discussion is practically academic because in the manner We are resolving this case, this point would be of no moment.

Before passing to another aspect of this case, it may not be amiss to mention here that in Moran's Comments on the Rules of Court (p. 326-327, 1979 ed.), it is stated that where the judgment debtor, which necessarily includes his successor-in-interest (Section 29, a, Rule 39) validly tenders the necessary payment for the redemption and the tender is refused, it is not necessary that it be followed by the deposit of the money in court or elsewhere (Enage vs. Vda. de Escano, 38 Phil. 687) and no interest after such tender is demandable on the redemption money. (Martinez vs. Campbell, 10 Phil. 626; Fabros vs. Agustin, 18 Phil. 336).

The jurisprudence cited by PNB are not applicable

Even as We have so far focused Our discussion and resolution of the issues herein on the pertinent statutory provisions, We have not really closed Our eyes to the jurisprudence cited by PNB in its brief, four of which are worthy of mention, namely Medina vs. PNB, 56 Phil. 655. Nepomuceno vs. RFC, G.R. No. L-14877, Nov. 23,1960; Perez vs. PNB, 17 SCRA 833 and DBP vs. Mirang 66 SCRA 141.

The case of Perez, supra, did not involve a redemption in the sense that it is in issue in this case. In fact, the point involved in the instant case is not even touched in the syllabus thereof in SCRA. This is because what was fundamentally the problem therein was whether or not it was obligatory on the part of the bank-mortgagee to foreclose judicially the mortgage inasmuch as the mortgagor died. As the Court said, "the main issue in this appeal is the application of Section 7, Rule 87 of the Rules of 1940 (now Section 7 of Rule 68), a reproduction of Section 708 of the Code of Civil Procedure". Hence, anything said therein at issue may be deemed as obiter. If anything in that opinion is relevant hereto, it is that portion thereof that justly and equitably holds that from whatever amount should be payable to the mortgagee Bank, should be deducted "the value of any rents and profits derived by the (said) bank from the property in question". (at p. 840)

In the Nepomuceno case, supra, what confronted the Court was a question relative to a mortgage with the Rehabilitation Finance Corporation (RFC for short, now the Development Bank of the Philippines). The Court found no difficulty in not applying Section 6 of Act 3135 because it found that there is in Section 31 of the Charter of the RFC a provision basically similar to Section 25 of Presidential Decree 694, now being invoked here by PNB. Naturally, the Court upheld the RFC's contention that the whole amount of the

mortgagor's indebtedness should be paid. But in the instant case, as already discussed earlier, P.D. 694 came too late.

DBP vs. Mirang supra, follows in principle the Nepomuceno ruling that the special provisions in the charter of DBP govern in matters of redemption of property acquired by it in a foreclosure sale. So, We need not elucidate any further on its inapplicability hereto.

It is the earlier case of Medina vs. PNB, supra, that nearly approximates the position PNB is pressing on Us now, because in a portion of the opinion thereof, Chief Justice Avenceña as correctly underlined by PNB in its brief, stated:

As we have indicated above, there is no question with regard to the plaintiffs' right, as successors of the Manila Commercial Company, to repurchase the parcels covered by the transfer certificates of title Nos. 137 and 139. The question is whether, as the bank contends and the trial court has held, the redemption should be made by paying to the bank the entire amount owned to it by the Manila Commercial Company. The appellants contend that this redemption may be made by only reimbursing the bank what it has paid for the sale made to it. In this respect we are also of the opinion that the judgment appealed from is correct. (Page 655)

But this statement needs clarification. Towards the concluding portion of the opinion, he explained that:

It will be remembered that the mortgage contract between the bank and the Manila Commercial Company was executed on October 30, 1920, before the approval of Act No. 3135 in March, 1924. If, before Act No. 3135 took effect, the Manila Commercial Company had violated the contract, beyond all doubt the bank would have been able to sell the mortgaged property, without the necessity of a judicial action, and the sale thus made would carry the right of repurchase on the part of the debtor through the payment of the entire amount of the debt.

When the bank's right to foreclose the mortgage of the Manila Commercial Company accrued, Act No. 3135 was already in force. Of course, this law, being general, did not affect the charter of the bank, which was a special law. Thus, when the bank, in order to sell the mortgaged property extrajudicially, resorted to Act No. 3135, it did so merely to find a proceeding for the sale; but that action cannot be taken to mean a waiver of its right to demand the payment of the whole debt before the property can be redeemed. The record contains nothing to show that the bank made this waiver of said right. (Pp 656-657)

There is here an implication that in undertaking the foreclosure therein involved, the PNB relied on Act 3135. This is not quite accurate, for in the opening paragraph of the same opinion, it is stated that:

On October 30, 1920 the Manila Commercial Co. and La Yebana Co. mortgaged four parcels of land with Torrens titles, described in the complaint, to the Philippine National Bank, the first and fourth parcels being in the name of the La Yebana Co. and the second and third in the name of the Manila Commercial Co. The mortgage was given to secure the payment of P680,000 or for whatever amount the Manila Commercial Co. might be indebted to the Philippine National Bank. One of the clauses of the mortgage provides that in case of a violation by the Manila Commercial Co. of any of the conditions of the contract the Philippine National Bank may take possession of the mortgaged property and sell or dispose of it by public or private sale, without first having to file a complaint or to give any notice, and at such sale, if public, it may acquire for itself all or any of the parcels of land. (Page 651) (Emphasis supplied)

Thus, it is to Our mind closer to the truth that it was by virtue of such contractual clause, rather than Act 3135, even if the request to the sheriff did mention said Act that PNB foreclosed. In any event, the Court did take into account that the mortgage at issue in that case was executed before the approval of Act 3135 and observed that without such Act, the right of the bank to full payment would have been indisputable. This is the same principle of non-impairment of the contracts by subsequent legislative action We have made reference to above in precluding the applicability hereto of P.D. 694.

On the minor issues

We are not impressed that PNB is really serious in its pose that the tender by manager's check by CITADEL was inefficacious. For one thing, that obligation was waived when in its letter of rejection, the bank did not invoke it. (Gregorio Araneta, Inc. vs. De Paterno and Vidal, 91 Phil. 786) More importantly, this Court has already sanctioned redemption by check. (Javellana vs. Mirasol, 40 Phil. 761)

Neither do We find any substantial weight in PNB's pose that the transfer or conveyance of STANDARD'S right of redemption to CITADEL and the latter to Leticia Co is not binding on it. In Lichauco vs. Olegario, et al., 43 Phil. 540, this Court held that "whether or not ... an execution debtor was legally authorized to sell his right of redemption, is a question already decided by this Court in the affirmative in numerous decisions on the precepts of Sections 463 and 464 and other sections related thereto, of the Code of Civil Procedure. " (The mentioned provisions are carried over in Rule 39 of the Revised Rules of Court.) That the transfers or con. conveyances in question were not registered is of miniscule significance, there being no showing that PNB was damaged or could be damaged by such omission, When CITADEL made its tender on May 5, 1976, PNB did not question the personality of CITADEL at all. It is now too late and purely technical to raise such an innocuous failure to comply with Article 1625 of the Civil Code.

The foregoing discussion inexorably points to the conclusion that the price of redemption of P1,621,970.00 tendered by CITADEL on March 5, 1976 was the correct amount. Since PNB refused to allow the redemption thus legally tendered, applying the law strictly, it would stand to lose P1,744,576.42 of what it claims was the total indebtedness or outstanding obligation of CITADEL as of March 11, 1976.

To avoid this loss, PNB invokes, as already stated above, P.D. No. 694, but We have also pointed out earlier that to apply said decree would result in the impairment of the contractual obligation of CITADEL, which cannot be allowed under the Constitution.

However, We are persuaded that all such considerations would render the result of this case short of what appears to be substantial justice in the light of the situation on hand. It strikes Us as rather unconscionable that by a literal application of the law and perhaps due to a mistake in the amount of the bid made by PNB, 6 the bank would not get full satisfaction of its credit. Indeed, there would be unjust enrichment on the part of the debtor- mortgagor in such an eventuality. Our sense of justice cannot permit such inequitous advantage.

With this point in mind, We deem it fairer and so hold that considering the unique factual milieu of this case, Articles 22 and 2142 of the Civil Code should be the guideposts of Our decision here. Said articles provide:

ART. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

xxx xxx xxx

ART. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

Although the report of the Code Commission states that:

Another rule is expressed in article 22 which compels the return of a thing acquired "without just or legal ground." This provision embodies the doctrine that no person should unjustly enrich himself at the expense of another, which has been one of the mainstays of every legal system for centuries. It is most needful that this ancient principle be clearly and specifically consecrated in the proposed Civil Code to the end that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the prejudice of another. The German Civil Code has a similar provision (art. 812).

it may be said that whatever of the principle of unjust enrichment may not be covered by Article 22, Article 2142 makes its enhancement in this jurisdiction most comprehensive

Consequently, it is but just and proper that PNB should be paid the full amount of P3,366,546.42 without any interest as of March 11, 1976, when it refused a redemption legally and validly tendered. On the other hand, the amount of P1,621,970.00 tendered by CITADEL on March 5, 1976 and which was deposited in a savings account, drawing interest apparently less than 12% p.a., in the name of PNB by order of the trial court should be computed to have earned legal interest or 12% p.a., compounded annually, since March 11, 1976, provided however that should such amount including the compounded interest at 12% p.a. so earned be less than P3,366,546.42, petitioner herein should pay PNB such difference, and provided, on the other hand, that with this arrangement, PNB does not have to account to CITADEL/LETICIA CO for any of the rentals it had earned from the time it took possession of the property. In the final analysis, instead of PNB losing P1,744,576.42, under strict technical legal reasoning, as explained above, applying hereto the principle of unjust enrichment, which We deem in the peculiar circumstances at this instant case to be the fairest way of resolving this controversy, it would still be paid by petitioner a certain amount, not to mention what must be quite substantial and considerable, the rentals the said bank it has earned, which it does not have to account for.

In closing, We may add that in Escano, supra, this Court laid down as a policy that "redemptions are looked upon with favor, and when an injury is to follow, a liberal construction will be given to our redemption laws to the end that the property of the debtor may pay as many of the debtor's liabilities", PNB having foreclosed on the Baguio properties and the chattels of STANDARD for what appears could have been a fairer price, it is but in consonance with the Escano policy that the redemption herein involved be allowed on the basis of the injunction against unjust enrichment. 7 We may add here the observation, taught by common business experience, that when a bank grants a loan, secured by any collateral, what is of uppermost consideration to such lender is the borrower's capacity to pay according to the terms stipulated, and not really the acquisition of the collateral, if only to maintain the bank's liquidity position as conveniently as possible. Acquired assets generally add to liquidity problems of banks. The foreclosure of the security is a measure of last resort, hence when by the exercise of the right of redemption, the bank can recover the money it has loaned, nothing could be more proper than to allow the borrower to retain his property. Of course, peculiar instances are naturally excepted. That is why this decision cannot be invoked as a precedent for other parties not exactly similarly situated as the appellee in this case. Should there be any thought that Our resolution of this case is not strictly according to legal principles, let everyone be reminded that this Court has inherent equity jurisdiction it can always exercise in settings attended by unusual circumstances to prevent manifest injustice that could result from bare technical adherence to the letter of the law and unprecise jurisprudence under it.

WHEREFORE, the judgment of the trial court against the Philippine National Bank herein on appeal is hereby modified and another one is hereby rendered in favor of the said defendant-appellant bank in accordance with the formula herein above stated, and, accordingly, upon payment by LETICIA CO of the amount due it pursuant to the above computation, PNB is hereby ordered to transfer the title to the property in question to LETICIA CO. This payment must be made within ten (10) days from the finality of this judgment.

No costs.

Concepcion, Jr., Guerrero, De Castro and Escolin, JJ., concur.

Aquino and Abad Santos, JJ., took no part.

SECOND DIVISION

[G.R. No. L-26274 : July 31, 1981.]

ALPHA INSURANCE AND SURETY CO., INC., Plaintiff-Appellant, vs. ESPERANZA C. REYES, ARTURO R. REYES and DEVELOPMENT BANK OF THE PHILIPPINES, Defendants-Appellees.

D E C I S I O N

BARREDO, J.:

An appeal from the decision of the Court of First Instance of Manila in Civil Case No. 49980, Alpha Insurance and Surety Co., Inc. vs. Esperanza C. Reyes, et al., certified by the Court of Appeals to this Court for the reason that the sole assignment of error of appellant raises purely a legal question.

The following facts are undisputed:

The spouses Esperanza C. Reyes and Arturo R. Reyes executed on November 15, 1958 in favor of Alpha Insurance and Surety Co., Inc. a second mortgage over their two parcels of land cranad(with a total area of 540 square meters) and the buildings thereon, located at Makati, Rizal, in consideration of Alpha Insurance’s undertaking to act as surety of the said spouses in certain loans cranad(not to exceed P10,000.00) to be obtained from banks or financial institutions. The two lots were previously mortgaged to the Development Bank of the Philippines as security for a loan of P17,000.00.

In 1958, Esperanza C. Reyes borrowed P5,000.00 from the Prudential Bank and Trust Company. In 1959, she borrowed also P5,000.00 from the Philippine Banking Corporation. Alpha Insurance was her surety and co-maker in two promissory notes covering the said loans. She and her husband executed indemnity agreements in favor of Alpha Insurance in addition to the second mortgage.

Due to the default of Esperanza C. Reyes, Alpha Insurance, as solidary debtor, was constrained to pay the two loans total balance of which as of November 21, 1961 was P7,575.00, plus 12% interest per annum.

As the Reyes spouses did not make any reimbursement to Alpha Insurance, the latter filed on March 27, 1962 in the Court of First Instance of Manila the foreclosure action above-mentioned against the spouses and the DBP.

The DBP in its answer alleged that it had a first mortgage on the two lots which was superior to Alpha Insurance’s mortgage. It prayed that, in case of foreclosure, the proceeds of the sale be first applied to its credit. The Reyes spouses did not file an answer. They were declared in default.

Judge Jose L. Moya in his decision dated February 1, 1963, simply ordered the Reyes spouses to pay Alpha Insurance the sum of P7,575.00 with 12% interest a year from November 22, 1961.

Because the judge had ignored the prayer in Alpha Insurance’s complaint for the foreclosure of its second mortgage, it filed a motion for reconsideration, praying that the foreclosure of the second mortgage be ordered and that the Reyes spouses be required to pay attorney’s fees.

Judge Moya in his order of February 19, 1963 awarded P757.50 as attorney’s fees, but he held that the second mortgage could not be recognized as an encumbrance because the DBP did not consent to its execution.

Judge Moya relied on the ruling in Associated Insurance & Surety Co., Inc. vs. Register of Deeds of Pampanga, 105 Phil. 123, which

construed the following provisions of Commonwealth Act No. 459, the law creating the Agricultural and Industrial Bank:

“SEC. 26. Securities on loans granted by the Agricultural and Industrial Bank shall not be subject to attachment nor can they be included in the property of insolvent persons or institutions, unless all debts and obligations of the debtor to the Agricultural and Industrial Bank have been previously paid, including accrued interest, collection expenses, and other charges.”1

This Court held therein that this section embraces “levy on execution or any other encumbrance, unless the same is created with the consent” of the bank and that “(A) different interpretation would defeat the very purpose of the law which is to maintain unhampered the value of the property until the encumbrance shall have been released.”

Alpha Insurance filed a motion for reconsideration wherein it alleged that the second mortgage was approved by DBP Governor Roberto S. Benedicto cranad(Exh. A-2) and that the second mortgage was registered because of that approval and because the DBP delivered the owner’s duplicate of the title to Alpha Insurance in order to effect the registration.

Nevertheless, Judge Moya denied the motion. Alpha Insurance appealed to this Court.

Controversies of this nature should not even be litigated, much less reach this Supreme Court, adding to its already almost unmanageable docket. The issue between the parties is so insubstantial that a little more effort on the part of respective counsels of the parties and the trial court to get together as to what should be done would have cleared up matters in a manner We are certain would have been satisfactory to all concerned. To think that a litigation like this should last since March 27, 1962 or more than almost two decades ago when plaintiff-appellant filed its action of foreclosure is a black spot in the administration of justice in this country. This situation is intolerable and the members of the Bar and the trial judges ought to change their attitudes and direct their efforts towards more important and substantial legal matters, thereby serving public interest to the utmost within their expected capabilities.

Deciding the legal question before Us, even if the DBP were just an ordinary first mortgagee without any preferential liens under Republic Act No. 85 or Commonwealth Act 459, the statutes mentioned in the Associated Insurance case relied upon by the trial court, it would be unquestionable that nothing may be done to favor plaintiff-appellant, a mere second mortgagee, until after the obligations of the debtors-appellees with the first mortgagee have been fully satisfied and settled. In law, strictly speaking, what was mortgaged by the Reyeses to Alpha was no more than their equity of redemption.

Thus, what We perceive to be most appropriate to do at this late stage is to see to it that the obligations in question are paid soonest. However, to insist now, after so many wasted years, on following in this case the ordinary foreclosure procedure provided by law would only cause further unnecessary delay in the termination of the insubstantial controversy among the parties herein.

In De la Riva vs. Reynoso, 61 Phil. 734, Antonio de la Riva, the second mortgagee, filed an action against the mortgagor Marceliano Reynoso to foreclose the second realty mortgage. La Urbana Mutual Building and Loan Association, the first mortgagee, was joined as a co-defendant.

This Court held that La Urbana was properly joined as a co-defendant and affirmed the lower court’s judgment ordering Reynoso to pay within ninety days the amounts due to La Urbana and De la Riva, and, in case of failure to do so, ordering the sale at public auction of the mortgaged property and the application of the proceeds of the sale to the two mortgage debts.

Within this precedent, the Court is of the considered opinion and so holds that to avoid further delay in writing finis to the instant case which started way back in 1962, without any more ado, all that has to be done here is to have the property herein involved ordered by

the trial court sold at public auction immediately, the proceeds thereof to be used to pay the outstanding obligation, if still there be any, of the defendants-appellees Esperanza Reyes and Arturo Reyes to the Development Bank of the Philippines; if there be any excess thereafter, the same be used to pay their obligation to the plaintiff-appellant, and should there still be any further excess, the same should be given to the said Defendants-Appellees.

ACCORDINGLY, judgment is hereby rendered modifying the decision of the trial court to conform with the procedure herein outlined. No costs.

Aquino, Concepcion Jr., Abad Santos and De Castro, JJ., concur.


SECOND DIVISION

G.R. Nos. L-34317 and L-34335 November 28, 1973

MARCELO STEEL CORPORATION, HON. WALFRIDO DE LOS ANGELES, in his capacity as Judge, Court of First Instance of Rizal, Branch IV, Quezon City, and THE SHERIFF OF QUEZON CITY, petitioners, vs.COURT OF APPEALS, PETRA R. FARIN and BENJAMIN FARIN, respondents.

Florentino I. Capco for petitioners.

Ramon M. de Claro for respondents.

BARREDO, J.:

Petitions for review of the decision of the Court of Appeals in CA-G. R. No. 47519-R, entitled Petra Farin, et al., vs. Hon. Walfrido de los Angeles, etc. et al., granting a petition for certiorari of herein private respondents, the spouses Benjamin and Petra Farin, and annulling and setting aside the orders separately issued by the Court of First Instance of Quezon City in its Civil Case No. Q-9384 and in L. R. C. Record No. 7681, the first being an order dated December 9, 1970 denying private respondents' motion to stop the Sheriff of Quezon City from proceeding with the extrajudicial foreclosure sale of the properties herein involved which said private respondents had mortgaged to herein petitioner Marcelo Steel Corporation, after the said court had already rendered judgment dismissing the complaint for prohibition to enjoin said foreclosure, but pending the appeal thereof, and the second being the order dated February 4, 1971 granting the same petitioner's motion for a writ of possession of the said properties which it had acquired in the foreclosure sale which the court had refused to restrain in the other case.

The background facts are stated in the decision of the Court of Appeals thus:

This is a petition for certiorari to annul the order dated December 9, 1970, issued in Civil Case No. Q-9384 of the Court of First Instance of Quezon City, Branch IV, and the writ of possession issued in L.R.C. Rec. No. 7681 of said court.

It appears that on October 30, 1964, the petitioner spouses executed a deed of real estate mortgage, in favor of respondent Marcelo Steel Corporation, hereinafter referred to as respondent corporation over a parcel of land covered by T.C.T. No. 42689 of the Register of Deeds of Quezon City, as security for the payment of a promissory note in the sum of P600,000.00.

On July 24, 1965, the respondent corporation filed with the Sheriff of Quezon City a verified letter-petition for the extra-judicial foreclosure of the afore-mentioned real estate mortgage. Accordingly, the respondent Sheriff of Quezon City advertised and scheduled the extra-judicial foreclosure sale of the mortgaged property for August 26, 1965.

On August 21, 1965, the petitioners filed against the respondent corporation and the respondent Sheriff of Quezon City a petition captioned "Prohibition with Injunction and Damages" docketed as Civil Case No. Q-9384 of the Court of First Instance of Rizal, wherein they prayed that the respondent sheriff be permanently enjoined from proceeding with the scheduled sale at public auction of the mortgaged property, and that the respondent corporation be condemned to pay the petitioners P200,000.00 as actual and moral damages and P50,000.00 as penal and compensatory damage and P30,000.00 as attorney's fees, on the ground that they have not been in default in the payment of their obligation.

On August 21, 1965, the respondent judge issued an order commanding the respondent Sheriff and the respondent corporation to desist from proceeding with the public auction sale of the mortgage property scheduled on August 26, 1965.

After trial, the respondent judge rendered a decision on October 3, 1970, the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered as follows:

1. The above-entitled case is hereby ordered DISMISSED, for lack of sufficient basis;

2. Ordering the petitioners, jointly and severally, to pay the sum equivalent to 15% of the total obligation due, as reasonable attorney's fees;

3. Ordering petitioners to pay respondent Marcelo Steel Corporation, jointly and severally, the sum of P50,000.00 as actual exemplary damages;

4. Ordering the petitioners, jointly and severally, to pay the costs of the suit.

The order of status quo issued by the Court under date of August 21, 1965 is hereby LIFTED and SET ASIDE, and the Sheriff of Quezon City may now proceed with the extrajudicial foreclosure of the mortgage."

Petitioners received a copy of the decision on October 15, 1970.

On October 19, 1970, respondent corporation filed with respondent Sheriff another verified letter-petition informing the latter of the decision rendered in Civil Case No. Q-9384 and praying for the extra-judicial foreclosure of the real estate mortgage. Acting on said letter-petition, the respondent Sheriff issued the necessary notices setting the public auction sale of the mortgaged property on December 9, 1970.

On October 30, 1970, petitioners filed their notice of appeal, appeal bond and record on appeal.

On December 4, 1970, petitioners riled an "Urgent Motion to Require Respondents to Desist From Proceeding With The Public Auction Sale of Petitioners' Properties."

After respondent corporation filed its opposition to said motion, the respondent judge issued on December 9, 1970, an order denying petitioners' aforementioned motion to stop respondent Sheriff from proceeding with the scheduled auction sale of petitioners' mortgaged property. On the same date, the respondent Sheriff proceeded with the auction sale of the mortgaged property, respondent corporation being the successful bidder, and issued the correspondent certificate of sale dated December 9, 1970.

On the same date, December 9, 1970, the respondent Judge issued an order approving petitioners record on appeal.

On January 12, 1971, the respondent corporation filed in L.R.C. Rec. No. 7681 an independent petition for the issuance of a writ of possession entitled "In the Matter of the Petition For Issuance of Writ of Possession Over a Parcel of Land Covered By Transfer Certificate of Title No. 42589 of The Office of The Register Of Deeds of Quezon City In The Name Of Mortgagor Petra R. Farin Married To Benjamin Farin; Marcelo Steel Corporation (Mortgage) Petitioner". This petition was also assigned to the respondent Judge. Petitioners did not file an opposition to said petition.

On January 18, 1971, the respondent Judge issued an order directing the presentation and submission of evidence before the Branch Clerk of Court. After the respondent corporation had submitted its evidence in support of its petition, the respondent Judge issued an order on February 4, 1971, granting the petition for the issuance of a writ of possession.

Thereupon, the petitioners filed the present petition.

Upon these facts, the Court of Appeals held the trial court exceeded its jurisdiction when it denied the motion of the Farins seeking to enjoin the foreclosure sale of their mortgaged properties inasmuch as they had already perfected their appeal from the decision dismissing their petition for prohibition against said sale. According to the appellate court, since the remedy pursued by the Farins was not an ordinary action of injunction within the contemplation of Section 4 of Rule 39 nor one for the annulment of mortgage, but a special civil action of prohibition, the decision therein is not immediately executory as a matter of right but only of sound judicial discretion under Section 2 of the same rule, and considering that the prevailing party had not even moved for immediate execution, the trial court could not have availed of its powers under this last mentioned provision.

It is quite obvious that the Court of Appeals has missed the point. As a matter of fact, it is plain that the trial court did not issue any order of execution. The sheriff's act of proceeding with the foreclosure sale was not done by virtue of any such order of execution, but pursuant to his authority and duty under Act 3135 as amended by Act 4118 governing the extrajudicial foreclosure of mortgages, which is simply to sell the mortgaged properties at public auction to the highest bidder, upon verified petition of the mortgagee and without the need of any judicial order. In other words, the sheriff went ahead not because he was so ordered by the court, but precisely because the court refused to restrain him by dismissing respondents' petition for prohibition and lifting the status quo order it had preliminarily issued upon the filing of the complaint. Under these circumstances, the perfection of respondents' appeal could not by itself have had the effect of restoring the status quo order, without an express order in that sense, which, of course, the court had the power to issue. The Court has so held as early as November 13, 1902 in Watson & Co. vs. Enriquez, found in Volume I of the Philippine Reports at pages 480 to 484. The ruling therein made which is very illuminating applies four-square to the case at bar.

The plaintiff, at the commencement of this action obtained a preliminary injunction as prayed for in its complaint. The case was afterwards tried, and in September, 1902, a final judgment therein was entered in favor of the defendants and the temporary injunction was dissolved.

On the 20th of September a bill of exceptions was perfected and signed by the judge, and a certified copy thereof was then transmitted to this court. In this court the plaintiff has presented a motion asking that the preliminary injunction be continued.

Before discussing the power of this court to grant a preliminary injunction, under these circumstances, it seems necessary to determine whether or not the preliminary injunction granted below was continued in force by the filing of the bill of exceptions. Article 144 of the Law of Civil Procedure, now in force, says: "But the filing of a bill of exceptions shall of itself stay execution until the final determination of the action, unless," etc. Article 1007 of the Revised Statutes of the United States states the manner of obtaining a supersedeas in cases pending in the Federal courts. The meaning of the word "supersedeas" as used in that section has been defined as follows: "A supersedeas, properly so called, is a suspension of the power of the court below to issue an execution on the judgment or decree appealed from; or, if a writ of execution has issued, it is a prohibition emanating from the court of appeals against the execution of the writ. (Hovey vs. McDonald, 109 U.S. 150.)

As so construed, article 1007 of the Revised Statutes of the United States is substantially the equivalent of our article 144. This question as to whether a supersedeas has, in the Federal courts, the effect of continuing in force an injunction dissolved by the lower court has frequently been passed upon by the Supreme Court. That court has said: "The general ruling is well settled that an appeal from a decree granting, refusing, or dissolving an injunction does not disturb its operative effect. (Hovey vs. McDonald, 109 U.S. 150-161; Slaughterhouse Cases, 10 Wall., 273-297; Leonard vs. Ozark Land Company, 115 U.S., 465-468.) When an injunction has been dissolved it can not be revived except by a new exercise of judicial power, and no appeal by a dissatisfied party can of itself revive it. (Knox Co. vs. Harshman, 132 U.S., 14.)

The truth is that the case is not governed by the ordinary rules that relate to a supersedeas of execution, but by those principles and rules which relate to chancery proceedings exclusively. ... In this country the matter is usually regulated by statutes or rules of court, and, generally speaking, an appeal, upon giving the security required law, when security is required, suspends further proceedings and operates as a supersedeas of execution. ... But the decree itself may have an intrinsic effect which can only be suspended by an affirmative order either of the court which makes the decree or of the appellate tribunal. This court, in the Slaughterhouse Cases, 10 Wall., 273, decided that an appeal from a decree granting, refusing, or dissolving an injunction does not disturb its operative effect. Mr. Justice Clifford, delivering the opinion of the court, says: "It is quite certain that neither an injunction nor a decree dissolving an injunction passed in circuit court is reversed or nullified by an appeal or writ of error before the cause is heard in this court." It was decided that neither a decree for an injunction nor a decree dissolving an injunction was suspended in its effect by the writ of error, though all the requisites for supersedeas were complied with. It was not decided that the court below had no power, if the purpose of justice required it, to order a continuance of the status quo until a decision should be made by the appellate court, or until that court should order the contrary. This power undoubtedly exists, and should always be exercised when any irremediable injury may result from the decree as rendered. ( Hovey vs. McDonald, 109, U.S., 159.)

In Minnesota the supersedeas statute provided that the appeal from the order of judgment should "stay all proceedings thereon and save all rights affected thereby." The court of this State, relying upon the last of the two clauses quoted, held that an appeal from an order dissolving an injunction continued the injunction in force. The evils which would result from such a holding are forcibly pointed out by Judge Mitchell in a dissenting opinion. He said: "Although a plaintiffs papers are so insufficient on their face or so false in their allegations that if he should apply on notice for an injunction, any court would, on a hearing, promptly refuse to grant one, yet, if he can find anywhere in the State a judge or court commissioner who will improvidently grant one ex parte, which the court on the first and only hearing ever had dissolves, he can, by appealing and filing bond, make the ex parte injunction impervious to all judicial interference until the appeal is determined in this court. ... Such result is so unjust and so utterly inconsistent with all known rules equity practice that no court should adopt such a construction unless absolutely shut up to it by the clear and unequivocal language of the statute. (State vs. Duluth St. Ry. Co., 47 Minn., 369.)

The supreme court of that State afterwards, although adhering to that decision on the ground of stare decisis, stated that in their opinion it was unsound. (State ex rel. Leary vs. District Court, 78 Minn., 464.)

We have in these Islands no appeal from orders granting or dissolving preliminary injunctions, yet what was said by Justice Mitchell applies to a case where, upon a full trial in a court below, the judge has decided that neither upon the facts nor the law is the plaintiff entitled to any relief. To allow a plaintiff in such a case, by taking an appeal and giving a supersedeas bond, to continue an injunction in force would be manifestly unjust.

We adopt the rule announced by the Supreme Court of the United States and hold that the filing of the bill of exceptions in the case at bar did not operate to revive the preliminary injunction which was dissolved in and by the final judgment.

We also adopt the other conclusion of that court to the effect that the judge below has the power, if the purposes of justice require it, to order a continuance of the status quo until a decision should be made by the appellate court or until that court should order to the contrary. We have already in effect declared that principle in the case of Maximo Cortes vs. Palanca Yutivo, decided August 6, 1902.

This doctrine was reiterated a few days later in Sitia Teco vs. Ventura, 1 Phil. 497 thus:

During the pendency of the suit the plaintiff applied for a preliminary injunction on the ground, as stated in the oral argument of counsel, that the house placed by the plaintiff upon the lot having

been destroyed by order of the municipality the defendants repossessed themselves of the premises and were preparing to build a house thereon.

Upon a trial of the case judgment was rendered against the plaintiff on the merits of the suit, and the injunction was dissolved. The plaintiff has appealed the case by a bill of exceptions and has made application to this court to restore the injunction on the ground that the operative effect of the judgment by which the injunction was dissolved has, by virtue of the appeal taken and the giving of a supersedeas bond, been lost, and that the judgment in the case should not have the effect of disturbing the interlocutory injunction. In the case of Watson & Co. vs. Enriquez, decided by this court October 26, 1902, it is held that an appeal from an order dissolving an injunction does not suspend the operation of the decision so as to revive the interlocutory injunction.

We had occasion to reaffirm the same ruling in Aguilar vs. Tan, G. R. No. L-23600, rendered in January 30, 1970 31 SCRA 205-214.

Now, in connection with the issuance by the trial court, upon motion of petitioner and without objection of the Farins, of the writ of possession in the L.R.C. case, the appellate court ruled that the same amounted to an execution of the decision in the civil case, and such being the case, the trial court should have desisted from doing it in view of the respondents' appeal. We do not agree. It is Our considered opinion that the writ of possession was properly issued, since, as already discussed above, the foreclosure proceeding conducted by the sheriff was not predicated on any judicial order. Again, the erroneous pose of the Court of Appeals runs counter to standing jurisprudence on the matter. In De Gracia vs. San Jose, 94 Phil. 623, which is likewise on all fours with the situation presently before Us, the Court held:

Petitioner is the registered owner of the real property described in Transfer Certificate of Title No. 3731 of the Land Records of the city of Manila, which, by way of extrajudicial foreclosure of a mortgage constituted upon the same in favor of the Rehabilitation Finance Corporation, was on November 14, 1952, sold to the Republic Surety & insurance Co., Inc., as the highest bidder at a public auction conducted by the sheriff of said city under a special power of attorney attached to the mortgage deed and pursuant Act. No. 3135, as amended by Act No. 4118. Three days after the sale, the purchaser filed an ex parte motion, duly verified, in the four branch of the Court of First Instance of Manila as authorized section 7 of the same Act, as amended, praying that it be given possession of the property during the redemption period and offering to furnish the corresponding bond. But before the motion could acted upon, herein petitioner filed an opposition thereto and followed it with a complaint for the annulment of the sale and a motion dismiss the petition for a writ of possession or to postpone consideration thereof until the complaint for annulment could be decided. Being specifically empowered by the Act to grant such writ on an ex parte motion by the purchaser, the court refused to be side tracked and authorized the issuance of the writ upon the filing of a bond without prejudice to the right of the oppositor to question the validity of the sale in the manner provided by law.

Contending that the lower court acted without jurisdiction and with grave abuse of discretion in authorizing the issuance of the writ, petitioner has come to this Court for a writ of certiorari and prohibition.

The petition is without merit.

Sections 7 and 8 of Act No. 3L35, as amended, provide:

SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form or an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage

Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety six, as amended by Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.

SEC. 8. The debtor may, in the proceedings in which possession was requested but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal.

As may be seen, the law expressly authorizes the purchaser to petition for a writ of possession during the redemption period by filing an ex parte motion under oath for that purpose in the corresponding registration or cadastral proceeding in the case of property with Torrens title; and upon the filing of such motion and the approval of the corresponding bond, the law also in express terms directs the court to issue the order for a writ of possession. Under the legal provisions above copied, the order for a writ of possession issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No discretion is left to the court. And any question regarding the regularity and validity of the sale (and the consequent cancellation of the writ) is left to be determined in a subsequent proceeding as outlined in section 8. Such question is not to be raised as a justification for opposing the issuance of the writ of possession, since, under the Act, the proceeding for this is ex parte.

It thus appear that the respondent Judge, in ordering the issuance of a writ of possession in this case, merely obeyed an express mandate of the law in the manner and upon the terms therein provided, and petitioner may not complain that he has been deprived of a substantial right without due process, because the order states that it is to be "without prejudice to the rights of the oppositor to question the validity of the above mentioned sale in the manner provided by law.

Having merely followed an express provision of the law, whose validity is not questioned, the Judge cannot be charged with having acted without jurisdiction or with grave abuse of discretion. The rule that the purchaser at a judicial public auction is not entitled to possession during the period of redemption is not applicable to a sale under Act No. 3135 where the granting of said possession expressly authorized. ...

As may be gleaned from the foregoing dissertation of Justice Alex Reyes for the Court, even the main remedy of prohibition sought by the Farins was uncalled for. The plain, speedy and adequate and even more expeditious remedy available to them was that specifically provided for in Section 8 of Act 3135, as amended, quoted in the opinion, which is by the summary petition under Section 112 of Act 496, the Land Registration Act. We surmise that the issue of alleged usury raised by respondents must have been considered by the trial judge who also decided the civil case in which said defense was raised as not substantial enough to warrant its being taken up in an ordinary action outside of the land court.

PREMISES CONSIDERED, the decision of the Court of Appeals under review is reversed and the petition for certiorari filed by the respondent Farins therein is dismissed, with costs against said respondents.

Zaldivar (Chairman), Fernando, Antonio, Fernandez and Aquino, JJ., concur.


SECOND DIVISION

G.R. No. L-52823 November 2, 1982 PHILIPPINE NATIONAL BANK, petitioner, vs.Hon. MIDPANTAO ADIL, in his capacity as Presiding Judge of the CFI Iloilo, Branch II, and the HEIRS OF THE LATE TEODORO MELLIZA Composed of ANGELINA LOBATON VDA. DE MELLIZA, etc., ROSEMARIE CHANG, RAYMUNDO TEODORO MELLIZA, JR., MARILYN MELLIZA, JOSE TEODORO MELLIZA, et al., respondents.

Juan L. Diaz, Ramon F. Aviado and Isidro F. Real, Jr., for petitioner.

Eugenio O. Original for respondents.

DE CASTRO, J:

This is a special civil action for certiorari which seeks to annul the several injunctive orders issued by respondent judge, and praying that, instead, the writ of possession issued in favor of petitioner, as purchaser in the foreclosure sale, dated April 20, 1979, be immediately enforced.

It appears that on 'August 2, 1974, respondent Angelina Lobaton Melliza, for herself and as judicial administratrix of the estate of Teodoro Uy Melliza, obtained a loan from petitioner in the amount of P80,000.00 which was secured by a mortgage over two parcels of land covered by TCT Nos. 8266 and T-8267, For failure of said respondent to pay the loan on maturity, the mortgage was foreclosed extrajudicially on February 16, 1976 at which foreclosure sale, petitioner purchased the properties for P97,923.73. The properties were not redeemed within the period, hence the title over the same were consolidated in the name of petitioner, and consequently TCT .Nos. T-50422 and T-50423 were issued in its name on June 26, 1978.

On April 19, 1979, petitioner filed an ex-parte petition for issuance of a writ of possession before the Court of First Instance of Iloilo, Branch II, which was granted by an order dated April 20, 1979. Upon issuance of the writ, the Deputy Sheriff served the same upon private respondents, but the latter requested for a grace period of seven (7) days to vacate the premises in question to which the Sheriff agreed. On May 8, 1979, the Sheriff returned to the premises in question and finding that private respondents are still staying in the premises and had not complied with the writ of possession, immediately ordered their ejectment. At around one o'clock in the afternoon, before the ejectment was completed, the Sheriff received an order dated May 8, 1979, issued motu proprio by respondent judge, suspending the implementation of the writ of possession for "humanitarian reasons" for a period of fifteen (15) days. Before the expiration of the fifteen (15) day period, private respondents filed a complaint dated May 14, 1979 for the annulment of the extrajudicial foreclosure, writ of possession and consolidation of ownership on ground that the properties were foreclosed without personal notice to any of the private respondents. The complaint was docketed as Civil Case No. 12894 and was assigned to the Court of First Instance of Iloilo, Branch V. Upon motion of private respondents "to consolidate the trial of the two cases," the Presiding Judge of said Branch, in an order dated May 24, 1979, transferred the case of Branch II, presided by respondent judge.

In the proceeding for the writ of possession, private respondents filed a motion for reconsideration of the order granting the writ of possession, while petitioner filed a motion to declare private respondents in contempt for refusal to vacate the premises, which motions were ordered by respondent judge held in abeyance pending the resolution of the prejudicial question raised by private respondents in Civil Case No. 12894.

On June 1, 1979, respondent judge, acting on private respondents' prayer for injunction, issued an order restraining petitioner from

disturbing the status quo, and on July 5, 1979, respondent judge issued an order granting the writ of preliminary injunction.

Subsequently, petitioner filed the following: 1) Motion to Require Plaintiff to Deposit Income/Fruits of the Disputed Property dated July 6, 1979; 2) Motion for Reconsideration of the order of July 5, 1979 dated July 17, 1979; and 3) Motion to Dismiss, the Complaint dated August 2, 1979. The first two motions were denied by, respondent judge on August 13, 1979, and the last motion, on November 22, 1979.

As could readily be seen, the main question is whether or not respondent judge grave abused his discretion, amounting to lack of jurisdiction. in issuing the orders dated May 8, 1979, June 1, 1979, July 5, 1979 and August 13, 1979 all of which, in effect, enjoined the enforcement of the writ of possession. The petitioner sustains the affirmative, contending that since pursuant to De los Angeles vs. Court of Appeals, et al. 1 citing De Gracia vs. San Jose, 94 Phil. 675, it is ministerial upon the court to issue a writ of possession in favor of the purchaser in a foreclosure sale of a mortgaged property, it follows that the execution of the writ of possession cannot be suspended, much less, restrained by respondent judge. It also contends that, as purchaser, it becomes the owner of the property entitled to jus possidendi as provided in Article 428 of the Civil Code.

It is, however, claimed by private respondents that respondent judge, contrary to petitioner's submission, acted within his authority, alleging that pursuant to Section 5 of Rule 135 of the Rules of Court, the court has inherent power to "amend and control (the court's) processes and order so as to make them conformable to law and justice." They further claimed that the case cited by petitioner is not applicable because in the instant case the writ has already been issued. Petition should be granted.

Section 4 of P.D. No. 385 "requiring governmental financial institutions to foreclosure mandatorily all loans with arrearages, including interest and charges amounting to at least 20 % of the total outstanding obligations," provides:

Section 4. As a result of foreclosure or any other legal proceedings wherein the properties of the debtor which are foreclosed, attached, or levied upon in satisfaction of a judgment are sold to a government financial institution, the said properties shall be placed in the possession and control of the financial institution concerned, with the assistance of the Armed Forces of the Philippines whenever necessary. The Petition for Writ of Possession shall be acted upon by the court within fifteen (15) days from the date of filing.

Pursuant to the above provision, it is mandatory for the court to place the government financial institution, which petitioner is, in the possession and control of the property. As stated, the said decree was enacted "in order to effect the early collection of delinquent loans from government financial institutions and enable them to continue effectively financing the development needs of the country" without being hampered by actions brought to the courts by borrowers.

Also, Section 6 of Act No. 3135, as amended by Act 4118, the law that regulates the methods affecting extrajudicial foreclosure of mortgage provides that in cases in which an extrajudicial sale is made, "redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure insofar as these are not inconsistent with the provisions of this Act." (Sections 464-466 of the Code of Civil Procedure were superseded by Sections 25-27 and Section 31 of Rule 39 of the Rules of Court which in turn were replaced by Sections 29 to 31 and Section 35 of Rule 39 of the Revised Rules of Court. 2 Section 35 which is one of the specific provisions applicable to the case at bar provides that "if no redemption be made within twelve (12) months after the sale, the purchaser, or his assignee, is entitled to a conveyance and possession of property. ... . The possession of the property shall be given to the purchaser or last redemptioner by the officer unless a third party is actually holding the property adversely to the judgment debtor."

The rule, therefore, is that after the redemption period has expired, the purchaser of the property has the right to be placed in possession thereof. Accordingly, it is the inescapable duty of the

Sheriff to enforce the writ of possession, especially, as in this case, a new title has already been issued in the name of the purchaser, In fact, under Section 7 of the said Act 3135, upon which the de los Angeles and de Gracia cases were based, even before the redemption period, it is ministerial upon the court to issue a writ of possession in favor of a purchaser, provided that a proper motion has been filed, a bond approved, and no third person is involved.

The right of the purchaser to be placed in the possession of the property is bolstered by Section 8 of the aforecited Act which provides that if the judge finds the complaint assailing the legality of the foreclosure sale justified, it shall not transfer the possession of the property, even on appeal, but will only proceed against the bond posted by the purchaser. Section 8 reads:

The debtor may, in the proceedings in which possession was requested; but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions thereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act Numbered Four Hundred and Ninety-Six, and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with sections fourteen of act numbered Four Hundred and Ninety-Six.

In the case at bar, the writ of possession was issued but its enforcement was suspended by the grace period given by the Sheriff who has no authority to do so, and later by the order of the judge on a very dubious ground as "humanitarian reason." If the applicable laws clearly allow the purchaser to have possession of the property foreclosed and mandate the court to give effect to such right, it would be a gross error for the judge to suspend the implementation of the writ of possession, which, as shown, should issue as a matter of course. We are of the opinion that once the writ of possession has been issued, the Court has no alternative but to enforce the writ without delay, especially as in this case, no motion for the suspension of the enforcement was filed.

The right of the petitioner to the possession of the property is clearly unassailable. It is founded on its right of ownership. As the purchaser of the properties in the foreclosure sale, and to which the respective titles thereto have already been issued, petitioner's right o-,,er the property has become absolute, vesting upon him the right of possession over an enjoyment of the property which the Court must aid in effecting its delivery. After such delivery, the purchaser becomes the absolute owner of the property. As We said , in Tan Soo Huat vs. Ongwico, 3 the deed of conveyance entitled the purchaser to have and to hold the purchased property, this means, that the purchaser is entitled to go immediately upon the real property, and that it is the Sheriff's inescapable duty to place him in such possession.

Respondents cannot claim that the writ of possession was suspended under the authority set forth in Rule 1135 of the Rules of Court. To invoke the power granted therein, the court must act within the law and with justice. When the reason given by the judge in issuing the order of suspension was not specified in the order, but stated only in general term, as "humanitarian reasons," the Court did not act within the bounds of the law. The order was, furthermore, issued motu proprio and without the petitioner being afforded the right to present its side. We cannot give Our approval to the actuation of respondent judge, for an order suspending the implementation of an earlier order is like an injunction which must be issued always with circumspection, and upon proper motion of the party concerned.

As it is, the suspension order has a far-reaching effect. It enabled private respondents to withhold the possession from petitioner and file the complaint where an injunction was sought. Had not respondent judge issued such order, petitioner could have already taken possession of the property, thereby acquiring an absolute ownership over the property, and injunction could no longer have been issued. A prohibitory injunction cannot be issued when the act

sought to be enjoined has already been committed. 4 Neither can a mandatory injunction issue, for it is a well-settled rule that injunction will not lie to take the property out of control of the party in possession. 5

The orders of the judge enjoining the enforcement of the writ of possession are vulnerable to attack. Firstly, the right of private respondents to injunctive order is, at least, doubtful, and it is a settled rule that to be entitled to the injunction, the applicant's right or title must be clear and unquestioned.

In the instant case, the ground relied upon by private respondents is not indubitable, while the foreclosure proceeding has in its favor the presumption of regularity. And secondly, P.D. No. 385, as aforestated, makes it mandatory for the court to place a government financial institution in possession of the property. To enjoin PTB from taking possession of the property would be to render nugatory the provisions of said decree, particularly Section 2 thereof:

Section 2. No restraining order, temporary or permanent in. junction shall be issued by the court against any government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is sought by the borrower(s) or any third party or parties, except after due hearing in which it is established by the borrower and admitted by the government financial institution concerned that twenty percent (20%) of the outstanding arrearages has been paid after the firing of foreclosure proceedings.

In case a restraining order or injunction is issued the borrower shall nevertheless be legally obligated to liquidate the remaining balance of the arrearages, paying ten percent (10%) of the arrearages outstanding as of the time of foreclosure, plus interest and other charges, on every succeeding thirtieth (30th) day after the issuance of such restraining order or injunction until the entire arrearages have been liquidated. These shall be in addition to the payment of amortizations currently maturing. The restraining order or injunction shall automatically be dissolved should the borrower fail to make any of the above-mentioned payments on due dates, and no restraining order or injunction shall be issued thereafter. This shall be without prejudice to the exercise by the government financial institutions of such rights and/or remedies available to them under their respective charters and their respective contracts with their debtors, nor should this provision be construed as restricting the government financial institutions concerned from approving, solely at its own discretion, any restructuring, recapitalization, or any other arrangement that would place the entire account on a current basis, provided, however, that at least twenty percent (20%) of the arrearages outstanding at the time of the foreclosure is paid.

All restraining orders and injunctions existing as of the date of this Decree on foreclosure proceedings filed by said government financial institutions shall be considered lifted unless finally resolved by the court within sixty (60) days from date hereof.

WHEREFORE, judgment is hereby rendered annulling and setting aside all the injunctive orders issued by respondent judge dated May 8, 1979, June 1, 1979, July 5, 1979 and August 13, 1979; and ordering respondent judge to place petitioner in possession of the purchased property without delay. Without cost.

SO ORDERED.

Makasiar, Concepcion, Jr., Guerrero and Escolin, JJ., concur.

Abad Santos, J., took no part.


EN BANC

G.R. No. L-21011 August 30, 1967

ISABEL OCAMPO, plaintiff-appellant, vs.IGNACIO DOMALANTA and PONCIANO MARTINEZ, in his capacity as Provincial Sheriff of Cavite, defendants-appellees.

Arturo M. Topacio, Jr. for plaintiff-appellant.Teodoro O. Domalanta for defendant-appellee.

SANCHEZ, J.:

Sole question raised on appeal is this: Is a court order confirming a sheriff's sale upon a judgment in a real estate foreclosure case a bar to a subsequent action by the judgment debtor to annul the sale upon grounds which were raised in said foreclosure proceedings?

First, to the background facts. A contested case to foreclose a real estate and chattel mortgage [Civil Case 45778, Court of First Instance of Manila, "Ignacio Domalanta, plaintiff vs. Isabel O. Vda. de Chi Chioco, et al., defendants"], resulted in judgment ordering appellant Isabel O. Vda. de Chi Chioco (now known as Isabel Ocampo) to pay appellee Ignacio Domalanta P2,000.00, with 1% interest per month from December 5, 1958 until full payment, and P500.00 as attorneys' fees, and directing that after failure to pay the above amounts in ninety days, the properties mortgaged be sold at public auction, subject to a first mortgage in favor of the Philippine National Bank in reference to appellant's land (located in Tanza, Cavite) mortgaged.1

The judgment debt remained unpaid. The court, on Domalanta's motion, issued a writ of execution. Pursuant thereto, on May 8, 1962, appellee sheriff sold at public auction the mortgaged land of 32,558 square meters to the highest bidder, appellee Ignacio Domalanta, for P3,537.00. Domalanta moved to confirm the sale. Over appellant's objection, the court, on June 2, 1962, confirmed.

After the June 2, 1962 order had become final, appellant started the present suit (Civil Case N-496 of the Court of First Instance of Cavite, entitled "Isabel Ocampo, plaintiff vs. Ignacio Domalanta and Ponciano Martinez an his capacity as Provincial Sheriff of Cavite, defendants") to annul the sheriff's sale. Grounds: Appellant mortgagor was not properly notified of the forecloseure sale; and the price for which the property was sold was "very much lower than the actual market value" and shocking to the conscience, and thus invalid. Appellee Domalanta moved to dismiss the complaint below. His reason, inter alia: res judicata. The court, on November 9, 1962, dismissed the case "with prejudice and with costs against the plaintiff." A move to reconsider was thwarted below in the order of November 21, 1962. Hence, this appeal.

1. Adverted to earlier is that the June 2, 1962 order of confirmation of the sheriff's sale in the first case — Case 45778 — was issued over appellant's opposition. That objection projected before the court the very same grounds relied upon in the complaint herein — the second case — to wit, lack of notice by the Provincial Sheriff to appellant of the foreclosure sale, and irregularities in the auction sale and non-conformity thereof to the rules of court. According to the order of confirmation, the thrust of appellant's said objection is that she "was not notified of the sheriff's sale and that the price for which the property was sold is unconscionable." But these factual allegations, so the same in order of June 2, 1962 stresses, "have not been established by any evidence," nor was appellant's opposition verified. Nothing in the record suggests that after the order of June 2, 1962 in the first case (Civil Case 45778), attempt was ever made by appellant to cure the defects so pointedly expressed by the court in that order.

2. Law and jurisprudence have formulated the rule that confirmation of sale of real estate in judicial foreclosure proceedings cuts off all interests of the mortgagor in the real estate sold and vests them in the purchaser. Confirmation retroacts to the date of the sale.2 An order of confirmation in court foreclosure proceedings is a final

order, not merely interlocutory. The right to appeal therefrom has long been recognized.3 In fact, it is the final order from which appeal may be taken in judicial foreclosure proceedings.4 No appeal was taken. It follows that said order is final, binding.

3. Not that the disputed order of confirmation may be labelled null and void, as appellant would want it to be. The presumption that the notice of sale of real estate in foreclosure proceedings has been given, holds true here. For, indeed, a legal tenet of long standing is that official duty presumptively has been regularly performed.5 Appellant pleaded such lack of notice. Her duty it was to prove it in court. She did not.1äwphï1.ñët

And if the notice that appellant here complains of is personal notice to her, she is wrong. Because, personal notice is not required by Section 16 of Rule 39 of the 1940 Rules of Court, now Section 18, Rule 39 of the new Rules. This legal provision was given judicial nod as early as 1930 in La Urbana vs. Belando, 54 Phil. 930, 932 — a case of foreclosure of real estate mortgage — where we pronounced that "[t]he law does not require that such notification be given personally to the party upon whose property execution is levied."

Nor was there an averment in the complaint now before us that if a resale should take place, "the realty would bring a higher price" thereat, a circumstance "essential to rescind a sale regularly made and confirmed by a competent court, on the ground of inadequacy of price."6 The mere averment that the price is unconscionable is nothing more than a conclusion of law. The value of such allegation is further downgraded by the lack of proof. This is one case which epitomizes the fatal distance between allegation and proof.

4. Properly to be pointed out here is that the dismissal order of November 9, 1962 now on appeal, states that the legality of the foreclosure sale questioned in this action "was an issue that could have been, and was in fact, raised and litigated in the anterior suit" (Civil Case 45778). Except for the Provincial Sheriff who is a nominal defendant here, the parties in the two suits below are the same: Isabel Ocampo and Ignacio Domalanta. Subject matter is the same land. The judgment and order of confirmation of the sheriff's sale in the first suit have both become final.

The first suit is a judicial foreclosure of mortgage; the second, annulment of the foreclosure sale conducted in the first suit. A proceeding for judicial foreclosure of mortgage is an action quasi in rem. It is based on a personal claim sought to be enforced against a specific property of a person named party defendant. And, its purpose is to have the property seized and sold by court order to the end that the proceeds thereof be applied to the payment of plaintiff's claim.7

To be read as controlling here are Sections 44 and 45, Rule 39 of the Rules of Court — which is now substantially embodied in Section 49, Rule 39 of the new Rules of Court, viz:

Sec. 49. Effect of judgments.—The effect of a judgment or final order rendered by a court or judge of the Philippines, having jurisdiction to pronounce the judgment or order, may be as follows:

(a) In case of a judgment or order against a specific thing, or in respect to the probate of a will, or the administration of the estate of a deceased person, or in respect to the personal, political or legal condition or status of a particular person or his relationship to another, the judgment or order is conclusive upon the title to the thing, the will or administration, or the condition, status or relationship of the person; however, the probate of a will or granting of letters of administration shall only be prima facie evidence of the death of the testator or intestate;

(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity;

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment which appears upon its face to have been so

adjudged, or which was actually and necessarily included therein or necessary thereto.

Paragraph (a) of the foregoing rule is commonly known to speak of judgments in rem; paragraph (b) is said to refer to judgments in personam; and paragraph (c) is the concept understood in law as "conclusiveness of judgment." 8

Here, the first suit was an action quasi in rem. A judgment therein "is conclusive only between the parties."9 Directly applicable is paragraph (b) above-quoted. By that provision, the confirmation order in the foreclosure case is, "with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties" and their privies.

As we view this case from another standpoint, we reach the same result. It is true that the cause of action in the first suit is not exactly identical to the cause of action in the second. For, the latter merely challenges the legality of the sheriff's sale in the first proceeding. We do say, however, that such legality of sale is an issue which could have been, and was in fact raised and rejected in the first case. Thus, coming into play also is paragraph (c) above-quoted. Therefore, the question raised by appellant in the present suit should be "deemed to have been adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto."

It is thus beyond doubt that the present action is barred by the conclusiveness of judgment in the anterior suit. 10 This case must be dismissed.

Conformably to the foregoing, the lower court's order of November 9, 1962 dismissing this case, and the order of November 21, 1962 denying reconsideration thereof, are hereby affirmed.

Costs against plaintiff-appellant. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Sanchez, Castro, Angeles and Fernando, JJ., concur.

credit trans real estate mortgage cases

Documents

maria guizon subdivision

rented lot lot

said properties

twostory house

deed of sale

sum of p3

city of manila

stipulated period