Uy Tong vs.

CA 161 SCRA 383

FACTS: Petitioners Uy Tong and Kho Po Giok (SPOUSES) purchased Apartment No. 307 of the Ligaya Building and leased
a portion of the land in which the building stands from Ligaya Investments, Inc, the registered owner of the land. In February,
1969, the SPOUSES purchased from private respondent Bayanihan Automotive, Inc. (BAYANIHAN) seven (7) units of
motor vehicles for a total amount of P47,700.00 payable in three (3) installments. The transaction was evidenced by a
written "Agreement" which states that should the VENDEE fail to pay her obligation to the VENDOR, the latter shall become
automatically the owner of the former's apartment. After making a downpayment of P7,700.00, the SPOUSES failed to pay
the balance of P40,000.00. BAYANIHAN filed an action for specific performance. Notwithstanding the execution of the deed
of assignment, the SPOUSES remained in possession of the premises. Subsequently, they were allowed to remain in the
premises as lessees for a stipulated monthly rental until November 30,1972. Despite the expiration of the said period and
demands to vacate, the SPOUSES failed to surrender possession of the premises. BAYANIHAN filed an action for recovery
of possession with damages whereby the court favored BAYANIHAN. The SPOUSES appealed to the CA.

CONTENTION: The SPOUSES contends that the deed of assignment is null and void because it is in the nature of a pactum
commissorium and/or was borne out of the same. They further contend that the deed is unenforceable because the condition
for its execution was not complied with.

ISSUE: Whether or not the deed of assignment is in the nature of a pactum commissorium

HELD: No.
The prohibition on pactum commissorium stipulations is provided for by Article 2088 of the Civil Code: Art. 2088.
The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of the same. Any stipulation to
the contrary is null and void.
The aforequoted provision furnishes the two elements for pactum commissorium to exist: (1) that there should be a
pledge or mortgage wherein a property is pledged or mortgaged by way of security for the payment of the principal obligation;
and (2) that there should be a stipulation for an automatic appropriation by the creditor of the thing pledged or mortgaged
in the event of non-payment of the principal obligation within the stipulated period .
A perusal of the terms of the questioned agreement evinces no basis for the application of the pactum
commissorium provision. First, there is no indication of 'any contract of mortgage entered into by the parties. It is a fact that
the parties agreed on the sale and purchase of trucks.
Second, there is no case of automatic appropriation of the property by BAYANIHAN. When the SPOUSES defaulted in their
payments of the second and third installments of the trucks they purchased, BAYANIHAN filed an action in court for specific
performance. The trial court rendered favorable judgment for BAYANIHAN and ordered the SPOUSES to pay the balance
of their obligation and in case of failure to do so, to execute a deed of assignment over the property involved in this case.
The SPOUSES elected to execute the deed of assignment pursuant to said judgment.
Clearly, there was no automatic vesting of title on BAYANIHAN because it took the intervention of the trial court to
exact fulfillment of the obligation, which, by its very nature is ". . anathema to the concept of pacto commissorio" [Northern
Motors, Inc. v. Herrera, G.R. No. L-32674, February 22, 1973, 49 SCRA 392]. And even granting that the srcinal agreement
between the parties had the badges of pactum commissorium, the deed of assignment does not suffer the same fate as this
was executed pursuant to a valid judgment in Civil Case… This being the case, there is no reason to impugn the validity of
the said deed of assignment.

A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION, petitioner, vs . COURT OF APPEALS and

SPOUSES ROMULO S.A. JAVILLONAR and ERLINDA P. JAVILLONAR, respondents .

Facts:

A. Francisco Realty granted a loan of P7.5 M to spouses Javillonar, in consideration of which, the latter executed a
promissory note, a real estate mortgage over a certain property, and a deed of sale of said mortgaged property in favor of
A. Francisco.
Upon maturity, Javillonar spouses failed to pay, and as a consequence, A. Francisco registered the sale of the mortgaged
property, for which a new TCT was issued.
A. Francisco demanded possession of the mortgaged realty. Spouses refused to vacate. Hence, A. Francisco filed a
case for possession before the RTC.
The spouses admitted that they owed money in favor of A. Francisco but they also alleged that it was not their intention to
sell the realty as the deed of sale executed by them was merely an additional security for the payment of their loan. RTC
adjudged in favor of A. Francisco. On appeal, CA reversed RTC decision and dismissed the complaint against the
spouses holding that the deed of sale was void, being in the nature of a pactum commissorium prohibited by law. Hence,
this petition with the SC.

Issue:

Whether or not the deed of sale executed by the spouses was void, being in the nature of pactum commissorium.

Held:

Yes. Art. 2088 of the Civil Code provides that the creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of them. Any stipulation to the contrary is void. What is envisioned by this article is a provision in
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the deed of mortgage providing for the automatic conveyance of the mortgaged property in case of the failure of the
debtor to pay the loan. A pactum commissorium is a forfeiture clause in a deed of mortgage. The proscribed stipulation
of automatic conveyance must be found in the mortgage deed itself.
In the case at bar, the stipulations in the promissory note provide that, upon failure of spouses to pay interest, ownership
of the property would be automatically transferred to A. Francisco and the deed of sale in its favor would be
registered. These stipulations are in substance a pactum commissorium. They embody the two elements of pactum
commissorium, to wit:
(1) that there should be a pledge or mortgage wherein a property is pledged or mortgaged by way of security for the
payment of the principal obligation;
(2) that there should be a stipulation for an automatic appropriation by the creditor of the thing pledged or mortgaged in
the event of non-payment of the principal obligation within the stipulated period.

Tambunting v. Rehabilitation Finance Corporation

FACTS:
Escuetas obtained a loan from RFC which loan was secured by a mortgage over the land owned by the former.
Subsequently, with the consent of RFC, Escuetas created a second mortgage over said land to secure another loan obtained
from Tambunting. Escuetas defaulted in payment to RFC, thus, RFC obtained the property after foreclosure and sale
thereof. Meanwhile, Tambunting offered to redeem the property from RFC which the latter agreed to with a condition of right
of redemption in favor of Escuetas. However, Escuetas assigned their rights to Hernandez, consequently, Tambunting
refused to sell the land to Hernandez claiming that Escuetas violated the stipulation concerning the redemption.

ISSUE:
Whether the assignment made by Escuetas in favor of Hernandez violated the terms of the mortgage.

RULING:
No. In the first place, the matter of whether or not the assignment was fictitious is an issue of fact and its resolution
by the Court of Appeals is, by firmly established and long observed principle, final and conclusive on this Court. A mortgagor,
by encumbering his property, does not ordinarily lose the right to sell the same or create another mortgage over it, although
of course obliged, when exercising said right, to preserve and maintain the superiority of the prior mortgagee's rights. Indeed,
recognition of the propriety of subsequent encumbrances is implicit in the grant of the right of redemption by Section 6 of
Act 3135, as amended, in cases of extra-judicial foreclosure of mortgage, to "any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold ," in addition to the "debtor, his successors in
interest or any judicial creditor or judgment creditor of said debtor.

Litonjua, et al. v. L &R Corporation, et al.,

FACTS:
Litonjua obtained a loan from Respondent. The loan was secured by a mortgage which contains a stipulation that
the mortgagor shall not alienate the object mortgaged without the consent of the mortgagee and that of right of first refusal
in favor of the latter. Subsequently, Litonjua sold to PWAS the object mortgaged. The respondent knew such sale, thus, he
moved for the cancellation thereof invoking the stipulation in the mortgage, and moved for the foreclosure of the same.

ISSUE:
Whether the mortgagee can move for the cancellation of the sale.
RULING:
Yes. The mortgagee can proceed to cancel the sale. Although the stipulation in mortgage contract which prohibits
the mortgagor from alienating the mortgaged property without prior consent from mortgagee is void, nonetheless, since
there is also a stipulation therein with respect to the right of first refusal, the mortgagor should respect such stipulation.
Since the mortgagor violated the tenor of the contract, the subsequent sale made in favor of PWAS is rescissible. Hence,
the sale of the property can be cancelled.

SPS. LITONJUA vs. L & R CORPORATION

FACTS:
This stems from loans obtained by the spouses Litonjua from L&R Corporation in the aggregate sum of P400,000.00;
P200,000.00 of which was obtained on August 6, 1974 and the remaining P200,000.00 obtained on March 27, 1978. The
loans were secured by a mortgage constituted by the spouses upon their two parcels of land and the improvements thereon.
The mortgage was duly registered with the Register of Deeds.

Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels of land they had previously
mortgaged to L & R Corporation for the sum of P430,000.00. Meanwhile, with the spouses Litonjua having defaulted in the
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payment of their loans, L & R Corporation initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon
City. The mortgaged properties were sold at public auction to L & R Corporation as the only bidder for the amount of
P221,624.58.

On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the Register of Deeds, stating: (1) that
the sale of the mortgaged properties to PWHAS was without its consent, in contravention of paragraphs 8 and 9 of their
Deed of Real Estate Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was seeking to redeem the
foreclosed properties, when under Articles 1236 and 1237 of the New Civil Code, the latter had no legal personality or
capacity to redeem the same.

On the other hand, the spouses Litonjua asked the Register of Deeds to annotate their Certificate of Redemption as an
adverse claim on the titles of the subject properties on account of the refusal of L & R Corpo ration to surrender the owner’s
duplicate copies of the titles to the subject properties. With the refusal of the Register of Deeds to annotate their Certificate
of Redemption, the Litonjua spouses filed a Petition on July 17, 1981 against L & R Corporation for the surrender of the
owner’s duplicate of Transfer Certificates of Title No. 197232 and 197233 before the then CFI.

ISSUE: WON there was a Valid and enforceable stipulation granting the mortgagee the right of first refusal.

HELD:
While petitioners question the validity of paragraph 8 of their mortgage contract, they appear to be silent insofar as paragraph
9 thereof is concerned. Said paragraph 9 grants upon L & R Corporation the right of first refusal over the mortgaged property
in the event the mortgagor decides to sell the same. We see nothing wrong in this provision. The right of first refusal has
long been recognized as valid in our jurisdiction.

The consideration for the loan-mortgage includes the consideration for the right of first refusal. L & R Corporation is in effect
stating that it consents to lend out money to the spouses Litonjua provided that in case they decide to sell the property
mortgaged to it, then L & R Corporation shall be given the right to match the offered purchase price and to buy the property
at that price. Thus, while the spouses Litonjua had every right to sell their mortgaged property to PWHAS without securing
the prior written consent of L & R Corporation, it had the obligation under paragraph 9, which is a perfectly valid provision,
to notify the latter of their intention to sell the property and give it priority over other buyers. It is only upon failure of L & R
Corporation to exercise its right of first refusal could the spouses Litonjua validly sell the subject properties to others, under
the same terms and conditions offered to L & R Corporation.

It was then held that the Contract of Sale there, which violated the right of first refusal, was rescissible.

In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R Corporation over the subject
properties since the Deed of Real Estate Mortgage containing such a provision was duly registered with the Register of
Deeds. As such, PWHAS is presumed to have been notified thereof by registration, which equates to notice to the whole
world.

That it did not duly exercised its right of first refusal at the opportune time cannot be taken against it, precisely because it
was not notified by the spouses Litonjua of their intention to sell the subject property and thereby, to give it priority over
other buyers.

SPOUSES CHARLIE FORTALEZA and OFELIA FORTALEZA v. SPOUSES RAUL LAPITAN and RONA LAPITAN
15 August 2012 | Del Castillo, J .

FACTS:
Sps. Charlie and Ofelia Fortaleza obtained a loan from Sps. Rolando and Amparo Lapitan in the amount of P1.2M subject
to 34% interest per annum. As security, Sps. Fortaleza executed a Deed of Real Estate Mortgage over their residential
house & lot in Barrio Anos, Los Baños, Laguna. When Sps. Fortaleza failed to pay their indebtedness including interests
and penalties, the creditors Lapitan applied for extrajudicial foreclosure of the Real Estate Mortgage before the Office of
the Clerk of Court and Ex-Officio Sheriff of Calamba City.

At the auction sale, the creditor’s son Dr. Raul Lapitan and his wife Rona emerged as the highest bidders at the amount of
P2.5M. They were then issued a Certificate of Sale registered with the Registry of Deeds of Calamba City and annotated
at the back of the TCT. The one-year redemption period expired without the spouses Fortaleza redeeming the mortgage.
Spouses Raul and Rona Lapitan executed an affidavit of consolidation of ownership and caused the cancellation of the
TCT held by Sps. Fortaleza and the registration of the subject property in their names under a new TCT. Despite the
foregoing, Sps. Fortaleza refused the Sps. Lapitan’s formal demand to vacate and surrender possession of the property.

Sps. Lapitan filed an ex parte petition for the issuance of writ of possession with RTC, Br35 of Calamva City, alleging that
as new registered owners of the subject property, they were entitled to its possession. Sps. Fortaleza questioned the
validity of the real estate mortgage and the foreclosure sale. They argued that the mortgage was void because the
creditors bloated the principal amount by the imposition of exorbitant interest.

RTC: Ordered issuance of a writ of possession  ministerial duty of the court since the redemption period had expired &
a new title had already been issued in the name of Sps. Lapitan
Sps. Fortaleza’s MR: Subject property is their family home and is exempt from foreclosure sale. MR denied.

CA: Dismissed the appeal and affirmed RTC Ruling.

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ISSUE: W/N the subject property is a family home exempt from forced sale.

RULING: No. As a rule, the family home is exempt from execution, forced sale or attachment. However, Article 155(3) of
the Family Code explicitly allows the forced sale of a family home “for debts secured by mortgages on the premises
before or after such constitution.” In this case, there is no doubt that spouses Fortaleza voluntarily executed on January
28, 1998 a deed of Real Estate Mortgage over the subject property which was even notarized by their srcinal counsel of
record. And assuming that the property is exempt from forced sale, spouses Fortaleza did not set up and prove to the
Sheriff such exemption from forced sale before it was sold at the public auction. As elucidated in Honrado v. Court of
Appeals:
While it is true that the family home is constituted on a house and lot from the time it is occupied as a family
residence and is exempt from execution or forced sale under Article 153 of the Family Code, such claim for
exemption should be set up and proved to the Sheriff before the sale of the property at public auction. Failure to
do so would estop the party from later claiming the exemption.
Certainly, reasonable time for purposes of the law on exemption does not mean a time after the expiration of the one-year
period for a judgment debtor to redeem the property.

The spouses Fortaleza neither filed an action nor made a formal offer to redeem the subject property accompanied by an
actual and simultaneous tender of payment. It is also undisputed that they allowed the one-year period to lapse from the
registration of the certificate of sale without redeeming the mortgage. For all intents and purposes, spouses Fortaleza
have waived or abandoned their right of redemption. Although the rule on redemption is liberally interpreted in favor of the
srcinal owner of the property, we cannot apply the privilege of liberality to accommodate the Sps. Fortaleza due to their
negligence or omission to exercise the right of redemption within the prescribed period without justifiable cause.

HUERTA ALBA RESORT, INC. V. COURT OF APPEALS

Petitioner: Huerta Alba Resort, Inc.

Respondent: SMGI
Date: Sep. 1, 2000
Ponente: Purisima

This is a fairly long case with two main discussion points. The first main point is the difference between equity of redempti on
and right of redemption, which we took up in Credit Transactions. Second, and more related to our topic, would be the
nature of a counterclaim.

At bar is a petition assailing the Court of Appeals decision, setting aside the RTC Makati decision that held that Huerta had
the right to redeem property within a one year period prescribed by Sec. 78 of RA 337, the General Banking Act.

This section provides -- “in case of a foreclosure of a mortgage in favor of a bank, banking or credit institution, whether
judicially or extrajudicially, the mortgagor shall have the right, within one year after the sale of the real estate as a res ult of
the foreclosure of the respective mortgage, to redeem the property.”

FACTS:
 SMGI (“Respondents”) filed a complaint for judicial foreclosure of mortgage on Oct 19, 1989
o
They sought to foreclose 4 parcels of land mortgaged by Huerta (“petitioner”) to Inter con Fund Resource
Inc (Intercon)
o Respondent instituted this as mortgagee-assignee (Intercon assigned their rights at some point.)
o The loan was P8.5M, secured by the subject parcels of land.
 In its answer, petitioner questioned
o Assignment of Intercon of the mortgage right (they said it was ultra vires)
o The correctness of charges.
 Petitioner lost and was ordered to pay the loan, plus interest and charges, within 150 days from receipt of the order,
else the properties would be sold to satisfy the debt.
 Petitioner appealed to the CA, which dismissed the case (late payment of docket fees).
 Petitioner then went to the SC, which also dismissed their complaint.
 After these rulings, respondent filed with the srcinal RTC a motion of execution, which was granted.
o Thus, a notice of levy and execution was issued by the Sheriff
o He issued a notice of Sheriff’s sale for the auction of subject properties.
 Petitioner then filed a motion to quash and set aside the writ of execution, saying that the trial court acted with GAD.
 It argued that the record of the case was still with the CA, and thus the writ was premature
o The 150 days period had not yet lapsed
o There was no default because respondent had not yet demanded for payment.
 RTC denied this, saying that the judgment had become final and executor
o Execution thereof was a matter of right
o Writ of execution thus was its ministerial duty
 Guess what? Petitioner appealed to the CA.
 While the appeal was pending, the auction sale proceeded and Respondent won the bidding.
o The certificate of sale was issued to it, and registered with the RoD.
 After this, petitioner presented a “motion for clarification,” asking the trial court if the 12 month period for redemption
would apply
o RTC ruled that the period of redemption would have to follow the rule on judicially foreclosed property (see
Rule 68)

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 o [The sale] shall operate to divest the rights in the property of all the parties to the action and to vest their
rights in the purchaser, subject to such rights of redemption as may be allowed by law.
 Thus, petitioner filed a motion to set aside this order, saying that it altered the earlier decision
o First decision declared that satisfaction of judgment would be governed by the sale of real estate under
execution (not Rule 68).
 Remember the CA? All this happened while the case was pending there, diba? They held that the 150 day period
of redemption should be computed from the date of notification of entry of judgment – thus, it had expired on Sept.
11, 1994.
o The appeal was dismissed because the subject was already moot and academic.
 They also dismissed the MR
o Even if it is true that Sec 78 of RA 337 (mentioned above) prescribes a period of one year from the auction
sale to redeem the property, petitioner never averred in its pleadings that it was entitled to this provision
 Issue of whether SMGI was a credit institution was never brought squarely before the court.
 SMGI then filed a petition for writ of possession – it was here that Huerta first claimed the right to redeem under the
General Banking Act
o Original mortgagee, they said, was a credit institution, and the assignment to SMGI did not remove the
transaction from the coverage of Sec 78 of RA 337.
o Thus, they should have one year to redeem from registration of the auction sale.
o Thus, they said, the issuance of titles to SMGI was premature.
 RTC denied the petition for writ of possession – they agreed (for the first time EVER) with Huerta, saying that they
had until Oct 21, 1995 to redeem said parcels of land.
o SMGI challenged the order, and the CA overturned it
 Hence, this petition.

ISSUE:
 w/n Huerta has the one year right of redemption under Sec 78 of RA 337 – No.

HELD:
 Various decisions show that Huerta has been adjudged to have only the Equity of Redemption, not the Right of
Redemption (Court cited Limpin v. IAC)
o Right of Redemption – exists only in extrajudicial mortgage.
 No right recognized in judicial foreclosure unless mortgagee is PNB or a banking institution
 Mortgagor has one year from registration of sheriff’s certificate of sale to redeem the property.
o This does not exist in judicial foreclosure of the mortgagee is not a banking institution
 The case here is mentioned above (Rule 68).
 What exists only now is the Equity of Redemption – right of the mortgagor to extinguish the
mortgage and retain ownership by paying the debt within the 90 day period after judgment becomes
final.
 Rule 68, Sec 2 – [court] shall render judgment for the sum so found due and order the
same to be paid into court within a period of not less than ninety (90) days from the date of
the service of such order, and that in default of such payment the property be sold to realize
the mortgage debt and costs.'
 This is the equity of redemption – it may even be exercised beyond the 90 day period from date of
service of the order, as long as its before the order of confirmation of the sale. (After such order of
confirmation, there is no more redemption possible)
 Petitioner did not seasonably invoke its purported right under Sec 78 of RA 337
o Earliest opportunity – when it submitted its answer to the complaint for foreclosure (essentially, they should
have filed a counterclaim).
 What is a Counterclaim? (in case he asks)
o A cause of action existing in favor of the defendant against the plaintiff.
o It will, if established, defeat/qualify the judgment or relief to which the plaintiff is entitled.
o Distinct/independent cause of action
o Defendant, in respect to the counterclaim, becomes an actor
 There exist 2 simultaneous actions, each party is at the same time a plaintiff and a defendant
 Represents the right of the defendant to have the claims of the parties counterbalanced
 Counterclaim is essentially an independent action, and should be treated as such. (tested by the
same rules, etc.)
 The point? – Huerta should have asserted their right under Sec 78 of RA 337 as a counterclaim in its answer.
o Counterclaims allow the whole controversy between parties to be disposed of in one action
o The applicability of Sec 78 hinged on a factual question
 Was Intercon a credit institution? – this was never squarely brought before the court.
 The claim of benefits under Sec 78 is in the nature of a compulsory counterclaim that should have
been in the answer to the complaint.
 Failure of Huerta to assert this alleged right precludes it from doing so at the late stage of litigation
o Estoppel may successfully be invoked.
o A party who failed to invoke his claim in the main case, while having opportunity to do so, will be precluded
from invoking this claim subsequently.
o Huerta should have alleged at the very start that Intercon was a credit institution, in order for Sec 78 to
apply.

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Huerta Alba Resort Inc. v CA
GR No. 128567, September 1, 2000

FACTS:
Syndicated Management Group, Inc. (SMGI), as mortgagee-assignee, filed a complaint before the RTC for foreclosure of
4 parcels of land mortgaged by Huerta Alba Resort to Intercon Fund Resource (“Intercon”).
DECISION OF LOWER COURTS:
(a) RTC – granted the complaint
(b) CA – dismissed appeal due to late payment of docket fees (c) Supreme Court – dismissed petition for certiorari.
SMGI then filed with the trial court of srcin a motion for execution of decision. Thus, a writ of execution was issued.
Petitioner filed an urgent motion to quash and set aside the writ of execution. The dispute is principally is as to when the
150 period within which Huerta Alba may exercise its equity of redemption be counted.

DECISIONS:
(a) RTC – denied to urgent motion to quash.
Meanwhile, the auction sale proceeded with SMGI as the sole bidder.
(b) CA – held that the 150 periods should be computed from the date petitioner was notified of the Entry of Judgment but
the same period has expired already.
Huerta Alba filed with the RTC a motion for clarification seeking clarification whether or not the 12 month period of
redemption for ordinary execution should apply.

DECISIONS:
(1) RTC: redemption should be governed by the rule on the sale of judicially foreclosed property under Rule 68 of the
Rules of Court
Huerta Alba again sought clarification with CA of the date of the commencement of the 1 year period for the redemption of
the properties
(2) CA: Foreclosure in this case is judicial and as such mortgagor has only the equity and not the right or redemption.
Even if under section 78 of RA 337 (General Banking Act), a mortgagor of a bank, banking or credit institution, whether
the foreclosure was done judicially or extrajudicially, has a period of 1 year from the auction sale within which to redeem
the foreclosed property, it was never raised whether SMGI is a bank or credit institution.
Upon motion for a writ of possession by SMGI, Huerta Alba then filed in opposition a motion to compel respondent to
accept redemption, alleging for the first time his right under RA 337, theorizing that the srcinal mortgagee being a credit
institution, its assignment of mortgage credit did not remove the coverage of RA 337

DECISIONS:
(1) RTC: denied SMGI’s writ of possession.
(2) CA: set aside the RTC’s decision.
Hence, the present petition.

ISSUE:
Whether or not Huerta Alba has the one year right of redemption of subject properties under Section 78 of RA 337

RULING:
YES, however, this was not seasonably filed.
The claim that it is entitled to the beneficial provisions of RA 337 – since SMGI’s predecessor-in-interest is a credit
institution – is in a nature of a compulsory counterclaim which should have been averred in its answer to the complaint for
judicial foreclosure.
The failure of petitioner to seasonably assert its right under RA 337 precludes it from so doing at this late stage case.
Estoppel may be successfully invoked if the party fails to raise the question in the early stages in proceeding.
The sale of the properties, as confirmed by the court, operated to divest Huerta Alba of its right of redemption. There then
existed only what is known as equity of redemption, which is simply the right of the petitioner to extinguish the mortgage
and retain ownership of the property by paying the secured debt within the 90 day period after the judgment became final.
However, redemption can no longer be effected since petitioner failed to exercise its equity of redemption within the
prescribed period.
“The equity of redemption is, to be sure, different from and should not be confused with the right of redemption.

RIGHT OF REDEMPTION
General Rule:
The right of redemption in relation to a mortgage – understood in the sense of a prerogative to re-acquire mortgaged
property after registration of the foreclosure sale – exists only in the case of the extrajudicial foreclosure of the mortgage.
Exception:
No such right is recognized in a judicial foreclosure except only where the mortgagee is the Philippine National Bank or a
bank or banking institution.
I. Extrajudicial foreclosure –right of redemption
Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of redemption within one (1)
year from the registration of the sheriff’s certificate of foreclosure sale.
II. Judicial foreclosure
Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The law declares that a
judicial foreclosure sale, ‘when confirmed by an order of the court, x x shall operate to divest the rights of all the partie s to
the action and to vest their rights in the purchaser, subject to such rights of redemption a may be allowed by law.’
Such rights exceptionally “allowed by law’ (i.e. even after confirmation by an order of the court) are those granted by the
charter of the Philippine National Bank (Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). These laws

6
confer on the mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right to redeem the
property sold on foreclosure – after confirmation by the court of the foreclosure sale – which may be exercised within a
period of one (1) year, counted from the date of registration of the certificate of sale in the Registry Property.
But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the mortgagee is not the
PNB or a bank or banking institution. In such a case, the foreclosure sale, ‘when confirmed by an order of the court. x x
shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser.’

EQUITY OF REDEMPTION
There then exists only what is known as the equity of redemption. This is simply the right of the defendant mortgagor to
extinguish the mortgage and retain ownership of the property by paying the secured debt:

1. within the 90-day period after the judgment becomes final, in accordance with Rule 68, or
2. even after judgment becomes final, in accordance with Rule 68, or
3. even after the foreclosure sale but prior to its confirmation.
Section 2, Rule 68 provides that – ‘xx If upon the trial xx the court shall find the facts set forth in the complaint to be true, it
shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and costs, and shall
render judgment for the sum so found due and order the same to be paid into court within a period of not less than ninety
(90) days from the date of the service of such order, and that in default of such payment the property be sold to realize the
mortgage debt and costs.’ This is the mortgagor’s equity (not right) of redemption which, as above stated, may be
exercised by him even beyond the 90-day period ‘from the date of service of the order,’ and even after the foreclosure
sale itself, provided it be before the order of confirmation of the sale. After such order of confirmation, no redemption can
be effected any longer.”

HUERTA ALBA RESORT, INC. v. CA (2000)

(Right of Redemption)

Equity of redemption Right of redemption

Exists in judicial foreclosure GR: Exists of

foreclosure only
the in the case of the extrajudicial
mortgage

E: in a judicial foreclosure except only where the

the right of the defendant mortgagor to extinguish
the mortgage and retain ownership of the property
by paying the secured debt within the 90-day period
after the judgment becomes final, in accordance with
Rule 68, or even after the foreclosure sale but prior
to its confirmation.
Section 2, Rule 68, 1997 Rules of Civil Procedure
Section 78 of R.A. No. 337.
mortgagee is the PNB or a bank or banking
institution
grants to the mortgagor the right of redemption
within 1 year from the registration of the sheriff's
certificate of foreclosure sale
Act 3135

Judicial Foreclosure
The law declares that a judicial foreclosure sale 'when confirmed be an order of the court. . . . shall operate to divest the
rights of all the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be
allowed by law.' Such rights exceptionally 'allowed by law' (i.e., even after confirmation by an order of the court) are those
granted by the charter of the PNB (Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). These laws confer
on the mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right to redeem the property sold
on foreclosure — after confirmation by the court of the foreclosure sale — which right may be exercised within a period of
one (1) year, counted from the date of registration of the certificate of sale in the Registry of Property.

Equity of redemption
This is simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by
paying the secured debt within the 90 -day period after the judgment becomes final , in accordance with Rule 68, or even
after the foreclosure sale but prior to its confirmation.

Section 2, Rule 68 provides that —

'. . If upon the trial . . the court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to
the plaintiff
found due andupon the mortgage
order debt
the same to beor obligation,
paid including
into court within ainterest and
period of costs,
not less and
than shall render
ninety judgment
(90) days from for
thethe sum
date so
of the
service of such order, and that in default of such payment the property be sold to realize the mortgage debt and costs.'

This is the mortgagor's equity (not right) of redemption which, as above stated, may be exercised by him even beyond
the 90-day period 'from the date of service of the order,' and even after the foreclosure sale itself, provided it be before the
order of confirmation of the sale. After such order of confirmation, no redemption can be effected any longer." (Emphasis
supplied)

Held: Petitioner failed to seasonably invoke its purported right under Section 78 of R.A. No. 337. The failure of petitioner to
seasonably assert its alleged right under Section 78 of R.A. No. 337 precludes it from so doing at this late stage case. Veri ly,
the petitioner has only itself to blame for not alleging at the outset that the predecessor-in-interest of the private respondent
is a credit institution. Thus, when the trial court, and the CA repeatedly passed upon the issue of WON petitioner had the
right of redemption or equity of redemption over subject properties in the decisions, resolutions and orders, it was
7
unmistakable that the petitioner was adjudged to just have the equity of redemption without any qualification whatsoever,
that is, without any right of redemption allowed by law.

There then existed only what is known as the equity of redemption, which is simply the right of the petitioner to extinguish
the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment
became final. The confirmation of the sale and the issuance of the TCT covering the subject properties to private respondent
was then, in order. The trial court therefore, has the ministerial duty to place private respondent in the possession of subject
properties.

RA 337

Sec. 78. Loans against real estate security shall not exceed seventy per cent (70%) of the appraised value of the
respective real estate security, plus seventy per cent (70%) of the appraised value of insured improvements, and such
loans shall not be made unless title to the real estate, free from all encumbrances, shall be in the mortgagor. In the event
of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan granted
before the passage of this Act or under the provisions of this Act, the mortgagor or debtor whose real property has been
sold at public auction, judicially or extrajudicially, for the full or partial payment of an obligation to any bank, banking, or
credit institution, within the purview of this Act, shall have the right, within one year after the sale of the real estate as a
result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by the court in the
order of execution, with interest thereon at the rate specified in the mortgage, and all the costs and other judicial expenses
incurred by the bank or institution concerned by reason of the execution and sale and as a result of the custody of said
property less the income received from the property. However, the purchaser at the auction sale concerned shall have the
right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale
and administer the same in accordance with law.

Similarly, loans on the security of chattels shall not exceed fifty per cent (50%) of the appraised value of the security, and
such loans shall not be made unless title to the chattels, free from all encumbrances, shall be in the mortgagor.

The Monetary Board may, by regulation, prescribe further security requirements to which the various types of bank credit
shall be subject, and, in accordance with the authority granted to it in section one hundred eleven of the Central Bank Act,
the Board may by regulation reduce the maximum ratios established in the present section, but in the exercise of the
aforementioned authority, the Board shall in no case fix ratios greater than those established herein.

The Monetary Board may, similarly, in accordance with the authority granted to it in section one hundred eleven of the
Central Bank Act, reduce the maximum permissible maturities specified in this Act for various types of bank loans, but in
no case shall the Board exercise such power to authorize maximum maturities greater than those established in this Act.
Any reduction by the Board of the maximum maturities specified in this Act shall apply only to loans made after the date of
such action.