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GR 118342, January 5, 1998 dispose the property.

DBP then thereafter, executed a Deed of
DBP VS. CA Conditional Sale in favor of Agripina Caperal.
RTC ruled in favor of Cuba declaring that DBP’s taking
FACTS: possession and ownership of property without foreclosure was
plainly violative of Article 2088 of the Civil Code or the
Cuba is a grantee of a Fishpond Lease Agreement from the provision on pactum commissorium. RTC also ruled that
Government. She obtained loans from DBP in the amounts of condition no. 12 of the Assignment of Leasehold Rights was a
P109, 000 and P98, 700 under the terms stated in the clear case of pactum commissorium expressly prohibited and
promissory notes and as security for said loans; she executed declared null and void by Article 2088, Civil Code and
two deeds of assignment of her leasehold right. Cuba concluded that since DBP never acquired lawful ownership of
however, failed to pay her loan on scheduled dates and Cuba’s leasehold rights, all acts of ownership and possession
without foreclosure proceedings, DBP appropriated the by bank is void and that the deed of Conditional Sale in favor
Leasehold Rights of Cuba over the fishpond. After DBP’s of Caperal was as well void and ineffective.
appropriation over the fishpond, DBP in turn executed a deed Cuba and DBP interposed appeals to CA. CA ruled that RTC
of Conditional Sale of the Leasehold Rights in favor of Cuba erred in declaring the deed of assignment as null and void and
over the same fishpond in question. In the negotiation for that Caperal can validly acquire the leasehold rights and that
repurchase, Cuba addressed 2 letters to the Manager of DBP condition no. 12 of deed of assignment was an express
which was accepted. authority from Cuba for DBP to sell whatever right she had
over the fishpond.
After the Deed of Conditional Sale was executed in favor of
Cuba, a new fishpond lease agreement was issued by the Hence, this petition.
Ministry of Agriculture and Food in favor of Cuba only
excluding her husband. Cuba again failed to pay the ISSUE/S:
amortization as stated in Deed of Conditional Sale and 1. WoN the assignment of leasehold rights was a mortgage
because of this she entered with DBP a temporary contract (as contended by Cuba)
arrangement whereby in consideration for deferment of
Notarial Rescission of Deed of Conditional Sale, Cuba YES. In all of the promissory notes, there is a provision that “in
promised to make certain payments. the event of foreclosure of the mortgage securing this note,
I/We further bind myself/ourselves, jointly and severally, to pay
DBP thereafter sent a Notice of Rescission thru Notarial Act the deficiency, if any.” Moreover, in Condition No. 22 of the
and was received by Cuba. After the Notice of Rescission, deed, it was provided that “failure to comply with the terms and
DBP took possession of the Leasehold Rights of fishpond and condition of any of the loans shall cause all other loans to
after, advertised in SUNDAY PUNCH the public bidding to become due and demandable and all mortgages shall be
foreclosed.” In the facts stipulated, it states that “As security

for loans, plaintiff Lydia P. Cuba executed two Deeds of proceeds to the payment of the loan. This provision is a
Assignment of her leasehold rights.” standard condition in mortgage contracts and is in conformity
with Article 2087 of the Civil Code, which authorizes the
We find no merit in DBP’s contention that the assignment mortgagee to foreclose the mortgage and alienate the
novated the promissory notes in that the obligation to pay a mortgaged property for the payment of the principal obligation.
sum of money the loans (under the promissory notes) was
substituted by the assignment of the rights over the fishpond
(under the deed of assignment). The said assignment merely G.R. No. 126800. November 29, 1999.
complemented or supplemented the notes; both could stand Bustamante vs. Rosel
together. Significantly, both the deeds of assignment and the
promissory notes were executed on the same dates the loans Facts:
were granted. Also, the last paragraph of the assignment
stated: “The assignor further reiterates and states all terms, Petitioner borrowed money from respondents for a period of
covenants, and conditions stipulated in the promissory note or two years and with interest. The former set up as collateral a
notes covering the proceeds of this loan, making said parcel of land with apartment thereon to guaranty payment.
promissory note or notes, to all intent and purposes, an They also agreed that in the event that she fails to pay,
integral part hereof.” respondents can buy the collateral for a cheap consideration,
inclusive of the principal and interest. When the loan was
2. WoN condition no. 12 of the deed of assignment constituted about to mature, respondents proposed to buy the collateral.
pactum commissorium
Petitioner, however, refused to sell and requested for
NO. The elements of pactum commissorium are as follows: (1) extension of time to pay the loan. She, instead, offered to sell
there should be a property mortgaged by way of security for another residential lot. Respondents refused to extend the
the payment of the principal obligation, and (2) there should be payment of the loan and to accept the second lot offered. On
a stipulation for automatic appropriation by the creditor of the maturity date, petitioner tendered payment of the loan to
thing mortgaged in case of non-payment of the principal respondents which the latter refused to accept. They insisted
obligation within the stipulated period. that a deed of absolute sale of the collateral be executed.
Respondents then instituted an action for specific performance
Condition no. 12 did not provide that the ownership over the and consignation against petitioner. After demand, petitioner
leasehold rights would automatically pass to DBP upon consigned the amount of the loan plus interest.
CUBA’s failure to pay the loan on time. It merely provided for
the appointment of DBP as attorney-in-fact with authority, The trial court ruled in favor of the petitioner. On the other
among other things, to sell or otherwise dispose of the said hand, the Court of Appeals reversed this decision, which the
real rights, in case of default by CUBA, and to apply the Supreme Court affirmed. However, petitioner filed a motion for

2088: Effects on Held: Pledge or Mortgage Petitioner did not fail to pay the loan. All is to guarantee the payment of the loan. of contracts lest the lenders devour the borrowers like vultures do with their prey. Hence. Under the MOA. These elements are that the real intention of the parties in putting up the collateral present in this case. courts are duty which is not contrary to law. After note with a promise to pay the FIRST PARTY in full within one refusal. A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the property Held: Pactum Commissorium. She alleged that she did not fail to pay the thing mortgaged in case of non-payment of the principal loan so there is no reason for respondent to buy the collateral. Art. Therefore. which the law prohibits. GR 171592 (2) Whether or not the stipulation in the loan contract was ONG. she “The SECOND PARTY hereby signed another promissory tendered the payment which respondents refused. (2008) valid and enforceable. and (2) there should be a pay their debt within the one-year period gives respondent the stipulation for automatic appropriation by the creditor of the right to enforce the Dacion in Payment transferring to it . Art. 2087. which they have executed and fulfillment of petitioner’s obligation. Issues: (1) Whether or not petitioner failed to pay the loan at its maturity date. the stipulation is void. obligation within the stipulated period. that it is relationships whatever the condition if only to alleviate their their right to purchase the collateral based on the contact financial burden albeit temporarily. on one persons in need of money are liable to enter into contractual hand. On the maturity date. Since the event otherwise the SECOND PARTY agree to have their “DACION did not occur. she consigned the payment. Pactum Commissorium. The sale of the collateral year from the date of the consolidation and restructuring. Respondent. contends that petitioner failed to pay the loan. public bound to exercise caution in the interpretation and resolution order and public policy. the failure by the petitioners to payment of the principal obligation. Issue: Whether the contract constitutes pactum The stipulation in the loan contract was not valid and commissorium or dacion en pago. is an obligation with a suspensive condition. given as security for the loan.reconsideration. ROBAN LENDING CORPORATION. good customs. respondents do not have the right to demand IN PAYMENT” agreement. morals. especially where the same signed today in favor of the FIRST PARTY be enforced” would be disadvantageous to petitioner. The In the case at bar. V. This is embraced in the concept of pactum commissorium. the MOA and the Dacion in Payment elements of pactum commissorium are as follows: (1) there contain no provisions for foreclosure proceedings nor should be a property mortgaged by way of security for the redemption. unenforceable.

and a T-T was issued in favor of Villar. CA appeal. The Dacion Villaras stipulated in the deed of the real estate $mortgage is in Payment did not extinguish petitioners’ obligation to violative of the prohibition of Pactum -ommissorium.00. pactum commissorium being void for being commissorium prohibited by law. Held: Villar’s purchase of the subject property did not violate the GR158891. reversed the decision execute a promissory note which they were to pay within one and ruled in favor of Villar. In a true dacion en pago. 2012 prohibition on pactum commissorium. there should be a stipulation for automatic appropriation by was mortgaged to secure a loan obtained by Galas from Villar the creditor of the in the amount of P2.000. pago as a special form of payment whereby the debtor alienates property to the creditor in satisfaction of a monetary A year later. and not by way of satisfying the debt.ownership of the properties covered by the TCT.000. &proceeds shall be Ø Respondent argues that the law recognizes dacion en a&&lied to her outstanding loan. respondent. automatically acquires ownership of the properties It was established from the facts that in the deed of real estate upon petitioners’ failure to pay their debt within the stipulated $mortgage executed between Galas and Villar. the former period. Galas decided to This does not persuade. in effect. June 27. 800. arguing his main &point that the authority given to of security. mortgaged in favor of Pablo Garcia to secure a loan amounting to P 1. deed of sale was executed assignment of the property extinguishes the monetary debt. and with such. The following are the Garcia vs Villar elements of pactum commissorium. year. between them. . Aggrieved. issue That the questioned contracts were freely and voluntarily 1 whether the authority given to Villar in the deed of real estate executed by petitioners and respondent is of no mortgage is violative of the prohibition on pactum moment. the alienation of the properties was by way damages. afterwards. Garcia filed a Petition for mandamus with In the case at bar. appoints the latter to sell the subject &property in case Galas fails to &ay the loan. The lot 2. Respondent. there should be a property mortgaged by way of security for The case stemmed from a mortgage transaction involving a lo the payment of the principal obligation t owned by Lourdes Galas in favor of Yolanda Villar. the sell the subject &property to Villar.200. the same subject &property was subsequently obligation. under the MOA executed on the same day as the Dacion in Payment. petitioners had to It ruled in favor of Garcia. 1. On the contrary.00.

only undertook to pay such automatically pass to Villar upon Galas failure to pay the loan mortgage or allow the subject property to be sold upon failure on time. the owner of attorney provision above did enforceable. it being necessary that a demand for 2129 of the Civil Code. has not yet been discharged. to the fulfillment of the obligation for whose security it of the third person in possession of the property mortgaged was constituted. the mortgage on the property may still payment should have previously been made upon the debtor be foreclosed despite the transfer. 136 of possesses. the creditor may demand may be. ( Article 2126 of the Civil Code) Art. The Mortgage Law provided that the debtor should not after subsequent transfers by the mortgagor. the obligation to pay the mortgage indebtedness remains with the Real nature of a mortgage: original debtors Galas and Pingol. inasmuch as it is a right in rem. 1889. “A registered pay the debt upon its maturity after judicial or notarial demand.) This clearly shows that the spirit of the Civil establishes. However. mortgage lien is considered inseparable from the property for payment has been made by the creditor upon him. or otherwise debtor once the debt matures. Therefore. payment of such part of the debt. as is secured by the property in his possession. which follows the property. which he is the mortgagee. under Art. of obligation within the stipulated period. whoever the possessor According to Art. While . And even if these Art. demand payment of him. The creditor may claim from a third person in requirements were complied with. in terms and with the formalities which the law the same law. hat it granted was the mere appointment of of the mortgage creditor to obtain payment from the principal Villaras Attorney in fact with authority to sell. Villar did not obligate herself to disposed of the subject property. and in that case it is of the credit secured by the property which said third person considered to be in the possession of the debtor.thing mortgaged in case of nonpayment of the principal While we agree with Garcia that since the second mortgage. still the third possessor possession of the mortgaged property. we find that said mortgage subsists and is still in the case at bar. 2126. In fact. viz: and the latter should have failed to pay. so in law without the creditor’s consent. even law. the payment of the part might abandon the property mortgaged. in buying the subject property not provide that ownership over the subject property would with notice that it was mortgaged. Villar.) According to this. and to apply the proceeds to replace the debtor in the principal obligation. The mortgage directly and immediately subjects Effects of a transfer of a mortgaged property to a third person the property upon which it is imposed. 2129.” The sale or transfer of the 135 of the Mortgage Law of the Philippines of mortgaged property cannot affect or release the mortgage. in the manner and form established by the A mortgage is a real right. Code is to let the obligation of the debtor to pay the debt stand although the property mortgaged to secure the payment of said debt may have been transferred to a third person. and could not do the payment of the loan. 1879 of this Code. the obligation of the new possessor thus the purchaser or transferee is necessarily bound to to pay the debt originated only from the right of the creditor to acknowledge and respect the encumbrance. (Art. (Art.

No. Teodoro Jr executed a Deed of undertaking for the convenience and security of the mortgage Assignment of Receivables in favour of MBC from creditor. Spouses Teodoro together with Teodoro Sr executed a PN in favour of Manila Banking Corp (MBC). if he is so minded. Reason: the mortgage is merely an encumbrance on the . L-53955 January 13. Mortgage is merely an accessory 3. can . foreclosed. In the stipulations of fact. and that they release and quitclaim all its rights. which provides the substitution of the debtor by the third person in possession of G.R. It appears than in 1964. (Art.the Mortgage Law of 1893 eliminated these provisions. debt secured by it. in case the principal obligor does not pay . i. does not Bidin. loans. by the mortgage. The mere fact that the purchaser of an immovable has notice . and apply the proceeds of the sale to the of September 1969.Amounted to 44k. The mortgagee. J.They failed to pay and left balance of 15k as of he is to assume payment of the mortgage debt. JR. 168 of the Regulation. satisfaction of his credit. Article 129 of this law. and GRACE ANNA TEODORO in this respect. overdrafts and other credit mortgagor accommodations extended to the spouses and Teodoro Sr as security for the payment of said sum and interest thereon.9k balance as the mortgage debt..8k and 1k respectively payable within 120 days and property.That MBC extended loans to the spouses and Teodoro Jr because of certain contracts entered into by latter with EEA for fabrication of fishing boats and that the .) 1. title and interest in the receivables.The deed provided it was for consideration of certain principal debt by personal action against the original credits. waive the mortgage security and proceed to collect the . for the purposes of the giving of notice. entitling the mortgagee to have the property 12% per annum. it THE MANILA BANKING CORPORATION vs.They made partial payment but still left 8. May and June 1966. September 1969. ANASTACIO contained nothing indicating any change in the spirit of the law TEODORO. April 1966. with 12% interest that the acquired realty is encumbered with a mortgage does not render him liable for the payment of the debt guaranteed per annum. show this change and has reference to a case where the action is directed only against the property burdened with the mortgage. executed two PNs.Payable within 120 days (until Aug). sold. it was admitted by the parties: . 1989 the property. in the absence of stipulation or condition that . 2. and exists independently of the obligation to pay the Emergency Employment Administration.e. 4.

That the Bank took steps to collect from the accounts receivable. assignment is a quitclaim in consideration of their 6. in view of . .Teodoro Sr subsequently died so suit only against the The position of appellants. MFR denied. instituted against them. transfer the ownership of the receivables to appellee bank and release appellants from their loans with the bank incurred The character of the transactions between the parties under promissory notes. indebtedness to appellee bank. not mere guaranty. MBC appellee bank shall have been fully paid by them. and as security for the payment of said sum and the promissory note which are the subject of the suit for collection interest thereon. Philippine Fisheries Commission succeeded EEA after in and to the accounts receivable assigned. and their be said to have been constituted by virtue of a dation in credit accommodations extended to appellants by appellee payment for appellants' loans with the bank evidenced by bank. At the time the deed of assignment was and quitclaim to assignee bank all their rights. receivable is to remain in said assignee and it shall have the right to collect directly from the debtor. said loans were non-existent yet.. that appellants as assignors. correspondingly the assignment shall also extend to all the . title and interest executed. NO. the assignment of The Deed of Assignment provided that it was for and in the receivables did not result from a sale transaction. however. TC favoured MBC. . of all the loans contracted by the spouses. title and interest in the Issues: accounts receivable described hereunder. until the consideration on the loans secured by appellants from 5. is not. For failure of the spouses and Teodor Sr to pay.That non-payment of the PNs was due to failure of the guaranty for future loans of appellants to appellee bank and Commission to pay spouses. release and quit- claim unto said assignee all its rights.. Deed of Assignment). release. remise. It cannot consideration of certain credits. NO. is that the deed of spouses.. Definitely. (Emphasis supplied W/N the assignment of receivables has the effect of payment by appellants...Spouses appealed to CA but since issue pure question the following provisions of the deed of assignment: of law. It was further its abolition. overdrafts. stipulated that the assignment will also stand as a continuing . appellants shall also obtain in the future. loans. and whatever the Ratio: Assignor does in connection with the collection of said accounts. first par. it agrees to do so as agent and representative of the The assignment of receivables executed by appellants did not Assignee and it trust for said Assignee. determined by the language used in the document but by their intention. W/N MBC must exhaust all legal remedies against PFC before . the Assignor do hereby remise. however. Commission but no collection was effected. CA forwarded to SC. that the title and right of possession to said account it can proceed against the spouses. the deed of assignment was intended as collateral security for . Obviously. in a Civil Case.

and attorney's fees. The ruling was then appealed. Sabeniano was a client of both petitioners Citibank the amount with legal interest. known as the assignee. & INVESTOR FINANCE CORPORATION V. they also alleged that respondent later obtained several loans from Citibank. such as sale.A. Facts: Citibank supposedly informed Sabeniano of the foregoing compensation through letters. the proceeds of which were supposedly deposited automatically and directly to her account with Citibank. exchange or donation. the civil case for and without the need of the consent of the debtor. CA modified the decision but only to the extent of Sabeniano’s Sabeniano filed a complaint with the RTC against petitioners loans . transfers his "Accounting. companies. and accounts with Citibank-Geneva and her money market affiliate company of Citibank. However. The case was eventually decided after 10 years with the Judge declaring the offsetting done as illegal and the return of Modesta R. despite her repeated demands. dation in payment. petitioners placements(MMPs are short term debt instruments that give prayed for the dismissal of the Complaint and for the award of the owner an unconditional right to receive a stated. N. Thus. executed through Promissory Notes and secured by a pledge on her dollar accounts. pursuant to securities she executed.A. Citibank et al admitted that Sabeniano had extent as the assignor could have enforced it against the deposits and money market placements with them.the bank loans of appellants. the business relations pay her loans to Citibank. including debtor. Subsequently. who acquires the power to enforce it to the same In their reply. N. known as the assignor. Sabeniano and her counsel duly registered under US Laws and is licensed to do made repeated requests for the withdrawal of respondent's commercial banking and trust functions in the Philippines and deposits and MMPs with Citibank. Citibank exercised its right to off-set or compensate SABENIANO respondent's outstanding loans with her deposits and money market placements. mainly handling money market placements with petitioner FNCB Finance. thus. dollar accounts in other Citibank branches. 9 of the deed. by a legal deposits and the proceeds of her money market placements cause.” credit and its accessory rights to another. thus. and exemplary damages.. as placements with the petitioners and other investment stated in stipulation No. including her dollar Investor's Finance Corporation (aka FNCB Finance). while Sabeniano was ordered to and FNCB Finance. of money on a specified date). When Sabeniano CITIBANK. Sum of Money and Damages. as a continuing guaranty for as she claims to have substantial deposits and money market whatever sums would be owing by defendants to plaintiff. Assignment of credit is an agreement by virtue of Sabeniano alleged that Citibank et al refused to return her which the owner of a credit.Unfortunately. and a deed of assignment against her MMPS with FNCB Finance. a banking corporation surprised when six years later. fixed sum actual. defaulted. The among the parties subsequently went awry. Citibank et al were This is a case involving Citibank. moral.

are creditors and debtors of each other. Both debts consist in sums of money. which. it is for her loans. set had matured and became demandable. they be of the same kind. but technically speaking Citibank did not effect a legal General Requirement of Compensation: compensation or off-set under Article 1278 of the Civil Code. upon the authority granted to it under the foregoing Deeds . controversy. as to the outstanding loans. the said PNs were issued. 1279. respondent was the creditor of petitioner Citibank. it partly extinguished respondent's obligations in their own right. or if the inclusive of the principal amounts and interests. and that he be at the same time a principal the creditor of respondent for her outstanding loans. Art. actually did was to exercise its rights to the proceeds of as far as her deposit account was concerned. savings. through the application of the security given by the respondent Art. Petitioner Citibank was only acting banking institution. Yes. things due are consumable. they (1) That each one of the obligors be bound principally. or current. that each one of the obligors be 1. Yes. In order that compensation may be proper. and As to these money market placements. while. As already found by this Court.which it ruled that Citibank failed to establish the indebtedness and is also without legal and factual basis. since bank respondent's money market placements with petitioner FNCB deposits. should be Finance by virtue of the Deeds of Assignment executed by considered as simple loan or mutuum by the depositor to the respondent in its favor.) MMPs. would not apply since the first requirement for a valid compensation. under Article 1278 in due time to the debtor.022. (thereby implying that money market placement is a simple (4) That they be liquidated and demandable. loan or mutuum). Respondent's money market placements were necessary. (2) That both debts consist in a sum of money. all of respondent's PNs in the second appealed to the SC. were ultimately covered by PNs No.916. What petitioner Citibank same time.)Deposits and b. Held: 2. 1278. The case was thus By June 1979. but rather. legal compensation. the date the check for the proceeds of other. and after several roll-overs. of the Civil Code. due time to the debtor concerned. At the creditor of the other. with petitioner FNCB Finance. commenced by third persons and communicated Consequently. petitioner Citibank was bound principally. and that he be at the same time a principal creditor of the by 3 September 1979. was not met.66. 20138 and 20139. Neither was there Issue: any retention or controversy over the PNs and the deposit Whether or not there was a valid off setting/compensation of account commenced by a third person and communicated in loan vis a vis the a. while respondent's savings account was demandable anytime. whether fixed. Compensation takes place by operation of law. was the creditor and petitioner FNCB Finance the debtor (3) That the two debts be due. petitioner (5) That over neither of them there be any retention or Citibank was the creditor and respondent the debtor. respondent also of the same quality if the latter has been stated. Compensation shall take place when two persons. amounted to P1.

PN BD#76/C-430 covering P545. Metro Manila for the issuance of a writ of preliminary injunction with . secured by D/A the Civil Code SFDX #129.when it finally used the proceeds of PNs No. Inc. July 28.640. (PN BD#75/C-252) was effect a legal compensation or off-set under Article 1278 of the then issued covering the said loan. but rather. 20138 and They executed a deed of real estate mortgage of the said 20139. The “dragnet clause” in the first security instrument constituted Metro Manila.000. which provides that the Civil Code. Alviar Realty and Development.B. to the mentioned in their approval letter that additional securities for pledgor. to partly pay for property in favor of petitioner Prudential Bank to secure the respondent's outstanding loans. covering the three (3) promissory notes. Inc.00. the loan were the deed of assignment on two PNs executed by Bancom Realty and the chattel mortgage on various heavy and transportation equipment. If a credit has been pledged becomes due before the bank under Account No. 2005 Spoused Alviar paid petitioner P2. Strictly speaking.000. GR150197.68. they were. 2118. He shall apply the same to the payment of his secured by “Clean-Phase out TOD CA 3923.. in reality. Facts: Spouses Alviar are the registered owners of a parcel of land in Respondents then filed a complaint for damages with a prayer San Juan.000.608.00 loan covering the two (2) lots in San Juan. it did not payment of a loan worth P250. 129 in the name of Donalco it is redeemed. and that the note is secured respondent for her loans. had the total obligation of P1. and that properties Prudential Bank moved for the extrajudicial when the lender accepted a different security he did not accept foreclosure of the mortgage on the property since respondents the first offer. paid by petitioner FNCB Finance. signifying that the loan was secured by a “hold- – out” on the mortgagor’s foreign currency savings account with ART.00. Bank also claim. Although the pertinent documents by a real estate mortgage as aforementioned with a “blanket were entitled Deeds of Assignment.000. more mortgage clause” or the “dragnet clause”. to be applied to PRUDENTIAL BANK VS ALVIAR the obligations of G. According to Article 2118 of PN BD#76/C-345 for P2.00.000.256. of a pledge by respondent to petitioner Citibank of her credit due from petitioner FNCB Finance by virtue of her money The spouses thereafter issued other promissory notes (PN): market placements with the latter. and deliver the surplus.000. should there be any. the pledgee may collect and receive the Trading. The payment was acknowledged by petitioner a continuing offer by the borrower to secure further loans who accordingly released the mortgage over the two under the security of the first security instrument. it partly extinguished respondent's loan matured on 4 August 1976 at an interest rate of 12% per obligations through the application of the security given by the annum with a 2% service charge. and for the release of the real estate mortgage for Doctrine: the P450.000 to be amount due.

Thus. existence of the other securities given for the two other promissory notes.R. subject of course to defenses which are available to respondents. This ambiguity shall be interpreted strictly principal loan secured by the mortgaged property. favored respondents saying that the Petitioner.000 the P250.000. and for any amount not covered by the security G. Held: Yes. for any Issue: WON real estate mortgage secures only the first loan of deficiency after D/A SFDX#129. Facts: but also future credit facilities and advancements that may be Dahican Lumber Co. the Bank requested DALCO to securities. Both the lower extrajudicial foreclosure was improper for the mortgage only courts found that respondents have not yet paid covers the first loan of P250.the RTC of Pasig. Dahican Lumber Co. then the same should have been indicated in the submit complete list of the said properties but DALCO refused . and thus the against petitioner for having drafted the same.000. covering 5 parcels of land together with all the buildings and other improvements existing thereon and all the personal When the mortgagor takes another loan for which another properties of DALCO located in its place of business. the subsequent loans Bank and Trust Co. there is a need to respect the Petition is DENIED.00 loan from the petitioner.00 loan covered by PN BD#75/C-252. However. P250. has been exhausted. DALCO “dragnet clause. No. on the new security given.00 loan. security for PN BD#76/C-345. Petitioner and respondents intended the real estate mortgage to secure not only the P250.00. is not without recourse. v. (DALCO) obtained a loan from People's obtained by the respondents. L-17500 for the second promissory note.[11] claiming that they have paid their mortgage contract. mortgage should not be foreclosed RTC.000. security was given it could not be inferred that such loan was made in reliance solely on the original security with the After the day of the execution of the mortgage. CA affirmed. This is purchased various machinery.000.. The foreclosure of the mortgaged property should only then be for theP250.000. While the existence and validity of the “dragnet clause” cannot be denied. If the parties intended that the “blanket mortgage clause” shall Pursuant to the provision of the mortgage deeds regarding cover subsequent advancement secured by separate "after acquired properties".” but rather. equipment. People's Bank and Trust Co.” supplies. however. spare parts and the “reliance on the security test. on its final decision. the mortgaged property could still be CA affirmed the decision of the RTC properly subjected to foreclosure proceedings for the unpaid P250. (Bank) secured by a deed of mortgage obtained by respondents were secured by other securities. and as mentioned earlier.

the mortgagor proceedings over their mortgaged properties.R. or that the address is fictitious. No. deputy sheriff and herein private respondent Banco Filipino Savings and Mortgage Bank. summons.- Held: The bank responded and said that petitioners were notified of Yes. subpoena or notifications of any judicial or extrajudical actions shall be sent to the Mortgagor at Hence. a newspaper of Article 415 of the Civil Code does not define real property but general circulation in the province where the subject properties enumerates what are considered as such. the "after acquired properties" were subject to the deed the address given above or at the address that may hereafter be given of mortgage. 91779 February 7. instruments or replacements intended by owner of the tenement for an industry or works which may On the basis of implied admission that no formal be carried on in a building or on a piece of land. authorized extra-judicial sale upon breach of contract and that . in writing by the Mortgagor to the Mortgagee." Petitioners filed Civil Case No. and shall tend notice was served personally. including the operation of Article 145. the auction sale by the posting of notices and the publication of notice in the Metropolitan Newsweek. Issue: Whether or not the "after acquired properties" were subject to After the bank filed its answer.to do so. and the fact that any GRAND FARMS. motion for summary judgment contending that the foreclosure was violative of the provisions of the mortgage The chattels or the "after acquired properties" were placed in contract. they are subject to the deeds of mortgage. petitioners filed a directly to meet the needs of the said industry or works. specifically paragraph (k) thereof which provides: the real properties mortgaged to the Bank. demand letters. Metro Manila for annulment and/or The bank opposed the motion saying that based on declaration of nullity of the extrajudicial foreclosure other paragraphs (b and d) in the contract. admission by the bank that no formal notice of intention to foreclose the real estate mortgage was sent by the bank to petitioners. INC. They came within "k) All correspondence relative to this Mortgage. and the mere act of sending any correspondence by mail or by personal delivery to the said address shall be valid and effective notice to the Mortgagor for all legal purposes. among them being are located and in the Philippines. against respondents clerk of court. receptacles. and PHILIPPINE SHARES communication is not actually received by the Mortgagor. machinery. or that G. petitioners requested an the deed of mortgage. or cannot be located. 1991 no person was found at the address given. 2816-V-88 in the Regional Trial Court of Valenzuela. shall not excuse or relieve the Facts: Mortgagor from the effects of such notice. with damages. or CORPORATION. vs COURT OF APPEALS that it has been returned unclaimed to the Mortgagee. petitioners.

Court of Appeals. and as is evident from the discretion. Stated otherwise. when the same was mutually agreed upon by the parties as additional condition of YES.The RTC issued an clearly meritorious. CA the foreclosure may be annulled solely on the basis of such defect. morals. Thus.. And as the pleadings. It further held that paragraph (k) of the mortgage foreclosure defective and irregular for being contrary to the express contract merely specified the address where correspondence provisions of the mortgage contract. The Rules of Court authorize the rendition the mortgage contract. by itself. holding that no personal records. rendered the property.the mortgagee was appointed atty-in-fact with full powers upon matter of law that there is no defense to the action or that the claim is any breach of the obligations in the contract. good customs and public policy. while publication of the foreclosure proceedings in the newspaper of general circulation was complied with. MFR was also denied on the ground that genuine and substantial issues Reasoning exist which require the presentation of evidence during the trial. except as to the amount of damages. Community Savings & Loan Association. and all the facts are within the judicial knowledge of defective and are not binding on the debtor-mortgagor.To still the court. depositions and admissions on file. summary judgment may be granted. for private respondent to notify petitioners personally of the foreclosure. show that. order denying petitioners' motion for summary judgment. at al. There is thus no further should be sent and did not impose an additional condition on the part of necessity to inquire into the other issues cited by the trial court. require a trial notwithstanding private respondent's admission of the lack of therefore. the same should be complied with faithfully (Art. The real test. the extrajudicial maybe raised formally by the pleadings but there is no genuine foreclosure proceedings on the property in question are fatally issue of fact. HELD: personal notice is still required.. Inc. 1306 Whether or not summary judgment was proper CC). This omission.. together with the record is bereft of any evidence which even impliedly affidavits. . Private respondent tacitly admitted in its answer to petitioners' Petitioners filed a petition for certiorari to CA attacking said request for admission that it did not send any formal notice of orders of denial as having been issued with grave abuse of foreclosure to petitioners.. there is no indicate that the issue as to any material fact and that the moving party required notice of the extrajudicial foreclosure was ev is entitled to a judgment as a matter of law. affidavits and exhibits in support of the motion are injustice to petitioners whose obtention of the relief to which sufficient to overcome the opposing papers and to justify a finding as a they are plainly and patently entitled would be further delayed. 1306. there has been no denial by private respondent that no notice was required to foreclose since private respondent was personal notice of the extrajudicial foreclosure was ever sent constituted by petitioners as their attorney-in-fact to sell the mortgaged to petitioners prior thereto... the SC held that the stipulation is the law between [the parties] Issue: and as it not contrary to law. of a motion for summary judgment is whether the such requisite notice would be a superfluity and would work pleadings. CA dismissed the petition. et al. Failure to comply with this additional of a summary judgment if the stipulation would render illusory Art. vs. Although an issue er sent to the debtor mortgagor.In also denied petitioners MFR.

000. there would be compliance with . Inc. alarmed of losing their the same property in favor of a third party during the period of right of redemption over thesubject parcel of land from Juan redemption. Dolino. A certificate of sale expiration of the redemption period and the conveyance of the was subsequently issued which was also registered. went to Teotimo Abellana. auction and for the cancellation of certificate of sale issued pursuant thereto. Spouses Dolino. purchaser of the aforesaid lot at a foreclosure sale of the previous mortgage in favor of Cebu City Development Held: Bank. as amended. Prior thereto. failed to comply with the notice requirement of Act 3135. alleging that the extrajudicial foreclosure sale Disposition was in violation of Act 3135. President of the City Savings It is undisputed that the real estate mortgage in favor of Bank (formerly known as Cebu City Savings and Loan petitioner bank was executed by respondent spouses during Association. Sps. vs. may validly execute a mortgage contract over Private respondents.). Gandiocho. to obtain a loan of P30. CITY SAVINGS BANK (formerly Cebu City Savings declaring the said mortgage as void. The trial court The decision appealed from is hereby REVERSED and SET sustained the validity of the loan and the real estate mortgage. Subsequently they foreclosed property since the rule up to now is the right of a executed a promissory note in favor of CSB. The land was sold at a public foreclosure remains in the mortgagor or his grantee until the auction to CSB being the highest bidder. whose property has been extrajudicially foreclosed and sold at a corresponding Facts: foreclosure sale. COURT OF APPEALS and SPS. The loan became purchaser of a foreclosure sale is merely inchoate until after due and demandable without the spouses Dolino paying the the period of redemption has expired without the right being same.) and TEOTIMO ABELLANA. Dolino interposed a partial appeal to the CA. ASIDE and this case is REMANDED to the court of origin for but annulled the extrajudicial foreclosure on the ground that it further proceedings in conformity with this decision. The title to the land sold under mortgage foreclosure of the mortgage. Whether or not a mortgage. The CA ruled in favor of private respondents Cebu. Issue: ANDRES DOLINO and PASCUALA DOLINO. Dolino then filed a case to annul the sale at public why our procedural rules have provided for summary judgments. petitioners. Inc. No master deed. the period of redemption. MANUEL D.That undesirable contingency is obviously one of the reasons CSB. During the said period it cannot be their son Teofredo filed a similar loan application and the said that the mortgagor is no longer the owner of the subject lot was offered as security. MEDIDA. petitioner association caused the extrajudicial exercised. Sps. assailing the validity of the mortgage executed between them and City Savings Bank. their title to the the property during the redemption period and has the free property was cancelled and a new title was issued in favor of disposal of his property. Not satisfied with the ruling of the trial court. and Loan Association. Deputy Sheriff of the Province of among others. respondents. The mortgagor remains as the absolute owner of redemption was being effected by Sps.

511. amounted only to obligation as reflected in the Notice of Sale and the amount P1. hereby declared to be valid and binding. The petitioners mortgage on the property. 2085 of the Civil Code for the constitution of another of all the subject properties to its name. The petitioners of sale and final deed of sale executed appurtenant thereto are were unable to pay their obligation.000. foreclosure. to deliver to the Sheriff the bid 2. including the certificate estate mortgage on five of their properties.770. PNB did not pay to the Sheriff who conducted the auction sale the amount of its bid which was P8.00. No. PNB. at the very least. it was the legal duty extrajudicial foreclosure sale null and void.000. RTC rendered its Decision for declaration of nullity of the extrajudicial foreclosure of mortgage. the amount of such bid in excess of petitioners’ HELD: outstanding obligation.00 or ISSUES: give an accounting of how said amount was applied against petitioners’ outstanding loan. which according to the 1. merely directing PNB to pay the Sale of the subject properties was issued in favor of PNB. PNB or even just the amount in excess of petitioners’ obligation. To hold otherwise would create an thereafter filed a Complaint against the PNB before the RTC of inequitable situation wherein the mortgagor would be deprived Mandaue City for Declaration of Nullity of Extrajudicial of the opportunity. to raise Foreclosure of Mortgage.991. as of 10 March 1992. PNB secured a Certificate of Final Sale from the Sheriff and. PNB filed a petition for extrajudicial foreclosure of mortgage Petitioners filed a Motion for Reconsideration but the Court of constituted on the petitioners’ properties. funds to timely redeem his property through another mortgage. A Certificate of its Amended Decision. as lone bidder. PNB failed to deliver the amount of their bid to the Sheriff or. Appeals maintained the validity of the foreclosure sale and. WoN the failure of PNB to pay and tender the price of its bid price or what was left thereof after deducting the amount of or the surplus thereof to the sheriff nullifies the extrajudicial petitioners’ outstanding obligation. PNB. When the PNB appealed its case to CA.38. it reversed and set FACTS: aside the questioned decision of the RTC declaring that the Spouses Suico. One year after issuance of the 1. PNB transferred registration . Since the amount of the bid grossly exceeded actually due and collected from the petitioners at the time of the amount of petitioners’ outstanding obligation as stated in the auction sale constitute fraud which renders the the extrajudicial foreclosure of mortgage. Certificate of Sale. of the winning bidder. obtained loan from PNB secured by a real extra judicial foreclosure of mortgage. the certificate of sale and certificate of finality of sale owing to the failure of PNB as the GR 170215 winning bidder to deliver to the petitioners the amount of its bid SUICO v. as a result. in offered a bid in the amount of P8.Article. WoN the discrepancy between the amount of petitioners’ petitioners. which may be his last recourse.511. deficiency in the filing fees However.

amount of PNB’s bid resulted in discouraging or misleading but as far as concerns the unconsumed balance. There is no showing that the difference entitled thereto if he fails to do so. or to prevent it sale in foreclosure shall be as follows: from bringing a fair price. to be ascertained by the court. then to the mortgagor or his duly authorized attained. after paying off the mortgage debt due. pay off the mortgage debt fatal to the validity of the notice. a mortgagee who exercises the power of sale which they have an interest. is liable to the persons this case is valid. the bidders. but also that payment. to depreciate the value of the property. to inform all interested parties of the date. the equity of redemption. about to be sold at the foreclosure sale is the real property in Perforce. and also to the sale made (c) thirdly. immaterial errors and mistakes will not affect the agent. the disposition of the proceeds of the bidders. GOLDEN POWER DIESEL balance or residue. contained in a mortgage is considered a custodian of the fund All these considered. The application of the proceeds from the sale of the Logically. this not only requires that the correct date.. it is the mortgagee's any and all interested parties be able to determine that what is duty to return any surplus in the selling price to the mortgagor. the Court held that the Notice of Sale in and. not payment by dacion. Section 4 of the Rules of Court provides: mortgagor a cause of action to recover such surplus. his The purpose of the publication of the Notice of Sheriff’s Sale is agent or the person entitled to it. Even though the mortgagee between the amount stated in the Notice of Sale and the is not strictly considered a trustee in a purely equitable sense. 4. pay the costs (b) secondly. time and mortgaged property to the mortgagor's obligation is an act of place of the foreclosure sale appear in the notice. time and place of the foreclosure sale of the real property subject thereof. depreciated the value of the property or prevented it mortgagee is deemed a trustee for the mortgagor or owner of from commanding a fair price. If these objects are payment to them. priority (d) fourthly. or to the person entitled to it.The amount realized from the foreclosure sale of the mortgaged property shall. but if mistakes or omissions occur in the notices of sale. which are calculated to deter or mislead Under the above rule. the SALES same shall be paid to junior encumbrancers in the order of their priority. SEC. this fact alone will not affect the validity of the sale but simply give the Rule 68. hence. or if there be no FACTS: . Disposition of proceeds of sale. Thus it has been held that if the mortgagee is retaining more of 2. be paid to the person GR 176019 foreclosing the mortgage. such mistakes or omissions will be (a) first.Notices are given for the purpose of securing bidders and to such encumbrancers or there be a balance or residue after prevent a sacrifice of the property. give the balance to the mortgagor. being bound to apply it properly. the proceeds of the sale than he is entitled to. if any in the order of pursuant thereto. after deducting the costs of the sale. and when there shall be any BPI FAMILY SAVINGS BANK v. No. sufficiency of the notice. pay the junior encumbrancers.

mortgage was duly annotated on titles.31. BPI Family filed a verified petition for extrajudicial foreclosure of real estate mortgage over the properties. These latter mortgages were duly annotated on the ISSUE: titles respectively. and again mortgaged same affirmed by CA. The procedure is for the trial court to order another one was later issued but before it could be a hearing to determine the nature of the adverse possession. An alias writ said real property ceases to be ministerial and may no longer was then issued which expired without being implemented and be done ex parte. Sheriff transferred only be possessed by a third party. the issuance by the and accept the deed of sale between CEDEC and trial court of a writ of possession in favor of the purchaser of respondents. denied the motion. Sheriff sold the properties at public No. for the . Act No. RTC however. 1. properties which were granted by the trial court. however. 570. Inc. Renato Tan filed an affidavit of 3rd party claim on For the exception to apply. 140. in holding adverse rights to the judgment that the first writ failed favor of BPI Family to secure a loan of P6. There is. 000. on the same day the loans were obtained. After HELD: due notice and publication. the property need not properties. however. 160. Pasay City. when the foreclosed properties. 705. as highest bidder. Hence. obtained from BPI Family additional loans of P2. present petition. Certificate of Sheriff’s sale was then duly issuance of a writ of possession is governed by Section 7 of annotated on titles covering properties. 793. properties. In an to CEDEC and cannot be deprived of possession over extrajudicial foreclosure of real property. implemented.CEDEC Transport. BPI Family. 000 and BPI moved to reconsider but was denied which was then P1. CEDEC and that respondents are in actual possession. Also. respectively. 000. upon the trial court to issue the writ of possession in favor of GPD argued that they are 3rd persons claiming rights adverse the purchaser. they filed a complaint in RTC for cancellation property is in the possession of a third party holding the of Sheriff’s certificate sale and an order to direct BPI to honor same adversely to the judgment obligor. mortgaged 2 parcels of land situated in implementation saying that it should not affect 3rd persons Malibay. CEDEC defaulted in its mortgage has adverse interest against debtor or mortgagor obligations. 3135. the properties as allegedly acquired from CEDEC pursuant to upon an ex parte petition of the purchaser. Golden Power Diesel (GPD) and Renato Tan motioned to hold the The general rule is that a purchaser in a public auction sale of implementation of writ alleging that they are in possession of a foreclosed property is entitled to a writ of possession and. Instead of implementing the writ. BPI bought at the public auction sale after the redemption period Family filed an ex-parte petition for writ of possession over the has expired without redemption having been made. auction. but also held by the third the matter to RTC for resolution. Whether or not GPD is a 3rd party in possession who Despite demand. This procedure may also be availed of by the Despite several demand letters. it is ministerial a deed of absolute sale. CEDEC refused to vacate purchaser seeking possession of the foreclosed property properties and to surrender possession to BPI Family. RTC suspended the party adversely to judgment obligor. Then. On the to consider respondent’s claim of ownership in another court same day. Unfortunately. acquired properties for In extrajudicial foreclosures of real estate mortgages. the P13. including all the improvements thereon. an exception.

Rosario Centeno paid properties is derived from CEDEC. Barbara v.respondents. Centeno that he purchased and has. Centeno. they subject lots had already prescribed.000 CEDEC will “sell.[9] On March 19. asserting Rural Bank of Sta. Centeno) were mortgage. it obtained a Certificate of Sale at Public encumbrances excepting the mortgage as may be subsisting Auction[4]which was later registered with the Register of Deeds in favor of the BPI FAMILY. Barbara (Iloilo). As transferees of CEDEC. No. petitioner filed a petition for the issuance of a writ of possession before the RTC. Consequently. Sps. son of Sps.[12] mortgaged the foregoing properties in favor of petitioner Rural . took over the Therefore.R. 1969. transfer and convey” to petitioner being the highest bidder at the auction sale. Inc. however. open and exclusive possession of the same properties for at least fifteen Facts: (15) years. respondents hold title to and possess the properties cultivation of the same. the capital gains taxes on the sale transaction and tax they merely stepped into CEDEC’s shoes and are bound to declarations were eventually issued in the name of acknowledge and respect the mortgage CEDEC had executed respondent. respondent Gerry Centeno. Centeno failed to redeem the subject lots within the one VENDOR (CEDEC) in favor of BPI Family by the mortgage (1) year redemption period pursuant to Section 6[6] of Act No. Centeno. tax declarations in its name. 1988. he purchased the as CEDECʼs transferees and any right they have overthe said lots from his parents. he claims that petitioner's rights over the the previous owners of the subject lots. their occupancy over the properties cannot Sale thereof and in 1998.65 not the third parties referred to by the law! They acquired loan. On March 14. On respondents the properties “free f rom all liens and October 10.” of Iloilo City on December 13. 1971.[10] Respondent opposed the petition. defaulted on the loan. prompting possession pursuant to the Deed of Sale.[8] While the latter was in possession of the subject in favor of BPI Family.[7]Nonetheless. lots. petitioner to cause the extrajudicial foreclosure of the said mortgage. 1997 a Final Deed of interest and thus. 200667 subject lots.[5] Respondents bind themselves to assume “the payment of the unpaid balance of the mortgage indebtedness of the Sps. Accordingly. Moreover. Respondents are thesuccessors-in. claiming entitlement to the said writ by virtue of the Final Deed of Sale covering the G. 1998.[11] He further averred that the foreclosure sale was null and void owing to the forged signatures in the real estate Spouses Gregorio and Rosario Centeno (Sps.” and cultivation of the aforesaid properties. petitioner secured on November 25. they still continued with the possession precise terms and conditions therein contained. the subject lots were sold to For P15. they do not fall under the exception—they are Bank of Sta.000. instruments and does hereby further agree to be bound by the 3135. been in actual. in fact. Sometime in 1983.753. was able to obtain the corresponding be considered adverse to CEDEC. as security for a P1. During that time.

[18] The foregoing rule is Cadastral Case No. petitioner filed the instant petition. property in their own right. Consequently.[16] Aggrieved. 33. Deed and possession to be given at expiration of redemption period. interest and claim of the judgment obligor to the and as such. the RTC rendered its Decision[13] in right adverse to that of the mortgagor. Rule 39 of the Rules of Court which owner of the subject lots whose rights became absolute due to partly provides: respondent's failure to redeem the same.[21] . respondent appealed to the CA. the issuance also held by the third party adversely to the judgment of a writ of possession. 2012 Decision. The co- owner. and they are not merely the It is well-established that after consolidation of title in the successor or transferee of the right of possession of purchaser's name for failure of the mortgagor to redeem the another co-owner or the owner of the property. title. but absolute right of a confirmed owner.[15] reversed the RTC and ruled against the issuance of a writ of Upon the expiration of the right of redemption. 98-069. (Emphasis and underscoring supplied) Issue Before The Court The sole issue in this case is whether or not petitioner is In China Banking Corporation v. and usufructuary possess the The petition is meritorious. the purchaser possession. tenant or usufructuary. finding petitioner to be the lawful contained in Section 33. through its January 31. It considered respondent as a third party who is or redemptioner shall be substituted to and acquire all the actually holding the property adverse to the judgment obligor rights. the phrase "a third party who is actually holding the property adversely to the judgment obligor" contemplates a situation in which a third party holds the property by adverse title or right. by whom executed or given.[17] unless it appears Ruling of the RTC that the property is in possession of a third party claiming a On October 8.e. Lozada. agricultural tenant. it found the issuance of a writ of possession ministerial on its part. an ejectment suit or reinvindicatory property shall be given to the purchaser or last action. has the right to ventilate his claims in a proper property as of the time of the levy. 2002. title.[20] Notably. At that point. redemptioner by the same officer unless a third party is actually holding the property adversely to the judgment obligor. Ruling of the CA xxxx The CA.[14] Dissatisfied.[19] the Court held that entitled to a writ of possession over the subject lots. the property. Sec. the purchaser's right to possession ripens into the property should not only be possessed by a third party. upon proper application and proof of obligor.. The possession of the judicial proceeding i. The Court's Ruling such as that of a co-owner. to a purchaser in an extrajudicial foreclosure sale becomes merely a ministerial function.

Barotac Viejo. anent the issue of laches. The new redemption period commences from the On the issue regarding the identity of the lots as raised by date of foreclosure sale. 2000. As such. Petitioner possession which is merely ministerial on the RTC's part as eventually failed to settles its loan obligation. its findings of facts are binding and conclusive upon the Court. petitioner Goldenway Merchandising Corporation executed a Real Estate Mortgage in favour of Finally. reducing the one-year period srcinally provided in Act No. In a letter dated March 7. Centeno. arbitrariness or redemption rights under Act No. redemption was no longer the October 8. Accordingly.[22] records show that the RTC had the certificate of sale or three months after foreclosure.R. 78398 is REVERSED and SET ASIDE. the identity application of the new redemption period because Section of the said lots had already been established for the purpose 47 exempts from its operation those properties foreclosed of issuing a writ of possession. 2001. It is hornbook principle that prior to its effectivity and whose owners shall retain their absent any clear showing of abuse. the RTC had the ministerial duty to modified the time for the exercise of such right by issue as it did issue the said writ in petitioner's favor. SO ORDERED. 98- In this case. It cannot therefore be disputed that respondent is a EQUITABLE PCI BANK mere successor-in-interest of Sps. Petitioner and respondent 2012 Decision of the Cebu City Court of Appeals in CA-G. met on March 12. Sps. petitioner offered to redeem the foreclosed WHEREFORE.[23] as in this FACTS: case.000. Branch 66 in Cadastral Case No. leading above-explained. petitioner was told that CV No. The January 31. and expires upon registration of respondent in his Comment. 2013 Auction was registered with the Register of Deeds of Iloilo City GOLDENWAY MERCHANDISING CORPORATION VS in 1971. 2001. properties by tendering a check. issued to respondent on January 26. capriciousness committed by the lower court. Centeno. Hence. 3135. However. the petition is GRANTED. on March 14. he cannot be deemed as a "third party who is actually holding the DOCTRINE: Section 47 did not divest juridical persons of property adversely to the judgment obligor" under legal the right to redeem their foreclosed properties but only contemplation. Accordingly. Subsequently. 2001. already passed upon petitioner's title over the subject lots whichever is earlier. There is likewise no retroactive during the course of the proceedings.000 loan granted to the petitioner. parents. all defenses which respondent may respondent to extrajudicially foreclose the mortgage on raise including that of laches should be ventilated through a December 13. 1988 after they were purchased by petitioner and its Certificate of Sale at Public March 13. Consequently. respondent acquired the subject lots from his 069 is hereby REINSTATED. 3135. 2002 Decision of the Regional Trial Court of . 1985. On November 29. it must be maintained that Equitable PCI Bank over three parcels of land as security for a the instant case only revolves around the issuance of a writ of Php2. a Certificate of Sale was proper proceeding. Iloilo City.

There is likewise no retroactive application of the new redemption period because Section 47 exempts from its operation those properties ISSUE: foreclosed prior to its effectivity and whose owners shall retain their redemption rights under Act No. The new redemption period ruling that redemption was made belatedly and that there was commences from the date of foreclosure sale. In this case. or dispose sooner of these acquired assets. right of redemption only "until. 3135. or used for parties provided in their real estate mortgage contract that industrial or commercial purposes. 3135. 3135. persons was based on the nature of the properties foreclosed The one-year period of redemption is counted from the date of – whether these are used as residence. It must be extrajudicially in accordance with Act No. 2001. underscored that the General Banking Law of 2000. respondent may immediately foreclose the in the ownership of property and enable mortgagee-banks to mortgage judicially in accordance with the Rules of Court. and not the shorter period We agree with the CA that the legislature clearly intended to under RA 8791 as the parties expressly agreed that shorten the period of redemption for juridical persons whose foreclosure would be in accordance with Act 3135 properties were foreclosed and sold in accordance with the provisions of Act No. the liberal one-year redemption period is retained. the registration of Petitioner filed a complaint for specific performance and the certificate of foreclosure sale" and in no case more than damages contending that the 1-year period of redemption three (3) months after foreclosure. Whether or not the redemption period should be the 1-year period provided under Act 3135. in which case a shorter upon petitioner’s default and the latter’s entire loan obligation term is deemed necessary to reduce the period of uncertainty becoming due. under Act 3135 should apply. and not the shorter redemption period under RA 8791 as applying RA 8791 would result in the Section 47 did not divest juridical persons of the right to impairment of obligations of contracts and would violate the redeem their foreclosed properties but only modified the time equal protection clause under the for the exercise of such right by reducing the one-year period constitution. crafted in the aftermath of the 1997 Southeast Asian financial crisis. foreclosure. and expires no redemption made at all. whichever comes first. whichever is earlier. for which the more the registration of the certificate of sale.possible since the certificate of sale had already been But under Sec 47 of RA 8791. but not after. an exception is thus made in registered. sought to reform the General Banking Act of 1949 by . 3135. the title to the foreclosed properties were the case of juridical persons which are allowed to exercise the consolidated in favor of the respondent on March 9. The RTC dismissed the action of the petitioner srcinally provided in Act No. RULING: The difference in the treatment of juridical persons and natural The shorter period under RA 8791 should apply. upon registration of the certificate of sale or three months after The Court of Appeals affirmed the RTC. as amended.

to make i t effective. but all such regulations must be subject to change from time to FACTS: time. land registered in his name. Such authority to regulate businesses extends to the banking industry which. Furthermore. It Having ruled that the assailed Section 47 of R. we find no reversible error committed by the CA the redemption period in Act 3135 was based on a reasonable in holding that petitioner can no longer exercise the right of classification and germane to the purpose of the law." Its scope. to secure a loan P2. may regulations which affect them be established by the State.fashioning a legal framework for maintaining a safe and sound Court has time and again emphasized. After the execution. as with other individual rights to contract has to give way to police power exercised for public welfare and to property. even to anticipate the future If a contract of loan with security does not stipulate the where it could be done. all contracts and all afterwards that of the principal. the amendment introduced by with public interest. it must be exercised in the manner prescribed by the statute. ever-expanding to DOCTRINE: meet the exigencies of the times. if the concept of police power is well-established in this jurisdiction. G. provides enough room for an efficient payment of interest but provides for the delivery to the creditor and flexible response to conditions and circumstances thus by the debtor of the property given as security. and within the prescribed time limit. The defendant Segundo Fernando executed a deed of or as the circumstances may change. Section 47 embodied one of such safe and sound practices aimed at ensuring the solvency and liquidity of our banks. as the general well-being of the community may require. payable within 4 years.R. the State’s power of regulation. as this . without stating that said fruits are to be applied to the payment of interest. redemption over its foreclosed properties after the certificate of sale in favor of respondent had been registered. and The freedom to contract is not absolute. The right of redemption being statutory. in order that assuming the greatest benefits. or as experience may mortgage in favor of plaintiff Cecilio Diego over 2 parcels of demonstrate the necessity. In this context.A. No. the latter may gather its fruits. the contract is a mortgage and rights are subject to the police power of the State and not only not antichresis. purposes targeted by the Government. No. if any. without impairment clause of the Constitution must yield to the loftier interest. is undeniably imbued banking system. Settled is the rule that the non. 8791 is cannot therefore be disputed that the said provision amending constitutional. L-15128 It has been defined as the "state authority to enact legislation Diego v Fernando that may interfere with personal liberty or property in order to promote the general welfare. The right granted by possession of the mortgaged properties were turned over to this provision must submit to the demands and necessities of the mortagagee.000.

have the following similar or identical rights and obligations: which. for the purpose of enforcing his security upon Fernando claims that the transaction was one of antichresis such property or making its income help to pay his debt. Hence this appeal. any agreement is not uncommon. standing upon his rights as mortgagee and not claiming under another title. having been given possession of the properties given as security. for the foreclosure. at the rate of P9. with Diego having Diego is a mortgagee in possession.Fernando failed to pay after four years. must parties. which land. the non-payment of the debt within the term agreed does not The CFI found that it was really a mortgage and that the fact vest the ownership of the property in the creditor. account for the value of the fruits received by him.200. mortgage. Hence this action for foreclosure of acquired possession of the premises mortgaged to him. at the rate of P10 a cavan. interest. and not of mortgage. coupled with the transfer of the possession of the properties mortgaged to the mortgagee. he becomes a trustee for the mortgagor as to the excess of the rents and profits over such debt.720. must have intended that the mortgagee would collect the fruits the mortgagee must account for the rents and profits of the of the mortgaged properties as interest on his loan. has been satisfied. and thereafter to palay. Hence the CFI mortgage debt. Also Diego had allegedly received a total A mortgagee in possession and a creditor in an antichresis of 120 cavans of palay from the properties given as security. like an antichretic creditor. ordered Fernando to pay Diego 2K with interest and upon if the mortgage remains in possession after the mortgage debt default. he P5. is to apply their In this case. [READ DOCTRINE]. that possession of the mortgaged properties were turned over the general duty of the mortgagee in possession towards the to the mortgagee did not alter the transaction. satisfied and the property redeemed. fruits received by Diego is P495. The parties premises is that of the ordinary prudent owner. Diego had received a net share of 55 cavans of fruits to the payment of the interest. if owing. or its value for purposes of use and occupation. ISSUE: W/ the contract between Diego and Fernando is the mortgagor can only enforce his rights to the land by an mortgage or antichresis considering that the loan was without equitable action for an account and to redeem. Also Diego has already received amount thus realized going towards the discharge on the 55 cavans of palay during his possession. Deducting this amount from . and deduct To be antichresis. the total value of the the principal of his credit. Since Fernando did not expressly waive his right to the fruits of the properties mortgaged during the time they were in Diego’s HELD: considered as a mortgage contract between the possession. one who has lawfully made several demands. it must be expressly agreed between it from the loan obtained by appellant.00 per cavan. Hence his debt had already been paid. with Diego still is entitled to retain such possession until the indebtedness is owing him a refund of some P2. the latter. represented a value of if the mortgagee acquires possession in any lawful manner. creditor and debtor that the former.

he stated that he which fruits shall be deducted from the total amount of his had received in mortgage. it alleges that the agreement was one of appellant. in the rendition of judgment) vs. or in case of appellant's failure to mortgaged. L-9957 August 8. Tomas Ballilos to himself the parcels of land.” (These provisions will be material PERFECTO DE LA VEGA. Tomas Ballilos . at the expiration of which I may redeem them. we waive the exception of money not paid in cash. the CFI judgement is MODIFIED in that and during the period above stipulated. former has only P1. . the sum of P430. . the two recovery. henceforth WHEREFORE. and whereas on this day I have mortgaged the two The defendant refused to receive the sums and appropriated parcels of land above-mentioned to the said D. among from this day. defendant. therefore. until foreclosure of the mortgage thereon.. . defendant alleged. I hereby mortgage the two parcels of There was no period specified for the right of repurchase land hereinabove mentioned to D. pay. plaintiffs-appellees. which he has already delivered to the said D. ET AL. In the following year. Tomas Ballilos in order that he may manage and him from the properties in question from the time of the filing of enjoy the same in consideration of the sum for which they are this action until full payment.. that: that should I not then do so. which I have received from him in current coin. . the said lands shall continue to be The parcels of land in question as these were validly sold to mortgaged until I have the money available wherewith the him by the co-owners dela Vega. the plaintiffs (save for Policarpio dele Vega) borrowed in succession P40. 1916 case of legal proceedings.00 left to pay the latter. and as the same was not received in our presence. In essence. P18.the loan of P2. Tomas Ballilos for the said agreed upon. for the sum of P430.000. and P60 from Facts: the respondent under the same contract of antichresis. therefore. under the conditions and for the time stipulated. other things. . Fidel de a Vega. the value of There being present D.00 received by Fernando from Diego. for the sum of P430 and for the term of eight years. redeem them. 1905. TOMAS BALLILOS (or BALIELOS). three of the properties to defendant Ballilos for P430. antichresis constituted until the borrowed sum is paid in full. The The plaintiffs then attempted to pay off their loans (in the total relevant provisions of their contract as follows: amount of P548) in order to reacquire the said parcels of land. mortgaged collect the interest. . who in turn states that the said lands are free of all charges and encumbrances and binds himself to warrant this mortgage in G. parcels of tillable land above mentioned.505 and that Diego has the ownership and possession in the said two parcels of land to obligation to render an accounting of all the fruits received by the said D. Fidel dela Vega. to his entire satisfaction. counting During the trial in the lower court. . I grant and convey my Fernando is ordered to pay P1. One of them. No. They Petitioners are co-owners (pro-indiviso share) of eight parcels gave three more properties as security from which he is to of land in Batangas.505.R. “.

in order to free himself the amount loaned. notwithstanding the terms of employed by them and recorded in the said document. (The court cited Old Civil Code provisions. to his creditor. neither can it be held to be a article. operation of law. were mortgaged. Any stipulation to the contrary shall be . -36. of the allegations of both parties. 2. -37. Second Topic: Instrument is a Contract of Antichresis (Main Point of the Case) ISSUE: As it is not shown that the said document is a contract of Whether or not there was a contract of Antichresis. And antichresis. However. even though it were.When the co-owners failed to repurchase within the legal lands in order that he might manage and enjoy them in period. and -85 – Now NCC A2132. still less does it appear to be a contract of pacto de retro. may always compel the debtor to reenter upon sale under pacto de retro inasmuch as the said document the enjoyment of the estate. the instrument are the elements of a contract of Antichresis) recites that the debtor thenceforth ceded and conveyed his ownership and possession in the said two parcels of land to 1. and of Pacto de Retro (Academic) the findings of the court in regard to the allegations. The creditor does not acquire the ownership of the real conveyed to the creditor the ownership and possession of the property by nonpayment of the debt within the term agreed upon. and lands. A1881. in view of the terms HELD: of the agreement Exhibit O. the document. By antichresis a creditor acquires a right to receive the the creditor Ballilos in order that Ballilos might manage and fruits of real property of his debtor. with the obligation enjoy the same in consideration of the sum for which the to apply them to the payment of interest. The debtor cannot recover the enjoyment of the real If the instrument above mentioned cannot be construed as a property without previously paying in full what he owes mortgage of the said two parcels of land in security for P430. redemption. free of all burden and encumbrance according to the afterwards to the principal of his credit. (Yes) mortgage executed as security for a loan. taking into account the intention of the the debtor Fidel de la Vega might be able to pay his debt and contracting parties as revealed by the words and terms redeem the said land. ownership of the properties was consolidated in him by consideration of the sum for which they were mortgaged. debtor. it was not recorded in the property -83. unless there be an contains no mention whatever of any sale with right of agreement to the contrary. made and The said contract apparently records a loan of P430. and -38. But the latter. These registry as it ought to have been. although it does say that the debtor ceded and 3. as stipulated between the First topic: Instrument neither a Real Mortgage nor a Sale contracting parties. if due. and for the payment of the debt within from the obligations imposed on him by the preceding eight years or some other period. Furthermore. or within such time as correct and proper. secured proven at the trial by the contending parties. legally there is no mortgage inasmuch as the Several articles of the Civil Code relating to the contract of said instrument is not of the nature of a public instrument. -84. we find the by a mortgage of the aforementioned two parcels of land and classification of the said contract as one of antichresis to be payable within the period of eight years.

in the recovery of the enjoyment of immovables given in antichresis. the plaintiffs have an unquestionable right to recover 4. the provided that the debtor previously pay what he owes to this payment of the debtor or the sale of the reality. might redeem it whenever he should have the means to pay his debt and recover the lands given in antichresis to his creditor who might told them in usufruct in consideration for the money he had loaned. Specific article numbers just changed) The contract entered into by the contracting parties which has produced between them rights and obligations is in fact one of antichresis. they should not be understood to include things and cases different from those with regard to which the interested parties intended to contract. 5. and 7 of the land designated in the map or of the debt be set off against the fruits of the estate plan admitted by agreement of the parties. The contracting parties may stipulate that the interest parcels Nos. manner prescribed in the law of civil procedure. debt of P430 to the defendant-creditor. 1. article 1284 of the same code says that if any stipulation of a contract should admit of several different meanings. But in this case the creditor may demand. further. the intent shall prevail. book 4. it was stipulated that even after eight years the debtor. after first paying the given in antichresis. for article 1281 of the Civil Code prescribes among other things that if the words should appear to conflict with the evident intent of the contracting parties. that most suitable to give it effect should be applied. void. creditor. In this case. for both the former and the latter contracts are comprised in title 15. Article 1283 provides that however general the terms of the contract may be. and. of the Civil Code. the owner of the property. and as the foregoing articles of the Civil Code fixes no term for the . (Still applicable. This contract is somewhat similar to those of pledge and mortgage and for this reason article 1886 (now 2139) prescribed that certain articles relative to these latter contracts are applicable to contracts of antichresis.