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G.R. No.

101163 January 11, 1993

STATE INVESTMENT HOUSE, INC., petitioner,

vs.

COURT OF APPEALS and NORA B. MOULIC, respondents.

Escober, Alon & Associates for petitioner.

Martin D. Pantaleon for private respondents.

BELLOSILLO, J.:

The liability to a holder in due course of the drawer of checks issued to another merely as security, and
the right of a real estate mortgagee after extrajudicial foreclosure to recover the balance of the
obligation, are the issues in this Petition for Review of the Decision of respondent Court of Appeals.

Private respondent Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be
sold on commission, two (2) post-dated Equitable Banking Corporation checks in the amount of Fifty
Thousand Pesos (P50,000.00) each, one dated 30 August 1979 and the other, 30 September 1979.
Thereafter, the payee negotiated the checks to petitioner State Investment House. Inc. (STATE).

MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the
checks. The checks, however, could no longer be retrieved as they had already been negotiated.
Consequently, before their maturity dates, MOULIC withdrew her funds from the drawee bank.

Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20 December
1979, STATE allegedly notified MOULIC of the dishonor of the checks and requested that it be paid in
cash instead, although MOULIC avers that no such notice was given her.
On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and expenses of
litigation.

In her Answer, MOULIC contends that she incurred no obligation on the checks because the jewelry was
never sold and the checks were negotiated without her knowledge and consent. She also instituted a
Third-Party Complaint against Corazon Victoriano, who later assumed full responsibility for the checks.

On 26 May 1988, the trial court dismissed the Complaint as well as the Third-Party Complaint, and
ordered STATE to pay MOULIC P3,000.00 for attorney's fees.

STATE elevated the order of dismissal to the Court of Appeals, but the appellate court affirmed the trial
court on the ground that the Notice of Dishonor to MOULIC was made beyond the period prescribed by
the Negotiable Instruments Law and that even if STATE did serve such notice on MOULIC within the
reglementary period it would be of no consequence as the checks should never have been presented for
payment. The sale of the jewelry was never effected; the checks, therefore, ceased to serve their
purpose as security for the jewelry.

We are not persuaded.

The negotiability of the checks is not in dispute. Indubitably, they were negotiable. After all, at the pre-
trial, the parties agreed to limit the issue to whether or not STATE was a holder of the checks in due
course.1

In this regard, Sec. 52 of the Negotiable Instruments Law provides —

Sec. 52. What constitutes a holder in due course. — A holder in due course is a holder who has taken the
instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he
became the holder of it before it was overdue, and without notice that it was previously dishonored, if
such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to
him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.
Culled from the foregoing, a prima facie presumption exists that the holder of a negotiable instrument is
a holder in due course.2 Consequently, the burden of proving that STATE is not a holder in due course
lies in the person who disputes the presumption. In this regard, MOULIC failed.

The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular: (b)
petitioner bought these checks from the payee, Corazon Victoriano, before their due dates;3 (c)
petitioner took these checks in good faith and for value, albeit at a discounted price; and, (d) petitioner
was never informed nor made aware that these checks were merely issued to payee as security and not
for value.

Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free from any
defect of title of prior parties, and from defenses available to prior parties among themselves; STATE
may, therefore, enforce full payment of the checks.4

MOULIC cannot set up against STATE the defense that there was failure or absence of consideration.
MOULIC can only invoke this defense against STATE if it was privy to the purpose for which they were
issued and therefore is not a holder in due course.

That the post-dated checks were merely issued as security is not a ground for the discharge of the
instrument as against a holder in due course. For the only grounds are those outlined in Sec. 119 of the
Negotiable Instruments Law:

Sec. 119. Instrument; how discharged. — A negotiable instrument is discharged: (a) By payment
in due course by or on behalf of the principal debtor; (b) By payment in due course by the party
accommodated, where the instrument is made or accepted for his accommodation; (c) By the
intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple
contract for the payment of money; (e) When the principal debtor becomes the holder of the
instrument at or after maturity in his own right.

Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the
instrument. But, the intentional cancellation contemplated under paragraph (c) is that cancellation
effected by destroying the instrument either by tearing it up,5 burning it,6 or writing the word
"cancelled" on the instrument. The act of destroying the instrument must also be made by the holder of
the instrument intentionally. Since MOULIC failed to get back possession of the post-dated checks, the
intentional cancellation of the said checks is altogether impossible.

On the other hand, the acts which will discharge a simple contract for the payment of money under
paragraph (d) are determined by other existing legislations since Sec. 119 does not specify what these
acts are, e.g., Art. 1231 of the Civil Code7 which enumerates the modes of extinguishing obligations.
Again, none of the modes outlined therein is applicable in the instant case as Sec. 119 contemplates of a
situation where the holder of the instrument is the creditor while its drawer is the debtor. In the present
action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time the jewelry was
returned.

Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the mere
expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis
to excuse herself from liability on her checks to a holder in due course.

Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. The need
for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable Instruments Law:

Sec. 114. When notice need not be given to drawer. — Notice of dishonor is not required to be given to
the drawer in the following cases: (a) Where the drawer and the drawee are the same person; (b) When
the drawee is a fictitious person or a person not having capacity to contract; (c) When the drawer is the
person to whom the instrument is presented for payment: (d) Where the drawer has no right to expect
or require that the drawee or acceptor will honor the instrument; (e) Where the drawer had
countermanded payment.

Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve the checks when she
returned the jewelry. She simply withdrew her funds from her drawee bank and transferred them to
another to protect herself. After withdrawing her funds, she could not have expected her checks to be
honored. In other words, she was responsible for the dishonor of her checks, hence, there was no need
to serve her Notice of Dishonor, which is simply bringing to the knowledge of the drawer or indorser of
the instrument, either verbally or by writing, the fact that a specified instrument, upon proper
proceedings taken, has not been accepted or has not been paid, and that the party notified is expected
to pay it.8
In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or
hampering transactions in commercial paper. Thus, the said statute should not be tampered with
haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities in a single case.9

The drawing and negotiation of a check have certain effects aside from the transfer of title or the
incurring of liability in regard to the instrument by the transferor. The holder who takes the negotiated
paper makes a contract with the parties on the face of the instrument. There is an implied
representation that funds or credit are available for the payment of the instrument in the bank upon
which it is drawn.10 Consequently, the withdrawal of the money from the drawee bank to avoid liability
on the checks cannot prejudice the rights of holders in due course. In the instant case, such withdrawal
renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks.

Under the facts of this case, STATE could not expect payment as MOULIC left no funds with the drawee
bank to meet her obligation on the checks,11 so that Notice of Dishonor would be futile.

The Court of Appeals also held that allowing recovery on the checks would constitute unjust enrichment
on the part of STATE Investment House, Inc. This is error.

The record shows that Mr. Romelito Caoili, an Account Assistant, testified that the obligation of Corazon
Victoriano and her husband at the time their property mortgaged to STATE was extrajudicially
foreclosed amounted to P1.9 million; the bid price at public auction was only P1 million.12 Thus, the
value of the property foreclosed was not even enough to pay the debt in full.

Where the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of
mortgage, the mortgagee is entitled to claim the deficiency from the debtor.13 The step thus taken by
the mortgagee-bank in resorting to an extra-judicial foreclosure was merely to find a proceeding for the
sale of the property and its action cannot be taken to mean a waiver of its right to demand payment for
the whole debt.14 For, while Act 3135, as amended, does not discuss the mortgagee's right to recover
such deficiency, it does not contain any provision either, expressly or impliedly, prohibiting recovery. In
this jurisdiction, when the legislature intends to foreclose the right of a creditor to sue for any deficiency
resulting from foreclosure of a security given to guarantee an obligation, it so expressly provides. For
instance, with respect to pledges, Art. 2115 of the Civil Code15 does not allow the creditor to recover
the deficiency from the sale of the thing pledged. Likewise, in the case of a chattel mortgage, or a thing
sold on installment basis, in the event of foreclosure, the vendor "shall have no further action against
the purchaser to recover any unpaid balance of the price. Any agreement to the contrary will be
void".16

It is clear then that in the absence of a similar provision in Act No. 3135, as amended, it cannot be
concluded that the creditor loses his right recognized by the Rules of Court to take action for the
recovery of any unpaid balance on the principal obligation simply because he has chosen to
extrajudicially foreclose the real estate mortgage pursuant to a Special Power of Attorney given him by
the mortgagor in the contract of mortgage.17

The filing of the Complaint and the Third-Party Complaint to enforce the checks against MOULIC and the
VICTORIANO spouses, respectively, is just another means of recovering the unpaid balance of the debt
of the VICTORIANOs.

In fine, MOULIC, as drawer, is liable for the value of the checks she issued to the holder in due course,
STATE, without prejudice to any action for recompense she may pursue against the VICTORIANOs as
Third-Party Defendants who had already been declared as in default.

WHEREFORE, the petition is GRANTED. The decision appealed from is REVERSED and a new one entered
declaring private respondent NORA B. MOULIC liable to petitioner STATE INVESTMENT HOUSE, INC., for
the value of EBC Checks Nos. 30089658 and 30089660 in the total amount of P100,000.00, P3,000.00 as
attorney's fees, and the costs of suit, without prejudice to any action for recompense she may pursue
against the VICTORIANOs as Third-Party Defendants.

Costs against private respondent.

SO ORDERED.

_______________________

SPS. REYNALDO K. LITONJUA and ERLINDA P. LITONJUA and PHIL. WHITE HOUSE AUTO SUPPLY, INC.,
petitioners, vs. L & R CORPORATION, VICENTE COLOYAN in his capacity as Acting Registrar of the
Register of Deeds of Quezon City thru Deputy Sheriff ROBERTO R. GARCIA, respondents.
DECISION

YNARES-SANTIAGO, J.:

May a mortgage contract provide: (a) that the mortgagor cannot sell the mortgaged property without
first obtaining the consent of the mortgagee and that, otherwise, the sale made without the mortgagees
consent shall be invalid; and (b) for a right of first refusal in favor of the mortgagee?

The controversy 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[1] constituted by the
spouses upon their two parcels of land and the improvements thereon located in Cubao, Quezon City
covered by Transfer Certificates of Title No. 197232 and 197233, with an area of 599 and 1,436 square
meters, respectively. The mortgage was duly registered with the Register of Deeds of Quezon City.

On July 14, 1979, the 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.[2] The
sale was annotated at the back of the respective certificates of title of the properties.[3]

Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L & R Corporation
initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City. On July 23,
1980, the mortgaged properties were sold at public auction to L & R Corporation as the only bidder for
the amount of P221,624.58.[4] When L & R Corporation presented its corresponding Certificate of Sale
issued by Deputy Sheriff Roberto B. Garcia, to the Quezon City Register of Deeds for registration on
August 15, 1980, it learned for the first time of the prior sale of the properties made by the spouses
Litonjua to PWHAS upon seeing the inscription at the back of the certificates of title. Thus, on August 20,
1980, it wrote a letter[5] to the Register of Deeds of Quezon City requesting for the cancellation of the
annotation regarding the sale to PWHAS. L & R Corporation invoked a provision in its mortgage contract
with the spouses Litonjua stating that the mortgagees prior written consent was necessary in case of
subsequent encumbrance or alienation of the subject properties. Thus, it argued that since the sale to
PWHAS was made without its prior written consent, the same should not have been registered and/or
annotated.

On March 10, 1981, or seven months after the foreclosure sale, PWHAS, for the account of the spouses
Litonjua, tendered payment of the full redemption price to L & R Corporation in the form of China Bank
Managers Check No. HOF-M O12623 in the amount of P238,468.04.[6] See Exhibits G & 2, Letter of
PWHAS to L & R Corporation, id.6 L & R Corporation, however, refused to accept the payment, hence,
PWHAS was compelled to redeem the mortgaged properties through the Ex-Oficio Sheriff of Quezon
City. On March 31, 1981, it tendered payment of the redemption price to the Deputy Sheriff through
China Bank Managers Check No. HOF-O14750 in the amount of P240,798.94.[7] The check was
deposited with the Branch Clerk of Court who issued Receipt No. 7522484[8] for the full redemption
price of the mortgaged properties. Accordingly, the Deputy Sheriff issued a Certificate of Redemption in
favor of the spouses Litonjua dated March 31, 1981.[9]

In a letter of the same date, the Deputy Sheriff informed L & R Corporation of the payment by PWHAS of
the full redemption price and advised it that it can claim the payment upon surrender of its owners
duplicate certificates of title.[10]

On April 2, 1981, the spouses Litonjua presented for registration the Certificate of Redemption issued in
their favor to the Register of Deeds of Quezon City. The Certificate also informed L & R Corporation of
the fact of redemption and directed the latter to surrender the owners duplicate certificates of title
within five days.[11]

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.[12]

On the other hand, on May 8 and June 8, 1981, 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 Corporation to surrender the owners 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[13] on July 17, 1981 against L & R Corporation for the
surrender of the owners duplicate of Transfer Certificates of Title No. 197232 and 197233 before the
then Court of First Instance of Quezon City, Branch IV, docketed as Civil Case No. 32905.

On August 15, 1981, while the said case was pending, L & R Corporation executed an Affidavit of
Consolidation of Ownership.[14] Thereafter, on August 20, 1981, the Register of Deeds cancelled
Transfer Certificates of Title No. 197232 and 197233 and in lieu thereof, issued Transfer Certificates of
Title No. 280054[15] and 28055[16] in favor of L & R Corporation, free of any lien or encumbrance.

With titles issued in its name, L & R Corporation advised the tenants of the apartments situated in the
subject parcels of land that being the new owner, the rental payments should be made to them, and
that new lease contracts will be executed with interested tenants before the end of August, 1981.[17]
Upon learning of this incident from their tenants, the spouses Litonjua filed an adverse claim[18] and a
notice of lis pendens[19] with the Register of Deeds. In the process, they learned that the prior sale of
the properties in favor of PWHAS was not annotated on the titles issued to L & R.

A complaint for Quieting of Title, Annulment of Title and Damages with preliminary injunction was filed
by the spouses Litonjua and PWHAS against herein respondents before the then Court of First Instance
of Quezon City, Branch 9, docketed as Civil Case No. Q-33362.[20] On February 10, 1987, the lower court
rendered its Decision[21] dismissing the Complaint upon its finding that the sale between the spouses
Litonjua and PWHAS was null and void and unenforceable against L & R Corporation and that the
redemption made was also null and void.

On appeal, the decision of the trial court was set aside by the Court of Appeals in its Decision dated June
22, 1994,[22] on the ground that the sale made to PWHAS as well as the redemption effected by the
spouses Litonjua were valid. However, the same was subsequently reconsidered and set aside in an
Amended Decision dated September 11, 1997.[23]

Hence, the instant Petition on the following issues:

(1) whether or not paragraphs 8 and 9 of the Real Estate Mortgage are valid and enforceable;

(2) whether or not the sale of the mortgaged properties by the spouses Litonjua to PWHAS, without the
knowledge and consent of L & R Corporation, is valid and enforceable;

(3) whether or not PWHAS had the right to redeem the foreclosed properties on the account of the
spouses Litonjua; and
(4) whether or not there was a valid redemption.

Paragraphs 8 and 9 of the subject Deed of Real Estate Mortgage read as follows

"8. That the MORTGAGORS shall not sell, dispose of, mortgage, nor in any other manner encumber the
real property/properties subject of this mortgage without the prior written consent of the MORTGAGEE;

9. That should the MORTGAGORS decide to sell the real property/properties subject of this mortgage,
the MORTGAGEE shall be duly notified thereof by the MORTGAGORS, and should the MORTGAGEE be
interested to purchase the same, the latter shall be given priority over all the other prospective
buyers;[24]

There is no question that the spouses Litonjua violated both the aforesaid provisions, selling the
mortgaged properties to PWHAS without the prior written consent of L & R Corporation and without
giving the latter notice of such sale nor priority over PWHAS.

Re: Validity of prohibition against subsequent sale of mortgaged property without prior written consent
of mortgagee and validity of subsequent sale to PWHAS

Petitioners defend the validity of the sale between them by arguing that paragraph 8 violates Article
2130 of the New Civil Code which provides that (A) stipulation forbidding the owner from alienating the
immovable mortgaged shall be void.

In the case of Philippine Industrial Co. v. El Hogar Filipino and Vallejo,[25] a stipulation prohibiting the
mortgagor from entering into second or subsequent mortgages was held valid. This is clearly not the
same as that contained in paragraph 8 of the subject Deed of Real Estate Mortgage which also forbids
any subsequent sale without the written consent of the mortgagee. Yet, in Arancillo v. Rehabilitation
Finance Corporation,[26] the case of Philippine Industrial Co., supra, was erroneously cited to have held
that the prohibition in a mortgage contract against the encumbrance, sale or disposal of the property
mortgaged without the consent of the mortgagee is valid. No similar prohibition forbidding the owner of
mortgaged property from (subsequently) mortgaging the immovable mortgaged is found in our laws,
making the ruling in Philippine Industrial Co., supra, perfectly valid. On the other hand, to extend such a
ruling to include subsequent sales or alienation runs counter not only to Philippine Industrial Co., itself,
but also to Article 2130 of the New Civil Code.

Meanwhile in De la Paz v. Macondray & Co., Inc.,[27] it was held that while an agreement of such nature
does not nullify the subsequent sale made by the mortgagor, the mortgagee is authorized to bring the
foreclosure suit against the mortgagor without the necessity of either notifying the purchaser or
including him as a defendant. At the same time, the purchaser of the mortgaged property was deemed
not to have lost his equitable right of redemption.

In Bonnevie v. Court of Appeals,[28] where a similar provision appeared in the subject contract of
mortgage, the petitioners therein, to whom the mortgaged property were sold without the written
consent of the mortgagee, were held as without the right to redeem the said property. No consent
having been secured from the mortgagee to the sale with assumption of mortgage by petitioners
therein, the latter were not validly substituted as debtors. It was further held that since their rights were
never recorded, the mortgagee was charged with the obligation to recognize the right of redemption
only of the original mortgagors-vendors. Without discussing the validity of the stipulation in question,
the same was, in effect, upheld.

Again, in Cruz v. Court of Appeals,[29] while a similar provision was recognized and applied, no
discussion as to its validity was made since the same was not raised as an issue.

On the other hand, in Tambunting v. Rehabilitation Finance Corporation,[30] the validity of a similar
provision was specifically raised and discussed and found as invalid. It was there ratiocinated that --

To be sure, the deed of second mortgage executed by the Escuetas in favor of Aurora Tambunting,
married to Antonio L. Tambunting, does contain a provision that the property mortgaged shall not be x x
x the subject of any new or subsequent contracts of agreements, saving and excepting those having
connection with the first mortgage with the RFC, without first securing the written permission and
consent of the MORTGAGEE. But the provision can only be construed as directed against subsequent
mortgages or encumbrances, not to an alienation of the immovable itself. For while covenants
prohibiting the owner from constituting a later mortgage over property registered under the Torrens Act
have been held to be legally permissible (Phil. Industrial Co. v. El Hogar Filipino, et al., 45 Phil. 336, 341-
342; Bank of the Philippines v. Ty Camco Sobrino, 57 Phil. 801), stipulations forbidding the owner from
alienating the immovable mortgaged are expressly declared void by law (Art. 2130, Civil Code). It is clear
that the stipulation against subsequent agreements above mentioned had not been breached by the
assignment by the Escuetas (to the Hernandezes) of their right of redemption in connection with the
mortgage constituted in favor of the R.F.C. The assignment was not a subsequent mortgage or
encumbrance, licitly comprehended by the prohibitory stipulation, but was actually a sale or conveyance
of all their rights in the encumbered real property in truth, an alienation of the immovable which could
not lawfully be forbidden. Moreover, since the subject of the assignment to the Hernandezes had
connection with the first assignment with the R.F.C., it did not fall within, but was explicitly excepted
from, the prohibitory stipulation in question. Finally, it should not be forgotten that since the
Tambuntings, in their own deed of conditional sale with the R.F.C., had accepted without demur the
provision that said contract could be revoked within one (1) year from September 16, 1955 at the option
of the RFC, as vendor, should the former owner (Escueta) exercise his right to redeem the property; and
that the redemption of the property within said period by the former owner or his successor-in-interest
would render their instrument of conditional sale automatically null and void and without effect, they
cannot now assume a position inconsistent with said provision. (underscoring, Ours)

Earlier, in PNB v. Mallorca,[31] it was reiterated that a real mortgage is merely an encumbrance; it does
not extinguish the title of the debtor, whose right to dispose a principal attribute of ownership is not
thereby lost. Thus, a mortgagor had every right to sell his mortgaged property, which right the
mortgagee cannot oppose.

In upholding the validity of the stipulation in question, the amended Decision relied on the cases of Cruz
v. Court of Appeals, supra, and Medida v. Court of Appeals.[32] According to the Court of Appeals, said
cases, are not only more recent that that of Tambunting, supra, but are also more applicable to the issue
at bar.

We are not convinced.

As we have mentioned, although a similar provision was recognized and applied in Cruz v. Court of
Appeals, supra, no discussion as to its validity was made since the same was not raised as an issue. Thus,
it cannot be said that the specific pronouncement in the Tambunting case that such a stipulation can
only be construed as against subsequent mortgages or encumbrances but not to an alienation of the
immovable itself, which is prohibited under Article 2130, was abandoned thereby. On the other hand,
the facts in the case of Medida v. Court of Appeals, are different from those in the present case for what
was in issue in the said case was a second mortgage over a foreclosed property during the period of
redemption. Thus, the ruling in Medida quoted in the Amended Decision that what is delimited is not
the mortgagors jus dispodendi, as an attribute of ownership, but merely the rights conferred by such act
of disposal which may correspondingly be restricted, actually refers to the fact that the only rights which
a mortgagor can legally transfer, cede and convey after the foreclosure of his properties are the right to
redeem the land, and the possession use and enjoyment of the same during the period of redemption. It
has no connection or reference to the right of a mortgagor to sell his mortgaged property without the
required consent of the mortgagee. To be sure, there is absolutely nothing in Medida that upholds the
validity of the stipulation in controversy.

Insofar as the validity of the questioned stipulation prohibiting the mortgagor from selling his mortgaged
property without the consent of the mortgagee is concerned, therefore, the ruling in the Tambunting
case is still the controlling law. Indeed, we are fully in accord with the pronouncement therein that such
a stipulation violates Article 2130 of the New Civil Code. Both the lower court and the Court of Appeals
in its Amended Decision rationalize that since paragraph 8 of the subject Deed of Real Estate Mortgage
contains no absolute prohibition against the sale of the property mortgaged but only requires the
mortgagor to obtain the prior written consent of the mortgagee before any such sale, Article 2130 is not
violated thereby. This observation takes a narrow and technical view of the stipulation in question
without taking into consideration the end result of requiring such prior written consent. True, the
provision does not absolutely prohibit the mortgagor from selling his mortgaged property; but what it
does not outrightly prohibit, it nevertheless achieves. For all intents and purposes, the stipulation
practically gives the mortgagee the sole prerogative to prevent any sale of the mortgaged property to a
third party. The mortgagee can simply withhold its consent and thereby, prevent the mortgagor from
selling the property. This creates an unconscionable advantage for the mortgagee and amounts to a
virtual prohibition on the owner to sell his mortgaged property. In other words, stipulations like those
covered by paragraph 8 of the subject Deed of Real Estate Mortgage circumvent the law, specifically,
Article 2130 of the New Civil Code.

Being contrary to law, paragraph 8 of the subject Deed of Real Estate Mortgage is not binding upon the
parties. Accordingly, the sale made by the spouses Litonjua to PWHAS, notwithstanding the lack of prior
written consent of L & R Corporation, is valid.

Re: Validity of redemption effected by PWHAS on the account of the spouses Litonjua

Coming now to the issue of whether the redemption offered by PWHAS on account of the spouses
Litonjua is valid, we rule in the affirmative. The sale by the spouses Litonjua of the mortgaged properties
to PWHAS is valid. Therefore, PWHAS stepped into the shoes of the spouses Litonjua on account of such
sale and was in effect, their successor-in-interest. As such, it had the right to redeem the property
foreclosed by L & R Corporation. Again, Tambunting, supra, clarifies that
x x x. The acquisition by the Hernandezes of the Escuetas rights over the property carried with it the
assumption of the obligations burdening the property, as recorded in the Registry of Property, i.e., the
mortgage debts in favor of the RFC (DBP) and the Tambuntings. The Hernandezes, by stepping into the
Escuetas shoes as assignees, had the obligation to pay the mortgage debts, otherwise, these debts
would and could be enforced against the property subject of the assignment. Stated otherwise, the
Hernandezes, by the assignment, obtained the right to remove the burdens on the property subject
thereof by paying the obligations thereby secured; that is to say, they had the right of redemption as
regards the first mortgage, to be exercised within the time and in the manner prescribed by law and the
mortgage deed; and as regards the second mortgage, sought to be judicially foreclosed but yet
unforeclosed, they had the so-called equity of redemption.

The redemption of PWHAS to redeem the subject properties finds support in Section 6 of Act 3135 itself
which gives not only the mortgagor-debtor the right to redeem, but also his successors-in-interest. As
vendee of the subject properties, PWHAS qualifies as such a successor-in-interest of the spouses
Litonjua.

Re: Validity of redemption made

It is clear from the records that PWHAS offered to redeem the subject properties seven (7) months after
the date of registration of the foreclosure sale, well within the one year period of redemption.

Re: Validity and enforceability of stipulation granting the mortgagee the right of first refusal

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.

What then is the status of the sale made to PWHAS in violation of L & R Corporations contractual right of
first refusal? On this score, we agree with the Amended Decision of the Court of Appeals that the sale
made to PWHAS is rescissible. The case of Guzman, Bocaling & Co v. Bonnevie[33] is instructive on this
point

The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under
Article 1380 to 1381(3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently
rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly
accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the
subject property to the petitioner without recognizing their right of first priority under the Contract of
Lease.

According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to
third persons, to secure reparation for damages caused to them by a contract, even if this should be
valid, by means of the restoration of things to their condition at the moment prior to the celebration of
said contract. It is a relief allowed for one of the contracting parties and even third persons from all
injury and damage the contract may cause, or to protect some incompatible and preferential right
created by the contract. Rescission implies a contract which, even if initially valid, produces a lesion or
pecuniary damage to someone that justifies its invalidation for reasons of equity. (underscoring, Ours)

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.

We note that L & R Corporation had always expressed its willingness to buy the mortgaged properties
on equal terms as PWHAS. Indeed, in its Answer to the Complaint filed, L & R Corporation expressed
that it was ready, willing and able to purchase the subject properties at the same purchase price of
P430,000.00, and was agreeable to pay the difference between such purchase price and the redemption
price of P249,918.77, computed as of August 13, 1981, the expiration of the one-year period to redeem.
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.

All things considered, what then are the relative rights and obligations of the parties? To recapitulate:,
the sale between the spouses Litonjua and PWHAS is valid, notwithstanding the absence of L & R
Corporations prior written consent thereto. Inasmuch as the sale to PWHAS was valid, its offer to
redeem and its tender of the redemption price, as successor-in-interest of the spouses Litonjua, within
the one-year period should have been accepted as valid by L & R Corporation. However, while the sale
is, indeed, valid, the same is rescissible because it ignored L & R Corporations right of first refusal.

Foreseeing a possible rescission of the sale, the spouses Litonjua contend that with the restoration of
the original status quo, with no sale having been made, they should now be allowed to redeem the
subject properties, the period of redemption having been suspended during the period of litigation. In
effect, the spouses Litonjua want to retain ownership of the same. We cannot, however, sanction this
belated reversal of the spouses Litonjuas decision to sell. To do so would afford them undue advantage
on account of the appreciation of the value of the subject properties in the intervening years when they
precisely were the ones who violated and ignored the right of first refusal of L & R Corporation over the
same. Moreover, it must be stressed that in rescinding the sale made to PWHAS, the purpose is to
uphold and enforce the right of first refusal of L & R Corporation.

WHEREFORE, the Decision appealed from is hereby AFFIRMED with the following MODIFICATIONS:

(a) Ordering the rescission of the sale of the mortgaged properties between petitioners spouses
Reynaldo and Erlinda Litonjua and Philippine White House Auto Supply, Inc. and ordering said spouses to
return to Philippine White House Auto Supply, Inc. the purchase price of P430,000.00;

(c) Disallowing, due to the rescission of the sale made in its favor, the redemption made by Philippine
White House Auto Supply, Inc. and ordering Quezon City Sheriff Roberto Garcia to return to it the
redemption check of P240,798.94;
(d) Allowing respondent L & R Corporation to retain its consolidated titles to the foreclosed properties
but ordering it to pay to the Litonjua spouses the additional sum of P189,201.96 representing the
difference from the purchase price of P430,000.00 in the rescinded sale;

(e) Deleting the awards for moral and exemplary damages and attorneys fees to the respondents.

No pronouncement as to costs.

SO ORDERED.

___________________________________________________________

G.R. No. 100635 February 13, 1995

SPOUSES RAMON TARNATE and ERLINDA TARNATE, petitioners,

vs.

HONORABLE COURT OF APPEALS, HON. JUDGE REGIONAL TRIAL COURT BATANGAS and IBAAN RURAL
BANK, INC., respondents.

VITUG, J.:

This petition for review on certiorari disputes the decision, dated 20 March 1991, of the Court of
Appeals, as well as its resolution of 26 June 1991 denying the motion for reconsideration of said
decision, that has affirmed a summary judgment of the court a quo.

The facts, gathered from the questioned decision, may be summarized thusly:
In order to secure various loans obtained from the Ibaan Rural Bank, Inc., the spouses Ramon and
Erlinda Tarnate, along with Vicente Templo and Manuel Villacorte, executed real estate mortgages over
different parcels of land, each covered by a Transfer Certificate of Title ("TCT"), all situated in Mataas na
Lupa, Lipa City.

When the loans were not repaid at maturity, the hypothecated parcels of land were extrajudicially
foreclosed by the bank in accordance with Act No. 3135. At the auction, the bank gave the highest bids.
The corresponding certificates of sale were issued in favor of the bank on 07 October 1981.

On 03 May 1982, the bank commenced an action to recover the remaining deficiency on the total
indebtedness. It averred that while the loan secured by the mortgage on TCT No. T-37203 amounted to
P99,190.97, the foreclosed property, however, was sold for just P46,512.00, thus leaving a balance of
P52,678.97; that with regard to the loan of P146,429.38, secured by TCT No. 37204, the auction sale
brought in an amount of P46,440.00, similarly resulting in a deficiency of P99,989.38; that the obligation
secured by TCT No. 37202 was for P96,259.16, but its foreclosure merely commanded an auction price
of P42,156.00, or a deficit of P54,103.16; and that relative to the P136,304.63 loan, covered by a
mortgage on TCT No. 37751, the winning bid price of P65,232.00 was likewise short by P71,072.63. In
their answer, the defendants, questioned the validity of the extrajudicial foreclosure of the mortgaged
parcels of land but, by and large, maintained that the complaint had been filed prematurely since the
redemption period at the time had yet to expire.

A pre-trial conference was held. The bank was accorded a period of up to ten (10) days to formally
submit its motion for summary judgment. The defendants were also given (10) days from receipt of said
motion within which to present their opposition. On 13 October 1983, the bank filed a motion for
summary judgment. On 17 November 1983, it manifested that counsel for the defendants was
furnished, by registered mail, a copy of its motion but that the same was "returned unclaimed." The
bank prayed that the defendants be deemed to have waived their right to oppose the motion. On 21
November 1983, the defendants sought to have their supplemental answer with counterclaim admitted,
stating that during the pendency of the case, the bank applied for, and was granted, the consolidation of
ownership over the foreclosed property. The bank filed a counter-manifestation and opposition. The
court a quo set these incidents for hearing on 10 January 1984, but neither of the parties appeared. The
trial court forthwith considered the motion for summary judgment, as well as the pleadings related
thereto, submitted for resolution.

On 19 June 1986, the court a quo finally rendered judgment thusly:


WHEREFORE, judgment is hereby rendered in favor of the plaintiff as follows:

1. Under the first cause of action, ordering the defendants spouses Ramon Tarnate and Erlinda
Tarnate to pay the plaintiff the sum of P52,678.97, with interest thereon at the legal rate per annum
starting from October 7, 1981 until fully paid;

2. Under the second cause of action, ordering the defendants Spouses Ramon Tarnate and Erlinda
Tarnate to pay plaintiff the sum of P99,989.38 with legal rate of interest thereon from October 7, 1981
until fully paid;

3. Under the third cause of action, ordering the defendants Spouses Ramon Tarnate and Erlinda
Tarnate and Vicente Templo to pay, jointly and severally, the plaintiff the sum of P54,103.16 with legal
rate of interest thereon per annum from October 7, 1981 until fully paid;

4. Under the fourth cause of action, ordering the defendants Spouses Ramon Tarnate and Erlinda
Tarnate and Manuel Villacorte to pay, jointly and severally, the plaintiff the sum of P71,072.63 with legal
rate of interest thereon per annum from October 7, 1981 until fully paid;

5. Under all the causes of action, ordering the defendants to pay, jointly and severally, the plaintiff
attorney's fees in the amount equivalent to 10% of the sum due and payable; and

6. The costs of suit.

SO ORDERED.1

The defendants brought the case to the Court of Appeals. On 20 March 1991, the appellate court
affirmed the assailed decision of the court a quo and dismissed the appeal for lack of merit. The motion
for reconsideration filed by the defendant-appellants was denied by the appellate court in its resolution
of 26 June 1991.
In the instant recourse, the spouses Ramon and Erlinda Tarnate merely reiterated the claim that they
had made before the appellate court to the effect that:

1. THE LOWER COURT ERRED IN NOT GIVING THE DEFENDANTS-APPELLANTS THE OPPORTUNITY
TO FILE THEIR OPPOSITION TO MOTION FOR SUMMARY JUDGMENT.

2. THE LOWER COURT ERRED IN RENDERING JUDGMENT BASED ON THE PLEADINGS IN FAVOR OF
THE PLAINTIFF-APPELLEE AND AGAINST DEFENDANTS-APPELLANTS.

3. THE LOWER COURT ERRED IN GRANTING THE MOTION FOR SUMMARY JUDGMENT.

4. THE LOWER COURT ERRED IN DENYING DEFENDANTS-APPELLANTS MOTION TO ADMIT


SUPPLEMENTAL ANSWER WITH COUNTERCLAIM.2

The petition is bereft of merit.

Summary judgment is proper when, except with respect to the amount of damages, there is no veritable
issue on any material fact, and the moving party is entitled to such summary judgment as a matter of
course.3 The appellate court clearly did not commit error in concluding that summary judgment could
be had in the case at bench. Neither the existence of the loans and the mortgage deeds, nor the fact of
default on the due repayments, is disputed. Concededly, the bank has had the unquestioned right to
foreclose on the mortgages. It is a settled rule that a mortgagee may recover any deficiency in the
mortgage account which is not realized in a foreclosure sale,4 and that the action for recovery of that
deficiency may be filed even during the redemption period.5

The contention that petitioner have been made to believe by respondent bank that the loans extended
to them would be for long-term, not short-term, accommodations does not appear to indeed be a real
genuine issue. The loan documents admittedly executed by the parties clearly contradict petitioners'
asseverations. The parties must have realized that when the terms of an agreement are unequivocally
reduced to writing, such as in this case, they hardly can be controverted by oral evidence to the
contrary.
Petitioners decry their not having been given an opportunity to submit their opposition to the motion
for summary judgment. This contention is simply not true.

The bank served on petitioners' counsel a copy, through registered mail, of its motion for summary
judgment (albeit "returned unclaimed").6 Upon petitioners' manifestation of its failure to receive that
copy, the court a quo set the motion, as well as the incidents that followed, for hearing. Since neither
petitioners nor respondent bank appeared, the court considered the matter submitted for resolution.
Four months having elapsed without the motion being yet resolved, respondent bank, on 18 May 1985,
moved for an early resolution. Close to a year later, or on 15 April 1986, a second motion was filed to
resolve the pending matter. On 30 April 1986, the motion for summary judgment was finally granted.
During the interim, no further step was taken by herein petitioners. After an evaluation of the pleadings
before it, the court a quo, rendered judgment, on 19 June 1986, in favor of the bank.

Anent the contention that the property has been sold at an extremely low price, suffice it to say that, if
correct, it would have, in fact, favored an easy redemption of the property.7 That remedy could have
well been availed of but petitioners did not. Neither can the charge of irregularity in the foreclosure sale
for lack of notice and publication be seriously considered. The records of the case immediately belie
such a claim (Annexes "A," "B," "C," and "D," Motion for Summary Judgment, pp. 67-70, Records).

In their supplemental answer, petitioners have called attention to respondent bank's consolidation of
ownership over the mortgaged property during the pendency of this case. We see nothing wrong in this
action of the bank. Upon a failure to redeem a foreclosed realty, the consolidation of title becomes a
matter of right on the part of the auction buyer.

The award of attorney's fees made by the court a quo has not been questioned in petitioners' appeal to
the Court of Appeals. It is too late in the day to do it now.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED in toto. Costs against petitioners.

SO ORDERED.

____________________________
HUERTA ALBA RESORT, INC., petitioner, vs. COURT OF APPEALS and SYNDICATED MANAGEMENT
GROUP, INC., respondents.

DECISION

PURISIMA, J.:

Litigation must at some time be terminated, even at the risk of occasional errors. Public policy dictates
that once a judgment becomes final, executory and unappealable, the prevailing party should not be
denied the fruits of his victory by some subterfuge devised by the losing party. Unjustified delay in the
enforcement of a judgment sets at naught the role of courts in disposing justiciable controversies with
finality.

TheCase

At bar is a petition assailing the Decision, dated November 14, 1996, and Resolution, dated March 11,
1997, of the Court of Appeals in CA-G.R. No. 38747, which set aside the Order, dated July 21, 1995, and
Order, dated September 4, 1997, of the Regional Trial Court of Makati City, in Civil Case No. 89-5424.
The aforesaid orders of the trial court held that petitioner had the right to redeem subject pieces of
property within the one-year period prescribed by Section 78 of Republic Act No. 337 otherwise known
as the General Banking Act.

Section 78 of R.A. No. 337 provides that 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 result of the foreclosure of the respective mortgage,
to redeem the property.

TheFacts

The facts that matter are undisputed:

In a complaint for judicial foreclosure of mortgage with preliminary injunction filed on October 19, 1989,
docketed as Civil Case No. 89-5424 before the Regional Trial Court of Makati City, the herein private
respondent sought the foreclosure of four (4) parcels of land mortgaged by petitioner to Intercon Fund
Resource, Inc. (Intercon).

Private respondent instituted Civil Case No. 89-5424 as mortgagee-assignee of a loan amounting to P8.5
million obtained by petitioner from Intercon, in whose favor petitioner mortgaged the aforesaid parcels
of land as security for the said loan.

In its answer below, petitioner questioned the assignment by Intercon of its mortgage right thereover to
the private respondent, on the ground that the same was ultra vires. Petitioner also questioned during
the trial the correctness of the charges and interest on the mortgage debt in question.

On April 30, 1992, the trial court, through the then Judge now Court of Appeals Justice Buenaventura J.
Guerrero, came out with its decision granting herein private respondent SMGIs complaint for judicial
foreclosure of mortgage, disposing as follows:

WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the following:

(1) P8,500,000.00 representing the principal of the amount due;

(2) P850,000.00 as penalty charges with interest at 6% per annum, until fully paid;

(3) 22% per annum interest on the above principal from September 6, 1998, until fully paid;

(4) 5% of the sum total of the above amounts, as reasonable attorneys fees; and,

(5) Costs.

All the above must be paid within a period of not less than 150 days from receipt hereof by the
defendant. In default of such payment, the four parcels of land subject matter of the suit including its
improvements shall be sold to realize the mortgage debt and costs, in the manner and under the
regulations that govern sales of real estate under execution.[1]

Petitioner appealed the decision of the trial court to the Court of Appeals, the appeal docketed as CA-
G.R. CV No. 39243 before the Sixth Division of the appellate court, which dismissed the case on June 29,
1993 on the ground of late payment of docket fees.

Dissatisfied with the dismissal of CA-G.R. No. 39243, petitioner came to this Court via a petition for
certiorari, docketed as G.R. No. 112044, which this court resolved to dismiss on December 13, 1993, on
the finding that the Court of Appeals erred not in dismissing the appeal of petitioner.

Petitioners motion for reconsideration of the dismissal of its petition in G.R. No. 112044 was denied with
finality in this Courts Resolution promulgated on February 16, 1994. On March 10, 1994, leave to
present a second motion for reconsideration in G.R. No. 112044 or to submit the case for hearing by the
Court en banc was filed, but to no avail. The Court resolved to deny the same on May 11, 1994.

On March 14, 1994, the Resolution dated December 13, 1993, in G.R. No. 112044 became final and
executory and was entered in the Book of Entries of Judgment.

On July 4, 1994, private respondent filed with the trial court of origin a motion for execution of the
Decision promulgated on April 30, 1992 in Civil Case No. 89-5424. The said motion was granted on July
13, 1994.

Accordingly, on July 15, 1994 a writ of execution issued and, on July 20, 1994, a Notice of Levy and
Execution was issued by the Sheriff concerned, who issued on August 1, 1994 a Notice of Sheriffs Sale
for the auction of subject properties on September 6, 1994.

On August 23, 1994, petitioner filed with the same trial court an Urgent Motion to Quash and Set Aside
Writ of Execution ascribing to it grave abuse of discretion in issuing the questioned Writ of Execution. To
support its motion, petitioner invited attention and argued that the records of the case were still with
the Court of Appeals and therefore, issuance of the writ of execution was premature since the 150-day
period for petitioner to pay the judgment obligation had not yet lapsed and petitioner had not yet
defaulted in the payment thereof since no demand for its payment was made by the private
respondent. In petitioners own words, the dispute between the parties was principally on the issue as to
when the 150-day period within which Huerta Alba may exercise its equity of redemption should be
counted.

In its Order of September 2, 1994, the lower court denied petitioners urgent motion to quash the writ of
execution in Civil Case No. 89-5424, opining that subject judgment had become final and executory and
consequently, execution thereof was a matter of right and the issuance of the corresponding writ of
execution became its ministerial duty.

Challenging the said order granting execution, petitioner filed once more with the Court of Appeals
another petition for certiorari and prohibition with preliminary injunction, docketed as C.A.-G.R. SP No.
35086, predicated on the same grounds invoked for its Motion to Quash Writ of Execution.

On September 6, 1994, the scheduled auction sale of subject pieces of properties proceeded and the
private respondent was declared the highest bidder. Thus, private respondent was awarded subject
bidded pieces of property. The covering Certificate of Sale issued in its favor was registered with the
Registry of Deeds on October 21, 1994.

On September 7, 1994, petitioner presented an Ex-Parte Motion for Clarification asking the trial court to
clarify whether or not the twelve (12) month period of redemption for ordinary execution applied in the
case.

On September 26, 1994, the trial court ruled that the period of redemption of subject property should
be governed by the rule on the sale of judicially foreclosed property under Rule 68 of the Rules of Court.

Thereafter, petitioner then filed an Exception to the Order dated September 26, 1994 and Motion to Set
Aside Said Order, contending that the said Order materially altered the Decision dated April 30, 1992
which declared that the satisfaction of the judgment shall be in the manner and under the regulation
that govern sale of real estate under execution.

Meanwhile, in its Decision of September 30, 1994, the Court of Appeals resolved the issues raised by the
petitioner in C.A.-G.R. SP No. 35086, holding that the one hundred-fifty day period within which
petitioner may redeem subject properties should be computed from the date petitioner was notified of
the Entry of Judgment in G.R. No. 112044; and that the 150-day period within which petitioner may
exercise its equity of redemption expired on September 11, 1994. Thus:

Petitioner must have received the resolution of the Supreme Court dated February 16, 1994 denying
with finality its motion for reconsideration in G.R. No. 112044 before March 14, 1994, otherwise the
Supreme Court would not have made an entry of judgment on March 14, 1994. While, computing the
150-day period, petitioner may have until September 11, 1994, within which to pay the amounts
covered by the judgment, such period has already expired by this time, and therefore, this Court has no
more reason to pass upon the parties opposing contentions, the same having become moot and
academic.[2](Underscoring supplied).

Petitioner moved for reconsideration of the Decision of the Court of Appeals in C.A.-G.R. SP No. 35086.
In its Motion for Reconsideration dated October 18, 1994, petitioner theorized that the period of one
hundred fifty (150) days should not be reckoned with from Entry of Judgment but from receipt on or
before July 29, 1994 by the trial court of the records of Civil Case No. 89-5424 from the Court of Appeals.
So also, petitioner maintained that it may not be considered in default, even after the expiration of 150
days from July 29, 1994, because prior demand to pay was never made on it by the private respondent.
According to petitioner, it was therefore, premature for the trial court to issue a writ of execution to
enforce the judgment.

The trial court deferred action on the Motion for Confirmation of the Certificate of Sale in view of the
pendency of petitioners Motion for Reconsideration in CA-G.R. SP No. 35086.

On December 23, 1994, the Court of Appeals denied petitioners motion for reconsideration in CA-G.R.
SP No. 35086. Absent any further action with respect to the denial of the subject motion for
reconsideration, private respondent presented a Second Motion for Confirmation of Certificate of Sale
before the trial court.

As regards the Decision rendered on September 30, 1994 by the Court of Appeals in CA G.R. SP No.
35086 it became final and executory on January 25, 1995.

On February 10, 1995, the lower court confirmed the sale of subject properties to the private
respondent. The pertinent Order declared that all pending incidents relating to the Order dated
September 26, 1994 had become moot and academic. Conformably, the Transfer Certificates of Title to
subject pieces of property were then issued to the private respondent.

On February 27, 1995, petitioner filed with the Court of Appeals a Motion for Clarification seeking
clarification of the date of commencement of the one (1) year period for the redemption of the
properties in question.

In its Resolution dated March 20, 1995, the Court of Appeals merely noted such Motion for Clarification
since its Decision promulgated on September 30, 1994 had already become final and executory;
ratiocinating thus:

We view the motion for clarification filed by petitioner, purportedly signed by its proprietor, but which
we believe was prepared by a lawyer who wishes to hide under the cloak of anonymity, as a veiled
attempt to buy time and to delay further the disposition of this case.

Our decision of September 30, 1994 never dealt on the right and period of redemption of petitioner, but
was merely circumscribed to the question of whether respondent judge could issue a writ of execution
in its Civil Case No. 89-5424 xxx.

We further ruled that the one-hundred fifty day period within which petitioner may exercise its equity
of redemption should be counted, not from the receipt of respondent court of the records of Civil Case
No. 89-5424 but from the date petitioner was notified of the entry of judgment made by the appellate
court.

But we never made any pronouncement on the one- year right of redemption of petitioner because, in
the first place, the foreclosure in this case is judicial, and as such, the mortgagor has only the equity, not
the right of redemption xxx. While it may be true that under Section 78 of R.A. 337 as amended,
otherwise known as the General Banking Act, a mortgagor of a bank, banking or credit institution,
whether the foreclosure was done judicially or extrajudicially, has a period of one year from the auction
sale within which to redeem the foreclosed property, the question of whether the Syndicated
Management Group, Inc., is a bank or credit institution was never brought before us squarely, and it is
indeed odd and strange that petitioner would now sarcastically ask a rhetorical question in its motion
for clarification.[3] (Underscoring supplied).
Indeed, if petitioner did really act in good faith, it would have ventilated before the Court of Appeals in
CA-G.R. No. 35086 its pretended right under Section 78 of R.A. No. 337 but it never did so.

At the earliest opportunity, when it filed its answer to the complaint for judicial foreclosure, petitioner
should have averred in its pleading that it was entitled to the beneficial provisions of Section 78 of R.A.
No. 337; but again, petitioner did not make any such allegation in its answer.

From the said Resolution, petitioner took no further step such that on March 31, 1995, the private
respondent filed a Motion for Issuance of Writ of Possession with the trial court.

During the hearing called on April 21, 1995, the counsel of record of petitioner entered appearance and
asked for time to interpose opposition to the Motion for Issuance of /Writ of Possession.

On May 2, 1995, in opposition to private respondents Motion for Issuance of /writ of Possession,
petitioner filed a Motion to Compel Private Respondent to Accept Redemption. It was the first time
petitioner ever asserted the right to redeem subject properties under Section 78 of R.A. No. 337, the
General Banking Act; theorizing that the original mortgagee, being a credit institution, its assignment of
the mortgage credit to petitioner did not remove petitioner from the coverage of Section 78 of R.A. No.
337. Therefore, it should have the right to redeem subject properties within one year from registration
of the auction sale, theorized the petitioner which concluded that in view of its right of redemption, the
issuance of the titles over subject parcels of land to the private respondent was irregular and premature.

In its Order of July 21, 1995, the trial court, presided over by Judge Napoleon Inoturan, denied private
respondents motion for a writ of possession, opining that Section 78 of the General Banking Act was
applicable and therefore, the petitioner had until October 21, 1995 to redeem the said parcels of land,
said Order ruled as follows:

It is undisputed that Intercon is a credit institution from which defendant obtained a loan secured with a
real estate mortgage over four (4) parcels of land. Assuming that the mortgage debt had not been
assigned to plaintiff, there is then no question that defendant would have a right of redemption in case
of foreclosure, judicially or extrajudicially, pursuant to the above quoted Section 78 of RA 337, as
amended.
However, the pivotal issue here is whether or not the defendant lost its right of redemption by virtue of
the assignment of its mortgage debt by Intercon to plaintiff, which is not a bank or credit institution. The
issue is resolved in the negative. The right of redemption in this case is vested by law and is therefore an
absolute privilege which defendant may not lose even though plaintiff-assignee is not a bank or credit
institution (Tolentino versus Court of Appeals, 106 SCRA 513). Indeed, a contrary ruling will lead to a
possible circumvention of Section 78 because all that may be needed to deprive a defaulting mortgagor
of his right of redemption is to assign his mortgage debt from a bank or credit institution to one which is
not. Protection of defaulting mortgagors, which is the avowed policy behind the provision, would not be
achieved if the ruling were otherwise. Consequently, defendant still possesses its right of redemption
which it may exercise up to October 21, 1995 only, which is one year from the date of registration of the
certificate of sale of subject properties (GSIS versus Iloilo, 175 SCRA 19, citing Limpin versus IAC, 166
SCRA 87).

Since the period to exercise defendants right of redemption has not yet expired, the cancellation of
defendants transfer certificates of title and the issuance of new ones in lieu thereof in favor of plaintiff
are therefore illegal for being premature, thereby necessitating reconveyance (see Sec. 63 (a) PD 1529,
as amended).

WHEREFORE, the Court hereby rules as follows:

(1) The Motion for Issuance of Writ of Possession is hereby denied;

(2) Plaintiff is directed to accept the redemption on or before October 21, 1995 in an amount computed
according to the terms stated in the Writ of Execution dated July 15, 1994 plus all other related costs
and expenses mentioned under Section 78, RA 337, as amended; and

(3) The Register of Deeds of Valenzuela, Bulacan is directed (a) to reconvey to the defendant the
following titles of the four (4) parcels of land, namely TCT Nos. V-38878, V-38879, V-38880, and V-
38881, now in the name of plaintiff, and (b) to register the certificate of sale dated October 7, 1994 and
the Order confirming the sale dated February 10, 1995 by a brief memorandum thereof upon the
transfer certificates of title to be issued in the name of defendant, pursuant to Sec. 63 (a) PD 1529, as
amended.
The Omnibus Motion dated June 5, 1995, together with the Opposition thereto, is now deemed
resolved.

SO ORDERED.[4]

Private respondent interposed a Motion for Reconsideration seeking the reversal of the Order but to no
avail. In its Order dated September 4, 1995, the trial court denied the same.

To attack and challenge the aforesaid order of July 21, 1995 and subsequent Order of September 4,
1995 of the trial court, the private respondent filed with this court a Petition for Certiorari, Prohibition
and Mandamus, docketed as G.R. No. 121893, but absent any special and cogent reason shown for
entertaining the same, the Court referred the petition to the Court of Appeals, for proper
determination.

Docketed as G.R. No. 387457 on November 14, 1996, the Court of Appeals gave due course to the
petition and set aside the trial courts Order dated July 21, 1995 and Order dated September 4, 1995.

In its Resolution of March 11, 1997, the Court of Appeals denied petitioners Motion for Reconsideration
of the Decision promulgated on November 14, 1996 in CA-G.R. No. 38747.

Undaunted, petitioner has come to this Court via the present petition, placing reliance on the
assignment of errors, that:

THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT THE COURT OF APPEALS
(TWELFTH DIVISION) IN CA G.R. SP NO. 35086 HAD RESOLVED WITH FINALITY THAT PETITIONER HUERTA
ALBA HAD NO RIGHT OF REDEMPTION BUT ONLY THE EQUITY OF REDEMPTION.

II
THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN IGNORING THAT PETITIONER HUERTA ALBA
POSSESSES THE ONE-YEAR RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 (THE GENERAL
BANKING ACT).

III

THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT PRIVATE RESPONDENT
SYNDICATED MANAGEMENT GROUP, INC. IS ENTITLED TO THE ISSUANCE OF A WRIT OF POSSESSION
OVER THE SUBJECT PROPERTY.[5]

In its comment on the petition, private respondent countered that:

A. THE HONORABLE COURT OF APPEALS CORRECTLY HELD THAT IT RESOLVED WITH FINALITY IN C.A.-
G.R. SP NO. 35086 THAT PETITIONER ONLY HAD THE RIGHT OF REDEMPTION IN RESPECT OF THE
SUBJECT PROPERTIES.

B. THE PETITION IS AN INSIDIOUS AND UNDERHANDED ATTEMPT TO EVADE THE FINALITY OF VARIOUS
DECISIONS, RESOLUTIONS AND ORDERS WHICH HELD THAT PETITIONER ONLY POSSESSES THE EQUITY
OF REDEMPTION IN RESPECT OF THE SUBJECT PROPERTIES.

C. PETITIONER IS BARRED BY ESTOPPEL FROM BELATEDLY RAISING THE ISSUE OF ITS ALLEGED RIGHT OF
REDEMPTION.

D. IN HOLDING THAT THE PETITIONER HAD THE RIGHT OF REDEMPTION OVER THE SUBJECT PROPERTIES,
THE TRIAL COURT MADE A MOCKERY OF THE LAW OF THE CASE.[6]

And by way of Reply, petitioner argued, that:


I.

THE COURT OF APPEALS IN CA G.R. SP NO. 35086 COULD NOT HAVE POSSIBLY RESOLVED THEREIN -
WHETHER WITH FINALITY OR OTHERWISE - THE ISSUE OF PETITIONER HUERTA ALBAS RIGHT OF
REDEMPTION UNDER SECTION 78, R.A. NO. 337.

II.

THERE IS NO ESTOPPEL HERE. PETITIONER HUERTA ALBA INVOKED ITS RIGHT OF REDEMPTION UNDER
SECTION 78, R.A. NO. 337 IN TIMELY FASHION, i.e., AFTER CONFIRMATION BY THE COURT OF THE
FORECLOSURE SALE, AND WITHIN ONE (1) YEAR FROM THE DATE OF REGISTRATION OF THE CERTIFICATE
OF SALE.

III.

THE PRINCIPLE OF THE LAW OF THE CASE HAS ABSOLUTELY NO BEARING HERE:

(1)

THE RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 IS IN FACT PREDICATED UPON THE
FINALITY AND CORRECTNESS OF THE DECISION IN CIVIL CASE NO. 89-5424.

(2)

THUS, THE RTCS ORDER RECOGNIZING PETITIONER HUERTA ALBAS RIGHT OF REDEMPTION UNDER
SECTION 78, R.A. NO. 37 DOES NOT IN ANY WAY HAVE THE EFFECT OF AMENDING, MODIFYING, OR
SETTING ASIDE THE DECISION IN CIVIL CASE NO. 89-5424.
The above arguments and counter-arguments advanced relate to the pivotal issue of whether or not the
petitioner has the one-year right of redemption of subject properties under Section 78 of Republic Act
No. 337 otherwise known as the General Banking Act.

The petition is not visited by merit.

Petitioners assertion of right of redemption under Section 78 of Republic Act No. 337 is premised on the
submission that the Court of Appeals did not resolve such issue in CA-G.R. SP No. 35086; contending
thus:

(1)

BY NO STRETCH OF LOGIC CAN THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP NO. 35086 BE
INTERPRETED TO MEAN THE COURT OF APPEALS HAD RESOLVED WITH FINALITY THE ISSUE OF
WHETHER PETITIONER HUERTA ALBA HAD THE RIGHT OF REDEMPTION WHEN ALL THAT THE
RESOLUTION DID WAS TO MERELY NOTE THE MOTION FOR CLARIFICATION.

(2)

THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP NO. 35086 IS NOT A FINAL JUDGMENT, ORDER OR
DECREE. IT IS NOT EVEN A JUDGMENT OR ORDER TO BEGIN WITH. IT ORDERS NOTHING; IT
ADJUDICATES NOTHING.

(3)

PETITIONER HUERTA ALBAS RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 37 WAS NOT AN ISSUE
AND WAS NOT IN ISSUE, AND COULD NOT HAVE POSSIBLY BEEN AN ISSUE NOR IN ISSUE, IN CA G.R. SP
NO. 35086.

(4)
THE 30 SEPTEMBER 1994 DECISION IN CA G.R. SP NO. 35086 HAVING ALREADY BECOME FINAL EVEN
BEFORE THE FILING OF THE MOTION FOR CLARIFICATION, THE COURT OF APPEALS NO LONGER HAD
ANY JURISDICTION TO ACT OF THE MOTION OR ANY OTHER MATTER IN CA G.R. SP NO. 35086, EXCEPT
TO MERELY NOTE THE MOTION.

II.

IN STARK CONTRAST, THE ISSUE OF PETITIONER HUERTA ALBAS RIGHT OF REDEMPTION UNDER SECTION
78, R.A. NO. 337 WAS DIRECTLY RAISED AND JOINED BY THE PARTIES, AND THE SAME DULY RESOLVED
BY THE TRIAL COURT.

III.

THE RIGHT OF REDEMPTION UNDER SECTION 78 OF R.A. NO. 337 IS MANDATORY AND AUTOMATICALLY
EXISTS BY LAW. THE COURTS ARE DUTY-BOUND TO RECOGNIZE SUCH RIGHT.

IV.

EQUITABLE CONSIDERATIONS WEIGH HEAVILY IN FAVOR OF PETITIONER HUERTA ALBA, NOT THE LEAST
OF WHICH IS THE WELL-SETTLED POLICY OF THE LAW TO AID RATHER THAN DEFEAT THE RIGHT OF
REDEMPTION.

V.

THEREFORE THE 21 JULY 1995 AND 04 SEPTEMBER 1995 ORDERS OF THE TRIAL COURT ARE VALID AND
PROPER IN ACCORDANCE WITH THE MANDATE OF THE LAW.
From the various decisions, resolutions and orders a quo it can be gleaned that what petitioner has been
adjudged to have was only the equity of redemption over subject properties. On the distinction between
the equity of redemption and right of redemption, the case of Gregorio Y. Limpin vs. Intermediate
Appellate Court,[7] comes to the fore. Held the Court in the said case:

The equity of redemption is, to be sure, different from and should not be confused with the right of
redemption.

The right of redemption in relation to a mortgage - understood in the sense of a prerogative to re-
acquire mortgaged property after registration of the foreclosure sale - exists only in the case of the
extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosure except only
where the mortgagee is the Philippine National Bank or a bank or banking institution.

Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of
redemption within one (1) year from the registration of the sheriffs certificate of foreclosure sale.

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 parties to the action and to vest their rights in the purchaser, subject to such
rights of redemption as may be allowed by law. Such rights exceptionally allowed by law (i.e., even after
confirmation by an order of the court) are those granted by the charter of the Philippine National Bank
(Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). 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.

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. There then exists only what is known as the equity of
redemption. This is simply the right of the defendant mortgagor to extinguish the mortgage and retain
ownership of the property by paying the secured debt within the 90-day period after the judgment
becomes final, in accordance with Rule 68, or even after the foreclosure sale but prior to its
confirmation.
Section 2, Rule 68 provides that -

x x If upon the trial x x 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 mortgagors 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.[8] (Underscoring supplied)

Petitioner failed to seasonably invoke its purported right under Section 78 of R.A. No. 337.

Petitioner avers in its petition that the Intercom, predecessor in interest of the private respondent, is a
credit institution, such that Section 78 of Republic Act No. 337 should apply in this case. Stated
differently, it is the submission of petitioner that it should be allowed to redeem subject properties
within one year from the date of sale as a result of the foreclosure of the mortgage constituted thereon.

The pivot of inquiry here therefore, is whether the petitioner seasonably invoked its asserted right
under Section 78 of R.A. No. 337 to redeem subject properties.

Petitioner theorizes that it invoked its "right" in "timely fashion", that is, after confirmation by the court
of the foreclosure sale, and within one (1) year from the date of registration of the certificate of sale.
Indeed, the facts show that it was only on May 2, 1995 when, in opposition to the Motion for Issuance
of Writ of Possession, did petitioner file a Motion to Compel Private Respondent to Accept Redemption,
invoking for the very first time its alleged right to redeem subject properties under to Section 78 of R.A.
No. 337.
In light of the aforestated facts, it was too late in the day for petitioner to invoke a right to redeem
under Section 78 of R.A. No. 337. Petitioner failed to assert a right to redeem in several crucial stages of
the Proceedings.

For instance, on September 7, 1994, when it filed with the trial court an Ex-part Motion for Clarification,
petitioner failed to allege and prove that private respondent's predecessor in interest was a credit
institution and therefore, Section 78 of R.A. No. 337 was applicable. Petitioner merely asked the trial
court to clarify whether the sale of subject properties was execution sale or judicial foreclosure sale.

So also, when it presented before the trial court an Exception to the Order and Motion to Set Aside Said
Order dated October 13, 1994, petitioner again was silent on its alleged right under Section 78 of R.A.
No. 337, even as it failed to show that private respondent's predecessor in interest is a credit institution.
Petitioner just argued that the aforementioned Order materially altered the trial court's Decision of April
30, 1992.

Then, too, nothing was heard from petitioner on its alleged right under Section 78 of R.A. No. 337 and of
the predecessor in interest of private respondent as a credit institution, when the trial court came out
with an order on February 10, 1995, confirming the sale of subject properties in favor of private
respondent and declaring that all pending incidents with respect to the Order dated September 26, 1994
had become moot and academic.

Similarly, when petitioner filed on February 27, 1995 a Motion for Clarification with the Court of
Appeals, seeking "clarification" of the date of commencement of the one (1) year redemption period for
the subject properties, petitioner never intimated any alleged right under Section 78 of R.A. No. 337 nor
did it invite attention to its present stance that private respondent's predecessor-in-interest was a credit
institution. Consequently, in its Resolution dated March 20, 1995, the Court of Appeals ruled on the said
motion thus:

But we never made any pronouncement on the one-year right of redemption of petitioner because, in
the first place, the foreclosure in this case is judicial, and as such, the mortgagor has only the equity, not
the right of redemption xxx. While it may be true that under Section 78 of R.A. 337 as amended,
otherwise known as the General Banking Act, a mortgagor of a bank, banking or credit institution,
whether the foreclosure was done judicially or extrajudicially, has a period of one year from the auction
sale within which to redeem the foreclosed property, the question of whether the Syndicated
Management Group, Inc., is bank or credit institution was never brought before us squarely, and it is
indeed odd and strange that petitioner would now sarcastically ask a rhetorical question in its motion
for clarification.[9] (Underscoring supplied).

If petitioner were really acting in good faith, it would have ventilated before the Court of Appeals in CA-
G.R. No. 35086 its alleged right under Section 78 of R.A. No. 337; but petitioner never did do so.

Indeed, at the earliest opportunity, when it submitted its answer to the complaint for judicial
foreclosure, petitioner should have alleged that it was entitled to the beneficial provisions of Section 78
of R.A. No. 337 but again, it did not make any allegation in its answer regarding any right thereunder. It
bears stressing that the applicability of Section 78 of R.A. No. 337 hinges on the factual question of
whether or not private respondents predecessor in interest was a credit institution. As was held in
Limpin, a judicial foreclosure sale, when confirmed by an order of the court, xx 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,[10] which 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 judicial foreclosure sale. Thus, the claim that petitioner is entitled to
the beneficial provisions of Section 78 of R.A. No. 337 - since private respondents predecessor-in-
interest is a credit institution - is in the nature of a compulsory counterclaim which should have been
averred in petitioners answer to the compliant for judicial foreclosure.

xxx A counterclaim is, most broadly, a cause of action existing in favor of the defendant against the
plaintiff. More narrowly, it is a claim which, if established, will defeat or in some way qualify a judgment
or relief to which plaintiff is otherwise entitled. It is sometimes defined as any cause of action arising in
contract available against any action also arising in contract and existing at the time of the
commencement of such an action. It is frequently defined by the codes as a cause of action arising out
of the contract or transaction set forth in the complaint as the foundation of the plaintiffs claim, or
connected with the subject of the action.[11] (underscoring supplied)

The counterclaim is in itself a distinct and independent cause of action, so that when properly stated as
such, the defendant becomes, in respect to the matters stated by him, an actor, and there are two
simultaneous actions pending between the same parties, wherein each is at the same time both a
plaintiff and a defendant. Counterclaim is an offensive as well as a defensive plea and is not necessarily
confined to the justice of the plaintiffs claim. It represents the right of the defendant to have the claims
of the parties counterbalanced in whole or in part, and judgment to be entered in excess, if any. A
counterclaim stands on the same footing, and is to be tested by the same rules, as if it were an
independent action.[12] (underscoring supplied)
The very purpose of a counterclaim would have been served had petitioner alleged in its answer its
purported right under Section 78 of R.A. No. 337:

xxx The rules of counterclaim are designed to enable the disposition of a whole controversy of
interested parties conflicting claims, at one time and in one action, provided all parties be brought
before the court and the matter decided without prejudicing the rights of any party.[13]

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 of the case. Estoppel may be successfully invoked if the party fails to
raise the question in the early stages of the proceedings.[14] Thus, a party to a case who failed to
invoked his claim in the main case, while having the opportunity to do so, will be precluded,
subsequently, from invoking his claim, even if it were true, after the decision has become final,
otherwise the judgment may be reduced to a mockery and the administration of justice may be placed
in disrepute.[15]

All things viewed in proper perspective, it is decisively clear that the trial court erred in still allowing
petitioner to introduce evidence that private respondents predecessor-in-interest was a credit
institution, and to thereafter rule that the petitioner was entitled to avail of the provisions of Section 78
of R.A. No. 337. In effect, the trial court permitted the petitioner to accomplish what the latter failed to
do before the Court of Appeals, that is, to invoke its alleged right under Section 78 of R.A. No. 337
although the Court of Appeals in CA-G.R. no. 35086 already found that the question of whether the
Syndicated Management Council Group, Inc. is a bank or credit institution was never brought before
(the Court of Appeals) squarely. The said pronouncement by the Court of Appeals unerringly signified
that petitioner did not make a timely assertion of any right under Section 78 of R.A. No. 337 in all the
stages of the proceedings below.

Verily, 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 Court of
Appeals repeatedly passed upon the issue of whether or not petitioner had the right of redemption or
equity of redemption over subject properties in the decisions, resolutions and orders, particularly in Civil
Case no. 89-5424, CA-G.R. CV No. 39243, CA-G.R. SP No. 35086, and CA-G.R. SP No. 38747, it was
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.
The law of case holds that petitioner has the equity of redemption without any qualification.

There is, therefore, merit in private respondents contention that to allow petitioner to belatedly invoke
its right under Section 78 of R.A. No. 337 will disturb the law of the case. However, private respondents
statement of what constitutes the law of the case is not entirely accurate. The law of the case is not
simply that the defendant possesses an equity of redemption. As the Court has stated, the law of the
case holds that petitioner has the equity of the redemption without any qualification whatsoever, that
is, without the right of redemption afforded by Section 78 of R.A. No. 337. Whether or not the law of the
case is erroneous is immaterial, it still remains the law of the case. A contrary rule will contradict both
the letter and spirit of the rulings of the Court of Appeals in CA-G.R. SP No. 35086, CA-G.R. CV No.
39243, and CA-G.R. 38747, which clearly saw through the repeated attempts of petitioner to forestall so
simple a matter as making the security given for a just debt to answer for its payment.

Hence, in conformity with the ruling in Limpin, the sale of the subject properties, as confirmed by the
Order dated February 10, 1995 of the trial court in Civil Case No. 89-5424 operated to divest the rights
of all the parties to the action and to vest their rights in private respondent. 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. There being an explicit finding on the part of the Court of Appeals in its
Decision of September 30, 1994 in CA-G.R. No. 35086 - that the herein petitioner failed to exercise its
equity of redemption within the prescribed period, redemption can no longer be effected. The
confirmation of the sale and the issuance of the transfer certificates of title 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.

WHEREFORE, the petition is DENIED, and the assailed decision of the Court of Appeals, declaring null
and void the Order dated 21 July 1995 and Order dated 4 September 1997 of the Regional Trial Court of
Makati City in Civil Case No. 89-5424, AFFIRMED. No pronouncement as to costs.

SO ORDERED.

____________________________________________________________

G.R. No. 114418 September 21, 1995


ESTANISLAO BODIONGAN, petitioner,

vs.

COURT OF APPEALS and LEA SIMEON, respondents.

PUNO, J.:

This petition for review on certiorari seeks to annul and set aside the Decision dated October 25, 1993
and the Resolution dated March 3, 1994 of the Court of Appeals in CA-G.R. CV No. 36314.

The antecedent facts are as follows:

On October 4, 1982, respondent Lea Simeon obtained from petitioner Estanislao Bodiongan and his wife
a loan of P219,117·39 secured by a mortgage on three (3) parcels of land with a four-storey hotel
building and personal properties located at Gango, Ozamiz City. The three (3) lots were covered by
Transfer Certificates of Title Nos. T-6530, T-6531 and T-6532 in the name of private respondent.

Private respondent failed to pay the loan. Petitioner thus instituted against her Civil Case No. OZ-1177
with the Regional Trial Court, Branch 15, Ozamiz City for collection of sum of money or foreclosure of
mortgage. Judgment was rendered by the trial court on October 11, 1984 ordering private respondent
to pay petitioner, P220,459.71, at the legal rate of interest and P5,000.00 as attorney's fees, and in case
of non-payment, to foreclose the mortgage on the properties. The dispositive portion of the decision
reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against defendant LEA SIMEON
ordering the defendant LEA SIMEON to pay the plaintiff the following:

1. P220,459.71 with legal rate of interest starting March 30, 1983, until fully paid;
2. P5,000.00 as reimbursement of plaintiff's attorney's fees;

3. In case of non-payment of the above amounts, the equitable mortgage (Exhibit "C") be ordered
foreclosed and sold at public auction to settle the obligation; and

4. To pay the costs. 1

This decision was affirmed on March 21, 1986 by the Court of Appeals in AC-G.R. CV No. 05367 and later
became final and executory.

Private respondent again failed to pay the judgment debt, hence, the mortgaged properties were
foreclosed and sold on execution on January 12, 1987. At the auction sale, petitioner submitted to the
sheriff a written bid of P309,000.00 and at the same time reserved in said bid a deficiency claim of
P439,710.57.2 The properties were awarded to petitioner as sole bidder and a certificate of sale was
issued in his name and registered with the Register of Deeds of Ozamiz City.

Petitioner then took possession of the properties after filing, per order of the trial court, a guaranty
bond of P350,000.00 to answer for any damage thereon during the redemption period.

On January 8, 1988, private respondent offered to redeem her properties and tendered to the Provincial
Sheriff a check in the amount of P337,580.00. This amount was based on a tentative computation by the
sheriff.3 The check was received by petitioner on the same day after which the sheriff issued a
certificate of redemption to private respondent also on the same day.4

On January 11, 1988, petitioner, claiming additional interest at 38% per annum, moved to correct the
computation of the redemption price and to suspend the issuance of a writ of possession pending
computation. The motion was denied by the trial court. On July 8, 1988, the trial court issued the said
writ and private respondent took possession of her properties.

On October 4, 1988, petitioner instituted against private respondent Civil Case No. OZ-1480-R with the
Regional Trial Court, Branch 15, Ozamiz City for annulment of redemption and confirmation of the
foreclosure sale on the ground of insufficiency of the redemption price. On October 7, 1988, petitioner
consigned the redemption money with the court. 5

On November 25, 1991, the trial court dismissed the complaint but reduced the 12% interest rate on the
purchase price to 6%, and thus, on the counterclaim, ordered petitioner to refund private respondent
the excess 6% plus P10,000.00 and P5,000.00 for moral damages and attorney's fees, as follows:

WHEREFORE, premises considered, plaintiff's complaint is hereby dismissed, with costs against him.

On the counterclaim, plaintiff Engr. Estanislao Bodiongan is ordered to refund the 6% interest in excess
of the 12% granted him in the computation which is not the legal rate allowed in the Civil Code, to pay
defendant Lea Simeon the further sum of P10,000.00 as moral damages and the sum of P5,000.00 as
attorney's fees.6

The Court of Appeals in CA-G.R. CV No. 36314 affirmed the trial court's decision except for the refund of
the 6% interest, to wit:

WHEREFORE premises considered, the judgment appealed from is hereby AFFIRMED subject to the
modification on the amount of interest due, such that, the legal rate of interest due is 1% per month or
12% for 12 months in the case at bar and not 6% as ruled by the trial court. Costs against appellant.7

Hence, this petition.

Petitioner claims before us that under the Revised Rules of Court, the redemption price for the
mortgaged properties should be P351,080.00. Since private respondent actually tendered P337,580.00
which is short by P13,500.00, this price was inadequate thereby rendering redemption ineffectual.

The price for the redemption of properties at an extrajudicial foreclosure sale8 is, according to Section 6
of Act 3135, fixed by Section 30 of Rule 39 of the Revised Rules of Court9 which reads as follows:
Sec. 30. Time and manner of, and amounts payable on, successive redemptions. Notice to be given and
filed. — The judgment debtor, or redemptioner, may redeem the property from the purchaser, at any
time within twelve (12) months after the sale, on paying the purchaser the amount of his purchase, with
one per centum per month interest thereon in addition, up to the time of redemption, together with the
amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and
interest on such last-named amount at the same rate; and if the purchaser be also a creditor having a
prior lien to that of the redemptioner, other than the judgment under which such purchase was made,
the amount of such other lien, with interest. Property so redeemed may again be redeemed within sixty
(60) days after the last redemption upon payment of the sum paid on the last redemption, with two per
centum thereon in addition, and the amount of any assessments or taxes which the last redemptioner
may have paid thereon after redemption by him, with interest on such last-named amount, and in
addition, the amount of any liens held by said last redemptioner prior to his own, with interest. The
property may be again, and as often as a redemptioner is so disposed, redeemed from any previous
redemptioner within sixty (60) days after the last redemption, on paying the sum paid on the last
previous redemption, with two per centum thereon in addition, and the amounts of any assessments or
taxes which the last previous redemptioner paid after the redemption thereon, interest thereon, and
the amount of any liens held by the last redemptioner prior to his own, with interest.

Written notice of any redemption must be given to the officer who made the sale and a duplicate filed
with the registrar of deeds of the province, and if any assessments or taxes are paid by the
redemptioner or if he has or acquires any lien other than that upon which the redemption was made,
notice thereof must in like manner be given to the officer and filed with the registrar of deeds; if such
notice be not filed, the property may be redeemed without paying such assessments, taxes, or liens.

In order to effect a redemption, the judgment debtor must pay the purchaser the redemption price
composed of the following: (1) the price which the purchaser paid for the property; (2) interest of 1%
per month on the purchase price; (3) the amount of any assessments or taxes which the purchaser may
have paid on the property after the purchase; and (4) interest of 1% per month on such assessments and
taxes. The redemption price must be for the full amount, otherwise the offer to redeem will be
ineffectual. 10 And if the tender is for less than the entire amount, the purchaser may justly refuse
acceptance thereof. 11 In the instant case, the redemption price covers the purchase price of
P309,000.00 plus 1% interest thereon per month for twelve months at P37,080.00. Petitioner does not
claim any taxes or assessments he may have paid on the property after his purchase. He, however, adds
P5,000.00 to the price to cover the attorney's fees awarded him by the trial court in Civil Case No. OZ-
1177.

In the redemption of property sold at an extrajudicial foreclosure sale, the amount payable is no longer
the judgment debt but the purchase price at the auction sale. 12 In other words, the attorney's fees
awarded by the trial court should not have been added to the redemption price because the amount
payable is no longer the judgment debt, but that which is stated in Section 30 of Rule 39. The
redemption price for the mortgaged properties in this case should therefore be P346,080.00, not
P351,080.00.

Private respondent's tender was P337,580.00 which is still short by P8,500.00. The Provincial Sheriff
declared that private respondent ordered him to deduct from the redemption price the value of certain
personal properties in the hotel. During petitioner's possession of the lots, he sold some of the furniture,
water pump and electrical installations in the hotel and appropriated the proceeds to himself without
private respondent's knowledge and approval.

Petitioner does not deny the fact that he sold the personal properties and appropriated the proceeds of
P13,500.00 to himself. He has expressly admitted this in his written bid to the sheriff. He, however,
cannot be considered in estoppel because the deduction for the loss of the personal properties was not
authorized under Section 30 of Rule 39. In the first place, the sheriff should not have issued the
certificate of redemption without a final determination of the amount of the redemption price. 13 This
unauthorized deduction of the value of private respondent's personal properties and the sheriff's
overzealousness in issuing the certificate of redemption are aggravated by the fact that private
respondent later sought for and was actually compensated for the said loss.

After taking possession of the lots and hotel, private respondent moved in Civil Case No. OZ-1177 to
charge the loss of her personal properties to the guaranty bond posted by petitioner. The trial court
awarded her P108,246.00 — with P23,246.00 for the "loss of her properties" and P85,000.00 for
"unrealized income of the hotel." 14 The order of the trial court was affirmed by the Court of Appeals in
CA-G.R. CV No. 31384 and this became final and executory after the Supreme Court dismissed
petitioner's petition for review in G.R. No. 112344. 15

Indeed, if we were to allow the deduction of the value of private respondent's personal properties from
the redemption price, this will amount to double compensation and unjust enrichment at the expense of
petitioner. 16 On the other hand, it would be highly unjust to deprive private respondent of her right to
redeem by a strict application of the Rules of Court. It must be remembered that the policy of the law is
to aid rather than defeat the right of redemption. 17 Inasmuch as in the instant case tender of the
redemption price was timely made and in good faith, and the deficiency in said price is not substantial,
we incline to give private respondent the opportunity to complete the redemption of her properties
within fifteen days from the time this decision becomes final. It is well to recall our earlier
pronouncements on this matter:
Considering that appellee tendered payment only of the sum of P317.44, whereas the three parcels of
land she was seeking to redeem were sold for the sums of P1,240.00, P21,000.00 and P30,000.00,
respectively, the aforementioned amount of P317.44 is insufficient to effectively release the properties.
However, the tender of payment was timely made and in good faith, in the interest of justice we incline
to give the appellee opportunity to complete the redemption purchase of the three parcels, as provided
in Section 26, Rule 39 of the Rules of court, within fifteen (15) days from the time this decision becomes
final and executory. In this wise, justice is done to the appellee who had been made to pay more than
her share in the judgment, without doing an injustice to the purchaser who shall get the corresponding
interest of 1% per month on the amount of his purchase up to the time of redemption. 18

The rule on redemption is liberally interpreted in favor of the original owner of the property. The fact
alone that he is allowed the right to redeem clearly demonstrates the tenderness of the law toward him
in giving him another opportunity, should his fortunes improve, to recover his lost property. This benign
motivation would be frustrated by a too-literal reading that would subordinate the warm spirit of the
rule to its cold language. 19

IN VIEW WHEREOF, the petition is DENIED and the Decision in CA-G.R. CV No. 36314 is affirmed with the
modification that private respondent be allowed to complete the redemption price by paying to
petitioner the difference of P8,500.00 at 1% interest per month 20 from January 8, 1988 until full
payment thereof within fifteen (15) days from the time this decision becomes final and executory.

SO ORDERED.

__________________________

[G.R. No. 26844. September 27, 1927.]

ISABEL FLORES, Plaintiff-Appellant, v. TRINIDAD LIM, Defendant-Appellee.

Sumulong, Lavides & Hilado and DeWitt, Perkins & Brady for Appellant.

Vicente Sotto for Appellee.


SYLLABUS

1. WHEN PURCHASER IS NOT ENTITLED TO POSSESSION. — A purchaser at a sheriff’s sale of real


property sold on an ordinary execution is not legally entitled to the possession of the property sold
during the period of redemption.

2. WHEN PURCHASER IS NOT ENTITLED TO MONEY EXPENDED FOR IMPROVEMENTS. — A purchaser of


such real property who obtains possession at or about the time of the sale by force and without the
knowledge and consent of the judgment debtor, and during the period of redemption plants thereon a
large number of coconut trees and makes extensive improvements, does so at his peril and is not
entitled to the return of the money so expended as a condition precedent to the right of redemption.

3. THE LAW SPECIFIES AND DEFINES WHAT THE REDEMPTIONER MUST PAY TO REDEEM. — As to such a
sale the law specifies and defines what the redemptioner is required to pay to redeem, and in the
absence of something unusual or an extraordinary expense incurred in the preservation of the property
and to be approved by the court, the redemptioner will not be required to pay and other or greater
amount.

STATEMENT

January 20, 1923, plaintiff’s land was sold at sheriff’s sale to the defendant for P1,603.78. It is in the
barrio of Pinaninding, municipality of Laguimanoc — formerly Atimonan — Province of Tayabas, and is
about seventy-three hectares, on which were 164 coconut bearing trees and 1,000 non-bearing, and
about 300 buri trees. The usual certificate of sale was issued to the defendant under the provisions of
section 463 of the Code of Civil Procedure. Prior to the one year period of redemption, plaintiff made a
formal demand upon the defendant, under the provisions of section 469 of the same Code, for an
accounting of the fruits and profits derived by her from the land, so that the plaintiff might have credit
for the amount received on the money required for redemption from the sale.

The instant case is brought by the plaintiff to redeem, and it is alleged that at the time of the sale, the
defendant took the actual, physical possession of the property, and has refused and still refuses to
render an account of the fruits and profits, to plaintiff’s damage in the sum of P1,000, and she prays
judgment that the defendant be ordered to render an itemized account, the amount of which should be
deducted from the price of the redemption; that plaintiff have the right to redeem; and that defendant
pay her P1,000 as damages and costs.

For answer the defendant makes a general and specific denial, and as a special defense alleges that her
rights of ownership over the land arise rather from a purchase made from the Government which had
confiscated the land for a delinquency in the payment of the land tax than from her acquisition of it at
public auction. That the plaintiff has not repurchased the land within one year, and the offer to redeem
was made out of time. Defendant consented to the redemption upon the condition only that the
plaintiff should pay the purchase price of the land, P6,371.19, the value of the improvements, P217.07,
the amount of the land tax, and alleges that plaintiff offered to pay only the sum of P2,500, and
promising to pay that little by little, which offer the defendant rejected. That the action was brought for
the purpose of delaying the matter, and to gain time in which to obtain the money to redeem. That the
defendant has been improving the land up to the present date, and she prays that she be absolved from
the complaint, and in the event redemption is allowed, that plaintiff be required to pay her the value of
the improvements made on the land in question. As a reply plaintiff made a general and specific denial
of all of the new matters alleged in the answer, and as a special defense, alleged that the defendant had
no legal right to make such improvements, and that they were made without her knowledge, and that
she is not liable for such improvements.

The evidence was taken upon such issues, and the trial court rendered judgment giving plaintiff the right
to redeem the land upon the payment to the defendant within fifteen days from notice the following
amounts: (a) The price of the land at the auction sale with legal interest thereon up to this date; (b) the
amount of the land tax paid by the defendant with legal interest up to this date; and (c) the sum of
P15,000, the value of the improvements made by the defendant on the land, and in case redemption is
not made within that period, the right is lost, and relieved the defendant from rendering an account.

On appeal the plaintiff assigns the following errors:jgc:chanrobles.com.ph

"ERROR NO. 1

"The trial court erred in sentencing plaintiff to reimburse defendant in the sum of P15,000 for
improvements alleged to have been introduced by said defendant in the land in suit, altho said
improvements were placed thereon by defendant with manifest bad faith.
ERROR NO. 2

"The trial court erred in not ordering defendant to account to plaintiff for fruits and benefits received by
said defendant from the land, and credit plaintiff against the amount due for its redemption the value of
said fruits and benefits.

"ERROR NO. 3

"The trial court erred in denying plaintiff’s motion for new trial on the ground of fraud and newly
discovered evidence, that excessive indemnity was granted, and that the decision was not justified by
the evidence and that the same was against the law."

DECISION

JOHNS, J.:

The lower court having found that the plaintiff has a legal right to redeem, and the defendant not having
appealed from that portion of the decision, the only question before this court is the amount which the
plaintiff should pay to redeem. The property was sold to the defendant at sheriff’s sale under the
provisions of Chapter XIX of the Code of Civil Procedure, section 461 of which
provides:jgc:chanrobles.com.ph

"When the purchaser of any personal property, capable of manual delivery, pays the purchase money,
the officer making the sale must deliver to the purchaser the property, and, if desired, execute and
deliver to him a certificate of sale. Such sale conveys to the purchaser all the right which the debtor had
in such property on the day the execution or attachment was levied."cralaw virtua1aw library
Section 463, among other things, provides:jgc:chanrobles.com.ph

"Upon a sale of real property, the purchaser shall be substituted, to, and acquire all the right, interest,
title, and claim of the judgment debtor thereto, subject to the right of redemption as hereinafter
provided. The officer must give to the purchaser a certificate of sale containing:jgc:chanrobles.com.ph

"1. A particular description of the real property sold;

"2. The price paid for each distinct lot or parcel;

"3. The whole price by him paid;

"4. The date when the right of redemption expires."cralaw virtua1aw library

Construing that section, this court in Pabico v. Ong Pauco (43 Phil., 572), said:jgc:chanrobles.com.ph

"The sheriff’s action in placing the defendant, as the purchaser at the execution sale, in possession of
the land was absolutely without warrant of law, was null and void ab initio, and not merely voidable,
and no special action for setting the proceedings aside are therefore required. In executing a judgment
the duties of the sheriff are merely ministerial; he simply carries out the orders of the court. If the writ
of execution or other order of the court does not command or direct him to deliver the possession of
real property to a certain person, he has no authority whatever to do so and in undertaking to eject the
party in possession and deliver such possession to some one else, he becomes a mere trespasser. In
such case, the person to whom possession is delivered is also a trespasser and the fact that he has been
aided by another trespasser can constitute no defense.

"‘The act of going on the property and excluding the lawful possessor therefrom necessarily implies the
exertion of force over the property, and this is all that is necessary.
"‘If a trespasser enters upon land in open daylight, under the very eyes of the person already clothed
with lawful possession, but without the consent of the latter, and there plants himself and excludes such
prior possessor from the property, the action of forcible entry and detainer can unquestionably be
maintained, even though no force is used by the trespasser other than such as is necessarily implied
from the mere acts of planting himself on the ground and excluding the other party.’"

Among other things, section 465 of the Code of Civil Procedure provides:jgc:chanrobles.com.ph

"The judgment debtor, or redemptioner, may redeem the property from the purchaser, at any time
within twelve months after the sale, on paying the purchaser the amount of his purchase, with one per
cent per month interest thereon in addition, up to the time of redemption, together with the amount of
any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on
such last-named amount at the same rate."cralaw virtua1aw library

That is to say, the statute specifically provides that the redemptioner may redeem within twelve months
after the sale by paying the purchaser the amount of his purchase, with interest thereon at one per cent
per month from the date of the purchase to the time of redemption, together with the amount of any
assessments or taxes which the purchaser may have paid after the purchase, with interest thereon at
the same rate. The statute having specified what the redemptioner should pay to redeem, it follows that
she is not required to pay anything not specified in the statute.

The lower court found that immediately after the purchase, the defendant entered upon and took
possession of the premises, and that at the time of the trial, she had planted 8,000 coconut trees on the
land at an expense of P15,000, and that to redeem the property it was not only necessary for the
plaintiff to pay the amounts specified in section 465 of the Code above quoted, but in addition thereto
and in order to redeem the property, she must pay the defendant the further sum of P15,000, the cost
and the value of the 8,000 coconut trees planted on the property by the defendant. That was error. It
nullifies the plain and express provisions of the statute, and there is no legal principle upon which it can
be sustained.

The record shows that immediately after the sale, the defendant took the actual, physical possession of
the property and drove off the employees of the plaintiff.
A purchaser of real property at an ordinary execution sale is not entitled to possession of the land or the
accruing rents and profits until after the period of redemption has expired and the legal title to the land
has become vested in him.

The defendant had no legal right to possession of the land in question, and, hence, she was a trespasser
from the time she took possession during the whole period of redemption. Being such a trespasser, and
under the provisions of section 465 of the Code of Civil Procedure, the defendant cannot recover from
the plaintiff any money which she expended for the planting of the coconut trees.

It is claimed that after the sale the plaintiff had said that she would not redeem, and that the defendant
expended the money relying upon that statement. The evidence of that nature was verbal and is more
or less hearsay, and to say the least, it is not clear or convincing. We are dealing with real property, the
title to which is passed by written conveyance, judicial sale, will or descent, and it would be very
dangerous to hold that the right of redemption can be waived by parol testimony. Be that as it may, the
evidence should be both clear and convincing and free from any doubt.

Suffice it to say that upon that point, there is a failure of proof. It is possible that a case could arise
where the purchaser at a sheriff’s sale pending the period of redemption might be forced to make
certain improvements for the preservation of the property, and in equity and good conscience, he would
then be entitled to receive the reasonable cost of such improvements as a condition precedent to the
right of redemption. But that is not this case, and is & matter wholly outside of the record. The alleged
improvements here were not made for the preservation of the property, and were apparently made for
the sole purpose of preventing redemption. Defendant’s contention would nullify the express provisions
of the statute, and would put it beyond the power of a judgment debtor to redeem any real property
sold on execution. It is the policy of the law to aid rather than to defeat the right of redemption.

Under the provisions of section 469 of the Code of Civil Procedure, the plaintiff made a demand upon
the defendant for an accounting, and it was the legal duty of the defendant to comply with that
demand. That section also provides that for failure to comply with the demand, the redemptioner "may
bring an action to compel an accounting and disclosure of such rents and profits, and until fifteen days
from and after the final determination of such action, the right of redemption is extended to such
redemptioner or debtor."cralaw virtua1aw library

In legal effect, the lower court held that such a demand was made, and that by reason thereof, the
period of redemption was extended. But found that "the defendant is not under obligation to render a
detailed account of the products of the coconut and buri trees planted on the land." Technically
speaking, the defendant should have been required to render an accounting, but under all the
circumstances, and in view of the fact that no large amount is involved, we are not disposed to disturb
that finding.

The judgment of the lower court, requiring the plaintiff to pay the defendant P15,000, as one of the
conditions for the redemption of the property, is reversed, but the judgment as to the payment of" (a)
the price of said land at the auction sale with the legal interest thereon up to this day;" and" (b) the
amount of the land tax paid by the defendant with legal interest up to this date" is in all things and
respects affirmed, with costs. So ordered.

Johnson, Street, Malcolm, Villamor, Romualdez, and Villa-Real, JJ., concur.

Separate Opinions

AVANCEÑA, C.J., concurring and dissenting:chanrob1es virtual 1aw library

I agree, in part, with the affirmation of the judgment appealed from. I also agree with the revocation in
regard to ordering the plaintiff to reimburse the defendant in the sum of P15,000, the value of the
improvements made on the land, because the law, I understand, does not require this reimbursement in
order to effect the legal redemption. (Sec. 465, Code of Civil Procedure.)

But, I do not agree with the finding made in the majority decision that the defendant illegally possessed
the land purchased by her during the year allowed the plaintiff for redemption and that she was a
trespasser. It seems that this finding is based principally upon the decision rendered by this court in the
case of Pabico v. Ong Pauco (43 Phil., 572). In that case the sheriff, after having sold the real property at
public auction in order to execute the judgment, placed the purchaser in possession thereof. But, I think,
in that case the court only declared that after the sale the functions of the sheriff, being purely
ministerial, ceased and he was under no obligation to place the purchaser in possession of the property
sold. If the court then held that the purchaser was a trespasser and his possession was illegal, it was
because the real property sold to him was, and for a period of ten years, had been in the possession of
another, who was not the judgment debtor in that case.
In the present case no one claims any right to the land except the plaintiff.

In my opinion, defendant’s possession of the land in question after she bought it at public auction and
during the year fixed for the right of redemption by the plaintiff-judgment-debtor, was legal. According
to section 463 of the Code of Civil Procedure, which is quoted in the majority decision, the effect of this
sale, as regards the defendant, was to substitute the plaintiff and to acquire all her right, interest and
title to the land, except the right of redemption. Possession being one of the rights which the plaintiff
had to the land, this possession naturally passed to the defendant. It seems absurd to say that the
defendant, by virtue of the purchase, substituted the plaintiff and acquired all her right, interest and
title to the land, but not the right of possession, as would necessarily be the case if, in spite of the
provision contained in said section 463, the defendant’s Possession of the land should be considered
illegal after having purchased it and during the year granted the judgment debtor for the redemption.

The same provision of section 469 of the Code of Civil Procedure which authorizes the purchaser, during
the year of redemption, to receive from the tenant the rent or the compensation for the use or
occupation of the land, and which imposes upon the purchaser the obligation to deduct he amount of
this rent and that of the products which he has received from the redemption price which the judgment
debtor has to reimburse him with to effect the redemption, shows that the law takes it for granted that
the purchaser is in possession of the property purchased by him during this time. This same idea implies
that this section grants the judgment debtor the right to demand that the purchaser render an account,
any time during the period of redemption, of the money received by him in the way of rents and
products. These provisions would be useless if it were not taken for granted that the purchaser had
received these rents and products during this time and was, therefore, in possession of the property
sold to him.

Furthermore, inasmuch as it must be taken for granted that the property sold had been seized before
the sale and had passed to the possession of the sheriff, after the sale the possession is no longer in the
sheriff, whose functions have ceased from that time except to execute, in due time, the proper deed of
sale in favor of the purchaser. On the other hand, I do not believe that it can be maintained that this
possession must be returned to the judgment debtor during the period of redemption. Consequently,
the conclusion seems inevitable that the possession of the property thus sold must pass to the
purchaser.

Aside from the plaintiff’s right of redemption, I believe that the defendant has the right to be
reimbursed, at least for the increase in value that the land acquired by reason of the expense incurred in
improving it, as she was a possessor in good faith (art. 453, Civil Code) and because the plaintiff should
not enrich herself at the expense of another and should pay what has enriched her.

The Civil Code requires that in order to exercise the right of redemption, the useful expenditures made
on the thing sold should be reimbursed. (Arts. 1518 and 1525.) While the Civil Code is not applicable to
this case, but section 465 of the Code of Civil Procedure, which provides for this redemption and which
does not require reimbursement in order to exercise the same, yet I believe that under the same
principles of justice that inspired the provisions of the Civil Code, the defendant has the same right,
although not as a limitation of the right of redemption by the plaintiff.