Grand Farms, Inc. & Philippine Shares Corporation vs. Court of Appeals, et al.

, 193
SCRA 748

FACTS

Sometime in 15 April 1988, petitioners filed for annulment of the judicial

foreclosure proceedings over their mortgaged properties. Petitioners further filed a
request for admission by private respondent of the allegation that no formal notice
of intention to foreclose the real estate mortgage was sent by private respondent to
petitioners.

Private respondent countered that petitioners were notified of the auction sale by
the posting of notices and its publication in the Metropolitan Newsweek, a
newspaper of general circulation in the province where the subject properties are
located.

Petitioners filed a motion for summary judgment contending that the foreclosure
was violative of the provisions of the mortgage contract, specifically paragraph (k)
thereof. However, private respondent opposed such motion.

The trial court and the Court of Appeals denied petitioner’s motion for summary
judgment, respectively. The respondent court held that paragraph (k) of the
mortgage contract merely specified the address where correspondence should be
sent and did not impose an additional condition on the part of private respondent to
notify petitioners of the foreclosure.

ISSUE

Whether or not the foreclosure was valid.

RULING

No. The inclusion of the aforementioned paragraph (k) in the mortgage contract
rendered personal notice to the petitioners indispensable. Paragraph (k) is an
additional stipulation between the parties; as such, it is the law between them and
as it is not contrary to law, morals, good customs and public policy, the same should
be complied with faithfully.

Thus, while the publication of the foreclosure proceedings in the newspaper of

general circulation was complied with, personal notice is still required when the
same was mutually agreed upon by the parties as additional condition of the
mortgage contract.
 Medida, et al. vs. Court of Appeals, et al., 208 SCRA 887

FACTS

On 10 October 1974, plaintiff spouses, alarmed of losing their right of redemption

over Lot 4731 from Gandioncho, purchaser at the foreclosure sale of the previous
mortgage in favor of Cebu City Development Bank, went to Teotimo Abellana,
president of said association, to obtain a loan of P 30,000.00. Prior thereto, their son
Teofredo Dolino filed a similar loan application with the disputed lot as security.

When the loan became due and demandable without plaintiff spouses paying the
same, defendant association caused the extrajudicial foreclosure of the mortgage on
16 March 1976. The land was sold at public auction to defendant association being
the highest bidder on 19 April 1976 and was registered on 10 May 1976 with the
Register of Deeds of Cebu.

On 24 May 1971, no redemption having been made, TCT No. 14272 was cancelled
and in lieu thereof TCT No. 68041 was issued in the name of defendant association.

On 18 October 1979, the spouses filed for the annulment of the sale. They assailed
the validity of the extrajudicial foreclosure sale of their property, claiming it was
held in violation of Act No. 3315. In its answer, defendant association denied such
allegations and averred that present private respondent spouses may still avail their
right of redemption.

The trial court upheld the validity of the loan and the real estate mortgage, but
annulling the extrajudicial foreclosure sale due to its failure to comply with the
notice requirements in Act No. 3135. The Court of Appeals modified the lower
court’s decision and declared the real estate mortgage as void and ineffective.

ISSUE

Whether or not the spouses may validly execute a mortgage contract over the
disputed lot in favor of a third party during the period of redemption.

RULING

Yes. The rule has always been that it is only upon the expiration of the redemption
period without the judgment debtor having made use of the right of redemption,
that the ownership of the land sold becomes consolidated in the purchaser.

In this case, the real estate mortgage in favor of petitioner bank was executed by
respondent spouses during the period of redemption. During the said period, the
ownership of the disputed property was still vested in the mortgagor spouses, since
the right of the purchaser is merely inchoate until after the period of redemption
has expired, without the right being exercised.
 Suico vs. Philippine National Bank, 531 SCRA 514

FACTS

Petitioner spouses Suico obtained a loan from the Philippine National Bank (PNB)
secured by a real estate mortgage on the former’s real properties. The petitioners
failed to pay their obligations prompting the PNB to extrajudicially foreclose the
mortgage over the subject properties before the City Sheriff of Mandaue City.

The petitioners filed a Complaint against the PNB before the Regional Trial Court of
Mandaue City for Declaration of Nullity of Extrajudicial Foreclosure of Mortgage.
The Complaint alleged that PNB filed a petition for the extrajudicial foreclosure of
mortgage for an outstanding loan obligation amounting to P 1,991,770.38. During
the foreclosure sale, PNB, as the lone bidder, offered a bid in the amount of P
8,511,000.00. Since the amount of the bid exceeded the amount of petitioners’
outstanding obligation, it was the legal duty of PNB to deliver to the Mandaue City
Sheriff the bid price or what was left thereof after deducting the amount of
petitioners’ outstanding obligation. PNB failed to deliver the amount of their bid, or
the amount of such bid in excess of petitioners’ outstanding obligation. Nonetheless,
PNB transferred registration of all the subject properties to its name.

PNB maintained that the outstanding obligation of the petitioners was already more
than the bid price of P 8,511,000.00. Moreover, they admitted the non-delivery of
the bid price since the transfer of subject properties was still pending.

The RTC rendered its Decision for the declaration of nullity of the extrajudicial
foreclosure of mortgage. However, the Court of Appeals reversed the trial court’s
decision and ruled that the fact of the surplus alone will not affect the validity of the
sale but simply gives the petitioners a cause of action to recover such surplus.

ISSUE

Whether or not PNB is obliged to deliver the surplus.

RULING

Yes. PNB should deliver the excess. The application of the proceeds of the sale from
the sale of the mortgaged property to the mortgagor’s obligation is an act of
payment; hence it is the mortgagee’s duty to return any surplus in the selling price
to the mortgagor.

It was held that the petitioners’ principal obligation amounted to P 6,409,814.92,

which is less than the amount of the bid price. Thus, there is clearly an excess in the
bid price which PNB must return.
 BPI Family Savings Bank, Inc. vs. Golden Power Diesel Sales Center Inc., 639 SCRA
405

FACTS

On 26 October 1994, CEDEC Transport, Inc. mortgaged two (2) parcels of land
situated in Malibay, Pasay City in favor of BPI Family to secure a loan of P
6,570,000.00.

Despite demand, CEDEC defaulted in its mortgage obligations. Thus, BPI filed for a
petition for extrajudicial foreclosure of real estate mortgage over the properties.
Consequently, the properties were sold at public auction, with BPI Family as the
highest bidder.

On 15 May 1999, the one-year redemption period expired without CEDEC

redeeming the properties. Thus, the titles to the properties were consolidated in the
name of BPI Family. However, CEDEC refused to vacate the properties and to
surrender possession to BPI Family.

On 29 July 2002, respondents Golden Power Diesel Sales Center, Inc. and Renato
Tan filed a Motion to Hold Implementation of the Writ of Possession. Respondents
alleged that they are in possession of the properties which they acquired from
CEDEC on 10 September 1988 pursuant to the Deed of Sale. Respondents argued
that they are third persons claiming rights adverse to CEDEC, the judgment obligor
and they cannot be deprived of possession over the properties.

The trial court ruled in favor of respondents, noting that they were in actual
possession of the properties. The Court of Appeals held that the obligation of the
court to issue an ex parte writ of possession in favor of a purchaser in an
extrajudicial foreclosure sale ceases to be ministerial once it appears that there is a
third party in possession of the property who is claiming a right adverse to that of
the debtor or mortgagor.

ISSUE

Whether or not respondents can claim a right to possession over the properties.

RULING

No. Respondents’ possession of the properties was premised on the sale to them by
CEDEC. Therefore, as CEDEC’s transferees, respondents merely stepped into
CEDEC’s shoes and are necessarily bound to acknowledge and respect the mortgage
it had earlier executed in favor of BPI Family. Respondents are the successors-in-
interest of CEDEC and thus, respondents’ occupancy over the properties cannot be
considered adverse to CEDEC.