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Mambulao Mambulao 07BARO


Lumber Compa… Lumber Co
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ATTY. RENO R. GONZALES, JR.


3/6/18
SURVEY OF JURISPRUDENCE ON FORECLOSURE, LOANS, AND PROPERTY LIEN

Definition of Real Estate Mortgage

Republic vs. Peralta, G.R. No. L-56568, 20 May 1987.

A real estate mortgage is a contract in which the debtor guarantees to the creditor the fulfillment of a
principal obligation, subjecting for the faithful compliance therewith a real property in case of non-
fulfillment of said obligation at the time stipulated. A mortgage directly and immediately subjects the
property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted (Article 2176, Civil Code). It creates a real right which is enforceable
against the whole world. It is a lien on an Identified immovable property, which a preference is not. A
recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on
classification of credits.

Isaguirre v de Lara, 332 SCRA 803.

A mortgage is a contract entered into in order to secure the fulfillment of a principal obligation, and
constituted by recording the document in which it appears with the proper Registry of Property, although,
even if it is not recorded, the mortgage is nevertheless binding between the parties; As a general rule, a
mortgagor retains possession of the mortgaged property since a mortgage is merely a lien and title to the
property does not pass to the mortgagee.

When can you foreclose a mortgage constituted over a property.

Producers Bank v. Court of Appeals, G.R. No. 111584, 17 September 2001.

FACTS: Sometime in April, 1982, respondent Salvador Chua was offered by Mr. Jimmy Rojas, manager of
Producers Bank, to transfer his account from Pacific Banking Corporation to herein Producers Bank. In
view of Rojas' assurances of longer loan terms and lower rates of interest, respondent spouses opened
and maintained substantial savings and current deposits with the Bacolod branch of petitioner bank.
Likewise, respondents obtained various loans from petitioner bank, one of which was a loan for
P2,000,000.00 which was secured by a real estate mortgage and payable within a period of three (3)
years or from 1982 to 1985.

On January 20, 1984, respondents deposited with Producers Bank the total sum of P960,000.00, which
was duly entered in respondents' savings account passbook. However, Producers Bank failed to credit
this deposit in respondents' savings account due to the fact that its Branch Manager, Sixto Castillo,
absconded with the money of the bank's depositors. Also, Producers Bank dishonored the checks drawn
out by respondents in favor of their various creditors on the ground of insufficient funds, despite the fact
that at that time, the balance of respondents' deposit was in the amount of P1,051,051.19. These events
prompted respondents to request for copies of their ledgers covering their savings and current accounts,
but petitioner bank refused.

Due to Producers Bank's refusal to furnish respondents copies of their ledgers, respondents instituted an
action for damages against Producers Bank. On the other hand, Producers Bank filed with the City Sheriff
of Bacolod a petition for extrajudicial foreclosure of the real estate mortgage during the pendency of the
civil case for damages. As a result, respondents filed a complaint for injunction and damages, alleging
that the petition for extrajudicial foreclosure was without basis and was instituted maliciously in order to
harass private respondents.

Producers Bank contends that it has the right to foreclose the real estate mortgage executed by
respondents in its favor as the loan under the real estate mortgage contract had become due and
demandable.

ATTY. RENO R. GONZALES, JR.


3/6/18
SURVEY OF JURISPRUDENCE ON FORECLOSURE, LOANS, AND PROPERTY LIEN

RULING: Foreclosure is but a necessary consequence of non-payment of a mortgage indebtedness. As a


rule, the mortgage can be foreclosed only when the debt remains unpaid at the time it is due. As found
by the trial court and the Court of Appeals, and as borne by the evidence on record, respondents were
constantly paying their loan obligations with petitioner bank. In fact, the amount of P960,000.00 was
properly deposited with Producers Bank as evidenced by the corresponding deposit slip and the entry
made in respondents' savings account passbook. It is, therefore, not the fault of respondents that their
payment amounting to P960,000.00 was not credited to their account. Thus, it is certain that the loan
which was secured by a real estate mortgage cannot be considered as unpaid so as to warrant
foreclosure on the mortgage.

DBP v. Licuanan, G.R. No. 150097, 26 February 2007.

FACTS: Respondent spouses Alejandro and Adelaida Licuanan were granted a piggery loan in the amount
of P4,700 by DBP, evidenced by a promissory note dated September 20, 1974 and secured by a real
estate mortgage over a 980-square meter parcel of land with a two-storey building. The loans maturity
date was September 23, 1979.

DBP granted respondents an additional loan of P12,000 evidenced by a promissory note dated May 29,
1975 payable on or before the year 1980. This was secured by a real estate mortgage over four parcels
of land situated in Pangasinan covered by 4 TCTs.

On October 2, 1975, DBP granted respondent spouses another loan of P22,000 evidenced by a
promissory note maturing on October 3, 1985. This was secured by a real estate mortgage executed in
favor of DBP over three (3) parcels of land covered by 3 TCTs, all of the Registry of Deeds of Pangasinan.

On August 6, 1979, DBP and respondents restructured the P12,000.00 loan, extending the maturity date
from June 22, 1979 to June 22, 1982. On the same date, respondents executed a promissory note
for P12,320.73 and another for P6,519.90.

On July 6, 1981, DBP sent a letter by registered mail to respondents informing them that, since the
conditions of the mortgage had been breached, DBP would have the mortgaged properties sold by the
sheriff under Act 3135. The total amount due from the three loans had by then ballooned to P75,298.32.
Subsequently, DBP filed an application for extrajudicial foreclosure. The mortgaged properties were sold
in a public auction on December 16, 1981. DBP, as the highest bidder, acquired them for a total
of P16,340. The certificate of sale was registered on January 25, 1982.

A year after, DBP consolidated its ownership over the properties. On October 16, 1984, DBP wrote
respondents by registered mail, informing them that the properties (now acquired assets of the bank)
would be disposed of by public auction. DBP published an advertisement stating that on November 14,
1984, the properties would be sold by oral bidding. On this date, however, there were no bidders.

On November 16, 1984, petitioner sent respondents a letter informing them that the properties could be
reacquired by negotiated sale for cash or installment. Three days later, however, the properties were sold
through negotiated sale to one Emelita A. Peralta. Respondents were informed of the sale by petitioner
through a letter dated December 6, 1984.

On the same day, petitioner executed a deed of conditional sale in favor of Peralta. On December 11,
1984, respondents offered to repurchase the properties from petitioner but they had already been sold to
Peralta. Respondents then filed a complaint for recovery of real properties and damages against DBP and
Peralta. RTC rendered judgment in favor of respondents. It found that there was no demand for
payment prior to the extrajudicial foreclosure. Thus, the foreclosure proceedings were null and void. It
ordered Peralta to reconvey the properties to respondents subject to Peraltas right to be paid by

ATTY. RENO R. GONZALES, JR.


3/6/18
SURVEY OF JURISPRUDENCE ON FORECLOSURE, LOANS, AND PROPERTY LIEN

respondents the amount of P104,000 in consideration of such reconveyance. It also held that DBP did not
deal fairly with respondents making it liable for nominal and moral damages to the latter.

The issue of whether demand was made before the foreclosure was effected is essential. If demand was
made and duly received by the respondents and the latter still did not pay, then they were already in
default and foreclosure was proper.

RULING: Unless demand is proven, one cannot be held in default. DBP’s cause of action did not accrue
on the maturity dates stated in the promissory notes. It is only when demand to pay is made and
subsequently refused that respondents can be considered in default and petitioner obtains the right to file
an action to collect the debt or foreclose the mortgage.

The acceleration clause of the promissory notes stated that in case of non-payment of this note or any
portion of it on demand, when due, on account of this note, the entire obligation shall become due and
demandable. Hence, the maturity dates only indicate when payment can be demanded. It is the refusal
to pay after demand that gives the creditor a cause of action against the debtor.

Since demand, which is necessary to make respondents guilty of default, was never made on
respondents, the CA and RTC correctly ruled that the foreclosure was premature and therefore null and
void.

Prohibition against pactum commissorium

Lumayag v. Heirs of Jacinto, G.R. No. 162112, 3 July 2007.

FACTS: During their lifetime, the spouses Jacinto Nemeño and Dalmacia Dayangco-Nemeño,
predecessors-in-interest of the herein respondent heirs, owned two (2) parcels of coconut land located in
Manaca, Ozamiz City. In 1979, Dalmacia died survived by her husband, Jacinto, and their six (6) children,
to wit: Meliton, Eleuteria, Timoteo, Justo, Saturnino and Felipa.

On February 25, 1985, Jacinto, joined by his five (5) children, namely, Meliton, Eleuteria, Timoteo, Justo
and Saturnino, conveyed to his daughter Felipa and the latter’s husband Domingo Lumayag the two (2)
lots. The instrument of conveyance is denominated as Deed of Sale with Pacto De Retro. Thereunder, it
was stipulated that the consideration for the alleged sale of the two (2) aforementioned lots was Twenty
Thousand Pesos (₱20,000.00) and that the vendors a retro have the right to repurchase the same lots
within five (5) years from the date of the execution of the instrument on February 25, 1985. It was
likewise agreed thereunder that in the event no purchase is effected within the said
stipulated period of five (5) years "conveyance shall become absolute and irrevocable
without the necessity of drawing up a new absolute deed of sale, subject to the
requirements of law regarding consolidation of ownership of real property."

On April 4, 1985, Jacinto died. More than a decade later, the spouses Domingo Lumayag and Felipa
Nemeño-Lumayag filed with the RTC a petition for the reconstitution of the owner’s duplicate copy of one
of the two lots subject of the earlier Deed of Sale with Pacto De Retro. In that petition, the Lumayags
alleged that said owner’s duplicate copy was in Domingo’s possession but the same was lost when a
typhoon hit and destroyed the couple’s house. The petition was opposed by the other heirs of Jacinto and
Dalmacia who claimed that the owner’s duplicate copy of the same OCT was actually in the possession
and custody of their brother Meliton Nemeño, the administrator of the property, when it was burned in a
fire. RTC resolved said petition by ordering the issuance of a new owner’s duplicate copy as prayed for
and its delivery to the heirs of Jacinto and Dalmacia.

On December 24, 1996, in the same RTC, the heirs of Jacinto and Dalmacia, namely, their children
Meliton, Eleuteria, Timoteo and Justo and grandchildren Ricky and Daisy who are the heirs of Saturnino,

ATTY. RENO R. GONZALES, JR.


3/6/18
SURVEY OF JURISPRUDENCE ON FORECLOSURE, LOANS, AND PROPERTY LIEN

(hereinafter collectively referred to as the respondent heirs) filed against the spouses Domingo Lumayag
and Felipa N. Lumayag a complaint for Declaration of Contract as Equitable Mortgage, Accounting and
Redemption with Damages. Essentially, the complaint alleged that the subject Deed of Sale with Pacto De
Retro was executed only for the purpose of securing the payment of a loan of ₱20,000.00 obtained from
the defendant spouses in connection with the medication and hospitalization of the then ailing Jacinto
Nemeño. To support their claim that the contract in question was an equitable mortgage, the plaintiff
heirs materially pointed out the following: (1) the grossly inadequate price of the subject lots considering
that the lot with an area of 5 hectares has a mark et value of ₱40,760.00 and an assessed value of
₱15,230.00, while the other lot with an area of 4,420 square meters has a market value of ₱4,120.00 and
an assessed value of ₱1,460.00; (2) their continued payment of realty taxes; (3) the land title and tax
declaration remained in the names of Jacinto Nemeño and Dalmacia Dayangco-Nemeño; (4) their
possession, particularly Justo Nemeño’s, of the subject lots with the petitioner spouses only given two -
thirds share of the harvest therefrom; and (5) t he pactum commissorium stipulation in the subject
contract.

Thus, the heirs pray for a judgment (a) declaring the subject Deed of Sale with Pacto de Retro as an
equitable mortgage and considering the lots subject thereof as redeemed; (b) ordering the defendant
spouses to render an accounting of the fruits and/or income of the coconut lands from 1985 to 1996 and
to return whatever remains of the amount with interest at the legal rate after deducting the ₱20,000.00
loan; and (c) ordering the same defendants to pay liti gation expenses and attorney’s fees .

RULING: The subject Deed of Sale with Pacto De Retro, while purporting to be a sale, is in truth and in
fact an equitable mortgage. An equitable mortgage has been defined "as one which although lacking in
some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the

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intention of the parties to charge real property as security for a debt, and contains nothing impossible or
contrary to law. Upload EN

Evidence is extant on record that the respondent heirs, as vendors a retro, remained in possession of the
subject lots after the execution of the deed of sale with right to repurchase. Further, respondents’
continued payment of the real property taxes subsequent to the alleged sale is indicative of the fact that
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the parties intended to enter into an equitable mortgage. Search document
Lastly, the stipulation in the subject deed reading: "if we fail to exercise our rights to repurchase as
herein granted within the period stipulated, then this conveyance shall become absolute and irrevocable
without the necessity of drawing a new absolute Deed of Sale, subject to the requirements of law
Saved regarding consolidation of ownership of real property," - is considered a pactum commissorium. This
stipulation is contrary to the nature of a true pacto de retro sale since in such sale, ownership of the
property sold is immediately transferred to the vendee a retro upon execution of the sale, subject only to
the repurchase of a vendor a retro within the stipulated period. Undoubtedly, the aforementioned
stipulation is a pactum commissorium because it enables the mortgagee to acquire ownership of the
mortgaged properties without need of any foreclosure proceedings which is a nullity being contrary to the
Bestsellers provisions of Article 2088 of the Civil Code. Indeed, the inclusion of such stipulation in the deed shows
the intention to mortgage rather than to sell.

Garcia v. Villar, G.R. No. 158891, June 27, 2012

Books The following are the elements of pactum commissorium: (1) There should be a property mortgaged by
way of security for the payment of the principal obligation; and (2) There should be a stipulation for
automatic appropriation by the creditor of the thing mortgaged in case of nonpayment of the principal
obligation within the stipulated period.
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Options of a secured creditor in case of death of the debtor.

Magazines

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Sheet Music ATTY. RENO R. GONZALES, JR.


3/6/18
SURVEY OF JURISPRUDENCE ON FORECLOSURE, LOANS, AND PROPERTY LIEN

Maglaque v. Planters Development Bank, G.R. No. 109472, 18 May 1999.

FACTS: The spouses Egmidio Maglaque and Sabina Payawal were the owners of a parcel of land, situated
in the municipality of San Miguel Bulacan and a residential house of strong materials erected thereon.

On March 19, 1974, the spouses Maglaque obtained a loan of Php 2,000.00 pesos from the Planters
Development Bank evidenced by a promissory note, payable on or before March 19, 1975, in two
installments, the first payment of P1,000.00, shall be due on September 19, 1974, and the second
payment of P1,000.00, shall be due on March 19, 1975, with interest at 12% per annum. To secure the
loan, the spouses executed a deed of real estate mortgage on the above-described parcel of land,
including its improvements.

On September 15, 1976, Sabina Payawal died. On December 22, 1977, Egmidio Maglaque paid Planters
Development Bank the amount of P2,000.00, which the bank accepted. On April 9, 1979, Egmidio
Maglaque died.

On September 15, 1978, for non-payment in full of the loan, the bank extra-judicially foreclosed on the
real estate mortgage, through the Provincial Sheriff of Bulacan, who conducted a public auction sale of
the mortgaged property pursuant to the authority provided for in the deed of real estate mortgage. The
bank was the highest bidder.

After the lapse of the redemption period, the bank consolidated its title to the property, and became its
registered owner.

On September 4, 1980, David Maglaque, as heir of the deceased spouses Maglaque filed with the court a
complaint for annulment of the sale conducted by the Provincial Sheriff of Bulacan, reconveyance of title,
Related titles
with damages, and injunction. Subsequently, the bank sold the property to the spouses Angel S. Beltran
and Erlinda C. Beltran.
This document is...
TheRead books,
Register audiobooks,
of Deeds wrote a letterand morethe bank about a notice of lis pendens. Thereafter,
informing
Spouses Angel Beltran and Erlinda Beltran registered an adverse claim on the property.
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The lower court dismissed the complaint for lack of merit or insufficiency of evidence. Petitioners
GET —
appealed theOn thetoApp
case Storeof Appeals which also ruled against them. Petitioners aver that the Court
the Court
of Appeals erred in not finding that the Bank should have filed its claim in the settlement of estate of the
deceased mortgagors.

RULING: A secured creditor holding a real estate mortgage has three (3) options in case of death of the
debtor. These are:

(1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an
ordinary claim;
(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by
prescription, without right to file a claim for any deficiency.

Obviously, respondent bank was in the right when it availed itself of the third option.
Mambulao Mambulao 07BAROPS_ChattelMortgageLaw_201to207
13_Prudential Medida vs. C
Nature of Judicial and Extra-Judicial Foreclosure.
Lumber Compa… Lumber Co Bank vs Panis
v. Philippine
Biaco v. Philippine Countryside Rural Bank, G.R. No. 161417, 8 February 2007.

National Bank

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Trial

ATTY. RENO R. GONZALES, JR.


3/6/18
SURVEY OF JURISPRUDENCE ON FORECLOSURE, LOANS, AND PROPERTY LIEN

Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves Biaco. While employed in the Philippine
Countryside Rural Bank (PCRB) as branch manager, Ernesto obtained several loans from the respondent
bank.

As security for the payment of the said loans, Ernesto executed a real estate mortgage in favor of the
bank covering the parcel of land described in Original Certificate of Title (OCT) No. P-14423. The real
estate mortgages bore the signatures of the spouses Biaco.

When Ernesto failed to settle the above-mentioned loans on its due date, respondent bank through
counsel sent him a written demand. The amount due as of September 30, 1999 had already reached
P1,080,676.50. The written demand, however, proved futile.

On February 22, 2000, respondent bank filed a c omplaint for foreclosure of mortgage
ATTY. RENOagainst the spouses
R. GONZALES, JR.
3/6/18
Ernesto and Teresa Biaco before the RTC of Misamis Oriental. Summons was served to the spouses Biaco
SURVEY
through Ernesto OFoffice.
at his JURISPRUDENCE ON FORECLOSURE, LOANS, AND PROPERTY LIEN

Ernesto received the summons but for unknown reasons, he failed to file an answer. Hence, the spouses
Ernesto
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Countryside Rural Bank
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Toring, the branch
payment of the said
manager of theloans, Ernesto bank,
respondent executed a realthat
testified estate
the mortgage in favor
spouses Biaco hadofbeen
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since
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1996 to in1998.
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loans for the of Title
years(OCT)
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No. P-14423.
had alreadyThebeen
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estatebymortgages
paid the spouses bore the signatures
Biaco, of theaspouses
leaving behind balance Biaco.
of P1,260,304.33 representing the 1998 loans. The
amount being claimed is inclusive of interests, penalties and service charges as agreed upon by the
When Ernesto failed to settleUnlock
parties. full access loans
the above-mentioned with on a free
its duetrial.
date, respondent bank through
counsel sent him a written demand. The amount due as of September 30, 1999 had already reached
P1,080,676.50.
On July 12, 2000, Thethe
written
sheriff
demand,
personally
however,
servedproved
the above-mentioned
futile. judgment to Ernesto Biaco at his
office at Export and Industry Bank. The spouses Biaco did not appeal from the adverse decision of the
On February
trial court. On22,
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his office.Biaco to pay within a period of 90 days had passed, thus making it necessary
to sell the mortgaged lot at public auction, as previously mentioned in the order of the court. The motion
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their residence. The writ bank. The respondent
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then appointed
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as
Commissioner.
public auction in favor of the respondent bank in the amount of P150,000.00.

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sold atofpublic
the respondent
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to cover
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amounthadofbeen
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obligation, the respondent
from the bankbanksince
filed 1996
an extoparte
1998.motion
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for judgment
for the years
praying
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for the issuance
had already of abeen
writ
paid
of execution
by the spouses
against Biaco,
the other
leaving
properties
behind ofa balance
the spouses
of P1,260,304.33
Biaco for therepresenting
full settlement
theof1998
the loans.
remaining
The
amount being
obligation. Granting
claimed
the is
motion,
inclusive
the of
court
interests,
orderedpenalties
that a writ
andof service
executioncharges
be issued
as agreed
againstupon
the spouses
by the
parties.
Biaco to enforce and satisfy the judgment of the court for the balance of P1,369,974.70.

On July
The 12,executed
sheriff 2000, thetwo sheriff personally
(2) notices served
of levy the above-mentioned
against properties registeredjudgment
under totheErnesto
name ofBiaco at his
petitioner
officeTeresa
Ma. at Export
Chaves
andBiaco.
Industry
However,
Bank. the
Thenotices
spousesofBiaco
levy were
did not
denied
appeal
registration
from thebecause
adverse Ma.
decision
Teresaof had
the
trial court.
already soldOnthe
October
two (2)13,properties
2000, the to respondent
her daughtersbankonfiled 11,ex2001.
Aprilan parte motion for execution to direct the
sheriff to sell the mortgaged lot at public auction. The respondent bank alleged that the order of the
court requiring
Biaco sought the theannulment
spouses Biaco of the
to pay
RTCwithin
decision
a period
contending
of 90 days
thathad
extrinsic
passed,fraud
thus prevented
making it necessary
her from
to sell the mortgaged
participating in the judicial
lot at public
foreclosure
auction, proceedings.
as previouslyAccording
mentioned toinher,
the she
ordercame
of thetocourt.
knowThe about
motionthe
for execution
judgment in the was
casegranted by the lapse
only after trial court.
of more Accordingly,
than six (6)the sheriff
months served
after a copyShe
its finality. of claimed
the writthat
of
executionfraud
extrinsic to the wasspouses
perpetrated
Biaco against
at their her
residence.
becauseThe the writ
bankoffailed
execution
to verify
was thepersonally
authenticity
received
of herby
Ernesto. Byonvirtue
signature the real
of theestate
writ ofmortgage
executionand issued
did by
notthe
inquire
trial court,
into the mortgaged
reason for property
the absence
was sold
of herat
public auction in favor of the respondent bank in the amount of P150,000.00.

The amount of the property sold at public auction being insufficient to cover the full amount of the
obligation, the respondent bank filed an ex parte motion for judgment praying for the issuance of a writ
of execution against the other properties of the spouses Biaco for the full settlement of the remaining
obligation. Granting the motion, the court ordered that a writ of execution be issued against the spouses
Biaco to enforce and satisfy the judgment of the court for the balance of P1,369,974.70.

The sheriff executed two (2) notices of levy against properties registered under the name of petitioner
Ma. Teresa Chaves Biaco. However, the notices of levy were denied registration because Ma. Teresa had
already sold the two (2) properties to her daughters on April 11, 2001.
ATTY. RENO R. GONZALES, JR.
Biaco sought the annulment of the RTC decision contending that extrinsic fraud prevented her 3/6/18
from
SURVEY
participating in the OF JURISPRUDENCE
judicial ON FORECLOSURE,
foreclosure proceedings. LOANS,
According AND
to her, shePROPERTY LIEN about the
came to know
judgment in the
signature on the case only after
promissory theShe
notes. lapse of moreasserted
moreover than sixthat
(6) the
months after its
trial court finality.
failed She claimed
to acquire that
jurisdiction
extrinsic fraud was perpetrated against her because the bank failed to verify the
because summons were served on her through her husband without any explanation as to why personalauthenticity of her
signature on the real
service could not be made.estate mortgage and did not inquire into the reason for the absence of her

RULING: The Court ruled that there was no fraud perpetrated by respondent bank upon petitioner, noting
that the spouses Biaco were co-defendants in the case and shared the same interest. Whatever fact or
circumstance concealed by the husband from the wife cannot be attributed to respondent bank.

Moreover, petition er’s allegation that her signature on the promissory notes was forged does not evince
extrinsic fraud. It is well-settled that the use of forged instruments during trial is not extrinsic fraud
because such evidence does not preclude the participation of any party in the proceedings.

The question of whether the trial court has jurisdiction depends on the nature
ATTY.ofRENO
the action, i.e., whether
R. GONZALES, JR.
the action is in personam, in rem, or quasi in rem. The rules on service of summons under Rule 14 of 3/6/18
the
SURVEY
Rules of Court OFapply
likewise JURISPRUDENCE ON nature
according to the FORECLOSURE, LOANS, AND PROPERTY LIEN
of the action.

An action in personam is an action against a person on the basis of his personal liability. An action in
signature
rem is an on action
the promissory
against thenotes. thingSheitselfmoreover
instead asserted
of against thatthe
theperson.
trial courtAn failed
actiontoquasi
acquirein jurisdiction
rem is one
because
wherein an summons
individual were served as
is named ondefendant
her through andherthehusband
purposewithout any explanation
of the proceeding as to why
is to subject his personal
interest
service could
therein to thenot obligation
be made. or lien burdening the property. In an action in personam, jurisdiction over the
person of the defendant is necessary for the court to validly try and decide the case. In a proceeding in
RULING:
rem The Court
or quasi in rem, ruled that thereover
jurisdiction was theno fraud
person perpetrated by respondent
of the defendant is notbanka upon petitioner,
prerequisite to noting
confer
jurisdiction
that the spouses on the Biaco
courtwere You're Reading a Preview
provided
co-defendants
that thein court
the caseacquires
and shared
jurisdiction
the same
overinterest.
the res.Whatever
Jurisdiction factover
or
circumstance
the concealed
res is acquired eitherby(1) thebyhusband from of
the seizure thethewife cannot under
property be attributed to respondent
legal process, whereby bank.
it is brought
into actual custody of the law; or (2) as a result of the institution of legal proceedings, in which the
power
Moreover, of the courter’s
petition is recognized
allegationUnlock
and
thatmadeherfull access
effective.
signature on with a free trial.
the promissory notes was forged does not evince
extrinsic fraud. It is well-settled that the use of forged instruments during trial is not extrinsic fraud
because such summons
Nonetheless, evidence does must notbe served
preclude upon
the the
participation
defendantofnot anyforparty
the in
purpose
the proceedings.
of vesting the court with
jurisdiction but merely for satisfying the due process requirements.

A
theresident
action is defendant who in
Download With Free Trial
The question of whether the trial court has jurisdiction depends on the nature of the action, i.e., whether
in personam, rem,
does not quasi in rem.
or voluntarily appear
The rules
in court,
on service
such asofpetitioner
summonsinunder this case,
Rule 14 mustof the
be
Rules of Court
personally servedlikewise
with apply
summons according to the nature
as provided of the6,action.
under Sec. Rule 14 of the Rules of Court. If she cannot
be personally served with summons within a reasonable time, substituted service may be effected (1) by
An
leaving
action in personam
copies of the summons
is an action at against
the defendants
a person residence
on the basis withofsomehis personal
person of liability.
suitableAn age
action in
and
rem is an then
discretion actionresiding
againsttherein,
the thing or itself
(2) byinstead
leavingofthe against
copiestheat person.
defendants An action quasi in rem
office or regular place is one
of
wherein an
business with
individual
some competent
is named as person
defendant
in chargeand thereof
the purpose
in accordance
of the proceeding
with Sec.is7,toRulesubject
14 of histhe
interest
Rules
Court.to the obligation or lien burdening the property. In an action in personam, jurisdiction over the
therein
of
person of the defendant is necessary for the court to validly try and decide the case. In a proceeding in
rem
In thisor quasi
case, the in rem,
judicial
jurisdiction
foreclosure overproceeding
the person instituted
of thebydefendant
respondent is PCRB
not aundoubtedly
prerequisitevested to confer
the
jurisdiction
trial court with on thejurisdiction
court provided
over the thatres. A thejudicial
court foreclosure
acquires jurisdiction
proceedingover is anthe res. Jurisdiction
action quasi in rem. over
As
the resjurisdiction
such, is acquiredover either
the(1) person
by the of seizure
petitioner of the
is not
property
required,
underit being
legal sufficient
process, whereby
that the it trial
is brought
court is
into actual
vested with custody
jurisdiction of the
overlaw;
the subject
or (2) as matter.
a result of the institution of legal proceedings, in which the
power of the court is recognized and made effective.
While the trial court acquired jurisdiction over the res, its jurisdiction is limited to a rendition of judgment
Nonetheless,
on the res. Itsummons
cannot extendmust be its served upon beyond
jurisdiction the defendant
the resnotandforissue
the purpose
a judgment of vesting
enforcingthe petitioners
court with
jurisdiction
personal liability.
but merely
In doingfor satisfy
so without
ing the first
due having
processacquired
requirements
jurisdiction
. over the person of petitioner, as it
did, the trial court violated her constitutional right to due process, warranting the annulment of the
A residentrendered
judgment defendant in who does not voluntarily appear in court, such as petitioner in this case, must be
the case.
personally served with summons as provided under Sec. 6, Rule 14 of the Rules of Court. If she cannot
be personally
Effect if the junior
servedencumbrancer
with summons is not
within
impleaded
a reasonable
in the time,
complaint
substituted
for foreclosure
service .may be effected (1) by
leaving copies of the summons at the defendants residence with some person of suitable age and
discretion
Limpin vs.then
IACresiding
, G.R. No.therein,
70987, or 30 (2)
January
by leaving
1987. the copies at defendants office or regular place of
business with some competent person in charge thereof in accordance with Sec. 7, Rule 14 of the Rules
of Court.

In this case, the judicial foreclosure proceeding instituted by respondent PCRB undoubtedly vested the
trial court with jurisdiction over the res. A judicial foreclosure proceeding is an action quasi in rem. As
such, jurisdiction over the person of petitioner is not required, it being sufficient that the trial court is
vested with jurisdiction over the subject matter.

While the trial court acquired jurisdiction over the res, its jurisdiction is limited to a rendition of judgment
on the res. It cannot extend its jurisdiction beyond the res and issue a judgment enforcing petitioners
personal liability. In doing so without first having acquired jurisdiction over the person of petitioner, as it
did, the trial court violated her constitutional right to due process, warranting the annulment of the
judgment rendered in the case. ATTY. RENO R. GONZALES, JR.
3/6/18
Effect if theSURVEY OF JURISPRUDENCE
junior encumbrancer ON FORECLOSURE,
is not impleaded LOANS,
in the complaint AND PROPERTY
for foreclosure . LIEN

FACTS: On February 28, 1973, four lots covered by TCTs Nos. 92836, 92837, 92839 and 92840 of the
Limpin vs. IAC, G.R. No. 70987, 30 January 1987.
Register of Deeds of Quezon City were mortgaged by the spouses Jose and Marcelina Aquino to
Guillermo Ponce and his wife Adela as security for a loan of P2,200,000.00. Two of the lots, those
covered by TCTs Nos. 92836 and 92837, were sold in 1978 by the Aquinos to the Butuan Bay Wood
Export Corporation, which caused an adverse claim to be annotated on the certificates of title on
February 24, 1978.

In 1979, petitioner Gregorio Y. Limpin, Jr. obtained a money judgment against Butuan Bay Wood Export
Corporation. On September 3, 1980, to satisfy the judgment, the lots covered by TCTs Nos. 92836 and
92837 were levied upon and sold at public auction to Limpin as the highest bidder. Upon order of the
court, the covering titles were cancelled and in their stead new TCTS were issued to Limpin. On
November 21, 1981, Limpin sold the two lots to Rogelio M. Sarmiento. TCTs were now cancelled and
replaced by new ones in Sarmiento’s name. ATTY. RENO R. GONZALES, JR.
3/6/18
Earlier howeverSURVEY or aOF dayJURISPRUDENCE
before levy wasON madeFORECLOSURE,
on the two lots LOANS, AND PROPERTY
in execution LIEN
of the judgment against
Butuan Bay Wood Export Corporation. Ponce had initiated judicial proceedings for the foreclosure of the
mortgage over said two (2) lots (together with the two (2) others mortgaged to him Judgment was
FACTS: On
rendered in February
his favor 28, and1973,
became fourfinal;
lots and
coveredat thebyensuing
TCTs Nos. foreclosure
92836, 92837,
sale, the 92839
lots were
and 92840
acquiredof the
by
Register of Deeds
Ponce himself as highestof Quezon
bidder. City
Ponce were
thenmortgaged by the spouses
moved for confirmation of theJose and Marcelina
foreclosure sale, butAquino
the Court to
Guillermo Ponce
confirmed the saleand of only
his wife
two lots,
Adelarefusing
as security
to do forso as a loan
regardsof P2,200,000.00.
the two which had Twobeen of the
subject
lots, ofthose
the
covered bysale
execution TCTsin Limpin
Nos. 92836s favorand (i.e.,92837,
those covered
were sold TCTs in 1978
Nos. 92836
by theandAquinos
92837). to the Butuan Bay Wood
Export Corporation, which caused an adverse claim to be annotated on the certificates of title on
February
Nine months24, 1978. You're Reading a Preview
or so after entry of the judgment, recognizing his equity of redemption as successor-in-
interest of the original mortgagors that Sarmiento stirred himself to attempt to exercise his unforeclosed
In 1979,
equity of petitioner
redemption. Gregorio
He filedY. Limpin,
a motion Jr. and
obtained a money
manifested judgment
therein against
that he would Butuan
exerciseBaytheWood Export
right and
asked the Court
Corporation. On September 3,Unlock
to fix the redemption1980, to fullprice.
satisfyaccess
The
the Court with
judgment, athe
opined free
lotstrial.
that this
coveredshould by be theNos.
TCTs subject
92836of and
the
92837 werebetween
agreement levied upon Ponceand andsold at public auction to Limpin as the highest bidder. Upon order of the
Sarmiento.
court, the covering titles were cancelled and in their stead new TCTS were issued to Limpin. On
November 21,
Sarmiento then1981,wroteLimpinto Poncesold offering
the two Plots 2.6tomillion
RogelioasM. Sarmiento.price
redemption TCTsfor were
the now
two cancelled
lots originallyand
replaced by
covered by TCTsnew ones Nos. in92836 Download With Free Trial
Sarmiento’s
and 92837. name.Ponce rejected the offer on the ground that the period within
which Sarmiento could have exercised such right had already lapsed. Sarmiento filed a motion, asked the
Earliertohowever
court fix the or a day before
redemption price,levy
andwas madefthat
prayed on the thetwo lots in execution
implementation of the of writ
the judgment
of possession againstbe
Butuan Bay Wood
provisionally deferred.ExportAn Corporation.
opposition was Poncepromptly
had initiated
filed byjudicial
Ponceproceedings
in which hefor argued
the foreclosure
that Sarmiento’s
of the
mortgage
right to exercise
over said his equity
two (2) of lots
redemption
(together over withthose
the lots
twohad(2) long
others
expired,
mortgagedthe opportunity
to him Judgment
to exercise wasit
rendered
having in his favor
presented itselfandbutbecame final; of
not availed and (i) atafter
the default
ensuinginforeclosure sale, the
the performance of lots
the were acquired
conditions by
of the
Ponce himself
mortgage and as (ii)highest
before the bidder.
Sheriff’s
Ponce sale
thenof moved
the property
for confirmation
and the judicial
of theconfirmation
foreclosure thereof.
sale, but the Court
confirmed the sale of only two lots, refusing to do so as regards the two which had been subject of the
execution
CA set thesale in Limpin
judgment of sthe
favor (i.e.,court
lower thosewhich
covered TCTsthe
denied Nos. 92836 and of
confirmation 92837).
the sale of the lots formerly
covered by TCTs Nos. 92836 and 92837. It also ordered the lower court to confirm the same and issue a
Nineofmonths
writ possession or sotoafter
Ponce entry
with of respect
the judgment,
thereto, subject
recognizing
to Sarmiento's
his equityequity
of redemption
of redemption. as successor-in-
interest of the original mortgagors that Sarmiento stirred himself to attempt to exercise his unforeclosed
equity of The
RULING: redemption.
rights and Heinterests
filed a motion
of petitioners
and manifested
Limpin and therein
Sarmiento
that heto would
the property
exercisein thequestion
right andare
asked the Court
subordinate to thoseto fix of the redemption
respondent price.
Ponce, whoThe Court
holds opined
a prior andthat thislien.
senior should
Settledbe is
thethesubject of the
rule that
agreement
effect of thebetween
failure to Ponce
impleadand aSarmiento.
subordinate lienholder or subsequent purchaser or both is to render the
foreclosure ineffective as against them, with the result that there remains in their favor the "unforeclosed
Sarmiento
equity of redemption."
then wrote But to Ponce
the foreclosure
offering is P valid
2.6 million
as betweenas redemption
the partiesprice
to thefor suit.
the two lots originally
covered by TCTs Nos. 92836 and 92837. Ponce rejected the offer on the ground that the period within
which Sarmiento
Applied to this case, couldthishave exercised
means that thesuchsalerightto had
Ponce,already lapsed.
as the Sarmiento
highest bidder in filed
thea foreclosure
motion, asked saletheof
court
the two
to lots
fix inthequestion
redemption should price,
haveand beenprayed
confirmed,fthat subject
the implementation
to Limpin's (and of now
the writSarmiento's)
of possession
equity be to
provisionally As
redemption. deferred.
held in An opposition
Santiago was promptly
v. Dionisio , the registration
filed by ofPoncethe lands,
in which firsthein argued
the name thatof Sarmiento’s
Limpin and
right of
later to Sarmiento,
exercise hiswas equity of redemption
premature. At mostoverwhat those
theylotswerehad long expired,
entitled to was the theregistration
opportunityoftotheir exercise
equity it
having
of redemption.
presented itself but not availed of (i) after default in the performance of the conditions of the
mortgage and (ii) before the Sheriff’s sale of the property and the judicial confirmation thereof.

CA set the judgment of the lower court which denied the confirmation of the sale of the lots formerly
covered by TCTs Nos. 92836 and 92837. It also ordered the lower court to confirm the same and issue a
writ of possession to Ponce with respect thereto, subject to Sarmiento's equity of redemption.

RULING: The rights and interests of petitioners Limpin and Sarmiento to the property in question are
subordinate to those of respondent Ponce, who holds a prior and senior lien. Settled is the rule that the
effect of the failure to implead a subordinate lienholder or subsequent purchaser or both is to render the
foreclosure ineffective as against them, with the result that there remains in their favor the "unforeclosed
equity of redemption." But the foreclosure is valid as between the parties to the suit.

Applied to this case, this means that the sale to Ponce, as the highest bidderATTY. in RENO R. GONZALES,
the foreclosure sale JR.
of
the two lots in question should have been confirmed, subject to Limpin's (and now Sarmiento's) equity 3/6/18
to
redemption. SURVEY in Santiago
As held OF v. DionisioON
JURISPRUDENCE FORECLOSURE,
, the registration of LOANS, AND
the lands, firstPROPERTY
in the name LIEN
of Limpin and
later of Sarmiento, was premature. At most what they were entitled to was the registration
Moreover, the superiority of the mortgagee's lien over that of a subsequent judgment creditor of theirisequity
now
of redemption.
expressly provided in Rule 39, Section 16 of the Revised Rules of Court, which states with regard to the
effect of levy on execution that it shall create a lien in favor of a judgment creditor over the right title and
interest of the judgment debtor in such property at the time of the levy, subject to the liens or
encumbrances then existing.

It is well settled that a recorded mortgage is a right in rem, a hen on the property whoever its owner
may be. The recordation of the mortgage in this case put the whole world, petitioners included, on
constructive notice of its existence and warned everyone who thereafter dealt with the property on which
it was constituted that he would have to reckon with that encumbrance. Hence, Limpin's subsequent
purchase of the "interests and participation" of Butuan Bay Wood Export Corporation in the lots covered
by TCTs Nos. 92836 and 92837, as well as the sale of the same to Sarmiento were both subject to said
mortgage. On the other hand, Ponce's purchase of the lots mortgaged toATTY. him at RENO
the foreclosure sale was
R. GONZALES, JR.
subject to no prior lien or encumbrance, and could in no way be affected or prejudiced by a subsequent 3/6/18
SURVEY
or junior lien, such OF
as JURISPRUDENCE ON FORECLOSURE,
that of Limpin. Petitioner LOANS,
Sarmiento having AND PROPERTY
acquired no betterLIEN
right than his
predecessor-in-interest, petitioner Limpin, his title must likewise fail.

Moreover, the superiority of the mortgagee's lien over that of a subsequent judgment creditor is now
expressly provided in Rule 39, Section 16 of the Revised Rules of Court, which states with regard to the
effect of
Equity of levy
Redemption
on execution
v. Right
thatofit Redemption.
shall create a lien in favor of a judgment creditor over the right title and
interest of the judgment debtor in such property at the time of the levy, subject to the liens or
encumbrances
Limpin then
vs. IAC existing.
, G.R. No. 70987, 29 September 1988.
You're Reading a Preview in rem,before
It is well
Once settled
again, thatand
Limpin a recorded
Sarmientomortgage
brought is a rightpetition
another a hentheon Supreme
the property whoever
Court, its owner
this time, for a
may be. The of
determination recordation
whether or of not
the the
mortgage
equity ofin this case putrecognized
redemption the wholeinworld,
favor petitioners
of petitionerinclude
Rogeliod, on
M.
Sarmiento
constructive innotice
the Court’s Unlock
judgment
of its existence and full access
promulgated
warned on 30 with
everyone whoathereafter
January free trial.
1987, stilldealt
subsists
withand
the may be exercised,
property on which
it wasthan
more constituted that that
a year after he would havehad
judgment to reckon
becomewith finalthat
and encumbrance.
executory. (Side Hence,
note: Limpin's subsequent
Sarmiento’s counsel
purchase
was ACCRA;
of the
Ponce’s
"interests
counsel andwasparticipation"
Sycip) of Butuan Bay Wood Export Corporation in the lots covered
by TCTs Nos. 92836 and 92837, as well as the sale of the same to Sarmiento were both subject to said
mortgage.
The judgment
subject to
petition and
On the
noinprior
other
of the
effect
lien
Supreme
affirmed
Download With Free Trial
hand, Ponce's
Court inpurchase
or encumbrance,
the Trial Court’s
and could
of the 1987
its 30 January
courder
lots mortgaged
in no"toway
confirm
be affected
to him atSarmiento's
Decision dismissed
the saleor(of
the foreclosure
prejudiced
and sale
the lots formerly
by a subsequent
was
Limpin's
covered
or junior
by TCT Nos.lien,92836
such andas that of Limpin.
92837 and issue Petitioner
a writ ofSarmiento
possessionhaving acquiredPonce
to Guillermo no better
with right
respect than his
to the
predecessor-in-interest
aforesaid lots, subject to , petitioner
the equityLimpin, his title must
of redemption of thelikewise fail. Rogelio V. Sarmiento.
respondent

Rogelio M. Sarmiento, particularly, was aware that the trial court had the ministerial duty to execute the
Appellate Court's decision, i.e., to confirm the sale and issue a writ of possession as regards the aforesaid
Equity
lots, subject
of Redemption
to the equityv. Right
of redemption
of Redemption.
explicitly recognized in his favor in the decisions mentioned. He
knew that he had the prerogative to exercise his equity of redemption , if not from the moment that the
Limpin vs.
judgment this, G.R.
ofIAC CourtNo.became 29 September
70987,final and executory, 1988.
at least until the court subsequently con firmed the
sale and issued a writ of possession in favor of Guillermo Ponce.
Once again, Limpin and Sarmiento brought another petition before the Supreme Court, this time, for a
determination
RULING: Theof whether
equity or not the is,
of redemption equity of redemption
to be sure, different recognized
from and in should
favor ofnotpetitioner
be confused
Rogeliowith
M.
Sarmiento
the right ofinredemption
the Court’s. judgment
The right promulgated
of redemption onin30relation
January to 1987, still subsists and may
a mortgage-understood be exercised,
in the sense of a
more than atoyear
prerogative re-acquire
after that
mortgaged
judgmentproperty
had become
after registration
final and executory.
of the foreclosure
(Side note:
sale-
Sarmiento’s
exists onlycounsel
in the
was AC
case of CRA; Ponce’s counsel
the extrajudicial was Sycip)
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.
The judgment of the Supreme Court in its 30 January 1987 Decision dismissed Sarmiento's and Limpin's
petitionaand
Where in effect
mortgage affirmed the
is foreclosed Trial Court’s ,courder
extra-judicially Act 3135 "togrants
confirm the mortgagor
to the sale (of thethelots formerly
right covered
of redemption
by TCTone
within Nos.
(1)92836
year fromand the
92837
registration
and issueof the
a writ
sheriffs
of possession
certificate toof foreclosure
Guillermo Ponce
sale. with respect to the
aforesaid lots, subject to the equity of redemption of the respondent Rogelio V. Sarmiento.
Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The
Rogelio
law declares
M. Sarmiento,
that a judicial
particularly,
foreclosure
was aware
sale, "when
that theconfirmed
trial courtbyhad
an order
the ministerial
of the court
dutyshall
to execute
operatethe
to
Appellate
divest theCourt's
rights of decision,
all the parties
i.e., to confirm
to the action
the sale
andandto issue
vest their
a writrights
of possession
in the purchaser,
as regards the aforesaid
subject to such
lots, subject to the equity of redemption explicitly recognized in his favor in the decisions mentioned. He
knew that he had the prerogative to exercise his equity of redemption , if not from the moment that the
judgment of this Court became final and executory, at least until the court subsequently con firmed the
sale and issued a writ of possession in favor of Guillermo Ponce.

RULING: 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 extra-judicially, Act 3135 grants to the mortgagor the right of redemption
within one (1) year from the registration of the sheriffs certificate of foreclosure sale.
A
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 shall operate to
divest the rights of all theSURVEY
parties to theOF JURISPRUDENCE
action and to vest their rights in ON FORECLOSURE,
the purchaser, subject to such LOANS, AN

rights of redemption as may be allowed by law. Such rights exceptiona


after confirmation by an order of the court) are those granted by the ch
Bank (Acts No. 2747 and 2938), and the General Banking Act (R.A. 33
mortgagor, his successors in interest or any judgment creditor of the mort
property sold on foreclosure- after confirmation by the court of the forec
exercised within a period of one (1) year, counted from the date of registr
the Registry of Property.

But, to repeat, no such right of redemption exists in case of judicial fo


mortgagee is not the PNB or a bank or banking institution. In such a ca
confirmed by an order of the court shall operate to divest the rights of all
vest their rights in the purchaser." There then exists only what is know
This is simply You're
the rightReading a Preview
of the defendant mortgagor to extinguish the moA
the property by paying the secured debt within the 90-day period after t
Unlock
accordanceSURVEY
with Rulefull
OF68,access withafter
or even a freethe
JURISPRUDENCE trial.
ON FORECLOSURE,
foreclosure LOANS,
sale but prior AN
to its

This is the mortgagor's equity (not right) of redemption which, as above s


rights
even beyond
Download
of redemption
the 90-day as mayWith
periodbeFree
allowed
"from
Trial
thebydate
law.of Such
service
rights
of the
exceptiona
order,'
afteritself,
sale confirmation
providedby an before
it be order ofthethe court)
order are those granted
of confirmation by the
of the sale. ch
After
Bank (Acts can
redemption No. be 2747
effected
and 2938),
any longer.
and the General Banking Act (R.A. 33
mortgagor, his successors in interest or any judgment creditor of the mort
property
It sold on
is this same foreclosure-
equity after confirmation
of redemption by the
that is conferred by court
law onofthe themortga
forec
exercised
third persons
withinacquiring
a period rights
of one
over(1)the
year,
mortgaged
counted property
from the subsequent,
date of registr an
the Registry of
mortgagee's Property.
lien. If these subsequent or junior lienholders be not joined
judgment in the mortgagor's favor is inef fective as to them, of c ourse. In
known
But, to as the "unforeclosed
repeat, no such right equityof redemption exists inand
of redemption," casea of separate
judicial for
fo
mortgagee
brought to isrequire
not thethemPNB orto aredeem
bank orfrom banking
the institution. In suchora ca
first mortgagee, th
confirmed by
mortgaged property
an orderatofthe theforeclosure
court shall sale,
operate
within
to divest
90 days,
the under
rights ofpenal
all
vest their rights in the purchaser." There then exists only what is know
redeem.
This is simply the right of the defendant mortgagor to extinguish the mo
thethe
In property
case atbybar, paying
however,
the secured
there isdebtno occasion
within the
to 90-day
speak ofperiod
any "unfore
after t
accordance with
Sarmiento's favorRule
since 68,
heorwaseven after the
properly foreclosure
impleaded salejudicial
in the but prior to its
proceedin
over the mortgaged property were ventilated and specifically adjudicate
This is the cannot
Sarmiento mortgagor's equity
be heard to (not right)ofofdenial
complain redemption
of duewhich,
process asforabove
allegs
even
or beyond
hearing for the 90-day period
confirmation of sale."from
Court thehereby
date of service
rules of the
that the order,'
equity of re
saleRogelio
by itself, provided
M. Sarmiento
it be before
over the orderproperties
of confirmation
subject ofofthe thecase
sale.lapse
After
redemption
having beencanproperly
be effected
exercised.
any longer.

Judicial
It is thisForeclosure
same equityv.ofExtra-Judicialredemption that Foreclosure;
is conferred Writby of law
Possession.
on the mortga
third persons acquiring rights over the mortgaged property subsequent, an
mortgagee's
Dayot v. Shell lien.Chemical
If these subsequent
Co. (PHILS), or Inc.,
juniorG.R.lienholders
No. 156542, be not 26 joined
JuneA
judgment in the mortgagor's favor is inef fective as to them, of c ourse. In
known Railways,
Panay the "unforeclosed
as SURVEY Inc.OF(PRI) equity ofa redemption,"
executed
JURISPRUDENCE real
ONestate and a separate
mortgage
FORECLOSURE, LOANS,for
contract ov
AN
brought
in Lapuz District,
to require Iloilothem
City in to favor
redeem of from
Traders the Royal
first mortgagee,
Bank (TRB)orforth
TRB sold toproperty
mortgaged
obligations tospouses
TRB. at Edmundo
PRIthefailed and
foreclosure
to payCandelaria
sale, Dayot
within
its loan. 90 (Spouses
As adays, under
consequence,Dayot),
penal b
th
Sale,
redeem. five parcels
foreclosed and sold of land.
at public auction to TRB as the highest bidder. PRI f
properties. Hence, TRB consolidated its ownership over the subject pa
Subsequently,
In the case of
certificates on February
attitle
bar, however,
were issued 5,there
1991,
in Candelaria
no occasionDayot
itsisname. to speak(petitioner) filed a
of any "unfore
the RTC of Iloilo
Sarmiento's favorCity,since praying
he wasthat she, being
properly the transferee
impleaded in the judicialof allproceedin
the right
parcels theof mortgaged
over filed
TRB aland subject
Petition forofWrit
propertythe Petition
ofwere for Writwith
Possession
ventilated ofand
Possession
RTC offiled
thespecifically by City
Iloilo the la
adjudicate (
petitioner
Sarmiento
Order dated in the
cannot
OctoberLand
be 22, Registration
heard to complain
1990, Case
the trial of and that
denial
court an alias
of due
granted writ
theprocess of possess
petitionforand alleg
or
trial court granted
or hearing
possession for
in favor Dayot’s
confirmation
of TRB. of prayer
sale. in
However, Courtits Order.
the hereby
writ was The notRTC
rules fullyalso
that the issued of
implemented.
equity anre
favor.
by Rogelio M. Sarmiento over the properties subject of the case lapse
having been properly exercised.
The spouses Dayot filed another case with the RTC of Iloilo City, a compl
and Possession,
Judicial Foreclosure Annulment of Documents,
v. Extra-Judicial Foreclosure; Cancellation of Titles, Recon
Writ of Possession.
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TRB, Petron Corporation (Petron) and herein respondent Shell ChemicalA
prayingv.
Dayot that
Shell Shell be directed
Chemical Co.to(PHILS),
vacate the portion
Inc., G.R.of No.one of the 26
156542, lotsJune
whic
both PetronSURVEY andUnlock
Shellfull
OF toaccess with aownership
JURISPRUDENCE
surrender free trial.ON and
FORECLOSURE,
possession ofLOANS, portionsAN o
Panay Railways, Inc. (PRI) executed a real estate mortgage contract ov
On August
in Lapuz 21, 1Iloilo
District, 997, Citywhile in thefavor above
ofTrial civil case
Traders RoyalwasBank pending
(TRB)resolu for
TRB
Registration
Download With Free
obligations to TRB. PRI failed to pay its loan. As a consequence,ofth
sold to Case
spouses an Amended
Edmundo Supplemental
and Candelaria Motion
Dayot for
(Spouses
the Issuance
Dayot), b
W
Sale, be
Shell fiveejected
foreclosed parcels
and sold of land.
from atthe portion
public of the
auction tosubject
TRB aslot the which
highest it actually
bidder.posses
PRI f
properties. Hence, TRB consolidated its ownership over the subject pa
Subsequently,
RTC deniedofherein
certificates on February
title petitioner's
were issued 5, in1991,
Motion Candelaria
its name. for the Dayot Issuance (petitioner)
of a Writ filedof aP
the RTC of Iloilo
concerned. Despite City,thepraying
issuancethat of she, thebeing the transferee Order,
above-mentioned of all the right
petition
parcels
motions
TRB ofpraying
filed aland subject
Petitionfor theforofissuance
the Petition
Writ of anfor
of Possession aliasWrit
writofof
with Possession
posRTC
the session.offiled
Shell
by City
Iloilo the
oppos la
(
petitioner
Order dated in the OctoberLand22, Registration
1990, theCase and that
trial court an alias
granted the writ of possess
petition and or
trial
RTC court
issued granted
an Alias Dayot’s
Writ of prayer
Possession in its
in Order.
favor
possession in favor of TRB. However, the writ was not fully implemented. ofThe RTC
petitioner also
Dayot.issuedOn an
eve
Shell
favor.a Notice to Vacate. Shell then filed a petition for certiorari and proh
the nullification of the RTC order.
The spouses Dayot filed another case with the RTC of Iloilo City, a compl
and Possession,
RULING: Annulment
The obligation of aofcourt
Documents,
to issueCancellation
a writ of possessionof Titles, inRecon favo
TRB, Petron
judicial foreclosure Corporation
sale of(Petron)
a mortgaged and herein
property respondent
ceases to Shell Chemical
be ministerial
praying
third party
thatinShell possession
be directed of the to property
vacate the who
portion
is claiming
of one aofright the lotsadverse
whic
both such
that Petron third andpartyShellistoa surrender
stranger to ownership and possession
the foreclosure proceedings of portions
in whicho
was applied for.
On August 21, 1 997, while the above civil case was pending resolu
Registration
It bears emphasis Case anthat Amended Supplemental
an ex-parte petition Motion for the Issuance
for issuance of a writofof W
Shell be ejected
proceeding authorized
from the in anportion
extra-judicial
of the subject foreclosure
lot which of mortgage
it actually pursua
posses
is brought for the benefit of one party only, and without notice to, or co
RTC denied herein petitioner's Motion for the Issuance of a Writ of P
interested.
concerned. Despite the issuance of the above-mentioned Order, petition
motions prayingunlike
Furthermore, for the aissuance
judicialofforeclosure
an alias writ of of real
pos session.
estate Shell oppos
mortgage
of Court where an action for foreclosure is brought before the
RTC issuedor
property anany Alias Writthereof
part of Possession in favora ny
is situated, of petitioner
propertyDayot. brought On witeve
Shell a Notice
foreclosed bytothe Vacate.
filingShell of a then filed anot
petition, petition
with for certiorari
any court ofand proh
justice
the nullification
sheriff of the province of the RTCwhere order. the sale is to be made. As such, a th
an extra-judicially foreclosed property, who claims a right supe
RULING: Theisobligation
mortgagor, thus given of a court to issue a writ
no opportunity to ofbepossession
heard inin his favo
judicial
therefore, foreclosure
that such sale of a mortgaged
third person may propertynotceases to be ministerial
be dispossessed on
third
parteparty in possession
possessory writ,ofsince the property
to do so who is claiming
would a right adverse
be tantamount to
that such third
violation of the party
basicis atenets
stranger of to
due theprocess.
foreclosure proceedings in which
was applied for.
In the case at bar, it is not disputed that Shell had been in possession of t
It bears
that it has emphasis that an ex-parte
in its premises bulk plant petition
and fuel for issuance
storage facilities
of a writ for oft
proceedingInauthorized
business. this respect, in anthe extra-judicial
Court agrees foreclosure
with the of mortgage
findings ofpursua the
is brought for the benefit of one party only, and without notice to, or co
interested.

Furthermore, unlike a judicial foreclosure of real estate mortgage


of Court where an action for foreclosure is brought before the
property or any part thereof is situated, a ny property brought wit
foreclosed by the filing of a petition, not with any court of justice
sheriff of the province where the sale is to be made. As such, a th
an extra-judicially foreclosed property, who claims a right supe
mortgagor, is thus given no opportunity to be heard in his
therefore, that such third person may not be dispossessed on
parte possessory writ, since to do so would be tantamount to
violation of the basic tenets of due process.

In the case at bar, it is not disputed that Shell had been in possession of t
that it has in its premises bulk plant and fuel storage facilities for t
business. In this respect, the Court agrees with the findings of the

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