DBP v Environmental Aquatics

GR 174329
October 20, 2010

Facts:

Respondents Environmental Aquatics, Inc. (EAI) and Land Services and Management
Enterprises, Inc. (LSMEI) loaned P1,792,600 from petitioner DBP. As security for the
loan, LSMEI mortgaged to DBP its 411-square meter parcel of land.

EAI and LSMEI failed to pay the loan. As of 11 September 1990, the loan had increased
to P16,384,419.90. Thereafter, DBP applied for extrajudicial foreclosure of the real estate
mortgage. In its application letter, DBP stated that:

“We request the ex-officio sheriff to take possession of the properties described in the
above-mentioned mortgages as well as those embraced in the after acquired properties
clause thereof, and sell the same at public auction in accordance with the provisions of
Act 3135, as amended by Act 4118, with respect to the real estate and Act 1508 with
respect to the chattels, as amended by Presidential Decree No. 385 aforecited.”

The ex-officio sheriff sold the property to DBP as the highest bidder for P1,507,000.

On 15 May 1991, LSMEI transferred its right to redeem the property to respondent Mario
Matute. In his letter, 1aw Matute informed DBP that he is interested in redeeming the
property by paying the P1,507,000 purchase price, plus other costs. However, DBP
informed Matute that he could redeem the property by paying the remaining balance of
EAI and LSMEI's loan. As of 31 August 1991, the loan amounted to P19,279,106.22.

On 8 November 1991, EAI, LSMEI and Matute filed with the RTC a complaint praying that
DBP be ordered to accept Matute's bonafide offer to redeem the foreclosed property. The
RTC ruled in favor of Matute. DBP appealed to the Court of Appeals. The Court of Appeals
affirmed with modification the RTC ruling. Hence, this appeal.

Issue: WON DBP chose Act No. 3135 as the governing law for the extrajudicial
foreclosure of the property, including the determination of the redemption price.

Ruling:

No, Section 16 of Executive Order (EO) No. 81 states that the redemption price for
properties mortgaged to and foreclosed by DBP is equivalent to the remaining balance of
the loan. Section 16 states that, "Any mortgagor of the Bank whose property has been
extrajudicially sold at public auction shall have the right to redeem the real property by
paying to the Bank all of the latter's claims against him, as determined by the Bank."

In Development Bank of the Philippines v. West Negros College, Inc., the Court held that
the redemption price for properties mortgaged to and foreclosed by DBP is equivalent to
the remaining balance of the loan, with interest at the agreed rate.

The lower courts ruled that the redemption price for the property is equivalent to
the P1,507,000 purchase price because DBP chose Act No. 3135 as the governing law
for the extrajudicial foreclosure. The Court disagrees. Republic Act (RA) No. 85 and Act
No. 1508 do not provide a procedure for extrajudicial foreclosure of real estate mortgage.
When DBP stated in its letter to the ex-officio sheriff that the property be sold "at public
auction in accordance with the provisions of Act 3135," it did so merely to find a
proceeding for the sale.

In its 10 October 2006 petition, DBP claims that when it resorted to Act No. 3135 in order
to sell the mortgaged property extrajudicially, it did so merely to find a proceeding for the
sale. DBP stated that: chanroblesvirtualawlibrary

“When herein petitioner resorted to Act 3135 in its application for extrajudicial foreclosure
of the subject mortgaged real estate, it did so only to find a proceeding for the
extrajudicial sale.”

Even assuming that DBP chose Act No. 3135 as the governing law for the extrajudicial
foreclosure, the redemption price would still be equivalent to the remaining balance of the
loan. EO No. 81, being a special and subsequent law, amended Act No. 3135 insofar as
the as redemption price is concerned.

In Sy v. Court of Appeals, cra1aw the Court held that RA No. 337 amended Act No. 3135
insofar as the redemption price is concerned. The Court held that:

“The General Banking Act partakes of the nature of an amendment to Act No. 3135
insofar as the redemption price is concerned, when the mortgagee is a bank or banking
or credit institution, Section 6 of Act No. 3135 being, in this respect, inconsistent with
Section 78 of the General Banking Act. Although foreclosure and sale of the subject
property was done by SIHI pursuant to Act. No. 3135, Section 78 of the General Banking
Act, as amended provides the amount at which the subject property is redeemable from
SIHI, which is, in this case, the amount due under the mortgage deed, or the outstanding
obligation of Carlos Coquinco, plus interest and expenses.”
De Leon vs Rehabilitation Finance Corp.
GR L-24571
December 18, 1970

Facts:

On August 14, 1945, herein plaintiff Jose L. Ponce de Leon and Francisco Soriano, father
of third-party plaintiffs, obtained a loan for P10,000.00 from the PNB, mortgaging a parcel
of land situated in the name of Francisco Soriano, married to Tomasa Rodriguez, as
security for the loan. Thereafter, Jose L. Ponce de Leon filed with the Rehabilitation
Finance Corporation (RFC for short), his loan application, for an industrial loan, for putting
up a sawmill, in the amount of P800,000.00 offering as security certain parcels of land,
among which, was the parcel which Ponce de Leon and Soriano mortgaged to the PNB.
The application was approved for P495,000.00 and the mortgage contract was executed
by Jose L. Ponce de Leon, his wife Carmelina Russel, and Francisco Soriano. The same
parties signed a promissory note for P495,000.00, with interest at 6% per annum, payable
on installments. None of the amortization and interests which had become due was paid
and, for this reason, the RFC took steps for the extra-judicial foreclosure of the mortgaged
properties consisting of real estates and the sawmill and its equipment of Ponce de Leon
situated in two places in Samar.

The Sheriff sold the land in the name of Francisco Soriano, married to Tomasa Rodriguez,
and the deed of sale, was executed by the sheriff in favor of the purchaser thereof, the
RFC. Previous to the expiration of the one-year period of redemption, Francisco Soriano,
through Teofila Soriano del Rosario offered to repurchase the Soriano lot for P14,000.00.
However, the offer was rejected and they were told to participate in the public sale of the
land to be conducted by the RFC. Francisco Soriano wrote a letter to the President asking
the latter's intervention so that the projected sale on the same date to be conducted by
the RFC may be suspended insofar as the lot in his name is concerned and that he be
allowed to redeem it. RFC sent a letter to Francisco Soriano informing the latter that he
could redeem his former property for not less than its appraised value of P59,647.05,
payable 20% down and the balance in ten years, with 6% interest. Soriano did not redeem
the lot under the conditions of the RFC. He then filed a third-party complaint in this case
with the RFC and Jose L. Ponce de Leon as the third-party defendants.

Issue: WON the redemption may be made by "paying the purchaser the amount of his
purchase," with interest and taxes

Ruling:
No, sec. 78 of Rep. Act 337 provides that, "in the event of foreclosure ... the mortgagor
or debtor whose real property has been sold at public auction for the payment of an
obligation to any bank, banking, or credit institution, ... shall have the right ... to redeem
the property by paying the amount fixed by the court in the order of execution, ...," not the
amount for which it had been purchased by the buyer at public auction. We have already
declared that" ... (o)nly foreclosure of mortgages to banking institutions (including the
Rehabilitation Finance Corporation) and those made extrajudicially are subject to legal
redemption, by express provision of statute. The Sorianos insist that the present case is
governed, not by Rep. Act No. 337, but by Act No. 3135, as amended by Act No. 4118 —
pursuant to which, in relation to section 465 of Act No. 190, the redemption may be made
by "paying the purchaser the amount of his purchase," with interest and taxes — the deed
of real estate mortgage in favor of the RFC having allegedly been executed and the
aforementioned property having been sold pursuant to said Acts Nos. 3135 and 4118.

The conclusion drawn by the Sorianos from these facts is untenable. As set forth in its
title, Act No. 3135 was promulgated "to regulate the sale of property under special powers
inserted in or annexed to real estate mortgages," Section 6 thereof provides that in all
cases of "extrajudicial sale ... made under the special power hereinbefore referred to,"
the property sold may be redeemed within "one year from and after the date of the sale
...." Act No. 4118 amended Act No. 3135 by merely adding thereto three (3) new sections.
Upon the other hand, Rep. Act No. 337, otherwise known as "The General Banking Act,"
is entitled "An Act Regulating Banks and Banking Institutions and for other purposes."
Section 78 thereof limits the amount of the loans that may be given by banks and banking
or credit institutions on the basis of the appraised value of the property given as security,
as well as provides that, in the event of foreclosure of a real estate mortgage to said banks
or institutions, the property sold may be redeemed "by paying the amount fixed by the
court in the order of execution," or the amount judicially adjudicated to the creditor bank.
This provision had the effect of ammending section 6 of Act No. 3135, insofar as the
redemption price is concerned, when the mortgagee is a bank or a banking or credit
institution, said section 6 of Act No. 3135 being, in this respect, inconsistent with the
above-quoted portion of section 78 of Rep. Act No. 337. In short, the Parañaque property
was sold pursuant to said Act No. 3135, but the sum for which it is redeemable shall be
governed by Rep. Act No. 337, which partakes of the nature of an amendment to Act No.
3135, insofar as mortgages to banks are banking or credit institutions are concerned, to
which class the RFC belongs. At any rate, the conflict between the two (2) laws must be
resolved in favor of Rep. Act No. 337, both as a special and as the subsequent legislation.
Spouses YU vs PCIB
GR No. 147902
March 17, 2006

Facts:

Under a Real Estate Mortgage, spouses YU, mortgaged their title, interest, and
participation over several parcels of land located in Dagupan City and Quezon City, in
favor of the Philippine Commercial International Bank (respondent) as security for the
payment of a loan in the amount of P9,000,000.00.
As the petitioners failed to pay the loan, the interest, and the penalties due thereon,
respondent filed on July 21, 1998 with the Office of the Clerk of Court and Ex-Officio
Sheriff of the Regional Trial Court of Dagupan City a Petition for Extra-Judicial
Foreclosure of Real Estate Mortgage on the Dagupan City properties. Thereafter, the City
Sheriff issued a Notice of Extra-Judicial Sale scheduling the auction sale. At the auction
sale, respondent emerged as the highest bidder.
On September 30, 1999, petitioners filed a Motion to Dismiss and to Strike Out Testimony
of Rodante Manuel stating that the Certificate of Sale dated September 14, 1998 is void
because respondent violated Article 2089 of the Civil Code on the indivisibility of the
mortgaged by conducting two separate foreclosure proceedings on the mortgage
properties in Dagupan City and Quezon City and indicating in the two notices of extra-
judicial sale that petitioners’ obligation is P10,437,015.20 as of March 31, 1998, when
petitioners are not indebted for the total amount of P20,874,031.56.

Issue: WON a real estate mortgage over several properties located in different locality
can be separately foreclosed in different places.

Ruling:

Yes, the Court finds that petitioners have a mistaken notion that the indivisibility of a real
estate mortgage relates to the venue of extra-judicial foreclosure proceedings. The rule
on indivisibility of a real estate mortgage is provided for in Article 2089 of the Civil Code,
which provides:
Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided
among the successors in interest of the debtor or of the creditor.
Therefore, the debtor’s heir who has paid a part of the debt cannot ask for the
proportionate extinguishment of the pledge or mortgage as the debt is not completely
satisfied.
Neither can the creditor’s heir who received his share of the debt return the pledge or
cancel the mortgage, to the prejudice of the other heirs who have not been paid.
This rule presupposes several heirs of the debtor or creditor and therefore not applicable
to the present case. Furthermore, what the law proscribes is the foreclosure of only a
portion of the property or a number of the several properties mortgaged corresponding to
the unpaid portion of the debt where, before foreclosure proceedings, partial payment
was made by the debtor on his total outstanding loan or obligation. This also means that
the debtor cannot ask for the release of any portion of the mortgaged property or of one
or some of the several lots mortgaged unless and until the loan thus secured has been
fully paid, notwithstanding the fact that there has been partial fulfillment of the obligation.
Hence, it is provided that the debtor who has paid a part of the debt cannot ask for the
proportionate extinguishment of the mortgage as long as the debt is not completely
satisfied. In essence, indivisibility means that the mortgage obligation cannot be divided
among the different lots, that is, each and every parcel under mortgage answers for the
totality of the debt.
On the other hand, the venue of the extra-judicial foreclosure proceedings is the place
where each of the mortgaged property is located. Where the application concerns the
extrajudicial foreclosure of mortgages of real estates and/or chattels in different locations
covering one indebtedness, only one filing fee corresponding to such indebtedness shall
be collected. The collecting Clerk of Court shall, apart from the official receipt of the fees,
issue a certificate of payment indicating the amount of indebtedness, the filing fees
collected, the mortgages sought to be foreclosed, the real estates and/or chattels
mortgaged and their respective locations, which certificate shall serve the purpose of
having the application docketed with the Clerks of Court of the places where the
other properties are located and of allowing the extrajudicial foreclosures to
proceed thereat.
The indivisibility of the real estate mortgage is not violated by conducting two separate
foreclosure proceedings on mortgaged properties located in different provinces as long
as each parcel of land is answerable for the entire debt. Petitioners’ assumption that their
total obligation is P20,874,030.40 because the two notices of extra-judicial sale indicated
that petitioners’ obligation is P10,437,015.20 each, is therefore flawed. Considering the
indivisibility of a real estate mortgage, the mortgaged properties in Dagupan City and
Quezon City are made to answer for the entire debt of P10,437,015.29.
Rodrigo B. Supena vs Judge Dela Rosa
GR. No RTJ-93-1031
January 28,1997

Facts:

On April 1, 1993, mortgagee BAID decided to extrajudicially foreclose the Real Estate
Mortgage executed by mortgagor PQL in the former's favor. Accordingly, BAID petitioned
the Ex-Officio Sheriff of Manila to take the necessary steps for the foreclosure of the
mortgaged property and its sale to the highest bidder.

Thereafter, the Clerk of Court and Ex-Officio Sheriff of Manila, issued a Notice of
Extrajudicial Sale, scheduling the public auction. However, one day before the scheduled
sale, the Hon. Rosalio G. de la Rosa, in his capacity as Executive Judge of the Regional
Trial Court of Manila, issued an Order holding in abeyance the scheduled public auction
sale, on the basis of a mere ex-parte motion filed by PQL. Complainant avers that, said
order is, for all practical intents and purposes, a restraining order for an indefinite period,
issued without the proper case being filed and without the benefit of notice and hearing,
or even an injunction bond from which the mortgagee may seek compensation and
restitution for the damages it may suffer by reason of the improper cancellation of the
auction sale.

Respondent, in his comment, maintains that he held in abeyance the extrajudicial

Issue: WON the order issued by the respondent judge to hold in abeyance the scheduled
public auction sale, on the basis of a mere ex-parte motion filed by PQL was proper.

Ruling:

No, the case at bench involves an extrajudicial foreclosure sale of a real estate mortgage
executed by mortgagor PQL in favor of mortgagee BAID. If the main concern of
respondent judge in holding in abeyance the auction sale in Manila scheduled on May 26,
1993 was to determine whether or not venue of the execution sale was improperly laid,
he would have easily been enlightened by referring to the correct law, definitely not the
Rules of Court, which is Act No. 3135.

Here, the real property subject of the sale is situated in Felix Huertas Street, Sta, Cruz,
Manila. Thus, by express provision of Section 2, the sale cannot be made outside of
Manila. Moreover, were the intention of the parties be considered with respect to venue
in case the properties mortgaged be extrajudicially foreclosed, they even unequivocably
stipulated in the Deed of Real Estate Mortgage itself under paragraph 15.

Respondent judge, therefore, had no valid reason to entertain any doubt as to the
propriety of the venue of the auction sale in Manila. The law as well as the intention of
the parties cannot be more emphatic in this regard.
Respondent judge, however, refers to the venue stipulation in the Loan Agreement signed
by the parties to the effect that, "Any action or suit brought under this Agreement or any
other documents related hereto shall be instituted in the proper courts of Makati. Again,
in this regard, we reiterate that the law in point here is Act No. 3135, as amended, which
is a special law, dealing particularly on extrajudicial foreclosure sales of real estate
mortgages, and not the general provisions of the Rules of Court on Venue of Actions. The
failure of respondent to recognize this is an utter display of ignorance of the law to which
he swore to maintain professional competence
White Mktg. v Grandwood,
GR 222407
November 23, 2016

Facts:

On May 26, 1995, Granwood obtained a loan in the amount of P40,000,000.00 from
Metropolitan Bank and Trust Company (Metrobank). The loan was secured by a real
estate mortgage over a parcel of land. Metrobank eventually sold its rights and interests
over the loan and mortgage contract to Asia Recovery Corporation (ARC). The latter then
assigned the same rights and interests to Cameron Granville 3 Asset Management, Inc.
(CGAM3). After Grandwood failed to pay the loan which already amounted to
P68,941,239.46, CGAM3 initiated extrajudicial foreclosure proceedings of the real estate
mortgage. During the Auction Sale, petitioner White Marketing Development Corporation
was declared the highest bidder and a certificate of sale was issued in its favor.

Thereafter, White Marketing received a letter from the sheriff informing it that Grandwood
intended to redeem the foreclosed property. In response, White Marketing sent a letter
informing the sheriff that Grandwood no longer had the right to redeem.

Insisting on its right to redeem the property, Grandwood sent a letter to the Office of the
Clerk of Court of the RTC insisting that it was the latter's ministerial duty to recognize its
right of redemption, to accept the tender of payment and to issue a certificate of
redemption. The OCC-RTC, however, refused to accept the tender of payment on the
ground that it was confronted with the conflicting applicable laws on the matter of the
redemption period. Thus, Grandwood was prompted to file its Petition for Consignation,
Mandamus and Damages before the RTC. It reiterated its right to redeem the property
subject of the foreclosure sale under Act No. 3135 in relation to Republic Act (R.A.) No.
337 and Sections 27 and 28 of Rule 39 of the Rules of Court.

Issue: WON Granwood has a right to redeem the property.

Ruling:

NO, in an assignment of credit, the assignee is subrogated to the rights of the original
creditor, such that he acquires the power to enforce it, to the same extent as the assignor
could have enforced it against the debtor. Through the assignment of credit, the new
creditor is entitled to the rights and remedies available to the previous creditor,
and includes accessory rights such as mortgage or pledge. Consequently, ARC
acquired all the rights, benefits and obligations of Metrobank under its mortgage contract
with Grandwood. The same could be said for subsequent assignees or successors-in-
interest after ARC like White Marketing.

The mortgage between Grandwood and Metrobank, as the original mortgagee, was
subject to the provisions of Section 47 of R.A. No. 8791. Section 47 provides that when
a property of a juridical person is sold pursuant to an extrajudicial foreclosure, it "shall
have the right to redeem the property in accordance with this provision until, but not after,
the registration of the Certificate of foreclosure sale with the applicable Register of Deeds
which in no case shall be more than three (3) months after foreclosure, whichever is
earlier

Here, Grandwood had three months from the foreclosure or before the certificate of
foreclosure sale was registered to redeem the foreclosed property. This holds true even
when Metrobank ceased to be the mortgagee in view of its assignment to ARC of its
credit, because the latter acquired all the rights of the former under the mortgage contract-
including the shorter redemption period. The shorter redemption period should also
redound to the benefit of White Marketing as the highest bidder in the foreclosure sale as
it stepped into the shoes of the assignee mortgagee.

Measured by the foregoing parameters, the Court finds that Grandwood's redemption
was made out of time as it was done after the certificate of sale was registered on
September 30, 2013. Pursuant to Section 47 of R.A. No. 8791, it only had three (3)
months from foreclosure or before the registration of the certificate of foreclosure sale,
whichever came first, to redeem the property sole in the extrajudicial sale.

To reiterate, the shortened period of redemption provided in Section 47 of R.A. No. 8791
serves as additional security and protection to mortgagee-banks in order for them to
maintain a solvent and liquid financial status. The period is not extended by the mere
fact that the bank assigned its interest to the mortgage to a non-banking institution
because the assignee merely steps into the shoes of the mortgagee bank and acquires
all its rights, interests and benefits under the mortgage-including the shortened
redemption period. Moreover, to extend the redemption period would prejudice the ability
of the banks to quickly dispose of its hard assets to maintain solvency and liquidity.
Sps. Rosario v PCI Leasing,
GR 139233
November 11, 2205

Facts:

Spouses Rosario purchased an Isuzu Elf Pick-up Utility vehicle from CarMerchants, Inc.
The transaction was covered by a Purchase Agreement whereby the spouses undertook
to make a downpayment of ₱190,000.00 of the total purchase price of ₱380,000.00. The
spouses then applied for a loan with PCI Leasing to pay for the balance of ₱190,000.00.
Upon the approval of their loan application, the spouses Rosario executed a Promissory
Note in favor of PCI Leasing covering the amount of the loan plus finance charges. To
secure the payment of the loan, they executed, on the same day, a Chattel Mortgage in
favor of PCI Leasing over the Isuzu Elf 4BD1. Despite demands, the spouses Rosario
failed to pay the amortizations on their loan to PCI Leasing. Thereafter, PCI Leasing filed
a Complaint against the spouses Rosario in the RTC of Dagupan City for "Sum of Money
with Damages with a Prayer for a Writ of Replevin.
In their Answer to the complaint, the spouses Rosario alleged that the chattel mortgage
they executed in favor of PCI Leasing covering the motor vehicle was in effect a contract
of sale of personal property, payable in installments to be governed by Article 1484 of the
New Civil Code of the Philippines. They further alleged that since PCI Leasing opted to
foreclose the chattel mortgage, it was estopped from collecting the balance of their
account under the promissory note and chattel mortgage.
Issue: WON PCI Leasing may collect the balance of the account of the spouses under
the promissory note and chattel mortgage.
Ruling:
Yes, Article 1484 of the New Civil Code is applicable, it is not proscribed from suing the
petitioners for their unpaid balance. The fact of the matter is that the respondent did not
foreclose the chattel mortgage, but opted to sue the petitioners for the balance of their
account under the promissory note, with a plea for a writ of replevin. By securing a writ of
replevin, the respondent did not thereby foreclose the chattel mortgage. If there has been
no foreclosure of the chattel mortgage or a foreclosure sale, then the prohibition against
further collection of the balance of the price does not apply. Where the remedy is not
foreclosure of the chattel mortgage, but specific performance of the obligation to do
payment, then the levy on the property is indeed not a foreclosure of the mortgage but is
instead a levy on execution.
A creditor is not obliged to foreclose a chattel mortgage even if there is one; precisely the
law says that any of the remedies "may" be exercised by the seller. He may still sue for
fulfillment or for cancellation of the obligation, if he does not want to foreclose. As a matter
of fact, he may avail himself of remedy no. 1 (specific performance) and may still ask that
a real estate mortgage be executed to secure the payment of the obligation, in which
case, and in the event of foreclosure, there can still be recovery of the deficiency.

Here, there was foreclosure of the chattel mortgage has not been established; as a matter
of fact, this is not obvious either in the evidence having been presented to the court. What
is only apparent was the execution of the promissory note and the chattel mortgage
Tomasa v CA
GR 88602
April 06, 1990

Facts:

Dr. Alfredo E. Jacob was the registered owner of a parcel of land. Sometime in 1972
Jorge Centenera was appointed as administrator of Hacienda Jacob until January 1, 1978
when the Special Power of Attorney executed in his favor by Dr. Jacob was revoked by
the latter. Because of the problem of paying realty taxes, internal revenue taxes and
unpaid wages of farm laborers of the hacienda, Dr. Jacob asked Centenera to negotiate
for a loan. For this purpose, a special power of attorney was executed and acknowledged
by Dr. Jacob before notary public.

Consequently, Centenera secured a loan in the amount of P18,000.00 from the Bicol
Savings & Loan Association sometime in September 1972. Centenera signed and
executed the real estate mortgage and promissory note as attorney-in-fact of Dr.
Jacob. When the loan fell due in 1975 Centenera failed to pay the same but was able to
arrange a restructuring of the loan using the same special power of attorney and property
as security. Centenera again failed to pay the loan upon the maturity date forcing the
bank to send a demand letter. Thus, the bank foreclosed the real estate mortgage and
the corresponding provisional sale of the mortgaged property to the respondent bank was
effected.
Tomasa Vda. de Jacob who was subsequently named administratrix of the estate of Dr.
Jacob and who claimed to be an heir of the latter, conducted her own investigation and
therefore she filed a complaint in the Regional Trial Court alleging that the special power
of attorney and the documents therein indicated are forged and therefore the loan and/or
real estate mortgages and promissory notes are null and void. However, while the action
for annulment of mortgage, etc. aforestated was pending in the trial court, on November
5, 1982, a definite deed of sale was issued by the sheriff in favor of respondent bank.
Without redemption having been exercised within the prescribed period, the title in the
name of Dr. Jacob was cancelled and in its place, Transfer Certificate of was issued in
favor of respondent bank. Respondent bank then filed a petition for the issuance of a writ
of possession in the Regional Trial Court of Naga City which was opposed by petitioner.
In due course a writ of possession was issued by the trial court in a decision in favor of
the respondent bank.
Issue: WON the extrajudicial foreclosure proceedings and the sale of the property
mortgaged under the amended real estate mortgage after the mortgagor died are null and
void.
Ruling:
No, the rules clearly recognized that a mortgagee has three remedies that may be
alternately availed of in case the mortgagor dies, to wit:
(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 the deficiency as an ordinary claim; and;
(3) to rely on the mortgage exclusively, or other security and foreclose the same at any
time, before it is barred by prescription, without the right to file a claim for any deficiency.
From the foregoing it is clear that the mortgagee does not lose its light to extrajudicially
foreclose the mortgage even after the death of the mortgagor as a third alternative under
Section 7, Rule 86 of the Rules of Court.
The power to foreclose a mortgage is not an ordinary agency that contemplated
exclusively the representation of the principal by the agent but is primarily an authority
conferred upon the mortgagee for the latter's own protection. That power survives the
death of the mortgagor.
The right of the mortgagee bank to extrajudicially foreclose the mortgage after the death
of the mortgagor, acting through his attorney-in-fact, did not depend on the authority in
the deed of mortgage executed by the latter. That right existed independently of said
stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of Court aforecited.