Rule 68 – Foreclosure of Real Estate Mortgage

Sps. Marques vs. Alindog

G.R. No. 184045 January 22, 2014 J. Perlas-Bernabe

Facts: In June 1998, petitioner Anita J. Marquez (Anita) extended a loan in the amount of ₱500,000.00 to a certain Benjamin Gutierrez
(Gutierrez). As security therefor, Gutierrez executed a Deed of Real Estate Mortgage over a parcel of land located in Tagaytay City registered
under the name of Benjamin A. Gutierrez, married to Liwanag Camerin (Sps. Gutiererez). The mortgage was duly annotated on the dorsal
portion of TCT No. T-13443, which Sps. Marquez had verified as clean prior to the mortgage.

Since Gutierrez defaulted in the payment of his loan obligation, Anita sought the extra-judicial foreclosure of the subject property. At the
public auction sale Anita emerged as the highest bidder.

Upon Gutierrez’s failure to redeem the same property within the prescribed period therefor, title was consolidated under TCT No. T-41939 on
November 5, 2001 (in the name of Anita J. Marquez, married to Nicasio C. Marquez) which, however, bore an annotation of adverse claim in
the names of respondents-spouses Carlito and Carmen Alindog (Sps. Alindog)

Subsequently, Sps. Alindog filed a civil case for annulment of real estate mortgage and certificate of sale with prayer for damages against
Sps. Marquez and a certain Agripina Gonzales (Gonzales) before the RTC. Sps. Alindog alleged that they purchased the subject property
from Gutierrez way back in September 1989, but were unable to secure a certificate of title in their names because Gonzales – to whom they
have entrusted said task – had deceived them in that they were assured that the said certificate was already being processed when such was
not the case. Eventually, they found out that the property had already been mortgaged to Sps. Marquez, and that when they tried to contact
Gonzales for an explanation, she could no longer be found. Separately, Sps. Alindog averred that when the mortgage was executed in favor of
Sps. Marquez, Gutierrez was already dead.

Meanwhile, Anita filed an ex-parte petition for the issuance of a writ of possession (ex-parte petition) before the RTC. The RTC granted
Anita’s ex-parte petition and thereby directed the issuance of a writ of possession in her favor. Consequently, a notice to vacate was issued by
Acting Sheriff Teodorico V. Cosare (Sheriff Cosare) against Sps. Gutierrez and all persons claiming rights under them. Sps. Alindog were
served with a copy of the said notice to vacate on September 27, 2005.

Sps. Alindog, claiming that they would suffer irreparable injury if the implementation of the writ of possession in favor of Sps. Marquez
would be left unrestrained, sought the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction with prayer for
damages.

The RTC, through an Order dated November 14, 2005, issued a writ of preliminary injunction enjoining Sps. Marquez from taking possession
of the subject property until after the controversy has been fully resolved on the merits.

The RTC denied the motion for reconsideration of Sps. Marquez, hence, they elevated the case to the CA on certiorari.

The CA denied Sps. Marquez’s petition as it found no grave abuse of discretion on the RTC’s part when it issued the injunctive writ that
enjoined Sps. Marquez from taking possession of the subject property. 

Issue: Whether or not the CA erred in finding no grave abuse of discretion on the part of the RTC when it issued the injunctive writ which
enjoined Sps. Marquez from taking possession of the subject property.

Held: The Court ruled in the affirmative. It is an established rule that the purchaser in an extra-judicial foreclosure sale is entitled to the
possession of the property and can demand that he be placed in possession of the same either during (with bond) or after the expiration
(without bond) of the redemption period therefor. To this end, the Court, in China Banking Corp. v. Sps. Lozada (China Banking Corp.),
citing several cases on the matter, explained that a writ of possession duly applied for by said purchaser should issue as a matter of course,
and thus, merely constitutes a ministerial duty on the part of the court.

The Court expounded on the application of the foregoing provision (Section 7 of Act No. 3135 or extrajudicial foreclosure of real estate
mortgage) in De Gracia v. San Jose, thus:

As may be seen, the law expressly authorizes the purchaser to petition for a writ of possession during the redemption period by filing an ex
parte motion under oath for that purpose in the corresponding registration or cadastral proceeding in the case of property with Torrens title;
and upon the filing of such motion and the approval of the corresponding bond, the law also in express terms directs the court to issue the
order for a writ of possession. Under the legal provisions above copied, the order for a writ of possession issues as a matter of course upon the
filing of the proper motion and the approval of the corresponding bond. No discretion is left to the court. And any question regarding the
regularity and validity of the sale (and the consequent cancellation of the writ) is left to be determined in a subsequent proceeding as outlined
in section 8. Such question is not to be raised as a justification for opposing the issuance of the writ of possession, since, under the Act, the
proceeding for this is ex parte.

Strictly, Section 7 of Act No. 3135, as amended, refers to a situation wherein the purchaser seeks possession of the foreclosed property during
the 12-month period for redemption. Upon the purchaser’s filing of the ex parte petition and posting of the appropriate bond, the RTC shall,
as a matter of course, order the issuance of the writ of possession in the purchaser’s favor.

In IFC Service Leasing and Acceptance Corporation v. Nera, the Court reasoned that if under Section 7 of Act No. 3135, as amended, the
RTC has the power during the period of redemption to issue a writ of possession on the ex parte application of the purchaser, there is no
reason why it should not also have the same power after the expiration of the redemption period, especially where a new title has already been
issued in the name of the purchaser. Hence, the procedure under Section 7 of Act No. 3135, as amended, may be availed of by a purchaser
seeking possession of the foreclosed property he bought at the public auction sale after the redemption period has expired without redemption
having been made.

It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the
period of one year after the registration of the sale. As such, he is entitled to the possession of the said property and can demand it at any time
following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title. The buyer can in fact

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demand possession of the land even during the redemption period except that he has to post a bond in accordance with Section 7 of Act No.
3135, as amended. No such bond is required after the redemption period if the property is not redeemed. Possession of the land then becomes
an absolute right of the purchaser as confirmed owner. Upon proper application and proof of title, the issuance of the writ of possession
becomes a ministerial duty of the court.

However, the ministerial issuance of a writ of possession in favor of the purchaser in an extra-judicial foreclosure sale admits of an exception.
Section 33, Rule 39 of the Rules of Court (Rules) pertinently provides that the possession of the mortgaged property may be awarded to a
purchaser in an extra-judicial foreclosure unless a third party is actually holding the property by adverse title or right. In the recent case of
Rural Bank of Sta. Barbara (Iloilo), Inc. v. Centeno, citing the case of China Banking Corp., the Court illumined that "the phrase ‘a third party
who is actually holding the property adversely to the judgment obligor’ contemplates a situation in which a third party holds the property by
adverse title or right, such as that of a co-owner, tenant or usufructuary. The co-owner, agricultural tenant, and usufructuary possess the
property in their own right, and they are not merely the successor or transferee of the right of possession of another co-owner or the owner of
the property. Notably, the property should not only be possessed by a third party, but also held by the third party adversely to the judgment
obligor."  In other words, as mentioned in Villanueva v. Cherdan Lending Investors Corporation, the third person must therefore claim a right
superior to that of the original mortgagor.

In this case, it is clear that the issuance of a writ of possession in favor of Sps. Marquez, who had already consolidated their title over the
extra-judicially foreclosed property, is merely ministerial in nature. The general rule as herein stated – and not the exception found under
Section 33, Rule 39 of the Rules – should apply since Sps. Alindog hinged their claim over the subject property on their purported purchase
of the same from its previous owner, i.e., Sps. Gutierrez (with Gutierrez being the original mortgagor). Accordingly, it cannot be seriously
doubted that Sps. Alindog are only the latter’s (Sps. Gutierrez) successors-in-interest who do not have a right superior to them.

Marquez in this case - should come as a matter of course, and, in such regard, constitutes only a ministerial duty on the part of the court.
Besides, it was improper for the RTC to have issued a writ of preliminary injunction since the act sought to be enjoined, i.e., the
implementation of the writ of possession, had already been accomplished in the interim and thus, rendered the matter moot. Case law instructs
that injunction would not lie where the acts sought to be enjoined had already become fait accompli (meaning, an accomplished or
consummated act). Hence, since the consummation of the act sought to be restrained had rendered Sps. Alindog's injunction petition moot, the
issuance of the said injunctive writ was altogether improper.

Ardiente vs. Provincial Sherrif

G.R. NO. 148448 August 17, 2004 J. Carpio Morales

Facts: The spouses Rustico Ardiente and Asuncion Paloma, together with their son Angel P. Ardiente and the latter's wife Gliceria Ardiente,
obtained a loan in the amount of P100,000.00 from the Peninsula Development Bank (the bank) to be amortized in six years, on account of
which they executed a November 15, 1979 Promissory Note in the same amount.

To secure the payment of the loan, the Ardientes executed in favor of the bank a Real Estate Mortgage on November 14, 1979 over a parcel of
land situated in Quezon.

Out of the proceeds of the loan, the Ardientes purchased a mini bus costing P81,875.00. After the bus was in operation for several months, it
met an accident in August 1980 as result of which it sustained heavy damages and rendered the Ardientes unable to meet their obligation to
the bank. As the Ardientes were later granted by the bank an additional loan of P46,000 for which they executed an October 29, 1981
Promissory Note, the Real Estate Mortgage was amended.

Demands for the payment of their obligation to the bank notwithstanding, the Ardientes failed to settle the same.

The bank thus extra-judicially foreclosed the mortgage and the parcels of land covered thereby were sold at public auction to the bank which
was the highest bidder.

The bank later notified the Ardientes by letter of February 24, 1984 that they had one (1) year from November 11, 1983 or up to November
11, 1984 to redeem the foreclosed mortgage.

Two days before the period to redeem the foreclosed mortgage expired or on November 9, 1984, the spouses Rustico and Suncion Ardiente
filed before the Regional Trial Court (RTC) of Quezon at Gumaca a complaint, denominated as Petition, against the bank, the provincial
Sheriff of Quezon, and the Register of deeds of Quezon, for Annulment of Auction Sale with Preliminary Injunction and Damages, anchored
to two grounds as reflected in paragraph 16 of the Complaint:

16. On two (2) legal grounds, therefore, namely, (a) that it was the defendant, not herein petitioners, who had violated the Real Estate
Mortgage and Amended Real Estate Mortgage, and (b) that the requisite of notifying the mortgagors of the intended extra-judicial
foreclosure sale was not duly complied with ' the FORECLOSURE SALE should be annulled,

As the following allegation in paragraph 15 of the Complaint shows, the Ardiente spouses capitalized on the alleged lack of notice to them of
the "judicial foreclosure auction sale." 15. And, the unkindest cut of all came up when, without first having been duly notified of an intended
extra-judicial foreclosure auction sale

The bank, in its Answer with Counterclaim, alleged: 15) Answering respondent admits the allegations contained in paragraph 15 of the
petition, with the explanations and qualifications, that petitioners were duly notified of the extra-judicial foreclosure and public auction
sale. There was sufficient notice and publication served to all concern[ed] of said public auction sale of the properties offered as collaterals.

To the Answer the spouses Ardiente filed a Reply and Answer to Counterclaim.

In their memorandum, the defendants bank et al. proffered the following pertinent argument on the Ardiente spouses' claim that they were not
previously notified of the foreclosure: [I]t is maintained that there was notice, coupled with a publication of Notice of Public Auction Sale in
a newspaper of general circulations (sic) supported by publishers' affidavit attached to the record in the Office of the Provincial Sheriff of
Quezon at Calauag, Quezon. Personal notice was sent to the plaintiffs. However, said requirements in the extra-judicial foreclosure is
dispensed with, in accordance with the decision of the Supreme Court in the case of - - - BONNEVIE V. COURT OF APPEALS

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The trial court, noting the absence of documentary evidence showing strict compliance with the statutory requirements on publication of
notice of extra-judicial foreclosure of mortgage, declared the extra-judicial foreclosure and the sale of the mortgaged properties null and void.
It held that no documentary exhibits of such publication of notice of public auction sale in a newspaper of general circulations
supported by publisher's affidavit were ever submitted by respondent Bank. Considering that petitioners are clearly attacking the
validity of the public auction sale for which respondent Bank was the sole bidder, said documentary exhibits should have been
presented in court and not merely alleged to be attached to the record in the Office of the Provincial Sheriff of Quezon at
Calauag, Quezon.  Therefore, in the absence of convincing proof that the statutory provisions governing publication of notice of
mortgage foreclosure sales have been strictly complied with, this Court has no other recourse except to declare as null and void the
sale

The Court of Appeals reversed the decision of the trial court after finding the argument of the defendant-appellants bank et al. that the lack of
required notice and publication of the extra-judicial foreclosure of mortgage was not averred in the complaint, hence, cannot be the basis of an
adverse judgment

The spouses Ardientes (hereinafter referred to as petitioners) argue that paragraph 15 of their Complaint and paragraph 16 of the Amended
Complaint show that they were "attacking the validity of the extra-judicial sale"; that the impleading of the sheriff demonstrates that they are
"questioning the validity and legality of his performance of officially duty"; that the bank was sufficiently informed of their "cause of action,
theory of their case and relief being sought" as shown by the bank's allegations in paragraphs 15 and 16 of its Answer;

Issue: Whether respondent erred in reversing the trial court’s decision because of failure of the complaint and amended complaint to mention
of the absence of the required posting and publication of the notice of foreclosure of sale hence, defendant bank need not to present sherrif
certification of posting and the newspaper where the notice was published as well as the publisher’s affidavit to prove the validity of the
foreclosure sale

Held: The Court ruled in the negative. With respect to petitioners' paragraphs 15 and 16 allegations in their Complaint, clearly, they were
questioning the validity of the extra-judicial foreclosure of the mortgage on the basis of lack of notice to them as mortgagors.

It is settled that personal notice to the mortgagor in extra-judicial foreclosure proceedings is not necessary, hence, not a ground to set aside the
foreclosure sale.

With respect to petitioners' argument that the bank, in paragraph 25 of its Answer, in fact put in issue its compliance with the requirements of
Act 3135, "more specifically with regards to the notices of the public auction sale as well as the extra-judicial application in accordance with
law," to thus call for the presentation of evidence, they citing again Benavides, the same fails.

Benavides bears on the rendition of judgment on the pleadings. It holds that where the defendant's answer tenders an issue, as where it does
not only deny the material allegations of the complaint but also sets up certain special and affirmative defenses, the nature of such answer
calls for presentation of evidence, hence, it is error to render a judgment on the pleadings thereon without such evidence.
No doubt, it is a well-settled rule that statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly
complied with, and that even slight deviations therefrom will invalidate the notice and the sale at least voidable.

Despite petitioners' non-allegation of lack of publication of notice of foreclosure in their Complaint, the bank pleaded in its Answer (1)
"that petitioners were duly notified of the extrajudicial foreclosure and public auction sale" and "[t]here was sufficient notice and publication
served to all concern[ed] of said public auction sale," and (2) that it and the Office of the provincial Sheriff "fully compl[ied] with the
requirements of law under Act 3135, more specifically with regard to notices of the public auction as well as the extra-judicial foreclosure in
accordance with law."

Yet petitioners never refuted in their Reply and Answer to Counterclaim such defense of the bank nor presented evidence before the trial
court to disprove the same.

In fact, in its Comment on petitioners' Formal Offer of Evidence before the trial court, the bank, passing on Exhibit "D" - its letter to
petitioners advising them that they had one year from November 11, 1993 to exercise their right of redemption, stated that said exhibit was
admitted "with the qualification as to the purpose to the effect that said extra-judicial foreclosure was filed in accordance with law and that all
requirements of said law were complied with and that plaintiffs were duly notified of said proceedings."

Despite the bank's repeated claim that the statutory requirements governing extra-judicial foreclosure had been complied with, the bank's plea
of lack of publication of notice of foreclosure was not raised by petitioners either in the Amended Complaint or in the Reply and Answer to
Counterclaim. It was not also raised during the trial as the entire transcripts of the stenographic notes of the proceedings before the trial court
show. Nor even in their memorandum filed before the trial court, petitioners having merely assailed the lack of "personal" notification to
them of any "intended" extrajudicial foreclosure and the "grossly and greatly inadequate" purchase price of the lands.

As the appellate court thus held, the issue of lack of publication of notice cannot be raised for the first time on appeal.

LZK Holdings and Development Corporation vs. Planters Development Bank

G.R. No. 187973 January 20, 2014 J. Reyes

Facts: LZK Holdings obtained a ₱40,000,000.00 loan from Planters Bank on December 16, 1996 and secured the same with a Real Estate
Mortgage over its lot located in La Union.

The lot was sold at a public auction after Planters Bank extrajudicially foreclosed the real estate mortgage thereon due to LZK Holdings'
failure to pay its loan. Planters Bank emerged as the highest bidder during the auction sale and its certificate of sale was registered on March
16, 1999.

On April 5, 1999, LZK Holdings filed before the RTC of Makati City, a complaint for annulment of extra judicial foreclosure, mortgage
contract, promissory note and damages. LZK Holdings also prayed for the issuance of a temporary restraining order (TRO) or writ of
preliminary injunction to enjoin the consolidation of title over the lot by Planters Bank.

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On December 27, 1999, Planters Bank filed an ex-parte motion for the issuance of a writ of possession with the RTC-San Fernando.

On March 13, 2000 or three (3) days before the expiration of LZK Holdings' redemption period, the RTC-Makati issued a TRO effective for
20 days enjoining Planters Bank from consolidating its title over the property.

On April 3, 2000, the RTC-Makati ordered the issuance of a writ of preliminary injunction for the same purpose but the writ was issued only
on June 20, 2000 upon LZK Holdings' posting of a ₱40,000.00 bond.

In the meantime, Planters Bank succeeded in consolidating its ownership over the property on April 24, 2000. However, the proceedings for
its ex-parte motion for the issuance of a writ of possession was suspended by the RTC-San Fernando in an Order dated May 11, 2000 in
view of the TRO and writ of preliminary injunction issued by the RTC-Makati.

Meanwhile, upon motion of LZK Holdings, the RTC-Makati declared as null and void the consolidated title of Planters Bank.  Such ruling
was affirmed by the CA. When the matter reached the Court via G.R. No. 164563, we sustained the CA's judgment .

Planters Bank also appealed the May 11, 2000 Order of the RTC-San Fernando which held in abeyance the resolution of its ex parte motion
for the issuance of a writ of possession. This time, Planters Bank was victorious. The CA granted the appeal and annulled the assailed order of
the RTC-San Fernando. Aggrieved, LZK Holdings sought recourse with the Court in a petition for review docketed as G.R. No. [Link]
Our Decision dated April 27, 2007, we affirmed the CA's ruling and decreed that Planters Bank may apply for and is entitled to a writ of
possession as the purchaser of the property in the foreclosure sale, viz:

The writ of possession may be issued to the purchaser in a foreclosure sale either within the one-year redemption period upon the filing of a
bond, or after the lapse of the redemption period, without need of a bond.

We have consistently held that the duty of the trial court to grant a writ of possession is ministerial. Such writ issues as a matter of course
upon the filing of the proper motion and the approval of the corresponding bond. No discretion is left to the trial court. Any question
regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent
proceeding as outlined in Section 8 of Act No. 3135. Such question cannot be raised to oppose the issuance of the writ, since the proceeding
is ex parte. The recourse is available even before the expiration of the redemption period provided by law and the Rules of Court.
To emphasize the writ's ministerial character, we have in previous cases disallowed injunction to prohibit its issuance, just as we have held
that issuance of the same may not be stayed by a pending action for annulment of mortgage or the foreclosure itself.

Armed with the above ruling, Planters Bank filed before the RTC-San Fernando a motion to set ex-parte hearing for the issuance of a writ of
possession. LZK Holdings opposed the motion. RTC-San Fernando issued another Order granting Planter Bank's ex-parte motion for the
issuance of a writ of possession.

The CA affirmed the foregoing ruling and dismissed LZK Holdings' petition for certiorari. LZK Holdings then filed a motion before the Court
for a 30-day extension within which to file a petition for review

LZK Holdings also claimed that the writ of possession issued to Planters Bank should be annulled for the following reasons, to wit:
(a) with the cancellation of Planters Bank's consolidated title, LZK Holdings remain to be the registered owner of the property and as such,
the former had no right to apply for a writ of possession pursuant to PNB v. Sanao Marketing Corporation, which held that right of possession
is based on the ownership of the subject property by the applicant;
(b) LZK Holdings was deprived of due process because the RTC did not conduct a hearing on Planter Bank's motion for the issuance of a writ
of possession;
(c) the P.2,000,000.00 bond posted by LZK Holdings does not conform with Section 7 of Act No. 3135 which mandates that the bond amount
shall be equivalent to "twelve (12) months use of the subject property" which in this case amounted to P.7,801,4 72.28 at the time the writ
was issued.

In a Resolution dated October 13, 2010 the Court took a liberal stance on the late filing of LZK Holdings' petition for review. Accordingly, its
motion for reconsideration was granted and the petition for review reinstated.

Issue: Whether or not petitioner’s contentions are meritorious

Held: The Court ruled in the negative. First, LZK Holdings can no longer question Planter Bank's right to a writ of possession over the
subject property because the doctrine of conclusiveness of judgment bars the relitigation of such particular issue.

The doctrine of res judicata by conclusiveness of judgment postulates that "when a right or fact has been judicially tried and determined by
a court of competent jurisdiction, or when an opportunity for such trial has been given, the judgment of the court, as long as it remains
unreversed, should be conclusive upon the parties and those in privity with them."

All the elements of the doctrine are present in this case. The final judgment in G.R. No. 167998 was rendered by the Court pursuant to its
jurisdiction over the review of decisions and rulings of the CA. It was a judgment on the merits of Planters Banks's right to apply for and be
issued a writ of possession. Lastly, the parties in G.R. No. 167998 are the same parties involved in the present case.

Second, the pronouncement in PNB that right of possession is based on the ownership of the subject property by the applicant pertains to
applications for writ of possession after the expiration of the redemption period, a situation not contemplated within the facts of the present
case.
Third, We cannot also uphold the contentions of LZK Holdings that the RTC, in issuing the writ of possession, transgressed Act No. 3135.
No hearing is required prior to the issuance of a writ of possession. This is clear from the following disquisitions in Espinoza v. United
Overseas Bank Phils., which reiterates the settled rules on writs of possession, to wit:
The proceeding in a petition for a writ of possession is ex parte and summary in nature.1âwphi1 It is a judicial proceeding brought for the
benefit of one party only and without notice by the court to any person adverse of interest. It is a proceeding wherein relief is granted without
giving the person against whom the relief is sought an opportunity to be heard.

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By its very nature, an ex parte petition for issuance of a writ of possession is a non-litigious proceeding. It is a judicial proceeding for the
enforcement of one's right of possession as purchaser in a foreclosure sale. It is not an ordinary suit filed in court, by which one party sues
another for the enforcement of a wrong or protection of a right, or the prevention or redress of a wrong. (Citations omitted)

Given the ex-parte nature of the proceedings for a writ of possession, the R TC did not err in cancelling the previously scheduled hearing and
in granting Planters Bank's motion without affording notice to LZK Holdings or allowing it to participate.

Lastly, Anent the correct amount of surety bond, it is well to emphasize that our task in an appeal by petition for review on certiorari is
limited, as a jurisdictional matter, to reviewing errors of law that might have been committed by the CA. The allegations of incorrect
computation of the surety bond involve factual matters within the competence of the trial court to address as this Court is not a trier of facts. 

Goldenway Merchandising Corporation vs. Equitable PCI Bank

G.R. No. 195540   March 13, 2013 J. Villarama, Jr.

Facts:  On November 29, 1985, Goldenway Merchandising Corporation (petitioner) executed a Real Estate Mortgage in favor of Equitable
PCI Bank (respondent) over its real properties situated in Valenzuela, Bulacan (now Valenzuela City). The mortgage secured the Two Million
Pesos (₱2,000,000.00) loan granted by respondent to petitioner and was duly registered.

As petitioner failed to settle its loan obligation, respondent extrajudicially foreclosed the mortgage on December 13, 2000. During the public
auction, the mortgaged properties were sold for ₱3,500,000.00 to respondent. Accordingly, a Certificate of Sale was issued to respondent on
January 26, 2001. On February 16, 2001, the Certificate of Sale was registered.

In a letter dated March 8, 2001, petitioner’s counsel offered to redeem the foreclosed properties by tendering a check in the amount of
₱3,500,000.00. On March 12, 2001, petitioner’s counsel met with respondent’s counsel reiterating petitioner’s intention to exercise the right
of redemption. However, petitioner was told that such redemption is no longer possible because the certificate of sale had already been
registered. Petitioner also verified with the Registry of Deeds that title to the foreclosed properties had already been consolidated in favor of
respondent and that new certificates of title were issued in the name of respondent on March 9, 2001.

On December 7, 2001, petitioner filed a complaint7 for specific performance and damages against the respondent, asserting that it is the one-
year period of redemption under Act No. 3135 which should apply and not the shorter redemption period provided in Republic Act (R.A.) No.
8791. Petitioner argued that applying Section 47 of R.A. 8791 to the real estate mortgage executed in 1985 would result in the impairment of
obligation of contracts and violation of the equal protection clause under the Constitution. 

The trial court rendered its decision dismissing the complaint as well as the counterclaim. It noted that the issue of constitutionality of Sec. 47
of R.A. No. 8791 was never raised by the petitioner during the pre-trial and the trial. Aside from the fact that petitioner’s attempt to redeem
was already late, there was no valid redemption made because Atty. Judy Ann Abat-Vera who talked to Atty. Joseph E. Mabilog of the Legal
Division of respondent bank, was not properly authorized by petitioner’s Board of Directors to transact for and in its behalf; it was only a
certain Chan Guan Pue, the alleged President of petitioner corporation, who gave instruction to Atty. Abat-Vera to redeem the foreclosed
properties.

Aggrieved, petitioner appealed to the CA which affirmed the trial court’s decision. According to the CA, petitioner failed to justify why
Section 47 of R.A. No. 8791 should be declared unconstitutional.

In the present petition, it is contended that Section 47 of R.A. No. 8791 is inapplicable considering that the contracting parties expressly and
categorically agreed that the foreclosure of the real estate mortgage shall be in accordance with Act No. 3135.

Petitioner then argues that applying Section 47 of R.A. No. 8791 to the present case would be a substantial impairment of its vested right of
redemption under the real estate mortgage contract. Such impairment would be violative of the constitutional proscription against impairment
of obligations of contract, a patent derogation of petitioner’s vested right and clearly changes the intention of the contracting parties.

Petitioner further argues that since R.A. No. 8791 does not provide for its retroactive application, courts therefore cannot retroactively apply
its provisions to contracts executed and consummated before its effectivity. Also, since R.A. 8791 is a general law pertaining to the banking
industry while Act No. 3135 is a special law specifically governing real estate mortgage and foreclosure, under the rules of statutory
construction that in case of conflict a special law prevails over a general law regardless of the dates of enactment of both laws, Act No. 3135
clearly should prevail on the redemption period to be applied in this case.

Issue: Whether RA 8791 is constitutional

Held: The Court ruled in the affirmative. The law governing cases of extrajudicial foreclosure of mortgage is Act No. 3135, as amended by
Act No. 4118. Section 6 thereof provides:

SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors-in-interest or any judicial
creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is
sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions
of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the
provisions of this Act.

The one-year period of redemption is counted from the date of the registration of the certificate of sale. In this case, the parties provided in their real estate
mortgage contract that upon petitioner’s default and the latter’s entire loan obligation becoming due, respondent may immediately foreclose the mortgage
judicially in accordance with the Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended.

However, Section 47 of R.A. No. 8791 otherwise known as "The General Banking Law of 2000" which took effect on June 13, 2000,
amended Act No. 3135. Said provision reads:

SECTION 47. Foreclosure of Real Estate Mortgage. — In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is
security for any loan or other credit accommodation granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of the real estate, to redeem the property by paying the amount due under the mortgage deed, with

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interest thereon at the rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from the sale and custody of said
property less the income derived therefrom. However, the purchaser at the auction sale concerned whether in a judicial or extrajudicial foreclosure shall have
the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due
course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may suffer
by the enjoining or the restraint of the foreclosure proceeding.

Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, 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. Owners of property that has been sold in a foreclosure sale prior to the effectivity of
this Act shall retain their redemption rights until their expiration. 

Under the new law, an exception is thus made in the case of juridical persons which are allowed to exercise the right of redemption only
"until, but not after, the registration of the certificate of foreclosure sale" and in no case more than three (3) months after foreclosure,
whichever comes first.

May the foregoing amendment be validly applied in this case when the real estate mortgage contract was executed in 1985 and the mortgage
foreclosed when R.A. No. 8791 was already in effect? We answer in the affirmative.

Petitioner’s contention that Section 47 of R.A. 8791 violates the constitutional proscription against impairment of the obligation of contract
has no basis. Impairment is anything that diminishes the efficacy of the contract. There is an impairment if a subsequent law changes the
terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws remedies for the enforcement
of the rights of the parties.

Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only modified the time for the exercise of
such right by reducing the one-year period originally provided in Act No. 3135. The new redemption period commences from the date of
foreclosure sale, and expires upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There is
likewise no retroactive application of the new redemption period because Section 47 exempts from its operation those properties foreclosed
prior to its effectivity and whose owners shall retain their redemption rights under Act No. 3135.

Also, Petitioner’s claim that Section 47 infringes the equal protection clause as it discriminates mortgagors/property owners who are juridical
persons is equally bereft of merit. Equal protection permits of reasonable classification. We have ruled that one class may be treated
differently from another where the groupings are based on reasonable and real distinctions. If classification is germane to the purpose of
the law, concerns all members of the class, and applies equally to present and future conditions, the classification does not violate the equal
protection guarantee.

We agree with the CA that the legislature clearly intended to shorten the period of redemption for juridical persons whose properties were
foreclosed and sold in accordance with the provisions of Act No. 3135.

The difference in the treatment of juridical persons and natural persons was based on the nature of the properties foreclosed – whether these
are used as residence, for which the more liberal one-year redemption period is retained, or used for industrial or commercial purposes, in
which case a shorter term is deemed necessary to reduce the period of uncertainty in the ownership of property and enable mortgagee-banks
to dispose sooner of these acquired assets. It must be underscored that the General Banking Law of 2000, crafted in the aftermath of the 1997
Southeast Asian financial crisis, sought to reform the General Banking Act of 1949 by fashioning a legal framework for maintaining a safe
and sound banking system. In this context, the amendment introduced by Section 47 embodied one of such safe and sound practices aimed at
ensuring the solvency and liquidity of our banks. It cannot therefore be disputed that the said provision amending the redemption period in
Act 3135 was based on a reasonable classification and germane to the purpose of the law.

The right of redemption being statutory, it must be exercised in the manner prescribed by the statute, and within the prescribed time limit, to
make it effective. Furthermore, as with other individual rights to contract and to property, it has to give way to police power exercised for
public welfare.

The freedom to contract is not absolute; all contracts and all rights are subject to the police power of the State and not only may regulations
which affect them be established by the State, but all such regulations must be subject to change from time to time, as the general well-being
of the community may require, or as the circumstances may change, or as experience may demonstrate the necessity. Settled is the rule that
the non-impairment clause of the Constitution must yield to the loftier purposes targeted by the Government. The right granted by this
provision must submit to the demands and necessities of the State’s power of regulation. Such authority to regulate businesses extends to the
banking industry which, as this Court has time and again emphasized, is undeniably imbued with public interest.

Solid Builders, Inc. and Medina Foods Industries, Inc. vs. China Bank Corporataion
G.R. No. 179665 April 3, 2013 J. Leonardo-De Castro

Facts: China Banking Corporation (CBC) granted several loans to Solid Builders, Inc. (SBI), which amounted to ₱139,999,234.34, exclusive
of interests and other charges. To secure the loans, Medina Foods Industries, Inc. (MFII) executed in CBC’s favor several surety agreements
and contracts of real estate mortgage over parcels of land in the Loyola Grand Villas in Quezon City and New Cubao Central in Cainta, Rizal.

Subsequently, SBI proposed to CBC a scheme through which SBI would sell the mortgaged properties and share the proceeds with CBC on a
50-50 basis until such time that the whole obligation would be fully paid. SBI also proposed that there be partial releases of the certificates of
title of the mortgaged properties without the burden of updating interests on all loans

In a letter dated March 20, 2000 addressed to CBC, SBI requested the restructuring of its loans, a reduction of interests and penalties and the
implementation of a dacion en pago of the New Cubao Central property.

In response, CBC sent SBI a letter dated April 17, 2000 stating that the loans had been completely restructured effective March 1, 1999 in the
amount of ₱218,540,646.00. On the aspect of interests and charges, CBC suggested the updating of the obligation to avoid paying interests
and charges.

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This was followed by another communication from CBC to SBI reiterating, among others, that the loan has been restructured effective March
1, 1999 upon issuance by SBI of promissory notes in favor of CBC. 

Subsequently, in a letter dated September 18, 2000, CBC demanded SBI to settle its outstanding account within ten days from receipt thereof.

On October 5, 2000, claiming that the interests, penalties and charges imposed by CBC were iniquitous and unconscionable and to enjoin
CBC from initiating foreclosure proceedings, SBI and MFII filed a Complaint "To Compel Execution of Contract and for Performance and
Damages, With Prayer for Writ of Preliminary Injunction and Ex-Parte Temporary Restraining Order" in the Regional Trial Court (RTC) of
Pasig City.

After hearing the parties, the trial court issued an Order dated December 14, 2000 granting the application of SBI and MFII for the issuance
of a writ of preliminary injunction. The trial court held that SBI and MFII were able to sufficiently comply with the requisites for the issuance
of an injunctive writ. Aggrieved, CBC filed a Petition for Certiorari.

The Court of Appeals found that, on its face, the trial court’s Order dated December 14, 2000 granting the application of SBI and MFII for the
issuance of a writ of preliminary injunction had no basis as there were no findings of fact or law which would indicate the existence of any of
the requisites for the grant of an injunctive writ. It appeared to the Court of Appeals that, in ordering the issuance of a writ of injunction, the
trial court simply relied on the imposition by CBC of the interest rates to the loans obtained by SBI and MFII.

SBI and MFII filed a motion for reconsideration but it was denied by the Court of Appeals, hence, this petition

Issue: Whether or not CA erred in finding that there were no findings of fact or law which would indicate the existence of any of the
requisites for the grant of an injunctive writ

Held: The Court ruled in the negative. At times referred to as the "Strong Arm of Equity," a writ of preliminary injunction is an extraordinary
event which must be granted only in the face of actual and existing substantial rights. The duty of the court taking cognizance of a prayer for a
writ of preliminary injunction is to determine whether the requisites necessary for the grant of an injunction are present in the case before
it. In this connection, a writ of preliminary injunction is issued to preserve the status quo ante, upon the applicant’s showing of two important
requisite conditions, namely: (1) the right to be protected exists prima facie, and (2) the acts sought to be enjoined are violative of that right. It
must be proven that the violation sought to be prevented would cause an irreparable injury.

Here, SBI and MFII basically claim a right to have their mortgaged properties shielded from foreclosure by CBC on the ground that the
interest rate and penalty charges imposed by CBC on the loans availed of by SBI are iniquitous and unconscionable.

As debtor-mortgagors, however, SBI and MFII do not have a right to prevent the creditor-mortgagee CBC from foreclosing on the mortgaged
properties simply on the basis of alleged "usurious, exorbitant and confiscatory rate of interest." First, assuming that the interest rate agreed
upon by the parties is usurious, the nullity of the stipulation of usurious interest does not affect the lender’s right to recover the principal loan,
nor affect the other terms thereof. Thus, in a usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right can be
exercised by the creditor upon failure by the debtor to pay the debt due.

Second, even the Order dated December 14, 2000 of the trial court, which granted the application for the issuance of a writ of preliminary
injunction, recognizes that the parties still have to be heard on the alleged lack of "fairness of the increase in interests and penalties" during
the trial on the merits. Thus, the basis of the right claimed by SBI and MFII remains to be controversial or disputable as there is still a need to
determine whether or not, upon consideration of the various circumstances surrounding the agreement of the parties, the interest rates and
penalty charges are unconscionable. Therefore, such claimed right cannot be considered clear, actual and subsisting. In the absence of a clear
legal right, the issuance of the injunctive writ constitutes grave abuse of discretion.

The Order dated December 10, 2001 also shows the reasoning of the trial court which betrays that its grant of the application of SBI and MFII
for the issuance of a writ of preliminary injunction was not based on a clear legal right. Said the trial court: It was likewise shown that
plaintiffs SBI and MFII had the clear right and urgency to ask for injunction because of the issue of validity of the increase in the amount of
the loan obligation. (Emphasis supplied.) At most, the above finding of the trial court that the validity of the increase in the amount of the loan
obligation is in issue simply amounted to a finding that the rights of SBI and MFII vis-à-vis that of CBC are disputed and debatable. In such a
case where the complainant-movant’s right is doubtful or disputed, the issuance of an injunctive writ is not proper.

Even assuming that SBI and MFII are correct in claiming their supposed right, it nonetheless disintegrates in the face of the ten promissory
notes in the total amount of ₱218,540,648.00, exclusive of interest and penalties, issued by SBI in favor of CBC on March 1, 1999 which
until now remain unpaid despite the maturity of the said notes on March 1, 2004 and CBC’s repeated demands for payment. 37 Foreclosure is
but a necessary consequence of nonpayment of mortgage indebtedness. As this Court held in Equitable PCI Bank, Inc. v. OJ-Mark Trading,
Inc:

Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes that the mortgagee is authorized to foreclose the mortgaged
properties in case of default by the mortgagors, the mortgagee has a clear right to foreclosure in case of default, making the issuance of a Writ of Preliminary
Injunction improper.

In addition, the default of SBI and MFII to pay the mortgage indebtedness disqualifies them from availing of the equitable relief that is the
injunctive writ. In particular, SBI and MFII have stated in their Complaint that they have made various requests to CBC for restructuring of
the loan. The trial court’s Order dated December 14, 2000 also found that SBI wrote several letters to CBC "requesting, among others, for a
reduction of interests and penalties and restructuring of the loan."A debtor’s various and constant requests for deferment of payment and
restructuring of loan, without actually paying the amount due, are clear indications that said debtor was unable to settle his obligation. SBI’s
default or failure to settle its obligation is a breach of contractual obligation which tainted its hands and disqualified it from availing of the
equitable remedy of preliminary injunction.

As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The accessory follows the principal. The accessory
obligation of MFII as accommodation mortgagor and surety is tied to SBI’s principal obligation to CBC and arises only in the event of SBI’s
default.
Thus, MFII’s interest in the issuance of the writ of preliminary injunction is necessarily prejudiced by SBI’s wrongful conduct and breach of
contract

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As no clear right that warrants the extraordinary protection of an injunctive writ has been shown by SBI and MFII to exist in their favor, the
first requirement for the grant of a preliminary injunction has not been satisfied. In the absence of any requisite, and where facts are shown to
be wanting in bringing the matter within the conditions for its issuance, the ancillary writ of injunction must be struck down for having been
rendered in grave abuse of discretion. Thus, the Court of Appeals did not err when it granted the petition for certiorari of CBC and ordered the
dissolution of the writ of preliminary injunction issued by the trial court.

Neither has there been a showing of irreparable injury. An injury is considered irreparable if it is of such constant and frequent recurrence that
no fair or reasonable redress can be had therefor in a court of law, or where there is no standard by which their amount can be measured with
reasonable accuracy, that is, it is not susceptible of mathematical computation. The provisional remedy of preliminary injunction may only be
resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard of compensation.

In the first place, any injury that SBI and MFII may suffer in case of foreclosure of the mortgaged properties will be purely monetary and
compensable by an appropriate judgment in a proper case against CBC. Moreover, where there is a valid cause to foreclose on the mortgages,
it cannot be correctly claimed that the irreparable damage sought to be prevented by the application for preliminary injunction is the loss of
the mortgaged properties to auction sale. The alleged entitlement of SBI and MFII to the "protection of their properties put up as collateral for
the loans" they procured from CBC is not the kind of irreparable injury contemplated by law. Foreclosure of mortgaged property is not an
irreparable damage that will merit for the debtor-mortgagor the extraordinary provisional remedy of preliminary injunction. As this Court
stated in Philippine National Bank v. Castalloy Technology Corporation:

All is not lost for defaulting mortgagors whose properties were foreclosed by creditors-mortgagees. The respondents will not be deprived outrightly of their
property, given the right of redemption granted to them under the law. Moreover, in extrajudicial foreclosures, mortgagors have the right to receive any surplus
in the selling price. Thus, if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the
sale but will give the mortgagor a cause of action to recover such surplus

Robles vs. Yapcinco

G.R. No. 169568 October 22, 2014 J. Bersamin

Facts: The property in litis was originally registered under Transfer Certificate (TCT) No. 20458 of the Registry of Deeds of Tarlac in the
name of Fernando F. Yapcinco, married to Maxima Alcedo.

In May 4,1944, Yapcinco constituted a mortgage on the property in favor of Jose C. Marcelo to secure the performance of his obligation. In
turn, Marcelo transferred his rights as the mortgagee to Apolinario Cruz on October 24, 1944.

When Yapcinco did not pay the obligation, Apolinario Cruz brought an action for judicial foreclosure of the mortgage in the Court of First
Instance (CFI) of Tarlac, which rendered its decision on July 27, 1956 ordering Patrocinio Y. Kelly, the administratrix of the estate of
Yapcinco, who died during the pendency of the action, to pay Apolinario Cruz the indebtedness secured by the mortgage plus interest; and in
case of the failure to pay after 90 days from the date of the decision, the property would be sold at a public auction

Apolinario Cruz was adjudged the highest bidder in the public auction held on March 18, 1959. In his favor was then issued the certificate of
absolute sale,6 and he took possession of the property in due course. However, he did not register the certificate of sale; nor was a judicial
confirmation of sale issued.

Apolinario Cruz donated the property to his grandchildren, namely: Carlos C. de la Rosa, Apolinario Bernabe, Ferdinand Cruz, and petitioner
Rolando Robles.7 On August 29, 1991, however, Apolinario Bernabe falsified a deed of absolute sale, whereby he made it appear that
Yapcinco had sold the property to him, Ma. Teresita Escopete, Orlando Santos and Oliver Puzon.

On January 2, 2000, the respondents, all heirs of the Spouses Yapcinco, instituted an action against Apolinario Bernabe and his co-vendees in
the Regional Trial Court (RTC) in Tarlae City for the annulment of TCT No. 243719, document restoration, reconveyance and damages.
They claimed that although the property had been mortgaged, the mortgage had not been foreclosed, judicially or extra-judicially;

The RTC in Tarlae City rendered its judgment declaring TCT No. 243719 and the deed of absolute sale dated August 28, 1991 null and void.
As a consequence, TCT No. 243719 was cancelled, and TCT No. 20458 in the name of Yapcinco was restored.

Petitioner filed an action for the nullification of document, cancellation of title, reconveyance and damages against the respondents 

RTC ruled in favor of petitioner. The court opined that the respondents could not claim to have no knowledge that the property in litis was no
longer part of the estate of the late Fernando F. Yapcinco; that one of them had substituted the late Fernando F. Yapcinco in the judicial
foreclosure proceedings, and even appealed the adverse decision to the CA; that they could not argue that they were not bound by the
foreclosure of the mortgage due to the non-registration of the certificate of sale because as between the parties registration was not a requisite
for the validity of the foreclosure; and that they did not redeem the property until the present.

The respondents appealed to the CA. The court reversed the judgment of the RTC, and holding that due to the non-registration of the
certificate of sale, the period of redemption did not commence to run. It also held that Apolinario Cruz never acquired title to the property and
could not have conveyed and transferred ownership over the same to his grandchildren through the deed of donation

Hence, this petition

The petitioner insists that the rules and principles relied upon by the CA were applicable only to extra-judicial foreclosure, not to a judicial
foreclosure like the one herein; that the importance of registration of the certificate of sale was true only in extrajudicial sale where it would
be the reckoning point for the exercise of the right of redemption

Issue: Whether or not registration of the certificate of sale is a requisite for the validity of the foreclosure

Held: The Court ruled in the negative. The Court clarifies that the failure of Apolinario Cruz to register the certificate of sale was of no
consequence in this adjudication. The registration of the sale is required only in extra-judicial foreclosure sale because the date of the
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registration is the reckoning point for the exercise of the right of redemption. In contrast, the registration of the sale is superfluous in judicial
foreclosure because only the equity of redemption is granted to the mortgagor, except in mortgages with banking institutions.

The equity of redemption is the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying
the secured debt within the 90-day period after the judgment becomes final, or even after the foreclosure sale but prior to the confirmation of
the sale. In this light, it was patent error for the CA to declare that: "By Apolinario Cruz's failure to register the 18 March 1958 Certificate of
Absolute Sale in the Office of the Register of Deeds, the period of redemption did not commence to run."

The applicable rule on March 18, 1959, the date of the foreclosure sale, was Section 3, Rule 70 of the Rules of Court, which relevantly
provided that: "Such sale shall not affect the rights of persons holding prior incumbrances upon the property or a part thereof, and when
confirmed by an order of the court, it shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser,
subject to such rights of redemption as may be allowed by law." The records show that no judicial confirmation of the sale was made despite
the lapse of more than 40 years since the date of the sale. Hence, it cannot be said that title was fully vested in Apolinario Cruz.

However, the Court will not be dispensing true and effective justice if it denies the petition for review on the basis alone of the absence of the
judicial confirmation of the sale. The Rules of Court itself calls for a liberal construction of its rules with the view of promoting their
objective of securing a just, speedy and inexpensive disposition of every action and proceeding.

The effect of the failure of Apolinario Cruz to obtain the judicial confirmation was only to prevent the title to the property from being
transferred to him. For sure, such failure did not give rise to any right in favor of the mortgagor or the respondents as his successors-in-
interest to take back the property already validly sold through public auction. Nor did such failure invalidate the foreclosure proceedings. To
maintain otherwise would render nugatory the judicial foreclosure and foreclosure sale, thus unduly disturbing judicial stability. The non-
transfer of the title notwithstanding, Apolinario Cruz as the purchaser should not be deprived of the property purchased at the foreclosure sale.
With the respondents having been fully aware of the mortgage, and being legally bound by the judicial foreclosure and consequent public
sale, and in view of the unquestioned possession by Apolinario Cruz and his successors-in-interest (including the petitioner) from the time of
the foreclosure sale until the present, the respondents could not assert any better right to the property. It would be the height of inequity to still
permit them to regain the property on the basis alone of the lack of judicial confirmation of the sale. After all, under the applicable rule earlier
cited, the judicial confirmation operated only "to divest the rights of all the parties to the action and to vest their rights in the purchaser,
subject to such rights of redemption as may be allowed by law."

Consequently, the late Fernando F. Yapcinco and the respondents as his successors-in-interest were divested of their right in the property, for
they did not duly exercise the equity of redemption decreed in the decision of the trial court. With Yapcinco having thereby effectively ceased
to be the owner of the property sold, the property was taken out of the mass of the assets of Yapcinco upon the expiration of the equity of
redemption.

Metropolitan Bank and Trust Company vs. CPR Promotions and Marketing Inc
G.R. No. 200567 June 22, 2015 J. Velasco Jr.

Facts: Respondent CPR Promotions and Marketing, Inc. (CPR Promotions) obtained loans from petitioner MBTC. These loans were covered
by fifteen (15) promissory notes (PNs) all signed by respondents, spouses Leoniza F. Reynoso and Cornelio P. Reynoso, Jr. (spouses
Reynoso), as Treasurer and President of CPR Promotions, respectively.

To secure the loans, the spouses Reynoso executed two deeds of real estate mortgage on separate dates. 

All of the mortgaged properties are registered under the spouses Reynoso's names, except for TCT No. 565381, which is registered under
CPR Promotions.

Spouses Reynoso executed a continuing surety agreement8 binding themselves solidarity with CPR Promotions to pay any and all loans CPR
Promotions may have obtained from petitioner MBTC, including those covered by the said PNs, but not to exceed PhP 13,000,000.

Upon maturity of the loans, respondents defaulted, prompting MBTC to file a petition for extra-judicial foreclosure of the real estate
mortgages, pursuant to Act No. 3135, as amended. MBTC's request for foreclosure.

Notwithstanding the foreclosure of the mortgaged properties for the total amount of PhP 13,614,000, petitioner MBTC alleged that there
remained a deficiency balance of PhP 2,628,520.73, plus interest and charges as stipulated and agreed upon in the PNs and deeds of real
estate mortgages. Despite petitioner's repeated demands, however, respondents failed to settle the alleged deficiency. Thus, petitioner filed an
action for collection of sum of money against respondents

The Regional Trial Court ruled in favor of petitioner that there, indeed, was a balance of PhP 2,628,520.73, plus interest and charges

The appellate court, through the assailed Decision, reversed the court a quo and ruled in favor of respondents. The fallo of the said Decision
reads: Wherefore, in view of the foregoing, the decision appealed from is reversed, and the plaintiff-appellee Metrobank is ordered to refund
or return to the defendants-appellants Cornelio and Leoniza Reynoso the amount of PhP 722,602.22 representing the remainder of the
proceeds of the foreclosure sale

Hence this recourse

Petitioner asserts that the CA's grant of a refund valued at PhP 722,602.22 plus legal interest of six percent (6%) in favor of respondents is
erroneous for two reasons: first, respondents never set up a counterclaim for refund of any amount; 18 and second, the total outstanding
obligation as of February 10, 1998, to which the full amount of the bid prices was applied, is PhP 11,216,783.99 and not PhP 12,891,397.78,
which was used by the CA in its computation.

Issue: Whether or not the CA gravely abused its discretion when it ordered the refund of the remainder of the proceeds to respondents

Held: The Court fully agrees with the CA that MBTC was not able to prove the amount claimed, We however, find that neither were
respondents able to timely setup their claim for refund.

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A counterclaim is compulsory if: (a) it arises out of or is necessarily connected with the transaction or occurrence which is the subject matter
of the opposing party's claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction; and (c) the court has jurisdiction to entertain the claim both as to its amount and nature, except that in an original action before
the RTC, the counterclaim may be considered compulsory regardless of the amount

Based on jurisprudence, it is evident that a claim for recovery of the excess in the bid price vis-a-vis the amount due should be interposed as a
compulsory counterclaim in an action for recovery of a deficiency filed by the mortgagee against the debtor-mortgagor. First, in both cases,
substantially the same evidence is needed in order to prove their respective claim. Second, adjudication in favor of one will necessarily bar the
other since these two actions are absolutely incompatible with each other; a debt cannot be fully paid and partially unpaid at the same
time. Third, these two opposing claims arose from the same set of transactions. And finally, if these two claims were to be the subject of
separate trials, it would definitely entail a substantial and needless duplication of effort and time by the parties and the court, for said actions
would involve the same parties, the same transaction, and the same evidence. The only difference here would be in the findings of the courts
based on the evidence presented with regard to the issue of whether or not the bid prices substantially cover the amounts due.

Having determined that a claim for recovery of an excess in the bid price should be set up in the action for payment of a deficiency as a
compulsory counterclaim, We rule that respondents failed to timely raise the same. It is elementary that a defending party's compulsory
counterclaim should be interposed at the time he files his Answer, 30 and that failure to do so shall effectively bar such claim.

As it appears from the records, what respondents initially claimed herein were moral and exemplary damages, as well as attorney's [Link],
realizing, based on its computation, that it should have sought the recovery of the excess bid price, respondents set up another counterclaim,
this time in their Appellant's Brief filed before the CA. Unfortunately, respondents' belated (assertion proved fatal to their cause as it did not
cure their failure to timely raise such claim in their Answer. Consequently, respondents' claim for the excess, if any, is already barred. With
this, We now resolve the substantive issues of this case.

The CA erred in ruling that the total amount due was PhP 12,891,397.78

The CA concluded that the amount of PhP 12,891,397.78 is actually comprised of the PhP 11,216,783.99 due as of February 10, 1998, plus
additional interest and other charges that became due from February 10, 1998 until the date of foreclosure on May 5, 1998. The appellate
court is mistaken.

By simply adding the figures stated in the PNs as the principal sum, it can readily be seen that the amount of PhP 12,891,397.78 actually
pertains to the aggregate value of the fifteen (15) PNs

This belies the findings of the CA that PhP 12,891,397.78 is the resulting value of PhP 11,216,783.99 plus interest and other charges.
Consequently, the CA's conclusion that there is an excess of PhP 722,602.22, after deducting the amount of PhP 12,891,397.78 from the total
bid price of PhP 13,614,000, is erroneous.

Nevertheless, while the CA's factual finding as to the amount due is flawed, petitioner, as discussed below, is still not entitled to the alleged
deficiency balance of PhP 2,628,520.73.

MBTC failed to prove that there is a deficiency balance of PhP 2,628,520.73

To support its deficiency claim, petitioner presented a Statement of Account, 53 which refers to the amounts due as of May 5, 1998, the date of
the first foreclosure sale

Applying the proceeds from the auction sales to the foregoing amount, according to petitioner, would result in a deficiency balance of PhP
2,443,143.43. Afterwards, the said amount allegedly earned interest for four (4) months in the amount of PhP 185,377.30, 54 bringing
petitioner's claim for deficiency judgment to a total of PhP 2,628,520.73. We are not convinced.

We have already ruled in several cases56 that in extrajudicial foreclosure of mortgage, where the proceeds of the sale are insufficient to pay
the debt, the mortgagee has the right to recover the deficiency from the debtor. 57 In ascertaining the deficit amount, Sec. 4, Rule 68 of the
Rules of Court is elucidating, to wit:

Section 4. Disposition of proceeds of sale. — The amount realized from the foreclosure sale of the mortgaged property shall, after deducting
the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying off the
mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be
no such encumbrancers or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the
person entitled to it. 

Verily, there can only be a deficit when the proceeds of the sale is not sufficient to cover (1) the costs of foreclosure proceedings; and (2) the
amount due to the creditor, inclusive of interests and penalties, if any, at the time of foreclosure

a. Petitioner failed to prove the amount due at the time of foreclosure

Having alleged the existence of a deficiency balance, it behooved petitioner to prove, at the very least, the amount due at the date of
foreclosure against which the proceeds from the auction sale would be applied. Otherwise, there can be no basis for awarding the claimed
deficiency balance. Unfortunately for petitioner, it failed to substantiate the amount due as of May 5, 1998 as appearing in its Statement of
Account.

To recall, MBTC admitted that the amount due as of February 10, 1998 is PhP 11,216,783.99, inclusive of interests and charges. As
alleged in the petition

If the total amount due as of February 10, 1998 is PhP 11,216,783.99 is already inclusive of interests and penalties, the principal amount,
exclusive of interests and charges, would naturally be lower than the PhP 11,216,783.99 threshold. How petitioner made the determination in
its Statement of Account that the principal amount due on the date of the auction sale is PhP 12,450,652.22 is then questionable, nay
impossible, unless respondents contracted another loan anew.
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Further, petitioner failed to sufficiently explain during the proceedings how it came up with the alleged "deficiency" in the amount of PhP
2,443,143.43, as per the Statement of Account. Reversing the formula, petitioner's claim would only be mathematically possible if the
missing interest and penalties for the three-month period—from February 10, 1998 to May 6, 1998—amounted to PhP
3,047,954,73,59 which is inconsistent with MBTC's declaration in its Statement of Account as of May 5, 1998. 60 Needless to say, this amount
is not only unconscionable, it also finds no support from any of the statement of accounts and loan stipulations agreed upon by the parties.

b. Petitioner failed to prove the amount of expenses incurred in foreclosing the mortgaged prop erties

Another obstacle against petitioner's claim for deficiency balance is the burden of proving the amount of expenses incurred during the
foreclosure sales. To recall, petitioner alleged that it incurred expenses totalling PhP 1,373,238.04 and PhP 419,166.67 for the first and second
public auction sales, respectively. However, in claiming that there is a deficiency, petitioner only submitted the following pieces of evidence,
to wit:chanRoblesvirtualLawlibrary

1. The fifteen (15) promissory notes (Exhibits A to O);

2. Continuing Surety Agreement (Exhibit P);

3. Real Estate Mortgage (Exhibits Q & R);

4. Petition for Sale under Act. No. 3135, as amended (Exhibit S);

5. Notices of Sheriff s Sale (Exhibits T & U);

6. Affidavits of Publication (Exhibits V & W);

7. Certificates of Posting and a Xerox copy thereof (Exhibits X & Y);

8. Certificates of Sale (Exhibits Z & AA);

9. Demand Letters (Exhibits BB & CC); and

10. Statement of Account (Exhibit DD).chanroblesvirtuallawlibrary

Curiously, petitioner never offered as evidence receipts proving payment of filing fees, publication expenses, Sheriffs Commission on Sale,
attorney's fee, registration fee for the Certificate of Sale, insurance premium and other miscellaneous expenses, all of which MBTC claims
that it incurred. Instead, petitioner urges the Court to take judicial notice of the following expenses

First, the Court cannot take judicial notice of the attorney's fees being claimed by petitioner because although 10% was the rate agreed upon
by the parties, We have, in a line of cases, held that the percentage to be charged can still be fixed by the Court.

Second, the Court cannot also take judicial notice of the expenses incurred by petitioner in causing the publication of the notice of foreclosure
and the cost of insurance. This is so because there are no standard rates cited or mentioned by petitioner that would allow Us to take judicial
notice of such expenses. It is not unthinkable that the cost of publication would vary from publisher to publisher, and would depend on
several factors, including the size of the publication space. Insurance companies also have their own computations on the insurance premiums
to be paid by the insurer, which the courts cannot be expected to be knowledgeable of. To be sure, in arguing for the Court to take judicial
notice of the alleged expenses, MBTC merely cited Sec. 3 of Act 3135 requiring publication and the mortgage agreement provision on the
insurance requirement, without more.67 Said provisions never expressly provided for the actual cost of publication and insurance, nor any
formulae for determining the same. Thus, the claims for publication and insurance expenses ought to be disallowed.

Third, the claims for registration fees and miscellaneous expenses were also never substantiated by receipts

Conclusion

In sum, given petitioner's failure to establish the sum due at the time the mortgaged properties were foreclosed and sold via public auction, as
well as the expenses incurred in those foreclosure proceedings, it would be impossible for the Court to determine whether or not there is,
indeed, a deficiency balance petitioner would have been entitled to.

In demanding payment of a deficiency in an extrajudicial foreclosure of mortgage, proving that there is indeed one and what its exact amount
is, is naturally a precondition thereto. The same goes with a claim for reimbursement of foreclosure expenses, as here. In this regard, it is
elementary that the burden to prove a claim rests on the party asserting such. Ei incumbit probatio qui dicit, non qui negat. He who asserts,
not he who denies, must prove.68 For having failed to adequately substantiate its claims, We cannot sustain the finding of the trial court that
respondents are liable for the claimed deficiency, inclusive of foreclosure expenses. Neither can We sustain the CA's finding that respondents
are entitled to the recovery of the alleged excess payment.

Roldan vs. Barrios

G.R. No. 214803 April 23, 2018 J. Peralta

Facts: petitioner Alona G. Roldan filed an action for foreclosure of real estate mortgage against respondents spouses Barrios.

The RTC dismissed the foreclosure cases finding that being a real action and the assessed value of the mortgaged property is only P13,380.00,
it is the first level court which has jurisdiction over the case and not the RTC

Petitioner filed the instant petition for certiorari alleging grave abuse of discretion committed by the RTC when it ordered the dismissal of
her foreclosure case without prejudice and denying her motion for reconsideration. She argues that foreclosure of mortgage is an action
incapable of pecuniary estimation which is within the exclusive jurisdiction of the RTC.

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Petitioner cites Russell v. Vestil to show that action for foreclosure of mortgage is an action incapable of pecuniary estimation and, therefore,
within the jurisdiction of the RTC

Issue: whether the RTC committed grave abuse of discretion in dismissing the foreclosure cases filed with it on the ground of lack of
jurisdiction.

Held: The Court ruled in the negative. The RTC exercises exclusive original jurisdiction in civil actions where the subject of the litigation is
incapable of pecuniary estimation. It also has jurisdiction in civil cases involving title to, or possession of, real property or any interest in it
where the assessed value of the property involved exceeds P20,000.00, and if it is below P20,000.00, it is the first level court which has
jurisdiction.

An action "involving title to real property" means that the plaintiffs cause of action is based on a claim that he owns such property or that he
has the legal right to have exclusive control, possession, enjoyment, or disposition of the same.

The allegations and reliefs sought in petitioner's action for foreclosure of mortgage showed that the loan obtained by respondents spouses
Barrios from petitioner fell due and they failed to pay such loan which was secured by a mortgage on the property of the respondents spouses;
and prayed that in case of default of payment of such mortgage indebtedness to the court, the property be ordered sold to answer for the
obligation under the mortgage contract and the accumulated interest. It is worthy to mention that the essence of a contract of mortgage
indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the
payment of money or the fulfillment of an obligation to answer the amount of indebtedness, in case of default in payment. Foreclosure is but a
necessary consequence of non-payment of the mortgage indebtedness. In a real estate mortgage when the principal obligation is not paid when
due, the mortgagee has the right to foreclose the mortgage and to have the property seized and sold with the view of applying the proceeds to
the payment of the obligation. Therefore, the foreclosure suit is a real action so far as it is against property, and seeks the judicial recognition
of a property debt, and an order for the sale of the res.

As foreclosure of mortgage is a real action, it is the assessed value of the property which determines the court's jurisdiction. Considering that
the assessed value of the mortgaged property is only P13,380.00, the RTC correctly found that the action falls within the jurisdiction of the
first level court. er Section 33(3) of BP 129 as amended.

This Court is not persuaded as to the case cite by petitioner. In Singsong vs. Isabela Sawmill, we had the occasion to rule that:

[I]n determining whether an action is one the subject matter of which is not capable of pecuniary estimation, this Court has
adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a
sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in
the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other than the
right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought,
this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are
cognizable exclusively by courts of first instance (now Regional Trial Courts).

Examples of actions incapable of pecuniary estimation are those for specific performance, support, or foreclosure of mortgage or
annulment of judgment; also actions questioning the validity of a mortgage, annulling a deed of sale or conveyance and to recover
the price paid and for rescission, which is a counterpart of specific performance.

While actions under Sec. 33(3) of B.P. 129 are also incapable of pecuniary estimation, the law specifically mandates that they are
cognizable by the MTC, METC, or MCTC where the assessed value of the real property involved does exceed P20,000.00 in
Metro Manila, or P50,000.00, if located elsewhere. If the value exceeds P20,000.00 or P50,000.00 as the case may be, it is the
Regional Trial Courts which have jurisdiction under Sec. 19(2). However, the subject matter of the complaint in this case is
annulment of a document denominated as "DECLARATION OF HEIRS AND DEED OF CONFIRMATION OF PREVIOUS
ORAL PARTITION."

Clearly, the last paragraph clarified that while civil actions which involve title to, or possession of, real property, or any interest therein, are
also incapable of pecuniary estimation as it is not for recovery of money, the court's jurisdiction will be determined by the assessed value of
the property involved.

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