G.R. No.

L-15947 April 30, 1965

JOSE F. APARRI, petitioner,

vs.
THE COURT OF APPEALS, SALVACION E. VDA. DE FERRO and LINO BAJAR, Sheriff of
Masbate, respondents.

Ernesto P. Valencia for petitioner.

Felix L. Moya for respondent Salvacion E. Vda. de Ferro.

REGALA, J.:

The record shows that on June 9, 1947, Jose F. Aparri mortgaged a piece of land to the Philippine
National Bank to secure the payment of P600.00. The mortgage was registered in the Office of the
Register of Deeds of Masbate on June 21, 1947.

On July 1, 1953, a criminal case for malversation 1 of public funds amounting to P5,167.24 was filed
against Aparri in the Justice of the Peace Court of Masbate, Masbate, which, on July 9, 1953, issued
a writ of preliminary attachment against Aparri's properties, including the one he had mortgaged to
Philippine National Bank.

In the meantime, Aparri failed to pay his indebtedness and so the Philippine National Bank
extrajudicially foreclosed the mortgage. Subsequently, the property was sold at public auction for
P1,500 to Salvacion E. Vda. de Ferro, to whom a certificate of sale was given on January 28, 1955.

Of the amount of P1,500, P1,400 was paid to the Philippine National Bank; P18.60 was paid to the
sheriff for his fees; and P477.40 was retained by the sheriff on the strength of an opinion of the
Auditor General, in view of Aparri's pending criminal case, and the writ of preliminary attachment
issued therein.

There is no question that within the one-year period of redemption, Aparri tendered to Ferro the sum
of P1,265.32 and that when the latter refused to receive the same, Aparri paid the amount to the
provincial sheriff. The sheriff refused to execute the corresponding certificate of redemption in favor
of Aparri even as he refused to place Ferro in possession of the property and to execute in her favor
a final deed of sale.

Ferro brought the matter on mandamus to the Court of First Instance of Masbate. After trial, the
lower court rendered judgment in favor of the petitioner and against the respondent —

1. Ordering the respondent Provincial Sheriff or anybody acting in his place to execute the
absolute and final deed of sale of the land described in paragraph 3 of the petition;

2. Ordering the respondent Provincial Sheriff or anybody acting in his place to place the
petitioner in possession of the above described property;

3. Ordering the respondent Aparri to pay the petitioner the sum of P450.00 as actual
damages, representing attorney's fees and expenses of litigation;

4. Dismissing the counterclaim and the cross-claim of the respondent Aparri for lack of merit.

On appeal to the Court of Appeals, said decision was affirmed. Hence, Aparri's petition for review.

Section 6 of Act No. 3135, as amended by Act No. 4148, provides:

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 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.

Sections 464-466 of the Code of Civil Procedure, however, have been superseded by Sections 29 to
31 of Rule 39 of the Revised Rules of Court.

Under Section 30 of Rule 39, in order to effect redemption, the judgment debtor must pay the
purchaser within twelve months after the sale, "the amount of his purchase, with one per centum per
month interest thereon in addition, up to the time of redemption, together with the amount of any
assessments or taxes which the purchaser may have paid thereon after the purchase, and interest
on such last-named amount at the same rate," otherwise, the purchaser may justly refuse the tender
if it is for less than this amount. (See Ordoñez v. Villaroman, 44 O.G. [No. 6] 2226) Indeed, the
payment mentioned in the rule must be made by tendering and delivering to the purchaser the sum
of money required for the purpose. Obviously, he cannot be compelled to accept a promissory note;
much less may he be compelled to accept an amount in the possession of a third person, which
amount, to make things worst, is the subject of an adverse claim by another party.

This is exactly the situation obtaining in the present case. Aparri tendered to Mrs. Ferro only the sum
of P1,265.32, an amount admitted to be P477.40 less than what he was under obligation to pay as
redemption money. In effect, he told the purchaser: Here, take this sum of P1,265.32, and get the
remaining P477.40 from the office of the Sheriff of Masbate who, as stated heretofore, was not
willing to part away with the amount because it was claimed by the Government by reason of the
preliminary attachment levied upon the parcel of land subject of redemption.

Aparri contends that as the prosecution in the criminal case did not make any move to attach the
surplus amount of P477.40, the sheriff had no right to retain the same and that, added to this amount
the sum of P1,265.32, which he had paid to the sheriff, is equal to the amount paid by Ferro for the
land and its taxes, assessments and interest. 1äwphï1.ñët

We disagree with this contention. The rule is that if any property under attachment is sold by order of
the court because it is fungible in nature or by virtue of a writ of execution issued to satisfy the
judgment rendered, the proceeds of the sale take the place of the property and should be used by
the Sheriff to pay the judgment, and the balance, if any, should be retained by him as security for the
satisfaction of the claims of other parties with a subordinate lien on the same property, such as that
of another attaching creditor.

Petitioner further argues that because the lien by attachment upon the property in question was
junior to the mortgage lien in favor of the Bank, the attaching creditor had nothing more than the right
to redeem the property after the extrajudicial foreclosure sale.

It is urged for the applicant that no opposition has been registered against his petition on the issues
above-discussed. Absence of opposition, however, does not preclude the scanning of the whole
record by the appellate court, with a view to preventing the conferment of citizenship to persons not
fully qualified therefor (Lee Ng Len vs. Republic, G.R. No. L-20151, March 31, 1965). The applicant's
complaint of unfairness could have some weight if the objections on appeal had been on points not
previously passed upon. But the deficiencies here in question are not new but well-known, having
been ruled upon repeatedly by this Court, and we see no excuse for failing to take them into
account.1äwphï1.ñët

Distinction should be made, in this connection, of the three different kinds of sales, under the law,
namely: an ordinary execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale.
While the three are identical in most of the essential formalities required to make the sale, they differ
from one another in important respects as far as it concerns their respective effects on the rights of
the parties and the subject matter of the sale.

There is no question that in the case of an execution sale of real estate to satisfy a money judgment,
a redemptioner, as far as the property sold is concerned, has only the right to redeem it within the
period and under the conditions provided by law. However, the case is different when the sale is the
result of judicial foreclosure proceedings.

Section 4 of Rule 68 provides that the money realized from the sale of the mortgaged property, after
deducting the cost of the sale, shall be paid to the mortgagee foreclosing his mortgage, and the
balance or residue, if any, shall be paid to junior encumbrancers in the order of their priority to be
ascertained by the court. Only if there be no such junior encumbrancers or there be a balance or
residue after paying their claims, is said balance or residue to be delivered to the mortgagor.

Act No. 3135, as amended by Act No. 4148, which governs extrajudicial foreclosure sales, expressly
provides that the debtor, his successors in interest or any judicial creditor of said debtor, or any
person having a lien on the property subsequent to the mortgage under which it was sold, may
redeem the same within one year from and after the date of the sale, said redemption to be
governed by the provisions of Sections 464-466 of the Code of Civil Procedure (now the pertinent
sections of Rule 39). The said provision, however, is silent on the matter of what should be done in
the event the highest bid made for the property at the extrajudicial foreclosure sale is in excess of
the mortgage debt; whether the balance of residue shall be delivered to the mortgagor or shall be
used to pay the junior encumbrancers. Neither does said statute specifically limit the right of junior
encumbrancers to the exercise of their right of redemption.
The problem, therefore, is whether in the event there be a balance or residue, the same should be
delivered to the mortgagor, following the rule in ordinary execution sales where the property sold is
not subject to any existing subordinate liens, or it should be used to pay the junior encumbrancers,
as is provided in the case of judicial foreclosure sales. It is the considered opinion of this Court that
the rule and practice in judicial foreclosure sales with respect to any balance or residue should be
likewise applied to extrajudicial foreclosure sales with respect to any balance or residue should be
likewise applied to extrajudical foreclosure sales ion a similar event, considering that both are
foreclosure sales. Accordingly, the balance or residue of P477.40 referred to should be used to pay
junior liens on the property subject of the extrajudicial foreclosure sale, such as the lien by
attachment acquired by the Government.

Coming now to Ferro's counter-assignment of error that —

Co-respondent Court of Appeals erred in not assessing in favor of respondent Salvacion

Vda. de Ferro and against the petitioner herein actual damages representing the value of the
products of the land in question from January 28, 1955.

the principle is that while an appellee who is not an appellant, may assign errors in her brief, she
may do so only to maintain the judgment on other grounds, but not to have the judgment modified or
reversed, for, in such case she must appeal. (2 Moran Comments on the Rules of Court 427-428
[1963])

PREMISES CONSIDERED, finding no error in the decision under review the same is hereby
affirmed. No pronouncement as to costs.

G.R. No. 137792 August 12, 2003

SPOUSES RICARDO ROSALES and ERLINDA SIBUG, Petitioners,

vs.
SPOUSES ALFONSO and LOURDES SUBA, THE CITY SHERIFF OF MANILA, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Challenged in the instant petition for review on certiorari are the Resolutions dated November 25,
1

1998 and February 26, 1999 of the Court of Appeals dismissing the petition for certiorari in CA G.R.
SP No. 49634, "Spouses Ricardo Rosales and Erlinda Sibug vs. Alfonso and Lourdes Suba."

On June 13, 1997, the Regional Trial Court, Branch 13, Manila rendered a Decision in Civil Cases
2

Nos. 94-72303 and 94-72379, the dispositive portion of which reads:

"WHEREFORE, judgment is rendered:

(1) Declaring the Deed of Sale of Exhibit D, G and I, affecting the property in question, as an
equitable mortgage;

(2) Declaring the parties Erlinda Sibug and Ricardo Rosales, within 90 days from finality of
this Decision, to deposit with the Clerk of Court, for payment to the parties Felicisimo
Macaspac and Elena Jiao, the sum of ₱65,000.00, with interest at nine (9) percent per
annum from September 30, 1982 until payment is made, plus the sum of ₱219.76 as
reimbursement for real estate taxes;

(3) Directing the parties Felicisimo Macaspac and Elena Jiao, upon the deposit on their
behalf of the amounts specified in the foregoing paragraph, to execute a deed of
reconveyance of the property in question to Erlinda Sibug, married to Ricardo Rosales, and
the Register of Deeds of Manila shall cancel Transfer Certificate of Title No. 150540 in the
name of the Macaspacs (Exh. E) and issue new title in the name of Sibug;

(4) For non-compliance by Sibug and Rosales of the directive in paragraph (2) of this
dispositive portion, let the property be sold in accordance with the Rules of Court for the
release of the mortgage debt and the issuance of title to the purchaser.

"SO ORDERED." 3

The decision became final and executory. Spouses Ricardo and Erlinda Rosales, judgment debtors
and herein petitioners, failed to comply with paragraph 2 quoted above, i.e., to deposit with the Clerk
of Court, within 90 days from finality of the Decision, ₱65,000.00, etc., to be paid to Felicisimo
Macaspac and Elena Jiao. This prompted Macaspac, as judgment creditor, to file with the trial court
a motion for execution.

Petitioners opposed the motion for being premature, asserting that the decision has not yet attained
finality. On March 5, 1998, they filed a manifestation and motion informing the court of their difficulty
in paying Macaspac as there is no correct computation of the judgment debt.

On February 23, 1998, Macaspac filed a supplemental motion for execution stating that the amount
due him is ₱243,864.08.

Petitioners failed to pay the amount. On March 25, 1998, the trial court issued a writ of execution
ordering the sale of the property subject of litigation for the satisfaction of the judgment.

On May 15, 1998, an auction sale of the property was held wherein petitioners participated.
However, the property was sold for ₱285,000.00 to spouses Alfonso and Lourdes Suba, herein
respondents, being the highest bidders. On July 15, 1998, the trial court issued an order confirming
the sale of the property and directing the sheriff to issue a final deed of sale in their favor.

On July 28, 1998, Macaspac filed a motion praying for the release to him of the amount of
₱176,176.06 from the proceeds of the auction sale, prompting petitioners to file a motion praying
that an independent certified public accountant be appointed to settle the exact amount due to
movant Macaspac.

Meanwhile, on August 3, 1998, the Register of Deeds of Manila issued a new Transfer Certificate of
Title over the subject property in the names of respondents.

On August 18, 1998, respondents filed with the trial court a motion for a writ of possession,
contending that the confirmation of the sale "effectively cut off petitioners’ equity of redemption."
Petitioners on the other hand, filed a motion for reconsideration of the order dated July 15, 1998
confirming the sale of the property to respondents.

On October 19, 1998, the trial court, acting upon both motions, issued an order (1) granting
respondents’ prayer for a writ of possession and (2) denying petitioners’ motion for reconsideration.
The trial court ruled that petitioners have no right to redeem the property since the case is for judicial
foreclosure of mortgage under Rule 68 of the 1997 Rules of Civil Procedure, as amended. Hence,
respondents, as purchasers of the property, are entitled to its possession as a matter of right.

Forthwith, petitioners filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP
No. 49634, alleging that the trial court committed grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing a writ of possession to respondents and in denying their motion for
reconsideration of the order dated July 15, 1998 confirming the sale of the property to said
respondents.

On November 25, 1998, the CA dismissed outright the petition for lack of merit, holding that there is
no right of redemption in case of judicial foreclosure of mortgage. Petitioners’ motion for
reconsideration was also denied.

Hence this petition.

In the main, petitioners fault the Appellate Court in applying the rules on judicial foreclosure of
mortgage. They contend that their loan with Macaspac is unsecured, hence, its payment entails an
execution of judgment for money under Section 9 in relation to Section 25, Rule 39 of the 1997
Rules of Civil Procedure, as amended, allowing the judgment debtor one (1) year from the date
4

of registration of the certificate of sale within which to redeem the foreclosed property.

Respondents, upon the other hand, insist that petitioners are actually questioning the decision of the
trial court dated June 13, 1997 which has long become final and executory; and that the latter have
no right to redeem a mortgaged property which has been judicially foreclosed.

Petitioners’ contention lacks merit. The decision of the trial court, which is final and executory,
declared the transaction between petitioners and Macaspac an equitable mortgage. In Matanguihan
vs. Court of Appeals, this Court defined an equitable mortgage as "one which although lacking in
5

some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals
the intention of the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law." An equitable mortgage is not different from a real estate mortgage,
and the lien created thereby ought not to be defeated by requiring compliance with the formalities
necessary to the validity of a voluntary real estate mortgage. Since the parties’ transaction is an
6

equitable mortgage and that the trial court ordered its foreclosure, execution of judgment is governed
by Sections 2 and 3, Rule 68 of the 1997 Rules of Civil Procedure, as amended, quoted as follows:
SEC. 2. Judgment on foreclosure for payment or sale. – If upon the trial in such action the court shall
find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff
upon the mortgage debt or obligation, including interest and other charges as approved by the court,
and costs, and shall render judgment for the sum so found due and order that the same be
paid to the court or to the judgment obligee within a period of not less that ninety (90) days
nor more than one hundred twenty (120) days from the entry of judgment, and that in default
of such payment the property shall be sold at public auction to satisfy the judgment.

SEC. 3. Sale of mortgaged property, effect. – When the defendant, after being directed to do so as
provided in the next preceding section, fails to pay the amount of the judgment within the period
specified therein, the court, upon motion, shall order the property to be sold in the manner and
under the provisions of Rule 39 and other regulations governing sales of real estate under execution.
Such sale shall not effect the rights of persons holding prior encumbrances upon the property or a
part thereof, and when confirmed by an order of the court, also upon motion, it shall operate to
divest the rights in the property 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.

x x x."

In Huerta Alba Resort, Inc. vs. Court of Appeals, we held that the right of redemption is not
7

recognized in a judicial foreclosure, thus:

"The right of redemption in relation to a mortgage–understood in the sense of a prerogative

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

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

"Where the foreclosure is judicially effected, however, no equivalent right of redemption

exists. The law declares that a judicial foreclosure sale, ‘when confirmed by an order of the
court, x x x shall operate to divest the rights of all the parties to the action and to vest their
rights in the purchaser, subject to such rights of redemption as may be allowed by law.’ Such
rights exceptionally ‘allowed by law’ (i.e., even after the confirmation by an order of the court) are
those granted by the charter of the Philippine National Bank (Act Nos. 2747 and 2938), and the
General Banking Act (R.A.337). These laws confer on the mortgagor, his successors in interest or
any judgment creditor of the mortgagor, the right to redeem the property sold on foreclosure–after
confirmation by the court of the foreclosure sale–which right may be exercised within a period of one
(1) year, counted from the date of registration of the certificate of sale in the Registry of Property.

"But, to repeat, no such right of redemption exists in case of judicial foreclosure of a

mortgage if the mortgagee is not the PNB or a bank or banking institution. In such a case, the
foreclosure sale, ‘when confirmed by an order of the court, x x x shall operate to divest the
rights of all the parties to the action and to vest their rights in the purchaser.’ There then
exists only what is known as the equity of redemption. This is simply the right of the
defendant mortgagor to extinguish the mortgage and retain ownership of the property by
paying the secured debt within the 90-day period after the judgment becomes final, in
accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation.

xxx

"This is the mortgagor’s equity (not right) of redemption which, as above stated, may be exercised by
him even beyond the 90-day period ‘from the date of service of the order,’ and even after the
foreclosure sale itself, provided it be before the order of confirmation of the sale. After such order of
confirmation, no redemption can be effected any longer." (Italics supplied)

Clearly, as a general rule, there is no right of redemption in a judicial foreclosure of mortgage. The
only exemption is when the mortgagee is the Philippine National Bank or a bank or a banking
institution. Since the mortgagee in this case is not one of those mentioned, no right of redemption
exists in favor of petitioners. They merely have an equity of redemption, which, to reiterate, is simply
their right, as mortgagor, to extinguish the mortgage and retain ownership of the property by paying
the secured debt prior to the confirmation of the foreclosure sale. However, instead of exercising this
equity of redemption, petitioners chose to delay the proceedings by filing several manifestations with
the trial court. Thus, they only have themselves to blame for the consequent loss of their property.

WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals dated November
25, 1998 and February 26, 1999 in CA G.R. SP No. 49634 are AFFIRMED.
G.R. No. 201892 JULY 22, 2015

NORLINDA S. MARILAG, Petitioner,

vs.
MARCELINO B. MARTINEZ, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari are the Decision dated November 4, 2011 and the
1 2

Resolution dated May 14, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 81258 which
3

recalled and set aside the Orders dated November 3, 2003 and January 14, 2004 of the Regional
4 5

Trial Court (RTC) of Las Piñas City, Branch 202 (court a quo) in Civil Case No. 980156, and
reinstated the Decision dated August 28, 2003 directing petitioner Norlinda S. Marilag (petitioner) to
6

return to respondent Marcelino B. Martinez (respondent) the latter's excess payment, plus interest,
and to pay attorney's fees and the costs of suit.

The Facts

On July 30, 1992, Rafael Martinez (Rafael), respondent's father, obtained- from petitioner a loan in
the amount of ₱160,000.00, with a stipulated monthly interest of five percent ( 5% ), payable within a
period of (6) months. The loan was secured by a real estate mortgage over a parcel of land covered
by Transfer Certificate of Title (TCT) No. T-208400. Rafael failed'. to settle his obligation upon
maturity and despite repeated demands, prompting petitioner to file a Complaint for Judicial
Foreclosure of Real Estate Mortgage before the RTC of Imus, Cavite, Branch 90 (RTC-lmus) on7

November 10, 1995, docketed as Civil Case No. 1208-95 (judicial foreclosure case).
8

Rafael failed to file his answer and, upon petitioner's motion, was declared in default. After an ex
parte presentation of petitioner's evidence, the RTC-lmus issued a Decision dated January 30,
9

1998, (January 30, 1998 Decision) in the foreclosure case, declaring the stipulated 5% monthly
interest to be usurious and reducing the same to 12% per annum (p.a.). Accordingly, it ordered
Rafael to pay petitioner the amount of ₱229,200.00, consisting of the principal of ₱160,000.00 and
accrued interest of ₱59,200.00 from July 30, 1992 to September 30, 1995. Records do not show
10

that this Decision had already attained finality.

Meanwhile, prior to Rafael's notice of the above decision, respondent agreed to pay Rafael's
obligation to petitioner which was pegged at ₱689,000.00. After making a total payment of
₱400,000.00, he executed a promissory note dated February 20, 1998 (subject PN), binding
11 12

himself to pay on or before March 31, 1998 the amount of ₱289,000.00, "representing the balance of
the agreed financial obligation of [his] father to [petitioner]." After learning of the January 30, 1998
13

Decision, respondent refused to pay the amount covered by the subject PN despite demands,
prompting petitioner to file a complaint for sum of money and damages before the court a quo on
14

July 2, 1998, docketed as Civil Case No. 98-0156 (collection case).

Respondent filed his answer, contending that petitioner has no cause of action against him. He
15

averred that he has fully settled Rafael's obligation and that he committed a mistake in paying more
than the amount due under the loan, i.e., the amount of ₱229,200.00 as adjudged by the RTC-Imus
in the judicial foreclosure case which, thus, warranted the return of the excess payment. He
therefore prayed for the dismissal of the complaint, and interposed a compulsory counterclaim for
the release of the mortgage, the return of the excess payment, and the payment of moral and
exemplary damages, attorney's fees and litigation expenses. 16

The Court A Quo's Ruling

In a Decision dated August 28, 2003 (August 28, 2003 Decision), the court a quo denied recovery
17

on the subject PN. It found that the consideration for its execution was Rafael's indebtedness to
petitioner, the extinguishment of which necessarily results in the consequent extinguishment of the
cause therefore. Considering that the RTC-Imus had adjudged Rafael liable to petitioner only for the
amount of ₱229,200.00, for which a total of ₱400,000.00 had already been paid, the court a quo
found no valid or compelling reason to allow petitioner to recover further on the subject PN. There
being an excess payment of Pl 71,000.00, it declared that a quasi-contract (in the concept of solution
indebiti) exists between the parties and, accordingly, directed petitioner to return the said amount to
respondent, plus 6% interest p.a.18 reckoned from the date of judicial demand on August 6, 1998
19

until fully paid, and to pay attorney's fees and the costs of suit. 20

In an Order dated November 3, 2003 (November 3, 2003 Order), however, the court a quo granted
21

petitioner's motion for reconsideration, and recalled and set aside its August 28, 2003 Decision. It
declared that the causes of action in the collection and foreclosure cases are distinct, and
respondent's failure to comply with his obligation under the subject PN justifies petitioner to seek
judicial relief. It further opined that the stipulated 5% monthly interest is no longer usurious and is
binding on respondent considering the suspension of the Usury Law pursuant to Central Bank
Circular 905, series of 1982. Accordingly, it directed respondent to pay the amount of ₱289,000.00
due under the subject PN, plus interest at the legal rate reckoned from the last extra judicial demand
on May 15, 1998, until fully paid, as well as attorney's fees and the costs of suit. 22

Aggrieved, respondent filed a motion for reconsideration which was denied in an Order dated
23 24

January 14, 2004, prompting him to elevate the matter to the CA. 25

The CA Ruling

In a Decision dated November 4, 2011, the CA recalled and set aside the court a quo 's November
26

3, 2003 and January 14, 2004 Orders, and reinstated the August 28, 2003 Decision. It held that the
doctrine of res judicata finds application in the instant case, considering that both the judicial
27

foreclosure and collection cases were filed as a consequence of the non-payment of Rafael's loan,
which was the principal obligation secured by the real estate mortgage and the primary
consideration for the execution of the subject PN. Since res judicata only requires substantial, not
actual, identity of causes of action and/or identity of issue, it ruled that the judgment in the judicial
28

foreclosure case relating to Rafael's obligation to petitioner is final and conclusive on the collection
case.

Petitioner's motion for reconsideration was denied in a Resolution dated May 14, 2012; hence, this
29

petition.

The Issue before the Court

The essential issue for the Court's resolution is whether or not the CA committed reversible error in
upholding the dismissal of the collection case.

The Court's Ruling

The petition lacks merit.

A case is barred by prior judgment or res judicata when the following elements concur: (a) the
judgment sought to bar the new action must be final; ( b) the decision must have been rendered by a
court having jurisdiction over the subject matter and the parties; (c) the disposition of the case must
be a judgment on the merits; and ( d) there must be as between the first and second action, identity
of parties, subject matter, and causes of action. 30

After a punctilious review of the records, the Court finds the principle of res judicata to be
inapplicable to the present case. This is because the records are bereft of any indication that the
August 28, 2003 Decision in the judicial foreclosure case had already attained finality, evidenced, for
instance, by a copy of the entry of judgment in the said case. Accordingly, with the very first element
of res judicata missing, said principle cannot be made to obtain.

This notwithstanding, the Court holds that petitioner's prosecution of the collection case was barred,
instead, by the principle of litis pendentia in view of the substantial identity of parties and singularity
of the causes of action in the foreclosure and collection cases, such that the prior foreclosure case
barred petitioner's recourse to the subsequent collection case.

To lay down the basics, litis pendentia, as a ground for the dismissal of a civil action, refers to
that situation where in another action is pending; between the same parties for the same
cause of action, such that the second action becomes unnecessary and vexatious. For the bar
of litis pendentia to be invoked, the following requisites must concur: (a) identity of parties, or at least
such parties as represent the same interests in both actions; ( b) identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and ( c) the identity of the two preceding
particulars is such that any judgment rendered in the pending case, regardless of which party is
successful would amount to res judicata in the other. The underlying principle of litis pendentia is
31

the theory that a party is not allowed to vex another more than once regarding the same subject
matter and for the same cause of action. This theory is founded on the public policy that the same
subject matter should not be the subject of controversy in courts more than once, in order that
possible conflicting judgments may be avoided for the sake of the stability of the rights and status of
persons, and also to avoid the costs and expenses incident to numerous suits. Consequently, a
32

party will not be permitted to split up a single cause of action and make it a basis for several suits as
the whole cause must be determined in one action. To be sure, splitting a cause of action is a
33

mode of forum shopping by filing multiple cases based on the same cause of action, but with
different prayers, where the ~round of dismissal is litis pendentia (or res judicata, as the case
may be). 34
In this relation, it must be noted that the question of whether a cause of action is single and entire or
separate is not always easy to determine and the same must often be resolved, not by the general
rules, but by reference to the facts and circumstances of the particular case. The true rule, therefore,
is whether the entire amount arises from one and the same act or contract which must, thus, be
sued for in one action, or the several parts arise from distinct and different acts or contracts, for
which a party may maintain separate suits. 35

In loan contracts secured by a real estate mortgage, the rule is that the creditor-mortgagee has a
single cause of action against the debtor-mortgagor, i.e., to recover the debt, through the filing of a
personal action for collection of sum of money or the institution of a real action to foreclose on the
mortgage security. The two remedies are alternative, not cumulative or successive, and each
36 37

remedy is complete by itself. Thus, if the creditor-mortgagee opts to foreclose the real estate
mortgage, he waives the action for the collection of the unpaid debt, except only for the recovery of
38

whatever deficiency may remain in the outstanding obligation of the debtor-mortgagor after
deducting the bid price in the public auction sale of the mortgaged properties. Accordingly, a
39

deficiency judgment shall only issue after it is established that the mortgaged property was sold at
public auction for an amount less than the outstanding obligation.

In the present case, records show that petitioner, as creditor-mortgagee, instituted an action for
judicial foreclosure pursuant to the provisions of Rule 68 of the Rules of Court in order to recover on
Rafael's debt. In light of the foregoing discussion, the availment of such remedy thus bars recourse
to the subsequent filing of a personal action for collection of the same debt, in this case, under the
principle of litis pendentia, considering that the foreclosure case only remains pending as it was not
shown to have attained finality.

While the ensuing collection case was anchored on the promissory note executed by respondent
who was not the original debtor, the same does not constitute a separate and distinct contract of
loan which would have given rise to a separate cause of action upon breach. Notably, records are
bereft of any indication that respondent's agreement to pay Rafael's loan obligation and the
execution of the subject PN extinguished by novation the contract of loan between Rafael and
40

petitioner, in the absence of express agreement or any act of equal import. Well-settled is the rule
that novation is never presumed, but must be clearly and unequivocally shown. Thus, in order for a
new agreement to supersede the old one, the parties to a contract must expressly agree that they
are abrogating their old contract in favor of a new one, which was not shown here.
41

On the contrary, it is significant to point out that: (a) the consideration for the subject PN was the
same consideration that supported the original loan obligation of Rafael; (b) respondent merely
assumed to pay Rafael's remaining unpaid balance in the latter's behalf, i.e., as Rafael's agent or
representative; and (c) the subject PN was executed after respondent had assumed to pay
42

Rafael's obligation and made several payments thereon. Case law states that the fact that the
creditor accepts payments from a third person, who has assumed the obligation, will result merely in
the addition of debtors, not novation, and the creditor may enforce the obligation against both
debtors. for ready reference, the subject PN reads in full:
43

February 20, 1998

PROMISSORY NOTE

₱289, 000.00
===========

I, MARCELINO B. MARTINEZ son of Mr. RAFAEL MARTINEZ, of legal age, Filipino, married and a
resident of No. 091 Anabu I-A, Imus, Cavite, by these presents do hereby specifically and
categorically PROMISE, UNDERTAKE and bind myself in behalf of my father, to pay to Miss
NORLINDA S. MARILAG, Mortgagee-Creditor of my said father, the sum of TWO HUNDRED
EIGHTY NINE THOUSAND PESOS (₱289,000.00), Philippine Currency, on or before MARCH 31,
1998, representing the balance of the agreed financial obligation of my said father to her.
(Emphases supplied)

Executed at Pamplona I, Las Piñas City, Metro Manila, this 20th day of February, 1998.

Sgd.
MARCELINO B. MARTINEZ
Promissory 44

Petitioner's contention that the judicial foreclosure and collection cases enforce independent
rights must, therefore, fail because the Deed of Real Estate Mortgage and the subject PN both
45 46

refer to one and the same obligation, i.e., Rafael's loan obligation. As such, there exists only one
cause of action for a single breach of that obligation. Petitioner cannot split her cause of action on
Rafael's unpaid loan obligation by filing a petition for the judicial foreclosure of the real estate
mortgage covering the said loan, and, thereafter, a personal action for the collection of the unpaid
balance of said obligation not comprising a deficiency arising from foreclosure, without violating the
proscription against splitting a single cause of action, where the ground for dismissal is either res
judicata or litis pendentia, as in this case.

As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. v. lcaranga!. 47

For non-payment of a note secured by mortgage, the creditor has a single cause of action against
the debtor. This single cause of action consists in the recovery of the credit with execution of the
security. In other words, the creditor in his action may make two demands, the payment of the debt
and the foreclosure · of his mortgage. But both demands arise from the same cause, the
nonpayment of the debt, and, for that reason, they constitute a single cause of action. Though the
debt and the mortgage constitute separate agreements, the latter is subsidiary to the former, and
both refer to one and the same obligation. Consequently, there exists only one cause of action for a
single breach of that obligation. Plaintiff. then, by applying the rule above stated, cannot split up his
single cause of action by filing a complaint (or payment of the debt, and thereafter another complaint
(or foreclosure of the mortgage. If he does so, the filing of the first complaint will bar the subsequent
complaint. By allowing the creditor to file two separate complaints simultaneously or successively,
one to recover his credit and another to foreclose his mortgage, we will, in effect, be authorizing him
plural redress for a single breach of contract at so much cost to the courts and with so much
vexation and oppression to the debtor. (Emphases and underscoring supplied)

Further on the point, the fact that no foreclosure sale appears to have been conducted is of no
moment because the remedy of foreclosure of mortgage is deemed chosen upon the filing of the
complaint there for. In Suico Rattan & Buri Interiors, Inc. v. CA, it was explained:
48 49

x x x x In sustaining the rule that prohibits mortgage creditors from pursuing both the remedies of a
personal action for debt or a real action to foreclose the mortgage, the Court held in the case of
Bachrach Motor Co., Inc. v. Esteban Icarangal, et al. that a rule which would authorize the plaintiff to
bring a personal action against the debtor and simultaneously or successively another action against
the mortgaged property, would result not only in multiplicity of suits so offensive to justice and
obnoxious to law and equity, but also in subjecting the defendant to the vexation of being sued in the
place of his residence or of the residence of the plaintiff, and then again in the place where the
property lies. Hence, a remedy is deemed chosen upon the filing of the suit for collection or upon the
filing of the complaint in an action for foreclosure of mortgage, pursuant to the provisions of Rule 68
of the Rules of Court. As to extrajudicial foreclosure, such remedy is deemed elected by the
mortgage creditor upon filing of the petition not with any court of justice but with the office of the
sheriff of the province where the sale is to be made, in accordance with the provisions of Act No.
3135, as amended by Act No. 4118. (Emphases supplied)

As petitioner had already instituted judicial foreclosure proceedings over the mortgaged
property, she is now barred from availing herself of an ordinary action for
collection, regardless of whether or not the decision in the foreclosure case had attained finality. In
fine, the dismissal of the collection case is in order. Considering, however, that respondent's claim
for return of excess payment partakes of the nature of a compulsory counterclaim and, thus,
survives the dismissal of petitioner's collection suit, the same should be resolved based on its own
merits and evidentiary support. 50

Records show that other than the matter of interest, the principal loan obligation and the payments
made were not disputed by the parties. Nonetheless, the Court finds the stipulated 5% monthly
1âwphi1

interest to be excessive and unconscionable. In a plethora of cases, the Court has affirmed that
stipulated interest rates of three percent (3°/o) per month and higher are excessive, iniquitous,
unconscionable, and exorbitant, hence, illegal and void for being contrary to morals. In Agner v.
51 52 53

BPI Family Savings Bank, Inc., the Court had the occasion to rule:
54

Settled is the principle which this Court has affirmed in a number of cases that stipulated interest
rates of three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and
exorbitant. While Central Bank Circular No. 905-82, which took effect on January 1, 1983, effectively
removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity,
nothing in the said circular could possibly be read as granting carte blanche authority to lenders to
raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of
their assets. Since the stipulation on the interest rate is void for being contrary to morals, if not
against the law, it is as if there was no express contract on said interest rate; thus, the interest rate
may be reduced as reason and equity demand. (Emphases supplied)

As such, the stipulated 5% monthly interest should be equitably reduced to l % per month or 12%
p.a. reckoned from the execution of the real estate mortgage on July 30, 1992. In order to determine
whether there was any overpayment as claimed by respondent, we first compute the interest until
January 30, 1998 when he made a payment in the amount of ₱300,000.00 on Rafael's loan
55
obligation. Accordingly, the amount due on the loan as of the latter date is hereby computed as
follows:

Principal ₱160, 000.00

Add: Interest from 07/30/1992 to 01/30/1998

(₱160, 000.00 x 12% x 5.5 yrs.) 105,600.00

Amount due on the loan ₱265, 600.00

Less: Payment made on 01/30/98 (300,000.00)

Overpayment as of 01/30/98 (P 34,400.00) 56

Thus, as of January 30, 1998, only the amount of ₱265,600.00 was due under the loan contract, and
the receipt of an amount more than that renders petitioner liable for the return of the excess.
Respondent, however, made further payment in the amount of Pl 00,000.00 on the belief that the
57

subject loan obligation had not yet been satisfied. Such payments were, therefore, clearly made by
mistake, giving rise to the quasi-contractual obligation of solutio indebiti under Article 2154 in 58

relation to Article 2163 of the Civil Code. Not being a loan or forbearance of money, an interest of
59

6% p.a. should be imposed on the amount to be refunded and on the damages and attorney's fees
awarded, if any, computed from the time of demand until its satisfaction. Consequently, petitioner
60 61

must return to respondent the excess payments in the total amount of ₱134,400.00, with legal
interest at the rate of 6% p.a. from the filing of the Answer on August 6, 1998 interposing a
62

counterclaim for such overpayment, until fully settled.

However, inasmuch as the court a quo failed to state in the body of its decision the factual or legal
basis for the award of attorney's fees to the respondent, as required under Article 2208 of the New
63

Civil Code, the Court resolves to delete the same. The rule is well-settled that the trial court must
clearly state the reasons for awarding attorney's fees in the body of its decision, not merely in its
dispositive portion, as the appellate courts are precluded from supplementing the bases for such
award. 64

Finally, in the absence of showing that the court a quo 's award of the costs of suit in favor of
respondent was patently capricious, the Court finds no reason to disturb the same.
65

WHEREFORE, the petition is DENIED. The Decision dated November 4, 2011 and the Resolution
dated May 14, 2012 of the Court of Appeals in CA-G.R. CV No. 81258 reinstating the court a quo's
Decision dated August 28, 2003 in Civil Case No. 98-0156 are hereby AFFIRMED with the
MODIFICATIONS: (a) directing petitioner Norlinda S. Marilag to return to respondent Marcelino B.
Martinez the latter's excess payments in the total amount of ₱134,400.00, plus legal interest at the
rate of 6% p.a. from the filing of the Answer on August 6, 1998 until full satisfaction; and (b) deleting
the award of attorney's fees.

SO ORDERED.

ESTELA M.PERLAS-BERNABE
Associate Justice

WE CONCUR:

G.R. No. 169568 October 22, 2014

ROLANDO ROBLES, REPRESENTED BY ATTY. CLARA C. ESPIRITU, Petitioner,

vs.
FERNANDO FIDEL YAPCINCO, PATROCINIO B. YAPCINCO, MARIA CORAZON B. YAPCINCO,
and MARIA ASUNCION B. YAPCINCO-FRONDA, Respondents.

DECISION

BERSAMIN, J.:

The dispute involves the ownership of a judicially-foreclosed parcel of land sold at a public auction,
but which sale was not judicially confirmed. On one side is the petitioner, the successor in interest of
the purchaser in the public auction, and, on the other, the heirs of the mortgagor, who never
manifested interest in redeeming the property from the time of the foreclosure.
 The Case

Assailed herein are the decision and resolution of the Court of Appeals (CA) respectively
promulgated on February 24, 2005 and September 12, 2005 in CA-G.R. No. 79824 entitled Rolando
Robles, represented by Atty. Clara C. Espiritu v. Fernando Fidel Yapcinco,et al., reversing and
1

setting aside the decision rendered on July 7, 2003 by the Regional Trial Court, Branch63, in Tarlac
City (RTC). 2

Antecedents

The property in litiswas 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 3

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
4

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, topay Apolinario Cruz the
indebtedness secured by the mortgage plus interest; and in case of the failure topay after 90 days
from the date of the decision, the property would be sold at a public auction, to wit:
5

IN VIEW OF THE FOREGOING, the Court renders decision to the following effect:

A. Ordering the defendant Patrocinio Y. Kelly, as judicial administratrix of the intestate estate
of Fernando Yapcinco, to pay to Apolinario Cruz the total amount of ₱6,000.00, representing
the mortgage indebtedness of the defendant in favor of plaintiff, together with interest
thereon at the rate of 8% per annum payable from May 4, 1944, until all payment thereof;
and if after ninety (90) days from the date of this decision shall have become final and
executory the defendant shall not have paid the obligation herein ordered paid, the
properties mortgaged shall be sold by the Provincial Sheriff at Public Auction, and the
proceeds thereof to be applied and disposed of in accordance with law.

B. Dismissing the third-party complaint of defendant Fernando Yapcinco against Jose C.

Marcelo; and

C. Ordering the defendant to pay the costs of this suit.

SO ORDERED.

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, and he took possession of the property in due
6

course. However, he did not register the certificate of sale; nor was a judicial confirmation of sale
issued.

On September 5, 1972, ApolinarioCruz donated the property to his grandchildren, namely: Carlos C.
de la Rosa, Apolinario Bernabe, Ferdinand Cruz, and petitioner Rolando Robles. On August 29,
7

1991, however, Apolinario Bernabe falsified a deed ofabsolute sale, whereby he made it appear that
Yapcinco had sold the property to him, Ma. Teresita Escopete, Orlando Santos and Oliver
Puzon. As a consequence, the Register of Deeds cancelled Yapcinco’s TCT No. 20458 and issued
8

TCT No. 243719 in their names as co-vendees. The sale was annotated on TCT No. 20458. It
9

appears that another instrument dated August 28, 1991 was annotated on TCT No. 20458
purportedly releasing and cancelling the mortgage. Both instruments were annotated on February
11, 1992. 10

On February 3, 1993, Carlos C. dela Rosa and Ferdinand Cruz, the other donees, filed a complaint
for the nullification of the contract of sale, cancellation of title and reconveyance against Apolinario
Bernabe and his co-vendees, but the case was not aggressively pursued inasmuch as the parties
were first degree cousins. 11

On January 2, 2000, the respondents, all heirs of the Spouses Yapcinco, instituted an action against
Apolinario Bernabe and his covendees in the Regional Trial Court (RTC) in Tarlac 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; that the property was released from the mortgage per Entry No. 32-2182 in the
12

Memorandum of Incumbrances; and that the deed ofabsolute sale between Fernando Yapcinco and
Bernabe, et al. was void and ineffectual because the Spouses Yapcinco had already been dead as
of the date of the sale. 13

Defendants Apolinario Bernabe and his co-vendees were declared in default.

On September 13, 2001, the RTC, Branch 64, in Tarlac 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. 14

On December 17, 2002, the petitioner filed an action for the nullification of document, cancellation of
title, reconveyance and damages against the respondents (Civil Case No. 9436). He averred that
15

the heirs of Yapcinco had acted in bad faith in causing the issuance of TCT No. 354061 because
they had known fully well that the property had long been excluded from the estate of Yapcinco by
virtue of the CFI decision dated July 27, 1956, and which the CA affirmed on April 25, 1958; that a
certificate of absolute sale was issued in the name of ApolinarioCruz as early as 1959; and that he
had a vested right in the property pursuant to the deed of donation executed on September 5, 1972
by Apolinario Cruz in his favor, among others. The respondents countered thatTCT No. 20458
contained an annotation to the effect that the property had been released from the mortgage by
virtue of an instrument dated August 28, 2001; and that, in any case, the certificate of absolute
saleand the deed of donation relied upon by the petitioner were not even inscribed in TCT No.
20458. 16

Ruling of the RTC

On July 7, 2003, the RTC renderedits judgment, disposing thusly:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff by declaring the subject land
covered by TCT No. 354067 to be owned by the late Apolinario Cruz and is part of his estate; and

1. declaring null and void TCT No. 354067 and that a new title be issued to Apolinario Cruz.
Defendants should deliver to plaintiff or to this Court the owner’s copy of TCT No. 354067; if
they will not do so after finality of this judgment, the Registry of Deeds is nevertheless
authorized to cancel TCT NO. 354067 and issue a new one inname [the] of Apolinario Cruz,
even without the surrender of the owner’s copy;

2. declaring as null and void the extra-judicial settlement of the estate of late the Fernando
Yapcinco as far as the subject land is concerned;

3. claim for damages of both parties are denied.

SO ORDERED. 17

The RTC opined that the respondents could not claim to have no knowledge that the property in
litiswas 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 nonregistration 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. 18

Decision of the CA

The respondents appealed to the CA, insisting that the RTC erred, as follows: (1) in declaring TCT
No. 354061as null and void, and issuing a new one to Apolinario Cruz and including the subject land
in his estate; (2) in holding that res judicataapplied; (3) in not honoring that the TCT No. 20458 was
free from any lien and encumbrances; (4) in finding that they were aware of the proceedings in Civil
Case No. CA-G.R. No. 19332-R; (5) in not considering prescription, laches and estoppelsto bar the
action; and (6) in not considering that they had the better right to the property. 19

On February 24, 2005, the CA promulgated its assailed decision, reversing the judgment of the
20

RTC,and holding that due to the nonregistration of the certificate of sale, the period of redemption
did not commence to run. It also held thatApolinario Cruz never acquired title to the property and
could nothave conveyed and transferred ownership over the same to his grandchildren through the
deed of donation; and that contrary to the RTC’s finding, Patrocinio Yapcinco’s knowledge of
21

Apolinario Cruz’ interest over the subject property was not tantamount to registration. It found that
Patrocinio Yapcinco Kelly, the administratrix of the estate of Fernando F. Yapcinco, and Patrocinio
B. Yapcinco, one of the respondents, were two different persons, such that it could not be concluded
that the respondents had knowledge of the sale. Accordingly, it concluded that the heirs of Fernando
F. Yapcinco had the right to include the property as the asset of the estateof Fernando F. Yapcinco. 22

The petitioner moved for reconsideration, but on September 12, 2005, the CA denied his motion for
reconsideration, observing that there had been no order confirming the auction sale; hence, the
respondents were never divested of their rights and interest in the property. 23
 Issues

In this appeal, the petitioner posits the following issues:

THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT APOLINARIO CRUZ, AS

PURCHASER IN A JUDICIAL FORECLOSURE OF SALE, NEVER ACQUIRED TITLE TO THE
SUBJECT PROPERTY BY THE MERE OMISSION TO REGISTER THE CERTIFICATE OF SALE.

II

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT RESPONDENTS HAD NO

KNOWLEDGE OF, AND THUS COULD NOT BE BOUND BY, THE FORECLOSURE OF
MORTGAGE THAT WAS EARLIER CONDUCTEDAS THE SAME WAS NOT SUPPORTED BY THE
REAL FACTS AND CIRCUMSTANCES ATTENDANT TO THE INSTANT CASE.

III

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT HOLDING THAT WHATEVER RIGHTS
BEING CLAIMED BY THE RESPONDENTS IN THE INSTANT CASE ARE ALREADY BARRED BY
LACHES. 24

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; that the respondents were aware of the
25

auction sale and even actually participated in the proceedings leading to the foreclosure, but they
never tried to exercise their equity of redemption, before or even after the foreclosure sale; that the
26

family of Apolinario Cruz had been occupying the property for more than 40 years from the time of
the foreclosure sale; and that the respondents should not be allowed to recover the lot on the basis
of the non-registration of the certificate of sale.

The petitioner argues that the non-registration of the certificate of sale did not affect the title acquired
by Apolinario Cruz as the purchaser in the judicial foreclosure of mortgage; that the respondents’
27

actual knowledge of the judicial foreclosure was equivalentto automatic registration; that the doctrine
of indefeasibility of Torrens title was not absolute, and should yield to the right of another person
based on equitable principles of laches; that the finality of the judgment rendered in the judicial
28

action for foreclosure of mortgage was valid and binding on the respondents as the successors-
ininterest of the judgment debtor; and that whether or not respondent Patrocinio Yapcinco and
Patrocinio Yapcinco Kelly were the same persons, or whether Patrocinio Yapcinco was only the
daughter of the latter who was the administratrix was irrelevant because the respondents remained
charged with knowledge of the foreclosure sale by virtue of their being the successors-in-interest of
the mortgagor. 29

In contrast, the respondents maintainthat they were lawfully entitled to the property in litisbecause
there was no registration of the certificate of sale or confirmation from the court; that even the deed
30

of donation executed by Apolinario Cruz was not registered; that the issue revolved on whether or
31

not there was a valid transfer of ownership; and that with the release of mortgage being validly
32

registered in the Office of Registry of Deeds of Tarlac on February 11, 1992, thereby rendering the
title free from any lien and encumbrances, they already had the right to transfer the property in their
names. 33

Ruling of the Court

The petition for review is meritorious.

Before anything more, 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
extrajudicial foreclosure sale because the date of the 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
34

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
35

Cruz’s failure to register the 18 March 1958 Certificate of Absolute Salein the Office of the Register
of Deeds, the period of redemption did not commence to run." 36
The applicable rule on March 18, 1959, the date of the foreclosure sale, was Section 3, Rule 70 of 37

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 partthereof, 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. Although procedural rules
are not to be belittled or disregarded considering thatthey insure an orderly and speedy
administration of justice, it is equally true that litigation is not a game of technicalities. Law and
jurisprudence grant to the courtsthe prerogative to relax compliance with procedural rules of even
the most mandatory character, mindful of the duty to reconcile both the need to speedily put an end
to litigation and the parties’ rightto an opportunity to be heard. The Rules of Courtitself calls for a
38

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. 39

To better serve the ends of justice, the Court holds that the real issue to consider and resolve iswho
between the parties had the better right to the property, not whether there was a valid transfer of
ownership to Apolinario Cruz.

It was not denied that Fernando F.Yapcinco, as the mortgagor, did not pay his obligation, and that
his default led to the filing of the action for judicial foreclosure against him, in which he actively
participated in the proceedings, and upon his death was substituted by the administratrive of his
estate. In the end, the decision in the action for judicial foreclosure called for the holding of the public
sale of the mortgaged property. Due to the subsequent failure of the estate of Fernando F. Yapcinco
to exercise the equity of redemption, the property was sold at the public sale, and Apolinario Cruz
was declared the highest bidder. Under the circumstances, the respondents as the successors-in-
interest of Fernando F. Yapcinco were fully bound by that decision and by the result of the ensuing
foreclosure sale.

In this regard, determining whether Patrocinio Yapcinco Kelly, the adminsitratrix of the estate, and
respondent Patrocinio Yapcinco were one and the same person was not necessary. Even if they
were not one and the same person, they were both bound by the foreclosure proceedings by virtue
of their being both successors-in-interest of Fernando F. Yapcinco.

Although the respondents admitted the existence of the mortgage, they somehow denied knowledge
of its foreclosure. Yet, in asserting their superior right to the property, theyrelied on and cited the
1âwphi1

entry dated February 11, 1992 concerning the release of mortgage inscribed on TCT No. 20458.
This duplicity the Court cannotcountenance. Being the heirs and successors-in-interest of the late
Fernando F. Yapcinco, they could not repudiate the foreclosure sale and its consequences, and
escape such consequences that bound and concluded their predecessor-in-interest whose shoes
they only stepped into. Given their position on the lack of judicial confirmation of the sale in favor of
40

Apolinario Cruz, they should have extinguished the mortgage by exercising their equity of
redemption through paying the secured debt. They did not do so, and, instead, they sought the
annulment of TCT No. 243719 and caused the issuance of another title in their name.

Even assuming that there was no foreclosure of the mortgage, such that the respondents did not
need to exercise the equity of redemption, the legal obligation to pay off the mortgageindebtedness
in favor of Apolinario Cruz nonetheless devolved on them and the estate of Fernando F. Yapcinco.
They could not sincerely rely on the entry about the release or cancellation of the mortgage in TCT
No. 20458, because such entry appeared to be unfounded in the face of the lack of any showing by
them that either they or the estate of Fernando F. Yapcinco had settled the obligation.

The petitioner did not tender any explanation for the failure of Apolinario Cruz to secure the
judicialconfirmation of the sale. He reminds only that Apolinario Cruz and his successors-in-interest
and representatives have been in actual, notorious, publicand uninterrupted possession of the
property from the time of his purchase at the foreclosure sale until the present.

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 riseto 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 Y apcinco upon
the expiration of the equity of redemption.

WHEREFORE, the Court REVERSES and SETS ASIDE decision promulgated on February 24,
2005 by the Court of Appeals; RE INST ATES the decision rendered on July 7, 2003 by the Regional
Trial Court, Branch 63, in Tarlac City; and ORDERS the respondents to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

G.R. No. 222407

WHITE MARKETING DEVELOPMENT CORPORATION, Petitioner

vs.
GRANDWOOD FURNITURE & WOODWORK, INC., Respondent

DECISION

MENDOZA, J.:

This Petition for Review on Certiorari seeks to reverse and set aside the June 22, 2015
Decision and the December 28, 2015 Resolution of the Court of Appeals (CA) in CA-G.R. CV No.
1 2

103488, which reversed and set aside the July 21, 2014 Decision of the Regional Trial Court,
3

Branch 166, Pasig City (RTC), in a case involving the issue on the applicable redemption period.

On May 26, 1995, respondent Grandwood Furniture & Woodwork, Inc. (Grandwood) obtained a loan
in the amount of ₱40,000,000.00 from Metropolitan Bank and Trust Company (Metrobank). The loan
was secured by a real estate mortgage over a parcel of land covered by Transfer Certificate of
Title (TCT) No. 63678. 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). 4

On July 24, 2013, after Grandwood failed to pay the loan which already amounted to
₱68,941,239.46, CGAM3 initiated extrajudicial foreclosure proceedings of the real estate mortgage.
During the September 17, 2013 Auction Sale, petitioner White Marketing Development
Corporation (White Marketing) was declared the highest bidder and a certificate of sale was issued
in its favor.5

On September 30, 2013, the certificate of sale was registered and annotated on TCT No. 63678. On
November 21, 2013, 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. 6

Insisting on its right to redeem the property, Grandwood sent a letter, dated December 3, 2013, to
the Office of the Clerk of Court of the RTC (OCC-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. 7

The RTC Decision

In its July 21, 2014 Decision, the RTC dismissed the petition for mandamus. The trial court ruled that
the redemption period applicable in the mortgage between Metro bank and Grandwood was Section
47 of R.A. No. 8791 or the "General Banking Law of 2000. "The RTC wrote that by virtue of the said
8

law, Grandwood should have redeemed the property before the registration of the certificate of sale
on September 30, 2013, which was an earlier date than December 17, 2013, or three months after
the foreclosure on September 17, 2013. It further stressed that White Marketing acquired all the
rights of Metrobank in the mortgage contract, which was eventually assigned to CGAM3. The
dispositive portion of the RTC decision reads:

WHEREFORE, premises considered, the petition for consignation and mandamus is hereby
DISMISSED, for lack of merit. Petitioner's claim is DENIED, for lack of legal basis.

Private Respondent's counterclaims are likewise DENIED, for lack of sufficient basis.

No pronouncement as to costs.

SO ORDERED. 9

Aggrieved, Grandwood moved for reconsideration but its motion was denied by the RTC in the
Order, dated September 11, 2014. Hence, it appealed before the CA.
10

The CA Decision

In its June 22, 2015 Decision, the CA reversed the RTC ruling and remanded the case to the latter
for the determination of the amount of the redemption price. It ordered the OCC-RTC to accept the
consigned amount and to issue the corresponding certificate of redemption in Grandwood's favor. It
emphasized that Section 47 of R.A. No. 8791 applied only in cases of foreclosure of real estate by a
mortgagee bank in order to provide sufficient legal remedies to banks in case of unpaid debts or
loans. As White Marketing was not privy to the contract of loan and the accessory contract of
mortgage, it considered the limitation on the right of redemption on juridical persons as inapplicable.
It was of the view that in case of doubt on the issue of the right of redemption, it should be resolved
in favor of the mortgagor. Thus, the CA disposed:

WHEREFORE, premises considered, the instant appeal is GRANTED. Accordingly, the Decision
dated July 21, 2014 of the Regional Trial Court of Pasig City, Branch 166, in SCA No. 3915, is
hereby REVERSED AND SET ASIDE and a new one is rendered by allowing petitioner-appellant
Grandwood Furniture & Woodwork, Inc. to consign to the court a quo the amount corresponding to
the redemption of its foreclosed property covered by TCT No. 63678 of the Register of Deeds of
Pasig. Furthermore, the Court hereby directs the following:

(a) remand this case to the court a quo and the latter is ordered to reinstate SCA Case No. 3915 into
its docket;

(b) for the court a quo to determine the entire amount of redemption price together with interest and
other legal fees;

(c) for the Office of the Clerk of Court and Ex-Officio Sheriff of RTC Pasig City to forthwith accept the
consigned amounts and issue the corresponding Certificate of Redemption in favor petitioner-
appellant.

SO ORDERED. 11

White Marketing moved for reconsideration but the CA denied its motion in the assailed December
28, 2015 Resolution.

Hence, this petition.

SOLE ISSUE

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE
COURT A QUO WHEN IT DECLARED THAT SEC. 47 of R.A. NO. 8791 OR THE GENERAL
BANKING LAW IS NOT APPLICABLE IN THE CASE AT BAR. 12

Petitioner White Marketing insisted that Grandwood's right of redemption had lapsed because, under
the mortgage contract, the parties agreed that the same would be governed by R.A. No. 8791. It
argued that because the parties voluntarily stipulated on the governing law, the same was binding on
them. White Marketing asserted that when Metrobank assigned its rights, its assignees acquired
whatever rights the former had under the Real Estate Mortgage.
It reiterated that Section 47 of R.A. No. 8791 was the applicable law with regard to the period of
redemption. For said reason, Grandwood should have redeemed the foreclosed property before the
registration of the certificate of sale on September 30, 2013.

In its March 14, 2016 Resolution, the Court resolved to deny the petition. White Marketing moved
13
1âwphi1

for reconsideration. In its June 15, 2016 Resolution, the Court granted the motion, reinstated the
14

petition, and required respondent Grandwood to file its comment.

In its Comment, dated July 22, 2016, Grandwood argued that the provisions of the real estate
15

mortgage were pro forma as the original mortgagee, Metrobank, was a banking institution; and so,
the contract would necessarily contain a provision indicating that the mortgagor would be bound by
R.A. No. 8791.

Grandwood, however, explained that White Marketing could not enjoy the provision of R.A. No. 8791
on the redemption period because it was not a banking institution. It asserted that its exercise of
redemption rights was not against Metrobank in accordance with the real estate mortgage, but
against White Marketing as the highest bidder in the foreclosure sale.

Grandwood further reiterated that pursuant to the spirit and intent of R.A No. 8791, the shorter
redemption period applied in favor of banking institutions only. In its view, R.A. No. 8791 would apply
only when the mortgagee bank itself would foreclose the property and not when the same had
already assigned or conveyed its mortgage rights for a consideration.

In its Reply, dated August 10, 2016, White Marketing countered that Grandwood was bound by the
16

provisions of the real estate mortgage. It added that the fact that Metrobank assigned its rights to
CGAM3 neither modified the terms of the mortgage contract nor excluded Grandwood from the
provisions thereof. Thus, it insisted that Grandwood was bound by the redemption period under R.A.
No. 8791 and should suffer the consequences for its failure to redeem the mortgaged property within
the allotted time.

The Court's Ruling

The Court finds merit in the petition.

In the case at bench, it is undisputed that Metrobank assigned its rights in the mortgage to ARC,
which later assigned the same to CGAM3. After Grandwood defaulted in its loan obligation, CGAM3
foreclosed the mortgaged property. As earlier stated, White Marketing emerged as the winning
bidder in the foreclosure sale. Thus, White Marketing, stepped into the shoes of Metro bank.

In Fort Bonifacio v. Fong, the Court explained the effects of assignment of credit, to wit:
17

The reason that a contracting party's assignees, although seemingly a third party to the transaction,
remain bound by the original party's transaction under the relativity principle further lies in the
concept of subrogation, which inheres in assignment.

Case law states that when a person assigns his credit to another person, the latter is deemed
subrogated to the rights as well as to the obligations of the former. By virtue of the Deed of
Assignment, the assignee is deemed subrogated to the rights and obligations of the assignor
and is bound by exactly the same conditions as those which bound the assignor. Accordingly,
an assignee cannot acquire greater rights than those pertaining to the assignor. The general rule is
that an assignee of a non-negotiable chose in action acquires no greater right than what was
possessed by his assignor and simply stands into the shoes of the latter. [Emphasis and underlining
supplied]

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
18

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
19

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."
Applied in the present case, 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.

Such interpretation is in harmony with the avowed purpose of R.A. No. 8791 in providing for a
shorter redemption period for juridical persons. In Goldenway Merchandising Corporation v.
Equitable PCI Bank, the Court explained that the shortened period under Section 47 of R.A. No.
20

8791 served as additional security for banks to maintain their solvency and liquidity, to wit:

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. [Emphasis supplied]

To adopt Grandwood's position that Section 47 of R.A. No. 8791 no longer applies would defeat its
very purpose to provide additional security to mortgagee-banks. The shorter redemption period is
1âwphi1

an incentive which mortgagee-banks may use to encourage prospective assignees to accept the
assignment of credit for a consideration. If the redemption period under R.A. No. 8791 would be
extended upon the assignment by the bank of its rights under a mortgage contract, then it would be
tedious for banks to find willing parties to be subrogated in its place. Thus, it would adversely limit
the bank's opportunities to quickly dispose of its hard assets, and maintain its solvency and liquidity.

Although it is true that, generally, redemption is liberally construed in favor of the mortgagor, the rule
cannot be applied in the present case. In City of Davao v. The Intestate Estate of
Amado S. Dalisay, the Court eruditely explained that the liberal construction of the redemption
21

period is not a panacea readily invoked by mortgagors whose right to redeem had been justifiably
defeated, viz:

The Court need not belabor the existence of this rule in jurisprudence. In a long line of cases, the
Court has indeed been copious in its stance to allow the redemption of property where in doing so,
the ends of justice are better realized. xxx

Nonetheless, the Court's agreement with the CA decision ends here. The above rulings now beget a
more important question for the resolution of this case: Does a simplistic application of the liberal
construction of redemption laws provide a just resolution of this case? The Court answers this
question in the negative.

While it is a given that redemption by property owners is looked upon with favor, it is equally
true that the right to redeem properties remains to be a statutory privilege. Redemption is by
force of law, and the purchaser at public auction is bound to accept it. Further, the right to redeem
property sold as security for the satisfaction of an unpaid obligation does not exist preternaturally.
Neither is it predicated on proprietary right, which, after the sale of the property on execution, leaves
the judgment debtor and vests in the purchaser. Instead, it is a bare statutory privilege to be
exercised only by the persons named in the statute.

In other words, a valid redemption of property must appropriately be based on the law which
is the very source of this substantive right. It is, therefore, necessary that compliance with
the rules set forth by law and jurisprudence should be shown in order to render validity to the
exercise of this right. Hence, when the Court is beckoned to rule on this validity, a hasty resort to
elementary rules on construction proves inadequate. Especially so, when there are deeper
underpinnings involved, not only as to the right of the owner to take back his property, but equally
important, as to the right of the purchaser to acquire the property after deficient compliance with
statutory requirements, including the exercise of the right within the period prescribed by law.

The Court cannot close its eyes and automatically rule in favor of the redemptioner at all
times. The right acquired by the purchaser at an execution sale is inchoate and does not become
absolute until after the expiration of the redemption period without the right of redemption having
been exercised. "But inchoate though it be, it is, like any other right, entitled to protection and must
be respected until extinguished by redemption." Suffice it to say, the liberal application of
redemption laws in favor of the property owner is not an austere solution to a
controversy, where there are remarkable factors that lead to a more sound and reasonable
interpretation of the law. Here, the proper focus of the CA should have been the just and fair
interpretation of the law, instead of an automatic and constricted view on its liberal application.
[Emphases supplied]

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.

WHEREFORE, the June 22, 2015 Decision of the Court of Appeals and its December 28, 2015
Resolution, in CA-G.R. CV No. 103488 are REVERSED and SET ASIDE. The July 21, 2014
Decision of the Regional Trial Court, Branch 166, Pasig City is REINSTATED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR: