CONCEPCION V. COURT OF APPEALS, ET AL.

ISSUE: WON the escalation clause in their mortgage contract valid?

HELD: Some contracts contain what is known as an escalator clause, which is defined as one in
which the contract fixes a base price but contains a provision that in the event of specified cost
increases, the seller or contractor may raise the price up to a fixed percentage of the base.
Attacks on such a clause have usually been based on the claim that, because of the open price-
provision, the contract was too indefinite to be enforceable and did not evidence an actual
meeting of the minds of the parties, or that the arrangement left the price to be determined
arbitrarily by one party so that the contract lacked mutuality. However, the SC generally upheld
its validity. Nonetheless, an escalation clause at bench which gives the bank unbridled right to
unilaterally upwardly adjust the interest on private respondents' loan is unconscionable, as it
would completely take away from mortgagees the right to assent to an important modification
in their agreement, and would negate the element of mutuality in contracts.

GREGORIO SALAZAR, PETITIONER, VS. JUSTINIANA DE TORRES, ET AL., RESPONDENTS.

a. Whether or not the foreclosure sale in favor of the De Torres is consummated? No.
b. Whether or not the foreclosure sale is unappealable ? No.

a) No. A foreclosure sale is not complete until it is confirmed, and before said confirmation,
the court retains control of the proceedings by exercising a sound discretion in regard to it,
either granting or withholding confirmation as the rights and interests of the parties and the
ends of justice may require. From this standpoint, the order of November 21, 1957 which
neither set aside nor confirmed the foreclosure sale was merely interlocutory in character.
b) No. A foreclosure sale can be appealed. However in the case at bar there was no final or
consummated foreclosure sale to be appealed for. The lower court is yet to confirm on
whether or not to accept or reject the offer of the defendant De Torres as the highest
bidder for the foreclosure sale. "Commonly, an appeal from an interlocutory decree is lost
where final decree becomes immune to attack for want of appeal from final decree."

SPS GUILLERMO AGBADA and MAXIMA AGBADA vs INTER-URBAN DEVELOPERS, INC., and
RTC
G.R. No. 144029. September 19, 2002

ISSUE: Whether the foreclosure by the defendant is valid.

RULING:

Yes. The material issues in a civil action for foreclosure of real estate mortgage are the
existence of the debt and its demandability. The first one was not refuted by the petitioner-
spouses. The second lies on whether the term is 6 months or 5 years. When proceedings had
been ongoing in the trial court for more than 4 years, petitioner-spouses plainly assailed the
finding of the trial court vis-a-vis the appraised value of the foreclosed property, without more,
thus strongly implying their acquiescence to the due and demandable loan, and in fact
attempted to pay the loan completely and recover the foreclosed lot and improvements.

The defense of failure of the writing to express the true intent and agreement of the parties,
obtains only where the written contract is so ambiguous or obscure in terms that the
contractual intention of the parties cannot be understood from a mere reading of the
instrument, thus necessitating the reception of relevant extrinsic evidence of the contractual
provision in dispute to enable the court to make a proper interpretation of the instrument.
However, in this case, the loan and mortgage deed is clear and without ambiguity, mistake or
imperfection in specifying the maturity of the loan exactly after 6 months from date of
execution thereof at interest rate of 3% per month.

CESAR SULIT, petitioner vs COURT OF APPEALS and ILUMINADA CAYCO, respondents

G.R. No. 119247. February 17, 1997

ISSUES:

a) Whether or not the mortgagee or purchaser in an extrajudicial foreclosure sale is entitled to

the issuance of a writ of possession over the mortgaged property despite his failure to pay
the surplus proceeds of the sale to the mortgagor or the person entitled thereto.
b) Whether or not the act of mortgagee in retaining more of the proceeds of the sale than he
is entitled to will affect the validity of the foreclosure.
RULINGS

1. NO. The governing law explicitly authorizes the purchaser in a foreclosure

sale to apply 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. 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. No discretion appears to be left to the 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 3135, and it cannot 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. Such
recourse is available to a mortgagee, who effects the extrajudicial foreclosure of the
mortgage, even before the expiration of the period of redemption provided by law and
the Rules of Court.
The rule is however, not without exception. Under Section 35, Rule 39 of the Rules of
Court, which is made applicable to the extrajudicial foreclosure of real estate mortgages by
Section 6 of Act 3135, the possession of the mortgaged property may be awarded to a
purchaser in the extrajudicial foreclosure "unless a third party is actually holding the property
adversely to the judgment debtor."
In the case at bar, the Court also held that equitable considerations demand that a writ
of possession should not be issued in this case because Sulit has yet give the surplus proceeds
of the sale to Cayco. The application of the proceeds from the sale of the mortgaged property
to the mortgagor's obligation is an act of payment, not payment by dation; hence, it is the
mortgagee's duty to return any surplus in the selling price to the mortgagor.
2. NO. 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 simply gives the
mortgagor a cause of action to recover such surplus. This is likewise in harmony with the
decisional rule that in suing for the return of the surplus proceeds, the mortgagor is
deemed to have affirmed the validity of the sale since nothing is due if no valid sale has
been made. In the early case of Caparas v. Yatco, etc., Et Al., it was also held that where
the mortgagee has been ordered by the court to return the surplus to the mortgagor or
the person entitled thereto, and the former fails to do so and flagrantly disobeys the
order, the court can cite the mortgagee for contempt and mete out the corresponding
penalty under Section 3(b) of the former Rule 64 (now Rule 71) of the Rules of Court.

DBP VS JOVENCIO A. ZARAGOZA AND AVELINA E. ZARAGOZA

G.R. No. L-23493 / August 23,1978

ISSUE: Whether or not the mortgagee is entitled to claim the deficiency in extrajudicial
foreclosure of mortgage.

RULING: As ruled in the case of Philippine Bank of Commerce v. Tomas de Vera and
Development Bank of the Philippines v. Vda de Moll, a reading of the provisions of Act No. 3135,
as amended provides nothing as to the mortgagee's right to recover such deficiency. However,
neither the court find any provision thereunder, which expressly or impliedly prohibits such
recovery.

Article 2131 of the new Civil Code, on the contrary, expressly provides that 'The form, extent
and consequences of a mortgage, both as to its constitution, modification and extinguishment,
and as to other matters not included in this Chapter, shall be governed by the provisions of the
Mortgage Law and of the Land Registration Law. Under the Mortgage Law, which is still in force,
the mortgagee has the right to claim for the deficiency resulting from the price obtained in the
sale of the real property at public auction and the outstanding obligation at the time of the
foreclosure proceedings.

Under the Rules of Court (Sec. 6, Rule 70), 'Upon the sale of any real property, under an order
for a sale to satisfy a mortgage or other incumbrance thereon, if there be a balance due to the
plaintiff after applying the Proceeds of the sale, the court, upon motion, should render a
judgment against the defendant for any such balance for which by the record of the case, he
may be personally liable to the plaintiff. It is true that this refers to a judicial foreclosure, but
the underlying principle is the same, that the mortgage is but a security and not a satisfaction of
indebtedness.

Let it be noted that when the legislature intends to foreclose the right of a creditor to sue for
any deficiency resulting from the foreclosure of the security given to guarantee the obligation,
it so expressly provides as in a case of pledge (Art. 2115) and foreclosure of chattel mortgage on
things sold in installments . It is then clear that in the absence of a similar provision in Act No.
3135, as amended, it cannot be concluded that the creditor loses his right given him under the
Mortgage Law and recognized in the Rules of Court, to take action for the recovery of any
unpaid balance on the principal obligation.

RPRP VENTURES MANAGEMENT & DEVT CORPORATION VS. HON. TEOFILLO L. GUADIZ, JR.
G.R. No. 152236 July 28, 2010

Issue: Whether or not the foreclosure was void since petitioners did not yet defaulted in their
obligation.
Ruling: Contrary to the assertion of the petitioner that it never admitted its inability to pay its
loan and that it was not in default, because it merely disputed Metrobank's computation of the
charges due, a close reading of the complaint it filed with the lower court categorically shows
that it acknowledged its default in the payment of its loan obligation. In fact, parties come to
several agreements of deferment of payments to aid petitioner of its obligation to pay. The
various and constant requests for deferment of payment and restructuring of loan, without
actually paying the amount due, are clear indications that petitioner was unable to settle its
obligation. Since petitioner defaulted on its obligation, the subsequent foreclosure of the Real
Estate Mortgage is valid. It is a settled rule that in a real estate mortgage when the obligation is
not paid when due, the mortgagee has the right to foreclose the mortgage and to have the
property seized and sold in view of applying the proceeds to the payment of the obligation.

RUBEN C. REYES, VS TANG SOAT ING (JOANNA TANG) AND ANDO G. SY, RESPONDENTS.
G.R. No. 185620 December 14, 2011

ISSUE: W/O the execution sale of the subject property is void for alleged lack of compliance
with the posting and publication requirements?

RULING: NO. Contrary to the Court of Appeal’s holding, the burden of evidence to prove lack of
compliance with Section 15, Rule 39 of the Rules of Court rests on the party claiming lack
thereof i.e., respondents.

There was substantial compliance with Section 15, Rule 39 of the Rules of Court: the documents
in support thereof, i.e., the Certificate of Posting issued by Sheriff Legaspi and the Affidavit of
Publication executed by the publisher of The Times Newsweekly, appear to be in order. In this
case, the purpose of giving notice through posting and publication under Section 15(c) of the
same rule—to let the public know of the sale to the end that the best price or a better bid may
be made possible to minimize prejudice to the judgment debtor—was realized.

In this jurisdiction, we adhere to the doctrine that registration in a public registry works as
constructive notice to the whole world.34 Section 51 of Act No. 496, as amended by Section 52
of Presidential Decree No. 1529, provides:
SECTION 52. Constructive notice upon registration.—Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed or entered in the Office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering,
filing, or entering.

And, quite undeniably, respondents had constructive notice that their property is subject of
execution proceedings arising from their judgment debt and in danger of forfeiture to their
judgment creditor.

ARMANDO S. OLIZON and ILUMINADA C. OLIZON, vs. CA and PRUDENTIAL BANK,

respondents.
G.R. No. 107075 September 1, 1994
ISSUE/S:

a. W/N personal notice to the mortgagors about the foreclosure sale is necessary?
b. W/N the requirement on posting the notice of sale as required in Act 3135 was not
complied with?

RULING:
a. NO. It is now a well-settled rule that personal notice to the mortgagor in extrajudicial
foreclosure proceedings is not necessary. 10 Section 3 of Act No. 3135 governing
extrajudicial foreclosure of real estate mortgages, as amended by Act No. 4118, requires
only the posting of the notice of sale in three public places and the publication of that
notice in a newspaper of general circulation. Hence, the lack of personal notice to the
mortgagors, herein petitioners, is not a ground to set aside the foreclosure sale. Assuming
arguendo that personal notice to the mortgagor is necessary, the Court concurred with the
finding of the CA that the mortgagors were actually notified by appellant bank of the
foreclosure proceedings is shown by its letters to the Olizons before the actual sale at public
auction of the subject property
b. No. The Court finds the supposed failure of respondent bank to comply with the posting
requirement as provided under the aforesaid Section 3, under the factual ambiance and
circumstances which obtained in this case, be considered a sufficient ground for annulling
the aforementioned sale. The notice of sale was duly published in accordance with law and
furnished the Olizons.

The object of a notice of sale is to inform the public of the nature and condition of the
property to be sold, and of the time, place and terms of the sale. Notices are given for the
purpose of securing bidders and to prevent a sacrifice of the property. If these objects are
attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if
mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead
bidders, to depreciate the value of the property, or to prevent it from bringing a fair price,
such mistakes or omissions will be fatal to the validity of the notice, and also to the sale
made pursuant thereto.
CARLOS LIM, CONSOLACION LIM, EDMUNDO LIM, CARLITO LIM, SHIRLEY DIZON and ARLEEN
LIM FERNANDEZ, vs. DEVELOPMENT BANK OF THE PHILIPPINES
G. R. No. 177050, July 01, 2013

ISSUE: Whether or not the Foreclosure proceeding is valid.

RULING: NO. The foreclosure proceeding is null and void for failure of the Bank to send notice
of foreclosure. While it is true that what was conducted was an extrajudicial foreclosure, where
notice to the parties is not necessary for its validity, however it is not of without exception.

Under Section 3 of Act 3135 requires only the posting of the notice of sale in the three public
places and the publication of that notice in a newspaper of general circulation, unless there is a
stipulation to the contrary. Here, the parties stipulated the Mortgage that all correspondence
relative to this mortgage, including demand letters, summons, subpoenas, or notification of any
judicial or extrajudicial shall be sent to the Mortgagor that may hereafter be given in writing by
the Mortgagor or the Mortgagee. However, no notice of the extrajudicial foreclosure was sent
by DBP to the petitioners about the foreclosure scheduled on July 11, 1994. Failure on the part
of DBP to comply with their contractual agreement with petitioner, in this case, to send notice,
is a breach sufficient to invalidate the foreclosure sale.

K-PHIL., INC., SOO MYUNG PARK and NETWORK DEVELOPMENT HOLDING CORP., vs
METROPOLITAN BANK, et al
G.R. No. 167500 October 17, 2008

Issues:
(1) Whether the petition for extrajudicial foreclosure was null and void for its failure to implead
Network and to state the correct amount of indebtedness
(2) Whether it was proper to order the issuance of a new notice with the necessary corrections.
Held:
(1) No. Network’s name was indeed omitted from the caption of the application/petition for
extrajudicial foreclosure. However, this omission was not fatal to Metrobank’s application as it
was not in violation of Act 3135. Moreover, the application included Network in its body. It is
the allegations in the body of the petition that is controlling and not the heading or caption. The
notice clearly identified Network as the mortgagor. Such identification in the notice of
extrajudicial sale counts under the rules of procedure in extrajudicial foreclosure of mortgage.
The validity of a notice of sale is not affected by immaterial errors; only substantial errors will
invalidate it. Unless it was calculated to deter or mislead bidders, to depreciate the value of the
property or to prevent it from bringing a fair price, the discrepancy between the amount of the
obligation as reflected in the notice of sale and the amount actually due and collected during
the bidding does not constitute a substantial error that should invalidate the notice.
While there may be a discrepancy in the amount of indebtedness stated in the notice and that
actually owed by petitioners, such discrepancy tends to appreciate, rather than depreciate, the
value of the mortgaged properties. It cannot be reasonably considered to have prevented the
estimation of a fair price.
(2) Yes. The CA’s order for the sheriff to issue, publish and serve a new notice of extrajudicial
sale correcting the inaccuracies and inadequacies of the prior notice was sufficient to remedy
the discrepancies.

DEVELOPMENT BANK OF THE PHILIPPINES vs CA and EMERALD RESORT HOTEL CORPORATION

G.R. No. 146322. December 6, 2006
ISSUE:

a. Whether DBP complied with the posting and publication requirements under applicable
laws for a valid foreclosure.
b. Whether ERHC’s offer to lease the foreclosed properties constitutes a waiver of its right
to question the validity of the foreclosure.
HELD:

a. YES. Based on the records, DBP presented sufficient evidence to prove

that the sheriffs posted the notices of the extrajudicial sale. The trial and appellate
courts glaringly erred and gravely abused its discretion in disregarding the sheriffs’
partial report and the sheriffs’ certificate of sale executed after the auction sale. The
Sheriff also testified that he, together with another Sheriff, actually posted the notices
of sale. Indisputably, there is clear and convincing evidence of the posting of the notices
of sale. What the law requires is the posting of the notice of sale, which is present in this
case, and not the execution of the certificate of posting.
b. NO. To constitute a waiver, the intent to waive must be shown clearly
and convincingly. A mere offer to lease the foreclosed properties cannot constitute a
waiver of ERHC’s right to contest the validity of the foreclosure on the ground of non-
compliance with the statutory requisites. ERHC’s offer to lease does not relinquish
ERHC’s right to challenge the validity of the foreclosure. The offer to lease the
foreclosed properties cannot validate or ratify a void foreclosure. ERHC’s intention to
lease the foreclosed properties cannot simply outweigh DBP’s failure to comply with the
statutory requisite for a valid extrajudicial foreclosure.

DIONISIO FIESTAN and JUANITA ARCONADO vs. COURT OF APPEALS

G.R. No. 81552 May 28, 1990

ISSUES:
a. WON the extrajudicial foreclosure was valid without first effecting a levy on said
property before selling the same at the public auction sale.
b. WON DBP, as mortgagee-creditor, cannot acquire by purchase the mortgaged property
at the public auction sale by virtue of par. (2) of Article 1491 and par. (7) of Article 1409
of the Civil Code which prohibits agents from acquiring by purchase

RULING
a. YES. The formalities of a levy, as an essential requisite of a valid execution sale under
Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court,
are not basic requirements before an extra judicially foreclosed property can be sold at
public auction. At the outset, distinction should be made of the three different kinds of
sales under the law. An ordinary execution sale is governed by the pertinent provisions
of Rule 39 of the Rules of Court. Rule 68 of the Rules of Court applies in cases of judicial
foreclosure sale. On the other hand, Act No. 3135, as amended by Act No. 4118
otherwise known as “An Act to Regulate the Sale of Property under Special Powers
Inserted in or Annexed to Real Estate Mortgages” applies in cases of extrajudicial
foreclosure sale.

The case at bar involves an extrajudicial foreclosure sale. The public auction sale
conducted on August 6, 1979 by the Sheriff refers to the “sale” mentioned in Section 1
of Act No. 3135, which was made pursuant to a special power inserted in or attached to
a real estate mortgage made as security for the payment of money or the fulfillment of
any other obligation. It must be noted that in the mortgage contract, petitioners, as
mortgagor, had appointed private respondent DBP, for the purpose of extrajudicial
foreclosure, “as his attorney-in-fact to sell the property mortgaged under Act No. 3135.

There is no justifiable basis, therefore, to apply by analogy the provisions of Rule 39 of

the Rules of Court on ordinary execution sale, particularly Section 15 thereof as well as
the jurisprudence under said provision, to an extrajudicial foreclosure sale conducted
under the provisions of Act No. 3135, as amended. Act No. 3135, as amended, being a
special law governing extrajudicial foreclosure proceedings, the same must govern as
against the provisions on ordinary execution sale under Rule 39 of the Rules of Court.
Levy, as understood under Section 15, Rule 39 of the Rules of Court in relation to
execution of money judgments, has been defined by this Court as the act whereby a
sheriff sets apart or appropriates for the purpose of satisfying the command of the writ,
a part or the whole of the judgment-debtor’s property.
In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not
be identified or set apart by the sheriff from the whole mass of property of the
mortgagor for the purpose of satisfying the mortgage indebtedness. For, 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.

b. NO. The prohibition mandated by par. (2) of Articles 1491 in relation to Article 1409 of
the Civil Code does not apply in the instant case where the sale of the property in
dispute was made under a special power inserted in or attached to the real estate
mortgage pursuant to Act No. 3135, as amended. Section 5 of Act No. 3135, as
amended, creates and is designed to create an exception to the general rule that a
mortgagee or trustee in a mortgage or deed of trust which contains a power of sale on
default may not become the purchaser, either directly or through the agency of a third
person, at a sale which he himself makes under the power. Under such an exception,
 the title of the mortgagee-creditor over the property cannot be impeached or defeated
on the ground that the mortgagee cannot be a purchaser at his own sale.

SPOUSES VICENTE YU AND DEMETRIA LEE-YU vs PHILIPPINE COMMERCIAL INTERNATIONAL

BANK
G.R. No. 147902 March 17, 2006

ISSUE:

Whether or not a real estate mortgage over several properties located in different localities can
be separately foreclosed in different places.

RULING:
Yes. The indivisibility of the real estate mortgage is not violated by conducting two
separate foreclosure proceedings on mortgaged properties located in different provinces as
long as each parcel of land is answerable for the entire debt.
Also, Article 2089 of the Civil Code presupposes several heirs of the debtor or creditor
and therefore not applicable to the present case. What the law proscribes is the foreclosure of
only a portion of the property or a number of the several properties mortgaged corresponding
to the unpaid portion of the debt where, before foreclosure proceedings, partial payment was
made by the debtor on his total outstanding loan or obligation. This also means that the debtor
cannot ask for the release of any portion of the mortgaged property or of one or some of the
several lots mortgaged unless and until the loan thus secured has been fully paid,
notwithstanding the fact that there has been partial fulfillment of the obligation. Hence, it is
provided that the debtor who has paid a part of the debt cannot ask for the proportionate
extinguishment of the mortgage as long as the debt is not completely satisfied. In essence,
indivisibility means that the mortgage obligation cannot be divided among the different lots,
that is, each and every parcel under mortgage answers for the totality of the debt.
SYCAMORE VENTURES CORPORATION and SPOUSES PAZ vs. METROBANK
G.R. No. 173183 November 18, 2013

ISSUE: WON the appraisal value of the mortgaged properties material in the mortgage
foreclosure’s validity?

RULING: NO. A secured creditor may institute against the mortgage debtor either a personal
action for the collection of the debt, a real action to judicially foreclose the real estate
mortgage, or an extrajudicial judicial foreclosure of the mortgage. The remedies, however, are
alternative, not cumulative, and the election or use of one remedy operate as a waiver of the
others. In this case, Metrobank elected extrajudicial foreclosure of the real estate mortgage
which is governed by Act No. 3135, as amended. In choosing this remedy, the creditor enforces
his lien through the sale on foreclosure of the mortgaged property. The proceeds of the sale
will then be applied to the satisfaction of the debt. In case of a deficiency, the mortgagee has
the right to recover the deficiency resulting from the difference between the amount obtained
in the sale at public auction, and the outstanding obligation at the time of the foreclosure
proceedings. Act No. 3135 has no requirement for the determination of the mortgaged
properties’ appraisal value. Neither has it provided that the latter shall be the basis for the bid
price. What the law only provides are the requirements, procedure, venue and the mortgagor’s
right to redeem the property. When the law does not provide for the determination of the
property’s valuation, neither should the courts so require, for our duty limits us to the
interpretation of the law, not to its augmentation.
Whether Metrobank’s reduced valuation is valid or not, or whether the valuation is
outrageously lower than its current value, has nothing to do with the foreclosure proceedings.

ESTEBAN JOSE vs CARMEN BLUE

G. R. No. L-28646, November 29, 1971.

It is clear, therefore, that appellant Catalina Cayetano is a successor in interest by title

subsequent to the commencement of the action filed by herein appellee, so that her acquisition
of the lot in question was subject, and must yield, to the superior right of the appellee who was
an heir of Cipriano Jose. The trial court declared that Carmen Blue was entitled to only one-half
of the lot which she sold to Julita Luis, because the other half was the share of herein appellee.
When Carmen Blue sold the whole lot to Julita Luis without the knowledge and consent of
appellee, the most that Julita Luis had acquired in virtue of that sale was the undivided one-half
portion which was the share of Carmen Blue. The lower court, therefore, had correctly held
that the sale of the whole lot to Julita Luis was null and void, and TCT No. 41711 that was issued
in the name of Julita Luis as a result of the sale was also null and void.

ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC vs. ERNESTO QUIAMCO
G.R. No. 146322. December 6, 2006

ISSUE:
Whether or not Uypitching Corporation abused their right of recovery as mortgagee
HELD:
Yes. It is true that a mortgagee may take steps to recover the mortgaged property to enable it
to enforce or protect its foreclosure right thereon. However, there is a well-defined procedure
for the recovery of possession of mortgaged property: if a mortgagee is unable to obtain
possession of a mortgaged property for its sale on foreclosure, he must bring a civil action
either to recover such possession as a preliminary step to the sale, or to obtain judicial
foreclosure.

Petitioner corporation failed to bring the proper civil action necessary to acquire legal
possession of the motorcycle. No doubt, petitioner corporation, acting through its co-petitioner
Uypitching, blatantly disregarded the lawful procedure for the enforcement of its right, to the
prejudice of respondent. Petitioners’ acts violated the law as well as public morals, and
transgressed the proper norms of human relations embodied in Article 19 of the Civil Code also
known as the “principle of abuse of right”.

SPOUSES DELOS SANTOS V. METROPOLITAN BANK & TRUST COMPANY

G.R. No. 153852 October 24, 2012

ISSUE:

Whether or not a writ of preliminary injunction may be issued pending extrajudicial foreclosure.

HELD: The Court held in the affirmative. A writ of preliminary injunction to enjoin an impending
extrajudicial foreclosure sale should be issued except upon a clear showing of a violation of the
mortgagors’ unmistakable right to the injunction. Injunction will not protect contingent,
abstract or future rights whose existence is doubtful or disputed. Indeed, there must exist an
actual right, because injunction will not be issued to protect a right not in esse and which may
never arise, or to restrain an act which does not give rise to a cause of action. At any rate, an
application for injunctive relief is strictly construed against the pleader. As with all equitable
remedies, injunction must be issued only at the instance of a party who possesses sufficient
interest in or title to the right or the property sought to be protected. It is proper only when the
applicant appears to be entitled to the relief demanded in the complaint, which must aver the
existence of the right and the violation of the right, or whose averments must in the minimum
constitute a prima facie showing of a right to the final relief sought. Accordingly, the conditions
for the issuance of the injunctive writ are: (a) that the right to be protected exists prima facie;
(b) that the act sought to be enjoined is violative of that right; and (c) that there is an urgent
and paramount necessity for the writ to prevent serious damage. Indeed, a right, to be
protected by injunction, means a right clearly founded on or granted by law or is enforceable as
a matter of law.

Nor do we discern any substantial controversy that had any real bearing on Metrobank’s right
to foreclose the mortgage. The mere possibility that the RTC would rule in the end in the
petitioners’ favor by lowering the interest rates and directing the application of the excess
payments to the accrued principal and interest did not diminish the fact that when Metrobank
filed its application for extrajudicial foreclosure they were already in default as to their
obligations and that their short-term loan of P4,400,000.00 had already matured. Under such
circumstances, their application for the writ of preliminary injunction could not but be viewed
as a futile attempt to deter or delay the forced sale of their property.

Escalation clauses are valid and do not contravene public policy. These clauses are common in
credit agreements as means of maintaining fiscal stability and retaining the value of money on
long-term contracts. To avoid any resulting one sided situation that escalation clauses may
bring, we required the inclusion in the parties’ agreement of a de-escalation clause that would
authorize a reduction in the interest rates corresponding to downward changes made by law or
by the Monetary Board. The validity of escalation clauses notwithstanding, we cautioned that
these clauses do not give creditors the unbridled right to adjust interest rates unilaterally. As
we said in the same Banco Filipino case, any increase in the rate of interest made pursuant to
an escalation clause must be the result of an agreement between the parties. The minds of all
the parties must meet on the proposed modification as this modification affects an important
aspect of the agreement. There can be no contract in the true sense in the absence of the
element of an agreement, i.e., the parties’ mutual consent. Thus, any change must be mutually
agreed upon, otherwise, the change carries no binding effect. A stipulation on the validity or
compliance with the contract that is left solely to the will of one of the parties is void; the
stipulation goes against the principle of mutuality of contract under Article 1308 of the Civil
Code.

ROMULA MABALE, FILOMENO TAMALA, FE MANGOMPIT TAMALA, GENARA MANGOMPIT

ETOC and NESTOR MANGOMPIT vs. HON. SIMPLICIO APALISOK, Presiding Judge, CFI,
BRANCH I, Dipolog City and TAN TIAN TIONG
G.R. No. L-46942 February 6, 1979

ISSUES:
1. Whether or not the compromise is valid and executory
2. Whether under the judgment based on the compromise, the lower court could issue a writ of
possession (as distinguished from a writ of execution) so as to eject from Lot No. 1592 Romula
Mabale and "all the persons acting under her".
3. Whether or not because Tan Tian Tiong is now the registered owner of Lot No. 1592 by virtue
of the judgment based on the compromise, Mabale may be compelled to deliver the possession
of that lot to Tan Tian Tiong in spite of the pendency of Civil Case No. 3256 for the annulment
of the said judgment

RULING:
1. Yes. The judgment is binding and conclusive upon the defendant. Its enforcement or
execution, already begun, may be completed. Of course, the compromise in question is not a
flawless agreement. Its terms could have been couched in less involuted language. Its
provisions could have been simpler and more concise. And before rendering judgment, the trial
court should have held a hearing and asked Romula Mabale categorically in open court whether
she understood the stipulations of the compromise. The trial court should scrutinize a
compromise agreement with utmost care and section so as to obviate misunderstanding
controversy when later on it is sought to be implemented. Notwithstanding those deficiencies,
the compromise and the judgment based thereon are valid and effective. Romula was assisted
by her lawyer when she signed the compromise. She was personally furnished with a copy of
the judgment approving it.
A compromise has upon the parties the effect and authority of res judicata. "A judicial
compromise may be enforced by writ of execution. However, a compromise in which there is
mistake, fraud, violence, intimidation, undue influence, or falsity of documents may be
annulled. If a party fails or refuses to abide by the compromise, the other party may either
enforce the compromise or regard it as rescinded and insist upon his original-demand. As a
rule, "a judgment on compromise is not appealable and is immediately executory unless a
motion is filed to set aside the compromise on the ground of fraud, mistake or duress, in which
event an appeal may be taken from the order denying the motion."
The reason for the rule is that when both parties enter into an agreement to end a pending
litigation and request that a decision be rendered approving said agreement, it is only natural
to presume that such action constitutes an implicit waiver of the right to appeal from the
decision which waiver is as undeniable as an express waiver. For a party to a compromise to
reserve the right to appeal from the said decision "is to adopt an attitude of bad faith which
courts cannot countenance.”
To be entitled to appeal from a judgment approving a compromise, a party must move not only
to set aside the judgment but also to annul or set aside the compromise itself on the ground of
fraud, mistake or duress vitiating his consent to the compromise. Romula Mabale did not
seasonably move for the setting aside of the compromise and the judgment based upon it.
Instead her children, pretending to be the unregistered owners of Lot No. 1592, filed a separate
action against Tan Tian Tiong and his wife for the recovery of Lot No. 1592 (Civil Case No. 3216).
Romula and her children filed a second case to rescind the compromise and annul the judgment

2. No. The compromise and the judgment are silent as to the transfer of possession to Tan Tian
Tiong in the event that Lot No. 1592 is registered in his name. In that connection, it should be
borne in mind that the law specifies when a writ of possession may be issued. That writ is
available
(1) in a land registration proceeding, which is proceeding in rem (Sec. 17, Act No. 496);
(2) in an extra-judicial foreclosure of a realty mortgage (Section 7, Act No. 3135);
(3) in a judicial foreclosure of mortgage, a quasi in rem proceeding provided that the mortgagor
is in possession of the mortgaged realty and no third person, not a party to the foreclosure suit,
had intervened; and
(4) in execution sales (last par. of sec. 35, Rule 39, Rules of Court).
Since the instant case does not fall in any of the above, the issuance of the writ of possession
was not proper. Moreover, the writ of possession was addressed to the sheriff. Hence, the
petitioners herein could not have been guilty of disobeying that writ and, therefore, they could
not be held liable for contempt of court.

3. Yes. If the claim of Romula Mabale, her children and son in-law to retain possession of Lot
No. 1592 is based merely on her ownership, which was terminated by the issuance of a new
title to Tan Tian Tiong then the court, to avoid multiplicity of writ, may order her, her children
and son-in-law (the petitioners herein) to vacate that lot. Squarely applicable to the situation
herein is the following ruling:
Judgement; When Adjudication of Ownership does not Include possession; Case at Bar. -The
adjudication of ownership “do not include possession of the property where the actual
possessor has a valid right over the property enforceable even against owner thereof.” An
example is the case of tenants and lessees. This doctrine, however, may not be invoked in
instances where no such right may be appreciated in favor of the possessor.
In the instant case considering that appellants have no other claim to the possession of the
property in question, apart from their claim of ownership which was rejected by the lower
court, and consequently, have no right to remain therein after such ownership was adjudged to
appellees, the delivery of possession of the land should be considered included in the
adjudication.

PHILIPPINE BANK OF COMMERCE vs TOMAS DE VERA

G.R. No. L-18816. December 29, 1962

ISSUE:
Whether or not the creditor bank is entitled to recover the deficiency arising after the extra
judicial foreclosure, under Act No. 3135, as amended.

RULING: Yes, the creditor bank is entitled to recover the deficiency arising after the extra
judicial foreclosure. A reading of the provisions of Act No. 3135, as amended (re extra-judicial
foreclosure) discloses nothing, it is true, as to the mortgagee’s right to recover such deficiency.
But neither do we find any provision thereunder which expressly or impliedly prohibits such
recovery. Article 2131 of the new Civil Code, on the contrary, expressly provides that: “The
form, extent and consequences of a mortgage, both as to its constitution, modification and
extinguishment, and as to other matters not included in this Chapter, shall be governed by the
provisions of the Mortgage Law and of the Land Registration Law.”

Under the Mortgage Law, which is still in force, the mortgagee has the right to claim for the
deficiency resulting from the price obtained in the sale of the real property at public auction
and the outstanding obligation at the time of the foreclosure proceedings.
Further, under the Rules of Court (Sec. 6, Rule 70), Upon the sale of any real property, under an
order for a sale to satisfy a mortgage or other encumbrance thereon, if there be a balance due
to the plaintiff after applying the proceeds of the sale, the court, upon motion, should render a
judgment against the defendant for any such balance for which, by the record of the case, he
may be personally liable to the plaintiff. It is true that this refers to a judicial foreclosure, but
the underlying principle is the same, that the mortgage is but a security and not a satisfaction of
indebtedness.
The real estate mortgage does not, in any way, limit nor minimize the amount of the obligation.
Its only purpose is to guarantee the fulfillment of said obligation and, in case of default on the
part of the debtor mortgagor, the creditor mortgagee may execute the obligation on the real
property given as a mortgage by way of judicial or extra-judicial foreclosure, according to our
statutes and procedure. Therefore, by analogy and applying the same principle of equity, if
after the sale of the mortgaged property at public auction, there is a resulting deficiency in the
application for the payment of the obligation of the debtor mortgagor to the creditor
mortgagee, the latter may proceed in a proper action against the debtor mortgagor for the
deficiency of the former’s obligation. It is of no importance whether the buyer of the highest
bidder in the public auction is the creditor itself. Extrajudicial foreclosure under Act No. 3135 is
not waiver of right to payment for whole debt. The step taken by the mortgagee-bank in
resorting to extra-judicial foreclosure under Act No. 3135, was merely to find a proceeding for
the sale, and its action can not be taken to mean a waiver of its right to demand the payment of
the whole debt.

SPOUSES RAMON TARNATE and ERLINDA TARNATE vs CA and REGIONAL TRIAL COURT
BATANGAS and IBAAN RURAL BANK, INC
G.R. No. 100635, February 13, 1995

Issue: Whether or not the mortgagee bank may recover the deficiency.

Held: YES. It is a settled rule that a mortgagee may recover any deficiency in the mortgage
account which is not realized in a foreclosure sale, and that the action for recovery of that
deficiency may be filed even during the redemption period. The contention that petitioner have
been made to believe by respondent bank that the loans extended to them would be for long-
term, not short-term, accommodations does not appear to indeed be a real genuine issue. The
loan documents admittedly executed by the parties clearly contradict petitioners'
asseverations. The parties must have realized that when the terms of an agreement are
unequivocally reduced to writing, such as in this case, they hardly can be controverted by oral
evidence to the contrary.

Anent the contention that the property has been sold at an extremely low price, suffice it to say
that, if correct, it would have, in fact, favored an easy redemption of the property. That remedy
could have well been availed of but petitioners did not. In their supplemental answer,
petitioners have called attention to respondent bank's consolidation of ownership over the
mortgaged property during the pendency of this case. The Court sees nothing wrong in this
action of the bank. Upon a failure to redeem a foreclosed realty, the consolidation of title
becomes a matter of right on the part of the auction buyer.

TOP RATE INTERNATIONAL SERVICES, INC vs. IAC and RODRIGO TAN, doing business under
the name and style "ASTRO AUTOMOTIVE SUPPLY,"
G.R. No. L-67496 July 7, 1986
TOP RATE INTERNATIONAL SERVICES, INC vs. IAC and POLARIS MOTOR SUPPLY COMPANY
G.R. No. L-68257 July 7, 1986

Two consolidated petitions before the SC seeking to annul the decisions of the Intermediate
Appellate Court both decisions upheld the validity of the levy made on two properties whose
ownership is claimed by Top Rate International Services Inc, notwithstanding the fact that the
value of said properties are far in excess of the amount of the liens thereon and that what was
attached and levied upon are not the properties themselves but only the vendor's equity of
redemption.

In Civil Case No. 142443 now, G.R. No. 67496, the facts as found by the appellate court are:
On August 12, 1981, Rodrigo Tan, doing business under the name Astro
Automotive Supply' filed a complaint against Consolidated Mines Inc. and Jose
Marino Olondriz, the president of said corporation, for the non-payment of the
purchase price of certain heavy equipment, parts and accessories with a total
cost of P271,372.20. On August 17, 1981, respondent Court granted plaintiff's
motion for the issuance of a writ of preliminary attachment upon plaintiff's
posting of a bond. The sheriff served notices of garnishment on the tenants of
the building owned by defendant Consolidated Mines, Inc. garnishing the rentals
due from said tenants, but since there were earlier notices of garnishment
served upon said tenants, the sheriff was not able to garnish any amount. The
sheriff levied on the properties of Consolidated Mines, Inc. and the notice of levy
was duly annotated on TCT Nos. S-68501 (143900) and S-68500 (14329). The
notice of levy was not annotated on the TCTs of a third property covered by TCT
No. 79776, although duly entered in the primary book of the Registry of Deeds of
Rizal.

Annotated as prior encumbrances on the first two properties on December 20,

1978 was a mortgage in favor of 12 consortium banks.

Meanwhile, in Civil Case No. 142598 now, G.R. No. 68257, the appellate court made the
following findings:
On August 18, 1981, Polaris Motor Supply, Co. brought suit in CFI of Manila
against Consolidated Mines, Inc. and its president Jose Marino Olondriz for the
collection of P71,855.20 representing unpaid price of the heavy equipment and
accessories which the respondent CMI had purchased from the petitioner. On
November 3, 1981, the respondent judge ordered the attachment of CMI's
properties. On November 26, 1981, notice of the attachment of real properties
of the CMI was annotated the levy on TCT Nos. S-68500 (143929), S-68501
(143900) and 79711. On May 31, 1981, several banks, constituting the
Consortium Banks filed a third party claim alleging that they were the
mortgagees of the real and personal properties of the CMI with a total book
value of P656,613,303.00 and an appraised value of P4,497,443,040.00. They,
therefore, asked that the properties be released from attachment.
The petitioner filed a motion to quash the third party claim but its motion was
denied. The court ruled that the Consortium Banks, as mortgagees of the real
and personal properties of the CMI had a superior lien on the properties and that
the petitioner could validly levy only on the mortgagor's CMI's equity of
redemption after the sale of the mortgaged properties.
 The personal properties were foreclosed by the Consortium Banks to which the
properties were sold and the certificate of sale issued on July 6, 1982. The
petitioner then asked that it be allowed to exercise its right of redemption. But
the Consortium Banks opposed the motion on the ground that there was an
equity in redemption only in case of foreclosure sale of real properties but not in
the case of chattels.
In the meantime, on March 17, 1982, the CFI of Rizal, acting as an insolvency
court, authorized the sale of the properties of the CMI. Accordingly, on
September 17, 1982, the properties were sold to Top Rate International as
assignee of the El Grande Development Corp thru a 'Deed of Confirmation of
Sale with Assumption of Mortgage.' On the basis of the sale to it, Top Rate
International filed a third party claim asking that the said properties be
discharged from attachment.

After hearing on the merits, the trial court ordered the lifting and setting aside of
the levy on attachment on the two properties and maintaining, however, the
levy on attachment on the property covered by TCT No. 79776 in favor of
plaintiff Rodrigo Tan.

The plaintiffs in the above civil cases appealed to the Intermediate Appellate Court, which the
appellate court reversed the decision of the trial court and ordered the levy on the two
properties maintained.

On June 6, 1984, the appellate court reversed the decision of the trial court ruling that there is
no merit in Top Rate's claim that the attachment is improper because the value of the property
levied upon is in excess of the total claim of the petitioners which was only P71,885.20 for what
was actually attached by the petitioners (Rodrigo Tan and Polaris) was the equity of redemption
to the properties.
The only remaining question raised by petitioner Top Rate in these petitions, is whether or not
the private respondent could not have levied on the properties but only on the right of
redemption or equity of redemption thereon. Top Rate states that the respondents' claims are
only P271,372.20 and P71,855.20 respectively, and that an over-levy is obvious because the
properties levied upon are worth more than P40,000,000.00. It alleges as error the appellate
court's ruling that since the equity of redemption and not the properties themselves were
attached, its value has no way of exceeding the respondents' individual claims because the
value of the equity of redemption should be that which will effectively release the properties,
that is P40,000,000.00. This is the amount which the respondents must necessarily pay, at the
very least, to exercise such right and not the amount of their claims. There is, therefore, no
over-levy.
Equity of redemption is the right of the mortgagor to redeem the mortgaged property after his
default in the performance of the conditions of the mortgage but before the sale of the
property or the confirmation of the sale, whereas the right of redemption means the right of
the mortgagor to repurchase the property even after confirmation of the sale, in cases of
foreclosure by banks, within one year from the registration of the sale. As we have ruled
in Northern Motors, Inc. v. Coquia, “Levying upon the property itself is distinguishable from
levying on the judgment debtor's interest in it. Interest in the mortgaged lots is merely an
equity of redemption, an intangible or incorporeal right. That interest could be levied upon by
means of writ of execution issued by the court as had been done in the case of property
encumbered by a chattel mortgage.
It is, therefore, error on the part of the petitioner to say that since private respondents' lien is
only a total of P343,227.40, they cannot be entitled to the equity of redemption because the
exercise of such right would require the payment of an amount which cannot be less than
P40,000,000.00.
When herein private respondents prayed for the attachment of the properties to secure their
respective claims against Consolidated Mines, Inc., the properties had already been mortgaged
to the consortium of twelve banks to secure an obligation of US$62,062,720.66. Thus, like
subsequent mortgagees, the respondents' liens on such properties became inferior to that of
the banks, which claims in the event of foreclosure proceedings, must first be satisfied. The
appellate court, therefore, was correct in holding that in reality, what was attached by the
respondents was merely Consolidated Mines' right or equity of redemption. Thus, in the case
of Alpha Insurance and Surety Co., Inc. vs. Reyes (106 SCRA 274, 278), we ruled: A mere second
mortgage, until after the obligations of the debtors-appellees with the first mortgagee have
been fully satisfied and settled.

We, therefore, hold that the appellate court did not commit any error in ruling that there was
no over-levy on the disputed properties. What was actually attached by respondents was
Consolidated Mines' right or equity of redemption, an incorporeal and intangible right, the
value of which can neither be quantified nor equated with the actual value of the properties
upon which it may be exercised. We find no merit in the contention of respondent Top Rate
International Services that its right over the properties in question based on the deed of sale in
its favor on September 17, 1982 confirming the contract to sell of December 10, 1981 in favor
of El Grande Development Corporation, should be recognized as superior to the right of
petitioner under the writ of attachment issued in his favor and registered on October 1, 1981
because it succeeded to the rights of the twelve (12) consortium of banks which hold a
mortgage over said properties registered on December 20, 1978. Said sale was not actually a
sale or assignment by the banks of their rights as mortgagee over said properties but a sale of
said properties by the mortgagor, Consolidated Mines, Inc. with the consent of the mortgagee.
The consortium of banks could not have sold the properties to Top Rate International Services
except through foreclosure proceedings, for as mortgagees they have no right to appropriate
for themselves or dispose of the mortgaged properties (Article 2088, Civil Code Appropriation
of the mortgaged properties of sale by the mortgagee of said property even if stipulated by the
parties would be null and void being what is known as pactum commissorium. In the present
case the sale of the properties by Consolidated Mines, Inc. to Top Rate International Services
with the consent of the mortgagee banks under an arrangement where the purchase price of
P40,000,000.00 would be paid directly to the banks did not adversely affect the rights of
plaintiff under the writ of attachment issued in the present case.