Foreclosure of Real Estate Mortgage
plaintiff [Ramirez] and against the defendant [bank], whose
G.R. No. 198800               December 11, 2013
JOSE T. RAMIREZ, Petitioner,
vs.
THE MANILA BANKING CORPORATION, Respondent.
DECISION
VILLARAMA, JR., J.:
We have consistently held that unless the parties
stipulate, personal notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary because Section 31 of Act No. 31352 only
requires the posting of the notice of sale in three public places and the
publication of that notice in a newspaper of general circulation.3
Before us is a petition for review on certiorari under Rule 45 of the
Decision4 dated November 26, 2010 and Resolution5 dated September
28, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 80616.
The facts of the case are as follows:
Petitioner Jose T. Ramirez mortgaged two parcels of land located at
Bayanbayanan, Marikina City and covered by Transfer Certificate of
Title (TCT) Nos. N-107226 and N-230337 in favor of respondent The
Manila Banking Corporation to secure his ₱265,000 loan. The real
estate mortgage provides that all correspondence relative to the
mortgage including notifications of extrajudicial actions shall be sent to
petitioner Ramirez at his given address, to wit:
N) All correspondence relative to this MORTGAGE, including demand
letters, summons, subpoenas or notifications of any judicial or
extrajudicial actions shall be sent to the MORTGAGOR at the address
given above or at the address that may hereafter be given in writing
by the MORTGAGOR to the MORTGAGEE, and the mere act of sending
any correspondence by mail or by personal delivery to the said address
shall be valid and effective notice to the MORTGAGOR for all legal
purposes and the fact that any communication is not actually received
by the MORTGAGOR, or that it has been returned unclaimed to the
MORTGAGEE, or that no person was found at the address given, or
that the address is fictitious or cannot be located, shall not excuse or
relieve the MORTGAGOR from the effects of such notice.8
Respondent filed a request for extrajudicial foreclosure of real estate
mortgage9 before Atty. Hipolito Sañez on the ground that Ramirez
failed to pay his loan despite demands. During the auction sale on
September 8, 1994, respondent was the only bidder for the mortgaged
properties.10 Thereafter, a certificate of sale11 was issued in its favor as
the highest bidder.
In 2000, respondent demanded that Ramirez vacate the properties.12
Ramirez sued respondent for annulment of sale and prayed that the
certificate of sale be annulled on the ground, among others, that
paragraph N of the real estate mortgage was violated for he was not
notified of the foreclosure and auction sale.13
In its answer, respondent claimed that the foreclosure proceedings
were valid.
The trial court ruled that the extrajudicial foreclosure proceedings were
null and void and the certificate of sale is invalid. The fallo  of the
Decision14 dated June 30, 2003 of the Regional Trial Court, Branch
193, Marikina City, in Civil Case No. 2001-701-MK reads:
1
Premises considered, judgment is hereby rendered in favor of the
counterclaim is hereby dismissed, declaring the Certificate of Sale of
the properties covered by TCT Nos. N-10722 and N-23033, as null and
void and ordering the defendant [bank] to pay the following:
1) One Hundred Thousand (₱100,000.00) Pesos as moral damages;
2) Fifty Thousand (₱50,000.00) Pesos as exemplary damages;
3) Fifty Thousand (₱50,000.00) Pesos as Attorney’s fees; and
4) Costs of suit.
SO ORDERED.15
The CA reversed the trial court’s decision and ruled that absence of
personal notice of foreclosure to Ramirez as required by paragraph N
of the real estate mortgage is not a ground to set aside the foreclosure
sale.16 The fallo  of the assailed CA Decision reads:
WHEREFORE, the appealed decision dated June 30, 2003 of the
Regional Trial Court of Marikina, Branch 193 is
hereby REVERSED  and SET ASIDE, and a new one is
entered AFFIRMING  the validity of the Certificate of Sale of the
properties covering TCT Nos. N-10722 and N-23033.
SO ORDERED.17
Ramirez’s motion for reconsideration was denied in the assailed CA
Resolution.
Hence, this petition raising a lone issue:
What is the legal effect of violating paragraph N of the deed of
mortgage which requires personal notice to the petitioner-
mortgagor by the respondent-mortgagee bank?18
Ramirez insists that the auction sale as well as the certificate of sale
issued to respondent are null and void since no notice of the
foreclosure and sale by public auction was personally given to him in
violation of paragraph N of the real estate mortgage which requires
personal notice to him of said extrajudicial foreclosure.19
In its comment, respondent counters that under Section 3 of Act No.
3135, no personal notice to the mortgagor is required in case of a
foreclosure sale. The bank claims that paragraph N of the real estate
mortgage does not impose an additional obligation to it to provide
personal notice to the mortgagor Ramirez.20
We agree with Ramirez and grant his petition.
The CA erred in ruling that absence of notice of extrajudicial
foreclosure sale to Ramirez as required by paragraph N of the real
estate mortgage will not invalidate the extrajudicial foreclosure sale.
We rule that when respondent failed to send the notice of extrajudicial
foreclosure sale to Ramirez, it committed a contractual breach of said
paragraph N sufficient to render the extrajudicial foreclosure sale on
September 8, 1994 null and void. Thus, we reverse the assailed CA
Decision and Resolution.
In Carlos Lim, et al. v. Development Bank of the Philippines ,21 we held
that unless the parties stipulate, personal notice to the mortgagor
in extrajudicial foreclosure proceedings is not necessary because
Section 3 of Act No. 3135 only requires the posting of the notice of
sale in three public places and the publication of that notice in a
newspaper of general circulation. In this case, the parties stipulated in
paragraph N of the real estate mortgage that all correspondence
relative to the mortgage including notifications of extrajudicial actions
shall be sent to mortgagor Ramirez at his given address. Respondent
had no choice but to comply with this contractual provision it has
entered into with Ramirez. The contract is the law between them.
Hence, we cannot agree with the bank that paragraph N of the real
estate mortgage does not impose an additional obligation upon it to
provide personal notice of the extrajudicial foreclosure sale to the
mortgagor Ramirez.
As we explained in Metropolitan Bank v. Wong,22 the bank’s violation of
paragraph N of the real estate mortgage is sufficient to invalidate the
extrajudicial foreclosure sale:
[A] contract is the law between the parties and … absent any showing
that its provisions are wholly or in part contrary to law, morals, good
customs, public order, or public policy, it shall be enforced to the letter
by the courts. Section 3, Act No. 3135 reads:
"Sec. 3. Notice shall be given by posting notices of the sale for not less
than twenty days in at least three public places of the municipality or
city where the property is situated, and if such property is worth more
than four hundred pesos, such notice shall also be published once a
week for at least three consecutive weeks in a newspaper of general
circulation in the municipality and city."
The Act only requires (1) the posting of notices of sale in three public
places, and (2) the publication of the same in a newspaper of general
circulation. Personal notice to the mortgagor is not
necessary. Nevertheless, the parties to the mortgage contract are not
precluded from exacting additional requirements. In this case,
petitioner and respondent in entering into a contract of real estate
mortgage, agreed inter alia:
"all correspondence relative to this mortgage, including demand
letters, summonses, subpoenas, or notifications of any judicial or
extra-judicial action shall be sent to the MORTGAGOR…."
Precisely, the purpose of the foregoing stipulation is to apprise
respondent of any action which petitioner might take on the subject
property, thus according him the opportunity to safeguard his rights.
When petitioner failed to send the notice of foreclosure sale to
respondent, he committed a contractual breach sufficient to render the
foreclosure sale on November 23, 1981 null and void.1âwphi1
We reiterated the Wong  ruling in Global Holiday Ownership
Corporation v. Metropolitan Bank and Trust Company23 and recently,
in Carlos Lim, et al. v. Development Bank of the Philippines .24 Notably,
all these cases involved provisions similar to paragraph N of the real
estate mortgage in this case.
On another matter, we note that the trial court awarded moral and
exemplary damages, attorney’s fees and costs of suit to Ramirez. In
granting said monetary awards, the trial court noted that if the bank
followed strictly the procedure in the extrajudicial foreclosure of the
real estate mortgage and had not filed prematurely an unlawful
detainer case against Ramirez, he would not have been forced to
litigate and incur expenses.25
We delete aforesaid monetary awards, except the award of costs of
suit. Nothing supports the trial court’s award of moral damages. There
was no testimony of any physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury26 suffered by Ramirez. The
award of moral damages must be anchored on a clear showing that
Ramirez actually experienced mental anguish, besmirched reputation,
sleepless nights, wounded feelings or similar injury.27 Ramirez’s
testimony28 is also wanting as to the moral damages he suffered.
2
Similarly, no exemplary damages can be awarded since there is no
basis for the award of moral damages and there is no award of
temperate, liquidated or compensatory damages.29 Exemplary
damages are imposed by way of example for the public good, in
addition to moral, temperate, liquidated or compensatory damages.30
We likewise delete the trial court’s award of attorney’s fees since the
trial court failed to state in the body of its decision the factual or legal
reasons for said award.31
Indeed, even the instant petition32 does not offer any supporting fact
or argument for us to affirm the award of moral and exemplary
damages and attorney’s fees.
However, we agree, with the trial court’s award of costs of suit to
Ramirez. Costs shall be allowed to the prevailing party as a matter of
course unless otherwise provided in the Rules of Court.33 These costs
Ramirez may recover are those stated in Section 10, Rule 142 of the
Rules of Court.34 For instance, Ramirez may recover the lawful fees he
paid in docketing his action for annulment of sale before the trial court.
We add thereto the amount of ₱3,530 or the amount of docket and
lawful fees paid by Ramirez for filing this petition before this
Court.35 We deleted the award of moral and exemplary damages;
hence, the restriction under Section 7, Rule 142 of the Rules of
Court36 would have prevented Ramirez to recover any cost of suit. But
we certify, in accordance with said Section 7, that Ramirez’s action for
annulment of sale involved a substantial and important right such that
he is entitled to an award of costs of suit. Needless to stress, the
purpose of paragraph N of the real estate mortgage is to apprise the
mortgagor, Ramirez, of any action that the mortgagee-bank might take
on the subject properties, thus according him the opportunity to
safeguard his rights. 37
WHEREFORE, we GRANT the petition, REVERSE and SET ASIDE the
Decision dated November 26, 2010 and Resolution dated September
28, 2011 of the Court of Appeals in CA-G.R. CV No. 80616. The
extrajudicial foreclosure proceedings and auction sale conducted by
Atty. Hipolito Safiez on September 8, 1994 and the Certificate of Sale
over the mortgaged properties covered by TCT Nos. N-10722 and N-
23033, issued in favor of respondent The Manila Banking Corporation,
are hereby DECLARED NULL and VOID.
Costs against respondent The Manila Banking Corporation.
SO ORDERED.
G.R. No. 184045               January 22, 2014
SPOUSES NICASIO C. MARQUEZ AND ANITA J.
MARQUEZ, Petitioners,
vs.
SPOUSES CARLITO ALINDOG AND CARMEN
ALINDOG, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated
February 29, 2008 and Resolution 3 dated August 6, 2008 of the Court
of Appeals (CA) in CA-G.R. SP No. 97744 finding no grave abuse of
discretion on the part of the Regional Trial Court of Tagaytay City,
Branch 18 (RTC) in issuing the Orders dated November 14, 2005 4 and
January 17, 2007[[5 ]] in SCA No. TG-05-2521. Based on these orders,
a writ of preliminary injunction was issued against petitioners-spouses
Nicasio C. Marquez and Anita J. Marquez (Sps. Marquez), enjoining
them from taking possession of the property subject of this case
despite the consolidation of their title over the same.
The Facts
Records show that sometime in June 1998, petitioner Anita J. Marquez
(Anita) extended a loan in the amount of ₱500,000.00 to a certain
Benjamin Gutierrez (Gutierrez). As security therefor, Gutierrez
executed a Deed of Real Estate Mortgage6 dated June 16, 1998 over a
parcel of land located in Tagaytay City with an area of 660 square
meters, more or less, covered by Transfer Certificate of Title (TCT) No.
T-134437 (subject property), registered under the name of Benjamin A.
Gutierrez, married to Liwanag Camerin (Sps. Gutiererez). The
mortgage was duly annotated on the dorsal portion of TCT No. T-
13443, which Sps. Marquez had verified as clean prior to the
mortgage.8
Since Gutierrez defaulted in the payment of his loan obligation, Anita
sought the extra-judicial foreclosure of the subject property. At the
public auction sale held on January 19, 2000, Anita emerged as the
highest bidder for the amount of ₱1,171,000.00.9 Upon Gutierrez’s
failure to redeem the same property within the prescribed period
therefor, title was consolidated under TCT No. T-4193910 on November
5, 2001 (in the name of Anita J. Marquez, married to Nicasio C.
Marquez) which, however, bore an annotation of adverse claim11 dated
March 2, 2000 in the names of respondents-spouses Carlito and
Carmen Alindog (Sps. Alindog). Said annotation was copied from an
earlier annotation on TCT No. T-13443 made only after the subject
property’s mortgage to Sps. Marquez.
Subsequently, or on March 21, 2000, Sps. Alindog filed a civil case for
annulment of real estate mortgage and certificate of sale with prayer
for damages against Sps. Marquez and a certain Agripina Gonzales
(Gonzales) before the RTC, docketed as Civil Case No. TG-1966
(annulment case). In their complaint,12 Sps. Alindog alleged that they
purchased13 the subject property from Gutierrez way back in
September 1989, but were unable to secure a certificate of title in their
names because Gonzales – to whom they have entrusted said task –
had deceived them in that they were assured that the said certificate
was already being processed when such was not the
case.14 Eventually, they found out that the property had already been
mortgaged to Sps. Marquez, and that when they tried to contact
Gonzales for an explanation, she could no longer be found. Separately,
Sps. Alindog averred that when the mortgage was executed in favor of
Sps. Marquez, Gutierrez was already dead.15
In their defense,16 Sps. Marquez disputed Sps. Alindog’s ownership
over the subject property, arguing that the purported sale in the
latter’s favor was never registered and therefore, not binding upon
them. Further, they insisted that their certificate of title, TCT No. T-
41939, was already indefeasible, and cannot be attacked collaterally.
Meanwhile, on March 16, 2005, Anita filed an ex-parte petition for the
issuance of a writ of possession17 (ex-parte petition) before the RTC,
docketed as LRC Case No. TG-05-1068, claiming that the same is
ministerial on the court’s part following the consolidation of her and
her husband’s title over the subject property. Impleaded in said
petition are Sps. Gutierrez, including all persons claiming rights under
them.
The RTC Rulings and Subsequent Proceedings
In an Order18 dated August 1, 2005, the RTC granted Anita’s ex-parte
petition and thereby directed the issuance of a writ of possession in
her favor. Consequently, a notice to vacate19 dated September 23,
2005 was issued by Acting Sheriff Teodorico V. Cosare (Sheriff Cosare)
against Sps. Gutierrez and all persons claiming rights under them. Sps.
Alindog were served with a copy of the said notice to vacate on
September 27, 2005.20
Claiming that they would suffer irreparable injury if the implementation
of the writ of possession in favor of Sps. Marquez would be left
unrestrained, Sps. Alindog sought the issuance of a temporary
restraining order (TRO) and/or writ of preliminary injunction with
3
prayer for damages,21 in a separate case docketed as SCA No. TG-05-
252122 (injunction case) which was raffled to the same court.
While it appears that the RTC issued a 72-hour TRO on September 29,
2005 in Sps. Alindog’s favor, records nonetheless show that said order
was not extended to a full 20-day TRO.23 To this end, the Sheriff’s
Return24 dated November 14, 2005 shows that Sheriff Cosare was able
to implement the writ of possession on November 11, 2005, turning
over the possession of the subject property to Sps. Marquez.
After further proceedings on the injunction case, the RTC, through an
Order25 dated November 14, 2005, issued a writ of preliminary
injunction enjoining Sps. Marquez from taking possession of the
subject property until after the controversy has been fully resolved on
the merits. The said issuance was based on the RTC’s appreciation of
the initial evidence adduced by Sps. Alindog, concluding that they
appear to have a right to be protected. Thus, notwithstanding the
consolidation of Sps. Marquez’s title over the subject property, the RTC
granted Sps. Alindog’s prayer for injunctive relief, holding that any
further dispossession on their part would cause them irreparable
injury.26
Aggrieved, Sps. Marquez moved for reconsideration,27 essentially
pointing out that, as the confirmed and registered owners of the
subject property, they are entitled to its possession as a matter of
right. They argued that pursuant to Sections 728 and 829 of Act No.
3135,30 as amended by Act No. 4118,31 the RTC was legally bound to
place them in possession of the subject property pending resolution of
the annulment case. Further, it is their position that the purpose for
the issuance of the injunctive writ – i.e., to restrain the implementation
of the writ of possession – had already been rendered moot and
academic by its actual enforcement in the interim.
For their part, Sps. Alindog filed a Motion for Approval of Cash Bond
and to Regain Possession32 of the subject property.
In an Order33 dated January 17, 2007, the RTC denied the motion of
Sps. Marquez, while granted that of Sps. Alindog. Unperturbed, Sps.
Marquez elevated the case to the CA on certiorari.34
The CA Ruling
In a Decision35 dated February 29, 2008, the CA denied Sps. Marquez’s
petition as it found no grave abuse of discretion on the RTC’s part
when it issued the injunctive writ that enjoined Sps. Marquez from
taking possession of the subject property. It observed that Sps.
Alindog had indeed "adduced prima facie proof of their right to possess
the subject property"36 while the annulment case was pending, adding
that the latter’s "right to remain in possession" 37 proceeds from the
fact of the subject property’s earlier sale to them. Thus, while Sps.
Marquez concededly had a right to possess the subject property on
account of the consolidation of the title in their names, the CA
nonetheless found no fault on the part of the RTC for "proceeding with
caution"38 in weighing the conflicting claims of the parties and
subsequently issuing the writ of preliminary injunction in Sps. Alindog’s
favor.
Dissatisfied, Sps. Marquez moved for reconsideration39 which was,
however, denied in a Resolution40 dated August 6, 2008, hence, this
petition.
The Issue Before the Court
The essential issue in this case is whether or not the CA erred in
finding no grave abuse of discretion on the part of the RTC when it
issued the injunctive writ which enjoined Sps. Marquez from taking
possession of the subject property.
The Court’s Ruling
The petition is meritorious.
It is an established rule that the purchaser in an extra-judicial
foreclosure sale is entitled to the possession of the property and can
demand that he be placed in possession of the same either during
(with bond) or after the expiration (without bond) of the redemption
period therefor. To this end, the Court, in China Banking Corp. v. Sps.
Lozada41 (China Banking Corp.), citing several cases on the matter,
explained that a writ of possession duly applied for by said purchaser
should issue as a matter of course, and thus, merely constitutes a
ministerial duty on the part of the court, viz.:42
The procedure for extrajudicial foreclosure of real estate mortgage is
governed by Act No. 3135, as amended. The purchaser at the public
auction sale of an extrajudicially foreclosed real property may seek
possession thereof in accordance with Section 7 of Act No. 3135, as
amended, which provides:
SEC. 7. In any sale made under the provisions of this Act, the
purchaser may petition the Court of First Instance of the province or
place where the property or any part thereof is situated, to give him
possession thereof during the redemption period, furnishing bond in an
amount equivalent to the use of the property for a period of twelve
months, to indemnify the debtor in case it be shown that the sale was
made without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath and
filed in form or an ex parte motion in the registration or cadastral
proceedings if the property is registered, or in special proceedings in
the case of property registered under the Mortgage Law or under
section one hundred and ninety-four of the Administrative Code, or of
any other real property encumbered with a mortgage duly registered
in the office of any register of deeds in accordance with any existing
law, and in each case the clerk of court shall, upon the filing of such
petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety six as
amended by Act Numbered Twenty-eight hundred and sixty-six, and
the court shall, upon approval of the bond, order that a writ of
possession issue addressed to the sheriff of the province in which the
property is situated, who shall execute said order immediately.
The Court expounded on the application of the foregoing provision in
De Gracia v. San Jose, thus:
As may be seen, the law expressly authorizes the purchaser to petition
for a writ of possession during the redemption period by filing an ex
parte motion under oath for that purpose in the corresponding
registration or cadastral proceeding in the case of property with
Torrens title; and upon the filing of such motion and the approval of
the corresponding bond, the law also in express terms directs the court
to issue the order for a writ of possession. Under the legal provisions
above copied, the order for a writ of possession issues as a matter of
course upon the filing of the proper motion and the approval of the
corresponding bond. No discretion is left to the court. And any
question regarding the regularity and validity of the sale (and the
consequent cancellation of the writ) is left to be determined in a
subsequent proceeding as outlined in section 8. Such question is not to
be raised as a justification for opposing the issuance of the writ of
possession, since, under the Act, the proceeding for this is ex parte.
Strictly, Section 7 of Act No. 3135, as amended, refers to a situation
wherein the purchaser seeks possession of the foreclosed property
during the 12-month period for redemption. Upon the purchaser’s filing
of the ex parte petition and posting of the appropriate bond, the RTC
shall, as a matter of course, order the issuance of the writ of
possession in the purchaser’s favor.
In IFC Service Leasing and Acceptance Corporation v. Nera, the Court
reasoned that if under Section 7 of Act No. 3135, as amended, the
RTC has the power during the period of redemption to issue a writ of
possession on the ex parte application of the purchaser, there is no
reason why it should not also have the same power after the
4
expiration of the redemption period, especially where a new title has
already been issued in the name of the purchaser. Hence, the
procedure under Section 7 of Act No. 3135, as amended, may be
availed of by a purchaser seeking possession of the foreclosed
property he bought at the public auction sale after the redemption
period has expired without redemption having been made.
xxxx
It is thus settled that the buyer in a foreclosure sale becomes the
absolute owner of the property purchased if it is not redeemed during
the period of one year after the registration of the sale. As such, he is
entitled to the possession of the said property and can demand it at
any time following the consolidation of ownership in his name and the
issuance to him of a new transfer certificate of title. The buyer can in
fact demand possession of the land even during the redemption period
except that he has to post a bond in accordance with Section 7 of Act
No. 3135, as amended. No such bond is required after the redemption
period if the property is not redeemed. Possession of the land then
becomes an absolute right of the purchaser as confirmed owner. Upon
proper application and proof of title, the issuance of the writ of
possession becomes a ministerial duty of the court. (Emphases and
underscoring supplied; citations and emphases in the original omitted)
In the case of Spouses Espiridion v. CA,43 the Court expounded on the
ministerial nature of the foregoing issuance as follows:44
The issuance of a writ of possession to a purchaser in a public auction
is a ministerial act.1âwphi1 After the consolidation of title in the
buyer’s name for failure of the mortgagor to redeem the property, the
writ of possession becomes a matter of right. Its issuance to a
purchaser in an extrajudicial foreclosure sale is merely a ministerial
function. The trial court has no discretion on this matter. Hence, any
talk of discretion in connection with such issuance is misplaced.
A clear line demarcates a discretionary act from a ministerial one.
Thus:
The distinction between a ministerial and discretionary act is well
delineated. A purely ministerial act or duty is one which an officer or
tribunal performs in a given state of facts, in a prescribed manner, in
obedience to the mandate of a legal authority, without regard to or the
exercise of his own judgment upon the propriety or impropriety of the
act done. If the law imposes a duty upon a public officer and gives him
the right to decide how or when the duty shall be performed, such
duty is discretionary and not ministerial. The duty is ministerial only
when the discharge of the same requires neither the exercise of official
discretion or judgment.
Clearly, the use of discretion and the performance of a ministerial act
are mutually exclusive. (Emphases and underscoring supplied; citations
omitted)
The ministerial issuance of a writ of possession in favor of the
purchaser in an extra-judicial foreclosure sale, however, admits of an
exception. Section 33,45 Rule 39 of the Rules of Court (Rules)
pertinently provides that the possession of the mortgaged property
may be awarded to a purchaser in an extra-judicial foreclosure unless
a third party is actually holding the property by adverse title or right.
In the recent case of Rural Bank of Sta. Barbara (Iloilo), Inc. v.
Centeno,46 citing the case of China Banking Corp., the Court illumined
that "the phrase ‘a third party who is actually holding the property
adversely to the judgment obligor’ contemplates a situation in which a
third party holds the property by adverse title or right, such as that of
a co-owner, tenant or usufructuary. The co-owner, agricultural tenant,
and usufructuary possess the property in their own right, and they are
not merely the successor or transferee of the right of possession of
another co-owner or the owner of the property. Notably, the property
should not only be possessed by a third party, but also held by the
third party adversely to the judgment obligor."47 In other words, as
mentioned in Villanueva v. Cherdan Lending Investors
Corporation,48 the third person must therefore claim a right superior to
that of the original mortgagor.
In this case, it is clear that the issuance of a writ of possession in favor
of Sps. Marquez, who had already consolidated their title over the
extra-judicially foreclosed property, is merely ministerial in nature. The
general rule as herein stated – and not the exception found under
Section 33, Rule 39 of the Rules – should apply since Sps. Alindog
hinged their claim over the subject property on their purported
purchase of the same from its previous owner, i.e., Sps. Gutierrez
(with Gutierrez being the original mortgagor). Accordingly, it cannot be
seriously doubted that Sps. Alindog are only the latter’s (Sps.
Gutierrez) successors-in-interest who do not have a right superior to
them.
That said, the RTC therefore gravely abused its discretion when it
issued the injunctive writ which enjoined Sps. Marquez from taking
possession of the subject property. To be sure, grave abuse of
discretion arises when a lower court or tribunal patently violates the
Constitution, the law or existing jurisprudence.49 Here, while the RTC
had initially issued a writ of possession in favor of Sps. Marquez, it
defied existing jurisprudence when it effectively rescinded the said writ
by subsequently granting Sps. Alindog's prayer for injunctive relief.
The RTC's finding anent the initial evidence adduced by Sps. Alindog
constitutes improper basis to justify the issuance of the writ of
preliminary injunction in their favor since, in the first place, it had no
authority to exercise any discretion in this respect. Jurisprudence is
clear on the matter: without the exception under Section 33, Rule 39
of the Rules availing, the issuance of a writ of possession in favor of
the purchaser of an extra-judicially foreclosed property - such as Sps.
Marquez in this case - should come as a matter of course, and, in such
regard, constitutes only a ministerial duty on the part of the court.
Besides, it was improper for the RTC to have issued a writ of
preliminary injunction since the act sought to be enjoined, i.e., the
implementation of the writ of possession, had already been
accomplished in the interim and thus, rendered the matter moot. Case
law instructs that injunction would not lie where the acts sought to be
enjoined had already become fait accompli (meaning, an accomplished
or consummated act).50 Hence, since the consummation of the act
sought to be restrained had rendered Sps. Alindog's injunction petition
moot, the issuance of the said injunctive writ was altogether improper.
All told, by acting averse to well-settled jurisprudential rules and
resultantly depriving Sps. Marquez of their right of possession over the
subject property, the Court therefore concludes that the RTC gravely
abused its discretion in this case. In effect, the CA's contrary ruling
thereto is hereby reversed and set aside, which consequentially leads
to the nullification of the writ of preliminary injunction issued by the
RTC in favor of Sps. Alindog, and the reinstatement of the writ of
possession issued by the same court in favor of Sps. Marquez. It must,
however, be noted that these pronouncements are without prejudice
to any separate action which Sps. Alindog may file in order to recover
ownership of the subject property.
WHEREFORE, the petition is GRANTED. The Decision dated February
29, 2008 and Resolution dated August 6, 2008 of the Court of Appeals
in CA-G.R. SP No. 97744, as well as the Orders dated November 14,
2005 and January 17, 2007 of the Regional Trial Court of Tagaytay
City, Branch 18 in SCA No. TG-05-2521 are hereby REVERSED and SET
ASIDE. Accordingly, the writ of preliminary injunction in SCA No. TG-
05-2521 is NULLIFIED, while the Writ of Possession in LRC Case No.
TG-05-1068 is REINSTATED.
SO ORDERED.
5
G.R. No. 148448             August 17, 2004
RUSTICO A. ARDIENTE and ASUNCION
PALOMARDIENTE, petitioners,
vs.
PROVINCIAL SHERIFF, REGISTER OF DEEDS OF QUEZON and
PENINSULA DEVELOPMENT BANK, respondents.
DECISION
CARPIO MORALES, J.:
In mid-November 1979, the spouses Rustico Ardiente and Asuncion
Paloma, together with their son Angel P. Ardiente and the latter’s wife
Gliceria Ardiente, obtained a loan in the amount of P100,000.00 from
the Peninsula Development Bank (the bank) at its main office at
Lucena City, to be amortized in six years, on account of which they
executed a November 15, 1979 Promissory Note1 in the same amount.
To secure the payment of the loan, the Ardientes executed in favor of
the bank a Real Estate Mortgage2 on November 14, 1979 over a parcel
of land situated at Mabutag, Cawa, Buenavista, Quezon and covered
by Transfer Certificate of Title (TCT) No. 29478, and three (3) parcels
of land situated at Cadlit, Guinayangan, Quezon and covered by
Original Certificate of Title (OCT) No. 0-5961.
Out of the proceeds of the loan, the Ardientes purchased a mini bus
costing P81,875.00.
After the bus was in operation for several months, it met an accident
in August 1980 as result of which it sustained heavy damages and
rendered the Ardientes unable to meet their obligation to the bank. As
the Ardientes were later granted by the bank an additional loan
of P46,000 for which they executed an October 29, 1981 Promissory
Note,3 the Real Estate Mortgage was amended.
Demands for the payment of their obligation to the bank
notwithstanding, the Ardientes failed to settle the same.
The bank thus extra-judicially foreclosed the mortgage and the parcels
of land covered thereby were sold at public auction to the bank which
was the highest bidder.
The bank later notified the Ardientes by letter of February 24,
19844 that they had one (1) year from November 11, 1983 or up to
November 11, 1984 to redeem the foreclosed mortgage.
Two days before the period to redeem the foreclosed mortgage
expired or on November 9, 1984, the spouses Rustico and Suncion
Ardiente filed before the Regional Trial Court (RTC) of Quezon at
Gumaca a complaint, denominated as Petition,5 against the bank, the
provincial Sheriff of Quezon, and the Register of deeds of Quezon, for
Annulment of Auction Sale with Preliminary Injunction and Damages,
anchored to two grounds as reflected in paragraph 16 of the
Complaint:
16. On two (2) legal grounds, therefore, namely, (a) that it
was the defendant, not herein petitioners, who had violated
the Real Estate Mortgage and Amended Real Estate
Mortgage, and (b) that the requisite of notifying the
mortgagors of the intended extra-judicial foreclosure
sale was not duly complied with ¾ the FORECLOSURE
 SALE should be annulled, which had supposedly taken place
on November 11, 1983 in the Office of the Provincial Sheriff
situated in the courthouse building, National Trial Court,
Lucena City wherein the alleged highest bidder was the
defendant for the satisfaction of petitioners’ alleged
indebtedness of P247,279.14;6 (Underscoring in the original;
emphasis supplied)
As the following allegation in paragraph 15 of the Complaint shows,
the Ardiente spouses capitalized on the alleged lack of notice to them
of the "judicial foreclosure auction sale."
15. And, the unkindest cut of all came up when, without first
having been duly notified of an intended extra-judicial
foreclosure auction sale, petitioners received a letter from
the defendant, under date of February 24, 1984, informing
them that "the one (1) year period within which to exercise
their right to redeem the foreclosed properties commenced
to run on November 11, 1983 to November 11, 1984" (a
Xerox copy of which is hereto attached as Annex "A" and
made an integral part hereof).7 (Underscoring supplied)
On the above-quoted allegations in paragraphs 15 and 16 of the
Complaint, the bank, in its Answer with Counterclaim, alleged:
xxx
15) Answering respondent admits the allegations contained
in paragraph 15 of the petition, with the explanations and
qualifications, that petitioners were duly notified of the
extra-judicial foreclosure and public auction sale. There was
sufficient notice and publication served to all concern[ed] of
said public auction sale of the properties offered as
collaterals.8 (Underscoring supplied)
(16) Answering respondent specifically denies the allegations
contained in paragraph [16] of the petition. The truth of the
matter is that the petitioners have violated the terms and
conditions of Real Estate Mortgage, Amended Real Estate
Mortgage and that respondent has complied with the
requisites of Art. 3135 as amended in relation to the
application [for] extra-judicial proceeding of
collaterals."9 (Underscoring supplied)
To the Answer the spouses Ardiente filed a Reply and Answer to
Counterclaim.10
The Complaint was later amended11 whereby the spouses Ardiente
alleged that, among other things, the purchase price of the mortgaged
parcels of land was so "grossly and greatly inadequate," hence, the
foreclosure sale should be annulled; by reason of the unlawful
foreclosure of the real estate mortgage, they suffered damages; and to
protect their interests, they filed a formal request with the Register of
Deeds to cause a notice of lis pendens.
In compliance with the directive of Branch 61 of the Gumaca RTC, the
parties submitted their respective memoranda.
In their memorandum, the defendants bank et al. proffered the
following pertinent argument on the Ardiente spouses’ claim that they
were not previously notified of the foreclosure:
[I]t is maintained that there was notice, coupled with a
publication of Notice of Public Auction Sale in a newspaper
of general circulations (sic) supported by publishers’
affidavit attached to the record in the Office of the
Provincial Sheriff of Quezon at Calauag, Quezon.
Personal notice was sent to the plaintiffs. However, said
requirements in the extra-judicial foreclosure is dispensed
6
with, in accordance with the decision of the Supreme Court
in the case of ---
BONNEVIE V. COURT OF APPEALS, 125 SCRA 122
(1983)
In extra-judicial foreclosure, Act No. 3135 personal
notice on the mortgagor is not necessary. Section
3 thereof reads:
Sec. 3 – Notice shall be given by posting notices of
the sale for not less than twenty (20) days in at
least three (3) public places of the municipality or
city where the property is situated, and if such
property is worth more than P400.00, such notice
shall also be published once a week for at least 3
consecutive weeks in a newspaper of general
circulation in the municipality or city.
Such phrase "once a week for at least 3 consecutive weeks",
as interpreted in "BASA vs. MERCADO" (61 Phil. 632) does
not mean that the notice should be published for 3 full
weeks.12 (Emphasis and underscoring supplied)
By Decision of August 12, 1994,13 the trial court, noting the absence of
documentary evidence showing strict compliance with the statutory
requirements on publication of notice of extra-judicial foreclosure of
mortgage, declared the extra-judicial foreclosure and the sale of the
mortgaged properties null and void. Thus, the trial court discoursed:
Respondent Bank maintained that it filed an extra-judicial
foreclosure with the Provincial Sheriff of Quezon. After due
notice and publication, these properties were sold at Public
Auction Sale where a corresponding Certificate of Sale (Exh.
5) was issued in its name dated November 11, 1983, as the
sole bidder (Memorandum for the Defendants, p.4). On page
7 of said Memorandum, it contended that there was notice,
coupled with a publication of Notice of Public Auction Sale in
a newspaper of general circulation supported by publisher’s
affidavit attached to the record in the Office of the Provincial
Sheriff of Quezon at Calauag, Quezon. Personal notice was
sent to petitioners. (Record, pp. 358 & 361, Memorandum
For the Defendants, pages 4 & 7). Despite these
allegations on record, no documentary exhibits of
such publication of notice of public auction sale in a
newspaper of general circulations supported by
publisher’s affidavit were ever submitted by
respondent Bank. Considering that petitioners are clearly
attacking the validity of the public auction sale for which
respondent Bank was the sole bidder, said documentary
exhibits should have been presented in court and not
merely alleged to be attached to the record in the
Office of the Provincial Sheriff of Quezon at
Calauag, Quezon. The clear fact remains that these
documents were not submitted to form part of the records
of this case. No such proof of publication exists in the
records. In the case of Tambunting vs. Court of
Appeals (167 SCRA 17), the Hon. Supreme Court stressed
that "failure to present proof of posting and publication
rebuts the presumption of compliance with official duty". To
show compliance, the published notices and certificate of
posting by the sheriff of the notice of sale on November 11,
1983 should have been presented.
Therefore, in the absence of convincing proof that the
statutory provisions governing publication of notice
of mortgage foreclosure sales have been strictly
complied with, this Court has no other recourse
except to declare as null and void the sale in favor of
judgment creditor, made by respondent Sheriff on November
12, 1983, awarding the properties in question to respondent
 Bank, and for which, the titles in the name of petitioner-
spouses were already cancelled and registered in its name.
This Court also finds that petitioners are entitled to and
deserving the reliefs prayed for.14 (Emphasis and
underscoring supplied),
Accordingly, the trial court disposed as follows:
WHEREFORE, judgment is hereby rendered, in favor of
petitioners, and against the respondents, as follows:
(1) Declaring as null and void the extrajudicial foreclosure
and sale conducted by respondent Provincial Sheriff of
Quezon;
(2) Declaring as null and void all transactions/proceedings
held subsequent thereto such as the execution of the final
deed of sale and issuance of title to and in the name of
respondent Bank;
(3) Ordering the respondent Register of Deeds of Quezon to
re-issue a new Transfer Certificate of Title to and in the
name of petitioners in lieu of the former titles which had
been deemed cancelled by virtue of the issuance of the titles
which had been deemed cancelled by virtue of the issuance
of the titles which had been issued in favor of respondent
Corporation; and
(4) Ordering all respondents, jointly and severally, to pay
unto herein petitioners, the sum of P15,000, for attorney’s
fees and litigation expenses of P10,000.
Costs against defendants.
SO ORDERED.15
The Defendants bank et al. thus appealed to the Court of Appeals
upon the following assigned errors:
[I.]
THE LOWER COURT ERRED IN FINDING AND CONCLUDING
THAT THERE WAS ABSENCE OF CONVINCING PROOF THAT
THE STATUTORY PROVISIONS GOVERNING PUBLICATION
OF NOTICE OF MORTGAGE FORECLOSURE SALE HAVE BEEN
STRICTLY COMPLIED WITH.
[II.]
THE COURT A QUO ERRED IN DECLARING NULLAND VOID
THE EXTRAJUDICIAL FORECLOSURE AND SALE
CONDUCTED BY RESPONDENT PROVINCIAL SHERIFF OF
QUEZON, AND ALL TRANSACTIONS/PROCEEDINGS HELD
SUBSEQUENT THERETO SUCH AS THE EXECUTION OF THE
FINAL DEED OF SALE AND ISSUANCE OF TITLE TO AND IN
THE NAME OF RESPONDENT BANK.
[III.]
THE LOWER COURT ERRED IN ORDERING THE
RRESPONDENT REGISTER OF DEEDS OF QUEZON TO
REISSUE A NEW TRANSFER CERTIFICATE OF TITLE TO AND
IN THE NAME OF PETITIONERS IN LIEU OF THE FORMER
TITLES WHICH HAD BEEN DEEMED CANCELLED BY VIRTUE
OF THE ISSUANCE OF THE TITLES WHICH HAD BEEN
ISSUED IN FAVOR OF RESPONDENT CORPORATION.
7
[IV.]
THE TRIAL COURT ERRED IN AWARDING TO PLAINTIFFS-
APPELLEES’ ATTORNEY’S FEES ABD LITIGATION
EXPENSES.16 (Underscoring supplied)
By Decision of January 29, 2001,17 the Court of Appeals reversed the
decision of the trial court after finding the argument of the defendant-
appellants bank et al. that the lack of required notice and publication
of the extra-judicial foreclosure of mortgage was not averred in the
complaint, hence, cannot be the basis of an adverse judgment.
Explaining its reversal of the decision, the Court of Appeals held:
It is axiomatic that the complaint should inform the
defendant of all the material facts on which the plaintiff
relies to support his demand; it should state the theory of a
cause of action which forms the bases of the plaintiff’s claim
of liability. The office, purpose or function of the complaint is
to inform the defendant clearly and definitely of the claims
made against him so that he may be prepared to meet the
issues at the trial. Otherwise stated, if the wrong or omission
of the defendant is not alleged in the complaint, then the
defendant would be precluded from presenting evidence to
refute the imputation of such wrong or present justification
for the alleged omission. In this case, even perfunctory
reading of the Petition and the Amended Petition, readily
reveals the absence of any averment relating to the
required posting and publication of the notice of
foreclosure sale. Understandably then, the defendant-
appellant Bank saw no need to present the Sheriff’s
Certification of Posting and the newspaper where the notice
was published as well as the publisher’s affidavit. Clearly, the
presumption that the Provincial Sheriff of Quezon has
discharged his official duty in a regular manner and that the
defendant-appellant Bank complied with the requirements
under the law will suffice. And while it may be true that
the Supreme Court said, in the case of Tambunting v.
Court of Appeals  and relied upon by the trial court,
that the presumption of compliance with official duty
is rebutted by the failure to present proof of posting
and publication of the notice of sale, such may be
applied only when these omissions are alleged and
raised by the party in the complaint.
The result would have been different if evidence of these
issues were raised during the trial of the case with the
acquiescence of the parties. Then, the rule on the
amendment of the petition to conform to or authorize
presentation of evidence may be applied, thus:
Sec. 5. Amendment to conform to or authorize presentation
of evidence.¾  When issues not raised in the pleadings are
tried with the express or implied consent of the parties, they
shall be treated in all respects as if they had been raised in
the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to
raise these issues may be made upon motion of any party at
any time, even after judgments but failure to amend does
not affect the result of the trial of these issues. x x x
As earlier stated however, the issue of lack of posting and
publication was not even discussed nor even touched in the
testimony of plaintiff-appellee Rustico Ardiente. His
testimony is limited only to his receipt of a letter from the
bank that their properties have been foreclosed and that
they have one year to redeem the same. The plaintiffs-
appellees only imputed to the defendant-appellant Bank its
omission to give them personal notice of the foreclosure
sale. However, it is jurisprudentially settled that personal
notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary. Hence, lack of personal notice
 to the mortgagors is not a ground to set aside the
foreclosure sale. Ergo, the trial court erred in declaring the
foreclosure null and void based on a ground not raised in the
pleadings nor tried before it.18 (Underscoring in the original;
emphasis supplied)
Hence, the present petition for review filed by the Ardiente spouses
proferring the following:
REASONS WARRANTING REVIEW
I.
RESPON[ENT] COURT OF APPEALS SERIOUSLY ERRED IN
HOLDING THAT SINCE THE PETITIONER’S IN THEIR
PETITION AND IN THEIR AMENDED PETITION DID NOT
MENTION THE ABSENCE OF THE REQUIRED POSTING AND
PUBLICATION OF THE NOTICE OF FORECLOSURE SALE,
THERE IS NO NEED FOR THE DEFENDANT APPELLANT
BANK TO PRESENT THE SHERIFF CERTIFICATION OF
POSTING AND THE NEWSPAPER WHERE THE NOTICE WAS
PUBLISHED AS WELL AS THE PUBLISHER’S AFFIDAVIT TO
PROVE THE VALIDITY OF THE FORECLOSURE SALE.
II.
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
REVERSING THE TRIAL COURT’S DECISION AND
DISMISSING PETITIONER’S COMPLAINT.
III.
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
NOT AWARDING ATTORNEY’S FEES AND LITIGATION
EXPENSES TO THE PLAINTIFFS-APPELLEES.19
The spouses Ardientes (hereinafter referred to as petitioners) argue
that paragraph 15 of their Complaint and paragraph 16 of the
Amended Complaint show that they were "attacking the validity of the
extra-judicial sale"; that the impleading of the sheriff demonstrates
that they are "questioning the validity and legality of his performance
of officially duty"; that the bank was sufficiently informed of their
"cause of action, theory of their case and relief being sought" as
shown by the bank’s allegations in paragraphs 15 and 16 of its
Answer; and that in fact in the bank’s Special and Affirmative
Defenses, particularly paragraph 25 thereof which reads:
25) That answering respondent as well as the Office of
Provincial Sheriff fully compl[ied] [with] the requirements of
law under Act 3135 as amended, more specifically with
regards to notices of the public auction sale as well as the
extra-judicial foreclosure application in accordance with the
law.20 ,
an issue was tendered, the nature of which affirmative defense-answer
called for the presentation of evidence, they citing Benavides v.
Alabastro,21 but the bank did not present "proof of proper compliance
with Act 3135, "AN ACT TO REGULATE THE SALE OF PROPERTY
UNDER SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL
ESTATE MORTAGES,: as to posting and publication of notices of public
auction sale.
The Court is not persuaded.
With respect to petitioners’ paragraphs 15 and 16 allegations in their
Complaint, clearly, they were questioning the validity of the extra-
judicial foreclosure of the mortgage on the basis of lack of notice to
them as mortgagors.
8
It is settled that personal notice to the mortgagor in extra-judicial
foreclosure proceedings is not necessary, hence, not a ground to set
aside the foreclosure sale.22
With respect to petitioners’ argument that the bank, in paragraph 25
of its Answer, in fact put in issue its compliance with the requirements
of Act 3135, "more specifically with regards to the notices of the public
auction sale as well as the extra-judicial application in accordance with
law," to thus call for the presentation of evidence, they citing
again Benavides,23 the same fails.
Benavides bears on the rendition of judgment on the pleadings. It
holds that where the defendant’s answer tenders an issue, as where it
does not only deny the material allegations of the complaint but also
sets up certain special and affirmative defenses, the nature of such
answer calls for presentation of evidence, hence, it is error to render
a judgment on the pleadings thereon without such evidence.
No doubt, it is a well-settled rule that statutory provisions governing
publication of notice of mortgage foreclosure sales must be strictly
complied with, and that even slight deviations therefrom will invalidate
the notice and the sale at least voidable.24
Despite petitioners’ non-allegation of lack of publication of notice of
foreclosure in their Complaint, the bank pleaded in its Answer (1) "that
petitioners were duly notified of the extrajudicial foreclosure and public
auction sale" and "[t]here was sufficient notice and publication served
to all concern[ed] of said public auction sale," and (2) that it and the
Office of the provincial Sheriff "fully compl[ied] with the requirements
of law under Act 3135, more specifically with regard to notices of the
public auction as well as the extra-judicial foreclosure in accordance
with law."
Yet petitioners never refuted in their Reply and Answer to
Counterclaim such defense of the bank nor presented evidence before
the trial court to disprove the same.
In fact, in its Comment on petitioners’ Formal Offer of Evidence before
the trial court, the bank, passing on Exhibit "D" – its letter to
petitioners advising them that they had one year from November 11,
1993 to exercise their right of redemption, stated that said exhibit was
admitted "with the qualification as to the purpose to the effect that
said extra-judicial foreclosure was filed in accordance with law and that
all requirements of said law were complied with and that plaintiffs
were duly notified of said proceedings."25
Despite the bank’s repeated claim that the statutory requirements
governing extra-judicial foreclosure had been complied with, the
bank’s plea of lack of publication of notice of foreclosure was not
raised by petitioners either in the Amended Complaint or in the Reply
and Answer to Counterclaim. It was not also raised during the trial as
the entire transcripts of the stenographic notes of the proceedings
before the trial court show. Nor even in their memorandum filed before
the trial court, petitioners having merely assailed the lack of "personal"
notification to them of any "intended" extrajudicial foreclosure and the
"grossly and greatly inadequate" purchase price of the lands.
As the appellate court thus held, the issue of lack of publication of
notice cannot be raised for the first time on appeal.
In the Tambunting case cited by petitioners to support their thesis that
failure to strictly comply with statutory requirements governing
publication of notice of mortgage foreclosure sales renders the sale at
least voidable, the therein mortgagors, in their complaint for
annulment of mortgage and damages, sought to enjoin the extra-
judicial foreclosure of mortgage. During the pendency of the case, the
extra-judicial foreclosure pushed thru just the same. The mortgaged
property was sold at public auction to the mortgagees, and the
property was eventually sold to the Tambunting Realty. The
mortgagors thereupon filed a Supplemental Complaint impleading the
realty firm, the provincial sheriff as the officer responsible for holding
the foreclosure, and the Register of Deeds for the subsequent transfer
of the property "despite alleged non-compliance with the requirements
of Act 3135, Sec. 3 (as amended by Act 4118) on posting and
publication of the notice of foreclosure sale." In other words, the lack
of publication was raised in issue by the mortgagors in their
Supplemental Complaint.
In the case of Go v. Court of Appeals,26 as in the present case, despite
the fact that the mortgagees pleaded as a defense in their Answer the
"receipt of the ‘notice of the sale which was published in a newspaper
of general circulation,’’’ the issue of lack of publication of the notice of
foreclosure was never raised in issue by the mortgagors.
In disposing of the issue of lack of publication of the notice of
foreclosure of mortgage which was raised for the first time on appeal,
this Court in Go held:
Indeed, as correctly held by the respondent Court, the issue
of lack of publication of the notice of foreclosure of the
mortgage was raised only on appeal. Petitioner does not
represent that he directly attacked in his complaint in Civil
Case No. 8920 the validity of the foreclosure because of
such lack of notice. His own Statement of the Facts and of
the Case in the instant petition makes no reference to such
lack o notice as one, or even just as a basis for any, of his
causes of action in the complaint. He sought the cancellation
of the contract of mortgage because he allegedly never
received the amounts indicated in the promissory notes. Of
course, nullity of the mortgage due to absence of
consideration is leagues apart form the nullity of the
foreclosure of a mortgage because of non-publication of the
notice of foreclosure.
Additionally, petitioner presented no evidence before the
trial court to prove the absence of publication of the notice
despite the fact that private respondents, in their
Answer, squarely pleaded as a defense the foreclosure
sale and petitioner’s receipt of the "notice of the sale
which was published in a newspaper of general
circulation." That the lack of publication of the notice of
foreclosure was never raised in issue by petitioner and that it
is not within the issues framed by the parties in the trial
court are then too obvious. (Emphasis and underscoring
supplied)27
WHEREFORE, there being no reversible error in the assailed decision,
the petition is hereby DISMISSED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 187973               January 20, 2014
LZK HOLDINGS and DEVELOPMENT CORPORATION, Petitioner,
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
RESOLUTION
REYES, J.:
This resolves the appeal filed by petitioner LZK Holdings and
Development Corporation (LZK Holdings) assailing the Decision1 dated
January 27, 2009 of the Court of Appeals (CA) in CA-G.R. S.P. No.
103267 affirming the Order2 dated April 8, 2008 of the Regional Trial
Court (RTC) of San Fernando City (San Fernando), La Union, Branch
9
66, which issued a writ of possession in favor of respondent Planters
Development Bank (Planters Bank).
The facts are not disputed.
LZK Holdings obtained a ₱40,000,000.00 loan from Planters Bank on
December 16, 1996 and secured the same with a Real Estate Mortgage
over its lot located in La Union. The lot measures 589 square meters
and is covered by Transfer Certificate of Title No. T-45337.
On September 21, 1998, the lot was sold at a public auction after
Planters Bank extrajudicially foreclosed the real estate mortgage
thereon due to LZK Holdings' failure to pay its loan. Planters Bank
emerged as the highest bidder during the auction sale and its
certificate of sale was registered on March 16, 1999.
On April 5, 1999, LZK Holdings filed before the RTC of Makati City,
Branch 150, a complaint for annulment of extra judicial foreclosure,
mortgage contract, promissory note and damages. LZK Holdings also
prayed for the issuance of a temporary restraining order (TRO) or writ
of preliminary injunction to enjoin the consolidation of title over the lot
by Planters Bank.
On December 27, 1999, Planters Bank filed an ex-parte motion for the
issuance of a writ of possession with the RTC-San Fernando.
On March 13, 2000 or three (3) days before the expiration of LZK
Holdings' redemption period, the RTC-Makati issued a TRO effective
for 20 days enjoining Planters Bank from consolidating its title over the
property. On April 3, 2000, the RTC-Makati ordered the issuance of a
writ of preliminary injunction for the same purpose3 but the writ was
issued only on June 20, 2000 upon LZK Holdings' posting of a
₱40,000.00 bond.
In the meantime, Planters Bank succeeded in consolidating its
ownership over the property on April 24, 2000. However, the
proceedings for its ex-parte motion for the issuance of a writ of
possession was suspended by the RTC-San Fernando in an Order
dated May 11, 2000 in view of the TRO and writ of preliminary
injunction issued by the RTC-Makati. Planters Bank moved for
reconsideration but its motion was denied by the RTC-San Fernando in
an Order dated September 1, 2000.4
Meanwhile, upon motion of LZK Holdings, the RTC-Makati declared as
null and void the consolidated title of Planters Bank in an Order5 dated
June 2, 2000. Such ruling was affirmed by the CA in a Decision 6 dated
February 26, 2004 in CA-G.R. SP No. 59327. When the matter reached
the Court via G.R. No. 164563, we sustained the CA's judgment in our
Resolution7 dated September 13, 2004.
Planters Bank also appealed the May 11, 2000 Order of the RTC-San
Fernando which held in abeyance the resolution of its ex parte motion
for the issuance of a writ of possession. This time, Planters Bank was
victorious. The CA granted the appeal and annulled the assailed order
of the RTC-San Fernando. Aggrieved, LZK Holdings sought recourse
with the Court in a petition for review docketed as G.R. No.
167998.8 In Our Decision dated April 27, 2007, we affirmed the CA's
ruling and decreed that Planters Bank may apply for and is entitled to
a writ of possession as the purchaser of the property in the foreclosure
sale, viz:
"A writ of possession is a writ of execution employed to enforce a
judgment to recover the possession of land. It commands the sheriff to
enter the land and give possession of it to the person entitled under
the judgment. It may be issued in case of an extrajudicial foreclosure
of a real estate mortgage under Section 7 of Act No. 3135, as
amended by Act No. 4118.
Under said provision, the writ of possession may be issued to the
purchaser in a foreclosure sale either within the one-year redemption
period upon the filing of a bond, or after the lapse of the redemption
period, without need of a bond.
We have consistently held that the duty of the trial court to grant a
writ of possession is ministerial. Such writ issues as a matter of course
upon the filing of the proper motion and the approval of the
corresponding bond. No discretion is left to the trial court. Any
question regarding the regularity and validity of the sale, as well as the
consequent cancellation of the writ, is to be determined in a
subsequent proceeding as outlined in Section 8 of Act No. 3135. Such
question cannot be raised to oppose the issuance of the writ, since the
proceeding is ex parte. The recourse is available even before the
expiration of the redemption period provided by law and the Rules of
Court.
To emphasize the writ's ministerial character, we have in previous
cases disallowed injunction to prohibit its issuance, just as we have
held that issuance of the same may not be stayed by a pending action
for annulment of mortgage or the foreclosure itself.
xxxx
x x x [Planters Bank], as the purchaser in the foreclosure sale, may
apply for a writ of possession during the redemption period. In fact, it
did apply for a writ on December 27, 1999, well within the redemption
period. The San Fernando RTC, given its ministerial duty to issue the
writ, therefore, should have acted on the ex parte petition. The
injunction order is of no moment because it should be understood to
have merely stayed the consolidation of title. As previously stated, an
injunction is not allowed to prohibit the issuance of a writ of
possession. Neither does the pending case for annulment of
foreclosure sale, mortgage contract, promissory notes and damages
stay the issuance of said writ.
Lastly, the trial on the merits has not even started. Until the
foreclosure sale of the property in question is annulled by a court of
competent jurisdiction, petitioner is bereft of valid title and of the right
to prevent the issuance of a writ of possession to [Planters Bank]. Until
then, it is the trial court's ministerial function to grant the possessory
writ to [Planters Bank]. "9 (Citations omitted)
Armed with the above ruling, Planters Bank filed before the RTC-San
Fernando a motion to set ex-parte hearing for the issuance of a writ of
possession. LZK Holdings opposed the motion. In an Order dated April
2, 2008, the RTC-San Fernando denied the opposition and set the
hearing on April 14, 2008. On April 8, 2008, the RTC-San Fernando
issued another Order10 declaring the scheduled hearing moot and
academic and granting Planter Bank's ex-parte motion for the issuance
of a writ of possession which was filed as early as December 27, 1999.
The decretal portion of the order reads:
WHEREFORE, premises considered, the pet1t10n is hereby granted,
hence the order setting the case for ex-parte hearing on April 14, 2008
is rendered moot and academic by this order. Let [a] Writ of
Possession issue in favor of Planters Development Bank and the
Deputy Sheriff of this Court is hereby directed to place Planters
Development Bank or any of its authorized representatives in
possession of the subject parcel of land, together with all the
improvements existing thereon, covered by TCT- 45337 of the Register
of Deeds for the province of La Union against LZK HOLDINGS AND
DEVELOPMENT CORPORATION (referred to as LZK) including all other
persons/occupants who are claiming rights under them and who are
depriving [Planters Bank] of its right to possess the above-described
property upon the filing of bond by (Planters Bank] in the amount of
two million pesos (Php2,000,000.00).
SO ORDERED.11
10
In its herein assailed Decision12 dated January 27, 2009, the CA
affirmed the foregoing ruling and dismissed LZK Holdings' petition for
certiorari docketed as CA-G.R. SP No. 103267. The CA likewise denied
LZK Holdings' motion for reconsideration in its Resolution13 dated May
12, 2009.
LZK Holdings then filed a motion before the Court for a 30-day
extension within which to file a petition for review reckoned from the
date of its receipt of the resolution granting such extension. In our
Resolution dated July 15, 2009 we granted the motion but we ordered
that the 30-day extended period shall be counted from the expiration
of the original reglementary period.14 As such, LZK Holdings had until
July 23, 2009 to file its petition and not August 24, 2009 or the date
when the petition was actually filed.
In our Resolution dated August 26, 2009, we denied the petition for
being filed beyond the extended period pursuant to Section 5(a), Rule
56 of the Rules of Court and for lack of reversible error in the assailed
judgment of the CA.15 LZK Holdings moved for
16
reconsideration  explaining that it was able to obtain a copy of the
Court's July 15, 2009 Resolution on July 29, 2009 when Lourdes Z.
Korshak, LZK Holdings' Chief Executive Officer, went to the Office of
the Clerk of Court of the Third Division and that she still had to
confront and get the case records from the company's previous
counsel and then look for a substitute lawyer. LZK Holdings also
claimed that the writ of possession issued to Planters Bank should be
annulled for the following reasons, to wit:
(a) with the cancellation of Planters Bank's consolidated title,
LZK Holdings remain to be the registered owner of the
property and as such, the former had no right to apply for a
writ of possession pursuant to PNB v. Sanao Marketing
Corporation,17 which held that right of possession is based
on the ownership of the subject property by the applicant;
(b) LZK Holdings was deprived of due process because the
RTC did not conduct a hearing on Planter Bank's motion for
the issuance of a writ of possession;
(c) the P.2,000,000.00 bond posted by LZK Holdings does
not conform with Section 7 of Act No. 3135 which mandates
that the bond amount shall be equivalent to "twelve (12)
months use of the subject property" which in this case
amounted to P.7,801,4 72.28 at the time the writ was
issued.
In a Resolution18 dated October 13, 2010 the Court took a liberal
stance on the late filing of LZK Holdings' petition for review.
Accordingly, its motion for reconsideration was granted and the
petition for review reinstated.
However, after a re-examination of the substantive merits of the
petition, the Court finds and stands by its initial determination that the
CA committed no reversible error in affirming the issuance of a writ of
possession by the R TC in favor of Planters Bank.
Under the principle of conclusiveness of judgment, the right of
Planter's Bank to a writ of possession as adjudged in G.R. No. 167998
is binding and conclusive on the parties.
The doctrine of res judicata by conclusiveness of judgment postulates
that "when a right or fact has been judicially tried and determined by a
court of competent jurisdiction, or when an opportunity for such trial
has been given, the judgment of the court, as long as it remains
unreversed, should be conclusive upon the parties and those in privity
with them."19
All the elements of the doctrine are present in this case. The final
judgment in G.R. No. 167998 was rendered by the Court pursuant to
its jurisdiction over the review of decisions and rulings of the CA. It
was a judgment on the merits of Planters Banks's right to apply for G.R. No. 195540               March 13, 2013
and be issued a writ of possession. Lastly, the parties in G.R. No.
167998 are the same parties involved in the present case.20
GOLDENWAY MERCHANDISING CORPORATION, Petitioner,
vs.
Hence, LZK Holdings can no longer question Planter Bank's right to a EQUITABLE PCI BANK, Respondent.
writ of possession over the subject property because the doctrine of
conclusiveness of judgment bars the relitigation of such particular
DECISION
issue.

Moreover, the authority relied upon by LZK Holdings defeats rather
than support its position. The ruling in PNB21 echoes the very same
rationale of the judgment in G.R. No. 167998 that is - the purchaser in
foreclosure sale may take possession of the property even before the
expiration of the redemption period by filing an ex parte motion for
such purpose and upon posting of the necessary bond.22
The pronouncement in PNB that right of possession is based on the
ownership of the subject property by the applicant pertains to
applications for writ of possession after the expiration of the
redemption period, a situation not contemplated within the facts of the
present case.
We cannot also uphold the contentions of LZK Holdings that the RTC,
in issuing the writ of possession, transgressed Act No. 3135.23
No hearing is required prior to the issuance of a writ of possession.
This is clear from the following disquisitions in Espinoza v. United
Overseas Bank Phils.24 which reiterates the settled rules on writs of
possession, to wit:
The proceeding in a petition for a writ of possession is ex parte and
summary in nature.1âwphi1 It is a judicial proceeding brought for the
benefit of one party only and without notice by the court to any person
adverse of interest. It is a proceeding wherein relief is granted without
giving the person against whom the relief is sought an opportunity to
be heard.
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari which seeks to
reverse and set aside the Decision 1 dated November 19, 2010 and
Resolution2 dated January 31, 2011 of the Court of Appeals (CA) in CA-
G.R. CV No. 91120. The CA affirmed the Decision 3 dated January 8,
2007 of the Regional Trial Court (RTC) of- Valenzuela City, Branch 171
dismissing the complaint in Civil Case No. 295-V -01.
The facts are undisputed.
On November 29, 1985, Goldenway Merchandising Corporation
(petitioner) executed a Real Estate Mortgage in favor of Equitable PCI
Bank (respondent) over its real properties situated in Valenzuela,
Bulacan (now Valenzuela City) and covered by Transfer Certificate of
Title (TCT) Nos. T-152630, T-151655 and T-214528 of the Registry of
Deeds for the Province of Bulacan. The mortgage secured the Two
Million Pesos (₱2,000,000.00) loan granted by respondent to petitioner
and was duly registered.4
As petitioner failed to settle its loan obligation, respondent
extrajudicially foreclosed the mortgage on December 13, 2000. During
the public auction, the mortgaged properties were sold for
₱3,500,000.00 to respondent. Accordingly, a Certificate of Sale was
issued to respondent on January 26, 2001. On February 16, 2001, the
Certificate of Sale was registered and inscribed on TCT Nos. T-152630,
T-151655 and T-214528.5

In a letter dated March 8, 2001, petitioner’s counsel offered to redeem

By its very nature, an ex parte petition for issuance of a writ of
possession is a non-litigious proceeding. It is a judicial proceeding for
the enforcement of one's right of possession as purchaser in a
foreclosure sale. It is not an ordinary suit filed in court, by which one
party sues another for the enforcement of a wrong or protection of a
right, or the prevention or redress of a wrong.25 (Citations omitted)
Given the ex-parte nature of the proceedings for a writ of possession,
the R TC did not err in cancelling the previously scheduled hearing and
in granting Planters Bank's motion without affording notice to LZK
Holdings or allowing it to participate.
Anent the correct amount of surety bond, it is well to emphasize that
our task in an appeal by petition for review on certiorari is limited, as a
jurisdictional matter, to reviewing errors of law that might have been
committed by the CA.26 The allegations of incorrect computation of the
surety bond involve factual matters within the competence of the trial
court to address as this Court is not a trier of facts. The RTC found the
amount of ₱2,000,000.00 to be sufficiently equivalent to the use of the
property for a period of twelve (12) months. We are bound by such
factual finding especially considering the affirmation accorded it by the
CA.
In fine, the decision of the CA is in accordance with the law and
jurisprudence on the matter. It correctly sustained the Order of the
RTC in issuing a writ of possession in favor of Planters Bank.
the foreclosed properties by tendering a check in the amount of
₱3,500,000.00. On March 12, 2001, petitioner’s counsel met with
respondent’s counsel reiterating petitioner’s intention to exercise the
right of redemption.6 However, petitioner was told that such
redemption is no longer possible because the certificate of sale had
already been registered. Petitioner also verified with the Registry of
Deeds that title to the foreclosed properties had already been
consolidated in favor of respondent and that new certificates of title
were issued in the name of respondent on March 9, 2001.
On December 7, 2001, petitioner filed a complaint 7 for specific
performance and damages against the respondent, asserting that it is
the one-year period of redemption under Act No. 3135 which should
apply and not the shorter redemption period provided in Republic Act
(R.A.) No. 8791. Petitioner argued that applying Section 47 of R.A.
8791 to the real estate mortgage executed in 1985 would result in the
impairment of obligation of contracts and violation of the equal
protection clause under the Constitution. Additionally, petitioner
faulted the respondent for allegedly failing to furnish it and the Office
of the Clerk of Court, RTC of Valenzuela City with a Statement of
Account as directed in the Certificate of Sale, due to which petitioner
was not apprised of the assessment and fees incurred by respondent,
thus depriving petitioner of the opportunity to exercise its right of
redemption prior to the registration of the certificate of sale.

WHEREFORE, premises considered, the petition is hereby DENIED. The

Decision dated January 27, 2009 of the Court of Appeals in CA-G.R.
S.P. No. 103267 is AFFIRMED.

SO ORDERED.

11
In its Answer with Counterclaim,8 respondent pointed out that
petitioner cannot claim that it was unaware of the redemption price
which is clearly provided in Section 47 of R.A. No. 8791, and that
petitioner had all the opportune time to redeem the foreclosed
properties from the time it received the letter of demand and the
notice of sale before the registration of the certificate of sale. As to the
check payment tendered by petitioner, respondent said that even
assuming arguendo such redemption was timely made, it was not for
the amount as required by law.
On January 8, 2007, the trial court rendered its decision dismissing the
complaint as well as the counterclaim. It noted that the issue of
constitutionality of Sec. 47 of R.A. No. 8791 was never raised by the
petitioner during the pre-trial and the trial. Aside from the fact that
petitioner’s attempt to redeem was already late, there was no valid
redemption made because Atty. Judy Ann Abat-Vera who talked to
Atty. Joseph E. Mabilog of the Legal Division of respondent bank, was
not properly authorized by petitioner’s Board of Directors to transact
for and in its behalf; it was only a certain Chan Guan Pue, the alleged
President of petitioner corporation, who gave instruction to Atty. Abat-
Vera to redeem the foreclosed properties.9
Aggrieved, petitioner appealed to the CA which affirmed the trial
court’s decision. According to the CA, petitioner failed to justify why
Section 47 of R.A. No. 8791 should be declared unconstitutional.
Furthermore, the appellate court concluded that a reading of Section
47 plainly reveals the intention to shorten the period of redemption for
juridical persons and that the foreclosure of the mortgaged properties
in this case when R.A. No. 8791 was already in effect clearly falls
within the purview of the said provision.10
Petitioner’s motion for reconsideration was likewise denied by the CA.
In the present petition, it is contended that Section 47 of R.A. No.
8791 is inapplicable considering that the contracting parties expressly
and categorically agreed that the foreclosure of the real estate
mortgage shall be in accordance with Act No. 3135. Citing Co v.
Philippine National Bank11 petitioner contended that the right of
redemption is part and parcel of the Deed of Real Estate Mortgage
itself and attaches thereto upon its execution, a vested right flowing
out of and made dependent upon the law governing the contract of
mortgage and not on the mortgagee’s act of extrajudicially foreclosing
the mortgaged properties. This Court thus held in said case that
"Under the terms of the mortgage contract, the terms and conditions
under which redemption may be exercised are deemed part and parcel
thereof whether the same be merely conventional or imposed by law."
Petitioner then argues that applying Section 47 of R.A. No. 8791 to the
present case would be a substantial impairment of its vested right of
redemption under the real estate mortgage contract. Such impairment
would be violative of the constitutional proscription against impairment
of obligations of contract, a patent derogation of petitioner’s vested
right and clearly changes the intention of the contracting parties.
Moreover, citing this Court’s ruling in Rural Bank of Davao City, Inc. v.
Court of Appeals12 where it was held that "Section 119 prevails over
statutes which provide for a shorter period of redemption in
extrajudicial foreclosure sales", and in Sulit
v. Court of Appeals,13 petitioner stresses that it has always been the
policy of this Court to aid rather than defeat the mortgagor’s right to
redeem his property.
Petitioner further argues that since R.A. No. 8791 does not provide for
its retroactive application, courts therefore cannot retroactively apply
its provisions to contracts executed and consummated before its
effectivity. Also, since R.A. 8791 is a general law pertaining to the
banking industry while Act No. 3135 is a special law specifically
governing real estate mortgage and foreclosure, under the rules of
statutory construction that in case of conflict a special law prevails
over a general law regardless of the dates of enactment of both laws,
12
Act No. 3135 clearly should prevail on the redemption period to be
applied in this case.
The constitutional issue having been squarely raised in the pleadings
filed in the trial and appellate courts, we shall proceed to resolve the
same.
The law governing cases of extrajudicial foreclosure of mortgage is Act
No. 3135,14 as amended by Act No. 4118. Section 6 thereof provides:
SEC. 6. In all cases in which an extrajudicial sale is made under the
special power hereinbefore referred to, the debtor, his successors-in-
interest or any judicial creditor or judgment creditor of said debtor, or
any person having a lien on the property subsequent to the mortgage
or deed of
trust under which the property is sold, may redeem the same at any
time within the term of one year from and after the date of the sale;
and such redemption shall be governed by the provisions of sections
four hundred and sixty-four to four hundred and sixty-six, inclusive, of
the Code of
Civil Procedure,15 in so far as these are not inconsistent with the
provisions of this Act.
The one-year period of redemption is counted from the date of the
registration of the certificate of sale. In this case, the parties provided
in their real estate mortgage contract that upon petitioner’s default
and the latter’s entire loan obligation becoming due, respondent may
immediately foreclose the mortgage judicially in accordance with the
Rules of Court, or extrajudicially in accordance with Act No. 3135, as
amended.
However, Section 47 of R.A. No. 8791 otherwise known as "The
General Banking Law of 2000" which took effect on June 13, 2000,
amended Act No. 3135. Said provision reads:
SECTION 47. Foreclosure of Real Estate Mortgage. — In the event of
foreclosure, whether judicially or extrajudicially, of any mortgage on
real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property
has been sold for the full or partial payment of his obligation shall have
the right within one year after the sale of the real estate, to redeem
the property by paying the amount due under the mortgage deed, with
interest thereon at the rate specified in the mortgage, and all the costs
and expenses incurred by the bank or institution from the sale and
custody of said property less the income derived therefrom. However,
the purchaser at the auction sale concerned whether in a judicial or
extrajudicial foreclosure shall have the right to enter upon and take
possession of such property immediately after the date of the
confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain the
conduct of foreclosure proceedings instituted pursuant to this provision
shall be given due course only upon the filing by the petitioner of a
bond in an amount fixed by the court conditioned that he will pay all
the damages which the bank may suffer by the enjoining or the
restraint of the foreclosure proceeding.
Notwithstanding Act 3135, juridical persons whose property is being
sold pursuant to an extrajudicial foreclosure, shall have the right to
redeem the property in accordance with this provision until, but not
after, the registration of the certificate of foreclosure sale with the
applicable Register of Deeds which in no case shall be more than three
(3) months after foreclosure, whichever is earlier. Owners of property
that has been sold in a foreclosure sale prior to the effectivity of this
Act shall retain their redemption rights until their expiration. (Emphasis
supplied.)
Under the new law, an exception is thus made in the case of juridical
persons which are allowed to exercise the right of redemption only
"until, but not after, the registration of the certificate of foreclosure
sale" and in no case more than three (3) months after foreclosure,
whichever comes first.16
May the foregoing amendment be validly applied in this case when the
real estate mortgage contract was executed in 1985 and the mortgage
foreclosed when R.A. No. 8791 was already in effect?
We answer in the affirmative.
When confronted with a constitutional question, it is elementary that
every court must approach it with grave care and considerable caution
bearing in mind that every statute is presumed valid and every
reasonable doubt should be resolved in favor of its
constitutionality.17 For a law to be nullified, it must be shown that there
is a clear and unequivocal breach of the Constitution. The ground for
nullity must be clear and beyond reasonable doubt. 18 Indeed, those
who petition this Court to declare a law, or parts thereof,
unconstitutional must clearly establish the basis therefor. Otherwise,
the petition must fail.19
Petitioner’s contention that Section 47 of R.A. 8791 violates the
constitutional proscription against impairment of the obligation of
contract has no basis.
The purpose of the non-impairment clause of the Constitution20 is to
safeguard the integrity of contracts against unwarranted interference
by the State. As a rule, contracts should not be tampered with by
subsequent laws that would change or modify the rights and
obligations of the parties.21 Impairment is anything that diminishes the
efficacy of the contract. There is an impairment if a subsequent law
changes the terms of a contract between the parties, imposes new
conditions, dispenses with those agreed upon or withdraws remedies
for the enforcement of the rights of the parties.22
Section 47 did not divest juridical persons of the right to redeem their
foreclosed properties but only modified the time for the exercise of
such right by reducing the one-year period originally provided in Act
No. 3135. The new redemption period commences from the date of
foreclosure sale, and expires upon registration of the certificate of sale
or three months after foreclosure, whichever is earlier. There is
likewise no retroactive application of the new redemption period
because Section 47 exempts from its operation those properties
foreclosed prior to its effectivity and whose owners shall retain their
redemption rights under Act No. 3135.
Petitioner’s claim that Section 47 infringes the equal protection clause
as it discriminates mortgagors/property owners who are juridical
persons is equally bereft of merit.
The equal protection clause is directed principally against undue favor
and individual or class privilege. 1âwphi1 It is not intended to prohibit
legislation which is limited to the object to which it is directed or by the
territory in which it is to operate. It does not require absolute equality,
but merely that all persons be treated alike under like conditions both
as to privileges conferred and liabilities imposed.23 Equal protection
permits of reasonable classification.24 We have ruled that one class
may be treated differently from another where the groupings are
based on reasonable and real distinctions.25 If classification is germane
to the purpose of the law, concerns all members of the class, and
applies equally to present and future conditions, the classification does
not violate the equal protection guarantee.26
We agree with the CA that the legislature clearly intended to shorten
the period of redemption for juridical persons whose properties were
foreclosed and sold in accordance with the provisions of Act No.
3135.27
The difference in the treatment of juridical persons and natural
persons was based on the nature of the properties foreclosed –
13
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.28 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.1âwphi1 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.
This legitimate public interest pursued by the legislature further
enfeebles petitioner’s impairment of contract theory.
The right of redemption being statutory, it must be exercised in the
manner prescribed by the statute,29 and within the prescribed time
limit, to make it effective. Furthermore, as with other individual rights
to contract and to property, it has to give way to police power
exercised for public welfare.30 The concept of police power is well-
established in this jurisdiction. It has been defined as the "state
authority to enact legislation that may interfere with personal liberty or
property in order to promote the general welfare." Its scope, ever-
expanding to meet the exigencies of the times, even to anticipate the
future where it could be done, provides enough room for an efficient
and flexible response to conditions and circumstances thus assuming
the greatest benefits.31
The freedom to contract is not absolute; all contracts and all rights are
subject to the police power of the State and not only may regulations
which affect them be established by the State, but all such regulations
must be subject to change from time to time, as the general well-being
of the community may require, or as the circumstances may change,
or as experience may demonstrate the necessity.32 Settled is the rule
that the non-impairment clause of the Constitution must yield to the
loftier purposes targeted by the Government. The right granted by this
provision must submit to the demands and necessities of the State’s
power of regulation.33 Such authority to regulate businesses extends to
the banking industry which, as this Court has time and again
emphasized, is undeniably imbued with public interest.34
Having ruled that the assailed Section 47 of R.A. No. 8791 is
constitutional, we find no reversible error committed by the CA in
holding that petitioner can no longer exercise the right of redemption
over its foreclosed properties after the certificate of sale in favor of
respondent had been registered.
WHEREFORE, the petition for review on certiorari is DENIED for lack of
merit. The Decision dated November 19, 2010 and Resolution dated
January 31, 2011 of the Court of Appeals in CA-G.R. CV No. 91120 are
hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.
G.R. No. 179665               April 3, 2013
SOLID BUILDERS, INC. and MEDINA FOODS INDUSTRIES,
INC., Petitioners,
vs.
CHINA BANKING CORPORATION, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This petition for review on certiorari1 assails the Decision2 dated April
16, 2007 and the Resolution3 dated September 18, 2007 of the Court
of Appeals in CA-G.R. SP No. 81968.
During the period from September 4, 1992 to March 27, 1996, China
Banking Corporation (CBC) granted several loans to Solid Builders, Inc.
(SBI), which amounted to ₱139,999,234.34, exclusive of interests and
other charges. To secure the loans, Medina Foods Industries, Inc.
(MFII) executed in CBC’s favor several surety agreements and
contracts of real estate mortgage over parcels of land in the Loyola
Grand Villas in Quezon City and New Cubao Central in Cainta, Rizal.4
Subsequently, SBI proposed to CBC a scheme through which SBI
would sell the mortgaged properties and share the proceeds with CBC
on a 50-50 basis until such time that the whole obligation would be
fully paid. SBI also proposed that there be partial releases of the
certificates of title of the mortgaged properties without the burden of
updating interests on all loans.5
In a letter dated March 20, 2000 addressed to CBC, SBI requested the
restructuring of its loans, a reduction of interests and penalties and the
implementation of a dacion en pago of the New Cubao Central
property.6
The letter reads:
March 20, 2000
CHINA BANKING CORPORATION
Dasmarinas cor. Juan Luna Sts.
Binondo, Manila
Attn: Mr. George Yap
Account Officer
Dear Mr. Yap,
This is to refer to our meeting held at your office last March 10, 2000.
In this regard, please allow us to call your attention on the following
important matters we have discussed:
1. With respect to the penalties, we are requesting
for a reduction in the rates as we find it onerous
considering the big amount of our loan
(₱218,540,648.00). The interest together with the
penalties that you are imposing is similar to the
ones being charged by private lending institutions,
i.e., 4.5%/month total.
2. As I had discussed with you regarding Dacion
en Pago, which you categorically stated that it
could be a possibility, we are considering putting
our New Cubao Central (NCC) on Dacion and
restructuring our loan with regards to our Loyola
Grand Villas.
Considering that you had stated that our restructuring had not been
finalized, we find it timely to raise these urgent matters and possibly
agree on a realistic and workable scheme that we can incorporate on
our final agreement.
Thank you and we strongly hope for your prompt consideration on our
request.
14
Very truly yours,
V. BENITO R. SOLIVEN (Sgd.)
President7
In response, CBC sent SBI a letter dated April 17, 2000 stating that the
loans had been completely restructured effective March 1, 1999 in the
amount of ₱218,540,646.00. On the aspect of interests and charges,
CBC suggested the updating of the obligation to avoid paying interests
and charges.8 The relevant portion of the letter dated April 17, 2000
reads:
First of all, to clarify, the loan’s restructuring has been finalized and
completed on 3/01/99 with the booking of the Restructured loan of
₱218,540,646. Only two Amendments of Real Estate Mortgages remain
to be registered to date. Certain documents that we requested from
your company since last year, that could facilitate this amendment
have not yet been forwarded to us until now. Nevertheless, this does
not change the fact that the restructuring of the loan has been done
with and finalized.
This in turn is with regards to statement[s] no. 1 & 2 of your letter,
referring to the interest rates and penalties. As per our records, the
rates are actually the prevailing bank interest rates. In addition,
penalty charges are imposed in the event of non-payment. To avoid
experiencing having to pay more due to the penalty charges, updating
of obligations is necessary. Thus, we advise updating of your
obligations to avoid penalty charges. However, should you be able to
update both interest and penalty through a "one-time" payment, we
shall present your request to Senior Management for possible
reduction in penalty charges.
Concerning statement no. 3 containing your request for the possible
Dacion en Pago of your NCC properties, as was discussed already in
the meeting, it is a concern that has to be discussed with Senior
Management and approved by the Executive Committee before we can
commit to you on the matter. We suggest that your company, Solid
Builders, exhaust all possibilities to sell the NCC properties yourselves
because, being a real estate company, Solid has better ways and
means of selling the properties.9
This was followed by another communication from CBC to SBI
reiterating, among others, that the loan has been restructured
effective March 1, 1999 upon issuance by SBI of promissory notes in
favor of CBC. The relevant portion of that letter dated May 19, 2000
reads:
Again, in response to your query with regards the issue of the loans
restructuring, to reiterate, the loan restructuring has been finalized and
completed on 3/01/99 with the booking of the Restructured loan of
₱231,716,646. The Restructured Loan was effective ever since the new
Promissory Note was signed on the said date.
The interest rates for the loans are actually rates booked since the new
Promissory Notes were effective.1âwphi1 Any move of changing it or
"re-pricing" the interest is only possible every 90 days from the
booking date, which represents the interest amortization payment
dates. No change or "re-pricing" in interest rates is possible since
interest payment/obligations have not yet been paid.
With regards to the possible Dacion en Pago of your NCC properties,
as was discussed already in the meeting, it is a concern that has to be
discussed with Senior Management and approved by the Executive
Committee before we can commit to you on the matter. We suggest
that your company, Solid Builders, exhaust all possibilities to sell the
NCC properties yourselves because, being a real estate company, Solid
has better ways and means of selling the properties.10
Subsequently, in a letter dated September 18, 2000, CBC demanded
SBI to settle its outstanding account within ten days from receipt
thereof. The letter dated September 18, 2000 reads:
September 18, 2000
SOLID BUILDERS, INC.
V.V. Soliven Bldg., I
EDSA, San Juan, Metro Manila
We refer again to the balances of the abovementioned Promissory
Notes amounting to PH₱218,540,646.00 excluding interest, penalties
and other charges signed by you jointly and severally in our favor,
which remains unpaid up to this date despite repeated demands for
payment.
In view of the strict regulations of Bangko Sentral ng Pilipinas on past
due accounts, we regret that we cannot hold these accounts further in
abeyance. Accordingly, we are reiterating our request that
arrangements to have these accounts settled within ten (10) days from
receipt hereof, otherwise, we shall be constrained to refer the matter
to our lawyers for collection.
We enclose a Statement of Account as of September 30, 2000 for your
reference and guidance.
Very truly yours,
MERCEDES E. GERMAN (Sgd.)
Manager
Loans & Discounts Department – H.O.11
On October 5, 2000, claiming that the interests, penalties and charges
imposed by CBC were iniquitous and unconscionable and to enjoin CBC
from initiating foreclosure proceedings, SBI and MFII filed a Complaint
"To Compel Execution of Contract and for Performance and Damages,
With Prayer for Writ of Preliminary Injunction and Ex-Parte Temporary
Restraining Order" in the Regional Trial Court (RTC) of Pasig City. The
case was docketed as Civil Case No. 68105 and assigned to Branch
264.12
In support of their application for the issuance of writ of preliminary
injunction, SBI and MFII alleged:
IV. APPLICATION FOR PRELIMINARY INJUNCTION WITH EX- PARTE
TEMPORARY RESTRAINING ORDER
A. GROUNDS FOR PRELIMINARY INJUNCTION
1. That SBI and MFII are entitled to the reliefs demanded,
among which is enjoining/restraining the commission of the
acts complained of, the continuance of which will work
injustice to the plaintiffs; that such acts are in violation of
the rights of plaintiffs and, if not enjoined/restrained, will
render the judgment sought herein ineffectual.
2. That under the circumstances, it is necessary to require,
through preliminary injunction, CBC to refrain from
immediately enforcing its letters dated April 17, 2000 and
May 19, 2000 and September 18, 2000 during the pendency
of this complaint, and
3. That SBI and MFII submit that they are exempt from filing
of a bond considering that the letters dated April 17, 2000,
May 19, 2000 and September 18, 2000 are a patent nullity,
and in the event they are not, they are willing to post such
15
bond this Honorable Court may determine and under the
conditions required by Section 4, Rule 58.13
In its Answer and Opposition to the issuance of the writ of preliminary
injunction, CBC alleged that to implement the agreed restructuring of
the loan, SBI executed ten promissory notes stipulating that the
interest rate shall be at 18.5% per annum. For its part, MFII executed
third party real estate mortgage over its properties in favor of CBC to
secure the payment of SBI’s restructured loan. As SBI was delinquent
in the payment of the principal as well as the interest thereon, CBC
demanded settlement of SBI’s account.14
After hearing the parties, the trial court issued an Order dated
December 14, 2000 granting the application of SBI and MFII for the
issuance of a writ of preliminary injunction. The trial court held that
SBI and MFII were able to sufficiently comply with the requisites for
the issuance of an injunctive writ:
It is well-settled that to be entitled to an injunctive writ, a party must
show that: (1) the invasion of right sought to be protected is material
and substantial; (2) the right of complainant is clear and unmistakable;
and, (3) there is an urgent and paramount necessity for the writ to
prevent serious damage.
The Court opines that the above-mentioned requisites have been
sufficiently shown by plaintiffs in this case, accordingly, a writ of
preliminary injunction is in order.
The three subject letters, particularly the letter dated September 18,
2000, indicate that the promissory notes executed by Benito Soliven as
President of plaintiff SBI amounted to ₱218,540,646.00, excluding
interest, penalties and other charges remained unpaid, and demand
that the account be settled within ten days, else defendant bank shall
refer the latter to its lawyers for collection.
The message in the letter is clear: If the account is not settled within
the grace period, defendant bank will resort to foreclosure of mortgage
on the subject properties.
The actual or imminent damage to plaintiffs is likewise clear.
Considering the number of parcels of land and area involved, if these
are foreclosed by defendant bank, plaintiffs’ properties and source of
income will be effectively diminished, possibly to the point of closure.
The only issue remaining is whether or not plaintiffs have the right to
ask for an injunctive writ in order to prevent defendant bank from
taking over their properties.
Plaintiffs argued that the interest and penalties charged them in the
subject letters and attached statements of account increased during a
seven-month period to an amount they described as "onerous",
"usurious" ad "greedy".
They likewise asserted that there were on-going talks between officers
of the corporations involved to treat or restructure the contracts to a
dacion en pago, as there was a proposed plan of action by
representatives of plaintiffs during the meetings.
Defendant, on the other hand, sought to explain the increase in the
interest as contained in the promissory notes which were voluntarily
and willingly signed by Soliven, therefore, binding on plaintiffs and that
the proposed plan of action is merely an oral contract still in the
negotiation stage and not binding.
The condition on the interest payments as contained in the promissory
notes are as follows:
"Interest for the first quarter shall be @ 18.5% P.A. Thereafter, it shall
be payable quarterly in arrears based on three months average rate."
In its Memorandum, defendant bank tried to show that the questioned
increase in the interests was merely in compliance with the above
condition. To this Court, the explanation is insufficient. A more detailed
rationalization is required to convince the court of the fairness of the
increase in interests and penalties.
However, the coming explanation may probably be heard only during
trial on the merits, and by then this pending incident or the entire
case, may already be moot and academic if the injunctive writ is not
issued.15
The dispositive portion of the trial court’s Order dated December 14,
2000 reads:
WHEREFORE, premises considered, the application for issuance of writ
of preliminary injunction is GRANTED.
Defendant CHINA BANKING CORPORATION, its representatives,
agents and all persons working in its behalf are hereby enjoined from
enforcing the contents of its letters to plaintiffs dated April 17, 2000,
May 19, 2000 and September 18, 2000, particularly the bank’s legal
department or other counsel commencing collection proceedings
against plaintiffs in the amount stated in the letters and statements of
account.
The Writ of Preliminary Injunction shall be issued upon plaintiffs’
posting of a bond executed to defendant in the amount of Two Million
Pesos (₱2,000,000.00) to the effect [that] the plaintiffs will pay
defendant all damages which the latter may sustain by reason of the
injunction if it be ultimately decided that the injunction is
unwarranted.16
CBC sought reconsideration but the trial court denied it in an
Order17 dated December 10, 2001.
Subsequently, CBC filed a "Motion to Dissolve Injunction Order" but
this was denied in an Order18 dated November 10, 2003. The trial court
ruled that the motion was in the nature of a mere belated second
motion for reconsideration of the Order dated December 14, 2000. It
also declared that CBC failed to substantiate its prayer for the
dissolution of the injunctive writ.
Aggrieved, CBC filed a Petition for Certiorari docketed as CA-G.R. SP
No. 81968 in the Court of Appeals where it claimed that the Orders
dated December 14, 2000 (granting the application of petitioners SBI
and MFII for the issuance of writ of preliminary injunction), December
10, 2001 (denying reconsideration of the order dated December 14,
2000), and November 10, 2003 (denying the CBC’s motion to dissolve
injunction order) were all issued with grave abuse of discretion
amounting to lack of jurisdiction.19
In a Decision dated April 16, 2007, the Court of Appeals found that, on
its face, the trial court’s Order dated December 14, 2000 granting the
application of SBI and MFII for the issuance of a writ of preliminary
injunction had no basis as there were no findings of fact or law which
would indicate the existence of any of the requisites for the grant of an
injunctive writ. It appeared to the Court of Appeals that, in ordering
the issuance of a writ of injunction, the trial court simply relied on the
imposition by CBC of the interest rates to the loans obtained by SBI
and MFII. According to the Court of Appeals, however, the records do
not reveal a clear and unmistakable right on the part of SBI and MFII
that would entitle them to the protection of a writ of preliminary
injunction. Thus, the Court of Appeals granted the petition of CBC, set
aside the Orders dated December 14, 2000, December 10, 2001, and
November 10, 2003 and dissolved the injunctive writ issued by the
RTC of Pasig City.20
16
SBI and MFII filed a motion for reconsideration but it was denied by
the Court of Appeals in a Resolution dated September 18, 2007.
Hence, this petition.
SBI and MFII assert that the Decision dated April 16, 2007 of the Court
of Appeals is legally infirm as its conclusions are contrary to the judicial
admissions of CBC. They allege that, in its Answer, CBC admitted
paragraphs 25 and 26 of the Complaint regarding the interests and
charges amounting to ₱35,093,980.14 and ₱80,614,525.15,
respectively, which constituted more than 50% of the total obligation
of ₱334,249,151.29 as of February 15, 2000. For SBI and MFII, CBC’s
admission of paragraphs 25 and 26 of the Complaint is an admission
that the interest rate imposed by CBC is usurious, exorbitant and
confiscatory. Thus, when the Court of Appeals granted the petition of
CBC and ordered the lifting of the writ of preliminary injunction it
effectively disposed of the main case, Civil Case No. 68105, without
trial on the merits and rendered moot and academic as it enabled CBC
to foreclose on the mortgages despite the usurious, exorbitant and
confiscatory interest rates.21
SBI and MFII also claim that the Court of Appeals either overlooked or
disregarded undisputed and admitted facts which, if properly
considered, would have called for the maintenance and preservation of
the preliminary injunction issued by the trial court. They argue that the
Court of Appeals did not even consider Article 1229 of the Civil Code
which provides:
Art. 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may also
be reduced by the courts if it is iniquitous or unconscionable.
For SBI and MFII, the failure of the Court of Appeals to take into
account Article 1229 of the Civil Code and its act of lifting the
preliminary injunction "would definitely pave the way for CBC’s
unbridled imposition of illegal rates of interest and immediate
foreclosure" of the properties of SBI and MFII "without the benefit of a
full blown trial."22
For its part, CBC assails the petition contending that it is not allowed
under Rule 45 of the Rules of Court because it simply raises issues of
fact and not issues of law. CBC further asserts that the Decision of the
Court of Appeals is an exercise of sound judicial discretion as it is in
accord with the law and the applicable provisions of this Court.23
The petition fails.
This Court has recently reiterated the general principles in issuing a
writ of preliminary injunction in Palm Tree Estates, Inc. v. Philippine
National Bank24:
A preliminary injunction is an order granted at any stage of an action
prior to judgment of final order, requiring a party, court, agency, or
person to refrain from a particular act or acts. It is a preservative
remedy to ensure the protection of a party’s substantive rights or
interests pending the final judgment in the principal action. A plea for
an injunctive writ lies upon the existence of a claimed emergency or
extraordinary situation which should be avoided for otherwise, the
outcome of a litigation would be useless as far as the party applying
for the writ is concerned.
At times referred to as the "Strong Arm of Equity," we have
consistently ruled that there is no power the exercise of which is more
delicate and which calls for greater circumspection than the issuance
of an injunction. It should only be extended in cases of great injury
where courts of law cannot afford an adequate or commensurate
remedy in damages; "in cases of extreme urgency; where the right is
very clear; where considerations of relative inconvenience bear
strongly in complainant’s favor; where there is a willful and unlawful
invasion of plaintiff’s right against his protest and remonstrance, the
injury being a continuing one, and where the effect of the mandatory
injunction is rather to reestablish and maintain a preexisting continuing
relation between the parties, recently and arbitrarily interrupted by the
defendant, than to establish a new relation."
A writ of preliminary injunction is an extraordinary event which must
be granted only in the face of actual and existing substantial rights.
The duty of the court taking cognizance of a prayer for a writ of
preliminary injunction is to determine whether the requisites necessary
for the grant of an injunction are present in the case before it. 25 In this
connection, a writ of preliminary injunction is issued to preserve the
status quo ante, upon the applicant’s showing of two important
requisite conditions, namely: (1) the right to be protected exists prima
facie, and (2) the acts sought to be enjoined are violative of that right.
It must be proven that the violation sought to be prevented would
cause an irreparable injury.26
Here, SBI and MFII basically claim a right to have their mortgaged
properties shielded from foreclosure by CBC on the ground that the
interest rate and penalty charges imposed by CBC on the loans availed
of by SBI are iniquitous and unconscionable. In particular, SBI and
MFII assert:
There is therefore an urgent necessity for the issuance of a writ of
preliminary injunction or at least a status quo [order], otherwise,
respondent bank will definitely foreclose petitioners’ properties without
awaiting the trial of the main case on the merits, with said usurious
and confiscatory rates of interest as basis.27
and
There is therefore no legal justification for the Honorable Court of
Appeals to lift/dissolve the injunction issued by the trial court,
otherwise, respondent bank – on the basis of this illegal imposition of
interest – can already foreclose the properties of petitioners and
render the whole case (sans trial on the merits) moot and academic.28
On this matter, the Order dated December 14, 2000 of the trial court
enumerates as the first argument raised by SBI and MFII in support of
their application for the issuance of a writ of preliminary injunction:
1. Their rights basically are for the protection of their properties put up
as collateral for the loans extended by defendant bank to them.29
As debtor-mortgagors, however, SBI and MFII do not have a right to
prevent the creditor-mortgagee CBC from foreclosing on the
mortgaged properties simply on the basis of alleged "usurious,
exorbitant and confiscatory rate of interest."30 First, assuming that the
interest rate agreed upon by the parties is usurious, the nullity of the
stipulation of usurious interest does not affect the lender’s right to
recover the principal loan, nor affect the other terms thereof.31 Thus, in
a usurious loan with mortgage, the right to foreclose the mortgage
subsists, and this right can be exercised by the creditor upon failure by
the debtor to pay the debt due.32
Second, even the Order dated December 14, 2000 of the trial court,
which granted the application for the issuance of a writ of preliminary
injunction, recognizes that the parties still have to be heard on the
alleged lack of "fairness of the increase in interests and penalties"
during the trial on the merits.33 Thus, the basis of the right claimed by
SBI and MFII remains to be controversial or disputable as there is still
a need to determine whether or not, upon consideration of the various
circumstances surrounding the agreement of the parties, the interest
rates and penalty charges are unconscionable. Therefore, such claimed
right cannot be considered clear, actual and subsisting. In the absence
of a clear legal right, the issuance of the injunctive writ constitutes
grave abuse of discretion.34
17
The Order dated December 10, 2001 also shows the reasoning of the
trial court which betrays that its grant of the application of SBI and
MFII for the issuance of a writ of preliminary injunction was not based
on a clear legal right. Said the trial court:
It was likewise shown that plaintiffs SBI and MFII had the clear right
and urgency to ask for injunction because of the issue of validity of the
increase in the amount of the loan obligation.35 (Emphasis supplied.)
At most, the above finding of the trial court that the validity of the
increase in the amount of the loan obligation is in issue simply
amounted to a finding that the rights of SBI and MFII vis-à-vis that of
CBC are disputed and debatable. In such a case where the
complainant-movant’s right is doubtful or disputed, the issuance of an
injunctive writ is not proper.36
Even assuming that SBI and MFII are correct in claiming their
supposed right, it nonetheless disintegrates in the face of the ten
promissory notes in the total amount of ₱218,540,648.00, exclusive of
interest and penalties, issued by SBI in favor of CBC on March 1, 1999
which until now remain unpaid despite the maturity of the said notes
on March 1, 2004 and CBC’s repeated demands for
payment.37 Foreclosure is but a necessary consequence of nonpayment
of mortgage indebtedness.38 As this Court held in Equitable PCI Bank,
Inc. v. OJ-Mark Trading, Inc.39:
Where the parties stipulated in their credit agreements, mortgage
contracts and promissory notes that the mortgagee is authorized to
foreclose the mortgaged properties in case of default by the
mortgagors, the mortgagee has a clear right to foreclosure in case of
default, making the issuance of a Writ of Preliminary Injunction
improper. x x x. (Citation omitted.)
In addition, the default of SBI and MFII to pay the mortgage
indebtedness disqualifies them from availing of the equitable relief that
is the injunctive writ. In particular, SBI and MFII have stated in their
Complaint that they have made various requests to CBC for
restructuring of the loan.40 The trial court’s Order dated December 14,
2000 also found that SBI wrote several letters to CBC "requesting,
among others, for a reduction of interests and penalties and
restructuring of the loan."41 A debtor’s various and constant requests
for deferment of payment and restructuring of loan, without actually
paying the amount due, are clear indications that said debtor was
unable to settle his obligation.42 SBI’s default or failure to settle its
obligation is a breach of contractual obligation which tainted its hands
and disqualified it from availing of the equitable remedy of preliminary
injunction.
As SBI is not entitled to the issuance of a writ of preliminary injunction,
so is MFII. The accessory follows the principal. The accessory
obligation of MFII as accommodation mortgagor and surety is tied to
SBI’s principal obligation to CBC and arises only in the event of SBI’s
default.
Thus, MFII’s interest in the issuance of the writ of preliminary
injunction is necessarily prejudiced by SBI’s wrongful conduct and
breach of contract.
Even Article 1229 of the Civil Code, which SBI and MFII invoke, works
against them. Under that provision, the equitable reduction of the
penalty stipulated by the parties in their contract will be based on a
finding by the court that such penalty is iniquitous or unconscionable.
Here, the trial court has not yet made a ruling as to whether the
penalty agreed upon by CBC with SBI and MFII is unconscionable.
Such finding will be made by the trial court only after it has heard both
parties and weighed their respective evidence in light of all relevant
circumstances. Hence, for SBI and MFII to claim any right or benefit
under that provision at this point is premature.
As no clear right that warrants the extraordinary protection of an
injunctive writ has been shown by SBI and MFII to exist in their favor,
the first requirement for the grant of a preliminary injunction has not
been satisfied. In the absence of any requisite, and where facts are
shown to be wanting in bringing the matter within the conditions for
its issuance, the ancillary writ of injunction must be struck down for
having been rendered in grave abuse of discretion.43 Thus, the Court of
Appeals did not err when it granted the petition for certiorari of CBC
and ordered the dissolution of the writ of preliminary injunction issued
by the trial court.
Neither has there been a showing of irreparable injury. An injury is
considered irreparable if it is of such constant and frequent recurrence
that no fair or reasonable redress can be had therefor in a court of
law, or where there is no standard by which their amount can be
measured with reasonable accuracy, that is, it is not susceptible of
mathematical computation. The provisional remedy of preliminary
injunction may only be resorted to when there is a pressing necessity
to avoid injurious consequences which cannot be remedied under any
standard of compensation.44
In the first place, any injury that SBI and MFII may suffer in case of
foreclosure of the mortgaged properties will be purely monetary and
compensable by an appropriate judgment in a proper case against
CBC. Moreover, where there is a valid cause to foreclose on the
mortgages, it cannot be correctly claimed that the irreparable damage
sought to be prevented by the application for preliminary injunction is
the loss of the mortgaged properties to auction sale.45 The alleged
entitlement of SBI and MFII to the "protection of their properties put
up as collateral for the loans" they procured from CBC is not the kind
of irreparable injury contemplated by law. Foreclosure of mortgaged
property is not an irreparable damage that will merit for the debtor-
mortgagor the extraordinary provisional remedy of preliminary
injunction. As this Court stated in Philippine National Bank v. Castalloy
Technology Corporation46:
All is not lost for defaulting mortgagors whose properties were
foreclosed by creditors-mortgagees. The respondents will not be
deprived outrightly of their property, given the right of redemption
granted to them under the law. Moreover, in extrajudicial foreclosures,
mortgagors have the right to receive any surplus in the selling price.
Thus, if the mortgagee is retaining more of the proceeds of the sale
than he is entitled to, this fact alone will not affect the validity of the
sale but will give the mortgagor a cause of action to recover such
surplus. (Citation omitted.)
The En Banc Resolution in A.M. No. 99-10-05-0, Re: Procedure in
Extrajudicial or Judicial Foreclosure of Real Estate Mortgages, further
stacks the odds against SBI and MFII. Issued on February 20, 2007, or
some two months before the Court of Appeals promulgated its decision
in this case, the resolution embodies the additional guidelines intended
to aid courts in foreclosure proceedings, specifically limiting the
instances, and citing the conditions, when a writ against foreclosure of
a mortgage may be issued, to wit:
(1) No temporary restraining order or writ of preliminary
injunction against the extrajudicial foreclosure of real estate
mortgage shall be issued on the allegation that the loan
secured by the mortgage has been paid or is not delinquent
unless the application is verified and supported by evidence
of payment.
(2) No temporary restraining order or writ of preliminary
injunction against the extrajudicial foreclosure of real estate
mortgage shall be issued on the allegation that the interest
on the loan is unconscionable, unless the debtor pays the
mortgagee at least twelve percent per annum interest on the
principal obligation as stated in the application for
foreclosure sale, which shall be updated monthly while the
case is pending.
18
(3) Where a writ of preliminary injunction has been issued
against a foreclosure of mortgage, the disposition of the
case shall be speedily resolved. To this end, the court
concerned shall submit to the Supreme Court, through the
Office of the Court Administrator, quarterly reports on the
progress of the cases involving ten million pesos and above.
(4) All requirements and restrictions prescribed for the
issuance of a temporary restraining order/writ of preliminary
injunction, such as the posting of a bond, which shall be
equal to the amount of the outstanding debt, and the time
limitation for its effectivity, shall apply as well to a status
quo order.47
The guidelines speak of strict exceptions and conditions. 48 To reverse
the decision of the Court of Appeals and reinstate the writ of
preliminary injunction issued by the trial court will be to allow SBI and
MFII to circumvent the guidelines and conditions provided by the En
Banc Resolution in A.M. No. 99-10-05-0 dated February 20, 2007 and
prevent CBC from foreclosing on the mortgaged properties based
simply on the allegation that the interest on the loan is
unconscionable. This Court will not permit such a situation. What
cannot be done directly cannot be done indirectly.49
All told, the relevant circumstances in this case show that there was
failure to satisfy the requisites for the issuance of a writ of preliminary
injunction. The injunctive writ issued by the trial court should therefore
be lifted and dissolved. That was how the Court of Appeals decided.
That is how it should be.
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.
G.R. No. 179665               April 3, 2013
SOLID BUILDERS, INC. and MEDINA FOODS INDUSTRIES,
INC., Petitioners,
vs.
CHINA BANKING CORPORATION, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This petition for review on certiorari1 assails the Decision2 dated April
16, 2007 and the Resolution3 dated September 18, 2007 of the Court
of Appeals in CA-G.R. SP No. 81968.
During the period from September 4, 1992 to March 27, 1996, China
Banking Corporation (CBC) granted several loans to Solid Builders, Inc.
(SBI), which amounted to ₱139,999,234.34, exclusive of interests and
other charges. To secure the loans, Medina Foods Industries, Inc.
(MFII) executed in CBC’s favor several surety agreements and
contracts of real estate mortgage over parcels of land in the Loyola
Grand Villas in Quezon City and New Cubao Central in Cainta, Rizal.4
Subsequently, SBI proposed to CBC a scheme through which SBI
would sell the mortgaged properties and share the proceeds with CBC
on a 50-50 basis until such time that the whole obligation would be
fully paid. SBI also proposed that there be partial releases of the
certificates of title of the mortgaged properties without the burden of
updating interests on all loans.5
In a letter dated March 20, 2000 addressed to CBC, SBI requested the
restructuring of its loans, a reduction of interests and penalties and the
implementation of a dacion en pago of the New Cubao Central
property.6
The letter reads:
March 20, 2000
CHINA BANKING CORPORATION
Dasmarinas cor. Juan Luna Sts.
Binondo, Manila
Attn: Mr. George Yap
Account Officer
Dear Mr. Yap,
This is to refer to our meeting held at your office last March 10, 2000.
In this regard, please allow us to call your attention on the following
important matters we have discussed:
1. With respect to the penalties, we are requesting
for a reduction in the rates as we find it onerous
considering the big amount of our loan
(₱218,540,648.00). The interest together with the
penalties that you are imposing is similar to the
ones being charged by private lending institutions,
i.e., 4.5%/month total.
2. As I had discussed with you regarding Dacion
en Pago, which you categorically stated that it
could be a possibility, we are considering putting
our New Cubao Central (NCC) on Dacion and
restructuring our loan with regards to our Loyola
Grand Villas.
Considering that you had stated that our restructuring had not been
finalized, we find it timely to raise these urgent matters and possibly
agree on a realistic and workable scheme that we can incorporate on
our final agreement.
Thank you and we strongly hope for your prompt consideration on our
request.
Very truly yours,
V. BENITO R. SOLIVEN (Sgd.)
President7
In response, CBC sent SBI a letter dated April 17, 2000 stating that the
loans had been completely restructured effective March 1, 1999 in the
amount of ₱218,540,646.00. On the aspect of interests and charges,
CBC suggested the updating of the obligation to avoid paying interests
and charges.8 The relevant portion of the letter dated April 17, 2000
reads:
First of all, to clarify, the loan’s restructuring has been finalized and
completed on 3/01/99 with the booking of the Restructured loan of
₱218,540,646. Only two Amendments of Real Estate Mortgages remain
to be registered to date. Certain documents that we requested from
your company since last year, that could facilitate this amendment
have not yet been forwarded to us until now. Nevertheless, this does
not change the fact that the restructuring of the loan has been done
with and finalized.
This in turn is with regards to statement[s] no. 1 & 2 of your letter,
referring to the interest rates and penalties. As per our records, the
rates are actually the prevailing bank interest rates. In addition,
penalty charges are imposed in the event of non-payment. To avoid
experiencing having to pay more due to the penalty charges, updating
19
of obligations is necessary. Thus, we advise updating of your
obligations to avoid penalty charges. However, should you be able to
update both interest and penalty through a "one-time" payment, we
shall present your request to Senior Management for possible
reduction in penalty charges.
Concerning statement no. 3 containing your request for the possible
Dacion en Pago of your NCC properties, as was discussed already in
the meeting, it is a concern that has to be discussed with Senior
Management and approved by the Executive Committee before we can
commit to you on the matter. We suggest that your company, Solid
Builders, exhaust all possibilities to sell the NCC properties yourselves
because, being a real estate company, Solid has better ways and
means of selling the properties.9
This was followed by another communication from CBC to SBI
reiterating, among others, that the loan has been restructured
effective March 1, 1999 upon issuance by SBI of promissory notes in
favor of CBC. The relevant portion of that letter dated May 19, 2000
reads:
Again, in response to your query with regards the issue of the loans
restructuring, to reiterate, the loan restructuring has been finalized and
completed on 3/01/99 with the booking of the Restructured loan of
₱231,716,646. The Restructured Loan was effective ever since the new
Promissory Note was signed on the said date.
The interest rates for the loans are actually rates booked since the new
Promissory Notes were effective.1âwphi1 Any move of changing it or
"re-pricing" the interest is only possible every 90 days from the
booking date, which represents the interest amortization payment
dates. No change or "re-pricing" in interest rates is possible since
interest payment/obligations have not yet been paid.
With regards to the possible Dacion en Pago of your NCC properties,
as was discussed already in the meeting, it is a concern that has to be
discussed with Senior Management and approved by the Executive
Committee before we can commit to you on the matter. We suggest
that your company, Solid Builders, exhaust all possibilities to sell the
NCC properties yourselves because, being a real estate company, Solid
has better ways and means of selling the properties.10
Subsequently, in a letter dated September 18, 2000, CBC demanded
SBI to settle its outstanding account within ten days from receipt
thereof. The letter dated September 18, 2000 reads:
September 18, 2000
SOLID BUILDERS, INC.
V.V. Soliven Bldg., I
EDSA, San Juan, Metro Manila
We refer again to the balances of the abovementioned Promissory
Notes amounting to PH₱218,540,646.00 excluding interest, penalties
and other charges signed by you jointly and severally in our favor,
which remains unpaid up to this date despite repeated demands for
payment.
In view of the strict regulations of Bangko Sentral ng Pilipinas on past
due accounts, we regret that we cannot hold these accounts further in
abeyance. Accordingly, we are reiterating our request that
arrangements to have these accounts settled within ten (10) days from
receipt hereof, otherwise, we shall be constrained to refer the matter
to our lawyers for collection.
We enclose a Statement of Account as of September 30, 2000 for your
reference and guidance.
Very truly yours,
MERCEDES E. GERMAN (Sgd.) The three subject letters, particularly the letter dated September 18,
Manager 2000, indicate that the promissory notes executed by Benito Soliven as
President of plaintiff SBI amounted to ₱218,540,646.00, excluding
interest, penalties and other charges remained unpaid, and demand
Loans & Discounts Department – H.O.11
that the account be settled within ten days, else defendant bank shall
refer the latter to its lawyers for collection.
On October 5, 2000, claiming that the interests, penalties and charges
imposed by CBC were iniquitous and unconscionable and to enjoin CBC
The message in the letter is clear: If the account is not settled within
from initiating foreclosure proceedings, SBI and MFII filed a Complaint
the grace period, defendant bank will resort to foreclosure of mortgage
"To Compel Execution of Contract and for Performance and Damages,
on the subject properties.
With Prayer for Writ of Preliminary Injunction and Ex-Parte Temporary
Restraining Order" in the Regional Trial Court (RTC) of Pasig City. The
case was docketed as Civil Case No. 68105 and assigned to Branch The actual or imminent damage to plaintiffs is likewise clear.
264.12 Considering the number of parcels of land and area involved, if these
are foreclosed by defendant bank, plaintiffs’ properties and source of
income will be effectively diminished, possibly to the point of closure.
In support of their application for the issuance of writ of preliminary
injunction, SBI and MFII alleged:
The only issue remaining is whether or not plaintiffs have the right to
ask for an injunctive writ in order to prevent defendant bank from
IV. APPLICATION FOR PRELIMINARY INJUNCTION WITH EX- PARTE
taking over their properties.
TEMPORARY RESTRAINING ORDER

Plaintiffs argued that the interest and penalties charged them in the
A. GROUNDS FOR PRELIMINARY INJUNCTION
subject letters and attached statements of account increased during a
seven-month period to an amount they described as "onerous",
1. That SBI and MFII are entitled to the reliefs demanded, "usurious" ad "greedy".
among which is enjoining/restraining the commission of the
acts complained of, the continuance of which will work
They likewise asserted that there were on-going talks between officers
injustice to the plaintiffs; that such acts are in violation of
of the corporations involved to treat or restructure the contracts to a
the rights of plaintiffs and, if not enjoined/restrained, will
dacion en pago, as there was a proposed plan of action by
render the judgment sought herein ineffectual.
representatives of plaintiffs during the meetings.

2. That under the circumstances, it is necessary to require,

Defendant, on the other hand, sought to explain the increase in the
through preliminary injunction, CBC to refrain from
interest as contained in the promissory notes which were voluntarily
immediately enforcing its letters dated April 17, 2000 and
and willingly signed by Soliven, therefore, binding on plaintiffs and that
May 19, 2000 and September 18, 2000 during the pendency
the proposed plan of action is merely an oral contract still in the
of this complaint, and
negotiation stage and not binding.

3. That SBI and MFII submit that they are exempt from filing
The condition on the interest payments as contained in the promissory
of a bond considering that the letters dated April 17, 2000,
notes are as follows:
May 19, 2000 and September 18, 2000 are a patent nullity,
and in the event they are not, they are willing to post such
bond this Honorable Court may determine and under the "Interest for the first quarter shall be @ 18.5% P.A. Thereafter, it shall
conditions required by Section 4, Rule 58.13 be payable quarterly in arrears based on three months average rate."

In its Answer and Opposition to the issuance of the writ of preliminary
injunction, CBC alleged that to implement the agreed restructuring of
the loan, SBI executed ten promissory notes stipulating that the
interest rate shall be at 18.5% per annum. For its part, MFII executed
third party real estate mortgage over its properties in favor of CBC to
secure the payment of SBI’s restructured loan. As SBI was delinquent
in the payment of the principal as well as the interest thereon, CBC
demanded settlement of SBI’s account.14
After hearing the parties, the trial court issued an Order dated
December 14, 2000 granting the application of SBI and MFII for the
issuance of a writ of preliminary injunction. The trial court held that
SBI and MFII were able to sufficiently comply with the requisites for
the issuance of an injunctive writ:
In its Memorandum, defendant bank tried to show that the questioned
increase in the interests was merely in compliance with the above
condition. To this Court, the explanation is insufficient. A more detailed
rationalization is required to convince the court of the fairness of the
increase in interests and penalties.
However, the coming explanation may probably be heard only during
trial on the merits, and by then this pending incident or the entire
case, may already be moot and academic if the injunctive writ is not
issued.15
The dispositive portion of the trial court’s Order dated December 14,
2000 reads:

WHEREFORE, premises considered, the application for issuance of writ

It is well-settled that to be entitled to an injunctive writ, a party must
of preliminary injunction is GRANTED.
show that: (1) the invasion of right sought to be protected is material
and substantial; (2) the right of complainant is clear and unmistakable;
and, (3) there is an urgent and paramount necessity for the writ to Defendant CHINA BANKING CORPORATION, its representatives,
prevent serious damage. agents and all persons working in its behalf are hereby enjoined from
enforcing the contents of its letters to plaintiffs dated April 17, 2000,
May 19, 2000 and September 18, 2000, particularly the bank’s legal
The Court opines that the above-mentioned requisites have been
department or other counsel commencing collection proceedings
sufficiently shown by plaintiffs in this case, accordingly, a writ of
against plaintiffs in the amount stated in the letters and statements of
preliminary injunction is in order.
account.

20
The Writ of Preliminary Injunction shall be issued upon plaintiffs’
posting of a bond executed to defendant in the amount of Two Million
Pesos (₱2,000,000.00) to the effect [that] the plaintiffs will pay
defendant all damages which the latter may sustain by reason of the
injunction if it be ultimately decided that the injunction is
unwarranted.16
CBC sought reconsideration but the trial court denied it in an
Order17 dated December 10, 2001.
Subsequently, CBC filed a "Motion to Dissolve Injunction Order" but
this was denied in an Order18 dated November 10, 2003. The trial court
ruled that the motion was in the nature of a mere belated second
motion for reconsideration of the Order dated December 14, 2000. It
also declared that CBC failed to substantiate its prayer for the
dissolution of the injunctive writ.
Aggrieved, CBC filed a Petition for Certiorari docketed as CA-G.R. SP
No. 81968 in the Court of Appeals where it claimed that the Orders
dated December 14, 2000 (granting the application of petitioners SBI
and MFII for the issuance of writ of preliminary injunction), December
10, 2001 (denying reconsideration of the order dated December 14,
2000), and November 10, 2003 (denying the CBC’s motion to dissolve
injunction order) were all issued with grave abuse of discretion
amounting to lack of jurisdiction.19
In a Decision dated April 16, 2007, the Court of Appeals found that, on
its face, the trial court’s Order dated December 14, 2000 granting the
application of SBI and MFII for the issuance of a writ of preliminary
injunction had no basis as there were no findings of fact or law which
would indicate the existence of any of the requisites for the grant of an
injunctive writ. It appeared to the Court of Appeals that, in ordering
the issuance of a writ of injunction, the trial court simply relied on the
imposition by CBC of the interest rates to the loans obtained by SBI
and MFII. According to the Court of Appeals, however, the records do
not reveal a clear and unmistakable right on the part of SBI and MFII
that would entitle them to the protection of a writ of preliminary
injunction. Thus, the Court of Appeals granted the petition of CBC, set
aside the Orders dated December 14, 2000, December 10, 2001, and
November 10, 2003 and dissolved the injunctive writ issued by the
RTC of Pasig City.20
SBI and MFII filed a motion for reconsideration but it was denied by
the Court of Appeals in a Resolution dated September 18, 2007.
Hence, this petition.
SBI and MFII assert that the Decision dated April 16, 2007 of the Court
of Appeals is legally infirm as its conclusions are contrary to the judicial
admissions of CBC. They allege that, in its Answer, CBC admitted
paragraphs 25 and 26 of the Complaint regarding the interests and
charges amounting to ₱35,093,980.14 and ₱80,614,525.15,
respectively, which constituted more than 50% of the total obligation
of ₱334,249,151.29 as of February 15, 2000. For SBI and MFII, CBC’s
admission of paragraphs 25 and 26 of the Complaint is an admission
that the interest rate imposed by CBC is usurious, exorbitant and
confiscatory. Thus, when the Court of Appeals granted the petition of
CBC and ordered the lifting of the writ of preliminary injunction it
effectively disposed of the main case, Civil Case No. 68105, without
trial on the merits and rendered moot and academic as it enabled CBC
to foreclose on the mortgages despite the usurious, exorbitant and
confiscatory interest rates.21
SBI and MFII also claim that the Court of Appeals either overlooked or
disregarded undisputed and admitted facts which, if properly
considered, would have called for the maintenance and preservation of
the preliminary injunction issued by the trial court. They argue that the
Court of Appeals did not even consider Article 1229 of the Civil Code
which provides:
21
Art. 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may also
be reduced by the courts if it is iniquitous or unconscionable.
For SBI and MFII, the failure of the Court of Appeals to take into
account Article 1229 of the Civil Code and its act of lifting the
preliminary injunction "would definitely pave the way for CBC’s
unbridled imposition of illegal rates of interest and immediate
foreclosure" of the properties of SBI and MFII "without the benefit of a
full blown trial."22
For its part, CBC assails the petition contending that it is not allowed
under Rule 45 of the Rules of Court because it simply raises issues of
fact and not issues of law. CBC further asserts that the Decision of the
Court of Appeals is an exercise of sound judicial discretion as it is in
accord with the law and the applicable provisions of this Court.23
The petition fails.
This Court has recently reiterated the general principles in issuing a
writ of preliminary injunction in Palm Tree Estates, Inc. v. Philippine
National Bank24:
A preliminary injunction is an order granted at any stage of an action
prior to judgment of final order, requiring a party, court, agency, or
person to refrain from a particular act or acts. It is a preservative
remedy to ensure the protection of a party’s substantive rights or
interests pending the final judgment in the principal action. A plea for
an injunctive writ lies upon the existence of a claimed emergency or
extraordinary situation which should be avoided for otherwise, the
outcome of a litigation would be useless as far as the party applying
for the writ is concerned.
At times referred to as the "Strong Arm of Equity," we have
consistently ruled that there is no power the exercise of which is more
delicate and which calls for greater circumspection than the issuance
of an injunction. It should only be extended in cases of great injury
where courts of law cannot afford an adequate or commensurate
remedy in damages; "in cases of extreme urgency; where the right is
very clear; where considerations of relative inconvenience bear
strongly in complainant’s favor; where there is a willful and unlawful
invasion of plaintiff’s right against his protest and remonstrance, the
injury being a continuing one, and where the effect of the mandatory
injunction is rather to reestablish and maintain a preexisting continuing
relation between the parties, recently and arbitrarily interrupted by the
defendant, than to establish a new relation."
A writ of preliminary injunction is an extraordinary event which must
be granted only in the face of actual and existing substantial rights.
The duty of the court taking cognizance of a prayer for a writ of
preliminary injunction is to determine whether the requisites necessary
for the grant of an injunction are present in the case before it. 25 In this
connection, a writ of preliminary injunction is issued to preserve the
status quo ante, upon the applicant’s showing of two important
requisite conditions, namely: (1) the right to be protected exists prima
facie, and (2) the acts sought to be enjoined are violative of that right.
It must be proven that the violation sought to be prevented would
cause an irreparable injury.26
Here, SBI and MFII basically claim a right to have their mortgaged
properties shielded from foreclosure by CBC on the ground that the
interest rate and penalty charges imposed by CBC on the loans availed
of by SBI are iniquitous and unconscionable. In particular, SBI and
MFII assert:
There is therefore an urgent necessity for the issuance of a writ of
preliminary injunction or at least a status quo [order], otherwise,
respondent bank will definitely foreclose petitioners’ properties without
awaiting the trial of the main case on the merits, with said usurious
and confiscatory rates of interest as basis.27
and
There is therefore no legal justification for the Honorable Court of
Appeals to lift/dissolve the injunction issued by the trial court,
otherwise, respondent bank – on the basis of this illegal imposition of
interest – can already foreclose the properties of petitioners and
render the whole case (sans trial on the merits) moot and academic.28
On this matter, the Order dated December 14, 2000 of the trial court
enumerates as the first argument raised by SBI and MFII in support of
their application for the issuance of a writ of preliminary injunction:
1. Their rights basically are for the protection of their properties put up
as collateral for the loans extended by defendant bank to them.29
As debtor-mortgagors, however, SBI and MFII do not have a right to
prevent the creditor-mortgagee CBC from foreclosing on the
mortgaged properties simply on the basis of alleged "usurious,
exorbitant and confiscatory rate of interest."30 First, assuming that the
interest rate agreed upon by the parties is usurious, the nullity of the
stipulation of usurious interest does not affect the lender’s right to
recover the principal loan, nor affect the other terms thereof.31 Thus, in
a usurious loan with mortgage, the right to foreclose the mortgage
subsists, and this right can be exercised by the creditor upon failure by
the debtor to pay the debt due.32
Second, even the Order dated December 14, 2000 of the trial court,
which granted the application for the issuance of a writ of preliminary
injunction, recognizes that the parties still have to be heard on the
alleged lack of "fairness of the increase in interests and penalties"
during the trial on the merits.33 Thus, the basis of the right claimed by
SBI and MFII remains to be controversial or disputable as there is still
a need to determine whether or not, upon consideration of the various
circumstances surrounding the agreement of the parties, the interest
rates and penalty charges are unconscionable. Therefore, such claimed
right cannot be considered clear, actual and subsisting. In the absence
of a clear legal right, the issuance of the injunctive writ constitutes
grave abuse of discretion.34
The Order dated December 10, 2001 also shows the reasoning of the
trial court which betrays that its grant of the application of SBI and
MFII for the issuance of a writ of preliminary injunction was not based
on a clear legal right. Said the trial court:
It was likewise shown that plaintiffs SBI and MFII had the clear right
and urgency to ask for injunction because of the issue of validity of the
increase in the amount of the loan obligation.35 (Emphasis supplied.)
At most, the above finding of the trial court that the validity of the
increase in the amount of the loan obligation is in issue simply
amounted to a finding that the rights of SBI and MFII vis-à-vis that of
CBC are disputed and debatable. In such a case where the
complainant-movant’s right is doubtful or disputed, the issuance of an
injunctive writ is not proper.36
Even assuming that SBI and MFII are correct in claiming their
supposed right, it nonetheless disintegrates in the face of the ten
promissory notes in the total amount of ₱218,540,648.00, exclusive of
interest and penalties, issued by SBI in favor of CBC on March 1, 1999
which until now remain unpaid despite the maturity of the said notes
on March 1, 2004 and CBC’s repeated demands for
payment.37 Foreclosure is but a necessary consequence of nonpayment
of mortgage indebtedness.38 As this Court held in Equitable PCI Bank,
Inc. v. OJ-Mark Trading, Inc.39:
22
Where the parties stipulated in their credit agreements, mortgage
contracts and promissory notes that the mortgagee is authorized to
foreclose the mortgaged properties in case of default by the
mortgagors, the mortgagee has a clear right to foreclosure in case of
default, making the issuance of a Writ of Preliminary Injunction
improper. x x x. (Citation omitted.)
In addition, the default of SBI and MFII to pay the mortgage
indebtedness disqualifies them from availing of the equitable relief that
is the injunctive writ. In particular, SBI and MFII have stated in their
Complaint that they have made various requests to CBC for
restructuring of the loan.40 The trial court’s Order dated December 14,
2000 also found that SBI wrote several letters to CBC "requesting,
among others, for a reduction of interests and penalties and
restructuring of the loan."41 A debtor’s various and constant requests
for deferment of payment and restructuring of loan, without actually
paying the amount due, are clear indications that said debtor was
unable to settle his obligation.42 SBI’s default or failure to settle its
obligation is a breach of contractual obligation which tainted its hands
and disqualified it from availing of the equitable remedy of preliminary
injunction.
As SBI is not entitled to the issuance of a writ of preliminary injunction,
so is MFII. The accessory follows the principal. The accessory
obligation of MFII as accommodation mortgagor and surety is tied to
SBI’s principal obligation to CBC and arises only in the event of SBI’s
default.
Thus, MFII’s interest in the issuance of the writ of preliminary
injunction is necessarily prejudiced by SBI’s wrongful conduct and
breach of contract.
Even Article 1229 of the Civil Code, which SBI and MFII invoke, works
against them. Under that provision, the equitable reduction of the
penalty stipulated by the parties in their contract will be based on a
finding by the court that such penalty is iniquitous or unconscionable.
Here, the trial court has not yet made a ruling as to whether the
penalty agreed upon by CBC with SBI and MFII is unconscionable.
Such finding will be made by the trial court only after it has heard both
parties and weighed their respective evidence in light of all relevant
circumstances. Hence, for SBI and MFII to claim any right or benefit
under that provision at this point is premature.
As no clear right that warrants the extraordinary protection of an
injunctive writ has been shown by SBI and MFII to exist in their favor,
the first requirement for the grant of a preliminary injunction has not
been satisfied. In the absence of any requisite, and where facts are
shown to be wanting in bringing the matter within the conditions for
its issuance, the ancillary writ of injunction must be struck down for
having been rendered in grave abuse of discretion.43 Thus, the Court of
Appeals did not err when it granted the petition for certiorari of CBC
and ordered the dissolution of the writ of preliminary injunction issued
by the trial court.
Neither has there been a showing of irreparable injury. An injury is
considered irreparable if it is of such constant and frequent recurrence
that no fair or reasonable redress can be had therefor in a court of
law, or where there is no standard by which their amount can be
measured with reasonable accuracy, that is, it is not susceptible of
mathematical computation. The provisional remedy of preliminary
injunction may only be resorted to when there is a pressing necessity
to avoid injurious consequences which cannot be remedied under any
standard of compensation.44
In the first place, any injury that SBI and MFII may suffer in case of
foreclosure of the mortgaged properties will be purely monetary and
compensable by an appropriate judgment in a proper case against
CBC. Moreover, where there is a valid cause to foreclose on the
mortgages, it cannot be correctly claimed that the irreparable damage
sought to be prevented by the application for preliminary injunction is
the loss of the mortgaged properties to auction sale.45 The alleged
entitlement of SBI and MFII to the "protection of their properties put
up as collateral for the loans" they procured from CBC is not the kind
of irreparable injury contemplated by law. Foreclosure of mortgaged
property is not an irreparable damage that will merit for the debtor-
mortgagor the extraordinary provisional remedy of preliminary
injunction. As this Court stated in Philippine National Bank v. Castalloy
Technology Corporation46:
All is not lost for defaulting mortgagors whose properties were
foreclosed by creditors-mortgagees. The respondents will not be
deprived outrightly of their property, given the right of redemption
granted to them under the law. Moreover, in extrajudicial foreclosures,
mortgagors have the right to receive any surplus in the selling price.
Thus, if the mortgagee is retaining more of the proceeds of the sale
than he is entitled to, this fact alone will not affect the validity of the
sale but will give the mortgagor a cause of action to recover such
surplus. (Citation omitted.)
The En Banc Resolution in A.M. No. 99-10-05-0, Re: Procedure in
Extrajudicial or Judicial Foreclosure of Real Estate Mortgages, further
stacks the odds against SBI and MFII. Issued on February 20, 2007, or
some two months before the Court of Appeals promulgated its decision
in this case, the resolution embodies the additional guidelines intended
to aid courts in foreclosure proceedings, specifically limiting the
instances, and citing the conditions, when a writ against foreclosure of
a mortgage may be issued, to wit:
(1) No temporary restraining order or writ of preliminary
injunction against the extrajudicial foreclosure of real estate
mortgage shall be issued on the allegation that the loan
secured by the mortgage has been paid or is not delinquent
unless the application is verified and supported by evidence
of payment.
(2) No temporary restraining order or writ of preliminary
injunction against the extrajudicial foreclosure of real estate
mortgage shall be issued on the allegation that the interest
on the loan is unconscionable, unless the debtor pays the
mortgagee at least twelve percent per annum interest on the
principal obligation as stated in the application for
foreclosure sale, which shall be updated monthly while the
case is pending.
(3) Where a writ of preliminary injunction has been issued
against a foreclosure of mortgage, the disposition of the
case shall be speedily resolved. To this end, the court
concerned shall submit to the Supreme Court, through the
Office of the Court Administrator, quarterly reports on the
progress of the cases involving ten million pesos and above.
(4) All requirements and restrictions prescribed for the
issuance of a temporary restraining order/writ of preliminary
injunction, such as the posting of a bond, which shall be
equal to the amount of the outstanding debt, and the time
limitation for its effectivity, shall apply as well to a status
quo order.47
The guidelines speak of strict exceptions and conditions. 48 To reverse
the decision of the Court of Appeals and reinstate the writ of
preliminary injunction issued by the trial court will be to allow SBI and
MFII to circumvent the guidelines and conditions provided by the En
Banc Resolution in A.M. No. 99-10-05-0 dated February 20, 2007 and
prevent CBC from foreclosing on the mortgaged properties based
simply on the allegation that the interest on the loan is
unconscionable. This Court will not permit such a situation. What
cannot be done directly cannot be done indirectly.49
All told, the relevant circumstances in this case show that there was
failure to satisfy the requisites for the issuance of a writ of preliminary
injunction. The injunctive writ issued by the trial court should therefore
23
be lifted and dissolved. That was how the Court of Appeals decided.
That is how it should be.
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.
G.R. No. 200567               June 22, 2015
METOROPLITAN BANK AND TRUST COMPANY, Petitioner,
vs.
CPR PROMOTIONS AND MARKETING, INC. and SPOUSES
CORNELIO P. REYNOSO, JR. and LEONIZA* F.
REYSONO, Respondents.
DECISION
VELASCO, JR., J.:
The Case
Before Us is a petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the September 28, 2011 Decision 1 and
February 13, 2012 Resolution2 of the Court of Appeals (CA) rendered in
CA-G.R. CV No. 91424. Said ruling dismissed petitioner Metropolitan
Banking and Trust Company’s (MBTC’s) claim for deficiency payment
upon foreclosing respondents’ mortgaged properties and ordered the
bank, instead, to return to respondent mortgagors the excess amount
of PhP 722,602.22.
The Facts
The facts of the case, as culled from the records, are as follows:
From February to October 1997, respondent CPR Promotions and
Marketing, Inc. (CPR Promotions) obtained loans from petitioner
MBTC. These loans were covered by fifteen (15) promissory note (PNs)
all signed by respondents, spouses Leoniza F. Reynoso and Cornelio P.
Reynoso, Jr. (spouses Reynoso), as Treasurer and President of CPR
Promotions, respectively. The issued PNs are as follows:
To secure the loans, the spouses Reynoso executed two deeds of real
estate mortgage on separate dates. The first mortgage, securing the
amount of PhP 6,500,000, was executed on February 2, 1996 over real
estate covered by Transfer Certificate of Title (TCT) No. 624835; 3 the
other was executed on July 18, 1996 over properties covered by TCT
Nos. 565381,4 263421,5 and 2746826 to secure the amount of PhP
2,500,000. All of the mortgaged properties are registered under the
spouses Reynoso’s names, except for TCT No. 565381, which is
registered under CPR Promotions.7
Thereafter, on December 8, 1997, the spouses Reynoso executed a
continuing surety agreement8 binding themselves solidarily with CPR
Promotions to pay any and all loans CPR Promotions may have
obtained from petitioner MBTC, including those covered by the said
PNs, but not to exceed PhP 13,000,000.
Upon maturity of the loans, respondents defaulted, prompting MBTC to
file a petition for extra-judicial foreclosure of the real estate
mortgages, pursuant to Act No. 3135,9 as amended. MBTC’s request
for foreclosure,10 dated March 6, 1998, pertinently reads:
We have the honor to request your good Office to conduct/undertake
extra-judicial foreclosure sale proceedings under Act No. 3135, as
amended, and other applicable laws on the properties covered by two
Real Estate Mortgages executed by CPR PROMOTIONS & MARKETING
INC., represented by its President Mr. Cornelio P. Reynoso and
Treasurer Leoniza F. Reynoso and SPOUSES CORNELIO P. REYNOSO,
JR., AND LEONIZA F. REYNOSO in favour of the mortgagee,
METROPLITAN BANK AND TRUST COMPANY, to secure fifteen (15)
loans with a total principal amount of TWELVE MILLION EIGHT
HUNDRED NINETY ONE THOUSAND THREE HUNDRED NINETY SEVEN
PESOS AND SEVENTY EIGHT CENTAVOS (₱12,891,397.78), for breach
of the terms of said mortgage.11
As Annex "R", a copy of the Statement of Account, showing that the
total amount due on the loans of the borrowers/mortgagers which
remains unpaid and outstanding as a February 10, 1998 was ELEVEN
MILLION TWO HUNDRED SIXTEEN THOUSAND SEVEN HUNDRED
EIGHTY THREE PESOS AND NINETY NIN CENTAVOR (₱11,216,783.99)
Subsequently, on May 5, 1998, the mortgaged covered by TCT Nos.
624835 and 565381 were sold at a public auction sale. MBTC
participated therein and submitted the highest bid in the amount of
PhP 10,374,000. The day after, on May 6, 1998, petitioner again
participated and won in the public auction sake of the remaining
mortgaged properties, having submitted the highest bid amounting to
PhP 3,240,000. As a result petitioner was issued the corresponding
Certificates of Sale on July 15 and 16, 1998, covering the properties
subjected to the first and second public auctions, respectively.
Notwithstanding the foreclosure of the mortgaged properties for the
total amount of PhP 13, 614,000, petitioner MBTC alleged that there
remained a deficiency balance of PhP 2,628,520.73, plus interest and
charges as stipulated and agreed upon in the PNs and deeds of real
estate mortgages. Despite petitioner’s repeated demands, however,
respondents failed to settle the alleged deficiency. Thus, petitioner
filed an action for collection of sum of money against respondents,
docketed as Civil Case No. 99-230, entitled Metropolitan Bank and
Trust Company v. CPR Promotions and Marketing, Inc. and Spouses
Cornelio Reynoso, Jr. and Leoniza F. Reynoso.
Ruling of the Regional Trial Court
In its Decision13 dated October 11, 2007, the Regional Trial Court,
Branch 59 in Makati City (RTC) ruled in favor of petitioner that there,
indeed, was a balance of Php 2,628,520.73, plus interest and charges,
as of September 18, 1998, and that respondents are liable for the said
amount, as part of their contractual obligation. 14 The court disposed of
the case in this wise:
WHEREFORE, premises considered, judgment is hereby rendered
ordering [respondents], jointly and severally, to pay [petitioner]
Metrobank, as follows:
a] the amount of PhP 2,628,520.73 plus stipulated interest
and penalty charges stipulated in the Promissory Notes
marked as Exhibits A to O until full payment thereof; and
b] the costs of the suit.
SO ORDERED.
Respondents timely moved for reconsideration of the RTC’s Decision,
which was denied through the trial court’s February 7, 2008 Order.
Aggrieved, respondents elevated the case to the CA.
Ruling of the Court of Appeals
The appellate court, through the assailed Decision, reversed the court
a quo and ruled in favor of respondents. The fallo of the said Decision
reads:
Wherefore, in view of the foregoing, the decision appealed from is
reversed, and the plaintiff-appallee Metrobank is ordered to refund or
24
return to the defendants-appellants Cornelio and Leoniza Reynoso the
amount of Ph₱722,602.22 representing the remainder of the proceeds
of the foreclosure sale, with legal interest of six percent per annum
from the date of filing the answer with counterclaim on March 26,
1999, until paid.
SO ORDERED.15
Supporting the reversal is the CA’s finding that there was a sudden
change in the terminology used, from "total amount due" to "principal
amount."16 According to the CA, from February to May 1998, the
amount sought to be collected ballooned from PhP 11,216,783.99 to
PhP 12,891,397.78. From this apparently unexplained increase, the CA
deduced that the increased amount must mean the principal and
interest and other charges. Furthermore, the appellate court found
that petitioner failed to prove that there was a deficiency, since the
records failed to corroborate the claimed amount. As noted by the CA,
"[Petitioner] did not even introduce the continuing surety agreement
on which the trial court gratuitously based its decision."
On October 24, 2011, petitioner filed a motion for reconsideration of
the assailed Decision, which the appellate court denied in its assailed
February 13, 2012 Resolution.
The Issues
Hence this recourse, on the following issues:
Whether or not the CA gravely abused its discretion when it failed to
consider the continuing surety agreement presented in evidence and in
ruling that petitioner MBTC failed to prove that the spouses Reynoso
are solidarily liable with respondent CPR Promotions.
Whether or not the CA gravely abused its discretion when it grossly
misappreciated the promissory notes, real estate mortgages, petition
for extrajudicial foreclosure of mortgage, certificates of sale and
statement of account marked in evidence and ruled that petitioner
MBTC failed to prove that a deficiency balance resulted after
conducting the extrajudicial foreclosure sales of the mortgaged
properties.
The Arguments
Anent the first issue, MBTC faults the appellate court for finding that it
did not introduce the continuing surety agreement on which the RTC
based its ruling that respondent spouses are solidarily liable with
respondent CPR Promotions.17
As regards the second issue, petitioner asserts that the CA’s grant of a
refund valued at PhP 722,602.22 plus legal interest of six percent (6%)
in favor of respondents is erroneous for two reasons: first,
respondents never set up a counterclaim for refund of any
amount18 and second, the total outstanding obligation as of February
10, 1998, to which the full amount of the bid prices was applied, is PhP
11,216,783.99 and not Ph₱12,891,397.78, which was used by the CA
in its computation.19
Lastly, petitioner claims that respondents should be made to answer
for certain specific expenses connected with the foreclosure, i.e., filing
fees, publication expense, Sheriff’s Commission on Sale, stipulated
attorney’s fee, registration fee for the Certificate of Sale, insurance
premium and other miscellaneous expenses, in the amounts of PhP
1,373,238.04 and PhP 419,166.67 for the first and second foreclosure
sales, respectively.20
In their Comment,21 respondents maintained the propriety of the CA’s
grant of a refund, arguing that in their Answer with Compulsory
Counterclaim, they laid-down in detail the excess of the prices of the
foreclosed properties over their obligation.22 Respondents then went on
and argued that "from the beginning of the instant case in the trial
court, [they] have already raised in issue the fact of [petitioner’s]
taking-over of [their] lands with values over and above the latter’s
financial liabilities."23 Thus, they postulate that the CA did right when it
touched on the issue and ruled thereon.24
Furthermore, respondents insist that there is actually no difference
between the PhP 12,891,397.78 and the PhP 11,261,783.99 amounts
except for the accumulated interest, penalties, and other
charges.25 Too, according to them, this is the reason why what
respondent CPR owed petitioner at that time increased substantially
from that on February 10, 1998, when the amount was just PhP
11,216,783.99.26
The Court's Ruling
We partially grant the petition. While We fully agree with the CA that
MBTC was not able to prove the amount claimed, We however, find
that neither were respondents able to timely setup their claim for
refund.
Respondents belatedly raised their compulsory counterclaim
Rule 6 of the Rules of Court denies a compulsory counterclaim as
follows:
Section 7. Compulsory counterclaim. – A compulsory counterclaim is
one which, being cognizable by the regular courts of justice, arises out
of or is connected with the transaction or occurrence constituting the
subject matter of the opposing party’s claim and does not require for
its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction. Such a counterclaim must be within the jurisdiction
of the court both as to the amount and the nature thereof. Except that
in an original action before the Regional Trial Court, the counterclaim
may be considered compulsory regardless of the amount.
Accordingly, a counterclaim is compulsory if: (a) it arises out of or is
necessarily connected with the transaction or occurrence which is the
subject matter of the opposing party’s claim; (b) it does not require for
its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction; and (c) the court has jurisdiction to entertain the
claim both as to its amount and nature, except that in an original
action before the RTC, the counterclaim may be considered
compulsory regardless of the amount.27
In determining whether a counterclaim is compulsory or permissive,
We have, in several cases, utilized the following tests:28
(1) Are the issues of fact or law raised by the claim and the
counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on defendant’s
claims, absent the compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute
plaintiff’s claim as well as the defendant’s counterclaim?
(4) Is there any logical relation between the claim and the
counterclaim, such that the conduct of separate trials of the
respective claims of the parties would entail a substantial
duplication of effort and time by the parties and the court?
This test is the "compelling test of compulsoriness."29
Based on the above tests, it is evident that a claim for recovery of the
excess in the bid price vis-à-vis the amount due should be interposed
as a compulsory counterclaim in an action for recovery of a deficiency
filed by the mortgagee against the debtor-mortgagor. First, in both
cases, substantially the same evidence is needed in order to prove
25
their respective claim. Second, adjudication in favor of one will
necessarily bar the other since these two actions are absolutely
incompatible with each other; a debt cannot be fully paid and partially
unpaid at the same time. Third, these two opposing claims arose from
the same set of transactions. And finally, if these two claims were to
be the subject of separate trials, it would definitely entail a substantial
and needless duplication of effort and time by the parties and the
court, for said actions would involve the same parties, the same
transaction, and the same evidence. The only difference here would be
in the findings of the courts based on the evidence presented with
regard to the issue of whether or not the bid prices substantially cover
the amounts due.
Having determined that a claim for recovery of an excess in the bid
price should be set up in the action for payment of a deficiency as a
compulsory counterclaim, We rule that respondents failed to timely
raise the same.
It is elementary that a defending party’s compulsory counterclaim
should be interposed at the time he files his Answer, 30 and that failure
to do so shall effectively bar such claim.31 As it appears from the
records, what respondents initially claimed herein were moral and
exemplary damages, as well as attorney’s fees. 32 Then, realizing, based
on its computation, that it should have sought the recovery of the
excess bid price, respondents set up another counterclaim, this time in
their Appellant’s Brief filed before the CA.33 Unfortunately, respondents’
belated assertion proved fatal to their cause as it did not cure their
failure to timely raise such claim in their Answer. Consequently,
respondents’ claim for the excess, if any, is already barred. With this,
we now resolve the substantive issues of this case.
The CA erred in ruling that the total amount due was PhP
12,891,397.78
Basic is the rule that a Petition for Review on Certiorari under Rule 45
of the Rules of Court should only cover questions of law.34 Moreover,
findings of fact of the CA are generally final and conclusive and this
Court will not review them on appeal. 35 This rule, however, admits of
several exceptions36 such as when the findings of fact are conflicting,
manifestly mistaken, unsupported by evidence or the result of a
misapprehension of acts, or when the findings are contrary to that of
the trial court, as in this case.
To recall, the CA, in its assailed Decision, made the following findings
as regards the amount due on the loan against which the proceeds
from the auction sales are to be applied:
In the application for extrajudicial foreclosure sale dated March 6,
1998, the total amount due as of February 10, 1998 was stated to be
₱11,216,783.99. The plaintiff categorically declared that
₱11,216,783.99 was the total amount due on February 10, 1998. By
the time the auction sales were conducted, in May 1998, as reflected
in the certificate of Sale, the principal amount was said to be
₱12,891,397.78. What is the meaning of the change from total amount
due to principal amount? If from February to May 1998, a matter of
three months, the amount sought to be collected ballooned to
₱12,891,397.78, the increase could have resulted from no other source
that the interest and other charges under the promissory notes after
the defendants incurred in default. Thus, the amount of
₱12,891,397.78 as of May 1998, must mean the principal and interest
and other charges. The statement in the certificates of sale that it is
the principal amount is a subtle change in language, a legerdemain to
suggest that thte amount does not include the interest and other
charges.37
In short, the CA concluded that the amount of PhP 12,891,397.78 is
actually comprised of the PhP 11,216,783.99 due as of February 10,
1998, plus additional interest and other charges that became due from
February 10, 1998 until the date of foreclosure on May 5, 1998.
The appellate court is mistaken.
By simply adding the figures stated in the PNs as the principal sum, it
can readily be seen that the amount of PhP 12,891,397.78 actually
pertains to the aggregate value of the fifteen (15) PNs, viz:
This belies the findings of the CA that PhP 12, 891,397.78 is the
resulting value of PhP 11,216,783.99 plus interest and other charges.
Consequently, the CA’s conclusion that there is an excess of PhP
722,602.22, after deducting the amount of PhP 12,891,397.78 from
the total bid price of PhP 13,614,000, is erroneous.
Nevertheless, while the CA’s factual finding as to the amount due is
flawed, petitioner, as discussed below, is still not entitled to the
alleged deficiency balance of PhP 2,628,520.73.
MBTC failed to prove that there is a deficiency balance of PhP
2,628,520.73
To support its deficiency claim, petitioner presented a Statement of
Account,53 which referes to the amounts due as of May 5, 1998, the
date of the first foreclosure sale, to wit:
Applying the proceeds from the auction sales to the foregoing amount,
according to petitioner, would result in a deficiency balance of PhP
2,443,143.43. Afterwards, the amount allegedly earned interest for
four (4) months in the amount of PhP 185,337.30,54 bringing
petitioner’s claim for deficiency judgment to a total of PhP
2,628,520.73.55
We are not convinced.
We have already ruled in several cases56 that in extrajudicial
foreclosure of mortgage, where the proceeds of the sale are
insufficient to pay the debt, the mortgagee has the right to recover the
deficiency from the debtor.57 In ascertaining the deficit amount, Sec. 4,
Rule 68 of the Rules of Court is elucidating, to wit:
Section 4. Disposition of proceeds of sale. – The amount realized from
the foreclosure sale of the mortgaged property shall, after deducting
the costs of the sale, be paid to the person foreclosing the mortgage,
and when there shall be any balance or residue, after paying off the
mortgage debt due, the same shall be paid to junior encumbrancers in
the order of their priority, to be ascertained by the court, or if there be
no such encumbrancers or there be a balance or residue after payment
to them, then to the mortgagor or his duly authorized agent, or to the
person entitled to it.
Verily, there can only be a deficit when the proceeds of the sale is not
sufficient to cover (1) the costs of foreclosure proceedings; and (2) the
amount due to the creditor, inclusive of interests and penalties, if any,
at the time of foreclosure.
a. Petitioner failed to prove the amount due at the time of
foreclosure
Having alleged the existence of a deficiency balance, it behooved
petitioner to prove, at the very least, the amount due at the date of
foreclosure against which the proceeds from the auction sale would be
applied. Otherwise, there can be no basis for awarding the claimed
deficiency balance. Unfortunately for petitioner, it failed to substantiate
the amount due as of May 5, 1998 as appearing in its Statement of
Account.
To recall, MBTC admitted that the amount due as of February
10, 1998 is PhP 11,216,783.99, inclusive of interests and
charges. As alleged in the petition:
57. Firstly, it should be noted that respondents’ total unpaid
obligations inclusive of interest and penalties as of 10 February 1998
26
amounted to Php 11,216,783.99.1âwphi1 This amount was the subject
of petitioner Metrobank’s Petitioners for Extrajudicial Foreclosure of
Mortgage and NOT Php 12,891,397.78 which is the total principal
amount of respondents’ loan obligations at the time when they
obtained said loans as shown in the Promissory Notes and the
Certificates of Sale. After the execution of the Promissory
Notes, payments were made, although insufficient, which
resulted in the balance of PhP 11,216,783.99 as of February
1998 inclusive of interest and penalties. 58
If the total amount due as of February 10, 1998 is PhpP 11,216,783.99
is already inclusive of interests and penalties, the principal amount,
exclusive of interests and charges, would naturally be lower than the
PhP 11,216,783.99 threshold. How petitioner made the determination
in its Statement of Account that the principal amount due on the date
of the auction sale is PhP 12,450,652.22 is then questionable, nay
impossible, unless respondents contracted another loan anew.
Moreover, the amounts petitioner itself supplied would result in the
following computation:
As can be gleaned, petitioner failed to sufficiently explain during the
proceedings how it came up with the alleged "deficiency" in the
amount of PhP 2,443,143.43, as per the Statement of Account.
Reversing the formula, petitioner’s claim would only be
mathematically possible if the missing interest and penalties
for the three-month period-from February 10, 1998 to May 6,
1998-amounted to PhP 3,047,954,73,59 which is inconsistent with
MBTC’s declaration in its Statement of Account as of May 5,
1998.60 Needless to say, this amount is not only unconscionable, it also
finds no support from any of the statement of accounts and loan
stipulations agreed upon by the parties.
Given MBTC’s conflicting, if not irreconcilable, allegations as to the
amount due as of the date of foreclosure-as noted in the statement of
accounts, the petition for foreclosure, and the promissory notes-the
computation offered by MBTC cannot be accepted at face value.
Consequently, there can then be no basis for determining the value of
the additional interests and penalty charges that became due, and,
more importantly, whether or not there was indeed a deficiency
balance at the time the mortgaged properties were foreclosed.
In addition, it is noticeable that petitioner’s presentation of the
computation is circuitous and needlessly lengthened.1âwphi1 As a
matter of fact, nowhere in the petition, in its complaint, 61 reply.62 pre-
trial brief,63 among others, did it make a simple computation of
respondents’ obligation as well as the amounts to be applied to it, or
even a summary thereof, when it could have easily done so.
b. Petitioner failed to prove the amount of expenses incurred
in foreclosing the mortgaged properties
another obstacle against petitioner’s claim for deficiency balance is the
burden of proving the amount of expenses incurred during the
foreclosure sales. To recall, petitioner alleged that it incurred expenses
totaling PhP 1,373,238.04 and PhP 419,166.67 for the first and second
public auction sales, respectively. However, in claiming that there is a
deficiency, petitioner only submitted the following pieces of evidence,
to wit:
1. The fifteen (15) promissory notes (Exhibits A to O);
2. Continuing Surety Agreement (Exhibit P);
3. Real Estate Mortgage (Exhibits Q & R);
4. Petition for Sale under Act. No. 3135, as amended (Exhibit
S);
 5. Notices of Sheriff’s Sale (Exhibits T & U);
6. Affidavit of Publication (Exhibits V & W);
7. Certificates of Posting and a Xerox copy thereof (exhibits
X & Y);
8. Certificates of Sale (Exhibits Z & AA);
9. Demand Letters (Exhibits BB & CC); and
10. Statement of Account (Exhibit DD).
Curiously, petitioner never offered as evidence receipts proving
payment of filing fees, publication expenses, Sheriff’s Commission on
Sale, attorney’s fee, registration fee for the Certificate of Sale,
insurance premium and other miscellaneous expenses, all of which
MBTC claims that it incurred. Instead, petitioner urges the Court to
take judicial notice of the following expenses:64
May 5, 1998 auction sale expenses
Filing Fee
Publication Expenses
Sheriff’s Commission on Sale
Registration fee and other Miscellaneous Expenses
Attorney’s Fees (10% of total amount claimed)
Fire Insurance
Sub-total
May 6, 1998 auction sale expenses
Publication Expenses
Sheriff’s Commission on Sale
Registration fee and other Miscellaneous Expenses
Attorney’s Fees (10% of total amount claimed)
Sub-total
Petitioner’s argument is untenable.
First, the Court cannot take judicial notice of the attorney’s fees being
claimed by petitioner because although 10% was the rate agreed upon
by the parties, We have, in a line of cases, held that the percentage to
be charged can still be fixed by the Court. For instance, in Mambulao
Lumber Company v. Philippine National Bank,65 the Court held:
In determining the compensation of an attorney, the following
circumstances should be considered: the amount and character of the
services rendered; the responsibility imposed; the amount of money or
the value of the property affected by the controversy, or involved in
the employment; the skill and experience called for in the performance
of the service; the professional standing of the attorney; the results
secured; and whether or not the fee is contingent or absolute, it being
a recognized rule that an attorney may properly charge a much larger
fee when it is to be contingent that when it is not. From the stipulation
in the mortgage contract earlier quoted, it appears that the agreed fee
is 10% of the total mortgage is to be effected. The agreement is
perhaps fair enough in case the foreclosure proceedings is prosecuted
judicially but, surely, it is unreasonable when, as in this case, the
mortgage was foreclosed extra-judicially, and all that the attorney did
was to file a petition for foreclosure with the sheriff concerned.
Similarly, in Bank of the Philippine Islands, Inc. v. Spouses Norman
and Angelina Yu,66 the Court reduced the claim for attorney’s fees from
10% to 1% based on the following reasons: (1) attorney’s fee is not
essential to the cost of borrowing, but a mere incident of collection;
(2) 1% is just and adequate because the mortgagee bank had already
charged foreclosure expenses; (3) attorney’s fee of 10% of the total
amount due is onerous considering the rote effort that goes into
extrajudicial foreclosures.
27
Second, the Court cannot also take judicial notice of the expenses
incurred by petitioner in causing the publication of the notice of
foreclosure and the cost of insurance. This is so because there are no
standard rates cited or mentioned by petitioner that would allow Us to
take judicial notice of such expenses. It is not unthinkable that the cost
of publication would vay from publisher to publisher, and would
depend on several factors, including the size of the publication space.
Insurance companies also have their own computations on the
insurance premiums to be paid by the insurer, which the courts cannot
be expected to be knowledgeable of. To be sure, in arguing the Court
to take judicial notice of the alleged expenses, MBTC merely cited Sec.
3 of Act 3135 requiring publication and the mortgage agreement
provision on the insurance requirement, without more.67 Said
provisions never expressly provided for the actual cost of publication
and insurance, nor any formulae for determining the same. Thus, the
claims for publication and insurance expenses ought to be disallowed.
Third, the claims for registration fees and miscellaneous expenses
were also never substantiated by receipts.
Conclusion
In demanding payment of a deficiency in an extrajudicial foreclosure of
mortgage, proving that there is indeed one and what its exact amount
is, is naturally a precondition thereto. The same goes with a claim for
reimbursement of foreclosure expenses, as here. In this regard, it is
elementary that the burden to prove a claim rests on the party
asserting such. Ei incumbit probation qui dicit, non qui negat. He who
asserts, not he who denies, must prove. 68 For having failed to
adequately substantiate its claims, We cannot sustain the finding of
the trial court that respondents are liable for the claimed deficiency,
inclusive of foreclosure expenses. Neither can We sustain the CA’s
finding that respondents are entitled to the recovery of the alleged
excess payment.
In light of the foregoing, the Court need not belabor the other
assigned errors.
WHEREFORE, premises considered, the instant petition is hereby
PARTIALLY GRANTED. Accordingly, the Decision of the Court of
Appeals dated September 28, 2011 in CA-G.R. CV No. 91424 and its
February 13, 2012 Resolution are hereby AFFIRMED with
MODIFICATION. The award of refund in favor of respondents in the
amount of ₱722,602.22 with legal interest of six percent (6%) per
annum is hereby DELETED.
No pronouncement as to costs.
SO ORDERED.
APRIL 23, 2018
G.R. No. 214803
ALONA G. ROLDAN, Petitioner
vs
SPOUSES CLARENCE I. BARRIOS and ANNA LEE T. BARRIOS,
ROMMEL MATORRES, and HON. JEMENA ABELLAR ARBIS, in
her capacity as Presiding Judge, Branch 6, Regional Trial
Court, Aldan, Respondents
DECISION
PERALTA, J.:
Before us is a petition for certiorari  assailing the Order1 dated July 22,
2014 issued by the Regional Trial Court (RTC),  Branch 6, Kalibo, Aklan
as well as the Order2 dated August 18, 2014 denying reconsideration
thereof.
The antecedent facts are as follows:
On February 3, 2014, petitioner Alona G. Roldan filed an action 3 for
foreclosure of real estate mortgage against respondents spouses
Clarence I. Barrios and Anna Lee T. Barrios and respondent Romel D.
Matorres, docketed as Civil Case No. 9811. She alleged the following:
xxxx
2. That on October 13, 2008, defendants borrowed from plaintiff the
sum of Two Hundred Fifty Thousand Pesos (₱250,000.00), Philippine
Currency, payable within the period of one (1) year from said date,
with an interest thereon at the rate of 5% per month; and to secure
the prompt and full payment of the principal and interest, defendants
made and executed on October 13, 2008 a Deed of Real Estate
Mortgage in favor of plaintiff upon a parcel of land and improvements
thereon described as follows:
A parcel of land (Lot 5891-A-4) situated in Baybay, Makato, Aklan,
containing an area of four hundred seventy-eight (478) square meters,
more or less x x x declared in the name of Spouses Clarence Barrios
and Anna Lee T. Barrios, assessed in the sum of ₱13,380.00, tax
effectivity for the year 2008. Said land is covered by OCT No. P-5561
pt.
xxx
3. That the condition of said mortgage, as stated therein, is such, that
if within the period of one year from October 13, 2008, the defendants
shall pay or cause to be paid to the plaintiff, her heirs and assigns, the
said sum of ₱250,000.00 together with the agreed interest, then the
said mortgage shall be discharged; otherwise, it shall remain in full
force and effect, to be enforceable in the manner provided by law.
4. That the time for payment of said loan is overdue and defendants
failed and refused to pay both the principal obligation and the interest
due starting from February 2011 to the present notwithstanding
repeated demands;
5. That there are no other persons having or claiming interest in the
mortgaged property except Romel D. Matorres whom plaintiff recently
discovered that the defendants mortgaged again to the said person
the same property subject of this suit for One Hundred Fifty Thousand
Pesos, (₱150,000.00) on June 11, 2012 x x x The said Romel D.
Matorres is however a mortgagee in bad faith.
WHEREFORE, it is respectfully prayed that upon due notice and
hearing, judgment be rendered ordering defendants SPS. CLARENCE I.
BARRIOS and ANNA LEE T. BARRIOS:
1. To pay unto the court within the reglementary period of ninety days
the sum of ₱250,000.00 together with the stipulated interest at five
percent (5%) per month starting from February 2011 to the present,
plus the additional sum of ₱25,000.00 the total amount due for
attorney's fees; litigation expenses and costs; and that in default of
such payment, the above-mentioned property be ordered sold to pay
off the mortgage debt and its accumulated interest;
2. To teach the defendants a lesson for having mortgaged the property
subject of this suit without plaintiffs consent or knowledge, the
defendants be ordered to pay the plaintiff the sum of ₱50,000.00 as
exemplary damages.
3. That plaintiff be granted such other relief in law and equity.4
28
Respondents spouses Barrios filed their Answer 5 with Special and
Affirmative Defenses contending that the computation of their alleged
loan obligation was not accurate; that they had filed with the RTC a
petition for rehabilitation of a financially distressed individuals under
Special Proceeding No. 9845, thus there is a need to suspend the
foreclosure proceed1ngs. On the other hand, respondent Matorres filed
his Answer6 with Special and Affirmative Defenses admitting that the
subject land was mortgaged to him; that he had also filed a judicial
foreclosure case against respondents spouses Barrios pending with the
RTC of Kalibo Aldan, Branch 6, docketed as Civil Case No. 9642; that
petitioner had no cause of action against him as they did not have any
transaction with each other; and prayed for damages and attorney's
fees, and cross-claim against respondent spouses for moral damages.
On July 22, 2014, the RTC issued the assailed Order as follows:
Civil Cases Nos. 9642 and 9811 are complaints for Foreclosure of Real
Estate Mortgage that involved the same property, Lot 5891-A-4,
situated in Baybay, Makato, Aklan, owned by Spouses Clarence Barrios
and Anna Lee Barrios.
It appearing from the complaint that the assessed value of the
property mortgaged is only ₱13,380.00 and the instant cases being a
real action, the assessed value of the property determines the
jurisdiction.1âwphi1 The assessed value of the property involved being
below ₱20,000.00, it is the first level court that has jurisdiction over
the cases. Premises considered, for lack of jurisdiction, Civil Cases Nos.
9642 and 9811 are ordered DISMISSED without prejudice.
SO ORDERED.7
Petitioner and respondent Matorres filed their respective motions for
reconsideration.
In an Order dated August 18, 2014, the RTC denied petitioner's motion
as follows:
xxxx
Petitioner in her Motion argued that foreclosure of real estate
mortgage is an action incapable of pecuniary estimation and
jurisdiction lies with the Regional Trial Court.
Petitioner's argument is devoid of merit.
A petition for foreclosure of real estate mortgage is a real action and
the assessed value of the property determines jurisdiction while
location of the property determines the venue.
Premises considered, the Motion for Reconsideration is DENIED for
lack of merit.
SO ORDERED.8
Respondent Matorres' motion for reconsideration was also denied in an
Order9 dated September 1, 2014.
Petitioner filed the instant petition for certiorari  alleging grave abuse of
discretion committed by the RTC when it ordered the dismissal of her
foreclosure case without prejudice and denying her motion for
reconsideration. She argues that foreclosure of mortgage is an action
incapable of pecuniary estimation which is within the exclusive
jurisdiction of the RTC.
In his Comment, respondent Matorres joins the position and
arguments of petitioner that the cause of action of the foreclosure
cases is incapable of pecuniary estimation, hence, falling within the
jurisdiction of the RTC.
Respondents spouses Barrios filed their Explanation and Comment
alleging that petitioner violated the Tax Reform Act of 1997 for her
failure to issue official receipts on the payments made by them; that
she failed to show any proof of authority from the Bangko Sentral ng
Pilipinas relative to her money-lending activities.
The issue for resolution is whether the RTC committed grave abuse of
discretion in dismissing the foreclosure cases filed with it on the
ground of lack of jurisdiction.
Preliminarily, we need to point out that generally a direct recourse to
this Court is highly improper, for it violates the established policy of
strict observance of the judicial hierarchy of courts. Although this
Court, the RTCs and the Court of Appeals have concurrent jurisdiction
to issue writs of certiorari,  prohibition, mandamus, quo warranto,
habeas corpus  and injunction, such concurrence does not give the
petitioner unrestricted freedom· of choice of court forum. This Court is
a court of last resort, and must so remain if it is to satisfactorily
perform the functions assigned to it by the Constitution and
immemorial tradition. 10 However, the judicial hierarchy of courts is not
an iron-clad rule. A strict application of the rule of hierarchy of courts
is not necessary when the cases brought before the appellate courts
do not involve factual but legal questions. 11 Since petitioner raises a
pure question of law pertaining to the court's jurisdiction on complaint
for judicial foreclosure of sale, we would allow petitioner's direct resort
to us.
The RTC dismissed the foreclosure cases finding that being a real
action and the assessed value of the mortgaged property is only
₱13,380.00, it is the first level court which has jurisdiction over the
case and not the RTC.
Jurisdiction over the subject matter is the power to hear and
determine cases of the general class to which the proceedings in
question belong. It is conferred by law and an objection based on this
ground cannot be waived by the parties. 12 To determine whether a
court has jurisdiction over the subject matter of a case, it is important
to determine the nature of the cause of action and of the relief
sought. 13
Batas Pambansa Big. (BP)  129 as amended by Republic Act
No. (RA)  7691 pertinently provides for the jurisdiction of the RTC and
the first level courts as follows:
Sec. 19. Jurisdiction in civil cases.  - Regional Trial Courts shall exercise
exclusive original jurisdiction:
1. In all civil actions in which the subject of the litigation is incapable
of pecuniary estimation;
2. In all civil actions which involve the title to, or possession of, real
property, or any interest therein, where the assessed value of the
property involved exceeds Twenty thousand pesos (₱20,000.00) or, for
civil actions in Metro Manila, where such value exceeds Fifty thousand
pesos (₱20,000.00) except actions for forcible entry into and unlawful
detainer of lands or buildings, original jurisdiction over which is
conferred upon the Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts.
and
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in civil cases.  - Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall
exercise:
29
xxxx
3) Exclusive original jurisdiction in all civil actions which involve title to,
or possession of, real property, or any interest therein where the
assessed value of the property or interest therein does not exceed
Twenty thousand pesos (₱20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty thousand
pesos (₱50,000.00) exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses and costs: Provided, That in cases
of land not declared for taxation purposes, the value of such property
shall be determined by the assessed value of the adjacent lots.
From the foregoing, the RTC exercises exclusive original jurisdiction in
civil actions where the subject of the litigation is incapable of pecuniary
estimation. It also has jurisdiction in civil cases involving title to, or
possession of, real property or any interest in it where the assessed
value of the property involved exceeds ₱20,000.00, and if it is below 1!
20,000.00, it is the first level court which has jurisdiction. An action
"involving title to real property" means that the plaintiffs cause of
action is based on a claim that he owns such property or that he has
the legal right to have exclusive control, possession, enjoyment, or
disposition of the same. 14
The allegations and reliefs sought in petitioner's action for foreclosure
of mortgage showed that the loan obtained by respondents spouses
Barrios from petitioner fell due and they failed to pay such loan which
was secured by a mortgage on the property of the respondents
spouses; and prayed that in case of default of payment of such
mortgage indebtedness to the court, the property be ordered sold to
answer for the obligation under the mortgage contract and the
accumulated interest. It is worthy to mention that the essence of a
contract of mortgage indebtedness is that a property has been
identified or set apart from the mass of the property of the debtor-
mortgagor as security for the payment of money or the fulfillment of
an obligation to answer the amount of indebtedness, in case of default
in payment. 15 Foreclosure is but a necessary consequence of non-
payment of the mortgage indebtedness. 16 In a real estate mortgage
when the principal obligation is not paid when due, the mortgagee has
the right to foreclose the mortgage and to have the property seized
and sold with the view of applying the proceeds to the payment of the
obligation. 17 Therefore, the foreclosure suit is a real action so far as it
is against property, and seeks the judicial recognition of a property
debt, and an order for the sale of the res. 18
Petitioner cites Russell v. Vestil19to show that action for foreclosure of
mortgage is an action incapable of pecuniary estimation and,
therefore, within the jurisdiction of the RTC. We are not persuaded. In
the Russell  case, we held:
In Singsong vs. Isabela Sawmill,  we had the occasion to rule that:
[I]n determining whether an action is one the subject matter of which
is not capable of pecuniary estimation, this Court has adopted the
criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money,
the claim is considered capable of pecuniary estimation, and whether
jurisdiction is in the municipal courts or in the courts of first instance
would depend on the amount of the claim. However, where the basic
issue is something other than the right to recover a sum of money,
where the money claim is purely incidental to, or a consequence of,
the principal relief sought, this Court has considered such actions as
cases where the subject of the litigation may not be estimated in terms
of money, and are cognizable exclusively by courts of first instance
(now Regional Trial Courts).
Examples of actions incapable of pecuniary estimation are those for
specific performance, support, or foreclosure of mortgage or
annulment of judgment; also actions questioning the validity of a
mortgage, annulling a deed of sale or conveyance and to recover the
price paid and for rescission, which is a counterpart of specific
performance.
While actions under Sec. 33(3) of B.P. 129 are also incapable of
pecuniary estimation, the law specifically mandates that they are
cognizable by the MTC, METC, or MCTC where the assessed value of
the real property involved does exceed ₱20,000.00 in Metro Manila, or
₱50,000.00, if located elsewhere. If the value exceeds ₱20,000.00 or
₱50,000.00 as the case may be, it is the Regional Trial Courts which
have jurisdiction under Sec. 19(2). However, the subject matter of the
complaint in this case is annulment of a document denominated as
"DECLARATION OF HEIRS AND DEED OF CONFIRMATION OF
PREVIOUS ORAL PARTITION.20
Clearly, the last paragraph clarified that while civil actions which
involve title to, or possession of, real property, or any interest therein,
are also incapable of pecuniary estimation as it is not for recovery of
money, the court's jurisdiction will be determined by the assessed
value of the property involved.
WHEREFORE, the petition for certiorari  is DISMISSED as we find no
grave abuse of discretion committed by the Regional Trial Court,
Branch 6, Kalibo, Aklan in dismissing the complaint for lack of
jurisdiction.
SO ORDERED.
[ G.R. No. 207976, November 14, 2018 ]
PLANTERS DEVELOPMENT BANK, PETITIONER, V. LUBIYA
AGRO INDUSTRIAL CORPORATION, RESPONDENT.
DECISION
A. REYES, JR., J.:
Nature of the Case
This Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeks to reverse and set aside the January 24, 2013
Decision1 and June 20, 2013 Resolution2 of the Court of Appeals (CA)
in CA-G.R. CV No. 01761-MIN. The challenged rulings partially
reversed the March 5, 2008 Decision3 of the Regional Trial Court
(RTC), Branch 35, General Santos City in Civil Case No. 6884,
dismissing herein respondent's complaint for nullification of loan
agreement and foreclosure proceedings.
Factual Antecedents
On August 23, 1995 and November 13, 1997, petitioner Planters
Development Bank (Planters Bank) granted two (2) loans to
respondent Lubiya Agro Industrial Corporation (Lubiya) in the amounts
of P6,500,000.00 and P5,000,000.00, respectively. The said loans were
secured by real estate mortgages over two (2) parcels of land with
improvements thereon located in General Santos City covered by
Transfer Certificate of Title Nos. T-55058 and T-55057.4
When Lubiya defaulted, Planters Bank sent a letter dated June 8, 1998
to it demanding payment and informing the latter that failure to heed
such demand shall prompt Planters Bank to institute a legal action
against it.5 Consequently, due to Libuya's failure to settle its
obligation, Planters Bank extrajudicially foreclosed the properties
offered as security by Lubiya. A public auction was held on October 6,
1998 wherein Planters Bank emerged as the sole and highest bidder. A
Certificate of Sale was thereafter issued in its favor and recorded with
the Registry of Deeds on November 11, 1998. After the expiration of
the redemption period, ownership over the properties was
consolidated and titles thereto were correspondingly issued in the
name of Planters Bank.6
30
On January 23, 2001, Lubiya filed a complaint for nullification of the
loan agreement, foreclosure proceedings, damages, and attorney's
fees, with application for the issuance of a temporary restraining order
and injunction against Planters Bank. The said complaint was anchored
on Planters Bank's alleged failure to furnish Lubiya with notices
regarding the foreclosure and sale of the mortgaged properties despite
being obligated in their mortgage contract to do so.7
In its Answer, Planters Bank admitted that the loan agreements are
contracts of adhesion and Lubiya was indeed not notified of the
extrajudicial foreclosure proceedings.8
In view of the foregoing admissions, Lubiya moved for a summary
judgment alleging that no genuine issues exist as to the material facts
of the case. The RTC granted the motion and rendered judgment on
March 5, 2008. Strangely however, the summary judgment was
adversed to Lubiya as the RTC dismissed its complaint against Planters
Bank, to wit:
WHEREFORE, premises considered, the instant case is hereby
ordered DISMISSED. No pronouncement as to cost.
SO ORDERED.9
Thus, Lubiya appealed before the CA.
CA Ruling
On appeal, the CA reversed the decision of the RTC and nullified the
foreclosure sale. The dispositive portion of its January 24, 2013
Decision reads:
WHEREFORE, premises considered, the appeal
is PARTIALLY GRANTED. The loan agreements are hereby declared
valid, legal and subsisting. However, the extrajudicial foreclosure
proceedings conducted on October 6, 1998 is declared null and void.
Consequently, the certificate of sale as well as the consolidation of the
title in favor of the bank are also declared null and void.
SO ORDERED.10
In so ruling, the CA found that Planters Bank failed to personally notify
Lubiya of the extrajudicial foreclosure proceedings as required in
Paragraph 12 of the parties' real estate mortgage contracts. This
omission not only constituted a breach of its obligations under the
contracts but also invalidated the foreclosure.
Planters Bank moved for, but was denied, reconsideration of the
adverted decision. Hence, this petition.
Issue
The sole issue before this Court is whether or not the lack of personal
notice of the extrajudicial foreclosure proceedings upon the mortgagor
renders the same null and void.
Planters Bank, in the main, alleges that the CA erred in giving a
restrictive interpretation to Paragraph 12 of the real estate mortgage
contracts. It insists that the June 8, 1998 letter informing Lubiya of its
intention to institute legal action against it constituted sufficient
compliance with the requirement of "notification of any judicial or
extrajudicial action."11
In its Comment,12 respondent maintains that Planters Bank's failure to
give personal notice of the foreclosure proceedings violates Lubiya's
fundamental right to due process.
Ruling of the Court all correspondence relative to this mortgage, including demand letters,
summonses, subpoenas, or notifications of any judicial or extra-judicial
action shall be sent to the MORTGAGOR x x x.
The petition has no merit.

Precisely, the purpose of the foregoing stipulation is to apprise

As a general rule, personal notice to the mortgagor in extrajudicial
respondent of any action which petitioner might take on the subject
foreclosure proceedings is not necessary.13 Section 3 of Act No.
property, thus according him the opportunity to safeguard his rights.
313514 governing extra-judicial foreclosure of real estate mortgages
When petitioner failed to send the notice of foreclosure sale to
only requires the 1) posting of the notice of extrajudicial foreclosure
respondent, he committed a contractual breach sufficient to render the
sale in three public places; and 2) publication of the said notice in a
foreclosure sale on November 23, 1981 null and void.22
newspaper of general circulation,15 viz:

We reiterated the Wong ruling in Global Holiday Ownership

Sec. 3. Notice shall be given by posting notices of the sale for not less
Corporation v. Metropolitan Bank and Trust Company,23 Carlos Lim v.
than twenty days in at least three public places of the municipality or
Development Bank of the Philippines,24 and Ramirez v. The Manila
city where the property is situated, and if such property is worth more
Banking Corporation.25 Notably, all these cases involved provisions
than four hundred pesos, such notice shall also be published once a
similar to paragraph 12 of the mortgage contracts in the present case.
week for at least three consecutive weeks in a newspaper of general
circulation in the municipality and city.
Time and again, We have underscored that the purpose of stipulations
of such nature is to precisely apprise the mortgagors of any action
Nevertheless, jurisprudence is replete with Our pronouncement that
which the mortgagees might take on the mortgaged properties in
despite the above provisions of the law, the parties to a mortgage
order to accord the former of an opportunity to safeguard their
contract are not precluded from imposing additional
rights.26 Thus, when Planters Bank failed to send the notice of
stipulations.16 This includes the requirement of personal notification to
foreclosure sale to Lubiya, it committed a contractual breach sufficient
the mortgagor of any action relative to the mortgage contract, such as
to render the foreclosure sale on October 6, 1998 null and
the institution of an extrajudicial foreclosure proceeding.17
void.27 Besides, the loan agreements and mortgage contracts are
standard contracts of adhesion prepared by petitioner itself. If the
Thus, the exception to the rule is when the parties stipulate that parties did not intend to require personal notice in addition to the
personal notice is additionally required to be given the statutory requirements of posting and publication, the said provision
mortgagor.ℒαwρhi ৷ Failure to abide by the general rule, or its should not have been included in the mortgage contracts.
exception, renders the foreclosure proceedings null and void.18
Fundamentally, a contract is the law between the parties and, absent
In the instant case, paragraph 12 of the parties' real estate mortgage any showing that its provisions are wholly or in part contrary to law,
contracts state: morals, good customs, public order, or public policy, it shall be
enforced to the letter by the courts.28 Consequently, the failure by the
All correspondence relative to this mortgage, including demand letters, mortgagee to send the notice of foreclosure sale to mortgagor
summons, subpoenas, or notification of any judicial or extra-judicial constitutes a contractual breach sufficient to render the foreclosure
action, shall be sent to the Mortgagor at the above given address or at sale null and void.29
the address that may hereafter be given in writing by the Mortgagor to
the Mortgagee.19 (Emphasis and italics supplied) WHEREFORE, the petition is DENIED. The Decision dated January
24, 2013 and Resolution dated June 20, 2013 Resolution of the Court
However, in an effort to extricate itself from its duties under the of Appeals in CA-G.R. CV No. 01761-MIN are hereby AFFIRMED.
mortgage contracts, Planters Bank avers that the foregoing provision
does not state that it should notify Lubiya of the actual extrajudicial SO ORDERED.
foreclosure sale before it can be validly conducted. As such, it
conveniently insists that the demand letter dated June 8, 1998, which
Lubiya received on June 24, 1998 prior to the auction sale on October
6, 1998, duly satisfied the notice requirement agreed upon by the
parties.20

This argument fails to persuade.

The provisions of Act No. 3135 notwithstanding, under paragraph 12

of the real estate mortgage contracts signed by the parties, Planters
Bank obligated itself to notify Lubiya of any judicial or extrajudicial
action it may resort to with respect to the mortgages. Hence, We
cannot agree with Planters Bank that the June 8, 1998 demand letter
that it sent to Lubiya satisfies the bank's additional obligation to
provide personal notice of the extrajudicial foreclosure sale to the
mortgagor.

As the Court elucidated in Metropolitan Bank v. Wong,21 the bank's

violation of paragraph 12 of the real estate mortgage contracts is
sufficient to invalidate the extrajudicial foreclosure sale:

In this case, petitioner and respondent in entering into a contract of

real estate mortgage, agreed inter alia:

31