GRAND FARMS, INC.
and PHILIPPINE SHARES CORPORATION, accomplish said purpose and to appoint its substitutes as such
petitioners,
vs.
COURT OF APPEALS, JUDGE ADRIAN R. OSORIO, as Presiding Judge
of the Regional Trial Court, Branch 171, Valenzuela, Metro Manila;
ESPERANZA ECHIVERRI, as Clerk of Court & Ex-Officio Sheriff of the
Regional Trial Court of Valenzuela, Metro Manila; SERGIO
CABRERA, as Deputy Sheriff-in-Charge; and BANCO FILIPINO
SAVINGS AND MORTGAGE BANK, respondents.
Facts:
Petitioner Grand Farms Inc. filed an annulment and/or declaration of nullity
of the extrajudicial foreclosure proceedings over their mortgaged
properties, with damages in RTC Valenzuela, MM against respondents clerk
of court, deputy sheriff and PR Banco Filipino Savings and Mortgage Bank
Reason: no formal notice of intention to foreclose the real estate
mortgage was sent by private respondent to petitioners.
PR (thorugh its deputy liquidator) responded and said petitioners were
"notified of the auction sale by the posting of notices and the
publication of notice in the Metropolitan Newsweek, a newspaper of
general circulation in the province where the subject properties are located
and in the Philippines on February 13, 20 and 28, 1988."
Because of alleged implied admission by PR Petitioners filed a motion for
summary judgment contending that the foreclosure was violative of the
provisions of the mortgage contract specifically paragraph (k)
k) All correspondence relative to this Mortgage, including
demand letters, summons, subpoena or notifications of any judicial or
extrajudical 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;
PR opposed the motion argued that petitioners' reliance on said
paragraph (k) of the mortgage contract fails to consider
paragraphs (b) and (d) of the same contract, which respectively
provide as follows:
b) . . . For the purpose of extra-judicial foreclosure, the
Mortgagor (plaintiff) hereby appoints the Mortgagee (BF) his
attorney-in-fact to sell the property mortgaged, to sign all
documents and perform any act requisite and necessary to
attorney-in-fact, with the same powers as above-specified. The
Mortgagor hereby expressly waives the term of thirty (30) days or any
other term granted or which may hereafter be granted him by law as the
period which must elapse before the Mortgagee shall be entitled to
foreclose this mortgage, it being specifically understood and agreed that
the said Mortgagee may foreclose this mortgage at any time after the
breach of any conditions hereof. . . .
d) Effective upon the breach of any conditions of the
mortgage and in addition to the remedies herein stipulated, the
Mortgagee is hereby likewise appointed attorney-in-fact of the
Mortgagor with full powers and authority, with the use of force, if
necessary, to take actual possession of the mortgaged property,
without the necessity for any judicial order or any permission of
power to collect rents, to eject tenants, to lease or sell the mortgaged
property, or any part thereof, at public or private sale without previous
notice or adverstisement of any kind and execute the corresponding bills of
sale, lease or other agreement that may be deemed convenient, to make
repairs or improvement to the mortgaged property and pay for the same
and perform any other act which the Mortgagor may deem convenient . . .
RTC: denied petitioners motion for summary judgment -> genuine and
substantial issues exist which require the presentation of evidence during
the trial, to wit:
(a) whether or not the loan has matured;
(b) whether or not private respondent notified petitioners of the foreclosure
of their mortgage;
(c) whether or not the notice by publication of the foreclosure constitutes
sufficient notice to petitioners under the mortgage contract;
(d) whether or not the applicant for foreclosure of the mortgage was a duly
authorized representative of private respondent; and
(e) whether or not the foreclosure was enjoined by a resolution of this
Court.
Petitioners filed petition for certiorari orders of denial as having been
issued with grave abuse of discretion
when it dismissed the petition, holding that no personal
notice was required to foreclose since private respondent
was constituted by petitioners as their attorney-in-fact to
sell the mortgaged property.
When it held that paragraph (k) of the mortgage contract
merely specified the address where correspondence should
be sent and did not impose an additional condition on the
part of private respondent to notify petitioners personally
of the foreclosure.
WON a summary judgment may be promulgated by the TC, given that
there was no notice of foreclosure sent by the mortgagee to the mortgagor
YES
The Rules of Court authorize the rendition of a summary judgment if the
pleadings, depositions and admissions on file, together with the affidavits,
show that, except as to the amount of damages, there is no issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.
Although an issue may be raised formally by the pleadings but there is no
genuine issue of fact, and all the facts are within the judicial knowledge of
the court, summary judgment may be granted.
Real test: whether the pleadings, affidavits and exhibits in support of the
motion are sufficient to overcome the opposing papers and to justify
a finding as a matter of law that there is no defense to the action or
that the claim is clearly meritorious.
Case at bar: petitioners' action in the court below for annulment and/or
declaration of nullity of the foreclosure proceedings and damages ripe for
summary judgment.
PR tacitly admitted in its answer that it did not send any formal notice of
foreclosure to petitioners omission (by itself) rendered the foreclosure
defective and irregular no further necessity to inquire into the
other issues cited by the trial court, for the foreclosure may be
annulled solely on the basis of such defect.
While private respondent was constituted as their attorney-in-fact by
petitioners, the inclusion of the aforequoted paragraph (k) in the
mortgage contract nonetheless rendered personal notice to the
latter indispensable.
Community Savings & Loan Association, Inc., et al. vs. Court of Appeals, et
al.,: CA ruled that provision in the contract1 is an additional stipulation
between the parties. As such, it is the law between them and as it not
contrary to law, morals, good customs and public policy, the same
should be complied with faithfully (Article 1306, New Civil Code of the
Philippines). Thus, while publication of the foreclosure proceedings
in the newspaper of general circulation was complied with,
personal notice is still required, as in the case at bar, when the same
was mutually agreed upon by the parties as additional condition of
the mortgage contract.
Failure to comply with this additional stipulation would render illusory
Article 1306 of the New Civil Code of the Philippines (p. 37, Rollo).
SC does not agree with CA that paragraph (k) of the mortgage contract in
question was intended merely to indicate the address to which the
communications stated therein should be sent. already been interpreted
1 (10)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,
in previous jurisprudence no reason to deviate from previous
interpretation
There is no irreconcillable conflict between, as in fact a reconciliation
should be made of, the provisions of paragraphs (b) and (d) which
appear first in the mortgage contract and those in paragraph (k)
which follow thereafter and necessarily took into account the provisions of
the preceding two paragraphs.
The notices respectively mentioned in paragraphs (d) and (k) are
addressed to the particular purposes contemplated therein.
Those mentioned in paragraph (k) are specific and additional
requirements intended for the mortgagors so that, thus apprised,
they may take the necessary legal steps for the protection of their
interests such as the payment of the loan to prevent foreclosure or to
subsequently arrange for redemption of the property foreclosed.
PR having caused the formulation and preparation of the printed
mortgage contract in question, any obscurity that it imputes
thereto or which supposedly appears therein should not favor it as
a contracting party.
Decision: decision appealed from is hereby REVERSED and SET ASIDE
and this case is REMANDED to the court of origin for further
proceedings in conformity with this decision. This judgment is immediately
executory.
MANUEL D. MEDIDA, Deputy Sheriff of the Province of Cebu, CITY
SAVINGS BANK (formerly Cebu City Savings and Loan Association,
Inc.) and TEOTIMO ABELLANA, petitioners,
vs.
COURT OF APPEALS and SPS. ANDRES DOLINO and PASCUALA
DOLINO, respondents.
Gines N. Abellana for petitioners.
Dionisio U. Flores for private respondents.
Spouses Dolino (private respondents) mortgaged their lot of the Cebu City
Cadastre to Cebu City Development bank foreclosed Gandioncho
bought it in a foreclosure sale
Plaintif spouses, alarmed of losing their right of redemption, went to
Abellana (president of Cebu City Savings and Loan Association) to obtain
a loan of P30k
Prior to this, their son Dolino filed a similar loan application for P25k
and offered the subject lot as security for the P30k loan from CCSLA
Both documents indicated that the principal obligation is for the P30k
pesos payable in 1 year with 12% per annum interest
When the loan became due and demandable (Spouses failed to pay)
CCSLA extrajudicially foreclosed the mortgage.
After the posting and publication requirements were complied with the
land was sold at public auction to CCSLA (being the highest bidder)
The certificate of was issued the day after and registered on May 10
1976 with the Register of Deeds of Cebu
On May 24 1971, no redemption was effected by the spouses so the
TCT was cancelled and a new TCT in the name of CCSLA was issued
On October 18, 1979, Spouses Dolino filed civil case for the annulment of
the sale at public auction conducted on April 19, 1976, as well as the
corresponding certificate of sale issued pursuant thereto assailed the
validity of the extrajudicial foreclosure sale of their property,
claiming that the same was held in violation of Act No. 3135, as
amended prayed for the cancellation of TCT issued in favor of therein
City Savings and Loan Association, Inc., now known as City Savings Bank
and one of the petitioners herein.
CCSLA denied the material allegations of the complaint PR spouses
may still avail their right of redemption over the land in question
Court
-held validity of the loan and the REM BUT annulled foreclosure sale
because they failed to comply with the notice requirements
-Ordered cancellation of TCT in the name of CCSLA and issuance of
new TCT to contain all the annotations made in TCT No. 14272 of the
plaintiffs Pascuala Sabellano, married to Andres Dolino;
-Ordering the Spouses to pay the defendant Cebu City Savings and
Loan Association, Inc. the unpaid balance of the loan, plus
interest; and reimbursing said defendant the value of any
necessary and useful expenditures on the property after
deducting any income derived by said defendant from the
property.
For this purpose, CCSLA is given 15 days from receipt hereof within
which to submit its statement of the amount due it from the
spouses Dolino, with notice to them.
The payment to be made by the plaintiffs shall be within ninety (90) days
from their receipt of the order approving the amount due the defendant
Cebu City Savings and Loan Association, Inc.
PR interposed a partial appeal: lower court erred in
(1) declaring that the mortgage executed by the therein plaintiff
spouses Dolino is valid;
(2) permitting therein Cebu City Savings and Loan Association, Inc. to
collect interest after the same foreclosure proceedings and
auction sale which are null and void from the beginning;
(3) not ordering the forfeiture of the capital or balance of the loan
with usurious interest; and
(4) not sentencing therein defendant to pay damages and attorney's fees
to plaintiffs.
CA modified the decision of RTC declaring as void and ineffective the
real estate mortgage executed by the spouses in favor of CCSLA
Petitioners filed MR denied
ISSUE:
1) WON respondent court erred in declaring the real estate mortgage
void
2) WON judgment of the trial court declaring ineffective the
extrajudicial foreclosure of said mortgage and ordering the
cancellation of TCT issued in favor of CCSLA
1) CA ERRED IN DECLARING THE REAL ESTATE MORTGAGE VOID
CA declared the REM void because the mortgagor spouses, at the time
when the said mortgage was executed, were no longer the owners of the
lot, having supposedly lost the same when the lot was sold to a
purchaser in the foreclosure sale under the prior mortgage.
Since it wasnt raised in the lower court cannot be raised for the first
time in appeal
BUT since CA took cognizance thereof SC may consider such procedure
analogous to the rule that an unassigned error closely related to an error
properly assigned, or upon which the determination of the question
properly assigned is dependent, may be considered by an appellate court.
SC adopted this approach since both lower courts agreed upon the
invalidity of the extrajudicial foreclosure but differed only on the
matter of the validity of the real estate mortgage upon which the
extrajudicial foreclosure was based.
CA relied on an obiter dictum laid down in Dizon vs. Gaborro, et al. which
we shall analyze. For, as explicitly stated therein by the Court, "(t)he basic
issue to be resolved in this case is whether the 'Deed of Sale with
Assumption of Mortgage' and the 'Option to Purchase Real Estate,'
two instruments executed by and between petitioner Jose P. Dizon and
Alfredo G. Gaborro (defendant below) on the same day, October 6, 1959,
constitute in truth and in fact an absolute sale of the three parcels
of land therein described or merely an equitable mortgage or
conveyance thereof by way of security for reimbursement or
repayment by petitioner Jose P. Dizon of any and all sums which may have
been paid to the Development Bank of the Philippines and the Philippine
National Bank by Alfredo G. Gaborro . . . ." (BASICALLY IF IT WAS AN
ABSOLUTE SALE OR EQUITABLE MORTGAGE)
Said documents were execute and the payments made by Gaborro for the
debt of Dizon to the said banks AFTER DBP had foreclosed the
mortgage executed by Dizon and DURING the period of redemption
after the foreclosure sale of the mortgaged property to said
creditor bank.
RTC said that the true agreement was that Gaborro would assume and
pay the indebtedness of Dizon to the banks and, in consideration
thereof, Gaborro was given the possession and enjoyment of the
properties in question until Dizon shall have reimbursed him for
the amount paid to the creditor banks.
RTC ordered the reformation of the documents to the extent indicated and
such particular relief was affirmed by the Court of Appeals. This Court held
that the agreement between the parties is one of those innominate
contracts under Article 1307 of the Civil Code whereby the parties
agreed "to give and to do" certain rights and obligations, but
partaking of the nature of antichresis.
CA
The two instruments sought to be reformed in this case appear to
stipulate rights and obligations between the parties thereto
pertaining to and involving parcels of land that had already been
foreclosed and sold extrajudicially, and purchased by the mortgage
creditor, a third party. necessary, to determine the legality of said
rights and obligations arising from the foreclosure and sale
proceedings not only between the two contracting parties to the
instruments executed between them but also in so far as the
agreement affects the rights of the third party, the purchaser
Bank.
ROC Rule 39, Section 33, the judgment debtor remains in
possession of the property foreclosed and sold, during the period
of redemption. If the judgment debtor is in possession of the
property sold, he is entitled to retain it, and receive the fruits, the
purchaser not being entitled to such possession.
Upon foreclosure and sale, the purchaser is entitled to a certificate
of sale executed by the sheriff. (Section 27, Revised Rules of Court).
After the termination of the period of redemption and no
redemption having been made, the purchaser is entitled to a deed of
conveyance and to the possession of the properties. (Section 35,
Revised Rules of Court).
The weight of authority is to the effect that the purchaser of land sold
at public auction under a writ of execution has only an inchoate
right to the property, subject to be defeated and terminated
within the period of 12 months from the date of sale, by a
redemption on the part of the owner.
Therefore, the judgment debtor in possession of the property is
entitled to remain therein during the period for redemption.
after the extrajudicial foreclosure and sale of his properties petitioner
Dizon retained the right to redeem the lands, the possession, use and
enjoyment of the same during the period of redemption under
instrument captioned Deed of Sale with Assumption of Mortgage
Such an instrument cannot be legally considered a real and unconditional
sale of the parcels of land,
1) because there was absolutely no money consideration therefor, as
admittedly stipulated, the sum of P131,831.91 mentioned in the document
as the consideration "receipt of which was acknowledged" was not actually
paid; and,
2) because the properties had already been previously sold by the
sheriff at the foreclosure sale, thereby divesting the petitioner of
his full right as owner thereof to dispose and sell the lands.
Obiter was unnecessary because no sale was concluded and it was also
inaccurate if admitted, purchaser at a foreclosure sale mere acquired an
inchoate right to the property which could ripen into ownership only upon
the lapse of the redemption period without his credit having been
discharged
Illogical to hold that during that same period of twelve months the
mortgagor was "divested" of his ownership, since the absurd result would
be that the land will consequently be without an owner although it
remains registered in the name of the mortgagor.
What is divested from the mortgagor is only his "full right as owner
thereof to dispose (of) and sell the lands," merely clarifying that
the mortgagor does not have the unconditional power to
absolutely sell the land since the same is encumbered by a lien of
a third person which, if unsatisfied, could result in a consolidation
of ownership in the lienholder but only after the lapse of the
period of redemption.
What is delimited is NOT the mortgagor's jus dispodendi, as an
attribute of ownership, but merely the rights conferred by such act of
disposal which may correspondingly be restricted.
Still not applicable to the case because what is presently involved is a
mortgage, not a sale, to petitioner bank. does not involve a
transfer, cession or conveyance of the property but only constitutes a lien
thereon. no obstacle to the legal creation of such a lien even after the
auction sale of the property but during the redemption period, since no
distinction is made between a mortgage constituted over the property
before or after the auction sale thereof.
Redemptioner: is defined as a creditor having a lien by attachment,
judgment or mortgage on the property sold, or on some part
thereof, subsequent to the judgment under which the property was
sold.
Of course, while in extrajudicial foreclosure the sale contemplated is not
under a judgment but the proceeding pursuant to which the mortgaged
property was sold, a subsequent mortgage could nevertheless be legally
constituted thereafter with the subsequent mortgagee becoming and
acquiring the rights of a redemptioner, aside from his right against the
mortgagor.
In either case, what bears attention is that since the mortgagor remains as
the absolute owner of the property during the redemption period and has
the free disposal of his property, there would be compliance with the
requisites of Article 2085 of the Civil Code for the constitution of another
mortgage on the property.
To hold otherwise would create the inequitable situation wherein the
mortgagor would be deprived of the opportunity, which may be his
last recourse, to raise funds wherewith to timely redeem his
property through another mortgage thereon.
IN THE PRESENT CASE
REM in favor of petitioner bank was executed during the period of
redemption.
During the said period, the mortgagor is still the owner of the
foreclosed property since the right of the purchaser at a
foreclosure sale is merely inchoate until the period of redemption
expires without the right being exercised
The title to land sold under mortgage foreclosure remains in the
mortgagor or his grantee until the expiration of the redemption
period and conveyance by the master's deed.
The rule has always been that it is only upon the expiration of the
redemption period, without the judgment debtor having made use of his
right of redemption, that the ownership of the land sold becomes
consolidated in the purchaser.
The effect of the exercise of the right of redemption by the mortgage
debtor is NOT the recovery of ownership of his land, which
ownership he never lost, but the elimination from his title thereto
of the lien created by the levy on attachment or judgment or the
registration of a mortgage thereon.
Redemption of property sold under a foreclosure sale DEFEATS the
inchoate right of the purchaser and restores the property to the
same condition as if no sale had been attempted.
Further, it does NOT give to the mortgagor a new title, but merely restores
to him the title freed of the encumbrance of the lien foreclosed.
Lower court already ruled that violation of Act No. 3135, as amended
nullified the extrajudicial foreclosure proceeding and its effects. Such
findings and ruling of the trial court are already final and binding
on petitioners and can no longer be modified, petitioners having
failed to appeal therefrom.
Decision:
CA decision modifying the RTC decision is REVERSED and SET ASIDE. The
judgment of said trial court REINSTATED.