8. Rural Bank v.
CA order sought to be appealed is interlocutory but also because in the
Facts:
In a civil case for foreclosure of mortgaged before the CFI Misamis
Occidental, Oroquieta City, the lower court rendered a decision:
o ordering the defendants to pay plaintiff bank within a
period of not less than ninety (90) days nor more than one
hundred (100) days from the receipt of the decision the
loan of P1,500 with twelve percent interest per annum from
January 16, 1972 plus ten percent of the principal as
attorneys fees
o In case of nonpayment within that period, sheriff is hereby
ordered to sell at public auction the mortgaged lot, which is
a parcel of coconut land
Aforesaid judgment became final and executory.
Spouses Serrano, mortgagors, did not pay their mortgaged debt
within the time specified by the judgment.
As a result, the said mortgaged lot was sold at public auction,
which Petitioner Rural bank is the highest and only bidder
After the auction sale, a certificate of sale was issued by the sheriff
and was registered the following day
Then, Petitioner Rural bank sold the lot to a third person named
Mejos. TCT was issued to her.
CFI issued a writ of possession to the bank
Spouses Serrano, mortgagors, opposed and filed a motion for
reconsideration (MR) stating that there was no judicial
confirmation of auction sale. They may still exercise its equity
of redemption, and may still pay the mortgage debt
CFI granted the MR, and ordered Petitioner Rural Bank to accept
the payment of the loan with interests
Bank filed a manifestation, where it said that the lot was already
sold to a third person, and court cannot compel them to receive
the payment. It further averred that a pending case for annulment
of foreclosure is still pending
CFI denied the motion of Petitioner Rural bank. Rural Bank filed a
notice of appeal. CFI dismissed appeal since the order appeal from
is interlocutory, and not appealable.
CA assailed the order by means of certiorari. CA dismissed the
petition and sustained RTC
Hence, this petition
Issue: W/N judicial confirmation of the auction sale is necessary to
consolidate ownership of the mortgaged lot to mortgagees (Petitioner Rural
Bank)
Held: Yes.
We hold that the trial court and the Court of Appeals acted correctly in
refusing to give due course to the banks appeal not only because the
present posture of the case it is imperative that the trial court
should consolidate the foreclosure case
After the execution of a real estate mortgage, the mortgagor has an
equity of redemption exercisable within the period stipulated in the
mortgage deed. In case of judicial foreclosure, that equity of redemption
subsists after the sale and before it is confirmed by the court. However, in
case of a judicial foreclosure of a mortgage in favor of a banking institution,
section 78 of the General Banking Law grants the mortgagor a right of
redemption which may be exercised within one year from the sale.
Under section 3, Rule 68 of the Rules of Court, it is the confirmation by
the court of the auction sale that would divest the Serrano
spouses of their rights to the mortgaged lot and that would vest
such rights in the bank as purchaser at the auction sale.
The settled rule that a foreclosure sale is not complete until it is
confirmed, and before said confirmation, the court retains control of the
proceedings by exercising a sound discretion in regard to it, either granting
or withholding confirmation as the rights and interests of the parties and
the ends of justice may require.
In order that a foreclosure sale may be validly confirmed by the court, it is
necessary that a hearing be given the interested parties, at which
they may have an opportunity to show cause why the sale should not be
confirmed.
The acceptance of a bid at the foreclosure sale confers no title on
the purchaser. Until the sale has been validly confirmed by the
court, he is nothing more than a preferred bidder. Title vests only
when the sale has been validly confirmed by the court. The
confirmation then retroacts from the date of the sale. It is after the
confirmation of the sale that the mortgagor loses all interest in the
mortgaged property.
In the instant case, where the foreclosure sale has not yet been
confirmed but the statutory one-year period for redemption expired
and the mortgaged lot was sold by the mortgagee (as the only bidder at
the auction sale) to a third person, the trial court should give the
purchaser a chance to be heard before requiring the mortgagee-
bank to accept the redemption price tendered by the mortgagors.
WHEREFORE, while we affirm the decision of the Court of Appeals in not
giving due course to petitioners appeal from the trial courts
aforementioned order of October 12, 1977, at the same time the said order
is reversed and set aside for being premature.