G.R. No.

L-51997 September 10, 1981

SPOUSES INOCENCIO H. GONZALES and ROSARIO ES QUIVEL GONZALES, petitioners,
vs.
THE GOVERNMENT SERVICE INSURANCE SYSTEM thru GENERAL MANAGER ROMAN A. CRUZ, JR. and THE
MANAGER, RESIDENTIAL LOANS DEPARTMENT, respondents.

MELENCIO-HERRERA, J.:
We view this Petition as substantially one for mandamus to compel the respondent Government Service Insurance System
(GSIS) to accept 6% interest-bearing bonds issued by the Land Bank of the Philippines at their par or face value as payment
for petitioners' outstanding housing loan.
On April 2, 1968, August 14, 1968 and November 7, 1968, petitioner-spouses Inocencio H. Gonzales and Rosario Esquivel
Gonzales obtained a housing loan of P80,000.00 from the respondent GSIS. This was to be repayable within fifteen years at
6% interest per annum for the first P30,000.00 and pay for the balance. GSIS accepted as collaterals two (2) residential lots
located in Quezon City, and two (2) agricultural lands located in Jaen, Nueva Ecija. Of the latter two, one is 15.7880
hectares in area, while the other is 9.4602 hectares.
Petitioners were able to pay several monthly installments of P814.38 until both of them retired compulsorily from government
service in 1973, leaving an unpaid obligation of over P73,000.00, which, as of May 31, 1978, amounted to P 135,884.87
because of accumulated interests or arrearages
By virtue of Presidential Decree No. 27, otherwise known as the Tenants' Emancipation Act, effective October 21, 1972,
the agricultural lands of petitioners were subdivided and awarded by the then Department of Agrarian Reform to the tenantfarmers therein. It was only in May of 1979, however, that payment by the Land Bank became remittable covering in
particular, the 15- hectare land of petitioners in Jaen
The land, having been appraised at P117,005.00, that sum was tendered by the Land Bank to the GSIS broken down as
follows: 20% in cash or P23,505.00 (recomputed at P23,401.00), and 80% in bonds or P9,3,500.00 re-computed all
P93,604.00). The GSIS refused acceptance unless the payment in bonds was to be credited thus: P16,400.00 at par (the
loan value of the property and P77,100.00 in land bank bonds discounted at 18%; interest per annum to
maturity, 1 actuarially computed at P25,375.00. In effect, the bonds were given a creditable value of only

P41,775.00 (P16,400.00, at par plus P25,375.00, the discounted value) compared to its face value of
P93,500.00.
Petitioners, on July 30, 1979, accepted under protest the condition of the GSIS This, however, did not stop them from
seeking reconsideration of the decision of the GSIS to the extent of appealing to the Office of the President on September
24, 1979 and offering to pay the balance of their obligation in cash provided GSIS would accept at par value the Land Bank
bonds without awaiting payment corresponding to their other 9-hectare agricultural land in Jaen
Without reconsidering its previous position, the GSIS resolved:
.... In accordance with GSIS policy on the matter, the proposed remittance of Land Bank bonds of
P93,604.00 will be accepted at par only for P16,400 (the loan value of the property), and the balance of
P77,200.00 at the discounted rate to yield the System 18% per annum to maturity. The total amount
creditable, therefore, is only P65,176.00 (P23,401.00 in cash, and P93,604.00 in Land Bank bonds with a
creditable value of P41,77 5.00). 2
Subsequently, the instant Petition for mandamus was filed on November 28, 1979, with petitioners praying that the GSIS be
directed to accept the payment of Land Bank bonds at par value, without any discount whatsoever, so that an of petitioners

collaterals could be released. They also ask for actual, moral and exemplary damages, aside from attorney's fees and costs
of suit.
The issue is whether or not under the provisions of section 80, Republic Act No. 3844, as amended, the GSIS may be
compelled to accept Land Bank bonds at face value in payment of outstanding loans secured partially by lands taken by the
Land Bank under Operation Land Transfer.
Section 80 of Republic Act No. 3844, otherwise known as "The Code of Agrarian Reforms of the Philippines," as amended
by Presidential Decree No. 251, provides for the various modes of settlement by the Land Bank:
Sec. 80. Modes of Modes of Payment Bank shall finance the acquisition of farm lots under any of the
following modes of settlement:
l. Cash payment of 10% and balance in 25-year tax-free 6% Land Bank bonds:
xxx xxx xxx
In the event there is an existing lien or encumbrance on the land in favor of any Government lending
institution at the time of acquisition by the Bank, the landowner shall be paid the net value of the land
(i.e., the value of the land determined under Proclamation (sic) No. 27 minus the outstanding balance of
the obligation/s secured by the hen/s or encumbrance/s), and the outstanding balance of the obligations
to the lending institutions shall be paid by the Land Bank in Land Bank bonds or other securities; existing
charters of those institutions to the contrary notwithstanding. A similar settlement may be negotiated by
the Land Bank in the case of obligations secured by liens or encumbrances in favor of private parties or
institutions. (Emphasis supplied)
Clearly, when lands with existing encumbrances are acquired under the land reform program, the land owner is paid the net
value of the land as determined under Presidential Decree No. 27, minus the outstanding balance of his obligation to a
government lending institution, which is to be paid directly to the latter by the Land Bank in Land Bank bonds, existing
charters of those government lending institutions to the contrary notwithstanding. The insistence of the GSIS to discount
those bonds (notwithstanding the alleged "reasonableness" of the 18% discount rate) is to defeat that very provision aimed
not only to cushion the impact of dispossession on the land owner but also to benefit the tenant so that the latter may obtain
title to the land free from any hen or encumbrance.
True, the statute does not explicitly provide that Land Bank bonds shall be accepted at their face value. There can be no
question, however, that such is the intendment of the law particularly in the absence of any provision expressly permitting
discounting, as differentiated from Republic Act No. 304, or the Backpay Law, as amended by Republic Acts Nos. 800 and
897, which expressly allows it.
Land Bank bonds are certificates of indebtedness, approved by the Monetary Board of the Central Bank, fully tax-exempt
both as to principal and income, and bear interest at the rate of 6% per annum redeemable at the option of the Land Bank at
or before maturity, which in no case shall exceed 25 years. They are fully negotiable and unconditionally guaranteed by the
Government of the Republic of the Philippines. 3
These bonds are deemed contracts and the obligations resulting therefrom fall within the purview of the non-impairment
clause of the Constitution, and any impairment thereof may take any encroachment in any respect upon the obligation and
cannot be permitted. 4 Thus, the value of these bonds cannot be diminished by any direct or indirect act,

particularly, since said bonds are fully guaranteed by the Govemment of the Republic of the Philippines.
They are issued not in the open market nor for the primary purpose of raising funds or pooling financial
resources but in the captive market of landowners and to facilitate the speedy transfer of lands to the
tenant-farmers in support of the land reform program of the Government. They are not ordinary
commercial paper in that sense subject to discounting.

The GSIS fears disastrous consequences on its actuarial solvency and capacity to pay retirement, insurance and other
claims of its members if it were to accept the bonds at par or face value. Whatever unfavorable results the acceptance may
have on its finances, the effects must be deemed to have been intended 5 by Presidential Decree No. 25 1,

particularly, when it provided for the payment in bonds to government lending institutions their "existing
charters to the contrary notwithstanding." If iniquitous to said institutions, it remains now with the
legislative branch to make the necessary revisions if desired. The traditional role assigned to the Judiciary
is to implement and not to thwart fundamental policy goals. 6
Although executive construction is not necessarily binding upon the Courts, 7 apropos to mention here is Opinion No.

141, series of 1976, of then Secretary of Justice Vicente Abad Santos on substantially the same facts as
those in the case at bar, wherein he opined that there is legal justification for requiring the acceptance by
the Government lending institutions of Land Bank bonds under the circumstances. 8
It should also be borne in mind that Republic Act No. 3844, then known as the Agricultural Land Reform Code, is a social
legislation whose implementation has been made more imperative by Section 6, Article II of the 1973 Constitution. 9 It is

designed to promote economic and social stability. It must be interpreted liberally to give full force and
effect to its clear intent. 10 This liberality in interpretation, however, should not accrue solely in favor of
actual timers of the land, the tenant-farmers, but should extend to landowners as well, especially those
owning "small landholdings", by which is meant landholdings of 24 hectares and less than 24
hectares. 11 These landowners constitute part of the economic middle class which the Government is
trying to build. They deserve as much consideration as the tenants themselves in order not to create an
economic dislocation, were tenants solely favored but this particular group of landowners impoverished.

12

In support of its stand, the GSIS further advances the ratiocination that since the agricultural land of 15 hectares subjected
to land reform is only one of the securities for petitioners' outstanding obligation with the GSIS, the Land Bank bond
payments should be applied at par value only to that portion of the loan secured by the land covered by Operation Land
Transfer. Stated otherwise, the GSIS is not compelled to accept Land Bank bonds for the discharge of existing liens or
encumbrances on lands given as security to the GSIS but not acquired by the Land Bank under Operation Land Transfer.
The obligation of the GSIS, it is claimed, is "limited to acceptance of Land Bank bonds to pay the loan corresponding to
the loan value of the acquired land, and nothing more."
We find the foregoing asseverations self-serving and in contravention of Presidential Decree No. 251, which ordains that
"the outstanding balance of the obligations to the lending institution/s shall be paid by the Land Bank in Land Bank bonds or
other securities". (Emphasis supplied). It is clear then that it is not only the loan value but the outstanding balance of the
obligation that has to be settled with Land Bank bonds, and as discussed above, at their par or face value.
The fact that only one agricultural land of the four securities was placed under land reform should make no difference.
Although it may be conceded that the obligation of the petitioners is, in a sense, divisible because it can be settled partially
according to current practice, it does not render the mortgage of four (4) parcels of land also divisible. Generally the
divisibility of the principal obligation is not affected by the indivisibility of the mortgage. 13 The mortgage obligation is

indivisible; that is, it cannot be divided among the different lots. 14 A real estate mortgage voluntarily
constituted by the debtor on two or more parcels of land is one and indivisible. 15 Each and every parcel
under mortgage answers for the totality of the debt. 16 Being indivisible, the full value of the one parcel
being paid for by the Land Bank should be applied in full to the outstanding loan obligation without any
discounting.
The case at bar does not fall under the exception in Article 2089 of the Civil Code where each of the several things given in
mortgage guarantees only a determinate portion of the credit. This exception contemplates separate debts secured by
Feparate properties, which is not the factual set-up herein. Neither can it be said that the Land Bank, by operation of law,
has rendered the mortgage of the four parcels divisible by taking only one of them solely to obtain its release. The basic
indivisibility of the mortgage obligation still remains unimpaired despite that fact. To hold that the acceptance of the bonds at
par value should be limited only to the loan value of properties acquired by the Land Bank but should be discounted as to

other lands not so acquired, would not only run counter to the principle of indivisibility of a mortgage and contravene the
clear mandate of PD No. 251, but would also reduce the bond payment to the dispossessed landowner by approximately
one-half, to his complete detriment. This is a consequence that neither law, equity, nor justice would countenance.
WHEREFORE, granting Mandamus, respondent Government Service Insurance System is hereby required to accept the
bonds issued by the Land Bank of the Philippines at their par or face value in payment of petitioners' outstanding balance.
No findings as to damages. No costs.
G.R. No. 147902

March 17, 2006

SPOUSES VICENTE YU AND DEMETRIA LEE-YU, Petitioners,

vs.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari of the Decision 1 dated November 14, 2000 of the Court of Appeals
(CA) in CA-G.R. SP No. 58982 and the CA Resolution dated April 26, 2001, which denied petitioners Motion for
Reconsideration.
The factual background of the case is as follows:
Under a Real Estate Mortgage dated August 15, 19942 and Amendments of Real Estate Mortgage dated April 4, 19953 and
December 4, 1995,4 spouses Vicente Yu and Demetria Lee-Yu (petitioners) and spouses Ramon T. Yu and Virginia A. Tiu, or
Yu Tian Hock aka Victorino/Vicente Yu, mortgaged their title, interest, and participation over several parcels of land located
in Dagupan City and Quezon City, in favor of the Philippine Commercial International Bank (respondent) as security for the
payment of a loan in the amount of P9,000,000.00.5
As the petitioners failed to pay the loan, the interest, and the penalties due thereon, respondent filed on July 21, 1998 with
the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Dagupan City a Petition for Extra-Judicial
Foreclosure of Real Estate Mortgage on the Dagupan City properties. 6 On August 3, 1998, the City Sheriff issued a Notice of
Extra-Judicial Sale scheduling the auction sale on September 10, 1998 at 10:00 oclock in the morning or soon thereafter in
front of the Justice Hall, Bonuan, Tondaligan, Dagupan City.7
At the auction sale on September 10, 1998, respondent emerged as the highest bidder.8 On September 14, 1998, a
Certificate of Sale was issued in favor of respondent.9 On October 1, 1998, the sale was registered with the Registry of
Deeds of Dagupan City.
About two months before the expiration of the redemption period, or on August 20, 1999, respondent filed an Ex-Parte
Petition for Writ of Possession before the Regional Trial Court of Dagupan City, docketed as Special Proceeding No. 9900988-D and raffled to Branch 43 (RTC Branch 43).10 Hearing was conducted on September 14, 1999 and respondent
presented its evidence ex-parte.11 The testimony of Rodante Manuel was admitted ex-parte and thereafter the petition was
deemed submitted for resolution.
On September 30, 1999, petitioners filed a Motion to Dismiss and to Strike Out Testimony of Rodante Manuel stating that the
Certificate of Sale dated September 14, 1998 is void because respondent violated Article 2089 of the Civil Code on the
indivisibility of the mortgaged by conducting two separate foreclosure proceedings on the mortgage properties in Dagupan
City and Quezon City and indicating in the two notices of extra-judicial sale that petitioners obligation is P10,437,015.2012 as
of March 31, 1998, when petitioners are not indebted for the total amount of P20,874,031.56.13
In the meantime, petitioners filed a complaint for Annulment of Certificate of Sale before the Regional Trial Court of Dagupan
City, docketed as Civil Case No. 99-03169-D and raffled to Branch 44 (RTC Branch 44).

On February 14, 2000, RTC Branch 43 denied petitioners Motion to Dismiss and to Strike Out Testimony of Rodante
Manuel, ruling that the filing of a motion to dismiss is not allowed in petitions for issuance of writ of possession under Section
7 of Act No. 3135.14
On February 24, 2000, petitioners filed a Motion for Reconsideration, further arguing that the pendency of Civil Case No. 9903169-D in RTC Branch 44 is a prejudicial issue to Spec. Proc. No. 99-00988-D in RTC Branch 43, the resolution of which is
determinative on the propriety of the issuance of a writ of possession. 15
On May 8, 2000, RTC Branch 43 denied petitioners Motion for Reconsideration, holding that the principle of prejudicial
question is not applicable because the case pending before RTC Branch 44 is also a civil case and not a criminal case. 16
On June 1, 2000, petitioners filed a Petition for Certiorari with the CA. 17 On November 14, 2000, the CA dismissed
petitioners Petition for Certiorari on the grounds that petitioners violated Section 8 of Act No. 3135 and disregarded the rule
against multiplicity of suits in filing Civil Case No. 99-03169-D in RTC Branch 44 despite full knowledge of the pendency of
Spec. Proc. No. 99-00988-D in RTC Branch 43; that since the one-year period of redemption has already lapsed, the
issuance of a writ of possession in favor of respondent becomes a ministerial duty of the trial court; that the issues in Civil
Case No. 99-03169-D are not prejudicial questions to Spec. Proc. No. 99-00988-D because: (a) the special proceeding is
already fait accompli, (b) Civil Case No. 99-03169-D is deemed not filed for being contrary to Section 8 of Act No. 3135, (c)
the filing of Civil Case No. 99-03169-D is an afterthought and dilatory in nature, and (d) legally speaking what seems to exist
is litis pendentia and not prejudicial question.18
Petitioners filed a Motion for Reconsideration19 but it was denied by the CA on April 26, 2001.20
Hence, the present Petition for Review on Certiorari.
Petitioners pose two issues for resolution, to wit:
A. Whether or not a real estate mortgage over several properties located in different locality [sic] can be separately
foreclosed in different places.
B. Whether or not the pendency of a prejudicial issue renders the issues in Special Proceedings No. 99-00988-D
as [sic] moot and academic.21
Anent the first issue, petitioners contend that since a real estate mortgage is indivisible, the mortgaged properties in
Dagupan City and Quezon City cannot be separately foreclosed. Petitioners further point out that two notices of extra-judicial
sale indicated that petitioners obligation is P10,437,015.2022 each as of March 31, 1998 or a total ofP20,874,030.40,23 yet
their own computation yields only P9,957,508.90 as of February 27, 1998.
As to the second issue, petitioners posit that the pendency of Civil Case No. 99-03169-D is a prejudicial issue, the resolution
of which will render the issues in Spec. Proc. No. 99-00988-D moot and academic. Petitioners further aver that they did not
violate Section 8 of Act No. 3135 in filing a separate case to annul the certificate of sale since the use of the word "may" in
said provision indicates that they have the option to seek relief of filing a petition to annul the certificate of sale in the
proceeding involving the application for a writ of possession or in a separate proceeding.
Respondent contends24 that, with respect to the first issue, the filing of two separate foreclosure proceedings did not violate
Article 2089 of the Civil Code on the indivisibility of a real estate mortgage since Section 2 of Act No. 3135 expressly
provides that extra-judicial foreclosure may only be made in the province or municipality where the property is situated.
Respondent further submits that the filing of separate applications for extra-judicial foreclosure of mortgage involving several
properties in different locations is allowed by A.M. No. 99-10-05-0, the Procedure on Extra-Judicial Foreclosure of Mortgage,
as further amended on August 7, 2001.
As to the second issue, respondent maintains that there is no prejudicial question between Civil Case No. 99-03169-D and
Spec. Proc. No. 99-00988-D since the pendency of a civil action questioning the validity of the mortgage and the extrajudicial foreclosure thereof does not bar the issuance of a writ of possession. Respondent also insists that petitioners should

have filed their Petition to Annul the Certificate of Sale in the same case where possession is being sought, that is, in Spec.
Proc. No. 99-00988-D, and not in a separate proceeding (Civil Case No. 99-01369-D) because the venue of the action to
question the validity of the foreclosure is not discretionary since the use of the word "may" in Section 8 of Act No. 3135
refers to the filing of the petition or action itself and not to the venue. Respondent further argues that even if petitioners filed
the Petition to Annul the Certificate of Sale in Spec. Proc. No. 99-00988-D, the writ of possession must still be issued
because issuance of the writ in favor of the purchaser is a ministerial act of the trial court and the one-year period of
redemption has already lapsed.
Anent the first issue, the Court finds that petitioners have a mistaken notion that the indivisibility of a real estate mortgage
relates to the venue of extra-judicial foreclosure proceedings. The rule on indivisibility of a real estate mortgage is provided
for in Article 2089 of the Civil Code, which provides:
Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the successors in interest of the
debtor or of the creditor.
Therefore, the debtors heir who has paid a part of the debt cannot ask for the proportionate extinguishment of the pledge or
mortgage as the debt is not completely satisfied.
Neither can the creditors heir who received his share of the debt return the pledge or cancel the mortgage, to the prejudice
of the other heirs who have not been paid.
From these provisions is excepted the case in which, there being several things given in mortgage or pledge, each one of
them guarantees only a determinate portion of the credit.
The debtor, in this case, shall have a right to the extinguishment of the pledge or mortgage as the portion of the debt for
which each thing is specially answerable is satisfied.
This rule presupposes several heirs of the debtor or creditor 25 and therefore not applicable to the present case. Furthermore,
what the law proscribes is the foreclosure of only a portion of the property or a number of the several properties mortgaged
corresponding to the unpaid portion of the debt where, before foreclosure proceedings, partial payment was made by the
debtor on his total outstanding loan or obligation. This also means that the debtor cannot ask for the release of any portion of
the mortgaged property or of one or some of the several lots mortgaged unless and until the loan thus secured has been
fully paid, notwithstanding the fact that there has been partial fulfillment of the obligation. Hence, it is provided that the
debtor who has paid a part of the debt cannot ask for the proportionate extinguishment of the mortgage as long as the debt
is not completely satisfied.26 In essence, indivisibility means that the mortgage obligation cannot be divided among the
different lots,27 that is, each and every parcel under mortgage answers for the totality of the debt. 28
On the other hand, the venue of the extra-judicial foreclosure proceedings is the place where each of the mortgaged
property is located, as prescribed by Section 2 of Act No. 3135, 29 to wit:
SECTION 2. Said sale cannot be made legally outside of the province in which the property sold is situated; and in case the
place within said province in which the sale is to be made is subject to stipulation, such sale shall be made in said place or in
the municipal building of the municipality in which the property or part thereof is situated.
A.M. No. 99-10-05-0,30 the Procedure on Extra-Judicial Foreclosure of Mortgage, lays down the guidelines for extra-judicial
foreclosure proceedings on mortgaged properties located in different provinces. It provides that the venue of the extrajudicial foreclosure proceedings is the place where each of the mortgaged property is located. Relevant portion thereof
provides:
Where the application concerns the extrajudicial foreclosure of mortgages of real estates and/or chattels in different
locations covering one indebtedness, only one filing fee corresponding to such indebtedness shall be collected. The
collecting Clerk of Court shall, apart from the official receipt of the fees, issue a certificate of payment indicating the amount
of indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the real estates and/or chattels mortgaged
and their respective locations, which certificate shall serve the purpose of having the application docketed with the

Clerks of Court of the places where the other properties are located and of allowing the extrajudicial foreclosures to
proceed thereat. (Emphasis supplied)
The indivisibility of the real estate mortgage is not violated by conducting two separate foreclosure proceedings on
mortgaged properties located in different provinces as long as each parcel of land is answerable for the entire debt.
Petitioners assumption that their total obligation is P20,874,030.40 because the two notices of extra-judicial sale indicated
that petitioners obligation is P10,437,015.2031 each, is therefore flawed. Considering the indivisibility of a real estate
mortgage, the mortgaged properties in Dagupan City and Quezon City are made to answer for the entire debt
of P10,437,015.29.32
As to the second issue, that is, whether a civil case for annulment of a certificate of sale is a prejudicial question to a petition
for issuance of a writ of possession, this issue is far from novel and, in fact, not without precedence. In Pahang v. Vestil, 33 the
Court said:
A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue involved therein,
and the cognizance of which pertains to another tribunal. It generally comes into play in a situation where a civil action and a
criminal action are both pending and there exists in the former an issue that must be preemptively resolved before the
criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris
et de jure of the guilt or innocence of the accused in the criminal case. The rationale behind the principle of prejudicial
question is to avoid two conflicting decisions.
1avvph!l.net

In the present case, the complaint of the petitioners for Annulment of Extrajudicial Sale is a civil action and the respondents
petition for the issuance of a writ of possession of Lot No. 3-A, Block 1, Psd-07-021410, TCT No. 44668 is but an incident in
the land registration case and, therefore, no prejudicial question can arise from the existence of the two actions. A similar
issue was raised in Manalo v. Court of Appeals, where we held that:
At any rate, it taxes our imagination why the questions raised in Case No. 98-0868 must be considered determinative of
Case No. 9011. The basic issue in the former is whether the respondent, as the purchaser in the extrajudicial foreclosure
proceedings, may be compelled to have the property repurchased or resold to a mortgagors successor-in-interest
(petitioner); while that in the latter is merely whether the respondent, as the purchaser in the extrajudicial foreclosure
proceedings, is entitled to a writ of possession after the statutory period for redemption has expired. The two cases,
assuming both are pending, can proceed separately and take their own direction independent of each other.34
In the present case, Civil Case No. 99-01369-D and Spec. Proc. No. 99-00988-D are both civil in nature. The issue in Civil
Case No. 99-01369-D is whether the extra-judicial foreclosure of the real estate mortgage executed by the petitioners in
favor of the respondent and the sale of their properties at public auction are null and void, whereas, the issue in Spec. Proc.
No. 99-00988-D is whether the respondent is entitled to a writ of possession of the foreclosed properties. Clearly, no
prejudicial question can arise from the existence of the two actions. The two cases can proceed separately and take their
own direction independently of each other.
Nevertheless, there is a need to correct the CAs view that petitioners violated Section 8 of Act No. 3135 and disregarded the
proscription on multiplicity of suits by instituting a separate civil suit for annulment of the certificate of sale while there is a
pending petition for issuance of the writ of possession in a special proceeding.
Section 8 of Act No. 3135 provides:
Sec. 8. Setting aside of sale and writ of possession. The debtor may, in the proceedings in which possession was
requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the
writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale
was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance
with the summary procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninety-six;
and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the
person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section
fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the
pendency of the appeal. (Emphasis supplied)

Under the provision above cited, the mortgagor may file a petition to set aside the sale and for the cancellation of a writ of
possession with the trial court which issued the writ of possession within 30 days after the purchaser mortgagee was given
possession. It provides the plain, speedy, and adequate remedy in opposing the issuance of a writ of possession. 35 Thus,
this provision presupposes that the trial court already issued a writ of possession. In Sps. Ong v. Court of Appeals, 36 the
Court elucidated:
The law is clear that the purchaser must first be placed in possession of the mortgaged property pending proceedings
assailing the issuance of the writ of possession. If the trial court later finds merit in the petition to set aside the writ of
possession, it shall dispose in favor of the mortgagor the bond furnished by the purchaser. Thereafter, either party may
appeal from the order of the judge in accordance with Section 14 of Act 496, which provides that "every order, decision, and
decree of the Court of Land Registration may be reviewedin the same manner as an order, decision, decree or judgment
of a Court of First Instance (RTC) might be reviewed." The rationale for the mandate is to allow the purchaser to have
possession of the foreclosed property without delay, such possession being founded on his right of ownership. 37
Accordingly, Section 8 of Act No. 3135 is not applicable to the present case since at the time of the filing of the separate civil
suit for annulment of the certificate of sale in RTC Branch 44, no writ of possession was yet issued by RTC Branch 43.
Similarly, the Court rejects the CAs application of the principle of litis pendentia to Civil Case No. 99-03169-D in relation to
Spec. Proc. No. 99-00988-D. Litis pendentia refers to that situation wherein another action is pending between the same
parties for the same cause of actions and that the second action becomes unnecessary and vexatious. For litis pendentia to
be invoked, the concurrence of the following requisites is necessary: (a) identity of parties or at least such as represent the
same interest in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same
facts; and, (c) the identity in the two cases should be such that the judgment that may be rendered in one would, regardless
of which party is successful, amount to res judicatain the other.38
Applying the foregoing criteria in the instant case, litis pendentia does not obtain in this case because of the absence of the
second and third requisites. The issuance of the writ of possession being a ministerial function, and summary in nature, it
cannot be said to be a judgment on the merits, but simply an incident in the transfer of title. Hence, a separate case for
annulment of mortgage and foreclosure sale cannot be barred by litis pendentiaor res judicata.39 Thus, insofar as Spec. Proc.
No. 99-00988-D and Civil Case No. 99-03169-D pending before different branches of RTC Dagupan City are concerned,
there is no litis pendentia.
To sum up, the Court holds that the rule on indivisibility of the real estate mortgage cannot be equated with the venue of
foreclosure proceedings on mortgaged properties located in different provinces since these are two unrelated concepts.
Also, no prejudicial question can arise from the existence of a civil case for annulment of a certificate of sale and a petition
for the issuance of a writ of possession in a special proceeding since the two cases are both civil in nature which can
proceed separately and take their own direction independently of each other.
Furthermore, since the one-year period to redeem the foreclosed properties lapsed on October 1, 1999, title to the
foreclosed properties had already been consolidated under the name of the respondent. As the owner of the properties,
respondent is entitled to its possession as a matter of right. 40 The issuance of a writ of possession over the properties by the
trial court is merely a ministerial function. As such, the trial court neither exercises its official discretion nor judgment. 41 Any
question regarding the validity of the mortgage or its foreclosure cannot be a legal ground for refusing the issuance of a writ
of possession.42 Regardless of the pending suit for annulment of the certificate of sale, respondent is entitled to a writ of
possession, without prejudice of course to the eventual outcome of said case. 43
WHEREFORE, the petition is DENIED
G.R. No. L-49120 June 30, 1988
ESTATE OF GEORGE LITTON, petitioner,
vs.
CIRIACO B. MENDOZA and COURT OF APPEALS, respondents.
Ruben G. Bala for respondent Mendoza.

GANCAYCO, J.:
This petition for review presents two (2) main issues, to wit: (1) Can a plaintiff in a case, who had previously assigned in
favor of his creditor his litigated credit in said case, by a deed of assignment which was duly submitted to the court, validly
enter into a compromise agreement thereafter releasing the defendant therein from his claim without notice to his assignee?
and (2) Will such previous knowledge on the part of the defendant of the assignment made by the plaintiff estop said
defendant from invoking said compromise as a ground for dismissal of the action against him?
The present case stemmed from Civil Case No. Q-8303 1 entitled "Alfonso Tan vs. Ciriaco B. Mendoza," an action

for the collection of a sum of money representing the value of two (2) checks which plaintiff Tan claims to
have been delivered to him by defendant Mendoza, private respondent herein, by way of guaranty with a
commission.
The record discloses that the Bernal spouses 2 are engaged in the manufacture of embroidery, garments and

cotton materials. Sometime in September 1963, C.B.M. Products, 3 with Mendoza as president, offered to
sell to the Bernals textile cotton materials and, for this purpose, Mendoza introduced the Bernals to
Alfonso Tan. Thus, the Bernals purchased on credit from Tan some cotton materials worth P 80,796.62,
payment of which was guaranteed by Mendoza. Thereupon, Tan delivered the said cotton materials to the
Bernals. In view of the said arrangement, on November 1963, C.B.M. Products, through Mendoza, asked
and received from the Bernals PBTC Check No. 626405 for P 80,796.62 dated February 20, 1964 with
the understanding that the said check will remain in the possession of Mendoza until the cotton materials
are finally manufactured into garments after which time Mendoza will sell the finished products for the
Bernals. Meanwhile, the said check matured without having been cashed and Mendoza demanded the
issuance of another check 4 in the same amount without a date.
On the other hand, on February 28, 1964, defendant Mendoza issued two (2) PNB checks 5 in favor of Tan in the total

amount of P 80,796.62. He informed the Bernals of the same and told them that they are indebted to him
and asked the latter to sign an instrument whereby Mendoza assigned the said amount to Insular
Products Inc. Tan had the two checks issued by Mendoza discounted in a bank. However, the said checks
were later returned to Tan with the words stamped "stop payment" which appears to have been ordered
by Mendoza for failure of the Bernals to deposit sufficient funds for the check that the Bernals issued in
favor of Mendoza.
Hence, as adverted to above, Tan brought an action against Mendoza docketed as Civil Case No. Q-8303 6 while the

Bernals brought an action for interpleader docketed as Civil Case No. 56850 7 for not knowing whom to
pay. While both actions were pending resolution by the trial court, on March 20, 1966, Tan assigned in
favor of George Litton, Sr. his litigatious credit * in Civil Case No. 56850 against Mendoza, duly submitted to the court, with
notice to the parties. 8 The deed of assignment was framed in the following tenor:
DEED OF ASSIGNMENT
I, ALFONSO TAN, of age, Chinese, married to UY CHAY UA, residing at No. 6 Kanlaon, Quezon City,
doing business under the name and style ALTA COMMERCIAL by way of securing or guaranteeing my
obligation to Mr. GEORGE LITTON, SR., do by these presents CEDE, ASSIGN, TRANSFER AND
CONVEY unto the said Mr. GEORGE LITTON, SR., my claim against C.B.M. Products, Inc., personally
guaranteed by Mr. Ciriaco B. Mendoza, in the amount of Eighty-Thousand Seven Hundred Ninety Six
Pesos and Sixty-two centavos (P 80,796.62) the balance of which, in principal, and excluding, interests,
costs, damages and attorney's fees now stands at P 76,000.00, P 4,796.62, having already been
received by the assignor on December 23, 1965, pursuant to the order of the court in Civil Case No.

56850, C.F.I., Manila, authorizing Alfonso Tan to withdraw the amount of P 4,796.62 then on deposit with
the court. All rights, and interests in said net amount, plus interests and costs, and less attorney's fees, in
case the amount allowed therefor be less than the amounts claimed in the relief in Civil
Case 56850 (C.F.I., Manila) and Q-8503 (C.F.I., Quezon City) are by these presents covered by this
assignment.
I further undertake to hold in trust any and all amounts which may hereafter be realized from the
aforementioned cases for the ASSIGNEE, Mr. GEORGE LITTON, SR., and to turn over to him such
amounts in application to my liability to him, as his interest may then show, and I further undertake to
cooperate towards the successful prosecution of the aforementioned cases making available myself, as
witness or otherwise, as well as any and all documents thereto appertaining. ... 9
After due trial, the lower court ruled that the said PNB checks were issued by Mendoza in favor of Tan for a commission in
the sum of P 4,847.79 and held Mendoza liable as a drawer whose liability is primary and not merely as an indorser and thus
directed Mendoza to pay Tan the sum of P 76,000.00, the sum still due, plus damages and attorney's fees. 10
Mendoza seasonably filed an appeal with the Court of Appeals, dockted as C.A. G.R. No. 41900-R, arguing in the main that
his liability is one of an accommodation party and not as a drawer.
On January 27, 1977, the Court of Appeals rendered a decision affirming in toto the decision of the lower court. 11
Meanwhile, on February 2, 1971, pending the resolution of the said appeal, Mendoza entered into a compromise agreement
with Tan wherein the latter acknowledged that all his claims against Mendoza had been settled and that by reason of said
settlement both parties mutually waive, release and quit whatever claim, right or cause of action one may have against the
other, with a provision that the said compromise agreement shall not in any way affect the right of Tan to enforce by
appropriate action his claims against the Bernal spouses. 12
On February 25, 1977, Mendoza filed a motion for reconsideration praying that the decision of January 27, 1977 be set
aside, principally anchored upon the ground that a compromise agreement was entered into between him and Tan which in
effect released Mendoza from liability. Tan filed an opposition to this motion claiming that the compromise agreement is null
and void as he was not properly represented by his counsel of record Atty. Quiogue, and was instead represented by a
certain Atty. Laberinto, and principally because of the deed of assignment that he executed in favor of George Litton, Sr.
alleging that with such, he has no more right to alienate said credit.
While the case was still pending reconsideration by the respondent court, Tan, the assignor, died leaving no properties
whatever to satisfy the claim of the estate of the late George Litton, Sr.
In its Resolution dated August 30, 1977,

13

the respondent court set aside its decision and approved the

compromise agreement.
As to the first ground invoked by Tan, now deceased, the respondent court ruled that the non-intervention of Tan's counsel of
record in the compromise agreement does not affect the validity of the settlement on the ground that the client had an
undoubted right to compromise a suit without the intervention of his lawyer, citing Aro vs. Nanawa. 14
As to the second ground, respondent court ruled as follows:
... it is relevant to note that Paragraph 1of the deed of assignment states that the cession,assignment,
transfer, bond conveyance by Alfonso Tan was only by way of securing, or guaranteeing his obligation to
GEORGE LITTON, SR.
Hence, Alfonso Tan retained possession and dominion of the credit (Par. 2, Art. 2085, Civil Code).
"Even considered as a litigations credit," which indeed characterized the claims herein of Alfonso Tan,
such credit may be validly alienated by Tan (Art. 1634. Civil Code).

Such alienation is subject to the remedies of Litton under Article 6 of the Civil Code, whereby the waiver,
release, or quit-claim made by plaintiff-appellee Alfonso Tan in favor of defendant-appellant Ciriaco B.
Mendoza, if proven prejudicial to George Litton, Sr. as assignee under the deed of assignment, may
entitle Litton to pursue his remedies against Tan.
The alienation of a litigatious credit is further subject to the debtor's right of redemption under Article 1634
of the Civil Code.
As mentioned earlier, the assignor Tan died pending resolution of the motion for reconsideration. The estate of George
Litton, Sr., petitioner herein, as represented by James Litton, son of George Litton, Sr. and administrator 15 of the former's

estate, is now appealing the said resolution to this Court as assignee of the amount sued in Civil Case
No. Q-8303, in relation to Civil Case No. 56850.
Before resolving the main issues aforementioned, the question of legal personality of herein petitioner to bring the instant
petition for review, must be resolved.

If after the
rendition of judgment the original party dies, he should be substituted by his successor-in-interest. In this
case, it is not disputed that no proper substitution of parties was done. This notwithstanding, the Court so
holds that the same cannot and will not materially affect the legal right of herein petitioner in instituting the
instant petition in view of the tenor of the deed of assignment, particularly paragraph two
thereof 17 wherein the assignor, Tan, assumed the responsibility to prosecute the case and to turn over to
the assignee whatever amounts may be realized in the prosecution of the suit.
As a rule, the parties in an appeal through a review on certiorari are the same original parties to the case.

16

We note that private respondent moved for the dismissal of the appeal without notifying the estate of George Litton, Sr.
whereas the former was fully aware of the fact that the said estate is an assignee of Tan's right in the case
litigated. 18 Hence, if herein petitioner failed to observe the proper substitution of parties when Alfonso Tan

died during the pendency of private respondent's motion for reconsideration, no one is to blame but
private respondent himself. Moreover, the right of the petitioner to bring the present petition is well within
the concept of a real party-in-interest in the subject matter of the action. Well-settled is the rule that a real
party-in-interest is a party entitled to the avails of the suit or the party who would be injured by the
judgment. 19 We see the petitioner well within the latter category.
Hence, as the assignee and successor-in-interest of Tan, petitioner has the personality to bring this petition in substitution of
Tan.
Now, the resolution of the main issues.

courts encourage the same. A

compromise once approved by final order of the court has the force of res judicata between parties and
should not be disturbed except for vices of consent or forgery. 21
The purpose of a compromise being to replace and terminate controverted claims,

20

In this case, petitioner seeks to set aside the said compromise on the ground that previous thereto, Tan executed a deed of
assignment in favor of George Litton, Sr. involving the same litigated credit.
We rule for the petitioner. The fact that the deed of assignment was done by way of securing or guaranteeing Tan's
obligation in favor of George Litton, Sr., as observed by the appellate court, will not in any way alter the resolution on the
matter. The validity of the guaranty or pledge in favor of Litton has not been questioned. Our examination of the deed of
assignment shows that it fulfills the requisites of a valid pledge or mortgage. 22Although it is true that Tan may validly

alienate the litigatious credit as ruled by the appellate court, citing Article 1634 of the Civil Code, said
provision should not be taken to mean as a grant of an absolute right on the part of the assignor Tan to

indiscriminately dispose of the thing or the right given as security. The Court rules that the said provision
should be read in consonance with Article 2097 of the same code. 23 Although the pledgee or the
assignee, Litton, Sr. did not ipso factobecome the creditor of private respondent Mendoza, the pledge
being valid, the incorporeal right assigned by Tan in favor of the former can only be alienated by the latter
with due notice to and consent of Litton, Sr. or his duly authorized representative. To allow the assignor to
dispose of or alienate the security without notice and consent of the assignee will render nugatory the
very purpose of a pledge or an assignment of credit.
Moreover, under Article 1634, 24 the debtor has a corresponding obligation to reimburse the assignee, Litton,

Sr. for the price he paid or for the value given as consideration for the deed of assignment. Failing in this,
the alienation of the litigated credit made by Tan in favor of private respondent by way of a compromise
agreement does not bind the assignee, petitioner herein.
Indeed, a painstaking review of the record of the case reveals that private respondent has, from the very beginning, been
fully aware of the deed of assignment executed by Tan in favor of Litton, Sr. as said deed was duly submitted to Branch XI of
the then Court of First Instance of Manila in Civil Case No. 56850 (in relation to Civil Case No. Q-8303) where C.B.M.

As earlier mentioned, private

respondent herein is the president of C.B.M. Products, hence, his contention that he is not aware of the
said deed of assignment deserves scant consideration from the Court. Petitioner pointed out at the same
time that private respondent together with his counsel were served with a copy of the deed of assignment
which allegation remains uncontroverted. Having such knowledge thereof, private respondent is estopped
from entering into a compromise agreement involving the same litigated credit without notice to and
consent of the assignee, petitioner herein. More so, in the light of the fact that no reimbursement has ever
been made in favor of the assignee as required under Article 1634. Private respondent acted in bad faith
and in connivance with assignor Tan so as to defraud the petitioner in entering into the compromise
agreement.
Products is one of the defendants and the parties were notified through their counsel.

25

WHEREFORE, the petition is GRANTED. The assailed resolution of the respondent court dated August 30,1977 is hereby
SET ASIDE, the said compromise agreement being null and void, and a new one is hereby rendered reinstating its decision
dated January 27, 1977, affirming in toto the decision of the lower court. This decision is immediately executory. No motion
for extension of time to file a motion for reconsideration will be granted.
SO ORDERED.