Professional Documents
Culture Documents
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l. BULK SALES LAW
Act 3952 (1932), as amended by RA
111 (1947)
1.1. Topics
A. Purpose
To prevent the defraudng of credtors by the
secret sae or dsposa or mortgage n buk of a
or substantay a of merchants stock of goods
n buk
B. Types of Saes n Buk
Sec. Z
1) Any sae, transfer, mortgage or assgnment
of a stock of goods, wares, merchandse,
provsons, or materas otherwise than in the
ordinary course of trade and the reguar
prosecuton of the busness of the vendor,
mortgagor, transferor, or assgnor; or
2) sae, transfer, mortgage or assgnment of all,
or substantially all, of the business or
trade theretofore conducted by the vendor,
mortgagor, transferor, or assgnor, or
3) of a, or substantay a, of the fixtures
and equipment used n and about the
busness of the vendor, mortgagor, transferor,
or assgnor, sha be deemed to be a sae and
transfer n buk, n contempaton of ths Act:
C. Dutes of Person Seng n Buk
Sec 3, 4, 5 and 9
1) Dever a sworn wrtten statement of the
names and addresses of a credtors to whom
the vendor or mortgagor may be ndebted,
ndcatng the amount of ndebtedness due or
owng, or to become due or owng (Sec. 3);
2) To appy the proceeds of the sae or
mortgage pro-rata to credtors (Sec. 4);
3) At east 10 days before
sae/transfer/executon of mortgage, make
detaed nventory and to preserve the same
showng the quantty and, to the extent
possbe, the cost prce to the vendor, etc. of
each artce to be ncuded n the sae, etc. (Sec.
5);
4) Gve notce to every credtor at east 10 days
before the sae or transfer (Sec. 5);
5) Regstraton of the documents n Bureau of
Trade Reguaton and Consumer Protecton
(Sec. 9).
D. When Law not Appcabe
1) A credtors gve wrtten waver (Sec. 2);
2) |udca saes (Sec. 8)
E. Consequences of non-compance wth dutes
From San Beda reviewer
1. Between the partes Vad contract
2. Between persons
other than the credtor
Vad contract
3. As to effected
credtors of the
seer/mortgagor
Vod contract
F. Interpretaton of Statute
The aw s pena n nature and n derogaton of
the rght to aenate property wthout
restrcton. Thus, ts provsons must be strcty
construed aganst the State and beray n
favor of the accused.
1.2 Case
Sae Of Foundry Shop Not Covered By BLS
PEOPLE V WONG SZU TUNG (1954)
The ob|ect of the sae - a foundry shop - s not
covered by the provsons of the Buk saes aw.
What was sod was the shop tsef, together wth
the goodw and credts, equpment, toos and
machnery thereof (ncudng a Dodge truck),
whch are not the stock of merchandse, goods,
wares, provsons or materas n buk referred
to n the aw. A foundry shop manufactures ron
works or processes or casts metas. It does not
se merchandse.
ll. GENERAL BONDED WAREHOUSE
ACT
Act 3893 (1931), as amended by RA
237 (1948)
2.1 Topics
A. Purpose
1) reguate the busness of recevng
commodtes for storage;
2) to protect persons who may want to ava of
the servces;
3) to encourage the estabshment of more
warehouses.
B. Busness of recevng commodty for storage
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Sec. Z
1) the warehouseman s obgated to return the
very same commodty devered to hm or to
pay ts vaue;
2) the commodty devered s to be med for
the owner thereof;
3) the commodty devered s commnged wth
the commodty beongng to other persons, and
the warehouseman s obgate to return
commodty of the same knd or to pay ts vaue.
C. Requrement of Lcense
Sec. 3
To acheve the purposes mentoned above, any
person who wants to engage n the busness of
recevng commodtes for storage s requred
by the Act to frst secure a cense therefore
from the DTI
D. Dutes of Bonded Warehouseman
1) nsure the commodty receved for storage
aganst fre (Sec. 6);
2) receve for storage any commodty of the
knd customary stored by hm n the
warehouse, so far as hs cense and the
capacty of hs warehouse w permt, wthout
makng any dscrmnaton between the persons
desrng to ava themseves of warehouse
factes (Sec. 8);
3) keep a compete record of a commodtes
receved by hm, of the recepts ssued
therefore, of the wthdrawas, of the qudaton,
and of a the recepts returned to and canceed
by hm (Sec. 9)
2.2 Cases
Recept of Paay for Mng
LlM]OCO V DlRECTOR OF COMMERCE
(1965)
FACTS: Pettoner and husband are owners of a
rce m. The ssue was whether of not the
Genera Bonded Warehouse Act s appcabe to
her busness. Pettoner argues that snce her
busness s the mng of paay, the devery
thereof to her s merey ncdenta to such
busness and does not consttute storage wthn
the meanng of the statute.
HELD: The Genera Bonded Warehouse Act s
appcabe. SEC 2 s too cear to permt of any
exercse n constructon or semantcs. It does
not stop at the bare use of the word "storage,"
but expressy provdes that any contract or
transacton wheren the paay devered s to be
med for and on account of the owner sha be
deemed ncuded n the busness of recevng
rce for storage for the purpose of the Act. In
other words, t s enough that the paay s
devered, even f ony to have t med. The
man ntenton of the awmaker s to gve
protecton to the owner of the commodty
aganst possbe abuses (and we mght add
neggence) of the person to whom the physca
contro of hs propertes s devered.
GOZALES V GO TlONG (1958)
FACTS: Pror to the ssuance of the cense to Go
Tong to operate as bonded warehouseman, he
had on severa occasons receved paay for
depost from pantff Gonzaes, totang 368
sacks, for whch he ssued .After he was
censed as bonded warehouseman, Go Tong
agan receved varous deveres of paay from
pantff, totang 492 sacks, for whch he ssued
the correspondng recepts, a the grand tota
of 860 sacks, vaued at P8,600 at the rate of
P10 per sack.
On or about March 15, 1953, pantff demanded
from Go Tong the vaue of hs deposts n the
amount of P8,600, but he was tod to return
after two days, whch he dd, but Go Tong
agan tod hm to come back. A few days ater,
the warehouse burned to the ground. When
pantff fed sut co cam hs osses, Go Tong
argued that the formers cam s governed by
the Cv Code and not by the Bonded
Warehouse Act (Act No. 3893, as amended by
Repubc Act No. 247), for the reason that, as
aready stated, what Go Tong ssued to pantff
were ordnary recepts, not the warehouse
recepts contempated by the Warehouse
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Recepts Law, and because the deposts of
paay of pantff were gratutous.
HELD: Bonded Warehouse Act appcabe. Act
No. 3893 as amended s a speca aw reguatng
the busness of recevng commodtes for
storage and defnng the rghts and obgatons
of a bonded warehouseman and those
transactng busness wth hm. Consequenty,
any depost made wth hm as a bonded
warehouseman must necessary be governed
by the provsons of Act No. 3893. The knd or
nature of the recepts ssued by hm for the
deposts s not very matera much ess
decsve. Though t s desrabe that recepts
ssued by a bonded warehouseman shoud
conform to the provsons of the Warehouse
Recepts Law, sad provsons n our opnon are
not mandatory and ndspensabe n the sense
that f they fe short of the requrements of the
Warehouse Recepts Act, then the commodtes
devered for storage become ordnary deposts
and w not be governed by the provsons of
the Bonded Warehouse Act. Under SEC 1 of the
Warehouse Recepts Act, one woud gather the
mpresson that the ssuance of a warehouse
recept n the form provded by t s merey
permssve and drectory and not obgatory.
lll. WAREHOUSE RECElPTS ACT
Act 2137 (1912)
3.1 Topics
A. Purpose
To prescrbe the rghts and dutes of a
warehouseman and to reguate the reatonshp
between a warehouseman and:
1) the depostor of goods;
2) hoder of a warehouse recept for the goods;
3) person awfuy entted to the possesson of
the goods; or
4) other persons.
B. Obgaton to ssue recept
Sec. Z
A warehouseman s requred to ssue a recept
for the commodty he receves for storage. No
form s prescrbed, but t shoud at east contan
the foowng nformaton:
1. Locaton of the warehouse
2. Date of Issue
3. Recept number
4. Language to ndcate f the recept were
negotabe or non-negotabe
5. Rate of storage charges
6. Descrpton of goods or packages contanng
them
7. Sgnature of the warehouseman or hs
agentLanguage ndcatng f the warehouseman
s an owner soey or |onty wth others, of the
goods deposted and
8. Statement of advances made by the
warehouseman for whch he cams a en
C. Degree of Care
Sec. 3
That degree of care whch a reasonaby carefu
man woud exercse n regard to smar goods
of hs own.
D. Knds or Recepts (Sec. 4-7)
1) Non-negotabe recept
a. one whch states that the goods receved by
the warehouseman w be devered to the
depostor or to any other specfed person
b. the word "non-negotabe" shoud be paced
pany upon ts face
2) Negotabe recept
a. One whch states that the goods receved by
the warehouseman w be devered to the
bearer or to the order of any person named n
such recept.
b. Can not be converted to non-negotabe
E. Obgaton to Dever Goods (Sec. 8-9)
1) Dever to whom - upon demand
a. Hoder of the recept for the goods
b. Depostor
2) The demand shoud be accompaned by:
a. An offer to satsfy the warehousemans en
b. An offer to surrender the recept f t s
negotabe
c. A readness and wngness to sgn an
acknowedgement, when the goods are
devered, that they have been devered f such
s requested by the warehouseman.
F. Labty for Msdevery or Converson (Sec.
10, 17-18)
1) Where a warehouseman devers the goods
to one who s not n fact awfuy entted to the
possesson of them
2) He woud aso be abe for msdevery even
f he devers to a person hodng a non-
negotabe recept or a negotabe recept, as
provded n SEC 9(b) or (c) of the Act, f pror to
such devery he had ether:
a. Been requested, by or on behaf of the
person awfuy entted to a rght of property or
possesson n the goods, not to make such
dever; or
b. Had nformaton that the devery about to be
made was to one not awfuy entted to the
possesson of the goods.
G. Rghts of Hoder of Recept Coverng Goods
vs. Owner of Goods
Not beng a negotabe nstrument (but a
Document of Tte), the hoder of the recept can
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ony acqure such rghts /tte to the goods as
the person negotatng the recept had. Thus, as
between the owner of the good, and a hoder of
the recept of the good whch was apparenty
stoen, the former has a better rght.
H. When negotabe recept not requred to be
surrendered (Sec. 9, 14 and 16)
1) Warehouseman s |ustfed n deverng
goods to the foowng persons (Sec. 9):
a. the person awfuy entted to the possesson
of the goods, or hs agent;
b. A person who s ether hmsef entted to
devery by the terms of a non-negotabe
recept ssued for the goods, or who has wrtten
authorty from the person so entted ether
ndorsed upon the recept or wrtten upon
another paper; or
c. A person n possesson of a negotabe recept
by the terms of whch the goods are deverabe
to hm or order, or to bearer, or whch has been
ndorsed to hm or n bank by the person to
whom devery was promsed by the terms of
the recept or by hs medate or mmedate
ndorser.
2) Where a negotabe recept has been ost or
destroyed (Sec. 14)
a. A court of competent |ursdcton may order
the devery of the goods upon:
. satsfactory proof of such oss or destructon
and
. upon the gvng of a bond wth suffcent
suretes to be approved by the court to protect
the warehouseman from any abty or expense
b. The court may aso n ts dscreton order the
payment of the warehouseman's reasonabe
costs and counse fees.
c. The devery of the goods under an order of
the court as provded n ths SEC, sha not
reeve the warehouseman from abty to a
person to whom the negotabe recept has
been or sha be negotated for vaue wthout
notce of the proceedngs or of the devery of
the goods.
3) Warehouseman cannot set up tte n hmsef
(Sec. 16)
a. No tte or rght to the possesson of the
goods, on the part of the warehouseman sha
excuse the warehouseman from abty for
refusng to dever the goods accordng to the
terms of the recept.
b. EXECEPT: such tte or rght s derved drecty
or ndrecty from a transfer made by the
depostor at the tme of or subsequent to the
depost for storage, or from the
warehouseman's en,
I. Commngng of Goods (Sec. 22-23)
1) A warehouseman must keep the goods of a
depostor separate from the goods of other
depostors, or from the goods of the same
depostor for whch a separate recept has been
ssued.
2) Ratonae: permt the nspecton and
redevery of the goods deposted at a tmes
3) EXCEPT:
a. The goods are fungbe, AND
b. The commngng s authorzed by agreement
or by custom.
|. Other Labtes of Warehouseman
1) Faure to mark a recept ntended to be non-
negotabe as "non-negotabe" (Sec. 7)
a. Because the hoder of the recept may treat
the same as negotabe.
2) Faure to take up and cance a negotabe
recept when goods are devered (Sec. 11)
a. The warehouseman sha be abe for faure
to dever the goods to any one who purchases
for vaue n good fath
. WON such purchaser acqured tte to the
recept before or after the devery of the goods
by the warehouseman.
. Sha be guty of a crme punshabe by fne
or mprsonment.
b. EXCEPT:
. Goods have been awfuy sod to satsfy a
warehousemans en.
. Goods have been awfuy sod or dsposed of
because of ther pershabe or hazardous
nature.
3) Faure to take up and cance a negotabe
recept or to pace upon t a statement of what
goods have been devered, when goods are
party devered (Sec. 12)
a. Same as #2.
4) For atered recepts
Knd of Ateraton Warehousemans
Labty
Immatera Labe accordng to the
terms of the recepts as
orgnay ssued
Authorzed Labe accordng to the
terms of the recepts as
authorzed
Unauthorzed but
wthout frauduent
ntent
Labe accordng to the
terms of the recepts as
they were before the
ateraton
Unauthorzed but
wth frauduent ntent
Labe accordng to the
terms of the recepts as
orgnay ssued, even
aganst: ) a purchaser
of the recept for vaue
wth notce of the
ateraton; 2) to the
person who made the
ateraton and to any
person who took t wth
notce of the ateraton.
However, n the atter
case, such matera and
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frauduent ateraton
sha excuse the
warehouseman from
any other abty to the
sad persons.
5) For non-exstence or msdescrpton of goods
(Sec. 20)
a. Labe for damages to hoder of a recept f at
tme of ts ssue, goods not yet exsted or by
faure of the goods to match descpton
b. EXCEPT:
. Statement of the marks or abes upon them
or upon the packages contanng them;
. Statement that the goods are of a certan
knd at that the packages contanng the goods
contan goods of a certan knds or by words of
smar mport
Eg: "receved box said to contain..." and not
"box contanng."
6) For commngng goods (Sec. 24)
a. Sha be abe severay to each depostor for
the care and redevery of the depostors share
of the mass of commnged goods to the same
extent and under the same crcumstances as f
the goods had been kept separate
7) For ssung recepts for goods not receved
(Sec. 50)
a. Sha be guty of a crme f he ssues a
recept for goods that have not actuay been
receved by hm or are not under hs actua
contro at the tme of the ssuance of the recept
8) For ssung recepts contanng fase
statements (Sec. 51)
a. Sha be guty of a crme f he frauduenty
ssues a recept for goods knowng that t
contans any fase statement
9) For ssung dupcate recepts not so marked
(Sec. 52)
a. Guty of crme f ssues a dupcate or
addtona negotabe recept for goods knowng
that a former negotabe recept for the same
goods or any part of them s outstandng and
uncanceed, wthout pany pacng upon the
face of the recept the word "dupcate"
b. EXCEPT: n the case of a ost or destroyed
recept after proceedngs as provded for n Sec.
14
10) For ssung recepts for the warehousemans
goods whch do not state that fact (Sec. 53)
a. Guty of a crme f he ssues a negotabe
recept for oods deposted wth or hed by hm
of whch he knows that he s the owner, soey
or |onty or n common wth others, f he fas to
state such ownershp n the recept
11) For devery of goods wthout obtanng
negotabe recept (sec. 54)
a. Guty of a crme f he devers gods our of hs
possesson knowng that a negotabe recept s
oustandng and canceed
b. EXCEPT:
. Goods have been awfuy sod to satsfy a
warehousemans en.
. Goods have been awfuy sod or dsposed of
because of ther pershabe or hazardous
nature.
. In the case of ost or destroyed recept after
proceedngs (Sec. 14)
K. Warehousemans Len (Sec. 27, 28, 29, and
31)
1) Defnton
a. A warehouseman has a en on the goods
deposted wth hm or on the proceeds thereof
n the hs hands for a awfu charges for
storage and preservaton of the goods, money
advanced by hm n reaton to such goods such
as the expenses of transportaton or abor, etc.
2) Aganst what property
a. A goods beongng to the person abe for
the charges
b. A goods beongng to others deposted by
the person abe for the charges who has been
entrusted wth the possesson of the goods and
coud have vady pedged the same
3) Lose Len
a. Warehouseman may ose en by:
. surrenderng the possesson of the goods
because t s possessory n nature
. refusng to dever the goods when a demand
s made wth whch he s bound to compy
4) Effect of sae to satsfy en
a. The warehouseman sha not, after the sae,
be abe for faure to dever the goods to the
depostor or owner of the goods or to the hoder
of the recept
3.2 Case
PNB V ]UDGE BENlTO C. SE, ]R. (1996)
FACTS: PNB fed for attachment of severa
quedans of sugar n the possesson of Noahs
Ark Sugar refnery. The sugar was securty for
oans of PNBs cents whch they faed to pay.
Noahs Ark camed that they were the owners
of the sugar.
HELD: Whe the PNB s entted to the stocks of
sugar as the endorsee of the quedans, devery
to t sha be effected ony upon payment of the
storage fees. Imperatve s the rght of the
warehouseman to demand payment of hs en
at ths |uncture, because, n accordance wth
SEC 29 of the Warehouse Recepts Law, the
warehouseman oses hs en upon goods by
surrenderng possesson thereof. In other words,
the en may be ost where the warehouseman
surrenders the possesson of the goods wthout
requrng payment of hs en, because a
warehousemans en s possessory n nature.
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SEC 14. Lost or destroyed recepts. - Where
a negotabe recept has been ost or destroyed,
a court of competent |ursdcton may order the
devery of the goods upon satsfactory proof of
such oss or destructon and upon the gvng of
a bond wth suffcent suretes to be approved
by the court to protect the warehouseman from
any abty or expense, whch he or any person
n|ured by such devery may ncur by reason of
the orgna recept remanng outstandng. The
court may aso n ts dscreton order the
payment of the warehouseman's reasonabe
costs and counse fees.
The devery of the goods under an order of the
court as provded n ths SEC, sha not reeve
the warehouseman from abty to a person to
whom the negotabe recept has been or sha
be negotated for vaue wthout notce of the
proceedngs or of the devery of the goods.
SEC 36. Effect of sae. - After goods have
been awfuy sod to satsfy a warehouseman's
en, or have been awfuy sod or dsposed of
because of ther pershabe or hazardous
nature, the warehouseman sha not thereafter
be abe for faure to dever the goods to the
depostor or owner of the goods or to a hoder
of the recept gven for the goods when they
were deposted, even f such recept be
negotabe.
lV. CHATTEL MORTGAGE LAW
Act 1508 (1906), n reaton to Artces
1484, 1485, 2140 and 2140 Cv Code
Act J508
Sec. 3 Chatte mortgage defned. - A chatte
mortgage s a condtona sae of persona
property as securty for the payment of a debt,
or the performance of some other obgaton
specfed theren, the condton beng that the
sae sha be vod upon the seer payng to the
purchaser a sum of money or dong some other
act named. If the condton s performed
accordng to ts terms the mortgage and sae
mmedatey become vod, and the mortgagee
s thereby dvested of hs tte.
Sec 4 Vadty. - A chatte mortgage sha not
be vad aganst any person except the
mortgagor, hs executors or admnstrators,
uness the possesson of the property s
devered to and retaned by the mortgagee or
uness the mortgage s recorded n the offce of
the regster of deeds of the provnce n whch
the mortgagor resdes at the tme of makng the
same, or, f he resdes wthout the Phppne
Isands, n the provnce n whch the property s
stuated: Provded, however, That f the
property s stuated n a dfferent provnce from
that n whch the mortgagor resdes, the
mortgage sha be recorded n the offce of the
regster of deeds of both the provnce n whch
the mortgagor resdes and that n whch the
property s stuated, and for the purposes of ths
Act the cty of Mana sha be deemed to be a
provnce.
Sec 5 Form. - A chatte mortgage sha be
deemed to be suffcent when made
substantay n accordance wth the foowng
form, and sha be sgned by the person or
persons executng the same, n the presence of
two wtnesses, who sha sgn the mortgage as
wtnesses to the executon thereof, and each
mortgagor and mortgagee, or, n the absence of
the mortgagee, hs agent or attorney, sha
make and subscrbe an affdavt n substance as
herenafter set forth, whch affdavt, sgned by
the partes to the mortgage as above stated,
and the certfcate of the oath sgned by the
authorty admnsterng the same, sha be
appended to such mortgage and recorded
therewth.
FORM OF CHATTEL MORTGAGE AND AFFIDAVIT.
"Ths mortgage made ths ____ day of
______19____ by _______________, a resdent of
the muncpaty of ______________, Provnce of
____________, Phppne Isands mortgagor, to
____________, a resdent of the muncpaty of
___________, Provnce of ______________,
Phppne Isands, mortgagee, wtnesseth:
"That the sad mortgagor hereby conveys and
mortgages to the sad mortgagee a of the
foowng-descrbed persona property stuated
n the muncpaty of ______________, Provnce of
____________ and now n the possesson of sad
mortgagor, to wt:
(Here nsert specfc descrpton of the property
mortgaged.)
"Ths mortgage s gven as securty for the
payment to the sad ______, mortgagee, of
promssory notes for the sum of ____________
pesos, wth (or wthout, as the case may be)
nterest thereon at the rate of ___________ per
centum per annum, accordng to the terms of
__________, certan promssory notes, dated
_________, and n the words and fgures foowng
(here nsert copy of the note or notes secured).
"(If the mortgage s gven for the performance
of some other obgaton asde from the
payment of promssory notes, descrbe correcty
but concsey the obgaton to be performed.)
"The condtons of ths obgaton are such that
f the mortgagor, hs hers, executors, or
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admnstrators sha we and truy perform the
fu obgaton (or obgatons) above stated
accordng to the terms thereof, then ths
obgaton sha be nu and vod.
"Executed at the muncpaty of _________, n
the Provnce of ________, ths _____ day of
19_____
____________________
(Sgnature of mortgagor.)
"In the presence of
"_________________
"_________________
(Two wtnesses sgn here.)
FORM OF OATH.
"We severay swear that the foregong
mortgage s made for the purpose of securng
the obgaton specfed n the condtons
thereof, and for no other purpose, and that the
same s a |ust and vad obgaton, and one not
entered nto for the purpose of fraud."
FORM OF CERTIFICATE OF OATH.
"At ___________, n the Provnce of _________,
personay appeared ____________, the partes
who sgned the foregong affdavt and made
oath to the truth thereof before me.
"_____________________________"
(Notary pubc, |ustce of the peace, 1 or other
offcer, as the case may be.)
Sec 6 Corporatons. - When a corporaton s a
party to such mortgage the affdavt requred
may be made and subscrbed by a drector,
trustee, casher, treasurer, or manager thereof,
or by a person authorzed on the part of such
corporaton to make or to receve such
mortgage. When a partnershp s a party to the
mortgage the affdavt may be made and
subscrbed by one member thereof.
Sec 7 Descrptons of property. - The
descrpton of the mortgaged property sha be
such as to enabe the partes to the mortgage,
or any other person, after reasonabe nqury
and nvestgaton, to dentfy the same.
If the property mortgaged be arge catte," as
defned by SEC one of Act Numbered Eeven
and forty-seven, 2 and the amendments
thereof, the descrpton of sad property n the
mortgage sha contan the brands, cass, sex,
age, knots of radated har commony known as
remonos, or cowcks, and other marks of
ownershp as descrbed and set forth n the
certfcate of ownershp of sad anma or
anmas, together wth the number and pace of
ssue of such certfcates of ownershp.
If growng crops be mortgaged the mortgage
may contan an agreement stpuatng that the
mortgagor bnds hmsef propery to tend, care
for and protect the crop whe growng, and
fathfuy and wthout deay to harvest the
same, and that n defaut of the performance of
such dutes the mortgage may enter upon the
premses, take a the necessary measures for
the protecton of sad crop, and retan
possesson thereof and se the same, and from
the proceeds of such sae pay a expenses
ncurred n carng for, harvestng, and seng
the crop and the amount of the ndebtedness or
obgaton secured by the mortgage, and the
surpus thereof, f any sha be pad to the
mortgagor or those entted to the same.
A chatte mortgage sha be deemed to cover
ony the property descrbed theren and not ke
or substtuted property thereafter acqured by
the mortgagor and paced n the same
depostory as the property orgnay
mortgaged, anythng n the mortgage to the
contrary notwthstandng.
Sec. 8 Faure of mortgagee to dscharge the
mortgage. - If the mortgagee, assgn,
admnstrator, executor, or ether of them, after
performance of the condton before or after the
breach thereof, or after tender of the
performance of the condton, at or after the
tme fxed for the performance, does not wthn
ten days after beng requested thereto by any
person entted to redeem, dscharge the
mortgage n the manner provded by aw, the
person entted to redeem may recover of the
person whose duty t s to dscharge the same
twenty pesos for hs negect and a damages
occasoned thereby n an acton n any court
havng |ursdcton of the sub|ect-matter
thereof.
Sec. J3 When the condton of a chatte
mortgage s broken, a mortgagor or person
hodng a subsequent mortgage, or a
subsequent attachng credtor may redeem the
same by payng or deverng to the mortgagee
the amount due on such mortgage and the
reasonabe costs and expenses ncurred by
such breach of condton before the sae
thereof. An attachng credtor who so redeems
sha be subrogated to the rghts of the
mortgagee and entted to forecose the
mortgage n the same manner that the
mortgagee coud forecose t by the terms of
ths Act.
Sec. J4 Sae of property at pubc aucton;
Offcer's return; Fees; Dsposton of proceeds.
- The mortgagee, hs executor, admnstrator,
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or assgn, may, after thrty days from the tme
of condton broken, cause the mortgaged
property, or any part thereof, to be sod at
pubc aucton by a pubc offcer at a pubc
pace n the muncpaty where the mortgagor
resdes, or where the property s stuated,
provded at east ten days' notce of the tme,
pace, and purpose of such sae has been
posted at two or more pubc paces n such
muncpaty, and the mortgagee, hs executor,
admnstrator, or assgn, sha notfy the
mortgagor or person hodng under hm and the
persons hodng subsequent mortgages of the
tme and pace of sae, ether by notce n
wrtng drected to hm or eft at hs abode, f
wthn the muncpaty, or sent by ma f he
does not resde n such muncpaty, at east
ten days prevous to the sae.
The offcer makng the sae sha, wthn thrty
days thereafter, make n wrtng a return of hs
dongs and fe the same n the offce of the
regster of deeds where the mortgage s
recorded, and the regster of deeds sha record
the same. The fees of the offcer for seng the
property sha be the same as n the case of
sae on executon as provded n Act Numbered
One hundred and nnety, 4 and the
amendments thereto, and the fees of the
regster of deeds for regsterng the offcer's
return sha be taxed as a part of the costs of
sae, whch the offcer sha pay to the regster
of deeds. The return sha partcuary descrbe
the artces sod, and state the amount receved
for each artce, and sha operate as a
dscharge of the en thereon created by the
mortgage. The proceeds of such sae sha be
apped to the payment, frst, of the costs and
expenses of keepng and sae, and then to the
payment of the demand or obgaton secured
by such mortgage, and the resdue sha be pad
to persons hodng subsequent mortgages n
ther order, and the baance, after payng the
mortgages, sha be pad to the mortgagor or
person hodng under hm on demand.
If the sae ncudes any "arge catte," a
certfcate of transfer as requred by SEC
sxteen of Act Numbered Eeven hundred and
forty-seven 5 sha be ssued by the treasurer of
the muncpaty where the sae was hed to the
purchaser thereof.
Art. J484. In a contract of sae of persona
property the prce of whch s payabe n
nstaments, the vendor may exercse any of
the foowng remedes:
(1) Exact fufment of the obgaton, shoud the
vendee fa to pay;
(2) Cance the sae, shoud the vendee's faure
to pay cover two or more nstaments;
(3) Forecose the chatte mortgage on the thng
sod, f one has been consttuted, shoud the
vendee's faure to pay cover two or more
nstaments. In ths case, he sha have no
further acton aganst the purchaser to recover
any unpad baance of the prce. Any agreement
to the contrary sha be vod. (1454-A-a)
Art. J485. The precedng artce sha be
apped to contracts purportng to be eases of
persona property wth opton to buy, when the
essor has deprved the essee of the possesson
or en|oyment of the thng. (1454-A-a)
Art. ZJ40. By a chatte mortgage, persona
property s recorded n the Chatte Mortgage
Regster as a securty for the performance of an
obgaton. If the movabe, nstead of beng
recorded, s devered to the credtor or a thrd
person, the contract s a pedge and not a
chatte mortgage. (n)
Art. ZJ4J. The provsons of ths Code on
pedge, nsofar as they are not n confct wth
the Chatte Mortgage Law sha be appcabe to
chatte mortgages. (n)
4.1 Topics
Essenta Requstes
1) That t be consttuted to secure the fufment
of a prncpa obgaton;
2) That the mortgagor be the absoute owner of
the thng mortgaged;
3) That the persons consttutng the mortgage
have the free dsposa of ther property or, n
the absence thereof, that they be egay
authorzed for the purpose; and
4) That the ob|ect be persona and movabe
property.
Forma Requrements
1) Sgned by the person executng the same n
the presence of two wtnesses;
2) Accompaned by an affdavt of good fath
and a certfcate of oath;
3) Mortgaged property must be descrbed n
such a manner as to enabe anybody readng
the document, after reasonabe nqury and
nvestgaton, to be abe to dentfy the same.
Regstraton: When And Where
When
No specfc tme s provded under the aw.
However, such regstraton must be made:
1) before the mortgagor has comped wth hs
prncpa obgaton; and
2) no rght of an nnocent thrd person s
pre|udced.
Where
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1) Where the mortgagor resdes n the
Phppnes, n hs pace of resdence;
2) Where the mortgagor resdes abroad, n the
pace where the property s stuated;
3) Where the mortgagor resdes n a pace
dfferent from where the property s stuated, n
the pace where the mortgagor resdes and
where the property s stuated, except where
the amount of the mortgage s more than
Php50,000 n whch case the regstraton of the
mortgage n the provnce where the property s
stuated sha be suffcent regstraton.
For motor vehces, the chatte mortgage must
aso be regstered wth the Land Transportaton
Offce to bnd thrd persons.
After-Acqured, Future Or Substtuted Property
Future or after-acqured property can be
sub|ect of a chatte mortgage f:
1) The propertes mortgaged are:
a. Pershabe; or
b. Sub|ect to nevtabe wear and tear; or
c. Intended to be sod or used but wth the
understandng that they woud be repaced wth
smar propertes to be thereafter acqured by
the mortgagor
2) In the case of other propertes, f the
ncuson of such future or after-acqured
propertes s expressy stpuated and a
suppement to the mortgage specfcay stng
and descrbng such property s executed and
regstered n the chatte mortgage regster.
Lke or substtuted property cannot be deemed
covered by a chatte mortgage, uness the
property s descrbed n a suppement to the
mortgage.
After-Incurred Obgaton
Whe a pedge, rea estate mortgage, or
antchress may exceptonay secure after-
ncurred obgatons so ong as these future
debts are accuratey descrbed, a chatte
mortgage, however, can ony cover obgatons
exstng at the tme the mortgage s
consttuted. Athough a promise expressed n a
chatte mortgage to ncude debts that are yet
to be contracted can be a bndng that can be
compeed upon, the securty tsef, however,
does not come nto exstence or arse unt after
a chatte amendng the od contract
conformaby wth the form prescrbed by the
Chatte Mortgage Law. Refusa on the part of
the borrower to execute the agreement so as to
cover the after-ncurred obgaton can
consttute an act of defaut on the part of the
borrower of the fnancng agreement whereon
the promse s wrtten but, of course, the
remedy of forecosure can ony cover the debts
extant at the tme of consttuton and durng the
fe of the chatte mortgage sought to be
forecosed.
One of the requstes of a chatte mortgage s
the executon of an affdavt of good fath,
whch requres an oath that the mortgage s for
the purpose of securng the obgaton specfed
n the condtons thereof, and for no other
purpose, and that the same s a |ust and vad
obgaton, and one not entered nto for the
purpose of fraud.
Ths requrement makes t obvous that the debt
referred to n the aw s a current, not an
obgaton that s yet merey contempated.
(Acme Shoe v CA)
Rght Of |unor Mortgagee
Art. J3
After a frst mortgage s executed, there
remans n the mortgagor a mere rght of
redempton and ony ths rght passes to the
second mortgagee by vrtue of the second
mortgage.
Forecosure Procedure
Art 14; SC Crcuar No. 7-2002, Dated |anuary
22, 2002
1) 30 days after the condton of a chatte
mortgage s broken, the mortgagee may cause
the mortgaged property or any part thereof to
be sod at pubc aucton by a pubc offcer at a
pubc pace n the muncpaty where the
mortgagor resdes or where the property s
stuated.
2) The appcaton for the forecosure of the
mortgage shoud be fed wth the Executve
|udge through the Cerk of Court.
3) After recept of the appcaton, the Cerk of
Court sha, among other dutes:
a. Raffe the appcaton among the Sherffs; and
b. Cause the postng of the notce of sae.
4) Notce of the tme, pace and purpose of such
sae must be posted, at east 10 days before the
date of sae, at 2 or more pubc paces n the
muncpaty where the mortgagor resdes or
where the property s stuated.
5) The mortgagee sha notfy the mortgagor
and the persons hodng subsequent mortgages
of the tme and pace of sae, at east 10 days
before the sae, ether by notce n wrtng
drected to hm or eft at hs abode, f wthn the
muncpaty, or sent by ma f he does not
resde n such muncpaty.
6) The offcer makng the sae sha, wthn 30
days thereafter, make n wrtng a return of hs
dongs and fe the same n the offce of the
regstry of deeds where the mortgage s
recorded, and the regstry of deeds sha record
the same. The return sha partcuary descrbe
the artces sod and state the amount receved
for each artce.
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Redempton
There s no rght of redempton n Chatte
Mortgage. There s ony an EOUITY of
REDEMPTION.
1) Perod wthn whch equty of redempton
may be exercsed.
From the date the condton of the Chatte
Mortgage s broken but BEFORE the forecosure
sae of the coatera thereof.
> The 30-day perod to forecose a Chatte
Mortgage s the mnmum perod after voaton
of the mortgage condton for the mortgage
credtor to cause the sae at pubc aucton of
the mortgaged chatte AND s a perod of grace
for the mortgagor to dscharge the mortgage
obgaton.
2) Amount to be pad.
a. The amount due on such mortgage; and
b. The costs and expenses ncurred by such
breach of condton before the sae thereof.
3) Persons entted to redeem.
a. Mortgagor;
b. A person hodng a subsequent mortgage;
c. A subsequent attachng credtor.
Cam For Defcency; Rue And Excepton
Rule: A chatte mortgagee may sue for a
defcency foowng forecosure.
Exception: n the case of persona property sod
n nstaments where the chatte
mortgagor/vendees faure to pay covers 2 or
more nstaments.
4.2 Cases
Chatte Mortgage On House Not Bndng On
Thrd Persons Not Partes To Contract
PlANSAY V DAVlD (1964)
FACTS: Conrado Davd receved a oan from
Cauda Vda. De Uy Km. In order to secure the
oan, he executed a chatte mortgage on a
house. The chatte mortgage was regstered
wth the Regster of Deeds. The mortgaged
house was sod to Cauda at a pubc aucton,
whch Cauda, n turn, sod to Savador Pansay.
Meanwhe, Marcos Mangubat fed a compant
aganst Conrado for coecton of a oan. Marcos
eved upon the house that was n possesson of
Savador, and at the same tme, demanded
payment of rentas from Savador.
ISSUE: WON the chatte mortgage consttuted n
favour of Cauda s vad
HELD: NO. Cauda had no rght to forecose the
chatte mortgage consttuted n her favor,
because t was n reaty a mere contract of an
unsecured oan. Therefore, the contract of sae
between Cauda and Savador was of no effect.
Regardess of the vadty of a contract
consttutng a chatte mortgage on a house, as
between the partes to sad contract, the same
cannot and does not bnd thrd persons, who
are not partes to the aforementoned contract
or ther prves. As a consequence, the sae of
the house s nu and vod nsofar s Marcos
Mangubat s concerned.
Chatte Mortgage Over House But On Another
Persons Land
TUMALAD V VlVENClO (1971)
FACTS: Pettoners executed a chatte
mortgage n favor of respondents over ther
house, whch s ocated n a and that s beng
rented by pettoners from Madrga & Company,
Inc. The mortgage was regstered n the
Regstry of Deeds and was executed to
guarantee a oan.
Snce the pettoners defauted on ther oan,
the mortgage was extra|udcay forecosed and
the house was sod to respondents at a pubc
aucton.
Respondents commenced a cv case n the
muncpa court, whch decded aganst the
pettoners and ordered the atter to vacate the
premses and to pay rent unt the premses s
competey vacated.
Pettoners argue that the chatte mortgage s
vod ab nto reyng on the foowng grounds:
1) That ther sgnatures on the chatte mortgage
was obtaned through fraud, decet or trckery;
and
2) That the sub|ect matter of the chatte
mortgage s a house, and beng an mmovabe,
t can ony be sub|ect of a rea estate mortgage
and not a chatte mortgage.
ISSUE: WON the chatte mortgage s vad
HELD: YES. That partes to a deed of chatte
mortgage may agree to consder a house as
persona property for the purposes of sad
contract s good ony nsofar as the contractng
partes are concerned. Ths s based party upon
the prncpe of estoppe.
In a case, the SC hed that a mortgaged house
but on a rented and was hed to be a persona
property, not ony because the deed of
mortgage consdered t as such, but aso
because t dd not form part of the and, for t
now setted that an ob|ect paced on and by
one who had ony a temporary rght to the
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same, does not become mmobzed by
attachment. Hence, f a house beongng to a
person stands on a rented and beongng to
another person, t may be mortgaged as a
persona property as so stpuated n the
document of mortgage. It shoud be noted,
however that the prncpe s predcated on
statements by the owner decarng hs house to
be a chatte, a conduct that may concevaby
estop hm from subsequenty camng
otherwse.
In the case at bar, the house on rented and s
expressy desgnated as chatte mortgage.
Athough there s no specfc statement
referrng to the sub|ect house as persona
property, yet by cedng, seng or transferrng a
property by way of chatte mortgage,
pettoners coud ony have meant to convey
the house as chatte, or at east, ntended to
treat the same as such, so that they shoud not
now be aowed to make an nconsstent stand
by camng otherwse.
Moreover, the sub|ect house stood on a rented
ot to whch pettoners merey ad a temporary
rght as essee, and athough ths cannot n
tsef determne the status of the property, t
does so when combned wth other factors to
sustan the nterpretaton that the partes,
partcuary the mortgagors, ntended to treat
the house as personaty.
Fnay, t s the pettoners themseves, as
debtor-mortgagors, who are attackng the
vadty of the chatte mortgage. The doctrne of
estoppes apped to pettoners.
Chatte Mortgage Over Machnery
MAKATl LEASlNG V WEAREVER TEXTlLE
MlLLS (1983)
FACTS: In order to obtan fnanca
accommodatons from pettoner Makat Leasng
and Fnance Corp., prvate respondent
Wearever Texte Ms, dscounted and assgned
severa recevabes wth the former. To secure
the coecton of the recevabes assgned,
prvate respondent executed a Chatte
Mortgage over certan raw materas nventory
as we as a machnery.
Upon prvate respondents defaut, pettoner
fed a compant to effect the sezure of the
machnery. The ower court ssued a wrt of
sezure and n order to enforce the sad wrt, the
sherff went to the premses and removed the
man drve motor of the sub|ect machnery.
Prvate respondent questons the act of the
sherff argung that the drve motor the
machnery n sut cannot be sub|ect of a chatte
mortgage because t s rea property pursuant
to Art. 415 of the New of Cv Code, the same
beng attached to the ground by means of bots
and the ony way to remove t woud be to dr
out or destroy the concrete foor.
ISSUE: WON the machnery n sut s rea or
persona property
HELD: It s persona property. As the partes to
the contract so agree and no nnocent thrd
party w be pre|udced thereby, there s
absoutey no reason why a machnery, whch s
movabe n ts nature and becomes mmobzed
ony by destnaton or purpose, may not be
kewse treated as such. Ths s because one
who has so agreed s stopped from denyng the
exstence of the chatte mortgage.
The characterzaton of the sub|ect machnery
as chatte by the prvate respondent s
ndcatve of ntenton and mpresses upon the
property the character as determned by the
partes. In other words, the partes to a contract
may by agreement treat as persona property
that whch by nature woud be rea property, as
ong as no nterest of thrd partes woud be
pre|udced thereby.
In addton, records show that no steps were
taken to nufy the mortgage and that the
prvate respondent has benefted from the
contract. Equty dctates that one shoud not
beneft at the expense of another. Prvate
respondent coud not now therefore, be aowed
to mpugn the effcacy of the chatte mortgage
after t has benefted therefrom.
After-Acqured Property
TORRES V LlM]AP
FACTS: |ose B. Henson executed n favor of the
respondents a chatte mortgage on hs drug
store n order to secure a oan. In the
nstrument of the chatte mortgage, t was
stpuated that the mortgagor was authorzed to
se the goods covered thereby and to repace
them wth other goods thereafter acqured.
Pettoner attacks the vadty of the stpuaton
and nssts that a stpuaton authorzng the
dsposa and substtuton of the chattes
mortgaged does not operate to extend the
mortgage to after-acqured property, and that
such stpuaton s n contraventon of the
express provson of the ast paragraph of SEC 7
Act No. 1508.
ISSUE: WON the chatte mortgage on the after-
acqured property s vad
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HELD: YES. In the nterpretaton and
constructon of a statute, the ntent of the aw-
maker shoud aways be ascertaned and gven
effect. In enactng Act No. 1508, the prmary
am of the aw-makng body was undoubtedy to
promote busness and trade and to gve
mpetus to the economc deveopment of the
country. Bearng ths n mnd, t coud not have
been the ntenton of the Phppne Commsson
to appy the provson of SEC 7 to stores open to
the pubc for reta busness, where the goods
are constanty sod and substtuted wth new
stock.
A stpuaton n the mortgage, extendng ts
scope and effect to after-acqured property, s
vad and bndng where the after-acqured
property s n renewa of, or n substtuton for,
goods on hand when the mortgage was
executed, or s purchased wth the proceeds of
the sae of such goods.
In other words, a mortgage may be made to
ncude future acqustons of goods to be added
to the orgna stock mortgaged, but the
mortgage must expressy provde that such
future acqustons sha be hed as ncuded n
the mortgage.
In sum, the court hed:
1) That the provson of the ast paragraph of
SEC 7 of Act No. 1508 s not appcabe to drug
stores, bazaars and a other stores n the
nature of a revovng and foatng busness; and
2) That the stpuaton n the chatte mortgages
n queston, extendng ther effect to after-
acqured property, s vad and bndng.
After-Incurred Obgaton
ACME SHOE V CA (1996)
FACTS: Pettoner Chua Pac, the presdent and
genera manager of co-pettoner "Acme Shoe,
Rubber & Pastc Corporaton," executed for and
n behaf of the company, a chatte mortgage n
favor of prvate respondent Producers Bank.
The mortgage stands as a securty for
pettoners corporate oan of Php3M. However,
a provson n the chatte mortgage agreement
states that the mortgage sha aso stand as a
securty for the payment of subsequent
promssory note or notes, ether as a renewa or
a new oan.
In due tme, the pettoner pad the Php3M oan.
Subsequenty, however, t obtaned addtona
fnanca accommodatons from respondent and
faed to sette ths addtona oan.
Respondent then apped for an extra|udca
forecosure of the chatte mortgage. The
pettoner seeks to en|on the forecosure.
ISSUE: WON a cause n a chatte mortgage,
whch extend ts coverage to obgatons yet to
be contracted or ncurred, s vad and effectve
HELD: NO. Whe a pedge, rea estate
mortgage, or antchress may exceptonay
secure after-ncurred obgatons so ong as
these future debts are accuratey descrbed, a
chatte mortgage, however, can ony cover
obgatons exstng at the tme the mortgage s
consttuted. Athough a promise expressed n a
chatte mortgage to ncude debts that are yet
to be contracted can be a bndng that can be
compeed upon, the securty tsef, however,
does not come nto exstence or arse unt after
a chatte amendng the od contract
conformaby wth the form prescrbed by the
Chatte Mortgage Law. Refusa on the part of
the borrower to execute the agreement so as to
cover the after-ncurred obgaton can
consttute an act of defaut on the part of the
borrower of the fnancng agreement whereon
the promse s wrtten but, of course, the
remedy of forecosure can ony cover the debts
extant at the tme of consttuton and durng the
fe of the chatte mortgage sought to be
forecosed.
One of the requstes of a chatte mortgage s
the executon of an affdavt of good fath,
whch requres an oath that the mortgage s for
the purpose of securng the obgaton specfed
n the condtons thereof, and for no other
purpose, and that the same s a |ust and vad
obgaton, and one not entered nto for the
purpose of fraud.
Ths requrement makes t obvous that the debt
referred to n the aw s a current, not an
obgaton that s yet merey contempated. In
the chatte mortgage here nvoved, the ony
obgaton specfed n the chatte mortgage
contract was the Php3M oan whch pettoner
corporaton ater fuy pad. By vrtue of SEC 3 of
the Chatte Mortgage Law, the payment of the
obgaton automatcay rendered the chatte
mortgage vod or termnated.
Wth the fu payment of the Php3M oan, there
was no onger any chatte mortgage that coud
cover the new oans that were concuded
thereafter.
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Specfc Performance
SOUTHERN MOTORS V MOSCOSO (1961)
FACTS: Prvate respondent Southern Motors,
Inc. sod to pettoner Ange Moscoso a
Chevroet truck. Upon makng a down payment,
Ange executed a promssory note and a chatte
mortgage on the truck.
Upon the faure of Ange to pay the
nstaments, Southern Motors fed a compant
aganst Ange, to recover the unpad baance of
the purchase prce. A wrt of attachment was
ssued by the ower court and the Chevroet
truck and a house and ot beongng to Ange
were attached by the sherff. The sherff then
sod the truck at a pubc aucton n whch
Southern Motors was the ony bdder.
The tra court then condemned Ange to pay
Southern Motors the defcency.
Ange questons ths order of the court and
aeged that the attachment caused to be eved
on the truck and ts mmedate sae at pubc
aucton, was tantamount to the forecosure of
the chatte mortgage on sad truck.
Southern Motors counters and cams that n
fng the compant, t chose to exact fufment
of the obgaton (specfc performance) and s
thus entted to sue for the unpad baance of
the purchase prce.
ISSUE: WON the defcency of the purchase
prce can st be recovered
HELD: YES. The case s governed by Art. 1484
of the New Cv Code. (SEE Art. 1484, NCC)
Southern Motors had chosen the frst remedy.
The compant s an ordnary cv acton for
recovery of the remanng unpad baance de
on the promssory note. Ths s shown by the
foowng crcumstances:
1) Southern Motors had not adopted the
procedure or methods outned by Sec. 14 of
the Chatte Mortgage Law but those prescrbed
for ordnary cv actons
2) Southern Motors not ony attached the truck
but aso the house and ot of Ange.
Nothng unawfu or rreguar n Southern
Motors act of attachng the mortgaged truck
tsef. As Southern Motors has chosen to exact
the fufment of Anges obgaton, the former
may enforce executon of the |udgment
rendered n ts favor on the persona and rea
property of the atter not exempt from
executon suffcent to satsfy the |udgment.
Attachment s merey an ncdent to an ordnary
cv acton. Therefore, the mortgage credtor
may recover |udgment on the mortgage debt
and cause an executon on the mortgaged
property and may cause an attachment to be
ssued and eved on such property, upon
begnnng hs cv acton.
No Recourse Aganst Addtona Mortgaged
Property
1) Residential house and lot
LEVY HERMANOS V PAClFlC COMMERClAL
(1941)
FACTS: In addton to a chatte mortgage on the
motor vehces that they bought, the Hermanos
aso executed a mortgage on a resdenta ot
and house of strong materas.
HELD: The SC hed that the mortgage s vod
nsofar as t ncuded the house and ot of
vendees. It sad that the vendor cannot be
aowed to nsst on the sae of the house and ot
of the vendees for to do so woud be equvaent
to obtanng a wrt of executon aganst them
concernng other propertes whch are separate
and dstnct from those whch are sod on
nstament. Ths woud be contrary to pubc
pocy mtng the vendors rght to forecose
the chatte mortgage ony on the thng sod.
2) Parcel of land mortgaged by third party
CRUZ V FlLlPlNAS lNVESTMENT (1968)
FACTS: Pantff Ruperto G. Cruz purchased on
nstaments, from Far East Motor Corporaton,
an Isuzu Dese Bus, for whch Ruperto executed
a promssory note and a chatte mortgage on
the same vehce.
As an addtona securty, Fecdad Vda. De
Reyes, n the form of a SECOND MORTGAGE, a
parce of and and a budng.
Far East Motor Corp. then assgned a ts rghts
and nterest n the Deeds of Chatte Mortgage
and n the Deed of Rea Estate Mortgage to
Fpnas Investment and Fnance Corp.
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Ruperto defauted. Fpnas took steps to
forecose the chatte mortgage, however, the
vehce had been damaged n an accdent. Ths
s the reason why after the forecosure sae of
the chatte, the proceeds were not suffcent to
dscharge fuy ndebtedness of Ruperto.
Therefore, Fpnas prepared to forecose the
rea estate mortgage on Mrs. Reyes and by
payng the mortgage ndebtedness of Mrs.
Reyes to DBP, requestng the sherff to take
possesson, and by postng notces of sae.
Athough Fpnas admts that the remedes n
Art. 1484 of the New Cv Code s aternatve, t
cams that what s beng wthhed from the
vendor theren s ony the rght to recover
"aganst the purchaser", and not a recourse to
the addtona securty put up, not by the
purchaser hmsef, but by a thrd person.
ISSUE: WON Fpnas, whch has aready
extra|udcay forecosed the chatte mortgage
executed by the buyer, Ruperto, may aso
extra|udcay forecose the rea estate
mortgage consttuted by Mrs. Reyes on her own
and, as addtona securty, for the payment of
the baance of Rupertos obgaton, st
remanng unpad
HELD: The remedes n Art. 1484 of the NCC
are aternatve, not cumuatve, that the
exercse of one woud bar the exercse of the
others. The reason for ths doctrne was to
remedy the abuses commtted n connecton
wth the forecosure of chatte mortgages.
To sustan Fpnas argument s to overook the
fact that f the guarantor shoud be compeed
to pay the baance of the purchase prce, the
guarantor w n turn be entted to recover
what she has pad from the debtor vendee; so
utmatey, t w be the vendee who w be
made to bear the payment of the baance of the
prce, despte the earer forecosure of the
chatte mortgage gven by hm. Thus, the
protecton gven by Art. 1484 woud be
ndrecty subverted, and pubc pocy
overturned.
Nether s there vadty to Fpnas aegaton
that, snce the aw speaks of "acton", the
restrcton shoud be confned ony to the
brngng of |udca suts or proceedngs n court.
The word "acton" s wthout a defnte or
excusve meanng. Consderng the purpose for
whch the prohbton contaned n Art. 1484 was
ntended, the word "acton" used theren may
be construed as referrng to any |udca or
extra|udca proceedng by vrtue of whch the
vendor may awfuy be enabed to exact
recovery of the supposed unsatsfed baance of
the purchase prce from the purchaser or hs
prvy. Certany, an extra|udca forecosure of
rea estate mortgage s one such proceedng.
Rght Of Recourse Aganst Seer/Assgnor
FlLlPlNAS lNVESTMENT V VlTUG (1969)
FACTS: |uan R. Vtug executed and devered
to Supreme Saes & Deveopment Corp. a
promssory note, accompaned by a chatte
mortgage to secure hs purchase of a 4-door
consu sedan. Then, Supreme Saes negotated
and assgned a ts rghts, tte, and nterests to
the same to Fpnas Investment & Fnance
Corp., the assgnment ndcatng that t s with
recourse aganst Supreme Saes.
|uan defauted n the payment of 4
nstaments due whch resuted n the entre
obgaton becomng due and demandabe.
Pursuant to ths, Fpnas obtaned a wrt of
repevn but ths became unnecessary as |uan
vountary surrendered possesson of the car.
The car was sod at a pubc aucton but snce
the proceeds st eft a defcency, Fpnas
wants to hod Supreme Saes abe.
Supreme Saes cams that the wth-recourse
provson n the assgnment s voatve of the
Recto Law, whch decares nu and vod any
agreement n contraventon thereof.
ISSUE: WON the Recto Law s appcabe n the
case at bar, makng the wth recourse provson
contaned n the agreement nu and vod
HELD: NO. The remedy presenty beng sought
s not aganst the buyer of the car but aganst
the seer. Under the Recto Law, what Congress
seeks to protect are ony the buyers on
nstament who more often than not have been
vctmzed by seers who, before the enactment
of ths aw, succeeded n un|usty enrchng
themseves at the expense of the buyers
because asde from recoverng the goods sod,
upon defaut of the buyer n the payment of two
nstaments, st retaned for themseves a
amounts aready pad, n addton, furthermore,
to other damages, such as attorneys fees, and
costs. Surey, Congress coud not have ntended
to mpar and much ess do away wth the rght
of the seer to make commerca use of hs
credt aganst the buyer, provded sad buyer s
not burdened beyond what ths aw aows.
In the case at bar, the assgnment made by
Supreme Saes to Fpnas of the promssory
note and mortgage of |uan Vtug precsey
stpuated that Fpnas had a rght of recourse
aganst the seer shoud the buyer fa to pay.
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Snce the Recto Law s not appcabe n ths
case, the sad provson remans vad.
The case s remanded for further proceedngs.
Rght Of Unpad Seer Under Art. 1484, Cv
Code, Aternatve Not Cumuatve
SPOUSES ROSARlO V PCl LEASlNG AND
FlNANCE, lNC. (2005)
FACTS: Spouses Rosaro purchased an Isuzu Ef
pck up utty vehce from Car Merchants, Inc.
covered by a Purchase Agreement. In order to
pay the baance of the purchase prce, the
spouses contracted a oan wth PCI Leasng
wheren they executed a promssory note n
favor of PCI Leasng agreeng that n case of
defaut, the sum and nterest sha mmedatey
become due and demandabe. In addton, the
spouses aso executed a chatte mortgage n
favor of PCI Leasng over the vehce.
Snce the spouses faed to pay ther oan, PCI
Leasng nsttuted a compant that ed to the
ssuance of the tra court of a wrt of repevn,
n pursuance of whch the sherff sezed the
vehce and turned over the possesson to PCI
Leasng.
The spouses Car Merchants had assgned to PCI
Leasng ts rght to coect the baance; hence, t
was subrogated to the rghts of Car Merchants
sub|ect to the mtatons of Art. 1484NCC.
Furthermore, they aege that snce PCI Leasng
opted to forecose the chatte mortgage, t was
estopped from coectng the unpad baance of
the purchase prce.
ISSUE: WON PCI Leasng s the assgnee of Car
Merchant; WON Art. 1484 of the NCC s
appcabe
HELD: NO. There s no factua bass on the
cam that Car Merchants had assgned ts rghts
to coect the baance of the purchase prce to
PCI Leasng. In fact, what the evdence shows s
that the spouses secured a oan from PCI
Leasng and even executed a promssory note
and a chatte mortgage n ts favor.
Under Art. 1625 of the NCC, an assgnment of
credt, rght or acton must appear n a pubc
document to bnd thrd persons. Snce there s
no evdence that Car Merchants executed such
a deed, Art 1484 of the NCC does not appy n
ths case.
Even assumng that Art 1484 s appcabe, PCI
Leasng s not proscrbed from sung the
spouses for ther unpad baance. The fact s
that PCI Leasng dd not forecose the chatte
mortgage, but opted to sue the spouses for the
baance of ther account under the promssory
note, wth a pea for wrt of repevn. By
securng a wrt of repevn, the respondent dd
not thereby forecose the chatte mortgage. If
there has been no forecosure of the chatte
mortgage or a forecosure sae, then the
prohbton aganst further coecton of the
baance prce does not appy.
A credtor s not obged to forecose a chatte
mortgage even f there s one; precsey the aw
says that any of the remedes may be exercsed
by the seer.
Ony Actua Sae Of Mortgaged Chatte Bars
Forecosng Credtor From Recoverng Unpad
Baance
MAGNA FlNANClAL SERVlCES GROUP, lNC.
V COLARlNA (2005)
FACTS: Eas Coarna bought on nstament a
Suzuk Mutcab from Magna Fnanca Servces
Group, Inc. whereby he executed an ntegrated
promssory note and deed of chatte mortgage
over the vehce.
Snce Coarna faed to pay the monthy
amortzaton, Magna fed a Compant for
Forecosure of Chatte Mortgage wth Repevn.
From the compant, t w show that Magna
avaed tsef of the frst and thrd remedes
under Art. 1484 of the NCC.
A wrt of repevn was ssued by the court and
upon servce of the same to Coarna, he
vountary surrendered possesson of the
vehce to the sherff, who n turn, surrendered
possesson to Magna.
Coarna ponts to the nconsstency of the
remedes or reefs sought by the Magna n ts
Compant where t prayed for the custody of
the chatte mortgage and at the same tme
asked for the payment of the unpad baance on
the motor vehce.
ISSUE: WON Magna opted to forecose the
chatte mortgage
HELD: YES. A contract of chatte mortgage s n
the nature of a condtona sae of persona
property gven as a securty for the payment of
a debt, or the performance of some other
obgaton specfed theren, the condton beng
that the sae sha be vod upon the seer
payng to the purchaser a sum of money or
dong some other act named. If the condton s
performed accordng to ts terms, the mortgage
and sae mmedatey become vod, and the
mortgagee s thereby dvested of hs tte. On
the other hand, n case of non payment,
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forecosure s one of the remedes avaabe to a
mortgagee by whch he sub|ects the mortgaged
property to the satsfacton of the obgaton to
secure that for whch the mortgage was gven.
Forecosure may be effected ether |udcay or
extra|udcay, that s, by ordnary acton or by
forecosure under power of sae contaned n
the mortgage. Extra|udca forecosure, as
chosen by the pettoner, s attaned by causng
the mortgaged property to be sezed by the
sherff, as agent of the mortgagee, and have t
sod at pubc aucton n the manner prescrbed
by SEC 14 of Act No. 1508, or the Chatte
Mortgage Law. Ths rue governs extra|udca
forecosure of chatte mortgage.
In sum, snce the pettoner has undenaby
eected a remedy of forecosure under Artce
1484(3) of the Cv Code, t s bound by ts
eecton and thus may not be aowed to change
what t has opted for.
ISSUE: WON there has been an actua
forecosure of the sub|ect vehce
HELD: NO. Where the mortgagee eects a
remedy of forecosure, the aw requres the
actua forecosure of the mortgaged chatte.
It s actua sae of the mortgaged chatte n
accordance wth Sec. 14 of Act No. 1508 that
woud bar the credtor (who chooses to
forecose) from recoverng any unpad baance.
And t s deemed that there has been
forecosure of the mortgage when a the
proceedngs of the forecosure, ncudng the
sae of the property at pubc aucton, have
been accompshed.
Be that as t may, athough no actua
forecosure as contempated under the aw has
taken pace n ths case, snce the vehce s
aready n the possesson of Magna and t has
persstenty and consstenty eected the
remedy of forecosure, the Court of Appeas,
thus, rued correcty n drectng the forecosure
of the sad vehce wthout more.
PD J4J7
Further Amending SEC J98 Of The Revised
Administrative Code As Amended By
Republic Act Nos. JJ6 And Z7JJ, By
lncreasing The Fees Collectible ln
Connection With Registration Of Chattel
Mortgages
WHEREAS, there has been an unprecedented
ncrease n the cost of equpment, materas
and suppes used by the Land Regstraton
Commsson;
WHEREAS, t s n consonance wth sound fsca
pocy that the regstraton fees coectbe by
the Land Regstraton Commsson through ts
regstres of deeds be ad|usted accordngy.
NOW, THEREFORE, I, FERDINAND E. MARCOS,
Presdent of the Phppnes, by vrtue of the
powers n me vested by the Consttuton, do
hereby decree and order:
SEC 1. SEC 198 of the Revsed Admnstratve
Code, as amended by Repubc Act Nos. 116
and 2711, s hereby further amended to read as
foows:
"Sec. 198. Regstraton of chatte mortgages
and fees coectbe n connecton therewth.
Every regster of deeds sha keep a prmary
entry book and a regstraton book for chatte
mortgages; sha certfy on each mortgage fed
for record, as we as on ts dupcate, the date,
hour, and mnute when the same was by hm
receved; and sha record n such books any
chatte mortgage, assgnment, or dscharge
thereof, and any other nstruments reatng to a
recorded mortgage, and a such nstruments
sha be presented to hm n dupcate the
orgna to be fed and the dupcate to be
returned to the person concerned.
The recordng of a mortgage sha be effected
by makng an entry, whch sha be gven a
correatve number, settng forth the names of
the mortgages and the mortgagor, the sum or
obgaton guaranteed, date of the nstrument,
name of the notary before whom t was sworn
to or acknowedged, and a note that the
property mortgaged, as we as the terms and
condtons of the mortgage, s mentoned n
deta n the nstrument fed, gvng the proper
fe number thereof. The recordng of other
nstruments reatng to a recorded mortgage
sha be effected by way of annotatons on the
space provded therefor n the regstraton
book, after the same sha have been entered n
the prmary entry book.
The regster of deeds sha aso certfy the
offcer's return of sae upon any mortgage,
makng reference upon the record of such
offcer's return to the voume and page of the
record of the mortgage, and a reference of such
return on the record of the mortgage tsef, and
gve a certfed copy thereof, when requested,
upon payment of the awfu fees for such copy;
and certfy upon each mortgage offcer's return
of sae or dscharge of mortgage, and upon any
other nstrument reatng to such a recorded
mortgage, both on the orgna and on the
dupcate, the date, hour and mnute when the
same s receved for record and record such
certfcate wth the return tsef and keep an
aphabetca ndex or mortgagors and
mortgagees, whch record and ndex sha be
open to pubc nspecton.
Duy certfed copes of such records and of fed
nstruments sha be recevabe as evdence n
any court.
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The regster of deeds sha coect the foowng
fees for servces rendered by hm under ths
SEC:
(a) For entry or presentaton of any document n
the prmary entry book, fve pesos. Supportng
papers presented together wth the prncpa
document need not be charged any entry or
presentaton fee uness the party n nterest
desres that they be kewse entered.
(b) For fng and recordng each chatte
mortgage, ncudng the necessary certfcates
and affdavts, the fees estabshed n the
foowng schedue sha be coected:
"1. When the amount of the mortgage does not
exceed sx thousand pesos, seven pesos for the
frst fve hundred pesos or fractona part
thereof, and three pesos for each addtona fve
hundred pesos or fractona part thereof.
"2. When the amount of the mortgage s more
than sx thousand pesos but does not exceed
thrty thousand pesos, forty-eght pesos for the
nta amount not exceedng eght thousand
pesos, and eght pesos for each addtona two
thousand pesos or fractona part thereof.
"3. When the amount of the mortgage s more
than thrty thousand pesos but does not exceed
one hundred thousand pesos, one hundred ffty
pesos for nta amount not exceedng thrty-
fve thousand pesos, and fourteen pesos for
each addtona fve thousand pesos or
fractona part thereof.
"4. When the amount of the mortgage s more
than one hundred thousand pesos but does not
exceed fve hundred thousand pesos, three
hundred ffty-two pesos for the nta amount
not exceedng one hundred ten thousand pesos
and twenty pesos for each addtona ten
thousand pesos or fractona part thereof.
"5. When the amount of the mortgage s more
than fve hundred thousand pesos, one
thousand one hundred sxty-two pesos for the
nta amount not exceedng fve hundred
twenty thousand pesos, and thrty pesos for
each addtona twenty thousand pesos or
fractona part thereof: Provded, however, That
regstraton of the mortgage n the provnce
where the property s stuated sha be suffcent
regstraton: And provded, further, That f the
mortgage s to be regstered n more than one
cty or provnce, the regster of deeds of the cty
or provnce where the nstrument s frst
presented for regstraton sha coect the fu
amount of the fees due n accordance wth the
schedue prescrbed above, and the regster of
deeds of the other cty or provnce where the
same nstrument s aso to be regstered sha
coect ony a sum equvaent to twenty per
centum of the amount of fees due and pad n
the frst cty or provnce, but n no case sha the
fees payabe n any regstry be ess than the
mnmum fxed n ths schedue.
"(c) For recordng each nstrument of sae,
conveyance, or transfer of the property whch s
sub|ect of a recorded mortgage, or of the
assgnment of mortgage credt, the fees
estabshed n the precedng schedue sha be
coected on the bass of ten per centum of the
amount of the mortgage or unpad baance
thereof: Provded, That the atter s stated n the
nstrument.
"(d) For recordng each notce of attachment,
ncudng the necessary ndex and annotatons,
eght pesos.
"(e) For recordng each reease of mortgage,
ncudng the necessary ndex and reference,
the fees estabshed n the schedue under
paragraph (b) above sha be coected on the
bass of fve per centum of the amount of the
mortgage.
"(f) For recordng each reease of attachment,
ncudng the proper annotatons, fve pesos.
"(g) For recordng each sherff's return of sae,
ncudng the ndex and reference, seven pesos.
"(h) For recordng a power of attorney,
appontment of |udca guardan, admnstrator,
or trustee, or any other nstrument n whch a
person s gven power to act n behaf of
another n connecton wth a mortgage, ten
pesos.
"() For recordng each nstrument or order
reatng to a recorded mortgage, ncudng the
necessary ndex and reference, for whch no
specfc fee s provded above fve pesos.
"(|) For certfed copes of records, such fees as
are aowed by aw for copes kept by the
regster of deeds.
"(k) For ssung a certfcate reatve to, or
showng the exstence or non-exstence of, and
entry n the regstraton book, or a document on
fe, for each such certfcate contanng not
more than two hundred words, fve pesos; f t
exceeds that number, an addtona fee of one
peso sha coected for every one hundred
words or fractona part thereof, n excess of the
frst two hundred words.
"() For servces rendered n attendng to
requests for references to, or researches on any
document on fe n the regstry, there sha be
coected a fee of two pesos per document."
SEC 2. Ths decree sha take effect upon ts
approva.
Done n the Cty of Mana, ths 9th day of |une,
n the year of Our Lord, nneteen hundred and
seventy-eght
Circular No. 7-Z00Z
To: All Executive judges, Clerks Of Court,
Sheriffs ln The Office Of The Clerk Of
Court And Branch Sheriffs ln The Regional
Trial Courts
Subject: Guidelines For The
Enforcement Of Supreme Court Resolution
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Of December J4, J999 ln Administrative
Matter No. 99-J0-05-0 (Re: Procedure ln
Extra-judicial Foreclosure Of
Mortgage), As Amended By The
Resolutions Dated january 30, Z00J And
August 7, Z00J
These gudenes are ssued pursuant to the
Supreme Court En Banc Resouton of December
14, 1999 n Admnstratve Matter No. 99-10-05-
0, as amended by the resoutons of |anuary 30,
2001 and August 7, 2001, drectng the Offce of
the Court Admnstrator to prepare the
gudenes for the enforcement of A.M. No. 99-
10-05-0 on the extra-|udca forecosure of
mortgages.
Sec. 1. A appcatons for extra-|udca
forecosure of mortgage, whether under the
drecton of the Sherff or a notary pubc
pursuant to Art. No. 3135, as amended, and Act
1508, as amended, sha be fed wth the
Executve |udge, through the Cerk of Court,
who s aso the Ex-Offco Sherff (A.M. No. 99-
10-05-0, as amended, March 1, 2001).
Sec. 2. Upon recept of the appcaton, the
Cerk of Court sha:
a. Examne the same to ensure that the
speca power of attorney authorzng the extra-
|udca forecosure of the rea property s ether
nserted nto or attached to the deed of rea
estate mortgage (Act No. 3135, Sec. 1, as
amended);
b. Gve a fe number to the appcaton and
endorse the date and tme of ts fng and
thereafter docket the same, keepng, n ths
connecton, separate docket books for extra-
|udca forecosure saes conducted by the
Sherff and those conducted by notares pubc;
c. For the conduct of extra-|udca
forecosure of rea estate or chatte mortgage
under the drecton of the sherff, coect the
approprate fng fees and ssues the
correspondng offca recept pursuant to the
foowng schedue:
If the amount of the ndebtedness or the
mortgagees cam s:
(1) Less than P50,000.00
......... P275.00
(2) P50,000.00 or more but ess
than
P100,000.00 ................ 400.00
(3) P100,000.00 or more but ess
than
P150,000.00 ............. 500.00
(4) P150,000.00 or more but ess
than
P200,000.00 ............. 650.00
(5) P200,000.00 or more but ess
than
P250,000.00 ............. 1,000.00
(6) P250,000.00 or more but ess
than
P300,000.00 ............. 1,250.00
(7) P300,000.00 or more but ess
than
P400,000.00 ............. 1,500.00
(8) P400,000 or more but ess than
P500,000.00 ............. 1,750.00
(9) P500,000.00 or more but not
more than
P100,000,000.00 ............ 2,000.00
(10) For each P1,000.00 n excess of
P1,000,000.00.............. 10.00
(SEC 7 (c), Rue 141, Rues of Court, as
amended by A.M. No. 00-2-01-SC, February 1,
2000).
Cooperatves, thrft banks, and rura banks are
not exempt from the payment of fng fees and
other fees under these gudenes (A.M. No. 98-
9-280-RTC, September 29, 1998; A.M. No. 99-3-
93-RTC, Apr 20, 1999; and A.M. No. 92-9-408-
0).
d. In case the appcaton s for the extra-|udca
forecosure of mortgages of rea estates and/or
chattes n dfferent ocatons coverng one
ndebtedness, ssue, apart from the offca
recept for the fees, a certfcate of payment
ndcatng the amount of ndebtedness, the
fng fees coected, the mortgages sought to
be forecosed, the rea estates and/or chattes
mortgaged and ther respectve ocatons, for
purposes of havng the appcaton docketed
wth the Cerks of Court n the paces where the
other propertes are ocated and of aowng the
extra-|udca forecosure to proceed thereat.
(A.M. No. 99-10-05-0, par. 2(e)).
Sec. 3. The appcaton for extra-|udca
forecosure sha be raffed under the
supervson of the Executve |udge, wth the
assstance of the Cerk of Court and Ex-Ofco
Sherff, among a Sherffs ncudng those
assgned to the Offce of the Cerk of court and
Sherffs assgned n the branches of the court. A
Sherff to whom the case has been raffed sha
be excuded n the succeedng raffes and sha
partcpate agan ony after a other Sherffs
sha have been assgned a case by raffe
(Admnstratve Crcuar No. 3-98, Feb. 5, 1998).
Sec. 4. The Sherff to whom the appcaton for
extra-|udca forecosure of mortgage was
raffed sha do the foowng:
a. Prepare a Notce of Extra-|udca Sae
usng the foowng form:
"NOTICE OF EXTRA-|UDICIAL SALE"
"Upon extra-|udca petton for sae under Act
3135 / 1508 fed __________________ aganst
(name and address of Mortgator/s) to satsfy the
mortgage ndebtedness whch as of ___________
amounts to P _________________, excudng
penates, charges, attorneys fees and
expenses of forecosure, the undersgned or hs
duy authorzed deputy w se at pubc aucton
on (date of sae) _______________ at 10:00 A.M.
or soon thereafter at the man entrance of the
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___________ (pace of sae) to the hghest bdder,
for cash or managers check and n Phppne
Currency, the foowng property wth a ts
mprovements, to wt:
"(Descrpton of Property)"
"A seaed bds must be submtted to the
undersgned on the above stated tme and
date."
"ln the event the public auction should
not take place on the said date, it shall be
held on _______________, _______________
without further notice."
________________ (date)
"SHERIFF"
b. (1) In case of forecosure of rea estate
mortgage, cause the pubcaton of the notce of
sae by postng t for not ess than twenty (20)
days n at east three (3) pubc paces n the
muncpaty or cty where the property s
stuated and f such property s worth more than
four hundred (P400.00) pesos, by havng such
notce pubshed once a week for at east three
(3) consecutve weeks n a newspaper of
genera crcuaton n the muncpaty or cty
(Sec. 3, Act No. 3135, as amended). The
Executve |udge sha desgnate a reguar
workng day and defnte tme each week durng
whch sad notce sha be dstrbuted personay
by hm for pubcaton to quafed newspapers
or perodcas as defned n Sec. 1 of P.D. No.
1079, whch dstrbuton sha be effected by
raffe (A.M. No. 01-1-07-SC, Oct. 16, 2001).
Uness otherwse stpuated by the partes to
the mortgage contract, the debtor-mortgagor
need not be personay served a copy of the
notce of the extra-|udca forecosure.
For rea estate mortgages coverng oans not
exceedng P100,000.00, excusve of nterests
due and unpad, granted by rura banks (RA No.
7353, Sec. 6) or thrft banks (RA No. 7906, Sec.
18),pubcaton n a newspaper sha be
dspensed wth, t beng suffcent that the
notces of forecosure are posted for a perod of
sxty (60) days mmedatey precedng the
pubc aucton n the most conspcuous areas of
the muncpa budng, the muncpa pubc
market, the rura bank, the barangay ha, and
the barangay pubc market, f any, where the
and mortgaged s stuated. Proof of pubcaton
sha be accompshed by an affdavt of the
Sherff and sha be attached to the records of
the case.
(2) In case of forecosure of a chatte mortgage,
post the notce for at east ten (10) days n two
(2) or more pubc paces n the muncpaty
where the mortgagor resdes or where the
property s stuated (Sec. 14, Act No. 1508, as
amended).
Sec. 5. Conduct of the extra-|udca forecosure
sae -
a. The bddng sha be made through
seaed bds whch must be submtted to the
Sherff who sha conduct the sae between the
hours of 9 a.m. and 4 p.m. of the date of the
aucton (Act 3135, Sec. 4). The property
mortgaged sha be awarded to the party
submttng the hghest bd and, n case of a te,
an open bddng sha be conducted between
the hghest bdders. Payments of the wnnng
bd sha be made ether n cash or n managers
check, n Phppne currency, wthn fve (5)
days from notce.
b. The sae must be made n the provnce
n whch the rea property s stuated and, n
case the pace wthn the sad provnce n whch
the sae s to be made s the sub|ect of
stpuaton, such sae sha be made n sad
pace n the muncpa budng of the
muncpaty n whch the property or part
thereof s stuated (Act No. 3135, as amended,
Sec. 2);
n case of a chatte mortgage, the sae sha be
made at a pace n the muncpaty where the
mortgagor resdes or where the property s
stuated (Sec. 14, Act No. 1508, as amended).
Sec. 6. After the sae, the Cerk of Courts sha
coect the approprate fees pursuant to Sec.
9(1), Rue 141, as amended by A.M No. 00-2-01-
SC, computed on the bass of the amount
actuay coected by hm, whch fee sha not
exceed P100,000.00 (A.M. No. 99-10-05-0,
March 1, 2001, 2|d|). The amount pad sha not
be sub|ect to a refund even f the forecosed
property s subsequenty redeemed.
Sec. 7. In case of forecosure under Act No.
1508, the Sherff sha, wthn thrty (30) days
from the sae, prepare a return and fe the
same n the Offce of the Regstry of Deeds
where the mortgage s recorded.
Sec. 8. The Sherff or the notary pubc who
conducted the sae sha report the name/s of
the bdder/s to the Cerk of Court.
Sec. 9. Upon presentaton of the approprate
recepts, the Cerk of Court sha ssue and sgn
the Certfcate of Sae, sub|ect to the approva
of the Executve |udge or, n the atters
absence, the Vce-Executve |udge. Pror to the
ssuance of the certfcate of Sae, the Cerk of
court sha, n extra-|udca forecosure
conducted under the drecton of the sherff,
coect P300.00 as provded n SEC 20(d), Rue
141, as amended, and n extra-|udca
forecosure saes conducted under the drecton
of a notary pubc, coect the approprate fees
pursuant to Rue 141, 20(e), whch amount
sha not exceed P100,000.00 (Mnute Res., A.M.
No. 99-10-05-0, August 7, 2001).
Sec. 10. After the Certfcate of Sae has been
ssued, the Cerk of Court sha keep the
compete records for a perod of one (1) year
from the date of regstraton of the certfcate of
sae wth the Regster of Deeds, after whch the
records sha be archved. Notwthstandng the
foregong, |urdca persons whose property s
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sod pursuant to an extra-|udca forecosure
sha have the rght to redeem the property
unt, but not ater than, the regstraton of the
certfcate of forecosure sae whch n no case
sha be more than three (3) months after
forecosure, whchever s earer (R.A. 8791, SEC
47). In case the property s redeemed, the Cerk
of Court sha assess the redemptoners fee as
provded n SEC 7 (k), Rue 141, as amended. If
the property s not redeemed, the Cerk of Court
sha, as a requste for the ssuance of the fna
Deed of Sae, assess the hghest bdder the
amount of P300.00 as provded n SEC 20(d),
Rue 141, as amended.
Sec. 11. These gudenes sha take effect on
Apr 22, 2002.
Issued ths 22
nd
day of |anuary 2002
V. AN ACT TO REGULATE THE SALE
OF PROPERTY UNDER SPEClAL
POWERS lNSERTED lN OR ANNEXED
TO REAL ESTATE MORTGAGES
Act 3135, as amended by Act 4118
(1933), Sec 6 RA 7353 (1992), Sec 18
RA 7906 (1995), Sec 47 RA 8791 (2000)
5.1 Topics
Remedes Avaabe To Mortgagee Upon Defaut
Of Mortgagor
Forecosure: A remedy avaabe to the
mortgagee where he sub|ects the mortgaged
property to the satsfacton of the obgaton to
secure for whch the mortgage was gven. It
may be effected ether |udcay or
extra|udcay.
Authorty To Forecose Mortgage Extra|udcay
1) The ony nstance when an extra|udca
forecosure may be effected s when a sae s
made and a Speca Power of Attorney to
extra|udcay forecose s nserted or attached
to the Rea Estate Mortgage (REM).
2) If the REM s sent as to the manner of
forecosng the mortgage, extra|udca
forecosure may not be effected and Rue 68 of
the Rues of Court n |udca Forecosure sha
appy.
Procedure
Where to file
> Appcaton shoud be fed wth the Executve
|udge through the Cerk of Court.
> After the recept of the appcaton, the Cerk
of Court sha:
1) examne the same to ensure that the speca
power f attorney authorzng the E|F of the rea
property s ether nserted or attached to the
deed of rea estate mortgage.
2) raffe the appcaton among the Sherffs
3) cause the postng and /or pubcaton of the
notce of sae
Where to sell
> pace where each of the mortgaged property
s ocated.
> The sae must be made n the provnce where
the property to be sod s stuated. Sae outsde
the provnce s ega.
> If the mortgage deed specified a place n
the muncpaty n the provnce where the sae
woud be made, such sae sha be made n such
pace.
> If the pace of sae n the muncpaty was not
stpuated, the sae sha be made n the
municipal building of the muncpaty n
whch the property or part thereof s stuated.
Posting Requirement/ Publication
Requirement
1) Notces of the sae sha be posted for not
less than 20 days in at least 3 public
places n the cty or muncpaty where the
property s stuated.
2) If property s worth more than P400, the
notce of the sae sha aso be published once
a week for 3 consecutive weeks in a
newspaper of general circulation n the cty
or muncpaty.
EXCEPTlON to the requirement of
newspaper publication
even f mortgaged property s worth more than
P400:
> For rea estate mortgages coverng oans not
exceedng P100,000, excusve of nterests due
and unpad, granted by rura or thrft banks,
pubcaton n a newspaper sha be dspensed
wth, t beng suffcent that notces of
forecosure are posted for a perod of 60 days
mmedatey precedng the pubc aucton n the
most conspcuous areas at the premses of the
rura bank or thrft bank, as the case may be,
and at the muncpa budng, muncpa pubc
market, barangay ha and barangay pubc
market f any or where the and s stuated
Unless otherwise stipulated by the parties
in the mortgage contract, the
debtor/mortgagor need not be personay
served a copy of the notce of extra|udca
forecosure.
No persona notce s requred because an E|F s
an acton in rem requrng ony the pubcaton
of the notce of the sae to bnd the partes
nterested.
> Faure to post notce s NOT per se a ground
for nvadatng the sae provded that the notce
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thereof s duy pubshed n a newspaper of
genera crcuaton. (DBP vs. Agurre)
> The ob|ect of the notce s to nform the
pubc of the sae and to secure as many
bdders as possbe to get the best prce for the
property.
> Republication: Repubcaton n the manner
prescrbed by Act 3135 s necessary for the
vadty of a postponed E|F sae. The absence of
such repubcaton nvadates the forecosure
sae.
Conduct Of Sale
1) Sae sha be by pubc aucton or bddng
made through seaed bds.
2) Seaed bds are submtted to the Sherff who
sha conduct the sae between the hours of
9:00 A.M. to 4:00 P.M. of the date of aucton.
The sae sha be under the drecton of:
a. Sherff of the provnce; or
b. Muncpaty or auxary muncpa |udge of
the muncpaty n whch the sae s to be
made; or
c. Notary pubc of the sad muncpaty
3) Property sha be awarded to the hghest
bdder, n case of a te, an open bddng sha be
conducted between the hghest bdders.
> No aucton sae sha be hed uness there are
at east 2 partcpatng bdders (n case of
second sae, f there s ony one bdder, the sae
sha proceed)
4) Payment of the wnnng bd sha be made
ether n cash or n managers check, n
Phppne currency, wthn 5 days from notce.
> Inadequacy of the prce woud not nufy the
sae uness the prce s so nadequate as to
shock the conscence of the court. In fact the
property may be sod for ess than ts FMV
because the esser the prce the easer for the
owner to effect redempton. (Vamonte v CA)
> If the proceeds of the sae are n excess of
the amount camed by the mortgagee, the
excess sha be turned over to the mortgagor.
5) Credtor may be barred from partcpatng n
the bddng, ony IF so provded n the mortgage
deed. Hence, credtor or any of hs
representatves may partcpate absent any
express provson n the mortgage or trust deed
barrng hm.
6) Certfcate of sae ssued by the cerk of court
must be approved by the executve |udge or n
hs absence the vce-executve |udge. No
certfcate of sae sha be ssued n favor of the
hghest bdder unt a fees have been pad
Possesson By Purchaser Of Forecosed Property
J. During redemption period
The purchaser of the forecosed property s not
automatcay entted to possesson of the
property. He must fe an ex parte appcaton
and gve a bond n the amount equvaent to the
use of the property for a perod of 12 months.
Upon approva of the bond, the court sha order
the ssuance of a wrt of possesson.
However, a wrt of possesson may be ssued n
an E|F of REM, ony f the debtor s n possesson
and no thrd party has ntervened. (PNB vs. CA)
Z. After the lapse of the redemption
period
Consodaton of the tte becomes a matter of
rght on the part of the purchaser and the
ssuance of a certfcate of sae n hs favor
becomes mnstera upon the Regstry of
Deeds.
To obtan possesson, the purchaser may ether
ask for a wrt of possesson or brng an
ndependent acton such as a sut of e|ectment.
Remedy Of Debtor If Forecosure Not Proper
The debtor, n the proceedngs n whch
possesson was requested, but not ater than 30
days after the purchaser was gven possesson,
petton the sae to be set asde and the wrt of
possesson canceed, specfyng the damages
suffered by hm, because the mortgage was not
voated or the sae was not made n
accordance wth the provsons hereof, and the
court sha take cognzance of ths petton n
accordance wth the summary procedure
provded n SEC 112 of Act 496 (now SEC 108 of
PD 1529) and f t fnds the compant of the
debtor |ustfed, t sha dspose n hs favor of a
or part of the bond whch the partes may have
furnshed by the person who obtaned the
possesson. Ether of the partes may appea
from the order of the |udge n accordance wth
SEC 14 of Act 496 (no SEC 33 of PD 1529), but
the order of possesson sha contnue n effect
durng the pendency of the appea.
Redempton
Who may redeem
1) the debtor
2) hs successor n nterest
3) any |udca credtor havng an nterest
4) any person havng a en on the property
subsequent to the mortgage under whch the
property s sod.
Period of Redemption
One year from the date of the regstraton of
certfcate of sae.
SEC 6. In a cases n whch an extra|udca sae
s made under the speca power herenbefore
referred to, the debtor, hs successors n
nterest or any |udca credtor or |udgment
credtor of sad debtor, or any person havng a
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en on the property subsequent to the
mortgage or deed of trust under whch the
property s sod, may redeem the same at any
time within the term of one year from and
after the date of the sale, and such
redempton sha be governed by the provsons
of SECs 29-31 and 35 of the Rues of Court.
Date of Sale: has been construed by the
Supreme Court as the date of regstraton of the
sherffs certfcate of forecosure sae n the
offce of the Regster of Deeds concerned.
Where the mortgaged property sod to thrd
party by the mortgagor: transfers ony the rght
to redeem the property and the rght to
possess, use and en|oy the same durng the
redempton perod.
Where the mortgaged property sod to thrd
party by mortgagee after the forecosure: the
mortgagor may st redeem t at the amount of
the prncpa obgaton pus nterest unt the
tme of actua redempton and not of the
purchase prce.
Requisites For A Valid Exercise Of Right Of
Redemption
1) The redempton must have been made wthn
a year from the date of regstraton of the
certfcate of sae.
2) Payment of the Purchase prce of the
property pus 1% nterest per month wth the
taxes, f pad by the purchaser and the amount
of hs pror en, f any computed from the date
of the regstraton of the sae up to the tme of
redempton.
3) Wrtten notce of the redempton must be
served on the offcer who made the sae and a
dupcate fed wth the proper Regstry of
Deeds.
4) The redempton must be made before the
sae s confrmed by the court.
5. Tender of payment must be made for the fu
amount of the purchase prce, otherwse, to
aow payment by nstaments woud be to aow
the extenson of the redempton perod.
Z Kinds of Redemption
1) Equty of Redempton - rght of the
mortgagor n case of a judicial foreclosure to
recover the mortgaged property after hs
defaut n the performance the condtons of the
mortgage but before the confrmaton of sae of
the mortgaged property.
2) Rght of redempton - rght of the mortgagor
n case of extrajudicial foreclosure to
redeem the mortgaged property wthn a
certan perod after t was sod for the
satsfacton of the mortgage debt. Ths s the
knd of redempton contempated n ACT 3135.
Equity of
Redemption
Right of Redemption
Governing Law
Governed by Rue 68
of the Rues of Court
Governed by SEC 29-
31 of Rue 39
Applicability
1. n |udca
forecosure of REM;
2. n E|F of REM
nvovng a bank as a
mortgagee and a
|urdca person as a
mortgagor
1. n |udca
forecosure of REM
nvovng a bank as a
mortgagee, whether
the mortgagor s a
natura or a |urdca
person;
2. n E|F of REM
However, no rght of
redempton exsts f t
nvoves a bank as a
mortgagee and a
|urdca person as a
mortgagor.
To whom conferred
Conferred by aw ony
to the mortgagor but
acqured by second
mortgagee snce hs
rght s subordnate to
the frst mortgagee.
Conferred by aw to
the mortgagor, hs
successors-n-nterest
or any |udgment
credtor of the
mortgagor.
Period
Can be exercsed
wthn a perod of not
ess than 90 days nor
more than 120 days
from entry of
|udgment or even after
forecosure of sae but
pror to confrmaton.
Can be exercsed
wthn 1 year from
date of regstraton of
certfcate of sae.
When Exercised
Can be exercsed after
entry of |udgment but
before forecosure sae
and after forecosure
sae but pror to
confrmaton of sae.
Can be exercsed ONLY
after the forecosure
sae.
Redemption Price
Redempton prce
depends on the
|udgment of the court
as to the amount due
to pantff upon
mortgage debt wth
nterest and charges
approved by the court
and costs.
Redempton prce
depends on the
purchase prce as fxed
n Sec 26 Rue 39 ROC
except n cases under
SEC 78 of the Genera
Bankng Law, the
amount and the
nterest to be pad by
the mortgagor w be
the amount due and
the rate stpuated n
the mortgage oan not
the purchase prce and
ega nterest under
the ROC.
5.2 Cases
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Acton For Forecosure Of Mortgage Prescrbes
After 10 Years From The Tme The Rght Of
Acton Accrued, I.E. When The Mortgagor
Defauts In The Payment Of Hs Obgaton
CANDO V SPOUSES OLAZO (2007)
Even from a cursory readng of the appea, t s
ndeby cear that the tra court commtted an
appang bunder when t rued that an acton
for forecosure of mortgage prescrbes after ten
(10) years from the date of the mortgage
contract. Under Artce 1142 of the Cv Code, a
mortgage acton prescrbes after ten (10) years.
|ursprudence, however, has carfed ths rue
by hodng that a mortgage acton prescrbes
after ten (10) years from the tme the rght of
acton accrued, whch s obvousy not the same
as the date of the mortgage contract. Stated
dfferenty, an acton to enforce a rght arsng
from a mortgage shoud be enforced wthn ten
(10) years from the tme the rght of acton
accrues; otherwse, t w be barred by
prescrpton and the mortgage credtor w ose
hs rghts under the mortgage. The rght of
acton accrues when the mortgagor defauts n
the payment of hs obgaton to the mortgagee.
Remedes Avaabe To Mortgagee Aternatve,
Not Successve Or Cumuatve
CALTEX PHlLS v lAC (1989)
Where a debt s secured by a mortgage and
there s a defaut n payment on the part of the
mortgagor, the mortgagee has a choce of one
(1) of two (2) remedes, but he cannot have
both. The mortgagee may: 1) forecosure the
mortgage; or 2) fe an ordnary acton to coect
the debt.
When the mortgagee chooses the forecosure of
the mortgage as a remedy, he enforces hs en
by the sae on forecosure of the mortgaged
property. The proceeds of the sae w be
apped to the satsfacton of the debt. Wth ths
remedy, he has a pror en on the property. In
case of a defcency, the mortgagee has the
rght to cam for the defcency resutng from
the prce obtaned n the sae of the rea
property at pubc aucton and the outstandng
obgaton at the tme of the forecosure
proceedngs
On the other hand, f the mortgagee resorts to
an acton to coect the debt, he thereby waves
hs mortgage en. He w have no more prorty
over the mortgaged property. If the |udgment n
the acton to coect s favorabe to hm, and t
becomes fna and executory, he can enforce
sad |udgment by executon. He can even evy
executon on the same mortgaged property, but
he w not have prorty over the atter and
there may be other credtors who have better
en on the propertes of the mortgagor.
CALTEX submts that the prncpes enuncated
n the 8achrach case are not appcabe nor
determnatve of the case at bar for the reason
that the factua crcumstances obtaned n the
sad case are totay dfferent from the nstant
case. In the 8achrach case, the pantff
nsttuted an acton to forecose the mortgage
after the money |udgment n ts favor remaned
unsatsfed whereas n the present case,
CALTEX ntay fed a compant for coecton
of the debt and durng the pendency thereof
forecosed extra|udcay the mortgage.
We dsagree. Athough the facts n the Bachrach
case and n the present case are not dentca,
there s smarty n the fact that the pantffs n
these two cases avaed of both remedes
athough they are entted to a choce of ony
one.
BANK OF AMERlCA NT & SA V AMERlCAN
REALTY CORP (1999)
Anent rea propertes n partcuar, the Court
has ad down the rue that a mortgage credtor
may nsttute aganst the mortgage debtor
ether a persona acton for debt or a rea acton
to forecose the mortgage.
In our |ursdcton, the remedes avaabe to the
mortgage credtor are deemed aternatve and
not cumuatve. Notaby, an eecton of one
remedy operates as a waver of the other. For
ths purpose, a remedy s deemed chosen upon
the fng of the sut for coecton or upon the
fng of the compant n an acton for
forecosure of mortgage, pursuant to the
provson of Rue 68 of the of the 1997 Rues of
Cv Procedure. As to extra|udca forecosure,
such remedy s deemed eected by the
mortgage credtor upon fng of the petton not
wth any court of |ustce but wth the Offce of
the Sherff of the provnce where the sae s to
be made, n accordance wth the provsons of
Act No. 3135, as amended by Act No. 4118.
In the case at bench, prvate respondent ARC
consttuted rea estate mortgages over ts
propertes as securty for the debt of the
prncpa debtors. By dong so, prvate
respondent sub|ected tsef to the abtes of a
thrd party mortgagor. Under the aw, thrd
persons who are not partes to a oan may
secure the atter by pedgng or mortgagng
ther own property. Notwthstandng, there s no
ega provson nor |ursprudence n our
|ursdcton whch makes a thrd person who
secures the fufment of another's obgaton by
mortgagng hs own property, to be sodary
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bound wth the prncpa obgor. The sgnatory
to the prncpa contract - oan - remans to be
prmary bound. It s ony upon defaut of the
atter that the credtor may have recourse on
the mortgagors by forecosng the mortgaged
propertes n eu of an acton for the recovery
of the amount of the oan.
SUlCO RATTAN & BURl lNTERlORS V CA
(2006)
The remedy of extra|udca forecosure s
deemed chosen not on the day of the sae but
on the day of the fng of a petton for
forecosure wth the offce of the Provnca
Chef. Snce the fng of petton for forecosure
was earer than the fng of acton for sum of
money, the remedy of forecosure was chosen
frst, even f the actua forecosure sae was
conducted after the fng of acton for sum of
money.
The rue s that the remedes of acton for sum
of money and forecosure are aternatve and
not cumuatve. Hence, the acton for sum of
money by Metrobank was vady dsmssed
because t aready fed a petton for
forecosure before t fed the acton. If t had
fed an acton for recovery of defcency nstead
of coecton of sum of money, t woud not have
been dsmssed. (Because recovery of
defcency s aowed for Rea Estate Mortgage
wthn 10 years after forecosure)
Mortgage nvad f mortgagor not the property
owner; doctrne of mortgagee n good fath not
appcabe
ERENA V UERRER-KAUFFMAN (2006)
One of the essenta requstes of a mortgage
contract s that the mortgagor must be the
absoute owner of the thng mortgaged. A
mortgage s thus nvad f the mortgagor s not
the property owner. In ths case, the tra court
and the CA are one n fndng that based on the
evdence on record, the owner of the property s
Kauffman who was not the one who mortgaged
the same to Erena.
The doctrne of mortgagee n good fath cannot
appy n ths case. Ths doctrne s based on the
rue that persons deang wth propertes
covered by a TCT are not requred to go beyond
what appears on the face of the tte. But ths s
ony n a stuaton where the mortgagor has a
frauduent or defectve tte, but not when the
mortgagor s an mpostor and a forger.
In a forged mortgage, as n ths case, the
doctrne of mortgagee n good fath cannot be
apped and w not beneft a mortgagee no
matter how arge s hs or her reservor of good
fath and dgence. Such mortgage s vod and
cannot pre|udce the regstered owner whose
sgnature to the deed s fasfed. When the
nstrument presented s forged, even f
accompaned by the owners dupcate
certfcate of tte, the regstered owner does
not ose hs tte, and nether does the assgnee
n the forged deed acqure any rght or tte to
the property. An nnocent purchaser for vaue s
one who purchases a tted and bay vrtue of a
deed executed by the regstered owner hmsef
not a forged deed.
Newspaper of Genera Crcuaton
PEREZ V PEREZ (2005)
To be newspaper of genera crcuaton, t s
enough that t s pubshed for the
dssemnaton of oca news and genera
nformaton; that t has a bona fde subscrpton
st of payng subscrbers and that t s pubshed
at reguar ntervas.
The newspaper must not aso be devoted to the
nterests or pubshed for the entertanment of a
partcuar cass, professon, trade, cang, race,
or regous denomnaton. The newspaper need
not have the argest crcuaton as ong as t s
of genera crcuaton.
In ths case, the Oongapo News was the ony
newspaper n genera crcuaton n Bataan at
the tme the notce of aucton was pubshed
Waver By Partes Of Postng And Pubcaton
Requrements Vod
PNB V NEPOMUCENO PRODUCTlONS, lNC.
(2002)
FACTS: Pettoner PNB granted respondents a 4
Mon Pesos credt ne to fnance the fmng of
the move "Pacfc Connecton." The oan was
secured by mortgages on respondents rea and
persona propertes, to wt: (1) the Maugay
property; (2) the Forbes property; and (3)
severa moton pcture equpments. The credt
ne was ater ncreased to 6 Mon Pesos and
fnay to 7.5 Mon Pesos. Respondents
defauted n ther obgaton. Pettoner sought
forecosure of the mortgaged propertes. The
aucton sae was re-schedued severa tmes
wthout need of repubcaton of the notce of
sae, as stpuated n the Agreement to
Postpone Sae, unt fnay, the aucton sae
proceeded, wth pettoner as the hghest bdder
n the amount of P10,432,776.97. Aggreved,
respondents fed a Cv Case wth the RTC, an
acton for annument of forecosure sae and
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damages wth n|uncton. Respondents
contended that the forecosure sae s nu and
vod because: (1) the obgaton s yet to mature
as there were negotatons for an addtona
oan amount; (2) lack of publication; (3) the
purchase prce was grossy nadequate and
unconsconabe; and (4) the forecosure
proceedngs were ntated by pettoner n bad
fath.
RTC ordered the annument and settng asde of
the forecosure proceedngs and aucton sae on
the ground that there was lack of
publication of the notice of sale. Pettoner
appeaed to the CA. CA dsmssed pettoners
appea wth regard to the Forbes Park property
as the same was aready the sub|ect of a Deed
of Reconveyance executed by pettoner n
favor of respondents as we as a Compromse
Agreement dated between the same partes.
As to the Maugay property, CA affrmed the
RTC decson.
ISSUE: WON the partes to the mortgage can
vady wave the postng and pubcaton
requrements mandated by Act No. 3135.
HELD NO. Act. No. 3135, as amended,
governng extra|udca forecosure of
mortgages on rea property s specfc wth
regard to the postng and pubcaton
requrements of the notce of sae, to wt:
"Sec. 3. Notce sha be gven by postng notces
of the sae for not ess than twenty days n at
east three pubc paces of the muncpaty or
cty where the property s stuated, and f such
property s worth more than four hundred
pesos, such notce sha aso be pubshed once
a week for at east three consecutve weeks n a
newspaper of genera crcuaton n the
muncpaty or cty."
On ths score, t s we setted that what Act No.
3135 requres s: (1) the postng of notces of
sae n three pubc paces; and, (2) the
pubcaton of the same n a newspaper of
genera crcuaton. Faure to pubsh the notce
of sae consttutes a |ursdctona defect, whch
nvadates the sae. Pettoner and
respondents have absoutey no rght to wave
the postng and pubcaton requrements of Act
No. 3135. Whe t s estabshed that rghts
may be waved, Artce 6 of the Cv Code
expcty provdes that such waver s sub|ect to
the condton that t s not contrary to aw,
pubc order, pubc pocy, moras, or good
customs, or pre|udca to a thrd person wth a
rght recognzed by aw.
The prncpa ob|ect of a notce of sae n a
forecosure of mortgage s not so much to notfy
the mortgagor as to nform the pubc generay
of the nature and condton of the property to
be sod, and of the tme, pace, and terms of the
sae. Notces are gven to secure bdders and
prevent a sacrfce of the property. Ceary, the
statutory requrements of postng and
pubcaton are mandated, not for the
mortgagors beneft, but for the pubc or thrd
persons. In fact, persona notce to the
mortgagor n extra|udca forecosure
proceedngs s not even necessary, uness
stpuated. As such, t s mbued wth pubc
pocy consderatons and any waver thereon
woud be nconsstent wth the ntent and etter
of Act No. 3135. Moreover, statutory provsons
governng pubcaton of notce of mortgage
forecosure saes must be strcty comped wth
and sght devatons therefrom w nvadate
the notce and render the sae at the very east
vodabe.
Thus, n the recent case of Deveopment Bank
of the Phppnes v. Agurre, the forecosure
sae hed more than two (2) months after the
pubshed date of sae was consdered vod for
ack of repubcaton. Smary, n the nstant
case, the ack of repubcaton of the notce of
the sub|ect forecosure sae renders t vod.
OUANO V CA (2003)
FACTS: |ueta M. Ouano obtaned a oan from
the PNB n the amount of P104,280.00. As
securty for sad oan, she executed a rea
estate mortgage over two parces of and. She
defauted on her obgaton. PNB fed a petton
for extra|udca forecosure wth the Cty Sherff
of Mandaue Cty. The sherff prepared a notce
of sae settng the date of pubc aucton of the
two parces of and on December 5, 1980 at
9:00 a.m. to 4:00 p.m. He caused the notce to
be pubshed n the Cebu Day Tmes, a
newspaper of genera crcuaton n Mandaue
Cty, n ts ssues of November 13, 20 and 27,
1980. He kewse posted copes thereof n
pubc paces n Mandaue Cty and n the pace
where the propertes are ocated. However, the
sae as schedued and pubshed dd not take
pace as the partes, on four separate dates,
executed Agreements to Postpone Sae
(Agreements). These Agreements were
addressed to the sherff, requestng the atter to
defer the aucton sae to another date at the
same tme and pace, "wthout any further
repubcaton of the Notce." In a the
postponements, no new notce of sae was
ssued, nor was there any repubcaton or
repostng of notce for the reschedued dates.
Fnay, on May 29, 1981, the sherff conducted
the aucton sae, awardng the two parces of
and to PNB, the ony bdder. He executed a
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Certfcate of Sae certfyng the sae for and n
consderaton of P195, 510.50.
As |ueta faed to redeem the propertes wthn
the one year perod from regstraton of sae,
PNB consodated ts tte on February 12, 1983.
On February 23 of the same year, t conveyed
the propertes to Afredo Ouano, the brother of
|ueta, under a Deed of Promse to Se payabe
n fve years. On March 28, 1983, |ueta sent
demand etters to PNB and Ouano, pontng out
rreguartes n the forecosure sae. On Apr
18, 1983, |ueta fed a compant wth the RTC
of Cebu for the nufcaton of the May 29, 1981
forecosure sae. Ouano fed a moton for
eave to ntervene, and fed hs Answer n
Interventon to protect hs rghts over the
propertes.
Whe the case was pendng, on February 25,
1986, PNB executed a Deed of Sae n favor of
Ouano. The Regster of Deeds of Mandaue Cty
accordngy canceed the TCTs n PNBs name
and ssued n eu thereof TCTs n the name of
pettoner over the two parces of and. On
|anuary 29, 1990, the Regona Tra Court of
Cebu rendered a decson n favor of |ueta,
hodng that the ack of repubcaton rendered
the forecosure sae vod. Not satsfed, PNB
and Ouano brought the case to the CA. In ts
decson, sad court affrmed the tra courts
rung on the same ground that there was no
compance wth the mandatory requrements of
postng and pubcaton of notce of sae. Ouano
fed a moton for reconsderaton, whch was
dened for ack of mert by the same court on
Apr 15, 1997.
ISSUE: WON requrements of Act No. 3135 were
comped wth n the May 29, 1981 forecosure
sae
HELD: NO. Act No. 3135 (as amended by Act
No. 4118) SEC 3, whch provdes:
SEC. 3. Notce sha be gven by postng notces
of the sae for not ess than twenty (20) days n
at east three pubc paces of the muncpaty
or cty where the property s stuated, and f
such property s worth more than four hundred
pesos, such notce sha aso be pubshed once
a week for at east three consecutve weeks n a
newspaper of genera crcuaton n the
muncpaty of cty.
It s a we-setted rue that statutory provsons
governng pubcaton of notce of mortgage
forecosure saes must be strictly complied
with, and that even sght devatons therefrom
w nvadate the notce and render the sae at
east vodabe. Faure to advertse a mortgage
forecosure sae n compance wth statutory
requrements consttutes a |ursdctona defect
nvadatng the sae. Consequenty, such defect
renders the sae absoutey vod and no tte
passes.
Ouano, however, nssts that there was
substanta compance wth the pubcaton
requrement, consderng that pror pubcaton
and postng of the notce of the frst date were
made.
In Tambunting v. Court of Appeals, we hed that
repubcaton n the manner prescrbed by Act
No. 3135 s necessary for the vadty of a
postponed extra|udca forecosure sae. Thus
we stated:
Where requred by the statute or by the terms
of the forecosure decree, pubc notce of the
pace and tme of the mortgage forecosure sae
must be gven, a statute requrng t beng hed
appcabe to subsequent saes as we as to the
frst advertsed sae of the property
Ouano further contends that repubcaton may
be waved vountary by the partes.
Ths argument has no bass n aw.
See PNB vs. Nepomuceno
The prncpa ob|ect of a notce of sae n a
forecosure of mortgage s not so much to notfy
the mortgagor as to nform the pubc generay
of the nature and condton of the property to
be sod, and of the tme, pace, and terms of the
sae. Notces are gven to secure bdders and
prevent a sacrfce of the property. Ceary, the
statutory requrements of postng and
pubcaton are mandated, not for the
mortgagors beneft, but for the pubc or thrd
persons. In fact, persona notce to the
mortgagor n extra|udca forecosure
proceedngs s not even necessary, uness
stpuated. As such, t s mbued wth pubc
pocy consderatons and any waver thereon
woud be nconsstent wth the ntent and etter
of Act No. 3135. Pubcaton, therefore, s
requred to gve the forecosure sae a
reasonaby wde pubcty such that those
nterested mght attend the pubc sae. To aow
the partes to wave ths |ursdctona
requrement woud resut n convertng nto a
prvate sae what ought to be a public aucton.
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Moreover, assumng arguendo that the wrtten
wavers are vad, we fnd notceabe faws that
woud nevertheess nvadate the forecosure
proceedngs. First, the Agreements, as worded,
ony waved "further repubcaton of the notce
of sae." Nothng n the Agreements ndcates
that the partes kewse dspensed wth the
repostng of the notces of sae. As there was no
repostng of notce of the May 29, 1981 sae,
the forecosure fe short of the requrements of
Act No. 3135. 5econd, we observe that the
Agreements were executed and fed wth the
sherff severa days after each reschedued
date. The frst agreement was tmey fed, two
days pror to the orgnay schedued sae on
December 5, 1980. The subsequent
agreements, however, was executed and fed
severa days after the reschedued saes. On the
reschedued dates, therefore, no pubc sae
occurred, nor was there any request to
postpone fed wth the sherff, except for the
frst one. In short, the Agreements are ceary
defectve for havng been beatedy executed
and fed wth the sherff. PNB s at faut. It s the
mortgagee who causes the mortgaged property
to be sod, and the date of sae s fxed upon hs
nstructon. PNBs nacton on the schedued
date of sae and beated fng of requests to
postpone may be deemed as an abandonment
of the petton to forecose t fed wth the
sherff. Consequenty, ts rght to forecose the
mortgage based on sad petton apsed.
Ouano asserts that Rue 39, SEC 24 of the Rues
of Court, whch aows ad|ournment of executon
saes by agreement of the partes shoud be
apped.
The sad provson provdes:
Sec. 24. Adjournment of 5ale - By wrtten
consent of debtor and credtor, the offcer may
ad|ourn any sae upon executon to any date
agreed upon n wrtng by the partes. Wthout
such agreement, he may ad|ourn the sae from
day to day, f t becomes necessary to do so for
ack of tme to compete the sae on the day
fxed n the notce.
Dstncton shoud be made of the three
dfferent knds of saes under the aw, namey:
an ordnary executon sae (ROC Rue 39)
a |udca forecosure sae (ROC Rue 68)
an extra|udca forecosure sae (Act 3135)
A dfferent set of aw appes to each cass of
sae mentoned. The cted provson n the
Rues of Court hence does not appy to an
extra|udca forecosure sae. Moreover, even
assumng that the aforected provson appes,
a t authorzes s the ad|ournment of the
executon sae by agreement of the partes.
Nowhere does t state that repubcaton and
repostng of notce for the postponed sae may
be waved. Thus, t cannot, by any means,
sancton the waver n the case at bar.
Pubcaton Of Notce Of Forecosure Sae More
Than Suffcent Compance Wth The Postng
Notce Requrement Of The Law
OLlZON V CA(1994)
We take |udca notce of the fact that
newspaper pubcatons have more far-reachng
effects than postng on buetn boards n pubc
paces. There s a greater probabty that an
announcement or notce pubshed n a
newspaper of genera crcuaton, whch s
dstrbuted natonwde, sha have a readershp
of more peope than that posted n a pubc
buetn board, no matter how strategc ts
ocaton may be, whch caters ony to a mted
few. Hence, the pubcaton of the notce of sae
n the newspaper of genera crcuaton aone s
more than suffcent compance wth the notce-
postng requrement of the aw. By such
pubcaton, a reasonaby wde pubcty had
been effected such that those nterested mght
attend the pubc sae, and the purpose of the
aw had been thereby subserved.
The ob|ect of a notce of sae s to nform the
pubc of the nature and condton of the
property to be sod, and of the tme, pace and
terms of the sae. Notces are gven for the
purpose of securng bdders and to prevent a
sacrfce of the property. If these ob|ects are
attaned, mmatera errors and mstakes w
not affect the suffcency of the notce; but f
mstakes or omssons occur n the notces of
sae, whch are cacuated to deter or msead
bdders, to deprecate the vaue of the property,
or to prevent t from brngng a far prce, such
mstakes or omssons w be fata to the
vadty of the notce, and aso to the sae made
pursuant thereto.
In the nstant case, the aforesad ob|ectve was
attaned snce there was suffcent pubcty of
the sae through the newspaper pubcaton.
There s competey no showng that the
property was sod for a prce far beow ts vaue
as to nsnuate any bad fath, nor was there any
showng or even an ntmaton of couson
between the sherff who conducted the sae and
respondent bank. Ths beng so, the aeged
non-compance wth the postng requrement,
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even f true, w not |ustfy the settng asde of
the sae.
Forecosure Vod If Sae Does Not Take Pace On
The Date Specfed In Pubshed Notce
DBP V AGUlRRE (2001)
Faure to post notce s not per se a ground for
nvadatng the sae, provded notce s duy
pubshed n a newspaper of genera crcuaton.
In Ozon vs. CA, the Court hed that newspaper
have more-far-reachng effects than postng on
buetn boards n pubc paces. Because of the
greater probabty of readershp of more peope
and that newspapers are dstrbuted
natonwde, there s a reasonaby wde pubcty.
Those nterested mght attend the pubc sae.
Pubcaton n the newspaper of genera
crcuaton aone s more than suffcent
compance wth the notce-postng requrement
of the aw.
Here, the sae was hed more than two months
after the pubshed date of the sae, renderng
the sae vod. In Masantol Rural 8ank, lnc. v.
CA the Court stated that faure to pubsh the
notce of aucton sae as requred by the statute
consttutes a |ursdctona defect whch
nvadates the sae. Masanto squarey appes.
Athough ack of repubcaton of notce of sae
has not been rased, SC may rue on the
reevant ssue of DBPs ack of |ursdcton to
hod the forecosure sae.
Repubcaton Of Notce Of Sae
DBP V CA (2003)
Postng requrement was comped wth n ths
case but not the pubcaton requrement. DBP
pubshed the notce of aucton sae schedued
on 12 August 1986. However, no aucton sae
took pace on 12 August 1986 because DBP, at
the nstance of ERHC, agreed to postpone the
same to 11 September 1986.
The Court hed recenty n Ouano v. Court of
Appeas that repubcaton n the manner
prescrbed by Act No. 3135 s necessary for the
vadty of a postponed extra|udca forecosure
sae. Another pubcaton s requred n case the
aucton sae s reschedued, and the absence of
such repubcaton nvadates the forecosure
sae.
The Court aso rued n Ouano that the partes
have no rght to wave the pubcaton
requrement n Act No. 3135.
Pubcaton, therefore, s requred to gve the
forecosure sae a reasonaby wde pubcty
such that those nterested mght attend the
pubc sae. To aow the partes to wave ths
|ursdctona requrement woud resut n
convertng nto a prvate sae what ought to be
a pubc aucton.
Forecosure Of Mortgage Arsng Out Of A
Settement Of Estate Not Covered By Act 3135
PNB V CA (2001)
WON Act 3135 s appcabe n the case? NO.
WON PNB may st recover defcency from the
estate? NO. Snce t eected to extra-|udcay
forecose the mortgage.
The case at bar nvoves a forecosure of
mortgage arsng out of a settement of estate,
wheren the admnstrator mortgaged a
property beongng to the estate of the
decedent, pursuant to an authorty gven by the
probate court. The Rues of Court on Speca
Proceedngs comes nto pay decsvey. SEC 7,
Rue 86 of the Rues of Court s appropratey
appcabe to the case at hand and not Act
3135.
Case aw now hods that ths rue grants to the
mortgagee three dstnct, ndependent and
mutuay excusve remedes that can be
aternatvey pursued by the mortgagee credtor
for the satsfacton of hs credt n case the
mortgagor des, among them:
1. To wave the mortgage and cam the entre
debt from the estate of the mortgagor as an
ordnary cam;
2. To forecose the mortgage |udcay and
prove any defcency as an ordnary cam; and
3. To rey on the mortgage excusvey,
forecosng the same at any tme before t s
barred by prescrpton wthout rght to fe a
cam for defcency.
The pan resut of adoptng the ast mode of
forecosure, whch PNB dd n ths case, s that
the credtor waves hs rght to recover any
defcency from the estate.
Inadequacy of Bd Prce
VALMONTE V CA (1999)
It s we-setted that when there s rght to
redeem, nadequacy of prce s of no moment
for the reason that the |udgment debtor has
aways had the chance to redeem and reacqure
the property. In fact, the property may be sod
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for ess of ts far market vaue precsey
because the esser the prce, the easer for the
owner to effect redempton.
Issuance Of A Wrt Of Possesson
SAMSON V RlVERA (2004)
Ths Court has consstenty hed that the duty of
the tra court to grant a wrt of possesson s
mnstera. Such wrt ssues as a matter of
course upon the fng of the proper moton and
the approva of the correspondng bond. No
dscreton s eft to the tra court. Any queston
regardng the reguarty and vadty of the sae,
as we as the consequent canceaton of the
wrt, s to be determned n a subsequent
proceedng as outned n SEC 8 of Act 3135.
Such queston cannot be rased to oppose the
ssuance of the wrt, snce the proceedng s ex
parte. The recourse s avaabe even before the
expraton of the redempton perod provded by
aw and the Rues of Court.
The purchaser, who has a rght to possesson
that extends after the expraton of the
redempton perod, becomes the absoute
owner of the property when no redempton s
made. Hence, at any tme foowng the
consodaton of ownershp and the ssuance of
a new transfer certfcate of tte n the name of
the purchaser, he or she s even more entted
to possesson of the property. In such a case,
the bond requred under SEC 7 of Act 3135 s no
onger necessary, snce possesson becomes an
absoute rght of the purchaser as the confrmed
owner.
Ths Court has ong setted that a pendng
acton for annument of mortgage or forecosure
does not stay the ssuance of a wrt of
possesson. Therefore, the contenton of
pettoners that the RTC shoud have
consodated Cv Case No. 01-6219 wth LR
Case No. 01-2698 and resoved the annument
case pror to the ssuance of the Wrt of
Possesson s unavang.
DBP V SPOUSES GATAL (2005)
WON the RTC vady dsmssed the petton for
wrt of possesson on the ground of Lts
Pendenta gven that a compant for n|uncton
wth TRO was pendng, n whch acton sought
to decare the sae to Torrefranca as vod and to
uphod the spouses rght to pre-empton. NO.
The rghts asserted and the reefs sought by
the partes n both cases are not dentca. Thus,
Lts Pendenta s unavang.
Sec 33, Rue 39 of the ROC: f no redempton be
made wthn a year from the date of the
regstraton of the certfcate of sae, the
purchaser s entted to a conveyance and
possesson of the property,
Here, no redempton was made wthn a year
from |anuary 1996. So n August, 1997, more
than a year after, DBP fed a petton for wrt of
possesson. Ths s n order.
Where, as here, the tte s consodated n the
name of the mortgagee, the wrt of possesson
becomes a matter of rght on the part of the
mortgagee, and a mnstera duty on the part of
the court to ssue the same.
The pendency of a separate cv sut
questonng the vadty of the sae of the
mortgaged property cannot bar the ssuance of
the wrt of possesson.
Postng Of Bond Not Necessary If Wrt Of
Possesson Apped For After Ownershp Has
Vested On The Credtor-Mortgagee
METROPOLlTAN BANK AND TRUST
COMPANY V SPOUSES BANCE (2008)
The wrt of possesson was not rreguar despte
the fact that pettoner dd not post a bond. The
postng of a bond as a condton for the
ssuance of the wrt of possesson becomes
necessary ony f t s apped for wthn one year
from the regstraton of the sae wth the
regster of deeds, i.e., durng the redempton
perod nasmuch as ownershp has not yet
vested on the credtor-mortgagee. After the
one-year perod, and no redempton was made,
the mortgagor oses a nterest over t. In ths
case, respondents were aready strpped of
ther rghts over the propertes when they faed
to redeem the same wthn one year from May
3, 1999, the date of regstraton of the sae.
Hence, when pettoner apped for the wrt after
the expraton of the redempton perod there
was even more reason to ssue the wrt.
Excepton To The Rue That Issuance Of Wrt Of
Possesson Mnstera And May Be Done Ex
Parte
CHlNA BANKlNG CORP V SPOUSES LOZADA
(2008)
The excepton provded under SEC 33 of Rue
39 of the Revsed Rues of Court (to the genera
rue that ssuance of a wrt of possesson s
mnstera and may be done ex parte)
contempates a stuaton n whch a thrd party
hods the property by adverse tte or rght,
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such as that of a co-owner, tenant or
usufructuary. The co-owner, agrcutura
tenant, and usufructuary possess the property
n ther own rght, and they are not merey the
successor or transferee of the rght of
possesson of another co-owner or the owner of
the property. The spouses Lozada cannot cam
that ther rght of possesson over Unt No. 402
s anaogous to any of these.
It s true that n the case presenty before ths
Court, PPGI executed n favor of the spouses
Lozada the Contract to Se coverng Unt No.
402 before t consttuted n favor of CBC the
rea estate mortgages on 51 Pro|ect unts
ncudng Unt No. 402. Nonetheess, t must be
emphaszed that what PPGI executed n favor of
the spouses Lozada was a Contract to Se, a
mere promse to se, whch, at the moment of
ts executon, dd not yet transfer possesson,
much ess, tte to Unt No. 402 from PPGI to the
spouses Lozada. When PPGI consttuted the
rea estate mortgage on Unt No. 402 n favor of
CBC sx months ater, possesson of and tte to
the property st resded n PPGI. And when
PPGI subsequenty ceded possesson of Unt No.
402, upon ts competon, to the spouses
Lozada, such rght was aready burdened by the
terms and condtons of the mortgage
consttuted thereon. By merey steppng nto
the shoes of PPGI, the spouses Lozadas rght of
possesson to Unt No. 402 cannot be ess or
more than PPGIs.
The spouses Lozada, havng succeeded PPGI n
the possesson of Unt No. 402, cannot be
consdered a thrd party hodng the sad
property adversey to PPGI, the defautng
debtor/mortgagor. Resutanty, the genera
rue, and not the excepton, appes to the
nstant Petton. It was the mandatory and
mnstera duty of the Makat Cty RTC to grant
the ex parte petton of CBC and order the
ssuance of a wrt of possesson n the atters
favor over Unt No. 402. It was kewse
mandatory and mnstera for the Cerk of Court
to compy wth the Makat Cty RTC order by
ssung the wrt of possesson, and for the
Sherff to mpement the wrt by frst ssung a
notce to vacate to the occupants of Unt No.
402.
Nature Of Redempton Perod
SPOUSES LANDRlTO V CA (2005)
In Lazo v. Repubc Surety & Insurance Co., Inc.,
ths Court has made t cear that t s ony
where, by vountary agreement of the partes,
consstng of extensons of the redempton
perod, foowed by commtment by the debtor
to pay the redempton prce at a fxed date, w
the concept of ega redempton be converted
nto one of conventona redempton.
Here, there s no showng whatsoever that
pettoners agreed to pay the redempton prce.
On the contrary, ther act of fng ther
compant to decare the nuty of the
forecosure sae s ndcatve of ther refusa to
pay the redempton prce on the aeged
deadne set by the husband. At the very east,
f they so beeved that ther oan obgaton was
ony for P1,000,000.00, pettoners shoud have
made an offer to redeem wthn one (1) year
from the regstraton of the sherffs certfcate
of sae, together wth a tender of the same
amount. Ths, they never dd.
It must be remembered that the perod of
redempton s not a prescrptve perod but a
condton precedent provded by aw to restrct
the rght of the person exercsng redempton.
Correspondngy, f a person exercsng the rght
of redempton has offered to redeem the
property wthn the perod fxed, he s
consdered to have comped wth the condton
precedent prescrbed by aw and may
thereafter brng an acton to enforce
redempton. If, on the other hand, the perod s
aowed to apse before the rght of redempton
s exercsed, then the acton to enforce
redempton w not prosper, even f the acton
s brought wthn the ordnary prescrptve
perod. Moreover, the perod wthn whch to
redeem the property sod at a sherffs sae s
not suspended by the nsttuton of an acton to
annu the forecosure sae. It s cear, then, that
pettoners have ost any rght or nterest over
the sub|ect property prmary because of ther
faure to redeem the same n the manner and
wthn the perod prescrbed by aw. Ther
beated attempts to queston the egaty and
vadty of the forecosure proceedngs and
pubc aucton must accordngy fa.
One Year Of Perod Of Redempton Computed
From Date Of Regstraton Of Certfcate Of
Forecosure Sae
REYES V NOBLE]AS (1967)
Redempton s not the concern merey of the
aucton-vendee and the mortgagor, but aso of
the atters successors n nterest or any |udca
credtor or |udgment credtor of sad mortgagor,
or any person havng a en on the property
subsequent to the mortgage under whch the
property has been sod. It s precsey for ths
reason that the certfcate of sae shoud be
regstered, for ony upon such regstraton may
t egay be sad that proper notce, though
constructve, has been served unto possbe
redemptoners contempated n the aw. It s for
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ths reason that the date of sae mentoned n
SEC 6 of Act 3135 shoud be construed to mean
the date of regstraton of the certfcate of sae
n the offce of the regster of deeds concerned.
The Land Regstraton Commssoner was rght
n orderng the Regster of Deeds of Rza to
deny the regstraton of the Deed of Sae and
the Affdavt of Consodaton of Ownershp, the
smutaneous regstraton of whch documents
was sought by heren pettoner even before the
certfcate of sae ssued by the sherff was
regstered.
Extenson Of 1-Year Redempton Perod
LAZO V REPUBLlC SURETY (1970)
The partes had abandoned entrey the concept
of ega redempton n ths case and converted
t nto one of conventona redempton, n whch
the ony governng factor was the agreement
between them.
The pantffs' repeated requests for tme wthn
whch to redeem, each wth a defnte date of
expraton, generated bndng contracts when
approved by the defendant company. A
contract, needess to say, has the force of aw
between the partes. In any event, the prncpe
of estoppe woud step n to prevent the
pantffs from gong back upon ther own acts
and representatons to the pre|udce of the
other party who reed upon them. Ths s a
prncpe of equty and natura |ustce, expressy
adopted n our Cv Code (Arts. 1431 et seq.)
and artcuated as one of the concusve
presumptons n Rue 31, Sec. 3(a), of our Rues
of Court as foows:
Whenever a party has, by hs own decaraton,
act, or omsson, ntentonay and deberatey
ed another to beeve a partcuar thng true,
and to act upon such beef, he cannot, n any
tgaton arsng out of such decaraton, act, or
omsson, be permtted to fasfy t.
lBAAN RURAL BANK V CA (1999)
When pettoner receved a copy of the
Certfcate of Sae regstered n the Offce of the
Regster of Deeds of Lpa Cty, t had actua and
constructve knowedge of the certfcate and ts
contents. For two years, t dd not ob|ect to the
two-year redempton perod provded n the
certfcate. Thus, t coud be sad that pettoner
consented to the two-year redempton perod
especay snce t had tme to ob|ect and dd
not. When crcumstances mpy a duty to speak
on the part of the person for whom an
obgaton s proposed, hs sence can be
construed as consent. By ts sence and
nacton, pettoner msed prvate respondents
to beeve that they had two years wthn whch
to redeem the mortgage. After the apse of two
years, pettoner s estopped from assertng that
the perod for redempton was ony one year
and that the perod had aready apsed.
The doctrne n Lazo vs. Repubc Surety and
Insurance Co., Inc. does not appy n ths case.
In that case the court hed that the one year
perod of redempton provded n Act No. 3135
s ony drectory and can be extended by
agreement of the partes. But t bears notng
that n Lazo the partes vountary agreed to
extend the redempton perod. Thus, the
concept of ega redempton was converted by
the partes n Lazo nto conventona
redempton. Ths s not so n the nstant case.
There was no vountary agreement. In fact, the
sherff unateray and arbtrary extended the
perod of redempton to two (2) years n the
Certfcate of Sae. The partes were not even
prvy to the extenson made by the sherff.
Nonetheess, as above dscussed, the bank
cannot after the apse of two years nsst that
the redempton perod was one year ony.
Addtonay, the rue on redempton s beray
nterpreted n favor of the orgna owner of a
property. The fact aone that he s aowed the
rght to redeem ceary demonstrates the
soctousness of the aw n gvng hm another
opportunty, shoud hs fortune mprove, to
recover hs ost property.
Rght Of Redempton Dstngushed From Equty
Of Redempton
HUERTA ALBA RESORT V CA (2000)
From the varous decsons, resoutons and
orders a quo t can be geaned that what
pettoner has been ad|udged to have was ony
the equty of redempton over sub|ect
propertes. On the dstncton between the
equty of redempton and rght of redempton,
the case of Gregoro Y. Lmpn vs. Intermedate
Appeate Court,7 |166 SCRA 87.| comes to the
fore:
The equty of redempton s, to be sure,
dfferent from and shoud not be confused wth
the rght of redempton.
The rght of redempton n reaton to a
mortgage - understood n the sense of a
prerogatve to re-acqure mortgaged property
after regstraton of the forecosure sae - exsts
ony n the case of the extra|udca forecosure
of the mortgage. No such rght s recognzed n
a |udca forecosure except ony where the
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mortgagee s the Phppne Natona Bank or a
bank or bankng nsttuton.
Where a mortgage s forecosed extra|udcay,
Act 3135 grants to the mortgagor the rght of
redempton wthn one (1) year from the
regstraton of the sherffs certfcate of
forecosure sae.
Where the forecosure s |udcay effected,
however, no equvaent rght of redempton
exsts. The aw decares that a |udca
forecosure sae, when confrmed by an order
of the court, x x sha operate to dvest the
rghts of a the partes to the acton and to vest
ther rghts n the purchaser, sub|ect to such
rghts of redempton as may be aowed by aw.
Such rghts exceptonay aowed by aw (.e.,
even after confrmaton by an order of the
court) are those granted by the charter of the
Phppne Natona Bank (Acts No. 2747 and
2938), and the Genera Bankng Act (R.A. 337).
These aws confer on the mortgagor, hs
successors n nterest or any |udgment credtor
of the mortgagor, the rght to redeem the
property sod on forecosure - after confrmaton
by the court of the forecosure sae - whch rght
may be exercsed wthn a perod of one (1)
year, counted from the date of regstraton of
the certfcate of sae n the Regstry of
Property.
But, to repeat, no such rght of redempton
exsts n case of |udca forecosure of a
mortgage f the mortgagee s not the PNB or a
bank or bankng nsttuton. In such a case, the
forecosure sae, when confrmed by an order
of the court. x x sha operate to dvest the
rghts of a the partes to the acton and to vest
ther rghts n the purchaser. There then exsts
ony what s known as the equty of redempton.
Ths s smpy the rght of the defendant
mortgagor to extngush the mortgage and
retan ownershp of the property by payng the
secured debt wthn the 90-day perod after the
|udgment becomes fna, n accordance wth
Rue 68, or even after the forecosure sae but
pror to ts confrmaton.
Ths s the mortgagors equty (not rght) of
redempton whch, as above stated, may be
exercsed by hm even beyond the 90-day
perod from the date of servce of the order,
and even after the forecosure sae tsef,
provded t be before the order of confrmaton
of the sae. After such order of confrmaton, no
redempton can be effected any onger.
Redempton Prce To Be Pad By
Accommodaton Mortgagors
BELO V PNB (2001)
Eduardo Beo, assgnor of the pettoners, s an
accommodaton mortgagor. Accommodaton
mortgagors as such are not n any way abe for
the payment of the oan or prncpa obgaton
of the debtor/borrower. The abty of the
accommodaton mortgagor extends ony up to
the oan vaue of ther mortgaged property and
not to the entre oan tsef. Hence, t s ony |ust
that they be aowed to redeem ther mortgaged
property by payng ony the winning bid price
plus interest at the pubc aucton sae wth
respect ony to the property beongng to the
accommodaton mortgagor.
The prncpe of ndvsbty of mortgage
contracts does not appy to the rght of
redempton of an accommodaton mortgagor
and her assgnees. Indvsbty arses ony
where there s a debt, that s, there s a debtor-
credtor reatonshp. But, ths reatonshp s
wantng n the case at bar n the sense that
pettoners are assgnees of an accommodaton
mortgagor and not of a debtor-mortgagor.
Hence, t s far and ogca to aow the
pettoners to redeem ony the property
beongng to ther assgnor, Eduardo Beo.
Wth respect to the 4 parces of and beongng
to Esabon Spouses, pettoners beng tota
strangers to sad ots ack ega personaty to
redeem the same. Far pay and |ustce demand
that respondent PNBs nterest of recoverng ts
entre bank cam shoud not be at the expense
of pettoners, as assgnees of Beo, who s not
ndebted to t.
Preservng The Rght Of Redempton Beyond
Redempton Perod
Hl-YlELD REALTY V CA (2002)
What s the redemptoners opton therefore
when the redempton perod s about to expre
and the redempton cannot take pace on
account of dsagreement over the redempton
prce?
Accordng to |ursprudence, the redemptoner
faced wth such a probem may preserve hs
rght of redempton through |udca acton
whch n every case must be fed wthn the
one-year perod of redempton. The fng of the
court acton to enforce redempton, beng
equvaent to a forma offer to redeem, woud
have the effect of preservng hs redemptve
rghts and "freezng" the expraton of the one-
year perod. Ths s a far nterpretaton
provded the acton s fed on tme and n good
fath, the redempton prce s fnay determned
and pad wthn a reasonabe tme, and the
rghts of the partes are respected.
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Stated otherwse, the foregong nterpretaton,
as apped to the case at bar, has three crtca
dmensons: (1) tmey redempton or
redempton by expraton date (or, as what
happened n ths case, the redemptoner was
forced to resort to |udca acton to "freeze" the
expraton of the redempton perod); (2) good
fath as aways, meanng, the fng of the
prvate respondents acton on August 13, 1993
must have been for the soe purpose of
determnng the redempton prce and not to
stretch the redemptve perod ndefntey; and
(3) once the redempton prce s determned
wthn a reasonabe tme, the redemptoner
must make prompt payment n fu.
In the nstant case, the respondents dd not
tender payment wthn the perod set by the
tra court. Instead, they asked for a 45-day
extenson to tender payment. Such 45-day
extenson for payment must be dened.
The pendency of the rght of redempton
depresses the market vaue of the and unt the
perod expres. Permttng prvate respondent to
fe a sut for redempton, wth ether party
unabe to foresee when fna |udgment w
come, renders meanngess the perod fxed by
the statute for effectng the redempton. It
makes the redemptve perod ndefnte and
crppes any effort of the andowner to reaze
the vaue of hs and. In the same way, the
buyer cannot mmedatey recover hs
nvestment. Thus, uness and unt the
redempton s resoved wth fnaty, both the
andowners and buyers needs cannot be met.
Pettoner and prvate respondent heren were
thus bascay posed on smar footng before
redempton. But whoever of them stands to be
rreparaby n|ured n the ong run deserves the
Courts equtabe protecton.
In the nstant case, the fact that prvate
respondent made a forma offer to redeem
before the expraton of the perod to redeem
was not squarey at ssue. The foca ssue here
s whether or not the extenson of the
redemptve perod by the tra court was we
wthn prvate respondents preserved rght to
redeem. The crcumstances ceary show t was
not.
The opportunty to redeem the sub|ect property
was never dened to prvate respondent. Hs
tmey forma offer through |udca acton to
redeem was kewse recognzed. But that s
where t ends. We cannot sancton and grant
every succeedng moton or petton - specay
f frvoous or unreasonabe - fed by hm
because ths woud manfesty and
unreasonaby deay the fna resouton of
ownershp of the sub|ect property.
In ths case, no defnte tender of payment was
made snce there s no consgnaton.
Consgnaton shoud have been made to show
good fath and fnanca capabty to redeem.
Faure to consgn was downrght refectve of
Francscos ncapabty to pay from the very
start
Case For |udca Redempton Not Fed In Good
Fath But For The Purpose Of Stretchng The
Perod Of Redempton Indefntey
TOLENTlNO V CA (2007)
The genera rue n redempton s that t s not
suffcent that a person offerng to redeem
smpy manfests hs/her desre to do so. The
statement of ntenton must be accompaned by
an actua and smutaneous tender of payment.
Ths consttutes the exercse of the rght to
repurchase. Bona fde redempton necessary
mpes a reasonabe and vad tender of the
entre purchase prce, otherwse the rue on the
redempton perod fxed by aw can easy be
crcumvented.
The records show that the correct redempton
prce had been determned pror to the fng of
the compant for |udca redempton. Pettoner
had been furnshed updated Statements of
Account specfyng the redempton prce even
pror to the consodaton of the tte of the
forecosed property n the bank's name. The
ncuson of ate payment charges, forecosure
expense, attorney's fees, qudated damages,
forecosure fee, and nterests theren was
pursuant to the Loan Agreement. Consderng
that the Loan Agreement was read and freey
adhered to by pettoner, the stpuatons
theren are bndng on her. Based on the
foregong, t s cear that pettoner dd not fe
the nstant case for |udca redempton n good
fath. It was not fed for the purpose of
determnng the correct redempton prce but to
stretch the redempton perod ndefntey,
whch s not aowed by aw.