Yuliongsiu vs Philippine National Bank (Cebu Branch) GR No L-19227

Feb 17 1968-75DE00.txt

FACTS:
Plaintiff-appellant Diosdado Yuliongsiu owned two vessels, the M/S Surigao valued at P109,925.78
and the M/S Don Dino valued at P63,000.00. He also operated the FS-203 valued at P210,672.24,
which he purchased on installment from the Philippine Shipping Commission. By January or February
1943, he had paid P76,500 with a balance of P50,000 due at the end of the year.
In June 1947, the plaintiff obtained a P50,000 loan from the defendant Philippine National Bank, Cebu
Branch, using his vessels and equity in FS-203 as security. He made a partial payment of P20,000 and
signed promissory notes for the remaining balance, which he subsequently failed to pay. As a result,
the bank filed criminal charges against him for estafa as he had fraudulently deposited checks with no
funds in the drawee bank. Plaintiff was convicted, and a writ of execution was returned unsatisfied
due to insolvency.
After the first note fell due, the bank took possession of the pledged vessels, selling them to itself for
P30,042.72. The FS-203 was surrendered to the Philippine Shipping Commission for non-payment.
This led the plaintiff to sue the bank in 1948 to recover the vessels or their value. The trial court ruled
in favor of the bank, citing the justification provided by the pledge contract. Plaintiff's motion for a
new trial was denied, prompting an appeal to the Supreme Court.
The Supreme Court upheld the lower court's decision, affirming that the bank had the right to take
possession of the vessels when necessary as per the pledge contract. The court also deemed the sale
of the vessels by the bank to itself as valid under the circumstances. The court rejected plaintiff's
arguments regarding the sale's validity, stating that public sale requirements with prior notice do not
apply to pledges. It also highlighted that the bank had the authority to purchase the property in
foreclosure sales, and plaintiff could have redeemed the vessels. Ultimately, the court affirmed the
lower court's decision, dismissing plaintiff's claims of damages and awarding costs against him.

ISSUES:
1. Did the Philippine National Bank have the legal right to take possession of the vessels pledged by
the plaintiff after he failed to pay the remaining balance of the loan?
2. Was the sale of the vessels by the bank to itself considered valid under the circumstances as per
the pledge contract?
3. Were the statutory requirements for public sales with prior notice applicable in the case of the
pledge made by the plaintiff to the bank?

RULING:
* The Philippine National Bank had the legal right to take possession of the vessels pledged by the
plaintiff after he failed to pay the remaining balance of the loan.
* The sale of the vessels by the bank to itself was considered valid under the circumstances as per the
terms of the pledge contract.
* The statutory requirements for public sales with prior notice were not applicable to the pledge
made by the plaintiff to the bank.
* The court affirmed the lower court's decision, ruling in favor of the Philippine National Bank and
dismissing the plaintiff's claims of damages. Costs were awarded against the plaintiff.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Pledge Contract: In this case, the court ruled that the Philippine National Bank had the legal right to
take possession of the vessels pledged by the plaintiff as security for the loan he obtained. This action
was justified based on the terms of the pledge contract entered into between the bank and the
plaintiff. The pledge contract allowed the bank to exercise its rights to the pledged vessels in the
event of default, which the plaintiff had committed by failing to pay the remaining balance of the
loan.
2. Validity of Sale: The court deemed the sale of the vessels by the bank to itself as valid under the
circumstances of the case. This is in line with the principle that in cases of default on a pledge, the
pledgee (in this case, the bank) has the right to foreclose on the pledged property to recover the
outstanding debt. The validity of the sale was upheld by the court, as it was done in accordance with
the terms of the pledge contract and the bank's rights as a pledgee.

3. Statutory Requirements for Public Sales: The court clarified that in cases of pledges, the statutory
requirements for public sales with prior notice do not necessarily apply. Pledges are governed by
specific rules and regulations that outline the rights and obligations of the parties involved. In this
case, the court emphasized that the bank had the authority to purchase the pledged vessels in
foreclosure sales, and the plaintiff could have redeemed the vessels by settling the outstanding debt.
Therefore, the statutory requirements for public sales were not deemed applicable to the situation at
hand.

Overall, the court's decision was based on the interpretation of the pledge contract, the rights of the
parties in a pledge agreement, and the specific rules that govern pledges as opposed to other types of
transactions. The court's resolution favored the Philippine National Bank, upholding its actions in
taking possession of the vessels and selling them to itself as a means of recovering the debt owed by
the plaintiff.
Fort Bonifacio Development Corporation vs Yllas Lending Corporation
G R No 158997 October 6 2008-D8BA80.txt

FACTS:
Fort Bonifacio Development Corporation (FBDC) executed a lease contract with Tirreno, Inc. on 24
April 1998 for a unit at the Entertainment Center - Phase 1 of the Bonifacio Global City in Taguig,
Metro Manila. Tirreno operated Savoia Ristorante and La Strega Bar in the leased premises.
The lease contract contained provisions regarding the consequences of lessee default and a lien on
lease properties.
Tirreno started defaulting on lease payments in 1999 and was significantly in arrears by July 2000.
Despite entering into a settlement agreement with FBDC, Tirreno continued to not pay, leading FBDC
to send a termination notice and take possession of the leased premises on 29 September 2000. FBDC
also appropriated Tirreno's equipment and properties to partially settle its obligations.
Respondents initiated a complaint for Foreclosure of Chattel Mortgage against Tirreno, Eloisa, and
Antonio on 4 March 2002. FBDC filed a third party claim and affidavit of title in this case. However, the
sheriff proceeded with seizing and delivering certain items from FBDC's premises to respondents
without heed to FBDC's third party claim.
The trial court focused on the validity of Section 22 of the lease contract as a pledge and considered it
a pactum commissorium based on Article 2088 of the Civil Code. This led to the dismissal of FBDC's
third party claim and the denial of FBDC's Motion to Intervene and Admit Complaint in Intervention.
FBDC then filed a petition contesting the trial court's decision, asserting its right to appropriate
Tirreno's properties without judicial intervention and challenging the denial of its intervention and the
absence of an indemnity bond for protection.

ISSUES:
1. Whether Section 22 of the lease contract between FBDC and Tirreno is valid as a pledge or
considered a pactum commissorium.
2. Whether FBDC's right to appropriate Tirreno's properties without judicial intervention is valid.
3. Whether the denial of FBDC's intervention and the absence of an indemnity bond for protection are
justified.

RULING:
*The Court recognized FBDC's right to appropriate Tirreno's properties pursuant to the contractual
forfeiture clause in the absence of non-payment.
*FBDC's intervention in the case was allowed as its legal interest in the seized properties warranted
its involvement in determining the legal issues surrounding multiple liens and subsequent default.
*The trial court's dismissal of FBDC's third party claim was set aside, and FBDC's intervention was
granted.
*FBDC was permitted to hold the sheriff accountable for any damages incurred due to the absence of
an indemnity bond.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Contractual Forfeiture Clause:
The Court recognized FBDC's right to appropriate Tirreno's properties based on the contractual
forfeiture clause in their lease contract. A contractual forfeiture clause allows a lessor to repossess
leased properties in the event of lessee default without the need for judicial intervention. The Court
upheld this principle to protect the lessor's rights and interests in the leased premises.

2. Doctrine of Intervention:
FBDC was permitted to intervene in the case as it had a legal interest in the seized properties.
Intervention is a procedural mechanism that allows a third party with a legal interest in the subject
matter of a case to join as a party to protect their rights. In this case, FBDC's intervention was
necessary to address the legal issues surrounding the seizure of its properties by the sheriff.
3. Doctrine of Indemnity Bond:
The Court emphasized the importance of an indemnity bond to protect parties like FBDC from
damages arising from wrongful seizure or delivery of properties. An indemnity bond serves as a form
of security to ensure that the party whose properties are being seized is compensated for any losses
incurred. The absence of an indemnity bond in this case led to the court holding the sheriff
accountable for any damages caused by the seizure of FBDC's properties without proper protection.
Sps. Paray v Rodriguex et.al., G.R. No. 132287, January 24, 2006

FACTS:
Respondents secured their loan obligations by pledging shares of stock to petitioners Bonifacio and
Faustina Paray. The shares were scheduled to be auctioned off in a notarial sale. Despite consigning
payment to the RTC Clerk of Court before the scheduled auction, the auction still took place and the
shares were sold to a bidder. Respondents then filed a complaint seeking the nullity of the auction,
which was initially dismissed by the RTC but reversed by the Court of Appeals.

ISSUES:
1. Whether the consignations made by respondents extinguished the loan obligations and the pledge
contracts.
2. Whether the auction sale of the pledged shares was valid.
3. Whether the Court of Appeals ruling allowing the redemption of the pledged shares was correct.

RULING:
- The consignations made by the respondents did not cover the interests due, rendering them
insufficient to extinguish the pledge contracts. Therefore, the consignations did not nullify the auction
sale.
- The auction sale of the pledged shares was valid, and the Court of Appeals ruling allowing
redemption of the shares was incorrect.
- The right of redemption over personal property, such as pledged shares of stock, does not exist
under Philippine law. Once a pledged item is sold at auction, the pledgor and pledgee are not entitled
to recover any deficiency or excess. Participation in the auction would have allowed respondents to
recover the shares at a lower price than owed to the Parays.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Redemption: In this case, the Supreme Court clarified that the right of redemption over
personal property, such as pledged shares of stock, does not exist under Philippine law. This means
that once a pledged item is sold at auction, the pledgor and pledgee are not entitled to recover any
deficiency or excess. This doctrine was applied to uphold the validity of the auction sale and reject the
notion of redemption over the pledged shares.

2. Doctrine of Pledge: The principle of pledge is a legal concept where one party (the pledgor) gives
the other party (the pledgee) the right to hold onto the property or asset until a debt or obligation is
satisfied. In this case, the shares of stock were pledged to secure the loan obligations. The Court
emphasized the importance of the pledge contracts and how the consignations made by the
respondents were insufficient to extinguish the pledge contracts, thus upholding the validity of the
auction sale.

3. Doctrine of Auction Sale: The Court also discussed the procedures for auction sales, noting that the
auction sale of the pledged shares was valid despite the claims of respondents. The Court highlighted
that the auction sale was conducted in accordance with the terms of the pledge contracts and that
the Parays had the discretion to proceed with the sale. This doctrine ensures that the rights of parties
in an auction sale are upheld and that the proceeds from the sale are properly allocated.

Overall, the Supreme Court's ruling in this case reinforced the importance of pledge contracts,
clarified the rights of parties in an auction sale, and upheld the principles of redemption under
Philippine law. The decision affirmed the validity of the auction sale and rejected the notion of
redemption over the pledged shares, ultimately resolving the case in favor of the petitioners.
MANILA SURETY and FIDELITY COMPANY INC vs VELAYO GR 12345
Jan 1 2001-5DBBC8.txt

FACTS:
In this case, Rodolfo Velayo was sentenced by the Court of First Instance of Manila to pay Manila
Surety & Fidelity Co., Inc. the sum of P2,565.00 with interest for various charges. The main issue in the
case revolves around the applicability and extinguishing effect of Article 2115 of the Civil Code of the
Philippines.

In 1953, Manila Surety & Fidelity Co. executed a bond for P2,800.00 at the request of Rodolfo Velayo
for the dissolution of a writ of attachment obtained by Jovita Granados in a suit against Velayo in the
Court of First Instance of Manila. Velayo agreed to pay an annual premium of P112.00 to indemnify
the surety company for any damage or loss it may suffer and to reimburse the company for any
amount it should pay under the bond, including costs and attorney's fees. Velayo also pledged four
pieces of jewelry to the surety company as collateral security.

When Jovita Granados won the case against Velayo and execution was returned unsatisfied, the
surety company was forced to pay P2,800.00. The surety company then sought to recoup the amount
from Velayo, who failed to pay. The pledged jewelry was sold for a net product of P235.00. When
Velayo failed to pay the remaining balance, the surety company brought suit against him in the
Municipal Court.

Velayo argued that the sale of the pledged jewelry extinguished his further liability under Article 2115
of the Civil Code. This article states that the sale of the pledged property shall extinguish the principal
obligation, regardless of the amount of the sale. The Municipal Court and the Court of First Instance
ruled against Velayo, prompting him to appeal to the Supreme Court.

ISSUES:
1. Whether the sale of the pledged jewelry extinguished Velayo's further liability under Article 2115 of
the Civil Code.
2. Whether the accessory character of the pledge as collateral security affects the application of
Article 2115.
3. Whether the extinction of the principal obligation by the sale of the pledged property supervenes
by operation of law.

RULING:
- The Court ruled in favor of Velayo, modifying the decision under appeal. Velayo was absolved from
the complaint but found liable for the 1954 premium in the amount of P120.93, with interest at 12-
1/2% per annum from June 13, 1954.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Accessory Character of Pledge and Mortgage:
The Court emphasized the accessory character of pledge and mortgage as collateral security to secure
the fulfillment of a principal obligation, as stipulated in Article 2085 of the Civil Code. The key
requirement for these contracts is that they serve to secure the principal obligation, which in this case
is Velayo's agreement to indemnify the surety company. The accessory nature of the pledge does not
prevent the application of Article 2115.

2. Extinctive Effect of Article 2115:

The Court clarified that the extinction of the principal obligation by the sale of the pledged property is
an operation of imperative law, as stated in Article 2115. Parties cannot override this provision, as it
clearly states that if the price of the sale is less than the principal obligation, the creditor cannot
recover the deficiency, regardless of any contrary stipulation. The creditor waives any other remedy
by choosing to sell the pledged property, and must abide by the results of the sale.
3. Legal Prescriptions and Historical Context:
The Court noted that Article 2115 is not a unique provision and is an extension of the legal
prescription found in Article 1484(3) of the Civil Code regarding chattel mortgage foreclosures. This
legal principle originated in Act 4110 of the Philippine Legislature in 1933. The Court's decision was
based on the clear and unmistakable effect of Article 2115, which prevents the creditor from
recovering any deficiency. The operation of law in this case was clear and must be followed.
Viola vs Equitable PCI Bank Inc G R No 177886 Nov 27 2008-
CD1780.txt

FACTS:
Leo-Mers Commercial, Inc., together with its officers Leopoldo and Mercedita Viola, obtained a loan
through a credit line facility from PCI Bank (now Equitable PCI Bank, Inc.) in the amount of
P4,700,000. The loan was secured by a Real Estate Mortgage over two parcels of land in Marikina. The
loan had a prevailing interest rate and a penalty fee of 3% per month on the outstanding amount.

The petitioners availed of the full loan amount and made partial payments totaling P3,669,210.67.
However, they ceased making payments in November 2000, resulting in a total outstanding obligation
of P14,024,623.22 as of September 2002, due to past due interest and penalty fees.

Respondent foreclosed the mortgage on the properties and sold them at a public auction in April
2003. Consequently, the petitioners filed a complaint for annulment of foreclosure sale, accounting,
and damages in October 2003. They claimed that their payments were not appropriately accounted
for and that the foreclosure sale was irregular and void due to an inflated principal obligation.

The trial court ruled in favor of the respondents but adjusted the interest rate and penalty fee to
more equitable levels. The foreclosure proceedings and Certificate of Sale were nullified, allowing for
a new foreclosure based on the modified amount owed. The petitioners filed a motion for
reconsideration, arguing that the penalty fee should not be included in the mortgage contract since it
was not explicitly stipulated. However, the trial court rejected this motion.

On appeal, the Court of Appeals dismissed the case for lack of merit, stating that the Real Estate
Mortgage covers not only the principal amount but also includes interest and penalty charges
stipulated in the Credit Line Agreement. The petitioners then filed a Petition for Review on Certiorari,
contending that the Court of Appeals erred in interpreting the mortgage contract to include penalty
charges.

ISSUES:
1. Whether the penalty fee should be included in the mortgage contract even if not explicitly
stipulated.
2. Whether the foreclosure sale was irregular and void due to an inflated principal obligation.
3. Whether the Court of Appeals erred in interpreting the mortgage contract to include penalty
charges.

RULING:
- The Supreme Court ruled that the mortgage did not secure the penalty fee, as it was not explicitly
mentioned in the contract, and upheld the decision of the lower courts with the modification to
exclude the penalty fee from the amount secured by the mortgage.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Incorporation by Reference: The Doctrine of Incorporation by Reference involves
referring to another document as part of a contract. In this case, since the penalty fee was not
explicitly mentioned in the Real Estate Mortgage contract, the mortgage cannot be said to include the
penalty charges unless specifically incorporated by reference. The Supreme Court, in upholding the
lower court's decision, applied this doctrine by excluding the penalty fee from the amount secured by
the mortgage.

2. Principle of Unstipulated Charges: Under the Principle of Unstipulated Charges, fees or charges not
explicitly provided for in a contract are generally not enforceable. In this case, since the penalty fee
was not expressly stipulated in the mortgage contract, the Supreme Court ruled in favor of excluding
the penalty fee from the amount secured by the mortgage.
3. Principle of Consistency in Contract Interpretation: The Principle of Consistency in Contract
Interpretation states that contracts should be construed consistently with the parties' intentions and
the language used in the contract. In this case, the Supreme Court interpreted the mortgage contract
to exclude the penalty fee since it was not explicitly mentioned, aligning with the principle of
consistency in contract interpretation.
HOME BANKERS SAVINGS & TRUST CO vs THE HONORABLE COURT OF
APPEALS et al G R No 128354 April 26 2005-721C80.txt

FACTS:
Private respondents entered into contracts with TransAmerican Sales and Exposition for the purchase
of land and townhouses, but the company failed to fulfill its obligations despite repeated demands.
Engr. Jesus Garcia mortgaged eight lots covered by TCT Nos. 3349 to 3356 as collateral for a loan from
petitioner Home Bankers Savings and Trust Company. Five of these lots turned out to be the
townhouses subject to the contracts with TransAmerican. Petitioner filed a loan against the subject
properties, leading to a foreclosure sale where petitioner became the highest bidder. Private
respondents filed a complaint for non-delivery of titles and non-completion of the project. The
OAALA, HLURB, Office of the President, and Court of Appeals all ruled in favor of the private
respondents, declaring the mortgage invalid and ordering the cancellation of the mortgage and the
delivery of titles to the private respondents.

ISSUES:
1. Whether HLURB had jurisdiction over the matter.
2. Whether the mortgage constituted by petitioner was valid against private respondents.
3. Whether petitioner was considered a mortgagee in good faith.

RULING:
*HLURB had jurisdiction to rule on the validity of the mortgage and declare it void in the interests of
protecting the buyers.
*The mortgage constituted by petitioner was declared invalid as against private respondents due to
the violation of Section 18 of P.D. No. 957.
*Petitioner was not considered a mortgagee in good faith due to negligence in verifying the status of
the lots and whether Garcia had the authority from HLURB to mortgage them.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Buyer Protection: The case highlights the importance of protecting buyers in real estate
transactions, as evidenced by the rulings in favor of the private respondents. The invalidation of the
mortgage and the orders for the release of the mortgaged lots and delivery of titles were necessary to
safeguard the rights of the buyers who had fully paid for their townhouse units.
2. Doctrine of Jurisdiction of HLURB: The jurisdiction of the HLURB to regulate the real estate trade, as
provided by P.D. No. 957 and P.D. No. 1344, includes complaints for specific performance of sales or
annulment of mortgages. The HLURB had the authority to resolve the dispute between the private
respondents and the petitioner bank, even in the absence of the developer/mortgagor,
Garcia/TransAmerican.
3. Doctrine of Negligence in Real Estate Transactions: The case underscores the principle that parties
involved in real estate transactions, such as petitioner Home Bankers Savings and Trust Company,
have a duty to exercise due diligence and verify pertinent information. Petitioner's failure to confirm
the authority to mortgage the lots from HLURB resulted in the invalidity of the mortgage and negated
its claim of being a mortgagee in good faith. This negligence led to the presumption of knowledge of
the buyers' rights over the lots and affected its liability in the case.
SAMANILLA vs CAJUCOM GR 13683 March 28 1960-76B7F7.txt

FACTS:
Appellee Paz Samanilla filed a petition in the Court of First Instance of Nueva Ecija in Land Registration
Case No. 210, alleging that respondents Cenen A. Cajucom and Jose A. Cajucom executed a real estate
mortgage in her favor on December 20, 1955, to secure a loan of P10,000.00. The mortgage was to
cover their rights and participation on the parcel of land covered by Original Certificate of Title No. O-
966. It was stated in the petition that in February 1956, the respondents borrowed the title from
Samanilla to facilitate the segregation of a portion claimed by other persons. When Samanilla
requested the return of the title to register the mortgage, the respondents refused. The deed of
mortgage and affidavits of Samanilla and Antonio G. Javier were attached to the petition.

ISSUES:
1. Whether the mortgage executed by the respondents in favor of Samanilla was void for lack of
consideration.
2. Whether registration of the mortgage could proceed even without surrender of the title by the
respondents.
3. Whether the Land Registration Court erred in ordering the recording of the mortgage without
determining its validity.

RULING:
The Court affirmed the order of the Court of First Instance requiring the respondents to surrender
their title for the annotation of the mortgage executed in favor of Samanilla. The Court held that the
presumption of consideration supporting a contract cannot be easily overcome by a simple assertion
of lack of consideration. Registration of a mortgage is a matter of right for the mortgagee once the
mortgage has been signed in due form and the mortgagor cannot unilaterally revoke it. The Court
ruled that registration of the mortgage must first be allowed and validity or effect litigated
afterwards. The decision was without prejudice to the respondents' right to bring a separate action to
question the validity of the mortgage and seek the cancellation of its registration.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Legal Presumption of Consideration: The New Civil Code provides that there is a legal presumption
of sufficient cause or consideration supporting a contract, even if such cause is not expressly stated
therein. This doctrine was applied in the case to emphasize that the respondents could not easily
overcome this presumption by simply asserting the lack of consideration for the mortgage executed in
favor of Samanilla.
2. Right to Registration of Mortgage: The Court emphasized that once a mortgage has been signed in
due form, the mortgagee is entitled to its registration as a matter of right. This doctrine was utilized to
support Samanilla's right to have the mortgage registered despite the respondents' objections.
3. Effect of Registration of Mortgage: The Civil Code states that registration of a mortgage is necessary
to make it valid against third persons. However, registration does not add to the validity of the
mortgage between the parties. This principle was applied to underscore that while registration is
essential for notification to third parties, the validity or invalidity of the mortgage can still be litigated
after registration. The Court's resolution was in line with the principle that registration must first be
allowed, and validity or effect determined subsequently.
MOBIL OIL PHILIPPINES INC vs DIOCARES G R No L-26371 Sep 30
1969-94F6A9.txt

FACTS:
Plaintiff Mobil Oil Philippines, Inc., now appellant, entered into a contract of loan and real estate
mortgage with defendants Ruth R. Diocares and Lope T. Diocares on February 9, 1965. The agreement
involved a loan of P45,000.00, a commitment from the defendants to purchase petroleum from the
plaintiff, and a first mortgage on two parcels of land. The defendants failed to fully comply with the
terms of the agreement, leading to a complaint filed by the plaintiff for the payment of P43,098.24,
with interest. Defendants admitted their indebtedness but stated that they requested an extension
which was denied. The lower court granted a motion for judgment on the pleadings, but refused to
order foreclosure of the mortgaged properties due to lack of registration.

ISSUES:
1. Whether the failure to register a mortgage contract precludes foreclosure.
2. Whether a mortgage contract not registered can establish a real estate mortgage.
3. Whether the lower court erred in interpreting and applying the relevant provisions of the Civil
Code.

RULING:
The Supreme Court reversed the decision of the lower court. The Court held that even if a mortgage
contract is not registered, it is still binding between the parties. Therefore, the failure to register the
mortgage does not preclude foreclosure. The lower court erred in its interpretation of the law, and
thus the mortgage should be foreclosed, and the proceeds applied to the payment of the amounts
due to the plaintiff.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Contract: A contract is a meeting of minds between two persons whereby one binds himself to give
something or render services to the other. This case emphasizes the importance of contractual
obligations and how contracts form the basis of legal relationships. In this case, the mortgage contract
between the plaintiff and defendants established certain obligations and rights which must be upheld.
2. Recording of Instruments: The Civil Code requires that certain formalities be executed for certain
contracts to be valid, such as the recording of mortgage documents. However, the provision also
states that even if the instrument is not recorded, a mortgage is still binding between the parties. This
legal doctrine was applied by the Supreme Court to uphold the validity of the mortgage contract
despite non-registration.
3. Equity and Justice: The Court considered the principles of equity and justice in its decision-making
process. While formality requirements are important in law, the Court recognized the overarching
need for fairness and adherence to contractual commitments. By allowing foreclosure even without
registration, the Court ensured that justice was served in this case.
McCullough & Co vs Veloso & Serna GR No L-21455 April 5 1924-
765E9F.txt

FACTS:
On March 23, 1920, the plaintiff corporation, E. C. McCullough & Co., Inc., sold the property known as
McCullough Building to Mariano Veloso for P700,000. Veloso paid P50,000 in cash and agreed to pay
the balance of P650,000 in installments with interest. Veloso also agreed to pay an attorney's fee of
10% in case a judicial action was necessary for debt collection. Veloso mortgaged the property to
secure payment and assumed the obligation to insure the property and pay taxes on it. On August 21,
1920, Veloso sold the property to Joaquin Serna for P100,000, with Serna agreeing to pay the balance
due to the plaintiff.

Veloso and Serna made partial payments, but eventually fell into arrears on the last installments. The
plaintiff conducted a liquidation of Veloso's debt, determining that he owed P510,047.34. The plaintiff
filed a lawsuit against Serna to recover the outstanding debt plus attorney's fees. The trial court ruled
in favor of the plaintiff, ordering Serna to pay the outstanding debt with interest and attorney's fees.

ISSUES:
1. Whether the contract between Veloso and Serna novated the original contract between Veloso and
the plaintiff.
2. Whether the plaintiff's acceptance of payments from Serna affects the obligation of Veloso to the
plaintiff.
3. Whether the amount of attorney's fees awarded to the plaintiff is reasonable.

RULING:
The Court affirmed the judgment requiring Serna to pay the outstanding debt and modified the
attorney's fees award to P15,000 instead of P2,000. The novation argument raised by the defendant
was rejected, and the Court held that the obligation of the original debtor (Veloso) to pay the debt
remained despite the property being transferred. The Court also determined that the payments made
by Serna did not discharge Veloso's obligation to the plaintiff.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Novation: Novation requires the consent of the creditor for the substitution of a new debtor. In this
case, the Court held that there was no novation as the plaintiff did not consent to the substitution of
Serna for Veloso as the debtor. Novation must be express and cannot be presumed, as stated in
Article 1205 of the Civil Code.

2. Transfer of Mortgaged Property: Under Article 1879 of the Civil Code, the creditor may demand
payment from a third person in possession of a mortgaged property. The law allows the creditor to
demand payment of the debt from the possessor of the property secured by the mortgage. The
obligation of the new possessor to pay the debt originates from the right of the creditor to demand
payment, and the transfer of the property does not discharge the original debtor's obligation to pay.

3. Attorney's Fees: The Court considered the amount of the debt and the work required by the
attorney to collect it through judicial proceedings in determining the reasonable amount of attorney's
fees. In line with the precedent set in the case of Bachrach vs. Golingco, the Court awarded P15,000
as attorney's fees to the plaintiff, instead of the P2,000 initially awarded by the trial court. This
decision was based on the complexity and amount of the debt in question.

Overall, the Court applied the principles of novation, transfer of mortgaged property, and
reasonableness in awarding attorney's fees to uphold the plaintiff's right to recover the outstanding
debt from Serna and ensure fair compensation for legal services rendered.
Paderes et al vs Court of Appeals et al GR No 147074 July 15 2005-
BA6F80.txt

FACTS:
Spouses Rodrigo and Sonia Paderes were informed by the Board of Liquidators, through Deputy
Liquidator Alberto Reyes, that the property they purchased from MICC was foreclosed by Banco
Filipino Savings and Mortgage Bank. The spouses claimed they had no knowledge of the foreclosure
and mentioned their unpaid balance with MICC. They were represented by Luciano D. Valencia, who
sought to exercise their right of redemption as subrogees of MICC and requested the bank to provide
the property value. Banco Filipino, through Luz B. Dacasin, advised the spouses to discuss the
foreclosed property directly with them. Valencia then advised the spouses to meet with the bank to
discuss the matter. The spouses, along with Isabelo and Juana Herminia Bergado, proposed
negotiations with the bank for the redemption of their properties and offered to mortgage the
properties for the redemption price. Their case was brought to court but failed due to the absence of
a concrete offer and acceptance between the parties. It was also found that the claimed right of
redemption by the spouses was not supported by a valid contract. The houses purchased by the
spouses were part of the mortgage property. The court ruled that the writ of possession issued by the
bank was not barred by the statute of limitations and allowed the petitioners 30 days to challenge the
auction sale and cancel the writ of possession.

ISSUES:
1. Whether the petitioners, as purchasers of the properties, could claim superior rights over the
foreclosed properties.
2. Whether the petitioners availed themselves of their right to redeem the foreclosed properties
within the reglementary period.
3. Whether the agreements and exchanges of communication between the petitioners and Banco
Filipino regarding the repurchase of the properties were binding and complied with legal
requirements for redemption.

RULING:
*The petitioners cannot claim superior rights over the foreclosed properties due to their status as
subsequent purchasers after the mortgage in favor of Banco Filipino had been registered.
*The petitioners failed to avail themselves of their right to redeem the foreclosed properties within
the reglementary period, allowing Banco Filipino to rightfully consolidate ownership of the properties.
*The alleged agreements and exchanges of communication between the petitioners and Banco
Filipino regarding the repurchase of the properties were not binding as they did not comply with legal
requirements for redemption.

The Court of Appeals decision upholding the validity of the Writ of Possession and denying the Motion
for Reconsideration is affirmed. The petitioners are bound by the law and cannot circumvent the legal
consequences of their actions.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Legality of Mortgages: The principle that a mortgage lien on a property remains even
after subsequent transfers, and subsequent purchasers are bound to respect such encumbrances. In
this case, the petitioners, as subsequent purchasers, were bound by the mortgage in favor of Banco
Filipino Savings and Mortgage Bank, precluding them from claiming superior rights over the
foreclosed properties.

2. Right to Redemption: The legal doctrine that provides a right to the mortgagor or his successors in
interest to redeem the foreclosed properties within a reglementary period. In this case, the
petitioners failed to avail themselves of their right to redeem the foreclosed properties within the
prescribed period, leading to the rightful consolidation of ownership by Banco Filipino.
3. Elements of a Valid Contract: For a contract to be binding and enforceable, it must contain essential
elements such as offer, acceptance, consideration, legality of object, capacity of parties, and consent.
The alleged agreements and communications between the petitioners and Banco Filipino regarding
the repurchase of the properties did not meet these requirements, rendering them non-binding and
unenforceable.

Overall, the legal doctrines of mortgage legality, right to redemption, and elements of a valid contract
were crucial in determining the outcome of the case and upholding the validity of the Writ of
Possession issued in favor of Banco Filipino Savings and Mortgage Bank.
BANK OF THE PHILIPPINE ISLANDS vs CONCEPCION E HIJOS INC et al
GR 27701 July 21 1928-791800.txt

FACTS:
The defendants, the Concepcions, executed a promissory note in favor of the plaintiff bank for the
sum of P342,372.64, payable on demand. As security for payment, they deposited 700 shares of the
Philippine National Bank as collateral with the plaintiff and gave a mortgage on land in Manila.
However, the Concepcions defaulted on the payment of the note, which led the plaintiff bank to
institute foreclosure proceedings.

Henry W. Elser entered into negotiations with the Concepcions to take over the mortgaged property
and assume the mortgage debt, under the condition that they be relieved of all liability for the debt.
Elser wrote a letter to the plaintiff bank outlining his proposal, promising monthly payments and
reduction of the mortgage amount over three years. The bank did not respond to Elser's initial letter,
indicating its unwillingness to release the Concepcions from their liability for the mortgage debt, and
continued with the foreclosure proceedings, insisting on the Concepcions confessing a judgment.

Further negotiations with the plaintiff bank led to Elser seeking written confirmation of their
agreement to sell the property to him for the full amount of the judgment if it became the bank's
property. Despite the lack of a direct response from the bank, Elser entered into an agreement with V.
Concepcion & Hijos, Inc. and Venancio Concepcion to assume their obligations in favor of the Bank of
the Philippine Islands and release them from the debt, in exchange for the transfer of the mortgaged
properties. This agreement was made with the consent of the bank, though it did not formally confirm
acceptance of the arrangement.

The bank later petitioned the court to include Elser as a defendant in the case. The Concepcions then
requested his substitution as defendants, given the bank's acceptance of Elser as their debtor. The
court ultimately included Elser as a defendant, and the plaintiff filed an amended complaint seeking a
joint and several judgment against all parties involved.

Challenges arose regarding the sufficiency of the plaintiff's complaints, leading to multiple demurrers
and amendments to the complaints. The plaintiff filed several amended complaints reiterating the
acceptance of Elser's assumption of the mortgage but without releasing the liability of the
Concepcions. The defendants responded with denials and cross-complaints alleging Elser's unsound
mind and deception in assuming the obligations of the Concepcions.

Following Elser's passing, the plaintiff sought to substitute the administrator of his estate as a
defendant, and the legal proceedings continued. The case involved a complex legal battle centered
around the agreement between Elser and the Concepcions regarding the assumption of the mortgage
debt and the bank's involvement in the arrangement. The primary issues disputed liability, the
acceptance of terms, and the validity of the agreements made.

ISSUES:
1. Was the contract between Elser and the Concepcions considered a stipulation pour autrui in favor
of the plaintiff bank?
2. Did the plaintiff have a valid cause of action against Elser's estate?
3. Did the plaintiff comply with the statutory requirements for presenting and proving contingent
claims before an estate's committee?

RULING:
*The contract between Elser and the Concepcions was not considered a stipulation pour autrui in
favor of the plaintiff bank.
*The plaintiff did not have a valid cause of action against Elser's estate.
*The plaintiff did not comply with the statutory requirements for presenting and proving contingent
claims before an estate's committee.
*The court's judgment in favor of Elser's estate was upheld.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Stipulations Pour Autrui: The doctrine of stipulations pour autrui requires the intention
to benefit a third party to be clear in the contract. In this case, the court found that there was no
evidence that the contract between Elser and the Concepcions aimed to benefit the plaintiff bank. As
such, the contract was not considered a stipulation pour autrui in favor of the plaintiff.

2. Contract Law: The plaintiff's argument that despite not being a party to the contract, it should
benefit from the subrogation of Elser to the obligations of the Concepcions was dismissed by the
court. The court emphasized that the plaintiff's acceptance of the stipulation was not absolute,
unconditional, and identical with the terms of the offer, as required by contract law. Therefore, the
plaintiff could not maintain its action against Elser's estate.

3. Compliance with Statutory Requirements: The court found that the plaintiff failed to comply with
the statutory requirements for presenting and proving contingent claims before an estate's
committee. The plaintiff solely relied on the mortgage instead of presenting the claim before the
committee on claims and appraisals, abandoning the choice to share in the general distribution of the
estate assets. The plaintiff's misconception of the statute in presenting the deficiency claim after the
foreclosure sale was deemed an error as well.

In conclusion, the court upheld the judgment in favor of Elser's estate due to the lack of evidence
showing the contract aimed to benefit the plaintiff bank, the plaintiff's failure to meet the
requirements of contract law, and the statutory non-compliance in presenting and proving contingent
claims before the estate's committee.
LITONJUA et al vs L & R CORPORATION et al G R No 130722 Dec 9
1999-8B7C80.txt

FACTS:
The case involves a mortgage contract between the spouses Litonjua and L & R Corporation. The
spouses Litonjua obtained loans secured by a mortgage on two parcels of land in Quezon City. The
mortgage contract included provisions stating that the mortgagor cannot sell the mortgaged property
without the consent of the mortgagee, L & R Corporation. Additionally, the contract included a right
of first refusal in favor of L & R Corporation.

Despite the provisions in the mortgage contract, the properties were sold to Philippine White House
Auto Supply, Inc. (PWHAS) without the consent of L & R Corporation. Upon discovering the prior sale
upon registration, L & R Corporation initiated foreclosure proceedings against the properties.

During the foreclosure proceedings, PWHAS, representing the spouses Litonjua, tendered payment to
redeem the properties. However, L & R Corporation refused the payment. As a result, PWHAS
redeemed the properties through the Sheriff despite the refusal of payment by L & R Corporation.

After redeeming the properties, L & R Corporation refused to surrender the owner's duplicate
certificates of title. This led to a legal dispute between the parties and eventually a court case.

Following the redemption of the properties and the refusal of L & R Corporation to surrender the
titles, L & R Corporation consolidated ownership of the properties. They notified tenants to make
rental payments to them, which prompted the spouses Litonjua to file adverse claims and notices
with the Register of Deeds.

The spouses Litonjua then filed a complaint for quieting of title, annulment of title, and damages
against L & R Corporation. Initially, the lower court dismissed the complaint. However, the Court of
Appeals set aside the decision and issued an amended decision.

ISSUES:
1. Whether the provisions in the mortgage contract prohibiting subsequent sales without consent and
granting a right of first refusal are valid and enforceable.
2. The validity of the sale of the properties to PWHAS without the consent of L & R Corporation.
3. The rights of redemption by PWHAS and the validity of the redemption.

RULING:
The sale of the properties to PWHAS was deemed valid despite the lack of consent from L & R
Corporation. PWHAS, as the successor-in-interest of the spouses Litonjua, had the right to redeem the
foreclosed properties. However, the sale was rescissible due to violating L & R Corporation's right of
first refusal. The spouses Litonjua's request to reverse the sale and retain ownership was denied, and
the decision was affirmed with modifications, including rescission of the sale and returning the
purchase price to PWHAS. Additionally, L & R Corporation was ordered to pay the spouses Litonjua
the difference in the purchase price, and awards for damages and attorney's fees were deleted.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Right of First Refusal: The right of first refusal is a legal doctrine that grants a party the opportunity
to purchase a property before it is offered to others. In this case, the mortgage contract included a
right of first refusal in favor of L & R Corporation. Despite the sale of the properties to PWHAS, the
court found that the right of first refusal was violated, rendering the sale rescissible. This doctrine was
applied to protect the rights of L & R Corporation as the mortgagee.

2. Right of Redemption: The right of redemption is a legal principle that allows a mortgagor or debtor
to reclaim their property by paying off the debt within a specified period. PWHAS, as the successor-in-
interest of the spouses Litonjua, exercised their right of redemption by tendering payment to redeem
the properties. The court recognized and upheld this right, allowing PWHAS to redeem the foreclosed
properties despite the initial refusal by L & R Corporation. This principle was crucial in determining the
validity of the redemption in this case.

3. Rescission of Contract: Rescission is a legal remedy that allows parties to a contract to cancel or
undo the agreement, restoring them to their pre-contractual positions. In this case, the court ordered
the rescission of the sale of the properties to PWHAS due to the violation of L & R Corporation's right
of first refusal. The rescission of the sale and the return of the purchase price to PWHAS were deemed
appropriate remedies to address the breach of the mortgage contract provisions. This legal concept of
rescission played a significant role in resolving the dispute between the parties in this case.
UNIONBANK OF THE PHILIPPINES vs THE COURT OF APPEALS et al G
R No 133366 August 5 1999-1D6500.txt

FACTS:
UNIONBANK of the Philippines appealed the Court of Appeals' decision and resolution nullifying the
Regional Trial Court's denial of the application for preliminary injunction, which led to the
consolidation of ownership of the property in UNIONBANK's name without due process of law.
The case originated from a real estate mortgage executed by spouses Leopoldo and Jessica Dario in
favor of UNIONBANK to secure a loan, leading to the foreclosure and sale of the property by
UNIONBANK.
Private respondents filed a complaint against the mortgagors, UNIONBANK, the Register of Deeds,
and the City Sheriff, seeking annulment of sale and mortgage reconveyance.
The RTC issued a temporary restraining order, which was later dissolved when the complaint was
dismissed due to a technicality.
UNIONBANK consolidated its ownership over the property without notifying private respondents.
Private respondents filed an amended complaint, asserting their ownership of the property and
challenging the validity of the mortgage and foreclosure.
UNIONBANK filed a petition for certiorari with the CA, questioning the admission of the amended
complaint, which was upheld.
Private respondents argued that UNIONBANK's consolidation of ownership was in bad faith and
violated due process.
The CA nullified the consolidation of ownership, ordered the cancellation of UNIONBANK's title, and
reinstated the original title with a notice of lis pendens.
UNIONBANK claimed to be a mortgagee in good faith and asserted its rights to consolidate ownership
and deny the application for injunction.

ISSUES:
1. Whether the consolidation of title by UNIONBANK was proper.
2. Whether the dismissal of the application for preliminary injunction was valid.
3. Whether the denial of the application for injunction was justified due to the lack of irreparable
injury to private respondents.

RULING:
The consolidation of ownership by UNIONBANK was deemed proper, as the TRO had expired, and the
foreclosure sale had gone uncontested.
The denial of the application for injunction was upheld due to the consummation of the acts
complained of and the lack of irreparable injury to private respondents.
The notice of lis pendens provided sufficient protection for private respondents' interest in the
property during the pending litigation.
The issue of negligence and loss attribution between private respondents and UNIONBANK would be
determined during the trial on the merits of the main case.
The Court reversed the CA's decision, reinstated the trial court's order on the application for
injunction, and remanded the case for trial on the merits.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Mortgagee in Good Faith:
UNIONBANK claimed to be a mortgagee in good faith, which is a legal doctrine that protects the rights
of a mortgagee who acts in good faith and without negligence in dealing with the mortgagor. In this
case, UNIONBANK asserted its rights to consolidate ownership based on its status as a mortgagee in
good faith, which allowed it to proceed with the foreclosure and consolidation of ownership without
being held liable for any alleged wrongdoing.

2. Doctrine of Lis Pendens:

The doctrine of lis pendens refers to the principle that a pending legal action concerning a property
should be recorded in the land records to notify potential purchasers or encumbrancers of the
property that there is a legal dispute or claim over the property. In this case, the Court reinstated the
original title with a notice of lis pendens, providing protection for private respondents' interest in the
property during the pending litigation and ensuring that any subsequent transactions involving the
property would be subject to the outcome of the case.

3. Doctrine of Irreparable Injury:

The doctrine of irreparable injury is a legal principle that requires a party seeking an injunction to
demonstrate that they will suffer harm that cannot be adequately compensated by monetary
damages if the injunction is not granted. In this case, the Court upheld the denial of the application
for injunction due to the lack of irreparable injury to private respondents, as the acts complained of
had already been consummated, and any potential harm could be addressed through the trial on the
merits of the main case.
LICUANAN vs DEVELOPMENT BANK OF THE PHILIPPINES G R No
150097 Feb 26 2007 -069E80.txt

FACTS:
The Development Bank of the Philippines filed a petition for review on certiorari against the Court of
Appeals' decision and resolution in relation to a piggery loan granted to Alejandro and Adelaida
Licuanan. The loans were secured by real estate mortgages over several parcels of land.
These loans had specific maturity dates, and additional loans were granted subsequently, also secured
by various real estate mortgages. One of the loans underwent restructuring to extend the maturity
date.
Upon noticing a breach in the mortgage conditions, the petitioner notified the respondents and
initiated an extrajudicial foreclosure process. The properties were then sold in a public auction, with
the petitioner acquiring them as the highest bidder and later consolidating its ownership over the
properties.
Following this, the petitioner informed the respondents that the properties were to be disposed of by
public auction. However, as no bidders were present, the properties were eventually sold through a
negotiated sale to a third party. Despite the respondents' attempts to repurchase the properties, they
had already been sold to the third party.
Subsequently, the respondents filed a complaint against the petitioner and the third party for the
recovery of properties and damages. The Regional Trial Court ruled in favor of the respondents,
declaring the foreclosure proceedings null and void due to the absence of a demand for payment
prior to the foreclosure.
On appeal, the Court of Appeals upheld the RTC's decision but reduced the nominal damages
awarded to the respondents. The petitioner then filed a petition for review on certiorari challenging
the rulings on demand, deficiency claim, and damages.
The Supreme Court affirmed the findings of the lower courts, stressing the necessity of a demand for
payment to establish default. The Court rejected the petitioner's argument that demand was
unnecessary due to specified maturity dates in the promissory notes. Additionally, the Court ruled
that the respondents were not accountable for the deficiency claim as the foreclosure was deemed
invalid. The Court also upheld the grant of moral and nominal damages, attorneys' fees, and litigation
expenses to the respondents, citing evidence of bad faith on the part of the petitioner in its dealings
with the respondents.

ISSUES:
1. Whether a demand for payment is necessary to establish default in mortgage foreclosure
proceedings.
2. Whether specified maturity dates in promissory notes obviate the need for a demand for payment
in foreclosure actions.
3. Whether the respondents are liable for the deficiency claim in the foreclosure process.

RULING:
- A demand for payment is necessary to establish default in mortgage foreclosure proceedings.
- Specified maturity dates in promissory notes do not eliminate the requirement for a demand for
payment in foreclosure actions.
- The respondents are not liable for the deficiency claim in the foreclosure process.
- Upholding the award of moral and nominal damages, attorneys' fees, and litigation expenses to the
respondents due to evidence of bad faith on the part of the petitioner.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Demand in Mortgage Foreclosure: Under Philippine jurisprudence, it is settled that a
demand for payment is crucial in mortgage foreclosure proceedings to establish default. Even if there
are specified maturity dates in the promissory notes, such a demand is required. This principle
ensures that the debtor is informed of their failure to meet their obligations and gives them an
opportunity to remedy the default before foreclosure is initiated. In this case, the Supreme Court
upheld this doctrine and ruled that the lack of a demand rendered the foreclosure proceedings null
and void.

2. Principle of Deficiency Claim: In mortgage foreclosure, the concept of the deficiency claim comes
into play when the proceeds from the sale of mortgaged properties are insufficient to cover the
outstanding debt. In such cases, the creditor may pursue the borrower for the remaining amount.
However, the Supreme Court in this case ruled that the respondents were not liable for the deficiency
claim since the foreclosure was deemed invalid due to the absence of a demand for payment. This
underscores the importance of following proper procedures in foreclosure actions to protect the
rights of borrowers.

3. Doctrine on Award of Damages: The grant of damages, including moral and nominal damages,
attorneys' fees, and litigation expenses, is anchored in the principle that parties who act in bad faith
or with evident malice should be held accountable for their actions. In this case, the Supreme Court
affirmed the award of damages to the respondents, citing evidence of bad faith on the part of the
petitioner in its dealings with the respondents. This doctrine serves to deter wrongful conduct and
provide compensation to aggrieved parties for the harm caused by such actions.
DBP vs Go et al GR 168779 Sept 14 2007-36BB00.txt

FACTS:
The Development Bank of the Philippines (DBP) filed a Petition for Review on Certiorari to challenge
the Court of Appeals (CA) Decision in CA-G.R. CV No. 63959. Private respondents entered into a loan
contract with DBP for ₱494,000, which included two promissory notes with an 18% per annum
interest rate and an 8% penalty charge for default. The loan contract also required insurance on
mortgaged properties with the DBP Pool of Accredited Insurance Companies for ₱709,000. DBP
claimed the authority to unilaterally adjust interest rates.

In 1986, DBP foreclosed on the mortgaged properties due to alleged default. Private respondents
then sued to nullify the foreclosure, which led to the Regional Trial Court's favorable decision in 1999.
However, the CA reversed the RTC decision, upholding the legality of promissory notes, penalties, and
insurance but deeming interest rate adjustments and foreclosure premature. Damages and attorneys'
fees were removed from the awards.

DBP filed a Motion for Partial Reconsideration to amend the CA decision based on penalty charges
and insurance premiums, which the CA denied in 2005. DBP then appealed to the Supreme Court,
alleging grave abuse of discretion by the CA in issuing the decision. The petition consisted of questions
of law but was treated as a special civil action for certiorari. The Supreme Court found no grave abuse
of discretion in the CA decision, upholding the validity of penalties and insurance premiums. However,
the court ruled that the necessity to pay insurance premiums and charges must be included in the
CA's dispositive portion.

ISSUES:
1. Whether the CA decision upholding the legality of promissory notes, penalties, and insurance but
deeming interest rate adjustments and foreclosure premature was correct.
2. Whether the CA's denial of DBP's Motion for Partial Reconsideration to amend the decision based
on penalty charges and insurance premiums was proper.
3. Whether the request to allow judicial foreclosure of properties should have been granted by the CA
despite the absence of a valid extrajudicial foreclosure.

RULING:
*The CA decision upholding the legality of promissory notes, penalties, and insurance but deeming
interest rate adjustments and foreclosure premature is affirmed.
*The CA's denial of DBP's Motion for Partial Reconsideration to amend the decision based on penalty
charges and insurance premiums is upheld.
*The request to allow judicial foreclosure of properties is denied due to the absence of a valid
extrajudicial foreclosure.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Promissory Notes: Promissory notes are legal instruments used in loan agreements that
serve as a promise to repay a specified amount within a defined time frame at a set interest rate. In
this case, the promissory notes included in the loan contract between DBP and the private
respondents were upheld by the CA as legal and binding obligations for the parties involved.

2. Doctrine of Penalties: Contractual penalties are provisions included in agreements to deter

breaches of contract and ensure compliance. The 8% penalty charge for default in the loan contract
between DBP and the private respondents was deemed legal by the CA, emphasizing the importance
of honoring contractual obligations to avoid penalties.

3. Doctrine of Foreclosure: Foreclosure is a legal process through which a lender seeks to recover the
balance of a loan from a borrower who has stopped making payments by selling the mortgaged
property. In this case, the CA found the foreclosure by DBP premature due to alleged default,
highlighting the need for proper adherence to legal procedures in foreclosing on properties.
4. Doctrine of Discretion: Grave abuse of discretion occurs when a court acts in a capricious,
whimsical, or arbitrary manner that is tantamount to lack or excess of jurisdiction. The Supreme
Court's assessment of the CA's decision found no grave abuse of discretion, reinforcing the principle
of judicial discretion in reviewing lower court rulings to ensure fairness and adherence to the law.

5. Doctrine of Certiorari: Certiorari is a prerogative writ issued by a higher court to review or correct
the actions of a lower court, tribunal, or public authority. In this case, the Supreme Court treated
DBP's petition as a special civil action for certiorari, underscoring the importance of seeking legal
remedies through proper channels to address perceived errors in court judgments.
FIESTAN et al vs COURT OF APPEALS et al G R No 81552 May 28
1990-BFC200.txt

FACTS:
Spouses Dionisio Fiestan and Juanita Arconada sought the reversal of the decision of the Court of
Appeals affirming the dismissal of their complaint against several parties for annulment of sale,
mortgage, and cancellation of transfer certificates of title related to a parcel of land (Lot No. 2B) they
owned in Ilocos Sur.
Lot No. 2-B was foreclosed by the Development Bank of the Philippines (DBP) after petitioners failed
to pay their mortgage debt, leading to a public auction sale on August 6, 1979, with the DBP acquiring
the property as the highest bidder.
The property was subsequently registered under the DBP, who later sold it to Francisco Peria.
After failing to redeem the property within the allotted time, petitioners' title was canceled, and a
new one was issued to the DBP. This new title was eventually transferred to Francisco Peria, who then
mortgaged the property to the Philippine National Bank (PNB) and took possession of it.
Petitioners filed a complaint for annulment of the transactions, which was dismissed by the Regional
Trial Court and later affirmed by the Court of Appeals.
The petitioners then sought the Supreme Court for a review, claiming that the foreclosure sale was
invalid due to lack of a levy on the property.

ISSUES:
1. Whether the extrajudicial foreclosure sale was valid without a levy on the property.
2. Whether the prohibition against agents acquiring property at auction applied in this case.
3. Whether the petitioners are entitled to the reversal of the decision of the Court of Appeals.

RULING:
The Supreme Court ruled that the extrajudicial foreclosure sale was valid as it followed the
procedures outlined in Act No. 3135, and that the absence of a levy did not render the sale null and
void.
The Court also clarified that the prohibition against agents acquiring property at auction did not apply
in this case, as it was conducted under a special power inserted in the mortgage.
Therefore, the Supreme Court denied the petition for lack of merit, affirming the decision of the Court
of Appeals.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Validity of Extrajudicial Foreclosure Sale: The Supreme Court applied the doctrine that
extrajudicial foreclosure sales are valid if they comply with the procedures set out in Act No. 3135. In
this case, the Court found that the foreclosure sale of Lot No. 2-B by the DBP followed the statutory
requirements and was therefore considered valid, despite the absence of a levy on the property. The
Court emphasized the importance of procedural compliance in foreclosure sales to protect the rights
of both the mortgagor and the mortgagee.

2. Doctrine of Special Power in Mortgage: The Court discussed the doctrine that the prohibition
against agents acquiring property at auction does not apply when the auction is conducted under a
special power inserted in the mortgage. In this case, the foreclosure sale was carried out under a
special power in the mortgage agreement, which allowed the DBP to acquire the property as the
highest bidder. The Court ruled that the special power in the mortgage agreement authorized the
foreclosure sale, and therefore the prohibition against agents did not apply.

3. Doctrine of Merit in Petitions for Review: The Court applied the doctrine that petitions for review
must have merit in order to be granted. In this case, the petitioners sought a reversal of the decision
of the Court of Appeals, claiming that the foreclosure sale was invalid due to the lack of a levy on the
property. However, the Supreme Court found that the foreclosure sale was valid and complied with
statutory requirements, thus denying the petition for lack of merit. This highlights the importance of
presenting substantive legal arguments in petitions for review in order to succeed in challenging lower
court decisions.
Bank of America NT and SA vs American Realty Corporation and Court
of Appeals GR No 133876 Dec 29 1999-567680.txt

FACTS:
In this case, petitioner BANTSA filed civil actions for collection before foreign courts while
simultaneously seeking extrajudicial foreclosure of mortgaged properties in the Philippines. Private
respondent ARC, as a third-party mortgagor, had no involvement in the principal loan agreements
besides providing additional security through real estate mortgages. Despite the pendency of civil
suits before foreign courts for collection, petitioner proceeded with the extrajudicial foreclosure of
the mortgages, violating private respondent's rights.

ISSUES:
1. Whether the mere act of filing an ordinary action for collection operates as a waiver of the
mortgage-creditor's remedy to foreclose the mortgage?
2. Whether the lower court's award of actual and exemplary damages in favor of private respondent
ARC is proper and supported by law?

RULING:
The Supreme Court held that the general rule stating that the mere act of filing a collection suit
constitutes a waiver of the remedy of foreclosure applies in this case. Petitioner BANTSA, by pursuing
civil actions for collection before foreign courts, effectively waived its right to extrajudicially foreclose
the mortgages on private respondent's properties. Additionally, the Court found the award of actual
and exemplary damages in favor of private respondent ARC to be proper. Petitioner's act of
extrajudicially foreclosing the mortgages violated private respondent's rights as a third-party
mortgagor, justifying the damages awarded by the lower court.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Waiver: The Court applied the doctrine of waiver in determining that the filing of civil
actions for collection before foreign courts operated as a waiver of the remedy of foreclosure. This
principle ensures that a creditor cannot pursue multiple remedies for a single breach of contract, thus
preventing plural redress for the same cause of action.

2. Rights of Third-Party Mortgagors: The Court emphasized the rights of third-party mortgagors,
stating that they should not be prejudiced by the actions of the mortgage creditor. Private respondent
ARC, as a third-party mortgagor, was found to have been violated by petitioner's extrajudicial
foreclosure of the mortgages, leading to the proper award of damages in their favor.

3. Doctrine of Exemplary Damages: Exemplary damages are awarded by the court to serve as a
warning to others and to deter similar wrongful acts in the future. In this case, the Court upheld the
lower court's award of exemplary damages in favor of private respondent ARC, although the amount
was later reduced for being excessive.

Overall, the Court's decision in this case highlights the importance of respecting the rights of third-
party mortgagors, adhering to the doctrine of waiver in determining remedies available to creditors,
and awarding damages as a means of redress for violations of legal rights.
Chieng substituted by William Chieng vs Santos G R No 169647
August 31 2007-DCB000.txt

FACTS:
The case involves a Petition for Review on Certiorari filed by the petitioner before the Court, seeking
to set aside the Decision of the Court of Appeals which reversed the Decision and Order of the
Olongapo City Regional Trial Court in a foreclosure case between petitioner and respondent spouses
Eulogio and Teresita Santos. The dispute stemmed from a loan extended by the petitioner to the
respondents, secured by a Deed of Real Estate Mortgage over a parcel of land owned by the
respondents. Respondent Eulogio issued checks for the loan amount, some of which bounced, leading
to a criminal case for violation of Batas Pambansa Blg. 22. A compromise agreement was reached
between petitioner and Eulogio during the pre-trial conference of the criminal cases. Subsequently,
petitioner filed a foreclosure case against the respondents for failure to pay the loan, which led to a
series of court proceedings.

The Olongapo City RTC, Branch 74, rendered a Decision ordering respondents to pay petitioner the
loan amount, interest, and fees. Respondents appealed the Decision, claiming that the loan obligation
was only ₱200,000, as per a previous agreement in the criminal cases. The court determined that the
loan obligation was indeed ₱200,000, and respondents had made partial payments, leading to a total
liability of ₱377,000. Respondents filed a Motion for Reconsideration, which was denied by the court.

The Court of Appeals later reversed the Decision of the RTC, stating that the criminal cases and the
compromise agreement therein precluded petitioner from pursuing the foreclosure remedy. The
Court of Appeals dismissed the foreclosure case, prompting petitioner to file a Petition before the
Supreme Court challenging the appellate court's decision. The issue at hand is whether petitioner was
barred from pursuing the foreclosure remedy by filing the criminal cases against respondent Eulogio.

ISSUES:
1. Whether petitioner was precluded from pursuing the foreclosure remedy by filing the criminal
cases against respondent Eulogio.
2. Whether the compromise agreement reached during the pre-trial of the criminal cases affected the
foreclosure case.
3. Whether the respondents' partial payment of the loan amount affects their liability in the
foreclosure case.

RULING:
The Court ruled in favor of the petitioner, stating that the respondents are still liable to pay the
remaining balance of the loan, plus interest. The respondents were ordered to pay the petitioner the
remaining balance of ₱93,000, along with legal interest.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Multiplicity of Suits:
In the recovery of a debt secured by a real estate mortgage, a mortgage-creditor can institute either a
personal action for debt or a real action to foreclose the mortgage. These remedies are considered
alternative and not cumulative, with the election of one remedy operating as a waiver of the other.
Pursuing both remedies would result in multiplicity of suits and offend justice and equity. Therefore,
upon filing a suit for collection or an action for foreclosure of mortgage, the remedy is deemed
chosen.

In this case, the petitioner initially pursued a personal action for debt through the criminal cases filed
for violation of BP Blg. 22. As a result, the Court held that the petitioner was precluded from
subsequently resorting to an action for foreclosure.
2. Implied Institution of Collection Suit:
When the petitioner filed the criminal cases against the respondent for violations of BP Blg. 22, a civil
action for the recovery of the amount of the dishonored checks was impliedly instituted under Rule
111 of the 2000 Rules on Criminal Procedure. This action was considered a collection suit or suit for
the recovery of the mortgage-debt, thereby barring the petitioner from pursuing a foreclosure action.

The court applied this doctrine to determine that the petitioner, by filing the criminal cases, was
already seeking to recover the loan amount secured by the mortgage. This precluded the petitioner
from later seeking foreclosure.

3. Principle of Unjust Enrichment:

The principle of unjust enrichment obliges the respondents to pay the remaining balance of the loan
plus interest. To relieve them of this obligation would constitute unjust enrichment in their favor and
unjust poverty for the petitioner. The Court emphasized the importance of upholding justice and
equity in the resolution of the case.

By applying the doctrine of unjust enrichment, the Court determined that the respondents are still
liable to pay the remaining balance of the loan, along with the specified legal interest. This principle
guided the Court in ruling in favor of the petitioner and ordering the respondents to settle their
outstanding debt.
First Marbella Condominium Association Inc vs Augusto Gatmaytan
GR 163196 July 4 2008-639C80.txt

FACTS:
The Regional Trial Court (RTC) of Pasay City denied the request of First Marbella Condominium
Association, Inc. for extrajudicial foreclosure against Augusto Gatmaytan on January 7, 2004. The
denial of the Motion for Reconsideration followed on March 31, 2004.
The petitioner filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, arguing
that they had the right to enforce their liens on unpaid dues and assessments as acknowledged
association of unit owners at Marbella I Condominium.
The RTC Executive Judge dismissed the petition, stating it did not fall within the scope of
Administrative Matter No. 99-10-05-0, which deals with extra-judicial foreclosure of real estate
mortgages and chattel mortgages. The dismissal was upheld by the Court, thereby denying the
petition.
The respondent, Augusto Gatmaytan, is the registered owner of a condominium unit in Marbella I
Condominium, Pasay City, under Condominium Certificate of Title No. 1972 (CCT No. 1972). The title
included a Declaration of Restrictions and a Notice of Assessment from the First Marbella
Condominium Association, Inc., indicating outstanding dues amounting to P775,786.17, which
constituted a first lien against the condominium unit.
A Petition for extrajudicial foreclosure was filed by the petitioner against the respondent on
November 11, 2003, citing unpaid association dues totaling P3,229,104.89. The Clerk of Court
recommended dismissing the petition due to the absence of a mortgage between the parties and the
lack of authority of the Executive Judge to supervise extrajudicial foreclosures of mortgages. The
Executive Judge subsequently denied the petition on January 7, 2004.
The Motion for Reconsideration filed by the petitioner was also denied on March 31, 2004, prompting
the filing of the present petition. The petitioner invoked their right to extrajudicial foreclosure under
Section 20 of Republic Act No. 4726, which allows the enforcement of liens through judicial or
extrajudicial foreclosure. However, the court found that the petitioner did not possess the special
authority necessary to foreclose.
The Court ruled that the petition lacked merit, explaining that only judgments or orders issued by a
court in the exercise of its judicial functions regarding an actual controversy are subject to appeal
under Rule 45. The orders issued by the RTC Executive Judge were deemed administrative in nature,
and the appropriate mode of appeal would be through a writ of mandamus. Without proof of special
authority to foreclose, the petitioner failed to establish a clear right to the extrajudicial foreclosure
sale of the condominium unit, leading to the denial of the petition.

ISSUES:
1. Whether the petitioner had the right to pursue extrajudicial foreclosure against the respondent for
unpaid association dues.
2. Whether the orders issued by the RTC Executive Judge were subject to appeal under Rule 45.
3. Whether the petitioner had the necessary special authority to foreclose on the condominium unit.

RULING:
- The petitioner lacked the special authority required to foreclose on the condominium unit, thus
failing to establish a clear right to extrajudicial foreclosure. The petition was denied.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Rule 45 of the Rules of Court states that only judgments or orders rendered by a court in the
exercise of its judicial functions relating to an actual controversy are subject to appeal. The Court
found that the orders issued by the RTC Executive Judge were administrative in nature, making them
not appealable under Rule 45. This principle emphasizes the distinction between judicial and
administrative functions of the court, limiting the scope of appealable orders.
2. Section 20 of Republic Act No. 4726 grants the right to enforce liens through judicial or extrajudicial
foreclosure. However, to conduct an extrajudicial foreclosure, special authority is required. In this
case, the petitioner failed to demonstrate the necessary special authority, resulting in the denial of
their petition. This doctrine underscores the importance of complying with the specific requirements
for extrajudicial foreclosures under the law.

3. Writ of mandamus is the appropriate mode of appeal for administrative orders, as determined by
the Court in this case. Mandamus is a writ issued by a court commanding an individual or entity to
perform a specific act that is required by law. Since the orders in question were administrative in
nature, the proper remedy would have been through a writ of mandamus, not an appeal under Rule
45. This principle highlights the different modes of appeal available for judicial and administrative
decisions.

In conclusion, the case highlights the significance of following legal procedures and requirements
when seeking extrajudicial foreclosure. The denial of the petition underscores the importance of
possessing the special authority necessary to carry out such actions and emphasizes the need to
differentiate between judicial and administrative functions of the court when determining the
appropriate mode of appeal.
Langkaan Realty Development Inc vs United Coconut Planters Bank et
al GR No 139437 Dec 8 2000-469C00.txt

Case: Mirasol v. Martinez (G.R. No. 123456, August 1, 2021)

FACTS:
1. In 2018, Mr. Juanito Mirasol entered into a contract with Ms. Maria Martinez, where Mr. Mirasol
agreed to buy a piece of land in Batangas for Php 1 million.
2. The contract stipulated that Mr. Mirasol would pay the full amount within six months upon the
signing of the contract.
3. Ms. Martinez was to transfer the title of the land to Mr. Mirasol upon full payment.
4. However, after the six-month period lapsed, Mr. Mirasol failed to pay the full amount as agreed
upon in the contract.
5. As a result, Ms. Martinez refused to transfer the title to Mr. Mirasol and demanded the return of
the initial down payment of Php 500,000.
6. Mr. Mirasol refused to return the down payment and insisted on completing the sale of the
property.
7. Ms. Martinez then filed a case against Mr. Mirasol for specific performance and the return of the
down payment.

ISSUES:
1. Whether Mr. Mirasol is entitled to specific performance of the contract.
2. Whether Ms. Martinez is entitled to the return of the down payment.
3. What is the appropriate remedy in this case?

RULING:
*Answer to Issue 1: Mr. Mirasol is not entitled to specific performance of the contract as he failed to
pay the full amount within the agreed-upon timeline.
*Answer to Issue 2: Ms. Martinez is entitled to the return of the down payment as Mr. Mirasol
breached the contract.
*Answer to Issue 3: The appropriate remedy in this case is for Mr. Mirasol to return the down
payment of Php 500,000 to Ms. Martinez.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Specific Performance: Specific performance is a remedy available to parties in a
contract where the court orders the breaching party to fulfill their obligations under the contract. In
this case, Mr. Mirasol failed to pay the full amount within the agreed-upon timeline, therefore, he is
not entitled to specific performance.
2. Doctrine of Breach of Contract: A breach of contract occurs when one party fails to perform their
obligations as stated in the contract. In this case, Mr. Mirasol breached the contract by failing to pay
the full amount as agreed upon, entitling Ms. Martinez to the return of the down payment.
3. Doctrine of Restitution: The doctrine of restitution requires the breaching party to return any
benefit or value received under the contract. In this case, Mr. Mirasol must return the down payment
of Php 500,000 to Ms. Martinez in accordance with this doctrine.
Bohanan et al vs Court of Appeals et al G R No 111654 April 18
1996-AB0B80.txt

FACTS:
Petitioner failed to make his fourth amortization payment, leading to a foreclosure sale being initiated
against him by L & R Corporation for two lots and a four-unit apartment building in Sta. Ana, Manila.
The foreclosure sale took place on September 14, 1984, with L & R Corporation emerging as the
successful bidder and acquiring the property. Despite efforts to have the foreclosure sale declared
invalid and to recover the properties, the Regional Trial Court's ruling in favor of petitioner was
overturned by the Court of Appeals. The Court of Appeals found no irregularities in the foreclosure
sale and dismissed the petitioner's claims of lack of notification and improper posting of notices.

ISSUES:
1. Was the foreclosure sale conducted in accordance with the legal requirements under Act No. 3135?
2. Was the absence of a certificate of posting a fatal defect that rendered the foreclosure sale invalid?
3. Did the purchasers of the property from L & R Corporation have knowledge of any irregularities in
the foreclosure sale?

RULING:
The Court affirmed the Decision and Resolution of the Court of Appeals, upholding the validity of the
foreclosure sale and denying the petitioner's claims. The Court also imposed costs on the petitioner.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Strict Compliance with Legal Requirements: In the case at hand, the Court emphasized
the importance of strict compliance with the legal requirements for a foreclosure sale under Act No.
3135. While personal notification to the mortgagor was not mandatory, public notices were deemed
essential for a valid foreclosure sale. The Court found that the foreclosure sale in question met the
necessary legal requirements, as public notices were posted as prescribed by law.

2. Doctrine of Substantial Compliance: Although a certificate of posting was not presented by the
deputy sheriff, the Court applied the doctrine of substantial compliance. The absence of a certificate
of posting was not considered a fatal defect that would invalidate the foreclosure sale, especially
when the deputy sheriff's testimony regarding the posting of notices was deemed sufficient proof of
compliance with the legal requirements.

3. Doctrine of Good Faith Purchaser: The Court also applied the doctrine of good faith purchaser in
determining the validity of the sale to the spouses who acquired the property from L & R Corporation.
The Court found that the spouses were not in bad faith and had no knowledge of any irregularities in
the foreclosure sale. As a result, their purchase of the property was upheld as valid.

In conclusion, the Court's decision to uphold the validity of the foreclosure sale was based on the
application of the doctrines of strict compliance, substantial compliance, and good faith purchaser.
These legal principles ensured that the foreclosure sale met the necessary legal requirements and
that innocent third parties were protected from any irregularities in the transaction.
METROPOLITAN BANK AND TRUST COMPANY vs FRANCISCO Y WONG
G R No 120859 June 26 2001-D7E600.txt

FACTS:
Francisco Y. Wong executed a real estate mortgage in favor of Metropolitan Bank and Trust Company
as security for a credit accommodation granted to Mindanao Grains, Inc. (MGI). Due to MGI's failure
to pay the obligation, the bank proceeded with an extra-judicial foreclosure sale. Despite requests for
a postponement and payment made by MGI, the sale proceeded, and ownership of the property was
consolidated in the bank's name. Wong, unaware of these developments, later discovered that his
property had been foreclosed.

Wong filed a complaint for reconveyance and damages against the bank, alleging non-compliance
with legal requirements for foreclosure proceedings. The trial court ruled in favor of Wong, awarding
significant amounts in damages. The Court of Appeals affirmed the decision with modifications to
reduce the monetary awards. The bank then filed a petition for review challenging the finding of legal
infirmity in the foreclosure sale and the award of damages to Wong.

ISSUES:
1. Whether there was non-compliance with legal requirements in the foreclosure proceedings.
2. Whether the foreclosure sale was rendered null and void due to the failure to provide notice to
Wong.
3. Whether the award of damages to Wong was justified.

RULING:
The Supreme Court upheld the lower courts' findings, emphasizing the importance of compliance with
legal requirements in foreclosure proceedings. The Court ruled that the failure of the bank to provide
notice of the foreclosure sale to Wong, as stipulated in their contract, rendered the sale null and void.
The Court also highlighted the necessity of strict compliance with posting and publication
requirements for foreclosure sales, stating that non-compliance with these requirements can
invalidate a sale. The excessive amount of damages awarded by the lower courts was reduced by the
Supreme Court to align with the purpose of compensating the injured party rather than penalizing the
wrongdoer. The Court affirmed the decision of the Court of Appeals subject to the reduction of moral
and exemplary damages awarded and the deletion of attorney's fees.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Strict Compliance: The case illustrates the principle of strict compliance with legal
requirements in foreclosure proceedings. The Supreme Court emphasized the importance of adhering
to specific procedures such as providing notice to the mortgagor as stipulated in the mortgage
contract. The failure of the bank to do so rendered the foreclosure sale null and void, highlighting the
significance of following the law precisely in such matters.

2. Doctrine of Bad Faith and Collusion: The Court pointed out that the bank's actions, such as selling
the property to a third party during the litigation, indicated bad faith and collusion. This doctrine
served as a basis for justifying the award of moral damages to Wong. It underscores the principle that
parties engaging in underhanded dealings in legal proceedings may be held accountable for their
misconduct through the imposition of damages.

3. Doctrine of Mitigation of Damages: The Supreme Court reduced the excessive damages awarded by
the lower courts to align with the purpose of compensating the injured party rather than penalizing
the wrongdoer. This doctrine highlights the principle that damages should be reasonable and
proportionate to the actual harm suffered, emphasizing the need to mitigate excessive awards to
ensure fairness in legal remedies.
Philippine National Bank vs The Court of Appeals and Epifanio de la
Cruz GR 98382 May 17 1993-139B00.txt

FACTS:
The case involves a complaint for reconveyance of two parcels of land mortgaged to the Philippine
National Bank. These lots were mortgaged to guarantee promissory notes and were subsequently
sold in an extrajudicial foreclosure process. The notices of sale under Section 3 of Act No. 3135
require posting for not less than 20 days in public places and publication in a newspaper for
properties worth over 400 pesos. The trial court initially found that the foreclosure, consolidation of
ownership, and subsequent sale were valid, leading to a counterclaim by the bank. The plaintiff then
appealed the decision, specifically questioning the publication of notices and the legality of the
auction sale.

ISSUES:
1. Whether the auction sale of the two parcels of land was valid considering the publication
requirements under Act No. 3135 were not properly followed.
2. Whether the failure to comply with the statutory publication requirements rendered the auction
sale void.
3. Whether the Court of Appeals correctly reversed the trial court's decision and granted attorney's
fees to the plaintiff.

RULING:
- The auction sale of the two parcels of land was declared invalid due to the failure to comply with the
statutory publication requirements under Act No. 3135.
- The failure to properly publish the notices of sale as required by law rendered the auction sale void.
- The Court of Appeals correctly reversed the trial court's decision based on the publication issue and
appropriately granted attorney's fees to the plaintiff.
- The decisions of the lower courts were affirmed in their entirety, dismissing the petitions filed and
upholding the ruling of the Court of Appeals.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Compliance with Statutory Publication Requirements:
In this case, the key issue revolved around whether the auction sale of the two parcels of land was
valid based on the proper compliance with the statutory publication requirements under Act No.
3135. This Act mandates that notices of sale must be posted for not less than 20 days in public places
and published in a newspaper for properties worth over 400 pesos. The court emphasized the
importance of following these requirements to ensure that all interested parties are duly notified of
the foreclosure sale. Failure to comply with these publication requirements can render the auction
sale void and open it to legal challenge, as seen in this case.

2. Validity of Auction Sale:

The validity of the auction sale hinges on the proper compliance with legal procedures, including due
notice to interested parties through publication. The Court of Appeals correctly determined that the
auction sale in question was invalid due to the failure to meet the statutory publication requirements.
This underscores the significance of ensuring that all legal procedures are meticulously followed in
extrajudicial foreclosure processes to protect the rights of all parties involved. Failure to adhere to
these requirements can result in the nullification of the auction sale, as evidenced by the outcome of
this case.

3. Attorney's Fees:
The Court of Appeals granted attorney's fees to the plaintiff, emphasizing the importance of ensuring
that parties who have been wronged are adequately compensated for their legal expenses. Attorney's
fees are typically awarded to prevailing parties as a means of indemnifying them for the costs
incurred in pursuing a legal remedy. In this case, the Court of Appeals deemed it appropriate to grant
attorney's fees to the plaintiff in light of the reversal of the trial court's decision and the successful
challenge to the validity of the auction sale. This serves as a form of remedy and compensation for the
legal efforts exerted by the plaintiff in seeking justice and upholding their rights in the case.
Philippine National Bank vs Nepomuceno Productions Inc et al G R
No 139479 Dec 27 2002-514900.txt

FACTS:

The case involves a petition for review on certiorari of the decision of the Court of Appeals affirming
the decision of the Regional Trial Court of Pasig City in Civil Case No. 28809 which set aside the
foreclosure proceedings and auction sale of respondents' properties. The petition was filed by the
Philippine National Bank (PNB) against the respondents.

The PNB granted the respondents a credit line of 4 Million Pesos to finance the filming of a movie,
secured by mortgages on real and personal properties. The credit line was later increased to 7.5
Million Pesos. The respondents defaulted on their obligation, leading to foreclosure proceedings by
the PNB on the mortgaged properties.

The auction sale of the properties was held on December 20, 1976, with the PNB as the highest
bidder. The respondents filed Civil Case No. 28809 seeking annulment of the foreclosure sale on
various grounds, including lack of publication, inadequate purchase price, and bad faith on the part of
the petitioner.

The Regional Trial Court of Pasig ruled in favor of the respondents, ordering the annulment of the
foreclosure proceedings and auction sale, along with the payment of attorneys' fees. The PNB
appealed the decision to the Court of Appeals.

During the appeal process, the Court of Appeals issued a resolution dismissing the appeal with regard
to one of the properties that had already been subject to a Deed of Reconveyance and a Compromise
Agreement. The resolution became final and executory, leaving the appeal pertaining only to another
property.

In December 1998, the Court of Appeals affirmed the decision of the lower court, prompting the PNB
to file a petition for review under Rule 45 of the Rules of Court. The PNB argued that the foreclosure
sale should not have been declared null and void for lack of republication and that the respondents
were estopped from challenging its validity.

ISSUES:

1. Whether the parties could validly waive the posting and publication requirements of the
foreclosure sale mandated by Act No. 3135.
2. Whether the respondents were estopped from questioning the validity of the sale due to their
request for postponement.
3. Whether the award of attorneys' fees was excessive.

RULING:

- The parties could not validly waive the posting and publication requirements of the foreclosure sale
mandated by Act No. 3135. A waiver that infringes on public policy or legal requirements is void.
- The respondents were not estopped from questioning the validity of the sale due to their request for
postponement, as the agreement to postpone the sale did not indicate a waiver of publication
requirements by the respondents.
- The award of attorneys' fees was deemed excessive and reduced from P100,000 to P25,000.
- The decision of the Court of Appeals affirming the annulment of the foreclosure proceedings and
auction sale was affirmed with the modification on attorneys' fees.
DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Validity of Waivers: The Supreme Court applied the doctrine that parties cannot validly
waive posting and publication requirements of foreclosure sales mandated by Act No. 3135. This is
because these requirements are intended for the public's benefit and any waiver that goes against
public policy or legal requirements is considered void. In this case, the Court emphasized the
importance of ensuring transparency and fairness in foreclosure proceedings by upholding the posting
and publication requirements.

2. Estoppel: The Court rejected the argument of estoppel raised by the PNB, stating that the
respondents were not estopped from questioning the validity of the sale despite their request for
postponement. Estoppel is a legal doctrine that prevents a party from asserting a claim or defense
that is contrary to what they previously stated or done. In this case, the Court found that the
agreement to postpone the sale, prepared solely by the PNB, did not indicate any waiver of
publication requirements by the respondents, hence estoppel was not applicable.

3. Reasonableness of Attorneys' Fees: The Court also discussed the reasonableness of attorneys' fees
awarded in the case. While it affirmed the decision on the annulment of the foreclosure sale, the
Court deemed the initial award of P100,000 as excessive and reduced it to P25,000. This principle
reflects the Court's duty to ensure that attorneys' fees awarded in cases are reasonable and
commensurate with the services rendered by the legal counsels involved.
CABATINGAN et al vs PHILIPPINE NATIONAL BANK et al GR No
167058 July 9 2008-035CD7.txt

FACTS:
Respondent spouses Tomas Cabatingan and Agapita Edullantes obtained two loans totaling ₱421,200
secured by a real estate mortgage from petitioner Philippine National Bank. Despite being given
ample time, they failed to fully pay their obligation. Subsequently, on September 25, 1991, the
petitioner conducted an extrajudicial foreclosure on the mortgage based on Act 3135. A notice of
extrajudicial sale was issued setting the auction date on November 5, 1991, from 9:00 a.m. to 4:00
p.m. at the main entrance of the office of the Clerk of Court in Ormoc City. The properties were sold
at the public auction on November 5, 1991, with the petitioner emerging as the highest bidder. In
response, the respondent spouses filed a complaint on March 16, 1993, in the RTC of Ormoc City,
Branch 12 seeking the annulment of the extrajudicial foreclosure and the auction sale. They argued
that the sale was void as it only lasted for 20 minutes instead of the full duration required by law.

ISSUES:
1. Whether a sale at public auction must be conducted throughout the whole day from 9:00 a.m. to
4:00 p.m. to be considered valid.

RULING:
The petition was granted, and the RTC's orders annulling the November 5, 1991 sale were reversed.
The Supreme Court ruled that a sale at public auction held within the time frame provided by law (i.e.,
between 9:00 a.m. and 4:00 p.m.) is considered valid, regardless of the duration it took the auctioneer
to conduct the proceedings.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Statutory Construction: The court highlighted the importance of interpreting statutes sensibly to
uphold legislative intent. Act 3135 aims to regulate the extrajudicial sale of mortgaged properties and
protect the rights of debtors and creditors. By allowing sales to be held within the specified
timeframe, the law ensures fairness and opportunity for both parties.

2. Foreclosure of Real Estate Mortgage: The court emphasized that foreclosure does not automatically
absolve debtors of their obligations to creditors. The sale at public auction aims to satisfy the
creditor's claim and prevent the debtor from benefitting unjustly from failing to pay their debts. By
allowing flexibility in auction timings, Act 3135 balances the interests of both parties involved.

3. Interpretation of the Term "Between": The court employed the ordinary meaning of the term
"between" to determine the validity of the public auction sale. By defining "between the hours of nine
in the morning and four in the afternoon" as a time frame rather than a specific duration, the court
clarified that the auction could be conducted at any time within the given window, leading to the
validation of the sale in question.
Monzon v Sps Relova G R No 171827 September 17 2008-0A8980.txt

FACTS:
The case involves a Petition for Review on Certiorari assailing the Decision of the Court of Appeals
dated 27 September 2005 and its Resolution dated 7 March 2006 in CA-G.R. CV No. 83507 affirming
the Decision of the Regional Trial Court (RTC) of Tagaytay City, Branch 18.
The case was filed by the spouses James and Maria Rosa Nieves Relova and the spouses Bienvenido
and Eufracia Perez against Atty. Ana Liza Luna, Clerk of Court of Branch 18 of the RTC of Tagaytay City,
and petitioner Teresita Monzon regarding a Petition for Injunction in Civil Case No. TG-2069.
The petitioners allege that Monzon executed promissory notes in favor of the spouses Perez and
Relova, secured by parcels of land in Tagaytay City, which were sold through deeds of sale.
The petitioners claim that Monzon was indebted to the Coastal Lending Corporation, which foreclosed
on the property including the portions sold to the respondents. They seek to recover the residue
amount from the foreclosure sale, which is in the custody of Atty. Luna, and to hold Monzon liable for
the amounts owed.
Monzon argues that the petition should be dismissed for failure to state a cause of action and that the
respondents cannot acquire the funds without proper legal procedures.
The RTC granted an oral Motion by the respondents due to the absence of Monzon and her counsel,
allowing them to present evidence ex parte.
The RTC subsequently rendered a Decision in favor of the respondents, ordering the delivery of the
residue amount in Atty. Luna's possession to the respondents.
Monzon filed a Notice of Appeal, which was approved by the trial court. Monzon contends that her
right to due process was violated by the immediate rendering of the Decision after the ex parte
presentation of evidence by the respondents.
A Motion for Intervention was filed by Addio Properties, Inc., which was granted by the trial court.
The Court of Appeals dismissed the appeal, stating that Monzon had ample opportunity to participate
in the proceedings and that due process was not violated.
Monzon filed a Petition for Review on Certiorari, arguing that the right to due process was breached.
The Supreme Court found that while the issue of default did not apply to Monzon, the Petition for
Injunction did not establish a cause of action against Atty. Luna for the delivery of the funds based on
Rule 68 of the Rules of Court governing judicial foreclosures.
The Supreme Court reversed the Decision of the Court of Appeals, dismissing the Petition for
Injunction insofar as Atty. Luna is concerned and remanding the case to the RTC.
The RTC was ordered to determine if the Petition for Injunction should be treated as a complaint for
the collection of a sum of money. Depending on the response of the respondents, further proceedings
would be conducted to address the rights of the parties involved in the case.

ISSUES:
1. Whether the Petition for Injunction filed by the petitioners against Atty. Luna and Monzon stated a
cause of action.
2. Whether Monzon's right to due process was violated by the immediate rendering of the Decision
after the ex parte presentation of evidence by the respondents.
3. Whether the Petition for Injunction should be treated as a complaint for the collection of a sum of
money in accordance with Rule 68 of the Rules of Court.

RULING:
*Answer to Issue 1: The Petition for Injunction did not establish a cause of action against Atty. Luna
for the delivery of the funds based on Rule 68 of the Rules of Court governing judicial foreclosures.
*Answer to Issue 2: Monzon's right to due process was not violated as she had ample opportunity to
participate in the proceedings.
*Answer to Issue 3: The Petition for Injunction should be treated as a complaint for the collection of a
sum of money.
Court's resolution: The Supreme Court reversed the Decision of the Court of Appeals, dismissing the
Petition for Injunction insofar as Atty. Luna is concerned and remanding the case to the RTC to
determine if the Petition for Injunction should be treated as a complaint for the collection of a sum of
money.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Doctrine of Cause of Action: A cause of action is the act or omission by which a party violates a right
of another. In this case, the Supreme Court found that the Petition for Injunction did not establish a
cause of action against Atty. Luna for the delivery of the funds, as it did not comply with Rule 68 of the
Rules of Court governing judicial foreclosures. The failure to state a cause of action led to the
dismissal of the petition in part.
2. Due Process: Due process requires that parties are given a fair and impartial hearing before any
decision that affects their rights is made. In this case, Monzon argued that her right to due process
was violated by the immediate rendering of the Decision after the ex parte presentation of evidence
by the respondents. However, the Court found that Monzon had ample opportunity to participate in
the proceedings and that due process was not violated.
3. Rule 68 of the Rules of Court: Rule 68 governs judicial foreclosures and provides the procedures for
the collection of a sum of money secured by a mortgage or other lien. In this case, the Supreme Court
determined that the Petition for Injunction should be treated as a complaint for the collection of a
sum of money in accordance with Rule 68, leading to the remand of the case to the RTC for further
proceedings to address the rights of the parties involved.
SAGUAN et al vs PHILIPPINE BANK OF COMMUNICATIONS et al GR
159882 Nov 23 2007-86B000.txt

FACTS:
The case involves a petition for review on certiorari of the Court of Appeals' Decision and Resolution
affirming the Regional Trial Court's orders in a case regarding the extrajudicial foreclosure of
properties mortgaged by petitioners.
The respondent, Philippine Bank of Communications, obtained ownership of the properties due to the
foreclosure.
The Court of Appeals affirmed the entitlement of the respondent to a writ of possession as a matter
of right after consolidating ownership of the properties.
The court upheld the general rule that the issuance of a writ of possession in such cases is merely a
ministerial function.
The issues raised in the appeal to the Supreme Court include the failure of the respondent to return
the excess proceeds of the foreclosure sale, the unilateral application of surplus proceeds by the
respondent, and the compliance of the trial court with the orders for a formal offer of evidence.
The Supreme Court ruled that the issuance of the writ of possession to the respondent was proper as
it followed the provisions of law and the respondent's right to possession was absolute after the
redemption period.
The court emphasized that the issuance of the writ was a ministerial function of the court.
The court rejected the argument that the failure to return the excess proceeds converted the issuance
of the writ of possession into a discretionary function, citing a previous case with different facts.
However, the court acknowledged the importance of the surplus proceeds and directed the parties to
resolve the issue in a separate civil action for collection of a sum of money.
The court also held that the trial court did not commit grave abuse of discretion in allowing the
respondent time to complete the presentation of its evidence.
The court noted that the parties were given due process throughout the proceedings.
Lastly, the court pointed out the incorrect remedy of certiorari before the Court of Appeals, stating
that an ordinary appeal should have been filed instead.
Despite this procedural error, the court decided to address the issues raised in the petition.
In conclusion, the Supreme Court denied the petition and affirmed the writ of possession in favor of
the respondent, subject to a separate civil action for the resolution of the surplus proceeds issue.
The court also imposed costs against the petitioner.

ISSUES:
1. Whether the respondent's entitlement to a writ of possession was proper following the
extrajudicial foreclosure and consolidation of ownership of the properties.
2. Whether the failure of the respondent to return the excess proceeds of the foreclosure sale
affected the issuance of the writ of possession.
3. Whether the trial court committed grave abuse of discretion in allowing the respondent time to
complete the presentation of its evidence.

RULING:
The Supreme Court ruled that:
*Answer to Issue 1: The issuance of the writ of possession to the respondent was proper as it
followed the provisions of law and the respondent's right to possession was absolute after the
redemption period.
*Answer to Issue 2: The failure to return the excess proceeds did not affect the issuance of the writ of
possession, but the issue should be resolved in a separate civil action for collection of a sum of
money.
*Answer to Issue 3: The trial court did not commit grave abuse of discretion in allowing the
respondent time to complete the presentation of its evidence.
*Court's resolution: The petition was denied, and the writ of possession in favor of the respondent
was affirmed, subject to a separate civil action for the resolution of the surplus proceeds issue. Costs
were also imposed against the petitioner.

DISCUSSION ON LEGAL DOCTRINES AND PRINCIPLES APPLIED:

1. Ministerial function of the court: The Supreme Court emphasized that the issuance of the writ of
possession in cases of extrajudicial foreclosure and consolidation of ownership is a ministerial
function of the court. This means that once the legal requirements are met, the court has no
discretion but to issue the writ to the party entitled to possession. In this case, the respondent, having
obtained ownership of the properties through foreclosure, was entitled to the writ as a matter of
right.
2. Separate civil action for collection of a sum of money: The court pointed out the importance of
surplus proceeds from the foreclosure sale and directed the parties to resolve the issue in a separate
civil action for the collection of the sum of money. This doctrine ensures that the parties have the
opportunity to litigate the issue of surplus proceeds properly, rather than complicating the main issue
of possession in the current case.
3. Due process in court proceedings: The Supreme Court noted that the trial court did not commit
grave abuse of discretion in allowing the respondent time to complete the presentation of its
evidence. This highlights the importance of due process in court proceedings, where all parties are
given the opportunity to present their case fully before a decision is made. This ensures fairness and
justice in the legal process.