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

What is divested from the mortgagor is only his "full right as owner thereof to dispose (of) Further, it does NOT give to the mortgagor a new title, but merely restores to him the title
and sell the lands,"  merely clarifying that the mortgagor does not have the freed of the encumbrance of the lien foreclosed.
unconditional power to absolutely sell the land since the same is encumbered by a lien of
a third person which, if unsatisfied, could result in a consolidation of ownership in the Lower court already ruled that violation of Act No. 3135, as amended nullified the
lienholder but only after the lapse of the period of redemption. extrajudicial foreclosure proceeding and its effects. Such findings and ruling of the trial
What is delimited is NOT the mortgagor's jus dispodendi, as an attribute of ownership, but court are already final and binding on petitioners and can no longer be modified,
merely the rights conferred by such act of disposal which may correspondingly be petitioners having failed to appeal therefrom.
restricted.
Decision:
Still not applicable to the case because what is presently involved is a mortgage, not a sale, CA decision modifying the RTC decision is REVERSED and SET ASIDE. The judgment of
to petitioner bank.  does not involve a transfer, cession or conveyance of the property but said trial court REINSTATED.
only constitutes a lien thereon.  no obstacle to the legal creation of such a lien even after the
auction sale of the property but during the redemption period, since no distinction is made
between a mortgage constituted over the property before or after the auction sale thereof.
Redemptioner: is defined as a creditor having a lien by attachment,
judgment or mortgage on the property sold, or on some part thereof, subsequent to the
judgment under which the property was sold.

Of course, while in extrajudicial foreclosure the sale contemplated is not under a judgment but
the proceeding pursuant to which the mortgaged property was sold, a subsequent mortgage
could nevertheless be legally constituted thereafter with the subsequent mortgagee becoming
and acquiring the rights of a redemptioner, aside from his right against the mortgagor.
In either case, what bears attention is that since the mortgagor remains as the absolute owner
of the property during the redemption period and has the free disposal of his property, there
would be compliance with the requisites of Article 2085 of the Civil Code for the constitution
of another mortgage on the property.
To hold otherwise would create the inequitable situation wherein the mortgagor would be
deprived of the opportunity, which may be his last recourse, to raise funds wherewith to
timely redeem his property through another mortgage thereon.

IN THE PRESENT CASE

REM in favor of petitioner bank was executed during the period of redemption.
During the said period, the mortgagor is still the owner of the foreclosed property since the
right of the purchaser at a foreclosure sale is merely inchoate until the period of
redemption expires without the right being exercised

The title to land sold under mortgage foreclosure remains in the mortgagor or his
grantee until the expiration of the redemption period and conveyance by the master's
deed.
The rule has always been that it is only upon the expiration of the redemption period, without
the judgment debtor having made use of his right of redemption, that the ownership of the land
sold becomes consolidated in the purchaser.