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Prof. Joselito Guianan Chan's The Labor Code of the Philippines, Annotated Labor Standards & Social Legislation Volume I of a 3-Volume Series 2019 Edition (3rd Revised Edition)
 

 
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UNITED STATES SUPREME COURT JURISPRUDENCE
 

 
PHILIPPINE SUPREME COURT JURISPRUDENCE
 

   
February-1997 Jurisprudence                 

  • G.R. No. 99039 February 3, 1997 - FORD PHIL., ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 100748 February 3, 1997 - JOSE BARITUA v. COURT OF APPEALS, ET AL.

  • G.R. No. 108547 February 3, 1997 - FELICIDAD VDA. DE CABRERA, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. Nos. 112761-65 February 3, 1997 - PEOPLE OF THE PHIL. v. PORFERIO M. PEPITO

  • G.R. No. 114183 February 3, 1997 - PEOPLE OF THE PHIL. v. JESUS BORJA

  • G.R. No. 119310 February 3, 1997 - JULIETA V. ESGUERRA v. COURT OF APPEALS, ET AL.

  • G.R. No. 119935 February 3, 1997 - UNITED SOUTH DOCKHANDLERS, INC. v. NLRC, ET AL.

  • G.R. No. 122156 February 3, 1997 - MANILA PRINCE HOTEL v. GSIS, ET AL.

  • G.R. No. 123332 February 3, 1997 - AUGUSTO GATMAYTAN v. COURT OF APPEALS, ET AL.

  • G.R. No. 118915 February 4, 1997 - CAPITOL MEDICAL CENTER-ACE-UFSW v. BIENVENIDO LAGUESMA, ET AL.

  • Adm. Matter No. P-94-1110 February 6, 1997 - MELENCIO S. SY v. CARMELITA S. MONGCUPA

  • Adm. Matter No. P-96-1203 February 6, 1997 - ERNESTO A. REYES v. NORBERTO R. ANOSA

  • G.R. No. 110668 February 6, 1997 ccc zz

    SMITH, BELL & CO., INC. v. COURT OF APPEALS, ET AL.

  • G.R. No. 111682 February 6, 1997 - ZENAIDA REYES v. COURT OF APPEALS, ET AL.

  • G.R. No. 117982 February 6, 1997 - COMMISSIONER OF INTERNAL REVENUE v. COURT OF APPEALS, ET AL.

  • G.R. No. 118843 February 6, 1997 - ERIKS PTE. LTD. v. COURT OF APPEALS, ET AL.

  • G.R. Nos. 118950-54 February 6, 1997 - PEOPLE OF THE PHIL. v. LUCRECIA GABRES

  • G.R. No. 119322 February 6, 1997 - COMMISSIONER OF INTERNAL REVENUE, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 98252 February 7, 1997 - PEOPLE OF THE PHIL. v. RENE JANUARIO, ET AL.

  • G.R. No. 110391 February 7, 1997 - PEOPLE OF THE PHIL. v. DOLORES DE LEON

  • G.R. No. 112191 February 7, 1997 - FORTUNE MOTORS (PHILS.) CORP., ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. Nos. 112714-15 February 7, 1997 - PEOPLE OF THE PHIL. v. ANTONIO SAGARAL

  • G.R. No. 117472 February 7, 1997 - PEOPLE OF THE PHIL. v. LEO ECHEGARAY

  • G.R. No. 119657 February 7, 1997 - UNIMASTERS CONGLOMERATION, INC. v. COURT OF APPEALS, ET AL.

  • G.R. Nos. 119772-73 February 7, 1997 - PEOPLE OF THE PHIL. v. NIGEL RICHARD GATWARD

  • G.R. No. 125249 February 7, 1997 - JIMMY S. DE CASTRO v. COMELEC, ET AL.

  • Adm. Matter No. P-95-1161 February 10, 1997 - JESUS N. BANDONG v. BELLA R. CHING

  • G.R. No. 108894 February 10, 1997 - TECNOGAS PHIL. MFG. CORP. v. COURT OF APPEALS, ET AL.

  • G.R. No. 109887 February 10, 1997 - CECILIA CARLOS v. COURT OF APPEALS, ET AL.

  • G.R. No. 117702 February 10, 1997 - PEOPLE OF THE PHIL. v. CRISPIN YPARRAGUIRRE

  • G.R. No. 124553 February 10, 1997 - ROSARIO R. TUASON v. COURT OF APPEALS, ET AL.

  • Adm. Matter No. MTJ-95-1070 February 12, 1997 - MARIA APIAG, ET AL. v. ESMERALDO G. CANTERO

  • Adm. Matter No. P-87-100 February 12, 1997 - FELISA ELIC VDA. DE ABELLERA v. NEMESIO N. DALISAY

  • Adm. Matter No. P-96-1231 February 12, 1997 - ISAIAS P. DICDICAN v. RUSSO FERNAN, JR., ET AL.

  • G.R. No. 68166 February 12, 1997 - HEIRS OF EMILIANO NAVARRO v. INTERMEDIATE APPELLATE COURT, ET AL.

  • G.R. No. 104666 February 12, 1997 - PEOPLE OF THE PHIL. v. BIENVENIDO OMBROG

  • G.R. No. 115129 February 12, 1997 - IGNACIO BARZAGA v. COURT OF APPEALS, ET AL.

  • G.R. No. 116511 February 12, 1997 - PEOPLE OF THE PHIL. v. COLOMA TABAG, ET AL.

  • G.R. No. 118025 February 12, 1997 - PEOPLE OF THE PHIL. v. REBECCO SATOR

  • G.R. No. 120769 February 12, 1997 - STANLEY J. FORTICH v. COURT OF APPEALS, ET AL.

  • G.R. No. 125531 February 12, 1997 - JOVAN LAND v. COURT OF APPEALS, ET AL.

  • G.R. No. 126013 February 12, 1997 - HEINZRICH THEIS, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 107554 February 13, 1997 - CEBU INT’L. FINANCE CORP. v. COURT OF APPEALS, ET AL.

  • G.R. No. 108763 February 13, 1997 - REPUBLIC OF THE PHIL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 112968 February 13, 1997 - PEOPLE OF THE PHIL. v. ARSENIO LETIGIO

  • G.R. No. 114144 February 13, 1997 - PEOPLE OF THE PHIL. v. FLORENTINO ABAD

  • G.R. Nos. 114711 & 115889 February 13, 1997 - GARMENTS and TEXTILE EXPORT BOARD v. COURT OF APPEALS, ET AL.

  • G.R. No. 122728 February 13, 1997 - CASIANO A. ANGCHANGCO v. OMBUDSMAN, ET AL.

  • Adm. Matter No. RTJ-96-217 February 17, 1997 - MANUEL F. CONCEPCION v. JESUS V. AGANA, ET AL.

  • Adm. Matter No. RTJ 97-1369 February 17, 1997 - OCTAVIO DEL CALLAR v. IGNACIO L. SALVADOR, ET AL.

  • G.R. Nos. 103501-03 & 103507 February 17, 1997 - LUIS A. TABUENA v. SANDIGANBAYAN, ET AL.

  • G.R. No. 119247 February 17, 1997 - CESAR SULIT v. COURT OF APPEALS, ET AL.

  • G.R. No. 119536 February 17, 1997 - GLORIA S. DELA CRUZ v. NLRC, ET AL.

  • G.R. No. 121017 February 17, 1997 - OLIVIA B. CAMANAG v. JESUS F. GUERRERO, ET AL.

  • G.R. No. 122165 February 17, 1997 - ALA MODE GARMENTS, INC. v. NLRC, ET AL.

  • G.R. No. 123823 February 17, 1997 - MODESTO G. ESPAÑO v. COURT OF APPEALS, ET AL.

  • G.R. No. 96249 February 19, 1997 - PEOPLE OF THE PHIL. v. ALIPIO QUIAMCO, ET AL.

  • G.R. No. 114396 February 19, 1997 - PEOPLE OF THE PHIL. v. WILLIAM ROBERT BURTON

  • G.R. No. 118140 February 19, 1997 - PEOPLE OF THE PHIL. v. DANTE PIANDIONG, ET AL.

  • G.R. No. 121084 February 19, 1997 - TOYOTA MOTOR PHILS. CORP. v. TOYOTA MOTOR PHILS. CORP. LABOR UNION, ET AL.

  • G.R. No. 107916 February 20, 1997 - PERCIVAL MODAY, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 112288 February 20, 1997 - DELSAN TRANSPORT LINES, INC. v. COURT OF APPEALS, ET AL.

  • Adm. Matter No. P-94-1034 February 21, 1997 - LEWELYN S. ESTRELLER v. SOFRONIO MANATAD, JR.

  • G.R. No. 73399 February 21, 1997 - PEOPLE OF THE PHIL. v. RAMON ABEDES

  • G.R. No. 117394 February 21, 1997 - HINATUAN MINING CORP. v. NLRC, ET AL.

  • A.M. No. SDC-97-2-P February 24, 1997 - SOPHIA ALAWI v. ASHARY M. ALAUYA

  • G.R. No. 110427 February 24, 1997 - CARMEN CAÑIZA v. COURT OF APPEALS, ET AL.

  • Adm. Matter No. RTJ-94-1195 February 26, 1997 - ROMEO NAZARENO, ET AL. v. ENRIQUE M. ALMARIO

  • G.R. No. 94237 February 26, 1997 - BUILDING CARE CORP. v. NLRC, ET AL.

  • G.R. No. 105294 February 26, 1997 - PACITA DAVID-CHAN v. COURT OF APPEALS, ET AL.

  • G.R. No. 107671 February 26, 1997 - REMMAN ENTERPRISES v. COURT OF APPEALS, ET AL.

  • G.R. No. 109849 February 26, 1997 - MAXIMINO FUENTES v. COURT OF APPEALS, ET AL.

  • G.R. No. 110098 February 26, 1997 - PEOPLE OF THE PHIL. v. BUENAFE AZUGUE

  • G.R. No. 111538 February 26, 1997 - PARAÑAQUE KINGS ENTERPRISES, INC. v. COURT OF APPEALS, ET AL.

  • G.R. No. 116033 February 26, 1997 - ALFREDO L. AZARCON v. SANDIGANBAYAN, ET AL.

  • G.R. No. 123404 February 26, 1997 - AURELIO SUMALPONG v. COURT OF APPEALS, ET AL.

  • Adm. Matter No. RTJ-97-1368 February 27, 1997 - ERNESTO RIEGO, ET AL. v. EMILIO LEACHON, JR.

  •  





     
     

    G.R. No. 119247   February 17, 1997 - CESAR SULIT v. COURT OF APPEALS, ET AL.

     
    PHILIPPINE SUPREME COURT DECISIONS

    SECOND DIVISION

    [G.R. No. 119247. February 17, 1997.]

    CESAR SULIT, Petitioner, v. COURT OF APPEALS and ILUMINADA CAYCO, Respondents.

    Jesus M. Bautista for petitioner

    Benjamin A. Opeña for Private Respondent.


    SYLLABUS


    1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; MORTGAGE; INTEREST; LEGAL RATE OF 12% PER ANNUM ON DUE AND DEMANDABLE LOAN IN THE ABSENCE OF STIPULATION. — It is elementary that in the absence of a stipulation as to interest, the loan due will now earn interest at the legal rate of 12% per annum.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

    2. REMEDIAL LAW; EVIDENCE; PRESUMPTIONS THAT EVIDENCE WILLFULLY SUPPRESSED IS ADVERSE IF PRODUCED; APPLIED IN CASE AT BAR. — It baffles this Court why petitioner has continually failed up to the present to submit documentary evidence of the alleged expenses of the foreclosure sale, and this in spite of the express requirement therefor in the certificate of sale issued by the notary public for the purpose of computing the actual amount payable by the mortgagor or redemptioner in the event of redemption. It may thus be safely presumed that such evidence having been willfully suppressed, it would be adverse if produced.

    3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; MORTGAGE; FORECLOSURE SALE; ISSUANCE OF WRIT OF POSSESSION, MINISTERIAL. — The governing law thus explicitly authorizes the purchaser in a foreclosure sale to apply for a writ of possession during the redemption period by filing an ex parte motion under oath for that purpose in the corresponding registration or cadastral proceeding in the case of property with Torrens title. Upon the filing of such motion and the approval of the corresponding bond, the law also in express terms directs the court to issue the order for a writ of possession. No discretion appears to be left to the court. Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8 of Act 3135, and it cannot be raised as a justification for opposing the issuance of the writ of possession since, under the Act, the proceeding for this is ex parte. Such recourse is available to a mortgagee, who effects the extrajudicial foreclosure of the mortgage, even before the expiration of the period of redemption provided by law and the Rules of Court.

    4. ID.; ID.; ID.; ID.; ID.; EXCEPTION. — The rule is however, not without exception. Under Section 35, Rule 39 of the Rules of Court, which is made applicable to the extrajudicial foreclosure of real estate mortgages by Section 6 of Act 3135, the possession of the mortgaged property may be awarded to a purchaser in the extrajudicial foreclosure "unless a third party is actually holding the property adversely to the judgment debtor."cralaw virtua1aw library

    5. ID.; ID.; ID.; ID.; ID.; ID.; WHERE FORECLOSED PROPERTY WAS SOLD 40% IN EXCESS OF THE MORTGAGE DEBT. — The case at bar is quite the reverse, in the sense that instead of an inadequacy in price, there is due in favor of private respondent, as mortgagor, a surplus from the proceeds of the sale equivalent to approximately 40% of the total mortgage debt, which excess is indisputably a substantial amount. Nevertheless, it is our considered opinion, and we so hold, that equitable considerations demand that a writ of possession should also not issue in this case.

    6. ID.; ID.; ID.; ID.; APPLICATION OF PROCEEDS TO MORTGAGOR’S OBLIGATION, AN ACT OF PAYMENT; MORTGAGEE, CONSIDERED TRUSTEE OF THE BALANCE. — In forced sales low prices are generally offered and the mere inadequacy of the price obtained at the sheriff’s sale, unless shocking to the conscience, has been held insufficient to set aside a sale. This is because no disadvantage is caused to the mortgagor. On the contrary, a mortgagor stands to gain with a reduced price because he possesses the right of redemption. When there is the right to redeem, inadequacy of price becomes immaterial since the judgment debtor may reacquire the property or sell his right to redeem, and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale. The application of the proceeds from the sale of the mortgaged property to the mortgagor’s obligation is an act of payment, not payment by dation; hence, it is the mortgagee’s duty to return any surplus in the selling price to the mortgagor. Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a custodian of the fund, and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do so. And even though the mortgagee is not strictly considered a trustee in a purely equitable sense, but as far as concerns the unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity of redemption.

    7. ID.; ID.; ID.; ID.; MERE INADEQUACY OF PRICE, NOT SUFFICIENT TO SET ASIDE FORECLOSURE SALE; REASON. — The general rule that mere inadequacy of price is not sufficient to set aside a foreclosure sale is based on the theory that the lesser the price the easier it will be for the owner to effect the redemption. The same thing cannot be said where the amount of the bid is in excess of the total mortgage debt. The reason is that in case the mortgagor decides to exercise his right of redemption, Section 30 of Rule 39 provides that the redemption price should be equivalent to the amount of the purchase price, plus one per cent monthly interest up to the time of the redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last-named amount at the same rate.chanrobles.com:cralaw:red

    8. ID.; ID.; ID.; RIGHT OF REDEMPTION, LIBERALLY CONSTRUED. — Where the redemptioner chooses to exercise his right of redemption, it is the policy of the law to aid rather than to defeat his right. It stands to reason, therefore, that redemption should be looked upon with favor and where no injury will follow, a liberal construction will be given to our redemption laws, specifically on the exercise of the right to redeem. Conformably hereto, and taking into consideration the facts obtaining in this case, it is more in keeping with the spirit of the rules, particularly Section 30 of Rule 39, that we adopt such interpretation as may be favorable to the private Respondent.

    9. ID.; ID.; ID.; FORECLOSURE SALE; MORTGAGEE ACCOUNTABLE FOR PROCEEDS OF SALE EVEN IF MADE ON CREDIT. — In case of a surplus in the purchase price, however, there is jurisprudence to the effect that while the mortgagee ordinarily is liable only for such surplus as actually comes into his hands, but he sells on credit instead of for cash, he must still account for the proceeds as if the price were paid in cash, and in an action against the mortgagee to recover the surplus, the latter cannot raise the defense that no actual cash was received. We cannot simply ignore the importance of surplus proceeds because by their very nature, surplus money arising from a sale of land under a decree of foreclosure stands in the place of the land itself with respect to liens thereon or vested rights therein. They are constructively, at least, real property and belong to the mortgagor or his assigns. Inevitably, the right of a mortgagor to the surplus proceeds is a substantial right which must prevail over rules of technicality. Since it has never been denied that the bid price greatly exceeded the mortgage debt, petitioner cannot be allowed to unjustly enrich himself at the expense of private Respondent.

    10. ID.; ID.; ID.; FORECLOSURE SALE; SURPLUS MONEY; APPLIED TO LIEN ACCORDING TO THEIR PRIORITY. — Surplus money, in case of a foreclosure sale, gains much significance where there are junior encumbrancers on the mortgaged property. Jurisprudence has it that when there are several liens upon the premises, the surplus money must be applied to their discharge in the order of their priority. A junior mortgagee may have his rights protected by an appropriate decree as to the application of the surplus, if there be any, after satisfying the prior mortgage. His lien on the land is transferred to the surplus fund. And a senior mortgagee, realizing more than the amount of his debt on a foreclosure sale, is regarded as a trustee for the benefit of junior encumbrancers.

    11. REMEDIAL LAW; EVIDENCE; CREDIBILITY; FINDINGS OF FACTS OF THE LOWER COURTS, GENERALLY BINDING AND CONCLUSIVE ON APPEAL. — A question of non-compliance with the notice and publication requirements of an extrajudicial foreclosure sale is a factual issue and the resolution thereof by the lower courts is binding and conclusive upon this Court, absent any showing of grave abuse of discretion. In the case at bar, both the trial court and respondent Court of Appeals have found that the sale was conducted in accordance with law. No compelling reason exists in this case to justify a rejection of their findings or a reversal of their conclusions.

    12. ID.; ACTIONS; MOTION TO SET ASIDE FORECLOSURE SALE AND TO DEFER ISSUANCE OF WRIT OF POSSESSION WHERE EX-PARTE PETITION FOR ISSUANCE OF SAID WRIT WAS PENDING, TREATED AS SUBSTANTIAL COMPLIANCE WITH SECTION 112 OF THE LAND REGISTRATION ACT. — There is likewise no merit in the argument that if private respondent had wanted to question the validity of the sale, she should have filed a petition to set the same aside and to cancel the writ of possession. These, it is argued, should have been disposed of in accordance with the summary procedure laid down in Section 112 of the Land Registration Act, provided the petition is filed not later than thirty days after the purchaser was given possession of the land. Considering, however, that private respondent has filed a motion to set aside the sale and to defer the issuance of a writ of possession before the court where the ex parte petition for issuance of such writ was then pending, we deem the same to be substantial compliance with the statutory prescription.

    13. CIVIL LAW; OBLIGATIONS AND CONTRACTS; MORTGAGE; FORECLOSURE SALE; REMEDY OF MORTGAGOR AGAINST MORTGAGEE RETAINING MORE OF THE PROCEEDS OF SALE. — If the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply gives the mortgagor a cause of action to recover such surplus. This is likewise in harmony with the decisional rule that in suing for the return of the surplus proceeds. the mortgagor is deemed to have affirmed the validity of the sale since nothing is due if no valid sale has been made. In the early case of Caparas v. Yatco, etc., Et Al., it was also held that where the mortgagee has been ordered by the court to return the surplus to the mortgagor or the person entitled thereto, and the former fails to do so and flagrantly disobeys the order, the court can cite the mortgagee for contempt and mete out the corresponding penalty under Section 3(b) of the former Rule 64 (now Rule 71) of the Rules of Court.chanrobles.com.ph : virtual law library


    D E C I S I O N


    REGALADO, J.:


    The primary issue posed before the Court, in this appeal by certiorari from a decision 1 of the Court of Appeals, is whether or not the mortgagee or purchaser in an extrajudicial foreclosure sale is entitled to the issuance of a writ of possession over the mortgaged property despite his failure to pay the surplus proceeds of the sale to the mortgagor or the person entitled thereto. Secondarily, it calls for a resolution of the further consequences of such non-payment of the full amount for which the property was sold to him pursuant to his bid.

    The material facts, as found by respondent court, are not disputed:jgc:chanrobles.com.ph

    "It appears from the record that on 9 June 1992 petitioner (herein private respondent) Iluminada Cayco executed a Real Estate Mortgage (REM) over Lot 2630 which is located in Caloocan City and covered by TCT No. (23211) 11591 in favor of private respondent (herein petitioner) Cesar Sulit, to secure a loan of P4 Million. Upon petitioner’s failure to pay said loan within the stipulated period, private respondent resorted to extrajudicial foreclosure of the mortgage as authorized in the contract. Hence, in a public auction conducted by Notary Public Felizardo M. Mercado on 28 September 1993 the lot was sold to the mortgagee, herein private respondent, who submitted a winning bid of P7 Million. As stated in the Certificate of Sale executed by the notary public (Annex B, petition), the mortgaged property was sold at public auction to satisfy the mortgage indebtedness of P4 Million. The Certificate further states as follows:chanrob1es virtual 1aw library

    IT IS FURTHER CERTIFIED, that the aforementioned highest bidder/buyer, CESAR SULIT, being the petitioner/mortgagee thereupon did not pay to the undersigned Notary Public of Kalookan City the said sum of SEVEN MILLION PESOS (P7,000,000.00), Philippine Currency, the sale price of the above-described real estate property together with all improvements existing thereon, which amount was properly credited to the PARTIAL satisfaction of the mortgage debt mentioned in the said real estate mortgage, plus interests, attorney’s fees and all other incidental expenses of foreclosure and sale (par. 2, Annex B, petition).

    On 13 December 1993 private respondent petitioned the Regional Trial Court of Kalookan City for the issuance of a writ of possession in his favor. The petition was docketed as LRC Case No. C-3462 and assigned to Branch 131, presided over by public Respondent.

    On 17 January 1994 respondent Judge issued a decision (should have been denominated as order), the dispositive part of which reads:chanrob1es virtual 1aw library

    WHEREFORE, finding the subject petition to be meritorious, the same is hereby GRANTED. As prayed for, let a Writ of Possession be issued in favor of herein petitioner, Cesar Sulit, upon his posting of an indemnity bond in the amount of One Hundred Twenty Thousand (P120,000.00) Pesos (Annex C, petition).

    On 28 March 1994 petitioner filed a Motion to have the auction sale of the mortgaged property set aside and to defer the issuance of the writ of possession. She invited the attention of the court a quo to some procedural infirmities in the said proceeding and further questioned the sufficiency of the amount of bond. In the same Motion petitioner prayed as an alternative relief that private respondent be directed to pay the sum of P3 Million which represents the balance of his winning bid of P7 Million less the mortgage indebtedness of P4 Million (Annex D, petition). This Motion was opposed by private respondent who contended that the issuance of a writ of possession upon his filing of a bond was a ministerial duty on the part of respondent Judge (Annex E), to which Opposition petitioner submitted a Reply (Annex F, petition).

    On 11 May 1994 respondent Judge denied petitioner’s Motion and directed the issuance of a writ of possession and its immediate enforcement by deputy sheriff Danilo Norberte (Annex G, petition)." 2 (Emphasis words supplied for clarity).

    From the aforesaid orders of the court a quo, herein private respondent Iluminada Cayco filed on May 26, 1994 a petition for certiorari with preliminary injunction and/or temporary restraining order before respondent Court of Appeals, which immediately issued a status quo order restraining the respondent judge therein from implementing his order of January 17, 1994 and the writ of possession issued pursuant thereto. Subsequently, respondent court rendered judgment on November 11, 1994, as follows:jgc:chanrobles.com.ph

    "IN JUDGMENT, We grant the writ of certiorari and the disputed order of 17 January 1994 which precipitately directed the issuance of a writ of possession in favor of private respondent and the subsequent order of 11 May 1994 which denied petitioner’s Motion for Reconsideration are hereby SET ASIDE.

    Accordingly, private respondent is ordered to pay unto petitioner, through the notary public, the balance or excess of his bid of P7 Million after deducting therefrom the sum of P4,365.280 which represents the mortgage debt and interest up to the date of the auction sale (September 23, 1993), as well as expenses of foreclosure based on receipts which must be presented to the notary public.

    In the event that private respondent fails or refuses to pay such excess or balance, then the auction sale of 28 September 1993 is deemed CANCELLED and private respondent may foreclose the mortgage anew either in a judicial or extrajudicial proceeding as stipulated in the mortgage contract."cralaw virtua1aw library

    Corollary to the principal issue earlier stated, petitioner asserts that respondent Court of Appeals gravely erred when it failed to appreciate and consider the supposed legal significance of the bouncing checks which private respondent issued and delivered to petitioner as payment for the agreed or stipulated interest on the mortgage obligation. He likewise avers that a motion for reconsideration or an appeal, and not certiorari, is the proper remedy available to herein private respondent from an order denying her Motion to defer issuance of the writ of possession. Moreover, it is claimed that any question regarding the propriety of the sale and the issuance of the writ of possession must be threshed out in a summary proceeding provided for in Section 8 of Act 3135.

    There is no merit in petitioner’s contention that the dishonored checks amounting to a total of P1,250,000.00, allegedly representing interest of 5% per month from June 9, 1992 to December 9, 1992, were correctly considered by the trial court as the written agreement between the parties. Instead, we find the explanation of respondent court in rejecting such postulate, on the basis of Article 1956 of the Civil Code, 3 to be more logical and plausible, to wit:jgc:chanrobles.com.ph

    "It is noteworthy that the Deed of Real Estate Mortgage executed by the parties on 9 June 1992 (Annex A, Petition) does not contain any stipulation for payment of interest. Private respondent who maintains that he had an agreement with petitioner for the payment of 5% monthly interest did not produce any other writing or instrument embodying such a stipulation on interest. It appears then that if any such agreement was reached by the parties, it was merely a verbal one which does not conform to the aforequoted statutory provision. Certainly, the dishonored checks claimed to have been issued by petitioner in payment of interest could not have been the written stipulation contemplated in Article 1956 of the Code. Consequently, in the absence of a written stipulation for the imposition of interest on the loan obtained by petitioner, private respondent’s assessment thereof has no legal basis." 4

    It is elementary that in the absence of a stipulation as to interest, the loan due will now earn interest at the legal rate of 12% per annum 5 which, according to respondent court, is equivalent to P365,280.00 computed from December 10, 1992, after private respondent’s obligation became due, until September 23, 1993, the date of the auction sale. It is this amount which should further be deducted from the purchase price of P7,000,000.00, together with any other expenses incurred in connection with the sale, such as the posting and publication of notices, notarial and documentary fees and assessments or taxes due on the disputed property.chanroblesvirtual|awlibrary

    It baffles this Court, therefore, why petitioner has continually failed up to the present to submit documentary evidence of the alleged expenses of the foreclosure sale, and this in spite of the express requirement therefor in the certificate of sale 6 issued by the notary public for the purpose of computing the actual amount payable by the mortgagor or redemptioner in the event of redemption. It may thus be safely presumed that such evidence having been willfully suppressed, it would be adverse if produced. 7

    Coming now to the main issue in this case, petitioner argues that it is ministerial upon the court to issue a writ of possession after the foreclosure sale and during the period of redemption, invoking in support thereof Sections 7 and 8 of Act 3135 which conjointly provide:jgc:chanrobles.com.ph

    "Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.

    "Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act Number Four hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal."cralaw virtua1aw library

    The governing law thus explicitly authorizes the purchaser in a foreclosure sale to apply for a writ of possession during the redemption period by filing an ex parte motion under oath for that purpose in the corresponding registration or cadastral proceeding in the case of property with Torrens title. Upon the filing of such motion and the approval of the corresponding bond, the law also in express terms directs the court to issue the order for a writ of possession.

    No discretion appears to be left to the court. Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8, and it cannot be raised as a justification for opposing the issuance of the writ of possession since, under the Act, the proceeding for this is ex parte. 8 Such recourse is available to a mortgagee, who effects the extrajudicial foreclosure of the mortgage, even before the expiration of the period of redemption provided by law and the Rules of Court. 9

    The rule is, however, not without exception. Under Section 35, Rule 39 of the Rules of Court, which is made applicable to the extrajudicial foreclosure of real estate mortgages by Section 6 of Act 3135, the possession of the mortgaged property may be awarded to a purchaser in the extrajudicial foreclosure "unless a third party is actually holding the property adversely to the judgment debtor." 10

    Thus, in the case of Barican, Et. Al. v. Intermediate Appellate Court, Et Al., 11 this Court took into account the circumstances that long before the mortgagee bank had sold the disputed property to the respondent therein, it was no longer the judgment debtor who was in possession but the petitioner spouses who had assumed the mortgage, and that there was a pending civil case involving the rights of third parties. Hence, it was ruled therein that under the circumstances, the obligation of a court to issue a writ of possession in favor of the purchaser in a foreclosure of mortgage case ceases to be ministerial.

    Now, in forced sales low prices are generally offered and the mere inadequacy of the price obtained at the sheriff’s sale, unless shocking to the conscience, has been held insufficient to set aside a sale. This is because no disadvantage is caused to the mortgagor. On the contrary, a mortgagor stands to gain with a reduced price because he possesses the right of redemption. When there is the right to redeem, inadequacy of price becomes immaterial since the judgment debtor may reacquire the property or sell his right to redeem, and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale. 12

    However, also by way of an exception, in Cometa, Et. Al. v. Intermediate Appellate Court, Et. Al. 13 where the properties in question were found to have been sold at an unusually lower price than their true value, that is, properties worth at least P500,000.00 were sold for only P57,396.85, this Court, taking into consideration the factual milieu obtaining therein as well as the peculiar circumstances attendant thereto, decided to withhold the issuance of the writ of possession on the ground that it could work injustice because the petitioner might not be entitled to the same.

    The case at bar is quite the reverse, in the sense that instead of an inadequacy in price, there is due in favor of private respondent, as mortgagor, a surplus from the proceeds of the sale equivalent to approximately 40% of the total mortgage debt, which excess is indisputably a substantial amount. Nevertheless, it is our considered opinion, and we so hold, that equitable considerations demand that a writ of possession should also not issue in this case.

    Rule 68 of the Rules of Court provides:chanrob1es virtual 1aw library

    Sec. 4. Disposition of proceeds of sale. — The money realized from the sale of mortgaged property under the regulations hereinbefore prescribed shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying off such mortgage or other encumbrances, the same shall be paid to the junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be no such encumbrancers or there be a balance or residue after payment of such encumbrancers, then to the mortgagor or his agent, or to the person entitled to it."cralaw virtua1aw library

    The application of the proceeds from the sale of the mortgaged property to the mortgagor’s obligation is an act of payment, not payment by dation; hence, it is the mortgagee’s duty to return any surplus in the selling price to the mortgagor. 14 Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a custodian of the fund, and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do so. And even though the mortgagee is not strictly considered a trustee in a purely equitable sense, but as far as concerns the unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity of redemption. 15

    Commenting on the theory that a mortgagee, when he sells under a power, cannot be considered otherwise than as a trustee, the vice-chancellor in Robertson v. Norris (1 Giff. 421) observed: "That expression is to be understood in this sense: that with the power being given to enable him to recover the mortgage money, the court requires that he shall exercise the power of sale in a provident way, with a due regard to the rights and interests of the mortgagor in the surplus money to be produced by the sale." 16

    The general rule that mere inadequacy of price is not sufficient to set aside a foreclosure sale is based on the theory that the lesser the price the easier it will be for the owner to effect the redemption. 17 The same thing cannot be said where the amount of the bid is in excess of the total mortgage debt. The reason is that in case the mortgagor decides to exercise his right of redemption. Section 30 of Rule 39 provides that the redemption price should be equivalent to the amount of the purchase price, plus one percent monthly interest up to the time of the redemption, 18 together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last-named amount at the same rate. 19

    Applying this provision to the present case would be highly iniquitous if the amount required for redemption is based on P7,000,000.00, because that would mean exacting payment at a price unjustifiably higher than the real amount of the mortgage obligation. We need not elucidate on the obvious. Simply put, such a construction will undeniably be prejudicial to the substantive rights of private respondent and it could even effectively prevent her from exercising the right of redemption.

    Where the redemptioner chooses to exercise his right of redemption, it is the policy of the law to aid rather than to defeat his right. It stands to reason, therefore, that redemption should be looked upon with favor and where no injury will follow, a liberal construction will be given to our redemption laws, specifically on the exercise of the right to redeem. Conformably hereto, and taking into consideration the facts obtaining in this case, it is more in keeping with the spirit of the rules, particularly Section 30 of Rule 39, that we adopt such interpretation as may be favorable to the private Respondent.

    Admittedly, no payment was made by herein petitioner, as the highest bidder, to the notary public who conducted the extrajudicial foreclosure sale. We are not unmindful of the rule that it is not necessary for the mortgagee to pay cash to the sheriff or, in this case, the notary public who conducted the sale. It would obviously serve no purpose for the sheriff or the notary public to go through the idle ceremony of receiving the money and paying it back to the creditor, under the truism that the lawmaking body did not contemplate such a pointless application of the law in requiring that the creditor must bid under the same conditions as any other bidder. 20 It bears stressing that the rule holds true only where the amount of the bid represents the total amount of the mortgage debt.

    In case of a surplus in the purchase price, however, there is jurisprudence to the effect that while the mortgagee ordinarily is liable only for such surplus as actually comes into his hands, but he sells on credit instead of for cash, he must still account for the proceeds as if the price were paid in cash, and in an action against the mortgagee to recover the surplus, the latter cannot raise the defense that no actual cash was received. 21

    We cannot simply ignore the importance of surplus proceeds because by their very nature, surplus money arising from a sale of land under a decree of foreclosure stands in the place of the land itself with respect to liens thereon or vested rights therein. They are constructively, at least, real property and belong to the mortgagor or his assigns. 22 Inevitably, the right of a mortgagor to the surplus proceeds is a substantial right which must prevail over rules of technicality.

    Surplus money, in case of a foreclosure sale, gains much significance where there are junior encumbrancers on the mortgaged property. Jurisprudence has it that when there are several liens upon the premises, the surplus money must be applied to their discharge in the order of their priority. 23 A junior mortgagee may have his rights protected by an appropriate decree as to the application of the surplus, if there be any, after satisfying the prior mortgage. His lien on the land is transferred to the surplus fund. 24 And a senior mortgagee, realizing more than the amount of his debt on a foreclosure sale, is regarded as a trustee for the benefit of junior encumbrancers.25cralaw:red

    Upon the strength of the foregoing considerations, we cannot countenance the apparent paltriness that petitioner persistently accords the right of private respondent over the surplus proceeds. It must be emphasized that petitioner failed to present the receipts or any other proof of the alleged costs or expenses incurred by him in the foreclosure sale. Even the trial court failed or refused to resolve this issue, notwithstanding the fact that this was one of the grounds raised in the motion filed by private respondent before it to set aside the sale. Since it has never been denied that the bid price greatly exceeded the mortgage debt, petitioner cannot be allowed to unjustly enrich himself at the expense of private Respondent.

    As regards the issue concerning the alleged defect in the publication of the notice of the sale, suffice it to state for purposes of this discussion that a question of non-compliance with the notice and publication requirements of an extrajudicial foreclosure sale is a factual issue and the resolution thereof by the lower courts is binding and conclusive upon this Court, 26 absent any showing of grave abuse of discretion. In the case at bar, both the trial court and respondent Court of Appeals have found that the sale was conducted in accordance with law. No compelling reason exists in this case to justify a rejection of their findings or a reversal of their conclusions.

    There is likewise no merit in the argument that if private respondent had wanted to question the validity of the sale, she should have filed a petition to set the same aside and to cancel the writ of possession. These, it is argued, should have been disposed of in accordance with the summary procedure laid down in Section 112 of the Land Registration Act, provided the petition is filed not later than thirty days after the purchaser was given possession of the land. Considering, however, that private respondent has filed a motion to set aside the sale and to defer the issuance of a writ of possession before the court where the ex parte petition for issuance of such writ was then pending, we deem the same to be substantial compliance with the statutory prescription.

    We, however, take exception to and reject the last paragraph in the dispositive portion at the questioned decision of respondent court, which we repeat:jgc:chanrobles.com.ph

    "In the event that private respondent fails or refuses to pay such excess or balance, then the auction sale of 28 September 1993 is deemed CANCELLED and private respondent (petitioner herein) may foreclose the mortgage anew either in a judicial or extrajudicial proceeding as stipulated in the mortgage contract."cralaw virtua1aw library

    for lack of statutory and jurisprudential bases. The quoted phrase "as stipulated in the mortgage contract" does not, of course, envision such contingency or warrant the suggested alternative procedure.

    Section 4 of Rule 64, hereinbefore quoted, merely provides that where there is a balance or residue after payment of the mortgage, the same shall be paid to the mortgagor. While the expedient course desired by respondent court is commendable, there is nothing in the cited provision from which it can be inferred that a violation thereof will have the effect of nullifying the sale. The better rule is that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply gives the mortgagor a cause of action to recover such surplus. 27 This is likewise in harmony with the decisional rule that in suing for the return of the surplus proceeds, the mortgagor is deemed to have affirmed the validity of the sale since nothing is due if no valid sale has been made. 28

    In the early case of Caparas v. Yatco, etc., Et Al., 29 it was also held that where the mortgagee has been ordered by the court to return the surplus to the mortgagor or the person entitled thereto, and the former fails to do so and flagrantly disobeys the order, the court can cite the mortgagee for contempt and mete out the corresponding penalty under Section 3(b) of the former Rule 64 (now Rule 71) of the Rules of Court.

    WHEREFORE, the questioned decision of the Court of Appeals is MODIFIED by deleting. the last paragraph of its fallo, but its disposition of this case in all other respects is hereby AFFIRMED.

    SO ORDERED.

    Romero, Puno, Mendoza and Torres, Jr., JJ., concur.

    Endnotes:



    1. Penned by Justice Godardo A. Jacinto, with the concurrence of Justices Ricardo J. Francisco and Cancio C. Garcia; Annex A, Petition; Rollo, 142.

    2. Rollo, 43-45.

    3. Art. 1956. No interest shall be due unless it has been expressly stipulated in writing.

    4. Rollo, 46-47.

    5. Central Bank Circular No. 416, July 29, 1974.

    6. Annex C, Petition; Rollo, 51.

    7. Section 3(e), Rule 131, Rules of Court.

    8. United Coconut Planters Bank v. Reyes, etc., G.R. No. 95095, February 7, 1991, 193 SCRA 756; Ong v. Court of Appeals, Et Al., G.R. No. 98448, May 27, 1992, 209 SCRA 350.

    9. Veloso, Et Al., v. Intermediate Appellate Court, Et Al., G.R. No. 73338, January 21, 1992, 205 SCRA 227.

    10. Roxas, Et. Al. v. Buan, etc., Et Al., G.R. No. 53798, November 8, 1988, 167 SCRA 43.

    11. G.R. No. 79906, June 20, 1988, 162 SCRA 358.

    12. Prudential Bank v. Martinez, Et Al., G.R. No. 51768, September 14, 1990, 189 SCRA 612.

    13. G.R. No. 69294, June 30, 1987, 151 SCRA 563.

    14. Gorospe, Et Al., v. Gochangco, 106 Phil. 425 (1959).

    15. 59 CJS, Mortgages, Sec. 596, 1033-1034.

    16. Cited in Reynolds v. Hennessey, 2 A. 701.

    17. Cortes, Et. Al. v. Intermediate Appellate Court, Et Al., G.R. No. 73678, July 21, 1989, 175 SCRA 545.

    18. Delos Reyes v. Intermediate Appellate Court, Et Al., G.R. No. 74768, August 11, 1989, 176 SCRA 394.

    19. Sy v. Court of Appeals, Et Al., G.R. No. 83139, April 12, 1989, 172 SCRA 125.

    20. Ruiz, Et. Al. v. Sheriff of Manila, Et Al., G.R. No. L-24016, July 31, 1970, 34 SCRA 83.

    21. 41 CJ, Mortgages, Sec. 1478, 1017.

    22. 3 Jones on Mortgages, Sec. 2164, 685.

    23. 59 CJS, Mortgages, Sec. 2168, 689.

    24. Ibid., Sec. 2169, 690.

    25. Ibid., Sec. 596, 1034.

    26. Community Savings and Loan Association, Inc., Et. Al. v. Court of Appeals, Et Al., G.R. No. 75786, August 31, 1987, 153 SCRA 564.

    27. Kleinman v. Neubert, 172 NW 315.

    28. 59 CJS, Mortgages, Sec. 596, 1036.

    29. 89 Phil. 10 (1951).

    G.R. No. 119247   February 17, 1997 - CESAR SULIT v. COURT OF APPEALS, ET AL.


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