KOREA EXCHANGE BANK, petitioner, vs.

FILKOR BUSINESS INTEGRATED, INC., KIM EUNG JOE, and LEE HAN SANG, respondents.
G.R. No. 138292. April 10, 2002

FACTS: Respondent FILKOR had three transactions with the respondent KOREA EXCHANGE BANK:

1. Borrowed US$ 40,000.00, of which only US$ 40,000.00 was paid;

2. Executed nine (9) trust receipt but failed to turn over the proceeds of the goods or the
goods themselves; and

3. Negotiated the proceeds of seventeen (17) letters of credit, which were all dishonored
because of discrepancies.

To secure payment for these obligations respondent FILKOR executed a Real Estate Mortgage. It
mortgaged to the bank the improvements it constructed on the lot it was leasing in Cavite Export
Processing Zone Authority. Respondents Kim Eung Joe and Lee Han Sang on their part executed a
Continuing Suretyship binding themselves jointly and severally with FILKOR to pay the obligations to
the bank.

When FILKOR breached all its obligations, petitioner KOREA EXCHANGE BANK filed a civil
case with the RTC of CAVITE. The petitioner sought to be paid for 27 causes of action and that the
mortgaged property be foreclosed and sold at a public auction in case the respondent fails to pay within
ninety days from the entry of judgment.

The trial court rendered a judgment in favor of the petitioner for all 27 actions but failed to order
the foreclosure and public auction of the mortgaged property in the event that FILKOR fails to pay its
obligation. Petitioner filed a motion for partial reconsideration seeking that the relief of foreclosure be
granted but such motion was denied saying that the petitioner in opting to file a civil action for the
collection of the defendant’s obligation, has abandoned its mortgaged lien on the property subject of the
real estate mortgage.

BASIS of TC’s DECISION: Danao vs. Court of Appeals, 154 SCRA 446, citing Manila Trading and
Supply Co. vs. Co Kim, et al., 71 Phil. 448
“The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an
ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the
properties of the debtor including the subject matter of the mortgage, subject to the qualification that if he
fails in the remedy by him elected, he cannot pursue further the remedy he has waived.”

ISSUE: Whether or not the petitioner had abandoned the real estate mortgage in its favor, because it
filed a simple collection case. NO

Whether or not petitioner’s complaint before the trial court was an action for foreclosure of a real estate
mortgage, or an action for collection of a sum of money.
HELD: It was an action for foreclosure of a real estate mortgage. Petitioner’s allegations in its
complaint, and its prayer that the mortgaged property be foreclosed and sold at public auction, indicate
that petitioner’s action was one for foreclosure of real estate mortgage.

 In petitioner’s complaint before the trial court, petitioner alleges:

To secure payment of the obligations of defendant Corporation under the First to the
Twenty-Seventh Cause of Action, on February 9, 1996, defendant Corporation executed
a Real Estate Mortgage by virtue of which it mortgaged to plaintiff the improvements
standing on Block 13, Lot 1, Cavite Export Processing Zone, Rosario, Cavite, belonging
to defendant Corporation covered by Tax Declaration No. 5906-1 and consisting of a
one-story building called warehouse and spooling area, the guardhouse, the
cutting/sewing area building and the packing area building. (A copy of the Real Estate
Mortgage is attached hereto as Annex “SS” and made an integral part hereof.)

 This allegation satisfies in part the requirements of Section 1, Rule 68 of the 1997 Rules of Civil
Procedure on foreclosure of real estate mortgage, which provides:

SECTION 1. Complaint in action for foreclosure. – In an action for the foreclosure of

a mortgage or other encumbrance upon real estate, the complaint shall set forth the
date and due execution of the mortgage; its assignments, if any; the names and
residences of the mortgagor and the mortgagee; a description of the mortgaged
property; a statement of the date of the note or other documentary evidence of the
obligation secured by the mortgage, the amount claimed to be unpaid thereon; and the
names and residences of all persons having or claiming an interest in the property
subordinate in right to that of the holder of the mortgage, all of whom shall be made
defendants in the action.

 Prayer of the complaint before the trial court reads as follows:

WHEREFORE, it is respectfully prayed that judgment be rendered:

x xx
2. Ordering that the property mortgaged be foreclosed and sold at public auction in
case defendants fail to pay plaintiff within ninety (90) days from entry of judgment.

 Petitioner’s action being one for foreclosure of real estate mortgage the trial should have ordered the
foreclosure and public auction of the mortgaged property in the event that respondent Filkor fails to
pay its outstanding obligations. This is pursuant to Section 2 of Rule 68 of the 1997 Rules of Civil
Procedure, which provides: SEC. 2. Judgment on foreclosure for payment or sale.- If upon the trial
in such action the court shall find the facts set forth in the complaint to be true, it shall ascertain the
amount due to the plaintiff upon the mortgage debt or obligation, including interest and other charges
 as approved by the court, and costs, and shall render judgment for the sum so found due and order
that the same be paid to the court or to the judgment obligee within a period of not less than ninety

(90) days nor more than one hundred twenty (120) days from entry of judgment, and that in default of
such payment the property shall be sold at public auction to satisfy the judgment.

DISPOSITION: WHEREFORE, the petition is GRANTED The Order dated March 12, 1999, of
the Regional Trial Court of Cavite City, Branch 88, in Civil Case No. N-6689 is hereby
MODIFIED, to state that the mortgaged property of respondent Filkor be ordered foreclosed and
sold at public auction in the event said respondent fails to pay its obligations to petitioner within
ninety (90) days from entry of judgment.

HUERTA ALBA RESORT, INC. vs. CA & nd SYNDICATED MANAGEMENT GROUP, INC.
September 1, 2000

Facts: Private respondent instituted a civil case as mortgagee-assignee of a loan amounting

to P8.5 million obtained by petitioner from Intercon. In a complaint for judicial foreclosure
of mortgage private respondent sought the foreclosure of (4) parcels of land mortgaged by
petitioner to Intercon Fund Resource, Inc. (“Intercon”), which was granted by the CA. On
September 6, 1994, private respondent was declared the highest bidder during the auction
sale and the Certificate of Sale issued in its favor was registered on October 21, 1994. in
opposition to the Motion for Issuance of Writ of Possession, petitioner filed a Motion to
Compel Private Respondent to Accept Redemption on May 2, 1995, invoking for the very
first time its alleged right to redeem subject properties under to Section 78 of R.A. No. 337
(General Banking Act).

Section 78 of R.A. No. 337 provides that “in case of a foreclosure of a mortgage in favor of a
bank, banking or credit institution, whether judicially or extrajudicially, the mortgagor shall
have the right, within one year after the sale of the real estate as a result of the foreclosure
of the respective mortgage, to redeem the property.”

ISSUE: whether petitioner had the right of redemption or equity of redemption over subject
properties.

HELD: From the various decisions, resolutions and orders a quo , petitioner has been
adjudged to have was only the equity of redemption over subject properties. The right of
redemption in relation to a mortgage - understood in the sense of a prerogative to re-
acquire mortgaged property after registration of the foreclosure sale - exists only in the
case of the extrajudicial foreclosure of the mortgage. No such right is recognized in a
judicial foreclosure except only where the mortgagee is the Philippine National Bank or a
bank or banking institution. Where a mortgage is foreclosed extrajudicially, Act 3135 grants
to the mortgagor the right of redemption within one (1) year from the registration of the
sheriff’s certificate of foreclosure sale.
In light of the aforestated facts, it was too late in the day for petitioner to invoke a right to
redeem under Section 78 of R.A. No. 337. Thus, the claim that petitioner is entitled to the
beneficial provisions of the said law - since private respondent’s predecessor-in-interest is
a credit institution - is in the nature of a compulsory counterclaim which should have been
averred in petitioner’s answer to the compliant for judicial foreclosure.

There then existed only what is known as the equity of redemption, which is simply the
right of the petitioner to extinguish the mortgage and retain ownership of the property by
paying the secured debt within the 90-day period after the judgment became final. There
being an explicit finding on the part of the CA - that the petitioner failed to exercise its
equity of redemption within the prescribed period, redemption can no longer be effected.

Huerta Alba Resort Inc, v. CA and Syndicated Management Grp, Inc.

Facts
 SMGI (“Respondents”) filed a complaint for judicial foreclosure of mortgage on Oct
19, 1989
o They sought to foreclose 4 parcels of land mortgaged by Huerta (“petitioner”)
to Intercon Fund Resource Inc (Intercon)
o Respondent instituted this as mortgagee-assignee (Intercon assigned their
rights at some point.)
o The loan was P8.5M, secured by the subject parcels of land.
 In its answer, petitioner questioned
o Assignment of Intercon of the mortgage right (they said it was ultra vires)
o The correctness of charges.
 Petitioner lost and was ordered to pay the loan, plus interest and charges, within
150 days from receipt of the order, else the properties would be sold to satisfy the
debt.
 Petitioner appealed to the CA, which dismissed the case (late payment of docket
fees).
 Petitioner then went to the SC, which also dismissed their complaint.
 After these rulings, respondent filed with the original RTC a motion of execution,
which was granted.
o Thus, a notice of levy and execution was issued by the Sheriff
o He issued a notice of Sheriff’s sale for the auction of subject properties.
 Petitioner then filed a motion to quash and set aside the writ of execution, saying
that the trial court acted with GAD.
 It argued that the record of the case was still with the CA, and thus the writ was
premature
o The 150 days period had not yet lapsed
o There was no default because respondent had not yet demanded for
payment.
 RTC denied this, saying that the judgment had become final and executor
o Execution thereof was a matter of right
o Writ of execution thus was its ministerial duty
  Guess what? Petitioner appealed to the CA.
 While the appeal was pending, the auction sale proceeded and Respondent won the
bidding.
o The certificate of sale was issued to it, and registered with the RoD.
 After this, petitioner presented a “motion for clarification,” asking the trial court if
the 12 month period for redemption would apply
o RTC ruled that the period of redemption would have to follow the rule on
judicially foreclosed property (see Rule 68)
o [The sale] shall operate to divest the rights in the property of all the parties to
the action and to vest their rights in the purchaser, subject to such rights of
redemption as may be allowed by law.
 Thus, petitioner filed a motion to set aside this order, saying that it altered the
earlier decision
o First decision declared that satisfaction of judgment would be governed by
the sale of real estate under execution (not Rule 68).
 Remember the CA? All this happened while the case was pending there, diba? They
held that the 150 day period of redemption should be computed from the date of
notification of entry of judgment – thus, it had expired on Sept. 11, 1994.
o The appeal was dismissed because the subject was already moot and
academic.
 They also dismissed the MR
o Even if it is true that Sec 78 of RA 337 (mentioned above) prescribes a period
of one year from the auction sale to redeem the property, petitioner never
averred in its pleadings that it was entitled to this provision
 Issue of whether SMGI was a credit institution was never brought
squarely before the court.
 SMGI then filed a petition for writ of possession – it was here that Huerta first
claimed the right to redeem under the General Banking Act
o Original mortgagee, they said, was a credit institution, and the assignment to
SMGI did not remove the transaction from the coverage of Sec 78 of RA 337.
o Thus, they should have one year to redeem from registration of the auction
sale.
o Thus, they said, the issuance of titles to SMGI was premature.
 RTC denied the petition for writ of possession – they agreed (for the first time EVER)
with Huerta, saying that they had until Oct 21, 1995 to redeem said parcels of land.
o SMGI challenged the order, and the CA overturned it
 Hence, this petition.

Issue
 w/n Huerta has the one year right of redemption under Sec 78 of RA 337 – No.
Held
 Various decisions show that Huerta has been adjudged to have only the Equity of
Redemption, not the Right of Redemption (Court cited Limpin v. IAC)
o Right of Redemption – exists only in extrajudicial mortgage.
 No right recognized in judicial foreclosure unless mortgagee is PNB or
a banking institution
 Mortgagor has one year from registration of sheriff’s certificate of sale
to redeem the property.
o This does not exist in judicial foreclosure of the mortgagee is not a banking
institution
 The case here is mentioned above (Rule 68).
 What exists only now is the Equity of Redemption – right of the
mortgagor to extinguish the mortgage and retain ownership by paying
the debt within the 90 day period after judgment becomes final.
 Rule 68, Sec 2 – [court] shall render judgment for the sum so found due
and order the same to be paid into court within a period of not less
than ninety (90) days from the date of the service of such order,
and that in default of such payment the property be sold to realize the
mortgage debt and costs.'
 This is the equity of redemption – it may even be exercised beyond the
90 day period from date of service of the order, as long as its before
the order of confirmation of the sale. (After such order of
confirmation, there is no more redemption possible)
 Petitioner did not seasonably invoke its purported right under Sec 78 of RA 337
o Earliest opportunity – when it submitted its answer to the complaint for
foreclosure (essentially, they should have filed a counterclaim).
 What is a Counterclaim? (in case he asks)
o A cause of action existing in favor of the defendant against the plaintiff.
o It will, if established, defeat/qualify the judgment or relief to which the
plaintiff is entitled.
o Distinct/independent cause of action
o Defendant, in respect to the counterclaim, becomes an actor
 There exist 2 simultaneous actions, each party is at the same time a
plaintiff and a defendant
 Represents the right of the defendant to have the claims of the parties
counterbalanced
 Counterclaim is essentially an independent action, and should be
treated as such. (tested by the same rules, etc.)
 The point? – Huerta should have asserted their right under Sec 78 of RA 337 as a
counterclaim in its answer.
o Counterclaims allow the whole controversy between parties to be disposed of
in one action
o The applicability of Sec 78 hinged on a factual question
  Was Intercon a credit institution? – this was never squarely brought
before the court.

The claim of benefits under Sec 78 is in the nature of a compulsory


counterclaim that should have been in the answer to the complaint.
 Failure of Huerta to assert this alleged right precludes it from doing so at the late
stage of litigation
o Estoppel may successfully be invoked.
o A party who failed to invoke his claim in the main case, while having
opportunity to do so, will be precluded from invoking this claim
subsequently.
o Huerta should have alleged at the very start that Intercon was a credit
institution, in order for Sec 78 to apply.
GRAND FARMS, INC. and PHILIPPINE SHARES CORP. v. CA [RTC presiding judge, RTC clerk of court, & deputy
sheriff-in-charge] (BANCO FILIPINO SAVINGS AND MORTGAGE BANK)
193 SCRA 748
REGALADO; Feb. 7, 1991
NATURE
Appeal from the decision of CA, which found no grave abuse of discretion on the part of respondent judge in denying petitioners' motion for summary judgment

FACTS
- Petitioners filed Civil Case No. 2816-V-88 in the Regional Trial Court of Valenzuela, Metro Manila for annulment and/or declaration of nullity of the extrajudicial
foreclosure proceedings over their mortgaged properties, with damages, against respondents clerk of court, deputy sheriff and herein private respondent Banco
Filipino Savings and Mortgage Bank.
- After the bank filed its answer, petitioners requested an admission by the bank that no formal notice of intention to foreclose the real estate mortgage was sent
by the bank to petitioners.
- The bank responded and said that 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 the basis of implied admission that no formal notice was served personally, petitioners filed a motion for summary judgment contending that the foreclosure
was violative of the provisions of the mortgage contract, specifically paragraph (k) thereof which provides:
"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;"
- The bank opposed the motion saying that based on other paragraphs (b and d) in the contract, the mortgagor authorized extra-judicial sale upon breach of
contract and that the mortgagee was appointed atty-in-fact with full powers upon any breach of the obligations in the contract.
- The RTC issued an order denying petitioners' motion for summary judgment. MFR was also denied on the ground that genuine and substantial issues exist
which require the presentation of evidence during the trial.
- Petitioners filed a petition for certiorari to CA attacking said orders of denial as having been issued with grave abuse of discretion. CA 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. It further 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. CA also denied petitioners MFR.

ISSUE: WON summary judgment was proper

HELD: YES.
Ratio 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. The real test, therefore, of a motion for summary judgment is 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.
Reasoning: Private respondent tacitly admitted in its answer to petitioners' request for admission that it did not send any formal notice of foreclosure to
petitioners. Stated otherwise, and as is evident from the records, there has been no denial by private respondent that no personal notice of the extrajudicial
foreclosure was ever sent to petitioners prior thereto. This omission, by itself, rendered the foreclosure defective and irregular for being contrary to the express
provisions of the mortgage contract. There is thus 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.
- In Community Savings & Loan Association, Inc., et al. vs. Court of Appeals, at al. , the SC held that the stipulation is the law between [the parties] and as it not
contrary to law, morals, good customs and public policy, the same should be complied with faithfully (Art. 1306 CC). Thus, while publication of the foreclosure

proceedings in the newspaper of general circulation was complied with, personal notice is still required, 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 Art. 1306. And as the record is bereft of
any evidence which even impliedly indicate that the required notice of the extrajudicial foreclosure was ever sent to the debtor-mortgagor, the extrajudicial
foreclosure proceedings on the property in question are fatally defective and are not binding on the debtor-mortgagor.
- To still require a trial notwithstanding private respondent's admission of the lack of such requisite notice would be a superfluity and would work injustice to
petitioners whose obtention of the relief to which they are plainly and patently entitled would be further delayed. That undesirable contingency is obviously one of
the reasons why our procedural rules have provided for summary judgments.

Disposition The 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.