G.R. No. L-8219; April 28, 1956
BENITO TAN CHAT, plaintiff-appellee, vs. C. N. HODGES, ET AL., defendants; C. N. HODGES, defendant-appellant.

FACTS

The defendant-appellant, C. N. Hodges, sold three lots to the plaintiff-appellee, Benito Tan Chat, for P15,105. The appellee paid P3,105 in cash and mortgaged the lots to secure the balance of P12,000. The appellant provided a printed form of mortgage contract (Exhibit E), but the deed actually executed (Exhibit D) omitted certain provisions from that form. Specifically, Exhibit E contained clauses (paragraphs 7 and 8) providing for automatic foreclosure without judicial proceedings and authorizing the mortgagee to take possession upon default. These were not included in Exhibit D. Instead, Exhibit D contained conditions stating that the mortgagee, in selling the property at public auction, shall follow the procedure in Act No. 3135 , with notification to the mortgagor by registered mail, and that the mortgagee retained the right to institute judicial foreclosure proceedings if deemed necessary. Due to the appellee’s failure to comply with the mortgage conditions, the appellant initiated extra-judicial foreclosure proceedings under Act No. 3135 . The appellee filed a petition for prohibition with injunction to stop the sale, which the trial court granted. The appellant appealed.

ISSUE

Whether or not the deed of mortgage (Exhibit D) contains a special power to foreclose extra-judicially as required by Act No. 3135 .

RULING

The Supreme Court reversed the trial court’s decision and dismissed the petition for prohibition. The Court ruled that paragraphs 3 and 4 of the deed of mortgage (Exhibit D), taken together, constitute an express authority for extra-judicial foreclosure. Paragraph 3 explicitly references the procedure under Act No. 3135 for a public auction sale and requires notification by registered mail, which pertains to extra-judicial foreclosure. Paragraph 4 reserves the mortgagee’s right to institute judicial foreclosure, implying the existence of the alternative remedy of extra-judicial foreclosure. The omission of the more explicit clauses from the printed form (Exhibit E) is immaterial, as the language in Exhibit D is sufficient to evince an intention to grant a power of sale upon default. No particular formality is required for creating such a power; any words showing an intention for a sale upon default are adequate. However, the Court did not award the appellant’s claim for expenses, attorney’s fees, and damages. Costs were imposed on the plaintiff-appellee.