G.R. No. 171868 and G.R. No. 171991, July 27, 2011
Case Parties/Title:

SPOUSES FRANCISCO D. YAP and WHELMA S. YAP, Petitioners, vs. SPOUSES ZOSIMO DY, SR. and NATIVIDAD CHIU DY, SPOUSES MARCELINO MAXINO and REMEDIOS L. MAXINO, PROVINCIAL SHERIFF OF NEGROS ORIENTAL and DUMAGUETE RURAL BANK, INC., Respondents.
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DUMAGUETE RURAL BANK, INC. (DRBI) herein represented by Mr. William D.S. Dichoso, Petitioners, vs. SPOUSES ZOSIMO DY, SR. and NATIVIDAD CHIU DY, SPOUSES MARCELINO MAXINO and REMEDIOS MAXINO, and SPOUSES FRANCISCO D. YAP and WHELMA S. YAP, Respondents.

FACTS

The spouses Tomas Tirambulo and Salvacion Estorco (Tirambulos) were the registered owners of several parcels of land. On December 3, 1976, they executed a Real Estate Mortgage over Lots 1, 4, 5, 6, and 8 in favor of Dumaguete Rural Bank, Inc. (DRBI) to secure a ₱105,000 loan. On August 3, 1978, they obtained a second loan for ₱28,000 and mortgaged Lots 3 and 846 to DRBI. On October 27, 1979, the Tirambulos sold all seven mortgaged lots to the spouses Zosimo Dy, Sr. and Natividad Chiu Dy (the Dys) and the spouses Marcelino C. Maxino and Remedios Lasola Maxino (the Maxinos) without DRBI’s knowledge or consent. The Tirambulos defaulted on their loans. DRBI extrajudicially foreclosed the December 3, 1976 mortgage, and Lots 1, 4, 5, 6, and 8 were sold at public auction on March 31, 1982, with DRBI as the highest bidder for ₱216,040.93. The Sheriff’s Certificate of Sale was registered on June 24, 1983. On July 6, 1983, DRBI sold Lots 1, 3, and 6 to the spouses Francisco D. Yap and Whelma D. Yap (the Yaps) under a Deed of Sale with Agreement to Mortgage, although Lot 3 was not among the foreclosed properties. The Yaps obtained a writ of possession and were placed in possession of Lots 1, 3, and 6 on September 12, 1983. On May 22, 1984, within the redemption period, the Dys and Maxinos attempted to redeem Lots 1, 3, and 6 by tendering ₱40,000 to DRBI and the Yaps, who refused, insisting redemption required the full bid price for all foreclosed lots. On May 28, 1984, the Dys and Maxinos paid ₱50,625.29 to the Provincial Sheriff. The Clerk of Court and Provincial Sheriff issued a Certificate of Redemption only for Lots 1 and 6, noting Lot 3 was not included in the foreclosure. The Yaps refused to accept the redemption money. On June 15, 1984, the Dys and Maxinos filed a complaint (Civil Case No. 8426) against the Yaps and DRBI for accounting, injunction, declaration of nullity of the deed of sale regarding Lot 3, and damages.

ISSUE

May persons to whom several mortgaged lands were transferred without the knowledge and consent of the creditor redeem only several parcels if all the lands were sold together for a single price at the foreclosure sale?

RULING

Yes. The Court of Appeals’ decision is affirmed with modification. The principle of indivisibility of a mortgage applies only to the security, not to the foreclosure sale or the right of redemption. The right of redemption is statutory and may be exercised separately on individual properties sold en masse, provided the redemptioner pays the proportional price corresponding to the property sought to be redeemed. The Dys and Maxinos, as successors-in-interest to the mortgagor, validly redeemed Lots 1 and 6. The sale of Lot 3 by DRBI to the Yaps was void as DRBI had no ownership rights over it, not having been foreclosed. The Yaps’ possession of Lot 3 was illegal. The awards for damages, attorney’s fees, and litigation expenses are deleted for lack of basis. The Yaps and DRBI are ordered to account for and deliver the net income from Lots 1, 3, and 6 to the Dys and Maxinos.