G.R. No. 222505 and G.R. No. 222776, June 28, 2021.
LOURDES C. AKIAPAT, BILLY CACHERO AND NOEL CACHERO, PETITIONERS, VS. SUMMIT BANK (RURAL BANK OF TUBLAY [BENGUET], INC.), RESPONDENT. [and] RICHARD CACHERO, JEANETTE C. GAMBOA AND TERESITA C. MAINEM, PETITIONERS, VS. SUMMIT BANK (RURAL BANK OF TUBLAY [BENGUET], INC.), RESPONDENT.

FACTS

Domacia Galipen, Renato Cachero, Richard Cachero, Teresita C. Mainem, and Jeanette C. Gamboa (Domacia, et al.) were co-owners of a parcel of land covered by TCT No. T-34811, together with Lourdes C. Akiapat, Billy Cachero, and Noel Cachero (Lourdes, et al.). Domacia, et al. obtained separate loans from Summit Bank in 1996 and 1997, secured by a Real Estate Mortgage over the subject property. Lourdes, et al., who were co-owners but non-borrowers, also joined in executing the mortgage.
Due to Domacia, et al.’s failure to pay, Summit Bank extrajudicially foreclosed the mortgage on January 11, 2000. Domacia, et al. filed Civil Case No. 01-CV-1584 for annulment. On September 17, 2007, the RTC upheld the validity of the mortgage and promissory notes but nullified the foreclosure sale, modifying the interest and penalty rates. This decision became final and executory on September 3, 2009, after the RTC confirmed the indebtedness at P28,508,425.50.
Summit Bank proceeded with a second foreclosure. The RTC issued a writ of execution on December 15, 2009, leading to an auction sale on May 12, 2010, and the eventual issuance of a writ of possession to Summit Bank on September 29, 2011.
In October 2011, Lourdes, et al. filed a Third-Party Affidavit of Claim (Terceria), arguing their shares should not be included as they were non-borrowers. On November 25, 2011, the RTC nullified its prior orders and writs and directed Summit Bank to reapply for extrajudicial foreclosure but to exclude the pro indiviso shares of Lourdes, et al. The RTC denied Summit Bank’s motion for reconsideration, stating it was more equitable to exclude the non-borrowers’ shares.
Summit Bank filed a Petition for Certiorari with the CA. The CA granted the petition, finding that the RTC gravely abused its discretion because: (1) the remedy of terceria was not available to Lourdes, et al. as they were not third persons to the judgment; (2) the RTC’s order effectively modified a final and executory decision; and (3) the order added a new directive to the final decision. The CA denied the motions for reconsideration, leading to the consolidated petitions before the Supreme Court.

ISSUE

Whether the Court of Appeals correctly ruled that the Regional Trial Court gravely abused its discretion in ordering the exclusion of the pro indiviso shares of Lourdes, et al. from the foreclosure proceedings and directing Summit Bank to reapply for extrajudicial foreclosure.

RULING

The Supreme Court DENIED the petitions and AFFIRMED the Decision of the Court of Appeals. The RTC committed grave abuse of discretion.
First, the remedy of terceria under Section 14, Rule 57 of the Rules of Court is available only to a third person other than the judgment obligor or the latter’s agent. Lourdes, et al. were co-owners of the mortgaged property and were parties to the real estate mortgage contract. They were impleaded as co-plaintiffs in the original civil case (Civil Case No. 01-CV-1584) for annulment. Therefore, they were not third persons, and the RTC should not have entertained their third-party claim.
Second, the RTC’s September 17, 2007 Decision in Civil Case No. 01-CV-1584, which declared the real estate mortgage valid and binding, had long become final and executory. The RTC’s subsequent Resolution dated November 25, 2011, which directed the exclusion of the shares of Lourdes, et al., effectively modified the final judgment. A final and executory judgment can no longer be amended or modified, except for clerical errors or nunc pro tunc entries, or when the judgment is void. The RTC’s order constituted an unauthorized alteration of a final judgment.
Third, the real estate mortgage is indivisible. The mortgage obligation is secured by the entire mortgaged property, not by specific portions thereof. All the co-owners, including the non-borrowers Lourdes, et al., voluntarily constituted the mortgage over the entire property. Consequently, the mortgage lien attaches to the whole property, and the foreclosure must cover the entire property. The RTC’s order to exclude specific shares contravenes the indivisible nature of a real estate mortgage.
Therefore, the CA correctly found that the RTC acted with grave abuse of discretion in issuing the Resolution dated November 25, 2011.