MARIANO TORRES Y CHAVARRIA, petitioner, vs. THE HONORABLE COURT OF APPEALS, FRANCISCO E.

FERNANDEZ and FE FERNANDEZ, ROSARIO MOTA CUE, ERNESTO MEDINA CUE and the NATIONAL
TREASURER, as Custodian of the Assurance Fund, respondents.

This is a petition for review of the decision of the Court of Appeals in CA-G.R. No. 62248-R entitled "Mariano Torres Y
Chavarria v. Francisco E. Fernandez, et al., etc.," which reversed the decision of the then Court of First Instance of Manila,
Branch 7, by holding that it is the respondent Rosario Mota who is legally entitled to the disputed realties, being an innocent
mortgagee and later the highest bidder when the properties were supposedly foreclosed, and not the petitioner Mariano
Torres, the defrauded owner thereof; and of the resolution of that Court denying Torres' motion for reconsideration.
Torres – owner of the parcel of land * LRC GLRO Cad. Rec. No. 133 – petition filed by Francisco
Francisco Fernandez – Torres’ brother-in-law; the one who Fernandez where he misrepresented himself to the attorney-
forged a simulated deed of sale in-fact of Torres to be obtained the latter’s TCT
Rosario Mota Cue – highest bidder when the land (of Torres) * Civil Case 72494 – civil case filed by Torres against
was sold at public auction Francisco Fernandez to annul the TCT issued in Fernando’s
name as well as the proceedings made in LRC GLRO Cad. Rec.
No. 133
* Civil Case No. 85753 – present case filed by Torres against * Civil 75643 – civil case filed by Francisco Fernandez to annul
respondents the mortgage with preliminary injunction

The parcel of land located at the corner of Quezon Boulevard and Raon Street (now Gonzalo Street), and the building
therein known as "M. Torres Building" is owned by Mariano Torres, as evidenced by TCT No. 53628-Manila issued in
his name. As far as the records show, Torres was and still is in possession of the realties, holding safely to his owner's
duplicate certificate of title, and, at least until 1971, paying the real estate taxes due thereon, and collecting rentals
from his tenants occupying the building.

Sometime in 1966, Francisco Fernandez, Torres' brother-in-law, filed a petition with the CFI of Manila, docketed as
LRC GLRO Cad. Rec. No. 133, where he, misrepresenting to be the attorney-in-fact of Torres and falsely alleging
that the duplicate copy of TCT No. 53628 was lost, succeeded in obtaining a court order for the issuance of another
copy of the certificate. Once in possession, Francisco forged a simulated deed of sale of the realties in his favor.
Whereupon TCT No. 53628 in the name of Torres was canceled and TCT No. 86018 was issued in Fernandez' name.

On various dates from December, 1966 to November, 1967 Fernandez mortgaged the realties to Rosario Mota, wife
of Ernesto Cue, and also to Angela Fermin, who later assigned her credit to the spouses Cue. The mortgages were
annotated at the back of TCT No. 86018 and so was the deed of assignment.

Torres, upon learning of the fraud committed by Fernandez, caused, on March 18, 1968, the annotation on the
latter's TCT a notice of adverse claim. On March 30, 1968, Torres filed Civil Case No. 72494 against Fernandez to
annul TCT No. 86018 as well as the proceedings in LRC GLRO Cad. Rec. No. 133. On April 2, 1968, a notice of lis
pendens was annotated at the back of Fernandez' TCT.

In the meantime, Fernandez failed to pay his various loans which prompted the Cues to institute an extrajudicial
foreclosure of the mortgage. Fernandez filed Civil Case No. 75643 against the spouses Cue for the annulment of
the mortgage with preliminary injunction.

Spouses Cue and Francisco Fernandez entered into an amicable settlement, wherein Fernandez acknowledged and
promised to pay his debt to the Cues for P562,955.28 Pesos on or before, March 30, 1970, while the spouses bound
themselves to execute and deliver, within ten (10) days from receipt of the sum mentioned such documents as are
necessary to release the mortgages in favor of defendants on plaintiffs' property.

Before Fernandez could pay his obligation, lower court rendered judgment in Civil Case No. 72494 where it
declared void the proceedings held in LRC GLRO Cad. Rec, No. 133 and that TCT No. 86018, issued in the name of
Fernandez, is without force. (CA affirmed lower court’s decision)

Fernandez failed to comply with the amicable settlement so Spouses Cue applied for (and were granted) a writ of
execution. The subject realties were then levied and sold at a public auction to which Rosario Mota Cue was the
highest bidder. On August 31, 1971, the redemption period for the subject immovables having lapsed without
Fernandez nor Torres redeeming the properties, Rosario Mota was issued the Sheriffs Deed of Sale. On December
7, 1971 Mota, through her lawyer, notified the tenants occupying "M. Torres Building" that she is the new owner,
payment of their rentals should be made to her.
On December 17, 1971 Torres filed a complaint, which later gave rise to this petition, with the CFI of Manila, docketed
as Civil Case No. 85753, against Fernandez and his spouse and the Cues to restrain the latter from collecting rentals
and for the declaration as void TCT No. 105953.

The Cues in turn filed a cross-claim against Fernandez spouses and a third party complaint against the National
Treasurer as the custodian of the Assurance Fund.

During the proceeding, Mariano Torres, having died sometime in 1974, was substituted by his widow.

RTC (June 3, 1977)

 declared TCT No. 105953 in the name of Rosario Mota null and void as it upheld the validity of TCT No. 53628
in the name of Torres;
 dismissed the Cues' third party complaint against the Treasurer of the Philippines as custodian of the Assurance
Fund after finding them negligent in protecting their interest. It recognized the principle that a person dealing
with registered lands need not go beyond the certificate of title but nevertheless pointed out that there are
circumstances in this case which should have put the Cues on guard and prompted them to investigate the
property being mortgaged to them;
 The property in question is a very valuable property, in fact accepted by defendants Mota and Medina Cue as
collateral for more than half a million in loans. Its value lies principally in its income potential, in the form of
substantial monthly rentals. Certainly, the registered title does not yield any information as to the amount of
rentals due from the building, much less on who is collecting them, or who is recognized by the tenants as
their landlord. Any prospective buyer or mortgagee of such a property, if prudent and in good faith, is normally
expected to inquire into all these and related facts and circumstances.
 that it should be readily obvious to any one that the area of the two lots covered by TCT No. 86018 cannot
accommodate the building, as in fact it also rests upon a lot covered by TCT No. 56387, and partly upon a lot
leased by (Torres) from the City of Manila.
 The Spouses Cue never bothered to look into this fact about the building
 Another thing that defendants Mota and Medina Cue must have investigated, as any prudent buyer
or mortgagee should before consummating any transaction on real property, in the matter of
payment of taxes on the property. After all, the big value of the property in question necessarily
means that even real estate taxes on it alone would involve big amounts of money, and if there are
tax arrearages, any buyer or subsequent owner of the property wig have to come face to face with
the tax hen attaching to the property wherever its owner may be.

CA – reversed the trial court’s decision

SC: affirmed RTC’s decision

In view of the foregoing, to hold, for the purpose of enforcing the mortgage, that Mota was an innocent mortgagee
would be futile because, as above shown, no certificate of title covering the subject realties in derogation of
Torres' certificate of title may validly be issued.

There is nothing on the records which shows that Torres performed any act or omission which could have jeopardized
his peaceful dominion over his realties. The decision under review, however, in considering Mota an innocent
mortgagee protected under Section 55 of the Land Registration Law, held that Torres was bound by the mortgage.
Inevitably, it pronounced that the foreclosure sale, where Mota was the highest bidder, also bound Torres and
concluded that the certificate of title issued in the name of Mota prevails over that of Torres'. As correctly pointed
out by Torres, however, his properties were sold on execution, and not on foreclosure sale, and hence,
the purchaser thereof was bound by his notice of adverse claim and lis pendens annotated at the back
of Fernandez' TCT. Moreover, even if We grant Mota the status of an innocent mortgagee, the doctrine
relied upon by the appellate court that a forged instrument may become the root of a valid title, cannot
be applied where the owner still holds a valid and existing certificate of title covering the same interest
in a realty. The doctrine would apply rather when, as in the cases for example, the forger thru insidious means
obtains the owner's duplicate certificate of title, converts it in his name, and subsequently sells or otherwise
encumbers it to an innocent holder for value, for in such a case the new certificate is binding upon the owner. But
if the owner holds a valid and existing certificate of title, his would be indefeasible as against the whole
world, and not that of the innocent holder's. "Prior tempore potior jure" as We have said in several
jurisprudence, we laid down the doctrine that:
The claim of indefeasibility of the petitioner's title under the Torrens land title system would be correct
if previous valid title to the same parcel of land did not exist. The respondent had a valid title ... It
never parted with it; it never handed or delivered to anyone its owner's duplicate of the transfer
certificate of title, it could not be charged with negligence in the keeping of its duplicate certificate of
title or with any act which could have brought about the issuance of another certificate upon which a
purchaser in good faith and for value could rely. If the petitioner's contention as to indefeasibility of his title
should be upheld, then registered owners without the least fault on their part could be divested of their title and
deprived of their property. Such disastrous results which would shake and destroy the stability of land titles had
not been foreseen by those who had endowed with indefeasibility land titles issued under the Torrens system.

Again in the case of Baltazar v. Court of Appeals, G.R. No. 78728, December 8, 1988, 168 SCRA 354, We held that
as between two persons both of whom are in good faith and both innocent of any negligence, the law
must protect and prefer the lawful holder of registered title over the transfer of a vendor bereft of any
transmissible rights.

Then it becomes evident that the remaining possible remedies of the Cues are to go against Fernandez or the
Assurance Fund, as they in fact had done in the lower court by filing a cross claim and third party complaint. The
lower court dismissed the Cues' cross-claim reasoning out that their remedy is to cause the final judgment
(compromise agreement) in Civil Case No. 75643 executed. This, of course, is correct since the rights and obligations
of both parties had been determined in that case.

We likewise take note of the manifestation of the Office of the Solicitor General that the Cues failed to contest the
ruling of the trial court negating the liability of the Assurance Fund. For these reasons, We hold that the Cues' remedy
merely is to go against Francisco Fernandez or rather his estate since record shows that he died sometime in 1983.
G.R. No. 195540 March 13, 2013

GOLDENWAY MERCHANDISING CORPORATION, Petitioner,

vs.
EQUITABLE PCI BANK, Respondent.

On November 29, 1985, Goldenway Merchandising Corporation (petitioner) executed a Real Estate Mortgage in favor
of Equitable PCI Bank (respondent) over its real properties situated in Valenzuela, Bulacan (now Valenzuela City)
and covered by Transfer Certificate of Title (TCT) Nos. T-152630, T-151655 and T-214528 of the Registry of Deeds
for the Province of Bulacan. The mortgage secured the Two Million Pesos (₱2,000,000.00) loan granted by respondent
to petitioner and was duly registered.4

As petitioner failed to settle its loan obligation, respondent extrajudicially foreclosed the mortgage on December 13,
2000. During the public auction, the mortgaged properties were sold for ₱3,500,000.00 to respondent. Accordingly,
a Certificate of Sale was issued to respondent on January 26, 2001. On February 16, 2001, the Certificate of Sale
was registered and inscribed on TCT Nos. T-152630, T-151655 and T-214528.5

In a letter dated March 8, 2001, petitioner’s counsel offered to redeem the foreclosed properties by tendering a
check in the amount of ₱3,500,000.00. On March 12, 2001, petitioner’s counsel met with respondent’s counsel
reiterating petitioner’s intention. However, petitioner was told that such redemption is no longer possible because
certificate of sale had already been registered and new TCTs were issued in the name of the bank on March 9, 2001.

Petitioner’s Contentions:

 On December 7, 2001, filed a complaint for specific performance and damages

 that it is the one-year period of redemption under Act No. 3135 which should apply and not the
shorter redemption period provided in Republic Act (R.A.) No. 8791.
 that applying Section 47 of R.A. 8791 to the real estate mortgage executed in 1985 would result in the
impairment of obligation of contracts and violation of the equal protection clause under the Constitution.
 faulted the respondent for allegedly failing to furnish it and the Office of the Clerk of Court, RTC of Valenzuela
City with a Statement of Account as directed in the Certificate of Sale, due to which petitioner was not apprised
of the assessment and fees incurred by respondent, thus depriving petitioner of the opportunity to exercise
its right of redemption prior to the registration of the certificate of sale.

Respondent’s Contentions:

 in its Answer with Counterclaim, it pointed out that petitioner cannot claim that it was unaware of the
redemption price which is clearly provided in Section 47 of R.A. No. 8791
 that petitioner had all the opportune time to redeem the foreclosed properties from the time it received the
letter of demand and the notice of sale before the registration of the certificate of sale
 As to the check payment tendered by petitioner, respondent said that even assuming arguendo such
redemption was timely made, it was not for the amount as required by law.

RTC of Valenzuela:

 dismissing the complaint as well as the counterclaim.

 that the issue of constitutionality of Sec. 47 of R.A. No. 8791 was never raised by the petitioner during the
pre-trial and the trial. Aside from the fact that petitioner’s attempt to redeem was already late, there was no
valid redemption made because Atty. Judy Ann Abat-Vera who talked to Atty. Joseph E. Mabilog of the Legal
Division of respondent bank, was not properly authorized by petitioner’s Board of Directors to transact for and
in its behalf; it was only a certain Chan Guan Pue, the alleged President of petitioner corporation, who gave
instruction to Atty. Abat-Vera to redeem the foreclosed properties.

CA:

 affirmed the trial court’s decision

 that a reading of Section 47 plainly reveals the intention to shorten the period of redemption for juridical
persons and that the foreclosure of the mortgaged properties in this case when R.A. No. 8791 was already in
effect clearly falls within the purview of the said provision.
Petitioner’s Contention:

 filed a petitioner for review on certiorari

 that Section 47 of R.A. No. 8791 is inapplicable considering that the contracting parties expressly and
categorically agreed that the foreclosure of the real estate mortgage shall be in accordance with Act No. 3135
 that applying Section 47 of R.A. No. 8791 to the present case would be a substantial impairment of its vested
right of redemption under the real estate mortgage contract
 that since R.A. No. 8791 does not provide for its retroactive application, courts therefore cannot retroactively
apply its provisions to contracts executed and consummated before its effectivity
 since R.A. 8791 is a general law pertaining to the banking industry while Act No. 3135 is a special
law specifically governing real estate mortgage and foreclosure, under the rules of statutory
construction that in case of conflict a special law prevails over a general law regardless of the dates
of enactment of both laws, Act No. 3135 clearly should prevail on the redemption period to be
applied in this case
 such impairment would be violative of the constitutional proscription against impairment of obligations of
contract
 Citing Co v. Philippine National Bank, petitioner contended that the right of redemption is part and parcel of
the Deed of Real Estate Mortgage itself and attaches thereto upon its execution, a vested right flowing out of
and made dependent upon the law governing the contract of mortgage and not on the mortgagee’s act of
extrajudicially foreclosing the mortgaged properties
 citing this Court’s ruling in Rural Bank of Davao City, Inc. v. Court of Appeals, where it was held that "Section
119 prevails over statutes which provide for a shorter period of redemption in extrajudicial foreclosure sales",
and in Sulit v. Court of Appeals, petitioner stresses that it has always been the policy of this Court to aid rather
than defeat the mortgagor’s right to redeem his property

ISSUE: May the foregoing amendment be validly applied in this case when the real estate mortgage contract was
executed in 1985 and the mortgage foreclosed when RA 8791 was already in effect? - YES

SC:

The law governing cases of extrajudicial foreclosure of mortgage is Act No. 3135,14 as amended by Act No. 4118.
Section 6 thereof provides:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the
debtor, his successors-in-interest or any judicial creditor or judgment creditor of said debtor, or any person having
a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem
the same at any time within the term of one year from and after the date of the sale

The one-year period of redemption is counted from the date of the registration of the certificate of sale.

However, Section 47 of R.A. No. 8791 otherwise known as "The General Banking Law of 2000" which took effect on
June 13, 2000, amended Act No. 3135. Said provision reads:
SECTION 47. Foreclosure of Real Estate Mortgage. — In the event of foreclosure, whether judicially or
extrajudicially, of any mortgage on real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property has been sold for the full or
partial payment of his obligation shall have the right within one year after the sale of the real estate,
to redeem the property by paying the amount due under the mortgage deed, with interest thereon at
the rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from the
sale and custody of said property less the income derived therefrom. However, the purchaser at the auction
sale concerned whether in a judicial or extrajudicial foreclosure shall have the right to enter upon and
take possession of such property immediately after the date of the confirmation of the auction sale and
administer the same in accordance with law. Any petition in court to enjoin or restrain the conduct of
foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the
petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank
may suffer by the enjoining or the restraint of the foreclosure proceeding.

Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure,
shall have the right to redeem the property in accordance with this provision until, but not after, the registration
 of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three
(3) months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior
to the effectivity of this Act shall retain their redemption rights until their expiration.

Under the new law, an exception is thus made in the case of juridical persons which are allowed to exercise
the right of redemption only (1) "until, but not after, the registration of the certificate of foreclosure
sale" and (2) in no case more than three (3) months after foreclosure, whichever comes first.

Petitioner’s contention that Section 47 of R.A. 8791 violates the constitutional proscription against impairment of the obligation of
contract has no basis
There is an impairment if a subsequent law changes the terms of a contract between the parties, imposes new conditions,
dispenses with those agreed upon or withdraws remedies for the enforcement of the rights of the parties.

Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only
modified the time for the exercise of such right by reducing the one-year period originally provided in
Act No. 3135. The new redemption period commences from the date of foreclosure sale, and expires
upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There
is likewise no retroactive application of the new redemption period because Section 47 exempts from its
operation those properties foreclosed prior to its effectivity and whose owners shall retain their
redemption rights under Act No. 3135.

Petitioner’s claim that Section 47 infringes the equal protection clause as it discriminates mortgagors/property owners who are
juridical persons is equally bereft of merit.
Equal protection permits of reasonable classification. We have ruled that one class may be treated differently from another where
the groupings are based on reasonable and real distinctions. If classification is germane to the purpose of the law, concerns all
members of the class, and applies equally to present and future conditions, the classification does not violate the equal protection
guarantee

The difference in the treatment of juridical persons and natural persons was based on the nature of the properties
foreclosed – whether these are used as residence, for which the more liberal one-year redemption period is retained,
or used for industrial or commercial purposes, in which case a shorter term is deemed necessary to reduce the
period of uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner of
these acquired assets. It must be underscored that the General Banking Law of 2000, crafted in the aftermath of
the 1997 Southeast Asian financial crisis, sought to reform the General Banking Act of 1949 by fashioning a legal
framework for maintaining a safe and sound banking system. In this context, the amendment introduced by Section
47 embodied one of such safe and sound practices aimed at ensuring the solvency and liquidity of our banks. It
cannot therefore be disputed that the said provision amending the redemption period in Act 3135 was based on a
reasonable classification and germane to the purpose of the law.

The right of redemption being statutory, it must be exercised in the manner prescribed by the statute, and within
the prescribed time limit, to make it effective. The freedom to contract is not absolute; all contracts and all rights
are subject to the police power of the State and not only may regulations which affect them be established by the
State, but all such regulations must be subject to change from time to time, as the general well-being of the
community may require, or as the circumstances may change, or as experience may demonstrate the necessity.

Having ruled that the assailed Section 47 of R.A. No. 8791 is constitutional, we find no reversible error committed by the CA in
holding that petitioner can no longer exercise the right of redemption over its foreclosed properties after the certificate of sale in
favor of respondent had been registered. WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.