View full case

SPS. FRANCISCO D. YAP v. SPS. ZOSIMO DY

FACTS:

The spouses Tomas Tirambulo and Salvacion Estorco mortgaged several lots to the Rural Bank of Dumaguete, Inc. (DRBI) to secure a loan. They later sold the mortgaged lots to the spouses Zosimo Dy, Sr. and Natividad Chiu and the spouses Marcelino C. Maxino and Remedios Lasola without the consent of DRBI. DRBI foreclosed the mortgage and bought Lots 1, 4, 5, 6, and 8 at public auction. They sold Lots 1, 3, and 6 to the spouses Francisco D. Yap and Whelma D. Yap. The Dys and Maxinos attempted to redeem Lots 1, 3, and 6, but the Yaps refused stating that the redemption should be for the full amount of the winning bid for all the foreclosed properties. The Dys and Maxinos then filed a case against the Yaps and DRBI for nullity of the sale and other claims.

The case involves two consolidated civil cases filed by the Dys and Maxinos against the Yaps, the Provincial Sheriff, and DRBI. The Dys and Maxinos sought to nullify the Deed of Sale with Agreement to Mortgage, have the Yap's possession of Lot No. 3 declared illegal, accounting of incomes from Lot No. 3, validate the redemption of Lots 1 and 6, accounting of incomes from Lots 1 and 6, delivery of net proceeds of income, and payment of damages. The Yaps sought the declaration of their exclusive ownership of Lots 1 and 6, damages, execution of the final Deed of Sale, and transfer of the property to them.

The Yaps filed a motion to withdraw the redemption money from the provincial sheriff, which was granted. The trial court rendered a decision in favor of the Yaps, stating that the Dys and Maxinos failed to offer their evidence, the Deed of Sale with Agreement to Mortgage was valid, and the Dys and Maxinos failed to properly and timely exercise their rights of redemption. The Dys and Maxinos appealed to the Court of Appeals, arguing various errors on the part of the trial court.

The case involves a dispute over several parcels of land in Negros Oriental. A Deed of Sale with Mortgage was executed by the Yap and Dy/Maxino spouses, covering seven parcels of land. The Dy/Maxino spouses failed to pay the mortgage, resulting in the foreclosure of the properties. The properties were sold at public auction and DRBI was the highest bidder. The Yap spouses filed a complaint seeking nullification of the foreclosure sale and asserting their rights over two of the lots they purportedly redeemed.

The trial court initially ruled in favor of the Yap spouses, declaring the Certificate of Redemption null and void, and ordering the execution of a Final Deed of Sale in favor of the bank. However, the trial court later amended its decision without waiting for the Yap spouses' comment and without explaining the basis for the amendment. The amended decision declared the Deed of Sale made by the Dy/Maxino spouses null and void and declared the Yaps as exclusive owners of two of the lots as the Dy/Maxino spouses failed to redeem the properties within the prescribed period. The Yap spouses appealed to the Court of Appeals, alleging errors on the part of the trial court and claiming that the defendant should be held liable for damages.

ISSUES:

  1. Is Lot 3 among the foreclosed properties?

  2. To whom should the payment of redemption money be made?

  3. Did the Dys and Maxinos validly redeem Lots 1 and 6?

  4. Is DRBI liable for damages?

RULING:

  1. Is Lot 3 among the foreclosed properties?

    • The Supreme Court ruled that Lot 3 was not among the properties foreclosed. It was established that the Provincial Sheriff’s Certificate of Sale was altered to include Lot 3, which was not part of the original foreclosure.

  2. To whom should the payment of redemption money be made?

    • The Dys and Maxinos validly followed the procedure outlined in Section 31, Rule 39 of the Rules of Court. They made an initial attempt to pay DRBI and the Yaps, who refused, and thereafter correctly tendered the redemption money to the sheriff who made the sale.

  3. Did the Dys and Maxinos validly redeem Lots 1 and 6?

    • Yes, the Dys and Maxinos validly redeemed Lots 1 and 6. The Supreme Court held that nothing in the law prohibits the piecemeal redemption of properties. The amount deposited for the two lots was deemed sufficient as it was more than 60% of the purchase price of the five foreclosed properties, which constitutes only 52% of the total area.

  4. Is DRBI liable for damages?

    • Yes, the Supreme Court affirmed the CA’s award of moral and exemplary damages, as well as attorney’s fees, against DRBI. The bank's act of including Lot 3 in the Sheriff’s Certificate of Sale, despite it not being part of the foreclosure, caused pecuniary loss to the Dys and Maxinos and was found to be in bad faith.

PRINCIPLES:

  1. Doctrine of Indivisibility of Mortgage The doctrine does not apply once the mortgage is extinguished by a complete foreclosure.

  2. Piecemeal Redemption Mortgagors or their successors-in-interest may redeem one or some of the foreclosed properties.

  3. Tender of Redemption The redemption money may be tendered to the purchaser or the sheriff who conducted the sale.

  4. Good Faith and Bad Faith Good faith is required in foreclosure proceedings, and bad faith actions by mortgagees can justify the award of damages.

  5. Award of Damages Moral and exemplary damages, as well as attorney's fees, can be awarded when the mortgagee acts in bad faith and causes pecuniary loss to the mortgagor or their successors.