GAERLAN, J.:
WHEREFORE, premises considered, the Court hereby renders judgment DISMISSING the complaint for lack of merit and evidence. Defendants' counterclaims are likewise dismissed for lack of evidence.[19] (Emphasis in the original)The RTC agreed with the respondents that the foreclosure provision of the mortgage contract gave Nakamura sufficient authority to foreclose and sell the disputed property. According to the trial court, "[t]he provision is clear as well as specific enough that the conclusion is inevitable that the agreement between mortgagors Palo and mortgagee Nakamura was for the latter to foreclose the mortgage properly either judicially or extra-judicially if mortgagor fails to redeem the same within the given period."[20]
WHEREFORE, the appeal is DENIED. The Judgment dated August 7, 2012 and Order dated January 8, 2013, both rendered by the Regional Trial Court, Branch 54, Lapulapu City in Civil Case No. R-LLP-09-04171-CV, are hereby AFFIRMED.The appellate court held that the act of issuance of judgment on the pleadings is in itself the indication that the answer failed to tender an issue or admitted the material allegations of the complaint, so the trial court need not belabor this point.[27] On the substantive issue, the CA ruled that Nakamura's lack of an SPA does not preclude him from extrajudicially foreclosing on the mortgage, as the foreclosure provision of the mortgage contract gave him the requisite authority to do so.[28] The absence in the mortgage contract of an express authority in favor of Nakamura to conduct a foreclosure sale is immaterial, for no particular formality is required to empower the mortgagee to sell the mortgaged property. What matters is that the terms of the contract evince an intention that the sale may be made upon default or any other contingency.[29]
SO ORDERED.[26]
WHEREFORE, premises considered, the Petition for Review is DENIED. The CA Decision dated 10 March 2016 in CA-G.R. CV No. 04717, which affirmed the RTC Decision dated 7 August 2012 and Order dated 8 January 2013 in Civil Case No. R-LLP-09-04171-CV, upholding the validity of the extrajudicial foreclosure sale of the mortgaged property, is AFFIRMED.In the present Motion for Reconsideration, Palo argues that: 1) the foreclosure provision of the mortgage contract does not name the person or persons authorized to foreclose upon the mortgage, contrary to Section 1 of Act No. 3135 as amended;[36] 2) since Nakamura was not specifically named in the mortgage contract as a party authorized to foreclose, the notarial foreclosure by Atty. Casul-Arendain on his behalf is likewise void;[37] and 3) upholding the foreclosure and the auction sale in favor of Rey amounts to a taking of property without due process of law.[38]
SO ORDERED.[35] (Emphasis in the original)
WHEREAS, the MORTGAGOR acknowledges to be justly indebted to the MORTGAGEE in the sum set forth below, and is willing to guarantee the repayment thereof as well as the performance of such other obligations as may arise thereunder.We find that the RTC and the CA committed reversible error when they construed the last aforequoted paragraph to be a fully-contained special power to both foreclose on the mortgage and sell the disputed property, in compliance with the provisions of Act No. 3135, as amended.
NOW THEREFORE, for and in consideration of the above premises and more specifically as security for the principal obligation in the sum of FOUR HUNDRED SEVEN THOUSAND PESOS (P407,000.00), Philippine Currency, the receipt whereof is hereby acknowledged by the MORTGAGOR, payable on or before 24 November 2001, without any interest, the herein MORTGAGOR does by these presents constitute a first mortgage in favor of the MORTGAGEE, his heirs and assigns upon the afore-described parcel of land, INCLUDING all the buildings and improvements which may now or may hereafter exist thereon;
That it is the principal condition, of this mortgage that the MORTGAGOR is prohibited from selling/and or contract[ing] a 2nd mortgage subjecting the [abovementioned] properties (subject of this mortgage) in favor of any other person, persons or entities until the principal obligation in the sum of FOUR HUNDRED SEVEN THOUSAND PESOS (P407,000.00) shall be paid with the full satisfaction of the MORTGAGEE;
That if the MORTGAGOR faithfully compl[ies] with all the conditions herein mentioned, then this mortgage shall ipso facto become null and void, otherwise, it shall remain in full force and effect and be enforceable in the manner provided by law and by this agreement.
Should the MORTGAGOR fail to redeem the above-described properties within the period, then this mortgage shall be foreclosed either judicially or extra-judicially in accordance with law.[39]
[s]hould the MORTGAGOR fail to redeem the above-described properties within the period, then this mortgage shall be foreclosed either judicially or extra-judicially in accordance with law,[44] (Emphasis and underscoring supplied)their obvious intention was to empower Nakamura to seek the foreclosure of the mortgage in accordance with law. The omission of Nakamura's name in the contract's foreclosure provision is immaterial, for he is the mortgagee named in the contract.
Tenth. The borrower, Aniceta Ardosa, hereby confers a sufficient and irrevocable power of attorney in favor of the manager of the partnership, in order that he, in the event that the indebtedness, hereby acknowledged, falls due, on account of the failure on the part of the borrower to fulfill any of the obligations mentioned in clauses second, fourth, fifth, eleventh, thirteenth, sixteenth, seventeenth and twenty-first of this deed, once the board of directors has resolved that said partnership has decide to exercise its right to consider the indebtedness of the borrower due, and once a notice has been published in a newspaper of general circulation of this city, once a week, during three consecutive weeks, may proceed to make an extrajudicial sale, before a notary public or auctioneer, whom the board of directors may designate, of the real property, the subject of this mortgage, the manager of the partnership being hereby authorized, by irrevocable power of attorney, to execute, as agent of the borrower, the corresponding deed of sale in favor of the highest bidder at said auction sale; provided, however, that the deed of sale shall not be executed but after the expiration of the thirty days' time granted to run from the date of the borrower should pay, within that period of thirty days, to be computed from the date of the sale, to the partnership, the total amount of her indebtedness, at such date, with interest due and expenses incurred by the sale, less the expenses for the cancellation of her shares, such public sale shall remain invalid, and the representative of the partnership shall execute the proper deed for the cancellation of the mortgage hereby made, the expenses for the execution of said deed of cancellation being on account of the borrower.Upon default, the creditor, a Manila-based building and loan association, foreclosed in accordance with the mortgage contract and conducted an extrajudicial auction sale, where it emerged as the highest bidder. The provincial register of deeds refused to register the auction sale, prompting the creditor to file an action for mandamus to compel registration. Citing Spanish Supreme Court decisions and other Spanish and American sources, we ruled that:
x x x x
Fifteenth. It is expressly agreed upon that the partnership shall be entitled to bid in any of the extrajudicial auctions for the sale of the mortgaged property, which might be held in accordance with the agreement entered into on this date, and that in the event that the partnership's bid be higher than any other bid made by any other person, the manager of the partnership may execute in favor of the partnership, as the agent for the borrower, the corresponding deed of sale, in the same form and under the same condition established in clause tenth of the deed.[49]
[A] stipulation in a mortgage conferring a power of sale upon the mortgagee is valid. The history of this doctrine, as abstracted from the pages of a well-known legal encyclopedia is briefly this: The right to foreclose a mortgage of personality by the exercise of a power of sale encountered considerable opposition; and doubts as to its validity of the power of sale encountered considerable opposition; and doubts as to its validity were not infrequently expressed far into the nineteenth century. In 1811, however, the power was recognized as being a good source of title, and in a few years the practice of inserting the provision had become general. Having once been recognized in England, the power of sale soon came to be an ordinary incident in the execution of a mortgage and was usually inserted as a matter of course; and so fully did the exercise of the power accord with considerations of public policy, that, by parliamentary enactment, the power of sale can now be exercised in England by the mortgagee although a provision therefor be omitted from the deed. In America also numerous early expressions are to be found which question the validity of the power of sale or deny it altogether; but legislative and judicial opinion soon eradicated this notion almost entirely, and it is now settle in America as in England that, in the absence of a statutory requirement of judicial foreclosure, the exercise of the power of sale contained in a mortgage or deed of trust will vest a good title in the purchaser and cut off the equity of redemption. Such is the doctrine maintained in the Federal courts of the United States and the courts of every American State with the exception of one only.Justice George Malcolm dissented from this ruling on the ground that extrajudicial foreclosure agreements are not only prohibited by the then-prevailing laws but also prone to abuse and are therefore inimical to public policy.[51] Justice Charles Johns further argued that the aforequoted stipulations
x x x x
In the light of the foregoing authorities it is evident that the power of sale conferred on the creditor in the mortgage now under consideration cannot be declared to be in contravention either of law, morals, or public policy.
That this view is in harmony with legal conceptions prevailing in this jurisdiction can be further seen from the circumstance that section 66 of the Land Registration Act (Act No. 496) fully recognizes the validity of a clause in a mortgage conferring a special power of sale on the mortgagee. It is true that that section deals only with land that has been registered under the Torrens system, but the provision reflects the commonly accepted professional view that such a clause is valid, regardless of the nature of the title. Certainly, it would be an astonishing conclusion if we were to hold here that a clause conferring special power of sale is invalid in a contract dealing with land not registered under the Torrens system, notwithstanding the fact that the same clause is valid when inserted in contract relating to land so registered.[50]
[give] the mortgagee an irrevocable power of attorney to sell the property to itself by the publishing of a notice of sale for three weeks in the City of Manila, and within thirty days after the sale, the mortgagee, as agent of the mortgagor, may make a deed to itself of the property. Under such provisions, it will be noted that the property may be advertised and sold without notice of any kind to the mortgagor, either real or constructive, except the notice to be published in a newspaper in the City of Manila, and that thirty days after the sale, the mortgagee may make a deed to itself of the property.In March 1924, less than a year after the promulgation of El Hogar Filipino, the Philippine Legislature passed Act No. 3135, entitled AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES. Section 1 thereof provides:
We vigorously contend that, under the conditions existing in the Philippine Islands, such provisions are both unfair, unjust and unconscionable, and ought never to be sanctioned or approved by any court.
x x x x
In many of the States, which uphold the "power of sale" under a mortgage, it will be found that by such a mortgage, it will be found that by such a mortgage, the record title to the land passes ipso facto from the mortgagor to the mortgagee, subject only to the right of redemption.
Under the mortgage in the instant case, the record title could not pass to the mortgagee without the formalities of a sale.
The Philippine Islands is a country exclusively of islands of which there thousand. They are inhabited by people of different habits and modes of living, and who use and speak many different dialects and languages, and many of whom can only speak or write in their own dialect or language, and who know nothing of either Spanish or English.
The records of this court show, and it is a matter of common knowledge, that a very large percentage of all written instruments in the Philippine Islands are made and signed by "thumb prints" by person who cannot read or write in any language. In many of such cases, the makers such instruments do not know or understand what they are signing. Many of them at one time have owned valuable lands and property rights, which, through their ignorance and the cunning and design of the money lender, have been lost by the signing of instruments known as pacto de retro.
In the interest of justice, this court has many times been called upon to relieve innocent and ignorant people from the Shylock methods by which they were induced to sign a pacto de retro, and lost their title to valuable lands.
Even in that kind of an instrument, the time is specified in which the property may be redeemed, ranging from one to many years. With a "power of sale" under a mortgage, with the provisions in the instant case, a mortgagor may own land in one island and live at a long distance in another, and, through some neglect or default, his land could be sold and a conveyance made and his title lost forever without his knowledge.
In the instant case the land is situated in the situated in the sitios of Agtongtong and Bayabas, barrio of Tortosa, municipality of Manapla, Province of Occidental Negros, and the mortgagor resided in Iloilo, and after three weeks' notice in a newspaper published in Manila, the land was sold in Manila.
Of what value is it to a person in a distant island, who does not take a newspaper, or who cannot read or write, to have a notice of the sale of his or her property published in a newspaper in the City of Manila?
It is a matter of common knowledge that there are about 11,000,000 people in the Philippine Islands, and that only about 1 per cent of them take or read a newspaper of any kind published in any language. Yet by the majority opinion, these people, living in distant islands, can be divested of valuable lands and property rights, through a notice of sale published in a newspaper in the City of Manila, which they will never see and never read, and of which they never will have any knowledge.
In the final analysis, whatever injustice there may be in a pacto de retro, it will be found that the "power of sale" under the provisions of the real mortgage in question, is far more drastic, summary and unconscionable than a pacto de retro.[52]
SECTION 1. When a sale is made under a special power inserted in or attached to any real-estate mortgage here after made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following sections shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision for the same is made in the power.Act No. 3135 thus provides legislative sanction to extrajudicial foreclosures similar to the one implicated in El Hogar Filipino, while specifically addressing Justice Johns' objections to the particular power of sale therein. Thus, Sections 2 and 3 of the statute specifically address the objection regarding the conduct of the foreclosure sale outside the province where the property is located. Said provisions also provide for a longer publication period and advertisement of the sale through newspapers and public notices.[53] Section 6 of the statute extends the redemption period to one year, compared to the thirty days stipulated in the contract in question; and in 1933, the Legislature added Section 8, which gives the debtor a right of action to set aside the extrajudicial foreclosure sale.[54]
Después de tan terminante declaración de la jurisprudencia, imposible es toda duda; pero aún se registran otras resoluciones que confirman dicha doctrina, entre ellas una sentencia de 21 de Octubre del mismo año 1902, en la que al declarar válido el pacto autorizando á un acreedor hipotecario para proceder á la venta extrajudicial de las fincas hipotecadas al vencimiento de plazo, sin necesidad de demanda alguna, sirviendo do tipo la cantidad por que quedaban gravadas, y que si no hubiera licitador en las subastas cuyo número se fijaba, se adjudicara al acreedor por el precio que hubiera servido de tipo, vino á reconocer y sancionar la doctrina indicada, toda vez que si se estimó la validez de dicho pacto fué por la razón única de que no implicaba apropiación alguna de la finca hipotecada el derecho otorgado al acreedor para venderla, ó para la adjudicación en pago en su caso, sino sólo una derivación de la facultad concedida á los contratantes en el art. 1255, facultad no contraria á la ley, ya que lo único vedado por ésta consiste en que el acreedor pueda adquirir por la mera faltado pago la propiedad de la cosa dada en hipoteca (ó en prenda), y únicamente se le autorizaba por el pacto expresado para venderla con las condiciones estipuladas; autorización aneja al dominio y no contraria tampoco á la moral y al orden público, puesto que lo permitido por el art. 1872, en cuanto al acreedor pignoraticio, no podía nunca estimarse injusto respecto al acreedor hipotecario cuando el deudor expresamente ha convenido esa forma de pago. De este modo, y en términos tales, vino á quedar confirmada la prohibición de hacerse pago con la cosa pignorada ó hipotecada, sin que preceda la venta en la forma convenida ó en la establecida por la ley en otro caso.It may well be argued that the power to foreclose necessarily includes the power to sell, for the essence of foreclosure lies in the termination of the mortgagee's right in the mortgaged property,[57] and that such termination of right necessarily involves the alienation, i.e., the sale, of the mortgaged property in order to apply the proceeds of such alienation to the satisfaction of the principal obligation which is secured by the mortgage.[58] However, in its formulation of specific rules governing the extrajudicial foreclosure of real estate mortgages under Act No. 3135, the legislature used the particular term "sale made under a special power", which, as explained in El Hogar Filipino, contemplates an express authority to sell the mortgaged property. This deliberate choice of term dovetails perfectly with Justice Manresa's discussion regarding the validity of extrajudicial foreclosures of real mortgages under the Civil Code, subject to the requirement of an express authorization from the mortgagor. To this Court's mind, these circumstances reflect the legislature's intent to adopt the power of sale, as contemplated in the common law, as the modality by which real estate mortgages may be extrajudicially foreclosed. Furthermore, by referring to special powers that are inserted or attached to real estate mortgages, Act No. 3135 forecloses the invocation of any implicit power to sell, since the act of insertion or attachment necessarily implies that the special power must be expressly and distinctly granted.
x x x x
II. Tiene aplicación en el crédito hipotecario la facultad concedida al acreedor prendario?—Mucho se ha discutido si la potestad otorgada por este artículo al acreedor prendario debe considerarse extensiva, por razón de analogía, al acreedor hipotecario, el cual se encuentra en el mismo caso con relación al deudor hipotecante ó al dueño de la finca hipotecada, si fuere distinto de aquél.
El Código no resuelve de una manera expresa esta cuestión, ni en el capitulo siguiente, consagrado especialmente á la hipoteca; se encuentra disposición alguna que á ello se refiera; pero tanto la Dirección general de los Registros, como el Tribunal Supremo, han sentado una jurisprudencia uniforme en sentido afirmativo en determinados casos, fundándose para ello en la razón de analogía antes indicada y por motivos de equidad dignos de ser tenidos en cuenta.
En prueba de ello, pueden verse las resoluciones de la Dirección citada de 9 de Febrero, 12 de Julio y 21 de Octubre de 1901, 16 de Noviembre de 1902, 5 de Diciembre de 1903, 28 de Mayo de 1904 y la ya citada de 19 de Febrero de dicho año, así como la sentencia del Tribunal Supremo de 21 de Octubre de 1902, en las cuales se establece la doctrina, común á la prenda y á la hipoteca, de que el pacto en virtud del cual el deudor concede al acreedor hipotecario el derecho de vender en pública subasta extrajudicial la cosa hipotecada para hacerse pago de la deuda, no implica apropiación de aquélla, sino solo una derivación de la facultad concedida á los contratantes en el artículo 1255, cuya facultad no es contraria á la ley, porque lo único vedado por ésta consiste en que el acreedor pueda, por sólo la falta de pago, adquirir la propiedad de la cosa dada en hipoteca, y tampoco es contraria á la moral, porque lo autorizado por el Código civil en cuanto al acreedor pignoraticio, no puede estimarse injusto con respecto al acreedor hipotecario, sobre todo sí el deudor conviene en tal forma de pago. Pero si bien es lícito dicho pacto, es condición indispensable para su validez, según las citadas decisiones, que la enajenación se verifique precisamente con sujeción á los requisitos y formalidades que se determinan en el art. 1872, siendo nulo el pacto de que el acreedor pueda vender los inmuebles hipotecados sin dar cuenta al prestatario, y con sólo el anuncio de la subasta en los periódicos de la localidad.
x x x x
Esos requisitos y formalidades exigidos por este artículo son [referring to Article 1872 of the old Code], como dice la Dirección [de los Registros, referring to the Spanish directorate of civil registries] mencionada en sus resoluciones citadas, «garantia cierta de que mediante ellos no puede ser expoliado el deudor con inmoral enriquecimiento del acreedor», y «lo que es justo, tratándose de la prenda, no ha de reputarse injusto con relación á la cosa hipotecada».
La necesidad de la concurrencia de esos requisitos consistentes en la celebración de subasta pública y de la previa citación indicada, tanto en la prenda como en la hipoteca, se halla sancionada también por el Tribunal Supremo, en sentencia de 3 de Noviembre de 1902, en la que terminantemente se declara que «es un pacto inmoral aquel en que se estipula que el acreedor pueda apropiarse de la cosa dada en prenda como si le fuera vendida, por el solo transcurso del término del contrato de préstamo, porque siendo nulo dicho pacto en cuanto al acreedor hipotecario (art. 1884), no hay fundamento racional para que pueda estimarse lícito con respecto al acreedor pignoraticio, el cual, á falta de otras condiciones válidamente pactadas, no puede prescindir para la enajenación de la prenda de los términos prescriptos en el art. 1872, que si constituye derecho concedido al acreedor, es también garantía del deudor que no puede perderla por la sola voluntad de aquél, ó pactando lo que es ineficaz en derecho».
De cuanto llevamos dicho acerca de la aplicación del precepto de este artículo al acreedor hipotecario, podemos deducir como conclusión, que, á pesar de no existir disposición especial alguna en el capítulo consagrado al contrato especial de hipoteca que haga extensivo á él dicha disposición, puede, sin embargo, el acreedor proceder válidamente á la venta de las fincas hipotecadas en los términos expuestos en el presente artículo, siempre que exista pacto expreso que le autorice para ello; pero de no existir tal pacto, no tendrá otro medio para conseguir la realización de su crédito, en el caso de que no fuere satisfecho á su vencimiento, que pedir la venta judicial de los bienes afectados con la garantía.
A esto no obsta la consideración alegada por algunos, de que hallándose para la ley en igualdad de circunstancias el acreedor hipotecario y el prendario, y siendo lícito y permitido á éste proceder á la enajenación extrajudicial de las cosas dadas en prenda, aunque no exista pacto expreso que le autorice para ello, por ser una facultad inherente al contrato de prenda, debiera igualmente permitirse á aquél dicha venta sin necesidad de que se le conceda autorización especial, por ser también un derecho esencial de la garantía constituida por la hipoteca la realización de los bienes gravados con ella. Pero á poco que se fije la atención en la distinta clase de bienes destinados en uno y otro caso á asegurar el cumplimiento de la obligación principal ó la realización y efectividad del crédito que la misma constituye, se comprenderá la razón de la diferencia y su plena justificación.
En efecto; la índole especial de los inmuebles, las mayores garantías que requiere su transmisión, y la superior cuantía é importancia de los perjuicios que en dicho caso podrían ocasionarse al dueño de los bienes hipotecados por los abusos á que puede dar lugar la venta extrajudicial, aconsejan la limitación en la facultad mencionada autorizándola tan sólo en el caso en que el hipotecante haya prestado su conformidad expresamente, porque entonces todos los daños y todos los perjuicios que le puedan sobrevenir tienen que ser imputados á sí mismo por efecto de su propia voluntad, aceptándolos desde luego al conceder dicha autorización.[56]
[W]hile it has been held that a power of sale will not be recognized as contained in mortgage unless it is given by express grant and in clear and explicit terms, and that there can be no implied power of sale where a mortgage holds by a deed absolute in form, it is generally held that no particular formality is required in the creation of the power of sale. Any words are sufficient which evince an intention that the sale may be made upon default or other contingency.[61]Thus, while it is not necessary that the words "sale" or "sell" be used in the special power, the terms thereof must clearly evince the mortgagee's intent to vest in the mortgagee the power to sell or to otherwise alienate the mortgaged property for purposes of foreclosing upon the mortgage. For example, in The Commoner Lending Corporation v. Villanueva,[62] the mortgage contract contained the following provision:
3. That in case of non-payment or violation of the terms of the mortgage or any of the provision of the Republic Act No. 728 as amended this mortgage shall immediately be foreclosed judicially or extra-judicially as provided by law and the mortgagee is hereby appointed attorney-in-fact of the mortgagor(s) with full power and authority to take possession of the mortgaged properties without the necessity of any judicial order or any other permission of power, and to take any legal action as may be necessary to satisfy the mortgage debt, but if the mortgagor(s) shall well and truly fulfill the obligation above stated according to the terms thereof then this mortgage shall become null and void.[63]We ruled that the aforequoted provision is a valid special power under Act No. 3135 because the "full power and authority to x x x take any legal action as may be necessary to satisfy the mortgage debt" can only be construed as including the power to sell or otherwise alienate the mortgaged property as satisfaction for the secured debt.