Medida vs Court of Appeals (208 SCRA 887)

Medida vs. Court of Appeals and Sps. Dolino 208 SCRA 887 Facts: Private respondents, Spouses Dolino, alarmed of losing their right of redemption over the

subject parcel of land from Juan Gandiocho, purchaser of the aforesaid lot at a foreclosure sale of  the previous mortgage in favor of Cebu City Development Bank, went to Teotimo Abellana, President of the City Savings Bank (formerly known as Cebu City Savings and Loan Association, Inc.), to obtain a loan of P30, 000. Prior thereto, their son Teofredo filed a similar  loan application and the subject lot was offered as security. Subsequently they executed a  promissory note in favor of CSB. The loan became due and demandable without the spouses Dolino paying the same, petitioner  association caused the extrajudicial foreclosure of the mortgage. The land was sold at a public auction to CSB being the highest bidder. A certificate of sale was subsequently issued which was also registered. No redemption was being effected by Sps. Dolino, their title to the property was cancelled and a new title was issued in favor of CSB. Sps. Dolino then filed a case to annul the sale at public auction and for the cancellation of  certificate of sale issued pursuant thereto, alleging that the extrajudicial foreclosure sale was in violation of Act 3135, as amended. The trial court sustained the validity of the loan and the real estate mortgage, but annulled the extrajudicial foreclosure on the ground that it failed to comply with the notice requirement of Act 3135.  Not satisfied with the ruling of the trial court, Sps. Dolino interposed a partial appeal to the CA, assailing the validity of the mortgage executed between them and City Savings Bank, among others. The CA ruled in favor of private respondents declaring the said mortgage as void. Issue: Whether or not a mortgage, whose property has been extrajudicially foreclosed and sold at

a corresponding foreclosure sale, may validly execute a mortgage contract over the same  property in favor of a third party during the period of redemption. Held: It is undisputed that the real estate mortgage in favor of petitioner bank was executed by

respondent spouses during the period of redemption. During the said period it cannot be said that the mortgagor is no longer the owner of the foreclosed property since the rule up to now is the

right of a purchaser of a foreclosure sale is merely inchoate until after the period of redemption has expired without the right being exercised. The title to the land sold under mortgage foreclosure remains in the mortgagor or his grantee until the expiration of the redemption period and the conveyance of the master deed. The mortgagor remains as the absolute owner of the property during the redemption period and has the free disposal of his property, there would be compliance with Article. 2085 of the Civil Code for the constitution of another mortgage on the property. To hold otherwise would create an inequitable situation wherein the mortgagor would be deprived of the opportunity, which may  be his last recourse, to raise funds to timely redeem his property through another mortgage.