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G.R. No. 171206. September 23, 2013.*

HEIRS OF THE LATE SPOUSES FLAVIANO MAGLASANG and
SALUD ADAZA-MAGLASANG, namely, OSCAR A.
MAGLASANG, EDGAR A. MAGLASANG, CONCEPCION
CHONA A. MAGLASANG, GLENDA A. MAGLASANG-
ARNAIZ, LERMA A. MAGLASANG, FELMA A.
MAGLASANG, FE DORIS A. MAGLASANG, LEOLINO A.
MAGLASANG, MARGIE LEILA A. MAGLASANG, MA.
MILALIE A. MAGLASANG, SALUD A. MAGLASANG, and
MA. FLASALIE A. MAGLASANG, REPRESENTING THE
ESTATES OF THEIR AFORE-NAMED DECEASED PARENTS,
petitioners, vs. MANILA BANKING CORPORATION, now
substituted by FIRST SOVEREIGN ASSET MANAGEMENT
[SPV-AMC], INC. [FSAMI], respondent.

Remedial Law; Special Proceedings; Settlement of Estate of Deceased

Persons; Claims against deceased persons should be filed

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* SECOND DIVISION.

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during the settlement proceedings of their estate.―Claims against deceased

persons should be filed during the settlement proceedings of their estate.
Such proceedings are primarily governed by special rules found under Rules
73 to 90 of the Rules, although rules governing ordinary actions may, as far
as practicable, apply suppletorily. Among these special rules, Section 7,
Rule 86 of the Rules (Section 7, Rule 86) provides the rule in dealing with
secured claims against the estate: SEC. 7. Mortgage debt due from estate.—
A creditor holding a claim against the deceased secured by a mortgage
or other collateral security, may abandon the security and prosecute his
claim in the manner provided in this rule, and share in the general
distribution of the assets of the estate; or he may foreclose his mortgage or
realize upon his security, by action in court, making the executor or

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administrator a party defendant, and if there is a judgment for a deficiency,

after the sale of the mortgaged premises, or the property pledged, in the
foreclosure or other proceeding to realize upon the security, he may claim
his deficiency judgment in the manner provided in the preceding section; or
he may rely upon his mortgage or other security alone, and foreclose the
same at any time within the period of the statute of limitations, and in that
event he shall not be admitted as a creditor, and shall receive no share in the
distribution of the other assets of the estate; but nothing herein contained
shall prohibit the executor or administrator from redeeming the property
mortgaged or pledged, by paying the debt for which it is held as security,
under the direction of the court, if the court shall adjudged it to be for the
best interest of the estate that such redemption shall be made.
Civil Law; Mortgages; The secured creditor has three remedies/options
that he may alternatively adopt for the satisfaction of his indebtedness. In
particular, he may choose to: (a) waive the mortgage and claim the entire
debt from the estate of the mortgagor as an ordinary claim; (b) foreclose the
mortgage judicially and prove the deficiency as an ordinary claim; and (c)
rely on the mortgage exclusively, or other security and foreclose the same
before it is barred by prescription, without the right to file a claim for any
deficiency.―Jurisprudence breaks down the rule under Section 7, Rule 86
and explains that the secured creditor has three remedies/options that he
may alternatively adopt for the satisfaction of his indebtedness. In particular,
he may choose to: (a) waive the mortgage and claim the entire debt from the
estate of the mortgagor as an ordinary claim; (b)

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foreclose the mortgage judicially and prove the deficiency as an

ordinary claim; and (c) rely on the mortgage exclusively, or other security
and foreclose the same before it is barred by prescription, without the right
to file a claim for any deficiency. It must, however, be emphasized that these
remedies are distinct, independent and mutually exclusive from each other;
thus, the election of one effectively bars the exercise of the others. With
respect to real properties, the Court in Bank of America v. American Realty
Corporation, 321 SCRA 659 (1999), pronounced: In our jurisdiction, the
remedies available to the mortgage creditor are deemed alternative and not
cumulative. Notably, an election of one remedy operates as a waiver of
the other. For this purpose, a remedy is deemed chosen upon the filing of
the suit for collection or upon the filing of the complaint in an action for
foreclosure of mortgage, pursuant to the provision of Rule 68 of the 1997
Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is
deemed elected by the mortgage creditor upon filing of the petition not with
any court of justice but with the Office of the Sheriff of the province where

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the sale is to be made, in accordance with the provisions of Act No. 3135, as
amended by Act No. 4118.
Remedial Law; Special Civil Actions; Foreclosure of Mortgage; Venue;
The stipulated venue and that provided under Act No. 3135 can be applied
alternatively. In particular, Section 2 of Act No. 3135 allows the foreclosure
sale to be done within the province where the property to be sold is
situated.―Case law states that absent such qualifying or restrictive words to
indicate the exclusivity of the agreed forum, the stipulated place should only
be as an additional, not a limiting venue. As a consequence, the stipulated
venue and that provided under Act No. 3135 can be applied alternatively. In
particular, Section 2 of Act No. 3135 allows the foreclosure sale to be done
within the province where the property to be sold is situated, viz.: SEC. 2.
Said sale cannot be made legally outside of the province which the property
sold is situated; and in case the place within said province in which the sale
is to be made is subject to stipulation, such sale shall be made in said place
or in the municipal building of the municipality in which the property or
part thereof is situated.

PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.

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Heirs of the Late Spouses Flaviano Maglasang and Salud Adaza-
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   The facts are stated in the opinion of the Court.

  Sycip, Salazar, Hernandez & Gatmaitan for petitioners.
  Puyat, Jacinto & Santos for respondent.

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated July 20, 2005 and Resolution3 dated January 4,
2006 of the Court of Appeals (CA) in CA-G.R. CV No. 50410
which dismissed petitioners’ appeal and affirmed the Decision4
dated April 6, 1987 of the Regional Trial Court of Ormoc City,
Branch 12 (RTC) directing petitioners to jointly and severally pay
respondent Manila Banking Corporation the amount of P434,742.36,
with applicable interests, representing the deficiency of the former’s
total loan obligation to the latter after the extrajudicial foreclosure of
the real estate mortgage subject of this case, including attorney’s
fees and costs of suit.
The Facts
On June 16, 1975, spouses Flaviano and Salud Maglasang (Sps.
Maglasang) obtained a credit line from respondent5 in the amount of
P350,000.00 which was secured by a real estate mortgage6 executed
over seven of their properties7 located in
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1 Rollo, pp. 3-25.
2 Id., at pp. 39-50. Penned by Associate Justice Isaias P. Dicdican, with Associate
Justices Vicente L. Yap and Enrico A. Lanzanas, concurring.
3 Id., at pp. 52-53.
4 Id., at pp. 71-76. Penned by Judge Francisco C. Pedrosa.
5  Id., at pp. 401-402. Now substituted in these proceedings by First Sovereign
Asset Management (SPV-AMC), Inc. (FSAMI). See Resolution dated October 4,
2010.
6 Id., at pp. 54-55.
7 Id., at pp. 56-57.

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Ormoc City and the Municipality of Kananga, Province of Leyte.8

They availed of their credit line by securing loans in the amounts of
P209,790.50 and P139,805.83 on October 24, 1975 and March 15,
1976, respectively,9 both of which becoming due and demandable
within a period of one year. Further, the parties agreed that the said
loans would earn interest at 12% per annum (p.a.) and an additional
4% penalty would be charged upon default.10
After Flaviano Maglasang (Flaviano) died intestate on February
14, 1977, his widow Salud Maglasang (Salud) and their surviving
children, herein petitioners Oscar (Oscar), Concepcion Chona,
Lerma, Felma, Fe Doris, Leolino, Margie Leila, Ma. Milalie, Salud
and Ma. Flasalie, all surnamed Maglasang, and Glenda Maglasang-
Arnaiz, appointed11 their brother petitioner Edgar Maglasang
(Edgar) as their attorney-in-fact.12 Thus, on March 30, 1977, Edgar
filed a verified petition for letters of administration of the intestate
estate of Flaviano before the then Court of First Instance of Leyte,
Ormoc City, Branch 5 (probate court), docketed as Sp. Proc. No.
1604-0.13 On August 9, 1977, the probate court issued an Order14
granting the petition, thereby appointing Edgar as the administrator15
of Flaviano’s estate.
In view of the issuance of letters of administration, the probate
court, on August 30, 1977, issued a Notice to Creditors16 for the
filing of money claims against Flaviano’s estate. Accordingly, as one
of the creditors of Flaviano, respondent

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8  Id., at pp. 6 and 40.
9  Id., at p. 7.
10 Id., at pp. 40-41.
11 Records, pp. 325-327. See Bill of Exhibits and Minutes.
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12 Rollo, p. 97.
13 Id., at p. 41.
14 CA Rollo, pp. 146-147. Penned by Judge Numeriano G. Estenzo.
15 Id., at p. 148.
16 Id., at p. 149.

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notified17 the probate court of its claim in the amount of

P382,753.19 as of October 11, 1978, exclusive of interests and
charges.
During the pendency of the intestate proceedings, Edgar and
Oscar were able to obtain several loans from respondent, secured by
promissory notes18 which they signed.
In an Order19 dated December 14, 1978 (December 14, 1978
Order), the probate court terminated the proceedings with the
surviving heirs executing an extrajudicial partition of the properties
of Flaviano’s estate. The loan obligations owed by the estate to
respondent, however, remained unsatisfied due to respondent’s
certification that Flaviano’s account was undergoing a restructuring.
Nonetheless, the probate court expressly recognized the rights of
respondent under the mortgage and promissory notes executed by
the Sps. Maglasang, specifically, its “right to foreclose the same
within the statutory period.”20
In this light, respondent proceeded to extrajudicially foreclose the
mortgage covering the Sps. Maglasang’s properties and emerged as
the highest bidder at the public auction for the amount of
P350,000.00.21 There, however, remained a deficiency on Sps.
Maglasang’s obligation to respondent. Thus, on June 24, 1981,
respondent filed a suit to recover the deficiency amount of
P250,601.05 as of May 31, 1981 against the estate of Flaviano, his
widow Salud and petitioners, docketed as Civil Case No. 1998-0.22
Text

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17 Records, p. 344. See Bill of Exhibits and Minutes.
18 Id., at pp. 328-342.
19 Id., at p. 346.
20 Id., at p. 344.
21 Rollo, p. 42.
22 Id.

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Heirs of the Late Spouses Flaviano Maglasang and Salud Adaza-

Maglasang vs. Manila Banking Corporation

The RTC Ruling and Subsequent Proceedings

After trial on the merits, the RTC (formerly, the probate court)23
rendered a Decision24 on April 6, 1987 directing the petitioners to
pay respondent, jointly and severally, the amount of P434,742.36
with interest at the rate of 12% p.a., plus a 4% penalty charge,
reckoned from September 5, 1984 until fully paid.25 The RTC found
that it was shown, by a preponderance of evidence, that petitioners,
after the extrajudicial foreclosure of all the properties mortgaged,
still have an outstanding obligation in the amount and as of the date
as above-stated. The RTC also found in order the payment of
interests and penalty charges as abovementioned as well as
attorney’s fees equivalent to 10% of the outstanding obligation.26
Dissatisfied, petitioners elevated the case to the CA on appeal,
contending,27 inter alia, that the remedies available to respondent
under Section 7, Rule 86 of the Rules of Court (Rules) are
alternative and exclusive, such that the election of one operates as a
waiver or abandonment of the others. Thus, when respondent filed
its claim against the estate of Flaviano in the proceedings before the
probate court, it effectively abandoned its right to foreclose on the
mortgage. Moreover, even on the assumption that it has not so
waived its right to foreclose, it is nonetheless barred from filing any
claim for any deficiency amount.
During the pendency of the appeal, Flaviano’s widow, Salud,
passed away on July 25, 1997.28

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23 Ibid.
24 Id., at pp. 71-76.
25 Id., at p. 76.
26 Id.
27 Rollo, p. 43.
28 Id., at p. 10.

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The CA Ruling
29
In a Decision dated July 20, 2005, the CA denied the
petitioners’ appeal and affirmed the RTC’s Decision. At the outset, it
pointed out that the probate court erred when it, through the
December 14, 1978 Order, closed and terminated the proceedings in
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Sp. Proc. No. 1604-0 without first satisfying the claims of the
creditors of the estate — in particular, respondent — in violation of
Section 1, Rule 90 of the Rules.30 As a consequence, respondent was
not able to collect from the petitioners and thereby was left with the
option of foreclosing the real estate mortgage.31 Further, the CA held
that Section 7, Rule 86 of the Rules does not apply to the present
case since the same does not involve a mortgage made by the
administrator over any property belonging to the estate of the
decedent.32 According to the CA, what should apply is Act No.
313533 which entitles respondent to claim the deficiency amount
after the extrajudicial foreclosure of the real estate mortgage of Sps.
Maglasang’s properties.34
Petitioners’ motion for reconsideration was subsequently denied
in a Resolution35 dated January 4, 2006. Hence, the present recourse.
The Issue Before the Court
The essential issue in this case is whether or not the CA erred in
affirming the RTC’s award of the deficiency amount in favor of
respondent.

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29 Id., at pp. 39-50.
30 Id., at pp. 45-46.
31 Id., at p. 46.
32 Id.
33 “AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERS INSERTED IN
OR ANNEXED TO REAL-ESTATE MORTGAGES.” Effective March 6, 1924.
34 Rollo, pp. 46-49.
35 Id., at pp. 52-53.

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Petitioners assert36 that it is not Act No. 3135 but Section 7, Rule
86 of the Rules which applies in this case. The latter provision
provides alternative and exclusive remedies for the satisfaction of
respondent’s claim against the estate of Flaviano.37 Corollarily,
having filed its claim against the estate during the intestate
proceedings, petitioners argue that respondent had effectively
waived the remedy of foreclosure and, even assuming that it still had
the right to do so, it was precluded from filing a suit for the recovery
of the deficiency obligation.38
Likewise, petitioners maintain that the extrajudicial foreclosure
of the subject properties was null and void, not having been
conducted in the capital of the Province of Leyte in violation of the
stipulations in the real estate mortgage contract.39 They likewise
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deny any personal liability for the loans taken by their deceased
parents.40

The Court’s Ruling

The petition is partly meritorious.

Claims against deceased persons should be filed during the
settlement proceedings of their estate.41 Such proceedings are
primarily governed by special rules found under Rules 73 to 90 of
the Rules, although rules governing ordinary actions may, as far as
practicable, apply suppletorily.42 Among these

_______________
36 Id., at p. 214.
37 Id., at pp. 11-14.
38 Id., at pp. 14-18.
39 Id., at pp. 18-20.
40 Id., at pp. 22-24.
41  See Metropolitan Bank & Trust Company v. Absolute Management
Corporation, G.R. No. 170498, January 9, 2013, 688 SCRA 225, 237.
42 Section 2, Rule 72 of the Rules provides:
SEC. 2. Applicability of rules of civil actions.—In the absence of special
provisions, the rules provided for in ordi-

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special rules, Section 7, Rule 86 of the Rules (Section 7, Rule 86)

provides the rule in dealing with secured claims against the estate:

SEC. 7. Mortgage debt due from estate.—A creditor holding a

claim against the deceased secured by a mortgage or other
collateral security, may abandon the security and prosecute his
claim in the manner provided in this rule, and share in the general
distribution of the assets of the estate; or he may foreclose his
mortgage or realize upon his security, by action in court, making the
executor or administrator a party defendant, and if there is a
judgment for a deficiency, after the sale of the mortgaged premises,
or the property pledged, in the foreclosure or other proceeding to
realize upon the security, he may claim his deficiency judgment in
the manner provided in the preceding section; or he may rely upon
his mortgage or other security alone, and foreclose the same at any
time within the period of the statute of limitations, and in that event
he shall not be admitted as a creditor, and shall receive no share in
the distribution of the other assets of the estate; but nothing herein

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contained shall prohibit the executor or administrator from

redeeming the property mortgaged or pledged, by paying the debt for
which it is held as security, under the direction of the court, if the
court shall adjudged it to be for the best interest of the estate that
such redemption shall be made. (Emphasis and underscoring
supplied)

As the foregoing generally speaks of “[a] creditor holding a claim

against the deceased secured by a mortgage or other collateral
security” as above-highlighted, it may be reasonably concluded that
the aforementioned section covers all secured claims, whether by
mortgage or any other form of collateral, which a creditor may
enforce against the estate of the de-

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nary actions shall be, as far as practicable, applicable in special
proceedings.

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ceased debtor. On the contrary, nowhere from its language can it be

fairly deducible that the said section would — as the CA interpreted
— narrowly apply only to mortgages made by the administrator over
any property belonging to the estate of the decedent. To note,
mortgages of estate property executed by the administrator, are also
governed by Rule 89 of the Rules, captioned as “Sales, Mortgages,
and Other Encumbrances of Property of Decedent.”
In this accord, it bears to stress that the CA’s reliance on
Philippine National Bank v. CA43 (PNB) was misplaced as the said
case did not, in any manner, limit the scope of Section 7, Rule 86. It
only stated that the aforesaid section equally applies to cases where
the administrator mortgages the property of the estate to secure the
loan he obtained.44 Clearly, the pronouncement was a ruling of
inclusion and not one which created a distinction. It cannot,
therefore, be doubted that it is Section 7, Rule 86 which remains
applicable in dealing with a creditor’s claim against the mortgaged
property of the deceased debtor, as in this case, as well as mortgages
made by the administrator, as that in the PNB case.
Jurisprudence breaks down the rule under Section 7, Rule 86 and
explains that the secured creditor has three remedies/options that he
may alternatively adopt for the satisfaction of his indebtedness. In
particular, he may choose to: (a) waive the mortgage and claim the
entire debt from the estate of the mortgagor as an ordinary claim; (b)
foreclose the mortgage judicially and prove the deficiency as an
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ordinary claim; and (c) rely on the mortgage exclusively, or other

security and foreclose the same before it is barred by prescription,
without the right to file a claim for any deficiency.45 It must,
however, be emphasized that these remedies are distinct,
independent and mutually exclusive from each other; thus, the
election of

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43 412 Phil. 807; 360 SCRA 370 (2001).
44 See id., at pp. 812-815; pp. 374-377.
45 Id., at p. 814; p. 376.

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one effectively bars the exercise of the others. With respect to real
properties, the Court in Bank of America v. American Realty
Corporation46 pronounced:

In our jurisdiction, the remedies available to the mortgage creditor

are deemed alternative and not cumulative. Notably, an election of
one remedy operates as a waiver of the other. For this purpose, a
remedy is deemed chosen upon the filing of the suit for collection or
upon the filing of the complaint in an action for foreclosure of
mortgage, pursuant to the provision of Rule 68 of the 1997 Rules of
Civil Procedure. As to extrajudicial foreclosure, such remedy is
deemed elected by the mortgage creditor upon filing of the petition
not with any court of justice but with the Office of the Sheriff of the
province where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.47
(Emphasis supplied)

Anent the third remedy, it must be mentioned that the same

includes the option of extrajudicially foreclosing the mortgage under
Act No. 3135, as availed of by respondent in this case. However, the
plain result of adopting the last mode of foreclosure is that the
creditor waives his right to recover any deficiency from the estate.48
These precepts were discussed in the PNB case, citing Perez v.
Philippine National Bank49 which overturned the earlier Pasno v.
Ravina ruling:50

Case law now holds that this rule grants to the mortgagee three
distinct, independent and mutually exclusive remedies that can be
alternatively pursued by the mortgage creditor for the satisfaction of
his credit in case the mortgagor dies, among them:

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46 378 Phil. 1279; 321 SCRA 659 (1999).
47 Id., at p. 1291; pp. 668-669.
48 Id., at pp. 1289-1304.
49 124 Phil. 260; 17 SCRA 833 (1966).
50 54 Phil. 378 (1930).

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(1) to waive the mortgage and claim the entire debt from the
estate of the mortgagor as an ordinary claim;
(2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same
at any time before it is barred by prescription without right to
file a claim for any deficiency.
In Perez v. Philippine National Bank, reversing Pasno vs. Ravina,
we held:
The ruling in Pasno v. Ravina not having been reiterated in
any other case, we have carefully reexamined the same, and
after mature deliberation have reached the conclusion that the
dissenting opinion is more in conformity with reason and law.
Of the three alternative courses that section 7, Rule 87 (now
Rule 86), offers the mortgage creditor, to wit, (1) to waive the
mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim; (2) foreclose the mortgage
judicially and prove any deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same
at any time before it is barred by prescription, without right to
file a claim for any deficiency, the majority opinion in Pasno
v. Ravina, in requiring a judicial foreclosure, virtually wipes
out the third alternative conceded by the Rules to the
mortgage creditor, and which would precisely include extra-
judicial foreclosures by contrast with the second alternative.
The plain result of adopting the last mode of foreclosure is
that the creditor waives his right to recover any deficiency from
the estate. Following the Perez ruling that the third mode
includes ex-

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trajudicial foreclosure sales, the result of extrajudicial

foreclosure is that the creditor waives any further deficiency
claim. x  x  x.51 (Emphases and underscoring supplied; italics in the
original)

To obviate any confusion, the Court observes that the operation

of Act No. 3135 does not entirely discount the application of Section
7, Rule 86, or vice-versa. Rather, the two complement each other
within their respective spheres of operation. On the one hand,
Section 7, Rule 86 lays down the options for the secured creditor to
claim against the estate and, according to jurisprudence, the
availment of the third option bars him from claiming any deficiency
amount. On the other hand, after the third option is chosen, the
procedure governing the manner in which the extrajudicial
foreclosure should proceed would still be governed by the
provisions of Act No. 3135. Simply put, Section 7, Rule 86 governs
the parameters and the extent to which a claim may be advanced
against the estate, whereas Act No. 3135 sets out the specific
procedure to be followed when the creditor subsequently chooses
the third option — specifically, that of extrajudicially foreclosing
real property belonging to the estate. The application of the
procedure under Act No. 3135 must be concordant with Section 7,
Rule 86 as the latter is a special rule applicable to claims against the
estate, and at the same time, since Section 7, Rule 86 does not detail
the procedure for extrajudicial foreclosures, the formalities
governing the manner of availing of the third option — such as the
place where the application for extrajudicial foreclosure is filed, the
requirements of publication and posting and the place of sale —
must be governed by Act No. 3135.
In this case, respondent sought to extrajudicially foreclose the
mortgage of the properties previously belonging to Sps. Maglasang
(and now, their estates) and, therefore, availed of

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51 Philippine National Bank v. CA, supra note 43, at pp. 814-815; pp. 376-377.

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the third option. Lest it be misunderstood, it did not exercise the first
option of directly filing a claim against the estate, as petitioners
assert, since it merely notified52 the probate court of the outstanding
amount of its claim against the estate of Flaviano and that it was
currently restructuring the account.53 Thus, having unequivocally
opted to exercise the third
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_______________
52 Records, p. 344. See Bill of Exhibits and Minutes.
53  To note, petitioners did not file a claim against the estate since its notice
deviates from the proper characterization under Section 9, Rule 86 of the Rules of
Court which sets forth the manner through which a claim against the estate may be
filed, to wit:
SEC. 9. How to file a claim. Contents thereof. Notice to executor or
administrator.—A claim may be filed by delivering the same with the necessary
vouchers to the clerk of court and by serving a copy thereof on the executor or
administrator. If the claim be founded on a bond, bill, note, or any other
instrument, the original need not be filed, but a copy thereof with all
indorsements shall be attached to the claim and filed therewith. On demand,
however, of the executor or administrator, or by order of the court or judge, the
original shall be exhibited, unless it be lost or destroyed, in which case the claimant
must accompany his claim with affidavit or affidavits containing a copy or particular
description of the instrument and stating its loss or destruction. When the claim is
due, it must be supported by affidavit stating the amount justly due, that no
payments have been made thereon which are not credited, and that there are no
offsets to the same, to the knowledge of the affiant. If the claim is not due, or is
contingent, when filed, it must also be supported by affidavit stating the particulars
thereof. When the affidavit is made by a person other than the claimant, he must set
forth therein the reason why it is not made by the claimant. The claim once filed shall
be attached to the record of the case in which the letters testamentary or of
administration were issued, although the court, in its discretion, and as a matter of
convenience, may order all the claims to be collected in a separate folder. (Emphases
supplied)

250

250 SUPREME COURT REPORTS ANNOTATED

Heirs of the Late Spouses Flaviano Maglasang and Salud Adaza-
Maglasang vs. Manila Banking Corporation

option of extrajudicial foreclosure under Section 7, Rule 86,

respondent is now precluded from filing a suit to recover any
deficiency amount as earlier discussed.
As a final point, petitioners maintain that the extrajudicial
foreclosure of the subject properties was null and void since the
same was conducted in violation of the stipulation in the real estate
mortgage contract stating that the auction sale should be held in the
capital of the province where the properties are located, i.e., the
Province of Leyte.
The Court disagrees.
As may be gleaned from the records, the stipulation under the
real estate mortgage54 executed by Sps. Maglasang which fixed the
place of the foreclosure sale at Tacloban City lacks words of
exclusivity which would bar any other acceptable fora wherein the
said sale may be conducted, to wit:
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It is hereby agreed that in case of foreclosure of this mortgage

under Act 3135, the auction sale shall be held at the capital of the
province if the property is within the territorial jurisdiction of the
province concerned, or shall be held in the city if the property is
within the territorial jurisdiction of the city concerned; x x x.55

Case law states that absent such qualifying or restrictive words to

indicate the exclusivity of the agreed forum, the stipulated place
should only be as an additional, not a limiting venue.56 As a
consequence, the stipulated venue and that provided under Act No.
3135 can be applied alternatively.

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54 Rollo, pp. 54-55.
55 Id., at p. 55.
56  “[T]he doctrine that absent qualifying or restrictive words, the venue shall
either be that stated in the law or rule governing the action or the one agreed in the
contract, was applied to an extra-judicial foreclosure sale under Act No. 3135.”
(Auction in Malinta, Inc. v. Luyaben, 544 Phil. 500, 505; 515 SCRA 569, 574-575
[2007].)

251

VOL. 706, SEPTEMBER 23, 2013 251

Heirs of the Late Spouses Flaviano Maglasang and Salud Adaza-
Maglasang vs. Manila Banking Corporation

In particular, Section 2 of Act No. 3135 allows the foreclosure

sale to be done within the province where the property to be sold is
situated, viz.:

SEC. 2. Said sale cannot be made legally outside of the

province which the property sold is situated; and in case the place
within said province in which the sale is to be made is subject to
stipulation, such sale shall be made in said place or in the municipal
building of the municipality in which the property or part thereof is
situated. (Italics supplied)

In this regard, since the auction sale was conducted in Ormoc

City, which is within the territorial jurisdiction of the Province of
Leyte, then the Court finds sufficient compliance with the above-
cited requirement.
All told, finding that the extrajudicial foreclosure subject of this
case was properly conducted in accordance with the formalities of
Act No. 3135, the Court upholds the same as a valid exercise of
respondent’s third option under Section 7, Rule 86. To reiterate,
respondent cannot, however, file any suit to recover any deficiency

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amount since it effectively waived its right thereto when it chose to

avail of extrajudicial foreclosure as jurisprudence instructs.
WHEREFORE, the petition is PARTLY GRANTED. The
complaint for the recovery of the deficiency amount after
extrajudicial foreclosure filed by respondent Manila Banking
Corporation is hereby DISMISSED. The extrajudicial foreclosure of
the mortgaged properties, however, stands.
SO ORDERED.

Carpio (Chairperson), Brion, Del Castillo and Perez, JJ.,

concur.

Petition partly granted, complaint for recovery of deficiency

amount filed by Manila Banking dismissed.

252

252 SUPREME COURT REPORTS ANNOTATED

Heirs of the Late Spouses Flaviano Maglasang and Salud Adaza-
Maglasang vs. Manila Banking Corporation

Notes.―When appointed, a special administrator is not regarded

as an agent or representative of the parties suggesting the
appointment. (Ocampo vs. Ocampo, 623 SCRA 559 [2010])
It has long been settled that the selection or removal of special
administrators is not governed by the rules regarding the selection or
removal of regular administrators — the probate court may appoint
or remove special administrators based on grounds other than those
enumerated in the Rules at its discretion. (Ibid.)

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