Medida vs.

CA
Facts:
Private respondent spouses Dolino obtained a loan from Cebu City Development Bank. Spouses
Dolino executed a real estate mortgage covering the property in question in favour of Cebu City
Development Bank. When, Spouses Dolino failed to pay their loan, Cebu City Development Bank
extra judicially foreclosed the property in question. The property in question was sold at the public
auction where Mr. Juan Gandioncho was the purchaser.
Afraid of losing their right of redemption, Spouses Dolino obtained a loan of P30,000 from the City
Savings Bank (formerly Cebu City Savings and Loan Association Inc.). To secure the loan, Spouses
Dolino mortgaged the same property in question in favour of the defendant Association. (Note:
Mortgage was happened during the period of right of redemption)
When Spouses Dolino defaulted in payment of the second loan, defendant association caused the
extrajudicial foreclosure of the property in question. After posting and publication requirements were
complied with, the property in question was sold at public auction to defendant Association being the
highest bidder. Thereafter, the certificate of sale was issued. For failure of the Spouses Dolino to
exercise their right of redemption, the TCT was cancelled and issued a new TCT in favour of the
defendant Bank.
Private respondent spouses filed a petition for the annulment of the sale at public auction as well as
the corresponding issuance of certificate of sale against the petitioner Association. They contend
that the extrajudicial foreclosure sale was in violation of Act No. 3135.
RTC – ruled in favour of Spouses declaring the extrajudicial foreclosure of the property in question
as null and void. RTC ordered the cancellation of TCT. RTC ordered Spouses to pay the petitioner
Bank of the unpaid balance, plus interest and reimbursed said defendant the value of any necessary
and useful expenditure on the property after deducting income derived by petitioener Association
from the property.
Private respondent appealed to CA.
CA – modified RTC judgment declaring as void and ineffective the real estate mortgage executed by
Spouses in favour of the petitioner Association.
Issue:
Won a mortgagor, whose property has been extrajudicially foreclosed and sold at the corresponding
foreclosure sale, may validly execute a mortgage contract over the same property in favor of a third
party during the period of right of redemption.
Held:
YES.
The Supreme Court held that during the redemption period, the mortgagor remains the owner of the
foreclosed property and may mortgage it to a third party. The right of a purchaser at a foreclosure
sale is merely inchoate until after the period of right of redemption has expired without the right being
exercised. The title or ownership of the land sold under foreclosure remains in the mortgagor or
grantee until the expiration of the redemption period and conveyance by the master’s deed. To
repeat, the rule has always been that it is only upon the expiration of the redemption period, without
the judgment debtor having made use of his right of redemption, that the ownership of the land sold
becomes consolidated in the purchaser.