G.R. No. 9878 - People vs. Molina

On July 6, 1993, Lourdes V. Galas, with her daughter Ophelia G. Pingol as co-maker, executed a real estate mortgage over TCT No. RT-67970(253279) in favor of Yolanda V. Villar to secure a loan of ₱2,200,000.00.
On October 10, 1994, Galas (with Pingol) executed a second real estate mortgage over the same property in favor of Pablo P. Garcia to secure a loan of ₱1,800,000.00.

On November 21, 1996, Galas sold the mortgaged property to Villar for ₱1,500,000.00, declaring it “free and clear of all liens and encumbrances.”
The deed of sale was registered on December 3, 1996, resulting in the cancellation of the old TCT and issuance of TCT No. N-168361 in Villar’s name, with both the first and second mortgages annotated thereon.

On October 27, 1999, Garcia filed a petition for mandamus (later amended to a complaint for foreclosure of real estate mortgage) against Villar before the RTC, Branch 92, Quezon City. The RTC granted summary judgment in Garcia’s favor on May 27, 2002, ordering Villar to pay ₱1,800,000.00 or foreclose the property.
Villar appealed to the Court of Appeals, which reversed and dismissed Garcia’s complaint on February 27, 2003. The Supreme Court granted Garcia’s petition for certiorari and, on June 27, 2012, rendered the instant decision.

Whether the second mortgage in favor of Garcia was valid.
Whether the sale of the subject property to Villar was valid.
Whether the sale violated the prohibition on pactum commissorium.
Whether Garcia’s action for judicial foreclosure of his second mortgage can prosper.