G.R. No. 98334 - Medida vs. Court of Appeals

On October 10, 1974, the spouses Andres and Pascuala Dolino (plaintiffs/private respondents) sought a loan of ₱30,000 from Cebu City Savings and Loan Association, Inc. (defendant association, now City Savings Bank and a petitioner herein), offering as security Lot No. 4731, covered by TCT No. 14272, owned by Juan Gandioncho, a purchaser at the foreclosure sale of a prior mortgage.
Prior to this, on October 3, 1974, their son had also applied for a ₱25,000 loan using the same lot as collateral.
The plaintiffs executed a promissory note for ₱30,000 payable in one year with 12% interest per annum.

When the loan became due and was unpaid, the defendant association initiated extrajudicial foreclosure on March 16, 1976.
After fulfilling posting and publication requirements, the property was sold at public auction on April 19, 1976, with the defendant association as highest bidder.
The certificate of sale was issued on April 20, 1976, and registered on May 10, 1976.
On May 24, 1977, with no redemption made by the plaintiffs, TCT No. 14272 was cancelled, and TCT No. 68041 was issued in favor of the defendant association.

On October 18, 1979, the spouses Dolino filed Civil Case No. R-18616 seeking to annul the extrajudicial foreclosure sale and the certificate of sale, alleging violations of Act No. 3135, as amended.
They prayed for the cancellation of TCT No. 68041 and reinstatement of their original title.
The defendant association denied the allegations and claimed that plaintiffs could still redeem the land.

On January 12, 1983, the trial court upheld the validity of the loan and the mortgage but annulled the foreclosure sale for failure to comply with the notice requirements of Act No. 3135, as amended.
The court ordered:

The extrajudicial foreclosure declared ineffective.
Cancellation of TCT No. 68041 and reinstatement of TCT No. 14272 to plaintiffs.
Payment by plaintiffs of unpaid loan balance plus interest and reimbursement of necessary expenditures by the defendant association.

Private respondents appealed parts of the decision relating to the validity of the mortgage, interest collection, forfeiture of loan capital, and damages.
On September 28, 1990, the Court of Appeals modified the trial court decision by declaring the mortgage void and ineffective, while affirming the rest of the decision.
Petitioner City Savings Bank and other petitioners filed a motion for reconsideration, which was denied, leading to the present petition.

Whether a mortgagor, after extrajudicial foreclosure and sale of the mortgaged property but before expiration of the redemption period, can validly execute another mortgage on the same property in favor of a third party.

Whether the extrajudicial foreclosure sale conducted in this case was valid or null and void, and the effect of such on the ownership of the property and subsequent mortgage.

Whether the Court of Appeals erred in declaring the subsequent mortgage null and void and declaring the extrajudicial foreclosure ineffective.