El Hogar Filipino v. Paredes
REITERATIONFacts
The Antecedents: On September 26, 1919, Doña Aniceta Ardosa executed a mortgage in favor of El Hogar Filipino, a mutual building and loan association, to secure a loan. The mortgage contained clauses (tenth and fifteenth) stipulating that upon default, the manager of the association could conduct an extrajudicial sale of the property after publication, with the debtor having a 30-day period to redeem. The association could also participate in the bidding. Procedural History: The debtor defaulted, and El Hogar Filipino proceeded with a nonjudicial foreclosure, with the association itself becoming the highest bidder. The association presented the deed to the register of deeds of Occidental Negros for registration. The register refused registration, deeming the power of sale clause void. The Petition: El Hogar Filipino filed a petition for a writ of mandamus to compel the register of deeds to register the deed. Doña Aniceta Ardosa was later made a party defendant and demurred to the complaint. The respondent register of deeds also questioned the validity of the stipulation.
Issue(s)
Whether a stipulation in a mortgage of real property granting the mortgagee the power to foreclose the mortgage by an extrajudicial sale upon default of the debtor is valid. Whether the remedy by action provided in Section 185 of the Corporation Law is exclusive, precluding extrajudicial foreclosure.
Ruling
The Court ruled in favor of the petitioner, ordering the registration of the deed. The demurrer of Doña Aniceta Ardosa was overruled, and the answer of Geronimo Paredes, acting as a demurrer, was declared insufficient and overruled. The writ of mandamus was ordered to issue.
Ratio Decidendi
On the validity of the power of sale stipulation: The Court held that the stipulation in a mortgage granting the mortgagee the power to foreclose the mortgage by an extrajudicial sale upon default of the debtor is valid. This doctrine is supported by Spanish jurisprudence, including resolutions from the General Director of Registries and decisions of the Supreme Court of Spain, which interpreted Article 1859 of the Civil Code as not prohibiting such stipulations, and Article 1255 as allowing parties to agree to such procedures. The Court also noted the overwhelming consensus in English and American jurisprudence that a power of sale clause in a mortgage is valid. The Court reasoned that such a power, when exercised under reasonable restrictions, is a less objectionable form of security than a contract of sale with pacto de retro. Furthermore, Section 66 of the Land Registration Act (Act No. 496) recognizes the validity of such clauses for registered land, reflecting a commonly accepted professional view. On the exclusivity of the remedy by action under the Corporation Law: The Court opined that Section 185 of the Corporation Law, which authorizes building and loan associations to proceed by action to enforce collection upon securities, does not establish an exclusive remedy. The statutory remedy by action is not exclusive, and the provision does not impede the inclusion of an express stipulation for extrajudicial sale. The Court viewed judicial foreclosure and foreclosure under a special power of sale as alternative or cumulative remedies, a stance consistent with jurisdictions where both methods are employed.
Main Doctrine
A stipulation in a mortgage granting the mortgagee the power to foreclose the mortgage by an extrajudicial sale of the mortgaged property upon default of the debtor is valid and not contrary to law, morals, or public policy.