ESTRELLA BENIPAYO RODRIGUEZ, MANUEL D. BENIPAYO, DONATO BENIPAYO, JR., JAIME D. BENIPAYO, MAXIMA BENIPAYO MORALES, AURORA BENIPAYO DE LEON, FRANCISCO D. BENIPAYO, ALEJANDRO D. B…

Petition for certiorari, with a prayer for the issuance of
a writ of preliminary injunction, filed by some^[1] of
the children of the deceased spouses, Donato Benipayo, Jr., and Pura Disonglo,
seeking to have this Court set aside the order issued on 28 April 1964 by the
Hon. Juan O. Reyes in Civil Case No. 52188 of the Court of First Instance of
Manila, entitled “Estrella Benipayo-Rodriguez, et al. vs. Alberto D.
Benipayo”, approving the sheriff’s sales of properties owned in common by
the plaintiffs and defendant aforesaid, subject to the condition that the
vendors should clear the titles thereof from any encumbrance in favor of the
Development Bank of the Philippines. The petition further sought to compel the respondent judge to cause a
re-bidding of the properties involved, at public auction, or to approve the sales
aforementioned without the condition imposed upon the vendors.

Upon the filing of a bond in the amount of P20,000.00, this Court
ordered the issuance of a writ of preliminary injunction on 25 June 1964.^[2]

It appears that on 13 November 1962, petitioners filed with the
respondent court a complaint against their brother, respondent Alberto D. Benipayo, for the partition of the
properties held by them in common as heirs of the late spouses, Donato D.
Benipayo and Pura Disonglo (Civil Case No. 52188). After respondent Benipayo had answered the complaint, the court
set the case for a pre-trial
conference, and in the course thereof the parties agreed to have the properties
in litigation sold at public auction to the highest bidder. Pursuant to an order issued by the
respondent judge, the parties submitted to
the court a list of the properties to be sold, among which were some
lots in Albay, and the following parcels of land, with their improvements, that
were at the time mortgaged to the
Development Bank of the Philippines:

“1. Lot No.
6-A, Block 2124, with an area of 314.70 square meters, evidenced by TCT No.
48978, Manila;

2. Lot No. 6-B-2,
Block No. 2124, with an area of 389.90 square meters, evidenced by TCT No.
48979, Manila;

3. The improvements
erected on the above two lots denominated as No. 664 Misericordia, Manila.

The above improvements and two lots are mortgaged with the
Development Bank of the Philip­pines with an outstanding mortgage capital of
about P50,000.00.”

The respondent judge first directed the sale at public auction of
pro­perties located in Albay. After the consummation of the sale and the approval thereof, His Honor
ordered the sale of the two Manila lots
and improvements described above. Pursuant to the order, the sheriff of the City of Manila scheduled the auction sale on 30 March 1964 at 10:00 o’clock A.M. Notice thereof was duly posted and published, with the following warning:

“NOTE: According to
information furnished by the plaintiffs’ counsel, Atty. Gonzalo D. David, the
real properties described above are mortgaged with (sic) the Development Bank
of the Philippines, under which there is allegedly an outstanding balance in the sum of P37,121.76.

“Prospective buyers and bidders are hereby enjoined to
investigate for themselves the titles to the real properties described above,
as well as the encumbrances thereon, if any there be.”

On the date set for the sale, petitioners moved for its
postponement on the ground that they were not in a position to actively participate therein, but upon objection
of respondent Benipayo’s counsel, His Honor denied the motion and the sale was
held as scheduled.

Herein respondent, Jose N. Dualan, successfully bid at the
auction sale the sum of P 235,000.00
for Lot No. 6-B-2, Block No. 2124, covered by Transfer Certificate of Title No.
48979, issued by the Office of the Register of Deeds of Manila; while
respondent Vicente Sayson’s bid of P173,000.00
was the highest for Lot No. 6-A of Block No. 2124, covered by Transfer
Certificate of Title No. 48978 issued by the same office.^[3]

After the sheriff had filed his return with the respondent judge,
peti­tioners moved for the approval of the sale, deducting from the total
amount of P408,000.00 the sheriff’s percentage, and the expenses incurred by
petitioners for the publication of the notice of sale. Commenting on the aforesaid motion,
respondents Benipayo and Dualan prayed that the res­pondent judge order (1) the
payment of the mortgage debt in favor of the Development Bank of the
Philippines in the amount of P37,121.96 from the proceeds of the auction sale;
(2) the issuance by the sheriff of Manila of a certificate of sale in favor of
Dualan of the property sold to him free from all liens and encumbrances; and
(3) the payment to respondent Benipayo of 1/12 of the proceeds of the sale
after deducting therefrom the payment to the Development Bank of the
Philippines.

After hearing the arguments of the parties on the motion, the
respondent judge apparently entertained some doubts as to whether there had been
a meeting of minds on the question of who was to discharge the mortgage
obligation in favor of the Development Bank, so he suggested that the
properties be subjected to another “bidding” “with a clear-cut
understand­ing that the 12 heirs shall assume all obligations and that they
should not be paid by the buyers.”^[4] The
suggestion was not accepted by the buyers; and the respondent judge, on 28
April 1964, issued the order complained of, the dispositive portion of which
reads as follows:

“WHEREFORE, the Manila Sheriff’s Report dated March 30, 1964,
and the Quezon City Sheriff’s Report dated April 6, 1964, are hereby approved,
subject to the following conditions:

1.    That
the vendors or the owners of the prop­erties sold shall clear said properties
of all encumbrances that were incurred by them long before the auction sales;

2.    That
since the taxes on said real estates are not encumbrances incurred by the
owners of the pro­perties, but are proper charges attached and against the
properties themselves, the real estate taxes shall be borne by the owner or
owners of the said proper­ties on the date when said taxes become due for
payment.”

Petitioners’ motion for reconsideration of the above-quoted order
having been denied, the present petition for certiorari was filed by
them.

After the respondents had filed their answer to the petition and
the parties had submitted their respective memorandum, the petitioners, jointly
with respondents Vicente Sayson and Alberto Benipayo, submitted a compromise
agreement, on 8 May 1970, cancelling the sale to respondent Vicente Sayson of
the property (TCT No. 48978) previously bidded for by him, upon the
consideration that the amount paid to the Sheriff by Sayson be returned to the
latter. As respondent Jose Dualan
interposed no objection to the approval of the said compromise agreement, this
Court rendered, on 30 June 1970, a partial decision, approving the compromise
agreement and ordering the compliance with
its provisions by the parties thereto, and, as prayed for, dismissed
this case as against Vicente Sayson, leaving only Jose N. Dualan, purchaser of
the property covered by TCT No. 48979
of the City of Manila, as party
respondent.

The petitioners seek to apply the doctrine of caveat emptor
to the successful bidder Dualan, and contend that under said rule Dualan bought
at his own peril and, having purchased the property with knowledge of the
incumbrance, he should assume payment of the indebtedness secured thereby.

We find the stand of petitioners-appellants to be unmeritorious
and untenable. The maxim “caveat
emptor” applies only to execution sales, and this was not one such.^[5]
The mere fact that the purchaser of an immovable has notice that the required
realty is encumbered with a mortgage does not render him liable for the payment
of the debt guaranteed by the mortgage, in the absence of stipulation or
condition that he is to assume payment
of the mortgage debt. The reason is
plain: the mortgage is merely an
encumbrance on the property, entitling the mortgagee to have the pro­perty
forclosed, i.e., sold, in case the principal obligor does not pay the mortgage
debt, and apply the proceeds of the sale to the satisfaction of his
credit. Mortgage is merely an accessory
undertaking for the convenience and security of the mortgage creditor, and
exists independently of the obligation to pay the debt secured by it. The mortgagee, if he is so minded, can waive
the mortgage security and proceed to collect the principal debt by personal
action against the original mortgagor.

By buying the property covered by TCT No. 48979 with notice that
it was mortgaged, respondent Dualan only undertook either to pay or else allow
the land’s being sold if the mortgage creditor could not or did not obtain
payment from the principal debtor when the debt matured.^[6]
Nothing else. Certainly the buyer did
not obligate himself to replace the debtor in the principal obligation, and he
could not do so in law without the creditor’s consent. Our Civil Code, Article 1293, explicitly
provides:

“ART. 1293. Novation
which consists in substituting a new debtor in the place of the original one,
may be made even without the knowledge or against the will of the latter, but
not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in articles
1236 and 1237.”

The obligation to discharge the mortgage indebtedness, therefore,
remained on the shoulders of the original debtors and their heirs, petitioners
herein, since the record is devoid of any evidence of contrary intent. This Court has so ruled in Bank of the
Philippine Islands vs. Concepcion é Hijos, Inc., 53 Phil. 806, from which We
quote:

“But the plaintiff argues that in American jurisprudence, the
purchaser of mortgaged property who assumes the payment of the mortgage debt,
may for that reason alone be sued for the debt by the creditor and that that
rule is applicable in this jurisdiction. Aside from the fact we are not here dealing with a mere assumption of
the debt, but with a subrogation, it may be noted that this court has
already held that the American doctrine in this respect is not in harmony with
the spirit of our legislation and has
not been adopted in this country. In
the case of E. C. McCullough & Co. vs. Veloso and Serna (46 Phil.,
1), the court, speaking through its present Chief Justice, said:

‘The effects of a transfer of a mortgaged property to a third
person are well determined by the Civil Code. According to article 1879^[7] of
this Code, the creditor may demand of the third person in possession of the
property mortgaged payment of such part of the debt, as is secured by the
property in his possession, in the manner and form established by the law. The Mortgage Law in force at the
promulgation of the Civil Code and referred to in the latter, exacted, among other conditions, also the
circumstance that after judicial or notarial demand, the original debtor had
failed to make payment of the debt at maturity. (Art. 135 of the Mortgage Law of the Philippines of 1889.)
According to this, the obligation of the new possessor to pay the debt
originated only from the right of the creditor to demand payment of him, it
being necessary that a demand for payment should have previously been made upon
the debtor and the latter should have failed to pay. And even if these requirements were complied with, still the third possessor might
abandon the property mortgaged, and in that case it is considered to be in the
possession of the debtor. (Art. 136
of the same law.) This clearly shows that the spirit of the Civil Code is to
let the obligation of the debtor to pay the debt stand although the proper­ty
mortgaged to secure the payment of said debt may have been transferred to a
third person. While the Mortgage Law of
1893 eliminated these provisions, it contained nothing indicating any change in
the spirit of the law in this respect. Article 129 of this law, which provides for
the substitution of the debtor by the third person in possession of the
property, for the purposes of the giving of notice, does not show this change
and has reference to a case where the action is directed only against the
property burdened with the mortgage. (Art. 168 of the Regulation.)'”

Upon the other hand, the orders complained of, in so far as they
require the vendors-heirs to clear the title to the land sold to respondent
Dualan, when the latter bid for it with full knowledge that the same was
subject to a valid and subsisting mortgage, is plainly erroneous. In submitting
his bid, Dualan is presumed to know, and in fact did know, that the property
was subject to a mortgage lien; that such encumbrance would make him, as
purchaser, eventually liable to discharge mortgage by paying or settling with
the mortgage creditor, should the original mortgagors fail to satisfy the
debt. Normally, therefore, he would
have taken this eventuality into account in making his bid, and offer a lower
amount for the lot than if it were not en­cumbered. If he intended his bid to be understood as conditioned upon the
property being conveyed to him free from encumbrance, it was his duty to have
so stated in his bid, or at least before depositing the purchase price. He did not do so, and the bid must be
understood and taken to conform to the normal practice of the buyer’s taking
the mortgaged property subject to the mortgage. Consequently, he may not demand that the vendors should discharge
the encumbrance aforesaid.

Thus, the questioned order of the trial court ordering the
vendors-heirs to clear the property of all its encumbrances is not in
accordance with law.

The second and fourth grounds for the petition for certiorari
are that the minds of the parties allegedly never met, so that the court should
have ordered a re-bidding. The claim
that there was no meeting of the minds is not only inconsistent with petitioners’
own argument on the main issue, but is belied by their conduct. The fact is that an offer to sell was
advertised, a bidding was conducted, and the winning bidder deposited the
price. A rebidding would have been
proper had all the parties agreed to it, but they did not. Instead, the petitioners authorized their
lawyer to negotiate for the redemption of the property, thereby implying that
they have accepted the validity of the sale and that their questioning it now
is but an afterthought.

The third ground relied upon in the petition for annulling the
sale is the
participation of Atty. Ambrosio Padilla in the auction sale on behalf of
respondent Dualan while still the counsel of record for respondent
Benipayo. The ground lacks merit, for
the reason that petitioners have not shown that they were in any way
prejudiced, and they had, by their conduct, accepted the validity of the sale.

FOR THE FOREGOING REASONS, the petition for certiorari
is hereby granted and the orders complained of are reversed and set aside in so
far as they require petitioners to clear the property sold from the mortgage in
favor of the Development Bank. The writ
of prelim­inary injunction heretofore issued is made permanent. No costs.

Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo, Villamor,
and Makasiar, JJ., concur.

Concepcion, C.J., and
Castro, J., no part.

^[1]
Some of the 11 petitioners denied having authorized the filing of the
petition. (Motion, dated 13 June 1964, Rollo,
pages 162 -169)

^[2]
Rollo, page 192.

^[3]
Per Sheriff’s return on auction sale,
Annex “P” to Petition, Rollo, pages 65-68.

^[4]
T.s.n., 18 April 1964, pages 29-31.

^[5]
Albay vs. Benito, 43 Phil. 576;
Laxamana vs. Carlos, 57 Phil. 722.

^[6]
“ART. 2129. The creditor may claim from a third person
in posses­sion of the mortgaged property, the payment of the part of the credit
secured by the property which said third person possesses, in the terms and
with the formalities which the law establishes.

^[7]
Now Article 2129, New Civil Code.