Bicol Savings v. Hon. Court of Appeals

Summary

This case involved a dispute over the validity of an extrajudicial foreclosure sale conducted by Bicol Savings and Loan Association on property mortgaged by an agent acting under special power of attorney. The deceased property owner Juan de Jesus had authorized his son Jose through special power of attorney to mortgage the property, which Jose did to secure a P20,000 loan. When the loan defaulted, the bank foreclosed extrajudicially. The heirs challenged this, arguing that the special power to mortgage did not include authority to agree to extrajudicial foreclosure stipulations. The Court of Appeals initially agreed, applying Article 1879 of the Civil Code. However, the Supreme Court reversed, holding that Article 1879 applies only to voluntary sales, not foreclosure sales. The Court ruled that the power to foreclose is an ancillary stipulation forming an essential part of the mortgage contract, and that banks have an independent statutory right to extrajudicial foreclosure under Rule 86 of the Rules of Court, making the foreclosure valid.