BANCO MAXIMO, INC., PETITIONER, VS. CHRIS ANGELO C. PELAYO, MARY ANN C. PELAYO-CALISURA, AND CATHERINE C. PELAYO-SOCO, RESPONDENTS.
- G.R. Number: G.R. No. 257251
- Promulgated: 2025-08-18
Doctrine
## Facts of the Case Spouses Edgar and Marlinda Pelayo raised their four children, including Chris Angelo C. Pelayo, Mary Ann C. Pelayo-Calisura, and Catherine C. Pelayo-Soco (collectively, Chris et al.), and Ian C. Pelayo (Ian), in their residential house and lot (subject property). Following Edgar's death in 2004, Marlinda and Chris et al. executed an Extrajudicial Declaration of Heirs with Waiver of Rights (EJS) in 2008, waiving their interest in the subject property in favor of Ian. Ian subsequently obtained a loan of PHP 400,000.00 from Banco Maximo, Inc. (Banco Maximo) in 2008, secured by a real estate mortgage on the subject property, with Marlinda acting as his attorney-in-fact. Upon Ian's default, Banco Maximo extrajudicially foreclosed the property in 2012. Chris et al. attempted to redeem the property but negotiations failed. In 2013, Chris et al. filed a complaint before the Regional Trial Court (RTC) to nullify the real estate mortgage, extrajudicial foreclosure sale, and certificate of sale, claiming the property was a family home exempt from execution. The RTC dismissed the complaint, finding that Chris et al. lacked legal standing and that the property ceased to be a family home after the EJS. On appeal, the Court of Appeals (CA) reversed the RTC, declaring the mortgage and foreclosure void on the basis that the property was a family home at the time the EJS was executed, thus rendering the EJS and subsequent transactions invalid. Banco Maximo filed a Motion for Reconsideration, which the CA denied, leading to this petition for review. ## Issues 1. Did the CA err in nullifying the real estate mortgage and extrajudicial foreclosure between Ian and Banco Maximo on the ground that the subject property is a family home exempt from execution? ## Decision / Rationale The Petition is **GRANTED**. The Supreme Court **REVERSED and SET ASIDE** the Decision and Resolution of the CA and **REINSTATED** the Decision of the RTC. **Issue 1:** The Supreme Court ruled that the CA erred in nullifying the real estate mortgage and extrajudicial foreclosure. The Court found that Chris et al. had **no legal standing** to assert that the subject property was a family home exempt from execution. Through their voluntary execution of the EJS, they waived all interest in the property in favor of Ian prior to the execution of the mortgage. The right to claim exemption as a family home is a **personal privilege** that must be invoked by the proper party. The exemption must be asserted **timely and properly**, specifically before the public auction sale. Chris et al. only raised the claim that the property was a family home after the foreclosure and consolidation of title in Banco Maximo's name, suggesting it was an afterthought and not a genuine or timely defense. The previous attempt by Marlinda and Chris et al. to redeem the property from Banco Maximo through negotiation demonstrated their implicit recognition of the validity of the mortgage and foreclosure. The Court also held that allowing Chris et al. to prevail would be **unjust and inequitable** to Banco Maximo, which extended credit in good faith based on the Tax Declaration showing Ian as the sole registered owner, without notice of any adverse claim. Furthermore, the CA **erred in annulling the EJS, mortgage, and foreclosure** on the premise that the property remained a family home despite the absence of any specific allegation or prayer to annul the EJS. Courts are limited to deciding questions in issue and cannot adjudicate matters on which parties were not heard. Finally, even assuming the property retained its character as a family home, **Article 155 of the Family Code explicitly states that the family home is not exempt from execution for debts secured by mortgages** on the premises, whether constituted before or after the family home was established. Therefore, the classification of the property as a family home would not, by itself, invalidate the mortgage or foreclosure…
Keywords
Family Code Articles 152, 153, 155, 159, Rule 45 Rules of Court, Civil Code Article 13, family home exemption, innocent mortgagee in good faith, family home, extrajudicial foreclosure, real estate mortgage, waiver of rights, property dispute, petition for review on certiorari, extrajudicial declaration of heirs with waiver of rights, legal standing, cause of action, equity, residence, execution, forced sale, attachment, redemption period