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CASE DOCTRINES: CREDIT: PLEDGE AND MORTGAGE

PLEDGE
FACTS: Petitioner granted a loan to private
respondents. Petitioner claims that private
1. CIRCE S. DURAN and ANTERO S. respondents failed to pay the interest and, as a
GASPAR, petitioners, vs. consequence, it registered the sale of the land in
its favor. (PACTUM COMMISSORIUM)
FACTS: Petitioner Circe S. Duran claims that
the Deed of Sale in favor of her mother Fe S.ART. 2088. The creditor cannot appropriate
Duran is a forgery WON the mortgage of the the things given by way to pledge or
mother is valid? mortgage, or dispose of them. Any
stipulation to the contrary is null and void.
YES. Even if the signatures were a forgery,
and the sale would be regarded as void, still
it is Our opinion that the Deed of Mortgage
is VALID, with respect to the mortgagees,
the defendants-appellants. While it is true 4. DBP VS. CA
that under Art. 2085 of the Civil Code, it is
essential that the mortgagor be the FACTS: Plaintiff Lydia P. Cuba is a grantee of a Fishpond
absolute owner of the property mortgaged, Lease Agreement, and obtained loans from DBP. plaintiff
and while as between the daughter and the Lydia P. Cuba executed two Deeds of Assignment of her
mother, it was the daughter who still owned Leasehold Rights;4. Plaintiff failed to pay her loan on the
the lots, STILL insofar as innocent third scheduled dates thereof in accordance with the terms of
persons are concerned the owner was the Promissory Notes;5. Without foreclosure proceedings,
already the mother (Fe S. Duran) inasmuch whether judicial or extra-judicial, defendant DBP
as she had already become the registered appropriated the Leasehold Rights of plaintiff Lydia Cuba
owner (Transfer Certificates of Title Nos. over the fishpond in question. NO. Elements of pactum
2418 and 2419). commissorium are not present. Condition no. 12 did
not provide that the ownership over the leasehold rights
The fraudulent and forged document of sale would automatically pass to DBP upon CUBAs failure to
may become the root of a valid title if the pay the loan on time.
certificate has already been transferred
from the name of the true owner to the The provision is a standard condition in mortgage
name indicated by the forger. contracts and is in conformity with Art. 2087 of the
Civil Code, which authorizes the mortgagee to
2. CABUHAT VS. CA foreclose the mortgage and alienate the
mortgaged property for the payment of the
FACTS: Mary Ann Arede was barely three days old principal obligation.
when appellant Mercedes Arede informally
adopted her as the latters own daughter. Upon
5. GEMMA R. HECHANOVA, vs. HON.
reaching the age of majority and unknown to
MIDPANTAO L. ADIL
appellant, Mary Ann Arede obtained a
reconstituted owners duplicate thru the use of a
falsified court order FACTS: The plaintiff Pio Servando impugned the validity of
the sale as being fraudulent, and prayed that it be
The Court of Appeals, in reversing the declared null and void.
decision of the trial court, relied solely on
the provisions of Article 2085 of the New It is clear from the records of this case that the plaintiff
Civil Code, which states, in part, that for a has no cause of action. Plaintiff has no standing to
mortgage to be valid, the persons question the validity of the deed of sale executed by the
constituting the pledge or mortgage should deceased defendant Jose Servando in favor of his co-
have the free disposal of their property, and defendants Hechanova and Masa. No valid mortgage
in the absence thereof, they should be has been constituted plaintiff's favor, the alleged
legally authorized for the purpose. deed of mortgage being a mere private document
and not registered; moreover, it contains a
An innocent mortgagee for value, his or her stipulation (pacto comisorio) which is null and void
right or lien upon the land mortgaged must under Article 2088 of the Civil Code. Even
be respected and protected, even if the assuming that the property was validly mortgaged
mortgagor obtained her title thereto to the plaintiff, his recourse was to foreclose the
through fraud mortgage, not to seek annulment of the sale.

3. A. FRANCISCO, vs. COURT OF 6. VICENTE REYES VS. FRANCISCO


APPEALS SIERRA
whether a transaction is a pledge or a dation
in payment, the presumption is in favor of
FACTS: Petitioner declared that he acquired
pledge, the theland bylatter being the lesser
inheritance from his father who diedtransmission
sometime in 1944.
of rights and interests
Applicant is one of the heirs of the deceased Vicente
Reyes Sr. but the other heirs executed a deed of quit
claim in favor of the applicant. It is contended that the
father of the petitioner was only a REAL
mortgageeESTATE MORTGAGE
and the
heirs of Beltran were the original owners of the disputed
land. It is a mortgage contract. The intentionMANUEL of the LAO vs. COURT OF
APPEALS and
parties at the time of the execution of the contract must BETTER HOMES REALTY &
HOUSING CORPORATION
prevail, that is, the borrowing and lending of money with
security. FACTS: Private respondent filed a complaint of
unlawful
Mortgage does not constitute just title on the detainer against the petitioner. Petitioner
part of the
mortgagee. since ownership is claimed retained thatby
he is
thethe true owner of the house and
mortgagor. When possession is assertedlot; that the private
to convert itselfrespondent purchased the same
into ownership, a new right is sought from
to be N. Domingo
created, and Realty and Development
the law becomes more exacting and requires positive
Corporation but the agreement was actually a loan
proof of title. Applicant failed tosecured
presentbysufficient
mortgage; and that plaintiff's cause of
evidence to prove that he is entitled actiontoisregister the
for accion publiciana outside the jurisdiction
property. Mere failure of the owner to pay the taxes does
of an inferior court.
not warrant a conclusion that there was abandonment of
a right to the property. The law enumerates when a contract may be
presumed to be an equitable mortgage: (1) when the
7. PNB VS. BANATAO price of a sale with right to repurchase is unusually
inadequate; (2) When the vendor remains in
FACTS: The disputed property was a new land
possession as lessee or otherwise; (3) When upon or
formation on the banks of the Cagayan River after an the expiration of the right to repurchase
accretion to Lot 3192 of the Iguig Cadastre thatanother instrument extending the period of
the plaintiffs-respondents claimed as the ownersredemption
of or granting a new period is executed; (4)
the adjoining Lot 3192. The defendants-respondents,
When the purchaser retains for himself a part of the
on the other hand, were the occupants of purchase the price; (5) when the vendor binds himself to
disputed property. pay the taxes on the thing sold; (6) In any other case
where it may be fairly inferred that the real intention
A judgment based entirely on a compromise of the parties is that the transaction shall secure the
agreement is binding only on the parties payment to of a debt or the performance of any other
the compromise the court approved, and not obligation. The foregoing presumption applies also
to a 'contract purporting to be an absolute sale.
upon the parties who did not take part in the
compromise agreement and in the proceedings 2. STATE INVESTMENT HOUSE INC. vs. COURT OF
leading to its submission and approval by the APPEALS
court.
FACTS: A Contract to Sell was executed by the
One who contracts with a homestead patentee Spouses Canuto and Ma. Aranzazu Oreta, and the
is charged with knowledge of the law's Solid Homes, Inc. (SOLID), involving a parcel of
proscriptive provision that must necessarily be land in Quezon City. SOLID executed several real
read into the terms of any agreement estate mortgage contracts in favor of State
involving the homestead. Investment Homes, Inc. For failure of SOLID to pay
the subdivision was extrajudicially foreclosed.
Mortgagee has a superior right over the
8. THE MANILA BANKING CORPORATION, vs. vendee.
TEODORO
3. PREMIERE DEVELOPMENT BANK vs. HON.
FACTS: Defendants, together with Anastacio Teodoro, COURT OF APPEALS, LIBERATO G. YAMBAO,
Sr., jointly and severally, executed in favor of plaintiff JESUS B. RODRIGUEZ and JESUS D. MORALES
a Promissory Note. Defendants failed to pay the
FACTS:
said amount in spite of repeated demands and the
obligation. The son executed a The Deed of (2) different persons with exactly the same name, i.e.,
Assignment provided that it was for and in Vicente T. Garaygay, each claimed exclusive
consideration of certain credits, loans, overdrafts ownership. One in Cebu and one in Rizal, the latter is
and other credit accommodations extended to the true owner.
defendants as security for the payment.
The TCT of Garaygay of Rizal was decalared genuine
Obviously, the deed of assignment was and that of Garaygay of Cebu, spurious. The Court
intended as collateral security for the bank ruled that Garaygay of Rizal is an authentic person,
loans of appellants, as a continuing guaranty once residing in and a registered voter of Angono,
for whatever sums would be owing by Rizal has adequate evidentiary support in his voter's
defendants to plaintiff, as stated in stipulation ID, the COMELEC and barangay certifications
No. 9 of the deed. In case of doubt as to aforementioned and the testimony of an occupant of
Lot 23; That the TCT of Garaygay of Cebu
presumption
containedthat they have abandoned such
entries and other uncommon markings or features
which could not have existed without human
intervention. 6. URSAL VS CA

Premiere Bank, being in the FACTS: Spouses


business of Monesets are the registered
owners
extending loans secured by real estate of a land together with a house thereon
mortgage, is familiar with rules situated
on at landSitio Laguna, Basak, Cebu.They
registration. As such, it was executed
expected a Contract
to to Sell Lot & House in favor of
exercise more care and prudenceUrsal. Unknown
than private to petitioner, the
Monesetsexecuted
individuals in their dealing with registered lands an absolute deed of sale in
favor of Dr. Rafael Canora, Jr. For the failure of the
Monesets to pay the loan, the Bank served a notice
of extrajudicial foreclosure dated January 27, 1988
4. DELA MERCED VS GSIS on Bundalo
FACTS: Governor Jose C. Zulueta and The
his wife Soledad
reason is that, the contract between
Ramos were the owners of lands, petitioner
known as and the the Monesets being one of
Antonio Village Subdivision. Several loans to
Contract were Sell Lot and House, petitioner,
obtained by Spouses Zulueta to under GSIS. And the as circumstances, never acquired
security, they mortgaged the parcelsownership
of lands in overthe the property and her rights
Antonio Village Subdivision. Sps. Zuluetas
were sold the
limited to demand for specific
lots to De La Merced (Absolute Deed of Sale). The
performance from the Monesets.
Zuluetas defaulted in the payment of their loans.
Thus, GSIS extrajudicially foreclosed Respondent
the mortgages. is not an ordinary mortgagee; it
Eliza and Theresa Manlongat are the highest
is a mortgagee-bank.
bidder. As such, unlike private
individuals, it is expected to exercise greater
The title of Manlongat was derived care and through
prudence in its dealings, including
sale or transfer from GSIS, whose acquisition
those involving registered lands. A banking
over the property proceeded from is
institution a expected to exercise due
foreclosure sale that was null anddiligence
void. before entering into a mortgage
contract. The ascertainment of the status or
condition of a property offered to it as
5. NAVARRO VS LAGUNA DEVELOPMENT security
BANK for a loan must be a standard and
indispensable part of its operations.
FACTS: Without the knowledge and consent of
petitioners, spouses Donalito Velasco and Esther
Navarro, conspiring with the latters sister Luciana
Navarro, executed a falsified Deed of7.Absolute
Rizal BankingSale. Corporation vs CA
Upon failure of spouses Velasco to FACTS:
pay their RCBCloan,
Binondo Branch initially granted a
respondent bank had the mortgage creditforeclosed.
facility of P30M to Goyu & Sons, Inc. GOYU
(Alabang, Muntinlupa lots). Respondent bank sold
obtained the name 10 insurance policy on the
in its
lot to respondent spouses Isaacmortgaged Guzman and properties from Malayan Insurance
VilmaEsporlas. Company, Inc. (MICO). In February 1992, he was
In entering into the mortgage issued 8 insurance
contract with policies in favor of RCBC.
spouses Velasco, there was no indication
It is settledthat that a mortgagor and a
respondent bank acted in bad mortgagee
faith. Spouses have separate and distinct
Velasco presented to the bank insurable
their TCT interests
No. in the same mortgaged
114256 showing they were then the absolute
property, such that each one of them may
insure the same property for his own sole
benefit.
owners thereof. Indeed, there were no
circumstances or indications that aroused
respondent banks suspicion that the title was Ramirez vs CA, Sps. Claravall
defective.
private respondents spouses Loreto and
On all these occasions, appellants did not Victoria Claravall executed a deed of sale in favor
even bother to question the validity of the of the spouses Francisco Ramirez, Jr. and Carolina
purchasers title over the property. Hence, we
Ramirez a parcel of land, situated in Ilagan,
agree with the court a quo that these acts of
Isabela.
appellants were tainted with laches and
estoppel. They failed for an unreasonable
length of time to do that which by exercising
due diligence could or should have been done
earlier. They neglected or omitted to assert On even date, another instrument was executed
their right within a time reasonable under granting the spouses Claravall an option to
the premises, thereby warranting a
repurchase the property within a period of two years
from December 29, 1965 but not earlier nor later
than the month of December, 1967. 11. Maglaque
At the vs Planters Dev. Bank
expiration of the two-year period, the Claravalls
FACTS: The spouses Egmidio Maglaque and
failed to redeem the property, promptingSabina
them to file
Payawal were the owners of a parcel of
a complaint against the spouses. land in Bulacan. The spouses Maglaque
It is a well-established doctrineobtained
that the a loan of two thousand (P2,000.00)
mortgagors default does not operate to vest the Bulacan Development Bank
pesos from
the mortgagee the ownershipevidenced
of by a promissory note. To secure the
the
encumbered property and the act loan, ofthe the
spouses executed a deed of real estate
mortgagee in registering the mortgagemortgaged on the above-described parcel of
land, including its improvements. The Bank
property in his own name upon the mortgagors
extra-judicially
failure to redeem the property amounts to foreclosed the said property due
to
pactum commissorium, a forfeiture clause nonpayment of the loan. After the lapse of
declared by this Court as contrary the toredemption
good period, the bank consolidated
its title
morals and public policy and, therefore, void. to the property, and became its
registered owner.
The rule is that a secured creditor holding
9. PRUDENTIAL BANK VS. ALVIAR a real estate mortgage has three (3)
options in case of death of the debtor.
FACTS: Respondents, spouses Don A.These Alviarare:
and
Georgia B. Alviar, are the registered owners of a
parcel of land in San Juan, Metro Manila. "(l) to waive the mortgage and claim the
entire debt from the estate of the
W/N the subject property may be foreclosed on the as an ordinary claim;"(2) to
mortgagor
ground that it covers all the mortgagesforeclose
(as blanketthe mortgage judicially and
mortgage (dragnet clause) granted to the spouses?
prove any deficiency as an ordinary claim;
NO. It is important to note that one of the loans
sought to be included in the blanket mortgage
"(3) to clause
rely on the mortgage exclusively,
was obtained by respondents for Donalco Trading, the same at anytime before it
foreclosing
Inc. Indeed, PN BD#76/C-430 was executedis barred by by prescription, without right to
respondents on behalf of Donalco Trading, Inc.
file a and for any deficiency."Obviously,
claim
not in their personal capacity. PN BD#76/C-430,
respondent bank availed itself of the third
being an obligation of Donalco Trading, option.
Inc., and not
of the respondents, is not within the contemplation
of the blanket mortgage clause.
A blanket mortgage clause, also known McCullough
as a vs Veloso, Serna
dragnet clause in American jurisprudence, is
one which is specifically phrased to FACTS: McCullough & Co., Inc., sold to Mariano
subsume
all debts of past or future origins. Veloso "McCullough Building," consisting of a
land, with the building. . Veloso agreed,
furthermore, to pay 10 per cent of the amount
of the debt, as attorney's fee, in the event that
10. UNION BANK VS. CA a judicial action should be necessary for the
FACTS: DRossa Incorporated (DRI) collectionagreed of tothe whole or a part of the debt. To
mortgage its parcels of land covered by TCT Nos. S-payment of these amounts, Veloso
secure the
24740 and S-24747 in favor of Union mortgaged
Bank of the the property purchased, this
Philippines (Union Bank) as security for the credit having been noted on the TCT. It
encumbrance
facility of Josephine Marine Trading was, finally, stipulated that in case of failure on
Corporation
the part
(JMTC). JMTC availed P3 million from the credit line.of Veloso to comply with any of the
stipulations contained in the mortgage deed, all
Doctrine: the installments with the interest thereon shall
become due, and the creditor shall then have
Indeed, a mortgage liability is usually limited
the right to bring the proper action for the
to the amount mentioned in the contract, collectionbut
of the unpaid part of the debt. THERE
where the intent of the contracting WASparties is
NO NOVATION.
manifest that the mortgage property shall also
answer for future loans or advancements, In order that
the this novation may take place, the
same is valid and binding between the law parties
requires the consent of the creditor (art.
1205 of the Civil Code). The plaintiff did not
intervene in the contract between Veloso and
Serna and did not expressly give his consent to
this substitution. Novation must be express, and
cannot be presumed.
The mortgage is merely an encumbrance When Spouses Montealegre failed to pay the loan,
upon the property and does not extinguish PNB initiated foreclosure proceedings on the
the title of the debtor, who does not, mortgaged properties, including the subject lot. In
therefore, lose his principal attribute as the auction sale, PNB emerged as the highest
owner, that is, the right to dispose. The bidder. Before the expiration of the redemption
fact that the plaintiff recognized the period, Spouses Maraon filed before the RTC a
efficaciousness of that sale cannot complaint for Annulment of Title, Reconveyance
prejudice him, which sale the defendant and Damages against Spouses Montealegre, PNB,
had the right to make and the plaintiff the Register of Deeds.
cannot oppose and which, at all events,
could not affect the mortgage, as the The RTC concluded to sale null and void, the title
latter follows the property whoever the remaining with the Spouses Marano. It further held
possessor may be. (Art. 1876 of the Civil that PNB is a mortgagee in good faith hence its lien
Code.) upon the subject lot must be respected. Both
parties contend that they own such rent, Spouses
Maranon by virtue of their ownership of the building
while PNB contends their mortgage over the land
13. extends over its fruits.
13. Philippine Trust Company vs CA, Forfom Rent is a civil fruit that belongs to the owner
Development Corp. of the property producing it by right of
FACTS: Forfom Development Corporation accession. is The rightful recipient of the
engaged in agricultural business and real estate disputed rent in this case should thus be the
development and owns several parcels of land owner
in of the subject lot at the time the rent
Pampanga. It is the registered owner of two (2) accrued. It is beyond question that Spouses
Maraon never lost ownership over the
parcels of land subject of the present controversy,
situated in Angeles City, Pampanga. Upon subject lot.
verification with the DAR and the Register of Deeds
made by plaintiffs Vice-President at that time, Mr.
Jose Marie L. Ramos, plaintiff discovered
15. Arguelles
that the vs Malarayat Rural Bank
subject properties had already been transferred in
the names of said Ma. Teresa Limcauco FACTS: The and late Fermina M. Guia was the
Ellenora Limcauco who were never known owner
registered to of Lot 3, a parcel of agricultural
land in Batangas,
plaintiff or its employees. As to the TCT issued in She sold the south portion of
the name of Ellenora Vda. De Limcauco, thea land.
Deed toof the spouses Petronio and Macaria
Absolute Sale was executed by Ellenora Arguelles.
Vda. DeAlthough the spouses Arguelles
Limcauco in favor of defendant Raulimmediately
P. Claveria acquired possession of the land, the
whereby the property was supposedlyDeed sold toof said
Sale was neither registered with the
defendant. Defendant spouses Raul and EleaDeeds nor annotated. At the same
Register of
Claveria mortgaged the property time,
withFermina
the M. Guia ordered her son Eddie Guia
defendant Philippine Trust Company latter's
and the to wife Teresita Guia to subdivide
guarantee a loan. the land covered into three lots and to apply for
the issuance of separate titles therefor.
Philtrust was negligent in its credit investigation
procedures. It is settled that banks, Spousestheir Guia obtained a loan in the amount
business being impressed withP240,000
publicfrom the respondent Malarayat Rural
interest, are expected to exerciseBank more and secured the loan with a Deed of Real
care
and prudence than private individuals Estatein Mortgage
their over Lot 3-C. The loan and Real
dealings, even those involving Estate Mortgage were made pursuant to the
registered
lands. The rule that persons dealing Special with
Power of Attorney purportedly executed
registered lands can rely solely by theon registered
the owner of Lot 3-C, Fermina M.
certificate of title does not applyGuia, in favor of the mortgagors, spouses Guia.
to banks.
Consequently, Philtrust should prove that Rural
Malarayat it Bank is not a mortgagee in good
exercised extraordinary diligence faith.
required of
Where the mortgagor is not the
it in approving the mortgage contract in favor owner of the property but is
registered
of the spouses Claveria. merely an attorney-in-fact of the same, it is
incumbent upon the mortgagee to exercise
greater care and a higher degree of
14. PNB vs Maranon prudence in dealing with such mortgagor.
Moreover, in a long line of cases, we have
FACTS: The controversy at bar involves a 152- enjoined banks to exert a
consistently
square meter parcel of land located higherBacolod
degree of diligence, care, and
(subject lot) erected with a building leased by
prudence than individuals in handling real
various tenants. The subject lot wasestate
amongtransactions.
the
properties mortgaged by Spouses Spouses
Montealegre to PNB as a security for a loan.
16. DSM CONSTRUCTION AND whether the estate remains in the possession of the
DEVELOPMENT CORPORATION vs. CA mortgagor, or passes into the hands of a third
& MEGAWORLD GLOBUS ASIA, INC. person.
FACTS: Petitioner and respondent entered into 18. PRUDENTIAL BANK vs. DON A. ALVIAR and
agreements for the construction of a GEORGIA B. ALVIAR
condominium project owned by respondent called
The Salcedo Park, with petitioner as contractor. FACTS: On July 1975, Sps Alviar executed a real
Respondent sought to clarify if the writ of estate mortgage in favor of Prudential Bank. The
execution shall be limited to six condominium mortgage was registered and it states that it will
units in consonance with the Court of Appeals secure the payment of the P250,000 loan and those
decision, but CIAC replied in the negative. that may hereafter be obtained by the Mortgagor
and/or Debtor.Blanket mortgage clause or
WON the alias writ should have been dragnet clause is one which is specifically
expressly qualified in limiting the execution phrased to subsume all debts past or future
to just six condominium units origins. Such clauses are carefully scrutinized
and strictly construed. It enables the parties to
No. There was indeed a six unit limit but provide continuous dealings, the nature or
respondent itself breached the same. In a letter to extent of which may not be known or
the Register of Deeds of Makati City, respondent anticipated at the time, and they avoid the
asked that the Notice of Levy/Attachment as well expense and inconvenience of executing a new
as the Decision annotated at the back of security. These types of mortgage given to
Condominium. secure future advancements are valid and
17. LUIS CASTRO, JR., MARISSA CASTRO, legal. Based on the wording of the real estate
RAMON CASTRO, MARY ANN CASTRO, mortgage, it is a dragnet mortgage
CATHERINE CASTRO and ANTONIO CASTRO Dragnet clause has two schools of thought: (1)
vs. CA & UNION BANK OF THE PHILIPPINES Dragnet clause covers all debts, including
FACTS: The Cabanatuan City Colleges obtained a future ones; (2) it will not secure a note that is
loan from the Bancom Development Corporation. In separately covered by another security.The
order to secure the indebtedness, the college Bank may foreclose the real estate mortgage for the
mortgaged to Bancom two parcels of land located unpaid P250k note, and for any deficiency after the
in Cabanatuan City. The parcels were both within FC/SA has been exhausted for the 2nd PN. Petition
the school site. While the mortgage was subsisting, denied.
the college board of directors agreed to lease to 19. SPS. REYNALDO K. LITONJUA and ERLINDA
petitioners a 1,000-square-meter portion of the P. LITONJUA & PHIL. WHITE HOUSE AUTO
encumbered property on which the SUPPLY, INC.
vs. L & R CORPORATION,
FACTS: Litonjua obtained loans from L&R Corporation
latter, eventually, built a residential house. Bancom,
the mortgagee, was duly advised of the matter.secured
The by a real estate mortgage which its
paragraphs
school defaulted in the due payment of the loan. In 8 and 9 read as follows
time, Bancom extrajudicially foreclosed on 8.the That the MORTGAGORS shall not sell, dispose of,
mortgage, and the mortgaged property was sold at
mortgage, nor in any other manner encumber the
public auction with Bancom coming out to be the real
only property/properties subject of this mortgage
bidder. without the prior written consent of the MORTGAGEE.
Whether or not a residential house,
VALID which
STIPULATION EVEN WITHOUT THE
was constructed by a lessee on a portion of the CONSENT. This finds support in
MORTGAGEES
leased property theretofore encumbered
Sectionunder
6 of Act 3135 itself which gives not
a real estate mortgage by the lessor,
only can
the bemortgagor-debtor the right to
rightly covered by a writ ofredeem, possession
but also his successor-ininterest
following the foreclosure sale
The of
rightthe
of first refusal has long been
mortgaged land recognized as valid. The consideration for the
loan-mortgage
NO. The basic question raised in the petition relates includes the consideration for
theofright
to the proper application of Article 2127 of first refusal
the Civil
Code. The law reads: While the mortgagor had every right to sell
their mortgaged property to a buyer without
Art. 2127. The mortgage extends to securing
the natural the prior written consent of
accessions, to the improvements, growingmortgagee,
fruits, and it had the obligation under
the rents or income not yet received paragraph
when the 9(stipulation regarding right of
first refusal,
obligation becomes due, and to the amount of the which is a perfectly valid
provision)
indemnity granted or owing to the proprietor from to notify the latter of their
the insurers of the property mortgaged, intention to sell the property and give it
or in virtue
priority
of expropriation for public use, with the over other buyers. It is only upon
declarations,
failurebyof law,
amplifications and limitations established the mortgagee to exercise its right
of first refusal could the mortgagor validly their land, registered under Transfer Certificate of Title
sell the mortaged properties to others, under (TCT) No. N-203923, located at Loyola Grand
the same terms and conditions offered to the Villas, Quezon City, consisting of 303 square meters;
mortgagee. and the proposed house that was to be built thereon.
[6]
Petitioners asserted that even if the loan documents
That L&R did not duly exercised its right of first refusal at were signed in blank, it was understood that they
the opportune time cannot be taken against it, precisely executed the REM in favor of EPCIB.
because it was not notified by the Litonjua of their
intention to sell the subject property and thereby, to give
it priority over other buyers. When the petitioners failed to pay for the loan in full
by 30 September 2003, respondent sought to extra-
judicially foreclose the REM.
20. LUZON DEVELOPMENT BANK V. CONQUILLA
In the instant case, petitioners assert that their
FACTS: Feliciano Conquilla was the president of an creditor-mortgagee is EPCIB and not
educational institution located at Noveleta Cavite respondent. While ESB claims that petitioners
and known as Columbia College. mortgaging the have had transactions with it, particularly the
three properties on which the school sat and titled in five check payments made in the name of ESB, it
their names to secure a loan from the Luzon fails to categorically state that ESB and not
Development Bank EPCIB is the real creditor-mortgagor in this loan
and mortgage transaction. This Court finds the
It held that foreclosure was valid; and that the position taken by the petitioners to be more
debtor was in default in the payment of his credible. The four Promissory Notes designate
obligation.The Order of Dismissal also EPCIB as the lender.
explained that the Mortgage Contract and the
Promissory Notes had authorized the 23. ROXAS VS CA
mortgagee to foreclose.
FACTS: Petitioner Blanca Roxas is the owner of a
21. SYCAMORE VENTURES CORP V. parcel of land in Panay, Capiz, with an area of
METROPOLITAN BANK & TRUST 14.7238 hectares. She appointed her brother, the
late Manuel Roxas, as her attorney-in-fact to apply
FACTS: Sycamore and the spouses Paz obtained from for an agricultural loan with private respondent Rural
respondent Metropolitan Bank and Trust Company Bank of Dumalag, Inc. using said land as collateral,
(Metrobank) a credit line of P180,000,000.00, to which was granted and Manuel Roxas received an
secured by 10 real estate mortgages . Sycamore and agricultural loan of P2,000.00 from private
the spouses Paz still failed to settle their loan respondent. He executed the corresponding real
obligations, compelling Metrobank to file a second estate mortgage over the subject land as security for
petition for auction sale, which was set for October the loan. Private respondent foreclosed the real
25, 2002.On October 16, 2002, Sycamore and the estate mortgage for failure to pay the loan on
spouses Paz once again asked for the postponement. maturity, and the subject land was sold at public
auction to private respondent, being the highest
The CA did not err when it set aside the RTCs bidder.
order granting the motion for appointment of
independent commissioners.Remedies of a Elaborating on these issues, petitioners asserts that
secured creditor. A secured creditor may the failure to post the notice in the barrio where the
institute against the mortgage debtor either a mortgaged property is situated rendered the
personal action for the collection of the debt, a foreclosure and sale by public auction void. In the
case at bar, the Certificate of Posting which was
real action to judicially foreclose the real
executed by the sheriff states that he posted three
estate mortgage, or an extrajudicial judicial (3) copies of the notice of public auction sale in
foreclosure of the mortgage. The remedies, three (3) conspicuous public places in the
however, are alternative, not cumulative, and municipality of Panay, where the subject land was
the election or use of one remedy operate as a situated and in like manner in Roxas City, where the
waiver of the others. In the present case, public auction sale took place. It is beyond dispute
Metrobank elected the third remedy the that there was a failure to publish the notices of
extrajudicial foreclosure of the real estate auction sale as required by law. Section 5 provides
further that proof of publication shall be
mortgage.Extrajudicial foreclosure under Act
accomplished by an affidavit of the sheriff or officer
No. 3135 Extrajudicial foreclosure is governed conducting the foreclosure sale. In this case, the
by Act No. 3135, as amended by Act No. 4118. sheriff executed a certificate of posting, which is not
the affidavit required by law. The rationale behind
22. BORROMEO V. COURT OF APPEALS this is simple: an affidavit is a sworn statement in
writing. Strict compliance with the aforementioned
FACTS: Respondent is a domestic savings bank provisions is mandated. We, therefore, cannot
sustain the view of respondent court that there was
corporation with principal office and place of business
at EPCIB Tower 2, Makati Avenue, Salcedo Village.substantial
it compliance with Section 5 of R.A. No.
720, as amended, with respect to the affidavit of
was a subsidiary of Equitable PCI Bank (EPCIB),posting a by the sheriff and the non-posting of the
domestic universal banking corporation. To secure required
the notice in the barrio where the land
payment of the loan, petitioners executed an REM over
mortgaged is situated. Instead, We declare the
the foreclosed
foreclosure and public auction sale properties was held for only 20 minutes
of the subject
land void. (instead of seven hours as required by law), the
consequent sale was void. A creditor may foreclose on
a real estate mortgage only if the debtor fails to pay
the principal obligation when it falls due.[15]
Nonetheless, the foreclosure of a mortgage does not
ipso facto extinguish a debtors obligation to his
24. GREGORIO SALAZAR, v. JUSTINIANAcreditor.
DE The proceeds of a sale at public auction may
TORRES, not be sufficient to extinguish the liability of the
former to the latter.[16] For this reason, we favor a
FACTS: The original action was brought construction by of Section 4 of Act 3135 that affords the
respondents Justiniana de Torres, Et Al., againstcreditor greater opportunity to satisfy his claim
petitioner Gregorio Salazar to foreclose a real estate
without unduly rewarding the debtor for not paying
mortgage. his just debt. Therefore, a sale at public auction held within
the intervening period provided by law (i.e., at any time from
A foreclosure sale is not complete until it 9:00
is a.m. until 4:00 p.m.) is valid, without regard to the
duration or length of time it took the auctioneer to conduct
confirmed, and before said confirmation, the
the proceedings.
court retains control of the proceedings by
exercising a sound discretion in regard to it,
either granting or withholding confirmation as
the rights and interests of the parties and the
ends of justice may require. 27. AMPARO G. PEREZ, ET AL., plaintiffs and
appellees, vs. PHILIPPINE NATIONAL BANK,
25. SPOUSES GUILLERMO AGBADA and MAXIMA Binalbagan Branch, ET AL., defendants and
AGBADA, petitioners, vs. INTER-URBAN appellants.
DEVELOPERS
FACTS: Vicente Perez mortgaged Lot No. 286-E of
the Kabankalan Cadastre, with Transfer certificate
FACTS: Petitioner-spouses Guillermo Agbada and
of Title No. 29530, to the appellant Philippine
Maxima Agbada borrowed P1,500,000.00 from
National Bank, Bacolod Branch, in order to secure
respondent Inter-Urban Developers, Inc. through its
payment of a loan of P2,500, plus interest, payable
president, Simeon L. Ong Tiam. To secure the loan, the
in yearly installments. On October 7, 1942, Vicente
parties concurrently executed a Deed of Real Estate
Perez, mortgagor, died intestate, survived by his
Mortgage over a parcel of land and the improvements
widow and children (appellees herein). At that time,
thereon situated in Tandang Sora, Quezon City owned
there was an outstanding balance of P1,917.00,
by the spouses. The loan was payable within six (6)
and corresponding interest, on the mortgage
months.
indebtedness. Nevertheless, while upholding the
validity of the appellant Bank's foreclosure, We
Failure to discharge the loan within the stipulated
cannot close our eyes to the fact that the Bank was
period would entitle Inter-Urban Developers, Inc. to
apprised since 1947 of the death of its debtor,
foreclose the mortgage judicially or extra-judicially.
Vicente Perez, yet it failed and neglected to give
The spouses failed to pay the loan within the six-
notice of the foreclosure to the latter's widow and
month period despite several out-of-court demands
heirs as expressly found by the court a quo.
made by respondent.
Such failure, in effect, prevented them from
It bears stressing that the proper remedy to blocking the foreclosure through seasonable
seek reversal of judgment in an action for payment, as well as impeded their
foreclosure of real estate mortgage is not a effectuating a seasonable redemption. In
petition for annulment of judgment but an view of these circumstances, it is our view
appeal from the judgment itself or from the that both justice and equity would be served
order confirming the sale of the foreclosed real by permitting herein appellees to redeem the
estate. Since petitioner-spouses failed to avail foreclosed property within a reasonable time,
of appeal without sufficient justification, they by paying the capital and interest of the
cannot conveniently resort to the action for indebtedness up to the time of redemption,
annulment for otherwise they would benefit plus foreclosure and useful expenses, less
from their own inaction and negligence. any rents and profits obtained by the Bank
from and after the same entered into its
26. PNB VS AZCUNA possession.

FACTS: Respondent spouses Tomas Cabatingan and 28. LUISA GUANCO, assisted by her husband,
Agapita Edullantes obtained two loans, secured by a LEONARDO GUANCO, Petitioner, v.ISIDRO
real estate mortgage from petitioner PNB. However, ANTOLO, Respondent.
they were unable to fully pay their obligation despite
FACTS: Isidro Antolo, a resident of Funda, Hamtic,
having been granted more than enough time to do so.
Antique, applied for a P600.00 loan from the Rural
[3] Thus, on September 25, 1991, petitioner
Bank of Sibalom (RBS) (Antique), Inc. To secure
extrajudicially foreclosed on the mortgage. Petitioners
payment thereof, Antolo executed a Real Estate
claimed that the provision quoted above must be
Mortgage over a parcel of land. RBS, through
observed strictly. Thus, because the public auction of
Maosa requested him to pay his account
the auction.
with RBS,
WHEREFORE, the instant petition is
otherwise the real estate mortgage DENIED. would be
foreclosed. Antolo failed to pay his loan account.
The RBS, through counsel, then 30.sentSPS.a VICENTE
letter, YU & DEMETRIA LEE- YU vs.
declaring that unless Antolo paid PHILIPPINE COMMERCIAL INTERNATIONAL BANK
his loan account
including the accrued interest thereon
FACTS: within ten1995, Spouses Vicente Yu & Demetria
On April,
(10) days from notice thereof, appropriate
Lee- Yu, among legal
others mortgaged their title,interest &
action would be taken against him to protectover
participation its several parcels of land located in
rights and interests. Antolo laterDagupan
inquired City
on his
in favor of the respondent, Philippine
account status, he found that Commercial
his account International
had Bank, as security for the
previously been paid for, that the payment
owners title had As the petitioners failed to pay the
of loan.
been released, and that the property
loan,had been sold
interests & penalties due thereon, respondent
to Guanco via a public auction. filed a Petition for Extra- Judicial Foreclosure of Real
Antolo can recover ownership. Estate on Dagupan
Posting of a City properties before the RTC,
Dagupan
notice of the foreclosure of the real City. Auction sale of the said properties was
estate
mortgage in at least threescheduled
of the on September 10, 1998 where respondent
most
conspicuous public places not emerged
only asinthe highest bidder.
the
municipality but also in the barrio where the
On August 20, 1998, about 2 months before the
land mortgaged is situated duringof the
expiration the redemption period, respondent filed
60dayperiod immediately preceding the
an Ex-Parte Petition for Writ of Possession.Petitioners
public land auction is mandatory. UnlesstoitDismiss & to Strike Out testimony of
filed a Motion
was made to appear that a Rodante
sale atManuel
public stating that the Certificate of Sale
auction was conducted and thatdatedthe Sept.
requisite
14, 1998, is void because respondent
redemption period had lapsed, no Torrens
violated Article 2089 of the Civil Code in the
title over the property can beindivisibility
issued by of thethe mortgaged by conducting 2
Register of Deeds. separate foreclosure proceedings on the mortgaged
properties in Dagupan City &Quezon City.
As to the first issue, the court finds that
petitioners have mistaken a notion that the
indivisibility of a real estate mortgage relates to
the venue of extra judicial foreclosure
29. SPS CERTEZA VS. PHILIPPINE SAVING BANK proceedings. The rule on indivisibility of a real
FACTS: Petitioners obtained a P1,255,000.00 loan estate
from mortgage is provided for in Article 2089
respondent Philippine Savings Bank (PS Bank), of the Civil Code which provides. Article 2089: A
pledge
secured by two parcels of land. Petitioners failed to or mortgage is indivisible even though
pay their outstanding obligation despite demands the debt may be divide damong the successors
in interest of the debtor or the creditor.
hence PS Bank instituted, an action for Extrajudicial
Foreclosure of the Real Estate Mortgage. Bank Indivisibility means that the mortgage
emerged as the sole and highest bidder. PS Bank obligation cannot be divided among the
different
opposed the motion citing Manalo v. Court of Appeals lots, that is each & every parcel under
where we held that (T)he issuance of an order mortgage answers for the totality of the debt.
granting the writ of possession is in essence a
rendition of judgment within the purview of Section 2,
Rule 19 of the Rules of Court. PS Bank also argued The indivisibility of the real estate mortgage
that with the issuance of the trial courts, the Motion by conducting 2 separate foreclosure
for Leave to Intervene can no longer be entertained. proceedings on mortgaged properties located
in different provinces as long as each parcel of
WHETHER X X X THE COURT OF APPEALS ERRED land is answerable for the entire debt.
IN RULING THAT THERE MAY BE ONLY ONE
BIDDER IN A FORECLOSURE SALE. The court holds that the rule on indivisibility of the
real estate mortgage cannot be equated with the
HELD: No. The law governing cases of extrajudicial venue of foreclosure proceedings on mortgaged
foreclosure of mortgage is Act No. 3135. The properties located in different provinces since these
requirement for at least two participating bidders are 2 unrelated concepts. Also, no prejudicial
provided in the original version of paragraph 5 of A.M. question can arise from the existence of a civil case
No. 99-10-05-0 is not found in Act No. 3135. for annulment of a Certificate of Sale & a Petition for
In view of the foregoing, the extra-judicial the Issuance of Writ of Possession in a special
foreclosure sale conducted in this case is proceeding since the 2 cases are both civil in nature
regular and valid. Consequently, the subsequent which can proceed separately & take their own
issuance of the writ of possession is likewise direction independently of each other. The petition is
regular and valid. Hence, it is no longer DENIED.
necessary for this Court to rule on the other 31.UNITED COCONUT PLANTERS BANK, petitione
issues presented by the petitioners, which are r, vs. SPOUSES SAMUEL and ODETTE BELUSO
also grounded on the supposed irregularity in
FACTS: Petition for Review on Certiorari declaring
void the interest rate provided in the promissory
notes executed by the respondents Spouses Samuel
and Odette Beluso (spouses Beluso) in favor of
petitioner United Coconut Planters Bank (UCPB).
UCPB granted the spouses Beluso a Promissory
Notes Line under a Credit Agreement The spouses
Beluso constituted, other than their promissory
notes, a real estate mortgage over parcels of land in
Roxas City.
However, the spouses Beluso alleged that the
amounts covered by these last two promissory notes
were never released or credited to their account and,
thus, claimed that the principal indebtedness was
only P2 Million. The spouses Beluso, however, failed
to make any payment of the foregoing amounts. On
2 September 1998, UCPB demanded that the
spouses Beluso pay their total obligation of
P2,932,543.00 plus 25% attorneys fees, but the
spouses Beluso failed to comply therewith. On 28
December 1998, UCPB foreclosed the properties
mortgaged by the spouses Beluso to secure their
credit line.
The foreclosure proceedings are valid since
there was a valid demand made by UCPB upon
the spouses Beluso. Despite being excessive,
the spouses Beluso are considered in default
with respect to the proper amount of their
obligation to UCPB and, thus, the property
they mortgaged to secure such amounts may
before closed. Consequently, proceeds of the
foreclosure sale should be applied to the
extent of the amounts to which UCPB is
rightfully entitled.
(SUPPOSED NUMBER 3)
SPOUSES GODOFREDO & DOMINICA FLANCIA
vs. COURT OF APPEALS & WILLIAM ONG GENATO
This is an action to declare null and void the mortgage
executed by defendant Oakland Development Resources
Corp. in favor of defendant William Ong Genato over the
house and lot plaintiffs spouses Godofredo and Dominica
Flancia purchased from defendant corporation. Under the
Art. 2085 of the Civil Code, the essential
requisites of a contract of mortgage are: (a)
that it be constituted to secure the fulfillment
of a principal obligation; (b) that the
mortgagor be the absolute owner of the thing
mortgaged; and (c) that the persons
constituting the mortgage have the free
disposal of their property, and in the absence
thereof, that they be legally authorized for the
purpose