CASE 1 |ARIEL BALTAZAR

_______________________________________________________________________________

DEVELOPMENT BANK OF THE PHILIPPINES, vs. THE NATIONAL LABOR RELATIONS

COMMISSION, ONG PENG, ET. AL., G.R. Nos. 100264-81 January 29, 1993

FACTS:

November 14, 1986, private respondents filed with DOLE- Daet, Camarines Norte, 17
individual complaints against Republic Hardwood Inc. (RHI) for unpaid wages and separation
pay. These complaints were thereafter endorsed to Regional Arbitration Branch of the NLRC
since the petitioners had already been terminated from employment.

RHI alleged that it had ceased to operate in 1983 due to the government ban against
tree-cutting and that in May 24, 1981, its sawmill was totally burned resulting in enormous
losses and that due to its financial setbacks, RHI failed to pay its loan with the DBP. RHI
contended that since DBP foreclosed its mortgaged assets on September 24,1985, then any
adjudication of monetary claims in favor of its former employees must be satisfied against
DBP. Private respondent impleaded DBP.

Labor Arbiter favored private respondents and held RHI and DBP jointly and severally
liable to private respondents. DBP appealed to the NLRC. NLRC affirmed LA‘s judgment. DBP
filed M.R. but it was dismissed. Thus, this petition for certiorari.

ISSUE:

1. Whether the private respondents are entitled to separation pay.

2. Whether the private respondents‘ separation pay should be preferred than the DBP‘s lien
over the RHI‘s mortgaged assets.

RESOLUTION:

1. Yes. Despite the enormous losses incurred, RHI would still have continued its business had
not the petitioner foreclosed all of its assets and properties. Thus, the closure of RHI‘s
business was not primarily brought about by serious business losses and was a consequence
of DBP‘s foreclosure of RHI‘s assets. The Supreme Court applied Article 283 which
provides:

“. . . in cases of closures or cessation of operations of establishment or undertaking not

due to serious business losses or financial reverses, the separation pay shall be equivalent
to 1 month pay or at least 1/2 month pay for every year of service, whichever is higher. .
. .”

2. No. Because of the petitioner‘s assertion that LA and NLRC incorrectly applied the
provisions of Article 110 of the Labor Code.

Article 110 must be read in relation to the Civil Code concerning the classification,
concurrence and preference of credits, which is application in insolvency proceedings
where the claims of all creditors, preferred or non-preferred, may be adjudicated in a
binding manner.
DBP‘s lien on RHI‘s mortgaged assets, being a mortgage credit, is a special preferred
credit under Article 2242 of the Civil Code while the workers‘ preference is an ordinary
preferred credit under Article 2244.Article 110 of the Labor Code does not create
a lien in favor of workers or employees for unpaid wages either upon all of the properties
or upon any particular property owned by their employer.

Article 110 of the Labor Code has been amended by R.A. No. 6715. The amendment
―expands worker preference to cover not only unpaid wages but also other monetary
claims to which even claims of the Government must be deemed subordinate.‖ Under the
new law, even mortgage credits are subordinate to workers‘ claims. R.A. No. 6715,
however, took effect only on March 21, 1989. The amendment cannot be retroactively
applied to, nor can it affect, the mortgage credit which was secured by the petitioner
several years prior to its effectivity.
CASE 2 |ANNA MARIE JUANICO
_______________________________________________________________________________

G.R. No. 82135 August 20, 1990

BANCO FILIPINO SAVINGS AND MORTGAGE BANK (Represented by its liquidator, MS.
CARLOTA P. VALENZUELA), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Labor Arbiter EVANGELINE LUBATON and
FORTUNATO DIZON, JR., respondents.

FACTS:
1. After BANCO FILIPINO SAVINGS AND MORTGAGE BANK was placed under receivership,
FORTUNATO M. DIZON. Jr., the Executive Vice President and Chief Operating Officer of
the bank, received a letter from the Central Bank appointed liquidator, MS. CARLOTA P.
VALENZUELA, informing him that all management authority in the bank had been assumed
by the Central Bank appointed liquidators and that his employment is being terminated.
2. Mr. Dizon filed with the liquidator a request for the payment to him of the cash equivalent
of his vacation and sick leave credits and unexpended/unused reimbursable allowance.
3. His claims were not paid by the liquidator upon counsel's advice that Dizon's claim should
be treated as a claim of a creditor and should therefore be processed pursuant to the
liquidation plan as approved by the Monetary Board.
ISSUES:
1. WON all disputed claims against banks under liquidation pertain to the exclusive
jurisdiction of the liquidation court (pursuant to section 29 of the Central Bank Act) and
may not be adjudicated by the Labor Arbiters and the NLRC under Article 217 of the Labor
Code
2. WON the assailed decisions directing the payment of the claims outside of the liquidation
process amount to an undue preference in favor of a particular creditor.
3. WON an action could not be maintained against an insolvent bank after it had been
ordered liquidated citing.

RULING:

1. NO

Sec. 29. Proceedings upon insolvency. — ... If the Monetary Board shall determine and
confirm within the said period that the bank or non-bank financial intermediary
performing quasi-banking functions is insolvent or cannot resume business with safety to
its depositors, creditors and the general public, it shall, if the public interest requires,
order its liquidation, indicate the manner of its liquidation and approve a liquidation plan.

The Central Bank shall, by the Solicitor General, file a petition in the Court of First
Instance reciting the proceedings which have been taken and praying the assistance of
the court in the liquidation of such institution. The court shall have jurisdiction in the
 same proceedings to adjudicate disputed claims against the bank or non-bank financial
intermediary performing quasibanking function and enforce individual liabilities of the
stockholders. and do all that is necessary to preserve the assets of such institution and to
implement the liquidation plan approved by the Monetary Board.

ART. 217. Jurisdiction of the Labor Arbiter and the Commission. (a) The Labor
Arbiter shall have the original and exclusive jurisdiction to hear and decide ... the
following cases involving all workers,...: xxx xxx xxx

All money claims of workers, including those based on non-payment or

underpayment of wages, overtime compensation, separation pay and other benefits
provided by law or appropriate agreement, except claims for employee's compensation,
social security, medicare and maternity benefits.

There is nothing in Sec 29 which suggest the jurisdiction of the liquidation court to
adjudicate claims against the insolvent bank is exclusive. Furthermore, the jurisdiction of
a court would not be lost simply because a former employer had been placed under
liquidation. The legislature deemed it wise to confer jurisdiction over labor disputes to a
body exclusively of others.

2. YES

ART. 110. Worker Preference in case of Bankruptcy — In the event of bankruptcy

or liquidation of an employer's business, his workers shall enjoy first preference as regards
wages due them for services rendered during the period prior to the bankruptcy or
liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be
paid in full before other creditors may establish any claim to a share in the assets of the
employer.

Thus, Dizon's adjudicated claims should be submitted to the liquidators for

processing. If, of course, it is later determined that Banco Filipino's liquidation is improper
then the NLRC'S decision may be executed under normal procedure. If the contrary is
proven, however, and the bank's liquidation should proceed, Dizon's established claims
should be treated as an ordinary preferred credit enjoying first preference under Art.
2244 of the Civil Code.

3. YES

Article 284 (Art. 283), in case of closure of establishment, the employee is always
given termination pay. The reason for the closure is taken into consideration only to
determine whether to give one month or one-half month pay for every year of service.
This provision is based on social justice and equity

As regards the commutation to cash of Dizon's accumulated vacation and sick

leaves, both the Labor Arbiter and the NLRC found that this was authorized by the
Collective Bargaining Agreement then existing before the bank's closure and which CBA
the liquidators manifested to honor. This is a factual issue which We are not inclined to
disturb.

DICISION: AFFIRMED
CASE 3 |BARRY BABIANO
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REPUBLIC VS PERALTA 150 SCRA 37

FACTS:
The republic of the Philippines seeks the review on certiorari on the Order of the Court of
First Instance of Manila in the voluntary insolvency case of Quality Tobacco Corporation (teh
Insolvent). The trial court held that the claims of the labor unions (USTC Asociation of
Employees and Federacion de la Industria Tabaquera y Otros Trabajadore de Filipinas) for
separation pay of their respective members embodied in final awards of the National Labor
Relations Commission were to be preferred over the claims of the Bureau of Customs and
Bureau of Internal Revenue for customs duties and inspection fees relying on Article 110 of
the Labor Code. Said Article reads ―Worker preference in case of bankruptcy – in the event of
bankruptcy or liquidation of an employer‘s business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the bankruptcy or
liquidation, any provision of law to the contrary notwithstanding. Union paid wages shall be
paid in full before other creditors may establish any claim to a share in the assets of the
employer.‖

ISSUE:

Whether or not separation pays are preferred liabilities over taxes in insolvency cases.

RULING:
The Supreme Court ruled on the negative. Article 110 of the Labor Code, in determining the
reach of its terms, cannot be viewed in isolation. Rather, Article 110 must be read in relation
to the provisions of the Civil Code concerning the classification, concurrence and preference
of credits, which provisions find particular application in insolvency proceedings where the
claims of all creditors, preferred or non-preferred, may be adjudicated in a binding manner.
Articles 2241 and 2242 jointly with Articles 2246 to 2249, all of the Civil Code, establish a
two-tier order of preference. The first tier includes only taxes, duties and fees due on
specific movable or immovable property. All other special preferred credits stand on the
same second tier to be satisfied, pari passu and pro rata, out of any residual value of the
specific property to which such other credits relate.
Under Section 1204 of the Tariff and Customs Code, the liability of ab importer for duties,
taxes and fees and other charges attaching on importation constitute a personal debt due
from the importer to the government which can be discharged only by payment in full of all
duties, taxes, fees and other charges legally accruing. It also constitutes a lien upon the
articles imported which may be enforced while such articles are in the custody or subject to
the control of the government. Clearly, the claim of the Bureau of Customs for unpaid
customs, duties and taxes enjoys the status of a specially preferred credit under Article 2241
No. 1 of the Civil Code only in respect of the articles importation of which by the insolvent
resulted in the assessment of the unpaid taxes and duties, and which are still in teh custody
or subject to the control of the Bureau of Customs. The goods imported on one occasion are
not subject to a lien for customs duties and taxes assessed upon other importations though
also effected by the insolvent. Customs duties and taxes which remain unsatisfied after levy
upon the imported articles on which such duties and taxes are due, would have to be paid out
of the insolvent‘s ―free property‖ in accordance with the order of preference embodied in
Article 2244 of the Civil Code. Such unsatisfied customs duties and taxes would fall within
Article 2244 No. 9 of the Civil Code and hence, would be ninth in priority.
The claim of the Bureau of Internal Revenue for unpaid tobacco inspection constitutes a claim
for unpaid internal revenue taxes which gives rise to a tax lien upon all the properties and
assets, movable and immovable, of the insolvent as taxpayer. Clearly, under Articles 2241
No.1, 2242 No. 1 and 2246-2249 of the Civil Code, this tax claim must be given preference
over any other claim of any other creditor, in respect of any and all properties of the
insolvent.
Article 110 of the Labor Code did not sweep away the overriding preference accorded under
the scheme of the Civil Code to tax claims of the government or any subdivision thereof which
constitute a lien upon the properties of the insolvent. It is frequently said that taxes are the
very lifeblood of the government. The effective collection of taxes is a task of highest
importance for the sovereign. It is critical indeed for its own survival.
Thus, very substantial effect may be given to teh provisions of Article 110 without distorting
the framework established in the Civil Code in two respects: (a.) Firstly, by removing the one
year limitation found in Article 2244, number 2: and (b) secondly, by moving up claims for
unpaid wages of labourers or workers of teh insolvent from second priority to first priority in
the order of preference established by Article 2244.
CASE 4 |JAYSON AZURA
_______________________________________________________________________________

J.L. BERNARDO CONSTRUCTION VS. CA AND MAYOR SALONGA

FACTS:
In 1990, the municipal government of San Antonio, Nueva Ecija approved the construction of
the San Antonio Public Market. After evaluating the bids, the municipal pre-qualification bids
and awards committee, headed by respondent Jose L. Salonga (then incumbent municipal
mayor of San Antonio) as Chairman, awarded the contract to petitioners. A Construction
Agreement was entered into by the Municipality of San Antonio thru respondent Salonga and
petitioner J.L. Bernardo Construction in relation thereto.
It is claimed by petitioners that under this Construction Agreement, the Municipality agreed
to assume the expenses for the demolition, clearing and site filling of the construction site
and, in addition, to provide cash equity to be remitted directly to petitioners.
Petitioners allege that, although the whole amount of the cash equity became due, the
Municipality refused to pay the same, despite repeated demands and notwithstanding that
the public market was more than ninety-eight percent (98%) complete as of July 20, 1991.
Furthermore, petitioners maintain that Salonga induced them to advance the expenses for the
demolition, clearing and site filling work by making representations that the Municipality had
the financial capability to reimburse them later on. However, petitioners claim that they
have not been reimbursed for their expenses.
For this reason, JL Bernardo construction filed a complaint for breach of contract, specific
performance, and collection of a sum of money, with prayer for preliminary attachment and
enforcement of contractor‘s lien against the Municipality of San Antonio, Nueva Ecija and
Salonga, in his personal and official capacity as municipal mayor. The RTC ruled in favour of
the Petitioner, thereby issuing the writ of preliminary attachment prayed for by the
petitioners and granting the right of possession and use of the public market. With regards to
the contractors lien, the trial court held that since plaintiffs have not been reimbursed for
the cash equity and for the demolition, clearing and site filling expenses, they stand in the
position of an unpaid contractor and as such are entitled, pursuant to articles 2242 and 2243
of the Civil Code. Pending the motion filed by the respondent, the latter filed a petition for
certiorari before the CA, which reversed the earlier court‘s decision. Thus, the herein
petition to SC.
ISSUES:
a. WON petition for certiorari to CA was an appropriate remedy in the herein case?
b. WON the rule on contractor‘s lien as provided in Art. 2242 of the NCC is applicable in the
herein case?
RULING:
A. NO. The CA erred in obtaining jurisdiction over the petition for certiorari under rule 65 of
the ROC. The petition for certitiorari filed by petitioner should not have been given due
course for there are still available remedies for the aggrieved party insofar as their claims
 for writ of preliminary attached are concerned. Under the herein case, resort to petition
for certiorari is patently premature.
B. NO. The contractor‘s lien claimed by the petitioner is not applicable in the instant case.
Specifically, the contractors lien claimed by petitioners is granted under the third
paragraph of Article 2242 which provides that the claims of contractors engaged in the
construction, reconstruction or repair of buildings or other works shall be preferred with
respect to the specific building or other immovable property constructed.

However, Article 2242 only finds application when there is a concurrence of credits, i.e.
when the same specific property of the debtor is subjected to the claims of several
creditors and the value of such property of the debtor is insufficient to pay in full all the
creditors. Fundamental tenets of due process will dictate that this statutory lien should
then only be enforced in the context of some kind of a proceeding where the claims of all
the preferred creditors may be bindingly adjudicated, such as insolvency proceedings. The
action filed by petitioners in the trial court does not partake of the nature of an
insolvency proceeding. It is basically for specific performance and damages.

Furthermore, it not having been alleged in their pleadings that they have any rights as a
mortgagee under the contracts, petitioners may only obtain possession and use of the
public market by means of a preliminary attachment upon such property, in the event
that they obtain a favorable judgment in the trial court. Under our rules of procedure, a
writ of attachment over registered real property is enforced by the sheriff by filing with
the registry of deeds a copy of the order of attachment, together with a description of the
property attached, and a notice that it is attached, and by leaving a copy of such order,
description, and notice with the occupant of the property, if any. If judgment be
recovered by the attaching party and execution issue thereon, the sheriff may cause the
judgment to be satisfied by selling so much of the property as may be necessary to satisfy
the judgment. Only in the event that petitioners are able to purchase the property will
they then acquire possession and use of the same. Clearly, the trial courts order of
September 5, 1991 granting possession and use of the public market to petitioners does
not adhere to the procedure for attachment laid out in the Rules of Court.
CASE 5 |NIKKI BEVERLY G. BACALE
_______________________________________________________________________________

FRANCISCO C. MANABAT, IN HIS CAPACITY AS PROVINCIAL SHERIFF OF LAGUNA VS

LAGUNA FEDERATION OF FACOMAS, INC., ET.AL
19 SCRA 691
FACTS:
In a suit filed by Laguna Federation of Facomas, Inc., against Nierves M. Vda. De
Roxas, a judgment in favor of the plaintiff was rendered. By virtue of a writ of execution
issued pursuant to said judgment, Francisco Manabat, the provincial sheriff, sold at public
auctin all rights, titles, and interests of Nierves M. Vda. De Roxas in ten (10) parcels of land
for a total price of P 37,000.00.
It was however later discovered that said parcels of land were subject to registered
liens such as writs of execution and attachment annotated at the back of the respective title
certificates, the sheriff instituted an action for interpleader for the different creditors to
litigate among themselves and determine their rights to the P 37,000.00 proceeds of the sale.
There were nine (9) claims on the said property, to wit:

Claimant Nature of Annotation Date of Amount of

Registration of Claim
Credit
1. Laguna Attachment writ in CFI October 10, 1958 P 17,448.00
Federation of Laguna Case SC-152
Facomas, Inc.
2. Valeriana & Attachment writ in CFI October 13, 1958 P 3,375.00
Limaco de Laguna Case SC-153
Almeda
3. Cosmopolitan Attachment writ in CFI October 20, 1958 P 12, 650.00
Insurance Co, Manila Case No. 38118
Inc.
4. Florentino Cayco Attachment writ in CFI October 29, 1958 P 26,787.50
and Jose Rizal Case No. 5238
Fernandez
Zorilla
5. Victoria Attachment writ in CFI May 23, 1960 P 12,500.00
Dimayuga Manila Case No. 3878
6. Jose Marfori and Execution writ CFI September 26, P 9410.00
Josefina Reyes Cavite Case No. 6480-R 1960
7. Pastor Canillas Attachment writ in CFI November 23, P 25,552.00
Manila Case No. 38872 1960
8. Trinidad Calatin Attachment writ in CFI November 29, P 3,450.00
Laguna Case No. B-191 1960
 9. Rosauro Register of Deeds Not registered P 9,000.00
Taningco and denied registration of
Simplicio Ramos ded of mortgage;
registrability became
object of suit in SC, L-
15242

After submission of documentary evidence, the Court of Instance rendered a decision

stating that the defendants-claimants are entitled to the proceeds of the sale in the order of
preference in accordance with the dates of the registration of their credits.
From said judgment, Florentino Cayco and Jose Fernandez Zorilla, the 4th claimants
basing on the date of registration of claims, appealed; reasoning that since this is an instance
of several credits referring to the same specific real property; that the rule in such case is to
satisfy all the aforesaid credits pro rata, following Article 2242 of the NCC.

ISSUE:
WHETHER OR NOT in the satisfaction of credits, that of preference in the order of dates of
registration should be followed or distributed pro rata.
RULING:
Judgment appealed from is hereby affirmed.
The Supreme Court held that under the New Civil Code, there is no preference among
specific creditors; the general rule is pro rata. But there is one exception to this, when there
have been attachments and executions, there is still preference among them in order of time
they were levied upon in the Registry. This can be noted from par. 7 of Article 2242 of the
NCC, to wit:
“(7) Credits annotated in the Registry of Property, in virtue of a judicial order, by
attachments or executions, upon the property affected and only as to later credits.”
Thus, as can be gleamed from the above provision, it follows that the same limitation
applies as to their preference among themselves; that is, for purposes of satisfying several
credits annotated by attachments or executions, the rule is still preference according to
priority of credits in the order of time. Otherwise, the result would be absurd: the preference
of an attachment or execution lien over later credits, as above provided for, could easily be
defeated by simply obtaining writs of attachment or execution, and annotating them, no
matter how much later.
CASE 6 |ROBERT ABUEVA
_______________________________________________________________________________

CHINA BANKING CORPORATION VS. FAUSTINO LICHAUCO ET AL.(G.R. NO. L-22001. NOV. 4,
1924)
FACTS:
Lichauco & Company, Inc., owed the plaintiff a large sum by way of loan. On September 5,
1921, Faustino Lichauco and wife Luisa F. de Lichauco executed a document (Exhibit C) in
favor of the plaintiff whereby they secured with a mortgage upon the property described in
the document the payment of a part of this loan in the amount of P50,000 with interest at 9
per cent per year. It was agreed that in case of non-fulfillment of the contract, this mortgage
would stand as security also for the payment of all the costs of the suit and expenses of any
kind, including attorney‘s fees, which by way of liquidated damages are fixed at 5 per cent of
the principal. It is stated lastly in this document that if Faustino Lichauco and Luisa F. de
Lichauco should fail to pay this amount of P50,000, the mortgage shall be in full force and
effect.

On the 20th of December, 1922, Lichauco & Co., Inc., Faustino Lichauco, and Luisa F. de
Lichauco executed another document (Exhibit D) in which, among other things, they ratified
the former mortgage and stated that the payment of the P50,000 shall continue to be secured
in the same manner and with the same property, and shall earn interest at 12 per cent per
year from October 20, 1920.
ISSUE:

1. Whether or not the mortgage guaranteed by Faustino Lichauco and Luisa Lichauco was a
debt of Lichauco & co., Inc.
2. Whether or not the lower court erred in allowing the legal interest at the rate of 6
percent from the filing of the complaint.
RULING:
1. This contention does not find support in law. As a mortgage is an accessory contract, its
consideration is the very consideration of the principal contract, from which it receives its
life, and without which it cannot exist as an independent contract, although, as in the
instant case, it may secure an obligation incurred by another (art. 1857 of the Civil Code).
That this amount of P50,000 is to earn interest, and that 5 per cent must be paid in
addition for judicial expenses and attorney‘s fees, was expressly stipulated in the
contract. The trial court, however, fixed this interest at 12 per cent from September 5,
1921, which we believe is an error.
2. There is no error. Article 1109 of the Civil Code expressly provides that interest due
shall earn legal interest from the date payment thereof is judicially demanded, although
the obligation may be silent on the matter. For the foregoing, it being understood that
the defendants may pay interest at 9 per cent from September 5, 1921, and 12 per cent
from December 20, 1922, the judgment appealed from is affirmed in all other respects,
without special pronouncement as to costs. So ordered.
CASE 7 |CARLO ANGELO GO
_______________________________________________________________________________
SORIANO VS GALIT 411 SCRA 631
FACTS:
Ricardo Galit contracted a loan from herein petitioner Marcelo Soriano in the total amount of
P480,000 evidenced by four promissory notes in the amount of P120,000,each dated August 2,
1996, August 15, 1996, September 4, 1996 and September 14, 1996. The loan was secured by
a real estate mortgage over a parcel of land. Galit failed to pay his obligation, and Soriano
filed a complaint for collection of sum of money at the RTC of Balanga City. In relation to the
complaint filed, respondents failed to file his answer, hence, upon motion by Soriano, the
trial court declared the spouses in default and proceeded to receive the evidence ex parte.
The RTC rendered a judgement in favor of the petitioner Soriano and it became final and
executor. Accordingly, the trial court issued a writ of execution in due course, by virtue of
which, the Deputy Sheriff levied on 3 real properties of the Galit spouses, The petitioner,
being the highest and lone bidder, did not pay the amount of the bid for the reason that the
amount was credited to partial/ full satisfaction of the judgement embodied in the writ of
execution.
Respondents filed a petition for certiorari with the CA, assailing the inclusion of the parcel of
land not included in the list of properties in the writ of possession, and not among those sold
on execution. Petitioner prayed for the dismissal of the petition on the ground that
respondent failed to move for reconsideration of the assailed order prior to the filing of the
petition. Moreover, petitioner argues that the proper remedy should be an appeal or a motion
to quash the writ of possession.
ISSUE/S: (1) WON the petition for certiorari the proper remedy for the respondents in
assailing the trial court‘s order? ; (2) WON the writ of possession, being a public document
which enjoys the presumption of regularity, cannot be overcome?
HELD:
1. The Court held that concededly, those who seek to avail of the procedural remedies
provided by the rules must adhere to the requirements thereof, failing which the right to
do so is lost. It is, however, equally settled that the Rules of Court seek to eliminate
undue reliance on technical rules and to make litigation as inexpensive as practicable and
as convenient as can be done. The rules of procedure are not to be applied in a very rigid,
technical sense and are used only to help secure substantial justice. Technicality should
not be allowed to stand in the way of equitably and completely resolving the rights and
obligations of the parties.
2. While it is true that public documents are by themselves may be adequate to establish the
presumption of their validity, their probative weight, however, must be evaluated not in
isolation but in conjunction with other evidence adduced by the parties in the
controversy, much more so where the contents of a copy thereof subsequently registered
for documentation purposes is being contested. While a public document like a notarized
deed of sale is vested with the presumption of regularity, this is not s guarantee of the
validity of its contents.
Thus, the petition is denied for lack of merit, and the writ of possession issued by the
RTC of Balanga City is declared null and void.
CASE 8 |RACHEL MARIE C. CATUDAY
_______________________________________________________________________________

NORBERTO L. DILAG, AS ADMINISTRATOR OF THE INTESTATE ESTATE OF LAUREANO

MARQUEZ, PETITIONER
VS
THE LEGAL HEIRS OF FORTUNATO RESURRECCION, ET AL, RESPONDENTS
G.R NO. 48941
FACTS:
Before the year 1936 Laureano Marquez was indebted to Fortunato Resurreccion in the sum of
P5,000 as the balance of the purchase price of a parcel of land which the former had bought
and received from the latter. Fortunato Resurreccion in turn was indebted to the Luzon
Surety Company in the same amount, which was secured by a mortgage on three parcels of
land, one of which was that bought by Laureano Marquez from him. The formal deed of sale
from Resurreccion to Marquez was to have been executed after Marquez shall have fully paid
the purchase price and after Resurreccion shall have secured the cancellation of the
mortgage by the Luzon Surety Company.
As early as 1933 Laureano Marquez had agreed to pay Fortunato Resurreccion‘s indebtedness
of P5,000 to the Luzon Surety Company by way of satisfaction of his own indebtedness to
Fortunato Resurreccion in the same amount.
On July 10, 1933, Laureano Marquez bound himself as follows: "In the event an action is
presented by the Luzon Surety Company against Fortunato Resurreccion for the recovery of
the said indebtedness and the interests thereon, I, Laureano Marquez, obligate myself to
indemnify Fortunato Ressurreccion for all the damages he may suffer in case the parcels of
land mortgaged to the Luzon Surety Company are sold at public auction, including the fees of
the attorneys of Fortunato Surety Company as well as in the action that Fortunato
Resurreccion in the suit brought by the Luzon Surety Company as well as in the action that
Fortunato Resurreccion may bring against me in relation to this agreement."cralaw virtua1aw
library

Laureana Marquez failed to pay the indebteness of Fortunato Resurreccion to the Luzon
Surety Company, and the latter foreclosed judicially the mortgaged executed in its favor by
Fortunato Resurreccion.
On April 25, 1936, pending the foreclosure sale of the Company, Laureano Marquez executed
and delivered to Fortunato Resurreccion another document. Since Laureano Marquez did not
fulfill his promise contained in the first clause of the instrument above quoted, with the
result that the mortgaged properties were sold at public auction and were totally lost by
Fortunato Resurreccion, the latter commenced the present action against Laureano Marquez
upon the instrument above quoted (1) to recover the value of the lost properties amounting
to P16,500, with legal interest thereon from the date of the filing of the complaint, plus
P2,000 as indemnity for the rents of the lands sold and P1,000 as attorney‘s fees, and (2) to
foreclose the mortgage embodied in said instrument.
ISSUE:
Wether or not respondent had no right to enforce and foreclose Exhibit A as regards the
damages caused by the loss of two of the three parcels of land mortgaged to the Luzon Surety
Company because they did not belong to Fortunato Resurreccion but to Emilia Resurrecion
and the children of Vicente Platon.

RULING: robles.ph
Section 3 of Rule 3 of the Rules of Court which says that "a party with whom or in whose name
a contract has been made for the benefit of another may sue or be sued without joining the
party for whose benefit the action is presented or defended‖.
The contentions of petitioner that it should not be applied because Exhibit A is a unilateral
promise by Laureano Marquez to indemnify Fortunato Resurreccion or those who might
become the owners of the lands in question; and that Fortunato Resurreccion was not a party
to the contract Exhibit A, for as a matter of fact it was signed by Laureano Marquez only.
The Supreme Court says that ―We do not think that the word "contract" used in section 3 of
Rule 3 refers exclusively to a bilateral contract. It obviously refers to any contract — bilateral
or unilateral — enforcible in court. The rule in question refers to a suit by or against "a party
with whom or in whose name a contract has been made for the benefit of another. Article
1254 of the Civil Code says that a contract exists from the moment one or more persons
consent to be bound with respect to another or others to deliver something or to render some
service. A deed of sale or mortgage is usually a unilateral contract in the sense that only the
vendor or mortgagor signs it. Likewise a promissor note is a unilateral contract in the sense
that only the promissor or maker signs it. But these do not mean that the signer is the only
party to that contract and the only one entitled to sue thereon. The obligee is as much a
party to the contract as the obligor, for there can be no obligor without an obligee; and as a
matter of course it is the obligee who has the right to sue on and enforce the obligation‖.
CASE 9 |GIAN CASAL
_______________________________________________________________________________

G.R. No. L-17500 May 16, 1967

PEOPLE'S BANK AND TRUST CO. and ATLANTIC GULF AND PACIFIC CO. OF
MANILA, plaintiffs-appellants,
vs.
DAHICAN LUMBER COMPANY, DAHICAN AMERICAN LUMBER CORPORATION and CONNELL
BROS. CO. (PHIL.), defendants-appellants.

FACTS:

On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation
licensed to do business in the Philippines sold and assigned all its rights in the Dahican
Lumber concession to Dahican Lumber Company (DALCO) for the total sum of $500,000.00, of
which only the amount of $50,000.00 was paid. Thereafter, to develop the concession, DALCO
obtained various loans from the People's Bank & Trust Company amounting, as of July 13,
1950, to P200,000.00. In addition, DALCO obtained, a loan of $250,000.00 from the Export-
Import Bank of Washington D.C., evidenced by five promissory notes of $50,000.00 each,
maturing on different dates, executed by both DALCO and the Dahican America Lumber
Corporation (DAMCO), a foreign corporation and a stockholder of DALCO,
As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed
in favor of the BANK a deed of mortgage covering five parcels of land situated in the province
of Camarines Norte together with all the buildings and other improvements existing thereon
and all the personal properties of the mortgagor located in its place of business in the
municipalities of Mambulao and Capalonga, Camarines Norte. On the same date, DALCO
executed a second mortgage on the same properties in favor of ATLANTIC to secure payment
of the unpaid balance of the sale price of the lumber concession amounting to the sum of
$450,000.00. Both deeds contained a provision extending the mortgage lien to properties to
be subsequently acquired by the mortgagor.
Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In
addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and
9,286 shares of DAMCO to secure the same obligation.
Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the
BANK paid the same to the Export-Import Bank of Washington D.C., and the latter assigned to
the former its credit and the first mortgage securing it. Subsequently, the BANK gave DALCO
and DAMCO up to April 1, 1953 to pay the overdue promissory note.
After July 13, 1950 - the date of execution of the mortgages mentioned above - DALCO
purchased various machineries, equipment, spare parts and supplies in addition to, or in
replacement of some of those already owned and used by it on the date aforesaid. Pursuant
to the provision of the mortgage deeds quoted theretofore regarding "after acquired
properties," the BANK requested DALCO to submit complete lists of said properties but the
latter failed to do so. In connection with these purchases, there appeared in the books of
DALCO as due to the Connell Bros. Company (CONNELL) - a domestic corporation acting as the
general purchasing agent of DALCO - the sum of P452,860.55 and to DAMCO, the sum of
P2,151,678.34.chan

On December 16, 1952, the Board of Directors of DALCO, in a special meeting, passed a
resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by
CONNELL and DAMCO to it.
On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said
agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February
12, 1953; ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First
Instance of Camarines Norte against DALCO and DAMCO.
Upon motion of the parties the Court, on September 30, 1953, issued an order transferring
the venue of the action to the Court of First Instance of Manila.

On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the
machineries, equipment and supplies of DALCO, and the same were subsequently sold for a
total consideration of P175,000.00 which was deposited in court pending final determination
of the action. By a similar agreement one-half (P87,500.00) of this amount was considered as
representing the proceeds obtained from the sale of the "undebated properties" (those not
claimed by DAMCO and CONNELL), and the other half as representing those obtained from the
sale of the "after acquired properties".
ISSUE:

Whether or not the "after acquired properties" were subject to the deeds of mortgage.
Whether or not the mortgages are valid and binding on the properties stated, in spite of
them, not being registered in accordance with the provisions of the Chattel Mortgage Law.

RULING:

Under the fourth paragraph of both deeds of mortgage, it is apparent that all property of
every nature and description that are taken in exchange or replacement, as well as all
buildings, machineries, fixtures, tools, equipments, and other property that the mortgagor
may acquire, construct, install, attach; or use in, to upon, or in connection with the
premises, that is, its lumber concession, "shall immediately be and become subject to the
lien" of both mortgages in the same manner and to the same extent as if already included
therein at the time of their execution. Such stipulation is neither unlawful nor immoral, its
obvious purpose being to maintain, to the extent allowed by circumstances, the original value
of the properties given as security.
Article 415 does not define real property but enumerates what are considered as such, among
them being machinery, receptacles, instruments or replacements intended by owner of the
tenement for an industry or works which may be carried on in a building or on a piece of land,
and shall tend directly to meet the needs of the said industry or works. Basing of this quoted
legal provision, the lower court held that "the chattels‖ or ―the after acquired properties"
were placed in the real properties mortgaged to plaintiffs; they came within the operation of
Art. 415, paragraph 5 and Art. 2127 of the New Civil Code".
In this case, the after acquired properties were subject to the deed of mortgage.
CASE 10 |MELANI CALCETA
_______________________________________________________________________________

G.R. NO. L-18452 MAY 31, 1965

AUGUSTO COSIO AND BEATRIZ COSIO DE RAMA, PETITIONERS,
VS.
CHERIE PALILEO, RESPONDENT

FACTS:

1. Respondent Palileo obtained a loan of Php 12,000 from petitioner Beatriz Cosio de
Rama. In consideration of which, she signed a document entitled ―Conditional Sale of
Residential Building‖ with right of repurchase within one year. Pursuant to another
agreement, respondent Palileo remained in possession of the house as tenant, paying
petitioner Cosio De Rama a monthly rental of Php 250.00.
2. Petitioner Cosio de Rama subsequently insured the house against fire with the Associated
Insurance & Surety Co., Inc. On October 25, 1952, fire broke out in the house and partly
destroyed the same. For the loss, petitioner Cosio de Rama was paid P13,107 by the
insurance company.
3. Thereafter, Petitioner, Cosio de Rama entered the premises and began the repair of the
house, incurring a cost of Php 12,000.
4. Palileo filed an action seeking for the reformation of the deed of pacto de retro sale into
a loan with an equitable mortgage. Coming to the merits of the case, the trial courts
declared Palileo as lawful owner of the property, without having to reimburse herein
petitioners of the house repair costs. In addition, Cosio De Rama was ordered to pay a
monthly rental of Php 300.00 from the time they unlawfully occupied the house.

ISSUE:

Whether petitioner Cosio de Rama are possessors in good faith with a right to retain
possession until reimbursed for her expenses in repairing the house

RULING:

No. Petitioners do not have right to possession under the Pacto de Retro Contract. ―In
reforming instruments, courts do not make another contract for the parties. They
merely inquire into the intention of the parties and, having found it, reform the
written instrument (not the contract) in order that it may express the real intention of
the parties.”

It was held that the true intention of the parties was merely to place the house as
security for the payment of the loan. Having said that, petitioner could not have
mistaken in the nature of the contract. Therefore, they qualify as possessors in bad
faith.
However, even if they are possessors in bad faith, the High Court held that they have to
be reimbursed of the amount spent in repairing and restoring the house after it has been
damaged by fire.
The High Court held that although the petitioners are deemed ―possessors in bad faith‖,
they are not ―builders in bad faith‖.
CASE 11 |LIANNE BASOG
_______________________________________________________________________________

SORIANO VS. BAUTISTA 6 SCRA 946

This is an appeal made on the judgment rendered by the Court of First Instance of Rizal after
a joint trial of both cases filed by parties which orders to spouses Bautista and de Roxas to
execute a deed of sale covering the property in question in favor of spouses Soriano and de
Jesus upon payment by the latter of Pp1,650.00 which is the balance of the price agreed
upon, that is P3,900.00 and the amount previously received by way of loan of the said spouses
from the said Ruperto Soriano and Olimpia de Jesus, to pay the sum of P500.00 by way of
attorney‘s fees, and to pay the cost.

FACTS:
Spouses Basilio Bautista and Sofia de Roxas are the absolute and registered owners of a parcel
of land, situated in the municipality of Teresa, province of Rizal, covered by Original
Certificate of Title No. 3905, of the Register of Deeds of Rizal and particularly described as
follow:
A parcel of land (lot No. 4980) of the Cadastral Survey of Teresa; situated in the municipality
of Teresa; bounded on the NE. by Lot No. 5004; on the SE. by Lots Nos. 5003 and 4958; on the
SW. by Lot 4949; and the W. and NW by a creek . Containing the area of THIRTY THOUSAND
TWO HUNDRED TWENTY TWO (30,222) square meters, more or less. Date of Survey, December
1913-June, 1914.
That, on May 30, 1956, the said spouses for and in consideration of the sum of P1,800, signed
a document entitled "Kasulatan Ng Sanglaan". And on the said deed both parties agreed that
the mortgagees sps. Soriano and de Jesus may purchase the land within the two years period
as stated in the signed deed. The land was transferred in possession to the mortgagees and
fruits are being enjoyed by them. On May 13 1958 through Atty. Ver spouses Soriano and de
Jesus sent a letter to spouses Bautista and de Roxas stating their interest to buy the land but
the latter refused to comply on the letter. Both parties filed complaints, for spouses Bautista
and de Roxas, they want defendants to accept the payment of the principal obligation and
release the mortgage and to make accounting for the harvest on harvest season (1956-1957)
and for spouses Soriano and de Jesus they pray that they‘ll be allowed to consign or deposit
with the clerk of court the sum of P1,650.00 as the balance of the purchase price of the
parcel of land and have the defendants execute an absolute deed of sale of property in their
favor plus damages. Both cases on the agreement of the parties were tried jointly.
ISSUE:
Whether or not spouses Bautista are entitled to redemption of the subject property.
RULING:
The CFI of Rizal resolved the issue in favor of spouses Ruperto Soriano and Olimpia de Jesus
which orders the other party, spouses Basilio Bautista and Sofia de Roxas to execute an
absolute deed of sale covering the property in question after the former paid the balance of
P1,650.00.
Appellate court affirmed the judgment appealed with cost.
 While the transaction is undoubtedly a mortgage and contains the customary stipulation
concerning redemption, it carries the added special provision which renders the mortgagor‘s
right to redeem defeasible at the election of the mortgagees. There is nothing illegal or
immoral in this as this is allowed under Art 1479 NCC which states: ―A promise to buy and sell
a determinate thing for a price certain is reciprocally demandable. An accepted unilateral
promise to buy or to sell a determinate thing for a price certain is binding upon the promisor
if the promise supported by a consideration apart from the price.‖
In the case cited, the mortgagor‘s promise is supported by the same consideration as that of
the mortgage itself, which is distinct from the consideration in sale should the option be
exercised. The mortgagor‘s promise was in the nature of a continuing offer, non-
withdrawable during a period of 2 years, which upon acceptance by the mortgagees gave rise
to a perfected contract of sale.
CASE 12 |ROBERT JAY BRAZIL
_______________________________________________________________________________

BUCTON VS. RURAL BANK OF EL SALVADOR

G.R No. 179625
FACTS:
Petitioner is the owner of a parcel of land located in Cagayan de Oro City to which Erlinda
Concepcion borrowed the title of the land on the pretext that she is going to show it to an
interested buyer. Concepcion, however, obtained a loan from respondent bank and as a
security for the loan, Concepcion mortgaged the property of petitioner using a SPA which was
allegedly executed in her favor. When Concepcion failed to pay the loan, the house and lot of
petitioner were foreclosed. Petitioner contested that she did not obtained any loan from the
bank and that her signature was forged by Concepcion who obtained such loan. That such
contract was entered into by Concepcion in her own personal capacity. The bank on the other
hand, maintains that it was not negligent in inspecting the said properties and relied on the
presumption of the regularity of the SPA.
ISSUE:
Whether or not the Real Estate mortgage entered into by Erlinda Concepcion binding to the
petitioner which resulted to the foreclosure of her property.
HELD:
The Supreme Court ruled that in order to bind the principal by the deed executed by an
agent, the deed must upon its face purport to be made, signed and sealed in the name of the
principal. The mere fact that the agent was authorized to mortgage the property is not
sufficient to bind the principal, unless the deed was executed and signed by the agent for and
on behalf of his principal. In the case at bar, the authorized agent failed to indicate in the
mortgage that she is acting for and on behalf of her principal. The Real Estate mortgage
explicitly shows on its face that it was signed by Concepcion in her own name and in her own
capacity. There is nothing in the document to show that Concepcion was acting or signing as
an agent of petitioner. Thus, consistent with the law on agency and established
jurisprudence, petitioner cannot be bound by the acts of Concepcion and that the Real Estate
mortgage is void and unenforceable against petitioner.
CASE 13 |MELANI L. BRILATA
_______________________________________________________________________________

THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., INC

VS
JUAN M. POIZAT
FACTS:
The defendant, Juan M. Poizat was given a general power of attorney by his wife,
Gabriela Andrea de Coster, authorizing him to do in her name, place and stead, and make use
of her rights and actions in order to loan or borrow any amount in cash or fungible conditions
he may deem convenient collecting, or paying the principal or interest, for the time, and
under the principal of the interest, when they respectively should or private documents, and
making these transactions with or without mortgage, pledge or personal securities. With the
said SPA, the defendant in the case obtained from the plaintiff a credit for the sum of 10,000
Pounds Sterling to be drawn on the ―Banco Espaňol del Rio de la Plata‖ in London not later
than January, 1913. In order to secure the said mortgage, defendant executed a mortgage
upon the real property of the wife. Originally it was the paraphernal property of the wife.
Later, it formed part of the conjugal property of the husband and wife when the six
warehouse thereon was demolished and a new building was erected there. On November 12,
1923, the defendant failed to pay the loan. The plaintiff brought an action against defendant
to foreclose the mortgage. In the said action, summon was served upon the defendant Juan
M. Poizat only. He employed the services of Antonio A. Sanz to represent the defendant. A
general denial was filed as an answer. On February 18, 1924, during the trial, Jose Galan y
Blanco admitted in open court all the allegations in the complaint and consented that
judgement be rendered. A motion for new trial filed by the defendant was denied. With
that, an execution sale was directed to satisfy the judgement. Thus, the property which has
an assessed value of P324, 685.00 was sold to the plaintiff for the sum of P100, 000.00.
The wife of the defendant which was now the appellant for the said case, has
objected for the first time as to the confirmation of the sale for she claimed that it was
illegally executed and is null and void. She contends that the agent of the defendant was not
authorize to execute it. That the plaintiff, with full knowledge that Juan M. Poizat was
acting beyond the scope of his authority. The contract was not valid. She contends that it
was only after the judgement of the foreclosure became final and order of the sale of the
property was made that she learned about it for the first time and it was tainted with fraud.
The mortgage was executed to secure a loan made to the defendant and to his own benefit
only. With all the objection made by the wife of the defendant the confirmation of the sale
was overruled. Thus, an appeal with several assignment of errors was filed by Gabriela
Andrea de Coster.
ISSUES:
1. WON the real mortgage executed has full force and effect, by whom and for whom it is
binding and for whom it was executed and upon whom it is binding.
2. WON the mortgage is null and void.
RULING:
Although it was admitted that the appellant gave her consent to her husband J. M.
Poizat, the power of attorney in question, and it was in writing and speaks for itself, still it
would be considered legally executed if the mortgage was executed by her or through her
attorney in fact for her and in her name as her act and deed. It would be considered legal
and binding upon her and her property. If it is not so, then it is null and void. Based on the
face of the said instrument, J. M. Poizat as the husband of the wife, was personally a party to
the mortgage. That he was the only person who signed the mortgage. It was absent in the
instrument that he signed it for his wife as agent or as attorney in fact and with the intention
to bind his wife. The instrument shows that the purpose and intent was to bind wife. But, it
also shows upon its face that the credit was granted to Don Juan M. Poizat which he might use
within the entire month of January. Any authority that will bind his wife should be confined
and limited to the power of attorney. There is no principle of law that can bind a person and
become liable on a real property mortgaged which she never executed either in person or
through her attorney in fact. Since, the case was pertaining to a real mortgage upon real
property, the title to which cannot be divested except by sale on execution or the formalities
of the will or deed. The law requires that a power of attorney be executed with all the
formalities required in the deed. In the case, J. M. Poizat has the authority but the law
species how and in what manner it must be done. Since the mortgage was executed by him
and him only and with that reason, it will not be binding upon his wife, and therefore null and
void to her personally. With regards to Don Juan M. Poizat, the said decree is valid and
binding and therefore remains in full force and effect. Regarding the paraphernal property of
the wife it was declared null and void ab initio, and as to her personally, as to the sale of the
paraphernal property it was set aside and vacated, and held for naught, leaving it free and
clear from the mortgage, decree and sale.
CASE 14 |ROBY RENNA ESTOQUE
_______________________________________________________________________________

TAN vs. VALDEHUEZA

66 SCRA 61 August 6, 1975

FACTS:

Defendants Arador Valdehueza and Rediculo Valdehueza have executed two documents of
Deed of Pacto de Retro Sale of two portions of a parcel of land with the total amount of
P1,500.00 in favor of the plaintiff Lucia Tan. Copies of said documents were marked as
‗Annex D‘ and ‗Annex E‘.

The Deed of Pacto de Retro referred to as ‗Annex D‘ dated August 5, 1955 was not registered
in the Registry of Deeds, while the Deed of Pacto de Retro referred to as ‗Annex E‘ dated
March 15, 1955 was registered.

From the execution of the Deed of Sale with right to repurchase, defendants remained in
possession of the land, and land taxes to said land were paid by the same said defendants.

On July 24, 1957, a complaint for injunction was filed by plaintiff against the Valdehuezas to
enjoin them "from entering the above-described parcel of land and gathering the nuts
therein…‖

The trial court rendered judgment ordering defendants not to encroach and molest plaintiff in
the exercise of her proprietary rights; and from which property defendants must be
dispossessed. The trial court treated the registered deed of pacto de retro as an equitable
mortgage but considered the unregistered deed of pacto de retro as a mere case of simple
loan, secured by the property thus sold under pacto de retro.

ISSUE:

Whether or not the transaction between the parties were simple loan

RULING:

No, the transactions between the parties were not simple loan, but equitable mortgage.

Article 2125 of the New Civil Code provides that if the instrument is not recorded, the
mortgage is nonetheless binding between the parties.

The Valdehuezas having remained in possession of the land and the realty taxes having been
paid by them, the contracts which purported to be pacto de retro transactions are presumed
to be equitable mortgages, whether registered or not, there being no third parties involved.
CASE 15 |KRISTIAN ALICANDO
_______________________________________________________________________________

SPOUSES BERNADETTE AND RODULFO VILBAR, Petitioners.

VS
ANGELITO L. OPINION, Respondent.
G.R. NO. 176043
FACTS:

Spouses Vilbar claimed that on July 10, 1979, they and Dulos Realty and Development
Corporation (Dulos Realty) entered into a Contract to Sell involving two (2) lots, LOT 20-b and
LOT 20-A. Sometime in August 1979, spouses Vilbar took possession of Lot 20-B in the concept
of owners and exercised acts of ownership thereon with the permission of Dulos Realty after
making some advance payment.
Upon full payment of the purchase price for Lot 20, or on June 1, 1981, Dulos Realty executed
a duly notarized Deed of Absolute Sale in favour of the spouses Vilbar and their co-purchases
Elena. Dulos Realty also surrendered and delivered the owners duplicate copy covering Lot 20
to them.
However, spouses Vilbar and Elena were not able to register and transfer the title in their
names because Dulos Realty allegedly failed to have the lot formally subdivided despite its
commitment to do so, until Juan Dulos (Juan) died without the subdivision being
accomplished.

Spouses Vilbar and Dulos Realty also executed a Contract to Sell covering Lot 21. To pay for
the balance of the purchase price, spouses Vilbar obtained a housing loan from the
Development Bank of the Philippines (DBP) secured by a real estate mortgage over the said
lot. Dulos Realty facilitated the approval of the loan, the proceeds of which were
immediately paid to it as full payment of the purchase price.
In 1991, the spouses Vilbar were able to pay the loan in full and DBP issued the requisite
Cancellation of Mortgage. The spouses Vilbar have been in actual, open and peaceful
possession of Lot 21 and occupy the same as absolute owners since 1981.
In contrast, Opinion claimed that he legally acquired Lots 20 and 21 through extra-judicial
foreclosure of mortgage constituted over the said properties by Gorospes. They defaulted in
payment, prompting Opinion to file a petition for Extra-Judicial Foreclosure of Real Estate
Mortgage. Subsequently, the subject properties were sold at a public auction where Opinion
emerged as the highest bidder. A Certificate of Sale was issued in his favour on December
18,1995 and annotated on the TCTs of the properties. The Gorospes failed to redeem the
properties within the reglementary period resulting in the eventual cancellation of their
titles. Thus, the issuance of the titles to Opinion.
February 13, 1997, Opinion filed a Petition for Issuance of a Writ of Possession against the
Gorospes. Branch 253initially issued a Writ of Possession and spouses Vilbar and Elena were
served with a notice to vacate the premises. However, the writ was quashed when spouses
Vilbar filed an urgent motion for the quashal of the writ and presented their title to Lot 21,
while Elena presented the Deed of Absolute Sale executed by Dulos Realty covering Lot 20.
Consequently, Opinion filed a Complaint for Accion Reinvindicatoria with Damagesdocketed as
Civil Case No. 98-0302 and raffled to Branch 255 of the RTC of Las Pis City for him to be
declared as the lawful owner and possessor of the subject properties and for his titles to be
declared as authentic.
He likewise prayed for the cancellation of the titles of spouses Vilbar and Elena.

The RTC rendered its decision in favour of Opinion declaring that he lawfully acquired the
disputed properties and that his titles are valid, the sources of which having been duly
established.

The CA agreed with the trial courts ruling that Opinion validly acquired title over Lots 20 and
21 through a valid mortgage, extrajudicial foreclosure and eventual consolidation proceedings
instituted over the said properties.
ISSUE:
Whether or not the CA erred in finding that the respondent Opinion has a better title and/or
has preference over the subject properties identified as Lots 20 and 21.
Whether or not defendant is a buyer in good faith
RULING:
The CA was correct.
Court recognizes the settled rule that levy on attachment, duly registered, takes preference
over a prior unregistered sale. This result is a necessary consequence of the fact that the
properties involved were duly covered by the Torrens system which works under the
fundamental principle that registration is the operative act which gives validity to the
transfer or creates a lien upon the land.
For some unknown reasons, the spouses Vilbar did not cause the transfer of the certificate
title in their name, or at the very least, annotate or register such sale in the original title in
the name of Dulos Realty. This, sadly, proved fatal to their cause. Time and time again, this
Court has ruled that a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears therein.
Having no certificate of title issued in their names, spouses Vilbar have no indefeasible and
incontrovertible title over Lot 20 to support their claim. Further, it is an established rule that
registration isthe operative act which gives validity to the transfer or creates a lien upon the
land.

The spouses Vilbar do not even know if a Deed of Absolute Sale over Lot 21 was executed in
their favor. As the evidence extant on record stands, only a Contract to Sell which is legally
insufficient to serve as basis forthe transfer of title over the property is available. At most, it
affords spouses Vilbar an inchoate right over the property. Absent that important deed of
conveyance over Lot 21 executed between Dulos Realty and the spouses Vilbar, TCT No.
36777 issued in the name of Bernadette Vilbar cannot be deemed to have been issued in
accordance with the processes required by law.
Simply, the spouses Vilbar were not able to present material evidence to prove that TCT of
Lot 21 was issued in accordance with the land registration rules.
Secondly, Gorospe, Sr. acquired through lawful means a valid right to the properties, and he
and his son had a legal right to mortgage the same to Opinion. As a consequence, the Goropes
transmitted property rights to Opinion, who, in turn, acquired valid rights from the Gorospes.
Respondent Opinion is a Buyer in Good Faith. This Court also treats Opinion as a buyer in good
faith. Admittedly, Opinion stated that prior to the execution of the mortgage, he only went to
Lots 20 and 21 once and saw that the properties had occupants.
He likewise admitted that he never talked to the spouses Vilbar and Guingon to determine the
nature of their possession of the properties, but merely relied on the representation of
Gorospe, Sr. that the occupants were mere tenants. He never bothered to request for any
kind of proof, documentary or otherwise, to confirm this claim. Nevertheless, the Court
agreed with the CA that Opinion is not required to go beyond the Torrens title, viz: Contrary
to the [Spouses Vilbar‘s] claim, [Opinion] was never remiss in his duty of ensuring that the
Gorospes had clean title over the property. [Opinion] had even conducted an investigation.
He had, in this regard, no reason not to believe in the assurance of the Gorospes, more so
that the claimed right of [Spouses Vilbar] was never annotated on the certificate of title
covering lot 20, because it is settled that a party dealing with a registered land does not have
to inquire beyond the Certificate of Title in determining the true owner thereof, and in
guarding or protecting his interest, for all that he has to look into and rely on are the entries
in the Certificate of Title. Inarguably, Opinion acted in good faith in dealing with the
registered owners of the properties. He relied on the titles presented to him, which were
confirmed by the Registry of Deeds to be authentic, issued in accordance with the law, and
without any liens or encumbrances. Besides, assuming arguendo that the Gorospes‘ titles to
the subject properties happened to be fraudulent, public policy considers Opinion to still have
acquired legal title as a mortgagee in good faith. As held in Cavite Development Bank v.
Spouses Lim: There is, however, a situation where, despite the fact that the mortgagor is not
the owner of the mortgaged property, his title being fraudulent, the mortgage contract and
any foreclosure sale arising therefrom are given effect by reason of public policy. This is the
doctrine of ‘the mortgagee in good faith’ based on the rule that all persons dealing with
property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required
to go beyond what appears on the face of the title. The public interest in upholding the
indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of
any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon
what appears on the face of the certificate of title.
CASE 16 |ARIEL BALTAZAR
_______________________________________________________________________________

ROSANA EREA VS QUERRER-KAUFFMAN, G.R. No. 165853

FACTS:

Vida Dona Kauffman is the owner of a residential lot with a house erected thereon
with the duplicate copy of the title as well as the tax declaration covering the property, kept
in a safety deposit box in the house. In February 1997, as she was going to the United States,
Kuaffman entrusted to her live in partner, Eduardo Victor the key to her house. Victor also
later left to the United States entrusting the same house and key to his sister, Mira Bernal.

In October 1997, Kauffman asked sister Evelyn Pares to get the house from Bernal so
that the property could be sold. Upon opening of the deposit box, Pares discovered that the
owners duplicate were missing and some other articles. Learning of the loss of the title,
Kauffman decided to return to the Philippines. It was discovered then that the property was
mortgaged to Rosena Erena. It appeared that a Vida Dana F. Querrer had signed the Real
Estate Mortgage as owner-mortgagor together with Jennifer V. Ramirez, Victors daughter, as
attorney-in-fact.

Kauffman filed a complaint against Erea, Bernal and Jennifer Ramirez for Nullification
of Deed of Real Estate Mortgage and Damages. Erea interposed the defense of being a
mortgagee in good faith. She likewise interposed a cross-claim against Bernal and Jennifer
Ramirez.
Indeed, when respondent and her sister, Evelyn Pares, confronted Mira Bernal
(Jennifer Ramirezs aunt), admitted that she and Jennifer Ramirez stole the owners duplicate
copy of the title and the tax declarations covering the property that they forged the
respondents signature on the Real Estate Mortgage.

On April 2004 rendered a ruling in favour of the defendant and ordered dismissal of
the complaint, RTC adduced that the defendant relied in good faith on the title after
ascertaining with ROD the identity of Vida Dona Kauffman as the true owner of the property.
Kaufman filed a Motion for Reconsideration but was denied prompting her to file an appeal
with the Court of Appeals.

The Court of Appeals rendered a ruling in favor of Kaufman holding that in a real
estate mortgage contract, it is essential that the mortgagor be the absolute owner of the
property to be mortgaged; otherwise, the mortgage is void.

ISSUE:

Whether or not the exercise of due diligence and reasonable caution prior to the
acceptance and execution, or the doctrine ―mortgagee in good faith‖ will apply in a forged
contract.
RULING:

The Supreme Court ruled that in a forged mortgage, the doctrine of "mortgaged in a
good faith‖ cannot be applied and will not benefit morgagee in a forged contract.

The doctrine of mortgagee in good faith does not apply to a situation where the title is
still in the name of the rightful owner and the mortgagor is a different person pretending to
be the owner. In such a case, the mortgagee is not an innocent mortgagee for value and the
registered owner will generally not lose his title.
CASE 17 |REA FE GARABILES
_______________________________________________________________________________

G.R. No. 167848 April 27, 2007

BANK OF COMMERCE, Petitioner,

vs.
SPS. PRUDENCIO SAN PABLO, JR., and NATIVIDAD O. SAN PABLO, Respondents.

FACTS:

Santos obtained a loan of P1,064,000.40from Direct Funders Management and Consultancy

Inc., (Direct Funders). Natividad executed a SPA in favor of Santos, authorizing him to
mortgage to Direct Funders her paraphernal real property as security. In the Deed of REM,
Natividad and her husband, Prudencio San Pablo, signed as the co-mortgagors of Santos.
Santos settled his obligation but failed to turn over the TCT of the subject property despite
demands. Upon inquiry with the ROD, the spouses discovered that the property was again
used by Santos as collateral for another loan obligation from the Bank of Commerce. The
spouses then filed a Complaint seeking for the Quieting of Title and Nullification of the SPA
and the deed of REM, and the subsequent foreclosure sale. While the case is pending, the
Bank of Commerce, for non-payment, initiated the foreclosure proceedings, and was the
highest bidder at the auction sale.

Spouses: Their signatures were forged. While the loan with the Direct Funders was obtained
with their consent and direct participation, they never authorized the subsequent loan
obligation with the Bank of Commerce.

Bank of Commerce: It is a mortgagee in good faith and therefore entitled to protection under
the law. It strenuously asserts that it is an innocent party who had no knowledge that the
right of Santos to mortgage the subject property was merely simulated. Since the loan
already became due and demandable, the foreclosure sale is justified.

ISSUE:
Whether or not the Bank of Commerce is a mortgagee in good faith.

RULING:

No. In cases where the mortgagee does not directly deal with the registered owner of real
property, the law requires that a higher degree of prudence be exercised by the mortgagee.
This principle is applied more strenuously when the mortgagee is a bank or a banking
institution.
The Bank of Commerce clearly failed to observe the required degree of caution in
ascertaining the genuineness and extent of the authority of Santos to mortgage the subject
property. It should not have simply relied on the face of the documents submitted by Santos,
as its undertaking to lend a considerable amount of money required of it a greater degree of
diligence. That the person applying for the loan is other than the registered owner of the
real property being mortgaged should have already raised a red flag and which should have
induced the Bank of Commerce to make inquiries into and confirm Santos‘ authority to
mortgage the Spouses San Pablo‘s property.
A person who deliberately ignores a significant fact that could create suspicion in an
otherwise reasonable person is not an innocent purchaser for value.
Wherefore, in view of the foregoing, the instant petition is DENIED. The Decision dated 10
September 2004 rendered by the Court of Appeals in CA-G.R. SP No. 76562, is
hereby affirmed. The SPA, the Deed of Real Estate Mortgage, and the Foreclosure Proceedings
conducted in pursuant to said deed, are hereby declared void ab initio.
SO ORDERED.
CASE 18 |ARABELLA A. MERIDA
_______________________________________________________________________________

HOMEOWNERS SAVINGS AND LOAN BANK VS FELONIA

717 SCRA 359 (2014)
FACTS:
Felonia and De Guzman owners of a parcel of land, mortgage their property to Delgado
to secure a loan of P1, 655, 000.00. However, instead of a real estate mortgage, the parties
executed a deed of absolute sale with an option to repurchase.
On, 20 December 1991, Felonia and De Guzman filed a reformation of contract before
the RTC of Manila. The RTC, on March 1995, rendered a judgement favourable to Felonia and
de Guzman ruling that the contract as a mortgage instead of a deed of sale with right to
repurchase.
Aggrieved, Delgado elevated the case to the CA. The CA affirmed the trial court
decision on 16 October 2000, the CA decision became final and executory.
Inspite of the pendency of the reformation case in which she was the defendant,
Delgado filed a petition for consolidation of ownership of property sold with an option to
repurchase and issuance of a new title certificate in the RTC of Las Pinas which was granted.
By virtue of the RTC decision, Delgado transferred the title to her name. Hence the
title registered in the name of Felonia and de Guzman, was cancelled.
Aggrieved, Felonia and De Guzman elevated the case to the CA through a petition for
annulment of judgement.
Meanwhile, on June 1995 Delgado mortgage the subject property to Homeowners
Savings and Loan Bank (HSLB) using her newly registered title. Three days later, on 5 June
1995, HSLB caused the annotation of the mortgage.
On 14 September 1995, Felonia and De Guzman cause the annotation of a Notice of Lis
Pendens on Delgado‘s title in a civil case for reformation of instrument.
On 20 November 1997 HSLB foreclosed the subject property and later consolidated
ownership in its favour, causing the issuance of a new title in its name.
On 27, October 200, the CA annulled and set aside the decision of the RTC, Las Pinas
in the consolidation case. The CA declared Felonia and D Guzman as the absolute owners of
the subject property and ordering the cancellation of Delgado‘s title, became final and
executory on 1 December 2000.
ISSUE:
Whether or not there was a valid mortgage between Delgado and HSLB?
RULING:
The subject of Lis Pendens on the tittle of HSLB‘s vendor, Delgado, is the reformation
case file against Delgado by the herein respondents the case was decide with finality by the
CA in favour of herein respondents. The contract of sale in favour of Delagado was ordered
reformed into a contract of mortgage. As it turned out, Delgado could not have constituted a
valid mortgage on the property. That the mortgagor be the absolute owner of the thing
mortgaged is the essential requisite of a contract of mortgage. Article 2085 (2) of the Civil
Code specifically says so:
ART. 2085. The following requisites are essential to the contract of pledged and
mortgaged.
xxxx
(2) That the pledger or mortgagor be the absolute owner of the thing pledged or
mortgaged.
Succinctly, for a valid mortgaged to exist, ownership of the property is an essential
requisite.
Reyes v. D Leon cited the case of PNB v. Rocha where it pronounced that a ―mortgage
of real property executed by one who is not the owner thereof at the time of the execution of
mortgage is without legal existence‖. Such that according to DBP v. Prudential Bank, there
being no valid mortgage there could also be no valid foreclosure or valid auction sale.
CASE 19 |TALITHA THEA ARPON
_______________________________________________________________________________
ARGUELLES VS. MALARAYAT
719 SCRA 563 (2014)
FACTS:
A petition for review on certiorari on CA‘s decision in reversing the RTC Branch 86, of Taal,
Batangas‘ decision on Civil Case No. 66.
Fermina M. Guia was the registered owner of Lot 3, a parcel of agricultural land in Barrio
Pinagkurusan, Alitagtag, Batangas, (4,560 sq. meters) as evidenced by Original Certificate of
Title (OCT) No. P-129304. On December 1, 1990, F. Guia sold the south portion of the land
(1,350 sq. meters) to the spouses Petronio and Macaria Arguelles who took possession but
failed to register the Deed of Sale with the Register of Deeds nor was annotated on the OCT.
F. Guia ordered her son Eddie Guia and his wife Teresita Guia to subdivide the land covered
by OCT No. P-12930 into three lots and to apply for the issuance of separate titles (Lot 3-A,
Lot 3-B, Lot 3-C), wherein they succeeded subdividing the lot to the following: Lot 3-A=
Fermina M. Guia, Lot 3-B= Spouses Datingaling, Lot 3-C= Fermina M. Guia. However, F. Guia
instructed to deliver the Transfer Certificate of Title (TCT) corresponding to Lot 3-C to the
vendees of the unregistered sale (spouses Arguelles), whom despite their demands, they
never received the TCT.
On August 18, 1997, the spouses Guia obtained a loan amounting to P240,000 from the
respondent Malarayat Rural Bank and secured the loan with a Deed of Real Estate Mortgage
over Lot 3-C pursuant to the duly annotated Special Power of Attorney executed by the
registered owner of Lot 3-C, Fermina M. Guia, in favor of the mortgagors.
Then the spouses (Arguelles) alleged that it was only in 1997 that they discovered the
subdivision of the lot into three, the issuance of separate TCT of each lot and the annotation
of the Real Estate Mortgage and SPA over Lot 3-C. Hence, the spouses filed a complaint for
Annulment of Mortgage and Cancellation of Mortgage Lien with Damages against respondent.
However, the respondent filed an Answer with Counterclaim and Cross-claim wherein it
argued that the failure of the spouses to register the Deed of Sale was fatal to their claim of
ownership.
The RTC ruled in favor of the plaintiffs on the ground that the spouses Guia were no longer
the absolute owners of Lot 3-C at the time they mortgaged it to the respondent, and that the
latter was not a mortgagee in good faith as it failed to exercise the required degree of
diligence.
However, the CA reversed the decision of the RTC claiming that because of the failure of the
spouses to register, the unregistered sale could not affect the respondent, hence, the latter
has a better right to the land mortgaged.
ISSUE:
Whether or not, the respondent is a mortgagee in good faith who is entitled to the protection
on its mortgage lien.
RULING:
The respondent is not a mortgagee in good faith, he failed to exercise the required degree of
diligence, prudence, and care in approving the loan application of the spouses Guia.
Respondent should have diligently conducted an investigation of the land offered as collateral
although the report of Inspection and Credit Investigation found that the land was inspected,
he turned a blind eye to the finding therein that the "lot is planted with sugarcane with
annual yield (crops) in the amount of P15,000". Such fact should have immediately prompted
to conduct further inquiries especially that the spouses Guia were not the registered owners
of the mortgaged land. It was incumbent upon the respondent to be more cautious in dealing
with the spouses Guia, and inquire further regarding the identity and possible adverse claim
of those in actual possession of the property.
In LBP vs Poblete, ―where the mortgagee acted with haste in granting the mortgage loan and
did not ascertain the ownership of the land being mortgaged, as well as the authority of the
supposed agent executing the mortgage, it cannot be considered an innocent mortgagee‖.
Moreover, when "the person applying for the loan is other than the registered owner of the
real property being mortgaged, such fact should have already raised a red flag and which
should have induced the Bank xx x to make inquiries into and confirm x x x the authority to
mortgage x x x. A person who deliberately ignores a significant fact that could create
suspicion in an otherwise reasonable person is not an innocent purchaser for value."
Since the respondent is not a mortgagee in good faith, he is not entitled to the protection
under the law. The unregistered sale in favor of the spouses Arguelles prevails over the
mortgaged lien of the respondent. Hence, the petition is granted.
CASE 20 |CELESTE FAITH S. DELA CRUZ
_______________________________________________________________________________

LANDBANK OF THE PHILIPPINES VS POBLETE 691 SCRA VS 613 (2013)

FACTS:
Respondent Barbara Sampaga Poblete (Poblete) is the registered owner of a parcel of land,
Lot No. 29 under OCT No. P-12026 with an area of 455 square meters located in Buenavista,
Sablayan, Occidental Mindoro.
On October 1997, Poblete obtained a loan of P300,000.00 from Kabalikat ng Pamayanan ng
Nagnanais Tumulong at Yumaman Multi-Purpose (Kapantay). She mortgaged her Lot No.29 to
Kapantay, who, in turn, used OCT No. P-12026 as collateral under its Loan Account No. 97-OC-
013 with Land Bank-Sablayan Branch.
After a year, Poblete instructed her son-in-law Domingo Balen to look for a buyer for Lot No.
29 in order to pay her loan and he referred Angelito Joseph Maniego. Both parties agreed that
the lot shall amount to P 900,000.00. However, upon Maniego‘s suggestion, a Deed of
Absolute Sale dated November 9, 1998 with P300,000.00 as consideration was executed by
Poblete in order to reduce taxes. In the Deed, Poblete specifically described herself as a
widow. Balen, then, delivered the Deed to Maniego. But, instead of paying the price, Maniego
promised to pay upon his return from the United States. In an affidavit dated November 19,
1998, Poblete agreed to have said amount deposited in her Land Bank Savings Account but,
Maniego failed to do so.
Based on a Certification issued by Landbank Sablyan Branch on August 1999, Maniego paid
Kapantay‘s Loan Account ofP448,202.08. On the subsequent year, he applied for a loan of P1
million from Land Bank using OCT No. P-12026 as a collateral with a condition that the title
must be first transferred on his name. On August 11, 2000, the Register of Deeds issued TCT
No. T-20151 in Maniego‘s name pursuant to a Deed of Absolute Sale bearing the signatures of
Mrs. Poblete and her husband dated August 11, 2000 and Maniego successfully availed the
Credit Line Agreement for P1M and a Real Estate Mortgage over TCT No. T-20151 on August
15, 2000. On November 2002, Land Bank filed an Application for an Extra-judicial Foreclosure
against the said Mortgage stating that Maniego failed to pay his loan amounting to
P1,154,388.88.
Poblete filed a complaint for nullification of the Deed of Sale dated August 11, 2000 and TCT
No. T-20151, Reconveyance of the Title and Damages with a Prayer for Temporary Restraining
Order and/or Issuance of Writ of Preliminary Injunction against Maniego, Landbank , the
Register of Deeds and Elsa Aguirre. The complainant alleged taht despite her demands on
Maniego, she did not receive the consideration of P900,000.00 FOR loT. No. 29. She also
claimed that the Deed dated August 11, 2000 bearing her and her deceased husband‘s
signature, was a forgery as their signatures were forged.
The judgment of RTC, affirmed by the CA upon appeal, favors the plaintiff Poblete. Hence,
this petition.
ISSUE: WON the CA erred in upholding the finding of the trial court declaring the TCT No. T-
20151 as null and void.
RULING:
The petition is bereft of merit.
It is well-entrenched rule, as applied, by the CA, that a forged or fraudulent deed is a
nullity and conveys no title. Moreover, where the deed of sale states that the purchase
price has been paid but in fact has never been, the deed is void ab initio for lack of
consideration. Since the Deed, is void, the title is also void. Since the land title has been
declared void by final judgment, the Real Estate Mortgage over it is also void. It is
essential that the mortgagor be the absolute owner of the mortgage; otherwise, the
mortgage is void.
The doctrine ―the mortgagee in good faith as a rule does not apply to banks which are
required to observe a higher standard of diligence. A bank cannot assume that, simply
because the title offered as security is on its face, free of any encumbrances or lien, it is
relieved of the responsibility of taking further steps to verify the title and inspect the
properties to be mortgaged.
Land Bank processed Maniego‘s loan application upon his presentation of OCT No. P-12026,
which was still under the name of Poblete. Land Bank even ignored the fact that Kapantay
previously used Poblete‘s title as collateral in its loan account with Land Bank.
The records do not even show that Land Bank investigated and inspected theproperty to
ascertain its actual occupants. The standard practice of banks, before approving a loan is to
send representatives to the premises of the land offered as collateral to investigate its real
owners
Land Bank merely mentioned Maniego‘s loan application upon his presentation of OCT No. P-
12026, which was still under the name of Poblete.
Furthermore, only one day after Maniego obtained TCT No. P-20151 under his name, Land
Bank and Maniego executed a Credit Line Agreement and Real Mortgage. Because of
Landbank‘s haste in granting the loan, it appears that Maniego‘s loan was already completely
processed while the collateral was still in the name of Poblete.
Where said mortgagee acted with haste in granting the mortgage loan and did not ascertain
the ownership of the land being mortgaged, it cannot be considered innocent mortgagee.
The pari delicto rule provides ―when two parties are equally at fault, the law leaves them as
they are and denies recovery by either one of them. This court adopt the decisions of RTC and
CA that only Maniego is at fault. Finally, on the issue of estoppels and laches, such question
were not raised before the trial court. It is settled that an issue which are neither alleged in
the complaint nor raised during the trial cannot be raised for the time on appeal.
The issue on the nullity of Maniego‘s title had already been foreclosed when this Court denied
Maniego‘s petition for review in the Resolution dated 13 July 2011, which became final and
executory on 19 January 2012. It is settled that a decision that has acquired finality becomes
immutable and unalterable and may no longer be modified in any respect, even if the
modification is meant to correct erroneous conclusions of fact or law and whether it will be
made by the court that rendered it or by the highest court of the land. This is without
prejudice, however, to the right of Maniego to recover from Poblete what he paid to
Kapantay for the account of Poblete, otherwise there will be unjust enrichment by Poblete.
CASE 21 |REYMART A. TANPINGCO
_______________________________________________________________________________

G.R. No. 129471. April 28, 2000

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner
vs.
COURT OF APPEALS and CARLOS CAJES, respondents.

FACTS:
The land in dispute is a 19.4 hec. parcel of land in San Miguel, Bohol was owned by Ulpiano
Mumar since 1917. He sold it to the respondent Carlos Cajes in 1950 for which tax declaration
was issued in 1950, 1961, and 1974.
In 1969, unknown to Cajes, Jose Alvares obtained registration of a parcel of land with an area
of 1,512,468 sq. m. in his name, on June 16, 1969, which included the 19.4 hec. of land
occupied by Cajes.
In 1972, Alvares sold the land to spouses Geudencio and Rosario Benduya to whom TCT No.
10101 was issued. Like Alvares, the spouses were never in possession of the property. The
spouses Benduya then obtained a loan from the petitioner DBP (Development Bank of the
Philippines) for P 526,000.00 and mortgage the land.
In 1978, another mortgage over the land was executed by SAAD Investment Corp., and SAAD
Agro-Industries Inc., represented by Gaudencio Benuya and the spouses Benuya personally
execute another mortgage in favour of DBP for P 1.43 million.
In 1985, mortgage on the payment was foreclosed because of failure to pay the loan. In the
foreclosure sale, the property was sold with DBP as the highest bidder.
It appears that respondent Cajes had also applied for a loan from DBP in 1978, offering his
19.4 hec. property as security for the loan which was approved. However, after the release of
the loan, DBP found out that the land mortgage by Cajes was included in the land mortgaged
by spouses Beduya.
Petitioner DBP cancelled the loan and demanded payment from Cajes. Sometime in April of
1986, more than a year after the foreclosure sale, a re-appraisal of the property covered by
TCT No. 10101 was conducted by the petitioner‘s representatives. It was then discovered that
the private respondent Cajes was still in possession of the property and was asked to vacate
immediately. As private respondent refused to do so, petitioner filed a complaint for recovery
of possession with damages against Cajes, invoking that DPB was an innocent purchaser for
value during the foreclosure sale. The Region Trial Court of Tagbilaran City rendered a
decision declaring petitioner, DBP, the lawful owner of the entire land on the ground that the
degree of registration was binding upon the land.
The Court of Appeals reversed the RTC decision. Hence, this petition.
ISSUES:
Whether or not the foreclosure sale of the property is valid? Or whether or not the petitioner
bank is a mortgagor in good faith or innocent purchaser for value?
RULING:
No, the foreclosure sale is invalid and the petitioner, DBP is neither a mortgagor in good faith
nor an innocent purchaser for value.
At the time of the constitution of the mortgage, the mortgagee bank failed to conduct a
standard ocular inspection of the property being mortgage. While an innocent mortgagee is
not expected to conduct an exhaustive investigation on the history of the mortgagor‘s title,
just by relying on the face of the certificate of title, in the case of a banking institutions, the
case is different. A bank, as a mortgagee, must exercise due diligence before entering into a
contract. The standard practice for banks, before approving a loan is to send a representative
to the premises of the land offered as collateral and to investigate who are the legal owners
thereof, in compliance with the rules on judicial notices. Banks, having been impressed with
public interest, are expected to exercise more care and prudence than ordinary private
individuals in their dealings, even those involving registered foreclosure sales. A person who
deliberately ignores a significant fact which would create a suspicion in an otherwise
reasonable man is not an innocent purchaser for value.
Being informed by Beduya that private respondent occupied a portion of the property and
upon ascertaining by the petitioner‘s representative the land mortgaged to be included in
TCT No. 10101, the petitioner cannot claim an innocent purchaser for value, even in a
foreclosure sale by the court.
It is a well-settled rule that a purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor.
The SC affirms the decision of the CA.
CASE 22 |JUNNEL CANETE
_______________________________________________________________________________
CASE 23 |LOURDES ECLE
_______________________________________________________________________________

RIZAL COMMERCIAL BANKING CORP. VS CA 289 SCRA 292 (1998)

FACTS:

 RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons,
Inc. GOYU‘s applied again and through Binondo Branch key officer's Uy‘s and Lao‘s
recommendation, RCBC‘s executive committee increased its credit facility to P50M to
P90M and finally to P117M.
 As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in favor of
RCBC.
 GOYU obtained in its name 10 insurance policy on the mortgaged properties from Malayan
Insurance Company, Inc. (MICO). In February 1992, he was issued 8 insurance policies in
favor of RCBC.
 April 27, 1992: One of GOYU‘s factory buildings was burned so he claimed against MICO for
the loss who denied contending that the insurance policies were either attached pursuant
to writs of attachments/garnishments or that creditors are claiming to have a better right
 GOYU filed a complaint for specific performance and damages at the RTC
 RCBC, one of GOYU‘s creditors, also filed with MICO its formal claim over the proceeds of
the insurance policies, but said claims were also denied for the same reasons that MICO
denied GOYU‘s claims
 RTC: Confirmed GOYU‘s other creditors (Urban Bank, Alfredo Sebastian, and Philippine
Trust Company) obtained their writs of attachment covering an aggregate amount
of P14,938,080.23 and ordered that 10 insurance policies be deposited with the court
minus the said amount so MICO deposited P50,505,594.60.
 Another Garnishment of P8,696,838.75 was handed down
 RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC its
loan
 CA: Modified by increasing the damages in favor of GOYU
 In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C.
Sebastian (the creditor) and GOYU (the debtor), where the subject insurance policies
were attached in favor of Sebastian
 RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded
that the endorsements favoring RCBC as defective.

ISSUE:
W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the
mortgagor, in case of the occurrence of loss CLICK TO SEE MORE

RULING:
YES.
 mortgagor and a mortgagee have separate and distinct insurable interests in the same
mortgaged property, such that each one of them may insure the same property for his
own sole benefit
 although it appears that GOYU obtained the subject insurance policies naming itself as the
sole payee, the intentions of the parties as shown by their contemporaneous acts, must be
given due consideration in order to better serve the interest of justice and equity
 8 endorsement documents were prepared by Alchester in favor of RCBC
 MICO, a sister company of RCBC
 GOYU continued to enjoy the benefits of the credit facilities extended to it by RCBC.
GOYU is at the very least estopped from assailing their operative effects.
 The two courts below erred in failing to see that the promissory notes which they ruled
should be excluded for bearing dates which are after that of the fire, are mere renewals
of previous ones
 RCBC has the right to claim the insurance proceeds, in substitution of the property lost in
the fire. Having assigned its rights, GOYU lost its standing as the beneficiary of the said
insurance policies
 insurance company to be held liable for unreasonably delaying and withholding payment
of insurance proceeds, the delay must be wanton, oppressive, or malevolent - not shown
 Sebastian‘s right as attaching creditor must yield to the preferential rights of RCBC over
the Malayan insurance policies as first mortgagee.
CASE 24 |EDWIN LOPEZ
_______________________________________________________________________________

G.R. No. 189316 June 1, 2013

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
SPOUSES BERNARD and CRESENCIA MARANON, Respondents.

FACTS:

The case at bar involves a 152-square meter parcel of land located at Cuadra-Smith Streets,
Downtown, Bacolod (subject lot) erected with a building leased by various tenants. The
subject lot was among the properties mortgaged by Spouses Rodolfo and Emilie Montealegre
to PNB as a security for a loan. In their transactions with PNB, Spouses Montealegre used
Transfer Certificate of Title (TCT) No. T-156512 over the subject lot purportedly registered in
the name of Emilie Montealegre .

When Spouses Montealegre failed to pay the loan, PNB initiated foreclosure proceedings on
the mortgaged properties, including the subject lot. In the auction sale held on August 16,
1991, PNB emerged as the highest bidder. It was issued the corresponding Certificate of Sale
dated December 17, 19917 which was subsequently registered on February 4, 1992.

Before the expiration of the redemption period or on July 29, 1992, Spouses Marañon filed
before the RTC a complaint for Annulment of Title, Reconveyance and Damages 9 against
Spouses Montealegre, PNB, the Register of Deeds of Bacolod City and the Ex-Officio Provincial
Sheriff of Negros Occidental. The complaint, docketed as Civil Case No. 7213, alleged that
Spouses Marañon are the true registered owners of the subject lot by virtue of TCT No. T-
129577 which was illegally cancelled by TCT No. T-156512 under the name of Emilie who used
a falsified Deed of Sale bearing the forged signatures of Spouse Marañon10 to effect the
transfer of title to the property in her name.

In its Answer,11 PNB averred that it is a mortgagee in good faith and for value and that its
mortgage lien on the property was registered thus valid and binding against the whole world.
The parties stipulated, among others, that the period for legal redemption of the subject lot
has already expired.

While the trial proceedings were ongoing, Paterio Tolete (Tolete), one of the tenants of the
building erected on the subject lot deposited his rental payments with the Clerk of Court of
Bacolod City which, as of October 24, 2002, amounted to P144,000.00.

Ruling of the RTC :

The RTC rendered its Decision13 in favor of the respondents after finding, based on the
expert testimony of Colonel Rodolfo Castillo, Head of the Forensic Technology Section of
Bacolod City Philippine National Police, that the signatures of Spouses Marañon in the Deed of
Sale presented by Spouses Montealegre before the Register of Deeds to cause the cancellation
of TCT No. T-129577 were forged. Hence, the RTC concluded the sale to be null and void and
as such it did not transfer any right or title in law. PNB was adjudged to be a mortgagee in
good faith whose lien on the subject lot must be respected.

What precipitated the controversy at hand were the subsequent motions filed by Spouses
Marañon for release of the rental payments deposited with the Clerk of Court and paid to PNB
by Tolete.

On June 13, 2006, Spouses Marañon filed an Urgent Motion for the Withdrawal of Deposited
Rentals15 praying that the P144,000.00 rental fees deposited by Tolete with the Clerk of Court
be released in their favor for having been adjudged as the real owner of the subject lot. The
RTC granted the motion in its Order16 dated June 28, 2006.

On September 5, 2006, Spouses Marañon again filed with the RTC an Urgent Ex-Parte Motion
for Withdrawal of Deposited Rentals17 praying that the P30,000.00 rental fees paid to PNB by
Tolete on December 12, 1999 be released in their favor. The said lease payments were for the
five (5)-month period from August 1999 to December 1999 at the monthly lease rate
of P6,000.00.

The RTC granted the motion in its Order18 dated September 8, 2006 reasoning that pursuant
to its Decision dated June 2, 2006 declaring Spouses Marañon to be the true registered owners
of the subject lot, they are entitled to its fruits.

The PNB differed with the RTC‘s ruling and moved for reconsideration averring that as
declared by the RTC in its Decision dated June 2, 2006, its mortgage lien should be carried
over to the new title reconveying the lot to Spouses Marañon. PNB further argued that with
the expiration of the redemption period on February 4, 1993, or one (1) year from the
registration of the certificate of sale, PNB is now the owner of the subject lot hence, entitled
to its fruits. On November 20, 2006, the RTC issued an Order again directing PNB to release to
Spouses Marañon the P30,000.00 rental payments considering that they were adjudged to
have retained ownership over the property.20

On December 6, 2006, the RTC issued another Order denying PNB‘s motion for reconsideration
and reiterating the directives in its Order dated September 8, 2006.21

Aggrieved, PNB sought recourse with the CA via a petition for certiorari and
mandamus22 claiming that as the lawful owner of the subject lot per the RTC‘s judgment
dated June 2, 2006, it is entitled to the fruits of the same such as rentals paid by tenants
hence, the ruling that "the real estate mortgage lien of the PNB registered on the title of Lot
No. 177-A-1 Bacolod Cadastre shall stay and be respected.

Ruling of the CA :

In its Decision23 dated June 18, 2008, the CA denied the petition and affirmed the RTC‘s
judgment ratiocinating that not being parties to the mortgage transaction between PNB and
Spouses Montealegre, Spouses Marañon cannot be deprived of the fruits of the subject lot as
the same will amount to deprivation of property without due process of law. The RTC further
held that PNB is not a mortgagee in good faith because as a financial institution imbued with
public interest, it should have looked beyond the certificate of title presented by Spouses
Montealegre and conducted an inspection on the circumstances surrounding the transfer to
Spouses Montealegre.

PNB moved for reconsideration25 but the motion was denied in the CA Resolution dated
August 10, 2009.26Hence, the present recourse whereby PNB argues that the RTC Decision
dated June 2, 2006 lapsed into finality when it was not appealed or submitted for
reconsideration. The CA however erroneously altered the RTC Decision by reversing the
pronouncement that PNB is a mortgagee-in-good-faith.

ISSUES:

1. Whether or not the petition for certiorari and mandamus of PNB claiming as the rightful
owner of the foreclosed property is entitled to the fruits such as rentals paid by the tenants

2.Whether or not the RTC and CA erred in its decision favoring the Spouses Maranon as the
rightful owners of the forclosed property and thus entitled to receive the rental fees

RULING:

The petition is denied.

The RTC affirmed the pronouncement that Spouses Marañon are still the rightful owners of
the subject lot, a matter that has been settled with finality as well. This notwithstanding, the
Court agrees with the ultimate outcome of the CA‘s assailed resolutions.

Rent is a civil fruit31 that belongs to the owner of the property32 producing it by right of
accession33.34 The rightful recipient of the disputed rent in this case should thus be the owner
of the subject lot at the time the rent accrued. It is beyond question that Spouses Marañon
never lost ownership over the subject lot. This is the precise consequence of the final and
executory judgment in Civil Case No. 7213 rendered by the RTC on June 3, 2006 whereby the
title to the subject lot was reconveyed to them and the cloud thereon consisting of Emilie‘s
fraudulently obtained title was removed.

The protection afforded to PNB as a mortgagee in good faith refers to the right to have its
mortgage lien carried over and annotated on the new certificate of title issued to Spouses
Marañon35 as so adjudged by the RTC. Thereafter, to enforce such lien thru foreclosure
proceedings in case of non-payment of the secured debt,36 as PNB did so pursue.

Consequently, in case of non-payment of the secured debt, foreclosure proceedings shall

cover not only the hypothecated property but all its accessions and accessories as well.

However, the rule is not without qualifications. After all, it is an indispensable requisite of a
valid real estate mortgage that the mortgagor be the absolute owner of the encumbered
property.

All improvements subsequently introduced or owned by the mortgagor on the encumbered

property are deemed to form part of the mortgage. That the improvements are to be
considered so incorporated only if so owned by the mortgagor is a rule that can hardly be
debated since a contract of security, whether, real or personal, needs as an indispensable
element thereof the ownership by the pledgor or mortgagor of the property pledged or
mortgaged.

In the absence of an adverse claimant or any evidence to the contrary, all accessories and
accessions accruing or attached to the mortgaged property are included in the mortgage
contract and may thus also be foreclosed together with the principal property in case of non-
payment of the debt secured.

Corollary, any evidence sufficiently overthrowing the presumption that the mortgagor owns
the mortgaged property precludes the application of Article 2127. Otherwise stated, the
provision is irrelevant and inapplicable to mortgages and their resultant foreclosures if the
mortgagor is later on found or declared to be not the true owner of the property, as in the
instant case.1âwphi1

It is beyond question that PNB‘s mortgagors, Spouses Montealegre, are not the true owners of
the subject lot much less of the building which produced the disputed rent. The foreclosure
proceedings on August 16, 1991 caused by PNB could not have, thus, included the building
found on the subject lot and the rent it yields. PNB‘s lien as a mortgagee in good faith
pertains to the subject lot alone because the rule that improvements shall follow the
principal in a mortgage under Article 2127 of the Civil Code does not apply under the
premises. Accordingly, since the building was not foreclosed, it remains a property of Spouses
Marañon; it is not affected by non-redemption and is excluded from any consolidation of title
made by PNB over the subject lot. Thus, PNB‘s claim for the rent paid by Tolete has no basis.

Lastly, it is worthy to note that the effects of the foreclosure of the subject lot is in fact still
contentious considering that as a purchaser in the public sale, PNB was only substituted to
and acquired the right, title, interest and claim of the mortgagor to the property as of the
time of the levy.44 There being already a final judgment reconveying the subject lot to
Spouses Marañon and declaring as null and void Emilie's purported claim of ownership, the
legal consequences of the foreclosure sale, expiration of the redemption period and even the
consolidation of the subject lot's title in PNB's name shall be subjected to such final
judgment.

The petition is hereby DENIED. The Decision dated June 18, 2008 and Resolution dated August
10, 2009 of the Court of Appeals in CA-G.R. SP No. 02513 are AFFIRMED.
CASE 25 |JUNNEL CANETE
_______________________________________________________________________________
REPUBLIC PLANTERS BANK VS. SARMIENTO 537SCRA303 (2007)

FACTS:
Respondents Vivencio and Jesusa Sarmiento, their son Jose and latter‘s spouse,
Elizabeth entered into several loan transaction with petitioner Republic Planter‘s Bank.
Initially, respondents entered into an Php 80,000.00 loan agreement with the petitioner bank
secured by a mortgage on parcels of land covered by OCT 5781 and TCT 145850. On 8 April
1980, Vivencio for himself and as attorney-in-fact of Jesusa and Jose, executed a promissory
note in which he undertook to pay the amount of P100,000.00 plus 14% interest per annum on
or before April 1981.5 In the same month, all four respondents executed an amendment to
the real estate mortgage changing the consideration of the mortgage from P80,000.00 to
P100,000.00 but adopting all the terms and conditions of the previous mortgage as integral
parts of the later one.6
Vivencio was the owner of V. Sarmiento Rattan Furniture, a sole proprietorship engaged in
export business. On various occasions in 1981, he incurred loan obligations from Maybank by
way of export advances. As of 08 September 1982, the debts incurred under the export bills
transactions totaled P1,281,748.03.
On 3 September 1981, Vivencio, Jose and Elizabeth executed a Suretyship Agreement,7
whereby they agreed to be solidarily liable with V. Sarmiento Rattan Furniture for the
payment of P100,000.00 plus all obligations which the latter incurred or would incur from
Maybank.
Respondents defaulted in the payment of the export advances, prompting Maybank to
institute an extrajudicial foreclosure of the real estate mortgage on 9 November 1982. At the
foreclosure sale, Maybank was awarded the property for its bid of P254,000.00 and issued a
certificate of sale. The certificate of sale was registered with the Register of Deeds on 04
March 1983.8
Maricel Sarmiento, sister of respondent Jose, purchased a manager‘s check from Maybank in
the amount of P300,000.00 on 21 July 1983.9 A week later, respondent Jesusa deposited the
amount of P12,000.00.10 Maybank treated the total amount of P312,000.00 as a deposit and
did not grant respondents‘ request for certificate of redemption releasing the foreclosed
property. Sometime in November 1983, Maybank demanded the payment of all outstanding
loans under the export bills transactions. On 3 December 1983, respondents tendered the
amount of P302,333.33 in the name of V. Sarmiento Rattan Furniture.
On 4 July 1990, Maybank consolidated its ownership over the foreclosed property. On 12
November 1997, Maybank and Philmay executed a deed of absolute sale, transferring
ownership of the foreclosed property to the latter. On 15 July 1998, Philmay sold the same to
Fabra.
On 3 September 1998, respondents Vivencio and Jose instituted an action for specific
performance against Maybank, Philmay and Fabra. The Complaint,11 docketed as Civil Case
No. 98-0323, prayed for judgment directing Maybank to execute a deed of redemption in
favor of respondents and revoking the subsequent sale of the property to Philmay and Fabra.
During the pendency of the trial, Fabra died and was substituted by Kim Caro as the legal
representative of the former‘s heirs.

ISSUE:
Whether or not the export advances is included in the obligation secured by the mortgage?
Whether or not the deposits made by the respondents constituted a valid redemption price?

RULING:
The court held that the ―blanket mortgage clause‖ expressed in the mortgage contract
entered into by the respondents. A blanket mortgage clause, also known as a dragnet clause
in American jurisprudence, is one that is specifically phrased to subsume all debts of past or
future origins. Such clauses are carefully scrutinized and strictly construed. Mortgages of this
character enable the parties to provide continuous dealings, the nature or extent of which
may not be known or anticipated at the time, and they avoid the expense and inconvenience
of executing a new security on each new transaction. Therefore, the court concluded that the
mortgage security entered into by Vivencio should include the export advances by the
corporation. Vivencio being a corporate officer of the V Sarmiento Rattan Furniture should be
held personally liable for debts of the corporation if he boumd himself to pay the debt of the
corporation under a separate surety or guaranty. The court then ruled that the deposits made
by the respondent was not sufficient to satisfy the debt incurred by the respondents to the
petitioner that would warrant the redemption of the foreclosed property.
CASE 26 |REA FE GARABILES
_______________________________________________________________________________

GR. No. 150197 July 28, 2005

PRUDENTIAL BANK, Petitioner,

vs.
DON A. ALVIAR and GEORGIA B. ALVIAR, Respondents.

FACTS:
Respondents, spouses Don A. Alviar and Georgia B. Alviar, are the registered owners of a
parcel of land in San Juan, Metro Manila, covered by Transfer Certificate of Title (TCT) No.
438157 of the Register of Deeds of Rizal. On 10 July 1975, they executed a deed of real estate
mortgage in favor of petitioner Prudential Bank to secure the payment of a loan
worth P250,000.00. This mortgage was annotated at the back of TCT No. 438157. On 4 August
1975, respondents executed the corresponding promissory note, PN BD#75/C-252, covering
the said loan, which provides that the loan matured on 4 August 1976 at an interest rate of
12% per annum with a 2% service charge, and that the note is secured by a real estate
mortgage as aforementioned.

On 22 October 1976, Don Alviar executed another promissory note, PN BD#76/C-345

for P2,640,000.00, secured by D/A SFDX #129, signifying that the loan was secured by a "hold-
out" on the mortgagor‘s foreign currency savings account with the bank under Account No.
129, and that the mortgagor‘s passbook is to be surrendered to the bank until the amount
secured by the "hold-out" is settled. On 27 December 1976, respondent spouses executed for
Donalco Trading, Inc., of which the husband and wife were President and Chairman of the
Board and Vice President, respectively, PN BD#76/C-430 covering P545,000.000. As provided
in the note, the loan is secured by "Clean-Phase out TOD CA 3923," which means that the
temporary overdraft incurred by Donalco Trading, Inc. with petitioner is to be converted into
an ordinary loan in compliance with a Central Bank circular directing the discontinuance of
overdrafts.

On 16 March 1977, petitioner wrote Donalco Trading, Inc., informing the latter of its approval
of a straight loan of P545,000.00, the proceeds of which shall be used to liquidate the
outstanding loan of P545,000.00 TOD. The letter likewise mentioned that the securities for
the loan were the deed of assignment on two promissory notes executed by Bancom Realty
Corporation with Deed of Guarantee in favor of A.U. Valencia and Co. and the chattel
mortgage on various heavy and transportation equipment.

On 06 March 1979, respondents paid petitioner P2,000,000.00, to be applied to the

obligations of G.B. Alviar Realty and Development, Inc. and for the release of the real estate
mortgage for the P450,000.00 loan covering the two (2) lots located at Vam Buren and
Madison Streets, North Greenhills, San Juan, Metro Manila. The payment was acknowledged
by petitioner who accordingly released the mortgage over the two properties. On 15 January
1980, petitioner moved for the extrajudicial foreclosure of the mortgage on the property
covered by TCT No. 438157. Per petitioner‘s computation, respondents had the total
obligation of P1,608,256.68, covering the three (3) promissory notes, to wit: PN BD#75/C-252
for P250,000.00, PN BD#76/C-345 for P382,680.83, and PN BD#76/C-340 for P545,000.00, plus
assessed past due interests and penalty charges. The public auction sale of the mortgaged
property was set on 15 January 1980. On 15 March 1994, the trial court dismissed the
complaint and ordered the Sheriff to proceed with the extra-judicial foreclosure. Respondents
sought reconsideration of the decision.

Petitioner Prudential Bank seeks the reversal of the decision of the Court of Appeals. The
Court of Appeals affirmed the Order of the trial court but deleted the award of attorney‘s
fees. It ruled that while a continuing loan or credit accommodation based on only one
security or mortgage is a common practice in financial and commercial institutions, such
agreement must be clear and unequivocal. In the instant case, the parties executed different
promissory notes agreeing to a particular security for each loan. Thus, the appellate court
ruled that the extrajudicial foreclosure sale of the property for the three loans is improper.
ISSUE:
Whether or not the real estate mortgage secures only the first loan of P250,000.

RULING:

Yes. While the existence and validity of the ―dragnet clause‖ cannot be denied, there is a
need to respect the existence of the other securities given for the two other promissory
notes. Petitioner, however, is not without recourse. Both the Court of Appeals and the trial
court found that respondents have not yet paid the P250,000.00, and gave no credence to
their claim that they paid the said amount when they paid petitioner P2,000,000.00. Thus,
the mortgaged property could still be properly subjected to foreclosure proceedings for the
unpaid P250,000.00 loan, and as mentioned earlier, for any deficiency after D/A SFDX#129,
security for PN BD#76/C-345, has been exhausted, subject of course to defenses which are
available to respondents.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
59543 is AFFIRMED.

SO ORDERED.
CASE 27 |CHONA G. FRANCO
_______________________________________________________________________________

G.R. No. 100480 May 1, 1993

BLANCA CONSUELO ROXAS, petitioner,

vs.
COURT OF APPEALS and RURAL BANK OF DUMALAG, INC., respondents.

FACTS:
Petitioner Blanca Consuelo Roxas is the owner of a parcel of land (Lot No. 3108)
located at Tanza Norte, Panay, Capiz. This land was mortgage to secure an agricultural loan
with private respondent Rural Bank of Dumalag. Private respondent then foreclosed the real
state mortgage for failure to pay the loan on maturity and was sold at a public auction.
Private respondent consolidated its ownership over the subject land when the petitioner
failed to exercise its right of redemption.
Petitioner filed a complaint for cancellation of foreclosure of mortgage and annulment
of auction sale against private respondent before the RTC of Roxas City. RTC rendered
judgement in favor of the petitioner. Case was then appealed to the court of appeals which
reversed the decision of the lower court.

ISSUE:
Whether or not the sale of the subject land was valid.

RULING:

The auction sale of the subject land was null and void. Section 5 of R.A. No. 720, as
amended by R.A. No. 5939, provides that notices of foreclosure should be posted in at least
three (3) of the most conspicuous public places in the municipality and barrio where the land
mortgaged is situated.‖ It is settled doctrine that failure to publish notice of auction sale as
required by the statute constitutes a jurisdiction defects with invalidates the sale.
In the case at bar, the Certificate of Posting which was executed by the sheriff states
that he posted three (3) copies of the notice of public auction sale in three (3) conspicuous
public places in the municipality of Panay, where the subject land was situated and in like
manner in Roxas City, where the public auction sale took place. 8 It is beyond despute that
there was a failure to publish the notices of auction sale as required by law. Section 5
provides further that proof of publication shall be accomplished by an affidavit of the sheriff
or officer conducting the foreclosure sale. In this case, the sheriff executed a certificate of
posting, which is not the affidavit required by law.
Therefore the Supreme Court ruled that the foreclosure and public auction sale of the
subject land null and void.
CASE 28 |KATHLEEN BERONES
_______________________________________________________________________________

GR NO. 175697
RURAL BANK OF TABOSO, INC. VS JEAN VENIEGAS AGTOTO
______________________
GR NO. 176103
JEAN VENIEGAS AGTOTO
VS
RURAL BANK OF TABOSO, INC AND ANTONIO ARBIS IN HIS CAPACITY AS EX-OFFICIO
PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL
MARCH 23, 2011
FACTS:
This case is about the foreclosure of a real estate mortgage for the whole amount of loan
when the mortgage covered only a part of it.
On August 18, 1991 Agtoto‘s husband was authorized to loan from the Bank the amount of
P130,500.00 through an SPA in her name, with the P61,068.00 portion of the loan secured by
a real estate mortgage on Agtoto‘s land. The remaining P69,432.00 of the loan was secured by
a chattel mortgage over two service boats and one Yanmar Marine engine.
Agtoto defaulted in the payment, after only paying P14,500.00. After unheeded demands to
pay, the Bank extrajudicially foreclosed the mortgage on the land. The Bank also pegged the
debt at P130,500.00 as of Dec. 31, 1989 with stipulated interest of 14% per anuum, from date
of default until full payment and liquidated damages.

The sheriff foreclosed the mortgage on land on Sept. 12, 1990 and sold it at a public auction
to the Bank, as the highest bidder at P305,000.00 at Dec. 31, 1989, plus stipulated interest at
14% per anuum. The certificate of sale was issued by the sheriff in the Bank‘s favor.
Agtoto filed a complaint with RTC Bacolod against the Bank for annulment of sale of her land,
damages and injunction with prayer for issuance of TRO.
RTC ruled in favor of Agtoto, ordering the Bank to pay Agtoto P305,000.00 which was the bid
for the land and deduct P61,068.00 which was the due for her loan.
On Nov. 26, 1997 RTC amended and included an 6% interest per anuum on the amount of the
award from date of auction sale (Sept. 13, 1990) until full payment. The P14,500 that Agtoto
previously paid was charged against interests, surcharges and penalties due her loan.
Agtoto appealed to CA stating that CA erred in not declaring the foreclosure sale of her land
as null and void. CA affirmed the RTC decision with modification that awards Agtoto
P189,497.10 plus 12% interest per anuum from Jan. 29, 1992 or the date of judicial demand
until full payment.
ISSUES:
1. Whether or not the foreclosure on Agtoto‘s land is valid.
 2. Whether or not the Bank should pay P189,497.10 to Agtoto as excess bid proceeds with
12% per anuum from Jan. 29, 1992 until full payment.
RULING:
The foreclosure on Agtoto‘s land was valid. In contrast with Agtoto‘s contention that her
husband is not authorized to act as her attorney-in-fact for the foreclosure proceedings, the
powers that Agtoto vested in her husband as attorney-in-fact in connection with the mortgage
includes the power of the mortgagee bank to act as Rodney‘s attorney-in-fact for the
foreclosure proceedings, to complete the usual course of the powers granted to him to enter
into a mortgage contract in his wife‘s name.
The SPA authorized her husband to execute contracts and other documents of any kind with
any person that is acceptable to him as attorney-in-fact; one of them constituting the Bank as
attorney-in-fact during foreclosure proceedings and binding Agtoto as principal.
The Bank must return P189,497.10 to Agtoto. The proceeds of the of the foreclosure sale
should be applied to satisfy only the debt and related charges of the foreclosed land.
However, the chattel mortgage is a distinct contract from the real estate mortgage which
only covers P69,432.00 portion of the loan. The Bank cannot include in the foreclosure of the
land the portion of the loan that is secured by the chattel mortgage. Furthermore, the Bank
must pay the 12% interest per anuum until full payment, computed from the date of the CA
decision.
CASE 29 |ELWIN OPENA
_______________________________________________________________________________

AGBADA VS INTER-URBAN DEVELOPERS, INC. 389 SCRA 430 (2002)

RULE:

1. Agbada obtained a loan from Inter-Urban. To secure the loan, they executed a REM. The
loan was payable in 6 mos. With 3% interest.
2. Agbada defaulted. Inter-Urban filed a claim to have REM foreclosed. However, Agbada
opposed claiming that the loan was actually not yet due because the real agreement
of the parties was that it was payable in 5 years with no interest.
3. RTC rendered summary judgment on the ground that the defense of Agbada was
untenable because it was in conflict with the REM contract which expressly showed
that the partied agreed that the period of the loan was 6 months with 3% interest.
4. Meanwhile, the property was foreclosed and sold at public action. The court confirmed
the sale. Agbada did not appeal to such confirmation of sale. Instead, they appealed
the summary judgment of the RTC.
5. CA denied the appeal. Summary judgment was proper. Hence, they appealed
with the SC, claiming that they were denied of due process because they were not given
the opportunity to prove that the loan was not yet due and demandable.

ISSUE:

Whether or not Agbada was afforded with due process?

RULING:

1. SC held that Summary Judgment was proper. The mortgage contract expressly
showed the agreement of the parties as to the period and interest of the loan.
The defense of Agbada was baseless and untenable.
2. SC further held that the proper remedy of a mortgagor in this case was not to appeal the
summary judgment of the RTC but to appeal the confirmation of the foreclosure sale,
which the Agbada spouses did not do in the case at bar.
DOCTRINE: Judgment; Foreclosure; Proper remedy to seek reversal of judgment in an
action for foreclosure of real estate mortgage is not a petition for annulment of judgment but
an appeal from the judgment itself or from the order confirming the sale of the foreclosed
real estate.
CASE 30 |MERCY GAY DADULLA
_______________________________________________________________________________

INGLES VS. ESTRADA 695 SCRA 285 (2013)

FACTS:
Jose D. Ingles, Sr. (Jose) and his wife, petitioner Josefina F. Ingles (Josefina), were
the registered owners of a 2,265 square meter parcel of land in Quezon City with a Transfer
Certificate of Title (TCT) No. 125341 PR-17485. On April 14, 1993, Jose and Josefina obtained
a loan of P6,200,000.00 from respondent Charles J. Esteban (Charles). As collateral for such
loan, Jose and Josefina mortgaged their above-described land in favor of Charles. A
Promissory Note and a Deed of Real Estate Mortgage, evidencing both such loan and
mortgage, were accordingly executed between Jose, Josefina and Charles on the same day.
The Deed of Real State Mortgage contained a stipulation that upon failure of the mortgagor/s
to pay the loan at maturity, mortgagor/s may elect or choose to foreclose it judicially or
extrajudicially and that in the event of extrajudicial foreclosure the mortgagor/s appoint the
mortgagee as attorney-in-fact without further formality, with full power and authority to
dispose the mortgaged property in accordance with the provision of Act 3135 as amended.
Upon maturity of their loan, Jose and Josefina issued to Charles a check for P6,200,000.00 as
payment; unfortunately, that check bounced. So, Charles sent to Josefina a letter demanding
for the payment of the loan. He also threatened to foreclose the mortgage in his favor should
Josefina fail to heed the demand for payment within ten (10) days from her receipt of the
letter. To these, Josefina responded with her own letter asking Charles for an extension of
time until but despite the extension, Josefina still failed to pay.
On July 12, 1997, Charles file a petition to Executive Judge Estrella T. Estrada of the
Regional Trial Court of Quezon City for the extrajudicial foreclosure of the mortgage in his
favour and sought for the sale at public auction. The said petition was granted and with an
order for an extrajudicial sale of the ten (10) lots. With this, Ingles filed a motion for
reconsideration which was further denied. A notice of Sale was issued setting the public
auction; at the public auction Charles was declared the highest bidder for all of the ten (10)
lots and was awarded with a corresponding Certificate of Sale which Charles subsequently
register it with the Register of Deeds of Quezon City. On January 23, 1998, the Ingleses filed
with the Quezon City RTC a complaint for the Annulment of the Deed of Real Estate Mortgage
against Charles alleging that Jose and Josefina never actually consented to mortgage any on
their land; that their signatures in the Deed of Real Estate Mortgage were obtained thru
Charles‘ deception which was docketed as Civil Case No. Q-98-33277. On the other hand,
Charles filed an Ex-Parte Petition for Issuance of a Writ of Possession before the Quezon City
RTC, he asked to immediately be placed in possession of the ten (10) lots foreclosed in his
favour and was docketed as LRC Case No. Q-10766. Furthermore, the RTC issued an order
directing LRC Case No. Q-10766 (98) be consolidated with Civil Case No. Q-98-3327738 and
allows Charles to present ex parte evidence in support of his application of writ of possession.
The Ingleses filed before the Court of Appeals a petition for Annulment of Final Orders
dated 8 October 1997, 20 November 1997 and 27 July 1998 of Executive Judge Estrada which
was dismissed on the ground of lack of jurisdiction. Moreover, they also appealed by
certiorari and argued that the RTC gravely abused its discretion in allowing Charles to present
ex-parte evidence on his application for a writ of possession despite the consolidation of LRC
Case No. Q-10766 (98) with Civil Case No. Q-98-33277 accompanied by a prayer for a
temporary restraining order which was then also dismissed on the ground of noncompliance
with Section 1 of Rule 65 in relation to Section 3 of Rule 46 of the Rules of Court.
Unconvinced, the Ingleses hence appealed before this Court by certiorari.
ISSUE:
1. Whether or not the Court of Appeals erred in dismissing the Ingleses‘ petition for
Annulment of Final Orders on the ground of lack of jurisdiction?
2. Whether or not the Court of Appeals erred in dismissing Ingles petition of certiorari on
the ground of noncompliance with Section 1 of Rule 65 in relation to Section 3 of Rule
46 of the Rules of Court?
3. Whether or not consolidation of LRC Case No. Q-10766 (98) with Civil Case No. Q-98-
33277 and ex-parte presentation of evidence is proper?

RULING:
With regards on the first issue, the Supreme Court ruled that there is no reversible
error on the part of the Court of Appeals in dismissing the Ingleses‘ petition for Annulment of
Final Orders. The subjects of the Ingleses‘ petition for Annulment of Final Orders are not the
proper subjects of a petition for annulment before the Court of Appeals. The assailed Orders
dated 8 October 1997, 20 November 1997 and 27 July 1998 of Executive Judge Estrada are not
the final orders in ―civil actions‖ of ―Regional Trial Courts‖ that may be the subject of
annulment by the Court of Appeals under Rule 47. Proceedings for the extrajudicial
foreclosure of mortgages, are not suits filed in a court. They are commenced not by the filing
of a complaint, but by submitting an application before an executive judge who, in turn,
receives the same neither in a judicial capacity nor on behalf of the court. The conduct of
such proceedings is not governed by the rules on ordinary or special civil actions, but by Act
No. 3135, as amended, and by special administrative orders issued by this Court. Proceedings
for the extrajudicial foreclosure of mortgages are also not adversarial; as the executive judge
merely performs therein an administrative function to ensure that all requirements for the
extrajudicial foreclosure of a mortgage are satisfied before the clerk of court, as the ex-
officio sheriff, goes ahead with the public auction of the mortgaged property. Necessarily,
the orders of the executive judge in such proceedings, whether they be to allow or disallow
the extrajudicial foreclosure of the mortgage, are not issued in the exercise of a judicial
function but, in the words of First Marbella Condominium Association, Inc. v. Gatmaytan: RTC
Executive Judge issued in the exercise of his administrative function to supervise the
ministerial duty of the Clerk of Court as Ex Officio Sheriff in the conduct of an extrajudicial
foreclosure. Verily, the Orders dated 8 October 1997, 20 November 1997 and 27 July 1998 of
Executive Judge Estrada cannot be the subject of a petition for annulment before the Court
of Appeals. Such orders, issued as they were by an executive judge in connection with a
proceeding for the extrajudicial foreclosure of a mortgage, evidently do not fall within the
type of issuances so carefully identified under Section 1 of Rule 47. Hence, the Court of
Appeals was, therefore, correct in postulating that the annulment of the assailed Orders is
not within their exclusive original jurisdiction per Section 9(2) of Batas Pambansa Blg. 129.
On the second issue, Supreme Court ruled that the CA erred in dismissing the petition.
A certiorari petition under Rule 65 of the Rules of Court is one where the pleadings required
to be both verified and accompanied by a certification against forum shopping when filed
before a court. In the case of Altres v. Empleo, verification and certification is to assure that
such petition or complaint was filed in good faith; and that the allegations therein are true
and correct and not the product of the imagination or a matter of speculation, can
sufficiently be achieved even if only one of the several petitioners or plaintiffs signs the
verification. As long the signatory of the verification is competent, there is already
substantial compliance with the requirement. Hence, the Court of Appeals is ought to give
due course to the certiorari petition because there was substantial compliance with the said
requirements by the Ingleses.
With regards to the third issue, the Supreme Court ruled that consolidation of LRC
Case No. Q-10766 (98) with Civil Case No. Q-98-33277 is improper. As a rule, a petition for the
issuance of a writ possession may not be consolidated with any other ordinary action. It is
well-settled that a petition for the issuance of a writ of possession is ex-parte, summary and
non-litigious by nature; which nature would be rendered nugatory if such petition was to be
consolidated with any other ordinary civil action. The exception to the foregoing rule is the
case of Active Wood Products, Co., Inc. vs. Court of Appeals wherein the Court allowed the
consolidation of a petition for the issuance of a writ of possession with an ordinary action for
the annulment of mortgage. However, this led to a deplorable practice where mortgagors
aggrieved by the result of an extrajudicial foreclosure would prevent possession by the
successful purchaser by simply filing an action contesting the latter‘s ―presumed right of
ownership.‖ This abusive practice have reached the attention of the which led to subsequent
decisions refining the application of the Active Wood doctrine. In the case of Sps. De Vera v.
Hon. Agloro, the Court held that the consolidation of an action for the annulment of mortgage
and extrajudicial sale with a petition for the issuance of a writ of possession, is not
mandatory but still rests within the discretion of the trial court to allow and held that
consolidation of an action for annulment of extrajudicial sale and a petition for the issuance
of a writ of possession should not be allowed when doing so will lead to more delay in the
proceedings and defeat the rationale of consolidation. Therefore, the consolidation is
improper and cases must be deconsolidated since it is clear that the sole purpose of the
petition is to delay the proceedings.
CASE 31 |ELWIN OPENA
_______________________________________________________________________________

SPOUSES FRANCISCO and MERCED RABAT v. PNB

G.R. No. 158755 June 18, 2012

FACTS:

1. Parties are before the court a second time. First case: PNB v. Rabat, decided in Nov. 15,
2000, G.R. Np. 134406.
2. Aug. 25, 1979: Spouses Rabat (RABATS) applied, and were granted a loan by PNB on
01/14/80, a medium term loan of Php4M, to mature in 3 years.
3. January 28, 1980: (1) RABATS signed a credit agreement; executed a real estate mortgage
over 12 parcels of land.
4. Loan stipulation states interest = 17% per year, plus service charge, and penalty of 3% on
amount unpaid or not renewed when due.
5. September 25, 1980: RABATS executed an ―Amendment of the Credit Agreement‖ to
increase interest rate from 17 to21%. Also executed another real estate mortgage on 9
parcels of land located in Davao Oriental (agricultural, commercial, and residential) as
addition a security for their Php4M loan.
6. Loans of RABATS reached total amount of Php3,517,380, due 3/14/83, evidenced by
several PN‘s.
7. RABATS failed to pay their outstanding balance when it became due.
8. July 24, 1986: PNB responded with a denial to request of RABAT for extension of time for
settlement. PNB have a deadline of until 4/30/86 for settlement, which they sent to
address at Wilson St, San Juan, MM.
9. PNB filed for extrajudicial foreclosure of mortgage executed by RABATS.
10. Parcels of land were sold at Public auction, with PNB as highest bidder at Php3,874,800.
11. Proceeds were inadequate to satisfy entire obligation, so PNB sent additional demand
letters to RABAT (2 at Wilson, San Juan on 11/15/90, and 8/30/91, and another at Davao
Oriental)
12. PNB filed with RTC of Manila a complaint for a sum of money, due to failure by RABATS to
settle obligation which had already amounted to Php14,745,398.25 (with interest,
penalties, and other charges).
13. RABATS: (1) admitted loan availments and default in payment, but (2) assailed validity of
the auction sales, for want of notice to them before and after the foreclosure sales.
14. RABATS also claim: (1) They have been residents of Mati, Davao Oriental since 1970-
present; (2) received nor heard about the foreclosure proceedings, in spite of PNB‘s claim
of publication in San Pedro Times; (3) Latter is not a newspaper of general circulation; (4)
bid price was grossly inadequate and unconscionable; (5) accumulated interest and
penalty charges were invalid because properties were sold in ‘87, but PNB waited till
‘92 to file the case. Therefore, they should not be made to suffer payment of interest and
penalty charges from May ‘87 to present, because such would allow PNB to profit from its
―questionable scheme‖
15. RTC dismissed the complaint; Auction sales of the properties were set aside, and PNB was
ordered to convey to RABATS the remaining properties after sufficient sale of properties
to satisfy the obligation.
16. PNB appealed to CA, which upheld RTC‘s decision for nullification of foreclosure sales.
17. PNB appealed to SC (G.R. No. 134406). SC granted petition. Case was remanded to CA to
DECIDE on the basis of the errors raised by petitioner PNB in its brief. CA amended its
decision, resolving errors assigned by PNB, but still affirmed RTC decision. On MR,
 however, CA found for PNB.18. RABAT moved for reconsideration, but was denied, hence
appeal by them to SC.

ISSUE :
1. W/N the inadequacy of PNB‘s bid price renders the forced sale of the properties invalid;
2. W/N PNB was entitled to recover any deficiency from the RABATS.

HELD:
1. NO; SC ruled against spouses Rabat. Auction bid was valid. (2) YES; PNB is entitled to
recover from the RABATS.
CASE 32 |CHONA G. FRANCO
_______________________________________________________________________________

G.R. No. 177050 July 01, 2013

CARLOS LIM, CONSOLACION LIM, EDMUNDO LIM,* CARLITO LIM, SHIRLEY LEODADIA
DIZON,** AND ARLEEN LIM FERNANDEZ, PETITIONERS,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, RESPONDENT.
FACTS:

Petitioners obtained a loan of P40,000.00 (Lim Account) and P960,000.00 (Diamond L

Ranch Account) from respondent Development Bank of the Philippines (DBP). They executed a
Promissory Note undertaking to pay the annual amortization with an interest rate of 9% per
annum and penalty of 11% per annum for the Lim account loan and another promissory note
for the Diamond L. Ranch Account Loan promising to pay the loan annually from August 22,
1973 until August 22, 1982 with an interest rate of 12% per annum and a penalty charge of
1/3% per month on the overdue amortization. To secure the loans, petitioners executed a
Mortgage in favor of DBP over several titled real properties.
Petitioners failed to pay the loan amortizations on the period stipulated. Petitioners
then received a notice of foreclosure on the mortgaged properties and was advised by the
bank to pay an interest covering a 60-days period to postpone the foreclosure and to submit a
written proposal for the settlement of the loan accounts. Petitioner tried to negotiate with
the bank and DBP agreed to restructure the load. DBP gave several extensions for petitioners
to settle their loan, but they never did. Thus, Prompted DBP to cancel the restructuring
agreement. The mortgaged properties was then auctioned and DBP was the highest bidder.
Petitioners filed before the RTC of General Santos City a complaint against DBP for
Annulment of Foreclosure and Damages with Prayer for Issuance of Writ of Preliminary
Injunction and Temporary Restraining Order. Petitioners alleged that DBP‘s acts and omissions
prevented them from fulfilling their obligation; thus, they prayed that they be discharged
from their obligation and that the foreclosure of the mortgaged properties be declared void.
They likewise prayed for actual damages for loss of business opportunities, moral and
exemplary damages, attorney‘s fees, and expenses of litigation. RTC issued a Temporary
Restraining Order directing DBP to cease and desist from consolidating the titles over
petitioners‘ foreclosed properties and from disposing the same. It also granted the Writ of
Preliminary Injunction and declared that the petitioners have fully extinguished and
discharged their obligation to the respondent Bank and that the foreclosure of the mortgaged
properties was null and void. On appeal, the CA reversed and set aside the RTC Decision.

ISSUE:

1. Whether or not the obligations of the petitioners were extinguished.

2. Whether or not the foreclosure of the mortgaged properties were null and void.

RULING:

The obligation of the petitioners was not extinguished.

We do not agree on the petitioners claim that DBP‘s cancellation of the Restructuring
Agreement justifies the extinguishment of their loan obligation under the Principle of
Constructive Fulfillment found in Article 1186 of the Civil Code which states that "the
condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment,". This
provision does not apply in this case.
Article 1186 enunciates the doctrine of constructive fulfillment of suspensive
conditions, which applies when the following three (3) requisites concur, viz: (1) The
condition is suspensive; (2) The obligor actually prevents the fulfillment of the condition; and
(3) He acts voluntarily. Suspensive condition is one the happening of which gives rise to the
obligation. It will be irrational for any Bank to provide a suspensive condition in the
Promissory Note or the Restructuring Agreement that will allow the debtor-promisor to be
freed from the duty to pay the loan without paying it. It is significant to point out that when
the Regional Credit Committee reconsidered petitioners‘ proposal to restructure the loan, it
imposed additional conditions which petitioners had failed to do.
Therefore, DBP had reason to cancel the Restructuring Agreement. Since the
Restructuring Agreement was cancelled, it could not have novated or extinguished
petitioners‘ loan obligation.

The foreclosure sale is not valid.

DBP had a right to foreclose the mortgage property however they failed to send a
notice of foreclosure to petitioners. It is consistently held that unless the parties stipulate,
"personal notice to the mortgagor in extrajudicial foreclosure proceedings is not
necessary" because Section 3 of Act 3135 only requires the posting of the notice of sale in
three public places and the publication of that notice in a newspaper of general circulation.
In this case, the parties stipulated in paragraph 11 of the Mortgage that: ―All
correspondence relative to this mortgage, including demand letters, summons, subpoenas, or
notification of any judicial or extra-judicial action shall be sent to the Mortgagor at xxx or at
the address that may hereafter be given in writing by the Mortgagor or the Mortgagee‖.
However, no notice of the extrajudicial foreclosure was sent by DBP to petitioners about the
foreclosure sale. The failure of DBP to comply with their contractual agreement with
petitioners, i.e., to send notice, is a breach sufficient to invalidate the foreclosure sale.
Therefore, The foreclosure sale of the mortgaged properties is not valid.
CASE 33 |INDIRA L. PALOMO
_______________________________________________________________________________

DE LOS SANTOS VS. METROPOLITAN BANK AND TRUST COMPANY 684 SCRA 410 (2012)
FACTS:

Petitioners made several loans totaling P12,000,000.00 from December 9, 1996 until March
20, 1998 from Metrobank, Davao City Branch. The proceeds would be used in constructing a
hotel on their 305- square-meter parcel of land located in Davao City. Various promissory
notes were executed by petitioners to cover the loans, and a mortgage was constituted over
their parcel of land to secure the performance of their obligation. The stipulated interest
rates were 15.75% per annum for the long term loans (maturing on December 9, 2006) and
22.204% per annum for a short term loan of P4,400,000.00 (maturing on March 12, 1999). The
interest rates were fixed for the first year, subject to escalation or deescalation in certain
events without advance notice to them. The loan agreements further stipulated that the
entire amount of the loans would become due and demandable upon default in the payment
of any installment, interest or other charges.

Metrobank filed a petition for extrajudicial foreclosure of the real estate mortgage, which
was scheduled for April 6, 2000 which was originally set to March 6, 2000 but was
cancelled. In anticipation of the foreclosure sale, the spouses filed an action before the
Regional Trial Court for damages, fixing of interest and application of excess payments.

Among the allegations of the spouses in their complaint was that they were not yet in default
of their obligation with Metrobank, that the bank excessively charged interest and applied the
escalation clause without their assent, and then have made excess payment of the interest
which should be applied to the principal. Upon receipt of the complaint, the RTC issued a
temporary restraining order and later a preliminary injunction to restrain Metrobank from
proceeding with the foreclosure sale. But on motion for reconsideration of Metrobank, where
the spouses did not file a comment, and did not attend during the hearing on the motion, the
RTC reversed itself and lifted the preliminary injunction. The spouses sought reconsideration
of the order but was denied, hence they filed a petition for certiorari before the CA which
also denied it.

ISSUES:

1. Whether or not the RTC Presiding Judge, finding the petitioners in default of their
obligation with the Bank, has committed grave abuse of discretion amounting to excess or
lack of jurisdiction as the same run counter against the legal principle enunciated in the
Almeda Case;

2. Assuming that the Presiding Judge did not excessively exercise judicial authority in the
issuance of the assailed orders, notwithstanding consistency with the legal principle
enunciated in the Almeda Case, whether or not the petitioners can avail of the remedy
under Rule 65, taking into consideration the sense of urgency involved in the resolution of
the issue raised;

3. Whether or not the Petition lodged before the Court of Appeals presented a question of
fact, and hence not within the province of the extraordinary remedy of certiorari.
RULING:

The Court found no substantiation over petitioners‘ claim of their lack of assent to the
escalation clauses. The Spouses de los Santos did not present evidence to show that they did
not consent to the increases in the interest rates. The records showed instead that what they
requested was only the reduction of the interest rate or the restructuring of their loans. The
Court pointed out that escalation clauses are valid and are not in contravention to public
policy. These clauses are common in credit agreements as means of maintaining fiscal
stability and retaining the value of money on long-term contracts. The foreclosure of a
mortgage is but a necessary consequence of the non-payment of an obligation secured by the
mortgage. Where the parties have stipulated in their agreement, mortgage contract and
promissory note that the mortgagee is authorized to foreclose the mortgage upon the
mortgagor‘s default, the mortgagee has a clear right to the foreclosure in case of the
mortgagor‘s default. The issuance of a writ of preliminary injunction upon the application of
the mortgagor will thereby be improper. Thus, aware that an injunction may cause limitation
upon the freedom of action of Metrobank, the RTC properly and reasonably denied granting
the petitioners‘ application for the writ of preliminary injunction. Whereas, the Court of
Appeals also rightfully denied the petition.

The Court must therefore deny the petition.

CASE 34 |MYLIN BACOLOD
_______________________________________________________________________________

UCPB vs. SPS. SAMUEL & ODETTE BELUSO

GR No. 159912, Aug 17, 2007

FACTS:
Apr 16, 1996: UCPB granted the Sps Beluso a Promissory Notes Line under a Credit Agreement
whereby the Belusos‘ could avail a credit up to a maximum amount of Php1.2M for a term
ending on Apr 30, 1997. The Belusos, in addition to the promissory notes, executed a real
estate mortgage over some land in Roxas as additional security.
Later on, their Credit Agreement was amended to increase the amount of the
Promissory Notes Line to Php2.M.
The term was also amended: extended to Feb 23, 1998.
The Belusos availed of 3 promissory notes amounting to Php2M, which were renewed several
times. Apr 30, 1997, the payment of the principal + interest of the last 2 notes was debited
form their account with UCPB (both added up to Php1.3 M). Later, a loan of Php1.3M was still
released to them under a promissory note whose due date was Feb 28, 1998 (meaning their
loan was still an even Php2M)
To completely avail of the Php2.35M credit line, they executed 2 more promissory
notes amounting to Php350k. However, they alleged that the notes were never
released to them so they claim that their debt is still only Php2M.
(Anyway) UCPB applied interest rates on the promissory notes ranging from 18% to 34%:
From 1996 to Feb 1998, the Belusos paid Php763k.
From Feb 1998 to June 1998, UCPB charged them interests and penalties. The Belusos
failed to make any payment on these.
Sept 1998, UCPB demanded pay Php2.93M PLUS 25% atty‘s fees. Belusos did not pay.
Dec 1998, UCPB foreclosed on the Belusos mortgaged properties. (by that time already
ballooned to Php3.7M)

RTC decision:
interest rate provided in the promissory notes are void and imposed a fine of Php26k
for violating the Truth in Lending Act.
CA affirmed the decision of the RTC because the rates were determined solely by the UCPB.

ISSUES/HELD:
Are the interest rates valid? NO
 Is UCPB liable for violation of the Truth in Lending Act? YES

RE: Validity of the interest rates

SC disagrees with the UCPB.
(PNB v. CA: There must be mutuality.) The provision:―interest shall be at the rate
indicative of DBD retail rate OR as determined by the Branch Head‖means the interest rates
are solely on the will of UCPB. Under the provision, UCPB has 2 choices:
1. Rate indicative of the DBD rate
2. Rate as determined by the branch head

Because UCPB has the choice, the rate should be determinable in BOTH choices. If
either gives UCPB to determine the rate at will, then the bank can just do that, thus making
the entire interest rate provision violative of the principle of mutuality
In this case, BOTH are dependent solely on the will of UCPB. In the case of the ―rate
indicative of the DBD rate‖ it is not akin to a ―prevailing/prime rate‖ in Polotan. In Polotan,
the interest rate was ―interest per annum at 3% interest plus the prime rate of Security Bank
and Trust Company‖
-…. here, there is a fixed margin over the reference rate: 3%. Parties can easily
determine the rate by applying simple arithmetic.
-In UCPB‘s provision, there is no specification of any margin above or below the DBD
retail rate. It can peg the interest at any percentage above or below the DBD retail
rate (giving it unfettered discretion in determining the interest rate
Also, the stipulation that the interest rate is subjected to a review is given to UCPB alone as
the lender. (interest rate MAY be increased or decreased by the LENDER considering:
prevailing financial and monetary conditions, rate of other banks or financial institutions,
resulting profitability to the lender)

RE: Error in computation

SC agrees with UCPB
Default commences on demand. The excess amount in such demand does not nullify
the demand with the proper amount.
Belusos are considered in default with the proper amount, therefore the interests and
penalties begin to run at that point
As there was no valid stipulation to interest, legal interest shall be charged (the
Belusos even originally asked the RTC to impose the legal interest rate. This shows
that they acknowledge their obligation to pay 12% legal interest)
This is proper because what was voided was the stipulated interest and not the
stipulation that the loan shall earn interest
Also, uphold the compounding of interest
 Penalty = inequitous (because this 30-36% is already over and above the compounded
interest rate
Attorney‘s fees: both were forced to litigate so both parties are compensated.
Merely affirm deletion of attorney‘s fees.

RE: Liability for violating the Truth in Lending Act

SC says:
the allegations in the complaint are controlling. SC adds some other parts in the
complaint from which some violations can also be inferred: ―unilaterally imposed an
increased interest rate by relying on the provision in the promissory note that granted
it the power to unilaterally fix the interest rate. Such interest rate was not
determined in the promissory note but was left solely to the will of the branch head.‖
-----> this means the promissory notes did not contain a clear statement in
writing of the finance charge expressed in terms of pesos and centavos/the
percentage that the finance charge bears to the amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of the
obligation
RE: Prescriptive period
SC disagrees.
The penalty for violation of the act is Php100 or an amount equal to twice the finance
charge required by creditor in connection with such transaction, whichever is greater
(will not exceed P2k).
----> not that the penalty depends on the finance charged to the borrower.
Hence, the borrowers cause of action would only accrue when the finance
charge is required.
Here, the date of demand was Sept 2, 1998. Therefore, the filing of the case
on Feb 1999 was within the prescriptive period.
RE: Cannot be implied nor inferred
Violation of the Act gives rise to both criminal and civil liabilities:
Sec 6 (c) considers a criminal offense the willful violation of the Act. Penalty:
Fine/imprisonment/both
Sec 6 (a) provides for a civil cause of action for failure to disclose any
information of the required information to any person in violation of the Act.
Penalty: Php100 or amount equal to twice the finance charge required by the
creditor in connection with such
transaction, whichever is greater, not exceeding Php2k.
In this case, the civil action to recover under Sec 6 (a) was jointly instituted with:
The action to declare the interests void; and
 The action to declare the foreclosure void. Under the Rules of Court, the
Joinder is allowed.

RE: Due Process

SC says:
―any attempt of UCPB to feign ignorance as to prevent it from putting up a defense is
plainly hogwash!
Actually, in the Pre Trial Brief, the claim for civil sanctions was expressly alleged (that
since from the start, the bank violated the Act by not informing them in writing before
the execution of the promissory notes of the interest rates expressed as a percentage
of the total loan
Also, in that brief they raised the issue: does the expression indicative rate of DBD
comply with the Truth in Lending Act provision to express the interest rate as a simple
annual percentage of the loan?
Opening a credit line did not create a credit transaction (mutuum). Credit line =
preparatory contract to the mutuum.
Credit transaction occurred not when the line was opened, but when it was availed of
Violation of the Act occurred not when they executed the Credit Agreement (where no
interest rate was mentioned) but when the parties executed the promissory notes
(where the offending interest rate was stipulated)

RE: Substantial compliance

SC disagrees.
Sec 4 of the Truth in Lending Act provides that the disclosure statement must be
made prior to the consummation of the transaction

Rationale:
to protect users of credit from lack of awareness of the true cost, proceeding from the
experience that banks are able to concealsuch true cost by hidden charges,
uncertainty of interest rates, deduction of interests from the loaned amount

The law seeks to protect debtors by permitting them to fully appreciate the cost of
their loan, to enable them to give full consent to the contractand to properly evaluate
their options in arriving at business decisions
Upholding the claim of substantial compliance would defeat the purposes of the Act
Also, the promissory notes are not sufficient notification. The interest rate provision
does not sufficiently indicate with particularity the interestrate to be applied
DISPOSITIVE:
CA decision modified.
Belusos liable for:
Php2.35M
Penalty 12% per annum from date of demand
Compounded legal interest rate 12% per annum from date of demand
The following amounts are to be deducted from Belusos liability:
Payments made: Php763k. (payments to be applied to the date of actual
payment in the ff. order:
Penalty charges
Interest
Principal
Outstanding balance

Penalty of Php26k under the Act (amount to be deducted from liability

of Belusos on Feb 1999 in the ff. order:
Penalty
Interest
Principal
Outstanding balance

Foreclosure of mortgage valid

Amounts which the RTC/CA ordered the Belusos to pay is
deducted from the proceeds of the foreclosure sale.
CASE 35 |DARRYL ANONUEVO
_______________________________________________________________________________

HI-CEMENT CORPORATION VS. INSULAR BANK OF ASIA AND AMERICA 534 SCRA 567 (2007)
FACTS:
Petitioners Enrique Tan and Lilia Tan (spouses Tan) were the controlling stockholders
of E.T. Henry & Co., Inc. (E.T. Henry), a company engaged in the business of processing
and distributing bunker fuel. Among their customers was petitioner Hi-Cement
Corporation (Hi-Cement), Riverside Mills Corporation (Riverside) and Kanebo Cosmetics
Philippines, Inc. (Kanebo) who issued postdated checks for their purchases. Sometime in
1979: Insular Bank of Asia and America (turned PCIB then Equitable PCI-Bank) granted
E.T. Henry a credit facility known as ―Purchase of Short Term Receivables‖ constituting a
re-discounting arrangement through which E.T. Henry was able to encash, with pre-
deducted interest, the postdated checks of its clients with E.T Henry executing a
promisory note and deed of assignment for every transaction.
On February 1981, 20 crossed checks and with restriction deposit to payee‘s account
only of Hi-Cement were dishonoured including those of Riverside and Kanebo. The Bank
then filed a complaint for sum of money in CFI against E.T. Henry, the spouses Tan, Hi-
Cement (including its general manager and its treasurer as signatories of the postdated
crossed checks), Riverside and Kanebo. This also prompted the bank to forclose some of
the properties of E.T Henry. CA Affirmed RTC: Ordering E.T. Henry, spouses Tan, Hi-
Cement, Riverside and Kanebo, jointly and severally, to pay bank damages represented by
the face value of the postdated checks plus interests, services, charges and penalties until
fully paid. The Bank‘s contention is that Hi-Cement authorized its general manager and
treasurer to issue the subject postdated crossed checks and that Hi-Cement was already
estopped from denying such authority since it never objected to the signatories' issuance
of all previous checks to E.T. Henry. Hi –Cement‘s defense however, contends that the
general manger and treasurer were not authorized to issue the postdated checks and that
the bank was not a holder in due course for discounting the crossed checks.

ISSUES:

Whether or not the respondent bank was a holder in due course

Whether or not Hi-Cement should be held solitarily liable.
Whether or not the veil of corporate identity of E.T. Henry should have been pierced.

RULING:

The Supreme Court held that the general manager and the treasurer of the Hi-Cement
were authorized to issue the postdated check. However, the court ruled that the bank could
not be a holder in due course. A holder in due course requires that the instrument he took:
(a) is complete and regular on its face; (b) he became the holder of it before it was overdue,
and without notice that it has previously been dishonored, if such was the fact; (c) he took it
in good faith and for value and (d) at the time it was negotiated to him, he had no notice of
any infirmity in the instrument or defect in the title of the person negotiating it. The last two
requirements had not been met in the case at bar. The crossed checks issued by Hi-Cement
was for a specific purpose requiring it to be deposited to the bank where he has an account.
Under such circumstances, the bank could not have acted in good faith upon its acceptance
and discounting of the checks. Hence the checks could not have been negotiated further.
 Further, the court ruled that Hi-Cement could not be held solidarily liable for the
checks of Riverside and Kanebo for solidary liability should not be presumed but must be
established by law or contract. It further ruled that the veil of corporate identity of E.T.
Henry should not have been pierced for there was no proof and that the respondents failed to
show defrauding on the part of the petitioners. Hence, the doctrine cannot apply to the
spouses.
CASE 36 |JAPPHET LOIDE Y. DE GUZMAN
_______________________________________________________________________________

BPI FAMILY SAVINGS BANK VS. MARGARITA VDA. DE COSCULLUELA

G.R. No. 167724
June 27, 2006
FACTS:
Respondent Margarita Cosculluela and her husband Oscar Cosculluela obtained an
agricultural sugar crop from the Far East Bank and Trust Co. (FEBTC) for crop years 1997 and
1998. However, in the book of FEBTC, the loan account of the spouses was treated as a single
account as evidenced by 67 promissory notes executed on various dates from 1996 to 1998.
In 1997, the spouses executed a Real Estate Mortgage in favor of FEBTC over their
parcel of land as security of loans on credit accommodation obtained by the spouses from the
bank and those that may be obtained by the mortgagees, as well as those that may be
extended by the mortgagor to the mortgagees.
Under the terms and conditions of the real estate mortgage, in the event of failure to
pay the mortgage obligation or any portion thereof when due, the entire principal, interest,
penalties and other charges then outstanding , shall become immediately due; upon such
breach or violation of the terms and conditions thereof, FEBTC may, at its absolute discretion
foreclose the same extrajudicially, to enter the premises where the property is located and to
take actual possession and control thereof without need of any order of any court and finally
with special power to sell the mortgaged property at a public or private sale.
For failure to settle the outstanding obligation on the maturity dates, FEBTC sent a
final demand letter to respondent demanding payment of the principal loan with past due
interests and penalties. Respondent however failed to settle her obligation.
In 1999, FEBTC filed a petition for the extrajudicial foreclosure of the mortgaged
property, covered by promissory notes nos. 1-33. While the extrajudicial foreclosure
proceeding was pending, petitioner FEBTC filed a complaint against respondent for the
collection of the amounts indicated in the promissory notes nos. 34-67.
Respondent alleged that the complaint was barred by litis pendentia, specifically the
pending action for the extrajudicial foreclosure of the real estate mortgage. She also filed a
demurrer to evidence contending that there is only one loan account secured by the real
estate mortgage. Plaintiff was thus barred from instituting a personal action for collection.
Petitioner opposed the demurrer arguing that while the loans were considered as a
single account, each promissory note constituted a separate contract.
The trial court denied the demurrer on the ground that the promissory notes contained
different amounts, and each note covered a loan distinct from the others. It ruled that the
petition for the extrajudicial and foreclosure of the real estate mortgage involves obligations
different and separate from those in its action for a sum of money.
 The Court of Appeals however granted the petition. It held that under prevailing
jurisprudence, the remedies of a real action to foreclose the mortgage or a personal action to
collect the debt of a mortgage are alternative and not cumulative.
ISSUE:
Whether or not the collection suit should be dismissed.
RULING:
The Supreme Court held that the collection suit should be dismissed.
Section 3, Rule 2 of the 1997 Rules of Civil Procedure provides that a party may not
institute more than one suit for a single cause of action and, if two or more suits are
instituted on the basis of the same cause of action, the filing of one on a judgment upon the
merits in any one is available as ground for the dismissal of the other or others. A party will
not be permitted to split up a single cause of action and make it a basis for several suits. A
party seeking to enforce a claim must present to the court by the pleadings or proofs or both,
all the grounds upon which he expects a judgment in his favor. He is not at liberty to split up
his demands and prosecute it by piecemeal, or present only a portion of the grounds upon
which special relief is sought, and leave the rest to be presented in a second suit if the first
fails. The law does not permit the owner of a single or entire cause of action or an entire or
indivisible demand to divide and split the cause or demand so as to make it the subject of
several actions. The whole cause must be determined in one action.
The true rule which determines whether a party has only a single and entire cause of
action for all that is due him, and which must be sued for in one action, or has a severable
demand for which he may maintain separate suits, is whether the entire amount arises from
one and the same act or contract or the several parts arise from distinct and different acts or
contracts. Though the debt may be covered by a promissory note or several promissory notes
and is covered by a real estate mortgage, the latter is subsidiary to the former and both refer
to one and the same obligation. A mortgage creditor may institute two alternative remedies
against the mortgage debtor, either a personal action for the collection of debt, or a real
action to foreclose the mortgage, but not both. Each remedy is complete by itself.
In the case at bar that the petitioner had already instituted extrajudicial foreclosure
proceedings of the mortgaged property, it is now barred from availing itself of a personal
action for the collection of indebtedness.
Therefore, petition is dismissed for lack of merit.
CASE 37 |MELANI CALCETA
_______________________________________________________________________________

FLORES VS. LINDO 648 SCRA 772

FACTS:
Edna Lindo obtained a loan of Php 400,000 from Arturo Flores on 1995. This loan was secured
through a deed of real estate mortgage on a property under the conjugal property of Edna
and her husband, Enrico Lindo. Only Edna signed the deed. But in November 1995, Enrico
executed a special power of attorney authorizing Edna to mortgage the property.
Edna defaulted in paying her loan; thus, Flores filed an action to foreclose the real estate
mortgage before the RTC Manila.
The trial court ruled that the action is devoid of merit because there was no valid mortgage
resulting from the lack of husband‘s consent. Further, the execution of the special power of
attorney after one month did not validly ratify such defect.
Thereafter, Flores filed a suit for collection of sum of money against Edna and Enrico. The
Lindo spouses filed a motion to dismiss on the ground of res judicata. The trial court denied
the motion. The spouses then filed a petition for certiorari with the Court of Appeals.
The CA ruled in favor of the spouses. It ruled that when Flores filed an action for the
foreclosure of the mortgage, he had abandoned the remedy of filing a personal action to
collect the indebtedness. These remedies are mutually exclusive.

ISSUE:
Whether or not the Court of Appeals is correct.

HELD:
No. The High Court ruled on the negative.
The ruling in this case is an exception to the rule. The High Court ruled that the remedies
available to a mortgagee-creditor of filing a personal action for collection of money and
instituting a real action to foreclose a mortgage are mutually exclusive. However, the
technicalities of rules cannot outweigh the generally-accepted rule on unjust enrichment.
In this case, it was clear that Edna is unjustly enriched at the expense of Flores.
Further, the Supreme Court also ruled that the execution of the Special Power of
Attorney authorizing Edna to mortgage the subject property ratified the defect of the
Contract.
CASE 39 |SOL AMOR OLIMBA-TOREJOS
_______________________________________________________________________________

PHILIPPINE VETERANS BANK VS BENJAMIN MONILLAS

GR. 167098
March 28, 2008

(Effects of Prior Registration of Mortgage shall Prevail over the Belated Annotation of a
LisPendens)

FACTS:

Benjamin Monillas executed a deed of sale of his share over the property to his
brother, Ireneo. Ireneo then caused the transfer of the title in his name. Ireneo mortgaged
twenty-two (22) lots to petitioner Philippine Veterans Bank (PVB). Benjamin Monillas filed for
the nullification of the deed of sale and for the recovery of the property, which the RTC
decided on his favor; hence, he filed for the declaration of the nullity of the titles issued in
PVB's name. He caused the annotation of notices of lis pendens relating to the said case on
the titles of the lots. While the case remained pending, PVB foreclosed the mortgage, PVB
was the highest bidder Benjamin Monillas. The RTC ruled against PVB. The RTC rationalized
that while the annotation of the notices of lis pendens succeeded the registration of the
mortgage, still the effect of the notices was that PVB acquired knowledge of an impediment
against its interest, and as a matter of fact, PVB ignored the notices and slept on its rights, as
it did not intervene in the said civil case.
ISSUE:
Whether or not the prior registered mortgage and the already concluded foreclosure
proceedings should prevail over the subsequent annotation of the notices of lis pendens on
the lot titles.
RULING:
On the procedural issue raised, we declare that the instant petition, contrary to
respondent‘s contention, is the correct remedy to question the challenged issuances. Under
the Rules of Court, a party may directly appeal to this Court from a decision of the trial court
only on pure questions of law. A question of law lies, on one hand, when the doubt or
difference arises as to what the law is on a certain set of facts; on the other hand, a question
of fact exists when the doubt or difference arises as to the truth or falsehood of the alleged
facts. Here, the facts are not disputed; the controversy merely relates to the correct
application of the law or jurisprudence to the undisputed facts.
On the merits of the petition, the Court rules that the prior registered mortgage of
PVB and the foreclosure proceedings already conducted prevail over respondent‘s subsequent
annotation of the notices of lis pendens on the titles to the property. Settled in this
jurisdiction is the doctrine that a prior registration of a lien creates a preference; hence, the
subsequent annotation of an adverse claim cannot defeat the rights of the mortgagee, or the
purchaser at the auction sale whose rights were derived from a prior mortgage validly
registered. A contrary rule will make a prior registration of a mortgage or any lien nugatory or
meaningless. It may not be amiss to point out, at this juncture, that the doctrine applies
with greater force in this case considering that the annotation of the notice of lis pendens
was made not only after the registration of the mortgage, but also, and much later, after the
conclusion of the foreclosure sale. Furthermore, the mortgagee itself, PVB, is the purchaser
of the subject properties in the foreclosure sale.
The Court also notes that PVB is an innocent mortgagee for value. When the lots were
mortgaged to it by Ireneo, the titles thereto were in the latter‘s name, and they showed
neither vice nor infirmity. In accepting the mortgage, petitioner was not required to make
any further investigation of the titles to the properties being given as security, and could rely
entirely on what is stated in the aforesaid titles. The public interest in upholding the
indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of
any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon
what appears on the face of the certificate of title.
PVB cannot even be considered to have slept on its rights when it only registered the
Sheriff‘s certificate of sale after the lapse of almost 15 years, because, as already discussed,
it registered its prior mortgage and had already foreclosed on the same. Petitioner,
therefore, had every reason to expect that its rights were amply protected. And the
mortgagor was even benefited by this late registration of the Sheriff‘s Sale, because then, he
would still have a chance to redeem the property. Laches, being a doctrine in equity, cannot
be invoked to resist the enforcement of a legal right.23 Furthermore, oft-repeated is the rule
that the foreclosure sale retroacts to the date of the registration of the mortgage.24 Thus, it
no longer matters that the annotation of the sheriff‘s certificate of sale and the affidavit of
consolidation of ownership was made subsequent to the annotation of the notice of lis
pendens.