29. G.R. No. L-49568 October 17, 1979 [Banco De Oro vs.

Bayuga]

Facts:
Bayuga and Zaballero executed a Real Estate Mortgage in favour of Acme savings. He
used Tolentino and Zaballeros’ land as a security for a loan which purpose was for the
acquisition of real estate property in Tagaytay that was bought from Algue. Tolentino
purchased a manager’s check. The bank claimed that the borrowers did not intend to pay
the obligation to Algue which was a violation of Section 77 of RA 337 that made the bank
stopped payment of the manager’s check. With that, Respondents filed an action for specific
performance with the court granted but the bank appealed to CA and while pending appeal,
the lower court issued a writ of execution of its judgement. CA affirmed the lower court
decision. Hence, this petition.

Issue:
Whether or not the Bank has the right to terminate the loan and demand immediate
payment.

Ruling:
Yes. The Court held that the Bank has the right to terminate the loan and demand immediate
payment if it finds that the borrower has not used the funds borrowed for the agreed
purpose. The unfairness and inequity of this posture to the banking business is too evident
to require elaboration. Funds of a bank are, in a sense, held in trust. In this case, the lack of
good faith and of a sense of fair play on the part of private respondents was all too evident.
‘They were treating the release of the amount of P389,000.00 in their favor more as a money
judgment, which it is not, rather than as a loan which it is. They want to avail of the full
benefits of the loan without assumption of the corresponding obligations, or very minimally
at, that.
30. G.R. No. 191174 June 7, 2017 [Paradigm Development Corporation of the
Philippines vs. Bank of the Philippine Islands]

Facts:
Sengkon Trading (Sengkon), a sole proprietorship, obtained a loan from Far East Bank and
Trust Company (FEBTC) under a credit facility. FEBTC again granted Sengkon another
credit facility. Two real estate mortgage (REM) contracts were executed by PDCP’s
President to partially secure Sengkon’s obligations under this Credit Line. Sengkon defaulted
in the payment of its loan obligations. FEBTC demanded payment from PDCP. Negotiations
were put on hold because BPI acquired FEBTC and assumed the rights and obligations of
the latter.

Upon verification with the Registry of Deeds, PDCP discovered that FEBTC extra-judicially
foreclosed the first and second mortgage without notice to it as mortgagor and sold the
mortgaged properties to FEBTC as the lone bidder. Thereafter, the corresponding Certificate
of Sale was registered. PDCP filed a Complaint for Annulment of Mortgage, Foreclosure,
Certificate of Sale and Damages. The RTC rendered its Decision nullifying the REMs and
the foreclosure proceedings. The CA reversed the RTC’s ruling. Hence, this Petition.

Issues:
(1) Whether or not the validity of both REMs was vitiated by lack of consent.
(2) Whether or not the foreclosure proceedings are valid.

Ruling:

(1) No. To begin with, the registration of the REM contract is not essential to its validity
under Article 2085. The provision is clear and explicit that even if the instrument were
not recorded, “the mortgage is nevertheless binding between the parties.” Hence,
even assuming that the parties indeed agreed to register only one of the two REMs,
the subsequent registration of both REMs did not affect an already validly executed
REM if there was no other basis for the declaration of its nullity.

(2) No. FEBTC’s failure to comply with its contractual obligation to send notice to PDCP
of the foreclosure sale is fatal to the validity of the foreclosure proceedings. In
Metropolitan Bank v. Wong, the Court ruled that while as a rule, personal notice to
the mortgagor is not required, such notice may be subject of a contractual stipulation,
the breach of which is sufficient to nullify the foreclosure sale.
31. GR No. 219500, August 9, 2017 [Mamerto Dy vs. Maria Lourdes Rosell Aldea]

Facts:
Dy is the owner of Lot 5158 with an area of 6,738 square meters, and covered by TCT No.
T-24849. In June 2005, Mamerto agreed to sell the subject land to his brothers Nelson Dy ad
Sancho Dy, Jr. After asking copies of the tax declarations of the subject land from the
Municipal Assessor’s Office, Nelson found out that the subject land had gone through a
series of anomalous transactions. The owner’s duplicate copy of the same TCT was
declared lost. As a result, a new owner’s duplicate copy of the same TCT was issued and
the subject land was subsequently mortgaged. Later, it was found out that the said lot was
sold to Lourdes by an impostor Mamerto.

Issue:
Whether or not Lourdes is an innocent purchaser for value.

Ruling:
No. Lourdes did not conduct a thorough investigation and she merely instructed her uncle to
check with the Register of Deeds whether the subject land is free from any encumbrance.
Further, Lourdes met the seller only during the signing of the two deeds of sale. Yet, she did
not call into question why the seller refused to see her during the negotiation. For sure, an
ordinary prudent buyer of real property who would be relinquishing a significant amount of
money would want to meet the seller of the property and would exhaust all means to ensure
that the seller is the real owner thereof.
32. G.R. No. 48941 May 6, 1946 [Dilag vs. Heirs of Resurreccion]

Facts:
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. 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. 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 Ressurreccion shall have secured the cancellation of
the mortgage by the Luzon Surety Company.

In 1933, Laureano Marquez had agreed to pay Resurreccion’s indebtedness of P5,000 to

The First Division of the Court of Appeals affirmed with modification the decision of the Court
of First Instance of Bulacan. Hence, this petition.

Issue:
Whether or not a property subsequently acquired can be mortgaged?

Ruling:
No. The Court held that a property subsequently acquired cannot be mortgaged. In this
case, Laureano Marquez could not legally mortgage any property he did not yet own. In the
second place, in order that a mortgage may be validly constituted, the instrument by which it
is created must be recorded in the registry of deeds and insofar as the additional five parcels
of land are concerned, the registration of the document did not affect and could not have
affected them because they were not specifically described therein.
33. G.R. No. L-21953 March 28, 1969 [Gaotian vs. Gaffud]

Facts:
On June 12, 1950, appellee Gatioan obtained a loan in the amount from the appellant,
Philippine National, Bank, and as security therefor, mortgaged the land described in TCT No.
T1212. Using the same land and title as collateral, appellee acquired another loan from the
same bank on. The annotated incumbrance covering this second loan was upon its being
paid released on June 28, 1956. On July 18, 1957, appellee secured, a third loan from the
same bank mortgaging the same title. Appellee paid plus interest, in full payment of the last
loan secured by mortgage on the land covered by TCT No. T1212. Despite payment,
appellant executed no instrument releasing or discharging the encumbrance on TCT No. T-
1212. It turned out that defendant spouses Sixto Gaffud and Villamora Logan procured a
free patent covering the identical parcel of land described in TCT No. T1212 of appellee, on
the basis of which Original Certificate of Title No. P6038 was issued in their favor.
Defendants also obtained two loans from appellant Bank, and as collateral for both, they
mortgaged the said land covered by OCT No. P6038. Hence, appellee filed the complaint for
quieting of title.

The Court of first instance of Isabela ruled in favor of appellee Gaotian and ordered TCT no
P-6038 Declaring the real estate mortgage executed by the defendant spouses in favor of
the Bank, recorded on OCT P6038 null and void and unenforceable as against the herein
plaintiff, and ordering its cancellation, without prejudice of the Bank's right to collect from the
said spouses. Hence this appeal by PNB on a sole question of law.

Issue:
Whether or not the bank may benefit from the provisions of Act No. 496 regarding the
protection for innocent purchasers of land

Ruling:
No, it may not. Act No. 496, or the Land Registration Act, provides that the vendee may
acquire rights and be protected against the defenses which the vendor would not. However,
these provisions do not apply to the appellant PNB because it cannot claim that it is a bona
fide purchaser/mortgagee who had no knowledge of the existence of the flaws in the
defendants’ title, as compared to the petitioner’s title. When a conveyance has been properly
recorded, such record is constructive notice of its contents and all interests, legal and
equitable, included therein. The conveyance is recorded in the public registry, and it is never
issued unless and until it is recorded. Thus, it serves as a notice to the world that such land
is registered, and it is presumed that a purchaser has examined every instrument of record
affecting the title of the land he purchased. This presumption is not rebuttable; otherwise, the
very purpose of the system providing for records of conveyance will be negated.

In this case, PNB failed to exercise a higher degree of diligence in granting the loans of the
parties, as well as in checking the mortgaged properties and the titles thereto. The petitioner
already mortgaged the property three times; it should have noticed that the defendants’
mortgaged property was exactly the same as that of the petitioner’s. Under the
circumstances, appellant had absolutely no excuse for approving the application of the
defendant spouses and giving the loans in question.
34. G.R. No. L-49940 September 25, 1986 [Hechanova vs. Adil]

Facts:
Pio Servando sought to annul the sale made by Jose Servando of three parcels of land
which according to him were mortgaged in his favor. Alternatively, if the sale is not annulled,
to order the defendant Jose Servando to pay the amount of P20,000.00, plus interests, and
to order defendants to pay damages.

Issue:
Whether or not the sale can be annulled by reason that a mortgages has been constituted
on the subject properties.

Ruling:
No. The Court held that plaintiff has no standing to question the validity of the deed of sale
executed by the deceased defendant Jose Servando in favor of his co-defendants
Hechanova and Masa. No valid mortgage has been constituted plaintiff's favor, the alleged
deed of mortgage being a mere private document and not registered; moreover, it contains a
stipulation (pacto comisorio) which is null and void under Article 2088 of the Civil Code. Even
assuming that the property was validly mortgaged to the plaintiff, his recourse was to
foreclose the mortgage, not to seek annulment of the sale.
35. G.R. No. L-26371 September 30, 1969 [Mobil Philippines, Inc. vs. Diocares]

Facts:
In February 1965, Mobil Oil Philippines, Inc. (Mobil Oil) extended a PhP 45 000 loan to Ruth
Diocares and Lope Diocares (Diocares) in a condition that Diocares would buy on cash basis
from Mobil Oil a minimum of 50 000 liters of petroleum per month.

Payment of the loan would be in monthly installments of PhP 950 per month for a period of
five years. As security, Diocares executed a mortgage on two parcels of land.

In case of non-payment of any installment or/and non-performance of the condition (to buy
petroleum), Mobil Oil had the right to foreclose. Diocares defaulted when the third installment
was due. Only PhP 1900 was paid, leaving a balance of PhP 43 000. Diocares also failed to
buy the minimum amount of petroleum per month. Mobil Oil filed a complaint and prayed that
mortgaged properties.

Issue:
Whether or not the mortgage contract, although unregistered, is binding between the same
parties who created it.

Ruling:
Yes. The Court held that a mortgage contract, although unregistered, is binding between the
same parties who created it. Article 2125 is clear and explicit. Even if the instrument were
not recorded, “the mortgage is nevertheless binding between the parties.” As between them,
the mere fact that there is as yet no compliance with the requirement that it be recorded
cannot be a bar to foreclosure. To hold otherwise would defeat the clear provision that the
mortgage subsists despite lack of registration insofar as the parties thereto are concerned,
and that the mortgagor is still liable thereon. Furthermore, while the law says that registration
is “indispensable” in order that the mortgage be validly constituted, yet, what is
indispensable may be dispensed with.
36. G.R. No. L-22331 June 6, 1967 [Lanuza vs. De Leon]

Facts:
Rodolfo Lanuza and his wife Belen sold their house, leasehold rights to the lot, television set
and a refrigerator to Reyes and Navarro in consideration of a sum of P3,000. It was
executed under a “Deed of Sale with Right to Repurchase.” The parties extended the term
for the redemption when the original expired.

Subsequently, the Lanuzas mortgaged the property to the intervenor, De Leon recorded in
the Register of Deeds in Manila. And upon failure to pay of the former, the latter filed in the
sheriff’s office petition for extrajudicial foreclosure. De Leon then won as the sole bidder.
On the other hand, the petitioners Reyes and Navarro filed a petition for consolidation of
ownership of the house on the ground that the vendees failed to redeem their property upon
the expiration of the redemption period. Consequently, De Leon argued that the pacto de
retro sale could not affect his right as a third party. The lower court decided the case in favor
of Reyes and Navarro on the ground that the Lanuzas lose the right to mortgage their
property because they were not the absolute owners of the property that time.

Issue:
Whether De Leon has a better right

Held:
Yes, De Leon has a better right. Art 2088 of the New Civil Code states that the creditor
cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void. There were no transmission of ownership between
the Lanuzas and Reyes and Navarro. In truth, there was a provision regarding automatic
transfer of ownership which was a Pactum Commisorium and it is prohibited under the law.
Hnece, the intention of the parties was deemed as a mortgage rather than of a sale.

The court held that it was in reality an equitable mortgage and the claims of De Leon is
preferred because his mortgage was registered under art. 2125 of the New Civil Code - In
addition to the requisites stated in article 2085, it is indispensable, in order that a mortgage
may be validly constituted, that the document in which it appears be recorded in the Registry
of Property. If the instrument is not recorded, the mortgage is nevertheless binding between
the parties.

37. G.R. No. 146942 April 22, 2003 35.[EVELYN V. RUIZ vs. BERNARDO F. DIMAILIG]
Facts:
Bernardo F. Dimailig (Dimailig) was the registered owner of a parcel of land covered by TCT
No. T-361747 located in Alapan, Imus, Cavite.

In 1997, he entrusted the owner's copy of the said TCT to his brother, Jovannie, who in turn
gave the title to Editha Sanggalang, a broker, for its intended sale.

In 1998, the property was mortgaged to Evelyn V. Ruiz as evidenced by a Deed of REM
without Bernardo's knowledge and consent. Hence, Bernardo instituted this suit for
annulment of the Deed of REM.

The RTC dismissed the complaint and ruled that Ruiz is a mortgagee in good faith. The CA,
however, reversed the decision of the RTC, stating that Ruiz is not a mortgagee in good faith
since she failed to verify the real identity of the person introduced to her as Dimailig. Hence,
this petition.

Issue:
Whether or not Ruiz is a mortgagee in good faith

Ruling:
No. Ruiz failed to prove that she is a mortgagee in good faith. Generally, no valid mortgage
will arise unless the mortgagor has a valid title or ownership over the mortgaged property.
However, as an exception, a mortgagee can invoke that he or she derived title even if the
mortgagor's title on the property is defective, if he or she acted in good faith. In such
instance, the mortgagee must prove that no circumstance that should have aroused her
suspicion on the veracity of the mortgagor's title on the property was disregarded.

The doctrine of mortgagee in good faith assumes that the title to the subject property had
already been transferred or registered in the name of the impostor who thereafter transacts
with a mortgagee who acted in good faith However, in this case, the title remained to be
registered in the name of Bernardo, the rightful and real owner, and not in the name of the
impostor. Also, in this case, Ruiz failed to prove that she is a mortgagee in good faith.

38. G.R. No. 189316, July 01, 2013 [PHILIPPINE NATIONAL BANK vs. SPOUSES
BERNARD AND CRESENCIA MARAÑON]
Facts:
The case is a petition for review on certiorari under Rule 45 of the Rules of Court. The
antecedent events being the Spouses Maranon, owner of a piece of real property, erected
with a building occupied by various tenants. Said subject property was among the properties
mortgaged by spouses Montealegre to PNB as a security for a loan. Spouses Montealegre,
through a falsified Deed of Sale, acquired title to the property and used the property’s title
which was purportedly registered in the name of Emelie Montealegre. However, due to
failure to pay the loan, said property was foreclosed by PNB, and upon auction, was
thereafter acquired by the same bank, PNB. Spouses Maranon filed before the RTC a
complaint for Annulment of Title, Reconveyance and Damages against spouses
Montealegre. Judgment of RTC was rendered in favour of spouses Maranon, and also
stipulated that the Real Estate Mortgage lien of PNB shall stay and be respected. Such
decision prompted PNB to also seek for entitlement to the fruits of the property such as
rentals paid by the tenants.

Issue:
Whether or not is PNB entitled to fruits of the disputed property.

Ruling:
No. Rent is a civil fruit that belongs to the owner of the property producing it by right of
accession. The rightful recipient of the disputed rent in this case should be thus the owner of
the lot at the time the rent accrued. It is beyond question that spouses Maranon never lost
ownership over the subject lot, and that technically, there is no juridical tie created by a valid
mortgage contract that binds PNB to the subject lot because the mortgagors Montealegre
were not the true owners. PNB’s lien as a mortgagee in good faith pertains to the subject lot
alone and not on the erected building which was not foreclosed and still remained to be a
property of Maranon. Thus, PNB’s claim for the rents paid by the tenants has no basis.

39. G.R. No. 165853 June 22, 2006 [Erena vs. Querrer-Kauffman]
Facts:
Vida Dana Querrer-Kauffman is the owner of a residential lot with a house constructed
thereon located at Las Piñas City. The owner’s duplicate copy of the title as well as the tax
declaration covering the property, were kept in a safety deposit box in the house. Sometime
in February 1997, as she was going to the United States, Kauffman entrusted her minor
daughter, Vida Rose, to her live-in partner, Eduardo Victor. Victor also left for the U.S. and
entrusted the house and the key thereto to his sister, Mira Bernal. On October 25, 1997,
Kauffman asked her sister, Evelyn Pares, to get the house from Bernal so that the property
could be sold. Pares did as she was told. Kauffman then sent the key to the safety deposit
box to Pares, but Pares did not receive it. Kauffman then asked Pares to hire a professional
locksmith who could open the safe. When the safe was broken open, however, Pares
discovered that the owner’s duplicate title and the tax declarations, including pieces of
jewelry were missing.

She and Pares went to the Register of Deeds of Las Piñas City and found out that the lot
had been mortgaged to Rosana Ereña. It appeared that a "Vida Dana F. Querrer" had
signed the Real Estate Mortgage as owner-mortgagor, together with Jennifer V. Ramirez,
Victor’s daughter, as attorneyin-fact. Kauffman and Pares were able to locate Bernal who,
when asked, confirmed that Ramirez had taken the contents of the safety deposit box.
Bernal admitted that Jennifer Ramirez had been in a tight financial fix and pleaded for time to
return the title and the jewelry. Kauffman however still filed a complaint against Ereña,
Bernal and Ramirez for the nullification of Real Estate Mortgage and Damages. Ereña
countered that she was a mortgagee in good faith.

Issue:
Whether or not the Real Estate Mortgage is valid

Ruling:
No. According to Article 2085 (2), a pledgor or mortgagor has to be absolute owner of the
thing pledged or mortgaged for a contract of pledge and mortgage to be valid. Both the trial
court and the appellate courts found that Kauffman is the true owner of the property and that
the signatures on the Special Power of Attorney and Real Estate Mortgage are not her
genuine signatures. The evidence on record shows that Ramirez and her husband used an
impostor who claimed she was the owner of the property. This impostor was the one who
signed the Real Estate Mortgage and showed to Ereña the owner's duplicate copy of the
title. When the instrument presented for registration is forged, even if accompanied by the
owner's duplicate title, the registered owner does not lose his title and neither does the
mortgagee acquire any right to the property. In such case, the mortgagee based on a forged
instrument is not even a purchaser or a mortgagee for value protected by law. Ereña is not a
mortgagee in good faith. 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 case, the mortgagee is not an innocent
mortgagee for value and the registered owner will generally not lose his title.