PLEDGE

Cavite Development Bank v. Lim (1 February 2006)

524 SCRA 346 | Ponente: J. Mendoza
Facts
1. Rodolfo Guansing obtained a Php 90,000.00 loan
from CDB. To secure the loan, he managed a
parcel of land located in Quezon City.
2. Guansing defaulted in the payment of his loan.
Thus, CDB foreclosed the mortgaged property.
3. At the extrajudicial foreclosure sale, the
mortgaged property was sold to CDB who was
the highest bidder. Eventually, the title of the
said lot was consolidated in the name of the
bank.
4. Lim offered to buy the property.
5. Conflict arose when Lim discovered that the title
of the property was not in the name of Rodolfo
Guansing because it was under the name of his
father Perfecto. Indeed, Perfecto filed a case for
the cancellation of the title in the name of
Rodolfo.
(In other words, Rodolfo mortgaged a
property that is not his)
6. The Lims sued CDB and its mother company
FEBTC.
7. The RTC ruled in favor of the Lims. It ruled,
among others, that CDB and FEBTC are not
exempt from liability despite the impossibility of
performance, because they could not credibly
disclaim knowledge of the cancellation of
Rodolfos title without admitting their failure to
discharge their duties to the public as a
reputable banking institution.
8. The C.A. affirmed the decision of the RTC in toto.

Issue (1) Whether or not the sale of the mortgaged

property is valid.
Held (1) NO. A foreclosure sale, though essentially a
forced sale, is still a sale, in accordance with Art. 1458
of the NCC, under which the mortgagor in default
becomes obliged to transfer the ownership of the thing
sold to the highest bidder who, in turn, is obliged to
pay the bid price in money or its equivalent. Corollary,
the rule that the seller owns the thing to be sold also
applies. This is the reason why Art. 2085 (b) of the
NCC require, for the validity of the contract of pledge
or mortgage, that the pledger or mortgagor be the
absolute owner of the thing to be pledged or
mortgaged, in anticipation of a probable foreclosure
sale, should the mortgagor default in the payment of
the loan.
Issue (2) - Whether or not the bang should be liable for
the botched sale, which was caused by the defect in
the title of the property mortgaged.
Held (2) The doctrine of mortgagee in good faith
provides that 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.
The court held that the CDB is not a mortgagee in
good faith. While petitioners are not expected to
conduct an exhaustive investigation on the history of
the mortgagors title, they cannot be excused from the
duty of exercising the diligence required of banking
institutions. In Tomas v. Tomas, the court held that it is

standard practice of banks, before approving a loan, to

send representatives to the premises of the land
offered as collateral and to investigate who are the
real owners thereof, noting that banks are expected to
exercise more care and prudence than private
individuals in their dealings, even those involving
registered lands for their business is imbued with
public interest.

6.) Since the case was dismissed, they were compelled

to file a petition for Certiorari
Issue: Whether or not RTC Judge Sayo erred in
dismissing the petition to set aside foreclosure sale
YES
Held
- SC remanded the case back to RTC
- SC found nothing objectionable in such recourse

GSIS v. CA 266 SRA 187

FACTS
1.) Private Respondent PVHI (Sulo ng Nayon Inc.)
obtained a loan of 22 M from GSIS for the construction
of a hotel as security PVHI hypothecated the hotel
and its contents. GSIS granted PVHI two additional
load accommodations of 8 M and 6.5 M.
2.) PVHI was only able to pay 98 M, thus GSIS finally
instituted foreclosure proceedings (Real Estate,
Chattel)
3.) Hotel was finally sold at public auction with GSIS as
highest bidder
4.) GSIS filed with RTC of Pasay for a writ of
possession. RTC granted. CA affirmed.
5.) PVHI filed a petition to set aside foreclosure sale (in
accordance with Section 8 Act 3135), but RTC Judge
Sayo dismissed on the ground of lack of jurisdiction

- Pursuant to Section 8, 3135, the recourse for a party

aggrieved by foreclosure is to have the sale set aside.

PNB v BANALAO

Facts

Banatao filed a case against Carag for recovery

of property
o Real property in dispute is an accretion
which Carag was occupying, and which
Banatao was caiming to own
While case was pending, Carag was able to
secure homestead patents on the disputed land
o Homestead patent bears a proviso that
homestead cannot be alienated or
encumbered within 5 years from issuance
Carag applied for loans with PNB, secured by a
real estate mortgage of the disputed property
o PNB approved the applications, relying on
the OCT which had no notice of lis
pendens
Mortgages were annotated on the
OCT
o PNB extra-judicially foreclosed the
property, won at the public auction, and
consolidated ownership in its name
Compromise agreement was entered into
between Banatao and Carag, whereby the
former would own the northern half, and the
latter, the southern half
o PNB was not made party to the
agreement

Issue

Held

WON the mortgage is valid

No
o
o

Mortgage liens occurred mere months

after the issuance of the homestead
patents
PNB is not a mortgagee in good faith
Prohibition on alienation or
encumbrance can be seen on the
face of the OCT
PNB is chargeable with knowledge
of law
It failed to observe due
diligence

Bank of American, NT and SA v. American Realty

Corp.
FACTS:
(1) Bank of America NT & SA (BANTSA) and Bank of
America International Limited (BAIL) are both
foreign banking corporations who granted three
multi-million US dollar loans to three corporate
borrowers.
(2) The corporate borrowers defaulted. Hence, their
loan was reconstructed. American Realty
Corporation (ARC) secured their reconstructed
loan by executing REM.
(3) The corporate borrowers still defaulted in paying
their loan. Hence, BANTSA filed a case against
the corporate borrowers in the foreign court for
collection of the loan. ARC was not impleaded in
such case.
(4) In addition to the foreign case, they also filed
with the Sheriff of Bulacan to have the REM
executed by ARC extra judicially foreclosed.
(5) ARC filed a case against BANTSA claiming that
the latter can no longer file for extrajudicial
foreclosure the REM because it already filed a
collection case with the foreign courts.
(6) BANTSAs defense, on the other hand, was that
ARC was not impleaded in the foreign courts and
that final judgment was necessary in the foreign
cases before there could be a waiver or a bar to
foreclose the mortgage.
ISSUE: W/N the extrajudicial foreclosure was proper.
HELD: NO.
(1) The SC held that the mortgagee creditor has 2
options when the principal debtor defaulted: (1)

foreclose the mortgage; or (2) file a collection

suit. The option is alternative and not
cumulative. An exercise of one option is deemed
waiver or bar on the other. The option is
deemed chosen when in: (1) collection suit has
been filed; or (2) when a petition was filed with
the sheriff where the property is located to have
the mortgage judicially or extra judicially
foreclosed.
(2) In the case at bar, SC it was immaterial whether
or not ARC was impleaded in the foreign cases.
The mere fact that BANTSA filed a collection suit
against the corporate borrowers already
constituted a bar or waiver to foreclose the
mortgage.
DOCTRINES:
(1) Remedies available to the mortgage creditor are
deemed alternative and not cumulative
(2) Filing of a collection suit barred the foreclosure
of the mortgage
(3) The mere act of filing of an ordinary action for
collection operates as a waiver of the mortgagecreditors remedy to foreclose the mortgage; No
final judgment in the collection is required for
the rule on waiver to apply.

HELD:
Yes. Section 195 of the National Internal Revenue Code
(NIRC) imposes a DST on every pledge. All pledges are
subject to DST, unless there is a law exempting them
in clear and categorical language. DST is essentially an
excise tax; it is not an imposition on the document
itself but on the privilege to enter into a taxable
transaction of pledge.
M. J. Lhuillier Pawnshop, Inc. v. Commissioner on
Internal Revenue!G.R. No 166785. September
11, 2006.!
FACTS:
1. The case is a motion for reconsideration which
contends that before an exercise of a taxable
privilege may be subject to Documentary Stamp
Tax (DST), it is indispensable that the
transaction must be embodied in and evidenced
by a document.
2. MJ Lhuillier argued that since a pawn ticket as
defined in thePawnshop Regulation Act is merely
the pawnbrokers receipt for apawn and not a
security nor a printed evidence of indebtedness, it
cannot be considered as among the documents
subject to DST

ISSUE:
Whether or not pledge transactions entered into by
pawnshops are subject to DST.

Commissioner of Internal Revenue v.

Trustworthy Pawnshop, Inc.! G. R. No. 149834.
May 2, 2006.

EL HOGAR V PAREDES
Facts:
1. On September, 26 1919, Doa Aniceta
Ardosa executed a mortgage upon a rural
estate land in the municipality of Manapla
Occidental Negros. Such land was called the
Hacienda de Bayabas y Agtongtong.
2. The mortgage was executed in favor of El
Hogar Filipino for a building and loan
contract.
3. In such contract, the parties stipulated a
clause that provided that whenever the
debtor defaults at the maturity of the debt
El Hogar shall have to power to sell or
execute an extra-judicial sale of the
property.
El Hogar shall have the right to
participate in the bidding.
4. Ardosa later on defaulted in payment which
resulted in the foreclosure of the
sale.
5. When El Hogar was already registering the
land under its name, Paredes, as registry of
deeds of Negros, denied such registration
because the stipulation conferring power to
sell is void.

FACTS:
1. Commissioner of Internal Revenue issued Revenue
Memorandum Order (RMO) No. 15-91, which classified
the pawnshop business as akin to the lending
investors business activity and subject to 5% lending
investors tax.
2. Cebu City issued a notice against Trustworthy
Pawnshop for the payment of deficiency percentage
tax but the pawnshop protested and alleged that a
pawnshop business is different from a lending
investors business,hence, should not be subjected to
the 5% lending investors tax. !
ISSUE:
Whether or not pawnshops are considered lending
investors.
HELD:
No. In CIR v. MJ Lhuillier, it is anchored in the following
reasons: a.) Under the provisions of National Internal
Revenue Code (NIRC), pawnshops and lending
investors were subjected to different tax treatments.
b.) Congress never intended pawnshops to be treated
in the same way as lending investors. c.) A section in
the NIRC subjects to percentage tax dealers in
securities and lending investors only. There is no
mention of pawnshops.!! d.) The BIR had ruled several
times prior to the issuance of the memorandum that
pawnshops were not subject to the 5% percentage tax.

Issue:
WON the power to sell given to the manager of
El Hogar is a valid stipulation.

Ruling:

There is no domestic law or jurisprudence that

criticizes the validity of such stipulation. However, the
SC in this case, enshrined the doctrine that:
That this view is in harmony with legal
conceptions prevailing in this jurisdiction can be
further seen from the circumstances that section 66 of
the Land Registration Act (Act No. 496) fully recognizes
the validity of a clause in a mortgage conferring a
special power of sale on the mortgagee. It is true that
the section deals only with land that has been
registered under the Torrens system, but the
provision reflects the commonly accepted
professional view that such a clause is valid,
regardless of the nature of the title. Certainly, it
would be an astonishing conclusion if we were to hold
here that a clause conferring special power of sale is
invalid in a contract dealing with land not registered
under the Torrens system, notwithstanding the fact
that the same clause is valid when inserted in a
contract relating to land so registered.
It is a matter of common knowledge that, owing to
the difficulties and uncertainties attendant upon
the realization of loans extended upon
mortgages of real property in this country,
intending borrowers are compelled in most
cases to resort to the dangerous expedient of
selling their land under a contract of sale
with pacto de retro.

Lopez and Javelona v. El Hogar (12 January

1925)
GR No.: 22678 | Ponente: J. Villamor
Facts
1. Lopez and Javelona obtained a loan in the
amount of Php 94,000.00 from El Hogar.
2. The loan agreement provided among others that

a. Par. 8 Failure to pay for 3 consecutive

months will allow El Hogar to collect the
rent received from the properties
mortgaged and to apply them as
payments for the debt.
b. Par. 10 If debt remains unpaid, debtors
will give the manage or he authorized
person of El Hogar to sell the property
mortgaged at a public auction.
3. Beginning 31 May 1921, the debtos failed to
make the monthly payments stipulated in the
contract. Thus, the BOD of El Hogar declared the
amount due and demandable.
4. The mortgaged properties were sold publicly at
an extrajudicial foreclosure sale, and were
purchased by El Hogar.
5. The debtors filed a complaint praying for the
annulment of the extrajudicial foreclosure sale
and the cancellation of all the registration,
annotations, etc in the title of the of the
properties mortgaged.
6. The CFI rendered a decision against El Hogar. It
ruled among others that Par. 10 of the loan
agreement is null and void.
Issue Whether or not paragraph of the loan
agreement is null and void.

Held Citing El Hogar v. Paredes, the court held that a

stipulation in the mortgage contract allowing the
mortgagee, upon default of the mortgagor in the
payment of the mortgage debt and after publication
for 3 successive weeks in a paper of general
circulation, and allowing the mortgagee to become a
bidder at such sale is valid. It is not contrary to any
public policy.
Therefore, par. 10 of the aforementioned contract is
valid. The court a quo erred in holding Par. 10 of the
said contract null and void.
NB: The case is really long. Indeed, your patience will
run out when you read the full text. But the only thing
we need in this case is the validity of Par. 10 of the
mortgage contract.

FRANCISCO REALTY AND DEVELOPMENT CORP V

CA
FACTS:
Petitioner granted a loan of 7.5 million pesos to private
respondents, spouses Javillonar, in consideration of
which the latter executed the following documents: (a)
a promissory note stating an interest charge of 4% per
month for 6 months; (b) a real estate mortgage,
together with the improvements; and (c) an undated
deed of sale of the mortgaged property in favor of
petitioner. The interest on the said loan was to be paid
in 4 installments: 900k to be deducted from the
proceeds of the loan, while the remaining balance was
to be paid monthly by means of post-dated checks
(March 27, April 27, May 27). Promissory note provided
that in failure to pay the interest, full possession will
be transferred and deed of sale will be registered.
Petitioner claimed respondents failed to pay.
Respondent obtained another loan of 2.5 million and
issued another promissory note, loan to be paid on or
before April 27, 1992. Respondents failed to pay again
and refused to vacate the property covered by the real
estate mortgage. Said that it was not their intent to
sell the property but the undated deed of sale was
merely additional security.

ISSUE(S):
WON there was pactum commissorium.

HELD:
YES. A pactum commissorium is a forfeiture clause in
a deed of sale. The stipulations in the promissory notes
providing that upon failure of respondent spouses to
pay the interest, ownership of the property would be
automatically transferred to petitioner and the deed of
sale would be registered, are in substance of a pactum
commissorium.
2 elements of a pactum commissorium: (1) there
should be a pledge or mortgage wherein a property is
pledged or mortgaged by way of security, (2) that
there is a stipulation for an automatic appropriation by
the creditor in the event o f non-payment.

ONG V. ROBAN LENDING CORP.

FACTS:
1. Spouses Ong obtained several loans from Roban
Lending Corp amounting to 4M which was
secured by several REMs.
2. The amount was subsequently amended to 6M
and a Memorandum of Agreement was
executed.
3. MOA states that in case of default of payment,
Dation in payment will take place and that a
promissory note will be executed by the
spouses.
4. Spouses defaulted.
5. Spouses filed for Annulment of TCTs issued to
Roban, and annulment of Deed of Mortgage on
the
grounds
that
there
was
Pactum
Commissorium.
ISSUE: WON there was Pactum Commissorium?

HELD:
1. Pactum Commissorium is the automatic
appropriation of a property that is being held by
the mortgagee as security. The rule is, Pactum
Commissorium is not allowed and any
stipulation of the same will be null and void.
2. There was nothing in the Memorandum of
Agreement
that
provides
a
foreclosure
proceeding nor redemption in case of default.

3. The respondents could not say that Dation is

allowed since the purpose of Dation is to
extinguish the debt. But in this case, the Dation
would not extinguish the debt since a PN should
subsequently be executed after Dation.
DISPOSITIVE:
The memorandum agreement and Dation made by the
parties is null and void.

ONG V IAC

To secure the fulfillment, Madrigal Shipping Co.,

Inc executed a document denominated as
"Pledge Agreement".

DOCTRINE:

Under the said Pledge Agreement he was to give

additional securities or collaterals in the form of
a pledge in favor of the bank, its barge and
tugboat.

Madrigal Shipping Co., Inc. failed to pay its

obligation to the Solidbank.

The creditor bank had to sell the pledged

properties, however the tugboat and the barge
had been taken from Pasig River, Manila, where
the vessels were moored and towed to North
Harbor, Manila, without the knowledge and
consent of the Solidbank

Meanwhile, petitioner Honesto Ong bought one

Barge (the same barge which was subject of the
pledge) from Santiago S. Ocampo, a successful
bidder in a public auction.

Private respondent (Solidbank) filed a complaint

against Honesto Ong, et al. for Replevin with
Damages before the CFI

The respondent court (CFI) issued an order for

the seizure of the above described personal
property upon posting of a bond in the sum of
P1,000,000.00

Requirements for Pledge to take effect against third

persons:

Article 2096 of the Civil Code that for a pledge

to take effect against third persons, it should be
in a public instrument which must contain the
description of the thing pledged and the date of
the pledge.
In the case of Bachrach Motor Co. v. Lacson
Ledesma, 64 Phil. 681 (1937), Art. 2096 has
been interpreted in the sense that for the
contract to affect third persons, apart from
being in a public instrument, possession of the
thing pledged must in addition be delivered to
the pledgee.

FACTS:

Madrigal Shipping Co., Inc. applied for and was

granted a loan by the Consolidated Bank and
Trust Corporation (Solidbank for short) in the
amount of P2,094,000.00

After an opposition to the motion for

reconsideration and a reply to the opposition
had been filed by the parties, the Court of First
Instance denied the motion for reconsideration
but ordered the petitioners Alfonso Ong and
Honesto Ong to post a counterbond of
P400,000.00 executed to the herein plaintiffprivate respondent. The pertinent part of the
order and its dispositive portion reads:
o

The alleged Pledge Agreement between

plaintiff and Madrigal Shipping Company
covering the vessel (barge) in question
was not registered in the registry of
vessels. Considering that plaintif
does not charge private defendants
with knowledge of such pledge (see
par. 8, complaint), said defendants,
being third persons, cannot be said
to be bound by said pledge.

ISSUE: WON the contract of pledge entered into by

and between Solidbank and Madrigal Shipping Co., Inc.
is binding on the petitioners Ong.

HELD:
Undoubtedly, petitioners rely heavily on the fact that
the contract of pledge by and between Solidbank and
Madrigal Shipping Co., Inc. was not recorded under

Sections 804 and 809 of the Tariff and Customs Code

and argue that it is not binding on third persons like
the petitioners. It is, however, stated under Article
2096 of the Civil Code that for a pledge to take effect
against third persons, it should be in a public
instrument which must contain the description of the
thing pledged and the date of the pledge.
In the case of Bachrach Motor Co. v. Lacson Ledesma,
64 Phil. 681 (1937), Art. 2096 has been interpreted in
the sense that for the contract to affect third persons,
apart from being in a public instrument, possession of
the thing pledged must in addition be delivered to the
pledgee.

All these requirements have been complied with, in the

case at bar. The pledge agreement is a public
instrument, the same having been notarized and under
the notarial seal of Vicente A. Casim. Subject of the
pledge (MSC Barge No. 601) was delivered to the
Solidbank which had it moored at Tanque Bodega,
Pasig River, Manila, where it was guarded by a security
guard.

Undeniably, Madrigal Shipping co., Inc., owner of MSC

Barge No. 601, pledged said vessel and tugboat to
secure the shipping company's obligation to the
creditor bank (Solidbank) in the amount of
P2,094,000.00, and no payment was made by Madrigal
Shipping Co., Inc., as pledgor. Therefore the Solidbank

has the light of retention of the barge in question

pledged to it until it is paid. The Civil Code expressly
provides;

Art. 2090. The contract of pledge gives right to the

creditor to retain the thing in his possession or in that
of a third person to whom it has been delivered, until
the debt is paid.
Applying these concepts in the case at bar, the
pledgee is obviously a lawful and rightful possessor of
the personal property pledge

HERNANDEZ V IAC
Facts

Hernandez was introduced to De Leon as

someone buying and selling jewelry
There have been previous transactions between
which have been paid for in cash and PDCs
Petitioner got 2 carat earrings, 1 choker, 1 heart
shaped diamond set, and 1 carat ring and
earrings which were each paid for with a PDC
payable to cash, and a 5 carat diamond piece
which was paid for using an indorsed PDC issued
by a certain Enrique Araneta
Upon presentment, 3 checks were drawn
against insufficient funds, and 2 were drawn
against a closed account

Issue

Held

WON there is Estafa

Yes
o

Ownership is not a requisite for Estafa

As long as one defrauds another
Owner need not be the one
on whom the loss falls

REAL ESTATE MORTGAGE

Soriano v. Galit
Topic: REM
Ponente: Ynares-Santiago, J.
Facts:

Respondent Ricardo and Rosalina Galit got a 480k

loan from petitioner Marcelo Soriano secured by a
REM over a 35k sqm. land.
The Galits defaulted, hence, Soriano filed for
collection with the RTC.
It granted his petition then issued a writ of execution.
The deputy sheriff levied on the Galits 35k sqm.
land, a house, and a bodega. Soriano also won the
public auction for such properties totaling 483k, thus,
a certificate of sale was issued in Dec. 23, 1998.
When Soriano caused the registration in 1999, of his
certificate of sale, a 139sqm lot was included which
was not in the writ of execution.
2001, after the registration, Soriano moved for writ of
possession as the Galits never availed of their right
of redemption within a year after the public sale. RTC
granted the writ of possession.
CA reverses for the Galits and grants their petition
for certiorari. Hence, Soriano appeals contending CA
erred because the proper remedy was to quash the
writ of possession, not attack the validity of the writ
of possession.

Issue:

Held:

WON the writ of possession is void. YES, its VOID.

SC points out that there should be a strict application

of the certificate of sale wherein it should state the
correct description of the property to be sold.
Otherwise, its void because it indicates fraud.
CA pointed out in its ruling that there was a
difference between the 1st page of the certificate of
sale and those at the dorsal portion. Slightest
deviations will invalidate the proceeding and the
public sale.

MOJICA v. CA

1. Petitioner Leonardo Mojica [deceased] contracted a

loan with the defendant rural bank of Kawit. As a
security, he executed a real estate mortgage. In the
REM contract, it was stated that, ... agreement for
the payment of the loan of P20,000.00 and such
other loans or other advances already obtained or
still to be obtained by the mortgagors ....
2. The 20k loan was fully and completely paid.
Subsequently, mojica contracted another loan with
the defendant for 18k. No formal deed of mortgage
was constituted over any of the properties of the
petitioner but it was stated on the top of the PN that
it was secured by the previous REM executed.
3. Spouses
failed
to
pay,
the
property
was
extrajudicially foreclosed in favor of the defendant as
the highest bidder. Mojica failed to redeem the
property within one year.
4. The son of mojica, attempted to pay his fathers
debt. He made 2 partial payments. Subsequently, the
defendant
bank
executed
an
affidavit
of
consolidation of title over the said property.
5. After consolidation, defendant bank scheduled a
public auction sale over the subject property. The
bank refused to accept the payment of unpaid
balance of Mojicas son. Hence, this complant.
ISSUE: Whether or not the foreclosure sale by the Sheriff on
had for its basis, a valid and subsisting mortgage contract.
HELD: Yes.
-

mortgages given to secure future advancements are

valid and legal contracts; that the amounts named as
consideration in said contract do not limit the
amount for which the mortgage may stand as
security if from the four corners of the instrument the
intent to secure future and other indebtedness can
be gathered. A mortgage given to secure

advancements is a continuing security and is not

discharged by repayment of the amount named in
the mortgage, until the full amount of the
advancements are paid
where the annotation on the back of a certificate of
title about a first mortgage states "that the mortgage
secured the payment of a certain amount of money
plus interest plus other obligations arising there
under' there was no necessity for any notation of the
later loans on the mortgagors' title. It was incumbent
upon any subsequent mortgagee or encumbrances of
the property in question to e e the books and records
of the bank, as first mortgagee, regarding the credit
standing of the debtors

PEOPLES BANK AND TRUST CO. vs. DAHICAN LUMBER

CO.
FACTS:
Atlantic Gulf and Pacific Company of Manila sold and
assigned all of its rights in the Dahican lumber concession to
Dahican Lumber Company (DALCO) for $500K, of which only
$50k was paid. Therefore, to develop the concession, DALCO
obtained various loans from the Peoples Bank and Trust Co.
(BANK) amounting to 200K pesos. And along with Dahican
American Lumber Corp. (DAMCO), a stockholder of DALCO,
obtained a $250K loan from the Export-Import Bank of
Washington. As security for the loans, DALCO executed in
favor of the BANK a real estate mortgage covering 5 parcels
of land with all the buildings and improvements thereon and
all personal properties of mortgagor in its place of business.
Executed a 2nd mortgage on the same property in favor of
Atlantic to secure unpaid balance of $450K. Both deeds
contained the provision extending mortgage to properties
subsequently acquired. Failed to pay 5 th promissory note.
Respondent acquired new equipment and machineries from

Connell Cros. Company, a general purchasing agent of

DALCO.

ISSUE(S):
WON the after acquired properties were subject to the
deeds of mortgaged mentioned.
WON mortgages are valid even if
accordance with Chattel Mortgage Law.

not

recorded

in

HELD:
1st ISSUE: YES. Explicitly stated in the contract and SC said
that such stipulations are not unlawful because they were
meant to just replace existing equipment. Treated the
equipment as perishable.
2nd ISSUE: YES. No need to record because such equipment
was immobilized by destination. Art. 415

San Juan v. CA
Facts:

Subject property was a lot in Bacolod which was

owned by petitioner Asuncion San Juan which she
mortgaged to respondent Young Auto Supply Co., Inc.
(YAS) through her atty-in-fact, Rafael Alducente.
After San Juan defaulted, REM was extra-judicially
foreclosed by YAS, won in the public sale, registered
the certificate of sale with the Register of Deeds in
Sept. 13, 1985.
Sept. 22, 1986, a final certificate of sale was issued
but YAS couldnt register it because San Juan refused
to surrender her owners duplicate of the title to the
foreclosed property. Hence, this case.
RTC ruled for YAS, ordered the Register of Deeds to
annotate in the OCT of the property the sale without
presenting the owners duplicate. San Juan appeals
to the CA attacking the validity of the final certificate
of sale as she had already revoked the SPA she made
in favor of the Rafael Alducente before all this
happened.
But naaaaah, CA affirmed the validity because San
Juan failed to exercise her 1 year right of redemption
or question the validity in the first place. Plus the
certificate of sale registered was a public document
which has a prima facie presumption that its valid.

Issue:

WON the Register of Deeds can annotate in the OCT

without need of the owners copy. YES.

HECHANOVA v. ADIL
1. Petitioner seeks the annulment of the court order
issued by respondent judge in a civil case declaring
the deed of sale null and void.
2. The defendant in a civil case mortgage the land to
his cousin wherein it was stated in the mortgage
contract that in case the former fails to redeem the
property within 10 years, the latter will become the
former thereof.
3. The defendant sold the property to the herein
petitioner, alleging that the mortgage executed
between him and his cousin was null and void.
ISSUE: WON the plaintiff in the civil case [defendants
cousin/ mortgagor] has a legal standing to question the
validity of sale. NO
WON the sale of the subject property null and void. NO.

Held:

she shouldve attacked the validity of this whole

proceeding the moment she knew about the REM as
she alleged that she had revoked the SPA of Rafael.
San Juan just refused to give her owners duplicate.
SC held that if this was allowed, no buyer in a public
sale can consolidate his/her title even after the
expiration of the right of redemption.
Also, sec. 71 of PD1529 pertains to the Register of
Deeds annotating the OCT without the owners copy
and they just send a notice to the refusing owner, to
produce it. Otherwise, itll be subject to court action,
like this case.

SC states that San Juan was already barred by laches

by letting 3 years pass without exercising her right of
redemption or question the certificate of sale.
In any case, San Juans defense that this violates her
rights under Sec. 107, PD1529 is untenable because

HELD: No.
- It is clear from the records of this case that the plaintiff has
no cause of action. 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.

Bank of Commerce vs. San Pablo, Jr.

Facts:

to observe the required diligence to ascertain the

genuineness and extent of the authority of Santos.

1. On December 20, 1994, Santos obtained a loan from

Direct Funders, secured by a real estate mortgage.
The said property was owned by the defendants and
that Santos was able to mortgage the property
through an SPA signed by defendants.
2. Respondents received a letter from Direct Funders
regarding Santos failure to meet her obligation.
However, Santos subsequently settled the loan with
Direct Funders.
3. Respondents later demanded the return of the TCT
pertaining to the mortgaged property which to their
surprise was mortgaged by Santos to Bank of
Commerce using an SPA with forged signatures.
4. The property was subsequently foreclosed, thus
respondents filed an action for quieting of title
against Bank of Commerce.
Issue: Who between respondents and Bank of Commerce
has a better title over the property.
Held: Respondents have a better title over the property.
1. Their signatures in the SPA were forged, thus the real
estate mortgage was declared null and void. It
naturally follows that the foreclosure is also null and
void.
2. Bank of Commerce was not in good faith. Dealing
with Santos who is not the registered owner of the
property being mortgaged, Bank of Commerce failed

ABAD V. GUIMBA

FACTS:
1. Vivian Guimba wanted to apply for a loan and asked
Gemma to look for a person to obtain loan from.
2. She gave Gemma the Duplicate Copy of her title.
Subsequently, she changed her mind. She asked for
the copy back but was told by Gemma that the copy
was in a bank. Upon calling the bank, the latter
informed Vivian that the title was not there.
3. Later on, someone called Vivian, which is Abad, and
informed her that her loan was upon maturity.
4. Vivian filed for cancellation of Mortgage.
5. Abad contends that he was a mortgagee in good
faith since PD 1529 gives the public the right to rely
only on the face of the title.
ISSUE: WON Abad was a mortgagee in good faith?

HELD: NO.

1. PD 1529 only applies to purchasers or mortgagees in

good faith. It was shown in the factual findings that
Abad met a different couple and that he did not
inquire on whether they are the persons who are
indicated in the tiltle. Therefore, it excludes
purchasers who have knowledge of any defect in
title.
2. In dealing with a registered land, through an
unregistered owner, the purchaser must look beyond
the face of the title since the mere fact that the
vendor is not the registered owner must put him on
his guard.

ASUNCION v. EVANGELISTA

FACTS:
Private respondent has been operating a piggery on his
landholdings under the trade name Embassy Farms as a
single proprietorship. Private respondent, with his wife and 3
others organized Embassy Farms Inc. and registered it with
the SEC. Private respondent was majority stockholder of the
corporation with 90% of the shares. He also served as the
president and CEO. Respondent borrowed 500K pesos from
Paluwagan ng Bayan Savings and Loan Association to use as
working capital for Embassy Farms. He executed a real
estate mortgage on 3 of his properties as security for the
loan. Mortgaged 10 more titles in favor of PAIC Savings and
Mortgage Bank for 1.7M pesos. Another loan of 800K from
Mercator Finance secured by 5 mortgages. Debt totaled to
3M. Defaulted on his payments and loan ballooned to 6M
due to interest and other financial charges. Petitioner and
Respondent executed a memorandum of agreement
transferring to petitioner Embassy Fars and assuming all of
its obligations. However, 1 year has already lapsed and he
still hasnt transferred land and stocks of Embassy Farms to
petitioner.

ISSUE(S):
WON petitioner should execute a formal assumption of
mortgage separate from the MOA

HELD:
NO. A recorded REM is a lien inseparable from the
mortgaged property until it is discharged. It is an

elementary principle in civil law that a real mortgage

subsists not withstanding the changes in ownership and all
subsequent purchasers of the property must respect the
mortgage, whether the transfer to them be with or without
the consent of the mortgage.

Perfecta Quintanilla vs CA and RCBC

FACTS:
- Quintanilla under the business name of Cebu Cane
Products export rattan goods and was granted with 45K
credit line by RCBC and former executed REM of land as
security, but only 25K was availed from 45K then again
availed credit lines with RCBC for her export bills twice
amounting to 100K each as evidenced by PNs
- Quintanilla exported her goods in Belgium and Bank
Brussels-Lambert New York paid RCBC so RCBC credited it to
the 25K secured by REM and 100K. Another shipment to
Belgium was sent, but Bank in Brussels refused payment
and even demanded for reimbursement of the previous
payment. Due to persistent demand, RCBC reimbursed and
revert the credit from Quintanillas account and demanded
for the whole amount.
- Quintanilla failed to pay so RCBC foreclosed the REM, but
not only to the 25K secured by REM, but to total amount of
500K, so the petitioner filed for specific performance with
damages and RCBC filed counterclaim
- RTC: foreclosure to proceed only to 25K; counterclaim
dismissed
- CA: affirm RTC; permissive counterclaim granted
ISSUE: WON the counterclaim is compulsory?

RULING: YES. Court Affirmed CA except nature of

counterclaim.
- To determine if compulsory, REM must be interpreted. REM
stated: for principal of 45K and as well as those mortgagee
may extend to mortgagor.
- As a general rule, mortgage must be limited to the amount
mentioned, but the REM expressly stated that the mortgage
is not limited to the fixed amount, but also to credit
accommodations in excess thereof, therefore, general rule
does not apply but the specific provision or agreement of
the parties.
- Since REM clearly indicated to include also future
advancements, counterclaim is compulsory so CA has
jurisdiction, thus, may grant even without payment of
docket fees.

Agbada v. Inter-Urban Developers Inc.

(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.

FACTS:
(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: W/N Agbada was denied of due process

HELD: NO.
(1) SC held that Summary Judgment was proper.
mortgage
contract
expressly
showed
agreement of the parties as to the period
interest of the loan. The defense of Agbada
baseless and untenable.

The
the
and
was

DOCTRINE: Judgment; Foreclosure; Proper remedy

to seek reversal of judgment in an action for
foreclosure

of

real

estate

mortgage

is

not

petition for annulment of judgment but an appeal

from

the

judgment

itself

or

from

the

order

confirming the sale of the foreclosed real estate.

SAYSON vs. LUNA

DOCTRINE:

Sheriffs duty in the execution of a writ is purely ministerial

he is to execute the order of the court strictly to the letter,
and he has no discretion whether to execute the judgment
or not.

Sheriffs report, as a document, is clothed with the

presumption of regularity, and since it was not objected to
by the complainant, it must be upheld.
The complainants failed to substantiate the charges against
the respondent. As against the bare allegations of
misconduct with no cogent proof thereon, and the
presumption of regularity in the performance of official
functions, the latter shall prevail.
FACTS:
This instant administrative case arose from the
Affidavit-Complaint of Gloria R. Sayson, Francisco R.
Rellorosa and Rustico Y. Caparas charging Efren Luna,
Sheriff III, Metropolitan Trial Court, Quezon City, with
grave misconduct
The complainants alleged:
o That the weekend before July 15, 1999,
Gregorio Rellorosa informed them that his car
would be levied upon pursuant to a writ of
execution issued by the Metropolitan Trial
Court of Quezon City, and that it was
scheduled to be sold at public auction at
10:00 a.m. on July 15, 1999.
o Rellorosa requested them to participate in the
bidding, to which they agreed, subject to the
condition that in case one of them would win
the bid, they would allow Rellorosa to redeem

In his
o
o
o

the car within one year at the bid price plus

accrued interest.
That at 9:00 a.m. of July 15, 1999, they met
Rellorosa and agreed to pool their resources
so that they would come out as the highest
bidder.
They also met the respondent sheriff that
same morning. Upon being told that the
scheduled auction sale had been postponed
to July 19, 1999, the complainants left.
They, however, later learned from Rellorosa
that the respondent sheriff conducted the
auction sale of the said car at 2:00 p.m. that
same day.
comment, the respondent narrated that:
He levied the car in question pursuant to a
writ of execution issued by the court.
The auction sale was set at 10:00 a.m. of July
15, 1999, with due notice to Gregorio
Rellorosa.
Three days prior to the scheduled auction sale
or on July 12, 1999, Gregorio Rellorosa filed a
Petition for Relief from Judgment with Urgent
Prayer for Preliminary Injunction Inter Alia and
Temporary Restraining Order to Stop Sheriffs
Sale Scheduled on July 15, 1999.
The respondent further averred that he came
to see Gregorio Rellorosa alone in the morning
of July 15, 1999, and informed the latter that
his motion was denied.
He also told Gregorio that the auction sale
would not push through as scheduled, but
would proceed any time of the day once the
order was signed.
The respondent avers that he advised
Gregorio to wait for the plaintiff, Genaro
Serrano, to ask if the latter would postpone
the auction sale, but Rellorosa immediately
left.

ISSUE: WON Luna (Sheriff) acted in accordance with the

Writ of Execution We agree.
HELD:
The respondent sheriff acted in accordance with the Writ of
Execution dated June 11, 1999, as issued by Judge Augustus
C. Diaz, Metropolitan Trial Court, Branch 37, Quezon City.
Indeed, a sheriffs duty in the execution of a writ is purely
ministerial he is to execute the order of the court strictly to
the letter, and he has no discretion whether to execute the
judgment or not. A perusal of the notice of levy and sale will
also show that the sale at public auction was to take place
on July 15, 1999 at 10:00 a.m. or soon thereafter at the front
of [the] Hall of Justice Building, Q.C. As found by Executive
Judge Ponferrada, such notice was served on July 8, 1999, or
more than five (5) days before the scheduled auction sale.
Furthermore, a sheriffs report, in this case the Minutes of
the Auction Sale, as a document, is clothed with the
presumption of regularity, and since it was not objected to
by the complainant, it must be upheld.
The complainants failed to substantiate the charges against
the respondent. As against the bare allegations of
misconduct with no cogent proof thereon, and the
presumption of regularity in the performance of official
functions, the latter shall prevail.

Paguyo v. Gatbunton

A.M. P-06-2135. May 25, 2007.

Topic: REM
Ponente: Garcia, J.

Issue:

Facts:

In Sept. 9, 2002, petitioner Adoracion Paguyo got a

20k loan from Jeanlyns Lending Investor with a REM
over their residential property in Bataan.
Feb. 3, 2003, Sps. Celso and Jenelita Garcia, owners
of Jeanlyns Lending, filed for extra-judicial
foreclosure of the REM under Act No. 3135 as Paguyo
defaulted since Jan. 9, 2003.
Hence, a notice of sheriffs sale was issued by
respondent sheriff Charlie Gatbunton, setting the
public sale on April 11, 2003. Notice was posted in
Feb. 24, 2003, and published in Sierra Pacific news in
Martch 12, 15, and 19, 2003.
However, the public auction was made on Dec. 1,
2003, in which the Sps. Garcia won. So Paguyo filed
this case for grave abuse of authority and/or gross
ignorance of the law with the Office of the Court
Administrator (OCA) alleging that the foreclosure by
Gatbunton was illegal contending:
a. She already paid the loan;
b. No SPA attached in the REM authorizing the
Garcias to foreclose the property; and
c. There was no publication of the Dec. 1, 2003
public auction.
Gatbunton denies this and alleges that:
a. The Dec. 1, 2003 auction was already approved
by the ex officio sheriff;
b. Foreclosure in its substance is valid;
c. It was made on December 1 because the Garcias
wanted to give Paguyo time to make good of the
loan.

OCA ruled that respondent sheriff Gatbunton was not

liable for the checking of the SPA. But he is liable for
the December sale for incompetency.

WON OCA erred in not ruling Gatbunton is liable for

the checking of the SPA. NO.

Held:

Under Act No. 3135 Sec. 1, a sheriff has the

obligation to check an SPA attached to the REM
authorizing to sell the mortgaged property.
But this was amended by Circular No. 7-2002,
enacted on April 22, 2002, which provides that
application for extra-judicial foreclosures are to be
examined now by the clerk of court. As the
foreclosure was made on Feb. 3, 2003, which is now
governed by such circular, Gatbunton is not anymore
liable.
However, Gatbunton is still liable for the December
sale for not causing re-publication of the sheriffs
notice. The publication in the Sierra Pacific news only
referred to the April 11 public sale.
SC makes him liable for incompetency under Sec.
52(A)(16) in the Revised Uniform Rules on
Administrative Cases in the Civil Service.

SPOUSES VIRGILIO G. TAMAYO vs. HEIRS OF GAVINO

DOMINGUEZ

NOTE: Section 10 of the mortgage deed thereof read:

DOCTRINE: In extrajudicial foreclosure proceedings,

personal notice to the mortgagor is actually unnecessary
unless stipulated. If not being contrary to law, morals, good
customs and public policy, mortgagee should have complied
with it faithfully.

(10) All correspondence relative to this

Mortgage,
including
demand
letters,
summons, subpoenas or notification of any
judicial or extra judicial actions shall be sent
to the Mortgagor at the address given above
or at the address that may hereafter be given
in writing by the Mortgagor to the Mortgagee.

FACTS:

To
secure
a P40,000 loan, Gavino Dominguez
executed a real estate mortgage on one-half of his
commercial property in favor of the Community
Savings and Loan Association (CSLA)
The mortgagor Gavino Dominguez died without
settling his obligation.
On maturity of the loan, CSLA filed a petition for
extrajudicial foreclosure. In the auction sale, the
property was awarded to it as the highest bidder. The
certificate of sale was registered in its name.
Subsequently CSLA allegedly gave respondents, the
heirs of Gavino Dominguez, the option to repurchase
within thirty days its half of the property.
When they failed to avail of the offer, CSLA sold the
same
to
petitioners Virgilio Tamayo,
Jr.
and
Lucinda Tamayo.
Petitioners filed with the RTC of Antipolo, Rizal, an
action for partition against respondents who opposed
it mainly on the ground that, since CSLA committed a
violation of the mortgage deed when it failed to
send Gavino Dominguez or his heirs a notice of the
extrajudicial foreclosure and sale, the proceeding
was null and void.

ISSUE: WON the CSLA sent a notice of the extrajudicial

foreclosure
and
sale
to
the
mortgagor,
deceased Gavino Dominguez, or to his heirs as required in
the mortgage deed.

HELD:
SC adopted the CAs finding that CSLA violated the notice
requirement in the mortgage deed. As held by the appellate
court:
Indeed, as correctly found by the lower
court, there is no evidence in this case to
show that the [CSLA] properly sent
notice of the foreclosure proceedings to
deceased mortgagor Gavino Dominguez
or to his heirs, pursuant to Section 10 of
the Real Estate Mortgage Contract. We
cannot submit to [petitioners] reliance on
Exhibit I, the alleged notice of foreclosure
proceedings
sent
to
deceased Gavino Dominguez, inasmuch as
there is no showing that in the blank return
card of said letter [,] the same was properly
received by deceased Gavino Dominguez or
by his heirs or by any duly authorized person.
In extrajudicial foreclosure proceedings, personal notice to
the mortgagor is actually unnecessary unless stipulated. In
this case, the parties voluntarily agreed on an additional
stipulation embodied in Section 10 of the mortgage deed.
Not being contrary to law, morals, good customs and public
policy, CSLA should have complied with it faithfully.

San Jose v Ca
Doctrine: Notice of Sheriffs Sale must contain the correct
title number and technical description of property foreclosed
Facts:
Petitioner-spouses San Jose and Batongbakal filed a
complaint to annul the extra-judicial foreclosure sale
conducted by the Provincial Sheriff of Bulacan of the
property. The land was mortgaged by the petitioner-spouses
to private respondent-spouses de Guzman as security
for the payment of a loan. Allegedly for failing to comply,
the respondents extra judicially foreclosed the mortgage
and the land was sold at a sheriffs sale. The TCT was
cancelled and issued under the respondent spouses name.
There was a failure to pay the loan obtained by the
respondents and so the latter had the right to foreclose the
mortgage either judicially/extrajudicially are not disputed.
The trial court and CA upheld the validity of the foreclosure
sale. The MR was denied, hence this petition for review.
Issue:
WON the extra-judicial foreclosure sale complied with the
requirements of Act No. 3135 as amended by Act No. 4118
which governs the extra-judicial foreclosure of real estate
mortgage
Held:
In the Tambunting case, this Court stated that the failure to
advertise a mortgage foreclosure sale in compliance
with
statutory
requirements
constitutes
a
jurisdictional defect invalidating the sale and that a
substantial error or omission in a notice of sale will
render the notice insufficient and vitiate the sale.
The Notice of Sheriffs Sale, in this case, did not state the
correct number of the transfer certificate of title of the
property to be sold. This is a substantial and fatal error
which resulted in invalidating the entire Notice. That the
correct technical description appeared on the Notice does
not constitute substantial compliance with the statutory
requirements. The purpose of the publication of the Notice

of Sheriffs Sale is to inform all interested parties of the date,

time and place of the foreclosure sale of the real property
subject thereof. Logically, this not only requires that the
correct date, time and place of the foreclosure sale appear
in the notice but also that any and all interested parties be
able to determine that what is about to be sold at the
foreclosure sale is the real property in which they have an
interest.
The Court is not unaware of the fact that the majority of the
population do not have the necessary knowledge to be able
to understand the technical descriptions in certificates of
title. It is to be noted and stressed that the Notice is not
meant only for individuals with the training to understand
technical descriptions of property but also for the layman
with an interest in the property to be sold, who normally
relies on the number of the certificate of title. To hold that
the publication of the correct technical description, with an
incorrect title number, of the property to be sold constitutes
substantial compliance would certainly defeat the purpose
of the Notice. This is not to say that a correct statement of
the title number but with an incorrect technical description
in the notice of sale constitutes a valid notice of sale. The
Notice of Sherifs Sale, to be valid, must contain the
correct title number and the correct technical
description of the property to be sold.

LCK Ind. vs. Planters Bank

Facts:
1. On Sept. 1, 1995, LCK obtained a loan from Planters
Bank. As security for the loan, Sps. Lim executed a real
estate mortgage pertaining to their Quezon City
property.
2. To secure the same obligation, Sps. Lim executed
another real estate mortgage pertaining to their Baguio
property.
3. The spouses failed to meet their obligations and bot
properties were foreclosed.
4. At the time of the foreclosure, their outstanding liability
is P 2,962,500.00. The Baguio property and the Quezon
City property were sold to an aggregate amount of P
4,856,416.67.
5. Sps. Lim contends that the excess proceeds should be
turned over to them. Planters Bank refuses as according
to them, the issue was not included in the pre-trial order.
Issue: Surplus amount in the sale of the foreclosed
properties.
Held: Planters Bank was ordered to pay the Sps. Lim, the
excess amount with interest.
1. Should Planters Bank retain the excess proceeds, it will
be tantamount to unjust enrichment as prohibited under
Art. 22 of the New Civil Code.
2. Rule 39 Sec. 21 of the Rules of Court judgment oblige
need not pay the bid amount if it does not exceed the
amount of the judgment. If it does, he shall pay only the

excess. In this case, there was an excess in the proceeds

of the foreclosed properties.

Limpin v IAC (digest)

Facts:
Four lots were mortgaged by the spouses Jose and Marcelina
Aquino to Guillermo Ponce and his wife Adela (since
deceased) as security for a loan of P2,200,000.00. The
mortgages were registered. Two of the lots, those covered
by TCTs Nos. 92836 and 92837, were afterwards sold by the
Aquinos to the Butuan Bay Wood Export Corporation, which
caused an adverse claim to be annotated on the certificates
of title. Gregorio Y. Limpin, Jr. obtained a money judgment
against Butuan Bay Wood Export Corporation in Court of
First Instance of Davao. To satisfy the judgment, the lots
covered by TCTs Nos. 92836 and 92837 were levied upon on
and sold at public auction to Limpin as the highest bidder for
the sum of P517,485.41.
On order of the trial court, the covering titles were cancelled
and issued to Limpin. Limpin sold the two lots to Rogelio M.
Sarmiento. By virtue of said sale, TCTs Nos. 285450 and
285451 were cancelled on November 4, 1983, and TCTS
were replaced in Sarmiento's name. Ponce filed suit against
the Aquino spouses for judicial foreclosure of the mortgage
over the Aquinos' four lots. Judgment was rendered in favor
of Ponce. After the judgment became final, the Trial Court,
directed the sale at public auction of the 4 mortgaged lots to
satisfy the judgment. The 4 lots, including those formerly
covered by TCTs Nos. 92836 and 92837, were sold to Ponce
himself whose bid was the highest and exactly correspond
to the judgment debt. On the same day, the sheriff's
certificate of sale was registered.Ponce then moved for the
confirmation of the sale and the issuance of a writ of
possession in his favor covering the four lots. But the Trial
Court confirmed only the sale of the lots covered by TCTs
Nos. 02839 and 92840, refusing to confirm the sale or issue
a writ of possession in regard to the lots covered by TCTs
Nos. 92836 and 92837 on the ground that those titles had
already been cancelled and new ones issued to Gregorio F.
Limpin.

Limpin refused to participate in the hearings contending

that the Court had no jurisdiction over his person; but he did
comment that the mortgage over the lots covered by TCTs
Nos. 92836 and 92837 had been released by Ponce by
virtue of a "Partial Release of Real Estate Mortgage". The
Trial Court denied Ponce's motion for reconsideration,
whereupon he sought corrective relief by filing a special civil
action for certiorari and mandamus in the Intermediate
Appellate Court, impleading Limpin and Sarmiento, as
private respondents.
IAC set aside the judgment of the Trial Court and issue a writ
of possession to Ponce with respect thereto, subject to
Sarmiento's equity of redemption.
Issue:
Whether or not IAC erred in according superiority to the
mortgage rights of Ponce over the levy and sale in favor of
Limpin and the subsequent sale to Sarmiento.
Held:
NO. The superiority of the mortgagee's lien over that of a
subsequent judgment creditor is now expressly provided in
Rule 39, Section 16 of the Revised Rules of Court, which
states with regard to the effect of levy on execution that it
shall create a lien in favor of a judgment creditor over the
right title and interest of the judgment debtor in such
property at the time of the levy, subject to the liens or
encumbrances then existing.
Using jurisprudence in Santiago v Dionisio, the Court in that
case held that:
... [T]he effect of the failure to implead a subordinate
lienholder or subsequent purchaser or both is to render the
foreclosure ineffective as against them, with the result that
there remains in their favor the "unforeclosed equity of
redemption." But the foreclosure is valid as between the
parties to the suit.
Applied to this case, this means that the sale to Ponce, as
the highest bidder in the foreclosure sale of the two lots in
question should have been confirmed, subject to Limpin's

(and now Sarmiento's equity to redemption. The registration

of the lands, first in the name of Limpin and later of
Sarmiento, was premature. At most what they were entitled
to was the registration of their equity of redemption.
It is well settled that a recorded mortgage is a right in
rem, a lien on the property whoever its owner may
be. The recordation of the mortgage in this case puts the
whole world on constructive notice of its existence and
warned everyone who thereafter dealt with the property on
which it was constituted that he would have to reckon with
that encumbrance. Hence, Limpin's subsequent purchase of
the "interests and participation" of Butuan Bay Wood Export
Corporation in the lots covered by TCTs Nos. 92836 and
92837, as well as the sale of the same to Sarmiento were
both subject to said mortgage.

Mendoza vs Salinas
FACTS:
- Salinas won in a registration case and OCT was issued
under her name by RTC of Olongapo acting as Land
Registration Court. Thus, she filed for a writ of possession
before the same court, but herein petitioners opposed
contending not parties to the aforementioned registration
case, in actual possession of the land since 1964 and offered
documentary evidence to support their claim.
- RTC: writ of possession granted so petition for review on
certiorari
ISSUE: WON the grant of writ of possession proper?
RULING: No. Court denied issuance of writ of possession
without prejudice to filing of case for recovery.
- Writ of possession is issued in the following instances: 1.)
land registration proceedings; 2.) judicial foreclosure,
provided debtor is still in possession of mortgaged realty
and no third person intervened; and 3.) extra-judicial
foreclosure of REM.
- It is well-settled that in land registration cases, a judgment
confirming title of the applicant and ordering its registration
in his name necessarily carries with it the delivery of
possession. Hence, issuance of writ of possession becomes
a ministerial duty of the Court.
- However, issuance of writ of possession is not proper in the
case at bar because the aforementioned rule does not apply
when petitioners are in actual possession under claim of
ownership. As provided in Art. 433 of NCC, they have
disputable presumption of ownership and person claiming
must resort to judicial process.
- Judicial process refers to ejectment suit, which respondent
already filed in MTCC of Olongapo against herein petitioners,
but was dismissed for lack of cause of action. Instead of
appealing the judgment therein, petitioner opted to file for
writ of possession.

Maliwat v Metrobank
Facts

Sps. Maliwat obtained a P23,850,000 loan from

Metrobank
o Secured by 3 REM over land located in
Valenzuela
Petitioners failed to pay the loan
o Respondent bank instituted extra-judicial
foreclosure proceedings
Land was sold at public auction, and
Metrobank was the highest bidder
Sps. Maliwat refused to turn over property
Metrobank filed for a Writ of Possession
o RTC granted
Sps. Maliwat filed for Annulment of proceedings,
TRO, and preliminary mandatory injunction
o RTC issued PMI, enjoining Metrobank from
enforcing the WOP

Issue

WON the RTC committed GADLEJ in issuing the PMI

Held

Yes
o

WOP is a writ of execution commanding the

sheriff to enter the land and give possession
to the person entitled under the judgment
It is issued in land registration
proceedings, judicial foreclosure where
debtor has possession, and extrajudicial foreclosure
In De Gracia v San Jose, the SC held that WOP
issues as a matter of course

Upon filing of motion and approval of

the bond
No discretion is left with the Court
Questions on regularity and validity of
sale may not be raised to justify
opposition to the issuance of WOP
May
be
determined
in
subsequent proceedings
Purchaser at foreclosure sale is entitled as a
matter of right to the issuance of WOP
Once WOP issued, Court has no
alternative but to enforce it without
delay
Injunction will not lie

Sps. Basilio and Norma Hilaga v Rural Bank of Isulan,

GR 179781
FACTS
Petitioners obtained a loan from respondent Rural Bank of
Isulan Inc. To secure the loan, they executed a Real Estate
Mortgage over their land property. When petitioners failed to
pay their obligation when it became due, the respondent
bank initiated foreclosure proceedings. The subject property
was sold at a public auction and a Certificate of Extrajudicial
Sale a was issued in favor of the Rural Bank of Isulan
(Cotabato) Inc. as the highest bidder. The respondent bank
then took possession of the foreclosed property. Meanwhile,
unknown to respondent bank, a Free Patent title(Original
Certificate of Title No. P- 19766) had been issued in favor of
petitioners before the foreclosure sale. On September 21,
1994, or more than seventeen (17) years after the
foreclosure sale, petitioner Basilio Hilaga sent a letter to the
respondent bank's lawyer, the late Atty. Ismail Arceno,
conveying his desire to redeem the subject property. When
the letter remained unanswered, petitioners, through their
counsel, again sent a letter, seeking to redeem the
foreclosed property. The second letter, however, also
remained unheeded. Thus, on June 3, 1999, petitioners filed
a complaint a for Redemption of Foreclosed Mortgaged
Property Under [Act No. 3135], seeking to redeem the
subject property from the respondent bank under the
provisions of Act No. 3135. In their complaint, petitioners
alleged that the mortgage and subsequent foreclosure of
the subject property had not been annotated on the title nor
registered with the Register of Deeds. Also, no annotation
and consolidation of ownership was made in favor of the
respondent bank. Thus, the one (1)-year redemption period
under Act No. 3135, which commences from the date of
registration of the sale, has not yet started. They insisted
that, indeed, their right of redemption has not yet expired
because under Section 119 of Commonwealth Act No. 141
or the Public Land Act, a homesteader whose homestead
has been sold at a public auction by virtue of an
extrajudicial foreclosure, may repurchase said land within

five (5) years from the date of registration of the sale. Thus,
they can still exercise their right of redemption. They
signified their willingness to redeem or repurchase the
foreclosed property by depositing the amount of P10,000.00
with the court. In its Answer with Counterclaim, the
respondent bank averred that when the real estate
mortgage in its favor was executed, the parcel of land was
merely covered by a tax declaration. That unknown to the
respondent bank, petitioners proceeded to apply for and
cause the issuance in 1976 of a free patent and torrens title
to the land; hence, they are estopped to claim that the
parcel of land mortgaged is covered by a free patent and
torrens title. They likewise cannot avail of the benefits
afforded to a grantee of a public land under the Homestead
and Free Patent Laws because they violated the terms and
conditions of their application to avail of a grant by
homestead or free patent when they mortgaged the land. As
aforesaid, the trial court rendered judgment in favor of
petitioners. The trial court ruled that because the certificate
of sale was not registered, petitioners can still redeem the
subject property. On appeal, the CA reversed the trial court.
According to the CA, the right of petitioners to redeem their
foreclosed property can only be exercised within two (2)
years from the date of foreclosure, as provided under
Republic Act No. 72013ca or the Rural Banks' Act, as
amended by Republic Act No. 2670. The CA also ruled that
petitioners are guilty of laches. CA Denied the MR of the
petitioners.
ISSUE
WON the petitioners have only 2 years to redeem their
property from the issuance certificate of sale after the same
was
foreclosed
HELD
If the land is mortgaged to a rural bank under
Republic Act No. 720, as amended, the mortgagor
may redeem the property within two (2) years from
the date of foreclosure or from the registration of the

sherifs certificate of sale at such foreclosure if the

property is not covered or is covered, respectively, by
a Torrens title. If the mortgagor fails to exercise such
right, he or his heirs may still repurchase the property within
five (5) years from the expira-tion of the two (2)-year
redemption period pursuant to Section 119 of the Public
Land Act
In the present case, petitioners admit that when the
property was mortgaged, only the tax declaration was
presented. Although a free patent title was subsequently
issued in their favor on August 4, 1976, petitioners failed to
inform the creditor rural bank of such issuance. As a result,
the certificate of sale was not registered or annotated on the
free patent title. Petitioners are estopped from redeeming
the property based on the free patent title which was not
presented during the foreclosure sale nor delivered to the
Register of Deeds for annotation of the certificate of sale as
required under Section 5 of Republic Act No. 720, as
amended. Estoppel in pais arises when one, by his acts,
representations or admissions, or by his own silence when
he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain facts to exist
and such other rightfully relies and acts on such belief, so
that he will be prejudiced if the former is permitted to deny
the existence of such facts.

PCSO v. New Dagupan

Facts
1. A certain Purita Peralta owns the land in question,
which is located in Dagupan City. A real estate
mortgage was constituted over such property in
favor of PCSO to secure the payment of the
sweepstakes tickets purchased by one of its
provincial distributors, Galang.
2. Purita then sold, under a conditional contract of sale,
the subject property to New Dagupan. The contract
of sale provided that the conveyance will only be
absolute upon New Dagupans full payment of the
price of Php 800,000.00.
3. One day, New Dagupan withheld payment of the last
installment because Peralta failed to deliver the
owners duplicate TCT and to execute a deed of
absolute sale in its favor.
4. New Dagupan sued Peralta for his continued failure
to deliver the deed of absolute sale and the owners
duplicate of the title.
5. While the case is pending, PCSO caused the
registration of the mortgage.
6. PCSO then filed an application for the extrajudicial
foreclosure sale of the subject property in view of
Galangs failure to fully pay the sweepstakes tickets
she purchased in 1992.
7. At the extrajudicial foreclosure sale, PCSO won.
8. Meanwhile, when New Dagupan got a copy of the
TCT, it found out about the mortgage lien of PCSO.
9. PCSO and New Dagupan entered into a compromise
agreement, in view of their respective claims on the
land.
10. Pursuant to the compromise agreement New
Dagupan demanded Perlata to deliver the owners
duplicate of the TCT. However, such demand was
unheeded. Indeed, PCSO responded saying that it
foreclosed the mortgage on the subject property and
it has in its name a certificate of sale for being the
highest bidder in the public auction.

11. New Dagupan filed a case against PCSO. The RTC

decided in favor of New Dagupan.
12. Fast forward in the SC (Most important fact in this
case. You can forget numbers 1-11, but do not
forget this). In the SC, PCSO averred among others
that the CA erred when it ruled that the mortgage of
PCSO was extinguished when Galang paid the Php
450,000.00, representing the amount of the
sweepstakes tickets she purchased in 1989. PCSO
claimed that the said amount is actually the credit
line granted to Galang and the phrase all draws
refers to her ticket purchases for subsequent years
drawn against such credit line.
PCSO further posits that the subject mortgage
has not been extinguished by Peraltas
payment of her ticket purchases in 1989, and
its coverage extends to her purchases after
1989, which she made against the credit line
that was granted to her.
Issue Whether or not PCSO can rely on the dragnet clause
in the mortgage contract.
Held NO.
A dragnet clause, also known as a blanket clause is a clause
in a mortgage contract which is specifically phrased to
subsume all debts of past or future origins. 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.
A mortgage with a dragnet clause is in the nature of a
continuing guaranty. It is prospective in its operation and is
generally intended to provide security with respect to future
transactions within certain limits. It covers all transactions,
including those arising in the future, which are within the

description or contemplation of the contract of guaranty,

until the expiration of the term thereof.
PCSO mortgage is not a continuing guaranty. Indeed the
contract provides that the mortgage shall only secure
Galangs liability in the amount of Php 450,000.00. The
amount due, having been discharged, there is no necessity
for any act/document to be executed for the purpose.
PCSOs registration of its non-existent mortgage lien and
subsequent foreclosure of a mortgage that was no longer
extant cannot defeat New Dagupans title over the subject
propery.

GARCIA V VILLAR
FACTS:
1. Galas was the owner of a parcel of land.
2. Galas executed a real estate mortgage on her land in
favor of one Villar.
3. Galas executed a second real estate mortgage in
favor of Garcia. Both mortgages were annotated at
the back of the TCT.
4. Subsequently, Galas sold the property to Villar.
Garcia refused filed for damages and fore closure of
Real estate mortgages?

ISSUE: WON there was pactum comissorium? WON there

can be foreclosure of properties?

HELD:
1. NO. There was no pactum comissorium since there
was no stipulation of an automatic appropriation. The
stipulation in the case was for an authority to sell
which is allowed by the law.
2. NO. There was no demand from Garcia of the
obligation so there is no showing that it is due and
demandable.
3. Villar does not step into the shoes of Galas as
principal debtor without the consent of Garcia since
that would be novation which means extinguishment
of obligation.
5.

Land Bank vs Poblete

Real Estate Mortgage
1

Poblete owned a parcel of land. Subsequently, a certain

Maniego mortgaged said land to Land Bank.
a Maniego showed an alleged deed of sale executed by
Poblete in favor of Maniego
When Maniego defaulted with his loan to Land Bank,
Land Bank filed an action for foreclosure
a Poblete filed a complaint for reconveyance, arguing
that the signatures in the alleged deed of sale were
forged.
b Land Bank argued that it is a mortgagee in good
faith.

ISSUE: WON Poblete may recover the land despite the

mortgage to Land Bank by Maniego
HELD: YES
1

The mortgagor was not the owner of the land, thus,

there is no valid mortgage.
a The RTC and CA found the signatures were indeed
forged.
b No rights could be derived from a void deed.
Since TCT No. T-20151 and Deed of Sale has been
declared void by final judgment, the Real Estate
Mortgage constituted over it is also void. 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
Doctrine of Mortgagee in Good Faith- buyers or
mortgages are not obliged to go beyond the title.
a However, this doctrine does not apply to banks are
they are imbued with public interest; they are
required to observe a higher standard of diligence
b Land Bank cannot be in good faith because when the
land was mortgaged, the title was still under
Pobletes name; there was no investigation/ due

diligence made by Land Bank; the same land was

mortgaged by a 3rd person (Kapantay) with the
authority of Pobblete.

Sps. Ramos v Obispo

Facts

Held
Ramos and Obispo were best friends
Obispo secured a credit accommodation from FEBTC
o To secure the same, Ramos executed a REM
on his land
FEBTC received a letter from petitioners
o That they entrusted the property to Obispo to
be used a collateral for a P250,000 loan on
their behalf
o That Obispo instead secured a loan of P1M
That he failed to return the title
despite
petitioners
payment
of
P250,000
Sps. Ramos filed for annulment of REM and damages
against Obispo and FEBTC
o They allegedly signed a blank REM form
o They received P250,000, and have already
paid for the same
o They demanded a release of title but Obispo
went into hiding
o They were surprised to see in the ROD that
the property was mortgaged for P1M
FEBTC said that the REM is only partial security for
Obispos P2.5M loan
o Since the loan remains unpaid, FEBTC cannot
be compelled to release the mortgage
o Laches and estoppel has stepped in against
petitioner
o That in case of judgment in favor of Ramos, it
must be Obispo who is to be made liable
Obispo was declared in default

Issue

WON REM is valid

Yes
o

o
o

No sufficient evidence was presented on the

allegation of fraud by Obispo
Inconsistent with ordinary experience
and common sense
That Obispo was not able to
show any document or receipt
should have alerted them
Loan proceeds accepted by
them were personal check of
Obispo, and not of the bank
Despite signing REM in their
names, they did not pay
directly to the bank, but
through Obispo
Questionable how they knew
monthly amortization without
document pertaining to loan
They paid P250,000 which is
equal to principal loan, asa
naman no interest
Evidence suggests that it was really Obispo
who borrowed, and that petitioners were mere
accommodation mortgagors
Assuming REM is invalid due to vitiated
consent and misrepresentation by Obispo
1 year and 3 months had elapsed
Unreasonable delay constitutes
estoppel and waiver of right to
question invalidity and defect

ANTICHRESIS
Ancieto Bangis v Heirs of Serafin and Salud Adolfo,
GR 190875 June 13 2012

CA affirmed the RTC finding that the contract

between the parties was a mortgage, not a sale. It noted
that while Bangis was given possession of the subject
property, the certificate of title remained in the custody of
Adolfo and was never cancelled.

FACTS
Spouses Serafin, Sr. and Saludada Adolfo were the original
registered owners of a lot which was mortgaged to the DBP.
Upon default in the payment of the loan obligation, it was
foreclosed and ownership was consolidated in DBPs name
under a TCT. Serafin Adolfo, Sr. repurchased the same and
was issued a TCT a year after his wife died. He allegedly
mortgaged the subject property to Ancieto Bangis who took
possession of the land but their transaction was not reduced
into writing. When Adolfo died, his heirs executed a deed of
extrajudicial partition covering the subject property and TCT
issued to them. The said property was subdivided and
separate titles were issued in names of the heirs of Adolfo.
The heirs of Adolfo filed a complaint for annulment of the
deed of sale and declaration of the purported contract of
sale as antichresis, accounting and redemption of property
and damages against Bangis. During the trial, one of the
Heirs of Bangis, Rodolfo Bangis, presented a photocopy of
an Extra-Judicial Settlement with Absolute Deed of Sale and
a Promissory Note23 of even date purportedly executed by
Bangis and Segundino Cortel undertaking to pay the balance
of the purchase price Both documents were notarized by
Atty. Valentin Murillo who testified to the fact of their
execution. The RTC rendered a decision in favor of the heirs
of Adolfo declaring that the contract as an antichresis,
ordering the defendant to deliver the possession of the
property in question to the plaintiffs and the TCT under
Bangis as null and void. Thus, the heirs of Bangis appealed
before the CA.

ISSUE
WON the transaction between the parties was one of sale
and not a mortgage or antichresis
HELD
There was neither an antichresis nor sale. For the contract of
antichresis to be valid, Article 2134 of the Civil Code
requires that the amount of the principal and of the
interest shall be specified in writing; otherwise the
contract of antichresis shall be void. In this case, the
Heirs of Adolfo were indisputably unable to produce any
document in support of their claim that the contract
between Adolfo and Bangis was an antichresis, hence, the
CA properly held that no such relationship existed between
the parties.
The bare testimony of one of the Heirs of Bangis,
Rodolfo Bangis, that the subject document was only handed
to him by his father, Aniceto, with the information that the
original thereof could not be found was insufficient to
justify its admissibility. The identification made by Notary
Public Atty. Valentin Murillo that he notarized such document
cannot be given credence as his conclusion was not verified
against his own notarial records.

In sum, the Heirs of Bangis failed to establish the

existence and due execution of the subject deed on which
their claim of ownership was founded.