GR 118342, January 5, 1998
DBP then thereafter, executed a Deed of
DBP VS. CA
FACTS:
Cuba is a grantee of a Fishpond Lease Agreement from the
Government. She obtained loans from DBP in the amounts of
P109, 000 and P98, 700 under the terms stated in the
promissory notes and as security for said loans; she executed
two deeds of assignment of her leasehold right. Cuba
however, failed to pay her loan on scheduled dates and
without foreclosure proceedings, DBP appropriated the
Leasehold Rights of Cuba over the fishpond. After DBP’s
appropriation over the fishpond, DBP in turn executed a deed
of Conditional Sale of the Leasehold Rights in favor of Cuba
over the same fishpond in question. In the negotiation for
repurchase, Cuba addressed 2 letters to the Manager of DBP
which was accepted.
After the Deed of Conditional Sale was executed in favor of
Cuba, a new fishpond lease agreement was issued by the
Ministry of Agriculture and Food in favor of Cuba only
excluding her husband. Cuba again failed to pay the
amortization as stated in Deed of Conditional Sale and
because of this she entered with DBP a temporary
arrangement whereby in consideration for deferment of
Notarial Rescission of Deed of Conditional Sale, Cuba
promised to make certain payments.
DBP thereafter sent a Notice of Rescission thru Notarial Act
and was received by Cuba. After the Notice of Rescission,
DBP took possession of the Leasehold Rights of fishpond and
after, advertised in SUNDAY PUNCH the public bidding to
dispose the property.
Conditional Sale in favor of Agripina Caperal.
RTC ruled in favor of Cuba declaring that DBP’s taking
possession and ownership of property without foreclosure was
plainly violative of Article 2088 of the Civil Code or the
provision on pactum commissorium. RTC also ruled that
condition no. 12 of the Assignment of Leasehold Rights was a
clear case of pactum commissorium expressly prohibited and
declared null and void by Article 2088, Civil Code and
concluded that since DBP never acquired lawful ownership of
Cuba’s leasehold rights, all acts of ownership and possession
by bank is void and that the deed of Conditional Sale in favor
of Caperal was as well void and ineffective.
Cuba and DBP interposed appeals to CA. CA ruled that RTC
erred in declaring the deed of assignment as null and void and
that Caperal can validly acquire the leasehold rights and that
condition no. 12 of deed of assignment was an express
authority from Cuba for DBP to sell whatever right she had
over the fishpond.
Hence, this petition.
ISSUE/S:
1. WoN the assignment of leasehold rights was a mortgage
contract (as contended by Cuba)
YES. In all of the promissory notes, there is a provision that “in
the event of foreclosure of the mortgage securing this note,
I/We further bind myself/ourselves, jointly and severally, to pay
the deficiency, if any.” Moreover, in Condition No. 22 of the
deed, it was provided that “failure to comply with the terms and
condition of any of the loans shall cause all other loans to
become due and demandable and all mortgages shall be
foreclosed.” In the facts stipulated, it states that “As security
for loans, plaintiff Lydia P. Cuba executed two Deeds of
Assignment of her leasehold rights.”
We find no merit in DBP’s contention that the assignment
novated the promissory notes in that the obligation to pay a
sum of money the loans (under the promissory notes) was
substituted by the assignment of the rights over the fishpond
(under the deed of assignment). The said assignment merely
complemented or supplemented the notes; both could stand
together. Significantly, both the deeds of assignment and the
promissory notes were executed on the same dates the loans
were granted. Also, the last paragraph of the assignment
stated: “The assignor further reiterates and states all terms,
covenants, and conditions stipulated in the promissory note or
notes covering the proceeds of this loan, making said
promissory note or notes, to all intent and purposes, an
integral part hereof.”
2. WoN condition no. 12 of the deed of assignment constituted
pactum commissorium
NO. The elements of pactum commissorium are as follows: (1)
there should be a property mortgaged by way of security for
the payment of the principal obligation, and (2) there should be
a stipulation for automatic appropriation by the creditor of the
thing mortgaged in case of non-payment of the principal
obligation within the stipulated period.
Condition no. 12 did not provide that the ownership over the
leasehold rights would automatically pass to DBP upon
CUBA’s failure to pay the loan on time. It merely provided for
the appointment of DBP as attorney-in-fact with authority,
among other things, to sell or otherwise dispose of the said
real rights, in case of default by CUBA, and to apply the
proceeds to the payment of the loan. This provision is a
standard condition in mortgage contracts and is in conformity
with Article 2087 of the Civil Code, which authorizes the
mortgagee to foreclose the mortgage and alienate the
mortgaged property for the payment of the principal obligation.
G.R. No. 126800. November 29, 1999.
Bustamante vs. Rosel
Facts:
Petitioner borrowed money from respondents for a period of
two years and with interest. The former set up as collateral a
parcel of land with apartment thereon to guaranty payment.
They also agreed that in the event that she fails to pay,
respondents can buy the collateral for a cheap consideration,
inclusive of the principal and interest. When the loan was
about to mature, respondents proposed to buy the collateral.
Petitioner, however, refused to sell and requested for
extension of time to pay the loan. She, instead, offered to sell
another residential lot. Respondents refused to extend the
payment of the loan and to accept the second lot offered. On
maturity date, petitioner tendered payment of the loan to
respondents which the latter refused to accept. They insisted
that a deed of absolute sale of the collateral be executed.
Respondents then instituted an action for specific performance
and consignation against petitioner. After demand, petitioner
consigned the amount of the loan plus interest.
The trial court ruled in favor of the petitioner. On the other
hand, the Court of Appeals reversed this decision, which the
Supreme Court affirmed. However, petitioner filed a motion for
reconsideration. She alleged that she did not fail to pay the
loan so there is no reason for respondent to buy the collateral;
that the real intention of the parties in putting up the collateral
is to guarantee the payment of the loan. Respondent, on one
hand, contends that petitioner failed to pay the loan; that it is
their right to purchase the collateral based on the contact
which is not contrary to law, morals, good customs, public
order and public policy.
Issues:
(1) Whether or not petitioner failed to pay the loan at its
maturity date.
(2) Whether or not the stipulation in the loan contract was
valid and enforceable.
Held:
Petitioner did not fail to pay the loan. On the maturity date, she
tendered the payment which respondents refused. After
refusal, she consigned the payment. The sale of the collateral
is an obligation with a suspensive condition. Since the event
did not occur, respondents do not have the right to demand
fulfillment of petitioner’s obligation, especially where the same
would be disadvantageous to petitioner.
The stipulation in the loan contract was not valid and
unenforceable. A scrutiny of the stipulation of the parties
reveals a subtle intention of the creditor to acquire the property
given as security for the loan. This is embraced in the concept
of pactum commissorium, which the law prohibits. The
elements of pactum commissorium are as follows: (1) there
should be a property mortgaged by way of security for the
payment of the principal obligation, and (2) there should be a
stipulation for automatic appropriation by the creditor of the
thing mortgaged in case of non-payment of the principal
obligation within the stipulated period. These elements are
present in this case. Therefore, the stipulation is void. All
persons in need of money are liable to enter into contractual
relationships whatever the condition if only to alleviate their
financial burden albeit temporarily. Hence, courts are duty
bound to exercise caution in the interpretation and resolution
of contracts lest the lenders devour the borrowers like vultures
do with their prey.
GR 171592
ONG. V. ROBAN LENDING CORPORATION, (2008)
Pactum Commissorium, Art. 2087, Art. 2088: Effects on
Pledge or Mortgage
“The SECOND PARTY hereby signed another promissory
note with a promise to pay the FIRST PARTY in full within one
year from the date of the consolidation and restructuring,
otherwise the SECOND PARTY agree to have their “DACION
IN PAYMENT” agreement, which they have executed and
signed today in favor of the FIRST PARTY be enforced”
Issue: Whether the contract constitutes pactum
commissorium or dacion en pago.
Held: Pactum Commissorium.
In the case at bar, the MOA and the Dacion in Payment
contain no provisions for foreclosure proceedings nor
redemption. Under the MOA, the failure by the petitioners to
pay their debt within the one-year period gives respondent the
right to enforce the Dacion in Payment transferring to it
ownership of the properties covered by the TCT. Respondent,
in effect, automatically acquires ownership of the properties
upon petitioners’ failure to pay their debt within the stipulated
period.
Ø Respondent argues that the law recognizes dacion en
pago as a special form of payment whereby the debtor
alienates property to the creditor in satisfaction of a monetary
obligation.
This does not persuade. In a true dacion en pago, the
assignment of the property extinguishes the monetary debt.
In the case at bar, the alienation of the properties was by way
of security, and not by way of satisfying the debt. The Dacion
in Payment did not extinguish petitioners’ obligation to
respondent. On the contrary, under the MOA executed on the
same day as the Dacion in Payment, petitioners had to
execute a promissory note which they were to pay within one
year.
That the questioned contracts were freely and voluntarily
executed by petitioners and respondent is of no
moment, pactum commissorium being void for being
prohibited by law.
GR158891, June 27, 2012
Garcia vs Villar
The case stemmed from a mortgage transaction involving a lo
t owned by Lourdes Galas in favor of Yolanda Villar. The lot
was mortgaged to secure a loan obtained by Galas from Villar
in the amount of P2,200,000.00.
It was established from the facts that in the deed of real estate
$mortgage executed between Galas and Villar, the former
appoints the latter to sell the subject &property in case Galas
fails to &ay the loan, and with such, &proceeds shall be
a&&lied to her outstanding loan.
A year later, the same subject &property was subsequently
mortgaged in favor of Pablo Garcia to secure a loan
amounting to P 1, 800,000.00. afterwards, Galas decided to
sell the subject &property to Villar. deed of sale was executed
between them, and a T-T was issued in favor of Villar.
Aggrieved, Garcia filed a Petition for mandamus with
damages, arguing his main &point that the authority given to
Villaras stipulated in the deed of the real estate $mortgage is
violative of the prohibition of Pactum -ommissorium.
It ruled in favor of Garcia. CA appeal, reversed the decision
and ruled in favor of Villar.
issue
1 whether the authority given to Villar in the deed of real estate
mortgage is violative of the prohibition on pactum
commissorium
Held:
Villar’s purchase of the subject property did not violate the
prohibition on pactum commissorium. The following are the
elements of pactum commissorium.
1. there should be a property mortgaged by way of security for
the payment of the principal obligation
2. there should be a stipulation for automatic appropriation by
the creditor of the
thing mortgaged in case of nonpayment of the principal
obligation within the stipulated period.
in the case at bar, the owner of attorney provision above did
not provide that ownership over the subject property would
automatically pass to Villar upon Galas failure to pay the loan
on time. hat it granted was the mere appointment of
Villaras Attorney in fact with authority to sell, or otherwise
disposed of the subject property, and to apply the proceeds to
the payment of the loan.
Real nature of a mortgage:
( Article 2126 of the Civil Code)
Art. 2126. The mortgage directly and immediately subjects
the property upon which it is imposed, whoever the possessor
may be, to the fulfillment of the obligation for whose security it
was constituted.
A mortgage is a real right, which follows the property, even
after subsequent transfers by the mortgagor. “A registered
mortgage lien is considered inseparable from the property
inasmuch as it is a right in rem.” The sale or transfer of the
mortgaged property cannot affect or release the mortgage;
thus the purchaser or transferee is necessarily bound to
acknowledge and respect the encumbrance. In fact, under Art.
2129 of the Civil Code, the mortgage on the property may still
be foreclosed despite the transfer, viz:
Art. 2129. The creditor may claim from a third person in
possession of the mortgaged property, the payment of the part
of the credit secured by the property which said third person
possesses, in terms and with the formalities which the law
establishes.
While we agree with Garcia that since the second mortgage, of
which he is the mortgagee, has not yet been discharged, we
find that said mortgage subsists and is still
enforceable. However, Villar, in buying the subject property
with notice that it was mortgaged, only undertook to pay such
mortgage or allow the subject property to be sold upon failure
of the mortgage creditor to obtain payment from the principal
debtor once the debt matures. Villar did not obligate herself to
replace the debtor in the principal obligation, and could not do
so in law without the creditor’s consent. Therefore, the
obligation to pay the mortgage indebtedness remains with the
original debtors Galas and Pingol.
Effects of a transfer of a mortgaged property to a third person
According to Art. 1879 of this Code, the creditor may demand
of the third person in possession of the property mortgaged
payment of such part of the debt, as is secured by the property
in his possession, in the manner and form established by the
law. The Mortgage Law provided that the debtor should not
pay the debt upon its maturity after judicial or notarial demand,
for payment has been made by the creditor upon him. (Art.
135 of the Mortgage Law of the Philippines of
1889.) According to this, the obligation of the new possessor
to pay the debt originated only from the right of the creditor to
demand payment of him, it being necessary that a demand for
payment should have previously been made upon the debtor
and the latter should have failed to pay. And even if these
requirements were complied with, still the third possessor
might abandon the property mortgaged, and in that case it is
considered to be in the possession of the debtor. (Art. 136 of
the same law.) This clearly shows that the spirit of the Civil
Code is to let the obligation of the debtor to pay the debt stand
although the property mortgaged to secure the payment of
said debt may have been transferred to a third person. While
the Mortgage Law of 1893 eliminated these provisions, it
contained nothing indicating any change in the spirit of the law
in this respect. Article 129 of this law, which provides the
substitution of the debtor by the third person in possession of
the property, for the purposes of the giving of notice, does not
show this change and has reference to a case where the
action is directed only against the property burdened with the
mortgage. (Art. 168 of the Regulation.)
The mere fact that the purchaser of an immovable has notice
that the acquired realty is encumbered with a mortgage does
not render him liable for the payment of the debt guaranteed
by the mortgage, in the absence of stipulation or condition that
he is to assume payment of the mortgage debt.
Reason: the mortgage is merely an encumbrance on the
property, entitling the mortgagee to have the property
foreclosed, i.e., sold, in case the principal obligor does not pay
the mortgage debt, and apply the proceeds of the sale to the
satisfaction of his credit. Mortgage is merely an accessory
undertaking for the convenience and security of the mortgage
creditor, and exists independently of the obligation to pay the
debt secured by it. The mortgagee, if he is so minded, can
waive the mortgage security and proceed to collect the
principal debt by personal action against the original
mortgagor
THE MANILA BANKING CORPORATION vs. ANASTACIO
TEODORO, JR. and GRACE ANNA TEODORO
G.R. No. L-53955 January 13, 1989
Bidin, J.
1. April 1966, Spouses Teodoro together with Teodoro Sr
executed a PN in favour of Manila Banking Corp (MBC);
- Payable within 120 days (until Aug), with 12% interest
per annum;
- They failed to pay and left balance of 15k as of
September 1969;
2. May and June 1966, executed two PNs;
- 8k and 1k respectively payable within 120 days and
12% per annum;
- They made partial payment but still left 8.9k balance as
of September 1969;
3. It appears than in 1964, Teodoro Jr executed a Deed of
Assignment of Receivables in favour of MBC from
Emergency Employment Administration;
- Amounted to 44k;
- The deed provided it was for consideration of certain
credits, loans, overdrafts and other credit
accommodations extended to the spouses and
Teodoro Sr as security for the payment of said sum
and interest thereon; and that they release and
quitclaim all its rights, title and interest in the
receivables;
4. In the stipulations of fact, it was admitted by the parties:
- That MBC extended loans to the spouses and Teodoro
Jr because of certain contracts entered into by latter
with EEA for fabrication of fishing boats and that the
 Philippine Fisheries Commission succeeded EEA after
its abolition;
- That non-payment of the PNs was due to failure of the
Commission to pay spouses;
- That the Bank took steps to collect from the
Commission but no collection was effected;
5. For failure of the spouses and Teodor Sr to pay, MBC
instituted against them;
- Teodoro Sr subsequently died so suit only against the
spouses;
6. TC favoured MBC; MFR denied;
- Spouses appealed to CA but since issue pure question
of law, CA forwarded to SC;
Issues:
W/N the assignment of receivables has the effect of payment
of all the loans contracted by the spouses; NO.
W/N MBC must exhaust all legal remedies against PFC before
it can proceed against the spouses. NO.
Ratio:
The assignment of receivables executed by appellants did not
transfer the ownership of the receivables to appellee bank and
release appellants from their loans with the bank incurred
under promissory notes.
The Deed of Assignment provided that it was for and in
consideration of certain credits, loans, overdrafts, and their
credit accommodations extended to appellants by appellee
bank, and as security for the payment of said sum and the
interest thereon; that appellants as assignors, remise, release,
and quitclaim to assignee bank all their rights, title and interest
in and to the accounts receivable assigned. It was further
stipulated that the assignment will also stand as a continuing
guaranty for future loans of appellants to appellee bank and
correspondingly the assignment shall also extend to all the
accounts receivable; appellants shall also obtain in the future,
until the consideration on the loans secured by appellants from
appellee bank shall have been fully paid by them.
The position of appellants, however, is that the deed of
assignment is a quitclaim in consideration of their
indebtedness to appellee bank, not mere guaranty, in view of
the following provisions of the deed of assignment:
... the Assignor do hereby remise, release and quit-
claim unto said assignee all its rights, title and interest in the
accounts receivable described hereunder. (Emphasis supplied
by appellants, first par., Deed of Assignment).
... that the title and right of possession to said account
receivable is to remain in said assignee and it shall have
the right to collect directly from the debtor, and whatever the
Assignor does in connection with the collection of said
accounts, it agrees to do so as agent and representative of the
Assignee and it trust for said Assignee.
The character of the transactions between the parties
is not, however, determined by the language used in the
document but by their intention. Definitely, the assignment of
the receivables did not result from a sale transaction. It cannot
be said to have been constituted by virtue of a dation in
payment for appellants' loans with the bank evidenced by
promissory note which are the subject of the suit for collection
in a Civil Case. At the time the deed of assignment was
executed, said loans were non-existent yet. Obviously, the
deed of assignment was intended as collateral security for
the bank loans of appellants, as a continuing guaranty for
whatever sums would be owing by defendants to plaintiff, as
stated in stipulation No. 9 of the deed.
Assignment of credit is an agreement by virtue of
which the owner of a credit, known as the assignor, by a legal
cause, such as sale, dation in payment, exchange or donation,
and without the need of the consent of the debtor, transfers his
credit and its accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same
extent as the assignor could have enforced it against the
debtor.
CITIBANK, N.A. & INVESTOR FINANCE CORPORATION V.
SABENIANO
Facts:
This is a case involving Citibank, N.A., a banking corporation
duly registered under US Laws and is licensed to do
commercial banking and trust functions in the Philippines and
Investor's Finance Corporation (aka FNCB Finance), and
affiliate company of Citibank, mainly handling money market
placements(MMPs are short term debt instruments that give
the owner an unconditional right to receive a stated, fixed sum
of money on a specified date).
Modesta R. Sabeniano was a client of both petitioners Citibank
and FNCB Finance.Unfortunately, the business relations
among the parties subsequently went awry. Subsequently,
Sabeniano filed a complaint with the RTC against petitioners
as she claims to have substantial deposits and money market
placements with the petitioners and other investment
companies, the proceeds of which were supposedly deposited
automatically and directly to her account with Citibank.
Sabeniano alleged that Citibank et al refused to return her
deposits and the proceeds of her money market placements
despite her repeated demands, thus, the civil case for
"Accounting, Sum of Money and Damages.”
In their reply, Citibank et al admitted that Sabeniano had
deposits and money market placements with them, including
dollar accounts in other Citibank branches. However, they also
alleged that respondent later obtained several loans from
Citibank, executed through Promissory Notes and secured by
a pledge on her dollar accounts, and a deed of assignment
against her MMPS with FNCB Finance. When Sabeniano
defaulted, Citibank exercised its right to off-set or compensate
respondent's outstanding loans with her deposits and money
market placements, pursuant to securities she executed.
Citibank supposedly informed Sabeniano of the foregoing
compensation through letters, thus, Citibank et al were
surprised when six years later, Sabeniano and her counsel
made repeated requests for the withdrawal of respondent's
deposits and MMPs with Citibank, including her dollar
accounts with Citibank-Geneva and her money market
placements with petitioner FNCB Finance. Thus, petitioners
prayed for the dismissal of the Complaint and for the award of
actual, moral, and exemplary damages, and attorney's fees.
The case was eventually decided after 10 years with the
Judge declaring the offsetting done as illegal and the return of
the amount with legal interest, while Sabeniano was ordered to
pay her loans to Citibank. The ruling was then appealed. The
CA modified the decision but only to the extent of Sabeniano’s
loans
which it ruled that Citibank failed to establish the indebtedness
and is also without legal and factual basis. The case was thus
appealed to the SC.
Issue:
Whether or not there was a valid off setting/compensation of
loan vis a vis the a.)Deposits and b.) MMPs.
Held:
General Requirement of Compensation:
Art. 1278. Compensation shall take place when two persons,
in their own right, are creditors and debtors of each other.
Art. 1279. In order that compensation may be proper, it is
necessary;
(1) That each one of the obligors be bound principally,
and that he be at the same time a principal creditor of the
other;
(2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and communicated
in due time to the debtor.
1. Yes. As already found by this Court, petitioner Citibank was
the creditor of respondent for her outstanding loans. At the
same time, respondent was the creditor of petitioner Citibank,
as far as her deposit account was concerned, since bank
deposits, whether fixed, savings, or current, should be
considered as simple loan or mutuum by the depositor to the
banking institution. Both debts consist in sums of money.
By June 1979, all of respondent's PNs in the second
set had matured and became demandable, while respondent's
savings account was demandable anytime. Neither was there
any retention or controversy over the PNs and the deposit
account commenced by a third person and communicated in
due time to the debtor concerned. Compensation takes place
by operation of law.
2. Yes, but technically speaking Citibank did not effect a legal
compensation or off-set under Article 1278 of the Civil Code,
but rather, it partly extinguished respondent's obligations
through the application of the security given by the respondent
for her loans. Respondent's money market placements were
with petitioner FNCB Finance, and after several roll-overs, they
were ultimately covered by PNs No. 20138 and 20139, which,
by 3 September 1979, the date the check for the proceeds of
the said PNs were issued, amounted to P1,022,916.66,
inclusive of the principal amounts and interests.
As to these money market placements, respondent
was the creditor and petitioner FNCB Finance the debtor
(thereby implying that money market placement is a simple
loan or mutuum); while, as to the outstanding loans, petitioner
Citibank was the creditor and respondent the debtor.
Consequently, legal compensation, under Article 1278
of the Civil Code, would not apply since the first requirement
for a valid compensation, that each one of the obligors be
bound principally, and that he be at the same time a principal
creditor of the other, was not met. What petitioner Citibank
actually did was to exercise its rights to the proceeds of
respondent's money market placements with petitioner FNCB
Finance by virtue of the Deeds of Assignment executed by
respondent in its favor. Petitioner Citibank was only acting
upon the authority granted to it under the foregoing Deeds
when it finally used the proceeds of PNs No. 20138 and
20139, paid by petitioner FNCB Finance, to partly pay for
respondent's outstanding loans. Strictly speaking, it did not
effect a legal compensation or off-set under Article 1278 of the
Civil Code, but rather, it partly extinguished respondent's
obligations through the application of the security given by the
respondent for her loans. Although the pertinent documents
were entitled Deeds of Assignment, they were, in reality, more
of a pledge by respondent to petitioner Citibank of her credit
due from petitioner FNCB Finance by virtue of her money
market placements with the latter. According to Article 2118 of
the Civil Code
– out” on the mortgagor’s foreign currency savings account with
ART. 2118. If a credit has been pledged becomes due before
it is redeemed, the pledgee may collect and receive the
amount due. He shall apply the same to the payment of his
claim, and deliver the surplus, should there be any, to the
pledgor.
GR150197, July 28, 2005
PRUDENTIAL BANK VS ALVIAR
Doctrine:
The “dragnet clause” in the first security instrument constituted
a continuing offer by the borrower to secure further loans
under the security of the first security instrument, and that
when the lender accepted a different security he did not accept
the first offer.
Facts:
Spouses Alviar are the registered owners of a parcel of land in
San Juan, Metro Manila
They executed a deed of real estate mortgage of the said
property in favor of petitioner Prudential Bank to secure the
payment of a loan worth P250,000.00. (PN BD#75/C-252) was
then issued covering the said loan, which provides that the
loan matured on 4 August 1976 at an interest rate of 12% per
annum with a 2% service charge, and that the note is secured
by a real estate mortgage as aforementioned with a “blanket
mortgage clause” or the “dragnet clause”.
The spouses thereafter issued other promissory notes (PN):
PN BD#76/C-345 for P2,640,000.00, secured by D/A
SFDX #129, signifying that the loan was secured by a “hold-
the bank under Account No. 129 in the name of Donalco
Trading, Inc., PN BD#76/C-430 covering P545,000.000 to be
secured by “Clean-Phase out TOD CA 3923. Bank also
mentioned in their approval letter that additional securities for
the loan were the deed of assignment on two PNs executed
by Bancom Realty and the chattel mortgage on various
heavy and transportation equipment.
Spoused Alviar paid petitioner P2,000,000.00, to be applied to
the obligations of G.B. Alviar Realty and Development, Inc.
and for the release of the real estate mortgage for
the P450,000.00 loan covering the two (2) lots in San Juan,
Metro Manila. The payment was acknowledged by petitioner
who accordingly released the mortgage over the two
properties Prudential Bank moved for the extrajudicial
foreclosure of the mortgage on the property since respondents
had the total obligation of P1,608,256.68, covering the three
(3) promissory notes.
Respondents then filed a complaint for damages with a prayer
for the issuance of a writ of preliminary injunction with
the RTC of Pasig,[11] claiming that they have paid their
principal loan secured by the mortgaged property, and thus the
mortgage should not be foreclosed
RTC, on its final decision, favored respondents saying that the
extrajudicial foreclosure was improper for the mortgage only
covers the first loan of P250,000
CA affirmed the decision of the RTC
Issue: WON real estate mortgage secures only the first loan of
P250,000.
Held: Yes. While the existence and validity of the “dragnet
clause” cannot be denied, there is a need to respect the
existence of the other securities given for the two other
promissory notes. The foreclosure of the mortgaged property
should only then be for theP250,000.00 loan covered by PN
BD#75/C-252, and for any amount not covered by the security
for the second promissory note.
Petitioner and respondents intended the real estate mortgage
to secure not only the P250,000.00 loan from the petitioner,
but also future credit facilities and advancements that may be
obtained by the respondents. However, the subsequent loans
obtained by respondents were secured by other securities.
When the mortgagor takes another loan for which another
security was given it could not be inferred that such loan was
made in reliance solely on the original security with the
“dragnet clause,” but rather, on the new security given. This is
the “reliance on the security test.”
If the parties intended that the “blanket mortgage clause” shall
cover subsequent advancement secured by separate
securities, then the same should have been indicated in the
mortgage contract. This ambiguity shall be interpreted strictly
against petitioner for having drafted the same.
Petitioner, however, is not without recourse. Both the lower
courts found that respondents have not yet paid
the P250,000.00. Thus, the mortgaged property could still be
properly subjected to foreclosure proceedings for the
unpaid P250,000.00 loan, and as mentioned earlier, for any
deficiency after D/A SFDX#129, security for PN BD#76/C-345,
has been exhausted, subject of course to defenses which are
available to respondents.
Petition is DENIED. CA affirmed.
G.R. No. L-17500
People's Bank and Trust Co. v. Dahican Lumber Co.,
Facts:
Dahican Lumber Co. (DALCO) obtained a loan from People's
Bank and Trust Co. (Bank) secured by a deed of mortgage
covering 5 parcels of land together with all the buildings and
other improvements existing thereon and all the personal
properties of DALCO located in its place of business.
After the day of the execution of the mortgage, DALCO
purchased various machinery, equipment, spare parts and
supplies.
Pursuant to the provision of the mortgage deeds regarding
"after acquired properties", the Bank requested DALCO to
submit complete list of the said properties but DALCO refused
to do so.
Issue:
Whether or not the "after acquired properties" were subject to
the deed of mortgage.
Held:
Yes, they are subject to the deeds of mortgage.
Article 415 of the Civil Code does not define real property but
enumerates what are considered as such, among them being
machinery, receptacles, instruments or replacements intended
by owner of the tenement for an industry or works which may
be carried on in a building or on a piece of land, and shall tend
directly to meet the needs of the said industry or works.
The chattels or the "after acquired properties" were placed in
the real properties mortgaged to the Bank. They came within
the operation of Article 145.
Hence, the "after acquired properties" were subject to the deed
of mortgage.
GRAND FARMS, INC. and PHILIPPINE SHARES
CORPORATION, petitioners, vs COURT OF APPEALS
G.R. No. 91779 February 7, 1991
Facts:
Petitioners filed Civil Case No. 2816-V-88 in the Regional Trial
Court of Valenzuela, Metro Manila for annulment and/or
declaration of nullity of the extrajudicial foreclosure
proceedings over their mortgaged properties, with damages,
against respondents clerk of court, deputy sheriff and herein
private respondent Banco Filipino Savings and Mortgage Bank.
After the bank filed its answer, petitioners requested an
admission by the bank that no formal notice of intention to
foreclose the real estate mortgage was sent by the bank to petitioners.-
The bank responded and said that petitioners were notified of
the auction sale by the posting of notices and the publication
of notice in the Metropolitan Newsweek, a newspaper of
general circulation in the province where the subject properties
are located and in the Philippines.
On the basis of implied admission that no formal
notice was served personally, petitioners filed a
motion for summary judgment contending that the
foreclosure was violative of the provisions of the mortgage
contract, specifically paragraph (k) thereof which provides:
"k) All correspondence relative to this Mortgage, including
demand letters, summons, subpoena or notifications of any
judicial or extrajudical 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, and the mere act of
sending any correspondence by mail or by personal delivery to
the said address shall be valid and effective notice to the
Mortgagor for all legal purposes, and the fact that any
communication is not actually received by the Mortgagor, or
that it has been returned unclaimed to the Mortgagee, or that
no person was found at the address given, or that the address
is fictitious, or cannot be located, shall not excuse or relieve the
Mortgagor from the effects of such notice;"
The bank opposed the motion saying that based on
other paragraphs (b and d) in the contract, the mortgagor
authorized extra-judicial sale upon breach of contract and that
the mortgagee was appointed atty-in-fact with full powers upon
any breach of the obligations in the contract.- The RTC issued an
order denying petitioners' motion for summary judgment. MFR
was also denied on the ground that genuine and substantial issues
exist which require the presentation of evidence during the trial.-
Petitioners filed a petition for certiorari to CA attacking said
orders of denial as having been issued with grave abuse of
discretion. CA dismissed the petition, holding that no personal
notice was required to foreclose since private respondent was
constituted by petitioners as their attorney-in-fact to sell the mortgaged
property. It further held that paragraph (k) of the mortgage
contract merely specified the address where correspondence
should be sent and did not impose an additional condition on the part of
private respondent to notify petitioners personally of the foreclosure. CA
also denied petitioners MFR.
Issue:
Whether or not summary judgment was proper
HELD:
YES. The Rules of Court authorize the rendition
of a summary judgment if the
pleadings, depositions and admissions on file, together with the
affidavits, show that, except as to the amount of damages, there is no
issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law. Although an issue
maybe raised formally by the pleadings but there is no genuine
issue of fact, and all the facts are within the judicial knowledge of
the court, summary judgment may be granted. The real test,
therefore, of a motion for summary judgment is whether the
pleadings, affidavits and exhibits in support of the motion are
sufficient to overcome the opposing papers and to justify a finding as a
matter of law that there is no defense to the action or that the claim is
clearly meritorious.
Reasoning
Private respondent tacitly admitted in its answer to petitioners'
request for admission that it did not send any formal notice of
foreclosure to petitioners. Stated otherwise, and as is evident from the
records, there has been no denial by private respondent that no
personal notice of the extrajudicial foreclosure was ever sent
to petitioners prior thereto. This omission, by itself, rendered the
foreclosure defective and irregular for being contrary to the express
provisions of the mortgage contract. There is thus no further
necessity to inquire into the other issues cited by the trial court, for
the foreclosure may be annulled solely on the basis of such defect.- In
Community Savings & Loan Association, Inc., et al. vs. Court of Appeals,
at al., the SC held that the stipulation is the law between [the parties]
and as it not contrary to law, morals, good customs and public
policy, the same should be complied with faithfully (Art. 1306
CC). Thus, while publication of the foreclosure proceedings in
the newspaper of general circulation was complied with,
personal notice is still required, when the same was mutually
agreed upon by the parties as additional condition of
the mortgage contract. Failure to comply with this additional
stipulation would render illusory Art. 1306. And as the
record is bereft of any evidence which even impliedly
indicate that the
required notice of the extrajudicial foreclosure was ev
er sent to the debtor mortgagor, the extrajudicial
foreclosure proceedings on the property in question are fatally
defective and are not binding on the debtor-mortgagor.- To still
require a trial notwithstanding private respondent's admission of the lack of
such requisite notice would be a superfluity and would work
injustice to petitioners whose obtention of the relief to which
they are plainly and patently entitled would be further delayed.
That undesirable contingency is obviously one of the reasons
why our procedural rules have provided for summary judgments.
Disposition
The decision appealed from is hereby REVERSED and SET
ASIDE and this case is REMANDED to the court of origin for
further proceedings in conformity with this decision.
MANUEL D. MEDIDA, Deputy Sheriff of the Province of
Cebu, CITY SAVINGS BANK (formerly Cebu City Savings
and Loan Association, Inc.) and TEOTIMO
ABELLANA, petitioners, vs. COURT OF APPEALS and SPS.
ANDRES DOLINO and PASCUALA DOLINO, respondents.
Facts:
Private respondents, Spouses Dolino, alarmed of losing their
right of redemption over thesubject parcel of land from Juan
Gandiocho, purchaser of the aforesaid lot at a foreclosure sale
of the previous mortgage in favor of Cebu City Development
Bank, went to Teotimo Abellana, President of the City Savings
Bank (formerly known as Cebu City Savings and Loan
Association, Inc.), to obtain a loan of P30, 000. Prior thereto,
their son Teofredo filed a similar loan application and the
subject lot was offered as security. Subsequently they
executed a promissory note in favor of CSB. The loan became
due and demandable without the spouses Dolino paying the
same, petitioner association caused the extrajudicial
foreclosure of the mortgage. The land was sold at a public
auction to CSB being the highest bidder. A certificate of sale
was subsequently issued which was also registered. No
redemption was being effected by Sps. Dolino, their title to the
property was cancelled and a new title was issued in favor of
CSB. Sps. Dolino then filed a case to annul the sale at public
auction and for the cancellation of certificate of sale issued
pursuant thereto, alleging that the extrajudicial foreclosure sale
was in violation of Act 3135, as amended. The trial court
sustained the validity of the loan and the real estate mortgage,
but annulled the extrajudicial foreclosure on the ground that it
failed to comply with the notice requirement of Act 3135. Not
satisfied with the ruling of the trial court, Sps. Dolino
interposed a partial appeal to the CA, assailing the validity of
the mortgage executed between them and City Savings Bank,
among others. The CA ruled in favor of private respondents
declaring the said mortgage as void.
Issue:
Whether or not a mortgage, whose property has been
extrajudicially foreclosed and sold at a corresponding
foreclosure sale, may validly execute a mortgage contract over
the same property in favor of a third party during the period of
redemption.
Held:
It is undisputed that the real estate mortgage in favor of
petitioner bank was executed by respondent spouses during
the period of redemption. During the said period it cannot be
said that the mortgagor is no longer the owner of the
foreclosed property since the rule up to now is the right of a
purchaser of a foreclosure sale is merely inchoate until after
the period of redemption has expired without the right being
exercised. The title to the land sold under mortgage
foreclosure remains in the mortgagor or his grantee until the
expiration of the redemption period and the conveyance of the
master deed. The mortgagor remains as the absolute owner of
the property during the redemption period and has the free
disposal of his property, there would be compliance with
Article. 2085 of the Civil Code for the constitution of another
mortgage on the property. To hold otherwise would create an
inequitable situation wherein the mortgagor would be deprived
of the opportunity, which may be his last recourse, to raise
funds to timely redeem his property through another mortgage.
GR 170215
SUICO v. PNB
FACTS:
Spouses Suico, obtained loan from PNB secured by a real
estate mortgage on five of their properties. The petitioners
were unable to pay their obligation.
PNB filed a petition for extrajudicial foreclosure of mortgage
constituted on the petitioners’ properties. PNB, as lone bidder,
offered a bid in the amount of P8, 511,000.00. A Certificate of
Sale of the subject properties was issued in favor of PNB.
However, PNB did not pay to the Sheriff who conducted the
auction sale the amount of its bid which was P8,511,000.00 or
give an accounting of how said amount was applied against
petitioners’ outstanding loan, which according to the
petitioners, as of 10 March 1992, amounted only to
P1,991,770.38. Since the amount of the bid grossly exceeded
the amount of petitioners’ outstanding obligation as stated in
the extrajudicial foreclosure of mortgage, it was the legal duty
of the winning bidder, PNB, to deliver to the Sheriff the bid
price or what was left thereof after deducting the amount of
petitioners’ outstanding obligation.
PNB failed to deliver the amount of their bid to the Sheriff or, at
the very least, the amount of such bid in excess of petitioners’
outstanding obligation. One year after issuance of the
Certificate of Sale, PNB secured a Certificate of Final Sale
from the Sheriff and, as a result, PNB transferred registration
of all the subject properties to its name. The petitioners
thereafter filed a Complaint against the PNB before the RTC of
Mandaue City for Declaration of Nullity of Extrajudicial
Foreclosure of Mortgage.
RTC rendered its Decision for declaration of nullity of the
extrajudicial foreclosure of mortgage, the certificate of sale and
certificate of finality of sale owing to the failure of PNB as the
winning bidder to deliver to the petitioners the amount of its bid
or even just the amount in excess of petitioners’ obligation.
When the PNB appealed its case to CA, it reversed and set
aside the questioned decision of the RTC declaring that the
extra judicial foreclosure of mortgage, including the certificate
of sale and final deed of sale executed appurtenant thereto are
hereby declared to be valid and binding.
Petitioners filed a Motion for Reconsideration but the Court of
Appeals maintained the validity of the foreclosure sale and, in
its Amended Decision, merely directing PNB to pay the
deficiency in the filing fees
ISSUES:
1. WoN the discrepancy between the amount of petitioners’
obligation as reflected in the Notice of Sale and the amount
actually due and collected from the petitioners at the time of
the auction sale constitute fraud which renders the
extrajudicial foreclosure sale null and void.
2. WoN the failure of PNB to pay and tender the price of its bid
or the surplus thereof to the sheriff nullifies the extrajudicial
foreclosure.
HELD:
1. No.
Notices are given for the purpose of securing bidders and to
prevent a sacrifice of the property. If these objects are
attained, immaterial errors and mistakes will not affect the
sufficiency of the notice; but if mistakes or omissions occur in
the notices of sale, which are calculated to deter or mislead
bidders, to depreciate the value of the property, or to prevent it
from bringing a fair price, such mistakes or omissions will be
fatal to the validity of the notice, and also to the sale made
pursuant thereto.
The purpose of the publication of the Notice of Sheriff’s 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.
All these considered, the Court held that the Notice of Sale in
this case is valid. There is no showing that the difference
between the amount stated in the Notice of Sale and the
amount of PNB’s bid resulted in discouraging or misleading
bidders, depreciated the value of the property or prevented it
from commanding a fair price.
2. No.
Rule 68, Section 4 of the Rules of Court provides:
SEC. 4. Disposition of proceeds of sale.- The amount realized
from the foreclosure sale of the mortgaged property shall, after
deducting the costs of the sale, be paid to the person
foreclosing the mortgage, and when there shall be any
balance or residue, after paying off the mortgage debt due, the
same shall be paid to junior encumbrancers in the order of
their priority, to be ascertained by the court, or if there be no
such encumbrancers or there be a balance or residue after
payment to them, then to the mortgagor or his duly authorized
agent, or to the person entitled to it.
Under the above rule, the disposition of the proceeds of the
sale in foreclosure shall be as follows:
(a) first, pay the costs (b) secondly, pay off the mortgage debt
(c) thirdly, pay the junior encumbrancers, if any in the order of
priority (d) fourthly, give the balance to the mortgagor, his
agent or the person entitled to it.
The application of the proceeds from the sale of the
mortgaged property to the mortgagor's obligation is an act of
payment, not payment by dacion; hence, it is the mortgagee's
duty to return any surplus in the selling price to the mortgagor.
Perforce, a mortgagee who exercises the power of sale
contained in a mortgage is considered a custodian of the fund
and, being bound to apply it properly, is liable to the persons
entitled thereto if he fails to do so. Even though the mortgagee
is not strictly considered a trustee in a purely equitable sense,
but as far as concerns the unconsumed balance, the
mortgagee is deemed a trustee for the mortgagor or owner of
the equity of redemption.
Thus it has been held that if the mortgagee is retaining more of
the proceeds of the sale than he is entitled to, this fact alone
will not affect the validity of the sale but simply give the
mortgagor a cause of action to recover such surplus.
GR 176019
BPI FAMILY SAVINGS BANK v. GOLDEN POWER DIESEL
SALES
FACTS:
CEDEC Transport, Inc. mortgaged 2 parcels of land situated in
Malibay, Pasay City, including all the improvements thereon, in
favor of BPI Family to secure a loan of P6, 570, 000. On the
same day, mortgage was duly annotated on titles. CEDEC
obtained from BPI Family additional loans of P2, 160, 000 and
P1, 140, 000, respectively, and again mortgaged same
properties. These latter mortgages were duly annotated on the
titles respectively, on the same day the loans were obtained.
Despite demand, CEDEC defaulted in its mortgage
obligations. BPI Family filed a verified petition for extrajudicial
foreclosure of real estate mortgage over the properties. After
due notice and publication, Sheriff sold the properties at public
auction. BPI Family, as highest bidder, acquired properties for
P13, 793, 705.31. Certificate of Sheriff’s sale was then duly
annotated on titles covering properties.
Despite several demand letters, CEDEC refused to vacate
properties and to surrender possession to BPI Family. BPI
Family filed an ex-parte petition for writ of possession over the
properties which were granted by the trial court. Then, Golden
Power Diesel (GPD) and Renato Tan motioned to hold the
implementation of writ alleging that they are in possession of
the properties as allegedly acquired from CEDEC pursuant to
a deed of absolute sale.
GPD argued that they are 3rd persons claiming rights adverse
to CEDEC and cannot be deprived of possession over
properties. Also, they filed a complaint in RTC for cancellation
of Sheriff’s certificate sale and an order to direct BPI to honor
and accept the deed of sale between CEDEC and
respondents. RTC however, denied the motion. An alias writ
was then issued which expired without being implemented and
another one was later issued but before it could be
implemented, Renato Tan filed an affidavit of 3rd party claim on
properties. Instead of implementing the writ, Sheriff transferred
the matter to RTC for resolution. RTC suspended the
implementation saying that it should not affect 3rd persons
holding adverse rights to the judgment that the first writ failed
to consider respondent’s claim of ownership in another court
and that respondents are in actual possession.
BPI moved to reconsider but was denied which was then
affirmed by CA. Hence, present petition.
ISSUE:
1. Whether or not GPD is a 3rd party in possession who
has adverse interest against debtor or mortgagor
HELD:
No.
In extrajudicial foreclosures of real estate mortgages, the
issuance of a writ of possession is governed by Section 7 of
Act No. 3135. This procedure may also be availed of by the
purchaser seeking possession of the foreclosed property
bought at the public auction sale after the redemption period
has expired without redemption having been made.
The general rule is that a purchaser in a public auction sale of
a foreclosed property is entitled to a writ of possession and,
upon an ex parte petition of the purchaser, it is ministerial
upon the trial court to issue the writ of possession in favor of
the purchaser. There is, however, an exception. In an
extrajudicial foreclosure of real property, when the foreclosed
property is in the possession of a third party holding the
same adversely to the judgment obligor, the issuance by the
trial court of a writ of possession in favor of the purchaser of
said real property ceases to be ministerial and may no longer
be done ex parte. The procedure is for the trial court to order
a hearing to determine the nature of the adverse possession.
For the exception to apply, however, the property need not
only be possessed by a third party, but also held by the third
party adversely to judgment obligor. Unfortunately, for the
respondents, they do not fall under the exception—they are
not the third parties referred to by the law! They acquired
possession pursuant to the Deed of Sale.
For P15,000,000 CEDEC will “sell, transfer and convey” to
respondents the properties “free f rom all liens and
encumbrances excepting the mortgage as may be subsisting
in favor of the BPI FAMILY.”
Respondents bind themselves to assume “the payment of
the unpaid balance of the mortgage indebtedness of the
VENDOR (CEDEC) in favor of BPI Family by the mortgage
instruments and does hereby further agree to be bound by the
precise terms and conditions therein contained.”
Therefore, respondents hold title to and possess the properties
as CEDECʼs transferees and any right they have overthe
properties is derived from CEDEC. As transferees of CEDEC,
they merely stepped into CEDEC’s shoes and are bound to
acknowledge and respect the mortgage CEDEC had executed
in favor of BPI Family. Respondents are thesuccessors-in-
interest and thus, their occupancy over the properties cannot
be considered adverse to CEDEC.
G.R. No. 200667
Rural Bank of Sta. Barbara v. Centeno
Facts:
Spouses Gregorio and Rosario Centeno (Sps. Centeno) were
the previous owners of the subject lots. During that time, they
mortgaged the foregoing properties in favor of petitioner Rural
Bank of Sta. Barbara (Iloilo), Inc. as security for a P1,753.65
loan. Sps. Centeno, however, defaulted on the loan, prompting
petitioner to cause the extrajudicial foreclosure of the said
mortgage. Consequently, the subject lots were sold to
petitioner being the highest bidder at the auction sale. On
October 10, 1969, it obtained a Certificate of Sale at Public
Auction[4]which was later registered with the Register of Deeds
of Iloilo City on December 13, 1971.[5]
Sps. Centeno failed to redeem the subject lots within the one
(1) year redemption period pursuant to Section 6[6] of Act No.
3135.[7]Nonetheless, they still continued with the possession
and cultivation of the aforesaid properties. Sometime in 1983,
respondent Gerry Centeno, son of Sps. Centeno, took over the
cultivation of the same. On March 14, 1988, he purchased the
said lots from his parents. Accordingly, Rosario Centeno paid
the capital gains taxes on the sale transaction and tax
declarations were eventually issued in the name of
respondent.[8] While the latter was in possession of the subject
lots, petitioner secured on November 25, 1997 a Final Deed of
Sale thereof and in 1998, was able to obtain the corresponding
tax declarations in its name.[9]
On March 19, 1998, petitioner filed a petition for the issuance
of a writ of possession before the RTC, claiming entitlement to
the said writ by virtue of the Final Deed of Sale covering the
subject lots.[10] Respondent opposed the petition, asserting
that he purchased and has, in fact, been in actual, open and
exclusive possession of the same properties for at least fifteen
(15) years.[11] He further averred that the foreclosure sale was
null and void owing to the forged signatures in the real estate
mortgage. Moreover, he claims that petitioner's rights over the
subject lots had already prescribed.[12]

Ruling of the RTC
On October 8, 2002, the RTC rendered its Decision[13] in
Cadastral Case No. 98-069, finding petitioner to be the lawful
owner of the subject lots whose rights became absolute due to
respondent's failure to redeem the same. Consequently, it
found the issuance of a writ of possession ministerial on its
part.[14] Dissatisfied, respondent appealed to the CA.
Ruling of the CA
The CA, through its January 31, 2012 Decision,[15] reversed
the RTC and ruled against the issuance of a writ of
possession. It considered respondent as a third party who is
actually holding the property adverse to the judgment obligor
and as such, has the right to ventilate his claims in a proper
judicial proceeding i.e., an ejectment suit or reinvindicatory
action.[16] Aggrieved, petitioner filed the instant petition.
Issue Before The Court
The sole issue in this case is whether or not petitioner is
entitled to a writ of possession over the subject lots.
The Court's Ruling
The petition is meritorious.
It is well-established that after consolidation of title in the
purchaser's name for failure of the mortgagor to redeem the
property, the purchaser's right to possession ripens into the
absolute right of a confirmed owner. At that point, the issuance
of a writ of possession, upon proper application and proof of
title, to a purchaser in an extrajudicial foreclosure sale
becomes merely a ministerial function,[17] unless it appears
that the property is in possession of a third party claiming a
right adverse to that of the mortgagor.[18] The foregoing rule is
contained in Section 33, Rule 39 of the Rules of Court which
partly provides:
Sec. 33. Deed and possession to be given at expiration of
redemption period; by whom executed or given.
xxxx
Upon the expiration of the right of redemption, the purchaser
or redemptioner shall be substituted to and acquire all the
rights, title, interest and claim of the judgment obligor to the
property as of the time of the levy. The possession of the
property shall be given to the purchaser or last
redemptioner by the same officer unless a third party is
actually holding the property adversely to the judgment
obligor. (Emphasis and underscoring supplied)
In China Banking Corporation v. Lozada,[19] the Court held that
the phrase "a third party who is actually holding the property
adversely to the judgment obligor" contemplates a situation in
which a third party holds the property by adverse title or right,
such as that of a co-owner, tenant or usufructuary. The co-
owner, agricultural tenant, and usufructuary possess the
property in their own right, and they are not merely the
successor or transferee of the right of possession of
another co-owner or the owner of the property.[20] Notably, the
property should not only be possessed by a third party, but
also held by the third party adversely to the judgment
obligor.[21]

In this case, respondent acquired the subject lots from his
parents, Sps. Centeno, on March 14, 1988 after they were
purchased by petitioner and its Certificate of Sale at Public
Auction was registered with the Register of Deeds of Iloilo City
in 1971. It cannot therefore be disputed that respondent is a
mere successor-in-interest of Sps. Centeno. Consequently, he
cannot be deemed as a "third party who is actually holding the
property adversely to the judgment obligor" under legal
contemplation. Hence, the RTC had the ministerial duty to
issue as it did issue the said writ in petitioner's favor.
On the issue regarding the identity of the lots as raised by
respondent in his Comment,[22] records show that the RTC had
already passed upon petitioner's title over the subject lots
during the course of the proceedings. Accordingly, the identity
of the said lots had already been established for the purpose
of issuing a writ of possession. It is hornbook principle that
absent any clear showing of abuse, arbitrariness or
capriciousness committed by the lower court, its findings of
facts are binding and conclusive upon the Court,[23] as in this
case.
Finally, anent the issue of laches, it must be maintained that
the instant case only revolves around the issuance of a writ of
possession which is merely ministerial on the RTC's part as
above-explained. As such, all defenses which respondent may
raise including that of laches should be ventilated through a
proper proceeding.
WHEREFORE, the petition is GRANTED. The January 31,
2012 Decision of the Cebu City Court of Appeals in CA-G.R.
CV No. 78398 is REVERSED and SET ASIDE. Accordingly,
the October 8, 2002 Decision of the Regional Trial Court of
Barotac Viejo, Iloilo City, Branch 66 in Cadastral Case No. 98-
069 is hereby REINSTATED. SO ORDERED.
March 13, 2013
GOLDENWAY MERCHANDISING CORPORATION VS
EQUITABLE PCI BANK
DOCTRINE: Section 47 did not divest juridical persons of
the right to redeem their foreclosed properties but only
modified the time for the exercise of such right by
reducing the one-year period srcinally provided in Act No.
3135. The new redemption period commences from the
date of foreclosure sale, and expires upon registration of
the certificate of sale or three months after foreclosure,
whichever is earlier. There is likewise no retroactive
application of the new redemption period because Section
47 exempts from its operation those properties foreclosed
prior to its effectivity and whose owners shall retain their
redemption rights under Act No. 3135.
FACTS:
On November 29, 1985, petitioner Goldenway Merchandising
Corporation executed a Real Estate Mortgage in favour of
Equitable PCI Bank over three parcels of land as security for a
Php2,000,000 loan granted to the petitioner. Petitioner
eventually failed to settles its loan obligation, leading
respondent to extrajudicially foreclose the mortgage on
December 13, 2000. Subsequently, a Certificate of Sale was
issued to respondent on January 26, 2001. In a letter dated
March 7, 2001, petitioner offered to redeem the foreclosed
properties by tendering a check. Petitioner and respondent
met on March 12, 2001. However, petitioner was told that
redemption was no longer
possible since the certificate of sale had already been
registered; the title to the foreclosed properties were
consolidated in favor of the respondent on March 9, 2001.
Petitioner filed a complaint for specific performance and
damages contending that the 1-year period of redemption
under Act 3135 should apply, and not the shorter redemption
period under RA 8791 as applying RA 8791 would result in the
impairment of obligations of contracts and would violate the
equal protection clause under the
constitution. The RTC dismissed the action of the petitioner
ruling that redemption was made belatedly and that there was
no redemption made at all.
The Court of Appeals affirmed the RTC.
ISSUE:
Whether or not the redemption period should be the 1-year
period provided under Act 3135, and not the shorter period
under RA 8791 as the parties expressly agreed that
foreclosure would be in accordance with Act 3135
RULING:
The shorter period under RA 8791 should apply.
The one-year period of redemption is counted from the date of
the registration of the certificate of sale. In this case, the
parties provided in their real estate mortgage contract that
upon petitioner’s default and the latter’s entire loan obligation
becoming due, respondent may immediately foreclose the
mortgage judicially in accordance with the Rules of Court, or
extrajudicially in accordance with Act No. 3135, as amended.
But under Sec 47 of RA 8791, an exception is thus made in
the case of juridical persons which are allowed to exercise the
right of redemption only "until, but not after, the registration of
the certificate of foreclosure sale" and in no case more than
three (3) months after foreclosure, whichever comes first.
Section 47 did not divest juridical persons of the right to
redeem their foreclosed properties but only modified the time
for the exercise of such right by reducing the one-year period
srcinally provided in Act No. 3135. The new redemption period
commences from the date of foreclosure sale, and expires
upon registration of the certificate of sale or three months after
foreclosure, whichever is earlier. There is likewise no
retroactive application of the new redemption period because
Section 47 exempts from its operation those properties
foreclosed prior to its effectivity and whose owners shall retain
their redemption rights under Act No. 3135.
We agree with the CA that the legislature clearly intended to
shorten the period of redemption for juridical persons whose
properties were foreclosed and sold in accordance with the
provisions of Act No. 3135.
The difference in the treatment of juridical persons and natural
persons was based on the nature of the properties foreclosed
– whether these are used as residence, for which the more
liberal one-year redemption period is retained, or used for
industrial or commercial purposes, in which case a shorter
term is deemed necessary to reduce the period of uncertainty
in the ownership of property and enable mortgagee-banks to
dispose sooner of these acquired assets. It must be
underscored that the General Banking Law of 2000, crafted in
the aftermath of the 1997 Southeast Asian financial crisis,
sought to reform the General Banking Act of 1949 by
fashioning a legal framework for maintaining a safe and sound
banking system. In this context, the amendment introduced by
Section 47 embodied one of such safe and sound practices
aimed at ensuring the solvency and liquidity of our banks. It
cannot therefore be disputed that the said provision amending
the redemption period in Act 3135 was based on a reasonable
classification and germane to the purpose of the law.
The right of redemption being statutory, it must be exercised in
the manner prescribed by the statute, and within the
prescribed time limit, to make i t effective. Furthermore, as with
other individual rights to contract has to give way to police
power exercised for public welfare and to property, if the
concept of police power is well-established in this jurisdiction.
It has been defined as the "state authority to enact legislation
that may interfere with personal liberty or property in order to
promote the general welfare." Its scope, ever-expanding to
meet the exigencies of the times, even to anticipate the future
where it could be done, provides enough room for an efficient
and flexible response to conditions and circumstances thus
assuming the greatest benefits.
The freedom to contract is not absolute; all contracts and all
rights are subject to the police power of the State and not only
may regulations which affect them be established by the State,
but all such regulations must be subject to change from time to
time, as the general well-being of the community may require,
or as the circumstances may change, or as experience may
demonstrate the necessity. Settled is the rule that the non-
impairment clause of the Constitution must yield to the loftier
purposes targeted by the Government. The right granted by
this provision must submit to the demands and necessities of
the State’s power of regulation. Such authority to regulate
businesses extends to the banking industry which, as this
Court has time and again emphasized, is undeniably imbued
with public interest.
Having ruled that the assailed Section 47 of R.A. No. 8791 is
constitutional, we find no reversible error committed by the CA
in holding that petitioner can no longer exercise the right of
redemption over its foreclosed properties after the certificate of
sale in favor of respondent had been registered.
G.R. No. L-15128
Diego v Fernando
DOCTRINE:
If a contract of loan with security does not stipulate the
payment of interest but provides for the delivery to the creditor
by the debtor of the property given as security, in order that
the latter may gather its fruits, without stating that said fruits
are to be applied to the payment of interest, if any, and
afterwards that of the principal, the contract is a mortgage and
not antichresis.
FACTS:
The defendant Segundo Fernando executed a deed of
mortgage in favor of plaintiff Cecilio Diego over 2 parcels of
land registered in his name, to secure a loan P2,000, without
interest, payable within 4 years. After the execution,
possession of the mortgaged properties were turned over to
the mortagagee.
Fernando failed to pay after four years, with Diego having
made several demands. Hence this action for foreclosure of
mortgage.
Fernando claims that the transaction was one of antichresis
and not of mortgage. Also Diego had allegedly received a total
of 120 cavans of palay from the properties given as security,
which, at the rate of P10 a cavan, represented a value of
P5,200. Hence his debt had already been paid, with Diego still
owing him a refund of some P2,720.
The CFI found that it was really a mortgage and that the fact
that possession of the mortgaged properties were turned over
to the mortgagee did not alter the transaction. The parties
must have intended that the mortgagee would collect the fruits
of the mortgaged properties as interest on his loan, which
agreement is not uncommon. Also Diego has already received
55 cavans of palay during his possession. Hence the CFI
ordered Fernando to pay Diego 2K with interest and upon
default, for the foreclosure. Hence this appeal.
ISSUE: W/ the contract between Diego and Fernando is
mortgage or antichresis considering that the loan was without
interest, coupled with the transfer of the possession of the
properties mortgaged to the mortgagee.
HELD: considered as a mortgage contract between the
parties.
To be antichresis, it must be expressly agreed between
creditor and debtor that the former, having been given
possession of the properties given as security, is to apply their
fruits to the payment of the interest, if owing, and thereafter to
the principal of his credit. [READ DOCTRINE].
Diego is a mortgagee in possession, one who has lawfully
acquired possession of the premises mortgaged to him,
standing upon his rights as mortgagee and not claiming under
another title, for the purpose of enforcing his security upon
such property or making its income help to pay his debt.
A mortgagee in possession and a creditor in an antichresis
have the following similar or identical rights and obligations:
if the mortgagee acquires possession in any lawful manner, he
is entitled to retain such possession until the indebtedness is
satisfied and the property redeemed;
the non-payment of the debt within the term agreed does not
vest the ownership of the property in the creditor;
the general duty of the mortgagee in possession towards the
premises is that of the ordinary prudent owner;
the mortgagee must account for the rents and profits of the
land, or its value for purposes of use and occupation, any
amount thus realized going towards the discharge on the
mortgage debt;
if the mortgage remains in possession after the mortgage debt
has been satisfied, he becomes a trustee for the mortgagor as
to the excess of the rents and profits over such debt;
the mortgagor can only enforce his rights to the land by an
equitable action for an account and to redeem.
Since Fernando did not expressly waive his right to the fruits of
the properties mortgaged during the time they were in Diego’s
possession, the latter, like an antichretic creditor, must
account for the value of the fruits received by him, and deduct
it from the loan obtained by appellant.
In this case, Diego had received a net share of 55 cavans of
palay; at the rate of P9.00 per cavan, the total value of the
fruits received by Diego is P495. Deducting this amount from
the loan of P2,000.00 received by Fernando from Diego, the
former has only P1,505.00 left to pay the latter.
WHEREFORE, the CFI judgement is MODIFIED in that
Fernando is ordered to pay P1,505 and that Diego has the
obligation to render an accounting of all the fruits received by
him from the properties in question from the time of the filing of
this action until full payment, or in case of appellant's failure to
pay, until foreclosure of the mortgage thereon, the value of
which fruits shall be deducted from the total amount of his
recovery.
G.R. No. L-9957 August 8, 1916
PERFECTO DE LA VEGA, ET AL., plaintiffs-appellees,
vs. TOMAS BALLILOS (or BALIELOS), defendant-
appellant.
Facts:
Petitioners are co-owners (pro-indiviso share) of eight parcels
of land in Batangas. One of them, Fidel dela Vega, mortgaged
three of the properties to defendant Ballilos for P430. The
relevant provisions of their contract as follows:
“. . . . and whereas on this day I have mortgaged the two
parcels of land above-mentioned to the said D. Tomas Ballilos
for the sum of P430 and for the term of eight years, counting
from this day, at the expiration of which I may redeem them;
that should I not then do so, the said lands shall continue to be
mortgaged until I have the money available wherewith the
redeem them; therefore, I hereby mortgage the two parcels of
land hereinabove mentioned to D. Tomas Ballilos for the said
sum of P430, which I have received from him in current coin,
and as the same was not received in our presence, we waive
the exception of money not paid in cash; therefore, henceforth
and during the period above stipulated, I grant and convey my
ownership and possession in the said two parcels of land to
the said D. Tomas Ballilos in order that he may manage and
enjoy the same in consideration of the sum for which they are
mortgaged.
There being present D. Tomas Ballilos . . . ., he stated that he
had received in mortgage, to his entire satisfaction, the two
parcels of tillable land above mentioned, under the conditions
and for the time stipulated, for the sum of P430, which he has
already delivered to the said D. Fidel de a Vega, who in turn
states that the said lands are free of all charges and
encumbrances and binds himself to warrant this mortgage in
case of legal proceedings.” (These provisions will be material
in the rendition of judgment)
In essence, it alleges that the agreement was one of
antichresis constituted until the borrowed sum is paid in full.
In the following year, 1905, the plaintiffs (save for Policarpio
dele Vega) borrowed in succession P40, P18, and P60 from
the respondent under the same contract of antichresis. They
gave three more properties as security from which he is to
collect the interest.
The plaintiffs then attempted to pay off their loans (in the total
amount of P548) in order to reacquire the said parcels of land.
The defendant refused to receive the sums and appropriated
to himself the parcels of land.
During the trial in the lower court, defendant alleged, among
other things, that:
The parcels of land in question as these were validly sold to
him by the co-owners dela Vega;
There was no period specified for the right of repurchase
agreed upon;
When the co-owners failed to repurchase within the legal
period, ownership of the properties was consolidated in him by
operation of law;
ISSUE:
Whether or not there was a contract of Antichresis. (Yes)
HELD:
First topic: Instrument neither a Real Mortgage nor a Sale
Pacto de Retro (Academic)
The said contract apparently records a loan of P430, secured
by a mortgage of the aforementioned two parcels of land and
payable within the period of eight years, or within such time as
the debtor Fidel de la Vega might be able to pay his debt and
redeem the said land. However, notwithstanding the terms of
the document, legally there is no mortgage inasmuch as the
said instrument is not of the nature of a public instrument. And
even though it were, it was not recorded in the property
registry as it ought to have been. Furthermore, the instrument
recites that the debtor thenceforth ceded and conveyed his
ownership and possession in the said two parcels of land to
the creditor Ballilos in order that Ballilos might manage and
enjoy the same in consideration of the sum for which the
lands, free of all burden and encumbrance according to the
debtor, were mortgaged.
If the instrument above mentioned cannot be construed as a
mortgage of the said two parcels of land in security for P430,
the amount loaned, and for the payment of the debt within
eight years or some other period, neither can it be held to be a
sale under pacto de retro inasmuch as the said document
contains no mention whatever of any sale with right of
redemption, although it does say that the debtor ceded and
conveyed to the creditor the ownership and possession of the
lands in order that he might manage and enjoy them in
consideration of the sum for which they were mortgaged.
Second Topic: Instrument is a Contract of Antichresis
(Main Point of the Case)
As it is not shown that the said document is a contract of
mortgage executed as security for a loan, still less does it
appear to be a contract of pacto de retro, in view of the terms
of the agreement Exhibit O, as stipulated between the
contracting parties, of the allegations of both parties, and of
the findings of the court in regard to the allegations, made and
proven at the trial by the contending parties, we find the
classification of the said contract as one of antichresis to be
correct and proper, taking into account the intention of the
contracting parties as revealed by the words and terms
employed by them and recorded in the said document.
Several articles of the Civil Code relating to the contract of
antichresis. (The court cited Old Civil Code provisions, A1881,
-83, -84, and -85 – Now NCC A2132, -36, -37, and -38; These
are the elements of a contract of Antichresis)
1. By antichresis a creditor acquires a right to receive the
fruits of real property of his debtor, with the obligation
to apply them to the payment of interest, if due, and
afterwards to the principal of his credit.
2. The debtor cannot recover the enjoyment of the real
property without previously paying in full what he owes
to his creditor. But the latter, in order to free himself
from the obligations imposed on him by the preceding
article, may always compel the debtor to reenter upon
the enjoyment of the estate, unless there be an
agreement to the contrary.
3. The creditor does not acquire the ownership of the real
property by nonpayment of the debt within the term
agreed upon. Any stipulation to the contrary shall be
 void. But in this case the creditor may demand, in the
manner prescribed in the law of civil procedure, the
payment of the debtor or the sale of the reality.
4. The contracting parties may stipulate that the interest
of the debt be set off against the fruits of the estate
given in antichresis.
recovery of the enjoyment of immovables given in antichresis,
provided that the debtor previously pay what he owes to this
creditor, the plaintiffs have an unquestionable right to recover
parcels Nos. 1, 5, and 7 of the land designated in the map or
plan admitted by agreement of the parties, after first paying the
debt of P430 to the defendant-creditor.

This contract is somewhat similar to those of pledge and

mortgage and for this reason article 1886 (now 2139)
prescribed that certain articles relative to these latter contracts
are applicable to contracts of antichresis, for both the former
and the latter contracts are comprised in title 15, book 4, of the
Civil Code. (Still applicable. Specific article numbers just
changed)

The contract entered into by the contracting parties which has

produced between them rights and obligations is in fact one of
antichresis, for article 1281 of the Civil Code prescribes among
other things that if the words should appear to conflict with the
evident intent of the contracting parties, the intent shall prevail.
Article 1283 provides that however general the terms of the
contract may be, they should not be understood to include
things and cases different from those with regard to which the
interested parties intended to contract; and, further, article
1284 of the same code says that if any stipulation of a contract
should admit of several different meanings, that most suitable
to give it effect should be applied.

In this case, it was stipulated that even after eight years the
debtor, the owner of the property, might redeem it whenever
he should have the means to pay his debt and recover the
lands given in antichresis to his creditor who might told them in
usufruct in consideration for the money he had loaned; and as
the foregoing articles of the Civil Code fixes no term for the