Petitioner : Direct Funders Holding Corporation

Respondent: Kambiak Y. Chan, Jr. & Judge Celso D. Lavina

Date of the Decision of Case: Jan 16, 2002

Important Places: RTC of Pasig, Court of Appeals,

SUMMARY:

- Petitioner claimed that the respondent Judge issued the warrant of

preliminary injunction despite clear Amended Complaint
- Chan Jr, sought the issuance of warrant of preliminary mandatory injunction
- Judge denied the Motion for reconsideration claiming that the issuance of
motion for reconsideration is due to petitioner’s mistaken interpretation &
reliefs sought for.
- Removed from the records: actions for annulment of documents,
reconveyance (doc released by mortgage holder that borrower is free from
debt) , recovery of possession, damages with application for issuance of
mandatory injunction & TRO.
- During the hearing: the property in question was occupied by petitioner by
virtue of court order of possession issued by RTC of Pasig.
- Judge orders to restore possession to Chan; obvious dictatorial exercise of
power due to prejudice/ personal hostility, lack of authority
- Dec. 8, 1997: TRO was issued and Court Sheriff IV implemented the TRO
& returned it on Dec. 9, 1997
- Jan. 21, 1998: Judge granted the issuance of warrant of preliminary
injunction
- May 29, 1998: Motion for Inhibition( issue from a superior court, forbidding an
inferior judge to proceed further in a cause pending before him) & Motion to
dissolve injunction were DENIED
- Aug. 5, 1998: Petitioner filed in COA a petition for certiorari (higher court
review decision of lower court) & prohibition attacking TC issuance of
injunction
- Sept. 28, 1999: COA dismissed the petition that TC had authority to issue
the order that did not interfere w/ writ of possession.
 - Oct. 19, 1999: petitioner filed in COA a motion for reconsideration of the
decision
- Feb. 2, 2000: COA denied petitioners motion stating that the arguments were
only the repetition & restatement of those contained in their pleadings.

ISSUE:
- COA made a mistake in affirming TC ruling issuance of injunction
restraining permit of possession to place respondent back in possession of
the property instead of the petitioner.
- Who has a better right to the possession? Direct Funders Corp or Chan Jr.?

COURT’S RULING:
- Conditional sale agreement= only document presented by Chan during the
hearing of application for TRO in RTC, Pasig
- Conditional agreement =biased & incompetent
o – not completed
o - not registered & duly annotated on Transfer Certificate Title
o Executed 8 yrs after execution of real estate mortgage

- Mortgagee (USB) did not give its consent to the change of debtor. In law on
contracts, a person not on a party to an agreement cannot be affected.
Material breach of stipulation of real estate
- REAL ESTATE:
- Mortgagor (borrower) neither let the mortgage property be rented nor sell/
dispose without the written consent of the mortgagee.
- In spite of this agreement, when the property in this matter became a
collateral or any portion of it are leased/sold, it is essential upon the
mortgagor to make it a condition or separate the buyer to other party in
whose favour the alienation is made shall be recognized as the 1st lien (right
to keep property belonging to another until debt owed by that person is
discharged) or burden in favour of mortgagee
- Promise & bind himself to recognize & respect extension of terms of the
original mortgage granted by the mortgagee.
 - If mortgagor sell, transfer of mortgaged property is a violation of agreement
and shall be liable for damages
- Conditions of sale agreement were NOT FULFILLED. Thus, respondents
claim to property was weak.
- ART 1181: Acquisition of rights & extinguishment shall depend upon the
happening of event. Basis of petitioners right:
1. Real estate mortgage was duly registered & annotated on TCT
2. Deed of assignment executed by USB conveyed its rights as mortgagee
in favour of petitioner
3. Deed of assignment wherein they assigned their right of recovery over
the property to USB
4. Certificate of Sale executed by sheriff, confirmation of merging of
ownership, TCT issued to petitioner
5. Turn- Over/ Delivery of possession of the sheriff in LRC case.

***** Deed of Real Estate Mortgage gives mortgagee the option to purchase
the land subject within 2yrs of mortgage. Mortgagee bought the land.

Being mortgagors they cannot be deprived of the right to redeem the

mortgage property bcos such right was inherent & inseparable from this kind of
contract. The transaction carried the added special provision which renders the
mortgagors right to redeem defeasible (valid objection) at the election of
mortgages.