ESTANISLAUA ARENAS V.

FAUSTO RAYMUNDO
G.R. No. L-5741
March 13, 1911
Art 2085: Requisites of Contract of Pledge and Mortgage
Doctrine: Pledger must be owner of the thing to be pledged
FACTS:
Between end-April or early May 1908, Estanislaua Arenas delivered
jewelry (gold ring, gold bracelet, gold earring, ladys comb and 2 rosaries,
valued at Php 8,600) to her agent Elena de Vega, to be sold on commission.
De Vega delivered it to Concepcion Perello. Instead of selling the jewelry,
Perello pledged the same in the Tondo pawnshop of respondent Fausto
Raymundo, as security for a loan, without the knowledge or consent of
Arenas. Raymundo received the jewelry in good faith.
Raymundo retained possession of the jewelry and refused to deliver the
same unless payment of loan amount was made. He argues the pledge was
made with the knowledge of Arenas son, Gabriel La O. Perello was
convicted of estafa in a separate case and was unable to redeem the jewelry
by paying the loan amount of Php 1,524.
On 1908 August 31, Arenas filed an action for replevin (recovery of
personal property) of the jewelry. The court ordered Raymundo to restore
the jewelry to Arenas. Raymundo filed an answer praying the amount of the
loan, or jewelry be returned.
ISSUE: WON Raymundo may collect value of loan out of value of
pledged jewelry
HELD: NO
1. There was no contract of pledge. Raymundo has no right over the
jewelry
Ratio: Art 2085 prescribes, as an essential requisite, that the thing pledged
or mortgaged must belong to the person who pledges/mortgages the same.
Perello was not the owner of the jewelry pledged and legitimate owner
Arenas had no knowledge/consent of the pledging of the jewelry at

Raymundos pawnshop. Even if Raymundo acted in good faith, he was not

entitled to retain the same
Lacking an essential requisite, the pledge is void and cannot confer upon
Raymundo any right over the pledged jewelry. The jewelry cannot serve as
security for Perellos loan. Similarly, no obligation is imposed on Arenas to
reimburse Raymundo for the loan value since no contractual obligation was
created and was even deprived possession of such jewelry via a criminal
act.
Other discussion:
Nature of Pawnshop Business Court will not prefer pawnshop owner over
rightful owners
Pawnshop owners are exposed to the risk of receiving
stolen/embezzled goods as security for loans.
Pawnshop owner, in receiving such goods, cant expect preferential
treatment of law over owners of stolen/embezzled goods who were
wrongfully deprived of the same thru crime
Raymundo may bring action to collect amounts against the property party
Old Civil Code: Perello, who was convicted of estafa, can also be
held civilly liable by reason of her conviction in a criminal case
UNION MOTOR CORP v. CA
GR No. 117187
July 20, 2001
FACTS: Spouses Bernal purchased from Union Motor one Cimarron
jeepney. The spouses issued a promissory note and a deed of chattel
mortgage in favor of Union Motor. Union Motor then assigned the
promissory note and deed of chattel mortgage to Jardine-Manila Finance,
Inc. Through Unions agent Sosmea, spouses Bernal and Union agreed
that the spouses would pay Jardine, the assignee.
Spouses Bernal paid the obligation in installments and discontinued their
payment on the account of the non-delivery of the vehicle. According to the
spouses, Sosmea allegedly took the jeepney in his personal capacity.
Jardine-Manila filed a complaint for sum of money. RTC rendered decision
in favor of the spouses Bernal. CA affirmed RTC decision.

ISSUE: Whether or not the Chattel Mortgage Contract signed by the Bernal
Spouses proves that the ownership of the subject motor vehicle has already
been transferred to them for the reason that under Art 2085 of the New Civil
Code, the mortgagor must be the owner of the property.
HELD: Union Motor reliance on the Chattel Mortgage Contract executed
by the respondent spouses does not helps its assertion that ownership has
been transferred to the latter since there was neither delivery nor transfer of
possession of the subject motor vehicle to respondent spouses.
Consequently, the said accessory contract of chattel mortgage has no legal
effect whatsoever inasmuch as the respondent spouses are not the absolute
owners thereof, ownership of the mortgagor being an essential requirement
of a valid mortgage contract. The respondent spouses never acquired
possession of the subject motor vehicle. The manifestations of ownership
are control and enjoyment over the thing owned. The respondent spouses
never became the actual owners of the subject motor vehicle inasmuch as
they never had dominion over the same.
DBP vs. Prudential (2005)
FACTS: Lirag Textile Mills, Inc. (Litex) opened an irrevocable commercial
letter of credit with respondent Prudential Bank for US$498,000. This was
in connection with its importation of 5,000 spindles for spinning machinery
with drawing frame, simplex fly frame, ring spinning frame and various
accessories, spare parts and tool gauge. These were released to Litex under
covering trust receipts it executed in favor of Prudential Bank. Litex
installed and used the items in its textile mill located in Montalban, Rizal. 9
years later, DBP granted a foreign currency loan in the amount of
US$4,807,551 to Litex. To secure the loan, Litex executed real estate and
chattel mortgages on its plant site in Montalban, Rizal, including the
buildings and other improvements, machineries and equipments there.
Among the machineries and equipments mortgaged in favor of DBP were
the articles covered by the trust receipts. Sometime in June 1982,
Prudential Bank learned about DBPs plan for the overall rehabilitation of
Litex. In a July 14, 1982 letter, Prudential Bank notified DBP of its claim
over the various items covered by the trust receipts which had been
installed and used by Litex in the textile mill. Prudential Bank informed
DBP that it was the absolute and juridical owner of the said items and they
were thus not part of the mortgaged assets that could be legally ceded to
DBP. For the failure of Litex to pay its obligation, DBP extra-judicially

foreclosed on the real estate and chattel mortgages, including the articles
claimed by Prudential Bank. During the foreclosure sale held on April 19,
1983, DBP acquired the foreclosed properties as the highest bidder.
Learning of the intended public auction, Prudential Bank wrote a letter
dated September 6, 1984 to DBP reasserting its claim over the items
covered by trust receipts in its name and advising DBP not to include
them in the auction. It also demanded the turn-over of the articles or
alternatively, the payment of their value.

ISSUE: Whether or not the chattel mortgage covers the goods under the
trust receipt
HELD: No. Article 2085 (2) of the Civil Code requires that, in a contract of
pledge or mortgage, it is essential that the pledgor or mortgagor should be
the absolute owner of the things pledged or mortgaged. Article 2085 (3)
further mandates that the person constituting the pledge or mortgage must
have the free disposal of his property, and in the absence thereof, that he be
legally authorized for the purpose. Litex had neither absolute ownership,
free disposal nor the authority to freely dispose of the articles. Litex could
not have subjected them to a chattel mortgage. Their inclusion in the
mortgage was void and had no legal effect. There being no valid mortgage,
there could also be no valid foreclosure or valid auction sale. Thus, DBP
could not be considered either as a mortgagee or as a purchaser in good
faith.
No one can transfer a right to another greater than what he himself has.
Nemo dat quod non habet. Hence, Litex could not transfer a right that it did
not have over the disputed items. Corollarily, DBP could not acquire a right
greater than what its predecessor-in-interest had. The spring cannot rise
higher than its source. DBP merely stepped into the shoes of Litex as trustee
of the imported articles with an obligation to pay their value or to return
them on Prudential Banks demand. By its failure to pay or return them
despite Prudential Banks repeated demands and by selling them to Lyon
without Prudential Banks knowledge and conformity, DBP became a
trustee ex maleficio. As a consequence of the release of the goods and the
execution of the trust receipt, a two-fold obligation is imposed on the
entrustee, namely: (1) to hold the designated goods, documents or
instruments in trust for the purpose of selling or otherwise disposing of
them and (2) to turn over to the entruster either the proceeds thereof to the

extent of the amount owing to the entruster or as appears in the trust receipt,
or the goods, documents or instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the terms and conditions
specified in the trust receipt. In the case of goods, they may also be released
for other purposes substantially equivalent to (a) their sale or the
procurement of their sale; or (b) their manufacture or processing with the
purpose of ultimate sale, in which case the entruster retains his title over the
said goods whether in their original or processed form until the entrustee
has complied fully with his obligation under the trust receipt; or (c) the
loading, unloading, shipment or transshipment or otherwise dealing with
them in a manner preliminary or necessary to their sale. Thus, in a trust
receipt transaction, the release of the goods to the entrustee, on his
execution of a trust receipt, is essentially for the purpose of their sale or is
necessarily connected with their ultimate or subsequent sale.

original owner of the land is PERFECTO GUANSING, the father of

Rodolfo. In a civil case instituted by Perfecto for the cancellation of
Rodolfos title, the Supreme Court adjudged Perfecto as the real owner after
proving that Rodolfo fraudulently obtained it. Thus, Rodolfos title was
cancelled and a new one was issued to Perfecto.
Aggrieved, the Spouses Lim instituted an action for specific performance
and damages questioning the ability of CDB, and its mother company Far
East Bank and Trust Company (FEBTC), to sell the subject property.
The Regional Trial Court rendered a decision in favor of the Spouses Lim,
which was affirmed by the Court of Appeals.

ISSUES:
CAVITE DEVELOPMENT vs. SPOUSES LIM
G. R. No. 131679
February 1, 2000

(1)

What is the legal relation between the parties?

(2)
Whether or not Rodolfo Guansing/CDB was the absolute owner of
the subject property as required under Art. 2085 to effect a valid
mortgage/sale?
(3)

Whether or not CDB is a mortgagee in good faith?

FACTS: One Rodolfo Guansing obtained a loan in the amount of

P90,000.00 from Cavite Development Bank (CDB). As a security, he
mortgaged a parcel of land situated La Loma, Quezon City and covered by
TCT No. 300809 registered in his name. Guansing defaulted on the
payment of the loan, which led CDB to foreclose the mortgage and later on
emerged as the highest bidder and subsequently, the owner of the lot after
Guansing failed to redeem the same.

HELD:

The Spouses Lim, through a broker, offered to purchase the

property from CDB. The formal written offer stated a payment of P30,000
(10% of P300,000) as option money, provided that the land be cleared of
illegal occupants. For payment of the option money, CDB issued an official
receipt. However, after following up on the sale, Lim discovered that the

The Spouses Lim paid the option money, which left only the
balance of the purchase price to be paid.

(1)

The parties entered into a CONTRACT OF SALE.

CDB.

The formal written offer of the Spouses Lim was accepted by

In the Law on Sales, one does not need to be the owner at the
perfection of the contract.


HOWEVER, NEMO DAT QUOD NON HABET [One cannot give
what he does not have]. At the consummation stage, it was impossible for
CDB to comply with its legal obligation.
(2)
NO. The sale by CDB to Lim of the property mortgaged in 1983
by Rodolfo Guansing must, therefore, be deemed a nullity for CDB did not
have a valid title to the said property.

CDB never acquired a valid title to the property because the

foreclosure sale, by virtue of which the property had been awarded to CDB
as highest bidder, is likewise void since the mortgagor was not the owner of
the property foreclosed

A forced sale is still a sale within the contemplation of the law.

Thus, the principle that the seller must be the owner of the thing sold also
applies.
(3)

NO. CDB cannot be considered as a mortgagee in good faith.

CDB was remiss in its duty as bank and failed to exercise the due
diligence required of it. In short, CDB was negligent.

Citing jurisprudence, it is standard practice for 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 affected with public interest

No evidence to the contrary.

o
Extrajudicial Settlement of the Estate With Waiver, a self-executed
deed by Rodolfo, should have placed CDB on guard.
o
Report of the purported ocular inspection by its representatives
was never admitted into evidence.

De Leon vs. Calalo

Cebu International Finance Corporation vs. CA

G.R. No. 123031 October 12, 1999
FACTS: Jacinto Dy executed a Special Power of Attorneyin favor of
private respondent Ang Tay, authorizing the latter to sell the cargo vessel
owned by Dy and christened LCT Asiatic. Through a Deed of Absolute
Sale, Ang Tay sold the subject vessel to Robert Ong (Ong). Ong paid the
purchase price by issuing three (3) checks However, since the payment was
not made in cash, it was specifically stipulated in the deed of sale that the
LCT Asiatic shall not be registered or transferred to Robert Ong until
complete payment. Thereafter, Ong obtained possession of the subject
vessel so he could begin deriving economic benefits therefrom. He,
likewise, obtained copies of the unnotarized deed of sale allegedly to be
shown to the banks to enable him to acquire a loan to replenish his (Ongs)
capital. The aforequoted condition, however, which was handwritten on the
original deed of sale does not appear on Ongs copies.Contrary to the
aforementioned agreements and without the knowledge of Ang Tay, Ong
had his copies of the deed of sale (on which the aforementioned prohibition
does not appear) notarized Ong presented the notarized deed to the
Philippine Coast Guard which subsequently issued him a Certificate of
Ownership and a Certificate of Philippine Register over the subject vessel.
Ong also succeeded in having the name of the vessel changed to LCT
Orient Hope.
Using the acquired vessel, Ong acquired a loan from Cebu International
Finance Corporation to be paid in installments as evidenced by a
promissory note of even date. As security for the loan, Ong executed a
chattel mortgage over the subject vessel, which mortgage was registered
with the Philippine Coast Guard and annotated on the Certificate of
Ownership.
-Ong defaulted in the payment of the monthly installments. Consequently,
Cebu International Finance Corporation sent him a letter] demanding
delivery of the mortgaged vessel for foreclosure or in the alternative to pay
the balance pursuant to paragraph 11 of the deed of chattel mortgage.
Meanwhile, the two checks paid by Ong to Ang Tay for the Purchase of the
subject vessel bounced. Ang Tays search for the elusive Ong and all
attempts to confer with him proved to be futile. A subsequent investigation
and inquiry with the Office of the Coast Guard revealed that the subject
vessel was already in the name of Ong, in violation of the express

undertaking contained in the original deed of sale. As a result thereof, Ang

Tay and Jacinto Dy filed a civil case for rescission and replevin with
damages against Ong and his wife.
ISSUE: Whether or not Cebu International Finance Corporation can validly
foreclose the chattel mortgage
HELD: The prevailing jurisprudence is that a mortgagee has a right to rely
in good faith on the certificate of title of the mortgagor to the property given
as security and in the absence of any sign that might arouse suspicion, has
no obligation to undertake further investigation. Hence, even if the
mortgagor is not the rightful owner of or does not have a valid title to the
mortgaged property, the mortgagee or transferee in good faith is nonetheless
entitled to protection. Although this rule generally pertains to real property,
particularly registered land, it may also be applied by analogy to personal
property, in this case specifically, since ship owners are, likewise, required
by law to register their vessels with the Philippine Coast Guard.
The chattel mortgage constituted on a vessel by the buyer who was able to
register the vessel in his name despite the agreement with the seller that the
vessel would not be so registered until after full payment of the price which
do not appear in the buyers copy of the deed of sale is VALID, for the
mortgagee has the right to rely in good faith on the certificate of
registration.
Erea v. Querrer-Kauffman
GR No. 165853
June 22, 2006
FACTS: Dana Querrer-Kauffman is the owner of a residential lot with a
house in BF Resort Village in Las Pias City. The property is covered by
TCT No. T-48521. The owner's duplicate copy and the tax declarations
covering the property were kept in a safety deposit box in the house.
Sometime in 1997, Kauffman entrusted her minor daughter, Vida Rose, and
the key to the house to her live in partner, Eduardo Victor, as she will go to
the United States. After a while, both Vida Rose and Victor also left for the
US. Victor then entrusted the key to his sister, Mira Bernal.
Kauffman then asked her sister Evelyn Pares to get the house from Bernal
so that she can sell it. She sent the key to the safety deposit box. Pares

wasn't able to receive it and thus they hired a professional locksmith to open
it. Upon opening, Pares discovered that the owner's duplicate title, tax
declarations and pieces of jewelry were missing. Learning this incident,
Kauffman immediately returned to the Philippines. She and Pares went to
the Register of Deeds of Las Pias and they found out that the lot has been
mortgaged to a certian Rosana Erea. It appeared that Kauffman signed a
real estate mortgage as owner-mortgagor and Jennifer Ramirez as atty-infact.

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

Kauffman and Pares were able to locate Bernal. Bernal confirmed that
Ramirez, daughter of Victor, had taken the contents of the safety deposit
box. Using the key entrusted to them by Victor, they were able to open the
house and they forced open the deposit box and stole the said items. Having
in their possession the title, they forged the signature of Kauffman through
an impostor and made a Real Estate Mortgage in favor of Erea. When
Kauffman told Bernal that she would file suit, Bernal cried and asked for
forgiveness. She admitted that Ramirez had been in a tight financial fix and
pleaded for time to return the title and the jewelry.

FACTS:
On Nov. 9, 1920, Paz Agudelo executed a special power of
attorney (Exhibit K) in favor of her nephew, Mauro Garrucho
- In the said SPA, Garrucho is able to sell alienate and mortgage in
whatever manner or form he might deem convenient,
all Agudelos properties in Murcia and Bacolod, Negros Occidental
- On Dec. 22, 1920, Amparo Garrucho executed a special power of
attorney (Exhibit H) wherein she enabled her brother, Mauro, to
sell, alienate, mortgage or otherwise encumber all her properties in
Murcia and Bago, Negros Occidental
However, nothing in the said SPAs expressly authorized Mauro A.
Garrucho to contract any loan nor to constitute a mortgage on the
properties belonging to the respective principals, to secure his
obligations
- On Dec. 23, 1920, a document (Exhibit G) was executed by Mauro
in favor of Philippine National Bank (PNB) whereby he
constituted a mortgage on Lot No. 878 under Amparo A. Garrucho,
to secure the payment of credits, loans, commercial overdrafts,
etc., not exceeding P6,000, together with interest thereon, which he
might obtain from PNB, issuing the corresponding promissory note
to that effect
- For the years 1921 and 1922, Mauro maintained a personal credit
account with PNB
On Aug. 24, 1921, Mauro executed another document (Exhibit J)
in PNBs favor whereby he constituted a mortgage on Agudelos 2
lots, including the buildings and improvements to secure the
payment of credits, loans and commercial overdrafts which the
said bank might furnish him to the amount of P16,000, payable on
August 24, 1922, executing the corresponding promissory note to
that effect.

Kauffman however still filed a complaint against Erea, Bernal and

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

PBN vs. AGUDELO y GONZAGA

GR No. L-39037 Oct. 30, 1933

Said mortgage contracts and promissory notes were executed by

Mauro in his own name and signed by him in his personal capacity,
authorizing PNB to take possession of the mortgaged properties,
by means of force if necessary, in case he failed to comply with
any of the conditions stipulated therein
- Thereafter, PNB notified Mauro of his promissory note within
which to make a payment
- Eventually, Mauros commercial credit was closed starting May
22, 1922
- PNB manager requested Mauro to liquidate his account amounting
to P15,148.15, at the same time notifying him that his promissory
note for P16,000 giving as security for the commercial overdraft in
question, had fallen due As a result, another mortgage contract
(Exhibit C) was executed by Mauro in PNBs favor over Agudelos
lot in Bacolod and Murcia
- Mauro incurred credits and loans for a total of P21,000. A new
promissory note was executed for P21,000, thereby novating the
first 2 notes
- Sometime 1925, Amparo sold Lot 878 (which was under exhibit
G) to Paz Agudelo (Exhibit M).
- An affidavit (Exhibit N) was likewise signed by Paz Agudelo
which states: xxx do hereby agree and consent to the transfer in
my favor of lot No. 878 of the Cadastre of Murcia, Occidental
Negros, P. I., by Miss Amparo A. Garrucho, as evidenced by the
public instrument dated November 25, 1925, executed before the
notary public Mr. Genaro B. Benedicto, and do hereby further
agree to the amount of the lien thereon stated in the mortgage deed
executed by Miss Amparo A. Garrucho in favor of the Philippine
National Bank.
Pursuant to the said sale, the property and title was transferred in
Pazs name
- CFI Ruling:
- Absolved Mauro from the complaint
- Paz Agudelo is ordered to pay PNB
ISSUE: W/N the powers of attorney issued in Mauro Garruchos favor to
mortgage their respective real estate, authorized him to obtain loans
secured by mortgage in the properties in question?
RULING: NO

Art. 1709 of the Civil Code states that by the contract of agency,
one person binds himself to render some service, or to do
something for the account or at the request of another
On the other hand, Art. 1717 states that when an agent acts in his
own name, the principal shall have no right of action against the
persons with whom the agent has contracted, or such persons
against the principal. In such case, the agent is directly liable to the
person with whom he has contracted, as if the transaction were his
own. Cases involving things belonging to the principal are
excepted xxx
There is nothing in the mortgage deeds to show that Mauro A.
Garrucho is attorney in fact of Amparo and Paz, and that he
obtained the loans mentioned in the aforesaid mortgage deeds and
constituted said mortgages as security for the payment of said
loans, for the account and at the request of said Amparo A.
Garrucho and Paz Agudelo
Mauros transactions with PNB appears to have been acted in his
personal capacity
In the mortgage deeds, Mauro appears to have acted in his
personal capacity. In his capacity as mortgage debtor, he appointed
the mortgage creditor PNB as his attorney in fact so that it might
take actual and full possession of the mortgaged properties by
means of force in case of violation of any of the conditions
stipulated in the respective mortgage contracts
As held in National Bank vs. Palma Gil, a mortgage on real
property of the principal not made and signed in the name of the
principal is not valid as to the principal.
If Mauro A. Garrucho acted in his capacity as mere attorney in fact
of Amparo A. Garrucho and of Paz Agudelo, he could not delegate
his power, in view of the legal principle of "delegata potestas
delegare non potest" (a delegated power cannot be delegated),
inasmuch as there is nothing in the records to show that he has
been expressly authorized to do so
Also, he executed the promissory notes evidencing the aforesaid
loans, under his own signature, without authority from his
principal and, therefore, were not binding upon the latter. There
was no showing that the loan obtained was for his principal
What really happened was Mauro obtained such credit for himself
in his personal capacity and secured the payment thereof by

mortgage constituted by him in his personal capacity, although on

properties belonging to his principal
Thus, Mauro exceeded his scope of his authority and the principal
is not liable for his acts
In conclusion, when an agent negotiates a loan in his personal
capacity and executes a promissory note under his own signature,
without express authority from his principal, giving as security
therefor real estate belonging to the letter, also in his own name
and not in the name and representation of the said principal, the
obligation do constructed by him is personal and does not bind his
aforesaid principal.

MAMERTA VDA. DE JAYME VS CA

FACTS: The spouses Graciano and Mamerta Jayme are the registered
owners of Lot 2700, situated in the Municipality of Mandaue. On January 8,
1973, they entered into a Contract of Lease5 with George Neri, president of
Airland Motors Corporation (now Cebu Asian cars Inc.), covering one-half
of Lot 2700. The lease was for twenty (20) years. The terms and conditions
of the lease contract stipulated that Cebu Asiancars Inc. (hereafter,
Asiancars) may use the leased premises as a collateral to secure payment of
a loan which Asiancars may obtain from any bank, provided that the
proceeds of the loan shall be used solely for the construction of a building
which, upon the termination of the lease or the voluntary surrender of the
leased premises before the expiration of the contract, shall automatically
become the property of the Jayme spouses (the lessors).A Special Power of
Attorney\7 dated January 26, 1974, was executed in favor of respondent
George Neri, who used the lot to secure a loan of P300,000 from the
General Bank and Trust Company. The loan was fully paid on August 14,
1977In October 1977, Asiancars obtained a loan of P6,000,000 from the
Metropolitan Bank and Trust Company (MBTC). The entire Lot 2700 was
offered as one of several properties given as collateral for the loan. As
mortgagors, the spouses signed a Deed of Real Estate Mortgage dated
November 21, 1977 in favor of MBTC. It stated that the deed was to secure
the payment of a loan obtained by Asiancars from the bank. To assure the
Jayme spouses, Neri and the other officers of Asiancars, executed an
undertaking .In it they promised, in their personal capacities and/or in
representation of Cebu Asiancars, Inc., "to compensate Mr. & Mrs.
Graciano Jayme for any and all or whatever damage they may sustain or
suffer by virtue and arising out of the mortgage to MBTC. In addition, Neri

wrote a letter dated September 1, 1981 addressed to Mamerta Jayme

acknowledging her "confidence and help" extended to him, his family and
Asiancars. He promised to pay their indebtedness to MBTC before the loan
was due. Meeting financial difficulties and incurring an outstanding balance
on the loan, Asiancars conveyed ownership of the building on the leased
premises to MBTC, by way of "dacion en pago." Asiancars failed to pay.
Eventually, MBTC extra-judicially foreclosed the mortgage. A public
auction was held on February 4, 1981. MBTC was the highest bidder for
P1,067,344.35. A certificate of sale was issued and was registered with the
Register of Deeds. Petitioners claim that Neri and Asiancars did not tell
them that the indebtedness secured by the mortgage was for P6,000,000 and
that the security was the whole of Lot 2700. Petitioners allege that the deed
presented to the Jayme spouses was in blank, without explanation on the
stipulations contained therein, except that its conditions were identical to
those of the stipulations when they mortgaged half the lots area previously
with General Bank. Petitioners also alleged that the Jayme spouses were
illiterate and only knew how to sign their names. That because they did not
know how to read nor write, and had given their full trust and confidence to
George Neri, the spouses were deceived into signing the Deed of Real
Estate Mortgage. Their intention as well as consent was only to be bound as
guarantors.
ISSUE:WON the dacion en pago by Asiancars in favor of MBTC is valid
and binding despite the stipulation in the lease contract that ownership of
the building will vest on the Jaymes at the termination of the lease.
HELD: In the case at bar, when Asiancars failed to pay its obligations with
MBTC, the properties given as security (one of them being the land owned
by the Jaymes) became subject to foreclosure. When several things are
given to secure the same debt in its entirety, all of them are liable for the
debt, and the creditor does not have to divide his action by distributing the
debt among the various things pledged or mortgaged. Even when only a part
of the debt remains unpaid, all the things are liable for such balance. The
debtor cannot ask for the release of one or some of the several properties
pledged or mortgaged (or any portion thereof) or proportionate
extinguishment of the pledge or mortgage unless and until the debt secured
has been fully paid. The alienation of the building by Asiancars in favor of
MBTC for the partial satisfaction of its indebtedness is, in our view, also
valid. The ownership of the building had been effectively in the name of the
lessee-mortgagor (Asiancars), though with the provision that said ownership

be transferred to the Jaymes upon termination of the lease or the voluntary

surrender of the premises. The lease was constituted on January 8, 1973 and
was to expire 20 years thereafter, or on January 8, 1993. The alienation via
dacion en pago was made by Asiancars to MBTC on December 18, 1980,
during the subsistence of the lease. At this point, the mortgagor, Asiancars,
could validly exercise rights of ownership, including the right to alienate it,
as it did to MBTC.
Belo vs Philippine National Bank
G.R. No. 134330
March 1, 2001
FACTS: Eduarda Belo owned an agricultural land (661,288) square meters
located in Timpas, Panitan, Capiz. She leased a portion of the said tract of
land to spouses Marcos and Arsenia Eslabon for their sugar plantation
business, effective for 7 years at a rate of 7,000 pesos per year. To finance
their business venture, spouses Eslabon obtained a loan from Philippine
National Bank (PNB) secured by a real estate mortgage on their own 4
residential houses in Roxas City, as well as on the agricultural land owned
by Eduarda Belo. The assent of Eduarda Belo to the mortgage was acquired
through a special power of attorney which she executed in favor of
respondent Marcos Eslabon on June 15, 1982.
Spouses Eslabon failed to pay their loan resulting to the extrajudicial
foreclosure proceedings against the mortgaged properties instituted by
respondent PNB. PNB was the highest bidder of the foreclosed properties at
P447,632.00.
PNB through a letter informed Eduarda Belo of the sale at public auction of
her agricultural land on June 10, 1991 as well as the registration of the
Certificate of Sheriffs Sale in its favor on July 1, 1991, and the one-year
period to redeem the land
Meanwhile, Eduarda Belo sold her right of redemption to petitioners
spouses Enrique and Florencia Belo (petitioners) under a deed of absolute
sale of proprietary and redemption rights. Before the expiration of the
redemption period, petitioners spouses Belo tendered payment for the
redemption of the agricultural land in the amount of P484,482.96, including
the bid price of PNB, plus interest and expenses as provided under Act No.
3135, which subsequently was rejected by PNB contending that the
redemption price should be the total claim of the bank on the date of the
auction sale and custody of property plus charges accrued and interests

amounting to P2,779,978.72. Petitioners spouses disagreed and refused to

pay the said total claim of respondent PNB.
ISSUES:
1)
Whether or not the SPA, the real estate mortgage contract, the
foreclosure proceedings and the subsequent auction sale involving Eduarda
Belos property are valid.
2)
Whether or not the Sps Belo should pay all the claims of PNB
(P2,779,978.72) instead of only the amount of the bid price plus interests
(P484,482.96) on Eduarda Belos property.
HELD:
1)
YES.
(discussion of the validity of the real estate mortgage only as relevant to the
topic)
It is stipulated in paragraph three (3) of the SPA that Eduarda Belo
consented to have her land mortgaged for the benefit of the respondents
spouses Eslabon. The SPA was not meant to make her a co-obligor to the
principal contract of loan between respondent PNB, as lender, and the
spouses Eslabon, as borrowers. The accommodation real estate mortgage
over her property, which was executed in favor of PNB by the spouses
Eslabon, in their capacity as her attorneys-in-fact by virtue of her SPA, is
merely an accessory contract.
The SPA form of the PNB was utilized to authorize the spouses Eslabon to
mortgage Eduarda Belos land as additional collateral of the Eslabon spouses
loan from respondent PNB. Besides, Eduarda Belo benefited, in signing the
SPA, in the sense that she was able to collect the rentals on her leased
property from the Eslabons.
An accommodation mortgage is not necessarily void simply because the
accommodation mortgagor did not benefit from the same. The validity of an
accommodation mortgage is allowed under Article 2085 of the New Civil
Code which provides that third persons who are not parties to the principal
obligation may secure the latter by pledging or mortgaging their own
property. An accommodation mortgagor, ordinarily, is not himself a
recipient of the loan, otherwise that would be contrary to his designation as
such. It is not always necessary that the accommodation mortgagor be
appraised beforehand of the entire amount of the loan nor should it first be
determined before the execution of the SPA.
Fourth, the courts a quo correctly held that the letter of Eduarda Belo
addressed to respondent PNB manifesting her intent to redeem the property

is a waiver of her right to question the validity of the SPA and the mortgage
contract as well as the foreclosure and the sale of her subject property.

Bustamante vs. Spouses Rosel

GR 126800, November 29, 1999

2)

FACTS: On March 9, 1987, Norma Rosel entered into a loan agreement

with petitioner Natalia Bustamante wherein Norma Rosel borrowed the sum
of P100, 000 from the lender for a period of 2 years with 18% interest per
annum. As a guaranty to the payment thereof, Rosel put as collateral 70
square meters of her lot situated along Congressional Avenue. The
agreement states that in the event the borrower fails to pay, the lender has
the option to buy or purchase the collateral for P200, 000 inclusive of the
amount borrowed and the interest therein.

NO.
Section 78 of the Genral Banking Act, as amended, and Sec. 25 PD
No. 694 (providing that right to redeem of mortgagors are subject only to
paying all claims of the Bank against them) are inapplicable to
accommodation mortgagors in the redemption of their mortgaged
properties.
PNB has no claim against accommodation mortgagor Eduarda
Belo inasmuch as she only mortgaged her property to accommodate the
Eslabon spouses who are the loan borrowers of the PNB. The principal
contract is the contract of loan between the Eslabon spouses, as
borrowers/debtors, and the PNB as lender. The accommodation real estate
mortgage (which secures the loan) is only an accessory contract. The Court
holds that the term mortgagor in Section 25 of P.D. No. 694 pertains only to
a debtor-mortgagor and not to an accommodation mortgagor.
Moreover, the mortgage contract explicitly provides that mortgagee may
immediately foreclose this mortgage judicially in accordance with the Rules
of Court or extrajudicially in accordance with Act No. 3135, as amended
and Presidential Decree No. 385
While the petitioners, as assignees of Eduarda Belo, are not required to pay
the entire claim of respondent PNB against the principal debtors, spouses
Eslabon, they can only exercise their right of redemption with respect to the
parcel of land belonging to Eduarda Belo, the accommodation mortgagor.
Thus, they have to pay the bid price less the corresponding loan value of the
foreclosed four (4) residential lots of the spouses Eslabon.
PNB further contends that to allow petitioners to redeem only the property
belonging to their assignor, Eduarda Belo, would violate the principle of
indivisibility of mortgage contracts. We disagree.
With reference to Article 2089 of the Civil Code of the Philippines, there is
no dispute that the mortgage on the four (4) parcels of land by the Eslabon
spouses and the other mortgage on the property of Eduarda Belo both
secure the loan obligation of respondents spouses Eslabon to respondent
PNB. However, the Court is not persuaded by the contention of the PNB
that the indivisibility concept applies to the right of redemption of an
accommodation mortgagor and her assignees.

On March 1, 1989, petitioner tendered payment of the loan which the

respondents refused to accept. Respondents insisted on petitioners signing
a prepared deed of absolute sale of the collateral. Respondents also filed
with the RTC a complaint for specific performance with consignation
against the petitioner pursuant to the option to buy embodied in the
agreement. On the other hand, petitioner also filed with the RTC a petition
for consignation and deposited the amount of P153, 000 with the City
Treasurer. RTC ruled in favor of petitioner. Court of Appeals reversed.
Supreme Court affirmed the decision of the CA so petitioner filed a motion
for reconsideration contending that the real intention of the parties to the
loan was to put up the collateral as guaranty similar to an equitable
mortgage.
ISSUE
1. W/N petitioner failed to pay the load on maturity
2. W/N the stipulation in the loan contract was valid and enforceable
HELD
1. No
2. No
RATIONALE
1. The loan was due for payment on March 1, 1989. Petitioner tendered
payment to settle the loan which the respondents refused to accept. After the
refusal, petitioner consigned the amount with the trial court.

2. Upon scrutiny of the stipulation of the parties, it can be seen that it is a

subtle intention of the creditor to acquire the property given as security for
loan. This is in the nature of PACTUM COMMISORIUM and is therefore
VOID.
Elements of pactum commissorium
a. there should be a property mortgaged as security for a loan
b. there is 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.
Alcantara v. Alinea
FACTS:

Alinea and Belarmino entered into a contract with Alcantara where

the defendants borrowed from the plaintiff the sum of 480 pesos, payable in
January of said year 1905 under the agreement that if, at the expiration of
the said period, said amount should not be paid it would be understood that
the house and lot owned by the said defendants be considered as absolutely
sold to the plaintiff for the said sum.

After the time for the payment of said sum has expired and no
payment has been made and the defendants refuse to deliver to plaintiff the
said property.

Therefore Alcantara filed a complaint in the Court of First Instance

of La Laguna, praying that judgment be rendered in his behalf ordering the
defendants to de liver to him the house and lot claimed, and to pay him in
addition thereto as rent the sum of 8 pesos per month from February of that
year, and to pay the costs of the action.
ISSUE
1.
Whether the contract is a pledge, mortgage, or antichresis. NO to
all
2.
Whether the contract is valid?

be registered in the Register of Property, in accordance with article 1875 of

the Civil Code, and the document of contract, Exhibit A, does not constitute
a mortgage, nor could it possibly be a mortgage, for the reason of said
document is not vested with the character and conditions of a public
instrument.
By the aforesaid document, Exhibit A, said property could not be pledged,
not being personal property, and notwithstanding the said double contract
the debtor continued in possession thereof and the said property has never
been occupied by the creditor.
Neither was there ever any contract of antichresis by reason of the said
contract of loan, as is provided in articles 1881 and those following of the
Civil Code, inasmuch as the creditor-plaintiff has never been in possession
thereof, nor has he enjoyed the said property, nor for one moment ever
received its rents.
2.

The contract is valid

The fact that the parties have agreed at the same time, in such a manner that
the fulfillment of the promise of sale would depend upon the nonpayment or
return of the amount loaned, has not produced any charge in the nature and
legal conditions of either contract, or any essential defect which would tend
to nullify the same.
No article of the Civil Code, under the rules or regulations of which such
double contract was executed, prohibits expressly, or by inference from any
of its provisions, that an agreement could not be made in the form in which
the same has been executed; on the contrary, article 1278 of the aforesaid
code provides that "contracts shall be binding, whatever may be the form in
which they may have been executed, provided the essential conditions
required for their validity exist." This legal prescription appears firmly
sustained by the settled practice of the courts.

RULING
1.

The contract is not a pledge, mortgage, or antichresis

The property does not appear mortgaged in favor of the creditor, because in
order to constitute a valid mortgage it is indispensable that the instrument

The document of contract has been recognized by the defendant Alinea and
by the witnesses who signed same with him, being therefore an authentic
and efficacious document, in accordance with article 1225 of the Civil
Code; and as the amount loaned has not been paid and continues in

possession of the debtor, it is only just that the promise of sale be carried
into effect, and the necessary instrument be executed by the vendees.

merchandise pledged in half of their value and absolutely appropriating

them to himself.

Mahoney v. Tuason
G.R. No. 14129
July 30, 1919

HELD:

FACTS:
Counsel for D.J. Mahoney, receiver of the insolvency of P. Blanc, prayed
the Court of First Instance of Manila to cite Mariano Tuason to appear and
explain before the court the reason why he had in his custody the jewels
mentioned in the said petition, and after the hearing, to order him, if proper,
to deliver the said jewels to the receiver, in order that they form part of the
estate of the insolvent P. Blanc.
Mariano Tuason guaranteed in favor of the insolvent P. Blanc, the credit
which the Chartered Bank of India, Australia and China had granted to said
P. Blanc. In order to guarantee the said security, P. Blanc gave as pledge the
jewels to Mariano Tuason. P. Blanc did not pay the debt due to the bank,
wherefore Tuason had to pay and did in fact pay to the said bank the entire
debt owed by P. Blanc.
In the private document containing the contract of pledge appears the
express agreement that if Blanc should fail to comply with the obligations
stipulated, among other things, that of paying one thousand pesos (P1,000)
monthly in advance beginning from June, 1913, till his debt shall have been
paid together with the stipulated interests and the interests paid to the bank,
the creditor would be entitled to retain the jewels and other thing given in
pledge to the said creditor in an amount which results after deducting the
fifty per cent (50%).
ISSUE:
Whether a contract of pledge or of chattel mortgage duly entered into is
rendered null and void by an additional stipulation among the contracting
parties that in case of the debtors failure to comply with the conditions
agreed upon, the creditor would be authorized to retain the jewels and

YES. Tuason has no right to appropriate to himself the merchandise

pledged, nor can he make payment by himself and to himself with half or
the total value of the same (Art. 1859, Civil Code), inasmuch as he is only
permitted to recover his credit, which Blanc owes, from the proceeds of the
sale of the jewels and merchandise delivered to him in pledge, and said sale
at public auction should be effected, according to Article 1872, before a
notary, and according to Section 14 of Act No. 1508, in a public place in the
municipality after previous notices and notifications to the debtor through
the sheriff of the province.
If the last part of the contract concerning the fact that the creditor Tuason is
entitled to retain and appropriate to himself the merchandise received in
pledge is null and indefensible, because he can only recover his credit,
according to law, from the proceeds of the sale of the same, there is no
sound reason nor any legal provision which determines the nullity of the
principal contract by virtue of which Tuason paid Blancs debt to the bank,
and according to the stipulation, Tuason took possession of the jewels and
merchandise pledged as security for the big sum of money which he had
paid and which the debtor Blanc had not refunded.
If the creditor Tuason could not appropriate to himself the jewels and
merchandise which he had in his custody, by way of pledge an act
expressly prohibited by law it does not follow that the contract of pledge
or mortgage of the jewels and the other merchandise which was duly
executed between the said Tuason and Blanc was also null, because if the
latter could not pay his debt by refunding to Tuason the amount paid to the
Chartered Bank, there is no just nor legal reason which prevents the creditor
from recovering his credit and other amounts which Blanc was obliged to
pay from the proceeds of the sale of the jewels and merchandise pledged.
The contract of pledge or chattel mortgage entered into between P. Blanc
and Mariano Tuason on June 20, 1913, and stated in the documents on pp.
14 to 21 of the bill of exceptions, is valid and subsisting; that the creditor,
Mariano Tuason, has the right to recover his credit of eighteen thousand
eight hundred seventy pesos (P18,870) from the proceeds of the public sale

of the merchandise pledged, which sale should be effected by the sheriff of

the city of Manila in the manner and with the formalities established by
Section 14 of Act No. 1508; and that the stipulation contained in the last
part of the document (page 21 of the bill of exceptions) whereby the debtor
authorized the creditor Tuason to retain the jewels in his possession is null
and void. However, the creditor Tuason is obliged to deliver to the receiver,
D.J. Mahoney, the balance of the proceeds of the sale of the jewels and
merchandise pledged, after deducting his credit, the interests thereon and
the other amounts to which he is entitled to recover, according to the
stipulation contained in the said contract.
DAYRIT v. COURT OF APPEALS
(1970, Ruiz Castro, J.)
PETITIONER: Vincent P. Dayrit
RESPONDENTS: Court of Appeals, Hon. Francisco Arca, judge of CFI of
Manila, Mobil Oil Philippines, Inc., and Eladio Ylagan, special sheriff
FACTS:
On July 21, 1965, defendants Vincent Dayrit, Leonila T. Sumbillo and
Reynaldo Angeles entered into a contract with Mobil Oil Philippines, Inc.,
entitled "LOAN & MORTGAGE AGREEMENT":
For and in consideration of Sales Agreement dated July 21,1965, among
the parties herein, Mobil grants a loan of P150,000 to borrowers.
Defendants-Borrowers shall repay Mobil the whole amount of P150,000
plus 10% interest per annum on the diminishing balance for 48 months.
To secure the prompt repayment of such loan by defendants borrowers to
Mobil and the faithful performance by Borrowers of that Sales Agreement,
Defendants-Borrowers hereby transfer in favor of Mobil by way of first
mortgage lands covered by TCT No.45169 and TCT No. 45170, together
with the improvements existing in said two (2) parcels of land.
In case of default of Defendants-Borrowers in payment of any of the
installments and/or their failure to purchase the quantity of products stated
therein Mobil shall have the right to foreclose this mortgage.
Mobil, in case of default and foreclosure shall be entitled to attorney's
fees and cost of collection equivalent to not less than 25%of total
indebtedness remaining unpaid.
All expenses in connection with the preparation and registration of this
mortgage as well as cancellation of same shall the for the account of
Defendants-Borrowers.

If Defendants-Borrowers shall perform the full obligation above stated

according to the terms thereof, then this obligation shall be null and void,
otherwise, it shall remain in full force and effect.

The defendants violated the Loan & Mortgage Agreement, they

having paid but one installment in the amount of P3,816, of which P1,250
was applied to interest, and the remaining P2,566 to the principal
obligation. The defendants likewise failed to buy the quantities of products
as required in the Sales Agreement. The plaintiff made due demand, which
Dayrit answered, acknowledging his liability in his letter.

TC: in favor of the plaintiff

No appeal having been interposed by the defendants, the above

decision became final and executory.
An undated Mobil's motion for execution of the decision and for the
appointment of Eladio Ylagan as special sheriff was received by the
petitioner Dayrit on February 8, 1968. Whereupon, he filed his opposition
and motion to stay execution ,alleging that before the finality of the
aforesaid judgment, he and the plaintiff had agreed not to appeal and/or file
any motion for reconsideration, the petitioner offering to pay his one-third
share with a reasonable discount, if possible, in so far as the interests and
the award for attorney's fees were concerned, with the corresponding release
of the mortgage on all his properties, and praying, inview thereof, for a 30day grace period within which to pay the plaintiff. The 30-day grace period
was granted by the court in its orderof February 24, 1968.
On March 25, 1968, petitioner filed another motion for 20 days' extension
within which to pay his one-third share of the judgment obligation and to
submit the corresponding compromise agreement for the satisfaction of the
judgment. The said motion was granted.
Thereafter, the respondent Mobil filed all "Urgent Reply to Opposition and
Motion to Stay Execution dated February 21, 1968 and Motion dated March
25, 1968," alleging therein that the respondent agreed to release the
mortgage or collateral for the entire judgment obligation only if "the whole
principal mortgaged debt plus the whole accrued interest" were fully paid.
Mobil further prayed for a writ of execution to be issued against the
petitioner after the lapse of 20 days from March 25, 1968, if by then the
parties shall not have submitted a compromise agreement for the
satisfaction of the judgment; Mobil also reiterated its prayer for the
appointment of respondent Eladio Ylagan as special sheriff.
On April 3, 1968 the petitioner filed a manifestation and motion, praying
that he be allowed to deposit with the Clerk of Court the amount
corresponding to his one-third share of the obligation under the decision of

November 17, 1967, and that thereupon the collateral or mortgage over
petitioner's properties or lands be ordered released or cancelled.
Court a quo ordered all pending incidents set for hearing on April 19,
1968, "so that the Court may have the opportunity to confer with the parties
to thresh out the settlement of this case." At this hearing Mobil did not
appear; the court reset the hearing for May 23, 1968.
Under date of May 8, 1968, Mobil filed an addendum to its reply dated
April 1, 1968 and opposition to petitioner's motion dated April3, 1968,
playing that the motion of petitioner Dayrit that the entire mortgaged
collateral be released upon his payment of mere 1/3 of the loan obligation,
be denied and instead a writ of execution against him in accordance with the
dispositive portion of the decision and Sections 2 and 3 of Rule 68 of the
Revised Rules of Court be issued.
On May 18, 1968 the petitioner filed his rejoinder to respondent Mobil's
aforesaid addendum and opposition.
On May 23, 1968, after hearing oral argument, the court denied the
manifestation and motion of Dayrit filed thru counsel and dated April 3,
1968; the court further ruled that "There is no further need to issue an order
for the issuance of a writ of execution and appointment of special, sheriff ...
considering that the Court, in its order of February 24, 1968, has already
ordered the issuance of a writ of execution for the satisfaction of the
judgment."
CA: dismissed the petition for certiorari, there being no abuse of discretion
in ordering the execution of a final judgment. Details of execution for
satisfaction of Vincent Dayrit's liability will be worked out in connection
with the safe of the collateral for mortgaged debt, and the judgment in Civil
Case No. 64138 of the CFI-Manila a will control the disposition and
application of the collateral.
ISSUE: W/N the CFI and the CA erred in refusing to allow the alleged
proposed deposit of a sum equivalent to 1/3 of the loan agreed upon and in
refusing to release forever the collaterals owned by Dayrit, although the
other 2/3 portion of the loan obligation had not been satisfied due to
insolvency of the other two co-defendants.
HELD/RATIO: NO.
1. PROCEDURAL ISSUE: The present petition was filed with this Court
six days late, contrary to and in violation of Section 1, Rule 45, which
specifically provides that a petition for certiorari under such Rule should be
filed within 15 days from notice of judgment or denial of motion for

reconsideration. Hence, the present petition may be dismissed on the

aforestated ground. But we opt, nevertheless, to consider the merits of this
case, if only to demonstrate to the petitioner his error.
2. The decision of the lower court has admittedly become final and
executory. The controverted judgment ordered the defendants (Dayrit,
Sumbillo and Angeles) "to pay to the plaintiff one-third each of the sum of
P147,434.00 with interest of 10% per annum from the time it fell due
according to agreement, and in default of such payment, the properties put
up in collateral shall be sold in foreclosure sale in accordance with law, the
proceeds to be applied in payment of the amount due to the plaintiff from
the defendants as claimed in the complaint, provided that, as to Dayrit, his
liability shall in no case exceed 113 of the total obligation."
The prayer of the complaint filed with the CFI recites as follows:
WHEREFORE, it is respectfully prayed that judgment be rendered
(a) Ordering the defendants to pay the sum of P147,434 with 10%interest
per annum from the time it fell due as agreed upon and that in default of
such payment, the above described properties be sold and the proceeds of
sale be applied to the payment of the amount due to the plaintiff from the
defendants under this complaint.
The complaint, in effect, is a collection suit with damages and
foreclosure of mortgage against the three defendants, Leonila Sumbillo,
Reynaldo Angeles and Vincent Dayrit. Although the Loan and Mortgage
Agreement was signed by the three defendants as mortgagors, the properties
being foreclosed belong solely to, and are registered solely in the name of
the petitioner Vincent Dayrit.
Petitioner: the judgment by the lower court is a simple money judgment
and not a foreclosure judgment, and that because Mobil resorted to the
remedy of enforcing his right by a complaint against the defendantpetitioner for collection of a sum of money, with the consequent simple
money judgment, the satisfaction of his 1/3 share of the joint obligation
would release all the mortgaged properties put up as collateral to secure the
payment of the whole obligation. The reason advanced by the petitioner is
that the decision rendered being a simple money judgment and not a
mortgage foreclosure judgment, the distinction in its execution is decisive.
that is, whereas in mortgage foreclosure the judgment should conform to the
requirement, embodied in Section 2, Rule 68of the Rules of Court, that the
order of payment be made into the court "within a period not less than
ninety (90) days, x x x and in default of such payment, the property
mortgaged be sold to realize" the indebtedness, in a simple money

judgment, upon satisfaction of part (in the instant case his 1/3 share) of the
joint obligation, the mortgaged properties should be released from such
mortgage contract.
The decision which the petitioner describes as a simple money judgment
orders the defendants Vincent Dayrit, Leonila T. Sumbilloand Reynaldo
Angeles to pay the plaintiff the sum of P147,434, and in default of such
payment, the properties put up in collateralshall be sold. In foreclosure sale
in accordance with law, the proceeds to be applied in payment of the
amount due to the plaintiff from the defendants as claimed in the complaint.
While it is true that the obligation is merely joint and each of the defendants
is obliged to pay only his/her 1/3 share of the joint obligation, the
undisputed fact remains that the intent and purpose of the Loan and
Mortgage Agreement was to secure, inter alia, die entire loan of P150,000
that the respondent Mobil extended to die defendants. The court below
found that the defendants had violated the Loan and Mortgage Agreement,
they having paid but one installment. The undisputed fact also remains that
the petitioner alone benefited from the proceeds of the loan of P150,000, the
said amount havingbeen paid directly to the Bank of the Philippines to bail
out the same properties from a mortgage that was about to be foreclosed. In
effect, Mobil merely stepped into the shoes of the Bank of the Philippines.
Petitioner: the dispositive portion of the judgment declaring the
obligation merely joint with the proviso that "as to Dayrit, his liability shall
in no case exceed 1/3 of the total obligation," should be construed in the
light of the opinion of the lower court that "said collateral must answer in
full but only to the extent of Dayrit's liability which as above determined, is
1/3 of the obligation," thereby entitling him to pay or deposit in court his
correspondent share of the joint obligation in satisfaction thereof, with the
automatic release of all the mortgaged properties.
A judgment must be distinguished from an opinion. The latter is the
informal expression of the views of the court and cannot prevail against its
final order or decision. "While the two may be combined in one instrument,
the opinion forms no part of the judgment. There is a distinction between
the findings and conclusion of a court and its judgment. While they may
constitute its decision and amount to a rendition of a judgment they are not
the judgment itself. They amount to nothing more than an order for
judgment which must be distinguished from the judgment. Only the
dispositive portion may be executed.
A mortgage directly and immediately subjects the property upon which it
is imposed, the same being indivisible even though the debt may be divided,
and such indivisibility likewise being unaffected by the fact that 'the debtors

are not solidarity liable. As Tolentino, in his Commentaries and

Jurisprudence on the Civil Code of the Philippines, puts it:
"When several things are pledged or mortgaged, each thing for a
determinate portion of the debt, the pledges or mortgage, are considered
separate from each other. But when the several things are given to secure
the same debt in its entirety, all of themare liable for the debt, and the
creditor does not have to divide his action by distributing the debt among
the various things pledgedor mortgaged. Even when only a part of the debt
remains unpaid, all the things are still liable for such balance." Hence, a
mortgage voluntarily constituted by the debtor on two or more parcels of
land is one and indivisible, and the mortgagee has the right to have either or
both parcels, jointly or singly, sold to satisfy his claim. In case the
mortgaged properties are a house and lot, it cannot be claimed that the lot
and the house should be sold separately and not together."
But then there is this other seeming posture of the petitioner: that the
judgment which has become final and executory either modified or
superseded the Loan and Mortgage Agreement between the parties, and
since the obligation is merely joint, upon payment thereof, as in attachment,
the properties mortgaged are released from liability. The decision under
consideration, however, did nothing of the sort. The petitioner conveniently
refuses to recognize the true import of the dispositive portion of the
judgment. The said portion unequivocally states that "in default of such
payment, the properties put up in collateral shall be sold in foreclosuresale
in accordance with law, the proceeds to be applied in payment of the
amount due to the plaintiff as claimed in the complaint."And the claim in
the complaint was the full satisfaction of the total indebtedness of
P147,434; therefore, the release of all themortgaged properties may be
authorized only upon the full payment of the above-stated amount secured
by the said mortgage.
With respect to the provisions of Section 2 of Rule 68 of the Rules of
Court giving the petitioner a period of 90 days within which liemight
voluntarily pay the debt before the sale of the collateral at public auction
was ordered, we agree that the trial court failed toprovide such period.
However, this failure can be regarded as having resulted in mere dammum
absque injuria.From November 17, 1967 when the decision was rendered to
May 23, 1968 when the final order to sell the mortgaged properties
wasissued, a period of more than six months had passed, which is
considerably much more than the 90-day period of grace allowed
thepetitioner to validly tender the proper payment.
Spouses Yu vs. PCIB

GR No. 147902, March 17, 2006

FACTS:
Petitioners Vicente Yu and Demetria Lee-Yu mortgaged their title, interest,
and participation over several parcels of land located in Dagupan City and
Quezon City, in favor of the Philippine Commercial International Bank,
respondent and highest bidder, as security for the payment of a loan.
As petitioners failed to pay the loan and the interest and penalties due
thereon, respondent filed petition for extra-judicial foreclosure of real estate
mortgage on the Dagupan City properties on July 21, 1998. City Sheriff
issued notice of extra-judicial sale on August 3, 1998 scheduling the auction
sale on September 10, 1998.
Certificate of Sale was issued on September 14, 1998 in favor of
respondent, the highest bidder. The sale was registered with the Registry of
Deeds in Dagupan City on October 1, 1998. After two months before the
expiration of the redemption period, respondent filed an ex-parte petition
for writ of possession before RTC of Dagupan. Petitioners complaint on
annulment of certificate of sale and motion to dismiss and to strike out
testimony of Rodante Manuel was denied by said RTC. Motion for
reconsideration was then filed on February 14, 2000 arguing that the
complaint on annulment of certificate of sale is a prejudicial issue to the
filed ex-parte petition for writ of possession, the resolution of which is
determinative of propriety of the issuance of a Writ of Possession.
ISSUE: Whether prejudicial question exist in a civil case for annulment of a
certificate of sale and a petition for the issuance of a writ of possession.
HELD:
Supreme Court held that no prejudicial question can arise from the
existence of a civil case for annulment of a certificate of sale and a petition
for the issuance of a writ of possession in a special proceeding since the two
cases are both civil in nature which can proceed separately and take their
own direction independently of each other.
A prejudicial question is one that arises in a case the resolution of which is
a logical antecedent of the issue involved therein, and the cognizance of

which pertains to another tribunal. It generally comes into play in a

situation where a civil action and a criminal action are both pending and
there exists in the former an issue that must be preemptively resolved before
the criminal action may proceed because issue raised in civil action would
be determinative de jure of the guilt or innocence of the accused in a
criminal case.
Metrobank vs. SLGT Holdings
September 14, 2007
FACTS:
ASB Development Corporation is the defaulting developer of BSA
Twin Towers Condo in Ortigas. Respondent Dylanco and SLGT Holdings
are unit buyers of the said project and Petitioners Metrobank and UCPB are
the lending-mortgagee banks.
Dylanco and SLGT each entered into a contract to sell with ASB
for the purchase of a unit (Unit 1106 for Dylanco and Unit 1211 for SLGT)
at BSA Towers then being developed by the latter.
As stipulated, ASB will deliver the units thus sold upon completion
of the construction or before December 1999. Relying on this and other
undertakings, Dylanco and SLGT each paid in full the contract price of their
respective units.
The promised completion date came and went, but ASB failed to
deliver, as the Project remained unfinished at that time. To make matters
worse, they learned that the lots on which the BSA Towers were to be
erected had been mortgaged to Metrobank and UCPB without the prior
written approval of the HLURB.
SLGT and Dylanco filed with the HLURB a complaint for delivery
of property and title and for the declaration of nullity of mortgage. At this
time ASB had already filed with SEC a petition for rehabilitation and a
rehabilitation receiver had in fact been appointed. According to ASB it
encountered liquidity problems after Metrobank and UCPB simultaneously
demanded payments of their loans.
On the other hand, Metrobank claims that complainants [Dylanco
and SLGT] have no personality to ask for the nullification of the mortgage
because they are not parties to the mortgage transaction. UCPB questioned
the personality of SLGT to challenge the validity of the mortgage reasoning
that the latter is not party to the mortgage contract [and] maintains that
the mortgage transaction was done in good faith.
HLURB ruled in favor of SLGT stating that the mortgage
constituted over the lots is invalid for lack of mortgage clearance from the

HLURB. The Office of the President and the Court of Appeals affirmed the
decision.
ISSUE:
1.)
WON the declaration of nullity of the entire mortgage constituted
on the project land site and the improvements thereon is valid. YES
2.)
WON this nullity extends to the entire mortgage contract YES
(related to Art. 2089)
HELD:
1.)
The project lot/s and the improvements introduced thereon were
mortgaged in clear violation of of Sec. 18 of PD 957. And to be sure,
Dylanco and SLGT, as Project unit buyers, were not notified of the
mortgage before the release of the loan proceeds by petitioner banks. Sec.
18 reads:
o
No mortgage of any unit or lot shall be made by the owner or
developer without prior written approval of the [HLURB]. Such approval
shall not be granted unless it is shown that the proceeds of the mortgage
loan shall be used for the development of the condominium or subdivision
project . The loan value of each lot or unit covered by the mortgage shall
be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the
lot or unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtedness secured by the particular lot or unit
being paid for .
2.)
A mortgage contract is, by nature, indivisible. Consequent to this
feature, a debtor cannot ask for the release of any portion of the mortgaged
property or of one or some of the several properties mortgaged unless and
until the loan thus secured has been fully paid, notwithstanding the fact that
there has been partial fulfillment of the obligation. Hence, it is provided that
the debtor who has paid a part of the debt cannot ask for the proportionate
extinguishments of the mortgage as long as the debt is not completely
satisfied.
o
The situation obtaining in the case at bench is within the purview
of the aforesaid rule on the indivisibility of mortgage. It may be that Section
18 of PD 957 allows partial redemption of the mortgage in the sense that the
buyer is entitled to pay his installment for the lot or unit directly to the
mortgagee so as to enable him - the said buyer - to obtain title over the lot
or unit after full payment thereof. Such accommodation statutorily given to

a unit/lot buyer does not, however, render the mortgage contract also
divisible. Generally, the divisibility of the principal obligation is not
affected by the indivisibility of the mortgage. The real estate mortgage
voluntarily constituted by the debtor (ASB) on the lots or units is one and
indivisible. In this case, the mortgage contract executed between ASB and
the petitioner banks is considered indivisible, that is, it cannot be divided
among the different buildings or units of the Project. Necessarily, partial
extinguishment of the mortgage cannot be allowed. In the same token, the
annulment of the mortgage is an all or nothing proposition. It cannot be
divided into valid or invalid parts. The mortgage is either valid in its
entirety or not valid at all. In the present case, there is doubtless only one
mortgage to speak of. Ergo, a declaration of nullity for violation of Section
18 of PD 957 should result to the mortgage being nullified wholly.
Central Bank v. CA
FACTS:
Suplico M. Tolentino loaned 80,000 pesos from Island Savings Bank,
secured by a real estate mortgage over Tolentino's 100-hectare land in
Agusan. The loan was repayable in semi-annual installments for a period of
3 years, with 12% annual interest.
After a month, only a mere 17,000 pesos was released by the bank. Thus,
Tolentino signed a promissory note for 17,000 pesos at 12% annual interest,
payable within 3 years in semi-annual installments.
The bank repeatedly promised the release of the 63,000 peso balance. But
after 3 years, the Monetary Board, through a resolution, prohibited the bank
from doing business as it failed to put up the required capital to restore its
solvency.
Tolentino failed to pay the 17,000 pesos. Thus, Island Savings Bank moved
to foreclose the mortgage on Tolentino's 100-hectare property, and the
sheriff scheduled the auction.
Tolentino filed for injunction, specific performance or rescission with
damages, alleging that the bank failed to deliver the 63,000 peso balance.
The trial court found this unmeritorious. CA affirmed this decision, but
ruled that the bank can neither foreclose or collect the 17k.

ISSUE:
Can Tolentino's real estate mortgage be entirely foreclosed to satisfy the
17,000 debt?
HELD:
WE hold that the real estate mortgage of Sulpicio M. Tolentino cannot be
entirely foreclosed to satisfy his 17,000.00 debt.
The fact that when Sulpicio M. Tolentino executed his real estate mortgage,
no consideration was then in existence, as there was no debt yet because
Island Savings Bank had not made any release on the loan, does not make
the real estate mortgage void for lack of consideration.
It is not necessary that any consideration should pass at the time of the
execution of the contract of real mortgage. lt may either be a prior or
subsequent matter. But when the consideration is subsequent to the
mortgage, the mortgage can take effect only when the debt secured by it is
created as a binding contract to pay. And, when there is partial failure of
consideration, the mortgage becomes unenforceable to the extent of such
failure. Where the indebtedness actually owing to the holder of the

mortgage is less than the sum named in the mortgage, the mortgage cannot
be enforced for more than the actual sum due.
Since Island Savings Bank failed to furnish the P63,000.00 balance of the
P80,000.00 loan, the real estate mortgage of Sulpicio M. Tolentino became
unenforceable to such extent. P63,000.00 is 78.75% of P80,000.00, hence
the real estate mortgage covering 100 hectares is unenforceable to the extent
of 78.75 hectares. The mortgage covering the remainder of 21.25 hectares
subsists as a security for the P17,000.00 debt. 21.25 hectares is more than
sufficient to secure a P17,000.00 debt.
The rule of indivisibility of a real estate mortgage provided for by Article
2089 of the Civil Code is inapplicable to the facts of this case. The rule of
indivisibility of the mortgage presupposes several heirs of the debtor or
creditor which does not obtain in this case. Hence, the rule of indivisibility
of a mortgage cannot apply