1.

Yuliongsiu v. PNB. G.R. No. L-19227. February 17, 1968.

Yuliongsiu obtained a loan from the PNB. To guarantee its payment, Yuliongsiu pledged his
maritime vessels. Yu failed to pay. PNB filed criminal charges against Yuliongsiu for estafa. Yuliongsiu
was convicted. Together with the institution of the criminal action, PNB took physical possession of the
pledged vessels.
Yuliongsiu commenced action in the lower court to recover the vessels from PNB. The lower
court rendered ruled (a) that the PNBs taking of physical possession of the vessels was justified by
the pledge contract and; (b) that the private sale of the pledged vessels by PNB to itself without notice
to Yuliongsiu was valid.
The PNB as pledgee was entitled to the actual possession of the vessels. While it is true that
Yuliongsiu continued operating the vessels after the pledge contract was entered into, his possession
was expressly made "subject to the order of the pledgee." The pledgee can temporarily entrust the
physical possession of the chattels pledged to the pledgor without invalidating the pledge. In this case,
the pledgor is regarded as holding the pledged property merely as trustee for the pledgee. PNB could
take actual possession at any time during the life of the pledge to make more effective its security.
PNBs taking of the vessels therefore was not unlawful.
If the sale is public, PNB could purchase the whole or part of the property sold "free from any
right of redemption on the part of the mortgagor or pledgor." And so, if the sale is private and PNB
became the purchaser, Yuliongsiu could redeem the property. Hence, Yuliongsiu could have recovered
the vessels by exercising this right of redemption. He is the only one to blame for not doing so.
If PNB countered with the seizure and sale of the pledged vessels pursuant to the pledge
contract, it was only to protect its interests after Yuliongsiu had defaulted in the payment.
3.

Manila Surety v. Velayo. G.R. No. L-21069. October 26, 1967.

Manila Surety, upon request of Velayo, executed a bond in a suit against Velayo. As "collateral
security and by way of pledge" Velayo delivered jewelry to the Manila Surety "for the latter's further
protection, with power to sell the same in case Manila Surety paid the bond, applying the proceeds to
the payment.
Judgment having been rendered against Velayo, Manila Surety was forced to pay that it later
sought to recoup from Velayo; and upon the latter's failure to do so, the surety caused the pledged
jewelry to be sold. The amount of the jewelry, however, was less than that of the bond paid by Manila
Surety. Manila Surety brought suit in the lower court. Velayo countered with a claim that the sale of the
pledged jewelry extinguished any further liability on his part under Article 2115 of the Civil Code.
If the price of the sale is less, neither shall the creditor be entitled to recover the deficiency
notwithstanding any stipulation to the contrary.
7.

BDO v. Bayuga. G.R. No. L-49568. October 17, 1979.

Bayuga executed a Real Estate Mortgage in favor of BDO over a parcel of land. The purpose
of the loan was for the "acquisition of real estate property. BDO approved the loan subjecting that the
property sought to be acquired be given as additional collateral. BDO made a partial release of the
loan. Bayuga used the amount to deposit it in another bank account. Claiming that Bayuga showed no
indication of paying the loan, BDO refused to release the balance of the loan. The action was
necessary, according to BDO, in order to prevent Bayuga from perpetrating a fraud against it.
Bayuga brought an action against BDO. The lower court rendered its decision in favor of
Bayuga. Pending appeal, The court released a Special Order authorizing execution, which directs
BDO to release the loan.
The special reason cited by the lower court does not exist in law. As pointed out by BDO, the
subject property need not have remained subject to the mortgage, the mortgage being but an
accessory contract to the contract of loan which is the principal obligation and which has been
cancelled. The consideration of the mortgage is the same consideration of the principal contract
without which it cannot exist as an independent contract. The factor that the loan is intended to buy
real estate property was disproved by the fact that Bayuga utilized the amount to open bank accounts
in his name rather than pay for the subject property.

9.

Hechanova v. Servando. G.R. No. L-49940. September 25, 1986. 144 SCRA 450.

A contract of sale was executed in favor of Hechanova over parcels of land. Servando claimed
that the parcels of land were mortgaged to him by the vendor to secure a loan evidenced by a private
document and certifying therein that in case the vendor fails to pay, Servando shall become the owner
of the land. He brought suit against Hechanova praying that the sale be annulled. Hechanova moved
to dismiss the complaint on the ground that the alleged mortgage was not recorded in the Register of
Deeds.
No valid mortgage has been constituted in Servandos favor, the alleged deed of mortgage
being a mere private document and not registered; moreover, it contains a stipulation (pacto
comisorio) which is null and void.
12.

Land Bank v. Poblete. G.R. No. 196577. February 25, 2013. 691 SCRA 613.

Facts: Poblete executed a deed of sale of her land in favor of Maniego. Maniego did not pay
the purchase price. Maniego applied for a loan with Land Bank, using the subject lands title as
collateral. Land Bank alleged that as a condition for the approval of the loan, the title of the land
should first be transferred to Maniego.
Pursuant to a later deed of sale, a transfer certificate of title of the land was issued in
Maniegos name. Maniego and Land Bank executed a Real Estate Mortgage over the title. Maniego
failed to pay the loan with Land Bank. Land Bank filed an application for foreclosure of the mortgage.
Poblete filed a complaint for nullification of the deed and the title and reconveyance of title
against Maniego and Land Bank. Poblete alleged that despite her demands to Maniego, she did not
receive the consideration for the subject land. Poblete claimed that without her knowledge, Maniego
used the earlier deed to acquire the original certificate of title from her. The later deed was used to
obtain the transfer certificate of title.
Land Bank claimed that they are a mortgagee in good faith and it observed due diligence prior
to approving the loan by verifying Maniegos title.
The lower court decided in favor of Poblete. It ruled that that the sale between Poblete and
Maniego was a nullity. It found that Maniego failed to pay the consideration of the sale. The signatures
in the sale were also proven to be a forgery. It ruled that Land Bank was not a mortgagee in good faith
because it failed to exercise the diligence required of banking institutions. It explained that had Land
Bank exercised due diligence, it would have known before approving the loan that the sale between
Poblete and Maniego had not been consummated.
The appellate court decided affirming the lower courts decision.
Issue: Whether Land Bank is a mortgagee in good faith.
Ruling: The doctrine of "the mortgagee in good faith is based on the rule that buyers or
mortgagees dealing with property covered by a title are not required to go beyond what appears on
the face of the title. However, it has been consistently held that this rule does not apply to banks,
which are required to observe a higher standard of diligence. A bank whose business is impressed
with public interest is expected to exercise more care and prudence in its dealings than a private
individual, even in cases involving registered lands. A bank cannot assume that, simply because the
title offered as security is on its face free of any encumbrances or lien, it is relieved of the
responsibility of taking further steps to verify the title and inspect the properties to be mortgaged.