Name: SARACHO, NICOLE R.

Topic: Real Estate Mortgage

Law or Provision Cited: Art. 2127 of the Civil Code: The mortgage
extends to the natural accessions, to the improvements, growing fruits,
and the rents or income not yet received when the obligation becomes
due, and to the amount of the indemnity granted or owing to the
proprietor from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations, amplifications and
limitations established by law, whether the estate remains in the
possession of the mortgagor, or it passes into the hands of a third
person.
Title: PHILIPPINE NATIONAL
CRESENCIA MARANON

BANK

vs

SPOUSES

BERNARD

and

Source, Date: G.R. No. 189316; 01 July 2013

Facts:
Spouses Rodolfo and Emilie Montealegre (Spouses Montealegre)
mortgaged a 152 square meter land (subject lot) to PNB as a security
for a loan. The property was under the name of Emilie Montealegre
under TCT 15612. The subject lot was erected with a building leased to
various tenants. Subsequently, Spouses Montealegre failed to pay the
loan and PNC initiated a foreclosure proceedings on the mortgaged
properties including the subject lot. In the auction sale, PNB emerged
as the highest bidder and a corresponding Certificate of Sale was
issued to them.
Before the expiration of the redemption period, Spouses Maranon
filed before the RTC a complaint for the Annulment of Title,
Reconveyance and Damages against Spouses Montealegre, PNB and
the Provincial Sheriff. Spouses Maranon alleged that they are the true
registered owners of by subject lot by virtue of TCT No. T-129577 which
was illegally cancelled by TCT 156512 under the name of Emilie who
used a falsified Deed of Sale bearing the forged signatures of Spouses
Maranon to effect the transfer of title to the property in her name. In its
answer PNB contend that they are mortgagee in good faith and that its
mortgage lien on the property was registered thus valid and binding
against the whole world.
While the trial proceedings were ongoing Paterio Tolete, one of
the tenants of the building erected in the subject lot deposited his
rental payments with the Clerk of Court.
RTC decided in favor of Spouses Maranon after finding that the
signatures of the Spouses Maranon in the Deed of Sale presented by
Spouses Montealegre to cause the cancellation of the formers title

were forged. RTC concluded the sale null and void and PNC was
adjudged to be mortgagee in good faith whose lien on the subject lot
must be respected. Neither parties sought any reconsideration nor
appeal.
Thereafter, Spouses Maranon filed subsequent motions for the
release of the rental payments deposited with the Clerk of Court and
paid to PNB by Tolete for having been adjudged as the real owner of
the subject lot. RTC granted the motions on the ground that as they
were the true registered owners of the lot, they are entitled to its fruits.
PNB moved for reconsideration of RTCs ruling contending that its
mortgage lien should be carried over to the new title reconveying the
lot to Spouses Maranon. They further argued that since the redemption
period already expired, the PNB is now the rightful owner of the lots
and its fruits. PNC denied its motion for reconsideration.
PNB then brought the case to CA. CA affirmed RTCs decision. CA
held that since Spouses Maranon is not a party to the mortgage
transaction between PNB and Spouses Montealegre, Spouses Maranon
cannot be deprived of the fruits of the subject lot as the same will
amount to deprivation of property without due process of law. It further
held that PNB is not a mortgagee in good faith because as a financial
institution, it should have looked beyond the certificate titles and
conducted an inspection on the circumstances surrounding the transfer
of title.
Hence, this petition.
Issue: Whether or not PNB has the right to the fruits of the mortgaged
lot.
Held: Petition denied.
Ruling: No. PNB is not entitled to the fruits of the mortgaged lot. The
protection afforded to PNB as a mortgagee in good faith refers to the
right to have its mortgage lien carried over and annotated to the new
certificate title issued to the Spouses Maranon. Thereafter, to enforce
such lien thru foreclosure proceedings in case of non-payment of debt.
However, this rule does not govern real estate mortgages and
foreclosures attend by fraudulent transfers to the mortgagor. Rent as
an accessory follows the principal. According to Article 2127 of the Civil
Code, when the principal property is mortgaged, the mortgage shall
include all natural or civil fruits and improvements found thereon when
the secured obligation becomes due. Hence, on case of non-payment
of the secured debt the foreclosure proceedings shall cover not only
the property but all its accessions and accessories as well. However,
the rule is not without qualifications. In Castro v CA, the Court
explained that Article 2127 is predicated on the presumption that the
ownership of accessions and accessories also belongs to the mortgagor

as owner of the principal. All improvements subsequently introduced or

owned by the mortgagor on the encumbered property are deemed to
form part of the mortgage. That the improvements are to be
considered so incorporated only if so owned by the mortgagor.
Corollary, any evidence sufficiently overthrowing the presumption that
the mortgagor owns the mortgaged property precludes the application
of Article 2127. Otherwise stated, the provision is irrelevant and
inapplicable to mortgages and their resultant foreclosures if the
mortgagor is later on found or declared to be not the true owner of the
property, as in the instant case.
Since PNBs mortgagors, are not owners of the subject lot much
less of the building which produced the disputed rent, the foreclosure
proceedings could not have included the building found in the subject
lot and the rent it yields. PNBs lien as a mortgagee in good faith
pertains on the subject lot alone because the rule that improvements
shall follow the principal in a mortgage under Article 2127 does not
apply in this case. The building was not foreclosed and it remained as a
property of Spouses Maranon and is not effected by non-redemption
and is excluded from any consolidation of title made by PNB over the
subject lot. There is technically no juridical tie created by a valid
mortgage contract that binds PNB to the subject lot because its
mortgagor was not the true owner. But by virtue of the mortgagee in
good faith principle, the law allows PNB to enforce its lien. Hence, PNB
has no basis in claiming the rent paid.