1. STA. IGNACIA RURAL BANK INC. vs.

CA

Facts: On January 14, 1980, the defendants Sta. Ignacia Rural Bank, Inc. extended
to the plaintiff-spouses Conrado Pablo and Juanita Gonzales a loan totalling
P12,109.75. As a security, the plaintiff-spouses executed in favor of the defendant
bank a Real Estate Mortgage over their residential house and two (2) lots covered
by Free Patent Title, OCT No. P-7941 located at Poblacion Norte, Mayantoc, Tarlac.
The plaintiff-spouses defaulted in the payment of their obligation, as a result of
which, the defendant bank filed with the Provincial Sheriff of Tarlac a petition for
extra-judicial foreclosure of their real estate mortgage under Act 3135. On July 28,
1981, the aforecited house and lots of the plaintiff-spouses were sold at public
auction with the defendant bank as the highest bidder for P13,168.35.

Thereafter, the Certificate of Sale was executed in favor of the defendant

bank on September 29, 1981 and the same was registered with the Register of
Deeds of Tarlac on November 5, 1981. The ownership of the subject house and lots
was consolidated in favor of the defendant bank virtue of the final deed of sale
executed on November 5, 1983. On December 19, 1984, the defendant bank sold
the aforementioned real estates to defendant-spouses Alberto Lucas and Nelia Rico
for P47,500.00, and Transfer Certificates of Title Nos. 184687 and 184688 over the
house and lots were subsequently issued in the name of said defendant-spouses.
Hence, the complaint for the repurchase of the subject house and lots, annulment
of title and damages filed on March 20, 1986 by the plaintiff-spouses.

Issue: Whether or not the appellants had exercised their right to redeem within the
redemption period.

Ruling: Yes. The appellants had exercised their right to redeem within the
redemption period.

In this case, it will be recalled that the mortgaged house and lots were sold
at public auction to the appellee bank on July 28, 1981. However, the Sheriff's
Certificate of Sale was registered only on November 5, 1981. Under Act 3135, the
appellants may redeem the subject house and lots until November 5, 1982 being
the last day of the one-year period of repurchase allowed by said law. Following,
then, the ruling of the Supreme Court in the case of Belisario vs. Intermediate
Appellate Court, supra, the appellants still had five years from November 5, 1982 or
until November 5, 1987, within which to exercise their right to repurchase under
the Public Land Act.

Moreover, for purposes of ascertaining whether appellants exercised their

right to repurchase effectively, we have only to consider their filing of the action for
the "repurchase of the subject house and lots, annulment of title and damages" on
March 20, 1986 against the appellee bank and the appellee-spouses, which was
filed within the five-year period to repurchase. The question now of whether the
appellant had actually tendered, deposited or consigned in court the redemption
price for the subject house and lots becomes immaterial in view of the filing of said
action to repurchase which has been equivalent to an offer to redeem and has the
effect per se of preserving their right of recovering the disputed house and lots.

Following the doctrine enunciated in the Rural Bank of Davao City case, it is
clear from a perusal of the factual antecedents at bar that the plea for repurchase
was not time-barred at the time it was made. When the certificate of sale in favor
of petitioner was registered with the Register of Deeds on November 5, 1981,
private respondents had two years, reckoned from said date, within which to
redeem the property from petitioner, and another five years, under Commonwealth
Act No. 141, counted from the expiration of the redemption period, to effect
repurchase which private respondents precisely did when the suit below was
initiated on March 20, 1986.
2. UNITED COCONUT PLANTERS BANK vs. CHRISTOPHER LUMBO and
MILAGROS LUMBO

Facts: The respondents borrowed the aggregate amount of ₱12,000,000.00 from

UCPB. To secure the performance of their obligation, they constituted a real estate
mortgage on a parcel of land located in Boracay, Aklan and all the improvements
thereon that they owned and operated as a beach resort known as Titay’s South
Beach Resort. Upon their failure to settle the obligation, UCPB applied on November
11, 1998 for the extrajudicial foreclosure of the mortgage, and emerged as the
highest bidder at the ensuing foreclosure sale held on January 12, 1999. The
certificate of sale was issued on the same day, and UCPB registered the sale in its
name on February 18, 1999. The title over the mortgaged property was
consolidated in the name of UCPB after the respondents failed to redeem the
property within the redemption period.

On January 7, 2000, the respondents brought against UCPB in the RTC an

action for the annulment of the foreclosure, legal accounting, injunction against the
consolidation of title, and damages.

During the pendency of Civil Case No. 5920, UCPB filed an ex parte petition
for the issuance of a writ of possession to recover possession of the property
(Special Proceedings No. 5884). The RTC granted the ex parte petition of UCPB,
and issued on December 4, 2001 the writ of possession directing the sheriff of the
Province of Aklan to place UCPB in the actual possession of the property.

Although the possession of the property was turned over to UCPB on

February 1, 2002, they were allowed to temporarily remain on the property for
humanitarian reasons.

On February 14, 2002, the respondents filed in the RTC handling Special
Proceedings No. 5884 a petition to cancel the writ of possession and to set aside
the foreclosure sale.6 They included an application for a writ of preliminary
injunction and temporary restraining order to prevent the implementation of the
writ of possession.

On March 19, 2002, the RTC denied the respondents’ application for the
issuance of a writ of preliminary injunction.8Aggrieved by the denial, the
respondents brought a petition for certiorari and/or mandamus in the CA.
On November 27, 2003, the CA resolved C.A.-G.R. SP No. 70261 by granting
the respondents’ petition, setting aside the assailed orders, and enjoining the RTC
from implementing the writ of possession "pending the final disposition of the
petition for its cancellation and the annulment of the foreclosure sale.

It held as follows: A careful review of the records of this case reveals that the
respondent judge committed glaring errors of jurisdiction in his assailed order in
denying the petitioners’ entreaty for injunctive relief pending the determination of
the propriety of the writ of possession and the adjudication of the action for the
annulment of the disputed foreclosure sale. UCPB sought the reconsideration of the
decision, but the CA denied its motion for reconsideration. Hence, UCPB appeals by
petition for review on certiorari.

Issue: Whether or not the CA correctly granted the injunctive writ to enjoin the
implementation of the writ of possession the RTC had issued to place UCPB in the
possession of the mortgaged property.

Ruling: No. A writ of possession commands the sheriff to place a person in

possession of real property. It may be issued in the following instances, namely:
(1) land registration proceedings under Section 17 of Act No. 496; (2) judicial
foreclosure, provided the debtor is in possession of the mortgaged property, and no
third person, not a party to the foreclosure suit, had intervened; (3) extrajudicial
foreclosure of a real estate mortgage, pending redemption under Section 7 of Act
No. 3135, as amended by Act No. 4118; and (4) execution sales, pursuant to the
last paragraph of Section 33, Rule 39 of the Rules of Court.

With particular reference to an extra-judicial foreclosure of a real estate

mortgage under Act No. 3135, as amended by Act No. 4118, the purchaser at the
foreclosure sale may apply ex parte with the RTC of the province or place where the
property or any part of it is situated, to give the purchaser possession thereof
during the redemption period, furnishing bond in an amount equivalent to the use
of the property for a period of twelve months, to indemnify the debtor should it be
shown that the sale was made without violating the mortgage or without complying
with the requirements of Act No. 3135; and the RTC, upon approval of the bond,
order that a writ of possession be issued, addressed to the sheriff of the province in
which the property is situated, who shall then execute said order immediately. We
underscore that the application for a writ of possession by the purchaser in a
foreclosure sale conducted under Act No. 3135 is ex parte and summary in nature,
brought for the benefit of one party only and without notice being sent by the court
to any person adverse in interest. The relief is granted even without giving an
opportunity to be heard to the person against whom the relief is sought. Its nature
as an ex parte petition under Act No. 3135, as amended, renders the application for
the issuance of a writ of possession a non-litigious proceeding. Indeed, the grant of
the writ of possession is but a ministerial act on the part of the issuing court,
because its issuance is a matter of right on the part of the purchaser. The judge
issuing the order for the granting of the writ of possession pursuant to the express
provisions of Act No. 3135 cannot be charged with having acted without jurisdiction
or with grave abuse of discretion.

The property was sold at the public auction on January 12, 1999, with UCPB
as the highest bidder. The sheriff issued the certificate of sale to UCPB on the same
day of the sale. Considering that UCPB registered the certificate of sale in its name
on February 18, 1999, the period of redemption was one year from said date. By
virtue of the non-redemption by the respondents within said period, UCPB
consolidated the title over the property in its name.
It is clear enough, therefore, that the RTC committed no grave abuse of discretion
but acted in accordance with the law and jurisprudence in denying the respondents’
application for the injunctive writ filed on February 14, 2002 in Special Proceedings
No. 5884 to prevent the implementation of the writ of possession issued on
December 4, 2001.

Consequently, the CA grossly erred in granting the respondents’ petition for

certiorari and/or mandamus, and in enjoining the RTC from implementing the writ
of possession in favor of UCPB.
3. DEVELOPMENT BANK OF THE PHILIPPINES vs. ENVIRONMENTAL
AQUATICS, INC., LAND SERVICES AND MANAGEMENT ENTERPRISES

Facts: Respondent Environmental Aquatics and Land Services and Management

Enterprises loaned P1,792,600 from petitioner . As security for the loan, LSMEI
mortgaged to DBP its parcel of land situated in New Manila, Quezon City, and
covered by Transfer Certificate of Title.

The mortgage contract stated that: If at anytime the Mortgagor shall fail or
refuse to pay any of the amortization on the indebtedness, or the interest when
due, or whatever other obligation herein secured or to comply with any of the
conditions and stipulations herein agreed, or shall initiate insolvency proceedings or
be declared involuntary insolvent, or uses the proceeds of the loan for purposes
other than those specified herein then all the amortizations and other obligations of
the Mortgagor of any nature, shall become due, payable and defaulted and the
Mortgagee may immediately foreclose this mortgage judicially or extra judicially
under Act No. 3135 as amended, or under Republic Act No. 85, as amended and or
under Act No. 1508 as amended.

EAI and LSMEI failed to pay the loan. Thus, DBP applied for extrajudicial
foreclosure of the real estate mortgage. During the 19 December 1990 public
auction, the ex-officio sheriff sold the property to DBP as the highest bidder for
P1,507,000. On 15 May 1991, LSMEI transferred its right to redeem the property to
respondent Mario Matute . In his 27 July 1991 letter, Atty. Julian R. Vitug, Jr. (Atty.
Vitug, Jr.) informed DBP that his client Matute was interested in redeeming the
property by paying the P1,507,000 purchase price, plus other costs.

In its 29 August 1991 letter, DBP informed Atty. Vitug, Jr. that Matute could
redeem the property by paying the remaining balance of EAI and LSMEI's loan.
Thereafter, EAI, LSMEI and Matute filed with the RTC a complaint praying that DBP
be ordered “to accept Matute's bona fide offer to redeem the foreclosed property.

Issue: Whether or not the lower courts erred in finding that the bank chose Act No.
3135 as the governing law for the extrajudicial foreclosure of the property,
including the determination of the redemption price, and in ruling that the
redemption price is equivalent to the P1,507,000 purchase price.

Ruling: Yes. The petition is meritorious. Section 16 of Executive Order (EO) No. 81
states that the redemption price for properties mortgaged to and foreclosed by DBP
is equivalent to the remaining balance of the loan.

Section 16 states that, “Any mortgagor of the Bank whose property has been
extra judicially sold at public auction shall have the right to redeem the real
property by paying to the Bank all of the latter's claims against him, as determined
by the Bank.” In Development Bank of the Philippines v. West Negros College, Inc.,
the Court held that the redemption price for properties mortgaged to and foreclosed
by DBP is equivalent to the remaining balance of the loan, with interest at the
agreed rate.

The Court held that: It has long been settled that where the real property is
mortgaged to and foreclosed judicially or extra judicially by the Development Bank
of the Philippines, the right of redemption may be exercised only by paying to “the
Bank all the amount he owed the latter on the date of the sale, with interest on the
total indebtedness at the rate agreed upon in the obligation from said date, unless
the bidder has taken material possession of the property or unless this had been
delivered to him, in which case the proceeds of the property shall compensate the
interest.”
4. ALBERTO BARRETTO vs. LEONARDO F. BARRETTO, ET AL.

FACTS: After the death of Juan Antonio Barretto, Sr., his son Juan Antonio Barreto
Jr., in his own behalf and as the executor of his father, mortgaged, the cultivated
half of said hacienda in favor of Antonio Vicente Barretto as security for the amount
of P11,000 which the latter loaned to him. By verbal agreement, Antonio will collect
his credit from the products of the property.
His three children and heirs Antonio Ma Barretto, Ricardo Esteban Barretto, and
Guadalupe Barretto came to succeed after the death of Antonio. Guadalupe made a
donation inter vivos in favor of the plaintiff Alberto Barretto of the undivided one-
third part of the hypothecary credit and of the rights belonging to her deceased
father Antonio Vicente Barretto, assigning to the donee all the rights and actions
which she might havein the foreclosure proceedings exhibited at the trial of the
present action, on the condition that as soon as the donee Alberto Barretto could
collect the said one-third part of the credit or should obtain the assignment of the
property of the debtor, he would divide what was donated, into nine equal parts
among the donee himself and six living brothers and the heirs of their two brothers
now dead, each receiving one-ninth part.

Alberto Barretto, complying with the condition imposed in said document of

the donation paid to each of his brothers and nephews, and in exchange for the
sums received as such price his co-donees assigned and conveyed to him one-eight
part of the third of the said hacienda and whatever rights and interests the grantors
might have by virtue of the said donation in favor of the plaintiff Barretto.

It is to be noted that the plaintiff bought one-eight undivided part of the third
of the whole hacienda of Balintagac and paid to every claimant the price of the
eight part sold to him. The third part of the ownership of the hacienda was
transferred to the plaintiff by the donor Guadalupe Barretto. Antonio and Ricardo,
as grantors, sold and conveyed all their rights and actions included and derived
from the said hypothecary credit for the price of P14,000 which would be paid by
the grantee and vendee by installments and in the manner prescribed in the said
deed, assigning to him, besides, all the rights which the said brothers had over the
two-third parts of the said hacienda.

ISSUE: Whether or not there was a transfer of ownership to Alberto.

RULING: No. It does not appear that the donation made by Guadalupe Barretto and
the sales or assignment made by Antonio M. Barretto and Ricardo Esteban Barretto
were that of the ownership or dominion of the hacienda, but the hypothecary credit
and whatever right the donor and the assignor and vendors had against the owners
of the hacienda, as it is clearly expressed in the documents. The rights acquired by
the plaintiff Alberto Barretto consist, without any doubt whatsoever, of what the
said three brothers of the creditor Antonio Vicente Barretto had transferred to him
and under no circumstance could it be understood that they transferred the
dominion and the ownership of the said hacienda.

It is clear and beyond all discussion that the possession enjoyed by the
predecessors of the plaintiff has not been conferred by the owners of the hacienda
to the creditor that the latter might acquire the ownership of the property, but
merely that from its products he might collect the existing debt. Consequently, the
possession exercised by the creditor Antonio Vicente Barretto, not being under title
of ownership because no right of ownership could have taken place, the present
possession of the hacienda can not possibly turn into title of acquisitive prescription
of the property.
5. MAKATI LEASING FINANCIAL CORP. VS. WEAREVER TEXTILE MILLS INC.

Facts: Wearever Textile in order to obtain a financial accommodation from Makati

Leasing, discounted and assigned several receivables with the former under a
Receivable Purchase Agreement. To secure the collection of the receivables
assigned, Waerever executed a Chattel Mortgage over certain raw materials
inventory as well as a machinery described as an Artos Aero Dryer Stentering
Range.

Upon Wearever's default, Makati Leasing filed a petition for extrajudicial

foreclosure of the properties mortgage to it. However, the Deputy Sheriff assigned
to implement the foreclosure failed to gain entry into Wearever's premises and was
not able to effect the seizure of the machinery. Makati Leasing thereafter filed a
complaint for judicial foreclosure with the CFI Rizal.

RTC then issued a writ of seizure, the enforcement of which was restrained
upon Wearever's filing of a motion for reconsideration. finally issued on 11 February
1981, an order to break open the premises of Wearever to enforce said writ.

The sheriff enforcing the seizure order, repaired to the premises of Wearever
and removed the main drive motor of the subject machinery.

CA set aside the orders of the RTC and ordered the return of the drive motor
seized by the sheriff after ruling that the machinery in suit cannot be the subject of
replevin, much less of a chattel mortgage, because it is a real property pursuant to
Article 415 of the new Civil Code. CA also rejected the argument that Wearever is
estopped from claiming that the machine is real property by constituting a chattel
mortgage thereon. A motion for reconsideration was filed by Makati Leasing, but it
was denied. Hence this petition.

Issue: Whether the machinery in suit is real or personal property?

Held: If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no innocent
third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because
one who has so agreed is estopped from denying the existence of the chattel
mortgage.

It must be pointed out that the characterization of the subject machinery as

chattel by the private respondent is indicative of intention and impresses upon the
property the character determined by the parties. As stated in Standard Oil Co. of
New York vs. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract
may by agreement treat as personal property that which by nature would be real
property, as long as no interest of third parties would be prejudiced thereby.
6. THE HONGKONG & SHANGHAI BANKING CORP. vs. ALDECOA & CO.

FACTS: Aldecoa and Co. obtained a credit worth P450,000 from HSBC secured by a
mortgage of shares and real properties. On Dec. of 1906, the firm of Aldecoa and
Co. went into liquidation and obtained another P50,000 from the bank upon the
condition that this would be covered by the previous mortgage. In October 1908,
Joaquin and Zoilo Ibañez de Aldecoa filed an action against the bank for the
purpose of annulling the mortgages executed by them on the grounds that they
were minors at the time incapable of creating a valid mortgage upon their real
property. The Court of First Instance dismissed the complaint as to Joaquin upon
the ground that he had ratified those mortgages after becoming of age, but entered
a judgment annulling said mortgages with respect to Zoilo. Both parties appealed
from this decision and the case was still pending in the Supreme Court when HSBC
filed an action against Aldecoa and Co. and its partners for the collection of a sum
of money and foreclosure of the mortgaged properties. Judgment was entered in
favor of the bank.

ISSUE: Whether or not the action filed by the bank should be dismissed on the
ground of lis pendens.

RULING: No. A plea of the pendency of a prior action is not available unless the
prior action is of such a character that, had a judgment been rendered therein on
the merits, such a judgment would be conclusive between the parties and could be
pleaded in bar of the second action.

In the instant case, the former suit is to annul the mortgages while the other
one is for the foreclosure. If the final judgment in the former action is that the
mortgages be annulled, such an adjudication will deny the right of the bank to
foreclose the mortgages. But a valid decree will not prevent the bank from
foreclosing them. In such an event, the judgment would not be a bar to the
prosecution of the present action. The rule is not predicated upon such a
contingency. It is applicable, between the same parties, only when the judgment to
be rendered in the action first instituted will be such that, regardless of which party
is successful, it will amount to res adjudicata against the second action.
7. PHILIPPINE NATIONAL BANK vs. MARCELINO BANATAO et al.

FACTS: On November 16, 1962, Banatao, et al. initiated an action for recovery of
real property against Marciano Carag before the RTC. The disputed property was a
new land formation on the banks of the Cagayan River — an accretion to Lot 3192
of the Iguig Cadastre — that the plaintiffs-respondents claimed as the owners of the
adjoining Lot 3192. The defendants-respondents, on the other hand, were the
occupants of the disputed property.
While the case was pending, the defendants-respondents were able to secure
homestead patents evidenced by Original Certificates of Title issued in their names.
The OCTs were issued in 1965 and 1966, and all bear the proviso that, in
accordance with the Public Land Act, the patented homestead shall neither be
alienated nor encumbered for five years from the date of the issuance of the
patent.

The defendants-respondents separately applied for loans with the Philippine

National Bank secured by real estate mortgages on their respective titled portions
of the disputed property. The PNB mortgages were annotated on the defendants-
respondents' respective OCTs also in the years 1965 and 1966.

The trial court decided the case in favor of the plaintiffs-respondents and
ordered the return of the disputed property to the plaintiffs-respondents. Carag
appealed the trial court decision to the Court of Appeals.

In an amended complaint, the plaintiffs-respondents also added two (2)

additional causes of action, or a total of three (3) causes of action, namely: (1)
recovery of real property; (2) cancellation of the OCTs; and (3) annulment of real
estate mortgage. The bank was made a party to the case in view of the suit for
annulment of mortgage.

The records disclose that on March 29, 1973, while the case was pending
before the trial court, the bank extrajudicially foreclosed the property. The bank
was declared the highest bidder in the ensuing public auction, resulting in the
consolidation of title in the bank’s name; hence, the issuance on October 3, 1985 of
TCT No. T-65664 in the name of the bank.

On February 28, 1991, the plaintiffs-respondents and the defendants-

respondents entered into a compromise agreement whereby ownership of virtually
the northern half of the disputed property was ceded to the plaintiffs-respondents,
while the remaining southern half was given to the defendants-respondents. In the
same compromise agreement, the defendants-respondents acknowledged their
indebtedness to petitioner PNB and bound themselves to pay their respective
obligations to the bank, including the interests accruing thereon. Petitioner PNB,
however, was not a party to the compromise agreement.

The trial court rendered its decision, approving and adopting in toto the
compromise agreement, and ordering the participating parties to strictly comply
with its terms. The appellate court dismissed the appeal in its decision of March 30,
2001.

PNB submits that its consent to the compromise agreement is necessary to

secure a final and complete determination of the claims and defenses of all the
parties to the case. The PNB further argues that when the appellate court approved
in toto the trial court's judgment on the compromise agreement, it failed to
consider that the bank was a mortgagee in good faith. The bank claims good faith
on the position that the OCTs presented to it were all clean on their faces at the
time the mortgages were applied for; that there were no notices of lis pendens or
any annotation of liens or encumbrances on all of them; and that it had no
knowledge, actual or constructive, of facts or circumstances to warrant further
inquiry into the titles of the defendants-respondents.

ISSUE: Whether or not the mortgage constituted on the disputed land covered by a
homestead patent is valid.

RULING: The mortgage on the land covered by a homestead patent is not valid.

We conclude from our own examination of these OCTs that the mortgages
cannot but be void ab initio. On the faces of all the OCTs—secured through
homestead patents—are inscribed the following words that echo the mandatory
provisions of law:

TO HAVE AND TO HOLD the said tract of land with the appurtenances
thereunto x x x subject to the provisions of Sections 118, 121, 122 and 124
of Commonwealth Act No. 141, as amended, which provide that except in
favor of the Government or any of its branches, units or institutions, THE
LAND HEREBY ACQUIRED SHALL BE INALIENABLE AND SHALL NOT BE
SUBJECT TO [E]NCUMBRANCE FOR A PERIOD OF FIVE (5) YEARS NEXT
FOLLOWING THE DATE OF THIS PATENT, and shall not be liable for the
satisfaction of any debt contracted prior to the expiration of that period; x x
x.

This inscription reproduces Section 118 of the Public Land Act, as amended,
which contains a proscription against the alienation or encumbrance of homestead
patents within five years from issue. The rationale for the prohibition, reiterated in
a line of cases, first laid down in Pascua v. Talens states that "x x x homestead laws
were designed to distribute disposable agricultural lots of the State to land-
destitute citizens for their home and cultivation. It aims to preserve and keep in the
family of the homesteader that portion of public land which the State had
gratuitously given to him."

PNB cannot claim that it is a mortgagee in good faith. The proscription

against alienation or encumbrance is unmistakable even on a cursory reading of the
OCTs. Thus, one who contracts with a homestead patentee is charged with
knowledge of the law's proscriptive provision that must necessarily be read into the
terms of any agreement involving the homestead. Under the circumstances, the
PNB simply failed to observe the diligence required in the handling of its
transactions and thus made the fatal error of approving the loans secured by
mortgages of properties that cannot, in the first place, be mortgaged.
8. THE MANILA BANKING CORPORATION vs ANASTACIO TEODORO, JR.

FACTS: Defendants, together with Anastacio Teodoro, Sr., jointly and severally,
executed in favor of plaintiff a Promissory Note.

It appears that the Son executed in favor of plaintiff a Deed of Assignment of

Receivables from the Emergency Employment Administration The Deed of
Assignment provided that it was for and in consideration of certain credits, loans,
overdrafts and other credit accommodations extended to defendants as security for
the payment of said sum and the interest thereon, and that defendants do hereby
remise, release and quitclaim all its rights, title, and interest in and to the accounts
receivables.

For failure of defendants to pay the sums due on the Promissory Note, this
action for the collection of the sum of money was instituted.

ISSUE: Whether or not the assignment of receivables has the effect of payment of
all the loans contracted by appellants from appellee bank.

RULING: No, the assignment of the receivables did not result from a sale
transaction. It cannot be said to have been constituted by virtue of a dation in
payment for appellants' loans with the bank. At the time the deed of assignment
was executed, said loans were non-existent yet. Moreover, in order that an
obligation may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other (Article 1292, New Civil
Code).
Obviously, the deed of assignment was intended as collateral security for the
bank loans of appellants, as a continuing guaranty for whatever sums would be
owing by defendants to plaintiff, as stated in the stipulation.

Having been released by the assignment of receivables, appellants remain as

the principal debtors of appellee bank rather than mere guarantors. The deed of
assignment merely guarantees said obligations. That the guarantor cannot be
compelled to pay the creditor unless the latter has exhausted all the property of the
debtor, and has resorted to all the legal remedies against the debtor, under Article
2058 of the New Civil Code does not therefore apply to them. It is of course of the
essence of a contract of pledge or mortgage that when the principal obligation
becomes due, the things in which the pledge or mortgage consists may be alienated
for the payment to the creditor (Article 2087, New Civil Code). In the instant case,
appellants are both the principal debtors and the pledgors or mortgagors. Resort to
one is, therefore, resort to the other.
9. RECEBIDO vs PEOPLE

FACTS: Caridad Dorol went to the house of her cousin, petitioner Aniceto Recebido,
at San Isidro, Bacon, Sorsogon to redeem her mortgaged real property. Petitioner
and Caridad Dorol did not execute a document on the mortgage but Dorol instead
gave petitioner a copy of the Deed of Sale executed in her favor by her father, Juan
Dorol.

In said confrontation, petitioner refused to allow Caridad Dorol to redeem her

property on his claim that she had sold her property to him. Caridad Dorol
maintained and insisted that the transaction between them involving her property
was a mortgage.

Caridad Dorol verified from the Office of the Assessor in Sorsogon that there
exists on its file a Deed of Sale. NBI found that her signature was falsified.

ISSUE: Whether or not the Petitioner may be ordered to vacate the land in question
owned by the offended party.

RULING: Yes. Petitioner may be ordered to vacate the land. The petitioner based
his claim of possession alternatively by virtue of two alternative titles: one, based
on the forged deed of sale and, two, as mortgagee of the land. As already
discussed, the deed of sale was forged and, hence, could not be a valid basis of
possession. Neither could his status as mortgagee be the basis of possession since
it is the mortgagor in a contract of mortgage who is entitled to the possession of
the property. We have taken note of the practice in the provinces that in giving
realty for collateral, possession usually goes with it. Besides, even assuming that
petitioner had a right to possess the subject land, his possession became unlawful
when the private complainant offered to redeem the property and petitioner
unjustly refused. Petitioner cannot profit from the effects of his crime. The trial
court, therefore, did not commit any error in ordering petitioner to vacate the
subject property.
10. ARGUELLES et al. vs MALARAYAT RURAL BANK

FACTS: Fermina M. Guia was the registered owner of an agricultural land. She sold
the south portion of the land to the spouses Petronio and Macaria Arguelles.
Although the spouses Arguelles immediately acquired possession of the land, the
Deed of Sale was neither registered with the Register of Deeds nor annotated on
the title. At the same time, Fermina M. Guia ordered her son Eddie Guia and the
latter's wife Teresita Guia to subdivide pther parts of her land and to apply for the
issuance of separate titles therefor.

Nevertheless, in accordance with the instructions of Fermina M. Guia, the

spouses Guia succeeded in cancelling OCT and in subdividing the lot.

The spouses Guia obtained a loan in the amount of ₱240,000 from the
respondent Malarayat Rural Banlc and secured the loan with a Deed of Real Estate
Mortgage. The loan and Real Estate Mortgage were made pursuant to the Special
Power of Attorney purportedly executed by the registered owner of Lot 3-C,
Fermina M. Guia, in favor of the mortgagors, spouses Guia. Moreover, the Real
Estate Mortgage and Special Power of Attorney were duly annotated in the
memorandum of encumbrances.

The spouses Arguelles alleged that it was only after seven years from the
date of the unregistered sale that they discovered from the Register of Deeds of
Batangas City the following facts: (1) subdivision of Lot 3 into Lots 3-A, 3-B, and 3-
C; (2) issuance of separate TCTs for each lot; and (3) the annotation of the Real
Estate Mortgage and Special Power of Attorney over Lot 3-C covered by TCT No. T-
83944. Two years thereafter, or on June 17, 1999, the spouses Arguelles registered
their adverse claim based on the unregistered sale.
The spouses Arguelles filed a complaint10 for Annulment of Mortgage and
Cancellation of Mortgage Lien with Damages against the respondent Malarayat
Rural Ban. In asserting the nullity of the mortgage lien, the spouses Arguelles
alleged ownership over the land that had been mortgaged in favor of the
respondent Malarayat Rural Bank. Malarayat Rural Bank argued that the failure of
the spouses Arguelles to register the Deed of Sale was fatal to their claim of
ownership.

ISSUE: Whether the respondent Malarayat Rural Bank is a mortgagee in good faith
who is entitled to protection on its mortgage lien.

RULING: No. Land Bank processed Maniego's loan application upon his presentation
of an OCT which was still under the name of Poblete. Land Bank even ignored the
fact that Kapantay previously used Poblete's title as collateral in its loan account
with Land Bank. In Bank of Commerce v. San Pablo, Jr., we held that when "the
person applying for the loan is other than the registered owner of the real property
being mortgaged, [such fact] should have already raised a red flag and which
should have induced the Bank xx x to make inquiries into and confirm x x x [the]
authority to mortgage x x x. A person who deliberately ignores a significant fact
that could create suspicion in an otherwise reasonable person is not an innocent
purchaser for value."

Moreover, in a long line of cases, we have consistently enjoined banks to

exert a higher degree of diligence, care, and prudence than individuals in handling
real estate transactions.

Pertinently, in Land Bank of the Philippines v. Poblete,31 we ruled that

"[w]here the mortgagee acted with haste in granting the mortgage loan and did not
ascertain the ownership of the land being mortgaged, as well as the authority of the
supposed agent executing the mortgage, it cannot be considered an innocent
mortgagee."
 Since the subject land was not mortgaged by the owner thereof and since the
respondent Malarayat Rural Bank is not a mortgagee in good faith, said bank is not
entitled to protection under the law. The unregistered sale in favor of the spouses
Arguelles must prevail over the mortgage lien of respondent Malarayat Rural Bank.
11. DSM CONSTRUCTION vs CA and MEGAWORLD

FACTS: Petitioner and respondent entered into agreements for the construction of a
condominium project owned by respondent called “The Salcedo Park”, with
petitioner as contractor. In the course of the project’s construction, differences with
respect to billings arose between the parties. Petitioner thus filed a complaint for
compulsory arbitration before the CIAC claiming payment for approximately P97
Million as the outstanding balance due from respondent pursuant to the
agreements.

The CIAC rendered a decision partially granting both petitioner’s and

respondent’s claims in favor of petitioner. This award was affirmed by the Court of
Appeals. Thereafter, the Supreme Court promulgated its Decision affirming the
judgment of the Court of Appeals and lifting the TRO that was then still in effect.It
became final and executory. Petitioner centers on attempts, regrettably entertained
by respondent Court of Appeals, to thwart the execution of a final and executory
decision of the Supreme Court

ISSUE: Whether or not the Court of Appeals gravely abused its discretion when it
issued a Resolution enjoining the enforcement of Alias Writ of Execution.

RULING: Yes. The abuse of discretion amounting to lack or excess of jurisdiction in

this case was made manifest by the fact that the appellate court not only took
cognizance of the case and issued the assailed restraining order. It eventually
decided the case in petitioner’s (respondent herein) favor as well notwithstanding
the dearth of any basis for doing so.

Rule 1, Section 6 of the Rules of Court provides that the Rules shall be
liberally construed in order to promote their objective of securing a just, speedy
and inexpensive disposition of every action and proceeding. We have at times
relaxed procedural rules in the interest of substantial justice.

But from the outset, it bears stressing that the subject of petitioner and
respondent’s petitions is the execution of a final judgment was affirmed by no less
than this Court. This being so, the appellate court should have been doubly careful
about entertaining an obviously dilatory petition intended merely to delay the
satisfaction of the judgment. Any lower court or tribunal that trifles with the
execution of a final and executory judgment of the Supreme Court flirts with
insulting the highest court of the land. While we do not diminish the availability of
judicial remedies to the execution of final judgments of this Court, as may be
sanctioned under the Rules of Court, such actions could only prosper if they have
basis in fact and in law. Any court or tribunal that entertains such baseless actions
designed to thwart the execution of final judgments acts with grave abuse of
discretion tantamount to lack of jurisdiction. It is the positive duty of every court of
the land to give full recognition and effect to final and executory decisions, much
less those rendered by the Supreme Court.
12. RURAL BANK OF CALOOCAN vs CA and CASTRO

FACTS: Maxima Castro, accompanied by Severino Valencia, went to the Rural Bank
of Caloocan to apply for an industrial loan. Upon request by Castro and the
Valencias and with conformity of the bank, the auction sale that was scheduled for
March 10, 1961 was postponed for April 10, 1961. But when April 10, 1961 was
subsequently declared a special holiday, the sheriff of Manila sold the property at a
public auction sale that was held on April 11, 1961, which was the next succeeding
business day following the special holiday.

Castro alleged that it was only when she received the letter from the Acting
Deputy Sheriff on February 13, 1961, when she learned for the first time that the
mortgage contract which was an encumbrance on her property was for P6.000.00
and not for P3,000.00 and that she was made to sign as co-maker of the
promissory note without her being informed of this.

ISSUE: Whether or not the promissory note is valid insofar as they affect
respondent Castro vis-a-vis petitioner bank, and the mortgage contract.

RULING: Yes. It is valid up to the amount of P3,000.00 only. The consent of Castro
was obtained by fraud perpetrated on her by the Valencias who had abused her
confidence, taking advantage of her old age and ignorance of her financial need.
Respondent court added that "the mandate of fair play decrees that she should be
relieved of her obligation under the contract" pursuant to Articles 24 7 and 1332 8
of the Civil Code.

From the foregoing, it is evident that the bank was as much, guilty as Castro
was, of negligence in giving its consent to the contracts. It apparently relied on
representations made by the Valencia spouses when it should have directly
obtained the needed data from Castro who was the acknowledged owner of the
property offered as collateral. Moreover, considering Castro's personal
circumstances – her lack of education, ignorance and old age – she cannot be
considered utterly neglectful for having been defrauded. On the contrary, it is
demanded of petitioners to exercise the highest order of care and prudence in its
business dealings with the Valencias considering that it is engaged in a banking
business –a business affected with public interest. It should have ascertained
Castro's awareness of what she was signing or made her understand what
obligations she was assuming, considering that she was giving accommodation to,
without any consideration from the Valencia spouses.