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Real Mortgage: proceedings on the mortgaged property.

proceedings on the mortgaged property. After the action of PNB to recover the amount of the loan and its
extrajudicial sale thereof, a Certificate of Sale was interests from Ros.
issued in favor of PNB, Laoag as the highest bidder.
After the lapse of one (1) year without the property
Ros vs. PNB
being redeemed, the property was consolidated and
registered in the name of PNB, Laoag Branch on
G.R. No. 170166 is a petition for review1 assailing the August 10, 1978. The dispositive portion reads:
Decision2 promulgated on 17 October 2005 by the
Court of Appeals (appellate court) in CA-G.R. CV No. Claiming that she (plaintiff-appellee Estrella Aguete) WHEREFORE, premises considered, judgment is
76845. The appellate court granted the appeal filed by has no knowledge of the loan obtained by her husband hereby rendered:
the Philippine National Bank Laoag Branch (PNB). The nor she consented to the mortgage instituted on the
appellate court reversed the 29 June 2001 Decision of conjugal property a complaint was filed to annul the 1. DECLARING the Deed of Real Estate
Branch 15 of the Regional Trial Court of Laoag City proceedings pertaining to the mortgage, sale and Mortgage (Exhibit C) and the subsequent foreclosure
(trial court) in Civil Case No. 7803. consolidation of the property interposing the defense proceedings conducted thereon NULL and VOID;
that her signatures affixed on the documents were
forged and that the loan did not redound to the benefit 2. ORDERING the Register of Deeds of the
The trial court declared the Deed of Real Estate
of the family. City of Laoag to cancel TCT No. T-15276 in the name
Mortgage executed by spouses Jose A. Ros3 (Ros)
of defendant PNB and revert the same in the name of
and Estrella Aguete (Aguete) (collectively, petitioners),
plaintiffs spouses Joe Ros and Estrella Aguete;
as well as the subsequent foreclosure proceedings,
3. ORDERING defendant to vacate and
void. Aside from payment of attorneys fees, the trial
In its answer, PNB prays for the dismissal of the turnover the possession of the premises of the property
court also ordered PNB to vacate the subject property
complaint for lack of cause of action, and insists that it in suit to the plaintiffs; and
to give way to petitioners possession.
was plaintiffs-appellees own acts [of]
omission/connivance that bar them from recovering 4. ORDERING defendant to pay plaintiffs
the subject property on the ground of estoppel, laches, attorneys fee and litigation expenses in the sum of TEN
abandonment and prescription.4 THOUSAND (P10,000.00) PESOS.
The Facts
No pronouncement as to costs.

SO ORDERED.6
The Trial Courts Ruling
The appellate court narrated the facts as follows:

PNB filed its Notice of Appeal7 of the trial courts


decision on 13 September 2001 and paid the
On January 13, 1983, spouses Jose
On 29 June 2001, the trial court rendered its corresponding fees. Petitioners filed on the same date a
A. Ros and Estrella Aguete filed a complaint for the
Decision5 in favor of petitioners. The trial court motion for execution pending appeal,8 which PNB
annulment of the Real Estate Mortgage and all legal
declared that Aguete did not sign the loan documents, opposed.9 In their comment to the opposition10 filed on
proceedings taken thereunder against
did not appear before the Notary Public to acknowledge 10 October 2001, petitioners stated that at the hearing
PNB, Laoag Branch before the Court of First
the execution of the loan documents, did not receive of the motion on 3 October 2001, PNBs lay
Instance, Ilocos Norte docketed as Civil Case No. 7803.
the loan proceeds from PNB, and was not aware of the representative had no objection to the execution of
loan until PNB notified her in 14 August 1978 that she judgment pending appeal. Petitioners claimed that the
The complaint was later amended and was raffled to
and her family should vacate the mortgaged property house on the subject lot is dilapidated, a danger to life
the Regional Trial Court, Branch 15, Laoag City.
because of the expiration of the redemption period. and limb, and should be demolished. Petitioners added
Under the Civil Code, the effective law at the time of that they obliged themselves to make the house
The averments in the complaint disclosed that
the transaction, Ros could not encumber any real habitable at a cost of not less P50,000.00. The repair
plaintiff-appellee Joe A. Ros obtained a loan
property of the conjugal partnership cost would accrue to PNBs benefit should the appellate
of P115,000.00 from PNB Laoag Branch on October
without Aguetes consent. Aguete may, during their court reverse the trial court. PNB continued to oppose
14, 1974 and as security for the loan, plaintiff-
marriage and within ten years from the transaction petitioners motion.11
appellee Ros executed a real estate mortgage involving
questioned, ask the courts for the annulment of the
a parcel of land Lot No. 9161 of the Cadastral Survey
contract her husband entered into without her
of Laoag, with all the improvements thereon described
consent, especially in the present case where her
under Transfer Certificate of Title No. T-9646.
consent is required. The trial court, however, ruled
that its decision is without prejudice to the right of In an Order12 dated 8 May 2002, the trial court found
Upon maturity, the loan remained outstanding. As a
petitioners motion for execution pending appeal
result, PNB instituted extrajudicial foreclosure
1
improper because petitioners have made it clear that (3) The fruits, rents or interest received or due
they were willing to wait for the appellate courts during the marriage, coming from the common
decision. However, as a court of justice and equity, the property or from the exclusive property of each spouse.
Petitioners assigned the following errors:
trial court allowed petitioners to occupy the subject
property with the condition that petitioners would Art. 160. All property of the marriage is presumed to
voluntarily vacate the premises and waive recovery of belong to the conjugal partnership, unless it be proved
improvements introduced should PNB prevail on I. The Honorable Court of Appeals erred in not giving that it pertains exclusively to the husband or to the
appeal. weight to the findings and conclusions of the trial wife.
court, and in reversing and setting aside such findings
and conclusions without stating specific contrary Art. 161. The conjugal partnership shall be liable for:
The Appellate Courts Ruling
evidence; (1) All debts and obligations contracted by the
husband for the benefit of the conjugal partnership,
II. The Honorable Court of Appeals erred in declaring and those contracted by the wife, also for the same
the real estate mortgage valid; purpose, in the cases where she may legally bind the
partnership;
On 17 October 2005, the appellate court
III. The Honorable Court of Appeals erred in declaring, (2) Arrears or income due, during the
rendered its Decision13 and granted PNBs appeal. The
without basis, that the loan contracted by husband marriage, from obligations which constitute a charge
appellate court reversed the trial courts decision, and
Joe A. Ros with respondent Philippine National upon property of either spouse or of the partnership;
dismissed petitioners complaint.
Bank Laoag redounded to the benefit of his family, (3) Minor repairs or for mere preservation
aside from the fact that such had not been raised by made during the marriage upon the separate property
respondent in its appeal.14 of either the husband or the wife; major repairs shall
not be charged to the partnership;
(4) Major or minor repairs upon the conjugal
The appellate court stated that the trial court
partnership property;
concluded forgery without adequate proof; thus it was
(5) The maintenance of the family and the
improper for the trial court to rely solely
education of the children of both husband and wife,
on Aguetes testimony that her signatures on the loan
and of legitimate children of one of the spouses;
documents were forged. The appellate court declared
that Aguete affixed her signatures on the documents
(6) Expenses to permit the spouses to
knowingly and with her full consent.
complete a professional, vocational or other course.
The Courts Ruling
Art. 166. Unless the wife has been declared a non
compos mentis or a spendthrift, or is under civil
Assuming arguendo that Aguete did not give interdiction or is confined in a leprosarium, the
husband cannot alienate or encumber any real
her consent to Ros loan, the appellate court ruled that
The petition has no merit. We affirm the ruling of the property of the conjugal partnership without the wifes
the conjugal partnership is still liable because the loan
appellate court. consent. If she refuses unreasonably to give her
proceeds redounded to the benefit of the family. The
consent, the court may compel her to grant the same.
records of the case reveal that the loan was used for
the expansion of the familys business. Therefore, the
Art. 173. The wife may, during the marriage, and
debt obtained is chargeable against the conjugal
within ten years from the transaction questioned, ask
partnership.
The Civil Code was the applicable law at the time of the courts for the annulment of any contract of the
the mortgage. The subject property is thus considered husband entered into without her consent, when such
part of the conjugal partnership of gains. The pertinent consent is required, or any act or contract of the
articles of the Civil Code provide: husband which tends to defraud her or impair her
Petitioners filed the present petition for review interest in the conjugal partnership property. Should
before this Court on 9 December 2005. the wife fail to exercise this right, she or her heirs after
Art. 153. The following are conjugal partnership the dissolution of the marriage may demand the value
property: of the property fraudulently alienated by the husband.
(1) That which is acquired by onerous title
during the marriage at the expense of the common
The Issues fund, whether the acquisition be for the partnership, There is no doubt that the subject property was
or for only one of the spouses; acquired
(2) That which is obtained by the industry, or during Ros and Aguetes marriage. Ros and Aguete wer
work or as salary of the spouses, or of either of them; e married on 16 January 1954, while the subject

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property was acquired in 1968.15 There is also no proved by clear and convincing evidence, and whoever contract of loan or services, the family stands to
doubt that Ros encumbered the subject property when alleges it has the burden of proving the same.21 benefit from the loan facility or services to be rendered
he mortgaged it for P115,000.00 on 23 October to the business or profession of the husband. It is
1974.16 PNB Laoag does not doubt that Aguete, as immaterial, if in the end, his business or profession
evidenced by her signature, consented fails or does not succeed. Simply stated, where the
to Ros mortgage to PNB of the subject property. On the husband contracts obligations on behalf of the family
other hand, Aguete denies ever having consented to business, the law presumes, and rightly so, that such
Ros himself cannot bring action against PNB, for no
the loan and also denies affixing her signature to the obligation will redound to the benefit of the conjugal
one can come before the courts with unclean hands. In
mortgage and loan documents. partnership.26
their memorandum before the trial court, petitioners
themselves admitted
that Ros forged Aguetes signatures.
The husband cannot alienate or encumber any
conjugal real property without the consent, express or
implied, of the wife. Should the husband do so, then Joe A. Ros in legal effect admitted in the complaint
the contract is voidable.17 Article 173 of the Civil Code that the signatures of his wife in the questioned For this reason, we rule that Ros loan from PNB
allows Aguete to question Ros encumbrance of the documents are forged, incriminating himself to redounded to the benefit of the conjugal partnership.
subject property. However, the same article does not criminal prosecution. If he were alive today, he would Hence, the debt is chargeable to the conjugal
guarantee that the courts will declare the annulment be prosecuted for forgery. This strengthens the
partnership.
of the contract. Annulment will be declared only upon testimony of his wife that her signatures on the
a finding that the wife did not give her consent. In the questioned documents are not hers.
present case, we follow the conclusion of the appellate
WHEREFORE, we DENY the petition. The Decision of
court and rule that Aguete gave her consent In filing the complaint, it must have been a remorse of
the Court of Appeals in CA-G.R. CV No. 76845
to Ros encumbrance of the subject property. conscience for having wronged his family; in forging
promulgated on 17 October 2005 is AFFIRMED. Costs
the signature of his wife on the questioned documents;
against petitioners.
in squandering the P115,000.00 loan from the bank
The documents disavowed by Aguete are for himself, resulting in the foreclosure of the conjugal
acknowledged before a notary public, hence they are property; eviction of his family therefrom; and,
public documents. Every instrument duly exposure to public contempt, embarassment and
acknowledged and certified as provided by law may be ridicule.22
presented in evidence without further proof, the
certificate of acknowledgment being prima
facie evidence of the execution of the instrument or
document involved.18 The execution of a document
that has been ratified before a notary public cannot be
The application for loan shows that the loan would be
disproved by the mere denial of the alleged
used exclusively for additional working [capital] of buy
signer.19 PNB was correct when it stated that
& sell of garlic & virginia tobacco.23 In her
petitioners omission to present other positive evidence
testimony, Agueteconfirmed that Ros engaged in such
to substantiate their claim of forgery was fatal to
business, but claimed to be unaware whether it
petitioners cause.20 Petitioners did not present any
prospered. Aguete was also aware of loans contracted
corroborating witness, such as a handwriting expert,
by Ros, but did not know where he wasted the
who could authoritatively declare
money.24 Debts contracted by the husband for and in
that Aguetes signatures were really forged.
the exercise of the industry or profession by which he
contributes to the support of the family cannot be
deemed to be his exclusive and private debts.25
A notarized document carries the evidentiary weight
conferred upon it with respect to its due execution,
and it has in its favor the presumption of regularity
If the husband himself is the principal obligor in the
which may only be rebutted by evidence so clear,
contract, i.e., he directly received the money and
strong and convincing as to exclude all controversy as
services to be used in or for his own business or his
to the falsity of the certificate. Absent such, the
own profession, that contract falls within the term x
presumption must be upheld. The burden of proof to
x x x obligations for the benefit of the conjugal
overcome the presumption of due execution of
partnership. Here, no actual benefit may be proved. It
a notarial document lies on the one contesting the
is enough that the benefit to the family is apparent at
same. Furthermore, an allegation of forgery must be
the signing of the contract. From the very nature of the

3
was falsified on the promissory notes and the of the Regional Trial Court of Malolos, Bulacan,
PNB vs. Reyes mortgage.14chanrobleslaw Branch 81 dated May 27, 2009 and August 4, 2009,
respectively, are hereby AFFIRMED.19 (Emphasis in
Since the three (3) lots involved were conjugal the original)
properties, he argued that the mortgage constituted
A spouse's consent is indispensable for the disposition
over them was void.15chanrobleslaw Philippine National Bank moved for reconsideration,
or encumbrance of conjugal properties.
but the Motion was denied in the Resolution20 dated
On May 27, 2009, Branch 81 of the Regional Trial May 5, 2014.
This resolves a dispute between petitioner Philippine
Court of Malolos, Bulacan ordered the annulment of
National Bank and respondent Venancio C. Reyes, Jr.
the real estate mortgage and directed Lilia to Petitioner Philippine National Bank insists that the
(Venancio). Philippine National Bank filed a Petition for
reimburse Philippine National Bank the loan amount Court of Appeals erred in affirming the ruling of the
Review on Certiorari1 assailing the Decision2dated
with interest.16 The dispositive portion reads: trial court. It argues that the real estate mortgage is
August 22, 2013 and the Resolution3 dated May 5,
valid, that the conjugal partnership should be held
2014 of the Court of Appeals. The assailed Court of
chanRoblesvirtualLawlibrary liable for the loan, and that respondent Venancio C.
Appeals Decision affirmed the Decision and Order of
Reyes, Jr.'s cause of action should be deemed barred
Branch 81 of the Regional Trial Court of Malolos,
by laches.21chanrobleslaw
Bulacan, which annulled the real estate mortgage and WHEREFORE, judgment is hereby rendered:
the certificate of sale issued under the extrajudicial
Petitioner claims that respondent and his wife both
foreclosure conducted, and ordered Lilia Reyes (Lilia) chanRoblesvirtualLawlibrary1. Annulling in its entirety
duly consented to the loan and the mortgage.22 It
to reimburse to Philippine National Bank the total loan the Real Estate Mortgage Contract and the
points to respondent's testimony during cross
amount she borrowed from the bank.4chanrobleslaw Amendment thereto, the Certificate of Sale issued
examination where he admitted that he had actual
pursuant to the extra judicial foreclosure and the
knowledge of the loan as early as 1996, but only filed
Venancio is married to Lilia since 1973. During their foreclosure proceedings on the subject properties
the Complaint in 1998.23 Petitioner further claims that
union, they acquired three (3) parcels of land in covered by Transfer Certificates of Title Nos. T-53994,
it is impossible for respondent to have no knowledge of
Malolos, Bulacan. Transfer Certificates of Title (TCT) T-
the transaction since the ·Reyes Spouses live together
Nos. T-52812 and T-52813 were registered under
in the same house where the notices and demand
"Felicidad Pascual and Lilia C. Reyes, married to 52812 and T-52813 of the Registry of Deeds of
letters were sent.24 It contends that the Court of
Venancio Reyes[,]"5 while TCT No. 53994 was Bulacan for want of consent on the part of the plaintiff;
Appeals should not have relied heavily on the
registered under "Lilia C. Reyes, married to Venancio
testimony of the handwriting expert since
Reyes."6chanrobleslaw 2. Making the writ of preliminary injunction
jurisprudence show these experts are not
permanent and perpetual conditioned on plaintiffs
indispensable in determining a
The properties were mortgaged to Philippine National posting within an inextendible period of five (5) days
forgery.25cralawredchanrobleslaw
Bank on August 25, 1994 to secure a loan worth from receipt thereof of the injunctive bond in the
P1,100,000.00,7 which on October 6, 1994 was amount Eight Hundred Thousand (P800,000.00) pesos
Respondent, in his Comment,26 alleges that his wife
increased to P3,000,000.00.8 According to Philippine as contained in the Order dated November 3, 1998;
hid the transaction from him. Even if they lived under
National Bank, the Reyes Spouses contracted and duly
the same roof, he was not aware of everything
consented to the loan.9chanrobleslaw 3. Ordering defendant Lilia C. Reyes to reimburse the
happening in their home because as a practicing
defendant Philippine National Bank the total loan
lawyer, he was always away at work from 8 a.m. to 7
When the Reyes Spouses failed to pay the loan account of P3,324,771.18 with interest at 6% per
p.m.27 He likewise points out that since both the
obligations, Philippine National Bank foreclosed the annum from the date of the foreclosure sale until
Regional Trial Court and the Court of Appeals made a
mortgaged real properties.10 The auction sale was held finality of this decision. After this decision has attained
factual finding of forgery, this Court should respect
on September 19, 1997. Philippine National Bank finality interest at the rate of 12% per annum on the
this finding.28 Respondent contends that the conjugal
emerged as the highest bidder, and a certificate of sale principal and interest (or any part thereof) shall be
partnership cannot be held liable because a void
was issued in its favor.11chanrobleslaw imposed until full payment.
contract has no legal existence from which an
obligation may stem.29chanrobleslaw
On September 22, 1998, Venancio filed before the SO ORDERED.17
Regional Trial Court a Complaint (or Annulment of
The issues for resolution are:
Certificate of Sale and Real Estate Mortgage against Aggrieved, Philippine National Bank appealed to the
Philippine National Bank.12 Upon order of the trial Court of Appeals. On August 22, 2013, the Court of
chanRoblesvirtualLawlibraryFirst, whether the Court
court, Venancio amended his Complaint to include Appeals denied the appeal18 and affirmed the ruling of
of Appeals erred in declaring the real estate mortgage
Lilia and the Provincial Sheriff ofBulacan as the Regional Trial Court. The dispositive portion of the
void;
defendants.13chanrobleslaw Court of Appeals Decision reads:
Second, whether the conjugal partnership can be held
In assailing the validity of the real estate mortgage, chanRoblesvirtualLawlibrary
liable for the loan contracted unilaterally by Lilia C.
Venancio claimed that his wife undertook the loan and WHEREFORE, premises considered, the present
Reyes; and cralawlawlibrary
the mortgage without his consent and his signature appeal is DENIED. The challenged Decision and Order

4
Lastly, whether respondent is guilty of laches and respondent alleges that his signature was forged and on this Court."43chanrobleslaw
whether his claim is now barred by estoppel. offers testimony from a handwriting expert to prove
that his signature on the bank documents were We see no compelling reason to overturn the lower
falsified.34 The Regional Trial Court and the Court of couris' factual findings that the forgery was proven
I Appeals both agreed that respondent presented clear with clear and convincing evidence. Having established
and convincing evidence that his signature, as it that his signature was forged, respondent proved that
The real estate mortgage over a conjugal property is appeared on the mortgage contract, was forged. he did not consent to the real estate mortgage. The
void if the noncontracting spouse did not give consent. mortgage unilaterally made by his wife over their
Respondent offered the expert testimony of Efren B. conjugal property is void and legally inexistent.
The Court of Appeals committed no reversible error in Flores (Flores) of the Questioned Document Section of
affirming the ruling of the Regional Trial Court. The the National Bureau of Investigation. Flores, a
real estate mortgage over the conjugal properties is handwriting expert, compared the signature on the II
void for want of consent from respondent. The Family loan documents with the standard signatures of
Code is clear: the written consent of the spouse who respondent.35 He concluded that they were not written The lower courts may have declared the mortgage void,
did not encumber the property is necessary before any by the same person through the following but the principal obligation is not affected. It remains
disposition or encumbrance of a conjugal property can observations: valid.
be valid.30
chanRoblesvirtualLawlibraryFirst, the signatures on Petitioner contends that the conjugal partnership
It is not disputed that the Reyes Spouses were married the loan documents were executed in a slowly drawn should be made liable to the extent that it redounded
in 1973,31 before the Family Code took effect. Under motion of a pen. This can be observed in the hidden to the benefit of the family under Article 122 of the
the Family Code, their property regime is Conjugal portion of the signature because the changes in pen Family Code.
Partnership of Gains; thus, Article 124 is the pressure were abrupt.36chanrobleslaw
applicable provision regarding te administration of Petitioner's reliance on Article 122 to support the
their conjugal property. It states: Second, respondent's standard signature is written validity of the mortgage is misplaced.
with free and wellcoordinated strokes.37chanrobleslaw
chanRoblesvirtualLawlibrary Article 122 provides:
Art. 124. The administration and enjoyment of the Lastly, there were discrepancies in the structural
conjugal partnership shall belong to both spouses pattern of letter formation of the two (2) sets of chanRoblesvirtualLawlibrary
jointly. In case of disagreement, the husband's signatures. With the signatures in the loan documents, ARTICLE 122. The payment of personal debts
decision shall prevail, subject to recourse to the court both the upper and lower loops were elongated. On the contracted by the husband or the wife before or during
by the wife for proper remedy, which must be availed standard signatures, the upper loop was shorter while the marriage shall not be charged to the conjugal
of within five years from the date of the contract the lower loop was bigger.38chanrobleslaw partnership except insofar as they redounded to the
implementing such decision. benefit of the family.
Flores was convinced that the variations he noted is
In the event that one spouse is incapacitated or "due to the operation of a different personality and not Neither shall the fines and pecuniary indemnities
otherwise unable to participate in the administration merely an expected and inevitable variation found in imposed upon them be charged to the partnership.
of the conjugal properties, the other spouse may genuine handwriting of the same
assume sole powers of administration. These powers writer."39chanrobleslaw However, the payment of personal debts contracted by
do not include disposition or encumbrance without either spouse before the marriage, that of fines and
authority of the court or the written consent of the Likewise telling was petitioner's inability to prove that indemnities imposed upon them, as well as the
other spouse. In the absence of such authority or respondent took part in the transactions. Efren support of illegitimate children of either spouse, may
consent, the disposition or encumbrance shall be void. Agustin (Agustin), Loan and Discount Division Chief of be enforced against the partnership assets after the
However, the transaction shall be construed as a Philippine National Bank, admitted that he merely responsibilities enumerated in the preceding Article
continuing offer on the part of the consenting spouse relied on the documents presented to him,40 and that have been covered, if the spouse who is bound should
and the third person, and may be perfected as a he never actually saw respondent sign the documents, have no exclusive property or if it should be
binding contract upon the acceptance by the other follow up, or inquire about the loan's status or the insufficient; but at the time of the liquidation of the
spouse or authorization by the court before the offer is mortgage. Agustin only testified to seeing Lilia, but not partnership, such spouse shall be charged for what
withdrawn by either or both offerors. respondent, within the bank's has been paid for the purposes above-mentioned.
premises.41chanrobleslaw
Any disposition or encumbrance of a conjugal property Article 122 applies to debts that were contracted by a
by one spouse must be consented to by the other; This Court is not a trier of facts. In Manotok Realty, spouse and redounded to the benefit of the family. It
otherwise, it is void.32chanrobleslaw Inc. v CLT Realty Development Corp.,42 "[w]here ... the applies specifically to the loan that respondent's wife
findings of fact of the trial courts are affirmed by the Lilia contracted, but not to the mortgage.
Petitioner points to respondent's signature on the Court of Appeals, the same are accorded the highest
Promissory Notes and Deed of Mortgage to prove that degree of respect and, generally, will not be disturbed To be clear, nowhere in the Decision did the Court of
he consented to the transactions.33 For his part, on appeal. Such findings are binding and conclusive Appeals state that the principal obligation secured by
5
the mortgage was void. The Court of Appeals affirmed from the loan need to be presented before the conjugal Laches means the failure or neglect, for an
the May 27, 2009 Decision of the Regional Trial Court partnership can be held liable. On the other hand, if unreasonable and unexplained length of time, to do
ordering, respondent's wife to reimburse the petitioner the loan was taken out to be used for the family that which by exercising due diligence could or should
the total loan amount44 "of P3,324,771.18 with interest business, there is no need to prove actual benefit. The have been done earlier. It is negligence or omission to
at 6% per annum from the date of the foreclosure sale law presumes the family benefited from the loan and assert a right within a reasonable time, warranting a
until finality of this decision."45 The Regional Trial the conjugal partnership is held liable. presumption that the party entitled to assert it either
Court further imposed interest at 12% per annum on has abandoned it or declined to assert it. As the Court
the principal and interest, or any part thereof, after the According to petitioner, the Regional Trial Court explained in the preceding paragraphs, the Torbela
decision had attained finality and until full found49 that the loan was used as additional working siblings instituted Civil Case No. U-4359 five years
payment.46chanrobleslaw capital for respondent's printing business. As held after Dr. Rosario's repudiation of the express trust,
in Ayala Investment, since the loaned money is used in still within the 10-year prescriptive period for
Ayala Investment & Development Corp. v. Court of the husband's business, there is a presumption that it enforcement of such trusts. This does not constitute
Appeals47 has explained how Article 121 should be redounded to the benefit of the family; hence, the an unreasonable delay in asserting one's right. A delay
applied: conjugal partnership may be held liable for the loan within the prescriptive period is sanctioned by law and
amount.50 Since there is a legal presumption to this is not considered to be a delay that would bar relief
chanRoblesvirtualLawlibrary effect, there is no need to prove actual benefit to the Laches apply only in the absence of a statutory
From the foregoing jurisprudential rulings of this family. prescriptive period.57 (Emphasis supplied)
Court, we can derive the following conclusions:
What the lower courts declared void was the real estate Since respondent filed the Complaint for Annulment of
chanRoblesvirtualLawlibrary(A) If the husband himself mortgage attached to the conjugal property of the Certificate of Sale and Real Estate Mortgage within the
is the principal obligor in the contract, i.e., he directly Reyes Spouses. Since the real estate mortgage was an period of redemption prescribed by law, petitioner fails
received the money and services to be used in or for his encumbrance attached to a conjugal property without to convince that respondent slept on his right.
own business or his own profession, that contract falls the consent of the other spouse, it is void and legally
within the term "x x x obligations for the benefit of the inexistent. Although petitioner cannot foreclose the The mortgage over the conjugal property is void and
conjugal partnership. " Here, no actual benefit may be mortgage over the conjugal property in question, it can cannot be foreclosed. However, petitioner can still hold
proved. It is enough that the benefit to the family is still recover the loan amount from the conjugal the conjugal partnership liable for the principal
apparent at the time of the signing of the contract. partnership. obligation since the loan is presumed to have
From the very nature of the contract of loan or redounded to the benefit of the family. If the conjugal
services, the family stands to benefit from the loan In Philippine National Bank v. Banatao,51 "a mortgage partnership is insufficient to cover the liability, the
facility or services to be rendered to the business or is merely an accessory agreement and does not affect husband is solidarity liable with the wife for the
profession of the husband. It is immaterial, if in the the principal contract of loan. The mortgages, while unpaid balance.58chanrobleslaw
end, his business or profession fails or does not void, can still be considered as instruments evidencing
succeed. Simply stated, where the husband contracts the indebtedness[.]"52chanrobleslaw The last paragraph of Article 121 of the Family Code is
obligations on behalf of the family business, the law instructive:
presumes, and rightly so, that such obligation will
redound to the benefit of the conjugal partnership. III chanRoblesvirtualLawlibrary
Art. 121. The conjugal partnership shall be liable for:
(B) On the other hand, if the money or services are Laches does not apply where the delay is within the
given to another person or entity, and the husband period prescribed by law. chanRoblesvirtualLawlibrary
acted only as a surety or guarantor, that contract
cannot, by itself, alone be categorized as falling within Petitioner contends that respondent's action to annul (1) The support of the spouse, their common
the context of "obligations for the benefit of the the Deed of Real Estate Mortgage is already barred by children, and the legitimate children of either
conjugal partnership." The contract of loan or services latches.53 This is erroneous. spouse; however, the support of illegitimate
is clearly for the benefit of the principal debtor and not children shall be governed by the provisions of
for the surety or his family. No presumption can be As found by the trial court, records show that upon this Code on Support;
inferred that, when a husband enters into a contract of learning about the mortgage, respondent immediately
surety or accommodation agreement, it is "for the informed the bank about his forged signature.54 He
benefit of the conjugal partnership." Proof must be filed the Complaint for Annulment of Certificate of Sale (2) All debts and obligations contracted during the
presented to establish benefit redounding to the and Real Estate Mortgage against petitioner on marriage by the designated administrator-
conjugal partnership.48 (Emphasis supplied) September 22, 1998, which was still within the spouse for the benefit of the conjugal
prescribed period to redeem a mortgaged partnership of gains, or by both spouses or by
There are two scenarios considered: one is when the property.55chanrobleslaw one of them with the consent of the other;
husband, or in this case, the wife, contracts a loan to
be used for the family business and the other is when In Torbela v. Rosario:56chanrobleslaw (3) Debts and obligations contracted by either
she acts as a surety or guarantor. If she is a mere spouse without the consent of the other to the
surety or guarantor, evidence that the family benefited
6
Spouses Venancio C. Reyes, Jr. and Lilia Reyes are
extent that the family may have benefited; declared jointly and solidarity liable with each other
with their separate properties if their conjugal
(4) All taxes, liens, charges, and expenses, partnership is insufficient to fully pay for the loan.
including major or minor repairs upon the
conjugal partnership property; SO ORDERED.

(5) All taxes and expenses for mere preservation


made during the marriage upon the separate
property of either spouse;

(6) Expenses to enable either spouse to commence


or complete a professional, vocational, or other
activity for self-improvement;

(7) Ante-nuptial debts of either spouse insofar as


they have redounded to the benefit of the family;

(8) The value of what is donated or promised by


both spouses in favor of their common legitimate
children for the exclusive purpose of
commencing or completing a professional or
vocational course or other activity for self-
improvement; and

(9) Expenses of litigation between the spouses


unless the suit is found to groundless.

If the conjugal partnership is insufficient to cover the


foregoing liabilities, the spouses shall be solidarily
liable for the unpaid balance with their separaie
properties. (Emphasis supplied)

The last paragraph points to the "subsidiary but


solidary liability of the separate properties"59 of the
spouses for liabilities enumerated in the Article. This
Article, similar to Article 94 of the Family Code
governing the Absolute Community of Property regime,
explicitly holds the spouses solidarity liable with each
other if the conjugal properties are not enough to
answer for the liabilities. In this case, if the conjugal
properties of the Reyes Spouses are not enough to
answer for the loan, petitioner can recover the
remaining unpaid balance from the separate properties
of either respondent or his wife Lilia.

WHEREFORE, the Petition is DENIED for failure to


show the Court of Appeals committed a reversible error
in the assailed Decision. The Decision of the Court of
Appeals dated August 22, 2013 in CA-G.R. CV No.
94018 is AFFIRMED with MODIFICATION, in that

7
Significantly, the real estate mortgage that it was ready to liquidate its past due account with
Producers Bank vs. Excelsa contained the following clause: petitioner. Respondent sent another letter dated 08
September 1987, reiterating the same assurance. In a
This is a petition for review on certiorari[1] under Rule For and in consideration of letter 05 October 1987, Kwang Ju Bank, Ltd. informed
43 of the 1997 Rules of Civil Procedure, assailing the those certain loans, overdraft petitioner that it would be returning the export
decision[2] and resolution[3] of the Court of Appeals in and/or other credit accommodations documents on account of the non-acceptance by the
CA-G.R. CV No. 59931. The Court of Appeals on this date obtained from the importer.[13]
decision[4] reversed the decision of the Regional Trial MORTGAGEE, and to secure the
Court (RTC), Branch 73, Antipolo, Rizal, upholding the payment of the same, the principal Petitioner demanded from respondent the
extrajudicial foreclosure of the mortgage on of all of which is hereby fixed at payment of the peso equivalent of the export
respondents properties, while the resolution denied FIVE HUNDRED THOUSAND documents, plus interest and other charges, and also
petitioners motion for reconsideration.[5] PESOS ONLY (P500,000.00) Pesos, of the other due and unpaid loans. Due to respondents
Philippine Currency, as well as failure to heed the demand, petitioner moved for the
As borne by the records of the case, the those that the MORTGAGEE may extrajudicial foreclosure on the real estate mortgage
following factual antecedents appear: hereafter extend to the over respondents properties.
MORTGAGOR, including interest
Respondent Excelsa Industries, Inc. is a manufacturer and expenses or any other obligation Per petitioners computation, aside from
and exporter of fuel products, particularly charcoal owing to the MORTGAGEE, the charges for attorneys fees and sheriffs fees, respondent
briquettes, as an alternative fuel source. Sometime in MORTGAGOR does hereby transfer had a total due and demandable obligation
January 1987, respondent applied for a packing credit and convey by way of mortgage unto of P573,225.60, including interest, in six different
line or a credit export advance with petitioner the MORTGAGEE, its successors or accounts, namely:
Producers Bank of the Philippines, a banking assigns, the parcel(s) of land which
institution duly organized and existing under is/are described in the list inserted
Philippines laws.[6] on the back of this document, 1) EBP-PHO-87-1121 (US$4,585.97 x
and/or appended hereto, together 21.212) = P119,165.06
with all the buildings and 2) EBP-PHO-87-1095 (US$ 5,739.76 x
The application was supported by Letter of improvements now existing or which 21.212) = 151,580.97
Credit No. M3411610NS2970 dated 14 October 1986. may hereafter be erected or 3) BDS-001-87 = 61,777.78
Kwang Ju Bank, Ltd. of Seoul, Korea issued the letter constructed thereon, of which the 4) BDS-030/86 A = 123,555.55
of credit through its correspondent bank, the Bank of MORTGAGOR declares that he/it is 5) BDS-PC-002-/87 = 55,822.91
the Philippine Islands, in the amount of US$23,000.00 the absolute owner, free from all 6) BDS-005/87 = 61,323.33
for the account of Shin Sung Commercial Co., Ltd., liens and encumbrances.[10] P573,225.60[14]
also located in Seoul, Korea. T.L. World Development
Corporation was the original beneficiary of the letter of The total approved bid price, which included
credit. On 05 December 1986, for value received, T.L. On 17 March 1987, respondent presented for the attorneys fees and sheriff fees, was pegged
World transferred to respondent all its rights and negotiation to petitioner drafts drawn under the letter at P752,074.63. At the public auction held on 05
obligations under the said letter of credit. Petitioner of credit and the corresponding export documents in January 1988, the Sheriff of Antipolo, Rizal issued a
approved respondents application for a packing credit consideration for its drawings in the amounts Certificate of Sale in favor of petitioner as the highest
line in the amount of P300,000.00, of which of US$5,739.76 and US$4,585.79. Petitioner bidder.[15] The certificate of sale was registered on 24
about P96,000.00 in principal remained purchased the drafts and export documents by paying March 1988.[16]
outstanding.[7] Respondent executed the corresponding respondent the peso equivalent of the drawings. The
promissory notes evidencing the indebtedness.[8] purchase was subject to the conditions laid down in On 12 June 1989, petitioner executed an
two separate undertakings by respondent dated 17 affidavit of consolidation over the foreclosed properties
Prior to the application for the packing credit March 1987 and 10 April 1987.[11] after respondent failed to redeem the same. As a
line, respondent had obtained a loan from petitioner in result, the Register of Deeds of Marikina issued new
the form of a bill discounted and secured credit On 24 April 1987, Kwang Ju Bank, Ltd. certificates of title in the name of petitioner.[17]
accommodation in the amount of P200,000.00, of notified petitioner through cable that the Korean buyer
which P110,000.00 was outstanding at the time of the refused to pay respondents export documents on
approval of the packing credit line. The loan was account of typographical discrepancies. Kwang Ju On 17 November 1989, respondent instituted
secured by a real estate mortgage dated 05 December Bank, Ltd. returned to petitioner the export an action for the annulment of the extrajudicial
1986 over respondents properties covered by Transfer documents.[12] foreclosure with prayer for preliminary injunction and
Certificates of Titles (TCT) No. N-68661, N-68662, N- damages against petitioner and the Register of Deeds
68663, N-68664, N-68665 and N-68666, all issued by Upon learning about the Korean importers of Marikina. Docketed as Civil Case No. 1587-A, the
the Register of Deeds of Marikina.[9] non-payment, respondent sent petitioner a letter dated complaint was raffled to Branch 73 of the RTC of
27 July 1987, informing the latter that respondent had Antipolo, Rizal. The complaint prayed, among others,
brought the matter before the Korea Trade Court and that the defendants be enjoined from causing the
8
transfer of ownership over the foreclosed properties because the drafts and export documents were the export documents because the obligation to collect the
from respondent to petitioner.[18] evidence that respondent received export advances export proceeds from Kwang Ju Bank, Ltd. devolved
from petitioner.[22] upon petitioner. It cited the testimony of petitioners
On 05 April 1990, petitioner filed a petition manager for the foreign currency department to the
for the issuance of a writ of possession, docketed as LR The RTC also found that by its admission, effect that petitioner was respondents agent, being the
Case No. 90-787, before the same branch of the RTC of respondent had other loan obligations obtained from only entity authorized under Central Bank Circular
Antipolo, Rizal. The RTC ordered the consolidation of petitioner which were due and demandable; hence, No. 491 to collect directly from the importer the export
Civil Case No, 1587-A and LR Case No. 90-787.[19] petitioner correctly exercised its right to foreclose the proceeds on respondents behalf and converting the
real estate mortgage, which provided that the same same to Philippine currency for remittance to
On 18 December 1997, the RTC rendered a secured the payment of not only the loans already respondent. The appellate court found that respondent
decision upholding the validity of the extrajudicial obtained but also the export advances.[23] was not authorized and even powerless to collect from
foreclosure and ordering the issuance of a writ of the importer and it appeared that respondent was left
possession in favor of petitioner, to wit: Lastly, the RTC found respondent guilty of at the mercy of petitioner, which kept the export
laches in questioning the foreclosure sale considering documents during the time that respondent attempted
WHEREFORE, in Case No. that petitioner made several demands for payment of to collect payment from the Korean importer.
1587-A, the court hereby rules that respondents outstanding loans as early as July 1987
the foreclosure of mortgage for the and that respondent acknowledged the failure to pay
old and new obligations of the its loans and advances.[24] The Court of Appeals disregarded the RTCs
plaintiff Excelsa Industries Corp., finding that the export documents were the only
which has remained unpaid up to The RTC denied respondents motion for evidence of respondents export advances and that
the time of foreclosure by defendant reconsideration.[25] Thus, respondent elevated the petitioner was justified in refusing to return them. It
Producers Bank of the Philippines matter to the Court of Appeals, reiterating its claim opined that granting petitioner had no obligation to
was valid, legal and in order; In that petitioner was not only a collection agent but was return the export documents, the former should have
Case No. 787-A, the court hereby considered a purchaser of the export helped respondent in the collection efforts instead of
orders for the issuance of a writ of augmenting respondents dilemma.
possession in favor of Producers On 30 May 2001, the Court of Appeals
Bank of the Philippines after the rendered the assailed decision, reversing the RTCs
properties of Excelsa Industries decision, thus: Furthermore, the Court of Appeals found
Corp., which were foreclosed and petitioners negligence as the cause of the refusal by
consolidated in the name of the Korean buyer to pay the export proceeds based on
Producers Bank of the Philippines WHEREFORE, the appeal the following: first, petitioner had a hand in preparing
under TCT No. 169031, 169032, is hereby GRANTED. The decision of and scrutinizing the export documents wherein the
169033, 169034 and 169035 of the the trial court dated December 18, discrepancies were found; and, second, petitioner
Register of Deeds of Marikina. 1997 is REVERSED and SET ASIDE. failed to advise respondent about the warning from
Accordingly, the foreclosure of Kwang Ju Bank, Ltd. that the export documents would
SO ORDERED.[20] mortgage on the properties of be returned if no explanation regarding the
appellant is declared as INVALID. discrepancies would be made.
The issuance of the writ of
The RTC held that petitioner, whose possession in favor of appellee is
obligation consisted only of receiving, and not of ANNULLED. The following damages The Court of Appeals invalidated the
collecting, the export proceeds for the purpose of are hereby awarded in favor of extrajudicial foreclosure of the real estate mortgage on
converting into Philippine currency and remitting the appellant: the ground that the posting and publication of the
same to respondent, cannot be considered as notice of extrajudicial foreclosure proceedings did not
respondents agent. The RTC also held that petitioner (a) Moral damages in the comply with
cannot be presumed to have received the export amount of P100,000.00;
proceeds, considering that respondent executed
undertakings warranting that the drafts and (b) Exemplary damages in the personal notice requirement under paragraph
accompanying documents were genuine and the amount of P100,000.00; and 12[27] of the real estate mortgage executed between
accurately represented the facts stated therein and petitioner and respondent. The Court of Appeals also
would be accepted and paid in accordance with their (c) Costs. overturned the RTCs finding that respondent was
tenor.[21] guilty of estoppel by laches in questioning the
SO ORDERED.[26] extrajudicial foreclosure sale.
Furthermore, the RTC concluded that
petitioner had no obligation to return the export
documents and respondent could not expect their The Court of Appeals held that respondent Petitioners motion for reconsideration[28] was
return prior to the payment of the export advances should not be faulted for the dishonor of the drafts and denied in a Resolution dated 29 January 2002. Hence,
9
the instant petition, arguing that the Court of Appeals account of your negotiating the Respondent agreed to
erred in finding petitioner as respondents agent, which above draft(s) because of the purchase the draft and credit
was liable for the discrepancies in the export following discrepancies or reasons or petitioner its value upon the
documents, in invalidating the foreclosure sale and in any other discrepancy or reason undertaking that he will reimburse
declaring that respondent was not estopped from whatever. the amount in case the sight draft is
questioning the foreclosure sale.[29] dishonored. The bank would
We hereby undertake to certainly not have agreed to grant
The validity of the extrajudicial foreclosure of pay on demand the full amount of petitioner an advance export
the mortgage is dependent on the following issues the above draft(s) or any unpaid payment were it not for the letter of
posed by petitioner: (1) the coverage of the blanket balance thereof, the Philippine undertaking. The consideration for
mortgage clause; (2) petitioners failure to furnish perso equivalent converted at the the letter of undertaking was
personal notice of the foreclosure to respondent; and prevailing selling rate (or selling rate petitioners promise to pay
(3) petitioners obligation as negotiating bank under the prevailing at the date you negotiate respondent the value of the sight
letter of credit. our draft, whichever is higher) draft if it was dishonored for any
allowed by the Central Bank with reason by the Bank of Seoul.[33]
interest at the rate prevailing today
Notably, the errors cited by petitioners are from the date of negotiation, plus all
factual in nature. Although the instant case is a charges and expenses whatsoever Thus, notwithstanding petitioners alleged
petition for review under Rule 45 which, as a general incurred in connection therewith. failure to comply with the requirements of notice of
rule, is limited to reviewing errors of law, findings of You shall neither be obliged to dishonor and protest under Sections 89[34] and
fact being conclusive as a matter of general principle, contest or dispute any refusal to 152,[35]respectively, of the Negotiable Instruments Law,
however, considering the conflict between the factual accept or to pay the whole or any respondent may not escape its liability under the
findings of the RTC and the Court of Appeals, there is part of the above draft(s), nor separate undertakings, where respondent promised to
a need to review the factual issues as an exception to proceed in any way against the pay on demand the full amount of the drafts.
the general rule.[30] drawee, the issuing bank or any
endorser thereof, before making a
demand on us for the payment of The next question, therefore, is whether the
Much of the discussion has revolved around the whole or any unpaid balance of real estate mortgage also served as security for
who should be liable for the dishonor of the draft and the draft(s).(Emphasis supplied)[31] respondents drafts that were not accepted and paid by
export documents. In the two undertakings executed the Kwang Ju Bank, Ltd.
by respondent as a condition for the negotiation of the
drafts, respondent held itself liable if the drafts were
not accepted. The two undertakings signed by Respondent executed a real estate mortgage
respondent are similarly-worded and contained In Velasquez v. Solidbank containing a blanket mortgage clause, also known as a
respondents express warranties, to wit: Corporation,[32] where the drawer therein also executed dragnet clause. It has been settled in a long line of
a separate letter of undertaking in consideration for decisions that mortgages given to secure future
In consideration of your the banks negotiation of its sight drafts, the Court held advancements are valid and legal contracts, and the
negotiating the above described that the drawer can still be made liable under the amounts named as consideration in said contracts do
draft(s), we hereby warrant that letter of undertaking even if he is discharged due to not limit the amount for which the mortgage may
the said draft(s) and the banks failure to protest the non-acceptance of the stand as security if from the four corners of the
accompanying documents thereon drafts. The Court explained, thus: instrument the intent to secure future and other
are valid, genuine and accurately indebtedness can be gathered.[36]
represent the facts stated therein, Petitioner, however, can
and that such draft(s) will be still be made liable under the letter
accepted and paid in accordance of undertaking. It bears stressing In Union Bank of the Philippines v. Court of
with its/their tenor. We further that it is a separate contract from Appeals,[37] the nature of a dragnet clause was
undertake and agree, jointly and the sight draft. The liability of explained, thus:
severally, to defend and hold you petitioner under the letter of
free and harmless from any and all undertaking is direct and primary. It Is one which is specifically
actions, claims and demands is independent from his liability phrased to subsume all debts of
whatsoever, and to pay on demand under the sight draft. Liability past and future origins. Such
all damages actual or compensatory subsists on it even if the sight draft clauses are carefully scrutinized and
including attorneys fees, costs and was dishonored for non-acceptance strictly construed. Mortgages of this
other awards or be adjudged to pay, or non-payment. character enable the parties to
in case of suit, which you may suffer provide continuous dealings, the
arising from, by reason, or on nature or extent of which may not
10
be known or anticipated at the time,
and they avoid the expense and
inconvenience of executing a new Plaintiff is estopped from
security on each new transaction. A questioning the foreclosure. The
dragnet clause operates as a plaintiff is guilty of laches and
convenience and accommodation to cannot at this point in time question
the borrowers as it makes available the foreclosure of the subject
additional funds without their properties. Defendant bank made
having to execute additional security demands against the plaintiff for the
documents, thereby saving time, payment of plaintiffs outstanding
travel, loan closing costs, costs of loans and advances with the
extra legal services, recording defendant as early as July 1997.
fees, et cetera.[38] Plaintiff acknowledged such
outstanding loans and advances to
xxx the defendant bank and committed
to liquidate the same. For failure of
Petitioner, therefore, was not precluded from the plaintiff to pay its obligations on
seeking the foreclosure of the real estate mortgage maturity, defendant bank foreclosed
based on the unpaid drafts drawn by respondent. In the mortgage on subject properties
any case, respondent had admitted that aside from the on January 5, 1988 the certificate of
unpaid drafts, respondent also had due and sale was annotated on March 24,
demandable loans secured from another account as 1988 and there being no redemption
evidenced by Promissory Notes (PN Nos.) BDS-001-87, made by the plaintiff, title to said
BDS-030/86 A, BDS-PC-002-/87 and BDS-005/87. properties were consolidated in the
name of defendant in July 1989.
However, the Court of Appeals invalidated the Undeniably, subject foreclosure was
extrajudicial foreclosure of the mortgage on the ground done in accordance with the
that petitioner had failed to furnish respondent prescribed rules as may be borne
personal notice of the sale contrary to the stipulation out by the exhibits submitted to this
in the real estate mortgage. Court which are Exhibit 33, a notice
of extrajudicial sale executed by the
Sheriff of Antipolo, Exhibit 34
Petitioner, on the other hand, claims that certificate posting of extrajudicial
under paragraph 12[39] of the real estate mortgage, sale, Exhibit 35 return card
personal notice of the foreclosure sale is not a evidencing receipt by plaintiff of the
requirement to the validity of the foreclosure sale. notice of extrajudicial sale and
Exhibit 21 affidavit of publication.

A perusal of the records of the case shows


that a notice of sheriffs sale[40] was sent by registered The Court adopts and approves the
mail to respondent and received in due course.[41] Yet, aforequoted findings by the RTC, the same being fully
respondent claims that it did not receive the notice but supported by the evidence on record.
only learned about it from petitioner. In any event,
paragraph 12 of the real estate mortgage requires
petitioner merely to furnish respondent with the notice
and does not oblige petitioner to ensure that
respondent actually receives the notice. On this score, WHEREFORE, the instant petition for review
the Court holds that petitioner has performed its on certiorari is GRANTED and the decision and
obligation under paragraph 12 of the real estate resolution of the Court of Appeals in CA-G.R. CV No.
mortgage. 59931 are REVERSED and SET ASIDE. The decision of
the Regional Trial Court Branch 73, Antipolo, Rizal in
Civil Case No. 1587-A and LR Case No. 90-787 is
As regards the issue of whether respondent REINSTATED.
may still question the foreclosure sale, the RTC held
that the sale was conducted according to the legal
procedure, to wit:
11
G.R. No. 173171 July 11, 2012 FIFTY THOUSAND (P450,000.00), representing the and undertook to deliver the owner’s duplicate within
balance of his/her accountabilities for all draws; three (3) months from the execution of the contract.7
PHILIPPINE CHARITY SWEEPSTAKES OFFICE
(PCSO), Petitioner, WHEREAS, the PRINCIPAL agrees to liquidate or pay New Dagupan withheld payment of the last instalment,
vs. said account ten (10) days after each draw with which was intended to cover the payment of the capital
NEW DAGUPAN METRO GAS CORPORATION, interest at the rate of 14% per annum. gains tax, in view of Peralta’s failure to deliver the
PURITA E. PERALTA and PATRICIA P. owner’s duplicate of TCT No. 52135 and to execute a
GALANG, Respondents. deed of absolute sale in its favor. Further, New
xxxx
Dagupan, through its President, Julian Ong Cuña
(Cuña), executed an affidavit of adverse claim, which
DECISION
The PRINCIPAL shall settle or pay his/her account of was annotated on TCT No. 52135 on October 1, 1991
FOUR HUNDRED FIFTY THOUSAND PESOS as Entry No. 14826.8
REYES, J.: (P450,000.00) PESOS with the MORTGAGEE, provided
that the said balance shall bear interest thereon at the
In view of Peralta’s continued failure to deliver a deed
rate of 14% per annum;
This is a petition for review under Rule 45 of the Rules of absolute sale and the owner’s duplicate of the title,
of Court, assailing the Decision1 dated September 29, New Dagupan filed a complaint for specific
2005 and Resolution2 dated June 9, 2006 of the Court To secure the faithful compliance and as security to performance against her with the RTC on February 28,
of Appeals (CA) in CA-G.R. CV No. 59590. the obligation of the PRINCIPAL stated in the next 1992. New Dagupan’s complaint was raffled to Branch
preceding paragraph hereof, the MORTGAGOR hereby 43 and docketed as Civil Case No. D-10160.
convey unto and in favor of the MORTGAGEE, its
In the assailed Decision, the CA Affirmed the
successor and assigns by way of its first real estate
Decision3 dated January 28, 1998 of the Regional Trial On May 20, 1992, during the pendency of New
mortgage, a parcel/s of land together with all the
Court (RTC), Branch 42 of Dagupan City in Civil Case Dagupan’s complaint against Peralta, PCSO caused
improvements now or hereafter existing thereon
No. 94-00200-D, ordering petitioner Philippine Charity the registration of the mortgage.9
located at BOQUIG, DAGUPAN CITY, covered by TCT
Sweepstakes Office (PCSO) to surrender the owner’s
No. 52135, of the Register of Deeds of DAGUPAN CITY,
duplicate of Transfer
and more particularly described as follows: On February 10, 1993, PCSO filed an application for
the extrajudicial foreclosure sale of the subject
Certificate of Title (TCT) No. 52135 to the Register of property in view of Galang’s failure to fully pay the
xxxx
Deeds of Dagupan City for cancellation and issuance sweepstakes she purchased in 1992.10 A public auction
of a new certificate of title in the name of respondent took place on June 15, 1993 where PCSO was the
New Dagupan Metro Gas Corporation (New Dagupan). 4. During the lifetime of this mortgage, the highest bidder. A certificate of sale was
MORTGAGOR shall not alienate, sell, or in any manner correspondingly issued to PCSO.11
dispose of or encumber the above-mentioned property,
In its Resolution4 dated June 9, 2006, the CA denied
without the prior written consent of the MORTGAGEE;
PCSO’s motion for reconsideration. The certified true copy of TCT No. 52135 that New
Dagupan obtained from the Register of Deeds of
xxxx Dagupan City for its use in Civil Case No. D-10160
The Factual Antecedents
reflected PCSO’s mortgage lien. New Dagupan,
claiming that it is only then that it was informed of the
15. Upon payment of the principal amount together
Respondent Purita E. Peralta (Peralta) is the registered subject mortgage, sent a letter to PCSO on October 28,
with interest and other expenses legally incurred by
owner of a parcel of land located at Bonuan Blue 1993, notifying the latter of its complaint against
the MORTGAGEE, the above undertaking is considered
Beach Subdivision, Dagupan City under TCT No. Peralta and its claim over the subject property and
terminated.6
52135. On March 8, 1989, a real estate mortgage was suggesting that PCSO intervene and participate in the
constituted over such property in favor of PCSO to case.
secure the payment of the sweepstakes tickets On July 31, 1990, Peralta sold, under a conditional
purchased by one of its provincial distributors, Patricia sale, the subject property to New Dagupan, the
On January 21, 1994, the RTC Branch 43 rendered a
P. Galang (Galang). The salient provisions of the Deed conveyance to be absolute upon the latter’s full
Decision, approving the compromise agreement
of Undertaking with First Real Estate Mortgage,5 where payment of the price of P800,000.00. New Dagupan
between Peralta and New Dagupan. Some of the
Galang, PCSO and Peralta were respectively designated obliged to pay Peralta P200,000.00 upon the execution
stipulations made are as follows:
as "principal", "mortgagee" and "mortgagor", are as of the corresponding deed and the balance of
follows: P600,000.00 by monthly instalments of P70,000.00,
the first instalment falling due on August 31, 1990. 3. For her failure to execute, sign and deliver
Peralta showed to New Dagupan a photocopy of TCT a Deed of Absolute Sale to plaintiff by way of
WHEREAS, the PRINCIPAL acknowledges that he/she
No. 52135, which bore no liens and encumbrances, transferring TCT No. 52135 in the name of
has an outstanding and unpaid account with the
the latter, defendant hereby waives and
MORTGAGEE in the amount of FOUR HUNDRED
12
quitclaims the remaining balance of the In a Motion for Leave to File Third-Party SO ORDERED.19
purchase price in the amount of P60,000.00 Complaint15 dated April 17, 1995, PCSO sought the
in favor of the plaintiff, it being understood inclusion of Peralta and Galang who are allegedly
The RTC Branch 42 ruled that New Dagupan is a
that the said amount shall be treated as a indispensable parties. In its Third-Party
buyer in good faith, ratiocinating that:
penalty for such failure; Complaint,16 PCSO reiterated its allegations in its
Answer dated March 7, 1995 and made the further
claim that the sale of the subject property to New In other words, the evidence of the petitioner would
xxxx
Dagupan is void for being expressly prohibited under show that although the Deed of Undertaking with First
the Deed of Undertaking with First Real Estate Real Estate Mortgage was executed on March 8, 1989
6. Upon the signing of this compromise Mortgage. its annotation was made long after the conditional sale
agreement, possession and ownership of the in favor of the petitioner was executed and annotated
above described property, together with all at the back of the title in question. Because of the said
In their Answer to Third-Party Complaint with
the improvements existing thereon, are exhibits, petitioner contended that it was a buyer in
Counterclaims17 dated January 2, 1996, Peralta and
hereby vested absolutely upon, and good faith and for value.
Galang claimed that: (a) the provision in the Deed of
transferred to the plaintiff whom the
Undertaking with First Real Estate Mortgage
defendant hereby declares and acknowledges
prohibiting the sale of the subject property is void Defendant, to controvert the aforementioned evidence
to be the absolute owner thereof, now and
under Article 2130 of the Civil Code; (b) PCSO’s failure of the plaintiff, alleged that Exhibits C, C-1 to C-1-C
hereafter;
to intervene in Civil Case No. D-10160 despite notice was contrary to the testimony of Mr. Julian Ong Cuña
barred it from questioning the sale of the subject to the effect that when defendants sold the property to
7. This compromise agreement shall be property to New Dagupan and the compromise petitioner only the xerox copy of the title was shown
without prejudice to whatever rights and agreement approved by the RTC Branch 43; (c) it was and petitioner should have verified the original as it
remedies, if any, that the Philippine Charity due to PCSO’s very own neglect in registering its was a buyer in bad faith. Defendant also alleged that
Sweepstakes Office has against the herein mortgage lien that preference is accorded to New the decision in Civil Case D-10160 dated January 21,
defendant and Patricia P. Galang under the Dagupan’s rights as a buyer of the subject property; 1994 would show that there was a collusion between
Deed of Undertaking adverted to under par. and (d) PCSO no longer has any cause of action the petitioner and the third-party defendants.
2(f) hereof.12 against them following its decision to foreclose the
subject mortgage.
The Court cannot go along with the reasoning of the
As the RTC Branch 43 Decision dated January 21, defendant because what was shown to Mr. Cuña by
1994 became final and executory, New Dagupan once On March 6, 1996, Civil Case No. 94-00200-D was the third-party defendants was Exhibit "C" which did
again demanded Peralta’s delivery of the owner’s transferred to Branch 42, after the presiding judge of not carry any encumbrance at the back of the subject
duplicate of TCT No. 52135. Also, in a letter dated Branch 43 inhibited himself. title and the annotation made on May 20, 1992 in
March 29, 1994, New Dagupan made a similar favor of the PCSO. Mr. Cuña verified the title x x x but
demand from PCSO, who in response, stated that it the encumbrance on the title was not still there at
On January 28, 1998, the RTC Branch 42 rendered a
had already foreclosed the mortgage on the subject [that] time. One thing more, there was nothing
Decision18 in New Dagupan’s favor, the dispositive
property and it has in its name a certificate of sale for indicated in the decision in Civil Case No. D-10160
portion of which states:
being the highest bidder in the public auction that that petitioner already knew that there was already a
took place on June 15, 1993. mortgage in favor of the PCSO. Worst, defendant did
WHEREFORE, judgment is hereby rendered in favor of not even introduce any oral evidence to show that
the petitioner and against the defendant, ordering petitioner was in bad faith except the manifestations of
Thus, on June 1, 1994, New Dagupan filed with the
PCSO to deliver the owner’s duplicate copy of TCT No. counsel. Unfortunately, manifestations could not be
RTC a petition against PCSO for the annulment of TCT
52135 in its possession to the Registry of Deeds of considered evidence.
No. 52135 or surrender of the owner’s duplicate
Dagupan City for the purpose of having the decision in
thereof.13 The petition was docketed as Civil Case No.
favor of the petitioner annotated at the back thereof.
94-00200-D and raffled to Branch 43. xxxx
Should said defendant fail to deliver the said title
within 30 days from the date this decision becomes
In an Answer14 dated March 7, 1995, PCSO alleged final and executory, the said owner’s duplicate Defendant should not be allowed to profit from its
that: (a) New Dagupan was a buyer in bad faith; (b) certificate of title is hereby cancelled and the Register negligence of not registering the Deed of Undertaking
New Dagupan and Peralta colluded to deprive PCSO of of Deeds can issue a new one carrying all the with First Real Estate Mortgage in its favor.20
its rights under the subject mortgage; (c) New encumbrances of the original owner’s duplicate subject
Dagupan is estopped from questioning the superior of this case. Further, the defendant is ordered to pay
Also, the RTC Branch 42 ruled that the prohibition on
right of PCSO to the subject property when it entered to petitioner the sum of Ten Thousand Pesos
the sale of the subject property is void. Specifically:
into the compromise agreement subject of the RTC (P10,000.00) as attorney’s fees. It is also ordered to
Branch 43 Decision dated January 21, 1994; and (d) pay costs.
New Dagupan is bound by the foreclosure proceedings Suffice it to say that there is no law prohibiting a
where PCSO obtained title to the subject property. mortgagor from encumbering or alienating the
13
property mortgaged. On the contrary, there is a law intention of the parties, the undertaking should have xxxx
prohibiting an agreement forbidding the owner from so provided expressly. The term of the undertaking
alienating a mortgaged property. We are referring to with respect to the period was ambiguous but any
Upon full payment of the principal obligation, which
Article 2130 of the New Civil Code which provides as ambiguity in the Contract should be resolved against
from the testimonies of the officers of the PCSO had
follows: PCSO because the form used was a standard form of
been paid as early as 1990, the subsidiary contract of
the defendant and it appeared that it was its lawyers
guaranty was automatically terminated. The parties
who prepared it, therefore, it was the latter which
"A stipulation forbidding the owner from alienating the have not executed another contract of guaranty to
caused the ambiguity.23
immovable mortgage shall be void."21 secure the subsequent obligations of Galang for the
tickets issued thereafter. It must be noted that a
PCSO’s appeal from the foregoing adverse decision was contract of guaranty is not presumed; it must be
Moreover, the RTC Branch 42 ruled that PCSO had no
dismissed. By way of its assailed decision, the CA did express and cannot extend to more than what is
right to foreclose the subject mortgage as the land in
not agree with PCSO’s claim that the subject mortgage stipulated therein.
question had already been disencumbered after
is in the nature of a continuing guaranty, holding that
Galang’s full payment of all the sweepstakes tickets
Peralta’s undertaking to secure Galang’s liability to
she purchased in 1989 and 1990. xxxx
PCSO is only for a period of one year and was
extinguished when Peralta completed payment on the
It should be recalled that Amparo Abrigo, OIC Chief of sweepstakes tickets she purchased in 1989. The arguments of PCSO fail to persuade us. The
the Credit Accounts Division of the PCSO, admitted phrase "for all draws" is limited to the draws covered
not only once but twice that Patricia Galang has no by the original transaction. In its pleadings, the PCSO
The instant appeal must fail. There is nothing in the
more liability with the PCSO for the years 1989 and asserted that the contract of undertaking was renewed
Deed of Undertaking with First Real Estate Mortgage,
1990 x x x. Another witness, Carlos Castillo who is the and the collateral was re-used by Galang to obtain
expressly or impliedly, that would indicate that Peralta
OIC of the Sales Department of the PCSO, joined again tickets from the PCSO after she had settled her
agreed to let her property be burdened as long as the
Amparo Abrigo in saying that Patricia Galang has account under the original contract. From such
contract of undertaking with real estate mortgage was
already paid her liability with the PCSO for the years admission, it is thus clear that the contract is not in
not cancelled or revoked. x x x
1989 and 1990 x x x. Thus, the undertaking was the nature of a continuing guaranty. For a contract of
already discharged. Both of the said witnesses of the continuing guaranty is not renewed as it is understood
PCSO alleged that the undertaking has been re-used xxxx to be of a continuing nature without the necessity of
by Patricia Galang for the years 1991 to 1992 yet there renewing the same every time a new transaction
is no proof whatsoever showing that Purita Peralta contemplated under the original contract is entered
A perusal of the deed of undertaking between the
consented to the use of the undertaking by Patricia into. x x x 24 (Citations omitted)
PCSO and Peralta would reveal nothing but the
Galang for 1991 to 1992. Incidentally, it is not far-
undertaking of Peralta to guarantee the payment of the
fetched to say that Purita Peralta might have thought
pre-existing obligation of Galang, constituting the In this petition, PCSO claims that the CA erred in
that the undertaking was already discharged which
unpaid sweepstakes tickets issued to the latter before holding that the subject mortgage had been
was the reason she executed the Deed of Conditional
the deed of undertaking was executed, with the PCSO extinguished by Galang’s payment of P450,000.00,
Sale x x x in favor of petitioner in 1990. That being the
in the amount of P450,000.00. No words were added representing the amount of the sweepstakes tickets
case, the foreclosure sale in favor of the PCSO has no
therein to show the intention of the parties to regard it she purchased in 1989. According to PCSO, the said
legal leg to stand as the Deed of Undertaking with First
as a contract of continuing guaranty. In other amount is actually the credit line granted to Galang
Real Estate Mortgage has already been discharged
jurisdictions, it has been held that the use of the and the phrase "all draws" refers to her ticket
before the foreclosure sale was conducted.22
particular words and expressions such as payment of purchases for subsequent years drawn against such
"any debt", "any indebtedness", "any deficiency", or credit line. Consequently, PCSO posits, the subject
According to the RTC Branch 42, the intent to use the "any sum", or the guaranty of "any transaction" or mortgage had not been extinguished by Peralta’s
subject property as security for Galang’s purchases for money to be furnished the principal debtor "at any payment of her ticket purchases in 1989 and its
the years after 1989, as PCSO claimed, is not clear time", or "on such time" that the principal debtor may coverage extends to her purchases after 1989, which
from the Deed of Undertaking with First Real Estate require, have been construed to indicate a continuing she made against the credit line that was granted to
Mortgage: guaranty. Similar phrases or words of the same import her. That when Galang failed to pay her ticket
or tenor are not extant in the deed of undertaking. The purchases in 1992, PCSO’s right to foreclose the
deed of undertaking states: subject mortgage arose.
Was it not provided in the deed that the undertaking
would be for "all draws". That might be true but the
terms of the Contract should be understood to mean "WHEREAS, the PRINCIPAL acknowledges that he/she PCSO also maintains that its rights over the subject
only to cover the draws relative to the current has an outstanding and unpaid account with the property are superior to those of New Dagupan.
liabilities of Patricia Galang at the time of the MORTGAGEE in the amount of FOUR HUNDRED Considering that the contract between New Dagupan is
execution of the undertaking in 1989. It could have FIFTY THOUSAND (P450,000.00), representing the a conditional sale, there was no conveyance of
not been agreed upon that it should also cover her balance of his/her ticket accountabilities for all ownership at the time of the execution thereof on July
liability for 1991 up to 1992 because if that was the draws." 31, 1989. It was only on January 21, 1994, or when

14
the RTC Branch 43 approved the compromise The rise and fall of this recourse is dependent on the mortgage contract. An obligation is not secured by a
agreement, that a supposed transfer of title between resolution of the issue who between New Dagupan and mortgage unless it comes fairly within the terms of the
Peralta and New Dagupan took place. However, since PCSO has a better right to the property in question. mortgage contract.27
PCSO had earlier foreclosed the subject mortgage and
obtained title to the subject property as evidenced by
Our Ruling The stipulation extending the coverage of a mortgage
the certificate of sale dated June 15, 1993, Peralta had
to advances or loans other than those already obtained
nothing to cede or assign to New Dagupan.
or specified in the contract is valid and has been
PCSO is undeterred by the denial of its appeal to the
commonly referred to as a "blanket mortgage" or
CA and now seeks to convince this Court that it has a
PCSO likewise attributes bad faith to New Dagupan, "dragnet" clause. In Prudential Bank v. Alviar,28 this
superior right over the subject property. However,
claiming that Peralta’s presentation of a mere Court elucidated on the nature and purpose of such a
PCSO’s resolve fails to move this Court and the
photocopy of TCT No. 52135, albeit without any clause as follows:
ineluctability of the denial of this petition is owing to
annotation of a lien or encumbrance, sufficed to raise
the following:
reasonable suspicions against Peralta’s claim of a
A "blanket mortgage clause," also known as a "dragnet
clean title and should have prompted it to conduct an
clause" in American jurisprudence, is one which is
investigation that went beyond the face of TCT No. a. At the time of PCSO’s registration of its
specifically phrased to subsume all debts of past or
52135. mortgage lien on May 20, 1992, the subject
future origins. Such clauses are "carefully scrutinized
mortgage had already been discharged by
and strictly construed." Mortgages of this character
Galang’s full payment of P450,000.00, the
PCSO even assails the validity of the subject sale for enable the parties to provide continuous dealings, the
amount specified in the Deed of Undertaking
being against the prohibition contained in the Deed of nature or extent of which may not be known or
with First Real Estate Mortgage;
Undertaking with First Real Estate Mortgage. anticipated at the time, and they avoid the expense
and inconvenience of executing a new security on each
b. There is nothing in the Deed of new transaction. A "dragnet clause" operates as a
New Dagupan, in its Comment,25 avers that it was a
Undertaking with First Real Estate Mortgage convenience and accommodation to the borrowers as it
purchaser in good faith and it has a superior right to
that would indicate that it is a continuing makes available additional funds without their having
the subject property, considering that PCSO’s
security or that there is an intent to secure to execute additional security documents, thereby
mortgage lien was annotated only on May 20, 1992 or
Galang’s future debts; saving time, travel, loan closing costs, costs of extra
long after the execution of the conditional sale on July
legal services, recording fees, et cetera. x x
31, 1990 and the annotation of New Dagupan’s
x.29(Citations omitted)
adverse claim on October 1, 1991. While the subject c. Assuming the contrary, New Dagupan is
mortgage antedated the subject sale, PCSO was not bound by PCSO’s mortgage lien and was
already aware of the latter at the time of its belated a purchaser in good faith and for value; and A mortgage that provides for a dragnet clause is in the
registration of its mortgage lien. PCSO’s registration nature of a continuing guaranty and constitutes an
was therefore in bad faith, rendering its claim over the exception to the rule than an action to foreclose a
d. While the subject mortgage predated the
subject property defeasible by New Dagupan’s adverse mortgage must be limited to the amount mentioned in
sale of the subject property to New Dagupan,
claim. the mortgage contract. Its validity is anchored on
the absence of any evidence that the latter
Article 2053 of the Civil Code and is not limited to a
had knowledge of PCSO’s mortgage lien at the
single transaction, but contemplates a future course of
New Dagupan also claims that the subject property time of the sale and its prior registration of an
dealing, covering a series of transactions, generally for
had already been discharged from the mortgage, adverse claim created a preference in its
an indefinite time or until revoked. It is prospective in
hence, PCSO had nothing to foreclose when it filed its favor.
its operation and is generally intended to provide
application for extra-judicial foreclosure on February
security with respect to future transactions within
10, 1993. The subject mortgage was intended to
I certain limits, and contemplates a succession of
secure Galang’s ticket purchases that were
liabilities, for which, as they accrue, the guarantor
outstanding at the time of the execution of the same,
becomes liable. In other words, a continuing guaranty
the amount of which has been specified to be As a general rule, a mortgage liability is usually limited
is one that covers all transactions, including those
P450,000.00 and does not extend to Galang’s future to the amount mentioned in the contract. However, the
arising in the future, which are within the description
purchases. Thus, upon Galang’s full payment of amounts named as consideration in a contract of
or contemplation of the contract of guaranty, until the
P450,000.00, which PCSO admits, the subject mortgage do not limit the amount for which the
expiration or termination thereof.30
mortgage had been automatically terminated as mortgage may stand as security if from the four
expressly provided under Section 15 of the Deed of corners of the instrument the intent to secure future
Undertaking with First Real Estate Mortgage quoted and other indebtedness can be gathered.26 In this case, PCSO claims the subject mortgage is a
above. continuing guaranty. According to PCSO, the intent
was to secure Galang’s ticket purchases other than
Alternatively, while a real estate mortgage may
those outstanding at the time of the execution of the
Issue exceptionally secure future loans or advancements,
Deed of Undertaking with First Real Estate Mortgage
these future debts must be specifically described in the
on March 8, 1989 such that it can foreclose the
15
subject mortgage for Galang’s non-payment of her the provision relied upon by PCSO containing the Sections 51 and 53 of P.D. No. 1529 provide:
ticket purchases in 1992. PCSO does not deny and phrase "after each draw" and the other provisions,
even admits that Galang had already settled the which mention with particularity the amount of
Section 51. Conveyance and other dealings by
amount of P450,000.00. However, PCSO refuses to P450,000.00 as Galang’s unpaid and outstanding
registered owner. An owner of registered land may
concede that the subject mortgage had already been account and secured by the subject mortgage, should
convey, mortgage, lease, charge or otherwise deal with
discharged, claiming that Galang had unpaid ticket be construed against PCSO. The subject mortgage is a
the same in accordance with existing laws. He may use
purchases in 1992 and these are likewise secured as contract of adhesion as it was prepared solely by PCSO
such forms of deeds, mortgages, leases or other
evidenced by the following clause in the Deed of and the only participation of Galang and Peralta was
voluntary instrument, except a will purporting to
Undertaking with First Real Estate Mortgage: the act of affixing their signatures thereto.
convey or affect registered land, but shall operate only
as a contract between the parties and as evidence of
WHEREAS, the PRINCIPAL agrees to liquidate or pay Considering that the debt secured had already been authority to the Register of Deeds to make registration.
said account ten (10) days after each draw with fully paid, the subject mortgage had already been
interest at the rate of 14% per annum;31 discharged and there is no necessity for any act or
The act of registration shall be the operative act to
document to be executed for the purpose. As provided
convey or affect the land insofar as third persons are
in the Deed of Undertaking with First Real Estate
This Court has to disagree with PCSO in view of the concerned, and in all cases under this Decree, the
Mortgage:
principles quoted above. A reading of the other registration shall be made in the office of the Register
pertinent clauses of the subject mortgage, not only of of Deeds for the province or city where the land lies.
the provision invoked by PCSO, does not show that the 15. Upon payment of the principal amount together
security provided in the subject mortgage is continuing with interest and other expenses legally incurred by
Section 52. Constructive notice upon registration.
in nature. That the subject mortgage shall only secure the MORTGAGEE, the above-undertaking is
Every conveyance, mortgage, lease, lien, attachment,
Galang’s liability in the amount of P450,000.00 is considered terminated.33
order, judgment, instrument or entry affecting
evident from the following:
registered land shall, if registered, filed or entered in
Section 6234 of Presidential Decree (P.D.) No. 1529 the office of the Register of Deeds for the province or
WHEREAS, the PRINCIPAL acknowledges that he/she appears to require the execution of an instrument in city where the land to which it relates lies, be
has an outstanding and unpaid account with the order for a mortgage to be cancelled or discharged. constructive notice to all persons from the time of such
MORTGAGEE in the amount of FOUR HUNDRED However, this rule presupposes that there has been a registering, filing or entering.
FIFTY THOUSAND (P450,000.00), representing the prior registration of the mortgage lien prior to its
balance of his/her ticket accountabilities for all draws; discharge. In this case, the subject mortgage had
On the other hand, Article 2125 of the Civil Code
already been cancelled or terminated upon Galang’s
states:
full payment before PCSO availed of registration in
xxxx
1992. As the subject mortgage was not annotated on
TCT No. 52135 at the time it was terminated, there Article 2125. In addition to the requisites stated in
The PRINCIPAL shall settle or pay his/her account of was no need for Peralta to secure a deed of Article 2085, it is indispensable, in order that a
FOUR HUNDRED FIFTY THOUSAND PESOS cancellation in order for such discharge to be fully mortgage may be validly constituted, that the
(P450,000.00) PESOS with the MORTGAGEE, provided effective and duly reflected on the face of her title. document in which it appears be recorded in the
that the said balance shall bear interest thereon at the Registry of Property. If the instrument is not recorded,
rate of 14% per annum; the mortgage is nevertheless binding between the
Therefore, since the subject mortgage is not in the
parties.
nature of a continuing guaranty and given the
To secure the faithful compliance and as security to automatic termination thereof, PCSO cannot claim
the obligation of the PRINCIPAL stated in the next that Galang’s ticket purchases in 1992 are also The persons in whose favor the law establishes a
preceding paragraph hereof, the MORTGAGOR hereby secured. From the time the amount of P450,000.00 mortgage have no other right than to demand the
convey unto and in favor of the MORTGAGEE, its was fully settled, the subject mortgage had already execution and the recording of the document in which
successor and assigns by way of its first real estate been cancelled such that Galang’s subsequent ticket the mortgage is formalized.
mortgage, a parcel/s of land together with all the purchases are unsecured. Simply put, PCSO had
improvements now or hereafter existing thereon, nothing to register, much less, foreclose.
Construing the foregoing conjunctively, as to third
located at BOQUIG, DAGUPAN CITY, covered by TCT
persons, a property registered under the Torrens
No. 52135, of the Register of Deeds of DAGUPAN CITY,
Consequently, PCSO’s registration of its non-existent system is, for all legal purposes, unencumbered or
and more particularly described as follows:32
mortgage lien and subsequent foreclosure of a remains to be the property of the person in whose
mortgage that was no longer extant cannot defeat New name it is registered, notwithstanding the execution of
As the CA correctly observed, the use of the terms Dagupan’s title over the subject property. any conveyance, mortgage, lease, lien, order or
"outstanding" and "unpaid" militates against PCSO’s judgment unless the corresponding deed is registered.
claim that future ticket purchases are likewise
II
secured. That there is a seeming ambiguity between

16
The law does not require a person dealing with the mortgage lien was yet to be registered at the time New the subject mortgage and purchase of the subject
owner of registered land to go beyond the certificate of Dagupan filed its adverse claim on October 1, 1991 property at the auction sale took place prior to New
title as he may rely on the notices of the and its complaint against Peralta for the surrender of Dagupan’s acquisition of title as decreed in the
encumbrances on the property annotated on the the owner’s duplicate of TCT No. 52135 on February Decision dated January 21, 1994 of RTC Branch 43.
certificate of title or absence of any 28, 1992. It was only during the pendency of Civil The effects of a foreclosure sale retroact to the date the
annotation.35 Registration affords legal protection such Case No. D-10160, or sometime in 1993, that New mortgage was registered.43 Hence, while PCSO may be
that the claim of an innocent purchaser for value is Dagupan was informed of PCSO’s mortgage lien. On deemed to have acquired title over the subject property
recognized as valid despite a defect in the title of the the other hand, PCSO was already charged with on May 20, 1992, such title is rendered inferior by New
vendor.36 knowledge of New Dagupan’s adverse claim at the time Dagupan’s adverse claim, the validity of which was
of the annotation of the subject mortgage. PCSO’s confirmed per the Decision dated January 21, 1994 of
attempt to conceal these damning facts is palpable. RTC Branch 43.
In Cruz v. Bancom Finance Corporation,37 the
However, they are patent from the records such that
foregoing principle was applied as follows:
there is no gainsaying that New Dagupan is a
Otherwise, if PCSO’s mortgage lien is allowed to prevail
purchaser in good faith and for value and is not bound
by the mere expediency of registration over an adverse
Second, respondent was already aware that there was by PCSO’s mortgage lien.
claim that was registered ahead of time, the object of
an adverse claim and notice of lis pendens annotated
an adverse claim – to apprise third persons that any
on the Certificate of Title when it registered the
A purchaser in good faith and for value is one who transaction regarding the disputed property is subject
mortgage on March 14, 1980. Unless duly registered, a
buys property of another, without notice that some to the outcome of the dispute – would be rendered
mortgage does not affect third parties like herein
other person has a right to, or interest in, such naught. A different conclusion would remove the
petitioners, as provided under Section 51 of PD NO.
property, and pays a full and fair price for the same, at primary motivation for the public to rely on and
1529, which we reproduce hereunder:
the time of such purchase, or before he has notice of respect the Torrens system of registration. Such would
the claim or interest of some other person in the be inconsistent with the well-settled, even axiomatic,
xxxx property.39 Good faith is the opposite of fraud and of rule that a person dealing with registered property
bad faith, and its non-existence must be established need not go beyond the title and is not required to
by competent proof.40 Sans such proof, a buyer is explore outside the four (4) corners thereof in search
True, registration is not the operative act for a
deemed to be in good faith and his interest in the for any hidden defect or inchoate right that may turn
mortgage to be binding between the parties. But to
subject property will not be disturbed. A purchaser of out to be superior.
third persons, it is indispensible. In the present case,
a registered property can rely on the guarantee
the adverse claim and the notice of lis pendens were
afforded by pertinent laws on registration that he can
annotated on the title on October 30, 1979 and Worthy of extrapolation is the fact that there is no
take and hold it free from any and all prior liens and
December 10, 1979, respectively; the real estate conflict between the disposition of this case and
claims except those set forth in or preserved against
mortgage over the subject property was registered by Garbin v. CA44where this Court decided the
the certificate of title.41
respondent only on March 14, 1980. Settled in this controversy between a buyer with an earlier registered
jurisdiction is the doctrine that a prior registration of a adverse claim and a subsequent buyer, who is charged
lien creates a preference. Even a subsequent This Court cannot give credence to PCSO’s claim to the with notice of such adverse claim at the time of the
registration of the prior mortgage will not diminish this contrary. PCSO did not present evidence, showing that registration of her title, in favor of the latter. As to why
preference, which retroacts to the date of the New Dagupan had knowledge of the mortgage despite the adverse claim cannot prevail against the rights of
annotation of the notice of lis pendens and the adverse its being unregistered at the time the subject sale was the later buyer notwithstanding its prior registration
claim. Thus, respondent’s failure to register the real entered into. Peralta, in the compromise agreement, was discussed by this Court in this wise:
estate mortgage prior to these annotations, resulted in even admitted that she did not inform New Dagupan of
the mortgage being binding only between it and the the subject mortgage.42 PCSO’s only basis for claiming
It is undisputed that the adverse claim of private
mortgagor, Sulit. Petitioners, being third parties to the that New Dagupan was a buyer in bad faith was the
respondents was registered pursuant to Sec. 110 of
mortgage, were not bound by it. Contrary to latter’s reliance on a mere photocopy of TCT No.
Act No. 496, the same having been accomplished by
respondent’s claim that petitioners were in bad faith 52135. However, apart from the fact that the facsimile
the filing of a sworn statement with the Register of
because they already had knowledge of the existence of bore no annotation of a lien or encumbrance, PCSO
Deeds of the province where the property was located.
the mortgage in favor of respondent when they caused failed to refute the testimony of Cuña that his
However, what was registered was merely the adverse
the aforesaid annotations, petitioner Edilberto Cruz verification of TCT No. 52135 with the Register of
claim and not the Deed of Sale, which supposedly
said that they only knew of this mortgage when Deeds of Dagupan City confirmed Peralta’s claim of a
conveyed the northern half portion of the subject
respondent intervened in the RTC clean title.
property. Therefore, there is still need to resolve the
proceedings.38 (Citations omitted)
validity of the adverse claim in separate proceedings,
Since PCSO had notice of New Dagupan’s adverse as there is an absence of registration of the actual
It is undisputed that it was only on May 20, 1992 that claim prior to the registration of its mortgage lien, it is conveyance of the portion of land herein claimed by
PCSO registered its mortgage lien. By that time, New bound thereby and thus legally compelled to respect private respondents.
Dagupan had already purchased the subject property, the proceedings on the validity of such adverse claim.
albeit under a conditional sale. In fact, PCSO’s It is therefore of no moment if PCSO’s foreclosure of

17
From the provisions of the law, it is clear that mere which it is founded, the same does not obtain in this
registration of an adverse claim does not make such case. The existence and due execution of the
claim valid, nor is it permanent in character. More conditional sale and Peralta’s absolute and complete
importantly, such registration does not confer instant cession of her title over the subject property to New
title of ownership since judicial determination on the Dagupan are undisputed. These are matters covered
issue of the ownership is still necessary.45 (Citation by the Decision dated January 21, 1994 of RTC
omitted) Branch 43, which had long become final and
executory.
Apart from the foregoing, the more important
consideration was the improper resort to an adverse At any rate, in Sajonas v.CA,47 this Court clarified that
claim.1âwphi1 In L.P. Leviste & Co. v. Noblejas,46 this there is no necessity for a prior judicial determination
Court emphasized that the availability of the special of the validity of an adverse claim for it to be
remedy of an adverse claim is subject to the absence of considered a flaw in the vendor’s title as that would be
any other statutory provision for the registration of the repugnant to the very purpose thereof.48
claimant’s alleged right or interest in the property.
That if the claimant’s interest is based on a perfected
WHEREFORE, premises considered, the petition is
contract of sale or any voluntary instrument executed
DISMISSED and the Decision dated September 29,
by the registered owner of the land, the procedure that
2005 and Resolution dated June9, 2006 of the Court
should be followed is that prescribed under Section 51
of Appeals in CA-G.R. CV No. 59590 are hereby
in relation to Section 52 of P.D. No. 1529. Specifically,
AFFIRMED.
the owner’s duplicate certificate must be presented to
the Register of Deeds for the inscription of the
corresponding memorandum thereon and in the entry
day book. It is only when the owner refuses or fails to
surrender the duplicate certificate for annotation that
a statement setting forth an adverse claim may be filed
with the Register of Deeds. Otherwise, the adverse
claim filed will not have the effect of a conveyance of
any right or interest on the disputed property that
could prejudice the rights that have been subsequently
acquired by third persons.

What transpired in Gabin is similar to that in Leviste.


In Gabin, the basis of the claim on the property is a
deed of absolute sale. In Leviste, what is involved is a
contract to sell. Both are voluntary instruments that
should have been registered in accordance with
Sections 51 and 52 of P.D. No. 1529 as there was no
showing of an inability to present the owner’s
duplicate of title.

It is patent that the contrary appears in this case.


Indeed, New Dagupan’s claim over the subject property
is based on a conditional sale, which is likewise a
voluntary instrument. However, New Dagupan’s use of
the adverse claim to protect its rights is far from being
incongruent in view of the undisputed fact that Peralta
failed to surrender the owner’s duplicate of TCT No.
52135 despite demands.

Moreover, while the validity of the adverse claim in


Gabin is not established as there was no separate
proceeding instituted that would determine the
existence and due execution of the deed of sale upon
18
PRUDENTIAL BANK vs. ALVIAR the back of this document, and/or On 15 January 1980, petitioner moved for the
appended hereto, together with all extrajudicial foreclosure of the mortgage on the
the buildings and improvements property covered by TCT No. 438157. Per petitioners
now existing or which may hereafter computation, respondents had the total obligation
Before us is a petition for review on certiorari under
be erected or constructed thereon, of of P1,608,256.68, covering the three (3) promissory
Rule 45 of the Rules of Court. Petitioner Prudential
which the Mortgagor declares that notes, to wit: PN BD#75/C-252 for P250,000.00, PN
Bank seeks the reversal of the Decision[1] of the Court
he/it is the absolute owner free from BD#76/C-345 for P382,680.83, and PN BD#76/C-340
of Appeals dated 27 September 2001 in CA-G.R. CV
all liens and incumbrances. . . .[4] for P545,000.00, plus assessed past due interests and
No. 59543 affirming the Decision of the Regional Trial
penalty charges. The public auction sale of the
Court (RTC) of Pasig City, Branch 160, in favor of
mortgaged property was set on 15 January 1980.[10]
respondents.
On 22 October 1976, Don Alviar executed another
promissory note, PN BD#76/C-345 for P2,640,000.00, Respondents filed a complaint for damages with a
Respondents, spouses Don A. Alviar and Georgia B.
secured by D/A SFDX #129, signifying that the loan prayer for the issuance of a writ of preliminary
Alviar, are the registered owners of a parcel of land in
was secured by a hold-out on the mortgagors foreign injunction with the RTC of Pasig,[11]claiming that they
San Juan, Metro Manila, covered by Transfer
currency savings account with the bank under have paid their principal loan secured by the
Certificate of Title (TCT) No. 438157 of the Register of
Account No. 129, and that the mortgagors passbook is mortgaged property, and thus the mortgage should not
Deeds of Rizal. On 10 July 1975, they executed a deed
to be surrendered to the bank until the amount be foreclosed. For its part, petitioner averred that the
of real estate mortgage in favor of petitioner Prudential
secured by the hold-out is settled.[5] payment of P2,000,000.00 made on 6 March 1979 was
Bank to secure the payment of a loan
On 27 December 1976, respondent spouses executed not a payment made by respondents, but by G.B.
worth P250,000.00.[2] This mortgage was annotated at
for Donalco Trading, Inc., of which the husband and Alviar Realty and Development Inc., which has a
the back of TCT No. 438157. On 4 August 1975,
wife were President and Chairman of the Board and separate loan with the bank secured by a separate
respondents executed the corresponding promissory
Vice President,[6] respectively, PN BD#76/C-430 mortgage.[12]
note, PN BD#75/C-252, covering the said loan, which
covering P545,000.000. As provided in the note, the
provides that the loan matured on 4 August 1976 at
loan is secured by Clean-Phase out TOD CA 3923,
an interest rate of 12% per annum with a 2% service On 15 March 1994, the trial court dismissed the
which means that the temporary overdraft incurred by
charge, and that the note is secured by a real estate complaint and ordered the Sheriff to proceed with the
Donalco Trading, Inc. with petitioner is to be converted
mortgage as aforementioned.[3] Significantly, the real extra-judicial foreclosure.[13]Respondents sought
into an ordinary loan in compliance with a Central
estate mortgage contained the following clause: reconsideration of the decision.[14] On 24 August 1994,
Bank circular directing the discontinuance of
the trial court issued an Order setting aside its earlier
overdrafts.[7]
That for and in consideration of decision and awarded attorneys fees to
certain loans, overdraft and other respondents.[15] It found that only the P250,000.00
On 16 March 1977, petitioner wrote Donalco Trading,
credit accommodations obtained loan is secured by the mortgage on the land covered by
Inc., informing the latter of its approval of a straight
from the Mortgagee by the TCT No. 438157. On the other hand, the P382,680.83
loan of P545,000.00, the proceeds of which shall be
Mortgagor and/or ________________ loan is secured by the foreign currency deposit
used to liquidate the outstanding loan of P545,000.00
hereinafter referred to, irrespective account of Don A. Alviar, while the P545,000.00
TOD. The letter likewise mentioned that the securities
of number, as DEBTOR, and to obligation was an unsecured loan, being a mere
for the loan were the deed of assignment on two
secure the payment of the same and conversion of the temporary overdraft of Donalco
promissory notes executed by Bancom Realty
those that may hereafter be Trading, Inc. in compliance with a Central Bank
Corporation with Deed of Guarantee in favor of A.U.
obtained, the principal or all of circular. According to the trial court, the blanket
Valencia and Co. and the chattel mortgage on various
which is hereby fixed at Two mortgage clause relied upon by petitioner applies only
heavy and transportation equipment.[8]
Hundred Fifty Thousand to future loans obtained by the mortgagors, and not by
(P250,000.00) Pesos, Philippine parties other than the said mortgagors, such as
Currency, as well as those that the Donalco Trading, Inc., for which respondents merely
Mortgagee may extend to the On 06 March 1979, respondents paid signed as officers thereof.
Mortgagor and/or DEBTOR, petitioner P2,000,000.00, to be applied to the
including interest and expenses or obligations of G.B. Alviar Realty and Development, Inc.
On appeal to the Court of Appeals, petitioner made the
any other obligation owing to the and for the release of the real estate mortgage for
following assignment of errors:
Mortgagee, whether direct or the P450,000.00 loan covering the two (2) lots located
indirect, principal or secondary as at Vam Buren and Madison Streets, North Greenhills,
appears in the accounts, books and San Juan, Metro Manila. The payment was I. The trial
records of the Mortgagee, the acknowledged by petitioner who accordingly released court erred in holding that
Mortgagor does hereby transfer and the mortgage over the two properties.[9] the real estate mortgage
convey by way of mortgage unto the covers only the promissory
Mortgagee, its successors or note BD#75/C-252 for the
assigns, the parcels of land which sum of P250,000.00.
are described in the list inserted on

19
II. The trial Petitioner maintains that the blanket these loans are covered by separate promissory notes
court erred in holding that mortgage clause or the dragnet clause in the real that expressly provide for a different form of
the promissory note estate mortgage expressly covers not only security.[33] They reiterate the holding of the trial court
BD#76/C-345 the P250,000.00 under PN BD#75/C-252, but also the that the blanket mortgage clause would apply only to
for P2,640,000.00 two other promissory notes included in the application loans obtained jointly by respondents, and not to loans
(P382,680.83 outstanding for extrajudicial foreclosure of real estate obtained by other parties.[34] Respondents also place a
principal balance) is not mortgage.[20] Thus, it claims that it acted within the premium on the finding of the lower courts that the
covered by the real estate terms of the mortgage contract when it filed its petition real estate mortgage clause is a contract of adhesion
mortgage by expressed for extrajudicial foreclosure of real estate mortgage. and must be strictly construed against petitioner
agreement. Petitioner relies on the cases of Lim Julian v. bank.[35]
Lutero,[21] Tad-Y v. Philippine National Bank,[22]Quimson
III. The trial court v. Philippine National Bank,[23] C & C Commercial v. The instant case thus poses the following issues
erred in holding that Philippine National Bank,[24] Mojica v. Court of pertaining to: (i) the validity of the blanket mortgage
Promissory Note BD#76/C- Appeals,[25] and China Banking Corporation v. Court of clause or the dragnet clause; (ii) the coverage of the
430 for P545,000.00 is not Appeals,[26] all of which upheld the validity of mortgage blanket mortgage clause; and consequently, (iii) the
covered by the real estate contracts securing future advancements. propriety of seeking foreclosure of the mortgaged
mortgage. property for the non-payment of the three loans.
Anent the Court of Appeals conclusion that
the parties did not intend to include PN BD#76/C-345 At this point, it is important to note that one of the
IV. The trial court
in the real estate mortgage because the same was loans sought to be included in the blanket mortgage
erred in holding that the
specifically secured by a foreign currency deposit clause was obtained by respondents for Donalco
real estate mortgage is a
account, petitioner states that there is no law or rule Trading, Inc. Indeed, PN BD#76/C-430 was executed
contract of adhesion.
which prohibits an obligation from being covered by by respondents on behalf of Donalco Trading, Inc. and
more than one security.[27] Besides, respondents even not in their personal capacity. Petitioner asks the
V. The trial court Court to pierce the veil of corporate fiction and hold
continued to withdraw from the same foreign currency
erred in holding defendant- respondents liable even for obligations they incurred
account even while the promissory note was still
appellant liable to pay for the corporation. The mortgage contract states that
outstanding, strengthening the belief that it was the
plaintiffs-appellees the mortgage covers as well as those that the
real estate mortgage that principally secured all of
attorneys fees Mortgagee may extend to the Mortgagor and/or
respondents promissory notes.[28] As for PN BD#76/C-
for P20,000.00.[16] DEBTOR, including interest and expenses or any other
345, which the Court of Appeals found to be
exclusively secured by the Clean-Phase out TOD 3923, obligation owing to the Mortgagee, whether direct or
The Court of Appeals affirmed the Order of petitioner posits that such security is not exclusive, as indirect, principal or secondary. Well-settled is the rule
the trial court but deleted the award of attorneys the dragnet clause of the real estate mortgage covers that a corporation has a personality separate and
fees.[17] It ruled that while a continuing loan or credit all the obligations of the respondents.[29] distinct from that of its officers and stockholders.
accommodation based on only one security or Officers of a corporation are not personally liable for
mortgage is a common practice in financial and Moreover, petitioner insists that respondents attempt their acts as such officers unless it is shown that they
commercial institutions, such agreement must be clear to evade foreclosure by the expediency of stating that have exceeded their authority.[36] However, the legal
and unequivocal. In the instant case, the parties the promissory notes were executed by them not in fiction that a corporation has a personality separate
executed different promissory notes agreeing to a their personal capacity but as corporate officers. It and distinct from stockholders and members may be
particular security for each loan. Thus, the appellate claims that PN BD#76/C-430 was in fact for home disregarded if it is used as a means to perpetuate
court ruled that the extrajudicial foreclosure sale of construction and personal consumption of fraud or an illegal act or as a vehicle for the evasion of
the property for the three loans is improper.[18] respondents. Thus, it states that there is a need to an existing obligation, the circumvention of statutes,
pierce the veil of corporate fiction.[30] or to confuse legitimate issues.[37] PN BD#76/C-430,
The Court of Appeals, however, found that being an obligation of Donalco Trading, Inc., and not of
respondents have not yet paid the P250,000.00 Finally, petitioner alleges that the mortgage contract the respondents, is not within the contemplation of the
covered by PN BD#75/C-252 since the payment was executed by respondents with knowledge and blanket mortgage clause. Moreover, petitioner is
of P2,000,000.00 adverted to by respondents was understanding of the dragnet clause, being highly unable to show that respondents are hiding behind the
issued for the obligations of G.B. Alviar Realty and educated individuals, seasoned businesspersons, and corporate structure to evade payment of their
Development, Inc.[19] political personalities.[31] There was no oppressive use obligations. Save for the notation in the promissory
of superior bargaining power in the execution of the note that the loan was for house construction and
promissory notes and the real estate mortgage.[32] personal consumption, there is no proof showing that
Aggrieved, petitioner filed the instant petition, the loan was indeed for respondents personal
reiterating the assignment of errors raised in the Court consumption. Besides, petitioner agreed to the terms
of Appeals as grounds herein. For their part, respondents claim that the dragnet
clause cannot be applied to the subsequent loans of the promissory note. If respondents were indeed the
extended to Don Alviar and Donalco Trading, Inc. since real parties to the loan, petitioner, a big, well-
established institution of long standing that it is,
20
should have insisted that the note be made in the convey by way of mortgage unto the that a mortgage with such a clause will not secure a
name of respondents themselves, and not to Donalco Mortgagee, its successors or note that expresses on its face that it is otherwise
Trading Inc., and that they sign the note in their assigns, the parcels of land which secured as to its entirety, at least to anything other
personal capacity and not as officers of the are described in the list inserted on than a deficiency after exhausting the security
corporation. the back of this document, and/or specified therein,[45] such deficiency being an
Now on the main issues. appended hereto, together with all indebtedness within the meaning of the mortgage, in
the buildings and improvements the absence of a special contract excluding it from the
A blanket mortgage clause, also known as a dragnet now existing or which may hereafter arrangement.[46]
clause in American jurisprudence, is one which is be erected or constructed thereon, of
specifically phrased to subsume all debts of past or which the Mortgagor declares that The latter school represents the better position. The
future origins. Such clauses are carefully scrutinized he/it is the absolute owner free from parties having conformed to the blanket mortgage
and strictly construed.[38] Mortgages of this character all liens and incumbrances. . . clause or dragnet clause, it is reasonable to conclude
enable the parties to provide continuous dealings, the .[43] (Emphasis supplied.) that they also agreed to an implied understanding that
nature or extent of which may not be known or subsequent loans need not be secured by other
anticipated at the time, and they avoid the expense Thus, contrary to the finding of the Court of Appeals, securities, as the subsequent loans will be secured by
and inconvenience of executing a new security on each petitioner and respondents intended the real estate the first mortgage. In other words, the sufficiency of
new transaction.[39] A dragnet clause operates as a mortgage to secure not only the P250,000.00 loan from the first security is a corollary component of the
convenience and accommodation to the borrowers as it the petitioner, but also future credit facilities and dragnet clause. But of course, there is no prohibition,
makes available additional funds without their having advancements that may be obtained by the as in the mortgage contract in issue, against
to execute additional security documents, thereby respondents. The terms of the above provision being contractually requiring other securities for the
saving time, travel, loan closing costs, costs of extra clear and unambiguous, there is neither need nor subsequent loans. Thus, when the mortgagor takes
legal services, recording fees, et cetera.[40] Indeed, it excuse to construe it otherwise. another loan for which another security was given it
has been settled in a long line of decisions that could not be inferred that such loan was made in
mortgages given to secure future advancements are The cases cited by petitioner, while affirming reliance solely on the original security with the dragnet
valid and legal contracts,[41] and the amounts named the validity of dragnet clauses or blanket mortgage clause, but rather, on the new security given. This is
as consideration in said contracts do not limit the clauses, are of a different factual milieu from the the reliance on the security test.
amount for which the mortgage may stand as security instant case. There, the subsequent loans were not
if from the four corners of the instrument the intent to covered by any security other than that for the Hence, based on the reliance on the security test, the
secure future and other indebtedness can be mortgage deeds which uniformly contained the dragnet California court in the cited case made an inquiry
gathered.[42] clause. whether the second loan was made in reliance on the
original security containing a dragnet clause.
The blanket mortgage clause in the instant case states: In the case at bar, the subsequent loans Accordingly, finding a different security was taken for
That for and in obtained by respondents were secured by other the second loan no intent that the parties relied on the
consideration of certain loans, securities, thus: PN BD#76/C-345, executed by Don security of the first loan could be inferred, so it was
overdraft and other credit Alviar was secured by a hold-out on his foreign held. The rationale involved, the court said, was that
accommodations obtained from the currency savings account, while PN BD#76/C-430, the dragnet clause in the first security instrument
Mortgagee by the Mortgagor and/or executed by respondents for Donalco Trading, Inc., constituted a continuing offer by the borrower to
________________ hereinafter referred was secured by Clean-Phase out TOD CA 3923 and secure further loans under the security of the first
to, irrespective of number, as eventually by a deed of assignment on two promissory security instrument, and that when the lender
DEBTOR, and to secure the notes executed by Bancom Realty Corporation with accepted a different security he did not accept the
payment of the same and those Deed of Guarantee in favor of A.U. Valencia and Co., offer.[47]
that may hereafter be and by a chattel mortgage on various heavy and In another case, it was held that a mortgage
obtained, the principal or all of transportation equipment. The matter of PN BD#76/C- with a dragnet clause is an offer by the mortgagor to
which is hereby fixed at Two 430 has already been discussed. Thus, the critical the bank to provide the security of the mortgage for
Hundred Fifty Thousand issue is whether the blanket mortgage clause applies advances of and when they were made. Thus, it was
(P250,000.00) Pesos, Philippine even to subsequent advancements for which other concluded that the offer was not accepted by the bank
Currency, as well as those that the securities were intended, or particularly, to PN when a subsequent advance was made because (1) the
Mortgagee may extend to the BD#76/C-345. second note was secured by a chattel mortgage on
Mortgagor and/or DEBTOR, certain vehicles, and the clause therein stated that the
including interest and expenses or Under American jurisprudence, two schools note was secured by such chattel mortgage; (2) there
any other obligation owing to the of thought have emerged on this question. One school was no reference in the second note or chattel
Mortgagee, whether direct or advocates that a dragnet clause so worded as to be mortgage indicating a connection between the real
indirect, principal or secondary as broad enough to cover all other debts in addition to the estate mortgage and the advance; (3) the mortgagor
appears in the accounts, books and one specifically secured will be construed to cover a signed the real estate mortgage by her name alone,
records of the Mortgagee, the different debt, although such other debt is secured by whereas the second note and chattel mortgage were
Mortgagor does hereby transfer and another mortgage.[44] The contrary thinking maintains signed by the mortgagor doing business under an
21
assumed name; and (4) there was no allegation by the be read against the party who drafted it,[55] which is
bank, and apparently no proof, that it relied on the the petitioner in this case.
security of the real estate mortgage in making the
advance.[48] Even the promissory notes in issue were
made on standard forms prepared by petitioner, and
Indeed, in some instances, it has been held that in the as such are likewise contracts of adhesion. Being of
absence of clear, supportive evidence of a contrary such nature, the same should be interpreted strictly
intention, a mortgage containing a dragnet clause will against petitioner and with even more reason since
not be extended to cover future advances unless the having been accomplished by respondents in the
document evidencing the subsequent advance refers to presence of petitioners personnel and approved by its
the mortgage as providing security therefor.[49] manager, they could not have been unaware of the
import and extent of such contracts.
It was therefore improper for petitioner in this Petitioner, however, is not without recourse. Both the
case to seek foreclosure of the mortgaged property Court of Appeals and the trial court found that
because of non-payment of all the three promissory respondents have not yet paid the P250,000.00, and
notes. While the existence and validity of the dragnet gave no credence to their claim that they paid the said
clause cannot be denied, there is a need to respect the amount when they paid petitioner P2,000,000.00.
existence of the other security given for PN BD#76/C- Thus, the mortgaged property could still be properly
345. The foreclosure of the mortgaged property should subjected to foreclosure proceedings for the
only be for the P250,000.00 loan covered by PN unpaid P250,000.00 loan, and as mentioned earlier,
BD#75/C-252, and for any amount not covered by the for any deficiency after D/A SFDX#129, security for PN
security for the second promissory note. As held in one BD#76/C-345, has been exhausted, subject of course
case, where deeds absolute in form were executed to to defenses which are available to respondents.
secure any and all kinds of indebtedness that might
subsequently become due, a balance due on a note, WHEREFORE, the petition is DENIED. The Decision of
after exhausting the special security given for the the Court of Appeals in CA-G.R. CV No. 59543 is
payment of such note, was in the absence of a special AFFIRMED.
agreement to the contrary, within the protection of the Costs against petitioner.
mortgage, notwithstanding the giving of the special
security.[50] This is recognition that while the dragnet
clause subsists, the security specifically executed for
subsequent loans must first be exhausted before the
mortgaged property can be resorted to.
One other crucial point. The mortgage contract, as well
as the promissory notes subject of this case, is a
contract of adhesion, to which respondents only
participation was the affixing of their signatures or
adhesion thereto.[51] A contract of adhesion is one in
which a party imposes a ready-made form of contract
which the other party may accept or reject, but which
the latter cannot modify.[52]

The real estate mortgage in issue appears in a


standard form, drafted and prepared solely by
petitioner, and which, according to jurisprudence must
be strictly construed against the party responsible for
its preparation.[53] If the parties intended that the
blanket mortgage clause shall cover subsequent
advancement secured by separate securities, then the
same should have been indicated in the mortgage
contract. Consequently, any ambiguity is to be
taken contra proferentum, that is, construed against
the party who caused the ambiguity which could have
avoided it by the exercise of a little more care.[54] To be
more emphatic, any ambiguity in a contract whose
terms are susceptible of different interpretations must
22
force and effect as if the said promissory note or notes
PNB vs. SPS ALONDAY and/or accommodations were existing on the date
thereof, notwithstanding full payments of any or all Judgment of the RTC
obligations of the Mortgagors. This mortgage shall also
The issue is whether the all-embracing or dragnet
stand as security for said obligations and any and all On July 8, 1994, therefore, the respondents instituted
clause contained in the first mortgage contract
other obligations of the Mortgagor to the Mortgagee of a complaint against the petitioner in the Regional Trial
executed between the parties for the security of the
whatever kind and nature, whether such obligations Court (RTC) in Davao City to recover damages and
first loan could authorize the foreclosure of the
have been contracted before, during or after the attorney's fees (Civil Case No. 23,021-94), averring that
property under the mortgage to secure a second loan
constitution of this mortgage. However, if the the foreclosure and sale of the property covered by TCT
despite the full payment of the second loan.
Mortgagor shall pay the Mortgagee, its successors or No. T-66139 was illegal.
assigns, the obligations secured by this mortgage,
Antecedents together with interests, costs and other expenses, on On November 28, 1997, the RTC rendered judgment
or before the date they are due, and shall keep and finding in favor of the respondents,6 and disposed as
On September 26, 1974, the Spouses Benedicto and perform all the covenants and agreements herein follows:ChanRoblesVirtualawlibrary
Azucena Alonday (Spouses Alonday) obtained an contained for the Mortgagor to keep and perform, then
agricultural loan of P28,000.00 from the petitioner at this mortgage shall be null and void, otherwise, it shall WHEREFORE, judgment is hereby rendered in favor of
its Digos, Davao del Sur Branch, and secured the remain in full force and the plaintiffs and against defendant bank, ordering
obligation by constituting a real estate mortgage on effect.2chanroblesvirtuallawlibrary said defendant bank:ChanRoblesVirtualawlibrary
their parcel of land situated in Sta. Cruz, Davao del The Spouses Alonday made partial payments on the
Sur registered under Original Certificate of Title (OCT) commercial loan, which they renewed on December 23,
No. P-3599 of the Registry of Deeds of Davao del 1. To pay plaintiffs the sum of One Million
1983 for the balance of P15,950.00. The renewed
Sur.1chanrobleslaw Seven Hundred Thousand (P1,700,000.00)
commercial loan, although due on December 25, 1984,
Pesos, representing the value of the land
was fully paid on July 5, 1984.3chanrobleslaw
On June 11, 1980, the Spouses Alonday obtained a covered by TCT No. T-66139;
commercial loan for P16,700.00 from the petitioner's On August 6, 1984, respondents Mercy and Alberto
Davao City Branch, and constituted a real estate Alonday, the children of the Spouses Alonday, 2. To pay plaintiffs the sum of P20,000.00 as
mortgage over their 598 square meter residential lot demanded the release of the mortgage over the attorney's fees; and cralawlawlibrary
situated in Ulas, Davao City registered under Transfer property covered by TCT No. T-66139. The petitioner
Certificate of Title (TCT) No. T-66139 of the Registry of informed them, however, that the mortgage could not 3. To pay the costs of this suit.
Deeds of Davao City. be released because the agricultural loan had not yet
been fully paid, and that as the consequence of the
It is noted that the mortgage contracts contained the SO ORDERED.7chanroblesvirtuallawlibrary
failure to pay, it had foreclosed the mortgage over the
following identical provision, to The RTC observed that if the petitioner had intended to
property covered by OCT No. P-3599 on August 17,
wit:ChanRoblesVirtualawlibrary have the second mortgage secure the pre-existing
1984.
agricultural loan, it should have made an express
That for and in consideration of certain loans, reservation to that effect; that based on the all-
It appeared that notwithstanding such foreclosure, a
overdrafts, and other credit accommodations, obtained embracing clause, the mortgage was a contract of
deficiency balance of P91,525.22 remained.4 Hence,
from the Mortgagee, which is hereby fixed at _________, adhesion, and the ambiguities therein should be
the petitioner applied for the extrajudicial foreclosure
Philippine Currency, and to secure the payment of the construed strictly against the petitioner; that the last
of the mortgage on the property covered by TCT No. T-
same and those others that the Mortgagee may extend sentence of the all-embracing clause provided that the
66139. A notice of extra-judicial sale was issued on
to the Mortgagor, including interests and expenses, mortgage would be null and void upon the payment of
August 20, 1984, and the property covered by TCT No.
and other obligations owing by the Mortgagor to the the obligations secured by the mortgage; and that the
T-66139 was sold on September 28, 1984 to the
Mortgagee, whether direct or indirect, principal or petitioner was guilty of bad faith in refusing to nullify
petitioner in the amount of P29,900.00. Since the
secondary, as appearing in the accounts, books and the mortgage despite full payment of the commercial
Alondays were unable to redeem the property, the
records of the Mortgagee, the Mortgagor does hereby loan prior to its maturity.
petitioner consolidated its ownership. Later on, the
transfer and convey by way of mortgage unto the property was sold for P48,000.00 to one Felix Malmis
Mortgagee, its successors or assigns, the parcel of land The RTC also ruled that because the property had
on November 10, 1989.5chanrobleslaw
which is/are described in the list inserted at the back already been sold to Malmis, a third party not brought
of this document xxx. In case the Mortgagor executes within the trial court's jurisdiction, it could not order
According to the petitioner, the deed of mortgage
subsequent promissory note or notes either as renewal the return of the property; and that it was ordering the
relating to the property covered by TCT No. T-66139
of the former note, as an extension thereof, or as a new petitioner instead to pay the respondents the value of
included an "all-embracing clause" whereby the
loan, or is given any other kind of accommodation, the property under its present market valuation.
mortgage secured not only the commercial loan
xxx, this mortgage shall also stand as security for the contracted with its Davao City Branch but also the
payment of the said promissory note or notes and/or earlier agricultural loan contracted with its Digos
accommodations without the necessity of executing a Decision of the CA
Branch.
new contract and this mortgage shall have the same

23
mortgage contract.15 If the requirement could be
Dissatisfied, the petitioner appealed to the Court of imposed on a future loan that was uncertain to
Appeals (CA). The appeal was docketed as C.A.-G.R. Ruling of the Court materialize, there is a greater reason that it should be
CV No. 60625. applicable to a past loan, which is already subsisting
The appeal lacks merit. and known to the parties.
On August 31, 2005, the CA affirmed the
RTC,8 observing that the mortgage, being a contract of The CA opined as follows:ChanRoblesVirtualawlibrary Nonetheless, it was undeniable that the petitioner had
adhesion, should be construed strictly against the the opportunity to include some form of
petitioner as the patty who had drafted the same; and The real estate mortgage on the property covered by acknowledgement of the previously subsisting
that although the petitioner had argued, citing Mojica TCT No. T-66139 was specifically constituted to secure agricultural loan in the terms of the second mortgage
v. Court of Appeals,9 that all-embracing clauses were the payment of the commercial loan of the Spouses contract The mere fact that the mortgage constituted
valid to secure past, present and future loans, Mojica ALONDAY. In the same manner, the real estate on the property covered by TCT No. T-66139 made no
v. Court of Appeals was not in point inasmuch as the mortgage on the property covered by OCT No. P-3599 mention of the pre-existing loan could only strongly
facts therein were different from the facts herein. was constituted to secure the payment of their indicate that each of the loans of the Spouses Alonday
agricultural loan with the PNB. With the execution of had been treated separately by the parties themselves,
The petitioner filed a motion for reconsideration, but separate mortgage contracts for the two (2) loans, it is and this sufficiently explained why the loans had been
the CA denied the motion on February 27, clear that the intention of the parties was to limit the secured by different mortgages.
2006.10chanrobleslaw mortgage to the loan for which it was constituted.
Another indication that the second mortgage did not
Hence, this appeal by petition for review on certiorari. xxxx extend to the agricultural loan was the fact that the
second mortgage was entered into in connection only
The [Mojica] case is not in point since the facts therein with the commercial loan. Our ruling in Prudential
Issues are different from the case at bench. In Mojica vs. Bank v. Alviar16 is then relevant, to
Court of Appeals, the mortgaged real estate property wit:ChanRoblesVirtualawlibrary
The petitioner assigns the following errors to the CA, to was made to answer for future advancement or
wit:ChanRoblesVirtualawlibrary renewal of the loan, whereas in the instant case, the xxx The parties having conformed to the "blanket
foreclosure sale included a property which was used as mortgage clause" or "dragnet clause," it is reasonable
a security for a commercial loan which was obtained to conclude that they also agreed to an implied
after the agricultural loan. understanding that subsequent loans need not be
I. The Court of Appeals grievously erred in
The mortgage provision relied upon by appellant is secured by other securities, as the subsequent loans
restricting and delimiting the scope and
known in American jurisprudence as a "dragnet" will be secured by the first mortgage. In other words,
validity of the standard "all-embracing
clause, which is specifically phrased to subsume all the sufficiency of the first security is a corollary
clause" in real estate mortgage contracts
debts of past or future origin. Such clauses pursuant component of the "dragnet clause." But of course,
solely to future indebtedness and not to prior
to the pronouncement of the Supreme Court in DBP there is no prohibition, as in the mortgage contract in
ones, contrary to leading Supreme Court
vs. Mirang must be "carefully scrutinized and strictly issue, against contractually requiring other securities
decisions on the matter.
construed."12chanrobleslaw for the subsequent loans. Thus, when the mortgagor
takes another loan for which another security was
II. Even assuming arguendo that the xxx The petitioner wrongly insists that the CA, thr ough given it could not be inferred that such loan was made
decisions are inapplicable to the case at bar, the foregoing ratiocination, held that the all-embracing in reliance solely on the original security with the
the Court of Appeals grievously erred in or dragnet clauses were altogether invalid as to prior "dragnet clause," but rather, on the new security given.
awarding the unsubstantiated amount of obligations. What the CA, although reiterating that the This is the "reliance on the security test."
P1.7 million in damages and P20,000.00 as Court upheld the validity of using real estate
attorney's fees against PNB without factual mortgages to secure future advancements, only xxx Accordingly, finding a different security was taken
and legal basis.11 thereby pointed out that it could not find similar for the second loan no intent that the parties relied on
rulings as to mortgages executed to secure prior loans. the security of the first loan could be inferred, so it
The petitioner submits that Mojica v. Court of was held. The rationale involved, the court said, was
Appeals validates the use of an all-embracing clause in There is no question, indeed, that all-embracing or that the "dragnet clause" in the first security
a mortgage agreement to secure not only the amount dragnet clauses have been recognized as valid means instrument constituted a continuing offer by the
indicated on the mortgage instrument, but also the to secure debts of both future and past origins.13 Even borrower to secure further loans under the security of
mortgagor's future and past obligations; that by so, we have likewise emphasized that such clauses the first security instrument, and that when the lender
denying the applicability to the case of Mojica v. Court were an exceptional mode of securing obligations, and accepted a different security he did not accept the
of Appeals and other similar rulings, the CA have held that obligations could only be deemed offer.17chanroblesvirtuallawlibrary
disregarded the principle of stare decisis; and that the secured by the mortgage if they came fairly within the Although the facts in Prudential Bank were not entirely
CA in effect thereby regarded allembracing clauses terms of the mortgage contract.14 For the all-embracing on all fours with those of this case because the prior
invalid as to prior obligations. or dragnet clauses to secure future loans, therefore, mortgage in Prudential Bank was sought to be enforced
such loans must be sufficiently described in the against a subsequent loan already secured by other
24
securities, the logic in Prudential Bank is applicable per square meter. To date, the value could reasonably Interest is a compensation fixed by the parties for the
here. The execution of the subsequent mortgage by the be P3,000.00 per square use or forbearance of money. This is referred to as
parties herein to secure the subsequenlloan was an meter.19chanroblesvirtuallawlibrary monetary interest. Interest may also be imposed by law
indication that they had intended to treat each loan as Opining that the respondents should be indemnified or by courts as penalty or indemnity for damages. This
distinct from the other, and that they had intended to the value of the loss suffered from the illegal is called compensatory interest. The right to interest
secure each of the loans individually and separately. foreclosure of the property covered by TCT No. T- arises only by virtue of a contract or by virtue of
66139, theCA adopted the valuation by the RTC on the damages for delay or failure to pay the principal loan
We further concur with the CA and the RTC in their established fair market value of the property being on which interest is demanded.
holding that the mortgage contracts executed by the P3,000.00/square meter, for a total of P1,700,000.00
Spouses Alonday were contracts of adhesion as damages to be awarded.20chanrobleslaw Article 1956 of the Civil Code, which refers to
exclusively prep red by the petitioner. Under Article monetary interest, specifically mandates that no
1306 of the Civil Code, the contracting parties "may The petitioner challenges the valuation as devoid of interest shall be due unless it has been expressly
establish such stipulations, clauses, terms and basis. It points out that the complaint of the Spouses stipulated in writing. As can be gleaned from the
conditions as they may deem convenient, provided they Alonday had placed the value of the property at foregoing provision, payment of monetary interest is
are not contrary to law, morals, good customs, public P1,200.00/square meter; and that respondent Alberto allowed only if: (1) there was an express stipulation for
order or public policy." This is an express recognition Alonday had testified during the trial that the value of the payment of interest; and (2) the agreement for the
by the law of the right of the people to enter into all the property had been only P1,200.00/square meter. payment of interest was reduced in writing. The
manner of lawful conventions as part of their concurrence of the two conditions is required for the
safeguarded liberties. The objection against a contract We uphold the challenge by the petitioner. payment of monetary interest. Thus, we have held that
of adhesion lies most often in its negation of the collection of interest without any stipulation therefor
autonomy of the will of the parties in contracts. A We are at a loss at how the RTC had computed and in writing is prohibited by law.
contract of adhesion, albeit valid, becomes determined the valuation at P3,000.00/square meter.
objectionable only when it takes undue advantage of Such determination was easily the product of xxxx
one of the parties the weaker party- by having such guesswork on the part of the trial court, for the
party just adhere to the terms of the contract. In such language employed in its judgment in reference to There are instances in which an interest may be
situation, the courts go to the succor of the weaker such value was "could reasonably be."21 On its part, imposed even in the absence of express stipulation,
party by construing any obscurity in the contract the CA adverted to the valuation as "approximately verbal or written, regarding payment of interest. Article
against the party who prepared the contract, the latter P3,000.00,"22 indicating that its own determination of 2209 of the Civil Code states that if the obligation
being presumed as the stronger party to the the fair market value was of similar tenor as that by consists in the payment of a sum of money, and the
agreement, and as the party who caused the the RTC. Accordingly, the valuation by both lower debtor incurs delay, a legal interest of 12% per
obscurity.18chanrobleslaw courts cannot be upheld, for it is basic enough that in annum may be imposed as indemnity for damages if no
their determination of actual damages, the comis stipulation on the payment of interest was agreed
To reiterate, in order for the all-embracing or dragnet should eschew mere assertions, speculations, upon. Likewise, Article 2212 of the Civil Code provides
clauses to secure future and other loans, the loans conjectures or guesswork;23 otherwise, they would be that interest due shall earn legal interest from the time
thereby secured must be sufficiently described in the guilty of arbitrariness and whimsicality. it is judicially demanded, although the obligation may
mortgage contract. Considering that the agricultural be silent on this point.
loan had been pre-existing when the mortgage was Moreover, the courts cannot grant reliefs not prayed
constituted on the property covered by TCT No. T- for in the pleadings or in excess of what is being All the same, the interest under these two instances
66139, it would have been easy for the petitioner to sought by the party.24chanrobleslaw may be imposed only as a penalty or damages for
have expressly incorporated the reference to such breach of contractual obligations. It cannot be charged
agricultural loan in the mortgage contract covering the To accord with what is fair, based on the records, we as a compensation for the use or forbearance of
commercial loan. But the petitioner did not. Being the reduce the basis of the actual damages to money. In other words, the two instances apply only to
party that had prepared the contract of mortgage, its P1,200.00/square meter. Such valuation is insulated compensatory interest and not to monetary
failure to do so should be construed that it did not at from arbitrariness because it was made by the interest.26 xxx
all contemplate the earlier loan when it entered into Spouses Alonday themselves in their complaint, The petitioner should be held liable for interest on the
the subsequent mortgage. rendering a total of P717,600.00 as actual damages. actual damages of P717,600.00 representing the value
of the propetiy with an area 598 square meters that
Anent the value of the property covered by TCT No. T- The lower courts did not impose interest on the was lost to them through the unwarranted foreclosure,
66139, the findings of the RTC on the valuation were judgment obligation to be paid by the petitioner. Such the same to be reckoned from the date of judicial
as follows:ChanRoblesVirtualawlibrary interest is in the nature of compensatory interest, as demand (i.e., the filing of the action by the Spouses
distinguished from monetary interest. It is relevant to Alonday). At the time thereof, the rate was 12% per
Considering that the property is located at the junction elucidate on the distinctions between these kinds of annum, and such rate shall run until June 30, 2013.
of the roads leading to Toril and Calinan districts with interest. In this regard, the Court has expounded Thereafter, or starting on July 1, 2013, the rate of
big establishments all around, plaintiffs claim that at in Siga-an v. Villanueva:25cralawredcralawred interest shall be 6% per annum until full payment of
the time of the filing of this case which was in 1994, the obligation, pursuant to the ruling in Nacar v.
the reasonable market value of the land was P1,200.00 Gallery Frames,27 which took into consideration the
25
lowering of interest rates by the Monetary Board.

In addition, Article 221228 of the Civil Code requires


that interest due shall earn legal interest from the time
it is judicially demanded, although the obligation may
be silent upon this point. Accordingly, the interest due
shall itself earn legal interest of 6% per annum from
the date of finality of the judgment until its full
satisfaction, the interim period being deemed to be an
equivalent to a forbearance of credit.29chanrobleslaw

WHEREFORE, the Court AFFIRMS the decision


promulgated in C.A.-G.R. CV No. 60625 on August 31,
2005 in all respects subject to the
following MODIFICATIONS, namely: (1) the award of
P1,700,000.00 representing the value of the land
covered by Transfer Certificate of Title No. T-66139 of
the Registry of Deeds of Davao City is REDUCED to
P717,600.00, the same to be paid by petitioner
Philippine National Bank; (2) the principal amount of
P717,600.00 shall earn interest of 12% per
annum from the filing of the complaint until June 30,
2013, and interest of 6% per annum from July 1, 2013
until full payment; and (3) the interests thus earned
shall also earn interest of 6% per annum from the
finality of this decision until full payment.

26