Manila Banking Corp. v AnastacioTeodoro, Jr.

and Grace Teodoro

Bidin, J. | 1989
1. April 1966, Spouses Teodoro together with TeodoroSr executed a PN in
favour of Manila Banking Corp (MBC);
Payable within 120 days (until Aug), with 12% interest per annum;
They failed to pay and left balance of 15k as of September 1969;
2. May and June 1966, executed two PNs;
8k and 1k respectively payable within 120 days and 12% per annum;
They made partial payment but still left 8.9k balance as of September
1969;
3. It appears than in 1964, TeodoroJr executed a Deed of Assignment of
Receivables in favour of MBC from Emergency Employment Administration;
Amounted to 44k;
The deed provided it was for consideration of certain credits, loans,
overdrafts and other credit accommodations extended to the spouses
and TeodoroSr as security for the payment of said sum and interest
thereon; and that they release and quitclaim all its rights, title and
interest in the receivables;
4. In the stipulations of fact, it was admitted by the parties:
That MBC extended loans to the spouses and TeodoroJr because of
certain contracts entered into by latter with EEA for fabrication of fishing
boats and that the Philippine Fisheries Commission succeeded EEA after
its abolition;
That non-payment of the PNs was due to failure of the Commission to
pay spouses;
That the Bank took steps to collect from the Commission but no
collection was effected;
5. For failure of the spouses and TeodorSr to pay, MBC instituted against them;
TeodoroSr subsequently died so suit only against the spouses;
6. TC favoured MBC; MFR denied;
Spouses appealed to CA but since issue pure question of law, CA
forwarded to SC;
Issues:
W/N the assignment of receivables has the effect of payment of all the
loans contracted by the spouses; No.
W/N MBC must exhaust all legal remedies against PFC before it can
proceed against the spouses. No
Ratio:
Assignment of credit:
An agreement by virtue of which the owner of a credit(assignor) by a
legal cause (e.g. sale, dation in payment, exchange or donation) and
without the need of the consent of the debtor, transfers his credit and its
accessory rights to another(assignee) who acquires the power to enforce
it to the same extent as the assignor could have enforced it against the
debtor;

May be in form of:

o
Sale
o
Dation in payment - when a debtor, in order to obtain a release from
his debt, assigns to his creditor a credit he has against a third
person;
o
Donation when it is by gratuitous title;
o
Guaranty creditor gives as a collateral, to secure his own debt in
favour of the assignee, without transmitting ownership;
Obligations between the parties will depend upon the juridical relation
which is the basis of the assignment;

What is the legal effect of the Assignment (since its validity is not in
question):
1. Assignment of receivables in 1964 did not transfer the ownership of the
receivables to MBC and release the spouses from their loans;
Consideration was for certain credits, loans, overdrafts and credit
accommodations worth 10k extended by MBC to spouses and as
security for the payment of said sum and interest thereon; also
quitclaim of rights to MBC of their interest in the receivables;
Stipulated also that it was a continuing guaranty for future loans and
correspondingly, the assignment shall extend to all accounts
receivable;
Contention of spouses: not mere guaranty since it was stipulated:
That the assignor release and quitclaim to assignee all its rights, title
and interest in the accounts receivable;
That title and right of possession to account receivable is to remain
in assignee and it shall have right to collect directly from the debtor;
that whatever the assignor does in connection with collection of
such, it does so as agent and representative and in trust of
assignee;
SC: character of transaction is not determined by the language in
document but by intention of the parties;;
If it was intended to secure the payment of money, it must be
construed as a pledge.
A transfer of property by the debtor to a creditor, even if sufficient
on its farm to make an absolute conveyance, should be treated as a
pledge if the debt continues in existence and is not discharged by
the transfer;
Assignment of receivables did not result from sale or by virtue of a
dation in payment;
At time the deed was executed, the loans were non-existent yet;
At most, it was a dation for 10k, the amount of credit with MBC
indicated in the deed; at the time of execution, there was no
obligation to be extinguished except for the 10k;

2.

1292:in order that an obligation may be extinguished by another

which substitutes the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on
every point incompatible with each other;

Deed of assignment intended as collateral security for the loans, as a

continuing guaranty for whatever sums that would be owing by spouses;
In case of doubt as to whether a transaction is a pledge or a dation
in payment, the presumption is in favor of pledge, the latter being
the lesser transmission of rights and interests (Lopez v CA);
MBC need not exhaust all legal remedies against PFC:
Spouses, not being released by the assignment, remain as the
principal debtors of MBC, rather than mere guarantors;
The deed merely guarantees said obligations;
2058 (creditor must have exhausted property of debtor and resorted
to all legal remedies before it can proceed to guarantor) does not
apply to them;
Appellants are both the principal debtors and the pledgors or
mortgagors;
MBC did try to collect but at OP, it was disapproved; so the loan was
basically unsecured;

DISMISSED.
Feliciano, J. concurring.
Justice Bidins, "the character of the transactions between the parties is not,
however, determined by the language used in the document but by their
intention not without exception;
Deed here contains language which suggest that the parties intended
complete alienation of title to and rights over the receivables;
Words remise, release and quitclaim and clauses title the title and
right of possession to said accounts receivable is to remain in said
assignee" who "shall have the right to collect directly from the debtor;
Words agent also convey the ideas;
But such must be taken in conjunction with and qualified by other
language showing intent of the partiesthat title to the receivables shall
pass to the assignee for the limited purpose of securing another,
principal obligation owed by the assignor to the assignee;
Title moves from assignor to assignee but that title is defeasible being designed
to collateralize the principal obligation:
Operationally: means assignee is burdened to collateralize the principal
obligation; taking the proceeds of the receivables assigned and applying
such proceeds to the satisfaction of the principal obligation and returning
any balance remaining thereafter to the assignor;

The parties gave the deed of assignment the form of an absolute conveyance of
title over the receivables assigned, essentially for the convenience of the
assignee:
Without such nature of absolute conveyance, the assignee would have to
foreclose the properties; he would have to comply with documentation
and registration requirements of a pledge or chattel mortgage);
A deed of assignment by way of security avoids the necessity of a public
sale impose by the rule on pactumcommisorium, by in effect placing the
sale of the collateral up front;
The foregoing is applicable where the deed of assignment of receivables
combines elements of both a complete alienation of the credits and a
security arrangement to assure payment of a principal obligation;
Where the 2nd element is absent, the assignment would constitute
essentially a mode of payment or dacion en pago;
in order that a deed of assignment of receivables which is in form an
absolute conveyance of title to the credits being assigned, may be
qualified and treated as a security arrangement, language to such effect
must be found in the document itself and that language, precisely, is
embodied in the deed of assignment in the instant case;
DURAN v. INTERMEDIATE APPELLATE COURT
G.R. No. L-64159 September 10, 1985
Relova, J.
Doctrine:
The fraudulent and forged document of sale may become the root of a valid
title if the certificate has already been transferred from the name of the true
owner to the name indicated by the forger.
The mortgagee has the right to rely on what appears in the certificate of title
and, in the absence of anything to excite suspicion, he is under no obligation to
look beyond the certificate and investigate the title of the mortgagor appearing
on the face of the said certificate.
Good faith, while it is always to be presumed in the absence of proof to the
contrary, requires a well-founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it.

Facts:
Petitioner Duran owned 2 parcels of land. She left the Philippines in June 1954
and returned in May 1966. On 1963, a Deed of Sale was made in favor of the
petitioners mother. On December 1965, Durans mother mortgaged the same
property to private respondent Erlinda Marcelo-Tiangco. When Duran came to
know about the mortgage made by her mother, she wrote the Register of Deeds

informing the latter that she had not given her mother any authority to sell or
mortgage any of her properties in the Philippines. Meanwhile, foreclosure
proceedings were initiated by Tiangco upon the failure of Durans mother to
redeem the mortgaged properties.
Duran claims that the Deed of Sale is a forgery, saying that at the time of its
execution in 1963 she was in the United States. Respondent Court ruled that
there is a presumption of regularity in the case of a public document.
Issue:
Whether private respondent was a buyer in good faith and for value
Held:
Yes. Good faith consists in the possessors belief that the person from who he
received the thing was the owner of the same and could convey his title (Arriola
v. Gomez Dela Serna, 14 Phil. 627). Good faith, while it is always to be presumed
in the absence of proof to the contrary, requires a well-founded belief that the
person from whom title was received was himself the owner of the land, with the
right to convey it (Santiago v. Cruz, 19 Phil. 148).
The mortgagee has the right to rely on what appears in the certificate of title
and, in the absence of anything to excite suspicion, he is under no obligation to
look beyond the certificate and investigate the title of the mortgagor appearing
on the face of the said certificate. Every person dealing with registered land may
safely rely on the correctness of the certificate of title issued therefore and the
law will in no way oblige him to go behind the certificate to determine the
condition of the property. If the rule were otherwise, the efficacy and
conclusiveness of the Torrens Certificate of Titles would be futile and nugatory.
Thus the rule is simple: the fraudulent and forged document of sale may become
the root of a valid title if the certificate has already been transferred from the
name of the true owner to the name indicated by the forger.
While it is true that under Article 2085 of the Civil Code, it is essential that the
mortgagor be the absolute owner of the property mortgaged, and while as
between the daughter and her mother, it was the daughter who still owns the
lots, STILL insofar as innocent third persons are concerned the owner was
already the mother inasmuch as she had already become the registered owner.
REYES v. SIERRA
Facts:
Vicente Reyes sought to register under his name a parcel of land located in
Antipolo,Rizalopposed by Sierra et al
TC approved Reyes application, declaring him owner of said land owing to his
and his predecessor-in-interests constructive possession of the same,

particularly because they had been paying the realty taxes thereon since 1926
until 1961
Origin of the dispute over land was because in 1926, the Sierras predecessor,
Basilia Beltran, borrowed P100 from Vicente Reyes, Sr. and secured the loan with
the said piece of land. In so doing, Basilias children executed together with her a
document (katibayan ng papgpapahintulot sa aming ina na ipananagutan kay
Vicente Reyes sa inutang na halagang P100)
Beltran, however, died in 1938 without being able to pay the loan and Vicente
Reyes, Jr.continued in possession thereof, believing that the document executed
was a contractof sale and not of mortgage
Oppositors Sierra et al now claiming that the words sangla, ipinanagutang sa
halagang isang daang piso manifest that the document was one of mortgage
Issue: What was the nature of the document? determinative of the lands
ownership
Held/Ratio:
It is a mortgage contract. The intention of the parties at the time it was executed
must prevail, i.e., the borrowing and lending of money with security. The terms
indicate a debt and the creation of a creditor-debtor relationship, where the land
was used to secure repayment of the loan.
Following established doctrine, once a mortgage attaches to a transaction, its
character as a mortgage will always continue. The parties cannot by any
stipulation deprive it of the essential attributes of a mortgage in equity. Civil
Code itself provides: The creditor cannot appropriate the things given by way of
mortgage
Act of Vicente Reyes in registering the property in his name after failure of
mortgagor to redeem the property constitutes a pactum commisorium
which is against good morals and public policy.
Court also declared that possession by Reues has not been continuous (they had
only used the property to spend some vacation time there, but this was
discontinued for the last 23 years). Moreover, mere failure of owner to pay taxes
does not necessarily imply abandonment of a right to property; and on the other
hand, payment of realty taxes byitself does not constitute sufficient evidence of
title.
Application by Reyes for registration should therefore be dismissed.
Oppositorsdirected to pay back the P100 debt plus interest (6% p.a.) from 1926
until paid.