(26) JEANETTE D. MOLINO vs.
SECURITY DINERS novation did not serve to release petitioner from her surety
INTERNATIONAL CORPORATION
G.R. NO. 136780 August 16, 2001
FACTS: On 24 July 1987, Jeanette Molino acted as a surety for her
brother-in-law, Danilo Alto, in his application for a local credit card
(P10,000.00 credit limit) with the Security Diners International
Corporation (SDIC).
A Surety Undertaking was signed by Jeanette which states that she
bound herself jointly and severally with Danilo to pay SDIC all
obligations and charges in the use of the credit card; and she
declared that "any change or novation in the Agreement shall not
release her from the Surety Undertaking," it being understood that
said Undertaking is a continuing one and shall subsist and bind her
until all such obligations, charges, and fees have been fully paid and
satisfied.
The application of Danilo was approved by SDIC. On 8 February
1988, he requested SDIC to upgrade his Regular Card to Diamond
Card (no credit limit). As a requirement, Danilo secured the approval
of Jeanette who then signed a note indicating her approval to the said
request.
On 01 October 1988, Danilo defaulted in the payment of
P166,408.31. SDIC filed an action for collection against Danilo and
Jeanette before the RTC of Makati. Jeanette claimed that the Surety
Undertaking only applies to the original agreement covering the
Regular Card first issued to Danilo and incurred no liability under
the Diamond Card because she did not expressly give her consent to
be a surety thereto; and the upgrading of the card extinguishes her
obligation under the original agreement and Surety Undertaking.
ISSUE: Whether the upgrading of the card constituted a novation
that will extinguish Jeanettes obligation under the original
agreement and Surety Undertaking.
HELD: The upgrading was a novation because it was committed with
the intent of cancelling and replacing the first card. However, the
obligations because in the Surety Undertaking she expressly
waived discharge in case of change or novation in the agreement
governing the use of the first credit card.
The extent of a suretys liability is determined by the language of the
suretyship contract or bond itself. The Surety Undertaking expressly
provides that petitioners liability is solidary. A surety is considered in
law as being the same party as the debtor in relation to whatever is
adjudged touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable. Although the contract of a surety is
in essence secondary only to a valid principal obligation, his liability
to the creditor is direct, primary and absolute; he becomes liable for
the debt and duty of another although he possesses no direct or
personal interest over the obligations nor does he receive any benefit
therefrom.
The petition filed by Jeanette was dismissed for lack of merit.
(30) PEOPLE OF THE PHILIPPINES vs. JULIA MANIEGO
G.R. NO. L-30910 February 27, 1987
FACTS: In 1957, Lt. Rizalino M. Ubay, Disbursing Officer in the
Office of the Chief of Finance, was convicted of the crime of
malversation in conspiracy with Julia T. Maniego, the indorser of
personal checks drawn against the PNB and BPI. Maniego was
acquitted on reasonable doubt but both she and Ubay are ordered to
pay jointly and severally the amount of P57,434.50 (the amount
malversed) to the Government.
Maniego argued that her acquittal absolved her from civil liability to
indemnify the Government; and as a mere indorser, she cannot be
made liable on account of the dishonor of the checks indorsed by her.
ISSUE: Whether or not Maniegos acquittal absolved her from any
civil liability; and
Whether or not Maniego is liable as indorser to indemnify the
Government.
HELD: The Supreme Court ruled that the Trial Court was correct in
adjudging Maniego to be civilly liable in the same criminal action in
which she had been acquitted of the felony of Malversation.
Extinction of the penal action does not carry with it extinction of the
civil unless the extinction proceeds from a declaration in a final
judgment that the fact from which the civil might arise did not exist.
The Court also ruled that Maniego is liable as indorser. Under the
law, the holder or last indorsee of a negotiable instrument has the
right to "enforce payment of the instrument for the full amount
thereof against all parties (including the indorser) liable
thereon." Such an indorser "who indorses without qualification," inter
alia "engages that on due presentment, ** (the instrument) shall be
accepted or paid, or both, as the case may be, according to its tenor,
and that if it be dishonored, and the necessary proceedings on
dishonor be duly taken, he will pay the amount thereof to the holder,
or to any subsequent indorser who may be compelled to pay it."
Maniego may also be deemed an "accommodation party" in the light
of the facts, i.e., a person "who has signed the instrument as maker,
drawer, acceptor, or indorser, without receiving value therefor, and for
the purpose of lending his name to some other person." As such, she
is under the law "liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the instrument
knew ** (her) to be only an accommodation party, although she has
the right, after paying the holder, to obtain reimbursement from the
party accommodated, "since the relation between them is in effect
that of principal and surety, the accommodation party being the
surety."
The judgment of the Trial Court was affirmed in toto.
(34) PHILIPPINE PRYCE v. CA
G.R. NO. 107062 February 21, 1994
FACTS: Gegroco, Inc filed before the Makati Regional Trial Court,
Branch 138 complaint for collection of sum of money. The complaint
alleged that petitioner issued two surety bonds (No. 0029, dated July
24, 1987 and No. 0037, dated October 7, 1987) in behalf of its
principal Sagum General Merchandise for FIVE HUNDRED
THOUSAND (P500,000.00) PESOS and ONE MILLION (1,000,000.00)
PESOS, respectively. The trial court favored Gegroco, Inc. Upon
appeal to the CA, it affirmed RTC decision.
Interworld Assurance Corporation checks issued by its principal
which were supposed to pay for the premiums, which bounced and it
was not yet authorized by the Insurance Commission to issue surety
bonds.
ISSUE: Whether or not Interworld Assurance Corporation should be
liable for the surety bond that it issued as payment for the premium.
HELD: The Court ruled in the affirmative. Interworld Assurance
Corporation is liable for the surety bond it issued as payment for the
premium.
Under Sec. 177 of the Insurance Code: The surety is entitled to
payment of the premium as soon as the contract of suretyship or
bond is perfected and delivered to the obligor. No contract of
suretyship or bonding shall be valid and binding unless and until the
premium therefor has been paid, except where the obligee has
accepted the bond, in which case the bond becomes valid and
enforceable irrespective of whether or not the premium has been paid
by the obligor to the surety.
Interworld's defense that it did not have authority to issue a Surety
Bond when it did is an admission of fraud committed against
Gegroco. No person can claim benefit from the wrong he himself
committed. A representation made is rendered conclusive upon the
person making it and cannot be denied or disproved as against the
person relying thereon.
(38) BA FINANCE CORP v. CA
GR 94566, July 3, 1992
FACTS: On December 17, 1980, Renato Gaytano, doing business
under the name Gebbs International, applied for and was granted a
loan with respondent Traders Royal Bank in the amount of
P60,000.00. As security for the payment of said loan, the Gaytano
spouses executed a deed of suretyship whereby they agreed to pay
jointly and severally to respondent bank the amount of the loan
including interests, penalty and other bank charges. In a letter dated
December 5, 1980 addressed to respondent bank, Philip Wong as
credit administrator of BA Finance Corporation for and in behalf of
the latter, undertook to guarantee the loan of the Gaytano spouses.
Partial payments were made on the loan leaving an unpaid balance in
the amount of P85, 807.25. Since the Gaytan spouses refused to pay
their obligation, respondent bank filed with the trial court complaint
for sum of money against the Gaytano spouses and petitioner as
alternative defendant. The Gaytano spouses did not present evidence
for their defense. Petitioner, on the other hand, raised the defense of
lack of authority of its credit administrator to bind the corporation.
On December 12, 1988, the trial court rendered a decision in favor of
plaintiff and against defendants/Gaytano spouses, ordering the latter
to jointly and severally pay the plaintiff. Not satisfied with the
decision, respondent bank appealed with the Court of Appeals. On
March 13, 1990, respondent appellate court rendered judgment
modifying the decision of the trial court. Hence, this petition.
ISSUE: Whether or not the letter of guaranty of Wong is ultra vires
act.
HELD: Wong acts beyond his authority.
Although Wong was clearly authorized to approve loans even up to
P350,000.00 without any security requirement, which is far above
the amount subject of the guaranty in the amount of P60,000.00,
nothing in the said memorandum expressly vests on the credit
administrator power to issue guarantees. We cannot agree with
respondent's contention that the phrase "contingent commitment" set
forth in the memorandum means guarantees. It has been held that a
power of attorney or authority of an agent should not be inferred from
the use of vague or general words. Guaranty is not presumed, it must
be expressed and cannot be extended beyond its specified limits. In
one case, where it appears that a wife gave her husband power of
attorney to loan money, this Court ruled that such fact did not
authorize him to make her liable as a surety for the payment of the
debt of a third person.
The sole allegation of the credit administrator in the absence of any
other proof that he is authorized to bind petitioner in a contract of
guaranty with third persons should not be given weight. The
representation of one who acts as agent cannot by itself serve as
proof of his authority to act as agent or of the extent of his authority
as agent. Wong's testimony that he had entered into similar
transactions of guaranty in the past for and in behalf of the
petitioner, lacks credence due to his failure to show documents or
records of the alleged past transactions. The actuation of Wong in
claiming and testifying that he has the authority is understandable.
He would naturally take steps to save himself from personal liability
for damages to respondent bank considering that he had exceeded
his authority. The rule is clear that an agent who exceeds his
authority is personally liable for damages
(42) SBTC v. Cuenca
GR 138544 October 3, 2000
FACTS: Defendant-appellant Sta. Ines Melale (Sta. Ines/SIMC) is a
corporation engaged in logging operations. It was a holder of a Timber
License Agreement issued by the DENR. On 10 November 1980,
Security Bank and Trust Co. granted appellant Sta. Ines a credit line
in the amount of (P8,000,000.00) effective until November 30, 1981
to assist the latter in meeting the additional capitalization
requirements of its logging operations. To secure payment, it executed
a chattel mortgage over some of its machineries and equipments. And
as an additional security, its President and Chairman of the Board of
Directors Rodolfo Cuenca, executed an Indemnity agreement in favor
of Security Bank whereby he bound himself jointly and severally with
Sta. Ines. Cuenca resigned as President and Chairman of the Board
of Directors of defendant-appellant Sta. Ines. Subsequently, the
shareholdings of Cuenca in Sta. Ines were sold at a public auction to
Adolfo Angala. Before and after this, Sta. Ines availed of its credit line.
Sta. Ines encountered difficulty in making the amortization payments
on its loans and requested SBTC for a complete restructuring of its
indebtedness. SBTC accommodated SIMCs request and signified its
approval in a letter dated February 18, 1988 wherein SBTC and Sta.
Ines, without notice to or the prior consent of Cuenca, agreed to
restructure the past due obligations of defendant-appellant Sta. Ines.
To formalize their agreement to restructure the loan obligations of
Sta. Ines, Security Bank and Sta. Ines executed a Loan Agreement
dated October 31, 1989 Sta. Ines made payments up to
(P1,757,000.00). The defaulted in the payment of its restructured
loan obligations to SBTC despite demands made upon appellant
SIMC and CUENCA, SBTC filed a complaint for collection of sum of
resulting after trial on the merits in a decision by the court a quo,
from which Cuenca appealed. Cuenca was released from liability
because 1989 Loan Agreement novated the 1980 credit
accommodation which extinguished the Indemnity Agreement for
which Cuenca was liable solidarily.
ISSUE/S: Whether the 1989 Loan Agreement novated the original
credit accommodation and Cuencas liability under the Indemnity
Agreement.
HELD: YES. An obligation may be extinguished by novation,
pursuant to Article 1292 of the Civil Code, which reads as follows:
ART. 1292. In order that an obligation may be extinguished by
another which substitute 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.
Novation of a contract is never presumed. It has been held that in the
absence of an express agreement, novation takes place only when the
old and the new obligations are incompatible on every point. Indeed,
the following requisites must be established: (1) there is a previous
valid obligation; (2) the parties concerned agree to a new contract; (3)
the old contract is extinguished; and (4) there is a valid new contract.
(46) Llanto v. Alzona
GR 150730 January 31, 2005
FACTS: Maria Sales was the registered owner of a parcel of land in
Laguna which she acquired under a free patent. Until they died, she
and her husband (Bernardo) lived on the said land in the house w/c
they constructed. Maria died in August 1986. In January 1990, a
real estate mortgage contract (REM) was purportedly executed by
Maria in favor of Dominador Alzona. Estela Pelongco (one of the
daughters of Maria and Bernardo) signed as witness. Ernesta Alzona
(brother of Dominador) admitted that his name does not appear in
the REM although he was a co-mortgagee. The mortgage was
foreclosed and was sold in a mortgage sale to Ernesto. In January
1992, he executed a Consolidation of Ownership over the property
and a Transfer Certificate of Title was issued in his name. Mila Llanto
(another daughter of Maria and Bernardo) and the rest of her
brothers and sisters caused the inscription of an adverse claim on
the title to the property. They filed for a complaint for Annulment of
Mortgage and Auction Sale with Reconveyance of Title. However, the
RTC and CA both ruled in favor of Alzona.
ISSUE/S: Whether or not the Alzonas were mortgagees in good faith.
HELD: One of the essential requisites of mortgage is that the
mortgagor should be the absolute owner of property to be mortgaged,
otherwise the mortgage is null and void. To be considered as
mortgagees in good faith, jurisprudence require that they should take
the necessary precaution expected of a prudent man to ascertain the
status and condition of properties offered as collateral and to verify
the persons they transact businesses with. In the case, the RTC gave
credence to Ernestos testimony that he conducted a credit
investigation before he approved the loan sought and the property
mortgaged. A perusal testimony proved that he exercised the
necessary precautions to ascertain the status of the property to be
mortgaged. Llanto never disputed Ernestos claim that he met the
petitioners at the house built on the parcel of land. It was Estela and
the persons who represented themselves as Bernardo and Maria who
perpetrated the fraud. Ernesto cannot be faulted if he was led into
believing that the old man and woman he met in November 1989 and
January 1990 are 2 different persons.
(50) BELO vs. PNB
G.R. 134330 March 1, 2001
FACTS: Eduarda Belo owned an agricultural land located in Timpas,
Capiz. A portion of the land was leased to spouses Marcos and
Arsenia Eslabon (respondents) in connection with their sugar
plantation business. The spouses then obtained a loan from PNB
which was secured by a real estate mortgage on their four residential
houses including the land leased to them by Eduarda Belo. The
assent of Eduarda Belo to the mortgage was acquired through a
special power of attorney which she executed in favor Marcos
Eslabon. Since the spouses Eslabon failed to pay the loan, PNB
instituted extrajudicial foreclosure proceedings against the mortgaged
properties and at the auction sale, PNB was the highest bidder. PNB
appraised Eduarda Belo of the sale at public auction of her
agricultural land as well as the registration of the Certificate of
Sheriffs Sale in its favor and the one year period to redeem the land.
However, Eduarda Belo sold her right of redemption to spouses
Enrique and Florencia Belo (petitioners) under a deed of absolute sale
of proprietary and redemption rights. Spouses Belo
tendered payment for the redemption of the agricultural land that
included the bid price of PNB. However PNB rejected the payment
because the redemption price should be the total claim of the bank
on the date of the auction sale and custody of property plus charges
accrued and interests. The spouses disagreed and did not pay the
total claim of PNB.
ISSUE/S: 1. W/N the SPA, real estate mortgage contract, foreclosure
proceedings and auction sale of Eduarda Belos property is valid?
2. W/N petitioner spouses are required to pay the redemption price
which was the entire claim of PNB (P2,779,978.72)?
HELD: 1. The Court ruled that it is valid. The SPA was not created to
make Eduarda Belo a co-obligor of the principal contract of loan
between PNB and Spouses Eslabon.The accommodation real estate
mortgage over her property is merely an accessory contract. Eduarda
Belo consented to be an accommodation mortgagor that she signed
the SPA to authorize Spouses Eslabon to execute a mortgage on her
land. An accommodation mortgage is not necessarily void simply
because the accommodation mortgagor did not benefit from the
same. Under Article 2085 of the Civil Code, third persons who are not
parties to the principal obligation may secure the latter by pledging or
mortgaging their own property.
2. The Court ruled that Spouses Belo are only made to pay the bid
price less the corresponding loan value of the foreclosed residential
lots of Spouses Eslabon and to redeem only the property of Eduarda
Belo which was mortgaged. The indivisibility concept under Article
2089of the Civil Code cannot be applied in the case at bar because
the spouses Belo are assignees of an accommodation mortgagor
(Eduarda Belo). The indivisibility principle applies only when there is
a debtor and creditor relationship.
(54) SORIANO v. GALIT
G.R. 156295 September 23, 2003
FACTS: Ricardo Galit (respondent) contracted a loan from Marcelo
Soriano (petitioner) in the amount of P480,000 which was evidenced
by four promissory notes. The loan was secured by a real estate
mortgage over a parcel of land. Galit was unable to pay his obligation
to Soriano therefore Soriano filed a complaint for sum of money with
the Regional Trial Court. The RTC rendered the judgment in favor of
Soriano and the decision became final and executory. The trial court
then issued a writ of execution that the following real properties of
the Galit spouses be levied by the deputy sheriff: 1) A parcel of land;
2) Store or house made with strong materials and 3) Bodega made
with strong materials. At the auction sale, Soriano was the highest
bidder and the deputy sheriff issued him a Certificate of Sale of
Execution of Real Property.
When Soriano registered the Certificate of Sale of Execution of Real
Property to the Registry of deeds, it included another parcel of land
(TCT No. T-40785) which was not included in the Certificate of Sale
on file with the deputy sheriff. Soriano then moved for the issuance
of writ of possession on the basis that the one year redemption period
had already elapsed for the Spouses Galit to redeem the properties
and that the sale is considered as final. The RTC granted the
issuance of the writ of possession. The spouses filed for a petition of
certiorari with the CA for the reason of the inclusion of another
property which was not included in the original certificate of sale
which was given to Soriano. The CA ruled in favor of the Spouses and
declared the RTC judgment to be null and void.
ISSUE: W/N the Certificate of Sale on the execution of the real
property is null and void?
HELD: The Court ruled the Certificate of Sale is void. The issuance of
a Certificate of Sale is an end result of judicial foreclosure where
statutory requirements are strictly adhered to; where even the
slightest deviations therefrom will invalidate the proceeding and the
sale. Among these requirements is an explicit enumeration and
correct description of what properties are to be sold stated in the
notice. The certificate of sale is an accurate record of what properties
were actually sold to satisfy the debt. The strictness in the
observance of accuracy and correctness in the description of the
properties renders the enumeration in the certificate exclusive.
The Court also ruled the argument that the properties to be included
are necessarily included is incorrect. A provision in the Civil Code
enumerated lands and buildings separately and it could only mean
that buildings are considered as an immovable property. Thus it can
be mortgaged separately from the land which it has been built.
Applying the facts in the case at bar, the writ of execution, which
included the storehouse and bodega, it must be considered separate
property from the conveyance of the lot to where they stand.
(58) SPOUSES DAVID B. CARPO & and RECHILDA S. CARPO vs.
ELEANOR CHUA and ELMA DY NG
G.R. NOS. 150773 & 153599 September 30, 2005
contends that the agreed rate of interest of 6% per month or 72% per
annum is so excessive, iniquitous, unconscionable and exorbitant
that it should have been declared null and void and instead of
dismissing their complaint, they aver that the lower court should
have declared them liable to respondents for the original amount of
the loan plus 12% interest per annum and 1% monthly penalty
charge as liquidated damages, in view of the ruling in Medel v. Court
of Appeals.
ISSUE: Whether or not the extra judicial foreclosure of the real estate
mortgage is invalid on the ground that the invalidity of the stipulation
on interest rate on the loan renders such mortgage void.
HELD: NO. The invalidity of the agreed interest rate on the loan
does not render the real estate mortgage void.
The court held that the stipulated interest in this case is invalid. The
consideration of the mortgage contract is the same as that of the
principal contract from which it receives life, and without which it

FACTS: Spouses David Carpo and Rechilda Carpo borrowed from cannot exist as an independent contract. Being a mere accessory
contract, the validity of the mortgage contract would depend on the
Eleanor Chua and Elma Dy Ng the amount of 175,000.00 pesos
validity of the loan secured by it.
payable within 6 months with an interest rate of 6 % per month. To
secure the payment of the loan, Spouses Carpo mortgage their
In Medel, the Court did not invalidate the entire loan obligation
residential house and lot. The spouses failed to pay the loan upon
despite the inequitability of the stipulated interest, but instead
demand. Consequently, the real estate mortgage was extra judicially
reduced the rate of interest to the more reasonable rate of 12% per
foreclosed and the mortgage property sold at a public auction. The
annum.
house and lot was awarded to Chua and Dy Ng. Upon failure of the
spouses to exercise their right of redemption, TCT issued in the name
The Courts ultimate affirmation in the cases cited of the validity of
of respondents. Despite the issuance of TCT, spouses continued to
the principal loan obligation side by side with the invalidation of the
occupy the said house and lot which prompted the respondents to file
interest rates thereupon is congruent with the rule that a usurious
a petition for writ of possession. Spouses filed a complaint for
loan transaction is not a complete nullity but defective only with
annulment of real estate mortgage and the subsequent foreclosure
respect to the agreed interest
proceedings. Also, spouses assert that the nullity of the agreed
interest rate affects the validity of the real estate mortgage. They
The Courts wholehearted affirmation of the rule that the principal
obligation subsists despite the nullity of the stipulated interest is
evinced by its subsequent rulings, cited above, in all of which the
main obligation was upheld and the offending interest rate merely
corrected. Hence, it is clear and settled that the principal loan
obligation still stands and remains valid. By the same token, since
the mortgage contract derives its vitality from the validity of the
principal obligation, the invalid stipulation on interest rate is
similarly insufficient to render void the ancillary mortgage contract.
(62) METROPOLITAN BANK, & TRUST COMPANY (MBTC) vs.
Hon. FLORO T. ALEJO, in His Capacity as Presiding Judge of
Branch 172 of the Regional Trial Court of Valenzuela; and SY
TAN SE, represented by his Attorney-in-Fact, SIAN SUAT NGO
G.R. NO. 141970 September 10, 2001
FACTS: Spouses Acampado obtained loan from Metropolitant Bank
in the amounts of 5,000,000 pesos and 2,000,000 pesos respectively.
As security for the payment, the Spouses Acampado exectuted in
favor of Metropolitant Bank a real estate mortgage and an
amendment of real estate mortgage over a parcel of land registered in
their names. Subsequently, a complaint for declaration of nullity of
the TCT of the spouses parcel of land was filed by Sy Tan Se. Despite
being the registered mortgagee of the real property covered by the
title sought to be annulled, Metropolitant Bank was not made a party
to the declaration of nullity of the TCT case nor notified of its
existence. A Certificate of Sale was issued in favor of the bank and
the sale was entered in the Registry of Deeds. When the redemption
period lapsed exactly a year after, the bank executed an Affidavit of
Consolidation of Ownership to enable the Registry of Deeds to issue a
new TCT in its name. Upon presentation to the Register of Deeds of
the Affidavit of Consolidation of Ownership, the bank was informed of
the RTC decision annulling the TCT. The mortgagee bank then filed
with the Court of Appeals a petition for annulment of the RTC
decision. The Court of Appeals outrightly dismissed the petition on
the ground that the petition is not proper.
ISSUE: Whether or not the decision of RTC nullifying the TCT should
be declared null and void on the ground that the said court failed to
implead the mortgagee bank in such case as an indispensable party.
HELD: Yes. The RTC decision should be declared null and void for
the failure of the court to implead the motgagee bank as an
indispensable party.
The court held that it was the trial courts duty to order banks
inclusion as a party to the civil case. This was not done. Neither the
court nor private respondents bothered to implead bank as a party to
the case. In the absence of bank, an indispensable party, the trial
court had no authority to act on the case. Its judgment therein was
null and void due to lack of jurisdiction over an indispensable party.
In a suit to nullify an existing torrens certificate of title (TCT) in
which a real estate mortgage is annotated, the mortgagee is an
indispensable party. In such suit, a decision cancelling the TCT and
the mortgage annotation is subject to a petition for annulment of
judgment, because the non-joinder of the mortgagee deprived the
court of jurisdiction to pass upon the controversy.
Although a mortgage affects the land itself and not merely the TCT
covering it, the cancellation of the TCT and the mortgage annotation
exposed petitioner to real prejudice, because its rights over the
mortgaged property would no longer be known and respected by third
parties. Necessarily, therefore, the nullification of TCT adversely
affected its property rights, considering that a real mortgage is a real
right and a real property by itself.
(70) DEVELOPMENT BANK OF THE PHILIPPINES v. VERONICA
AGUIRREE and THE HONORABLE COURT OF APPEALS
G.R. 144877 September 07, 2001
FACTS: Petitioner DBP granted a loan to Veronica Aguirre. To
secure the loan, respondent Aguirre executed a mortgage over a 180-
square meter lot in Paraaque and issued two promissory notes
covering the amount of the loan. As respondent Aguirre defaulted,
petitioner took steps in 1982 to foreclose the mortgage. Upon request
of respondent Aguirre, petitioner offered to restructure her loan.
Respondent was given seven days to accept or reject the offer. As
respondent did not respond to the offer, petitioner proceeded with the
foreclosure of the mortgage.
The notice for the foreclosure sale, to be held on September
25, 1985to be held on September 25, 1985 in the municipal building
of the Paraaque, was published in Mabuhay, a newspaper of general
circulation in Bulacan and Metro Manila, in its issues of August 25,
September 1, and 8, 1985. For some reason, however, the foreclosure
sale scheduled on September 25, 1985 did not take place on the said
date but on January 7, 1986, during which petitioner was the
highest bidder. As respondent Aguirre failed to redeem the property,
DBP consolidated its title and advertised the sale of the foreclosed lot
through a public auction scheduled on December 6, 1988. On the
day of the bidding, respondent Aguirre brought suit against DBP to
enjoin the scheduled auction sale and to annul the extrajudicial sale
of January 7, 1986. Respondent claimed that her loan was not yet
due because it had been restructured and that she had not been
personally notified of the foreclosure sale.
ISSUE: Was the foreclosure proceeding valid?
HELD: Under Act No. 3135, if the value of the property subject of the
foreclosure is more than P400.00, the notice of sale must be posted
and published. The failure to post a notice is not per se a ground for
invalidating the sale provided that the notice thereof is duly
published in a newspaper of general circulation.
The Court explained in the case of Olizon v. C.A.:
[N]ewspaper publications have more far-reaching
effects than posting on bulletin boards in public
places. There is a greater probability that an
announcement or notice published in a newspaper of
general circulation, which is distributed nationwide,
shall have a readership of more people than that
posted in a public bulletin board, no matter how
strategic its location may be, which caters only to a
limited few. Hence. the publication of the notice of sale
in the newspaper of general circulation alone is more
than sufficient compliance with the notice-posting
requirement of the law. By such publication, a
reasonably wide publicity had been effected such that
those interested might attend the public sale, and the
purpose of the law had been thereby subserved.
In this case, a notice of extrajudicial foreclosure sale was
published on August 25, September 1, and 8, 1985 in a newspaper of
general circulation in Metro Manila in accordance with Act No. 3135.
However, although the notice of foreclosure sale was duly published,
the sale did not take place as scheduled on September 25, 1985.
Instead, it was held more than two months after the published date
of the sale or on January 7, 1986. This renders the sale void. As held
in Masantol Rural Bank, Inc. v. Court of Appeals,7 in which the
foreclosure sale likewise took place several months after the date
indicated in the published notice of sale
Act. No. 3135, as amended, which governs the
extrajudicial foreclosure of mortgages on real property
specifies the following publication requirements:
"Sec. 3. Notice shall be given by posting notices of the
sale for not less than twenty days in at least three
public places of the municipality or city where the
property is situated, and if such property is worth
more than four hundred pesos, such notice shall also
be published once a week for at least three consecutive
weeks in a newspaper of general circulation in the
municipality or city."
Although the lack of republication of the notice of sale has not
been raised in this case, this Court is possessed of ample power to
look into a relevant issue, such as the lack of jurisdiction to hold the
foreclosure sale.
(66) STATE INVESTMENT HOUSE, INC., v. COURT OF APPEALS
and SABINA VDA. DE CUENCA
G.R. No. 99308 November 13, 1992
FACTS: Private respondent obtained a loan from petitioner State
Investment House, Inc. (SIHI) under a promissory note for
P160,000.00, secured by a mortgage on Cuenca's property at
Tandang Sora, Quezon City. Cuenca, again, obtained another loan of
P500,000.00. This loan was secured by a real estate mortgage
executed by Cuenca on another property located along Timog,
Quezon City, with paragraph 6 of the contract expressly giving SIHI
the option of extra-judicially foreclosing the mortgaged property in
the event of Cuenca's default in the payment of her indebtedness.
Cuenca's unpaid balance of P120,000.00 under the first loan was
deducted from the proceeds of the second loan. The mortgage on her
property at Tandang Sora, Quezon City was cancelled.
Because of Cuenca's failure to pay on the maturity date of the loan,
her account was restructured and rolled over twelve times through
the execution of various promissory notes.
Cuenca did not heed SIHI's demands for payment. SIHI thus initiated
extra-judicial foreclosure of Cuenca's mortgaged property for which
the corresponding notice of sheriff's sale was issued on February 23,
1983, setting the auction sale on March 22, 1983. The scheduled
foreclosure sale was, however, deferred by SIHI on account of
Cuenca's request to be given time to pay the loan. Although Cuenca
did make some payments, these were not enough to fully pay her
outstanding obligation. Consequently, SIHI proceeded with the
auction sale.
ISSUE: Was there a valid foreclosure?
HELD: Cuenca's loan with SIHI was restructured and rolled over
twelve (12) times, with the last promissory note indicating the
maturity date of November 29, 1982. The recomputationof the Court
of Appeals shows, however, that on the said date Cuenca still had an
outstanding indebtedness. SIHI, in its letters to Cuencademanded
the payment of this unpaid amount. Cuenca, however, failed to make
any payments and thus, even at that point in time, was already
debtor in default under Article 1168 of the New Civil Code.
The extra-judicial foreclosure instituted by SIHI in February 1983
was, therefore, valid as at that time, Cuenca's loan being then
already almost three (3) months overdueAside from the fact that
Cuenca was already in default, the Real Estate Mortgage executed by
the parties expressly granted SIHI the option to foreclose.
SIHI, however, deferred the auction sale when Cuenca subsequently
asked for more time to pay her obligation. Cuenca's account, however,
was not restructured and she herself gave SIHI permission to proceed
with the auction sale on August 8, 1983 should she not be able to
pay her account by then. It is worth noting that the computation of
the Court of Appeals was not challenged or questioned by either SIHI
or Cuenca and the Court finds no reason to disturb the same.
The obvious implication is that, at the time of the foreclosure sale on
August 8, 1983, Cuenca had defaulted in the payment of
P279,963.42. Thus, SIHI had the option under the aforequoted
provision of the Real Estate Mortgage, to foreclose on the mortgaged
property. SIHI cannot be faulted for having chosen that option.
(74) BENGUET MANAGEMENT CORPORATION vs. COURT OF
APPEALS
G.R. NO. 153571 September 18, 2003
FACTS: This is a petition for certiorari under Rule 65 of the Revised
Rules of Court for the resolution of the Court of Appeals denying
petitioners application for the issuance of a temporary restraining
order. Benguet Management Corporation (BMC) and Keppel Bank
Philippines Inc. (KBPI) entered into a Loan Agreement and Mortgage
Trust Indenture. IN consideration is the loan of P190,000,000.00.
BMC mortgaged several lots in Alaminos, Laguna and Iba. Zambales.
BMC defaulted in its payment then KBPI filed an application for
extra-judicial foreclosure of real estate mortgage with the office of the
clerk of court of the Regional Trial Court of Iba and later with the
office of the clerk of court of the Regional Trial Court in San Pablo
City. BMC, on the other hand filed a compliance and supplementary
grounds to dispose the application for extr-judicial foreclosure and a
memorandum. BMC contended that the application should be denied
on the grounds of wrong remedy and forum shopping.
ISSUE: Whether or not the KBPI violated the Rule on Forum
Shopping in filing applications for extra-judicial foreclosure of real
estate mortgage with both the RTCs of Iba and San Pablo City.
HELD: The Supreme Court partly granted the petition. The
resolutions of the court of appeals are reversed and set aside. The
status quo order issued by the court shall stand until further order of
the court and the instant case is remanded to the court of appeals for
determination of the case of its merit.
According to the Supreme Court, there was no Forum Shopping in
this case. Under the procedure on extra-judicial foreclosure of
mortgage (A.M. NO. 99-10-05-0), the applicant in extra-judicial
foreclosure covering properties located in different provinces is
required to pay only one filing fee regardless of the number of
properties to be foreclosed so long as the application covers only one
transaction or indebtedness. The venue, however, shall be the place
where each of the mortgaged property is located. The reason behind
this rule is that an injunction order of the court is enforceable only
within its the territorial limits. The mortgagor is left without remedy
as to the properties located outside the jurisdiction of the issuing
court, unless an application for injunction is made with another
court which has jurisdiction over the properties.
(78) CESAR SULIT vs. COURT OF APPEALS AND ILUMINADA
CAYCO
G.R. NO. 119247 February 17, 1997
FACTS: On June 9, 1992, Iluminada Cayco executed a real estate
mortgage (REM) over a lot located at Calaocan City in favor of Cesar
Sulit to secure a loan of P4Million. Upon failure of petitioner to pay
within the stipulated period, respondent, Sulit, caused the
foreclosure of the mortgage. Hence, there was a public auction where
the lot was sold to the mortgagee with the winning bid of P7Million.
Then he petitioned the court for the issuance of the writ of
possession in his favor where it was granted. Later, Cayco filed a
petition to set aside the auction sale and to deter the issuance of the
writ of possession contending that the surplus proceeds of the sale
was not paid by Sulit. It was denied and on appeal the C.A reversed
the decision.
ISSUES: 1. Whether or not the purchase in an extra-judicial
foreclosure sale is entitled to the issuance of a writ of possession over
the mortgaged property despite his failure to pay the surplus
proceeds of the sale to the mortgagor or the person entitled thereto.
2. Whether or not mere inadequacy of price would invalidate the ale
on the person entitled thereto.
HELD: According to the Supreme Court, the law authorize the
purchase in a foreclosure sale to apply for a writ of possession and no
discretion appears to be left to the court. If there are any question
regarding the validity or regularity of the sale, as well as the
consequent cancellation, it is to be determined in a subsequent
proceeding and it cannot be raised as a justification for opposing the
issuance of the writ , unless a third party is actually holding the
property adversely to the judgment debtor.
As to the second issue, the mere inadequacy of the price, unless,
shocking to the conscience, is sufficient to set aside a sale. This is
because no disadvantage is caused by the mortgagor. A mortgagor
stands to gain with a reduced price because he possesses the right of
redemption. When there is a right to redeem, inadequacy of the price
becomes immaterial since the judgment debtor may reacquire the
property or sell his right to redeem, and then recover the loss he
claims to have suffered by reason of price obtained at the auction
sale. The case at bar is quite the reverse, in the sense that instead of
an inadequacy in price, there is due in favor of respondent. A surplus
in the proceeds of the sale is equivalent to approximately 40% of the
total mortgage debt, which excess is indisputably a substantial
amount. As equitable considerations demand, a writ of possession
should also not issue in this case pursuant to the provision of the
rules of court particularly on the disposition of the proceeds of sale.
(82) SPS. MAXIMO LANDRITO, JR. and PACITA EDGALANI vs.
THE HONORABLE COURT OF APPEALS; SPS. BENJAMIN SAN
DIEGO and CARMENCITA SAN DIEGO; The EX-OFFICIO SHERIFF
and CLERK OF COURT of the Regional Trial Court, Makati City;
and the REGISTER OF DEEDS, Makati City
G.R. No. 133079. August 9, 2005.
FACTS: Petitioners obtained a loan of P350,000.00 from respondent
Carmencita San Diego. To secure payment thereof, petitioners
executed in favor of the same respondent a deed of real estate
mortgage over their parcel of land. After making substantial
payments, petitioners again obtained and were granted by
Carmencita San Diego an additional loan of One Million Pesos
(P1,000,000.00). To secure this additional loan, the parties executed
an Amendment of Real Estate Mortgage, where they stipulated that
the loan shall be paid within six (6) months, and if not paid within
said period, the mortgagee shall have the right to declare the
mortgage due and may immediately foreclose the same judicially or
extrajudicially, in accordance with law.
Petitioners defaulted in paying their loan and continuously refused to
comply with their obligation despite repeated demands therefor,
prompting respondent Carmencita San Diego to send them a final
notice of demand requiring them to settle their financial obligation.
After her efforts to collect proved futile, respondent Carmencita San
Diego filed a petition for the extrajudicial foreclosure of the mortgage.
With the petitioners having failed to redeem their property within the
1-year redemption period from the date of inscription of the sheriffs
certificate of sale, the San Diegos caused the consolidation of title
over the foreclosed property in their names. Petitioners filed their
complaint for annulment of the extrajudicial foreclosure and auction
sale. Among other allegations, they alleged that the mortgaged
property was illegally foreclosed in the light of the settled rule that an
action to foreclose a mortgage must be limited to the amount
mentioned in the mortgage document, in this case, P1,000,000.00,
which amount was allegedly bloated by respondent Carmencita San
Diego to P1,950,000.00
ISSUE: Whether the foreclosure is valid as to the amount.
HELD: It is petitioners main submission, however, that the very
reason why they did not avail of their redemption right is because
Mrs. San Diego bloated their original loan of P1,000,000.00 to
P1,950,000.00, an issue supposedly not considered and/or
addressed by the appellate court in the decision under review. In this
regard, petitioners argue that the Court of Appeals, in sustaining the
extrajudicial foreclosure proceedings, thereby go against the
established jurisprudence that an action for foreclosure must be
limited to the amount mentioned in the mortgage document,
P1,000,000.00 in this case. We do not take issue with petitioners
submission that a mortgage may be foreclosed only for the amount
appearing in the mortgage document, more so where, as here, the
mortgage contract entered into by the parties is evidently silent on
the payment of interest. However, contrary to petitioners claim, the
appellate court did pass upon the legal issue raised by them, albeit
ruling that petitioners had been barred by laches from raising the
same.
(86) MANUEL IBASCO and EDITA TAMPINGCO vs. HON.
EDUARDO P. CAGUIOA, in his capacity as Presiding Judge of the
Court of First Instance of Bulacan Branch VIII, Valenzuela, Metro
Manila, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, and
RICARDO CRUZ, as ex-Officio Sherif
No. L-62619. August 19, 1986.
FACTS: Manuel IBASCO and Edita TAMPINGCO are the lessees of a
residential house that they had leased from the spouses Anastacio
Garcia and Asuncion Garcia. IBASCO and TAMPINGCO were
religiously paying their monthly rentals to the GARCIAS, and were
unaware of the fact that the GARCIAS had mortgaged the property
with respondent Banco Filipino Savings and Mortgage Bank.
However, because of non-payment by the GARCIAS, the mortgage had
been foreclosed, and that the redemption period had already expired.
The lessees were served on with a copy of the writ of possession. The
lessees then elevated the case to the Supreme Court claiming that
the lower court had abused its discretion in issuing the writ of
possession. The Supreme Court granted the temporary restraining
order prayed for, and enjoined the sheriff from enforcing the aforesaid
writ.
ISSUE: Whether or not a mortgage, who has foreclosed upon the
mortgaged real property of a delinquent debtor and has purchased
the same at the foreclosure sale, can be granted a writ of possession
over the property despite the fact that the premises are in the
possession of a lessee thereof and whose lease has not as yet been
terminated.
HELD: Anent the contention that the writ of possession can be
obtained only in a land registration case, suffice it to say that in
Section 7 of Act 3135, the writ of possession will be issued only in
the land registration or cadastral proceedings of the property
involved.
(90) SERVICEWIDE SPECIALIST vs. ITERMEDIATE APPELLATE
COURT (IAC)
GR 74553 June 8, 1989
FACTS: Galicano Siton, private respondent, bought a Mitsubishi
Celeste and paid P25,000 as downpayment and the remaining
balance is to be paid monthly of P1,900 for 36 months to Car Traders
Philippines Inc. He issued promissory notes and, for further security,
executed a chattel mortgage over the car in favor of the latter.
The credit covered by the promissory note and chattel mortgage
executed by Siton was first assigned to Filinvest Credit Corporation
then later reassigned to Servicewide Specialist Inc, the petitioner.
Siton was advised of this second assignment.
Justiniano de Dumo is currently in possession of the car due to it
being sold to him consequently by Siton.
Alleging the Siton failed to pay the part of the installment, the
petitioner filed an action against Siton and de Dumo praying for the
issuance of a Writ of Replevin over the car or the amount of money
left to be paid.
De Dumo, in his answer, contended that he as the successor have
paid the monthly installments religiously.
The RTC deny the issuance of Writ of Replevin and ordered the
defendants to pay the remaining balance. Thus this petition.
ISSUE: Whether or not the obligation to pay passes to the buyer of
thing subject to chattel mortgage.
HELD: Yes. The rule settled that the chattel mortgagor continues to
be the owner of the property, and therefore, has the power to alienate
the same; however, he is obliged under pain of penal liability, to
secure the written consent of the mortgagee. Such will not invalidate
the sale but only the penal liability of the mortgagor under the
Revised Penal Code and the binding effect of such sale on the
mortgagee under the Deed of Chattel Mortgage.
(94) JACA v. DAVAO LUMBER COMPANY
GR L-25771 March 29, 1982
FACTS: Urbano Jaca and Bonifacio Jaca are engaged in the logging
business of producing timber and logs for export and/or domestic
purpose of which they had a business dealings with the respondent,
Davao Lumber Corp.
Sometime in 1954, the parties entered into an agreement that the
company would provide for the materials, foodstuff and/or equipment
and payment for such is the logs or lumber produced by the
plaintiffs. The defendant made Urbano Jaca execute a chattel
mortgage in its favor and the respondent company had never
furnished them a copy thereof.
In 1963, plaintiffs requested a formal accounting of their business
relationship but the company persistently refused to do so. The
plaintiffs, surprised, received demand letters requesting them to pay
their accounts to the respondent which according to the latter had
long been overdue.
Plaintiffs claimed that they had overpaid and that there were many
errors in the monthly statements.
Respondent company in its counterclaim stated that they are the
ones who is in debt due to the chatter mortgage of which the plaintiff
executed.
The RTC rendered a decision in favor of the respondent. There were
issues with the execution of the decision but the plaintiffs appealed
otherwise.
ISSUE: Whether or not Davao Lumber Company is entitled to the
appointment of a receiver.
HELD: No. It is an established rule that the applicant for receivership
must have actual and existing interest in the property for which a
receiver is sought to be appointed. Respondents proof of interest is
the deed of chattel mortgage, executed by the plaintiff Urbano Jaca,
in Davao Lumber Companys favor. Such deed of chattel mortgage is
void because it provides that the security stated therein is for the
payment of any and all obligations herein before contracted and
which hereafter contracted by the Mortgagor in favor of the
Mortgagee.
(98) DE BARRETO vs. VILLANUEVA
GR. L-14938 January 28, 1961
FACTS: Rosario Cruzado, obtained from Rehabilitation Finance
Corporation (RFC) a loan. She then mortgaged the land in question to
secure payment. As she failed to pay, RFC foreclosed the said land
and acquired it. Subject to her rights as a mortgager to re-purchase
the same, the land was sold back to her conditionally.
Cruzado, sell with the previous consent of the RFC the land in
question, to Pura L. Villanueva, "all their rights thereon; free from all
charges and encumbrances, with the exception of the stipulated
interest thereon, which the vendor, is still presently obligated to pay
the RFC and which the vendee herein now assumes to pay to the
RFC. Villanueva, executed in favor of the vendor Cruzado a
promissory note. She was, subsequently, able to secure in her name
Transfer Certificate of Title, and then she mortgaged the said
property to Magdalena C. Barretto as security for a loan.
Villanueva failed to pay both Cruzado and De Barreto. De Barreto
sued for foreclosure and won. On the other hand, Cruzado filed a
motion in that foreclosure proceeding for the recognition of his
vendors lien.
The RTC granted Cruzados motion that his lien be satisfied by the
foreclosure proceeds. The SC affirmed the decision of the RTC (Jan.
28, 1961), but in MR, the SC reversed the RTCs ruling.
ISSUE: WON Cruzados lien can be satisfied by the foreclosure
proceedings in accordance with the relevant provisions of the Civil
Code?
HELD: No, Cruzados lien cannot be satisfied through the said
foreclosure proceeding.
Under the system of the Civil Code of the Philippines, only taxes
enjoy a similar absolute preference. All the remaining thirteen classes
of preferred creditors under Article 2242 enjoy no priority among
themselves, but must be paid pro-rata i.e., in proportion to the
amount of the respective credits. Thus, Article 2249 provides:
If there are two or more credits with respect to the same
specific real property or real rights, they, shall be
satisfied pro-rata after the payment of the taxes and
assessments upon the immovable property or real rights."
The question as to whether the Civil Code and the Insolvency Law
can be harmonized is settled by Article 2243, Civil Code. The
preferences named in Articles 2241 and 2242 are to be enforced in
accordance with the Insolvency Law.
Thus, it becomes evident that one preferred creditor's third-party
claim to the proceeds of a foreclosure sale (as in the case now before
us) is not the proceeding contemplated by law for the enforcement of
preferences under Article 2242, unless the claimant were enforcing a
credit for taxes that enjoy absolute priority. If none of the claims is for
taxes, a dispute between two creditors will not enable the Court to
ascertain the pro rata dividend corresponding to each, because the
rights of the other creditors likewise enjoying preference under Article
2242 can not be ascertained. Wherefore, the order of the Court of
First Instance of Manila now appealed from decreeing that the
proceeds of the foreclosure sale be apportioned only between
appellant and appellee, is incorrect and must be reversed.
In the absence of insolvency proceedings (or other equivalent general
liquidation of the debtor's estate), the conflict between the parties
now before us must be decided pursuant to the well established
principle concerning register lands; that a purchaser in good faith
and for value (as the appellant concededly is) takes registered
property free from liens and encumbrances other than statutory liens
and those recorded in the certificate of title. There being no
insolvency or liquidation, the claim of the appellee, as unpaid vendor,
did not acquire the character and rank of a statutory lien co-equal to
the mortgagee's recorded encumbrance, and must remain
subordinate to the latter.
(106) NORTH BULACAN CORP. v. PHILIPPINE BANK OF
COMMUNICATIONS (PBCOM)
G.R. NO. 183140, August 2, 2010
Abad, J.
FACTS: Petitioner North Bulacan Corporation (NBC) is engaged in the
business of developing low and medium-cost housing projects. In
2001, NBC brought a 21-hectare property from First Sarmiento
Property Holdings, Inc. (FSPHI) for P84,499,800. PBCom offered to
finance the whole project and immediately provided NBC P100
million loan facility on the condition that Pag-Ibig/Home
Development Mutual Fund directly paid PBCom for the houses upon
completion of construction, whether or not these had been sold. After
a time, however, PBCom discontinued its financial support to NBC
reportedly due to a cease-and-desist order issued by Bangko Sentral
ng Pilipinas against the bank. NBCs construction eventually stopped
for lack of funds and in 2006, it filed a petition for corporate
rehabilitation. The RTC issued an order giving due course to NBCs
petition for rehabilitation but was unable to approve a rehabilitation
plan for NBC after 180 days from the date of initial hearing in the
case. PBCom challenged the RTC order before the Court of Appeals
(CA) which granted the same and dismissed NBCs action for
corporate rehabilitation. NBC appealed CAs decision.
ISSUE: Whether NBC complied with and met the requirements of
(petition for) corporate rehabilitation.
HELD: No. The Court enacted the Interim Rules of Procedure on
Corporate Rehabilitation to provide a remedy for summary and non-
adversarial rehabilitation proceedings of distressed but viable
corporations. The intent is consistent with the commercial nature of
rehabilitation, which seeks to expedite its resolution for the benefit,
not only of the petitioner-corporation, but of all the parties involved
and the economy in general. NBC violated several rules on corporate
rehabilitation. The documents that accompanied NBCs petition fell
short of what the rules required. NBC filed several prohibited
pleadings which contributed in the RTCs failure to approve a
rehabilitation plan for the company. Under the Rehabilitation Rules,
if upon the lapse of 180 days from the date of the initial hearing there
is still no approved rehabilitation plan, the RTC must dismiss the
petition Moreover, the RTC did not properly address the opposition to
the rehabilitation, such as the claims of FSPHI and Pag-Ibig on
obligations owed by NBC. It appeared from the records that NBCs
liabilities were far greater than its claimed assets. Obviously, its
continued operation would no longer be viable.