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Case Digest- Real Estate Mortgage

G.R. No. 138053 May 31, 2000

CORNELIO M. ISAGUIRRE, petitioner,
vs.

FELICITAS DE LARA, respondent.

FACTS:

1. Alejandro de Lara was the original applicant-claimant for a Miscellaneous Sales

Application over a parcel of land with an area of 2,324 sq. m and is filed within the
Bureau of Land on Jan. 17, 1942
2. Upon his death, Alejandro de Lara was succeeded by his wife — respondent Felicitas
de Lara, the respondent.
3. The Undersecretary of Agriculture and Natural Resources amended the application
from 2,324 to 1,600 sq.m and finally to 1,000sq.m.
4. On this 1,000 sq. m, a two-story residential-commercial apartment declared for taxation
purposes by the responden’s son Apolonio and Rodolfo.
5. Subsequently, respondent obtained several loans from the Philippine National Bank.
6. When the respondent experience financial difficulties, she approached Cornelio M.
Isaguirre, the petitioner herein for assistance.
7. On February 10, 1960, a document denominated as "Deed of Sale and Special Cession
of Rights and Interests" was executed by respondent and petitioner, whereby the
former sold a 250 square meter portion of Lot No. 502, together with the two-story
commercial and residential structure standing thereon, in favor of petitioner, for and
in consideration of the sum of P5,000.
8. Respondents son filed a complaint for recovery of possession but was dismissed because of lack of
jurisdiction.
9. Now, petitioner filed a sales application over the subject property on the basis of the
deed of sale, it was approved and OCT was issued in favor of the latter.
10. Meanwhile, the previous application of the respondent was also approved.
11. As a result, the petitioner filed an action of quieting and damage in RTC Davao.
12. RTC ruled in favor with the petitioner.
13. CA reversed the decision of the RTC and declared that the OCT issued to petitioner is
null and void because the "Document of Sale and Special Cession of Rights and
Interests is declared to be an equitable mortgage not a sale.
14. Petitioner claims that he is entitled to retain possession of the subject property until
payment of the loan and the value of the necessary and useful improvements he made
upon such property.
15. Hence this appeal.

ISSUE: WON the mortgagee in an equitable mortgage has the right to retain possession of
the property pending actual payment to him of the amount of indebtedness by the mortgagor.
HELD: Negative
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 As the sole owner, respondent has the right to enjoy her property, without any other
limitations than those established by
law.
 The only right granted by law in favor of the mortgagee is to demand the execution
and the recording of the document in which the mortgage is formalized .
 As a general rule, the mortgagor retains possession of the mortgaged property since a
mortgage is merely a lien and title to the property does not pass to the mortgagee.
 The mortgagee merely has to annotate his claim at the back of the certificate of title in
order to protect his rights against third persons and thereby secure the debt.
 There is therefore no necessity for him to actually possess the property.
 Neither should a mortgagee in an equitable mortgage fear that the contract relied upon
is not registered and hence, may not operate as a mortgage to justify its foreclosure.
 In the same vein, there is nothing to stop the mortgagor de Lara from acquiring
possession of the property pending actual payment of the indebtedness to petitioner.
 This does not in anyway endanger the petitioner's right to security since, as pointed
out by private respondents, the petitioner can always have the equitable mortgage
annotated in the Certificate of Title of private respondent and pursue the legal
remedies for the collection of the alleged debt secured by the mortgage.
 In this case, the remedy would be to foreclose the mortgage upon failure to pay the
debt within the required period.
 Hence, this Court, once and for all resolves the matter by requiring the trial court to
determine the amount of total indebtedness and the period within which payment shall
be made.

G.R. No. L-13683 March 28, 1960

PAZ SAMANILLA, petitioner-appellee,

vs.
CENEN A. CAJUCOM, ET AL., respondents-appellants

FACTS:

1. Petitioner Samanilla presented a petition in said registration case alleging that

respondents Cajucom had executed in her favor, on December 20, 1955, a real estate
mortgage over their rights and participation on the parcel of land covered by Original
Certificate to secure a loan of P10,000.00.
2. According to the petitioner, in February 1956, respondents borrowed the title from the
petitioner on the excuse that they needed it to segregate from the land the portion
claimed by other persons.
3. Thereafter, petitioner asked for the return of the title so that she could register her
mortgage, but respondents refused.
4. Attached to the petition were the deed of mortgage and the affidavits of petitioner and
a certain Antonio G. Javier, who allegedly was the one who borrowed the title from
petitioner in behalf of respondents.
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5. Respondents opposed the petition, claiming that the mortgage in question was void ab
initio for lack of consideration, and that the issues should be litigated in an ordinary
civil action.
6. The trial Court ordered the respondent to return the title to the Register of Deeds or to
the Court.
7. CA affirmed the TC order.

ISSUE: WON the registration of the mortgage is void due to lack of consideration.

HELD: No, the mortgage is valid.

 There is a legal presumption of sufficient cause or consideration supporting a

contract, even if such cause is not stated therein.
 This presumption appellants cannot overcome by a simple assertion of lack of
consideration.
 As held by this Court.

Once a mortgage has been signed in due form, the mortgagee is entitled
to its registration as a matter of right. By executing the mortgage the mortgagor
is understood to have given his consent to its registration, and he cannot be
permitted to revoke it unilaterally. The validity and fulfillment of contracts
cannot be left to the will of one of the contracting parties (Article 1254 of the
Civil Code)." (Gonzales vs. Basa, Jr., et al., 73 Phil., 704)

 Moreover, the court held that, a mortgage, whether registered or not, is binding
between the parties, registration being necessary only to make the same valid
against third persons.
 In other words, registration only operates as a notice of the mortgage to others,
but neither adds to its validity nor convert an invalid mortgage into a valid one
between the parties.

MOBIL OIL PHILIPPINES, INC., plaintiff-appellant,

vs.
RUTH R. DIOCARES, ET AL., defendants-appellees

FATCS:

1. On Feb. 9, 1965 defendants Ruth R. Diocares and Lope T. Diocares entered into a
contract of loan and real estate mortgage with the plaintiff, among the conditions are
the following: the latter will extend to the said defendants a loan of P45,000.00 and
will repay the loan in monthly installment.
2. To secure the performance of the foregoing obligation they executed a first mortgage
on two parcels of land.
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3. The agreement further provided that in case of failure of the defendants to pay any of
the installments due and purchase their petroleum requirements in the minimum
amount of 50,000 liters per month from the plaintiff, the latter has the right to
foreclose the mortgage or recover the payment of the entire obligation or its remaining
unpaid balance; that in case of foreclosure the plaintiff shall be entitled to 12% of the
indebtedness as damages and attorney's fees.
4. According to the petitioner, defendant failed to fulfill the conditions.
5. Hence, a motion from the plaintiff for a judgment on the pleadings was filed.
6. Defendants, Ruth R. Diocares and Lope T. Diocares, now appellees, admitted their
indebtedness as set forth above, denying merely the alleged refusal to pay, the truth,
according to them, being that they sought for an extension of time to do so, inasmuch
as they were not in a position to comply with their obligation.
7. The lower court was of the opinion that while it "created a personal obligation [it] did
not establish a real estate mortgage." It did not decree foreclosure therefor.
8. Upon appeal, the lower court held that “The Court cannot, however, order the
foreclosure of the mortgage of properties, as prayed for, because there is no
allegation in the complaint nor does it appear from the copy of the loan and real
estate mortgage contract attached to the complaint that the mortgage had been
registered. The said loan agreement although binding among the parties merely
created a personal obligation but did not establish a real estate mortgage. The
document should have been registered.”

ISSUE: WON the default in payment of the respondent will establish a real estate
mortgage.

HELD:

 Yes
 Even if the instrument were not recorded, "the mortgage is nevertheless binding
between the parties." The law cannot be any clearer. Effect must be given to it as
written. The mortgage subsists; the parties are bound
 The mere fact that there is as yet no compliance with the requirement that it be
recorded cannot be a bar to foreclosure.
 In the language of the Report of the Code Commission: "In article [2125] an
additional provision is made that if the instrument of mortgage is not recorded, the
mortgage is nevertheless binding between the parties.
 We are not free to adopt then an interpretation, even assuming that the codal
provision lacks the forthrightness and clarity that this particular norm does and,
therefore, requires construction, that would frustrate or nullify such legislative
objective.
 Nor is the reason difficult to discern why such an exception should be made to the
rule that is indispensable for a mortgage to be validly constituted that it be
recorded.
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EDILBERTO CRUZ and SIMPLICIO CRUZ, petitioners, vs. BANCOM FINANCE

CORPORATION (NOW UNION BANK OF THE PHILIPPINES), respondent

FACTS:

1. Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs herein, were the
registered owners of a 339,335 square meter or 33.9335 hectare parcel of agricultural
land in Bulacan.
2. Sometime in May 1978, defendant Norma Sulit, after being introduced by Candelaria
Sanchez to Fr. Cruz, offered to purchase the land.
3. Plaintiffs asking price for the land was P700,000.00, but Norma only had P25,000.00
which Fr. Cruz accepted as earnest money with the agreement that titles would be
transferred to Norma upon payment of the balance of P675,000.00.
4. Norma failed to pay the balance, but, the Norma succeeded in in having the plaintiffs
execute a document of sale of the land in favor of Candelaria who would then obtain a
bank loan in her name using the plaintiffs land as collateral.
5. On the same day, Candelaria executed another Deed of Absolute Sale over the land in
favor of Norma for a consideration of P 150, 000.00.
6. In a Special Agreement dated September 1, 1978, Norma assumed Candelarias
obligation, stipulating to pay the plaintiffs the said amount within six months on pain
of fine or penalty in case of non-fulfillment.
7. Unknown to the plaintiffs, Norma managed to obtain a loan from Bancom in the
amount of P569,000.00 secured by a mortgage over the land now titled in her name
8. Norma failed to pay the amount stipulated in the Special Agreement.
9. Hence, plaintiff were prompted to file the herein complaint for the reconveyance of
the land.
10.Bancom filed a motion for leave to intervene which was granted by the trial court
alleging that he has priority as mortgagee in good faith and that its contract of
mortgage with Norma had been executed before the annotation of plaintiffs interest in
the title.
11.Norma likewise defaulted in her payment to the bank, hence the property was
foreclosed.
12.Bancom was declared the highest bidder and was issued the corresponding certificate
of sale over the land
13.TC held that the contract of sale between plaintiffs and Candelaria was absolutely
simulated.
14.Consequently, the second contract of sale, that is, between Candelaria and Norma,
produced no legal effect.
15.CA reversed the decision of the TC.

ISSUE: WON the Deeds of Sale and Mortgage is valid.

HELD:

1. No, it is not valid.

2. The Deeds of Sale were executed merely to facilitate the use of the property as
collateral to secure a loan from a bank.
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3. Being merely a subterfuge, these agreements could not have been the source of any
consideration for the supposed sales.
4. Indeed, the execution of the two documents on the same day sustains the position of
petitioners that the Contracts of Sale were absolutely simulated, and that they received
no consideration therefor.
5. The fact that she was able to secure a Certificate of Title to the subject property in her
name did not vest her with ownership over it.
6. Likewise, respondent bank was not a mortgagee in good faith because, at the time it
registered the real estate mortgage over the subject property, their adverse claim and
notice of lis pendens had already been annotated.
7. A banking institution is expected to exercise due diligence before entering into a
mortgage contract.
8. In a case decided by the court, it held that a bank that failed to observe due diligence
was not a mortgagee in good faith.
9. Further, the court held that the “Registration is not the operative act for a mortgage to
be binding between the parties. But to third persons, it is indispensable:”
10.In the present case, the adverse claim and the notice of lis pendens were annotated on
the title on October 30, 1979 and December 10, 1979, respectively; the real estate
mortgage over the subject property was registered by respondent only on March 14,
1980.
11.Settled in this jurisdiction is the doctrine that a prior registration of a lien creates a
preference.
12.However, respondents failure to register the real estate mortgage[52] prior to these
annotations, resulted in the mortgage being binding only between it and the
mortgagor, Sulit.
13.On the question of who has a preferential right over the property, the long-standing
rule, as provided by Article 2085[55] of the Civil Code,[56] is that only the absolute
owner of the property can constitute a valid mortgage on it.
14.In the instant case, the two Deeds of Sale were absolutely simulated; hence, null and
void.
15.Necessarily, the subsequent real estate mortgage constituted by Sulit in favor of
respondent was also null and void, because the former was not the owner thereof.

MANUEL D. MEDIDA, Deputy Sheriff of the Province of Cebu, CITY

SAVINGS BANK (formerly Cebu City Savings and Loan Association, Inc.) and
TEOTIMO ABELLANA, petitioners,
vs.
COURT OF APPEALS and SPS. ANDRES DOLINO and PASCUALA
DOLINO, respondents

FACTS:

16.On October 3, 1974, the son of the respondent filed a loan application for Twenty-Five
Thousand (P25,000.00) Pesos with lot No. 4731 offered as security for the Thirty
Thousand (P30,000.00) Pesos loan from defendant association.
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17.Likewise, on October 10, 1974 plaintiff spouses, alarmed of losing their right of
redemption over a lot in Cebu City from one Mr. Juan Gandioncho, purchaser of the
aforesaid lot at the foreclosure sale of the previous mortgage in favor of Cebu City
Development Bank, went to Teotimo Abellana, president of defendant Association, to
obtain a loan of P30,000.00.
18.When the loan became due and demandable without plaintiff paying the same,
defendant association caused the extrajudicial foreclosure of the mortgage on March
16, 1976.
19.The petitioner association was the highest bidder and certificate of sale was issued.
20.One year after, no redemption having been effected by plaintiff, TCT No. 14272 was
cancelled and in lieu thereof TCT No. 68041 was issued in the name of petitioner
association.
21.Private respondents filed in the court a quo for the annulment of the sale at public
auction conducted on April 19, 1976, as well as the corresponding certificate of sale
issued pursuant thereto.
22. Plaintiffs therein, assailed the validity of the extrajudicial foreclosure sale of their
property, claiming that the same was held in violation of Act No. 3135 and
prayed, inter alia, for the cancellation of TCT issued in favor of therein defendant
City Savings and Loan Association, Inc., now known as City Savings Bank and one of
the petitioners herein.
23.Petitioner therein denied the material allegations of the complaint and averred, among
others, that the present private respondent spouses may still avail of their right of
redemption over the land in question.
24.The TC rendered judgment upholding the validity of the loan and the real estate
mortgage, but annulling the extrajudicial foreclosure sale inasmuch as the same failed
to comply with the notice requirements in Act No. 3135.
25.The CA likewise held that real estate mortgage executed by plaintiffs in favor of
defendant association is void and ineffective.

ISSUE: WON real estate mortgage executed by plaintiff was null and void.

HELD:

 No, the REM was valid.

 what bears attention is that since the mortgagor remains as the absolute owner of the
property during the redemption period and has the free disposal of his property, there
would be compliance with the requisites of Article 2085 of the Civil Code for the
constitution of another mortgage on the property.
 , it is undisputed that the real estate mortgage in favor of petitioner bank was executed
by respondent spouses during the period of redemption.
 We reiterate that during said period it cannot be said that the mortgagor is no longer
the owner of the foreclosed property since the rule up to now is that the right of a
purchaser at a foreclosure sale is merely inchoate until after the period of redemption
has expired without the right being exercised.
 The title to land sold under mortgage foreclosure remains in the mortgagor or his
grantee until the expiration of the redemption period and conveyance by the master's
deed.
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 To repeat, the rule has always been that it is only upon the expiration of the
redemption period, without the judgment debtor having made use of his right of
redemption, that the ownership of the land sold becomes consolidated in the
purchaser.
 Parenthetically, therefore, what actually is effected where redemption is seasonably
exercised by the judgment or mortgage debtor is not the recovery of ownership of his
land, which ownership he never lost, but the elimination from his title thereto of the
lien created by the levy on attachment or judgment or the registration of a mortgage
thereon.

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS and LYDIA CUBA, respondents.

G.R. No. 118367 January 5, 1998

LYDIA P. CUBA, petitioner,

vs.
COURT OF APPEALS, DEVELOPMENT BANK OF THE PHILIPPINES and
AGRIPINA P. CAPERAL,respondents.

FACTS:

1. Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement 1974 from the
Government.
2. Subsequently, plaintiff obtained loans from the Development Bank of the Philippines
in the amounts of P109,000.00; P109,000.00; and P98,700.00 under the terms stated in
the Promissory Notes and executed two Deeds of Assignment of her Leasehold Rights.
3. Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the
terms of the Promissory Notes.
4. Defendant DBP appropriated the Leasehold Rights of plaintiff Lydia Cuba over the
fishpond in question and, executed a Deed of Conditional Sale of the Leasehold Rights
in favor of plaintiff Lydia Cuba over the same fishpond.
5. Plaintiff Lydia Cuba negotiate to repurchase the Leasehold right and DBP accepted
the offer to repurchase.
6. After the Deed of Conditional Sale was executed in favor of plaintiff a new Fishpond
Lease Agreement was issued to the latter.
7. However, Lydia Cuba failed to pay the amortizations stipulated in the Deed of
Conditional Sale.
8. Defendant DBP took possession of the Leasehold Rights of the fishpond in question.
9. DBP advertised in the SUNDAY PUNCH the public bidding dated June 24, 1984, to
dispose of the property.
10.DBP thereafter executed a Deed of Conditional Sale in favor of defendant Agripina
Caperal, and the latter was awarded FLA by the Ministry of Agriculture and Food.
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11.TC held in favor with CUBA declaring that DBP's taking possession and ownership of
the property without foreclosure was plainly violative of Article 2088 and is
considered as pactum commissorium .
12.CA reversed the decision the of the TC, declaring as valid the following: (a) the act of
DBP in appropriating Cuba's leasehold rights and interest under Fishpond Lease
Agreement; (b) the deeds of assignment executed by Cuba in favor of DBP; (c) the
deed of conditional sale between CUBA and DBP; and (d) the deed of conditional sale
between DBP and Caperal, the Fishpond Lease Agreement in favor of Caperal, and the
assignment of leasehold rights executed by Caperal in favor of DBP.
13.DBP alleged that Condition 12 merely provided for the appointment of DBP as
attorney-in-fact with authority, among other things, to sell or otherwise dispose of the
said real rights, in case of default by CUBA, and to apply the proceeds to the payment
of the loan.
14.Further DBP states that “this provision is a standard condition in mortgage contracts
and is in conformity with Article 2087 of the Civil Code, which authorizes the
mortgagee to foreclose the mortgage and alienate the mortgaged property for the
payment of the principal obligation”

ISSUE: WON the act of DBP in appropriating to itself CUBA's leasehold rights over the
fishpond in question without foreclosure proceedings was contrary to Article 2088 of the
Civil Code and, therefore, invalid.

HELD: Yes

 DBP's act of appropriating CUBA's leasehold rights was violative of Article 2088
of the Civil Code, which forbids a credit or from appropriating, or disposing of, the
thing given as security for the payment of a debt
 The fact that CUBA offered and agreed to repurchase her leasehold rights from
DBP did not estop her from questioning DBP's act of appropriation
 Instead of taking ownership of the questioned real rights upon default by CUBA,
DBP should have foreclosed the mortgage, as has been stipulated in condition no.
22 of the deed of assignment
 But, as admitted by DBP, there was no such foreclosure
 In view of the false representation of DBP that it had already foreclosed the
mortgage, the Bureau of Fisheries cancelled CUBA's original lease permit,
approved the deed of conditional sale, and issued a new permit in favor of CUBA.
 Even in cases where foreclosure proceedings were had, this Court had not hesitated
to nullify the consequent auction sale for failure to comply with the requirements
laid down by law, such as Act No. 3135, as amended. 15With more reason that the
sale of property given as security for the payment of a debt be set aside if there was
no prior fore closure proceeding.
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PEOPLE'S BANK AND TRUST CO. and ATLANTIC GULF AND PACIFIC CO. OF
MANILA, plaintiffs-appellants,
vs.
DAHICAN LUMBER COMPANY, DAHICAN AMERICAN LUMBER
CORPORATION and CONNELL BROS. CO. (PHIL.), defendants-appellants.

FACTS

1. Atlantic Gulf & Pacific Company of Manila sold and assigned all its rights in the
Dahican Lumber concession to Dahican Lumber Company for the total sum of
$500,000.00, only $50,0000 was paid.
2. DALCO obtained several loans amounting to 200,000 pesos from People·s bank (BANK) and ,together with
DALCO,
3. IN addition, DALCO and DAMCO obtained another loan amounting to $250,000 from Export-Import bank
secured by evidenced by five promissory notes of $50,000.00 each through people’s bank.
4. on July 13, 1950 DALCO executed in favor of the BANK — the latter acting for itself
and as trustee for the Export-Import Bank of Washington D.C. — a deed of mortgage
covering five parcels of land situated in the province of Camarines Norte together
with all the buildings and other improvements existing thereon and all the personal
properties of the mortgagor located in its place of business in the municipalities of
Mambulao and Capalonga, Camarines Norte .
5. On the same date, DALCO executed a second mortgage on the same properties in
favor of ATLANTIC to secure payment of the unpaid balance of the sale price of the
lumber concession amounting to the sum of $450,000.00.
6. Both mortgages were registered in the Office of the Register of Deeds of Camarines
Norte.
7. In addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock
of DALCO and 9,286 shares of DAMCO to secure the same obligations.
8. After July 13, 1950 — the date of execution of the mortgages mentioned above —
DALCO purchased various machineries, equipment, spare parts and supplies in
addition to, or in replacement of some of those already owned and used by it on the
date aforesaid from CONNELL.
9. However, the Board of Directors of DALCO, in a special meeting called for the
purpose, passed a resolution agreeing to rescind the alleged sales of equipment,
spare parts and supplies by CONNELL and DAMCO to it.
10. the BANK, in its own behalf and that of ATLANTIC, demanded that said agreements
be cancelled but CONNELL and DAMCO refused to do so
11. ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First
Instance of Camarines Norte against DALCO and DAMCO
12. CONNELL, filed a motion for intervention alleging that it was the owner and
possessor of some of the equipments, spare parts and supplies which DALCO had
acquired subsequent to the execution of the mortgages sought to be foreclosed and
which plaintiffs claimed were covered by the lien.
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13. TC ordered the sale of all the machineries, equipment and supplies of DALCO, and
the same were subsequently sold.
14. People’s bank asserted that the ´after acquired machinery and equipment of DAMCO are subject to the deed of
mortgage executed by DAMCO. Hence, these can be included in the foreclosure proceedings.
15. DALCO argued that the mortgages were void as regards the after acquired properties because they were not
registered in accordance with the chattel mortgage law. Moreover, provision of the fourth paragraph of each of
said mortgages did not automatically make subject to such mortgages the "after acquired properties", the only
meaning thereof being that the mortgagor was willing to constitute a lien over such properties.

ISSUE: Whether the ´after acquired machinery and equipment of DAMCO are included as subject of the Real
Estate mortgage, thus can be foreclosed.
HELD: Yes,
 The after acquired machinery and equipment are included in the executed mortgages. It is not disputed in the
case at bar that the "after acquired properties" were purchased by DALCO in connection with, and for use in the
development of its lumber concession and that they were purchased in addition to, or in replacement of those
already existing in the premises on July 13, 1950. In Law, therefore, they must be deemed to have been
immobilized, with the result that the real estate mortgages involved herein ³ which were registered as such ³ did
not have to be registered a second time as chattel mortgages in order to bind the "after acquired properties" and
affect third parties.
 Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature and
description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools, equipments,
and other property that the mortgagor may acquire, construct, install, attach; or use in, to upon, or in connection
with the premises ³ that is, its lumber concession "shall immediately be and become subject to the lien" of both
mortgages in the same manner and to the same extent as if already included therein at the time of
their execution. As the language thus used leaves no room for doubt as to the intention of the parties.
 We might say logical, in all cases where the properties given as collateral are perishable or subject to inevitable
wear and tear or were intended to be sold, or to be used thus becoming subject to the inevitable wear and tear
but with the understanding express or implied that they shall be replaced with others to be thereafter acquired
by the mortgagor.
 As regard the proceeds obtained from the sale of the of after acquired properties" and
the "undebated properties", it is clear, in view of our opinion sustaining the validity of
the mortgages in relation thereto, that said proceeds should be awarded exclusively to
the plaintiffs in payment of the money obligations secured by the mortgages under
foreclosure.
 Considering that the sale of the real properties subject to the mortgages under
foreclosure has not been effected, and considering further the lack of evidence
showing that the true value of all the properties already sold was not realized
because their sale was under stress.

DIONISIO MOJICA, in behalf of Spouses LEONARDO MOJICA (now deceased) and MARINA
RUFIDO,petitioner,
vs.
HON. COURT OF APPEALS, and RURAL BANK OF YAWIT, INC., respondents.

FACTS:
1. On February 1, 1971, plaintiff Leonardo Mojica (now deceased) contracted a loan of
P20,000.00 from defendant Rural Bank of Kawit, Inc. (now respondent).
2. This loan was secured by a real estate mortgage executed on the same date by the
plaintiffs spouses Leonardo Mojica and Marina Rufido.
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3. The real estate mortgage contract states among others.

... but if the mortgagors shall well and truly fulfill the obligation above stated according to
the terms thereof then this mortgage shall become null and void.

4. The spouses mortgaged to the Rural Bank of Kawit, a parcel of land consisting of 218,794
square meters, located in Naic, Cavite.
5. The loan of P20,000.00 by the plaintiffs spouses was fully and completely paid.
6. On March 5, 1974, a new loan in the amount of P18,000.00 was obtained by plaintiffs
spouses from the defendant Rural Bank which loan matured on March 5, 1975.
7. although the top of the promissory note dated March 5, 1974, contained the following
notation “This promissory note is secured by a Real Estate Mortgage executed before the
Notary Public of the Municipality of Kawit, Mrs. Felisa Senti”
8. The Real Estate Mortgage mentioned above is the registered mortgage which guaranteed
the already paid loan of P20,000.00 granted on February 1, 1971.
9. The spouses Leonardo Mojica and Marina Rufido failed to pay their obligation after its
maturity on March 5, 1975.
10. Respondent rural bank extrajudicially foreclosed the real estate mortgage on the
justification that it was adopted as a mortgage for the new loan of P18,000.00.
11. In that auction sale, defendant rural bank was the highest bidder, and its bid
corresponded to the total outstanding obligation of plaintiffs spouses Mojica and Rufido.
12. The corresponding certificate of sale in favor of defendant bank was executed by the
Provincial Sheriff and one year period for redemption elapses after June 1980 without
plaintiffs spouses having redeemed the foreclosure property.
13. on July 19, 1980, Dionisio Mojica, the son of petitioners-spouses, in an apparent attempt
to pay the debt of P18,000.00 made a partial payment in the amount of P24,658.00
(P19,958.00 of this amount in check bounced) which the defendant rural bank received
and accepted with the issuance of the defendant's official receipt No. 101 269,
ackowledging the payment as partial payment of 'past due loan', together with the
"interest on past due lose
14. another partial payment was made by Dionisio Mojica in the amount of P9,958.00.
15. After having consolidated its ownership over the foreclosed property, defendant bank
scheduled the parcel of land to be sold at public auction on February 26, 1982.
16. The refusal of the same bank to allow Dionisio Mojica to pay the unpaid balance of the
loan as per the "Computation Slip" amounting to P21,272.50, resulted in the filing of a
complaint
17. TC dismiss the complaint, the CA affirmed the decision of the TC and dismissed likewise the complaint.

ISSUE: WON the foreclosure sale by the Sheriff on June 27, 1979, had for its basis, a valid and
subsisting mortgage contract?

HELD: Yes
 stipulations in the mortgage document constitute the law between the parties, which
must be complied with faithfully
13

 As earlier stated, the Real Estate Mortgage in the case at bar expressly stipulates that
it serves as guaranty
 It has long been settled by a long line of decisions that mortgages given to secure
future advancements are valid and legal contracts; that the amounts named as
consideration in said contract do not limit the amount for which the mortgage may
stand as security if from the four corners of the instrument the intent to secure
future and other indebtedness can be gathered.
 A mortgage given to secure advancements is a continuing security and is not
discharged by repayment of the amount named in the mortgage, until the full
amount of the advancements are paid
 In fact, it has also been held that where the annotation on the back of a certificate of
title about a first mortgage states "that the mortgage secured the payment of a
certain amount of money plus interest plus other obligations arising there under'
there was no necessity for any notation of the later loans on the mortgagors' title
 The evidence on record shows that the amounts of P4,700.00 and P9,958.00 were
accepted by the bank on July 19 and August 11, 1980 as deposits for conventional
redemption after the property covered by real estate mortgage became the acquired
asset of the bank and priced at P85,000.00 and after petitioner had lost all rights
of legal redemption because more than one year had already elapsed from June 29,
1979, the date the certificate of sale was registered in the office of the Registry of
Deeds.
 . Indeed, the conventional redemption was subject to be exercised up to March 3,
1982 and was extended up to April 19, 1982 for a fixed amount of P85,000.00. The
respondent bank even favored the petitioner by giving them the first preference to
repurchase the property but they failed to avail of this opportunity, although the
bank "is certainly disposed to release at anytime" the deposits.

EMILIA B. SANTIAGO, plaintiff-appellant,

vs.
PIONEER SAVINGS AND LOAN BANK, ET. AL

FACTS:

1. Plaintiff-appellant, Emilia P. Santiago, is the registered owner of a parcel of land

situated at Polo, Valenzuela, Metro Manila, with an area of approximately 39,007
square meters
2. On 7 April 1983, plaintiff-appellant executed a Special Power of Attorney in favor of
Construction Resources Corporation of the Philippines (CRCP, for short) authorizing
and empowering CRCP among others to to borrow money and make, execute, sign and
14

deliver mortgages of real estate now owned by me and standing in my name and to
make, sign, execute and deliver any and all promissory notes necessary in the premises.
3. On 8 April 1983, CRCP executed a Real Estate Mortgage over the Disputed Property in
favor of FINASIA Investment and Finance Corporation to secure a loan of P1 million
4. The mortgage contract specifically provided that in the event of default in payment, the
mortgagee may immediately foreclose the mortgage judicially or extrajudicially
5. On 21 May 1984, FINASIA executed a "Supplemental Deed of Assignment" in favor
of Defendant Bank confirming and ratifying the assignment in the latter's favor of the
receivable of P610,752.59 from CRCP and of the mortgage constituted by CRCP over
the disputed property
6. CRCP failed to settle its obligation and Defendant Bank opted for extrajudicial
foreclosure of the mortgage
7. On 13 May 1985, on learning of the intended sale, plaintiff-appellant filed before the
RTC-Valenzuela, an action for declaration of nullity of the real estate mortgage with an
application for a Writ of Preliminary Injunction.
8. TC issued a TRO enjoining the sale at public auction of the Disputed Property.
9. Plaintiff-appellant claimed in her Complaint that she was not aware of any real estate
mortgage she had executed in favor of Defendant Bank; that she had not authorized
anyone to execute any document for the extrajudicial foreclosure of the real estate
mortgage constituted on the Disputed Property and that since the notice of Sheriffs sale
did not include her as a party to the foreclosure proceedings, it is not binding on her nor
on her property.
10.TC dismiss the complaint for lack of cause of action.

ISSUE: WON Special Power of Attorney in favor of CRCP specifically included the
authority to mortgage the Disputed Property?

HELD; yes

 The Real Estate Mortgage in favor of FINASIA explicitly authorized foreclosure

in the event of default
 . Plaintiff-appellant, therefore, cannot rightfully claim that FINASIA, as the
assignee of the mortgagee, cannot extrajudicially foreclose the mortgaged
property
 A mortgage directly and immediately subjects the property upon which it is
imposed to the fulfillment of the obligation for whose security it was constituted
 The assignment of receivables made by the original mortgagee, FINASIA, to
Defendant Bank was valid, since a mortgage credit may be alienated or assigned
to a third person, in whole or in part, with the formalities required by law
 The assignment was made in a public instrument and proper recording in the
Registry of Property was made.
 While notice may not have been given to plaintiff-appellant personally, the
publication of the Notice of Sheriff's Sale, as required by law, is notice to the
whole world
15

PRUDENTIAL BANK, Petitioner,

vs.
DON A. ALVIAR and GEORGIA B. ALVIAR, Respondents.

FACTS:

1. Respondents, spouses Don A. Alviar and Georgia B. Alviar, are the registered owners of a
parcel of land in San Juan, Metro Manila, covered by Transfer Certificate of Title (TCT)
No. 438157 of the Register of Deeds of Rizal. On 10 July 1975, they executed a deed of
real estate mortgage in favor of petitioner Prudential Bank to secure the payment of a loan
worth P250,000.00.
2. On 4 August 1975, respondents executed the corresponding promissory note, PN
BD#75/C-252, covering the said loan, which provides that the loan matured on 4 August
1976 at an interest rate of 12% per annum with a 2% service charge, and that the note is
secured by a real estate mortgage as aforementioned.
3. On 22 October 1976, Don Alviar executed another promissory note, PN BD#76/C-345
for P2,640,000.00, secured by D/A SFDX #129, signifying that the loan was secured by a
"hold-out" on the mortgagor’s foreign currency savings account with the bank under
Account No. 129, and that the mortgagor’s passbook is to be surrendered to the bank until
the amount secured by the "hold-out" is settled.
4. On 27 December 1976, respondent spouses executed for Donalco Trading, Inc., of which
the husband and wife were President and Chairman of the Board and Vice
President,6 respectively, PN.
5. As provided in the note, the loan is secured by "Clean-Phase out TOD CA 3923," which
means that the temporary overdraft incurred by Donalco Trading, Inc. with petitioner is to
be converted into an ordinary loan in compliance with a Central Bank circular directing
the discontinuance of overdrafts.
6. On 16 March 1977, petitioner wrote Donalco Trading, Inc., informing the latter of its
approval of a straight loan ofP545,000.00, the proceeds of which shall be used to liquidate
the outstanding loan of P545,000.00 TOD.
7. The letter likewise mentioned that the securities for the loan were the deed of assignment
on two promissory notes executed by Bancom Realty Corporation with Deed of Guarantee
in favor of A.U. Valencia and Co. and the chattel mortgage on various heavy and
transportation equipment
8. On 15 January 1980, petitioner moved for the extrajudicial foreclosure of the mortgage on
the property covered by TCT No. 438157.
9. Respondents filed a complaint for damages with a prayer for the issuance of a writ of
preliminary injunction with the RTC of Pasig,11 claiming that they have paid their
principal loan secured by the mortgaged property, and thus the mortgage should not be
foreclosed.
10. For its part, petitioner averred that the payment of P2,000,000.00 made on 6 March 1979
was not a payment made by respondents, but by G.B. Alviar Realty and Development Inc.,
which has a separate loan with the bank secured by a separate mortgage.
11. The trial court dismissed the complaint and ordered the Sheriff to proceed with the extra-
judicial foreclosure.
16

12. Court of Appeals affirmed the Order of the trial court.

13. 17 It ruled that while a continuing loan or credit accommodation based on only one
security or mortgage is a common practice in financial and commercial institutions, such
agreement must be clear and unequivocal.
14. In the instant case, the parties executed different promissory notes agreeing to a particular
security for each loan. Thus, the appellate court ruled that the extrajudicial foreclosure sale
of the property for the three loans is improper.
15. Petitioner maintains that the "blanket mortgage clause" or the "dragnet clause" in the real
estate mortgage expressly covers not only the P250,000.00 under PN BD#75/C-252, but
also the two other promissory notes included in the application for extrajudicial
foreclosure of real estate mortgage.
16. petitioner insists that respondents attempt to evade foreclosure by the expediency of
stating that the promissory notes were executed by them not in their personal capacity but
as corporate officers.
17. , respondents claim that the "dragnet clause" cannot be applied to the subsequent loans
extended to Don Alviar and Donalco Trading, Inc. since these loans are covered by
separate promissory notes that expressly provide for a different form of security

ISSUE: WON the "blanket mortgage clause" or the "dragnet clause"; is applicable

the coverage of the "blanket mortgage clause and the propriety of seeking
foreclosure of the mortgaged property for the non-payment of the three loans.

HELD: Not applicable

 A "blanket mortgage clause," also known as a "dragnet clause" in American

jurisprudence, is one which is specifically phrased to subsume all debts of past or
future origins. Such clauses are "carefully scrutinized and strictly
construed."38 Mortgages of this character enable the parties to provide continuous
dealings, the nature or extent of which may not be known or anticipated at the time,
and they avoid the expense and inconvenience of executing a new security on each new
transaction

 Indeed, it has been settled in a long line of decisions that mortgages given to secure
future advancements are valid and legal contracts,41 and the amounts named as
consideration in said contracts do not limit the amount for which the mortgage may
stand as security if from the four corners of the instrument the intent to secure future
and other indebtedness can be gathered

 Contrary to the finding of the Court of Appeals, petitioner and respondents intended the
real estate mortgage to secure not only the P250,000.00 loan from the petitioner, but
also future credit facilities and advancements that may be obtained by the respondents

 In the case at bar, the subsequent loans obtained by respondents were secured by other
securities, thus: PN BD#76/C-345, executed by Don Alviar was secured by a "hold-
out" on his foreign currency savings account, while PN BD#76/C-430, executed by
respondents for Donalco Trading, Inc., was secured by "Clean-Phase out TOD CA
17

3923" and eventually by a deed of assignment on two promissory notes executed by

Bancom Realty Corporation with Deed of Guarantee in favor of A.U. Valencia and
Co., and by a chattel mortgage on various heavy and transportation equipment. The
matter of PN BD#76/C-430 has already been discussed

the sufficiency of the first security is a corollary component of the "dragnet clause.

 when the mortgagor takes another loan for which another security was given it could
not be inferred that such loan was made in reliance solely on the original security with
the "dragnet clause," but rather, on the new security given. This is the "reliance on the
security test."
 The rationale involved, the court said, was that the "dragnet clause" in the first security
instrument constituted a continuing offer by the borrower to secure further loans under
the security of the first security instrument, and that when the lender accepted a
different security he did not accept the offer.

 Indeed, in some instances, it has been held that in the absence of clear, supportive
evidence of a contrary intention, a mortgage containing a "dragnet clause" will not be
extended to cover future advances unless the document evidencing the subsequent
advance refers to the mortgage as providing security therefor.

 It was therefore improper for petitioner in this case to seek foreclosure of the
mortgaged property because of non-payment of all the three promissory notes. While
the existence and validity of the "dragnet clause" cannot be denied, there is a need to
respect the existence of the other security given for PN

 As held in one case, where deeds absolute in form were executed to secure any and all
kinds of indebtedness that might subsequently become due, a balance due on a note,
after exhausting the special security given for the payment of such note, was in the
absence of a special agreement to the contrary, within the protection of the mortgage,
notwithstanding the giving of the special security

 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

 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.

 Being of such nature, the same should be interpreted strictly against petitioner and with
even more reason since having been accomplished by respondents in the presence of
petitioner’s personnel and approved by its manager, they could not have been unaware
of the import and extent of such contracts.

18

 Both the Court of Appeals and the trial court found that respondents have not yet paid
the P250,000.00, and gave no credence to their claim that they paid the said amount
when they paid petitioner P2,000,000.00.

 Thus, the mortgaged property could still be properly subjected to foreclosure
proceedings for the unpaid P250,000.00 loan

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
SPOUSES TOMAS CABATINGAN and AGAPITA EDULLANTES Represented by
RAMIRO DIAZ as Their Attorney-in-Fact, Respondents

FACTS:

1. Respondent spouses Tomas Cabatingan and Agapita Edullantes obtained two loans,
secured by a real estate mortgage,1 in the total amount of P421,2002 from petitioner
Philippine National Bank. However, they were unable to fully pay their obligation
despite having been granted more than enough time to do so.
2. petitioner extrajudicially foreclosed on the mortgage pursuant to Act 3135.
3. Thereafter, a notice of extrajudicial sale5 was issued stating that the foreclosed
properties would be sold at public auction on November 5, 1991 between 9:00 a.m. and
4:00 p.m. at the main entrance of the office of the Clerk of Court on San Pedro St.,
Ormoc City.
4. Pursuant to the notice, the properties were sold at public auction on November 5, 1991.
The auction began at 9:00 a.m. and was concluded after 20 minutes with petitioner as
the highest bidder.
5. On March 16, 1993, respondent spouses filed in the Regional Trial Court (RTC) of
Ormoc City, Branch 12 a complaint for annulment of extrajudicial foreclosure of real
estate mortgage and the November 5, 1991 auction sale.
6. They invoked Section 4 of Act 3135 which provides “Section 4. The sale shall be made
at public auction, between the hours of nine in the morning and four in the
afternoon, and shall be under the direction of the sheriff of the province, the justice or
auxiliary justice of peace of the municipality in which such sale has to be made, or of a
notary public of said municipality, who shall be entitled to collect a fee of Five pesos
for each day of actual work performed, in addition to his expenses”
7. Thus, because the public auction of the foreclosed properties was held for only 20
minutes (instead of seven hours as required by law), the consequent sale was void.
8. the RTC issued an order8 annulling the November 5, 1991 sale at public auction.
9. Petitioner moved for reconsideration.

ISSUE: WON a sale at public auction held within the intervening period (i.e., at any time
from 9:00 a.m. until 4:00 p.m.) is valid?

HELD: YES
19

 We note that neither the previous rule (Administrative Order No. 3)10 nor the
current rules (A.M. No. 99-10-05-O, as amended, and the guidelines for its
enforcement, Circular No. 7-2002)11 governing the conduct of foreclosure
proceedings provide a clear answer to the question at hand.
 Statutes should be sensibly construed to give effect to the legislative intention.12 Act
3135 regulates the extrajudicial sale of mortgaged real properties 13 by prescribing a
procedure which effectively safeguards the rights of both debtor and creditor. Thus,
its construction (or interpretation) must be equally and mutually beneficial to both
parties.
 A creditor may foreclose on a real estate mortgage only if the debtor fails to pay the
principal obligation when it falls due.
 Nonetheless, the foreclosure of a mortgage does not ipso facto extinguish a debtor’s
obligation to his creditor
 The proceeds of a sale at public auction may not be sufficient to extinguish the
liability of the former to the latter.
 16 For this reason, we favor a construction of Section 4 of Act 3135 that affords the
creditor greater opportunity to satisfy his claim without unduly rewarding the debtor
for not paying his just debt.
 "between the hours of nine in the morning and four in the afternoon" merely
provides a time frame within which an auction sale may be conducted.
 Therefore, a sale at public auction held within the intervening period provided by
law (i.e., at any time from 9:00 a.m. until 4:00 p.m.) is valid, without regard to the
duration or length of time it took the auctioneer to conduct the proceedings

G.R. Nos. 175181-82 September 14, 2007

METROPOLITAN BANK and TRUST COMPANY, INC., petitioner,

vs.
SLGT HOLDINGS, INC., DANILO A. DYLANCO and ASB DEVELOPMENT
CORPORATION, respondents.

x - - - - - - - - - - - - - - - - - - - - - - - -x

G.R. Nos. 175354 & 175387-88 September 14, 2007

UNITED COCONUT PLANTERS BANK, petitioner,

vs.
SLGT HOLDINGS, INC. and ASB DEVELOPMENT CORPORATION, respondents.

FACTS:
20

1. On October 25, 1995, Dylanco and SLGT each entered into a contract to sell with ASB for
the purchase of a unit (Unit 1106 for Dylanco and Unit 1211 for SLGT) at BSA Towers
then being developed by the latter.
2. As stipulated, ASB will deliver the units thus sold upon completion of the construction or
before December 1999. Relying on this and other undertakings, Dylanco and SLGT each
paid in full the contract price of their respective units.
3. The promised completion date came and went, but ASB failed to deliver, as the Project
remained unfinished at that time. To make matters worse, they learned that the lots on
which the BSA Towers were to be erected had been mortgaged 6 to Metrobank, as the lead
bank, and UCPB7 without the prior written approval of the Housing and Land Use
Regulatory Board (HLURB).
4. Dylanco, on August 10, 2004, filed with the HLURB a complaint8for delivery of property
and title and for the declaration of nullity of mortgage.
5. A similar complaint9 filed by SLGT followed three (3) days later.
6. ASB alleged … that it encountered liquidity problems sometime in … 2000 after its
creditors [UCPB and Metrobank] simultaneously demanded payments of their loans…;
that on May 4, 2000, the … Commission (SEC) granted its petition for rehabilitation; that
it negotiated with UCPB and Metrobank … but nothing came out positive from their
negotiation.
7. Metrobank claims that complainants [Dylanco and SLGT] have no personality to ask for
the nullification of the mortgage because they are not parties to the mortgage transaction
…; that the complaints must be dismissed because of the ongoing rehabilitation of ASB;
xxx that its claim against ASB, including the mortgage to the [Project] have already been
transferred to Asia Recovery Corporation
8. UCPB, for its part, denies its liability to SLGT [for lack of privity of contract] … [and]
questioned the personality of SLGT to challenge the validity of the mortgage reasoning
that the latter is not party to the mortgage contract … [and] maintains that the mortgage
transaction was done in good faith.
9. Housing Arbiter ruled that the mortgage constituted over the lots is invalid for lack of
mortgage clearance from the HLURB.
10. The HLURB Board of Commissioners, [per its separate Decision both dated April 21,
2005] affirmed the above rulings … with the modification that ASB should cause the
subdivision of the mother titles into condominium certificates of title of Dylanco and
SLGT free from all liens and encumbrances.
11. , Metrobank appealed to the OP, however, OP rendered a decision12 against Metrobank
and UCPB.
12. From the October 10, 2005 OP Decision, petitioner banks and SLGT interposed their
respective motions for reconsideration, SLGT excepting to that portion of the decision
declaring the mortgage contract as void only insofar as it and Dylanco are concerned. To
SLGT, the indivisibility of a mortgage contract requires that a declaration of nullity – or a
validity for that matter - should cover the entire mortgage
13. , petitioner banks went to the CA for appeal.
14. CA held that “A mortgage constituted on a condominium project without the approval of
the HLURB in violation of the prescription of Presidential Decree (PD) 957, like the ASB-
Metrobank-Trust Division mortgage contract, is void; a mortgage is indivisible and cannot
be divided into a valid and invalid parts and The complaints of Dylanco and SLGT are not
21

covered by the order issued by the SEC suspending all actions and proceedings against
ASB.”

ISSUE: WON entire mortgage constituted on the project land site and the improvements
thereon is void.

WON mortgage is indivisible.

HELD: YES, it is void.

 Both petitioners do not dispute executing the mortgage in question without the
HLURB’s prior written approval and notice to both individual respondents
 – The Subdivision and Condominium Buyers’ Protective Decree – provides:

SEC. 18. Mortgages. - No mortgage of any unit or lot shall be made by the
owner or developer without prior written approval of the [HLURB]. Such approval
shall not be granted unless it is shown that the proceeds of the mortgage loan shall
be used for the development of the condominium or subdivision project …. The loan
value of each lot or unit covered by the mortgage shall be determined and the buyer
thereof, if any, shall be notified before the release of the loan. The buyer may, at
his option, pay his installment for the lot or unit directly to the mortgagee who shall
apply the payments to the corresponding mortgage indebtedness secured by the
particular lot or unit being paid for …. (Emphasis and word in bracket added)

 There can thus be no quibbling that the project lot/s and the improvements
introduced or be introduced thereon were mortgaged in clear violation of the
aforequoted provision of PD 957.
 And to be sure, Dylanco and SLGT, as Project unit buyers, were not notified of the
mortgage before the release of the loan proceeds by petitioner banks.

 Its preambulatory clauses say so and the Court need not belabor the matter
presently. Section 18, supra, of the decree directly addresses the problem of fraud
and other manipulative practices perpetrated against buyers when the lot or unit they
have contracted to acquire, and which they religiously paid for, is mortgaged
without their knowledge, let alone their consent.
 Verily, if P.D. 957 were to exclude from its coverage the aforecited mortgage
contract, the vigorous regulation which P.D. 957 seeks to impose on
unconscientious subdivision sellers will be translated into a feeble exercise of police
power just because the iron hand of the state cannot particularly touch mortgage
contracts badged with the unfortunate accident of having been constituted prior to
the enactment of P.D. 957.

This disposition stems from the basic postulate that a mortgage contract is, by nature,
indivisible.

Consequent to this feature, a debtor cannot ask for the release of any portion of the
mortgaged property or of one or some of the several properties mortgaged unless and until
22

the loan thus secured has been fully paid, notwithstanding the fact that there has been partial
fulfillment of the obligation

Hence, it is provided that the debtor who has paid a part of the debt cannot ask for the
proportionate extinguishments of the mortgage as long as the debt is not completely satisfied.

The situation obtaining in the case at bench is within the purview of the aforesaid rule on the
indivisibility of mortgage. It may be that Section 18 of PD 957 allows partial redemption of
the mortgage in the sense that the buyer is entitled to pay his installment for the lot or unit
directly to the mortgagee so as to enable him - the said buyer - to obtain title over the lot or
unit after full payment thereof.

Generally, the divisibility of the principal obligation is not affected by the indivisibility of
the mortgage. The real estate mortgage voluntarily constituted by the debtor (ASB) on the
lots or units is one and indivisible. In this case, the mortgage contract executed between ASB
and the petitioner banks is considered indivisible, that is, it cannot be divided among the
different buildings or units of the Project.

In the present case, there is doubtless only one mortgage to speak of. Ergo, a declaration of
nullity for violation of Section 18 of PD 957 should result to the mortgage being nullified
wholly.