FERNANDEZ V ESPINOZA G.R. No.

156421, April 14, 2008 FACTS : United Overseas Bank (UOB) is a banking institution duly organized and existing as such under the Philippine Laws; while Firematic Philippines, Inc. (FPI) is a domestic corporation duly organized and existing under Philippine Laws represented by its President, Gregorio Espinoza. On March 24, 1996, FPI was granted a revolving credit line by the UOB amounting P11M. Using the said credit line, FPI obtained on several occassions from the UOB loans in different amounts, reaching the total sum of P4M, as evidenced by promissory notes executed by Gregorio Espinoza. Likewise drawn against the credit line of FPI were trust receipts in the sum of P6,325,588.71. As security in favor of UOB ,the spouses Espinoza executed a Deed of Real Mortgage over a parcel of land located in Pasig City, with an area of 200 sq.m., and covered by TCT No. PT-84838 in their names, with an area of 200 sq.m registered in the Registry of Deeds of Pasig City. Subsequently, FPI defaulted in its obligation to pay, which prompted UOB to cause the extrajudicial foreclosure of its mortgage on the subject property, and the public auction sale thereof. The UOB was the highest bidder at the auction sale.Because of failure of the spouses Espinoza to redeem said property, UOB filed an Affidavit of Consolidation before the Registry of Deeds of Pasig. Consequently, a new TCT covering the subject property was issued in the name of UOB, particularly, TCT No. PT-108565. in order to retain possession of the property, FPI and the spouses Espinoza instituted an action for nullification of the extrajudicial foreclosure proceedings and certificate of sale, before the RTC, Branch 164, docketed as Civil Case No. 66256. In their amended complaint, FPI and the spouses Espinoza alleged that there was bad faith on the part of UOB who made them sign the Deed of Real Estate Mortgage in blank. In addition, FPI and the spouses Espinoza averred that there was already an agreement entered into by the parties to restructure the loan, but for unknown reasons, the agreement was unilaterally rescinded by the UOB. Finally, FPI and the spouses Espinoza claimed that at the time they filed their complaint, FPI already paid UOB the sum of P5,275,012.43. Despite their repeated requests, however, UOB still failed to give them proper accounting of their outstanding loan obligations and the payments they made thereon. For its part, UOB filed an Ex-Parte Petition for Issuance of a Writ of Possession before the RTC, Branch 158, docketed as LRC Case No. R-5792. The spouses Espinoza opposed such petition and moved, instead, for the consolidation of the two cases (Civil Case No. 66256 and LRC Case No. R-5792) RTC (May 10, 2000): - denied the opposition to the Petition and the motion for consolidation - since UOB has already consolidated a title in its name, the pendency of separate civil action is not a bar to the issuance of writ of Possession because the same is ministerial act of the trial court; thus, the appearance nor the intervention of the spouses is not required. * Motion for Reconsideration by the Spouses (July 10, 2000) - denied by RTC, such is merely a reiteration of the earlier opposition to the Ex-Parte Petition for Issuance of Writ of Possession RTC (July 13,2000): - granted UOB's Ex-Parte Petition for the Issuance of Writ of Possession - UOB became the absolute owner of the subject property being the highest bidder and since spouses failed to redeem, UOB is now entitled to possession of the same as the confirmed owner - spouses to vacate the premises of the property * Motion for Clarification (August 25, 2000) - denied, nothing to clarify CA (March 25, 2002) - reversed the 4 RTC Orders - duty of the trial court to issue writ of possession after the expiration period ceased to be ministerial in view of the pressing peculiar and equitable circumstances in the instant case * Motion for Reconsideration (November 28, 2002) - CA denied UOB

ISSUE : W/N UOB is entitled to a writ of possession despite a pending case regarding the validity of the mortgage RULING : Yes. A writ of possession may be issued during the redemption period in favor of the purchaser of the mortgaged property in the foreclosure sale. Sec. 7 of Act No. 3135, as amended by Act No. 4118 explicitly allows the purchaser in a foreclosure sale to apply a writ of possession during the redemption period by filing a petition in the form of an ex parte motion under oath for that purpose. Upon the filing of such motion with the RTC having jurisdiction over the subject property and the approval of the corresponding bond, the law also in express terms directs the court to issue the order for a writ of possession. Upon the expiration of the redemption period, the right of the purchaser to the possession of the foreclosed property becomes absolute. The basis of this right to possession is the purchaser's ownership of the property. Mere filing of an ex parte motion for the issuance of the writ of possession would suffice, and the bond required no longer necessary since possession becomes an absolute right of the purchaser as the confirmed owner. It is clear the UOB has an absolute right to take possession of the subject property since it was the highest bidder in the foreclosure sale, and the spouses Espinoza failed to redeem the said property even after the redemption period. Act no. 3135, as amended by Act No. 4118, is categorical in stating that the purchaser must first be placed in possession of the mortgaged property pending proceedings assailing the issuance of the writ of possession. The judge with whom an application for a writ of possession is filed need not look into the validity of the mortgage or the manner of its foreclosure. Any question regarding the validity of the mortgage or its foreclosure cannot be a legal ground for the refusal to issue a writ of possession. Regardless, whether or not there is a pending suit for the annulment of the mortgage or the foreclosure itlself, the purchaser is entitled to a writ of possession, without prejudice, of course, to the eventual outcome of the pending annulment case. UOB, as the purchaser at the auction sale in the instant case, is entitled as a matter of right, to the issuance of the writ of possession. TANCHAN V ALLIED BANK CORPORATION G.R. No. 164510, November 25,2005 FACTS : Cebu Foremost Construction, Inc. (Foremost), through its Chairman and President Henry Tanchan (Henry) and his spouse, Vice-President and Treasurer Ma. Julie Ann Tanchan (Ma. Julie Ann) executed and delivered to Allied Banking Corp (respondent) 7 US $ promissory notes, including Promissory Notes No. 0051-97-036966 (Exhibit "G") for US$379,000.00 @ 9.50% interest rate per annum, due on February 9, 1998;and several Philippine peso promissory notes covering various loans in the aggregate amount of P28,900.000.00, including Promissory Notes No. 0051-97-03688 (Exhibit "H") for P16,500.00 @ an interest rare of 14.5% per annum, due on February 9,1998. All the foregoing notes are secured by 2 Continuing Guaranty/ Comprehensive Surety Agreements executed in the personal capacities of Spouses Henry & Ma. Julie Ann and Henry's brother, Santiago Tanchan, petitioner, and as attorney-in-fact of his wife and copetitioner Rufina Tanchan under a Special Power of Attorney, dated April 30,1993. The liabilities of the sureties are limited to P150,000,000.00.Exhibit "G" and "H" are also secured by a Real Estate Mortgage over the properties of minors Henry Paul Tanchan, Don Henry Tanchan, the wife of Henry - Ma. Julie Ann and Spouses Pablo and Milagros Lim, all located in Cebu City. In separate demand letters, respondent sought from Foremost payment of US$1,054,000.00, as the outstanding principal balance, exclusive of interest and charges, of its obligatios under the 7 promissory notes and P28,900,000.00 under its Philippine peso promissory notes. Separate demands for payment were also made upon Spouses Tanchan and the petitioners as sureties. Foremost offered to cede to respondent, by way of dacion en pago, the mortgaged real properties in full payment of its loan obligations. Respondent instituted the extra-judicial foreclosure of the real estate mortgage to satisfy its claim against Foremost in the aggregate amount of P55,578,826.77. At the public auction sale, respondent's bid of only P37,745,283.67 for all the mortgaged properties, including the buildings and improvements thereon,was adjudged the sole and highest bid.(malamang!! hehe..) Respondent filed with the RTC a complaint for Collection of Sum of Money with Petition for Issuance of Writ of Preliminary Injunction against Foremost, Spouses Tanchan herein petitioners, praying that they be ordered to pay respondent solidarily. In support of its application for issuance of a writ of preliminary attachment, respondent submitted an Affidavit executed by Elmer Elumbaring, Branch cashier/Loan Supervisor,Cebu Branch.The application for writ of preliminary attachment was granted by the RTC. Thus, the sheriff levied several parcels of land registered in the name of Foremost. In its amended answer and counterclaim, Foremost acknowledge the authenticity and due execution of the promissory notes but denied liability for the amounts alleged in the complaint, the computation of which they dispute due to the arbitrariness of the imposition of new interest rates. They impugned the causes of action of respondent to collect the amount due under Exhibit G and H in view of the bank's prior extra-judicial foreclosure of the securities thereon, which recourse bars collection of the amount due on the same promissory notes. At the

pre-trial, respondent submitted an Amended Pre-Trial Brief where it admitted that Foremost's Exhibit G and H were among those secured by the REM that it earlier foreclosed, but the proceeds of the foreclosure sale satisfied only part of the amounts due on said promissory notes and left a deficiency which is now the subject of the complaint. After the parties submitted their respective memoranda, the RTC rendered in favor of respondent, ordering Foremost, Spouses Henry and Ma. Julie Ann and Santiago and Rufina Tanchan to pay respondent solidarily. * Motion for Partial Reconsideration (Foremost) - respondent failed to state cause of action for the payment of any deficiency accound under Exhibit G and H. - complaint does not contain any allegation re: a deficiency account; nor even an allusion to the foreclosure sale conducted in partial satisfaction of said promissory notes. Spouses Tanchan and petitioners also filed a Motion to Lift the Writ of the Preliminary Attachment, but it was denied by the RTC, same as the Motion for Partial Reconsideration. * Foremost appealed to the CA - ini-extrajudicial foreclosure mo na nga yung REM ko, gusto mo pa mangolekta - tsk.tsk. Si Santiago, di nagpaalam kay Misis - dapat ni-lift ung writ of preliminary attachment CA dismissed the appeal. ISSUE: W/N Allied Banking Corp is barred from claiming any amount under the Promissory Notes, Exhibits G and H, because it had already elected to foreclose on the mortgage security. RULING: No. There is no question that a mortgage creditor has a single cause of action against a mortgagor debtor, which is to recover the debt; but it has the option of either filing a personal action for collection of sum of money or instituting a real action to foreclose on the mortgage security.68An election of the first bars recourse to the second; otherwise, there would be multiplicity of suits in which the debtor would be tossed from one venue to another, depending on the location of the mortgaged properties and the residence of the parties.69On the other hand, a creditor who elects to foreclose on the mortgage may yet file an independent civil action for recovery of whatever deficiency may remain in the outstanding obligation of the debtor, after deducting the price obtained in the sale of the mortgaged properties at public auction.The complaint, though, must specifically allege that what is being sought is the recovery of the deficiency, or that in the pre-trial, such claim be raised as an issue. Contrary to petitioners' argument, it is clear from the allegations in the Complaint that what respondent sought was the payment of the deficiency amount under the subject promissory notes. In particular, while the Promissory Note, Exhibit "H", is for the amount of Php16,500,000.00, what respondent sought to recover was only Php7,582,945.85, consistent with the fact that part of said promissory note has been satisfied from the proceeds of the extra-judicial foreclosure. While the exact phrase "deficiency account" is not employed in the Complaint, the intention of respondent to recover the same is borne out by its allegations. ESTANISLAO V EAST WEST BANKING CORPORATION G.R.No. 178537, February 11, 2008 FACTS: Estanilao obtained a loan from the East West Banking Corporation in the amount of P3,925,000.00 evidenced by a promissory note and secured by two deeds of chattel mortgage dated July 10, 1997: one covering two dump trucks and a bulldozer to secure the loan amount of P2,375,000.00, and another covering bulldozer and a wheel loader to secure the loan amount of P1,550,000.00. Petitioners defaulted in the amortizations and the entire obligation became due and demandable. Because of that, respondent bank filed a suit for replevin with damages, praying that the equipment covered by the first deed of chattel mortgage be seized and delivered to it. In the alternative, respondent prayed that petitioners be ordered to pay the outstanding principal amount of P3,846,127.73 with 19.5% interest per annum reckoned from judicial demand until fully paid, exemplary damages of P50,000.00, attorneys fees equivalent to 20% of the total amount due, other expenses and costs of suit. The case was filed in the Regional Trial Court of Antipolo. Subsequently, respondent moved for suspension of the proceedings on account of an earnest attempt to arrive at an amicable settlement of the case. The trial court suspended the proceedings, and during the course of negotiations, a deed of assignment was drafted by the respondent. Petitioners affixed their signatures on the deed of assignment. However, for some unknown reason, respondent banks duly authorized representative failed to sign the deed. Petitioners completed the delivery of the heavy equipment mentioned in the deed of assignment two dump trucks and a bulldozer to respondent, which accepted

the same without protest or objection. However, respondent filed a manifestation and motion to admit an amended complaint for the seizure and delivery of two more heavy equipment the bulldozer and wheel loader which are covered under the second deed of chattel mortgage. Respondent claimed that its representative inadvertently failed to include the second deed of chattel mortgage among the documents forwarded to its counsel when the original complaint was being drafted. Respondent likewise claimed that petitioners were given a chance to submit a refinancing scheme that would allow them to keep the remaining two heavy equipment, but they failed to come up with such a scheme despite repeated promises to do so.Petitioners sought to dismiss the amended complaint. They alleged that their previous payments on loan amortizations, the execution of the deed of assignment and respondents acceptance of the three units of heavy equipment, had the effect of full payment or satisfaction of their total outstanding obligation which is a bar on respondent bank from recovering any more amounts from them. The trial court dismissed the amended complaint for lack of merit. It held that the deed of assignment and the petitioners delivery of the heavy equipment effectively extinguished petitioners total loan obligation. It also held that respondent was estopped from further collecting from the petitioners when it accepted, without any protest, delivery of the three units of heavy equipment as full and complete satisfaction of the petitioners total loan obligation. Respondent likewise failed to timely rectify its alleged mistake in the original complaint and deed of assignment, taking almost a year to act. Respondent bank appealed to the CA which reversed the decision of the RTC. ISSUE: W/N East West Banking Corp is no longer allowed to foreclose the 2nd Deed of Chattel Mortgage RULING: Yes.Since the agreement was consummated by the delivery on March 8, 2001 of the last unit of heavy equipment under the deed, petitioners are deemed to have been released from all their obligations to respondent. Since there is no more credit to collect, no principal obligation to speak of, then there is no more second deed of chattel mortgage that may subsist. A chattel mortgage cannot exist as an independent contract since its consideration is the same as that of the principal contract. Being a mere accessory contract, its validity would depend on the validity of the loan secured by it.This being so, the amended complaint for replevin should be dismissed, because the chattel mortgage agreement upon which it is based had been rendered ineffectual. ACME SHOE V CA G.R.No.103576, August 22, 1996 FACTS: Chua Pac (petitioner) , the president and general manager of Acme Shoe, Rubber & Plastic Corporation (petitioner) executed for and in behalf of the company a chattel mortgage in favor of private respondent Producer's Bank of the Philippines. The mortgage is for the security of the petitioner's corporate loan of P3M. The loan P3M was paid by petitioner corporation. Subsequently, said corporation obtained another P2,700,000.00 which has been fully paid also. But on the next loan of petitioner amounting P1M, the loan was not settle at its maturity. Due to that, respondent bank thereupon applied for an extra-judicial foreclosure of the chattel mortgage with the sheriff of Caloocan City. Thus, prompted petitioner corporation to file an action for injunction, with damages and a prayer for a writ of preliminary injunction before the RTC of Caloocan City. RTC dismissed the complaint and ordered the foreclosure of the chattel mortgage. It held that petitioner is bound by the stipulations of the chattel mortgage. Petitioner corporation appealed to the CA but said court affirmed the ruling of the RTC. The motion for reconsideration was also denied. Hence, petitioner corporation elevated it to the SC, said court it denied their petition at first because it is insufficient in form and substance but they were granted on their second motion for reconsideration. In the instant case, the Court is constrained to relax the rules in order to give way to and uphold the paramount and overriding interest of justice. ISSUE: W/N Producer's Bank of the Philippines can foreclose the chattel mortgage executed by Acme Shoe because of the new loan obtained by the latter amounting P1M, covered by 4 promissory notes. RULING: No. While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as these future debts are accurately described,a chattel mortgage, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts

extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed. A chattel mortgage, as hereinbefore so intimated, must comply substantially with the form prescribed by the Chattel Mortgage Law itself. One of the requisites, under Section 5 thereof, is an affidavit of good faith. While it is not doubted that if such an affidavit is not appended to the agreement, the chattel mortgage would still be valid between the parties (not against third persons acting in good faith), the fact, however, that the statute has provided that the parties to the contract must execute an oath that . . . (the) mortgage is made for the purpose of securing the obligation specified in the conditions thereof, and for no other purpose, and that the same is a just and valid obligation, and one not entered into for the purpose of fraud. makes it obvious that the debt referred to in the law is a current, not an obligation that is yet merely contemplated. In the chattel mortgage here involved, the only obligation specified in the chattel mortgage contract was the P3,000,000.00 loan which petitioner corporation later fully paid. By virtue of Section 3 of the Chattel Mortgage Law, the payment of the obligation automatically rendered the chattel mortgage void or terminated. * Belgian Catholic Missionaries, Inc., vs. Magallanes Press, Inc. - A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage. The significance of the ruling to the instant problem would be that since the 1978 chattel mortgage had ceased to exist coincidentally with the full payment of the P3,000,000.00 loan, there no longer was any chattel mortgage that could cover the new loans that were concluded thereafter. LAM V METROPOLITAN BANK G.R.No.178881, February FACTS: Alexander and Julie Lam, petitioners, obtained a loan of P2M from Metropolitan Bank & Trust Company, repsondent. To secure its payment, petitioners executed a deed of REM over their property in Davao City, covered by TCT No. T-115893. After that, they were also granted additional loans and signed several amendments to the REM. However, petitioners failed to pay the loans and so respondent instituted an extra-judicial foreclosure proceeding with the Office of the Clerk of Court and the Ex-Officio Sheriff of Davao, which was granted by the latter. A Sheriff's sale was held and as the sole bidder, the property was awarded to the respondent. A Provisional Certificate of Sale was issued in favor of respondent and it was registered with the RD. Petitioners failed to redeem the property within the 1-yr redemption period. Accordingly, a Final Certificate of Sale in favor of the respondent was executed by the Sheriff. Respondent consolidated its title to the subject property, thus, TCT No. T-115893 was cancelled and TCT No. T-327605 in the name of the respondent was issued. Respondent demanded that petitioners turn over the possession of the property but the latter refused to do so. Due to that, respondent filed a complaint for the issuance of Writ of Possession with the RTC of Davao City.Petitioners in their answer, denied the material allegation in the complaint, that respondent's complaint did not allege its capacity to sue and be sued, that there was no showing that the officer who signed the verification and certification was duly authorized to represent the respondent and that they deny obtaining a loan of P3.9M. During the pre-trial conference, the RTC directed the paties to proceed to mediation but the parties failed to arrive at an amicable settlement and so the case was referred back to the RTC for the continuation of the pre-trial conference. At the pre-trial conference, respondent manifested and moved that the complaint for writ of possession should be heard ex parte. RTC rendered a decision that the case will be heard ex parte and that the defendant (petitioners) should not be allowed to participate in the case as an adverse party as if the same is an ordinary civil action.(so no need na dapat na magsend ng summons and notice of hearing kina Lam). On january 23, 2004, petitioners filed a complaint for the specific performance and annulment of the foreclosure of mortgage with the RTC. Subsequently, February 11, 2004, petitioners filed a motion for reconsideration of the order regarding the hearing of the issuance of Writ of Possession in ex parte.RTC granted petitioners' motion for reconsideration, reversing its decision and allowing petitioners to participate in the proceedings, RTC declared that respondent was estopped from demanding a resolution ex parte, after allowing petitioners to participate in the proceedings (engot xe nagpadala ng summons at notices of hearing tas eto nmn si RTC pinasagot pa tsk!). RTC added that under equitable circumstances, the duty of the court to issue a writ of possession ceased to be ministerial and that the existence of these equitable circumstances can only be determined in the adversarial proceedings. The respondent filed a motion for reconsideration, but it was denied by the RTC.Respondent then went to the CA (sumbong sya), CA reversed the RTC decision. It rendered a decision that petition for the issuance of a writ of possession is ex parte and that RTC mistakenly

opined that it was prudent to consolidate the hearing of the issuance of writ of possession with that of the civil case for annulment of the foreclosure sale. As to CA, the rule on the consolidation of actions in a civil procedure covers only civil actions, thus, it cannot be consolidated with an ex parte petition. It further held that any question regarding the validity of the mortgage or its foreclosure cannot be a legal ground for refusing the issuance of a writ of possession. Petitioners filed for a motion for reconsideration, but CA denied it. ISSUE: W/N the issuance of a writ of possession should be heard ex parte RULING: Yes. The court quote with approval the following disquisition of the CA: The respondent judges line of reasoning in declaring ex parte petition as an adversarial proceeding is simply puerile.(kalokohan!!) The fact that the Spouses Lam were allowed to actively participate in the proceedings for the said case, by filing an Answer and going through pre-trial and mediation, was a glaring procedural anomaly that the court a quo had inexcusably abetted. The court cannot allow the erring court a quo to use that same aberration as an excuse for a continuing defiance of the law and jurisprudence that defines a petition for the issuance of a writ of possession as a non-litigious ex parte proceeding that does not require the participation of the mortgagor. * Spouses Norberto Oliveros and Elvira Oliveros v. The Honorable Presiding Judge, Regional Trial Court, Branch 24, Bian, Laguna and Metropolitan Bank & Trust Company: "As to the nature of a petition for a writ of possession, it is well to state that the proceeding in a petition for a writ of possession is ex parte and summary in nature. It is a judicial proceeding brought for the benefit of one party only and without notice by the court to any person adverse of interest. It is a proceeding wherein relief is granted without giving the person against whom the relief is sought an opportunity to be heard. By its very nature, an ex parte petition for issuance of a writ of possession is a non-litigious proceeding authorized under Act No. 3135 as amended. It is not strictly speaking a judicial process as contemplated in Article 433 of the Civil Code. It is a judicial proceeding for the enforcement of one's right of possession as purchaser in a foreclosure sale. It is not an ordinary suit filed in court, by which one party "sues another for the enforcement of a wrong or protection of a right, or the prevention or redress of a wrong." METROPOLITAN BANK V PASCUAL G.R.No. 163744, February 29,2008 FACTS: During the union of Nicholson Pascual and Florencia Nevalga, Florencia bought from a 250-square meter lot with a 3-door apartment in Makati City. TCT No. 156283 was issued in the name of Florencia, "married to Nelson Pascual a.k.a. Nicholson Pascual. In 1994, Florencia filed a suit for the nullity of marriage based on the psychological incapacity of Nicholson. RTC rendered a decision declaring their marriage null and void. The couple separated without liquidating their conjugal partnership. On April 30, 1997, Florencia together with spouses Nortberto and elvira Oliveros obtained a loan of P58M from petitioner Metropolitan Bank and Trust Co.(Metrobank). To secure the obligation, Florencia and the spouses executed several REMs on their properties, including one bought by Florencia in Makati City. Among the documents Florencia submitted to procure the loan were a copy of TCT No. 156283, a photocopy of the marriage-nullifying RTC decision and a document denominated as waiver that Nicholson purportedly executed. The waiver, made in favor of Florencia, covered the conjugal properties of the ex-spouses listed therein, but did not incidentally include the lot in question. Florencia and the spouses failed to pay their loan obligation when it fell due and so Metrobank initiated foreclosure proceedings under Act No. 3135, as amended, before the Office of the Notary Public of Makati City. Subsequently, Metrobank caused the publication of the notice of the sale on 3 issues of Remate. At the auction sale, Metrobank emerged as the highest bidder. Nicholson learned of the foreclosure proceedings and so it filed before the RTC in Makati City a complaint to declare the nullity of the mortgage of the disputed property. He alleged that the property, which is still a conjugal property, was mortgaged without his consent. In its Answer with Counterclaim and Cross-Claim, Metrobank alleged that the disputed lot, being registered in Florencia's name, was paraphernal. Metrobank also asserted having apporved the mortgage in good faith. RTC - declared the REM invalid - Metrobank had not overcome the presumptive conjugal nature of the lot

- lot being conjugal property, it may not be validly encumbered by Florencia without Nicholson's consent - deed of waiver is found to be fatally defective, Nicholson denied executing the same and the signature of the notarizing officer was a forgery, waiver doc was allegedly executed a little over 3 mos. before the issuance of the RTC decision re: the nullity of their marriage * RTC dismissed Metrobank's counterclaim and cross-claim againtst the ex-spouses. * Metrobank's motion for reconsideration was denied, so punta sya kay CA. CA - affirmed with modification the RTC's decision - deleted moral damages and atty's fees * Metrobank moved for reconsideration (masigasig!!!) but was denied by the CA. ISSUE: 1. W/N the REM is void for the property mortgaged by Florencia is still a conjugal property 2. W/N Metrobank is a motgagee in good faith RULING: The petition is partly granted. 1. Yes. but only with respect to the 1/2 undivided portion of the property belonging to Nicholson. In the case at bar, Florencia constituted the mortgage on the disputed lot on April 30, 1997, or a little less than two years after the dissolution of the conjugal partnership on July 31, 1995, but before the liquidation of the partnership. Be that as it may, what governed the property relations of the former spouses when the mortgage was given is the provision of Art. 493.(check mo full text o kaya codal) .Under it, Florencia has the right to mortgage or even sell her one-half (1/2) undivided interest in the disputed property even without the consent of Nicholson. However, the rights of Metrobank, as mortgagee, are limited only to the 1/2 undivided portion that Florencia owned. Accordingly, the mortgage contract insofar as it covered the remaining 1/2 undivided portion of the lot is null and void, Nicholson not having consented to the mortgage of his undivided half. The conclusion would have, however, been different if Nicholson indeed duly waived his share in the conjugal partnership. But, as found by the courts a quo, the April 9, 1995 deed of waiver allegedly executed by Nicholson three months prior to the dissolution of the marriage and the conjugal partnership of gains on July 31, 1995 bore his forged signature, not to mention that of the notarizing officer. A spurious deed of waiver does not transfer any right at all, albeit it may become the root of a valid title in the hands of an innocent buyer for value. Metrobanks right, as mortgagee and as the successful bidder at the auction of the lot, is confined only to the 1/2 undivided portion thereof heretofore pertaining in ownership to Florencia. The other undivided half belongs to Nicholson. As owner pro indiviso of a portion of the lot in question, Metrobank may ask for the partition of the lot and its property rights "shall be limited to the portion which may be allotted to [the bank] in the division upon the termination of the co-ownership."This disposition is in line with the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so. 2. No, as per CA. Sabi ni SC no need to discuss na teh! In view of the resolution on the validity of the auction of the lot in favor of Metrobank, there is hardly a need to discuss at length whether or not Metrobank was a mortgagee in good faith. Suffice it to state for the nonce that where the mortgagee is a banking institution, the general rule that a purchaser or mortgagee of the land need not look beyond the four corners of the title is inapplicable.Unlike private individuals, it behooves banks to exercise greater care and due diligence before entering into a mortgage contract. The ascertainment of the status or condition of the property offered as security and the validity of the mortgagors title must be standard and indispensable part of the banks operation. A bank that failed to observe due diligence cannot be accorded the status of a bona fide mortgagee as here. But as found by the CA, however, Metrobanks failure to comply with the due diligence requirement was not the result of a dishonest purpose, some moral obliquity or breach of a known duty for some interest or ill-will that partakes of fraud that would justify damages.