PLEDGE

Cavite Development Bank v. Lim (1 February 2006)524 SCRA 346 | Ponente: J. Mendoza

Facts – 1. Rodolfo Guansing obtained a Php 90,000.00 loan from CDB.

To secure the loan, he managed a parcel of land located in Quezon City.

2. Guansing defaulted in the payment of his loan. Thus, CDB foreclosed the mortgaged property.

3. At the extrajudicial foreclosure sale, the mortgaged property was sold to CDB who was the highest bidder. Eventually, the title of the said lot was consolidated in the name of the bank.

4. Lim offered to buy the property. 5. Conflict arose when Lim discovered that the title of the

property was not in the name of Rodolfo Guansing because it was under the name of his father Perfecto. Indeed, Perfecto filed a case for the cancellation of the title in the name of Rodolfo.

(In other words, Rodolfo mortgaged a property that is not his…)

6. The Lims sued CDB and its mother company FEBTC. 7. The RTC ruled in favor of the Lims. It ruled, among others,

that CDB and FEBTC are not exempt from liability despite the impossibility of performance, because they could not credibly disclaim knowledge of the cancellation of Rodolfo’s title without admitting their failure to discharge their duties to the public as a reputable banking institution.

8. The C.A. affirmed the decision of the RTC in toto.

Issue (1) – Whether or not the sale of the mortgaged property is valid.

Held (1) – NO. A foreclosure sale, though essentially a forced sale, is still a sale, in accordance with Art. 1458 of the NCC, under which the mortgagor in default becomes obliged to transfer the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay the bid price in money or its equivalent. Corollary, the rule that the seller owns the thing to be sold also applies. This is the reason why Art. 2085 (b) of the NCC require, for the validity of the contract of pledge or mortgage, that the pledger or mortgagor be the absolute owner of the thing to be pledged or mortgaged, in anticipation of a probable foreclosure sale, should the mortgagor default in the payment of the loan.

Issue (2) - Whether or not the bang should be liable for the botched sale, which was caused by the defect in the title of the property mortgaged.

Held (2) – The doctrine of mortgagee in good faith provides that despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy.

The court held that the CDB is not a mortgagee in good faith. While petitioners are not expected to conduct an exhaustive investigation on the history of the mortgagor’s title, they cannot be excused from the duty of exercising the diligence required of banking institutions. In Tomas v. Tomas, the court held that it is standard practice of banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who are the real owners thereof, noting that banks are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands for their business is imbued with public interest.

GSIS v. CA 266 SRA 187

FACTS

1.) Private Respondent PVHI (Sulo ng Nayon Inc.) obtained a loan of 22 M from GSIS for the construction of a hotel – as security PVHI hypothecated the hotel and its contents. GSIS granted PVHI two additional load accommodations of 8 M and 6.5 M.

2.) PVHI was only able to pay 98 M, thus GSIS finally instituted foreclosure proceedings (Real Estate, Chattel)

3.) Hotel was finally sold at public auction with GSIS as highest bidder

4.) GSIS filed with RTC of Pasay for a writ of possession. RTC granted. CA affirmed.

5.) PVHI filed a petition to set aside foreclosure sale (in accordance with Section 8 Act 3135), but RTC Judge Sayo dismissed on the ground of lack of jurisdiction

6.) Since the case was dismissed, they were compelled to file a petition for Certiorari

Issue: Whether or not RTC Judge Sayo erred in dismissing the petition to set aside foreclosure sale – YES

Held

- SC remanded the case back to RTC

- SC found nothing objectionable in such recourse

- Pursuant to Section 8, 3135, the recourse for a party aggrieved by foreclosure is to have the sale set aside.

PNB v BANALAO

Facts

Banatao filed a case against Carag for recovery of propertyo Real property in dispute is an accretion which Carag

was occupying, and which Banatao was caiming to own

While case was pending, Carag was able to secure homestead patents on the disputed land

o Homestead patent bears a proviso that homestead cannot be alienated or encumbered within 5 years from issuance

Carag applied for loans with PNB, secured by a real estate mortgage of the disputed property

o PNB approved the applications, relying on the OCT which had no notice of lis pendens

Mortgages were annotated on the OCTo PNB extra-judicially foreclosed the property, won at

the public auction, and consolidated ownership in its name

Compromise agreement was entered into between Banatao and Carag, whereby the former would own the northern half, and the latter, the southern half

o PNB was not made party to the agreement

Issue

WON the mortgage is valid

Held

No

o Mortgage liens occurred mere months after the issuance of the homestead patents

o PNB is not a mortgagee in good faith Prohibition on alienation or encumbrance

can be seen on the face of the OCT PNB is chargeable with knowledge of law

It failed to observe due diligence

Bank of American, NT and SA v. American Realty Corp.

FACTS:(1) Bank of America NT & SA (BANTSA) and Bank of America

International Limited (BAIL) are both foreign banking corporations who granted three multi-million US dollar loans to three corporate borrowers.

(2) The corporate borrowers defaulted. Hence, their loan was reconstructed. American Realty Corporation (ARC) secured their reconstructed loan by executing REM.

(3) The corporate borrowers still defaulted in paying their loan. Hence, BANTSA filed a case against the corporate borrowers in the foreign court for collection of the loan. ARC was not impleaded in such case.

(4) In addition to the foreign case, they also filed with the Sheriff of Bulacan to have the REM executed by ARC extra judicially foreclosed.

(5) ARC filed a case against BANTSA claiming that the latter can no longer file for extrajudicial foreclosure the REM because it already filed a collection case with the foreign courts.

(6) BANTSA’s defense, on the other hand, was that ARC was not impleaded in the foreign courts and that final judgment was necessary in the foreign cases before there could be a waiver or a bar to foreclose the mortgage.

ISSUE: W/N the extrajudicial foreclosure was proper.

HELD: NO.(1) The SC held that the mortgagee creditor has 2 options when

the principal debtor defaulted: (1) foreclose the mortgage; or (2) file a collection suit. The option is alternative and not cumulative. An exercise of one option is deemed waiver or bar on the other. The option is deemed chosen when in: (1) collection suit has been filed; or (2) when a petition was filed with the sheriff where the property is located to have

the mortgage judicially or extra judicially foreclosed.(2) In the case at bar, SC it was immaterial whether or not ARC

was impleaded in the foreign cases. The mere fact that BANTSA filed a collection suit against the corporate borrowers already constituted a bar or waiver to foreclose the mortgage.

DOCTRINES:(1) Remedies available to the mortgage creditor are deemed

alternative and not cumulative

(2) Filing of a collection suit barred the foreclosure of the mortgage

(3) The mere act of filing of an ordinary action for collection operates as a waiver of the mortgage-creditor’s remedy to foreclose the mortgage; No final judgment in the collection is required for the rule on waiver to apply.

M. J. Lhuillier Pawnshop, Inc. v. Commissioner on Internal Revenue!G.R. No 166785. September 11, 2006.!

FACTS:

1. The case is a motion for reconsideration which contends that before an exercise of a taxable privilege may be subject to Documentary Stamp Tax (DST), it is indispensable that the transaction must be embodied in and evidenced by a document.

2. MJ Lhuillier argued that since a pawn ticket as defined in thePawnshop Regulation Act is merely the pawnbroker’s receipt for apawn and not a security nor a printed evidence of indebtedness, itcannot be considered as among the documents subject to DST

ISSUE:

Whether or not pledge transactions entered into by pawnshops are subject to DST.

HELD:

Yes. Section 195 of the National Internal Revenue Code (NIRC) imposes a DST on every pledge. All pledges are subject to DST, unless there is a law exempting them in clear and categorical language. DST is essentially an excise tax; it is not an imposition on the document itself but on the privilege to enter into a taxable transaction of pledge.

Commissioner of Internal Revenue v. Trustworthy Pawnshop, Inc.! G. R. No. 149834. May 2, 2006.

FACTS:

1. Commissioner of Internal Revenue issued Revenue Memorandum Order (RMO) No. 15-91, which classified the pawnshop business as “akin to the lending investor’s business activity” and subject to 5% lending investor’s tax.

2. Cebu City issued a notice against Trustworthy Pawnshop for the payment of deficiency percentage tax but the pawnshop protested and alleged that a pawnshop business is different from a lending investor’s business,hence, should not be subjected to the 5% lending investor’s tax. !

ISSUE:

Whether or not pawnshops are considered lending investors.

HELD:

No. In CIR v. MJ Lhuillier, it is anchored in the following reasons: a.) Under the provisions of National Internal Revenue Code (NIRC), pawnshops and lending investors were subjected to different tax treatments. b.) Congress never intended pawnshops to be treated in the same way as lending investors. c.) A section in the NIRC subjects to percentage tax dealers in securities and lending investors only. There is no mention of pawnshops.!! d.) The BIR had ruled several times prior to the issuance of the memorandum that pawnshops were not subject to the 5% percentage tax.

EL HOGAR V PAREDES

Facts:

1. On September, 26 1919, Doña Aniceta Ardosa executed a mortgage upon a rural estate land in the municipality of Manapla Occidental Negros. Such land was called the Hacienda de Bayabas y Agtongtong.

2. The mortgage was executed in favor of El Hogar Filipino for a building and loan contract.

3. In such contract, the parties stipulated a clause that provided that whenever the debtor defaults at the maturity of the debt

El Hogar shall have to power to sell or execute an extra-judicial sale of the property.

El Hogar shall have the right to participate in the bidding.

4. Ardosa later on defaulted in payment which resulted in the foreclosure of the sale.

5. When El Hogar was already registering the land under its name, Paredes, as registry of deeds of Negros, denied such registration because the stipulation conferring power to sell is void.

Issue:

WON the power to sell given to the manager of El Hogar is a valid stipulation.

Ruling:

There is no domestic law or jurisprudence that criticizes the validity of such stipulation. However, the SC in this case, enshrined the doctrine that:

“That this view is in harmony with legal conceptions prevailing in this jurisdiction can be further seen from the circumstances that section 66 of the Land Registration Act (Act No. 496) fully recognizes the validity of a clause in a mortgage conferring a special power of sale on the mortgagee. It is true that the section deals only with land that has been registered under the Torrens system, but the provision reflects the commonly accepted professional view that such a clause is valid, regardless of the nature of the title. Certainly, it would be an astonishing conclusion if we were to hold here that a clause conferring special power of sale is invalid in a contract dealing with land not registered under the Torrens system, notwithstanding the fact that the same clause is valid when inserted in a contract relating to land so registered.

It is a matter of common knowledge that, owing to the difficulties and uncertainties attendant upon the realization of loans extended upon mortgages of real property in this country, intending borrowers are compelled in most cases to resort to the dangerous expedient of selling their land under a contract of sale with pacto de retro.

Lopez and Javelona v. El Hogar (12 January 1925)GR No.: 22678 | Ponente: J. Villamor

Facts – 1. Lopez and Javelona obtained a loan in the amount of Php

94,000.00 from El Hogar. 2. The loan agreement provided among others that –

a. Par. 8 – Failure to pay for 3 consecutive months will allow El Hogar to collect the rent received from the properties mortgaged and to apply them as payments for the debt.

b. Par. 10 – If debt remains unpaid, debtors will give the manage or he authorized person of El Hogar to sell the property mortgaged at a public auction.

3. Beginning 31 May 1921, the debtos failed to make the monthly payments stipulated in the contract. Thus, the BOD of El Hogar declared the amount due and demandable.

4. The mortgaged properties were sold publicly at an extrajudicial foreclosure sale, and were purchased by El Hogar.

5. The debtors filed a complaint praying for the annulment of the extrajudicial foreclosure sale and the cancellation of all the registration, annotations, etc in the title of the of the properties mortgaged.

6. The CFI rendered a decision against El Hogar. It ruled among others that Par. 10 of the loan agreement is null and void.

Issue – Whether or not paragraph of the loan agreement is null and void.

Held – Citing El Hogar v. Paredes, the court held that a stipulation in the mortgage contract allowing the mortgagee, upon default of the mortgagor in the payment of the mortgage debt and after publication for 3 successive weeks in a paper of general circulation,

and allowing the mortgagee to become a bidder at such sale is valid. It is not contrary to any public policy.

Therefore, par. 10 of the aforementioned contract is valid. The court a quo erred in holding Par. 10 of the said contract null and void.

NB: The case is really long. Indeed, your patience will run out when you read the full text. But the only thing we need in this case is the validity of Par. 10 of the mortgage contract.

FRANCISCO REALTY AND DEVELOPMENT CORP V CA

FACTS:

Petitioner granted a loan of 7.5 million pesos to private respondents, spouses Javillonar, in consideration of which the latter executed the following documents: (a) a promissory note stating an interest charge of 4% per month for 6 months; (b) a real estate mortgage, together with the improvements; and (c) an undated deed of sale of the mortgaged property in favor of petitioner. The interest on the said loan was to be paid in 4 installments: 900k to be deducted from the proceeds of the loan, while the remaining balance was to be paid monthly by means of post-dated checks (March 27, April 27, May 27). Promissory note provided that in failure to pay the interest, full possession will be transferred and deed of sale will be registered. Petitioner claimed respondents failed to pay. Respondent obtained another loan of 2.5 million and issued another promissory note, loan to be paid on or before April 27, 1992. Respondents failed to pay again and refused to vacate the property covered by the real estate mortgage. Said that it was not their intent to sell the property but the undated deed of sale was merely additional security.

ISSUE(S):

WON there was pactum commissorium.

HELD:

YES. A pactum commissorium is a forfeiture clause in a deed of sale. The stipulations in the promissory notes providing that upon failure of respondent spouses to pay the interest, ownership of the property would be automatically transferred to petitioner and the deed of sale would be registered, are in substance of a pactum commissorium.

2 elements of a pactum commissorium: (1) there should be a pledge or mortgage wherein a property is pledged or mortgaged by way of security, (2) that there is a stipulation for an automatic appropriation by the creditor in the event o f non-payment.

ONG V. ROBAN LENDING CORP.

FACTS:

1. Spouses Ong obtained several loans from Roban Lending Corp amounting to 4M which was secured by several REMs.

2. The amount was subsequently amended to 6M and a Memorandum of Agreement was executed.

3. MOA states that in case of default of payment, Dation in payment will take place and that a promissory note will be executed by the spouses.

4. Spouses defaulted.5. Spouses filed for Annulment of TCTs issued to Roban, and

annulment of Deed of Mortgage on the grounds that there was Pactum Commissorium.

ISSUE: WON there was Pactum Commissorium?

HELD:

1. Pactum Commissorium is the automatic appropriation of a property that is being held by the mortgagee as security. The rule is, Pactum Commissorium is not allowed and any stipulation of the same will be null and void.

2. There was nothing in the Memorandum of Agreement that provides a foreclosure proceeding nor redemption in case of default.

3. The respondents could not say that Dation is allowed since the purpose of Dation is to extinguish the debt. But in this case, the Dation would not extinguish the debt since a PN should subsequently be executed after Dation.

DISPOSITIVE:

The memorandum agreement and Dation made by the parties is null and void.

ONG V IAC

DOCTRINE: Requirements for Pledge to take effect against third persons:

Article 2096 of the Civil Code that for a pledge to take effect against third persons, it should be in a public instrument which must contain the description of the thing pledged and the date of the pledge.

In the case of Bachrach Motor Co. v. Lacson Ledesma, 64 Phil. 681 (1937), Art. 2096 has been interpreted in the sense that for the contract to affect third persons, apart from being in a public instrument, possession of the thing pledged must in addition be delivered to the pledgee.

FACTS:

Madrigal Shipping Co., Inc. applied for and was granted a loan by the Consolidated Bank and Trust Corporation (Solidbank for short) in the amount of P2,094,000.00

To secure the fulfillment, Madrigal Shipping Co., Inc executed a document denominated as "Pledge Agreement".

Under the said Pledge Agreement he was to give additional securities or collaterals in the form of a pledge in favor of the bank, its barge and tugboat.

Madrigal Shipping Co., Inc. failed to pay its obligation to the Solidbank.

The creditor bank had to sell the pledged properties, however the tugboat and the barge had been taken from Pasig River, Manila, where the vessels were moored and towed to North Harbor, Manila, without the knowledge and consent of the Solidbank

Meanwhile, petitioner Honesto Ong bought one Barge (the same barge which was subject of the pledge) from Santiago S. Ocampo, a successful bidder in a public auction.

Private respondent (Solidbank) filed a complaint against Honesto Ong, et al. for Replevin with Damages before the CFI

The respondent court (CFI) issued an order for the seizure of the above described personal property upon posting of a bond in the sum of P1,000,000.00

After an opposition to the motion for reconsideration and a reply to the opposition had been filed by the parties, the Court of First Instance denied the motion for reconsideration but ordered the petitioners Alfonso Ong and Honesto Ong to post a counterbond of P400,000.00 executed to the herein plaintiff-private respondent. The pertinent part of the order and its dispositive portion reads:

o The alleged Pledge Agreement between plaintiff and Madrigal Shipping Company covering the vessel (barge) in question was not registered in the registry of vessels. Considering that plaintiff does not charge private defendants with knowledge of such pledge (see par. 8, complaint), said defendants, being third persons, cannot be said to be bound by said pledge.

ISSUE: WON the contract of pledge entered into by and between Solidbank and Madrigal Shipping Co., Inc. is binding on the petitioners Ong.

HELD: Undoubtedly, petitioners rely heavily on the fact that the contract of pledge by and between Solidbank and Madrigal Shipping Co., Inc. was not recorded under Sections 804 and 809 of the Tariff and Customs Code and argue that it is not binding on third persons like the petitioners. It is, however, stated under Article 2096 of the Civil Code that for a pledge to take effect against third persons, it should

be in a public instrument which must contain the description of the thing pledged and the date of the pledge.In the case of Bachrach Motor Co. v. Lacson Ledesma, 64 Phil. 681 (1937), Art. 2096 has been interpreted in the sense that for the contract to affect third persons, apart from being in a public instrument, possession of the thing pledged must in addition be delivered to the pledgee.

All these requirements have been complied with, in the case at bar. The pledge agreement is a public instrument, the same having been notarized and under the notarial seal of Vicente A. Casim. Subject of the pledge (MSC Barge No. 601) was delivered to the Solidbank which had it moored at Tanque Bodega, Pasig River, Manila, where it was guarded by a security guard.

Undeniably, Madrigal Shipping co., Inc., owner of MSC Barge No. 601, pledged said vessel and tugboat to secure the shipping company's obligation to the creditor bank (Solidbank) in the amount of P2,094,000.00, and no payment was made by Madrigal Shipping Co., Inc., as pledgor. Therefore the Solidbank has the light of retention of the barge in question pledged to it until it is paid. The Civil Code expressly provides;

Art. 2090. The contract of pledge gives right to the creditor to retain the thing in his possession or in that of a third person to whom it has been delivered, until the debt is paid.Applying these concepts in the case at bar, the pledgee is obviously a lawful and rightful possessor of the personal property pledge

HERNANDEZ V IAC

Facts

Hernandez was introduced to De Leon as someone buying and selling jewelry

There have been previous transactions between which have been paid for in cash and PDCs

Petitioner got 2 carat earrings, 1 choker, 1 heart shaped diamond set, and 1 carat ring and earrings which were each paid for with a PDC payable to cash, and a 5 carat diamond piece which was paid for using an indorsed PDC issued by a certain Enrique Araneta

Upon presentment, 3 checks were drawn against insufficient funds, and 2 were drawn against a closed account

Issue

WON there is Estafa

Held

Yeso Ownership is not a requisite for Estafa

As long as one defrauds another Owner need not be the one on whom the

loss falls

REAL ESTATE MORTGAGE

Soriano v. Galit

Topic: REM

Ponente: Ynares-Santiago, J.

Facts:

Respondent Ricardo and Rosalina Galit got a 480k loan from petitioner Marcelo Soriano secured by a REM over a 35k sqm. land.

The Galits defaulted, hence, Soriano filed for collection with the RTC. It granted his petition then issued a writ of execution. The deputy sheriff

levied on the Galits’ 35k sqm. land, a house, and a bodega. Soriano also won the public auction for such properties totaling 483k, thus, a certificate of sale was issued in Dec. 23, 1998.

When Soriano caused the registration in 1999, of his certificate of sale, a 139sqm lot was included which was not in the writ of execution.

2001, after the registration, Soriano moved for writ of possession as the Galits never availed of their right of redemption within a year after the public sale. RTC granted the writ of possession.

CA reverses for the Galits and grants their petition for certiorari. Hence, Soriano appeals contending CA erred because the proper remedy was to quash the writ of possession, not attack the validity of the writ of possession.

Issue:

WON the writ of possession is void. YES, it’s VOID.

Held:

SC points out that there should be a strict application of the certificate of sale wherein it should state the correct description of the property to be sold. Otherwise, it’s void because it indicates fraud.

CA pointed out in its ruling that there was a difference between the 1st page of the certificate of sale and those at the dorsal portion. Slightest deviations will invalidate the proceeding and the public sale.

MOJICA v. CA

1. Petitioner Leonardo Mojica [deceased] contracted a loan with the defendant rural bank of Kawit. As a security, he executed a real estate mortgage. In the REM contract, it was stated that, “... agreement for the payment of the loan of P20,000.00 and such other loans or other advances already obtained or still to be obtained by the mortgagors ...”.

2. The 20k loan was fully and completely paid. Subsequently, mojica contracted another loan with the defendant for 18k. No formal deed of mortgage was constituted over any of the properties of the petitioner but it was stated on the top of the PN that it was secured by the previous REM executed.

3. Spouses failed to pay, the property was extrajudicially foreclosed in favor of the defendant as the highest bidder. Mojica failed to redeem the property within one year.

4. The son of mojica, attempted to pay his father’s debt. He made 2 partial payments. Subsequently, the defendant bank executed an affidavit of consolidation of title over the said property.

5. After consolidation, defendant bank scheduled a public auction sale over the subject property. The bank refused to accept the payment of unpaid balance of Mojica’s son. Hence, this complant.

ISSUE: Whether or not the foreclosure sale by the Sheriff on had for its basis, a valid and subsisting mortgage contract.

HELD: Yes.

- 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

- 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. It was incumbent upon any subsequent mortgagee or encumbrances of the property in question to e e the books and records of the bank, as first mortgagee, regarding the credit standing of the debtors

PEOPLE’S BANK AND TRUST CO. vs. DAHICAN LUMBER CO.

FACTS:

Atlantic Gulf and Pacific Company of Manila sold and assigned all of its rights in the Dahican lumber concession to Dahican Lumber Company (DALCO) for $500K, of which only $50k was paid. Therefore, to develop the concession, DALCO obtained various loans from the People’s Bank and Trust Co. (BANK) amounting to 200K pesos. And along with Dahican American Lumber Corp. (DAMCO), a stockholder of DALCO, obtained a $250K loan from the Export-Import Bank of Washington. As security for the loans, DALCO executed in favor of the BANK a real estate mortgage covering 5 parcels of land with all the buildings and improvements thereon and all personal properties of mortgagor in its place of business. Executed a 2 nd mortgage on the same property in favor of Atlantic to secure unpaid balance of $450K. Both deeds contained the provision extending mortgage to properties subsequently acquired. Failed to pay 5th promissory note. Respondent acquired new equipment and machineries from Connell Cros. Company, a general purchasing agent of DALCO.

ISSUE(S):

WON the “after acquired properties” were subject to the deeds of mortgaged mentioned.

WON mortgages are valid even if not recorded in accordance with Chattel Mortgage Law.

HELD:

1st ISSUE: YES. Explicitly stated in the contract and SC said that such stipulations are not unlawful because they were meant to just replace existing equipment. Treated the equipment as “perishable”.

2nd ISSUE: YES. No need to record because such equipment was immobilized by destination. Art. 415

San Juan v. CA

Facts:

Subject property was a lot in Bacolod which was owned by petitioner Asuncion San Juan which she mortgaged to respondent Young Auto Supply Co., Inc. (YAS) through her atty-in-fact, Rafael Alducente.

After San Juan defaulted, REM was extra-judicially foreclosed by YAS, won in the public sale, registered the certificate of sale with the Register of Deeds in Sept. 13, 1985.

Sept. 22, 1986, a final certificate of sale was issued but YAS couldn’t register it because San Juan refused to surrender her owner’s duplicate of the title to the foreclosed property. Hence, this case.

RTC ruled for YAS, ordered the Register of Deeds to annotate in the OCT of the property the sale without presenting the owner’s duplicate. San Juan appeals to the CA attacking the validity of the final certificate of sale as she had already revoked the SPA she made in favor of the Rafael Alducente before all this happened.

But naaaaah, CA affirmed the validity because San Juan failed to exercise her 1 year right of redemption or question the validity in the first place. Plus the certificate of sale registered was a public document which has a prima facie presumption that it’s valid.

Issue:

WON the Register of Deeds can annotate in the OCT without need of the owner’s copy. YES.

Held:

SC states that San Juan was already barred by laches by letting 3 years pass without exercising her right of redemption or question the certificate of sale.

In any case, San Juan’s defense that this violates her rights under Sec. 107, PD1529 is untenable because she should’ve attacked the validity of this whole proceeding the moment she knew about the REM as she alleged that she had revoked the SPA of Rafael.

San Juan just refused to give her owner’s duplicate. SC held that if this was allowed, no buyer in a public sale can consolidate his/her title even after the expiration of the right of redemption.

Also, sec. 71 of PD1529 pertains to the Register of Deeds annotating the OCT without the owner’s copy and they just send a notice to the refusing owner, to produce it. Otherwise, it’ll be subject to court action, like this case.

HECHANOVA v. ADIL

1. Petitioner seeks the annulment of the court order issued by respondent judge in a civil case declaring the deed of sale null and void.

2. The defendant in a civil case mortgage the land to his cousin wherein it was stated in the mortgage contract that in case the former fails to redeem the property within 10 years, the latter will become the former thereof.

3. The defendant sold the property to the herein petitioner, alleging that the mortgage executed between him and his cousin was null and void.

ISSUE: WON the plaintiff in the civil case [defendant’s cousin/ mortgagor] has a legal standing to question the validity of sale. NO

WON the sale of the subject property null and void. NO.

HELD: No.

- It is clear from the records of this case that the plaintiff has no cause of action. Plaintiff has no standing to question the validity of the deed of sale executed by the deceased defendant Jose Servando in favor of his co-defendants Hechanova and Masa. No valid mortgage has been constituted plaintiff's favor, the alleged deed of mortgage being a mere private document and not registered; moreover, it contains a stipulation (pacto comisorio) which is null and void under Article 2088 of the Civil Code. Even assuming that the property was validly mortgaged to the plaintiff, his recourse was to foreclose the mortgage, not to seek annulment of the sale.

Bank of Commerce vs. San Pablo, Jr.

Facts:

1. On December 20, 1994, Santos obtained a loan from Direct Funders, secured by a real estate mortgage. The said property was owned by the defendants and that Santos was able to mortgage the property through an SPA signed by defendants.

2. Respondents received a letter from Direct Funders regarding Santos’ failure to meet her obligation. However, Santos subsequently settled the loan with Direct Funders.

3. Respondents later demanded the return of the TCT pertaining to the mortgaged property which to their surprise was mortgaged by Santos to Bank of Commerce using an SPA with forged signatures.

4. The property was subsequently foreclosed, thus respondents filed an action for quieting of title against Bank of Commerce.

Issue: Who between respondents and Bank of Commerce has a better title over the property.

Held: Respondents have a better title over the property.

1. Their signatures in the SPA were forged, thus the real estate mortgage was declared null and void. It naturally follows that the foreclosure is also null and void.

2. Bank of Commerce was not in good faith. Dealing with Santos who is not the registered owner of the property being mortgaged, Bank of Commerce failed to observe the required diligence to ascertain the genuineness and extent of the authority of Santos.

ABAD V. GUIMBA

FACTS:

1. Vivian Guimba wanted to apply for a loan and asked Gemma to look for a person to obtain loan from.

2. She gave Gemma the Duplicate Copy of her title. Subsequently, she changed her mind. She asked for the copy back but was told by Gemma that the copy was in a bank. Upon calling the bank, the latter informed Vivian that the title was not there.

3. Later on, someone called Vivian, which is Abad, and informed her that her loan was upon maturity.

4. Vivian filed for cancellation of Mortgage.5. Abad contends that he was a mortgagee in good faith since PD 1529 gives

the public the right to rely only on the face of the title.

ISSUE: WON Abad was a mortgagee in good faith?

HELD: NO.

1. PD 1529 only applies to purchasers or mortgagees in good faith. It was shown in the factual findings that Abad met a different couple and that he did not inquire on whether they are the persons who are indicated in the tiltle. Therefore, it excludes purchasers who have knowledge of any defect in title.

2. In dealing with a registered land, through an unregistered owner, the purchaser must look beyond the face of the title since the mere fact that the vendor is not the registered owner must put him on his guard.

ASUNCION v. EVANGELISTA

FACTS:

Private respondent has been operating a piggery on his landholdings under the trade name Embassy Farms as a single proprietorship. Private respondent, with his wife and 3 others organized Embassy Farms Inc. and registered it with the SEC. Private respondent was majority stockholder of the corporation with 90% of the shares. He also served as the president and CEO. Respondent borrowed 500K pesos from Paluwagan ng Bayan Savings and Loan Association to use as working capital for Embassy Farms. He executed a real estate mortgage on 3 of his properties as security for the loan. Mortgaged 10 more titles in favor of PAIC Savings and Mortgage Bank for 1.7M pesos. Another loan of 800K from Mercator Finance secured by 5 mortgages. Debt totaled to 3M. Defaulted on his payments and loan ballooned to 6M due to interest and other financial charges. Petitioner and Respondent executed a memorandum of agreement transferring to petitioner Embassy Fars and assuming all of its obligations. However, 1 year has already lapsed and he still hasn’t transferred land and stocks of Embassy Farms to petitioner.

ISSUE(S):

WON petitioner should execute a formal assumption of mortgage separate from the MOA

HELD:

NO. A recorded REM is a lien inseparable from the mortgaged property until it is discharged. It is an elementary principle in civil law that a real mortgage subsists not withstanding the changes in ownership and all subsequent purchasers of the property must respect the mortgage, whether the transfer to them be with or without the consent of the mortgage.

Perfecta Quintanilla vs CA and RCBC

FACTS:- Quintanilla under the business name of Cebu Cane Products export rattan goods and was granted with 45K credit line by RCBC and former executed REM of land as security, but only 25K was availed from 45K then again availed credit lines with RCBC for her export bills twice amounting to 100K each as evidenced by PNs- Quintanilla exported her goods in Belgium and Bank Brussels-Lambert New York paid RCBC so RCBC credited it to the 25K secured by REM and 100K. Another shipment to Belgium was sent, but Bank in Brussels refused payment and even demanded for reimbursement of the previous payment. Due to persistent demand, RCBC reimbursed and revert the credit from Quintanilla’s account and demanded for the whole amount.- Quintanilla failed to pay so RCBC foreclosed the REM, but not only to the 25K secured by REM, but to total amount of 500K, so the petitioner filed for specific performance with damages and RCBC filed counterclaim- RTC: foreclosure to proceed only to 25K; counterclaim dismissed- CA: affirm RTC; permissive counterclaim granted

ISSUE: WON the counterclaim is compulsory?RULING: YES. Court Affirmed CA except nature of counterclaim.- To determine if compulsory, REM must be interpreted. REM stated: “for principal of 45K and as well as those mortgagee may extend to mortgagor”.- As a general rule, mortgage must be limited to the amount mentioned, but the REM expressly stated that the mortgage is not limited to the fixed amount, but also to credit accommodations in excess thereof, therefore, general rule does not apply but the specific provision or agreement of the parties.- Since REM clearly indicated to include also future advancements, counterclaim is compulsory so CA has jurisdiction, thus, may grant even without payment of docket fees.

Agbada v. Inter-Urban Developers Inc.

FACTS:

(1) Agbada obtained a loan from Inter-Urban. To secure the loan, they executed a REM. The loan was payable in 6 mos. With 3% interest.

(2) Agbada defaulted. Inter-Urban filed a claim to have REM foreclosed. However, Agbada opposed claiming that the loan was actually not yet due because the real agreement of the parties was that it was payable in 5 years with no interest.

(3) RTC rendered summary judgment on the ground that the defense of Agbada was untenable because it was in conflict with the REM contract which expressly showed that the partied agreed that the period of the loan was 6 months with 3% interest.

(4) Meanwhile, the property was foreclosed and sold at public action. The court confirmed the sale. Agbada did not appeal to such confirmation of sale. Instead, they appealed the summary judgment of the RTC.

(5) CA denied the appeal. Summary judgment was proper. Hence, they appealed with the SC, claiming that they were denied of due process because they were not given the opportunity to prove that the loan was not yet due and demandable.

ISSUE: W/N Agbada was denied of due process

HELD: NO.

(1) SC held that Summary Judgment was proper. The mortgage contract expressly showed the agreement of the parties as to the period and interest of the loan. The defense of Agbada was baseless and untenable.

(2) SC further held that the proper remedy of a mortgagor in this case was not to appeal the summary judgment of the RTC but to appeal the confirmation of the foreclosure sale, which the Agbada spouses did not do in the case at bar.

DOCTRINE: Judgment; Foreclosure; Proper remedy to seek reversal of judgment in an action for foreclosure of real estate mortgage is not a

petition for annulment of judgment but an appeal from the judgment itself or from the order confirming the sale of the foreclosed real estate.

SAYSON vs. LUNA

DOCTRINE:

Sheriff’s duty in the execution of a writ is purely ministerial he is to execute the order of the court strictly to the letter, and he has no discretion whether to execute the judgment or not.

Sheriff’s report, as a document, is clothed with the presumption of regularity, and since it was not objected to by the complainant, it must be upheld.

The complainants failed to substantiate the charges against the respondent. As against the bare allegations of misconduct with no cogent proof thereon, and the presumption of regularity in the performance of official functions, the latter shall prevail.

FACTS: This instant administrative case arose from the Affidavit-Complaint of

Gloria R. Sayson, Francisco R. Rellorosa and Rustico Y. Caparas charging Efren Luna, Sheriff III, Metropolitan Trial Court, Quezon City, with grave misconduct

The complainants alleged:o That the weekend before July 15, 1999, Gregorio Rellorosa

informed them that his car would be levied upon pursuant to a writ of execution issued by the Metropolitan Trial Court of Quezon City, and that it was scheduled to be sold at public auction at 10:00 a.m. on July 15, 1999.

o Rellorosa requested them to participate in the bidding, to which they agreed, subject to the condition that in case one of them would win the bid, they would allow Rellorosa to redeem the car within one year at the bid price plus accrued interest.

o That at 9:00 a.m. of July 15, 1999, they met Rellorosa and agreed to pool their resources so that they would come out as the highest bidder.

o They also met the respondent sheriff that same morning. Upon being told that the scheduled auction sale had been postponed to July 19, 1999, the complainants left.

o They, however, later learned from Rellorosa that the respondent sheriff conducted the auction sale of the said car at 2:00 p.m. that same day.

In his comment, the respondent narrated that: o He levied the car in question pursuant to a writ of execution

issued by the court.

o The auction sale was set at 10:00 a.m. of July 15, 1999, with due notice to Gregorio Rellorosa.

o Three days prior to the scheduled auction sale or on July 12, 1999, Gregorio Rellorosa filed a Petition for Relief from Judgment with Urgent Prayer for Preliminary Injunction Inter Alia and Temporary Restraining Order to Stop Sheriffs Sale Scheduled on July 15, 1999.

o The respondent further averred that he came to see Gregorio Rellorosa alone in the morning of July 15, 1999, and informed the latter that his motion was denied.

o He also told Gregorio that the auction sale would not push through as scheduled, but would proceed any time of the day once the order was signed.

o The respondent avers that he advised Gregorio to wait for the plaintiff, Genaro Serrano, to ask if the latter would postpone the auction sale, but Rellorosa immediately left.

ISSUE: WON Luna (Sheriff) acted in accordance with the Writ of Execution We agree.

HELD:The respondent sheriff acted in accordance with the Writ of Execution dated June 11, 1999, as issued by Judge Augustus C. Diaz, Metropolitan Trial Court, Branch 37, Quezon City. Indeed, a sheriff’s duty in the execution of a writ is purely ministerial he is to execute the order of the court strictly to the letter, and he has no discretion whether to execute the judgment or not. A perusal of the notice of levy and sale will also show that the sale at public auction was to take place on July 15, 1999 at 10:00 a.m. or soon thereafter at the front of [the] Hall of Justice Building, Q.C. As found by Executive Judge Ponferrada, such notice was served on July 8, 1999, or more than five (5) days before the scheduled auction sale. Furthermore, a sheriff’s report, in this case the Minutes of the Auction Sale, as a document, is clothed with the presumption of regularity, and since it was not objected to by the complainant, it must be upheld.

The complainants failed to substantiate the charges against the respondent. As against the bare allegations of misconduct with no cogent proof thereon, and the presumption of regularity in the performance of official functions, the latter shall prevail.

Paguyo v. Gatbunton

A.M. P-06-2135. May 25, 2007.

Topic: REM

Ponente: Garcia, J.

Facts:

In Sept. 9, 2002, petitioner Adoracion Paguyo got a 20k loan from Jeanlyn’s Lending Investor with a REM over their residential property in Bataan.

Feb. 3, 2003, Sps. Celso and Jenelita Garcia, owners of Jeanlyn’s Lending, filed for extra-judicial foreclosure of the REM under Act No. 3135 as Paguyo defaulted since Jan. 9, 2003.

Hence, a notice of sheriff’s sale was issued by respondent sheriff Charlie Gatbunton, setting the public sale on April 11, 2003. Notice was posted in Feb. 24, 2003, and published in Sierra Pacific news in Martch 12, 15, and 19, 2003.

However, the public auction was made on Dec. 1, 2003, in which the Sps. Garcia won. So Paguyo filed this case for grave abuse of authority and/or gross ignorance of the law with the Office of the Court Administrator (OCA) alleging that the foreclosure by Gatbunton was illegal contending:a. She already paid the loan;b. No SPA attached in the REM authorizing the Garcias to foreclose the

property; andc. There was no publication of the Dec. 1, 2003 public auction.

Gatbunton denies this and alleges that:a. The Dec. 1, 2003 auction was already approved by the ex officio

sheriff;b. Foreclosure in its substance is valid;c. It was made on December 1 because the Garcias wanted to give

Paguyo time to make good of the loan. OCA ruled that respondent sheriff Gatbunton was not liable for the

checking of the SPA. But he is liable for the December sale for incompetency.

Issue:

WON OCA erred in not ruling Gatbunton is liable for the checking of the SPA. NO.

Held:

Under Act No. 3135 Sec. 1, a sheriff has the obligation to check an SPA attached to the REM authorizing to sell the mortgaged property.

But this was amended by Circular No. 7-2002, enacted on April 22, 2002, which provides that application for extra-judicial foreclosures are to be examined now by the clerk of court. As the foreclosure was made on Feb. 3, 2003, which is now governed by such circular, Gatbunton is not anymore liable.

However, Gatbunton is still liable for the December sale for not causing re-publication of the sheriff’s notice. The publication in the Sierra Pacific news only referred to the April 11 public sale.

SC makes him liable for incompetency under Sec. 52(A)(16) in the Revised Uniform Rules on Administrative Cases in the Civil Service.

SPOUSES VIRGILIO G. TAMAYO vs. HEIRS OF GAVINO DOMINGUEZ

DOCTRINE: In extrajudicial foreclosure proceedings, personal notice to the mortgagor is actually unnecessary unless stipulated. If not being contrary to law, morals, good customs and public policy, mortgagee should have complied with it faithfully.

FACTS:

To secure a P40,000 loan, Gavino Dominguez executed a real estate mortgage on one-half of his commercial property in favor of the Community Savings and Loan Association (CSLA)

The mortgagor Gavino Dominguez died without settling his obligation. On maturity of the loan, CSLA filed a petition for extrajudicial

foreclosure. In the auction sale, the property was awarded to it as the highest bidder. The certificate of sale was registered in its name.

Subsequently CSLA allegedly gave respondents, the heirs of Gavino Dominguez, the option to repurchase within thirty days its half of the property.

When they failed to avail of the offer, CSLA sold the same to petitioners Virgilio Tamayo, Jr. and Lucinda Tamayo.

Petitioners filed with the RTC of Antipolo, Rizal, an action for partition against respondents who opposed it mainly on the ground that, since CSLA committed a violation of the mortgage deed when it failed to send Gavino Dominguez or his heirs a notice of the extrajudicial foreclosure and sale, the proceeding was null and void.

ISSUE: WON the CSLA sent a notice of the extrajudicial foreclosure and sale to the mortgagor, deceased Gavino Dominguez, or to his heirs as required in the mortgage deed.

NOTE: Section 10 of the mortgage deed thereof read: (10) All correspondence relative to this Mortgage, including demand letters, summons, subpoenas or notification of any judicial or extra judicial actions shall be sent to the Mortgagor at the address given above or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee.

HELD:

SC adopted the CAs finding that CSLA violated the notice requirement in the mortgage deed. As held by the appellate court:

Indeed, as correctly found by the lower court, there is no evidence in this case to show that the [CSLA] properly sent notice of the foreclosure proceedings to deceased mortgagor Gavino Dominguez or to his heirs, pursuant to Section 10 of the Real Estate Mortgage Contract. We cannot submit to [petitioners] reliance on Exhibit I, the alleged notice of foreclosure proceedings sent to deceased Gavino Dominguez, inasmuch as there is no showing that in the blank return card of said letter [,] the same was properly received by deceased Gavino Dominguez or by his heirs or by any duly authorized person.

In extrajudicial foreclosure proceedings, personal notice to the mortgagor is actually unnecessary unless stipulated. In this case, the parties voluntarily agreed on an additional stipulation embodied in Section 10 of the mortgage deed. Not being contrary to law, morals, good customs and public policy, CSLA should have complied with it faithfully.

San Jose v CaDoctrine: Notice of Sheriff’s Sale must contain the correct title number and technical description of property foreclosed

Facts:Petitioner-spouses San Jose and Batongbakal filed a complaint to annul the extra-judicial foreclosure sale conducted by the Provincial Sheriff of Bulacan of the property. The land was mortgaged by the petitioner-spouses to private respondent-spouses de Guzman as security for the payment of a loan. Allegedly for failing to comply, the respondents extra judicially foreclosed the mortgage and the land was sold at a sheriff’s sale. The TCT was cancelled and issued under the respondent spouses’ name. There was a failure to pay the loan obtained by the respondents and so the latter had the right to foreclose the mortgage either judicially/extrajudicially are not disputed. The trial court and CA upheld the validity of the foreclosure sale. The MR was denied, hence this petition for review.Issue:WON the extra-judicial foreclosure sale complied with the requirements of Act No. 3135 as amended by Act No. 4118 which governs the extra-judicial foreclosure of real estate mortgageHeld:In the Tambunting case, this Court stated that the failure to advertise a mortgage foreclosure sale in compliance with statutory requirements constitutes a jurisdictional defect invalidating the sale and that a substantial error or omission in a notice of sale will render the notice insufficient and vitiate the sale.

The Notice of Sheriffs Sale, in this case, did not state the correct number of the transfer certificate of title of the property to be sold. This is a substantial and fatal error which resulted in invalidating the entire Notice. That the correct technical description appeared on the Notice does not constitute substantial compliance with the statutory requirements. The purpose of the publication of the Notice of Sheriffs Sale is to inform all interested parties of the date, time and place of the foreclosure sale of the real property subject thereof. Logically, this not only requires that the correct date, time and place of the foreclosure sale appear in the notice but also that any and all interested parties be able to determine that what is about to be sold at the foreclosure sale is the real property in which they have an interest.

The Court is not unaware of the fact that the majority of the population do not have the necessary knowledge to be able to understand the technical descriptions in certificates of title. It is to be noted and stressed that the Notice is not meant only for individuals with the training to understand technical descriptions of property but also for the layman with an interest in the property to be sold, who normally relies on the number of the certificate of title. To hold that the publication of the correct technical description, with an incorrect title number, of the property to be

sold constitutes substantial compliance would certainly defeat the purpose of the Notice. This is not to say that a correct statement of the title number but with an incorrect technical description in the notice of sale constitutes a valid notice of sale. The Notice of Sheriffs Sale, to be valid, must contain the correct title number and the correct technical description of the property to be sold.

LCK Ind. vs. Planters Bank

Facts:

1. On Sept. 1, 1995, LCK obtained a loan from Planters Bank. As security for the loan, Sps. Lim executed a real estate mortgage pertaining to their Quezon City property.

2. To secure the same obligation, Sps. Lim executed another real estate mortgage pertaining to their Baguio property.

3. The spouses failed to meet their obligations and bot properties were foreclosed.

4. At the time of the foreclosure, their outstanding liability is P 2,962,500.00. The Baguio property and the Quezon City property were sold to an aggregate amount of P 4,856,416.67.

5. Sps. Lim contends that the excess proceeds should be turned over to them. Planters Bank refuses as according to them, the issue was not included in the pre-trial order.

Issue: Surplus amount in the sale of the foreclosed properties.

Held: Planters Bank was ordered to pay the Sps. Lim, the excess amount with interest.

1. Should Planters Bank retain the excess proceeds, it will be tantamount to unjust enrichment as prohibited under Art. 22 of the New Civil Code.

2. Rule 39 Sec. 21 of the Rules of Court – judgment oblige need not pay the bid amount if it does not exceed the amount of the judgment. If it does, he shall pay only the excess. In this case, there was an excess in the proceeds of the foreclosed properties.

Limpin v IAC (digest)Facts:Four lots were mortgaged by the spouses Jose and Marcelina Aquino to Guillermo Ponce and his wife Adela (since deceased) as security for a loan of P2,200,000.00. The mortgages were registered. Two of the lots, those covered by TCTs Nos. 92836 and 92837, were afterwards sold by the Aquinos to the Butuan Bay Wood Export Corporation, which caused an adverse claim to be annotated on the certificates of title. Gregorio Y. Limpin, Jr. obtained a money judgment against Butuan Bay Wood Export Corporation in Court of First Instance of Davao. To satisfy the judgment, the lots covered by TCTs Nos. 92836 and 92837 were levied upon on and sold at public auction to Limpin as the highest bidder for the sum of P517,485.41.

On order of the trial court, the covering titles were cancelled and issued to Limpin. Limpin sold the two lots to Rogelio M. Sarmiento. By virtue of said sale, TCTs Nos. 285450 and 285451 were cancelled on November 4, 1983, and TCT’S were replaced in Sarmiento's name. Ponce filed suit against the Aquino spouses for judicial foreclosure of the mortgage over the Aquinos' four lots. Judgment was rendered in favor of Ponce. After the judgment became final, the Trial Court, directed the sale at public auction of the 4 mortgaged lots to satisfy the judgment. The 4 lots, including those formerly covered by TCTs Nos. 92836 and 92837, were sold to Ponce himself whose bid was the highest and exactly correspond to the judgment debt. On the same day, the sheriff's certificate of sale was registered.Ponce then moved for the confirmation of the sale and the issuance of a writ of possession in his favor covering the four lots. But the Trial Court confirmed only the sale of the lots covered by TCTs Nos. 02839 and 92840, refusing to confirm the sale or issue a writ of possession in regard to the lots covered by TCTs Nos. 92836 and 92837 on the ground that those titles had already been cancelled and new ones issued to Gregorio F. Limpin.

Limpin refused to participate in the hearings contending that the Court had no jurisdiction over his person; but he did comment that the mortgage over the lots covered by TCTs Nos. 92836 and 92837 had been released by Ponce by virtue of a "Partial Release of Real Estate Mortgage". The Trial Court denied Ponce's motion for reconsideration, whereupon he sought corrective relief by filing a special civil action for certiorari and mandamus in the Intermediate Appellate Court, impleading Limpin and Sarmiento, as private respondents.IAC set aside the judgment of the Trial Court and issue a writ of possession to Ponce with respect thereto, subject to Sarmiento's equity of redemption.

Issue:Whether or not IAC erred in according superiority to the mortgage rights of Ponce over the levy and sale in favor of Limpin and the subsequent sale to Sarmiento.

Held:

NO. The superiority of the mortgagee's lien over that of a subsequent judgment creditor is now expressly provided in Rule 39, Section 16 of the Revised Rules of Court, which states with regard to the effect of levy on execution that it shall create a lien in favor of a judgment creditor over the right title and interest of the judgment debtor in such property at the time of the levy, subject to the liens or encumbrances then existing. Using jurisprudence in Santiago v Dionisio, the Court in that case held that:

... [T]he effect of the failure to implead a subordinate lienholder or subsequent purchaser or both is to render the foreclosure ineffective as against them, with the result that there remains in their favor the "unforeclosed equity of redemption." But the foreclosure is valid as between the parties to the suit.Applied to this case, this means that the sale to Ponce, as the highest bidder in the foreclosure sale of the two lots in question should have been confirmed, subject to Limpin's (and now Sarmiento's equity to redemption. The registration of the lands, first in the name of Limpin and later of Sarmiento, was premature. At most what they were entitled to was the registration of their equity of redemption.

It is well settled that a recorded mortgage is a right in rem, a lien on the property whoever its owner may be. The recordation of the mortgage in this case puts the whole world on constructive notice of its existence and warned everyone who thereafter dealt with the property on which it was constituted that he would have to reckon with that encumbrance. Hence, Limpin's subsequent purchase of the "interests and participation" of Butuan Bay Wood Export Corporation in the lots covered by TCTs Nos. 92836 and 92837, as well as the sale of the same to Sarmiento were both subject to said mortgage.

Mendoza vs Salinas

FACTS:- Salinas won in a registration case and OCT was issued under her name by RTC of Olongapo acting as Land Registration Court. Thus, she filed for a writ of possession before the same court, but herein petitioners opposed contending not parties to the aforementioned registration case, in actual possession of the land since 1964 and offered documentary evidence to support their claim. - RTC: writ of possession granted so petition for review on certiorari

ISSUE: WON the grant of writ of possession proper?RULING: No. Court denied issuance of writ of possession without prejudice to filing of case for recovery.- Writ of possession is issued in the following instances: 1.) land registration proceedings; 2.) judicial foreclosure, provided debtor is still in possession of mortgaged realty and no third person intervened; and 3.) extra-judicial foreclosure of REM.- It is well-settled that in land registration cases, a judgment confirming title of the applicant and ordering its registration in his name necessarily carries with it the delivery of possession. Hence, issuance of writ of possession becomes a ministerial duty of the Court.- However, issuance of writ of possession is not proper in the case at bar because the aforementioned rule does not apply when petitioners are in actual possession under claim of ownership. As provided in Art. 433 of NCC, they have disputable presumption of ownership and person claiming must resort to judicial process.- Judicial process refers to ejectment suit, which respondent already filed in MTCC of Olongapo against herein petitioners, but was dismissed for lack of cause of action. Instead of appealing the judgment therein, petitioner opted to file for writ of possession.

Maliwat v Metrobank

Facts

Sps. Maliwat obtained a P23,850,000 loan from Metrobanko Secured by 3 REM over land located in Valenzuela

Petitioners failed to pay the loano Respondent bank instituted extra-judicial foreclosure proceedings

Land was sold at public auction, and Metrobank was the highest bidder

Sps. Maliwat refused to turn over property Metrobank filed for a Writ of Possession

o RTC granted Sps. Maliwat filed for Annulment of proceedings, TRO, and preliminary

mandatory injunctiono RTC issued PMI, enjoining Metrobank from enforcing the WOP

Issue

WON the RTC committed GADLEJ in issuing the PMI

Held

Yeso WOP is a writ of execution commanding the sheriff to enter the

land and give possession to the person entitled under the judgment

It is issued in land registration proceedings, judicial foreclosure where debtor has possession, and extra-judicial foreclosure

o In De Gracia v San Jose, the SC held that WOP issues as a matter of course

Upon filing of motion and approval of the bond No discretion is left with the Court Questions on regularity and validity of sale may not be

raised to justify opposition to the issuance of WOP May be determined in subsequent proceedings

o Purchaser at foreclosure sale is entitled as a matter of right to the issuance of WOP

Once WOP issued, Court has no alternative but to enforce it without delay

Injunction will not lie

Sps. Basilio and Norma Hilaga v Rural Bank of Isulan, GR 179781

FACTSPetitioners obtained a loan from respondent Rural Bank of Isulan Inc. To secure the loan, they executed a Real Estate Mortgage over their land property. When petitioners failed to pay their obligation when it became due, the respondent bank initiated foreclosure proceedings. The subject property was sold at a public auction and a Certificate of Extrajudicial Sale a was issued in favor of the Rural Bank of Isulan (Cotabato) Inc. as the highest bidder. The respondent bank then took possession of the foreclosed property. Meanwhile, unknown to respondent bank, a Free Patent title(Original Certificate of Title No. P- 19766) had been issued in favor of petitioners before the foreclosure sale. On September 21, 1994, or more than seventeen (17) years after the foreclosure sale, petitioner Basilio Hilaga sent a letter to the respondent bank's lawyer, the late Atty. Ismail Arceno, conveying his desire to redeem the subject property. When the letter remained unanswered, petitioners, through their counsel, again sent a letter, seeking to redeem the foreclosed property. The second letter, however, also remained unheeded. Thus, on June 3, 1999, petitioners filed a complaint a for Redemption of Foreclosed Mortgaged Property Under [Act No. 3135], seeking to redeem the subject property from the respondent bank under the provisions of Act No. 3135. In their complaint, petitioners alleged that the mortgage and subsequent foreclosure of the subject property had not been annotated on the title nor registered with the Register of Deeds. Also, no annotation and consolidation of ownership was made in favor of the respondent bank. Thus, the one (1)-year redemption period under Act No. 3135, which commences from the date of registration of the sale, has not yet started. They insisted that, indeed, their right of redemption has not yet expired because under Section 119 of Commonwealth Act No. 141 or the Public Land Act, a homesteader whose homestead has been sold at a public auction by virtue of an extrajudicial foreclosure, may repurchase said land within five (5) years from the date of registration of the sale. Thus, they can still exercise their right of redemption. They signified their willingness to redeem or repurchase the foreclosed property by depositing the amount of P10,000.00 with the court. In its Answer with Counterclaim, the respondent bank averred that when the real estate mortgage in its favor was executed, the parcel of land was merely covered by a tax declaration. That unknown to the respondent bank, petitioners proceeded to apply for and cause the issuance in 1976 of a free patent and torrens title to the land; hence, they are estopped to claim that the parcel of land mortgaged is covered by a free patent and torrens title. They likewise cannot avail of the benefits afforded to a grantee of a public land under the Homestead and Free Patent Laws because they violated the terms and conditions of their application to avail of a grant by homestead or free patent when they mortgaged the land. As aforesaid, the trial court rendered judgment in favor of petitioners. The trial court ruled that because the certificate of sale was not registered, petitioners can still redeem the subject property. On appeal, the CA reversed the trial court. According to the CA, the right of petitioners

to redeem their foreclosed property can only be exercised within two (2) years from the date of foreclosure, as provided under Republic Act No. 72013cЃa or the Rural Banks' Act, as amended by Republic Act No. 2670. The CA also ruled that petitioners are guilty of laches. CA Denied the MR of the petitioners.

ISSUEWON the petitioners have only 2 years to redeem their property from the issuance certificate of sale after the same was foreclosed

HELDIf the land is mortgaged to a rural bank under Republic Act No. 720, as amended, the mortgagor may redeem the property within two (2) years from the date of foreclosure or from the registration of the sheriff’s certificate of sale at such foreclosure if the property is not covered or is covered, respectively, by a Torrens title. If the mortgagor fails to exercise such right, he or his heirs may still repurchase the property within five (5) years from the expira-tion of the two (2)-year redemption period pursuant to Section 119 of the Public Land ActIn the present case, petitioners admit that when the property was mortgaged, only the tax declaration was presented. Although a free patent title was subsequently issued in their favor on August 4, 1976, petitioners failed to inform the creditor rural bank of such issuance. As a result, the certificate of sale was not registered or annotated on the free patent title. Petitioners are estopped from redeeming the property based on the free patent title which was not presented during the foreclosure sale nor delivered to the Register of Deeds for annotation of the certificate of sale as required under Section 5 of Republic Act No. 720, as amended. Estoppel in pais arises when one, by his acts, representations or admissions, or by his own silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts.

PCSO v. New Dagupan

Facts – 1. A certain Purita Peralta owns the land in question, which is located in

Dagupan City. A real estate mortgage was constituted over such property in favor of PCSO to secure the payment of the sweepstakes tickets purchased by one of its provincial distributors, Galang.

2. Purita then sold, under a conditional contract of sale, the subject property to New Dagupan. The contract of sale provided that the conveyance will only be absolute upon New Dagupan’s full payment of the price of Php 800,000.00.

3. One day, New Dagupan withheld payment of the last installment because Peralta failed to deliver the owner’s duplicate TCT and to execute a deed of absolute sale in its favor.

4. New Dagupan sued Peralta for his continued failure to deliver the deed of absolute sale and the owner’s duplicate of the title.

5. While the case is pending, PCSO caused the registration of the mortgage. 6. PCSO then filed an application for the extrajudicial foreclosure sale of the

subject property in view of Galang’s failure to fully pay the sweepstakes tickets she purchased in 1992.

7. At the extrajudicial foreclosure sale, PCSO won. 8. Meanwhile, when New Dagupan got a copy of the TCT, it found out about

the mortgage lien of PCSO. 9. PCSO and New Dagupan entered into a compromise agreement, in view of

their respective claims on the land. 10. Pursuant to the compromise agreement New Dagupan demanded Perlata

to deliver the owner’s duplicate of the TCT. However, such demand was unheeded. Indeed, PCSO responded saying that it foreclosed the mortgage on the subject property and it has in its name a certificate of sale for being the highest bidder in the public auction.

11. New Dagupan filed a case against PCSO. The RTC decided in favor of New Dagupan.

12. … Fast forward in the SC (Most important fact in this case. You can forget numbers 1-11, but do not forget this). In the SC, PCSO averred among others that the CA erred when it ruled that the mortgage of PCSO was extinguished when Galang paid the Php 450,000.00, representing the amount of the sweepstakes tickets she purchased in 1989. PCSO claimed that the said amount is actually the credit line granted to Galang and the phrase “all draws” refers to her ticket purchases for subsequent years drawn against such credit line.

PCSO further posits that the subject mortgage has not been extinguished by Peralta’s payment of her ticket purchases in 1989, and its coverage extends to her purchases after 1989, which she made against the credit line that was granted to her.

Issue – Whether or not PCSO can rely on the dragnet clause in the mortgage contract.

Held – NO.

A dragnet clause, also known as a blanket clause is a clause in a mortgage contract which is specifically phrased to subsume all debts of past or future origins. 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.

A mortgage with a dragnet clause is in the nature of a continuing guaranty. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits. It covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration of the term thereof.

PCSO mortgage is not a continuing guaranty. Indeed the contract provides that the mortgage shall only secure Galang’s liability in the amount of Php 450,000.00. The amount due, having been discharged, there is no necessity for any act/document to be executed for the purpose.

PCSO’s registration of its non-existent mortgage lien and subsequent foreclosure of a mortgage that was no longer extant cannot defeat New Dagupan’s title over the subject propery.

GARCIA V VILLAR

FACTS:

1. Galas was the owner of a parcel of land. 2. Galas executed a real estate mortgage on her land in favor of one Villar. 3. Galas executed a second real estate mortgage in favor of Garcia. Both

mortgages were annotated at the back of the TCT.4. Subsequently, Galas sold the property to Villar. Garcia refused filed for

damages and fore closure of Real estate mortgages?

ISSUE: WON there was pactum comissorium? WON there can be foreclosure of properties?

HELD:

1. NO. There was no pactum comissorium since there was no stipulation of an automatic appropriation. The stipulation in the case was for an authority to sell which is allowed by the law.

2. NO. There was no demand from Garcia of the obligation so there is no showing that it is due and demandable.

3. Villar does not step into the shoes of Galas as principal debtor without the consent of Garcia since that would be novation which means extinguishment of obligation.

5.

Land Bank vs Poblete

Real Estate Mortgage

1. Poblete owned a parcel of land. Subsequently, a certain Maniego mortgaged said land to Land Bank. a. Maniego showed an alleged deed of sale executed by Poblete in favor of

Maniego 2. When Maniego defaulted with his loan to Land Bank, Land Bank filed an action

for foreclosurea. Poblete filed a complaint for reconveyance, arguing that the signatures in

the alleged deed of sale were forged.b. Land Bank argued that it is a mortgagee in good faith.

ISSUE: WON Poblete may recover the land despite the mortgage to Land Bank by Maniego

HELD: YES

1. The mortgagor was not the owner of the land, thus, there is no valid mortgage.a. The RTC and CA found the signatures were indeed forged.b. No rights could be derived from a void deed.

2. Since TCT No. T-20151 and Deed of Sale has been declared void by final judgment, the Real Estate Mortgage constituted over it is also void. In a real estate mortgage contract, it is essential that the mortgagor be the absolute owner of the property to be mortgaged; otherwise, the mortgage is void

3. Doctrine of Mortgagee in Good Faith- buyers or mortgages are not obliged to go beyond the title.a. However, this doctrine does not apply to banks are they are imbued with

public interest; they are required to observe a higher standard of diligenceb. Land Bank cannot be in good faith because when the land was mortgaged,

the title was still under Poblete’s name; there was no investigation/ due diligence made by Land Bank; the same land was mortgaged by a 3 rd

person (Kapantay) with the authority of Pobblete.

Sps. Ramos v Obispo

Facts

Ramos and Obispo were best friends Obispo secured a credit accommodation from FEBTC

o To secure the same, Ramos executed a REM on his land FEBTC received a letter from petitioners

o That they entrusted the property to Obispo to be used a collateral for a P250,000 loan on their behalf

o That Obispo instead secured a loan of P1M That he failed to return the title despite petitioners’

payment of P250,000 Sps. Ramos filed for annulment of REM and damages against Obispo and

FEBTCo They allegedly signed a blank REM formo They received P250,000, and have already paid for the sameo They demanded a release of title but Obispo went into hidingo They were surprised to see in the ROD that the property was

mortgaged for P1M FEBTC said that the REM is only partial security for Obispo’s P2.5M loan

o Since the loan remains unpaid, FEBTC cannot be compelled to release the mortgage

o Laches and estoppel has stepped in against petitionero That in case of judgment in favor of Ramos, it must be Obispo

who is to be made liable Obispo was declared in default

Issue

WON REM is valid

Held

Yeso No sufficient evidence was presented on the allegation of fraud by

Obispo Inconsistent with ordinary experience and common

sense That Obispo was not able to show any

document or receipt should have alerted them Loan proceeds accepted by them were personal

check of Obispo, and not of the bank

Despite signing REM in their names, they did not pay directly to the bank, but through Obispo

Questionable how they knew monthly amortization without document pertaining to loan

They paid P250,000 which is equal to principal loan, asa naman no interest

o Evidence suggests that it was really Obispo who borrowed, and that petitioners were mere accommodation mortgagors

o Assuming REM is invalid due to vitiated consent and misrepresentation by Obispo

1 year and 3 months had elapsed Unreasonable delay constitutes estoppel and

waiver of right to question invalidity and defect

ANTICHRESISAncieto Bangis v Heirs of Serafin and Salud Adolfo, GR 190875 June 13 2012FACTSSpouses Serafin, Sr. and Saludada Adolfo were the original registered owners of a lot which was mortgaged to the DBP. Upon default in the payment of the loan obligation, it was foreclosed and ownership was consolidated in DBP’s name under a TCT. Serafin Adolfo, Sr. repurchased the same and was issued a TCT a year after his wife died. He allegedly mortgaged the subject property to Ancieto Bangis who took possession of the land but their transaction was not reduced into writing. When Adolfo died, his heirs executed a deed of extrajudicial partition covering the subject property and TCT issued to them. The said property was subdivided and separate titles were issued in names of the heirs of Adolfo. The heirs of Adolfo filed a complaint for annulment of the deed of sale and declaration of the purported contract of sale as antichresis, accounting and redemption of property and damages against Bangis. During the trial, one of the Heirs of Bangis, Rodolfo Bangis, presented a photocopy of an Extra-Judicial Settlement with Absolute Deed of Sale and a Promissory Note23 of even date purportedly executed by Bangis and Segundino Cortel undertaking to pay the balance of the purchase price Both documents were notarized by Atty. Valentin Murillo who testified to the fact of their execution. The RTC rendered a decision in favor of the heirs of Adolfo declaring that the contract as an antichresis, ordering the defendant to deliver the possession of the property in question to the plaintiffs and the TCT under Bangis as null and void. Thus, the heirs of Bangis appealed before the CA.

CA affirmed the RTC finding that the contract between the parties was a mortgage, not a sale. It noted that while Bangis was given possession of the subject property, the certificate of title remained in the custody of Adolfo and was never cancelled.

ISSUEWON the transaction between the parties was one of sale and not a mortgage or antichresis HELDThere was neither an antichresis nor sale. For the contract of antichresis to be valid, Article 2134 of the Civil Code requires that “the amount of the principal and of the interest shall be specified in writing; otherwise the contract of antichresis shall be void.” In this case, the Heirs of Adolfo were indisputably unable to produce any document in support of their claim that the contract between Adolfo and Bangis was an antichresis, hence, the CA properly held that no such relationship existed between the parties.

The bare testimony of one of the Heirs of Bangis, Rodolfo Bangis, that the subject document was only handed to him by his father, Aniceto, with the information that the original thereof “could not be found” was insufficient to justify its admissibility. The identification made by Notary Public Atty. Valentin Murillo

that he notarized such document cannot be given credence as his conclusion was not verified against his own notarial records.

In sum, the Heirs of Bangis failed to establish the existence and due execution of the subject deed on which their claim of ownership was founded.