GR 118342, January 5, 1998 DBP VS. CA
FACTS: Cuba is a grantee of a Fishpond Lease Agreement from the Government. She obtained loans from DBP in the amounts of P109, 000 and P98, 700 under the terms stated in the promissory notes and as security for said loans; she executed two deeds of assignment of her leasehold right. Cuba however, failed to pay her loan on scheduled dates and without foreclosure proceedings, DBP appropriated the Leasehold Rights of Cuba over the fishpond. After DBP’s
appropriation over the fishpond, DBP in turn executed a deed of Conditional Sale of the Leasehold Rights in favor of Cuba over the same fishpond in question. In the negotiation for repurchase, Cuba addressed 2 letters to the Manager of DBP which was accepted. After the Deed of Conditional Sale Sale was executed in favor of Cuba, a new fishpond lease agreement was issued by the Ministry of Agriculture and Food in favor of Cuba only excluding her husband. Cuba again failed to pay the amortization as stated in Deed of Conditional Sale and because of this she entered with DBP a temporary arrangement whereby in consideration for deferment of Notarial Rescission of Deed of Conditional Sale, Cuba promised to make certain payments. DBP thereafter sent a Notice of Rescission thru Notarial Act and was received by Cuba. After the Notice of Rescission, DBP took possession of the Leasehold Rights of fishpond and after, advertised in SUNDAY PUNCH the public bidding to
dispose the property. DBP then thereafter, executed a Deed of Conditional Sale in favor of Agripina Caperal. RTC ruled in favor of Cuba declaring that DBP’s taking possession and ownership of property without foreclosure was plainly violative of Article 2088 of the Civil Code or the provision on pactum commissorium. RTC also ruled that condition no. 12 of the Assignment of Leasehold Rights was a clear case of pactum commissorium expressly prohibited and declared null and void by Article 2088, Civil Code and concluded that since DBP never acquired lawful ownership of Cuba’s leasehold rights, all acts of ownership and possession by bank is void and that the deed of Conditional Sale in favor of Caperal was as well void and ineffective. Cuba and DBP interposed appeals to CA. CA ruled that RTC erred in declaring the deed of assignment as null and void and that Caperal can validly acquire the leasehold rights and that condition no. 12 of deed of assignment was an express authority from Cuba for DBP to sell whatever right she had over the fishpond. Hence, this petition. ISSUE/S: 1. WoN the assignment of leasehold rights was a mortgage contract (as contended by Cuba) YES. In all of the promissory notes, there is a provision that “in
the event of foreclosure of the mortgage securing this note, I/We further bind myself/ourselves, myself/ourselves, jointly and severally, to pay the deficiency, if any .” Moreover, in Condition No. 22 of the deed, it was provided that “failure to comply with the terms and
condition of any of the loans shall cause all other loans to become due and demandable and all mortgages shall be foreclosed.” In the facts stipulated, it states that “As security
for loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her leasehold rights.” We find no merit in DBP’s contention that the assignment
novated the promissory notes in that the obligation to pay a sum of money the loans (under the promissory notes) was substituted by the assignment of the rights over the fishpond (under the deed of assignment). The said assignment merely complemented or supplemented the notes; both could stand together. Significantly, both the deeds of assignment and the promissory notes were executed on the same dates the loans were granted. Also, the last paragraph of the assignment stated: “The assignor further reiterates and states all terms,
covenants, and conditions stipulated in the promissory note or notes covering the proceeds of this loan, making said promissory note or notes, to all intent and purposes, an integral part hereof.”
2. WoN condition no. 12 of the deed of assignment constituted pactum commissorium NO. The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period. Condition no. 12 did not provide that the ownership over the leasehold rights would automatically pass to DBP upon
proceeds to the payment of the loan. This provision is a standard condition in mortgage contracts and is in conformity with Article 2087 of the Civil Code, which authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged property for the payment of the principal obligation. G.R. No. 126800. November 29, 1999. Bustamante vs. Rosel
Facts: Petitioner borrowed money from respondents for a period of two years and with interest. The former set up as collateral a parcel of land with apartment thereon to guaranty payment. They also agreed that in the event that she fails to pay, respondents can buy the collateral for a cheap consideration, inclusive of the principal and interest. When the loan was about to mature, respondents proposed to buy the collateral. Petitioner, however, refused to sell and requested for extension of time to pay the loan. She, instead, offered to sell another residential lot. Respondents refused to extend the payment of the loan and to accept the second lot offered. On maturity date, petitioner tendered payment of the loan to respondents which the latter refused to accept. They insisted that a deed of absolute sale of the collateral be executed. Respondents then instituted an action for specific performance and consignation against petitioner. After demand, petitioner consigned the amount of the loan plus interest.
CUBA’s failure to pay the loan on time. It merely provided for
the appointment of DBP as attorney-in-fact with authority, among other things, to sell or otherwise dispose of the said real rights, in case of default by CUBA, and to apply the
The trial court ruled in favor of the petitioner. On the other hand, the Court of Appeals reversed this decision, which the Supreme Court affirmed. However, petitioner filed a motion for
reconsideration. She alleged that she did not fail to pay the loan so there is no reason for respondent to buy the collateral; that the real intention of the parties in putting up the collateral is to guarantee the payment of the loan. Respondent, on one hand, contends that petitioner failed to pay the loan; that it is their right to purchase the collateral based on the contact which is not contrary to law, morals, good customs, public order and public policy. Issues: (1) Whether or not petitioner failed to pay the loan at its maturity date. (2) Whether or not the stipulation in the loan contract was valid and enforceable. Held: Petitioner did not fail to pay the loan. On the maturity date, she tendered the payment which respondents refused. After refusal, she consigned the payment. The sale of the collateral is an obligation with a suspensive condition. Since the event did not occur, respondents do not have the right to demand fulfillment of petitioner’s obligation, especially where the same
thing mortgaged in case of non-payment of the principal obligation within the stipulated period. These elements are present in this case. Therefore, the stipulation is void. All persons in need of money are liable to enter into contractual relationships whatever the condition if only to alleviate their financial burden albeit temporarily. Hence, courts are duty bound to exercise caution in the interpretation and resolution of contracts lest the lenders devour the borrowers like vultures do with their prey. GR 171592 ONG. V. ROBAN LENDING CORPORATION, (2008) Pactum Commissorium, Art. 2087, Art. 2088: Effects on Pledge or Mortgage “
The SECOND PARTY hereby signed another promissory note with a promise to pay the FIRST PARTY in full within one year from the date of the consolidation and restructuring, otherwise the SECOND PARTY agree to have their “DACION IN PAYMENT” agreement, which they have executed and signed today in favor of the FIRST PARTY be enforced”
would be disadvantageous to petitioner. The stipulation in the loan contract was not valid and unenforceable. A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the property given as security for the loan. This is embraced in the concept of pactum commissorium, which the law prohibits. The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the
Issue: Whether the contract constitutes pactum commissorium or dacion en pago. Held: Pactum Commissorium.
In the case at bar, the MOA and the Dacion in Payment contain no provisions for foreclosure proceedings nor redemption. Under the MOA, the failure by the petitioners to pay their debt within the one-year period gives respondent the right to enforce the Dacion in Payment transferring to it
ownership of the properties covered by the TCT. Respondent, in effect, automatically acquires ownership of the properties upon petitioners’ failure to pay their debt within the stipulated period. Ø Respondent argues that the law recognizes dacion en pago as a special form of payment whereby the debtor alienates property to the creditor in satisfaction of a monetary obligation. This does not persuade. In a true dacion en pago, the assignment of the property extinguishes the monetary debt. In the case at bar, the alienation of the properties was by way of security, and not by way of satisfying the debt. The Dacion in Payment did not extinguish petitioners’ obligation to respondent. On the contrary, under the MOA executed on the same day as the Dacion in Payment, petitioners had to execute a promissory note which they were to pay within one year.
It was established from the facts that in the deed of real estate $mortgage executed between Galas and Villar, the f ormer appoints the latter to sell the subject &property in case Galas fails to &ay the loan, and with such, &proceeds shall be a&&lied to her outstanding loan. A year later, the same subject &property was subsequently mortgaged in favor of Pablo Garcia to secure a loan amounting to P 1, 800,000.00. afterwards, Galas decided to sell the subject &property to Villar. deed of sale was executed between them, and a T-T was issued in favor of Villar. Aggrieved, Garcia filed a Petition for mandamus with damages, arguing his main &point that the authority given to Villaras stipulated in the deed of the real estate $mortgage is violative of the prohibition of Pactum -ommissorium. It ruled in favor of Garcia. CA appeal, reversed the decision and ruled in favor of Villar. issue
That the questioned contracts were freely and voluntarily executed by petitioners and respondent is of no moment, pactum commissorium being void for being prohibited by law.
1 whether the authority given to Villar in the deed of real estate mortgage is violative of the prohibition on pactum commissorium Held: Villar’s purchase of the subject property did not violate the
GR158891, June 27, 2012 Garcia vs Villar
The case stemmed from a mortgage transaction involving a lo t owned by Lourdes Galas in favor of Yolanda Villar. The lot was mortgaged to secure a loan obtained by Galas from Villar in the amount of P2,200,000.00.
prohibition on pactum commissorium. The following are the elements of pactum commissorium. 1. there should be a property mortgaged by way of security for the payment of the principal obligation 2. there should be a stipulation for automatic appropriation by the creditor of the
thing mortgaged in case of nonpayment of the principal obligation within the stipulated period. in the case at bar, the owner of attorney provision above did not provide that ownership over the subject property would automatically pass to Villar upon Galas failure to pay the loan on time. hat it granted was the mere appointment of Villaras Attorney in fact with authority to sell, or otherwise disposed of the subject property, and to apply the proceeds to the payment of the loan. Real nature of a mortgage: ( Article 2126 of the Civil Code) Art. 2126. The mortgage directly and immediately subjects
the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. A mortgage is a real right, which follows the property, even after subsequent transfers by the mortgagor. “A registered mortgage lien is considered inseparable from the property inasmuch as it is a right in rem.” The sale or transfer of the mortgaged property cannot affect or release the mortgage; thus the purchaser or transferee is necessarily bound to acknowledge and respect the encumbrance. In fact, under Art. 2129 of the Civil Code, the mortgage on the property may still be foreclosed despite the transfer, viz : Art. 2129. The creditor may claim from a third person in possession of the mortgaged property, the payment of the part of the credit secured by the property which said third person possesses, in terms and with the formalities which the law establishes.
While we agree with Garcia that since the second mortgage, of which he is the mortgagee, has not yet been discharged, we find that said mortgage subsists and is still enforceable. However, Villar, in buying the subject property with notice that it was mortgaged, only undertook to pay such mortgage or allow the subject property to be sold upon failure of the mortgage creditor to obtain payment from the principal debtor once the debt matures. Villar did not obligate herself to replace the debtor in the principal obligation, and could not do so in law without the creditor’s consent. Therefore, the
obligation to pay the mortgage indebtedness remains with the original debtors Galas and Pingol. Effects of a transfer of a mortgaged property to a third person According to Art. 1879 of this Code, the creditor may demand of the third person in possession of the property mortgaged payment of such part of the debt, as is secured by the property in his possession, in the manner and form established by the law. The Mortgage Law provided that the debtor should not pay the debt upon its maturity after judicial or notarial demand, for payment has been made by the creditor upon him. (Art. 135 of the Mortgage Law of the Philippines of 1889.) According to this, the obligation of the new possessor to pay the debt originated only from the right of the creditor to demand payment of him, it being necessary that a demand for payment should have previously been made upon the debtor and the latter should have failed to pay. And even if these requirements were complied with, still the third possessor might abandon the property mortgaged, and in that case it is considered to be in the possession of the debtor. (Art. 136 of the same law.) This clearly shows that the spirit of the Civil Code is to let the obligation of the debtor to pay the debt stand although the property mortgaged to secure the payment of said debt may have been transferred to a third person. While
the Mortgage Law of 1893 eliminated these provisions, it contained nothing indicating any change in the spirit of the law in this respect. Article 129 of this law, which provides the substitution of the debtor by the third person in possession of the property, for the purposes of the giving of notice, does not show this change and has reference to a case where the action is directed only against the property burdened with the mortgage. (Art. 168 of the Regulation.) The mere fact that the purchaser of an immovable has notice that the acquired realty is encumbered with a mortgage does not render him liable for the payment of the debt guaranteed by the mortgage, in the absence of stipulation or condition that he is to assume payment of the mortgage debt. Reason: the mortgage is merely an encumbrance on the
property, entitling the mortgagee to have the property foreclosed, i.e., sold, in case the principal obligor does not pay the mortgage debt, and apply the proceeds of the sale to the satisfaction of his credit. Mortgage is merely an accessory undertaking for the convenience and security of the mortgage creditor, and exists independently of the obligation to pay the debt secured by it. The mortgagee, if he is so minded, can waive the mortgage security and proceed to collect the principal debt by personal action against the original mortgagor
THE MANILA BANKING CORPORATION vs. ANASTACIO TEODORO, JR. and GRACE ANNA TEODORO G.R. No. L-53955 January 13, 1989 Bidin, J.
1. April 1966, Spouses Teodoro together with Teodoro Sr executed a PN in favour of Manila Banking Corp (MBC); - Payable within 120 days (until Aug), with 12% interest per annum; - They failed to pay and left balance of 15k as of September 1969; 2. May and June 1966, executed two PNs; - 8k and 1k respectively payable within 120 days and 12% per annum; - They made partial payment but still left 8.9k balance as of September 1969; 3. It appears than in 1964, Teodoro Jr executed a Deed of Assignment of Receivables in favour of MBC from Emergency Employment Administration; - Amounted to 44k; - The deed provided it was for consideration of certain credits, loans, overdrafts and other credit accommodations extended to the spouses and Teodoro Sr as security for the payment of said sum and interest thereon; and that they release and quitclaim all its rights, title and interest in the receivables; 4. In the stipulations of fact, it was admitted by the parties: - That MBC extended loans to the spouses and Teodoro Jr because of certain contracts entered into by latter with EEA for fabrication of fishing boats and that the
Philippine Fisheries Commission succeeded EEA after its abolition; - That non-payment of the PNs was due to failure of the Commission to pay spouses; - That the Bank took steps to collect from the Commission but no collection was effected; 5. For failure of the spouses and Teodor Sr to pay, MBC instituted against them; - Teodoro Sr subsequently died so suit only against the spouses; 6. TC favoured MBC; MFR denied; - Spouses appealed to CA but since issue pure question of law, CA forwarded to SC; Issues:
W/N the assignment of receivables has the effect of payment of all the loans contracted by the spouses; NO. W/N MBC must exhaust all legal remedies against PFC before it can proceed against the spouses. NO. Ratio:
The assignment of receivables executed by appellants did not transfer the ownership of the receivables to appellee bank and release appellants from their loans with the bank incurred under promissory notes. The Deed of Assignment provided that it was for and in consideration of certain credits, loans, overdrafts, and their credit accommodations extended to appellants by appellee bank, and as security for the payment of said sum and the interest thereon; that appellants as assignors, remise, release, and quitclaim to assignee bank all their rights, title and interest
in and to the accounts receivable assigned. It was further stipulated that the assignment will also stand as a continuing guaranty for future loans of appellants to appellee bank and correspondingly the assignment shall also extend to all the accounts receivable; appellants shall also obtain in the future, until the consideration on the loans secured by appellants from appellee bank shall have been fully paid by them. The position of appellants, however, is that the deed of assignment is a quitclaim in consideration of their indebtedness to appellee bank, not mere guaranty, in view of the following provisions of the deed of assignment: ... the Assignor do hereby remise, release and quitclaim unto said assignee all its rights, title and interest in the accounts receivable described hereunder. (Emphasis supplied by appellants, first par., Deed of Assignment). ... that the title and right of possession to said account receivable is to remain in said assignee and it shall have the right to collect directly from the debtor , and whatever the Assignor does in connection with the collection of said accounts, it agrees to do so as agent and representative of the Assignee and it trust for said Assignee. The character of the transactions between the parties is not, however, determined by the language used in the document but by their intention. Definitely, the assignment of the receivables did not result from a sale transaction. It cannot be said to have been constituted by virtue of a dation in payment for appellants' loans with the bank evidenced by promissory note which are the subject of the suit for collection in a Civil Case. At the time the deed of assignment was executed, said loans were non-existent yet. Obviously, the deed of assignment was intended as collateral security for
the bank loans of appellants, as a continuing guaranty for whatever sums would be owing by defendants to plaintiff, as stated in stipulation No. 9 of the deed.
A s s ig nment of cr edit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without the need of the consent of the debtor, transfers his credit and its accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor.
CITIBANK, N.A. & INVESTOR FINANCE CORPORATION V. SABENIANO
Facts: This is a case involving Citibank, N.A., a banking corporation duly registered under US Laws and is licensed to do commercial banking and trust functions in the Philippines and Investor's Finance Corporation (aka FNCB Finance), and affiliate company of Citibank, mainly handling money market placements(MMPs are short term debt instruments that give the owner an unconditional right to receive a stated, fixed sum of money on a specified date). Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance.Unfortunately, the business relations among the parties subsequently went awry. Subsequently, Sabeniano filed a complaint with the RTC against petitioners
as she claims to have substantial deposits and money market placements with the petitioners and other investment companies, the proceeds of which were supposedly deposited automatically and directly to her account with Citibank. Sabeniano alleged that Citibank et al refused to return her deposits and the proceeds of her money market placements despite her repeated demands, thus, the civil case for "Accounting, Sum of Money and Damages.”
In their reply, Citibank et al admitted that Sabeniano had deposits and money market placements with them, including dollar accounts in other Citibank branches. However, they also alleged that respondent later obtained several loans from Citibank, executed through Promissory Notes and secured by a pledge on her dollar accounts, and a deed of assignment against her MMPS with FNCB Finance. When Sabeniano defaulted, Citibank exercised its right to off-set or compensate respondent's outstanding loans with her deposits and money market placements, pursuant to securities she executed. Citibank supposedly informed Sabeniano of the foregoing compensation through letters, thus, Citibank et al were surprised when six years later, Sabeniano and her counsel made repeated requests for the withdrawal of r espondent's deposits and MMPs with Citibank, including her dollar accounts with Citibank-Geneva and her money market placements with petitioner FNCB Finance. Thus, petitioners prayed for the dismissal of the Complaint and for the award of actual, moral, and exemplary damages, and attorney's fees. The case was eventually decided after 10 years with the Judge declaring the offsetting done as illegal and the return of the amount with legal interest, while Sabeniano was ordered to pay her loans to Citibank. The ruling was then appealed. The CA modified the decision but only to the extent of Sabeniano’s
loans
which it ruled that Citibank failed to establish the indebtedness and is also without legal and factual basis. The case was thus appealed to the SC. Issue: Whether or not there was a valid off setting/compensation of loan vis a vis the a.)Deposits and b.) MMPs.
By June 1979, all of respondent's PNs in the second set had matured and became demandable, while respondent's savings account was demandable anytime. Neither was there any retention or controversy over the PNs and the deposit account commenced by a third person and communicated in due time to the debtor concerned. Compensation takes place by operation of law.
Held: General Requirement of Compensation: Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Art. 1279. In order that compensation may be proper, it is necessary; (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. 1. Yes. As already found by this Court, petitioner Citibank was the creditor of respondent for her outstanding loans. At the same time, respondent was the creditor of petitioner Citibank, as far as her deposit account was concerned, since bank deposits, whether fixed, savings, or current, should be considered as simple loan or mutuum by the depositor to the banking institution. Both debts consist in sums of money.
2. Yes, but technically speaking Citibank did not effect a legal compensation or off-set under Article 1278 of the Civil Code, but rather, it partly extinguished respondent's obligations through the application of the security given by the respondent for her loans. Respondent's money market placements were with petitioner FNCB Finance, and after several roll-overs, they were ultimately covered by PNs No. 20138 and 20139, which, by 3 September 1979, the date the check for the proceeds of the said PNs were issued, amounted to P1,022,916.66, inclusive of the principal amounts and interests. As to these money market placements, respondent was the creditor and petitioner FNCB Finance the debtor (thereby implying that money market placement is a simple loan or mutuum); while, as to the outstanding loans, petitioner Citibank was the creditor and respondent the debtor. Consequently, legal compensation, under Article 1278 of the Civil Code, would not apply since the first requirement for a valid compensation, that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other, was not met. What petitioner Citibank actually did was to exercise its rights to the proceeds of respondent's money market placements with petitioner FNCB Finance by virtue of the Deeds of Assignment executed by respondent in its favor. Petitioner Citibank was only acting upon the authority granted to it under the foregoing Deeds
when it finally used the proceeds of PNs No. 20138 and 20139, paid by petitioner FNCB Finance, to partly pay for respondent's outstanding loans. Strictly speaking, it did not effect a legal compensation or off-set under Article 1278 of the Civil Code, but rather, it partly extinguished respondent's obligations through the application of the security given by the respondent for her loans. Although the pertinent documents were entitled Deeds of Assignment, they were, in reality, more of a pledge by respondent to petitioner Citibank of her credit due from petitioner FNCB Finance by virtue of her money market placements with the latter. According to Article 2118 of the Civil Code
They executed a deed of real estate mortgage of the said property in favor of petitioner Prudential Bank to secure the payment of a loan worth P250,000.00. (PN BD#75/C-252) was then issued covering the said loan, which provides that the loan matured on 4 August 1976 at an interest rate of 12% per annum with a 2% service charge, and that the note is secured by a real estate mortgage as aforementioned with a “blanket mortgage clause” or the “dragnet clause”.
The spouses thereafter issued other promissory notes (PN): PN BD#76/C-345 for P2,640,000.00, secured by D/A SFDX #129, signifying that the loan was secured by a “hold-
–
out” on the mortgagor’s foreign currency savings account with
ART. 2118. If a credit has been pledged becomes due before it is redeemed, the pledgee may collect and receive the amount due. He shall apply the same to the payment of his claim, and deliver the surplus, should there be any, to the pledgor.
the bank under Account No. 129 in the name of Donalco Trading, Inc., PN BD#76/C-430 covering P545,000.000 to be secured by “Clean-Phase out TOD CA 3923. Bank also mentioned in their approval letter that additional securities for the loan were the deed of assignment on two PNs executed by Bancom Realty and the chattel mortgage on various heavy and transportation equipment.
GR150197, July 28, 2005 PRUDENTIAL BANK VS ALVIAR
Spoused Alviar paid petitioner P2,000,000.00, to be applied to the obligations of G.B. Alviar Realty and Development, Inc. and for the release of the real estate mortgage for the P450,000.00 loan covering the two (2) lots in San Juan, Metro Manila. The payment was acknowledged by petitioner who accordingly released the mortgage over the two properties Prudential Bank moved for the extrajudicial foreclosure of the mortgage on the property since respondents had the total obligation of P1,608,256.68, covering the three (3) promissory notes.
Doctrine: The “dragnet clause” in the first security instrument constituted
a continuing offer by the borrower to secure further loans under the security of the first security instrument, and that when the lender accepted a different security he did not accept the first offer. Facts:
Spouses Alviar are the registered owners of a parcel of land in San Juan, Metro Manila
Respondents then filed a complaint for damages with a prayer for the issuance of a writ of preliminary injunction with
the RTC of Pasig,[11] claiming that they have paid their principal loan secured by the mortgaged property, and thus the mortgage should not be foreclosed RTC, on its final decision, favored respondents saying that the extrajudicial foreclosure was improper for the mortgage only covers the first loan of P250,000 CA affirmed the decision of the RTC Issue: WON real estate mortgage secures only the first loan of
P250,000.
mortgage contract. This ambiguity shall be interpreted strictly against petitioner for having drafted the same. Petitioner, however, is not without recourse. Both the lower courts found that respondents have not yet paid the P250,000.00. Thus, the mortgaged property could still be properly subjected to foreclosure proceedings for the unpaid P250,000.00 loan, and as mentioned earlier, for any deficiency after D/A SFDX#129, security for PN BD#76/C-345, has been exhausted, subject of course to defenses which are available to respondents.
Held: Yes. While the existence and validity of the “dragnet clause” cannot be denied, there is a need to respect the
Petition is DENIED. CA affirmed.
existence of the other securities given for the two other promissory notes. The foreclosure of the mortgaged property should only then be for theP250,000.00 loan covered by PN BD#75/C-252, and for any amount not covered by the security for the second promissory note.
G.R. No. L-17500 People's Bank and Trust Co. v. Dahican Lumber Co.,
Petitioner and respondents intended the real estate mortgage to secure not only the P250,000.00 loan from the petitioner, but also future credit facilities and advancements that may be obtained by the respondents. However, the subsequent loans obtained by respondents were secured by other securities. When the mortgagor takes another loan for which another security was given it could not be inferred that such loan was made in reliance solely on the original security with the “dragnet clause,” but rather, on the new security given. This is the “reliance on the security test.” If the parties intended that the “blanket mortgage clause” shall
cover subsequent advancement secured by separate securities, then the same should have been indicated in the
Facts:
Dahican Lumber Co. (DALCO) obtained a loan from People's Bank and Trust Co. (Bank) secured by a deed of mortgage covering 5 parcels of land together with all the buildings and other improvements existing thereon and all the personal properties of DALCO located in its place of business. After the day of the execution of the mortgage, DALCO purchased various machinery, equipment, spare parts and supplies. Pursuant to the provision of the mortgage deeds regarding "after acquired properties", the Bank requested DALCO to submit complete list of the said properties but DALCO refused
to do so.
against respondents clerk of court, deputy sheriff and herein private respondent Banco Filipino Savings and Mortgage Bank.
Issue:
Whether or not the "after acquired properties" were subject to the deed of mortgage. Held:
Yes, they are subject to the deeds of mortgage. Article 415 of the Civil Code does not define real property but enumerates what are considered as such, among them being machinery, receptacles, instruments or replacements intended by owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or works. The chattels or the "after acquired properties" were placed in the real properties mortgaged to the Bank. They came within the operation of Article 145.
After the bank filed its answer, petitioners requested an admission by the bank that no formal notice of intention to foreclose the real estate mortgage was sent by the bank to petitioners.The bank responded and said that petitioners were notified of the auction sale by the posting of notices and the publication of notice in the Metropolitan Newsweek, a newspaper of general circulation in the province where the subject properties are located and in the Philippines. On the basis of implied admission that no formal notice was served personally, petitioners filed a mo tio n fo r summary judgment contending that the foreclosure was violative of the provisions of the mortgage contract, specifically paragraph (k) thereof which provides:
Facts:
"k) All correspondence relative t o this Mortgage, including demand letters, summons, subpoena or notifications of any judicial or extrajudical act ions 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, and the mere act of sending any correspondence by mail or by personal delivery to the said address shall be valid and effective notice to t he Mortgagor for all legal purposes, and the fact that any communication is not actually received by the Mortgagor, or that it has been returned unclaimed to the Mortgagee, or that no person was found at the address given, or that the address is fictitious, or cannot be located, shall not excuse or relieve the Mortgagor from the effects of such notice;"
Petitioners filed Civil Case No. 2816-V-88 in the Regional Trial Court of Valenzuela, Metro Manila for annulment and/or declaration of nullity of the extrajudicial foreclosure proceedings over their mortgaged properties, with damages,
The bank opposed the motion saying that based on other paragraphs (b and d) in the contract, the mortgagor authorized extra-judicial sale upon breach of contract and that
Hence, the "after acquired properties" were subject to the deed of mortgage.
GRAND FARMS, INC. and PHILIPPINE SHARES CORPORATION, petitioners, vs COURT OF APPEALS G.R. No. 91779 February 7, 1991
the mortgagee was appointed atty-in-fact with full powers upon any breach of the obligations in the contract.- The RTC issued an order denying petitioners' motion for summary judgment. MFR was also denied on the ground that genuine and substantial issues exist which require the presentation of evidence during the trial.Petitioners filed a petition for certiorari to CA attacking said orders of denial as having been issued with grave abuse of discretion. CA dismissed the petition, holding that no personal notice was required to foreclose since private respondent was constituted by petitioners as their attorney-in-fact to sell the mortgaged property. It further held that paragraph (k) of the mortgage contract merely specified the address where correspondence should be sent and did not impose an additional condition on the part of private respondent to notify petitioners personally of the foreclosure. CA also denied petitioners MFR.
matter of law that there is no defense to the action or that the claim is clearly meritorious.
Issue:
and as it not contrary to law, morals, good customs and public policy, the same should be complied with faithfully (Art. 1306 CC). Thus, while publication of the foreclosure proceedings in the newspaper of general circulation was complied with, personal notice is still required, when the same was mutually agreed upon by the parties as additional condition of the mortgage contract. Failure to comply with this additional stipulation would render illusory Art. 1306. And as the record is bereft of any evidence which even impliedly indicate that the required notice of the extrajudicial foreclosure was ev er sent to the debtor mortgag or, the extrajudicial foreclosure proceedings on the property in question are fatally defective and are not binding on the debtor-mortgagor.- To still require a trial notwithstanding private respondent's admission of the lack of such requisite notice would be a superfluity and would work injustice to petitioners whose obtention of the relief to which they are plainly and patently entitled would be further delayed.
Whether or not summary judgment was proper HELD:
The Rules of Court authorize the rendition of a summary judgment if the pleadings, depositions and admissions on file, together with the affidavits, show that, except as to the amount of damages, there is no issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Although an issue maybe raised formally by the pleadings but there is no genuine issue of fact, and all the facts are within the judicial knowledge of the court, summary judgment may be granted. The real test, therefore, of a motion for summary judgment is whether the pleadings, affidavits and exhibits in support of the motion are sufficient to overcome the opposing papers and to justify a finding as a
YES.
Reasoning
Private respondent tacitly admitted in its answer to petitioners' request for admission that it did not send any formal notice of foreclosure to petitioners. Stated otherwise, and as is evident from the records, there has been no denial by private respondent that no personal notice of the extrajudicial foreclosure was ever sent to petitioners prior thereto. This omission, by itself, rendered the foreclosure defective and irregular for being contrary to the express provisions of the mortgage contract. There is thus no further necessity to inquire into the other issues cited by the trial court, for the foreclosure may be annulled solely on the basis of such defect.- In Community Savings & Loan Association, Inc., et al. vs. Court of Appeals, at al., the SC held that the stipulation is the law between [the parties]
That undesirable contingency is obviously one of the reasons why our procedural rules have provided for summary judgments. Disposition
The decision appealed from is hereby REVERSED and SET ASIDE and this case is REMANDED to the court of origin for further proceedings in conformity with this decision.
MANUEL D. MEDIDA, Deputy Sheriff of the Province of Cebu, CITY SAVINGS BANK (formerly Cebu City Savings and Loan Association, Inc.) and TEOTIMO ABELLANA, petitioners, vs. COURT OF APPEALS and SPS. ANDRES DOLINO and PASCUALA DOLINO, respondents. Facts:
Private respondents, Spouses Dolino, alarmed of losing their right of redemption over thesubject parcel of land from Juan Gandiocho, purchaser of the aforesaid lot at a foreclosure sale of the previous mortgage in favor of Cebu City Development Bank, went to Teotimo Abellana, President of the City Savings Bank (formerly known as Cebu City Savings and Loan Association, Inc.), to obtain a loan of P30, 000. Prior thereto, their son Teofredo filed a similar loan application and the subject lot was offered as security. Subsequently they executed a promissory note in favor of CSB. The loan became due and demandable without the spouses Dolino paying the same, petitioner association caused the extrajudicial foreclosure of the mortgage. The land was sold at a public auction to CSB being the highest bidder. A certificate of sale was subsequently issued which was also registered. No redemption was being effected by Sps. Dolino, their title to the property was cancelled and a new title was issued in favor of
CSB. Sps. Dolino then filed a case to annul the sale at public auction and for the cancellation of certificate of sale issued pursuant thereto, alleging that the extrajudicial foreclosure sale was in violation of Act 3135, as amended. The trial court sustained the validity of the loan and the real estate mortgage, but annulled the extrajudicial foreclosure on the ground that it failed to comply with the notice requirement of Act 3135. Not satisfied with the ruling of the trial court, Sps. Dolino interposed a partial appeal to the CA, assailing the validity of the mortgage executed between them and City Savings Bank, among others. The CA ruled in favor of private respondents declaring the said mortgage as void. Issue:
Whether or not a mortgage, whose property has been extrajudicially foreclosed and sold at a corresponding foreclosure sale, may validly execute a mortgage contract over the same property in favor of a third party during the period of redemption. Held:
It is undisputed that the real estate mortgage in favor of petitioner bank was executed by respondent spouses during the period of redemption. During the said period it cannot be said that the mortgagor is no longer the owner of the foreclosed property since the rule up to now is the right of a purchaser of a foreclosure sale is merely inchoate until after the period of redemption has expired without the right being exercised. The title to the land sold under mortgage foreclosure remains in the mortgagor or his grantee until the expiration of the redemption period and the conveyance of the master deed. The mortgagor remains as the absolute owner of the property during the redemption period and has the free disposal of his property, there would be compliance with
Article. 2085 of the Civil Code for the constitution of another mortgage on the property. To hold otherwise would create an inequitable situation wherein the mortgagor would be deprived of the opportunity, which may be his last recourse, to raise funds to timely redeem his property through another mortgage. GR 170215 SUICO v. PNB
FACTS: Spouses Suico, obtained loan from PNB secured by a real estate mortgage on five of their properties. The petitioners were unable to pay their obligation. PNB filed a petition for extrajudicial foreclosure of mortgage constituted on the petitioners’ properties. PNB, as lone bidder, offered a bid in the amount of P8, 511,000.00. A Certificate of Sale of the subject properties was issued in favor of PNB. However, PNB did not pay to the Sheriff who conducted the auction sale the amount of its bid which was P8,511,000.00 or give an accounting of how said amount was applied against
of all the subject properties to its name. The petitioners thereafter filed a Complaint against the PNB before the RTC of Mandaue City for Declaration of Nullity of Extrajudicial Foreclosure of Mortgage. RTC rendered its Decision for declaration of nullity of the extrajudicial foreclosure of mortgage, the certificate of sale and certificate of finality of sale owing to the failure of PNB as the winning bidder to deliver to the petitioners the amount of its bid or even just the amount in excess of petitioners’ obligation.
When the PNB appealed its case to CA, it reversed and set aside the questioned decision of the RTC declaring that the extra judicial foreclosure of mortgage, including the certificate of sale and final deed of sale executed appurtenant thereto are hereby declared to be valid and binding. Petitioners filed a Motion for Reconsideration but the Court of Appeals maintained the validity of the foreclosure sale and, in its Amended Decision, merely directing PNB to pay the deficiency in the filing fees ISSUES:
petitioners’ outstanding loan, which according to the
1. WoN the discrepancy between the amount of petitioners’
petitioners, as of 10 March 1992, amounted only to P1,991,770.38. Since the amount of the bid grossly exceeded the amount of petitioners’ outstanding obligation as stated in the extrajudicial foreclosure of mortgage, it was the legal duty of the winning bidder, PNB, to deliver to the Sheriff the bid price or what was left thereof after deducting the amount of
obligation as reflected in the Notice of Sale and the amount actually due and collected from the petitioners at the time of the auction sale constitute fraud which renders the extrajudicial foreclosure sale null and void. 2. WoN the failure of PNB to pay and tender the price of its bid or the surplus thereof to the sheriff nullifies the extrajudicial foreclosure.
petitioners’ outstanding obligation.
PNB failed to deliver the amount of their bid to the Sheriff or, at the very least, the amount of such bid in excess of petitioners’
outstanding obligation. One year after issuance of the Certificate of Sale, PNB secured a Certificate of Final Sale from the Sheriff and, as a result, PNB transferred registration
HELD: 1. No.
Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. The purpose of the publication of the Notice of Sheriff’s 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. All these considered, the Court held that the Notice of Sale in this case is valid. There is no showing that the difference between the amount stated in the Notice of Sale and the amount of PNB’s bid resulted in discouraging or misleading
bidders, depreciated the value of the property or prevented it from commanding a fair price. 2. No. Rule 68, Section 4 of the Rules of Court provides: SEC. 4. Disposition of proceeds of sale.- The amount realized from the foreclosure sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be no
such encumbrancers or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled to it. Under the above rule, the disposition of the proceeds of the sale in foreclosure shall be as follows: (a) first, pay the costs (b) secondly, pay off the mortgage debt (c) thirdly, pay the junior encumbrancers, if any in the order of priority (d) fourthly, give the balance to the mortgagor, his agent or the person entitled to it. The application of the proceeds from the sale of the mortgaged property to the mortgagor's obligation is an act of payment, not payment by dacion; hence, it is the mortgagee's duty to return any surplus in the selling price to the mortgagor. Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a custodian of the fund and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do so. Even though the mortgagee is not strictly considered a trustee in a purely equitable sense, but as far as concerns the unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity of redemption. Thus it has been held that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply give the mortgagor a cause of action to recover such surplus. GR 176019 BPI FAMILY SAVINGS BANK v. GOLDEN POWER DIESEL SALES
FACTS:
CEDEC Transport, Inc. mortgaged 2 parcels of land situated in Malibay, Pasay City, including all the improvements thereon, in favor of BPI Family to secure a loan of P6, 570, 000. On the same day, mortgage was duly annotated on titles. CEDEC obtained from BPI Family additional loans of P2, 160, 000 and P1, 140, 000, respectively, and again mortgaged same properties. These latter mortgages were duly annotated on the titles respectively, on the same day the loans were obtained. Despite demand, CEDEC defaulted in its mortgage obligations. BPI Family filed a verified petition for extrajudicial foreclosure of real estate mortgage over the properties. After due notice and publication, Sheriff sold the properties at public auction. BPI Family, as highest bidder, acquired properties for P13, 793, 705.31. Certificate of Sheriff’s sale was then duly
annotated on titles covering properties. Despite several demand letters, CEDEC refused to vacate properties and to surrender possession to BPI Family. BPI Family filed an ex-parte petition for writ of possession over the properties which were granted by the trial court. Then, Golden Power Diesel (GPD) and Renato Tan motioned to hold the implementation of writ alleging that they are in possession of the properties as allegedly acquired from CEDEC pursuant to a deed of absolute sale. GPD argued that they are 3rd persons claiming rights adverse to CEDEC and cannot be deprived of possession over properties. Also, they filed a complaint in RTC for cancellation of Sheriff’s certificate sale and an order to direct BPI to honor and accept the deed of sale between CEDEC and respondents. RTC however, denied the motion. An alias writ was then issued which expired without being implemented and another one was later issued but before it could be implemented, Renato Tan filed an affidavit of 3 rd party claim on properties. Instead of implementing the writ, Sheriff transferred the matter to RTC for resolution. RTC suspended the
implementation saying that it should not affect 3 rd persons holding adverse rights to the judgment that the first writ failed to consider respondent’s claim of ownership in another court
and that respondents are in actual possession. BPI moved to reconsider but was denied which was then affirmed by CA. Hence, present petition. ISSUE: 1. Whether or not GPD is a 3rd party in possession who has adverse interest against debtor or mortgagor HELD: No. In extrajudicial foreclosures of real estate mortgages, the issuance of a writ of possession is governed by Section 7 of Act No. 3135. This procedure may also be availed of by the purchaser seeking possession of the foreclosed property bought at the public auction sale after the redemption period has expired without redemption having been made. The general rule is that a purchaser in a public auction sale of a foreclosed property is entitled to a writ of possession and, upon an ex parte petition of the purchaser, it is ministerial upon the trial court to issue the writ of possession in favor of the purchaser. There is, however, an exception. In an extrajudicial foreclosure of real property, when the foreclosed property is in the possession of a third party holding the same adversely to the judgment obligor, the issuance by the trial court of a writ of possession in favor of the purchaser of said real property ceases to be ministerial and may no longer be done ex parte. The procedure is for the trial court to order a hearing to determine the nature of the adverse possession. For the exception to apply, however, the property need not only be possessed by a third party, but also held by the third party adversely to judgment obligor. Unfortunately, for the
respondents, they do not fall under the exception—they are not the third parties referred to by the law! They acquired possession pursuant to the Deed of Sale. For P15,000,000 CEDEC will “sell, transfer and convey” to respondents the properties “free f rom all liens and encumbrances excepting the mortgage as may be subsisting in favor of the BPI FAMILY.” Respondents bind themselves to assume “the payment of the unpaid balance of the mortgage indebtedness of the VENDOR (CEDEC) in favor of BPI Family by the mortgage instruments and does hereby further agree to be bound by the precise terms and conditions therein contained.” Therefore, respondents hold title to and possess the properties as CEDECʼs transferees and any right they have overthe properties is derived from CEDEC. As transferees of CEDEC, they merely stepped into CEDEC’s shoes and are bound to acknowledge and respect the mortgage CEDEC had executed in favor of BPI Family. Respondents are thesuccessors-ininterest and thus, their occupancy over the properties cannot be considered adverse to CEDEC.
G.R. No. 200667 Rural Bank of Sta. Barbara v. Centeno Facts:
Spouses Gregorio and Rosario Centeno (Sps. Centeno) were the previous owners of the subject lots. During that time, they mortgaged the foregoing properties in favor of petitioner Rural
Bank of Sta. Barbara (Iloilo), Inc. as security for a P1,753.65 loan. Sps. Centeno, however, defaulted on the loan, prompting petitioner to cause the extrajudicial foreclosure of the said mortgage. Consequently, the subject lots were sold to petitioner being the highest bidder at the auction sale. On October 10, 1969, it obtained a Certificate of Sale at Public Auction[4]which was later registered with the Register of Deeds of Iloilo City on December 13, 1971.[5] Sps. Centeno failed to redeem the subject lots within the one (1) year redemption period pursuant to Section 6[6] of Act No. 3135.[7]Nonetheless, they still continued with the possession and cultivation of the aforesaid properties. Sometime in 1983, respondent Gerry Centeno, son of Sps. Centeno, took over the cultivation of the same. On March 14, 1988, he purchased the said lots from his parents. Accordingly, Rosario Centeno paid the capital gains taxes on the sale transaction and tax declarations were eventually issued in the name of respondent.[8] While the latter was in possession of the subject lots, petitioner secured on November 25, 1997 a Final Deed of Sale thereof and in 1998, was able to obtain the corresponding tax declarations in its name. [9] On March 19, 1998, petitioner filed a petition for the issuance of a writ of possession before the RTC, claiming entitlement to the said writ by virtue of the Final Deed of Sale covering the subject lots.[10] Respondent opposed the petition, asserting that he purchased and has, in fact, been in actual, open and exclusive possession of the same properties for at least fifteen (15) years.[11] He further averred that the foreclosure sale was null and void owing to the forged signatures in the real estate mortgage. Moreover, he claims that petitioner's rights over the subject lots had already prescribed. [12]
Ruling of the RTC
On October 8, 2002, the RTC rendered its Decision[13] in Cadastral Case No. 98-069, finding petitioner to be the lawful owner of the subject lots whose rights became absolute due to respondent's failure to redeem the same. Consequently, it found the issuance of a writ of possession ministerial on its part.[14] Dissatisfied, respondent appealed to the CA. Ruling of the CA
The CA, through its January 31, 2012 Decision,[15] reversed the RTC and ruled against the issuance of a writ of possession. It considered respondent as a third party who is actually holding the property adverse to the judgment obligor and as such, has the right to ventilate his claims in a proper judicial proceeding i.e., an ejectment suit or reinvindicatory action.[16] Aggrieved, petitioner filed the instant petition.
title, to a purchaser in an extrajudicial foreclosure sale becomes merely a ministerial function,[17] unless it appears that the property is in possession of a third party claiming a right adverse to that of the mortgagor.[18] The foregoing rule is contained in Section 33, Rule 39 of the Rules of Court which partly provides: Sec. 33. Deed and possession to be given at expiration of redemption period; by whom executed or given. xxxx Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to and acquire all the rights, title, interest and claim of the judgment obligor to the property as of the time of the levy. The possession of the property shall be given to the purchaser or last redemptioner by the same officer unless a third party is actually holding the property adversely to the judgment obligor. (Emphasis and underscoring supplied)
Issue Before The Court
The sole issue in this case is whether or not petitioner is entitled to a writ of possession over the subject lots. The Court's Ruling
The petition is meritorious. It is well-established that after consolidation of title in the purchaser's name for failure of the mortgagor to redeem the property, the purchaser's right to possession ripens into the absolute right of a confirmed owner. At that point, the issuance of a writ of possession, upon proper application and proof of
In China Banking Corporation v. Lozada,[19] the Court held that the phrase "a third party who is actually holding the property adversely to the judgment obligor" contemplates a situation in which a third party holds the property by adverse title or right, such as that of a co-owner, tenant or usufructuary. The coowner, agricultural tenant, and usufructuary possess the property in their own right, and they are not merely the successor or transferee of the right of possession of another co-owner or the owner of the property.[20] Notably, the property should not only be possessed by a third party, but also held by the third party adversely to the judgment obligor.[21]
In this case, respondent acquired the subject lots from his parents, Sps. Centeno, on March 14, 1988 after they were purchased by petitioner and its Certificate of Sale at Public Auction was registered with the Register of Deeds of Iloilo City in 1971. It cannot therefore be disputed that respondent is a mere successor-in-interest of Sps. Centeno. Consequently, he cannot be deemed as a "third party who is actually holding the property adversely to the judgment obligor" under legal contemplation. Hence, the RTC had the ministerial duty to issue as it did issue the said writ in petitioner's favor. On the issue regarding the identity of the lots as raised by respondent in his Comment,[22] records show that the RTC had already passed upon petitioner's title over the subject lots during the course of the proceedings. Accordingly, the identity of the said lots had already been established for the purpose of issuing a writ of possession. It is hornbook principle that absent any clear showing of abuse, arbitrariness or capriciousness committed by the lower court, its findings of facts are binding and conclusive upon the Court,[23] as in this case. Finally, anent the issue of laches, it must be maintained that the instant case only revolves around the issuance of a writ of possession which is merely ministerial on the RTC's part as above-explained. As such, all defenses which respondent may raise including that of laches should be ventilated through a proper proceeding. WHEREFORE, the petition is GRANTED. The January 31,
2012 Decision of the Cebu City Court of Appeals in CA-G.R. CV No. 78398 is REVERSED and SET ASIDE. Accordingly, the October 8, 2002 Decision of the Regional Trial Court of
Barotac Viejo, Iloilo City, Branch 66 in Cadastral Case No. 98069 is hereby REINSTATED. SO ORDERED. March 13, 2013 GOLDENWAY MERCHANDISING CORPORATION VS EQUITABLE PCI BANK DOCTRINE: Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only modified the time for the exercise of such right by reducing the one-year period srcinally provided in Act No. 3135. The new redemption period commences from the date of foreclosure sale, and expires upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There is likewise no retroactive application of the new redemption period because Section 47 exempts from its operation those properties foreclosed prior to its effectivity and whose owners shall retain their redemption rights under Act No. 3135.
FACTS: On November 29, 1985, petitioner Goldenway Merchandising Corporation executed a Real Estate Mortgage in favour of Equitable PCI Bank over three parcels of land as security for a Php2,000,000 loan granted to the petitioner. Petitioner eventually failed to settles its loan obligation, leading respondent to extrajudicially foreclose the mortgage on December 13, 2000. Subsequently, a Certificate of Sale was issued to respondent on January 26, 2001. In a letter dated March 7, 2001, petitioner offered to redeem the foreclosed properties by tendering a check. Petitioner and respondent met on March 12, 2001. However, petitioner was told that redemption was no longer
possible since the certificate of sale had already been registered; the title to the foreclosed properties were consolidated in favor of the respondent on March 9, 2001. Petitioner filed a complaint for specific performance and damages contending that the 1-year period of redemption under Act 3135 should apply, and not the shorter redemption period under RA 8791 as applying RA 8791 would result in the impairment of obligations of contracts and would violate the equal protection clause under the constitution. The RTC dismissed the action of the petitioner ruling that redemption was made belatedly and that there was no redemption made at all. The Court of Appeals affirmed the RTC. ISSUE: Whether or not the redemption period should be the 1-year period provided under Act 3135, and not the shorter period under RA 8791 as the parties expressly agreed that foreclosure would be in accordance with Act 3135
But under Sec 47 of RA 8791, an exception is thus made in the case of juridical persons which are allowed to exercise the right of redemption only "until, but not after, the registration of the certificate of foreclosure sale" and in no case more than three (3) months after foreclosure, whichever comes first. Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only modified the time for the exercise of such right by reducing the one-year period srcinally provided in Act No. 3135. The new redemption period commences from the date of foreclosure sale, and expires upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There is likewise no retroactive application of the new redemption period because Section 47 exempts from its operation those properties foreclosed prior to its effectivity and whose owners shall retain their redemption rights under Act No. 3135. We agree with the CA that the legislature clearly intended to shorten the period of r edemption for juridical persons whose properties were foreclosed and sold in accordance with the provisions of Act No. 3135.
RULING: The shorter period under RA 8791 should apply.
The one-year period of redemption is counted from the date of the registration of the certificate of sale. In this case, the parties provided in their real estate mortgage contract that upon petitioner’s default and the latter’s entire loan obligation
becoming due, respondent may immediately foreclose the mortgage judicially in accordance with the Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended.
The difference in the treatment of juridical persons and natural persons was based on the nature of the properties foreclosed – whether these are used as residence, for which the more liberal one-year redemption period is retained, or used for industrial or commercial purposes, in which case a shorter term is deemed necessary to reduce the period of uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner of these acquired assets. It must be underscored that the General Banking Law of 2000, crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to reform the General Banking Act of 1949 by
fashioning a legal framework for maintaining a safe and sound banking system. In this context, the amendment introduced by Section 47 embodied one of such safe and sound practices aimed at ensuring the solvency and liquidity of our banks. It cannot therefore be disputed that the said provision amending the redemption period in Act 3135 was based on a reasonable classification and germane to the purpose of the law. The right of redemption being statutory, it must be exercised in the manner prescribed by the statute, and within the prescribed time limit, to make i t effective. Furthermore, as with other individual rights to contract has to give way to police power exercised for public welfare and to property, if the concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare." Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done, provides enough room for an efficient and flexible response to conditions and circumstances thus assuming the greatest benefits. The freedom to contract is not absolute; all contracts and all rights are subject to the police power of the State and not only may regulations which affect them be established by the State, but all such regulations must be subject to change from time to time, as the general well-being of the community may require, or as the circumstances may change, or as experience may demonstrate the necessity. Settled is the rule that the nonimpairment clause of the Constitution must yield to the loftier purposes targeted by the Government. The right granted by this provision must submit to the demands and necessities of the State’s power of regulation. Such authority to regulate businesses extends to the banking industry which, as this
Court has time and again emphasized, is undeniably imbued with public interest. Having ruled that the assailed Section 47 of R.A. No. 8791 is constitutional, we find no reversible error committed by the CA in holding that petitioner can no longer exercise the right of redemption over its foreclosed properties after the certificate of sale in favor of respondent had been registered.
G.R. No. L-15128 Diego v Fernando DOCTRINE:
If a contract of loan with security does not stipulate the payment of interest but provides for the delivery to the creditor by the debtor of the property given as security, in order that the latter may gather its fruits, without stating that said fruits are to be applied to the payment of interest, if any, and afterwards that of the principal, the contract is a mortgage and not antichresis. FACTS:
The defendant Segundo Fernando executed a deed of mortgage in favor of plaintiff Cecilio Diego over 2 parcels of land registered in his name, to secure a loan P2,000, without interest, payable within 4 years. After the execution, possession of the mortgaged properties were turned over to the mortagagee.
Fernando failed to pay after four years, with Diego having made several demands. Hence this action for foreclosure of mortgage. Fernando claims that the transaction was one of antichresis and not of mortgage. Also Diego had allegedly received a total of 120 cavans of palay from the properties given as security, which, at the rate of P10 a cavan, represented a value of P5,200. Hence his debt had already been paid, with Diego still owing him a refund of some P2,720. The CFI found that it was really a mortgage and that the fact that possession of the mortgaged properties were turned over to the mortgagee did not alter the transaction. The parties must have intended that the mortgagee would collect the fruits of the mortgaged properties as interest on his loan, which agreement is not uncommon. Also Diego has already received 55 cavans of palay during his possession. Hence the CFI ordered Fernando to pay Diego 2K with interest and upon default, for the foreclosure. Hence this appeal. ISSUE: W/ the contract between Diego and Fernando is
mortgage or antichresis considering that the loan was without interest, coupled with the transfer of the possession of the properties mortgaged to the mortgagee.
Diego is a mortgagee in possession, one who has lawfully acquired possession of the premises mortgaged to him, standing upon his rights as mortgagee and not claiming under another title, for the purpose of enforcing his security upon such property or making its income help to pay his debt. A mortgagee in possession and a creditor in an antichresis have the following similar or identical rights and obligations: if the mortgagee acquires possession in any lawful manner, he is entitled to retain such possession until the indebtedness is satisfied and the property redeemed; the non-payment of the debt within the term agreed does not vest the ownership of the property in the creditor; the general duty of the mortgagee in possession towards the premises is that of the ordinary prudent owner; the mortgagee must account for the rents and profits of the land, or its value for purposes of use and occupation, any amount thus realized going towards the discharge on the mortgage debt; if the mortgage remains in possession after the mortgage debt has been satisfied, he becomes a trustee for the mortgagor as to the excess of the rents and profits over such debt; the mortgagor can only enforce his rights to the land by an equitable action for an account and to redeem. Since Fernando did not expressly waive his right to the fruits of the properties mortgaged during the time they were in Diego’s
HELD: considered as a mortgage contract between the
parties. To be antichresis, it must be expressly agreed between creditor and debtor that the former, having been given possession of the properties given as security, is to apply their fruits to the payment of the interest, if owing, and thereafter to the principal of his credit. [READ DOCTRINE].
possession, the latter, like an antichretic creditor, must account for the value of the fruits received by him, and deduct it from the loan obtained by appellant. In this case, Diego had received a net share of 55 cavans of palay; at the rate of P9.00 per cavan, the total value of the fruits received by Diego is P495. Deducting this amount from
the loan of P2,000.00 received by Fernando from Diego, the former has only P1,505.00 left to pay the latter. WHEREFORE, the CFI judgement is MODIFIED in that Fernando is ordered to pay P1,505 and that Diego has the obligation to render an accounting of all the fruits received by him from the properties in question from the time of the filing of this action until full payment, or in case of appellant's failure to pay, until foreclosure of the mortgage thereon, the value of which fruits shall be deducted from the total amount of his recovery.
G.R. No. L-9957 August 8, 1916 PERFECTO DE LA VEGA, ET AL., plaintiffs-appellees, vs. TOMAS BALLILOS (or BALIELOS), defendantappellant.
Facts:
Petitioners are co-owners (pro-indiviso share) of eight parcels of land in Batangas. One of them, Fidel dela Vega, mortgaged three of the properties to defendant Ballilos for P430. The relevant provisions of their contract as follows: “. . . . and whereas on this day I have mortgaged the two
parcels of land above-mentioned to the said D. Tomas Ballilos for the sum of P430 and for the term of eight years, counting from this day, at the expiration of which I may redeem them; that should I not then do so, the said lands shall continue to be mortgaged until I have the money available wherewith the redeem them; therefore, I hereby mortgage the two parcels of land hereinabove mentioned to D. Tomas Ballilos for the said
sum of P430, which I have received from him in current coin, and as the same was not received in our presence, we waive the exception of money not paid in cash; therefore, henceforth and during the period above stipulated, I grant and convey my ownership and possession in the said two parcels of land to the said D. Tomas Ballilos in order that he may manage and enjoy the same in consideration of the sum for which they are mortgaged. There being present D. Tomas Ballilos . . . ., he stated that he had received in mortgage, to his entire satisfaction, the two parcels of tillable land above mentioned, under the conditions and for the time stipulated, for the sum of P430, which he has already delivered to the said D. Fidel de a Vega, who in turn states that the said lands are free of all charges and encumbrances and binds himself to warrant this mortgage in case of legal proceedings.” (These provisions will be material in the rendition of judgment) In essence, it alleges that the agreement was one of antichresis constituted until the borrowed sum is paid in full. In the following year, 1905, the plaintiffs (save for Policarpio dele Vega) borrowed in succession P40, P18, and P60 from the respondent under the same contract of antichresis. They gave three more properties as security from which he is to collect the interest. The plaintiffs then attempted to pay off their loans (in the total amount of P548) in order to reacquire the said parcels of land. The defendant refused to receive the sums and appropriated to himself the parcels of land. During the trial in the lower court, defendant alleged, among other things, that: The parcels of land in question as these were validly sold to him by the co-owners dela Vega; There was no period specified for the right of repurchase agreed upon;
When the co-owners failed to repurchase within the legal period, ownership of the properties was consolidated in him by operation of law; ISSUE:
Whether or not there was a contract of Antichresis. (Yes) HELD: First topic: Instrument neither a Real Mortgage nor a Sale Pacto de Retro (Academic)
The said contract apparently records a loan of P430, secured by a mortgage of the aforementioned two parcels of land and payable within the period of eight years, or within such time as the debtor Fidel de la Vega might be able to pay his debt and redeem the said land. However, notwithstanding the terms of the document, legally there is no mortgage inasmuch as the said instrument is not of the nature of a public instrument. And even though it were, it was not recorded in the property registry as it ought to have been. Furthermore, the instrument recites that the debtor thenceforth ceded and conveyed his ownership and possession in the said two parcels of land to the creditor Ballilos in order that Ballilos might manage and enjoy the same in consideration of the sum for which the lands, free of all burden and encumbrance according to the debtor, were mortgaged. If the instrument above mentioned cannot be construed as a mortgage of the said two parcels of land in security for P430, the amount loaned, and for the payment of the debt within eight years or some other period, neither can it be held to be a sale under pacto de retro inasmuch as the said document contains no mention whatever of any sale with right of redemption, although it does say that the debtor ceded and conveyed to the creditor the ownership and possession of the
lands in order that he might manage and enjoy them in consideration of the sum for which they were mortgaged. Second Topic: Instrument is a Contract of Antichresis (Main Point of the Case)
As it is not shown that the said document is a contract of mortgage executed as security for a loan, still less does it appear to be a contract of pacto de retro, in view of the terms of the agreement Exhibit O, as stipulated between the contracting parties, of the allegations of both parties, and of the findings of the court in regard to the allegations, made and proven at the trial by the contending parties, we find the classification of the said contract as one of antichresis to be correct and proper, taking into account the intention of the contracting parties as revealed by the words and terms employed by them and recorded in the said document. Several articles of the Civil Code relating to the contract of antichresis. (The court cited Old Civil Code provisions, A1881, -83, -84, and -85 – Now NCC A2132, -36, -37, and -38; These are the elements of a contract of Antichresis) 1. By antichresis a creditor acquires a right to receive the fruits of real property of his debtor, with the obligation to apply them to the payment of interest, if due, and afterwards to the principal of his credit. 2. The debtor cannot recover the enjoyment of the real property without previously paying in full what he owes to his creditor. But the latter, in order to free himself from the obligations imposed on him by the preceding article, may always compel the debtor to reenter upon the enjoyment of the estate, unless there be an agreement to the contrary. 3. The creditor does not acquire the ownership of the real property by nonpayment of the debt within the term agreed upon. Any stipulation to the contrary shall be
void. But in this case the creditor may demand, in the manner prescribed in the law of civil procedure, the payment of the debtor or the sale of the reality. 4. The contracting parties may stipulate that the interest of the debt be set off against the fruits of the estate given in antichresis. This contract is somewhat similar to those of pledge and mortgage and for this reason article 1886 (now 2139) prescribed that certain articles relative to these latter contracts are applicable to contracts of antichresis, for both the former and the latter contracts are comprised in title 15, book 4, of the Civil Code. (Still applicable. Specific article numbers just changed) The contract entered into by the contracting parties which has produced between them rights and obligations is in fact one of antichresis, for article 1281 of the Civil Code prescribes among other things that if the words should appear to conflict with the evident intent of the contracting parties, the intent shall prevail. Article 1283 provides that however general the terms of the contract may be, they should not be understood to include things and cases different from those with regard to which the interested parties intended to contract; and, further, article 1284 of the same code says that if any stipulation of a contract should admit of several different meanings, that most suitable to give it effect should be applied. In this case, it was stipulated that even after eight years the debtor, the owner of the property, might redeem it whenever he should have the means to pay his debt and recover the lands given in antichresis to his creditor who might told them in usufruct in consideration for the money he had loaned; and as the foregoing articles of the Civil Code fixes no term for the
recovery of the enjoyment of immovables given in antichresis, provided that the debtor previously pay what he owes to this creditor, the plaintiffs have an unquestionable right to recover parcels Nos. 1, 5, and 7 of the land designated in the map or plan admitted by agreement of the parties, after first paying the debt of P430 to the defendant-creditor.
