MILITAR, NATASHA CZARINA A.

CIVIL LAW REVIEW 2

LLB-4

1. Sta. Ignacia Rural Bank vs. Court of Appeals 230 SCRA 513March 1, 1994

Facts: On January 14, 1980, the defendants Sta. Ignacia Rural Bank, Inc. extended to the plaintiff-spouses
Conrado Pablo and Juanita Gonzales a loan totalling P12,109.75. As a security, the plaintiff-spouses
executed in favor of the defendant bank a Real Estate Mortgage (Exh. "A") over their residential house and
two (2) lots covered by Free Patent Title, OCT No. P-7941 (Exh. "E") located at Poblacion Norte,
Mayantoc, Tarlac. The plaintiff-spouses defaulted in the payment of their obligation, as a result of which,
the defendant bank filed with the Provincial Sheriff of Tarlac a petition for extra-judicial foreclosure of
their real estate mortgage under Act 3135. On July 28, 1981, the aforecited house and lots of the
plaintiff-spouses were sold at public auction with the defendant bank as the highest bidder for P13,168.35
(Exhs. "B"-"D", inclusive).Thereafter, the Certificate of Sale (Exh. "D") was executed in favor of the
defendant bank on September 29, 1981 and the same was registered with the Register of Deeds of Tarlac on
November 5, 1981 (Exh. "E-2"). The ownership of the subject house and lots was consolidated in favor of
the defendant bank virtue of the final deed of sale executed on November 5, 1983 (Exh. "I"). On December
19, 1984, the defendant bank sold the aforementioned real estates to defendant-spouses Alberto Lucas and
Nelia Rico for P47,500.00 (Exh. "K"), and Transfer Certificates of Title Nos. 184687 and 184688 (Exhs.
"L" and "M") over the house and lots were subsequently issued in the name of said defendant-spouses.
Hence, the complaint for the repurchase of the subject house and lots, annulment of title and damages filed
on March 20, 1986 by the plaintiff-spouses.

Issue: Whether or not the right had already prescribed.

Ruling: Yes, the appellants had exercised their right to redeem within the redemption period. In this case,
it will be recalled that the mortgaged house and lots were sold at public auction to the appellee bank on July
28, 1981. However, the Sheriff's Certificate of Sale was registered only on November 5, 1981. Under Act
3135, the appellants may redeem the subject house and lots until November 5, 1982 being the last day of the
one-year period of repurchase allowed by said law. Following, then, the ruling of the Supreme Court in the
case of Belisario vs. Intermediate Appellate Court, supra, the appellants still had five (5) years from
November 5, 1982 (the expiration of the redemption period under Act 3135), or until November 5, 1987,
within which to exercise their right to repurchase under the Public Land Act.Moreover, for purposes of
ascertaining whether appellants exercised their right to repurchase effectively, we have only to consider
their filing of the action for the "repurchase of the subject house and lots, annulment of title and damages"
on March 20, 1986 against the appellee bank andthe appellee-spouses, which was filed within the five-year
period to repurchase. The question now of whether the appellant had actually tendered, deposited or
consigned in court the redemption price for the subject house and lots becomes immaterial in view of the
filing of said action to repurchase which has been equivalent to an offer to redeem and has the effect per se
of preserving their right of recovering the disputed house and lots. (Tolentino vs. Court of Appeals, 106
SCRA 513; Tioseco vs. Court of Appeals, 143 SCRA 705).Following the doctrine enunciated in the Rural
Bank of Davao City case, it is clear from aperusal of the factual antecedents at bar that the plea for
repurchase was not time-barred at the time it was made. When the certificate of sale in favor of petitioner
was registered with the Register of Deeds on November 5, 1981, private respondents had two years,
reckoned from said date, within which to redeem the property from petitioner, and another five years, under
Commonwealth Act No. 141, counted from the expiration of the redemption period, to effect repurchase
which private respondents precisely did when the suit below was initiated on March 20, 1986.
 2. UNITED COCONUT PLANTERS BANK VS. LUMBO

FACTS: The respondents borrowed the aggregate amount of P12,000,000.00 from UCPB. To secure the
performance of theirobligation, they constituted a real estate mortgage on a parcel of land located in
Boracay, Aklan and all theimprovements thereon that they owned and operated as a beach resort known as
Titay’s South Beach Resort.Upon their failure to settle the obligation, UCPB applied for the extrajudicial
foreclosure of the mortgage, and emergedas the highest bidder at the ensuing foreclosure sale. The
certificate of sale was issued on the same day, and UCPBregistered the sale in its name. The title over the
mortgaged property was consolidated in the name of UCPB after therespondents failed to redeem the
property within the redemption period.Respondents brought against UCPB in the RTC an action for the
annulment of the foreclosure, legal accounting,injunction against the consolidation of title, and damages
(Civil Case No. 5920).During the pendency of Civil Case, UCPB filed an ex parte petition for the issuance
of a writ of possession to recoverpossession of the property. RTC granted the ex parte petition of UCPB,
and issued the writ of possession directing thesheriff of the Province of Aklan to place UCPB in the actual
possession of the property. The writ of possession wasserved on the respondents with a demand for them to
peacefully vacate on or before January 31, 2002. Although thepossession of the property was turned over to
UCPB, they were allowed to temporarily remain on the property forhumanitarian reasons.Respondents
filed in the RTC handling Special Proceedings No. 5884 a petition to cancel the writ of possession and to set
aside the foreclosure sale. They included an application for a writ of preliminary injunction and temporary
restraining order to prevent the implementation of the writ of possession.On March 19, 2002, the RTC
denied the respondents’ application for the issuance of a writ of preliminary injunction.Aggrieved by the
denial, the respondents brought a petition for certiorari and/or mandamus in the CA. CA ruled by granting
respondent’s petition and enjoining the RTC’s implementation of the writ of possession.However, records
show that the petitioners have the legal course to file a petition for the cancellation of the writ ofpossession
bases on cited legal grounds that the mortgage was not violated or that the sale was not made in
accordancewith the provisions of the law. Moreover, the respondent judge erred in declaring that he could
not act on the application for injunctive relief becausethe writ was issued by another court of coordinate
jurisdiction. The petition was filed before the same branch of theRTC of Kalibo, Aklan but was re-raffled to
another branch and later on consolidated before the branch of therespondent judge where the action for the
annulment of the foreclosure sale is pending.

3. DEVELOPMENT BANK OF THE PHILIPPINES vs. ENVIRONMENTAL AQUATICS, INC.,

LAND SERVICES AND MANAGEMENT ENTERPRISES

FACTS: Respondent Environmental Aquatics and Land Services and Management Enterprises loaned
P1,792,600 from petitioner . As security for the loan, LSMEI mortgaged to DBP its parcel of land situated
in New Manila, Quezon City, and covered by Transfer Certificate of Title. The mortgage contract stated
that: If at anytime the Mortgagor shall fail or refuse to pay any of the amortization on the indebtedness, or
the interest when due, or whatever other obligation herein secured or to comply with any of the conditions
and stipulations herein agreed, or shall initiate insolvency proceedings or be declared involuntary insolvent
(sic), or uses the proceeds of the loan for purposes other than those specified herein then all the
amortizations and other obligations of the Mortgagor of any nature, shall become due, payable and
defaulted and the Mortgagee may immediately foreclose this mortgage judicially or extrajudicially under
Act No. 3135 as amended, or under Republic Act No. 85, as amended and or under Act No. 1508 as
amended. EAI and LSMEI failed to pay the loan. Thus, DBP applied for extrajudicial foreclosure of the real
estate mortgage. During the 19 December 1990 public auction, the ex-officio sheriff sold the property to
DBP as the highest bidder for P1,507,000. On 15 May 1991, LSMEI transferred its right to redeem the
property to respondent Mario Matute . In his 27 July 1991 letter, Atty. Julian R. Vitug, Jr. (Atty. Vitug, Jr.)
informed DBP that his client Matute was interested in redeeming the property by paying the P1,507,000
purchase price, plus other costs. In its 29 August 1991 letter, DBP informed Atty. Vitug, Jr. that Matute
could redeem the property by paying the remaining balance of EAI and LSMEI's loan. Thereafter, EAI,
LSMEI and Matute filed with the RTC a complaint praying that DBP be ordered “to accept x x x Matute's
bonafide offer to redeem the foreclosed property.

ISSUE: Whether or not the redemption price is equivalent to the purchase price.

RULING: The petition is meritorious. Section 16 of Executive Order (EO) No. 81 states that the
redemption price for properties mortgaged to and foreclosed by DBP is equivalent to the remaining balance
of the loan. Section 16 states that, “Any mortgagor of the Bank whose property has been extrajudicially sold
at public auction shall x x x have the right to redeem the real property by paying to the Bank all of the latter's
claims against him, as determined by the Bank.” In Development Bank of the Philippines v. West Negros
College, Inc.,[23] the Court held that the redemption price for properties mortgaged to and foreclosed by
DBP is equivalent to the remaining balance of the loan, with interest at the agreed rate. The Court held that:
It has long been settled that where the real property is mortgaged to and foreclosed judicially or
extrajudicially by the Development Bank of the Philippines, the right of redemption may be exercised only
by paying to “the Bank all the amount he owed the latter on the date of the sale, with interest on the total
indebtedness at the rate agreed upon in the obligation from said date, unless the bidder has taken material
possession of the property or unless this had been delivered to him, in which case the proceeds of the
property shall compensate the interest.” x x x The foregoing rule is embodied consistently in the charters of
petitioner DBP and its predecessor agencies. Section 31 of CA 459 creating the Agricultural and Industrial
Bank explicitly set the redemption price at the total indebtedness plus contractual interest as of the date of
the auction sale. In Ponce de Leon v. Rehabilitation Finance Corporation,[37] the Court held that RA No.
337, being a special and subsequent law, amended Act No. 3135 insofar as the redemption price is
concerned. The Court held that: Rep. Act No. 337, otherwise known as “The General Banking Act,” is
entitled “An Act Regulating Banks and Banking Institutions and for other purposes.” Section 78 thereof
limits the amount of the loans that may be given by banks and banking or credit institutions on the basis of
the appraised value of the property given as security, as well as provides that, in the event of foreclosure of
a real estate mortgage to said banks or institutions, the property sold may be redeemed “by paying the
amount fixed by the court in the order of execution,” or the amount judicially adjudicated to the creditor
bank. This provision had the effect of amending Section 6 of Act No. 3135, insofar as the redemption price
is concerned, when the mortgagee is a bank or a banking or credit institution, said Section 6 of Act No. 3135
being, in this respect, inconsistent with the above-quoted portion of Section 78 of Rep. Act No. 337. In
short, the Parañaque property was sold pursuant to said Act No. 3135, but the sum for which it is
redeemable shall be governed by Rep. Act No. 337, which partakes of the nature of an amendment to Act
No. 3135, insofar as mortgages to banks or banking or credit institutions are concerned, to which class the
RFC belongs. At any rate, the conflict between the two (2) laws must be resolved in favor of Rep. Act No.
337, both as a special and as the subsequent legislation.

4. BARRETTO VS BARRETTO

FACTS:

RULING: The creditor in antichresis can never byprescription acquire the ownership of the real property
received in antichresis, as heentered into the possession of the same not as an owner but as a creditor with
the rightonly to collect his credit from the fruits of said real property. The extinguishment of the right as
creditorand the termination of his use and possession of the real property given in antichresisdepends upon
the full payment of the debt and its interests, after the liquidation of theamounts entered on the account of
the debtors and received by the creditor.

5. MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, INC.

FACTS: To obtain financial accommodations from Makati Leasing, Wearever Textile discounted and
assigned several receivables under a Receivable Purchase Agreement with Makati Leasing. To secure the
collection of receivables, it executed a chattel mortgage over several raw materials and a machinery – Artos
Aero Dryer Stentering Range (Dryer).

Wearever defaulted thus the properties mortgaged were extrajudicially foreclosed. The sheriff, after the
restraining order was lifted, was able to enter the premises of Wearever and removed the drive motor of the
Dryer. The CA reversed the order of the CFI, ordering the return of the drive motor since it cannot be the
subject of a replevin suit being an immovable bolted to the ground. Thus the case at bar.

ISSUE: Whether the dryer can be the subject of a replevin.

HELD: NO. Parties to a contract may by agreement treat as personal property that which by nature is a real
property, as long as no interest of 3rd party would be prejudiced. The SC relied on its ruling in Tumalad v.
Vicencio, that if a house of strong materials can be the subject of a Chattel Mortgage as long as the parties to
the contract agree and no innocent 3rd party will be prejudiced then more so that a machinery may treated as
a movable since it is movable by nature and becomes immobilized only by destination. And treating it as a
chattel by way of a Chattel Mortgage, Wearever is estopped from claiming otherwise.

6. THE HONGKONG & SHANGHAI BANKING CORP. vs. ALDECOA & CO.

FACTS: Aldecoa and Co. obtained a credit worth P450,000 from HSBC secured by a mortgage of shares
and real properties. On Dec. of 1906, the firm of Aldecoa and Co. went into liquidation and obtained
another P50,000 from the bank upon the condition that this would be covered by the previous mortgage. In
October 1908, Joaquin and Zoilo Ibañez de Aldecoa filed an action against the bank for the purpose of
annulling the mortgages executed by them on the grounds that they were minors at the time incapable of
creating a valid mortgage upon their real property. The Court of First Instance dismissed the complaint as to
Joaquin upon the ground that he had ratified those mortgages after becoming of age, but entered a judgment
annulling said mortgages with respect to Zoilo. Both parties appealed from this decision and the case was
still pending in the Supreme Court when HSBC filed an action against Aldecoa and Co. and its partners for
the collection of a sum of money and foreclosure of the mortgaged properties. Judgement was entered in
favor of the bank.

ISSUE: Whether or not the action filed by the bank should be dismissed on the ground of lis pendens.

RULING: No. A plea of the pendency of a prior action is not available unless the prior action is of such a
character that, had a judgment been rendered therein on the merits, such a judgment would be conclusive
between the parties and could be pleaded in bar of the second action.

In the instant case, the former suit is to annul the mortgages while the other one is for the foreclosure. If the
final judgment in the former action is that the mortgages be annulled, such an adjudication will deny the
right of the bank to foreclose the mortgages. But a valid decree will not prevent the bank from foreclosing
them. In such an event, the judgment would not be a bar to the prosecution of the present action. The rule is
not predicated upon such a contingency. It is applicable, between the same parties, only when the judgment
to be rendered in the action first instituted will be such that, regardless of which party is successful, it will
amount
7. PNB vsto res adjudicata
Banatao Sec.against the1 second action.
trans no.
7. PNB vs Banatao Sec. trans no. 1
7. Philippine National Bank vs. Banatao
FACTS: Banatao, et al. (plaintiffs-respondents) initiated an action against Marciano Carag (one of the
defendantsrespondents) before the RTC for the recovery of real property that the plaintiffs-respondents
claimed as the owners of the adjoining . The defendants-respondents, were the occupants of the disputed
property. The defendants-respondents were able to secure homestead patents evidenced by Original
Certificates of Title (OCTs) issued in their names, and all bear the proviso that, in accordance with the
Public Land Act, the patented homestead shall neither be alienated nor encumbered for five (5) years from
the date of the issuance of the patent. The defendants-respondents separately applied for loans with the PNB
secured by real estate mortgages which the bank approved the mortgages, relying solely on the OCTs
which, at the time, did not contain any notice of lis pendens or annotation of liens and encumbrances. The
bank extrajudicially foreclosed was declared the highest bidder of the property. The spouses Soriano failed
to redeem the foreclosed property, resulting in the consolidation of title in the banks name. The
plaintiffs-respondents and the defendants-respondents entered into a compromise agreement whereby
ownership of virtually the northern half of the disputed property was ceded to the plaintiffs-respondents,
while the remaining southern half was given to the defendants-respondents. In the same compromise
agreement, the defendantsrespondents acknowledged their indebtedness to petitioner PNB and bound
themselves to pay their respective obligations to the bank, including the interests accruing thereon.
Petitioner PNB, however, was not a party to the compromise agreement. The trial court rendered its
decision, approving and adopting in toto the compromise agreement, and ordering the participating parties
to strictly comply with its terms. The bank moved for reconsideration of the trial courts decision and for the
setting aside of the compromise agreement. The trial court denied the motion thus, compelled the bank to
elevate the case to the CA. The appellate court dismissed the appeal in, ruling that the bank is not an
indispensable party to the compromise agreement that only settles the actions for: (1) recovery of property;
and (2) cancellation of OCTs. On the third cause of action for annulment of mortgage, the court held the
bank is only a necessary party and the issue could be dealt with in a separate and distinct action. The
appellate court in the same decision proceeded to strike down the mortgages as void because the mortgagors
(defendants-respondents), not being the absolute owners of the disputed parcels of land as agreed upon in
the compromise agreement, did not have the right to constitute a mortgage on these properties.

ISSUE: WHETHER THE COMPROMISE AGREEMENT ENTERED INTO LEGALLY BINDS

PETITIONER PNB WHICH IS NOT A PARTY THERETO AND CONSTITUTES SUFFICIENT
LEGAL BASIS TO NULLIFY PNB'S MORTGAGE LIEN ON THE REALTY IN QUESTION.

RULING: It is basic in law that a compromise agreement, as a contract, is binding only upon the parties to
the compromise, and not upon non-parties. This is the doctrine of relativity of contracts. A court judgment
made solely on the basis of a compromise agreement binds only the parties to the compromise, and cannot
bind a party litigant who did not take part in the compromise agreement. We conclude from our own
examination of these OCTs that the mortgages cannot but be void ab initio. On the faces of all the
OCTssecured through homestead patentsare inscribed which contains a proscription against the alienation
or encumbrance of homestead patents within five years from issue. PNB cannot claim that it is a mortgagee
in good faith. One who contracts with a homestead patentee is charged with knowledge of the law's
proscriptive provision that must necessarily be read into the terms of any agreement involving the
homestead. Under the circumstances, the PNB simply failed to observe the diligence required in the
handling of its transactions and thus made the fatal error of approving the loans secured by mortgages of
properties that cannot, in the first place, be mortgaged. Both the defendants-respondents and the bank are to
be faulted for the invalidity of the mortgages. Our conclusion on the nullity of mortgage issue renders it
unnecessary to decide the question of whether the compromise agreement between the
plaintiffs-respondents and the defendants-respondents should be set aside for its effect on the bank. With
the mortgages invalidated, the PNB no longer has any interest that the compromise agreement can affect.
The parties liabilities to PNB on the loans they obtained are not issues before us for disposition, and are for
the parties to act upon as matters outside the coverage of this case.
 8. Manila Banking Corp. v Anastacio Teodoro, Jr. and Grace Teodoro

FACTS: 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:
1.Whether or not the assignment of receivables has the effect of payment of all the loans contracted by the
spouses; No.

2. Whether or not MBC must exhaust all legal remedies against PFC before it can proceed against the
spouses. No

RATIO: Assignment of credit: An agreement by virtue of which the owner of a credit(assignor) by a legal
cause (e.g. 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(assignee) who acquires the power to enforce it to the
same extent as the assignor could have enforced it against the debtor; May be in form of: o Sale o Dation in
payment - when a debtor, in order to obtain a release from his debt, assigns to his creditor a credit he has
against a third person; o Donation when it is by gratuitous title; o Guaranty creditor gives as a collateral, to
secure his own debt in favour of the assignee, without transmitting ownership; Obligations between the
parties will depend upon the juridical relation which is the basis of the assignment;

1. Assignment of receivables in 1964 did not transfer the ownership of the receivables to MBC and release
the spouses from their loans; Consideration was for certain credits, loans, overdrafts and credit
accommodations worth 10k extended by MBC to spouses and as security for the payment of said sum and
interest thereon; also quitclaim of rights to MBC of their interest in the receivables; Stipulated also that it
was a continuing guaranty for future loans and correspondingly, the assignment shall extend to all accounts
receivable; Contention of spouses: not mere guaranty since it was stipulated: That the assignor release and
quitclaim to assignee all its rights, title and interest in the accounts receivable; That title and right of
possession to account receivable is to remain in assignee and it shall have right to collect directly from the
debtor; that whatever the assignor does in connection with collection of such, it does so as agent and
representative and in trust of assignee; SC: character of transaction is not determined by the language in
document but by intention of the parties;; If it was intended to secure the payment of money, it must be
construed as a pledge. A transfer of property by the debtor to a creditor, even if sufficient on its farm to
make an absolute conveyance, should be treated as a pledge if the debt continues in existence and is not
discharged by the transfer; Assignment of receivables did not result from sale or by virtue of a dation in
payment; At time the deed was executed, the loans were non-existent yet; At most, it was a dation for 10k,
the amount of credit with MBC indicated in the deed; at the time of execution, there was no obligation to be
extinguished except for the 10k; 1292: in order that an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other; Title moves from assignor to assignee but that
title is defeasible being designed to collateralize the principal obligation: Operationally: means assignee is
burdened to collateralize the principal obligation; taking the proceeds of the receivables assigned and
applying such proceeds to the satisfaction of the principal obligation and returning any balance remaining
thereafter to the assignor; The parties gave the deed of assignment the form of an absolute conveyance of
title over the receivables assigned, essentially for the convenience of the assignee: Without such nature of
absolute conveyance, the assignee would have to foreclose the properties; he would have to comply with
documentation and registration requirements of a pledge or chattel mortgage); A deed of assignment by
way of security avoids the necessity of a public sale impose by the rule on pactum commisorium, by in
effect placing the sale of the collateral up front; The foregoing is applicable where the deed of assignment of
receivables combines elements of both a complete alienation of the credits and a security arrangement to
assure payment of a principal obligation; Where the 2nd element is absent, the assignment would constitute
essentially a mode of payment or dacion en pago; in order that a deed of assignment of receivables which is
in form an absolute conveyance of title to the credits being assigned, may be qualified and treated as a
security arrangement, language to such effect must be found in the document itself and that language,
precisely, is embodied in the deed of assignment in the instant case;

2. Deed of assignment intended as collateral security for the loans, as a continuing guaranty for whatever
sums that would be owing by spouses; In case of doubt as to whether a transaction is a pledge or a dation in
payment, the presumption is in favor of pledge, the latter being the lesser transmission of rights and
interests (Lopez v CA); MBC need not exhaust all legal remedies against PFC: Spouses, not being released
by the assignment, remain as the principal debtors of MBC, rather than mere guarantors; The deed merely
guarantees said obligations; 2058 (creditor must have exhausted property of debtor and resorted to all legal
remedies before it can proceed to guarantor) does not apply to them; Appellants are both the principal
debtors and the pledgors or mortgagors; MBC did try to collect but at OP, it was disapproved; so the loan
was basically unsecured.

9. RECEBIDO VS. PEOPLE

10. Arguelles vs Malarayat Rural Bank

FACTS: The late Fermina M. Guia was the registered owner of Lot 3, agricultural land in Alitagtag
Batangas, the south portion of which was sold to Spouses Petronio and Macaria Arguelles. Arguelles took
im mediate possession but the Deed of Sale was neither registered with the Register of Deeds nor
annotated. At the same time, G uia ordered her son Eddie Guia and the latter's wife Teresita Guia to
subdivide the same land into three lots and to apply for the issuance of separate titles therefor. She directed
the delivery of the (TCT) corresponding to Lot 3C to the vendees of the unregistered sale or the spouses
Arguelles. Spouses Arguelles claimed that they never received the TCT corresponding to Lot 3-C from the
spouses Guia. Spouses Guia obtained a loan in the amount of P240,000 from the respondent Malarayat
Rural Banlc and secured the loan with a Deed of Real Estate Mortgage over Lot 3-C pursuant to the Special
Power of Attorney executed by Fermina Guia. The spouses Arguelles alleged that it was only in 1997 or
after seven years from the date of the unregistered sale that they discovered from the Register of Deeds that
the Land was subdivided to three lots and were issued separate TCTs. The spouses Arguelles registered
their adverse claim based on the unregistered sale dated December 1, 1990 over Lot 3-C. Spouses Arguelles
filed petition to annul the mortgage against the respondent Bank. The spouses Arguelles alleged ownership
over the land that had been mortgaged in favor of the respondent Malarayat Rural Bank. RTC ruled in favor
of Sps. Arguelles finding that spouses Guia were no longer the absolute owners of the land in question in
view of the unregistered sale in favor of the vendee spouses Arguelles CA reversed and set aside the
decision of RTC.

ISSUE: Whether the respondent Malarayat Rural Bank is a mortgagee in good faith who is entitled to
protection on its mortgage lien.

HELD: We find that the respondent Malarayat Rural Bank is not a mortgagee in good faith. Therefore, the
spouses Arguelles as the vendees to the unregistered sale have a superior right to the mortgaged land. The
doctrine of "mortgagee in good faith" based on the rule that all persons dealing with the property covered by
a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the
face of the title. While one who buys from the registered owner does not need to look behind the certificate
of title, one who buys from one who is not the registered owner is expected to examine not only the
certificate of title but all factual circumstances necessary for one to determine if there are any flaws in the
title of the transferor, or in the capacity to transfer the land. The same rule applies inasmuch as the law itself
includes a mortgagee in the term "purchaser. When "the person applying for the loan is other than the
registered owner of the real property being mortgaged, such fact should have already raised a red flag and
which should have induced the Bank to make inquiries into and confirm the authority to mortgage. A
banking institution is expected to exercise due diligence before entering into a mortgage contract. Where
the mortgagee is a bank, it cannot rely merely on the certificate of title offered by the mortgagor in
ascertaining the status of mortgaged properties. Since its business is impressed with public interest, the
mortgagee-bank is duty-bound to be more cautious even in dealing with registered lands. The Court finds
that the respondent Malarayat Rural Bank fell short of the required degree of diligence, prudence, and care
in approving the loan application of the spouses Guia. Respondent should have diligently conducted an
investigation of the land offered as collateral. The fact that there are planting and harvesting of sugarcane in
the land should have immediately prompted the respondent to conduct further inquiries, especially since the
spouses Guia were not the registered owners of the land being mortgaged.

11. DSM CONSTRUCTION AND DEVELOPMENT CORP. VS COURT OF APPEALS

FACTS: Petitioner and respondent entered into agreements for the construction of a condominium project
owned by respondent called “The Salcedo Park”, with petitioner as contractor. In the course of the project’s
construction, differences with respect to billings arose between the parties. Petitioner thus filed a complaint
for compulsory arbitration before the CIAC claiming payment for approximately P97 Million as the
outstanding balance due from respondent pursuant to the agreements. The CIAC rendered a decision
partially granting both petitioner’s and respondent’s claims in favor of petitioner. This award was affirmed
by the Court of Appeals. Thereafter, the Supreme Court promulgated its Decision affirming the judgment
of the Court of Appeals and lifting the TRO that was then still in effect.It became final and
executory. Petitioner centers on attempts, regrettably entertained by respondent Court of Appeals, to thwart
the execution of a final and executory decision of the Supreme Court.

ISSUE: Whether or not the Court of Appeals gravely abused its discretion when it issued a Resolution
enjoining the enforcement of Alias Writ of Execution.

HELD: YES. Petition was granted. The CIAC is ordered to proceed with the execution of its Decision.

RATIO: Rule 1, Section 6 of the Rules of Court provides that the Rules shall be liberally construed in order
to promote their objective of securing a just, speedy and inexpensive disposition of every action and
proceeding. We have at times relaxed procedural rules in the interest of substantial justice.
But from the outset, it bears stressing that the subject of petitioner and respondent’s petitions is the
execution of a final judgment was affirmed by no less than this Court. This being so, the appellate court
should have been doubly careful about entertaining an obviously dilatory petition intended merely to delay
the satisfaction of the judgment. Any lower court or tribunal that trifles with the execution of a final and
executory judgment of the Supreme Court flirts with insulting the highest court of the land. While we do not
diminish the availability of judicial remedies to the execution of final judgments of this Court, as may be
sanctioned under the Rules of Court, such actions could only prosper if they have basis in fact and in law.
Any court or tribunal that entertains such baseless actions designed to thwart the execution of final
judgments acts with grave abuse of discretion tantamount to lack of jurisdiction. It is the positive duty of
every court of the land to give full recognition and effect to final and executory decisions, much less those
rendered by the Supreme Court.

The abuse of discretion amounting to lack or excess of jurisdiction in this case was made manifest by the
fact that the appellate court not only took cognizance of the case and issued the assailed restraining order. It
eventually decided the case in petitioner’s (respondent herein) favor as well notwithstanding the dearth of
any basis for doing so.

12. RURAL BANK OF CALOOCAN VS. COURT OF APPEALS