Prudential Bank v.

Panis
G.R. No. L-50008 | August 31, 1987 | Paras, J.

Petitioner: Prudential Bank

Respondents: Hon. Domingo D. Panis (Presiding Judge of Branch III, CFI of Zambales, Olongapo
City; Fernando Magcale and Teodula Baluyut-Magcale

Issue
Whether or not a valid real estate mortgage can be constituted on a land belonging to another (YES)

Rules/Laws
 Article 415 – Immovable Property
 Act No. 3344 – Recording of instruments relating to land not registered under Act No. 496
(The Land Registration Act)
 R.A. 730 – An Act To Permit The Sale Without Public Auction of Public Lands of the Republic
of the Philippines for Residential Purposes to Qualified Applicants Under Certain Conditions
 C.A. 141 – The Public Land Act
 Lopez vs. Orosa, Jr. – extent of lien for value of materials used in construction of building
 Associated Inc. and Surety Co., Inc. vs. IYA – preference of land which is the subject of two
mortgages
 Leung Yee vs. Strong Machinery Co. – nature of property registered in the chattel mortgage
registry
 Vda. de Bautista vs. Marcos – foreclosure of land made as security for a debt
 Visayan Realty Inc. vs. Meer, 96 Phil. 515
 Director of Lands vs. De Leon, 110 Phil. 28
 Director of Lands vs. Jurado, L-14702, May 23, 1961
 Arsenal vs. IAC, 143 SCRA 54 [1986]

Analysis
 Facts
o A married couple, Fernando Magcale and Teodula Baluyut-Magcale, borrowed P70,000
from Prudential Bank. To make sure that they pay back the amount, they pledged to the
bank Fernando’s properties – a 2-storey house and the land on which it is situated –
written on a document called a Deed of Real Estate Mortgage. More than a year later,
the Secretary of Agriculture issued, basically, that the land now belonged to the
government. Later, the couple borrowed another P20,000 with the same pledge. The
couple failed to pay the bank back when the debt became due, so the bank foreclosed
both properties and became the new owner thereof. Hon. Panis declared that the Deeds
were void since the land belonged to the government and the properties could not be
the subject of a Real Estate Mortgage.
 Arguments
Hon. Panis and Fernando Magcale and
Prudential Bank
Teodula Baluyut-Magcale
Both REMs were null and void – land had
already been acquired by the government. Thus,
Both REMs were valid and enforceable
both the land and the thing attached (the house)
cannot be the subject of the two REMs

Conclusion
 The Court first looked at the dates when the two loans were secured and when the land
belonged to the government. The first loan was secured on November 19, 1971. The
Miscellaneous Sales Patent, which indicated that the land of the couple belonged to the
government, was issued on April 24, 1972. The second loan was executed a year after the
government was divested of title of the land on May 2, 1973.
 COURT RULED THAT THE DEED WITH RESPECT TO THE FIRST LOAN (P70,000)
WAS VALID BUT THE SECOND (P20,000) WAS NOT. THIS IS BECAUSE WITH THE
FIRST, THE HOUSE IS IMMMOVABLE, THEREFORE, IT IN ITSELF CAN BE THE
SUBJECT OF A REM. EVEN IF THE LAND AND THE BUILDING ARE TREATED
SEPARATELY AND THE LAND BELONGS TO ANOTHER INDIVIDUAL OR ENTITY,
THE BUILDING IS IMMOVABLE. THE SECOND WAS EXECUTED AFTER THE
LAND WAS DECLARED TO BELONG TO THE GOVERNMENT, THEREFORE, IT
WAS UNDER THE PERTINENT PROVISIONS OF THE PUBLIC LAND ACT.