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Digest-Credit Trans-Pledge, Mortage, Antichresis
Digest-Credit Trans-Pledge, Mortage, Antichresis
RULING:
1. One of the essential requisites of a mortgage contract is Flancia vs. Court of Appeals, William Genato Ong
that the mortgagor must be the absolute owner of the thing
This is an action to declare null and void the mortgage
mortgaged.42 A mortgage is, thus, invalid if the mortgagor is
executed by defendant Oakland Development Resources
not the property owner.43 In this case, the trial court and the
Corp. xxx in favor of defendant William Ong Genato over
CA are one in finding that based on the evidence on record
the house and lot plaintiffs spouses Godofredo and Dominica
the owner of the property is respondent who was not the one
Flancia purchased from defendant corporation.
who mortgaged the same to the petitioner.
FACTS: Petitioner purchased from defendant corporation a
The evidence shows that Mira Bernal and Jennifer Ramirez
parcel of land by virtue of the contract of sale, defendant
were able to open respondent’s vault and steal the owner’s
corporation authorized plaintiffs occupy the house at the
duplicate of TCT No. T-48521 and the tax declarations
aforesaid lot.
covering the property; with the connivance of a woman who
pretended to be the respondent, they were able consummate Subsequently, petitioner received a copy of the execution
the execution of the Real Estate Mortgage by forging the foreclosing the mortgage issued by the RTC ordering the
respondent’s signature on said deed. sheriff to sell at public auction several lots formerly owned
by defendant corporation including subject lot of petitioner.
Respondent submits that Oakland Development Resources that there was no agreement that the same will be
Corporation mortgaged to Genato two parcels of land compounded monthly.
covered by TCT Nos. 356315 and 366380 as security and
guaranty for the payment of a loan in the sum of the RTC rendered judgment12 in favor of the respondent
P2,000,000.00, that for non-payment of the loan of the CA partially granted the petition and modified the RTC
P2,000,000.00 defendant Genato filed an action for decision insofar as the amount of the loan obligations
foreclosure of real estate mortgage against co-defendant secured by the real estate mortgage. It held that by express
corporation. intention of the parties, the real estate mortgage secured the
The RTC rendered a decision ordering defendant Oakland original P1,500,000.00 loan and the subsequent loans of
Dev’t. Resources Corporation to pay petitioner P150,000.00 and P500,000.00 obtained on July 1, 1992 and
September 5, 1992, respectively. As regards the loans
On MR, the trial judge declared that the subject mortgage obtained on May 31, 1992, October 29, 1992 and January 13,
and the foreclosure proceedings held thereunder as null and 1993 in the amounts of P150,000.00, P200,000.00 and
void. P250,000.00, respectively, the appellate tribunal held that the
parties never intended the same to be secured by the real
The CA, reversed and reinstated the first RTC decision. estate mortgage.
ISSUE: whether or not the registered mortgage constituted ISSUE: Whether or not the amount secured by the REM is
over the property was valid? YES limited only to 1.5M?
RULING: Under the Art. 2085 of the Civil Code, the RULING:
essential requisites of a contract of mortgage are: (a) that it
be constituted to secure the fulfillment of a principal As regards what loans were secured by the real estate
obligation; (b) that the mortgagor be the absolute owner of mortgage, respondents contended that all five additional
the thing mortgaged; and (c) that the persons constituting the loans were intended by the parties to be secured by the real
mortgage have the free disposal of their property, and in the estate mortgage. Thus, the CA erred in ruling that only two
absence thereof, that they be legally authorized for the of the five additional loans were secured by the real estate
purpose. All these requirements are present in this case. mortgage when the documents evidencing said loans would
show at least three loans were secured by the real estate
The contract between petitioner and corporation is a Contract mortgage, namely: (1) P150,000.00 obtained on May 31,
to sell, all that was granted to them by the “occupancy 1992; (2) P150,000.00 obtained on July 1, 1992; and (3)
permit” was the right to possess it. P500,000.00 obtained on September 5, 1992.
Because Oakland retained all the foregoing rights as owner As a general rule, a mortgage liability is usually limited to
of the property, it was entitled absolutely to mortgage it to the amount mentioned in the contract.31 However, the
Genato. Hence, the mortgage was valid. amounts named as consideration in a contract of mortgage do
WHEREFORE, the petition for review is hereby DENIED. not limit the amount for which the mortgage may stand as
The decision of the Court of Appeals reinstating the August security if from the four corners of the instrument the intent
16, 1996 decision of the trial court is hereby AFFIRMED. to secure future and other indebtedness can be gathered. This
stipulation is valid and binding between the parties and is
Cuyco vs. Cuyco known in American Jurisprudence as the “blanket mortgage
clause,” also known as a “dragnet clause.”
FATCTS: Petitioners, spouses Adelina and Feliciano
Cuyco, obtained a loan in the amount of P1,500,000.00 from A “dragnet clause” operates as a convenience and
respondents, spouses Renato and Filipina Cuyco, payable accommodation to the borrowers as it makes available
within one year at 18% interest per annum, and secured by a additional funds without their having to execute additional
Real Estate Mortgage4 over a parcel of land. security documents, thereby saving time, travel, loan closing
costs, costs of extra legal services, recording fees, et cetera.
Subsequently, petitioners obtained additional loans from the
While a real estate mortgage may exceptionally secure future
respondents in the aggregate amount of P1,250,000.00,
loans or advancements, these future debts must be
broken down as follows: (1) P150,000.00 on May 30, 1992;
sufficiently described in the mortgage contract. An
(2) P150,000.00 on July 1, 1992; (3) P500,000.00 on
obligation is not secured by a mortgage unless it comes fairly
September 5, 1992; (4) P200,000.00 on October 29, 1992;
within the terms of the mortgage contract.
and (5) P250,000.00 on January 13, 1993.
It is clear from a perusal of the aforequoted real estate
Petitioners made payments amounting to P291,700.00,7 but
mortgage that there is no stipulation that the mortgaged
failed to settle their outstanding loan obligations. Thus, on
realty shall also secure future loans and advancements. Thus,
September 10, 1997, respondents filed a complaint8 for
what applies is the general rule above stated.
foreclosure of mortgage with the RTC of Quezon City,
which was docketed as Civil Case No. Q-97-32130. They Even if the parties intended the additional loans of
alleged that petitioners’ loans were secured by the real estate P150,000.00 obtained on May 30, 1992, P150,000.00
mortgage; that as of August 31, 1997, their indebtedness obtained on July 1, 1992, and P500,00.00 obtained on
amounted to P6,967,241.14, inclusive of the 18% interest September 5, 1992 to be secured by the same real estate
compounded monthly; and that petitioners’ refusal to settle mortgage, as shown in the acknowledgement receipts, it is
the same entitles the respondents to foreclose the real estate not sufficient in law to bind the realty for it was not made
mortgage. substantially in the form prescribed by law
In their answer,11 petitioners admitted their loan obligations In order to constitute a legal mortgage, it must be executed in
but argued that only the original loan of P1,500,000.00 was a public document, besides being recorded. A provision in a
secured by the real estate mortgage at 18% per annum and private document, although denominating the agreement as
one of mortgage, cannot be considered as it is not susceptible
of inscription in the property registry. A mortgage in legal the dismissal of Metrobank’s petition for a writ of
form is not constituted by a private document, even if such possession.
mortgage be accompanied with delivery of possession of the
mortgaged property Metrobank, in its reply, alleged that the amount deposited by
the brothers Teoco as redemption price was not sufficient.
What the parties could have done in order to bind the realty
for the additional loans was to execute a new real estate On February 24, 1995, the trial court was informed that the
mortgage or to amend the old mortgage conformably with Brothers Teoco had deposited the amount of P356,297.57 to
the form prescribed by the law. Failing to do so, the realty the clerk of court of the RTC in Catbalogan, Samar. The trial
cannot be bound by such additional loans, which may be court ordered Metrobank to disclose whether it is allowing
recovered by the respondents in an ordinary action for the brothers Teoco to redeem the subject properties.
collection of sums of money. Metrobank refused to accept the amount deposited by the
Brothers Teoco, alleging that they are obligated to pay the
AFFIRMED WITH MODIFICATION. Spouses Co’s subsequent obligations to Metrobank as well.
The Brothers Teoco claimed that they are not bound to pay
all the obligations of the Spouses Co, but only the value of
the property sold during the public auction.
Ruling of RTC
Ruling of CA
RULING: NO
On February 14, 1991, the properties were sold to Metrobank While we agree with Metrobank that mortgages intended to
in an extrajudicial foreclosure sale under Act No. 3135. One secure future advancements are valid and legal contracts,13
year after the registration of the Certificates of Sale, the titles entering into such mortgage contracts does not necessarily
to the properties were consolidated in the name of put within its coverage all loan agreements that may be
Metrobank for failure of Ramon Co to redeem the same subsequently entered into by the parties. If Metrobank
within the one year period provided for by law. wishes to apply the mortgage contract in order to satisfy loan
obligations not stated on the face of such contract,
On November 29, 1993, Metrobank filed a petition for the Metrobank should prove by a preponderance of evidence that
issuance of a writ of possession against Spouses Co. such subsequent obligations are secured by said mortgage
However, since the spouses Co were no longer residing in contract and not by any other form of security.
the Philippines at the time the petition was filed, the trial
court ordered Metrobank, on January 12, 1994 and again on In order to prevent any injustice to, or unjust enrichment of,
January 26, 1994 to effect summons by publication against any of the parties, this Court holds that the fairest resolution
the Spouses Co is to allow the brothers Teoco to redeem the foreclosed
properties based on the amount for which it was foreclosed
On May 17, 1994, the brothers Teoco filed an answer-in- (P255,441.14 plus interest). This is subject, however, to the
intervention alleging that they are the successors-in- interest right of Metrobank to foreclose the same property anew in
of the Spouses Co, and that they had duly and validly order to satisfy the succeeding loans entered into by the
redeemed the subject properties within the reglementary Spouses Co, if they were, indeed, covered by the mortgage
period provided by law. The Brothers Teoco thus prayed for contract. The right of Metrobank to foreclose the mortgage
would not be hampered by the transfer of the properties to Upon the termination of this Contract or the expiration of the
the brothers Teoco as a result of this decision, since Article Lease Period without the rentals, charges and/or damages, if
2127 of the Civil Code provides: any, being fully paid or settled, the LESSOR shall have the
right to retain possession of the properties of the LESSEE
“Art. 2127. The mortgage extends to the natural accessions, used or situated in the Leased Premises and the LESSEE
to the improvements, growing fruits, and the rents or income hereby authorizes the LESSOR to offset the prevailing value
not yet received when the obligation becomes due, and to the thereof as appraised by the LESSOR against any unpaid
amount of the indemnity granted or owing to the proprietor rentals, charges and/or damages. If the LESSOR does not
from the insurers of the property mortgaged, or in virtue of want to use said properties, it may instead sell the same to
expropriation for public use, with the declarations, third parties and apply the proceeds thereof against any
amplifications and limitations established by law, whether unpaid rentals, charges and/or damages.”
the estate remains in the possession of the mortgagor, or it
passes into the hands of a third person.” Tirreno began to default in its lease payments in 1999. By
July 2000, Tirreno was already in arrears by P5,027,337.91.
Further, Article 2129 of the Civil Code provides:
Despite the execution of the settlement agreement, FBDC
“Art. 2129. The creditor may claim from a third person in found need to send Tirreno a written notice of termination
possession of the mortgaged property, the payment of the dated 19 September 2000 due to Tirreno’s alleged failure to
part of the credit secured by the property which said third settle its outstanding obligations. On 29 September 2000,
person possesses, in the terms and with the formalities which FBDC entered and occupied the leased premises. FBDC also
the law establishes.” appropriated the equipment and properties left by Tirreno
The mortgage directly and immediately subjects the property pursuant to Section 22 of their Contract of Lease as partial
upon which it is imposed, whoever the possessor may be to payment for Tirreno’s outstanding obligations.
the fulfillment of the obligation for whose security it was On 4 March 2002, Yllas Lending Corporation and Jose S.
constituted. Otherwise stated, a mortgage creates a real right Lauraya, in his official capacity as President, (respondents)
which is enforceable against the whole world. Hence, even if caused the sheriff of Branch 59 of the trial court to serve an
the mortgage property is sold or its possession transferred to alias writ of seizure against FBDC.
another, the property remains subject to the fulfillment of the
obligation for whose security it was constituted. FBDC found out that on 27 September 2001, respondents
filed a complaint for Foreclosure of Chattel Mortgage with
Thus, the redemption by the Brothers Teoco shall be without Replevin against Tirreno. IT appears that respondent lent a
prejudice to the subsequent foreclosure of same properties total of P1.5 million to Tirreno, the latter executed a Deed of
by Metrobank in order to satisfy other obligations covered by Chattel Mortgage in favor of respondents as security for the
the Real Estate Mortgage. loan.
Fort Bonifacio Development Corporation vs. Yllas Despite FBDC’s service upon him of an affidavit of title and
Lending Corporation third party claim, the sheriff proceeded with the seizure of
certain items from FBDC’s premises.
FACTS: On 24 April 1998, FBDC executed a lease contract
in favor of Tirreno, Inc. (Tirreno) over a unit at the Ruling of RTC
Entertainment Center—Phase 1 of the Bonifacio Global City In deciding against FBDC, the trial court declared that
in Taguig. Tirreno used the leased premises for Savoia Section 22 of the lease contract between FBDC and Tirreno
Ristorante and La Strega Bar. is void under Article 2088 of the Civil Code.
Two provisions in the lease contract are pertinent to the ISSUE: Whether or not a pledge is constituted by the
present case: Section 20, which is about the consequences in contract of lease between petitioner and Tirreno.
case of default of the lessee, and Section 22, which is about
the lien on the properties of the lease. The pertinent portion RULING: NO
of Section 20 reads:
Respondents, as well as the trial court, contend that Section
“Section 20. Default of the Lessee 22 constitutes a pactum commissorium, a void stipulation in
a pledge contract. FBDC, on the other hand, states that
20.1 The LESSEE shall be deemed to be in default within Section 22 is merely a dacion en pago.
the meaning of this Contract in case:
Articles 2085 and 2093 of the Civil Code enumerate the
(i) The LESSEE fails to fully pay on time any rental, utility requisites essential to a contract of pledge: (1) the pledge is
and service charge or other financial obligation of the constituted to secure the fulfillment of a principal obligation;
LESSEE under this Contract; x x x (2) the pledgor is the absolute owner of the thing pledged;
20.2 Without prejudice to any of the rights of the LESSOR (3) the persons constituting the pledge have the free disposal
under this Contract, in case of default of the LESSEE, the of their property or have legal authorization for the purpose;
lessor shall have the right to: and (4) the thing pledged is placed in the possession of the
creditor, or of a third person by common agreement. Article
(i) Terminate this Contract immediately upon written notice 2088 of the Civil Code prohibits the creditor from
to the LESSEE, without need of any judicial action or appropriating or disposing the things pledged, and any
declaration; contrary stipulation is void.
Section 22, on the other hand, reads: Section 22, as worded, gives FBDC a means to collect
payment from Tirreno in case of termination of the lease
“Section 22. Lien on the Properties of the Lessee
contract or the expiration of the lease period and there are
unpaid rentals, charges, or damages. The existence of a
contract of pledge, however, does not arise just because action for consolidation of ownership is an inappropriate
FBDC has means of collecting past due rent from Tirreno remedy on the part of the mortgagee in equity. The only
other than direct payment. The trial court concluded that proper remedy is to cause the foreclosure of the mortgage in
Section 22 constitutes a pledge because of the presence of equity. And if the mortgagee in equity desires to obtain title
the first three requisites of a pledge: Tirreno’s properties in to the mortgaged property, the mortgagee in equity may buy
the leased premises secure Tirreno’s lease payments; Tirreno it at the foreclosure sale.
is the absolute owner of the said properties; and the persons
representing Tirreno have legal authority to constitute the The private respondents do not appear to have caused the
pledge. However, the fourth requisite, that the thing pledged foreclosure of the mortgage much less have they purchased
is placed in the possession of the creditor, is absent. There is the property at a foreclosure sale. Petitioner, therefore,
non-compliance with the fourth requisite even if Tirreno’s retains ownership of the subject property. The right of
personal properties are found in FBDC’s real property. ownership necessarily includes the right to possess,
Tirreno’s personal properties are in FBDC’s real property particularly where, as in this case, there appears to have been
because of the Contract of Lease, which gives Tirreno no availment of the remedy of foreclosure of the mortgage
possession of the personal properties. Since Section 22 is not on the ground of default or non-payment of the obligation in
a contract of pledge, there is no pactum commissorium. question.
The essence of pacto commissorio, which is prohibited by Petitioner asserts that it is expressly provided under Section
Article 2088 of the Civil Code, is that ownership of the 20 of Republic Act (R.A.) No. 4726 that it has the right to
security will pass to the creditor by the mere default of the cause the extrajudicial foreclosure of its annotated lien on the
debtor condominium unit.
. . . The only right of a mortgagee in case of non-payment of Respondent impugns petitioner’s right to file the petition for
a debt secured by mortgage would be to foreclose the extrajudicial foreclosure, pointing out that the latter does not
mortgage and have the encumbered property sold to satisfy hold a real estate mortgage on the condominium unit or a
the outstanding indebtedness. The mortgagor’s default does special power of attorney to cause the extra-judicial
not operate to vest in the mortgagee the ownership of the foreclosure sale of said unit.
encumbered property, for any such effect is against public In the present case, the only basis of petitioner for causing
policy, as enunciated by the Civil Code . . . the extrajudicial foreclosure of the condominium unit of
Applying the principle of pactum commissorium specifically respondent is a notice of assessment annotated on CCT No.
to equitable mortgages, in Montevirgen v. CA, the Court 1972 in accordance with Section 20 of R.A. No. 4726.
enunciated that the consolidation of ownership in the person However, neither annotation nor law vests it with sufficient
of the mortgagee in equity, merely upon failure of the authority to foreclose on the property.
mortgagor in equity to pay the obligation, would amount to a
pactum commissorium. The Court further articulated that an
The notice of assessment contains no provision for the Meanwhile, acting on ERHC’s application for the issuance
extrajudicial foreclosure of the condominium unit. All that it of a writ of preliminary injunction, the trial court granted the
states is that the assessment of petitioner against respondent writ on 20 August 1990. Accordingly, the trial court enjoined
for unpaid association dues constitutes a “first lien against DBP from enforcing the legal effects of the foreclosure of
[the] condominium unit.” both the chattel and real estate mortgages.
There being no evidence of such special authority, petitioner ISSUE: Whether DBP complied with the posting and
failed to establish a clear right to a writ of mandamus to publication requirements under applicable laws for a valid
compel the RTC to act on its petition for extrajudicial foreclosure.
foreclosure.
RULING:
Development Bank of the Philippines vs CA, EMERALD
As to non-execution of the certificate of posting of the
RESORT HOTEL CORPORATION
auction sale
FACTS: Private respondent Emerald Resort Hotel
This Court ruled in Cristobal v. Court of Appeals13 that a
Corporation (“ERHC”) obtained a loan from petitioner
certificate of posting is not required, much less considered
Development Bank of the Philippines (“DBP”). DBP
indispensable for the validity of an extrajudicial foreclosure
released the loan of P3,500,000.00 in three installments:
sale of real property under Act No. 3135. What the law
P2,000,000.00 on 27 September 1975, P1,000,000.00 on 14
requires is the posting of the notice of sale, which is present
June 1976 and P500,000.00 on 14 September 1976. To
in this case, and not the execution of the certificate of
secure the loan, ERHC mortgaged its personal and real
posting.
properties to DBP.
As to publication of the notice of sale of the real
On 5 June 1986, alleging that ERHC failed to pay its loan,
properties in compliance with Act No. 3135.
DBP filed with the Office of the Sheriff, Regional Trial
Court of Iriga City, an Application for Extrajudicial DBP contends that the agreement to postpone dispensed with
Foreclosure of Real Estate and Chattel Mortgages. the need to publish again the notice of auction sale. Thus,
DBP did not anymore publish the notice of the 11 September
Deputy Provincial Sheriffs Abel Ramos and Ruperto Galeon
1986 auction sale. DBP insists that the law does not require
issued the required notices of public auction sale of the
republication of the notice of a rescheduled auction sale.
personal and real properties. However, Sheriffs Ramos and
Galeon failed to execute the corresponding certificates of The Court held recently in Ouano v. Court of Appeals that
posting of the notices. On 10 July 1986, the auction sale of republication in the manner prescribed by Act No. 3135 is
the personal properties proceeded. necessary for the validity of a postponed extrajudicial
foreclosure sale.
The Office of the Sheriff scheduled on 12 August 1986 the
public auction sale of the real properties. The Bicol Tribune Another publication is required in case the auction sale is
published on 18 July 1986, 25 July 1986 and 1 August 1986 rescheduled, and the absence of such republication
the notice of auction sale of the real properties. However, the invalidates the foreclosure sale.
Office of the Sheriff postponed the auction sale on 12
August 1986 to 11 September 1986 at the request of ERHC. DBP also maintains that ERHC’s act of requesting
DBP did not republish the notice of the rescheduled auction postponement of the 12 August 1986 auction sale estops
sale because DBP and ERHC signed an agreement to ERHC from challenging the absence of publication of the
postpone the 12 August 1986 auction sale. notice of the rescheduled auction sale.
On 22 December 1986, ERHC filed with the Regional Trial ERHC indeed requested postponement of the auction sale
Court of Iriga City a complaint for annulment of the scheduled on 12 August 1986.24 However, the records are
foreclosure sale of the personal and real properties. bereft of any evidence that ERHC requested the
Subsequently, ERHC filed a Supplemental Complaint. postponement without need of republication of the notice of
ERHC alleged that the foreclosure was void mainly because sale.
(1) DBP failed to comply with the procedural requirements
The form of the notice of extrajudicial sale is now prescribed
prescribed by law; and (2) the foreclosure was premature.
in Circular No. 7-200226 issued by the Office of the Court
ERHC maintained that the loan was not yet due and
Administrator
demandable because the DBP had restructured the loan.
“In the event the public auction should not take place on the
said date, it shall be held on _______ , ______ without
further notice.”