Professional Documents
Culture Documents
Credit Transactions Mortgage
Credit Transactions Mortgage
On November 4, 1976, SOLID executed several 3. Ordering respondent, Solid Homes, Inc. to pay
real estate mortgage contracts in favor of State to this Board the amount of Six Thousand Pesos
Investment Homes, (sic) Inc. (STATE) over its (P6,000.00) as administrative fine in accordance
subdivided parcels of land, one of which is the with Section 25 in relation to Section 38 of P.D.
subject lot covered by Transfer Certificate of Title 957.
No. 209642.
Both the STATE and SOLID appealed to the Board
For Failure of SOLID to comply with its mortgage of Commissioners, HLRB, which affirmed on June
obligations contract, STATE extrajudicially 5, 1990 the OAALA's decision (Annex "C" of the
foreclosed the mortgaged properties including Petition; ibid, p. 34). Again, both STATE and
the subject lot on April 6, 1983, with the SOLID appealed the decision of the Board of
corresponding certificate of sale issued therefor Commissioners, HLRB, to the Office of the
to STATE annotated at the back of the titles President which dismissed the twin appeals on
covering the said properties on October 13, 1983. February 26, 1993.
On June 23, 1984; SOLID thru a Memorandum of Petitioner filed with the Supreme Court this
Agreement negotiated for the deferment of petition for review of decision of the Office of the
consolidation of ownership over the foreclosed President where it was docketed as G.R. No.
properties by committing to redeem the 109364. However, in a resolution dated May 13,
properties from STATE. 1993, the Supreme Court referred this case to
this Court for proper disposition. On the other
On August 15, 1988, the spouses filed a hand, SOLID does not appear to have joined
complaint before the Housing and Land Use herein petitioner in this petition for review. 2
Regulatory Board, HLRB, against the developer
SOLID and STATE for failure on the part of SOLID In a decision dated May 19, 1994, respondent court
"to execute sustained the judgment of the Office of the President.
the necessary absolute deed of sale as well as to Hence, this petition substantially anchored on these
deliver title to said property . . . in violation of the two alleged errors, namely: (1) error in ruling that
private respondent spouses Oreta's unregistered rights respondent State Investment House Inc., [now
over the subject property are superior to the registered petitioner] had been aware of the lot's location and
mortgage rights of petitioner State Investment House, that the said lot formed part of Capital Park/Homes
Inc. (STATE); and (2) error in not applying the settled Subdivision." 8 In Sunshine Finance and Investment
rule that persons dealing with property covered by Corp. v. Intermediate Appellate Court, 9 the Court
torrens certificate of title are not required to go beyond noting petitioner therein to be a financing corporation,
what appears on the face of the title. deviated from the general rule that a purchaser or
mortgagee of a land is not required to look further that
At the outset, we note that herein petitioner argues what appears on the face of the Torrens Title. Thus:
more extensively on the second assigned issue, than
on the first. In fact, petitioner admits the superior Nevertheless, we have to deviate from the general
rights of respondents-spouses Oreta over the subject rule because of the failure of the petitioner in this
property as it did not pray for the nullification of the case to take the necessary precautions to ascertain
contract between respondents-spouses and SOLID, but if there was any flaw in the title of the mortgage.
instead asked for the payment of the release value of The petitioner is an investment and financing
the property in question, plus interest, attorney's fees corporation. We presume it is experienced in its
and costs of suit against SOLID or, in case of the business. Ascertainment of the status and condition
of properties offerred to it as security for the loans it
latter's inability to pay, against respondents-spouses
extends must be a standard and indispensable part
before it can be required to release the title of the
of its operations. Surely, it cannot simply rely on an
subject property in favor of the respondent
examination of a Torrens certificate to determine
spouses. 3 And even if we were to pass upon the first
what the subject property looks like as its condition
assigned error, we find respondent court's ruling on the is not apparent in the document. The land might be
matter to be well-founded. STATE's registered in a depressed area. There might be squatters on it.
mortgage right over the property is inferior to that of It might be easily inundated. It might be an interior
respondents-spouses' unregistered right. The lot, without convenient access. These and other
unrecorded sale between respondents-spouses and similar factors determine the value of the property
SOLID is preferred for the reason that if the original and so should be of practical concern to the
owner (SOLID, in this case) had parted with his petitioner.
ownership of the thing sold then he no longer had
ownership and free disposal of that thing so as to be xxx xxx xxx
able to mortgage it again. 4Registration of the
mortgage is of no moment since it is understood to be Our conclusion might have been different if the
without prejudice to the better right of third parties.5 mortgagee were an ordinary individual or company
without the expertise of the petitioner in the
Anent the second issue, petitioner asserts that a mortgage and sale of registered land or if the land
purchaser or mortgagee of land/s covered under the mortgaged were some distance from the mortgagee
Torrens System "is not required to do more than rely and could not be conveniently inspected. But there
upon the certificate of title [for] it is enough that the were no such impediments in this case. The facilities
(purchaser or mortgagee] examines the pertinent of the petitioner were not so limited as to prevent it
from making a more careful examination of the land
certificate of title [without] need [of] look[ing] beyond
to assure itself that there were no unauthorized
such title." 6
persons in possession. 10
ACCORDINGLY, finding no reversible error in the On June 29, 1998 the RTC rendered a decision granting
assailed judgment, the same is hereby AFFIRMED. respondent Corpuzs prayers. This prompted petitioner
PNB to appeal to the Court of Appeals (CA). On July 31,
2007 the CA affirmed the decision of the RTC and
SO ORDERED.
denied the motion for its reconsideration, prompting
PNB to take recourse to this Court.
G.R. No. 180945 February 12, 2010 The Issue Presented
PHILIPPINE NATIONAL BANK, AS THE ATTORNEY-
IN-FACT OF OPAL PORTFOLIO INVESTMENTS (SPV- The sole issue presented in this case is whether
AMC), INC., Petitioner, - versus - or not petitioner PNB is a mortgagee in good faith,
MERCEDES CORPUZ, REPRESENTED BY HER entitling it to its lien on the title to the property in
ATTORNEY-IN-FACT VALENTINA CORPUZ, dispute.
Respondent.
The Ruling of the Court
This case is about the need for a mortgagee-bank,
faced with suspicious layers of transfers involving a Petitioner PNB points out that, since it did a credit
property presented for mortgage, to exercise proper investigation, inspected the property, and verified the
diligence in ascertaining the bona fide status of those clean status of the title before giving out the loan to
transfers. the Songcuans, it should be regarded as a mortgagee
in good faith. PNB claims that the precautions it took
The Facts and the Case constitute sufficient compliance with the due diligence
On October 4, 1974 respondent Mercedes Corpuz required of banks when dealing with registered lands.
delivered her owners duplicate copy of Transfer As a rule, the Court would not expect a mortgagee to
Certificate of Title (TCT) 32815 to Dagupan City Rural conduct an exhaustive investigation of the history of
Bank as security against any liability she might incur as the mortgagors title before he extends a loan.[1] But
its cashier. She later left her job and went to the United petitioner PNB is not an ordinary mortgagee; it is
States. a bank.[2] Banks are expected to be more cautious than
ordinary individuals in dealing with lands, even
On October 24, 1994 the rural bank where she worked registered ones, since the business of banks is imbued
cancelled its lien on Corpuzs title, she having incurred with public interest.[3] It is of judicial notice that the
no liability to her employer. Without Corpuzs standard practice for banks before approving a loan is
knowledge and consent, however, Natividad Alano, the to send a staff to the property offered as collateral and
rural banks manager, turned over Corpuzs title to Julita verify the genuineness of the title to determine the real
Camacho and Amparo Callejo. owner or owners.[4]
Conniving with someone from the assessors office, One of the CAs findings in this case is that in
Alano, Camacho, and Callejo prepared a falsified deed the course of its verification, petitioner PNB was
of sale, making it appear that on February 23, 1995 informed of the previous TCTs covering the subject
Corpuz sold her land to one Mary Bondoc property.[5] And the PNB has not categorically contested
for P50,000.00. They caused the registration of the this finding. It is evident from the faces of those titles
deed of sale, resulting in the cancellation of TCT 32815 that the ownership of the land changed from Corpuz to
and the issuance of TCT 63262 in Bondocs name. About Bondoc, from Bondoc to the Palaganases, and from the
a month later or on March 27, 1995 the trio executed Palaganases to the Songcuans in less than three
another fictitious deed of sale with Mary Bondoc selling months and mortgaged to PNB within four months of
the property to the spouses Rufo and Teresa Palaganas the last transfer.
for only P15,000.00. This sale resulted in the issuance
of TCT 63466 in favor of the Palaganases. The above information in turn should have
driven the PNB to look at the deeds of sale involved. It
Nine days later or on April 5, 1995 the Palaganases would have then discovered that the property was sold
executed a deed of sale in favor of spouses Virgilio and for ridiculously low prices: Corpuz supposedly sold it to
Elena Songcuan for P50,000.00, resulting in the Bondoc for justP50,000.00; Bondoc to the Palaganases
issuance of TCT 63528. Finally, four months later or on for just P15,000.00; and the Palaganases to the
August 10, 1995 the Songcuans took out a loan of P1.1 Songcuans also for justP50,000.00. Yet the PNB gave
million from petitioner Philippine National Bank (PNB) the property an appraised value
and, to secure payment, they executed a real estate of P781,760.00. Anyone who deliberately ignores a
mortgage on their title. Before granting the loan, the significant fact that would create suspicion in an
PNB had the title verified and the property inspected.
otherwise reasonable person cannot be considered as payable within one week, and the balance of
an innocent mortgagee for value.[6] P350,000.00 to serve as his (Osmundo's) investment in
the business. Thus, Osmundo Canlas delivered to
The Court finds no reason to reverse the CA decision.
Vicente Mañosca the transfer certificates of title of the
WHEREFORE, the Court DENIES the petition
and AFFIRMS the decision of the Court of Appeals parcels of land involved. Vicente Mañosca, as his part
dated July 31, 2007 and its resolution dated December of the transaction, issued two postdated checks in
17, 2007 in CA-G.R. CV 60616. SO ORDERED. favor of Osmundo Canlas in the amounts of P40,000.00
and P460,000.00, respectively, but it turned out that
G.R. No. 112160 February 28, 2000 the check covering the bigger amount was not
sufficiently funded.4
OSMUNDO S. CANLAS and ANGELINA
CANLAS, petitioner, vs. On September 3, 1982, Vicente Mañosca was able to
COURT OF APPEALS, ASIAN SAVINGS BANK, mortgage the same parcels of land for P100,000.00 to
MAXIMO C. CONTRARES and VICENTE a certain Attorney Manuel Magno, with the help of
MAÑOSCA,respondents. impostors who misrepresented themselves as the
spouses, Osmundo Canlas and Angelina Canlas.5
PURISIMA, J.:
On September 29, 1982, private respondent Vicente
At bar is a Petition for Review on Certiorari under Rule Mañosca was granted a loan by the respondent Asian
45 of the Rules of Court, seeking to review and set Savings Bank (ASB) in the amount of P500,000.00, with
aside the Decision1 of the Court of Appeals in CA-G.R. the use of subject parcels of land as security, and with
CV No. 25242, which reversed the Decision2 of Branch the involvement of the same impostors who again
59 of the Regional Trial Court of Makati City in Civil introduced themselves as the Canlas spouses.6 When
Case No. M-028; the dispositive portion of which reads: the loan it extended was not paid, respondent bank
extrajudicially foreclosed the mortgage.
WHEREFORE, the decision appealed from is
hereby REVERSED and SET ASIDE and a new On January 15, 1983, Osmundo Canlas wrote a letter
one is hereby entered DISMISSING the informing the respondent bank that the execution of
complaint of the spouses Osmundo and subject mortgage over the two parcels of land in
Angelina Canlas. On the counterclaim of question was without their (Canlas spouses) authority,
defendant Asian Savings Bank, the plaintiffs and request that steps be taken to annul and/or revoke
Canlas spouses are hereby ordered to pay the the questioned mortgage. On January 18, 1983,
defendant Asian Savings Bank the amount of petitioner Osmundo Canlas also wrote the office of
P50,000.00 as moral and exemplary damages, Sheriff Maximo O. Contreras, asking that the auction
plus P15,000.00 as and for attorney's fees. sale scheduled on February 3, 1983 be cancelled or
held in abeyance. But respondents Maximo C.
With costs against appellees. Contreras and Asian Savings Bank refused to heed
petitioner Canlas' stance and proceeded with the
SO ORDERED.3 scheduled auction sale.7
ATTY. CARLOS:
Assuming that Osmundo Canlas was negligent in giving
Vicente Mañosca the opportunity to perpetrate the
You mean to say the criteria of ascertaining the identity of the
fraud, by entrusting to latter the owner's copy of the
mortgagor does not depend so much on the signature on the
residence certificate they have presented. transfer certificates of title of subject parcels of land, it
cannot be denied that the bank had the last clear
A: We have to accept that. chance to prevent the fraud, by the simple expedient of
faithfully complying with the requirements for banks to
xxx xxx xxx ascertain the identity of the persons transacting with
them.
A: We accepted the signature on the basis of the
mortgage in favor of ATTY. MAGNO duly notarized which I have For not observing the degree of diligence required of
been reiterrting (sic) entitled to full faith considering that it is banking institutions, whose business is impressed with
a public instrument.
public interest, respondent Asian Savings Bank has to
bear the loss sued upon.
ATTY. CARLOS:
Finally after the loan was finally approved, ANSWER: The main topic war then, about his
Osmundo accompanied Mañosca to the bank business although, Mr. Leonardo Rey, who actually
turned out as Mr. Canlas, supplier of Mr. Mañosca.
when the loan was released. At that time, a
manger's check for P200,000.00 was issued in
QUESTION: I see . . . other than the business of Mr.
the name of Oscar Motorworks, which Osmundo
Mañosca, were there any other topic discussed?
admits he owns and operates.
ANSWER: YES.
Collectively, the foregoing circumstances
cannot but conjure to a single conclusion that QUESTION: And what was the topic:
Osmundo active participated in the loan
application of defendant Asian Savings Bank, ANSWER: General Economy then.
which culminated in his receiving a portion of
the process thereof:18 xxx xxx x x x22
A meticulous and painstaking scrutiny of the Records Verily, Osmundo Canlas was left unaware of the illicit
on hand, reveals, however, that the findings arrived at plan of Mañosca, explaining thus why he (Osmundo)
by the Court of Appeals are barren of any sustainable did not bother to correct what Mañosca misrepresented
basis. For instance, the execution of the deeds of and to assert ownership over the two parcels of land in
mortgages constituted by Mañosca on subject pieces of question.
property of petitioners were made possible not by the
Special Power of Attorney executed by Osmundo Not only that; while it is true that Osmundo Canlas was
Canlas in favor of Mañosca but through the use of with Vicente Mañosca when the latter submitted the
impostors who misrepresented themselves as the documents needed for his loan application, and when
spouses Angelina Canlas and Osmundo Canlas. It the check of P200,000.00 was released, the former did
cannot be said therefore, that the petitioners not know that the collateral used by Mañosca for the
authorized Vicente Mañosca to constitute the mortgage said loan were their (Canlas spouses') properties.
on their parcels of land. Osmundo happened to be with Mañosca at the time
because he wanted to make sure that Mañosca would
What is more, Osmundo Canlas was introduced as make good his promise to pay the balance of the
"Leonardo Rey" by Vicente Mañosca, only on the purchase price of the said lots out of the proceeds of
occasion of the luncheon meeting at the Metropolitan the loan.23
Club.19 Thereat, the failure of Osmundo Canlas to
rectify Mañosca's misrepresentations could not be The receipt by Osmundo Canlas of the P200,000.00
taken as a fraudulent act. As well explained by the check from ASB could not estop him from assailing the
former, he just did not want to embarrass Mañosca, so validity of the mortgage because the said amount was
that he waited for the end of the meeting to correct in payment of the parcels of land he sold to Mañosca.24
Mañosca.20
What is decisively clear on record is that Mañosca petition on the ground that he is owner of a part of the
managed to keep Osmundo Canlas uninformed of his property in question; that the granting of the motion
(Mañosca's) intention to use the parcels of land of the would operate to his prejudice, as he has not
Canlas spouses as security for the loan obtained from participated in the mortgage cited in the motion; that
Asian Savings Bank. Since Vicente Mañosca showed Rafaela Yulo is dead; that the motion is not verified and
Osmundo Canlas several certificates of title of lots movant's rights have lapsed by prescription. Finally it is
which, according to Mañosca were the collaterals, argued that his opposition raises a controversial matter
Osmundo Canlas was confident that their (Canlases') which the court has no jurisdiction to pass upon.
parcels of land were not involved in the loan Margarita, Maria, Elena and Pilar, all surnamed Yulo,
transactions with the Asian Savings Bank.25 Under the joined the oppositor Estanislao Yusay, raising the same
attendant facts and circumstances, Osmundo Canlas objections interposed by Yusay.
was undoubtedly negligent, which negligence made
them (petitioners) undeserving of an award of The existence of the mortgage is not disputed, and
attorney's fees. neither is the fact that the mortgagor Rafaela Yulo is
part owner of Lot No. 855 of the Cadastral Survey of
Settled is the rule that a contract of mortgage must be Pontevedra. The oppositors do not dispute that she is
constituted only by the absolute owner on the property such a part owner, and their main objection to the
mortgaged;26 a mortgage, constituted by an impostor is petition is that as part owners of the property, the
void.27 Considering that it was established indubitably annotation of the mortgage on the common title will
that the contract of mortgage sued upon was entered affect their rights.
into and signed by impostors who misrepresented
themselves as the spouses Osmundo Canlas and The court held that even if the ownership of the
Angelina Canlas, the Court is of the ineluctible deceased Rafaela Yulo over the portion of the lot in
conclusion and finding that subject contract of question and the validity of the mortgage are disputed,
mortgage is a complete nullity. such invalidity of the mortgage is no proof of the non-
existence of the mortgage nor a ground for objecting to
WHEREFORE, the Petition is GRANTED and the Decision its registration, citing the case of Register of Deeds of
of the Court of Appeals, dated September 30, 1993, in Manila vs. Maxima Tinoco Vda. de Cruz, et, al., 95 Phil.,
CA-G.R. CV No. 25242 SET ASIDE. The Decision of 818; 53 Off. Gaz., 2804.
Branch 59 of the Regional Trial Court of Makati City in
Civil Case No. M-028 is hereby REINSTATED. No In his Brief before this Court, counsel for appellants
pronouncement as to costs. SO ORDERED. argue that the mortgage sought to be registered was
not recorded before the closing of the intestate
G.R. No. L-13313 April 28, 1960 proceedings of the deceased mortgagor, but was so
recorded only four months after the termination of said
AGRICULTURAL CREDIT COOPERATIVE proceedings, so that the claim of movant has been
ASSOCIATION OF HINIGARAN, movant-appellee, vs. reduced to the character of a mere money claim, not a
ESTANISLAO YULO YUSAY, ET AL., oppositors- mortgage, hence the mortgage may not be registered.
appellants. In the first place, as the judge below correctly ruled,
the proceeding to register the mortgage does not
LABRADOR, J.: purport to determine the supposed invalidity of the
mortgage or its effect. Registration is a mere
This is an appeal from an order of the Court of First ministerial act by which a deed, contract or instrument
Instance of Negros Occidental, Hon. Jose S. de la Cruz, is sought to be inscribed in the records of the Office of
presiding the Register of Deeds of Negros Occidental to the Register of Deeds and annotated at the back of the
register a mortgage executed by Rafael Yulo in favor of certificate of title covering the land subject of the deed,
the movant covering Lot No. 855, Pontevedra Cadastre, contract or instrument.
covered by Original Certificate of Title No. 4979.
The registration of a lease or mortgage, or the
The records disclose that on July 20, 1952, Rafaela Yulo entry of a memorial of a lease or mortgage on
executed in favor of the movant a mortgage for the register, is not a declaration by the state
P33,626.29, due from her, her mother, sisters, that such an instrument is a valid and
brothers, and others, which amount she assumed to subsisting interest in land; it is merely a
pay to the movant. A motion was presented to the declaration that the record of the title appears
court by the movant demanding the surrender of the to be burdened with the lease or mortgage
owner's duplicate certificate of title that he may described, according to the priority set forth in
annotate said mortgage at the back of the certificate. the certificate.
Estanislao Yusay, a part owner of the lot, opposed the
The mere fact that a lease or mortgage was PHILIPPINE NATIONAL BANK - LAOAG BRANCH,
registered does not stop any party to it from Respondent.
setting up that it now has no force or effect. CARPIO, J.:
(Niblack, pp. 134-135, quoted in Francisco Land
The Case
Registration Act, l950 ed., p. 348.) G.R. No. 170166 is a petition for review 1 assailing the
Decision2 promulgated on 17 October 2005 by the
The court below, in ordering the registration and Court of Appeals (appellate court) in CA-G.R. CV No.
annotation of the mortgage, did not pass on its 76845. The appellate court granted the appeal filed by
invalidity or effect. As the mortgage is admittedly an the Philippine National Bank Laoag Branch (PNB). The
appellate court reversed the 29 June 2001 Decision of
act of the registered owner, all that the judge below did
Branch 15 of the Regional Trial Court of Laoag City (trial
and could do, as a registration court, is to order its court) in Civil Case No. 7803.
registration and annotation on the certificate of title The trial court declared the Deed of Real Estate
covering the land mortgaged. By said order the court Mortgage executed by spouses Jose A. Ros 3 (Ros)
did not pass upon the effect or validity of the mortgage and Estrella Aguete(Aguete) (collectively, petitioners),
— these can only be determined in an ordinary case as well as the subsequent foreclosure proceedings,
before the courts, not before a court acting merely as a void. Aside from payment of attorneys fees, the trial
court also ordered PNB to vacate the subject property
registration court, which did not have the jurisdiction to
to give way to petitioners possession.
pass upon the alleged effect or validity.
The Facts
Wherefore, the order appealed from is hereby affirmed, The appellate court narrated the facts as follows:
with costs against oppositors-appellants. So ordered. On January 13, 1983, spouses Jose
A. Ros and Estrella Aguete filed a complaint for the
annulment of the Real Estate Mortgage and all legal
proceedings taken thereunder against
PNB, Laoag Branch before the Court of First
Instance, IlocosNorte docketed as Civil Case No. 7803.
2. ORDERING the Register of Deeds of the City rendered its Decision13 and granted PNBs appeal. The
of Laoag to cancel TCT No. T-15276 in the name of appellate court reversed the trial courts decision, and
defendant PNB and revert the same in the name of
plaintiffs spouses Joe Ros and Estrella Aguete; dismissed petitioners complaint.
3. ORDERING defendant to vacate and turnover
the possession of the premises of the property in suit to
The appellate court stated that the trial court
the plaintiffs; and
concluded forgery without adequate proof; thus it was
4. ORDERING defendant to pay plaintiffs improper for the trial court to rely solely
attorneys fee and litigation expenses in the sum of TEN
on Aguetes testimony that her signatures on the loan
THOUSAND (P10,000.00) PESOS.
documents were forged. The appellate court declared
No pronouncement as to costs. SO ORDERED.6 that Aguete affixed her signatures on the documents
knowingly and with her full consent.
purpose, in the cases where she may legally bind the
Assuming arguendo that Aguete did not give partnership;
her consent to Ros loan, the appellate court ruled that (2) Arrears or income due, during the marriage,
from obligations which constitute a charge upon
the conjugal partnership is still liable because the loan
property of either spouse or of the partnership;
proceeds redounded to the benefit of the family. The (3) Minor repairs or for mere preservation made
records of the case reveal that the loan was used for during the marriage upon the separate property of
either the husband or the wife; major repairs shall not
the expansion of the familys business. Therefore, the be charged to the partnership;
debt obtained is chargeable against the conjugal (4) Major or minor repairs upon the conjugal
partnership property;
partnership.
(5) The maintenance of the family and the
education of the children of both husband and wife,
Petitioners filed the present petition for review and of legitimate children of one of the spouses;
before this Court on 9 December 2005. (6) Expenses to permit the spouses to complete
a professional, vocational or other course.
Art. 166. Unless the wife has been declared a non
The Issues compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the
husband cannot alienate or encumber any real
Petitioners assigned the following errors: property of the conjugal partnership without the wifes
I. The Honorable Court of Appeals erred in not giving consent. If she refuses unreasonably to give her
weight to the findings and conclusions of the trial court, consent, the court may compel her to grant the same.
and in reversing and setting aside such findings and
conclusions without stating specific contrary evidence; Art. 173. The wife may, during the marriage, and within
ten years from the transaction questioned, ask the
II. The Honorable Court of Appeals erred in declaring courts for the annulment of any contract of the
the real estate mortgage valid; husband entered into without her consent, when such
III. The Honorable Court of Appeals erred in declaring, consent is required, or any act or contract of the
without basis, that the loan contracted by husband Joe husband which tends to defraud her or impair her
A. Ros with respondent Philippine National interest in the conjugal partnership property. Should
Bank Laoag redounded to the benefit of his family, the wife fail to exercise this right, she or her heirs after
aside from the fact that such had not been raised by the dissolution of the marriage may demand the value
respondent in its appeal.14 of the property fraudulently alienated by the husband.
Ros himself cannot bring action against PNB, for no one partnership.
can come before the courts with unclean hands. In WHEREFORE, we DENY the petition. The Decision of
their memorandum before the trial court, petitioners the Court of Appeals in CA-G.R. CV No. 76845
themselves admitted promulgated on 17 October 2005 is AFFIRMED. Costs
that Ros forged Aguetes signatures. against petitioners.
Joe A. Ros in legal effect admitted in the complaint that
the signatures of his wife in the questioned documents
are forged, incriminating himself to criminal SO ORDERED.
prosecution. If he were alive today, he would be
prosecuted for forgery. This strengthens the testimony
G.R. No. 152071 May 8, 2009
PRODUCERS BANK OF THE PHILIPPINES,
Petitioner, line in the amount of P300,000.00, of which
- versus- EXCELSA INDUSTRIES, INC.,
Respondent. about P96,000.00 in principal remained outstanding.
TINGA, J.: [7]
Respondent executed the corresponding promissory
This is a petition for review on certiorari [1] under Rule
notes evidencing the indebtedness.[8]
43 of the 1997 Rules of Civil Procedure, assailing the
decision[2] and resolution[3] of the Court of Appeals in Prior to the application for the packing credit
CA-G.R. CV No. 59931. The Court of Appeals line, respondent had obtained a loan from petitioner in
decision[4]reversed the decision of the Regional Trial the form of a bill discounted and secured credit
Court (RTC), Branch 73, Antipolo, Rizal, upholding the accommodation in the amount of P200,000.00, of
extrajudicial foreclosure of the mortgage on which P110,000.00 was outstanding at the time of the
respondents properties, while the resolution denied approval of the packing credit line. The loan was
petitioners motion for reconsideration.[5] secured by a real estate mortgage dated 05 December
line or a credit export advance with petitioner For and in consideration of those
certain loans, overdraft and/or other
Producers Bank of the Philippines, a banking institution credit accommodations on this date
obtained from the MORTGAGEE, and to
duly organized and existing under Philippines laws.[6] secure the payment of the same, the
principal of all of which is hereby fixed
at FIVE HUNDRED THOUSAND PESOS
ONLY (P500,000.00) Pesos, Philippine
The application was supported by Letter of Currency, as well as those that the
MORTGAGEE may hereafter extend to
Credit No. M3411610NS2970 dated 14 October 1986. the MORTGAGOR, including interest and
expenses or any other obligation owing
Kwang Ju Bank, Ltd. of Seoul, Korea issued the letter of to the MORTGAGEE, the MORTGAGOR
does hereby transfer and convey by way
credit through its correspondent bank, the Bank of the of mortgage unto the MORTGAGEE, its
successors or assigns, the parcel(s) of
Philippine Islands, in the amount of US$23,000.00 for
land which is/are described in the list
the account of Shin Sung Commercial Co., Ltd., also inserted on the back of this document,
and/or appended hereto, together with
located in Seoul, Korea. T.L. World Development all the buildings and improvements now
existing or which may hereafter be
Corporation was the original beneficiary of the letter of erected or constructed thereon, of which
the MORTGAGOR declares that he/it is
credit. On 05 December 1986, for value received, T.L. the absolute owner, free from all liens
and encumbrances.[10]
World transferred to respondent all its rights and
consideration for its drawings in the amounts including interest, in six different accounts, namely:
Petitioner demanded from respondent the damages against petitioner and the Register of Deeds
payment of the peso equivalent of the export of Marikina. Docketed as Civil Case No. 1587-A, the
documents, plus interest and other charges, and also of complaint was raffled to Branch 73 of the RTC of
the other due and unpaid loans. Due to respondents Antipolo, Rizal. The complaint prayed, among others,
failure to heed the demand, petitioner moved for the that the defendants be enjoined from causing the
extrajudicial foreclosure on the real estate mortgage transfer of ownership over the foreclosed properties
Per petitioners computation, aside from charges On 05 April 1990, petitioner filed a petition for
for attorneys fees and sheriffs fees, respondent had a the issuance of a writ of possession, docketed as LR
Case No. 90-787, before the same branch of the RTC of respondent could not expect their return prior to the
Antipolo, Rizal. The RTC ordered the consolidation of payment of the export advances because the drafts
Civil Case No, 1587-A and LR Case No. 90-787.[19] and export documents were the evidence that
foreclosure and ordering the issuance of a writ of The RTC also found that by its admission,
possession in favor of petitioner, to wit: respondent had other loan obligations obtained from
respondent, cannot be considered as respondents On 30 May 2001, the Court of Appeals rendered
agent. The RTC also held that petitioner cannot be the assailed decision, reversing the RTCs decision, thus:
Furthermore, the RTC concluded that petitioner (a) Moral damages in the
amount of P100,000.00;
had no obligation to return the export documents and
(b) Exemplary damages in the
amount of P100,000.00; and the following: first, petitioner had a hand in preparing
The Court of Appeals held that respondent be returned if no explanation regarding the
should not be faulted for the dishonor of the drafts and discrepancies would be made.
export proceeds from Kwang Ju Bank, Ltd. devolved The Court of Appeals invalidated the
upon petitioner. It cited the testimony of petitioners extrajudicial foreclosure of the real estate mortgage on
manager for the foreign currency department to the the ground that the posting and publication of the
effect that petitioner was respondents agent, being the notice of extrajudicial foreclosure proceedings did not
only entity authorized under Central Bank Circular No. comply with the personal notice requirement under
491 to collect directly from the importer the export paragraph 12[27] of the real estate mortgage executed
proceeds on respondents behalf and converting the between petitioner and respondent. The Court of
same to Philippine currency for remittance to Appeals also overturned the RTCs finding that
respondent. The appellate court found that respondent respondent was guilty of estoppel by laches in
was not authorized and even powerless to collect from questioning the extrajudicial foreclosure sale.
at the mercy of petitioner, which kept the export Petitioners motion for reconsideration[28] was
documents during the time that respondent attempted denied in a Resolution dated 29 January 2002. Hence,
to collect payment from the Korean importer. the instant petition, arguing that the Court of Appeals
The Court of Appeals disregarded the RTCs was liable for the discrepancies in the export
finding that the export documents were the only documents, in invalidating the foreclosure sale and in
evidence of respondents export advances and that declaring that respondent was not estopped from
petitioner was justified in refusing to return them. It questioning the foreclosure sale.[29]
opined that granting petitioner had no obligation to The validity of the extrajudicial foreclosure of
return the export documents, the former should have the mortgage is dependent on the following issues
helped respondent in the collection efforts instead of posed by petitioner: (1) the coverage of the blanket
Furthermore, the Court of Appeals found (3) petitioners obligation as negotiating bank under the
review the factual issues as an exception to the general In Velasquez v. Solidbank Corporation,[32] where
Much of the discussion has revolved around of its sight drafts, the Court held that the drawer can
who should be liable for the dishonor of the draft and still be made liable under the letter of undertaking
export documents. In the two undertakings executed even if he is discharged due to the banks failure to
by respondent as a condition for the negotiation of the protest the non-acceptance of the drafts. The Court
drafts, respondent held itself liable if the drafts were explained, thus:
pay on demand the full amount of the drafts. seeking the foreclosure of the real estate mortgage
The next question, therefore, is whether the any case, respondent had admitted that aside from the
real estate mortgage also served as security for unpaid drafts, respondent also had due and
respondents drafts that were not accepted and paid by demandable loans secured from another account as
the Kwang Ju Bank, Ltd. evidenced by Promissory Notes (PN Nos.) BDS-001-87,
Respondent executed a real estate mortgage However, the Court of Appeals invalidated the
containing a blanket mortgage clause, also known as a extrajudicial foreclosure of the mortgage on the ground
dragnet clause. It has been settled in a long line of that petitioner had failed to furnish respondent
decisions that mortgages given to secure future personal notice of the sale contrary to the stipulation in
advancements are valid and legal contracts, and the the real estate mortgage.
amounts named as consideration in said contracts do Petitioner, on the other hand, claims that under
not limit the amount for which the mortgage may stand paragraph 12[39] of the real estate mortgage, personal
as security if from the four corners of the instrument notice of the foreclosure sale is not a requirement to
the intent to secure future and other indebtedness can the validity of the foreclosure sale.
be gathered.[36]
A perusal of the records of the case shows that
of the Court of Appeals in CA-G.R. CV No. 59931 are That for and in consideration of certain loans, overdraft
and other credit accommodations obtained from the
REVERSED and SET ASIDE. The decision of the Regional Mortgagee by the Mortgagor and/or ________________
hereinafter referred to, irrespective of number, as
Trial Court Branch 73, Antipolo, Rizal in Civil Case No.
DEBTOR, and to secure the payment of the same and
1587-A and LR Case No. 90-787 is REINSTATED. those that may hereafter be obtained, the principal or
all of which is hereby fixed at Two Hundred Fifty
Thousand (P250,000.00) Pesos, Philippine Currency, as
SO ORDERED. well as those that the Mortgagee may extend to the
Mortgagor and/or DEBTOR, including interest and
expenses or any other obligation owing to the
Mortgagee, whether direct or indirect, principal or
secondary as appears in the accounts, books and
records of the Mortgagee, the Mortgagor does hereby
transfer and convey by way of mortgage unto the
Mortgagee, its successors or assigns, the parcels of
land which are described in the list inserted on the
back of this document, and/or appended hereto,
together with all the buildings and improvements now
existing or which may hereafter be erected or
constructed thereon, of which the Mortgagor declares
that he/it is the absolute owner free from all liens and have paid their principal loan secured by the
incumbrances. . . .4 mortgaged property, and thus the mortgage should not
be foreclosed. For its part, petitioner averred that the
On 22 October 1976, Don Alviar executed another payment of P2,000,000.00 made on 6 March 1979 was
promissory note, PN BD#76/C-345 for P2,640,000.00, not a payment made by respondents, but by G.B. Alviar
secured by D/A SFDX #129, signifying that the loan Realty and Development Inc., which has a separate
was secured by a "hold-out" on the mortgagor’s foreign loan with the bank secured by a separate mortgage.12
currency savings account with the bank under Account
No. 129, and that the mortgagor’s passbook is to be On 15 March 1994, the trial court dismissed the
surrendered to the bank until the amount secured by complaint and ordered the Sheriff to proceed with the
the "hold-out" is settled.5 extra-judicial foreclosure.13 Respondents sought
reconsideration of the decision.14 On 24 August 1994,
On 27 December 1976, respondent spouses executed the trial court issued anOrder setting aside its earlier
for Donalco Trading, Inc., of which the husband and decision and awarded attorney’s fees to
wife were President and Chairman of the Board and respondents.15 It found that only theP250,000.00 loan
Vice President,6 respectively, PN BD#76/C-430 is secured by the mortgage on the land covered by TCT
coveringP545,000.000. As provided in the note, the No. 438157. On the other hand, theP382,680.83 loan is
loan is secured by "Clean-Phase out TOD CA 3923," secured by the foreign currency deposit account of Don
which means that the temporary overdraft incurred by A. Alviar, while the P545,000.00 obligation was an
Donalco Trading, Inc. with petitioner is to be converted unsecured loan, being a mere conversion of the
into an ordinary loan in compliance with a Central Bank temporary overdraft of Donalco Trading, Inc. in
circular directing the discontinuance of overdrafts.7 compliance with a Central Bank circular. According to
the trial court, the "blanket mortgage clause" relied
On 16 March 1977, petitioner wrote Donalco Trading, upon by petitioner applies only to future loans obtained
Inc., informing the latter of its approval of a straight by the mortgagors, and not by parties other than the
loan ofP545,000.00, the proceeds of which shall be said mortgagors, such as Donalco Trading, Inc., for
used to liquidate the outstanding loan of P545,000.00 which respondents merely signed as officers thereof.
TOD. The letter likewise mentioned that the securities
for the loan were the deed of assignment on two On appeal to the Court of Appeals, petitioner made the
promissory notes executed by Bancom Realty following assignment of errors:
Corporation with Deed of Guarantee in favor of A.U.
Valencia and Co. and the chattel mortgage on various I. The trial court erred in holding that the real estate
heavy and transportation equipment.8 mortgage covers only the promissory note BD#75/C-
252 for the sum of P250,000.00.
On 06 March 1979, respondents paid
petitioner P2,000,000.00, to be applied to the II. The trial court erred in holding that the promissory
obligations of G.B. Alviar Realty and Development, Inc. note BD#76/C-345 for P2,640,000.00 (P382,680.83
and for the release of the real estate mortgage for outstanding principal balance) is not covered by the
the P450,000.00 loan covering the two (2) lots located real estate mortgage by expressed agreement.
at Vam Buren and Madison Streets, North Greenhills,
San Juan, Metro Manila. The payment was III. The trial court erred in holding that Promissory Note
acknowledged by petitioner who accordingly released BD#76/C-430 for P545,000.00 is not covered by the
the mortgage over the two properties.9 real estate mortgage.
On 15 January 1980, petitioner moved for the IV. The trial court erred in holding that the real estate
extrajudicial foreclosure of the mortgage on the mortgage is a contract of adhesion.
property covered by TCT No. 438157. Per petitioner’s
computation, respondents had the total obligation V. The trial court erred in holding defendant-appellant
of P1,608,256.68, covering the three (3) promissory liable to pay plaintiffs-appellees attorney’s fees
notes, to wit: PN BD#75/C-252 for P250,000.00, PN forP20,000.00.16
BD#76/C-345 for P382,680.83, and PN BD#76/C-340
for P545,000.00, plus assessed past due interests and The Court of Appeals affirmed the Order of the trial
penalty charges. The public auction sale of the court but deleted the award of attorney’s fees.17 It
mortgaged property was set on 15 January 1980.10 ruled that while a continuing loan or credit
accommodation based on only one security or
Respondents filed a complaint for damages with a mortgage is a common practice in financial and
prayer for the issuance of a writ of preliminary commercial institutions, such agreement must be clear
injunction with the RTC of Pasig,11 claiming that they and unequivocal. In the instant case, the parties
executed different promissory notes agreeing to a Finally, petitioner alleges that the mortgage contract
particular security for each loan. Thus, the appellate was executed by respondents with knowledge and
court ruled that the extrajudicial foreclosure sale of the understanding of the "dragnet clause," being highly
property for the three loans is improper.18 educated individuals, seasoned businesspersons, and
political personalities.31 There was no oppressive use of
The Court of Appeals, however, found that respondents superior bargaining power in the execution of the
have not yet paid the P250,000.00 covered by PN promissory notes and the real estate mortgage.32
BD#75/C-252 since the payment of P2,000,000.00
adverted to by respondents was issued for the For their part, respondents claim that the "dragnet
obligations of G.B. Alviar Realty and Development, clause" cannot be applied to the subsequent loans
Inc.19 extended to Don Alviar and Donalco Trading, Inc. since
these loans are covered by separate promissory notes
Aggrieved, petitioner filed the instant petition, that expressly provide for a different form of
reiterating the assignment of errors raised in the Court security.33 They reiterate the holding of the trial court
of Appeals as grounds herein. that the "blanket mortgage clause" would apply only to
loans obtained jointly by respondents, and not to loans
Petitioner maintains that the "blanket mortgage clause" obtained by other parties.34Respondents also place a
or the "dragnet clause" in the real estate mortgage premium on the finding of the lower courts that the real
expressly covers not only the P250,000.00 under PN estate mortgage clause is a contract of adhesion and
BD#75/C-252, but also the two other promissory notes must be strictly construed against petitioner bank.35
included in the application for extrajudicial foreclosure
of real estate mortgage.20 Thus, it claims that it acted The instant case thus poses the following issues
within the terms of the mortgage contract when it filed pertaining to: (i) the validity of the "blanket mortgage
its petition for extrajudicial foreclosure of real estate clause" or the "dragnet clause"; (ii) the coverage of the
mortgage. Petitioner relies on the cases of Lim Julian v. "blanket mortgage clause"; and consequently, (iii) the
Lutero,21 Tad-Y v. Philippine National Bank,22 Quimson v. propriety of seeking foreclosure of the mortgaged
Philippine National Bank,23 C & C Commercial v. property for the non-payment of the three loans.
Philippine National Bank,24 Mojica v. Court of
Appeals,25 and China Banking Corporation v. Court of At this point, it is important to note that one of the
Appeals,26 all of which upheld the validity of mortgage loans sought to be included in the "blanket mortgage
contracts securing future advancements. clause" was obtained by respondents for Donalco
Trading, Inc. Indeed, PN BD#76/C-430 was executed by
Anent the Court of Appeals’ conclusion that the parties respondents on behalf of Donalco Trading, Inc. and not
did not intend to include PN BD#76/C-345 in the real in their personal capacity. Petitioner asks the Court to
estate mortgage because the same was specifically pierce the veil of corporate fiction and hold
secured by a foreign currency deposit account, respondents liable even for obligations they incurred
petitioner states that there is no law or rule which for the corporation. The mortgage contract states that
prohibits an obligation from being covered by more the mortgage covers "as well as those that the
than one security.27 Besides, respondents even Mortgagee may extend to the Mortgagor and/or
continued to withdraw from the same foreign currency DEBTOR, including interest and expenses or any other
account even while the promissory note was still obligation owing to the Mortgagee, whether direct or
outstanding, strengthening the belief that it was the indirect, principal or secondary." Well-settled is the rule
real estate mortgage that principally secured all of that a corporation has a personality separate and
respondents’ promissory notes.28 As for PN BD#76/C- distinct from that of its officers and stockholders.
345, which the Court of Appeals found to be exclusively Officers of a corporation are not personally liable for
secured by the Clean-Phase out TOD 3923, petitioner their acts as such officers unless it is shown that they
posits that such security is not exclusive, as the have exceeded their authority.36 However, the legal
"dragnet clause" of the real estate mortgage covers all fiction that a corporation has a personality separate
the obligations of the respondents.29 and distinct from stockholders and members may be
disregarded if it is used as a means to perpetuate fraud
Moreover, petitioner insists that respondents attempt or an illegal act or as a vehicle for the evasion of an
to evade foreclosure by the expediency of stating that existing obligation, the circumvention of statutes, or to
the promissory notes were executed by them not in confuse legitimate issues.37 PN BD#76/C-430, being an
their personal capacity but as corporate officers. It obligation of Donalco Trading, Inc., and not of the
claims that PN BD#76/C-430 was in fact for home respondents, is not within the contemplation of the
construction and personal consumption of respondents. "blanket mortgage clause." Moreover, petitioner is
Thus, it states that there is a need to pierce the veil of unable to show that respondents are hiding behind the
corporate fiction.30 corporate structure to evade payment of their
obligations. Save for the notation in the promissory described in the list inserted on the back of this
note that the loan was for house construction and document, and/or appended hereto, together with all
personal consumption, there is no proof showing that the buildings and improvements now existing or which
the loan was indeed for respondents’ personal may hereafter be erected or constructed thereon, of
consumption. Besides, petitioner agreed to the terms of which the Mortgagor declares that he/it is the absolute
the promissory note. If respondents were indeed the owner free from all liens and incumbrances. . . .
real parties to the loan, petitioner, a big, well- 43
(Emphasis supplied.)
established institution of long standing that it is, should
have insisted that the note be made in the name of Thus, contrary to the finding of the Court of Appeals,
respondents themselves, and not to Donalco Trading petitioner and respondents intended the real estate
Inc., and that they sign the note in their personal mortgage to secure not only the P250,000.00 loan from
capacity and not as officers of the corporation. the petitioner, but also future credit facilities and
advancements that may be obtained by the
Now on the main issues. respondents. The terms of the above provision being
clear and unambiguous, there is neither need nor
A "blanket mortgage clause," also known as a "dragnet excuse to construe it otherwise.
clause" in American jurisprudence, is one which is
specifically phrased to subsume all debts of past or The cases cited by petitioner, while affirming the
future origins. Such clauses are "carefully scrutinized validity of "dragnet clauses" or "blanket mortgage
and strictly construed."38 Mortgages of this character clauses," are of a different factual milieu from the
enable the parties to provide continuous dealings, the instant case. There, the subsequent loans were not
nature or extent of which may not be known or covered by any security other than that for the
anticipated at the time, and they avoid the expense mortgage deeds which uniformly contained the
and inconvenience of executing a new security on each "dragnet clause."
new transaction.39 A "dragnet clause" operates as a
convenience and accommodation to the borrowers as it In the case at bar, the subsequent loans obtained by
makes available additional funds without their having respondents were secured by other securities, thus: PN
to execute additional security documents, thereby BD#76/C-345, executed by Don Alviar was secured by
saving time, travel, loan closing costs, costs of extra a "hold-out" on his foreign currency savings account,
legal services, recording fees, et cetera.40 Indeed, it has while PN BD#76/C-430, executed by respondents for
been settled in a long line of decisions that mortgages Donalco Trading, Inc., was secured by "Clean-Phase out
given to secure future advancements are valid and TOD CA 3923" and eventually by a deed of assignment
legal contracts,41 and the amounts named as on two promissory notes executed by Bancom Realty
consideration in said contracts do not limit the amount Corporation with Deed of Guarantee in favor of A.U.
for which the mortgage may stand as security if from Valencia and Co., and by a chattel mortgage on various
the four corners of the instrument the intent to secure heavy and transportation equipment. The matter of PN
future and other indebtedness can be gathered.42 BD#76/C-430 has already been discussed. Thus, the
critical issue is whether the "blanket mortgage" clause
The "blanket mortgage clause" in the instant case applies even to subsequent advancements for which
states: other securities were intended, or particularly, to PN
BD#76/C-345.
That for and in consideration of certain loans, overdraft
and other credit accommodations obtained from the Under American jurisprudence, two schools of thought
Mortgagee by the Mortgagor and/or ________________ have emerged on this question. One school advocates
hereinafter referred to, irrespective of number, as that a "dragnet clause" so worded as to be broad
DEBTOR, and to secure the payment of the same enough to cover all other debts in addition to the one
and those that may hereafter be obtained, the specifically secured will be construed to cover a
principal or all of which is hereby fixed at Two Hundred different debt, although such other debt is secured by
Fifty Thousand (P250,000.00) Pesos, Philippine another mortgage.44 The contrary thinking maintains
Currency, as well as those that the Mortgagee that a mortgage with such a clause will not secure a
may extend to the Mortgagor and/or DEBTOR, note that expresses on its face that it is otherwise
including interest and expenses or any other secured as to its entirety, at least to anything other
obligation owing to the Mortgagee, whether than a deficiency after exhausting the security
direct or indirect, principal or secondary as specified therein,45 such deficiency being an
appears in the accounts, books and records of the indebtedness within the meaning of the mortgage, in
Mortgagee, the Mortgagor does hereby transfer and the absence of a special contract excluding it from the
convey by way of mortgage unto the Mortgagee, its arrangement.46
successors or assigns, the parcels of land which are
The latter school represents the better position. The It was therefore improper for petitioner in this case to
parties having conformed to the "blanket mortgage seek foreclosure of the mortgaged property because of
clause" or "dragnet clause," it is reasonable to non-payment of all the three promissory notes. While
conclude that they also agreed to an implied the existence and validity of the "dragnet clause"
understanding that subsequent loans need not be cannot be denied, there is a need to respect the
secured by other securities, as the subsequent loans existence of the other security given for PN BD#76/C-
will be secured by the first mortgage. In other words, 345. The foreclosure of the mortgaged property should
the sufficiency of the first security is a corollary only be for the P250,000.00 loan covered by PN
component of the "dragnet clause." But of course, BD#75/C-252, and for any amount not covered by the
there is no prohibition, as in the mortgage contract in security for the second promissory note. As held in one
issue, against contractually requiring other securities case, where deeds absolute in form were executed to
for the subsequent loans. Thus, when the mortgagor secure any and all kinds of indebtedness that might
takes another loan for which another security was subsequently become due, a balance due on a note,
given it could not be inferred that such loan was made after exhausting the special security given for the
in reliance solely on the original security with the payment of such note, was in the absence of a special
"dragnet clause," but rather, on the new security given. agreement to the contrary, within the protection of the
This is the "reliance on the security test." mortgage, notwithstanding the giving of the special
security.50This is recognition that while the "dragnet
Hence, based on the "reliance on the security test," the clause" subsists, the security specifically executed for
California court in the cited case made an inquiry subsequent loans must first be exhausted before the
whether the second loan was made in reliance on the mortgaged property can be resorted to.
original security containing a "dragnet clause."
Accordingly, finding a different security was taken for One other crucial point. The mortgage contract, as well
the second loan no intent that the parties relied on the as the promissory notes subject of this case, is a
security of the first loan could be inferred, so it was contract of adhesion, to which respondents’ only
held. The rationale involved, the court said, was that participation was the affixing of their signatures or
the "dragnet clause" in the first security instrument "adhesion" thereto.51 A contract of adhesion is one in
constituted a continuing offer by the borrower to which a party imposes a ready-made form of contract
secure further loans under the security of the first which the other party may accept or reject, but which
security instrument, and that when the lender accepted the latter cannot modify.52
a different security he did not accept the offer.47
The real estate mortgage in issue appears in a
In another case, it was held that a mortgage with a standard form, drafted and prepared solely by
"dragnet clause" is an "offer" by the mortgagor to the petitioner, and which, according to jurisprudence must
bank to provide the security of the mortgage for be strictly construed against the party responsible for
advances of and when they were made. Thus, it was its preparation.53 If the parties intended that the
concluded that the "offer" was not accepted by the "blanket mortgage clause" shall cover subsequent
bank when a subsequent advance was made because advancement secured by separate securities, then the
(1) the second note was secured by a chattel mortgage same should have been indicated in the mortgage
on certain vehicles, and the clause therein stated that contract. Consequently, any ambiguity is to be
the note was secured by such chattel mortgage; (2) taken contra proferentum, that is, construed against
there was no reference in the second note or chattel the party who caused the ambiguity which could have
mortgage indicating a connection between the real avoided it by the exercise of a little more care.54 To be
estate mortgage and the advance; (3) the mortgagor more emphatic, any ambiguity in a contract whose
signed the real estate mortgage by her name alone, terms are susceptible of different interpretations must
whereas the second note and chattel mortgage were be read against the party who drafted it,55 which is the
signed by the mortgagor doing business under an petitioner in this case.
assumed name; and (4) there was no allegation by the
bank, and apparently no proof, that it relied on the Even the promissory notes in issue were made on
security of the real estate mortgage in making the standard forms prepared by petitioner, and as such are
advance.48 likewise contracts of adhesion. Being of such nature,
the same should be interpreted strictly against
Indeed, in some instances, it has been held that in the petitioner and with even more reason since having
absence of clear, supportive evidence of a contrary been accomplished by respondents in the presence of
intention, a mortgage containing a "dragnet clause" petitioner’s personnel and approved by its manager,
will not be extended to cover future advances unless they could not have been unaware of the import and
the document evidencing the subsequent advance extent of such contracts.
refers to the mortgage as providing security therefor.49
Petitioner, however, is not without recourse. Both the
Court of Appeals and the trial court found that
respondents have not yet paid the P250,000.00, and
gave no credence to their claim that they paid the said
amount when they paid petitioner P2,000,000.00. 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
G.R. No. 173171 July 11, 2012
BD#76/C-345, has been exhausted, subject of course
to defenses which are available to respondents.
PHILIPPINE CHARITY SWEEPSTAKES OFFICE
(PCSO), Petitioner,
WHEREFORE, the petition is DENIED. The Decision of
vs.
the Court of Appeals in CA-G.R. CV No. 59543 is
NEW DAGUPAN METRO GAS CORPORATION,
AFFIRMED.
PURITA E. PERALTA and PATRICIA P.
GALANG,Respondents.
Costs against petitioner.
DECISION
SO ORDERED.
REYES, J.:
15. Upon payment of the principal amount together On January 21, 1994, the RTC Branch 43 rendered a
with interest and other expenses legally incurred by the Decision, approving the compromise agreement
MORTGAGEE, the above undertaking is considered between Peralta and New Dagupan. Some of the
terminated.6 stipulations made are as follows:
On July 31, 1990, Peralta sold, under a conditional sale, 3. For her failure to execute, sign and deliver a
the subject property to New Dagupan, the conveyance Deed of Absolute Sale to plaintiff by way of
to be absolute upon the latter’s full payment of the transferring TCT No. 52135 in the name of the
price of P800,000.00. New Dagupan obliged to pay latter, defendant hereby waives and quitclaims
Peralta P200,000.00 upon the execution of the the remaining balance of the purchase price in
corresponding deed and the balance of P600,000.00 by the amount of P60,000.00 in favor of the
monthly instalments of P70,000.00, the first instalment plaintiff, it being understood that the said
falling due on August 31, 1990. Peralta showed to New amount shall be treated as a penalty for such
Dagupan a photocopy of TCT No. 52135, which bore no failure;
liens and encumbrances, and undertook to deliver the
owner’s duplicate within three (3) months from the xxxx
execution of the contract.7
6. Upon the signing of this compromise
New Dagupan withheld payment of the last instalment, agreement, possession and ownership of the
which was intended to cover the payment of the capital above described property, together with all the
gains tax, in view of Peralta’s failure to deliver the improvements existing thereon, are hereby
owner’s duplicate of TCT No. 52135 and to execute a vested absolutely upon, and transferred to the
plaintiff whom the defendant hereby declares Dagupan and the compromise agreement approved by
and acknowledges to be the absolute owner the RTC Branch 43; (c) it was due to PCSO’s very own
thereof, now and hereafter; neglect in registering its mortgage lien that preference
is accorded to New Dagupan’s rights as a buyer of the
7. This compromise agreement shall be without subject property; and (d) PCSO no longer has any
prejudice to whatever rights and remedies, if cause of action against them following its decision to
any, that the Philippine Charity Sweepstakes foreclose the subject mortgage.
Office has against the herein defendant and
Patricia P. Galang under the Deed of On March 6, 1996, Civil Case No. 94-00200-D was
Undertaking adverted to under par. 2(f) transferred to Branch 42, after the presiding judge of
hereof.12 Branch 43 inhibited himself.
As the RTC Branch 43 Decision dated January 21, 1994 On January 28, 1998, the RTC Branch 42 rendered a
became final and executory, New Dagupan once again Decision18 in New Dagupan’s favor, the dispositive
demanded Peralta’s delivery of the owner’s duplicate of portion of which states:
TCT No. 52135. Also, in a letter dated March 29, 1994,
New Dagupan made a similar demand from PCSO, who WHEREFORE, judgment is hereby rendered in favor of
in response, stated that it had already foreclosed the the petitioner and against the defendant, ordering
mortgage on the subject property and it has in its PCSO to deliver the owner’s duplicate copy of TCT No.
name a certificate of sale for being the highest bidder 52135 in its possession to the Registry of Deeds of
in the public auction that took place on June 15, 1993. Dagupan City for the purpose of having the decision in
favor of the petitioner annotated at the back thereof.
Thus, on June 1, 1994, New Dagupan filed with the RTC Should said defendant fail to deliver the said title
a petition against PCSO for the annulment of TCT No. within 30 days from the date this decision becomes
52135 or surrender of the owner’s duplicate final and executory, the said owner’s duplicate
thereof.13 The petition was docketed as Civil Case No. certificate of title is hereby cancelled and the Register
94-00200-D and raffled to Branch 43. of Deeds can issue a new one carrying all the
encumbrances of the original owner’s duplicate subject
In an Answer14 dated March 7, 1995, PCSO alleged that: of this case. Further, the defendant is ordered to pay to
(a) New Dagupan was a buyer in bad faith; (b) New petitioner the sum of Ten Thousand Pesos (P10,000.00)
Dagupan and Peralta colluded to deprive PCSO of its as attorney’s fees. It is also ordered to pay costs.
rights under the subject mortgage; (c) New Dagupan is
estopped from questioning the superior right of PCSO SO ORDERED.19
to the subject property when it entered into the
compromise agreement subject of the RTC Branch 43 The RTC Branch 42 ruled that New Dagupan is a buyer
Decision dated January 21, 1994; and (d) New Dagupan in good faith, ratiocinating that:
is bound by the foreclosure proceedings where PCSO
obtained title to the subject property. In other words, the evidence of the petitioner would
show that although the Deed of Undertaking with First
In a Motion for Leave to File Third-Party Real Estate Mortgage was executed on March 8, 1989
Complaint15 dated April 17, 1995, PCSO sought the its annotation was made long after the conditional sale
inclusion of Peralta and Galang who are allegedly in favor of the petitioner was executed and annotated
indispensable parties. In its Third-Party at the back of the title in question. Because of the said
Complaint,16 PCSO reiterated its allegations in its exhibits, petitioner contended that it was a buyer in
Answer dated March 7, 1995 and made the further good faith and for value.
claim that the sale of the subject property to New
Dagupan is void for being expressly prohibited under Defendant, to controvert the aforementioned evidence
the Deed of Undertaking with First Real Estate of the plaintiff, alleged that Exhibits C, C-1 to C-1-C was
Mortgage. contrary to the testimony of Mr. Julian Ong Cuña to the
effect that when defendants sold the property to
In their Answer to Third-Party Complaint with petitioner only the xerox copy of the title was shown
Counterclaims17 dated January 2, 1996, Peralta and and petitioner should have verified the original as it
Galang claimed that: (a) the provision in the Deed of was a buyer in bad faith. Defendant also alleged that
Undertaking with First Real Estate Mortgage prohibiting the decision in Civil Case D-10160 dated January 21,
the sale of the subject property is void under Article 1994 would show that there was a collusion between
2130 of the Civil Code; (b) PCSO’s failure to intervene the petitioner and the third-party defendants.
in Civil Case No. D-10160 despite notice barred it from
questioning the sale of the subject property to New
The Court cannot go along with the reasoning of the executed the Deed of Conditional Sale x x x in favor of
defendant because what was shown to Mr. Cuña by the petitioner in 1990. That being the case, the foreclosure
third-party defendants was Exhibit "C" which did not sale in favor of the PCSO has no legal leg to stand as
carry any encumbrance at the back of the subject title the Deed of Undertaking with First Real Estate
and the annotation made on May 20, 1992 in favor of Mortgage has already been discharged before the
the PCSO. Mr. Cuña verified the title x x x but the foreclosure sale was conducted.22
encumbrance on the title was not still there at [that]
time. One thing more, there was nothing indicated in According to the RTC Branch 42, the intent to use the
the decision in Civil Case No. D-10160 that petitioner subject property as security for Galang’s purchases for
already knew that there was already a mortgage in the years after 1989, as PCSO claimed, is not clear
favor of the PCSO. Worst, defendant did not even from the Deed of Undertaking with First Real Estate
introduce any oral evidence to show that petitioner was Mortgage:
in bad faith except the manifestations of counsel.
Unfortunately, manifestations could not be considered Was it not provided in the deed that the undertaking
evidence. would be for "all draws". That might be true but the
terms of the Contract should be understood to mean
xxxx only to cover the draws relative to the current liabilities
of Patricia Galang at the time of the execution of the
Defendant should not be allowed to profit from its undertaking in 1989. It could have not been agreed
negligence of not registering the Deed of Undertaking upon that it should also cover her liability for 1991 up
with First Real Estate Mortgage in its favor.20 to 1992 because if that was the intention of the parties,
the undertaking should have so provided expressly. The
Also, the RTC Branch 42 ruled that the prohibition on term of the undertaking with respect to the period was
the sale of the subject property is void. Specifically: ambiguous but any ambiguity in the Contract should be
resolved against PCSO because the form used was a
Suffice it to say that there is no law prohibiting a standard form of the defendant and it appeared that it
mortgagor from encumbering or alienating the property was its lawyers who prepared it, therefore, it was the
mortgaged. On the contrary, there is a law prohibiting latter which caused the ambiguity.23
an agreement forbidding the owner from alienating a
mortgaged property. We are referring to Article 2130 of PCSO’s appeal from the foregoing adverse decision was
the New Civil Code which provides as follows: dismissed. By way of its assailed decision, the CA did
not agree with PCSO’s claim that the subject mortgage
"A stipulation forbidding the owner from alienating the is in the nature of a continuing guaranty, holding that
immovable mortgage shall be void."21 Peralta’s undertaking to secure Galang’s liability to
PCSO is only for a period of one year and was
Moreover, the RTC Branch 42 ruled that PCSO had no extinguished when Peralta completed payment on the
right to foreclose the subject mortgage as the land in sweepstakes tickets she purchased in 1989.
question had already been disencumbered after
Galang’s full payment of all the sweepstakes tickets The instant appeal must fail. There is nothing in the
she purchased in 1989 and 1990. Deed of Undertaking with First Real Estate Mortgage,
expressly or impliedly, that would indicate that Peralta
It should be recalled that Amparo Abrigo, OIC Chief of agreed to let her property be burdened as long as the
the Credit Accounts Division of the PCSO, admitted not contract of undertaking with real estate mortgage was
only once but twice that Patricia Galang has no more not cancelled or revoked. x x x
liability with the PCSO for the years 1989 and 1990 x x
x. Another witness, Carlos Castillo who is the OIC of the xxxx
Sales Department of the PCSO, joined Amparo Abrigo in
saying that Patricia Galang has already paid her liability A perusal of the deed of undertaking between the PCSO
with the PCSO for the years 1989 and 1990 x x x. Thus, and Peralta would reveal nothing but the undertaking
the undertaking was already discharged. Both of the of Peralta to guarantee the payment of the pre-existing
said witnesses of the PCSO alleged that the obligation of Galang, constituting the unpaid
undertaking has been re-used by Patricia Galang for sweepstakes tickets issued to the latter before the
the years 1991 to 1992 yet there is no proof deed of undertaking was executed, with the PCSO in
whatsoever showing that Purita Peralta consented to the amount of P450,000.00. No words were added
the use of the undertaking by Patricia Galang for 1991 therein to show the intention of the parties to regard it
to 1992. Incidentally, it is not far-fetched to say that as a contract of continuing guaranty. In other
Purita Peralta might have thought that the undertaking jurisdictions, it has been held that the use of the
was already discharged which was the reason she particular words and expressions such as payment of
"any debt", "any indebtedness", "any deficiency", or her. That when Galang failed to pay her ticket
"any sum", or the guaranty of "any transaction" or purchases in 1992, PCSO’s right to foreclose the
money to be furnished the principal debtor "at any subject mortgage arose.
time", or "on such time" that the principal debtor may
require, have been construed to indicate a continuing PCSO also maintains that its rights over the subject
guaranty. Similar phrases or words of the same import property are superior to those of New Dagupan.
or tenor are not extant in the deed of undertaking. The Considering that the contract between New Dagupan is
deed of undertaking states: a conditional sale, there was no conveyance of
ownership at the time of the execution thereof on July
"WHEREAS, the PRINCIPAL acknowledges that he/she 31, 1989. It was only on January 21, 1994, or when the
has an outstanding and unpaid account with the RTC Branch 43 approved the compromise agreement,
MORTGAGEE in the amount of FOUR HUNDRED FIFTY that a supposed transfer of title between Peralta and
THOUSAND (P450,000.00), representing the balance of New Dagupan took place. However, since PCSO had
his/her ticket accountabilities for all draws." earlier foreclosed the subject mortgage and obtained
title to the subject property as evidenced by the
xxxx certificate of sale dated June 15, 1993, Peralta had
nothing to cede or assign to New Dagupan.
Upon full payment of the principal obligation, which
from the testimonies of the officers of the PCSO had PCSO likewise attributes bad faith to New Dagupan,
been paid as early as 1990, the subsidiary contract of claiming that Peralta’s presentation of a mere
guaranty was automatically terminated. The parties photocopy of TCT No. 52135, albeit without any
have not executed another contract of guaranty to annotation of a lien or encumbrance, sufficed to raise
secure the subsequent obligations of Galang for the reasonable suspicions against Peralta’s claim of a clean
tickets issued thereafter. It must be noted that a title and should have prompted it to conduct an
contract of guaranty is not presumed; it must be investigation that went beyond the face of TCT No.
express and cannot extend to more than what is 52135.
stipulated therein.
PCSO even assails the validity of the subject sale for
xxxx being against the prohibition contained in the Deed of
Undertaking with First Real Estate Mortgage.
The arguments of PCSO fail to persuade us. The phrase
"for all draws" is limited to the draws covered by the New Dagupan, in its Comment,25 avers that it was a
original transaction. In its pleadings, the PCSO asserted purchaser in good faith and it has a superior right to
that the contract of undertaking was renewed and the the subject property, considering that PCSO’s mortgage
collateral was re-used by Galang to obtain again tickets lien was annotated only on May 20, 1992 or long after
from the PCSO after she had settled her account under the execution of the conditional sale on July 31, 1990
the original contract. From such admission, it is thus and the annotation of New Dagupan’s adverse claim on
clear that the contract is not in the nature of a October 1, 1991. While the subject mortgage
continuing guaranty. For a contract of continuing antedated the subject sale, PCSO was already aware of
guaranty is not renewed as it is understood to be of a the latter at the time of its belated registration of its
continuing nature without the necessity of renewing mortgage lien. PCSO’s registration was therefore in bad
the same every time a new transaction contemplated faith, rendering its claim over the subject property
under the original contract is entered into. x x defeasible by New Dagupan’s adverse claim.
x 24 (Citations omitted)
New Dagupan also claims that the subject property had
In this petition, PCSO claims that the CA erred in already been discharged from the mortgage, hence,
holding that the subject mortgage had been PCSO had nothing to foreclose when it filed its
extinguished by Galang’s payment of P450,000.00, application for extra-judicial foreclosure on February
representing the amount of the sweepstakes tickets 10, 1993. The subject mortgage was intended to
she purchased in 1989. According to PCSO, the said secure Galang’s ticket purchases that were outstanding
amount is actually the credit line granted to Galang at the time of the execution of the same, the amount of
and the phrase "all draws" refers to her ticket which has been specified to be P450,000.00 and does
purchases for subsequent years drawn against such not extend to Galang’s future purchases. Thus, upon
credit line. Consequently, PCSO posits, the subject Galang’s full payment of P450,000.00, which PCSO
mortgage had not been extinguished by Peralta’s admits, the subject mortgage had been automatically
payment of her ticket purchases in 1989 and its terminated as expressly provided under Section 15 of
coverage extends to her purchases after 1989, which the Deed of Undertaking with First Real Estate
she made against the credit line that was granted to Mortgage quoted above.
Issue The stipulation extending the coverage of a mortgage
to advances or loans other than those already obtained
The rise and fall of this recourse is dependent on the or specified in the contract is valid and has been
resolution of the issue who between New Dagupan and commonly referred to as a "blanket mortgage" or
PCSO has a better right to the property in question. "dragnet" clause. In Prudential Bank v. Alviar,28 this
Court elucidated on the nature and purpose of such a
Our Ruling clause as follows:
PCSO is undeterred by the denial of its appeal to the CA A "blanket mortgage clause," also known as a "dragnet
and now seeks to convince this Court that it has a clause" in American jurisprudence, is one which is
superior right over the subject property. However, specifically phrased to subsume all debts of past or
PCSO’s resolve fails to move this Court and the future origins. Such clauses are "carefully scrutinized
ineluctability of the denial of this petition is owing to and strictly construed." Mortgages of this character
the following: enable the parties to provide continuous dealings, the
nature or extent of which may not be known or
a. At the time of PCSO’s registration of its anticipated at the time, and they avoid the expense
mortgage lien on May 20, 1992, the subject and inconvenience of executing a new security on each
mortgage had already been discharged by new transaction. A "dragnet clause" operates as a
Galang’s full payment of P450,000.00, the convenience and accommodation to the borrowers as it
amount specified in the Deed of Undertaking makes available additional funds without their having
with First Real Estate Mortgage; to execute additional security documents, thereby
saving time, travel, loan closing costs, costs of extra
legal services, recording fees, et cetera. x x
b. There is nothing in the Deed of Undertaking
x.29(Citations omitted)
with First Real Estate Mortgage that would
indicate that it is a continuing security or that
there is an intent to secure Galang’s future A mortgage that provides for a dragnet clause is in the
debts; nature of a continuing guaranty and constitutes an
exception to the rule than an action to foreclose a
mortgage must be limited to the amount mentioned in
c. Assuming the contrary, New Dagupan is not
the mortgage contract. Its validity is anchored on
bound by PCSO’s mortgage lien and was a
Article 2053 of the Civil Code and is not limited to a
purchaser in good faith and for value; and
single transaction, but contemplates a future course of
dealing, covering a series of transactions, generally for
d. While the subject mortgage predated the
an indefinite time or until revoked. It is prospective in
sale of the subject property to New Dagupan,
its operation and is generally intended to provide
the absence of any evidence that the latter had
security with respect to future transactions within
knowledge of PCSO’s mortgage lien at the time
certain limits, and contemplates a succession of
of the sale and its prior registration of an
liabilities, for which, as they accrue, the guarantor
adverse claim created a preference in its favor.
becomes liable. In other words, a continuing guaranty
is one that covers all transactions, including those
I
arising in the future, which are within the description or
contemplation of the contract of guaranty, until the
As a general rule, a mortgage liability is usually limited expiration or termination thereof.30
to the amount mentioned in the contract. However, the
amounts named as consideration in a contract of
In this case, PCSO claims the subject mortgage is a
mortgage do not limit the amount for which the
continuing guaranty. According to PCSO, the intent was
mortgage may stand as security if from the four
to secure Galang’s ticket purchases other than those
corners of the instrument the intent to secure future
outstanding at the time of the execution of the Deed of
and other indebtedness can be gathered.26
Undertaking with First Real Estate Mortgage on March
8, 1989 such that it can foreclose the subject mortgage
Alternatively, while a real estate mortgage may for Galang’s non-payment of her ticket purchases in
exceptionally secure future loans or advancements, 1992. PCSO does not deny and even admits that
these future debts must be specifically described in the Galang had already settled the amount of P450,000.00.
mortgage contract. An obligation is not secured by a However, PCSO refuses to concede that the subject
mortgage unless it comes fairly within the terms of the mortgage had already been discharged, claiming that
mortgage contract.27 Galang had unpaid ticket purchases in 1992 and these
are likewise secured as evidenced by the following
clause in the Deed of Undertaking with First Real Estate document to be executed for the purpose. As provided
Mortgage: in the Deed of Undertaking with First Real Estate
Mortgage:
WHEREAS, the PRINCIPAL agrees to liquidate or pay
said account ten (10) days after each draw with 15. Upon payment of the principal amount together
interest at the rate of 14% per annum;31 with interest and other expenses legally incurred by the
MORTGAGEE, the above-undertaking is considered
This Court has to disagree with PCSO in view of the terminated.33
principles quoted above. A reading of the other
pertinent clauses of the subject mortgage, not only of Section 6234 of Presidential Decree (P.D.) No. 1529
the provision invoked by PCSO, does not show that the appears to require the execution of an instrument in
security provided in the subject mortgage is continuing order for a mortgage to be cancelled or discharged.
in nature. That the subject mortgage shall only secure However, this rule presupposes that there has been a
Galang’s liability in the amount of P450,000.00 is prior registration of the mortgage lien prior to its
evident from the following: discharge. In this case, the subject mortgage had
already been cancelled or terminated upon Galang’s
WHEREAS, the PRINCIPAL acknowledges that he/she full payment before PCSO availed of registration in
has an outstanding and unpaid account with the 1992. As the subject mortgage was not annotated on
MORTGAGEE in the amount of FOUR HUNDRED FIFTY TCT No. 52135 at the time it was terminated, there was
THOUSAND (P450,000.00), representing the balance of no need for Peralta to secure a deed of cancellation in
his/her ticket accountabilities for all draws; order for such discharge to be fully effective and duly
reflected on the face of her title.
xxxx
Therefore, since the subject mortgage is not in the
The PRINCIPAL shall settle or pay his/her account of nature of a continuing guaranty and given the
FOUR HUNDRED FIFTY THOUSAND PESOS automatic termination thereof, PCSO cannot claim that
(P450,000.00) PESOS with the MORTGAGEE, provided Galang’s ticket purchases in 1992 are also secured.
that the said balance shall bear interest thereon at the From the time the amount of P450,000.00 was fully
rate of 14% per annum; settled, the subject mortgage had already been
cancelled such that Galang’s subsequent ticket
To secure the faithful compliance and as security to the purchases are unsecured. Simply put, PCSO had
obligation of the PRINCIPAL stated in the next nothing to register, much less, foreclose.
preceding paragraph hereof, the MORTGAGOR hereby
convey unto and in favor of the MORTGAGEE, its Consequently, PCSO’s registration of its non-existent
successor and assigns by way of its first real estate mortgage lien and subsequent foreclosure of a
mortgage, a parcel/s of land together with all the mortgage that was no longer extant cannot defeat New
improvements now or hereafter existing thereon, Dagupan’s title over the subject property.
located at BOQUIG, DAGUPAN CITY, covered by TCT No.
52135, of the Register of Deeds of DAGUPAN CITY, and II
more particularly described as follows:32
Sections 51 and 53 of P.D. No. 1529 provide:
As the CA correctly observed, the use of the terms
"outstanding" and "unpaid" militates against PCSO’s Section 51. Conveyance and other dealings by
claim that future ticket purchases are likewise secured. registered owner. An owner of registered land may
That there is a seeming ambiguity between the convey, mortgage, lease, charge or otherwise deal with
provision relied upon by PCSO containing the phrase the same in accordance with existing laws. He may use
"after each draw" and the other provisions, which such forms of deeds, mortgages, leases or other
mention with particularity the amount of P450,000.00 voluntary instrument, except a will purporting to
as Galang’s unpaid and outstanding account and convey or affect registered land, but shall operate only
secured by the subject mortgage, should be construed as a contract between the parties and as evidence of
against PCSO. The subject mortgage is a contract of authority to the Register of Deeds to make registration.
adhesion as it was prepared solely by PCSO and the
only participation of Galang and Peralta was the act of The act of registration shall be the operative act to
affixing their signatures thereto. convey or affect the land insofar as third persons are
concerned, and in all cases under this Decree, the
Considering that the debt secured had already been registration shall be made in the office of the Register
fully paid, the subject mortgage had already been of Deeds for the province or city where the land lies.
discharged and there is no necessity for any act or
Section 52. Constructive notice upon registration. Every the adverse claim and the notice of lis pendens were
conveyance, mortgage, lease, lien, attachment, order, annotated on the title on October 30, 1979 and
judgment, instrument or entry affecting registered land December 10, 1979, respectively; the real estate
shall, if registered, filed or entered in the office of the mortgage over the subject property was registered by
Register of Deeds for the province or city where the respondent only on March 14, 1980. Settled in this
land to which it relates lies, be constructive notice to all jurisdiction is the doctrine that a prior registration of a
persons from the time of such registering, filing or lien creates a preference. Even a subsequent
entering. registration of the prior mortgage will not diminish this
preference, which retroacts to the date of the
On the other hand, Article 2125 of the Civil Code annotation of the notice of lis pendens and the adverse
states: claim. Thus, respondent’s failure to register the real
estate mortgage prior to these annotations, resulted in
Article 2125. In addition to the requisites stated in the mortgage being binding only between it and the
Article 2085, it is indispensable, in order that a mortgagor, Sulit. Petitioners, being third parties to the
mortgage may be validly constituted, that the mortgage, were not bound by it. Contrary to
document in which it appears be recorded in the respondent’s claim that petitioners were in bad faith
Registry of Property. If the instrument is not recorded, because they already had knowledge of the existence
the mortgage is nevertheless binding between the of the mortgage in favor of respondent when they
parties. caused the aforesaid annotations, petitioner Edilberto
Cruz said that they only knew of this mortgage when
The persons in whose favor the law establishes a respondent intervened in the RTC
mortgage have no other right than to demand the proceedings.38 (Citations omitted)
execution and the recording of the document in which
the mortgage is formalized. It is undisputed that it was only on May 20, 1992 that
PCSO registered its mortgage lien. By that time, New
Construing the foregoing conjunctively, as to third Dagupan had already purchased the subject property,
persons, a property registered under the Torrens albeit under a conditional sale. In fact, PCSO’s
system is, for all legal purposes, unencumbered or mortgage lien was yet to be registered at the time New
remains to be the property of the person in whose Dagupan filed its adverse claim on October 1, 1991 and
name it is registered, notwithstanding the execution of its complaint against Peralta for the surrender of the
any conveyance, mortgage, lease, lien, order or owner’s duplicate of TCT No. 52135 on February 28,
judgment unless the corresponding deed is registered. 1992. It was only during the pendency of Civil Case No.
D-10160, or sometime in 1993, that New Dagupan was
informed of PCSO’s mortgage lien. On the other hand,
The law does not require a person dealing with the
PCSO was already charged with knowledge of New
owner of registered land to go beyond the certificate of
Dagupan’s adverse claim at the time of the annotation
title as he may rely on the notices of the encumbrances
of the subject mortgage. PCSO’s attempt to conceal
on the property annotated on the certificate of title or
these damning facts is palpable. However, they are
absence of any annotation.35 Registration affords legal
patent from the records such that there is no
protection such that the claim of an innocent purchaser
gainsaying that New Dagupan is a purchaser in good
for value is recognized as valid despite a defect in the
faith and for value and is not bound by PCSO’s
title of the vendor.36
mortgage lien.
Worthy of extrapolation is the fact that there is no What transpired in Gabin is similar to that in Leviste. In
conflict between the disposition of this case and Garbin Gabin, the basis of the claim on the property is a deed
v. CA44where this Court decided the controversy of absolute sale. In Leviste, what is involved is a
between a buyer with an earlier registered adverse contract to sell. Both are voluntary instruments that
claim and a subsequent buyer, who is charged with should have been registered in accordance with
notice of such adverse claim at the time of the Sections 51 and 52 of P.D. No. 1529 as there was no
registration of her title, in favor of the latter. As to why showing of an inability to present the owner’s duplicate
the adverse claim cannot prevail against the rights of of title.
It is patent that the contrary appears in this case. G.R. No. 183987 July 25, 2012
Indeed, New Dagupan’s claim over the subject property
is based on a conditional sale, which is likewise a ASIA TRUST DEVELOPMENT BANK, Petitioner,
voluntary instrument. However, New Dagupan’s use of vs.
the adverse claim to protect its rights is far from being CARMELO H. TUBLE, Respondent.
incongruent in view of the undisputed fact that Peralta
failed to surrender the owner’s duplicate of TCT No. DECISION
52135 despite demands.
SERENO, J.:
Moreover, while the validity of the adverse claim in
Gabin is not established as there was no separate Before this Court is a Petition for Review on Certiorari
proceeding instituted that would determine the under Rule 45 of the Revised Rules of Court, seeking to
existence and due execution of the deed of sale upon review the Court of Appeals (CA) 28 March 2008
which it is founded, the same does not obtain in this Decision and 30 July 2008 Resolution in CA-G.R. CV No.
case. The existence and due execution of the 87410. The CA affirmed the Regional Trial Court (RTC)
conditional sale and Peralta’s absolute and complete Decision of 15 May 2006 in Civil Case No. 67973, which
cession of her title over the subject property to New granted to respondent the refund
Dagupan are undisputed. These are matters covered by of P845,805.491 representing the amount he had paid
the Decision dated January 21, 1994 of RTC Branch 43, in excess of the redemption price.
which had long become final and executory.
The antecedent facts are as follows: 2
3. In case of redemptioners who are considered by law In Philippine Banking Communications v. Court of
as juridical persons, they shall have the right to redeem Appeals,34 we have construed such silence or omission
not after the registration of the certificate of of additional charges strictly against the bank. In that
foreclosure sale with the applicable Register of Deeds case, we affirmed the findings of the courts a quo that
which in no case shall be more than three (3) months penalties and charges are not due for want of
after foreclosure, whichever is earlier. stipulation in the mortgage contract.
Worse, when petitioner invites us to look at the connection between the real estate mortgage and the
Promissory Notes in determining the interest, these advance; (3) the mortgagor signed the real estate
loan agreements offer different interest charges: mortgage by her name alone, whereas the second note
Promissory Note No. 0142, which corresponds exactly and chattel mortgage were signed by the mortgagor
to the real estate loan, contains no stipulation on doing business under an assumed name; and (4) there
interest; while Promissory Note No. 0143, which in turn was no allegation by the bank, and apparently no
corresponds to the consumption loan, provides a proof, that it relied on the security of the real estate
charge of 18% interest per annum. mortgage in making the advance.39 (Emphasis
supplied)
Thus, an ambiguity results as to which interest shall be
applied, for to apply an 18% interest per annum based Here, the second loan agreement, or Promissory Note
on Promissory Note No. 0143 will negate the existence No. 0143, referring to the consumption loan makes no
of the 0% interest charged by Promissory Note No. reference to the earlier loan with a real estate
0142. Notably, it is this latter Promissory Note that mortgage. Neither does the bank make any allegation
refers to the principal agreement to which the security that it relied on the security of the real estate
attaches. mortgage in issuing the consumption loan to Tuble.
In resolving this ambiguity, we refer to a basic principle It must be remembered that Tuble was petitioner’s
in the law of contracts: "Any ambiguity is to be previous vice-president. Hence, as one of the senior
taken contra proferentem, that is, construed against officers, the consumption loan was given to him not as
the party who caused the ambiguity which could have an ordinary loan, but as a form of accommodation or
avoided it by the exercise of a little more privilege.40 The bank’s grant of the salary loan to Tuble
care."35 Therefore, the ambiguity in the mortgage deed was apparently not motivated by the creation of a
whose terms are susceptible of different interpretations security in favor of the bank, but by the fact the he was
must be read against the bank that drafted it. a top executive of petitioner.
Consequently, we cannot impute grave error on the
part of the courts a quo for not appreciating a charge of Thus, the bank cannot claim that it relied on the
18% interest per annum. previous security in granting the consumption loan to
Tuble. For this reason, the dragnet clause will not be
Furthermore, this Court refuses to be blindsided by the extended to cover the consumption loan. It follows,
dragnet clause in the Real Estate Mortgage Contract to therefore, that its corresponding interest – 18% per
automatically include the consumption loan, and its annum – is inapplicable. Consequently, the courts a
corresponding interest, in computing the redemption quo did not gravely abuse their discretion in refusing to
price. apply an annual interest of 18% in computing the
redemption price. A finding of grave abuse of discretion
As we have held in Prudential Bank v. Alviar,36 in the necessitates that the judgment must have been
absence of clear and supportive evidence of a contrary exercised arbitrarily and without basis in fact and in
intention, a mortgage containing a dragnet clause will law.41
not be extended to cover future advances, unless the
document evidencing the subsequent advance refers to The Interest Charges on Promissory
the mortgage as providing security therefor. Note No. 0142
In this regard, this Court adopted the "reliance on the In addition to the 18% annual interest, the bank also
security test" used in the above-mentioned cases, claims a 12% interest per annum on the consumption
Prudential Bank37 and Philippine Bank of loan. Notwithstanding that Promissory Note No. 0142
Communications.38 In these Decisions, we elucidated contains no stipulation on interest payments, the bank
the test as follows: still claims that Tuble is liable to pay the legal interest.
This interest is currently at 12% per annum, pursuant
x x x A mortgage with a "dragnet clause" is an "offer" to Central Bank Circular No. 416 and Article 2209 of the
by the mortgagor to the bank to provide the security of Civil Code, which provides:
the mortgage for advances of and when they were
made. Thus, it was concluded that the "offer" was not If the obligation consists in the payment of a sum of
accepted by the bank when a subsequent advance was money, and the debtor incurs in delay, the indemnity
made because (1) the second note was secured by a for damages, there being no stipulation to the contrary,
chattel mortgage on certain vehicles, and the clause shall be the payment of the interest agreed upon, and
therein stated that the note was secured by such in the absence of stipulation, the legal interest, which is
chattel mortgage; (2) there was no reference in the six per cent per annum. (Emphasis supplied)
second note or chattel mortgage indicating a
While Article 2209 allows the recovery of interest sans share in the DIP in view of the full settlement of his
stipulation, this charge is provided not as a form of obligations. Thus, there being no substantial delay on
monetary interest, but as one of compensatory his part, the CA did not grievously err in not declaring
interest.42 him to be in default.
Monetary interest refers to the compensation set by The Award of Moral and Exemplary
the parties for the use or forbearance of money.43 On Damages
the other hand, compensatory interest refers to the
penalty or indemnity for damages imposed by law or The courts a quo awarded Tuble P200,000 as moral
by the courts.44Compensatory interest, as a form of damages and P50,000 as exemplary
damages, is due only if the obligor is proven to have damages.1âwphi1 As appreciated by the RTC, which
defaulted in paying the loan.45 had the opportunity to examine the parties,47 the bank
treated Tuble unfairly and unreasonably by refusing to
Thus, a default must exist before the bank can collect lend even a little charity and human consideration
the compensatory legal interest of 12% per annum. In when it immediately foreclosed the loans of its previous
this regard, Tuble denies being in default since, by way vice-president instead of heeding his request to make a
of legal compensation, he effectively paid his liabilities straightforward calculation of his receivables and offset
on time. them against his liabilities.48
This argument is flawed. The bank correctly explains in To the mind of the trial court, this was such a simple
its Petition that in order for legal compensation to take request within the control of the bank to grant; and if
effect, Article 1279 of the Civil Code requires that the petitioner had only acceded, the troubles of the lawsuit
debts be liquidated and demandable. This provision would have been avoided.1âwphi1
reads:
Moreover, the RTC found that the bank caused Tuble
(1) That each one of the obligors be bound principally, severe humiliation when the Nissan Vannette was
and that he be at the same time a principal creditor of seized from his new office at Kuok Properties
the other; Philippines. The trial court also highlighted the fact that
respondent as the previous vice-president of petitioner
(2) That both debts consist in a sum of money, or if the was no ordinary employee – he was a man of good
things due are consumable, they be of the same kind, professional standing, and one who actively
and also of the same quality if the latter has been participated in civic organizations. The RTC then
stated; concluded that a man of his standing deserved fair
treatment from his employer, especially since they
(3) That the two debts be due; served common goals.
(4) That they be liquidated and demandable; This Court affirms the dispositions of the RTC and the
CA. They correctly ruled that the award of moral
(5) That over neither of them there be any retention or damages also includes cases of besmirched reputation,
controversy, commenced by third persons and moral shock, social humiliation and similar injury. In
communicated in due time to the debtor. (Emphasis this regard, the social and financial standings of the
supplied) parties are additional elements that should be taken
into account in the determination of the amount of
moral damages.49 Based on their findings that Tuble
Liquidated debts are those whose exact amount has
suffered undue embarrassment, given his social
already been determined.46 In this case, the receivable
standing, the courts a quo had factual Basis50 to justify
of Tuble, including his DIP share, was not yet
the award of moral damages and, consequently,
determined; it was the petitioner’s policy to compute
exemplary damages51 in his favor.
and issue the computation only after the retired
employee had been cleared by the bank. Thus, Tuble
incorrectly invoked legal compensation in addressing From all the foregoing, we rule that the appellate court
this issue of default. correctly deleted the 18% annual interest charges,
albeit for different reasons. First, the interest cannot be
imposed, because any reference to it under the Real
Nevertheless, based on the findings of the RTC and the
Estate Mortgage Contract is misplaced, as the contract
CA, the obligation of Tuble as evidenced by Promissory
is already extinguished. Second, the said interest
Note No. 0142, was set to mature on 1 January 1999.
cannot be collected without any basis in terms of
But then, he had already settled his liabilities on 17
Tuble's redemption rights. Third, assuming that the
March 1997 by paying P1,318,401.91 as redemption
Real Estate Mortgage Contract subsists, the bank
price. Then, in 1999, the bank issued his Clearance and
cannot collect the interest because of the contract's IN VIEW THEREOF, the assailed 28 March 2008
ambiguity. Fourth, the dragnet clause referred to in the Decision and 30 July 2008 Resolution of the Court of
contract cannot be presumed to include the 18% Appeals in CA-G.R. CV No. 87410 are
annual interest specified in the consumption loan. Fifth, hereby AFFIRMED.
with respect to the compensatory interest claimed by
the bank, we hold that neither is the interest due, SO ORDERED.
because Tuble cannot be deemed to be in default of his
obligations.