1 G.R. No. L-56450 July 25, 1983 RODOLFO T. GANZON and GREGORIO L.

LIRA, in his capacity as Ex-Oficio Provincial Sheriff of Iloilo, petitioners, vs. THE HONORABLE SANCHO Y. INSERTO, Presiding Judge, Branch I of the Court of First Instance of Iloilo, RANDOLPH C. TAJANLANGIT and ESTEBAN C. TAJANLANGIT, respondents. Case Analysis: Parties: Petitioner: RODOLFO T. GANZON Respondent: RANDOLPH C. TAJANLANGIT and ESTEBAN C. TAJANLANGIT Prior Proceeding: Respondents filed a preliminary injunction with the court against the petitioners on extra-judicially foreclosing a real estate mortgage. Court ordered mortgage be substituted by a surety bond. Petitioner now comes to SC to question validity of the order. Theories: Petioner: mortgage was different from the sale of the land Respondent: mortgage which is the subject of the extra judicial proceeding was for the purpose of securing payment which formed part of the price of the sale of the land. Objectives: Petitioner: to nullify the order of the trial court and cancel substitution of mortgage to surety bond. Respondent: to uphold the trial courts decision Key Facts: Petitioner sold a land to respondent. Respondent avers that the balance of the price would be secured by a mortgage on that land. However a proviso in the deed of sale contained a warranty that petitioner would guarantee that the occupants on the land would vacate within 120 days and since the warranty was breached because the occupants were still there, the foreclosure would be illegal. Respondents then came to trial court when petitioner tried to foreclose the mortgage. The trial court canceled the mortgage and substituted it with surety bond upon stating that petitioner failed to comply with the clearing of the occupants and since respondent now are willing to pay for the money promised by the mortgage Issue: Wheter or not court may order substitution of mortgage with surety bond Holdings: No. Court cannot substitute mortgage with surety bond. Ratio Decidendi: A mortgage is but an accessory contract. "The consideration of the mortgage is the same consideration of the principal contract without which it cannot exist as an independent contract ... By Article 2126 of the Civil Code, (Formerly Article 1876 of the Civil Code of Spain of 1889.) a 'mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted.' Sale or transfer cannot affect or release the mortgage. A purchaser is necessarily bound to acknowledge and respect the encumbrance to which is subject

2 the purchased thing and which is at the disposal of the creditor 'in order that he, under the terms of the contract, may recover the amount of his credit therefrom.' (Bischoff vs. Pomar, 12 Phil. 690, 700) For, a recorded real estate is a right in rem, a lien on the property whoever its owner may be. (Altavas, The Law of Mortgages in the Philippine Islands, 1924 ed., p. 2) Because the personality of the owner is disregarded; the mortgage subsists notwithstanding changes of ownership; the last transferee is just as much of a debtor as the first one; and this, independent of whether the transferee knows or not the person of the mortgagee. (Id., at p. 6) So it is, that a mortgage lien is inseparable from the property mortgaged. All subsequent purchasers thereof must respect the mortgage, whether the transfer to them be with or without the consent of the mortgagee. For, the mortgage, until discharge, follows the property. Applying the principles underlying the nature of a mortgage, the real estate mortgage can not be substituted by a surety bond as ordered by the trial court. The mortgage lien in favor of Petitioner Rodolfo Ganzon is inseparable from the mortgaged property. It is a right in rem, a lien on the property. To substitute the mortgage with a surety bond would convert such lien from a right in rem, to a right in personam. This conversion can not be ordered for it would abridge the rights of the mortgagee under the mortgage contract. Disposition: SC enjoined permanently trial courts order. 59. G.R. No. L-61744 June 25, 1984 MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner, vs. HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge, Branch IV, Baliuag, Bulacan, The PROVINCIAL SHERIFF of Bulacan, MARGARITA D. VDA. DE IMPERIO, ADORACION IMPERIO, RODOLFO IMPERIO, CONRADO IMPERIO, ERNESTO IMPERIO, ALFREDO IMPERIO, CARLOS IMPERIO, JR., JUAN IMPERIO and SPOUSES MARCELO PINEDA and LUCILA PONGCO, respondents. Parties: Petioner: MUNICIPALITY OF SAN MIGUEL, BULACAN Respondent: HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge Prior Proceedings: Petitioner, filed a Motion to Quash the writ of execution of the trial court. Theories: Petioner: the municipality's property or funds are all public funds and exempt from execution. Respondent: petioner has more than enough funds to meet its obligation. Objectives: Petioner: to annul the writ of execution Respondent: to subject public funds to levy and execution Key Facts: In Civil Case entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of San Miguel, Bulacan, et al.", the then Court of First Instance of Bulacan rendered judgment holding herein petitioner municipality liable to private respondents .Thereafter, herein private respondents moved for issuance of a writ of execution for the satisfaction of the judgment. Respondent judge issued an order for writ of execution. Petitioner filed a Motion to quash the writ of execution on the ground that the municipality's property or funds are all public funds exempt from execution. The said motion to quash was, however, denied by the respondent judge. Petitioner

3 now comes to SC to annul trial courts writ of execution. Issue: Wheter the funds of the municipality are public funds which are exempt from execution. Holdings: Yes.The funds are exempt from execution. Ratio Decidendi: Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained in that they are held in trust for the people, intended and used for the accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and public funds to execution would materially impede, even defeat and in some instances destroy said purpose. It is the settled doctrine of the law that not only the public property but also the taxes and public revenues of such corporations Cannot be seized under execution against them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of the law, are not subject to execution unless so declared by statute." Thus, it is clear that all the funds of petitioner municipality in the possession of the Municipal Treasurer of San Miguel, as well as those in the possession of the Provincial Treasurer of Bulacan, are also public funds and as such they are exempt from execution. Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a), provides: SEC. 2. Fundamental Principles. Local government financial affairs, transactions, and operations shall be governed by the fundamental principles set forth hereunder: (a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other specific statutory authority. Disposition: The order of respondent judge granting issuance of a writ of execution are SET ASIDE; and respondents are hereby enjoined from implementing the writ of execution.