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37
BANK OF COMMERCE, Petitioner,
vs.
SPS. PRUDENCIO SAN PABLO, JR., and NATIVIDAD O. SAN PABLO, Respondents.
G.R. No. 167848 April 27, 2007

Facts:

Melencio Santos obtained a loan from Direct Funders Management and Consultancy Inc.,
with spouses Natividad and Prudencio San Pablo issuing a Special Power of Attorney authorizing
the former to mortgage to Direct Funders their real property. Upon settlement of said obligation,
the spouses discovered that the property was again used by Santos as collateral for another loan
obligation he secured from the Bank of Commerce, as evidenced by an SPA and a Deed of REM,
bearing their forged signatures. The spouses filed a Complaint seeking for the Quieting of Title and
Nullification of the SPA. However, since the loan already became due and demandable, the Bank of
Commerce sought the foreclosure of the subject property.

Issue:
Whether or not Bank of Commerce can be considered a mortgagee in good faith

Held:

No. The Bank of Commerce clearly failed to observe the required degree of caution in
ascertaining the genuineness and extent of the authority of Santos to mortgage the subject
property. That the person applying for the loan is other than the registered owner of the real
property being mortgaged should have already raised a red flag and which should have induced the
Bank of Commerce to make inquiries into and confirm Santos’ authority to mortgage the Spouses
San Pablo’s property. In cases where the mortgagee does not directly deal with the registered
owner of real property and the mortgagee is a banking institution, the law requires that a higher
degree of prudence be exercised by such mortgagee.
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38

SPOUSES GUILLERMO AGBADA and MAXIMA AGBADA, petitioners, vs. INTER-URBAN

DEVELOPERS, INC., and REGIONAL TRIAL COURT-BR. 105, QUEZON CITY, respondents.
[G.R. No. 144029. September 19, 2002]

Facts:
Petitioners borrowed P1,500,000.00 from private respondent as secured by their parcel of
land and the improvements thereon. The loan was payable within six (6) months at three percent
(3%) interest per month. The spouses failed to pay the loan within the six-month period despite
demands. Private respondent moved for judicial foreclosure. The spouses filed their unverified
answer admitting that they had borrowed the amount of P1,500,000.00, but alleging that it was
payable within five (5) years and at twelve percent (12%) interest per annum.

A motion for summary judgment was filed by IUD. Therefore, the foreclosure proceedings
continued, with IUD as the highest bidder. The spouses opposed the sale because that the purchase
price of the property was below the appraised value as stated in an appraisal report, which were
denied by the trial court.

Issue:
Whether a foreclosure sale can be reversed on the ground that the purchase price of the property is
below its appraised value.

Held:
No. There is no merit in the spouses claim that the purchase price of the mortgaged real
property was way below its appraised value. To begin with, they deliberately withheld the
presentation of their own evidence which might have proved this matter and thus unfortunately
deprived respondent Inter-Urban Developers, Inc. the opportunity to cross-examine whatever such
evidence would tend to establish. Equally significant, the low purchase price could have worked
in the petitioner-spouses' favor if they promptly exercised their equity of redemption.

As held in Tarnate v. Court of Appeals, "[a]nent the contention that the property has been sold at
an extremely low price, suffice it to say that, if correct, it would have, in fact, favored an easy
redemption of the property. That remedy could have well been availed of but petitioners did not."
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45
SPOUSES ROBERTO and ADELAIDA PEN, Petitioners,
vs.
SPOUSES SANTOS and LINDA JULIAN, Respondents.
GR No. 160408, January 11, 2016

Facts:
The appellees (the Julians) obtained loans from appellant Adelaida Pen. When the loans
became due, appellees failed to pay. As such, appellant Adelaida decided to institute foreclosure
proceedings, but instead was convinced that she just purchase the property without proceedings.
After the sale, Linda Julian offered to repurchase the property but was denied by Adelaida. Further,
she was informed by the Registry of Deeds that the title to the mortgaged property had already
been registered in the name of Adelaida, prompting the former to file complaints.

The complaint alleged that appellant Adelaida, through obvious bad faith, maliciously caused to be
notarized the Deed of Sale earlier signed by appellee Julian, and used this spurious deed of sale as
the vehicle for her fraudulent transfer unto herself the parcel of land. CA and the RTC both declared
the deed of sale as void and inexistent.

Issue:
Whether or not the CA erred in ruling that the deed of sale is void

Held:
No. The deed of sale between the parties as pactum commissorium. There is a pledge or
mortgage wherein property is pledged or mortgaged by way of security for the payment of the
principal obligation; and a stipulation for an automatic appropriation by the creditor of the thing
pledged or mortgaged in the event of non-payment of the principal obligation within the stipulated
period. The first element was present considering that the property of the respondents was
mortgaged by Linda in favor of Adelaida as security for the farmer's indebtedness. As to the second,
the authorization for Adelaida to appropriate the property subject of the mortgage upon Linda's
default was implied from Linda's having signed the blank deed of sale simultaneously with her
signing of the real estate mortgage.

Also, the absence of the consideration from Linda's copy of the deed of sale was credible proof of
the lack of an essential requisite for the sale. In other words, the meeting of the minds of the parties
so vital in the perfection of the contract of sale did not transpire.
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49
SPOUSES GEORGE A. GALLENT, SR. and MERCEDES M. GALLENT, Petitioners,
vs.
JUAN G. VELASQUEZ, Respondent.
GR NO. 203949, April 06, 2016

FACTS:
Petitioners assigned to Juan Velasquez all their rights, interests, and obligations under
their Agreement to Sell with Allied Bank. On November 5, 2003, Allied Bank and Velasquez
executed a Deed of Absolute Sale over the subject property. However, the said instrument was
not registered. Subsequently, Velasquez caused another Deed of Sale dated, over the subject
property. After more than four years, Velasquez sent a demand letter to the Spouses Gallent to
vacate the subject property, but the latter refused to do so. On July 6, 2009, Velasquez filed an
ex parte petition for issuance of a writ of possession, to which the RTC granted.

ISSUE
Whether or not in extrajudicial foreclosure of mortgage, after the consolidation of the title over
the foreclosed property in the buyer, it is the ministerial duty of the court to issue a writ of
possession upon an ex parte petition by the new owner as a matter of right.

HELD
Yes. The issuance of the writ of possession is a ministerial duty of the court upon filing of the
proper application and proof of title and by its nature does not require notice upon persons
interested in the subject properties.

However, where a parcel levied upon on execution is occupied by a party other than a judgment
debtor, the procedure is for the court to order a hearing to determine the nature of said adverse
possession.

Further, When the vendor remains in possession of the property sold as lessee or otherwise, or
the price of the sale is unusually inadequate, as in this case, the law deems the contract as an
equitable mortgage.
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NOTE: YOU CAN OMIT THOSE IN RED.

39
ADORACION PAGUYO, complainant, vs. CHARLIE S. GATBUNTON, respondent.
A.M. No. P-06-2135 | May 25, 2007

Facts
Spouses Danilo Paguyo, Sr. and Adoracion Paguyo obtained a loan of ₱20,000.00 from
Jeanlyn’s Lending Investor (JLI), secured by a real estate mortgage executed over their residential
property. Upon default for payment, Spouses Garcia, as owner of JLI, filed an application for the
extrajudicial foreclosure with the RTC. Thereafter, a Notice of Sheriff’s Sale was issued by the
respondent, setting the public auction sale on April 11, 2003. However, the auction sale was
actually conducted by the respondent on December 1, 2003 with Jenelita Garcia emerging as the
highest bidder. As a result, Adoracion Paguyo filed with the Office of the Court Administrator a
sworn letter-complaint charging respondent with grave abuse of authority and/or gross ignorance
of the law. The OCA faults the respondent sheriff for conducting the auction sale of the mortgaged
property on December 1, 2003 without republishing the Notice of Sheriff’s Sale with the
corresponding change in the date of the auction.

Issue
Whether there is a need for a republication of the Notice of Sheriff’s Sale for a postponed
extrajudicial sale

Ruling
YES. In Development Bank of the Philippines v. Court of Appeals, the Court emphasized the
need for the republication of the Notice of Sheriff’s Sale of a postponed extrajudicial sale for the
latter’s validity. In that case, the Court held, citing Ouano v. CA:

x x x republication in the manner prescribed by Act No. 3135 is necessary for the
validity of a postponed extrajudicial foreclosure sale. Another publication is required in
case the auction sale is rescheduled, and the absence of such republication invalidates
the foreclosure sale.
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40
PHILIPPINE VETERANS BANK, petitioner, vs. BENJAMIN MONILLAS, respondent.
G.R. No. 167098 | March 28, 2008

Facts
Benjamin Monillas executed a deed of sale of his share over the inherited property to Ireneo
under the latter’s representation that he would use the deed to facilitate the procurement of a loan.
However, Ireneo caused the transfer of the title in his name and mortgaged 22 lots to petitioner
Philippine Veterans Bank (PVB). Three years thereafter, respondent moved for the nullification of
the deed of sale and recovery of property with the RTC, which was granted. However, while the case
was pending, PVB foreclosed the mortgage, wherein PVB emerged as the highest bidder. Later,
respondent caused the annotation of notices of lis pendens on the titles of the subdivided lots. On
April 10, 2003, respondent sued petitioner and the Register of Deeds of Isabela which was decided
in favor of the respondent. Petitioner’s Motion for Reconsideration was later denied. Hence, this
instant petition for review on certiorari.

Issue
Whether the prior registered mortgage and the already concluded foreclosure proceedings
should prevail over the subsequent annotation of the notices of lis pendens on the lot titles.

Ruling
YES. The Court ruled that the prior registered mortgage of PVB and the foreclosure
proceedings already conducted prevail over respondents subsequent annotation of the notices of lis
pendens on the titles to the property. Settled in this jurisdiction is the doctrine that a prior
registration of a lien creates a preference; hence, the subsequent annotation of an adverse claim
cannot defeat the rights of the mortgagee, or the purchaser at the auction sale whose rights were
derived from a prior mortgage validly registered. A contrary rule will make a prior registration of a
mortgage or any lien nugatory or meaningless.
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43
ROSALINA CARODAN, petitioner, vs. CHINA BANKING CORPORATION, respondent.
G.R. No. 210542 | February 24, 2016

Facts
Barbara Perez, Rebecca Perez-Viloria, Rosalina Carodan and Madeline Carodan obtained a
loan from China Banking Corporation for which Barbara and Rebecca executed a promissory note
under which they promised to jointly and severally pay the loan of P2.8 million and as a security,
Barbara, Rebecca and Rosalina executed a Real Estate Mortgage over a property of Rosalina.
China Bank also alleged that a Surety Agreement was also executed by Barbara and Rebecca as
principals and Rosalina and her niece Madeline as sureties. Barbara and Rebecca failed to pay
their loan obligation which prompted the bank to institute extrajudicial foreclosure proceedings on
the mortgaged property. The proceeds realized is Pl.5 million which would still leave a deficiency of
P365,345.77 when applied to the outstanding balance. For that reason, the bank prayed that the
court order the payment of the deficiency amount.

The RTC ordered Rebecca, Barbara and Rosalina to be jointly and severally liable to China
Bank for the deficiency with interest. Rosalina appealed to the CA which found it bereft of merit.
Hence, this petition.

Issue
1. Whether China Bank can still collect the deficiency amount.
2. Rosalina is liable jointly and severally with Barbara and Rebecca for the payment of
China Bank's claims.

Ruling
1. YES. A mortgage is simply a security for, and not a satisfaction of indebtedness. If the
proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage,
the mortgagee is entitled to claim the deficiency from the debtor. The creditor, respondent China
Bank in this Petition, is therefore not precluded, from recovering any unpaid balance on the
principal obligation if the extrajudicial foreclosure sale of the property, subject of the Real Estate
Mortgage, would result in a deficiency.

2. YES. The Court finds that Rosalina is liable as an accommodation mortgagor and as a
surety.

When Rosalina affixed her signature to the Real Estate Mortgage as mortgagor and to the
Surety Agreement as surety which covered the loan transaction represented by the Promissory
Note, she thereby bound herself to be liable to China Bank in case the principal debtors, Barbara
and Rebecca, failed to pay.
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44

MAE FLOR GALIDO, petitioner, vs. NELSON P. MAGRARE, EVANGELINE M. PALCAT, RODOLFO
BAYOMBONG, and REGISTER OF DEEDS OF ANTIQUE, San Jose, Antique, respondents.
G.R. No. 206584 | January 11, 2016

Facts
Andigan sold undivided portions of Lot 1052-A to Nelson P. Magrare , Evangeline M. Palcat
and Rodolfo Bayombong. Andigan subdivided the property into five lots and new certificates were
issued in the name of Andigan, but he did not turn over the new TCTs to the three buyers. Andigan
mortgaged the same three lots to petitioner. On 6 February 2001, at 11:00 a.m., Magrare, Palcat and
Bayombong registered their respective adverse claims on said titles. On the same day, at 3:00 p.m.,
petitioner also registered her mortgage on the same TCTs. Subsequently, Magrare, Palcat and
Bayombong filed before the RTC a Petition to Compel the Surrender to the Register of Deeds the
Owner’s Duplicate Copies of the three TCTs against the Spouses Andigan which was granted,
prompting the RD to annul the duplicate copies of the three titles and new ones were issued in
lieu thereof.

Meanwhile, petitioner also filed with the RTC a case for foreclosure of mortgage which was
granted, she was issued a Certificate of Sale for the three disputed lots. Hence, petitioner filed a
petition seeking to cancel all entries appearing on said three titles. RTC dismissed the case as it was
moot and academic because the same titles already cancelled. Petitioner appealed to the CA but
the same was denied. Hence, this petition.

Issue
Who has a better right to the properties concerned: petitioner on one hand, and Magrare,
Palcat and Bayombong on the other.

Ruling
Magrare, Palcat and Bayombong have a better right to the properties. Petitioner
derives her title from Andigan, as mortgagor. However, at the time Andigan mortgaged the lots to
petitioner he had already sold the same to Magrare, Palcat and Bayombong. Hence, when Andigan
mortgaged the lots to petitioner on 8 May 2000, he no longer had any right to do so. Since Andigan
no longer had any interest in the subject properties at the time he mortgaged them to her,
petitioner had nothing to foreclose. Further, the adverse claims were registered on the respective
titles on 6 February 2001, at 11:00 in the morning. They were already in existence when petitioner
filed her case for foreclosure of mortgage.
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35

ASUNCION SAN JUAN, petitioner, vs. COURT OF APPEALS and YOUNG AUTO SUPPLY CO.,
respondents.

GR No. 110055 | 20 August 2001 | Third Division | J. Panganiban

FACTS

Lot No. 14-B, which was formerly covered by TCT No. T-120163 was registered in the name of
Petitioner. The property was mortgaged to Private Respondent. Upon default in the payment, an
extrajudicial foreclosure proceeding was instituted and private respondent was the sole bidder
in the auction sale. After the lapse of the one-year redemption period, a final Certificate of Sale
was issued. However, private respondent could not register it, because petitioner refused to
surrender her duplicate Certificate of Title. Because of this a Petition for registration and
annotation of the Certificate of Sale was filed with the RTC. The trial court ordered San Juan to
deliver to private respondent her owner’s duplicate but she failed. Consequently, the Certificate
of Sale was annotated in the original Certificate of Title in favor of private respondent. The
motion reconsideration filed at the RTC after three (3) years and the appeals lodged at Court of
Appeals were both denied. Thus, this petition.

ISSUE

Whether the duly executed mortgage may be properly attacked

RULING

NO. It took almost three (3) years — well beyond the lapse of the redemption period — and the
issuance of the final Certificate of Sale, before she protested and attacked the validity of the real
estate mortgage. The right to attack the validity of a mortgage may be lost by a waiver of defects
and objections, such as alleged fraud or misrepresentation. Mortgagors desiring to attack the
validity of a mortgage should act with promptness. Otherwise, unreasonable delay may amount
to ratification. A duly executed mortgage is presumed to be valid until the contrary is shown. To
the party attacking rests the burden of proving its invalidity due to fraud, duress or illegality. It
should be stressed that, as a general rule, courts will adopt such construction as will sustain
rather than defeat the mortgage.
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41

SALVADOR PIANSAY and CLAUDlA V. VDA. DE UY KIM, plaintiffs-appellants, vs. CONRADO S.

DAVID and MARCOS MANGUBAT, defendants-appellees.

GR No. L-19468 | 30 October 1964 | En Banc | J. Concepcion

FACTS

Conrado S. David (David) received a loan of P3,000 with interest at 12% per annum
from Claudia B. Vda. de Uy Kim (Kim), one of the plaintiffs, and to secure the payment of the
same, David executed a chattel mortgage on a house owned by him. Later on, the mortgaged
house was sold at public auction to satisfy the indebtedness to Kim, and the house was sold to
the latter in the said proceedings. Kim sold the same house to, Salvador Piansay (Piansay) for
the sum of P5,000.00. Subsequently, David mortgaged the said house to Marcos Mangubat
(Mangubat). Seven years later, Mangubat filed a complaint against David, Piansay and Kim, in
the CFI of Manila, for the collection of the loan of P2,000 with a prayer that auction sale
executed by the Sheriff, and the deed of absolute sale be annulled. The complaint was dismissed.
A separate complaint was instituted by the plaintiffs to restrain the levy at the public auction
and denouncing Mangubat’s demand for payment of rental on his property. The lower court
dismissed the complaint on the ground of res judicata. Plaintiffs appealed directly to the
Supreme Court.

ISSUE

Whether a contract constituting a chattel mortgage on a house cannot bind third persons not
parties to said contract or their privies

RULING

NO. At any rate, regardless of the validity of a contract constituting a chattel mortgage on a
house, as between the parties to said contract (Standard Oil Co. of N.Y. vs. Jaramillo, 44 Phil.
632- 633), the same cannot and does not bind third persons, who are not parties to the
aforementioned contract or their privies. As a consequence, the sale of the house in question in
the proceedings for the extra-judicial foreclosure of said chattel mortgage, is null and void
insofar as defendant Mangubat is concerned, and did not confer upon Mrs. Uy Kim, as buyer in
said sale, any dominical right in and to said house (De la Riva vs. Ah Yee, 60 Phil. 800), so that
she could not have transmitted to her assignee, plaintiff Piansay, any such right as against
defendant Mangubat. In short, plaintiffs have no cause of action against the defendants herein.
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46

UNIVERSITY OF MINDANAO, INC., petitioner, vs. BANGKO SENTRAL NG PILIPINAS, ET AL.,

respondents.

GR No. 194964-65 | 11 January 2016 | Second Division | J. Leonen

FACTS

University of Mindanao (UM) is an educational institution. In 1982, its Board of

Trustees was chaired by Guillermo B. Torres (Guillermo). Before 1982, Guillermo operated two
(2) thrift banks: (1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2) Davao Savings
and Loan Association, Inc. (DSLAI). Guillermo acted as FISLAI's President. Upon Guillermo’s
request, BSP issued a P1.9 million standby emergency credit to FISLAI. In the same year, UM’s
Vice President for Finance, Saturnino Petalcorin (Petalcorin), without authority from UM,
executed several deeds of real estate mortgage over UM's properties in favor of BSP as a
security. Upon finding out of the unauthorized transaction, UM then filed two complaints for
nullification and cancellation of mortgage. Petitioner alleged that it never authorized Petralcino
to execute the mortgage to secure FISLAI’s debts and that as an educational institution, it
cannot mortgage its properties to secure another person’s debt.

ISSUE

1. Whether the mortgage is valid

2. Whether petitioner is bound by the real estate mortgage contracts executed by Saturnino
Petalcorin

RULING

1. NO. This court upheld the validity of corporate acts when those acts were shown to be
clearly within the corporation's powers or were connected to the corporation's purposes. In
this case, the presumption that the execution of mortgage contracts was within petitioner's
corporate powers does not apply. Securing third-party loans is not connected to petitioner's
purposes as an educational institution.
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2. NO. The mortgage contracts executed in favor of respondent do not bind petitioner. They were
executed without authority from petitioner. Being a juridical person, petitioner cannot conduct
its business, make decisions, or act in any manner without action from its Board of Trustees.
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36

GEMMA R. HECHANOVA, accompanied by her husband, NICANOR HECHANOVA,

JR., and PRESCILLA R. MASA accompanied by her husband, FRANCISCO MASA,
petitioners, vs. HON. MIDPANTAO L. ADIL, Presiding Judge, Branch II, Court of First
Instance of Iloilo, THE PROVINCIAL SHERIFF OF ILOILO, and PIO SERVANDO,
respondents.

GR No. L-49940 | 25 September 1986 | First Division | J. Yap

FACTS

Jose Y. Servando (Jose) executed in favor of Gemma Hechanova and Prescilla R. Masa
a deed of sale covering three parcels of land. Claiming that the said parcels of land were
mortgaged to him in 1970 by the vendor, to secure a loan of P20,000.00, Pio Servando (Pio)
impugned the validity of the alleged fraudulent sale before the CFI of Iloilo with a prayer that it
be declared null and void and the transfer certificates of title issued be cancelled; or
alternatively, if the sale is not annulled, to order Jose to pay P20,000.00, plus interests, and
damages. Attached in Pio’s complaint is an unrecorded private document evidencing the alleged
mortgage. A judgment by default was rendered against herein petitioners annulling the deed of
sale in question and ordering the Register of Deeds of Iloilo to cancel the titles issued to them.
They filed an appeal before the CA but the record on appeal was disapproved by the lower
court. The appeal was dismissed and the execution prayed for was ordered. Hence, this petition.

ISSUE

Whether the mortgage is valid

RULING

NO. It is clear from the records of this case that the plaintiff has no cause of action. Plaintiff has
no standing to question the validity of the deed of sale executed by the deceased defendant Jose
Servando in favor of his co-defendants Hechanova and Masa. No valid mortgage has been
constituted in plaintiff's favor, the alleged deed of mortgage being a mere private document and
not registered; moreover, it contains a stipulation (pacto comisorio) which is null and void
under Article 2088 of Civil Code. Even assuming that the property was validly mortgaged to the
plaintiff, his recourse was to foreclose the mortgage, not to seek annulment of the sale.
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