1) Naguiat v CA

GR No. 118375
Doctrine:
Art. 1934, NCC provides: "An accepted promise to deliver something by
way of commodatum or simple loan is binding upon the parties, but the
commodatum or simple loan itself shall not be perfected until the delivery
of the object of the contract."
Facts:
Queao loaned from Naguiat P200T. Naguiat issued 2 checks worth 95T each. The
loan was secured by a post dated check issued by Queao in favor of Naguiat, a Real
Estate Mortgage and a Promissory Note. When the loan was due, Naguiat deposited
the postdated check issued by Queao. It was dishonored by the bank. Naguiat
demanded that Queao pay his indebtedness. When said demand remained
unheeded, Naguiat sought for the foreclosure of the mortgage. Queao enjoined
Naguiat from proceeding with the foreclosure contending in main that he never
received the proceeds of the loan in the first place.
Issue:
Was the loan herein perfected when Naguiat delivered the checks to Queao?
Held:
No. The loan was never perfected since the checks were never proven to have been
encashed by Queao.
Absolutely no evidence was submitted by Naguiat that the checks she issued or
endorsed were actually encashed or deposited. The mere issuance of the checks did
not result in the perfection of the contract of loan. For the Civil Code provides that
the delivery of bills of exchange and mercantile documents such as checks shall
produce the effect of payment only when they have been cashed. It is only after the
checks have produced the effect of payment that the contract of loan may be
deemed perfected as provide in Art. 1934 of the Civil Code.
A loan contract is a real contract, not consensual, and, as such, is perfected only
upon the delivery of the object of the contract. In this case, the objects of the
contract are the loan proceeds which Q would enjoy only upon the encashment of
the checks signed or indorsed by N. If indeed the checks were encashed or
deposited, N would have certainly presented the corresponding documentary
evidence, such as the returned checks and the pertinent bank records. Since N
presented no such proof, it follows that the checks were not encashed or credited to
Qs account.

The Court finds no compelling reason to disturb the finding of the courts a quo that
the lender did not remit and the borrower did not receive the proceeds of the loan.
That being the case, it follows that the mortgage which is supposed to secure the
loan is null and void. The consideration of the mortgage contract is the same as that
of the principal contract from which it receives life, and without which it cannot exist
as an independent contract.

2) Producers Bank v CA
GR No. 115324
Doctrine:
A commodatum may have for its object consumable thing if the
consumable goods are loaned only for the purpose of exhibition, or when
the intention of the parties is to lend consumable goods and to have the
very same goods returned at the end of the period agreed upon.
Facts:
Doronilla is in the process of incorporating his business and to comply with one of
the requirements of incorporation, he caused Vives to issue a check which was then
deposited in Doronillas savings account. It was agreed that Vivescan withdraw his
money in a months time. However, what Doronilla did was to open a current
account and instructed the bank to debit from the savings account and deposit it in
his current account. So when Vives checked the savings account, the money was
gone.
Issue:
Is the contract herein a commodatum or a mutuum?
Held:
Supreme Court held that the contract is a commodatum. Although in a
commodatum, the object is a non-consumable thing, there are instances where a
consumable thing may be the object of a commodatum, such as when the purpose
is not for consumption of the object but merely for exhibition (Art. 1936). Thus, if
consumable goods are loaned only for purposes of exhibition, or when the intention
of the parties is to lend consumable goods and to have the very same goods
returned at the end of the period agreed upon, the loan is a commodatum and not a
mutuum.

3) Central Bank of the Philippines v. CA

139 scra 46
Doctrine:
In reciprocal obligations, the obligation or promise of each party is the
consideration for that of the other, and when one party has performed or
is ready and willing to perform his part of the contract, the other party
who has not performed his part of the contract, the other party who has
not perform his part of the contract, the other party who has not
performed or is not ready and willing to perform his part of the contract,
the other party who has not performed or is not ready and willing to
perform incurs in delay, Art. 1169, NCC.
Facts:
Tolentino made a loan from Island Savings Bank secured by a mortgage. The Bank
did not release the whole amount but only a portion thereof. Later, the Bank
experienced liquidity problems and the Monetary Board of Central Bank prohibited it
from making new loans and much later, from doing business in the Philippines.
Thereafter, the Acting Superintendent of Central Bank took charge of its assets.
Upon expiration of the loan term, the Bank filed extrajudicial foreclosure of the
mortgage.
Issue:
Was there a perfected contract of loan when only a portion of the amount was
delivered?
Held:
The Supreme Court held that there was only partial delivery. As such, the contract is
deemed perfect only in so far as what has been delivered. The mortgage cannot be
entirely foreclosed, except for up to the amount of the actual amount released, but
the Bank can recover the interest of the partial loan. Tolentino cannot anymore
demand the remaining amount of the loan from the Bank because he defaulted on
his payment. His liability offsets the liability of the Bank to him.

4) SAURA IMPORT & EXPORT V DBP

GR No. L-24968 (APRIL 27, 1972)
Doctrine:
Where an application for a loan of money was approved by resolution of
the corporation (lender) and the corresponding mortgage was executed
and registered, there arises a perfected consensual contract of loan. Since
mutual agreement can create a contract, mutual disagreement by the
parties can cause its extinguishment.
Facts:
Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion
into DBP, for an industrial loan to be used for construction of factory building, for
payment of the balance of the purchase price of the jute machinery and equipment
and as additional working capital. In Resolution No. 145, the loan application was
approved to be secured first by mortgage on the factory buildings, the land site, and
machinery and equipment to be installed.
The mortgage was registered and documents for the promissory not were executed.
The cancellation of the mortgage was requested to make way for the registration of
a mortgage contract over the same property in favor of Prudential bank and Trust
Co., the latter having issued Saura letter of credit for the release of the jute
manchinery. As security, Saura execute a trust receipt in favor of the Prudential. For
failure of Saura to pay said obligation, Prudential sued Saura.
After 9 years after mortgage was cancelled, Saura sued RFc alleging failure to
comply with its obligations to release the loan proceeds, thereby prevented it from
paying the obligation to Prudential Bank.
The trial court ruled in favor of Saura, ruling that there was a perfected contact
between the parties and that the RFC was guilty of breach thereof.

Issue:
Whether or not there was a perfected contract between the parties.
Held:
The Court held in the affirmative. Art. 1934 provides: An accepted promise to
deliver something by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself not be perfected until delivery of
the object of the contract.
There was undoubtedly offer and acceptance in the case. When an application for a
loan of money was approved by resolution of the respondent corporation and the
responding mortgage was executed and registered, there arises a perfected
consensual contract.

5) BPI Investment Corp. vs. CA and ALS

232 scra 302
Doctrine:
A loan contract is not a consensual, but a real, contract. It is perfected
only upon the delivery of the object of the contract. A loan contract
involves a reciprocal obligation wherein the obligation or promise of each
party is the consideration for that of the other. Neither party incurs in
delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him.
Facts:
Roa obtained a loan from AIDC, predecessor of BPI. He mortgaged his house and lot
in New Alabang Village as security for the loan.
Roa sold the prop to ALS and Litonjua, 350K cash + 500k-assumption of Roa's
indebtedness w/ AIDC.
March 1981, AIDC issued a new loan to ALS to be applied to Roa's debt w/same
security. It was released August (update of Roa'sarreages)-Sept (7K+ - what was left
of loan after deducting Roasarreages) 1982. Amortization commenced May 1981
(as stipulated in the contract).
June 1984, BPI instituted foreclosure proceedings against ALS for non-payment from
May 1981-June 1984.

February 1985, ALS and Litonjua filed a civil case for damages against BPI. They
alleged they were not in arrears because a simple loan is perfected only upon the
delivery of the object of the contract. Hence it was perfected only on Sept 1982, the
date when BPI released the balance. So payment of monthly amortizations should
commence only on Oct 1982 (despite the agreement that it shall commence May
1981). In fact, according ALS, there was overpayment.
Also, ALS contends that a perfected loan agreement imposes reciprocal obligations,
where the obligation or promise of each party is the consideration of the other party
- so neither incurs in delay if the other is not ready to comply. In this case, ALS will
not incur delay as long as the total loan is not yet released by BPI.
BPI contends that contract of loan is a consensual contract, perfected at the time
the contract of mortgage was executed - March 31, 1981 (under Bonnevie v CA).
Also, that the loan was actually release on March 31, 1981 and delay in the release
is attributable to ALS.
Issue:
WON the contract of loan is perfected despite non-delivery, if it was agreed upon

Held:
NO. A loan contract is not a consensual contract but a real contract. It is perfected
only upon the delivery of the object of the contract. The contract in Bonnevie
declared by this Court as a perfected consensual contract falls under the first clause
of A1934. It is an accepted promise to deliver something by way of simple loan.
A contract of loan involves a reciprocal obligation, wherein the obligation or promise
of each party is the consideration for that of the other. The promise of BPIIC to
extend and deliver the loan is upon the consideration that ALS and Litonjua shall
pay the monthly amortization. So neither party incurs in delay, if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon
him. Therefore, in computing the amount due as of the date when BPIIC
extrajudicially caused the foreclosure of the mortgage, the starting date is October
13, 1982 and not May 1, 1981.
We cannot properly declare BPIIC in bad faith because ALS made irregular
payments, but, BPIIC was negligent in relying merely on the entries found in the
deed of mortgage, without checking and correspondingly adjusting its records on
the amount actually released to ALS and the date when it was released. So nominal
damages 25K is awarded.

6) Mina vsPascual
25 Phil 540
Doctrine:
Precarium is a kind of commodatum wherein the bailor may demand the
object at will if the contract does not stipulate a period or use to which the
thing is devoted.
Facts:
Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla
acquired during his lifetime, on March 12, 1874, a lot. Andres Fontanilla, with the
consent of his brother Francisco, erected a warehouse on a part of the said lot,
embracing 14 meters of its frontage by 11 meters of its depth. Francisco Fontanilla,
the former owner of the lot, being dead, the herein plaintiffs, Alejandro Mina, et al.,
were recognized without discussion as his heirs. Andres Fontanilla, the former owner
of the warehouse, also having died, the children of Ruperta Pascual were
recognized, though it is not said how, and consequently are entitled to the said
building, or rather, as Ruperta Pascual herself stated, to only six-sevenths of onehalf of it, the other half belonging, as it appears, to the plaintiffs themselves, and
the remaining one-seventh of the first one-half to the children of one of the
plaintiffs, Elena de Villanueva. Ruperta Pascual, as the guardian of her minor

children, the herein defendants, petitioned the Curt of First Instance of Ilocos Norte
for authorization to sell "the six-sevenths of the one-half of the warehouse, of 14 by
11 meters, together with its lot. The warehouse, together with the lot on which it
stands, was sold to Cu Joco, the other defendant in this case
Issue:
WoN there exist a contract of commodatum
Held:
Although both litigating parties may have agreed in their idea of the commodatum,
on account of its not being, as indeed it is not, a question of fact but of law.
Contracts are not to be interpreted in conformity with the name that the parties
thereto agree to give them, but must be construed, duly considering their
constitutive elements, as they are defined and denominated by law.
By the contract of loan, one of the parties delivers to the other, either anything not
perishable, in order that the latter may use it during the certain period and return it
to the former, in which case it is called commodatum
It is, therefore, an essential feature of the commodatum that the use of the thing
belonging to another shall BE for a certain period. Francisco Fontanilla did not fix
any definite period or time during which Andres Fontanilla could have the use of the
lot whereon the latter was to erect a stone warehouse of considerable value, and so
it is that for the past thirty years of the lot has been used by both Andres and his
successors in interest.
It would seem that the Supreme Court failed to consider the possibility of a contract
of precardium between Francisco and Andres. Precarium is a kind of commodatum
wherein the bailor may demand the object at will if the contract does not stipulate a
period or use to which the thing is devoted.

7) Republic of the Philippines vs. Jose Bagtas, Felicidad

Bagtas
6 scra 262
Doctrine:
A contract of commodatum is essentially gratuitous. Ownership of the
thing does not transfer to the bailee, thus, the bailor bears the risk of loss
due to force majeure. However, the bailee is liable for loss of the thing due
to fortuitous event if he keeps the thing longer than the period stipulated
or when the thing loaned has been delivered with appraisal of its value,
unless there is a stipulation exempting him from responsibility in case of
a fortuitous event.
Facts:
On May 8, 1948, Jose Bagtas borrowed from the Bureau of Animal Industry 3 bulls
for 1 year for breeding purposes, subject to breeding fee for 10% of the book value
of the bulls. Upon the expiration of the contract, Bagtas asked for a renewal for

another year. The renewal granted was only for 1 bull. Bagtas offered to buy the
bulls at book value less depreciation, but the Bureau told him that he should either
return the bulls or pay for their book value. Bagtas failed to pay the book value, and
so the Republic commenced an action with the CFI Manila to order the return of the
bulls of the payment of book value. FelicidadBagtas, the surviving spouse and
administratrix of the decedents estate, stated that the 2 bulls have already been
returned in 1952, and that the remaining one died of gunshot during a Huk raid. As
regards the two bulls, is was proven that they were returned and thus, there is no
more obligation on the part of the appellant. As to the bull not returned, Felicidad
contends that the obligation is extinguished since the contract is that of a
commodatum and that the loss through fortuitous event should be borne by the
owner.
Issue:
Whether, depending on the nature of the contract, the respondent is liable for the
death of the bull?
Held:
A contract of commodatum is essentially gratuitous. If the breeding fee be
considered a compensation, then the contract would be a lease of the bull. Under
article 1671 of the Civil Code the lessee would be subject to the responsibilities of a
possessor in bad faith, because she had continued possession of the bull after the
expiry of the contract. And even if the contract be commodatum, still the appellant
is liable, because article 1942 of the Civil Code provides that a bailee in a contract
of commodatum
. . . is liable for loss of the things, even if it should be through a fortuitous
event:
(2) If he keeps it longer than the period stipulated . . .
(3) If the thing loaned has been delivered with appraisal of its value, unless
there is a stipulation exempting the bailee from responsibility in case of a
fortuitous event;
The loan of one bull was renewed for another period of one year to end on 8 May
1950. But the appellant kept and used the bull until November 1953 when during a
Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the
deceased husband of the appellant the bulls had each an appraised book value. It
was not stipulated that in case of loss of the bull due to fortuitous event the late
husband of the appellant would be exempt from liability.

Special proceedings for the administration and settlement of the estate of the
deceased Jose V. Bagtas having been instituted in the Court of First Instance of Rizal
(Q-200), the money judgment rendered in favor of the appellee cannot be enforced
by means of a writ of execution but must be presented to the probate court for
payment by the appellant, the administratrix appointed by the court.

8) LIGUTAN vs. COURT OF APPEALS

G.R. No. 147465, February 12, 2002
Doctrine:
A penalty clause is an accessory undertaking to assume greater liability
on the part of the obligor in case of breach of an obligation. It functions to
strengthen the coercive force of the obligation and to provide in effect, for
what would be the liquidated damages resulting from such a breach. The

obligor would then be bound to pay the stipulated indemnity without the
necessity of proof on the existence and on the measure of damages
caused by the breach. Such stipulated penalty may still be equitably
reduced by the courts if iniquitous or unconscionable or if the principal
obligation has been partly or irregularly complied with.
A penalty stipulation is not necessarily preclusive of interest, if there is
an agreement to that effect, the two being distinct concepts which may be
separately demanded. What may justify the court in reducing penalty or
surcharges may not equally justify non-payment or reduction of interest.
Facts:
Ligutan and delaLlana obtained a loan from Security Bank and Trust Co. They
executed a promissory note binding themselves jointly and severally to pay the sum
borrowed with an interest of 15.89% per annum upon maturity and to pay a penalty
of 5% every month on the outstanding principal and interest in case of default. In
addition, they agreed to pay 10% of the total amount due by way of attorneys fees
if the matter were indorsed to a lawyer for collection or if a suit were instituted to
enforce payment. Ligutan and delaLlana failed to settle the debt. A complaint for
recovery of the amount due was filed with the RTC. The court held, among others,
the borrowers were liable for a 3% per month penalty (instead of 5%) and 10% of
the total amount of the indebtedness for attorneys fee, in addition to the principal
loan.
Issue:
-Whether the court is correct in holding the borrowers liable for the penalty.
-Whether or not the payment of Interest is still proper even after payment of penalty

Held:
A penalty clause, expressly recognized by law, is an accessory undertaking to
assume greater liability on the part of an obligor in case of breach of an obligation.
It functions to strengthen the coercive force of the obligation and to provide for
what could be the stipulated indemnity without the necessity of proof on the
existence and on the measure of damages caused by the breach. Although the
court may not at liberty ignore the freedom of the parties to agree on such terms
and conditions as they see fit, a stipulated penalty, nevertheless may be equitably
reduced by the courts if iniquitous or unconscionable or if the principal obligation
has been partly or irregularly complied with. The reduction is justified by the facts
that the borrowers were able to partly comply with their obligations.
The essence or rationale for the payment of interest, quite often referred to as cost
of money, is not exactly the same as that of a surcharge or a penalty. A penalty

stipulation is not necessarily preclusive of interest, if there is an agreement to that

effect, the two being distinct concepts which may separately be demanded.

9) PNB vs SAYO
292 SCRA 202
Doctrine:

The foreclosure of the thing pledged results in the full satisfaction of the
loan liabilities to the pledge of the pledgor. The buyer in a foreclosure sale
does not assume the obligations of the pledgor to his other creditors.
Facts:
Sugar finery issued several warehouse receipts covering sugar deposited by ANS
merchandising and St. Therese Merchandising subsequently. Some receipts were
indorsed to Ramos and Zoleta. The latter then used the receipts on securing for two
loan agreements with PNB. They indorsed it with PNB. PNB demanded delivery of
the sugar stocks covered by the receipts from Noahs ark sugar finery. Noah refused
to conmply with the demand. Hence PNB filed a complaint with the RTC/
Issue:
Whether or not PNB entered into pledge.
Held:
Yes. PNB contends that it was a mere pledge and the receipts were used to secure
two loans it granted. Supreme Court held that the indorsement and delivery of the
receipts by Ramos and Zoleta to PNB was not to convey title of ownership but to
secure the loans by way of pledge. The indorsement of the receipts to perfect the
pledge constituted a symbolical or constructive delivery of the possession of the
thing.

10) GSIS vs CA
170 scra 553
Doctrine:

Third persons who are not parties to the principal obligation may secure
the latter by pledging or mortgaging their own property.
Facts:
SppousesRacho and spouses Lagasca, executed a deed of mortgage dated
November 13, 1957 in favor of GSIS and subsequently, another deed of mortgage
for two loans granted by the latter in the sums of P11, 800 and P3,000 respectively.
Lagasca spouses executed an instrument on assumption of obligation to secure
release of the mortgage, but such was not fulfilled. For failure of the mortgagors to
comply with conditions of the mortgage, particularly the payment of amortizations
due, GSIS extrajudicially foreclosed the mortgage and sold at public auction.
Spouses Racho filed a complaint against GSIS and Spouses Lagasa praying that
extrajudicial foreclosure be declared null and void.
Issue:
Whether or not in accommodation party mortgage, the respondent not befitting
from the obligation, the foreclosure is valid.
Held:
Yes, it is valid. It cannot be said that private respondents are without liability under
the aforesaid mortgage contracts. So long as valid consent was given, the fact that
the loans were solely for the benefit of Lagasaspouses, would not invalidate the
mortgage with respect to private respondents share in the property. Even in
consenting thereto, even assuming that private respondents may not be assuming
personal liability for the debt, their share in the property shall nevertheless secure
and respond for the performance of the principal obligation. The parties to the
mortgage could not have intended that the same would apply only to aliquot portion
of the Lagasca spouses in the property, otherwise the consent of private
respondents would not have been required.

11) Olizonvs CA

236 scra 148

Doctrine:
The fact alone that there was no certificate of posting attached to the
sheriffs records of the extrajudicial foreclosure sale is not sufficient to
prove the lack of posting.
Facts:
Spouses Armando and IluminadaOlizonexceuted in favor of prudential bank a real
estate mortgage over a parcel of land with 1,000 sqmts. Located in barrio Calaanan,
Kalookan City for their obtained loan in the amount of P25,000. Petitioner failed to
pay their obligation which resulted in extrajudicial foreclosure of the property. At the
auction, property was sold to prudential bank. On failure of petitioners to redeem
the property was consolidated in favor of the bank and a writ of possession was
issued against petitioners. The petitioners opposed. RTC ruled in favor of petitioner.
CA reversed the decision.
Issue:
Whether or not the foreclosure sale was valid.
Held:
No, the fact alone that there was no certificate of posting attached to the sheriffs
records of the foreclosure sale is not sufficient to prove the lack of posting,
especially in this case where the questioned act and the record thereof are already
16 years old. Court also held that newspaper publication have more far-reaching
effects than posting on bulletin boards in public places. There is greater probability
than an announcement published in a newspaper of general circulation, which is
distributed nationwide, shall have a readership of more people than that posted in
public bulletin board, which caters only to a limited few.

12) PNB vs. RABAT

344 scra 706
Doctrine:
In extrajudicial foreclosure sales, personal notice to the mortgagors is
not necessary.
Facts:
On 1979, respondent spouses Francisco and Nerced Rabat applied for applied for a
loan with PNB in the amount of P4 million to mature in 3 years. The next year,
Rabats signed a credit agreement and executed a real estate mortgage over twelve
parcels of land. Rabat failed to pay their outstanding balance on due date. For their
failure, PNB filed a petition for extrajudicial foreclosure of the mortgage. After due
notice and publication, properties were sold to the highest bidder, PNB. As the
proceeds were not enough, PNB sent a new demand letters, spouses failed to
comply with the demand. PNB filed a complaint for a sum of money. Spouses filed
their answer and alleged that the auction sale is invalid for want of notice to them
before and after the foreclosure sales. Trial court ruled in favor of spouses and
ordered reconveyance of the remaining properties after the sale. CA affirmed the
decision.
Issue:
Whether or not the sale is invalid on the ground that there was no personal notice to
spouses Rabat.
Held:
No, in extrajudicial foreclosure sales, personal notice to the mortgagor is not
necessary. Under Section 3 of Act No. 3135, notice must be made thru posting and
publication. Clearly personal notice is not required. The requirements of posting
were duly complied with by PNB.

13) DBP vs ZARAGOZA

84 scra 668
Doctrine:
Extrajudicial foreclosure of mortgage; In extrajudicial foreclosure of
mortgage when the proceeds of the sale is insufficient to cover the debt,
mortgagee is entitled to claim the deficiency from the debtor.
Facts:
Appellant Zaragoza obtained a loan of P30,000 from DBP which was secured by a
real estate mortgage. Zaragoza defaulted in payment, as a result DBP foreclosed
extrajudicially the mortgage on 1952. The property was sold at public auction to
DBP, being the highest bidder for the sum of P21,035. However Zaragoza still owed
the appellee the amount of P7,779.36. Suit for deficiency with preliminary
attachment was filed by DBP. CFI ruled in favor of DBP.
Issue:
Whether or not DBP can recover the remaining balance of the debt extrajudicially
foreclosure of the property.
Held:
Yes, upon the sale of any real property, under an order for a sale to satisfy a
mortgage or other encumbrance thereon, if there be a balance due to the plaintiff
after applying the proceeds of the sale, the court, upon motion should render a
judgment against the defendant for any such balance he may personally liable to
the plaintiff. Therefore, creditor is entitled to any claim of deficiency from the
debtor.

14) Sumerarizvs DBP

GR No. L-23764
Doctrine:
The mortgagor or his assignee is required to tender payment within the
prescribed period to make said redemption period to be valid, or to
preserve the right of redemption for future enforcement beyond such
period of redemption.
Facts:
Juan Sumerariz and his wife, Luisa constituted, in favor of Rehabilitation Finance
Corporation (now DBP and hereinafter referred to as Bank) a real estate mortgage of
2 parcels of land forming part of San andresSubd. Manila to guarantee a P15,000
loan granted by the bank, payable within 10 years, when plaintiff defaulted in
payment, the bank asked the sheriff of Manila to take possession of the property
and sell it at public auction. After several postponements made upon plaintiffs
request, the sale was set on 9 March 1955. The bank bought the property at P8,000
as the highest bidder. Instead of exercising the right of redemption on 26 March
1965, plaintiffs instituted Civil Case against the bank and the Sheriff of Manila to
seta side the foreclosure sale, upon the ground that the bank had failed to comply
with its agreement to postpone the auction sale.
Issue:
Whether or not the one year period to redeem the property foreclosed by
respondent was suspended by the institution of an action to annul the foreclosure
sale filed 3 days before the expiration of the period.
Held:
Court did not found any statute or decision in support of the pretense. Moreover, up
to now plaintiffs have not exercised the right of redemption. Indeed, although they
have intimated their wish to redeem the property they have not deposited the
amount necessary thereof.

15) Union Bank of the Philippines vs CA

GR no. 134068, June 25 2001
Doctrine:
Issuance of a writ of possession is a ministerial act of the Court except
for peculiar circumstances.
Facts:
On March 2 1990, spouses Gomalo and Trinidad vincoy mortgaged their residence in
favor of petitioner to secure the payment of a loan to Delco Industries, Incorporated
in the amount of two million pesos. For failure of spouses Vincoy to pay the loan at
its date of maturity, petitioner (unionbank) extrajudicially foreclosed the mortgage.
Prior to the expiration of the redemption period, respondent, spouses filed a
complaint for annulment of mortgage with the lower court. Spouses alleged that the
subject property mortgaged to unionbank had in fact been constituted as a family
home as early as October 1989. Among the beneficiaries of the said family home
are the sisters of Trinidad Vincoy, namely Apolonia and Luciana De Jesus Gregorio
whose consent to the mortgage was not obtained, mortgage and scheduled the
foreclosure sale on 10 April 1991.
Issue:
Whether or not the period of redemption is interrupted by the filing of an action
assailing the validity of the mortgage.
Held:
No, to rule otherwise and allow the institution of an action questioning the validity
of a mortgage to suspend the running of the one year period of redemption would
constitute a dangerous precedent. A likely off shoot of such ruling is the institution
of frivolous suit for annulment of mortgage intended merely to give the mortgagor
more time to redeem the mortgage property.

16) SY vs CA
172 scra 125
Doctrine:
Proper redemption price is determined as fix by the court or the amount
due under the mortgage deed.
Facts:
On 1979, Carlos Coquinco, executed in favor of State Investment House Inc (SIHI), a
real estate mortgage over a parcel of land, as security for the payment of loan in
the amount of P1 million. For failure of Coquinco to pay the outstanding balance, the
mortgaged property was extrajudicially foreclosed by SIHI and was sold to the latter
being the highest bidder. The certificate of sale was issued and was registered in
favor of SIHI. ArnelSy acquired by virtue of a deed of assignment, Coquincos right
of redemption for and in consideration of P500,000. Before the expiration of the
one-year redemption period.Sy offered to redeem the property from SIHI by
tendering to the latter 2 managers check issued by Solidbank, one representing the
purchase price and another for the interest. SIHI rejected the offer. ArnelSy filed an
action for cosignation of the amount with the RTC, but the latter dismissed it.
Issue:
Whether or not the redemption price must be fixed by the court.
Held:
Yes, Court held that the mortgagor shall have the right within one year after the sale
to redeem the property by paying the amount fixed by the court in the order of
execution, or the amount due under the mortgage deed, as the case maybe, with
interest thereon at the rate specified at the mortgage and all the costs and judicial
and other expenses incurred by the bank or institution by reason of the execution
and sale and as a result of the custody of said property less the income received
from the property.

17) Piansayvs David

12 scra 227
Doctrine:
Regardless of the validity of a contract constituting a chattel mortgage
on a house, as between the parties to said contract, the same cannot and
does not bind third persons, who are not parties to the aforementioned
contract or their privies.
Facts:
David obtained a loan from Uy Kim. To secure the loan, he executed a chattel
mortgage on a house in favour of Kim which was registered in the Manila. The
mortgage was later on foreclosed and Uy Kim sold the house to Piansay. On the
other hand, Mangubant another creditor of David, filed a complaint for the collection
of loan against David. Expecting that he can levy from the property of David,
Mangubat but dismissed the complaint with regard to Uy Kim and Piansay. The CA
affirmed the trial courts ruling with modification, allowing the house, which had
been bought by Uy Kim at the foreclosure proceedings and sold by her to Salvador
Piansay, to be levied upon at the instance of Mangubat. Hence, Piansay and Uy Kim
instituted an action against David and Mangubat to invoke the validity of the Chattel
Mortgage.
Issue:
Whether or not the Chattel Mortagage on a house constituted by David in favour of
Uy Kim is enforceable against Mangubat, a third person with respect to the said
mortgage.
Held:
No, regardless of the validity of a contract constituting Chattel Mortgage on a
house, as between the parties to said contract, the same cannot and does not bind
third persons, who are not parties to aforementioned contract or their privies. As a
consequence, the sale of the house in question is null and void insofar as Mangubat

is concerned and did not confer upon Mrs. Uy Kim, as buyer in said sale, any
dominical right in and to said house, so that she could not have transmitted to her
assignee, Piansay any such right as against Mangubat.

18) Liliusvs Manila Railroad Co.

62 Phil 50
Doctrine:
A valid mortgage may exist between the parties without its being
evidenced by a public document. However, as against creditors and
subsequent encumbrances, the law does not require an affidavit of good
faith appended to the mortgage and recorded with it.
Facts:
Driving with his wife and daughter for a sight-seeing trip in Pagsanjan, Lilius car
collided with MRCs train while passing a railroad crossing. Due to the injuries
suffered by the plaintiffs and the negligence of the defendant in warning the public
of approaching trains, among others, the SC awarded to plaintiffs in the amount of
P33,525 as indemnity to the damages suffered. Thereafter, the lower court issued
an order to fix the degree of preference of the claimants and to distribute the
award, which was assailed in the SC by several creditors of plaintiffs. One of then is
Manila Motor Co. Inc. whose claim was not declared as preferred due to lack of proof
that its credit is evidenced by a public document. As they only offer the certified
copy of judgment against Lilius in a case and a copy of writ of execution
garnishment issued by virtue of judgment as their evidence.
Issue:
Whether or not a chattel mortgage not proven by public document/instrument and
without an affidavit of good faith can enjoy preference of credit.
Held:

No, under Section 5 of Act 1507 (Chattel Mortgage Law) as amended by Act No.
2946, a chattel does not have to be acknowledged before a notary public. As
against creditors and subsequent encumbrances, the law does require an affidavit
of good faith appended to the mortgage and recorded with it. The SC ruled that
while the mortgage is valid between the parties, it cannot be allowed to enjoy
preference of credit without the required affidavit of good faith.

19) Republic vs Peralta

150 scra 37
Doctrine:
Tax claims of the government or any subdivision thereof which constitute
a lien upon properties of the insolvent are the highest priority.
Facts:
Quality Tobacco Corporation commenced a voluntary insolvency proceedings in May
1977. There were different claims of creditors filed because of this. The unions for
the unpaid separation pay, the BIR for tobacco inspection fees and the Bureau of
Customs for custom duties and taxes inspection fees and the Bureau of Customs for
customs duties and taxes payable on various importation by the insolvent. In 1980,
the trial court held that the unions claim for separation pay of their respective
members were to be preferred ever the claims of the Bureau of Customs and the
BIR. Court relied upon Article 110 of the Labor Code.
Issue:
Whether or not the unions claims for separation pay has a perfect or higher
preference over the claims of BIR and BOC.
Held:
No, tax claims of the government or any subdivision thereof which constitutes a
lien upon properties of the insolvent are of highest priority. Article 110 of the Labor
Code, in determining the reach of its terms, cannot be viewed in isolation. Rather,

article 110 must be read in relation to the provisions of the Civil Code concerning
the classification. Concurrence and preference of credits, which provisions find
particular application in insolvency proceedings where the claims of all creditors,
preferred or non-preferred, may be adjudicated in a binding manner. Clearly, under
Article 2241 No.1 and 2246-2249 of the Civil Code, this tax claim must be given
preference over any other claim of any other creditor, in respect of any and all
properties of the insolvent.

20) DBP vs NLRC

236 scra 117
Doctrine:
In the event of insolvency, a principal objective should be to effect an
equitable distribution of the insolvents property among his creditors. To
accomplish this there must first be some proceeding where notice to all
the insolvents creditor may be some proceeding where notice to all the
insolvents creditor may be binding/given and where the claims of
preferred creditors may be bindingly adjudicated. The right to preference
given to workers under Art 110 of the Labor Code cannot exist in any
effective way prior to the time of its presentation in distribution
proceedings.
Facts:
Resort Hotel Corporation was the former owner and operator of the Pines Hotel in
Baguio City, where private respondents were employed. The property was
hypothecated to petitioner DBP. When RHC failed to comply with its obligations, DBP
foreclosed on the mortgage. Following the foreclosure, Hotel Development
Corporation, a subsidiary of DBP, assumed the management and operations of the
hotel. Private respondents were rehired by HDC on 1984, Pines Hotel, unfortunately
was razed by fire. On 1985, private respondents filed a complaint against RHC for
money claims still outstanding in their favor at the time the foreclosure was effected
HDC and DBP were also impleaded upon the thesis that, should RHC be bereft or

sufficient property to answer those claims, the foreclosed property could be levied
against in accordance with Article 110 of the Labor Code.
Issue:
Whether or not the foreclosed property could be levied against in accordance with
Art. 110 of the Labor Code without any bankruptcy proceedings.
Held:
No, Art. 110 must be read in relation to the provisions of the Civil Code concerning
the classification, concurrence and preference of credits, which provisions find
particular application in insolvency proceedings where the claims of all creditors,
preferred or non-preferred, may be adjudicated in a binding manner. The right to
preference given to workers under Art 110 of the Labor Code cannot exist in any
effective way prior to the time of its presentation in distribution proceedings. It will
find application when, in proceedings such as insolvency, such unpaid wages shall
be paid in full before the claims of the Government and other creditors may be paid.
But for an orderly settlement of a debtors assets, all creditors must be convened,
their claims ascertained and inventoried, and thereafter the preferences determined
in the course of judicial proceedings which have for their object the subjection of the
property f the debtor to the payment of his debts or other lawful obligations.