Case: Catholic Vicar Apostolic of the Mt. Prov. v. CA, 165 SCRA 515 (1988) - When petitioner borrowed the house of private respondents! redecessors, and the petioner was allowed is free use, private respondents became balors in commodatum, and pettioner. the ballee b.2. Obligations of the bailee (Arts. 1941-1945) b.3. Obligations of the bailor (Arts. 1946-1952) Precarium: +) itneitner the duration ofthe contract north use to which the thing loaned should be devoted has been stipulated: or 2) Ifthe use ofthe thing is merely tolerated by the owner (Art. 1847) ) Simple Loan or Mutuum (Arts. 1953-1961) Cases: 1. Lao v. CA, 275 SCRA 237 (1997) _ Necossitous men are not, truly speaking, free men; but to answer a present ‘emergency, will submit to terms that the crafty may impose upon them qihete the borrower's urgent need for money places the latter ate disadvantage wis-evis the lender who can thus dictate the terms of their contract, the Court in case of 2. Claravalll v. CA, 190 SCRA 439 (1990) ~ A contract of loan with mortgage made to appear in paper as an absolute sale with @ companion option to buy is null and void even ifno usury is involved. 3. Javier v. de Guzman, 192 SCRA 434 (1990) ~ The Usury Law is legally inexistent pursuant to CB Circular No. 805, and the interest now legally chargeable depends upon the agreement ofthe lender and borrower. 4. Almeda v. CA, 256 SCRA 292 ~ While the Usury ceiling interest rates was ified by CB Circular No. 905, ‘thing in the said circular could possibly read as granting carte blanche authonty to lenders to raise interests rates to levels which would either enslave their borrowers or lead to hemorrhaging of their assets, Where the escalation clause of the credit agreement in the instant case ‘required thatthe same be made ‘within the limits allowed by laws,” it is obviously referred to specifically to legislative enactments not administrative circulars, Loan is a real contract Garcia v. Thio, 518 SCRA 433 (2007) |B loan is a real contract, not consensual, and as such is perfected upon delivery of the object ofthe contract. ;, Upon delivery of the object of the contract of loan (in this case the money received by the Geblor when the checks were encashed) the debior acquites ownership of such money or Yoar proceeds and is bound to pay the creditor an equal amount Payment of loan A loan is paid by the delivery of the sum of money due (A\ticle 1233, Civil Code). If the Geattor unjustly refuses to accept the tender of payment, the loan wil stil be considered paid ifthe debtor makes @ consignation or deposits the thing due or place it at the disposal of judicial ‘authorities forthe creditor to collect. There must therefore be _ tender of payment and consignation (Aricle 1256, Civil Code) (Go Sinco v. CA, GR No. 151903, 09 October 2000) Payment of loan in foreign currency RA 8183 (11July 1996) ‘All monetary obligations shall be settled in the Phillppine currency which is legal tender in the Philippines. However, the parties may agree that the obligation or transaction shall be setted in ‘any other currency at the time of payment,Case: CF Sharp & Co. v. Northwest Airlines, GR No. 133498, 18 April 2002 gains repeal of R.A. No. 529 by R.A. No. 8183 has the effect of removing the prohibition (on the stipulation of currency other than Philippine currency, such that obligations or transactions may now be paid in the currency agreed upon by the parties, Just lite RA No. 529, however. the new law docs not provide for the applicable rate of exchange for the conversion of foreign Currency-incurred obligations in their peso equivalent. It folows, therefore, that the jurisprudence established in R.A. No. 629 regarding the rate of conversion remains applicable, ‘Thus, in Aes Crerid Recnitment, Ine. v. National Labor Relations Commission, (313 SCRA 1. 17 (1989) the Court, applying R.A. No. 8183, sustained the ruling of the NLRC that cbigetions in foreign curtency ‘may be discharged in Philippine currency based on the prevailing rate at the time of paymert. Claim and Debt Premiere Development Bank v. Flores, 574 SCRA 66, 16 Dec. 2008 A distinction must be made between a debt and 2 mere claim. A debt is an amount ‘Actually ascertained. It is a ciaim which has been formally passed upon by the cours of quasr Judicial bodies to which it can in law be submitted and has been declared to be a debt. A clo on the other hand, isa debt in embryo. Its mere evidence of @ debt and must pass thru the process prescribed by law before t develops into what is property called a debt, Default & demand In order that the debtor may be in default, it is necessary that: (a) the obligation be Gemandable and already liquidated; (b) the debior delays performance; and (e) the creditor Tequires the performance judicially or exttajudicially, unless demand is not necossary—1e, when there is an express stipulation to that effect: where the law so provides, when the period is the controling motive or the principal inducement for the creation ofthe obligation, and where demang would be useless (Maybank Philippines, Ine. (formerly PNB-Ropublic Bank) v. Tarosa, 772 SCRA 670, 14 October 2015}. On interest rates: 1 No interest shall be due unless it has been expressly stipulated in writing (Pan Paci Service Contractors, Inc. v. Equitable PC! Bank, 616 SCRA 102, 18 March 2010). The payment of interest and penalties in loans is allowed only ifthe parties agreed to ittand reduced their agreement in writing (Lim v. DBP, 700 SCRA 210, Of July 2013), Article 1858 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shail be due unless it has been expressly stipulated in witing (Pua Lo Bun Tioing, 709 SCRA 871, 23 October 2073). 2, The BSP may prescribe interest rales Section 109 of R.A. No. 265 covered only loans extended by banks, whereas under Section 1-2 ofthe Usury Law, as amended, the Bangko Seniral ng Plipinas Monetary Board (BSP MB) may prescribe the maximum rate or rates of interest for all loans or renewals thereof or the forbearance of any money, goods or credits, including those for loans of low priority such as consumer loans, 25 well as such loans made by pawnshops, finance companies and similar credit Institutions (Advocates for Truth in Lending, inc. v. Bangko Sentral Monetary Board, 688" SCRA 530, 15 January 2013). ‘3. Legal interest: BSP Circular No. 799 effective 01 July 2013 The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest shall be 66% per annum. Pursuant to Circular No. 79, series of 2013, issued by the Office of the Governor of the Bangko Sentral ng Pilipinas on 21 June 2013, and in accordance with the ruling of the Supreme Court in the recent case of Dario Nacar-v. Gallery Frames and/or Felipe Borcley, Jr, 703 SCRA 439 (2013), effective 1 July 2013, the rate of interest for the loan or forbearance of any money, goods oF credits and the rate allowed in judgments, in the absence of an express conitact as to such interest, shall be six percent (6%) por annum (Andal v. PNB, 717 SCRA 15, 27 November 2013) 4. Forbearance of money Forbearance of money refers to the contractual obligation of the lender or creditor to desist for a fixed period from requiring the borrower or debtor to repay the loan or debt when dus and for which 12% per annum is imposed as interest in the absence of a stipulated rate (Land Bank of the Phillppines v. Ong, 636 SCRA 266, 24 November 2010),‘5, Reduction of unconscionable interest rates In contracts, the law empowers the courts to reduce Interest rates and penalty charges that are iniquitous, unconscionable and exorbitant (Phil. Export and Foreign Loan Guarantee Com. v. Amalgamated Management and Devt. Corp,, 858 SCRA 273, 28 Sept. 2011) ‘As mandated by Article 1955 of the New Civil Code, payment of monetary interest shall be {due only if (1) there was an express stipulation for the payment of interest: and (2) the agreement for such payment was reduced in writing (Albos v. Embisan, 743 SCRA 283, 26 November 2014). ‘As case law instructs, the imposition of an unconscionable rate of interest on money debt, even if knowingly and voluntarily assumed, is immoral and unjust (Albos v. Embisan, 743 ‘SCRA 283, 26 November 2014) ‘That the rate of interest was subsequently declared ilegal and unconscionable does not entite potiioners-spouses to stop payment of interest. It should be emphasized that only the rate of interest was declared void. The stipulation requiring petitioners-spouses to pay interest on their loan remains valid and binding (Andal v. PIB, 711 SCRA 15, 27 November 2013). DEPOSIT (Arts. 1962-2009) a) Deposits in General & its Different Kinds (Arts, 1962-1967) Cases: 1 BPI v. IAC, 164 SCRA 630, 19 August 1988 ~ Art, 1962: A deposit is constituted from the moment 2 person receives a thing belonging to another, with the obligation of safely keeping it and for rotuming the same. If the ‘safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract. ~ The document which embodies the contract states that the US$3,000 was received by the bank for safekeeping. The subsequent acts of the parties also show that the intent of parties \was really for the bank to safely keep the dollars and to retum it to Zshomack ata later time. Thus, Zshomack demanded the retum of the money on May 10, 1976 or over five months later. The ‘above arrangement is that contract defined under Art. 1962, Civil Code, 2. BPI Family Savings Bank v. First Metro, GR No. 132390, 21 May 2004 429 SCRA 30 ~ Ordinarily, a time deposit is defined as ‘one the payment of which cannot legally be equired within such @ specified number of days.” In contrast, demand deposits are "all those liabilities of the Bangko Sentral and other banks which are denominated in Philippine currency and _are subject fo payment in legal tender upon demand by the presentation of (depositor's) checks.” b) Voluntary Deposit (Arts. 1968-1994) b.1. General Provisions (Arts. 1968-1971) b.2. Obligations of the Depositary (Arts. 1972-1991) “thas been held that when there is no fixed period forthe return, withdrawal can 'be made at any time without necessity of judicial order (Aboitz v. Oquinena, 39 Phil. 926), b.3. Obligations of the Depositor (Arts. 1992-1995) *safety deposit box: a contract for the rent of a safety deposit box is not an ordinary contract of lease but a special king of deposit (CA-Agro Industrial Devt. Corp. v. CA, 219 SCRA 426, 03 March 1993) “free valet parking: when a restaurant offers free valet parking to ts customers, the restaurant company is constituted as DEPOSITARY. The customer entrust his or her car to the restaurant with the expectation ofthe cars safe return at the end of the meal. The stipulation in the “Parking Stub" holding the restaurant not Fable for any damag*Bank deposits Cases: 1. People v. Ong, 204 SCRA 942 ~All kinds of deposits whether fixed or current ae to be treated as loans and are tobe covered by the law on loans” 2. Guingona v. City Fiscal, 128 SCRA 577 - While banks have the obligation to return the amount deposited, they have no obligation to return or deliver the same money deposited in the same denomination as was deposited. Thus, estafa will not prosper. 3. Tan Tiong Tick v. American Apothecaries, 65 Phil 417 (1938) = Money deposited in banks, whether fixed, savings and current, are really loans to.a bank because the bank can use the same forts ordinary traneactions and for banking business in which ti engaged. 4. People v. Puig, 563 SCRA 564 (2008) « Its beyond doubt that tellers, cashiers, bookkeepers and other employees of a ‘bank who came into possession of the monies deposited therein enjoy the confidence eposed in them by their employer. Banks, on the other hand, where monies are deposited, are considered the owners thereof. This is vary clear not only from the express provisions ofthe law, but from established jurisprudence. The relationsnip between banks and depositors has been held to be thal of creditor and debtor. Articles 1953 and 1980 of the New Civil Code provide as follows: “Article 1953: A person who receives a loan of money or any ‘ungible thing acquires ovmership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality, Article 1980: Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning loan.” ©) Necessary Deposit (Arts. 1998-2004) d) Sequestration or Judicial Deposit (Arts. 2005-2009) GARNISHMENT 1. Nature = Gamishment has been defined as a specie of attachment for reaching oredits belonging to the judgment debtor and owing to him from a stranger tothe Iitigation ~ All that is necessary forthe tral court to lawfully bind the person of the garnishee or any person who has in his possession credits belonging to the judgment debtor is service upon him of the writ of gamishment (NPC v, PCIB, 598 SCRA 326, 04 September 2000), ‘The gamishee is obliged to pay all interests and bank charges that have accumulated on the amount gamished or, on the amount which has not been paid, from the date of ils receipt of the notice of garnishment until has made payment (PC v. PCIB, 598 SCRA 326, 04 September 2008), 2, Ganishment is proper only in money judgments Gamishment if proper only when the judgment to be enforced is one for the payment of a ‘sum of money—it cannot be employed to implement a special judgment such as that rendered in a ‘special civil action for mandamus (NIMC v. Abayar, 602 SCRA 242, 02 October 2009). GUARANTY & SURETYSHIP (Arts. 2047-2084) Contracts of security are either personal or real. In contracts of personal security, such es guaranty or @ suretyship, the faithful performance of the obligation by the principal debtor is Secured by the personal commitment of another (the guarenior or surely). In contract of real security, such as pledge, a mortgage or an antichresis, that fulfilment is secured by an ‘encumbrance of property (Acme Shoe, Rubber & Plastic Corp. v. CA, 260 SCRA 714. 22 Aug,b) Nature and Extent of Guaranty (Art. 2047-2057) Cases: 1. Aglibot v. Santia, 687 SCRA 283, 05 December 2012 - A guarantee agreement is @ promise to answer for the debt or default or another, the law clearly requires that it, or some nota ort memorandum thereof, be in writing, it would be unenforceable unless ratified, although It does not have to appear in a public document « Article 2055 of the Civil Code provides that a guaranty is not presumed, but must be express, and cannot extend to more than what is stipulated therein. 2. Prudential Guarantee and Assurance, Inc. v. Anscor Land, Inc., 630 SCRA 368, 08 September 2010 - A guarantee or surety contract under Article 2047 of the Civil Code of the Philippines is an accessory contract because itis dependent for its existence upon the principal obligation guaranteed by it 3. MWSS v. Daway, GR No. 160732, 21 June 2004 - In contracts of guarantee, the guarantor’ obligation is merely collateral and it arises only upon the default of the person primarily liable. Effects of Guaranty (Arts. 2058-2075) b.1. Effects of guaranty between guarantor and creditor (Arts. 2058-2065) b.2. Effects of guaranty between debtor and guarantor (Arts. 2066-2072) Cases: 1. Aglibot v. Santia, 687 SCRA 283, 05 Dec. 2012 ~ The lability of the guarantor is only subsidiary, and all the properties of the principal debtor must frst be exhausted before the guarantor may be held answerable for the debt. Thus, the creditor may hold the guarantor liable only after judgment has been obtained against the principal debtor and the latter's. tunable to pay. 2. Distelleria Limtuaco & Co. v. IAC, 29 Jan. 1988 ~The existence of a morigage negates the benefit of excussion, Effect of payment by the quarantor/payment without knowledge of debtor ‘As a rule 2 guarantor who pays for a debtor should be indemnified by the latter ‘and would be legally subrogated to the rights which the creditor has against the debtor. However, a person who makes payment without the knowledge or against the will of the debtor has the right to recover only insofar as the payment has been beneficial to. ‘the debtor. ifthe obligation was subject to defenses on the part ofthe debtor, the same defenses which could have been set up against the creditor can be set_up against the paying guarantor (Phil. Export and Foreign Loan Guarantee Corp. v. VP Eusebio Construction, Inc, GR No. 140047, 13 July 2004). Guarantor will pay only when the principal is in default ‘The petitioner guarantor should have walted for the natural course of guaranty: the debtor VPECI should have, in the frst place, defaulted in its obligation and that the creditor SOB should have first made a demand from the principal debtor. Its oniy when the debtor does not or cannot pay, in whole or in part, that the guarantor should pay. ‘When the petitioner guarantor in this case paid against the wil of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB at the time of payment. This is a hard lesson that the petitioner must learn (Phil. Export and Foreign Loan Guarantee Corp. v. VP Eusebio Construction, Inc., GR No, 140047, 13 July 2004) 6.3. _ Effects of guaranty as between co-guarantors (Arts. 2073- 2075)A) B) Continuing bond A continuing bond, as where there is no fixed expiration date, may be cancelled only by the obliges, by the Insurance Commissioner, and by the court (Country Bankers Insurance Corporation v. Lagman, 653 SCRA 765, 13 July 201). By law and by the specific contract involved in this case, the effectivity of the bond required for the obtention of a license to engage in the business of receiving rice for storage Is deiermined not alone by the payment of premiums but principally by the Administrator of the National Food Authority (NFA) (Country Bankers Insurance Corporation v. Lagman, 653 SCRA 765, 13 July 2041) Continuing guaranty Fortune Motors v. CA, 267 SCRA 653, 07 Feb. 1997 ~ A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes fable, Otherwise states, a continuing ‘guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract, of quaranly, until the expiration or termination thereof. A guaranty shall be construed as continuing when by the terms thereof Its evident that the object is to give standing credit to the principal debtor to be used from time to. time either indefinitely or until a certain period; especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be ‘made “from time to time’ the guaranty will be construed to be a continuing one, PLEDGE, MORTGAGE & ANTICHRESIS (Arts. 2085-2141) Provisions common to pledge and mortgage (Arts. 2085-2092) Case: Acme Shoe, Rubber & Plastic Corp. v. CA, 260 SCRA 714 (1996) - Contracts of security are either personal or real--in the former, the fethful performance of the obligation by the principal debtor is secured by the personal commitment of another while in the latter, that fulfilment is secured by an encumbranee of property. PLEDGE (Arts. 2093-2123) Kinds of pledge a) Conventional or voluntary b) Legal Conventional 1) Requisites (Arts. 2085 & 2093) = A pledge, being a real contract, requires for its perfection the delivery ofthe ting to the creditor or to @ third person by common agreement. Thus, without delivery, the pledge is void (El Banco Espanobilipino vs. Peterson, 7 Phil 409). The delvery required here is actual delivery (Botta v. Ganzon, 49 Phil 97: Pactic Commercial v. PNB, 49 Phil 936). Thus, no pledge Ie consituted ifthe delvery is merely symbole 2) Object (Arts. 2094 & 2095) 3) Form (Art. 2096) 4) Extent of pledge Art. 2102) 5) Rights of the debtor/pledgor (Arts. 2097, 2103-2107) 6) Obligations of the debtor/pledgor (Arts. 2105, 1951 & 1201) 7) Rights of the creditor/pledgee (Arts. 2098, 2099, 2103, 2104, 2108, 2109, 2118, 2087 & 2112) 8) Obligations of the creditor/pledgee (Arts. 2099, 2100, 2108)C) Legal Pledge 4) Concept 2) Examples (Arts. 546, 1731, 1994) MORTGAGE (Arts. 2124-2131) Case: 1. Ocampo v. LBP, 591 SCRA 562, 03 July 2009 ~ The essence of a contract of mortgage indebtedness is that @ property has been identified or set apart from the mass of the property of the debtor mortgagor as security for the payment of money or the fulfilment of an obligation to answer the amount of indebtecness, in case (of default of payment. 2. Balatico Vda. De Agatep v. Rodriguez, 604 SCRA 634, 28 October 2009 - Mortgage is an accessory contract intended to secure the performance of the principal obligation. = One of its characteristics is that itis inseparable from the property. It adheres to the Property regardless of who its owner may subsequently be Pe rium Article 2088 of the Civil Code provides that the creditor cannot appropriate the things lven by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void. ‘The elements of pactum commissorium, (which is void) which enables the mortgagee to ‘acquire ownership of the mortgaged property without the need of any foreclosure proceedings are: (@) there should be a property mortgaged by way of security for the payment of the principal obligation; and (b) there should be @ stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment ofthe principal obligation within the stipulated period (Ong v. Roban Lending Corp., 557 SCRA 516). “Pactum commisorium’ is a stipulation empowering the creditor to eppropriate the thing sven as a guaranty for the fuifllment of the obligation in the event the obligor fails to lve up to his Undertakings, without further formality, such as foreclosure proceedings, and public sale (Edralinv, PVB, GR No. 168523, 09 March 2017) Mortgage and iniquitous or unconscionable interests Stipulation authorizing iniquitous or unconscionable interests are contrary to morals, if not against the law; under Article 1409 of the Civil Code, these contracts are inexistent and void from the beginning; they cannot be ratified nor the right to set up their illegality as a defense be waived: the nullity of the stioulation on the usurious interest does not, however, affect the lender's right to recover the principal ofthe loan; nor would it affect the terms of the real estate mortgage; the right to foreclose the mortgage remains with the creditors, and said right can be exercised upon the failure of the debtors to pay the debt due; the debt due is to be considered without the stipulation of the excessive interest: a legal interest of 12% per annum wil be added in place of the excessive interest formerly imposed: since the Spouses Landrito, the debtors in this case, were not given an ‘opportunity to settle their debt, at the correct amount and without the iniquitous interest imposed, 1no foreclosure proceedings may be instituted; a judgment ordering a foreclosure sale is conditioned upon a finding on the correct amount of the unpaid obligation and the failure of the debtor to pay the said amount In this case, it has not yet been shown that the Spouses Landrito had already failed to pay the correct amount of the debt and, therefore, a foreclosure sale cannot be conducted in order to answer for the unpaid debt (Heirs of Espiritu vs. Spouses Landrito, G.R, No. 169617, Apnil 4, 2097) In @ usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to pay the debt due. The debt due \s considered as without the stipulated excessive interest, and the legal interest of 12% per annum will be added in piace cf the excessive interest formerty imposed (Advocates for Truth in Lending, Ine. v. Bangko Sentral Monetary Board, 688 SCRA 530, 18 January 2073) Blanket mortgage clause ‘Mother Hubbard, Anaconda, Blanket or Dragnet Clause (taken from Common Used Clauses in Law ‘and Contracts, by Mauricio Ulop, 743 SCRA 726) Itis a provision in @ mortgage in wich the mortgagor gives security for past and future advances as well as present indebtedness. A type of mortgage provision that attempts to make theIt operates as a convenience and accommodation to the borrowers a¢ it makes available ‘additional funds without their having to execute additional security documents, thereby saving to ‘execute additional security documents, thereby saving time, travel, loan closing costs of extra legal services, recording fees, et cetera (TRB v. Castanares, 636 SCRA 519 [2010]; also Ramos v. PNB, 662 SCRA 479 [2011]; PCSO v. New Dagupan Metro Gas Corp., 676 SCRA 156 [2012)) ‘Such clauses are carefully scrutinized and strictly construed (PBC v. CA, 253 SCRA 241 11996). ‘A “dragnet clause’ operates as a convenience and accommodation to the borrowers as it makes available additonal funds without their having fo execute additional security documents (Traders Royal bank v. Castanares, 636 SCRA 519, 05 December 2010). ‘A “blanket morigage clause,” also known as a dragnet clause in American jurisprudence, is one that is specifically phrased to subsume all debts of past or future origins. Such clauses are carefully scrutinized and stricly construed. Morigages of this character enable the parties to provide continuous dealings, the nature or extent of which may nat be known or anticipated at the time, and they avoid the expense and inconvenience of executing a new security on each new transaction. A dragnet clause operates as a convenience and accommodation to the borrowers as it makes available additional funds without their having to execute additional security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees. etc. (Republic Planters Bank, ef al. vs. Sarmiento, et al, G.R. No. 170785, October 19, 2007). ‘A mortgage with a “dragnet clause" is an offer by the mortgagor to the bank to provide the ‘security of the mortgage for advances of and when they were made (Asiatrust Development Bank v. Tuble, 677 SCRA 519, 25 July 2012), ‘A “blanket mortgage clause," also known as a “dragnet clause” in American jurisprudence. is one which is specifically phrased to subsume all debts of past or future origins (PCSO v, New Dagupan Metro Gas Corp., 676 SCRA 16, 11 July 2012) ‘A mortgage that provides for a dragnet clause is in the nature of a continuing guaranty {and constitutes an exception to the rule that an action to foreclose a morigage must be limited to the amount mentioned in the mortgage contract (ibid) The failure In the foreclosure the second loan/Dragnet clause For failure to include the second loan in its appication for extrajudicial foreciosure as well as in its bid at the public auction sale, respondent bank is deemed to have waived its lien on the mortgaged property with respect to the second loan, After the foreciosure of the mortgage property, the mortgage is extinguished and the Purchaser at auction sale acquires the property free from such morigage. Any deficiency amount after foreclosure cannot constitute @ continuing lien on the foreciosed property, but must be collected by the mortgagee-creditor in an ordinary action for collection, In this case, the second loan from the same mortgage deed is in the same nature of a deficiency amount after foreclosure (Tecklo v. Rural Bank of Pamplona, Inc., 620 SCRA 262, 18 June 2010), Real estate mortgages aiven to secure future advancements are valid and legal contracts. Real estate mortgages given to secure future advancements are valid and legal contracts! that the amounts named as consideration in sald contract do not limit the amount for which the mortgage may stand as securiy if from the four comers ofthe instrument the intent to secure future and other indebtedness can be gathered. A mortgage given to secure advancements in a continuing security and is not discharged by repayment of the amount named in the mortgage, until the full amount of the advancements are paid (Mendoza v. CA, GR No. 116710, 25 June 2001) jecommodation_mo is_not necessarily void simply because the accommodation mortgagor did not benefit from the same, ‘An accommodation morlgagor is not necessarily void simply because the accommodation mortgagor did not benefit from the same. The validity of an accommodation mortgage is allowed under Aicle 2085 of the New Civil code which provides that “()hird persons who are not parties to the principal obligation may secure the latter by pleading or mortgaging their own property." An accommodation mortgagor, ordinarily, is not himself a recipient of the loan, otherwise that would be contrary to his designation as such. It is not always necessary that the accommodation mortgagor be apprised beforehand of the entire amount ofthe loan nor should it frst be determined before the execution of the SPA (Mendoza v. CA, GR No. 116710, 25 June 2001). Mortgage & accessions/accessories When the principal property is mortgaged, the mortgage shall include all natural or civil‘The doctrine of mortgagee in good faith Despite the fact that the mortgagor is not the owner of the mortgaged property, his tite being fraudulent, the mortgage contract and any forectosure sale arising therefrom are given effect by reason of Public policy. This is the doctrine of ‘mortgagee in good faith” based on the rule that all persons dealing with ‘the property covered by a Torrens Certificate of Title, as buyers or mortgages, are not required to go beyond what appears on the face of the title. The public interest in upholding the indefeasibilty of 2 ccetificate of tle, as evidence of lawful ownership of the land or of any encumbrance thereon, protects @ buyer of mortgagee who, in good faith, relied upon what appears on the face ofthe certificate of title (Cavite Devt. Bank v. Lim, 324 SCRA 346 (2000) Indeed, a mortgagee has a right to rely in good faith on the certificate of tile of the mortgagor of the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to Undertake further investigation. Hence, even if the mortgagor is not the rightful owner of. or does not have valid tile to, the mortgaged property, the mortgagee in good faith is nonetheless entiled to protection. This doctrine presupposes, however, that the mortgagor, who is not the rightful owner of the property, has already succeeded in obtaining a Torrens ttle over ths property in his name and that, after obtaining the said tile, he succeeds in mortgaging the property to another who relies on what appears on the said title. The innocent purchaser (mortgagee in this case) for value protected by law Is one who purchases a titled land by virtue of a deed executed by the registered over himself, not by a forged deed, as the law expressly states, Such i not the situation of petitioner, who has been the victim of impostors pretending to be the owners. ‘The doctrine of mortgagee in good faith does not apply to a situation where the lite is stil in the name of the fightful owner and mortgagor is a different porson pretending ‘0 be the owner. In such a case, the mortgagee is not an innocent mortgagee for value and the registered owner will generally not lose his tile (Erejia v. Querer-Keufiman, 492 SCRA 298 (2006). In a forged mortgage, the doctrine of “mortgagee in good fat” cannot be applied and wil not benefit a mortgagee no matter how large is his or her reservoir of good faith and cilgence, Such mortgage i void and cannot prejudice the registered owner whose signature to the deed is falsiied. When the Instrument presented is forged. even if accompanied by the owners duplicate cerifcate of tite, the registered owner doos not lose his ie, and nein does the assignee in the forged deed acquire any right ore tothe property. An imacent purchaser for value is one who purchases a tiled lad by vituo of « deed ‘executed by the registered owner himself nota forged deed (Erena v. QuorrerKauriman, 492 SCRA 206 ‘006, Foreclosure ‘The mortgagee bank has no right to include in the foreclosure of the lend the portion of the loan separately secured by chattel mortgage (Rural Bank of Taboso, Inc. v. Agtoto, 646 SCRA 288, 23 March 204). Demand necessary for default to exist; exception Premiere Dev't. Bank v. Central Surety & Insurance Company, Inc., 579SCRA 359, 13 February 2009 - The Supreme Court may take judicial notice that the standard practice in commercial transactions to send demand leters has become part and parcel of every collection effort, especially in ight of the legal requirement that demand is a prerequisite before default may set in, subject to certain well-known ‘exceptions, including the situation were the law or the obligations expressly declare it unnecessary. Obtaining @ personal judgment waives right to foreclose Yap v. First e-Bank Corporation, 601 SCRA 250, 29 September 2009 + Prior to the effectivity of Circular 57-97, the alternative remedies of foreclosure of mortgage and collection suit were not barred even if a suit for Batas Pambansa Big. 22 had been filed earlier, unless a judgment of conviction had already been rendered in BP 22 case finding the accused debtor eriminally lable ‘and ordering him to pay the amount of the checks. ~ A creditor who obtains personal judgment against the debtor on a loan waives his right to foreclose on the mortgage securing the loan, otherwise, the creditor becomes guilty of spliting a single cause of action for the debtor's inabilty (or unjustified refusal) to pay his debt. A prior unrecorded sale is preferred over a registered mortgage Between an unrecorded sale of a prior date and a recorded martgage of a later date the former is. preferred to the later for the reason that ifthe original owner had parted with his ownership of the thing sold then he no longer had the ownership and free disposal of that thing so as to be able to mortgage it again (Aldover v. CA, 706 SCRA 188, 23 Sopt. 2013)Options/remedies of the mortgagee/secured creditor Yap v. First e-Bank Corporation, 601 SCRA 250, 29 September 2009 If the debtor fails (or unjustly refuses) to pay his debt when it falls due and the debt is secured by a mortgage and by @ check, the creditor has three options against the debtor and the exercise of one will bar the exercise of the others. He may pursue either of the three but not all or @ combination of them. Firs, the creditor may file a collection suit against the debtor. This will open up all the properties of the debtor to attachment and execution, even the mortgaged property itself. Second, the exeditor may opt to foreclose on the mortgaged property. In case the debt is not fully satisfied, he may sue the debtor for deficiency judgment, {not collection case for the whole indebtedness), in which case, ll the properties of the debtor, other than the mortgaged property, are again open up for the satisfaction ofthe deficiency. Lastly, the creditor may opt to sue the debtor for violation of BP 22 if the checks securing the obligation bounce. Circular 57-97 and ‘Section 1(b), Rule 111 of the Rules of Court both provide that the criminal action for violation of BP 22 shall bbe deemed fo necessarily include the corresponding civil action, /.0., a collection suit. No reservation to fle ‘such civil action separately shall be recognized, ‘The secured creditor has three remedies/options that he may alternatively adopt for the satisfaction of his indebtedness. in particular, he may choose to: (a) waive the morigage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and prove the deficiency as an ordinary ciaim; and (¢) rely on the mortgage exclusively, or other securty and foreclose the ‘same before its barred by prescription, without the right to file a claim for any deficiency (Heirs of the Late Flaviano Maglasang and Salud Adaza-Maglasang v. Manilabank, 706 SCRA 236, 23 September 2013). D) — ANTICHRESIS (Arts. 2132-2139) Articie 2132 of the Civil Code provides that [bly the contract of antichresis the creditor acquires the Fight to receive the fruits of an immovable of his debior, with the obligation to apply them to the payment of ‘the interest, | owing, and thereafter to the principal of his credit” (Cotoner-Zacarias v. Revilla, 740 SCRA 51, 12 November 2014) Antichresis requires delivery of the property to the antichretic creditor, but the latter cannot ordinarily acquire this immovable [roperty in his or her possession by prescription (ibid Case: Ramirez v. CA, 144 SCRA 292 (24 Sept. 1986) + An antichretic creditor cannot acquite land of debtor by prescription. Fact that such creditor has been in actual possession of land given as security will not bar is registration in favor of heirs of antichretic debtor, E) CHATTEL MORTGAGE (Arts. 2140-2141) Case: Acme Shoe, Rubber & Plastic Corp. v. CA, 260 SCRA 714 (1996) = Contracts of security are either personal or real-in the former, the faithful performance of the obligation by the principal debtor is secured by the personal commitment of another while in the latter, that fulfilment is secured by an encumbrance of property. = While @ pledge, real estate mortgage, or antichresis may exceptionally secure after- incurred obligations so long as these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at the time of the mortgage is executed, Reder hattel me - Section 13 of the Chattel Mortgage Law allows the would-be redemptioner thereunder to redeem the mortgaged property only before its sale. ~ Unmistakably, the redemption cited in Section 13 partakes of an equity of redemption, which is the right of the mortgagor to redeem the mortgaged property efter his default in the performance of the conditions of the mortgage but before the sale of the property to clear it from the encumbrance of the mortgage (RCBC v. Royal Cargo Corp., 602 SCRA 545, 02 October 2008). Since the registration of a chattel mortgage is an effective and binding notice to other ‘creditors ofits existence and creates a real right or lien that follows the property wherever it may bo, the right of an attaching creditor, or a purchaser at the auction sale, is subordinate to the lien of the mortgage who has in his favor a valid chattel mortgage (ibid) Deficiency claim in chattel mortage Under Section 14 of the Chattel Mortgage Law, the mortgagor is entitled to recover the baleen ofthe eect. When teehee OF ee ee ame bd kePossession of chatte! mortgage property in case of breach CONCURRENCE AND PREFERENCE OF CREDITS (Arts 2236-2251) a) General Provisions (Arts. 2236-2240) b) Classification of Credits (Arts. 2241-2245) ce) Order of Preference of Credits (Arts. 2246-2251) The assignment of a creit includes all the accessory righ, such as a_ guaranty, Oe Aaa ppiedse OF Preference (United Planters Sugar Milling Co., Inc. v. GA. 669 SCRA 69 02 April 2009), LPI