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Digest: Rural Bank of Caloocan vs.


Maxima Castro, accompanied by Severino Valencia, went to the Rural Bank of Caloocan to apply for
a loan. Valencia arranged everything about the loan with the bank. He supplied to the latter the
personal data required for Castro's loan application. After the bank approved the loan for the amount
of P3, 000.00, Castro, accompanied by the Valencia spouses, signed a promissory note
corresponding to her loan in favor of the bank. On the same day, the Valencia spouses obtained
from the bank an equal amount of loan for P3, 000.00. They signed another promissory note (Exhibit
"2") corresponding to their loan in favor of the bank and had Castro affixed thereon her signature as

Both loans were secured by a real-estate mortgage on Castro's house and lot. Later, the sheriff of
Manila sent a notice to Castro, saying that her property would be sold at public auction on March 10,
1961 to satisfy the obligation covering the two promissory notes plus interest and attorney's fees.
Upon request by Castro and the Valencias and with conformity of the bank, the auction sale was
postponed on April 10, 1961, but because April 10 was declared a special holiday, it was auctioned
on April 11, 1961, which was the next succeeding business day following the special holiday.

On April 4, 1961, Castro filed a suit against petitioners before CFI Manila contending that thru
mistake on her part or fraud on the part of Valencias she was induced to sign as co-maker of a
promissory note and to constitute a mortgage on her house and lot to secure the questioned note. At
the time of filing her complaint, respondent Castro deposited the amount of P3, 383.00 with the court
a quo in full payment of her personal loan plus interest. She prayed, among others, the annulment of
the foreclosure sale of her property. Petitioners interposed counterclaims and moved to dismiss the
complaint. However, the Lower Court ruled in favor of Castro annulling the extrajudicial foreclosure
sale, among others, and was thereafter affirmed by CA. Hence this petition.

Petitioners' contention: The public auction sale that was held on April 11, 1961 which was the next
business day after the scheduled date of the sale on April 10, 1961, a special public holiday, was
permissible and valid pursuant to the provisions of Section 31 of the Revised Administrative Code
which ordains:
"Pretermission of holiday. Where the day, or the last day, for doing any act required or permitted by
law falls on a holiday, the act may be done on the next succeeding business day."

Respondent Court's ruling: the aforesaid sale is null and void, it not having been carried out in
accordance with Section 9 of Act No. 3135, which provides:
"Section 9. Notice shall be given by posting notices of the sale for not less than twenty days in at
least three public places of the municipality or city where the property is situated, and if such
property is worth more than four hundred pesos, such notice shall also be published once a week for
at least three consecutive weeks in a newspaper of general circulation in the municipality or city."
ISSUE: WON the extrajudicial foreclosure sale at public auction of the mortgaged property that was
held on April 11, 1961 valid.

HELD: No. The Supreme Court held that the pretermission of a holiday applies only "where the day,
or the last day for doing any act required or permitted by law falls on a holiday," or when the last day
of a given period for doing an act falls on a holiday. It does not apply to a day fixed by an office or
officer of the government for an act to be done, as distinguished from a period of time within which
an act should be done, which may be on any day within that specified period. For example, if a party
is required by law to file his answer to a complaint within fifteen (15) days from receipt of the
summons and the last day falls on a holiday, the last day is deemed moved to the next succeeding
business day. But, if the court fixes the trial of a case on a certain day but the said date is
subsequently declared a public holiday, the trial thereof is not automatically transferred to the next
succeeding business day. Since April 10, 1961 was not the day or the last day set by law for the
extrajudicial foreclosure sale, nor the last day of a given period but a date fixed by the deputy sheriff,
the aforesaid sale cannot legally be made on the next succeeding business day without the notices
of the sale on that day being posted as prescribed in Section 9, Act No. 3135.

Digest: Vda. de Bautista vs. Marcos et al.

FACTS: In 1954, Brigida Marcos, herein Defendant, obtained a loan from herein Plaintiff Cristina
Vda. de Bautista, which is secured by way of real estate mortgage of an unregistered land in Tarlac.
The deed of mortgage provided that it will last for 3 years; that possession of the mortgaged land
was to be turned over to Plaintiff by way of usufruct with no obligation on her part to apply harvests
to the principal obligation; and mortgage will only be released upon payment of the loan without
In 1956, Defendant, together with her sisters, filed an application for the issuance of a free patent
over the mortgaged land, which was later granted to them.
Since the loan remained unpaid until 1959, Plaintiff filed an action against Defendant and her
husband for the foreclosure of the mortgage. Defendant argued that since the land is covered by a
free patent, the Public Land Law prohibited it to be taken within 5 years from the issuance of the
patent for the payment of any debts of the patentees contracted prior to the expiration of said five-
year period. Also, the real contract between them is an antichresis and not a mortgage. The Lower
Court ruled in favor of Plaintiff and held that the Public Land Law does not apply in this case
because the mortgage in question was executed before a patent was issued over the land in
question and the agreement of the parties could not be antichresis because the deed clearly shows
a mortgage with usufruct in favor of Plaintiff. Hence, this appeal.
ISSUE: WON Plaintiff has the right to foreclose the mortgage on the land in question
HELD: No. The Supreme Court held that the right of Plaintiff to foreclose her mortgage on the land in
question depends on whether the deed of mortgage is at all valid and enforceable, since the land
mortgaged was apparently still part of the public domain when the deed of mortgage was
constituted. As it is an essential requisite for the validity of a mortgage that Defendant be the
absolute owner of the thing mortgaged (Art. 2085), the mortgage here in question is void and
ineffective because at the time it was constituted, Defendant was not yet the owner of the land
mortgaged and could not, for that reason, encumber the same to Plaintiff.
Nor could the subsequent acquisition by Defendant of title over said land through the issuance of a
free patent validate and legalize the deed of mortgage under the doctrine of estoppel since upon the
issuance of said patent, the land in question was thereby brought under the operation of the Public
Land Law that prohibits the taking of said land for the satisfaction of debts contracted not only during
the five-year period immediately preceding the issuance of the patent but also those contracted
before such issuance, if the purpose and policy of the law, which is "to preserve and keep in the
family of the homesteader that portion of public land which the State has gratuitously given to him".
Since the mortgage is void and ineffective, Plaintiff has not right to foreclose the mortgage.

Digest: Dayrit vs. CA

FACTS: For and in consideration of a sales agreement, Vincent Dayrit, Leonila Sumbillo and
Reynaldo Angeles, herein Defendants, were granted of a loan amounting to P150,000.00 plus 10%
annual interest for 48 months from Mobil Oil Philippines, Inc. (Mobil) secured with a mortgage of 2
parcels of land together with its improvements, both under the name of Dayrit. In case of default in
payment of any of the installments and/or their failure to purchase the quantity of products stated in
the sales agreement, Mobil shall have the right to foreclose the mortgage.

Due to the failure of Defendants not only to pay the installments, having only paid one, but also to
buy the quantities of products as required in the Sales Agreement, Mobil filed an action against the
defendants, in which the Lower Court ordered the latter to pay the loan with interest, subject to
foreclosure sale in case of default of such payment. The judgment became final and executory.

Upon receiving Mobil's motion for execution of the decision, Dayrit opposed alleging that before the
finality of the aforesaid judgment, he and the plaintiff had agreed, among others, to pay his one-third
share with a reasonable discount, if possible, in so far as the interests and the award for attorneys
fees were concerned, with the corresponding release of the mortgage on all his properties, praying
also for an extension of initially a 30-day grace period and another 20-day extension. The Lower
court only granted the grace period and the extension. When Dayrit moved to allow the deposit of his
payment to the Clerk of Court and to order the release of the mortgage, it was denied by the Lower
Court. A petition for Certiorari was also filed before CA but was also denied. So as the first and
second motions for reconsideration. Hence, this petition.

ISSUE: WON the proposed deposit by Dayrit of a sum equivalent to 1/3 of the loan agreed upon will
release the collaterals owned by him, although the other 2/3 portion of the loan obligation had not
been satisfied due to insolvency of the other two co-defendants.

HELD: No. While it is true that the obligation is merely joint and each of the defendants is obliged to
pay only his/her 1/3 share of the joint obligation, the undisputed fact remains that the intent and
purpose of the Loan and Mortgage Agreement was to secure, inter alia, the entire loan of P150,000
that Mobil extended to the defendants.

Well-entrenched in law is the rule that a mortgage directly and immediately subjects the property
upon which it is imposed, the same being indivisible even though the debt may be divided, and such
indivisibility likewise being unaffected by the fact that the debtors are not solidarily liable. According
to Tolentinto, "(w)hen several things are pledged or mortgaged, each thing for a determinate portion
of the debt, the pledges or mortgages are considered separate from each other." But if they are to
secure the same debt in its entirety, all of them are liable for the debt.

Also, the fallo of the judgment states that "in default of such payment, the properties put up in
collateral shall be sold in foreclosure sale in accordance with law, the proceeds to be applied in
payment of the amount due to the plaintiff as claimed in the complaint." And the claim in the
complaint was the full satisfaction of the total indebtedness of P147,434; therefore, the release of all
the mortgaged properties may be authorized only upon the full payment of the above-stated amount
secured by the said mortgage.

Digest: Yuliongsiu vs. PNB

FACTS: Diosdado Yuliongsiu obtained a loan from PNB amounting to P50,000.00 and
pledged his 2 vessels and its equity to another vessel to guarantee its
payment.Yuliongsiu paid P20,000.00 and the remaining balance was renewed by
executing 2 promissory notes (notes) due on February and June, both in 1948 in
favor of PNB.
PNB took physical possession of the 3 pledged vessels while they were at the Port of
Cebu. When the first note was not paid, the Cebu Branch Manager of PNB executed
a document of sale, transferring the 2 pledged vessels and plaintiff's equity to
another vessel to PNB for P30,042.72. The vessels were sold to third parties but
when the equity was surrendered to Philippine Shipping Commission, the latter
rescinded the sale by Yuliongsiu to PNB for failure to pay the remaining installments
on the purchase price thereof.
On to a different transaction, PNB filed a criminal charge against Yulionsiu and 2
other accused for Estafa thru falsification of commercial documents. Yuliongsiu were
sentenced to indemnify PNB but was returned unsatisfied as he was totally
Yuliongsiu filed an action in CFI Cebu to recover the 3 vessels or their value and
damages from PNB. The Lower Court ruled in favor of PNB and held that the
physical possession of the vessels and the private sale of 2 of them without notice
to Yuliongsiu are valid. When his motion for reconsideration and new trial ws denied,
he brought the appeal to the Supreme Court, alleging, among others, that
constructive delivery is insufficient to make pledge effective, pointing the ruling on
the case of Betita vs. Ganzon.
ISSUE: WON the pledge was not effective because there was only constructive
delivery of the vessels.
HELD No. The Supreme Court ruled that the type of delivery will depend upon the
nature and the peculiar circumstances of each case. Upon examination of
jurisprudence, in the case of Betita vs. Ganzon, the objects pledged carabaos
were easily capable of actual, manual delivery unto the pledgee. In the case of
Banco Espaol-Filipino vs. Peterson, the objects pledged goods contained in a
warehouse were hardly capable of actual, manual delivery in the sense that it
was impractical as a whole for the particular transaction and would have been an
unreasonable requirement. The delivery to him of the keys to the warehouse
sufficed for purposes of showing the transfer of control to the pledgee. In this case,
the parties here agreed that the vessels be delivered by the "pledgor to the pledgor
who shall hold said property subject to the order of the pledgee." Considering the
circumstances of this case and the nature of the objects pledged, i.e., vessels used
in maritime business, such delivery is sufficient.
Since PNB was, pursuant to the terms of pledge contract, in full control of the
vessels thru Yuliongsiu, the former could take actual possession at any time during
the life of the pledge to make more effective its security. Its taking of the vessels
therefore was not unlawful. Nor was it unjustified considering that Yuliongsiu had
just defrauded PNB as stated in the Estafa case.

Digest: Manila Surety and Fidelity Company, Inc. vs. Velayo

FACTS: Rodolfo Velayo is a defendant in a case filed by Jovita Granados. In relation to the writ of
attachment obtained by the latter for the said case, Velayo entered into a suretyship contract with
Manila Surety & Fidelity Co., Inc. (MSFC), which undertook him to pay an annual premium and as
collateral security and by way of pledge, delivered 4 pieces of jewelry to MSFC in consideration of a
bond MSFC for P2,800 executed for the dissolution of said Writ. When judgment was rendered in
favor of Granados, Velayo failed to satisfy the execution. Hence, MSFC was forced to pay P2,800.
When it failed to recover the amount from Velayo, MSFC caused the pledged jewelry to be sold but
only realized a net product of P235.00. When Velayo failed to pay the balance, MSFC filed a suit
against the former. Velayo countered with a claim that the sale of the pledged jewelry extinguished
any further liability on his part under Article 2115 of the 1950 Civil Code.

The Municipal Court ruled against Velayo and held, among others, that the agreement is not a
pledge but an indemnity agreement, which does not state any understanding that the defendant
whould have no further liability to MSFC if the proceeds of the pieces of jewelry sold at public
auction fails to satisfy the entire amount. Also, the last portion of the said agreement which specifies
that in case the said collateral should diminish in value, the plaintiff may demand additional
securities is incompatible with the idea of pledge as a principal agreement. Thus, the status of the
pledge is nothing more nor less that a mortgage which entitles MSFC to a deficiency judgment for
the balance after proceeds of the collateral has been credited. His defense set on appeal was once
more overruled. Hence, this appeal.

ISSUE: WON the security made by Veloso a pledge.

HELD: Yes. The Supreme Court held that a pledge and mortgage are of accessory in character as
they are constituted to secure the fulfillment of a principal obligation, which in this case is the
undertaking of Velayo to indemnify MSFC for any disbursements made on account of its attachment
counterbond. Hence, the fact that the pledge is not the principal agreement is of no significance nor
is it an obstacle to the application of Article 2115 of the Civil Code.

Also, Article 2115 states that notwithstanding any stipulation to the contrary, if the price of the sale is
less, neither shall the creditor be entitled to recover the deficiency. By electing to sell the articles
pledged, instead of suing on the principal obligation, the creditor has waived any other remedy, and
must abide by the results of the sale. No deficiency is recoverable.

Digest: Piansay vs. David

FACTS: Conrado S. David received a loan of P3,000 with interest at 12% per annum from Claudia
B. Vda. de Uy Kim, one of the plaintiffs, and to secure the payment of the same, Conrado S. David
executed a chattel mortgage on a house in Tondo, Manila. The mortgage was foreclosed and was
sold to Uy Kim to satisfy the debt. 2 years later after the foreclosure, the house was sold by Uy Kim
to Marcos Magubat. The latter then filed to collect the loan from David and to declare the auction
sale and the deed of absolute sale issued by Uy Kim in favour of Piansay be annulled. (It appears
that Kim sold the house to two people, namely Piansay and Magubat) The trial court approved of the
collection of the loan from David but dismissed the complaint regarding the questioned sale between
Uy Kim and Piansay, declaring the latter as rightful owner of the house and awarding damages to
him. CA affirmed the decision. In the execution, the house in question was levied upon at the
instance of Mangubat. Piansay and Uy Kim filed a petition for certiorari and mandamus with
Preliminary Injunction before the CA to prevent the sale at public auction of the said house. CA
denied the petition.

Piansay and Uy Kim, herein plaintiffs, filed an action against David and Mangubat praying the
issuance of a writ of Preliminary Injunction to restrain levy and sale of house at public auction and
the declaration that Piansay is the true and lawful owner of said house alleging that Piansay is the
owner of the house. Mangubat moved to dismiss the action as it was barred by principle of res
judicata and plaintiffs have no personality to bring the action because they have no interest therein.
The Lower Court granted the motion to dismiss and dismissed the motion for reconsideration filed by
the plaintiffs. Hence this appeal.

ISSUE: WON the chattel mortgage constituted in favor of Uy Kim valid (in order for the plaintiffs to
have legal personality to bring the action)

HELD: No. The Supreme Court held that the resolution of the Court of Appeals when the civil case
filed by Mangubat was appealed became final and executory. On said resolution, the appellate court
held that since it is a rule in our law that buildings and constructions are regarded as mere
accessories to the land, it is logical that said accessories should partake of the nature of the principal
thing, which is the land forming, as they do, but a single object (res) with it in contemplation of law.

Where the interest conveyed is in the nature of real property, the registration of the document in the
registry of chattels is merely a futile act and produces no effect. And a mortgage creditor who
purchases real properties at an extra-judicial foreclosure sale thereof by virtue of a chattel mortgage
constituted in his favor, which mortgage has been declared null and void with respect to said real
properties acquires no right thereto by virtue of said sale.

Since a house which was subjected to a chattel mortgage produces no effect, the transaction
between David and Uy Kim was merely an unsecured loan. It follows that the Sheriff was not
authorized to sell the house as a result of the foreclosure of such chattel mortgage. And as Uy Kim
could not have acquired the house when the Sheriff sold it at public auction, she could not sell it to
Piansay. The Court cannot set aside upon instance of Mangubat because he is not a party thereto
nor has he any interest in the subject matter therein, as it was never sold or mortgaged to him.
At any rate, 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. As a consequence, the sale of the house in
question in the proceedings for the extrajudicial 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, 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.
Digest: Makati Leasing and Finance Corp vs. Wearever Textile Mills, Inc.

FACTS: Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of Makati Leasing
and Finance Corporation covering certain raw materials and machinery. Upon default, Makati
Leasing filed a petition for judicial foreclosure of the properties mortgaged. Acting on Makati
Leasings application for replevin, the lower court issued a writ of seizure. Pursuant thereto, the
sheriff enforcing the seizure order and removed the main motor of the subject machinery. In a
petition for certiorari and prohibition, the Court of Appeals ordered the return of the machinery on the
ground that the same cannot be the subject of replevin because it is a real property pursuant to
Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the
only way to remove it from Wearever textiles plant would be to drill out or destroy the concrete floor.
When the motion for reconsideration of Makati Leasing was denied by the Court of Appeals, Makati
Leasing elevated the matter to the Supreme Court.

ISSUE: WON the machinery in suit is real or personal property from the point of view of the parties.

HELD: The said machinery is a personal property. Like what was involved in the Tumalad case, if a
house of strong materials, may be considered as personal property for purposes of executing a
chattel mortgage thereon, as long as the parties to the contract so agree and no innocent third party
will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its
nature and becomes immobilized only by destination or purpose, may not be likewise treated as
such. This is really because one who has so agreed is estopped from the denying the existence of
the chattel mortgage. The decision of the Court of Appeals was set aside and the order of the lower
court was reinstated.

Digest: Northern Motors. Inc. vs. Coquia

FACTS: Manila Yellow Taxicab Co., Inc. (MYT) purchased 200 cars from Northern Motors, Inc.
(Northern) in May and June 1974 on installment plan for P28,250 per car. The former paid P1,000 on
each car and executed promissory notes for the balance secured with a chattel mortgage on the
cars. The said PNs and chattel mortgages for the 172 cars were assigned to Filinvest Credit
Corporation (Filinvest).

To satisfy the judgment obtained by Tropical Commercial Co., Inc. (Tropical) against MYT, the sheriff
levied upon and sold at public auction 20 taxicabs, 8 of which were mortgaged to Northern and 12
taxicabs assigned to Filinvest. Hence, Northern and Filinvest filed a third-party complaint. Tropical
Commercial posted indemnity bonds which the court, later canceled without notice to third-party
claimant. An addition levy on 35 taxicabs, 7 of which were likewise mortgaged to Northern and 28
were mortgaged to Filinvest, were made and the auction sale was scheduled. Again, Northern and
Filinvest filed third-party claims. By reason of the refusal of the lower court to reinstate the indemnity
bonds, Northern filed a petition for certiorari to annul order of the lower court to reinstate the
indemnity bonds and to stop the second auction sale, which was denied because the mortgagee's
remedy is to vindicate its claim in a proper action as provided in the Rules of Court, and that its
mortgage lien attached to the taxicabs wherever they might be. Northern moved to reconsider,
contending that it has the better right, as chattel mortgagee and unpaid vendor, of the mortgaged
taxicabs because the condition of the chattel mortgages had already been broken. It also alleges
that some of the buyers at the auction sale were fictitious and that the cars valued at P28,250 each
were sold for less than P3,000 each.

ISSUE: WON Northern Motors, Inc. has the preferential right to the possession of the mortgaged
taxicabs and claim the proceeds of the sale

HELD: Yes. The Supreme Court held that inasmuch as the condition of the chattel mortgages had
already been broken and Northern Motors, Inc. had in fact instituted an action for replevin so that it
could take possession of the mortgaged taxicabs, it has a superior, preferential and paramount right
to have possession of the mortgaged taxicabs and to claim the proceeds of the execution sale. The
sheriff wrongfully levied upon the mortgaged taxicabs and erroneously took possession of them. He
could have levied only upon the right or equity of redemption pertaining to MYT as chattel mortgagor
and judgment debtor, because that was the only leviable or attachable property right of the company
in the mortgaged taxicabs. And in levying the mortgagor's incorporeal right or equity of redemption, it
was not necessary for the sheriff to have taken physical possession of the mortgaged taxicabs. It
would have sufficed if he furnished MYT with a copy of the writ of execution and served upon it a
notice that its right or equity of redemption in the mortgaged taxicabs was being levied upon
pursuant to that writ. What the sheriff could have sold at public auction was merely the mortgagor's
right or equity of redemption. The sheriff and the judgment creditor are deemed to have constructive
notice of the chattel mortgages on the taxicabs. As a consequence of the registration of the
mortgages, Northern Motors, Inc. had the symbolical possession of the taxicabs