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Table of Contents
CREDIT TRANSACTIONS ..................................................................................................... 1
I. Guaranty and Suretyship .........................................................................................................1
II. Real Mortgage .........................................................................................................................3
III. Chattel Mortgage.................................................................................................................. 18
I. Guaranty and Suretyship


G.R. No. 201417, January 13, 2016, J. Brion


Cardline leased four machines (machines) from Orix as evidenced by three similarly-worded
lease agreements. Cardline’s principal stockholders and officers - Mary C. Calubad, Sony N. Calubad,
and Ng Beng Sheng (individual respondents) – signed the suretyship agreements in their personal
capacities to guarantee Cardline’s obligations under each lease agreement.

Cardline defaulted in paying the rent: the unpaid obligations amounted to P9,369,657.00 as
of July 12, 2007. Orix formally demanded payment from Cardline but the latter refused to pay.

Orix filed a complaint for replevin, sum of money, and damages with an application for a
writ of seizure against Cardline and the individual respondents (collectively, the respondents)
before the RTC. On May 6, 2008, the RTC rendered judgment in Orix’s favor. On appeal, the
respondents argued that the RTC erred in declaring them in default. The CA, and subsequently this
Court, denied the respondents’ appeal. Our denial in G.R. No. 189877 became final and executory.

Orix filed a motion for the issuance of a writ of execution, which the RTC granted in
its December 1, 2010 order. Thereafter, the respondents filed a petition for prohibition under Rule
65 of the Rules of Court before the CA. They assailed the issuance of the December 1, 2010 order,
arguing that their rental obligations were offset by the market value of the returned machines and
by the guaranty deposit.


Whether the individual respondents can invoke the benefit of excussion.


The individual respondents cannot avail of the benefit of excussion.

The terms of a contract govern the parties’ rights and obligations. When a party undertakes
to be "jointly and severally" liable, it means that the obligation is solidary. Furthermore, even
assuming that a party is liable only as a guarantor, he can be held immediately liable without the
benefit of excussion if the guarantor agreed that his liability is direct and immediate. In effect, the
guarantor waived the benefit of excussion pursuant to Article 2059(1) of the Civil Code.

In the present case, the records show that the individual respondents bound themselves
solidarily with Cardline. Section 31.1 of the lease agreements states that the persons who sign
separate instruments to secure Cardline’s obligations to Orix shall be jointly and severally liable
with Cardline.

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Even assuming arguendo that the individual respondents signed the continuing surety
agreements merely as guarantors, they still cannot invoke the benefit of excussion. The surety
agreements provide that the individual respondents’ liability is "solidary, direct, and immediate and
not contingent upon" Orix’s remedies against Cardline. The continuing suretyship agreements also
provide that the individual respondents "individually and collectively waive(s) in advance the
benefit of excussion xxx under Articles 2058 and 2065 of the Civil Code."


G.R. No. 210542 February 24, 2016, C.J. Sereno


Barbara Perez (Barbara), Rebecca Perez-Viloria (Rebecca) obtained a loan from China
Banking Corporation (China Bank) and executed a Promissory Note in favor of the latter. As
security for the payment of the loan, Barbara, Rebecca and Rosalina Carodan (Rosalina) also
executed a Real Estate Mortgage (REM) over 8 properties owned by the Barbara and Rebecca and 1
property owned by Rosalina. A Surety Agreement was likewise executed by Barbara and Rebecca as
principals and Rosalina and her niece Madeline Carodan (Madeline) as sureties.

Barbara and Rebecca failed to pay their loan obligation so China Bank foreclosed the
mortgaged property. Since the proceeds of the extra-judicial sale were insufficient to cover the total
outstanding obligation, China Bank instituted a Complaint for sum of money against the principal
debtors and the sureties. Subsequently, Barbara and Rebecca paid a potion of the loan, which
resulted to the release of their mortgaged property.

Rosalina claimed that a) she did not obtain any pecuniary benefit from the loan; and b)
China Bank's act of releasing the principal debtors' properties resulted in the extinguishment of the

The RTC ruled that Rebecca, Barbara and Rosalina are jointly and severally liable to China
Bank for the deficiency between the acquisition cost of the foreclosed real estate property and the
outstanding loan obligation of Barbara and Rebecca at the time of the foreclosure sale. The CA later
affirmed the RTC’s ruling.


1) Whether petitioner Rosalina is liable jointly and severally with Barbara and Rebecca for the
payment of respondent China Bank's claims.
2) Whether respondent China Bank can still recover the unpaid balance on the principal
obligation even after it already foreclosed the property subject of the REM extra-judicially.
3) Whether Rosalina was discharged from her liability as surety.


1) Petitioner Rosalina is liable jointly and severally with the principal debtors for the payment
of respondent China Bank's claims because Rosalina is not only an accommodation mortgagor but
also a surety.

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An accommodation mortgagor is not a party to the principal obligation but secures the
latter by pledging or mortgaging their own property. Ordinarily, he is not a recipient of the loan.

A surety is a person who binds himself solidarity with the principal debtor. A surety is
distinguished from a guaranty in that a guarantor is the insurer of the solvency of the debtor and
thus binds himself to pay if the principal is unable to pay while a surety is the insurer of the debt,
and he obligates himself to pay if the principal does not pay.

When Rosalina affixed her signature to the REM as mortgagor and to the Surety Agreement
as surety, which covered the loan transaction represented by the PN, she bound herself to be liable
to China Bank in case the principal debtors failed to pay.

2) Respondent bank can still recover the unpaid balance despite having foreclosed the
mortgaged property.

A mortgage is simply a security for, and not a satisfaction of indebtedness.69 If the proceeds
of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the
mortgagee is entitled to claim the deficiency from the debtor

3) Rosalina was not discharged from her liability as a surety.

The terms of the Surety Agreement clearly state that Rosalina not only waived waived the
rights to demand payment and to receive notice of nonpayment and protest, but she also expressly
agreed that the time for payment may be extended. More significantly, she agreed that the
securities may be "substituted, withdrawn or surrendered at any time" without her consent or
without notice to her. That China Bank indeed surrendered the properties of the principal debtors
was precisely within the ambit of this provision in the contract. Rosalina cannot now contest that
act in light of her express agreement to that stipulation.

A surety may only be discharged for the following reasons: a) the creditor has acted
negligently or has caused the material alteration of the contract; or b) the creditor has granted the
principal debtor an extension of time to pay for a definite period, pursuant to an enforceable
agreement, which was made without the consent of the surety or with the reservation of rights with
respect to him. None of the following reasons apply in this case.

II. Real Mortgage


G.R. No. 206584, January 11, 2016, J. Carpio


On 19 August 2004, Mae Flor Galido (petitioner) filed before the RTC of San Jose, Antique a
petition5 to cancel all entries appearing on Transfer Certificate of Title (TCT) Nos. T-22374, T-
22375 and T-22376, all in the name of Isagani Andigan (Andigan), and to annul TCT No. T-24815
and all other TCTs issued pursuant to the Order dated 18 October 2011 of RTC Branch 11, San Jose,
Antique (Branch 11) in RTC Civil Case No. 2001-2-3230.

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The controversy revolves around three parcels of land, designated as Lot 1052-A-1, Lot
1052-A-2 and Lot 1052-A-3, all of the San Jose, Antique Cadastre. These parcels of land were, prior
to subdivision in 1999, part of Lot 1052-A which was covered by TCT No. T-21405 in the name of

On 28 December 1998, Andigan sold undivided portions of Lot 1052-A to Nelson P. Magrare
(Magrare), Evangeline M. Palcat (Palcat) and Rodolfo Bayombong (Bayombong). To Magrare was
sold an undivided portion with an area of 700 square meters, more or less; to Palcat, 1,000 square
meters, more or less; and to Bayombong, 500 square meters, more or less.

Andigan caused the subdivision of Lot 1052-A into five lots, namely: Lot 1052-A-1, Lot
1052-A-2, Lot 1052-A-3, Lot 1052-A-4 and Lot 1052-A-5. On 18 October 1999, TCT No. T-21405
was cancelled and new certificates were issued for the subdivided portions. Pertinent to the case
are TCT No. T-22374 which was issued for Lot 1052-A-1, TCT No. T-22375 for Lot 1052-A-2 and
TCT No. T-22376 for Lot 1052-A-3, all in the name of Andigan. Andigan did not turn over the new
TCTs to Magrare, Palcat and Bayombong, and the latter were unaware of the subdivision.

On 8 May 2000, Andigan mortgaged the same three lots to petitioner and the latter came
into possession of the owner’s duplicate copies of TCT Nos. T-22374, T-22375 and T-22376.

On 6 February 2001, at 11:00 a.m., Magrare, Palcat and Bayombong registered their
respective adverse claims on TCT Nos. T-22374, T-22375 and T-22376. On the same day, at 3:00
p.m., petitioner also registered her mortgage on the same TCTs, such that the certificates in the
custody of the Register of Deeds were annotated.


1) Who has a better right to the properties concerned: petitioner on the one hand, and
Magrare, Palcat and Bayombong on the other.
2) Whether petitioner is a buyer in good faith.


Magrare, Palcat and Bayombong have the better right to the properties concerned.

First, there was no valid mortgage in favor of petitioner. Petitioner derives her title from
Andigan, as mortgagor. However, at the time Andigan mortgaged the lots to petitioner he had
already sold the same to Magrare, Palcat and Bayombong. In Civil Case No. 2001-2-3230, Andigan
admitted that Lot Nos. 1052-A-1, 1052-A-2 and 1052-A-3 were the parcels of land he sold to
Magrare, Palcat and Bayombong, respectively, on 28 December 1998. Hence, when Andigan
mortgaged the lots to petitioner on 8 May 2000, he no longer had any right to do so.

Notably, there were already adverse claims registered on the respective titles of the
property when when petitioner filed her case for foreclosure of mortgage. One who deals with
property registered under the Torrens system need not go beyond the certificate of title, but only
has to rely on the certificate of title. Every subsequent purchaser of registered land taking a
certificate of title for value and in good faith shall hold the same free from all encumbrances except
those noted on said certificate and any of the encumbrances provided by law.

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Preference is given to the prior registered adverse claim because registration is the
operative act that binds or affects the land insofar as third persons are concerned. Thus, upon
registration of respondents’ adverse claims, notice was given the whole world, including petitioner.

2) Petitioner is not a buyer in good faith.

Even assuming that the mortgage was valid, petitioner can hardly be considered a buyer in
good faith. A purchaser in good faith and for value is one who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full and fair
price for the same at the time of such purchase, or before he has notice of the claims or interest of
some other person in the property.

As discussed above, petitioner had notice as early as 2001 of the adverse claims of Magrare,
Palcat and Bayombong. The decision in Civil Case No. 2001-2-3230 became final and executory
before the Certificate of Sale was issued by the Provincial Sheriff on 14 July 2004 in Civil Case No.

G.R. No. 160408, January 11, 2016, J. Bersamin


On April 9, 1986, the Julians obtained a P60,000.00 loan from Adelaida Pen. On May 23,
1986 and on the (sic) May 27, 1986, they were again extended loans in the amounts of P50,000.00
and P10,000.00, respectively by Adelaida. The initial interests were deducted by Adelaida. Two (2)
promissory notes were executed by the Julians in favor of Adelaida to evidence the foregoing loans,
one dated April 9, 1986 and payable on June 15, 1986 for the P60,000.00 loan and another dated
May 22, 1986 payable on July 22, 1986 for the P50,000.00 loan. Both loans were charged interest at
6% per month. As security, on May 23, 1986, the Julians executed a Real Estate Mortgage over their
property covered by TCT No. 327733 registered under the name of appellee Santos Julian, Jr. The
owner's duplicate of TCT No. 327733 was delivered to the appellants.
At the time the mortgage was executed, the Julians were likewise required by the Adelaida
to sign a one (1) page document purportedly an "Absolute Deed of Sale". Said document did not
contain any consideration, and was "undated, unfilled and unnotarized". They allege that their total
payments amounted to P115,400.00 and that their last payment was on June 28, 1990 in the
amount of P100,000.00.

In December 1992, Linda Julian offered to pay Adelaida the amount of P150,000.00. The
latter refused to accept the offer and demanded that she be paid the amount of P250,000.00. Unable
to meet the demand, Linda desisted from the offer and requested that she be shown the land title
which she conveyed to Adelaida, but the latter refused. Upon verification with the Registry of Deeds
of Quezon City, she was informed that the title to the mortgaged property had already been
registered in the name of Adelaida under TCT No. 364880, and that the transfer was entered on July
17, 1987. A reconstituted title, TCT No. RT-45272 (364880), also appeared on file in the Registry of
Deeds replacing TCT No. 364880.

On September 8, 1994, the Julians filed a suit for the Cancellation of Sale, Cancellation of
Title issued to the spouses Roberto and Adelaida Pen; Recovery of Possession; Damages with
Prayer for Preliminary Injunction. The complaint alleged that Adelaida, through obvious bad faith,

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maliciously typed, unilaterally filled up, and caused to be notarized the Deed of Sale earlier signed
by Julian, and used this spurious deed of sale as the vehicle for her fraudulent transfer unto herself
the parcel of land covered by TCT No. 327733.


1) Whether the deed of sale is valid.

2) Whether monetary interest can validly be imposed.


1) The deed of sale is not valid.

Article 2088 of the Civil Code prohibits the creditor from appropriating the things given by
way of pledge or mortgage, or from disposing of them; any stipulation to the contrary is null and
void. The elements for pactum commissorium to exist are as follows, to wit: (a) that there should be
a pledge or mortgage wherein property is pledged or mortgaged by way of security for the payment
of the principal obligation; and (b) that there should be a stipulation for an automatic appropriation
by the creditor of the thing pledged or mortgaged in the event of non-payment of the principal
obligation within the stipulated period. The first element was present considering that the property
of the respondents was mortgaged by Linda in favor of Adelaida as security for the farmer's
indebtedness. As to the second, the authorization for Adelaida to appropriate the property subject
of the mortgage upon Linda's default was implied from Linda's having signed the blank deed of sale
simultaneously with her signing of the real estate mortgage. The haste with which the transfer of
property was made upon the default by Linda on her obligation, and the eventual transfer of the
property in a manner not in the form of a valid dacion en pago ultimately confirmed the nature of
the transaction as a pactum commissorium.

It cannot be argued that the transaction was a dacion en pago. For a valid dacion en pago to
transpire, the attendance of the following elements must be established, namely: (a) the existence
of a money obligation; (b) the alienation to the creditor of a property by the debtor with the consent
of the former; and (c) the satisfaction of the money obligation of the debtor. To have a valid dacion
en pago, therefore, the alienation of the property must fully extinguish the debt. Yet, the debt of the
respondents subsisted despite the transfer of the property in favor of Adelaida.

2) Monetary interest cannot be imposed.

Interest that is the compensation fixed by the parties for the use or forbearance of money is
referred to as monetary interest. On the other hand, interest that may be imposed by law or by the
courts as penalty or indemnity for damages is called compensatory interest.

The CA correctly deleted the monetary interest from the judgment. Pursuant to Article 1956
of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing. In order
for monetary interest to be imposed, therefore, two requirements must be present,
specifically: (a) that there has been an express stipulation for the payment of interest; and (b) that
the agreement for the payment of interest has been reduced in writing. Considering that the
promissory notes contained no stipulation on the payment of monetary interest, monetary interest
cannot be validly imposed.

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The CA properly imposed compensatory interest to offset the delay in the respondents'
performance of their obligation. Nonetheless, the imposition of the legal rate of interest should be
modified from 12% to 6%. This is pursuant to BSP Monetary Board Resolution No. 796, lowering to
6% per annum the legal rate of interest for a loan or forbearance of money, goods or credit starting
July 1, 2013. It should be noted, however, that imposition of the legal rate of interest at 6% per
annum is prospective in application.


G.R. No. 194964, January 11, 2016, J. Carpio


Before 1982, Guillermo B. Torres and Dolores P. Torres incorporated and operated two (2)
thrift banks: (1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2) Davao Savings and
Loan Association, Inc. (DSLAI). Guillermo chaired both thrift banks. He acted as FISLAI’s President,
while his wife, Dolores, acted as DSLAI’s President and FISLAI’s Treasurer.

Upon Guillermo’s request, Bangko Sentral ng Pilipinas (BSP) issued a P1.9 million standby
emergency credit to FISLAI. On May 25, 1982, University of Mindanao’s (UM) Vice President for
Finance, Saturnino Petalcorin, executed a deed of real estate mortgage over UM’s property in
Cagayan de Oro City (covered by Transfer Certificate of Title No. T-14345) in favor of BSP. "The
mortgage served as security for FISLAI’s P1.9 Million loan [.]" It was allegedly executed on UM’s

As proof of his authority to execute a real estate mortgage for UM, Petalcorin showed a
Secretary’s Certificate signed on April 13, 1982 by UM’s Corporate Secretary, Aurora de Leon. The
Secretary’s Certificate was supported by an excerpt from the minutes of the January 19, 1982
alleged meeting of UM’s Board of Trustees.

On October 21, 1982, BSP granted FISLAI an additional loan of P620,700.00. Guillermo and
Edmundo Ramos executed a promissory note on October 21, 1982 to cover that amount.

On November 5, 1982, Petalcorin executed another deed of real estate mortgage, allegedly
on behalf of UM, over its two properties in Iligan City. This mortgage served as additional security
for FISLAI’s loans. The two Iligan City properties were covered by TCT Nos. T-15696 and T-15697.

On January 11, 1985, FISLAI, DSLAI, and Land Bank of the Philippines entered into a
Memorandum of Agreement intended to rehabilitate the thrift banks, which had been suffering
from their depositors’ heavy withdrawals. Among the terms of the agreement was the merger of
FISLAI and DSLAI, with DSLAI as the surviving corporation. DSLAI later became known as
Mindanao Savings and Loan Association, Inc. (MSLAI).

Guillermo died on March 2, 1989. MSLAI failed to recover from its losses and was liquidated
on May 24, 1991.

On June 18, 1999, BSP sent a letter to UM, informing it that the bank would foreclose its
properties if MSLAI’s total outstanding obligation of P12,534,907.73 remained unpaid. UM,
however, denied that its properties were mortgaged. It also denied having received any loan
proceeds from BSP. UM later filed two Complaints for nullification and cancellation of mortgage.

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1) Whether respondent BSP’s action to foreclose the mortgaged properties had already
2) Whether petitioner UM is bound by the real estate mortgage contracts executed
by Petalcorin.
3) Whether ratification applies to the instant case.


1) BSP’s action to foreclose the mortgaged properties is not yet barred by prescription.

The prescriptive period for actions on mortgages is ten (10) years from the day they may be
brought. Actions on mortgages may be brought not upon the execution of the mortgage contract but
upon default in payment of the obligation secured by the mortgage. A debtor is considered in
default when he or she fails to pay the obligation on due date and, subject to exceptions, after
demands for payment were made by the creditor.

As a general rule, a person defaults and prescriptive period for action runs when (1) the
obligation becomes due and demandable; and (2) demand for payment has been made. In other
words, prescriptive period runs from the date of demand, subject to certain exceptions.

The mortgage contracts in this case were executed by Petalcorin in 1982. The maturity
dates of FISLAI’s loans were repeatedly extended until the loans became due and demandable only
in 1990. Respondent informed petitioner of its decision to foreclose its properties and demanded
payment in 1999.

Under Article 1155 of the Civil Code, prescription of actions may be interrupted by (1) the
filing of a court action; (2) a written extrajudicial demand; and (3) the written acknowledgment of
the debt by the debtor.

Therefore, the running of the prescriptive period was interrupted when respondent sent its
demand letter to petitioner on June 18, 1999. This eventually led to petitioner’s filing of its
annulment of mortgage complaints on July 16, 1999.

Assuming that demand was necessary, respondent’s action was within the ten (10)-year
prescriptive period. Respondent demanded payment of the loans in 1999 and filed an action in the
same year.

2) The mortgage contract is not binding on petitioner.

The relationship between a corporation and its representatives is governed by the general
principles of agency. Article 1317 of the Civil Code provides that there must be authority from the
principal before anyone can act in his or her name. Without delegation by the board of directors or
trustees, acts of a person—including those of the corporation’s directors, trustees, shareholders, or
officers—executed on behalf of the corporation are generally not binding on the corporation.

Contracts entered into in another’s name without authority or valid legal representation are
generally unenforceable, pursuant to Articles 1317 and 1403 of the Civil Code.

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BSP failed to prove that the UM Board of Trustees actually passed a Board Resolution
authorizing Petalcorin to mortgage the subject real properties. Hence, not having the proper board
resolution to authorize Petalcorin to execute the mortgage contracts for petitioner, the contracts he
executed are unenforceable against petitioner.

3) Ratification does not apply to the instant case.

Even though a person did not give another person authority to act on his or her behalf, the
action may be enforced against him or her if it is shown that he or she ratified it or allowed the
other person to act as if he or she had full authority to do so.

Implied ratification may take the form of silence, acquiescence, acts consistent with
approval of the act, or acceptance or retention of benefits. However, silence, acquiescence, retention
of benefits, and acts that may be interpreted as approval of the act do not by themselves constitute
implied ratification. For an act to constitute an implied ratification, there must be no acceptable
explanation for the act other than that there is an intention to adopt the act as his or her own. "[It]
cannot be inferred from acts that a principal has a right to do independently of the unauthorized act
of the agent." No act by petitioner can be interpreted as anything close to ratification.

Ratification must also be knowingly and voluntarily done. Here, petitioner’s lack of
knowledge about the mortgage executed in its name precludes an interpretation that there was any
ratification on its part.

Corporate acts may be ultra vires but not void. Mere ultra vires acts, or those which are not
illegal and void ab initio, but are not merely within the scope of the articles of incorporation, are
merely voidable and may become binding and enforceable when ratified by the stockholders.

There can be no apparent authority and the corporation cannot be estopped from denying
the binding affect of an act when there is no evidence pointing to similar acts and other
circumstances that can be interpreted as the corporation holding out a representative as having
authority to contract on its behalf.

Petalcorin’s authority to transact on behalf of petitioner cannot be presumed based on a

Secretary’s Certificate and excerpt from the minutes of the alleged board meeting that were found
to have been simulated. These documents cannot be considered as the corporate acts that held out
Petalcorin as petitioner’s authorized representative for mortgage transactions. They were not
supported by an actual board meeting.


G.R. No. 198745, January 13, 2016, J. Reyes


Mover Enterprises, Inc. (Mover) is the owner and developer of the Sunnyside Heights
Subdivision located in Batasan Hills, Quezon City. In March 1988, Mover mortgaged Lot 5, Block 10
of Phase I of the said subdivision containing 5,764 square meters to the Philippine Commercial
International Bank (PCIB) to secure a loan. Mover failed to pay its loan and PCIB foreclosed on the

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mortgage. After title was consolidated in PCIB, the Registry of Deeds of Quezon City issued Transfer
Certificate of Title (TCT) No. 86389 to the said bank on May 17, 1993.

Sometime in mid-1994, PCIB advertised the aforesaid lot for sale in the newspapers. This
prompted the Sunnyside Heights Homeowners Association (SI-IHA) to file before the Housing and
Land Use Regulatory Board (I-ILURB) a letter-complaint, docketed as HLURB Case No. REM-
091594-6077, to declare the mortgage between Mover and PCIB void on the ground that the subject
property, originally covered by TCT No. 366219, has been allocated as SHJ-IA's open space pursuant
to law. SHI-IA thus sought reconveyance of the property.


1) Whether the HLURB has jurisdiction over the subject matter of the case.
2) Whether Mover should be held liable for the nullity of the mortgage.


1) The HLURB has jurisdiction over the subject matter of the case.

The jurisdiction of the HLURB to regulate the real estate trade is broad enough to include
jurisdiction over complaints for annulment of mortgage. To disassociate the issue of nullity of
mortgage and lodge it separately with the liquidation court would only cause inconvenience to the
parties and would not serve the ends of speedy and inexpensive administration of justice as
mandated by the laws vesting quasi-judicial powers in the agency.

2) Mover should be held liable for the nullity of the mortgage.

It would be unjust enrichment on the part of Mover not to acknowledge its indebtedness to
BDO in view of the nullity of the mortgage. It should have known that its mortgage security was
invalid considering the alteration in its subdivision plan in May 1987. In equity, it must therefore
compensate PCIB for the loss thereat: reckoned from the filing of SHHA's letter-complaint on
September 14, 1994.

The Supreme Court, in the case of Eastern Shipping Lines, Inc. synthesized the rules on the
imposition of interest, if proper, and the applicable rate, as follows: The 12% per annum rate under
CB Circular No. 416 shall apply only to loans or forbearance of money, goods, or credits, as well as
to judgments involving such loan or forbearance of money, goods, or credit, while the. 6% per
annum under Art. 2209 of the Civil Code applies "when the transaction involves the payment of
indemnities in the concept of damage arising from the breach or a delay in the performance of
obligations in general," with the application of both rates reckoned "from the time the complaint
was filed until the [adjudged] amount is fully paid." In either instance, the reckoning period for the
commencement of the running of the legal interest shall be subject to the condition "that the courts
are vested with discretion, depending on the equities of each case, on the award of interest."

In view of absence of bad faith by PCIB in the questioned mortgage loan, in addition to the
loan amount of Pl,700,000.00, Mover should pay to BDO legal interest at 12% per annum from the
time it is due pursuant to Eastern Shipping Lines, except that with the effectivity of Monetary Board
Circular No. 799, the rate of interest for the loan shall be reduced to six percent (6%) per
annum from and after July 1, 2013.

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G.R. No. 168078 / G.R. No. 168357, January 13, 2016, C.J. Sereno


Petitioner Dulos Realty was the registered owner of certain residential lots covered by
Transfer Certificate of Title (TCT) Nos. S-39767, S-39775, S-28335, S-39778 and S-29776, located at
Airmen's Village Subdivision, Pulang Lupa II, Las Pinas, Metro Manila.

Dulos Realty obtained a loan from respondent CCC in the amount of P300,000. To secure the
loan, the realty executed a Real Estate Mortgage over the subject properties in favor of respondent.
The mortgage was duly annotated on the certificates of title.

Dulos Realty defaulted in the payment of the mortgage loan, prompting respondent CCC to
initiate extrajudicial foreclosure proceedings. An auction sale was held, with respondent CCC
emerging as the highest bidder. Consequently, TCT Nos. S-39775, S-28335, S-39778 and S-29776 -
all in the name of Dulos Realty - were cancelled and TCT Nos. 74531, 74532, 74533 and 74534 were
issued in the name of respondent CCC.

Meanwhile, Dulos Realty entered into Contracts to Sell with petitioners Cahayag, Rivera,
Escalona and a Deed of Absolute Sale with Baldoza over the houses and lots covered by TCT No. S-
39775, TCT No. S-28335, TCT No. S-29776 and S-39778, respectively.

On 21 December 1983, respondent CCC, through a Deed of Absolute Sale, sold to respondent
Qua the same subject properties, now covered by TCT Nos. 74531, 74532, 74533 and 74534, in the
name of respondent CCC. Accordingly, TCT Nos. 74531, 74532, 74533 and 74534 were cancelled;
and TCT Nos. 77012, 77013, 77014 and 770015 were issued to respondent Qua.

Subsequently, respondent Qua filed ejectment suits individually against petitioners Dulos
Realty, Cahayag, Escalona, and Rivera.

Petitioners, on the other hand filed a Complaint against respondents for the Annulment of
Sheriff’s Sale and Other Documents with Preliminary Injunction and/or Temporary Restraining
Order. The Complaint alleged that petitioners Cahayag, Rivera, Escalona and Baldoza were owners
of the properties in question by virtue of Contracts of Sale individually executed in their favor, and
that the Real Estate Mortgage between Dulos Realty and defendant-appellant CCC did not include
the houses, but merely referred to the lands themselves. Thus, the inclusion of the housing units in
the Deed of Sale executed by respondent CCC in favor of respondent Qua was allegedly illegal.


1) Whether the real mortgage covers the lands only or the housing units as well.
2) Whether Dulos Realty was the owner of the properties it had mortgaged at the time of its
3) Whether petitioners were bound to the mortgage by virtue of its registration.
4) Who, as between petitioners-buyers and respondent Qua, has a better right over the

Page 11
5) Whether there was a valid sale and transfer of title to Baldoza.
6) Whether respondent Qua is guilty of bad faith in the purchase of the properties.


1) The real mortgage covers the not only the lands but also the housing units.

The contra proferentem rule finds no application to this case. The doctrine provides that in
the interpretation of documents, ambiguities are to be construed against the drafter. By its very
nature, the precept assumes the existence of an ambiguity in the contract, which is why contra
proferentem is also called the ambiguity doctrine. In this case, the Deed of Real Estate
Mortgage clearly establishes that the improvements found on the real properties listed therein are
included as subject-matter of the contract. It covers not only the real properties, but the buildings
and improvements thereon as well.

2) Dulos Realty was the owner of the properties it had mortgaged at the time of its execution.
The Contracts to Sell and Deed of Absolute Sale could not have posed an impediment at all to the
mortgage, given that these contracts had yet to materialize when the mortgage was
constituted. They were all executed after the constitution of the Real Estate Mortgage on 20
December 1980.

Petitioners equate a contract to sell to a contract of sale, in which the vendor loses
ownership over the property upon its delivery. But a contract to sell, standing alone, does not
transfer ownership. At the point of perfection, the seller under a contract to sell does not even have
the obligation to transfer ownership to the buyer. The obligation arises only when the buyer fulfills
the condition: full payment of the purchase price. In other words, the seller retains ownership at the
time of the execution of the contract to sell.

There is no evidence to show that any of petitioners Cahayag, Rivera and Escalona were
able to effect full payment of the purchase price, which could have at least given rise to the
obligation to transfer ownership.

3) Petitioners Cahayag, Rivera and Escalona, were bound to the mortgage executed between
mortgagor Dulos Realty and mortgagee CCC, by virtue of its registration, which preceded the
execution of the Contracts to Sell.

Registration of the mortgage establishes a real right or lien in favor of the mortgagee, as
provided by Articles 1312 and 2126 of the Civil Code. Corollary to the rule, the lien has been treated
as "inseparable from the property inasmuch as it is a right in rem." In other words, it binds third
persons to the mortgage.

The purpose of registration is to notify persons other than the parties to the contract that a
transaction concerning the property was entered into. Ultimately, registration, because it provides
constructive notice to the whole world, makes the certificate of title reliable, such that third persons
dealing with registered land need only look at the certificate to determine the status of the

4) Respondent Qua has a better right over the properties.

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When it comes to extrajudicial foreclosures, the law grants mortgagors or their successors-
in-interest an opportunity to redeem the property within one year from the date of the sale. The
one-year period has been jurisprudentially held to be counted from the registration of the
foreclosure sale with the Register of Deeds. An exception to this rule has been carved out by
Congress for juridical mortgagors. Section 47 of the General Banking Law of 2000 shortens the
redemption period to within three months after the foreclosure sale or until the registration of the
certificate of sale, whichever comes first. The General Banking Law of 2000 came into law on 13
June 2000.

If the redemption period expires and the mortgagors or their successors-in-interest fail to
redeem the foreclosed property, the title thereto is consolidated in the purchaser. The consolidation
confirms the purchaser as the owner of the property; concurrently, the mortgagor-for failure to
exercise the right of redemption within the period-loses all interest in the property.

As the foreclosure sale took place prior to the advent of the General Banking Law of 2000,
the applicable redemption period is one year. In this case, because the Certificate of Sale in favor of
respondent CCC was registered on 8 March 1982, the redemption period was until 8 March 1983. It
lapsed without any right of redemption having been exercised by Dulos Realty. Consequently, the
right of respondent CCC, as purchaser of the subject lots, became absolute. Further, the right of
respondent CCC over the lots was transferred to respondent Qua by virtue of the Deed of Sale
executed between them.

5) While there was a valid sale to Baldoza, there was no valid transfer of title to him since
Dulos Realty was no longer the owner at the time of the execution of the Deed of Absolute Sale.

For title to pass to the buyer, the seller must be the owner of the thing sold at
the consummation stage or at the time of delivery of the item sold. The seller need not be the owner
at the perfection stage of the contract, whether it is of a contract to sell or a contract of sale.
Ownership is not a requirement for a valid contract of sale; it is a requirement for a valid transfer of
ownership'. The fact that Dulos Realty was no longer the owner of the property in question at the
time of the sale did not affect the validity of the contract.

On the contrary, lack of title goes into the performance of a contract of sale. It is therefore
crucial to determine in this case if the seller was the owner at the time of delivery of the object of
the sale. For this purpose, it should be noted that execution of a public instrument evidencing a sale
translates to delivery. It transfers ownership of the item sold to the buyer.

In this case, the delivery coincided with the perfection of the contract -The Deed of Absolute Sale
covering the real property in favor of petitioner Baldoza was executed on 10 December 1983. As
already mentioned, Dulos Realty was no longer the owner of the property on that date. Accordingly,
it could not have validly transferred ownership of the real property it had sold to petitioner.

6) Respondent Qua is not guilty of bad faith in the purchase of the properties.

An innocent purchaser for value is one who "buys the property of another without notice
that some other person has a right to or interest in it, and who pays a full and fair price at the time
of the purchase or before receiving any notice of another person's claim." The concept thus
presupposes that there must be an adverse claim or defect in the title to the property to be
purchased by the innocent purchaser for value.

Page 13
Respondent Qua traces her title to respondent CCC, whose acquisition over the property
proceeded from a foreclosure sale that was valid. As there is no defect in the title of respondent CCC
to speak of in this case, there is no need to go into a discussion of whether Qua is an innocent
purchaser for value.


G.R. No. 203949 & 205071, April 6, 2016; Reyes


George A. Gallent, Sr. (George) was the registered owner of a 761-square-meter residential
property covered by Transfer Certificate of Title (TCT) No. S-99286, located at Alabang Hills Village,
Muntinlupa City, with improvements thereon consisting of a two-storey house and a swimming
pool. On December 20, 1996, the Spouses George and Mercedes Gallent (Spouses Gallent)
mortgaged the said property to Allied Banking Corporation (Allied Bank) as security for a loan of
Pl.5 Million. The Spouses Gallent failed to pay their loan, which had ballooned to P4,631,974.66;
thus, Allied Bank extrajudicially foreclosed the mortgaged property wherein it emerged as the
highest bidder and was issued a corresponding certificate of sale dated September 25, 2000. Since
the Spouses Gallent failed to redeem the subject property after one year, Allied Bank consolidated
its ownership over the subject property.

On June 11, 2003, Allied Bank agreed to sell back the foreclosed property to the Spouses Gallent for
P4 Million, as evidenced by an Agreement to Sell, wherein the Spouses Gallent paid a down payment
of P3.5 Million, evidenced by an Official Receipt (O.R.) No. 0990687-A6 dated March 12, 2003, and
the balance thereof was payable in 12 monthly amortizations. The Spouses Gallent were allowed to
keep the possession of the subject property as tenants or lessees of Allied Bank.

However, due to financial difficulties, sometime in October 2003, the Spouses Gallent were
constrained to ask help from Juan Velasquez (Velasquez), to help them settle their remaining
monthly amortizations. As an inducement, they agreed that Velasquez would have the subject
property registered under his name until they have repaid him. On October 24, 2003, the Spouses
Gallent executed a Deed of Assignment of Rights whereby they assigned to Velasquez all their
rights, interests, and obligations under their Agreement to Sell with Allied Bank. Velasquez paid
Allied Bank the remaining balance amounting to P216,635.97.

On November 5, 2003, Allied Bank and Velasquez executed a Deed of Absolute Sale over the subject
property for the price of P4 Million, wherein George himself signed as an instrumental witness.
However, the said instrument was not registered. Subsequently, Velasquez caused another Deed of
Sale dated November 19, 2003, over the subject property which showed a lower selling price of
P1.2 Million to be registered, purportedly for tax purposes. On November 28, 2003, TCT No.
1181414 was issued under the name of Velasquez.

After more than four years, or on June 27, 2008, Velasquez sent a demand letter to the Spouses
Gallent to vacate the subject property, but the latter refused to do so, prompting the former to file
an ex parte petition for issuance of a writ of possession, docketed as LRC Case No. 09-055, in the
RTC of Muntinlupa City. The Spouses Gallent sought to dismiss the petition by filing Consolidated
Motions for Leave to Intervene and to Dismiss Petition on January 14, 2010.

Page 14
The RTC Muntinlupa denied the Spouses Gallent’s consolidated motions in an Order dated February
12, 2010. The trial court ratiocinated that the issuance of the writ of possession is a ministerial duty
of the court upon filing of the proper application and proof of title and by its nature does not
require notice upon persons interested in the subject properties. By virtue of the sale of the
properties involved, Velasquez became the new owner of the lots entitled to all rights and interests
its predecessor Allied Bank had therein, including the right to file an application for writ of
possession. The trial court subsequently denied the Spouses Gallent’s Motion for Reconsideration in
an Order dated April 13, 2010.

Thereafter the Spouses Gallent filed a Petition for Certiorari before the CA docketed as CA-G.R. SP
No. 114527 assailing the February 12 and April 13 Orders of the RTC Muntinlupa. They argued that
the RTC had no jurisdiction to issue an ex parte writ of possession to Velasquez since he did not
acquire the property at a foreclosure sale, but purchased the same from the mortgagee, winning
bidder and purchaser, Allied Bank, and only after it had consolidated its title thereto. The Spouses
allege that Velasquez should have filed an action for ejectment or for recovery of ownership or

Subsequently, the Spouses Gallent filed another Petition for Certiorari before the CA, this time
docketed as CA-G.R. SP No. 116097 arguing that the deed of sale between Velasquez and Allied
Bank was a forgery. The two cases pending before the CA were not consolidated.

In CA-G.R. SP No. 116097, the CA ruled that that Velasquez, as the bank's transferee of the said
property may also petition the court for an ex parte writ of possession since he merely stepped into
the shoes of Allied Bank.

However, in CA-G.R. SP No. 114527, the CA held that Velasquez was not entitled to a writ of
possession because the ministerial duty to issue a writ of possession ceases to be so with particular
regard to petitioners who are actual possessors of the property under a claim of ownership. Actual
possession under claim of ownership raises a disputable presumption of ownership. This
conclusion is supported by Article 433 of the Civil Code.

Both parties filed their respective Motions for Reconsideration and Petitions for Review on


1) Whether or not Velasquez entitled to the issuance of a writ of possession.


1) No, as an exception, the ministerial duty of the court to issue an ex parte writ of possession
ceases once it appears that a third party, not the debtor-mortgagor, is in possession of the
property under a claim of title adverse to that of the applicant.

The general rule in extrajudicial foreclosure of mortgage is that after the consolidation of the title
over the foreclosed property in the buyer, it is the ministerial duty of the court to issue a writ of
possession upon an ex parte petition by the new owner as a matter of right. Furthermore, when the
thing purchased at a foreclosure sale is in turn sold or transferred, the right to the possession
thereof, along with all other rights of ownership, follows the thing sold to its new owner. However,
as an exception, the ministerial duty of the court to issue an ex parte writ of possession ceases once

Page 15
it appears that a third party, not the debtor-mortgagor, is in possession of the property under a
claim of title adverse to that of the applicant. Section 33 of Rule 39 of the Rules of Court provides
that in an execution sale, the possession of the property shall be given to the purchaser or last
redemptioner, unless a third party is actually holding the property adversely to the judgment

Thus, applying the foregoing discussion, Velasquez is indeed be entitled to a writ of possession as
the successor-in-interest of Allied Bank except that the exception to the general rule applies in this


G.R. No. 206549 , April 6, 2016; Reyes


Momarco, controlled and owned by the Spouses Jonsay, is an importer, manufacturer and
distributor of animal health and feedmill products catering to cattle, hog and poultry producers. On
November 9, 1995, and again on April 28, 1997, Momarco obtained loans of P40,000,000.00 and
P20,000,000.00, respectively, from Solidbank for which the Spouses Jonsay executed a blanket
mortgage over three parcels of land they owned in Calamba City, Laguna registered in their names
under Transfer Certificates of Title Nos. T-224751, T-210327 and T-269668 containing a total of
23,733 square meters. On November 3, 1997, the loans were consolidated under one promissory
note for the combined amount of P60,000,000.00, signed by Florante as President of Momarco, with
his wife Luzviminda also signing as co-maker. The stipulated rate of interest was 18.75% per
annum, along with an escalation clause tied to increases in pertinent Central Bank-declared interest
rates, by which Solidbank was eventually able to unilaterally increase the interest charges up to
30% per annum.

Eventually, due to the reverses brought on by the 1997 Asian financial crisis, Momarco failed to pay
its interest payments. Solidbank then proceeded to extrajudicially foreclose on the mortgage, and at
the auction sale held on March 5, 1999, it submitted the winning bid of P82,327,249.54,
representing Momarco's outstanding loans, interests and penalties, plus attorney's fees of
P3,600,000.00. On March 22, 1999, Sheriff Adelio Perocho (Sheriff Perocho) issued a certificate of
sale to Solidbank, duly annotated on April 15, 1999 on the lots' titles.

On March 9, 2000, a month before the expiration of the period to redeem the lots, the petitioners
filed a Complaint against Solidbank, Sheriff Perocho and the Register of Deeds of Calamba, Laguna,
docketed as Civil Case No. 2912-2000-C, for Annulment of the Extrajudicial Foreclosure of
Mortgage, Injunction, Accounting and Damages with Prayer for the Immediate Issuance of a Writ of
Preliminary Prohibitory Injunction.

The RTC granted the injunction prayed for by the Spouses Jonsay and eventually ruled in their
favor. The RTC ruled that the mortgage contract and the promissory notes prepared by Solidbank,
which the Spouses Jonsay signed in blank, were contracts of adhesion; that Solidbank failed to take
into account Momarco’s payments in the two years preceding 1998 totaling P24,277,293.22 (this
amount was not disputed by Solidbank); that the interest rates, ranging from 19% to 30%, as well
as the penalties, charges and attorney's fees imposed by Solidbank, were excessive, unconscionable
and immoral, and that Solidbank has no carte blanche authority under the Usury Law to unilaterally

Page 16
raise the interest rates to levels as to enslave the borrower and hemorrhage its assets; that the
Morning Chronicle, in which the notice of auction was published, was not a newspaper of general
circulation because it had no bona fide list of paying subscribers; that Solidbank manipulated the
foreclosure sale through a defective publication of the notice of auction and by submitting an
unconscionably low bid of P82,327,000.00, whereas the value of the lots had risen sevenfold since
the rehabilitation of the SLEX.

On appeal, the CA initially rendered judgment affirming the RTC in toto. It agreed that Solidbank did
not comply with the publication requirements under Section 3, Act No. 3135. According to the CA,
the Morning Chronicle was not a newspaper of general circulation, notwithstanding the affidavit of
publication issued by its publisher, Turing R. Crisostomo (Crisostomo), to that effect as well as the
certification of the Clerk of Court of RTC-Calamba City that it was duly accredited by the court since
May 28, 1997 to publish legal notices. The CA ruled that it was not enough for Crisostomo to merely
state in his affidavit that the Morning Chronicle was published and edited in the province of Laguna
and in San Pablo City without a showing that it was published to disseminate local news and
general information, that it had a bona fide list of paying subscribers, that it was published at
regular intervals, and that it was in general circulation in Calamba City where the subject properties
are located.

However, on Motion for Reconsideration of Solidbank, the CA completely reversed its earlier
decision. The CA decalred that declared that Solidbank's extrajudicial foreclosure of the mortgage
enjoyed the presumption of regularity. The CA stressed that since the selection of Morning
Chronicle to publish the notice was through a court-supervised raffle, Solidbank was fully justified
in relying on the regularity of the publication of its notice in the aforesaid newspaper, in the choice
of which it had no hand whatsoever. The CA however still limited the interest to 12% per annum.


1) Whether or not Solidbank sufficiently complied with the publication requirement under
Section 3 of Act No. 3135.


1) Yes, petitioners were not able to present sufficient evidence to overcome the presumption
of regularity of the forecfoosure sale.

In the case at bar, there is no dispute that there was publication of the auction notice, which the CA
in its amended decision now held to have sufficiently complied with the requirement of publication
under Section 3 of Act No. 3135. Unfortunately, against the fact of publication and the presumption
of regularity of the foreclosure proceedings, the petitioners' only contrary evidence is Florante's
testimonial assertion that the Morning Chronicle was not a newspaper of general circulation in
Calamba City and that it could not be found in the local newsstands.

While it is true that the accreditation by the presiding judge of a trial court is not decisive of
whether a certain publication is a newspaper of general circulation, nonetheless, when the RTC
accredited the Morning Chronicle to publish legal notices in Calamba City, it can be presumed that
the RTC had made a prior determination that the said newspaper had met the requisites for valid
publication of legal notices in the said locality, guided by the understanding that for the publication
of legal notices in Calamba City to serve its intended purpose, it must be in general circulation
therein. This presumption lays the burden upon the petitioners to show otherwise, contrary to the

Page 17
CA's first ruling.

Moreover, an escalation clause in a loan agreement granting the lending bank authority to
unilaterally increase the interest rate without prior notice to and consent of the borrower is void.
Therefore, applying the adjusted interest rates and penalties, Solidbank should return the amount
of P14,100,271.05 to Spouses Jonsay as excess of the proceeds of the foreclosure sale.

III. Chattel Mortgage


G.R. No. 214752, March 9, 2016; Perlas-Bernabe


On August 15 2005, respondent Rosalinda Palces purchased a Hyundai Starex GRX Jumbo through a
loan granted by petitioner Equitable Savings Bank in the amount of P1,196,100.00. Respondent
executed a Promissory Note with Chattel Mortgage in favor of petitioner stating that (a) respondent
shall pay petitioner the aforesaid amount in 36-monthly installments of P33,225.00 per month,
beginning September 18, 2005 and every 18th of the month thereafter until full payment of the
loan; (b) respondent's default in paying any installment renders the remaining balance due and
payable; and (c) respondent's failure to pay any installments shall give petitioner the right to
declare the entire obligation due and payable and may likewise, at its option, x x x foreclose this
mortgage; or file an ordinary civil action for collection and/or such other action or proceedings as
may be allowed under the law.

Respondent failed to pay the monthly installments in January and February 2007, thereby
triggering the acceleration clause in the Promissory Note with Chattel Mortgage and prompting
petitioner to send a demand letter to respondent. When the demand went unheeded, petitioner
went ahead and filed the instant Complaint for Recovery of Possession with Replevin with
Alternative Prayer for Sum of Money and Damages.

Pending the filing of respondent’s Answer, summons and a writ of replevin were already issued and
served to her personally, resulting in the sheriff taking possession of the subject vehicle.

Respondent admits to defaulting on her installments for January and February 2007. However, in
her defense, she argues that a certain Rodrigo Dumagpi, an officer of petitioner, gave his consent for
respondent to catch-up on her payments on March. Thus, she paid the amount of P70,000.00 and
P33,000.00 on March 8 and March 20 respectively.

The RTC ruled in favor of petitioner and confirmed its right to possess the subject vehicle. The RTC
found that respondent’s default in her installments rendered the entire balance of the loan
amounting to P664,500.00 due and demandable. While respondent paid the installments due in
March, the same were late, irregular, and insufficient to fully satisfy respondent’s entire obligation.
The RTC, however, ruled that since its right to possess had already been confirmed, petitioner is no
longer entitled to the payment of the remaining balance of the loan.

On appeal, the CA modified the RTC’s ruling, ordering petitioner to return the amount of
P103,000.00 to respondent. Applying Article 1484 of the Civil Code, the CA ruled that by choosing

Page 18
to recover the subject vehicle by writ of replevin, petitioner had already waived its right to recover
any unpaid installments.


1) Whether the CA correctly applied rule 1484 of the Civil Code in ruling that petitioner had
already waived its right to recover an unpaid installments by choosing to recover the
subject vehicle subject of a chattel mortgage via a writ of replevin.


1) No, Article 1484 of the Civil Code does not apply since there is no vendor-vendee
relationship between respondent and petitioner.

Article 1484 of the Civil Code applies in a contract of sale of personal property the price of which is
payable in installments. The records of this case reveal that respondent never bought the subject
vehicle from petitioner but from a third party, and merely sought financing from petitioner for its
full purchase price. In order to document the loan transaction between petitioner and respondent, a
Promissory Note with Chattel Mortgage29 dated August 18, 2005 was executed wherein, inter alia,
respondent acknowledged her indebtedness to petitioner in the amount of P1,196,100.00 and
placed the subject vehicle as a security for the loan. Indubitably, a loan contract with the accessory
chattel mortgage contract - and not a contract of sale of personal property in installments - was
entered into by the parties with respondent standing as the debtor-mortgagor and petitioner as the

Since it is undisputed that petitioner had regained possession of the subject vehicle, it is only
appropriate that foreclosure proceedings, if none yet has been conducted/concluded, be
commenced in accordance with the provisions of Act No. 1508, otherwise known as "The Chattel
Mortgage Law," as intended. Otherwise, respondent will be placed in an unjust position where she
is deprived of possession of the subject vehicle while her outstanding debt remains unpaid, either
in full or in part, all to the undue advantage of petitioner - a situation which law and equity will
never permit. The P103,000.00 payment of respondent will only operate to reduce her outstanding
obligation to petitioner from P664,500.00 to P561,500.00. Such a reduction in respondent's
outstanding obligation should be accounted for when petitioner conducts the impending
foreclosure sale of the subject vehicle. Once such foreclosure sale has been made, the proceeds
thereof should be applied to the reduced amount of respondent's outstanding obligation, and the
excess of said proceeds, if any, should be returned to her.

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