Sps BELO VS PNB & Sps ESLABON

Facts:
 Eduarda Belo owned an agricultural land which she leased a portion to Sps
Eslabon in connection with the said spouses’ sugar plantation business.
 To finance their business venture, respondents spouses Eslabon obtained a loan
from PNB secured by a real estate mortgage on their own four (4) residential
houses located in Roxas City, as well as on the land owned by Eduarda Belo. SPA
was issued by Eduarda Belo as to the mortgage of her property
 Sps Eslabon failed to pay mortgages and thereafter extrajudicial foreclosure
proceedings against the mortgaged properties were instituted by PNB. PNB was
the highest bidder at the auction sale (P447,632.00).
 PNB appraised Eduarda Belo of the sale at public auction of her agricultural land.
She had one-year period to redeem the land.
 Eduarda Belo sold her right of redemption to petitioner Sps Belo under a deed of
absolute sale of proprietary and redemption rights.
 Sps Belo tendered payment for the redemption of the agricultural land for
(P484,482.96), which includes the bid price of respondent PNB, plus interest and
expenses as provided under Act No. 3135.
 PNB rejected payment contending that redemption price should be the total claim
of the bank on the date of the auction sale and custody of property plus charges
accrued and interests (P2,779,978.72).
 Sps Belo filed action to annul the mortgage, with an alternative cause of action to
compel PNB to accept offer of spouses Belo which is based on the winning bid
price of PNB (P447,632.00) plus interest and expenses.
 RTC: Granted alternative cause of action of Sps Belo P447,632.00, plus interest
and other charges
 CA: Modified TC ruling that the petitioners should pay the entire amount due to
PNB under the mortgage deed at the time of the foreclosure sale plus interest,
costs and expenses. As assignees of Eduarda Belo’s right of redemption, the
appellees succeed to the precise right of Eduarda including all conditions attendant
to such right. Moreover, the indivisible character of a contract of mortgage (Article
2089, Civil Code) will extend to apply in the redemption stage of the mortgage.

Issue:
1. WON SPA, real estate mortgage contract, the foreclosure proceedings and the
subsequent auction sale involving Eduarda Belo’s property are valid. YES
2. WON the petitioners are required to pay, as redemption price, the entire claim of
respondent PNB (P2,779,978.72) NO

Held:
1. YES.The subject SPA, the real estate mortgage contract, the foreclosure
proceedings and the subsequent auction sale of Eduarda Belo’s property are valid and
legal.
 The findings of trial courts which are factual in nature must not be disturbed.
 It is stipulated in paragraph three (3) of the SPA that Eduarda Belo appointed the
Eslabon spouses as her agents. The accommodation real estate mortgage over her
property is merely an accessory contract.
 An accommodation mortgage is not necessarily void simply because the
accommodation mortgagor did not benefit from the same. The validity of an
accommodation mortgage is allowed under Article 2085 of the New Civil Code
which provides that “(t)hird persons who are not parties to the principal obligation
may secure the latter by pledging or mortgaging their own property.”
 The letter of Eduarda Belo addressed to respondent PNB manifesting her intent to
redeem the property is a waiver of her right to question the validity of the SPA,
etc.

2. NO. This Court finds the petitioners’ position on that issue to be meritorious.
 There is no doubt that Eduarda Belo, assignor of the petitioners, is an
accommodation mortgagor. “Mortgagor” in Section 25 of P.D. No. 694 pertains
only to a debtor-mortgagor and not to an accommodation mortgagor.

Respondent PNB maintains that Section 25 of Presidential Decree No. 694 (right to
redeem the property by paying all claims of the Bank against him on the date of the
sale)
Petitioners assert to follow Section 6 of Act No. 3135 & Section 28 of Rule 39 of the
Rules of Court (by paying the purchaser the amount of his purchase plus interest &
other expenses)
 The interpretation accorded by respondent PNB to Section 25 of P.D. No. 694 is
unfair and unjust to accommodation mortgagors and their assignees. Forcing an
accommodation mortgagor like Eduarda Belo to pay for what the principal debtors
(Eslabon spouses) owe to respondent bank is to punish her for the accommodation
and generosity she accorded to the Eslabon spouses. Also, PNB’s application for
extrajudicial foreclosure and public auction sale of Eduarda Belo’s mortgaged
property[30] was filed under Act No. 3135 and none of the proceedings thereafter
mentioned P. D. No. 694 as the basis for redemption.
Similar rulings:
Sy v. Court of Appeals and other case
The General Banking Act and P.D. No. 694 shall prevail over Act No. 3135 with
respect to the redemption price. accommodation mortgagors as such are not in anyway
liable for the payment of the loan or principal obligation of the debtor/borrower. The
liability of the accommodation mortgagors extends only up to the loan value of their
mortgaged property and not to the entire loan itself.
While the petitioners, as assignees of Eduarda Belo, are not required to pay the
entire claim of respondent PNB against the principal debtors, spouses Eslabon, they
can only exercise their right of redemption with respect to the parcel of land belonging
to Eduarda Belo, the accommodation mortgagor. Thus, they have to pay the bid price
less the corresponding loan value of the foreclosed four (4) residential lots of the
spouses Eslabon.
 PNB contends to allow petitioners to redeem only the property belonging to their
assignor, Eduarda Belo, would violate the principle of indivisibility of mortgage
contracts (Art 2089). The indivisibility concept does not apply to the right of
redemption of an accommodation mortgagor and her assignees.
 Indivisibility arises only when there is a debt, that is, there is a debtor-creditor
relationship. But, this relationship is wanting in the case at bar in the sense that
petitioners are assignees of an accommodation mortgagor and not of a debtor-
mortgagor. Hence, it is fair and logical to allow the petitioners to redeem only the
property belonging to their assignor, Eduarda Belo.
 Redemption only extends to the subject property of Eduarda Belo for the reason
that the notice of the sale limited the redemption to said property.

Petition is partially granted: Petitioner Sps Belo are allowed to redeem only the
property of Eduarda Belo, by paying only the bid price less the corresponding loan
value of the foreclosed four (4) residential lots of the respondents Sps Eslabon,
consistent with the RTC