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Members: Dizon, Dumaliang, Esidera, Merrera


AUREA, and BINGBING, all surnamed DELOS SANTOS, Petitioners vs ALBERTO
ABEJON and the estate of TERESITA DINGLASAN ABEJON, Respondents (loan)
March 20, 2017 G.R. No. 215820

Respondents filed Complaint for Cancellation of Title with collection of sum of money against
Petitioners before the RTC. The complaint alleged that Erlinda and her late husband Pedro Delos
Santos (Pedro) borrowed money from the former's sister, Teresita, as evidenced by a Promissory
Note. As security for the loan, Erlinda and Pedro mortgaged their property, covered by Transfer
Certificate of Title which mortgage was annotated on the title. After Pedro died, Erlinda ended
up being unable to pay the loan, and as such, agreed to sell the subject land to Teresita. They
executed a Deed of Sale and a Release of Mortgage, and eventually issued in the name of
"Teresita, Abejon.”
In defense, petitioners denied any participation relative to the spurious Deed of Sale, and instead,
maintained that it was Teresita who fabricated the same and caused its registration before the
Register of Deeds of Makati City. They likewise asserted that Erlinda and Pedro never sold the
subject land to Teresita, and that they did not receive any demand for the payment, representing
the loan, representing the construction cost of the building. Finally, they claimed that the
improvements introduced by Teresita on the subject land were all voluntary on her part.
The RTC ruled that respondents should be reimbursed for the amount of the loan, as well as the
expenses incurred for the construction of the three (3)-storey building in view of petitioners'
categorical admission of their indebtedness to her, as well as the construction of the building
from which they derived benefit being the actual occupants of the property.
The CA ruled that since petitioners admitted their indebtedness to Teresita during the pre-trial
proceedings, respondents should be allowed to recover the amount representing the same,
including the appropriate interest.

Whether or not the CA correctly held that the petitioners should be held liable for the loan

NO. While petitioners admitted the existence of the ₱l00,000.00 loan obligation as well as
respondents' right to collect on the same, it does not necessarily follow that respondents should
collect the loan amount from petitioners, as concluded by both the RTC and the CA. It must be
pointed out that such loan was contracted by Erlinda, who is only one (1) out of the four (4)
herein petitioners, and her deceased husband, Pedro, during the latter's lifetime and while their
marriage was still subsisting. As they were married before the effectivity of the Family Code of
the Philippines24 and absent any showing of any pre-nuptial agreement between Erlinda and
Pedro, it is safe to conclude that their property relations were governed by the system of conjugal
partnership of gains. Hence, pursuant to Article 121(25) of the Family Code, the ₱l00,000.00
loan obligation, including interest, if any, is chargeable to Erlinda and Pedro's conjugal
partnership as it was a debt contracted by the both of them during their marriage; and should the
conjugal partnership be insufficient to cover the same, then Erlinda and Pedro (more particularly,
his estate as he is already deceased) shall be solidarily liable for the unpaid balance with their
separate properties. While the portion attributable to Pedro was not considered extinguished by
his death, it is merely passed on to his estate; and thus, his heirs, i.e., herein petitioners, could not
be held directly answerable for the same, contrary to the CA's conclusion.26 In sum, both the
RTC and the CA erred in holding petitioners liable to respondents for the loan obligation in the
amount of ₱l00,000.00.
Alternative to the collection of the said sum, respondents may also choose to foreclose the
mortgage on the subject land as the same was duly constituted to secure the ₱l00,000.00 loan
obligation. In other words, respondents have the option to either file a personal action for
collection of sum of money or institute a real action to foreclose on the mortgage security. The
aforesaid remedies are alternative, meaning the choice of one will operate to preclude the other

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated March 19, 2014
and the Resolution dated December 11, 2014 of the Court of Appeals in CA-G.R. CV No. 96884
are hereby AFFIRMED with MODIFICATIONS as follows:
(a) The Deed of Sale and the Release of Mortgage both dated July 8, 1992 are declared NULL
and VOID;
(b) The Register of Deeds of Makati City is ordered to CANCEL Transfer Certificate of Title
No. 180286 in the name of Teresita D. Abejon, married to Alberto S. Abejon,
and REINSTATE Transfer Certificate of Title No. 131753 in the name of Pedro Delos Santos
and Erlinda DinglasanDelos Santos, and restore the same to its previous state before its
cancellation, i.e., with the mortgage executed by the parties annotated thereon; and
(c) The entire fourth paragraph44 of the dispositive portion of the Decision dated March 19, 2014
of the Court of Appeals is hereby SET ASIDE, and in lieu thereof:
I. The ₱l00,000.00 loan obligation is DECLARED to be the liability of the conjugal partnership
of petitioner Erlinda Dinglasan Delos Santos and her deceased husband Pedro Delos Santos
which may be recovered by herein respondents in accordance with this Decision;
II. Petitioner Erlinda Dinglasan Delos Santos is ORDERED to return to respondents the amount
of ₱50,000.00 representing the additional consideration Teresita D. Abejon paid for in the sale,
with legal interest of six percent (6%) per annum from the finality of this Decision until fully
III. For the purpose of determining the proper indemnity for the 3- storey building, the case
is REMANDED to the Regional Trial Court of Makati City, Branch 132 for further proceedings
consistent with the proper application of Articles 448, 453, 546, and 548 of the Civil Code, as
applied in existing jurisprudence; and
IV. The award of attorney's fees and litigation expenses in the amount of ₱l00,000.00


G.R. No. 205578, March 1, 2017, J. Peralta

Carmen A. Encomienda met Georgia Osmeña-Jalandoni in Cebu on October 24, 1995, when the
former was purchasing a condominium unit and the latter was the real estate broker. Thereafter,
Encomienda and Jalandoni became close friends. On March 2, 1997, Jalandoni called
Encomienda to ask if she could borrow money for the search and rescue operation of her children
in Manila, who were allegedly taken by their father, Luis Jalandoni. All in all, Encomienda spent
around ₱3,245,836.02 and $6,638.20 for Jalandoni.

When Jalandoni came back to Cebu on July 14, 1997, she never informed Encomienda.
Encomienda then later gave Jalandoni six (6) weeks to settle her debts. Despite several demands,
no payment was made. Jalandoni insisted that the amounts given were not in the form of loans.
For her defense, Jalandoni claimed that there was never a discussion or even just an allusion
about a loan. She confirmed that Encomienda would indeed deposit money in her bank account
and pay her bills in Cebu. But when asked, Encomienda would tell her that she just wanted to
extend some help and that it was not a loan. When Jalandoni returned to Cebu, Encomienda
wanted to fetch her at the airport but the former refused. This allegedly made Encomienda upset,
causing her to eventually demand payment for the amounts originally intended to be gratuitous.

On January 9, 2006, the RTC of Cebu City dismissed Encomienda's complaint. Therefore,
Encomienda brought the case to the CA. On March 29, 2012, the appellate court granted the
appeal and reversed the RTC Decision. Jalandoni filed a motion for reconsideration, but the same
was denied. Hence, the instant petition.


Whether or not there existed a loan between Jalandoni and Encomendia.


Yes. The RTC harped on the fact that if Encomienda really intended the amounts to be a loan,
normal human behavior would have prompted at least a handwritten acknowledgment or a
promissory note the moment she parted with her money for the purpose of granting a loan. This
would be particularly true if the loan obtained was part of a business dealing and not one
extended to a close friend who suddenly needed monetary aid. In fact, in case of loans between
friends and relatives, the absence of acknowledgment receipts or promissory notes is more
natural and real. In a similar case, the Court upheld the CA' s pronouncement that the existence
of a contract of loan cannot be denied merely because it was not reduced in writing. Surely, there
can be a verbal loan. Contracts are binding between the parties, whether oral or written. The law
is explicit that contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. A simple loan or mutuum exists
when a person receives a loan of money or any other fungible thing and acquires its ownership.
He is bound to pay to the creditor the equal amount of the same kind and quality. Jalandoni
posits that the more logical reason behind the disbursements would be what Encomienda
candidly told the trial court, that her acts were plainly an "unselfish display of Christian help"
and done out of "genuine concern for Georgia's children." However, the "display of Christian
help" is not inconsistent with the existence of a loan. Encomienda immediately offered a helping
hand when a friend asked for it. But this does not mean that she had already waived her right to
collect in the future. Indeed, when Encomienda felt that Jalandoni was beginning to avoid her,
that was when she realized that she had to protect her right to demand payment. The fact that
Encomienda kept the receipts even for the smallest amounts she had advanced, repeatedly sent
demand letters, and immediately filed the instant case when Jalandoni stubbornly refused to heed
her demands sufficiently disproves the latter’s belief that all the sums of money she received
were merely given out of charity.

Truly, Jalandoni herself admitted that she received the aforementioned amounts from
Encomienda and is merely using her lack of authorization over the payments as her defense. In
fact, Lupong Tagapamayapa member Rogero, a disinterested third party, confirmed this, saying
that during the barangay conciliation, Jalandoni indeed admitted having borrowed money from
Encomienda and that she would return it. Jalandoni, however, reneged on said promise.

WHEREFORE, PREMISES CONSIDERED, the Court DISMISSES the petition for lack of
merit and AFFIRMS the Decision of the Court of Appeals, Cebu City dated March 29, 2012 and
its Resolution dated December 19, 2012 in CA-G.R. CV No. 01339, with MODIFICATION as
to the interest which must be twelve percent (12%) per annum of the amount awarded from the
time of demand on August 14, 1997 to June 30, 2013, and six percent (6%) per annum from July
1, 2013 until its full satisfaction.


G.R. No. 206037, March 13, 2017, J. Del Castillo


Lilibeth Chan (Chan) owns a commercial building where she leased said building to Philippine
National Bank (PNB) for five years. When the lease expired, PNB continued to occupy the
property until March 23, 2006. Meanwhile in 2002, secured by a Real Estate Mortgage
constituted over a parcel of land and a Deed of Assignment over the rental payments in favor of
PNB, Chan obtained a loan from PNB for ₱l,500,000.00 which was subsequently increased to

In 2005, Chan filed for Unlawful Detainer before the MeTC against PNB, alleging that PNB
failed to pay its monthly rentals from Oct. 2004 until Aug. 2005. PNB, on the other hand,
claimed that it applied the rental from Oct. 2004 to Jan. 2005 as payment for Chan’s outstanding
loan which became due and demandable in Oct. 2004. As for the rentals from Jan. 2005 to Feb.
2006, PNB deposited the rentals in a separate non-drawing savings account for the benefit of the
rightful party when it received a demand letter from a certain Lamberto Chua who claimed to be
the new owner of the leased property.

The parties agreed to apply the rental proceeds from Oct. 2004 to Jan. 15, 2005 to Chan's
outstanding loan and PNB consigned the amount of rentals due from Jan. 16, 2005 to Feb. 2006
with the MeTC on May 31, 2006. MeTC, then, ordered PNB to pay Chan ₱l,348,643.92 for the
accrued rentals, with interest at 6% p.a. from Jan. 16, 2005 up to March 23, 2006.
PNB appealed and while the appeal was pending, it initiated foreclosure proceedings on the
mortgaged property which was sold on Oct. 31, 2006 for ₱l5,311,000.00 to PNB. Chan filed a
Memorandum, claiming that PNB had no right to the amount consigned since her loan was fully
paid when PNB bought the mortgaged property. PNB argued that Chan's outstanding obligation
as of Oct. 31, 2006 was ₱18,016,300.71, thus, entitled to a deficiency claim of ₱2,705,300.71 to
which the consigned amount can be applied.

The RTC affirmed the MeTC ruling. Chan then moved for the issuance of a Writ of Execution
which was granted by the RTC. PNB filed a motion for reconsideration and for the quashal of the
Writ of Execution, but the RTC denied the motion. PNB, therefore, filed a Petition for Review
before the CA.

The CA found no sufficient evidence on record that the amount of respondent's liability as of
Oct. 31, 2006 is indeed ₱18,016,300.71. Consequently, the CA remanded the case the MeTC for
the proper reception of evidence and determination, if any, of the deficiency on the foreclosure
sale. Also, PNB merely opened a non-drawing savings account wherein it deposited the monthly
rentals. Such deposit, however, is not the consignation contemplated by law. Thus, PNB liable to
pay the 6% legal interest rate under Art. 2209 of the Civil Code for having defaulted in the
payment of its rentals.

PNB filed a partial Motion for Reconsideration, but the CA denied the motion, hence this


1. Whether PNB is liable to pay legal interest to Chan; and

2. Whether PNB is entitled to the disputed rental proceeds in order to cover the alleged
deficiency in payment of the respondent's liability after the foreclosure proceedings.

As for the first issue, PNB's obligation to pay the rentals had already fallen due and demandable
before PNB consigned the proceeds on May 31, 2006. Although consignment has a retroactive
effect, such payment is deemed to have been made only at the time of the deposit of the thing in
court or when it was placed at the disposal of the judicial authority. Based on these premises,
PNB's payment can only be considered to have been made not earlier than May 31, 2006.

Given its belated consignment, PNB clearly defaulted in the payment of monthly rentals to Chan
for the period Jan. 16, 2005 up to March 23, 2006, when it finally vacated the leased property.
As such, it is liable to pay interest in accordance with Art. 2209 of the Civil Code which provides
that if the debtor incurs delay in the performance of an obligation consisting of the payment of a
sum of money, he shall be liable to pay the interest agreed upon, and in the absence of
stipulation, the legal interest at 6% p.a. There being no stipulated interest in this case, PNB is
liable to pay legal interest at 6% p.a., from Jan. 16, 2005 up to May 30, 2006.

As for the issue on PNB' s entitlement to the subject rental proceeds to cover the deficiency in
payment after the foreclosure sale, we agree with the CA's finding that there is no sufficient
evidence on record to show that such a deficiency exists. Unfortunately, the Statement of
Account submitted by PNB is not enough to prove this claim, considering that it is unsupported
by any corroborating evidence. Besides, the copy of the document in our records consists of
illegible pages.

We likewise agree that the RTC seriously erred when it categorically stated that the loan was
fully paid by virtue of the foreclosure sale without determining the extent of the respondent's
liability as of Oct. 1, 2006, the date of the foreclosure sale. Specifically, the RTC held that: “x x
x the amount of the indebtedness in the Notice of Extra-Judicial Sale dated Aug. 9, 2006 as
₱l1,211,283.53, as of May 15, [2006], exclusive of penalties, etc. Since the property was sold to
the bank at ₱15,311,000,00, obviously, the difference could have easily covered the said
penalties, etc."
This is clearly an error. It is settled that a mortgagee has the right to recover the deficiency
resulting from the difference between the amount obtained in the sale at public auction and the
outstanding obligation of the mortgagor at the time of the foreclosure proceedings. The RTC
failed to consider that the amount of indebtedness indicated in the Notice of Extra-Judicial Sale
dated Aug. 9, 2006 was computed by PNB as of May 15, 2006. Surely, the respondent's liability
would have significantly increased by the time the foreclosure sale was held on Oct. 31, 2006.


WHEREFORE, we DENY the Petition for Review on Certiorari and AFFIRM the Decision
dated May 28, 2012 and the Resolution dated February 21, 2013 of the Court of Appeals in CA-
G.R. SP No. 98112.

G.R. No. 225562

REYES, J.; March 8, 2017; (Interest)

FACTS: The herein respondent, Bank of the Philippine Islands (BPI), issued a credit card in
William's name, with Irene as the extension card holder. Pursuant to the terms and conditions of
the cards' issuance, 3.5% finance charge and 6% late payment charge shall be imposed monthly
upon unpaid credit availments. The Spouses Louh made purchases from the use of the credit
cards and paid regularly based on the amounts indicated in the Statement of Accounts (SO As).
However, they were remiss in their obligations starting October 14, 2009. As of August 15,
2010, their account was unsettled prompting BPI to send written demand letters. By September
14, 2010, they owed BPI the total amount of ₱533,836.27. Despite repeated verbal and written
demands, the Spouses Louh failed to pay BPI.
BPI filed before the Regional Trial Court (RTC) of Makati City a Complaint for Collection of a
Sum of Money. The RTC rendered a Decision, ordering the Spouses Louh to solidarily pay BPI
(1) P533,836.27 plus 12% finance and 12% late payment annual charges starting from August 7,
2010 until full payment, and (2) 25% of the amount due as attorney's fees, plus ₱l,000.00 per
court hearing and ₱8,064.00 as filing or docket fees; and (3) costs of suit.
The RTC explained that BPI had adduced preponderant evidence proving that the Spouses Louh
had in fact availed of credit accommodations from the use of the cards. However, the RTC found
the 3.5% finance and 6% late payment monthly charges imposed by BPI as iniquitous and
unconscionable. Hence, both charges were reduced to 1 % monthly. Anent the award of
attorney's fees equivalent to 25% of the amount due, the RTC found the same to be within the
terms of the parties' agreement. CA affirmed RTC’s judgment in toto.
The Spouses Louh pray for the dismissal of BPI's suit. They alleged that BPI failed to establish
its case by preponderance of evidence. Purportedly, BPI did not amply prove that the Spouses
Louh had in fact received and accepted the SO As, which were, however, unilaterally prepared
by the bank. They allege the same circumstance as to the receipt of the demand letters. The
computations likewise did not show the specific amounts pertaining to the principal, interests and
penalties. They point out that since their credit limit was only ₱326,000.00, it is evident that the
amount of ₱533,836.27 demanded by BPI included unconscionable charges.

Issue: Whether or not the CA erred in sustaining BPI's complaint.

HELD: YES. The Court affirms the herein assailed decision and resolution, but modifies the
principal amount and attorney's fees awarded by the RTC and the CA.
BPI had offered as evidence the (1) testimony of Account Specialist Carlito M. Igos, who
executed a Judicial Affidavit in connection with the case, and (2) documentary exhibits, which
included the (a) delivery receipts pertaining to the credit cards and the terms and conditions
governing the use thereof signed by the Spouses Louh, (b) computer-generated authentic copies
of the SOAs, and (c) demand letters sent by BPI, which the Spouses Louh received. The Spouses
Louh slept on their rights to refute BPI's evidence, including the receipt of the SO As and
demand letters. BPI cannot be made to pay for the Spouses Louh's negligence, omission or
belated actions.
Be that as it may, the Court finds excessive the principal amount and attorney’s fees awarded by
the RTC and CA. A modification of the reckoning date relative to the computation of the charges
is in order too.
The Court ruled that stipulated interest rates of 3% per month and higher are excessive,
iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to
morals, if not against the law. The same is true with respect to the penalty charge.
The stipulated penalty charge of 3% per month or 36% per annum, in addition to regular
interests, is indeed iniquitous and unconscionable. In the case at bench, BPI imposed a
cumulative annual interest of 114%, plus 25% of the amount due as attorney's fees. Inevitably,
the RTC and the CA aptly reduced the charges imposed by BPI upon the Spouses Louh. Note
that incorporated in the amount of ₱533,836.27 demanded by BPI as the Spouses Louh's
obligation as of August 7, 2010 were the higher rates of finance and late payment charges, which
the comis a quo had properly directed to be reduced.
In the SOA dated October 14, 2009, the principal amount indicated was ₱l13,756.83. The
finance and late payment charges to be imposed on the principal amount of ₱l13,756.83 are
reduced to 12% each per annum, reckoned from October 14, 2009, the date when the Spouses
Louh became initially remiss in the payment of their obligation to BPI, until full payment. Anent
BPI's litigation expenses, the Court retains the RTC and CA's disquisition awarding ₱5,064.00 as
filing or docket fees, and costs of suit. However, the Court reduces the attorney's fees to 5% of
the total amount due from the Spouses Louh pursuant to MCMP and Article 2227 of the New
Civil Code.

WHEREFORE, the Decision and Resolution, dated August 11, 2015 and May 23, 2016,
respectively, of the Court of Appeals in CA-G.R. CV No. 100754, finding the Spouses William
and Irene Louh liable to the Bank of the Philippine Islands for the payment of their past credit
availments, plus finance and late payment charges of 12% each per annum, ₱5,064.00 as filing
or docket fees, and costs of suit, are AFFIRMED. The principal amount due, reckoning period
of the computation of finance and late payment charges, and attorney's fees are,
however, MODIFIED as follows:
(1) the principal amount due is Pl13,756.83 as indicated in the Statement of Account dated
October 14, 2009;
(2) finance and late payment charges of 12% each per annum shall be computed from October
14, 2009 until full payment; and
(3) 5% of the total amount due is to be paid as attorney's fees.
G.R. No. 216120 March 29, 2017
Peralta, J.

TOPIC: Surety
Petitioner Philtrust filed a complaint against Shangrila Realty Corporation, together with Elisa
Tan and respondent Redentor Gabinete alleging that petitioner granted Shangrila's application for
a renewal of its bills discounting line in the amount of Twenty Million Pesos as shown by a
letter-advice dated May 28, 1997 bearing the conformity of Shangrila's duly-authorized
representatives, Tan and respondent Gabinete. The said loan was conditioned on the execution of
a Continuing Suretyship Agreement dated August 20, 1997, with Shangrila as borrower and
respondent Gabinete and Tan as sureties, primarily to guaranty, jointly and severally, the
payment of the loan.
It is provided in the Continuing Suretyship Agreement that the sureties shall jointly and severally
guarantee with the borrower the punctual payment at maturity of any and all instruments, loans,
advances, credits and/or other obligations, and any and all indebtedness of every kind, due, or
owing to Philtrust, and such interest as may accrue and such expenses as may be incurred by
Upon the maturity of the loan, Shangrila failed to pay Philtrust, rendering the entire principal
loan, together with accrued interest and other charges, due and demandable. Philtrust repeatedly
demanded for payment, but none of the respondents heeded the said demands.
Thus, Philtrust filed a Petition for Extra judicial Foreclosure of the real estate mortgage wherein
Philtrust was the highest bidder at the public auction with a bid of Six Million Pesos.
Due to the insufficiency of the proceeds of the foreclosure sale to fully satisfy the obligation of
Shangrila, the Six Million Pesos proceeds of the foreclosure sale was applied but still leaving a
deficiency. Despite repeated demands, respondents failed to fully settle the deficiency .
As of 2006, respondent's total outstanding obligation to Philtrust is at Php 50,425,059.20,
inclusive of interest. Therefore, Philtrust filed the instant case and engaged the services of a
counsel incurring the equivalent of 10% of the total amount due as attorney's fees per stipulation
in the promissory notes.
Thereafter, Philtrust filed a Motion to Declare Shangrila, Tan and respondent Gabinete in
default. However, Gabinete claimed that when he received a demand for payment from Philtrust,
he immediately replied and denied any participation in the transaction and informed Philtrust that
his signature in the Continuing Surety Agreement had been forged, expressing his willingness
and readiness to cooperate with any investigation and he did not receive further notices of
demand from Philtrust and has no knowledge of the demands made on his co-respondents.
Finally, he argued that his refusal to pay as demanded is justified because he had no participation
in the loan transactions.
The RTC rendered its Decision in favor of the petitioner. However, the CA found merit in the
appeal and ruled in favor of respondent Gabinete.

1. Whether or not the signature of respondent gabinete on the continuing suretyship
agreement is forged.
2. Whether or not respondent gabinete agreed to be solidaril y liable with shangrila and ms.
Tan when he signed the letter-advice dated may 28, 1997

1. NO. As a rule, forgery cannot be presumed and must be proved by clear, positive and
convincing evidence, the burden of proof lies on the party alleging forgery. One who
alleges forgery has the burden to establish his case by a preponderance of evidence, or
evidence which is of greater weight or more convincing than that which is offered in
opposition to it. In this case, the respondent was not able to prove the fact that his
signature was forged. More so, the document being contested has been notarized and
thus, is considered a public document. It has the presumption of regularity in its favor and
to contradict all these, evidence must be clear, convincing, and more than merely
preponderant. As also borne in the records, the notary public who notarized the
Continuing Suretyship Agreement testified in court and confirmed that respondent signed
the said document in her presence. Thus, the NBI handwriting expert's opinion may not
overturn the categorical declaration of the notaries public. The positive testimony of the
attesting witnesses ought to prevail over expert opinions which cannot be
2. YES. Since the signature was not forged, the act of signing the letter-advice constituted a
binding force between the parties. Thus, Gabinete is solidarily liable.
WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
dated February 17, 2015 of petitioner Philippine Trust Company is GRANTED. Consequently,
the Decision dated March 25, 2014 of the Court of Appeals in CA-G.R. CV No. 96009 is
REVERSED and SET ASIDE and the Decision dated April 20, 2010 of the Regional Trial
Court, Branch 33, Manila is AFFIRMED and REINSTATED.


G.R. No. 205657 March 29, 2017
Leonen, J.

TOPIC: Chattel Mortgage

Sometime in 2003, spouses Jerome and Quinnie Briones (Spouses Briones) took out a loan of
P3,789,216.00 from iBank to purchase a BMW Z4 Roadster.
The Spouses Briones executed a promissory note with chattel mortgage that required them to
take out an insurance policy on the vehicle. This gave iBank an authority to file an insurance
claim in case of loss or damage to the vehicle.
The mortgaged BMW Z4 Roadster was carnapped by three armed men in front of Metrobank in
Quezon City. Jerome Briones (Jerome) immediately reported the incident to the PNP Traffic
Management Group. The Spouses Briones declared the loss to iBank, which instructed them to
continue paying the next three monthly installments "as a sign of good faith," in which they
complied with.
After the Spouses Briones finished paying the three-month installment, iBank sent them a letter
demanding for the full payment. Thereafter, Spouses Briones submitted a notice of claim with
their insurance company, which was denied due to the delayed reporting of the lost vehicle.
iBank filed a complaint for replevin and/or sum of money against the Spouses Briones and a
person named John Doe. The Complaint alleged that the Spouses Briones defaulted in paying the
monthly amortizations of the mortgaged vehicle.
The Regional Trial Court dismissed iBank's complaint. It ruled that as the duly constituted
attorney-in-fact of the Spouses Briones, iBank had the obligation to facilitate the filing of the
notice of claim and then to pursue the release of the insurance proceeds. The Court of Appeals
also dismissed the case on appeal.
iBank claims that it is entitled to recover the mortgaged vehicle or, in the alternative, to collect a
sum of money from respondents because of the clear wording of the promissory note with chattel
mortgage executed by respondents.

Whether or not iBank is entitled to the return of the mortgaged vehicle or, in the alternative,
payment of the outstanding balance of the loan taken out for the mortgaged vehicle.

As the agent, iBank was mandated to look after the interests of the Spouses Briones. However,
instead of going after the insurance proceeds, as expected of it as the agent, petitioner opted to
claim the full amount from the Spouses Briones, disregard the established principal-agency
relationship, and put its own interests before those of its principal.
The facts show that the insurance policy was valid when the vehicle was lost, and that the
insurance claim was only denied because of the belated filing. Having been negligent in its duties
as the duly constituted agent, iBank must be held liable for the damages suffered by the Spouses
Briones because of non-performance of its obligation as the agent, and because it prioritized its
interests over that of its principal.
Furthermore, petitioner's bad faith was evident when it advised the Spouses Briones to continue
paying three (3) monthly installments after the loss, purportedly to show their good faith. A
principal and an agent enjoy a fiduciary relationship marked with trust and confidence, therefore,
the agent has the duty "to act in good faith [to advance] the interests of [its] principal."
If petitioner was indeed acting in good faith, it could have informed the Spouses Briones that it
was terminating the agency and its right to file an insurance claim, and could have advised them
to facilitate the insurance proceeds themselves. Petitioner's failure to do so only compounds its
negligence and underscores its bad faith. Thus, it will be inequitable now to compel the Spouses
Briones to pay the full amount of the lost property.

WHEREFORE, premises considered, the Petition is DENIED. The Court of Appeals Decision
and Resolution dated September 27, 2012 and February 6, 2013, respectively, in CA-G.R. CV.
No. 97453 are AFFIRMED.

G.R. No. 213020

INDUSTRY BANK, INC., (formerly named Urban Bank, Inc.), through its TRUST
DEPARTMENT (formerly named Urban Trust Department); PACIFIC WIDE
Executive Judge, and ATTY. MARIVIC S. TIBAYAN, in her capacity as Clerk of Court
and Ex-Officio Sheriff, both of the Regional Trial Court of Pasay City
PERALTA, J.; March 20, 2017; (Mortgage)

FACTS: Petitioner Puerto Azul Land, Inc. (PALI) obtained loans from various creditors. As
security for its obligations amounting to ₱627,000,000.00, PALI, as borrower, and its
accommodation mortgagors, i.e., Ternate Development Corporation (TDC), petitioner Ternate
Utilities, Inc. (TUI), executed with Urban Bank Incorporated (UBI) a Mortgage Trust
Indenture (MTI) and the Supplemental Mortgage Trust Indenture (SMTI). Among the properties
that served as security for the loans were TUI's 2 parcels of land covered by TCT No. T-133164.
PALI failed to keep up with the payments of its debts and obligations. Export and Industry Bank,
Inc. (EJB), which was later merged with UBI, filed a petition for extrajudicial foreclosure of real
estate mortgage.
The mortgaged properties were sold on auction to SM Development Corporation (SMDC) for
having submitted the highest bid in the amount of ₱570,000,000.00. However, proceeds of the
sale were deposited to the Regional Trial Court, Pasay City, pending determination of the actual
payee of the bid price, considering that EIB, the mortgagee bank, is already closed. TUI
requested for the release in its favor of the amount of ₱488,641,500.00 representing the alleged
surplus amount after deducting the amount of its supposed indebtedness to EIB in the amount of
₱8l,358,500.00. In a letter, PBB-Trust claimed that the total bid price of ₱570,000,000.00 should
be remitted to them, being the successor-trustee of mortgagee bank EIB, pursuant to a
Memorandum of Agreement.
The Executive Judge issued an Order ordering the Clerk of Court to release in favor of PBB-
Trust the amount of ₱570,000,000.00, representing the entire bid price paid by SMDC, after
deducting the costs of the sale and other legal charges. The Executive Judge ruled that by its very
nature, the surplus arising from a foreclosure sale stands in the place of the collateral itself in
respect to liens thereon or vested rights therein. The surplus is constructively, at least, real
property and belongs to the mortgagor. The right of a mortgagor to the surplus is a substantial
right that prevails over rules of technicality. Perforce, a mortgagee who exercises the power of
sale contained in a mortgage is considered a custodian of the fund, and being bound to apply it
properly, is liable to the persons entitled thereto if he fails to do so. Even though the mortgagee is
not strictly considered a trustee in a purely equitable sense, but as far as it concerns the
unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity
of redemption. Thus, it has been held that if the mortgagee is retaining more of the proceeds of
the sale than he is entitled to, this fact alone will not affect the validity of the sale but will simply
give the mortgagor a cause of action to recover such surplus.

ISSUE: Whether or not the Executive Judge committed grave abuse of discretion, amounting to
lack or excess of jurisdiction, when it ordered the release of the entire amount of the bid price
paid by SMDC to PBB-Trust, the foreclosing mortgagee-assignee, despite the fact that there is a
genuine dispute not only on the amount due, but also as to the validity of PBB-Trust's
appointment as successor-trustee of EIB under the MTI.
HELD: YES. Despite having noted in the Order that there is still a "genuine dispute" on the
amount due to the foreclosing mortgagee-assignee, PBB-Trust, as a result of the rehabilitation
plan covering PALI and the sale of EIB's loan accounts to PACWIDE, the Executive Judge
erroneously estimated that the interest, penalties and other expenses alone would far exceed
PALI' s ₱311,000,000.00 principal loan obligation, and authorized the release of the entire
₱570,000,000.00 auction sale proceeds to PBB-Trust. In doing so, the Executive Judge exceeded
her administrative supervision over extrajudicial foreclosure sales, as she virtually adjudicated
the said dispute, and allowed one party to enjoy the subject proceeds even before the courts of
proper jurisdiction could resolve the pending issues between the opposing parties.
There is, likewise, no merit in private respondents' claim that it is the ministerial duty of the
Executive Judge to release the proceeds of the extrajudicial foreclosure sale to PBB-Trust,
pursuant to Section 4, Rule 68 of the Rules of Court, which provides that the money realized
from the sale of the mortgaged property under the regulations herein before prescribed shall,
after deducting the costs of sale, be paid to the person foreclosing the mortgage, and when there
shall be any balance or residue, after paying off such mortgage or other encumbrances, in the
order of their priority, to be ascertained by the court.
Under the above rule, the disposition of the proceeds of the foreclosure sale shall be in the
following order: (a) pay the costs of sale; (b) pay off the mortgage debt to the person foreclosing
the mortgage; (c) pay the junior encumbrancers, if any, in the order of priority; and (d) give the
balance to the mortgagor, his agent or the person entitled to it. Contrary to private respondents'
claim, it is not part of the Executive Judge's ministerial supervisory authority to order the release
of proceeds of the entire bid price to a person other than the one foreclosing the
mortgage, i.e., EIB, which is already closed. More so, since petitioners have a pending petition
for declaratory relief before Branch 231 of the RTC of Pasay City, questioning the appointment
of PBB-Trust as the successor-trustee of EIB under the MTI, as well as the exact computation of
PALI' s outstanding obligation secured by TCT No. T-133164, in light of the approved
rehabilitation plan and the LSP A, which supposedly equitably reduced the mortgaged debt.

WHEREFORE, the petition for certiorari is GRANTED. The assailed Order dated June 30,
2014 of the Pasay City Executive Judge in File No. REM 04-025 is REVERSED and SET
ASIDE, and her Order dated April 24, 2014 is REINSTATED. Accordingly, Philippine
Business Bank-Trust and Investment Center (PBB-Trust) is ORDERED to DEPOSIT in the
Fiduciary Fund of the Regional Trial Court (RTC) of Pasay City with the Land Bank of the
Philippines the amount of Five Hundred Seventy Million (₱570,000,000.00), representing the
entire bid price paid by SM Development Corporation, which shall continue to be held in trust by
the said RTC until the courts of proper jurisdiction shall have finally determined the rightful
recipient of the subject bid price and/or the respective amounts due the claimants.

G.R. No. 199810

REYES, J.; March 15, 2017; (Mortgage)

FACTS: Consuelo Vda. de dela Cruz applied for free patent over a parcel of land constituting
about 1,292 square meters, designated as Lot No. 9087, Cad. 102, located in Daliao, Toril,
Davao City. As she could not wait for the approval of her application, she executed a Deed of
Waiver/Quitclaim on November 25, 1981 in favor of Rollie Pagarigan (Pagarigan).
Pagarigan filed his own Free Patent Application (FPA) and subsequently, Free Patent No. (XI-
1)5133 was issued to him over said lot. Original Certificate of Title (OCT) No. P-111828 was
thereby issued in his name on November 25, 1982. On September 5, 1989, Pagarigan mortgaged
the lot to Banco Davao-Davao City Development Bank (the Bank). For failure to pay his loan,
the property was foreclosed, and was eventually sold to the Bank at public auction on October
26, 1990. These proceedings were duly annotated in the title.
However, the land covered by OCT No. P-11182 was allegedly occupied by Teodoro Valparaiso
and Pedro Malalis (protestants). On October 24, 1990, the protestants filed a formal protest with
the Bureau of Lands (Bureau). They prayed for the recall of the free patent issued to Pagarigan,
and for the institution of a corresponding action for reversion considering that they have been in
adverse, exclusive, and continuous occupation of the subject property since 1945, cultivating it,
and planting various crops, nipa palms and coconut trees on said land.
On January 2 7, 1992, the protestants caused the annotation of a notice of lis pendens in OCT
No. P-11182. Assigned as Entry No. 647677, said notice of lis pendens pertained to Civil Case
No. 20-435-9 instituted by the protestants against Pagarigan, Menardo Metran and Rene Galope
to enjoin them from demolishing the former's houses pending the determination of the
Department of Environment and Natural Resources (DENR) on the propriety of cancelling the
title obtained by Pagarigan. The administrative protest of the protestants reached the Office of the
Secretary of the DENR. On May 15, 1995, Secretary Angel C. Alcala rendered a Decision
against Pagarigan.
Meanwhile, on November 5, 1992, without consolidating title over the land in its name, the Bank
sold the subject property to herein petitioner Beverly Anne C. Yap (Yap) and Rosanna F.
Villamor (Villamor). Upon the execution of the deed of sale, OCT No. P-11182 was delivered to
them and Transfer Certificate of Title No. 366983 was eventually issued in the name ofYap and
Villamor on December 16, 2003. On February 28, 1997, the Department of Transportation and
Communication filed a complaint for expropriation of a portion of the subject lot before the RTC
of Davao City. On February 19, 2003, the RTC rendered its Decision. Confronted with the issue
of who among the claimants shall be entitled to just compensation.
The Bank, Yap, and Villamor sought reconsideration of the CA decision, but their motion was
evenly denied in the Resolution dated November 14, 2011. Hence this petition filed solely by

ISSUE: Whether the subsequent conveyances of the subject lot from Pagarigan were made to
innocent purchasers for value. Specifically, based on the records, can we regard the Bank, and
thereafter, Yap and Villamor as innocent purchasers for value.

HELD: NO. It cannot be overemphasized that [the Bank], being in the business of extending
loans secured by real estate mortgage, is familiar with rules on land registration. As such, it was,
as here, expected to exercise more care and prudence than private individuals in its dealings with
registered lands. Accordingly, given inter alia the suspicion-provoking presence of occupants
other than the owner on the land to be mortgaged, it behooved them to conduct a more
exhaustive investigation on the history of the mortgagor's title. That appellee Bank accepted in
mortgage the property in question notwithstanding the existence of structures on the property and
which were in actual, visible, and public possession of persons other than the mortgagor,
constitutes gross negligence amounting to bad faith.
This Court cannot sanction Yap's assertion. Time and again, the Court has ruled that the burden
of proof to establish the status of a purchaser and registrant in good faith lies upon the one who
asserts it. This onus probandi cannot be discharged by mere invocation of the legal presumption
of good faith. It must be emphasized that aside from the fact that a notice of lis pendens was
already annotated on OCT No. P-11182 even before Yap and Villamar purchased the subject
property, it was also established that when they did so, the said property was still registered in
the name of Pagarigan since the Bank did not consolidate its title thereto. Stated simply, Yap and
Villamor purchased the subject property not from the registered owner.

WHEREFORE, the petition is hereby DENIED. The Decision dated June 30, 2011 and
Resolution dated November 14, 2011 of the Court of Appeals in CA-GR. CV No. 01753-MIN