Notes: pledge and mortgage

Similar to G and S because same as accessory transactions. Cannot exist without valid principal contract.
Most of the time, not always, contract comes in the form of mutuum.

Difference:
1. Subject matter: In Guarantee, security given is an undertaking. It is recognized by law, legal concept
(intangible); In pledge/mortgage subject meter is tangible property (most attractive form of collateral)
2. In event of Default, in pledge/mortgage creditor will run after the property, by foreclosure or auction sale (judicial
sale or extra-judicial foreclosure sale - if there is express agreement between parties) it shall be awarded to highest
bidder.
Proceeds shall be: pay for expenses of auction sales. Interest charges charge against the proceeds. Net proceeds shall
be remitted to creditor for satisfaction.
If deficient, run after debtor in case of non-payment; if pledge/mortgage no right to run after debtor unless agreed
upon.

art. 2085 PLEDGE and Mortgage:

1. Constituted to secure the fulfillment of principal obligation
2. Pledgor and mortgagor be the absolute owner of the thing
3. Persons constituting the pledge or mortgage have free disposal of their property or legally authorized

If principal obligation is due, things pledge maybe alienated for payment of creditor

“Mortgagee in good faith” Mortgagee has the right to rely on what appears in the certificate of title and does not
have to inquire further. Certificate of title is evidence of lawful ownership of the land in the absence of any sign that
might arouse suspicion. Valuable consideration was given.
SC simply protecting the dignity and integrity of Torres system. So that people will not lose confidence in Torrens
system.

Pledge and mortgage may guarantee:

valid, voidable and unenforceable obligations
civil or natural obligations
pure and conditional obligations
present debts and future debts except for chattel mortgage

Pactum commissorium - stipulation that thing pledge or mortgage shall automatically become the property of the
creditor in the event of non-payment of debt within the term fixed.
- Against good morals and public policy
- requisites: there must be pledge or mortgage of property by way of security for payment of principal
obligation
- there should be an stipulation for Automatic appropriation by creditor

Pledge vs Mortgage
1. Pledge is constituted on movables, real estate mortgage on immovables
2. In pledge, property is delivered to the pledgee, mortgage, physical delivery is not necessary
3. Pledge is not valid against 3rd persons unless description and date of pledge appear in public instrument, in
mortgage is not valid to 3rd person if not registered
4. Pledgor can sell the thing pledged with consent of the pledgee, mortgagor can sell the property even without the
consent of mortgagee.

Mortgage chattel (movable) and r

Mortgage chattel perfected by registration with chattel mortgage registry, annotated in COR “encumbered”
Real estate mortgage - interest in real estate - perfected by registration at RD
Pledgor/mortgagor need not be the borrower, owner of the property must be Pledgor/mortgagor because it is act of
ownership
Under Personal Property Securities Act (effective feb2019) - can offer future or after acquired movable properties
mortgage (security interest) if it will be accepted by creditor. However, the security interest will only arise the
moment the pledgor or mortgagor become the owner of the subject property. (suspensive condition)
the only right of pledgee is the right to foreclose(ncc)
Pledge or mortgage is indivisible -

RA 11057 PPSA ( personal property security Act) aug.17, 2018, effect, sept 7 2018

Scope: all transactions of any form that secure an obligation with movable collateral except interest in Aircraft.
Repealed the laws on conventional pledge and chattel mortgage.

Security interest - property right in collateral that secures payment or other performance of an obligation, regardless
of whether the parties have denominated it as a security interest and regardless of the type of asset. Created by
security agreement.

Consensual - meeting of minds of grantor and secured creditor.

Accessory obligation - cannot exist w/o valid principal
Formal - registration in registry is necessary to bind 3rd persons. Must be WRITTEN signed by parties
Unilateral - only the creditor is oblige to perform by discharging the lien upon fulfillment.

Objects: security interest, commodity contracts, lease of goods, account receivables, all equipement, inventory,
deposit account, investment property, nego instruments, security certificate, intellectual property, livestock, fixtures

Description of collateral is sufficient, whether general or specific if it is reasonably identifies the collateral.

Perfection: if creditor taken one of the ff. Actions: (becomes effective to 3rd persons)
1. Registration of notice to registry
2. Possession of collateral by secured creditor
3. Control of investment property and deposit account

Enforcement: enforced either by recovery, disposition, or retention. In certain cases, secured creditors must fist seek
repossession (with or without judicial process) of the collateral.
The highest rank creditor is preferred to exercise right of enforcement

Without judicial process:

- if stipulated without breach of peace (violence or intimidation)
- if fixture, may remove the fixture from real property to which it afixed with due care

With judicial process: if upon default and cannot take without breach of peace, creditor:
- entitled to expedited hearing
- provided debtor grantor is furnished with copy of application including supporting docs
- Entitled to order granting possession upon court order

If refuse to yield possession, Mortgagee has right to:

- action to recover possession
- Action of Replevin

Disposition of Collateral
After default, may sell
publicly - creditor may buy
privately - may buy only if collateral is customarily sold on recognized market or subject of widely distributed
standard price quotation

Right of Redemption: any person receive notification of disposition

unless: has not waive in writing the right to redeem
collateral sold or disposed, acquired, or collected by secured creditor.
secured creditor retained collateral

APPLICATION OF PROCEEDS:

CASES:

Arenas vs Reymundo

Facts: Estanislaua Arenas brought an action for replevin of certain jewelry owned by her which she delivered for
sale on commission to Elena de Vega as her agent to sell on commission, and that the latter, in turn, delivered it to
Concepcion Perello, likewise to sell on commission, but that Perello, instead of fulfilling her trust, pledged the
jewelry in Fausto O. Raymundo’s pawnshop in tondo as security for a loan of P1,524 and appropriated the money.
Consequently, Raymundo refused to deliver the said jewelry unless first redeemed. It was established in the case that
Raymundo acted in good faith in accepting the pledge.

Issues: WON Raymundo(pawnshop owner) has the right to collect the sum loaned to out of the value of the said
jewelry?

Held: No. The contract of pledge was null and void, since Perello was not the owner of the jewelry pledged.
“between the supposed good faith of Raymundo and the undisputed good faith of arenas, the owner of the jewelry,
neither law nor justice permit that the arenas, after being the victim of embezzlement, should have to choose one of
the two extremes of a dilemma, both of which without legal ground or reason, are injurious and prejudicial to her
interests and rights, that is, she must either lose her jewelry or pay a large sum received by the embezzler as a loan
from elena, when arenas is not related to the Perello by any legal or contractual bond out of which legal obligations
arise.

Business of Pawnshops in exchange of high profits, is always exposed to contingency of receiving pledge, jewels
that have been robbed, stolen, or embezzled from their legit owners, and as owners of pawnshop accepts pledging of
jewels from first bearer without assuring himself whether such bearer is not the owner. Hence, cannot expect from
law more preferential protection than legit owners of jewels who deprived by means of crime.

Sofia Tabuada vs Eleanor Tabuada

Facts:

Sofia Tabuada received the notice sent by the Spouses Certeza regarding their land in Jaro, Iloilo City informing
them that the land had been mortgaged to Spouses Certeza upon learning this, she immediately inquired from
Eleanor Tabuada and Trabuco about the mortgage, and both admitted that they had mortgaged the property to the
Spouses Certeza;
however, she was puzzled to see the signature purportedly of Loreta Tabuada printed on the Mortgage of Real
Rights dated July 1, 1994 and the Promissory Note dated July 4, 1994 despite Loreta Tabuada having died on April
16, 1990;

The RTC declared the Mortgage of Real Rights null and void for not complying with the essential requisites of a
real estate mortgage. Based on the complaint and testimony of Sofia Tabuada, Eleanor Tabuada, who was not the
absolute owner of Lot, and without having the legal authority to mortgage said property [had] misrepresented herself
as the deceased Loreta Tabuada and mortgaged the property and benefited from said mortgage to the detriment of
the rights and interests of plaintiffs.

On appeal, the CA reversed. The CA found merit in the contention that the petitioners were not able to prove by
preponderance of evidence that they were the legal heirs of the late Loreta Tabuada, the registered holder of the title
over the mortgaged real property. The CA noted that the death certificate the petitioners presented was not an
authenticated copy on security paper issued by the National Statistics Office and that the name of the deceased on
the death certificate (Loreta Yulo Tabuada) did not match the name of the registered title holder (Loreta H.
Tabuada). It pointed out that the "discrepancy is material as it puts in issue the real identity of the Loreta H. Tabuada
who the plaintiffs claim is their predecessor-in-interest and the person whose name appears in the death certificate as
Loreta Yulo Tabuada. Consequently this inconsistency puts in doubt the plaintiffs ownership over the property.

Issues: WoN the real estate mortgage was null and void? Yes
WoN Spouses Certeza were not mortgagees in good faith? NO

Held:
YES Real estate mortgage is void. A person constituting a mortgage should be the owner of the property, or should
have the right of free disposal of it, or, in the absence of the right of free disposal, such person should be legally
authorized for the purpose. Otherwise, the mortgage is null and void. It is uncontested that the late Loreta Tabuada
had died in 1990, or four years before the mortgage was constituted; and that Eleanor Tabuada and Trabuco
admitted to petitioner Sofia Tabuada that they had mortgaged the property to the Spouses Certezas. Accordingly, the
RTC was fully justified in declaring the nullity of the mortgage based on its finding that Eleanor Tabuada had
fraudulently represented herself to the Spouses Certeza as the late Loreta Tabuada also, Eleanor Tabuada had not
been legally authorized to mortgage the lot to the Spouses Certeza.

NO. The Spouses Certeza admitted that the petitioners were the relatives by blood or affinity of their co-defendants
Eleanor Tabuada,.; and that Sofia Tabuada, et al. and the petitioners had been living in their respective residences
built on the property subject of the mortgage. At the very least, they should have been prudent and cautious enough
as to have inquired about Eleanor Tabuada's assertion of her capacity and authority to mortgage in view of the actual
presence of other persons like the petitioners herein on the property.

Alcantara vs Alinea

Facts: Alinea borrowed money from Alcantara under the agreement that if, at the expiration of the period stipulated,
the sum loaned should be paid, it would be understood that the house and lot owned by Alinea, be considered as
absolutely sold to Alcantara for the said sum.
Later on, No payment was made by alinea within the time fixed.
In view of the refusal of Alinea to deliver the property, Alcantara brought action at RTC to recover the property and
rents from Alinea.
Issues: WON the contact in question in the nature of a pactum commissorium?

Held: No, the contract in this case is a contract of loan and a promise of sale of property, the price of which should
be the amount loaned, if within a fixed period of the time such amount should not be paid by the debtor-vendor (D)
of the property to the creditor-vendee (C) of the same. The fact that the parties have agreed at the same time, in such
a manner that the fulfillment of the promise of sale would depend upon the nonpayment or return of the amount
loaned, has not produced any change in the nature and legal conditions of either contract or any essential defect
which would tend to nullify them. Pactum commissorium indicates the existence of the contracts of pledge or
mortgage or anticheris , none of which has coincided in the loan in question.

Uy Tong vs CA

Facts:
Spouses uy tong and kho po giok owned the apartment 307 of ligaya building and lease the portionof the land to
ligaya investment.

Later on, SPS purchase 7 units of motor vehicle from bayanihan automotive. Their agreement provides that if
vendee fails to pay, vendor shall become automatic owner of their apartment. When spouses defaulted in the
payment of the second and third installments, bayanihan filed an action in court for specific performance but the sps.
Remained in possession of the premises.
The trial court rendered judgement for bayanihan and ordered spouses to pay the balance of his obligation and in
case of failure to do so, to execute a deed of assignment pursuant to the judgement.
CA upheld the decision in toto.

Issues: WON the deed of assignment in the nature of a pactum commissorium?

Held: No.
2 elements of pactum commissorium
1. There should be pledge or mortgage, wherein the property is by way of security for payment of principal
obligation
2. 2. That there should be stipulation for an automatic appropriation by the creditor of the thing pledge.

In the case, there was no contract of Pledge or mortgage entered into by the parties; nor a case of automatic
appropriation of the property by bayanihan because it took the intervention of the trial court to exact fulfillment of
obligation, which by its very nature is “ anathema to the concept of pacto commissorio”. And even granting that the
original agreement between the parties had the badges of pactum commissorium, the deed of assignment does not
suffer the same fate as it was executed pursuant to a valid judgement as can be gleaned for its very terms and
condition.

DBP vs CA

Facts: Lydia P. Cuba, a grantee of Fishpond Lease agreement from the government, she later obtained from DBP 3
separate loans, each of which was covered by promissory note. Simultaneous with the execution of “assignment of
Leasehold Rights” by Lydia P. Cuba, as borrower of the mortgaged properties by way of security in the payment of
the loans. Condition 12 provides for the appointment of DBP as atty-in-fact with authority, among other things, to
sell or otherwise dispose of the said real rights in case of default by Lydia and to apply the proceeds to the payment
of the loan.
Later on, she failed to pay the installments and DBP without foreclosure appropriated the Leasehold Rights, she
exercise her right of repurchase but failed to pay the amortization, DBP then sent notice of rescission and sold the
rights to public bidding.

Issues: WON the condition in question in constitute pactum commissorium?

WON the act of DBP in appropriating to itself Cuba’s leasehold rights with foreclosure
proceeding was contrary to art.2088 and therefore invalid?
Held:
No, the act of DBP is not pactum commissorium, since elements of pactum commissorium were not
present.
Condition 12 did not provide that the ownership over the leasehold rights would automatically pass to DBP upon
CUBA’s failure to pay the loan on time. - this provision is a standard condition in mortgage contracts and is in
conformity with art. 2087 of civil code., which authorizes the mortgagee to foreclose the mortgage and alienate the
mortgaged property for the payment of the principal obligation.
2. DBP exceeded authority vested by condition since without foreclosure proceeding appropriated the leasehold
rights in question.

Bustamante vs Rosel

Facts: Rosel entered into loan agreement with sps. Bustamante for 100k payable in 2 years. To guarantee payment,
ups put their lot as collateral including the apartment. It also provides that in case of default, lender has the option to
buy the collateral of 200k.
On due date, ups bustamante tendered payment but refused to accept by lender. Consequently, rose demanded
petitioner to sell the collateral pursuant to option to buy and subsequently filed action at RTC for specific
performance.

Issues: WON rosel justified in compelling SPS. Bustamante to sell the lot?

Held: no! Doing so amounts to pactum commissorium, in this case, intent to appropriate property given as collateral
in favor of creditor appears to be evident, for the debtor is obliged to dispose of the collateral at the pre-agreed
consideration amounting to practically the same amount as the loan. Such stipulation is void.

Yau Chu vs CA
Facts: vitoria yau chu had been purchasing cement on credit from cams. To guaranty payment, she executed deed of
assignement of her time deposit at family savings bank. She assigned about 320k worth but her obligations to cams
came about 400k. CAMS requested the bank to encash the time deposit certificate, which the bank did only after
calling up and obtaining Victoria’s consent. Victoria then sued the bank and CAMS for allege pactum
commissorium. The court ruled in against her,

Issues: WON the encashment of the time deposit certificate is void on the ground that it is a pactum commissorium?

Held: NO! Since the collateral is money there Is no need to sell the thing being pledge at public auction in order to
satisfy the pledgor’s obligation. All he have to do is to convert the pledgers time deposit into cash and present them
to bank for encashment after due notice to the debtor.

CA found that the deeds of assignment were contracts of pledge, but as the collateral was also money or an
exchange of “peso for Peso”, the provision in Art. 2112 of the Civil Code for the sale of the thing pledge at public
auction to convert it into one to satisfy the pledgor’s obligation, did not have to be followed. All that had to be done
to convert the pledgor’s time deposit certificates into cash was to present them to the bank encashment after due
notice to the debtor.
The encashment of the deposit certs was not a pacto commissorio which prohibited under Art. 2088.
Whether the debt had already been paid as now alleged by the debtor, is a factual question which the CA found not
to have been proven for the evidence which the debtor sought to present on appeal, were receipts for payments made
prior to July 18, 1980 . Since the petitioner signed on July 18, 1980 a letter admitting her indebtedness to be in the
sum of 404K and there is no proof of payment made by her thereafter to reduce or extinguish her debt, the
application if her time deposits which she had assigned to the creditor to secure the payment of her debt, was proper.
The CA did not commit a reversible error in holding that it was so.

Sicam vs Jorge
Facts: On different dates, Lulu Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam located in
Parañaque to secure a loan. On October 19, 1987, two armed men entered the pawnshop and took away whatever
cash and jewelry were found inside the pawnshop vault. On the same date, Sicam sent Lulu a letter informing her of
the loss of her jewelry due to the robbery incident in the pawnshop. Respondent Lulu then wroteback expressing
disbelief, then requested Sicam to prepare the pawned jewelry for withdrawal on November 6, but Sicam failed to
return the jewelry. Lulu, joined by her husband Cesar, filed a complaint against Sicam with the RTC of Makati
seeking indemnification for the loss of pawned jewelry and payment of AD, MD and ED as well as AF. The RTC
rendered its Decision dismissing respondents’ complaint as well as petitioners’ counterclaim. Respondents appealed
the RTC Decision to the CA which reversed the RTC, ordering the appellees to pay appellants the actual value of the
lost jewelry and AF. Petitioners MR denied, hence the instant petition for review on Certiorari

Issues: WON the petitioners liable for the loss of the pawned articles in their possession? (Petitioners insist that they
are not liable since robbery is a fortuitous event and they are not negligent at all.)

Held: YES
Article 1174 of the Civil Code provides:
Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires the assumption of risk, no person shall be responsible for
those events which could not be foreseen or which, though foreseen, were inevitable.

Yuliongsui vs PNB

Facts: Yuliongsui borrowed money from PNB. As a security, D executed a contract of pledge over his vessels
which, however, were not actually delivered to PNB but remained in Yuliongsui’s possession “who shall hold said
property subject to the order of the pledgee”. D defaulted.
Pursuant to the terms of the pledge, pnb took possession of the vessels and sold the same. Debtor contended that the
pledge was not effective because there was only constructive and not actual delivery.

Issues: is the contention of Yuliongsui tenable?

Held: No, “in betta vs Hanson, the objects pledge - caribous - were easily capable of actual, manual delivery unto
the pledgee. In banco Español vs peterson, the objects pledge- goods contained in warehouse - were hardly capable
of actual, manual delivery in the sense that it was impractical as a whole for the particular transaction and would
have been an unreasonable requirement. Thus, for purposes of showing the transfer of control to the pledgee,
delivery to him of the keys to the warehouse sufficed. In other words, the type of delivery will depend upon the
nature and the peculiar circumstances of each case.
The parties here agreed that vessels be delivered by the pledgor to the pledgee who shall hold subject property to the
order of the pledgee. Considering the circumstances of the case and the nature of the objects pledge, vessels used in
maritime business, such delivery is sufficient.

Estate of Litton vs Mendoza

Facts:
Alfonso Tan brought and action against Ciriaco B. Mendoza, for the collection of money in RTC. While the case
was pending resolution, Tan assigned in favor of GEORGE LITTON, SR., by the way of securing or guaranteeing
Tan’s obligation to LITTON has litigated credit against Mendoza duly submitted to the court with notice to the
parties. The lower court ruled in favor of Tan.
Subsequently, pending resolution of the appeal of M to the court of appeals, M entered into a compromise
agreement with Tan wherein Tan acknowledge that all his claims against Mendoza had been settled.
After CA rendered a decision affirming in toto the decision of the lower court, Ciriaco B. Mendoza, filed a motion
for reconsideration praying that said decision be set aside, on the ground that compromise agreement was entered
into between him and Tan which, in effect, release Mendoza, from liability. The validity of the guarantee or pledge
in favor of LITTON has not been questioned and it appears that the deed of assignment fulfills the requisite of a
valid pledge or mortgage.
Issues: is the compromise agreement valid?

Held: No. Although Ciriaco B. Mendoza, may validly alienate the litigated credit under Art. 1634, said provision
should not be taken to mean as a grant of an absolute right on the part of the assignor (T) to indiscriminately dispose
of the thing or the right given as security. It should be in consonance with Art. 2097. Although the pledgee or
assignee (LITTON) did not ipso facto become the creditor of M, the pledge being valid, the incorporeal right
assigned by T in favor of LITTON can only be alienated by T with due notice to and consent of LITTON or his duty
authorized representative.
Under Art. 1634, the debtor Mendoza has a corresponding obligation to reimburse the assignee (L) for the price the
latter paid or for the value given in consideration for deed of assignment. Hence, alienation of litigated credit made
by Tan in favor of Mendoza by way of a compromise agreement does not bind LITTON.

Further, having knowledge of assignment, M was estopped from entering into the compromise agreement without
notice and consent of L, and no reimbursement has made in favor of L. M acted in bad faith and in connivance with
Tan two defraud L in entering compromise agreement.

Cruz and Serrano vs Chua A.H. Lee

Facts:
Cornelio Cruz pawned valuable jewelries to 2 pawnshops; monte de piedad & tambunting, receiving 12 pawn
tickets. These tickets are renewable according to the custom of pawnbroker upon payment from time to time of the
sum of money representing the intent accruing upon the debts.

Cruz presented himself to Chua and pledge to him 6 pawntickets of monte de piedad and a week after obtained
another loan to Chua. Chua renewed the ticket issued by monte de piedad by paying interest necessary to effect
renewal but these tickets expired and not renewed. subsequently, the jewelries were sold at public auction and were
not redeemed.

Chua alleged that tickets had been drawn in a form of sale with stipulation to repurchase, but it was understood
between the parties that transaction is a loan and jewelry and tickets held by him constituted mere security for
money advance by him to cruz.

Issues: Is Chua bound to renew the ticket from time to time, by the payment of interest or premium?

Held: yes, Chua is liable for loss of value of pawn tickets. Since ordinary pawn ticket is a document by virtue of
which property in the thing pledged passes from hand to hand by mere delivery of ticket. It results that one who
takes a pawn ticket in pledge acquires domination over the pledge.
Art. 2099, said that pledge (C) may have to undertake expenses in order to prevent pledge from being lost; and these
expenses pledgee is entitled to recover from pledgor D. This follows that where, in a case like this, pledge is lost by
failure of C to renew the loan, he is liable for resulting damage. This duty of C is not destroyed by the fact that he
has obtained a judgment for the debt of D which was secured by the pledge. The duty to use diligence of Good
father of family in caring for the thing pledge subsists as long as the same remains in the power of the pledgee.

Hernandez vs Ocampo

Facts: Petitioner Milagros Hernandez alleges that sometime in 1985, she bought from Romeo Uy An (An) two
parcels of land (lot 6 & 8) located in Binan, Laguna, as evidenced by a deed of sale. From 1985, she was in
continuous, open, and adverse possession of these lots. Until now, her daughter, Fe Hernandez-Arceo and her family
occupy them. Hernandez entrusted the registration of the lots in her name to her son-in-law, Ricardo San Andres.
However, he died in 1991 without transferring the titles to Hernandez's name. At that time, Hernandez was already
residing in the United States and was not aware of the non-registration of the lots. Due to old age, she has also not
come back to the Philippines for a long time.
Sometime in 2002, Hernandez and her family were surprised to receive a letter from one Atty. Agapito Carait, who
wrote in behalf of respondent Felicitas R. Mendoza (Mendoza), demanding that they vacate Lot 8.  Upon
investigation, they discovered that the titles to the lots were registered in the names of Mendoza and respondent
Edwina Ocampo (Ocampo) by virtue of a Deed of Sale dated April 13, 1989 executed by An. Lot 8 was then
covered by TCT No. T-193772 and registered in the name of Mendoza, while Lot 6 was covered by TCT No. T-193
773 and registered in the name of Ocampo.

Hernandez and her family also discovered that the lots were mortgaged. Lot 8 was mortgaged with Metropolitan
Bank and Trust Company (Metrobank) and Lot 6 was mortgaged with Philippine Savings Bank(PSB).

Eventually, the mortgages were extrajudicially foreclosed and the lots were separately sold at public auctions with
the two banks emerging as the highest bidders. Corresponding Certificates of Sale for Lot 6 and Lot 8 were issued to
PSB and Metrobank, respectively. PSB registered Lot 6 on November 9, 2001 and TCT No. T-518364 was issued in
its name. Metrobank also registered Lot 8 on May 6, 2003 and TCT No. T-550116 was issued in its name.

On January 18, 2002, PSB filed a petition for the issuance of writ of possession, docketed as LRC Case No. B-3071,
before the RTC of Hainan, Laguna, Branch 24.  The RTC granted the writ in an Order dated December 22, 2002.

Meanwhile, Hernandez filed a Complaint for Cancellation of Transfer Certificates of Title, which was raffled to the
same RTC, Branch 24. The case, docketed as Civil Case No. B-6191, was filed against Mendoza, Ocampo,
Metrobank, PSB, and the Register of Deeds of Calamba.    The summonses were served upon Metrobank and PSB
on November 25, 2002.
 
Issues: WON Hernandez is entitled to the issuance of a writ of preliminary injunction?

Held:

Limso vs PNB
Facts:  In 1993, Sps. Limso and Davao Sunrise took out a loan secured by real estate mortgages from Philippine
National Bank amounting to P700 Million.  The loan contract was subsequently restructured on January 1999. The
provision under their loan contract on the interest rate states that the same shall be determined "at the rate per annum
to be set by the Bank. The interest rate shall be reset by the Bank every month.”
The Sps. and Davao Sunrise were notified through a letter that the interest rate approved by the top management of
PNB is 20.756% and as of December 1998, the interest on the loan amounted to P217 Million. However, due to their
financial difficulties and despite repeated demands by PNB, Sps. Limso and Davao Sunrise failed to pay their debt.
The Sps. and Davao Sunrise files a complaint in court praying for the declaration of nullity of unilateral imposition
and increases of interest rates

Issues: Whether the provision under the loan contract regarding the unilateral imposition and increases of interest
rates violates the principle of mutuality of contract.

Held:  Yes. The SC held that the provision violates the principle of mutuality of contract.

The SC held that the interest on the principal loan obligation shall be at the rate of 12% per annum and computed
from January 28, 1999, the date of the execution of the Conversion, Restructuring and Extension Agreement.
Interest rate on the conventional interest shall be at the rate of 12% per annum from the date of judicial demand, to
June 30, 2013. From July 1, 2013 until full satisfaction, the interest rate on the conventional interest shall be
computed at 6% per annum in view of this court's ruling in Nacar v. Gallery Frames.

According to the SC, there was no mutuality of contract between the parties since the interest rates imposed were
based on the sole discretion of Philippine National Bank. Further, the escalation clauses in the real estate mortgage
"[did] not specify a fixed or base interest[.]" Thus, the interest rates are invalid.

Soriano vs Bautista
FACTS:
Spouses Bautista are the registered owners of a parcel of land. In 1956, the spouses entered into an agreement
entitled Kasulatan ng Sanglaan (mortgage)  in favor of spouses Soriano for the amount of P1,800. Simultaneously
with the signing of the deed, the spouses Bautista transferred the possession of the subject property to spouses
Soriano. The spouses Soriano have, since that date, been in possession of the property.

1.    Sometime after May 1956, the spouses Bautista received from spouses Soriano the sum of P450 pursuant to the
conditions agreed upon in the document. However, no receipt was issued. The said amount was returned by the
spouses Bautista

2.    In May 13, 1958, a certain Atty. Ver informed the spouses Bautista that the spouses Soriano have decided to
purchase the subject property pursuant to par. 5 of the document which states that “…the mortgagees may purchase
the said land absolutely within the 2-year term of the mortgage for P3,900.”
3.    Despite the receipt of the letter, the spouses Bautista refused to comply with Soriano’s demand
4.    Later on, spouses Soriano filed a case, praying that they be allowed to consign or deposit with the Clerk of
Court the sum of P1,650 as the balance of the purchase price of the land in question
5.    The trial court held in favor of Soriano and ordered Bautista to execute a deed of absolute sale over the said
property in favor of Soriano
6.    Subsequently spouses Bautista filed a case against Soriano, asking the court to order Soriano to accept the
payment of the principal obligation and release the mortgage
7.    RTC held in Soriano’s favor and ordered the execution of the deed of sale
8.    Bautista argued that as mortgagors, they cannot be deprived of the right to redeem the mortgaged property, as
such right is inherent in and inseparable from a mortgage.

ISSUE: WON spouses Bautista are entitled to redemption of subject property?

HELD: No. While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning
redemption, it carries the added special provision which renders the mortgagor ’s right to redeem defeasible at the
election of the mortgagees. There is nothing illegal or immoral in this as this is allowed under Art 1479 NCC which
states: “A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted
unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise supported by a consideration apart from the price.”

In the case at bar, the mortgagor’s promise is supported by the same consideration as that of the mortgage itself,
which is distinct from the consideration in sale should the option be exercised. The mortgagor ’s promise was in the
nature of a continuing offer, non-withdrawable during a period of 2 years, which upon acceptance by the mortgagees
gave rise to a perfected contract of sale.

Santiago vs Dionisio
Facts: Apolonia Santiago brought a parcel of land in Obando Bulacan from San Diego and the sale was recorded in
the office of RD, however, that prior to the sale Roman San Diego had already mortgaged the land to one Eulalia
Resurreccion, which mortgage was also registered. For failure of San Diego to pay the mortgage debt, Resurreccion
foreclosed the mortgage, and the land was sold to Angela Dionisio as the highest bidder.
On learning of the sale, Apolonia Santiago, brought an action to annul the judgment, including the sale made in
favor of Angela Dionisio, and she also intervened in the proceeding for the confirmance of the sale and filed her
opposition thereto. Taking the view that the oppositor's claim might well be determined in the action for annulment
which she had already filed the court (Judge Pastor Endencia, presiding) confirmed the sale but without prejudice to
whatever rights the oppositor might have.

Issues: WON the land should be registered to Dionisio or Santiago?

Held:
to Angela Dionisio, but subject to Santiago’s equitable right of redemption which right should be exercised within
three (3) months from the date the decision becomes final. Santiago’s equity of redemption is registrable, but only as
an encumbrance on a registered title of ownership. Santiago does not become the owner of the land until she has
exercised her right to redeem before such redemption, the registration of the land in P’s name would be subject to
the objection that it is premature, if not altogether anomalous.

Rural bank of Caloocan Inc. vs CA

Facts: public auction sale was held on April 11, 1961 which was the next business day after the scheduled date of
sale on April 10, 1961, a special public holiday.

Issues: is the sale valid?

Held: No, it not having been carried out in accordance with Sec. 3 Act. 3135, based on revised admin code, where
the day or last day for doing an act required or permitted by law falls on holiday, the act may be done on the next
succeeding business day. since, April 10, 1961 is not a day or last day set by law for the extrajudicial foreclosure
sale, nor the last day of given period, but fixed by deputy sheriff, the sale cannot legally be made on the next
succeeding day without the notice of sale on the day being posted as prescribed in sec.9, act. No. 3135.

Fiestan vs CA

Facts:
For failure of petitioner spouses Fiestan to pay their mortgage indebtedness to respondent Development Bank of the
Philippines, DBP was able to acquire at a public auction sale the parcel of land that the spouses Fiestan owned in
Ilocos Sur after extrajudicial foreclosure of said property.
The Sheriff issued a certificate of sale which was registered on September 28 in the Office of the Register of Deeds
of Ilocos Sur. Earlier, or on September 26, spouses Fiestan also executed a Deed of Sale in favor of DBP which was
likewise registered on September 28, 1979. When spouses Fiestan failed to redeem their parcel of land within the 1
year period which expired on September 28, 1980, the Register of Deeds cancelled their title over the subject
property and issued TCT No. T-19077 to DBP upon the latter’s duly executed affidavit of consolidation of
ownership.
Later on, DBP sold the lot to Francisco Peria, so the Register of Deeds of Ilocos Sur cancelled DBP ’s title over said
property and issued TCT No. T-19229 to Peria’s name, who later secured a tax declaration for said lot and
accordingly paid the taxes due thereon. He thereafter mortgaged said lot to the PNB-Vigan Branch as security for his
loan of P115,000.00. Since the spouses Fiestan were still in possession of the property, the Provincial Sheriff
ordered them to vacate the premises, but instead of leaving, they filed a complaint in the RTC of Vigan, Ilocos Sur
for annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP-Laoag City, PNB-
Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds of Ilocos Sur.
RTC dismissed said complaint, declaring valid the extrajudicial foreclosure sale in favor of DBP and its subsequent
sale to Francisco Peria as well as the real estate mortgage in favor of PNB-Vigan.
CA affirmed said decision.
The spouses Fiestan herein seek to annul the extrajudicial foreclosure sale of the mortgaged property on the ground
that the Provincial Sheriff conducted the foreclosure without first effecting a levy on property before selling it at the
public auction sale.

ISSUE: Who has the right to acquire by purchase the subject property?

RULING: In denying the petition, the Supreme Court reiterated that the formalities of a levy, which the Provincial
Sheriff of Ilocos Sur allegedly failed to comply with, are not basic requirements before an extrajudicially foreclosed
property can be sold at public auction. The spouses Fiestan insisted that what prevails over the case are par. (2) of
Article 1491 and par. (7) of Article 1409 of the Civil Code which prohibits agents from acquiring by purchase, even
at a public or judicial auction either in person or through the mediation of another, the property whose
administration or sale may have been entrusted to them unless the consent of the principal has been given. However,
the Supreme Court ruled that the power to foreclose is not an ordinary agency that contemplates exclusively the
representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's
own protection, as provided under Section 5 of Act No 3135, as amended, which is a special law that must prevail
over the Civil Code which is a general law. Even in the absence of statutory provision, there is authority to hold that
a mortgagee, and in this case the DBP, may purchase at a sale under his mortgage to protect his own interest or to
avoid a loss to himself by a sale to a third person at a price below the mortgage debt.

Ermitaño vs Paglas

Facts: in 1999, juanita and lailanie executed contract of lease wherein petitioner lease in favor of respondent a
residential lot and a house located at davao city. The contract period is 1 year with a monthly rental rate of
₱13,500.00.

Subsequently, petitioner mortgaged the subject property to Charlie Yap For failure to pay the loan the mortgage was
foreclosed.

On June 1, 2000, respondent bought the subject property from Yap for ₱950,000.00.
Later on Ermitanio, sent letter demanding the respondent to pay the rentals which are due and vacate the leased
premises. Later on, petitioner filed unlawful detainer against paglas at MTC.

Issues: WON the owner or mortgagor is entitled to the possession, rents, income derived from the property?

Held: the petitioner as owner and mortgagor is still entitled to the possession and rents until the lapse of 1 year
redemption period. however, petitioner ejectment case is rendered moot when the period of redemption expired in
feb 2001.

Malayan bank vs Lagrama

Facts: Demetrio Llego sold to his uncle Agustin Lagrama, and his aunt Paz Abastillas his share in the inherited
parcel of land
notwithstanding the absence of deed of sale, Lagrama and Paz Abastillas took possession of parcel of land and paid
for the price.
Later on, DLlego mortgage the property to petitioner Bank. As DLlego failed to pay his indebtedness, the mortgage
was foreclosed and the property was sold with the Bank as the highest bidder. DLlego failed to redeem the property.

Subsequently, Agustin Lagrama and Abastillas filed complaint for specific performance to compel DLlego to
execute necessary deed of absolute sale in their favor. The Bank alleged that it was a mortgagee in good faith.

Issues: WON petitioner bank may be compelled to execute deed of reconveyance transferring the land mortgage to
petitioner in favor of private respondents?

Held: yes! MalayanBank took took title to mortgage property pendente lite, whose title was subject to the incidents
and results of the pending litigation.
Bank contends that it constituted the mortgage more than a year before the private respondent’s action for specific
performance was filed and the fact the foreclosure and public auction sale took place after the institution of the case
is immaterial since foreclosure sale retroacts to the date of constitution of mortgage.

Petitioner acquired the property only after filing of private respondents case for specific performance. When
mortgage was constituted, petitioner was not yet, a transferee, being mere mortgagee of the property. Only when
petitioner acquired property in foreclosure sale and consolidated its title did it become transferee. Thus, petitioner
bank is transferee pendente lite of the property in litigation . As such, it is bound by decision against Demetrio llego.

- transferee pendente lite stands in the shoes of transferor and is bound by any judgement which may be rendered
to the transferor.
- Even if not transferee pendente lite, petitioner cannot claim right superior to the of private respondents because
petitioner acted in bad faith when it foreclosed and acquired the property.
“petioner was aware of the charge of fraud against Demetrio LLego in mortgaging the property to it despite the
previous sale.
Teves vs Integrated Credit & Corporate Services

Facts:
in 1996, Standard Chartered Bank extended various loans to petitioners Godfrey and Ma. Teresa Teves. As security,
petitioners mortgaged their property.
Later on, Petitioners defaulted in their loan payments. Standard extrajudicially foreclosed the mortgage, and the
property was sold to Integrated Credit and Corporate Services Co. (ICCS). A new certificate of title was issued in
favor of ICCS after petitioners failed to redeem the subject property upon the expiration of the redemption period.
ICCS filed a petition for the issuance of a writ of possession.
During the proceedings, or in May, 2010, ICCS was substituted by respondent Carol Aqui who appears to have
acquired the property from ICCS, and a new certificate of title was issued in Aqui's favor
Later on, the RTC issued two Orders.
The first, issued the writ of possession. The second, ordered the defendants to deliver to petitioner and/or deposit
with the Court the monthly rentals of the subject property covering the period from May 24, 2007 up to the time
they surrender the possession thereof to the petitioner.

Issues: WON back rentals can be awarded in an ex parte application for writ of possession under Act 3135. (YES)

Held: When the redemption period expired on May 23, 2007, ICCS became the owner of the subject property and
was, from then on, entitled to the fruits thereof. Petitioners ceased to be the owners of the subject property, and had
no right to the land as well as to its fruits.

Under Section 32, Rule 39 of the Rules, on Execution, Satisfaction and Effect of Judgments, all rents, earnings and
income derived from the property pending redemption shall belong to the judgment obligor, but only until the
expiration of his period of redemption. Thus, if petitioners leased out the property to third parties after their period
for redemption expired, as was in fact the case here, the rentals collected properly belonged to ICCS or Aqui, as the
case may be. Petitioners had no right to collect them.

Amada Cotoner – Zacarias vs. Spouses Alfredo & Heirs Revilla of Paz Revilla

Facts:
Paz Castillo – Revilla borrowed money from Amada Cotoner – Zacarias. By way of security, the parties verbally
agreed that Amada would take physical possession of the property, cultivate it, then use the earnings from the
cultivation to pay the loan and realty taxes. Upon full payment of the loan, Amada would return the property to the
Revilla spouses. Amanda sold the property to SPS Adolfo and Elvira Casorla by deed of absolute sale unregistered
land. In turn, the SPS Casorla executed deed of absolute sale in favor of SPS Sun. Alfredo revilla returned from
Saudi he asked Amanda why she had not returned their tax dec considering full payment of the loan. He then
discovered that the property tax declaration was already in the name of the Sun spouses.
The Revilla spouses filed a complaint before the Regional trial Court for annulment of sales and for transfer of title
and reconveyance of property with damages against amanda, sun sps, Casorla and Provincial Assessor of Cavite.
RTC found kasulatan ng bilihan ng lupa fraudulent.
CA dismissed the appeal of Amada, and partially granted the appeal of the Sun spouses

Issues: Whether or not the Contract of Antichresis executed between Amada & Paz Revilla is void?

Held: Article 2132 of the Civil Code provides that by the contract of antichresis the creditor acquires the right to
receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if
owing, and thereafter to the principal of his credit. It express agreement between parties such that the creditor will
have possession of the debtor’s real property given as security, and such creditor will apply the fruits of the property
to the interest owed by the debtor, if any, then to the principal amount.
Dizon vs Gaborro
Facts:
Petitioner, Jose P. Dizon, was the owner of the three parcels of land, situated in Mabalacat, Pampanga. He
constituted a first mortgage to DBP to secure a loan of P38,000.00 and a second mortgage to PNB amounting
P93,831.91.

Petitioner defaulted in the payment of his debt, therefore, the Development Bank of the Philippines foreclosed the
mortgage extrajudicially. Gaborro became interested in the lands of Dizon. But since the property was already
foreclosed by the DPB. They then entered into a contract captioned as “Deed of sale with assumption of mortgage”
and the second contract executed the same day, is called “Option to Purchase Real Estate” After the execution of
said contracts, Alfredo G. Gaborro took possession of the three parcels of land.

After the execution of the contract and its conditions to him, Gaborro made several payments to the DBP and PNB.
He improved, cultivated the kinds raised sugarcane and other crops produce.
Jose P. Dizon through his lawyer, wrote a letter to Gaborro informing him that he is formally offering reimburse
Gaborro of what he paid to the banks. Gaborro did not agreed to the demands of the petitioner, hence,  Jose P. Dizon
instituted a complaint in the Court of First Instance of Pampanga, alleging that the documents Deed of Sale With
Assumption of Mortgage and the Option to Purchase Real Estate did not express the true intention and agreement
between the parties. Petitioner, contended that the two deeds constitute in fact a single transaction that their real
agreement was not an absolute sale of the land but merely an equitable mortgage or conveyance by way of security
for the reimbursement or refund by Dizon to Gaborro of any and all sums which the latter may have paid on account
of the mortgage debts in favor of the DBP and the PNB.

Issue:

Whether or not the contract showed the true agreement  between the parties.?

Held:
No. The court held that the true agreement between the plaintiff and defendant is that the defendant would assume
and pay the indebtedness of the plaintiff to DBP and PNB, and in consideration therefore, the defendant was given
the possession and enjoyment of the properties in question until the plaintiff shall have reimbursed to defendant fully
the amount of P131,831.91 plus 8% interest per annum from October 6, 1959 until full payment, said right to be
exercised within one year from the date the judgment becomes final, if he fails to do so within the said period, then
he is deemed to have lost his right over the lands forever.

Belgian Catholic Missionaries vs Magallanes Press

Facts:
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Marquez vs Elisan Credit Corporation

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Held:

Metrobank vs SF Naguiat Enterprises Inc.

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Jan-Dec Construction Corp. Vs CA

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Atlantic Erectors Inc. vs Herbal Cove Realty Corp.

Facts:
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State Investment House vs CA

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Central bank of the Philis. Vs Morfe

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Lipana vs Devt. Bank of Rizal

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DBP vs CA 363 SCRA 307

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De Barreto vs Villanueva
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Phil. Savings Bank vs Lantin

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