G.R. No.
 110053 October 16, 1995 contained a waiver of the seller's warranty against
DEVELOPMENT BANK OF THE
PHILIPPINES, petitioner,  Thereafter, respondent spouses applied for an
vs.
COURT OF APPEALS, CELEBRADA MANGUBAT
and ABNER MANGUBAT, respondents.
This appeal by certiorari sprouted from the judgment
of respondent Court of Appeals promulgated on
September 9, 1992 in CA-G.R. CV No. 28311, and its
resolution dated April 7, 1993 denying petitioner's
motion for reconsideration.1 Said adjudgments, in
turn, were rooted in the factual groundwork of this
case which is laid out hereunder.
On July 20, 1981, herein petitioner Development
Bank of the Philippines (DBP) executed a "Deed of
Absolute Sale" in favor of respondent spouses
Celebrada and Abner Mangubat over a parcel of
unregistered land.
The land, covered only by a tax declaration, is known
to have been originally owned by one Presentacion
Cordovez, who, on February 4, 1937, donated it to
Luciano Sarmiento. On June 8, 1964, Luciano
Sarmiento sold the land to Pacifico Chica.
On April 27, 1965, Pacifico Chica mortgaged the land
to DBP to secure a loan of P6,000.00. However, he
defaulted in the payment of the loan, hence DBP
caused the extrajudicial foreclosure of the mortgage.
In the auction sale held on September 9, 1970, DBP
acquired the property as the highest bidder and was
issued a certificate of sale on September 17, 1970 by
the sheriff. The certificate of sale was entered in the
Book of Unregistered Property on September 23,
1970. Pacifico Chica failed to redeem the property,
and DBP consolidated its ownership over the same.
On October 14, 1980, respondent spouses offered to
buy the property for P18,599.99. DBP made a
counter-offer of P25,500.00 which was accepted by
respondent spouses. The parties further agreed that
payment was to be made within six months
thereafter for it to be considered as cash payment.
On July 20, 1981, the deed of absolute sale, which is
now being assailed herein, was executed by DBP in
favor of respondent spouses. Said document
and nature of DBP's rights, title and interest over the
eviction.2
industrial tree planting loan with DBP. The latter
required the former to submit a certification from the
Bureau of Forest Development that the land is
alienable and disposable. However, on October 29,
1981, said office issued a certificate attesting to the
fact that the said property was classified as
timberland, hence not subject to disposition.3
The loan application of respondent spouses was
nevertheless eventually approved by DBP in the sum
of P140,000.00, despite the aforesaid certification of
the bureau, on the understanding of the parties that
DBP would work for the release of the land by the
former Ministry of Natural Resources. To secure
payment of the loan, respondent spouses executed a
real estate mortgage over the land on March 17,
1982, which document was registered in the Registry
of Deeds pursuant to Act No. 3344.
The loan was then released to respondent spouses
on a staggered basis. After a substantial sum of
P118,540.00 had been received by private
respondents, they asked for the release of the
remaining amount of the loan. It does not appear
that their request was acted upon by DBP, ostensibly
because the release of the land from the then
Ministry of Natural Resources had not been obtained.
On July 7, 1983, respondent spouses, as plaintiffs,
filed a complaint against DBP in the trial
court4 seeking the annulment of the subject deed of
absolute sale on the ground that the object thereof
was verified to be timberland and, therefore, is in
law an inalienable part of the public domain. They
also alleged that petitioner, as defendant therein,
acted fraudulently and in bad faith by
misrepresenting itself as the absolute owner of the
land and in incorporating the waiver of warranty
against eviction in the deed of sale.5
In its answer, DBP contended that it was actually the
absolute owner of the land, having purchased it for
value at an auction sale pursuant to an extrajudicial
foreclosure of mortgage; that there was neither
malice nor fraud in the sale of the land under the
terms mutually agreed upon by the parties; that
assuming arguendo that there was a flaw in its title,
DBP can not be held liable for anything inasmuch as
respondent spouses had full knowledge of the extent
land.
It further averred that the annulment of the sale and
the return of the purchase price to respondent
spouses would redound to their benefit but would
result in petitioner's prejudice, since it had already
released P118,540.00 to the former while it would be
left without any security for the P140,000.00 loan;
and that in the remote possibility that the land is
reverted to the public domain, respondent spouses
should be made to immediately pay, jointly and
severally, the total amount of P118,540.00 with
interest at 15% per annum, plus charges and other
expenses.6
On May 25, 1990, the trial court rendered judgment
annulling the subject deed of absolute sale and
ordering DBP to return the P25,500.00 purchase
price, plus interest; to reimburse to respondent
spouses the taxes paid by them, the cost of the
relocation survey, incidental expenses and other
damages in the amount of P50,000.00; and to
further pay them attorney's fees and litigation
expenses in the amount of P10,000.00, and the costs
of suit.7
In its recourse to the Court of Appeals, DBP raised
the following assignment of errors:
1. The trial court erred in declaring
the deed of absolute sale executed
between the parties canceled and
annulled on the ground that therein
defendant-appellant had no title
over the property subject of the
sale.
2. The trial court erred in finding
that defendant-appellant DBP acted
fraudulently and in bad faith or
that it had misrepresented facts
since it had prior knowledge that
subject property was part of the
public domain at the time of sale to
therein plaintiffs-appellees.
3. The trial court erred in finding
said plaintiffs-appellees' waiver of
warranty against eviction void.
 4. The trial court erred awarding to
therein plaintiffs-appellees
damages arising from an alleged
breach of contract.
5. The trial court erred in not
ordering said plaintiffs-appellees to
pay their loan obligation to
defendant-appellant DBP in the
amount of P118,540. 8
As substantially stated at the outset, respondent
Court of Appeals rendered judgment modifying the
disposition of the court below by deleting the award
for damages, attorney's fees, litigation expenses and
the costs, but affirming the same in all its other
aspects.9 On April 7, 1993, said appellate court also
denied petitioner's motion for reconsideration. 10
Not satisfied therewith, DBP interposed the instant
petition for review on certiorari, raising the following
issues:
1. Whether or not private
respondent spouses Celebrada and
Abner Mangubat should be ordered
to pay petitioner DBP their loan
obligation due under the mortgage
contract executed between them
and DBP; and
2. Whether or not petitioner should
reimburse respondent spouses the
purchase price of the property and
the amount of P11,980.00 for
taxes and expenses for the
relocation Survey. 11
Considering that neither party questioned the legality
and correctness of the judgment of the court a quo,
as affirmed by respondent court, ordering the
annulment of the deed of absolute sale, such
decreed nullification of the document has already
achieved finality. We only need
The Court of Appeals, after an extensive discussion,
found that there had been no bad faith on the part of
either party, and this r, therefore, to dwell on the
effects of that declaration of nullity.emains
uncontroverted as a fact in the case at bar.
Correspondingly, respondent court correctly applied
the rule that if both parties have no fault or are not
guilty, the restoration of what was given by each of
them to the other is consequently in order. 12 This is
because the declaration of nullity of a contract which
is void ab initio operates to restore things to the
state and condition in which they were found before
the execution thereof. 13
We also find ample support for said propositions in
American jurisprudence. The effect of an application
of the aforequoted rule with respect to the right of a
party to recover the amount given as consideration
has been passed upon in the case of Leather
Manufacturers National Bank vs. Merchants National
Bank 14 where it was held that: "Whenever money is
paid upon the representation of the receiver that he
has either a certain title in property transferred in
consideration of the payment or a certain authority
to receive the money paid, when in fact he has no
such title or authority, then, although there be no
fraud or intentional misrepresentation on his part,
yet there is no consideration for the payment, the
money remains, in equity and good conscience, the
property of the payer and may be recovered back by
him."
Therefore, the purchaser is entitled to recover the
money paid by him where the contract is set aside
by reason of the mutual material mistake of the
parties as to the identity or quantity of the land
sold. 15 And where a purchaser recovers the purchase
money from a vendor who fails or refuses to deliver
the title, he is entitled as a general rule to interest
on the money paid from the time of payment. 16
A contract which the law denounces as void is
necessarily no contract whatever, and the acts of the
parties in an effort to create one can in no wise bring
about a change of their legal status. The parties and
the subject matter of the contract remain in all
particulars just as they did before any act was
performed in relation thereto. 17
An action for money had and received lies to recover
back money paid on a contract, the consideration of
which has failed. 18 As a general rule, if one buys the
land of another, to which the latter is supposed to
have a good title, and, in consequence of facts
unknown alike to both parties, he has no title at all,
equity will cancel the transaction and cause the
purchase money to be restored to the buyer, putting
both parties in status quo. 19
Thus, on both local and foreign legal principles, the
return by DBP to respondent spouses of the purchase
price, plus corresponding interest thereon, is
ineluctably called for.
Petitioner likewise contends that the trial court and
respondent Court of Appeals erred in ordering the
reimbursement of taxes and the cost of the
relocation survey, there being no factual or legal
basis therefor. It argues that private respondents
merely submitted a "list of damages" allegedly
incurred by them, and not official receipts of
expenses for taxes and said survey. Furthermore,
the same list has allegedly not been identified or
even presented at any stage of the proceedings,
since it was vigorously objected to by DBP.
Contrary to the claim of petitioner, the list of
damages was presented in the trial court and was
correspondingly marked as "Exhibit P." 20 The said
exhibit was, thereafter, admitted by the trial court
but only as part of the testimonial evidence for
private respondents, as stated in its Order dated
August 16, 1988.21
However, despite that admission of the said list of
damages as evidence, we agree with petitioner that
the same cannot constitute sufficient legal basis for
an award of P4,000.00 and P7,980.00 as
reimbursement for land taxes and expenses for the
relocation survey, respectively. The list of damages
was prepared extrajudicially by respondent spouses
by themselves without any supporting receipts as
bases thereof or to substantiate the same. That
list, per se, is necessarily self-serving and, on that
account, should have been declared inadmissible in
evidence as thefactum probans.
In order that damages may be recovered, the best
evidence obtainable by the injured party must be
presented. Actual or compensatory damages cannot
be presumed, but must be duly proved, and so
proved with a reasonable degree of certainty. A court
cannot rely on speculation, conjecture or guesswork
as to the fact and amount of damages, but must
depend upon competent proof that they have been
suffered and on evidence of the actual amount
thereof. If the proof is flimsy and unsubstantial, no
damages will be awarded. 22
Turning now to the issue of whether or not private
respondents should be made to pay petitioner their
loan obligation amounting to P118,540.00, we
answer in the affirmative.
In its legal context, the contract of loan executed
between the parties is entirely different and discrete
from the deed of sale they entered into. The
annulment of the sale will not have an effect on the
existence and demandability of the loan. One who
has received money as a loan is bound to pay to the
creditor an equal amount of the same kind and
quality. 23
The fact that the annulment of the sale will also
result in the invalidity of the mortgage does not have
an effect on the validity and efficacy of the principal
obligation, for even an obligation that is unsupported
by any security of the debtor may also be enforced
by means of an ordinary action. Where a mortgage is
not valid, as where it is executed by one who is not
the owner of the
property, 24 or the consideration of the contract is
simulated 25 or false, 26 the principal obligation which
it guarantees is not thereby rendered null and void.
That obligation matures and becomes demandable in
accordance with the stipulations pertaining to it.
Under the foregoing circumstances, what is lost is
only the right to foreclose the mortgage as a special
remedy for satisfying or settling the indebtedness
which is the principal obligation. In case of nullity,
the mortgage deed remains as evidence or proof of a
personal obligation of the debtor, and the amount
due to the creditor may be enforced in an ordinary
personal action. 27
It was likewise incorrect for the Court of Appeals to
deny the claim of petitioner for payment of the loan
on the ground that it failed to present the promissory
note therefor. While respondent court also made the
concession that its judgment was accordingly without
prejudice to the filing by petitioner of a separate
action for the collection of that amount, this does not
detract from the adverse effects of that erroneous
ruling on the proper course of action in this case.
The fact is that a reading of the mortgage
contract 28 executed by respondent spouses in favor
of petitioner, dated March 17, 1982, will readily show
that it embodies not only the mortgage but the
complete terms and conditions of the loan agreement
as well. The provisions of said contract, specifically
paragraphs 16 and 28 thereof, are so precise and
clear as to thereby render unnecessary the
introduction of the promissory note which would SO ORDERED.
merely serve the same purpose.
Furthermore, respondent Celebrada Mangubat
expressly acknowledged in her testimony that she
and her husband are indebted to petitioner in the
amount of P118,000.00, more or less. 29 Admissions
made by the parties in the pleadings or in the course
of the trial or other proceedings do not require proof
and can not be contradicted unless previously shown
to have been made through palpable mistake. 30
Thus, the mortgage contract which embodies the
terms and conditions of the loan obligation of
respondent spouses, as well as respondent Celebrada
Mangubat's admission in open court, are more than
adequate evidence to sustain petitioner's claim for
payment of private respondents' aforestated
indebtedness and for the adjudication of DBP's claim
therefor in the very same action now before us.
It is also worth noting that the adjustment and
allowance of petitioner's demand by counterclaim or
set-off in the present action, rather than by another
independent action, is favored or encouraged by law.
Such a practice serves to avoid circuitry of action,
multiplicity of suits, inconvenience, expense, and
unwarranted consumption of the time of the court.
The trend of judicial decisions is toward a liberal
extension of the right to avail of counterclaims or
set-offs. 31
The rules on counterclaim are designed to achieve
the disposition of a whole controversy of the
conflicting claims of interested parties at one time
and in one action, provided all parties can be brought
before the court and the matter decided without
prejudicing the rights of any party. 32
WHEREFORE, the judgment appealed from is hereby
MODIFIED, by deleting the award of P11,980.00 as
reimbursement for taxes and expenses for the
relocation survey, and ordering respondent spouses
Celebrada and Abner Mangubat to pay petitioner
Development Bank of the Philippines the amount of
P118,540.00, representing the total amount of the
loan released to them, with interest of 15% per
annum plus charges and other expenses in
accordance with their mortgage contract. In all other
respects, the said judgment of respondent Court of
Appeals is AFFIRMED.

G.R. No. 168736             April 19, 2006
SPOUSES ADELINA S. CUYCO and FELICIANO U.
CUYCO, Petitioners,  secured by the real estate mortgage. The Court of
vs.
SPOUSES RENATO CUYCO and FILIPINA
CUYCO, Respondents.  In their answer,11 petitioners admitted their loan
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the
Decision1 of the Court of Appeals (CA) in CA G.R. CV
No. 62352 dated November 5, 2003 which modified
the Decision2 of the Regional Trial Court (RTC) of
Quezon City, Branch 105 in Civil Case No. Q-97-
32130 dated January 27, 1999, as well as the
Resolution3 dated June 28, 2005 denying the motion
for reconsideration thereof.
The facts of the case are as follows:
Petitioners, spouses Adelina and Feliciano Cuyco,
obtained a loan in the amount of P1,500,000.00 from
respondents, spouses Renato and Filipina Cuyco,
payable within one year at 18% interest per annum,
and secured by a Real Estate Mortgage4 over a parcel
of land with improvements thereon situated in
Cubao, Quezon City covered by TCT No. RT-43723
(188321).5
Subsequently, petitioners obtained additional loans
from the respondents in the aggregate amount of
P1,250,000.00, broken down as follows: (1)
P150,000.00 on May 30, 1992; (2) P150,000.00 on
July 1, 1992; (3) P500,000.00 on September 5,
1992; (4) P200,000.00 on October 29, 1992; and (5)
P250,000.00 on January 13, 1993.6
Petitioners made payments amounting to
P291,700.00,7 but failed to settle their outstanding
loan obligations. Thus, on September 10, 1997,
respondents filed a complaint8 for foreclosure of
mortgage with the RTC of Quezon City, which was
docketed as Civil Case No. Q-97-32130. They alleged
that petitioners’ loans were secured by the real
estate mortgage; that as of August 31, 1997, their
indebtedness amounted to P6,967,241.14, inclusive
of the 18% interest compounded monthly; and that
petitioners’ refusal to settle the same entitles the
respondents to foreclose the real estate mortgage.  October 29, 1992 and January 13, 1993 in the
Petitioners filed a motion to dismiss9 on the ground
that the complaint states no cause of action which
was denied by the RTC10 for lack of merit.
obligations but argued that only the original loan of
P1,500,000.00 was secured by the real estate
mortgage at 18% per annum and that there was no
agreement that the same will be compounded
monthly.
On January 27, 1999, the RTC rendered
judgment12 in favor of the respondents, the
dispositive portion of which reads:
WHEREFORE, in the light of the foregoing, the Court
renders judgment on the Complaint in favor of the
plaintiffs and hereby orders the defendants to pay to
the Court or to the plaintiffs the amounts of
P6,332,019.84, plus interest until fully paid,
P25,000.00 as attorney’s fees, and costs of suit,
within a period of one hundred and twenty (120)
days from the entry of judgment, and in case of
default of such payment and upon proper motion,
the property shall be ordered sold at public auction
to satisfy the judgment. Further, defendants[’]
counterclaim is dismissed.
SO ORDERED.13
Petitioners appealed to the CA reiterating their
previous claim that only the amount
P1,500,000.00 was secured by the real estate
mortgage.14 They also contended that the RTC erred
in ordering the foreclosure of the real estate
mortgage to satisfy the total indebtedness of
P6,532,019.84, as of January 10, 1999, plus interest
until fully paid, and in imposing legal interest of 12%
per annum on the stipulated interest of 18% from
the filing of the case until fully paid.15
On November 5, 2003, the CA partially granted the
petition and modified the RTC decision insofar as the
amount of the loan obligations secured by the real
estate mortgage. It held that by express intention of
the parties, the real estate mortgage secured the
original P1,500,000.00 loan and the subsequent
loans of P150,000.00 and P500,000.00 obtained on
July 1, 1992 and September 5, 1992, respectively.
As regards the loans obtained on May 31, 1992,
amounts of P150,000.00, P200,000.00 and
P250,000.00, respectively, the appellate tribunal
held that the parties never intended the same to be
Appeals also found that the trial court properly
imposed 12% legal interest on the stipulated interest
from the date of filing of the complaint. The
dispositive portion of the Decision reads:
WHEREFORE, the instant appeal is PARTIALLY
GRANTED. The assailed decision of the Regional Trial
Court of Quezon City, Branch 105, in Civil Case No.
Q-97-32130 is hereby MODIFIED to read:
"WHEREFORE, in the light of the foregoing, the Court
renders judgment on the Complaint in favor of the
plaintiffs and hereby orders the defendants to pay to
the Court or to the plaintiffs the amount of
P2,149,113.92[,] representing the total outstanding
principal loan of the said defendants, plus the
stipulated interest at the rate of 18% per annum
accruing thereon until fully paid, within a period of
one hundred and twenty days from the entry of
judgment, and in case of default of such payment
and upon motion, the property, subject of the real
estate mortgage contract, shall be ordered sold at
public auction in satisfaction of the mortgage
debts.1avvphil.net
Defendants are further, ordered to pay the plaintiffs
the following:
1. the legal interest at the rate of 12% per
of annum on the stipulated interest of 18% per
annum, computed from the filing of the
complaint until fully paid;
2. the sum of P25,000.00 as and for
attorney’s fees; and
3. the costs of suit."
SO ORDERED.16
Hence, the instant petition for review on the sole
issue:
WHETHER OR NOT PETITIONERS MUST PAY
RESPONDENTS LEGAL INTEREST OF 12% PER
ANNUM ON THE STIPULATED INTEREST OF 18% PER
ANNUM, COMPUTED FROM THE FILING OF THE
COMPLAINT UNTIL FULL PAID.17
Petitioners contend that the imposition of the 12%
legal interest per annum on the stipulated interest of
18% per annum computed from the filing of the
complaint until fully paid was not provided in the real
estate mortgage contract, thus, the same has no
legal basis.  established at the time the demand is
We are not persuaded.  from the date the judgment of the court is
While a contract is the law between the parties,  it is
18
also settled that an existing law enters into and
forms part of a valid contract without the need for
the parties expressly making reference to it.19 Thus,
the lower courts correctly applied Article 2212 of the
Civil Code as the basis for the imposition of the legal
interest on the stipulated interest due. It reads:
Art. 2212. Interest due shall earn legal interest from
the time it is judicially demanded, although the
obligation may be silent upon this point.
The foregoing provision has been incorporated in the
comprehensive summary of existing rules on the
computation of legal interest enunciated by the Court
in Eastern Shipping Lines, Inc. v. Court of
Appeals,20 to wit:
1. When an obligation is breached, and it
consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the
interest due should be that which may have
been stipulated in writing. Furthermore,
the interest due shall itself earn legal
interest from the time it is judicially
demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum
to be computed from default, i.e., from
judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of
the Civil Code.
2. When an obligation, not constituting a
loan or forbearance of money, is breached,
an interest on the amount of damages
awarded may be imposed at the discretion
of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on
unliquidated claims or damages except
when or until the demand can be
established with reasonable certainty.
Accordingly, where the demand is
established with reasonable certainty, the
interest shall begin to run from the time the
claim is made judicially or extrajudicially
(Art. 1169, Civil Code) but when such
certainty cannot be so reasonably
made, the interest shall begin to run only
made (at which time the quantification of
damages may be deemed to have been
reasonably ascertained). The actual base for
the computation of legal interest shall, in
any case, be on the amount finally
adjudged.
3. When the judgment of the court
awarding a sum of money becomes
final and executory, the rate of legal
interest, whether the case falls under
paragraph 1 or paragraph 2, above,
shall be 12% per annum from such
finality until its satisfaction, this
interim period being deemed to be by
then an equivalent to a forbearance of
credit. (Emphasis supplied)
In the case at bar, the evidence shows that
petitioners obtained several loans from the
respondent, some of which as held by the CA were
secured by real estate mortgage and earned an
interest of 18% per annum. Upon default thereof,
respondents demanded payment from the petitioners
by filing an action for foreclosure of the real estate
mortgage. Clearly, the case falls under the rule
stated in paragraph 1.  secured by the real estate mortgage. Thus, the CA
Applying the rules in the computation of interest, the
principal amount of loans subject of the real estate
mortgage must earn the stipulated interest of
18% per annum, which interest, as long as unpaid,
also earns legal interest of 12% per annum,
computed from the date of the filing of the complaint
on September 10, 1997 until finality of the Court’s
Decision. Such interest is not due to stipulation but
due to the mandate of the law21 as embodied in
Article 2212 of the Civil Code. From such date of
finality, the total amount due shall earn interest of
12% per annum until satisfied.22
Certainly, the computed interest from the filing of
the complaint on September 10, 1997 would no
longer be true upon the finality of this Court’s
decision. In accordance with the rules laid down
in Eastern Shipping Lines, Inc. v. Court of Appeals,
we derive the following formula23 for the RTC’s
guidance:
TOTAL AMOUNT DUE = [principal + interest
+ interest on interest] - partial payments
made
Interest = principal x 18 % per annum x no.
of years from due date until finality of
judgment
Interest on interest = Interest computed as
of the filing of the complaint (September
10, 1997) x 12% x no. of years until finality
of judgment
Total amount due as of the date of finality of
judgment will earn an interest of 12% per annum
until fully paid.
In Rizal Commercial Banking Corporation v. Alfa RTW
Manufacturing Corporation,24 this Court held that the
total amount due on the contracts of loan may be
easily determined by the trial court through a simple
mathematical computation based on the formula
specified above. Mathematics is an exact science, the
application of which needs no further proof from the
parties.
As regards what loans were secured by the real
estate mortgage, respondents contended that all five
additional loans were intended by the parties to be
erred in ruling that only two of the five additional
loans were secured by the real estate mortgage
when the documents evidencing said loans would
show at least three loans were secured by the real
estate mortgage, namely: (1) P150,000.00 obtained
on May 31, 1992; (2) P150,000.00 obtained on July
1, 1992; and (3) P500,000.00 obtained on
September 5, 1992.25
In their Reply, petitioners alleged that their petition
only raised the sole issue of interest on the interest
due, thus, by not filing their own petition for review,
respondents waived their privilege to bring matters
for the Court’s review that do not deal with the sole
issue raised.
Procedurally, the appellate court in deciding the case
shall consider only the assigned errors, however, it is
equally settled that the Court is clothed with ample
authority to review matters not assigned as errors in
an appeal, if it finds that their consideration is
necessary to arrive at a just disposition of the case.26
Moreover, as an exception to the rule that findings of
facts of the CA are conclusive and binding on the
Court,27 an independent evaluation of facts may be
done by it when the findings of facts are
conflicting,28 as in this case. 
The RTC held that all the additional loans were
secured by the real estate mortgage, thus:
There is, therefore, a preponderance of evidence to
show that the parties agreed that the additional
loans would be against the mortgaged property. It is
of no moment that the Deed of Mortgage (Exh. B)
was not amended and thereafter annotated at the
back of the title (Exh. C) because under Article 2125
of the Civil Code, if the instrument of mortgage is
not recorded, the mortgage is nevertheless binding
between the parties. It is extremely difficult for the
court to perceive that the plaintiffs required the
defendants to execute a mortgage on the first loan
and thereafter fail to do so on the succeeding loans.
Such contrary behavior is unlikely.29
The CA modified the RTC decision holding that:  intended the said loans to be secured by the real
However, the real estate mortgage contract was
supplemented by the express intention of the
mortgagors (defendants-appellants) to secure the
subsequent loans they obtained from the mortgagees
(plaintiffs-appellees), on 01 July 1992, in the amount
of P150,000.00, and on 05 September 1992, in the
amount of P500,000.00. The mortgagors’
(defendants-appellants) intention to secure a larger
amount than that stated in the real estate mortgage
contract was unmistakable in the acknowledgment
receipts they issued on the said loans. The
acknowledgment receipts read:
"July 1, [1]992
"Received from Mr. & Mrs. Renato Q. Cuyco PCIB Ck
# 498243 in the amount of P150,000.00 July
1/92 as additional loan against mortgaged property
TCT No. RT-43723 (188321) Q.C.
(SGD) Adelina S. Cuyco"
"Sept. 05/92
"Received from Mr. R. Cuyco the amount of
P500,000.00 (five hundred thousand) PCIB Ck #
468657 as additional loan from mortgage property
TCT RT-43723.
(SGD) Adelina S. Cuyco"
In such case, the specific amount mentioned in the
real estate mortgage contract no longer controls. By
express intention of the mortgagors (defendants-
appellants) the real estate mortgage contract, as
supplemented, secures the P1,500,000.00 loan
obtained on 25 November 1991; the P150,000.00
loan obtained on 01 July 1992; and the P500,000.00
loan obtained on 05 September 1992. All these loans
are subject to stipulated interest of 18% per annum
provided in the real estate mortgage contract.
With respect to the other subsequent loans of the
defendants-appellants in the amount of P150,000.00,
obtained on 31 May 1992; in the amount of
P200,000.00, obtained on 29 October 1992; and, in
the amount of P250,000.00, obtained on 13 January
1993, nothing in the records remotely suggests that
the mortgagor (defendants-appellants), likewise,
estate mortgage contract. Consequently, we rule that
the trial court did err in declaring said loans to be
secured by the real estate mortgage contract.30
As a general rule, a mortgage liability is usually
limited to the amount mentioned in the
contract.31 However, the amounts named as
consideration in a contract of mortgage do not limit
the amount for which the mortgage may stand as
security if from the four corners of the instrument
the intent to secure future and other indebtedness
can be gathered. This stipulation is valid and binding
between the parties and is known in American
Jurisprudence as the "blanket mortgage clause," also
known as a "dragnet clause." 32
A "dragnet clause" operates as a convenience and
accommodation to the borrowers as it makes
available additional funds without their having to
execute additional security documents, thereby
saving time, travel, loan closing costs, costs of extra
legal services, recording fees, et cetera.33
While a real estate mortgage may exceptionally
secure future loans or advancements, these future
debts must be sufficiently described in the mortgage
contract. An obligation is not secured by a mortgage
unless it comes fairly within the terms of the
mortgage contract.34
The pertinent provisions of the November 26, 1991
real estate mortgage reads:
That the MORTGAGOR is indebted unto the
MORTGAGEE in the sum of ONE MILLION FIVE
THOUSAND PESOS (sic) (1,500,000.00) Philippine
Currency, receipt whereof is hereby acknowledged
and confessed, payable within a period of one year,
with interest at the rate of eighteen percent (18%)
per annum;
That for and in consideration of said indebtedness,
the MORTGAGOR does hereby convey and deliver by
way of MORTGAGE unto said MORTGAGEE, the
latter’s heirs and assigns, the following realty
together with all the improvements thereon and
situated at Cubao, Quezon City, and described as
follows:
xxxx
PROVIDED HOWEVER, that should the MORTGAGOR
duly pay or cause to be paid unto the MORTGAGEE
or his heirs and assigns, the said indebtedness of
ONE MILLION FIVE HUNDRED THOUSAND PESOS
(1,500,000.00), Philippine Currency, together with
the agreed interest thereon, within the agreed term
of one year on a monthly basis then this MORTGAGE
shall be discharged, and rendered of no force and
effect, otherwise it shall subsist and be subject to
foreclosure in the manner and form provided by law.
It is clear from a perusal of the aforequoted real
estate mortgage that there is no stipulation that the
mortgaged realty shall also secure future loans and
advancements. Thus, what applies is the general rule
above stated.  the property shall be sold at public auction to satisfy
Even if the parties intended the additional loans of
P150,000.00 obtained on May 30, 1992,
P150,000.00 obtained on July 1, 1992, and
P500,00.00 obtained on September 5, 1992 to be
secured by the same real estate mortgage, as shown
in the acknowledgement receipts, it is not sufficient
in law to bind the realty for it was not made
substantially in the form prescribed by law.
In order to constitute a legal mortgage, it must be
executed in a public document, besides being
recorded. A provision in a private document,
although denominating the agreement as one of
mortgage, cannot be considered as it is not
susceptible of inscription in the property registry. A
mortgage in legal form is not constituted by a private
document, even if such mortgage be accompanied
with delivery of possession of the mortgage
property.35 Besides, by express provisions of Section
127 of Act No. 496, a mortgage affecting land,
whether registered under said Act or not registered
at all, is not deemed to be sufficient in law nor may it
be effective to encumber or bind the land unless
made substantially in the form therein prescribed. It
is required, among other things, that the document
be signed by the mortgagor executing the same, in
the presence of two witnesses, and acknowledged as
his free act and deed before a notary public. A
mortgage constituted by means of a private
document obviously does not comply with such legal
requirements.36
What the parties could have done in order to bind
the realty for the additional loans was to execute a
new real estate mortgage or to amend the old
mortgage conformably with the form prescribed by
the law. Failing to do so, the realty cannot be bound
by such additional loans, which may be recovered by
the respondents in an ordinary action for collection of
sums of money. 
Lastly, the CA held that to discharge the real estate
mortgage, payment only of the principal and the
stipulated interest of 18% per annum is sufficient as
the mortgage document does not contain a
stipulation that the legal interest on the stipulated
interest due, attorney’s fees, and costs of suit must
be paid first before the same may be discharged.37
We do not agree. than 90 days nor more than 120 days from the entry
of judgment, and in case of default of such payment
Section 2, Rule 68 of the Rules of Court provides:
the judgment. 
SEC. 2. Judgment on foreclosure for payment or
SO ORDERED.
sale. — If upon the trial in such action the court
shall find the facts set forth in the complaint to be
true, it shall ascertain the amount due to the
plaintiff upon the mortgage debt or obligation,
including interest and other charges as
approved by the court, and costs, and shall
render judgment for the sum so found due and order
that the same be paid to the court or to the
judgment obligee within a period of not less than
ninety (90) days nor more than one hundred twenty
(120) days from the entry of judgment, and that in
default of such payment the property shall be sold at
public auction to satisfy the judgment. (Emphasis
added)
Indeed, the above provision of the Rules of Court
provides that the mortgaged property may be
charged not only for the mortgage debt or obligation
but also for the interest, other charges and costs
approved by the court. Thus, to discharge the real
estate mortgage, petitioners must pay the
respondents (1) the total amount due, as computed
in accordance with the formula indicated above, that
is, the principal loan of P1,500,000.00, the stipulated
interest of 18%, the interest on the stipulated
interest due of 12% computed from the filing of the
complaint until finality of the decision less partial
payments made, (2) the 12% legal interest on the
total amount due from finality until fully satisfied, (3)
the reasonable attorney’s fees of P25,000.00 and (4)
the costs of suit, within the period specified by the
Rules. Should the petitioners default in the payment
thereof, the property shall be sold at public auction
to satisfy the judgment. 
WHEREFORE, in view of the foregoing, the Decision
of the Court of Appeals in CA G.R. CV No. 62352
dated November 5, 2003, which modified the
Decision of the Regional Trial Court of Quezon City,
Branch 105, in Civil Case No. Q-97-32130,
is AFFIRMED with the MODIFICATIONS that
petitioners are ordered to pay the respondents (1)
the total amount due, as computed by the RTC in
accordance with the formula specified above, (2) the
legal interest of 12% per annum on the total amount
due from such finality until fully paid, (3) the
reasonable amount of P25,000.00 as attorney’s fees,
and (4) the costs of suit, within a period of not less

G.R. No. 115548 March 5, 1996
STATE INVESTMENT HOUSE INC., petitioner,  with the corresponding certificate
vs.
COURT OF APPEALS, ET AL., respondents.
FRANCISCO, J.:p
The factual background of the case, aptly
summarized in the decision of the Office of the
President and cited by respondent Court of
Appeals1 in its assailed decision, and which we have
verified to be supported by the record is herein
reproduced as follows:
The uncontroverted facts of the
case as recited in the decision of
the Office of the President are as
follows:
Records show that, on October 15,
1969, Contract to Sell No. 36 was
executed by the Spouses Canuto
and Ma. Aranzazu Oreta, and the
Solid Homes, Inc. (SOLID),
involving a parcel of land identified
as Block No. 8, Lot No. 1, Phase of
the Capitol Park Homes
Subdivision, Quezon City,
containing 511 square meters for a
consideration of P39,347.00. Upon
signing of the contract, the spouses
Oreta made payment amounting to
P7,869.40, with the agreement
that the balance shall be payable in
monthly installments of P451.70,
at 12% interest per annum.
On November 4, 1976, SOLID
executed several real estate
mortgage contracts in favor of
State Investment Homes, (sic) Inc.
(STATE) over its subdivided parcels
of land, one of which is the subject On May 23, 1989, the Office of
lot covered by Transfer Certificate Appeals, Adjudication and Legal
of Title No. 209642. Affairs (OAALA) rendered a
decision the decretal portion of
which reads:
For Failure of SOLID to comply with
its mortgage obligations contract,
STATE extrajudicially foreclosed 1. Ordering respondent, State
the mortgaged properties including Investment House, Inc. to execute
the subject lot on April 6, 1983, a Deed of Conveyance of Lot 1,
Block 8, in Capital Park Homes
of sale issued therefor to STATE Subdivision in favor of
annotated at the back of the titles complainants and to deliver to the
covering the said properties on latter the corresponding certificate
October 13, 1983. of title;
On June 23, 1984; SOLID thru a 2. Ordering respondent, Solid
Memorandum of Agreement Homes, Inc. to pay State
negotiated for the deferment of Investment House, Inc. that
consolidation of ownership over the portion of its loan which
foreclosed properties by corresponds to the value of the lot
committing to redeem the as collateral;
properties from STATE.
3. Ordering respondent, Solid
On August 15, 1988, the spouses Homes, Inc. to pay to this Board
filed a complaint before the the amount of Six Thousand Pesos
Housing and Land Use Regulatory (P6,000.00) as administrative fine
Board, HLRB, against the developer in accordance with Section 25 in
SOLID and STATE for failure on the relation to Section 38 of P.D. 957.
part of SOLID "to execute
the necessary absolute deed of sale
Both the STATE and SOLID
as well as to deliver title to said
appealed to the Board of
property . . . in violation of the
Commissioners, HLRB, which
contract to sell . . .," despite full
affirmed on June 5, 1990 the
payment of the purchase price as
OAALA's decision (Annex "C" of the
of January 7, 1981. In its Answer,
Petition; ibid, p. 34). Again, both
SOLID, by way of alternative
STATE and SOLID appealed the
defense, alleged that the
decision of the Board of
obligations under the Contract to
Commissioners, HLRB, to the Office
Sell has become so difficult . . . the
of the President which dismissed
herein respondents be partially
the twin appeals on February 26,
released from said obligation by
1993.
substituting subject lot with
another suitable residential lot
from another subdivision which Petitioner filed with the Supreme
respondents own/operates". Upon Court this petition for review of
the other hand, STATE, to which decision of the Office of the
the subject lot was mortgaged, President where it was docketed as
averred that unless SOLID pays the G.R. No. 109364. However, in a
redemption price of P125,1955.00, resolution dated May 13, 1993, the
(sic) it has "a right to hold on and Supreme Court referred this case
not release the foreclosed to this Court for proper disposition.
properties. On the other hand, SOLID does not
appear to have joined herein
 petitioner in this petition for
review.2
[Emphasis added.]
In a decision dated May 19, 1994, respondent court
sustained the judgment of the Office of the
President. Hence, this petition substantially anchored
on these two alleged errors, namely: (1) error in
ruling that private respondent spouses Oreta's
unregistered rights over the subject property are
superior to the registered mortgage rights of
petitioner State Investment House, Inc. (STATE);
and (2) error in not applying the settled rule that
persons dealing with property covered by torrens
certificate of title are not required to go beyond what
appears on the face of the title.
At the outset, we note that herein petitioner argues
more extensively on the second assigned issue, than
on the first. In fact, petitioner admits the superior
rights of respondents-spouses Oreta over the subject
property as it did not pray for the nullification of the
contract between respondents-spouses and SOLID,
but instead asked for the payment of the release
value of the property in question, plus interest,
attorney's fees and costs of suit against SOLID or, in
case of the latter's inability to pay, against
respondents-spouses before it can be required to
release the title of the subject property in favor of
the respondent spouses.3 And even if we were to
pass upon the first assigned error, we find
respondent court's ruling on the matter to be well-
founded. STATE's registered mortgage right over the
property is inferior to that of respondents-spouses'
unregistered right. The unrecorded sale between
respondents-spouses and SOLID is preferred for the
reason that if the original owner (SOLID, in this
case) had parted with his ownership of the thing sold
then he no longer had ownership and free disposal of
that thing so as to be able to mortgage it
again.4 Registration of the mortgage is of no moment
since it is understood to be without prejudice to the
better right of third parties.5
Anent the second issue, petitioner asserts that a
purchaser or mortgagee of land/s covered under the
Torrens System "is not required to do more than rely
upon the certificate of title [for] it is enough that the
(purchaser or mortgagee] examines the pertinent
certificate of title [without] need [of] look[ing]
beyond such title."6
As a general rule, where there is nothing in the
certificate of title to indicate any cloud or vice in the
ownership of the property, or any encumbrance
thereon, the purchaser is not required to explore
further than what the Torrens Title upon its face
indicates in quest for any hidden defect or inchoate
right that may subsequently defeat his right thereto.
This rule, however, admits of an exception as where
the purchaser or mortgagee, has knowledge of a
defect or lack of title in his vendor, or that he was
aware of sufficient facts to induce a reasonably
prudent man to inquire into the status of the title of
the property in litigation.7 In this case, petitioner was
well aware that it was dealing with SOLID, a
business entity engaged in the business of selling
subdivision lots. In fact, the OAALA found that at the
time the lot was mortgaged, respondent State
Investment House Inc., [now petitioner] had been
aware of the lot's location and that the said lot
formed part of Capital Park/Homes
Subdivision."8 In Sunshine Finance and Investment
Corp. v. Intermediate Appellate Court,9 the Court
noting petitioner therein to be a financing
corporation, deviated from the general rule that a
purchaser or mortgagee of a land is not required to
look further that what appears on the face of the
Torrens Title. Thus:
Nevertheless, we have to deviate
from the general rule because of
the failure of the petitioner in this
case to take the necessary
precautions to ascertain if there
was any flaw in the title of the
mortgage. The petitioner is an
investment and financing
corporation. We presume it is
experienced in its business.
Ascertainment of the status and
condition of properties offerred to it
as security for the loans it extends
must be a standard and
indispensable part of its operations.
Surely, it cannot simply rely on an
examination of a Torrens certificate
to determine what the subject
property looks like as its condition
is not apparent in the document.
The land might be in a depressed
area. There might be squatters on
it. It might be easily inundated. It
might be an interior lot, without
convenient access. These and other
similar factors determine the value
of the property and so should be of
practical concern to the petitioner.
xxx xxx xxx
Our conclusion might have been
different if the mortgagee were an
ordinary individual or company
without the expertise of the
petitioner in the mortgage and sale
of registered land or if the land
mortgaged were some distance
from the mortgagee and could not
be conveniently inspected. But
there were no such impediments in
this case. The facilities of the
petitioner were not so limited as to
prevent it from making a more
careful examination of the land to
assure itself that there were no
unauthorized persons in
possession.10
[Emphasis supplied.]
The above-enunciated rule should apply in
this case as petitioner admits of being a
financing institution.11 We take judicial
notice of the uniform practice of financing
institutions to investigate, examine and
assess the real property offered as security
for any loan application especially where, as
in this case, the subject property is a
subdivision lot located at Quezon City, M.M.
It is a settled rule that a purchaser or
mortgagee cannot close its eyes to facts
which should put a reasonable man upon his
guard, and then claim that he acted in good
faith under the belief that there was no
defect in the title of the vendor or
mortgagor.12 Petitioner's constructive
knowledge of the defect in the title of the
subject property, or lack of such knowledge
due to its negligence, takes the place of
registration of the rights of respondents-
spouses. Respondent Court thus correctly
ruled that petitioner was not a purchaser or
mortgagee in good faith; hence petitioner
can not solely rely on what merely appears
on the face of the Torrens Title.
ACCORDINGLY, finding no reversible error in the
assailed judgment, the same is hereby AFFIRMED.
SO ORDERED.
G.R. No. 146997. April 26, 2005
SPOUSES GODOFREDO & DOMINICA
FLANCIA, Petitioners,  xxx Defendant corporation also prays for attorney’s
vs.
COURT OF APPEALS & WILLIAM ONG
GENATO, Respondents.
DECISION
CORONA, J.:
Before us is a petition for review under Rule 45 of
the Rules of Court, seeking to set aside the October
6, 2000 decision1 of the Court of Appeals in CA-G.R.
CV No. 56035.
The facts as outlined by the trial court2 follow.
This is an action to declare null and void the
mortgage executed by defendant Oakland
Development Resources Corp. xxx in favor of
defendant William Ong Genato over the house and
lot plaintiffs spouses Godofredo and Dominica Flancia
purchased from defendant corporation.
In the complaint, plaintiffs allege that they
purchased from defendant corporation a parcel of
land known as Lot 12, Blk. 3, Phase III-A containing
an area of 128.75 square meters situated in Prater
Village Subd. II located at Brgy. Old Balara, Quezon
City; that by virtue of the contract of sale, defendant
corporation authorized plaintiffs to transport all their
personal belongings to their house at the aforesaid
lot; that on December 24, 1992, plaintiffs received a
copy of the execution foreclosing [the] mortgage
issued by the RTC, Branch 98 ordering defendant
Sheriff Sula to sell at public auction several lots
formerly owned by defendant corporation including
subject lot of plaintiffs; that the alleged mortgage of
subject lot is null and void as it is not authorized by
plaintiffs pursuant to Art. 2085 of the Civil Code
which requires that the mortgagor must be the
absolute owner of the mortgaged property; that as a
consequence of the nullity of said mortgage, the
execution foreclosing [the] mortgage is likewise null
and void; that plaintiffs advised defendants to
exclude subject lot from the auction sale but the
latter refused. Plaintiffs likewise prayed for damages
in the sum of ₱50,000.00.
Defendant William Ong Genato filed a motion to
dismiss the complaint which was opposed by the
plaintiffs and denied by the Court in its Order dated
February 16, 1993.
Defendant Genato, then filed his answer averring
that on May 19, 1989 co-defendant Oakland
Development Resources Corporation mortgaged to
Genato two (2) parcels of land covered by TCT Nos.
356315 and 366380 as security and guaranty for the
payment of a loan in the sum of ₱2,000,000.00; that
it appears in the complaint that the subject parcel of
land is an unsubdivided portion of the aforesaid TCT
No. 366380 which covers an area of 4,334 square
meters more or less; that said real estate mortgage
has been duly annotated at the back of TCT No.
366380 on May 22, 1989; that for non-payment of
the loan of ₱2,000,000.00 defendant Genato filed an
action for foreclosure of real estate mortgage against
co-defendant corporation; that after [trial], a
decision was rendered by the Regional Trial Court of
Quezon City, Branch 98 against defendant
corporation which decision was affirmed by the
Honorable Court of Appeals; that the decision of the
Court of Appeals has long become final and thus, the
Regional Trial Court, Brach 98 of Quezon City issued
an Order dated December 7, 1992 ordering
defendant Sheriff Ernesto Sula to cause the sale at
public auction of the properties covered by TCT No.
366380 for failure of defendant corporation to
deposit in Court the money judgment within ninety
(90) days from receipt of the decision of the Court of
Appeals; that plaintiffs have no cause of action
against defendant Genato; that the alleged plaintiffs’
Contract to Sell does not appear to have been
registered with the Register of Deeds of Quezon City
to affect defendant Genato and the latter is thus not
bound by the plaintiffs’ Contract to Sell; that the
registered mortgage is superior to plaintiffs’ alleged
Contract to Sell and it is sufficient for defendant
Genato as mortgagee to know that the subject TCT
No. 366380 was clean at the time of the execution of
the mortgage contract with defendant corporation
and defendant Genato is not bound to go beyond the
title to look for flaws in the mortgagor’s title; that
plaintiffs’ alleged Contract to Sell is neither a mutual
promise to buy and sell nor a Contract of Sale.
Ownership is retained by the seller, regardless of
delivery and is not to pass until full payment of the
price; that defendant Genato has not received any
advice from plaintiffs to exclude the subject lot from
the auction sale, and by way of counterclaim,
defendant Genato prays for ₱150,000.00 moral
damages and ₱20,000.00 for attorney’s fees.
On the other hand, defendant Oakland Development
Resources Corporation likewise filed its answer and
alleged that the complaint states no cause of action;
fees of ₱20,000.00 in its counterclaim.3 
After trial, the assisting judge4 of the trial court
rendered a decision dated August 16, 1996, the
decretal portion of which provided:
Wherefore, premises considered, judgment is hereby
rendered.
1) Ordering defendant Oakland Dev’t. Resources
Corporation to pay plaintiffs:
a) the amount of ₱10,000.00 representing payment
for the ‘option to purchase lot’;
b) the amount of ₱140,000.00 representing the first
downpayment of the contract price;
c) the amount of ₱20,520.80 representing five
monthly amortizations for February, March, April,
May and June 1990;
d) the amount of ₱3,000.00 representing
amortization for November 1990; all plus legal
interest from the constitution of the mortgage up to
the time the instant case was filed.
2) Ordering said defendant corporation to pay further
to plaintiffs the sum of ₱30,000.00 for moral
damages, ₱10,000.00 for exemplary damages and
₱20,000.00 for and as reasonable attorney’s fees
plus cost;
3) Dismissing defendant corporation’s counterclaim;
4) Dismissing defendant Genato’s counterclaim.5 
On motion for reconsideration, the regular presiding
judge set aside the judgment of the assisting judge
and rendered a new one on November 27, 1996, the
decretal portion of which read:
WHEREFORE, premises considered, the Motion for
Reconsideration is hereby GRANTED. The decision
dated August 16, 1996 is hereby set aside and a new
one entered in favor of the plaintiffs, declaring the
subject mortgage and the foreclosure proceedings
held thereunder as null and void insofar as they
affect the superior right of the plaintiffs over the
subject lot, and ordering as follows:
1. Defendant Oakland Development Resources to pay
to plaintiffs the amount of ₱20,000.00 for litigation-
related expenses;
2. Ordering defendant Sheriff Ernesto L. Sula to
desist from conducting further proceedings in the
extra-judicial foreclosure insofar as they affect the
plaintiffs, or, in the event that title has been
consolidated in the name of defendant William O.
Genato, ordering said defendant to reconvey to
plaintiffs the title corresponding to Lot 12, Blk. 3,
Phase III-A of Prater Village [Subd. II], located in
Old Balara, Quezon City, containing an area of
128.75 square meters; and
3. Dismissing the counterclaims of defendants
Oakland and Genato and with costs against them.6  a contract to sell.
On appeal, the Court of Appeals issued the assailed
order:
Wherefore, foregoing premises considered, the
appeal having merit in fact and in law is hereby
GRANTED and the decision of the Trial Court dated
27 November 1996 hereby SET
ASIDE and REVERSED, and its judgment dated
August 16, 1996 REINSTATED and AFFIRMED IN
TOTO. No Costs.
SO ORDERED.7 
Hence, this petition.
For resolution before us now are the following
issues:  over the property were expressly withheld by
(1) whether or not the registered mortgage
constituted over the property was valid;
(2) whether or not the registered mortgage was
superior to the contract to sell; and
(3) whether or not the mortgagee was in good faith.
Under the Art. 2085 of the Civil Code, the essential
requisites of a contract of mortgage are: (a) that it
be constituted to secure the fulfillment of a principal
obligation; (b) that the mortgagor be the absolute
owner of the thing mortgaged; and (c) that the
persons constituting the mortgage have the free
disposal of their property, and in the absence
thereof, that they be legally authorized for the
purpose.
All these requirements are present in this case.
FIRST ISSUE: WAS THE REGISTERED MORTGAGE
VALID?
As to the first essential requisite of a mortgage, it is
undisputed that the mortgage was executed on May
15, 1989 as security for a loan obtained by Oakland
from Genato.
As to the second and third requisites, we need to
discuss the difference between a contract of sale and
In a contract of sale, title to the property passes to
the vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement,
reserved by the vendor and is not to pass to the
vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor
loses ownership over the property and cannot
recover it unless and until the contract is resolved or
rescinded; in a contract to sell, title is retained by
the vendor until full payment of the price.8 
In the contract between petitioners and Oakland,
aside from the fact that it was denominated as
a contract to sell,the intention of Oakland not to
transfer ownership to petitioners until full payment of
the purchase price was very clear. Acts of ownership
Oakland from petitioner. All that was granted to
them by the "occupancy permit" was the right to
possess it.
Specifically, the contract between Oakland and
petitioners stated:
xxx xxx xxx
7. That the BUYER/S may be allowed to enter into
and take possession of the property upon issuance
of Occupancy Permit by the OWNER/DEVELOPER
exclusively, although title has not yet passed to
the BUYER/S, in which case his possession shall be
that of a possessor by mere tolerance Lessee,
subject to certain restrictions contained in this deed.
xxx xxx xxx
13. That the BUYER/S cannot sell, mortgage,
cede, transfer, assign or in any manner alienate
or dispose of,in whole or in part, the rights
acquired by and the obligations imposed on the
BUYER/S by virtue of this contract, without the
express written consent of the OWNER/DEVELOPER.
xxx xxx xxx
24. That this Contract to Sell shall not in any way
[authorize] the BUYER/S to occupy the assigned
house and lot to them.9 
xxx xxx xxx
Clearly, when the property was mortgaged to Genato
in May 1989, what was in effect between Oakland
and petitioners was a contract to sell, not a contract
of sale. Oakland retained absolute ownership over
the property.
Ownership is the independent and general power of a
person over a thing for purposes recognized by law
and within the limits established thereby.10 According
to Art. 428 of the Civil Code, this means that:
The owner has the right to enjoy and dispose of a
thing, without other limitations than those
established by law.
xxx xxx xxx
Aside from the jus utendi and the jus
abutendi  11 inherent in the right to enjoy the thing,
the right to dispose, or the jus disponendi, is the
power of the owner to alienate, encumber,
transform and even destroy the thing owned.12  FAITH?
Because Oakland retained all the foregoing rights as
owner of the property, it was entitled absolutely to
mortgage it to Genato. Hence, the mortgage was
valid.
SECOND ISSUE: WAS THE REGISTERED MORTGAGE
SUPERIOR TO THE CONTRACT TO SELL?
In their memorandum, petitioners cite our ruling
in State 
Investment House, Inc. v. Court of Appeals  to the
13 
effect that an unregistered sale is preferred over
a registered mortgage over the same property.
The citation is misplaced.
This Court in that case explained the rationale behind
the rule:
The unrecorded sale between respondents-spouses
and SOLID is preferred for the reason that if the
original owner xxx had parted with his ownership of
the thing sold then he no longer had ownership and
free disposal of that thing as to be able to mortgage
it again.
State Investment House is completely inapplicable to
the case at bar. A contract of sale and a contract to
sell are worlds apart. State Investment House clearly
pertained to a contract of sale, not to a contract to
sell which was what Oakland and petitioners had.
In State Investment House, ownership had passed
completely to the buyers and therefore, the former
owner no longer had any legal right to mortgage the
property, notwithstanding the fact that the new
owner-buyers had not registered the sale. In the
case before us, Oakland retained absolute ownership
over the property under the contract to sell and
therefore had every right to mortgage it.
In sum, we rule that Genato’s registered mortgage
was superior to petitioner’s contract to sell, subject
to any liabilities Oakland may have incurred in favor
of petitioners by irresponsibly mortgaging the
property to Genato despite its commitments to
petitioners under their contract to sell.
THIRD ISSUE: WAS THE MORTGAGE IN GOOD WHEREFORE, the petition for review is hereby
DENIED. The decision of the Court of Appeals
reinstating the August 16, 1996 decision of the trial
court is hereby AFFIRMED.
The third issue involves a factual matter which
should not be raised in this petition. Only questions
of law may be raised in a Rule 45 petition. This Court SO ORDERED.
is not a trier of facts. The resolution of factual issues
is the function of the lower courts. We therefore
adopt the factual findings of the Court of Appeals and
uphold the good faith of the mortgagee Genato.
RELIANCE ON WHAT APPEARS IN THE TITLE
Just as an innocent purchaser for value may
rightfully rely on what appears in the certificate of
title, a mortgagee has the right to rely on what
appears in the title presented to him. In the absence
of anything to arouse suspicion, he is under no
obligation to look beyond the certificate and
investigate the title of the mortgagor appearing on
the face of the said certificate. 14 
We agree with the findings and conclusions of the
trial court regarding the liabilities of Oakland in its
August 16, 1996 decision, as affirmed by the Court
of Appeals:
Anent [plaintiffs’] prayer for damages, the Court
finds that defendant corporation is liable to return to
plaintiffs all the installments/payments made by
plaintiffs consisting of the amount of ₱10,000.00
representing payment for the ‘option to purchase
lot’; the amount of ₱140,000.00 which was the first
downpayment; the sum of ₱20,520.80 representing
five monthly amortizations for February, March,
April, May and June 1990 and the amount of
₱3,000.00 representing amortization for November
1990 plus legal interest from the time of the
mortgage up to the time this instant case was filed.
Further, considering that defendant corporation
wantonly and fraudulently mortgaged the subject
property without regard to [plaintiffs’] rights over the
same, said defendant should pay plaintiffs moral
damages in the reasonable amount of ₱30,000.00.
xxx Furthermore, since defendant [corporation’s]
acts have compelled the plaintiffs to litigate and
incur expenses to protect their interest, it should
likewise be adjudged to pay plaintiffs attorney’s fees
of ₱20,000.00 under Article 2208 paragraph two (2)
of the Civil Code.15 

G.R. No. 180945               February 12, 2010
PHILIPPINE NATIONAL BANK, AS THE
ATTORNEY-IN-FACT OF OPAL PORTFOLIO
INVESTMENTS (SPV-AMC), INC., Petitioner,  ₱1.1 million from petitioner Philippine National Bank
vs.
MERCEDES CORPUZ, REPRESENTED BY HER
ATTORNEY-IN-FACT VALENTINA
CORPUZ, Respondent.
DECISION
ABAD, J.:
This case is about the need for a mortgagee-bank,
faced with suspicious layers of transfers involving a
property presented for mortgage, to exercise proper
diligence in ascertaining the bona fide status of those
transfers.
The Facts and the Case
On October 4, 1974 respondent Mercedes Corpuz
delivered her owner’s duplicate copy of Transfer
Certificate of Title (TCT) 32815 to Dagupan City
Rural Bank as security against any liability she might
incur as its cashier. She later left her job and went to
the United States.
On October 24, 1994 the rural bank where she
worked cancelled its lien on Corpuz’s title, she having
incurred no liability to her employer. Without
Corpuz’s knowledge and consent, however, Natividad
Alano, the rural bank’s manager, turned over
Corpuz’s title to Julita Camacho and Amparo Callejo.
Conniving with someone from the assessor’s office,
Alano, Camacho, and Callejo prepared a falsified
deed of sale, making it appear that on February 23,
1995 Corpuz sold her land to one "Mary Bondoc" for
₱50,000.00. They caused the registration of the deed
of sale, resulting in the cancellation of TCT 32815
and the issuance of TCT 63262 in Bondoc’s name.
About a month later or on March 27, 1995 the trio
executed another fictitious deed of sale with "Mary As a rule, the Court would not expect a mortgagee to
Bondoc" selling the property to the spouses Rufo and conduct an exhaustive investigation of the history of
Teresa Palaganas for only ₱15,000.00. This sale the mortgagor’s title before he extends a loan.1 But
resulted in the issuance of TCT 63466 in favor of the petitioner PNB is not an ordinary mortgagee; it is a
Palaganases.  bank.2 Banks are expected to be more cautious than
ordinary individuals in dealing with lands, even
registered ones, since the business of banks is
Nine days later or on April 5, 1995 the Palaganases
imbued with public interest.3 It is of judicial notice
executed a deed of sale in favor of spouses Virgilio
that the standard practice for banks before approving
and Elena Songcuan for ₱50,000.00, resulting in the
a loan is to send a staff to the property offered as
issuance of TCT 63528. Finally, four months later or
collateral and verify the genuineness of the title to
on August 10, 1995 the Songcuans took out a loan of
determine the real owner or owners.4
(PNB) and, to secure payment, they executed a real
estate mortgage on their title. Before granting the One of the CA’s findings in this case is that in the
loan, the PNB had the title verified and the property course of its verification, petitioner PNB was
inspected. informed of the previous TCTs covering the subject
property.5 And the PNB has not categorically
contested this finding. It is evident from the faces of
On November 20, 1995 respondent Corpuz filed,
those titles that the ownership of the land changed
through an attorney-in-fact, a complaint before the
from Corpuz to Bondoc, from Bondoc to the
Dagupan Regional Trial Court (RTC) against Mary
Palaganases, and from the Palaganases to the
Bondoc, the Palaganases, the Songcuans, and
Songcuans in less than three months and mortgaged
petitioner PNB, asking for the annulment of the
to PNB within four months of the last transfer. 
layers of deeds of sale covering the land, the
cancellation of TCTs 63262, 63466, and 63528, and
the reinstatement of TCT 32815 in her name. The above information in turn should have driven the
PNB to look at the deeds of sale involved. It would
have then discovered that the property was sold for
On June 29, 1998 the RTC rendered a decision
ridiculously low prices: Corpuz supposedly sold it to
granting respondent Corpuz’s prayers. This prompted
Bondoc for just ₱50,000.00; Bondoc to the
petitioner PNB to appeal to the Court of Appeals
Palaganases for just ₱15,000.00; and the
(CA). On July 31, 2007 the CA affirmed the decision
Palaganases to the Songcuans also for just
of the RTC and denied the motion for its
₱50,000.00. Yet the PNB gave the property an
reconsideration, prompting PNB to take recourse to
appraised value of ₱781,760.00. Anyone who
this Court. 
deliberately ignores a significant fact that would
create suspicion in an otherwise reasonable person
The Issue Presented cannot be considered as an innocent mortgagee for
value.6
The sole issue presented in this case is whether or
not petitioner PNB is a mortgagee in good faith, The Court finds no reason to reverse the CA decision.
entitling it to its lien on the title to the property in
dispute.
WHEREFORE, the Court DENIES the petition and
AFFIRMS the decision of the Court of Appeals dated
The Ruling of the Court July 31, 2007 and its resolution dated December 17,
2007 in CA-G.R. CV 60616. 
Petitioner PNB points out that, since it did a credit
investigation, inspected the property, and verified SO ORDERED.
the clean status of the title before giving out the loan
to the Songcuans, it should be regarded as a
mortgagee in good faith. PNB claims that the
precautions it took constitute sufficient compliance
with the due diligence required of banks when
dealing with registered lands. 

G.R. No. 112160           February 28, 2000
OSMUNDO S. CANLAS and ANGELINA
CANLAS, petitioner,  P350,000.00 to serve as his (Osmundo's) investment
vs.
COURT OF APPEALS, ASIAN SAVINGS BANK,
MAXIMO C. CONTRARES and VICENTE
MAÑOSCA,respondents. 
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, seeking to review and
set aside the Decision1 of the Court of Appeals in CA-
G.R. CV No. 25242, which reversed the Decision 2 of
Branch 59 of the Regional Trial Court of Makati City
in Civil Case No. M-028; the dispositive portion of
which reads:
WHEREFORE, the decision appealed from is
hereby REVERSED and SET ASIDE and a
new one is hereby entered DISMISSING the
complaint of the spouses Osmundo and
Angelina Canlas. On the counterclaim of
defendant Asian Savings Bank, the plaintiffs
Canlas spouses are hereby ordered to pay
the defendant Asian Savings Bank the
amount of P50,000.00 as moral and
exemplary damages, plus P15,000.00 as
and for attorney's fees.
With costs against appellees.
SO ORDERED.3
The facts that matter:
Sometime in August, 1982, the petitioner, Osmundo
S. Canlas, and private respondent, Vicente Mañosca,
decided to venture in business and to raise the
capital needed therefor. The former then executed a
Special Power of Attorney authorizing the latter to
mortgage two parcels of land situated in San
Dionisio, (BF Homes) Paranaque, Metro Manila, each
lot with semi-concrete residential house existing issuance of a writ of preliminary injunction; and on
thereon, and respectively covered by Transfer May 23, 1983, the trial court issued an Order
Certificate of Title No. 54366 in his (Osmundo's) restraining the respondent sheriff from issuing the
name and Transfer Certificate of Title No. S-78498 in corresponding Certificate of Sheriff's Sale.8
the name of his wife Angelina Canlas.
For failure to file his answer, despite several motions
Subsequently, Osmundo Canlas agreed to sell the for extension of time for the filing thereof, Vicente
said parcels of land to Vicente Mañosca, for and in Mañosca was declared in default.9
consideration of P850,000.00, P500,000.00 of which
payable within one week, and the balance of
On June 1, 1989, the lower court a quo came out
with a decision annulling subject deed of mortgage
in the business. Thus, Osmundo Canlas delivered to
and disposing, thus:
Vicente Mañosca the transfer certificates of title of
the parcels of land involved. Vicente Mañosca, as his
part of the transaction, issued two postdated checks Premises considered, judgment is hereby
in favor of Osmundo Canlas in the amounts of rendered as follows.1âwphi1.nêt
P40,000.00 and P460,000.00, respectively, but it
turned out that the check covering the bigger 1. Declaring the deed of real estate
amount was not sufficiently funded.4 mortgage (Exhibit "L") involving
the properties of the plaintiffs as
On September 3, 1982, Vicente Mañosca was able to null and void;
mortgage the same parcels of land for P100,000.00
to a certain Attorney Manuel Magno, with the help of 2. Declaring the public auction sale
impostors who misrepresented themselves as the conducted by the defendant
spouses, Osmundo Canlas and Angelina Canlas.5 Sheriff, involving the same
properties as illegal and without
On September 29, 1982, private respondent Vicente binding effect;
Mañosca was granted a loan by the respondent Asian
Savings Bank (ASB) in the amount of P500,000.00, 3. Ordering the defendants, jointly
with the use of subject parcels of land as security, and severally, to pay the plaintiffs
and with the involvement of the same impostors who the sum of P20,000.00
again introduced themselves as the Canlas representing attorney's fees;
spouses.6 When the loan it extended was not paid,
respondent bank extrajudicially foreclosed the
mortgage. 4. On defendant ASB's crossclaim:
ordering the cross-defendant
Vicente Mañosca to pay the
On January 15, 1983, Osmundo Canlas wrote a letter defendant ASB the sum of
informing the respondent bank that the execution of P350,000.00, representing the
subject mortgage over the two parcels of land in amount which he received as
question was without their (Canlas spouses) proceeds of the loan secured by
authority, and request that steps be taken to annul the void mortgage, plus interest at
and/or revoke the questioned mortgage. On January the legal rate, starting February 3,
18, 1983, petitioner Osmundo Canlas also wrote the 1983, the date when the original
office of Sheriff Maximo O. Contreras, asking that the complaint was filed, until the
auction sale scheduled on February 3, 1983 be amount is fully paid;
cancelled or held in abeyance. But respondents
Maximo C. Contreras and Asian Savings Bank
refused to heed petitioner Canlas' stance and 5. With costs against the
proceeded with the scheduled auction sale.7 defendants.
Consequently, on February 3, 1983 the herein SO ORDERED.10
petitioners instituted the present case for annulment
of deed of real estate mortgage with prayer for the
From such Decision below, Asian Savings Bank
appealed to the Court of Appeals, which handed
down the assailed judgment of reversal, dated
September 30, 1983, in CA-G.R. CV No. 25242.
Dissatisfied therewith, the petitioners found their
way to this Court via the present Petition; theorizing
that:
I (1104)
RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THAT THE MORTGAGE OF THE
PROPERTIES SUBJECT OF THIS CASE WAS VALID.
II
RESPONDENT COURT OF APPEALS ERRED IN
HIOLDING THAT PETITIONERS ARE NOT ENTITLED
TO RELIEF BECAUSE THEY WERE NEGLIGENT AND
THEREFORE MUST BEAR THE LOSS.
III
RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THAT RESPONDENT ASB EXERCISED DUE
DILIGENCE IN GRANTING THE LOAN APPLICATION
OF RESPONDENT.
IV
RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THAT RESPONDENT ASB DID NOT ACT
WITH BAD FAITH IN PROCEEDING WITH THE
FORECLOSURE SALE OF THE PROPERTIES.
V testified inter alia:
RESPONDENT COURT OF APPEALS ERRED IN
AWARDING RESPONDENT ASB MORAL DAMAGES.11
The Petition is impressed with merit.
Art. 1173 of the Civil Code, provides:
Art. 1173. The fault or negligence of the
obligor consist in the omission of that
diligence which is required by the nature of
the obligation and corresponds with the
circumstances of the persons, of the time
and of the place. When negligence shows
bad faith, the provisions of articles 1171
and 2201, paragraph 2, shall apply.
If the law or contract does not state the
diligence which is to be observed in the
performance, that which is expected of a
good father of a family shall be required.
The degree of diligence required of banks is more
than that of a good father of a family;12 in keeping
with their responsibility to exercise the necessary
care and prudence in dealing even on a registered or
titled property. The business of a bank is affected
with public interest, holding in trust the money of the
depositors, which bank deposits the bank should
guard against loss due to negligence or bad faith, by
reason of which the bank would be denied the
protective mantle of the land registration law,
accorded only to purchasers or mortgagees for value
and in good faith.13
In the case under consideration, from the evidence
on hand it can be gleaned unerringly that respondent
bank did not observe the requisite diligence in
ascertaining or verifying the real identity of the
couple who introduced themselves as the spouses
Osmundo Canlas and Angelina Canlas. It is worthy to
note that not even a single identification card was
exhibited by the said impostors to show their true
identity; and yet, the bank acted on their
representations simply on the basis of the residence
certificates bearing signatures which tended to match
the signatures affixed on a previous deed of
mortgage to a certain Atty. Magno, covering the
same parcels of land in question. Felizado Mangubat,
Assistant Vice President of Asian Savings Bank, thus
xxx     xxx     xxx
Q:           According to you, the basis for
your having recommended for the approval
of MANASCO's (sic) loan particularly that
one involving the property of plaintiff in this
case, the spouses OSMUNDO CANLAS and
ANGELINA CANLAS, the basis for such
approval was that according to you all the
signatures and other things taken into
account matches with that of the document
previously executed by the spouses
CANLAS?
Q:           That is the only basis for
accepting the signature on the mortgage,
the basis for the recommendation of the
approval of the loan are the financial
statement of MAÑOSCA?
A:           Yes; among others the signature
and TAX Account Number, Residence
Certificate appearing on the previous loan
executed by the spouses CANLAS, I am
referring to EXHIBIT 5, mortgage to ATTY.
MAGNO, those were made the basis.
A:           That is just the basis of accepting
the signature, because at that time the loan
have been approved already on the basis of
the financial statement of the client the
Bank Statement. Wneh (sic) it was
approved we have to base it on the
Financial statement of the client, the
signatures were accepted only for the
purpose of signing the mortgage not for the
approval, we don't (sic) approve loans on
the signature.
ATTY. CLAROS:
Would you agree that as part of
ascertaining the identify of the
parties particularly the mortgage,
you don't consider also the
signature, the Residence
Certificate, the particular address
of the parties involved.
A:           I think the question defers (sic)
from what you asked a while ago.
Q:           Among others?
A:           We have to accept the signature
on the basis of the other signatures given to
us it being a public instrument.
ATTY. CARLOS:
You mean to say the criteria of
ascertaining the identity of the
mortgagor does not depend so
much on the signature on the
 residence certificate they have
presented.
A:           We have to accept that.
xxx     xxx     xxx
A:           We accepted the signature on the
basis of the mortgage in favor of ATTY.
MAGNO duly notarized which I have been
reiterrting (sic) entitled to full faith
considering that it is a public instrument.
ATTY. CARLOS:
What other requirement did you
take into account in ascertaining
the identification of the parties
particularly the mortgagor in this
case.
A:           Residence Certificate.
Q:           Is that all, is that the only
requirement?
A:           We requested for others but they
could not produce, and because they
presented to us the Residence Certificate
which matches on the signature on the
Residence Certificate in favor of Atty.
Magno.14
Evidently, the efforts exerted by the bank to verify
the identity of the couple posing as Osmundo Canlas
and Angelina Canlas fell short of the responsibility of
the bank to observe more than the diligence of a
good father of a family. The negligence of
respondent bank was magnified by the fact that the
previous deed of mortgage (which was used as the
basis for checking the genuineness of the signatures
of the supposed Canlas spouses) did not bear the tax
account number of the spouses,15 as well as the
Community Tax Certificate of Angelina Canlas.16 But
such fact notwithstanding, the bank did not require
the impostors to submit additional proof of their true
identity.
Under the doctrine of last clear chance, which is
applicable here, the respondent bank must suffer the
resulting loss. In essence, the doctrine of last clear
chance is to the effect that where both parties are
negligent but the negligent act of one is appreciably
later in point of time than that of the other, or where
it is impossible to determine whose fault or
negligence brought about the occurrence of the
incident, the one who had the last clear opportunity
to avoid the impending harm but failed to do so, is
chargeable with the consequences arising therefrom.
Stated differently, the rule is that the antecedent
negligence of a person does not preclude recovery of
damages caused by the supervening negligence of
the latter, who had the last fair chance to prevent
the impending harm by the exercise of due
diligence.17
Assuming that Osmundo Canlas was negligent in
giving Vicente Mañosca the opportunity to perpetrate
the fraud, by entrusting to latter the owner's copy of
the transfer certificates of title of subject parcels of
land, it cannot be denied that the bank had the last
clear chance to prevent the fraud, by the simple
expedient of faithfully complying with the
requirements for banks to ascertain the identity of
the persons transacting with them.
For not observing the degree of diligence required of
banking institutions, whose business is impressed
with public interest, respondent Asian Savings Bank
has to bear the loss sued upon.
In ruling for respondent bank, the Court of Appeals
concluded that the petitioner Osmundo Canlas was a
party to the fraudulent scheme of Mañosca and
therefore, estopped from impugning the validity of
subject deed of mortgage; ratiocinating thus:
xxx     xxx     xxx
Thus, armed with the titles and the special
power of attorney, Mañosca went to the
defendant bank and applied for a loan. And
when Mañosca came over to the bank to
submit additional documents pertinent to
his loan application, Osmundo Canlas was
with him, together with a certain Rogelio
Viray. At that time, Osmundo Canlas was
introduced to the bank personnel as
"Leonardo Rey".
When he was introduced as "Leonardo Rey"
for the first time Osmundo should have
corrected Mañosca right away. But he did
not. Instead, he even allowed Mañosca to
avail of his (Osmundo's) membership
privileges at the Metropolitan Club when
Mañosca invited two officers of the
defendant bank to a luncheon meeting
which Osmundo also attended. And during
that meeting, Osmundo did not say who he
really is, but even let Mañosca introduced
him again as "Leonardo Rey", which all the
more indicates that he connived with
Mañosca in deceiving the defendant bank.
Finally after the loan was finally approved,
Osmundo accompanied Mañosca to the bank
when the loan was released. At that time, a
manger's check for P200,000.00 was issued
in the name of Oscar Motorworks, which
Osmundo admits he owns and operates.
Collectively, the foregoing circumstances
cannot but conjure to a single conclusion
that Osmundo active participated in the loan
application of defendant Asian Savings
Bank, which culminated in his receiving a
portion of the process thereof:18
A meticulous and painstaking scrutiny of the Records
on hand, reveals, however, that the findings arrived
at by the Court of Appeals are barren of any
sustainable basis. For instance, the execution of the
deeds of mortgages constituted by Mañosca on
subject pieces of property of petitioners were made
possible not by the Special Power of Attorney
executed by Osmundo Canlas in favor of Mañosca
but through the use of impostors who
misrepresented themselves as the spouses Angelina
Canlas and Osmundo Canlas. It cannot be said
therefore, that the petitioners authorized Vicente
Mañosca to constitute the mortgage on their parcels
of land.
What is more, Osmundo Canlas was introduced as
"Leonardo Rey" by Vicente Mañosca, only on the
occasion of the luncheon meeting at the Metropolitan
Club.19 Thereat, the failure of Osmundo Canlas to
rectify Mañosca's misrepresentations could not be
taken as a fraudulent act. As well explained by the
former, he just did not want to embarrass Mañosca,
so that he waited for the end of the meeting to
correct Mañosca.20
Then, too, Osmundo Canlas recounted that during
the said luncheon meeting, they did not talk about
the security or collateral for the loan of Mañosca with
ASB.21 So also, Mrs. Josefina Rojo, who was the
Account Officer of Asian Savings Bank when Mañosca
applied for subject loan, corroborated the testimony
of Osmundo Canlas, she testified:
xxx     xxx     xxx
QUESTION:           Now could you please
describe out the lunch conference at the
Metro Club in Makati?
ANSWER:           Mr. Mangubat, Mr.
Mañosca and I did not discuss with respect
to the loan application and discuss primarily
his business.
xxx     xxx     xxx
QUESTION:           So, what is the main
topic of your discussion during the meeting?
ANSWER:           The main topic war then,
about his business although, Mr. Leonardo
Rey, who actually turned out as Mr. Canlas,
supplier of Mr. Mañosca.
QUESTION:           I see . . . other than the
business of Mr. Mañosca, were there any
other topic discussed?
ANSWER:           YES.
QUESTION:           And what was the topic:
ANSWER:           General Economy then.
x x x           x x x           x x x22
Verily, Osmundo Canlas was left unaware of the illicit
plan of Mañosca, explaining thus why he (Osmundo)
did not bother to correct what Mañosca
misrepresented and to assert ownership over the two
parcels of land in question.
Not only that; while it is true that Osmundo Canlas
was with Vicente Mañosca when the latter submitted
the documents needed for his loan application, and
when the check of P200,000.00 was released, the
former did not know that the collateral used by
Mañosca for the said loan were their (Canlas
spouses') properties. Osmundo happened to be with
Mañosca at the time because he wanted to make
sure that Mañosca would make good his promise to
pay the balance of the purchase price of the said lots
out of the proceeds of the loan.23
The receipt by Osmundo Canlas of the P200,000.00
check from ASB could not estop him from assailing
the validity of the mortgage because the said
amount was in payment of the parcels of land he
sold to Mañosca.24
What is decisively clear on record is that Mañosca
managed to keep Osmundo Canlas uninformed of his
(Mañosca's) intention to use the parcels of land of
the Canlas spouses as security for the loan obtained
from Asian Savings Bank. Since Vicente Mañosca
showed Osmundo Canlas several certificates of title
of lots which, according to Mañosca were the
collaterals, Osmundo Canlas was confident that their
(Canlases') parcels of land were not involved in the
loan transactions with the Asian Savings
Bank.25 Under the attendant facts and circumstances,
Osmundo Canlas was undoubtedly negligent, which
negligence made them (petitioners) undeserving of
an award of attorney's fees.
Settled is the rule that a contract of mortgage must
be constituted only by the absolute owner on the
property mortgaged;26 a mortgage, constituted by an
impostor is void.27 Considering that it was
established indubitably that the contract of mortgage
sued upon was entered into and signed by impostors
who misrepresented themselves as the spouses
Osmundo Canlas and Angelina Canlas, the Court is of
the ineluctible conclusion and finding that subject
contract of mortgage is a complete nullity.
WHEREFORE, the Petition is GRANTED and the
Decision of the Court of Appeals, dated September
30, 1993, in CA-G.R. CV No. 25242 SET ASIDE. The
Decision of Branch 59 of the Regional Trial Court of
Makati City in Civil Case No. M-028 is hereby
REINSTATED. No pronouncement as to costs.
SO ORDERED.
 The existence of the mortgage is not disputed, and
neither is the fact that the mortgagor Rafaela Yulo is
part owner of Lot No. 855 of the Cadastral Survey of
Pontevedra. The oppositors do not dispute that she is
such a part owner, and their main objection to the
petition is that as part owners of the property, the
annotation of the mortgage on the common title will
affect their rights.
G.R. No. L-13313             April 28, 1960 The court held that even if the ownership of the
deceased Rafaela Yulo over the portion of the lot in
question and the validity of the mortgage are
AGRICULTURAL CREDIT COOPERATIVE
disputed, such invalidity of the mortgage is no proof
ASSOCIATION OF HINIGARAN, movant-appellee,  of the non-existence of the mortgage nor a ground
vs. for objecting to its registration, citing the case of
ESTANISLAO YULO YUSAY, ET AL., oppositors- Register of Deeds of Manila vs. Maxima Tinoco Vda.
appellants. de Cruz, et, al., 95 Phil., 818; 53 Off. Gaz., 2804.
The court below, in ordering the registration and
annotation of the mortgage, did not pass on its
invalidity or effect. As the mortgage is admittedly an
act of the registered owner, all that the judge below
did and could do, as a registration court, is to order
its registration and annotation on the certificate of
title covering the land mortgaged. By said order the
court did not pass upon the effect or validity of the
mortgage — these can only be determined in an
ordinary case before the courts, not before a court
acting merely as a registration court, which did not
have the jurisdiction to pass upon the alleged effect
or validity.
Wherefore, the order appealed from is hereby
affirmed, with costs against oppositors-appellants.
So ordered.

Aritao, Garcia & Aritao for appellee.
Catalino A. Dayon and Arsenio Al. Acuna for
appellant.
LABRADOR, J.:
This is an appeal from an order of the Court of First
Instance of Negros Occidental, Hon. Jose S. de la
Cruz, presiding the Register of Deeds of Negros
Occidental to register a mortgage executed by Rafael
Yulo in favor of the movant covering Lot No. 855,
Pontevedra Cadastre, covered by Original Certificate
of Title No. 4979.
The records disclose that on July 20, 1952, Rafaela
Yulo executed in favor of the movant a mortgage for
P33,626.29, due from her, her mother, sisters,
brothers, and others, which amount she assumed to
pay to the movant. A motion was presented to the
court by the movant demanding the surrender of the
owner's duplicate certificate of title that he may
annotate said mortgage at the back of the certificate.
Estanislao Yusay, a part owner of the lot, opposed
the petition on the ground that he is owner of a part
of the property in question; that the granting of the
motion would operate to his prejudice, as he has not
participated in the mortgage cited in the motion; that
Rafaela Yulo is dead; that the motion is not verified
and movant's rights have lapsed by prescription.
Finally it is argued that his opposition raises a
controversial matter which the court has no
jurisdiction to pass upon. Margarita, Maria, Elena and
Pilar, all surnamed Yulo, joined the oppositor
Estanislao Yusay, raising the same objections
interposed by Yusay.
In his Brief before this Court, counsel for appellants Paras, C. J., Bengzon, Padilla, Montemayor, Bautista
argue that the mortgage sought to be registered was Angelo, Concepcion, Endencia, and Gutierrez David,
not recorded before the closing of the intestate JJ.,concur
proceedings of the deceased mortgagor, but was so
recorded only four months after the termination of
said proceedings, so that the claim of movant has
been reduced to the character of a mere money
claim, not a mortgage, hence the mortgage may not
be registered. In the first place, as the judge below
correctly ruled, the proceeding to register the
mortgage does not purport to determine the
supposed invalidity of the mortgage or its effect.
Registration is a mere ministerial act by which a
deed, contract or instrument is sought to be
inscribed in the records of the Office of the Register
of Deeds and annotated at the back of the certificate
of title covering the land subject of the deed,
contract or instrument.
The registration of a lease or mortgage, or
the entry of a memorial of a lease or
mortgage on the register, is not a
declaration by the state that such an
instrument is a valid and subsisting interest
in land; it is merely a declaration that the
record of the title appears to be burdened
with the lease or mortgage described,
according to the priority set forth in the
certificate.
The mere fact that a lease or mortgage was
registered does not stop any party to it from
setting up that it now has no force or effect.
(Niblack, pp. 134-135, quoted in Francisco
Land Registration Act, l950 ed., p. 348.)

. G.R. No. 170166               April 6, 2011
JOE A. ROS and ESTRELLA AGUETE, Petitioners,  PESOS.
vs.
PHILIPPINE NATIONAL BANK - LAOAG
BRANCH, Respondent.
The Facts
The appellate court narrated the facts as follows:
On January 13, 1983, spouses Jose A. Ros and
Estrella Aguete filed a complaint for the annulment of
the Real Estate Mortgage and all legal proceedings
taken thereunder against PNB, Laoag Branch before
the Court of First Instance, Ilocos Norte docketed as
Civil Case No. 7803.
The complaint was later amended and was raffled to
the Regional Trial Court, Branch 15, Laoag City.
The averments in the complaint disclosed that
plaintiff-appellee Joe A. Ros obtained a loan of
₱115,000.00 from PNB Laoag Branch on October 14,
1974 and as security for the loan, plaintiff-appellee
Ros executed a real estate mortgage involving a
parcel of land – Lot No. 9161 of the Cadastral Survey
of Laoag, with all the improvements thereon
described under Transfer Certificate of Title No. T-
9646.
Upon maturity, the loan remained outstanding. As a
result, PNB instituted extrajudicial foreclosure
proceedings on the mortgaged property. After the
extrajudicial sale thereof, a Certificate of Sale was
issued in favor of PNB, Laoag as the highest bidder.
After the lapse of one (1) year without the property
being redeemed, the property was consolidated and
registered in the name of PNB, Laoag Branch on
August 10, 1978.
Claiming that she (plaintiff-appellee Estrella Aguete)
has no knowledge of the loan obtained by her
husband nor she consented to the mortgage
instituted on the conjugal property – a complaint was
filed to annul the proceedings pertaining to the
mortgage, sale and consolidation of the property –
interposing the defense that her signatures affixed
on the documents were forged and that the loan did
not redound to the benefit of the family.1avvphi1
In its answer, PNB prays for the dismissal of the
complaint for lack of cause of action, and insists that
it was plaintiffs-appellees’ own acts [of]
omission/connivance that bar them from recovering
the subject property on the ground of estoppel,
laches, abandonment and prescription.4]
The Trial Court’s Ruling
On 29 June 2001, the trial court rendered its
Decision5 in favor of petitioners. The trial court
declared that Aguete did not sign the loan
documents, did not appear before the Notary Public
to acknowledge the execution of the loan documents,
did not receive the loan proceeds from PNB, and was
not aware of the loan until PNB notified her in 14
August 1978 that she and her family should vacate
the mortgaged property because of the expiration of
the redemption period. Under the Civil Code, the
effective law at the time of the transaction, Ros could
not encumber any real property of the conjugal
partnership without Aguete’s consent. Aguete may,
during their marriage and within ten years from the
transaction questioned, ask the courts for the
annulment of the contract her husband entered into
without her consent, especially in the present case
where her consent is required. The trial court,
however, ruled that its decision is without prejudice
to the right of action of PNB to recover the amount of
the loan and its interests from Ros.
The dispositive portion reads:
WHEREFORE, premises considered, judgment is
hereby rendered:
1. DECLARING the Deed of Real Estate
Mortgage (Exhibit "C") and the subsequent
foreclosure proceedings conducted thereon
NULL and VOID;
2. ORDERING the Register of Deeds of the
City of Laoag to cancel TCT No. T-15276 in
the name of defendant PNB and revert the
same in the name of plaintiffs spouses Joe
Ros and Estrella Aguete;
3. ORDERING defendant to vacate and
turnover the possession of the premises of
the property in suit to the plaintiffs; and
4. ORDERING defendant to pay plaintiffs
attorney’s fee and litigation expenses in the
sum of TEN THOUSAND (₱10,000.00)
No pronouncement as to costs.
SO ORDERED.6]
PNB filed its Notice of Appeal7 of the trial court’s
decision on 13 September 2001 and paid the
corresponding fees. Petitioners filed on the same
date a motion for execution pending appeal,8 which
PNB opposed.9 In their comment to the
opposition10 filed on 10 October 2001, petitioners
stated that at the hearing of the motion on 3 October
2001, PNB’s lay representative had no objection to
the execution of judgment pending appeal.
Petitioners claimed that the house on the subject lot
is dilapidated, a danger to life and limb, and should
be demolished. Petitioners added that they obliged
themselves to make the house habitable at a cost of
not less ₱50,000.00. The repair cost would accrue to
PNB’s benefit should the appellate court reverse the
trial court. PNB continued to oppose petitioners’
motion.11
In an Order12 dated 8 May 2002, the trial court found
petitioners’ motion for execution pending appeal
improper because petitioners have made it clear that
they were willing to wait for the appellate court’s
decision. However, as a court of justice and equity,
the trial court allowed petitioners to occupy the
subject property with the condition that petitioners
would voluntarily vacate the premises and waive
recovery of improvements introduced should PNB
prevail on appeal.
The Appellate Court’s Ruling
On 17 October 2005, the appellate court rendered its
Decision13 and granted PNB’s appeal. The appellate
court reversed the trial court’s decision, and
dismissed petitioners’ complaint.
The appellate court stated that the trial court
concluded forgery without adequate proof; thus it
was improper for the trial court to rely solely on
Aguete’s testimony that her signatures on the loan
documents were forged. The appellate court declared
that Aguete affixed her signatures on the documents
knowingly and with her full consent.
Assuming arguendo that Aguete did not give her
consent to Ros’ loan, the appellate court ruled that
the conjugal partnership is still liable because the
loan proceeds redounded to the benefit of the family.
The records of the case reveal that the loan was
used for the expansion of the family’s business.
Therefore, the debt obtained is chargeable against
the conjugal partnership.
Petitioners filed the present petition for review before
this Court on 9 December 2005.
The Issues
Petitioners assigned the following errors:
I. The Honorable Court of Appeals erred in not giving
weight to the findings and conclusions of the trial
court, and in reversing and setting aside such
findings and conclusions without stating specific
contrary evidence;
II. The Honorable Court of Appeals erred in declaring
the real estate mortgage valid;
III. The Honorable Court of Appeals erred in
declaring, without basis, that the loan contracted by
husband Joe A. Ros with respondent Philippine
National Bank – Laoag redounded to the benefit of
his family, aside from the fact that such had not
been raised by respondent in its appeal.14]
The Court’s Ruling
The petition has no merit. We affirm the ruling of the
appellate court.
The Civil Code was the applicable law at the time of
the mortgage. The subject property is thus
considered part of the conjugal partnership of gains.
The pertinent articles of the Civil Code provide:
Art. 153. The following are conjugal partnership
property:
(1) That which is acquired by onerous title
during the marriage at the expense of the
common fund, whether the acquisition be
for the partnership, or for only one of the
spouses;
(2) That which is obtained by the industry,
or work or as salary of the spouses, or of
either of them;
(3) The fruits, rents or interest received or
due during the marriage, coming from the
common property or from the exclusive
property of each spouse.
Art. 160. All property of the marriage is presumed to
belong to the conjugal partnership, unless it be
proved that it pertains exclusively to the husband or
to the wife.
Art. 161. The conjugal partnership shall be liable for:
(1) All debts and obligations contracted by
the husband for the benefit of the conjugal
partnership, and those contracted by the
wife, also for the same purpose, in the
cases where she may legally bind the
partnership;
(2) Arrears or income due, during the
marriage, from obligations which constitute
a charge upon property of either spouse or
of the partnership;
(3) Minor repairs or for mere preservation
made during the marriage upon the
separate property of either the husband or
the wife; major repairs shall not be charged
to the partnership;
(4) Major or minor repairs upon the
conjugal partnership property;
(5) The maintenance of the family and the
education of the children of both husband
and wife, and of legitimate children of one
of the spouses;
(6) Expenses to permit the spouses to
complete a professional, vocational or other
course.
Art. 166. Unless the wife has been declared a non
compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the
husband cannot alienate or encumber any real
property of the conjugal partnership without the
wife’s consent. If she refuses unreasonably to give
her consent, the court may compel her to grant the
same.
Art. 173. The wife may, during the marriage, and
within ten years from the transaction questioned, ask
the courts for the annulment of any contract of the
husband entered into without her consent, when
such consent is required, or any act or contract of
the husband which tends to defraud her or impair
her interest in the conjugal partnership property.
Should the wife fail to exercise this right, she or her
heirs after the dissolution of the marriage may
demand the value of the property fraudulently
alienated by the husband.
There is no doubt that the subject property was
acquired during Ros and Aguete’s marriage. Ros and
Aguete were married on 16 January 1954, while the
subject property was acquired in 1968.15 There is
also no doubt that Ros encumbered the subject
property when he mortgaged it for P115,000.00 on
23 October 1974.16 PNB Laoag does not doubt that
Aguete, as evidenced by her signature, consented to
Ros’ mortgage to PNB of the subject property. On
the other hand, Aguete denies ever having
consented to the loan and also denies affixing her
signature to the mortgage and loan documents.
The husband cannot alienate or encumber any
conjugal real property without the consent, express
or implied, of the wife. Should the husband do so,
then the contract is voidable.17 Article 173 of the Civil
Code allows Aguete to question Ros’ encumbrance of
the subject property. However, the same article does
not guarantee that the courts will declare the
annulment of the contract. Annulment will be
declared only upon a finding that the wife did not
give her consent. In the present case, we follow the
conclusion of the appellate court and rule that
Aguete gave her consent to Ros’ encumbrance of the
subject property.
The documents disavowed by Aguete are
acknowledged before a notary public, hence they are
public documents. Every instrument duly
acknowledged and certified as provided by law may
be presented in evidence without further proof, the
certificate of acknowledgment being prima
facie evidence of the execution of the instrument or
document involved.18 The execution of a document
that has been ratified before a notary public cannot
be disproved by the mere denial of the alleged
signer.19 PNB was correct when it stated that
petitioners’ omission to present other positive
evidence to substantiate their claim of forgery was
fatal to petitioners’ cause.20 Petitioners did not
present any corroborating witness, such as a
handwriting expert, who could authoritatively declare
that Aguete’s signatures were really forged.
A notarized document carries the evidentiary weight
conferred upon it with respect to its due execution,
and it has in its favor the presumption of regularity
which may only be rebutted by evidence so clear,
strong and convincing as to exclude all controversy
as to the falsity of the certificate. Absent such, the
presumption must be upheld. The burden of proof to
overcome the presumption of due execution of a
notarial document lies on the one contesting the
same. Furthermore, an allegation of forgery must be
proved by clear and convincing evidence, and
whoever alleges it has the burden of proving the
same.21]
Ros himself cannot bring action against PNB, for no
one can come before the courts with unclean
hands.1avvphi1 In their memorandum before the
trial court, petitioners themselves admitted that Ros
forged Aguete’s signatures.
Joe A. Ros in legal effect admitted in the complaint
that the signatures of his wife in the questioned
documents are forged, incriminating himself to
criminal prosecution. If he were alive today, he
would be prosecuted for forgery. This strengthens
the testimony of his wife that her signatures on the
questioned documents are not hers.
In filing the complaint, it must have been a remorse
of conscience for having wronged his family; in
forging the signature of his wife on the questioned
documents; in squandering the P115,000.00 loan
from the bank for himself, resulting in the
foreclosure of the conjugal property; eviction of his
family therefrom; and, exposure to public contempt,
embarassment and ridicule.22]
The application for loan shows that the loan would be
used exclusively "for additional working [capital] of
buy & sell of garlic & virginia tobacco."23 In her
testimony, Aguete confirmed that Ros engaged in
such business, but claimed to be unaware whether it
prospered. Aguete was also aware of loans
contracted by Ros, but did not know where he
"wasted the money."24 Debts contracted by the
husband for and in the exercise of the industry or [G.R. No. 156295. September 23, 2003.]
profession by which he contributes to the support of
the family cannot be deemed to be his exclusive and MARCELO R. SORIANO, Petitioner, v. SPOUSES
private debts.25 RICARDO and ROSALINA GALIT, Respondents.
DECISION
If the husband himself is the principal obligor in the
contract, i.e., he directly received the money and
services to be used in or for his own business or his
YNARES-SANTIAGO, J.:
own profession, that contract falls within the term "x
x x x obligations for the benefit of the conjugal
partnership." Here, no actual benefit may be proved.
Petitioner was issued a writ of possession in Civil
It is enough that the benefit to the family is apparent
Case No. 6643 1 for Sum of Money by the Regional
at the signing of the contract. From the very nature
Trial Court of Balanga, Bataan, Branch 1. The writ of
of the contract of loan or services, the family stands
possession was, however, nullified by the Court of
to benefit from the loan facility or services to be
Appeals in CA-G.R. SP No. 65891 2 because it
rendered to the business or profession of the
included a parcel of land which was not among those
husband. It is immaterial, if in the end, his business
explicitly enumerated in the Certificate of Sale issued
or profession fails or does not succeed. Simply
by the Deputy Sheriff, but on which stand the
stated, where the husband contracts obligations on
immovables covered by the said Certificate.
behalf of the family business, the law presumes, and
Petitioner contends that the sale of these
rightly so, that such obligation will redound to the
immovables necessarily encompasses the land on
benefit of the conjugal partnership.26]
which they stand.chanrob1es virtua1 1aw 1ibrary
For this reason, we rule that Ros’ loan from PNB Dissatisfied, petitioner filed the instant petition for
redounded to the benefit of the conjugal partnership. review on certiorari.
Hence, the debt is chargeable to the conjugal
partnership. Respondent Ricardo Galit contracted a loan from
petitioner Marcelo Soriano, in the total sum of
P480,000.00, evidenced by four promissory notes in
WHEREFORE, we DENY the petition. The Decision
the amount of P120,000.00 each dated August 2,
of the Court of Appeals in CA-G.R. CV No. 76845
1996; 3 August 15, 1996; 4 September 4, 1996 5
promulgated on 17 October 2005 is AFFIRMED.
and September 14, 1996. 6 This loan was secured by
Costs against petitioners.
a real estate mortgage over a parcel of land covered
by Original Certificate of Title No. 569. 7 After he
SO ORDERED. failed to pay his obligation, Soriano filed a complaint
for sum of money against him with the Regional Trial
Court of Balanga City, Branch 1, which was docketed
as Civil Case No. 6643. 8 
Respondents, the Spouses Ricardo and Rosalina
Galit, failed to file their answer. Hence, upon motion
of Marcelo Soriano, the trial court declared the
spouses in default and proceeded to receive evidence
for petitioner Soriano ex parte.
On July 7, 1997, the Regional Trial Court of Balanga
City, Branch 1 rendered judgment 9 in favor of
petitioner Soriano, the dispositive portion of which
reads:chanrob1es virtual 1aw library
 GREETINGS:chanrob1es virtual 1aw library The period of redemption of the above described real
WHEREFORE, judgment is hereby rendered in favor properties together with all the improvements
of the plaintiff and against the defendant ordering I HEREBY that (sic) by virtue of the writ of execution thereon will expire One (1) year from and after the
the latter to pay:chanrob1es virtual 1aw library dated October 16, 1998, issued in the above-entitled registration of this Certificate of Sale with the
case by the HON. BENJAMIN T. VIANZON, ordering Register of Deeds.
1. the plaintiff the amount of P350,000.00 plus 12% the Provincial Sheriff of Bataan or her authorized
interest to be computed from the dates of maturity Deputy Sheriff to cause to be made (sic) the sum of This Certificate of Sheriff’s Sale is issued to the
of the promissory notes until the same are fully paid; P350,000.00 plus 12% interest to be computed from highest and lone bidder, Marcelo Soriano, under
the date of maturity of the promissory notes until the guarantees prescribed by law.
2. the plaintiff P20,000.00, as attorney’s fees; and same are fully paid; P20,000.00 as attorney’s fees
plus legal expenses in the implementation of the writ Balanga, Bataan, February 4, 1999.
3. the costs of suit. of execution, the undersigned Deputy Sheriff sold at
public auction on December 23, 1998 the rights and On April 23, 1999, petitioner caused the registration
SO ORDERED. 10  interests of defendants Sps. Ricardo and Rosalina of the "Certificate of Sale on Execution of Real
Galit, to the plaintiff Marcelo Soriano, the highest Property" with the Registry of Deeds.chanrob1es
The judgment became final and executory. and only bidder for the amount of FOUR HUNDRED virtua1 1aw 1ibrary
Accordingly, the trial court issued a writ of execution EIGHTY THREE THOUSAND PESOS (P483,000.00,
in due course, by virtue of which, Deputy Sheriff Philippine Currency), the following real estate The said Certificate of Sale registered with the
Renato E. Robles levied on the following real properties more particularly described as Register of Deeds includes at the dorsal portion
properties of the Galit spouses:chanrob1es virtual follows:chanrob1es virtual 1aw library thereof the following entry, not found in the
1aw library Certificate of Sale on file with Deputy Sheriff Renato
ORIGINAL CERTIFICATE OF TITLE NO. T-569 E. Robles: 13 
1. A parcel of land covered by Original Certificate of
Title No. T-569 (Homestead Patent No. 14692) A parcel of land (Homestead Patent No. 14692) ORIGINAL CERTIFICATE OF TITLE NO. T-40785 
situated in the Bo. of Tapulac, Orani, Bataan. situated in the Bo. of Tapulac, Orani, Bataan, . . . .
Bounded on the SW, along line 1-2 by Lot No. 3, Bounded on the SW., along line 1-2 by Lot No. 3, A parcel of land (Lot No. 1103 of the Cadastral
Cad. 145; containing an area of THIRTY FIVE Cad. 145, containing an area of THIRTY FIVE Survey of Orani), with the improvements thereon,
THOUSAND SEVEN HUNDRED FIFTY NINE (35,759) THOUSAND SEVEN HUNDRED FIFTY NINE (35,759) situated in the Municipality of Orani, Bounded on the
SQUARE METERS, more or less . . .; SQUARE METERS, more or less . . . NE; by Calle P. Gomez; on the E. by Lot No. 1104;
on the SE by Calle Washington; and on the W. by Lot
2. STORE/HOUSE — CONSTRUCTED on Lot No. 1103 TAX DEC. NO. — PROPERTY INDEX NO. 018-09-001- 4102, containing an area of ONE HUNDRED THIRTY
made of strong materials G.I. roofing situated at 02 NINE (139) SQUARE METERS, more or less. All
Centro I, Orani, Bataan, . . . containing an area of 30 points referred to are indicated on the plan; bearing
sq. meters, more or less . . . (constructed on TCT STOREHOUSE — constructed on Lot 1103, made of true; declination 0 deg. 40’E., date of survey,
No. T40785); strong materials G.I. roofing situated at Centro I, February 191-March 1920.
Orani, Bataan . . . containing an area of 30 sq.
3. BODEGA — constructed on Lot 1103, made of meters, more or less . . . (constructed on TCT No. On February 23, 2001, ten months from the time the
strong materials, G.I. roofing, situated in Centro I, 40785) Certificate of Sale on Execution was registered with
Orani, Bataan, . . . with a floor area of 42.75 sq. m. the Registry of Deeds, petitioner moved 14 for the
more or less . . . . 11  TAX DEC. NO. 86 — PROPERTY INDEX No. 018-09- issuance of a writ of possession. He averred that the
001-02 one-year period of redemption had elapsed without
At the sale of the above-enumerated properties at the respondents having redeemed the properties sold
public auction held on December 23, 1998, petitioner BODEGA — constructed on Lot 1103, made of strong at public auction; thus, the sale of said properties
was the highest and only bidder with a bid price of materials G.I. roofing situated in Centro I, Orani, had already become final. He also argued that after
P483,000.00. Accordingly, on February 4, 1999, Bataan, . . . with a floor area of 42.75 sq. m. more the lapse of the redemption period, the titles to the
Deputy Sheriff Robles issued a Certificate of Sale of or less . . . properties should be considered, for all legal intents
Execution of Real Property, 12 which and purposes, in his name and favor. 15 
reads:chanrob1es virtual 1aw library IT IS FURTHER CERTIFIED, that the aforesaid
highest and lone bidder, Marcelo Soriano, being the On June 4, 2001, the Regional Trial Court of Balanga
CERTIFICATE OF SALE ON EXECUTION OF REAL plaintiff did not pay to the Provincial Sheriff of City, Branch 1 granted the motion for issuance of
PROPERTY  Bataan the amount of P483,000.00, the sale price of writ of possession. 16 Subsequently, on July 18,
the above described property which amount was 2001, a writ of possession 17 was issued in
TO ALL WHO MAY SEE THESE PRESENTS:chanrob1es credited to partial/full satisfaction of the judgment petitioner’s favor which reads:chanrob1es virtual
virtual 1aw library embodied in the writ of execution. 1aw library
WRIT OF POSSESSION  land covered by Transfer Certificate of Title No. T-
40785 among the list of real properties in the writ of
Mr. Renato E. Robles possession. 18 Respondents argued that said
property was not among those sold on execution by
Deputy Sheriff  Deputy Sheriff Renato E. Robles as reflected in the
Certificate of Sale on Execution of Real Property.
RTC, Br. 1, Balanga City
In opposition, petitioner prayed for the dismissal of
Greetings:chanrob1es virtual 1aw library the petition because respondent spouses failed to
move for the reconsideration of the assailed order
WHEREAS on February 3, 2001, the counsel for prior to the filing of the petition. Moreover, the
plaintiff filed Motion for the Issuance of Writ of proper remedy against the assailed order of the trial
Possession; court is an appeal, or a motion to quash the writ of
possession.
WHEREAS on June 4, 2001, this court issued an
order granting the issuance of the Writ of On May 13, 2002, the Court of Appeals rendered
Possession; judgment as follows:chanrob1es virtual 1aw library
WHEREFORE, you are hereby commanded to place WHEREFORE, the instant petition is hereby
the herein plaintiff Marcelo Soriano in possession of GRANTED. Accordingly, the writ of possession issued
the property involved in this case situated (sic) more by the Regional Trial Court of Balanga City, Branch
particularly described as:chanrob1es virtual 1aw 1, on 18 July 2001 is declared NULL and VOID.
library
In the event that the questioned writ of possession
1. STORE HOUSE constructed on Lot No. 1103 has already been implemented, the Deputy Sheriff of
situated at Centro 1, Orani, Bataan covered by TCT the Regional Trial Court of Balanga City, Branch 1,
No. 40785; and private respondent Marcelo Soriano are hereby
ordered to cause the redelivery of Transfer
2. BODEGA constructed on Lot No. 1103 with an area Certificate of Title No. T-40785 to the petitioners.
of 42.75 square meters under Tax Declaration No. 86
situated at Centro 1, Orani, Bataan; SO ORDERED. 19  be done. 20 This is in accordance with the primary
3. Original Certificate of Title No. 40785 with an area Aggrieved, petitioner now comes to this Court
of 134 square meters known as Lot No. 1103 of the maintaining that — reads:chanrob1es
Cadastral Survey of Orani. . .
1.) THE SPECIAL CIVIL ACTION OF CERTIORARI
against the mortgagor/former owners Sps. Ricardo UNDER RULE 65 IS NOT THE PLAIN, SPEEDY AND
and Rosalinda (sic) Galit, her (sic) heirs, successors, ADEQUATE REMEDY OF THE RESPONDENTS IN
assigns and all persons claiming rights and interests ASSAILING THE WRIT OF POSSESSION ISSUED BY
adverse to the petitioner and make a return of this THE LOWER COURT BUT THERE WERE STILL OTHER
writ every thirty (30) days from receipt hereof REMEDIES AVAILABLE TO THEM AND WHICH WERE
together with all the proceedings thereon until the NOT RESORTED TO LIKE THE FILING OF A MOTION
same has been fully satisfied. FOR RECONSIDERATION OR MOTION TO QUASH OR
EVEN APPEAL.
WITNESS THE HONORABLE BENJAMIN T. VIANZON,
Presiding Judge, this 18th day of July 2001, at 2.) THE HONORABLE COURT OF APPEALS GRAVELY
Balanga City. ERRED IN DECLARING THE CERTIFICATE OF SALE
ON EXECUTION OF REAL PROPERTY AS NULL AND
(Sgd) GILBERT S. ARGONZA VOID AND SUBSEQUENTLY THE WRIT OF
POSSESSION BECAUSE THE SAME IS A PUBLIC
OIC DOCUMENT WHICH ENJOYS THE PRESUMPTION OF
REGULARITY AND IT CANNOT BE OVERCOME BY A
Respondents filed a petition for certiorari with the MERE STRANGE FEELING THAT SOMETHING IS
Court of Appeals, which was docketed as CA-G.R. SP AMISS ON ITS SURFACE SIMPLY BECAUSE THE
No. 65891, assailing the inclusion of the parcel of TYPEWRITTEN WORDS ON THE FRONT PAGE AND AT
THE DORSAL PORTION THEREOF IS DIFFERENT OR
THAT IT IS UNLIKELY FOR THE SHERIFF TO USE THE
DORSAL PORTION OF THE FIRST PAGE BECAUSE
THE SECOND PAGE IS MERELY HALF FILLED AND
THE NOTATION ON THE DORSAL PORTION COULD
STILL BE MADE AT THE SECOND PAGE.
On the first ground, petitioner contends that
respondents were not without remedy before the
trial court. He points out that respondents could have
filed a motion for reconsideration of the Order dated
June 4, 1999, but they did not do so. Respondents
could also have filed an appeal but they, likewise, did
not do so. When the writ of possession was issued,
respondents could have filed a motion to quash the
writ. Again they did not. Respondents cannot now
avail of the special civil action for certiorari as a
substitute for these remedies. They should suffer the
consequences for sleeping on their rights.chanrob1es
virtua1 1aw 1ibrary
We disagree.
Concededly, those who seek to avail of the
procedural remedies provided by the rules must
adhere to the requirements thereof, failing which the
right to do so is lost. It is, however, equally settled
that the Rules of Court seek to eliminate undue
reliance on technical rules and to make litigation as
inexpensive as practicable and as convenient as can
purpose of the 1997 Rules of Civil Procedure as
provided in Rule 1, Section 6, which
virtual 1aw library
Section 6. Construction. — These rules shall be
liberally construed in order to promote their objective
of securing a just, speedy and inexpensive
determination of every action and proceeding. 21 
The rules of procedure are not to be applied in a very
rigid, technical sense and are used only to help
secure substantial justice. If a technical and rigid
enforcement of the rules is made, their aim would be
defeated. 22 They should be liberally construed so
that litigants can have ample opportunity to prove
their claims and thus prevent a denial of justice due
to technicalities. 23 Thus, in China Banking
Corporation v. Members of the Board of Trustees of
Home Development Mutual Fund, 24 it was
held:chanrob1es virtual 1aw library
. . .while certiorari as a remedy may not be used as
a substitute for an appeal, especially for a lost
appeal, this rule should not be strictly enforced if the
petition is genuinely meritorious. 25 It has been said
that where the rigid application of the rules would
frustrate substantial justice, or bar the vindication of
a legitimate grievance, the courts are justified in
exempting a particular case from the operation of
the rules. 26 (Emphasis ours)
Indeed, well-known is the rule that departures from
procedure may be forgiven where they do not appear
to have impaired the substantial rights of the parties.
27 Apropos in this regard is Cometa v. CA, 28 where
we said that — page thereof describing a parcel of land covered by
There is no question that petitioners were remiss in
attending with dispatch to the protection of their
interests as regards the subject lots, and for that
reason the case in the lower court was dismissed on
a technicality and no definitive pronouncement on
the inadequacy of the price paid for the levied
properties was ever made. In this regard, it bears
stressing that procedural rules are not to be belittled
or dismissed simply because their non-observance
may have resulted in prejudice to a party’s
substantive rights as in this case. Like all rules, they
are required to be followed except when only for the
most persuasive of reasons they may be relaxed to
relieve a litigant of an injustice not commensurate
with the degree of his thoughtlessness in not
complying with the procedure prescribed. 29
(emphasis and Italics supplied.)
In short, since rules of procedure are mere tools
designed to facilitate the attainment of justice, their
strict and rigid application which would result in
technicalities that tend to frustrate rather than
promote substantial justice must always be avoided.
30 Technicality should not be allowed to stand in the
way of equitably and completely resolving the rights
and obligations of the parties. 31  judicial foreclosure where statutory requirements are
Eschewing, therefore, the procedural objections
raised by petitioner, it behooves us to address the
issue of whether or not the questioned writ of
possession is in fact a nullity considering that it
includes real property not expressly mentioned in the
Certificate of Sale of Real Property.
Petitioner, in sum, dwells on the general proposition
that since the certificate of sale is a public document,
it enjoys the presumption of regularity and all entries
therein are presumed to be done in the performance
of regular functions.
The argument is not persuasive.
There are actually two (2) copies of the Certificate of
Sale on Execution of Real Properties issued on
February 4, 1999 involved, namely: (a) copy which is
on file with the deputy sheriff; and (b) copy
registered with the Registry of Deeds. The object of
scrutiny, however, is not the copy of the Certificate
of Sale on Execution of Real Properties issued by the
deputy sheriff on February 4, 1999, 32 but the copy
thereof subsequently registered by petitioner with
the Registry of Deeds on April 23, 1999, 33 which
included an entry on the dorsal portion of the first
OCT No. T-40785 not found in the Certificate of Sale
of Real Properties on file with the sheriff.
True, public documents by themselves may be
adequate to establish the presumption of their
validity. However, their probative weight must be
evaluated not in isolation but in conjunction with
other evidence adduced by the parties in the
controversy, much more so in this case where the
contents of a copy thereof subsequently registered
for documentation purposes is being contested. No
reason has been offered how and why the questioned
entry was subsequently intercalated in the copy of
the certificate of sale subsequently registered with
the Registry of Deeds. Absent any satisfactory
explanation as to why said entry was belatedly
inserted, the surreptitiousness of its inclusion
coupled with the furtive manner of its intercalation
casts serious doubt on the authenticity of petitioner’s
copy of the Certificate of Sale. Thus, it has been held
that while a public document like a notarized deed of
sale is vested with the presumption of regularity, this
is not a guarantee of the validity of its contents. 34  x       x       x
It must be pointed out in this regard that the
issuance of a Certificate of Sale is an end result of
strictly adhered to; where even the slightest
deviations therefrom will invalidate the proceeding
35 and the sale. 36 Among these requirements is an
explicit enumeration and correct description of what
properties are to be sold stated in the notice. The
stringence in the observance of these requirements
is such that an incorrect title number together with a
correct technical description of the property to be
sold and vice versa is deemed a substantial and fatal
error which results in the invalidation of the sale. 37  (5)
The certificate of sale is an accurate record of what
properties were actually sold to satisfy the debt. The
strictness in the observance of accuracy and
correctness in the description of the properties
renders the enumeration in the certificate exclusive.
Thus, subsequently including properties which have
not been explicitly mentioned therein for registration
purposes under suspicious circumstances smacks of
fraud. The explanation that the land on which the
properties sold is necessarily included and, hence,
was belatedly typed on the dorsal portion of the copy
of the certificate subsequently registered is at best a
lame excuse unworthy of belief.chanrob1es virtua1
1aw 1ibrary
The appellate court correctly observed that there was
a marked difference in the appearance of the
typewritten words appearing on the first page of the
copy of the Certificate of Sale registered with the
Registry of Deeds 38 and those appearing at the
dorsal portion thereof. Underscoring the irregularity
of the intercalation is the clearly devious attempt to
let such an insertion pass unnoticed by typing the
same at the back of the first page instead of on the
second page which was merely half-filled and could
accommodate the entry with room to spare.
The argument that the land on which the buildings
levied upon in execution is necessarily included is,
likewise, tenuous. Article 415 of the Civil Code
provides:chanrob1es virtual 1aw library
ART. 415. The following are immovable
property:chanrob1es virtual 1aw library
(1) Land, buildings, roads and constructions of all
kinds adhered to the soil:chanrob1es virtual 1aw
library
(3) Everything attached to an immovable in a fixed
manner, in such a way that it cannot be separated
therefrom without breaking the material or
deterioration of the object;
(4) Statues, reliefs, paintings or other objects for use
or ornamentation, placed in buildings or on lands by
the owner of the immovable in such a manner that it
reveals the intention to attach them permanently to
the tenements;
Machinery, receptacles, instruments or
implements intended by the owner of the tenement
for an industry or works which may be carried on in
a building or on a piece of land, and which tend
directly to meet the needs of the said industry or
works;
(6) Animal houses, pigeon houses, beehives, fish
ponds or breeding places of similar nature, in case
their owner has placed them or preserves them with
the intention to have them permanently attached to
the land, and forming a permanent part of it; the
animals in these places are also included;
x       x       x
(9) Docks and structures which, though floating, are
intended by their nature and object to remain at a
fixed place on a river, lake or coast;
x       x       x.
The foregoing provision of the Civil Code enumerates
land and buildings separately. This can only mean
that a building is, by itself, considered immovable.
39 Thus, it has been held that —
. . . while it is true that a mortgage of land
necessarily includes, in the absence of stipulation of
the improvements thereon, buildings, still a building
by itself may be mortgaged apart from the land on
which it has been built. Such mortgage would be still
a real estate mortgage for the building would still be
considered immovable property even if dealt with
separately and apart from the land. 40 (emphasis
and Italics supplied)
In this case, considering that what was sold by virtue
of the writ of execution issued by the trial court was
merely the storehouse and bodega constructed on
the parcel of land covered by Transfer Certificate of
Title No. T-40785, which by themselves are real
properties of respondents spouses, the same should
be regarded as separate and distinct from the
conveyance of the lot on which they stand.
WHEREFORE, in view of all the foregoing, the petition
is hereby DENIED for lack of merit. The Decision
dated May 13, 2002 of the Court of Appeals in CA-
G.R. SP No. 65891, which declared the writ of
possession issued by the Regional Trial Court of
Balanga City, Branch 1, on July 18, 2001, null and
void, is AFFIRMED in toto.
SO ORDERED.
G.R. No. 116710      June 25, 2001
DANILO D. MENDOZA, also doing business
under the name and style of ATLANTIC
EXCHANGE PHILIPPINES, petitioner, 
vs.
COURT OF APPEALS, PHILIPPINE NATIONAL
BANK, FERNANDO MARAMAG, JR., RICARDO G.
DECEPIDA and BAYANI A.
BAUTISTA, respondents. 
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the
Decision1 dated August 8, 1994 of the respondent
Court of Appeals (Tenth Division) in CA-G.R. CV No.
38036 reversing the judgment2 of the Regional Trial
Court (RTC) and dismissing the complaint therein.
Petitioner Danilo D. Mendoza is engaged in the
domestic and international trading of raw materials
and chemicals. He operates under the business name
Atlantic Exchange Philippines (Atlantic), a single
proprietorship registered with the Department of
Trade and Industry (DTI). Sometime in 1978 he was
granted by respondent Philippine National Bank
(PNB) a Five Hundred Thousand Pesos (P500,000.00)
credit line and a One Million Pesos (P1,000,000.00)
Letter of Credit/Trust Receipt (LC/TR) line.
As security for the credit accommodations and for
those which may thereinafter be granted, petitioner
mortgaged to respondent PNB the following: 1) three
(3) parcels of land3 with improvements in F. Pasco
Avenue, Santolan, Pasig; 2) his house and lot in
Quezon City; and 3) several pieces of machinery and
equipment in his Pasig coco-chemical plant.
The real estate mortgage4 provided the following
escalation clause:
(f) The rate of interest charged on the
obligation secured by this mortgage as well
as the interest on the amount which may
have been advanced by the Mortgagee in
accordance with paragraph (d) of the
conditions herein stipulated shall be subject
during the life of this contract to such
increase within the rates allowed by law, as
the Board of Directors of the Mortgagee
may prescribe for its debtors.
Petitioner executed in favor of respondent PNB three
(3) promissory notes covering the Five Hundred
Thousand Pesos (P500,000.00) credit line, one dated
March 8, 1979 for Three Hundred Ten Thousand
Pesos (P310,000.00); another dated March 30, 1979
for Forty Thousand Pesos (P40,000.00); and the last
dated September 27, 1979 for One Hundred Fifty
Thousand Pesos (P150,000.00). The said 1979
promissory notes uniformly stipulated: "with interest
thereon at the rate of 12% per annum, until paid,
which interest rate the Bank may, at any time,
without notice, raise within the limits allowed by law
xxx."5
Petitioner made use of his LC/TR line to purchase
raw materials from foreign importers. He signed a
total of eleven (11) documents denominated as
"Application and Agreement for Commercial Letter of
Credit,"6 on various dates from February 8 to
September 11, 1979, which uniformly contained the
following clause: "Interest shall be at the rate of 9%
per annum from the date(s) of the draft(s) to the
date(s) of arrival of payment therefor in New York.
The Bank, however, reserves the right to raise the
interest charges at any time depending on whatever
policy it may follow in the future."7
In a letter dated January 3, 1980 and signed by
Branch Manager Fil S. Carreon Jr., respondent PNB
advised petitioner Mendoza that effective December
1, 1979, the bank raised its interest rates to 14%
per annum, in line with Central Bank's Monetary
Board Resolution No. 2126 dated November 29,
1979.
On March 9, 1981, he wrote a letter to respondent
PNB requesting for the restructuring of his past due
accounts into a five-year term loan and for an
additional LC/TR line of Two Million Pesos
(P2,000,000.00).8 According to the letter, because of
the shut-down of his end-user companies and the
huge amount spent for the expansion of his
business, petitioner failed to pay to respondent bank
his LC/TR accounts as they became due and
demandable.
Ceferino D. Cura, Branch Manager of PNB
Mandaluyong replied on behalf of the respondent
bank and required petitioner to submit the following
documents before the bank would act on his request:
1) Audited Financial Statements for 1979 and 1980;
2) Projected cash flow (cash in - cash out) for five
(5) years detailed yearly; and 3) List of additional
machinery and equipment and proof of ownership
thereof. Cura also suggested that petitioner reduce
his total loan obligations to Three Million Pesos
(P3,000,000.00) "to give us more justification in
recommending a plan of payment or restructuring of
your accounts to higher authorities of the Bank."9
On September 25, 1981, petitioner sent another
letter addressed to PNB Vice-President Jose
Salvador, regarding his request for restructuring of
his loans. He offered respondent PNB the following
proposals: 1) the disposal of some of the mortgaged
properties, more particularly, his house and lot and a
vacant lot in order to pay the overdue trust receipts;
2) capitalization and conversion of the balance into a
5-year term loan payable semi-annually or on annual
installments; 3) a new Two Million Pesos
(P2,000,000.00) LC/TR line in order to enable
Atlantic Exchange Philippines to operate at full
capacity; 4) assignment of all his receivables to PNB
from all domestic and export sales generated by the
LC/TR line; and 5) maintenance of the existing Five
Hundred Thousand Pesos (P500,000.00) credit line.
The petitioner testified that respondent PNB
Mandaluyong Branch found his proposal favorable
and recommended the implementation of the
agreement. However, Fernando Maramag, PNB
Executive Vice-President, disapproved the proposed
release of the mortgaged properties and reduced the
proposed new LC/TR line to One Million Pesos
(P1,000,000.00).10 Petitioner claimed he was forced
to agree to these changes and that he was required
to submit a new formal proposal and to sign two (2)
blank promissory notes.
In a letter dated July 2, 1982, petitioner offered the
following revised proposals to respondent bank: 1)
the restructuring of past due accounts including
interests and penalties into a 5-year term loan,
payable semi-annually with one year grace period on
the principal; 2) payment of Four Hundred Thousand
Pesos (P400,000.00) upon the approval of the
proposal; 3) reduction of penalty from 3% to 1%; 4)
capitalization of the interest component with interest
rate at 16% per annum; 5) establishment of a One
Million Pesos (P1,000,000.00) LC/TR line against the
mortgaged properties; 6) assignment of all his
export proceeds to respondent bank to guarantee
payment of his loans.
According to petitioner, respondent PNB approved his It appears from the record that the subject
proposal. He further claimed that he and his wife Promissory Notes Nos. 127/82 and 128/82
were asked to sign two (2) blank promissory note superseded and novated the three (3) 1979
forms. According to petitioner, they were made to promissory notes and the eleven (11) 1979
believe that the blank promissory notes were to be "Application and Agreement for Commercial Letter of
filled out by respondent PNB to conform with the 5- Credit" which the petitioner executed in favor of
year restructuring plan allegedly agreed upon. The respondent PNB.
first Promissory Note,11 No. 127/82, covered the
principal while the second Promissory Note,12No.
According to the petitioner, sometime in June 1983
128/82, represented the accrued interest.
the new PNB Mandaluyong Branch Manager Bayani
A. Bautista suggested that he sell the coco-chemical
Petitioner testified that respondent PNB allegedly plant so that he could keep up with the semi-annual
contravened their verbal agreement by 1) affixing amortizations. On three (3) occasions, Bautista even
dates on the two (2) subject promissory notes to showed up at the plant with some unidentified
make them mature in two (2) years instead of five persons who claimed that they were interested in
(5) years as supposedly agreed upon; 2) inserting in buying the plant.
the first Promissory Note No. 127/82 an interest rate
of 21% instead of 18%; 3) inserting in the second
Petitioner testified that when he confronted the PNB
Promissory Note No. 128/82, the amount stated
management about the two (2) Promissory Notes
therein representing the accrued interest as One
Nos. 127/82 and 128/82 (marked Exhibits "BB" and
Million Five Hundred Thirty Six Thousand Four
"CC" respectively) which he claimed were improperly
Hundred Ninety Eight Pesos and Seventy Three
filled out, Bautista and Maramag assured him that
Centavos (P1,536,498.73) when it should only be
the five-year restructuring agreement would be
Seven Hundred Sixty Thousand Three Hundred
implemented on the condition that he assigns 10%
Ninety Eight Pesos and Twenty Three Centavos
of his export earnings to the Bank.13 In a letter dated
(P760,398.23) and pegging the interest rate thereon
August 22, 1983, petitioner Mendoza consented to
at 18% instead of 12%.
assign 10% of the net export proceeds of a Letter of
Credit covering goods amounting to One Hundred
The subject Promissory Notes Nos. 127/82 and Fourteen Thousand Dollars
128/82 both dated December 29, 1982 in the ($114,000.00).14 However, petitioner claimed that
principal amounts of Two Million Six Hundred Fifty respondent PNB subsequently debited 14% instead
One Thousand One Hundred Eighteen Pesos and of 10% from his export proceeds.15
Eighty Six Centavos (P2,651,118.86) and One Million
Five Hundred Thirty Six Thousand Seven Hundred
Pursuant to the escalation clauses of the subject two
Ninety Eight and Seventy Three Centavos
(2) promissory notes, the interest rate on the
(P1,536,798.73) respectively and marked Exhibits
principal amount in Promissory Note No. 127/82 was
"BB" and "CC" respectively, were payable on equal
increased from 21% to 29% on May 28, 1984, and to
semi-annual amortization and contained the
32% on July 3, 1984 while the interest rate on the
following escalation clause:
accrued interest per Promissory Note No. 128/82
was increased from 18% to 29% on May 28, 1984,
x x x which interest rate the BANK may and to 32% on July 3, 1984.
increase within the limits allowed by law at
any time depending on whatever policy it
Petitioner failed to pay the subject two (2)
may adopt in the future; Provided, that, the
Promissory Notes Nos. 127/82 and 128/82 (Exhibits
interest rate on this note shall be
"BB" and "CC") as they fell due. Respondent PNB
correspondingly decreased in the event that
extra-judicially foreclosed the real and chattel
the applicable maximum interest rate is
mortgages, and the mortgaged properties were sold
reduced by law or by the Monetary Board.
at public auction to respondent PNB, as highest
In either case, the adjustment in the
bidder, for a total of Three Million Seven Hundred
interest rate agreed upon shall take effect
Ninety Eight Thousand Seven Hundred Nineteen
on the effectivity date of the increase or
Pesos and Fifty Centavos (P3,798,719.50).
decrease in the maximum interest rate. x x
x
The petitioner filed in the RTC in Pasig, Rizal a
complaint for specific performance, nullification of
the extra-judicial foreclosure and damages against
respondents PNB, Fernando Maramag Jr., Ricardo C.
Decepida, Vice-President for Metropolitan Branches,
and Bayani A. Bautista. He alleged that the
Extrajudicial Foreclosure Sale of the mortgaged
properties was null and void since his loans were
restructured to a five-year term loan; hence, it was
not yet due and demandable; that the escalation
clauses in the subject two (2) Promissory Notes Nos.
127/82 and 128/82 were null and void, that the total
amount presented by PNB as basis of the foreclosure
sale did not reflect the actual loan obligations of the
plaintiff to PNB; that Bautista purposely delayed
payments on his exports and caused delays in the
shipment of materials; that PNB withheld certain
personal properties not covered by the chattel
mortgage; and that the foreclosure of his mortgages
was premature so that he was unable to service his
foreign clients, resulting in actual damages
amounting to Two Million Four Thousand Four
Hundred Sixty One Pesos (P2,004,461.00).
On March 16, 1992, the trial court rendered
judgment in favor of the petitioner and ordered the
nullification of the extrajudicial foreclosure of the real
estate mortgage, the Sheriff’s sale of the mortgaged
real properties by virtue of consolidation thereof and
the cancellation of the new titles issued to PNB; that
PNB vacate the subject premises in Pasig and turn
the same over to the petitioner; and also the
nullification of the extrajudicial foreclosure and
sheriff's sale of the mortgaged chattels, and that the
chattels be returned to petitioner Mendoza if they
were removed from his Pasig premises or be paid for
if they were lost or rendered unserviceable.
The trial court also ordered respondent PNB to
restructure to five-years petitioner's principal loan of
Two Million Six Hundred Fifty One Thousand One
Hundred Eighteen Pesos and Eighty Six Centavos
(P2,651,118.86) and the accumulated capitalized
interest on the same in the amount of Seven
Hundred Sixty Thousand Three Hundred Eighty Nine
Pesos and Twenty Three Centavos (P760,389.23) as
of December 1982, and that respondent PNB should
compute the additional interest from January 1983
up to October 15, 1984 only when respondent PNB
took possession of the said properties, at the rate of
12% and 9% respectively.
The trial court also ordered respondent PNB to grant
petitioner Mendoza an additional Two Million Pesos
(P2,000,000.00) loan in order for him to have the petitioner and signed by Ceferino D. Cura, Branch
necessary capital to resume operation. It also Manager of PNB Mandaluyong, which states:
ordered respondents PNB, Bayani A. Bautista and
Ricardo C. Decepida to pay to petitioner actual
x x x In order to study intelligently the
damages in the amount of Two Million One Hundred
feasibility of your above request, please
Thirteen Thousand Nine Hundred Sixty One Pesos
submit the following documents/papers
(P2,113,961.00) and the peso equivalent of Six
within thirty (30) days from the date
Thousand Two Hundred Fifteen Dollars ($6,215.00)
thereof, viz:
at the prevailing foreign exchange rate on October
11, 1983; and exemplary damages in the amount of
Two Hundred Thousand Pesos (P200,000.00). 1. Audited Financial Statements for
1979 and 1980;
Respondent PNB appealed this decision of the trial
2. Projected cash flow (cash in -
court to the Court of Appeals. And the Court of
cash out) for five years detailed
Appeals reversed the decision of the trial court and
yearly; and
dismissed the complaint. Hence, this petition.
It is the petitioner’s contention that the PNB 3. List of additional machinery and
management restructured his existing loan equipment and proof of ownership
obligations to a five-year term loan and granted him thereof.
another Two Million Pesos (P2,000,000.00) LC/TR
line; that the Promissory Notes Nos. 127/82 and We would strongly suggest, however, that
128/82 evidencing a 2-year restructuring period or you reduce your total obligations to at least
with the due maturity date "December 29, 1984" P3 million (principal and interest and other
were filled out fraudulently by respondent PNB, and charges) to give us more justification in
contrary to his verbal agreement with respondent recommending a plan of payment or
PNB; hence, his indebtedness to respondent PNB was restructuring of your accounts to higher
not yet due and the extrajudicial foreclosure of his authorities of this bank.
real estate and chattel mortgages was premature.
On the other hand, respondent PNB denies that
The second document is a letter dated May 11, 1981
petitioner's loan obligations were restructured to five
addressed to Mr. S. Pe Benito, Jr., Managing Director
(5) years and maintains that the subject two (2)
of the Technological Resources Center and signed by
Promissory Notes Nos. 127/82 and 128/82 were
said PNB Branch Manager, Ceferino D. Cura.
filled out regularly and became due as of December
According to petitioner, this letter showed that
29, 1984 as shown on the face thereof.
respondent PNB seriously considered the
restructuring of his loan obligations to a five-year
Respondent Court of Appeals held that there is no term loan, to wit:
evidence of a promise from respondent PNB,
admittedly a banking corporation, that it had
xxx
accepted the proposals of the petitioner to have a
five-year restructuring of his overdue loan
obligations. It found and held, on the basis of the At the request of our client, we would like to
evidence adduced, that "appellee's (Mendoza) furnish you with the following information
communications were mere proposals while the pertinent to his accounts with us:
bank's responses were not categorical that the
appellee's request had been favorably accepted by
xxx
the bank."
Contending that respondent PNB had allegedly We are currently evaluating the
approved his proposed five-year restructuring plan, proposal of the client to re-
petitioner presented three (3) documents executed structure his accounts with us into
by respondent PNB officials. The first document is a a five-year plan.
letter dated March 16, 1981 addressed to the
 We hope that the above information will
guide you in evaluating the proposals of Mr.
Danilo Mendoza.
xxx
The third document is a letter dated July 8, 1981
addressed to petitioner and signed by PNB Assistant
Vice-President Apolonio B. Francisco.
xxx
Considering that your
accounts/accommodations were granted
and carried in the books of our
Mandaluyong Branch, we would suggest
that your requests and proposals be
directed to Ceferino Cura, Manager of our
said Branch.
We feel certain that Mr. Cura will be pleased
to discuss matters of mutual interest with
you.
xxx
Petitioner also presented a letter which he addressed
to Mr. Jose Salvador, Vice-President of the
Metropolitan Branches of PNB, dated September 24,
1981, which reads:
Re: Restructuring of our Account into a 5-
year Term Loan and Request for the
Establishment of a P2.0 Million LC/TR Line
Dear Sir:
In compliance with our discussion last
September 17, we would like to formalize
our proposal to support our above
requested assistance from the Philippine
National Bank.
xxx
Again we wish to express our sincere
appreciation for your open-minded approach
towards the solution of this problem which
we know and will be beneficial and to the
best interest of the bank and mutually
advantageous to your client.
xxx
Petitioner argues that he submitted the requirements
according to the instructions given to him and that
upon submission thereof, his proposed five-year
restructuring plan was deemed automatically
approved by respondent PNB. 
We disagree.
Nowhere in those letters is there a categorical
statement that respondent PNB had approved the
petitioner’s proposed five-year restructuring plan. It
is stretching the imagination to construe them as
evidence that his proposed five-year restructuring
plan has been approved by the respondent PNB
which is admittedly a banking corporation. Only an
absolute and unqualified acceptance of a definite
offer manifests the consent necessary to perfect a
contract.16 If anything, those correspondences only
prove that the parties had not gone beyond the
preparation stage, which is the period from the start
of the negotiations until the moment just before the
agreement of the parties.17
There is nothing in the record that even suggests
that respondent PNB assented to the alleged five-
year restructure of petitioner’s overdue loan
obligations to PNB. However, the trial court ruled in
favor of petitioner Mendoza, holding that since
petitioner has complied with the conditions of the
alleged oral contract, the latter may not renege on
its obligation to honor the five-year restructuring
period, under the rule of promissory estoppel.
Citing Ramos v. Central Bank,18 the trial court said:
The broad general rule to the effect that a
promise to do or not to do something in the
future does not work an estoppel must be
qualified, since there are numerous cases in
which an estoppel has been predicated on
promises or assurances as to future
conduct. The doctrine of ‘promissory
estoppel’ is by no means new, although the
name has been adopted only in
comparatively recent years. According to
that doctrine, an estoppel may arise from
the making of a promise, even though
without consideration, if it was intended
that the promise should be relied upon and
in fact it was relied upon, and if a refusal to
enforce it would be virtually to sanction the
perpetration of fraud or would result in
other injustice. In this respect, the reliance
by the promisee is generally evidenced by
action or forbearance on his part, and the
idea has been expressed that such action or
forbearance would reasonably have been
expected by the promissor. xxx
The doctrine of promissory estoppel is an exception
to the general rule that a promise of future conduct
does not constitute an estoppel. In some
jurisdictions, in order to make out a claim of
promissory estoppel, a party bears the burden of
establishing the following elements: (1) a promise
reasonably expected to induce action or
forebearance; (2) such promise did in fact induce
such action or forebearance, and (3) the party
suffered detriment as a result.19
It is clear from the forgoing that the doctrine of
promissory estoppel presupposes the existence of a
promise on the part of one against whom estoppel is
claimed. The promise must be plain and
unambiguous and sufficiently specific so that the
Judiciary can understand the obligation assumed and
enforce the promise according to its terms.20 For
petitioner to claim that respondent PNB is estopped
to deny the five-year restructuring plan, he must
first prove that respondent PNB had promised to
approve the plan in exchange for the submission of
the proposal. As discussed earlier, no such promise
was proven, therefore, the doctrine does not apply to
the case at bar. A cause of action for promissory
estoppel does not lie where an alleged oral promise
was conditional, so that reliance upon it was not
reasonable.21 It does not operate to create liability
where it does not otherwise exist.22
Since there is no basis to rule that petitioner's
overdue loan obligations were restructured to mature
in a period of five (5) years, we see no other option
but to respect the two-year period as contained in
the two (2) subject Promissory Notes Nos. 127/82
and 128/82, marked as Exhibits "BB" and "CC"
respectively which superseded and novated all prior
loan documents signed by petitioner in favor of
respondent PNB. Petitioner argues, in his
memorandum, that "respondent Court of Appeals
had no basis in saying that the acceptance of the
five-year restructuring is totally absent from the
record."23 On the contrary, the subject Promissory
Notes Nos. 127/82 and 128/82 are clear on their
face that they were due on December 29, 1984 or
two (2) years from the date of the signing of the said
notes on December 29, 1982.
Petitioner claims that the two (2) subject Promissory
Notes Nos. 127/82 and 128/82 were signed by him
in blank with the understanding that they were to be
subsequently filled out to conform with his alleged
oral agreements with PNB officials, among which is
that they were to become due only after five (5)
years. If petitioner were to be believed, the PNB
officials concerned committed a fraudulent act in
filling out the subject two (2) promissory notes in
question. Private transactions are presumed to be
fair and regular.24 The burden of presenting evidence
to overcome this presumption falls upon petitioner.
Considering that petitioner imputes a serious act of
fraud on respondent PNB, which is a banking
corporation, this court will not be satisfied with
anything but the most convincing evidence.
However, apart from petitioner's self-serving verbal
declarations, we find no sufficient proof that the
subject two (2) Promissory Notes Nos. 127/82 and
128/82 were completed irregularly. Therefore, we
rule that the presumption has not been rebutted.
Besides, it could be gleaned from the record that the
petitioner is an astute businessman who took care to
reduce in writing his business proposals to the
respondent bank. It is unthinkable that the same
person would commit the careless mistake of leaving
his subject two (2) promissory notes in blank in the
hands of other persons. As the respondent Court of
Appeals correctly pointed out:
Surely, plaintiff-appellee who is a C.P.A and
a Tax Consultant (p. 3 TSN, January 9,
1990) will insist that the details of the two
promissory notes he and his wife executed
in 1982 should be specific to enable them to
make the precise computation in the event
of default as in the case at bench. In fact,
his alleged omission as a C.P.A. and a Tax
Consultant to insist that the two promissory
notes be filled up on important details like
the rates of interest is inconsistent with the
legal presumption of a person who takes
ordinary care of his concerns (Section 3 (c),
Rule 131, Revised Rules on Evidence).
As pointed out by the Court of Appeals, Orlando
Montecillo, Chief, Loans and Discounts, PNB
Mandaluyong Branch, testified that the said
Promissory Notes Nos. 127/82 and 128/82 were
completely filled out when Danilo Mendoza signed
them (Rollo, p. 14).
In a last-ditch effort to save his five-year loan
restructuring theory, petitioner contends that
respondent PNB's action of withholding 10% from his
export proceeds is proof that his proposal had been
accepted and the contract had been partially
executed. He claims that he would not have
consented to the additional burden if there were no
corresponding benefit. This contention is not well
taken. There is no credible proof that the 10%
assignment of his export proceeds was not part of
the conditions of the two-year restructuring deal.
Considering that the resulting amount obtained from
this assignment of export proceeds was not even
enough to cover the interest for the corresponding
month,25 we are hard-pressed to construe it as the
required proof that respondent PNB allegedly
approved the proposed five-year restructuring of
petitioner’s overdue loan obligations.
It is interesting to note that in his Complaint,
petitioner made no mention that the assignment of
his export proceeds was a condition for the alleged
approval of his proposed five-year loan restructuring
plan. The Complaint merely alleged that "plaintiff in a
sincere effort to make payments on his obligations
agreed to assign 10% of his export proceeds to
defendant PNB." This curious omission leads the
court to believe that the alleged link between the
petitioner’s assignment of export proceeds and the
alleged five-year restructuring of his overdue loans
was more contrived than real.
It appears that respondent bank increased the
interest rates on the two (2) subject Promissory
Notes Nos. 127/82 and 128/82 without the prior
consent of the petitioner. The petitioner did not
agree to the increase in the stipulated interest rate
of 21% per annum on Promissory Note No. 127/82
and 18% per annum on Promissory Note No. 128/82.
As held in several cases, the unilateral determination
and imposition of increased interest rates by
respondent bank is violative of the principle of
mutuality of contracts ordained in Article 1308 of the
Civil Code.26 As held in one case:27
It is basic that there can be no contract in
the true sense in the absence of the
element of agreement, or of mutual assent
of the parties. If this assent is wanting on
the part of one who contracts, his act has
no more efficacy than if it had been done
under duress or by a person of unsound
mind.
Similarly, contract changes must be made
with the consent of the contracting parties.
The minds of all the parties must meet as to
the proposed modification, especially when
it affects an important aspect of the
agreement. In the case of loan contracts, it
cannot be gainsaid that the rate of interest
is always a vital component, for it can make
or break a capital venture.
It has been held that no one receiving a proposal to
change a contract to which he is a party is obliged to
answer the proposal, and his silence per se cannot
be construed as an acceptance.28 Estoppel will not lie
against the petitioner regarding the increase in the
stipulated interest on the subject Promissory Notes
Nos. 127/82 and 128/82 inasmuch as he was not
even informed beforehand by respondent bank of the
change in the stipulated interest rates. However, we
also note that the said two (2) subject Promissory
Notes Nos. 127/82 and 128/82 expressly provide for
a penalty charge of 3% per annum to be imposed on
any unpaid amount when due.
Petitioner prays for the release of some of his
movables29 being withheld by respondent PNB,
alleging that they were not included among the
chattels he mortgaged to respondent bank. However,
petitioner did not present any proof as to when he
acquired the subject movables and hence, we are not
disposed to believe that the same were "after-
acquired" chattels not covered by the chattel and
real estate mortgages.
In asserting its rights over the subject movables,
respondent PNB relies on a common provision in the
two (2) subject Promissory Notes Nos. 127/82 and
128/82 which states:
In the event that this note is not paid at
maturity or when the same becomes due
under any of the provisions hereof, we
hereby authorized the BANK at its option
and without notice, to apply to the payment
of this note, any and all moneys, securities
and things of value which may be in its
hands on deposit or otherwise belonging to
 me/us and for this purpose. We hereby,
jointly and severally, irrevocably constitute
and appoint the BANK to be our true
Attorney-in-Fact with full power and
authority for us in our name and behalf and
without prior notice to negotiate, sell and
transfer any moneys securities and things of
value which it may hold, by public or private
sale and apply the proceeds thereof to the
payment of this note.
It is clear, however, from the above-quoted provision
of the said promissory notes that respondent bank is
authorized, in case of default, to sell "things of
value" belonging to the mortgagor "which may be on
its hands for deposit or otherwise belonging to me/us
and for this purpose." Besides the petitioner
executed not only a chattel mortgage but also a real
estate mortgage to secure his loan obligations to
respondent bank.
A stipulation in the mortgage, extending its scope
and effect to after-acquired property is valid and
binding where the after-acquired property is in
renewal of, or in substitution for, goods on hand
when the mortgage was executed, or is purchased
with the proceeds of the sale of such goods.30 As
earlier pointed out, the petitioner did not present any
proof as to when the subject movables were
acquired.
More importantly, respondent bank makes a valid
argument for the retention of the subject movables.
Respondent PNB asserts that those movables were in
fact "immovables by destination" under Art. 415 (5)
of the Civil Code.31 It is an established rule that a
mortgage constituted on an immovable includes not
only the land but also the buildings, machinery and
accessories installed at the time the mortgage was
constituted as well as the buildings, machinery and
accessories belonging to the mortgagor, installed
after the constitution thereof.32
Petitioner also contends that respondent PNB’s bid
prices for this foreclosed properties in the total
amount of Three Million Seven Hundred Ninety Eight
Thousand Seven Hundred Nineteen Pesos and Fifty
Centavos (P3,798,719.50), were allegedly
"unconscionable and shocking to the conscience of
men". He claims that the fair market appraisal of his
foreclosed plant site together with the improvements
thereon located in Pasig, Metro Manila amounted to
Five Million Four Hundred Forty One Thousand Six
Hundred Fifty Pesos (P5,441,650.00) while that of WHEREFORE, the petition is hereby DENIED. The
his house and lot in Quezon City amounted to Seven challenged Decision of the Court of Appeals in CA-
Hundred Twenty Two Thousand Pesos (P722,000.00) G.R. CV No. 38036 is AFFIRMED with modification
per the appraisal report dated September 20, 1990 that the increase in the stipulated interest rates of
of Cuervo Appraisers, Inc.33 That contention is not 21% per annum and 18% per annum appearing on
well taken considering that: Promissory Notes Nos. 127/82 and 128/82
respectively is hereby declared null and void.
1. The total of the principal amounts alone
of petitioner’s subject Promissory Notes SO ORDERED.
Nos. 127/82 and 128/82 which are both
overdue amounted to Four Million One
Hundred Eighty Seven Thousand Nine
Hundred Seventeen Pesos and Fifty Nine
Centavos (P 4,187,917.59).
2. While the appraisal of Cuervo Appraisers,
Inc. was undertaken in September 1990,
the extrajudicial foreclosure of petitioner’s
real estate and chattel mortgages have
been effected way back on October 15,
1984, October 23, 1984 and December 21,
1984.34 Common experience shows that real
estate values especially in Metro Manila tend
to go upward due to developments in the
locality.1âwphi1.nêt
3. In the public auction/foreclosure sales,
respondent PNB, as mortgagee, was not
obliged to bid more than its claims or more
than the amount of petitioner’s loan
obligations which are all overdue. The
foreclosed real estate and chattel mortgages
which petitioner earlier executed are
accessory contracts covering the collaterals
or security of his loans with respondent
PNB. The principal contracts are the
Promissory Notes Nos. 127/82 and 128/82
which superseded and novated the 1979
promissory notes and the 1979 eleven (11)
Applications and Agreements for
Commercial Letter of Credit.
Finally, the record shows that petitioner did not even
attempt to tender any redemption price to
respondent PNB, as highest bidder of the said
foreclosed real estate properties, during the one-year
redemption period.
In view of all the foregoing, it is our view and we
hold that the extrajudicial foreclosure of petitioner’s
real estate and chattel mortgages was not premature
and that it was in fact legal and valid.
SECOND DIVISION
G.R. No. 212483, October 05, 2016
PHILIPPINE NATIONAL
BANK, Petitioner, v. VENANCIO C. REYES,
JR., Respondent.
DECISION
LEONEN, J.:
A spouse's consent is indispensable for the
disposition or encumbrance of conjugal properties.
This resolves a dispute between petitioner Philippine
National Bank and respondent Venancio C. Reyes, Jr.
(Venancio). Philippine National Bank filed a Petition
for Review on Certiorari1 assailing the
Decision2 dated August 22, 2013 and the
Resolution3 dated May 5, 2014 of the Court of
Appeals. The assailed Court of Appeals Decision
affirmed the Decision and Order of Branch 81 of the
Regional Trial Court of Malolos, Bulacan, which
annulled the real estate mortgage and the certificate
of sale issued under the extrajudicial foreclosure
conducted, and ordered Lilia Reyes (Lilia) to
reimburse to Philippine National Bank the total loan
amount she borrowed from the bank. 4chanrobleslaw
Venancio is married to Lilia since 1973. During their
union, they acquired three (3) parcels of land in
Malolos, Bulacan. Transfer Certificates of Title (TCT)
Nos. T-52812 and T-52813 were registered under
"Felicidad Pascual and Lilia C. Reyes, married to
Venancio Reyes[,]"5 while TCT No. 53994 was
registered under "Lilia C. Reyes, married to Venancio
Reyes."6chanrobleslaw
The properties were mortgaged to Philippine National
Bank on August 25, 1994 to secure a loan worth
P1,100,000.00,7 which on October 6, 1994 was
increased to P3,000,000.00.8 According to Philippine
National Bank, the Reyes Spouses contracted and
duly consented to the loan.9chanrobleslaw
When the Reyes Spouses failed to pay the loan
obligations, Philippine National Bank foreclosed the
mortgaged real properties.10 The auction sale was
held on September 19, 1997. Philippine National
Bank emerged as the highest bidder, and a
certificate of sale was issued in its
favor.11chanrobleslaw
On September 22, 1998, Venancio filed before the
Regional Trial Court a Complaint (or Annulment of
Certificate of Sale and Real Estate Mortgage against
Philippine National Bank.12Upon order of the trial
court, Venancio amended his Complaint to include
Lilia and the Provincial Sheriff ofBulacan as
defendants.13chanrobleslaw
In assailing the validity of the real estate mortgage,
Venancio claimed that his wife undertook the loan
and the mortgage without his consent and his
signature was falsified on the promissory notes and
the mortgage.14chanrobleslaw
Since the three (3) lots involved were conjugal
properties, he argued that the mortgage constituted
over them was void.15chanrobleslaw
On May 27, 2009, Branch 81 of the Regional Trial
Court of Malolos, Bulacan ordered the annulment of
the real estate mortgage and directed Lilia to
reimburse Philippine National Bank the loan amount
with interest.16 The dispositive portion reads:
chanRoblesvirtualLawlibrary
WHEREFORE, judgment is hereby rendered:
chanRoblesvirtualLawlibrary1. Annulling in its
entirety the Real Estate Mortgage Contract and the
Amendment thereto, the Certificate of Sale issued
pursuant to the extra judicial foreclosure and the
foreclosure proceedings on the subject properties
covered by Transfer Certificates of Title Nos. T-
53994, T-
52812 and T-52813 of the Registry of Deeds of
Bulacan for want of consent on the part of the
plaintiff;
2. Making the writ of preliminary injunction
permanent and perpetual conditioned on plaintiffs
posting within an inextendible period of five (5) days
from receipt thereof of the injunctive bond in the
amount Eight Hundred Thousand (P800,000.00)
pesos as contained in the Order dated November 3,
1998;
3. Ordering defendant Lilia C. Reyes to reimburse the
defendant Philippine National Bank the total loan
account of P3,324,771.18 with interest at 6% per
annum from the date of the foreclosure sale until
finality of this decision. After this decision has
attained finality interest at the rate of 12% per
annum on the principal and interest (or any part
thereof) shall be imposed until full payment.
SO ORDERED.17
Aggrieved, Philippine National Bank appealed to the
Court of Appeals. On August 22, 2013, the Court of
Appeals denied the appeal18 and affirmed the ruling
of the Regional Trial Court. The dispositive portion of
the Court of Appeals Decision reads:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the present
appeal is DENIED. The challenged Decision and Order
of the Regional Trial Court of Malolos, Bulacan,
Branch 81 dated May 27, 2009 and August 4, 2009,
respectively, are hereby AFFIRMED.19(Emphasis in
the original)
Philippine National Bank moved for reconsideration,
but the Motion was denied in the Resolution 20 dated
May 5, 2014.
Petitioner Philippine National Bank insists that the
Court of Appeals erred in affirming the ruling of the
trial court. It argues that the real estate mortgage is
valid, that the conjugal partnership should be held
liable for the loan, and that respondent Venancio C.
Reyes, Jr.'s cause of action should be deemed barred
by laches.21chanrobleslaw
Petitioner claims that respondent and his wife both
duly consented to the loan and the mortgage.22 It
points to respondent's testimony during cross
examination where he admitted that he had actual
knowledge of the loan as early as 1996, but only
filed the Complaint in 1998.23 Petitioner further
claims that it is impossible for respondent to have no
knowledge of the transaction since the ·Reyes
Spouses live together in the same house where the
notices and demand letters were sent.24 It contends
that the Court of Appeals should not have relied
heavily on the testimony of the handwriting expert
since jurisprudence show these experts are not
indispensable in determining a
forgery.25cralawredchanrobleslaw
Respondent, in his Comment,26 alleges that his wife
hid the transaction from him. Even if they lived
under the same roof, he was not aware of everything
happening in their home because as a practicing
lawyer, he was always away at work from 8 a.m. to
7 p.m.27 He likewise points out that since both the
Regional Trial Court and the Court of Appeals made a
factual finding of forgery, this Court should respect
this finding.28 Respondent contends that the conjugal
partnership cannot be held liable because a void
contract has no legal existence from which an
obligation may stem.29chanrobleslaw
The issues for resolution are:
chanRoblesvirtualLawlibraryFirst, whether the Court
of Appeals erred in declaring the real estate
mortgage void;
Second, whether the conjugal partnership can be
held liable for the loan contracted unilaterally by Lilia
C. Reyes; and cralawlawlibrary
Lastly, whether respondent is guilty of laches and
whether his claim is now barred by estoppel.
I offers testimony from a handwriting expert to prove
The real estate mortgage over a conjugal property is
void if the noncontracting spouse did not give
consent.
The Court of Appeals committed no reversible error
in affirming the ruling of the Regional Trial Court.
The real estate mortgage over the conjugal
properties is void for want of consent from
respondent. The Family Code is clear: the written
consent of the spouse who did not encumber the
property is necessary before any disposition or
encumbrance of a conjugal property can be
valid.30chanrobleslaw
It is not disputed that the Reyes Spouses were
married in 1973,31 before the Family Code took
effect. Under the Family Code, their property regime
is Conjugal Partnership of Gains; thus, Article 124 is
the applicable provision regarding te administration
of their conjugal property. It states:
chanRoblesvirtualLawlibrary
Art. 124. The administration and enjoyment of the
conjugal partnership shall belong to both spouses
jointly. In case of disagreement, the husband's
decision shall prevail, subject to recourse to the
court by the wife for proper remedy, which must be
availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or
otherwise unable to participate in the administration
of the conjugal properties, the other spouse may
assume sole powers of administration. These powers
do not include disposition or encumbrance without
authority of the court or the written consent of the
other spouse. In the absence of such authority or
consent, the disposition or encumbrance shall be
void. However, the transaction shall be construed as
a continuing offer on the part of the consenting
spouse and the third person, and may be perfected
as a binding contract upon the acceptance by the
other spouse or authorization by the court before the
offer is withdrawn by either or both offerors.
Any disposition or encumbrance of a conjugal
property by one spouse must be consented to by the
other; otherwise, it is void.32chanrobleslaw
Petitioner points to respondent's signature on the
Promissory Notes and Deed of Mortgage to prove
that he consented to the transactions.33 For his part,
respondent alleges that his signature was forged and
that his signature on the bank documents were
falsified.34 The Regional Trial Court and the Court of
Appeals both agreed that respondent presented clear
and convincing evidence that his signature, as it
appeared on the mortgage contract, was forged.
Respondent offered the expert testimony of Efren B.
Flores (Flores) of the Questioned Document Section
of the National Bureau of Investigation. Flores, a
handwriting expert, compared the signature on the
loan documents with the standard signatures of
respondent.35He concluded that they were not
written by the same person through the following
observations:
chanRoblesvirtualLawlibraryFirst, the signatures on
the loan documents were executed in a slowly drawn
motion of a pen. This can be observed in the hidden
portion of the signature because the changes in pen
pressure were abrupt.36chanrobleslaw
Second, respondent's standard signature is written
with free and wellcoordinated
strokes.37chanrobleslaw
Lastly, there were discrepancies in the structural
pattern of letter formation of the two (2) sets of
signatures. With the signatures in the loan
documents, both the upper and lower loops were
elongated. On the standard signatures, the upper
loop was shorter while the lower loop was
bigger.38chanrobleslaw
Flores was convinced that the variations he noted is
"due to the operation of a different personality and
not merely an expected and inevitable variation
found in genuine handwriting of the same
writer."39chanrobleslaw
Likewise telling was petitioner's inability to prove
that respondent took part in the transactions. Efren
Agustin (Agustin), Loan and Discount Division Chief
of Philippine National Bank, admitted that he merely
relied on the documents presented to him,40 and that
he never actually saw respondent sign the
documents, follow up, or inquire about the loan's
status or the mortgage. Agustin only testified to
seeing Lilia, but not respondent, within the bank's
premises.41chanrobleslaw
This Court is not a trier of facts. In Manotok Realty,
Inc. v CLT Realty Development Corp.,42 "[w]here ...
the findings of fact of the trial courts are affirmed by
the Court of Appeals, the same are accorded the
highest degree of respect and, generally, will not be
disturbed on appeal. Such findings are binding and
conclusive on this Court."43chanrobleslaw
We see no compelling reason to overturn the lower
couris' factual findings that the forgery was proven
with clear and convincing evidence. Having
established that his signature was forged,
respondent proved that he did not consent to the
real estate mortgage. The mortgage unilaterally
made by his wife over their conjugal property is void
and legally inexistent.
II
The lower courts may have declared the mortgage
void, but the principal obligation is not affected. It
remains valid.
Petitioner contends that the conjugal partnership
should be made liable to the extent that it redounded
to the benefit of the family under Article 122 of the
Family Code.
Petitioner's reliance on Article 122 to support the
validity of the mortgage is misplaced.
Article 122 provides:
chanRoblesvirtualLawlibrary
ARTICLE 122. The payment of personal debts
contracted by the husband or the wife before or
during the marriage shall not be charged to the
conjugal partnership except insofar as they
redounded to the benefit of the family.
Neither shall the fines and pecuniary indemnities
imposed upon them be charged to the partnership.
However, the payment of personal debts contracted
by either spouse before the marriage, that of fines
and indemnities imposed upon them, as well as the
support of illegitimate children of either spouse, may
be enforced against the partnership assets after the
responsibilities enumerated in the preceding Article
have been covered, if the spouse who is bound
should have no exclusive property or if it should be
insufficient; but at the time of the liquidation of the
partnership, such spouse shall be charged for what
has been paid for the purposes above-mentioned.
Article 122 applies to debts that were contracted by
a spouse and redounded to the benefit of the family.
It applies specifically to the loan that respondent's
wife Lilia contracted, but not to the mortgage.
To be clear, nowhere in the Decision did the Court of
Appeals state that the principal obligation secured by
the mortgage was void. The Court of Appeals
affirmed the May 27, 2009 Decision of the Regional
Trial Court ordering, respondent's wife to reimburse
the petitioner the total loan amount 44 "of
P3,324,771.18 with interest at 6% per annum from
the date of the foreclosure sale until finality of this
decision."45 The Regional Trial Court further imposed
interest at 12% per annum on the principal and
interest, or any part thereof, after the decision had
attained finality and until full
payment.46chanrobleslaw
Ayala Investment & Development Corp. v. Court of
Appeals47 has explained how Article 121 should be
applied:
chanRoblesvirtualLawlibrary
From the foregoing jurisprudential rulings of this
Court, we can derive the following conclusions:
chanRoblesvirtualLawlibrary(A) If the husband
himself is the principal obligor in the contract, i.e.,
he directly received the money and services to be
used in or for his own business or his own
profession, that contract falls within the term "x x x
obligations for the benefit of the conjugal
partnership. " Here, no actual benefit may be
proved. It is enough that the benefit to the family is
apparent at the time of the signing of the contract.
From the very nature of the contract of loan or
services, the family stands to benefit from the loan
facility or services to be rendered to the business or
profession of the husband. It is immaterial, if in the
end, his business or profession fails or does not In Philippine National Bank v. Banatao,51 "a mortgage
succeed. Simply stated, where the husband is merely an accessory agreement and does not
contracts obligations on behalf of the family affect the principal contract of loan. The mortgages,
business, the law presumes, and rightly so, that while void, can still be considered as instruments
such obligation will redound to the benefit of the evidencing the indebtedness[.]"52chanrobleslaw
conjugal partnership.
III
(B) On the other hand, if the money or services are
given to another person or entity, and the husband Laches does not apply where the delay is within the
acted only as a surety or guarantor, that contract period prescribed by law.
cannot, by itself, alone be categorized as falling
within the context of "obligations for the benefit of Petitioner contends that respondent's action to annul
the conjugal partnership." The contract of loan or the Deed of Real Estate Mortgage is already barred
services is clearly for the benefit of the principal by latches.53 This is erroneous.
debtor and not for the surety or his family. No
presumption can be inferred that, when a husband As found by the trial court, records show that upon
enters into a contract of surety or accommodation learning about the mortgage, respondent
agreement, it is "for the benefit of the conjugal immediately informed the bank about his forged
partnership." Proof must be presented to establish signature.54 He filed the Complaint for Annulment of
benefit redounding to the conjugal Certificate of Sale and Real Estate Mortgage against
partnership.48(Emphasis supplied) petitioner on September 22, 1998, which was still
within the prescribed period to redeem a mortgaged
There are two scenarios considered: one is when the property.55chanrobleslaw
husband, or in this case, the wife, contracts a loan to
be used for the family business and the other is In Torbela v. Rosario:56chanrobleslaw
when she acts as a surety or guarantor. If she is a
mere surety or guarantor, evidence that the family
Laches means the failure or neglect, for an
benefited from the loan need to be presented before
unreasonable and unexplained length of time, to do
the conjugal partnership can be held liable. On the
that which by exercising due diligence could or
other hand, if the loan was taken out to be used for
should have been done earlier. It is negligence or
the family business, there is no need to prove actual
omission to assert a right within a reasonable time,
benefit. The law presumes the family benefited from
warranting a presumption that the party entitled to
the loan and the conjugal partnership is held liable.
assert it either has abandoned it or declined to assert
it. As the Court explained in the preceding
According to petitioner, the Regional Trial Court
paragraphs, the Torbela siblings instituted Civil Case
found49 that the loan was used as additional working
No. U-4359 five years after Dr. Rosario's repudiation
capital for respondent's printing business. As held
of the express trust, still within the 10-year
in Ayala Investment, since the loaned money is used
prescriptive period for enforcement of such trusts.
in the husband's business, there is a presumption
This does not constitute an unreasonable delay in
that it redounded to the benefit of the family; hence,
asserting one's right. A delay within the prescriptive
the conjugal partnership may be held liable for the
period is sanctioned by law and is not considered to
loan amount.50 Since there is a legal presumption to
be a delay that would bar relief Laches apply only in
this effect, there is no need to prove actual benefit to
the absence of a statutory prescriptive
the family.
period.57 (Emphasis supplied)
What the lower courts declared void was the real
Since respondent filed the Complaint for Annulment
estate mortgage attached to the conjugal property of
of Certificate of Sale and Real Estate Mortgage within
the Reyes Spouses. Since the real estate mortgage
the period of redemption prescribed by law,
was an encumbrance attached to a conjugal property
petitioner fails to convince that respondent slept on
without the consent of the other spouse, it is void
his right.
and legally inexistent. Although petitioner cannot
foreclose the mortgage over the conjugal property in
The mortgage over the conjugal property is void and
question, it can still recover the loan amount from
cannot be foreclosed. However, petitioner can still
the conjugal partnership.
hold the conjugal partnership liable for the principal
 obligation since the loan is presumed to have
redounded to the benefit of the family. If the
conjugal partnership is insufficient to cover the
liability, the husband is solidarity liable with the wife
for the unpaid balance.58chanrobleslaw
If the conjugal partnership is insufficient to cover the
foregoing liabilities, the spouses shall be solidarily
liable for the unpaid balance with their separaie
properties. (Emphasis supplied)

The last paragraph of Article 121 of the Family Code
is instructive:
chanRoblesvirtualLawlibrary
Art. 121. The conjugal partnership shall be liable for:
chanRoblesvirtualLawlibrary
(1) The support of the spouse, their common
children, and the legitimate children of either
spouse; however, the support of illegitimate
children shall be governed by the provisions of
this Code on Support; 
(2)  All debts and obligations contracted during the
marriage by the designated administrator-
spouse for the benefit of the conjugal
partnership of gains, or by both spouses or by
one of them with the consent of the other;
(3)  Debts and obligations contracted by either
spouse without the consent of the other to the
extent that the family may have benefited; 
(4) All taxes, liens, charges, and expenses,
including major or minor repairs upon the
conjugal partnership property;
The last paragraph points to the "subsidiary but
solidary liability of the separate properties"59 of the
spouses for liabilities enumerated in the Article. This
Article, similar to Article 94 of the Family Code
governing the Absolute Community of Property
regime, explicitly holds the spouses solidarity liable
with each other if the conjugal properties are not
enough to answer for the liabilities. In this case, if
the conjugal properties of the Reyes Spouses are not
enough to answer for the loan, petitioner can recover
the remaining unpaid balance from the separate
properties of either respondent or his wife Lilia.
WHEREFORE, the Petition is DENIED for failure to
show the Court of Appeals committed a reversible
error in the assailed Decision. The Decision of the
Court of Appeals dated August 22, 2013 in CA-G.R.
CV No. 94018 is AFFIRMED with MODIFICATION,
in that Spouses Venancio C. Reyes, Jr. and Lilia
Reyes are declared jointly and solidarity liable with
each other with their separate properties if their
conjugal partnership is insufficient to fully pay for the
loan.
SO ORDERED.

(5)  All taxes and expenses for mere preservation

made during the marriage upon the separate
property of either spouse;

(6) Expenses to enable either spouse to commence

or complete a professional, vocational, or other
activity for self-improvement;

(7)  Ante-nuptial debts of either spouse insofar as

they have redounded to the benefit of the
family;

(8)  The value of what is donated or promised by

both spouses in favor of their common
legitimate children for the exclusive purpose of
commencing or completing a professional or
vocational course or other activity for self- G.R. No. 177886             November 27, 2008
improvement; and
SPOUSES LEOPOLDO S. VIOLA and MERCEDITA
(9)  Expenses of litigation between the spouses VIOLA, petitioners, 
unless the suit is found to groundless.
vs.
EQUITABLE PCI BANK, INC., respondent.
DECISION
CARPIO MORALES, J.:
Via a contract denominated as "CREDIT LINE AND
REAL ESTATE MORTGAGE AGREEMENT FOR
PROPERTY LINE"1(Credit Line Agreement) executed
on March 31, 1997, Leo-Mers Commercial, Inc., as
the Client, and its officers spouses Leopoldo and
Mercedita Viola (petitioners) obtained a loan through
a credit line facility in the maximum amount
of P4,700,000.00 from the Philippine Commercial
International Bank (PCI Bank), which was later
merged with Equitable Bank and became known as
Equitable PCI Bank, Inc. (respondent).
The Credit Line Agreement stipulated that the loan
would bear interest at the "prevailing PCIBank
lending rate" per annum on the principal obligation
and a "penalty fee of three percent (3%) per month
on the outstanding amount."
To secure the payment of the loan, petitioners
executed also on March 31, 1997 a "Real Estate
Mortgage"2 in favor of PCIBank over their two parcels
of land covered by Transfer Certificates of Title No.
N-113861 (consisting of 300 square meters, more or
less ) and N-129036 (consisting of 446 square
meters, more or less) of the Registry of Deeds of
Marikina.
Petitioners availed of the full amount of the loan.
Subsequently, they made partial payments which
totaled P3,669,210.67. By respondent’s claim,
petitioner had since November 24, 2000 made no
further payments and despite demand, they failed to
pay their outstanding obligation which, as of
September 30, 2002, totaled P14,024,623.22,
broken down as follows:
(a) Principal obligation
(b) Past due interest from 11/24/00
to 09/30/02 at 15% interest
(c) Penalty at 3% per month from
03/31/98 to 02/23/02
P14,024,623.22
Respondent thus extrajudicially foreclosed the
mortgage before the Office of the Clerk of Court &
Ex-Officio Provincial Sheriff of the Regional Trial
Court (RTC) of Marikina City. The mortgaged
properties were sold on April 10, 2003
for P4,284,000.00 at public auction to respondent,
after which a Certificate of Sale dated April 21,
20034 was issued.
More than five months later or on October 8, 2003,
petitioners filed a complaint5 for annulment of
foreclosure sale, accounting and damages before the
Marikina RTC, docketed as Civil Case No. 2003-905-
MK and raffled to Branch 192. Petitioners alleged,
inter alia, that they had made substantial payments
of P3,669,210.67 receipts of which were issued
without respondent specifying "whether the payment
was for interest, penalty or the principal obligation;"
that based on respondent’s statement of account,
not a single centavo of their payments was applied to
the principal obligation; that every time respondent
sent them a statement of account and demand
letters, they requested for a proper accounting for
the purpose of determining their actual obligation,
but all their requests were unjustifiably ignored on
account of which they were forced to discontinue
payment; that "the foreclosure proceedings and
auction sale were not only irregularly and
prematurely held but were null and void because the
mortgage debt is only P2,224,073.31 on the principal
obligation and P1,455,137.36 on the interest, or a
total of only P3,679,210.67 as of April 15, 2003, but
the mortgaged properties were sold to satisfy an
inflated and erroneous principal obligation
of P4,783,254.69, plus 3% penalty fee per month or
33% per year and 15% interest per year, which
amounted to P14,024,623.22 as of September 30,
2002;" that "the parties never agreed and stipulated
in the real estate mortgage contract " that the 15%
interest per annum on the principal loan and the 3%
penalty fee per month on the outstanding
amount would be covered or secured by the
mortgage; that assuming respondent could impose
P4,783,254.69
such interest and penalty fee, the same are
"exorbitant, unreasonable, iniquitous and
unconscionable, hence, must be reduced;" and that
P1,345,290.38
respondent is only allowed to impose the legal rate
of interest of 12% per annum on the principal loan
absent any stipulation thereon.6
P7,896,078.15
In its Answer, respondent denied petitioners’
assertions, contending, inter alia, that the absence of
stipulation in the mortgage contract securing the
payment of 15% interest per annum on the principal
loan, as well as the 3% penalty fee per month on the
outstanding amount, is immaterial since the
mortgage contract is "a mere accessory contract
which must take its bearings from the
principal Credit Line Agreement."7
During the pre-trial conference, the parties defined
as sole issue in the case whether the mortgage
contract also secured the payment of 15% interest
per annum on the principal loan of P4,700,000.00
and the 3% penalty fee per month on the
outstanding amount, which interest and penalty fee
are stipulated only in the Credit Line Agreement.8
By Decision9 of September 14, 2005, the trial court
sustained respondent’s affirmative position on the
issue but found the questioned interest and penalty
fee "excessive and exorbitant." Thus, it
equitably reduced the interest on the principal loan
from 15% to 12% per annum and the penalty fee
per month on the outstanding amount from 3%
to 1.5% per month.
Accordingly, the court nullified the foreclosure
proceedings and the Certificate of Sale subsequently
issued, "without prejudice" to the holding anew of
foreclosure proceedings based on the "re-computed
amount" of the indebtedness, "if the circumstances
so warrant."
The dispositive portion of the trial court’s Decision
reads:
WHEREFORE, judgment is hereby rendered
as follows:
1) The interest on the principal loan in the
amount of Four Million Seven Hundred
Thousand (P4,700,000.00) Pesos should
be recomputed at 12% per annum;
2) The 3% per month penalty on delinquent
account as stipulated by the parties in the
Credit Line Contract dated March 31, 1997
is hereby REDUCED to 1.5% per month;
 3) The foreclosure sale conducted on April
10, 2003 by the Clerk of Court and Ex-
Officio Sheriff of Marikina, to satisfy the
plaintiff’s mortgage
indebtedness, and the Certificate of Sale iss
ued as a consequence of the said
proceedings, are declared NULL and VOID,  A mortgage must "sufficiently describe the debt
without prejudice to the conduct of another  sought to be secured, which description must not be
foreclosure proceedings on the basis of ther
e-computed amount of the plaintiff’s indebte
dness, if the circumstances so warrant.
No pronouncement as to costs.
SO ORDERED. (Underscoring supplied)
Petitioners filed a Motion for Partial
Reconsideration,10 contending that the penalty fee
per month on the outstanding amount should have
been taken out of the coverage of the mortgage
contract as it was not stipulated therein. By Order
dated December 6, 2005, the trial court denied the
motion.
On appeal by petitioners, the Court of Appeals, by
Decision11 of February 21, 2007, dismissed the same
for lack of merit, holding that "the Real Estate
Mortgage covers not only the principal amount
[of P4,700,000.00] but also the ‘interest and bank
charges,’ which [phrase bank charges] refers to
the penalty charges stipulated in the Credit Line
Agreement."12
Petitioners’ Motion for Reconsideration having been
denied by Resolution13 of May 16, 2007, they filed
the present Petition for Review on Certiorari, alleging
that –
THE HONORABLE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR IN
DECIDING THE CASE NOT IN ACCORD WITH
LAW AND APPLICABLE DECISIONS OF THE
SUPREME COURT BY RULING THAT THERE
IS NOAMBIGUITY IN CONSTRUING
TOGETHER THE CREDIT LINE AND
MORTGAGE CONTRACTS WHICH
PROVIDED CONFLICTING PROVISIONS AS
TO INTEREST AND PENALTY.14
The only issue is whether the mortgage contract also
secured the penalty fee per month on the
outstanding amount as stipulated in the Credit Line CLIENT shall pay the
Agreement. deficiencyimmediately in addition
to collection expenses incurred by
the BANK and a penalty fee of
The Court holds not.
three percent (3%) per month of
the outstanding amount to be
computed from the day deficiency
is incurred up to the date of full
such as to mislead or deceive, and an obligation is payment thereon.
not secured by a mortgage unless it comes fairly
within the terms of the mortgage.15
x x x x.16 (Underscoring supplied)
In the case at bar, the parties executed two separate
The Real Estate Mortgage contract states its
documents on March 31, 1997 – the Credit Line
coverage, thus:
Agreement granting the Client a loan through a
credit facility in the maximum amount
of P4,700,000.00, and the Real Estate Mortgage That for and in consideration of certain
contract securing the payment thereof. Undisputedly, loans, credit and other banking facilities
both contracts were prepared by respondent and obtained x x x from the Mortgagee, the
written in fine print, single space. principal amount of which is PESOS FOUR
MILLION SEVEN HUNDERED THOUSAND
ONLY (P4,700,000.00) Philippine
The Credit Line Agreement contains the following
Currency, and for the purpose of securing
stipulations on interest and delinquency charges:
the payment thereof, including the
interest and bank chargesaccruing
A. CREDIT FACILITY thereon, the costs of collecting the same
and of taking possession of and keeping the
9. INTEREST ON AVAILMENTS mortgaged propert[ies], and all other
expenses to which the Mortgagee may be
put in connection with or as an incident to
The CLIENT shall pay the BANK this mortgage, as well as the faithful
interest on each availment against compliance with the terms and conditions of
the Credit Facility at the rate of: this agreement and of the separate
instruments under which the credits hereby
PREVAILING PCIBANK secured were obtained, the Mortgagor does
LENDING RATE hereby constitute in favor of the Mortgagee,
its successors or assigns, a mortgage on the
real property particularly described, and the
for the first interest period as defined in location of which is set forth, in the list
A(10) hereof. x x x. appearing at the back hereof and/or
appended hereto, of which the Mortgagor
xxxx declare that he is the absolute owner and
the one in possession thereof, free and clear
of any liens, encumbrances and adverse
15. DELINQUENCY
claims.17 (Emphasis and underscoring
supplied)
CLIENT’s account shall be
considered delinquent if the
The immediately-quoted provision of the mortgage
availments exceed the amount of
contract does not specifically mention that, aside
the line and/or in case the Account
from the principal loan obligation, it also secures the
is debited for unpaid interest and
payment of "a penalty fee of three percent (3%) per
the Available Balance is insufficient
month of the outstanding amount to be computed
to cover the amount debited. In
from the day deficiency is incurred up to the date of
such cases, the Available Balance
full payment thereon," which penalty as the above-
shall become negative and the
quoted portion of the Credit Line
Agreement expressly stipulates.
Since an action to foreclose "must be limited to the
amount mentioned in the mortgage"18 and the
penalty fee of 3% per month of the outstanding
obligation is not mentioned in the mortgage, it must
be excluded from the computation of the amount
secured by the mortgage.
The ruling of the Court of Appeals in its assailed
Decision that the phrase "including the interest
and bank charges" in the mortgage contract "refers
to the penalty charges stipulated in the Credit Line
Agreement" is unavailing.
"Penalty fee" is entirely different from "bank
charges." The phrase "bank charges" is normally
understood to refer to compensation for services. A
"penalty fee" is likened to a compensation
for damages in case of breach of the obligation.
Being penal in nature, such fee must
be specific and fixed by the contracting parties,
unlike in the present case which slaps
a 3% penalty fee per month of the outstanding am
ount of the obligation.
Moreover, the "penalty fee" does not belong to the
species of obligation enumerated in the mortgage
contract, namely: "loans, credit and other banking
facilities obtained x x x from the Mortgagee, . . .
including the interest and bank charges, . . . the
costs of collecting the same and of taking possession
of and keeping the mortgaged properties, and all
other expenses to which the Mortgagee may be put
in connection with or as an incident to this
mortgage . . ."
In Philippine Bank of Communications v. Court of
Appeals19 which raised a similar issue, this Court
held:
The sole issue in this case is whether, in the
foreclosure of a real estate mortgage, the
penalties stipulated in two promissory notes
secured by the mortgage may be charged
against the mortgagors as part of the sums
secured, although the mortgage contract
does not mention the said penalties.
xxxx
We immediately discern that the mortgage
contract does not at all mention the
penalties stipulated in the promissory notes.
However, the petitioner insists that the
penalties are covered by the following
provision of the mortgage contract:
This mortgage is given as security
for the payment to the
MORTGAGEE on demand or at
maturity, as the case may be, of all
promissory notes, letters of credit,
trust receipts, bills of exchange,
drafts, overdrafts and all other
obligations of every kind already
incurred or which hereafter may be
incurred….
xxxx
The Court is unconvinced, for the cases
relied upon by the petitioner are
inapplicable. x x x.
xxxx
The mortgage contract is also one of
creates an ambiguity between the two contracts,
adhesion as it was prepared solely by the
which ambiguity must be resolved in favor of
petitioner and the only participation of the
petitioners and against respondent who drafted the
other party was the affixing of his signature
contracts. Again, as stressed by the Court in
or "adhesion" thereto. Being a contract of
Philippine Bank of Communications:
adhesion, the mortgage is to be strictly
construed against the petitioner, the party
which prepared the agreement.
A reading, not only of the earlier quoted
provision, but of the entire mortgage
contract yields no mention of penalty
charges. Construing this silence strictly
against the petitioner, it can fairly be
concluded that the petitioner did not intend
to include the penalties on the promissory
notes in the secured amount. This explains
the finding by the trial court, as affirmed by
the Court of Appeals, that "penalties and
charges are not due for want of stipulation
in the mortgage contract."
Indeed, a mortgage must sufficiently
describe the debt sought to be secured ,
which description must not be such as to
mislead or deceive, and an obligation is
not secured by a mortgage unless it
comes fairly within the terms of the
mortgage. In this case, the mortgage
contract provides that it secures notes and
other evidences of indebtedness. Under the
rule of ejusdem generis, where a description
of things of a particular class or kind is
"accompanied by words of a generic
character, the generic words will usually be
limited to things of a kindred nature with
those particularly enumerated . . . " A
penalty charge does not belong to the
species of obligations enumerated in
the mortgage, hence, the said contract
cannot be understood to secure the
penalty.20(Emphasis and underscoring
supplied)
Respondent’s contention that the absence in
the mortgage contract of a stipulation
securing the payment of the 3% penalty fee
per month on the outstanding amount is of
no consequence, the deed of mortgage
being merely an "accessory contract" that
"must take its bearings from the principal
Credit Line Agreement,"21 fails. Such
absence is significant as it
There is also sufficient authority to declare
that any ambiguity in a contract whose
terms are susceptible of different
interpretations must be read against the
party who drafted it.
A mortgage and a note secured by it are
deemed parts of one transaction and are
construed together, thus, an ambiguity is
created when the notes provide for the
payment of a penalty but the mortgage
contract does not. Construing the
ambiguity against the petitioner, it follows
that no penalty was intended to be
covered by the mortgage. The mortgage
contract consisted of three pages with no
less than seventeen conditions in fine print;
it included provisions for interest and
attorney’s fees similar to those in the
 promissory notes; and it even provided for
the payment of taxes and insurance
charges. Plainly, the petitioner can be as
specific as it wants to be, yet it simply did
not specify nor even allude to, that the
penalty in the promissory notes would be
secured by the mortgage. This can then
only be interpreted to mean that the
petitioner had no design of including the
penalty in the amount secured.22 (Emphasis
and underscoring supplied)
WHEREFORE, the assailed Court of Appeals Decision
of February 21, 2007 and Resolution of May 16, 2007
in CA-G.R. SP No. CA-G.R. CV No. 86412 affirming
the trial court’s decision are, in light of the foregoing
disquisition, AFFIRMED withMODIFICATION in
that the "penalty fee" per month of the outstanding
obligation is excluded in the computation of the
amount secured by the Real Estate Mortgage
executed by petitioners in respondent’s favor.
SO ORDERED.
G.R. No. 152071               May 8, 2009
PRODUCERS BANK OF THE
PHILIPPINES, Petitioner,  payment, respondent sent petitioner a letter dated
vs.
EXCELSA INDUSTRIES, INC., Respondent.
DECISION
TINGA, J.:
This is a petition for review on certiorari 1 under Rule
43 of the 1997 Rules of Civil Procedure, assailing the
decision2and resolution3 of the Court of Appeals in
CA-G.R. CV No. 59931. The Court of Appeals’
decision4 reversed the decision of the Regional Trial
Court (RTC), Branch 73, Antipolo, Rizal, upholding
the extrajudicial foreclosure of the mortgage on
respondent’s properties, while the resolution denied
petitioner’s motion for reconsideration.5
As borne by the records of the case, the following
factual antecedents appear:
Respondent Excelsa Industries, Inc. is a MORTGAGOR does hereby transfer and convey by
manufacturer and exporter of fuel products,
particularly charcoal briquettes, as an alternative fuel
source. Sometime in January 1987, respondent
applied for a packing credit line or a credit export
advance with petitioner Producers Bank of the
Philippines, a banking institution duly organized and
existing under Philippines laws.6
The application was supported by Letter of Credit No.
M3411610NS2970 dated 14 October 1986. Kwang Ju
Bank, Ltd. of Seoul, Korea issued the letter of credit
through its correspondent bank, the Bank of the
Philippine Islands, in the amount of US$23,000.00
for the account of Shin Sung Commercial Co., Ltd.,
also located in Seoul, Korea. T.L. World Development
Corporation was the original beneficiary of the letter
of credit. On 05 December 1986, for value received,
T.L. World transferred to respondent all its rights and
obligations under the said letter of credit. Petitioner
approved respondent’s application for a packing
credit line in the amount of ₱300,000.00, of which
about ₱96,000.00 in principal remained
outstanding.7 Respondent executed the
corresponding promissory notes evidencing the
indebtedness.8
Prior to the application for the packing credit line,
respondent had obtained a loan from petitioner in
the form of a bill discounted and secured credit
accommodation in the amount of ₱200,000.00, of
which ₱110,000.00 was outstanding at the time of
the approval of the packing credit line. The loan was
secured by a real estate mortgage dated 05
December 1986 over respondent’s properties
covered by Transfer Certificates of Titles (TCT) No.
N-68661, N-68662, N-68663, N-68664, N-68665 and
N-68666, all issued by the Register of Deeds of
Marikina.9
Significantly, the real estate mortgage contained the
following clause:
For and in consideration of those certain loans,
overdraft and/or other credit accommodations on
this date obtained from the MORTGAGEE, and to
secure the payment of the same, the principal of all
of which is hereby fixed at FIVE HUNDRED
THOUSAND PESOS ONLY (₱500,000.00) Pesos,
Philippine Currency, as well as those that the
MORTGAGEE may hereafter extend to the
MORTGAGOR, including interest and expenses or any
other obligation owing to the MORTGAGEE, the
way of mortgage unto the MORTGAGEE, its
successors or assigns, the parcel(s) of land which
is/are described in the list inserted on the back of
this document, and/or appended hereto, together
with all the buildings and improvements now existing
or which may hereafter be erected or constructed
thereon, of which the MORTGAGOR declares that
he/it is the absolute owner, free from all liens and
encumbrances.10
On 17 March 1987, respondent presented for
negotiation to petitioner drafts drawn under the
letter of credit and the corresponding export
documents in consideration for its drawings in the
amounts of US$5,739.76 and US$4,585.79.
Petitioner purchased the drafts and export
documents by paying respondent the peso equivalent
of the drawings. The purchase was subject to the
conditions laid down in two separate undertakings by
respondent dated 17 March 1987 and 10 April
1987.11
On 24 April 1987, Kwang Ju Bank, Ltd. notified
petitioner through cable that the Korean buyer
refused to pay respondent’s export documents on
account of typographical discrepancies. Kwang Ju
Bank, Ltd. returned to petitioner the export
documents.12
Upon learning about the Korean importer’s non-
27 July 1987, informing the latter that respondent
had brought the matter before the Korea Trade Court
and that it was ready to liquidate its past due
account with petitioner. Respondent sent another
letter dated 08 September 1987, reiterating the
same assurance. In a letter 05 October 1987, Kwang
Ju Bank, Ltd. informed petitioner that it would be
returning the export documents on account of the
non-acceptance by the importer.13
Petitioner demanded from respondent the payment
of the peso equivalent of the export documents, plus
interest and other charges, and also of the other due
and unpaid loans. Due to respondent’s failure to
heed the demand, petitioner moved for the
extrajudicial foreclosure on the real estate mortgage
over respondent’s properties.  No. 90-787, before the same branch of the RTC of
Per petitioner’s computation, aside from charges for
attorney’s fees and sheriff’s fees, respondent had a
total due and demandable obligation of ₱573,225.60,
including interest, in six different accounts, namely:
1) EBP-PHO-87-1121 (US$4,585.97 x
21.212) = ₱119,165.06
2) EBP-PHO-87-1095 (US$ 5,739.76 x
21.212) = 151,580.97
3) BDS-001-87 = 61,777.78
4) BDS-030/86 A = 123,555.55
5) BDS-PC-002-/87 = 55,822.91
6) BDS-005/87 = 61,323.33
₱573,225.6014
The total approved bid price, which included the
attorney’s fees and sheriff fees, was pegged at
₱752,074.63. At the public auction held on 05
January 1988, the Sheriff of Antipolo, Rizal issued a
Certificate of Sale in favor of petitioner as the
highest bidder.15 The certificate of sale was
registered on 24 March 1988.16
On 12 June 1989, petitioner executed an affidavit of
consolidation over the foreclosed properties after
respondent failed to redeem the same. As a result,
the Register of Deeds of Marikina issued new
certificates of title in the name of petitioner.17
On 17 November 1989, respondent instituted an
action for the annulment of the extrajudicial
foreclosure with prayer for preliminary injunction and
damages against petitioner and the Register of
Deeds of Marikina. Docketed as Civil Case No. 1587-
A, the complaint was raffled to Branch 73 of the RTC
of Antipolo, Rizal. The complaint prayed, among
others, that the defendants be enjoined from causing
the transfer of ownership over the foreclosed
properties from respondent to petitioner.18
On 05 April 1990, petitioner filed a petition for the
issuance of a writ of possession, docketed as LR Case
Antipolo, Rizal. The RTC ordered the consolidation of
Civil Case No, 1587-A and LR Case No. 90-787.19
On 18 December 1997, the RTC rendered a decision
upholding the validity of the extrajudicial foreclosure
and ordering the issuance of a writ of possession in
favor of petitioner, to wit:
WHEREFORE, in Case No. 1587-A, the court hereby
rules that the foreclosure of mortgage for the old and
new obligations of the plaintiff Excelsa Industries
Corp., which has remained unpaid up to the time of
foreclosure by defendant Producers Bank of the
Philippines was valid, legal and in order; In Case No.
787-A, the court hereby orders for the issuance of a
writ of possession in favor of Producer’s Bank of the
Philippines after the properties of Excelsa Industries
Corp., which were foreclosed and consolidated in the
name of Producers Bank of the Philippines under TCT
No. 169031, 169032, 169033, 169034 and 169035
of the Register of Deeds of Marikina.
SO ORDERED.20
The RTC held that petitioner, whose obligation
consisted only of receiving, and not of collecting, the
export proceeds for the purpose of converting into
Philippine currency and remitting the same to
respondent, cannot be considered as respondent’s
agent. The RTC also held that petitioner cannot be
presumed to have received the export proceeds,
considering that respondent executed undertakings
warranting that the drafts and accompanying
documents were genuine and accurately represented
the facts stated therein and would be accepted and
paid in accordance with their tenor.21
Furthermore, the RTC concluded that petitioner had
no obligation to return the export documents and
respondent could not expect their return prior to the
payment of the export advances because the drafts
and export documents were the evidence that
respondent received export advances from
petitioner.22
The RTC also found that by its admission, respondent
had other loan obligations obtained from petitioner
which were due and demandable; hence, petitioner
correctly exercised its right to foreclose the real
estate mortgage, which provided that the same
secured the payment of not only the loans already
obtained but also the export advances.231avvphi1
Lastly, the RTC found respondent guilty of laches in
questioning the foreclosure sale considering that
petitioner made several demands for payment of
respondent’s outstanding loans as early as July 1987
and that respondent acknowledged the failure to pay
its loans and advances.24
The RTC denied respondent’s motion for
reconsideration.25 Thus, respondent elevated the
matter to the Court of Appeals, reiterating its claim
that petitioner was not only a collection agent but
was considered a purchaser of the export 
On 30 May 2001, the Court of Appeals rendered the
assailed decision, reversing the RTC’s decision, thus: 
WHEREFORE, the appeal is hereby GRANTED. The
decision of the trial court dated December 18, 1997
is REVERSED and SET ASIDE. Accordingly, the
foreclosure of mortgage on the properties of
appellant is declared as INVALID. The issuance of the
writ of possession in favor of appellee is ANNULLED.
The following damages are hereby awarded in favor
of appellant:
(a) Moral damages in the amount of
₱100,000.00;
(b) Exemplary damages in the amount of
₱100,000.00; and
(c) Costs.
SO ORDERED.26
The Court of Appeals held that respondent should not
be faulted for the dishonor of the drafts and export
documents because the obligation to collect the
export proceeds from Kwang Ju Bank, Ltd. devolved
upon petitioner. It cited the testimony of petitioner’s
manager for the foreign currency department to the
effect that petitioner was respondent’s agent, being
the only entity authorized under Central Bank
Circular No. 491 to collect directly from the importer
the export proceeds on respondent’s behalf and
converting the same to Philippine currency for
remittance to respondent. The appellate court found
that respondent was not authorized and even
powerless to collect from the importer and it
appeared that respondent was left at the mercy of
petitioner, which kept the export documents during
the time that respondent attempted to collect
payment from the Korean importer. 
The Court of Appeals disregarded the RTC’s finding
that the export documents were the only evidence of
respondent’s export advances and that petitioner
was justified in refusing to return them. It opined
that granting petitioner had no obligation to return
the export documents, the former should have
helped respondent in the collection efforts instead of
augmenting respondent’s dilemma.
Furthermore, the Court of Appeals found petitioner’s
negligence as the cause of the refusal by the Korean
buyer to pay the export proceeds based on the
following: first, petitioner had a hand in preparing
and scrutinizing the export documents wherein the
discrepancies were found; and, second, petitioner
failed to advise respondent about the warning from
Kwang Ju Bank, Ltd. that the export documents
would be returned if no explanation regarding the
discrepancies would be made.  In consideration of your negotiating the above
The Court of Appeals invalidated the extrajudicial
foreclosure of the real estate mortgage on the
ground that the posting and publication of the notice
of extrajudicial foreclosure proceedings did not
comply with  the sight draft if it was dishonored for any reason by
the personal notice requirement under paragraph
1227 of the real estate mortgage executed between
petitioner and respondent. The Court of Appeals also
overturned the RTC’s finding that respondent was
guilty of estoppel by laches in questioning the
extrajudicial foreclosure sale.
Petitioner’s motion for reconsideration28 was denied We hereby undertake to pay on demand the full
in a Resolution dated 29 January 2002. Hence, the amount of the above draft(s) or any unpaid
instant petition, arguing that the Court of Appeals balance thereof,the Philippine perso equivalent
erred in finding petitioner as respondent’s agent, converted at the prevailing selling rate (or selling
which was liable for the discrepancies in the export rate prevailing at the date you negotiate our draft,
documents, in invalidating the foreclosure sale and in whichever is higher) allowed by the Central Bank
declaring that respondent was not estopped from with interest at the rate prevailing today from the
questioning the foreclosure sale.29 date of negotiation, plus all charges and expenses
whatsoever incurred in connection therewith. You
shall neither be obliged to contest or dispute any
The validity of the extrajudicial foreclosure of the
refusal to accept or to pay the whole or any part of
mortgage is dependent on the following issues posed
the above draft(s), nor proceed in any way against
by petitioner: (1) the coverage of the "blanket
the drawee, the issuing bank or any endorser
mortgage clause;" (2) petitioner’s failure to furnish
thereof, before making a demand on us for the
personal notice of the foreclosure to respondent; and
payment of the whole or any unpaid balance of the
(3) petitioner’s obligation as negotiating bank under
draft(s).(Emphasis supplied)31
the letter of credit. 
In Velasquez v. Solidbank Corporation,32 where the
Notably, the errors cited by petitioners are factual in
drawer therein also executed a separate letter of
nature. Although the instant case is a petition for
undertaking in consideration for the bank’s
review under Rule 45 which, as a general rule, is
negotiation of its sight drafts, the Court held that the
limited to reviewing errors of law, findings of fact
drawer can still be made liable under the letter of
being conclusive as a matter of general principle,
undertaking even if he is discharged due to the
however, considering the conflict between the factual
bank’s failure to protest the non-acceptance of the
findings of the RTC and the Court of Appeals, there is
drafts. The Court explained, thus:
a need to review the factual issues as an exception
to the general rule.30
Petitioner, however, can still be made liable under
the letter of undertaking. It bears stressing that it is
Much of the discussion has revolved around who
a separate contract from the sight draft. The liability
should be liable for the dishonor of the draft and
of petitioner under the letter of undertaking is direct
export documents. In the two undertakings executed
and primary. It is independent from his liability
by respondent as a condition for the negotiation of
under the sight draft. Liability subsists on it even if
the drafts, respondent held itself liable if the drafts
the sight draft was dishonored for non-acceptance or
were not accepted. The two undertakings signed by
non-payment.
respondent are similarly-worded and contained
respondent’s express warranties, to wit:
Respondent agreed to purchase the draft and credit
petitioner its value upon the undertaking that he will
reimburse the amount in case the sight draft is
described draft(s), we hereby warrant that the
dishonored. The bank would certainly not have
said draft(s) and accompanying documents
agreed to grant petitioner an advance export
thereon are valid, genuine and accurately
payment were it not for the letter of undertaking.
represent the facts stated therein, and that
The consideration for the letter of undertaking was
such draft(s) will be accepted and paid in
petitioner’s promise to pay respondent the value of
accordance with its/their tenor. We further
undertake and agree, jointly and severally, to defend
the Bank of Seoul.33
and hold you free and harmless from any and all
actions, claims and demands whatsoever, and to pay
on demand all damages actual or compensatory Thus, notwithstanding petitioner’s alleged failure to
including attorney’s fees, costs and other awards or comply with the requirements of notice of dishonor
be adjudged to pay, in case of suit, which you may and protest under Sections 8934 and
suffer arising from, by reason, or on account of your 152,35 respectively, of the Negotiable Instruments
negotiating the above draft(s) because of the Law, respondent may not escape its liability under
following discrepancies or reasons or any other the separate undertakings, where respondent
discrepancy or reason whatever. 
promised to pay on demand the full amount of the
drafts.
The next question, therefore, is whether the real
estate mortgage also served as security for
respondent’s drafts that were not accepted and paid
by the Kwang Ju Bank, Ltd.
Respondent executed a real estate mortgage
containing a "blanket mortgage clause," also known
as a "dragnet clause." It has been settled in a long
line of decisions that mortgages given to secure
future advancements are valid and legal contracts,
and the amounts named as consideration in said
contracts do not limit the amount for which the
mortgage may stand as security if from the four
corners of the instrument the intent to secure future
and other indebtedness can be gathered.36
In Union Bank of the Philippines v. Court of
Appeals,37 the nature of a dragnet clause was
explained, thus:
Is one which is specifically phrased to subsume all
debts of past and future origins. Such clauses are
"carefully scrutinized and strictly construed."
Mortgages of this character enable the parties to
provide continuous dealings, the nature or extent of
which may not be known or anticipated at the time,
and they avoid the expense and inconvenience of
executing a new security on each new transaction. A
"dragnet clause" operates as a convenience and
accommodation to the borrowers as it makes
available additional funds without their  the plaintiff for the payment of plaintiff’s outstanding
having to execute additional security documents,
thereby saving time, travel, loan closing costs, costs
of extra legal services, recording fees, et cetera.38
xxx
Petitioner, therefore, was not precluded from seeking
the foreclosure of the real estate mortgage based on
the unpaid drafts drawn by respondent. In any case,
respondent had admitted that aside from the unpaid
drafts, respondent also had due and demandable
loans secured from another account as evidenced by
Promissory Notes (PN Nos.) BDS-001-87, BDS-
030/86 A, BDS-PC-002-/87 and BDS-005/87.
However, the Court of Appeals invalidated the The Court adopts and approves the aforequoted
extrajudicial foreclosure of the mortgage on the findings by the RTC, the same being fully supported
ground that petitioner had failed to furnish by the evidence on record.
respondent personal notice of the sale contrary to
the stipulation in the real estate mortgage. 
WHEREFORE, the instant petition for review on
certiorari is GRANTED and the decision and
Petitioner, on the other hand, claims that under resolution of the Court of Appeals in CA-G.R. CV No.
paragraph 1239 of the real estate mortgage, personal 59931 are REVERSED and SET ASIDE. The decision
notice of the foreclosure sale is not a requirement to of the Regional Trial Court Branch 73, Antipolo, Rizal
the validity of the foreclosure sale.  in Civil Case No. 1587-A and LR Case No. 90-787 is
REINSTATED. 
A perusal of the records of the case shows that a
notice of sheriff’s sale40 was sent by registered mail SO ORDERED.
to respondent and received in due course.41 Yet,
respondent claims that it did not receive the notice
but only learned about it from petitioner. In any
event, paragraph 12 of the real estate mortgage
requires petitioner merely to furnish respondent with
the notice and does not oblige petitioner to ensure
that respondent actually receives the notice. On this
score, the Court holds that petitioner has performed
its obligation under paragraph 12 of the real estate
mortgage.
As regards the issue of whether respondent may still
question the foreclosure sale, the RTC held that the
sale was conducted according to the legal procedure,
to wit:
Plaintiff is estopped from questioning the foreclosure.
The plaintiff is guilty of laches and cannot at this
point in time question the foreclosure of the subject
properties. Defendant bank made demands against
loans and advances with the defendant as early as
July 1997. Plaintiff acknowledged such outstanding
loans and advances to the defendant bank and
committed to liquidate the same. For failure of the
plaintiff to pay its obligations on maturity, defendant
bank foreclosed the mortgage on subject properties
on January 5, 1988 the certificate of sale was
annotated on March 24, 1988 and there being no
redemption made by the plaintiff, title to said
properties were consolidated in the name of
defendant in July 1989. Undeniably, subject
foreclosure was done in accordance with the
prescribed rules as may be borne out by the exhibits
submitted to this Court which are Exhibit "33," a
notice of extrajudicial sale executed by the Sheriff of
Antipolo, Exhibit "34" certificate posting of
extrajudicial sale, Exhibit "35" return card evidencing
receipt by plaintiff of the notice of extrajudicial sale
and Exhibit "21" affidavit of publication.