51. Lozano vs. Tan Suico, 23 Phil.

16 

FACTS:

The defendant had borrowed from plaintiff the sum of P340, under a promise to repay the
same within a period of two months. The plaintiff further alleged that the defendant had
guaranteed to pay an indebtedness of Dona Maria Ifurung, of the sum of P400. To secure
the payment of these two sums of money, the defendant had executed and delivered to
him a certain mortgage, upon certain property.

The defendant answered by denying generally and specifically all of the allegations of the
complaint, admitting, however, that he had borrowed from the plaintiff the sum of P340 on
the 3d of October, 1906, but declared that the same had been paid on the 2d of
December of the same year.

After hearing the evidence, the court found that the defendant owed the plaintiff nothing,
and ordered, adjudged and decreed that the case be dismissed, with costs against the
plaintiff, with the right on the part of the plaintiff to file another proceeding for the P400
due him by said Maria Ifurung, if said amount of P400 is not or shall not be paid by the
said Maria Ifurung or by her guarantor. Hence this petition.

ISSUE:

Whether a valid contract of mortgage was executed between the plaintiff and respondent.

RULING:

No, the document presented cannot be considered as a mortgage. While it was executed
before a notary public, it has not been recorded. There is no proof in the record that the
same had been registered. (Art. 1875, Civil Code.) The action, therefore, brought upon
said document can in no sense be regarded as an action to foreclose a mortgage. The
action is one upon a contract to pay money simply.
52. Carpo vs. Chua, 472 SCRA 471 

FACTS:

Petitioners borrowed from Respondents the amount of P175,000, payable within 6

months with an interest rate of 6% per month. To secure the payment of the loan,
petitioners mortgaged their residential house and lot. Petitioners failed to pay the loan
upon demand. Consequently, the real estate mortgage was extrajudicially foreclosed
and the mortgaged property sold at a public auction, where it was awarded to
respondents, where were the only bidders. Upon the failure of petitioners to exercise
their right of redemption, a certificate of sale was issued and a new TCT was issued
in the name of respondents. Despite issuance of the TCT, petitioners continued to
occupy the said house and lot, prompting respondents to file a petition for writ of
possession with the RTC. A writ of possession was issued. Petitioners filed a
complaint for annulment of real estate mortgage and the consequent foreclosure
proceedings. Petitioners claim that following the Court’s ruling in Medel v CA, the rate
of interest stipulated in the principal loan agreement is clearly null and void.
Consequently, the also argue that the nullity of the agreed interest rate affects the
validity of the real estate mortgage.

ISSUE:

Whether or not the rate of interest stipulated in the principal loan agreement is null
and void?

RULING:

YES, the rate of interest stipulated is null and void. Petitioners contend that the
agreed rate of interest of 6% per month or 72% per annum is so excessive, iniquitous,
unconscionable and exorbitant that it should have been declared null and void.
Pursuant to the freedom of contract principle embodied in Article 1306 of the Civil
Code, contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy. In the ordinary course, the codal
provision may be invoked to annul the excessive stipulated interest. In the case at
bar, the stipulated interest rate is 6% per month, or 72% per annum. By the standards
set in the above-cited cases, this stipulation is similarly invalid.
53. Bonnevie vs. Court of Appeals, 125 SCRA 122 

FACTS:

Spouses Jose M. Lozano and Josefa P. Lozano secured their loan of P75K from
Philippine Bank of Commerce (PBC) by mortgaging their property. On December 8,
1966 they Executed Deed of Sale with Mortgage to Honesto Bonnevie where P75K is
payable to PBC and P25K is payable to Spouses Lanzano April 28, 1967 to July 12,
1968.  Honesto Bonnevie paid a total of P18,944.22 to PBC. Honesto
Bonnevie assigned all his rights under the Deed of Sale with Assumption of Mortgage to
his brother, intervenor Raoul Bonnevie. On June 10, 1968 PBC applied for the
foreclosure of the mortgage, and notice of sale was published. Honesto Bonnevie filed
against Philippine Bank of Commerce for the annulment of the Deed of Mortgage dated
December 6, 1966 as well as the extrajudicial foreclosure made on September 4, 1968.

The RTC dismissed the complaint with costs against the Bonnevies which decision was
also affirmed by the CA. Hence this petition.

ISSUE:

Whether or not the foreclosure on the mortgage is validly executed.

RULING:

Yes, A contract of loan being a consensual contract is perfected at the same time the
contract of mortgage was executed. The promissory note executed on December 12,
1966 is only an evidence of indebtedness and does not indicate lack of consideration of
the mortgage at the time of its execution. Respondent Bank had every right to rely on
the certificate of title. It was not bound to go behind the same to look for flaws in the
mortgagor's title, the doctrine of innocent purchaser for value being applicable to an
innocent mortgagee for value. 

Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the
one-year redemption period expired on September 3, 1969. It was not until September
29, 1969 that Honesto Bonnevie first wrote respondent and offered to redeem the
property. 
loan matured on December 26, 1967 so when respondent Bank applied for foreclosure,
the loan was already six months overdue. Payment of interest on July 12, 1968 does not
make the earlier act of PBC inequitous nor does it ipso facto result in the renewal of the
loan. In order that a renewal of a loan may be effected, not only the payment of the
accrued interest is necessary but also the payment of interest for the proposed period of
renewal as well. Besides, whether or not a loan may be renewed does not solely depend
on the debtor but more so on the discretion of the bank. 
54. Metropolitan Bank and Trust Co. vs. Alejo, 364 SCRA 812 

FACTS:

Spouses Raul and Christina Acampado obtained loans from petitioner in the amounts of
P5,000,000.00 and P2,000,000.00, respectively. As security for the payment of these
credit accomodations, the spouses executed in favor of petitioner a Real Estate
Mortgage and an Amendment of Real Estate Mortgage over a parcel of land registered
in their names. The land was covered by TCT No. V-41319 in the Registry of Deeds of
Valenzuela City. On June 3, 1996, Complaint for Declaration of Nullity of TCT No.
V41319 was filed by respondent Sy Tan Se against the spouses. It was docketed as
Civil Case No. 4930-V-96 in the Regional Trial Court (RTC) of Valenzuela. Despite being
the registered mortgagee of the real property covered by the title sought to be annulled,
petitioner was not made a party to the case nor was she notified of its existence. The
spouses defaulted in the payment of their loan and extrajudicial foreclosure proceedings
were initiated wherein the petitioner submitted the highest and winning bid. A Certificate
of Sale was issued in their favor. Upon presentation to the Register of Deeds of the
Affidavit of Consolidation of Ownership, petitioner was informed of the decision in the
aforementioned civil case (complaint for declaration of nullity of TCT) declaring the
spouses’ TCT null and void. The petitioner filed with the CA a petition for annulment of
the RTC Decision. The CA dismissed their petition and ruled that the bank should have
filed a petition for relief from judgment or an action of quieting of title.

ISSUE

Whether or not a petition for annulment of judgment is the proper remedy of the
petitioner

RULING

YES. Petition for annulment of judgment was the proper remedy of the petitioner. It
precisely alleged that private respondent purposely concealed the case by excluding
petitioner as a defendant to the civil case even if he was an indispensable party. This
deprived the petitioner of its duly registered property without due process of law. The
allegation of extrinsic fraud may be the basis for annulling a judgment. Petition for relief
(what the CA recommended) was not available to the petitioner since it was never a
party to the civil case. An action for quieting of title is also not available to the petitioner.
An action for quieting of title is filed only when there is a cloud on title to real property or
any interest therein. The subject judgment cannot be considered as a cloud on
petitioner’s title or interest over real property covered by TCT, which does not even have
a semblance of being a title. Moreover, the petitioner cannot intervene to a case to which
he has no knowledge of.
55. Lagrosa vs. Court of Appeals, 312 SCRA 298

 FACTS:
Involved in this case is the possession of sixty-five (65) square meters of residential lot
located in Paco, Manila, originally owned by the City of Manila which, in due course,
following its land and housing program for the under-privileged, awarded it to one Julio
Arizapa who constructed a house and upholstery shop thereon. The award was in the
nature of a "Contract to Sell" payable monthly for a period of twenty (20) years. Julio died,
leaving behind his wife and children. His wife died the following year. The surviving
children, including Evelyn Arizapa Banua, executed a Deed of Extrajudicial Partition
adjudicating unto themselves the lot and a Renunciation in favor of Evelyn. Cesar Orolfo
is the caretaker of the same subject property as authorized and appointed by Evelyn
Banua, in whose name covering the said property is registered. The title of Evelyn Banua
to the subject property is evidenced by a Deed of Sale executed by the City of Manila in
her favor and by a TCT. Ruben Lagrosa claims to be the lawful possessor of the subject
property by virtue of the "Deed of Assignment of Real Estate Mortgage" executed in his
favor by Presentacion Quimbo on the basis of a "Contract of Real Estate Mortgage"
executed by Julio Arizapa in favor of the latter. Lagrosa posits that he cannot be evicted
from the subject property because he had prior possession as assignee of the said
"Assignment of Real Estate Mortgage" executed by Presentacion Quimbo in his favor,
and with the consent of Mauricia Albaytar, the sister of the deceased Josefa Albaytar
Arizapa, after the demise of the spouses Julio Arizapa and Josefa Albaytar. Evelyn
Banua and her husband filed a case against Lagrosa. Lagrosa, in turn, filed a case
against Cesar Orolfo.
The case filed by Evelyn Banua was ruled in her favor. The case filed by Lagrosa was
ruled in his favor. The case was consolidated in the CA, and the court affirmed the ruling
in favor of Evelyn Banua and reversed the ruling in favor of Cesar Orolfo.

ISSUE:

Whether a mortgage executed by a person who is not the owner of the property is valid.

RULING:
NO, The Deed of Real Estate Mortgage" executed by Julio Arizapa is null and void, the
property mortgaged by Julio Arizapa being owned by the City of Manila under Transfer
Certificate of Title No. 91120. For a person to validly constitute a valid mortgage on real
estate, he must be the absolute owner thereof as required by Article 2085 of the Civil
Code of the Philippines. Since the mortgage to Presentacion Quimbo of the lot is null and
void, the assignment by Presentacon Quimbo of her rights as mortgage to Lagrosa is
likewise void. Even if the mortgage is valid as insisted by herein petitioner, it is well-
settled that a mere mortgagee has no right to eject the occupants of the property
mortgaged.

56. Guanzon vs. Argel, 33 SCRA 474 

FACTS:

The respondents Dumaraogs filed an action against petitioner Guanzon for the
redemption of a parcel of rice land which their mother, Ines Flores, had mortgaged to
defendant, and to recover damages, before the Antique Court of First Instance,
presided by respondent judge. They prayed that the purported pacto de retro sale be
declared a mortgage and that Guanzon be ordered to execute an instrument of
reconveyance after payment by Dumaraog of the loan of P1,500.00.

Guanzon denied the material allegations of the complaint and alleged that the
document executed by Flores was in fact a pacto de retro sale and that her title as
vendee had been consolidated.

After trial, the lower court rendered judgment declaring the document involved to be
one of equitable mortgage, and ordered Guanzon to execute an instrument of
reconveyance in favor of Dumaraog upon payment by the latter of P1,500.00 within
20 days from the finality of the decision, otherwise execution may issue and the
Provincial Sheriff may execute the necessary document of conveyance, with costs
against Dumaraog.

In an order dated 4 March 1967, the respondent judge denied Guanzon's motion for
reconsideration for lack of merit. Respondent judge stated that it is not contemplated
in the decision that Guanzon is entitled to a deed of conveyance, and that at most,
she could withhold execution of the deed of reconveyance until Dumaraog pays
P1,500.00, otherwise the Provincial Sheriff shall execute the necessary conveyance
in her favor.

ISSUE:

Whether or not there was a grave abuse of discretion committed by respondent

Judge Argel.

RULING:

No, the court found the charge of grave of abuse of discretion not justified. In no way
can the judgment at bar be construed to mean that should the Dumaraogs fail to pay
the money within the specified period then the party would be conveyed by the Sheriff
to Guanzon. Any interpretation in that sense would contradict the declaration made in
the same judgment that the contract between the parties was in fact a mortgage and
not a pacto de retro sale. The only right of a mortgagee in case of non-payment of a
debt secured by mortgage would be to foreclose the mortgage and have the
encumbered property sold to satisfy the outstanding indebtedness. The mortgagor's
default does not operate to vest in the mortgagee the ownership of the encumbered
property, for any such effect is against public policy, as enunciated by the Civil
Code.1 The court can not be presumed to have adjudged what would be contrary to
law, unless it be plain and inescapable from its final judgment. No such purport
appears or is legitimately inferable from the terms of the judgment aforequoted.
Hence, the orders of the court below refusing to command the sheriff to convey the
property to petitioner Guanzon, as she demanded, and instead ordering her to
reconvey the property to respondents Dumaraog and receive the P1,500.00
deposited by the latter, were in conformity with the original decision that had become
final and executory.
57. Reyes vs. Sierre, 93 SCRA 472 

FACTS:
Vicente Reyes filed an application for registration of his title to a parcel of land in Antipolo
before the Bureau of Lands. He declared that he inherited the land from his father and
that the other heirs have executed a quit claim in favor of Vicente. An opposition was filed
by the director of lands, Francisco Sierra and Emilio Sierra. Later a motion to set aside an
interlocutory default was filed by the rest of the sierras, said Sierras were added as
oppositors to the registration Lower court decided in favor of Reyes, declared him the
rightful owner of the land. Hence this appeal.

ISSUE
Whether the contract between the father of Reyes and Basilia Beltran a mortgage or a
sale. 

RULING:
Reyes can’t register it under his name. Contract between father of Reyes and Beltran
was that of a mortgage and not a sale hence ownership didn’t pass to him. Thus, Court
ruled that the contract was a mortgage contract. The intention of the parties at the time
was the lending of money with security. 
58. PABLO P. GARCIA vs. YOLANDA VALDEZ VILLAR, G.R. No. 158891, June 27,
2012 

FACTS:

Lourdes V. Galas owned of a piece of property which she mortgaged to Villar as

security for a loan. Galas subsequently mortgaged the same subject property to
Pablo P. Garcia (Garcia) to secure another loan. Both mortgages were annotated on
the subject property’s TCT. Galas thereafter sold the subject property to Villar. The
Deed of Sale was registered and, consequently, a new TCT was issued in the name
of Villar. Both Villar’s and Garcia’s mortgages were carried over and annotated on
Villar’s new TCT. Garcia filed a Petition for Mandamus with Damages against Villar
before the RTC. Garcia subsequently amended his petition to a Complaint for
Foreclosure of Real Estate Mortgage with Damages and alleged that when Villar
purchased the subject property, she acted in bad faith as she knowingly and willfully
disregarded the laws on judicial and extrajudicial foreclosure of mortgaged property.
The RTC ruled in favor of Garcia and ordered Villar to pay the former the sum of
P1.8M (the amount of the loan secured by the mortgage) plus legal interest. The RTC
declared that the direct sale of the subject property to Villar, the first mortgagee, could
not operate to deprive Garcia of his right as a second mortgage. The RTC further
explained that upon Galas’s failure to pay her obligation, Villar should have foreclosed
the subject property to provide junior mortgagees like Garcia the opportunity to satisfy
their claims from the residue, if any, of the foreclosure sale proceeds. Villar appealed
and contended that the second mortgage is a void and inexistent contract. The Court
of Appeals reversed the RTC’s decision.

ISSUE

Whether or not the sale of the subject property to Villar was in violation of the
prohibition on pactum commissorium.

RULING:

No, the sale of the subject property does not violate the prohibition on pactum
commissorium. Garcia claims that the stipulation appointing Villar, the mortgagee, as
the mortgagor’s attorney-in-fact, to sell the property in case of default in the payment
of the loan, is in violation of the prohibition on pactum commissorium, as stated under
Article 2088 of the Civil Code.
59. A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION vs. COURT OF
APPEALS AND SPOUSES ROMULO S.A. JAVILLONAR AND ERLINDA P.
JAVILLONAR, G.R. No. 125055, October 30, 1998 

FACTS:

A.Francisco Realty and Development Corporation (AFRDC) loaned P7.5M to Sps

Romulo and Erlinda Javillonar, secured by a Real Estate Mortgage on the latter’s real
property. The Sps also executed and promissory note and an undated deed of sale of
the mortgaged property in favor of AFRDC. The PN provided that failure of the Sps to
pay interest on the loan will transfer full possession of the property to AFRDC and the
deed of sale will be registered. The Sps defaulted; AFRDC registered the sale and
obtained title in its name. The Sps then obtained additional loan evidenced by a PN
which states that in case of default, the Sps will voluntarily vacate the subject
property. Sps again defaulted but they refused to vacate. Thus, AFRDC filed an
action for possession of the subject property.

The Sps argued, among others, that they did not intend to sell the property to
AFRDC, and that the undated deed of sale was merely an additional security for the
loan.

The RTC ruled in favor of AFRDC. The CA reversed.

ISSUE:

Whether the Deed of Sale is void being in the nature of a pactum commissorium.

RULING:

Yes, The stipulations in the promissory notes providing that, upon failure of
respondent spouses to pay interest, ownership of the property would be automatically
transferred to petitioner A. Francisco Realty and the deed of sale in its favor would be
registered, are in substance a pactum commissorium. They embody the two elements
of pactum commissorium, namely: (1) that there should be a pledge or mortgage
wherein a property is pledged or mortgaged by way of security for the payment of the
principal obligation; and (2) that there should be a stipulation for an automatic
appropriation by the creditor of the thing pledged or mortgaged in the event of
nonpayment of the principal obligation within the stipulated period.
60. SPOUSES WILFREDO N. ONG AND EDNA SHEILA PAGUIO-ONG vs. ROBAN
LENDING CORPORATION, G.R. No. 172592, July 09, 2008 

FACTS:

Petitioner Spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong obtained several
loans from respondent Roban Lending Corporation in the total amount of P4,
000,000. These loans were secured by real estate mortgage on Spouses Ong‘s
parcel of lands.

Later Spouses Ong and Roban executed several agreements – an amendment to the
amended Real Estate Mortgage which consolidated their loans amounting to P5,
916,117.50; dacion in payment wherein spouses Ong assigned their mortgaged
properties to Roban to settle their total obligation and Memorandum of Agreement
(MOA) in which the dacion in payment agreement will be automatically enforced in
case spouses Ong fail to pay within one year from the execution of the agreement.

Spouses Ong filed a complaint before Regional Trial Court of Tarlac City to declare
the mortgage contract, dacion in payment agreement, and MOA void. Spouses Ong
allege that the dacion in payment agreement is pactum commissorium, and therefore
void. In its Answer with counterclaim, Roban alleged that the dacion in payment
agreement is valid because it is a special form of payment recognized under Article
1245 of the Civil Code. RTC ruled in favor of Roban, finding that there was no pactum
commissorium. The Court of Appeals upheld the RTC decision.

ISSUE:

Whether or not the dacion in payment agreement entered into by Spouses Ong and
Roban constitutes pactum commissorium

RULING:

Yes, the Court finds that the Memorandum of Agreement and Dacion in Payment
constitute pactum commissorium, which is prohibited under Article 2088 of the Civil
Code which provides that the creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and
void.

Here, Memorandum of Agreement and the Dacion in Payment contain no provisions

for foreclosure proceedings nor redemption. Under the Memorandum of Agreement,
the failure by the petitioners to pay their debt within the one-year period gives
respondent the right to enforce the Dacion in Payment transferring to it ownership of
the properties covered by TCT No. 297840. Respondent, in effect, automatically
acquires ownership of the properties upon Spouses Ong’s failure to pay their debt
within the stipulated period.
 In a true dacion en pago, the assignment of the property extinguishes the monetary
debt.

61. PHILIPPINE NATIONAL BANK vs. SPOUSES BERNARD AND CRESENCIA

MARAÑON, G.R. No. 189316, July 01, 2013

( SAME WITH CASE NO. 38)