credit transactions mortgage

8/17/2019 Credit Transactions Mortgage

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G.R. No. 115548 March 5, 1996

STATE INVESTMENT HOUSE INC., petitioner, vs.COURT OF APPEALS, ET AL., respondents.

FRANCISCO, J.: p

The factual background of the case, aptly summarizedin the decision of the Oce of the President and citedby respondent Court of Appeals 1 in its assaileddecision, and hich e have veri!ed to be supportedby the record is herein reproduced as follos"

The uncontroverted facts of the case as recited inthe decision of the Oce of the President are asfollos"

#ecords sho that, on October $%, $&'&,Contract to (ell )o. *' as e+ecuted by the(pouses Canuto and a. Aranzazu Oreta, and the(olid -omes, nc. /(O012, involving a parcel of

land identi!ed as 3lock )o. 4, 0ot )o. $, Phase ofthe Capitol Park -omes (ubdivision, 5uezon City,containing %$$ s6uare meters for a considerationof P*&,*78.99. :pon signing of the contract, thespouses Oreta made payment amounting toP8,4'&.79, ith the agreement that the balanceshall be payable in monthly installments ofP7%$.89, at $;< interest per annum.

On )ovember 7, $&8', (O01 e+ecuted severalreal estate mortgage contracts in favor of (tatenvestment -omes, /sic2 nc. /(TAT=2 over its

subdivided parcels of land, one of hich is thesub>ect lot covered by Transfer Certi!cate of Title)o. ;9&'7;.

?or ?ailure of (O01 to comply ith its mortgageobligations contract, (TAT= e+tra>udiciallyforeclosed the mortgaged properties includingthe sub>ect lot on April ', $&4*, ith thecorresponding certi!cate of sale issued thereforto (TAT= annotated at the back of the titlescovering the said properties on October $*, $&4*.

On @une ;*, $&47 (O01 thru a emorandum ofAgreement negotiated for the deferment ofconsolidation of onership over the foreclosedproperties by committing to redeem theproperties from (TAT=.

On August $%, $&44, the spouses !led acomplaint before the -ousing and 0and :se#egulatory 3oard, -0#3, against the developer(O01 and (TAT= for failure on the part of (O01Bto e+ecutethe necessary absolute deed of sale as ell as to

deliver title to said property . . . in violation of the

contract to sell . . .,B despite full payment of thpurchase price as of @anuary 8, $&4$. n itsAnser, (O01, by ay of alternative defense,alleged that the obligations under the Contract(ell has become so dicult . . . the hereinrespondents be partially released from saidobligation by substituting sub>ect lot ith anotsuitable residential lot from another subdivisiohich respondents onoperatesB. :pon theother hand, (TAT=, to hich the sub>ect lot a

mortgaged, averred that unless (O01 pays thredemption price of P$;%,$&%%.99, /sic2 it has right to hold on and not release the foreclosedproperties.

On ay ;*, $&4&, the Oce of Appeals,Ad>udication and 0egal ADairs /OAA0A2 renderea decision the decretal portion of hich reads"

$. Ordering respondent, (tate nvestment -ounc. to e+ecute a 1eed of Conveyance of 0ot $,3lock 4, in Capital Park -omes (ubdivision in

favor of complainants and to deliver to the lattthe corresponding certi!cate of title

;. Ordering respondent, (olid -omes, nc. to p(tate nvestment -ouse, nc. that portion of itsloan hich corresponds to the value of the lot collateral

*. Ordering respondent, (olid -omes, nc. to pto this 3oard the amount of (i+ Thousand Peso/P',999.992 as administrative !ne in accordancith (ection ;% in relation to (ection *4 of P.1.&%8.

3oth the (TAT= and (O01 appealed to the 3oaof Commissioners, -0#3, hich armed on @un%, $&&9 the OAA0AEs decision /Anne+ BCB of thePetition ibid, p. *72. Again, both (TAT= and(O01 appealed the decision of the 3oard ofCommissioners, -0#3, to the Oce of thePresident hich dismissed the tin appeals on?ebruary ;', $&&*.

Petitioner !led ith the (upreme Court thispetition for revie of decision of the Oce of tPresident here it as docketed as F.#. )o.$9&*'7. -oever, in a resolution dated ay $*$&&*, the (upreme Court referred this case tothis Court for proper disposition. On the otherhand, (O01 does not appear to have >oinedherein petitioner in this petition for revie.

n a decision dated ay $&, $&&7, respondent courtsustained the >udgment of the Oce of the President-ence, this petition substantially anchored on these

to alleged errors, namely" /$2 error in ruling that


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private respondent spouses OretaEs unregistered rightsover the sub>ect property are superior to the registeredmortgage rights of petitioner (tate nvestment -ouse,nc. /(TAT=2 and /;2 error in not applying the settledrule that persons dealing ith property covered bytorrens certi!cate of title are not re6uired to go beyondhat appears on the face of the title.

At the outset, e note that herein petitioner arguesmore e+tensively on the second assigned issue, than

on the !rst. n fact, petitioner admits the superiorrights of respondentsGspouses Oreta over the sub>ectproperty as it did not pray for the nulli!cation of thecontract beteen respondentsGspouses and (O01, butinstead asked for the payment of the release value ofthe property in 6uestion, plus interest, attorneyEs feesand costs of suit against (O01 or, in case of thelatterEs inability to pay, against respondentsGspousesbefore it can be re6uired to release the title of thesub>ect property in favor of the respondentspouses. ! And even if e ere to pass upon the !rstassigned error, e !nd respondent courtEs ruling on the

matter to be ellGfounded. (TAT=Es registeredmortgage right over the property is inferior to that ofrespondentsGspousesE unregistered right. Theunrecorded sale beteen respondentsGspouses and(O01 is preferred for the reason that if the originaloner /(O01, in this case2 had parted ith hisonership of the thing sold then he no longer hadonership and free disposal of that thing so as to beable to mortgage it again. 4#egistration of themortgage is of no moment since it is understood to beithout pre>udice to the better right of third parties.5

Anent the second issue, petitioner asserts that apurchaser or mortgagee of lands covered under theTorrens (ystem Bis not re6uired to do more than relyupon the certi!cate of title HforI it is enough that the/purchaser or mortgageeI e+amines the pertinentcerti!cate of title HithoutI need HofI lookHingI beyondsuch title.B 6

As a general rule, here there is nothing in thecerti!cate of title to indicate any cloud or vice in theonership of the property, or any encumbrancethereon, the purchaser is not re6uired to e+plore

further than hat the Torrens Title upon its faceindicates in 6uest for any hidden defect or inchoateright that may subse6uently defeat his right thereto.This rule, hoever, admits of an e+ception as herethe purchaser or mortgagee, has knoledge of a defector lack of title in his vendor, or that he as aare ofsucient facts to induce a reasonably prudent man toin6uire into the status of the title of the property inlitigation. " n this case, petitioner as ell aare thatit as dealing ith (O01, a business entity engaged inthe business of selling subdivision lots. n fact, theOAA0A found that at the time the lot as mortgaged,

respondent (tate nvestment -ouse nc., HnopetitionerI had been aare of the lotEs location andthat the said lot formed part of Capital Park-omes(ubdivision.B 8 n Sunshine Finance and InvestmentCorp. v . Intermediate Appellate Court , 9 the Courtnoting petitioner therein to be a !nancing corporatiodeviated from the general rule that a purchaser ormortgagee of a land is not re6uired to look further thhat appears on the face of the Torrens Title. Thus"

)evertheless, e have to deviate from the generrule because of the failure of the petitioner in thiscase to take the necessary precautions to ascertaif there as any Ja in the title of the mortgage. The petitioner is an investment and !nancingcorporation. Ke presume it is e+perienced in itsbusiness. Ascertainment of the status and conditof properties oDerred to it as security for the loane+tends must be a standard and indispensable paof its operations. (urely, it cannot simply rely on e+amination of a Torrens certi!cate to determinehat the sub>ect property looks like as its conditiis not apparent in the document. The land might in a depressed area. There might be s6uatters ont might be easily inundated. t might be an interilot, ithout convenient access. These and othersimilar factors determine the value of the propertand so should be of practical concern to thepetitioner.

+++ +++ +++

Our conclusion might have been diDerent if themortgagee ere an ordinary individual or compaithout the e+pertise of the petitioner in the

mortgage and sale of registered land or if the lanmortgaged ere some distance from the mortgagand could not be conveniently inspected. 3ut theere no such impediments in this case. The faciliof the petitioner ere not so limited as to prevenfrom making a more careful e+amination of the lato assure itself that there ere no unauthorizedpersons in possession. 1#

H=mphasis supplied.I

The aboveGenunciated rule should apply in this

case as petitioner admits of being a !nancinginstitution. 11Ke take >udicial notice of the unifopractice of !nancing institutions to investigate,e+amine and assess the real property oDered asecurity for any loan application especially heas in this case, the sub>ect property is asubdivision lot located at 5uezon City, .. t issettled rule that a purchaser or mortgagee cannclose its eyes to facts hich should put areasonable man upon his guard, and then claimthat he acted in good faith under the belief thatthere as no defect in the title of the vendor ormortgagor. 1 PetitionerEs constructive knoledg


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of the defect in the title of the sub>ect property, orlack of such knoledge due to its negligence,takes the place of registration of the rights ofrespondentsGspouses. #espondent Court thuscorrectly ruled that petitioner as not a purchaseror mortgagee in good faith hence petitioner cannot solely rely on hat merely appears on the faceof the Torrens Title.

ACCO#1)F0L, !nding no reversible error in the

assailed >udgment, the same is hereby A??#=1.

(O O#1=#=1.

G.R. No. 18#945 F$%r&ar' 1, #1#PHILIPPINE NATIONAL (AN), AS THE ATTORNE*+IN+FACT OF OPAL PORTFOLIO INVESTMENTS SPV+AMC-, INC., P$//o0$r, + $r2&2 +MERCE3ES CORPU, REPRESENTE3 (* HERATTORNE*+IN+FACT VALENTINA CORPU,R$2o0$0.

This case is about the need for a mortgageeGbank,

faced ith suspicious layers of transfers involving aproperty presented for mortgage, to e+ercise properdiligence in ascertaining the bona fde status of thosetransfers.

Th$ Fac2 a0 h$ Ca2$On October 7, $&87 respondent ercedes Corpuzdelivered her oners duplicate copy of TransferCerti!cate of Title /TCT2 *;4$% to 1agupan City #ural3ank as security against any liability she might incur asits cashier. (he later left her >ob and ent to the :nited(tates.

On October ;7, $&&7 the rural bank here she orked

cancelled its lien on Corpuzs title, she having incurredno liability to her employer. Kithout Corpuzsknoledge and consent, hoever, )atividad Alano, therural banks manager, turned over Corpuzs title to @ulitaCamacho and Amparo Calle>o.

Conniving ith someone from the assessors oce,Alano, Camacho, and Calle>o prepared a falsi!ed deedof sale, making it appear that on ?ebruary ;*, $&&%Corpuz sold her land to one ary 3ondocfor P%9,999.99. They caused the registration of thedeed of sale, resulting in the cancellation of TCT *;4$%and the issuance of TCT '*;'; in 3ondocs name. Abouta month later or on arch ;8, $&&% the trio e+ecuted

another !ctitious deed of sale ith ary 3ondoc sellingthe property to the spouses #ufo and Teresa Palaganasfor only P$%,999.99. This sale resulted in the issuanceof TCT '*7'' in favor of the Palaganases.

)ine days later or on April %, $&&% the Palaganasese+ecuted a deed of sale in favor of spouses Mirgilio and=lena (ongcuan for P%9,999.99, resulting in theissuance of TCT '*%;4. ?inally, four months later or onAugust $9, $&&% the (ongcuans took out a loan of P$.$million from petitioner Philippine )ational 3ank /P)32and, to secure payment, they e+ecuted a real estatemortgage on their title. 3efore granting the loan, theP)3 had the title veri!ed and the property inspected.

On )ovember ;9, $&&% respondent Cor

!led, through an attorneyGinGfact, a complaint befthe 1agupan #egional Trial Court /#TC2 against 3ondoc, the Palaganases, the (ongcuans, petitioner P)3, asking for the annulment of the layof deeds of sale covering the land, the cancellation

TCTs '*;';, '*7'', and '*%;4, and the reinstatemof TCT *;4$% in her name. On @une ;&, $&&4 the #TC rendered a decision grant

respondent Corpuzs prayers. This prompted petitioP)3 to appeal to the Court of Appeals /CA2. On @uly ;998 the CA armed the decision of the #TC denied the motion for its reconsideration, promptP)3 to take recourse to this Court.

Th$ I22&$ Pr$2$0$

The sole issue presented in this case is hetor not petitioner P)3 is a mortgagee in good faentitling it to its lien on the title to the propertydispute.

Th$ R&7/0 o h$ Co&r

Petitioner P)3 points out that, since it did a creinvestigation, inspected the property, and veri!ed clean status of the title before giving out the loanthe (ongcuans, it should be regarded as a mortgagin good faith. P)3 claims that the precautions it toconstitute sucient compliance ith the due diligere6uired of banks hen dealing ith registered landsAs a rule, the Court ould not e+pect a mortgageeconduct an e+haustive investigation of the historythe mortgagors title before he e+tends a loan.H$I petitioner P)3 is not an ordinary mortgagee ita bank.H;I 3anks are e+pected to be more cautious thordinary individuals in dealing ith lands, eregistered ones, since the business of banks is imbu

ith public interest.H*I t is of >udicial notice that standard practice for banks before approving a loanto send a staD to the property oDered as collateral averify the genuineness of the title to determine the roner or oners.H7I

One of the CAs !ndings in this case is tha

the course of its veri!cation, petitioner P)3 informed of the previous TCTs covering the subproperty.H%I And the P)3 has not categorically contesthis !nding. t is evident from the faces of those titthat the onership of the land changed from Corpuz3ondoc, from 3ondoc to the Palaganases, and from Palaganases to the (ongcuans in less than th

months and mortgaged to P)3 ithin four monthsthe last transfer.

The above information in turn should h

driven the P)3 to look at the deeds of sale involvedould have then discovered that the property as sfor ridiculously lo prices" Corpuz supposedly sold i3ondoc for >ustP%9,999.99 3ondoc to the Palaganafor >ust P$%,999.99 and the Palaganases to (ongcuans also for >ustP%9,999.99. Let the P)3 gathe property an appraised vaof P84$,8'9.99. Anyone ho deliberately ignoressigni!cant fact that ould create suspicion in

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otherise reasonable person cannot be considered asan innocent mortgagee for value.H'I

The Court !nds no reason to reverse the CA decision.:HEREFORE, the Court 3ENIES the petitionand AFFIRMS the decision of the Court of Appealsdated @uly *$, ;998 and its resolution dated 1ecember$8, ;998 in CAGF.#. CM '9'$'. (O O#1=#=1.

G.R. No. 1116# F$%r&ar' 8, ###

OSMUN3O S. CANLAS a0 ANGELINACANLAS, petitioner, vs.COURT OF APPEALS, ASIAN SAVINGS (AN),MA;IMO C. CONTRARES a0 VICENTEMAudicially foreclosed the mortgage.

On @anuary $%, $&4*, Osmundo Canlas rote a letteinforming the respondent bank that the e+ecution ofsub>ect mortgage over the to parcels of land in6uestion as ithout their /Canlas spouses2 authoritand re6uest that steps be taken to annul andor revothe 6uestioned mortgage. On @anuary $4, $&4*,petitioner Osmundo Canlas also rote the oce of(heriD a+imo O. Contreras, asking that the auctionsale scheduled on ?ebruary *, $&4* be cancelled orheld in abeyance. 3ut respondents a+imo C.Contreras and Asian (avings 3ank refused to heedpetitioner CanlasE stance and proceeded ith thescheduled auction sale.8

Conse6uently, on ?ebruary *, $&4* the hereinpetitioners instituted the present case for annulmentdeed of real estate mortgage ith prayer for theissuance of a rit of preliminary in>unction and on ;*, $&4*, the trial court issued an Order restraining trespondent sheriD from issuing the correspondingCerti!cate of (heriDEs (ale.4

?or failure to !le his anser, despite several motionsfor e+tension of time for the !ling thereof, MicenteaNosca as declared in default.&

On @une $, $&4&, the loer court a quo came out itdecision annulling sub>ect deed of mortgage anddisposing, thus"

Premises considered, >udgment is hereby rendere

as follos.1âwphi1.nêt

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$. 1eclaring the deed of real estate mortgage/=+hibit B0B2 involving the properties of the plaintiDsas null and void

;. 1eclaring the public auction sale conducted bythe defendant (heriD, involving the same propertiesas illegal and ithout binding eDect

*. Ordering the defendants, >ointly and severally, topay the plaintiDs the sum of P;9,999.99

representing attorneyEs fees

7. On defendant A(3Es crossclaim" ordering thecrossGdefendant Micente aNosca to pay thedefendant A(3 the sum of P*%9,999.99,representing the amount hich he received asproceeds of the loan secured by the void mortgage,plus interest at the legal rate, starting ?ebruary *,$&4*, the date hen the original complaint as!led, until the amount is fully paid

%. Kith costs against the defendants.

(O O#1=#=1.$9

?rom such 1ecision belo, Asian (avings 3ankappealed to the Court of Appeals, hich handed donthe assailed >udgment of reversal, dated (eptember *9,$&4*, in CAGF.#. CM )o. ;%;7;. 1issatis!ed thereith,the petitioners found their ay to this Court via thepresent Petition theorizing that"

#=(PO)1=)T CO:#T O? APP=A0( =##=1 ) -O01)FT-AT T-= O#TFAF= O? T-= P#OP=#T=( (:3@=CT O?T-( CA(= KA( MA01.

#=(PO)1=)T CO:#T O? APP=A0( =##=1 ) -O01)FT-AT P=TTO)=#( A#= )OT =)TT0=1 TO #=0=?3=CA:(= T-=L K=#= )=F0F=)T A)1 T-=#=?O#=:(T 3=A# T-= 0O((.

#=(PO)1=)T CO:#T O? APP=A0( =##=1 ) -O01)FT-AT #=(PO)1=)T A(3 ==#C(=1 1:= 10F=)C= )F#A)T)F T-= 0OA) APP0CATO) O? #=(PO)1=)T.

M

#=(PO)1=)T CO:#T O? APP=A0( =##=1 ) -O01)FT-AT #=(PO)1=)T A(3 11 )OT ACT KT- 3A1 ?AT-) P#OC==1)F KT- T-= ?O#=C0O(:#= (A0= O? T-=P#OP=#T=(.

M

#=(PO)1=)T CO:#T O? APP=A0( =##=1 ) AKA#1#=(PO)1=)T A(3 O#A0 1AAF=(.$$

The Petition is impressed ith merit.

Art. $$8* of the Civil Code, provides"

Art. $$8*. The fault or negligence of the obligconsist in the omission of that diligence hicre6uired by the nature of the obligation andcorresponds ith the circumstances of thepersons, of the time and of the place. Khennegligence shos bad faith, the provisions ofarticles $$8$ and ;;9$, paragraph ;, shallapply.

f the la or contract does not state thediligence hich is to be observed in theperformance, that hich is e+pected of a goo

father of a family shall be re6uired. /$$972

The degree of diligence re6uired of banks is more ththat of a good father of a family$; in keeping ith thresponsibility to e+ercise the necessary care andprudence in dealing even on a registered or titledproperty. The business of a bank is aDected ith pubinterest, holding in trust the money of the depositorshich bank deposits the bank should guard against ldue to negligence or bad faith, by reason of hich thbank ould be denied the protective mantle of the laregistration la, accorded only to purchasers or

mortgagees for value and in good faith.$*

n the case under consideration, from the evidence ohand it can be gleaned unerringly that respondentbank did not observe the re6uisite diligence inascertaining or verifying the real identity of the coupho introduced themselves as the spouses OsmundoCanlas and Angelina Canlas. t is orthy to note thatnot even a single identi!cation card as e+hibited bythe said impostors to sho their true identity and yethe bank acted on their representations simply on thbasis of the residence certi!cates bearing signatures

hich tended to match the signatures a+ed on aprevious deed of mortgage to a certain Atty. agno,covering the same parcels of land in 6uestion. ?elizaangubat, Assistant Mice President of Asian (avings3ank, thus testi!ed inter alia"

+ + + + + + + + +

5" According to you, the basis for your havingrecommended for the approval of A)A(COEs /sic2 loanparticularly that one involving the property of plaintiD in thcase, the spouses O(:)1O CA)0A( and A)F=0)A CA)0the basis for such approval as that according to you all th

signatures and other things taken into account matches i


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that of the document previously e+ecuted by the spousesCA)0A(

5" That is the only basis for accepting the signature onthe mortgage, the basis for the recommendation of theapproval of the loan are the !nancial statement of AQO(CA

A" Les among others the signature and TA Account)umber, #esidence Certi!cate appearing on the previous loane+ecuted by the spouses CA)0A(, am referring to =-3T %,mortgage to ATTL. AF)O, those ere made the basis.

A" That is >ust the basis of accepting the signature,because at that time the loan have been approved already onthe basis of the !nancial statement of the client the 3ank(tatement. Kneh /sic2 it as approved e have to base it onthe ?inancial statement of the client, the signatures ereaccepted only for the purpose of signing the mortgage not forthe approval, e donEt /sic2 approve loans on the signature.

ATTL. C0A#O("

Kould you agree that as part of ascertaining the identify ofthe parties particularly the mortgage, you donEt consider alsothe signature, the #esidence Certi!cate, the particular addressof the parties involved.

A" think the 6uestion defers /sic2 from hat you askeda hile ago.

5" Among others

A" Ke have to accept the signature on the basis of theother signatures given to us it being a public instrument.

ATTL. CA#0O("

Lou mean to say the criteria of ascertaining the identity of themortgagor does not depend so much on the signature on theresidence certi!cate they have presented.

A" Ke have to accept that.

+ + + + + + + + +

A" Ke accepted the signature on the basis of themortgage in favor of ATTL. AF)O duly notarized hich havebeen reiterrting /sic2 entitled to full faith considering that it isa public instrument.

ATTL. CA#0O("

Khat other re6uirement did you take into account inascertaining the identi!cation of the parties particularly themortgagor in this case.

A" #esidence Certi!cate.

5" s that all, is that the only re6uirement

A" Ke re6uested for others but they could not produce,and because they presented to us the #esidence Certi!catehich matches on the signature on the #esidence Certi!cate

in favor of Atty. agno.$7

=vidently, the eDorts e+erted by the bank to verify thidentity of the couple posing as Osmundo Canlas andAngelina Canlas fell short of the responsibility of thebank to observe more than the diligence of a goodfather of a family. The negligence of respondent banas magni!ed by the fact that the previous deed ofmortgage /hich as used as the basis for checkingthe genuineness of the signatures of the supposedCanlas spouses2 did not bear the ta+ account numbeof the spouses,$% as ell as the Community Ta+

Certi!cate of Angelina Canlas.$' 3ut such factnotithstanding, the bank did not re6uire theimpostors to submit additional proof of their trueidentity.

:nder the doctrine of last clear chance, hich isapplicable here, the respondent bank must suDer theresulting loss. n essence, the doctrine of last clearchance is to the eDect that here both parties arenegligent but the negligent act of one is appreciablylater in point of time than that of the other, or hereis impossible to determine hose fault or negligence

brought about the occurrence of the incident, the onho had the last clear opportunity to avoid theimpending harm but failed to do so, is chargeable ithe conse6uences arising therefrom. (tated diDerentthe rule is that the antecedent negligence of a persodoes not preclude recovery of damages caused by thsupervening negligence of the latter, ho had the lafair chance to prevent the impending harm by thee+ercise of due diligence.$8

Assuming that Osmundo Canlas as negligent in givMicente aNosca the opportunity to perpetrate the

fraud, by entrusting to latter the onerEs copy of thetransfer certi!cates of title of sub>ect parcels of landcannot be denied that the bank had the last clearchance to prevent the fraud, by the simple e+pedienfaithfully complying ith the re6uirements for banks ascertain the identity of the persons transacting iththem.

?or not observing the degree of diligence re6uired ofbanking institutions, hose business is impressed public interest, respondent Asian (avings 3ank has tbear the loss sued upon.

n ruling for respondent bank, the Court of Appealsconcluded that the petitioner Osmundo Canlas as aparty to the fraudulent scheme of aNosca andtherefore, estopped from impugning the validity ofsub>ect deed of mortgage ratiocinating thus"

+ + + + + + + + +

Thus, armed ith the titles and the specialpoer of attorney, aNosca ent to the

defendant bank and applied for a loan. And


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hen aNosca came over to the bank to submitadditional documents pertinent to his loanapplication, Osmundo Canlas as ith him,together ith a certain #ogelio Miray. At thattime, Osmundo Canlas as introduced to thebank personnel as B0eonardo #eyB.

Khen he as introduced as B0eonardo #eyB forthe !rst time Osmundo should have correctedaNosca right aay. 3ut he did not. nstead, he

even alloed aNosca to avail of his/OsmundoEs2 membership privileges at theetropolitan Club hen aNosca invited toocers of the defendant bank to a luncheonmeeting hich Osmundo also attended. Andduring that meeting, Osmundo did not say hohe really is, but even let aNosca introducedhim again as B0eonardo #eyB, hich all themore indicates that he connived ith aNoscain deceiving the defendant bank.

?inally after the loan as !nally approved,

Osmundo accompanied aNosca to the bankhen the loan as released. At that time, amangerEs check for P;99,999.99 as issued inthe name of Oscar otororks, hich Osmundoadmits he ons and operates.

Collectively, the foregoing circumstancescannot but con>ure to a single conclusion thatOsmundo active participated in the loanapplication of defendant Asian (avings 3ank,hich culminated in his receiving a portion ofthe process thereof"$4

A meticulous and painstaking scrutiny of the #ecordson hand, reveals, hoever, that the !ndings arrived atby the Court of Appeals are barren of any sustainablebasis. ?or instance, the e+ecution of the deeds ofmortgages constituted by aNosca on sub>ect pieces of property of petitioners ere made possible not by the(pecial Poer of Attorney e+ecuted by OsmundoCanlas in favor of aNosca but through the use ofimpostors ho misrepresented themselves as thespouses Angelina Canlas and Osmundo Canlas. tcannot be said therefore, that the petitionersauthorized Micente aNosca to constitute the mortgageon their parcels of land.

Khat is more, Osmundo Canlas as introduced asB0eonardo #eyB by Micente aNosca, only on theoccasion of the luncheon meeting at the etropolitanClub.$& Thereat, the failure of Osmundo Canlas torectify aNoscaEs misrepresentations could not betaken as a fraudulent act. As ell e+plained by theformer, he >ust did not ant to embarrass aNosca, sothat he aited for the end of the meeting to correctaNosca.;9

Then, too, Osmundo Canlas recounted that during thsaid luncheon meeting, they did not talk about thesecurity or collateral for the loan of aNosca ithA(3.;$ (o also, rs. @ose!na #o>o, ho as the AccouOcer of Asian (avings 3ank hen aNosca appliedfor sub>ect loan, corroborated the testimony ofOsmundo Canlas, she testi!ed"

+ + + + + + + + +

5:=(TO)" )o could you please describe out lunch conference at the etro Club in akati

A)(K=#" r. angubat, r. aNosca and did discuss ith respect to the loan application and discuprimarily his business.

+ + + + + + + + +

5:=(TO)" (o, hat is the main topic of yourdiscussion during the meeting

A)(K=#" The main topic ar then, about his

business although, r. 0eonardo #ey, ho actuallyturned out as r. Canlas, supplier of r. aNosca.

5:=(TO)" see . . . other than the business ofaNosca, ere there any other topic discussed

A)(K=#" L=(.

5:=(TO)" And hat as the topic"

A)(K=#" Feneral =conomy then.

+ + + + + + + + +;;

Merily, Osmundo Canlas as left unaare of the illiciplan of aNosca, e+plaining thus hy he /Osmundo2did not bother to correct hat aNosca misrepresenand to assert onership over the to parcels of land6uestion.

)ot only that hile it is true that Osmundo Canlas ith Micente aNosca hen the latter submitted thedocuments needed for his loan application, and hethe check of P;99,999.99 as released, the former d

not kno that the collateral used by aNosca for thesaid loan ere their /Canlas spousesE2 properties.Osmundo happened to be ith aNosca at the timebecause he anted to make sure that aNosca oulmake good his promise to pay the balance of thepurchase price of the said lots out of the proceeds ofthe loan.;*

The receipt by Osmundo Canlas of the P;99,999.99check from A(3 could not estop him from assailing tvalidity of the mortgage because the said amount in payment of the parcels of land he sold to aNosca


8/39

Khat is decisively clear on record is that aNoscamanaged to keep Osmundo Canlas uninformed of his/aNoscaEs2 intention to use the parcels of land of theCanlas spouses as security for the loan obtained fromAsian (avings 3ank. (ince Micente aNosca shoedOsmundo Canlas several certi!cates of title of lotshich, according to aNosca ere the collaterals,Osmundo Canlas as con!dent that their /CanlasesE2parcels of land ere not involved in the loantransactions ith the Asian (avings 3ank.;% :nder the

attendant facts and circumstances, Osmundo Canlasas undoubtedly negligent, hich negligence madethem /petitioners2 undeserving of an aard ofattorneyEs fees.

(ettled is the rule that a contract of mortgage must beconstituted only by the absolute oner on the propertymortgaged;' a mortgage, constituted by an impostor isvoid.;8 Considering that it as established indubitablythat the contract of mortgage sued upon as enteredinto and signed by impostors ho misrepresentedthemselves as the spouses Osmundo Canlas and

Angelina Canlas, the Court is of the ineluctibleconclusion and !nding that sub>ect contract ofmortgage is a complete nullity.

K-=#=?O#=, the Petition is F#A)T=1 and the 1ecisionof the Court of Appeals, dated (eptember *9, $&&*, inCAGF.#. CM )o. ;%;7; (=T A(1=. The 1ecision of3ranch %& of the #egional Trial Court of akati City inCivil Case )o. G9;4 is hereby #=)(TAT=1. )opronouncement as to costs. (O O#1=#=1.

G.R. No. L+1!!1! Ar/7 8, 196#

AGRICULTURAL CRE3IT COOPERATIVEASSOCIATION OF HINIGARAN, movantGappellee, vs.ESTANISLAO *ULO *USA*, ET AL., oppositorsGappellants.

LA(RA3OR, J.=

This is an appeal from an order of the Court of ?irstnstance of )egros Occidental, -on. @ose (. de la Cruz,presiding the #egister of 1eeds of )egros Occidental to

register a mortgage e+ecuted by #afael Lulo in favor ofthe movant covering 0ot )o. 4%%, Pontevedra Cadastre,covered by Original Certi!cate of Title )o. 7&8&.

The records disclose that on @uly ;9, $&%;, #afaela Luloe+ecuted in favor of the movant a mortgage forP**,';'.;&, due from her, her mother, sisters,brothers, and others, hich amount she assumed topay to the movant. A motion as presented to thecourt by the movant demanding the surrender of theonerEs duplicate certi!cate of title that he mayannotate said mortgage at the back of the certi!cate.

=stanislao Lusay, a part oner of the lot, opposed the

petition on the ground that he is oner of a part of thproperty in 6uestion that the granting of the motionould operate to his pre>udice, as he has notparticipated in the mortgage cited in the motion tha#afaela Lulo is dead that the motion is not veri!ed amovantEs rights have lapsed by prescription. ?inally iargued that his opposition raises a controversial mathich the court has no >urisdiction to pass upon.argarita, aria, =lena and Pilar, all surnamed Lulo,

>oined the oppositor =stanislao Lusay, raising the sam

ob>ections interposed by Lusay.

The e+istence of the mortgage is not disputed, andneither is the fact that the mortgagor #afaela Lulo ispart oner of 0ot )o. 4%% of the Cadastral (urvey ofPontevedra. The oppositors do not dispute that she isuch a part oner, and their main ob>ection to thepetition is that as part oners of the property, theannotation of the mortgage on the common title illaDect their rights.

The court held that even if the onership of the

deceased #afaela Lulo over the portion of the lot in6uestion and the validity of the mortgage are disputsuch invalidity of the mortgage is no proof of the none+istence of the mortgage nor a ground for ob>ectingits registration, citing the case of #egister of 1eeds oanila vs. a+ima Tinoco Mda. de Cruz, et, al., &% Ph4$4 %* OD. Faz., ;497.

n his 3rief before this Court, counsel for appellantsargue that the mortgage sought to be registered anot recorded before the closing of the intestateproceedings of the deceased mortgagor, but as sorecorded only four months after the termination of saproceedings, so that the claim of movant has beenreduced to the character of a mere money claim, notmortgage, hence the mortgage may not be registeren the !rst place, as the >udge belo correctly ruled,the proceeding to register the mortgage does notpurport to determine the supposed invalidity of themortgage or its eDect. #egistration is a mereministerial act by hich a deed, contract or instrumeis sought to be inscribed in the records of the Oce the #egister of 1eeds and annotated at the back of tcerti!cate of title covering the land sub>ect of the de

contract or instrument.

The registration of a lease or mortgage, or thentry of a memorial of a lease or mortgage othe register, is not a declaration by the statethat such an instrument is a valid andsubsisting interest in land it is merely adeclaration that the record of the title appearto be burdened ith the lease or mortgagedescribed, according to the priority set forth the certi!cate.


9/39


10/39

Th$ Tr/a7 Co&r2 R&7/0

On ;& @une ;99$, the trial court rendered its

1ecision% in favor of petitioners. The trial court

declared that Aguete did not sign the loan documents,

did not appear before the )otary Public to acknoledge

the e+ecution of the loan documents, did not receive

the loan proceeds from P)3, and as not aare of the

loan until P)3 noti!ed her in $7 August $&84 that she

and her family should vacate the mortgaged property

because of the e+piration of the redemption period.

:nder the Civil Code, the eDective la at the time of

the transaction, #os could not encumber any real

property of the con>ugal partnership

ithout Aguetes consent. Aguete may, during their

marriage and ithin ten years from the transaction6uestioned, ask the courts for the annulment of the

contract her husband entered into ithout her consent,

especially in the present case here her consent is

re6uired. The trial court, hoever, ruled that its

decision is ithout pre>udice to the right of action of

P)3 to recover the amount of the loan and its interests

from #os.

The dispositive portion reads"

K-=#=?O#=, premises considered, >udgment is herebyrendered"

$. 1=C0A#)F the 1eed of #eal =stateortgage /=+hibit C2 and the subse6uent foreclosureproceedings conducted thereon ):00 and MO1

;. O#1=#)F the #egister of 1eeds of the Cityof 0aoag to cancel TCT )o. TG$%;8' in the name of defendant P)3 and revert the same in the name of plaintiDs spouses @oe #os and =strella Aguete

*. O#1=#)F defendant to vacate and turnoverthe possession of the premises of the property in suit tothe plaintiDs and

7. O#1=#)F defendant to pay plaintiDsattorneys fee and litigation e+penses in the sum of T=)T-O:(A)1 /P$9,999.992 P=(O(.

)o pronouncement as to costs. (O O#1=#=1.'

P)3 !led its )otice of Appeal8 of the trial cou

decision on $* (eptember ;99$ and paid

corresponding fees. Petitioners !led on the same dat

motion for e+ecution pending appeal,4 hich P

opposed.& n their comment to the opposition$9 !led

$9 October ;99$, petitioners stated that at the hear

of the motion on * October ;99$, P)3s

representative had no ob>ection to the e+ecution

>udgment pending appeal. Petitioners claimed that

house on the sub>ect lot is dilapidated, a danger to

and limb, and should be demolished. Petitioners add

that they obliged themselves to make the ho

habitable at a cost of not less P%9,999.99. The rep

cost ould accrue to P)3s bene!t should the appel

court reverse the trial court. P)3 continued to opp

petitioners motion.$$

n an Order$; dated 4 ay ;99;, the trial court fou

petitioners motion for e+ecution pending app

improper because petitioners have made it clear t

they ere illing to ait for the appellate cou

decision. -oever, as a court of >ustice and e6uity,

trial court alloed petitioners to occupy the sub>

property ith the condition that petitioners o

voluntarily vacate the premises and aive recovery

improvements introduced should P)3 prevail

appeal.

Th$ A$77a$ Co&r2 R&7/0

On $8 October ;99%, the appellate co

rendered its 1ecision$* and granted P)3s appeal. T

appellate court reversed the trial courts decision, a

dismissed petitioners complaint.

The appellate court stated that the trial co

concluded forgery ithout ade6uate proof thus it

improper for the trial court to rely so

on Aguetes testimony that her signatures on the lo

documents ere forged. The appellate court decla

that Aguete a+ed her signatures on the docume

knoingly and ith her full consent.

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11/39

Assuming arguendo that Aguete did not give

her consent to #os loan, the appellate court ruled that

the con>ugal partnership is still liable because the loan

proceeds redounded to the bene!t of the family. The

records of the case reveal that the loan as used for

the e+pansion of the familys business. Therefore, the

debt obtained is chargeable against the con>ugal

partnership.

Petitioners !led the present petition for revie

before this Court on & 1ecember ;99%.

Th$ I22&$2

Petitioners assigned the folloing errors". The -onorable Court of Appeals erred in not givingeight to the !ndings and conclusions of the trial court,

and in reversing and setting aside such !ndings andconclusions ithout stating speci!c contrary evidence

. The -onorable Court of Appeals erred in declaringthe real estate mortgage valid

. The -onorable Court of Appeals erred in declaring,ithout basis, that the loan contracted by husband @oeA. #os ith respondent Philippine )ational3ank 0aoag redounded to the bene!t of his family,aside from the fact that such had not been raised byrespondent in its appeal.$7

Th$ Co&r2 R&7/0

The petition has no merit. Ke arm the ruling of theappellate court.The Civil Code as the applicable la at the time of themortgage. The sub>ect property is thus considered partof the con>ugal partnership of gains. The pertinentarticles of the Civil Code provide"Art. $%*. The folloing are con>ugal partnershipproperty"

/$2 That hich is ac6uired by onerous titleduring the marriage at the e+pense of the commonfund, hether the ac6uisition be for the partnership, orfor only one of the spouses

/;2 That hich is obtained by the industry, or

ork or as salary of the spouses, or of either of them/*2 The fruits, rents or interest received or due

during the marriage, coming from the commonproperty or from the e+clusive property of each spouse.

Art. $'9. All property of the marriage is presumed tobelong to the con>ugal partnership, unless it be provedthat it pertains e+clusively to the husband or to theife.

Art. $'$. The con>ugal partnership shall be liable for"

/$2 All debts and obligations contracted by thehusband for the bene!t of the con>ugal partnership,and those contracted by the ife, also for the same

purpose, in the cases here she may legally bind partnership

/;2 Arrears or income due, during the marriafrom obligations hich constitute a charge uproperty of either spouse or of the partnership

/*2 inor repairs or for mere preservation mduring the marriage upon the separate propertyeither the husband or the ife ma>or repairs shall be charged to the partnership

/72 a>or or minor repairs upon the con>u

partnership property/%2 The maintenance of the family and

education of the children of both husband and and of legitimate children of one of the spouses

/'2 =+penses to permit the spouses to compa professional, vocational or other course.

Art. $''. :nless the ife has been declared a ncompos mentis or a spendthrift, or is under cinterdiction or is con!ned in a leprosarium, husband cannot alienate or encumber any property of the con>ugal partnership ithout the consent. f she refuses unreasonably to give

consent, the court may compel her to grant the samArt. $8*. The ife may, during the marriage, and itten years from the transaction 6uestioned, ask courts for the annulment of any contract of husband entered into ithout her consent, hen sconsent is re6uired, or any act or contract of husband hich tends to defraud her or impair interest in the con>ugal partnership property. (hothe ife fail to e+ercise this right, she or her heirs athe dissolution of the marriage may demand the vaof the property fraudulently alienated by the husban

There is no doubt that the sub>ect property ac6uired

during #os and Aguetes marriage. #os and Aguete

e married on $' @anuary $&%7, hile the sub>

property as ac6uired in $&'4.$% There is also no do

that #os encumbered the sub>ect property hen

mortgaged it for P$$%,999.99 on ;* Octo

$&87.$' P)3 0aoag does not doubt that Aguete,

evidenced by her signature, consen

to #os mortgage to P)3 of the sub>ect property. On

other hand, Aguete denies ever having consented

the loan and also denies a+ing her signature to

mortgage and loan documents.

The husband cannot alienate or encumber a

con>ugal real property ithout the consent, e+press

implied, of the ife. (hould the husband do so, th

the contract is voidable.$8 Article $8* of the Civil Co

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12/39

allos Aguete to 6uestion #osencumbrance of the

sub>ect property. -oever, the same article does not

guarantee that the courts ill declare the annulment of

the contract. Annulment ill be declared only upon a

!nding that the ife did not give her consent. n the

present case, e follo the conclusion of the appellate

court and rule that Aguete gave her consent

to #os encumbrance of the sub>ect property.

The documents disavoed by Aguete are

acknoledged before a notary public, hence they are

public documents. =very instrument duly

acknoledged and certi!ed as provided by la may be

presented in evidence ithout further proof, the

certi!cate of acknoledgment being prima

acie evidence of the e+ecution of the instrument or

document involved.$4 The e+ecution of a document that

has been rati!ed before a notary public cannot be

disproved by the mere denial of the alleged

signer.$& P)3 as correct hen it stated that

petitioners omission to present other positive evidence

to substantiate their claim of forgery as fatal to

petitioners cause.;9 Petitioners did not present any

corroborating itness, such as a handriting e+pert,

ho could authoritatively declarethat Aguetes signatures ere really forged.A notarized document carries the evidentiary eightconferred upon it ith respect to its due e+ecution, andit has in its favor the presumption of regularity hichmay only be rebutted by evidence so clear, strong andconvincing as to e+clude all controversy as to thefalsity of the certi!cate. Absent such, the presumptionmust be upheld. The burden of proof to overcome thepresumption of due e+ecution of a notarial documentlies on the one contesting the same. ?urthermore, anallegation of forgery must be proved by clear andconvincing evidence, and hoever alleges it has theburden of proving the same.;$

#os himself cannot bring action against P)3, for no one

can come before the courts ith unclean hands. n

their memorandum before the trial court, petitioners

themselves admitted

that #os forged Aguetes signatures.@oe A. #os in legal eDect admitted in the complaint thatthe signatures of his ife in the 6uestioned documentsare forged, incriminating himself to criminalprosecution. f he ere alive today, he ould beprosecuted for forgery. This strengthens the testimony

of his ife that her signatures on the 6uestiodocuments are not hers.

n !ling the complaint, it must have been a remorseconscience for having ronged his family in forgthe signature of his ife on the 6uestioned documein s6uandering the P$$%,999.99 loan from the bankhimself, resulting in the foreclosure of the con>uproperty eviction of his family therefrom ae+posure to public contempt, embarassment ridicule.;;

The application for loan shos that the loan ould

used e+clusively for additional orking HcapitalI of b

sell of garlic virginia tobacco.;* n

testimony, Aguete con!rmed that #os engaged in s

business, but claimed to be unaare hether

prospered. Aguete as also aare of loans contrac

by #os, but did not kno here he asted

money.;7 1ebts contracted by the husband for and

the e+ercise of the industry or profession by hich

contributes to the support of the family cannot

deemed to be his e+clusive and private debts.;%

f the husband himself is the principal obligor in contract, i.e.! he directly received the money services to be used in or for his on business or on profession, that contract falls ithin the term+ + + obligations for the bene!t of the con>upartnership. -ere, no actual bene!t may be provedis enough that the bene!t to the family is apparentthe signing of the contract. ?rom the very nature of

contract of loan or services, the family standsbene!t from the loan facility or services to be rendeto the business or profession of the husband. timmaterial, if in the end, his business or profession for does not succeed. (imply stated, here the husbacontracts obligations on behalf of the family businethe la presumes, and rightly so, that such obligatill redound to the bene!t of the con>upartnership.;'

?or this reason, e rule that #os loan from P

redounded to the bene!t of the con>ugal partnersh

-ence, the debt is chargeable to the con>u

partnership.

:HEREFORE, e 3EN* the petition. The 1ecision

the Court of Appeals in CAGF.#. CM )o. 8'4

promulgated on $8 October ;99% is AFFIRME3. Co

against petitioners.

SO OR3ERE3.

G.R. No. 15#"1 Ma' 8, ##9

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13/39

PRO3UCERS (AN) OF THE PHILIPPINES,P$//o0$r,+ $r2&2+ E;CELSA IN3USTRIES, INC.,R$2o0$0.TINGA, J.=

This is a petition for revie on certiorariH$I under #ule

7* of the $&&8 #ules of Civil Procedure, assailing the

decisionH;I and resolutionH*I of the Court of Appeals in

CAGF.#. CM )o. %&&*$. The Court of Appeals

decisionH7Ireversed the decision of the #egional Trial

Court /#TC2, 3ranch 8*, Antipolo, #izal, upholding the

e+tra>udicial foreclosure of the mortgage on

respondents properties, hile the resolution denied

petitioners motion for reconsideration.H%I

As borne by the records of the case, the

folloing factual antecedents appear"

#espondent =+celsa ndustries, nc. is a manufacturer

and e+porter of fuel products, particularly charcoal

bri6uettes, as an alternative fuel source. (ometime in

@anuary $&48, respondent applied for a packing credit

line or a credit e+port advance ith petitioner

Producers 3ank of the Philippines, a banking institution

duly organized and e+isting under Philippines las.H'I

The application as supported by 0etter of

Credit )o. *7$$'$9)(;&89 dated $7 October $&4'.

Uang @u 3ank, 0td. of (eoul, Uorea issued the letter of

credit through its correspondent bank, the 3ank of the

Philippine slands, in the amount of :(V;*,999.99 for

the account of (hin (ung Commercial Co., 0td., also

located in (eoul, Uorea. T.0. Korld 1evelopment

Corporation as the original bene!ciary of the letter of

credit. On 9% 1ecember $&4', for value received, T.0.

Korld transferred to respondent all its rights and

obligations under the said letter of credit. Petitioner

approved respondents application for a packing credit

line in the amount of P*99,999.99, of h

about P&',999.99 in principal remained outstand

H8I #espondent e+ecuted the corresponding promiss

notes evidencing the indebtedness.H4I

Prior to the application for the packing cre

line, respondent had obtained a loan from petitione

the form of a bill discounted and secured cre

accommodation in the amount of P;99,999.99,

hich P$$9,999.99 as outstanding at the time of

approval of the packing credit line. The loan

secured by a real estate mortgage dated 9% 1ecem

$&4' over respondents properties covered by Trans

Certi!cates of Titles /TCT2 )o. )G'4''$, )G'4'';,'4''*, )G'4''7, )G'4''% and )G'4''', all issued

the #egister of 1eeds of arikina.H&I

(igni!cantly, the real estate mortg

contained the folloing clause"

?or and in consideration of those

certain loans, overdraft andor othercredit accommodations on this date

obtained from the O#TFAF==, and tosecure the payment of the same, theprincipal of all of hich is hereby !+edat ?M= -:)1#=1 T-O:(A)1 P=(O(O)0L /P%99,999.992 Pesos, PhilippineCurrency, as ell as those that theO#TFAF== may hereafter e+tend tothe O#TFAFO#, including interest ande+penses or any other obligation oingto the O#TFAF==, the O#TFAFO#does hereby transfer and convey by ayof mortgage unto the O#TFAF==, itssuccessors or assigns, the parcel/s2 of land hich isare described in the listinserted on the back of this document,andor appended hereto, together ithall the buildings and improvements noe+isting or hich may hereafter beerected or constructed thereon, of hichthe O#TFAFO# declares that heit isthe absolute oner, free from all liensand encumbrances.H$9I

On $8 arch $&48, respondent presented

negotiation to petitioner drafts dran under the let

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14/39

of credit and the corresponding e+port documents in

consideration for its draings in the amounts

of :(V%,8*&.8' and :(V7,%4%.8&. Petitioner purchased

the drafts and e+port documents by paying respondent

the peso e6uivalent of the draings. The purchase as

sub>ect to the conditions laid don in to separate

undertakings by respondent dated $8 arch $&48 and

$9 April $&48.H$$I

On ;7 April $&48, Uang @u 3ank, 0td. noti!ed

petitioner through cable that the Uorean buyer refused

to pay respondents e+port documents on account of

typographical discrepancies. Uang @u 3ank,

0td. returned to petitioner the e+port documents.

H$;I

:pon learning about the Uorean importers nonG

payment, respondent sent petitioner a letter dated ;8

@uly $&48, informing the latter that respondent had

brought the matter before the Uorea Trade Court and

that it as ready to li6uidate its past due account ith

petitioner. #espondent sent another letter dated 94

(eptember $&48, reiterating the same assurance. n a

letter 9% October $&48, Uang @u 3ank, 0td. informed

petitioner that it ould be returning the e+port

documents on account of the nonGacceptance by the

importer.H$*I

Petitioner demanded from respondent the

payment of the peso e6uivalent of the e+port

documents, plus interest and other charges, and also of

the other due and unpaid loans. 1ue to respondents

failure to heed the demand, petitioner moved for the

e+tra>udicial foreclosure on the real estate mortgage

over respondents properties.

Per petitioners computation, aside from charges

for attorneys fees and sheriDs fees, respondent had a

total due and demandable obligation of P%8*,;;%.

including interest, in si+ diDerent accounts, namely"

$2 =3PGP-OG48G$$;$ /:(V7,%4%.&8 ;$.;$;2 W P$$&,$'%.9'

;2 =3PGP-OG48G$9&% /:(V %,8*&.8' ;$.;$;2 W $%$,%49.&8

*2 31(G99$G48 W '$,888.8472 31(G9*94' A W $;*,%%%.%%%2 31(GPCG99;G48 W %%,4;;.&$'2 31(G99%48 W '$,*;*.**P%8*,;;%.'9H$7I

The total approved bid price, hich included

attorneys fees and sheriD fees, as peg

at P8%;,987.'*. At the public auction held on

@anuary $&44, the (heriD of Antipolo, #izal issue

Certi!cate of (ale in favor of petitioner as the high

bidder.H$%I The certi!cate of sale as registered on

arch $&44.H$'I

On $; @une $&4&, petitioner e+ecuted

adavit of consolidation over the foreclosed proper

after respondent failed to redeem the same. As

result, the #egister of 1eeds of arikina issued n

certi!cates of title in the name of petitioner. H$8I

On $8 )ovember $&4&, respondent institu

an action for the annulment of the e+tra>udi

foreclosure ith prayer for preliminary in>unction a

damages against petitioner and the #egister of 1e

of arikina. 1ocketed as Civil Case )o. $%48GA,

complaint as raSed to 3ranch 8* of the #TC

Antipolo, #izal. The complaint prayed, among othe

that the defendants be en>oined from causing

transfer of onership over the foreclosed proper

from respondent to petitioner.H$4I

On 9% April $&&9, petitioner !led a petition

the issuance of a rit of possession, docketed as

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15/39

Case )o. &9G848, before the same branch of the #TC of

Antipolo, #izal. The #TC ordered the consolidation of

Civil Case )o, $%48GA and 0# Case )o. &9G848.H$&I

On $4 1ecember $&&8, the #TC rendered a

decision upholding the validity of the e+tra>udicial

foreclosure and ordering the issuance of a rit of

possession in favor of petitioner, to it"

K-=#=?O#=, in Case )o. $%48G

A, the court hereby rules that theforeclosure of mortgage for the old andne obligations of the plaintiD =+celsandustries Corp., hich has remainedunpaid up to the time of foreclosure bydefendant Producers 3ank of thePhilippines as valid, legal and in ordern Case )o. 848GA, the court hereby

orders for the issuance of a rit of possession in favor of Producers 3ank of the Philippines after the properties of =+celsa ndustries Corp., hich ereforeclosed and consolidated in the nameof Producers 3ank of the Philippinesunder TCT )o. $'&9*$, $'&9*;, $'&9**,$'&9*7 and $'&9*% of the #egister of 1eeds of arikina.

(O O#1=#=1.H;9I

The #TC held that petitioner, hose obligation

consisted only of receiving, and not of collecting, the

e+port proceeds for the purpose of converting into

Philippine currency and remitting the same to

respondent, cannot be considered as respondents

agent. The #TC also held that petitioner cannot be

presumed to have received the e+port proceeds,

considering that respondent e+ecuted undertakings

arranting that the drafts and accompanying

documents ere genuine and accurately represented

the facts stated therein and ould be accepted and

paid in accordance ith their tenor.H;$I

?urthermore, the #TC concluded that petitioner

had no obligation to return the e+port documents and

respondent could not e+pect their return prior to

payment of the e+port advances because the dra

and e+port documents ere the evidence t

respondent received e+port advances from petition

H;;I

The #TC also found that by its admiss

respondent had other loan obligations obtained fr

petitioner hich ere due and demandable hen

petitioner correctly e+ercised its right to foreclose

real estate mortgage, hich provided that the sa

secured the payment of not only the loans alre

obtained but also the e+port advances.H;*I

0astly, the #TC found respondent guilty

laches in 6uestioning the foreclosure sale consider

that petitioner made several demands for paymen

respondents outstanding loans as early as @uly $&

and that respondent acknoledged the failure to

its loans and advances.H;7I

The #TC denied respondents motion

reconsideration. H;%I Thus, respondent elevated

matter to the Court of Appeals, reiterating its cla

that petitioner as not only a collection agent but

considered a purchaser of the e+port

On *9 ay ;99$, the Court of Appeals rende

the assailed decision, reversing the #TCs decision, th

K-=#=?O#=, the appeal ishereby F#A)T=1. The decision of thetrial court dated 1ecember $4, $&&8 is#=M=#(=1 and (=T A(1=. Accordingly,the foreclosure of mortgage on theproperties of appellant is declared as)MA01. The issuance of the rit of possession in favor of appellee isA)):00=1. The folloing damages arehereby aarded in favor of appellant"

/a2 oral damages in the

amount of P$99,999.99

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16/39

/b2 =+emplary damages in theamount of P$99,999.99 and

/c2 Costs. (O O#1=#=1.H;'I

The Court of Appeals held that respondent

should not be faulted for the dishonor of the drafts and

e+port documents because the obligation to collect the

e+port proceeds from Uang @u 3ank, 0td. devolved

upon petitioner. t cited the testimony of petitioners

manager for the foreign currency department to the

eDect that petitioner as respondents agent, being the

only entity authorized under Central 3ank Circular )o.

7&$ to collect directly from the importer the e+port

proceeds on respondents behalf and converting the

same to Philippine currency for remittance to

respondent. The appellate court found that respondent

as not authorized and even poerless to collect from

the importer and it appeared that respondent as left

at the mercy of petitioner, hich kept the e+port

documents during the time that respondent attempted

to collect payment from the Uorean importer.

The Court of Appeals disregarded the #TCs

!nding that the e+port documents ere the only

evidence of respondents e+port advances and that

petitioner as >usti!ed in refusing to return them. t

opined that granting petitioner had no obligation toreturn the e+port documents, the former should have

helped respondent in the collection eDorts instead of

augmenting respondents dilemma.

?urthermore, the Court of Appeals found

petitioners negligence as the cause of the refusal by

the Uorean buyer to pay the e+port proceeds based on

the folloing" !rst, petitioner had a hand in prepar

and scrutinizing the e+port documents herein

discrepancies ere found and, second, petitio

failed to advise respondent about the arning fr

Uang @u 3ank, 0td. that the e+port documents o

be returned if no e+planation regarding

discrepancies ould be made.

The Court of Appeals invalidated

e+tra>udicial foreclosure of the real estate mortgage

the ground that the posting and publication of

notice of e+tra>udicial foreclosure proceedings did

comply ith the personal notice re6uirement un

paragraph $;H;8I of the real estate mortgage e+ecu

beteen petitioner and respondent. The Court

Appeals also overturned the #TCs !nding t

respondent as guilty of estoppel by laches

6uestioning the e+tra>udicial foreclosure sale.

Petitioners motion for reconsiderationH;4I

denied in a #esolution dated ;& @anuary ;99;. -en

the instant petition, arguing that the Court of Appe

erred in !nding petitioner as respondents agent, h

as liable for the discrepancies in the e+p

documents, in invalidating the foreclosure sale and

declaring that respondent as not estopped fr

6uestioning the foreclosure sale.H;&I

The validity of the e+tra>udicial foreclosurethe mortgage is dependent on the folloing iss

posed by petitioner" /$2 the coverage of the blan

mortgage clause /;2 petitioners failure to furn

personal notice of the foreclosure to respondent a

/*2 petitioners obligation as negotiating bank under

letter of credit.

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17/39

)otably, the errors cited by petitioners are

factual in nature. Although the instant case is a petition

for revie under #ule 7% hich, as a general rule, is

limited to revieing errors of la, !ndings of fact being

conclusive as a matter of general principle, hoever,

considering the conJict beteen the factual !ndings of

the #TC and the Court of Appeals, there is a need to

revie the factual issues as an e+ception to the general

rule.H*9I

uch of the discussion has revolved around

ho should be liable for the dishonor of the draft and

e+port documents. n the to undertakings e+ecuted

by respondent as a condition for the negotiation of the

drafts, respondent held itself liable if the drafts ere

not accepted. The to undertakings signed by

respondent are similarlyGorded and contained

respondents e+press arranties, to it"n consideration of your

negotiating the above describeddraft/s2, ?$ h$r$%' ?arra0 ha h$2a/ ra2- a0 acco@a0'/0oc&@$02 h$r$o0 ar$ a7/,$0&/0$ a0 acc&ra$7' r$r$2$0h$ ac2 2a$ h$r$/0, a0 ha2&ch ra2- ?/77 %$ acc$$ a0a/ /0 accora0c$ ?/h /2h$/r$0or. Ke further undertake and agree,

>ointly and severally, to defend and holdyou free and harmless from any and allactions, claims and demandshatsoever, and to pay on demand alldamages actual or compensatoryincluding attorneys fees, costs and otheraards or be ad>udged to pay, in case of suit, hich you may suDer arising from,by reason, or on account of yournegotiating the above draft/s2 becauseof the folloing discrepancies or reasonsor any other discrepancy or reasonhatever.

:$ h$r$%' &0$raB$ o a'o0 $@a0 h$ &77 a@o&0 o h$a%o$ ra2- or a0' &0a/%a7a0c$ h$r$o, the Philippine persoe6uivalent converted at the prevailingselling rate /or selling rate prevailing atthe date you negotiate our draft,hichever is higher2 alloed by the

Central 3ank ith interest at the rate

prevailing today from the date of negotiation, plus all charges ande+penses hatsoever incurred inconnection thereith. Lou shall neitherbe obliged to contest or dispute anyrefusal to accept or to pay the hole orany part of the above draft/s2, norproceed in any ay against the draee,the issuing bank or any endorserthereof, before making a demand on usfor the payment of the hole or any

unpaid balance of the draft/s2./=mphasissupplied2H*$I

n "elasque# v. Solidban$ Corporation,H*;I h

the draer therein also e+ecuted a separate lette

undertaking in consideration for the banks negotiat

of its sight drafts, the Court held that the draer

still be made liable under the letter of undertak

even if he is discharged due to the banks failure

protest the nonGacceptance of the drafts. The Co

e+plained, thus"

Petitioner, hoever, can still be

made liable under the letter of undertaking. t bears stressing that it isa separate contract from the sight draft.

The liability of petitioner under the letterof undertaking is direct and primary. t isindependent from his liability under thesight draft. 0iability subsists on it even if the sight draft as dishonored for nonG

acceptance or nonGpayment. #espondent agreed to purchase

the draft and credit petitioner its valueupon the undertaking that he illreimburse the amount in case the sightdraft is dishonored. The bank ouldcertainly not have agreed to grantpetitioner an advance e+port paymentere it not for the letter of undertaking.

The consideration for the letter of undertaking as petitioners promise topay respondent the value of the sightdraft if it as dishonored for any reasonby the 3ank of (eoul.H**I

Thus, notithstanding petitioners alle

failure to comply ith the re6uirements of notice

dishonor and protest under (ections 4&H*7I and $

H*%I respectively, of the )egotiable nstruments 0

respondent may not escape its liability under

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18/39

separate undertakings, here respondent promised to

pay on demand the full amount of the drafts.

The ne+t 6uestion, therefore, is hether the

real estate mortgage also served as security for

respondents drafts that ere not accepted and paid by

the Uang @u 3ank, 0td.

#espondent e+ecuted a real estate mortgage

containing a blanket mortgage clause, also knon as a

dragnet clause. t 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 hich 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.H*'I

n %nion &an$ o the 'hilippines v. Court o

Appeals,H*8I the nature of a dragnet clause as

e+plained, thus"

s one hich is speci!cally

phrased to subsume all debts of pastand future origins. (uch clauses arecarefully scrutinized and strictlyconstrued. ortgages of this characterenable the parties to provide continuousdealings, the nature or e+tent of hichmay not be knon or anticipated at thetime, and they avoid the e+pense and

inconvenience of e+ecuting a nesecurity on each ne transaction. Adragnet clause operates as aconvenience and accommodation totheborroers as it makes available additional funds ithout theirhaving to e+ecute additional securitydocuments, thereby saving time, travel,loan closing costs, costs of e+tra legalservices, recording fees, et cetera.H*4I

+ +

Petitioner, therefore, as not precluded fr

seeking the foreclosure of the real estate mortga

based on the unpaid drafts dran by respondent

any case, respondent had admitted that aside from

unpaid drafts, respondent also had due

demandable loans secured from another account

evidenced by Promissory )otes /P) )os.2 31(G99$G

31(G9*94' A, 31(GPCG99;G48 and 31(G99%48.

-oever, the Court of Appeals invalidated

e+tra>udicial foreclosure of the mortgage on the grou

that petitioner had failed to furnish respond

personal notice of the sale contrary to the stipulatio

the real estate mortgage.

Petitioner, on the other hand, claims that un

paragraph $;H*&I of the real estate mortgage, perso

notice of the foreclosure sale is not a re6uiremen

the validity of the foreclosure sale.

A perusal of the records of the case shos t

a notice of sheriDs saleH79I as sent by registered m

to respondent and received in due course.H7$I

respondent claims that it did not receive the notice

only learned about it from petitioner. n any eve

paragraph $; of the real estate mortgage re6u

petitioner merely to furnish respondent ith the not

and does not oblige petitioner to ensure t

respondent actually receives the notice. On this sco

the Court holds that petitioner has performed

obligation under paragraph $; of the real est

mortgage.

As regards the issue of hether respond

may still 6uestion the foreclosure sale, the #TC h

that the sale as conducted according to the le

procedure, to it"

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19/39

PlaintiD is estopped from6uestioning the foreclosure. The plaintiD is guilty of laches and cannot at thispoint in time 6uestion the foreclosure of the sub>ect properties. 1efendant bankmade demands against the plaintiD forthe payment of plaintiDs outstandingloans and advances ith the defendantas early as @uly $&&8. PlaintiD acknoledged such outstanding loansand advances to the defendant bank

and committed to li6uidate the same.?or failure of the plaintiD to pay itsobligations on maturity, defendant bankforeclosed the mortgage on sub>ectproperties on @anuary %, $&44 thecerti!cate of sale as annotated onarch ;7, $&44 and there being noredemption made by the plaintiD, title tosaid properties ere consolidated in thename of defendant in @uly $&4&.:ndeniably, sub>ect foreclosure asdone in accordance ith the prescribedrules as may be borne out by thee+hibits submitted to this Court hich

are =+hibit **, a notice of e+tra>udicialsale e+ecuted by the (heriD of Antipolo,=+hibit *7 certi!cate posting of e+tra>udicial sale, =+hibit *% return cardevidencing receipt by plaintiD of thenotice of e+tra>udicial sale and =+hibit;$ adavit of publication.

The Court adopts and approves the afore6uoted

!ndings by the #TC, the same being fully supported by

the evidence on record.

K-=#=?O#= the instant petition for revie oncertiorari is F#A)T=1 and the decision and resolution

of the Court of Appeals in CAGF.#. CM )o. %&&*$ are

#=M=#(=1 and (=T A(1=. The decision of the #egional

Trial Court 3ranch 8*, Antipolo, #izal in Civil Case )o.

$%48GA and 0# Case )o. &9G848 is #=)(TAT=1.

(O O#1=#=1.

G.R. No. 15#19" >&7' 8, ##5

PRU3ENTIAL (AN), Petitioner,vs.3ON A. ALVIAR a0 GEORGIA (.ALVIAR, #espondents.

1 = C ( O )

T/0a, J.=

3efore us is a petition for revie on certiorari under#ule 7% of the #ules of Court. Petitioner Prudential 3aseeks the reversal of the (ecision$ of the Court ofAppeals dated ;8 (eptember ;99$ in CAGF.#. CM )o%&%7* arming the (ecision of the #egional Trial Co/#TC2 of Pasig City, 3ranch $'9, in favor ofrespondents.

#espondents, spouses 1on A. Alviar and Feorgia 3.Alviar, are the registered oners of a parcel of land i

(an @uan, etro anila, covered by Transfer Certi!caof Title /TCT2 )o. 7*4$%8 of the #egister of 1eeds of#izal. On $9 @uly $&8%, they e+ecuted a deed of realestate mortgage in favor of petitioner Prudential 3anto secure the payment of a loanorth P;%9,999.99.; This mortgage as annotated athe back of TCT )o. 7*4$%8. On 7 August $&8%,respondents e+ecuted the corresponding promissorynote, P) 31X8%CG;%;, covering the said loan, hichprovides that the loan matured on 7 August $&8' at interest rate of $;< per annum ith a ;< servicecharge, and that the note is secured by a real estatemortgage as aforementioned.* (igni!cantly, the realestate mortgage contained the folloing clause"

That for and in consideration of certain loans, overdrand other credit accommodations obtained from theortgagee by the ortgagor andor YYYYYYYYYYYYYYYYhereinafter referred to, irrespective of number, as1=3TO#, and to secure the payment of the same andthose that may hereafter be obtained, the principal oall of hich is hereby !+ed at To -undred ?ifty

Thousand /P;%9,999.992 Pesos, Philippine Currency, ell as those that the ortgagee may e+tend to the

ortgagor andor 1=3TO#, including interest ande+penses or any other obligation oing to theortgagee, hether direct or indirect, principal orsecondary as appears in the accounts, books andrecords of the ortgagee, the ortgagor does herebtransfer and convey by ay of mortgage unto theortgagee, its successors or assigns, the parcels ofland hich are described in the list inserted on theback of this document, andor appended hereto,together ith all the buildings and improvements noe+isting or hich may hereafter be erected orconstructed thereon, of hich the ortgagor declare

http://www.lawphil.net/judjuris/juri2005/jul2005/gr_150197_2005.html#fnt1http://www.lawphil.net/judjuris/juri2005/jul2005/gr_150197_2005.html#fnt2http://www.lawphil.net/judjuris/juri2005/jul2005/gr_150197_2005.html#fnt3http://www.lawphil.net/judjuris/juri2005/jul2005/gr_150197_2005.html#fnt3http://www.lawphil.net/judjuris/juri2005/jul2005/gr_150197_2005.html#fnt1http://www.lawphil.net/judjuris/juri2005/jul2005/gr_150197_2005.html#fnt2http://www.lawphil.net/judjuris/juri2005/jul2005/gr_150197_2005.html#fnt3


20/39

that heit is the absolute oner free from all liens andincumbrances. . . .7

On ;; October $&8', 1on Alviar e+ecuted anotherpromissory note, P) 31X8'CG*7% for P;,'79,999.99,secured by 1A (?1 X$;&, signifying that the loanas secured by a BholdGoutB on the mortgagorZs foreigncurrency savings account ith the bank under Account)o. $;&, and that the mortgagorZs passbook is to besurrendered to the bank until the amount secured by

the BholdGoutB is settled.%

On ;8 1ecember $&8', respondent spouses e+ecutedfor 1onalco Trading, nc., of hich the husband andife ere President and Chairman of the 3oard andMice President,' respectively, P) 31X8'CG7*9coveringP%7%,999.999. As provided in the note, theloan is secured by BCleanGPhase out TO1 CA *&;*,Bhich means that the temporary overdraft incurred by1onalco Trading, nc. ith petitioner is to be convertedinto an ordinary loan in compliance ith a Central 3ankcircular directing the discontinuance of overdrafts.8

On $' arch $&88, petitioner rote 1onalco Trading,nc., informing the latter of its approval of a straightloan ofP%7%,999.99, the proceeds of hich shall beused to li6uidate the outstanding loan of P%7%,999.99TO1. The letter likeise mentioned that the securitiesfor the loan ere the deed of assignment on topromissory notes e+ecuted by 3ancom #ealtyCorporation ith 1eed of Fuarantee in favor of A.:.Malencia and Co. and the chattel mortgage on variousheavy and transportation e6uipment.4

On 9' arch $&8&, respondents paidpetitioner P;,999,999.99, to be applied to theobligations of F.3. Alviar #ealty and 1evelopment, nc.and for the release of the real estate mortgage forthe P7%9,999.99 loan covering the to /;2 lots locatedat Mam 3uren and adison (treets, )orth Freenhills,(an @uan, etro anila. The payment asacknoledged by petitioner ho accordingly releasedthe mortgage over the to properties.&

On $% @anuary $&49, petitioner moved for thee+tra>udicial foreclosure of the mortgage

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