EDUARDO L. RAYO, Petitioner, vs. METROPOLITAN BANK AND TRUST COMPANY AND BRANCH 223 OF THE REGIONAL TRIAL COURT OF QUEZON CITY, Respondents.Before us is a petition for review assailing the Resolutions dated June 15, 20041 and August 23, 20042 of the Court of Appeals in CA-G.R. SP No. 83895 for annulment of judgment.The pertinent facts are undisputed.Midas Diversified Export Corp. (Midas), thru its president, Mr. Samuel U. Lee, obtained six (6) loans from private respondent Metropolitan Bank and Trust Company (Metrobank), amounting to P588,870,000 as evidenced by promissory notes. To secure the payment of an P8,000,000 loan, Louisville Realty & Development Corporation (Louisville), thru its president, Mr. Samuel U. Lee, executed in favor of Metrobank, a real estate mortgage over three parcels of land situated at No. 40 Timog Ave., Brgy. Laging Handa, Quezon City, with all the buildings and improvements thereon. The properties are covered by Transfer Certificates of Title (TCT) Nos. N-163455, N-166349 and N-166350 issued by the Registry of Deeds of Quezon City.When the debtor-mortgagor failed to pay, Metrobank extra-judicially foreclosed the real estate mortgage in accordance with Act No. 3135,3 as amended. Thereafter, in a public auction, Metrobank was the highest bidder. A Certificate of Sale4 dated December 11, 2000 was duly registered with the Registry of Deeds of Quezon City on December 13, 2000. When Louisville refused to turn over the real properties, on March 17, 2001, Metrobank filed before the Regional Trial Court (RTC), Branch 223, Quezon City, an ex parte petition5 for the issuance of a writ of possession docketed as LRC Case No. Q-13915(01). After presentation of evidence ex parte, the RTC granted the petition in an Order6 dated July 5, 2001, the dispositive portion of which reads as follows:WHEREFORE, in consideration of the foregoing premises, the instant petition is hereby GRANTED. Upon the filing of a bond in the amount of ONE HUNDRED THOUSAND PESOS ([P]100,000.00), let a Writ of Possession over the properties covered by Transfer Certificates of Title Nos. N-163455, N-166349 & N-166350 issue in favor of the petitioner METROPOLITAN BANK & TRUST COMPANY to be implemented by the Deputy Sheriff of Branch 223, Regional Trial Court of Quezon City by placing the petitioner in possession over the parcels of land with all its improvements.SO ORDERED.7On September 24, 2001, Metrobank posted the required bond. Consequently, a writ of possession was issued on October 9, 2001. This was partially implemented as to TCT No. N-163455, as evidenced by the Turn-Over Receipt8 dated December 13, 2002. The writ over the two remaining properties, under TCT Nos. N-166349 and N-166350, were subsequently implemented as evidenced by the Turn-Over Receipt9 dated December 3, 2003.Meanwhile, on April 3, 2002, petitioner Eduardo L. Rayo filed a complaint10 docketed as Civil Case No. Q02-46514 against Metrobank for Nullification of Real Estate Mortgage Contract(s) and Extrajudicial Foreclosure Sale, in the RTC, Branch 99, Quezon City.On May 13, 2004, petitioner Rayo filed with the Court of Appeals a Petition11 for Annulment of Judgment on the ground of "absolute lack of due process." Petitioner alleged that his predecessor, Louisville, was not notified of the proceedings and that Section 712 (ex parte motion or petition for the issuance of a writ of possession) of Act No. 3135 is unconstitutional.On June 15, 2004, the Court of Appeals denied the petition for lack of merit. The Court of Appeals ruled that petitioner is neither the registered owner nor the successor-in-interest of the registered owner; hence, not a real party-in-interest. It also ruled that there is no basis to challenge the constitutionality of Section 7 of Act No. 3135, as amended as it constitutes a collateral attack against said provision. Further, petitioner availed of the wrong remedy in filing Civil Case No. Q02-46514. Petitioner sought reconsideration, but was likewise denied.Petitioner now comes before us raising the following as primary issue:WHETHER OR NOT SECTION 7 OF ACT NO. 3135 IS CONTRARY TO THE DUE PROCESS PROVISION OF THE PHILIPPINE CONSTITUTION CONSIDERING THAT SUCH SECTION 7 OF THE LAW PROVIDES OR ALLOWS, ACCORDING TO THIS HONORABLE COURT, FOR AN EX-PARTE PROCEEDING WHICH IS A "JUDICIAL PROCEEDING BROUGHT FOR THE BENEFIT OF ONE PARTY ONLY, AND WITHOUT NOTICE TO, OR CONSENT BY ANY PERSON ADVERSELY INTERESTED" "OR A PROCEEDING WHEREIN RELIEF IS GRANTED WITHOUT AN OPPORTUNITY FOR THE PERSON AGAINST WHOM THE RELIEF IS SOUGHT TO BE HEARD," AS HELD IN THE CASE OF GOVERNMENT SERVICE INSURANCE SYSTEM VS. COURT OF APPEALS, 169 SCRA 244 @ 255, JANUARY 20, 1989.13He also raises the following as secondary issues:I.WHETHER OR NOT THE PETITIONER HAS THE LEGAL PERSONALITY TO SEEK THE ANNULMENT OF JUDGMENT IN [THE] SUBJECT LRC CASE NO. Q-13915(01).II.WHETHER OR NOT PRIVATE RESPONDENT VIOLATED THE RULE AGAINST FORUM-SHOPPING WHEN IT DID NOT INFORM THE HONORABLE BRANCH 223 OF THE REGIONAL TRIAL COURT OF QUEZON CITY REGARDING THE FILING OF CIVIL CASE NO. Q-02-46514 FOR NULLIFICATION OF REAL ESTATE MORTGAGE CONTRACT AND THE EXTRA-JUDICIAL FORECLOSURE SALE OF THE SAME SUBJECT REAL PROPERTIES AND THE PENDENCY OF THE SAME BEFORE THE HONORABLE BRANCH 99 OF THE SAME REGIONAL TRIAL COURT.14Stated simply, the issues raised are: (1) Does petitioner have the legal personality in the annulment of judgment proceedings? (2) Is Section 7 of Act No. 3135, as amended, unconstitutional? (3) Is respondent guilty of forum-shopping?Petitioner insists that contrary to the ruling of the Court of Appeals, he has the legal personality to institute the annulment of judgment case against Metrobank, considering that the March 25, 2002 deed of assignment he entered into with Louisville and Winston Linwy L. Chua makes him a co-assignee over the subject real properties.For its part, Metrobank claims that it was not a party to the deed of assignment among Louisville, Chua and petitioner, hence, it has no privity of contract with petitioner Rayo. Moreover, Metrobank points out that the real properties had already been extrajudicially foreclosed when petitioner and his assignors executed the deed of assignment.Under Section 2,15 Rule 3 of the Rules of Court, every action must be prosecuted or defended in the name of the real party-in-interest, or one "who stands to be benefited or injured by the judgment in the suit."16 A real party-in-interest is one with "a present substantial interest" which means such interest of a party in the subject matter of the action as will entitle him, under the substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand.17Now, is petitioner Rayo a real party-in-interest? Initially, we recognized herein petitioner as the co-assignee of the subject real properties as shown in the March 25, 2002 deed of assignment. However, while petitioner would be injured by the judgment in this suit, we find that petitioner has no present substantial interest to institute the annulment of judgment proceedings and nullify the order granting the writ of possession.First, there was no violation of petitioners right to constitutional due process. In a long line of cases,18 we have consistently ruled that the issuance of a writ of possession in favor of the purchaser in a foreclosure sale of a mortgaged property under Section 7 of Act No. 3135, as amended is a ministerial duty of the court. The purchaser of the foreclosed property, upon ex parte application and the posting of the required bond, has the right to acquire possession of the foreclosed property during the 12-month redemption period and with more reason, after the expiration of the redemption period.An ex parte petition for the issuance of a writ of possession under Section 7 of Act No. 3135 is not, strictly speaking, a "judicial process" as contemplated in Article 43319 of the Civil Code. It is a judicial proceeding for the enforcement of ones right of possession as purchaser in a foreclosure sale. It is not an ordinary suit filed in court, by which one party "sues another for the enforcement of a wrong or protection of a right, or the prevention or redress of a wrong." It is a non-litigious proceeding authorized in an extrajudicial foreclosure of mortgage pursuant to Act No. 3135, as amended, and is brought for the benefit of one party only, and without notice to, or consent by any person adversely interested. It is a proceeding where the relief is granted without requiring an opportunity for the person against whom the relief is sought to be heard. No notice is needed to be served upon persons interested in the subject property.20Second, in the deed of assignment, petitioner also acknowledged that the subject real properties were already sold at various extrajudicial foreclosure sales and bought by Metrobank. Clearly, petitioner recognized the prior existing right of Metrobank as the mortgagee-purchaser over the subject real properties.21 Actual knowledge of a prior mortgage with Metrobank is equivalent to notice of registration22 in accordance with Article 212523 of the Civil Code. Conformably with Articles 131224 and 212625 of the Civil Code, a real right or lien in favor of Metrobank had already been established, subsisting over the properties until the discharge of the principal obligation, whoever the possessor(s) of the land might be.26 As petitioner is not a party whose interest is adverse to that of Louisville, there was no bar to the issuance of a writ of possession to Metrobank. It does not matter that petitioner was not specifically named in the writ of possession nor notified of such proceedings.1avvphi1Third, we also note that petitioner availed of the wrong remedy in filing Civil Case No. Q02-46514, for nullification of real estate mortgage and extrajudicial foreclosure sale, more than six (6) months after the issuance of the writ of possession considering the mandate of Section 827 of Act No. 3135, as amended. Hence, even petitioners action for annulment of judgment cannot prosper as it cannot be a substitute for a lost remedy.Now, petitioner is challenging the constitutionality of Section 7 of Act No. 3135, as amended. He avers that Section 7 violates the due process clause because, by the mere filing of an ex parte motion in the proper cadastral court, the purchaser in a foreclosure sale is allowed to obtain possession of the foreclosed property during the redemption period.The Court of Appeals ruled that petitioners attempt to challenge the constitutionality of Section 7 of Act No. 3135, as amended, constitutes a collateral attack that is not allowed. We fully agree with the appellate courts ruling. For reasons of public policy, the constitutionality of a law cannot be attacked collaterally.28With regard to forum-shopping; forum-shopping is the filing of multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. It exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in another.29 The issuance of the writ of possession being a ministerial function, and summary in nature, it cannot be said to be a judgment on the merits. It is only an incident in the transfer of title. Hence, a separate case for annulment of mortgage and foreclosure sale cannot be barred by litis pendentia or res judicata.30 Clearly, insofar as LRC Case No. Q-13915(01) and Civil Case No. Q02-46514 are concerned, Metrobank is not guilty of forum-shopping.WHEREFORE, the petition is DENIED for lack of merit. The assailed Resolutions dated June 15, 2004 and August 23, 2004 of the Court of Appeals in CA-G.R. SP No. 83895 are hereby AFFIRMED. Costs against the petitioner.SO ORDERED.PHILIPPINE CHARITY SWEEPSTAKES OFFICE (PCSO), Petitioner, vs. NEW DAGUPAN METRO GAS CORPORATION, PURITA E. PERALTA and PATRICIA P. GALANG, Respondents.This is a petition for review under Rule 45 of the Rules of Court, assailing the Decision1 dated September 29, 2005 and Resolution2 dated June 9, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 59590.In the assailed Decision, the CA Affirmed the Decision3 dated January 28, 1998 of the Regional Trial Court (RTC), Branch 42 of Dagupan City in Civil Case No. 94-00200-D, ordering petitioner Philippine Charity Sweepstakes Office (PCSO) to surrender the owners duplicate of TransferCertificate of Title (TCT) No. 52135 to the Register of Deeds of Dagupan City for cancellation and issuance of a new certificate of title in the name of respondent New Dagupan Metro Gas Corporation (New Dagupan).In its Resolution4 dated June 9, 2006, the CA denied PCSOs motion for reconsideration.The Factual AntecedentsRespondent Purita E. Peralta (Peralta) is the registered owner of a parcel of land located at Bonuan Blue Beach Subdivision, Dagupan City under TCT No. 52135. On March 8, 1989, a real estate mortgage was constituted over such property in favor of PCSO to secure the payment of the sweepstakes tickets purchased by one of its provincial distributors, Patricia P. Galang (Galang). The salient provisions of the Deed of Undertaking with First Real Estate Mortgage,5 where Galang, PCSO and Peralta were respectively designated as "principal", "mortgagee" and "mortgagor", are as follows:WHEREAS, the PRINCIPAL acknowledges that he/she has an outstanding and unpaid account with the MORTGAGEE in the amount of FOUR HUNDRED FIFTY THOUSAND (P450,000.00), representing the balance of his/her accountabilities for all draws;WHEREAS, the PRINCIPAL agrees to liquidate or pay said account ten (10) days after each draw with interest at the rate of 14% per annum.x x x xThe PRINCIPAL shall settle or pay his/her account of FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00) PESOS with the MORTGAGEE, provided that the said balance shall bear interest thereon at the rate of 14% per annum;To secure the faithful compliance and as security to the obligation of the PRINCIPAL stated in the next preceding paragraph hereof, the MORTGAGOR hereby convey unto and in favor of the MORTGAGEE, its successor and assigns by way of its first real estate mortgage, a parcel/s of land together with all the improvements now or hereafter existing thereon located at BOQUIG, DAGUPAN CITY, covered by TCT No. 52135, of the Register of Deeds of DAGUPAN CITY, and more particularly described as follows:x x x x4. During the lifetime of this mortgage, the MORTGAGOR shall not alienate, sell, or in any manner dispose of or encumber the above-mentioned property, without the prior written consent of the MORTGAGEE;x x x x15. Upon payment of the principal amount together with interest and other expenses legally incurred by the MORTGAGEE, the above undertaking is considered terminated.6On July 31, 1990, Peralta sold, under a conditional sale, the subject property to New Dagupan, the conveyance to be absolute upon the latters full payment of the price of P800,000.00. New Dagupan obliged to pay Peralta P200,000.00 upon the execution of the corresponding deed and the balance of P600,000.00 by monthly instalments of P70,000.00, the first instalment falling due on August 31, 1990. Peralta showed to New Dagupan a photocopy of TCT No. 52135, which bore no liens and encumbrances, and undertook to deliver the owners duplicate within three (3) months from the execution of the contract.7New Dagupan withheld payment of the last instalment, which was intended to cover the payment of the capital gains tax, in view of Peraltas failure to deliver the owners duplicate of TCT No. 52135 and to execute a deed of absolute sale in its favor. Further, New Dagupan, through its President, Julian Ong Cua (Cua), executed an affidavit of adverse claim, which was annotated on TCT No. 52135 on October 1, 1991 as Entry No. 14826.8In view of Peraltas continued failure to deliver a deed of absolute sale and the owners duplicate of the title, New Dagupan filed a complaint for specific performance against her with the RTC on February 28, 1992. New Dagupans complaint was raffled to Branch 43 and docketed as Civil Case No. D-10160.On May 20, 1992, during the pendency of New Dagupans complaint against Peralta, PCSO caused the registration of the mortgage.9On February 10, 1993, PCSO filed an application for the extrajudicial foreclosure sale of the subject property in view of Galangs failure to fully pay the sweepstakes she purchased in 1992.10 A public auction took place on June 15, 1993 where PCSO was the highest bidder. A certificate of sale was correspondingly issued to PCSO.11The certified true copy of TCT No. 52135 that New Dagupan obtained from the Register of Deeds of Dagupan City for its use in Civil Case No. D-10160 reflected PCSOs mortgage lien. New Dagupan, claiming that it is only then that it was informed of the subject mortgage, sent a letter to PCSO on October 28, 1993, notifying the latter of its complaint against Peralta and its claim over the subject property and suggesting that PCSO intervene and participate in the case.On January 21, 1994, the RTC Branch 43 rendered a Decision, approving the compromise agreement between Peralta and New Dagupan. Some of the stipulations made are as follows:3. For her failure to execute, sign and deliver a Deed of Absolute Sale to plaintiff by way of transferring TCT No. 52135 in the name of the latter, defendant hereby waives and quitclaims the remaining balance of the purchase price in the amount of P60,000.00 in favor of the plaintiff, it being understood that the said amount shall be treated as a penalty for such failure;x x x x6. Upon the signing of this compromise agreement, possession and ownership of the above described property, together with all the improvements existing thereon, are hereby vested absolutely upon, and transferred to the plaintiff whom the defendant hereby declares and acknowledges to be the absolute owner thereof, now and hereafter;7. This compromise agreement shall be without prejudice to whatever rights and remedies, if any, that the Philippine Charity Sweepstakes Office has against the herein defendant and Patricia P. Galang under the Deed of Undertaking adverted to under par. 2(f) hereof.12As the RTC Branch 43 Decision dated January 21, 1994 became final and executory, New Dagupan once again demanded Peraltas delivery of the owners duplicate of TCT No. 52135. Also, in a letter dated March 29, 1994, New Dagupan made a similar demand from PCSO, who in response, stated that it had already foreclosed the mortgage on the subject property and it has in its name a certificate of sale for being the highest bidder in the public auction that took place on June 15, 1993.Thus, on June 1, 1994, New Dagupan filed with the RTC a petition against PCSO for the annulment of TCT No. 52135 or surrender of the owners duplicate thereof.13 The petition was docketed as Civil Case No. 94-00200-D and raffled to Branch 43.In an Answer14 dated March 7, 1995, PCSO alleged that: (a) New Dagupan was a buyer in bad faith; (b) New Dagupan and Peralta colluded to deprive PCSO of its rights under the subject mortgage; (c) New Dagupan is estopped from questioning the superior right of PCSO to the subject property when it entered into the compromise agreement subject of the RTC Branch 43 Decision dated January 21, 1994; and (d) New Dagupan is bound by the foreclosure proceedings where PCSO obtained title to the subject property.In a Motion for Leave to File Third-Party Complaint15 dated April 17, 1995, PCSO sought the inclusion of Peralta and Galang who are allegedly indispensable parties. In its Third-Party Complaint,16 PCSO reiterated its allegations in its Answer dated March 7, 1995 and made the further claim that the sale of the subject property to New Dagupan is void for being expressly prohibited under the Deed of Undertaking with First Real Estate Mortgage.In their Answer to Third-Party Complaint with Counterclaims17 dated January 2, 1996, Peralta and Galang claimed that: (a) the provision in the Deed of Undertaking with First Real Estate Mortgage prohibiting the sale of the subject property is void under Article 2130 of the Civil Code; (b) PCSOs failure to intervene in Civil Case No. D-10160 despite notice barred it from questioning the sale of the subject property to New Dagupan and the compromise agreement approved by the RTC Branch 43; (c) it was due to PCSOs very own neglect in registering its mortgage lien that preference is accorded to New Dagupans rights as a buyer of the subject property; and (d) PCSO no longer has any cause of action against them following its decision to foreclose the subject mortgage.On March 6, 1996, Civil Case No. 94-00200-D was transferred to Branch 42, after the presiding judge of Branch 43 inhibited himself.On January 28, 1998, the RTC Branch 42 rendered a Decision18 in New Dagupans favor, the dispositive portion of which states:WHEREFORE, judgment is hereby rendered in favor of the petitioner and against the defendant, ordering PCSO to deliver the owners duplicate copy of TCT No. 52135 in its possession to the Registry of Deeds of Dagupan City for the purpose of having the decision in favor of the petitioner annotated at the back thereof. Should said defendant fail to deliver the said title within 30 days from the date this decision becomes final and executory, the said owners duplicate certificate of title is hereby cancelled and the Register of Deeds can issue a new one carrying all the encumbrances of the original owners duplicate subject of this case. Further, the defendant is ordered to pay to petitioner the sum of Ten Thousand Pesos (P10,000.00) as attorneys fees. It is also ordered to pay costs.SO ORDERED.19The RTC Branch 42 ruled that New Dagupan is a buyer in good faith, ratiocinating that:In other words, the evidence of the petitioner would show that although the Deed of Undertaking with First Real Estate Mortgage was executed on March 8, 1989 its annotation was made long after the conditional sale in favor of the petitioner was executed and annotated at the back of the title in question. Because of the said exhibits, petitioner contended that it was a buyer in good faith and for value.Defendant, to controvert the aforementioned evidence of the plaintiff, alleged that Exhibits C, C-1 to C-1-C was contrary to the testimony of Mr. Julian Ong Cua to the effect that when defendants sold the property to petitioner only the xerox copy of the title was shown and petitioner should have verified the original as it was a buyer in bad faith. Defendant also alleged that the decision in Civil Case D-10160 dated January 21, 1994 would show that there was a collusion between the petitioner and the third-party defendants.The Court cannot go along with the reasoning of the defendant because what was shown to Mr. Cua by the third-party defendants was Exhibit "C" which did not carry any encumbrance at the back of the subject title and the annotation made on May 20, 1992 in favor of the PCSO. Mr. Cua verified the title x x x but the encumbrance on the title was not still there at [that] time. One thing more, there was nothing indicated in the decision in Civil Case No. D-10160 that petitioner already knew that there was already a mortgage in favor of the PCSO. Worst, defendant did not even introduce any oral evidence to show that petitioner was in bad faith except the manifestations of counsel. Unfortunately, manifestations could not be considered evidence.x x x xDefendant should not be allowed to profit from its negligence of not registering the Deed of Undertaking with First Real Estate Mortgage in its favor.20Also, the RTC Branch 42 ruled that the prohibition on the sale of the subject property is void. Specifically:Suffice it to say that there is no law prohibiting a mortgagor from encumbering or alienating the property mortgaged. On the contrary, there is a law prohibiting an agreement forbidding the owner from alienating a mortgaged property. We are referring to Article 2130 of the New Civil Code which provides as follows:"A stipulation forbidding the owner from alienating the immovable mortgage shall be void."21Moreover, the RTC Branch 42 ruled that PCSO had no right to foreclose the subject mortgage as the land in question had already been disencumbered after Galangs full payment of all the sweepstakes tickets she purchased in 1989 and 1990.It should be recalled that Amparo Abrigo, OIC Chief of the Credit Accounts Division of the PCSO, admitted not only once but twice that Patricia Galang has no more liability with the PCSO for the years 1989 and 1990 x x x. Another witness, Carlos Castillo who is the OIC of the Sales Department of the PCSO, joined Amparo Abrigo in saying that Patricia Galang has already paid her liability with the PCSO for the years 1989 and 1990 x x x. Thus, the undertaking was already discharged. Both of the said witnesses of the PCSO alleged that the undertaking has been re-used by Patricia Galang for the years 1991 to 1992 yet there is no proof whatsoever showing that Purita Peralta consented to the use of the undertaking by Patricia Galang for 1991 to 1992. Incidentally, it is not far-fetched to say that Purita Peralta might have thought that the undertaking was already discharged which was the reason she executed the Deed of Conditional Sale x x x in favor of petitioner in 1990. That being the case, the foreclosure sale in favor of the PCSO has no legal leg to stand as the Deed of Undertaking with First Real Estate Mortgage has already been discharged before the foreclosure sale was conducted.22According to the RTC Branch 42, the intent to use the subject property as security for Galangs purchases for the years after 1989, as PCSO claimed, is not clear from the Deed of Undertaking with First Real Estate Mortgage:Was it not provided in the deed that the undertaking would be for "all draws". That might be true but the terms of the Contract should be understood to mean only to cover the draws relative to the current liabilities of Patricia Galang at the time of the execution of the undertaking in 1989. It could have not been agreed upon that it should also cover her liability for 1991 up to 1992 because if that was the intention of the parties, the undertaking should have so provided expressly. The term of the undertaking with respect to the period was ambiguous but any ambiguity in the Contract should be resolved against PCSO because the form used was a standard form of the defendant and it appeared that it was its lawyers who prepared it, therefore, it was the latter which caused the ambiguity.23PCSOs appeal from the foregoing adverse decision was dismissed. By way of its assailed decision, the CA did not agree with PCSOs claim that the subject mortgage is in the nature of a continuing guaranty, holding that Peraltas undertaking to secure Galangs liability to PCSO is only for a period of one year and was extinguished when Peralta completed payment on the sweepstakes tickets she purchased in 1989.The instant appeal must fail. There is nothing in the Deed of Undertaking with First Real Estate Mortgage, expressly or impliedly, that would indicate that Peralta agreed to let her property be burdened as long as the contract of undertaking with real estate mortgage was not cancelled or revoked. x x xx x x xA perusal of the deed of undertaking between the PCSO and Peralta would reveal nothing but the undertaking of Peralta to guarantee the payment of the pre-existing obligation of Galang, constituting the unpaid sweepstakes tickets issued to the latter before the deed of undertaking was executed, with the PCSO in the amount of P450,000.00. No words were added therein to show the intention of the parties to regard it as a contract of continuing guaranty. In other jurisdictions, it has been held that the use of the particular words and expressions such as payment of "any debt", "any indebtedness", "any deficiency", or "any sum", or the guaranty of "any transaction" or money to be furnished the principal debtor "at any time", or "on such time" that the principal debtor may require, have been construed to indicate a continuing guaranty. Similar phrases or words of the same import or tenor are not extant in the deed of undertaking. The deed of undertaking states:"WHEREAS, the PRINCIPAL acknowledges that he/she has an outstanding and unpaid account with the MORTGAGEE in the amount of FOUR HUNDRED FIFTY THOUSAND (P450,000.00), representing the balance of his/her ticket accountabilities for all draws."x x x xUpon full payment of the principal obligation, which from the testimonies of the officers of the PCSO had been paid as early as 1990, the subsidiary contract of guaranty was automatically terminated. The parties have not executed another contract of guaranty to secure the subsequent obligations of Galang for the tickets issued thereafter. It must be noted that a contract of guaranty is not presumed; it must be express and cannot extend to more than what is stipulated therein.x x x xThe arguments of PCSO fail to persuade us. The phrase "for all draws" is limited to the draws covered by the original transaction. In its pleadings, the PCSO asserted that the contract of undertaking was renewed and the collateral was re-used by Galang to obtain again tickets from the PCSO after she had settled her account under the original contract. From such admission, it is thus clear that the contract is not in the nature of a continuing guaranty. For a contract of continuing guaranty is not renewed as it is understood to be of a continuing nature without the necessity of renewing the same every time a new transaction contemplated under the original contract is entered into. x x x 24 (Citations omitted)In this petition, PCSO claims that the CA erred in holding that the subject mortgage had been extinguished by Galangs payment of P450,000.00, representing the amount of the sweepstakes tickets she purchased in 1989. According to PCSO, the said amount is actually the credit line granted to Galang and the phrase "all draws" refers to her ticket purchases for subsequent years drawn against such credit line. Consequently, PCSO posits, the subject mortgage had not been extinguished by Peraltas payment of her ticket purchases in 1989 and its coverage extends to her purchases after 1989, which she made against the credit line that was granted to her. That when Galang failed to pay her ticket purchases in 1992, PCSOs right to foreclose the subject mortgage arose.PCSO also maintains that its rights over the subject property are superior to those of New Dagupan. Considering that the contract between New Dagupan is a conditional sale, there was no conveyance of ownership at the time of the execution thereof on July 31, 1989. It was only on January 21, 1994, or when the RTC Branch 43 approved the compromise agreement, that a supposed transfer of title between Peralta and New Dagupan took place. However, since PCSO had earlier foreclosed the subject mortgage and obtained title to the subject property as evidenced by the certificate of sale dated June 15, 1993, Peralta had nothing to cede or assign to New Dagupan.PCSO likewise attributes bad faith to New Dagupan, claiming that Peraltas presentation of a mere photocopy of TCT No. 52135, albeit without any annotation of a lien or encumbrance, sufficed to raise reasonable suspicions against Peraltas claim of a clean title and should have prompted it to conduct an investigation that went beyond the face of TCT No. 52135.PCSO even assails the validity of the subject sale for being against the prohibition contained in the Deed of Undertaking with First Real Estate Mortgage.New Dagupan, in its Comment,25 avers that it was a purchaser in good faith and it has a superior right to the subject property, considering that PCSOs mortgage lien was annotated only on May 20, 1992 or long after the execution of the conditional sale on July 31, 1990 and the annotation of New Dagupans adverse claim on October 1, 1991. While the subject mortgage antedated the subject sale, PCSO was already aware of the latter at the time of its belated registration of its mortgage lien. PCSOs registration was therefore in bad faith, rendering its claim over the subject property defeasible by New Dagupans adverse claim.New Dagupan also claims that the subject property had already been discharged from the mortgage, hence, PCSO had nothing to foreclose when it filed its application for extra-judicial foreclosure on February 10, 1993. The subject mortgage was intended to secure Galangs ticket purchases that were outstanding at the time of the execution of the same, the amount of which has been specified to be P450,000.00 and does not extend to Galangs future purchases. Thus, upon Galangs full payment of P450,000.00, which PCSO admits, the subject mortgage had been automatically terminated as expressly provided under Section 15 of the Deed of Undertaking with First Real Estate Mortgage quoted above.IssueThe rise and fall of this recourse is dependent on the resolution of the issue who between New Dagupan and PCSO has a better right to the property in question.Our RulingPCSO is undeterred by the denial of its appeal to the CA and now seeks to convince this Court that it has a superior right over the subject property. However, PCSOs resolve fails to move this Court and the ineluctability of the denial of this petition is owing to the following:a. At the time of PCSOs registration of its mortgage lien on May 20, 1992, the subject mortgage had already been discharged by Galangs full payment of P450,000.00, the amount specified in the Deed of Undertaking with First Real Estate Mortgage;b. There is nothing in the Deed of Undertaking with First Real Estate Mortgage that would indicate that it is a continuing security or that there is an intent to secure Galangs future debts;c. Assuming the contrary, New Dagupan is not bound by PCSOs mortgage lien and was a purchaser in good faith and for value; andd. While the subject mortgage predated the sale of the subject property to New Dagupan, the absence of any evidence that the latter had knowledge of PCSOs mortgage lien at the time of the sale and its prior registration of an adverse claim created a preference in its favor.I. As a general rule, a mortgage liability is usually limited to the amount mentioned in the contract. However, the amounts named as consideration in a contract of mortgage do not limit the amount for which the mortgage may stand as security if from the four corners of the instrument the intent to secure future and other indebtedness can be gathered.26Alternatively, while a real estate mortgage may exceptionally secure future loans or advancements, these future debts must be specifically described in the mortgage contract. An obligation is not secured by a mortgage unless it comes fairly within the terms of the mortgage contract.27The stipulation extending the coverage of a mortgage to advances or loans other than those already obtained or specified in the contract is valid and has been commonly referred to as a "blanket mortgage" or "dragnet" clause. In Prudential Bank v. Alviar,28 this Court elucidated on the nature and purpose of such a clause as follows:A "blanket mortgage clause," also known as a "dragnet clause" in American jurisprudence, is one which is specifically phrased to subsume all debts of past or future origins. Such clauses are "carefully scrutinized and strictly construed." Mortgages of this character enable the parties to provide continuous dealings, the nature or extent of which may not be known or anticipated at the time, and they avoid the expense and inconvenience of executing a new security on each new transaction. A "dragnet clause" operates as a convenience and accommodation to the borrowers as it makes available additional funds without their having to execute additional security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees, et cetera. x x x.29 (Citations omitted)A mortgage that provides for a dragnet clause is in the nature of a continuing guaranty and constitutes an exception to the rule than an action to foreclose a mortgage must be limited to the amount mentioned in the mortgage contract. Its validity is anchored on Article 2053 of the Civil Code and is not limited to a single transaction, but contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. In other words, a continuing guaranty is one that covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof.30In this case, PCSO claims the subject mortgage is a continuing guaranty. According to PCSO, the intent was to secure Galangs ticket purchases other than those outstanding at the time of the execution of the Deed of Undertaking with First Real Estate Mortgage on March 8, 1989 such that it can foreclose the subject mortgage for Galangs non-payment of her ticket purchases in 1992. PCSO does not deny and even admits that Galang had already settled the amount of P450,000.00. However, PCSO refuses to concede that the subject mortgage had already been discharged, claiming that Galang had unpaid ticket purchases in 1992 and these are likewise secured as evidenced by the following clause in the Deed of Undertaking with First Real Estate Mortgage:WHEREAS, the PRINCIPAL agrees to liquidate or pay said account ten (10) days after each draw with interest at the rate of 14% per annum;31This Court has to disagree with PCSO in view of the principles quoted above. A reading of the other pertinent clauses of the subject mortgage, not only of the provision invoked by PCSO, does not show that the security provided in the subject mortgage is continuing in nature. That the subject mortgage shall only secure Galangs liability in the amount of P450,000.00 is evident from the following:WHEREAS, the PRINCIPAL acknowledges that he/she has an outstanding and unpaid account with the MORTGAGEE in the amount of FOUR HUNDRED FIFTY THOUSAND (P450,000.00), representing the balance of his/her ticket accountabilities for all draws;x x x xThe PRINCIPAL shall settle or pay his/her account of FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00) PESOS with the MORTGAGEE, provided that the said balance shall bear interest thereon at the rate of 14% per annum;To secure the faithful compliance and as security to the obligation of the PRINCIPAL stated in the next preceding paragraph hereof, the MORTGAGOR hereby convey unto and in favor of the MORTGAGEE, its successor and assigns by way of its first real estate mortgage, a parcel/s of land together with all the improvements now or hereafter existing thereon, located at BOQUIG, DAGUPAN CITY, covered by TCT No. 52135, of the Register of Deeds of DAGUPAN CITY, and more particularly described as follows:32As the CA correctly observed, the use of the terms "outstanding" and "unpaid" militates against PCSOs claim that future ticket purchases are likewise secured. That there is a seeming ambiguity between the provision relied upon by PCSO containing the phrase "after each draw" and the other provisions, which mention with particularity the amount of P450,000.00 as Galangs unpaid and outstanding account and secured by the subject mortgage, should be construed against PCSO. The subject mortgage is a contract of adhesion as it was prepared solely by PCSO and the only participation of Galang and Peralta was the act of affixing their signatures thereto.Considering that the debt secured had already been fully paid, the subject mortgage had already been discharged and there is no necessity for any act or document to be executed for the purpose. As provided in the Deed of Undertaking with First Real Estate Mortgage:15. Upon payment of the principal amount together with interest and other expenses legally incurred by the MORTGAGEE, the above-undertaking is considered terminated.33Section 6234 of Presidential Decree (P.D.) No. 1529 appears to require the execution of an instrument in order for a mortgage to be cancelled or discharged. However, this rule presupposes that there has been a prior registration of the mortgage lien prior to its discharge. In this case, the subject mortgage had already been cancelled or terminated upon Galangs full payment before PCSO availed of registration in 1992. As the subject mortgage was not annotated on TCT No. 52135 at the time it was terminated, there was no need for Peralta to secure a deed of cancellation in order for such discharge to be fully effective and duly reflected on the face of her title.Therefore, since the subject mortgage is not in the nature of a continuing guaranty and given the automatic termination thereof, PCSO cannot claim that Galangs ticket purchases in 1992 are also secured. From the time the amount of P450,000.00 was fully settled, the subject mortgage had already been cancelled such that Galangs subsequent ticket purchases are unsecured. Simply put, PCSO had nothing to register, much less, foreclose.Consequently, PCSOs registration of its non-existent mortgage lien and subsequent foreclosure of a mortgage that was no longer extant cannot defeat New Dagupans title over the subject property.II.Sections 51 and 53 of P.D. No. 1529 provide:Section 51. Conveyance and other dealings by registered owner. An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instrument, except a will purporting to convey or affect registered land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration.The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies.Section 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.On the other hand, Article 2125 of the Civil Code states:Article 2125. In addition to the requisites stated in Article 2085, it is indispensable, in order that a mortgage may be validly constituted, that the document in which it appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding between the parties.The persons in whose favor the law establishes a mortgage have no other right than to demand the execution and the recording of the document in which the mortgage is formalized.Construing the foregoing conjunctively, as to third persons, a property registered under the Torrens system is, for all legal purposes, unencumbered or remains to be the property of the person in whose name it is registered, notwithstanding the execution of any conveyance, mortgage, lease, lien, order or judgment unless the corresponding deed is registered.The law does not require a person dealing with the owner of registered land to go beyond the certificate of title as he may rely on the notices of the encumbrances on the property annotated on the certificate of title or absence of any annotation.35 Registration affords legal protection such that the claim of an innocent purchaser for value is recognized as valid despite a defect in the title of the vendor.36In Cruz v. Bancom Finance Corporation,37 the foregoing principle was applied as follows:Second, respondent was already aware that there was an adverse claim and notice of lis pendens annotated on the Certificate of Title when it registered the mortgage on March 14, 1980. Unless duly registered, a mortgage does not affect third parties like herein petitioners, as provided under Section 51 of PD NO. 1529, which we reproduce hereunder:x x x xTrue, registration is not the operative act for a mortgage to be binding between the parties. But to third persons, it is indispensible. In the present case, the adverse claim and the notice of lis pendens were annotated on the title on October 30, 1979 and December 10, 1979, respectively; the real estate mortgage over the subject property was registered by respondent only on March 14, 1980. Settled in this jurisdiction is the doctrine that a prior registration of a lien creates a preference. Even a subsequent registration of the prior mortgage will not diminish this preference, which retroacts to the date of the annotation of the notice of lis pendens and the adverse claim. Thus, respondents failure to register the real estate mortgage prior to these annotations, resulted in the mortgage being binding only between it and the mortgagor, Sulit. Petitioners, being third parties to the mortgage, were not bound by it. Contrary to respondents claim that petitioners were in bad faith because they already had knowledge of the existence of the mortgage in favor of respondent when they caused the aforesaid annotations, petitioner Edilberto Cruz said that they only knew of this mortgage when respondent intervened in the RTC proceedings.38 (Citations omitted)It is undisputed that it was only on May 20, 1992 that PCSO registered its mortgage lien. By that time, New Dagupan had already purchased the subject property, albeit under a conditional sale. In fact, PCSOs mortgage lien was yet to be registered at the time New Dagupan filed its adverse claim on October 1, 1991 and its complaint against Peralta for the surrender of the owners duplicate of TCT No. 52135 on February 28, 1992. It was only during the pendency of Civil Case No. D-10160, or sometime in 1993, that New Dagupan was informed of PCSOs mortgage lien. On the other hand, PCSO was already charged with knowledge of New Dagupans adverse claim at the time of the annotation of the subject mortgage. PCSOs attempt to conceal these damning facts is palpable. However, they are patent from the records such that there is no gainsaying that New Dagupan is a purchaser in good faith and for value and is not bound by PCSOs mortgage lien.A purchaser in good faith and for value is one who buys property of another, without notice that some other person has a right to, or interest in, such property, and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other person in the property.39 Good faith is the opposite of fraud and of bad faith, and its non-existence must be established by competent proof.40 Sans such proof, a buyer is deemed to be in good faith and his interest in the subject property will not be disturbed. A purchaser of a registered property can rely on the guarantee afforded by pertinent laws on registration that he can take and hold it free from any and all prior liens and claims except those set forth in or preserved against the certificate of title.41This Court cannot give credence to PCSOs claim to the contrary. PCSO did not present evidence, showing that New Dagupan had knowledge of the mortgage despite its being unregistered at the time the subject sale was entered into. Peralta, in the compromise agreement, even admitted that she did not inform New Dagupan of the subject mortgage.42 PCSOs only basis for claiming that New Dagupan was a buyer in bad faith was the latters reliance on a mere photocopy of TCT No. 52135. However, apart from the fact that the facsimile bore no annotation of a lien or encumbrance, PCSO failed to refute the testimony of Cua that his verification of TCT No. 52135 with the Register of Deeds of Dagupan City confirmed Peraltas claim of a clean title.Since PCSO had notice of New Dagupans adverse claim prior to the registration of its mortgage lien, it is bound thereby and thus legally compelled to respect the proceedings on the validity of such adverse claim. It is therefore of no moment if PCSOs foreclosure of the subject mortgage and purchase of the subject property at the auction sale took place prior to New Dagupans acquisition of title as decreed in the Decision dated January 21, 1994 of RTC Branch 43. The effects of a foreclosure sale retroact to the date the mortgage was registered.43 Hence, while PCSO may be deemed to have acquired title over the subject property on May 20, 1992, such title is rendered inferior by New Dagupans adverse claim, the validity of which was confirmed per the Decision dated January 21, 1994 of RTC Branch 43.Otherwise, if PCSOs mortgage lien is allowed to prevail by the mere expediency of registration over an adverse claim that was registered ahead of time, the object of an adverse claim to apprise third persons that any transaction regarding the disputed property is subject to the outcome of the dispute would be rendered naught. A different conclusion would remove the primary motivation for the public to rely on and respect the Torrens system of registration. Such would be inconsistent with the well-settled, even axiomatic, rule that a person dealing with registered property need not go beyond the title and is not required to explore outside the four (4) corners thereof in search for any hidden defect or inchoate right that may turn out to be superior.Worthy of extrapolation is the fact that there is no conflict between the disposition of this case and Garbin v. CA44 where this Court decided the controversy between a buyer with an earlier registered adverse claim and a subsequent buyer, who is charged with notice of such adverse claim at the time of the registration of her title, in favor of the latter. As to why the adverse claim cannot prevail against the rights of the later buyer notwithstanding its prior registration was discussed by this Court in this wise:It is undisputed that the adverse claim of private respondents was registered pursuant to Sec. 110 of Act No. 496, the same having been accomplished by the filing of a sworn statement with the Register of Deeds of the province where the property was located. However, what was registered was merely the adverse claim and not the Deed of Sale, which supposedly conveyed the northern half portion of the subject property. Therefore, there is still need to resolve the validity of the adverse claim in separate proceedings, as there is an absence of registration of the actual conveyance of the portion of land herein claimed by private respondents.From the provisions of the law, it is clear that mere registration of an adverse claim does not make such claim valid, nor is it permanent in character. More importantly, such registration does not confer instant title of ownership since judicial determination on the issue of the ownership is still necessary.45 (Citation omitted)Apart from the foregoing, the more important consideration was the improper resort to an adverse claim.1wphi1 In L.P. Leviste & Co. v. Noblejas,46 this Court emphasized that the availability of the special remedy of an adverse claim is subject to the absence of any other statutory provision for the registration of the claimants alleged right or interest in the property. That if the claimants interest is based on a perfected contract of sale or any voluntary instrument executed by the registered owner of the land, the procedure that should be followed is that prescribed under Section 51 in relation to Section 52 of P.D. No. 1529. Specifically, the owners duplicate certificate must be presented to the Register of Deeds for the inscription of the corresponding memorandum thereon and in the entry day book. It is only when the owner refuses or fails to surrender the duplicate certificate for annotation that a statement setting forth an adverse claim may be filed with the Register of Deeds. Otherwise, the adverse claim filed will not have the effect of a conveyance of any right or interest on the disputed property that could prejudice the rights that have been subsequently acquired by third persons.What transpired in Gabin is similar to that in Leviste. In Gabin, the basis of the claim on the property is a deed of absolute sale. In Leviste, what is involved is a contract to sell. Both are voluntary instruments that should have been registered in accordance with Sections 51 and 52 of P.D. No. 1529 as there was no showing of an inability to present the owners duplicate of title.It is patent that the contrary appears in this case. Indeed, New Dagupans claim over the subject property is based on a conditional sale, which is likewise a voluntary instrument. However, New Dagupans use of the adverse claim to protect its rights is far from being incongruent in view of the undisputed fact that Peralta failed to surrender the owners duplicate of TCT No. 52135 despite demands.Moreover, while the validity of the adverse claim in Gabin is not established as there was no separate proceeding instituted that would determine the existence and due execution of the deed of sale upon which it is founded, the same does not obtain in this case. The existence and due execution of the conditional sale and Peraltas absolute and complete cession of her title over the subject property to New Dagupan are undisputed. These are matters covered by the Decision dated January 21, 1994 of RTC Branch 43, which had long become final and executory.At any rate, in Sajonas v.CA,47 this Court clarified that there is no necessity for a prior judicial determination of the validity of an adverse claim for it to be considered a flaw in the vendors title as that would be repugnant to the very purpose thereof.48WHEREFORE, premises considered, the petition is DISMISSED and the Decision dated September 29, 2005 and Resolution dated June9, 2006 of the Court of Appeals in CA-G.R. CV No. 59590 are hereby AFFIRMED.SO ORDERED.ALBERT R. PADILLA, petitioner, vs. SPOUSES FLORESCO PAREDES and ADELINA PAREDES, and THE HONORABLE COURT OF APPEALS, respondents.For resolution is a petition for review on certiorari, seeking reversal of the decision of the Court of Appeals in CA G.R. CV No. 33089, which set aside the decision of the Regional Trial Court in Civil Case No. 4357 and confirmed the rescission of the contract between petitioner and private respondents.From the records, we glean the following antecedent facts:On October 20, 1988, petitioner Albert R. Padilla and private respondents Floresco and Adelina Paredes entered into a contract to sell1 involving a parcel of land in San Juan, La Union. At that time, the land was untitled although private respondents were paying taxes thereon. Under the contract, petitioner undertook to secure title to the property in private respondents' names. Of the P312,840.00 purchase price, petitioner was to pay a downpayment of P50,000.00 upon signing of the contract, and the balance was to be paid within ten days from the issuance of a court order directing issuance of a decree of registration for the property.On December 27, 1989, the court ordered the issuance of a decree of land registration for the subject property. The property was titled in the name of private respondent Adelina Paredes. Private respondents then demanded payment of the balance of the purchase price, per the second paragraph of the contract to sell,2 which reads as follows:VENDEE agrees to pay the balance of the purchase price of subject property in the amount of TWO HUNDRED SIXTY TWO THOUSAND EIGHT HUNDRED FORTY (P262,840.00) PESOS, within ten (10) days counted from issuance of the Order of the Court for the issuance of a decree pursuant to an application for registration and confirmation of title of said subject property, of which the VENDEE is under obligation to secure the title of subject property at his own expense.Petitioner made several payments to private respondents, some even before the court issued an order for the issuance of a decree of registration.3 Still, petitioner failed to pay the full purchase price even after the expiration of the period set. In a letter dated February 14, 1990,4 private respondents, through counsel, demanded payment of the remaining balance, with interest and attorney's fees, within five days from receipt of the letter. Otherwise, private respondents stated they would consider the contract rescinded.On February 28, 1990, petitioner made a payment of P100,000.00 to private respondents,5 still insufficient to cover the full purchase price. Shortly thereafter, in a letter dated April 17, 1990,6 private respondents offered to sell to petitioner one-half of the property for all the payments the latter had made, instead of rescinding the contract. If petitioner did not agree with the proposal, private respondents said they would take steps to enforce the automatic rescission of the contract.1wphi1.ntPetitioner did not accept private respondents' proposal. Instead, in a letter dated May 2, 1990,7 he offered to pay the balance in full for the entire property, plus interest and attorney's fees. Private respondents refused the offer.On May 14, 1990, petitioner instituted an action for specific performance against private respondents, alleging that he had already substantially complied with his obligation under the contract to sell. He claimed that the several partial payments he had earlier made, upon private respondents' request, had impliedly modified the contract. He also averred that he had already spent P190,000.00 in obtaining title to the property, subdividing it, and improving its right-of-way.8For their part, private respondents claimed before the lower court that petitioner maliciously delayed payment of the balance of the purchase price, despite repeated demand and despite his knowledge of private respondents' need therefor.9 According to private respondents, their acceptance of partial payments did not at all modify the terms of their agreement, such that the failure of petitioner to fully pay at the time stipulated was a violation of the contract. 10 Private respondents claimed that this violation led to the rescission of the contract, of which petitioner was formally informed. 11After trial, the lower court ruled in favor of petitioner, saying that even if petitioner indeed breached the contract to sell, it was only a casual and slight breach that did not warrant rescission of the contract. The trial court pointed out that private respondents themselves breached the contract when they requested and accepted installment payments from petitioner, even before the land registration court ordered issuance of a decree of registration for the property. 12 According to the trial court, this constituted modification of the contract, though not reduced into writing as required by the contract itself. The payments, however, were evidenced by receipts duly signed by private respondents. Acceptance of delayed payments estopped private respondents from exercising their right of rescission, if any existed. 13The Court of Appeals, however, reversed the ruling of the trial court and confirmed private respondents' rescission of the contract to sell. According to the Court of Appeals, the issue of whether or not the breach of contract committed is slight or casual is irrelevant in the case of a contract to sell, where title remains in the vendor if the vendee fails to "comply with the condition precedent of making payment at the time specified in the contract." 14The Court of Appeals rejected petitioner's claim that there had been a novation of the contract when he tendered partial payments for the property even before payment was due. The Court of Appeals noted that the contract itself provides that no terms and conditions therein shall be modified unless such modification is in writing and duly signed by the parties. The modification alleged by petitioner is not in writing, much less signed by the parties. 15 Moreover, the Court of Appeals ruled that private respondents made a timely objection to petitioner's partial payments when they offered to sell to petitioner only one-half of the property for such partial payments. 16The Court of Appeals ruled that private respondents are entitled to rescission under Article 1191 of the Civil Code, but with the obligation to return to petitioner the payments the latter had made, including expenses incurred in securing title to the property and in subdividing and improving it right of way. Whatever damages private respondents had suffered should be deemed duly compensated by the benefits they derived from the payments made by petitioner. 17Hence, this petition, wherein petitioner assigns the following errors allegedly committed by the Court of Appeals:1. . . . HOLDING THAT: "THE APPELLANTS ARE ENTITLED TO RESCISSION UNDER ARTICLE 1191 OF THE CIVIL CODE.2. . . . IN CONFIRMING THE UNILATERAL RESCISSION OF THE CONTRACT TO SELL BY THE PRIVATE RESPONDENTS.3. . . . WHEN IT INTERPRETED AND APPLIED LIBERALLY IN FAVOR OF THE PRIVATE RESPONDENTS AND STRICTLY AGAINST THE HEREIN PETITIONERS, THE PROVISIONS OF ARTICLE 1191 AND OTHER PROVISIONS OF THE CIVIL CODE. 18Petitioner contends that private respondents are not entitled to rescission, because rescission cannot be availed of when the breach of contract is only slight or casual, and not so substantial and fundamental as to defeat the object of the parties in making the contract. Petitioner points out that he made partial payments even before they were due in fact, even before the land registration court issued an order for the issuance of a decree of registration for the property since private respondents requested it. Private respondents' acceptance of the payments amounted to a modification of the contract, though unwritten. Petitioner believed in good faith that private respondents would honor an alleged verbal agreement that the latter would not strictly enforce the period for the payment of the remaining balance.Petitioner additionally argues that private respondents were also guilty of breach of contract since they failed to deliver the three-meter wide additional lot for a right-of-way, as agreed upon in their contract.For their part, private respondents reiterate that, as ruled by the Court of Appeals, the issue of whether or not the breach is slight or casual is irrelevant in a contract to sell. They contend that in such a contract, the non-payment of the purchase price is not a breach but simply an event that prevents the vendor from complying with his obligation to transfer title to the property to the vendee. Moreover, they point out that the degree of breach was never raised as an issue during the pre-trial conference nor at trial of this case.Private respondents also aver that petitioner cannot avail of an action for specific performance since he is not an injured party as contemplated in Article 1191 of the Civil Code.Private respondents admit having requested cash advances from petitioner due to dire financial need. Such need, they point out, is the same reason why time is of the essence in the payment of the balance of the purchase price. They claim that petitioner offered to pay the balance only after more than three months had lapsed from the date his obligation to pay became due.Private respondents argue that their acceptance of advance payments does not amount to a novation of the contract since, as provided in the contract itself, modification of the contract would only be binding if written and signed by the parties, which is not the case here. Acceptance of advance payments is a mere act of tolerance, which under the contract would not be considered as a modification of the terms and conditions thereof.The core issue in this case is whether the respondent Court of Appeals erred in reversing and setting aside the judgment of the trial court, by holding that private respondents are entitled to rescind their "contract to sell" the land to petitioner.To begin with, petitioner is alleging that the contract entered into between the parties is a contract of sale, in which case rescission will not generally be allowed where the breach is only slight or casual. Petitioner insists that the title "Contract to Sell" does not reflect the true intention of the parties, which is to enter into a contract of sale.We note, however, that petitioner only made this claim as to the nature of the contract in his reply to the comment of private respondents to his petition for review. In his complaint in the RTC and in his petition for review, petitioner refers to the subject contract as a contract to sell. The nature of the contract was never in issue in the proceedings in the courts below. Moreover, petitioner does not deny private respondents' allegation that it was he and his counsel who prepared the contract. Thus, the ambiguity, if any exists, must be resolved strictly against him as the one who caused the same. 19At any rate, the contract between the parties in our view is indeed a contract to sell, as clearly inferrable from the following provisions thereof:x x x x x x x x xThat the VENDORS hereby agree and bind themselves not to allienate (sic), encumber, or in any manner modify the right of title to said property.x x x x x x x x xThat the VENDORS agree to pay real estate taxes of said subject property until the same will have been transferred to the VENDEE.That on payment of the full purchase price of the above-mentioned property the VENDORS will execute and deliver a deed conveying to the VENDEE the title in fee simple of said property free from all lien and encumbrances . . . (Emphasis supplied.)20These provisions signify that title to the property remains in the vendors until the vendee should have fully paid the purchase price, which is a typical characteristic of a contract to sell.Now, admittedly, petitioner failed to comply with his obligation to pay the full purchase pride within the stipulated period. Under the contract, petitioner was to pay the balance of the purchase price within 10 days from the date of the court order for the issuance of the decree of registration for the property. Private respondents claim, and petitioner admits, that there was delay in the fulfillment of petitioner's obligation. The order of the court was dated December 27, 1989. By April 1990, or four months thereafter, petitioner still had not fully paid the purchase price, clearly in violation of the contract.Petitioner's offer to pay is clearly not the payment contemplated in the contract. While he might have tendered payment through a check, this is not considered payment until the check is encashed.21 Besides, a mere tender of payment is not sufficient. Consignation is essential to extinguish petitioner's obligation to pay the purchase price.22We sustain the decision of the Court of Appeals, to the effect that private respondents may validly cancel the contract to sell their land to petitioner. However, the reason for this is not that private respondents have the power to rescind such contract, but because their obligation thereunder did not arise.Art. 1191 of the Civil Code, on rescission, is inapplicable in the present case. This is apparent from the text of the article itself:Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.Art. 1191 speaks of obligations already existing, which may be rescinded in case one of the obligors fails to comply with what is incumbent upon him. However, in the present case, there is still no obligation to convey title of the land on the part of private respondents. There can be no rescission of an obligation that is non-existent, considering that the suspensive condition therefor has not yet happened.23In Rillo v. Court of Appeals,24 we ruled:The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code on rescission to the case at bar. The contract between the parties is not an absolute conveyance of real property but a contract to sell. In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation of the vendor to convey title from acquiring any obligatory force. The transfer of ownership and title would occur after full payment of the purchase price.25We reiterated this rule in Odyssey Park, Inc. v. Court of Appeals, 280 SCRA 253 (1997). Moreover, we held in Odyssey:The breach contemplated in Article 1191 of the Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation.26Under the parties' contract, the property will be transferred to petition only upon the latter's "complete compliance of his obligation provided in [the] contract." Because of petitioner's failure to fully pay the purchase price; the obligation of private respondents to convey title to the property did not arise.27 Thus, private respondents are under no obligation, and may not be compelled, to convey title to petitioner and receive the full purchase price.Petitioner's reliance on Article 1592 of the Civil Code is misplaced. It provides:Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.Clearly, what this provision contemplates is an absolute sale and not a contract to sell as in the present case.Private respondents' acceptance of several partial payments did not modify the parties' contract as to exempt petitioner from complying with his obligation to pay within the stipulated period. The contract itself provided:No terms and conditions shall be considered modified, changed, altered, or waived by any verbal agreement by and between the parties hereto or by an act of tolerance on the parties unless such modification, change, alteration or waiver appears in writing duly signed by the parties hereto.28Acceptance of the partial payments is, at best, an act of tolerance on the part of private respondents that could not modify the contract, absent any written agreement to that effect signed by the parties.The Court of Appeals is correct in ordering the return to petitioner of the amounts received from him by private respondents, on the principle that no one may unjustly enrich himself at the expense of another.WHEREFORE, the petition is DENIED, for lack of merit. Costs against petitioner.PABLO P. GARCIA, Petitioner, vs.YOLANDA VALDEZ VILLAR, Respondent.This is a petition for review on certiorari1 of the February 27, 2003 Decision2 and July 2, 2003 Resolution3 of the Court of Appeals in CA-G.R. SP No. 72714, which reversed the May 27, 2002 Decision4 of the Regional Trial Court (RTC), Branch 92 of Quezon City in Civil Case No. Q-99-39139.Lourdes V. Galas (Galas) was the original owner of a piece of property (subject property) located at Malindang St., Quezon City, covered by Transfer Certificate of Title (TCT) No. RT-67970(253279).5On July 6, 1993, Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker, mortgaged the subject property to Yolanda Valdez Villar (Villar) as security for a loan in the amount of Two Million Two Hundred Thousand Pesos (P2,200,000.00).6On October 10, 1994, Galas, again with Pingol as her co-maker, mortgaged the same subject property to Pablo P. Garcia (Garcia) to secure her loan of One Million Eight Hundred Thousand Pesos (P1,800,000.00).7Both morgages were annotated at the back of TCT No. RT-67970 (253279), to wit:REAL ESTATE MORTGAGEEntry No. 6537/T-RT-67970(253279) MORTGAGE In favor of Yolanda Valdez Villar m/to Jaime Villar to guarantee a principal obligation in the sum of P2,200,000- mortgagees consent necessary in case of subsequent encumbrance or alienation of the property; Other conditions set forth in Doc. No. 97, Book No. VI, Page No. 20 of the Not. Pub. of Diana P. MagpantaySECOND REAL ESTATE MORTGAGEEntry No. 821/T-RT-67970(253279) MORTGAGE In favor of Pablo Garcia m/to Isabela Garcia to guarantee a principal obligation in the sum of P1,800,000.00 mortgagees consent necessary in case of subsequent encumbrance or alienation of the property; Other conditions set forth in Doc. No. 08, Book No. VII, Page No. 03 of the Not. Pub. of Azucena Espejo LozadaOn November 21, 1996, Galas sold the subject property to Villar for One Million Five Hundred Thousand Pesos (P1,500,000.00), and declared in the Deed of Sale9 that such property was "free and clear of all liens and encumbrances of any kind whatsoever."10On December 3, 1996, the Deed of Sale was registered and, consequently, TCT No. RT-67970(253279) was cancelled and TCT No. N-16836111 was issued in the name of Villar. Both Villars and Garcias mortgages were carried over and annotated at the back of Villars new TCT.12On October 27, 1999, Garcia filed a Petition for Mandamus with Damages13 against Villar before the RTC, Branch 92 of Quezon City. Garcia subsequently amended his petition to a Complaint for Foreclosure of Real Estate Mortgage with Damages.14 Garcia alleged that when Villar purchased the subject property, she acted in bad faith and with malice as she knowingly and willfully disregarded the provisions on laws on judicial and extrajudicial foreclosure of mortgaged property. Garcia further claimed that when Villar purchased the subject property, Galas was relieved of her contractual obligation and the characters of creditor and debtor were merged in the person of Villar. Therefore, Garcia argued, he, as the second mortgagee, was subrogated to Villars original status as first mortgagee, which is the creditor with the right to foreclose. Garcia further asserted that he had demanded payment from Villar,15 whose refusal compelled him to incur expenses in filing an action in court.16Villar, in her Answer,17 claimed that the complaint stated no cause of action and that the second mortgage was done in bad faith as it was without her consent and knowledge. Villar alleged that she only discovered the second mortgage when she had the Deed of Sale registered. Villar blamed Garcia for the controversy as he accepted the second mortgage without prior consent from her. She averred that there could be no subrogation as the assignment of credit was done with neither her knowledge nor prior consent. Villar added that Garcia should seek recourse against Galas and Pingol, with whom he had privity insofar as the second mortgage of property is concerned.On May 23, 2000, the RTC issued a Pre-Trial Order18 wherein the parties agreed on the following facts and issue:STIPULATIONS OF FACTS/ADMISSIONSThe following are admitted:1. the defendant admits the second mortgage annotated at the back of TCT No. RT-67970 of Lourdes V. Galas with the qualification that the existence of said mortgage was discovered only in 1996 after the sale;2. the defendant admits the existence of the annotation of the second mortgage at the back of the title despite the transfer of the title in the name of the defendant;3. the plaintiff admits that defendant Yolanda Valdez Villar is the first mortgagee;4. the plaintiff admits that the first mortgage was annotated at the back of the title of the mortgagor Lourdes V. Galas; and5. the plaintiff admits that by virtue of the deed of sale the title of the property was transferred from the previous owner in favor of defendant Yolanda Valdez Villar.x x x xISSUEWhether or not the plaintiff, at this point in time, could judicially foreclose the property in question.On June 8, 2000, upon Garcias manifestation, in open court, of his intention to file a Motion for Summary Judgment,19 the RTC issued an Order20 directing the parties to simultaneously file their respective memoranda within 20 days.On June 26, 2000, Garcia filed a Motion for Summary Judgment with Affidavit of Merit21 on the grounds that there was no genuine issue as to any of the material facts of the case and that he was entitled to a judgment as a matter of law.On June 28, 2000, Garcia filed his Memorandum22 in support of his Motion for Summary Judgment and in compliance with the RTCs June 8, 2000 Order. Garcia alleged that his equity of redemption had not yet been claimed since Villar did not foreclose the mortgaged property to satisfy her claim.On August 13, 2000, Villar filed an Urgent Ex-Parte Motion for Extension of Time to File Her Memorandum.23 This, however, was denied24 by the RTC in view of Garcias Opposition.25On May 27, 2002, the RTC rendered its Decision, the dispositive portion of which reads:WHEREFORE, the foregoing premises considered, judgment is hereby rendered in favor of the plaintiff Pablo P. Garcia and against the defendant Yolanda V. Villar, who is ordered to pay to the former within a period of not less than ninety (90) days nor more than one hundred twenty (120) days from entry of judgment, the sum of P1,800,000.00 plus legal interest from October 27, 1999 and upon failure of the defendant to pay the said amount within the prescribed period, the property subject matter of the 2nd Real Estate Mortgage dated October 10, 1994 shall, upon motion of the plaintiff, be sold at public auction in the manner and under the provisions of Rules 39 and 68 of the 1997 Revised Rules of Civil Procedure and other regulations governing sale of real estate under execution in order to satisfy the judgment in this case. The defendant is further ordered to pay costs.26The 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 mortgagee. The RTC said that upon Galass failure to pay her obligation, Villar should have foreclosed the subject property pursuant to Act No. 3135 as amended, to provide junior mortgagees like Garcia, the opportunity to satisfy their claims from the residue, if any, of the foreclosure sale proceeds. This, the RTC added, would have resulted in the extinguishment of the mortgages.27The RTC held that the second mortgage constituted in Garcias favor had not been discharged, and that Villar, as the new registered owner of the subject property with a subsisting mortgage, was liable for it.28Villar appealed29 this Decision to the Court of Appeals based on the arguments that Garcia had no valid cause of action against her; that he was in bad faith when he entered into a contract of mortgage with Galas, in light of the restriction imposed by the first mortgage; and that Garcia, as the one who gave the occasion for the commission of fraud, should suffer. Villar further asseverated that the second mortgage is a void and inexistent contract considering that its cause or object is contrary to law, moral, good customs, and public order or public policy, insofar as she was concerned.30Garcia, in his Memorandum,31 reiterated his position that his equity of redemption remained "unforeclosed" since Villar did not institute foreclosure proceedings. Garcia added that "the mortgage, until discharged, follows the property to whomever it may be transferred no matter how many times over it changes hands as long as the annotation is carried over."32The Court of Appeals reversed the RTC in a Decision dated February 27, 2003, to wit:WHEREFORE, the decision appealed from is REVERSED and another one entered DISMISSING the complaint for judicial foreclosure of real estate mortgage with damages.33The Court of Appeals declared that Galas was free to mortgage the subject property even without Villars consent as the restriction that the mortgagees consent was necessary in case of a subsequent encumbrance was absent in the Deed of Real Estate Mortgage. In the same vein, the Court of Appeals said that the sale of the subject property to Villar was valid as it found nothing in the records that would show that Galas violated the Deed of Real Estate Mortgage prior to the sale.34In dismissing the complaint for judicial foreclosure of real estate mortgage with damages, the Court of Appeals held that Garcia had no cause of action against Villar "in the absence of evidence showing that the second mortgage executed in his favor by Lourdes V. Galas [had] been violated and that he [had] made a demand on the latter for the payment of the obligation secured by said mortgage prior to the institution of his complaint against Villar."35On March 20, 2003, Garcia filed a Motion for Reconsideration36 on the ground that the Court of Appeals failed to resolve the main issue of the case, which was whether or not Garcia, as the second mortgagee, could still foreclose the mortgage after the subject property had been sold by Galas, the mortgage debtor, to Villar, the mortgage creditor.This motion was denied for lack of merit by the Court of Appeals in its July 2, 2003 Resolution.Garcia is now before this Court, with the same arguments he posited before the lower courts. In his Memorandum,37 he added that the Deed of Real Estate Mortgage contained a stipulation, which is violative of the prohibition on pactum commissorium.IssuesThe crux of the controversy before us boils down to the propriety of Garcias demand upon Villar to either pay Galass debt of P1,800,000.00, or to judicially foreclose the subject property to satisfy the aforesaid debt. This Court will, however, address the following issues in seriatim:1. Whether or not the second mortgage to Garcia was valid;2. Whether or not the sale of the subject property to Villar was valid;3. Whether or not the sale of the subject property to Villar was in violation of the prohibition on pactum commissorium;4. Whether or not Garcias action for foreclosure of mortgage on the subject property can prosper.DiscussionValidity of second mortgage to Garcia and sale of subject property to VillarAt the onset, this Court would like to address the validity of the second mortgage to Garcia and the sale of the subject property to Villar. We agree with the Court of Appeals that both are valid under the terms and conditions of the Deed of Real Estate Mortgage executed by Galas and Villar.While it is true that the annotation of the first mortgage to Villar on Galass TCT contained a restriction on further encumbrances without the mortgagees prior consent, this restriction was nowhere to be found in the Deed of Real Estate Mortgage. As this Deed became the basis for the annotation on Galass title, its terms and conditions take precedence over the standard, stamped annotation placed on her title. If it were the intention of the parties to impose such restriction, they would have and should have stipulated such in the Deed of Real Estate Mortgage itself.Neither did this Deed proscribe the sale or alienation of the subject property during the life of the mortgages. Garcias insistence that Villar should have judicially or extrajudicially foreclosed the mortgage to satisfy Galass debt is misplaced. The Deed of Real Estate Mortgage merely provided for the options Villar may undertake in case Galas or Pingol fail to pay their loan. Nowhere was it stated in the Deed that Galas could not opt to sell the subject property to Villar, or to any other person. Such stipulation would have been void anyway, as it is not allowed under Article 2130 of the Civil Code, to wit:Art. 2130. A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.Prohibition on pactum commissoriumGarcia claims that the stipulation appointing Villar, the mortgagee, as the mortgagors 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, viz:Art. 2088. 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.The power of attorney provision in the Deed of Real Estate Mortgage reads:5. Power of Attorney of MORTGAGEE. Effective upon the breach of any condition of this Mortgage, and in addition to the remedies herein stipulated, the MORTGAGEE is likewise appointed attorney-in-fact of the MORTGAGOR with full power and authority to take actual possession of the mortgaged properties, to sell, lease any of the mortgaged properties, to collect rents, to execute deeds of sale, lease, or agreement that may be deemed convenient, to make repairs or improvements on the mortgaged properties and to pay the same, and perform any other act which the MORTGAGEE may deem convenient for the proper administration of the mortgaged properties. The payment of any expenses advanced by the MORTGAGEE in connection with the purpose indicated herein is also secured by this Mortgage. Any amount received from the sale, disposal or administration abovementioned maybe applied by assessments and other incidental expenses and obligations and to the payment of original indebtedness including interest and penalties thereon. The power herein granted shall not be revoked during the life of this Mortgage and all acts which may be executed by the MORTGAGEE by virtue of said power are hereby ratified.38The following are the elements of pactum commissorium:(1) There should be a property mortgaged by way of security for the payment of the principal obligation; and(2) There should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.39Villars purchase of the subject property did not violate the prohibition on pactum commissorium. The power of attorney provision above did not provide that the ownership over the subject property would automatically pass to Villar upon Galass failure to pay the loan on time. What it granted was the mere appointment of Villar as attorney-in-fact, with authority to sell or otherwise dispose of the subject property, and to apply the proceeds to the payment of the loan.40 This provision is customary in mortgage contracts, and is in conformity with Article 2087 of the Civil Code, which reads:Art. 2087. It is also of the essence of these contracts that when the principal obligation becomes due, the things in which the pledge or mortgage consists may be alienated for the payment to the creditor.Galass decision to eventually sell the subject property to Villar for an additional P1,500,000.00 was well within the scope of her rights as the owner of the subject property. The subject property was transferred to Villar by virtue of another and separate contract, which is the Deed of Sale. Garcia never alleged that the transfer of the subject property to Villar was automatic upon Galass failure to discharge her debt, or that the sale was simulated to cover up such automatic transfer.Propriety of Garcias action for foreclosure of mortgageThe real nature of a mortgage is described in Article 2126 of the Civil Code, to wit:Art. 2126. The mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted.Simply put, a mortgage is a real right, which follows the property, even after subsequent transfers by the mortgagor.1wphi1 "A registered mortgage lien is considered inseparable from the property inasmuch as it is a right in rem."41The sale or transfer of the mortgaged property cannot affect or release the mortgage; thus the purchaser or transferee is necessarily bound to acknowledge and respect the encumbrance.42 In fact, under Article 2129 of the Civil Code, the mortgage on the property may still be foreclosed despite the transfer, viz:Art. 2129. The creditor may claim from a third person in possession of the mortgaged property, the payment of the part of the credit secured by the property which said third person possesses, in terms and with the formalities which the law establishes.While we agree with Garcia that since the second mortgage, of which he is the mortgagee, has not yet been discharged, we find that said mortgage subsists and is still enforceable. However, Villar, in buying the subject property with notice that it was mortgaged, only undertook to pay such mortgage or allow the subject property to be sold upon failure of the mortgage creditor to obtain payment from the principal debtor once the debt matures. Villar did not obligate herself to replace the debtor in the principal obligation, and could not do so in la