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Limpin v IAC Facts: Four lots were mortgaged by the spouses Jose and Marcelina Aquino to Guillermo Ponce

and his wife Adela (since deceased) as security for a loan of P2,200,000.00. The mortgages were registered. Two of the lots, those covered by TCTs Nos. 92836 and 92837, were afterwards sold by the Aquinos to the Butuan Bay Wood Export Corporation, which caused an adverse claim to be annotated on the certificates of title.

those titles had already been cancelled and new ones issued to Gregorio F. Limpin.

Gregorio Y. Limpin, Jr. obtained a money judgment against Butuan Bay Wood Export Corporation in Court of First Instance of Davao. To satisfy the judgment, the lots covered by TCTs Nos. 92836 and 92837 were levied upon on and sold at public auction to Limpin as the highest bidder for the sum of P517,485.41.

Limpin refused to participate in the hearings contending that the Court had no jurisdiction over his person; but he did comment that the mortgage over the lots covered by TCTs Nos. 92836 and 92837 had been released by Ponce by virtue of a "Partial Release of Real Estate Mortgage". The Trial Court denied Ponce's motion for reconsideration, whereupon he sought corrective relief by filing a special civil action for certiorari and mandamus in the Intermediate Appellate Court, impleading Limpin and Sarmiento, as private respondents.

IAC set aside the judgment of the Trial Court and issue a writ of possession to Ponce with respect thereto, subject to Sarmiento's equity of redemption.

On order of the trial court, the covering titles were cancelled and issued to Limpin. Limpin sold the two lots to Rogelio M. Sarmiento. By virtue of said sale, TCTs Nos. 285450 and 285451 were cancelled on November 4, 1983, and TCTS were replaced in Sarmiento's name.

Issue: Whether or not IAC erred in according superiority to the mortgage rights of Ponce over the levy and sale in favor of Limpin and the subsequent sale to Sarmiento.

Ponce filed suit against the Aquino spouses for judicial foreclosure of the mortgage over the Aquinos' four lots. Judgment was rendered in favor of Ponce. After the judgment became final, the Trial Court, directed the sale at public auction of the 4 mortgaged lots to satisfy the judgment.


The 4 lots, including those formerly covered by TCTs Nos. 92836 and 92837, were sold to Ponce himself whose bid was the highest and exactly correspond to the judgment debt. On the same day, the sheriff's certificate of sale was registered.

NO. The superiority of the mortgagee's lien over that of a subsequent judgment creditor is now expressly provided in Rule 39, Section 16 of the Revised Rules of Court, which states with regard to the effect of levy on execution that it shall create a lien in favor of a judgment creditor over the right title and interest of the judgment debtor in such property at the time of the levy, subject to the liens or encumbrances then existing.

Ponce then moved for the confirmation of the sale and the issuance of a writ of possession in his favor covering the four lots. But the Trial Court confirmed only the sale of the lots covered by TCTs Nos. 02839 and 92840, refusing to confirm the sale or issue a writ of possession in regard to the lots covered by TCTs Nos. 92836 and 92837 on the ground that

Using jurisprudence in Santiago v Dionisio, the Court in that case held that:

... [T]he effect of the failure to implead a subordinate lienholder or subsequent purchaser or both is to render the foreclosure ineffective as against them, with the result that

there remains in their favor the "unforeclosed equity of redemption." But the foreclosure is valid as between the parties to the suit. Applied to this case, this means that the sale to Ponce, as the highest bidder in the foreclosure sale of the two lots in question should have been confirmed, subject to Limpin's (and now Sarmiento's equity to redemption. The registration of the lands, first in the name of Limpin and later of Sarmiento, was premature. At most what they were entitled to was the registration of their equity of redemption.

Mrs. Adela Ponce. Moreover, the Deed of Partial Release was not registered but had simply been attached.

CRUZ VS. BANCOM FINANCE CORPORATION 379 SCRA 490. March 19, 2002 Facts: Petitioners Edilberto and Simplicio Cruz were registered owners of a parcel of agricultural land. They sold the land for P700,000 to Norma Sulit who gave P25, 000 as earnest money. However, Sulit failed to pay the balance price; consequently, the petitioners did not transfer the title of the land to Sulit. But capitalizing on the close relationship of one Candelaria Sanchez with the petitioners, Sulit succeeded in having the petitioners execute a document of sale of the land in favor of Sanchez and on the same day, Sanchez executed another deed of absolute sale over the said land in favor of Sulit. As a result, Sulit was able to effect the transfer of the title in her name. In a special agreement, Sulit assumed Sanchezs obligation to pay the petitioners within six months. Unknown to the petitioners, Sulit managed to obtain a loan from respondent Bancom secured by a mortgage over the land. On account of Sulits failure to pay the amount stipulated, petitioners filed a complaint for reconveyance of the land. Bancom intervened in the case and claimed priority as mortgagee in good faith. Meanwhile, Sulit defaulted in her payment to Bancom and her mortgage was foreclosed. Petitioners argue that respondent was not a mortgagee in good faith because at the time it registered the real estate mortgage over the subject matter, their adverse claim and notice of lis pendens had already been annotated in the title. On the other hand, respondent maintains that petitioners were the ones in bad faith because they already had knowledge of the existence of the mortgage over the property when they caused the annotations. Respondent further claims that, being an innocent mortgagee, it should not be required to conduct an exhaustive investigation on the mortgagors title before it could extend a loan. Issue: Whether or not respondent Bancom is a mortgagee in good faith. Held: First, as a general rule, every person dealing with a registered land may safely rely on the correctness of the certificate of title and is no longer required to look behind the certificate in order to determine the actual owner. This rule, however, is subject to the right of a person deprived of the land through fraud to bring an action for rconveyance, provided the rights of innocent purchaser for value and in

It is well settled that a recorded mortgage is a right in rem, a lien on the property whoever its owner may be. The recordation of the mortgage in this case puts the whole world on constructive notice of its existence and warned everyone who thereafter dealt with the property on which it was constituted that he would have to reckon with that encumbrance. Hence, Limpin's subsequent purchase of the "interests and participation" of Butuan Bay Wood Export Corporation in the lots covered by TCTs Nos. 92836 and 92837, as well as the sale of the same to Sarmiento were both subject to said mortgage.


Additional rulings not related to topic:

* The fact that at the time Ponce foreclosed the mortgage on October 21, 1983, the lots had already been bought by Limpin and subsequently sold to Sarmiento is of no consequence, since the settled doctrine is that the effects of the foreclosure sale retroact to the date of registration of the mortgage, i.e., March 1, 1973 in the present case.

* As regards the claim that Ponce executed a deed of partial release of his mortgage on July 20, 1977, the evidence discloses that Ponce and Jose Aquino, the mortgagor, thereafter executed separate affidavits dated December 1, 1983, stating that the said partial release was void, not only for want of consideration but also for lack of the signatures of Ponce's two sons who at the time of the execution of the document, were co-mortgagees as successors and heirs of

good faith are not prejudiced. An innocent purchaser for value includes an innocent lessee, mortgage or any other encumbrancer for value. Respondent, however, is not an ordinary mortgagee; it is a mortgagee bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. The ascertainment of the status for a loan must be a standard and indispensable part of its operations. Respondent was clearly wanting in the observance of the necessary precautions to ascertain flaws in the title of Sulit. It should have not simply relied on the face of the certificate of title as its ancillary function of investing funds required a greater degree of diligence. The rule that persons dealing with registered lands can rely solely on the certificate of title does not apply to banks. 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. Although, registration is not the operative act for a mortgage to be binding between parties, to third persons, it is indispensable. Thus, petitioners being third parties to the unregistered mortgage were not bound by it.

of credit. Petitioner approved respondents application for a packing credit line in the amount of P300,000.00, of which about P96,000.00 in principal remained outstanding. Respondent executed the corresponding promissory notes evidencing the indebtedness.

Prior to the application for the packing credit line, respondent had obtained a loan from petitioner in the form of a bill discounted and secured credit accommodation in the amount of P200,000.00, of which P110,000.00 was outstanding at the time of the approval of the packing credit line. The loan was secured by a real estate mortgage dated 05 December 1986 over respondents properties. Significantly, the real estate mortgage contained the following clause: For and in consideration of those certain loans, overdraft and/or other credit accommodations on this date obtained from the MORTGAGEE, and to secure the payment of the same, the principal of all of which is hereby fixed at FIVE HUNDRED THOUSAND PESOS ONLY (P500,000.00) Pesos, Philippine Currency, as well as those that the MORTGAGEE may hereafter extend to the MORTGAGOR, including interest and expenses or any other obligation owing to the MORTGAGEE, the MORTGAGOR does hereby transfer and convey by way of mortgage unto the MORTGAGEE, its successors or assigns, the parcel(s) of land which is/are described in the list inserted on the back of this document, and/or appended hereto, together with all the buildings and improvements now existing or which may hereafter be erected or constructed thereon, of which the MORTGAGOR declares that he/it is the absolute owner, free from all liens and encumbrances.



Facts: Excelsa Industries, Inc. is a manufacturer and exporter of fuel products, particularly charcoal briquettes, as an alternative fuel source. Sometime in January 1987, Excelsa applied for a packing credit line or a credit export advance with Producers Bank of the Philippines.

The application was supported by Letter of Credit dated 14 October 1986. Kwang Ju Bank, Ltd. of Seoul, Korea issued the letter of credit through its correspondent bank, the Bank of the Philippine Islands, in the amount of US$23,000.00 for the account of Shin Sung Commercial Co., Ltd., also located in Seoul, Korea. T.L. World Development Corporation was the original beneficiary of the letter of credit. On 05 December 1986, for value received, T.L. World transferred to respondent all its rights and obligations under the said letter

On 24 April 1987, Kwang Ju Bank, Ltd. notified petitioner through cable that the Korean buyer refused to pay respondents export documents on account of typographical discrepancies. Kwang Ju Bank, Ltd. returned to petitioner the export documents. Upon learning about the Korean importers non-payment, respondent sent petitioner a letter dated 27 July 1987, informing the latter that respondent had brought the matter before the Korea Trade Court and that it was ready to liquidate its past due account with petitioner.

Respondent sent another letter reiterating the same assurance. In a letter, Kwang Ju Bank, Ltd. informed

petitioner that it would be returning the export documents on account of the non-acceptance by the importer.

Petitioner demanded from respondent the payment of the peso equivalent of the export documents, plus interest and other charges, and also of the other due and unpaid loans.Due to respondents failure to heed the demand, petitioner moved for the extrajudicial foreclosure on the real estate mortgage over respondents properties.

clause." It has been settled in a long line of decisions that mortgages given to secure future advancements are valid and legal contracts, and the amounts named as consideration in said contracts do not limit the amount for which the mortgage may stand as security if from the four corners of the instrument the intent to secure future and other indebtedness can be gathered. In Union Bank of the Philippines v. Court of Appeals, the nature of a dragnet clause was explained, thus: Is one which is specifically phrased to subsume all debts of past and future origins. Such clauses are "carefully scrutinized and strictly construed." Mortgages of this character enable the parties to provide continuous dealings, the nature or extent of which may not be known or anticipated at the time, and they avoid the expense and inconvenience of executing a new security on each new transaction. A "dragnet clause" operates as a convenience and accommodation to the borrowers as it makes available additional funds without their having to execute additional security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees, et cetera. xxx Petitioner, therefore, was not precluded from seeking the foreclosure of the real estate mortgage based on the unpaid drafts drawn by respondent. In any case, respondent had admitted that aside from the unpaid drafts, respondent also had due and demandable loans secured from another account as evidenced by Promissory Notes.

At the public auction held, the Sheriff of Antipolo, Rizal issued a Certificate of Sale in favor of petitioner as the highest bidder. The certificate of sale was registered.

Petitioner executed an affidavit of consolidation over the foreclosed properties after respondent failed to redeem the same. As a result, the Register of Deeds of Marikina issued new certificates of title in the name of petitioner. Respondent instituted an action for the annulment of the extrajudicial foreclosure with prayer for preliminary injunction and damages against petitioner and the Register of Deeds of Marikina. RTC rendered a decision upholding the validity of the extrajudicial foreclosure and ordering the issuance of a writ of possession in favor of petitioner, as the RTC also found that by its admission, respondent had other loan obligations obtained from petitioner which were due and demandable; hence, petitioner correctly exercised its right to foreclose the real estate mortgage, which provided that the same secured the payment of not only the loans already obtained but also the export advances. The CA invalidated the extrajudicial foreclosure of the real estate mortgage on the ground that the posting and publication of the notice of extrajudicial foreclosure proceedings did not comply with the personal notice requirement under paragraph 12 of the real estate mortgage executed between petitioner and respondent. The Court of Appeals also overturned the RTCs finding that respondent was guilty of estoppel by laches in questioning the extrajudicial foreclosure sale.

However, the Court of Appeals invalidated the extrajudicial foreclosure of the mortgage on the ground that petitioner had failed to furnish respondent personal notice of the sale contrary to the stipulation in the real estate mortgage.

Petitioner, on the other hand, claims that under paragraph 12 of the real estate mortgage, personal notice of the foreclosure sale is not a requirement to the validity of the foreclosure sale.

Issue: Was there a valid foreclosure of the real estate mortgage?

Held: Respondent executed a real estate mortgage containing a "blanket mortgage clause," also known as a "dragnet

A perusal of the records of the case shows that a notice of sheriffs sale was sent by registered mail to respondent and received in due course. Yet, respondent claims that it did not receive the notice but only learned about it from petitioner. In any event, paragraph 12 of the real estate mortgage requires petitioner merely to furnish respondent with the

notice and does not oblige petitioner to ensure that respondent actually receives the notice. On this score, the Court holds that petitioner has performed its obligation under paragraph 12 of the real estate mortgage.

As regards the issue of whether respondent may still question the foreclosure sale, the RTC held that the sale was conducted according to the legal procedure, to wit: Plaintiff is estopped from questioning the foreclosure. The plaintiff is guilty of laches and cannot at this point in time question the foreclosure of the subject properties. Defendant bank made demands against the plaintiff for the payment of plaintiffs outstanding loans and advances with the defendant as early as July 1997. Plaintiff acknowledged such outstanding loans and advances to the defendant bank and committed to liquidate the same. For failure of the plaintiff to pay its obligations on maturity, defendant bank foreclosed the mortgage on subject properties on January 5, 1988 the certificate of sale was annotated on March 24, 1988 and there being no redemption made by the plaintiff, title to said properties were consolidated in the name of defendant in July 1989. Undeniably, subject foreclosure was done in accordance with the prescribed rules as may be borne out by the exhibits submitted to this Court which are Exhibit "33," a notice of extrajudicial sale executed by the Sheriff of Antipolo, Exhibit "34" certificate posting of extrajudicial sale, Exhibit "35" return card evidencing receipt by plaintiff of the notice of extrajudicial sale and Exhibit "21" affidavit of publication. The Court adopts and approves the aforequoted findings by the RTC, the same being fully supported by the evidence on record.