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1. RUIZ v. CANEBA
191 SCRA 865 | December 3, 1990 | Paras, J.

Petitioner:
Respondent:

EULALIO M. RUIZ and ILUMINADA RUIZ

HON. DOROTEO CANEBA, City Sheriff of Manila
and/or his deputies, and private respondents
Zenaida Sangalang and Adolfo Cruz

DOCTRINE/S:

ON ADDING INTEREST
Where the court judgment which did not provide
for interest is already final, there is no reason to add
interest in the judgment.

ON RAISING NEW ISSUES ON APPEAL

It is a basic rule that an issue which was not raised
in the court below cannot be raised for the first time
on appeal as it would be offensive to the basic rules
of fair play, justice and due process.

ON EXECUTION OF A FINAL JUDGMENT

Decision which had long become final and
executory can no longer be amended or modified
by the trial court. After finality of judgment, what
remains in the judges authority is purely the
ministerial enforcement or execution of judgment.
FACTS:
Petition for certiorari and prohibition with preliminary
injunction and/or restraining order of respondent judges
Order in a civil case1 involving the petitioners
o The now assailed Order amended the May 16, 1986
decision of Judge Antonio Martinez (trial court
judge at the time)
Private respondents ZENAIDA SANGALANG and ADOLFO
CRUZ are common-law spouses and co-owners of a two-

Civil Case No. 84-24032, dated 27 July 1988, entitled Eulalio M. Ruiz and Iluminada
M. Ruiz vs. Zenaida S. Sangalang and Adolfo Cruz

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storey house and lot registered only in the name of Zenaida

Sanagalang
Petitioners spouses RUIZ were the lessees of Door No. 1 of
the two-storey house for a monthly rental of P650
Sometime on November 19, 1982: Eulalio Ruiz and Zenaida
Sanagalang executed an agreement that provides that
Ruiz will buy the house and lot for P175,000 under certain
conditions2
o The spouses Ruiz paid the P65,000 downpayment,
as well as P21,119.62 to the Bank on the assumed
mortgage
However, because there was disagreement3 on the
amount paid by petitioners as regards the P78,500
remaining balance, the Ruiz spouses filed a complaint for
specific performance with damages against private
respondents
TRIAL COURT: ruled in favor of respondents:
o Petitioners failed to pay the balance in full before
the deadline and therefore, they are not entitled to
their prayer for specific performance with damages
o It however ordered Sangalang to return/refund the
payments made by the spouses
o Spouses shall continue to pay the monthly rentals
until the property is surrendered to Sangalang
Appeal in the COURT OF APPEALS was dismissed for failure
to pay the docket fee
o Thereafter, the respondent JUDGE issued an order
for the issuance of a writ of execution to effect
judgment

a) P65,000 as downpayment; b) will assume the balance of P31,500 with BPI, Marulas
Branch; c) That after payment of said balance mortgage, the remaining balance of
P78,500 will be payable on or before December 31, 1983; d) Upon failure to comply
with the foregoing conditions, the property will be open for sale and all partial payments
will be refunded by Sangalang; e) Spouses Ruiz will also continue to pay the P650
monthly rental until the amount of P175,000 is fully satisfied.
The Ruiz Spouses claim that they already paid P53,073, while Sangalang claims that
only P33,793 has been paid.

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The Clerk of Court, in his capacity as ex-officio city

sheriff, then caused execution of the spouses
payment of moral damages and costs of suit to
respondent Sangalang but not the latters
obligation to refund the installments to the spouses
September 2, 1987: the Ruiz spouses filed an Ex-parte
Motion for Execution of Decision Now Partly Executed,
praying that a writ of execution be issued for Sangalang to
return/refund the payments she already received
o However, the parties could not agree on the
amount to be returned, since they already disagree
on how much has been paid in the first place
Sangalang and Cruz then moved to AMEND the trial court
decision which they alleged to have clear disparities4
between the body of the decision and the dispositive
portion
o To settle the dispute once and for all, the trial court
even if the decision was already final and
executory then amended the dispositive portion
of the decision
o Before the hearing on the motion of Sangalang to
execute the new dispositive portion, the Ruiz
spouses filed an Urgent Motion to Cancel Hearing of
Motion
September 15, 1988: the Ruiz spouses filed this petition to
assail the most recent Order issued to execute the
amended dispositive portion
o Upon filing before this Court, the Ruiz spouses claim
that they are entitled to a refund of P124,192.62
PLUS 24% INTEREST compounded annually, or a total
amount of P169,414.95
o On the other hand, Sangalang claims that she only
received the amount of P120,092.62 from the
spouses, and that she is entitled to a P1,500 worth of
rentals for Door No. 2 which the spouses also
o

I no longer inserted the concerned dispositive portion and the newly issued one,
because in truth, there are no disparities, maarte lang sila

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occupied after execution of their prior (sale)

agreement
ISSUES:
1. WON there is an ambiguity in the dispositive portion of the
trial court decision sufficient to warrant the questioned
order of the respondent court amending subject final and
executory judgment
2. WON the spouses are entitled to their claimed interest
3. WON Sangalang is entitled to P1,500 additional rentals for
Door No. 2 despite its not being previously raised before the
trial court
4. WON an amendment was proper
HELD/RATIO: The instant petition is GRANTED. The most recent Order
of respondent Judge is hereby declared NULL AND VOID AB INITIO.
1. NO. Aside from the fact that there are no exact numbers
specified, there appears to be no ambiguity in the decision
to such an extent as to warrant an amendment of the
dispositive portion.
It is evident from the records that the amount that
Sangalang is ordered to return is as follows:
Downpayment
P65,000.00
Payment to BPI
P21,119.62
Payment to Sangalang of P53,073, less
P38,073.00
P15,000 sum of two dishonored checks
P124,
TOTAL PAYMENTS MADE
192.62
2. NO. They are not entitled to the 24% interest they now
claim before this Court.
It has been held n the case of SANTULAN V. FULE that
where the court judgment which did not provide for
interest is already final, there is no reason to add
interest in the judgment

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Interest was not demanded by the Ruizes when the

case was pending before the lower court, hence,
there is no reason for this Court to grant such claim
As ruled by this Court, such claim is groundless since
the decision and orders sought to be enforced do
not direct the payment of interest and have long
become final

3. NO. It is a basic rule that an issue which was not raised in

the court below cannot be raised for the first time on
appeal as it would be offensive to the basic rules of fair
play, justice and due process.
The issue of additional rentals was brought up by
Sangalang only when the motion for execution of
[refund] was filed by the Ruiz spouses
4. NO. Since the [trial court] decision has long become final
and executory and in fact has been partly executed, the
respondent judge had lost its jurisdiction thereon.
The judge has exceeded his authority, considering
that the trial court has no authority to modify or vary
the terms and conditions of a final and executory
judgment
What remains in his authority is purely the ministerial
enforcement or execution of judgment

2. EASTERN SHIPPING LINES, INC. v. CA and MERCANTILE

INSURANCE COMPANY, INC.
G.R. No. 97412 | July 12, 1994 | Vitug, J.

the carrier. Both the arrastre and the carrier are therefore charged
with the obligation to deliver the goods in good condition to the
consignee. Thus, the carrier and the arrastre operator are solidarily
liable.
FACTS:
Two fiber drums of riboflavin were shipped from Yokohama,
Japan for delivery vessel SS EASTERN COMET owned by
defendant Eastern Shipping Lines, Inc under Bill of Lading
No. YMA-8.
The shipment was insured under plaintiffs Marine Insurance
Policy for P36,382,466.38.
Upon arrival of the shipment in Manila, it was discharged
unto the custody of defendant Metro Port Service, Inc.
(MPSI) It excepted to one drum to be in bad order, which
damage was unknown to plaintiff.
Allied Brokerage Corporation (ABC) received the shipment
from MPSI one drum opened and without seal.
ABC made deliveries of the shipment to the consignees
warehouse. It excepted to one drum which contained
spillages, while the rest of the contents was adultered or
fake
Plaintiff contented that due to the losses/damages
sustained by said drum, the consignee suffered losses
totaling P19,032.95 due to the fault and negligence of
defendants
As a consequence of which, plaintiff was compelled to
pay the consignee under the aforementioned marine
insurance policy, so that it became subrogated to all the
rights of action of said consignee against the defendants.

MERCANTILE

ISSUE: Whether or not the defendants should be held liable for the
losses/damages

DOCTRINE: Since it is the duty of the arrastre to take good care of

the goods that are in its custody and to deliver them in good
condition to the consignee, such responsibility also devolves upon

HELD/RATIO: Yes. The defendants should be held liable. The instant

petition has been brought solely by Eastern Shipping Lines, which,
being the carrier and not having been able to rebut the
presumption of fault, is, in any event, to be held liable in this case.

Petitioner:
Respondent:

EASTERN SHIPPING LINES, INC.

HON. COURT OF APPEALS
INSURANCE COMPANY, INC.

and

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The legal relationship between the consignee and the

arrastre operator is akin to that of the depositor and a
warehouseman. The relationship between the consignee
and the common carrier is similar to that of the consignee
and the arrastre operator. Since it is the duty of the arrastre
to take good care of the goods that are in its custody and
to deliver them in good condition to the consignee, such
responsibility also devolves upon the carrier. Both the
arrastre and the carrier are therefore charged with the
obligation to deliver the goods in good condition to the
consignee
There is no doubt that the shipment sustained
losses/damages as evidenced by the Marine Cargo Survey
Report.
Under Art. 1737 of the NCC, the common carriers duty to
observe extraordinary diligence in the vigilance of goods
remains in full force and effect even if the goods are
temporarily unloaded and stored in transit in the
warehouse of the carrier at the place of destination, until
the consignee has been advised and has had reasonable
opportunity to remove or dispose of the goods.
The common carriers duty to observe the requisite
diligence in the shipment of goods lasts from the time the
articles are surrendered to or unconditionally placed in the
possession of and received by, the carrier for transportation
until delivered to or until the lapse of a reasonable time for
their acceptance by the person entitled to receive them.
When the good shipped are lost or arrive in damaged
condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable.

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3. CENTRAL BANK v. MORFE

G.R No. L-38427 | March 12, 1975 | Concepcion, C.J.
Petitioner:
Respondent:

CENTRAL BANK OF THE PHILIPPINES

HON. JUDGE JESUS MORFE and FIRST MUTUAL
SAVING AND LOAN ORGANIZATION, INC.

DOCTRINE: It should be noted that fixed, savings, and current

deposits of money in banks and similar institutions are not true
deposits. They are considered simple loans and, as such, are not
preferred credits.
FACTS:
The Monetary Board found the Fidelity Savings Bank to be
insolvent.
The Board directed the Superintendent of Banks to take
charge of its assets, forbade it to do business and instructed
the Central Bank Legal Counsel to take legal actions
(Resolution No. 350).
Prior to the institution of the liquidation proceeding but
after the declaration of insolvency, the spouses Elizes filed a
complaint in the CFI against the Fidelity Savings Bank for
the recovery of the sum of P50, 584 as the balance of their
time deposits. The court rendered decision in favor of the
spouses.
Upon motions of the Elizes and Padilla (same situation as
elizes spouses there was also a final judgment pero
different court in favor of them for the recovery of sum of
money) spouses for the recovery of the sum of money and
over the opposition of the Central Bank, directed the latter
as liquidator, to pay their time deposits as preferred
judgments, evidenced by final judgments, within the
meaning of article 2244(14)(b) of the Civil Code, if there
are enough funds in the liquidator's custody in excess of the
credits more preferred under section 30 of the Central Bank
Law in relation to articles 2244 and 2251 of the Civil Code.
The Central Bank appealed to this Court by certiorari. It
contends that the final judgments secured by the Elizes

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and Padilla spouses do not enjoy any preference because

(a) they were rendered after the Fidelity Savings Bank was
declared insolvent and (b) under the charter of the Central
Bank and the General Banking Law, no final judgment can
be validly obtained against an insolvent bank.

depositors in insolvent banks, after learning that the bank is

insolvent as shown by the fact that it can no longer pay
withdrawals or that it has closed its doors or has been
enjoined by the Monetary Board from doing business,
would rush to the courts to secure judgments for the
payment of their deposits.

ISSUE: WON such judgments secured by 2 spouses must enjoy

preference over other creditors?
HELD/RATIO: NO!
It should be noted that fixed, savings, and current deposits
of money in banks and similar institutions are not true
deposits. They are considered simple loans and, as such,
are not preferred credits
The aforequoted section 29 of the Central Bank's charter
explicitly provides that when a bank is found to be
insolvent, the Monetary Board shall forbid it to do business
and shall take charge of its assets. The Board in its
Resolution No. 350 dated February 18,1969 banned the
Fidelity Savings Bank from doing business. It took charge of
the bank's assets. Evidently, one purpose in prohibiting the
insolvent bank from doing business is to prevent some
depositors from having an undue or fraudulent preference
over other creditors and depositors.
That purpose would be nullified if, as in this case, after the
bank is declared insolvent, suits by some depositors could
be maintained and judgments would be rendered for the
payment of their deposits and then such judgments would
be considered preferred credits under article 2244 (14) (b)
of the Civil Code.
We are of the opinion that such judgments cannot be
considered preferred and that article 2244(14)(b) does not
apply to judgments for the payment of the deposits in an
insolvent savings bank which were obtained after the
declaration of insolvency.
A contrary rule or practice would be productive of
injustice, mischief and confusion. To recognize such
judgments as entitled to priority would mean that
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4. BANSON v. CA
G.R. No. 110580 | July 13, 1995| Quiason, J.
Petitioner:
Respondent:

MANUEL BANSON
COURT OF APPEALS, 9th Division and SPOUSES
ARTHUR DIOCAMPO and MERLENE DIOCAMPO

DOCTRINE: For a guarantor to proceed against a principal debtor,

it must first pay outstanding amounts. If there was no payment,
then the guarantor has no right to execute against an indemnitor.
FACTS:
Maximo R. Sta. Maria, obtained several crop loans from
PNB. For these loans, Associated acted as surety for Sta.
Maria by filing surety bonds in favor of PNB to guarantee
and answer for the prompt and faithful repayment of said
loans. Banson and Naval acted as indemnitors for
Associated.
Sta Maria failed to pay his crop loan obligations and
accordingly, PNB demanded payment from Associated as
surety.
Instead of paying the bank, Associated filed a complaint
Sta. Maria and indemnitors.
A judgment was rendered by the Court sentencing
indemnitors to pay jointly and severally to Associated.
The decision became final and executory, and the
corresponding writ of execution was issued. Two properties
of Banson were levied and later on sold in execution, with
Associated, the judgment creditor, as the highest bidder

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Associated then demanded the owners certificate of title

from Banson but the latter refused so Associated filed a
case in court and later received favorable judgment.
June 27, 1957, the corresponding certificate of sale was
issued and the same was duly registered on June 30, 1959.
The redemption period having expired, the judgment
creditor, the Associated, obtained in due time the final
certificate of sale which was likewise duly registered.
Demands were made upon Banson to deliver to
Associated the owners duplicates of TCT Nos. 39685 and
53759 but the latter failed to do so.
Consequently, Associated filed against Banson: a petition
for an order directing Banson to produce and surrender his
owners duplicates of TCTs to the Register of Deeds of Rizal,
for cancellation, and for the latter to subsequently issue
new titles in the name of Associated.
Simplified: Sta Maira defaulted on loan so PNB wants
Associated (as guarantor) to pay for it. Instead of paying
Associated files a case against Banson to get the amount
for payment since Banson is primarily liable as an
indemnitor.

ISSUE: Whether or not Banzon has the right to reconveyance of his

two properties?
HELD/RATIO: YES
Associated in proceeding against the indemnitor, before
proceeding
against
the
principal
debtor
acted
prematurely and it is now holding in trust by force of Article
1456 of the Civil Code, the two lots of Banson it has
wrongfully levied upon in execution and which it is legally
bound to return to Banson, their true and rightful owner.
As a general rule, the guarantor must first pay the
outstanding amounts due before it can exact payment
from the principal debtor. Hence, since Associated had not
paid nor compelled private respondent to pay the bank, it
had no right in law or equity to so execute the judgment
against Banson as indemnitor.
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To have a right against Banson, Associated must first pay

the obligation to PNB.

5. ATOK FINANCE CORP. v. CA

G.R. 80078 | May 18, 1993 | Feliciano. J
Petitioner:
Respondent:

ATOK FINANCE CORP.

COURT OF APPEALS, SANYU CHEMICAL CORP.,
DANILO
ARRIETA,
NENITA
ARRIETA,
PABLITO
BERMUDO, and LEOPOLDO HALILI

DOCTRINE: While a contract of suretyship or guarantee is an

accessory contract, it may be readily entered into to warranty
debts to be incurred or created in the future
Art. 2052. A guaranty cannot exist without a valid obligation.
Nevertheless, a guaranty may be constituted to guarantee the
performance of a voidable or an unenforceable contract. It may
also guarantee a natural obligation.
Art. 2053. A guaranty may also be given as security for future
debts, the amount of which is not yet known; there can be no
claim against the guarantor until the debt is liquidated. A
conditional obligation may also be secured.
FACTS:
Sanyu Chemical Corp. as principal and Sanyu Trading
Corp. along with individual private stockholders of Sanyu
Chemical, namely, private respondents spouses Danilo E.
Arrieta and Nenita B. Arrieta, Leopoldo G. Halili and Pablito
Bermundo as sureties, executed a Continuing Suretyship
Agreement in favor of Atok Finance as creditor.
Under this Agreement, Sanyu Trading and the individual
private respondents, who were officers and stockholders of
Sanyu Chemical, jointly and severally unconditionally
guarantee to Atok Finance Corp. the payment and
discharge of any and all indebtedness of Sanyu Chemical.

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The word indebtedness, as used in the agreement, includes

any and all advances, debts, obligations and liabilities of
Sanyu Chemical or any one or more of them, heretofore,
now or hereafter made.
This is a continuing suretyship relating to any indebtedness,
including that arising under successive transactions, which
shall either continue the indebtedness from time to time or
renew it after it has been satisfied.
Subsequently, Sanyu Chemical assigned its trade
receivables with a total face value of P125, 871 to Atok
Finance in consideration of receipt from Atok Finance of
the amount of P105,000.
Under the Deed of Assignment Sanyu Chemical warranted
that:
o The debtor/s (Sanyu Chemical) under the assigned
Contract/s are solvent and his/its/their failure to pay
the assigned Contracts and/or any installment
thereon upon maturity thereof shall be conclusively
considered as a violation of this warranty;
o Any violation thereof shall render the ASSIGNOR
(Sanyu Chemical) immediately and unconditionally
liable to pay the ASSIGNEE (Atok Finance) jointly
and severally with the debtors under the assigned
contracts, the amounts due thereon.
Later, additional trade receivable were assigned by Sanyu
Chemical to Atok Finance with a total face value of
P100,378.45.
On Jan. 13, 1984, Atok Finance filed a collection suit
against Sanyu Chemical, the Arrieta spouses, Pablito
Bermundo and Leopoldo Halili before the Regional Trial
Court of Manila to collect the sum of P120,240.00 plus
penalty charges amounting to P0.03 for every peso due
and payable for each month starting from 1 September
1983.
Atok Finance alleged that Sanyu Chemical failed to collect
and remit the amounts due under the trade receivables.
The individual private respondents, contended that the
Continuing Suretyship Agreement, being an accessory

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contract, was null and voide since, at the time of its

execution, Sanyu Chemical had no pre-existing obligation
due to Atok Finance.
At trial, Sanyu Chemical and the individual private
respondents failed to present any evidence on their own
behalf, hence the trial court rendered a decision in favor of
Atok Finance.
On appeal, the Court of Appeals ruled in favor of Sanyu
Chemical and the private respondents.
CA RULING:
o A continuing suretyship agreement cannot be
effected to secure future debts.
o The continuing suretyship agreement was null and
void for lack of consideration.

ISSUE/S:
1. Whether the Continuing Surety Agreement must be held
null and void as having been executed without
consideration and without a pre-existing principal
obligation to sustain it.
2. Whether the individual private respondents may be held
solidarily liable with Sanyu Chemical under the provisions of
the Deed of Assignment and of the Continuing Suretyship
Agreement.
HELD/RATIO:
1. NO
It is clear from Article 2052 of the Civil Code that
although a guaranty cannot exist without a valid
obligation, nevertheless, a guarantee may be
constituted to guarantee the performance of a
voidable or an unenforceable contract. It may also
guarantee a natural obligation. Moreover, Article 2053
of the Civil Code states that a guarantee may also be
given as security for future debts, the amount of which
is not yet known; there can be no claim against the
guarantor until the debt is liquidated. A conditional
obligation may also be secured.

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the Deed of Assignment, solidary obligor under each of

the assigned receivables, the other private respondents
(the Arrieta spouses, Pablito Bermundo and Leopoldo
Halili), became solidarily liable for that obligation of
Sanyu Chemical, by virtue of the operation of the
Continuing Suretyship Agreement.

Of course, a surety is not bound under any particular

principal obligation until that principal obligation is
born. But there is no theoretical or doctrinal difficulty
inherent in saying that the suretyship agreement itself is
valid and binding even before the principal obligation
intended to be secured thereby is born, any more than
there would be in saying that obligations which are
subject to a condition precedent are valid and binding
before the occurrence of the condition precedent.
Comprehensive or continuing surety agreements are
common in present day financial and commercial
practice. A bank or a financing company, which
anticipates entering into a series of credit transactions
with a particular company, commonly requires the
projected principal debtor to execute a continuing
surety agreement along with its sureties. By executing
such an agreement, the principal places itself in a
position to enter into the projected series of
transactions with its creditor; with such suretyship
agreement, there would be no need to execute a
separate surety contract or bond for each financing or
credit accommodation extended to the principal
debtor. (Basically, what the SC says is that a continuing
surety agreement is a kind of guaranty/surety for future
debts.)

2. YES
Under the Deed of Assignment, the effect of nonpayment by the original trade debtors was a breach of
warranty of solvency by Sanyu Chemical, resulting in
turn in the assumption of solidary liability by the assignor
under the receivables In other words, the assignor
Sanyu Chemical becomes a solidary debtor under the
terms of the receivables covered and transferred by
virtue of the Deed of Assignment. And because
assignor Sanyu Chemical became, under the terms of
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The obligations of individual private respondent officers

and stockholders of Sanyu Chemical under the
Continuing Suretyship Agreement, were activated by
the resulting obligations of Sanyu Chemical as solidary
obligor under each of the assigned receivables by
virtue of the operation of the Deed of Assignment.

6. INTEGRATED REALTY CORP. v. CA

GR No. L-60705 | June 28, 1989 | Regalado, J.
Petitioner:
Respondent:

INTEGRATED REALTY CORPORATION and RAUL L.

SANTOS
PHILIPPINE NATIONAL BANK, OVERSEAS BANK OF
MANILA and THE HON. COURT OF APPEALS

DOCTRINE: The obligation to pay interest on deposit ceases the

moment the operation of the bank is completely suspended by
the duly constituted authority, the Central Bank.
FACTS:
Raul Santos made a time deposit with the Overseas Bank of
Manila (OBM) in the amount of P500K and he was issued a
Certificate of Time Deposit (CTD). On another date, Santos again
made a time deposit with OBM in the amount of P200K, and he
was again issued a CTD.
Integrated Realty Corp., through its president Raul Santos,
applied for a loan and/or credit line in the amount of P700K with
PNB. To secure such, Santos executed a Deed of Assignment of
the 2 time deposits in favor of PNB. OBM gave its conformity to the

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assignment, through a letter dated Aug. 11, 1967. The IRC, through
Santos, also executed a Deed of Conformity to the loan
conditions.
After the due dates of the time deposit certificates, OBM
did not pay PNB. PNB then demanded payment from IRC and
Santos, but they refused to pay.
PNB then filed with the RTC to collect from IRC and Santos
with interest. IRC and Santos replied that the loan was deemed
paid with the irrevocable assignment of the time deposit
certificates. They also contend that they are not answerable for
the insolvency of OBM.
OBM on the other hand answered that they did indeed fail
to pay on due date due to its distressed financial situation. As
affirmative defenses, it alleged that by reason of its state of
insolvency, its operations have been suspended by the Central
Bank since Aug. 1, 1968; that the time deposits ceased to earn
interest from that date; that it may not give preference to any
depositor or creditor; and that payment of PNBs claim is
prohibited.
The trial court ruled in favor of PNB ordering IRC and Santos
to pay PNB the total amount of P700K plus interest of 9% per
annum, 2% additional interest, and 1% per annum penalty interest.
On appeal, the CA modified the decision of the RTC by deleting
the portion of the judgment ordering OBM to pay IRC and Santos
whatever amounts they will pay to PNB plus interests.
IRC and Santos now claim that OBM should reimburse them
for whatever amounts they may be adjudged to pay PNB by way
of compensation for damages incurred.
ISSUES:
1. WON the liability of IRC and Santos with PNB was extinguished by
virtue of the deed of assignment (NO)
2. WON OBM should be held liable for interests on the time deposits
of IRC and Santos from the time it ceased operations until it
resumed its business (NO, but OBM is liable for damages)
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HELD/RATIO:
1. NO. The SC held that it is clear from the Deed of Assignment that
it was only by way of security. The facts and circumstances
leading to the execution of the deed of assignment yield the
conclusion that it is in fact a pledge.
The deed of assignment has satisfied the requirements of a
contract of pledge:
(1) That it be constituted to secure the fulfillment of a
principal obligation;
(2) That the pledgor is the absolute owner of the thing
pledged;
(3) That the persons constituting the pledge have the free
disposal of their property, and in the absence thereof, that
they be legally authorized for the purpose.
The further requirement that the thing pledged be placed
in the possession of the creditor, or of a third person by common
agreement was complied with by the execution of the deed of
assignment in favor of PNB.
Under the foregoing circumstances and considerations, the
unavoidable conclusion is that IRC and Santos should be held
liable to PNB for the amount of the loan with the corresponding
interest thereon.
2. NO. As the SC has held in Overseas Bank of Manila v. CA:
It is a matter of common knowledge, which We
take judicial notice of, that what enables a bank to pay
stipulated interest on money deposited with it is that thru
the other aspects of its operation it is able to generate
funds to cover the payment of such interest.
Unless a bank can lend money, engage in
international transactions, acquire foreclosed mortgaged
properties or their proceeds and generally engage in other
banking and financing activities from which it can derive

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income, it is inconceivable how it can carry on as a

depository obligated to pay stipulated interest.
Consequently, it should be deemed read into every
contract of deposit with a bank that the obligation to pay
interest on the deposit ceases the moment the operation of
the bank is completely suspended by the duly constituted
authority, the Central Bank.
The same formula must be applied with OBM in this case,
and thus OBM must be exempted from the payment of interest
during the whole period of factual stoppage of its operations by
orders of the Central Bank.
HOWEVER, it must be noted in this case that the two time
deposits matured on Jan. 11, 1968 and Feb. 6, 1968, respectively.
OBM was suspended to operate only on July 31, 1968 and resolved
on Aug. 2, 1968. Thus, there was yet no obstacle to the faithful
compliance by OBM of its liabilities. For having incurred in delay in
the performance of its obligation, OBM should be held liable for
damages.
While it is true that under Art. 1956 of the NCC, no interest
shall be due unless it has been expressly stipulated in writing, this
applies only to interest for the use of money. It does not
comprehend interest paid as damages. OBM is being required to
pay such interest, not as interest income stipulated in the CTD, but
as damages for failure and delay in the payment of its obligations
which thereby compelled IRC and Santos to resort to the courts.
The applicable rule is that legal interest, in the nature of
damages for non-compliance with an obligation to pay sum of
money, is recoverable from the date judicially or extra-judicially
demand is made.

7. DEVELOPMENT BANK OF THE PHILIPPINES V. CA

G.R. No. 110053 | October 16, 1995| Regalado. J
Petitioner:
Respondent:

DEVELOPMENT BANK OF THE PHILIPPINES

COURT OF APPEALS, CELEBRADA MANGUBAT and
ABNER MANGUBAT

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DOCTRINE: A loan could still be enforced or collected despite the

annulment of the sale. The loan contract executed between the
parties is entirely different and discrete from the deed of sale they
entered into. The annulment of the sale will not have an effect on
the existence and demandability of the loan. Whoever received
money as a loan is bound to pay the creditor an equal amount of
the same kind and quality. The mortgage contract and the
testimony of the respondent wife proved that they are indebted to
the petitioner; thus, they must pay the debt due.
FACTS:
Petitioner, Development Bank of the Philippines (DBP)
executed a Deed of Absolute Sale in favor of
respondent, Spouses Mangubat, over a parcel of
unregistered land in Camarines Sur.

The land, covered only by a tax declaration, is known to

have been originally owned by Presentacio Cordovez who
donated it to Luciano Sarmiento. Sarmiento then sold the
land to Pacifico Chica.
Pacifico Chica mortgaged the land to DBP to secure a
loan of P6,000.00. However, he defaulted in the payment
of the loan, hence DBP caused the extrajudicial foreclosure
of the mortgage. In the auction sale, DBP acquired the
property as the highest bidder and was issued a certificate
of sale by the sheriff. The certificate of sale was entered in
the Book of Unregistered Property.
Pacifico Chica failed to redeem the property, and DBP
consolidated its ownership over the same.
The respondent spouses offered to buy the property for
P18,599.99. DBP made a counter-offer of P25,500.00 which
was accepted by the spouses. The parties further agreed
that payment was to be made within six months and that it
will be considered as cash payment.
The deed of absolute sale, which is now being assailed, was
executed by DBP in favor of spouses. The said document
contained a waiver of the sellers warranty against eviction.

Thereafter, the spouses applied for an industrial tree

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planting loan with DBP. Where DBP required the

respondents to submit a certification from the Bureau of
Forest Development that the land is alienable and
disposable. However, the Bureau issued a certificate
attesting to the fact that the said property was classified as
timberland, hence not subject to disposition.
The loan application of respondent spouses was
nevertheless approved by DBP in the sum of P140,000.00, on
the understanding of the parties that DBP would work for
the release of the land. To secure payment of the loan, the
spouses executed a real estate mortgage over the land,
which was registered in the Registry of Deeds.
The loan was then released to the spouses on a staggered
basis. After receiving a substantial sum, the spouses asked
for the release of the remaining amount of the loan. Their
request was not acted upon by DBP because the release
of the land had not been obtained.
The spouses filed a complaint against DBP in the trial court
seeking the annulment of the subject deed of absolute sale
on the ground that the object was verified to be
timberland. Thus, in law it is an inalienable part of the public
domain. They also alleged that DBP acted fraudulently and
in bad faith by misrepresenting itself as the absolute owner
of the land and in incorporating the waiver of warranty
against eviction in the deed of sale.

ISSUE: Whether or not the respondent spouses should be made to

pay petitioner their loan obligation? YES, the respondent
spouses should pay the petitioner their loan obligation.
HELD/RATIO:
The contract of loan executed between the parties is
different and discreet from the deed of sale they entered
into.
The annulment of the sale will not have an effect on the
existence and demandability of the loan. Whoever
received money as a loan is bound to pay the creditor an
equal amount of the same kind and quality.
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The fact that the annulment of the sale will also result in the
invalidity of the mortgage does not have an effect on the
validity and efficacy of the principal obligation, for even an
obligation that is unsupported by any security of the debtor
may also be enforced by means of an ordinary action.
Where a mortgage is not valid, as where it is executed by
one who is not the owner of the property, or the
consideration of the contract is simulated or false, the
principal obligation, which it guarantees, is not thereby
rendered null and void. That obligation matures and
becomes demandable.
The mortgage contract, which embodies the terms and
conditions of the loan obligation and the respondent wifes
admission in open court that they are indebted to the
petitioner are adequate evidence to show prove their
indebtedness.

8. ROBLES v. CA
G.R. No. 123509. | March 14, 2000 | Panganiban. J
Petitioner:
Respondent:

LUCIO ROBLES, EMETERIA ROBLES, ALUDIA ROBLES

and EMILIO ROBLES
COURT OF APPEALS, Spouses VIRGILIO SANTOS and
BABY RUTH CRUZ, RURAL BANK OF CARDONA, Inc.,
HILARIO ROBLES, ALBERTO PALAD JR. in his capacity
as Director of Lands, and JOSE MAULEON in his
capacity as District Land Officer of the Bureau Of
Lands

DOCTRINE: In a real estate mortgage, it is essential that the

mortgagor be the absolute owner of the property to be
mortgaged, otherwise, the mortgage is void. Considering that
Hilario can be deemed to have mortgaged the disputed property
not as absolute owner but only as a coowner, he can be
adjudged to have disposed to the Rural Bank of Cardona, Inc.,
only his undivided share therein.

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FACTS:
Leon Robles primitively owned the land in Rizal with an
area of 9,985 sqm which he occupied openly and
adversely and declared the same for taxation as early as
1916.
Robles died and his son Silvino inherited the land. Upon his
sons death, his widow and children inherited the property
(petitioners here).
The task of cultivating the land was assigned to plaintiff
Lucio Robles while Hilario Robles was entrusted with the
payment of the land.
In 1962, for some reason the tax declarations in the name
of Silvino was cancelled and transferred to Ballena (father
of the wife of Hilario). There was no deed.
Ballena secured a loan from Antipolo Rural Bank using the
tax declaration as security. The tax declaration was
transferred to Antipolo Rural Bank then to Hilario and his
wife Andrea (allegedly, he sold it to them).
Andrea secured a loan from the Cardona Rural Bank using
the tax declarations as security.
o Failed to pay
o Foreclosure proceedings were had and defendant
Rural Bank emerged as the highest bidder.
o Failed to redeem
o Tax dec transferred in the name of rural bank.
Rural Bank sold the land to Spouses Santos.
In 1987, plaintiff (heirs of Silvino) discovered the mortgage
and attempted to redeem the property but was
unsuccessful.
Spouses Santos took possession and was able to secure
Free Patent in their names.
Plaintiffs filed an action for quieting of title with the RTC.
RTC ruled in favor of plaintiffs and declared the free patent
void.
CA reversed the trial court holding the petitioners no longer
had any title to the property at the time they instituted the
complaint.

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o
o

the subsequent declaration of the subject realty for

taxation purposes not only in the name of Ballena
but also in the name of the Rural Bank of Antipolo.
Assuming co-owners: Hilario repudiated coownership- declared tax in his own name.
RTC erred in invalidating the real estate mortgage
on the basis of Andrea Robles testimony that her
husbands signature thereon was forged.
Rural bank even granted request of mortgagor to
extend redemption period.

ISSUE: Whether or not the real estate mortgage is valid

HELD/RATIO:
Hilario mortgaged the property to the Rural Bank in his
capacity as mere co-owner. There was no clear
repudiation. Petitioners continued possession of the
property.
In a real estate mortgage, it is essential that the mortgagor
be the absolute owner of the property to be mortgaged,
otherwise, the mortgage is void.

In the present case, it is apparent that Hilario was not the

absolute owner of the entire property and the Rural Bank of
Cardona failed to observe due diligence and thus, was a
mortgagee in bad faith.
o Bank was remiss in its duty to establish who the true
owners and possessors were. Had it been more
circumspect, it would have discovered that the
property was in fact occupied by petitioners.
o The bank should not have relied solely on the Deed
of Sale purportedly showing that the ownership of
the disputed property had been transferred from
Ballena to Robles spouses because it was dealing
with unregistered land and transactions were
suspicious.
o Court finds it unusual that notwithstanding the
banks insistence that it had become the owner,
petitioners continued to occupy and harvest fruits.

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Considering that Hilario can be deemed to have

mortgaged the disputed property not as absolute owner
but only as a coowner, he can be adjudged to have
disposed to the Rural Bank of Cardona, Inc., only his
undivided share therein.
The said bank, being the immediate predecessor of the
Santos spouses, was a mortgagee in bad faith. Thus, justice
and equity mandate the entitlement of the Santos spouses,
who merely stepped into the shoes of the bank, only to
what legally pertains to the latterHilarios share in the
disputed property.

FREE PATENT (not important):

Since it was private land, the free patent issued by the
director of lands was void.

9. BA FINANCE v. CA
G.R. No. 102998 | JULY 5, 1996 | Vitug. J.

Petitioner:
Respondent:

BA FINANCE CORPORATION
HON. COURT OF APPEALS and ROBERTO M. REYES

DOCTRINE: A chattel mortgagee, unlike a pledgee, need not be

in, nor entitled to, the possession of the property unless and until
the mortgagor defaults and the mortgagee thereupon seeks to
foreclose thereon.
FACTS:
Spouses Manahan executed, on 15 May 1980, a promissory
note binding themselves to pay Carmasters, Inc., the
amount of P83,080.00 in 36 monthly installments
commencing
To secure payment, the Manahan spouses executed a
deed of chattel mortgage over a motor vehicle, a Ford
Cortina 1.6 GL. Carmasters later assigned the promissory

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note and the chattel mortgage to petitioner BA Finance

Corporation with the conformity of the Manahans.
The spouses failed to pay the due installments, BA Finance
sent demand letters. The demands not having been
heeded, petitioner filed a complaint for replevin with
damages against the spouses, as well as against a John
Doe, praying for the recovery of the vehicle with an
alternative prayer for the payment of a sum of money
should the vehicle not be returned.
The lower court issued a writ of replevin. The court,
however, cautioned petitioner that should summons be not
served on the defendants within thirty (30) days from the
writ's issuance, the case would be dismissed for failure to
prosecute. The warning was based on what the court
perceived to be the deplorable practice of some
mortgagees of "freezing (the) foreclosure or replevin cases"
which they would so "conveniently utilize as a leverage for
the collection of unpaid installments on mortgaged
chattels.
The service of summons upon the spouses Manahan was
cause to be served.
Petitioner through its Legal Assistant, Danilo E. Solano,
issued a certification to the effect that it had received from
Orson R. Santiago, the deputy sheriff of the RTC that the
Ford Cortina seized from private respondent Roberto M.
Reyes, the John Doe referred to in the complaint.
A few months later the court issued an order retracting the
order of seizure of the property because there is no
showing that the principal defendants were served with
summons in spite the lapse of 4 months.
BA finance filed a notice of dismissal, which the court
noted. Private respondents filed a motion parying BA
finance be directed to comply with the court order
requiring the return of the vehicle to him.
BA finance filed a MR, which the court granted.
Some months later, the trial court rendered a decision
dismissing the complaint against the Manahans for failure

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of petitioner to prosecute the case against them5. It also

dismissed the case against private respondent for failure of
petitioner to show any legal basis for said respondent's
liability.
In its appeal to the Court of Appeals, petitioner has
asserted that a suit for replevin aimed at the foreclosure of
the chattel is an action quasi in rem which does not
necessitate the presence of the principal obligors as long
as the court does not render any personal judgment
against them. This argument did not persuade the
appellate court,

ISSUE: WON a mortgagee can maintain an action for replevin

against any possessor of the object of a chattel mortgage
even if the possessor were not a party to the mortgage?
HELD/RATIO: NO!
Replevin is so usually described as a mixed action, being
partly in rem and partly in personam -in rem insofar as the
recovery of specific property is concerned, and in
personam as regards to damages involved.
As an "action in rem," the gist of the replevin action is the
right of the plaintiff to obtain possession of specific personal
property by reason of his being the owner or of his having a
special interest therein.
Consequently, the person in possession of the property
sought to be replevied is ordinarily the proper and only
necessary party defendant, and the plaintiff is not required
to so join as defendants other persons claiming a right on
the property but not in possession thereof.
Rule 60 of the Rules of Court allows an application for the
immediate possession of the property but the plaintiff must

"x x x. Roberto M. Reyes is merely ancillary debtor in this case. The defendant spouses Manahan
being the principal debtor(s) and as there is no showing that the latter has been brought before the
jurisdiction of this court, it must necessarily follow that the plaintiff has no cause of action against
said Roberto M. Reyes herein before referred to as defendant John Doe. Under the circumstances, it
is incumbent upon the plaintiff to return the seized vehicle unto the said Roberto M. Reyes."
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show that he has a good legal basis, i.e., a clear title

thereto, for seeking such interim possession.
Where the right of the plaintiff to the possession of the
specific property is so conceded or evident, the action
need only be maintained against him who so possesses the
property. In rem actio est per quam rem nostram quae ab
alio possidetur petimus, et semper adversus eum est qui
rem possidet.
In effect then, the mortgagee, upon the mortgagor's
default, is constituted an attorney-in-fact of the mortgagor
enabling such mortgagee to act for and in behalf of the
owner. Accordingly, that the defendant is not privy to the
chattel mortgage should be inconsequential. By the fact
that the object of replevin is traced to his possession, one
properly can be a defendant in an action for replevin. It is
here assumed that the plaintiff's right to possess the thing is
not or cannot be disputed.
A chattel mortgagee, unlike a pledgee, need not be in, nor
entitled to, the possession of the property unless and until
the mortgagor defaults and the mortgagee thereupon
seeks to foreclose thereon.
Since the mortgagee's right of possession is conditioned
upon the actual fact of default which itself may be
controverted, the inclusion of other parties, like the debtor
or the mortgagor himself, may be required in order to allow
a full and conclusive determination of the case.
When the mortgagee seeks a replevin in order to effect the
eventual foreclosure of the mortgage, it is not only the
existence of, but also the mortgagor's default on, the
chattel mortgage that, among other things, can properly
uphold the right to replevy the property. The burden to
establish a valid justification for that action lies with the
plaintiff.
It is an undisputed fact that the subject motor vehicle was
taken from the possession of said Roberto M. Reyes, a third
person with respect to the contract of chattel mortgage
between the appellant and the defendants spouses
Manahan.

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Hence, an adverse possessor, who is not the mortgagor,

cannot just be deprived of his possession, let alone be
bound by the terms of the chattel mortgage contract,
simply because the mortgagee brings up an action for
replevin.

10. DBP v. CA *SCRA number indicated its DBP v. CA*

284 SCRA 14 |January 5, 1998 | Davide, J.

G.R. 118342
Petitioner:
DEVELOPMENT BANK OF THE PHILIPPINES
Respondent/s: COURT OF APPEALS and LYDIA CUBA

G.R. 118367
Petitioner:
Respondent/s:

LYDIA P. CUBA
DEVELOPMENT BANK OF THE PHILIPPINES and
AGRIPINA P. CAPERAL

FACTS:
Lydia Cuba (Cuba) is a grantee of a Fishpond Lease
Agreement.
She obtained three loans from the Development Bank of
the Philippines (DBP) in the total amount of Php316,700.00.
o As a security for said loans, Cuba executed two
Deeds of Assignment of her Leasehold Rights
(fishpond)
Cuba failed to pay her loan.
WITHOUT
FORECLOSURE
PROCEEDINGS,
judicial
or
extrajudicial, DBP appropriated Cubas Leasehold Rights
over the fishpond.
Thereafter, DBP executed a Deed of Conditional Sale of
the Leasehold Rights in favor of Cuba.
Cuba accepted the offer to repurchase said Leasehold
Rights.
o After the Deed of Conditional Sale was executed, a
new Fishpond Lease Agreement was issued by the

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Ministry of Agriculture in favor of Cuba, excluding

her husband.
Cuba then failed to pay the amortizations stipulated in the
Conditional Deed of Sale. She then entered into a
Temporary Arrangement with DBP to pay off the
amortizations.
DBP sent a Notice of Rescission to Cuba, which was
received by the latter.
Thereafter, DBP took possession of the Leasehold Rights of
the fishpond.
DBP then published in the Sunday Punch a public bidding
to dispose of the property.
o DBP executed a Deed of Conditional Sale in favor
of Agripina Caperal (Caperal). She was awarded a
new Fishpond Lease Agreement.
Cuba then filed a complaint against DBP and Caperal.
Trial court ruled in favor of Cuba. CA reversed the trial
courts decision.

ISSUE: WON DBP validly appropriated for itself Cubas Leasehold

Rights without foreclosure proceedings contrary to Article
2088.
HELD/RATIO: NO. DBP made the appropriation in violation of Article
2088. DBP should have undergone foreclosure proceedings first
before appropriating the Leasehold Rights.

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 Court ruled that the assignment of the leasehold rights
was a mortgage contract.
o It is undisputed that Cuba obtained from DBP three
separate loans, each of which was covered by a
promissory note. In all of the notes, there was a
provision that: In the event of foreclosure of the
MORTGAGE securing these notes, I/We bind

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myself/ourselves, jointly and severally, to pay the

deficiency, if any.
Cubas Assignment of Leasehold Rights in favor of DBP
constantly referred to Cuba as the borrower; the assigned
rights as MORTGAGED PROPERTIES; and the instrument itself,
as a MORTGAGE CONTRACT.
Moreover, under condition No. 22 of the deed, it was
provided that failure to comply with the terms and
condition of any of the loans shall cause all other loans to
become due and demandable and ALL MORTGAGES
SHALL BE FORECLOSED.
HOWEVER, the Court does not agree with Cuba that
condition No. 12 of the deed of assignment constituted a
pactum commissorium.
o DBP, however, exceeded the authority vested in
condition No. 12 of the deed of assignment. It did
not go through foreclosure proceedings before
appropriating the Leasehold Rights. Its contention
that it limited itself to mere administration by posting
caretakers is further belied by the deed of
conditional sale it executed in favor of Cuba.
The fact that Cuba offered and agreed to repurchase her
leasehold rights from DBP did not estop her from
questioning DBPs act of appropriation. The Court ruled
that estoppel cannot give validity to an act that is
prohibited by law or against public policy. Hence, the
appropriation of the leasehold rights, being contrary to
Article 2088 and to public polcy, cannot be deemed
validated by estoppel.

11. PHILIPPINE VETERANS BANK v. BENJAMIN MONILLAS

G.R. No. 167098|March 28, 2008|Nachura, J.
Petitioner:
PHILIPPINE VETERANS BANK
Respondent/s: BENJAMIN MONILLAS

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DOCTRINES:
1. Settled in this jurisdiction is the doctrine that a prior
registration of a lien creates a preference, hence, the
subsequent annotation of an adverse claim cannot defeat
the rights of the mortgagee, or the purchaser at the
auction sale whose rights were derived from a prior
mortgage validly registered.
2. Furthermore, oft-repeated is the rule that the foreclosure
sale retroacts to the date of the registration of the
mortgage.
3. Not so cred trans but relvenat: Laches, being a doctrine in
equity, cannot be invoked to resist the enforcement of a
legal right.
FACTS:
Respondent Benjamin Monillas and his brother, Ireneo,
inherited from their father a parcel of land
On May 21, 1973, respondent Benjamin executed a deed
of sale of his share over the property to Ireneo under the
latters representation that he would use the deed to
facilitate the procurement of a loan DBP for a planned
housing project on the land.
Ireneo then caused the transfer of the title in his name, the
propertys subdivision into 308 lots, and the issuance of
individual titles for the subdivided lots.
Ireneo mortgaged 22 of the 308 lots petitioner Philippine
Veterans Bank (PVB).
Three years later, respondent Benjamin filed a case for the
nullification of the 1973 deed of sale, the recovery of the
property, and the payment of damages (1st case)
While the case between the 2 brothers was pending, PVB
foreclosed the mortgage and PVB was the highest bidder.
Respondent Benjamin caused the annotation of notices of
lis pendens relating to the said civil case on the titles of the
subdivided lots.
RTC: in favor of Benjamin by declaring the 1973 deed as
null and void, cancelling the subsequent titles issued, and
ordering the payment of damages

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CA: affirmed the ruling of the RTC

The Sheriffs Certificate of Sale and the Affidavit of
Consolidation of Ownership were annotated and new titles
were issued in the name of PVB
Respondent Benjamin sued petitioner PVB and the Register
of Deeds of Isabela for the cancellation of the mortgage,
the invalidation of the foreclosure, and the declaration of
the nullity of the titles issued in petitioners name (2nd case)
RTC: in favor of Benjamin declaring the mortgage null and
void, the foreclosure sale null and void and ordered the
cancellation of the title under PVB and transfer such titles to
Benjamin Monillas.
The RTC rationalized that while the annotation of the
notices succeeded the registration of the mortgage, still
the effect of the notices was that PVB acquired knowledge
of an impediment against its interest, and as a matter of
fact, petitioner ignored the notices and slept on its rights, as
it did not intervene in the said civil case
PVB filed a Rule 45 with the SC (naks)

ISSUE: Whether or not the prior registered mortgage and the

already concluded foreclosure proceedings with PVB
should prevail over the subsequent annotation of the
notices of lis pendens on the lot titles
HELD/ RATIO: Petition is meritorious (SC in favor of PVB)
Court rules that the prior registered mortgage of PVB and
the foreclosure proceedings already conducted prevail
over respondents subsequent annotation of the notices of
lis pendens on the titles to the property.
Settled in this jurisdiction is the doctrine that a prior
registration of a lien creates a preference, hence, the
subsequent annotation of an adverse claim cannot defeat
the rights of the mortgagee, or the purchaser at the
auction sale whose rights were derived from a prior
mortgage validly registered.

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A contrary rule will make the prior registration of a

mortgage or lien useless. The purpose of the registration of
the mortgage is to protect the property it is attached to.
The doctrine applies with greater force in this case
considering that the annotation of the notice of lis pendens
was made not only after the registration of the mortgage,
but also, and much later, after the conclusion of the
foreclosure sale. (so late na din daw na annotate ang
notice of lis pendens)
The Court also notes that PVB is an innocent mortgagee for
value.
o When the lots were mortgaged to it by Ireneo:
! the titles thereto were in the Ireneos name;
and
! they showed neither vice nor infirmity
o The public interest in upholding the indefeasibility of
a certificate of title, as evidence of the lawful
ownership of the land or of any encumbrance
thereon, protects a buyer or mortgagee who, in
good faith, relied upon what appears on the face
of the certificate of title.
PVB cannot even be considered to have slept on its rights
when it only registered the Sheriffs certificate of sale after
the lapse of almost 15 years, because, as already
discussed, it registered its prior mortgage and had already
foreclosed on the same.
Petitioner, therefore, had every reason to expect that its
rights were amply protected. And the mortgagor was even
benefited by this late registration of the Sheriffs Sale,
because then, he would still have a chance to redeem the
property.
Furthermore, oft-repeated is the rule that the foreclosure
sale retroacts to the date of the registration of the
mortgage.
It no longer matters that the annotation of the sheriffs
certificate of sale and the affidavit of consolidation of
ownership was made subsequent to the annotation of the
notice of lis pendens.

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So basically order or things:

! Registration of Mortgage over property
(PVB)
! Foreclosure Sale (PVB)
! Notice of Lis Pendens (Benjamin)
! Sherrifs Certificate of Sale (PVB)

12. GUANCO v. ANTOLO

G.R. No. 150852|July 31, 2006| Callejo, Sr., J.
Petitioner:
LUISA GUANCO
Respondent/s: ISIDRO ANTOLO
DOCTRINE: Posting of a notice of the foreclosure of the real estate
mortgage in at least three of the most conspicuous public places
not only in the municipality but also in the barrio where the land
mortgaged is situated during the 60dayperiod immediately
preceding the public land auction is mandatory.
Unless it was made to appear that a sale at public auction was
conducted and that the requisite redemption period had lapsed,
no Torrens title over the property can be issued by the Register of
Deeds.
FACTS:
Antolo applied for a loan with Rural bank of Sibalom (RBS)
and executed a real estate mortgage to secure its
payment. This was annotated on the title on the same
date.
Antolo later transferred due to work but did not leave a
forwarding address with RBS.
The bank demanded payment when the loan was due but
Antolo failed to pay.
Antolo later inquired on his account status, he found that
his account had previously been paid for, that the owners
title had been released, and that the property had been
sold to Guanco via a public auction.
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Antolo filed a complaint for annulment of the sale and

recovery of ownership with damages.

ISSUE: Whether or not Antolo can recover ownership?

HELD/RATIO: YES
Under Section 5 of Republic Act No. 720, as amended by
Rep. Act No. 7939, the provincial sheriff is mandated to
post a notice of the foreclosure of the real estate
mortgage in at least three of the most conspicuous public
places not only in the municipality but also in the barrio
where the land mortgaged is situated during the 60day
period immediately preceding the public auction
o The foreclosure of mortgages covering loans
granted by rural banks shall be exempt from the
publication in newspapers now required by law
where the total amount of the loan, including
interests due and unpaid, does not exceed three
thousand pesos. It shall be sufficient publication in
such cases if the notices of foreclosure are posted
in at least three of the most conspicuous public
places in the municipality and barrio where the
land mortgaged is situated during the period of sixty
days immediately preceding the public auction
In this case, the provincial sheriff failed to comply with the
law. It appears on the face of the Final Deed of Sale
executed by Deputy Sheriff that the petition for
extrajudicial foreclosure of the real estate mortgage
purportedly filed with the said office was dated July 21,
1977. The deputy sheriff set the public auction sale on
August 19, 1977, or less than a month after the filing of the
said petition, short of the 60 day period under Section 5 of
Rep. Act No. 720, as amended.
Guanco and the deputy sheriff made it appear that a
public auction sale took place on August 19, 1977, that
Guanco purchased the property for P775.00 on said date,
that Antolo failed to redeem the property within the
requisite period, and, consequently, a final deed of sale

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was executed on August 28, 1977. The only conclusion is

that Deputy Sheriff Alvior made it appear in the certificate
of sale that a sale at public auction was conducted on
August 19, 1977, and that respondent failed to redeem the
property within one year from registration of the sale. This
was clearly done to enable petitioner Luisa Guanco to
secure a Torrens title over the property in her name. Unless
it was made to appear that a sale at public auction was
conducted and that the requisite redemption period had
lapsed, no Torrens title over the property can be issued by
the Register of Deeds to and under the name of petitioner.

13. PASCUAL V. UNIVERSAL MOTORS CORP.

L-27862| November 20, 1974 | Makalintal. C.J
Petitioner:
Respondent:

LORENZO PASCUAL and LEONILA TORRES

UNIVERSAL MOTORS CORPORATION

DOCTRINE: Foreclosure of chattel mortgage precludes any further

action against the debtor and his guarantor.
FACTS:
Pascual and Torres executed a real estate mortgage to
secure the payment of the indebtedness of PDP Transit, Inc.
for the purchase of five (5) units of Mercedez Benz trucks
totaling P152, 506.50 from Universal Motors Corp. However,
Pascual and Torres guarantee is not to exceed P50,000
which is the value of the mortgage.
The principal obligation of P152,506.50 was to bear interest
at 1% a month from Dec. 14, 1960.
As of April 5, 1961, PDP Transit, Inc. paid Universal Motors
Corp. the sum of P92,964.91, thus leaving a balance of
P68,641.69 including interest due as of Feb. 8, 1965.
The principal obligation of PDP Transit, Inc. to Universal
Motors Corp. is further secured by separate deeds of
chattel mortgages on the Mercedez Benz units in favor of
Universal Motors Corp.
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Universal Motors Corp. filed a complaint against PDP

Transit, Inc. before the CFI of Manila, with a petition for a
writ of replevin, to collect the balance due under the
Chattel Mortgages and to repossess all the units sold to
plaintiffs principal PDP Transit, Inc. including the 5 units
guaranteed under the real estate mortgage.
Universal Motors admitted that it was able to repossess all
the units sold to PDP Transit, Inc., including the 5 units
guaranteed by the real estate mortgage, and to foreclose
all the chattel mortgages constituted thereon, resulting in
the sale of the trucks at public auction.
Pascual and Torres, the real estate mortgagors, filed an
action in the CFI of Quezon City for the cancellation of the
mortgage they constituted on two parcels of land in favor
of Universal Motors Corp. to guarantee the obligation of
PDP Transit, Inc. to the extent of P50,0000.
The CFI ordered the cancellation of the mortgage. In
rendering judgment, the CFI ruled that Art. 1484 of the Civil
Code may be applied in relation to a chattel mortgage
constituted upon personal property on the installment
basis, precluding the mortgagee to maintain any further
action against the debtor for the purpose of recovering
whatever balance of the debt secured.
Unsatisfied, Universal Motors Corp. appealed the decision.
Universal Motors Corp. disputes the applicability of Art. 1484
of the Civil Code to the case at bar on the ground that
there is no evidence on record that the purchase by PDP
Transit, Inc. of the five (5) trucks, the payment of the price
of which was partly guaranteed by the real estate
mortgage in question, was payable in installments and that
the purchaser had failed to pay two or more installments. It
also contends that in any event what article 1484 prohibits
is for the vendor to recover from the purchaser the unpaid
balance of the price after he has foreclosed the chattel
mortgage on the thing sold, but not a recourse against the
security put up by a third party.

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ISSUE/S: Whether Article 1489 withholds from the vendor the right to
recover any deficiency from the purchaser after the
foreclosure of the chattel mortgage and not a recourse to
the additional security put up by a third party.
HELD/RATIO:
NO
To sustain appellants argument is to overlook the fact
that if the guarantor should be compelled to pay the
balance of the purchase price, the guarantor will in
turn be entitled to recover what she has paid from the
debtor vendee (Art. 2066, Civil Code); so that
ultimately, it will be the vendee who will be made to
bear the payment of the balance of the price, despite
the earlier foreclosure of the chattel mortgage given by
him. Thus, the protection given by Article 1484 would be
indirectly subverted, and public policy overturned.

14. INTERNATIONAL HARVESTER MACLEOD v. MEDINA JR.

G.R. NO. L-53623 | March 22, 1990 | Grio-Aquino, J.
Petitioner:
Respondent:

INTERNATIONAL HARVESTER MACLEOD, INC.

MARIANO MEDINA, JR. and HON. TOMAS P.
MADDELA, JR., in his capacity as Presiding Judge of
Branch XXXIV of the Court of First Instance of Manila

DOCTRINE: The financing transaction that is regulated by R.A. 5980

involves the buying, discounting, or factoring of promissory notes
and sales on credit or installment.
FACTS:
The International Harvester Macleod, Inc. (hereafter IHMI)
primary business is the sale of automotive products and
machineries;
Medina purchased on installment from IHMI twenty-four
(24) truck engines; IHMI imposed and collected the total
sum of P325,596.79 (Exh. A) as finance charges on the
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installment sales, evidenced by Retail Notes Analysis and

covering transmittal letters.
In connection with these transactions, IHMI sent letters to
Medina. The 4th letter indicated, unless this arrangement is
complied with, it may be necessary for our company to
discontinue financing your accounts.
A fifth letter was submitted and states in part: I have often
repeated to you the gross injustice and unfairness on a
situation where the motor trucks we are financing are
operating and we are not receiving payment from the
proceeds of such operations.
[sobrang weird kasi after nun RTC decision na agad; So
based sa first paragraph ng case I think Medina filed a
case against IHMI for collecting illegally imposed and
collected finance charges, plus 12% interest because
Medinas contending that IHMI is not a financing company
so dapat hindi siya naimpose ng ganun sa kanya]
RTC noted "there simply cannot be any room for doubt but
that the defendant (IHMI) imposed and collected the
amount of P325,596.79 purely as financing charges and this
is conclusive of the fact that it did engage in the business
of a financing company without authority from the
Securities and Exchange Commission in gross violation of
R.A. 5980

ISSUE: WON the imposition and collection of finance charges in

connection with the installment sale of its truck violated R.A
5980 by engaging in the business of a financing company
without the authority of the SEC?
HELD/RATIO: NO!
The financing transaction that is regulated by R.A. 5980
involves the buying, discounting, or factoring of promissory
notes and sales on credit or installment.
IHMI did not purchase from itself the Retail Notes Analysis
executed by Medina. IHMI only extended credit to Medina
by allowing him to pay for the 24 truck engines in
installment. While the increased price of the sale included

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a "financing charge," that charge was simply another

name for the interest to be paid by the installment buyer
(Medina) on the deferred payment of the purchase price
of the vehicles sold and delivered to him by IHMI.
IHMI used the word "finance charge" instead of "interest" in
the Retail Notes Analysis which it delivered to Medina,
because that is the term used in the Truth in Lending Act
(R.A 3765).
The transaction between IHMI and Medina did not involve
any discounting, factoring or assignment of IHMI's credit
against Medina to a finance company.
The transaction was bilateral (Medina and IHMI), not
trilateral (Installment buyer, seller and the financing
company). No financing company stepped into the shoes
of IHMI as assignee or purchaser of IHMI's credit against
Medina. Medina himself, not a financing company, paid
IHMI for the truck engines. Medina made his installment
payments or amortizations to IHMI, not to a financing
company.
Since IHMI's business of selling trucks in installment is not the
business of a financing company under R.A. 5980, IHMI did
not need SEC authorization to engage in it.

15. STATE INVESTMENT HOUSE, INC. v. CITIBANK N.A.

G.R. Nos. 79926-27 | October 17, 1991| Naravasa, J.
Petitioner:
Respondent:

STATE INVESTMENT HOUSE, INC. and STATE

FINANCING CENTER, INC.
CITIBANK, N.A., BANK OF AMERICA, NT & SA,
HONGKONG & SHANGHAI BANKING CORPORATION,
and the COURT OF APPEALS

DOCTRINE: The NIRC, Offshore banking law, and the General

banking act all support the theory that foreign corporations that
are licitly doing business in the Philippines are considered
resident corporations.

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Consequently, in applying the insolvency law, these corporations

have legal standing to institute involuntary insolvency proceedings
against its debtors.
FACTS:
Section 20 of insolvency law
o An adjudication of insolvency may be made on
the petition of three or more creditors, residents of
the Philippine Islands, whose credits or demands
accrued in the Philippine Islands, and the amount
of which credits or demands are in the aggregate
not less than one thousand pesos: Provided, that
none of said creditors has become a creditor by
assignment, however made, within thirty days prior
to the filing of said petition. Such petition must be
filed in the Court of First Instance of the province or
city in which the debtor resides or has his principal
place of business, and must be verified by at least
three (3) of the petitioners. xx.
Bank of American, HSBC and Citbank filed in court a
petition for involuntary insolvency of Consolidated Mines,
Inc. (CMI) because they failed to meet their obligation to
pay loans.
They claim that CMI had committed specific acts of
insolvency provided for in the insolvency law.
o 5. that he (CMI) has suffered his (CMIs) property to
remain under attachment or legal process for three
days for the purpose of hindering or delaying or
defrauding his (CMIs) creditors
xxx xxx xxx
o 11. that being a merchant or tradesman he (CMI)
has generally defaulted in the payment of his
(CMIs) current obligations for a period of thirty
days
SIHI opposed the petition by the banks, claiming that:
o Petitioner banks had come to court with unclean
hands in that they filed the petition for insolvency
alleging the CMI was defrauding its creditors, and

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they wished all creditors to share in its assets

although a few days earlier, they had received for
the account of CMI substantial payments
aggregating P10,800,000.00
the Court had no jurisdiction because the alleged
acts of insolvency were false: the writs of
attachment against CMI had remained in force
because there were just, valid and lawful grounds
for the(ir) issuance, and CMI was not a merchant
or tradesman nor had it generally defaulted in the
payment of (its) obligations for a period of thirty
days xx
the Court had no jurisdiction to take cognizance of
the petition for insolvency because petitioners are
not resident creditors of CMI in contemplation of the
Insolvency Law and
the Court has no power to set aside the
attachment issued in favor of intervenors-oppositors
SIHI and SFCI.

ISSUE: Whether or not foreign banks doing business in the

Philippines are considered residents of the Philippine
Islands with regard to the insolvency law?
HELD/RATIO: YES
The facts show that the banks are indeed foreign
corporations which are formed, organized or existing
under laws other than those of the Philippines but there is
also no question that the three banks that said banks have
been licensed to do business in this country and have in
fact been doing business here for many years.
National Internal Revenue Code declares that the term
resident foreign corporation applies to a foreign
corporation engaged in trade or business within the
Philippines,
Offshore Banking Law, Presidential Decree No. 1034, states
that branches, subsidiaries, affiliation, extension offices or
any other units of corporation or juridical person organized
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under the laws of any foreign country operating in the

Philippines shall be considered residents of the Philippines.
General Banking Act, Republic Act No. 337, places
branches and agencies in the Philippines of foreign banks
xx (which are) called Philippine branches, in the same
category as commercial banks, savings associations,
mortgage banks, development banks, rural banks, stock
savings and loan associations (which have been formed
and organized under Philippine laws), making no distinction
between the former and the latter in so far as the terms
banking institutions and bank are used in the Act,
declaring on the contrary that in all matters not
specifically covered by special provisions applicable only
to foreign banks, or their branches and agencies in the
Philippines, said foreign banks or their branches and
agencies lawfully doing business in the Philippines shall be
bound by all laws, rules, and regulations applicable to
domestic banking corporations of the same class, except
such laws, rules and regulations as provided for the
creation, formation, organization, or dissolution of
corporations or as fix the relation, liabilities, responsibilities,
or duties of members, stockholders or officers of
corporation.
This Court itself has already had occasion to hold that a
foreign corporation licitly doing business in the Philippines,
which is a defendant in a civil suit, may not be considered
a nonresident within the scope of the legal provision
authorizing attachment against a defendant not residing in
the Philippine Islands in other words, a preliminary
attachment may not be applied for and granted solely on
the asserted fact that the defendant is a foreign
corporation authorized to do business in the Philippines
and is consequently and necessarily, a party who resides
out of the Philippines.
Parenthetically, if it may not be considered as a party not
residing in the Philippines, or as a party who resides out of
the country, then, logically, it must be considered a party

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who does reside in the Philippines, who is a resident of the

country.
Obviously, the assimilation of foreign corporations
authorized to do business in the Philippines to the status of
domestic corporations, subsumes their being found and
operating as corporations, hence, residing, in the country.

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