CASE DIGESTS 43

by: Raisa Macabando

[G.R. No. 149295. September 23, 2003]
PHILIPPINE NATIONAL BANK, petitioner, vs. GENEROSO DE JESUS

FACTS:
Respondent filed a complaint against petitioner before the Regional Trial Court of Occidental
Mindoro for recovery of ownership and possession, with damages, over the questioned property.
On 26 March 1993, he had caused a verification survey of the property and discovered that the
northern portion of the lot was being encroached upon by a building of petitioner to the extent of
124 square meters. Despite two letters of demand sent by respondent, petitioner failed and refused
to vacate the area.
Petitioner asserted that when it acquired the lot and the building sometime in 1981 from then Mayor
Bienvenido Ignacio, the encroachment already was in existence and to remedy the situation, Mayor
Ignacio offered to sell the area in question (which then also belonged to Ignacio) to petitioner at
P100.00 per square meter which offer the latter claimed to have accepted. The sale, however, did
not materialize when, without the knowledge and consent of petitioner, Mayor Ignacio later
mortgaged the lot to the Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to be the rightful owner.
The Court of Appeals sustained the trial court.
ISSUE: W/N PETITIONER IS A BUILDER IN GOOD FAITH
HELD:
In reference to Article 448, et seq., of the Civil Code, a builder in good faith is one who, not being
the owner of the land, builds on that land believing himself to be its owner and unaware of any
defect in his title or mode of acquisition.
The essence of good faith lies in an honest belief in the validity of ones right, ignorance of a
superior claim, and absence of intention to overreach another. Applied to possession, one is
considered in good faith if he is not aware that there exists in his title or mode of acquisition any
flaw which invalidates it. Evidently, petitioner was quite aware, and indeed advised, prior to its
acquisition of the land and building from Ignacio that a part of the building sold to it stood on the
land not covered by the land conveyed to it.
Equally significant is the fact that the building, constructed on the land by Ignacio, has in actuality
been part of the property transferred to petitioner. Article 448, of the Civil Code refers to a piece of

land whose ownership is claimed by two or more parties, one of whom has built some works (or
sown or planted something) and not to a case where the owner of the land is the builder, sower, or
planter who then later loses ownership of the land by sale or otherwise for, elsewise stated, where
the true owner himself is the builder of works on his own land, the issue of good faith or bad faith is
entirely irrelevant.
In fine, petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil Code.

# 124
G.R. No. 197857 September 10, 2014
SPOUSES FRANCISCO SIERRA vs.
PAIC SAVINGS AND MORTGAGE BANK, INC
FACTS:
On May 31, 1983, Goldstar Conglomerates, Inc. (GCI), represented by Guillermo Zaldaga
(Zaldaga), obtained from Summa Bank, now respondent Paic Savings and Mortgage Bank, Inc.
(PSMB) a loan in the amount of P1,500,000.00 as evidenced by a Loan Agreement. As security
therefor, GCI executed in favor of PSMB six (6) promissory notes6 in the aggregate amount of
P1,500,000.00 as well as a Deed of Real Estate Mortgage over a parcel of land covered by
Transfer Certificate of Title (TCT) No. 308475.7 As additional security, petitioners Francisco Sierra,
Rosario Sierra, and Spouses Felix Gatlabayan and Salome Sierra mortgaged four(4) parcels of
land in Antipolo City.
Eventually, GCI defaulted in the payment of its loan to PSMB, thereby prompting the latter to
extrajudicially foreclose the mortgage on the subject properties. Since petitioners failed to redeem
the subject properties within the redemption period, their certificates of title were cancelled and
new ones were issued in PSMBs name.
Petitioners averred that under pressing need of money, with very limited education and lacking
proper instructions, they fell prey to a group who misrepresented to have connections with Summa
Bank and, thus, could help them secure a loan. Petitioners likewise lamented that they were not
furnished copies of the loan and mortgage documents, or notified/apprised of the assignment to
PSMB, rendering them unable to comply with their obligations under the subject deed. They further
claimed that they were not furnished a copy of the statement of account nor a copy of the petition
for foreclosure prior to the precipitate extrajudicial foreclosure and auction sale which failed to
comply with the posting and notice requirements.22 In light of the foregoing, petitioners prayed that
the real estate mortgage and the subsequent foreclosure proceedings, and all derivative titles and

rights arising therefrom be declared null and void ab initio, and that the subject properties be
reconveyed back to them, with further prayer for compensatory and exemplary damages, and
attorneys fees.
PSMB maintained that: (a) it acted in good faith with respect to the subject transactions and that
petitioners action should be directed against the group who deceived them;27 (b) the subject
properties were mortgaged to securean obligation covered by the loan agreement with GCI;28 (c)
the mortgage was valid, having been duly signed by petitioners before a notary public;29 (d) the
foreclosure proceedings were regular, having complied with the formalities required by law;30 and
(e) petitioners allowed time to pass without pursuing their purported right against Summa Bank
and/or PSMB.
ISSUE: 1. WHETHER OR NOT PETITIONERS ARE MERE ACCOMODATION
MORTGAGAGORS
2. W/N THE ACTION HAS PRESCRIBED AND BARRED BY LACHES
HELD:
Petitioners claim of lack of "proper instruction on the intricacies in securing [the] loan from the
bank" is belied by the fact that petitioners Francisco and Rosario Sierra had previously mortgaged
two (2) of the subject properties twiceto the Rural Bank of Antipolo.Moreover, petitioners did not:
(a) demand for any loan document containingthe details of the transaction, and (b) offer to pay the
purported partial loan proceeds they received at any time, complaining thereof only in 1991 when
they filed their complaint. Indeed, the foregoing circumstances clearly show that petitioners are
aware that they were mere accommodation mortgagors, debunking their claim that mistake vitiated
their consent to the mortgage.
There being valid consent on the part of petitioners to act as accommodation mortgagors. As mere
accommodation mortgagors, petitioners are not entitled to the proceeds of the loan, nor were
required to be furnished with the loan documents53 or notice of the borrowers default in paying the
principal, interests, penalties, and other charges on due date,54 or of the extrajudicial foreclosure
proceedings, unless stipulated in the subject deed.55 As jurisprudence states, an accommodation
mortgagor is a third person who is not a debtor to a principal obligation but merely secures it by
mortgaging his or her own property.
Anent the 2nd issue, Petitioners contends that the applicable provision is the ten-year prescriptive
period of mortgage actions under Article 1142 of the Civil Code. Based on case law, a "mortgage
action" refers to an action to enforcea right necessarily arising from a mortgage.59 In the present
case, petitioners are not "enforcing"their rights under the mortgage but are, in fact, seeking to be
relieved therefrom.The complaint filed by petitioners is, therefore, not a mortgage action as
contemplated under Article 1142.
Since the complaint for annulment was anchored on a claim of mistake, i.e., that petitioners are the
borrowers under the loan secured by the mortgage, the action should have been brought within (4)

years from its discovery. The discovery of the averred mistake should appear to be reckoned from
June 19, 1984.
As the records disclose, despite notice on June 19, 1984 of the scheduled foreclosure sale,
petitioners, for unexplained reasons, failed to impugn the real estate mortgage and oppose the
public auction sale for a period of more than seven (7) years from said notice.