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Penullar vs. PNB, 120 SCRA 171

GR No. L-32762, January 27, 1983

FACTS: There was a land registration case between Cristina Penullar and Florencio
Felix for the declaration of absolute nullity of judicial proceedings in a land
registration case. While the case was pending, the land was mortgaged to PNB for a
loan by the defendants of the case for declaration of nullity of judicial proceedings.
The CA in that case declared the judicial proceedings void and all Certificates of
Title flowing from the proceedings null and void, but at the same time declared the
mortgage of PNB valid on the basis of being a mortgagor in good faith. Penullar
claimed that PNB was negligent in allowing the void title to be mortgaged.

ISSUE: Whether or not PNB was negligent.

RULING: No, the court held that PNB had a right to rely on the torrens titles
presented to it, furthermore, Petitioner Penullar was also found to have been
negligent, to wit: He whose negligence had enabled a third person to cause damages
shall, as between two innocent parties, bear the loss. In the present case, [if herein
petitioner] had appealed from the decision in the registration case, no certificate of
Title would have been issued just like that in the name of the [petitioner] and no
mortgage could have been constituted by them in favor of Bank but as it is, said
[petitioner] failed to do that, instead they let the decision in the registration case gain
the status of finality; allowed without prior protest, the certificate of title to be issued;
did not even as early as possible, annotate an adverse claim on the titles; and they
filed this case only several months afterwards, it was their negligence that permitted
said adjudicates in the said registration case to apply for and secure mortgages from
the Bank.
Lim vs. Lutero, 49 PhIl. 703
GR No. 25235, December 9, 1926

FACTS: The case commenced that the complaint alleged that there was still due and
unpaid on said mortgage (a) the sum of P22,807.09 with interest at 12 per cent per
annum from the 27th day of June, 1921, until paid; and ( b) the sum of P2,000 as
penalty for failure on the part of the defendants to comply with their contract. The
plaintiff prayed for a judgment for said amounts, and that in case of a failure on their
part to pay the same, than an order be issued for the sale of the mortgaged premises.
Plaintiff also prayed for a judgment for costs. The action was commenced in the
Court of First Instance of the Province of Iloilo on the 8th day of March, 1922. On
the 6th day of April, 1922, the defendants Tiburcio Lutero and Asuncion Magalona
filed their answer, denying each and all of the allegations of the complaint.

In 1922, the "Hospital de San Pablo de Iloilo" presented a petition for

intervention, which was granted. The defendant Rafael Lutero was made a
defendant in the action simply because he was a tenant occupying and cultivating the
three parcels of land in question.

ISSUE: 1. Whether or not that the mortgage executed and delivered by Tiburcio
Lutero and Asuncion Magalona on the 17th day of June, 1920, in favor of the
"Hospital de San Pablo" should be registered in the registry of property of the
Province of Iloilo as the first lien upon the real property in question.

2. Whether or not that the mortgage executed in favor of the "Hospital de San
Pablo" on the 17th day of June, 1920, should take preference over the mortgage
executed by said mortgagors to the plaintiff herein on the 15th day of April, 1920.
From that judgment the plaintiff appealed.
RULING: 1. The court ruled, first, that the alleged oral agreement did not give the
alleged second mortgage of the "Hospital de San Pablo de Iloilo" a priority over the
mortgage of the plaintiff.
Second. That whatever may be the rule in other jurisdictions, in this
jurisdiction it is an indispensable statutory requirement, in order that a mortgage by
validly constituted, that the instrument by which it is created be recorded in the
registry of deeds. (Art. 1875 of the Civil Code; Tobias vs. Enrico, 22 Phil., 394, 396;
Lozano vs. Tan Suico, 23 Phil., 16; Borcelis vs. Golingco, 27 Phil., 560.) In this case
(Borcelis vs. Golingco) the late Chief Justice Arellano said: "This Supreme Court has
repeatedly declared that to make a mortgage valid it is necessary that the document
constituting it be inscribed in the property registry." Such documents, however, are
valid subsisting obligations between the parties thereto and may be used as evidence
or proof of such obligations.

2. The court discussed that the mortgage in favor of the Philippine National
Bank for the sum of P9,500 for the purpose of determining whether or not said
mortgage takes priority over the mortgage of the plaintiff. It will be remembered that
the mortgage of the plaintiff was taken with the express understanding that it was
subject to a first mortgage in favor of the Philippine National Bank for the sum of
P9,500 with interest at 8 per cent per annum for the period of ten years, payable by
annual installments. The plaintiff thus recognized the existence of said mortgage as a
prior lien. The record show that the said mortgage of the Philippine National Bank
was paid by the intervenor, the "Hospital de San Pablo de Iloilo," with its money.
The intervenor, the "Hospital de San Pablo de Iloilo" therefore stands in the shoes of
the Philippine National Bank and has a right to be paid by the plaintiff out of the
proceeds of the foreclosure whatever sum or sums it paid to the Philippine National
Bank, with interest thereon at 8 per cent from the date of payment until paid.
Castro Jr vs CA 250 SCRA661
GR No. 97401, December 6, 1995

FACTS: The loan application of Sulpicio M. Tolentino for 80,000 was approved by
Island Savings Bank, which, as a security for the loan, executed on the same day a
real estate mortgage over a property owned by the latter. Said loan stipulated for a
lump sum 80,000 loan, payable in semi-annual installments for a period of 3 years,
with 12% annual interest. Of the 80,000 only 17,000.00 was released by the Bank;
and Tolentino signed a PN for said amount at interest earlier stipulated, payable
within 3 years from the date of execution of the contract at semi-annual installments
of P3,459.00. The Monetary Board of the Central Bank, after finding Island Savings
Bank was suffering liquidity problems, issued a resolution which prohibits the bank
from making new loans and investments excluding extensions or renewals of already
approved loans. The Monetary Board, after finding that Island Savings Bank failed
to put up the required capital to restore its solvency, issued another resolution which
prohibited Island Savings Bank from doing business in the Philippines. Island
Savings Bank, in view of non-payment of the P17,000.00 covered by the PN, filed an
application for the extra-judicial foreclosure of the real estate mortgage covering the
100hectare land of Tolentino. The latter filed a petition for specific performance or
rescission and damages with, alleging that since Island Savings Bank failed to deliver
the P63,000.00 balance of the P80,000.00 loan, he is entitled to specific performance
by ordering Island Savings Bank to deliver the P63,000.00 with interest of 12% per
annum and if said balance cannot be delivered, to rescind the real estate mortgage.

RTC finding unmeritorious the petition of Tolentino, ordering him to pay

Island Savings Bank the amount of PI7 000.00 plus legal interest and legal charges
due thereon, and lifting the restraining order so that the sheriff may proceed with the
foreclosure. CA modified the RTC’s decision by affirming the dismissal of
Tolentino’s specific performance, but it ruled that Island Savings Bank can neither
foreclose the real estate mortgage nor collect the P17,000.00 loan.
ISSUES: 1.Whether the action of Sulpicio for specific performance prosper.
2. Whether Tolentino is liable to pay the P17,000.00 debt covered by the promissory
note. 3. If Sulpicio M. Tolentino's liability to pay the P17,000.00 subsists, can his real
estate mortgage be foreclosed to satisfy said amount?

RULING: 1. No. The court found that the Island Savings Bank was in default in
fulfilling its reciprocal obligation under their loan agreement, Tolentino under Article
1191 of the Civil Code, may choose between specific performance or rescission with
damages in either case. But since Island Savings Bank is now prohibited from doing
further business by Monetary Board Resolution, the court cannot grant specific
performance in favor of Tolentino. When Island Savings Bank and Tolentino
entered into an P80,000.00 loan agreement, they undertook reciprocal. obligations.
In reciprocal obligations, the obligation or promise of each party is the consideration
for that of the other; and when one party has performed or is ready and willing to
perform his part of the contract, the other party who has not performed or is not
ready and willing to perform incurs in delay (Art. 1169 of the Civil Code). The
promise of Sulpicio M. Tolentino to pay was the consideration for the obligation of
Island Savings Bank to furnish the P80,000.00 loan. When Sulpicio executed a real
estate mortgage, he signified his willingness to pay the P80,000.00 loan. From such
date, the obligation of Island Savings Bank to furnish the P80,000.00 loan accrued.
Thus, the Bank's delay in furnishing the entire loan started when Sulpicio executed a
real estate mortgage and lasted for a period of 3 years or when the Monetary Board
of the Central Bank issued Resolution, which prohibited Island Savings Bank from
doing further business. Such prohibition cannot interrupt the default of Island
Savings Bank in complying with its obligation of releasing the P63,000.00 balance
because said resolution merely prohibited the Bank from making new loans and
investments, and nowhere did it prohibit island Savings Bank from releasing the
balance of loan agreements previously contracted.
2. Yes, as far as the partial release of P17,000.00, which Sulpicio accepted and
executed a promissory note to cover it, the bank was deemed to have complied with
its reciprocal obligation to furnish a P17,000.00 loan. The PN gave rise to Sulpicio
reciprocal obligation to pay the P17,000.00 loan when it falls due. His failure to pay
the overdue amortizations under the promissory note made him a party in default,
hence not entitled to rescission (Article 1191 of the Civil Code).

3. The Court ruled that the real estate mortgage of Sulpicio M. Tolentino
cannot be entirely foreclosed to satisfy his P 17,000.00 debt. Since Island Savings
Bank failed to furnish the P63,000.00 balance of the P8O,000.00 loan, the real estate
mortgage of Sulpicio became unenforceable to such extent. P63,000.00 is 78.75% of
P80,000.00, hence the real estate mortgage covering 100 hectares is unenforceable to
the extent of 78.75 hectares.


Verzosa vs. Bucag, 97 Phil. 996

GR No. L-8031, October 29, 1955

FACTS: Defendants-appellant conveyed a certain parcel of land

(unirrigated) situated in to the spouses Faustino Andres and Petra Abara, in
consideration of an amount of P1,620, which the former had received from the
latter by way of indebtedness. According to their local custom, one-third of the
products shall be the share of the owner or possessor of land in the produce.

Later, the heirs of the spouses transferred the land to Verzosa, plaintiff
herein, in 1948, in consideration of the sum of Pl,000. However, on 1950,
defendants took possession of such land without the consent of the plaintiff and
without returning the amount of indebtedness.
The plaintiff-appellee filed an action against the defendant alleging that
he is entitled to the possession of the land by virtue of deeds of conveyance (original
deed of conveyance – Exhibit A, where two of the signers are defendants herein;
Exhibit B executed by the heirs of spouses).

Defendants-appellant, in answer, alleged that Exhibit A, by virtue of

which plaintiff’s predecessors in interest were in possession of the property, is null
and void as the contract is usurious, that is, 6% legal interest fixed by Usury Law.

Trial court ruled in favor of the plaintiff-appellee and was affirmed by

the CA. Hence, this appeal involving only questions of law.

ISSUE: Whether or not the contract (Exhibit A) is usurious.

RULING: No, the contract (Exhibit A) is not usurious. Defendants-appellants

claimed that the produce that the plaintiff and his predecessors in interest received
exceeded the 6% legal interest fixed by the Usury Law. However, under the Usury
Law, the amount allowable as interest when the property conveyed as security is not
registered land is 14% not 6% (Sec. 3, Act No. 2655, as amended by C.A. 399). 14%
of their debt P1,620 is P226.80. Under the stipulation of facts, the yearly products of
the land are valued at P645.00 and of this sum the holder of the property or owner
thereof receives one-third or P215.00. The contract, therefore, cannot be considered
as usurious because the value of the products received does not exceed 14% of the
money loaned.

But even if the value of the actual selling price of one-third exceeded the 14%
interest provided for by law, the excess in the case at bar would not be palpable as to
show a corrupt intent to violate and evade the Usury Law.

Thus, the Court affirmed the judgment in toto, with costs against the

Valencia vs. Alcala, 42 Phil. 177

GR No. L- 16256, September 28, 1921

FACTS: The parties agree that the land in question is the same lot that is the subject of
litigation in civil cause No. 966 of this court; and that in the year 1891, the plaintiff herein,
Dionisia Valencia, and her deceased husband, Daniel Adepueng, conveyed to one Severino
Agbagala and his wife Francisca Cadapan the land in question, as evidence by the
document marked Exhibit A of the plaintiffs, which is found on folio 24 of civil cause No.
966 of this court.

Later on in the year 1899 Francisca Cadapan, wife of Severino Agbagala, conveyed this
same property to Juan Cagayat and Josefa Galendis, as shown by the memorandum
appearing at the bottom of the document marked Exhibit A of the plaintiffs, attached to the
record of the cause No. 966, folio 24.

That the possession of the land passed to Pedro Acala, who is one of the Acalas, the
defendants in the present action. In the year 1912, the herein defendants Acala sold the land
unconditionally to the herein defendant Bagayanan for the sum of P70.
ISSUE: Whether or not the contract is Antichresis?
RULING: Upon examining, the court held that the record and bearing in mind the fact
that, when the terms of a contract are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its clauses should prevail, the opinion that the
contract herein above copied is a contract of antichresis and not of sale with the right of

In the case of De la Vega vs. Ballilos (34 Phil., 683), this court said:
When money is loaned and the debtor places the creditor in possession of a piece of real
property as security for the sum loaned in order that he may hold it in usufruct, in
consideration for the said loan, the contract is not one of mortgage, notwithstanding the
terms thereof, inasmuch as it is not of the nature of a public instrument, and even though it
were, it does not appear to have been recorded in the property registry. Neither can such a
contract be classified as one of sale under pacto de retro, notwithstanding that it is set forth
therein that the debtor cedes and conveys to the creditor the ownership and possession of
the said real property. Therefore, such a contract should be classified as one of antichresis,
by means of which the creditor acquires the right to collect the fruits of the real property
turned over to him by his debtor, but with the obligation to apply them to the payment of
whatever interest is due and the contracting parties may stipulate that the interest of the debt
be paid by the fruits of the property given in antichresis.
The legal nature of the contract in question having thus been determined, it is evident that
the antichretic creditor and his successors in interest cannot acquire ownership by
prescription of the realty given in antichresis.

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