Real Mortgage

(1) Prudential Bank vs. Panis

153 SCRA 390
 

FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real estate mortgage
over a residential building. The mortgage included also the right to occupy the lot and the information about the sales
patent applied for by the spouses for the lot to which the building stood. After securing the first loan, the spouses
secured another from the same bank. To secure payment, another real estate mortgage was executed over the same
properties.
 
The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged to
the bank.

The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public auction
despite opposition from the spouses. The respondent court held that the REM was null and void.

HELD:
A real estate mortgage can be constituted on the building erected on the land belonging to another.

The inclusion of building distinct and separate from the land in the Civil Code can only mean that the building itself is
an immovable property.

While it is true that a mortgage of land necessarily includes in the absence of stipulation of the improvements thereon,
buildings, still a building in itself may be mortgaged by itself apart from the land on which it is built. Such a mortgage
would still be considered as a REM for the building would still be considered as immovable property even if dealt with
separately and apart from the land.

The original mortgage on the building and right to occupancy of the land was executed before the issuance of the
sales patent and before the government was divested of title to the land. Under the foregoing, it is evident that the
mortgage executed by private respondent on his own building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits pertinent provisions of the
Public Land Act.

(2) Velasco vs. CA

95 SCRA 616

Facts: November 10, 1965, Alta Farms secured from the GSIS a Three Million Two Hundred Fifty Five Thousand
Pesos (P3,255,000.00) loan and an additional loan of Five Million Sixty-Two Thousand Pesos (P5,062,000.00) on
October 5, 1967, to finance a piggery project. Alta Farms defaulted in the payment because of this that Alta Farms
executed a Deed of Sale with Assumption of Mortgage with Asian Engineering Corporation on July 10, 1969 but
without the previous consent or approval of the GSIS and in direct violation of the provisions of the mortgage contracts.
Even without the approval of the Deed of Sale with Assumption of Mortgage by the GSIS, Asian Engineering
Corporation executed an Exclusive Sales Agency, Management and Administration Contract in favor of Laigo Realty
Corporation, with the intention of converting the piggery farm into a subdivision. After developing the area, on
December 4, 1969, Laigo entered into a contract with Amable Lumanlan, one of the petitioners, to construct for the
home buyers, 20 houses on the subdivision. Petitioner Lumanlan allegedly constructed 20 houses for the home buyers
and for which he claims a balance of P309,187.76from the home buyers and Laigo. Out of his claim, petitioner
Lumanlan admits that Mrs. Rhody Laigo paid him in several checks totaling P124,855.00 but which checks were all
dishonoured. On December 29, 1969, Laigo entered into a contract with petitioner Pepito Velasco to construct houses
for the home buyers who agreed with Velasco on the prices and the downpayment. Petitioner Velasco constructed
houses for various home buyers, who individually agreed with Velasco, as to the prices and the down payment to be
paid by the individual home buyers. When neither Laigo nor the individual home buyers paid for the home constructed,
Velasco wrote the GSIS to intercede for the unpaid accounts of the home buyers.

Issue: W/N GSIS is liable to the petitioners for the cost of the materials and labor furnished by them in construction of
the 63 houses now owned by the GSIS?

Ruling: Yes. GSIS should pay the petitioners. GSIS assumed ownership of the houses built by petitioners and was
benefited by the same. Art. 2127, the mortgage extends to the natural accessions, to the improvements, growing fruits,
rents.

(3) Litonjua vs. L&R Corp.

320 SCRA 405

Facts
The spouses Litonjua obtained a loan from L&R Corporation, which was secured by a mortgage of two parcels of land
owned by the couple. In 1979, the spouses sold the parcels of land to Philippine White House Auto Supply Inc.
(PWHAS), and the sale was annotated at the back of the certificates of title. When the spouses defaulted in the
payment of their loans to L&R, the company initiated an extrajudicial foreclosure. The properties were successfully
foreclosed and sold at a public auction, wherein L&R was the only bidder.

L&R was about to register the sale, but it learned for the first time of the Litonjuas’ sale of the lands to PWHAS.

The Deed of Real Estate Mortgage between the spouses and L&R contained the following provisions:
Section 8: That the mortgagors shall not sell, dispose of, mortgage, nor in any other manner encumber the real
property/properties subject of this mortgage without the prior written consent of the mortgagee;

Section 9: That should the mortgagors decide to sell the real property/properties subject of this mortgage, the
mortgagee shall be duly notified thereof by the mortgagors and should the mortgagee be interested to purchase the
same, the latter shall be given priority over all the other prospective buyers

Issues
1. Are paragraphs 8 and 9 of the Real Estate Mortgage valid and enforceable?
2. Is the sale of the properties to PWHAS without the consent of L&R valid?

Ruling

1. Paragraph 8 is invalid but paragraph 9 is valid.

Par. 8 violates Article 2130 of the Civil Code which provides that stipulation forbidding the owner from alienating the
immovable shall be void. While it is true that the provisions does not absolutely prohibit the mortgagor from selling his
property, what it does not outrightly prohibit, it nevertheless achieves. For all intents and purposes, the stipulation
practically gives the mortgagee the sole prerogative to prevent any sale of the mortgaged property to a third party.
Being contrary to law, the provision is void and is not binding on the parties.

Par. 9, on the other hand, is perfectly valid. The right to first refusal has long been recognized as valid in Philippine
jurisdiction.

2. The sale is valid but RESCISSIBLE. The Court cited the case of Guzman, Bocaling & Co v. Bonnevie, where it held
that a contract of sale which violated the right of first refusal was rescissible.
It is clear from the facts that the spouses did not inform L&R of their intent to sell the properties. By doing so, they
disrespected the latter’s right to first refusal. Furthermore, although the right was not exercised by the company at the
opportune time, this cannot be taken against it because they were never informed of the sale in the first place.

(4) Metrobank vs. Peñafiel

GR No. 173976 – Feb. 27, 2009
Facts: Respondent Erlinda Peñafiel and the late Romeo Peñafiel (Respondents) are the registered owners of two
parcels of land in Mandaluyong City. The Peñafiel spouses mortgaged their properties in favor of petitioner
Metropolitan Bank and Trust Company, Inc. Petitioner instituted an extrajudicial foreclosure proceeding under Act No.
3135. Respondents received the Notice of Sale. The Notice of Sale was published in Maharlika Pilipinas, as attested to
by its publisher in his Affidavit of Publication. At the auction sale, MBTC (Petitioner) emerged as the sole and highest
bidder. The subject lots were sold to petitioner for P6,144,000.00. Respondents filed a Complaint praying that the
extrajudicial foreclosure of the properties be declared null and void. The RTC rendered judgment in favor of petitioner.
Respondents appealed to the CA, raising the issue of whether petitioner complied with the publication requirement for
an extrajudicial foreclosure sale under Act No. 3135. On this issue, the CA reversed the ruling of the RTC. The CA
noted that the law requires that publication be made in a newspaper of general circulation in the municipality or city
where the property is situated.

Issue: Whether or not petitioner complied with the publication requirement under Section 3, Act No. 3135

Held: The Supreme Court DENIED the petition and AFFIRMED the decision of the CA in favor of the Respondents.
Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. The goal of the
notice requirement is to achieve a "reasonably wide publicity" of the auction sale. True, to be a newspaper of
general circulation, it is enough that it is published for the dissemination of local news and general
information, that it has a bona fide subscription list of paying subscribers, and that it is published at regular
intervals. Over and above all these, the newspaper must be available to the public in general, and not just to a select
few chosen by the publisher. Otherwise, the precise objective of publishing the notice of sale in the newspaper will not
be realized. In fact, to ensure a wide readership of the newspaper, jurisprudence suggests that the newspaper
must also be appealing to the public in general. The Court has, therefore, held in several cases that the newspaper
must not be devoted solely to the interests, or published for the entertainment, of a particular class, profession, trade,
calling, race, or religious denomination. The newspaper need not have the largest circulation so long as it is of general
circulation.

Antichresis

(1) Pando vs. Gimenez

G.R. No. L-31816 - February 15, 1930

(2) Peralta vs. Quinupo ??

Sept. 2, 1954

(3) Villanueva vs. Ipondo

Sept. 24, 1947 - ??

Facts: The deceased Juan Melliza owns 3 parcels of land, known as haciendas Barrusbus-Balcon, Sablai Ravena, and
Balcon-Bundulan. Melliza’s brother in law, Eusebio and his wife Fausta were placed as administrators over these
parcels of land. During their tenure, they introduced improvements thereon, and as way of reimbursing them, the late
Melliza executed a document entitled “mortgage” in which it was stated that Melliza owes the spouses 20,000 pesos
and the collection of the amount is voluntary and they have option to apply 1/3 of the fruits of Sablai-Ravena and
Barrusbus-Balcon for the payment of the debt of 20,000 split evenly between the two haciendas. Another document
was executed, this time for Balcon-Bundulan, appearing that the spouses have the right to possess the property for the
rest of their lives unless the debt of Php20,000 is paid. Now, the administrator of Melliza, Remedios Villanueva filed a
cause for illegal detainer against the spouses.

Issue: W/N Villanueva has a cause of action against the spouses for illegal detainer.

Held: No. For it is clear that the will of the deceased is to allow the possession of the spouses over the 3 haciendas.
The 2 documents executed by Melliza clearly shows that he allowed the spouses to continue the possession until
payment of the debt, which is for the improvements introduced thereon. However, the first document is not really a
mortgage; it is a contract of antichresis. It is so because Melliza allowed the spouses to use 1/3 of the fruits of the two
haciendas under such document for the payment of the debt. Moreover, Melliza allowed them to possess the two
haciendas until the debt is fully paid, which is made voluntarily in this arrangement. What is peculiar here is the fact
that the antichresis only allowed 1/3 of the fruits to be applied. There is nothing wrong about this arrangement since
the parties have freedom to stipulate it. The other document is a usufruct arrangement for life in favor of the spouses.
There is a doctrine that usufructs of these arrangements are really antichretic arrangements. This bolsters the theory
that possession is allowed. Ergo, the case for illegal detainer must fail.