GSIS vs. Santiago

FACTS: From September 1956 to October 1957, spouses Jose C. Zulueta and Soledad Ramos (Zulueta spouses) obtained various loans from GSIS totaling P3,117,000.00 secured by a real estate mortgage on several parcels of land located in Pasig City and covered by Transfer Certificates of Title (TCTs) Nos. 26105, 37177, and 50356 (the mother titles) in their name.

The Zuluetas failed to pay their loans to defendant GSIS and the latter foreclosed the real estate mortgages. On August 1974, the mortgaged properties were sold at public auction with defendant GSIS being the highest bidder. Not all lots covered by the mortgaged titles, however, were sold. Ninety-one (91) lots were expressly excluded from the auction since the lots were sufficient to pay for all the mortgage debts.

A Certificate ofSalewas issued later on and an Affidavit of Consolidation of Ownership was executed by defendant GSIS over Zuluetas lots, including the lots, which as earlier stated, were already excluded from the foreclosure. On March 1980, GSIS sold the foreclosed properties to Yorkstown Development Corporation which sale was disapproved by the Office of the President. The sold properties were returned to GSIS and the land titles issued in favour of Yorkstown were subsequently cancelled.

Thereafter, GSIS began disposing the foreclosed lots including the excluded ones.

OnApril 7, 1990, Representative Eduardo Santiago and then plaintiff Antonio Vic Zulueta executed an agreement whereby Zulueta transferred all his rights and interests over the excluded lots.Plaintiff Santiagos lawyer wrote a demand letter datedMay 11, 1989to defendant GSIS asking for the return of the eighty-one (81) excluded lots.

OnMay 7, 1990, Antonio Vic Zulueta, represented by Eduardo M. Santiago, filed with the Regional Trial Court (RTC) ofPasigCity, Branch 71, and a complaint for reconveyance of real estate against the GSIS.Spouses Alfeo and Nenita Escasa, Manuel III and Sylvia G. Urbano, and Marciana P. Gonzales and the heirs of Mamerto Gonzales moved to be included as intervenors and filed their respective answers in intervention.Subsequently, the petitioner, as defendant therein, filed its answer alleginginter aliathat the action was barred by the statute of limitations and/or laches and that the complaint stated no cause of action.Subsequently, Zulueta was substituted bySantiagoas the plaintiff in the complainta quo.Upon the death ofSantiagoin 1996, he was substituted by his widow as the plaintiff. After due trial, the RTC rendered judgment against the petitioner ordering it to reconvey to the respondent, Rosario Enriquez Vda. De Santiago, in substitution of her deceased husband Eduardo, the seventy-eight lots excluded from the foreclosure sale.

ISSUES:Whether or not the petitioner acted in bad faith in consolidating ownership and causing the issuance of titles in its name over the subject lots, notwithstanding that these were expressly excluded from the foreclosure sale.

RULING: YES. The acts of defendant-appellant GSIS in concealing from the Zuluetas the existence of these excluded lots, in failing to notify or apprise the spouses Zulueta about the excluded lots from the time it consolidated its titles on their foreclosed properties, in failing to inform them when it entered into a contract of sale of the foreclosed properties to Yorkstown as well as when the said sale was revoked by then President during the same year, demonstrated a clear effort on its part to defraud the spouses Zulueta and appropriate for itself the subject properties.

Even if titles over the lots had been issued in the name of the defendant-appellant, still it could not legally claim ownership and absolute dominion over them because indefeasibility of title under theTorrenssystem does not attach to titles secured by fraud or misrepresentation. The fraud committed by defendant-appellant in the form of concealment of the existence of said lots and failure to return the same to the real owners after their exclusion from the foreclosure sale made defendant-appellant holders in bad faith.It is well-settled that a holder in bad faith of a certificate of title is not entitled to the protection of the law for the law cannot be used as a shield for fraud.

The petitioners defense of prescription is untenable.As held by the CA, the general rule that the discovery of fraud is deemed to have taken place upon the registration of real property because it is considered a constructive notice to all persons does not apply in this case.

Contrary to its claim, the petitioner unarguably had the legal duty to return the subject lots to the Zuluetas.The petitioners attempts to justify its omission by insisting that it had no such duty under the mortgage contract is obviously clutching at straw.Article 22 of the Civil Code explicitly provides that every person who, through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

PNB VS BANATAO

FACTS: On November 16, 1962, Banatao, et al. initiated an action against Marciano Carag for the recovery of real property (disputed property) situated at Malabac, Iguig, Cagayan. The disputed property was a new land formation on the banks of the Cagayan River an accretion that the plaintiffs-respondents claimed as the owners of the adjoining lot. The defendants-respondents, on the other hand, were the occupants of the disputed property.

While the case was pending, the defendants-respondents were able to secure homestead patents) issued in their names. The OCTs were issued in 1965 and 1966, and all bear the proviso that, in accordance with the Public Land Act, the patented homestead shall neither be alienated nor encumbered for five (5) years from the date of the issuance of the patent.

Armed with their OCTs, the defendants-respondents separately applied for loans with the Philippine National Bank secured by real estate mortgages on their respective titled portions of the disputed property and was approved. PNB relied solely on the OCTs which, at the time, did not contain any notice of lis pendens or annotation of liens and encumbrances. On February 22, 1968, the trial court decided the case in favor of the plaintiffs-respondents and against defendant-respondent Carag, and ordered the return of the disputed property to the plaintiffs-respondents. Carag appealed the trial court decision to the Court of Appeals (CA).

On March 29, 1973, while the case was pending before the trial court, the bank extrajudicially foreclosed the property covered by OCT No. 24800 issued to the spouses Pedro Soriano and Paz Tagacay. The bank was declared the highest bidder in the ensuing public auction. The spouses Soriano failed to redeem the foreclosed property, resulting in the consolidation of title in the banks name; and certificate was issued in the name of the bank. On February 28, 1991, the plaintiffs-respondents and the defendants-respondents entered into a compromise agreement whereby ownership of virtually the northern half of the disputed property was ceded to the plaintiffs-respondents, while the remaining southern half was given to the defendants-respondents.

In the same compromise agreement, the defendants-respondents acknowledged their indebtedness to petitioner PNB and bound themselves to pay their respective obligations to the bank, including the interests accruing thereon.

On March 15, 1991, the trial court rendered its decision, approving and adopting in toto the compromise agreement, and ordering the participating parties to strictly comply with its terms

On March 30, 2001The appellate court dismissed the appeal made by PNB, ruling that the bank is not an indispensable party to the compromise agreement.

On the cause of action for annulment of mortgage, the court held the bank is only a necessary party and the issue could be dealt with in a separate and distinct action. The appellate court in the same decision proceeded to strike down the mortgages as void because the mortgagors (defendants-respondents), not being the absolute owners of the disputed parcels of land as agreed upon in the compromise agreement, did not have the right to constitute a mortgage on these properties.

ISSUE: WHETHER THE COMPROMISE AGREEMENT ENTERED INTO BY AND BETWEEN THE HEREIN PLAINTIFFS-RESPONDENTS AND DEFENDANTS-RESPONDENTS AND APPROVED BY THE TRIAL COURT LEGALLY BINDS PETITIONER PNB WHICH IS NOT A PARTY THERETO AND CONSTITUTES SUFFICIENT LEGAL BASIS TO NULLIFY PNB'S MORTGAGE LIEN ON THE REALTY IN QUESTION.

RULING: The Supreme Court resolves to dismiss the petition for the following reasons.

SC contended that the main cause of action is the Recovery of Realty and Reconveyance, the Annulment of Mortgage is only an ancillary cause of action. In the decision approving the compromise agreement it disposes and finally determined the Recovery of Realty and Reconveyance. The Supreme Court also ruled that the [defendants-respondents], not being the absolute owners and not having been authorized to mortgage the subject real property, could not validly mortgage the said real property with [petitioner PNB]. However, SC are also not unmindful of the [defendants-respondents'] liability to the bank. But such issue could be dealt with in a separate and distinct action.

SC concluded that OCTs that the mortgages cannot but be void ab initio on the faces of all the OCTs which contained:THE LAND HEREBY ACQUIRED SHALL BE INALIENABLE AND SHALL NOT BE SUBJECT TO [E]NCUMBRANCE FOR A PERIOD OF FIVE (5) YEARS NEXT FOLLOWING THE DATE OF THIS PATENT,

In the present case, the annotation of the mortgage liens occurred only months after the date of the issuance of the homestead patents.

In the present case that Supreme Court said that PNB cannot claim that it is a mortgagee in good faith. The proscription against alienation or encumbrance is unmistakable even on a cursory reading of the the OCTs. Thus, one who contracts with a homestead patentee is charged with knowledge of the law's proscriptive provision that must necessarily be read into the terms of any agreement involving the homestead. Under the circumstances, the PNB simply failed to observe the diligence required in the handling of its transactions and thus made the fatal error of approving the loans secured by mortgages of properties that cannot, in the first place, be mortgaged.

On Compromise Agreement:

Further, the SC held that, A compromise agreement, as a contract, is binding only upon the parties to the compromise, and not upon non-parties. This is the doctrine of relativity of contracts. Consistent with this principle, a judgment based entirely on a compromise agreement is binding only on the parties to the compromise the court approved, and not upon the parties who did not take part in the compromise agreement and in the proceedings leading to its submission and approval by the court. Otherwise stated, a court judgment made solely on the basis of a compromise agreement binds only the parties to the compromise, and cannot bind a party litigant who did not take part in the compromise agreement. WHEREFORE, the Supreme Court DECLARED the mortgages constituted on OCT Nos. 24800, 24801, 25217 and 25802 VOID and, for this reason, DISMISSED the petition. SC AFFIRMED the approval of the compromise agreement by the Court of Appeals and the disposition of the case on the basis of compromise.

LOPEZ VS. CA

FACTS: On June 2, 1959, petitioner Benito H. Lopez obtained a loan in the amount of P20,000.00 from the Prudential Bank and Trust Company. On the same date, he executed a promissory note for the same amount, in favor of the said Bank, binding himself to repay the said sum one (1) year after the said date, with interest at the rate of 10% per annum.

In addition to said promissory note, he executed Surety Bond No. 14164 in which he, as principal, and Philippine American General Insurance Co., Inc. (PHILAMGEN) as surety, bound themselves jointly and severally in favor of Prudential Bank for the payment of the sum of P20,000.00.

On the same occasion, Lopez also executed in favor of Philamgen an indemnity agreement whereby he agreed "to indemnify the Company and keep it indemnified and hold the same harmless from and against any and all damages, losses, costs, stamps, taxes, penalties, charges and expenses of whatever kind and nature which the Company shall or may at any time sustain or incur in consequence of having become surety upon the bond." At the same time, Lopez executed a deed of assignment of 4,000 shares of the Baguio Military Institution entitled "Stock Assignment Separate from Certificate.

On June 2, 1960, Lopez' obligation matured without it being settled. Thus, the Prudential Bank made demands for payment. In turn, Philamgen sent Lopez several written demands for the latter to pay his note but Lopez did not comply with said demands. Hence, the Prudential Bank sometime in August, 1961 filed a case against them to enforce payment on the promissory note plus interest.

The complaint was thereafter dismissed. But when no payment was still made by the principal debtor or by the surety, the Prudential Bank filed on November 8, 1963 another complaint for the recovery of the P20,000.00. obligation.

On December 9, 1963, Philamgen was forced to pay the Prudential Bank the sum of P27,785.89 which included the principal loan and accumulated interest and the Prudential Bank executed a subrogation receipt on the same date.

On March 18, 1965, Philamgen brought an action for reimbursement of the said amount. After hearing, the said court rendered judgment dismissing the complaint holding, that the stock of the defendant was merely pledged to it by the defendant. On the contrary, it appears to be contradicted by the facts of the case. The shares of stock of the defendant were actually transferred to the plaintiff when it became clear after the plaintiff and the defendant had been sued by the Prudential Bank that plaintiff would be compelled to make the payment to the Prudential Bank, in view of the inability of the defendant Benito H. Lopez to pay his said obligation.

The certificate bearing No. 44 was cancelled and upon request of the plaintiff to the Baguio Military Institute a new certificate of stock was issued in the name of the plaintiff bearing No. 171, by means of which plaintiff became the registered owner of the 4,000 shares originally belonging to the defendant.

Issue: Whether or not the stock assignment is a pledge or an absolute conveyance?

The Supreme Court ruled that the character of the transaction between the parties is to be determined by their intention, regardless of what language was used or what the form of the transfer was. If it was intended to secure the payment of money, it must be construed as a pledge; but if there was some other intention, it is not a pledge. However, even though a transfer, if regarded by itself, appears to have been absolute, its object and character might still be qualified and explained by a contemporaneous writing declaring it to have been a deposit of the property as collateral security.

The SC agreed with the holding of the respondent Court of Appeals that the stock assignment, Exhibit C, is in truth and in fact, a pledge.

Indeed, the facts and circumstances leading to the execution of the stock assignment, Exhibit C, and the admission of Lopez prove that it is in fact a pledge. The appellate court is correct in ruling that the following requirements of a contract of pledge have been satisfied: (1) that it be constituted to secure the fulfillment of a principal obligation; (2) that the pledgor be the absolute owner of the thing pledged; and (3) that the person constituting the pledge has the free disposal of the property, and in the absence thereof, that he be legally authorized for the purpose. (Article 2085, New Civil Code).

In addition to the requisites prescribed in article 2085, it is necessary, in order to constitute the contract of pledge, that the thing pledged be placed in the possession of the creditor, or of a third person by common agreement. (Art. 2093, N.C.C.) Incorporeal rights, including shares of stock may also be pledged (Art. 2095, N.C.C.) All these requisites are found in the transaction between the parties leading to the execution of the Stock Assignment, and that it is a pledge was admitted by the defendant in his letter of November 18, 1963, already quoted above, where he asked what had happened to his shares of stock "which were pledged to your goodselves to secure the said obligation".

The SC also do not agree with the contention of petitioner that "petitioner's 'sale assignment and transfer' unto private respondent of the shares of stock, coupled with their endorsement in blank and delivery, comes exactly under the Civil Code's definition of dation in payment.

According to Article 1245 of the New Civil Code, dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.

The modern concept of dation in payment considers it as a novation by change of the object, and this is to our mind the more juridically correct view. There is a real novation with immediate performance of the new obligation. The fact that there must be a prior agreement of the parties on the delivery of the thing in lieu of the original prestation shows that there is a novation which, extinguishes the original obligation, and the delivery is a mere performance of the new obligation.

SC finds that the debt or obligation at bar has not matured on June 2, 1959 when Lopez "alienated" his 4,000 shares of stock to Philamgen. Lopez' obligation would arise only when he would default in the payment of the principal obligation (the loan) to the bank and Philamgen had to pay for it. Such fact being adverse to the nature and concept of dation in payment, the same could not have been constituted when the stock assignment was executed.

In case of doubt as to whether a transaction is a pledge or a dation in payment, the presumption is in favor of pledge, the latter being the lesser transmission of rights and interests.

It must also be made clear that there is no double payment nor unjust enrichment in this case because We have ruled that the shares of stock were merely pledged.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the Court of Appeals is AFFIRMED in toto, with costs against the petitioner.

CAVITE DEVELOPMENT BANK AND FAR EAST BANK AND TRUST COMPANY, PETITIONERS, VS. SPOUSES CYRUS LIM AND LOLITA CHAN LIM AND COURT OF APPEALS, RESPONDENTS.

FACTS: Rodolfo Guansing obtained a loan from Cavite Development Bank(CDB) and offered as security his real estate property. For failing to pay his loan the property was foreclosed and title was issued in the name of CDB.

Now here comes Lolita Chan Lim, the respondent on this case who offered to buy the property from CDB. Mrs. Lim paid P30,000.00 as option money and was issued receipt by CDB. However , Mrs. Lim later discovered that the title of the property is being disputed by Perfecto Guansing, the father of the mortgagee Rodolfo Guansing. In fact, in a separate case it was declared that Rodolfo fraudulently secured title to the said mortgaged property and title to it was restored to Perfecto . The decision has since become final and executory.

Aggrieved by what she considered a serious misrepresentation by CDB and its mother company FEBTC, on their ability to sell the subject property, filed an action for specific performance and damage against petitioners.

ISSUES: Was the sale between CDB and Mrs. Lim perfected?Is CDB liable for damges? Is the sale valid?

RULING: Contracts are not defined by the parties thereto but by the principles of law. In determining the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties. In the case at bar, the sum of P30,000.00, although denominated in the offer to purchase as option money is actually in the nature of earnest money or down payment when considered with the other terms of the offer.

It is because when Mrs. Lim offered to buy the property the 10% so called option money forms part of the purchase price as contemplated under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price.

CDB cannot invoke the defense that it is a mortgagee in good faith. It only applies to private individuals and not to banking institutions. They cannot be excused from the duty of exercising the due diligence required of banking institutions. It is standard practice for banks, before approving a loan, to investigate who are the real owners thereof. Banking is affected with public interest that is why they are expected to exercise more care and prudence than private individuals.Considering CDBs negligence it is therefore liable for damages.As to its validity, the doctrine of Nemo dat quod non habet applies. One cannot give what one does not have. The seller not being the owner the sale is void.

MONTANO VS LIM-ANG

FACTS: Delfin Montano brought to the Philippines from the United States a Cadillac car which he registered in his name in the Motor Vehicles Office and for which he obtained a certificate of registration.

On May 30, 1952, he sold the car to Jose Lim Ang and his wife Teodora A. Gonzales for the sum of P28,000.00, payable in installments, for which the latter executed a promissory note. Having paid part of the price, said spouses executed on the same date a chattel mortgage on the car in favor of Montano to guarantee the payment of the balance.

Because Montano did not want to transfer the registration certificate to Jose Lim Ang before the registration of the mortgage, the latter was registered in the office of the register of deeds on June 4, 1952, but Montano failed to notify the Motor Vehicles Office of the execution of the mortgage.

On June 12, 1952, Jose Lim Ang transferred the registration certificate to Eugenio Villanueva. Villanueva sold the car to Amador D. Santos for P25,000.00, transferring to the latter the registration certificate. On the same date, Santos sold the car to the Manila Trading & Supply Company for P25,000.00, and on the same date this company sold the car to Angel M. Tinio for P26,000.00. Tinio made a down payment of P12,000.00 and for the balance he executed a promissory note which he assumed to pay in monthly installments. He also executed a chattel mortgage on the same car to secure the payment of the promissory note.

This mortgage was registered both in the office of the register of deeds as well as in the Motor Vehicles Office. After paying his obligation in full, the mortgage executed by Tinio in favor of the Manila Trading & Supply Company was cancelled, and as a consequence he secured the transfer to his name of the certificate of registration from the Motor Vehicles Office. None of the transferees took the trouble of investigating from whom Jose Lim Ang had acquired the Cadillac car, and neither did any of them investigate in the office of the register of deeds if there was any encumbrance existing thereon.

Jose Lim Ang failed to pay the balance of the purchase price to Montano in spite of the latter's demand and so on December 8, 1952 Montano requested the sheriff of Manila to sell the car in accordance with the conditions agreed upon in the chattel mortgage. Having found, however, that the car was no longer in the possession of Lim Ang but in that of Angel M. Tinio who claimed ownership thereof, on July 8, 1953 Montano commenced the present action of replevin before the Court of First Instance of Manila against spouses Jose Lim Ang and Teodora A. Gonzales and Angel M. Tinio to recover the ownership and possession of the car in question.

ISSUES: (1) whether or not the chattel mortgage executed by Jose Lim Ang and his wife Teodora A. Gonzales on May 30, 1952 before the car was actually registered in their name is valid and regular;

(2) Whether or not the chattel mortgage executed by Jose Lim Ang and Teodora A. Gonzales in favor of Delfin Montano is binding against third persons even if they failed to give notice thereof to the Motor Vehicles Office as required by Section 5(e) of the Revised Motor Vehicle Law; and

RULING: The Supreme Court ruled in the negative on the first issue.

The Supreme Court held the contention is untenable. It reasoned that it is not disputed that Montano agreed to sell and the spouses Ang agreed to buy the car for P28,000.00 for which a promissory note was executed and that to guarantee the same the spouses executed a chattel mortgage and took possession of the car sold. It is therefore safe to conclude that at the time of the sale wherein the parties agreed over the car and the price, the contract became perfected, and when part of the purchase price was paid and the car was delivered upon the execution of the promissory note and the mortgage, the same became consummated.

The fact that the registration certificate of the car has not as yet been transmitted to the purchasers when the mortgage was constituted is of no moment for, as this Court well said: "The registry of the transfer of automobiles and of the certificates of license for their use in the Bureau of Public Works (now Motor Vehicles Office) merely constitutes an administrative proceeding which does not bear any essential relation to the contract of sale entered into between the parties.

The Supreme Court continued that the flaw, if there was any, is deemed to have been cured when after the registration of the mortgage the registration certificate was transferred to the purchasers on June 4, 1952.

On the second issue, the Supreme Court hels that the issue raised is not new. In a similar case3 decided by them they said: "A mortgage in order to affect third persons should not only be registered in the Chattel Mortgage Registry, but the same should also be recorded in the Motor Vehicles Office as required by section 5(e) of the Revised Motor Vehicle Law. And the failure of the respondent mortgagee to report the mortgage executed in its favor had the effect of making said mortgage ineffective against Borlough, who had his purchase registered in the said Motor Vehicles Office."'

Adopting this view in our case the inevitable conclusion is that as between Montano whose mortgage over the car was not recorded in the Motor Vehicles Office and Angel M. Tinio who notified said office of his purchase and registered the car in his name, the latter is entitled to preference considering that the mere registration of the chattel mortgage in the office of the register of deeds is in itself not sufficient to hold it binding against third persons.WHEREFORE, the decision appealed from is affirmed insofar as it orders defendants Jose Lim Ang and his wife Teodora A. Gonzales to pay Delfin Montano the sum of P6,000.00, plus 12% interest thereon per annum from August 15, 1952 until it is fully paid.

DURAN vs. INTERMEDIATE APPELLATE COURT

FACTS:Petitioner Duran owned 2 parcels of land. She left the Philippines in June 1954 and returned in May 1966. On 1963, a Deed of Sale was made in favor of the petitioners mother. On December 1965, Durans mother mortgaged the same property to private respondent Erlinda Marcelo-Tiangco. When Duran came to know about the mortgage made by her mother, she wrote the Register of Deeds informing the latter that she had not given her mother any authority to sell or mortgage any of her properties in the Philippines. Meanwhile, foreclosure proceedings were initiated by Tiangco upon the failure of Durans mother to redeem the mortgaged properties.

Duran claims that the Deed of Sale is a forgery, saying that at the time of its execution in 1963 she was in the United States. Respondent Court ruled that there is a presumption of regularity in the case of a public document.

ISSUE:Whether private respondent was a buyer in good faith and for value

RULING: es. Good faith consists in the possessors belief that the person from who he received the thing was the owner of the same and could convey his title (Arriola v. Gomez Dela Serna, 14 Phil. 627). Good faith, while it is always to be presumed in the absence of proof to the contrary, requires a well-founded belief that the person from whom title was received was himself the owner of the land, with the right to convey it.

The mortgagee has the right to rely on what appears in the certificate of title and, in the absence of anything to excite suspicion, he is under no obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the face of the said certificate. Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefore and the law will in no way oblige him to go behind the certificate to determine the condition of the property. If the rule were otherwise, the efficacy and conclusiveness of the Torrens Certificate of Titles would be futile and nugatory. Thus the rule is simple: the fraudulent and forged document of sale may become the root of a valid title if the certificate has already been transferred from the name of the true owner to the name indicated by the forger.While it is true that under Article 2085 of the Civil Code, it is essential that the mortgagor be the absolute owner of the property mortgaged, and while as between the daughter and her mother, it was the daughter who still owns the lots, STILL insofar as innocent third persons are concerned the owner was already the mother inasmuch as she had already become the registered owner.

FLORDELIZA CABUHAT vs. CA and MERCEDES H. AREDE

FACTS: Mary Ann Arede was the adopted daughter of appellant Mercedes Arede. In 1972, appellant purchased a parcel of land in Cavite, and was registered by appellant in Mary Ann Aredes name and the corresponding title was issued by the Register of Deeds of Cavite as TCT No. T-56225.

Later on, unknown to appellant, Mary Ann Arede obtained a reconstituted owners duplicate of TCT No. T-56225 thru the use of a falsified court order. Using this reconstituted title, Mary Ann Arede mortgaged the land to Rural Bank. Upon release of the mortgage, the land was again mortgaged by Mary Ann Arede to appellee Flordeliza Cabuhat, which mortgage was registered by appellee on the following day at the Register of Deeds of Cavite.

It appeared however that prior to the second mortgage, the subject lot was sold by Mary Ann Arede to appellant Mercedes Arede as evidenced by a Deed of Sale. Unfortunately, this sale was not registered by appellant.

Hence, upon knowledge of the mortgage to appellee Cabuhat, appellant was prompted to commence the instant suit for annulment of title.

Judgment was rendered by the lower court against defendant Mary Ann Arede, decreeing, among others, that the mortgage lien in favor of defendant Flordeliza Cabuhat is rendered valid and binding.

Mercedes appealed to the CA arguing that the mortgage lien was invalid because: (1) the registration was procured through the presentation of a forged owners duplicate certificate of title, in violation of Section 53 of Presidential Decree 1529; and (2) the mortgage constituted when Mary Ann was no longer the absolute owner of the subject property contravened Article 2085 of the New Civil Code.

CA rendered judgment granting Mercedes appeal, reversing and setting aside the trial courts decision upholding the mortgage lien in favor of Flordeliza.

CA relied solely on the provisions of Article 2085 of the New Civil Code, which states, in part, that for a mortgage to be valid, the persons constituting the pledge or mortgage should have the free disposal of their property, and in the absence thereof, they should be legally authorized for the purpose. It also cited the 1954 case of Parqui v. PNB,[3] wherein the mortgage was declared null and void since the registration thereof was procured by the presentation of a forged deed.

ISSUE: Whether or not the mortgage lien, in favor of Cabuhat, over the subject property is valid.

RULING: Yes. It is well-settled that even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value.

Just as an innocent purchaser for value may rely on what appears in the certificate of title, a mortgagee has the right to rely on what appears in the title presented to him, and in the absence of anything to excite suspicion, he is under no obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the face of the said certificate. Furthermore, it is a well-entrenched legal principle that when an innocent mortgagee who relies upon the correctness of a certificate of title consequently acquires rights over the mortgaged property, the courts cannot disregard such rights.

Article 2085 of the Civil Code, which requires that the mortgagor must have free disposal of the property, or at least have legal authority to do so, admits of exceptions. In quite a number of instances, this Court has ruled that the said provision does not apply where the property involved is registered under the Torrens System.

Furthermore, Section 39 of Act No. 496 provides that every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser (or mortgagee) of registered land who takes a certificate of title for value in good faith, shall hold the same free of all encumbrance except those noted on said certificate.

In the case at bar, there is no doubt that petitioner was an innocent mortgagee for value. When Mary Ann mortgaged the subject property, she presented to petitioner Flordeliza an owners duplicate certificate of title that had been issued by the Register of Deeds. The title was neither forged nor fake. Petitioner had every right to rely on the said title which showed on its face that Mary Ann was the registered owner. There was no reason to suspect that Mary Anns ownership was defective. Besides, even if there had been a cloud of doubt, Flordeliza would have found upon verification with the Register of Deeds that Mary Ann was the titled owner and that the original title on file with the said office was free from any lien or encumbrance, and that no adverse claim of ownership was annotated thereon.

Petitioners reliance on the clean title of Mary Ann was reinforced by the fact that the latter had previously mortgaged the same property to a bank which accepted the property as collateral on the strength of the same owners duplicate copy of the title presented by Mary Ann. Certainly, petitioner Flordeliza cannot be expected or obliged to inquire whether the said owners duplicate copy presented to her was regularly or irregularly issued, when by its very appearance there was no reason to doubt its validity.

In accepting such a mortgage, petitioner was not required to make further investigation of the title presented to her to bind the property being given as security for the loan.

The Decision of the CA is SET ASIDE, and the Decision of the RTC of Cavite City, is REINSTATED in all aspects.

Spouses Ramos vs. Obispo Sr.

FACTS: Petitioner Nilo Ramos and respondent Raul Obispo met each other and became best friends while they were working in Saudi Arabia as contract workers.

Sometime in August 1996, petitioners executed a Real Estate Mortgage in favor of respondent Far East Bank and Trust Company-Fairview Branch, over their property covered by Transfer Certificate of Title (TCT) No. RT-64422 (369370). The notarized REM secured credit accommodations extended to Obispo in the amount of P1,159,096.00. On even date, the REM was registered and annotated on the aforesaid title.

On September 17, 1999, FEBTC received a letter from petitioners informing that Obispo, to whom they entrusted their property to be used as collateral for a P250,000.00 loan in their behalf, had instead secured a loan for P1,159,096.00, and had failed to return their title despite full payment by petitioners of P250,000.00. Petitioners likewise demanded that FEBTC furnish them with documents and papers pertinent to the mortgage failing which they will be constrained to refer the matter to their lawyer for the filing of appropriate legal action against Obispo and FEBTC.

A complaint for annulment of real estate mortgage with damages against FEBTC and Obispo commenced. Petitioners alleged that they signed the blank REM form given by Obispo who facilitated the loan with FEBTC, and that they subsequently received the loan proceeds of P250,000.00 which they paid in full through Obispo.

With their loan fully settled, they demanded the release of their title but Obispo refused to talk or see them, as he is now hiding from them. Upon verification with the Registry of Deeds of Quezon City, petitioners said they were surprised to learn that their property was in fact mortgaged for P1,159,096.00. Petitioners thus prayed that the REM be declared void and cancelled; that FEBTC be ordered to deliver to them all documents pertaining to the loan and mortgage of Obispo; and that FEBTC and Obispo be ordered to pay moral damages and attorneys fees.

In its Answer With Compulsory Counterclaim and Cross-claim, FEBTC averred that petitioners agreed to execute the REM over their property as partial security for the loans obtained by Obispo with a total principal balance of P2,500,000.00. Since the obligation secured by the REM remains unpaid, FEBTC contended that it should not be compelled to release the mortgage on the subject property. FEBTC further asserted that petitioners are guilty of laches and their claim already barred by estoppel.

RTC rendered a decision I favor of the respondents. FEBTC appealed to the CA which reversed the trial courts decision and dismissed the complaint, holding that petitioners were third-party mortgagors under Article 2085 of the Civil Code and that they failed to present any evidence to prove their allegations.

ISSUES: Whether or not the petitioners are accommodation mortgagors?Whether or not, the respondent bank is a mortgagee in good faith?

RULING: The Supreme Court declared that the petition has no merit. It reasoned that the validity of an accommodation mortgage is allowed under Article 2085 of the Civil Code which provides that "[t]hird persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property." An accommodation mortgagor, ordinarily, is not himself a recipient of the loan, otherwise that would be contrary to his designation as such.

In this case, the SC said that petitioners denied having executed an accommodation mortgage and claimed to have executed the REM to secure only their P250,000.00 loan and not the P1,159,096.00 personal indebtedness of Obispo. SC sustained the decision of the Court of Appeals, which found the subject REM as a valid third-party or accommodation mortgage due to petitioners failure to substantiate their allegations with the requisite quantum of evidence.

Furthermore, In civil cases, they say, basic is the rule that the party making allegations has the burden of proving them by a preponderance of evidence. Moreover, parties must rely on the strength of their own evidence, not upon the weakness of the defense offered by their opponent.

SC declared that in this case, petitioners testimonial evidence failed to convince that Obispo deceived them as to the debt secured by the REM. Petitioners factual allegations are not firmly supported by the evidence on record and even inconsistent with ordinary experience and common sense.

The Supreme Court continued that despite being aware of the absence of any document to ascertain if Obispo indeed filled up the REM contract form in accordance with their instructions, petitioners accepted the supposed loan proceeds in the form of personal checks issued by Obispo who claimed to have an account with FEBTC, instead of checks issued by the bank itself. These alleged checks were not submitted in evidence by the petitioners who could have easily obtained copies or record proving their issuance and encashment.

Another disturbing fact that the SC found out, is why, despite having signed the REM contract in their name as mortgagors, petitioners did not go directly to the bank to pay their loan. One is also tempted to ask how petitioners could have possibly arrived at the amount of amortization payments without having seen any document from FEBTC pertaining to their loan account. Such conduct of petitioners in not bothering to appear before the bank or directly dealing with it regarding their outstanding obligation strongly suggests that there was no such loan account in their name and it was really Obispo who was the borrower and petitioners were merely accommodation mortgagors.

They stressed that an accommodation mortgagor, ordinarily, is not himself a recipient of the loan, otherwise that would be contrary to his designation as such. We have held that it is not always necessary that the accommodation mortgagor be apprised beforehand of the entire amount of the loan nor should it first be determined before the execution of the Special Power of Attorney in favor of the debtor.

This is especially true when the words used by the parties indicate that the mortgage serves as a continuing security for credit obtained as well as future loan availments. Here, petitioners as owners signed the REM as mortgagors and there is no evidence adduced that suggests fraud or irregularity in its execution.

From all indications, the failure of defendant Obispo to pay his loan resulted to the prejudice of plaintiffs-appellees which may have led them to disown the Real Estate Mortgage they executed in favor of defendant-appellant FEBTC to accommodate the loan of defendant Obispo.

There being valid consent on the part of petitioners as accommodation mortgagors, no reversible error was committed by the CA in reversing the trial courts decision which declared the REM as void and awarded damages to petitioners.

WHEREFORE, the SC held that the petition for review on certiorari is DENIED for lack of merit. The Decision dated January 27, 2010 of the Court of Appeals in CA-G.R. CV No. 82378 is AFFIRMED and UPHELD.

With costs against the petitioners.

SO ORDERED.

Insurance services Commercial Traders Inc. vs Court of Appeals

FACTS: The Salvaleons borrowed two thousand (P2,000.00) pesos from spouses Amador and Mila de Castro under the following conditions: (1) They mortgage their parcel of land in favor of the spouses de Castro. (2) They surrender the possession of the title to the latter. And (3) they sign an authorization to obtain a loan from a bank.

Amador sought the advice of Cesar Busque, the General Manager of Cantrade Davao, on how to solicit a mortgage, using the Salvaleons' property as collateral. Busque recommended a "fast loan," where the Salvaleons would sign a prepared special power of attorney. The spouses de Castro refused. Instead, a special power of attorney authorizing Mila to mortgage the property was signed by the Salvaleons. Amador surrendered the said document "already notarized" to Busque.

Afterwards, Busque negotiated a real estate mortgage with Insurance Services and Commercial Traders, Inc. (Instrade), using a forged special power of attorney purportedly signed by the Salvaleons, authorizing Busque to use the property as security for Cantrade's indebtedness to Instrade. When Cantrade failed to fulfill its obligation, Instrade initiated foreclosure proceedings on the property.

Eventually, the Salvaleons learned of the scheduled extra-judicial foreclosure of their property by the City Sheriff. They filed a complaint for annulment of the foreclosure sale and damages before the Regional Trial Court of Davao City, against Instrade, Cantrade, and Busque. Paz and Vivencia were assisted by their respective husbands, Manuel Garcia and Dalmacio Abad.

The foreclosure sale pushed through and after the expiration of the period for redemption, TCT No. T-80694 was issued in the name of Instrade. The new title bore the annotation, Lis Pendens, under Entry No. 267545, carried over from the cancelled title.

The Salvaleons claimed that the special power of attorney authorizing Busque to mortgage their property to Instrade was a forgery. Allegedly, the real estate mortgage between Cantrade and Instrade and its subsequent foreclosure were null and void. The Salvaleons prayed for the reconveyance of the property in their favor.

On October 13, 1978, Busque admitted in his Answer that Cantrade was indebted to Instrade. Busque's version was that Instrade required a surety bond to cover Cantrade's purchases of automotive parts on credit. Cantrade failed to furnish a surety bond, hence, Instrade agreed to accept a direct real estate mortgage. The plan was for the spouses de Castro to sell the Salvaleons' foreclosed property for thirty thousand (P30,000.00) pesos. Inasmuch as the Salvaleons were anyway willing to sell their property for only an additional ten thousand (P10,000.00) pesos, apart from the extinguishment of a P2,000.00 debt, Busque thought he would as well pay the balance of twenty thousand (P20,000.00) pesos directly to the spouses de Castro. Then in turn, the spouses de Castro and Busque would mortgage the property to Instrade and the final deed of absolute sale would be executed later on. Before the plan materialized, a special power of attorney signed by the Salvaleons authorizing Busque to mortgage the property and its TCT- 37249 were forwarded to Instrade. Cantrade even submitted as optional collateral to Instrade, two other properties owned by a certain Conchita Ambe. Instrade accepted the properties owned by Ambe, but refused to surrender the documents of the Salvaleons' parcel of land.

On January 12, 1979, Busque, to exculpate himself, filed an amended answer, denying he owned Cantrade, and pointing to Antonio J. Palma, Jr., as its proprietor.

On January 22, 1979, Instrade in its Answer alleged good faith, not knowing nor participating in the irregularity. It asserted that it merely relied on the express authority given by the Salvaleons to Cantrade.On February 5, 1979, Busque moved to join as indispensable party the alleged proprietor of Cantrade, Antonio J. Palma, Jr. The motion was denied for lack of merit on March 1, 1979. However, the motion of Busque for leave to file third party complaint against the spouses de Castro, was given due course.

As third party defendants, the spouses de Castro denied they offered to sell the Salvaleons' property to Busque. They claimed Busque promised to help them secure a loan from JVA Financing Corporation and they entrusted the Salvaleons' title and Mila's authority as mortgagor to Busque. It was only later when Amador de Castro discovered that JVA Financing Corporation was non-existent. When he confronted Busque, the latter admitted that the Salvaleons' title was used as mortgage for a loan from Instrade. Amador repeatedly asked for the proceeds of the loan and Busque assured him that as soon as a certain Mr. Frace arrived, the money would be released. This never happened. When the spouses de Castro threatened to sue, Busque made a ten thousand (P10,000.00) peso deposit and guaranteed the return of the Salvaleons' title. The spouses de Castro asserted they never transacted with Cantrade nor Instrade.

On December 28, 1986, the lower court rendered judgment in favor of the Salvaleons.

ISSUE: Whether or not the Court of Appeals erred in affirming the decision of the trial court, which nullified a forged notarized special power of attorney purportedly executed by the Salvaleons.

Petitioner claims that the special power of attorney allegedly executed by the Salvaleons authorizing Cantrade and/or Busque as their agent is a public document duly executed by the parties, in accordance with notarial law. Vivencia Salvaleon's testimony that their signatures were forged was belied by the notarial attestation of Atty. Bumanglag. Since the attestation of the notary was not controverted, its regularity is presumed.

Furthermore, petitioner stresses that Vivencia offered contradictory evidence. She denied she appeared before the office of Atty. Bumanglag. At the same time, she presented another power of attorney, authorizing Mila as the Salvaleons' representative. This power of attorney was curiously also notarized by Atty. Bumanglag.

The SC agreed with the trial court when it said:

"From all the foregoing assertions which were not only left undisputed, but in fact admitted, there exists very strong and sufficient grounds to believe that the controversial notarized documents were really procured under questionable circumstances, as fraudulent misrepresentations appear perceptibly obvious in obtaining the supposed signatures which were repudiated as forged, and the admittedly irregular manner by which said documents were notarized, would clearly establish the conclusion that the Special Power of Attorney purportedly executed by the plaintiffs suffers from a congenital flaw thus subjecting its validity to serious legal doubt.

Petitioner contends that it was an innocent purchaser for value, and it should be protected as against the registered owners who were negligent. As early as Juaquin vs. Madrid, the SC already said that in order that the holder of a certificate for value issued by virtue of the registration of a voluntary instrument may be considered a holder in good faith and for value, the instrument registered should not be forged.

When the instrument presented is forged, even if accompanied by the owner's duplicate certificate of title, the registered owner does not lose his title, and neither does the assignee in the forged deed acquire any right or title to the property. An innocent purchaser for value is one who purchases a titled land by virtue of a deed executed by the registered owner himself not by a forged deed. Patently, petitioner is not an innocent purchaser.

The SC in Pichay vs. Celestino, 20 SCRA 314 (1967) that:"One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts, which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation."

Cantrade attempted to settle its indebtedness with a check that bounced. Cantrade offered a security registered under the names of third persons. When a special power of attorney allegedly signed by the Salvaleons was presented to the petitioner's counsel, the latter approved the same, without investigation as to the true owners who were residing within the same vicinity. As ruled by respondent court, an ordinarily prudent man would have inquired into the authenticity of the title, its location, and the owners. Petitioner's failure to investigate betrays its good faith. We, therefore, find that petitioner cannot be an innocent purchaser.

WHEREFORE, the SC instantly DENIED petition. The Decision and Resolution of the Court of Appeals in CA G.R. CV No. 15737 are hereby

AFFIRMED. Costs against petitioner.

SO ORDERED.

BANK OF AMERICA VS. AMERICANREALTY

FACTS: Petitioner granted loans to 3 foreign corporations. As security, the latter mortgaged a property located in the Philippines owned by herein respondent ARC. ARC is a third party mortgagor who pledged its own property in favor of the 3 debtor-foreign corporations.

The debtors failed to pay. Thus, petitioner filed collection suits in foreign courts to enforce the loan. Subsequently, it filed a petition in the Sheriff to extra-judicially foreclose the said mortgage, which was granted.On 12 February 1993, private respondent filed before the Pasig RTC, Branch 159, an action for damages against the petitioner, for the latters act of foreclosing extra-judicially the real estate mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan.

ISSUE: Whether petitioners act of filing a collection suit against the principal debtors for the recovery of the loan before foreign courts constituted a waiver of the remedy of foreclosure.

RULING: Yes.

In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action or debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself.

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province where the sale is to be made.In the case at bar, petitioner only has one cause of action which is non-payment of the debt. Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt to exercise only one of two remedies so as not to violate the rule against splitting a cause of action.

Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extra-judicially the mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute books.

Sps BELO VS PNB & Sps ESLABONFACTS: Eduarda Belo owned an agricultural land which she leased a portion to Sps Eslabon in connection with the said spouses sugar plantation business.To finance their business venture, respondents spouses Eslabon obtained a loan from PNB secured by a real estate mortgage on their own four (4) residential houses located in Roxas City, as well as on the land owned by Eduarda Belo. SPA was issued by Eduarda Belo as to the mortgage of her propertySps Eslabon failed to pay mortgages and thereafter extrajudicial foreclosure proceedings against the mortgaged properties were instituted by PNB. PNB was the highest bidder at the auction sale (P447,632.00).PNB appraised Eduarda Belo of the sale at public auction of her agricultural land. She had one-year period to redeem the land.Eduarda Belo sold her right of redemption to petitioner Sps Belo under a deed of absolute sale of proprietary and redemption rights.Sps Belo tendered payment for the redemption of the agricultural land for (P484,482.96), which includes the bid price of respondent PNB, plus interest and expenses as provided under Act No. 3135.PNB rejected payment contending that redemption price should be the total claim of the bank on the date of the auction sale and custody of property plus charges accrued and interests (P2,779,978.72).Sps Belo filed action to annul the mortgage, with an alternative cause of action to compel PNB to accept offer of spouses Belo which is based on the winning bid price of PNB (P447,632.00) plus interest and expenses.RTC: Granted alternative cause of action of Sps Belo P447,632.00, plus interest and other chargesCA: Modified TC ruling that the petitioners should pay the entire amount due to PNB under the mortgage deed at the time of the foreclosure sale plus interest, costs and expenses. As assignees of Eduarda Belos right of redemption, the appellees succeed to the precise right of Eduarda including all conditions attendant to such right. Moreover, the indivisible character of a contract of mortgage (Article 2089, Civil Code) will extend to apply in the redemption stage of the mortgage.ISSUE: Whether or not SPA, real estate mortgage contract, the foreclosure proceedings and the subsequent auction sale involving Eduarda Belos property are valid. YESWhether or not the petitioners are required to pay, as redemption price, the entire claim of respondent PNB (P2,779,978.72) NORULING:1. YES.The subject SPA, the real estate mortgage contract, the foreclosure proceedings and the subsequent auction sale of Eduarda Belos property are valid and legal.The findings of trial courts which are factual in nature must not be disturbed.It is stipulated in paragraph three (3) of the SPA that Eduarda Belo appointed the Eslabon spouses as her agents. The accommodation real estate mortgage over her property is merely an accessory contract.An accommodation mortgage is not necessarily void simply because the accommodation mortgagor did not benefit from the same. The validity of an accommodation mortgage is allowed under Article 2085 of the New Civil Code which provides that (t)hird persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. The letter of Eduarda Belo addressed to respondent PNB manifesting her intent to redeem the property is a waiver of her right to question the validity of the SPA, etc.2. NO. This Court finds the petitioners position on that issue to be meritorious.There is no doubt that Eduarda Belo, assignor of the petitioners, is an accommodation mortgagor. Mortgagor in Section 25 of P.D. No. 694 pertains only to a debtor-mortgagor and not to an accommodation mortgagor.Respondent PNB maintains that Section 25 of Presidential Decree No. 694 (right to redeem the property by paying all claims of the Bank against him on the date of the sale)Petitioners assert to follow Section 6 of Act No. 3135 & Section 28 of Rule 39 of the Rules of Court (by paying the purchaser the amount of his purchase plus interest & other expenses)The interpretation accorded by respondent PNB to Section 25 of P.D. No. 694 is unfair and unjust to accommodation mortgagors and their assignees. Forcing an accommodation mortgagor like Eduarda Belo to pay for what the principal debtors (Eslabon spouses) owe to respondent bank is to punish her for the accommodation and generosity she accorded to the Eslabon spouses. Also, PNBs application for extrajudicial foreclosure and public auction sale of Eduarda Belos mortgaged property[30] was filed under Act No. 3135 and none of the proceedings thereafter mentioned P. D. No. 694 as the basis for redemption. The General Banking Act and P.D. No. 694 shall prevail over Act No. 3135 with respect to the redemption price. accommodation mortgagors as such are not in anyway liable for the payment of the loan or principal obligation of the debtor/borrower. The liability of the accommodation mortgagors extends only up to the loan value of their mortgaged property and not to the entire loan itself. While the petitioners, as assignees of Eduarda Belo, are not required to pay the entire claim of respondent PNB against the principal debtors, spouses Eslabon, they can only exercise their right of redemption with respect to the parcel of land belonging to Eduarda Belo, the accommodation mortgagor. Thus, they have to pay the bid price less the corresponding loan value of the foreclosed four (4) residential lots of the spouses Eslabon.PNB contends to allow petitioners to redeem only the property belonging to their assignor, Eduarda Belo, would violate the principle of indivisibility of mortgage contracts (Art 2089). The indivisibility concept does not apply to the right of redemption of an accommodation mortgagor and her assignees.Indivisibility arises only when there is a debt, that is, there is a debtor-creditor relationship. But, this relationship is wanting in the case at bar in the sense that petitioners are assignees of an accommodation mortgagor and not of a debtor-mortgagor. Hence, it is fair and logical to allow the petitioners to redeem only the property belonging to their assignor, Eduarda Belo.Redemption only extends to the subject property of Eduarda Belo for the reason that the notice of the sale limited the redemption to said property.Petition is partially granted: Petitioner Sps Belo are allowed to redeem only the property of Eduarda Belo, by paying only the bid price less the corresponding loan value of the foreclosed four (4) residential lots of the respondents Sps Eslabon, consistent with the RTCDIZON V. SUNTAY

An owner of a movable unlawfully pledged by another is not estopped from recovering possession. Where the owner delivered the diamond ring solely for sale on commission but the seller instead pawned it without authority, the owner is not stopped form pursuing an action against the pawnshop.FACTS: Lourdes Suntay is the owner of a 3-carat diamond ring valued at P5,500. She and Clarita Sison entered into a transaction wherein the ring would be sold on commission. Clarita received the ring and issued a receipt. After some time, Lourdes made demands for the return of the ring but the latter refused to comply. When Lourdes insisted on the return, Clarita gave her the pawnshop ticket which is the receipt of the pledge and she found out that 3 days after the ring was received by Clarita, it was pledged by Melia Sison, the niece of Claritas husband in connivance with Clarita with the pawnshop of Dominador Dizon for P2,600. Lourdes then filed an estafa case. She then asked Dominador Dizon for the return of the ring pledged but refused to return the ring thus the case filed by Lourdes.The CFI issued a writ of replevin so Lourdes was able to have possession of the ring during the pendency of the case. The CFI also ruled in her favor which was affirmed by the CA on appeal. Thus the case at bar.ISSUE: W/N the CA erred in ruling that Lourdes has a right to possession of the ringHELD: NO

It reiterated the ruling in de Garcia v. CA, that the controlling provision is Art. 559 of the CC which states that the possession ofmovable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.Lourdes, being unlawfully deprived of her ring thus she has a right to recover it from the current possessor. Dizon is engaged in a business where presumably ordinary prudence would require him to inquire whether or not an individual who is offering the jewelry by pledge is entitled to do so. The principle of estoppel cannot help him at all. Since there was no precaution availed of, perhaps because of the difficulty of resisting opportunity for profit, he only has himself to blame and should be the last to complain if the right of the true owner of the jewelry should be recognized.

PNB v. CA

Facts: Private respondents, who are owners of a NACIDA-registered enterprise, obtained from petitioner PNB a loan initially pegged at 12% per annum interest. The contract agreement includes, among others, a clause which allows PNB to raise the rate of interest depending onn the bank's future policies. During the term of the agreement, PNB on several occasions imposed subsequent raises to the applicable rate ranging from the original 12% up to 42%, imposing also a 6% penalty per annum.

Issue: Can a creditor raise the rate of interest based solely on a certain clause in the contract and without consent from the debtor as to the amount and rate of increase?

Held: No. It is basic that there can be no contract in the true sense in the absence of the element of agreement, or of mutual assent of the parties. If this assent is wanting on the part of the one who contracts, his act has no more efficacy than if it had been done under duress or by a person of unsound mind.

Similarly, contract changes must be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed modification, especially when it affects an important aspect of the agreement. In the case of loan contracts, it cannot be gainsaid that the rate of interest is always a vital component, for it can make or break a capital venture. Thus, any change must be mutuallya greed upon, otherwise, it is bereft of any binding effect. The Court cannot countenance petitioner bank's posturing that the escalation clause at bench gives it unbridled right tounilaterally upwardly adjust the interest on private respondents' loan. That would completely take away from private respondents the right to assent to an important modification in their agreement, and would negate the element of mutuality in contracts.

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