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G.R. No. 201264 January 11, 2016

FACTS: Abuda loaned P250,000.00 to Vitug and his wife, Narcisa Vitug. As
security for the loan, Vitug mortgaged to Abuda his property in Tondo
Foreshore. The property was then subject of a conditional Contract to Sell
between the National Housing Authority and Vitug. The parties then executed a
"restructured" mortgage contract on the property to secure the amount of
P600,000.00 representing the original P250,000.00 loan, additional loans, and
subsequent credit accommodations given by Abuda to Vitug with an interest of
five (5) percent per month. By then, the property was covered by Transfer
Certificate of Title No. 234246 under Vitug's name. Spouses Vitug failed to pay
their loans despite Abuda's demands. Abuda filed a Complaint for Foreclosure
of Property before the Regional Trial Court ofManila. The Regional Trial Court
promulgated a Decision in favor of Abuda. Vitug appealed the December 19,
2008 Regional Trial Court Decision before the Court of Appeals. He contended
that the real estate mortgage contract he and Abuda entered into was void on
the grounds of fraud and lack of consent under Articles 1318, 1319, and 1332
of the Civil Code. He alleged that he was only tricked into signing the mortgage
contract, whose terms he did not really understand. Hence, his consent to the
mortgage contract was vitiated. The Court of Appeals found that all the
elements of a valid mortgage contract were present in the parties' mortgage
contract. Hence, this petition, where Vitug contends that a mortgagor must
have free disposal of the mortgaged property and that the restriction clause in
their contract has rendered the same void.

ISSUE: Whether the mortgage contract is valid.

HELD: Yes. For a mortgage contract to be valid, the absolute owner of a

property must have free disposal of the property.

Contracts entered into in violation of restrictions on a property owner’s rights

do not always have the effect of making them void ab initio.

Contracts that only subject a property owner’s property rights to conditions or

limitations but otherwise contain all the elements of a valid contract are merely
voidable by the person in whose favor the conditions or limitations are made.

The Principle of In Pari Delicto is an equitable principle that bars parties from
enforcing their illegal acts, assailing the validity of their acts, or using its
invalidity as a defense
Article 155 of the Family Code explicitly provides that debts secured by
mortgages are exempted from the rule against execution, forced sale, or
attachment of family home.

Parties are free to stipulate interest rates in their loan contracts in view of the
suspension of the implementation of the Usury Law ceiling on interest effective
January 1, 1983.

Iniquitous or unconscionable interest rates are illegal and, therefore, void for
being against public morals.

Even if the parties voluntarily agree to an interest rate, courts are given the
discretionary power to equitably reduce it if it is later found to be iniquitous or


G.R. No. 210542 February 24, 2016

FACTS: Barbara Perez and Rebecca Viloria were able to obtain a loan from
China Banking Corporation with the property of Rosalina Carodan (Petitioner)
as security. Barbara and Rebecca failed to pay the loan. China Bank
extrajudicially foreclosed the mortgage but was only able to realize P1.5 Million
which left a deficiency balance of P365,345.77. Hence, in the complaint for
sum of money that China Bank has filed against Barbara, Rebecca and
petitioner Rosalina, the former prayed that the RTC order the payment of the
deficiency amount with interest at 12% per annum, attorney’s fees equal to
10% of the deficiency amount, and litigation expenses and costs of suit. The
RTC ruled in favor of China Bank. Rosalina Carodan appealed before the CA,
but the latter affirmed the decision of the RTC. Hence, this petition, where
Rosalina imputes error to the CA' s affirmance of the RTC Decision. She says
that the CA Decision was not in accord with law and jurisprudence in holding
that petitioner, jointly and severally with Barbara and Rebecca, was liable to
pay China Bank's deficiency claim after the bank's release of the collateral of
the principal debtors. Respondent bank's alleged act of exposing Rosalina's
property to the risk of foreclosure despite the indivisible character of the Real
Estate Mortgage supposedly violated Article 2089 of the New Civil Code. Here,
Rosalina protests her liability for the deficiency. She claims that China Bank
cancelled the mortgage lien and released the. principal borrowers from liability.
She contends that this act violated Article 2089 of the Civil Code on the
indivisibility of mortgage and ultimately discharged her from liability as a

ISSUE: Whether China Bank may still recover the deficiency balance of the
HELD: Yes. Loan transactions in banking institutions usually entail the
execution of loan documents, typically a promissory note, covered by a real
estate mortgage and/or a surety agreement.

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

If the proceeds of the sale are insufficient to cover the debt in an extrajudicial
foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from
the debtor.


G.R. No. 211098 April 20, 2016

FACTS: Wellex obtained a loan in the principal amount of P500,000,000.00

from the IMA Account with BDO. As security for the loan, Wellex mortgaged the
WPI shares. By the time the loan obligation matured, Wellex was not able to
settle the same; however, BDO, as investment manager of the IMA Account did
not institute any foreclosure proceeding against the WPI shares. It was later on
found out that the said WPI shares were forfeited in favor of the State when
President Estrada was found guilty of plunder, because the WPI shares were
included among Estrada’s ill-gotten wealth. Now, the State, through Sheriff
Urieta by the order of the Sandiganbayan sought to foreclose the WPI shares
and sell it in a public auction.

Wellex filed a Civil Case with the trial court for the recovery of the possession of
the WPI shares. In essence, Wellex claims that it is the owner of the WPI
Shares; that it fully paid its loan obligation and that it is entitled to the return
thereof. Wellex prayed that the trial court issue a temporary restraining order
and a writ of preliminary injunction against the Sandiganbayan to enjoin them
from selling the WPI shares at a public auction. Wellex alleged that it instituted
the case as a third (3rd) party claimant because the Sandiganbayan failed to
observe the requirements under Section 16, Rule 39 of the Rules of Court, and
that Wellex was left with no recourse but to file an action with a competent
court to recover ownership of the WPI shares by virtue of the extinguishment of
the obligation through payment. The trial court directed the dismissal of the
Civil Case on the ground of lack of jurisdiction based on the principle of
hierarchy of courts. The same court denied the motion for reconsideration filed
by Wellex. Hence, this petition.

ISSUE: Whether the State as a subrogee of BDO as the creditor of Wellex may
sell the WPI shares.

HELD: No. Considering that the loan obligation of petitioner is valid and
existing, it necessarily follows that Banco de Oro (BDO), the creditor, or its
successor-in-interest, cannot be allowed to unilaterally sell the chattel securing
the loan and apply the proceeds thereof as payment, full or partial, to the said
loan. This would constitute a clear case of pactum commissorium, which is
expressly prohibited by Article 2088 of the Civil Code.

Given that the subrogee merely steps into the shoes of the creditor, he acquires
no right greater than those of the latter.


G.R. No. 194664 June 15, 2016

FACTS: Florita Liam purchased a condominium unit from Primetown Property

Group, Inc. (PPGI). To finance the construction of the condominium project,
PPGI obtained a loan from UCPB. PPGI thereafter partially settled it loan by
transferring to UCPB it right to collect all receivables from condominium
buyers, including Liam. Liam was notified by PPGI about the transfer of right
to collect to which she heeded. PPGI failed to deliver the condominium unit
based on its contract with Liam, so the latter demanded from UCPB the refund
of all the payments she made with PPGI. Liam saw UCPB's newspaper
advertisement offering to the public the sale of 'ready for occupancy' units in
the Palm Tower of MPC condominium project at a much lower price.

On November 14, 2005, Liam requested UCPB to suspend the restructuring of

her loan and instead asked for the downgrading of her purchased two-bedroom
condominium unit to another unit equivalent in value to the P1,223,000.00
total payments she already made. She also questioned the realty tax and
documentary stamp tax imposed by UCPB in the proposed financing package.
Her requests, however, remained unheeded. Thus, on April 10, 2006, Liam filed
a Complaint for specific performance before the HLURB against PPGI and

In its answer, UCPB averred that it had no legal obligation to deliver the unit to
Liam because it is not the developer of the condominium project. UCPB
maintained that it is merely a creditor of PPGI. UCPB explained that it only
acquired PPGI's right to collect its receivables from Liam and other
condominium buyers. UCPB denied giving a specific date for the completion of
Liam's unit because such matter was beyond its control but rather devolved
upon PPGI as the developer.

The HLURB ruled in favor of Liam. UCPB appealed but the same was denied.
The OP likewise affirmed the decision of the HLURB. However, the CA reversed
the decision of the OP. The CA ruled that Liam had no right to demand for
specific performance from UCPB because it was not a privy to the contract to
sell. The obligations of PPGI to Liam remained subsisting and it continued to
be Liam's obligor with respect to the delivery of the condominium units even
after the assignment. Thus, UCPB cannot be held liable for PPGI's breach of its
obligation to Liam. Hence, this petition.

ISSUE: Whether UCPB may be held liable for PPGI’s breach of its contract with
Liam by virtue of subrogation?

RULING: No. An assignment of credit is the process of transferring the right of

the assignor to the assignee who would then have the right to proceed against
the debtor.


GR No. 202176 Aug 01, 2016

FACTS: Chuy Lu Tan executed a mortgage contract with Metrobank. The

former having failed to pay its loan with the latter, Metrobank foreclosed the
mortgaged property. However, a deficiency balance was left after the auction
sale. Metrobank filed a complaint for collection of sum of money against Chuy
Lu Tan. The RTC ruled in favor of Metrobank. On appeal, the CA reversed the
decision of the RTC ruling that to allow Metrobank to recover the amount it
seeks from respondents would be iniquitous, unconscionable and would
amount to unjust enrichment. Hence, this petition.

Petitioner contends that, contrary to the ruling of the CA, it has the right to
collect from respondents the remainder of their obligation after deducting the
amount obtained from the extrajudicial foreclosure sale. On the other hand,
respondent avers that since the supposed value of the subject property shows
that it is more than the amount of their outstanding obligation, then
respondents can no longer be held liable for the balance, especially because it
was petitioner who bought the property at the foreclosure sale.

ISSUE: Whether Metrobank may recover the deficiency balance from Chuy Lu
Tan, including penalty charge.

HELD: Yes. Recovery of unpaid balance on principal obligation.Settled is the

rule that a creditor is not precluded from recovering any unpaid balance on the
principal obligation if the extrajudicial foreclosure sale of the property subject
of the real estate mortgage results in a deficiency.

Mortgage is simply a security and cannot be considered payment of an

outstanding obligation.

There is no rule or guideline prescribing the minimum amount of bid or that

the bid should be at least equal to the properties’ current appraised value.

Inadequacy of the price at a forced sale is immaterial and does not nullify a
sale since, in a forced sale, a low price is more beneficial to the mortgage

Equity is available only in the absence of law and not as its replacement.

Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.

Surcharge or penalty stipulated in loan agreement in case of default partakes

of the nature of liquidated damages and is separate and distinct from interest

The rate of penalty charge is reduced from eighteen percent (18%) per annum
to twelve percent (12%) per annum.

August 24, 2016 G.R. No. 219071

represented by BIENVENIDO M. MALANCE

FACTS: Benjamin Malance (Benjamin) was the owner of a 1.4017-hectare

parcel of agricultural land During his lifetime, Benjamin obtained from the
Magtalas sisters, who are distant relatives, a loan in the amount of
₱600,000.00, as evidenced by a Kasulatan Ng Ukol sa Utang dated June 26,
2006 (Kasulatan). Under the Kasulatan, the Magtalas sisters shall have the
right to the fruits of the subject land for six (6) years or until the loan is fully
paid. When Benjamin died, his siblings, the Malance heirs, inspected the
subject land and discovered that the Magtalas sisters, their respective
husbands, and their father were cultivating the same on the basis of
the Kasulatan. Doubting the authenticity of the said Kasulatan, the Malance
heirs filed a Complaint for Recovery of Possession, Declaration of Nullity of
the Kasulatan and Temporary Restraining Order against petitioners, which the
Malance heirs subsequently amended. They claimed that: (a) during his
lifetime, Benjamin accumulated enough wealth to sustain himself, was
unmarried and had no children to support; (b) the Kasulatan was executed
during the time when Benjamin was seriously ill and mentally incapacitated
due to his illness and advanced age; and (c) the Kasulatan was simulated as
the signature of Benjamin appearing thereon was not his signature.

ISSUE: Whether the Kasulatan is indeed a Contract of Antichresis

HELD: Yes. Antichresis involves an express agreement between parties

whereby: (a) the creditor will have possession of the debtor’s real property given
as security; (b) such creditor will apply the fruits of the said property to the
interest owed by the debtor, if any, then to the principal amount; (c) the
creditor retains enjoyment of such property until the debtor has totally paid
what he owes; and (d) should the obligation be duly paid, then the contract is
automatically extinguished proceeding from the accessory character of the

G.R. No. 212483, October 05, 2016


FACTS: During the union of Venancio and Lilia, they acquired three (3) parcels
of land in Malolos, Bulacan. The properties were mortgaged to Philippine
National Bank to secure a loan worth P1,100,000.00, which was increased to
P3,000,000.00. When the Reyes Spouses failed to pay the loan obligations,
Philippine National Bank foreclosed the mortgaged real properties. The auction
sale was held. PNB emerged as the highest bidder, and a certificate of sale was
issued in its favor.

Venancio filed before the RTC a Complaint (or Annulment of Certificate of Sale
and Real Estate Mortgage against Philippine National Bank. Upon order of the
trial court, Venancio amended his Complaint to include Lilia and the Provincial
Sheriff of Bulacan as defendants. In assailing the validity of the real estate
mortgage, Venancio claimed that his wife undertook the loan and the mortgage
without his consent and his signature was falsified on the promissory notes
and the mortgage. Since the three (3) lots involved were conjugal properties, he
argued that the mortgage constituted over them was void.

ISSUE: Whether real estate mortgage is void.

HELD: Any disposition or encumbrance of a conjugal property by one spouse

must be consented to by the other; otherwise, it is void.
The mortgage unilaterally made by his wife over their conjugal property is void
and legally inexistent.

Article 122 applies to debts that were contracted by a spouse and redounded to
the benefit of the family.

There are two (2) scenarios considered: one is when the husband, or in this
case, the wife, contracts a loan to be used for the family business and the other
is when she acts as a surety or guarantor.

If the conjugal partnership is insufficient to cover the liability, the husband is

solidarily liable with the wife for the unpaid balance.

Article 94 of the Family Code governing the Absolute Community of Property

regime, explicitly holds the spouses solidarily liable with each other if the
conjugal properties are not enough to answer for the liabilities.

G.R. No. 201074, October 19, 2016


FACTS: Westmont alleged that, petitioners, doing business under the trade
name of Moondrops General Merchandising (Moondrops), obtained a loan in
the amount of P2,429,500.00, evidenced by Promissory wherein a month after
it obtained another loan from Westmont Bank in the amount of P4,000,000.00,
evidenced by another Promissory Note. Disclosure Statements on the
Loan/Credit Transactions were signed by the parties. Earlier, a Continuing
Suretyship Agreement was executed between Westmont and petitioners for the
purpose of securing any future indebtedness of Moondrops. Westmont averred
that petitioners defaulted in the payment of their loan obligations. It sent a
Demand Letter to petitioners, but it was unheeded. Hence, Westmont filed the
subject complaint. However, petitioners insisted that their loan applications
from Westmont were denied and it was Chua who lent them the money.
Petitioners claimed that they paid Chua the total amount of their loans. Thus,
they contended that Westmont could not demand the payment of the said

ISSUE: Whether there is a perfect contract of loan.

HELD: No. A simple loan is a real contract and it shall not be perfected until
the delivery of the object of the contract.
April 19, 2017
G.R. No. 202573

FACTS: Petitioner filed a collection case against respondent Luz P. Alarte

alleging that respondent applied for and was granted credit accommodations
under Bankard myDream JCB Credit Card; that respondent, using the said
Bankard myDream JCB credit card, availed herself of credit accommodations
by "purchasing various products"; that per Statement of Account dated July 9,
2006, respondent's credit availments amounted to a total of ₱67,944.82,
inclusive of unbilled monthly installments, charges and penalties or at least
the minimum amount due under the credit card; and that respondent failed
and refuses to pay her obligations despite her receipt of a written demand.
Thus, it prayed that respondent be ordered to pay the amount of ₱67,944.82,
with interest, attorney's fees equivalent to 25% of the sum due, and costs of

Petitioner simply submits that it has presented sufficient evidence to support

its pecuniary claim. It claims that the Statement of Account properly reflected
the respondent's obligation; that respondent is estopped from questioning the
said statement of account as it contains a waiver, stating that if respondent
does not question the same within 20 days from receipt, "Bankard, Inc. will
deem the Statement true and correct".

ISSUE: Whether or not respondent is estopped from questioning the said

statement of account as it contains a waiver, stating that if respondent does
not question the same within 20 days from receipt, "Bankard, Inc. will deem
the Statement true and correct

HELD: This Court cannot completely blame the MeTC, RTC, and CA for their
failure to understand or realize the fact that a monthly credit card statement of
account does not always necessarily involve purchases or transactions made
immediately prior to the issuance of such statement; certainly, it may be that
the card holder did not at all use the credit card for the month, and the
statement of account sent to him or her refers to principal, interest, and
penalty charges incurred from past transactions which are too multiple or
cumbersome to enumerate but nonetheless remain unsettled by the card

Credit card arrangements are simple loan arrangements between the card
issuer and the card holder.

June 21, 2017

A.M. No. P-16-3616
III, Regional Trial Court, Branch 258, Parañaque City

FACTS: Before the Court is an Affidavit-Complaint, filed by Atty. Prosencio D.

Jaso (Atty. Jaso), against Gloria L. Londres (Landres), Court Stenographer III,
Regional Trial Court, Branch 258, Parafiaque City (RTC), for dishonesty and
conduct unbecoming of a court personnel when she failed to pay her financial
obligations. Landres admitted borrowing money from Atty. Jaso but denied
using her position as court stenographer in order to obtain the loan. According
to Londres, her financial trouble was caused by the sickness of her sister-in-
law, who was diagnosed with lung cancer and eventually died, and that of her
father who also got sick and died.

ISSUE: Whether or not Londres should be held administratively liable for her
failure to pay her debts in full.

HELD: Londres' alleged financial difficulty due to the sickness and untimely
death of her father and sister-in-law cannot justify her non-payment of the
loan for a long period of time. Financial difficulty is not an excuse to renege on
one's obligation.

JUNE 21, 2017

G.R. No. 228435

FACTS: Petitioner KT Construction Supply, Inc. obtained a loan from

respondent Philippine Savings Bank (PSBank) in the amount of ₱2.5 million.
The said loan was evidenced by a Promissory Note executed on the same date.
The said note was signed by William K. Go (Go) and Nancy Go-Tan (Go-Tan) as
Vice-President/General Manager and Secretary/Treasurer of KT Construction,
respectively. In addition, both Go and Go-Tan signed the note in their personal
capacities. The promissory note stipulated that the loan was payable within a
period of sixty (60) months from November 12, 2006 to October 12, 2011.

PSBank filed a complaint for sum of money against KT Construction that due
to the acceleration clause, the loan became due and demandable upon KT
Construction's failure to pay an installment.

KT Construction asserts that the complaint was premature because it was not
alleged that it had defaulted in paying any of the installments due and that it
had received a demand letter from PSBank. It reiterates that the promissory
note was null and void for being a contract of adhesion.
PSBank countered that Go and Go-Tan were solidarily liable with KT
Construction because they signed the promissory note in favor of PSBank as
officers of the corporation and in their personal capacities. It averred that the
obligation was already due and demandable in view of the acceleration clause
in the promissory note. Further, PSBank pointed out that the promissory note
was consensual as the parties voluntarily signed the same.

ISSUE: Whether or not the promissory note was a contract of adhesion.

HELD: It has long been settled that an acceleration clause is valid and
produces legal effects.

In Bognot v.RR!Lending Corporation, the Court explained that once the

indebtedness had been established, the burden is on the debtor to prove

Contracts of adhesion, where one party imposes a ready-made form of contract

on the other, are not entirely prohibited. The one who adheres to the contract
is, in reality, free to reject it entirely; if he adheres, he gives his consent.

July 19, 2017

G.R. No. 196412

FACTS: Respondent Miguel Omengan was the registered owner of a parcel of

land located at Ileb, Nambaran, Tabuk City, Kalinga with an area of 10.001

Respondent received a notice of coverage from the Department of Agrarian

Reform (DAR) placing the subject property under the Comprehensive Agrarian
Reform Program (CARP). Field investigation was then conducted and the
property was initially valued by petitioner at Php 219,524.98.

DAR, through its Provincial Agrarian Reform Officer (PARO), requested the
Office of Provincial Agrarian Reform Adjudicator (PARAD) for Kalinga for
preliminary determination of just compensation.

PARAD noted that since the property was taken in 2000, the unit market value
(UMV) for the year 2000 which is Php 18,940/ha as certified by the Municipal
Assessor of Tabuk, Kalinga should have been applied instead of the 1994
Schedule of Base UMV of Php 15,780/ha used by petitioner. The PARAD
further noted that the selling price of palay per kilo in 2000 as certified by the
National Food Authority (NFA) in the amount of Php 10 should have been used
in the computation of the Capitalized Net Income (CNI) and not petitioner's
baseless valuation of Php 6.50/k. Finally, the PARAD sustained petitioner's
valuation of the idle portion of four has, the same not having been contested by

Petitioner filed a petition for judicial determination of just compensation before

the RTC-SAC. Petitioner argues that no interest can be imposed as there was
no delay in the payment of just compensation.

ISSUE: Whether or not the six percent (6%) interest on the amount of just
compensation pursuant to DAR A.O. No. 13-94 should be imposed.

HELD: While the debt incurred by the government on account of the taking of
the property subject of an expropriation constitutes a forbearance,
nevertheless, in line with the recent circular of the Monetary Board of the
Bangko Sentral ng Pilipinas No. 799, Series of 2013, effective July 1, 2013, the
prevailing rate of interest for loans or forbearance of money is six percent
(6%) per annum, in the absence of an express contract as to such rate of

G.R. No. 204412, September 20, 2017


FACTS: This case involves the validity of the real estate mortgage of petitioner
Vicente L. Luntao's (Vicente) property in favor of respondent BAP. The mortgage
was executed by petitioner Nanette L. Luntao by virtue of a Special Power of
Attorney that Vicente issued in her favor.

Vicente was the owner of a real property and he executed a Special Power of
Attorney in favor of his sister Nanette. Nanette applied for a loan with BAP and
used Vicente's property as collateral. The loan was for the improvement of the
facilities of her business, the Holy Infant Medical Clinic. According to Nanette,
she was introduced to the lending institution by her sister Eleanor Luntao, who
allegedly had a personal loan with it and whose office was located in the same
building where BAP's office was.
Upon approval of the loan, the amount of P900,000.00, representing the loan
proceeds, was ordered to be released to the clinic through Security Bank. When
the loan obligation became due, BAP sent demand letters. In a letter, Nanette
and Eleanor's brother Jesus Luntao (Jesus) wrote BAP, asking for additional
time to settle his sisters’ accounts. He cited cash leakages and pending
accreditation with life insurers as reasons for the clinic’s substantial losses.
However, Nanette's loan was still left unpaid. As a result, BAP applied for
Extra-Judicial Foreclosure of Vicente's property. RTC issued a Notice of
Foreclosure and a Notice of Extrajudicial Sale.

Vicente and Nanette filed a Complaint for Declaration of Nullity of Real Estate
Mortgage with a prayer for the issuance of a Temporary Restraining Order and
Writ of Preliminary Injunction against BAP.

Vicente and Nanette claimed that Eleanor's alleged debt with BAP was separate
from Nanette's debt and was not secured by Vicente's property, which should
not be foreclosed if Eleanor failed to pay her alleged debt.
Petitioners argue that they did not receive any amount from the allegedly
approved loan application, thus they should not be held liable for its payment.
They contend that it was respondent BAP's negligence that caused the release
of the loan proceeds to a person not authorized by petitioners. Petitioners add
that neither of them gave authorization for BAP to release the loan proceeds
through Security Bank. There was also no evidence showing that the power
and authority to receive the loan proceeds under the Special Power of Attorney
were delegate to Eleanor.

According to petitioners, the contract was not consummated since they did not
receive the loan proceeds, and therefore, null and void. The principal contract
being void, the accessory contract of mortgage was also null and
void. Petitioners add that the mortgage contract also contained a pactum
commissorium provision.

BAP counters that the loan proceeds "were duly received, credited and
transferred to the Holy Infant Medical Clinic/Nanette L. Luntao/Eleonor L.
Luntao under Security Bank and Trust Company Account. Respondent BAP
also maintains that Eleanor has no separate personal loan with them.
Respondent BAP contends that the assailed mortgage provision is not pactum
commissorium since it does not "automatically allow the mortgagee to
appropriate or own the mortgage property without the need of ... foreclosure

ISSUE: Whether or not the Real Estate Mortgage executed by Vicente L. Luntao
and Nanette L. Luntao should be nullified.

HELD: As an accessory contract, a mortgage contract's validity depends on the

loan contract's validity.

January 10, 2018 G.R. No. 192971

FACTS: Petitioner Floro Mercene obtained a loan from respondent GSIS in the
amount of ₱29,500.00. As security, a real estate mortgage was executed over
Mercene's property in Quezon City. The mortgage was registered and annotated
on the title. Mercene contracted another loan with GSIS for the amount of
₱14,500.00. The loan was likewise secured by a real estate mortgage on the
same parcel of land. The following day, the loan was registered and duly
annotated on the title. Mercene opted to file a complaint for Quieting of
Title against GSIS. He alleged that: since 1968 until the time the complaint was
filed, GSIS never exercised its rights as a mortgagee; the real estate mortgage
over his property constituted a cloud on the title; GSIS' right to foreclose had
prescribed. In its answer, GSIS assailed that the complaint failed to state a
cause of action and that prescription does not run against it because it is a
government entity.

ISSUE: Whether the right to foreclosure had already prescribed.

HELD: No. The CA ruled that prescription commences only upon the accrual of
the cause of action, and that a cause of action in a written contract accrues
only when there is an actual breach or violation. Thus, the appellate court
surmised that no prescription had set in against GSIS because it has not made
a demand to Mercene.

In order for cause of action to arise, the following elements must be present: (1)
a right in favor of the plaintiff by whatever means and under whatever law it
arises or is created; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and (3) an act or omission on the part of
such defendant violative of the right of the plaintiff or constituting a breach of
obligation of the defendant to the plaintiff.

Therefore, the Court affirmed the ruling of the appellate court.

G.R. No. 157659 January 25, 2010


FACTS: Petitioner was a member of the bar who obtained two loans totaling
₱34,000.00 from respondent Government Service Insurance System (GSIS). To
secure the performance of his obligations, he mortgaged two parcels of land
registered under his and his wife Marcelina Mallari’s names. However, he paid
GSIS about ten years after contracting the obligations only ₱10,000.00 on May
22, 1978 and ₱20,000.00 on August 11, 1978. What followed thereafter was
the series of inordinate moves of the petitioner to delay the efforts of GSIS to
recover on the debt, and to have the unhampered possession of the foreclosed
property. Resulting to his disbarment case for neglecting the rules of court. The
petitioner claims that he had not been notified of the motion seeking the
issuance of the writ of execution cum writ of possession; hence, the writ was

ISSUE: Whether notice or even prior hearing of a motion for execution is

required before a writ of execution is issued

HELD: No. The 60-day limitation is considered inextendible.

As defaulting mortgagor, petitioner is not entitled to any prior notice of the

application for the issuance of the writ of possession.

The redemption period envisioned under Act 3135 is reckoned from the date of
the registration of the sale not from and after the date of the sale.

The consolidation of ownership in the purchaser’s name and the issuance to

him of a new Transfer Certificate of Title (TCT) then entitles him to demand
possession of the property at any time and the issuance of a writ of possession
to him becomes a matter of right upon the consolidation of title in his name.

Court cannot exercise any discretion to determine whether or not to issue the
writ, for the issuance of the writ to the purchaser in an extrajudicial
foreclosure sale becomes a ministerial function.

Proceedings upon an application for a writ of possession is ex parte and

summary in nature.

G.R. No. 190286, January 11, 2018


FACTS: The dispute in this case originated from a Continuing

Guaranty executed in favor of respondent Bancom by the petitioners herein. In
the instrument, the Reyes Group agreed to guarantee the full and due payment
of obligations incurred by Marbella under an Underwriting Agreement with
Bancom. These obligations included certain Promissory Notes issued by
Marbella in favor of Bancom for the aggregate amount of P2,828,140.32.
However, Marbella failed to fulfill its obligation at the time of their maturity
despite of many replacement maturity and repeated demands. Thus, Bancom
filed a Complaint for Dum of Money. On the contrary, Marbella and the Reyes
Group argued that they had been forced to execute the Promissory Notes and
the Continuing Guaranty against their will. They further argued that the
Promissory Notes were not meant to be binding, given that the funds released
to Marbella by Bancom were not loans, but merely additional financing.
Petitioners also contended that the action must be considered abated pursuant
to Section 122 of the Corporation Code. They pointed out that the Certificate of
Registration issued to Bancom had been revoked by the Securities and
Exchange Commission (SEC) on 31 May 2004, and that no trustee or receiver
had been appointed to continue the suit; in fact, even Bancom's former counsel
was compelled to withdraw its appearance from the case, as it could no longer
contact the corporation.

ISSUE: Whether the present suit should be deemed abated by the revocation
by the SEC of the Certificate of Registration issued to Bancom.

HELD: The revocation of Bancom's Certificate of Registration does not justify

the abatement of these proceedings. Here, it appears that the SEC revoked the
Certificate of Registration issued to Bancom on 26 May 2003.Despite this
revocation, however, Bancom does not seem to have conveyed its assets to
trustees or to its stockholders and creditors. The corporation has also failed to
appoint a new counsel after the law firm formerly representing it was allowed to
withdraw its appearance on 1 June 2004. Citing these circumstances,
petitioners assert that these proceedings should be considered abated. We

It is evident from the foregoing discussion of law and jurisprudence that the
mere revocation of the charter of a corporation does not result in the
abatement of proceedings. Since its directors are considered trustees by legal
implication, the fact that Bancom did not convey its assets to a receiver or
assignee was of no consequence. It must also be emphasized that the
dissolution of a creditor-corporation does not extinguish any right or remedy in
its favor.

The terms of the promissory notes and "Continuing Guaranty" are clear and
unequivocal, leaving no room for interpretation. For not being contrary to law,
morals, good customs, public order and public policy, defendants' obligation
has the force of law and should be complied with in good faith.

G.R. No. 214053, June 06, 2018


FACTS: Sometime in 1997, Prudential Bank - now Bank of the Philippine

Islands (BPI), herein respondent - extended various loans to petitioners
Teodorico and Alice Castillo amounting to at least P20 million. As security,
petitioners mortgaged for which corresponding deeds of real estate mortgage
were executed. Petitioners defaulted in their loan payments. BPI thus filed a
Petition for Extrajudicial Foreclosure of Real Estate Mortgage. At the auction
sale BPI emerged as the highest bidder. Petitioners were unable to redeem the
subject property. A Certificate of Sale was thus issued in BPI's favor. BPI filed a
Petition for Ex Parte Issuance of Writ of Possession. The RTC issued a Decision
granting BPI's prayer for a writ of possession. Petitioners interposed an appeal.

ISSUE: Whether the appeal of petitioner should be approved.

HELD: To resolve, the Court required BPI to comment on the petitioners

Withdrawal of Petition. However, to date, the bank has failed to file its written

Considering the lapse of time since the filing of the petitioners' Withdrawal of
Petition and the lack of action on respondent's part, it appears that the instant
Petition has been rendered moot and academic, and is thus ripe for dismissal.
Since the withdrawal of the Petition came upon the initiative of petitioners,
respondent's inaction may be considered to be an implied concurrence or
approval of the same. Thus, the Petition is dismissed.

G.R. No. 235511, June 20, 2018


G.R. No. 235565, June 20, 2018


FACTS: Junnel's Marketing Corporation is a domestic corporation engaged in

the business of selling wines and liquors, with a current account with
Metrobank from which it draws checks to pay its different suppliers. Among
JMC's suppliers are Jardine Wines and Spirits and Premiere Wines.
In its audit, JMC discovered an anomaly involving eleven (11) checks it had
issued to the orders of Jardine and Premiere on various dates between October
1998 to May 1999 but not covered by any official receipt from Jardine or
Premiere. The subject checks, which are all crossed checks and amounting to
P1,481,292.00 in total. Upon examination, it revealed that the checks had been
deposited with Bankcom, wherein the account used was not the supplier. It
had been known that the accountant of JMC, Delizo, she stole several company
checks drawn against JMC's current account. JMC filed before the RTC a
complaint for sum of money against Delizo, Bankcom and Metrobank. JMC
alleged that the wrongful conversion of the subject checks was caused by a
combination of the "tortious and felonious" scheme of Delizo and the "negligent
and unlawful acts" of Bankcom and Metrobank.
Both Metrobank and Bankcom pray for absolution but they differ in the
arguments they raise in support of their prayer. Metrobank posits that it
should be absolved because it had exercised absolute diligence in verifying the
genuineness of the subject checks. Bankcom, on the other hand, argues that it
should be absolved because it was never a party to the wrongful encashment of
the subject checks.

ISSUE: Whether the Metrobank and Bankcom should be absolved.

HELD: The consolidated appeals must be denied as neither Metrobank nor

Bankcom are entitled to absolution. We find that the two banks should have
been ordered sequentially liable for the entire amount of the subject checks. In
the case of Bank of America it held that, in cases involving the unauthorized
payment of valid checks, the drawee bank becomes liable to the drawer for the
amount of the checks but the drawee bank, in turn, can seek reimbursement
from the collecting bank. The rationale of this rule on sequence of recovery lies
in the very basis and nature of the liability of a drawee bank and a collecting
bank in said cases.

In the present case, it is apparent that Metrobank had breached JMC's

instructions when it paid the value of the subject checks to Bankcom for the
benefit of a certain Account No. 0015-32987-7. The payment to Account No.
0015-32987-7 was unauthorized as it was established that the said account
does not belong to Jardine or Premiere, the payees of the subject checks, or to
their indorsees. In addition, causal or concurring negligence on the part of JMC
had not been proven. Under such circumstances, Metrobank is clearly liable to
return to JMC the amount of the subject checks.

Here, it is clear that Bankcom had assumed the warranties of an indorser

when it forwarded the subject checks to PCHC for presentment to Metrobank.
By such presentment, Bankcom effectively guaranteed to Metrobank that the
subject checks had been deposited with it to an account that has good title to
the same. This guaranty, however, is a complete falsity because the subject
checks were, in truth, deposited to an account that neither belongs to the
payees of the subject checks nor to their indorsees. Hence, as the subject
checks were paid under Bankcom's false guaranty, the latter-as collecting
bank-stands liable to return the value of such checks to Metrobank.

G.R. No. 192934, June 27, 2018


G.R. No. 197010, June 27, 2018


FACTS: Security Bank granted spouses Mercado a revolving credit line in the
amount of P1,000,000.00.In their terms, for late payment the penalty is 2% per
month. To secure the credit line, the spouses Mercado executed a Real Estate
Mortgage in favor of Security Bank. Subsequently, the spouses Mercado
defaulted in their payment under the revolving credit line agreement. Security
Bank requested the spouses Mercado to update their account, and sent a final
demand letter. Thereafter, it filed a petition for extrajudicial foreclosure. The
foreclosure sale of the parcel of land in Lipa City, Batangas was held wherein
Security Bank was adjudged as the winning bidder. Not one year after, the
spouses Mercado offered to redeem the foreclosed properties for
P10,000,000.00. However, Security Bank allegedly refused the offer and made
a counter-offer in the amount of P15,000,000.00.The spouses file a petition to
nullify the foreclosure.

ISSUE: Whether the foreclosure should be nullify.

HELD: Yes. The foreclosure sales of the properties in Batangas City and San
Jose, Batangas are void for non-compliance with the publication requirement
of the notice of sale.

Act No. 3135, as amended, provides for the statutory requirements for a valid
extrajudicial foreclosure sale. Among the requisites is a valid notice of sale.
Section 3, as amended, requires that when the value of the property reaches a
threshold, the notice of sale must be published once a week for at least three
consecutive weeks in a newspaper of general circulation. The Notice of Sheriff['s
Sale in this case, did not state the correct number of the transfer certificate of
title of the property to be sold. This is a substantial and fatal error which
resulted in invalidating the entire Notice.

The interest rate provisions in the parties' agreement violate the principle of
mutuality of contracts.

The principle of mutuality of contracts is found in Article 1308 of the New Civil
Code, which states that contracts must bind both contracting parties, and its
validity or compliance cannot be left to the will of one of them. The binding
effect of any agreement between parties to a contract is premised on two settled
principles: (I) that any obligation arising from contract has the force of law
between the parties; and (2) that there must be mutuality between the parties
based on their essential equality.

Thus, Spouses Rodrigo and Erlinda Mercado are hereby ordered to pay
Security Bank Corporation the sum of P8,317,756.71 representing the amount
of deficiency, inclusive of interest and penalty.
G.R. No. 211206, November 07, 2018

FACTS: Rosemarie Rey borrowed from Cesar Anson the amount of

P200,000.00 payable in one year, and subject to 7.5% interest per month or
P15,000.00 monthly interest, which would be paid bi-monthly by way of
postdated checks. The loan was secured by a real estate mortgage on Spouses
Teodoro and Rosemarie Rey's property. In the event of default, the Spouses Rey
would pay a penalty charge of 10% of the total amount, plus 12% attorney's
fees. The terms and conditions of the loan were embodied in a Deed of Real
Estate Mortgage. Rosemarie Rey again borrowed from Cesar Anson
P350,000.000 secured by another parcel of land owned by the former’s mother.
She was, however, unable to pay the principal amount of P200,000.00. She
appealed to Cesar Anson not to foreclose the mortgage or to impose the
stipulated penalty charges, but instead to extend the terms thereof. Instead of
paying her loan obligations, Rosemarie Rey, through counsel, sent Cesar Anson
a letter stating that the interest rates imposed on the four loans were irregular,
if not contrary to law. The 7.5% and 7% monthly interest rates imposed on the
first and second loans, respectively, were excessive and unconscionable and
should be adjusted to the legal rate. Moreover, no interest should have been
imposed on the third and fourth loans in the absence of any written agreement
imposing interest.

ISSUE: Whether the interest rates in the first and second land are
unconscionable and contrary to morals.

HELD: Yes. The Court agrees with petitioner.

The freedom of contract is not absolute. Article 1306 of the Civil Code provides
that "[t]he contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy." As case law
instructs, the imposition of an unconscionable rate of interest on a money
debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is
tantamount to a repugnant spoliation and an iniquitous deprivation of
property, repulsive to the common sense of man. It has no support in law, in
principles of justice, or in the human conscience nor is there any reason
whatsoever which may justify such imposition as righteous and as one that
may be sustained within the sphere of public or private morals. In several
cases, we have ruled that stipulations authorizing iniquitous or
unconscionable interests are contrary to morals, if not against the law.

Bangis vs. Heirs of Serafin and Salud Adolfo, 672 SCRA 468, June 13,
2012 Syllabi Class: Civil Law|Interest Rates|Loans
FACTS: Respondent heirs filed a complaint for annulment of deed of sale and
declaration of the purported contract of sale as antichresis against Petitioner
when respondents’ predecessor-in-interest mortgaged their owned lot to
petitioner’s predecessor-in-interest without reducing it into writing. Petitioner
claimed prescription and the transaction was one of sale by presenting a
photocopy of Extra-Judicial Settlement with Absolute Deed of Sale without
presenting the title during trial.

ISSUE: Whether the transaction between the parties’ predecessors-in-interest

was one of sale and not a mortgage or antichresis.

HELD: For the contract of antichresis to be valid, Article 2134 of the Civil Code
requires that “the amount of the principal and of the interest shall be specified
in writing; otherwise the contract of antichresis shall be void.”

Trade and Invt Devt Corp of the Phil vs. Asia Paces Corporation, 716
SCRA 67, Feb 12, 2014 Syllabi Class :Civil Law|Suretyship|Guaranty|

FACTS: TIIDCORP filed a collection case against: (a) ASPAC, PICO, and
Balderrama on account of their obligations under the deeds of undertaking;
and (b) the bonding companies on account of their obligations under the Surety

Respondents Asia Paces Corporation (ASPAC) and Paces Industrial Corporation

(PICO) entered into a sub-contracting agreement, denominated as "200 KV
Transmission Lines Contract No. 20-/80-II Civil Works & Electrical Erection,"
with the Electrical Projects Company of Libya (ELPCO), as main contractor, for
the construction and erection of a double circuit bundle phase conductor
transmission line in the country of Libya. To finance its working capital
requirements, ASPAC obtained loans from foreign banks Banque Indosuez and
PCI Capital (Hong Kong) Limited (PCI Capital) which, upon the latter’s request,
were secured by several Letters of Guarantee issued by petitioner Trade and
Investment Development Corporation of the Philippines (TIDCORP), then
Philippine Export and Foreign Loan Guarantee Corp., a government owned and
controlled corporation created for the primary purpose of, among others,
"guarantee[ing], with the prior concurrence of the Monetary Board, subject to
the rules and regulations that the Monetary Board may prescribe, approved
foreign loans, in whole or in part, granted to any entity, enterprise or
corporation organized or licensed to engage in business in the Philippines."
Under the Letters of Guarantee, TIDCORP irrevocably and unconditionally
guaranteed full payment of ASPAC’s loan obligations to Banque Indosuez and
PCI Capital in the event of default by the latter.
As a condition precedent to the issuance by TIDCORP of the Letters of
Guarantee, ASPAC, PICO, and ASPAC’s President, respondent Nicolas C.
Balderrama (Balderrama) had to execute several Deeds of Undertaking, binding
themselves to jointly and severally pay TIDCORP for whatever damages or
liabilities it may incur under the aforementioned letters. In the same light,
ASPAC, as principal debtor, entered into surety agreements (Surety Bonds)
with Paramount, Phoenix, Mega Pacific and Fortune (bonding companies), as
sureties, also holding themselves solidarily liable to TIDCORP, as creditor, for
whatever damages or liabilities the latter may incur under the Letters of

ASPAC eventually defaulted on its loan obligations to Banque Indosuez and PCI
Capital, prompting them to demand payment from TIDCORP under the Letters
of Guarantee.

TIDCORP and its various creditor banks, such as Banque Indosuez and PCI
Capital, forged a Restructuring Agreement extending the maturity dates of the
Letters of Guarantee. The bonding companies were not privy to the
Restructuring Agreement and, hence, did not give their consent to the payment
extensions granted by Banque Indosuez and PCI Capital, among others, in
favor of TIDCORP. Nevertheless, following new payment schedules, TIDCORP
fully settled its obligations under the Letters of Guarantee to both Banque
Indosuez and PCI Capital.
ISSUE: Whether or not the bonding companies’ liabilities to TIDCORP under
the Surety Bonds have been extinguished by the payment extensions granted
by Banque Indosuez and PCI Capital to TIDCORP under the Restructuring

HELD: Although the contract of a surety is in essence secondary only to a

valid principal obligation, his liability to the creditor is direct, primary and
absolute; he becomes liable for the debt and duty of another although he
possesses no direct or personal interest over the obligations nor does he receive
any benefit therefrom. The fundamental reason therefor is that a contract of
suretyship effectively binds the surety as a solidary debt.

Since the surety is a solidary debtor, it is not necessary that the original debtor
first failed to pay before the surety could be made liable; it is enough that a
demand for payment is made by the creditor for the surety’s liability to attach.

Article 2079 of the Civil Code, which pertinently provides that “[a]n extension
granted to the debtor by the creditor without the consent of the guarantor
extinguishes the guaranty,” equally applies to both contracts of guaranty and
Centennial Guarantee Assurance Corp vs. Universal Motors Corp, 737
SCRA 654, Oct 8, 2014

FACTS: The instant petition originated from a Complaint for Breach of

Contract with Damages and Prayer for Preliminary Injunction and Temporary
Restraining Order filed by Nissan Specialist Sales Corporation (NSSC) and its
President and General Manager, Reynaldo A. Orimaco (Orimaco), against
herein respondents Universal Motors Corporation (UMC), Rodrigo T. Janeo, Jr.
(Janeo, Jr.), Gerardo Gelle (Gelle), Nissan Cagayan de Oro Distributors, Inc.
(NCOD), Jefferson U. Rolida (Rolida), and Peter Yap (Yap).

The temporary restraining order (TRO) prayed for was eventually issued by the
RTC upon the posting by NSSC and Orimaco of a _1,000,000.00 injunction
bond issued by their surety, CGAC. The TRO enjoined respondents UMC,
Rolida, Gelle, Janeo, Jr., NCOD, and Yap (respondents) from selling, dealing,
and marketing all models of motor vehicles and spare parts of Nissan, and from
terminating the dealer agreement between UMC and NSSC. It likewise
restrained UMC from supplying and doing trading transactions with NCOD,
which, in turn, was enjoined from entering and doing business on Nissan
Products within the dealership territory of NSSC as defined in the Dealer
Agreement. The TRO was converted to a writ of preliminary injunction on April
2, 2002.

ISSUE: Whether or not good reasons exist to justify execution pending appeal
against CGAC which is a mere surety

HELD: In a contract of suretyship, one lends his credit by joining in the

principal debtor’s obligation so as to render himself directly and primarily
responsible with him, and without reference to the solvency of the principal.