THE MANILA BANKING CORPORATION vs. ANASTACIO TEODORO, 4.

In the stipulations of fact, it was admitted by the parties:

JR. and GRACE ANNA TEODORO
- That MBC extended loans to the spouses and Teodoro Jr
G.R. No. L-53955 January 13, 1989 because of certain contracts entered into by latter with EEA for
fabrication of fishing boats and that the Philippine Fisheries
Bidin, J.
Commission succeeded EEA after its abolition;

- That non-payment of the PNs was due to failure of the

1. April 1966, Spouses Teodoro together with Teodoro Sr Commission to pay spouses;
executed a PN in favour of Manila Banking Corp (MBC);
- That the Bank took steps to collect from the Commission
- Payable within 120 days (until Aug), with 12% interest per but no collection was effected;
annum;
5. For failure of the spouses and Teodor Sr to pay, MBC
- They failed to pay and left balance of 15k as of September instituted against them;
1969;
- Teodoro Sr subsequently died so suit only against the
2. May and June 1966, executed two PNs; spouses;

- 8k and 1k respectively payable within 120 days and 12% per 6. TC favoured MBC; MFR denied;
annum;
- Spouses appealed to CA but since issue pure question of
- They made partial payment but still left 8.9k balance as of law, CA forwarded to SC;
September 1969;

3. It appears than in 1964, Teodoro Jr executed a Deed of

Issues:
Assignment of Receivables in favour of MBC from Emergency
Employment Administration; W/N the assignment of receivables has the effect of payment of all
the loans contracted by the spouses; NO.
- Amounted to 44k;
W/N MBC must exhaust all legal remedies against PFC before it can
- The deed provided it was for consideration of certain
proceed against the spouses. NO.
credits, loans, overdrafts and other credit accommodations
extended to the spouses and Teodoro Sr as security for the payment
of said sum and interest thereon; and that they release and
Ratio:
quitclaim all its rights, title and interest in the receivables;
Assignment of credit:
- An agreement by virtue of which the owner of a
credit(assignor) by a legal cause (e.g. sale, dation in payment,
exchange or donation) and without the need of the consent of the
debtor, transfers his credit and its accessory rights to
another(assignee) who acquires the power to enforce it to the same
extent as the assignor could have enforced it against the debtor;
- May be in form of:
o Sale
o Dation in payment - when a debtor, in order to obtain a
release from his debt, assigns to his creditor a credit he has against
a third person;
o Donation – when it is by gratuitous title;
o Guaranty – creditor gives as a collateral, to secure his own
debt in favour of the assignee, without transmitting ownership;
- Obligations between the parties will depend upon the
juridical relation which is the basis of the assignment;
as security for the payment of said sum and interest thereon; also
quitclaim of rights to MBC of their interest in the receivables;
- Stipulated also that it was a continuing guaranty for future
loans and correspondingly, the assignment shall extend to all
accounts receivable;
Contention of spouses: not mere guaranty since it was stipulated:
- That the assignor release and quitclaim to assignee all its
rights, title and interest in the accounts receivable;
- That title and right of possession to account receivable is to
remain in assignee and it shall have right to collect directly from the
debtor; that whatever the assignor does in connection with
collection of such, it does so as agent and representative and in
trust of assignee;
- SC: character of transaction is not determined by the
language in document but by intention of the parties;
- If it was intended to secure the payment of money, it must
be construed as a pledge.

- A transfer of property by the debtor to a creditor, even if

What is the legal effect of the Assignment (since its validity is not in
sufficient on its farm to make an absolute conveyance, should be
question):
treated as a pledge if the debt continues in existence and is not
1. Assignment of receivables in 1964 did not transfer the discharged by the transfer;
ownership of the receivables to MBC and release the spouses from
their loans;
Assignment of receivables did not result from sale or by virtue of a
- Consideration was for certain credits, loans, overdrafts and
dation in payment;
credit accommodations worth 10k extended by MBC to spouses and
- At time the deed was executed, the loans were non-existent
yet;
- At most, it was a dation for 10k, the amount of credit with
MBC indicated in the deed; at the time of execution, there was no
obligation to be extinguished except for the 10k;
- 1292: in order that an obligation may be extinguished by
another which substitutes the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other;
Deed of assignment intended as collateral security for the loans, as
a continuing guaranty for whatever sums that would be owing by
spouses;
- 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 (Lopez v CA);
2. MBC need not exhaust all legal remedies against PFC:
- Spouses, not being released by the assignment, remain as
the principal debtors of MBC, rather than mere guarantors;
- The deed merely guarantees said obligations;
- 2058 (creditor must have exhausted property of debtor and
resorted to all legal remedies before it can proceed to guarantor)
does not apply to them;
- Appellants are both the principal debtors and the pledgors
or mortgagors;
- MBC did try to collect but at OP, it was disapproved; so the
loan was basically unsecured;
DISMISSED.
Feliciano, J. concurring.
Justice Bidin’s, "the character of the transactions between the
parties is not, however, determined by the language used in the
document but by their intention” – not without exception;
- Deed here contains language which suggest that the parties
intended complete alienation of title to and rights over the
receivables;
- Words ‘remise’, ‘release’ and ‘quitclaim’ and clauses ‘ title
the title and right of possession to said accounts receivable is to
remain in said assignee" who "shall have the right to collect directly
from the debtor’;
- Words ‘agent’ also convey the ideas;
- But such must be taken in conjunction with and qualified by
other language showing intent of the parties that title to the
receivables shall pass to the assignee for the limited purpose of
securing another, principal obligation owed by the assignor to the
assignee;
Title moves from assignor to assignee but that title is defeasible
being designed to collateralize the principal obligation:
- Operationally: means assignee is burdened to collateralize
the principal obligation; taking the proceeds of the receivables
assigned and applying such proceeds to the satisfaction of the
principal obligation and returning any balance remaining thereafter
to the assignor;
The parties gave the deed of assignment the form of an absolute
conveyance of title over the receivables assigned, essentially for the
convenience of the assignee:
- Without such nature of absolute conveyance, the assignee
would have to foreclose the properties; he would have to comply
with documentation and registration requirements of a pledge or
chattel mortgage);
- A deed of assignment by way of security avoids the
necessity of a public sale impose by the rule on pactum
commisorium, by in effect placing the sale of the collateral up front;
- The foregoing is applicable where the deed of assignment of
receivables combines elements of both a complete alienation of the
credits and a security arrangement to assure payment of a principal
obligation;
- Where the 2nd element is absent, the assignment would
constitute essentially a mode of payment or dacion en pago;
- in order that a deed of assignment of receivables which is in
form an absolute conveyance of title to the credits being assigned,
may be qualified and treated as a security arrangement, language to
such effect must be found in the document itself and that language,
precisely, is embodied in the deed of assignment in the instant case.
RURAL BANK OF CALOOCAN, INC. and JOSE O. DESIDERIO, JR., vs.
THE COURT OF APPEALS and MAXIMA CASTRO
G.R. No. L-32116 April 2l, 1981
De Castro, J.
Facts:
On December 7, 1959, respondent Maxima Castro, accompanied by
Severino Valencia, went to the Rural Bank of Caloocan to apply for
an industrial loan. It was Severino Valencia who arranged everything
about the loan with the bank and who supplied to the latter the
personal data required for Castro's loan application. On December
11, 1959, after the bank approved the loan for the amount of
P3,000.00, Castro, accompanied by the Valencia spouses, signed a
promissory note corresponding to her loan in favor of the bank.
On the same day, December 11, 1959, the Valencia spouses
obtained from the bank an equal amount of loan for P3,000.00.
They signed a promissory note (Exhibit "2") corresponding to their
loan in favor of the bank and had Castro affixed thereon her
signature as co-maker.
The two loans were secured by a real-estate mortgage (Exhibit "6")
on Castro's house and lot of 150 square meters, covered by Transfer
Certificate of Title No. 7419 of the Office of the Register of Deeds of
Manila.
On February 13, 1961, the sheriff of Manila, thru Acting Chief
Deputy Sheriff Basilio Magsambol, sent a notice of sheriff's sale
addressed to Castro, announcing that her property covered by T.C.T.
No. 7419 would be sold at public auction on March 10, 1961 to
satisfy the obligation covering the two promissory notes plus
interest and attorney's fees.
Upon request by Castro and the Valencias and with conformity of
the bank, the auction sale that was scheduled for March 10, 1961
was postponed for April 10, 1961. But when April 10, 1961 was
subsequently declared a special holiday, the sheriff of Manila sold
the property covered by T.C.T. No. 7419 at a public auction sale that
was held on April 11, 1961, which was the next succeeding business
day following the special holiday.
Castro alleged that it was only when she received the letter from
the Acting Deputy Sheriff on February 13, 1961, when she learned
for the first time that the mortgage contract (Exhibit "6") which was
an encumbrance on her property was for P6.000.00 and not for
P3,000.00 and that she was made to sign as co-maker of the
promissory note (Exhibit "2") without her being informed of this.
On April 4, 1961, Castro filed a suit denominated "Re: Sum of
Money," against petitioners Bank and Desiderio, the Spouses
Valencia, Basilio Magsambol and Arsenio Reyes as defendants in
Civil Case No. 46698 before the Court of First Instance of Manila
upon the charge, amongst others, that thru mistake on her part or
fraud on the part of Valencias she was induced to sign as co-maker
of a promissory note (Exhibit "2") and to constitute a mortgage on
her house and lot to secure the questioned note. At the time of
filing her complaint, respondent Castro deposited the amount of
P3,383.00 with the court a quo in full payment of her personal loan
plus interest.
In her amended complaint, Castro prayed, amongst other, for the
annulment as far as she is concerned of the promissory note (Exhibit
"2") and mortgage (Exhibit "6") insofar as it exceeds P3,000.00; for
the discharge of her personal obligation with the bank by reason of
a deposit of P3,383.00 with the court a quo upon the filing of her
complaint; for the annulment of the foreclosure sale of her property
covered by T.C.T. No. 7419 in favor of Arsenio Reyes; and for the
award in her favor of attorney's fees, damages and cost.
Issue:
THE COURT OF APPEALS ERRED IN UPHOLDING THE PARTIAL
ANNULMENT OF THE PROMISSORY NOTE, EXHIBIT 2, AND THE
MORTGAGE, EXHIBIT 6, INSOFAR AS THEY AFFECT RESPONDENT
MAXIMA CASTRO VIS-A-VIS PETITIONER BANK DESPITE THE TOTAL
ABSENCE OF EITHER ALLEGATION IN THE COMPLAINT OR
COMPETENT PROOF IN THE EVIDENCE OF ANY FRAUD OR OTHER
UNLAWFUL CONDUCT COMMITTED OR PARTICIPATED IN BY
PETITIONERS IN PROCURING THE EXECUTION OF SAID CONTRACTS
FROM RESPONDENT CASTRO.
Held:
At any rate, We observe that while the Valencias defrauded Castro
by making her sign the promissory note (Exhibit 2) and the
mortgage contract (Exhibit 6), they also misrepresented to the bank
Castro's personal qualifications in order to secure its consent to the
loan. This must be the reason which prompted the bank to contend
that it was defrauded by the Valencias. But to reiterate, We cannot
agree with the contention for reasons above-mentioned. However,
if the contention deserves any consideration at all, it is in indicating
the admission of petitioners that the bank committed mistake in
giving its consent to the contracts.
Thus, as a result of the fraud upon Castro and the misrepresentation
to the bank inflicted by the Valencias both Castro and the bank
committed mistake in giving their consents to the contracts. In
other words, substantial mistake vitiated their consents given. For if
Castro had been aware of what she signed and the bank of the true
qualifications of the loan applicants, it is evident that they would
not have given their consents to the contracts.
Pursuant to Article 1342 of the Civil Code, which provides:
Art. 1342. Misrepresentation by a third person does not vitiate
consent, unless such misrepresentation has created substantial
mistake and the same is mutual.
We cannot declare the promissory note (Exhibit 2) valid between
the bank and Castro and the mortgage contract (Exhibit 6) binding
on Castro beyond the amount of P3,000.00, for while the contracts
may not be invalidated insofar as they affect the bank and Castro on
the ground of fraud because the bank was not a participant thereto,
such may however be invalidated on the ground of substantial
mistake mutually committed by them as a consequence of the fraud
and misrepresentation inflicted by the Valencias. Thus, in the case
of Hill vs. Veloso, 10 this Court declared that a contract may be
annulled on the ground of vitiated consent if deceit by a third
person, even without connivance or complicity with one of the
contracting parties, resulted in mutual error on the part of the
parties to the contract.
PEDRO ALCANTARA vs. AMBROSIO ALINEA, ET AL.
March 22, 1907 G.R. No. 3227
Torres, J.
FACTS:
On February 29. 1904, Ambrosio Alinea and Eudosia Belarmino,
herein defendants, borrowed money from Pedro Alcantara, herein
plaintiff, amounting to 480 pesos, payable in January 1905. The
parties further agreed that if said amount should not be paid at the
expiration of the stated date it would be understood that the house
and lot owned by the defendants located in the town of San Pablo,
Laguna be considered as absolutely sold to the plaintiff for the said
sum. The time for payment for the said sum has expired and no
payment has been made. The defendants refuse to deliver the
house property to plaintiff. Hence, the plaintiff’s action.
ISSUE:
Whether or not the contract was one of pactum commissorium.
RULING:
We have in this case a contract of loan and a promise of sale of a
house and lot, the price of which should be the amount loaned, if
within a fixed period of time such amount should not be paid by the
debtor-vendor of the property to the creditor-vendee of same.
The property, the sale of which was agreed to by the debtors, does
not appear mortgaged in favorof the creditor, because in order to
constitute a valid mortgage it is indispensable that the instrument
be registered in the Register of Property, in accordance with article
1875 of the Civil Code. Said property could not be pledged as well,
not being personal property, and notwithstanding the said double
contract the debtor continued in possession thereof and the said
property has never been occupied by the creditor. Neither was
there ever nay contract of antichresis by reason of the said contract
of loan, as is provided in articles 1881 and those following of the
Civil Code, inasmuch as the creditor-plaintiff has never been in
possession thereof, nor has he enjoyed the said property, nor for
one moment ever received its rents; therefore, there are no proper
terms in law, taking into consideration the terms of the conditions
contained in the aforesaid contract, whereby this court can find that
the contract was null, and under no consideration whatever would
it be just to apply to the plaintiff articles 1859 and 1884 of the same
code.
The document of contract has been recognized by the defendant
Alinea and by the witnesses whosigned same with him, being
therefore an authentic and efficacious document, in accordance
with article 1225 of the Civil Code; and as the amount loaned has
not been paid and continues in possession of the debtor, it is only
just that the promise of sale be carried into effect, and the
necessary instrument be executed by the vendees.
These stipulations are in substance a pactum commissorium. They
embody the two elements of pactum commissorium, to wit:
(1) that there should be a pledge or mortgage wherein a property is
pledged or mortgagedby way of security for the payment of the
principal obligation;
(2) that there should be a stipulation for an automatic appropriation
by the creditor of thething pledged or mortgaged in the event of
non-payment of the principal obligation withinthe stipulated period.

The pactum commissorium referred to in Law 41, title 5, and law 12,
title 12, of the fifth Partida, and perhaps included in the prohibition
and declaration of nullity expressed in articles 1859 and 1884 of the
Civil Code, indicates the existence of the contracts of mortgage or of
pledge or that of antichresis, none of which have coincided in the
loan indicated herein.
PHILIPPINE NATIONAL BANK,
vs.
THE HON. COURT OF APPEALS (SPECIAL FIRST DIVISION), PEDRO
BITANGA, FERNANDO BITANGA, GREGORIO BITANGA, GUILLERMO
BITANGA, CLARITA BITANGA together with her husband AGRIPINO
L. RABAGO and MELITONA LAGPACAN, assisted by her husband
JORGE MALACAS.
G.R. No. L-34404. June 25, 1980.
Petition for REVIEW of the decision of the CA, which affirmed with
certain modifications the judgment of the CFI of Ilocos Norte in
favor of the respondents.
FACTS:
Property in question originally belonged to the conjugal property of
Inigo Bitanga and Rosa Ver. The original certificate of title was
issued to them and inserted in the register of deeds of Ilocos Norte.
However, this issuance was only given on December 15, 1937 which
was after Inigo died (September 25, 1935).
Still before the issuance of the title, Rosa mortgaged the entire
property in favour of PNB on October 20, 1936 for the sum of 500
pesos. However, the mortgaged lien was not annotated in the
register of deeds when the original certificate was issued.
Nevertheless, the power of attorney in favour of PNB stated that in
the event Rosa defaults, it would have the capacity to take
possession of, and retain the property mortgaged, to sell or lease
the same or any part of it, and to do such other acts as necessary in
the performance of the power granted to the mortgagee. This PA
was, on the other hand, annotated on the original certificate title.
Meanwhile, Rosa Ver defaulted in the fulfilment of her obligation
with Manila trading. So, MTC levied upon her share in the lot in
question on December 13, 1939 and had the attachment annotated
on the title. Rosa’s interest in the lot in question was sold at a public
auction and was sold to MTC as the highest bidder. A deed of sale
was executed in favour of MTC and was again annotated on the
title.
MTC sold its rights over the lot to Santiago Sambrano and, again,
had the sale annotated on the title. One-half of the property passed
into the hands of MELITONA LAGPACAN, and her husband JORGE
MALACAS.
Meanwhile, Rosa failed to settle her obligation with PNB. Hence,
PNB, pursuant to the PA, sold the WHOLE LOT at a public auction.
PNB became the owner since it was the highest bidder. Rosa failed
to redeem and PNB consolidated its title over the lot. However, the
consolidation was not annotated on the owner’s duplicate title since
Rosa failed to surrender it.
On November 25, 1950, PNB filed a petition before the trial court
which asked that the original title over the land be declared null and
void and prayed that a new title be issued in its name. Trial court
acted favourably on PNB’s petition and ordered what was prayed
for on October 2, 1951.
On May 24, 1954, PNB sold the property to Felizardo Reyes. A new
owner’s duplicate title was issued in Reyes’s name.
On May 17, 1954, the heirs of Heirs of Inigo Bitanga, filed a
complaint before the Court of First Instance of Ilocos Norte against
the Philippine National Bank, the Register of Deeds of Ilocos Norte
and Felizardo Reyes, for reconveyance of real property and
damages, with a prayer for the issuance of an ex-parte writ of
preliminary injunction restraining and enjoining the PNB and
Felizardo Reyes from consummating the sale of the property in
question and prohibiting the Register of Deeds from registering the
sale in favor of Felizardo Reyes. the writ of preliminary injunction
was issued. During the pendency of the case, Melitona Lagpacan
and Jorge Malacas, filed a Motion to admit their complaint in
intervention, alleging that they had a legal interest in the subject
matter of the case, and the same was granted.
On November 16, 1960, the CFI ruled in favour of the heirs of
Bitanga and the Malacas spouses. It mentioned that the lot in
question was conjugal in nature; that half would go to the heirs and
half would go to rosa ver. The mortgage to PNB is not an existing
lien since it did not have a special mention in the decree of
registration and that the acquisition of MTC was valid and legal.
Since the MTC acquisition was valid and legal, the sale made to
Sambrano is likewise valid and legal, as well as the sale to the
Malacas spouses.
Felizardo Reyes was deemed not a purchaser in good faith and the
trial ordered the cancellation of the duplicate title in Reyes’ name.
PNB and Reyes appealed to the CA. CA affirmed the judgment of the
lower court and ordered that new titles be issued in the names of
the heirs of Bitanga and spouses Malacas (half to the heirs and half
to the Spouses). It also mentioned that the new titles would be free
from encumberance regarding the claims of PNB and Reyes.
PNB filed an M.R. to the CA but was denied, hence, the current
petition.
In this petition, respondents filed a motion to dismiss on the ground
that the CA decision became final and executory since Reyes failed
to join PNB in this recourse. Moreover, it assailed the issues of PNB
because they were questions of fact and not of law, hence, they are
proper for the review of SC.
SC denied petition initially but PNB filed an M.R. stating that it still
has interests in the property. S.C. reconsidered.
ISSUES:
WON Rosa Ver could really mortgage the entire lot to PNB. (NO)
WON the sale of PNB and/or the sale of MTC were valid. (PNB:NO ;
MTC: YES)
HELD:
SC said that lot was conjugal. When Inigo died, a co-ownership was
established between the heirs and Rosa Ver. Hence, Rosa cannot
validly mortgage the whole lot since it would prejudice the rights of
her co-owners, the heirs.
One of the essential requisites to the contract of pledge and
mortgage is that the pledgor or mortgagor be the absolute owner of
the thing. The effect of the mortgage, with respect to the co-
owners, shall be limited to the portion which may be allotted to him
in the division upon the TERMINATION OF THE CO-OWNERSHIP.
Thus, Rosa could only mortgage her share and not the whole lot.
She cannot give what is not hers.
She only had usufrutuary rights over the estate left by the husband.
Not being an owner, she cannot alienate or dispose of the objects
included in the usufruct. (as per the old civil code which was in force
during the time of Inigo’s death).
Though there were tax declarations in the name of Rosa, it does not
alter the conjugality of the lot. Tax declarations are not sufficient
evidences of title and should not prejudice the rights of the co-
owners. As far as the shares are concerned, the respective shares of
the co-owners were not included in the mortgage.
Thus, mortgage/subsequent sale to PNB and subsequent sale of PNB
to Reyes were invalid.
On the other hand, there is no showing that the Manila Trading
Company (MTC) had any knowledge or notice of the prior mortgage
in favor of the PNB, hence, it may be safely presumed that it (MTC)
acquired the rights of Rosa Ver and Guillermo Bitanga as an
innocent purchaser for value and free from all incumbrances. From
the MTC, the aforesaid rights of Rosa and Guillermo passed to
Santiago Sambrano, and from the latter, to the Malacas Spouses.
There is no question, therefore, as to spouses’ rights over the
property, as against the PNB or its transferee, Felizardo Reyes. The
intervenors merely stepped into the shoes of MTC, a prior
purchaser in good faith, and thereby became entitled to all the
defenses available to said Company, including those arising from the
acquisition of the property in good faith and for value.
The judgment of the CA was AFFIRMED but was modified with
respect to the shares of the Spouses Malacas and the Heirs (since
the spouses stepped into the shoes of the MTC, they also acquired
the rights and interests of Guillermo Bitanga, hence the heirs now
have 2/5 while the spouses have 3/5).
Alcantara v. Alinea
Facts:
1. In 1904, Ambrosio Alinea and Eudosia Belarmino borrowed
from Pedro Alcantara the amount of 480 pesos, payable in January
1905.
2. It was agreed that if, at the expiration of the said period
and the said amount should not be paid, the house owned by the
defendants and located in the town of San Pablo be considered as
absolutely sold to the plaintiff for the said sum.
3. Although the time for the payment of said sum has expired
and no payment has been made, the defendants refused to deliver
to plaintiff the said property.
4. Defendants alleged that the principal borrowed was only
200 pesos and that the interest was 280 pesos, and that they
offered to pay the plaintiff the sum of 480 pesos, but the plaintiff
had refused to accept it.
5. Trial court ruled for the plaintiff.
Issue: Was the contract between the parties that of mortgage, or
pledge, or antichresis and was the contract against the law?
(Note: The dissent suggest that identifying the nature of the
contract between the parties was the issue because the Spanish law
then did not allow an agreement whereby the mere failure to pay
the loan at maturity shall divest a debtor of a specific property
without any right on his part to redeem the property (pledge,
mortgage). The contract in this case did not give to a debtor a right
to redeem.)
Decision: No on both issues.
Ratio:
1. The contract was that of loan and promise of sale of a house
and lot with the amount loaned as the price. Either one of the
contracts is perfectly legal and both are authorized by the Civil
Code.
2. The contract was not a mortgage because in order to
constitute a valid mortgage it is indispensable that the instrument
be registered in the Register of Property, in accordance with article
1875 of the Civil Code, and because said document was not vested
with the character and conditions of a public instrument.
3. The contract was not a pledge because the property was
not a personal property and because the debtor continued in
possession thereof and the said property has never been occupied
by the creditor.
4. The contract was not an antichresis too because the
creditor has never been in possession of the property, has not
enjoyed the said property, and has not received its rents.
5. As the amount loaned has not been paid and continued to
be in possession of the debtor, it is only just that the promise of sale
be carried into effect, and the necessary instrument be executed by
the vendees.
6. Judgment of the trial court for plaintiff Alcantara was
AFFIRMED.
REYES v. SIERRA
Facts:
• Vicente Reyes sought to register under his name a parcel of
land located in Antipolo, Rizal opposed by Sierra et al
• TC approved Reyes’ application, declaring him owner of said
land owing to his and his predecessor-in-interest’s constructive
possession of the same, particularly because they had been paying
the realty taxes thereon since 1926 until 1961
• Origin of the dispute over land was because in 1926, the
Sierras’ predecessor, Basilia Beltran, borrowed P100 from Vicente
Reyes, Sr. and secured the loan with the said piece of land. In so
doing, Basilia’s children executed together with her a document
(“katibayan ng papgpapahintulot sa aming ina na ipananagutan kay
Vicente Reyes sa inutang na halagang P100”)
• Beltran, however, died in 1938 without being able to pay
the loan and Vicente Reyes, Jr. continued in possession thereof,
believing that the document executed was a contract of sale and
not of mortgage
• Oppositors Sierra et al now claiming that the words
“sangla”, “ipinanagutan sa halagang isangdaang piso” manifest that
the document was one of mortgage
Issue: What was the nature of the document? determinative of
the land’s ownership
Held/Ratio:
• It is a mortgage contract. The intention of the parties at the
time it was executed must prevail, i.e., the borrowing and lending of
money with security. The terms indicate a debt and the creation of
a creditor-debtor relationship, where the land was used to secure
repayment of the loan.
• Following established doctrine, once a mortgage attaches to
a transaction, its character as a mortgage will always continue. The
parties cannot by any stipulation deprive it of the essential
attributes of a mortgage in equity. Civil Code itself provides: The
creditor cannot appropriate the things given by way of mortgage
• Act of Vicente Reyes in registering the property in his name
after failure of mortgagor to redeem the property constitutes a
pactum commisorium which is against good morals and public
policy.
• Court also declared that possession by Reues has not been
continuous (they had only used the property to spend some
vacation time there, but this was discontinued for the last 23 years).
Moreover, mere failure of owner to pay taxes does not necessarily
imply abandonment of a right to property; and on the other hand,
payment of realty taxes by itself does not constitute sufficient
evidence of title.
• Application by Reyes for registration should therefore be
dismissed. Oppositors directed to pay back the P100 debt plus
interest (6% p.a.) from 1926 until paid.
HECHANOVA vs ADIL
(G.R. No. L-49940, September 25, 1986)
P20,000.00, plus interests, and to order defendants to pay damages.
Attached to the complaint was a copy of the private document
evidencing the alleged mortgage (Annex A), which is quoted
hereunder:
August 20, 1970
This is to certify that I, Jose Yusay Servando, the sole owner of three
parcel of land under Tax Declaration No. 28905, 44123 and 31591 at
Lot No. 1, 1863- Portion of 1863 & 1860 situated at Sto. Nino St.,
Arevalo, Compania St. & Compania St., Interior Molo, respectively,
have this date mortgaged the said property to my cousin Pio
Servando, in the amount of TWENTY THOUSAND PESOS
(P20,000.00), redeemable for a period not exceeding ten (10) years,
the mortgage amount bearing an interest of 10% per annum.

GEMMA R. HECHANOVA, accompanied by her husband, NICANOR

I further certify that in case I fail to redeem the said properties
HECHANOVA, JR., and PRESCILLA R. MASA, accompanied by her
within the period stated above, my cousin Pio Servando, shall
husband, FRANCISCO MASA, petitioners, vs. HON. MIDPANTAO L.
become the sole owner thereof.
ADIL, Presiding Judge, Branch II, Court of First Instance of Iloilo,
THE PROVINCIAL SHERIFF OF ILOILO, and PIO SERVANDO,
respondents.
ISSUE: WON the sale can be annulled by reason that a mortgages
has been constituted on the subject properties. NO

FACTS:

HELD:

Pio Servando sought to annul the sale made by Jose

Servando of three parcels of land which according to him were Plaintiff has no standing to question the validity of the deed of sale
mortgaged in his favor. Alternatively, if the sale is not annulled, to executed by the deceased defendant Jose
order the defendant Jose Servando to pay the amount of
Servando in favor of his co-defendants Hechanova and Masa. No
valid mortgage has been constituted plaintiff's favor, the alleged
deed of mortgage being a mere private document and not
registered; moreover, it contains a stipulation (pacto comisorio)
which is null and void under Article 2088 of the Civil Code. Even
assuming that the property was validly mortgaged to the plaintiff,
his recourse was to foreclose the mortgage, not to seek annulment
of the sale.
Central Bank v. CA
G.R. No. L-45710, October 3, 1985, 139 SCRA 46
FACTS:
On April 28, 1965, Island Savings Bank, upon favorable
recommendation of its legal department, approved the loan
application for P80,000.00 of Sulpicio M. Tolentino, who, as a
security for the loan, executed on the same day a real estate
mortgage over his 100-hectare land located in Cubo, Las Nieves,
Agusan, and covered by TCT No. T-305, and which mortgage was
annotated on the said title the next day. The approved loan
application called for a lump sum P80,000.00 loan, repayable in
semi-annual installments for a period of 3 years, with 12% annual
interest. It was required that Sulpicio M. Tolentino shall use the loan
proceeds solely as an additional capital to develop his other
property into a subdivision. The loan called for a lump sum of
P80,000, repayable in semi-annual installments for 3 yrs, with 12%
annual interest. After the agreement, a mere P17,000 partial release
of the loan was made by the bank and Tolentino and his wife signed
a promissory note for the P17,000 at 12% annual interest payable
w/in 3 yrs. An advance interest was deducted fr the partial release
but this prededucted interest was refunded to Tolentino after being
informed that there was no fund yet for the release of the P63,000
balance.
On August 13, 1965, the Monetary Board of the Central Bank, after
finding Island Savings Bank was suffering liquidity problems, issued
Resolution No. 1049, which provides the prohibition of the bank
from making new loans and investments [except investments in
government securities] excluding extensions or renewals of already
approved loans, provided that such extensions or renewals shall be
subject to review by the Superintendent of Banks, who may impose
such limitations as may be necessary to insure correction of the
bank’s deficiency as soon as possible.
ISSUES:
Can the action of Sulpicio M. Tolentino for specific performance
prosper?
RULING:
In reciprocal obligations, the obligation or promise of each party is
the consideration for that of the other and when one party has
performed or is ready and willing to perform his part of the
contract, the other party who has not performed or is not ready and
willing to perform incurs in delay (Art. 1169 of the Civil Code). The
promise of Sulpicio M. Tolentino to pay was the consideration for
the obligation of Island Savings Bank to furnish the P80,000.00 loan.
When Sulpicio M. Tolentino executed a real estate mortgage on
April 28, 1965, he signified his willingness to pay the P80,000.00
loan. From such date, the obligation of Island Savings Bank to
furnish the P80,000.00 loan accrued. Thus, the Bank’s delay in
furnishing the entire loan started on April 28, 1965, and lasted for a
period of 3 years or when the Monetary Board of the Central Bank
issued Resolution No. 967 on June 14, 1968, which prohibited Island
Savings Bank from doing further business. Such prohibition made it
legally impossible for Island Savings Bank to furnish the P63,000.00
balance of the P80,000.00 loan. The power of the Monetary Board
to take over insolvent banks for the protection of the public is
recognized by Section 29 of R.A. No. 265, which took effect on June
15, 1948, the validity of which is not in question.
Rose Packing Co. vs. Court of Appeals 167 SCRA 309
Facts: This is a petition for review on certiorari of the decision of the
Court of Appeals in CA-G.R. No. 431 98-12 promulgated on
December 16, 1070.
On December 12, 1962 respondent bank Philippine Commercial and
Industrial Bank (PCIB) approved a letter request by petitioner for
the reactivation of its overdraft line of P50,000.00, discounting line
of P100,000.00 and a letter of credit-trust receipt line of
P550,000.00 as well as an application for loan of P300,000.00 on
fully secured real estate and chattel mortgage and on the further
condition that respondent PCIB appoint its executive vice-president
Roberto S. Benedicto as its representative in petitioner’s board of
directors.
On November 3, 1965 the National Investment and Development
(NIDC), approved a P2.6 million loan application of petitioner with
certain conditions. The NIDC released to petitioner the amount of P
100,000.00. Petitioner purchased five (5) parcels of land in Pasig,
Rizal making down payment thereon.
August 3, 1966 and October 5,, 1966, respondent PCIB approved
additional accommodations to petitioner consisting of P 710,000.00
loan for the payment of the balance of the purchase price of those
lots in Pasig. However, PCIB released only P 300,000.00 of the P
710,000.00 on approved loan for the payment of the Pasig lands
and some P 300, 000.00 for operating capital.
On June 29 1967, the Development Bank of the Philippines
approved on application by petitioner for a loan of P 1,840,000.00
and a guarantee for $ 652,682.00 for the purchase of can making
equipment. Petitioner advised respondent PCIB of the availability of
P 800,000.00 to partially pay off its account and requested the
release of the titles to the Pasig lots for delivery to the DBP.
On January 5, 1968 respondent PCIB filed a complaint against
petitioner and Rene Knecht, its president for the collection of
petitioner’s indebtedness to respondent bank. The PCIB gave
petitioner notice that it would cause the real estate mortgage to be
foreclosed at an auction sale.
Petitioner filed a complaint in the Court of First Instance of Rizal to
enjoin respondents PCIB and the sheriff from the proceeding with
the foreclosure sale, and to ask the lower court to fix a new period
for the payment of the obligations of petitioner to PCIB. The lower
court issued an order denying the petition. The petitioner filed with
respondent Court of Appeals a petition for certiorari with
application for restraining order and preliminary injunction. Hence,
the petition is also denied.
Issue: Whether or not private respondent have the right to the
extra-judicial foreclosure sale of petitioner’s mortgaged properties
before trial on the merits.
Held: (1) The decision of the Court of Appeals is REVERSED insofar as
it sustained (a) the lower court’s denial of petitioner’s application
for preliminary injunction and (b) the validity of the foreclosure sale;
(2) the lower court is ordered to proceed with the trial on the merits
of the main case together with a determination of exactly how
much are petitioner’s liabilities in favor of respondent bank PCIB so
that proper measures may be taken for their eventual liquidation;
(3) the preliminary
Injunction issued by this Court on April 28, 1971 remains in force
until the merits of the main case are resolved; and (4) the motion of
respondent bank dated April 1, 1981, for leave to lease the real
properties in custodia legis is denied.
The loans of petitioner corporation from respondent bank were
supposed to become due only at the time that if receives from the
NIDC and PDCP the proceeds of the approved scheme. As it is, the
conditions did not happen.
For an obligation to become due there must generally a demand.
Default generally begins from the moment the creditor demands
the performance of the obligation. Without such demand, judicial or
extra-judicial, the effects of default will not arise.
POSSESION
Banco Espanol Filipino v Peterson (1907)
Facts: On March 4, 1905, Banco Espanol Filipino (BEP) executed a
contract of loan in favor of Francisco Reyes for P141 702.00. Reyes
was already indebted to the bank for P84 415.00. His total debt was
therefore P226 117.38. To secure payment of the P141k and the
P84k, Reyes executed a public instrument mortgaging several of his
properties and ledging part of his personal property to BEP (P90
591.75 worth of wines, liquors and canned goods), which were
stored at a warehouse he rented in Manila. BEP and Reyes agreed
that the goods should be delivered to Ramon Garcia (depositary) for
safekeeping. Reyes turned over the goods to R. Garcia by giving him
the warehouse keys. On September 29, 1905, BEP and Reyes
substituted Luis Sierra in place of R. Garcia as the depositary. On
October 19, 1905, Juan Garcia (yes, related to Ramon) brought an
action against Francisco Reyes and Ramon Agtarat. CFI Manila ruled
against Reyes and Agtarat for P15 000.00. On the same day, Sheriff
James Peterson entered the warehouse where the goods pledged to
BEP were stored under the custody of the depositary, Sierra.
Peterson levied upon P30 000 worth of the goods pledged to the
bank, depriving the latter of possession of the same, as stipulated in
the March 4 contract of loan.
Issues
1. Was the contract of pledge between BEP and Reyes to
secure a loan valid?
2. Was Reyes still in possession of the pledged property,
thereby making the contract defective?
Ruling:
The contract was valid. Reyes was no longer in possession of the
pledged property. BEP had symbolic possession of the same.
The contract complies with all the requisites of a valid pledge
contract, as prescribed by the Civil Code:
1. The property was pledged to secure a debt
2. The date of execution, the terms of the pledge, and the property
pledged appeared in a public instrument
3. The property pledged was placed in the hands of a third person
(in this case, Sierra) by common consent of the debtor and creditor,
under the supervision of an agent (in this case, Rodriguez) of the
bank
Reyes, after the pledge, parted with the possession of his personal
property, which was delivered to a third person (R. Garcia, and
subsequently, Sierra) who would take care of them for BEP. Sierra
was the third person appointed by common consent of BEP
(creditor) and Reyes (debtor), to hold possession over the goods
pledged in favor of the bank under the direct supervision of
Rodriguez, an agent specifically appointed by the bank. The contract
in question was, therefore, a perfect contract of pledge under
articles 1857 and 1863 of the Civil Code, it having been conclusively
shown that the pledgee (BEP) took charge and possession of the
goods pledged through a depositary (Sierra) and a special agent
(Rodriguez) appointed by it, each of whom had a duplicate key to
the warehouse wherein the said goods were stored, and that the
pledgee (BEP), itself, received and collected the proceeds of the
goods as they were sold. The legality of the pledge was not affected
by the fact that the goods remained in the warehouse formerly
rented by Reyes the pledgor. This is because after the pledge had
been agreed upon, and after the depository appointed with
common consent of the parties had taken possession of the said
property, Reyes could no longer dispose of the same because BEP
was the only party allowed to do so through Sierra and Rodriguez.
The symbolic transfer of the goods through delivery of the keys to
the warehouse where the goods were stored was sufficient
evidence to show that Sierra, the depositary appointed by both BEP
and Rodriguez, was legally placed in possession of the goods. Since
the contract of pledge was valid, BEP had a better right to the goods
compared to J. Garcia. The Court ordered either the return of the
improperly levied goods, or the payment of their value, P30 000.
Mobil Oil Philippines, Inc. v. Diocares (Fernando, 1969)
• In February 1965, Mobil Oil Philippines, Inc. (Mobil Oil)
extended a PhP 45 000 loan to Ruth Diocares and Lope Diocares
(Diocares) in a condition that Diocares would buy on cash basis from
Mobil Oil a minimum of 50 000 liters of petroleum per month.
o Payment of the loan would be in monthly installments of
PhP 950 per month for a period of five years.
o As security, Diocares executed a mortgage on two parcels of
land.
o In case of non-payment of any installment or/and non-
performance of the condition (to buy petroleum), Mobil Oil had the
right to foreclose.
• Diocares defaulted when the third installment was due.
o Only PhP 1900 was paid, leaving a balance of PhP 43 000.
o Diocares also failed to buy the minimum amount of
petroleum per month.
• Mobil Oil filed a complaint and prayed that they be paid PhP
43 000 with interest or, in default of payment, they be allowed to
sell the mortgaged properties.
o Defense: There was no refusal of payment. They only
sought for an extension of time.
• LC: The loan agreement created a personal obligation but it
did not establish a real estate mortgage because the mortgage was
not registered. Hence, foreclosure cannot be ordered by the LC.
Issue/Held: W/N the mortgage contract, although unregistered, is
binding between the same parties who created it. Yes.
Ratio:
1. Article 2125 is clear and explicit. Even if the instrument
were not recorded, “the mortgage is nevertheless binding between
the parties.” As between them, the mere fact that there is as yet no
compliance with the requirement that it be recorded cannot be a
bar to foreclosure.
2. To hold otherwise would defeat the clear codal provision
that the mortgage subsists despite lack of registration insofar as the
parties thereto are concerned, and that the mortgagor is still liable
thereon. Furthermore, while the law says that registration is
“indispensable” in order that the mortgage be validly constituted,
yet, what is indispensable may be dispensed with.
Dispositive: GRANTED.
DILAG VS. HEIRS OF RESURRECION
FACTS:
Laureano Marquez was indebted to Fortunato Resurreccion in the
sum of P5,000 as the balance of the purchase price of a parcel of
land. Fortunato Resurreccion in turn was indebted to the Luzon
Surety Company in the same amount, which was secured by a
mortgage on three parcels of land, one of which was that bought by
Laureano Marquez from him. The formal deed of sale from
Resurreccion to Marquez was to be executed after Marquez shall
have fully paid the purchase price and after Ressurreccion shall have
secured the cancellation of the mortgage by the Luzon Surety
Company.
Laureano Marquez had agreed to pay Fortunato Resurreccion's
indebtedness of P5,000 to the Luzon Surety Company by way of
satisfaction of his own indebtedness to Fortunato Resurreccion in
the same amount.
He bound himself as follows: "In the event an action is presented by
the Luzon Surety Company against Fortunato Resurreccion for the
recovery of the said indebtedness and the interests thereon, I,
Laureano Marquez, obligate myself to indemnify Fortunato
Resurreccion for all the damages he may suffer in case the parcels
of land mortgaged to the Luzon Surety Company are sold at public
auction, including the fees of the attorneys of Fortunato
Resurreccion in the suit brought by the Luzon Surety Company as
well as in the action that Fortunato Resurreccion may bring against
me in relation to this agreement." .
Laureano Marquez failed to pay the indebtedness of Fortunato
Resurreccion to the Luzon Surety Company, and the latter
foreclosed judicially the mortgage executed in its favor by Fortunato
Resurreccion.
Pending the foreclosure sale of the lands mortgaged by
Resurreccion to the Luzon Surety Company, Laureano Marquez
executed and delivered to Fortunato Resurreccion another
document. Since Laureano Marquez did not fulfill his promise
contained in the first clause of the instrument, with the result that
the mortgaged properties were sold at public auction and were
totally lost by Fortunato Resurreccion, the latter commenced the
present action against Laureano Marquez upon the instrument (1)
to recover the value of the lost properties amounting to P16,500,
with legal interest thereon from the date of the filing of the
complaint, plus P2,000 as indemnity for the rents of the lands sold
and P1,000 as attorney's fees, and (2) to foreclose the mortgage
embodied in said instrument.
Issue:
Whether or not the mortgage was valid
Ruling:
No. The five parcels are said to have been acquired by Laureano
Marquez subsequent to the execution of Exhibit A. In the fifth
clause of said document Laureano Marquez stipulated that
inasmuch as the five parcels of land described in the fourth clause
were not sufficient to cover all his obligations in favor of Fortunato
Resurreccion, he also constituted a mortgage in favor of the latter
and his assignees on any other property he then might have and on
those he might acquire in the future. Such a stipulation did not
constitute a valid mortgage on the five other parcels of land which
Laureano Marquez subsequently acquired. In the first place,
Laureano Marquez could not legally mortgage any property he did
not yet own. In the second place, in order that a mortgage may be
validly constituted the instrument by which it is created must be
recorded in the registry of deeds, and in so far as the additional as
parcels of land are concerned, the registration of Exhibit A did not
affect and could not have affected them because they were not
specifically described therein.
The contention of the respondents that after the institution of the
present action notice of lis pendens was filed in the registry of
deeds affecting the said five additional parcels of land, merely
serves to emphasize the fact that there was no mortgage thereon;
otherwise there would have been no necessity for any notice of lis
pendens.
PEOPLE'S BANK AND TRUST CO. vs. DAHICAN LUMBER COMPANY of the lumber concession amounting to the sum of $450,000.00.
Both deeds contained a provision extending the mortgage lien to
G.R. No. L-17500 May 16, 1967
properties to be subsequently acquired by the mortgagor.

Facts:
Both mortgages were registered in the Office of the Register of
Deeds of Camarines Norte. In addition thereto DALCO and DAMCO
pledged to the BANK 7,296 shares of stock of DALCO and 9,286
On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a shares of DAMCO to secure the same obligation.
West Virginia corporation licensed to do business in the Philippines
sold and assigned all its rights in the Dahican Lumber concession to
Dahican Lumber Company - hereinafter referred to as DALCO - for
Upon DALCO's and DAMCO's failure to pay the fifth promissory note
the total sum of $500,000.00, of which only the amount of
upon its maturity, the BANK paid the same to the Export-Import
$50,000.00 was paid. Thereafter, to develop the concession, DALCO
Bank of Washington D.C., and the latter assigned to the former its
obtained various loans from the People's Bank & Trust Company
credit and the first mortgage securing it. Subsequently, the BANK
amounting, as of July 13, 1950, to P200,000.00. In addition, DALCO
gave DALCO and DAMCO up to April 1, 1953 to pay the overdue
obtained, through the BANK, a loan of $250,000.00 from the Export-
promissory note.c
Import Bank of Washington D.C., evidenced by five promissory
notes of $50,000.00 each, maturing on different dates, executed by
both DALCO and the Dahican America Lumber Corporation, a
After July 13, 1950 - the date of execution of the mortgages
foreign corporation and a stockholder of DALCO,
mentioned above - DALCO purchased various machineries,
equipment, spare parts and supplies in addition to, or in
replacement of some of those already owned and used by it on the
As security for the payment of the abovementioned loans, on July
date aforesaid. Pursuant to the provision of the mortgage deeds
13, 1950 DALCO executed in favor of the BANK a deed of mortgage
quoted theretofore regarding "after acquired properties," the BANK
covering five parcels of land situated in the province of Camarines
requested DALCO to submit complete lists of said properties but the
Norte together with all the buildings and other improvements
latter failed to do so. In connection with these purchases, there
existing thereon and all the personal properties of the mortgagor
appeared in the books of DALCO as due to Connell Bros. Company
located in its place of business in the municipalities of Mambulao
(Philippines) - a domestic corporation who was acting as the general
and Capalonga, Camarines Norte. On the same date, DALCO
purchasing agent of DALCO -the sum of P452,860.55 and to DAMCO,
executed a second mortgage on the same properties in favor of
the sum of P2,151,678.34
ATLANTIC to secure payment of the unpaid balance of the sale price
On December 16, 1952, the Board of Directors of DALCO, in a WON the "after acquired properties" were subject to the deeds of
special meeting called for the purpose, passed a resolution agreeing mortgage mentioned heretofore. Assuming that they are subject
to rescind the alleged sales of equipment, spare parts and supplies thereto,
by CONNELL and DAMCO to it.
WON the mortgages are valid and binding on the properties
aforesaid inspite of the fact that they were not registered in
accordance with the provisions of the Chattel Mortgage Law.
On January 13, 1953, the BANK, in its own behalf and that of
ATLANTIC, demanded that said agreements be cancelled but
CONNELL and DAMCO refused to do so. As a result, on February 12,
HELD:
1953; ATLANTIC and the BANK, commenced foreclosure
proceedings in the Court of First Instance of Camarines Norte
against DALCO and DAMCO.
Under the fourth paragraph of both deeds of mortgage, it is crystal
clear that all property of every nature and description taken in
exchange or replacement, as well as all buildings, machineries,
Upon motion of the parties the Court, on September 30, 1953,
fixtures, tools, equipments, and other property that the mortgagor
issued an order transferring the venue of the action to the Court of
may acquire, construct, install, attach; or use in, to upon, or in
First Instance of Manila.
connection with the premises - that is, its lumber concession - "shall
immediately be and become subject to the lien" of both mortgages
in the same manner and to the same extent as if already included
On August 30, 1958, upon motion of all the parties, the Court
therein at the time of their execution. Such stipulation is neither
ordered the sale of all the machineries, equipment and supplies of
unlawful nor immoral, its obvious purpose being to maintain, to the
DALCO, and the same were subsequently sold for a total
extent allowed by circumstances, the original value of the
consideration of P175,000.00 which was deposited in court pending
properties given as security.
final determination of the action. By a similar agreement one-half
(P87,500.00) of this amount was considered as representing the
proceeds obtained from the sale of the "undebated properties"
Article 415 does not define real property but enumerates what are
(those not claimed by DAMCO and CONNELL), and the other half as
considered as such, among them being machinery, receptacles,
representing those obtained from the sale of the "after acquired
instruments or replacements intended by owner of the tenement
properties".
for an industry or works which may be carried on in a building or on
ISSUE: a piece of land, and shall tend directly to meet the needs of the said
industry or works. On the strength of the above-quoted legal
provisions, the lower court held that inasmuch as "the chattels were
placed in the real properties mortgaged to plaintiffs, they came
within the operation of Art. 415, paragraph 5 and Art. 2127 of the
New Civil Code". In the present case, the characterization of the
"after acquired properties" as real property was made not only by
one but by both interested parties. There is, therefore, more reason
to hold that such consensus impresses upon the properties the
character determined by the parties who must now be held in
estoppel to question it
principal obligation to secure as the loan of P75,000.00 was not
received by the Lozano spouses, so that in the absence of a principal
obligation, there is want of consideration in the accessory contract,
which consequently impairs its validity and fatally affects its very
existence.
Issue: Was there a perfected contract of loan?

Held: Yes. From the recitals of the mortgage deed itself, it is clearly
seen that the mortgage deed was executed for and on condition of
the loan granted to the Lozano spouses. The fact that the latter did
not collect from the respondent Bank the consideration of the
Bonnevie v. CA mortgage on the date it was executed is immaterial. A contract of
loan being a consensual contract, the herein contract of loan was
GR No. L-49101 October 24, 1983
perfected at the same time the contract of mortgage was executed.
The promissory note executed on December 12, 1966 is only an
evidence of indebtedness and does not indicate lack of
Facts: Spouses Lozano mortgaged their property to secure the consideration of the mortgage at the time of its execution.
payment of a loan amounting to 75K with private respondent
Philippine Bank of Communication (PBCom). The deed of mortgage
was executed on 12-6-66, but the loan proceeeds were received
only on 12-12-66. Two days after the execution of the deed of
mortgage, the spouses sold the property to the petitioner Bonnevie
for and in consideration of 100k—25K of which payable to the
spouses and 75K as payment to PBCom. Afterwhich, Bonnevie
defaulted payments to PBCom prompting the latter to auction the
property after Bonnivie failed to settle despite subsequent
demands, in order to recover the amount loaned. The latter now
assails the validity of the mortgage between Lozano and Pbcom
arguing that on the day the deed was executed there was yet no