PHILIPPINE NATIONAL BANK vs. HEIRS OF BENEDICTO AND AZUCENA ALONDAY G.R. No. 171865, O!o"#$ 1%, %&16, '. B#$s()*+ In order for the all-embracing or dragnet clauses to secure future and other loans, the loans thereby secured must be suciently described in the mortgage contract.
F(!s In 1974, the Sps. Alonday obtained an agricultural loan by mortgaging their property in Davao covered by O! "o. #$%&99. 'ater, the Sps. Alonday obtained a commercial loan by mortgaging their residential lot covered by !! ! ! "o. !$((1%9. "otably, the mortgage contracts both contained a dragnet clause, )hich state that the *mortgage shall also stand as security +or said obli ob liga gati tion ons s an and d an any y an and d al alll ot othe herr ob obli liga gati tion ons s o+ th the e o ort rtga gago gorr to th the e ortgagee o+ )hatever -ind and nature, )hether such obligations have been contracted be+ore, during or a+ter the constitution o+ this mortgage. !he second loan )as +ully paid. !he /rst loan, ho)ever, )as not. 0ence, petitioner +oreclosed the property mortgaged as a security +or the /rst loan. ut since the proceeds o+ the sale )ere not su2cient to cover the balance o+ the /rst loan, petitioner also +oreclosed +oreclosed the property mortgaged to secure the second loan. !he Sps. Alonday /led a complaint against petitioner recover damages and attorneys +ees, averring that the +oreclosure )as illegal. !he 3! and A ruled in +avor o+ the Sps Alonday.
Iss-#s 1
5het eth her the the drag agne nett cla laus use e in the the /rs rstt mo morrtga gage ge con contr tra act +or the the security o+ the /rst loan could authori6e the +oreclosure o+ the property under the mortgage to secure a second loan despite the +ull payment o+ the second loan. 5het 5h ethe herr the the a) a)ar ard d o+ da dama mage ges s and and at atto torn rney eys s +ee +ees s is is pro prope perr.
R-*+/ 1 !he !h e drag dragne nett clau clause se con conta tain ined ed iin n the the /rst /rst mor mortg tgag age e cont contra ract ct e8 e8ec ecut uted ed bet)een the parties +or the security o+ the /rst loan could not authori6e the +oreclosure o+ the property under the mortgage to secure the second loan. In order +or the all$embracing or dragnet clauses to secure +uture and other loans, the loans thereby secured must be su2ciently described in the mortga mor tgage ge con contra tract. ct. on onsid sideri ering ng tha thatt the agr agricu icultu ltura rall loa loan n had bee been n pr pre$ e$ e8isting )hen the mortgage )as constituted on the property covered by !! "o. !$((1%9, it )ould have been easy +or the petitioner to have e8pressly incorporated the re+erence to such agricultural loan in the mortgage contract covering the commercial loan. ut the petitioner did not. eing the party that
had prepared the contract o+ mortgage, its +ailure to do so should be construed that it did not at all contemplate the earlier loan )hen it entered into the subseuent mortgage. oreover, the mortgage contracts e8ecuted by the Spouses Alonday )ere contracts o+ adhesion e8clusively prepared by the petitioner. A contract o+ adhesion, albeit valid, becomes ob:ectionable only )hen it ta-es undue advantage o+ one o+ the parties the )ea-er party$ by having such party :ust adhere to the terms o+ the contract. 0ence, the mortgage contracts in this case should be construed strictly against the petitioner as the party )ho had dra+ted the same. !he a)ard o+ damages is not proper. !he amount o+ actual damages a)arded must be reduced because the amount upon )hich the initial a)ard )as based is merely an assertion that is not supported by evidence. #etitioner should also be made liable +or compensatory interest, )hich is imposed by la) or by courts as penalty or indemnity +or damages. #etitioner is liable +or interest on the actual damage, representing the value o+ the property that )as lost to the Sps. Alonday through the un)arranted +oreclosure, the same to be rec-oned +rom the date o+ :udicial demand ;i.e., the /ling o+ the action by the Spouses Alonday. At the time thereo+, the rate )as 1< per annum, and such rate shall run until =une %>, >1%. !herea+ter, or starting on =uly 1, >1%, the rate o+ interest shall be (< per annum until +ull payment o+ the obligation. In addition, Article 1 o+ the ivil ode reuires that interest due shall earn legal interest +rom the time it is :udicially demanded, although the obligation may be silent upon this point. Accordingly, the interest due shall itsel+ earn legal interest o+ (< per annum +rom the date o+ /nality o+ the :udgment until its +ull satis+action, the interim period being deemed to be an euivalent to a +orbearance o+ credit.
E0ELYN 0. RUIZ vs. BERNARDO F. DIAILIG G.R. No. %&2%8&, Nov#)"#$ 3, %&16, '. D#4C(s!*o The doctrine of mortgagee in good faith assumes that the title to the subject property had already been transferred or registered in the name of the impostor who thereafter transacts with a mortgagee who acted in good faith.
F(!s 3espondent ernardo ?. Dimailig ;ernardo )as the registered o)ner o+ a parcel o+ land in avite. 0e entrusted the o)ner@s copy o+ the !! to his brother, )ho, in turn, gave it to ditha Sanggalang, a bro-er +or the property@s intended sale. 0o)ever, the property )as mortgaged by ditha to velyn B. 3ui6 ;velyn as evidenced by a Deed o+ 3 )ithout ernardoCs -no)ledge and consent. 0ence, ernardo instituted this suit +or annulment o+ the Deed o+ 3.
In her Ans)er, velyn claimed that he is a mortgagee in good +aith and +or value. 0ence, the 3 cannot be annulled and she had the right to -eep the o)nerCs copy o+ the !! until the loan )as +ully paid to her. !he 3! dismissed the omplaint and held that velyn is a mortgagee in good +aith. !he A, ho)ever, reversed the ruling o+ the 3!.
Iss-# 5hether petitioner is a mortgagee in good +aith.
R-*+/ #etitioner is not a mortgagee in good +aith. "o valid mortgage )ill arise unless the mortgagor has a valid title or o)nership over the mortgaged property. y )ay o+ e8ception, a mortgagee can invo-e that he or she derived title even i+ the mortgagorCs title on the property is de+ective, i+ he or she acted in good +aith. In such instance, the mortgagee must prove that no circumstance that should have aroused her suspicion on the veracity o+ the mortgagorCs title on the property )as disregarded. !he doctrine o+ mortgagee in good +aith assumes that the title to the sub:ect property had already been trans+erred or registered in the name o+ the impostor )ho therea+ter transacts )ith a mortgagee )ho acted in good +aith. In this case, the title remained to be registered in the name o+ ernardo, the right+ul and real o)ner, and not in the name o+ the impostor. !he burden o+ proo+ that one is a mortgagee in good +aith and +or value lies )ith the person )ho claims such status. ood +aith entails an honest intention to re+rain +rom ta-ing unconscientious advantage o+ another. In this case, velyn insists that she is a mortgagee in good +aith and +or value. !hus, she has the burden to prove such claim and must provide necessary evidence to support the same. En+ortunately, velyn +ailed to discharge her burden. ?irst, the Deed o+ 3 )as established to be a +orged instrument. Second, the sub:ect property remained registered in the name o+ ernardo. !hird, even assuming that the impostor has caused the property to be titled in his name, velyn )ould still not be deemed a mortgagee in good +aith because she did not ta-e the necessary steps to determine any de+ect in the title o+ the alleged o)ner o+ the mortgaged property.
GILAT SATELLITE NETORKS, LTD. vs. UNITED COCONUT PLANTERS BANK GENERAL INSURANCE CO., INC. G.R. No. 18356, D##)"#$ 7, %&16, C.'. S#$#+o
Although the contract of a surety is in essence secondary only to a valid principal obligation, the surety's liability to the creditor or the promise'' of the principal is direct, primary and absolute.
F(!s One Birtual, a domestic corporation, and ilat Satellite "et)or-s, 'td. ;*ilat, an Israeli ompany, entered into a #urchase Agreement. !he #urchase Agreement contains an Arbitration lause )herein in case o+ disputes, the parties obliged themselves to submit the dispute to arbitration in accordance )ith the la)s o+ the Enited States. #ursuant to the #urchase Agreement, One Birtual placed )ith ilat a purchase order +or various telecommunications euipment, accessories, services and so+t)are. ilat shipped and delivered to One Birtual the said products and euipments as evidenced by air)ay bills and bill o+ lading. In order to secure payment o+ its orders, One Birtual caused E# " to issue a surety bond in +avor o+ ilat. One Birtual +ailed to pay +or One Birtual@s orders prompting ilat to demand payment +rom E# ". Due to the +ailure o+ both One Birtual and E# " to pay, ilat /led a collection complaint against E# ". A Decision )as rendered by the trial court ordering E# " to pay ilat the the principal debt under the surety bond, )ith legal interest o+ 1< per annum +rom the time the :udgment becomes /nal and e8ecutory until the obligation is +ully settled. !he trial court@s ruling )as reversed by the ourt o+ Appeals but )as reinstated by the Supreme ourt. 3espondent /led a otion +or 3econsideration, claiming that )hile the liability o+ a surety is principal and direct, such liability presupposes the e8istence o+ a valid principal obligation. 3espondent claims that since the obligations in the #urchase Agreement )ere not complied )ith, petitioner cannot validly demand payment. #etitioner li-e)ise /led a otion +or #artial 3econsideration andFor +or lari/cation )ith respect to the legal interest due. #etitioner points out that )hatever interest is due shall itsel+ earn legal interest +rom the time it is :udicially demanded
Iss-#sG !" #"
%
5hether respondent may be held liable +or the payment o+ One Birtual@s purchases +rom ilatH 5hether the trial court has :urisdiction over the sub:ect matter +or +ailure o+ ilat and One Birtual to submit the dispute arising +rom the #urchase Agreement to arbitration. 5hether interest on legal interest is due and demandable.
R-*+/
!" 3espondent, as surety, may be held liable +or the payment o+ One Birtual@s purchases +rom ilat. Although the contract o+ a surety is in essence secondary only to a valid principal obligation, the suretyCs liability to the creditor or the promiseCC o+ the principal is direct, primary and absolute. !he surety becomes liable +or the debt and duty o+ the principal obligor, even )ithout possessing a direct or personal interest in the obligations constituted by the latter. !he trial court has :urisdiction over the sub:ect matter. 3espondent cannot invo-e the arbitration clause, because it is not a party to the principal contractG the #urchase Agreement. An arbitration agreement, being contractual in nature, is binding only on the parties thereto, as )ell as their assigns and heirs. !he acceptance does not give the surety the right to intervene in the principal contract. !he suretyCs role arises only upon the debtorCs de+ault, at )hich time, it can be directly held liable by the creditor +or payment as a solidary obligor. % Interest on legal interest is due and demandable, pursuant to Article 1 o+ the ivil ode and the case o+ $astern %hipping &ines, Inc. v. ourt of Appeals, )hich state thatG !O!A' AOE"! DE J Kprincipal $ partial payments madeL M Kinterest M interest on interestL, )here Interest J remaining balance 8 1< per annum 8 no. o+ years +rom due date ;N December 199N )hen demand )as made until date o+ sale to a third party Interest on interest J interest computed as o+ the /ling o+ the complaint on 7 ay 1999 8 1< 8 no. o+ years until date o+ sale to a third party. 5hile ang-o Sentral$onetary oard ircular "o. 799 ;Series o+ >1% modi/ed the legal interest rate +rom 1< to (< per annum, the interest must be applied prospectively.
ARCELINO REPUELA AND CIPRIANO REPUELA, SUBSTITUTED BY CARELA REPUELA, ET AL. vs. ESTATE OF SPOUSES OTILLO LARAAN AND 'ULIANA BACUS, REPRESENTED BY NANCY LARAAN, ET AL. G.R. No. %1368, D##)"#$ 7, %&16, '. #+o( (or a presumption of an e)uitable mortgage to arise, two re)uisites must *rst be satis*ed, namely+ that the parties entered into a contract denominated as a contract of sale and that their intention was to secure an eisting debt by way of mortgage.
F(!s ipriano and arcelino ; epuela brothers borro) #>>.>> +rom Otillo 'ara)an ;tillo. !o secure the loan, the spouses Otillo and =uliana 'ara)an ;%pouses &arawan reuired them to turn over the certi/cate o+ title +or 'ot "o. %%&7 and sign an 8ta:udicial Declaration o+ 0eirs and Sale, )hich )as purportedly a mortgage contract. 0o)ever, they )ere not given a copy o+ the said document. ipriano a28ed his signature )hile arcelino, being illiterate, :ust placed his thumb mar- thereon. !he 3epuela brothers remained in possession o+ the land despite the mortgage and had been planting bamboos, corn, bananas, and papayas thereon and sharing the produce bet)een them. !hey also paid the ta8es due on the property. 'ater, the 3epuela brothers learned that the Spouses 'ara)an have already caused the trans+er o+ title over the property to their name by virtue o+ the 8ta:udicial Declaration o+ 0eirs and Sale. 0ence, they /led a complaint be+ore the 3! +or the annulment o+ the 8tra:udicial Declaration o+ 0eirs and Sale and the cancellation o+ title under the name o+ the Spouses 'ara)an. !he 3! decided in +avor o+ the 3epuela brothers, holding that the transaction bet)een the parties )as not a sale but an euitable mortgage. 0o)ever, the A reversed and set aside the Decision o+ the 3!.
Iss-#sG 1
5hether the 8tra:udicial Declaration o+ 0eirsand Sale amounted to an euitable mortgage. 5hether there is prescription or laches. % 5hat rate o+ interest should apply.
R-*+/ 1 !he 8tra:udicial Declaration o+ 0eirsand Sale amounted to an euitable mortgage. An euitable mortgage is one )hich, although lac-ing in some +ormality, or +orm, or )ords, or other reuisites demanded by a statute, reveals the intention o+ the parties to charge real property as security +or a debt, and contains nothing impossible or contrary to la). ?or a presumption o+ an euitable mortgage to arise, t)o reuisites must /rst be satis/ed, namelyG that the parties entered into a contract denominated as a contract o+ sale and that their intention )as to secure an e8isting debt by )ay o+ mortgage. Article 1(>, in relation to Article 1(>4 o+ the ivil ode enumerates several instances )hen a contract, purporting to be, and in +act styled as, an absolute sale, is presumed to be an euitable mortgage. In this case, instances enumerated in Article 1(> applyG a possession o+ the sub:ect property and b in+erence that the transaction )as in +act a
mortgage attended the assailed transaction. ?irst, the 3epuela brothers remained in possession o+ the sub:ect property a+ter the transaction. Second, it can be in+erred +rom the attending circumstances that the real intention o+ the 3epuela brothers )as to secure their indebtedness +rom Spouses 'ara)an. It )as never their intention to sell the sub:ect property. !he decisive +actor in evaluating such agreement is the intention o+ the parties, as sho)n not necessarily by the terminology used in the contract but by all the surrounding circumstances. ranting that the 3epuela brothers, signed and thumbmar-ed, respectively, the 8tra:udicial Declaration o+ 0eirs and Sale, they did so )ithout understanding the real nature, ePects and conseuences o+ )hat they did as they )ere never e8plained to them. ipriano, )ho only /nished rade One, and arcelino, an illiterate, )ere in dire need o+ money. !he burden to sho) that the other party +ully understood the contents o+ the document rests upon the party )ho see-s to en+orce the contract. I+ he +ails to discharge this burden, the presumption o+ mista-e, i+ not, +raud, stands unrebutted and controlling. 3espondent +ailed to overcome this burden. ?urthermore, the la) accords the euitable mortgage presumption in situations )hen doubt e8ists as to the true intent o+ the parties to the contract, as in this case. !here )as no prescription or laches. 5here there is no consent given by one party in a purported contract, such contract )as not per+ected there+ore, there is no contract to spea- o+. !he deed o+ sale relied upon by petitioner is deemed a void contract. !his being so, the action based on said deed o+ sale shall not prescribe in accordance )ith Article 141> o+ the ivil ode. % S# ircular "o. 799, series o+ >1% provides that ePective =uly 1, >1%, the rate o+ interest +or the loan or +orbearance o+ any money, goods or credits and the rate allo)ed in :udgments, in the absence o+ an e8press contract as to such rate o+ interest, shall be (< per annum. Applying the +oregoing, the rate o+ interest o+ 1< per annum on the obligation o+ the 3epuela brothers shall apply +rom the date o+ the /ling o+ the complaint on =anuary 17, >>% until =une %>, >1% only. ?rom =uly 1, >1% until +ully paid, the legal rate o+ (< per annum shall be applied to their unpaid obligation.