Case Digest In Credi Transactions.docx

103. Sps. Esmaraldo and Elizabeth Suico vs. Philippine National Bank Gr. No. 170215

August 28, 2007

FACTS: Petitioners, Spouses Esmeraldo and Elizabeth Suico, obtained a loan from the Philippine National Bank (PNB) secured by a real estate mortgage on real properties in the name of the former. The petitioners were unable to pay their outstanding loan obligation amounting to P1,991,770.38 prompting the PNB to extrajudicially foreclose the mortgage over the subject properties before the City Sheriff of Mandaue City. The petitioners thereafter filed a Complaint against the PNB before the Regional Trial Court (RTC) of Mandaue City and alleged that PNB filed with the Office of the Mandaue City Sheriff a petition for the extrajudicial foreclosure of mortgage constituted on the subject properties. Petitioners claimed that during the foreclosure sale, PNB, as the lone bidder, offered a bid in the amount of P8,511,000.00. By virtue of the said bid, a Certificate of Sale of the subject properties was issued by the Mandaue City Sheriff in favor of PNB. Since the amount of the bid grossly exceeded the amount of petitioners outstanding obligation it was the legal duty of the winning bidder, PNB, to deliver to the Mandaue City Sheriff the bid price or what was left thereof after deducting the amount of petitioners outstanding obligation. PNB failed to deliver the amount of their bid to the Mandaue City Sheriff or, at the very least, the amount of such bid in excess of petitioners outstanding obligation. ISSUE: (Considering the amount of PNB’s bid of P8,511,000 as against the amount of the petititoner’s obligation of P1,991,770.38) Whether the PNB is obliged to deliver the excess amount? Yes Whether the extrajudicial foreclosure of sale is valid? Yes RULING: Yes. Rule 68 Section 4 of the Rules of Courts provides for the disposition of the proceeds of the sale in foreclosure sale of the mortgage property: (1) Pay the costs of the sale; (2) pay off the mortgage debt; (3) pay the junior encumbrances, if any in the order of priority; and (4) give the balance to the mortgagor, his agent or the person entitled to it. The application of the proceeds from the sale of the mortgaged property to the mortgagor’s obligation is an act of payment, not payment by dacion, hence, it is the mortgagee’s duty to return any surplus in the selling price to the mortgagor. If the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact will not affect the validity of the sale but simply give the mortgagor a cause of action to recover such surplus.

107. Amparo Perez vs. Philippine National Bank GR No. L-21813 July 30, 1966 FACTS: Vicente Perez mortgaged Lot No. 286-E of the Kabankalan Cadastre, to the Philippine National Bank (PNB), Bacolod Branch, in order to secure payment of a loan of P2,500, plus interest, payable in yearly instalments. On October 7, 1942, Vicente Perez, mortgagor, died intestate, survived by his widow and children. At that time, there was an outstanding balance of P1,917.00, and corresponding interest, on the mortgage indebtedness. The widow instituted a proceedings for the settlement of the estate of Vicente Perez and was informed that there was an outstanding balance of P2,758.84. The bank caused the mortgage properties to be extrajudicially foreclosed. The Sheriff sold Lot No. 286-E at auction and it was purchased by the PNB. After the lapse of the redemption period of 1 year, a new title was issued in the name of the Bank. The widow and heirs were not notified. The widow and the heirs instituted this case against the PNB seeking to annul the extrajudicial foreclosure of sale and the transfer of the title as well as to recover damages, claiming that the PNB acted illegally and in bad faith. The trial court rendered judgment in favor to petitioner, hence this appeal to the Supreme Court. ISSUE: Whether the creditor holding a claim against the deceased may foreclose the mortgage property to satisfy the outstanding loan obligation. RULING: Yes. Rule 86 Section 7 of the Rules of Court provides for the remedies for the claims against the estate to wit: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency. The SC declared a valid and effective esxtrajudicial foreclosure of the mortgage over Lot 286-E of the Kabankalan Cadastre in accordance with Section 7, Rule 86 of the Rules of Court and the widow and other heirs of Vicente Perez are entitled to redeem the property in question by paying or tendering the bank the capital of the debt of Vicente Perez.

112. Jose T. Ramirez vs. Manila Banking Corporation GR No. 198800

December 11, 2013

FACTS: Petitioner Jose Ramirez mortgaged two parcels of land in favor of respondent The Manila Banking Corporation to secure his P265,000 loan. The deed of Real Estate Mortgage provides that all correspondence relative to the mortgage including the notifications of extrajudicial actions shall be sent to petitioner Ramirez. Respondent filed a request for extrajudicial foreclosure of real estate mortgage before Atty. Hipolito Sañez on the ground that Ramirez failed to pay his loan despite demands. During the auction sale, respondent was the only bidder for the mortgaged properties. Thereafter, a certificate of sale was issued in its favor as the highest bidder. Respondent demanded that Ramirez vacate the properties. Ramirez sued respondent for annulment of sale and prayed that the certificate of sale be annulled on the ground, that paragraph N of the Real Estate Mortgage was violated for he was not notified of the foreclosure and auction sale. The Trial Court ruled that the extrajudicial foreclosure proceedings were null and void and the certificate of sale is invalid. The CA reversed the trial court’s decision and ruled that absence of personal notice of foreclosure to Ramirez as required by paragraph N of the real estate mortgage is not a ground to set aside the foreclosure sale. Hence this petition. ISSUE: What is the legal effect of violating par. N of the deed of mortgage which requires personal notice to the petitioner-mortgagor by the respondent-mortgagee bank? RULING: The Court of Appeals erred in ruling that absence of extrajudicial foreclosure sale to Ramirez as required by Paragraph N of the Real Estate Mortgage will not invalidate the extrajudicial foreclosure sale. That when the respondent failed to send notice of extrajudicial foreclosure sale to Ramirez, it committed a contractual breach of said paragraph N sufficient to render the extrajudicial foreclosure sale null and void. A contract is the law between the parties and … absent any showing that its provisions are wholly or in part contrary to law, morals, good customs, public order, or public policy, it shall be enforced to the letter by the courts. Section 3, Act No. 3135 requires only (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation. Personal notice to the mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In this case, petitioner and respondent in entering into a contract of real estate mortgage, agreed inter alia: "all correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any judicial or extra-judicial action shall be sent to the MORTGAGOR…."

116. Philippine Bank of Commerce vs. Tomas De Vera GR No. L-18816

December 29, 1962

FACTS: By virtue of a contract entitled “Consolidation of First Real Estate Mortgage and Deed of Assignment”, defendant Tomas de Vera is indebted to the plaintiff in the total amount of P127,312.24 guaranteed by a real estate mortgage of the defendant’s two parcels of land. Upon maturity of the defendant’s obligation and despite several demands, the defendant failed to pay the outstanding balance of his obligation in the amount of P99,033.20 under the contract, for which reason, the plaintiff filed a petition with the Sheriff of Pasay to sell the properties subject to the Real Estate Mortgage for the sum of P150,000. The Sheriff acting accordingly, sold at public auction the two parcels of land to the highest bidder which was the plaintiff, Philippine Bank of Commerce, for the amount of P86,700. The plaintiff thru the present action, seeks to recover from the defendant the balance of his obligation after deducting the price of the land sold at public auction. ISSUE: Whether the plaintiff Bank is entitled to recover from appellant the sum of P99.033.20 a deficiency arising after the extrajudicial foreclosure. RULING: Yes. Article 2131 of the new Civil Code, on the contrary, expressly provides that "The form, extent and consequence of a mortgage, both as to its constitution, modification and extinguishment, and as to other matters not include in this Chapter, shall be governed by the provisions of the Mortgage Law and of the Land Registration Law.' Under the Mortgage Law, which is still in force, the mortgagee has the right to claim for the deficiency resulting from the price obtained in the sale of the real property at public auction and the outstanding obligation at the time of the foreclosure proceedings. "Upon the sale of any real property, under an order for following sale to satisfy a mortgage or other encumbrance thereon, if there be a balance due to the plaintiff after applying the proceeds of the sale, the court, upon motion, should render a judgment against the defendant for any such balance for which, by the record of the case, he may be personally liable to the plaintiff, ...." It is true that this refers to a judicial foreclosure, but the underlying principle is the same, that the mortgage is but a security and not a satisfaction of indebtedness.

120. Sta. Ignacia Rural Bank, Inc vs. The Honorable Court of Appeals and Sps. Conrado Pablo and Juanita Gonzales, GR. No. 97872 March 1, 1994 FACTS: Sta. Ignacia Rural Bank, In. extended to the Sps. Gonzales a loan totalling P12,109.75. As a security, Sps. Gonzales executed in favor of the Bank a Real Estate Mortgage over their residential house and 2 parcels of land covered by Free Patent Title. The Sps. Gonzales defaulted in the payment of their obligation, as a result of which, the defendant bank filed with the Provincial Sheriff of Tarlac a petition for extrajudicial foreclosure of their Real Estate Mortgage under Act 3135. The aforecited house and lot of the Sps. Gonzales were sold at public auction with the bank as the highest bidder for P13,168.35. Thereafter, the Certificate of Sale was executed in favor of the defendant bank on September 29, 1981 and the same was registered with the Register of Deed of Tarlac. The ownership of the house and 2 lots was consolidated in favor of the Bank. On December 19, 1984, the Bank sold the aforementioned real estates to Defendant Spouses Alberto Lucas and Nelia Rico and the Certificate of Titles were issued in the name of defendant-spouses. Hence, the complaint for the repurchase of the subject house and lots, annulment of title and damages filed by the Sps. Gonzales. ISSUE: whether the Sps. Gonzales had exercised their right to redeem within the redemption period or whether such right had already prescribed. RULING: Yes, In this case, it will be recalled that the mortgaged house and lots were sold at public auction to the appellee bank on July 28, 1981. However, the Sheriff's Certificate of Sale was registered only on November 5, 1981. Under Act 3135, the appellants may redeem the subject house and lots until November 5, 1982 being the last day of the one-year period of repurchase allowed by said law. It is clear from a perusal of the factual antecedents at bar that the plea for repurchase was not time-barred at the time it was made. When the certificate of sale in favor of petitioner was registered with the Register of Deeds on November 5, 1981, private respondents had two years, reckoned from said date, within which to redeem the property from petitioner, and another five years, under Commonwealth Act No. 141, counted from the expiration of the redemption period, to effect repurchase which private respondents precisely did when the suit below was initiated on March 20, 1986.

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125. Erlinda Gajudo, Et. Al. vs. Traders Royal Bank GR No. 151098

March 21, 2006

FACTS: Petitioner Danilo Chua obtained a load from respondent bank in the amount of P75,000 secured by a real estate mortgage over a parcel of land and owned in common by the petitioners. When the loan was not paid, respondent bank commenced extrajudicial foreclosure proceedings on the property proceedings on the property. The auction sale of the property was made without the knowledge and conformity of the other petitioners. On the rescheduled auction sale, the Sheriff of QC sold the property to the respondent bank, the highest bidder for the sum of P24,911.30. That the auction sale was tainted with irregularity because the bid price was shockingly or unconscionably low. The other petitioner failed to redeem the property due to their lack of knowledge and want of sufficient education, although the period of their right to redemption had long expired, petitioner Chua offered to buy back and respondent bank agreed to sell back, the foreclosed property, on the understanding that Chua would pay the amount of P40,135.53. Petitioner Chua made an initial payment in the amount of P4,000 covered by Interbank Check duly received by respondent bank. ISSUE: Whether the petitioner exercise conventional redemption under Article 1601 of the Civil Code. RULING: No. It is true that the one-year period of redemption provided in Act No. 3135, the law under which the property was sold in a foreclosure sale is only directory and can be extended by agreement of the parties. However it has been held that for legal redemption to be converted into conventional redemption, two requirements must be established: 1) voluntary agreement of the parties to extend the redemption period; and 2) the debtors commitment to pay the redemption price on a fixed date. The letters sent by the bank to Petitioner Chua do not convincing show that the parties arrived at a firm agreement for the repurchase of the property. The proposed letter offered by the Petitioner Chua is a proposal to pay the redemption price for the property, but the bank refused to accede to his request because the 1-year redemption period had already lapsed. There was no showing that petitioners had committed to pay the redemption price on a fixed date, even though that it was true that Petitioner Chua had attempted to establish a previous agreement to repurchase the property for less than its fair market value.

129. Banco Filipino Savings and Mortgage Bank vs. Intermediate Appellate Court and Celestina Pahimutang GR no. L-68878 April 8, 1986

FACTS: Spouses Gerardo and Celestina Pahimutang purchased a house and lot from Pilar Development Corporation for P139,800. The remaining balance of P125,700 was financed by petitioner through a loan contract secured by a real estate mortgage over the said house and lot. After sometime however, the spouses mortgagors failed to pay the monthly amortization of the loan. Petitioner filed with the Provincial Sheriff of Rizal a petition for extrajudicial foreclosure of the real estate mortgage. At public auction sale, the house and lot were awarded to petitioner as the highest bidder and the certificate of sale was registered. Petitioner file with the CFI of Rizal a verified petition for the issuance of a writ of possession pursuant to Section 7 of Act No. 3135. The spouses-mortgagors opposed alleging that they had already paid more than the installments due as of the date of the extrajudicial foreclosure; that the foreclosure of the mortgage was improper and that they had no notice of the same. The Trial Court issued an order directing the issuance of the writ of possession. The Spsmortgagor filed an action for “cancellation and annulment of the extrajudicial foreclosure of mortgage, damages and Preliminary injunction”. ISSUE: whether the writ of possession is properly issued in the case at bar. RULING: Yes. Under Section 7 of Act 3135 the purchaser is entitled to the possession of the property during the redemption period, provided that a proper motion has been filed, a bond approved and no third person is involved. Considering that the period of redemption had already lapsed with no redemption having been made, there is no justifiable ground why the Writ of Possession would not be issued. Section 35 of Rule 39 of the Revised Rules of Court is one of the specific provisions applicable to that case at bar provides that 'If no redemption be made within twelve (12) months after the sale, the purchaser, or his assignee, is entitled to a conveyance and possession of property. .... The possession of the property shall be given to the purchaser or last redemptioner by the officer unless a third party is actually holding the property adversely to the judgment debtor.

133. Manuel Ibasco and Edita Tampingo vs. Hon. Eduardo Caguioa GR No. L-62619

August 19, 1986

FACTS: Petitioners Manuel Ibasco and Edita Tampingo are lessees of a residential house which they had leased from the Sps. Anastacio and Asuncion Garcia at a monthly rental of P1500 (P1000 being paid by petitioner Ibasco for the portion occupied by him and P500 being paid by Tampingo for the part used by her) IBASCO and TAMPINGCO were religiously paying their monthly rentals to the GARCIAS, and were unaware of the fact that the GARCIAS had mortgaged the property with respondent Banco Filipino Savings and Mortgage Bank, that because of non-payment by the GARCIAS, the mortgage had been foreclosed, and that the redemption period had already expired. The lessees were served on December 1, 1982 by the deputy sheriff of Ricardo Cruz, ex-oficio sheriff with a copy of the writ of possession, the issuance of which had been ordered by the court authorities and which writ gave petitioners five days from December 1, 1982 within which to vacate the premises. The lessees elevated the case claiming that the lower court had abused its discretion in issuing the writ of possession. ISSUE: whether or not a mortgage, who has foreclosed upon the mortgaged real property of a delinquent debtor and has purchased the same at the foreclosure sale, can be granted a writ of possession over the property despite the fact that the premises are in the possession of a lessee thereof and whose lease has not as yet been terminated. RULING: Yes, unless the lease had been previously registered in the Registry of Property or unless despite non-registration, the mortgagee had prior knowledge of the existence and duration of the lease (actual knowledge being equivalent to registration). Act 3135 provides for the procedure in extra-judicial foreclosure of mortgages, while Batas Pambansa Blg. 25 refers to the maximum rent in certain leases and to grounds for ejectment. While it is true that under the latter law, there can be no ejectment of the lessee simply because the property has been sold or mortgaged to another, it is different if as a result of said mortgage, the same has been foreclosed upon, as provided for in Act 3135 which expressly grants the issuance of a writ of possession (without prejudice to the rights of a lessee under the Civil Code). Besides, Batas Pambansa Blg. 25 can in no case apply here because the rental of the property is P1,500.00 monthly (far in excess of the P300.00 rent regulated by the Batas). Art. 1648 of the Civil Code provides that the petitioners herein could have continued in their possession as lessees if the lease had been registered in the Registry of Property, or if the existence and duration of the lease had been known to the private respondents.

138. Recaredo Pando vs. Antonio Gimenez, Et al. GR No. L-31816

February 15, 1930

FACTS: Defendant Gimenez was indebted to the plaintiff in the sum of P8,000. To secure payment of such loan, he executed and delivered a real estate mortgage over a building located in Sta. Mesa and the leasehold rights on the lot upon which the building was erected and Hacienda Tuason being the lessor. Gimenez was about to leave Manila to attend a business in Cagayan, he gave Pando full control, complete and absolute administration over the property he mortgaged on the condition that Pando would attend to the administration, care and preservation of the building and property; pay the premium on the insurance of the said building, pay taxes that might become due on the building, pay rents of the leased property, collect rents from the tenants of the building to be applied to the payment of all expenses necessary for the preservation and maintenance of the building and the rents of the leased property. During Pando’s administration, he failed and neglected to pay the taxes for several years. He also failed and neglected to pay lessor Hacienda Tuason the rents due for several years on the land leased. By reason of this failure, the City of Manila sold at public auction the said building for the sum of P244.50. Lessor, Hacienda Tuason cancelled the contract of lease of Gimenez and brought a suit against him for desahucio. Gimenez claiming that Pando, being in charge of the administration of the premises, had the obligation to attend the payment of taxes and rents. Pando denies that he had such obligation, alleging that his duties were confined to the collection of rents on the house in order to apply them to the payment of the interest on the mortgage. ISSUE: Whether Pando having a full control and administration over the property of Gimenez, was obliged to pay the taxes, charges and other necessary expenses. RULING: Yes. Article 2135 of the New Civil Code provides that: “the creditor, unless there is a stipulation to the contrary, is obliged to pay the taxes and charges upon the estate. He is also bound to bear the expenses necessary for its preservation and repair. The sums spent for the purposes stated shall be deducted from the fruits. In the case at bar, the administration of Pando was antichretic in character. The antichretic creditor is obliged to pay the taxes and charges which burden the estate, in the absence of an agreement to the contrary. Such obligation arises from the very nature of the covenant, and is correlated with the antichretic creditor’s acquired right to take charge of the property and collect fruits for himself. Failure to fulfil his obligation to pay taxes and rent of the lot, he is liable to pay indemnity for damages.

142. Hilario Ramirez and Valentina Bonifacio vs. Hon. Court of Appeals, Francisca Medina, and others. GR No. L-38185 September 24, 1986 FACTS: Petitioners-spouses Hilario Ramirez and Valentina Bonifacio filed an application for registration of a parcel of riceland in Pamplona, Las Pinas Rizal. After notice and publication nobody appeared to oppose the application. Thereafter, the petitioners presented parol evidence that they acquired the land in question by purchase from Gregorio Pascual during the early part of the American regime but the corresponding contract of sale was lost and no copy or record of the same was available and the court ordered the issuance of the decree of registration and Original Certificate of Title was issued in the petitioners’ names. Private respondents filed a petition for review the decree of registration on the ground of fraud. The respondents alleged among others that they obtained a loan of P400 from the petitioners in which they secured with a mortgage on the land in question by way of antichresis and that there were several attempts to redeem the land but were refused by the petitioners. ISSUE: Whether the antichretic creditor can acquire the land of the debtor by prescription. RULING: No. even if the petitioner have been in actual possession of the disputed land since 1938, they are only considered as antichretic creditors. The respondents never admitted that they have not possessed the land at all. On the contrary, they alleged that they and their predecessors-in-interest namely Gregoria Pascual and Agapita Bonifacio have been in possession of the land since time immemorial and that the petitioners were placed in possession of the land pursuant to a contract of antichresis. The petitioners are not possessors in the concept of owner but mere holders placed in possession of the land by its owners. Thus, their possession cannot serve as a title for acquiring dominion. Respondents are ordered to pay the petitioners the amount of P400 as principal for the contract of antichresis, the fruits obtained from the possession of the land having been applied to the interests of the loan.

149. Buenaventura T. Saldana vs. Philippine Guaranty Company, Inc. GR No. L-13194 January 29, 1960 FACTS: In order to secure an indebtedness of P15,000, Josefina Vda. De Aleazar executed in favour of the plaintiff-appellant Saldana a chattel mortgage covering the following properties A building of strong materials, used for restaurant business, located in front of the San Juan de Dios Hospital at Dewey Boulevard, Pasay City, and the following personal properties therein contained: 1 Radio, Zenith, cabinet type; 1 Cooler.;1 Electric range, stateside, 4 burners.;1 Frigidaire, 8 cubic feet;1 G.E. Deepfreezer.;8 Tables, stateside.;32 Chromium chairs, stateside.;1 Sala set upholstered, 6 pieces.;1 Bedroom set, 6 pieces.;And all other furniture's, fixtures or equipment found in the said premises. Subsequent to the execution of said mortgage and while the same was still in force, the defendant Hospital de San Juan de Dios, Inc obtained a judgment against the Josefina and a writ of execution was duly issued the several personal properties abovementioned were levied. The plaintiff filed a third party claim assering that the above described properties levied are subject to his chattel mortgage. In virtue thereof, the sheriff release only some of the property originally included in the levy. To proceed with the execution sale of the rest of the properties still under levy, the defendants-appellees Hospital de San Juan de Dios, Inc. and the Philippine Guaranty Co., Inc., executed an indemnity bond to answer for any damages that plaintiff might suffer. Accordingly, on February 13, 1957, the said properties were sold to the defendant hospital as the highest bidder, for P1,500.00. Appellants claims that the phrase in the chattel mortgage contract — "and all other furniture, fixtures and equipment found in the said premises", validly and sufficiently covered within its terms the personal properties disposed of in the auction sale, as to warrant an action for damages by the plaintiff mortgagee. Issue: whether the contention of the appellant is correct. RULING: Yes. Section 7 of Act No. 1508, commonly and better known as the Chattel Mortgage Law, does not demand a minute and specific description of every chattel mortgaged in the deal of mortgage but only requires that the description of the properties be such "as to enable the parties in the mortgage, or any other person, after reasonable inquiry and investigation to identify the same". Gauged by this standard, general description have been held by this Court. The specifications in the chattel mortgage contract in the instant case, is in substantial compliance with the "reasonable description rule" fixed by the chattel Mortgage Act. It can thus be reasonably inferred therefrom that the "furnitures, fixture and equipment" referred to are properties of like nature, similarly situated or similarly used in the restaurant of the mortgagor located in front of the San Juan de Dos Hospital at Dewey

Boulevard, Pasay City, which articles can be definitely pointed out or ascertain by simple inquiry at or about the premises. Note that the limitation found in the last paragraph of section 7 of the Chattel Mortgage Law1 on "like or substituted properties" make reference to those "thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged", not to those already existing and originally included at the date of the constitution of the chattel mortgage.

153. ALEJANDRA TORRES vs. FRANCISCO LIMJAP, Special Administration of the estate of the deceased Jose Henson GR No. 34385

September 21, 1931

FACTS: The plaintiffs alleged that Jose Henson, in his lifetime, executed in their favor a chattel mortgage on his drug store known as Farmacia Henson, to secure a loan of P7,000, although it was made to appear in the instrument that the loan was for P20,000. Plaintiffs alleged that the defendant violated the terms of the mortgage and that, in consequence thereof they became entitled to the possession of the chattels and to foreclose their mortgages thereon. Upon the petition of the plaintiffs and after the filing of the necessary bonds, the court issued in each case an order directing the sheriff of the City of Manila to take immediate possession of said drug stores. Defendant set up the following defenses: (1) that the chattel mortgage is null and void for lack of sufficient particularity in the description of the property mortgage and (2) That the chattel which the plaintiffs sought to recover were not the same property described in the mortgage. ISSUE: Whether the after acquired properties can be subject to chattel mortgage. RULING: As a general rule no because Section 7 of Act 1508 provides: A chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgage. An exception to the rule, when there is a stipulation in the mortgage, extending its scope and effect to after-acquired property, is valid and binding —. . . where the after-acquired property is in renewal of, or in substitution for, goods on hand when the mortgage was executed, or is purchased with the proceeds of the sale of such goods, etc.

157. BA Finance Corporation vs. Hon. Court of Appeals GR No. 82040

August 27, 1991

FACTS: Private respondents Manuel and Lilia Cuady obtained from Supercars, Inc. a credit of P39,574.80 which amount covered the cost of one unit of Ford Escort 1300, four-door sedan evidenced by a promissory notes inclusive of interest at 14% per annum. To secure the faithful and prompt compliance of the obligation under the said promissory note, the Cuady constituted a chattel mortgage on the Ford Escort. The aforementioned motor vehicle figured in an accident and was badly damaged. The Cuadys asked the BA Finance Corp to consider the same as a total loss, and to claim from the insurer the face value of the car insurance policy and apply the same to the payment of their remaining account and give them the surplus thereof, if any. But the request of BA Finance prevailed to just have the car repaired. Not long thereafter, the car bogged down. When BA did not respond favorably to their former request, the Cuadys stopped paying their monthly instalments on the promissory. Failure of the Cuadys to pay the remaining instalment on the note, BA Finance sued them for the recovery of the said remaining instalments. ISSUE: Whether or not B.A. Finance Corporation has waived its right to collect the unpaid balance of the Cuady spouses on the promissory note for failure of the former to enforce the total loss provision in the insurance coverage of the motor vehicle subject of the chattel mortgage. RULING: The petition is devoid of merit. B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars, Inc. when the latter assigned the promissory note, together with the chattel mortgage constituted on the motor vehicle in question in favor of the former. Consequently, B.A. Finance Corporation is bound by the terms and conditions of the chattel mortgage executed between the Cuadys and Supercars, Inc. Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-in-fact with full power and authority to file, follow-up, prosecute, compromise or settle insurance claims; to sign execute and deliver the corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers any loss or damage. In granting B.A. Finance Corporation the aforementioned powers and prerogatives, the Cuady

spouses created in the former's favor an agency. Thus, under Article 1884 of the Civil Code of the Philippines, B.A. Finance Corporation is bound by its acceptance to carry out the agency, and is liable for damages which, through its non-performance, the Cuadys, the principal in the case at bar, may suffer. Unquestionably, the Cuadys suffered pecuniary loss in the form of salvage value of the motor vehicle in question, not to mention the amount equivalent to the unpaid balance on the promissory note, when B.A. Finance Corporation steadfastly refused and refrained from proceeding against the insurer for the payment of a clearly valid insurance claim, and continued to ignore the yearning of the Cuadys to enforce the total loss provision in the insurance policy, despite the undeniable fact that Rea Auto Center, the auto repair shop chosen by the insurer itself to repair the aforementioned motor vehicle, misrepaired and rendered it completely useless and unserviceable.

163. Bicol Savings & Loan Association vs. Jaime Guinhawa GR No. L-62415

August 20, 1990

FACTS: To secure the payment of the foregoing loan obligation, the principal borrower Victorio Depositario put up as security a chattel mortgage which was a Yamaha Motorcycle. Said motorcycle was eventually foreclosed by reason of the failure of Depositario and private respondent Guinhawa to pay the loan. As a result of the foreclosure, there was a deficiency in the amount of P5,158.06 as of July 31, 1981, where BISLA made a demand to pay the same. Thus, on August 6, 1981, petitioner BISLA (plaintiff therein) filed in the City Court of Naga, Branch II, a complaint for the recovery of a sum of money constituting the deficiency after foreclosure of the chattel mortgage put up by the principal borrower Depositario against the latter and his solidary co-maker Guinhawa (herein private respondent) as defendants. The City Court rendered a decision in favor of the petitioner. On appeal to the respondent CFI, it rendered a decision reversing the lower court’s decision. Hence this appeal. ISSUE: Whether the deficiency in foreclosure of chattel mortgage, the co-maker/surety may be held liable to the remaining balance. RULING: Yes. Article 1216 of the Civil Code, the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. And therefore, where the private respondent binds himself solidarily with the principal debtor to pay the latter's debt, he may be proceeded against by the principal debtor. Private respondent as solidary co- maker is also a surety (Art. 2047) and that under the law, the bringing of an action against the principal debtor to enforce the payment of the obligation is not inconsistent with, and does not preclude, the bringing of another action to compel the surety to fulfill his obligation under the agreement.

167. Pacific Farms, Inc. vs. Simplicio G. Esguerra GR No. L-21783

November 29, 1969

FACTS: The Carried Lumber Company (Company) sold and delivered lumber and construction materials to the Insular Farms, Inc. which the latter used in the construction of the six (6) buildings of the total procurement price of P15,000, the sum of P4,710.18 has not been paid by Insular. Consequently, the company instituted a civil case to recover the said unpaid balance. The Trial Court, rendered judgment sustaining the Company’s claim. The judgment debtor did not appeal and a corresponding writ of execution was issued. The defendant sheriff levied upon the six buildings. The Pacific Farms, Inc. filed a third-party claim, subscribed by its corporate president, asserting ownership over the levied buildings which it had acquired from the Insular Farms, Inc. by virtue of a deed of absolute sale. Asserting absolute and exclusive ownership of the buildings in question, the Pacific Farms, Inc. filed a complaint on May 14, 1962 against the Company and the sheriff with the court a quo, praying that judgment be rendered, (a) declaring null and void the levy and judicial sale of the six buildings, and (b) adjudging the defendants jointly and severally liable to the plaintiff in the sum of P2,000 by way of actual damages and for such amount as the court may deem proper and just to impose by way of exemplary damages and for costs of the suit. After due trial, the court a quo rendered judgment annulling the levy and the certificate of sale. The court, however, denied the plaintiff's claim for actual and exemplary damages on the ground that it was not "prepared to find that there was gross negligence or bad faith on the part of any of the defendants." ISSUE: Whether the lower court erred in holding that the credit of the Carried Lumber Company, against the Insular Farms, Inc., consisting of the value of lumber and construction materials used in the buildings which were later acquired by the appellee Pacific Farms, Inc., the appellee, was not a statutory lien on those buildings. RULING: The Supreme Court held that before there can be a pro rata payment of credits entitled to preference as to the same specific real property, there must first be some proceeding where the claims of all the preferred creditors may be bindingly adjudicated, such as insolvency, the settlement of a decedent's estate under Rule 87 of the Rules of Court, or liquidation proceedings of similar import. But in the case at bar, it does not involve a question of preference of credits, and is not one where two or more creditors have separate and distinct claims against the same debtor who has insufficient property. Indeed, it is a matter of necessity and logic that the question of preference should arise only where the debtor cannot pay his debts in full.

173. CRISTITU BAUTISTA and 155 others VS. THE AUDITOR GENERAL GR No. L-6799

June 29, 1955

FACTS: The Department of Public Works and Communications (DPWC) awarded a contract for the construction of a bridge across the Agno River to the International Construction and Engineering Co. (contractor). As provided by Act No. 3688, the contractor was required to furnish, as it did furnish, a penal bond in the sum of P103,343 to guarantee the full and faithful performance of the contract within 300 working days, the Philippine Surety and Insurance Co. binding itself as surety to pay the amount of the bond thus furnished if the contractor should fail to perform the contract. Cristitu Bautista and 155 laborers were engaged by the contractor to work or perform labor on the construction. The District Engineer of Pangasinan, through the Director of Public Works, and Communications that due to the slow progress of the work, 5.22% of the work having been accomplished as of 16 October 19502 in 187 days out of 300 days, the construction contract be resolved and that the Bureau of Public Works take over to complete the construction of the bridge. The contractor and its surety were duly notified of this action taken by the Undersecretary of Public Works and Communications as well as of the right of the Government to recover damages arising from its failure to perform its part of the contract On 30 June 1952 the bridge was finally completed by the Poblete Construction Co. which had taken over the work from the Bureau of Public Works. The total sum spent for the construction of the bridge is P947,858.62, or P530,806.41 in excess of the contract price. On 15 December 1952 the Director of Public Works advised the contractor and its surety of their liability to the Government arising from the contractor's failure to perform its part of the contract and demanded the payment of P103,343, the amount of the penal bond, from the surety and the balance from the contractor. Cristitu Bautista and 155 laborers brought an action in the Court of First Instance of Pangasinan against the International Construction and Engineering Co. to collect their unpaid wages. As the defendant admitted its liability in the sum of P25,390.29, the Court rendered judgment ordering the defendant to pay to the plaintiffs the sum sought to be collected with lawful interest from 15 August 1951, the date of the filing of the complaint. Judgment having become a writ of execution was issued but only P2,825.77 was realized and satisfied out of the contractor's leviable assets. On 23 March 1953 the laborers filed a money claim with the Auditor General under the provisions of Com. Act No. 327 for labor rendered in the project. On 22 May, the Auditor General denied the petitioners' claim. from the order of the Auditor General denying their claim the petitioners have appealed under Rule 45 of the Rules of the Court. The petitioners invoke the provisions of the article 1707 of the new Civil Code which provides: "The laborer's wages shall be a lien on the goods manufactured or the work done," and article 2241 of the same code which in part provides: "With reference to specific movable property of the debtor, the following claims or liens shall be preferred: . . . (6) Claims for laborers' wages, on the goods manufactured or the work done; . . ." The lien referred to in the first article is on the goods manufactured or work done. ISSUE: Whether the laborers enjoys the preference of credits RULING: No. For the payment of the laborer's wages, article 1707 creates a lien on the goods manufactured or work done, if the laborer be engaged by the owner of the goods to be manufactured or work to be done. However, where there is a contractor the first article invoked does not seem to apply, because article 1729 provides: "Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. . . .".

Doubt may be entertained as regards the applicability of the new Civil Code to the contracts entered into for the prosecution and completion of any public work, because Act No. 3688 provides: “any person, company or corporation who has furnished labor or materials used in the construction . . . of any . . . public work, and payment for which has not been made, shall have the right to intervene and be made a party to any action instituted by the Government of the Philippine Islands on the bond of the contractor, and to have their rights and claims adjudicated in such action and judgment rendered thereon, subject, however, to the priority of the claim and judgment of the Government of the Philippine Islands. If the full amount of the liability of the surety of said bond is insufficient to pay the full amount of said claims and demands, then, after paying the full amount due the government, the remainder shall be distributed pro rata among said intervenors.

177. Rizal Surety and Insurance Co. vs. Marciano De la Paz GR No. L-6463

May 26, 1954

FACTS: On March 22, 1950, the plaintiff Rizal Surety and Insurance Company filed a complaint in the Court of First Instance of Manila, alleging that the sum of P20,000 was due and payable to the Federal Films, Inc., as proceeds of fire insurance covering a theater situated in Marikina, Rizal, which was destroyed by fire on February 1, 1947; that a several creditors of the insured, namely, Marciano de la Paz, Domingo Leonor, Jose Santos and Dominador Nepomuceno, Pablo Roman, Serapion D. Yñigo, and the Collector of Internal Revenue, were claiming said proceeds from the plaintiff, the latter had no means of knowing definitely the order of preference among the various claimants; and praying that said creditors, named defendants in the complaint, be ordered to interplead and litigate their conflicting claims, and that the sum of P20,000 be ordered paid to the court for delivery to the proper parties, after deducting the costs of the suit. After the defendants had filed their respective answers, the Court of First Instance of Manila rendered a decision the dispositive part of which reads as follows: Wherefore, judgment is hereby rendered in favor of the defendants, and the plaintiff is ordered to pay said defendants out of the P20,000 minus the costs in its favor, in the following order: first the Collector of Internal Revenue to be paid the sum of P3,216.08; second, Jose Santos and Dominador Nepomuceno to be paid the sum of P10,000; third, the defendant Pablo Roman to be paid the sum of P9,000; with six per centum interest per annum from the date of the filing of complaint in Civil Case No. 73256 and his costs in said case out of the remaining balance; forth, the defendant Domingo E. Leonor to be paid the sum of P20,000 with interest of six per centum per annum from the date of the filing of the complaint in Civil Case No. 1749, should there be any balance; and fifth the defendant Marciano de la Paz to be paid by the sum of P6,001.50 with interest of six per centum from February 5, 1947, the date of the demand, plus P545 as costs and sheriff's fees should there be any balance left. From this judgment, the defendants Marciano de la Paz and Domingo Leonor appealed. Briefly the contention of the appellant Marciano de la Paz is that his claim for P6,001.50 should enjoy to be garnished the proceeds in question, said garnishment being prior to all other liens. The appellant Domingo Leonor in turn contends that his claim for P2,300 is superior, except with the regards to the tax lien of the Collector of Internal Revenue, because it is evidenced by a public document dated July 19, 1946, in addition to the fact that he garnished the disputed insurance to proceeds on February 17, 1947. ISSUE: Whether the order of preference of credits are correct. RULING: Yes. trial court correctly ordered that the claim of the Collector of Internal Revenue be paid first. Said claim being for amusement taxes on the theater insured, constitutes a lien superior to all other charges or liens not only the theater itself but also upon all property rights therein, including the insurance proceeds. Under article 1924, paragraph 3, of the Civil Code, the order of preference is, first, in favor of credits evidenced by a public instrument, and, secondly, in favor of credits evidenced by a final judgment, should they have been the subject of litigation, the preference among the two kinds of credits being determined by priority of dates.

181. Steel Corporation of the Philippines vs. Mapfre Insular Insurance Corporation GR No. 201199

October 16, 2013

FACTS: Steel Corporation of the Philippines SCP is a domestic corporation engaged in the manufacture and distribution of cold-rolled and galvanized steel sheets and coils. It obtained loans from several creditors and, as security, mortgaged its assets in their favor. The creditors appointed Bank of the Philippine Islands (BPI) as their trustee. On 17 December 1997, SCP and BPI entered into a Mortgage Trust Indenture (MTI) requiring SCP to insure all of its assets until the loans are fully paid. Under the MTI, the insurance policies were to be made payable to BPI. During the course of its business, SCP suffered financial difficulties. On 11 September 2006, one of the creditors, Equitable PCI Bank, Inc., now known as Banco de Oro-EPCI, Inc., filed with the RTC a petition to have SCP placed under corporate rehabilitation. On 12 September 2006, the RTC issued a stay order to defer all claims against SCP and appointed Atty. Santiago T. Gabionza, Jr. as rehabilitation receiver. On 3 December 2007, the RTC rendered a Decision approving the modified rehabilitation plan. Fires broke out at 2 SCP-plants damaging its machineries. Invoking its right under the MTI, BPI demanded and received from the insurers the insurance proceeds. SCP sought to collect the insurance proceeds claiming that it shall be used to rehabilitate the corporation by having machineries repaired and to buy replacements for the heavily damaged machines and that the assignment of the RTC as rehabilitation court did not divest it from being a court of general jurisdiction. The insurance companies refused to pay SCP the insurance proceeds contending that the fire was caused by several factors attributable to SCP such as arson and negligence and that the rehabilitation court has no jurisdiction over the propriety of the payment or non-payment of the insurance proceeds as the “claims” contemplated under the law do not cover the claims of the distressed bank to its debtors. The RTC, acting as the rehabilitation court, ruled on the matter and directed the insurance companies to pay the proceeds to SCP. In an appeal with the CA, the appellate court reversed the decision of the trial court. Hence, the present petition. ISSUE: 1. Whether the rehabilitation court has jurisdiction over the issue of payment of the insurance proceeds to a corporation under rehabilitation. 2. Whether the claim of SCP for insurance proceeds is covered by the “claims” under the law. RULING: 1. No. The RTC, acting as rehabilitation court, has no jurisdiction over the subject matter of the insurance claim of SCP against respondent insurers. SCP must file a separate action for collection where respondent insurers can properly thresh out their defenses. SCP cannot simply file with the RTC a motion to direct respondent insurers to pay insurance proceeds. Section 3 of Republic Act No. 10142 states that rehabilitation proceedings are "summary and non-adversarial" in nature. They do not include adjudication of claims that require full trial on the merits, like SCP’s insurance claim against respondent insurers. 2. No. The Court agrees with the ruling of the Court of Appeals that the jurisdiction of the rehabilitation courts is over claims against the debtor that is under rehabilitation, not over claims by the debtor against its own debtors or against third parties. In its 8 February 2012 Decision, the Court of Appeals held that:chanroblesvirtualawlibrary x x x Said insurance claims cannot be considered as “claims” within the jurisdiction of the trial court functioning as a rehabilitation court. Rehabilitation courts only have limited jurisdiction over the claims by creditors against the distressed company, not on the claims of said

distressed company against its debtors. The interim rules define claim as referring to all claims or demands, of whatever nature or character against a debtor or its property, whether for money or otherwise.

186. Jose Ramirez and Eloisa De Marcaida vs. J.R. Redfern GR No. L-26062

December 31, 1926

FACTS: The plaintiffs are Jose V. Ramirez and his wife, Eloisa de Marcaida. The defendant is J. R. Redfern. Jose V. Ramirez and J. R. Redfern are brothers-in-law. In 1908, J. R. Redfern took his wife and three minor children to England and left them there. He returned to the Philippines the following year. Beginning with 1910 and continuing until 1922, Mr. Redfern provided his wife with funds for her expenses Mr. Redferd is now furnishing his wife P300 per month for the support of herself and one child. The two grown sons are employed and are earning their own living. In 1920, while still in England, Mrs. Redfern obtained from her sister, Mrs. Ramirez, the sum of £600. Mrs. Redfern later secured an additional £185 from her sister in England. Mrs. Redfern did not make use of this money until 1922. Eight hundred seventy-five pesos were advanced by Mr. and Mrs. Ramirez to Mrs. Redfern after the latter had return to Manila. The action is brought by the plaintiffs to recover from the defendant the sums of $600, £185, and P875 for alleged advances to the defendant’s wife for her support and maintenance. The judgment of the trial court absolves the defendant from the demands of the plaintiffs with costs against the plaintiffs. ISSUE: Whether or not the plaintiffs can demand support from the defendants relying on Article 216 of the Family Code. RULING: No. For one to recover under the provisions of Art 216 of the Family Code, it must be alleged and proved, first, that support has been furnished a dependent of one bound to give support but who fails to do so; second, that the support was supplied without the knowledge of the person charged with the duty. The negative qualification is when the support is given without the expectation of recovering it. In the case at bar, there is a failure of proof as to the first essential, and possibly the second essential, of the law. The husband and wife are mutually bound to support each other. Parents are also required to bring up and educate their children. But in this connection, the point of interest is that the wife accepted assistance from another, when it is not shown that she had ever made any complaint to her husband or any of his agents with regard to her allowance. Mr. Redfern's reason for reducing the allowance, he says, was his precarious financial situation in 1921 and 1922. Before one can tender succor to the wife of another with an expectation or recouping himself for the loan, the husband should be given an opportunity to render the needful assistance. Also, it is clear that there is evidence in the record which corroborates the finding of the trial judge that the defendant was amply providing for his wife and children in London.