Tag: Real Estate Mortgage

Mortgage Rights Prevail: Protecting Mortgagee Interests Over Subsequent Property Contracts

In a real estate dispute, the Supreme Court affirmed the rights of a mortgagee over subsequent buyers in contracts to sell, emphasizing the importance of registration and the due diligence required in property transactions. The Court ruled that a real estate mortgage, duly registered, takes precedence over contracts to sell executed after the mortgage’s registration. This decision underscores the principle that registration serves as constructive notice to the world, binding subsequent purchasers to prior encumbrances on the property. This means that individuals entering into agreements involving real estate must conduct thorough due diligence to uncover existing liens or mortgages, as these will take precedence over their later claims.

Navigating Real Estate Entanglements: When Mortgages Overshadow Subsequent Sales

The case before the Supreme Court, Fabio Cahayag and Conrado Rivera vs. Commercial Credit Corporation, involved a complex web of property transactions and competing claims. Dulos Realty, the original owner, mortgaged several properties to Commercial Credit Corporation (CCC). Subsequently, Dulos Realty entered into contracts to sell these properties to various individuals, including Cahayag, Rivera, Escalona, and Baldoza. When Dulos Realty defaulted on its loan, CCC foreclosed the mortgage, leading to a legal battle over who had the superior right to the properties.

The central issue revolved around whether the subsequent buyers, who entered into contracts to sell after the mortgage was registered, had a valid claim against CCC, the mortgagee. Petitioners, the buyers, argued that the mortgage did not cover the improvements on the land and that Dulos Realty was no longer the owner of the properties when the mortgage was executed. They also contended that CCC, as a financial institution, should have exercised greater due diligence and that the mortgage required prior approval from the Housing and Land Use Regulatory Board (HLURB).

The Supreme Court, however, sided with the mortgagee, CCC, and its successor-in-interest, Qua. The Court emphasized that the real estate mortgage explicitly included not only the land but also all the buildings and improvements thereon. This was determined by examining the language of the mortgage agreement itself.

[T]he MORTGAGOR has transferred and conveyed and, by these presents, do hereby transfer and convey by way of FIRST MORTGAGE unto the MORTGAGEE, its successors and assigns the real properties described in the list appearing at the back of this document and/or in a supplemental document attached hereto as Annex “A” and made and integral part hereof, together with all the buildings and/or other improvements now existing or which may hereafter be place[d] or constructed thereon.

The Court found no ambiguity in the mortgage agreement, thereby dismissing the petitioners’ argument that the agreement should be construed against the drafter. The Court underscored the significance of the mortgage’s registration date. Since the contracts to sell were executed after the mortgage’s registration, the buyers were bound by the mortgage. The registration served as constructive notice, meaning that the buyers were legally presumed to know about the mortgage when they entered into their respective contracts.

The legal principle of constructive notice is crucial in property law, establishing that registration of an encumbrance, such as a mortgage, effectively informs all subsequent parties of its existence and implications. The Court cited Articles 1312 and 2126 of the Civil Code to support this principle.

Art. 1312. In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration laws.

Art. 2126. The mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted.

The Court distinguished this case from Dela Merced v. GSIS, where an unregistered contract to sell preceded a registered mortgage. In Dela Merced, the mortgagee, GSIS, was deemed to have knowledge of the contract to sell, which was equivalent to registration. However, in the present case, the mortgage was registered first, making it binding on the subsequent buyers. Moreover, unlike Dela Merced, the buyers in this case did not fully pay the purchase price or execute a deed of absolute sale before the foreclosure.

The Supreme Court also addressed the argument that CCC, as a financial institution, should have exercised greater due diligence. While financial institutions are generally held to a higher standard of care, the Court found that the registration of the mortgage was sufficient notice to all parties. The buyers could have protected their interests by redeeming the property within the one-year redemption period, which they failed to do.

The Court further clarified the application of the principle of nemo dat quod non habet, which means that one cannot give what one does not have. While the Court of Appeals mistakenly applied this principle to the validity of the sale, the Supreme Court clarified that it applies to the consummation stage, not the perfection stage, of a contract of sale. In this case, Dulos Realty was no longer the owner of the property at the time of delivery to Baldoza; thus, there was no valid transfer of title. This distinction highlights the critical difference between a valid contract of sale and a valid transfer of ownership.

Finally, the Court dismissed the argument that the mortgage lacked prior HLURB approval. Because this argument was raised for the first time on appeal, it was deemed waived. Parties cannot change their theory of a case at the appellate stage, as it would deprive the opposing party of the opportunity to present evidence on the issue.

FAQs

What was the key issue in this case?	The primary issue was whether a registered real estate mortgage took precedence over subsequent contracts to sell involving the same properties. The Court had to determine who had the superior right to the properties.
What is the significance of registering a real estate mortgage?	Registration serves as constructive notice to the world, legally informing everyone about the mortgage. This binds subsequent purchasers to the terms of the mortgage, giving the mortgagee a prior claim on the property.
What is the ‘nemo dat quod non habet’ principle, and how does it apply to this case?	This principle means one cannot give what one does not have. The Supreme Court clarified that this applies at the consummation (delivery) stage of a sale, not the perfection stage.
Why did the Court reject the argument about the lack of HLURB approval?	The Court rejected this argument because it was raised for the first time on appeal. Parties cannot introduce new legal theories at the appellate stage that were not presented during the trial.
How does this case compare to Dela Merced v. GSIS?	In Dela Merced, an unregistered contract to sell preceded a registered mortgage, and the mortgagee had knowledge of the prior contract. Here, the mortgage was registered first, making it binding on subsequent buyers.
What is the redemption period in foreclosure cases, and why is it important?	The redemption period is the time allowed for a mortgagor to reclaim the property after foreclosure. Failing to redeem within this period results in the title being consolidated in the purchaser.
What does it mean to be an ‘innocent purchaser for value’?	An innocent purchaser for value buys property without notice of any other person’s right or interest, paying a fair price. However, this concept was not central to this case because the mortgagee’s title was valid.
What is a contract to sell, and how does it differ from a contract of sale?	A contract to sell stipulates that the seller will execute a deed of sale only after full payment of the purchase price. Unlike a contract of sale, it does not transfer ownership until the condition of full payment is met.

The Supreme Court’s decision in this case reinforces the importance of due diligence and the legal effect of registration in property transactions. It clarifies that a registered mortgage takes precedence over subsequent contracts to sell, protecting the rights of the mortgagee. This ruling serves as a reminder to potential buyers to thoroughly investigate the status of a property before entering into any agreements.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Fabio Cahayag and Conrado Rivera vs. Commercial Credit Corporation, G.R. No. 168078, January 13, 2016

January 13, 2016

Mortgage Validity: Restrictions on Property Rights vs. Contractual Obligations

A party who willingly enters into a contract and benefits from it cannot later avoid their obligations by claiming irregularities in the contract’s execution. This principle was affirmed in a case involving a mortgaged property with restrictions on its title. The Supreme Court emphasized that such restrictions do not automatically invalidate a mortgage agreement, especially when the property owner willingly used the property as collateral and availed themselves of the loan. This decision reinforces the importance of honoring contractual commitments and clarifies the limits of property restrictions in mortgage agreements.

Borrower Beware: Can Restrictions on Property Titles Nullify a Mortgage?

The case of Florante Vitug versus Evangeline A. Abuda revolves around a loan secured by a real estate mortgage. Florante Vitug (Vitug) mortgaged his property to Evangeline A. Abuda (Abuda) as security for a loan. The property’s title contained a restriction imposed by the National Housing Authority (NHA), requiring NHA’s consent before any encumbrance or disposal of the property. Vitug later argued that the mortgage was invalid because he did not obtain the NHA’s consent. The central legal question is whether the restriction on Vitug’s title invalidated the mortgage contract, thus relieving him of his obligations.

The factual backdrop of the case begins with Abuda lending P250,000.00 to Vitug and his wife in March 1997. As collateral, Vitug mortgaged his property, which was under a conditional Contract to Sell with the NHA. By November 1997, the parties executed a restructured mortgage contract for P600,000.00, encompassing the original loan and subsequent credit accommodations, with a 5% monthly interest. Vitug failed to repay the loan, leading Abuda to file a foreclosure complaint.

The Regional Trial Court (RTC) ruled in favor of Abuda, ordering Vitug to pay the debt or face foreclosure. Vitug appealed to the Court of Appeals (CA), arguing fraud and lack of consent due to the NHA restriction. The CA affirmed the RTC’s decision but modified the interest rate to 1% per month or 12% per annum, deeming the original rate unconscionable. Vitug then appealed to the Supreme Court, raising the NHA’s lack of consent and the property’s status as a family home exempt from execution.

The Supreme Court addressed whether Vitug could raise these issues, even though they were initially presented in his Motion for Reconsideration at the CA. The Court acknowledged that Vitug had mentioned these issues in his Answer and Pre-trial Brief at the trial court level. Thus, the Supreme Court allowed the discussion of the issue. The Court then delved into the core elements of a valid mortgage contract, referencing Article 2085 of the Civil Code, which states:

Art. 2085. The following requisites are essential to contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

The Court found that all elements were present, including Vitug’s ownership and voluntary execution of the mortgage. The Supreme Court noted that the lower courts found no evidence supporting Vitug’s claim of being tricked into signing the mortgage contract. It reiterated that its role is not to re-evaluate factual findings of lower courts unless exceptions apply, which Vitug failed to demonstrate. The Court highlighted that Vitug’s undisputed title gave him the right to encumber the property, subject to legal limitations.

The Court addressed the restriction clause imposed by the NHA, stating that while it limited Vitug’s jus disponendi (right to dispose), it did not strip him of ownership. This restriction, the Court clarified, merely served as a notice to the world that the NHA retained certain claims over the property. Violations of such restrictions do not automatically render contracts void ab initio. The Court cited Municipality of Camiling v. Lopez to highlight that not all acts against the law are void from the beginning; some are merely voidable.

Building on this principle, the Court explained that the mortgage contract was, at most, voidable at the NHA’s option, not Vitug’s. Only the NHA, as the party for whose benefit the restriction was created, could seek annulment. Without the NHA’s action, the mortgage remained enforceable between Vitug and Abuda. Furthermore, the Court noted that the NHA had issued a Permit to Mortgage, demonstrating substantial compliance with the consent requirement. The mortgage contract also referenced the conditions set by the NHA, showing an intent to comply. The Court emphasized that Vitug could not use his own failure to fully comply with the NHA conditions as a basis to invalidate the contract.

Even if the mortgage were deemed illegal or wrongful, the Court invoked the principle of in pari delicto, enshrined in Articles 1411 and 1412 of the Civil Code. This principle prevents parties equally at fault from seeking legal remedies against each other. The Court emphasized that it will not aid parties in illegal acts, citing cases such as Batarra v. Marcos and Bough v. Cantiveros. The Court found that Vitug was aware of the NHA restrictions when he voluntarily entered into the mortgage contract. He cannot now use the contract’s alleged invalidity as a defense, as he benefited from the loan. The Court also clarified that applying the in pari delicto principle would not violate any law, morals, good customs, or public policy in this case.

Addressing Vitug’s claim that the property was a family home exempt from execution, the Court cited Article 155 of the Family Code. This article explicitly exempts debts secured by mortgages from the protection against execution of a family home. Since Vitug voluntarily used the property as security for the loan, it was subject to execution.

The Court addressed the unconscionable interest rates stipulated in the loan contracts. While parties have the freedom to stipulate interest rates, Article 1306 of the Civil Code limits this freedom to ensure public morals, safety, and welfare. The Court affirmed the CA’s decision to reduce the interest rate to 1% per month or 12% per annum, deeming the original rates iniquitous. The Court also referenced Nacar v. Gallery Frames to modify the interest rates further, reducing it to 6% per annum from July 1, 2013, until full satisfaction.

FAQs

What was the key issue in this case?	The key issue was whether a restriction on a property title, requiring consent from the National Housing Authority (NHA) before mortgaging, invalidated the mortgage contract when the property owner did not obtain that consent.
What is ‘jus disponendi’?	Jus disponendi is the right of an owner to dispose of their property, including the right to sell, encumber, or mortgage it. This right is subject to limitations established by law or contract.
What is the principle of ‘in pari delicto’?	The principle of in pari delicto means that when two parties are equally at fault in an illegal act, neither party can seek legal remedies against the other; the court will leave them as they are.
When is a contract considered voidable?	A contract is considered voidable when it contains all the elements of a valid contract but is subject to conditions or limitations in favor of one party; that party has the option to annul the contract.
Are family homes exempt from execution in the Philippines?	Family homes are generally exempt from execution, forced sale, or attachment, except for certain debts, including those secured by mortgages on the premises before or after the constitution of the family home.
What is the legal interest rate in the Philippines if not stipulated?	In the absence of a written stipulation, the legal interest rate for loans or forbearance of money is 6% per annum, computed from the time of default (judicial or extrajudicial demand).
What does Article 1306 of the Civil Code state?	Article 1306 states that contracting parties may establish stipulations, clauses, terms, and conditions as they deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
What was the Court’s ruling on the stipulated interest rates?	The Court found the stipulated interest rates of 5% to 10% per month unconscionable and reduced them to 1% per month (12% per annum), and eventually to 6% per annum from July 1, 2013, until full satisfaction.

In conclusion, the Supreme Court’s decision underscores the importance of honoring contractual obligations and clarifies the effect of property restrictions on mortgage agreements. The ruling serves as a reminder that parties who voluntarily enter into contracts and benefit from them cannot later escape their obligations by citing technicalities or restrictions of which they were aware. The Court balanced the need to protect borrowers from unconscionable interest rates with the principle of upholding valid contracts.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: FLORANTE VITUG VS. EVANGELINE A. ABUDA, G.R. No. 201264, January 11, 2016

January 11, 2016

Pactum Commissorium: When Mortgage Agreements Unfairly Benefit Lenders

The Supreme Court in Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian, held that a deed of sale executed simultaneously with a real estate mortgage was void due to pactum commissorium. This prohibited practice occurs when a lender automatically acquires ownership of a mortgaged property if the borrower defaults, circumventing the need for a public foreclosure. This decision safeguards borrowers by preventing lenders from exploiting mortgage agreements to unjustly seize properties.

Mortgage Trap: Did a Loan Agreement Lead to an Illegal Property Grab?

The case revolves around a series of loans obtained by Spouses Santos and Linda Julian (the respondents) from Adelaida Pen (one of the petitioners). To secure these loans, Linda executed a real estate mortgage over their property. The core of the dispute lies in a deed of sale that Linda also signed, purportedly transferring ownership of the mortgaged property to Adelaida. The Julians claimed that this deed was signed blank and intended to take effect only if they failed to repay the loans. The Pens, on the other hand, contended that the sale was a legitimate transaction separate from the mortgage. The lower courts and the Court of Appeals (CA) found the deed of sale to be void, albeit for differing reasons. The Regional Trial Court (RTC) initially declared the sale void due to the lack of consideration at the time of signing, while the CA focused on the element of pactum commissorium.

The Supreme Court (SC) agreed with the CA’s assessment, ultimately affirming the decision to invalidate the deed of sale. The SC emphasized that its review was generally limited to questions of law, especially when both lower courts concurred on the factual findings. The critical issue was whether the arrangement between the Pens and the Julians constituted a prohibited pactum commissorium, which is forbidden under Article 2088 of the Civil Code. This article explicitly states that “the creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them; any stipulation to the contrary is null and void.” This provision is designed to protect debtors from unfair practices by creditors who might abuse their position.

To fully understand the prohibition of pactum commissorium, we must examine its elements. As the Court noted, the essential elements are: (a) the existence of a pledge or mortgage where property is used as security for a principal obligation; and (b) a stipulation allowing the creditor to automatically appropriate the pledged or mortgaged property if the debt is unpaid. The Court found both elements present in this case. First, the real estate mortgage clearly established the property as security for the loans. Second, the simultaneous signing of the blank deed of sale implied that Adelaida could appropriate the property if Linda defaulted on her payments. The court underscored this point, stating:

Article 2088 of the Civil Code prohibits the creditor from appropriating the things given by way of pledge or mortgage, or from disposing of them; any stipulation to the contrary is null and void.

The Court also rejected the Pens’ argument that the transaction was a valid dacion en pago, a form of settling a debt by transferring property. While a valid dacion en pago is recognized under Philippine law, it requires the voluntary agreement of both parties, and the complete extinguishment of the debt. The SC found that the Julians’ debt was not fully extinguished upon the property transfer. Instead, the arrangement resembled a disguised attempt to circumvent the prohibition against pactum commissorium. The Pens insisted that the lack of a specified date and consideration on the deed of sale indicated that they were still negotiating the final terms. However, the Court found this argument unconvincing, noting that the Pens had ample opportunity to finalize these details before the deed was notarized. The absence of these essential elements raised serious doubts about the legitimacy of the sale agreement.

According to Article 1318 of the Civil Code, the essential requisites of a contract are consent, object and cause or consideration. Without these essential elements, a contract is not perfected. In this case, the lack of agreement regarding the consideration led the court to believe that there was no valid sale between the parties. The Court elucidated on the requirements for perfecting a contract of sale:

In a sale, the contract is perfected at the moment when the seller obligates herself to deliver and to transfer ownership of a thing or right to the buyer for a price certain, as to which the latter agrees.

Regarding the matter of interest, the CA initially imposed a 12% per annum compensatory interest on the outstanding debt. The Supreme Court modified this ruling to align with prevailing jurisprudence. Monetary interest, which is compensation for the use of money, must be expressly stipulated in writing as per Article 1956 of the Civil Code. Since the promissory notes lacked such a stipulation, monetary interest was deemed improper. However, compensatory interest could be imposed to address the damages caused by the respondents’ delay in fulfilling their obligations.

The legal rate of interest was subject to change, particularly with the implementation of Bangko Sentral ng Pilipinas (BSP) Monetary Board Resolution No. 796. This resolution reduced the legal interest rate for loans and forbearances of money from 12% to 6% per annum, effective July 1, 2013. The court applied this new interest rate prospectively. Consequently, the interest on the respondents’ debt was calculated at 12% per annum from the date of demand (October 13, 1994) until June 30, 2013, and then at 6% per annum from July 1, 2013, until full payment. This adjustment reflected the changing legal landscape regarding interest rates, balancing fairness to both creditors and debtors.

In summary, the Supreme Court’s decision in this case serves as a reminder of the importance of upholding the prohibition against pactum commissorium. By invalidating the deed of sale, the Court protected the respondents from an unfair property grab. The ruling underscores the need for transparency and fairness in mortgage agreements, ensuring that debtors are not unduly exploited by creditors. The Court also clarified the proper application of interest rates, aligning its decision with current legal standards and BSP regulations.

FAQs

*What is pactum commissorium?*	Pactum commissorium is a prohibited stipulation in mortgage or pledge agreements where the creditor automatically owns the property if the debtor defaults, bypassing proper foreclosure procedures. It is illegal under Article 2088 of the Civil Code.
*What are the elements of pactum commissorium?*	The elements are: (1) a pledge or mortgage securing a principal obligation, and (2) a stipulation that allows the creditor to automatically appropriate the property upon the debtor’s failure to pay. Both elements must be present for the prohibition to apply.
*What is dacion en pago?*	Dacion en pago is a way to settle a debt by transferring property to the creditor. It is valid if both parties agree, and the transfer completely extinguishes the debt.
Why was the deed of sale in this case considered invalid?	The deed of sale was deemed invalid because it was signed simultaneously with the mortgage and allowed the creditor to automatically acquire the property upon default, which constitutes pactum commissorium. The lack of a specified consideration also raised doubts about its legitimacy.
What is the difference between monetary and compensatory interest?	Monetary interest is compensation for the use of money and must be stipulated in writing. Compensatory interest is imposed as damages for delay or failure to pay the principal loan.
What interest rate applies to the respondents’ debt in this case?	The interest rate is 12% per annum from October 13, 1994, to June 30, 2013, and 6% per annum from July 1, 2013, until full payment, in accordance with BSP regulations.
What is the significance of Bangko Sentral ng Pilipinas (BSP) Monetary Board Resolution No. 796?	This resolution lowered the legal interest rate for loans and forbearances of money from 12% to 6% per annum, effective July 1, 2013. This change impacts how interest is calculated on debts and loans.
How does this case protect borrowers?	This case protects borrowers by preventing lenders from using mortgage agreements to unfairly seize properties through pactum commissorium. It ensures that proper foreclosure procedures are followed.
What are the requisites of a valid contract?	According to Article 1318 of the Civil Code, the requisites for any contract to be valid are, namely: (a) the consent of the contracting parties; (b) the object; and (c) the consideration.

This case underscores the importance of carefully reviewing loan and mortgage agreements to ensure fairness and compliance with the law. It highlights the judiciary’s role in safeguarding borrowers from potentially exploitative practices by lenders. The ruling serves as a critical precedent for preventing lenders from unjustly enriching themselves through the automatic appropriation of mortgaged properties.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Roberto and Adelaida Pen, vs. Spouses Santos and Linda Julian, G.R. No. 160408, January 11, 2016

January 11, 2016

Reformation of Contract: Correcting Errors to Reflect True Intent in Real Estate Mortgages

In Allied Banking Corporation v. Cristina B. Fukuoka, the Supreme Court affirmed the reformation of a real estate mortgage (REM) to reflect the true intentions of the parties involved. The Court held that when a contract doesn’t accurately represent the agreement due to mistake, fraud, or inequitable conduct, the instrument can be reformed. This decision underscores the principle that courts will look beyond the literal wording of a contract to ascertain the genuine agreement between the parties, especially when evidence suggests deceit or error in the documentation.

Whose Loan Is It Anyway? Unraveling a Mortgage Misunderstanding

This case revolves around a loan obtained from Allied Bank, purportedly secured by a real estate mortgage (REM) on Cristina Fukuoka’s property. Fukuoka claimed she only intended to mortgage her property for a P1,000,000.00 loan extended to her, while the bank argued the mortgage also secured loans of Crisostomo Borillo. The dispute arose because the REM contained a note stating it secured the loan of Crisostomo, leading to conflicting interpretations of the agreement. The central legal question was whether the REM should be reformed to reflect Fukuoka’s understanding that it only secured her loan, not Crisostomo’s separate obligations.

The Regional Trial Court (RTC) initially ruled in favor of Fukuoka, ordering the removal of the clause in the REM that bound her property to Crisostomo’s debts. The RTC found evidence of irregularities and conspiracy between Allied Bank and Crisostomo. Allied Bank contended that Fukuoka was liable for all of Crisostomo’s loans because of the phrase in the REM. However, the RTC emphasized that the intention of the parties should prevail over the literal wording of the contract, citing the maxim “lex succurrit ignoranti” (the law assists the ignorant).

The Court of Appeals (CA) upheld the RTC’s decision, affirming the appropriateness of reforming the contract. The CA pointed to evidence suggesting the bank intended to grant the P1,000,000.00 loan to Fukuoka, including a credit ticket issued in her name and consistent monthly amortization deductions from a designated account. The CA also highlighted potential fraud on the part of Allied Bank, noting the insertion of the clause securing Crisostomo’s loans without Fukuoka’s knowledge or consent. This supported the conclusion that the REM did not accurately reflect the parties’ true intentions.

Article 1359 of the New Civil Code allows for reformation of a contract when, due to mistake, fraud, inequitable conduct, or accident, the instrument fails to express the true intention of the parties. To ascertain this intention, Article 1371 mandates that the parties’ contemporaneous and subsequent acts should be considered. In this case, the actions of both Fukuoka and Allied Bank indicated that the loan was primarily intended for Fukuoka, with the mortgage serving as security for her obligation.

The Supreme Court emphasized that factual findings of lower courts are generally respected, especially when supported by substantial evidence. Since fraud is a question of fact, the Court deferred to the findings of the RTC and CA regarding the irregularities in the execution of the mortgage. The Supreme Court agreed with the CA, stating:

[F]raud on the part of [Allied Bank] can readily be seen from the feet that despite its release of the amount P984,937.50 in [Crisostomo’s] account on December 15, 1995, [Allied Bank’s] employee, Marilou Opeña, still issued a Credit Ticket in the name of [Fukuoka] on the same date, thereby causing the latter to believe that she was the one who obtained the loan. To make matters worse, [Allied Bank’s] employees inserted the phrase “[t]o secure the loan of [Crisostomo]/C.P. Borillo Const” in the deed of [REM] dated December 15, 1995 without [Fukuoka’s] knowledge or consent. In doing so, [Allied Bank] unfairly subjected [Fukuoka’s] property to an additional obligation by making it appear that it was mortgaged not only to secure the P1 million loan of [Fukuoka], but also to secure all the loans of [Crisostomo], regardless of their amount.

The Court further addressed the bank’s cross-claim against Crisostomo. The Court ordered the reinstatement of Allied Bank’s cross-claim against Crisostomo before the RTC, recognizing the need to resolve his outstanding loan obligations in a single proceeding.

The ruling in Allied Banking Corporation v. Fukuoka highlights the importance of accurately documenting the intentions of parties in a contract, especially in real estate mortgages. It also reinforces the principle that courts can reform contracts to prevent injustice when the written agreement fails to reflect the true understanding of the parties involved. This case serves as a reminder for financial institutions to exercise due diligence in ensuring that borrowers fully understand the terms of their loan agreements and that all relevant documents accurately reflect those terms. It also highlights that the courts look at the substance of the agreement, not just the form.

FAQs

What was the key issue in this case?	The key issue was whether a real estate mortgage (REM) should be reformed to reflect the true intention of the parties, specifically whether it secured only the loan of Cristina Fukuoka or also the loans of Crisostomo Borillo.
What is reformation of contract?	Reformation of contract is a legal remedy that allows a court to modify a written agreement to reflect the actual intentions of the parties when the written terms do not accurately represent their agreement due to mistake, fraud, or inequitable conduct.
What evidence did the Court consider in deciding to reform the mortgage?	The Court considered the credit ticket issued in Fukuoka’s name, the schedule of monthly amortizations corresponding to her loan amount, and the fact that monthly payments were deducted from a designated account, indicating the bank’s acknowledgment of her loan obligation.
*What does the phrase “lex succurrit ignoranti” mean, and how did it apply to this case?*	“Lex succurrit ignoranti” means “the law assists the ignorant.” It applied because Fukuoka was seemingly unaware that the REM was also securing loans of Crisostomo and the law seeks to protect those who are not fully aware of the implications of contracts they enter into.
What was Allied Bank’s argument in this case?	Allied Bank argued that Fukuoka was liable for all of Crisostomo’s loans because the REM contained a clause stating that it secured his loans as well. They claimed there was no basis to reform the contract.
Why did the Court reinstate Allied Bank’s cross-claim against Crisostomo?	The Court reinstated the cross-claim to ensure that Crisostomo’s outstanding loan obligations to Allied Bank were resolved in the same legal proceeding, avoiding the need for a separate lawsuit and promoting judicial efficiency.
What is the significance of this ruling for borrowers?	The ruling emphasizes the importance of carefully reviewing and understanding all terms of loan agreements, especially real estate mortgages, and ensuring that the documents accurately reflect their intentions. Borrowers should seek legal advice if they are unsure of any terms or if they believe the documents do not reflect their understanding.
What is the significance of this ruling for banks and lending institutions?	The ruling highlights the importance of exercising due diligence in preparing loan documents and ensuring that borrowers are fully aware of the terms of the agreement. Banks should take steps to avoid misunderstandings or misrepresentations that could lead to disputes and potential reformation of contracts.

The Supreme Court’s decision in Allied Banking Corporation v. Cristina B. Fukuoka serves as a valuable reminder of the principles governing contract interpretation and reformation in the Philippines. The case underscores the importance of ensuring that written agreements accurately reflect the true intentions of all parties involved and provides recourse when mistakes or fraudulent actions undermine the validity of contractual obligations. The court protects individuals from inequitable conduct in contractual agreements.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ALLIED BANKING CORPORATION VS. CRISTINA B. FUKUOKA, G.R. No. 192443, November 23, 2015

November 23, 2015

Possession Follows Ownership: Enforcing Writs After Foreclosure

In foreclosure cases, the issuance of a writ of possession is generally a ministerial duty of the court, especially after the redemption period has lapsed and the title has been consolidated in the buyer’s name. This means the buyer has a right to possess the property, and the court must issue a writ of possession to enforce that right. This ruling clarifies the scope and limitations of the court’s power when dealing with third-party claims and lease agreements not properly recorded, ensuring that the purchaser’s rights are protected.

When Does a School Building Fall Under Foreclosure? Examining Third-Party Claims

This case, St. Raphael Montessori School, Inc. v. Bank of the Philippine Islands, revolves around a dispute over a writ of possession following the foreclosure of a property. Spouses Rolando and Josefina Andaya, acting on behalf of St. Raphael Montessori, Inc., obtained loans from Far East Bank and Trust Company (now BPI) and secured them with a real estate mortgage over a parcel of land. When the Spouses Andaya defaulted on their loan obligations, BPI foreclosed the mortgaged property, leading to the issuance of a Certificate of Sale. After the mortgagors failed to redeem the property within the one-year redemption period, BPI consolidated its ownership and obtained a Transfer Certificate of Title in its name. Consequently, BPI petitioned the court for a writ of possession to take control of the property.

The Spouses Andaya initially requested a deferment of the writ’s implementation and pledged to vacate the premises. However, they later failed to comply, leading St. Raphael to file a Motion to Quash the Writ of Possession, arguing that it was not a party to the mortgage and that the school building on the property was subject to a prior Lease to Own Agreement. The lower court initially granted St. Raphael’s motion, but the Court of Appeals reversed this decision, affirming BPI’s right to possess the property, including the school building. This ruling was based on the principle that a writ of possession is a ministerial duty of the court after the redemption period expires, and the mortgage extends to all improvements on the property.

The Supreme Court affirmed the Court of Appeals’ decision, underscoring that the issuance of a writ of possession to a purchaser in a public auction is a ministerial function that cannot be restrained, even by a pending case questioning the foreclosure’s validity. The Court emphasized that once the title is consolidated in the buyer’s name after the mortgagor fails to redeem the property, the writ of possession becomes a matter of right. The Court cited Sections 6 and 7 of Act 3135, as amended by Act 4118, which outline the process for redemption and the purchaser’s right to petition the court for possession:

Sec. 6. In all cases in which an extrajudicial sale is made x x x, the debtor, his successors-in-interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale…

Sec 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond… and the court shall, upon approval of the bond, order that a writ of possession issue…

Building on this principle, the Court reiterated that after the redemption period lapses, no bond is required for the writ’s issuance, as the mortgagor loses all interest in the property. This principle was further explained in China Banking Corporation v. Spouses Lozada:

It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale. As such, he is entitled to the possession of the said property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title.

Therefore, BPI’s right to possess the property was upheld based on its consolidated ownership and the corresponding Transfer Certificate of Title. The Court also dismissed St. Raphael’s argument that it was not a party to the mortgage and that the mortgage did not include the school building. Citing Article 2127 of the Civil Code, the Court stated that a mortgage extends to all natural or civil fruits and improvements on the property when the obligation becomes due. Thus, foreclosure proceedings cover not only the mortgaged property but also all its accessions and accessories.

Moreover, St. Raphael failed to prove its claim of ownership over the building. The Court noted that the Spouses Andaya, who were the original incorporators and trustees of St. Raphael, were also the parties who mortgaged the property to BPI. St. Raphael failed to demonstrate that it was a separate entity or that the Spouses Andaya did not act on its behalf. Additionally, any lease agreement should have been annotated on the property’s title to bind third parties like BPI. The absence of such annotation meant that BPI had no prior knowledge of the lease.

The Court also addressed concerns about the lower court’s impartiality. The lower court’s decision to grant St. Raphael’s motion and install it in possession of the property, despite established legal principles, raised suspicions about the court’s intentions. The Supreme Court emphasized that lower court judges must render just, correct, and impartial decisions, free from any suspicion of unfairness.

FAQs

What was the central issue in this case?	The main issue was whether BPI could enforce a writ of possession on a property with a building owned by a third party, St. Raphael, after foreclosing the mortgage. The court needed to determine if St. Raphael’s rights superseded BPI’s right to possession.
What is a writ of possession?	A writ of possession is a court order directing the sheriff to place someone in possession of a property. In foreclosure cases, it is issued to the purchaser of the property after the redemption period expires.
When is a writ of possession considered a ministerial duty?	The issuance of a writ of possession becomes a ministerial duty of the court once the redemption period has lapsed and the title has been consolidated in the buyer’s name. At that point, the court must issue the writ upon proper application.
What happens if the mortgagor fails to redeem the property?	If the mortgagor fails to redeem the property within the one-year redemption period, the buyer at the foreclosure sale becomes the absolute owner. The buyer is then entitled to possess the property and can demand it at any time.
Does a mortgage include improvements on the property?	Yes, according to Article 2127 of the Civil Code, a mortgage extends to all natural or civil fruits and improvements found on the property when the obligation becomes due. This includes buildings and other structures.
What is the effect of a lease agreement not annotated on the title?	A lease agreement that is not annotated on the property’s title does not bind third parties who have no knowledge of it. The purchaser of the property, like BPI in this case, is not bound by the unannotated lease.
Can a third party challenge a writ of possession?	A third party can challenge a writ of possession, but they must prove that their claim of ownership or right to possess the property is superior to that of the purchaser. In this case, St. Raphael failed to provide sufficient evidence of its ownership.
What is the significance of this ruling?	This ruling reaffirms the rights of purchasers in foreclosure sales and clarifies the court’s duty to issue writs of possession. It also highlights the importance of properly recording lease agreements and other encumbrances to protect the rights of third parties.

In summary, the Supreme Court’s decision in St. Raphael Montessori School, Inc. v. Bank of the Philippine Islands reinforces the principle that ownership carries the right to possession, particularly in foreclosure cases. The ruling underscores the ministerial duty of courts to issue writs of possession after the redemption period and the consolidation of title, ensuring that the rights of the purchaser are protected against unsubstantiated third-party claims. This case serves as a reminder to properly document and annotate any interests in real property to safeguard against future disputes.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: St. Raphael Montessori School, Inc. v. Bank of the Philippine Islands, G.R. No. 184076, October 21, 2015

October 21, 2015

Docket Fees and Notarial Foreclosure: Clarifying the Rules Before 2000

The Supreme Court in Ravago v. Metropolitan Bank & Trust Company clarified that prior to January 15, 2000, extrajudicial foreclosures conducted by a notary public were not required to be filed with the court, and thus, were exempt from paying docket fees. This ruling hinged on the interpretation of Administrative Order No. 3 and its subsequent amendments, specifically A.M. No. 99-10-05-0. The Court emphasized that the obligation to pay legal fees for notarial foreclosures only arose after the effectivity of A.M. No. 99-10-05-0. This means that foreclosures completed before this date, where a notary public was involved, are not rendered invalid simply for the non-payment of docket fees.

Docket Fees and Foreclosure: Did the Bank Skip a Step?

Benjamin Ravago and his wife took loans from Metropolitan Bank & Trust Company amounting to P25,000,000.00. These loans were secured by a mortgage on their property. When the couple defaulted, the bank initiated extrajudicial foreclosure proceedings through a notary public. Ravago argued that the foreclosure was invalid because the bank did not comply with Administrative Order No. 3 by failing to pay the required docket fees. The core legal question was whether Administrative Order No. 3, before its amendment, applied to extrajudicial foreclosures conducted by a notary public.

The Supreme Court, siding with the bank, referenced the earlier case of China Banking Corporation v. Court of Appeals, stating that extrajudicial foreclosures handled by a notary public do not fall under Administrative Order No. 3 because they are not filed with the court. The Court underscored that Administrative Order No. 3 was designed to guide executive judges and clerks of court in managing court affairs, particularly those related to the sheriff’s duties. The decision emphasized a key distinction: prior to the amendments introduced by A.M. No. 99-10-05-0, notarial foreclosures operated outside the purview of this administrative order.

To fully grasp the Court’s reasoning, a comparison between Administrative Order No. 3 and A.M. No. 99-10-05-0 is essential. Administrative Order No. 3 focused on the responsibilities of the Executive Judge in managing the courts and supervising the Clerk of Court, who also acts as the Ex-Officio Sheriff. It specifically directed that applications for extra-judicial foreclosure be filed with the Executive Judge through the Clerk of Court. The order did not mention notaries public or foreclosures conducted under their direction. A.M. No. 99-10-05-0 expanded the scope to include the issuance of commissions to notaries public and the enforcement of their duties. It mandated that all applications for extra-judicial foreclosure, whether under the direction of the sheriff or a notary public, be filed with the Executive Judge.

The significance of this amendment is that, prior to January 15, 2000, the prevailing rule did not require the filing of notarial foreclosures with the court. Therefore, the payment of legal fees, as prescribed under Section 7(c), Rule 141 of the Rules of Court, did not apply to these types of foreclosures. The Court in RPRP Ventures Management & Development Corporation v. Judge Guadiz, Jr., et. al. affirmed this interpretation. The Court clarified that Section 7(c), Rule 141 pertains to petitions filed before the Office of the Ex-Officio Sheriff, not those filed before a notary public. However, after the effectivity of A.M. No. 04-2-04-SC on August 16, 2004, the requirement for payment of legal fees now applies to both sheriffs and notaries public.

FAQs

What was the central issue in the Ravago case?	The core issue was whether a notarial foreclosure conducted before 2000 was invalid due to non-payment of docket fees.
What is Administrative Order No. 3?	Administrative Order No. 3 is a directive outlining procedures for extrajudicial foreclosure, initially focused on sheriff-led proceedings.
What is A.M. No. 99-10-05-0?	A.M. No. 99-10-05-0 is an amendment to Administrative Order No. 3, expanding its coverage to include foreclosures by notaries public.
When did A.M. No. 99-10-05-0 take effect?	A.M. No. 99-10-05-0 took effect on January 15, 2000.
Did the Ravago case involve a foreclosure before or after the amendment?	The foreclosure in the Ravago case occurred in 1999, before the effectivity of A.M. No. 99-10-05-0.
Who is responsible for paying legal fees for foreclosures now?	Under current rules, both sheriffs and notaries public are responsible for collecting legal fees for foreclosures.
What was the impact of the China Banking case on this issue?	The China Banking case established that Administrative Order No. 3 did not initially apply to notarial foreclosures.
How does this ruling affect current foreclosure proceedings?	The Ravago ruling clarifies the rules before 2000; current foreclosures are subject to different rules requiring fee payment regardless of who handles it.

The Ravago case provides crucial insight into the application of foreclosure regulations before the year 2000, highlighting that notarial foreclosures were not subject to the same requirements as sheriff-led proceedings concerning payment of fees. This distinction, rooted in the historical evolution of administrative orders, impacts the validity of foreclosures completed during that period. Understanding this history is essential for legal professionals dealing with older real estate transactions.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Ravago v. Metropolitan Bank & Trust Company, G.R. No. 188739, August 5, 2015

August 5, 2015

Breach of Contract and the Limits of Bank Manager Authority: Understanding Apparent Authority in Real Estate Transactions

In a breach of contract dispute, the Supreme Court ruled that a bank is bound by the commitments made by its branch manager, even if those commitments exceeded the manager’s explicit authority. This decision reinforces the principle of apparent authority, ensuring that third parties who deal in good faith with a bank’s representatives are protected. The ruling clarifies the extent to which banks are liable for their employees’ actions, affecting real estate transactions and loan guarantees. By relying on the branch manager’s assurances, the plaintiff acted in good faith and was thus entitled to damages when the bank failed to honor those assurances. The court highlighted the importance of maintaining confidence in the banking system and the need for banks to exercise caution in the selection and supervision of their employees.

The Guaranty Gambit: When a Bank Manager’s Promise Leads to a Legal Showdown

Games and Garments Developers, Inc. (GGDI) entered into an agreement to sell a parcel of land to Bienvenida Pantaleon. Allied Banking Corporation (Allied Bank) was to provide a loan to Pantaleon, with a portion of the proceeds earmarked to pay GGDI. Ernesto Mercado, the branch manager of Allied Bank, issued letters assuring GGDI that the funds would be directly released to them upon the transfer of the land title. Relying on these assurances, GGDI transferred the title to Pantaleon, but Allied Bank released the loan proceeds to Pantaleon instead, leaving GGDI unpaid. This breach of promise led GGDI to file a lawsuit against Pantaleon, Mercado, and Allied Bank, alleging breach of contract and seeking damages. The central legal question was whether Allied Bank was bound by Mercado’s letters and liable for the unpaid balance, despite the bank’s claim that Mercado acted beyond his authority.

The initial Memorandum of Agreement (MOA) outlined the payment terms, with Allied Bank supposedly guaranteeing the balance. The subsequent Deed of Sale reduced the purchase price but maintained the condition of a bank guaranty. Mercado, as branch manager, played a crucial role, issuing letters that assured GGDI of direct payment from the loan proceeds. These letters became the crux of the dispute, with GGDI arguing that they relied on these guarantees in transferring the property title. However, Allied Bank later denied the validity of these guarantees, claiming Mercado lacked the authority to issue them and citing Section 74 of the General Banking Act, which prohibits banks from entering into contracts of guaranty or suretyship. This denial led to a legal battle over the extent of Mercado’s authority and the bank’s responsibility.

The Regional Trial Court (RTC) initially ruled in favor of GGDI, holding both Pantaleon and Allied Bank liable. The RTC emphasized that GGDI fulfilled its obligations by transferring the title, while Pantaleon and Allied Bank failed to pay the balance. The RTC also rejected Allied Bank’s argument that Mercado lacked authority, noting the bank’s subsequent actions that benefited from the title transfer. However, the Court of Appeals (CA) reversed this decision concerning Allied Bank, stating that the bank could not be held liable for Mercado’s actions, citing the prohibition on bank guarantees and the lack of ratification by the bank. The appellate court also deemed GGDI’s claim a collateral attack on Allied Bank’s title to the property. This divergence in rulings set the stage for the Supreme Court to clarify the legal principles at stake.

The Supreme Court reversed the Court of Appeals’ decision, finding Allied Bank liable based on the doctrine of apparent authority. The Court clarified that Mercado’s letters did not constitute a contract of guaranty prohibited by the General Banking Act. Instead, the letters were an undertaking related to the release of loan proceeds. The Court explained that the letters merely acknowledged that Bienvenida and/or her company had an approved real estate loan with Allied Bank and guaranteed that subsequent releases from the loan would be made directly to GGDI provided that the certificate of title over the subject property would be transferred to Bienvenida’s name and the real estate mortgage constituted on the subject property in favor of Allied Bank would be annotated on the said certificate. The Supreme Court reasoned that as a branch manager, Mercado was clothed with the authority to transact and contract on behalf of the bank.

The Court emphasized that Allied Bank knowingly permitted its officer to perform acts within the scope of an apparent authority, holding him out to the public as possessing power to do those acts, the corporation will, as against any person who has dealt in good faith with the corporation through such agent, be estopped from denying such authority. Citing BPI Family Savings Bank, Inc. v. First Metro Investment Corporation, the Court reiterated that corporate transactions would be significantly impeded if every person dealing with a corporation was duty-bound to disbelieve every act of its responsible officers. Banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency.

The Supreme Court underscored the importance of good faith reliance on the representations of bank managers. “Persons dealing with Mercado could not be blamed for believing that he was authorized to transact business for and on behalf of the bank,” the Court stated. Given that the letters were written on Allied Bank letterhead and signed by Mercado as branch manager, GGDI had no reason to doubt his authority. Therefore, Allied Bank was bound by Mercado’s commitment to directly release the loan proceeds to GGDI.

The Court also addressed the issue of whether Allied Bank was a mortgagee in good faith. The Court determined that Allied Bank was not a mortgagee in good faith because it knew that GGDI had not yet been fully paid for the subject property, that the balance of the purchase price was to be paid for from the proceeds of Bienvenida’s approved loan from the bank and that the proceeds of the loan were already released to the spouses Pantaleon, and not to GGDI, on August 23, 1996, merely a day after Mercado issued his letter dated August 22, 1996 and same day as the execution by GGDI in Bienvenida’s favor of the Deed of Sale for the subject property. The bank’s knowledge of the circumstances surrounding the sale and the unpaid balance disqualified it from claiming good faith status.

Consequently, the Supreme Court declared the foreclosure on the mortgage and the subsequent public auction sale of the subject property null and void. The Court reasoned that because Allied Bank was a mortgagee in bad faith, its actions could not be upheld. The decision reinforces the principle that banks must exercise due diligence and act in good faith when dealing with real estate transactions, especially when third parties are involved.

In its decision, the Supreme Court addressed the claim that Allied Bank’s title to the subject property could not be collaterally attacked in this case. It was emphasized that certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be used for the perpetration of fraud; neither do they permit one to enrich himself at the expense of others.

The Supreme Court ruled that the rescission of the Deed of Sale was justified due to the failure of the spouses Pantaleon to pay the balance of the purchase price for the subject property, thereby entitling GGDI to rescind the Deed of Sale. Allied Bank ordered to reconvey the subject property to Games and Garments Developers, Inc. and the Register of Deeds of Makati City (now Muntinlupa City) is directed to issue a new certificate of title, free from any liens or encumbrances, in the name of Games and Garments Developers, Inc.

The Court’s ruling highlights the importance of clear communication, due diligence, and good faith in banking transactions. Banks must ensure that their representatives are acting within their authorized scope and that third parties are not misled by their actions. The decision serves as a reminder that banks cannot escape liability by claiming their employees acted beyond their authority when the bank has created an appearance of authority and a third party has relied on it in good faith.

FAQs

What was the key issue in this case?	The key issue was whether Allied Bank was bound by the letters issued by its branch manager, Ernesto Mercado, assuring GGDI of direct payment from Bienvenida Pantaleon’s loan proceeds, despite the bank’s claim that Mercado acted beyond his authority.
What is the doctrine of apparent authority?	The doctrine of apparent authority holds a corporation liable when it knowingly permits its officer or agent to act within the scope of an apparent authority, leading third parties to believe that the agent possesses the power to act on behalf of the corporation.
Did the Supreme Court consider Mercado’s letters as contracts of guaranty?	No, the Supreme Court clarified that Mercado’s letters were not contracts of guaranty prohibited by the General Banking Act. The Court explained that the letters merely acknowledged that Bienvenida and/or her company had an approved real estate loan with Allied Bank and guaranteed that subsequent releases from the loan would be made directly to GGDI provided that the certificate of title over the subject property would be transferred to Bienvenida’s name and the real estate mortgage constituted on the subject property in favor of Allied Bank would be annotated on the said certificate.
Why was Allied Bank considered a mortgagee in bad faith?	Allied Bank was deemed a mortgagee in bad faith because it knew of the circumstances surrounding the sale of the subject property, including the fact that GGDI had not yet been fully paid and that the balance of the purchase price was to be paid for from the proceeds of Bienvenida’s approved loan from the bank and that the proceeds of the loan were already released to the spouses Pantaleon, and not to GGDI.
What was the effect of Allied Bank being a mortgagee in bad faith?	Because Allied Bank was a mortgagee in bad faith, the Supreme Court declared the foreclosure on the mortgage and the subsequent public auction sale of the subject property null and void.
What damages was Allied Bank required to pay GGDI?	Allied Bank was ordered to pay GGDI temperate/moderate damages in the amount of P500,000.00, exemplary/corrective damages in the amount of P150,000.00, and attorney’s fees in the amount of P100,000.00.
What was the purchase price of the property as stated in the Deed of Sale?	The purchase price of the property as stated in the Deed of Sale was P11,000,000.00.
What were the implications of the rescission of the Deed of Sale?	In the event of rescission of the Deed of Sale, GGDI is entitled to forfeit the P7,000,000.00 it had already received as liquidated damages pursuant to paragraph 4 of the Deed of Sale.

The Supreme Court’s decision in this case provides important guidance on the scope of a bank’s liability for the actions of its employees. By reaffirming the doctrine of apparent authority and emphasizing the need for good faith in banking transactions, the Court has strengthened the protection of third parties who rely on the representations of bank managers. This ruling serves as a reminder that banks must exercise caution in the selection and supervision of their employees, and it underscores the importance of maintaining confidence in the banking system.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Games and Garments Developers, Inc. vs. Allied Banking Corporation, G.R. No. 181426, July 13, 2015

July 13, 2015

Mortgage Foreclosure: Absence of Special Power to Sell Invalidates Extrajudicial Proceedings

The Supreme Court has ruled that the absence of a special power to sell, either within the real estate mortgage (REM) itself or as an attached document, renders an extrajudicial foreclosure invalid. This means that mortgagees cannot proceed with an extrajudicial sale if the mortgagor has not explicitly granted them the power to sell the property in case of default. This decision protects property owners by ensuring strict adherence to the requirements of Act No. 3135, safeguarding their right to due process in foreclosure proceedings.

Foreclosure Fight: Can a Bank Sell Your Home Without Explicit Permission?

This case revolves around a dispute between Spouses Benito and Victoria Baysa (petitioners) and Spouses Fidel and Susan Plantilla (respondents) concerning a real estate mortgage (REM). The Baysas mortgaged their Quezon City property to the Plantillas to secure a P2.3 million debt. The REM stipulated a 2.5% monthly interest rate. When the Baysas defaulted, the Plantillas initiated extrajudicial foreclosure, claiming a total liability of P3,579,100.00. The Baysas contested the foreclosure, arguing the REM lacked the required “special power to sell” and that the interest rates were unconscionable. The central legal question is whether the extrajudicial foreclosure was valid despite the absence of an explicit special power to sell within the REM.

The Regional Trial Court (RTC) initially dismissed the Baysas’ complaint, upholding the validity of the extrajudicial foreclosure. The RTC pointed to a clause in the REM where the Baysas agreed to extrajudicial foreclosure in case of non-payment. However, the Court of Appeals (CA) partially reversed this decision, affirming the foreclosure’s validity but invalidating the 8% additional interest imposed due to its absence in the REM. Dissatisfied, the Baysas elevated the case to the Supreme Court, questioning the validity of the extrajudicial foreclosure in light of the missing “special power to sell.”

At the heart of the matter is Section 1 of Act No. 3135, which governs extrajudicial foreclosures. This section explicitly states that a sale under a real estate mortgage must be made under “a special power inserted in or attached to any real estate mortgage.” This requirement is not merely procedural; it’s a substantive condition for the validity of the foreclosure. The Supreme Court emphasized that this special power empowers the mortgagee to sell the property on behalf of the mortgagor in case of default. Without it, the mortgagee’s actions lack legal basis.

The Supreme Court underscored that the agreement to allow extrajudicial foreclosure, as contained in the REM, is not equivalent to granting the explicit “special power to sell.” The Court emphasized that this power must be expressly stated within the REM or in a separate document attached to it. This requirement stems from civil law principles relating to agency. Because the extrajudicial foreclosure involves the mortgagee acting as an agent of the mortgagor in selling the property, a written authority – a “special power of attorney” – is required. Without such written authority, the sale is deemed void.

Article 1874 of the Civil Code provides:

Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void, (n)

The Court distinguished the current case from Centeno v. Court of Appeals, upon which the Court of Appeals relied, noting that the issue of the lack of a special power of attorney was not expressly dealt with and resolved in the mentioned case, and thus has no precedential value to the present case. The Supreme Court then addressed the issue of the 2.5% monthly interest, which the petitioners claimed was usurious. The Court stated that the petitioners were estopped from assailing the validity of the monthly interest payments, as they expressly consented to it and actually made several payments at that rate. Secondly, they did not assail the rate of 2.5%/month as interest in the lower courts, doing so only in this appeal.

Lastly, regarding the issue of redemption, the Supreme Court deemed it unnecessary to determine whether the petitioners had lost their right to redeem, given the declaration that the extrajudicial foreclosure was void from the beginning. The Supreme Court ultimately ruled in favor of the Baysas, reversing the Court of Appeals’ decision and declaring the extrajudicial foreclosure null and void. The Court ordered the cancellation of the Transfer Certificate of Title issued to the Plantillas and directed the Register of Deeds to reinstate the original title in the Baysas’ names. The case was remanded to the lower court for a recomputation of the mortgage indebtedness, excluding the improperly imposed 8% interest on unpaid interest.

FAQs

What was the key issue in this case?	The key issue was whether the extrajudicial foreclosure of a real estate mortgage was valid despite the absence of a specific “special power to sell” in the mortgage deed or attached to it.
What is a “special power to sell” in the context of a mortgage?	A “special power to sell” is an explicit authorization granted by the mortgagor (borrower) to the mortgagee (lender), allowing the latter to sell the mortgaged property in the event of default. This power must be expressly stated in the mortgage document or in a separate attached document.
Why is the “special power to sell” so important?	It is required by Section 1 of Act No. 3135 and Article 1874 of the Civil Code. Without this power, the mortgagee lacks the legal authority to sell the property extrajudicially, and any such sale is considered void.
What happens if a mortgage lacks the “special power to sell”?	If the mortgage lacks this power, the mortgagee cannot proceed with an extrajudicial foreclosure. Instead, they must resort to judicial foreclosure through a court action.
Did the Supreme Court address the interest rates in this case?	Yes, the Court acknowledged the Court of Appeals’ invalidation of the 8% compounded interest, but upheld the original 2.5% monthly interest rate, stating that the petitioners were estopped from questioning it as they consented to and paid it.
What was the final ruling of the Supreme Court?	The Supreme Court declared the extrajudicial foreclosure null and void due to the absence of the “special power to sell.” It ordered the reinstatement of the original property title and remanded the case for a recomputation of the debt.
What does “remand” mean in legal terms?	“Remand” means to send a case back to a lower court for further action. In this case, the Supreme Court sent the case back to the trial court to recalculate the mortgage debt without the invalid interest.
What is the significance of this ruling for borrowers?	This ruling reinforces the importance of explicit agreements in mortgage contracts and protects borrowers from potentially unlawful foreclosures when the mortgage document does not explicitly grant the mortgagee the power to sell.

This case clarifies the stringent requirements for extrajudicial foreclosure in the Philippines, particularly the necessity of an explicit “special power to sell.” Lenders must ensure their mortgage contracts contain this provision to validly foreclose on properties extrajudicially. Failure to include this clause can lead to the nullification of foreclosure proceedings, emphasizing the importance of careful legal review in mortgage agreements.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Baysa vs. Spouses Plantilla, G.R. No. 159271, July 13, 2015

July 13, 2015

Preliminary Injunctions: Grave Abuse of Discretion and Protection of Substantive Rights

The Supreme Court held that the Court of Appeals (CA) did not commit grave abuse of discretion in denying the application for a preliminary injunction. The applicant must demonstrate a clear right being threatened and an urgent need for the injunction to prevent serious damage. This ruling reinforces the principle that injunctive relief is an extraordinary remedy, only available when necessary to prevent immediate and irreparable harm, and not when the acts sought to be enjoined are already completed.

Mortgaged Properties and Injunctive Relief: When Does the Strong Arm of Equity Intervene?

The case of Spouses Rogelio and Shirley T. Lim, et al. v. Honorable Court of Appeals, et al. arose from a dispute over real estate and chattel mortgages. Petitioners, facing extrajudicial foreclosure by First Consolidated Bank, sought to prevent the foreclosure by claiming overpayment due to excessive interest charges. The Regional Trial Court (RTC) initially issued a preliminary injunction, but later lifted it and ruled in favor of the bank. The Court of Appeals (CA) then denied the petitioners’ subsequent application for a temporary restraining order (TRO) and preliminary injunction. This denial led to the Supreme Court review, focusing on whether the CA committed grave abuse of discretion.

The central question before the Supreme Court was whether the CA erred in denying the petitioners’ application for injunctive relief. The petitioners argued that they had a clear right to be protected and that the foreclosure would cause them irreparable injury. They contended that the CA’s denial constituted grave abuse of discretion. However, the Supreme Court disagreed, emphasizing that a preliminary injunction is an extraordinary remedy granted only when there is a pressing necessity to prevent serious damage.

The Supreme Court anchored its decision on Section 5, Rule 58 of the Rules of Court, which outlines the conditions for issuing a temporary restraining order. This rule requires that the applicant demonstrate a clear right that is directly threatened and that the invasion of this right is material and substantial. Moreover, there must be an urgent and paramount necessity for the writ to prevent serious damage. The Court quoted the provision:

Section 5. Preliminary injunction not granted without notice; exception. – No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it shall appear from facts shown by affidavits or by verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue a temporary restraining order to be effective only for a period of twenty (20) days from service on the party or person sought to be enjoined, except as herein provided.

Building on this legal framework, the Court reiterated that injunctive relief is not a tool to be wielded lightly. It is reserved for situations where the potential harm is immediate and irreparable. As the Court noted in Australian Professional Realty, Inc. v. Municipality of Padre Garcia, Batangas Province, a TRO issues only if the matter is of such extreme urgency that grave injustice and irreparable injury would arise unless it is issued immediately. The Court underscored that an essential element for granting injunctive relief is the existence of an urgent necessity to prevent serious damage.

The Supreme Court also cited Pahila-Garrido v. Tortogo, emphasizing the extraordinary nature of injunctive relief. According to the Court, “injunctive relief is resorted to only when there is a pressing necessity to avoid injurious consequences that cannot be redressed under any standard of compensation.” This highlights that injunctions are not granted as a matter of course, but rather as a last resort to protect actual and existing substantial rights. Absent such rights and the conditions for its issuance, the ancillary writ must be struck down for being issued in grave abuse of discretion.

The Court further clarified the concept of grave abuse of discretion, explaining that it implies a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction. This occurs when power is exercised in an arbitrary or despotic manner due to passion, prejudice, or personal aversion. Essentially, it involves an evasion of positive duty or a virtual refusal to perform the duty enjoined by law. The petitioners failed to prove that the CA acted with such grave abuse of discretion.

In the case at hand, the Supreme Court found that the CA acted within its discretion. The petitioners did not demonstrate that great or irreparable injury would result before the matter could be heard, nor did they show a clear and positive right to the protection of a TRO. Their claim that the respondent bank imposed astronomical interests on its loans was insufficient to warrant injunctive relief. Furthermore, the acts sought to be enjoined—the extrajudicial foreclosure of the properties—had already been completed. Sheriff Archibald Varga had executed the Sheriff’s Certificate of Sale in favor of the respondent bank after the petitioners failed to exercise their right of redemption. Therefore, there was nothing left to restrain.

The Supreme Court’s decision underscores the importance of adhering to the established legal standards for granting injunctive relief. It reaffirms that such relief is an extraordinary remedy, not a routine one. It serves as a reminder that parties seeking injunctions must present clear evidence of a threatened right and an urgent need to prevent irreparable harm. This ruling clarifies the role of appellate courts in reviewing decisions on injunctive relief, emphasizing that their discretion should not be interfered with absent a clear showing of grave abuse.

FAQs

What was the key issue in this case?	The key issue was whether the Court of Appeals committed grave abuse of discretion in denying the petitioners’ application for a temporary restraining order and preliminary injunction to stop the extrajudicial foreclosure of their properties. The Supreme Court addressed whether the appellate court properly applied the legal standards for injunctive relief.
What is a preliminary injunction?	A preliminary injunction is a court order that temporarily restrains a party from performing a specific act, typically to maintain the status quo until a full trial can be held. It is considered an extraordinary remedy and is granted only in cases where there is a clear and present danger of irreparable harm.
What must an applicant show to be granted a preliminary injunction?	To be granted a preliminary injunction, the applicant must show that there exists a right to be protected which is directly threatened by an act sought to be enjoined. Furthermore, there must be a showing that the invasion of the right is material and substantial, and that there is an urgent and paramount necessity for the writ to prevent serious damage.
What constitutes grave abuse of discretion?	Grave abuse of discretion implies a capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction. It is characterized by the exercise of power in an arbitrary or despotic manner by reason of passion, prejudice, or personal aversion amounting to an evasion of positive duty or to a virtual refusal to perform the duty enjoined.
Why did the Supreme Court deny the petition in this case?	The Supreme Court denied the petition because the petitioners failed to demonstrate that the Court of Appeals committed grave abuse of discretion in denying their application for a preliminary injunction. The petitioners did not show that great or irreparable injury would result before the matter could be heard, nor did they show any clear and positive right to be entitled to the protection of the TRO.
*What is the significance of the extrajudicial foreclosure being a fait accompli?*	The fact that the extrajudicial foreclosure was already a fait accompli (an accomplished fact) meant that there was no longer any act to be restrained by an injunction. Since the properties had already been sold at auction and the redemption period had expired, the issue of enjoining the foreclosure became moot.
What is a Sheriff’s Certificate of Sale?	A Sheriff’s Certificate of Sale is a document issued by the sheriff after a property has been sold at a foreclosure auction. It certifies that the sale has taken place and identifies the buyer and the amount paid. It marks a significant step in the transfer of ownership from the debtor to the buyer, subject to the right of redemption.
What is the effect of failing to exercise the right of redemption?	Failing to exercise the right of redemption within the period required by law means that the debtor loses the opportunity to reclaim the property sold at foreclosure. Once the redemption period expires, the buyer at the foreclosure sale has the right to consolidate ownership of the property.

In conclusion, the Supreme Court’s decision reinforces the stringent requirements for obtaining injunctive relief and underscores the limited scope of judicial intervention in completed foreclosure proceedings. The ruling serves as a guide for future litigants seeking to prevent foreclosure, emphasizing the need to demonstrate a clear legal right and an imminent threat of irreparable harm.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Rogelio and Shirley T. Lim, et al. v. Honorable Court of Appeals, et al., G.R. No. 190134, July 08, 2015

July 8, 2015

Possession Rights and Foreclosure: Upholding the Purchaser’s Right Pending Mortgage Disputes

In Spouses Dulnuan v. Metropolitan Bank & Trust Company, the Supreme Court affirmed that a purchaser in a foreclosure sale, like Metrobank, is entitled to possess the foreclosed property even while a dispute over the validity of the mortgage is ongoing. The ruling underscores that the right to possess the property stems from the purchaser’s status as the highest bidder at the foreclosure sale, provided the necessary bond is posted. This decision clarifies that the pendency of an action to annul the mortgage does not prevent the issuance of a writ of possession, ensuring the purchaser’s right to enjoy the property during the legal proceedings.

Mortgage Default and Possession: Can Banks Possess Property Despite Ongoing Disputes?

Spouses Victor and Jacqueline Dulnuan obtained loans totaling P3,200,000.00 from Metropolitan Bank and Trust Company (Metrobank), secured by a real estate mortgage (REM) on their property in La Trinidad, Benguet. When the Spouses Dulnuan defaulted on their loan obligations, Metrobank initiated extra-judicial foreclosure proceedings. Metrobank emerged as the highest bidder at the public auction, leading to a legal battle over the possession of the property.

The Spouses Dulnuan filed a complaint seeking to nullify the foreclosure, arguing that the mortgage was invalid because it was executed before the loan was actually received. They sought a temporary restraining order and preliminary injunction to prevent Metrobank from taking possession of the property. The Regional Trial Court (RTC) initially granted the injunction, but the Court of Appeals reversed this decision, stating that Metrobank, as the highest bidder, was entitled to possession. The central legal question was whether the RTC erred in issuing a preliminary injunction that prevented Metrobank from taking possession of the property pending the resolution of the annulment case.

The Supreme Court addressed whether the Court of Appeals erred in dissolving the writ of preliminary injunction issued against Metrobank. The writ had previously restrained Metrobank from entering, occupying, or possessing the subject property. The Court clarified that a preliminary injunction is a provisional remedy, designed to protect substantive rights or interests, but it is not a cause of action in itself. Its purpose is to maintain the status quo until the merits of the case can be fully examined.

According to the Court, the status quo is the last actual, peaceable, and uncontested condition that precedes the controversy. A preliminary injunction should not create new relations between the parties but should instead preserve or restore their pre-existing relationship. The Court referred to Section 3, Rule 58 of the Rules of Court, which outlines the grounds for issuing a writ of preliminary injunction:

SEC. 3. Grounds for issuance of preliminary injunction. — A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

To justify an injunctive writ, petitioners must demonstrate (1) a clear and unmistakable right to be protected; (2) a direct threat to this right by the action sought to be enjoined; (3) a material and substantial invasion of the right; and (4) an urgent and paramount necessity for the writ to prevent serious and irreparable damage. The Court found that the Spouses Dulnuan failed to meet these requirements. They did not establish a clear, existing right that needed protection during the principal action.

The Court stated that the RTC could not prevent Metrobank from taking possession of the property merely because the redemption period had not expired. As the highest bidder at the foreclosure sale, Metrobank had the right to possess the property even during the redemption period, provided that it posted the necessary bond. The Court cited Spouses Tolosa v. United Coconut Planters Bank to support this position:

A writ of possession is simply an order by which the sheriff is commanded by the court to place a person in possession of a real or personal property. Under Section 7 of Act No. 3135, as amended, a writ of possession may be issued in favor of a purchaser in a foreclosure sale either (1) within the one-year redemption period, upon the filing of a bond; or (2) after the lapse of the redemption period, without need of a bond. Within the one-year redemption period, the purchaser may apply for a writ of possession by filing a petition in the form of an ex parte motion under oath, in the registration or cadastral proceedings of the registered property. The law requires only that the proper motion be filed, the bond approved and no third person is involved. After the consolidation of title in the buyer’s name for failure of the mortgagor to redeem the property, entitlement to the writ of possession becomes a matter of right. In the latter case, the right of possession becomes absolute because the basis thereof is the purchaser’s ownership of the property.

The Court emphasized that the purchaser in an extra-judicial foreclosure sale is entitled to possession, either during (with bond) or after the expiration (without bond) of the redemption period. Metrobank had manifested its willingness to post a bond, but its application for a writ of possession was unjustly denied by the RTC.

The Court further clarified that the ongoing action contesting the validity of the mortgage should not impede the issuance of a writ of possession. Quoting Spouses Fortaleza v. Spouses Lapitan, the Court affirmed that questions about the regularity and validity of the mortgage or its foreclosure cannot justify opposing a petition for a writ of possession. These issues can only be raised and resolved after the writ of possession has been issued.

Lastly, we agree with the CA that any question regarding the regularity and validity of the mortgage or its foreclosure cannot be raised as a justification for opposing the petition for the issuance of the writ of possession. The said issues may be raised and determined only after the issuance of the writ of possession. Indeed, “[t]he judge with whom an application for writ of possession is filed need not look into the validity of the mortgage or the manner of its foreclosure.” The writ issues as a matter of course. “The rationale for the rule is to allow the purchaser to have possession of the foreclosed property without delay, such possession being founded on the right of ownership.”

Thus, Metrobank, without prejudice to the final resolution of the annulment case, is entitled to the writ of possession and cannot be prevented from enjoying the property, as possession is a fundamental aspect of ownership.

While the decision to grant or deny a preliminary injunction rests on the discretion of the court, the Court stated that issuing a writ of injunction is a grave abuse of discretion when there is no clear legal right. Grave abuse of discretion implies a capricious and whimsical exercise of judgment, equivalent to a lack of jurisdiction, or the exercise of power in an arbitrary and despotic manner. The Spouses Dulnuan failed to demonstrate a clear and unmistakable right to the issuance of the writ in question. Therefore, the Court concluded that the Court of Appeals did not err in reversing the injunction issued by the RTC.

FAQs

What was the key issue in this case?	The key issue was whether the Court of Appeals erred in dissolving the writ of preliminary injunction that prevented Metrobank from taking possession of a foreclosed property while a dispute over the validity of the mortgage was ongoing.
What is a writ of possession?	A writ of possession is a court order that directs the sheriff to place a person in possession of real or personal property. It is often issued in favor of a purchaser after a foreclosure sale.
Can a purchaser obtain a writ of possession during the redemption period?	Yes, under Section 7 of Act No. 3135, as amended, a purchaser can obtain a writ of possession during the one-year redemption period by filing a motion and posting a bond equivalent to the use of the property for twelve months.
Does a pending action to annul a mortgage affect the issuance of a writ of possession?	No, a pending action for annulment of mortgage or foreclosure does not prevent the issuance of a writ of possession. The purchaser is still entitled to the writ, regardless of the pending suit.
What must a party show to be entitled to an injunctive writ?	To be entitled to an injunctive writ, a party must show a clear and unmistakable right to be protected, a direct threat to this right, a material and substantial invasion of the right, and an urgent need to prevent serious and irreparable damage.
What is grave abuse of discretion in the context of issuing a preliminary injunction?	Grave abuse of discretion in issuing a preliminary injunction means the court acted capriciously, whimsically, or arbitrarily, amounting to an evasion of a positive duty or a virtual refusal to perform a duty required by law.
What is the significance of posting a bond in relation to a writ of possession?	Posting a bond is essential when a purchaser seeks a writ of possession during the redemption period. The bond protects the debtor in case it is later proven that the sale was improperly conducted.
Who is entitled to possess the property after a foreclosure sale?	The purchaser at the foreclosure sale, upon compliance with legal requirements like posting a bond (if during the redemption period) or after the redemption period has lapsed, is entitled to possess the property.

In conclusion, the Supreme Court’s decision reinforces the rights of purchasers in foreclosure sales to possess the acquired property, even while legal challenges to the mortgage or foreclosure process are pending. This ruling provides clarity and stability for financial institutions and purchasers, ensuring that property rights are upheld in accordance with established legal principles.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Dulnuan v. Metrobank, G.R. No. 196864, July 8, 2015

July 8, 2015