Spouses Evangelista vs. Mercator Finance Corp., et al.

G.R. No. 148864, August 21, 2003

PUNO, J.

Facts:

Spouses Evangelista filed a complaint for annulment of titles against respondents, Mercator Finance
Corporation, Lydia P. Salazar, Lamecs Realty and Development Corporation, and the Register of Deeds
of Bulacan. Petitioners claimed being the registered owners of five (5) parcels of land contained in the
Real Estate Mortgage executed by them and Embassy Farms, Inc. ("Embassy Farms"). They alleged that
they executed the Real Estate Mortgage in favor of Mercator Financing Corporation ("Mercator") only as
officers of Embassy Farms. They did not receive the proceeds of the loan evidenced by a promissory
note, as all of it went to Embassy Farms. Thus, they contended that the mortgage was without any
consideration as to them since they did not personally obtain any loan or credit accommodations.

There being no principal obligation on which the mortgage rests, the real estate mortgage is void. With
the void mortgage, they assailed the validity of the foreclosure proceedings conducted by Mercator, the
sale to it as the highest bidder in the public auction, the issuance of the transfer certificates of title to it,
the subsequent sale of the same parcels of land to respondent Lydia P. Salazar ("Salazar"), and the
transfer of the titles to her name, and lastly, the sale and transfer of the properties to respondent Lamecs
Realty & Development Corporation ("Lamecs").

Mercator admitted that petitioners were the owners of the subject parcels of land. It, however, contended
that "on February 16, 1982, plaintiffs executed a Mortgage in favor of defendant Mercator Finance
Corporation. It contended that since petitioners and Embassy Farms signed the promissory note6 as co-
makers, aside from the Continuing Suretyship Agreement subsequently executed to guarantee the
indebtedness of Embassy Farms, and the succeeding promissory notes restructuring the loan, then
petitioners are jointly and severally liable with Embassy Farms. Due to their failure to pay the obligation,
the foreclosure and subsequent sale of the mortgaged properties are valid.

Issue: Whether or not the Real Estate Mortgage executed by the plaintiffs in favor of defendant Mercator
Finance Corp. is null and void.

Held: NO

Even if petitioners intended to sign the note merely as officers of Embassy Farms, still this does not erase
the fact that they subsequently executed a continuing suretyship agreement. A surety is one who is
solidarily liable with the principal. Petitioners cannot claim that they did not personally receive any
consideration for the contract for well-entrenched is the rule that the consideration necessary to support a
surety obligation need not pass directly to the surety, a consideration moving to the principal alone being
sufficient. A surety is bound by the same consideration that makes the contract effective between the
principal parties thereto. Having executed the suretyship agreement, there can be no dispute on the
personal liability of petitioners.
 Philippine National Bank vs. Hon. Delos Reyes, Amanda Arana and Julia Reyes
G.R. Nos. L-46898-99, November 28, 1989
REGALADO, J.
Facts:

The respondent spouses Reyes mortgaged six (6) parcels of land to petitioner bank (PNB) to secure the
payment of a loan of P10,000.00. Two (2) of the six (6) parcels of land are covered by free patent titles
while the other four (4) are untitled and covered only by tax declarations.

For failure of respondent spouses to pay the loan after its maturity, PNB, pursuant to a special power of
attorney in the mortgage deed, effected the extrajudicial foreclosure of the mortgage under Act No. 3135,
as amended, and purchased the same at public auction. The certificate of sale, was duly registered with
the Register of Deeds.

After the one-year redemption period provided in said law expired without respondent spouses having
exercised their right or redemption, petitioner executed and registered an affidavit of consolidation of
ownership over the six (6) parcels of land on July 9, 1970 and new titles were issued in its name for the
two (2) parcels covered by free patent titles and the corresponding tax declarations for the four (4) parcels
were placed in its name.

On May 12, 1971, Jose Barrameda, then the manager of petitioner's Sorsogon Branch, sent a letter to
respondent spouses informing them of the consolidation of title and inviting them to repurchase the lands
not later than June 15, 1971. Respondent spouses, wrote a letter to PNB to extend the period of
repurchase. On December 19, 1971, petitioner sent another letter to respondent spouses reminding them
of the projected repurchase and informing them that petitioner would take actual possession of the lands
unless the repurchase would be effected.

On May 9, 1972, petitioner entered into a contract to sell the six (6) parcels of land to one Gerardo
Badong. Respondent spouses instituted a Civil Case for legal redemption of the six (6) parcels of land,
invoking Section 119 of the Public Land Act, with damages.

The trial court held that respondent spouses are entitled to redeem the six (6) parcels of land on the
theory of "indivisibility of mortgage".

Issue: Whether or not the respondent spouses are entitled to redeem the property mortgaged.

Held: NO. the rule on the indivisibility of mortgage finds no application to the case at bar.

The particular provision of the Civil Code referred to provides:

Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among
the successors in interest of the debtor or of the creditor.

Therefore, the debtor's heir who has paid a part of the debt cannot ask for the proportionate
extinguishment of the pledge or mortgage as long as the debt is not completely satisfied.

Neither can the creditor's heir who received his share of the debt return the pledge or cancel the
mortgage, to the prejudice of the other heirs who have not been paid.

From these provisions is excepted the case in which, there being several things given in
mortgage or pledge, each one of these guarantees only a determinate portion of the credit.

The debtor, in this case, shall have a right to the extinguishment of the pledge or mortgage as the
portion of the debt for which each thing is specially answerable is satisfied.
 From the foregoing, it is apparent that what the law proscribes is the foreclosure of only a portion
of the property or a number of the several properties mortgaged corresponding to the unpaid portion of
the debt where before foreclosure proceedings partial payment was made by the debtor on his total
outstanding loan or obligation. This also means that the debtor cannot ask for the release of any portion
of the mortgaged property or of one or some of the several lots mortgaged unless and until the loan thus,
secured has been fully paid, notwithstanding the fact that there has been a partial fulfillment of the
obligation. Hence, it is provided that the debtor who has paid a part of the debt cannot ask for the
proportionate extinguishment of the mortgage as long as the debt is not completely satisfied.

That the situation obtaining in the case at bar is not within the purview of the aforesaid rule on
indivisibility is obvious since the aggregate number of the lots which comprise the collaterals for the
mortgage had already been foreclosed and sold at public auction. There is no partial payment nor partial
extinguishment of the obligation to speak of. The aforesaid doctrine, which is actually intended for the
protection of the mortgagee, specifically refers to the release of the mortgage which secures the
satisfaction of the indebtedness and naturally presupposes that the mortgage is existing. Once the
mortgage is extinguished by a complete foreclosure thereof, said doctrine of indivisibility ceases to apply
since, with the full payment of the debt, there is nothing more to secure.

Neither does the instant case fall within the exception contemplated in the last two paragraphs of
Article 2089 in which, there being several things given in mortgage, each of them guarantees only a
determinate portion of the account. There is no proof or any averment to that effect.
 Ruben Lagrosa vs. CA, Spouses Banua and Cesar Orolfo
G.R. Nos. 115981-82, August 12, 1999
GONZAGA-REYES, J.:
Facts:
This involves two petitions for review of two (2) conflicting decisions rendered by two different
branches of the Regional Trial Court of Manila in ejectment suits involving the same parties and property
were consolidated before the Court of Appeals upon motion of one of herein respondents, Cesar Orolfo.

As found by the trial court, the title of respondent Evelyn Arizapa Banua to the subject property is
evidenced by the Deed of Sale executed by the City of Manila in her favor and the Transfer Certificate of
Title No. 197603, issued to her by the Register of Deeds of Manila. Respondent Evelyn Arizapa Banua
derived her title from her parents who died intestate before they could make full payment for the said lot.

On the other hand, Ruben Lagrosa claims to be the lawful possessor of the subject property by
virtue of the Deed of Assignment of Real Estate Mortgage executed in his favor by Presentacion Quimbo
on the basis of a Contract of Real Estate Mortgage executed by Julio Arizapa in favor of the latter.
Lagrosa posits that he cannot be evicted from the subject property because he had prior possession as
assignee of the said Assignment of Real Estate Mortgage executed by Presentacion Quimbo in his favor,
and with the consent of Mauricia Albaytar, the sister of the deceased Josefa Albaytar Arizapa, after the
demise of the spouses Julio Arizapa and Josefa Albaytar.

Issue: Who is entitled to the physical or material possession of the premises or possession de facto

Held: The Lagrosas right to possess the subject property is clearly inferior to or inexistent in relation to
Evelyn Arizapa Banua.

The court held that the Deed of Real Estate Mortgage executed by Julio Arizapa is null and void, the
property mortgaged by Julio Arizapa being then owned by the City of Manila under Transfer Certificate of
Title No. 91120. For a person to validly constitute a valid mortgage on real estate, he must be the
absolute owner thereof as required by Article 2085 of the Civil Code of the Philippines. Since the
mortgage to Presentacion Quimbo of the lot is null and void, the assignment by Presentacion Quimbo of
her rights as mortgagee to Lagrosa is likewise void. Even if the mortgage is valid as insisted by herein
petitioner, it is well-settled that a mere mortgagee has no right to eject the occupants of the property
mortgaged. This is so, because a mortgage passes no title to the mortgagee. Indeed, by mortgaging a
piece of property, a debtor merely subjects it to lien but ownership thereof is not parted with. Thus, a
mortgage is regarded as nothing more than a mere lien, encumbrance, or security for a debt, and passes
no title or estate to the mortgagee and gives him no right or claim to the possession of the property.