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In re: Conformity of Credit Policy Insurance

(CPI) No. 2018-006 with


the relevant Philippine laws

On 17 October 2018, the MLD’s Cauayan City, Isabela Field Legal


Services Head Atty. Ati Han sent a Memorandum addressed to MLD’s
Counsel General Atty. Virginia Manibog. In the said Memorandum, the
former seeks to clarify the procedures to be undertaken in case/s where
discrepancies or errors exist in the entries or technical descriptions in the
Transfer Certificate of Titles (TCTs) offered or held as collateral.
The lending company, MLD, issued the Credit Policy Insurance (CPI)
No. 2018-006 issued for clarity and uniform implementation of Lending
Units (LU) in handling real estate property/ies offered as collateral in case/s
of discrepancy/ies in the title and/or technical description of the property.
In this legal opinion, we will address two issues:
1. Whether or not “plain-meaning” rule will apply in the case of CPI;
and
2. Whether or not an error or mistake in the notice of sale would
invalidate the foreclosure sale
First, the CPI partakes the nature of a contract between the lending
unit, MLD in this case, and the borrower. In the case of Benguet
Corporation, et al. v. Cesar Cabildo 1, the Court held that:
“the cardinal rule in the interpretation of contracts is
embodied in the first paragraph of Article 1370 of the Civil Code:
"[i]f the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its
stipulations shall control." This provision is akin to the "plain
meaning rule” which assumes that the intent of the parties to an
instrument is embodied in the writing itself, and when the words
are clear and unambiguous the intent is to be discovered only
from the express language of the agreement." It also resembles
the "four corners" rule, a principle which allows courts in some
cases to search beneath the semantic surface for clues to
meaning. A court's purpose in examining a contract is to
interpret the intent of the contracting parties, as objectively
manifested by them. The process of interpreting a contract
requires the court to make a preliminary inquiry as to whether
the contract before it is ambiguous. A contract provision is
ambiguous if it is susceptible of two reasonable alternative
interpretations. Where the written terms of the contract are not
ambiguous and can only be read one way, the court will interpret
the contract as a matter of law. If the contract is determined to
be ambiguous, then the interpretation of the contract is left to the

1G.R. No. 151402, August 22, 2008, citing Abad v. Goldloop Properties, Inc., 521 SCRA 131, 143-
145 (2007)

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court, to resolve the ambiguity in the light of the intrinsic
evidence.”
The pertinent provisions of the CPI are:

Nature of Discrepancy Conditions for Acceptance


of Property as Collateral

Minor Discrepancy (such as  As a Pre-Release


misspelled name), in the TCT requirement, the
in the name of the registered Borrower shall present
owner vis-à-vis that reflected the Official Receipt
in the Deed of Sale or other representing payment of
acquisition documents. entry fee for the
annotation of Affidavit of
Discrepancy on the title.
 As a Post-Release
requirement, the
Borrower shall cause for
the annotation of Affidavit
of Discrepancy on the title
not later than ninety (90)
days from date of loan
approval.
Major Discrepancy in the As Pre-Release requirement,
name of the registered owner the Borrower shall present the
vis-à-vis that reflected in the Corrected Title.
Deed of Sale or other
acquisition documents (e.g.
difference in the names
appearing in the TCT vis-à-
vis the Deed of Sale)

It was claimed by Atty. Ati Han that CPI is not in accordance with
the relevant provision of P.D. 1529:
Section 108. Amendment and alteration of
certificates. No erasure, alteration, or amendment shall be
made upon the registration book after the entry of a certificate
of title or of a memorandum thereon and the attestation of the
same be Register of Deeds, except by order of the proper Court
of First Instance. A registered owner of other person having an
interest in registered property, or, in proper cases, the Register
of Deeds with the approval of the Commissioner of Land

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Registration, may apply by petition to the court upon the
ground that the registered interests of any description, whether
vested, contingent, expectant or inchoate appearing on the
certificate, have terminated and ceased; or that new interest not
appearing upon the certificate have arisen or been created; or
that an omission or error was made in entering a
certificate or any memorandum thereon, or, on any
duplicate certificate; or that the same or any person on the
certificate has been changed; or that the registered owner has
married, or, if registered as married, that the marriage has
been terminated and no right or interests of heirs or creditors
will thereby be affected; or that a corporation which owned
registered land and has been dissolved has not convened the
same within three years after its dissolution; or upon any other
reasonable ground; and the court may hear and determine the
petition after notice to all parties in interest, and may order the
entry or cancellation of a new certificate, the entry or
cancellation of a memorandum upon a certificate, or grant any
other relief upon such terms and conditions, requiring security
or bond if necessary, as it may consider proper; Provided,
however, That this section shall not be construed to give the
court authority to reopen the judgment or decree of
registration, and that nothing shall be done or ordered by the
court which shall impair the title or other interest of a purchaser
holding a certificate for value and in good faith, or his heirs and
assigns, without his or their written consent. Where the owner's
duplicate certificate is not presented, a similar petition may be
filed as provided in the preceding section.
All petitions or motions filed under this Section as well as
under any other provision of this Decree after original
registration shall be filed and entitled in the original case in
which the decree or registration was entered.

It is our view that the CPI is clear and unambiguous. CPI laid
down that procedures for acceptance of property as collateral, whereas,
Sec. 108 of P.D. 1529 provided for the instances when to file petitions
for amendment or alteration after original registration. CPI provides
for the conditions prior to acceptance of MLD of the property as
collateral. It categorizes discrepancies in the TCT into two (2)
categories, one is minor discrepancy and the other is major
discrepancy. For minor discrepancy, it is provided in the CPI that as a
pre-release requirement, the borrower shall present the official receipt
representing payment of entry fee for the annotation of Affidavit of

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Discrepancy in the title. It is noteworthy to point out that the CPI
demanded, as a post-release requirement, that the Borrower shall
cause the annotation of the Affidavit of Discrepancy on the title.
It is important to reiterate that CPI provides for the conditions to
be fulfilled by the borrower prior to granting or releasing of loan by the
MLD. The qualification of discrepancies in the CPI does not violate the
provisions on P.D. 1529, particularly Sec. 108.
Second, it is important to know the implication/s of having error
or mistake on the Notice of Sale. Will it invalidate Notice of Sale? Will
an invalid Notice of Sale invalidate a Foreclosure Sale?
The nature of business of MLD is a lending company. It will lend
money to borrowers and the latter will provide TCTs of their real
property/ies as collateral. Upon failure of borrower to pay his/her
obligations or upon violation of the terms and conditions, the MLD has
the right to foreclose the mortgage extrajudicially. One of the
requirements for extrajudicial foreclosure sale is posting of Notice of
Sale.
The Court ruled in “Spouses Suico vs. PNB2” that “notices are
given for the purpose of securing bidders and to prevent a sacrifice of
the property. If these objects are attained, immaterial errors
and mistakes will not affect the sufficiency of the notice; but
if mistakes or omissions occur in the notices of sale, which
are calculated to deter or mislead bidders, to depreciate the
value of the property, or to prevent it from bringing a fair
price, such mistakes or omissions will be fatal to the
validity of the notice, and also to the sale made pursuant
thereto.”(Emphasis supplied)
Taking into consideration the abovementioned jurisprudence,
for minor discrepancies or typographical errors in the technical
description, MLD should sustain the application of CPI procedure
because it will not invalidate the foreclosure sale. Mere typographical
errors in the technical description will not invalidate the Notice of Sale
nor sale made pursuant thereto. The Court enumerated the mistakes
and omissions which would invalidate notice, those are: 1) calculated
to deter or mislead bidders, 2) to depreciate the value of the property,
or 3) to prevent it from bringing a fair price3.
Therefore, the lending units must totally adhere to the provisions
of CPI No. 2018-006 because it is in conformity with the relevant
Philippine laws, i.e. P.D. 1529.

2 G.R No. 170215, August 27, 2007


3 G.R. No. 195272 January 14, 2015

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MARJORIE KAYE T. GO
MLD Legal Officer

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