Facts:

This case, Violeta Tudtud Banate, Mary Melgrid M. Cortel, Bonifacio Cortel, Rosendo Maglasang, and Patrocinia Monilar vs. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. and Teofilo Soon, Jr., originated from a dispute regarding a real estate mortgage. On July 22, 1997, spouses Rosendo Maglasang and Patrocinia Monilar (the "spouses Maglasang") acquired a loan amounting to ₱1,070,000.00 from the Philippine Countryside Rural Bank, Inc. (PCRB), secured by a real estate mortgage on their property, Lot 12868-H-3-C, which included a house owned by their daughter Mary Melgrid Cortel and son-in-law Bonifacio Cortel (the "spouses Cortel"). Apart from this loan, the spouses Maglasang had two additional loans from PCRB.

Prior to the subject loan's maturity on January 18, 1998, both couples requested PCRB, through its branch manager Pancrasio Mondigo, to allow them to sell the mortgaged property and release it from the mortgage, claiming that repayments on the

...

Facts:

Background and Parties

• Petitioners: Violeta Tudtud Banate; Mary Melgrid M. Cortel; Bonifacio Cortel; Rosendo Maglasang; and Patrocinia Monilar.
• Respondents: Philippine Countryside Rural Bank (Liloan, Cebu), Inc. (PCRB) and Teofilo Soon, Jr.
• The case was originally initiated by the petitioners before the Regional Trial Court (RTC) for specific performance and damages.

The Loan and Mortgage Transaction

• On July 22, 1997, spouses Rosendo Maglasang and Patrocinia Monilar obtained a loan (the “subject loan”) from PCRB for ₱1,070,000.00.
• The subject loan was evidenced by a promissory note, payable on January 18, 1998.
• To secure the payment of the subject loan, the spouses executed a real estate mortgage over their property (Lot 12868-H-3-C, including the house thereon).
• The mortgaged property was owned by Mary Melgrid Cortel and Bonifacio Cortel, who are the petitioners and the daughter and son-in-law of the spouses Maglasang.

Additional Loans and Requests for Release

• Besides the subject loan, the spouses Maglasang obtained two additional loans from PCRB, each secured by separate mortgages on other properties.
• In November 1997, before the subject loan was due, the spouses Maglasang along with the Cortels requested PCRB’s permission to sell the subject properties and have them released from the mortgage.
• They claimed that PCRB’s Branch Manager, Pancrasio Mondigo, had verbally agreed to release the mortgage provided the subject loan was fully paid.

Sale of the Subject Properties and Settlement of the Loan

• The petitioners, acting as sellers, sold the subject properties to Violeta Banate for ₱1,750,000.00.
• The proceeds from the sale were used to settle the subject loan with PCRB.
• After payment, PCRB released the owner’s duplicate certificate of title to Banate, who subsequently secured a new title; however, the new title still carried the mortgage lien in favor of PCRB.

Petition for Specific Performance and Damages

• The petitioners initiated an action for specific performance before the RTC, seeking to compel PCRB to execute a Deed of Release of Mortgage over the subject properties based on the alleged verbal agreement.
• They also sought damages for moral harm and attorney’s fees, alleging that PCRB caused a damaging news report which falsely depicted the transfer as “surreptitious.”

PCRB’s Defense and Lower Court Rulings

• PCRB invoked the cross-collateral stipulation (a dragnet or “blanket” mortgage clause) in the mortgage deed, which provided that the subject properties served as security not only for the subject loan, but also for the two additional loans.
• PCRB claimed that full payment of all three loans was required before releasing any mortgage lien.
• PCRB also argued that Banate was a buyer in bad faith as she was aware of the existing mortgage.
• The RTC ruled in favor of the petitioners, relying on the facts that they had settled the subject loan and pointing to their disadvantaged bargaining position under a contract of adhesion.
• On appeal, however, the Court of Appeals (CA) reversed the RTC’s decision, holding that there was no valid novation of the mortgage contract since the verbal agreement of Branch Manager Mondigo could not alter the clear cross-collateral stipulation.

Issue:

Validity of the Alleged Novation Agreement

• Whether the purported agreement by which Branch Manager Mondigo allegedly consented to release the subject properties from the mortgage novated the original mortgage contract.
• Whether such a novation, if it existed, was sufficient to release the subject properties from the cross-collateral stipulation covering multiple loans.

Authority and Effect of the Branch Manager’s Agreement

• Whether Mondigo acted with either actual or apparent authority to modify the terms of the mortgage contract between PCRB and the spouses.
• Whether PCRB can be bound by the branch manager’s verbal agreement given the contractual provisions and corporate governance rules.

Claim for Restitution of Payment

• Whether, in the absence of a valid novation, Banate is entitled to the return of the payment made towards settling the subject loan on the ground that the agreement should be deemed rescinded.
• The extent to which the payment made (via the endorsed check) affected the parties’ legal obligations under the mortgage contract.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)