Case Digest (A.M. No. 326-CJ)
Facts:
The case involves an application by Sim Janco against the Bank of the Philippine Islands (BPI) as the petitioner and appellant, with Ty Camco Sobrino and others as respondents and appellees. Ty Camco Sobrino was the registered owner of two parcels of land in Rosario, Pangasinan, evidenced by Transfer Certificates of Title Nos. 1803 and 1804. On April 2, 1924, Sobrino executed a deed of first mortgage in favor of the Philippine National Bank (PNB) on these parcels, with the mortgage noted on the corresponding transfer certificates. On February 21, 1930, Sobrino executed a deed of second mortgage on the same properties to Cu Yeg Keng and Simon A. Chan Bona without obtaining the prior written consent of PNB, which was a requirement explicitly stated in the first mortgage agreement. Despite the breach, the second mortgage was inscribed by the register of deeds in Pangasinan. Subsequently, a third mortgage was executed with the BPI, which was consented to by PNB. On April 14, 1931, PCase Digest (A.M. No. 326-CJ)
Facts:
- Ownership and Property Details
- Ty Camco Sobrino was the registered owner of two parcels of land situated in the municipality of Rosario, Province of Pangasinan.
- The properties were described in Transfer Certificates of Title Nos. 1803 and 1804.
- First Mortgage and Its Registration
- On April 2, 1924, Ty Camco Sobrino executed a deed of first mortgage in favor of the Philippine National Bank.
- This first mortgage was duly noted on the back of Transfer Certificates of Title Nos. 1803 and 1804.
- Execution and Registration of the Second Mortgage
- On February 21, 1930, Ty Camco Sobrino executed a deed of second mortgage on the same properties in favor of Cu Yeg Keng and Simon A. Chan Bona.
- The deed of second mortgage was executed without acquiring the written consent of the Philippine National Bank, despite an express clause in the first mortgage prohibiting such action.
- The register of deeds for Pangasinan registered this second mortgage and noted it on the transfer certificates.
- Mortgage Contract Provisions
- The second mortgage document contained a clause that strictly prohibited the mortgagor from:
- Selling or disposing of the mortgaged property.
- Incumbering the property with another (second) mortgage or leasing it for more than a year without the mortgagee’s written consent.
- The clause further provided that if the mortgagor failed to pay the secured indebtedness or comply with any conditions, or if the prohibited acts (such as executing a second mortgage without consent) were committed, the mortgagee was entitled to:
- Immediately foreclose the mortgage in accordance with law.
- Consider all other obligations of the mortgagor as immediately due and payable.
- Subsequent Mortgage Transaction
- A third mortgage was later executed in favor of the Bank of the Philippine Islands, which was given with the written consent of the Philippine National Bank.
- This development introduced a new dynamic, as the Bank of the Philippine Islands later became involved in the dispute.
- Litigation History
- On April 14, 1931, the Philippine National Bank filed a petition before the Court of First Instance of Pangasinan seeking:
- Declaration that the annotation (or inscription) of the second mortgage on the title be declared null and void.
- Cancellation of the second mortgage from the registry records.
- On April 17, 1931, the Bank of the Philippine Islands intervened by filing its own petition:
- It sought the substitution of the Philippine National Bank as petitioner.
- Its contention was based on having acquired all rights, interests, and actions of the Philippine National Bank in the first mortgage.
- The Court of First Instance's decision held that:
- The petition raised by the Bank of the Philippine Islands was akin to questioning the validity of the second mortgage.
- The validity issue could only be addressed in an ordinary action, not under Section 112 of the Land Registration Act (No. 496).
- Appeal to the Supreme Court
- The Bank of the Philippine Islands elevated the case to the Supreme Court on appeal.
- The appellant relied on:
- The first portion of the mortgage clause which explicitly provided a penalty for unauthorized second mortgages.
- The second headnote of the case Philippine Industrial Company vs. El Hogar Filipino and Vallejo (45 Phil., 336).
- Despite these arguments, the Court was inclined to consider the case on its substantive merits rather than on technical pleadings.
Issues:
- Validity of the Second Mortgage
- Whether the second mortgage, executed without the written consent of the mortgagee as required by the contract, is null and void.
- Whether the prohibition clause in the mortgage contract automatically invalidates the registration of the second mortgage or merely imposes a penalty (immediate foreclosure).
- Appropriate Remedy Under the Loan Contract
- Whether the mortgagee’s contractual right, provided in the clause, to immediately foreclose upon breach (i.e., the unauthorized second mortgage) precludes the cancellation of the second mortgage on the property record.
- Whether the registration of the mortgage against the Torrens system in light of the clause is permissible and valid.
- Estoppel Considerations
- Whether the act of delivering the certificate of title to the mortgagor, with an apparent intent to allow registration of the second mortgage, estops the bank from later complaining about the second mortgage's execution.
- The implications of relying on the register of deeds’ annotation vis-à-vis challenging the substance of the second mortgage.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)