Facts:

• The case involves the Philippine Industrial Co. (plaintiff-appellee) and El Hogar Filipino along with Salvador Vallejo (defendants), with El Hogar Filipino as the appellant.
• The dispute centers around a mortgage executed by Salvador Vallejo in favor of El Hogar Filipino on a property registered under the Torrens system.
• The mortgage included a stipulation prohibiting the creation of subsequent mortgages or leases without the prior written consent of El Hogar Filipino.
• The mortgage also allowed for the extrajudicial sale of the property in case of default.
• After this mortgage was registered, Vallejo executed a second mortgage in favor of the Philippine Industrial Co.
• The Register of Deeds refused to register this second mortgage due to the lack of consent from El Hogar Filipino, as required by the first mortgage's prohibiting clause.
• The trial court ruled that the validity of this prohibiting clause should be determined in an ordinary action.
• Subsequently, El Hogar Filipino advertised the property for public auction due to Vallejo's default, prompting the Philippine Industrial Co. to seek a declaration that the prohibiting clause was void and to obtain a preliminary injunction against the sale.
• The trial court ruled in favor of the Philippine Industrial Co., declaring the prohibiting clause ineffective and ordering the registration of the second mortgage.
• El Hogar Filipino appealed this decision.

Issue:

• (Unlock)

Ruling:

1. The Supreme Court ruled that the prohibiting clause in the first mortgage is valid and enforceable.
2. The preliminary injunction preventi...(Unlock)

Ratio:

• The Supreme Court's decision was based on the interpretation of the applicable laws and the principles of contract freedom.
• The court noted that Article 107, No. 4, of the Mortgage Law, which allows subsequent mortgages even if the first mortgage prohibits them, does not apply to properties registered under the Torrens system as per Act No. 496.
• Instead, the court applied Article 1255 of the Civil Code, which allows contracting parties to make ...continue reading