G.R. No. 171865 - Philippine National Bank vs. Heirs of Spouses Alonday

Spouses Benedicto and Azucena Alonday obtained an agricultural loan of ₱28,000.00 from Philippine National Bank (PNB)–Digos Branch.
They secured the loan by mortgaging their land in Sta. Cruz, Davao del Sur (OCT No. P-3599).

The Spouses Alonday obtained a commercial loan of ₱16,700.00 from PNB–Davao City Branch.
They mortgaged a 598 sqm residential lot in Ulas, Davao City (TCT No. T-66139), under a contract containing an “all-embracing” (dragnet) clause covering past, present, and future obligations.

The commercial loan was partly paid and renewed on December 23, 1983 for a balance of ₱15,950.00; fully paid on July 5, 1984.
On August 6, 1984, the Alonday heirs demanded release of the TCT No. T-66139 mortgage. PNB refused, citing the unpaid agricultural loan and noting it had foreclosed the OCT No. P-3599 mortgage on August 17, 1984 (with a remaining deficiency).
PNB foreclosed extrajudicially the TCT No. T-66139 mortgage (notice August 20; sale September 28, 1984) and acquired the property, later selling it to a third party in 1989.

Respondents sued PNB in the RTC of Davao City (Civil Case No. 23,021-94) for illegal foreclosure, damages, and attorney’s fees.
On November 28, 1997, the RTC awarded respondents ₱1,700,000.00 (value of land), ₱20,000.00 (attorney’s fees), and costs.
The Court of Appeals affirmed on August 31, 2005; PNB’s motion for reconsideration was denied (February 27, 2006). PNB elevated the case to the Supreme Court.

Whether the all-embracing (dragnet) clause in the second mortgage secured the prior agricultural loan.
Whether the award of ₱1.7 million damages and ₱20,000 attorney’s fees lacked factual and legal basis.