G.R. No. 220617 - Nestle Philippines, Inc. vs. Puedan, Jr.

On October 8, 1976, respondents Rodolfo C. MaAalac, Jr. and Rosita P. MaAalac (MaAalac spouses) obtained a loan of ₱1,300,000.00 from Philippine Savings Bank (PSBank) evidenced by promissory note LC No. 76-269.
To secure the loan, MaAalac executed a real estate mortgage over eight parcels of land covered by various Transfer Certificate of Titles (TCT Nos. 417012, N-1348, N-1347, N-3267, N-8552, N-6162, 469843, and 343593).
Due to inability to pay, MaAalac restructured the loan on October 13, 1977, signing a new promissory note LC No. 77-232 for ₱1,550,000.00 with a 19% interest per annum, secured by a new real estate mortgage over the same eight properties.

On March 5, 1979, with PSBank’s consent, MaAalac and spouses Igmidio and Dolores Galicia executed a Deed of Sale with Assumption of Mortgage on three of the mortgaged properties (TCT Nos. N-6162 (now N-36192), N-8552 (N-36193), and 469843 (N-36194)) where the Galicias assumed a ₱550,000.00 portion of MaAalac’s mortgage obligation subject to the bank’s consent.
The Galicias subsequently mortgaged these three properties plus another (TCT No. 75584) to PSBank to secure a ₱2,600,000.00 loan evidenced by promissory note LC-79-36.
On March 12, 1979, MaAalac paid PSBank ₱919,698.11 equivalent to the value of the three parcels now registered under the Galicias, prompting PSBank to issue a partial release of mortgage on those properties.
On August 25, 1981, the Galicias obtained a second loan of ₱3,250,000.00 from PSBank secured by a real estate mortgage over five titles, including the three previously mentioned parcels.

MaAalac defaulted on their loan installments, resulting in a past due obligation of ₱1,804,241.76. PSBank initiated extrajudicial foreclosure over five remaining mortgaged properties (TCT Nos. 417012, N-1347, N-1348, N-3267, and 343593).
After several postponements, foreclosure sale proceeded on May 3, 1982, with PSBank as highest bidder for ₱2,185,225.76. Certificate of Sale was issued the same date.
MaAalac failed to redeem, so titles to the foreclosed properties were consolidated to PSBank; new TCTs were issued in PSBank’s name (Nos. N-79995, N-79996, N-79997, N-79998, N-79999, replacing prior titles).

On December 16, 1983, MaAalac sent a letter to PSBank with a cashier’s check for ₱1,200,000.00 intended for the release of four mortgaged titles (three owned by the Galicias and one by MaAalac). PSBank received the check but issued a receipt explicitly stating that receipt was not a commitment to release the titles.
PSBank applied ₱1,000,000.00 to the Galicias’ loan account and ₱200,000.00 to MaAalac’s expenses but did not release the properties.
PSBank sold two foreclosed properties to third parties Ester Villanueva and Teresita Jalbuena; Villanueva later sold to MaAalac.
On October 20, 1986, MaAalac filed Civil Case No. 53967 for damages against PSBank, its officers, and the spouses Jalbuena. PSBank filed Land Registration Case No. R-3951 for writ of possession over three foreclosed properties (TCT Nos. N-79997, N-79998, N-79999).
The trial court consolidated the two cases. On April 27, 1993, it ordered the annulment of the May 3, 1982 Certificate of Sale over three of the foreclosed titles and dismissed the land registration case.
The Court of Appeals affirmed with modifications, awarding moral damages of ₱200,000.00 each to respondents Rosita and Rodolfo MaAalac.
PSBank appealed to the Supreme Court, raising issues on the applicability of legal doctrines, consolidation of cases, novation, and the award of moral damages.

Whether the general rule on issuance of writs of possession following foreclosure should apply or the exception in *Vaca v. Court of Appeals* should govern.
Whether the consolidation of Civil Case No. 53967 (an ordinary action) and LRC Case No. R-3951 (an ex parte writ of possession proceeding) was proper.
Whether novation occurred between the parties upon PSBank’s acceptance and application of the ₱1,200,000.00 check tendered by MaAalac.
Whether PSBank had the right to refuse the release of the mortgaged properties despite the tendered payment.
Whether PSBank was properly ordered to indemnify respondents with moral damages and the quantum thereof.