Case Summary (G.R. No. 235016)
Background of Loan, Mortgage, and Deed of Sale Transactions
On October 8, 1976, the MaAalacs obtained a loan from PSBank secured by a real estate mortgage over eight parcels of land. Due to default in payments, the loan was restructured in 1977, accompanied by the execution of a new mortgage over the same properties. In 1979, with PSBank’s consent, the MaAalacs sold three of the mortgaged parcels to the spouses Galicia under a Deed of Sale with Assumption of Mortgage, whereby the Galicias assumed part of the MaAalacs’ mortgage obligation to PSBank. These three parcels, together with another property, were later mortgaged by the Galicias to PSBank to secure a new loan.
Foreclosure and Subsequent Transactions
MaAalacs defaulted again on their loan payments. PSBank initiated extrajudicial foreclosure over five remaining mortgaged properties. After postponements, the foreclosure sale proceeded on May 3, 1982, with PSBank as the highest bidder; a Certificate of Sale was issued the same day. MaAalacs failed to redeem, resulting in consolidation of ownership in PSBank’s name and issuance of new Certificates of Title (TCTs). Subsequently, PSBank sold some foreclosed properties to third parties, including sales back to MaAalacs.
Disputes and Lower Court Decisions
In 1986, MaAalacs filed an action for damages against PSBank and others and opposed a petition for writ of possession filed by PSBank over certain properties. The RTC consolidated the cases and subsequently ordered cancellation of the Certificate of Sale over three parcels and annulment of certain sales, while dismissing PSBank’s petition for writ of possession. The CA affirmed with modifications, including an award of moral damages to the MaAalacs.
Issues Raised by Petitioner PSBank
- Applicability of the general rule on issuance of writs of possession versus an exception under the doctrine in Vaca v. CA;
- Legitimacy of consolidating a civil case and a land registration case involving writ of possession;
- Existence of novation which affected the mortgage contract;
- Appropriateness of awarding moral damages to the MaAalacs.
On the Consolidation of Civil and Land Registration Cases
Petitioner argued that consolidation was improper as a land registration case for writ of possession is a special proceeding, not an “action” under the Rules of Court. The Supreme Court rejected this narrow view, referencing jurisprudence allowing consolidation where cases share parties and subject matter, to avoid multiplicity and promote judicial economy. As both cases dealt with intertwined ownership controversies, consolidation was properly upheld.
On the Issuance of Writ of Possession and the Barican Doctrine
Petitioner asserted that the general rule mandating issuance of writ of possession after foreclosure should apply, rejecting reliance on the Barican v. IAC exception which allows withholding the writ when a third party’s possession and claim to ownership is involved. The Court differentiated the cases, emphasizing that unlike Barican, PSBank’s ownership of the foreclosed properties was unquestioned, titles having been consolidated in its name with no adverse possession or open claims. Moreover, the properties subject of writ of possession differed from those sold to other third parties, thus implementation would not prejudice innocent transferees. The Court found the writ of possession should be issued, reversing the lower courts’ ruling.
On Novation of the Mortgage Obligation
The Court examined the tender by MaAalac of a PHP 1,200,000 check intended to effect release of certain mortgaged properties, which PSBank accepted but with a reservation that acceptance was not a guarantee of release. The CA held there was novation because the bank applied payments according to MaAalac’s instructions. The Supreme Court, however, found the essential elements of novation lacking: no new contract extinguishing the old mortgage existed, no mutual consent to replace the old obligation was present, and the bank expressly refused to release the properties.
Furthermore, as several parcels had been sold to Galicias who held separate mortgage obligations, MaAalac was not a substitute debtor nor entitled to demand release absent full satisfaction of the Galicias’ loans. The doctrine that novation is never presumed and requires clear, express agreement was reaffirmed. Thus, no novation occurred, and the original mortgage’s foreclosure and cancellation remained effective.
On Demand to Repurchase Fo
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Background and Procedural History
- The case involves an appeal by certiorari filed by Philippine Savings Bank (PSBank) against Spouses Rodolfo and Rosita MaAalac, challenging the Court of Appeals’ decision dated October 12, 2000.
- The Court of Appeals affirmed with modifications a decision by the Pasig Regional Trial Court (RTC), Branch 161, dated April 27, 1993, in Civil Case No. 53967.
- The RTC ordered the annulment of the Certificate of Sale over certain properties covered by Transfer Certificate of Title (TCT) Nos. N-1347, N-1348, and N-3267 issued in favor of PSBank, and dismissed Land Registration Case No. R-3951.
- The controversy arose from a loan transaction involving mortgages over multiple properties and subsequent foreclosure proceedings, sales, and mortgage releases.
Facts of the Case
- On October 8, 1976, respondents MaAalac obtained a P1,300,000 loan from PSBank secured by a Real Estate Mortgage over eight parcels of land, evidenced by promissory note L.C. No. 76-269.
- Due to MaAalac's inability to keep up with payments, a loan restructuring occurred on October 13, 1977, increasing the loan to P1,550,000 at 19% interest, secured again by the same eight properties.
- On March 5, 1979, with PSBank’s consent, MaAalac entered a Deed of Sale with Assumption of Mortgage with Spouses Igmidio and Dolores Galicia for three of the mortgaged properties.
- The Galicias subsequently used the three properties, plus one more, as security for a separate loan of P2,600,000 from PSBank.
- Partial payments and mortgage releases were made between 1979 and 1981 involving these properties and loan accounts.
- MaAalac defaulted again, prompting PSBank to initiate extrajudicial foreclosure on five remaining mortgaged properties with TCT Nos. 417012, N-1347, N-1348, N-3267, and 343593.
- The foreclosure sale was conducted on May 3, 1982, with PSBank as the highest bidder, and certificates of title were consolidated in favor of PSBank.
- In 1983, MaAalac sent PSBank a check for P1,200,000 to request the partial release of four properties from mortgage, which PSBank accepted and applied to the loan accounts but did not release the properties.
- PSBank later sold certain foreclosed properties to third parties, who then sold some properties back to MaAalac.
- MaAalac filed a civil case for damages in 1986 and sought the annulment of the foreclosure sale and cancellation of certain certificates of sale and titles.
- PSBank simultaneously filed a petition for writ of possession over the properties subject to foreclosure and consolidation of ownership.
Issues on Appeal
- Whether the Court of Appeals erred in:
- Applying an exception to the general rule on the issuance of writs of possession, following the doctrine in Vaca vs. Court of Appeals.
- Upholding consolidation of Civil Case No. 53967 with Land Registration Case No. R-3951 despite procedural differences.
- Recognizing that novation had occurred between the parties regarding the underlying mortgage obligations.
- Awarding moral damages to the respondents.
Consolidation of Civil and Land Registration Cases
- The Court held that consolidation of a civil action and a Land Registration Case (an ex parte proceeding) is proper when both involve the same parties and disputed subject matter.
- This a