Republic of the
Supreme Court
SECOND DIVISION
|
BANK OF COMMERCE and
STEPHEN Z. TAALA, Petitioners, - versus - Spouses ANDRES and ELIZA
FLORES, Respondents. |
G.R.
No. 174006
Present: CARPIO, J.,
Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: December
8, 2010 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before
the Court is a petition for review on certiorari
under Rule 45 of the Rules of Court, assailing the Decision[1]
dated February 28, 2006 and the Resolution[2]
dated August 9, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 80362.
The facts of the case are as follows:
Respondents
filed a case for specific performance against petitioners before the Regional
Trial Court (RTC) of
On
October 22, 1993, respondents borrowed money from petitioner bank in the amount
of Nine Hundred Thousand Pesos (P900,000.00). Respondents executed a
Real Estate Mortgage[5]
over the condominium unit as collateral, and the same was annotated at the back
of CCT No. 2130.
On
October 3, 1995, respondents again borrowed One Million One Hundred Thousand
Pesos (P1,100,000.00) from petitioner bank, which was also secured by a
mortgage over the same property annotated at the back of CCT No. 2130.[6]
On
January 2, 1996, respondents paid One Million Eleven Thousand Five Hundred
Fifty-Five Pesos and 54 centavos (P1,011,555.54), as evidenced by
Official Receipt No. 147741[7]
issued by petitioner bank. On the face of the receipt, it was written that the
payment was “in full payment of the loan and interest.” Respondents then asked petitioner
bank to cancel the mortgage annotations on CCT No. 2130 since the loans secured
by the real estate mortgage were already paid in full. However, the bank
refused to cancel the same and demanded payment of Four Million Six Hundred
Thirty-Three Thousand Nine Hundred Sixteen Pesos and Sixty-Seven Centavos (P
4,633,916.67), representing the outstanding obligation of respondents as of February
27, 1998. Respondents requested for an accounting which would explain how the
said amount was arrived at. However, instead of heeding respondents’ request,
petitioner bank applied for extra-judicial foreclosure of the mortgages over
the condominium unit. The public auction sale was scheduled on September 4,
1998. Petitioner Stephen Z. Taala, a notary public, was tasked to preside over
the auction sale.[8]
Respondents
filed suit with the RTC,
On October 23, 1998, the RTC granted
respondents’ prayer for issuance of a writ of preliminary injunction,
restraining petitioner bank from foreclosing on the mortgage.[12]
Petitioner
bank admitted that there were only two (2) mortgage loans annotated at the back
of CCT No. 2130, but denied that respondents had already fully settled their outstanding
obligations with the bank.[13] It
averred that several credit lines were granted to respondent Andres Flores by
petitioner bank that were secured by promissory notes executed by him, and
which were either increased or extended from time to time. The loan that was
paid on January 2, 1996, in the amount of P1,011,555.54, was only one of
his loans with the bank. There were remaining loans already due and demandable,
and had not been paid by respondents despite repeated demands by petitioner
bank. The remaining loans, although not availed of at the same time, were
similarly secured by the subject real estate mortgage as provided in the
continuing guaranty agreement therein.[14]
Petitioner
bank alleged that respondents requested and were granted an increase in their
Bills Discounted Line from Nine Hundred Thousand Pesos (P900,000.00) to
Two Million Pesos (P2,000,000.00), which was secured by the same real estate
mortgage on CCT No. 2130. However, the subject condominium unit commanded only
a market value of One Million Seven Hundred Twenty-Three Thousand Six Hundred
Pesos (P1,723,600.00), and a loan value of Nine Hundred Fifty-Nine
Thousand Six Hundred Sixteen Pesos (P959,616.00). Since the market value
of the condominium unit was lower than the combined loans, the parties agreed
to fix the amount of the real estate mortgage at P1,100,000.00. Moreover,
petitioner bank stressed that under the terms of the two real estate mortgages,
future loans of respondents were also covered.[15]
On
December 4, 2002, the RTC rendered a resolution,[16]
the fallo of which reads:
FROM THE FOREGOING MILIEU, the present case for specific performance with damages and injunction filed by plaintiffs, Sps. Andres and Eliza Flores against defendants, Bank of Commerce and Stephen Z. Taala, is hereby DISMISSED. Likewise, the counterclaim filed by defendants, Bank of Commerce and Stephen Z. Taala against plaintiffs, Sps. Andres and Eliza Flores is DISMISSED for insufficiency of evidence.
SO ORDERED.[17]
In denying respondents’ complaint for
specific performance, the RTC ratiocinated that respondents’ right of action
hinged mainly on the veracity of their claim that they faithfully complied with
their loan obligations and had fully paid them in January 1996. The RTC stated
that the evidence submitted by petitioner bank, specifically the promissory
notes and statement of account dated February 27, 1998, negated this contention.
The RTC declared that respondents incurred other debts from petitioner bank,
which must be paid first before they could be absolved of liability, and, consequently,
demand the release of the mortgage. The RTC
also struck down respondents’ assertion that petitioner bank did not comply
with the posting and publication requirements under Act No. 3135, as amended.
Respondents filed a motion for
reconsideration, which was, however, denied by the RTC in a decision[18]
dated August 8, 2003.
Aggrieved, respondents appealed to the
CA.
Meanwhile, on March 25, 2004, the auction
sale of the subject property was conducted, and petitioner bank was awarded the
property, as the highest bidder.
On February 28, 2006, the CA rendered
a Decision[19]
reversing the decision and the resolution of the RTC. The dispositive portion
of the CA Decision reads:
IN VIEW OF ALL THE FOREGOING, the instant appeal is GRANTED; the challenged Decision dated December 4, 2002, is REVERSED and SET ASIDE; and a new one entered:
(a) ordering the cancellation of the real estate mortgage annotations on the dorsal side of CCT No. 2130 of the Registry of Deeds of Quezon City;
(b) ordering appellee Bank to issue a corresponding release of mortgages to plaintiffs-appellants’ CCT No. 2130;
(c) declaring null and void the challenged extra-judicial foreclosure and public auction sale held on March 25, 2004 together with the Certificate of Sale dated April 14, 2004 issued in favor of appellee Bank; and,
(d) appellees’ counterclaims are ordered dismissed, for lack of sufficient basis therefor.
No costs.
SO ORDERED.[20]
The CA ratiocinated that the principal obligation or loan was
already extinguished by the full payment thereof. Consequently, the real estate
mortgages securing the principal obligation were also extinguished. A real
estate mortgage, being an accessory contract, cannot survive without the
principal obligation it secures. The CA also noted that the two mortgages were
individually annotated at the back of CCT No. 2130. Thus, the CA opined that
the individual annotations clearly indicated that the said mortgages were not
meant to serve as a continuing guaranty for any future loan that respondents
would obtain from petitioner bank.
Petitioners
filed a motion for reconsideration. On August 9, 2006, the CA issued a
Resolution[21] denying
the same.
Hence,
the instant petition.
The
sole issue for resolution is whether the real estate mortgage over the subject
condominium unit is a continuing guaranty for the future loans of respondent
spouses despite the full payment of the principal loans annotated on the title
of the subject property.
We
resolve this issue in the affirmative.
The
contested portion of the Deed of Real Estate Mortgage dated October 22, 1993
for the principal obligation of P900,000.00 and of the second one dated October
3, 1995 for the sum of P1,100,000.00, uniformly read:
WITNESSETH: That
for and in consideration
of the credit accommodations granted by the MORTGAGEE [Bank of Commerce] to the
MORTGAGOR [Andres Flores] and/or _____________________ hereby initially fixed
at _____________________________PESOS: (P____________), Philippine Currency,
and as security for the payment of the
same, on demand or at maturity as the case may be, be the interest accruing
thereon, the cost of collecting the same, the cost of keeping the mortgaged
property(ies), of all amounts now owed or hereafter owing by the MORTGAGOR to
the MORTGAGEE under this or separate instruments and agreements, or in respect
of any bill, note, check, draft accepted, paid or discounted, or advances made
and all other obligations to every kind already incurred or which may hereafter
be incurred, for the use or accommodation of the MORTGAGOR, as well as the
faithful performance of the terms and conditions of this mortgage and of the
separate instruments and/or documents under which credits have been or may
hereafter be advanced by the MORTGAGEE to the MORTGAGOR, including their
renewals, extensions and substitutions, any and all of which separate
instruments and/or documents and their renewals, extensions and substitutions
are hereunto incorporated and made integral parts hereof, the MORTGAGOR [Andres
Flores] has transferred and conveyed, as by these presents it/he does hereby
transfer and convey, by way of First Mortgage, to the MORTGAGEE [Bank of
Commerce], its successors and assigns, all its/ his rights, title and interest
to that parcel(s) of land, together with all the buildings and improvements now
existing or which may hereafter be erected or constructed thereon, including
all other rights or benefits annexed to or inherent therein now existing or
which may hereafter exist, situated in Embassy Garden Homes, Quezon City,
Philippines, and more particularly described in Original/Transfer
Certificate(s) of Title No. CCT No. 2130 of the Registry of Deeds [of]
CCT No. 2130
Unit No. L-2, located on Building L, consisting of Ninety Five point Twenty (95.20) Square Meters, more of less, with Parking Space No. L-2.[22]
It
is petitioner bank’s contention that the said undertaking, stipulated in the
Deed of Real Estate Mortgage dated October 22, 1993 and October 3, 1995, is a
continuing guaranty meant to secure future debts or credit accommodations
granted by petitioner bank in favor of respondents. On the other hand, respondents posit
that, since they have already paid the loans secured by the real estate
mortgages, the mortgage should not be foreclosed because it does not include
future debts of the spouses or debts not annotated at the back of CCT No. 2130.
A
continuing guaranty is a recognized exception to the rule that an action to
foreclose a mortgage must be limited to the amount mentioned in the mortgage contract.[23] Under
Article 2053 of the Civil Code, a guaranty may be given to secure even future
debts, the amount of which may not be known at the time the guaranty is
executed. This is the basis for contracts denominated as a continuing guaranty
or suretyship. A continuing guaranty is not limited to a single transaction,
but contemplates a future course of dealing, covering a series of transactions,
generally for an indefinite time or until revoked. It is prospective in its
operation and is generally intended to provide security with respect to future
transactions within certain limits, and contemplates a succession of
liabilities, for which, as they accrue, the guarantor becomes liable. In other
words, a continuing guaranty is one that covers all transactions, including
those arising in the future, which are within the description or contemplation
of the contract of guaranty, until the expiration or termination thereof.[24]
A
guaranty shall be construed as continuing when, by the terms thereof, it is
evident that the object is to give a standing credit to the principal debtor to
be used from time to time either indefinitely or until a certain period,
especially if the right to recall the guaranty is expressly reserved. In other
jurisdictions, it has been held that the use of particular words and
expressions, such as payment of "any debt," "any
indebtedness," "any deficiency," or "any sum," or the
guaranty of "any transaction" or money to be furnished the principal
debtor "at any time" or "on such time" that the principal
debtor may require, has been construed to indicate a continuing guaranty.[25]
In the instant case, the language of
the real estate mortgage unambiguously reveals that the security provided in
the real estate mortgage is continuing in nature. Thus, it was intended as security
for the payment of the loans annotated at the back of CCT No. 2130, and as
security for all amounts that respondents may owe petitioner bank. It is well settled that mortgages given to
secure future advance or loans are valid and legal contracts, and that the
amounts named as consideration in said contracts do not limit the amount for
which the mortgage may stand as security if from the four corners of the
instrument the intent to secure future and other indebtedness can be gathered.[26]
A
mortgage given to secure advancements is a continuing security and is not
discharged by repayment of the amount named in the mortgage until the full
amounts of the advancements are paid.[27] Respondents’
full payment of the loans annotated on the title of the property shall not
effect the release of the mortgage because, by the express terms of the
mortgage, it was meant to secure all future debts of the spouses and such debts
had been obtained and remain unpaid. Unless full payment is made by the spouses
of all the amounts that they have incurred
from petitioner bank, the property is burdened by the mortgage.
WHEREFORE, in view of the foregoing,
the Decision dated February 28, 2006 and the Resolution dated August 9, 2006 of
the Court of Appeals in CA-G.R. CV No. 80362 are hereby REVERSED and SET ASIDE.
The decision of the Regional Trial Court dated December 4, 2002 is hereby REINSTATED.
SO
ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
WE CONCUR:
ANTONIO T.
CARPIO
Associate Justice
Chairperson
|
DIOSDADO M. PERALTA Associate Justice |
ROBERTO A. ABAD Associate Justice |
JOSE CATRAL
Associate
Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
ANTONIO
T. CARPIO
Associate
Justice
Chairperson,
Second Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
RENATO
C. CORONA
Chief
Justice
[1] Penned by Associate Justice Conrado M. Vasquez, Jr., with Associate Justices Mariano C. del Castillo (now a member of this Court) and Magdangal M. de Leon, concurring; rollo, pp. 26-37.
[2]
[3] Records, p. 7.
[4] CA rollo, p. 88.
[5] Records, p. 87.
[6]
[7]
[8] Rollo, p. 27.
[9] Records, pp. 11-12.
[10] Rollo, pp. 27-28.
[11]
[12]
[13]
[14] CA rollo, p. 89.
[15] Rollo, p. 28.
[16] Penned by Judge Percival Mandap Lopez; CA rollo, pp. 91-92.
[17]
[18] Penned by Pairing Judge Demetrio B. Macapagal, Sr.; id. at 88-90.
[19] Supra note 1.
[20]
[21] Supra note 2.
[22] Records, p. 88. (Emphasis supplied.)
[23] C & C Commercial Corp. v. Philippine National Bank, 256 Phil. 451, 463 (1989).
[24] Diño v. Court of Appeals, G.R. No. 89775, November 26, 1992, 216 SCRA 9, 17.
[25]
[26] China Banking Corp. v. CA, 333 Phil. 158, 170 (1996).
[27]