Republic
of the
Supreme
Court
FIRST DIVISION
|
pablo p. garcia, Petitioner, - versus
- yolanda valdez villar, Respondent. |
G.R.
No. 158891
Present:
LEONARDO-DE CASTRO,* Acting Chairperson, BERSAMIN, DEL
CASTILLO, VILLARAMA, JR., and PERLAS-BERNABE,** JJ.
Promulgated: June 27, 2012 |
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D E
C I S I O N
LEONARDO-DE
CASTRO, J.:
This is a
petition for review on certiorari[1]
of the February 27, 2003 Decision[2]
and July 2, 2003 Resolution[3]
of the Court of Appeals in CA-G.R. SP
No. 72714, which reversed the May 27, 2002 Decision[4]
of the Regional Trial Court (RTC), Branch 92 of Quezon City in Civil Case No.
Q-99-39139.
Lourdes V. Galas
(Galas) was the original owner of a piece of property (subject property)
located at Malindang St., Quezon City, covered by Transfer Certificate of Title
(TCT) No. RT-67970(253279).[5]
On July 6, 1993,
Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker, mortgaged
the subject property to Yolanda Valdez Villar (Villar) as security for a loan
in the amount of Two Million Two Hundred Thousand Pesos (P2,200,000.00).[6]
On October 10,
1994, Galas, again with Pingol as her co-maker, mortgaged the same subject
property to Pablo P. Garcia (Garcia) to secure her loan of One Million Eight
Hundred Thousand Pesos (P1,800,000.00).[7]
Both mortgages were
annotated at the back of TCT No. RT-67970 (253279), to wit:
REAL
ESTATE MORTGAGE
Entry
No. 6537/T-RT-67970(253279) MORTGAGE In favor of Yolanda Valdez Villar m/to
Jaime Villar to guarantee a principal obligation in the sum of P2,200,000-
mortgagees consent necessary in case of subsequent encumbrance or alienation
of the property; Other conditions set forth in Doc. No. 97, Book No. VI, Page
No. 20 of the Not. Pub. of Diana P. Magpantay
Date of Instrument: 7-6-93
Date of Inscription: 7-7-93
SECOND
REAL ESTATE MORTGAGE
Entry
No. 821/T-RT-67970(253279) MORTGAGE In favor of Pablo Garcia m/to Isabela
Garcia to guarantee a principal obligation in the sum of P1,800,000.00
mortgagees consent necessary in case of subsequent encumbrance or alienation
of the property; Other conditions set forth in Doc. No. 08, Book No. VII, Page
No. 03 of the Not. Pub. of Azucena Espejo Lozada
Date of Instrument: 10/10/94
Date of Inscription: 10/11/94
LRC Consulta No. 169[8]
On November 21,
1996, Galas sold the subject property to Villar for One Million Five Hundred
Thousand Pesos (P1,500,000.00), and declared in the Deed of Sale[9]
that such property was free and clear of all liens and encumbrances of any
kind whatsoever.[10]
On December 3,
1996, the Deed of Sale was registered and, consequently, TCT No.
RT-67970(253279) was cancelled and TCT No. N-168361[11]
was issued in the name of Villar. Both
Villars and Garcias mortgages were carried over and annotated at the back of
Villars new TCT.[12]
On October 27,
1999, Garcia filed a Petition for Mandamus
with Damages[13]
against Villar before the RTC, Branch 92 of Quezon City. Garcia subsequently amended his petition to a
Complaint for Foreclosure of Real Estate Mortgage with Damages.[14] Garcia alleged that when Villar purchased the
subject property, she acted in bad faith and with malice as she knowingly and
willfully disregarded the provisions on laws on judicial and extrajudicial
foreclosure of mortgaged property.
Garcia further claimed that when Villar purchased the subject property,
Galas was relieved of her contractual obligation and the characters of creditor
and debtor were merged in the person of Villar.
Therefore, Garcia argued, he, as the second mortgagee, was subrogated to
Villars original status as first mortgagee, which is the creditor with the
right to foreclose. Garcia further
asserted that he had demanded payment from Villar,[15]
whose refusal compelled him to incur expenses in filing an action in court.[16]
Villar, in her Answer,[17]
claimed that the complaint stated no cause of action and that the second
mortgage was done in bad faith as it was without her consent and knowledge. Villar alleged that she only discovered the
second mortgage when she had the Deed of Sale registered. Villar blamed Garcia for the controversy as
he accepted the second mortgage without prior consent from her. She averred that there could be no
subrogation as the assignment of credit was done with neither her knowledge nor
prior consent. Villar added that Garcia
should seek recourse against Galas and Pingol, with whom he had privity insofar
as the second mortgage of property is concerned.
On May 23, 2000,
the RTC issued a Pre-Trial Order[18]
wherein the parties agreed on the following facts and issue:
STIPULATIONS
OF FACTS/ADMISSIONS
The
following are admitted:
1.
the
defendant admits the second mortgage annotated at the back of TCT No. RT-67970
of Lourdes V. Galas with the qualification that the existence of said mortgage
was discovered only in 1996 after the sale;
2.
the
defendant admits the existence of the annotation of the second mortgage at the
back of the title despite the transfer of the title in the name of the
defendant;
3.
the
plaintiff admits that defendant Yolanda Valdez Villar is the first mortgagee;
4.
the
plaintiff admits that the first mortgage was annotated at the back of the title
of the mortgagor Lourdes V. Galas; and
5.
the
plaintiff admits that by virtue of the deed of sale the title of the property
was transferred from the previous owner in favor of defendant Yolanda Valdez
Villar.
x x x x
ISSUE
Whether
or not the plaintiff, at this point in time, could judicially foreclose the
property in question.
On June 8, 2000,
upon Garcias manifestation, in open court, of his intention to file a Motion
for Summary Judgment,[19]
the RTC issued an Order[20]
directing the parties to simultaneously file their respective memoranda within 20
days.
On June 26,
2000, Garcia filed a Motion for Summary Judgment with Affidavit of Merit[21]
on the grounds that there was no genuine issue as to any of the material facts
of the case and that he was entitled to a judgment as a matter of law.
On June 28,
2000, Garcia filed his Memorandum[22]
in support of his Motion for Summary Judgment and in compliance with the RTCs
June 8, 2000 Order. Garcia alleged that
his equity of redemption had not yet been claimed since Villar did not
foreclose the mortgaged property to satisfy her claim.
On August 13,
2000, Villar filed an Urgent Ex-Parte Motion for Extension of Time to File Her
Memorandum.[23] This, however, was denied[24]
by the RTC in view of Garcias Opposition.[25]
On May 27, 2002,
the RTC rendered its Decision, the
dispositive portion of which reads:
WHEREFORE, the foregoing premises
considered, judgment is hereby rendered in favor of the plaintiff Pablo P.
Garcia and against the defendant Yolanda V. Villar, who is ordered to pay to
the former within a period of not less than ninety (90) days nor more than one hundred
twenty (120) days from entry of judgment, the sum of P1,800,000.00 plus legal interest
from October 27, 1999 and upon failure of the defendant to pay the said amount
within the prescribed period, the property subject matter of the 2nd
Real Estate Mortgage dated October 10, 1994 shall, upon motion of the
plaintiff, be sold at public auction in the manner and under the provisions of
Rules 39 and 68 of the 1997 Revised Rules of Civil Procedure and other
regulations governing sale of real estate under execution in order to satisfy
the judgment in this case. The defendant
is further ordered to pay costs.[26]
The RTC declared
that the direct sale of the subject property to Villar, the first mortgagee,
could not operate to deprive Garcia of his right as a second mortgagee. The RTC said that upon Galass failure to pay
her obligation, Villar should have foreclosed the subject property pursuant to
Act No. 3135 as amended, to provide junior mortgagees like Garcia, the
opportunity to satisfy their claims from the residue, if any, of the
foreclosure sale proceeds. This, the RTC
added, would have resulted in the extinguishment of the mortgages.[27]
The RTC held
that the second mortgage constituted in Garcias favor had not been discharged,
and that Villar, as the new registered owner of the subject property with a
subsisting mortgage, was liable for it.[28]
Villar appealed[29]
this Decision to the Court of Appeals based on the arguments that Garcia had no
valid cause of action against her; that he was in bad faith when he entered
into a contract of mortgage with Galas, in light of the restriction imposed by
the first mortgage; and that Garcia, as the one who gave the occasion for the
commission of fraud, should suffer.
Villar further asseverated that the second mortgage is a void and
inexistent contract considering that its cause or object is contrary to law,
moral, good customs, and public order or public policy, insofar as she was
concerned.[30]
Garcia, in his
Memorandum,[31]
reiterated his position that his equity of redemption remained unforeclosed
since Villar did not institute foreclosure proceedings. Garcia added that the mortgage, until
discharged, follows the property to whomever it may be transferred no matter
how many times over it changes hands as long as the annotation is carried
over.[32]
The Court of
Appeals reversed the RTC in a Decision dated February 27, 2003, to wit:
WHEREFORE, the decision appealed from is REVERSED and another one entered DISMISSING the complaint for judicial
foreclosure of real estate mortgage with damages.[33]
The Court of
Appeals declared that Galas was free to mortgage the subject property even
without Villars consent as the restriction that the mortgagees consent was
necessary in case of a subsequent encumbrance was absent in the Deed of Real
Estate Mortgage. In the same vein, the
Court of Appeals said that the sale of the subject property to Villar was valid
as it found nothing in the records that would show that Galas violated the Deed
of Real Estate Mortgage prior to the sale.[34]
In dismissing
the complaint for judicial foreclosure of real estate mortgage with damages,
the Court of Appeals held that Garcia had no cause of action against Villar in
the absence of evidence showing that the second mortgage executed in his favor
by Lourdes V. Galas [had] been violated and that he [had] made a demand on the
latter for the payment of the obligation secured by said mortgage prior to the
institution of his complaint against Villar.[35]
On March 20,
2003, Garcia filed a Motion for Reconsideration[36]
on the ground that the Court of Appeals failed to resolve the main issue of the
case, which was whether or not Garcia, as the second mortgagee, could still
foreclose the mortgage after the subject property had been sold by Galas, the
mortgage debtor, to Villar, the mortgage creditor.
This motion was
denied for lack of merit by the Court of Appeals in its July 2, 2003 Resolution.
Garcia is now
before this Court, with the same arguments he posited before the lower courts. In his Memorandum,[37]
he added that the Deed of Real Estate Mortgage contained a stipulation, which is
violative of the prohibition on pactum
commissorium.
Issues
The crux of the
controversy before us boils down to the propriety of Garcias demand upon
Villar to either pay Galass debt of P1,800,000.00, or to judicially
foreclose the subject property to satisfy the aforesaid debt. This Court will, however, address the
following issues in seriatim:
1.
Whether or not
the second mortgage to Garcia was valid;
2. Whether or not the sale of the subject property to Villar was valid;
3. Whether or not the sale of the subject property to
Villar was in violation of the prohibition on pactum commissorium;
4.
Whether or not Garcias
action for foreclosure of mortgage on the subject property can prosper.
Discussion
Validity
of second mortgage to Garcia
and
sale of subject property to Villar
At the onset,
this Court would like to address the validity of the second mortgage to Garcia
and the sale of the subject property to Villar.
We agree with the Court of Appeals that both are valid under the terms
and conditions of the Deed of Real Estate Mortgage executed by Galas and
Villar.
While it is true
that the annotation of the first mortgage to Villar on Galass TCT contained a
restriction on further encumbrances without the mortgagees prior consent, this
restriction was nowhere to be found in the Deed of Real Estate Mortgage. As this Deed became the basis for the
annotation on Galass title, its terms and conditions take precedence over the
standard, stamped annotation placed on her title. If it were the intention of the parties to
impose such restriction, they would have and should have stipulated such in the
Deed of Real Estate Mortgage itself.
Neither did this
Deed proscribe the sale or alienation of the subject property during the life
of the mortgages. Garcias insistence
that Villar should have judicially or extrajudicially foreclosed the mortgage
to satisfy Galass debt is misplaced.
The Deed of Real Estate Mortgage merely provided for the options Villar
may undertake in case Galas or Pingol fail to pay their loan. Nowhere was it stated in the Deed that Galas could
not opt to sell the subject property to Villar, or to any other person. Such stipulation would have been void anyway,
as it is not allowed under Article 2130 of the Civil Code, to wit:
Art. 2130.
A stipulation forbidding the owner from alienating the immovable
mortgaged shall be void.
Prohibition
on pactum commissorium
Garcia claims
that the stipulation appointing Villar, the mortgagee, as the mortgagors
attorney-in-fact, to sell the property in case of default in the payment of the
loan, is in violation of the prohibition on pactum
commissorium, as stated under Article 2088 of the Civil Code, viz:
Art. 2088. The creditor cannot appropriate
the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and
void.
The power of
attorney provision in the Deed of Real Estate Mortgage reads:
5. Power of Attorney of MORTGAGEE. Effective upon the breach of any condition
of this Mortgage, and in addition to the remedies herein stipulated, the
MORTGAGEE is likewise appointed attorney-in-fact of the MORTGAGOR with full
power and authority to take actual possession of the mortgaged properties, to
sell, lease any of the mortgaged properties, to collect rents, to execute deeds
of sale, lease, or agreement that may be deemed convenient, to make repairs or
improvements on the mortgaged properties and to pay the same, and perform any
other act which the MORTGAGEE may deem convenient for the proper administration
of the mortgaged properties. The payment
of any expenses advanced by the MORTGAGEE in connection with the purpose
indicated herein is also secured by this Mortgage. Any amount received from the sale, disposal
or administration abovementioned maybe applied by assessments and other
incidental expenses and obligations and to the payment of original indebtedness
including interest and penalties thereon.
The power herein granted shall not be revoked during the life of this
Mortgage and all acts which may be executed by the MORTGAGEE by virtue of said
power are hereby ratified.[38]
The following
are the elements of pactum commissorium:
(1) There should
be a property mortgaged by way of security for the payment of the principal
obligation; and
(2) There should
be a stipulation for automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal obligation within the
stipulated period.[39]
Villars
purchase of the subject property did not violate the prohibition on pactum commissorium. The power of attorney provision above did not
provide that the ownership over the subject property would automatically pass
to Villar upon Galass failure to pay the loan on time. What it granted was the mere appointment of
Villar as attorney-in-fact, with authority to sell or otherwise dispose of the
subject property, and to apply the proceeds to the payment of the loan.[40] This provision is customary in mortgage
contracts, and is in conformity with Article 2087 of the Civil Code, which
reads:
Art. 2087.
It is also of the essence of these contracts that when the principal
obligation becomes due, the things in which the pledge or mortgage consists may
be alienated for the payment to the creditor.
Galass decision
to eventually sell the subject property to Villar for an additional P1,500,000.00
was well within the scope of her rights as the owner of the subject property. The subject property was transferred to
Villar by virtue of another and separate contract, which is the Deed of
Sale. Garcia never alleged that the
transfer of the subject property to Villar was automatic upon Galass failure
to discharge her debt, or that the sale was simulated to cover up such
automatic transfer.
Propriety of Garcias action
for foreclosure of mortgage
The real nature
of a mortgage is described in Article 2126 of the Civil Code, to wit:
Art. 2126.
The mortgage directly and immediately subjects the property upon which
it is imposed, whoever the possessor may be, to the fulfillment of the
obligation for whose security it was constituted.
Simply put, a
mortgage is a real right, which follows the property, even after subsequent
transfers by the mortgagor. A
registered mortgage lien is considered inseparable from the property inasmuch
as it is a right in rem.[41]
The sale or
transfer of the mortgaged property cannot affect or release the mortgage; thus
the purchaser or transferee is necessarily bound to acknowledge and respect the
encumbrance.[42] In fact, under Article 2129 of the Civil
Code, the mortgage on the property may still be foreclosed despite the
transfer, viz:
Art. 2129.
The creditor may claim from a third person in possession of the
mortgaged property, the payment of the part of the credit secured by the
property which said third person possesses, in terms and with the formalities
which the law establishes.
While we agree
with Garcia that since the second mortgage, of which he is the mortgagee, has
not yet been discharged, we find that said mortgage subsists and is still enforceable. However, Villar, in buying the subject
property with notice that it was mortgaged, only undertook to pay such mortgage
or allow the subject property to be sold upon failure of the mortgage creditor
to obtain payment from the principal debtor once the debt matures. Villar did not obligate herself to replace
the debtor in the principal obligation, and could not do so in law without the
creditors consent.[43] Article 1293 of the Civil Code provides:
Art. 1293. Novation which consists in
substituting a new debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but not without the
consent of the creditor. Payment by the
new debtor gives him the rights mentioned in articles 1236 and 1237.
Therefore, the
obligation to pay the mortgage indebtedness remains with the original debtors
Galas and Pingol.[44] The case of E.C. McCullough & Co. v. Veloso and Serna[45] is square on this point:
The effects of a transfer of a
mortgaged property to a third person are well determined by the Civil Code. According to article 1879[46] of
this Code, the creditor may demand of the third person in possession of the
property mortgaged payment of such part of the debt, as is secured by the
property in his possession, in the manner and form established by the law. The Mortgage Law in force at the promulgation of
the Civil Code and referred to in the latter, provided, among other things,
that the debtor should not pay the debt upon its maturity after judicial or
notarial demand, for payment has been made by the creditor upon him. (Art. 135 of the Mortgage Law of the
Philippines of 1889.) According to this,
the obligation of the new possessor to pay the debt originated only from the
right of the creditor to demand payment of him, it being necessary that a
demand for payment should have previously been made upon the debtor and the
latter should have failed to pay. And
even if these requirements were complied with, still the third possessor might
abandon the property mortgaged, and in that case it is considered to be in the
possession of the debtor. (Art. 136 of
the same law.) This clearly shows that
the spirit of the Civil Code is to let the obligation of the debtor to pay the
debt stand although the property mortgaged to secure the payment of said debt
may have been transferred to a third person. While the Mortgage Law of 1893 eliminated
these provisions, it contained nothing indicating any change in the spirit of
the law in this respect. Article 129 of this law, which provides the
substitution of the debtor by the third person in possession of the property, for
the purposes of the giving of notice, does not show this change and has
reference to a case where the action is directed only against the property
burdened with the mortgage. (Art. 168 of
the Regulation.)[47]
This
pronouncement was reiterated in Rodriguez
v. Reyes[48] wherein this Court, even before quoting
the same above portion in E.C. McCullough
& Co. v. Veloso and Serna, held:
We find
the stand of petitioners-appellants to be unmeritorious and untenable. The maxim caveat
emptor applies only to execution sales, and this was not one such. The mere fact that the purchaser of an
immovable has notice that the acquired realty is encumbered with a mortgage
does not render him liable for the payment of the debt guaranteed by the mortgage,
in the absence of stipulation or condition that he is to assume payment of the
mortgage debt. The reason is plain: the mortgage is merely an encumbrance on
the property, entitling the mortgagee to have the property foreclosed, i.e.,
sold, in case the principal obligor does not pay the mortgage debt, and apply
the proceeds of the sale to the satisfaction of his credit. Mortgage is merely
an accessory undertaking for the convenience and security of the mortgage
creditor, and exists independently of the obligation to pay the debt secured by
it. The mortgagee, if he is so minded, can waive the mortgage security and
proceed to collect the principal debt by personal action against the original
mortgagor.[49]
In view of the
foregoing, Garcia has no cause of action against Villar in the absence of
evidence to show that the second mortgage executed in favor of Garcia has been
violated by his debtors, Galas and Pingol, i.e.,
specifically that Garcia has made a demand on said debtors for the payment of
the obligation secured by the second mortgage and they have failed to pay.
WHEREFORE,
this Court hereby AFFIRMS the
February 27, 2003 Decision and March 8, 2003 Resolution of the Court of Appeals
in CA-G.R. SP No. 72714.
SO ORDERED.
Associate Justice
Acting
Chairperson, First Division
WE CONCUR:
Associate Justice
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MARIANO C. DEL CASTILLO Associate
Justice |
MARTIN S. VILLARAMA, JR. Associate Justice
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ESTELA M. PERLAS-BERNABE Associate
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ATTESTATION
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 Courts Division.
TERESITA J. LEONARDO-DE CASTRO
Associate
Justice
Acting Chairperson, First Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution and the Division Acting Chairpersons 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
Courts Division.
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)
* Per Special Order No. 1226 dated May 30, 2012.
** Per Special Order No. 1227 dated May 30, 2012.
[1] 1997
Rules of Court, Rule 45.
[2] Rollo, pp. 9-17; penned by Associate
Justice Marina L. Buzon with Associate Justices Josefina Guevara-Salonga and
Danilo B. Pine, concurring.
[3] Id.
at 23-24.
[4] Records, pp. 93-96.
[5] Id.
at 9-10.
[6] Id.
at 11-15.
[7] Id.
at 16-17.
[8] Id.
at 10 (dorsal side).
[9] Id.
at 18-20.
[10] Id.
at 19.
[11] Id.
at 21.
[12] Id.
at 21 (dorsal side).
[13] Id.
at 3-8.
[14] Id.
at 31.
[15] Id.
at 72-73.
[16] Id.
at 31.
[17] Id.
at 38-41.
[18] Id.
at 61-63.
[19] Id.
at 65.
[20] Id.
at 66.
[21] Id.
at 67-68.
[22] Id.
at 75-80.
[23] Id.
at 84.
[24] Id.
at 85.
[25] Id.
at 81-83.
[26] Id.
at 95-96.
[27] Id.
at 94.
[28] Id.
at 95.
[29] Id.
at 98.
[30] CA
rollo, pp. 17-18.
[31] Id.
at 10-14.
[32] Id.
at 12-13.
[33] Rollo, p. 17.
[34] Id.
at 14.
[35] Id.
at 17.
[36] Id.
at 18-21.
[37] Id.
at 99-102.
[38] Records,
pp. 13-14.
[39] Development Bank of the Philippines v. Court
of Appeals, 348 Phil. 15, 31 (1998).
[40] Id. at 29.
[41] Philippine National Bank v. RBL Enterprises,
Inc., G.R. No. 149569, May 28, 2004, 430 SCRA 299, 307.
[42] Ganzon v. Inserto, 208 Phil. 630, 637
(1983).
[43] Rodriguez v. Reyes, 147 Phil. 176, 183 (1971).
[44] Id.
[45] 46
Phil. 1 (1924).
[46] New Civil Code, now Art. 2129.
[47] E.C. McCullough & Co. v. Veloso and Serna, supra note 45 at 4-5.
[48] Supra
note 43.
[49] Id. at 182-183.