1. Garcia v. Villar, G. R. No.
158891, June 27, 2012, 675 SCRA 80
FACTS: On July 6, 1993, Galas, with her daughter, Ophelia G. Pingol, as co-maker, mortgaged the subject
property to Yolanda Valdez Villar as security for a loan in the amount of P2.2M. Galas, again with Pingol
as her co-maker, mortgaged the same property to Pablo P. Garcia to secure her loan of P1.8M. Both
mortgages were annotated at the back of TCT.
Galas sold the subject property to Villar for P1.5M and declared in the Deed of Sale that such property
was “free and clear of all liens and encumbrances of any kind whatsoever.” The Deed of Sale was
registered and TCT No. N-168361 was issued in the name of Villar.
Garcia filed a Complaint for Foreclosure of Real Estate Mortgage with Damages against Villar before RTC
of QC alleging 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. Villar 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.
RTC ruled in favor of Garcia. Villar appealed to CA. CA reversed the decision of RTC. Garcia filed for a
Motion for Reconsideration but was denied for lack of merit. Hence this petition.
ISSUES:
1. Whether or not the second mortgage to Garcia and the sale of the subject property to Villar was
valid
2. Whether or not the sale of the subject property to Villar was in violation of the prohibition on
pactum commissorium
3. Whether or not Garcia’s action for foreclosure of mortgage on the subject property can prosper.
HELD:
1. Yes. The Court agreed with CA 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 Galas’ TCT contained a restriction on further encumbrances without the
mortgagee’s 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 Galas 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. 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 which provides that A stipulation forbidding the owner from alienating the immovable
mortgaged shall be void.
2. No. Villar’s purchase of the subject property did not violate the prohibition on pactum
commissorium. The elements of pactum commissorium are (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. The power of attorney did
not provide that the ownership over the subject property would automatically pass to Villar
upon Galas 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. This provision is customary in mortgage
contracts, and is in conformity with Article 2087 of the Civil Code which provides that 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. Galas
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.
3. No. The Court find that the mortgage subsists and is still enforceable. The real nature of a
mortgage is described in Article 2126 which provides that 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. 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 since it is a right in rem. 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.
Under Article 2129 of the Civil Code, the mortgage on the property may still be foreclosed
despite the transfer. The provision states that 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.”
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 debt or 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 creditor’s
consent under Art 1293. Therefore, the obligation to pay the mortgage indebtedness remains
with the original debtors Galas and Pingol.
The decision of CA is affirmed.
