FIRST DIVISION
G.R. No. 171865, October 12, 2016
PHILIPPINE NATIONAL BANK, Petitioner, v. HEIRS OF BENEDICTO AND AZUCENA ALONDAY, Respondent.
D E C I S I O N
BERSAMIN, J.:
The issue is whether the all-embracing or dragnet clause contained in the first mortgage contract executed between the parties for the security of the first loan could authorize the foreclosure of the property under the mortgage to secure a second loan despite the full payment of the second loan.
That for and in consideration of certain loans, overdrafts, and other credit accommodations, obtained from the Mortgagee, which is hereby fixed at _________, Philippine Currency, and to secure the payment of the same and those others that the Mortgagee may extend to the Mortgagor, including interests and expenses, and other obligations owing by the Mortgagor to the Mortgagee, whether direct or indirect, principal or secondary, as appearing in the accounts, books and records of the Mortgagee, the Mortgagor does hereby transfer and convey by way of mortgage unto the Mortgagee, its successors or assigns, the parcel of land which is/are described in the list inserted at the back of this document xxx. In case the Mortgagor executes subsequent promissory note or notes either as renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodation, xxx, this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof, notwithstanding full payments of any or all obligations of the Mortgagors. This mortgage shall also stand as security for said obligations and any and all other obligations of the Mortgagor to the Mortgagee of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage. However, if the Mortgagor shall pay the Mortgagee, its successors or assigns, the obligations secured by this mortgage, together with interests, costs and other expenses, on or before the date they are due, and shall keep and perform all the covenants and agreements herein contained for the Mortgagor to keep and perform, then this mortgage shall be null and void, otherwise, it shall remain in full force and effect.2chanroblesvirtuallawlibraryThe Spouses Alonday made partial payments on the commercial loan, which they renewed on December 23, 1983 for the balance of P15,950.00. The renewed commercial loan, although due on December 25, 1984, was fully paid on July 5, 1984.3chanrobleslaw
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against defendant bank, ordering said defendant bank:ChanRoblesVirtualawlibraryThe RTC observed that if the petitioner had intended to have the second mortgage secure the pre-existing agricultural loan, it should have made an express reservation to that effect; that based on the all-embracing clause, the mortgage was a contract of adhesion, and the ambiguities therein should be construed strictly against the petitioner; that the last sentence of the all-embracing clause provided that the mortgage would be null and void upon the payment of the obligations secured by the mortgage; and that the petitioner was guilty of bad faith in refusing to nullify the mortgage despite full payment of the commercial loan prior to its maturity.SO ORDERED.7chanroblesvirtuallawlibrary
- To pay plaintiffs the sum of One Million Seven Hundred Thousand (P1,700,000.00) Pesos, representing the value of the land covered by TCT No. T-66139;
- To pay plaintiffs the sum of P20,000.00 as attorney's fees; and cralawlawlibrary
- To pay the costs of this suit.
The petitioner submits that Mojica v. Court of Appeals validates the use of an all-embracing clause in a mortgage agreement to secure not only the amount indicated on the mortgage instrument, but also the mortgagor's future and past obligations; that by denying the applicability to the case of Mojica v. Court of Appeals and other similar rulings, the CA disregarded the principle of stare decisis; and that the CA in effect thereby regarded allembracing clauses invalid as to prior obligations.
- The Court of Appeals grievously erred in restricting and delimiting the scope and validity of the standard "all-embracing clause" in real estate mortgage contracts solely to future indebtedness and not to prior ones, contrary to leading Supreme Court decisions on the matter.
- Even assuming arguendo that the xxx decisions are inapplicable to the case at bar, the Court of Appeals grievously erred in awarding the unsubstantiated amount of P1.7 million in damages and P20,000.00 as attorney's fees against PNB without factual and legal basis.11
The real estate mortgage on the property covered by TCT No. T-66139 was specifically constituted to secure the payment of the commercial loan of the Spouses ALONDAY. In the same manner, the real estate mortgage on the property covered by OCT No. P-3599 was constituted to secure the payment of their agricultural loan with the PNB. With the execution of separate mortgage contracts for the two (2) loans, it is clear that the intention of the parties was to limit the mortgage to the loan for which it was constituted.The mortgage provision relied upon by appellant is known in American jurisprudence as a "dragnet" clause, which is specifically phrased to subsume all debts of past or future origin. Such clauses pursuant to the pronouncement of the Supreme Court in DBP vs. Mirang must be "carefully scrutinized and strictly construed."12chanrobleslaw
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The [Mojica] case is not in point since the facts therein are different from the case at bench. In Mojica vs. Court of Appeals, the mortgaged real estate property was made to answer for future advancement or renewal of the loan, whereas in the instant case, the foreclosure sale included a property which was used as a security for a commercial loan which was obtained after the agricultural loan.
xxx The parties having conformed to the "blanket mortgage clause" or "dragnet clause," it is reasonable to conclude that they also agreed to an implied understanding that subsequent loans need not be secured by other securities, as the subsequent loans will be secured by the first mortgage. In other words, the sufficiency of the first security is a corollary component of the "dragnet clause." But of course, there is no prohibition, as in the mortgage contract in issue, against contractually requiring other securities for the subsequent loans. Thus, when the mortgagor takes another loan for which another security was given it could not be inferred that such loan was made in reliance solely on the original security with the "dragnet clause," but rather, on the new security given. This is the "reliance on the security test."Although the facts in Prudential Bank were not entirely on all fours with those of this case because the prior mortgage in Prudential Bank was sought to be enforced against a subsequent loan already secured by other securities, the logic in Prudential Bank is applicable here. The execution of the subsequent mortgage by the parties herein to secure the subsequenlloan was an indication that they had intended to treat each loan as distinct from the other, and that they had intended to secure each of the loans individually and separately.
xxx Accordingly, finding a different security was taken for the second loan no intent that the parties relied on the security of the first loan could be inferred, so it was held. The rationale involved, the court said, was that the "dragnet clause" in the first security instrument constituted a continuing offer by the borrower to secure further loans under the security of the first security instrument, and that when the lender accepted a different security he did not accept the offer.17chanroblesvirtuallawlibrary
Considering that the property is located at the junction of the roads leading to Toril and Calinan districts with big establishments all around, plaintiffs claim that at the time of the filing of this case which was in 1994, the reasonable market value of the land was P1,200.00 per square meter. To date, the value could reasonably be P3,000.00 per square meter.19chanroblesvirtuallawlibraryOpining that the respondents should be indemnified the value of the loss suffered from the illegal foreclosure of the property covered by TCT No. T-66139, theCA adopted the valuation by the RTC on the established fair market value of the property being P3,000.00/square meter, for a total of P1,700,000.00 as damages to be awarded.20chanrobleslaw
Interest is a compensation fixed by the parties for the use or forbearance of money. This is referred to as monetary interest. Interest may also be imposed by law or by courts as penalty or indemnity for damages. This is called compensatory interest. The right to interest arises only by virtue of a contract or by virtue of damages for delay or failure to pay the principal loan on which interest is demanded.The petitioner should be held liable for interest on the actual damages of P717,600.00 representing the value of the propetiy with an area 598 square meters that was lost to them through the unwarranted foreclosure, the same to be reckoned from the date of judicial demand (i.e., the filing of the action by the Spouses Alonday). At the time thereof, the rate was 12% per annum, and such rate shall run until June 30, 2013. Thereafter, or starting on July 1, 2013, the rate of interest shall be 6% per annum until full payment of the obligation, pursuant to the ruling in Nacar v. Gallery Frames,27 which took into consideration the lowering of interest rates by the Monetary Board.
Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. As can be gleaned from the foregoing provision, payment of monetary interest is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest. Thus, we have held that collection of interest without any stipulation therefor in writing is prohibited by law.
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There are instances in which an interest may be imposed even in the absence of express stipulation, verbal or written, regarding payment of interest. Article 2209 of the Civil Code states that if the obligation consists in the payment of a sum of money, and the debtor incurs delay, a legal interest of 12% per annum may be imposed as indemnity for damages if no stipulation on the payment of interest was agreed upon. Likewise, Article 2212 of the Civil Code provides that interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent on this point.
All the same, the interest under these two instances may be imposed only as a penalty or damages for breach of contractual obligations. It cannot be charged as a compensation for the use or forbearance of money. In other words, the two instances apply only to compensatory interest and not to monetary interest.26 xxx
Endnotes:
1Rollo, p. 12.
2 Id. at 16-17.
3 Id. at 12.
4 Id. at 12-13.
5 Id. at 13-14.
6 Id. at 85-92; penned by Judge Virginia Hofileña-Europa.
7 Id. at 92.
8 Id. at 11-22; penned by Associate Justice Myrna Dimaranan-Vidal (retired), and concurred in by Associate Justice Teresita Dy-Liacco Flores (retired) and Associate Justice Edgardo A. Camello.
9 G.R. No. 94247, September 11, 1991, 201 SCRA 517.
10Rollo, pp. 24-25.
11 Id. at 40-41.
12 Id. at 17-19.
13Traders Royal Bank v. Castañares, G.R. No. 172020, December 6, 2010, 636 SCRA 519, 528.
14Asiatrust Development Bank v. Tuble, G.R. No. 183987, July 25, 2012, 677 SCRA 519, 532-533.
15 Supra note 13, at 528-529.
16 G.R. No. 150197, July 28, 2005, 464 SCRA 353.
17 Id. at 366.
18Philippine National Bank v. Manalo, G.R. No. 174433, February 24, 2014, 717 SCRA 254, 269-270.
19Rollo, p. 9l.
20 Id. at 20-21.
21 Supra note 6.
22 Supra note 8.
23De Guzman v. Tumolva, G.R. No. 188072, October 19, 2011, 659 SCRA 725, 732.
24Diona v. Balangue, G.R. No. 173559, January 7, 2013, 688 SCRA 22, 35.
25cralawred G.R. No. 173227, January 20, 2009, 576 SCRA 696.
26 Id. at 704-705, 707.
27 G.R. No. 189871, August 13, 2013, 703 SCRA 439, 455-457.
28 Article 2212. Interest due shall earn legal interest from the time it is judicially demanded although the obligation may be silent upon this point. (1109a)
29Planters Development Bank v. Lopez, G.R. No. 186332, October 23, 2013, 708 SCRA 481, 501-503.