508 Phil. 705
YNARES-SANTIAGO, J.:
WHEREFORE, the complaint is hereby dismissed for lack of merit. The plaintiff is ordered to pay the defendant UBP, the sum of P250,000.00 as and for attorney's fees and the costs.On appeal, the Court of Appeals reversed the decision of the trial court. While it upheld Union Bank's right to foreclose, it found that DRI's mortgage liability is pegged at P3 million and which was later amended and increased to P8.61 million. It ruled that DRI could not be held liable for more than P8.61 million[7] even if JMTC availed more than this amount. It also noted that the date of the public sale as contained in the notice varies with the actual date of sale. As such, it declared as null the foreclosure sale because a foreclosure sale carried out on a day different from the published notice is a total nullity.[8]
SO ORDERED.[6]
WHEREFORE, the appealed Decision is REVERSED and SET ASIDE, and another is RENDERED:Union Bank's motion for reconsideration was denied hence this petition raising the following issues:[10]
(a) Declaring appellant DRI's mortgage liability to be P8.61 Million only;
(b) Declaring the foreclosure of appellant DRI's properties covered by TCTs No. S-24740 and No. S-24747 NULL and VOID ab initio;
(c) Ordering the Register of Deeds of Rizal or Makati City to CANCEL appellee UBP's TCTs No. 212659 and No. 212660, and to RESTORE appellant DRI's TCTs No. S-24740 and No. S-24747; and
(d) Ordering the appellee UBP to PAY appellant DRI P100,000.00 for and as attorney's fees plus the costs of suit.
SO ORDERED.[9]
The foregoing issues can be summed up into: (a) whether the Court of Appeals erred in holding that the liability of DRI is limited only to P8.61 million; and (b) whether the Court of Appeals erred in finding the foreclosure sale of DRI's mortgaged properties as null for lack of republication of the notice of sale.I.
Whether or not the Court of Appeals through its former Special Eleventh Division committed reversible error in declaring as null and void the foreclosure sale of private respondent D'Rossa's mortgaged properties then covered by TCT Nos. S-24740 and S-24747 notwithstanding its earlier ruling through the former Fifth Division in CA-G.R. SP No. 41694 sustaining the validity of the very same foreclosure proceedings covering the exact same properties.II.
Whether or not the Court of Appeals committed reversible error when it held that there was a "variance" between the notice regarding the date of foreclosure on 22 July 1996 and that of the actual date of foreclosure sale covering the same real properties on 20 September 1996.III.
Whether or not the Court of Appeals committed reversible error when it held that D'Rossa's liability to Union Bank is limited to only P8.61 Million even though the actual bid price tendered by Union Bank at the foreclosure sale of D'Rossa's mortgaged properties to cover the unpaid obligation of the borrower amounted to P15.3 Million.IV.
Whether or not the Court of Appeals committed reversible error when in holding as null and void the foreclosure of the mortgaged properties then covered by TCT Nos. S-24740 and S-24747 notwithstanding the earlier ruling of Honorable Court of Appeals, Fifth (5th) Division in CA-G.R. SP No. 41694 sustaining the validity of the very same foreclosure proceedings herein involved covering the same properties.V.
Whether or not the Court of Appeals committed reversible error in ordering the cancellation of TCT Nos. 212659 and 212660 now registered under the name of petitioner Union Bank and the corresponding restoration of D'Rossa's TCT Nos. S-24740 and S-24747.VI.
Whether or not the Court of Appeals committed reversible error in holding petitioner Union Bank liable for attorney's fees and costs of suit.
Section 1. Secured Obligations. – The obligations secured by this Mortgage (the "Secured Obligations") are the following:The foregoing provisions clearly show the parties' intent to constitute DRI's real estate properties as continuing securities, liable for the current as well as the future obligations of JMTC. Indeed, a mortgage liability is usually limited to the amount mentioned in the contract, but where the intent of the contracting parties is manifest that the mortgage property shall also answer for future loans or advancements, the same is valid and binding between the parties.[12] In this case, DRI expressly agreed to secure all the obligations of JMTC, whether presently owing or subsequently incurred. Thus, its liability is not limited to P8.61 million only.
a) All the obligations of the Borrower and/or the Mortgagor under: (i) the Notes, the Agreement and this Mortgage; (ii) any and all instruments or documents issued upon the renewal, extension, amendment or novation of the Notes, the Agreement and this Mortgage, irrespective of whether such obligations as renewed, extended, amended or novated are in the nature of new, separate or additional obligations; and (iii) any and all instruments or documents issued pursuant to the Notes, the Agreement and this Mortgage;
b) All other obligations of the Borrower and/or the Mortgagor in favor of the Mortgagee, whether presently owing or hereinafter incurred and whether or not arising from or connected with the Agreement, the Notes and/or this Mortgage; and
c) Any and all expenses which may be incurred in collecting any and all of the above and in enforcing any and all rights, powers and remedies of the Mortgagee under this Mortgage.[11] (Emphasis supplied)
A "blanket mortgage clause," also known as a "dragnet clause" in American jurisprudence, is one which is specifically phrased to subsume all debts of past or future origins. Such clauses are "carefully scrutinized and strictly construed." Mortgages of this character enable the parties to provide continuous dealings, the nature or extent of which may not be known or anticipated at the time, and they avoid the expense and inconvenience of executing a new security on each new transaction. A "dragnet clause" operates as a convenience and accommodation to the borrowers as it makes available additional funds without their having to execute additional security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees, et cetera. Indeed, it has been settled in a long line of decisions that mortgages given to secure future advancements are valid and legal contracts, and 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.Even if DRI is considered as an accommodation mortgagor only, its liability would still exceed P8.61 million. It is well to note that DRI, through its President, Rose D. Teodoro, agreed to secure not only the present obligations of JMTC but also those that may be incurred after the execution of the mortgage contract. DRI also actively participated in facilitating the increase of JMTC's credit facility.[14]
Dear Mr. Katigbak,It appears from the tenor of the foregoing letter that, more than just being a third-party mortgagor, DRI was actively involved in the business and operations of JMTC. As observed by the trial court:
We would like to thank you and your Executive Committee in approving the renewal and increase of our credit facilities for the operations of Josephine Marine Trading Corporation.
We are herewith submitting the following documents in relation to the above mentioned credit line:We have also taken note that the approval was in Sept. 30, 1994 and expires on Sept. 30, 1995. We apologize for the delay in forwarding the said documents and hope that effectivity of the accomodation could be extended.
- Sec. Cert. (Stockholder's Special Meeting) (2copies)
- Sec. Cert. (Board of DIRECTORS Special Meeting) (2 copies)
- Union Bank Real Estate Mortgage (signed)
- Amendment to the Real Estate Mortgage (signed)
Thank you.Very truly yours,(sgd.)
ROSE D. TEODORO
President
Encl. as stated[15]
[DRI] could not feign innocence on the subsequent renewal and increase of credit facility to JMTC because it even wrote a letter dated 26 January 1995 (Exhibit "8") to defendant UBP, signed by its President Rose D. Teodoro...Likewise, the evidence presented during the proceedings in the trial court reveal that DRI acknowledged and consented to the renewal and increase of the credit facilities of JMTC.[17] Thus, by agreeing to secure JMTC's future loans or advancements with its real properties, DRI is estopped from questioning the foreclosure proceedings conducted upon the failure of JMTC to pay its obligations to Union Bank....
Parenthetically, Josephine Marine Trading Corporation and D'Rossa Incorporated are family owned corporations of the Teodoros.[16]