G.R. No. L-108638 March 11, 1994
Spouses RAMON R. NACU and LOURDES I. NACU, petitioners, vs. THE COURT OF APPEALS and PILIPINAS BANK, respondents.

FACTS

Petitioners Spouses Ramon R. Nacu and Lourdes I. Nacu are the registered owners of a property covered by TCT No. 276891. On July 12, 1982, respondent Pilipinas Bank extended Irrevocable Stand-by LC No. 82/408-HO in the amount of P4,400,000.00 to Home Construction-Joint Venture, represented by Horacio Mendoza, Julio Matias, and Ramon Nacu. To secure this credit accommodation, petitioners, together with two other couples, executed a real estate mortgage on five distinct properties in favor of the bank on June 7, 1982. The mortgage contract contained a provision stating it shall also secure the payment of the promissory note and/or other accommodations without the necessity of executing a new contract. This principal obligation was later fully paid and extinguished. The bank released the mortgages on the properties of the co-mortgagors but refused to release the mortgage on petitioners’ title despite demands.
Subsequently, on February 24, 1983, a loan accommodation under letters of credit was secured by a Joint Venture of JBS Construction, Inc. (represented by Jose B. Sahagun) and P.I. Construction and Services Co., Inc. (represented by petitioner Ramon Nacu). For this transaction, Jose Sahagun and Ramon Nacu, as executive officers, executed a Continuing Security Agreement and trust receipts in favor of the bank. The bank refused to cancel the mortgage on petitioners’ property, claiming it also secured this 1983 JBS-PI Construction Joint Venture loan. Petitioners filed an action for cancellation of the encumbrance. The trial court ruled in favor of the petitioners, ordering the bank to release the mortgage. The Court of Appeals reversed the trial court’s decision, prompting this petition.

ISSUE

The core issue is whether the real estate mortgage executed on June 7, 1982, to secure the loan of Home Construction-Joint Venture, was extended by virtue of its comprehensive provision to cover the separate and distinct 1983 loan obligation of the Joint Venture of JBS Construction, Inc. and P.I. Construction and Services Co., Inc., for which petitioner Ramon Nacu signed as a corporate officer.

RULING

The Supreme Court GRANTED the petition, REVERSED the decision of the Court of Appeals, and REINSTATED the trial court’s decision ordering the bank to release the encumbrance on TCT No. 276891.
The Court held that the 1982 real estate mortgage did not secure the 1983 loan transaction. The 1983 loan was a distinct obligation contracted by different entities (JBS Construction, Inc. and P.I. Construction and Services Co., Inc., under a Joint Venture), not by the original mortgagor, Home Construction-Joint Venture. The comprehensive clause in the mortgage contract could not be stretched to cover obligations of a completely different debtor. Petitioner Ramon Nacu signed the 1983 Continuing Security Agreement and trust receipts in his capacity as a corporate officer of P.I. Construction, not in his personal capacity as a mortgagor. His wife, Lourdes Nacu, a co-owner of the mortgaged property, was not a party to the 1983 agreements. The Court emphasized that a contract of surety or mortgage is strictly construed and cannot be extended by implication. Any ambiguity in the contract, prepared by the bank, must be construed against the drafter. The bank’s refusal to cancel the mortgage was an attempt to collect a debt without a duly constituted mortgage for that specific obligation.