GR 137916; (December, 2004) (Digest)
G.R. No. 137916 , December 8, 2004
Development Bank of the Philippines, petitioner, vs. Court of Appeals, Elpidio O. Cucio, Spouses Jacinto Gotangco and Charity Bantug, respondents.
FACTS
Spouses Gotangco secured a loan from DBP, mortgaging seven parcels of land. They later executed a Contract to Sell these same lands to respondent Elpidio Cucio, with the purchase price to be paid directly to DBP to settle the mortgage. DBP was aware of this contract. Cucio made payments to DBP, which the bank accepted and applied to the Gotangcos’ loan. Concurrently, the Gotangcos, pursuant to a separate undertaking with DBP, substituted the original collateral with a new titled property (Lot No. 168), on which DBP annotated its mortgage. After Cucio completed his payments, DBP retained the titles to the original seven lots and refused to release them. Instead, DBP continued to demand payment from the Gotangcos and later sought to foreclose on the substituted Lot No. 168.
ISSUE
Whether DBP, having accepted full payment of the purchase price from Cucio with knowledge of the Contract to Sell, can still enforce the mortgage against the original properties or the substituted lot, and refuse the release of the titles to Cucio.
RULING
No. The Supreme Court affirmed the lower courts’ rulings in favor of Cucio. The bank’s acceptance of Cucio’s payments, with full knowledge that these were for the purchase of the mortgaged properties, constituted an implied ratification of the Contract to Sell between the Gotangcos and Cucio. By applying Cucio’s payments to the Gotangcos’ loan, DBP effectively allowed the buyer to step into the shoes of the mortgagors. Consequently, Cucio acquired an equitable right to the properties, and the mortgage lien was extinguished pro tanto to the extent of the payments received. DBP could not thereafter assert its mortgage rights over the original properties as against Cucio, the paying buyer. Furthermore, the substitution of the collateral (Lot No. 168) was for the bank’s benefit to secure the remaining loan balance, not to prejudice Cucio who had already fully paid for the original lots. The bank’s duty was to release the titles to the seven parcels upon full payment, which Cucio had satisfied. Its refusal to do so was unjustified.