GR 150197; (July, 2005) (Digest)
G.R. No. 150197 July 28, 2005
PRUDENTIAL BANK, Petitioner, vs. DON A. ALVIAR and GEORGIA B. ALVIAR, Respondents.
FACTS
Respondents-spouses Alviar mortgaged their property to petitioner Prudential Bank to secure a ₱250,000.00 loan. The real estate mortgage contained a “blanket mortgage” or dragnet clause stating it secured the stated loan “as well as those that the Mortgagee may extend to the Mortgagor and/or DEBTOR.” Respondents later obtained two additional loans: a ₱2,640,000.00 loan secured by a hold-out on a foreign currency deposit, and a ₱545,000.00 loan for Donalco Trading, Inc., where respondents were officers, which was an unsecured conversion of a temporary overdraft. When respondents paid ₱2,000,000.00, the bank applied it to other corporate obligations and proceeded to foreclose the mortgage, claiming it secured all three loans totaling over ₱1.6 million with interest.
ISSUE
Whether the dragnet clause in the real estate mortgage extends its coverage to secure the two subsequent loans obtained by the respondents.
RULING
No. The Supreme Court affirmed the lower courts’ rulings that the mortgage secured only the original ₱250,000.00 loan. The legal logic rests on the strict interpretation of dragnet clauses against the drafter, the bank. For a subsequent obligation to be secured by such a clause, it must be of the same class as the primary obligation and so related to it that the parties’ consent to be secured can be inferred. Here, the subsequent loans were not of the same class. The second loan was expressly secured by a separate hold-out on a deposit account, indicating a distinct security arrangement. The third loan was an unsecured corporate obligation of Donalco Trading, Inc., for which respondents signed merely as corporate officers, not as personal mortgagors. The Court found no evidence that the parties intended the real estate mortgage to secure these fundamentally different types of credit accommodations. The payment made by respondents was also misapplied by the bank. Therefore, the foreclosure for the aggregate amount of the three loans was invalid, as the mortgage only secured the first loan, which had been paid.