G.R. No. 207786 , January 30, 2017
Spouses Marcelian Tapayan and Alice Tapayan, Petitioners, vs. Ponceda M. Martinez, Respondent.

FACTS

Respondent Ponceda Martinez, the registered owner of a parcel of land (Pingol Property), constituted two mortgages over it: first, to secure her own loan from PNB, and second, to secure a ₱1,000,000.00 credit line from DBP obtained by petitioners, the Spouses Tapayan. The parties are relatives by affinity. A portion of the DBP loan proceeds was used to pay off respondent’s PNB loan. The parties executed a Deed of Undertaking stipulating that petitioners had sole liability for the DBP loan and, as security for respondent, would execute a second mortgage over their own property (Carangan Property). It further provided that if petitioners defaulted and respondent paid the loan to save her property, petitioners would owe her the amount paid, less the sum they advanced to settle her PNB obligation.
Petitioners defaulted on the DBP loan. Respondent paid DBP ₱1,180,200.10 to prevent foreclosure of her Pingol Property. When petitioners neither reimbursed her nor executed the promised mortgage over the Carangan Property, respondent filed a complaint for specific performance. Petitioners contested the suit, claiming the Deed was a falsity and that the loan was for a joint venture with respondent’s son and others.

ISSUE

Whether the petitioners are obligated to execute a mortgage over their Carangan Property in favor of the respondent pursuant to the Deed of Undertaking.

RULING

Yes, the petitioners are so obligated. The Supreme Court affirmed the lower courts’ findings that the Deed of Undertaking is valid and binding. Petitioners’ defense that the document was falsified was rejected. The Deed was notarized, enjoying the presumption of regularity, and petitioners failed to present clear and convincing evidence to overcome this presumption. Their claim of a joint venture arrangement was unsupported by credible evidence, whereas the Deed clearly established their personal obligation.
The legal logic rests on the principle of contractual obligation and the efficacy of notarized documents. The Deed of Undertaking is a clear contract whereby petitioners, in consideration of respondent mortgaging her property for their loan, agreed to secure her against loss by mortgaging their own property. Respondent fully performed her part by offering her property as collateral and, ultimately, paying the loan to redeem it. Petitioners’ default triggered their contractual duty to either reimburse her or execute the substitute mortgage. The Court modified the reimbursement amount, however, deducting the ₱65,320.55 petitioners paid to extinguish respondent’s PNB loan, as expressly stipulated in the Deed. Thus, the final amount due is ₱1,114,879.55. Petitioners were ordered to execute the mortgage over the Carangan Property unless they reimburse this sum.