GR 36524; (February, 1933) (Digest)
G.R. No. 36524 ; February 6, 1933
THE BANK OF THE PHILIPPINE ISLANDS, petitioner-appellant, vs. TY CAMCO SOBRINO, ET AL., respondents-appellees.
FACTS
Ty Camco Sobrino, the registered owner of two parcels of land, executed a first mortgage in favor of the Philippine National Bank (PNB) in 1924. In 1930, without obtaining PNB’s written consent as required by the mortgage contract, Sobrino executed a second mortgage over the same properties in favor of Cu Yeg Keng and Simon A. Chan Bona. The Register of Deeds registered and annotated this second mortgage on the certificates of title. The mortgage contract with PNB contained a clause prohibiting a second mortgage without PNB’s written consent and stipulated that a violation would give PNB the right to immediately foreclose. PNB later assigned its rights under the first mortgage to the Bank of the Philippine Islands (BPI). BPI filed a petition seeking the cancellation of the annotation of the second mortgage, arguing it was void for lack of consent.
ISSUE
Whether the second mortgage executed without the written consent of the first mortgagee (PNB/BPI) is null and void, warranting its cancellation from the certificate of title.
RULING
No. The Supreme Court affirmed the lower court’s dismissal of the petition. While the mortgage contract prohibited a second mortgage without the first mortgagee’s written consent, the stipulated consequence for violation was not the invalidity of the second mortgage, but the first mortgagee’s right to immediately foreclose. The contract, read in its entirety, did not grant the first mortgagee the power to treat a subsequent mortgage as null and void. The second mortgage remained valid. The Court also noted that reliance on a headnote from a prior case (*Philippine Industrial Company vs. El Hogar Filipino*) was misplaced, as the headnote overstated the actual ruling. The petition for cancellation under Section 112 of the Land Registration Act was improper, as it involved a question on the validity of the mortgage, which should be determined in an ordinary action.
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