GR 94247; (September, 1991) (Digest)
G.R. No. 94247 September 11, 1991
DIONISIO MOJICA, in behalf of Spouses LEONARDO MOJICA (now deceased) and MARINA RUFIDO, petitioner, vs. HON. COURT OF APPEALS, and RURAL BANK OF YAWIT, INC., respondents.
FACTS
On February 1, 1971, spouses Leonardo Mojica and Marina Rufido obtained a P20,000.00 loan from respondent Rural Bank of Kawit, Inc., secured by a real estate mortgage over a parcel of land. The mortgage contract contained a clause stating it secured the payment of the initial loan “and such other loans or other advances already obtained or still to be obtained.” This loan was fully paid. Subsequently, on March 5, 1974, the spouses obtained a new loan of P18,000.00. The promissory note for this new loan contained a notation that it was secured by the same real estate mortgage executed in 1971. The spouses defaulted on this subsequent loan.
The bank extrajudicially foreclosed the mortgage in 1979, acquired the property as the highest bidder at the auction sale, and consolidated its ownership after the redemption period expired. After consolidation, Dionisio Mojica, the spouses’ son, attempted to make payments, which the bank accepted but treated as deposits for a possible conventional repurchase of the already foreclosed property, not as payment for the loan.
ISSUE
Whether the real estate mortgage executed in 1971 to secure the first loan validly extended to secure the subsequent loan of 1974, thereby justifying the bank’s foreclosure.
RULING
Yes. The Supreme Court affirmed the Court of Appeals’ decision, upholding the validity of the foreclosure. The legal logic rests on the interpretation of the mortgage contract as a continuing security. The 1971 mortgage expressly stipulated it secured the initial loan and “such other loans or other advances already obtained or still to be obtained.” This clause clearly manifested the parties’ intent for the mortgage to cover future indebtedness. Consequently, when the spouses obtained the P18,000.00 loan in 1974, it was automatically secured by the existing mortgage without the need for a new mortgage instrument. The notation on the promissory note merely referenced this existing security.
The Court applied the doctrine that a mortgage intended to secure future advancements is a continuing security and is not discharged by the repayment of the initial loan until all secured obligations are satisfied. Therefore, the bank’s foreclosure for the unpaid 1974 loan was valid. The payments made by Dionisio Mojica after the bank had consolidated title were correctly treated by the bank as deposits for a possible repurchase, not as loan payments, as the right of legal redemption had already lapsed.