G.R. No. L-13063; April 30, 1959
Felix de Villa, plaintiff-appellant, vs. Cesario A. Fabricante, et al., defendants-appellees.

FACTS

Plaintiff Felix de Villa filed an action in the Court of First Instance of Camarines Sur to foreclose a mortgage executed by defendant Cesario A. Fabricante covering two parcels of land. After procedural delays and a default declaration against the defendants for failure to answer, the trial court rendered a decision. It ordered Cesario A. Fabricante to pay the sum of P16,666.66 (as amended) with 6% annual interest from April 18, 1944, and upon failure to pay within 90 days, to have the property under Transfer Certificate of Title No. RT-29 (50) sold. However, the court did not decree the foreclosure of the mortgage on the property under Transfer Certificate of Title No. 15, as it had been sold to spouses Jose Jacob and Cecilia Baduria, who were not made parties to the case. The trial court also held that only Cesario was liable for the debt, not his wife Maria G. de Fabricante, as the presented authority appeared limited to mortgaging her property, not contracting the obligation in her name. Plaintiff appealed, and the case was certified to the Supreme Court due to the amount involved exceeding P50,000.

ISSUE

1. Whether the trial court erred in holding only Cesario A. Fabricante liable for the mortgage debt and not his wife.
2. Whether the trial court erred in applying the Ballantyne Scale of Values to reduce the liability to P16,666.66 instead of enforcing the contract sum of P150,000.
3. Whether the trial court erred in not decreeing the foreclosure of the mortgage on the property sold to the spouses Jacob and Baduria due to their non-inclusion as parties.

RULING

1. On the liability of the wife: The Supreme Court affirmed the trial court. Examining the deed of mortgage, the Court found no evidence that Cesario was authorized by his wife to contract the obligation in her name. The authority was limited to executing the mortgage on her property. Absent the presentation of the power of attorney as evidence, the presumption that the power was limited to mortgaging, not contracting the debt, stands.
2. On the amount payable and applicable currency: The Supreme Court modified the trial court’s decision. The contract stipulated a loan of P150,000, repayable within a two-year period starting April 19, 1948 (after a four-year term), which fell after the liberation of the Philippines. Following established jurisprudence (e.g., Londres vs. The National Life Insurance Company of the Philippines), obligations payable after liberation in the currency prevailing at maturity must be paid in the present legal tender (Philippine currency). Therefore, the Ballantyne Scale was inapplicable. Appellee Cesario A. Fabricante is ordered to pay P150,000 in present currency, plus 6% interest from the filing of the complaint. The Court deemed the stipulated compounding of interest unreasonable and disregarded it.
3. On the foreclosure of the property sold to third parties: The Supreme Court affirmed the trial court. Under Section 1, Rule 70 of the Rules of Court (now relevant provisions on foreclosure), all persons claiming an interest in the mortgaged premises subordinate to the mortgagee must be made defendants. Since the property under TCT No. 15 was sold to spouses Jose Jacob and Cecilia Baduria during the mortgage period (with the encumbrance annotated), they are necessary parties. Their non-inclusion bars the foreclosure decree against that specific property.
The decision was modified regarding the payable amount and interest, and affirmed in all other respects.