Fort Bonifacio Vs Yllas

were not notified of the mortgage before the release of the loan proceeds by petitioner
banks. Sec. 18 reads:

o No mortgage of any unit or lot shall be made by the owner or developer without
prior written
approval of the [HLURB]. Such approval shall not be granted unless it is shown that the
proceeds
of the mortgage loan shall be used for the development of the condominium or
subdivision
project …. The loan value of each lot or unit covered by the mortgage shall be
determined and
the buyer thereof, if any, shall be notified before the release of the loan. The buyer may,
at his
option, pay his installment for the lot or unit directly to the mortgagee who shall apply
the
payments to the corresponding mortgage indebtedness secured by the particular lot or
unit being
paid for ….
2.) A mortgage contract is, by nature, indivisible. Consequent to this feature, a debtor
cannot
ask for the release of any portion of the mortgaged property or of one or some of the
several properties mortgaged unless and until the loan thus secured has been fully paid,
notwithstanding the fact that there has been partial fulfillment of the obligation. Hence, it
is
provided that the debtor who has paid a part of the debt cannot ask for the proportionate
extinguishments of the mortgage as long as the debt is not completely satisfied.
o The situation obtaining in the case at bench is within the purview of the
aforesaid rule
on the indivisibility of mortgage. It may be that Section 18 of PD 957 allows partial
redemption of the mortgage in the sense that the buyer is entitled to pay his installment
for the lot or unit directly to the mortgagee so as to enable him - the said buyer - to
obtain title over the lot or unit after full payment thereof. Such accommodation
statutorily given to a unit/lot buyer does not, however, render the mortgage contract
also divisible. Generally, the divisibility of the principal obligation is not affected by the
indivisibility of the mortgage. The real estate mortgage voluntarily constituted by the
debtor (ASB) on the lots or units is one and indivisible. In this case, the mortgage
contract executed between ASB and the petitioner banks is considered indivisible, that
is, it cannot be divided among the different buildings or units of the Project.
Necessarily, partial extinguishment of the mortgage cannot be allowed. In the same
token, the annulment of the mortgage is an all or nothing proposition. It cannot be
divided into valid or invalid parts. The mortgage is either valid in its entirety or not
valid at all. In the present case, there is doubtless only one mortgage to speak of. Ergo,
a
declaration of nullity for violation of Section 18 of PD 957 should result to the mortgage
being nullified wholly
FBDC vs. YLLAS LENDING CORP
G.R. No. 158997
October 6, 2008
FACTS:
FORT BONIFACIO DEVELOPMENT CORP. ( FBDC) executed a lease contract in

favor of Tirreno, Inc. over a unit at the Bonifacio Global City in Taguig, Metro Manila.
The parties had the lease contract notarized on the day of its execution. Tirreno used
the leased premises for Savoia Ristorante and La Strega Bar.
Due to Tirreno’s alleged failure to settle its outstanding obligations, FBDC entered and
occupied the leased premises. FBDC also appropriated the equipment and properties
left by Tirreno pursuant to Section 22 of their Contract of Lease as partial payment for
Tirreno’s outstanding obligations.
In 2002, Yllas Lending Corporation caused the sheriff of the trial court to serve an alias
writ of seizure against FBDC. FBDC found out that in 2001, respondents filed a
complaint for Foreclosure of Chattel Mortgage with Replevin, against Tirreno, et al. In
their complaint, Yllas alleged that they lent a sum of money to Tirreno et al and in 2000
executed a Deed of Chattel Mortgage in favor of Yllas as security for the loan. The
Chattel Mortgage covered properties of the Tirreno’s restaurant and bar.
On the same day, FBDC served on the sheriff an affidavit of title and third party claim.
Despite FBDC’s service upon him of an affidavit of title and third party claim, the sheriff
proceeded with the seizure of certain items from FBDC’s premises. The sheriff delivered
the seized properties to Yllas.
FBDC questioned the propriety of the seizure and delivery of the properties to
respondents without an indemnity bond before the trial court, which decided against
FBDC. It stated that:
1. Section 22 of the lease contract between FBDC and Tirreno is void under Article
2088 of the Civil Code.
2. FBDC should have filed a separate complaint against respondents instead of filing a
motion to intervene. (The trial court quoted Bayer Phils. v. Agana )
FBDC filed a MR, which was denied. Hence this petition to review pure questions of
law.
ISSUE:
1. WON FBDC has no right of ownership over the subject properties because Section
22 of the contract of lease is void for being a pledge and a pactum commissorium;
HELD
1.NO. Respondents, as well as the trial court, contend that Section 22 constitutes
a pactum commissorium, a void stipulation in a pledge contract. FBDC, on the other
hand, states that Section 22 is merely a dacion en pago.
Section 22 of the Lease Contract between FBDC and Terrano states:
Section 22. Lien on the Properties of the Lessee
Upon the termination of this Contract or the expiration of the Lease Period without the
rentals, charges and/or damages, if any, being fully paid or settled, the LESSOR shall
have the right to retain possession of the properties of the LESSEE used or situated in
the Leased Premises and the LESSEE hereby authorizes the LESSOR to offset the
prevailing value thereof as appraised by the LESSOR against any unpaid rentals,
charges and/or damages. If the LESSOR does not want to use said properties, it may
instead sell the same to third parties and apply the proceeds thereof against any unpaid
rentals, charges and/or damages.
Articles 2085 and 2093 of the Civil Code enumerate the requisites essential to a
contract of pledge:
(1) the pledge is constituted to secure the fulfillment of a principal obligation;
(2) the pledgor is the absolute owner of the thing pledged;
(3) the persons constituting the pledge have the free disposal of their property or have
legal authorization for the purpose; and
(4) the thing pledged is placed in the possession of the creditor, or of a third person by
common agreement. Article 2088 of the Civil Code prohibits the creditor from
appropriating or disposing the things pledged, and any contrary stipulation is void.
Section 22, as worded, gives FBDC a means to collect payment from Tirreno in case of
termination of the lease contract or the expiration of the lease period and there are
unpaid rentals, charges, or damages. The existence of a contract of pledge, however,
does not arise just because FBDC has means of collecting past due rent from Tirreno
other than direct payment.
The fourth requisite, that the thing pledged is placed in the possession of the
creditor, is absent. There is non-compliance with the fourth requisite even if Tirreno’s
personal properties are found in FBDC’s real property. Tirreno’s personal properties are
in FBDC’s real property because of the Contract of Lease, which gives Tirreno
possession of the personal properties. Since Section 22 is not a contract of pledge,
there is no pactum commissorium.
On the other hand, Article 1245 of the Civil Code defines dacion en pago, or dation in
payment, as the alienation of property to the creditor in satisfaction of a debt in
money. Philippine National Bank v. Pineda held that dation in payment requires delivery
and transmission of ownership of a thing owned by the debtor to the creditor as an
accepted equivalent of the performance of the obligation. There is no dation in payment
when there is no transfer of ownership in the creditor’s favor, as when the possession of
the thing is merely given to the creditor by way of security.

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were not notified of the mortgage before the release of the loan proceeds by petitioner

banks. Sec. 18 reads:

FORT BONIFACIO DEVELOPMENT CORP. ( FBDC) executed a lease contract in

Section 22. Lien on the Properties of the Lessee

(2) the pledgor is the absolute owner of the thing pledged;

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