CASE DIGEST
Quiambao v. China
Banking Corp.
G.R. No. 238462, May
12, 2021
SECOND DIVISION, LOPEZ,
M.
Obligations and Contracts; Foreclosure; Blanket Mortgage Clause; Contract of Adhesion
Under the concept of contracts of
adhesion, contracts are interpreted strictly against the drafting party,
especially when there's ambiguity. The presence of a "blanket mortgage clause" does not
automatically guarantee that all subsequent obligations will be covered; the
wording must be explicit.
Elena R. Quiambao obtained a loan from
China Banking Corporation, secured by a Real Estate Mortgage (REM) over her
property. The REM contained a "blanket mortgage clause" stating that
it would secure current and future debts. Later, the bank initiated a foreclosure
for unpaid loans under eight promissory notes (PNs). Elena challenged the
foreclosure, claiming that the REM only covered the initial loan, and not the
subsequent loans. She also claimed she signed blank documents without
understanding, and the foreclosure was invalid.
Whether the blanket mortgage clause in
the REM secured the subsequent loans, allowing for their valid foreclosure.
NO. The Supreme Court ruled in favor of Quiambao. It
highlighted that contracts of adhesion, where one party has more power, should
be interpreted against the drafting party. While blanket mortgage clauses, also
known as dragnet clauses, can encompass both existing and future debts, the
clause's specific language must be examined meticulously to determine its
scope. The Court found that the language of the clause did not unequivocally
cover the subsequent loans linked to the eight PN.
At the trial, it was established that Elena and Daniel signed the amendments to the REM in blank. It was China Banking Corporation which drafted and prepared the standard forms on which Elena and Daniel merely affixed their signatures. Corollarily, any ambiguity in the provisions of these documents must be interpreted against China Banking Corporation, the party who prepared the contracts. Moreover, Elena's limited education and the complex nature of the transactions were considered.
Therefore, the bank cannot validly foreclose a mortgage based on non-payment of unsecured PNs. As such, the foreclosure proceedings are void.
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