HAWAIIAN PHILIPPINE CO., PLAINTIFF AND APPELLEE, VS. JOSE E. HERNAEZ, DEFENDANT AND APPELLANT.

MALCOLM, J.:


The parties to this case unite in saying that the general legal issue is
whether the time of payment of a mortgage may be extended by a parol agreement
beyond that expressed in the mortgage.

Under date of August 1, 1919, Jose E. Hernaez executed a real estate mortgage
upon a certain parcel of land in favor of Alberto Kappeler in the sum of Pl0,000
payable on August 1, 1922. On October 21, 1922, this real estate mortgage was
assigned by Kappeler to the Hawaiian Philippine Company. The holder of the
mortgage alleging that Hernaez had never paid any portion of the indebtedness,
it instituted action in the Court of First Instance of Occidental Negros against
Hernaez on two causes of action, the first to recover P10,000 claimed to be
unpaid upon the mortgage, plus interest thereon at 10 per cent per annum from
August 1, 1922, and the second to recover P404.28 paid by the plaintiff for the
account of the defendant to settle the land taxes. Hernaez set up as a special
defense that on the occasion when he paid the interest due on the mortgage, Mr.
Gemperle, as legal representative of Alberto Kappeler, agreed to extend the time
for the payment of the P10,000 for a term of two years, or until August 1, 1924.
When the case was called for trial, the plaintiff by the witnesses Hernaez and
Pitcairn, Exhibits A, B, C, D, E, F and G, and the deposition of W. Gemperle,
made out its case. The first witness called by the defense was the defendant who
attempted to testify as to a verbal understanding between himself and Mr.
Gemperle, only to be met by the objection of counsel for the plaintiff sustained
by the trial judge who ordered the testimony stricken from the record. Judgment
then followed as a matter of course in favor of the plaintiff and against the
defendant practically in the terms of the prayer of plaintiff’s complaint.

Adverting but casually to the facts and paying no attention to the second
cause of action as not here challenged, we take up for consideration the
question suggested in the introductory paragraph of this decision.

The common-law rule is to the effect that a verbal agreement to extend the
time of payment of a mortgage is binding, and suspends the right to foreclose if
founded on a good consideration and otherwise valid; but if made without
consideration, it amounts to nothing, and the mortgage may be foreclosed at any
time. (2 Jones on Mortgages, pp. 825 et seq.; 5 Wigmore on Evidence, pp. 330,
331; 19 R. C. L., 306; Goss vs. Lord Nugent, 5 B. & Ad., 58;
Goodall vs. Boardman [1880], 53 Vt., 89; Cummings vs. Arnold
[1842], 3 Metcalf, Mass., 486.)

Our local law is not greatly dissimilar in many respects to the common-law
rule relating to subsequent verbal alteration of a written contract. It is true
that article 1280 of the Civil Code provides that acts or contracts whose object
is the creation, transmission, modification, or extinction of rights which
affect real property, must be reduced to writing in a public instrument. But the
courts in a series of decisions have held that article 1280 of the Civil Code
permits a verbal agreement for the sale of real estate, and that it is not
necessary that such an agreement be evidenced by a public document. In other
words, the codal provisions do not require accomplishment of acts or contracts
in a public instrument in order to validate the act or contract but only to
insure its efficacy so that after the existence of the act or contract has been
admitted, the party bound may be compelled to execute the document. (Doliendo
vs. Depino [1909], 12 Phil., 758; Dievas vs. Acufia Co Chongco
[1910], 16 Phil., 447.) The Civil Code provision has further been modified by
section 335 of the Code of Civil Procedure, announcing the cases in which
agreements are unenforceable by action unless made in writing, and, what is of
more particular interest, by the provisions of the Land Registration Law, Act
No. 496.

A discussion of the reasons for the institution of the Torrens system and an
analysis of the Land Registration Law are not needed here. It is sufficient to
invite attention to sections 38, 47, 50, 60 and 62 of the law last mentioned.
Section 60 is peculiarly precise when providing that the owners of registered
land may mortgage the same by executing a mortgage deed, and such deed may be
extended, etc., or otherwise dealt with by the mortgagee by any form of deed or
instrument sufficient in law for the purpose. But such mortgage deed and all
instruments assigning, extending, discharging, and otherwise dealing with the
mortgage, shall be registered and shall take effect upon the title only from the
time of registration.

As the land here mortgaged is registered land, as the mortgage of Kappeler
and the assignment to the Hawaiian Philippine Company are noted as encumbrances
affecting the property, and as the plaintiff is a third party, the situation
would appear to be different than generally it is under the common-law rule. The
interests of the Philippines will be best served by a strict adherence to the
provisions of the Land Registration Law.

Conceding, however, without deciding, that the law is as claimed by the
appellant and is in the Philippines no different than in the majority of the
jurisdictions in the United States, yet defendant’s case is still fatally
defective. His answer failed to specify that the extension of time for payment
of his debt was pursuant to an oral agreement supported by a valuable
consideration. At the trial, the defendant likewise failed to make an offer to
prove the verbal agreement as made for a legal and good consideration. Unless
there was present some unusual circumstance which would permit of the
application of the doctrine of estoppel, it was incumbent upon the defendant in
his pleadings and at the trial to make the necessary allegations and the
necessary offer to show a new contract made on a good consideration like every
other contract.

We rule that a mortgage deed of registered land may only be legally extended
by a form of written instrument sufficient in law for the purpose. We rule that
a consideration is necessary for a modification of a contract such as an
agreement for the extension of time of performance of a mortgage, and that the
moving party must plead and prove such consideration.

Finding therefore no reversible error to have been committed by the trial
court, judgment is affirmed with the costs of this instance against the
appellant. So ordered.

Araullo, C. J., Johnson, Street, Avancena, Ostrand, Johns, and
Romualdez, JJ., concur.