SIM JANCO, APPLICANT. THE BANK OF THE PHILIPPINE ISLANDS, PETITIONER AND APPELLANT, VS. TY CAMCO SOBRINO ET AL., RESPONDENTS AND APPELLEES.

Ty
Camco Sobrino is the registered owner of two parcels of land situated
in the municipality of Rosario, Province of Pangasinan, described in
Transfer Certificates of Title Nos. 1803 and 1804.

On April
2, 1924 Ty Camco Sobrino executed a deed of first mortgage on these
parcels of land in favor of the Philippine National Bank, and the
mortgage was noted on the back of the transfer certificates of title.

On February 21, 1930, Ty Camco Sobrino executed a deed of second
mortgage on the same properties in favor of Cu Yeg Keng and Simon A.
Chan Bona, without having secured the written consent of the Philippine
National Bank. The mortgagor obtained the certificates of title from
this bank. The register of deeds for Pangasinan registered and noted on
the Transfer Certificates of Title Nos. 1803 and 1804 the second
mortgage.

Among the clauses of the mortgage it is provided:

“The
Mortgagor shall not, during the existence of this mortgage, sell, or in
any manner dispose of the mortgaged property, or incumber the same with
a second mortgage or lease it for more than a year without the written
consent of the mortgagee.

“If at any time the mortgagor
shall fail, neglect or refuse to pay any of the indebtedness hereby
secured when due, or to comply with any of the conditions and covenants
herein agree, * * *, or shall sell, dispose of, or remove, any portion
of the mortgaged property or incumber said mortgaged property with a
second mortgage without the written consent of the mortgagee, the
latter may forthwith foreclose this mortgage in accordance with law, *
* * After any condition of this mortgage has been broken, all other
obligations of whatever nature of the mortgagor to the mortgagee shall
be considered due and payable, * * *.” Subsequently a third mortgage
was given to the Bank of the Philippine Islands with a written consent
of the Philippine National Bank.

On April
14, 1931, the Philippine National Bank filed in the Court of First
Instance of Pangasinan, a petition praying that the annotation or
inscription of the second mortgage be declared null and void, and
ordered cancelled. On April 17, 1931, the Bank of the Philippine
Islands filed its petition to substitute the Philippine National Bank
as petitioner on the ground that it had acquired by purchase, all the
rights, interests, and actions, of the latter in the first mortgage.

The Court of First Instance held that the petition of the bank was
equivalent to questioning the validity of the second mortgage, which in
its judgment could only be done in an ordinary action, and not under
section 112 of the Land Registration Act (No. 496). The Bank of the
Philippine Islands brings the case to this court on appeal relying on
the first portion of the mortgage above quoted, and the second headnote
of the Philippine Industrial Company vs. El Hogar Filipino and Vallejo (45 Phil., 336).

“2.
PACT AGAINST SECOND MORTGAGES OF REALTY REGISTERED IN THE REGISTRY OF
PROPERTY UNDER THE TORRENS SYSTEM.—Where the property mortgaged is
registered in the registry of property under the Torrens system
provided by Act No. 496, as article 107 of the Mortgage Law is made
inapplicable by express provision of section 124 of said Act No. 496,
said stipulation not to make a new mortgage, not being contrary to law,
morals or public order, is valid and is, therefore, an obstacle to the
registration of subsequent mortgages in the registry of property.”

While our practice is not as clear as it should be, we believe the
Court of First Instance of Pangasinan to be correct in its holding that
the cancellation of the second mortgage on the registry of property
involves the validity of the second mortgage, a question not within the
purview of the register of deeds. But, at the request of the parties we
will not stop by disposing of the case on the technical ground of
pleading, but proceed to consider the case on its merits.

The mortgage contract should be read in its entirety. (Cañizares Hiva vs. Philippine Trading Co., 4 Phil., 74; Hibberd vs. Estate of McElroy, 25 Phil., 164; Barretto vs. Santa Marina, 26 Phil., 200; Ignacio vs. Martinez and Martinez, 33 Phil., 576; and Hanlon vs.
Haussermann and Beam, 40 Phil., 796.) If so read, it is at once seen
that while the making of the second mortgage except with the written
consent of the mortgagee is prohibited, the contract continues and
states the penalty for such a violation, namely, it gives to the
mortgagee the right to immediately foreclose the mortgage. It does not
give the mortgagee the right to treat the second mortgage as null and
void.

It is also to be noted that this case is a marked
example of the inadvisability of relying upon a headnote. If the
decision of the Philippine Industrial Company vs. El Hogar Filipino and Vallejo, supra,
is read with care it will be seen at once that the headnote goes
further than the decision and is therefore incorrect. We are of the
opinion that the second mortgage is valid, which opinion renders it
unnecessary to consider the question as to whether the bank, by
delivering the certificate of title to the mortgagor, with a view of
having the second mortgage registered, is not estopped from complaining
of the execution of the second mortgage.

The orders of the Court of First Instance of Pangasinan are affirmed with costs against the appellant. So ordered.

Avanceña, C. J., Street, Villamor, Ostrand, Villa-Real, Abad Santos, Vickers, Imperial, and Butte, JJ., concur.