The Philippine Industrial Co. v. El Hogar Filipino

Summary

This case involved a dispute over the validity of a contractual clause prohibiting second mortgages without the first mortgagee's consent. Salvador Vallejo mortgaged property to El Hogar Filipino with such prohibition, then later mortgaged the same property to Philippine Industrial Co. When the register of deeds refused to register the second mortgage and El Hogar Filipino moved to foreclose, Philippine Industrial Co. sued to invalidate the prohibiting clause. The trial court ruled the clause void, but the Supreme Court reversed, holding that under Civil Code Article 1255, parties have freedom to contract unless contrary to law, morals, or public order. Since the Mortgage Law provisions allowing subsequent mortgages despite prohibiting clauses do not apply to Torrens system properties, and no law prohibits such stipulations, the clause was valid and enforceable between the parties.