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[G.R. No. 163510.
PNB vs. ABALOS
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this
Court dated
G.R. No. 163510 (Philippine National Bank vs. Carmen Abalos and Carmencita Abalos.)
At bar is this petition for review on certiorari of the January 30, 2004 decision [1] of the Court of Appeals in CA-G.R. CV No. 53568, affirming an earlier decision of the Regional Trial Court at Lingayen, Pangasinan, Branch 38, in its Civil Case No. 17314, an action for Annulment of Documents and Cancellation of Mortgage with Damages, thereat commenced by herein respondent Carmen Abalos against petitioner Philippine National Bank and her daughter, Carmencita Abalos.
Respondent Carmen Abalos (Carmen) and her late husband Edmundo Abalos were the registered owners of a parcel of land with an area of 402.40 square meters, situated in Poblacion, Lingayen, Pangasinan and covered by TCT No. 160760. The spouses Abalos had six (6) children, namely: Federico, Narciso, Alejandro, Gertrudes, Romualdo and respondent Carmencita.
On P120,000 from the Lingayen Catholic Credit Cooperative. As security
therefor, Carmen gave TCT No. 16076 to her daughter Carmencita who later paid
off the loan in the accumulated amount of P165,000
and secured the release of TCT No. 16076, which Carmencita retained in her
possession.
On P800,000.
Apparently, Carmencita executed an Extrajudicial
Settlement with Waiver of Real Rights, therein stating that she and her
mother Carmen are the only forced and legal heirs of the late Edmundo Abalos.
Carmen discovered the fraudulent acts of her daughter only after she was informed of the loan received by Carmencita from PNB. Thereupon, Carmen filed a complaint for Annulment of Document and Cancellation of Mortgage against Carmencita and PNB. Carmen denied having signed any waiver of rights or extrajudicial settlement to the exclusion of her other children who are also legal heirs of her late husband Edmundo Abalos.
Upon trial, it was found that Carmen did not give any authority, oral or otherwise, to her daughter Carmencita to act in her behalf in connection with the mortgage of the subject property; that no document was executed by Carmen authorizing Carmencita to encumber the land; and that, from Carmencita's own admission, the execution of the deed of extrajudicial settlement with waiver of real rights was forged and the issuance of the new title (TCT No. 196621) in Carmencita's name was tainted with irregularity and fraud.
As to PNB, the trial court found that it failed to exercise care and prudence in ascertaining the fullness of Carmencita's title to encumber the subject property; that the real estate mortgage is not valid and binding upon Carmen, who is the real owner of the property; and that the land can be recovered from PNB free from any lien and encumbrance.
Accordingly, in a decision dated
Wherefore, in the light of all the considerations discussed above, judgment is hereby rendered in favor of the plaintiff and against the defendants.
1.����� Declaring the deed of extrajudicial settlement with waiver of real rights, null and void;
2.����� Declaring Transfer Certificate of Title No. 196621 in the name of defendant Carmencita Abalos null and void and without legal force and effect and hereby orders the revival of Transfer Certificate of Title No. 160760 in the name of spouses Edmundo and Carmen Abalos free from any lien and encumbrance which was entered into by Carmencita Abalos;
3.����� Declaring the real estate mortgage executed by Carmencita Abalos in favor of the defendant bank (PNB) null and void in so far as the plaintiff is concerned.
4.����� Ordering defendant, Carmencita Abalos to pay the plaintiff the sum of Ten Thousand (P10,000.00) Pesos as moral damages; Five Thousand (P5,000.00) Pesos as atty's fees and litigation expenses and to further pay the costs of the proceedings.
All other claims are denied for lack of basis.
SO ORDERED.
Displeased, Carmencita and petitioner PNB interposed separate appeals to the Court of Appeals, whereat their recourse was docketed as CA-G.R. CV No. 53568.
In its Decision dated
WHEREFORE, the appeal is hereby DISMISSED. The Decision of the Regional Trail Court of Lingayen, Pangasinan, Branch 38, is hereby AFFIRMED.
SO ORDERED.
With its motion for reconsideration having been denied by the same court in its Resolution of May 6, 2004, [4] cralaw PNB is now with this Court via the present recourse, insisting that the Court of Appeals committed reversible errors in affirming the trial court's conclusion that it failed to observe the standard required of a mortgagee bank; in imposing upon it as mortgagee bank the duty of discovering fraudulent transactions; in not respecting and protecting its lien as innocent mortgagee for value; and in declaring as null and void the real estate mortgage executed in its favor by Carmencita Abalos insofar as Carmen is concerned.
The petition cannot prosper.
PNB claims protection over its lien on the subject property as a mortgagee in good faith, contending that it could not be expected to respect the interest or right of Carmen because such interest or right is unknown to it as the same was not inscribed on Carmencita's TCT No. 196621 nor disclosed in a manner that would put innocent third parties on guard in dealing with the same property. Petitioner further argues that it has no obligation to look beyond TCT No. 196621 and investigate the title of mortgagor Carmencita appearing on the face of the same certificate.
Petitioner's arguments cannot persuade.
The general rule is, where nothing in the certificate of title indicates a cloud or vice in the ownership of the property therein described, the purchaser is not obliged to look beyond what the title shows upon its face and search for a hidden defect or inchoate right that may later on defeat his right thereto. The rule, however, admits of exceptions. A case in point is Sunshine Finance and Investment Corp. vs. Intermediate Appellate Court [5] where this Court, taking note of the fact that the mortgagee involved therein was a financing corporation, held:
Nevertheless, we have to deviate from the general rule because of the failure of the petitioner in this case to take the necessary precautions to ascertain if there was any flaw in the title of the Nolascos and to examine the condition of the property they sought to mortgage. The petitioner is an investment and financing corporation. We presume it is experienced in its business. Ascertainment of the status and condition of properties offered to it as security for the loans it extends must be a standard and indispensable part of its operations. Surely, it cannot simply rely on an examination of a Torrens certificate to determine what the subject property looks like as its condition is not apparent in the document, xxx Our conclusions might have been different if the mortgagee were an ordinary individual or company without the expertise of the petitioner in the mortgage and sale of registered land xxx.
Jurisprudence is definitive of the standards a bank should observe in its transactions involving real properties, ascertaining, as it should, the true ownership of the land being offered as loan collateral. For, although banks are not expected to make a meticulous examination of the history of the mortgagor's title, they are certainly expected to exercise a higher degree of diligence in their dealings with both registered and unregistered lands.
As correctly ratiocinated by the appellate court, petitioner PNB should have been alerted on a possible defect in Carmencita's title by the short period of time covering the cancellation of TCT No. 160760 on June 24, 1994, the application for the P800.000 loan as early as July 10, 1994, when petitioner bank made an inspection of the subject property, and finally, the constitution of the mortgage oh July 20, 1994, covering in all a period of barely one (1) month from the time Carmencita was issued a certificate of title in her name.
The instant case is akin to that of Tomas vs. Tomas [6] . There, the loan was applied for within days from the issuance of a new certificate of title, which we held to be significant and sufficient enough to provoke further inquiry into the title of the mortgagor, especially when coupled with the fact that another person other than the mortgagor was in possession of the property therein involved, as revealed by the bank's inspection of the premises. A mortgagee bank must exercise due diligence before entering into said contract. Judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises offered as collateral and to investigate who are the real owners thereof. Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands. [7] cralaw
PNB's blind reliance on Carmencita's certificate of title alone is thus inadequate to support its claim of being an innocent mortgagee in good faith. We are consistent in ruling that a purchaser or mortgagor, more so if it is a bank, as in this case, cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor's or mortgagor's title, will not make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to the discovery thereof had he acted with the measure of precaution which may be required of a prudent man in a like situation. [8] cralaw
Here, while it is true that evidence exist showing that petitioner PNB had sent its representatives to investigate the condition of the subject property, nonetheless, and as correctly observed by the trial court, the same fell short of the standard required for a mortgagee bank to ascertain the true ownership of the mortgagor. PNB's credit investigator had admitted that when he went to the premises and inspected the same, he saw somebody residing in the house standing thereon but did not bother to ask who he was and why he was staying in the premises. The credit investigator did not even ask the nearby neighbors who the owner is of the house he was then inspecting. He also failed to ascertain why mortgagor Carmencita is residing in Artacho street in Lingayen and not in the premises. True, petitioner's bank inspector made a check-up in the Provincial Assessor's Office. But he did not care at all to verify if the house and the land were in the name of mortgagor Carmencita. Further, when the inspector went to the office of the Register of Deeds, he did not attempt nor try to look for pertinent documents which served as basis for the transfer of the title in the name of respondent Carmencita Abalos.
Given the foregoing, we rule and so hold that petitioner PNB cannot be considered a mortgagee in good faith. It is not entitled to the protective mantle of the Land Registration Act, which extends only to purchasers for value and in good faith, as well as to mortgagees of the same character and description. [9] cralaw
WHEREFORE, petition is hereby DENIED.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA
ABJELINA-SORIANO
Clerk of Court
Endnotes:
[1] cralaw Penned by Associate Justice Rosmari D. Carandang and concurred in by Associate Justices Eugenio S. Labitoria and Mercedes Gozo-Dadole.
[2] cralaw Rollo, pp. 61-72
[3] cralaw Rollo, pp. 11-19.
[4] cralaw Rollo, pp. 21-22.
[5] cralaw 203 SCRA 210 [1991].
[6] cralaw 98 SCRA 280 [1980].
[7] cralaw 387 Phil. 283 [2000].
[8] cralaw 316 Phil. 863 [1995].
[9] cralaw Tomas vs. Tomas, supra
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