September 2009 - Philippine Supreme Court Resolutions
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[G.R. No. 171550 : September 30, 2009] UNITED COCONUT PLANTERS BANK (UCPB) V. NILO T. GILLERA :
[G.R. No. 171550 : September 30, 2009]
UNITED COCONUT PLANTERS BANK (UCPB) V. NILO T. GILLERA
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court dated 30 September 2009:
G.R. No. 171550 (United Coconut Planters Bank (UCPB) v. Nilo T. Gillera).
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated April 14, 2005 in CA-G.R. CV 60982, which affirmed with modification the decision of Branch 27 of the Regional Trial Court, Lapu-Lapu City, in Civil Case 0016-L.
The facts are undisputed.
Respondent Nilo T. Gillera worked as a ship captain overseas. He had a common-law wife of over 20 years in the person of Filipinas Labrado. On April 27, 1983 he came home to the Philippines for a vacation, intending to mortgage his properties. He asked Labrado about the titles but she claimed that she had misplaced them. Soon after, Labrado disappeared.
Suspicious of Labrado's actions, respondent Gillera went to the Office of the City Assessor and Registry of Deeds of Lapu-Lapu City to inquire about the deeds of his properties. He then discovered that Labrado had sold these properties to Keebing S. Dy. These properties are the following:
Respondent Gillera also learned that Labrado used a falsified Special Power of Attorney to sell the residential house, as well as Lot Nos. 450-D, 450-E and 450-F, to Dy on May 8, 1979. Dy was then able to transfer title to the properties in his name. A month after the purchase, Dy contracted a loan with petitioner United Coconut Planters Bank of �150,000.00 and gave the properties as security. When Dy failed to pay the loan, petitioner bank foreclosed the mortgaged properties.
At the public auction done pursuant to the foreclosure, petitioner bank made the highest bid, resulting in the sale of the properties to it for P294,033.32. Upon failure of Dy to redeem them, the bank consolidated ownership in its name. All of these took place without respondent Gillera's knowledge and consent.
In May 1983, respondent Gillera thus filed an action for annulment of documents, reconveyance and damages against petitioner bank, Labrado, and Dy in Civil Case 0016-L of the Regional Trial Court (RTC) of Lapu-Lapu City. Gillera alleged that the deed of sale Labrado executed in favor of Dy was null and void, as Labrado had no authority to sell the properties. He also claimed that the mortgage contract between Dy and petitioner bank was a nullity because the former did not own the properties.
Respondent Gillera also pointed out that he acquired the properties worth no less than P400.000.00 with his exclusive earnings and occupied the same together with his children from 1971. They had never been disturbed in their possession of the same. He ascribed bad faith on petitioner bank, Labrador, and Dy, all of whom connived to deprive him of his properties. He cited the haste with which they executed the series of transactions, indicating their unlawful scheme.
For her part, Labrado claimed that respondent Gillera did not exclusively own the subject properties. Half of them belonged to her, since the couple acquired such properties during the years that she lived with him as his common-law wife. She admitted that the Special Power of Attorney was falsified, but pointed to Dy as its author. As a matter of fact, Dy also swindled her when he did not share the loan proceeds with her.
Labrado related that real estate brokers introduced her to Dy in the early part of 1979. The latter proposed a joint venture with her that would require them to put up an equal value of properties as collateral for a loan. They were supposed to divide the loan proceeds of P300,000.00 equally but after he gave her P5,000.00, he went away and she could no longer find him.
On the other hand, petitioner bank averred that it accepted the properties as security for Dy's loan and approved the mortgage in good faith. The titles that Dy presented to it were in his name. Verification with the Registry of Deeds showed that he legally acquired the properties. The bank caused the mortgage to be annotated at the back of the titles and released the full amount of the loan to him. It also validly foreclosed the mortgage after Dy failed to pay the loan. He should thus be ordered to reimburse whatever amount the bank might be required to pay respondent Gillera, including the amount of the loan, should judgment be rendered against it.
After hearing, the RTC rendered judgment for respondent Gilllera. It declared the sale of the properties to Dy as fictitious and simulated, considering the tatter's admission that he did not pay any consideration for the house and lots. Labrado was also not authorized to sell the properties, as these belonged exclusively to respondent.
As for petitioner bank, the RTC found it to be a mortgagee in bad faith because it accepted the properties as security for the loan, even as it knew that Dy did not have possession of them and that they were occupied by respondent Gillera and his family. The bank failed to exercise due diligence in accepting the properties for mortgage and approving Dy's loan.
The Court of Appeals affirmed the decision of the RTC but held that, as a common-law wife. Labrado is presumed to own half of the disputed properties in accordance with then prevailing Civil Code provisions. It also noted that, except for Lot 450-G and the house, the other properties were registered in the name of both respondent and Labrado. Thus, Labrado could sell half of the properties to Dy who, in turn, could validly mortgage half of the properties to petitioner bank. Only the latter pursued the present petition for review with this Court.
The core issue in this case is whether or not petitioner bank was a mortgagee in good faith.
Petitioner bank asserts that since the properties given to it by Dy as security for the loan are registered under the Torrens System, it could rely on the titles which were clean on its face.[2] But a mortgagee, particularly a bank or financial institution whose business is impressed with public interest, is expected to exercise more care and prudence than a private individual in its dealings, even those involving registered lands. Ascertaining the actual status of properties offered to it as security for loans must be a standard and indispensable part of its operations. Surely, it cannot simply rely on an examination of a Torrens certificate to determine the subject property's loanable condition. This is not apparent in the document[3]
Indeed, the Court has taken judicial notice of the uniform practice of banks to investigate, examine, and assess the real estate offered as security for a loan. A bank cannot assume that, simply because the titles offered as security were clean of any encumbrances or lien, that it was relieved of the responsibility of taking any other step to verify the over-reaching implications should the properties be auctioned on foreclosure.[4]
Besides, petitioner bank conducted an on-the-spot investigation and found respondent and his family occupying the mortgaged properties. Despite this, it did not conduct further investigation to ascertain the nature of respondent's rights over the properties. What is more, its representative, Pedrito Uy, entertained doubts regarding the ownership of the properties. Still he recommended approval of the loan.[5] Consequently, petitioner bank cannot be deemed a mortgagee in good faith.
Finally, respondent Gillera concedes that his former common-law wife, Labrado, owned half of the subject properties and could validly transfer her share to Dy. He thus also admits that Dy could mortgage half of the properties to petitioner bank. Consequently, "respondent is agreeable to declare the mortgage valid insofar as one-half of the properties is concerned.[6]
WHEREFORE, the Court entirely AFFIRMS the Decision of the Court of Appeals.
WITNESS the Honorable Conchita Carpio Morales, Acting Chairperson, Honorable Consuelo Ynares-Santiago (designated additional member per S.O. No. 691 in lieu of Quisumbing, J., on sabbatical leave), *Diosdado M. Peralta (designated additional member per S.O. No. 711 in lieu of Brion, J., on sick leave), Mariano C. Del Castillo and Roberto A. Abad, Members, Second Division, this 30th day of October, 2009.
G.R. No. 171550 (United Coconut Planters Bank (UCPB) v. Nilo T. Gillera).
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated April 14, 2005 in CA-G.R. CV 60982, which affirmed with modification the decision of Branch 27 of the Regional Trial Court, Lapu-Lapu City, in Civil Case 0016-L.
The facts are undisputed.
Respondent Nilo T. Gillera worked as a ship captain overseas. He had a common-law wife of over 20 years in the person of Filipinas Labrado. On April 27, 1983 he came home to the Philippines for a vacation, intending to mortgage his properties. He asked Labrado about the titles but she claimed that she had misplaced them. Soon after, Labrado disappeared.
Suspicious of Labrado's actions, respondent Gillera went to the Office of the City Assessor and Registry of Deeds of Lapu-Lapu City to inquire about the deeds of his properties. He then discovered that Labrado had sold these properties to Keebing S. Dy. These properties are the following:
"1. A parcel of land (Lot 450-D of the subdivision plan (LRC) x x x situated in Looc City of Lapu-Lapu, Island of Mactan, containing an area of 1,210 square meters, more or less and covered by TCT No. 7419;
2. A parcel of land (Lot 450-E of the subd. plan (LRC) x x x situated in the Barrio of Looc, City of Lapu-Lapu, Island of Mactan, containing an area of 1,139 sq. meters, more or less; covered by TCT No. 7420;
3. A parcel of land (Lot 450-F of the subdivision plan (LRC) x x x situated in Looc City of Lapu-Lapu, Isiand of Mactan. containing an area of 570 square meters, more or less, and covered by TCT No. 9333;
4. A parcel of land (Lot 450-G of the subdivision plan (LRC) x x x situated in the Barrio of Looc, City of Lapu-Lapu. Island of Mactan, containing an area of 569 square meters, more or less, and covered by TCT No. 9370;
5. A residential house situated in Looc. Lapu-Lapu of strong materials and covered by Tax Declaration No. 00737 constructed sometime in 1973 to 1973."[1]
Respondent Gillera also learned that Labrado used a falsified Special Power of Attorney to sell the residential house, as well as Lot Nos. 450-D, 450-E and 450-F, to Dy on May 8, 1979. Dy was then able to transfer title to the properties in his name. A month after the purchase, Dy contracted a loan with petitioner United Coconut Planters Bank of �150,000.00 and gave the properties as security. When Dy failed to pay the loan, petitioner bank foreclosed the mortgaged properties.
At the public auction done pursuant to the foreclosure, petitioner bank made the highest bid, resulting in the sale of the properties to it for P294,033.32. Upon failure of Dy to redeem them, the bank consolidated ownership in its name. All of these took place without respondent Gillera's knowledge and consent.
In May 1983, respondent Gillera thus filed an action for annulment of documents, reconveyance and damages against petitioner bank, Labrado, and Dy in Civil Case 0016-L of the Regional Trial Court (RTC) of Lapu-Lapu City. Gillera alleged that the deed of sale Labrado executed in favor of Dy was null and void, as Labrado had no authority to sell the properties. He also claimed that the mortgage contract between Dy and petitioner bank was a nullity because the former did not own the properties.
Respondent Gillera also pointed out that he acquired the properties worth no less than P400.000.00 with his exclusive earnings and occupied the same together with his children from 1971. They had never been disturbed in their possession of the same. He ascribed bad faith on petitioner bank, Labrador, and Dy, all of whom connived to deprive him of his properties. He cited the haste with which they executed the series of transactions, indicating their unlawful scheme.
For her part, Labrado claimed that respondent Gillera did not exclusively own the subject properties. Half of them belonged to her, since the couple acquired such properties during the years that she lived with him as his common-law wife. She admitted that the Special Power of Attorney was falsified, but pointed to Dy as its author. As a matter of fact, Dy also swindled her when he did not share the loan proceeds with her.
Labrado related that real estate brokers introduced her to Dy in the early part of 1979. The latter proposed a joint venture with her that would require them to put up an equal value of properties as collateral for a loan. They were supposed to divide the loan proceeds of P300,000.00 equally but after he gave her P5,000.00, he went away and she could no longer find him.
On the other hand, petitioner bank averred that it accepted the properties as security for Dy's loan and approved the mortgage in good faith. The titles that Dy presented to it were in his name. Verification with the Registry of Deeds showed that he legally acquired the properties. The bank caused the mortgage to be annotated at the back of the titles and released the full amount of the loan to him. It also validly foreclosed the mortgage after Dy failed to pay the loan. He should thus be ordered to reimburse whatever amount the bank might be required to pay respondent Gillera, including the amount of the loan, should judgment be rendered against it.
After hearing, the RTC rendered judgment for respondent Gilllera. It declared the sale of the properties to Dy as fictitious and simulated, considering the tatter's admission that he did not pay any consideration for the house and lots. Labrado was also not authorized to sell the properties, as these belonged exclusively to respondent.
As for petitioner bank, the RTC found it to be a mortgagee in bad faith because it accepted the properties as security for the loan, even as it knew that Dy did not have possession of them and that they were occupied by respondent Gillera and his family. The bank failed to exercise due diligence in accepting the properties for mortgage and approving Dy's loan.
The Court of Appeals affirmed the decision of the RTC but held that, as a common-law wife. Labrado is presumed to own half of the disputed properties in accordance with then prevailing Civil Code provisions. It also noted that, except for Lot 450-G and the house, the other properties were registered in the name of both respondent and Labrado. Thus, Labrado could sell half of the properties to Dy who, in turn, could validly mortgage half of the properties to petitioner bank. Only the latter pursued the present petition for review with this Court.
The core issue in this case is whether or not petitioner bank was a mortgagee in good faith.
Petitioner bank asserts that since the properties given to it by Dy as security for the loan are registered under the Torrens System, it could rely on the titles which were clean on its face.[2] But a mortgagee, particularly a bank or financial institution whose business is impressed with public interest, is expected to exercise more care and prudence than a private individual in its dealings, even those involving registered lands. Ascertaining the actual status of properties offered to it as security for loans must be a standard and indispensable part of its operations. Surely, it cannot simply rely on an examination of a Torrens certificate to determine the subject property's loanable condition. This is not apparent in the document[3]
Indeed, the Court has taken judicial notice of the uniform practice of banks to investigate, examine, and assess the real estate offered as security for a loan. A bank cannot assume that, simply because the titles offered as security were clean of any encumbrances or lien, that it was relieved of the responsibility of taking any other step to verify the over-reaching implications should the properties be auctioned on foreclosure.[4]
Besides, petitioner bank conducted an on-the-spot investigation and found respondent and his family occupying the mortgaged properties. Despite this, it did not conduct further investigation to ascertain the nature of respondent's rights over the properties. What is more, its representative, Pedrito Uy, entertained doubts regarding the ownership of the properties. Still he recommended approval of the loan.[5] Consequently, petitioner bank cannot be deemed a mortgagee in good faith.
Finally, respondent Gillera concedes that his former common-law wife, Labrado, owned half of the subject properties and could validly transfer her share to Dy. He thus also admits that Dy could mortgage half of the properties to petitioner bank. Consequently, "respondent is agreeable to declare the mortgage valid insofar as one-half of the properties is concerned.[6]
WHEREFORE, the Court entirely AFFIRMS the Decision of the Court of Appeals.
WITNESS the Honorable Conchita Carpio Morales, Acting Chairperson, Honorable Consuelo Ynares-Santiago (designated additional member per S.O. No. 691 in lieu of Quisumbing, J., on sabbatical leave), *Diosdado M. Peralta (designated additional member per S.O. No. 711 in lieu of Brion, J., on sick leave), Mariano C. Del Castillo and Roberto A. Abad, Members, Second Division, this 30th day of October, 2009.
Very truly yours,
(Sgd.) MA. LUISA L. LAUREA
Clerk of Court
(Sgd.) MA. LUISA L. LAUREA
Clerk of Court
Endnotes:
[1] Rollo, p. 60.
[2] Petition, id. at 25-27.
[3] Philippine National Bank v. Heirs of Estunislao Militar, G.R. No. 164801, June 30, 2006. 494 SCRA 308,317.
[4] Home Bankers Savings & Trust Co. v. Court of Appeals, G.R. No. 128354, April 26, 2005, 457 SCRA 167, 184.
[5] RTC Decision, rollo, pp. 51-52: Court of Appeals Decision, id. at 67.
[6] Respondent's Comment, id. at 78.
[*] Corrected to indicate Peralta, J. as additional member per S.O. No. 711 dated 28 September 2009 vice Brion, J., who was on sick leave.
