THIRD DIVISION
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LILLIAN N.
MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR., represented by their
Attorney-In-Fact, ALFREDO M. PEREZ, Petitioners, - versus - ALLIED BANKING CORPORATION, Respondent. |
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G.R. No. 171460 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and NACHURA, JJ. Promulgated: |
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CHICO-NAZARIO,
J.:
Before this Court is a Petition for
Review on Certiorari under Rule 45 of the Revised Rules of Court,
filed by petitioners Lillian N. Mercado, Cynthia M. Fekaris and Julian Mercado,
Jr., represented by their Attorney-In-Fact, Alfredo M. Perez, seeking to
reverse and set aside the Decision[1]
of the Court of Appeals dated 12 October 2005, and its Resolution[2]
dated 15 February 2006 in CA-G.R. CV No. 82636. The Court of Appeals, in its assailed Decision
and Resolution, reversed the Decision[3]
of the Regional Trial Court (RTC) of
WHEREFORE,
the appealed decision is REVERSED and SET ASIDE, and a new judgment is hereby
entered dismissing the [petitioners] complaint.[4]
Petitioners
are heirs of Perla N. Mercado (Perla).
Perla, during her lifetime, owned several pieces of real property
situated in different provinces of the
Respondent,
on the other hand, is a banking institution duly authorized as such under the
Philippine laws.
On
1. To act in my behalf, to sell, alienate,
mortgage, lease and deal otherwise over the different parcels of land described
hereinafter, to wit:
a)
Calapan, Oriental Mindoro Properties covered by Transfer Certificates
of Title Nos. T-53618 - 3,522 Square Meters, T-46810 – 3,953 Square Meters,
T-53140 – 177 Square Meters, T-21403 – 263 square Meters,
b)
c)
Personal property – 1983 Car with Vehicle Registration No. R-16381;
Model 1983; Make –
2.
To sign for and in my behalf any act of strict dominion or ownership
any sale, disposition, mortgage, lease or any other transactions including quit-claims,
waiver and relinquishment of rights in and over the parcels of land situated in
General Trias, Cavite, covered by Transfer Certificates of Title Nos. T-112254
and T-112255 of the Registry of Deeds of Cavite, in conjunction with his
co-owner and in the person ATTY. AUGUSTO F.
3.
To exercise any or all acts of strict dominion or ownership over the
above-mentioned properties, rights and interest therein. (Emphasis supplied.)
On the strength of the aforesaid SPA,
Julian, on P3,000,000.00, secured by real estate mortgage constituted
on TCT No. RT-18206 (106338) which
covers a parcel of land with an area of 805 square meters, registered with the
Registry of Deeds of Quezon City (subject property).[5]
Still using
the subject property as security, Julian obtained an additional loan from the
respondent in the sum of P5,000,000.00, evidenced by a Promissory Note[6]
he executed on
It appears,
however, that there was no property identified in the SPA as TCT No. RT – 18206 (106338) and
registered with the Registry of Deeds of
Quezon City. What was identified in
the SPA instead was the property covered by TCT No. RT-106338 registered with the Registry of Deeds of Pasig.
Subsequently,
Julian defaulted on the payment of his loan obligations. Thus, respondent initiated extra-judicial
foreclosure proceedings over the subject property which was subsequently sold
at public auction wherein the respondent was declared as the highest bidder as
shown in the Sheriff’s Certificate of Sale dated
On 23 March
1999, petitioners initiated with the RTC an action for the annulment of REM
constituted over the subject property on the ground that the same was not
covered by the SPA and that the said SPA, at the time the loan obligations were
contracted, no longer had force and effect since it was previously revoked by
Perla on 10 March 1993, as evidenced by the Revocation of SPA signed by the
latter.[8]
Petitioners
likewise alleged that together with the copy of the Revocation of SPA, Perla,
in a Letter dated 23 January 1996, notified the Registry of Deeds of Quezon
City that any attempt to mortgage or sell the subject property must be with her
full consent documented in the form of an SPA duly authenticated before the
Philippine Consulate General in New York. [9]
In the
absence of authority to do so, the REM constituted by Julian over the subject
property was null and void; thus, petitioners likewise prayed that the
subsequent extra-judicial foreclosure proceedings and the auction sale of the
subject property be also nullified.
In its
Answer with Compulsory Counterclaim,[10]
respondent averred that, contrary to petitioner’s allegations, the SPA in favor
of Julian included the subject property, covered by one of the titles specified
in paragraph 1(b) thereof, TCT No. RT-
106338 registered with the Registry
of Deeds of
On
WHEREFORE, premises
considered, judgment is hereby rendered in favor of the [herein petitioners]
and against the [herein respondent] Bank:
1. Declaring the Real Estate
Mortgages constituted and registered under Entry Nos. PE-4543/RT-18206 and
2012/RT-18206 annotated on TCT No. RT-18206 (106338) of the Registry of Deeds
of
2. Declaring the Sheriff’s
3. Ordering the defendant
Registry of Deeds of Quezon City to cancel the annotation of Real Estate
Mortgages appearing on Entry Nos. PE-4543/RT-18206 and 2012/RT-18206 on TCT No.
RT-18206 (106338) of the Registry of Deeds of
4. Ordering the [respondent]
Bank to deliver/return to the [petitioners] represented by their
attorney-in-fact Alfredo M. Perez, the original Owner’s Duplicate Copy of TCT
No. RT-18206 (106338) free from the encumbrances referred to above; and
5. Ordering the [respondent]
Bank to pay the [petitioners] the amount of P100,000.00 as for
attorney’s fees plus cost of the suit.
The other claim for damages
and counterclaim are hereby DENIED for lack of merit.[11]
Aggrieved,
respondent appealed the adverse Decision before the Court of Appeals.
In a
Decision dated
The Motion
for Reconsideration interposed by the petitioners was denied by the Court of
Appeals in its Resolution dated
Petitioners
are now before us assailing the Decision and Resolution rendered by the Court
of Appeals raising several issues, which are summarized as follows:
I WHETHER OR NOT THERE WAS A VALID
MORTGAGE CONSTITUTED OVER SUBJECT PROPERTY.
II WHETHER OR NOT THERE WAS A VALID
REVOCATION OF THE SPA.
III WHETHER OR NOT THE RESPONDENT WAS A
MORTGAGEE-IN- GOOD FAITH.
For a
mortgage to be valid, Article 2085 of the Civil Code enumerates the following
essential requisites:
Art. 2085. The following
requisites are essential to the contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a
principal obligation;
(2) That the pledgor or
mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons
constituting the pledge or mortgage have the free disposal of their property,
and in the absence thereof, that they be legally authorized for the purpose.
Third persons who are not
parties to the principal obligation may secure the latter by pledging or
mortgaging their own property.
In the case at bar, it was Julian who obtained the loan obligations from respondent which he secured with the mortgage of the subject property. The property mortgaged was owned by his wife, Perla, considered a third party to the loan obligations between Julian and respondent. It was, thus, a situation recognized by the last paragraph of Article 2085 of the Civil Code afore-quoted. However, since it was not Perla who personally mortgaged her own property to secure Julian’s loan obligations with respondent, we proceed to determining if she duly authorized Julian to do so on her behalf.
Under
Article 1878 of the Civil Code, a special power of attorney is necessary in
cases where real rights over immovable property are created or conveyed.[12] In the SPA executed by Perla in favor of
Julian on
There is no
question therefore that Julian was vested with the power to mortgage the pieces
of property identified in the SPA.
However, as to whether the subject property was among those identified
in the SPA, so as to render Julian’s mortgage of the same valid, is a question
we still must resolve.
Petitioners
insist that the subject property was not included in the SPA, considering that
it contained an exclusive enumeration of the pieces of property over which Julian
had authority, and these include only: (1) TCT
No. T-53618, with an
area of 3,522 square meters, located at Calapan, Oriental Mindoro, and
registered with the Registry of Deeds of Oriental Mindoro; (2) TCT No.
T-46810, with an area of
3,953 square meters, located at Calapan, Oriental Mindoro, and registered with
the Registry of Deeds of Oriental Mindoro; (3) TCT
No. T-53140, with an
area of 177 square meters, located at Calapan, Oriental Mindoro, and registered
with the Registry of Deeds of Oriental Mindoro; (4) TCT No. T-21403, with an area of 263 square meters, located at Calapan, Oriental Mindoro,
and registered with the Registry of Deeds of Oriental Mindoro; (5) TCT No.
Respondent,
on the other hand, mainly hinges its argument on the declarations made by the
Court of Appeals that there was no property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now
Makati); but there exists a property, the subject property herein, covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of
After
an examination of the literal terms of the SPA, we find that the subject
property was not among those enumerated therein. There is no obvious reference to the subject
property covered by TCT No. RT-18206 (106338) registered with the Registry of
Deeds of Quezon City.
There was
also nothing in the language of the SPA from which we could deduce the
intention of Perla to include the subject property therein. We cannot attribute such alleged intention to
Perla who executed the SPA when the language of the instrument is bare of any
indication suggestive of such intention.
Contrariwise, to adopt the intent theory advanced by the respondent, in
the absence of clear and convincing evidence to that effect, would run afoul of
the express tenor of the SPA and thus defeat Perla’s true intention.
In cases where the terms of the
contract are clear as to leave no room for interpretation, resort to
circumstantial evidence to ascertain the true intent of the parties, is not
countenanced. As aptly stated in the
case of JMA House, Incorporated v. Sta. Monica Industrial and
Development Corporation,[13] thus:
[T]he law is that if the
terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control. When the language of the contract is
explicit, leaving no doubt as to the intention of the drafters, the courts may
not read into it [in] any other intention that would contradict its main
import. The clear terms of the contract
should never be the subject matter of interpretation. Neither abstract justice nor the rule on
liberal interpretation justifies the creation of a contract for the parties
which they did not make themselves or the imposition upon one party to a
contract or obligation not assumed simply or merely to avoid seeming
hardships. The true meaning must be
enforced, as it is to be presumed that the contracting parties know their scope
and effects.[14]
Equally relevant is the rule that a
power of attorney must be strictly construed and pursued. The instrument will be held to grant only
those powers which are specified therein, and the agent may neither go beyond
nor deviate from the power of attorney.[15] Where powers and duties are specified and
defined in an instrument, all such powers and duties are limited and are
confined to those which are specified and defined, and all other powers and
duties are excluded.[16]
This is but in accord with the disinclination of courts to enlarge the
authority granted beyond the powers expressly given and those which
incidentally flow or derive therefrom as being usual and reasonably necessary
and proper for the performance of such express powers.[17]
Even the commentaries of renowned
Civilist
The law, which must look
after the interests of all, cannot permit a man to express himself in a vague
and general way with reference to the right he confers upon another for the
purpose of alienation or hypothecation, whereby he might be despoiled of all he
possessed and be brought to ruin, such excessive authority must be set down in
the most formal and explicit terms, and when this is not done, the law
reasonably presumes that the principal did not mean to confer it.
In this case, we are not convinced
that the property covered by TCT No.
106338 registered with the Registry of Deeds of Pasig (now
Having arrived at the conclusion that
Julian was not conferred by Perla with the authority to mortgage the subject
property under the terms of the SPA, the real estate mortgages Julian executed
over the said property are therefore unenforceable.
Assuming arguendo that the subject property was indeed included in
the SPA executed by Perla in favor of Julian, the said SPA was revoked by
virtue of a public instrument executed by Perla on
Moreover,
an agency is extinguished, among others, by its revocation (Article 1999,
New Civil Code of the Philippines).
The principal may revoke the agency at will, and compel the agent to
return the document evidencing the agency.
Such revocation may be express or implied (Article 1920, supra).
In
this case, the revocation of the agency or Special Power of Attorney is
expressed and by a public document executed on
The
Register of Deeds of Quezon City was even notified that any attempt to mortgage
or sell the property covered by TCT No. [RT-18206] 106338 located at
The
non-annotation of the revocation of the Special Power of Attorney on TCT No.
RT-18206 is of no consequence as far as the revocation’s existence and legal
effect is concerned since actual notice is always superior to constructive
notice. The actual notice of the
revocation relayed to defendant Registry of Deeds of Quezon City is not denied
by either the Registry of Deeds of Quezon City or the defendant Bank. In which case, there appears no reason why
Section 52 of the Property Registration Decree (P.D. No. 1529) should not apply
to the situation. Said Section 52 of
P.D. No. 1529 provides:
“Section 52.
Constructive notice upon registration. – Every conveyance, mortgage,
lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the
Office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive
notice to all persons from the time
of such registering, filing or entering. (Pres.
Decree No. 1529, Section 53) (emphasis ours)
It
thus developed that at the time the first loan transaction with defendant Bank
was effected on
Given that
Perla revoked the SPA as early as 10 March 1993, and that she informed the
Registry of Deeds of Quezon City of such revocation in a letter dated 23
January 1996 and received by the latter on 7 February 1996, then third parties
to the SPA are constructively notified that the same had been revoked and
Julian no longer had any authority to mortgage the subject property. Although the revocation may not be annotated
on TCT No. RT-18206 (106338), as the RTC pointed out, neither the Registry of
Deeds of Quezon City nor respondent denied that Perla’s
The final
issue to be threshed out by this Court is whether the respondent is a
mortgagee-in-good faith. Respondent
fervently asserts that it exercised reasonable diligence required of a prudent
man in dealing with the subject property.
Elaborating,
respondent claims to have carefully verified Julian’s authority over the
subject property which was validly contained in the SPA. It stresses that the SPA was annotated at the
back of the TCT of the subject property.
Finally, after conducting an investigation, it found that the property
covered by TCT No. 106338, registered
with the Registry of Deeds of Pasig (now
We are unconvinced. The property listed in the real estate
mortgages Julian executed in favor of PNB is the one covered by
“TCT#RT-18206(106338).” On the other
hand, the Special Power of Attorney referred to TCT No. “RT-106338 – 805 Square
Meters of the Registry of Deeds of
[Settled is the rule that] a
person dealing with registered lands [is not required] to inquire further than
what the
By putting blinders on its
eyes, and by refusing to see the patent defect in the scope of Julian’s
authority, easily discernable from the plain terms of the SPA, respondent
cannot now claim to be an innocent mortgagee.
Further, in the case of Abad
v. Guimba,[21]
we laid down the principle
that where the mortgagee does not directly deal with the registered owner of
real property, the law requires that a higher degree of prudence be exercised by
the mortgagee, thus:
While [the] one who buys
from the registered owner does not need to look behind the certificate of
title, one who buys from [the] one who is not [the] registered owner is
expected to examine not only the certificate of title but all factual
circumstances necessary for [one] to determine if there are any flaws in the
title of the transferor, or in [the] capacity to transfer the land. Although
the instant case does not involve a sale but only a mortgage, the same rule
applies inasmuch as the law itself includes a mortgagee in the term
“purchaser.”[22]
This principle is applied more strenuously when the mortgagee
is a bank or a banking institution.
Thus, in the case of Cruz v. Bancom Finance Corporation,[23]
we ruled:
Respondent, however, is not
an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private
individuals, it is expected to exercise greater care and prudence in its
dealings, including those involving registered lands. A banking institution is expected to exercise
due diligence before entering into a mortgage contract. The ascertainment of the status or condition of
a property offered to it as security for a loan must be a standard and
indispensable part of its operations.[24]
Hence, considering that the property being mortgaged by Julian was not his, and there are additional doubts or suspicions as to the real identity of the same, the respondent bank should have proceeded with its transactions with Julian only with utmost caution. As a bank, respondent must subject all its transactions to the most rigid scrutiny, since its business is impressed with public interest and its fiduciary character requires high standards of integrity and performance.[25] Where respondent acted in undue haste in granting the mortgage loans in favor of Julian and disregarding the apparent defects in the latter’s authority as agent, it failed to discharge the degree of diligence required of it as a banking corporation.
Thus, even
granting for the sake of argument that the subject property and the one
identified in the SPA are one and the same, it would not elevate respondent’s
status to that of an innocent mortgagee.
As a banking institution, jurisprudence stringently requires that
respondent should take more precautions than an ordinary prudent man should, to
ascertain the status and condition of the properties offered as collateral and
to verify the scope of the authority of the agents dealing with these. Had respondent acted with the required degree
of diligence, it could have acquired knowledge of the letter dated
On a last
note, we find that the real estate mortgages constituted over the subject
property are unenforceable and not null and void, as ruled by the RTC. It is best to reiterate that the said
mortgage was entered into by Julian on behalf of Perla without the latter’s
authority and consequently, unenforceable under Article 1403(1) of the Civil
Code. Unenforceable contracts are those
which cannot be enforced by a proper action in court, unless they are ratified,
because either they are entered into without or in excess of authority or they
do not comply with the statute of frauds or both of the contracting parties do
not possess the required legal capacity.[26] An unenforceable contract may be ratified,
expressly or impliedly, by the person in whose behalf it has been executed,
before it is revoked by the other contracting party.[27] Without Perla’s ratification of the same, the
real estate mortgages constituted by Julian over the subject property cannot be
enforced by any action in court against Perla and/or her successors in
interest.
In sum, we
rule that the contracts of real estate mortgage constituted over the subject
property covered by TCT No. RT – 18206
(106338) registered with the Registry of Deeds of Quezon City are
unenforceable. Consequently, the
foreclosure proceedings and the auction sale of the subject property conducted
in pursuance of these unenforceable contracts are null and void. This, however, is without prejudice to the
right of the respondent to proceed against Julian, in his personal capacity,
for the amount of the loans.
WHEREFORE, IN
VIEW OF THE FOREGOING, the instant petition is GRANTED. The Decision
dated
SO ORDERED.
|
|
MINITA V. CHICO-NAZARIOAssociate Justice |
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
Associate Justice
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson,
Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S.
PUNO
Chief Justice
[1] Penned by Associate Justice
Delilah Vidallon-Magtolis with Associate Justices Josefina Guevara-Salonga and
Fernanda Lampas-Peralta, concurring. Rollo,
pp. 44-59.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12] Paragraph 12 of Article 1878, Civil
Code of the
[13] G.R. No. 154156,
[14]
[15] Angeles
v. Philippine National Railways (PNR), G.R. No. 150128,
[16] Bank
of the Philippine
[17] Philippine National Bank v. Sta. Maria, id.
[18] Vol. II, p. 60.
[19] Rollo,
pp. 80-81.
[20] G.R. No. 145794,
[21] G.R. No. 157002,
[22]
[23] 429 Phil. 225 (2002).
[24]
[25] The General Banking Law of 2000, Section 2.
[26] Article 1403, Civil Code of the
[27] Article 1317, Civil Code of the