Republic of the
Supreme Court
FIRST DIVISION
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SPOUSES WILFREDO PALADA and BRIGIDA PALADA,* |
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G.R. No. 172227 |
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Petitioners, |
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Present: |
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- versus- |
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LEONARDO-DE CASTRO, |
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BERSAMIN, |
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VILLARAMA, JR., JJ. |
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SOLIDBANK
CORPORATION and |
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SHERIFF MAYO DELA CRUZ, Respondents. |
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Promulgated: June 29, 2011 |
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D E C I S I O N
Allegations of bad faith and fraud must be proved by
clear and convincing evidence.[1]
This Petition
for Review on Certiorari[2]
under Rule 45 of the Rules of Court assails the January 11, 2006 Decision[3]
of the Court of Appeals (CA) in CA-G.R. CV No. 84236 which dismissed the
complaint filed by the petitioners against the respondents and declared as
valid the real estate mortgage and certificate of sale. Also assailed is the
Factual
Antecedents
In February or
March 1997, petitioners, spouses Wilfredo and Brigida Palada, applied for a P3
million loan broken down as follows: P1 million as additional working
capital under the bills discounting line; P500,000.00 under the bills
purchase line; and P1.5 million under the time loan from respondent
Solidbank Corporation (bank).[5]
On P1 million as additional working
capital evidenced by a promissory note[6]
and secured by a real estate mortgage[7]
in favor of the bank covering several real properties situated in
Due to the
failure of petitioners to pay the obligation, the bank foreclosed the mortgage
and sold the properties at public auction.[9]
On August 19,
1999, petitioners filed a Complaint[10]
for nullity of real estate mortgage and sheriffs certificate of sale[11]
with prayer for damages, docketed as Civil Case No. 35-2779, against the bank
and respondent Sheriff Mayo dela Cruz (sheriff) before the Regional Trial Court
(RTC) of Santiago City, Branch 35.[12] Petitioners alleged that the bank, without
their knowledge and consent, included their properties covered by Transfer
Certificate of Title (TCT) Nos. T-225131 and T-225132,[13]
among the list of properties mortgaged; that it was only when they received the
notice of sale from the sheriff in August 1998 that they found out about the
inclusion of the said properties; that despite their objection, the sheriff
proceeded with the auction sale; and that the auction sale was done in
The bank, in its
Answer,[15]
denied the material allegations of the Complaint and averred that since
petitioners were collaterally deficient, they offered TCT Nos. T-237695,
T-237696, T-225131 and T-225132 as additional collateral;[16] that although the said properties were at
that time mortgaged to the Philippine National Bank (PNB), the bank accepted
the offer and caused the annotation of the mortgage in the original copies with
the Register of Deeds with the knowledge and consent of petitioners;[17]
and that when petitioners obligation to PNB was extinguished, they delivered
the titles of the four properties to the bank.[18]
Ruling of the
Regional Trial Court
On P3 million
to petitioners.[20] The RTC also found the bank guilty of fraud
and bad faith, thereby ordering it to pay petitioners moral and exemplary
damages, and attorneys fees. The RTC
ruled:
Furthermore, it appears
that the defendant unilaterally changed the term and condition of their loan
contract by releasing only P1M of the P3M approved loan. The defendant, in so doing, violated their
principal contract of loan in bad faith, and should be held liable therefor.
Likewise, the defendant
bank acted in bad faith when it made it appear that the mortgage was executed
by the plaintiffs on June 16, 1997, when the document was acknowledged before
Atty. German Balot, more so, when it made it appear that the mortgage was
registered with the Register of Deeds allegedly on the same date, when in truth
and in fact, the plaintiffs executed said mortgage sometime [in] March, 1997,
obviously much earlier than June 16, 1997; for, if indeed the mortgage was
executed on said date, June 16, 1997, it should have been written on the
mortgage contract itself. On the
contrary, the date and place of execution [were left blank]. Amazingly, defendant claims that it was the
plaintiffs who [had the] mortgage notarized by Atty. Balot; such claim however
is contrary or against its own interest, because, the defendant should be the
most interested party in the genuineness and due execution of material important
papers and documents such as the mortgage executed in its favor to ensure the
protection of its interest embodied in said documents, and the act of leaving
the notarization of such a very important document as a mortgage executed in
its favor is contrary to human nature and experience, more so against its
interest; hence, the claim is untrue.
Moreover, the defendant
also appears to have been motivated by bad faith amounting to fraud when it was
able to register the mortgage with the Register of Deeds at the time when the
collateral certificates of titles were still in the custody and possession of
another mortgagee bank (PNB) due also to an existing/subsisting mortgage
covering the same. Definitely, the defendant resorted to some machinations or fraudulent
means in registering the contract of mortgage with the Register of Deeds. This should not be countenanced.
Thus, on account of
defendants bad faith, plaintiffs suffered mental anguish, serious anxiety,
besmirched reputation, wounded feelings, moral shock and social humiliation,
which entitle them to the award of moral damages, more so, that it was shown
that defendants bad faith was the proximate cause of these damages plaintiffs
suffered.
x x x x
WHEREFORE, with all the
foregoing considerations, judgment is hereby rendered in favor of the
plaintiffs and against the defendant as follows:
1. DECLARING as null and void the undated real
estate mortgage between the plaintiffs and the defendant, appearing as Doc. No.
553; Page No. 29; Book No. 28; Series of 1997; (Exhibits B for the
plaintiffs, Exhibit 1 for the defendant);
2.
Likewise DECLARING as null and void the Sheriffs
Foreclosure and the Certificate of Sale, dated October 7, 1998 (Exhibit F to
F-3);
3.
ORDERING the defendant to pay the plaintiffs the
following damages:
a)
Php 1,000,000.00, moral damages;
b)
Php 500,000.00, exemplary damages; and
c)
Php 50,000.00, Attorneys fee; and
4.
ORDERING the defendant to pay the cost of litigation,
including plaintiffs counsels court appearance at Php1,500.00 each.
SO ORDERED.[21]
Ruling of the Court of Appeals
On appeal, the
CA reversed the ruling of the RTC. The
CA said that based on the promissory note and the real estate mortgage
contract, the properties covered by TCT Nos. T-225131 and T-225132 were
mortgaged to secure the loan in the amount of P1 million, and not the P3
million loan applied by petitioners.[22] As to the venue of the auction sale, the CA
declared that since the properties subject of the case are in
The List of Properties
Mortgaged printed at the dorsal side of the real estate mortgage contract
particularly includes the subject parcels of land covered by TCT No. T-225132
and TCT No. T-225131. Below the
enumeration, the signatures of [petitioners] clearly appear. The document was notarized before Notary
Public German M. Balot. We therefore
find no cogent reason why the validity of the real estate mortgage covering the
two subject properties should not be sustained.
Settled is the rule in
our jurisdiction that a notarized document has in its favor the presumption of
regularity, and to overcome the same, there must be evidence that is clear,
convincing and more than merely preponderant; otherwise the document should be
upheld. Clearly, the positive presumption of the due execution of the subject
real estate mortgage outweighs [petitioners] bare and unsubstantiated denial
that the parcels of land covered by TCT Nos. T-225132 and T-225131 were among
those intended to secure the loan of One Million Pesos. Their imputation of fraud among the officials
of [the bank] is weak and unpersuasive. x x x
x x x x
We also note why despite
the alleged non-approval of [petitioners] application for additional loan, the
owners copy of TCT Nos. T-225131 and T-225132 remained in the possession of
[the bank]. [Petitioners] claim that
they were still hoping to obtain an additional loan in the future appears to
this court as a weak explanation. The continued possession by the bank of the
certificates of title merely supports the banks position that the parcels of
land covered by these titles were actually mortgaged to secure the payment of
the One Million Peso loan.
x x x x
WHEREFORE, in view of the foregoing, the assailed decision
of the Regional Trial Court, Branch 35 of Santiago City in Civil Case No. 35-2779
is hereby ANNULLED and SET ASIDE and a new one entered:
(1)
DISMISSING the complaint filed by the plaintiffs-appellees
against the defendants-appellants; and
(2)
Declaring VALID
the questioned real estate mortgage and certificate of sale.
SO
ORDERED.[27]
On February 1,
2006, petitioners moved for reconsideration but the CA denied the same in its
Resolution dated April 12, 2006.[28]
Issues
Hence, the
present recourse, where petitioners allege that:
(A)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS
DISCRETION IN ANNULLING OR REVERSING THE FINDINGS OF BRANCH 35, REGIONAL TRIAL
COURT OF SANTIAGO CITY THEREBY IN EFFECT DISMISSING THE COMPLAINT FILED BY THE
PETITIONERS AGAINST RESPONDENTS SOLIDBANK CORPORATION AND SHERIFF MAYO DELA
CRUZ.
(B)
THE COURT OF APPEALS ERRED IN DECLARING VALID THE
REAL ESTATE MORTGAGE EXECUTED BETWEEN THE PETITIONERS AND RESPONDENT SOLIDBANK
CORPORATION AND IN SUSTAINING THE VALIDITY OF THE CERTIFICATE OF
(C)
THE COURT OF
APPEALS ERRED IN MISAPPRECIATING
THE
FINDINGS OF FACTS OF BRANCH 35,
Simply put, the
core issue in this
case is the validity
of the real estate
mortgage and the
auction sale.
Petitioners
Arguments
Petitioners echo
the ruling of the RTC that the real estate mortgage and certificate of sale are
void because the bank failed to deliver the full amount of the loan. They likewise impute bad faith and fraud on
the part of the bank in including TCT Nos. T-225131 and T-225132 in the list of
properties mortgaged. They insist that
they did not sign the dorsal portion of the real estate mortgage contract,
which contains the list of properties mortgaged, because at that time the
dorsal portion was still blank;[30]
and that TCT Nos. T-225131 and T-225132 were not intended to be included in the
list of mortgaged properties because these titles were still mortgaged with the
PNB at the time the real estate mortgage subject of this case was executed.[31]
Moreover, they claim that they delivered
the titles of these properties to the bank as additional collateral for their
additional loans, and not for the P1 million loan.[32]
Respondent
banks Arguments
The bank denies petitioners
allegations of fraud and bad faith and argues that the real estate mortgage
which was properly notarized enjoys the presumption of regularity.[33]
It maintains that TCT Nos. T-225131 and T-225132 were mortgaged as additional
collateral for the P1 million loan.[34]
Our Ruling
The petition is
bereft of merit.
The
loan contract was perfected.
Under Article
1934[35]
of the Civil Code, a loan contract is perfected only upon the delivery of the
object of the contract.
In this case,
although petitioners applied for a P3 million loan, only the amount of P1
million was approved by the bank because petitioners became collaterally
deficient when they failed to purchase TCT No. T-227331 which had an appraised
value of P1,944,000.00.[36]
Hence, on P1 million
was released by the bank to petitioners.[37]
Upon receipt of
the approved loan on P1
million.[38] As security for the P1 million loan,
petitioners on the same day executed in favor of the bank a real estate
mortgage over the properties covered by TCT Nos. T-237695, T-237696, T-237698,
T-143683, T-143729, T-225131 and T-225132. Clearly, contrary to the findings of the RTC,
the loan contract was perfected on P1 million
loan, which was the object of both the promissory note and the real estate
mortgage executed by petitioners in favor of the bank.
Claims of fraud and bad
faith
are
unsubstantiated.
Petitioners
claim that there was fraud and bad faith on the part of the bank in the
execution and notarization of the real estate mortgage contract.
We do not agree.
There is nothing
on the face of the real estate mortgage contract to arouse any suspicion of
insertion or forgery. Below the list of properties
mortgaged are the signatures of petitioners.[39] Except for the bare denials of petitioner, no
other evidence was presented to show that the signatures appearing on the
dorsal portion of the real estate mortgage contract are forgeries.
Likewise flawed
is petitioners reasoning that TCT Nos. T-225131 and T-225132 could not have
been included in the list of properties mortgaged as these were still mortgaged
with the PNB at that time. Under our
laws, a mortgagor is allowed to take a second or subsequent mortgage on a
property already mortgaged, subject to the prior rights of the previous
mortgages.[40]
As to the RTCs
finding that the x x x bank acted in bad faith when it made it appear that the
mortgage was executed by the [petitioners] on June 16, 1997, when the document
was acknowledged before Atty. German, x x x when in truth and in fact, the
[petitioners] executed said mortgage sometime in March, 1997 x x x, we find
the same without basis. A careful
perusal of the real estate mortgage contract would show that the bank did not
make it appear that the real estate mortgage was executed on
All told, we
find no error on the part of the CA in sustaining the validity of the real
estate mortgage as well as the certificate of sale.
WHEREFORE, the petition is hereby DENIED. The assailed January 11, 2006 Decision of
the Court of Appeals and its April 12, 2006 Resolution in CA-G.R. CV No. 84236 are
hereby AFFIRMED.
SO
ORDERED.
MARIANO C.
Associate Justice
WE
CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
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TERESITA J. LEONARDO-DE CASTRO Associate
Justice |
LUCAS P. BERSAMIN Associate
Justice |
MARTIN S. VILLARAMA, JR.
Associate Justice
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice
* In view of the demise of petitioner Brigada Palada, the title of the instant case should have been Wilfredo Palada and Heirs of Brigada Palada (See Transcript of Stenographic Notes [TSN] dated September 9, 2003, pp. 2-3).
[1] Cathay Pacific Airways, Ltd. v. Sps. Vazquez, 447 Phil. 306, 321 (2003).
[2] Rollo, pp. 9-21.
[3]
[4] CA rollo,
pp. 84-85.
[5] Rollo, p. 40.
[6] Records, p. 7. Although the promissory note is dated June 16, 1997, both parties admit that the promissory note was executed on March 17, 1997 (Complaint, id. at 2 and Answer, id. at 23).
[7]
[8] Rollo, pp. 23-24; TSN dated
[9]
[10] Records, pp. 1-6.
[11]
[12] Rollo, p. 34.
[13] Indicated as T-225152 and T-221512 in the Complaint; see records,
p. 2.
[14]
[15]
[16]
[17]
[18]
[19] Rollo, pp. 34-46; penned by Judge Efren M. Cacatian.
[20]
[21]
[22]
[23]
[24] SECTION 1. When a sale is made under a special power inserted in or attached to any real-estate mortgage hereafter made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following sections shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision for the same is made in the power.
[25] SECTION 2. Said sale cannot be made legally outside of the province in which the property sold is situated; and in case the place within said province in which the sale is to be made is the subject of stipulation, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof is situated.
[26] An Act To Regulate The
[27] Rollo, pp. 30-32.
[28]
[29]
[30]
[31]
[32]
[33]
[34]
[35] Art.
1934. An accepted promise to deliver
something by way of commodatum or simple loan is binding upon the parties, but
the commodatum or simple loan itself shall not be perfected until the delivery
of the object of the contract.
[36] TSN dated July 17, 2000, pp. 21-22, Direct Examination of Wilfredo Palada; TSN dated July 31, 2000, pp. 7 and 25-26, Cross-examination and Re-direct examination of Wilfredo Palada; TSN dated August 25, 2003, p. 22, Direct Examination of Julieta Ayala.
[37] TSN dated
[38]
[39] Rollo, p. 30.
[40] Cinco
v. Court of Appeals, G.R. No. 151903,
[41] Records, p. 8.
[42] Ocampo v. Land Bank of the Philippines, G.R. No. 164968, July 3, 2009, 591 SCRA 562, 571-572.