Philippine National Bank v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Leticia de la Vina-Sepe executed a real estate mortgage in favor of Philippine National Bank (PNB) over her lot to secure a sugar crop loan. Subsequently, acting as attorney-in-fact for her brother-in-law, Romeo Alcedo, she executed an amended mortgage to include Alcedo's lot as additional collateral for Sepe's increased loan. Alcedo and Sepe verbally agreed to split the loan proceeds, but Alcedo did not receive his share. On May 12, 1970, Alcedo wrote to PNB revoking the Special Power of Attorney he had given Sepe to mortgage his lot. PNB, through its Branch Manager, advised Alcedo on May 22, 1970, that his lot had already been included as collateral for Sepe's 1970-71 loan but assured him that it would be excluded for the 1971-72 loan. On the same day, PNB advised Sepe to replace Alcedo's lot with other collateral. Despite this, Sepe obtained an additional loan, increasing her debt, with Alcedo's property still listed as collateral. Alcedo received demand letters from PNB for Sepe's outstanding obligation. Alcedo sued Sepe and PNB for collection and injunction with damages. Procedural History: During the pendency of the case, PNB initiated extrajudicial foreclosure proceedings on Alcedo's property, which was sold to PNB as the highest bidder. Alcedo amended his complaint to include the annulment of the foreclosure sale and reconveyance of the land. The trial court declared the public auction sale and certificate of sale null and void, ordered PNB to reconvey the title to Alcedo free from liens related to Sepe's loans, and awarded damages and attorney's fees. PNB appealed to the Intermediate Appellate Court (IAC), which affirmed the trial court's decision, holding that PNB was estopped from foreclosing on Alcedo's lot due to its written assurance. PNB then filed the present petition for certiorari with the Supreme Court. The Petition: PNB seeks to set aside the IAC's decision, arguing that the doctrine of promissory estoppel does not apply, that it was a mortgagee in good faith and for value, and that it adduced substantial evidence for its cross-claim against Sepe. The core issue is whether PNB validly foreclosed Alcedo's property despite notice of revocation and the bank's own assurance.
Issue(s)
Whether the Philippine National Bank (PNB) validly foreclosed the real estate mortgage on Romeo Alcedo's property. Whether PNB is bound by its written assurance to Alcedo that his property would be excluded as collateral for Leticia de la Vina-Sepe's future loan obligations. Whether the revocation of the Special Power of Attorney by Alcedo, not being in a public instrument, was valid and binding on PNB. Whether PNB acted in bad faith in proceeding with the extrajudicial foreclosure.
Ruling
The petition is denied for lack of merit. The decision of the Intermediate Appellate Court is affirmed.
Ratio Decidendi
On whether PNB validly foreclosed the real estate mortgage on Romeo Alcedo's property: The Supreme Court affirmed the appellate court's ruling that PNB could not validly foreclose on Alcedo's property. The Court found that PNB, by its written assurance dated May 22, 1970, led Alcedo to believe that his property would no longer serve as collateral for Sepe's 1971-72 sugar crop loan. This assurance was made after Alcedo had notified the bank of his intention to revoke the Special Power of Attorney granted to Sepe. The Court held that PNB, having given this assurance, could not subsequently act contrary to it without prejudice to Alcedo, who relied on this representation. Therefore, the mortgage on Alcedo's property for the 1971-72 loan was considered null and void. On whether PNB is bound by its written assurance to Alcedo: The Court held that PNB was bound by its written assurance to Alcedo. Citing the doctrine of promissory estoppel, the Court stated that when a party makes a declaration or assurance intended to influence the conduct of another, and the other party acts upon that assurance, the first party is bound by that representation. The assurance given by PNB that Alcedo's lot would be excluded as collateral for Sepe's 1971-72 loan was clear and unequivocal. The bank could not later deny this representation to the prejudice of Alcedo, who had a right to rely on it. This principle is rooted in public policy, fair dealing, good faith, and justice, aiming to prevent parties from contradicting their own acts and commitments. On whether the revocation of the Special Power of Attorney by Alcedo was valid and binding on PNB: The Court acknowledged that Article 1358 of the Civil Code requires acts concerning real property to appear in a public document. However, it reiterated established jurisprudence that a revocation of a Special Power of Attorney, even if embodied in a private writing, is valid and binding between the parties. The Court cited cases like Doliendo v. Depino and Hawaiian-Philippines Co. vs. Hernaez, emphasizing that legalization by a public writing and registration are not essential for validity between the parties but are conditions for enforceability against third persons. Therefore, Alcedo's written revocation, while not in a public instrument, was effective between him and PNB upon notice. On whether PNB acted in bad faith in proceeding with the extrajudicial foreclosure: The Supreme Court concluded that PNB acted with bad faith. The bank was aware of Alcedo's revocation of the Special Power of Attorney and had explicitly assured him that his property would be excluded as collateral for Sepe's 1971-72 loan. Despite this assurance, PNB proceeded to include Alcedo's property as collateral for that very loan and subsequently foreclosed on it. This conduct was deemed inconsistent with principles of fair dealing and good faith, especially since Alcedo had relied on the bank's promise. The extrajudicial foreclosure was therefore declared null and void ab initio.
Main Doctrine
A bank that assures a property owner in writing that his property will be excluded as collateral for a loan, and induces the owner to rely on this assurance, is estopped from foreclosing on that property for the said loan, even if the revocation of the special power of attorney to mortgage was not in a public instrument, as the bank acted in bad faith by proceeding with the foreclosure.