Spouses Co and Liu Hun Kun v. Court of Appeals and Spouses Co Ling and Ngo Eng
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns a real estate mortgage executed by spouses Rufino Co Ling and Ngo Eng, along with spouses Bonifacio Co and Liu Hun Kun, over nine parcels of land. Rufino Co Ling and Ngo Eng allege that they signed the mortgage deed in blank, under the assurance from Bonifacio Co that only his share would be mortgaged, whereas the entire nine parcels were mortgaged to secure a substantial corporate loan. This led to the foreclosure of the mortgage and the subsequent sale of Lot No. 3208, one of the nine parcels, to spouses David Lio and Victoria Ong Lio. 2. Procedural History: The private respondents, spouses Rufino Co Ling and Ngo Eng, filed a complaint seeking the cancellation of Transfer Certificate of Title No. C-14429 registered in the names of spouses David Lio and Victoria Ong Lio, recovery of the property, and damages. The Regional Trial Court initially dismissed the complaint, finding that the mortgage deed was not signed in blank, based on the testimony of a private document examiner. However, upon appeal, the Court of Appeals reversed this decision, ordering the cancellation of the title and the issuance of a new one in favor of the Co Ling spouses, along with moral damages and attorney's fees. The petitioners' motions for reconsideration were denied, leading to the present petitions for review on certiorari. 3. The Petition: The petitioners, spouses Bonifacio Co and Liu Hun Kun, and spouses David Lio and Victoria Ong Lio, have filed separate petitions for review on certiorari under Rule 45 of the Rules of Court. They argue that the Court of Appeals promulgated its decision in violation of its own Revised Internal Rules, that its findings of fact are contrary to those of the trial court and unsupported by evidence, and that the appellate court erred in disregarding the trial court's assessment of witness credibility. Furthermore, they contend that the Court of Appeals disregarded the doctrine of indispensable parties by not impleading Republic Bank, the vendor of Lot No. 3208, and that David Lio and Victoria Ong Lio were buyers in good faith. The core of their argument revolves around the validity of the mortgage deed and the good faith of the subsequent purchasers.
Issue(s)
Whether the Court of Appeals committed grave abuse of discretion by violating its own Revised Internal Rules. Whether the findings of fact of the Court of Appeals are contrary to those of the trial court, and consequently, whether the deed of real estate mortgage was validly executed. Whether spouses David Lio and Victoria Ong Lio were purchasers in good faith of Lot No. 3208. Whether the Republic Bank was an indispensable party to the case.
Ruling
The petitions are DENIED. The appealed decision of the Court of Appeals is AFFIRMED. The mortgage contract is not valid insofar as it purportedly mortgaged Co Ling's one-half share of the nine parcels of land because his consent was vitiated by fraud. Spouses David Lio and Victoria Ong Lio were not purchasers in good faith. The Republic Bank was not an indispensable party.
Ratio Decidendi
On the alleged violation of the Court of Appeals' Internal Rules: The Court held that the petitioners' contention was without merit. The effectiveness of the Court of Appeals' Revised Internal Rules was subject to the Supreme Court's approval. The Supreme Court acted on the rules by disapproving certain sections and approving others on October 20, 1988. Since the CA decision was promulgated on October 17, 1988, prior to the final effectiveness of the rules, there was no violation. The Court emphasized that while the CA has the authority to adopt internal rules, these are subject to the Supreme Court's supervision and approval. On the conflicting findings of fact and the validity of the mortgage deed: The Court found that a review of factual findings was warranted due to the conflict between the RTC and the CA. The CA correctly gave more weight to the NBI's questioned documents report, which concluded that the signatures of Rufino Co Ling and Ngo Eng were affixed after the typewritten entries were made, indicating the deed was not signed in blank. This contradicted the RTC's reliance on a private document examiner whose credibility was undermined by an affidavit admitting to duplicity for self-serving ends. The Court found the NBI's report to be impartial and competent, unlike the private examiner's report. The Court reiterated that the NBI's findings, which were based on scientific criminalistics examination, were more reliable than the private examiner's report, which relied on observations alien to the required examination. The Court noted that the trial judge ignored the NBI report and opted for the private examiner's observations, which was a reversible error. The Court concluded that the mortgage contract was invalid regarding Co Ling's share due to fraud, as his consent was vitiated. On whether spouses David Lio and Victoria Ong Lio were purchasers in good faith: The Court disagreed with the trial court's finding of good faith. It highlighted that David Lio was the nephew of Liu Hun Kun and an employee of Bonifacio Co. The circumstances surrounding the assignment of the right to buy Lot No. 3208 from Bonifacio Co to David Lio, particularly Bonifacio Co's unilateral actions in the compromise agreement and his failure to inform Rufino Co Ling, indicated a concerted effort to deprive Rufino Co Ling of his rightful share. The Court found David Lio's claim of acquiring the lot from his own resources less credible than his participation in Bonifacio Co's scheme. On whether the Republic Bank was an indispensable party: The Court ruled that the Republic Bank was not an indispensable party. The Court reasoned that since Co Ling's share of the property was effectively not mortgaged due to fraud, the bank did not acquire that half. Therefore, the bank had no interest in the controversy between Co Ling and Co regarding the fraudulent transfer. An indispensable party is one whose interest is so vital that a final decree cannot be rendered without their presence, which was not the case for the Republic Bank in this dispute over the validity of the mortgage and subsequent transfer.
Main Doctrine
The Court of Appeals did not commit reversible error in giving full weight and credit to the NBI's questioned documents examination report over that of a private practitioner whose professional integrity was placed in doubt, especially when the latter's report was based on observations alien to the type of examination required. Consequently, the mortgage contract was deemed invalid as the consent of one of the mortgagors was vitiated by fraud.