Philippine National Bank v. Court of Appeals
REITERATIONFacts
The Antecedents: Manuel de los Santos obtained a loan from Philippine National Bank (PNB) secured by a mortgage on a parcel of agricultural land. Consuelo Yu filed a complaint against de los Santos and PNB, alleging she was the absolute owner of the land. Yu claimed de los Santos, through fraud and misrepresentation, executed an affidavit stating the land, though declared in Yu's name, was owned by his deceased father. Based on this affidavit, a new tax declaration was issued in de los Santos' name, who then mortgaged the land to PNB. Procedural History: The Regional Trial Court (RTC) declared Consuelo Yu the lawful owner, annulled the mortgage, and ordered de los Santos to pay PNB the loan amount. The RTC also held de los Santos and PNB jointly and severally liable for attorney's fees and costs. The Court of Appeals (CA) affirmed the RTC decision in toto. The Petition: PNB filed a petition for review, alleging the CA erred in not considering testimonies that raised doubts, in not passing upon the issue of inheritance, in not declaring PNB a mortgagee in good faith, and in holding PNB jointly and severally liable for attorney's fees and costs.
Issue(s)
Whether the Court of Appeals erred in not considering testimonies that raised doubts. Whether the Court of Appeals erred in not passing upon the issue of inheritance of the subject property by respondent's husband. Whether the Philippine National Bank should be declared a mortgagee in good faith. Whether PNB should be held jointly and severally liable for attorney's fees and costs.
Ruling
The Supreme Court denied the petition for review, affirming the decision of the Court of Appeals. The Court declared Consuelo Yu as the true and lawful owner of the land, annulled the mortgage contract between Manuel de los Santos and PNB, and upheld the joint and several liability of de los Santos and PNB for attorney's fees and costs.
Ratio Decidendi
On the issue of testimonies and doubts: The Court reiterated the well-settled rule that factual findings of the Court of Appeals, when supported by substantial evidence, are final and conclusive. The Supreme Court's jurisdiction is limited to reviewing errors of law, not re-analyzing evidence. The Court found that the conclusions of the RTC and CA were ably supported by evidence, particularly the consistent and convincing testimony of Dr. Leticia Go Garvida, the administrator of the property. On the issue of inheritance: The Court noted that the trial court found the documentary evidence presented by Manuel de los Santos to be inconsistent and unworthy of belief. Specifically, his affidavit claimed ownership by inheritance from his father, Gregorio Chua, while a "Deed of Confirmation of Ownership" by his brothers claimed Consuelo Yu was their mother and the property was Manuel's share of her estate. The trial court found both claims untruthful, as Consuelo Yu was neither the mother nor the aunt of Manuel and his brothers, whose real mother was Cresencia de los Santos, who testified for the plaintiff and denied knowledge of the property. On the issue of PNB as a mortgagee in good faith: The Court found PNB's claim of good faith untenable. The documents submitted by de los Santos to PNB were dubious. The Tax Declaration in de los Santos' name appeared newly issued and indicated it cancelled a previous declaration in Consuelo Yu's name. This circumstance should have prompted PNB to inquire into the basis of the cancellation or require proof of conveyance from Yu. PNB failed to exercise due diligence, especially since the land was unregistered. The Court emphasized that the principle protecting innocent purchasers for value applies to registered land under the Torrens system, not unregistered land. On the issue of PNB's liability for attorney's fees and costs: The Court affirmed the appellate court's decision, which in turn affirmed the trial court's finding of liability. The award of attorney's fees and costs against PNB was a natural consequence of the determination that PNB acted in bad faith when it executed the mortgage contract over property it should have known did not belong to de los Santos. The Court found it superfluous to further elaborate on the rationale for the award of attorney's fees in solidum.
Main Doctrine
A mortgagee bank is expected to exercise due diligence in verifying the title of the mortgagor, especially in cases involving unregistered land, and cannot claim to be a mortgagee in good faith if it fails to investigate apparent discrepancies or dubious documents presented as collateral.