Banate v. Philippine Countryside Rural Bank
REITERATIONFacts
1. The Antecedents: Petitioners Rosendo and Patrocinia Maglasang obtained a loan of P1,070,000.00 from Philippine Countryside Rural Bank (PCRB), secured by a real estate mortgage over properties owned by their daughter and son-in-law, Mary Melgrid and Bonifacio Cortel. The spouses Maglasang obtained two other loans from PCRB, also secured by mortgages on other properties. The spouses Maglasang and spouses Cortel sought permission from PCRB to sell the mortgaged properties, requesting their release from the mortgage, as the other loans were adequately secured. PCRB, through its branch manager, allegedly verbally agreed to this, provided the subject loan was fully paid. The properties were then sold to Violeta Banate for P1,750,000.00, and the proceeds were used to pay off the subject loan. PCRB released the owner's duplicate certificate of title to Banate, who obtained a new title, but it still carried the mortgage lien. When PCRB refused to issue a Deed of Release of Mortgage, the petitioners filed a complaint for specific performance and damages, alleging a malicious news report about the property transfer. 2. Procedural History: The Regional Trial Court (RTC) ruled in favor of the petitioners, finding the mortgage contract to be a contract of adhesion and any ambiguity to be construed against PCRB. The RTC concluded that the subject loan was fully paid, and PCRB's verbal agreement with its branch manager, Pancrasio Mondigo, to release the mortgage was valid. Consequently, the RTC ordered PCRB to execute a deed of release of mortgage and pay damages. On appeal, the Court of Appeals (CA) reversed the RTC's decision, holding that the alleged verbal agreement with Mondigo did not novate the original mortgage contract, which contained a clear cross-collateral stipulation requiring full payment of all loans before any mortgage could be released. The CA found Mondigo lacked the authority to orally amend the contract and that the release of the title was merely for annotation purposes. The petitioners, dismayed by the CA's reversal, filed the present petition for review on certiorari. 3. The Petition: The petitioners seek review of the CA's decision, arguing that their claims align with their agreement with PCRB and that they fulfilled their obligation by fully paying the subject loan, entitling them to the release of the mortgage. They contend that the cross-collateral stipulation was novated by the subsequent agreement with Mondigo. Alternatively, they argue that even if Mondigo lacked authority to novate the contract, the agreement should be considered rescinded, warranting restitution of the amount paid. The core issues presented to the Supreme Court are whether the purported agreement with Mondigo novated the mortgage contract and bound PCRB, and if not, whether Banate is entitled to restitution of the payment made.
Issue(s)
Whether the purported agreement between the petitioners and the branch manager novated the mortgage contract and is binding upon the respondent bank. Whether the buyer, Banate, can demand restitution of the amount paid for the subject properties if the new agreement is deemed rescinded.
Ruling
The Supreme Court denied the petition for review on certiorari, affirming the decision of the Court of Appeals. The Court held that the purported agreement did not novate the mortgage contract, and restitution was not warranted.
Ratio Decidendi
On the first issue of novation and the binding effect of the agreement with the branch manager: The Court ruled that the purported agreement did not novate the mortgage contract, particularly the cross-collateral stipulation. Novation requires a valid previous obligation, an agreement to a new contract, extinguishment of the old obligation, and the birth of a valid new obligation. Crucially, the Court found the second requisite lacking, as novation requires consent of all parties and proof of authority when a juridical entity is involved. The Court emphasized that corporate powers are exercised by the board of directors, and while delegation is possible, the authority of an agent to bind the corporation must be established. The petitioners failed to prove that Branch Manager Mondigo had actual or apparent authority to verbally alter the terms of the mortgage contract. The doctrine of apparent authority is determined by the principal's conduct, not the agent's acts, and requires proof that the principal clothed the agent with such power and that third parties reasonably relied on it. The Court found no evidence of PCRB's conduct that would clothe Mondigo with such authority, nor any ratification or estoppel on the part of PCRB. The Court also noted that the power to modify or nullify solemn agreements generally rests with the board of directors, and being a mere branch manager is insufficient to grant such authority, especially against an unequivocal contract provision and the bank's denial. On the second issue of restitution: The Court found no legal basis for restitution. Even assuming the purported agreement was established but not binding on the bank due to the manager's lack of authority, the prayer for restitution under Article 2154 of the Civil Code was denied. The Court clarified that Article 2154 applies when something is received without a right to demand it and was unduly delivered through mistake. In this case, the payment was not made by mistake to PCRB; rather, Banate's check was endorsed to PCRB by the payee (Mary Melgrid Cortel) to settle the subject loan. The mistake, if any, was in the perception of Mondigo's authority to alter the mortgage, not in the validity of the loan or the payment itself. Therefore, no right to recover accrued in Banate's favor as PCRB never dealt with her directly in a manner that would create an obligation to return the payment. The borrowers-mortgagors merely paid what was owed. The Court also noted that the subject loan had matured by the time the complaint was filed, negating any claim of premature payment recovery. The claim for moral damages also failed, as there was no evidence that PCRB authored the injurious publication, and no proof of damage was presented.
Main Doctrine
A branch manager's purported verbal agreement to release a mortgaged property, despite a subsisting cross-collateral stipulation (dragnet clause) in the mortgage contract, does not bind the bank due to lack of actual or apparent authority. The doctrine of apparent authority requires proof of the principal's conduct that leads third parties to reasonably believe in the agent's authority, not merely the agent's acts. Furthermore, restitution under Article 2154 of the Civil Code is not applicable when payment was not made by mistake to the bank and the loan obligation itself was valid.