Heirs of Macalalad v. Rural Bank of Pola
REITERATIONFacts
The Antecedents: This case concerns a parcel of land originally owned by Leopoldo Constantino, Jr. After Leopoldo's death in 1995, it was allegedly sold to spouses Remigio and Josephine Pimentel. The Spouses Pimentel then mortgaged this land to the Rural Bank of Pola, Inc. to secure a loan. Upon their failure to repay the loan, the bank foreclosed the mortgage, becoming the highest bidder and subsequently obtaining a new Transfer Certificate of Title (TCT) in its name. The heirs of Paz Macalalad, who is Leopoldo's sole surviving heir, initiated a case to nullify the bank's title, alleging that the sale to the Spouses Pimentel was fraudulent, as Leopoldo had already passed away at the time of the purported sale. Procedural History: The heirs of Paz Macalalad, substituted for Paz Macalalad after her death, filed a complaint for the declaration of nullity of TCT No. T-117484 with the Regional Trial Court (RTC) of Calapan City. The RTC dismissed the complaint, finding that the Rural Bank of Pola, Inc. acted as a mortgagee in good faith and had complied with standard procedures in verifying ownership. The petitioners appealed this decision to the Court of Appeals (CA), which affirmed the RTC's ruling. The CA found that the bank had conducted an ocular inspection and verified the title with the Register of Deeds, thus exercising due diligence. The petitioners then filed the present petition for review on certiorari with the Supreme Court. The Petition: The petitioners seek reversal of the Court of Appeals' decision and resolution through a petition for review on certiorari under Rule 45 of the Rules of Court. They raise two main issues: first, whether the Court of Appeals erred in affirming the legality of the deed of sale between Leopoldo Constantino, Jr. and the Spouses Pimentel, given that Leopoldo was deceased at the time of its execution; and second, whether the Court of Appeals erred in affirming that the respondent bank acted in good faith and was an innocent mortgagee for value. The petitioners argue that the bank was negligent in its duty to investigate the validity of the Spouses Pimentel's title.
Issue(s)
Whether the Court of Appeals erred in affirming the legality of the deed of sale purportedly executed between Leopoldo Constantino, Jr. and Spouses Pimentel, considering the principle of nemo dat quod non habet and the potential exception for innocent purchasers for value. Whether the Court of Appeals erred in affirming that the respondent bank acted in good faith and was an innocent mortgagee for value, taking into account the standard of care expected of banks and the factual findings of the lower courts.
Ruling
The petition is denied. The Decision and Resolution of the Court of Appeals are affirmed. Respondent bank's General Manager, Leonor L. Hidalgo, is ordered to pay an additional fine of ₱2,000.00 for her repeated failure to heed the directives of the Court, and is sternly warned that a repetition of the same or similar act will be dealt with more severely.
Ratio Decidendi
On the issue of the legality of the Deed of Sale: The Court noted that the Spouses Pimentel, from whom the respondent bank derived its title, were indispensable parties to the case, yet they were not impleaded by the petitioners. While the Court acknowledged the principle of nemo dat quod non habet (no one can give what one does not have), which would render a forged deed of sale incapable of transferring ownership, it also recognized the exception for innocent purchasers for value. The Court stated that even assuming the deed of sale was forged, it could still give rise to a valid title in favor of the respondent bank if the latter was a mortgagee in good faith. On the issue of the respondent bank acting in good faith and as an innocent mortgagee for value: The Court reiterated that the issue of good faith is a question of fact, which is generally beyond the scope of a Rule 45 review. It further emphasized that when the CA affirms the factual findings of the RTC, these findings become conclusive and binding upon the Supreme Court, and no exceptions were present in this case. The Court then proceeded to resolve the issue on the merits, noting that the burden of proving good faith lies with the party asserting it. It stressed that while a person dealing with registered land may rely on the certificate of title, this rule does not strictly apply to banks, which are expected to exercise greater care and prudence. The Court found that the respondent bank, as a mortgagee-bank, had discharged its burden by conducting an ocular inspection through a representative and verifying the title with the Register of Deeds, thus acting as a mortgagee in good faith.
Main Doctrine
A forged deed of sale, while generally not a root of a valid title, can be the source of a valid title in favor of an innocent purchaser for value or a mortgagee in good faith, provided that the bank exercised due diligence in verifying the mortgagor's title and the property's condition.