Parcon-Song v. Parcon
REITERATIONFacts
The Antecedents: Spouses Joaquin and Lilia Parcon obtained loans from Maybank Philippines, Inc. (Maybank) in 1995, mortgaging a parcel of land registered in Lilia's name. The Parcon Spouses defaulted in 2001, leading to the mortgage's foreclosure, with Maybank emerging as the highest bidder. Julie Parcon-Song, daughter of the Spouses, filed a complaint seeking to annul the title, mortgage, and foreclosure proceedings, claiming she was the true owner, having purchased the property in 1983 and placed it in her mother's name by way of trust. She alleged the mortgage was executed without her consent. Procedural History: The Regional Trial Court (RTC) initially dismissed the case for failure to prosecute but later reinstated it. However, Julie was deemed to have waived her right to formally offer evidence due to her counsels' failure to appear. The RTC dismissed Julie's complaint, finding the mortgage valid, no trust existing, and the foreclosure proceedings valid. The Court of Appeals (CA) affirmed the RTC's decision. The case was elevated to the Supreme Court En Banc due to the constitutional issue raised. The Petition: Julie argued that the mortgage was void as she was the real owner, and her parents held the property in trust. She also contended that Maybank was not a mortgagee in good faith, as it failed to discover her alleged open and adverse possession. Furthermore, she questioned Maybank's status as a foreign corporation prohibited from owning land and its compliance with entry requirements under Republic Act No. 7721.
Issue(s)
Whether or not respondents Joaquin and Lilia Parcon are holding the property in trust for petitioner Julie Parcon-Song. Whether or not respondent Maybank Philippines, Inc. is a mortgagee in good faith. Whether or not respondent Maybank Philippines, Inc. is a foreign bank authorized by the Monetary Board to operate in the Philippine banking system; and Whether or not respondent Maybank Philippines, Inc.'s foreclosure and acquisition of the properties are authorized under the Constitution despite it being a fully-owned foreign corporation.
Ruling
The Supreme Court partially granted the petition, modifying the Court of Appeals' decision. The Court declared the mortgage valid and affirmed the lower courts' findings regarding the absence of trust and Maybank's authority to operate. However, the foreclosure sale in favor of Maybank was declared void. The prayer to transfer the property to Julie was denied.
Ratio Decidendi
On the issue of trust: The Court declined to rule on the existence of trust as it is a question of fact, improper in a Rule 45 petition which is limited to questions of law. The Court found no evidence that the lower courts' findings on this matter were unsupported or manifestly erroneous. The burden of proof rests on the party alleging a fact, and Julie failed to substantiate her claim of trust. On the issue of mortgagee in good faith: The Court affirmed the validity of the real estate mortgage. Applying the doctrine of mortgagee in good faith, a mortgage is valid if the mortgagee relied on what appears on the face of the title. While banks are held to a higher standard of diligence, the Court found that even if Maybank had investigated, it would not have discovered any anomaly, as Julie failed to prove her actual possession of the property. The title was clean, registered in Lilia Parcon's name, and lacked any annotations of trust, lien, or encumbrance. Julie's failure to prosecute her case and present evidence further weakened her claim. On the issue of Maybank's authority to operate, foreclosure, and acquisition of property; and the constitutionality of Maybank's foreclosure and acquisition: The Court declined to rule on Maybank's authority to operate as it is a question of fact, improper in a Rule 45 petition which is limited to questions of law. The Court found no evidence that the lower courts' findings on this matter were unsupported or manifestly erroneous. The Court declared Maybank's acquisition of the property void based on statutory grounds, specifically Republic Act No. 4882, which was in effect at the time of the foreclosure in 2001. This law prohibited mortgagees disqualified from acquiring lands from bidding or taking part in foreclosure sales. Although Maybank was authorized to operate in the Philippines, RA 4882 restricted its participation in foreclosure sales. The Court explicitly stated that Republic Act No. 10641, enacted in 2014 and which allowed foreign banks to participate in foreclosure sales, was not applicable to the present case as it occurred prior to its enactment. The Court also declined to rule on the constitutionality of Maybank's foreclosure and acquisition. It invoked the principle of avoidance, stating that the case could be resolved on statutory grounds without passing on the constitutionality of Republic Act No. 10641. The Court emphasized that judicial review of constitutionality is only exercised when it is the very lis mota of the case and cannot be resolved on other grounds. Since the case was decided based on the provisions of Republic Act No. 4882, the constitutional issue was rendered unnecessary.
Main Doctrine
A foreign bank's acquisition of property in a foreclosure sale is void if conducted under a law prohibiting such acquisition, even if the bank is authorized to operate in the Philippines. The constitutionality of a statute will not be passed upon if the case can be resolved on statutory grounds.