Malayan Bank v. Cabigao
REITERATIONFacts
The Antecedents: Spouses Joseph and Jocelyn Cabigao (Spouses Cabigao), registered owners of a lot, discovered their title was cancelled and a new one issued to Rosalinda E. Techico (Techico). They found that a Deed of Absolute Sale was purportedly executed by Jocelyn Cabigao in favor of Techico, who then mortgaged the property to Malayan Bank Savings and Mortgage Bank (Malayan Bank) for P13 Million. Spouses Cabigao filed a Complaint for Annulment of Titles and Other Documents, alleging the sale and mortgage were void because Techico was not the owner, and Malayan Bank was in bad faith for failing to verify ownership. Procedural History: The Regional Trial Court (RTC) declared the deeds of sale, the new titles, and the real estate mortgage null and void. It ordered the cancellation of the new titles, reinstatement of the original titles in the Spouses Cabigao's name, and awarded damages. Malayan Bank failed to appear during the pre-trial conference, leading the RTC to allow the presentation of evidence ex parte. The RTC denied Malayan Bank's Motion for Reconsideration. The Court of Appeals (CA) affirmed the RTC's decision, finding Malayan Bank acted in bad faith and failed to discharge its affirmative defense of good faith. The CA denied Malayan Bank's Motion for Reconsideration. The Petition: Malayan Bank filed a Petition for Review on Certiorari, asserting its status as a mortgagee in good faith and reiterating its claim of having exercised due diligence in verifying Techico's identity, financial capacity, and the property's title.
Issue(s)
Whether Malayan Bank is a mortgagee in good faith. Whether the CA erred in affirming the RTC's findings despite Malayan Bank's failure to appear during pre-trial.
Ruling
The petition is DENIED. The Decision dated April 24, 2019 and the Resolution dated September 2, 2019 of the Court of Appeals in CA-G.R. CV No. 108813 are AFFIRMED. The Court reminded the banking industry to exercise utmost diligence at all times.
Ratio Decidendi
On the issue of Malayan Bank's status as a mortgagee in good faith: The Court reiterated that the ascertainment of good faith or the lack thereof is a factual matter generally outside the scope of a petition for review on certiorari under Rule 45. Factual findings of the CA, when supported by evidence and consistent with the trial court's findings, are conclusive. In this case, the evidence showed irregularities in the issuance of Techico's title, including the failure to surrender the original title of Spouses Cabigao and the use of fictitious tax clearances. The Deed of Absolute Sale was falsified, as Spouses Cabigao never sold the property. Furthermore, the person who notarized the deed lacked authority. The haste in executing the mortgage shortly after the alleged sale was a badge of bad faith. Crucially, Malayan Bank's own Inspection and Appraisal Report indicated that the property was still registered in the name of Spouses Cabigao at the time of Techico's loan application, demonstrating a failure to exercise the extraordinary diligence required of a banking institution. Therefore, Malayan Bank was not a mortgagee in good faith. On the issue of the CA affirming the RTC's findings despite Malayan Bank's failure to appear during pre-trial: The Court clarified that while Malayan Bank's failure to appear at the pre-trial conference led to the presentation of evidence ex parte and the loss of its right to adduce evidence, it did not strip it of all its rights. Malayan Bank retained the right to appeal the RTC's decision. The Court noted that Malayan Bank did avail itself of these remedies by filing a Motion for Reconsideration and a Notice of Appeal. However, as a consequence of its failure to appear, it was proscribed from seeking a modification or reversal of the assailed decision based on its own evidence, as this would allow it to regain the right to adduce evidence it had lost in the trial court. The CA correctly affirmed the RTC's findings based on the evidence presented ex parte.
Main Doctrine
Banks are expected to exercise extraordinary diligence and more care and prudence than private individuals in their dealings, even involving registered lands, due to their business being impressed with public interest. Failure to exercise such diligence, particularly in verifying ownership and title authenticity, can render them not mortgagees in good faith.