LAND BANK OF THE PHILIPPINES v. RAMOS [G.R. No. 247868, October 12, 2022]

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LAND BANK OF THE PHILIPPINES v. RAMOS

[G.R. No. 247868, October 12, 2022]

THIRD DIVISION, INTING, J.

 

Mortgagee in Bad Faith; Higher Degree of Diligence Required of Banks; Registered Land; Special Power of Attorney; Void Agency; Cooperative Loans; Void Real Estate Mortgage; Ocular Inspection; Solidary Liability; Moral and Exemplary Damages

 

Where the mortgagee is a bank or other institution engaged in the business of extending credit secured by real property, the rule on innocent mortgagees for value is applied more strictly than to a private individual. Banking being a business affected with public interest, and banks being presumed familiar with land-registration rules and practices, they are held to a higher degree of diligence, care, and prudence in dealing with registered land, even land whose title appears clean on its face. A bank may not rest on the facial regularity of the certificate of title or of a special power of attorney presented to it; it must investigate and verify the true ownership and status of the property, ascertain the genuineness of the title and of the instruments of authority relied upon, and cause an ocular inspection to confirm the identity and possession of the property and the continuing existence and scope of the agent's authority. Where irregularities on the face of the documents themselves would have prompted a prudent bank to inquire further, the failure to do so, followed by acceptance of a mortgage executed under a void or lapsed authority, constitutes negligence amounting to bad faith, defeats the defense of mortgagee in good faith, renders the mortgage void as to the non-consenting owner, and exposes the bank to solidary liability for the resulting damages.

 

Respondent Pilar L. Ramos and her husband Juan C. Ramos were the registered owners of a 500-square-meter parcel of land in Valenzuela. Juan had died on November 10, 1985. 

In 1998, Pilar obtained a PHP 200,000.00 loan arrangement connected with Parada Consumer and Credit Cooperative, Inc. (PCCCI), whose officers dealt with petitioner Land Bank of the Philippines on the cooperative's behalf. Respondents alleged that Pilar was induced to sign documents and to surrender her owner's duplicate title. 

A Special Power of Attorney dated December 5, 1998 purportedly authorized PCCCI to lease, mortgage, sell, or otherwise dispose of the property. The SPA bore what appeared to be the signatures of both Pilar and Juan — even though Juan had by then been dead for thirteen years — and reflected only one community tax certificate for what should have been two signatories. 

On January 11, 1999, a Deed of Real Estate Mortgage over the property was executed to secure PCCCI's own loan obligations to Land Bank, using the December 5, 1998 SPA as the source of authority. Land Bank accepted the property as collateral and presented the SPA to the Registry of Deeds without further inquiry. 

After her loan was paid, Pilar requested her title in 2001 and discovered the mortgage. When PCCCI later defaulted, Land Bank sought to foreclose. Respondents sued to annul the SPA and the mortgage and for damages; PCCCI failed to answer and was declared in default. The Regional Trial Court declared the SPA and the mortgage void, ordered release of the title, and awarded moral damages and attorney's fees. The Court of Appeals affirmed with modification, additionally awarding exemplary damages. Land Bank elevated the case to the Supreme Court. 

 

Whether a bank dealing with registered land offered as collateral is required to observe a higher degree of diligence than an ordinary mortgagee in good faith.

YES. The Court reiterated that when the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for value is applied more strictly. Because banks are in the business of extending loans secured by real estate mortgage, they are presumed to be familiar with the rules on land registration, and because banking is impressed with public interest, they are expected to be more cautious and to exercise a higher degree of diligence, care and prudence than private individuals in their dealings, even those involving registered lands.

 

 

Whether the bank could rely solely on the face of the certificate of title and the special power of attorney presented to it.

NO. Banks may not simply rely on the face of the certificate of title. They cannot assume that, simply because the title offered as security appears free of any encumbrance or lien, they are relieved of the responsibility of taking further steps to verify the title and inspect the properties to be mortgaged. Standard practice before approving a loan is to send representatives to the property offered as collateral to assess its actual condition, verify the genuineness of the title, and investigate who are its real owners and actual possessors. 

Land Bank failed to look for or verify the whereabouts of the registered owner when it did not find her at the property, and it dispensed with requiring the deceased co-owner's appearance, treating one signature and a facially defective SPA — bearing only one community tax certificate for two supposed signatories — as sufficient. These irregularities should have already prompted it to further inquire into and investigate the authority of the cooperative to mortgage the property.

 

 

Whether a real estate mortgage executed under a special power of attorney that one of the named principals could not possibly have signed is valid and binding on the registered owner.

NO. Juan having died on November 10, 1985, thirteen years before the SPA was purportedly executed on December 5, 1998, his signature on the SPA was physically impossible, rendering the SPA void. The Real Estate Mortgage of January 11, 1999 having been executed on the strength of that void SPA, it was likewise null and void and unenforceable against the registered owners.

 

 

Whether the bank is solidarily liable with the cooperative for moral damages, exemplary damages, and attorney's fees.

YES. Finding that Land Bank was not a mortgagee in good faith because it ignored the warning signs — the absent registered owner, the impossibility of the deceased co-owner's signature, and the missing community tax certificate — all of which should have cautioned it against hastily accepting the property, the Court affirmed the ruling holding Land Bank solidarily liable with the cooperative for PHP 50,000.00 moral damages, PHP 50,000.00 exemplary damages, and PHP 30,000.00 attorney's fees.

 

DISPOSITION: The Petition was DENIED and the Decision and Resolution of the Court of Appeals AFFIRMED: the Special Power of Attorney and the Real Estate Mortgage remain declared void, the owner's duplicate title is to be released to respondents, and Land Bank remains solidarily liable with the cooperative for moral damages, exemplary damages, and attorney's fees as awarded.




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