Case Digest (G.R. No. 200468) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
This case arose from a petition for review on certiorari involving Macaria Arguelles and the heirs of Petronio Arguelles as petitioners against Malarayat Rural Bank, Inc. as the respondent. The case began when Fermina M. Guia was the registered owner of Lot 3, an agricultural land in Barrio Pinagkurusan, Alitagtag, Batangas, covering an area of 4,560 square meters, as evidenced by Original Certificate of Title No. P-12930. On December 1, 1990, Fermina sold a portion of this land, measuring approximately 1,350 square meters, to spouses Petronio and Macaria Arguelles. Although they acquired possession immediately, the deed of sale was neither registered nor annotated on the title. Fermina later instructed her son, Eddie Guia, and his wife, Teresita, to subdivide the property into three lots and secure separate titles. Eventually, the Guia spouses were able to obtain titles for Lots 3-A, 3-B, and 3-C, with Lot 3-C being mortgaged to Malarayat Rural Bank to secure a loan of ₱240,00
Case Digest (G.R. No. 200468) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Property Background and Title
- Fermina M. Guia was the registered owner of Lot 3, a 4,560‑square‑meter parcel of agricultural land located in Barrio Pinagkurusan, Alitagtag, Batangas.
- The original evidence of ownership is embodied in Original Certificate of Title (OCT) No. P‑12930, issued by the Register of Deeds of Batangas.
- The Unregistered Deed of Sale and Subsequent Subdivision
- On December 1, 1990, Fermina M. Guia sold the south portion (approximately 1,350 square meters) of the land to spouses Petronio and Macaria Arguelles.
- The spouses Arguelles took possession of the land immediately.
- The Deed of Sale, however, was not registered with the Register of Deeds nor annotated on OCT No. P‑12930.
- Concurrently, Fermina M. Guia instructed her son Eddie Guia and his wife Teresita Guia to subdivide the land (as covered by OCT No. P‑12930) into three distinct lots: Lot 3‑A, Lot 3‑B, and Lot 3‑C.
- The instructions further included the issuance of a Transfer Certificate of Title (TCT) for Lot 3‑C to the vendees of the unregistered sale (the spouses Arguelles), though the latter claimed they never received the TCT.
- Cancellation of the Original Title and Issuance of New TCTs
- Pursuant to Fermina’s instructions, the spouses Guia cancelled OCT No. P‑12930 on August 15, 1994.
- The land was subdivided and separate TCTs were issued as follows:
- Lot 3‑A: T‑83943, registered under Fermina M. Guia.
- Lot 3‑B: T‑83945, registered in the name of the spouses Datingaling.
- Lot 3‑C: T‑83944, again registered under Fermina M. Guia.
- The Loan Transaction and Real Estate Mortgage
- On August 18, 1997, the spouses Guia secured a loan amounting to P240,000 from Malarayat Rural Bank.
- To secure the loan, a Real Estate Mortgage was executed over Lot 3‑C.
- The mortgage transaction was supported by a purported Special Power of Attorney said to be executed by Fermina M. Guia in favor of the spouses Guia.
- The Real Estate Mortgage and the Special Power of Attorney were duly annotated in the memorandum of encumbrances of TCT No. T‑83944.
- Discovery of Inconsistencies and Subsequent Adverse Claim
- It was only in 1997, several years after the mortgage, that the spouses Arguelles became aware of:
- The subdivision of Lot 3 into Lots 3‑A, 3‑B, and 3‑C.
- The issuance of separate TCTs for each lot.
- The annotation of the Real Estate Mortgage and the Special Power of Attorney on Lot 3‑C.
- On June 17, 1999, the spouses Arguelles registered an adverse claim based on the unregistered deed of sale dated December 1, 1990, specifically over Lot 3‑C.
- Court Proceedings at the Regional Trial Court (RTC)
- On July 22, 1999, the spouses Arguelles filed a complaint for:
- Annulment of Mortgage.
- Cancellation of Mortgage Lien with Damages against Malarayat Rural Bank.
- The RTC, Branch 86 of Taal, Batangas, rendered a decision on July 29, 2008:
- Declared the mortgage made by the spouses Guia in favor of the bank null and void.
- Set aside the foreclosure sale (conducted on December 6, 1999) and the corresponding certificate of sale.
- Ordered the Register of Deeds to cancel the annotation related to the mortgage.
- Directed the spouses Guia to pay the bank an amount equivalent to the principal loan with interest, and awarded moral damages to the spouses Arguelles.
- Denied the prayer seeking the registration of the deed of sale in favor of the spouses Arguelles due to pending administrative requirements regarding land acquisition and transfer.
- The RTC’s ruling rested on the finding that, at the time of the mortgage, the spouses Guia were not the absolute owners of Lot 3‑C because of the unregistered sale to the spouses Arguelles.
- Court of Appeals (CA) Decision
- The respondent Malarayat Rural Bank filed an appeal with the CA on September 16, 2008.
- On December 19, 2011, the CA reversed the RTC decision:
- The CA held that the unregistered sale could not affect the bank’s rights due to the failure of the spouses Arguelles to register the deed of sale.
- Found that Malarayat Rural Bank was a mortgagee in good faith as it had exercised the required degree of diligence in approving the loan.
- Consequently, dismissed the spouses Arguelles’ complaint.
- Issues Raised in the Petition for Review
- Petitioners challenged the CA decision on multiple grounds (which are elaborated under Issues) and ultimately questioned the bank’s status as a mortgagee in good faith.
Issues:
- Non-Registration of the Deed of Sale
- Whether the CA erred in holding that the deed of sale, executed by Fermina Guia in favor of the spouses Arguelles, cannot be enforced against Malarayat Rural Bank due to its failure to be registered and annotated on the certificate of title, even if the bank had actual knowledge of such a deed.
- Determination of Mortgagee Good Faith
- Whether the CA committed an error in deeming Malarayat Rural Bank a mortgagee in good faith despite evidence indicating gross negligence on its part by not ascertaining the real condition of the property in the possession of the spouses Arguelles before accepting it as collateral based on a mere attorney‑in‑fact.
- Ownership and Absolute Right Over the Mortgaged Property
- Whether the CA erred in declaring that Malarayat Rural Bank had become the absolute owner of the subject property, notwithstanding the contention that the mortgage foreclosure was null and void.
- Constructive Notice and Possession
- Whether the CA erred in holding that the spouses Arguelles did not put in issue that Malarayat Rural Bank had constructive notice and possession of the subject lot.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)