Facts:

The case involves a Petition for Review on Certiorari filed by Ceferino Bautista (substituted by his son and legal representative, Philip de Vera Bautista), Felisa Bautista, and Nehemias Bautista (collectively referred to as the petitioners) against the Spouses Francis and Minda Balolong, Metropolitan Bank and Trust Company (Metrobank), and the Register of Deeds of Lingayen, Pangasinan (respondents). The events leading to the case began when the petitioners, who were the registered owners of two parcels of land in Lingayen, Pangasinan, migrated to Canada in the 1980s, leaving their properties in the care of their daughter, Minda. Minda later married Francis Balolong, and they built a home on the properties. On June 17, 2003, Philip Bautista received a call from a Metrobank branch manager informing him that the property mortgaged by Minda was due for foreclosure. Upon investigation, the petitioners discovered that their titles (TCT Nos. 139362 and 163938) had been canceled and...

Facts:

Parties and Property Background

• Petitioners: Ceferino Bautista (substituted by his son and legal representative, Philip de Vera Bautista), Felisa Bautista, and Nehemias Bautista.
• Respondents: Spouses Francis and Minda Balolong; Metropolitan Bank and Trust Company (Metrobank); and the Register of Deeds of Lingayen, Pangasinan.
• Subject Properties: Two parcels of land located in Lingayen, Pangasinan originally registered in the name of Spouses Bautista under Transfer Certificate of Title (TCT) Nos. 139362 and 163938.

Transaction and Alteration of Title

• In the 1980s, Spouses Bautista and their son Nehemias migrated to Canada and left the care of the properties to their daughter, Minda.
• Minda later married Francis Balolong and constructed a residence on the subject properties.
• Subsequent to the migration, the original titles were canceled, and the lands were subdivided into three lots:
• Lot 1: TCT No. 262244, registered under the name of respondents Minda and Francis Balolong.
• Lot 2: TCT No. 262245, registered in the name of William Bautista (Minda’s brother).
• Lot 3: TCT No. 262246, registered in the name of petitioners’ son, Nehemias Bautista.

Mortgage Transaction and Foreclosure Proceedings

• Minda and Francis obtained a loan amounting to Php1,500,000.00 from Metrobank, using Lot 1 as collateral.
• A complaint was filed by the petitioners before the Regional Trial Court (RTC) seeking cancellation of title, nullity of mortgage, and damages.
• Petitioners contended that the Deed of Absolute Sale dated March 9, 2002, allegedly executed by them, was fraudulent and executed without their knowledge, asserting that they were in Canada at the time.
• Minda denied participation in any fraud and claimed she was misled into signing documents that she contended were forged, including promissory notes and the mortgage papers.
• Francis, by virtue of failing to answer, was declared in default by the RTC.

Due Diligence and Conduct of Metrobank

• Metrobank contended that it acted as a mortgagee in good faith by conducting due diligence prior to approving the loan and mortgage contract.
• The bank verified the authenticity of the property’s title with the Register of Deeds, conducted an ocular inspection of the property, and performed background checks regarding the capacity of Minda and Francis Balolong to pay the loan.
• Despite the allegations of fraud related to the sale of the property, Metrobank maintained that no irregularity was detected during its investigation.

Procedural History and Court Decisions

• RTC Decision (June 7, 2018):
• Declared the fraudulent Deed of Absolute Sale void, proving that the signatures of Spouses Bautista were forged.
• Held Metrobank to be a bona fide mortgagee by emphasizing its due diligence in the approval of the mortgage transaction.
• Dismissed the case against Minda while attributing liability solely to Francis, ordering him to pay actual, moral, exemplary damages and attorney’s fees.
• Court of Appeals (CA) Decision:
• Affirmed in toto the decision of the RTC, upholding both the foreclosure and the validity of the mortgage as exercised on Lot 1.
• Reiterated that banks must exercise heightened care, but found that sufficient evidence of due diligence had been presented by Metrobank.
• Petition for Review on Certiorari:
• Issued by petitioners under Rule 45 of the Rules of Court, challenging the CA’s affirmation of Metrobank’s status as a mortgagee in good faith.
• Argued that the evidence, particularly the reliance on a single branch manager’s testimony, was insufficient to conclude extraordinary diligence.

Issue:

Whether Metrobank can be declared a mortgagee in good faith despite the allegations of fraud in the underlying Deed of Absolute Sale.

• Examination of whether due diligence by a financial institution suffices to dispel claims of fraudulent conduct in the mortgage transaction.
• Consideration on whether relying solely on testimonial evidence (such as that of Metrobank’s branch manager) without corroborative documentary evidence undermines the conclusion of good faith.

Whether the Court of Appeals erred in affirming the RTC’s findings that upheld the validity of the mortgage and foreclosure upon the subject property under the doctrine protecting mortgagees in good faith.

• Discussion on the extent to which the doctrine of innocent mortgagee or buyer in good faith applies when there are allegations of forgery and fraud.
• Inquiry into whether questions of fact regarding the sufficiency of due diligence should be re-examined on certiorari, given the evidentiary standard in civil cases.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)