G.R. No. 47701 - Mentholatum Co., Inc. vs. Mangaliman

Petitioner Nicanora G. Bucton (deceased, substituted by Requilda B. Yray) filed a case for Annulment of Mortgage, Foreclosure, and Special Power of Attorney (SPA) on April 29, 1988 with the RTC of Cagayan de Oro City against Erlinda Concepcion, respondent Rural Bank of El Salvador (Rural Bank), and Sheriff Reynaldo Cuyong.
Third-party defendants were Erlinda Concepcion and her husband, and Agnes Bucton Lugod (petitioner’s daughter).

Petitioner claimed ownership of a property covered by TCT No. T-3838 located in Cagayan de Oro City.
Concepcion borrowed petitioner’s title on June 6, 1982, purportedly to show to a buyer.
Concepcion secured a loan of ₱30,000.00 from the Rural Bank, mortgaging petitioner’s house and lot as collateral via a SPA allegedly executed by petitioner in favor of Concepcion.
Concepcion defaulted on the loan. Petitioner’s property was foreclosed and sold at a sheriff’s auction without proper notice.
Petitioner denied executing the SPA, claiming forgery of her and her husband’s signatures. She found out about the mortgage only after being informed by the bank.

Denied forgery allegations.
Claimed petitioner promised to settle Concepcion’s loan as of June 22, 1987.
Asserts legal compliance in foreclosure proceedings.
Filed a third-party complaint against Concepcion and Lugod to indemnify the bank in case of liability.

Summons could not be served on Concepcion; she was dropped as defendant, then made third-party defendant.
Concepcion declared in default for failure to file responsive pleading.
Trial testimonies:

Petitioner testified denial of executing SPA, asserting forgery and that property referenced in SPA (TCT No. 3838) is a vacant lot, different from the mortgaged house covered by TCT No. 3839.
Witness Emma Nagac testified she was asked to witness SPA signing after petitioner’s purported signatures were already affixed and was told not to inform petitioner.
Respondent bank employees and sheriff testified loan application, approval, and property inspection. Appraiser inspected property covered by TCT No. 3838 but could not explain why the foreclosed house was on a lot covered by a different title.

Declared SPA forged based on signature discrepancies.
Annulled SPA, Real Estate Mortgage, sheriff’s sale, and related title issuance.
Ordered respondent bank to pay attorney’s fees of ₱20,000 and moral damages of ₱20,000 to petitioner.

Ordered third-party defendants Concepcion and husband to indemnify bank for any damages, interests, attorney’s fees, and costs arising from the case.

Court of Appeals (CA) Decision (August 17, 2005) and Resolution (June 7, 2007)

Reversed RTC, finding no convincing proof of forgery.
Held SPA, Real Estate Mortgage, foreclosure, and certificate of title valid.
Applied principle of equitable estoppel, holding petitioner liable due to negligence in entrusting title to Concepcion.
Denied petitioner’s motion for reconsideration.

Whether under Article 1878 of the New Civil Code the CA was correct in holding petitioner primarily liable as surety in the absence of a proper SPA.

Whether the CA erred in dismissing petitioner’s declarations as self-serving in face of respondent’s documentary evidence.

Whether the CA was correct in attributing the loss to petitioner’s alleged negligence despite her non-participation in the loan/mortgage, and the bank’s failure to properly verify the title and agent’s authority.

Whether the CA properly disregarded false testimony of bank employees regarding inspection and verification of the mortgaged property and SPA validity.

Whether the CA correctly disregarded evidence showing SPA forgery or infirmities undermining the presumption of regularity of notarized documents.