Title
Butuan Development Corp. vs. Court of Appeals, 21st Division
Case
G.R. No. 197358
Decision Date
Apr 5, 2017
BDC, unincorporated at the time, contested a fraudulent mortgage on its property, alleging misrepresentation. SC ruled in favor, reinstating RTC orders for trial.
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Case Digest (G.R. No. 197358)

Facts:

Background of the Case

  • On March 31, 1966, Butuan Development Corporation (BDC), then in the process of incorporation, purchased a 7.6923-hectare parcel of land in Butuan City from the Spouses Jose and Socorro Sering.
  • On January 28, 1969, Transfer Certificate of Title (TCT) No. RT-4724 was issued in BDC’s name.

Mortgage of the Property

  • On May 5, 1998, Max L. Arriola Jr., representing himself as BDC’s Chairman, mortgaged the property to De Oro Resources, Inc. (DORI) and its President, Louie A. Libarios, using a notarized resolution allegedly from BDC’s Board of Directors.

Incorporation of BDC

  • On May 23, 2002, BDC was officially incorporated after its Articles of Incorporation were approved by the Securities and Exchange Commission.

Discovery of Missing Title

  • In 2004, BDC discovered that the owner’s duplicate copy of TCT No. RT-4724 was missing and later found in Libarios’s possession. BDC alleged that the Arriolas misrepresented themselves as BDC’s owners and directors to execute the mortgage.

Legal Action

  • On August 23, 2005, BDC filed a complaint for the declaration of nullity of the real estate mortgage (REM) against Max Arriola Jr., Libarios, DORI, and others, claiming the mortgage was void.

Issue:

  1. Whether the Court of Appeals (CA) gravely abused its discretion in setting aside the Regional Trial Court’s (RTC) orders, ruling that BDC’s complaint failed to state a cause of action.
  2. Whether BDC, which was not yet incorporated at the time of the mortgage execution, had a right to the subject property.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Conclusion:

The Supreme Court ruled in favor of BDC, emphasizing that the complaint adequately stated a cause of action and that the issues raised should be resolved during trial. The CA’s dismissal was deemed unwarranted, and the case was remanded for further proceedings.


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