G.R. No. 187490 - Dela PeAa vs. Avila

The subject of the suit is a 277-square meter residential land in Marikina City, initially registered under Transfer Certificate of Title (TCT) No. N-32315 in the name of Antonia R. Dela PeAa, married to Antegono A. Dela PeAa.
On May 7, 1996, Antonia secured a loan of P250,000.00 from A.C. Aguila & Sons, Co., payable on or before July 7, 1996, with a 5% monthly interest rate.
To secure this loan, on the same day, Antonia executed a notarized Deed of Real Estate Mortgage over the property, valid for three months from execution.

On November 4, 1997, Antonia executed a notarized Deed of Absolute Sale of the property in favor of Gemma Remilyn C. Avila for P600,000.00.
Using this document, Gemma caused cancellation of the original TCT and registered the property under her name on TCT No. 337834.
On November 26, 1997, Gemma constituted a mortgage over the property in favor of Far East Bank & Trust Company (FEBTC, now Bank of the Philippine Islands - BPI) to secure a loan facility with a credit limit of P1,200,000.00.
Gemma executed multiple promissory notes from December 1997 to March 1998, drawing loans totaling P1,200,000.00 from FEBTC-BPI.

On March 3, 1998, Antonia filed an Affidavit of Adverse Claim with the Register of Deeds actively contesting her ownership, alleging the deed of sale to Gemma was simulated and that she, not Gemma, was the true owner.
The Affidavit was entered in the registry on March 10, 1998 as an encumbrance.

Due to Gemma’s failure to pay the loans, FEBTC-BPI extrajudicially foreclosed the mortgage and purchased the property at public auction on March 15, 1999.
The property was then titled under FEBTC-BPI's name via TCT No. 415392.
On May 18, 1998, Antonia and her son Alvin John B. Dela PeAa filed a complaint for annulment of the Deed of Sale, asserting the property was conjugal, that Antonia's late husband did not consent to the original mortgage, and that the sale was simulated and prejudicial to Alvin's succession rights.
Gemma denied these allegations, claiming Antonia misrepresented the marital status, failed to pay Aguila’s loan, agreed to settle the debt through Gemma, and utilized the property as collateral for FEBTC-BPI loans, which Gemma paid using the proceeds borrowed.
FEBTC-BPI filed a responsive pleading asserting good faith as mortgagee and cross-claims for loan payments from Gemma.

Gemma was declared in default for failure to appear or continue legal representation.
Witnesses included Antonia, Alvin, Alessandro Almoden (referral witness for Gemma), an Account Officer from FEBTC-BPI, and an NBI Document Examiner (who confirmed Antonia’s signatures on documents).

The RTC declared the property conjugal, annulled the sale, and ordered reconveyance in favor of the Dela PeAas.
Ordered Gemma to pay damages and attorney's fees and directed her to settle debts to FEBTC-BPI.

The CA reversed the RTC ruling.
Declared the property paraphernal as Dela PeAas failed to prove acquisition during marriage.
Found Gemma’s purchase and mortgage valid and binding, with FEBTC-BPI deemed a mortgagee in good faith.

Whether the Court of Appeals erred in declaring the property paraphernal and not conjugal.
Whether the CA erred in reversing the RTC decision declaring null and void the Deed of Absolute Sale executed by Antonia.
Whether FEBTC-BPI was a mortgagee/purchaser in bad faith and if the CA erred in declaring the bank's good faith.