G.R. No. 200899 - Heirs of Macalalad vs. Rural Bank of Pola, Inc.

On September 26, 2003, Paz Macalalad, the predecessor-in-interest of the present petitioners, filed a Complaint for Declaration of Nullity of Transfer Certificate of Title (TCT No. T-117484) before the RTC of Calapan City.
The complaint alleged that Paz was the sole surviving legal heir of Leopoldo Constantino, Jr., who died intestate on November 13, 1995, leaving behind a parcel of land registered under TCT No. RT-124 (later T-45233).
It was contended that a deed of sale, executed on July 14, 1998, in favor of the Spouses Pimentel, was fraudulent since it bore Leopoldo’s signature despite his death three years earlier.
Subsequent to the alleged sale, the Spouses Pimentel mortgaged the property to Rural Bank of Pola, Inc. (the respondent bank) to secure a loan.
The bank, acting on the basis of the certificate of title and without thorough investigation, accepted the mortgaged property as collateral, later foreclosed the mortgage upon the Spouses Pimentel’s default, and obtained TCT No. T-117484 in its own name.

The RTC rendered its Decision on October 23, 2007, dismissing the complaint on the ground that respondent bank had complied with standard operating procedures and exercised due care in verifying ownership through its ocular inspection and examination of the title.
Petitioners appealed the RTC’s decision, and on September 28, 2011, the Court of Appeals (CA) affirmed the RTC’s ruling, reiterating that the bank was not negligent in its duties.
Petitioners subsequently filed a Motion for Reconsideration, which was denied by the CA in its February 29, 2012 Resolution.

The petition for review on certiorari was raised under Rule 45, aiming to reverse the CA’s affirmation of the lower court’s decisions.
Throughout the proceedings, respondent bank’s counsel and General Manager, Leonor L. Hidalgo, repeatedly failed to comply with several of the Court’s directives regarding the submission of required comments and participation by new counsel.
The non-compliance led the Court to impose fines and warnings on Hidalgo, although these lapses did not alter the substantive findings on the merits of the case.

Petitioners contended that the deed of sale executed by Leopoldo in favor of the Spouses Pimentel was null and void because it was executed after his death.
They argued that the Spouses Pimentel, if the deed were fraudulent, never acquired legal ownership and therefore could not validly mortgage the property.
Consequently, respondent bank’s subsequent foreclosure and acquisition of the property were challenged as being based on an invalid title.
The Complaint included two distinct prayers: (a) cancellation of TCT No. T-117484 in the name of the respondent bank, and (b) re-issuance of a new title in the name of the original owner, Leopoldo.
However, petitioners failed to implead the Spouses Pimentel, who were deemed indispensable parties for resolving the issue regarding the rightful ownership of the property.

Whether the Court of Appeals erred in affirming the legality of the deed of sale purportedly executed between Leopoldo Constantino, Jr. and the Spouses Pimentel, given that the sale was executed after Leopoldo’s death.
Whether the Court of Appeals erred in upholding that respondent bank acted in good faith and was an innocent mortgagee for value, particularly in light of the potential negligence in verifying the true ownership of the property offered as collateral.