Title
Metropolitan Bank and Trust Co. vs. Pascual
Case
G.R. No. 163744
Decision Date
Feb 29, 2008
A property acquired during marriage is presumed conjugal; nullity of marriage does not dissolve conjugal ownership without liquidation. Bank failed due diligence.
mortgage
conjugal property
null and void
A

Case Digest (G.R. No. L-23794)

Facts:

  • Background of the Parties and Acquisition of the Disputed Property
    • Nicholson Pascual (also known as Nelson Pascual) and Florencia Nevalga were married on January 19, 1985.
    • During their marriage, Florencia purchased a 250-square meter lot with a three-door apartment located in Makati City from Clarito and Belen Sering.
    • The lot was initially covered by TCT No. S-101473/T-510, which was later canceled and replaced by TCT No. 156283, issued in Florencia’s name even though she was married to Nicholson.
  • Proceedings on the Nullity of Marriage and Liquidation of Conjugal Partnership
    • In 1994, Florencia filed a suit under Article 36 of the Family Code for the declaration of nullity of the marriage, docketed as Civil Case No. Q-95-23533.
    • The Regional Trial Court (RTC), Branch 94 in Quezon City, on July 31, 1995, declared the marriage null and void based on psychological incapacity on Nicholson’s part.
    • Along with the declaration of nullity, the RTC ordered the dissolution and liquidation of the ex-spouses’ conjugal partnership of gains.
    • Despite the RTC order, the conjugal partnership was never liquidated, and the parties went their separate ways.
  • The Mortgage Transaction and Subsequent Foreclosure
    • On April 30, 1997, Florencia, together with spouses Norberto and Elvira Oliveros, secured a PhP 58 million loan from Metropolitan Bank and Trust Co. (Metrobank).
    • To secure the loan, Florencia and the Oliveros spouses executed several real estate mortgages (REMs) on their properties, including one affecting the lot covered by TCT No. 156283.
    • Among the documents submitted by Florencia were:
      • A copy of TCT No. 156283.
      • A photocopy of the RTC decision declaring the nullity of her marriage to Nicholson.
      • A document titled “Waiver” purportedly executed by Nicholson on April 9, 1995, which purportedly waived his rights over certain conjugal properties (though it notably did not include the disputed lot).
    • Owing to the failure to pay the loan when due, Metrobank initiated foreclosure proceedings on November 29, 1999, under Act No. 3135 (as amended) before the Office of the Notary Public of Makati City.
    • Metrobank published the notice of sale in Remate and subsequently became the highest bidder at the auction sale on January 21, 2000.
  • Litigation Concerning the Mortgage and Parties’ Positions
    • On June 28, 2000, Nicholson filed a complaint before the RTC in Makati City, seeking the declaration of nullity of the mortgage, asserting that the property—still considered conjugal—was mortgaged without his consent.
    • In its Answer with Counterclaim and Cross-Claim, Metrobank contended:
      • The disputed lot was paraphernal by nature, being registered solely in Florencia’s name.
      • It had approved the mortgage in good faith.
    • Florencia failed to file an answer within the reglementary period, resulting in her being declared in default.
    • On September 24, 2001, the RTC rendered judgment declaring the real estate mortgage on the lot null and void; however, the court found the lot to be conjugal and affirmed that Florencia could not validly encumber the property without Nicholson’s consent.
    • The RTC declared the deed of waiver submitted by Florencia as fatally defective, noting issues such as:
      • Nicholson’s denial of having executed the waiver.
      • The allegation that the notarizing officer’s signature was a forgery.
      • The suspicious timing of the execution of the waiver (April 9, 1995) relative to the RTC decision on the nullity of marriage.
    • The RTC also declared Metrobank as a mortgagee acting in bad faith due to negligence in evaluating supporting documents.
    • Metrobank’s counterclaims and cross-claims against Florencia were dismissed, and its motion for reconsideration was denied.
  • Appeal to the Court of Appeals (CA)
    • Metrobank appealed the RTC decision before the CA (appellate docket CA-G.R. CV No. 74874).
    • On January 28, 2004, the CA affirmed the RTC’s decision with a modification:
      • The award of moral damages and attorney’s fees was deleted, on the basis that Metrobank did not engage in fraudulent or morally oblique conduct.
    • The CA reiterated that:
      • Metrobank failed to overcome the legal presumption favoring the conjugal nature of property acquired during the marriage.
      • Florencia’s noncompliance with provisions regarding the disposition of conjugal partnership property exacerbated the invalidity of the mortgage covering Nicholson’s interest.
  • Issues Raised in the Petition for Review on Certiorari
    • Whether the CA erred in declaring the disputed property as conjugal by applying Article 116 of the Family Code.
    • Whether the CA erred in not holding that the declaration of nullity of marriage automatically dissolved the conjugal property regime.
    • Whether the CA erred in ruling that Metrobank is an innocent purchaser for value regarding the mortgage.

Issues:

  • Issue on the Classification of the Disputed Property
    • Whether the CA correctly applied Article 116 of the Family Code—traditionally the purview of Article 160 of the Civil Code since the acquisition took place before the Family Code’s effectivity—to declare the property conjugal.
    • The question of whether sufficient evidence was presented to establish that the property was acquired during the marriage (thus invoking the presumption of conjugal ownership).
  • Issue on the Effect of the Nullity of Marriage on Conjugal Property
    • Whether the declaration of nullity of the marriage automatically terminates the conjugal partnership property regime.
    • Whether the absence of liquidation or partition of the conjugal assets affects the continuing conjugal nature of the property.
  • Issue on the Status of the Mortgage and the Due Diligence of the Bank
    • Whether Metrobank’s conduct in approving the mortgage, particularly in light of the alleged defects in the waiver document and the non-consent of Nicholson, qualifies it as an innocent purchaser for value.
    • Whether the bank’s failure to exercise due diligence in verifying the status of the property and the authenticity of the waiver document should preclude it from obtaining full rights as a mortgagee over the disputed property.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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