G.R. No. 162059 - Serana vs. Sandiganbayan

On January 30, 1975, spouses Jose Tad-y and Patricia Toledanes Tad-y (spouses Tad-y) obtained an agricultural sugar crop loan from the Philippine National Bank (PNB), Binalbagan Branch, for P109,000.00.
To secure this loan, PNB and the spouses Tad-y executed a Real Estate Mortgage (REM) over six parcels of land located in Himamaylan City and Hinigaran, Negros Occidental. (Annotations were made on titles as Entry Nos. 201793 and 210254.)
On August 14, 1975, the spouses Tad-y obtained a second sugar crop loan of P63,000.00, which was likewise covered by the REM.

On August 9, 1988, Lots 778 and 788, covered by the REM, were sold at a tax delinquency auction by the provincial treasurer of Negros Occidental for failure to pay real property taxes.
PNB was the sole bidder and successfully acquired the lots for P10,609.63, receiving final bills of sale dated August 23, 1989, and annotations of certificates of sale on the titles.

In November 1995, the spouses Tad-y availed of loan restructuring under Republic Act No. 7202.
By 1996, they completed payments on both loans.
On March 6, 1996, PNB executed a deed of release of the REM, but excluded Lots 778 and 788, claiming ownership from the auction sale.

Patricia Toledanes Tad-y (Patricia) made written requests in 2001 and 2003 for release of Lots 778 and 788, offering reimbursement to PNB.
PNB maintained ownership but expressed willingness to negotiate repurchase.
In March 2004, Patricia and her children, represented by Antonio Tad-y, filed a complaint for breach of contract and reconveyance against PNB before the Regional Trial Court (RTC), Himamaylan City.
The RTC ruled in favor of the Tad-ys, ordering PNB to reconvey Lots 778 and 788 upon payment of the acquisition price with interest.
The RTC found PNB liable for breach of contract, stating that PNB had a duty to pay the real estate taxes and that its failure to do so, then acquiring the lots at a tax auction, constituted abuse of rights and constructive fraud.
PNB appealed to the Court of Appeals (CA), which affirmed the RTC decision, sustaining the applicability of the REM provisions and ruling that a constructive trust was created over the disputed lots in favor of the Tad-ys.
PNB moved for reconsideration, which the CA denied.
PNB filed the present petition for review on certiorari before the Supreme Court.

The CA erred in holding PNB breached the REM for failing to pay real property taxes.
The CA misconstrued PNB’s role as attorney-in-fact during the auction sale.
The complaint is barred by prescription, which the CA erroneously ignored.
PNB argued the obligation to pay taxes arose only upon judicial foreclosure, which was never exercised.
PNB contended the power-of-attorney in the REM did not authorize it to acquire ownership of the mortgaged lots.
PNB challenged the ruling on the imposition of constructive trust, denying fraud or fiduciary breach.

Whether PNB breached the Real Estate Mortgage by failing to pay real property taxes on Lots 778 and 788, thereby justifying the reconveyance order.
Whether PNB’s acquisition of Lots 778 and 788 at the tax delinquency auction is valid and within the agency powers granted under the REM.
Whether the complaint filed by the spouses Tad-y is barred by prescription, and if the defense was properly considered.
Whether the creation of a constructive trust over the disputed properties in favor of the spouses Tad-y is warranted by law and facts.
Interpretation and effect of the specific provisions of the REM, especially paragraphs (c) and (d), concerning tax payment obligations and appointment of PNB as attorney-in-fact.