G.R. No. 208254 - Rural Bank of Candelaria , Inc. vs. Banluta

The case arose from a complaint for annulment of a foreclosure process initiated by Rural Bank of Candelaria (Zambales), Inc. (petitioner) against Romulo Banluta (respondent), who later represented by his children following his demise.
The foreclosure involved real estate mortgage secured by two parcels of land, where the respondent alleged that the subject loan, originally obtained with his wife in 1993, had been fully paid.
Respondent contended that although he had paid various amounts—specifically, payments on August 5, 1995; July 3, 1999; July 9, 1999; and a lump sum fully settling the loan inclusive of penalties and interests—he did not secure the release of the mortgage.

Originally obtained on June 11, 1993 by respondent and his wife secured by a real estate mortgage.
Despite the alleged full payment, petitioner's records and subsequent transactions pointed to a renewal of the loan, with the latest renewal dated September 15, 1999 recording a principal of P683,000.00.

Initially, the mortgage was instituted using tax declarations since the land titles had not yet been issued.
When titles were later issued in 1994, discrepancies emerged—the area indicated in the certificates of title was larger than that in the tax declarations, raising questions about the scope of the foreclosure.

Respondent stated that in early January 2003, armed individuals acting on behalf of petitioner forcibly entered the subject property, leading to harassment and a discovery of the foreclosure application and subsequent auction sale without proper notice.
Petitioner, in its defense, maintained that the foreclosure sale was valid having complied with all legal requirements, including the registration of the certificate of sale with the Register of Deeds on June 29, 2001.
Petitioner further claimed that the alleged payments made by respondent were applied to previous loans and not to the most recent one evidenced by the September 15, 1999 promissory note (PN).

The RTC rendered a decision declaring the foreclosure sale null and void due to discrepancies between the real estate mortgage and the promissory note, particularly noting that the PN (dated September 15, 1999) established a different amount and conditions.
The RTC held that payments made were attributable to prior loans and not to the September 15, 1999 loan, leading to a computation of a total debt of P4,228,955.98.
The RTC also ruled that the real estate mortgage supposed to secure the September 15, 1999 loan was invalid, as the documents provided were mere photocopies and ambiguously described the debt.

The CA, in the November 29, 2011 decision, affirmed the RTC decision.
Subsequent motions led to the CA’s February 28, 2013 Amended Decision which, while ruling that the PN was admissible as an original, found it to be materially altered and, therefore, of no evidentiary value as to respondent's alleged unpaid obligation.
Respondent’s later attempt to reassert the authenticity of the PN and challenge material alterations was ultimately not successful.

There had been an apparent, unsigned alteration in the fields “Date Granted” and “Date Due.”
Alterations were evidenced by typed-over dates, which cast doubts on the genuineness and due execution of the document.

Relying on Sections 124 and 125 of the Negotiable Instruments Law (NIL), the CA concluded that such material alterations rendered the PN avoided, thereby negating its value to prove any outstanding debt.
Respondent, despite offering the PN as evidence, never adequately challenged its authenticity or brought the issue of material alteration into proper evidence before the RTC.

Whether Manikan, as Chairperson and President of the petitioner, had the authority to file the petition without an accompanying board resolution, given that his valid government-issued IDs were attached to the verification/certification.
The issue further covered whether the representation of petitioner by Manikan was legally sufficient, especially since he was specifically named as the corporate officer in the original complaint.

Whether the finding of the RTC and subsequently the CA, declaring the foreclosure sale null and void on account of the real estate mortgage’s discrepancies and procedural lapses, should stand.
The determination considered if the foreclosure should have been limited to the area originally mortgaged (as per the tax declarations) rather than the enlarged area shown in the certificates of title.

Whether the CA committed reversible error in ruling that the PN was materially altered—specifically, in not allowing the evidence to prove respondent’s indebtedness—since the issue of material alteration was raised for the first time on appeal and had not been litigated before the RTC.
Whether respondent’s failure to object to and properly argue the issue of material alteration during trial should preclude its consideration on appeal.