Case Summary (G.R. No. 200468)
Factual Background
Fermina M. Guia was the registered owner of Lot 3, which measured 4,560 square meters. On December 1, 1990, she sold the southern portion of this land, approximately 1,350 square meters, to the spouses Petronio and Macaria Arguelles. However, the deed of sale was not registered with the Register of Deeds, and the title corresponding to this portion was never delivered to the spouses. Fermina M. Guia later subdivided Lot 3 into three new lots, issuing titles for these lots that did not recognize the unregistered sale to the Arguelles.
Registration and Mortgage
In a subsequent transaction on August 18, 1997, the spouses Guia mortgaged Lot 3-C to Malarayat Rural Bank for a loan amounting to ₱240,000. The mortgage was executed under a Special Power of Attorney purportedly granted by Fermina M. Guia. The spouses Arguelles only learned of the subdivision and the mortgage in 1997, prompting them to file an adverse claim in 1999 and a complaint for annulment of the mortgage against the bank.
Regional Trial Court Decision
The Regional Trial Court (RTC) initially ruled in favor of the Arguelles, declaring the mortgage and foreclosure sale null and void. The court found that the Guia spouses were not the rightful owners of Lot 3-C at the time of the mortgage, thus rendering the mortgage invalid. The RTC also criticized Malarayat Rural Bank for its lack of due diligence in confirming ownership before approving the mortgage.
Court of Appeals Reversal
However, on appeal, the Court of Appeals (CA) reversed the RTC's ruling, asserting that the lack of registration of the sale to the Arguelles rendered their claim ineffective against the bank, which was found to be a mortgagee in good faith. The CA dismissed the Arguelles’ complaint, ruling that the bank had a better claim to the land due to the unregistered nature of the sale.
Legal Issues Presented
The Arguelles raised multiple issues on appeal, including whether the CA erred in concluding that their deed of sale could not be enforced against Malarayat Rural Bank due to its unregistered status and whether the bank acted in good faith. They argued that the bank had actual knowledge of the sale and was negligent in not ascertaining the complete ownership status before accepting the property as collateral.
Supreme Court Ruling
The Supreme Court found merit in the petitioners' arguments and determined that Malarayat Rural Bank could not be considered a mortgagee in good faith. The Court emphasized the heightened duty of diligence required from banking institutions, which must conduct thorough investigations before approving loans secured by real estate. It undersc
...continue readingCase Syllabus (G.R. No. 200468)
Case Summary
- The case revolves around a petition for review on certiorari concerning the ownership and mortgage of a parcel of agricultural land originally owned by Fermina M. Guia.
- The petitioners, Macaria Arguelles and the heirs of Petronio Arguelles, contest the decision of the Court of Appeals, which reversed the Regional Trial Court's ruling favoring them regarding the validity of their ownership over the property in question.
- The central issue is whether the respondent, Malarayat Rural Bank, is considered a mortgagee in good faith and entitled to protection of its mortgage lien.
Factual Background
- Fermina M. Guia was the original owner of Lot 3 in Barrio Pinagkurusan, Alitagtag, Batangas, with an area of 4,560 square meters, covered by Original Certificate of Title No. P-12930.
- On December 1, 1990, Fermina sold a portion of this land (approximately 1,350 square meters) to the spouses Petronio and Macaria Arguelles. However, this Deed of Sale was neither registered nor annotated on the original title.
- Following the sale, Fermina instructed her son Eddie Guia and his wife to subdivide Lot 3 into three separate lots, resulting in the issuance of separate Transfer Certificates of Title (TCTs) for Lots 3-A, 3-B, and 3-C.
- In 1997, the spouses Guia took out a loan from Malarayat Rural Bank, securing it with a mortgage on Lot 3-C. This mortgage was duly annotated on TCT No. T-83944.
- The spouses Arguelles discovered the subdivision and mortgage only in 1997