Case Summary (G.R. No. 214939)
Relevant Property Details and Fraudulent Acts
The spouses Soriano owned two parcels covered by Transfer Certificate of Title (TCT) Nos. 85840 (previously T-14467) and 87113 (previously T-14466), valued at Php626,640 and Php428,820, respectively. Rey Viado forged the spouses' signatures on an Affidavit of Loss and a Special Power of Attorney, which facilitated the reissuance of duplicate certificates of title. These reissued titles were subsequently used fraudulently to secure loans from Maria Luzviminda Patimo and BPI Family Savings Bank.
Civil Cases and Claims
The spouses Soriano filed Civil Cases Nos. 6210-R and 6211-R, contesting fraudulent acts by Viado, Jessica Jose, Vanessa P. Hufana, Maria Luzviminda Patimo, and BPI Family. In Civil Case No. 6210-R, they sought to void an “Acknowledgment of Trust” and to reconvey TCT No. 85840 wrongly transferred to Jose. In Civil Case No. 6211-R, they challenged the loan secured by Hufana using a forged Deed of Absolute Sale and a fraudulent transfer of TCT No. 87113. They prayed for the annulment of these transactions, reconveyance of titles, and damages.
Trial Court’s Findings and Decision
The Regional Trial Court (RTC) of Baguio City, Branch 60, ruled that the signatures of the spouses Soriano on all disputed documents were forgeries. The reissued TCTs and transfers stemming from these forged documents were null and void. However, the court found that the financial institutions—Maria Luzviminda Patimo and BPI Family—dealt with the properties in good faith. Thus, the court dismissed the cases against Patimo and BPI Family but rendered damages against the other parties involved in perpetrating the fraud.
Court of Appeals Ruling and Modifications
The Court of Appeals (CA) partially reversed the RTC’s decision concerning BPI Family Savings Bank. It declared the mortgage loan agreement and TCT No. 87113 issued to Hufana null and void, reinstated the spouses’ original TCT No. 14466, and held that BPI Family was not a mortgagee in good faith. The CA ruled that Maria Luzviminda Patimo was a mortgagee in good faith given her verification of title through the Register of Deeds and direct property inspection. Conversely, BPI Family failed to exercise the heightened diligence required of banks, as it allowed Hufana to secure a loan without properly verifying her authority or ownership status, especially since the original owners’ names were still on the title at the time of loan application.
Legal Standards on Mortgagee in Good Faith and Due Diligence
Under the 1987 Philippine Constitution and relevant jurisprudence, a registered certificate of title is generally conclusive evidence of ownership. However, banks as mortgagees are held to a higher standard of diligence due to their public interest role and are expected to verify the true ownership of property beyond face value of the title. The doctrine of a mortgagee in good faith presupposes that the mortgagor has validly acquired title. When an instrument is forged, the transferee or mortgagee is not protected as a purchaser or mortgagee in good faith. This principle was emphasized in cases such as Arguelles v. Malarayat Rural Bank and EreAa v. Querrer-Kauffman.
Application of Law to Facts: BPI Family’s Liability
BPI Family’s reliance merely on the documentation presented by Hufana, without contacting the original owners or conducting thorough background checks, fell short of the requisite standard. The bank approved the loan and accepted the fraudulent title even though the TCT presented initially bore the Sorianos' names, and the new TCT was only issued after the loan approval. This failure to investigate was deemed negligence. The bank’s claim that it was natural for the TCT still to indicate the original owners because the loan application was for buying the land was not sufficient as a defense.
Award of Damages and Liability
The CA held BPI Family solidarily liable with the fraudulent parties for moral, exemplary damages, and attorney’s fees; however, the Supreme Court modified this holding. It partially granted BPI Family’s petition to the extent that the award of actual damages against the bank was set aside because the spouses Soriano recovered their titles, thus no pecuniary loss requiring actual damages remained. Nevertheless, the Court held that BPI Family was liable for moral and exemplary damages due to its proven negligence, although there was no showing of bad faith or malice.
Final Supreme Court Ruling and Orders
The Supreme Court modified the CA ruling by declaring fraudulent the reissued TCT No. 87113 and the mortgage loan agreement involving BPI Family. The Register of Deeds was ordered to cancel encumbrances on and reinstate the original TCT No. 14466 in the name of the spouses Soriano. BPI Family was ordered to pay moral dama
Case Syllabus (G.R. No. 214939)
Facts of the Case
- Spouses Jacinto Servo Soriano and Rosita Fernandez Soriano owned two parcels of land in Chapis Village, Baguio City, covered by TCT Nos. 85840 and 87113, with fair market values of P626,640.00 and P428,820.00 respectively.
- On April 21, 2004, Rey Viado, using forged signatures of the spouses, executed an Affidavit of Loss and caused its annotation on the original TCTs.
- Viado used forged Special Powers of Attorney to file a petition for re-issuance of Owner's Duplicate Copies of TCT Nos. T-14466 and T-14467 before the Baguio City RTC, which declared the originals lost and ordered the issuance of new titles.
- The reissued TCTs were utilized by Viado and others to secure loans from Maria Luzviminda Patimo and BPI Family Savings Bank (BPI Family).
- Subsequent fraudulent conveyances were executed: an "Acknowledgment of Trust" deed by Jessica Jose and Viado caused TCT No. T-14467 to be transferred to Jose, who obtained a loan from Patimo; and a forged Deed of Absolute Sale enabled Vanessa P. Hufana to obtain title to the other parcel and secure a loan from BPI Family.
- The spouses discovered these transfers upon attempting to pay realty taxes and subsequently filed actions to annul the sales, reconvey titles, and recover damages.
- Defendants Jose and Hufana defaulted; Viado admitted some facts but denied forging special powers of attorney.
- BPI Family claimed it dealt with Hufana in good faith as a mortgagee and relied on the apparent validity of presented documents.
- Patimo verified documents before granting her loan and was found to have exercised due diligence.
Issues Presented
- Whether BPI Family Savings Bank was a mortgagee in good faith when it extended a loan to Hufana secured by the fraudulently obtained TCT.
- Whether the forged transfers and reissued titles invalidated the purported transfer of ownership to third parties.
- Whether Patimo and BPI Family should be held liable for damages and reconveyance due to their dealings with forged titles.
- The appropriateness and extent of damages to be awarded to the spouses Soriano.
Regional Trial Court (RTC) Findings and Decision
- The signatures on the Affidavit of Loss, Special Power of Attorney, Acknowledgment of Trust, and Deed of Absolute Sale were all found to be forged.
- The subsequent TCTs issued based on forged documents, including those presented to BPI Family and Patimo, were declared null and void.
- Patimo and BPI Family were deemed mortgagees in good faith, and thus not liable for ownership reconveyance.
- Defendants Jose, Viado, and Hufana were ordered to pay actual, moral, and exemplary damages plus attorney’s fees, solidarily, to the spouses.
- The spouse’s motions for reconsideration dismissing Patimo and BPI Family were denied.
Court of Appeals (CA) Ruling
- Partially reversed the RTC decision against BPI Family.
- Dec