G.R. No. 214939 - BPI Family Savings Bank, Inc. vs. Spouses Soriano

Case Summary (G.R. No. 214939)

Key Dates and Documents

Significant transactional and procedural dates appearing in the record include: April 21, 2004 (Affidavit of Loss executed and annotated on TCTs); March–July 2005 (series of transfers, issuance of reconstituted titles and subsequent TCTs in transferees’ names); January 13, 2006 (annotation of adverse claim by attorney‑in‑fact); July 19, 2011 (RTC decision); appellate proceedings following the RTC decision. Primary documents at issue: Owner’s Duplicate Copies of original TCT Nos. T‑14466 and T‑14467 (reconstituted and then reissued as TCT Nos. 87113 and 85840), alleged forged Affidavit of Loss, forged Special Power of Attorney, forged Deed(s) of Sale/Acknowledgment of Trust, mortgage instruments, and loan agreements.

Factual Background — Ownership and Forgery Allegations

The spouses Soriano were the registered owners of two parcels: one (approx. 1,492 sqm) covered originally by TCT No. T‑14467 (fair market value stated P626,640.00) and the other (approx. 1,021 sqm) covered originally by TCT No. T‑14466 (fair market value stated P428,820.00). The record shows that Rey Viado caused execution and annotation of an Affidavit of Loss and used forged signatures to obtain reissuance of Owner’s Duplicate Copies for those TCTs, and that forged Special Power(s) of Attorney and forged instruments of conveyance were used to procure reissued titles and transfers into the names of third parties.

Subsequent Transactions with Lenders and Purchasers

Using the reissued titles derived from forged instruments, Viado and others caused transfers and encumbrances: TCT No. T‑14467 was allegedly conveyed and became TCT No. T‑85840 (registered in Jessica Jose’s name) and was mortgaged to and foreclosed by Maria Luzviminda Patimo; TCT No. T‑14466 was allegedly conveyed and became TCT No. 87113 (registered in Vanessa Hufana’s name), which Hufana presented to BPI Family as collateral for a P2,000,000 loan. The spouses’ attorney‑in‑fact discovered these registrations when attempting to pay realty taxes and thereafter annotated an adverse claim and filed suit.

Procedural Posture — Parallel Civil Cases and Parties’ Positions

The spouses filed two related civil cases seeking annulment of sale, reconveyance of titles, and damages. Defendants included Viado, the transferees (Jose and Hufana), Patimo (in the Jose transaction), and BPI Family (in the Hufana transaction). Viado admitted involvement in the petition for reissuance but denied forging the documents. Jose and Hufana defaulted after summons by publication. BPI Family answered and pleaded it was a mortgagee in good faith entitled to rely on the face of the title and loan documents; Patimo likewise asserted she investigated the title before lending and claimed good faith.

Trial Court Findings and Judgment (RTC)

The RTC found that signatures in the Special Power of Attorney, Affidavit of Loss, Acknowledgment of Trust, and Deed of Absolute Sale were forged; consequently, subsequent reissued TCTs and transfers were null and void. The RTC nevertheless found that Patimo and BPI Family dealt with the fraudulently acquired properties in good faith. The RTC dismissed claims against Patimo and BPI Family for lack of merit, but ordered Viado, Jose and Hufana to pay indemnity and other damages; it quantified actual damages based on amounts obtained by the fraudulent actors (e.g., loans and foreclosure proceeds) and awarded recovery of litigation expenses actually incurred by the spouses.

Court of Appeals Disposition

On appeal, the Court of Appeals modified the RTC decision with respect to BPI Family: it held that BPI Family was not a mortgagee in good faith, declared TCT No. 87113 and the mortgage loan agreement with BPI Family null and void, directed the Register of Deeds to cancel liens/encumbrances on the original copy of TCT No. T‑14466 and to reinstate the Owner’s Duplicate Copy of TCT No. T‑14466, and ordered BPI Family to be solidarily liable with Viado and Hufana for the damages previously awarded by the RTC. The CA affirmed the RTC as to other defendants; it found Patimo a mortgagee in good faith based on her verification of title and ocular inspection, but found BPI Family did not exercise the elevated diligence required of banking institutions.

Legal Issue Presented on Review

The petition to the Supreme Court presented three principal assignments of error by BPI Family: (1) the CA erred in reversing the RTC’s finding that BPI Family was a mortgagee in good faith; (2) the CA erred in holding BPI Family solidarily liable for actual damages; and (3) the CA erred in affirming the RTC’s award of moral and exemplary damages as to BPI Family.

Supreme Court Analysis — Mortgagee in Good Faith and Bank Diligence

The Supreme Court treated the question of mortgagee in good faith as generally factual but accepted review under exceptions where lower courts’ rulings conflict. The Court reiterated doctrinal rules: while the Torrens system generally permits third parties to rely on the certificate of title, banks and financial institutions are held to a higher standard of diligence when dealing with real property; they are expected to go beyond facial inspection of title, perform ocular inspection, verify ownership, and investigate suspicious circumstances. The Court also emphasized that where a title is obtained through forged instruments, the transferee or mortgagee who acquired rights on the basis of forgeries acquires no valid title or right. Applying these principles to the record, the Court sustained the CA’s finding that BPI Family was not a mortgagee in good faith because: (a) Hufana initially presented a TCT still in the spouses’ names when seeking a loan — a circumstance that should have raised a red flag; (b) BPI Family did not contact the spouses or their attorney‑in‑fact to verify Hufana’s authority or the authenticity of the transfer; and (c) the bank processed the loan while the alleged TCT in Hufana’s name (TCT No. 87113) had been issued only after the loan application and mortgage agreement were executed, demonstrating insufficient verification. Accordingly, the Court affirmed that BPI Family failed to exercise the elevated standard of care required of mortgagee‑banks and therefore was not a mortgagee in good faith.

Supreme Court Analysis — Actual, Moral and Exemplary Damages

On actual damages, the Court examined the basis for the RTC’s awards: the RTC had grounded actual damages on the premise that the spouses could no longer recover the properties, awarding amounts tied to the pecuniary benefit the wrongdoers derived (e.g., loan proceeds, foreclosure sale amounts). The Supreme Court noted that because the CA and the Supreme Court reinstated the spouses’ title to the property (reconveyance ordered), there is no longer a legal basis for actual damages premised on non‑recovery of the properties. Consequently, the Court held that the CA erred in imposing solidary liability on BPI Family for the actual damage awards that were premised on permanent loss of the

Case Syllabus (G.R. No. 214939)

Case Reference and Procedural Posture

Supreme Court Third Division decision reported at 873 Phil. 419, G.R. No. 214939, dated June 08, 2020; opinion penned by Justice Gaerlan.
Petition for Review on Certiorari from the Court of Appeals (CA) Decision dated January 28, 2014 and Resolution dated September 17, 2014 in CA‑G.R. CV No. 100039.
The petition assails the CA’s modification of the Regional Trial Court (RTC), Branch 60, Baguio City, July 19, 2011 Decision in Civil Cases Nos. 6210‑R and 6211‑R and the denial of reconsideration by the CA.
The appeal presents questions regarding: (a) whether BPI Family Savings Bank, Inc. (BPI Family) was a mortgagee in good faith; (b) whether BPI Family was properly held solidarily liable for damages to the spouses Soriano; and (c) whether the awards of moral and exemplary damages were correctly affirmed.

Material Facts

Spouses Jacinto Servo Soriano and Rosita Fernandez Soriano owned two parcels of land in Chapis Village, Baguio City:
- Parcel covered by TCT No. T‑14467 (later TCT No. 85840): area 1,492 sq.m., fair market value P626,640.00.
- Parcel covered by TCT No. T‑14466 (later TCT No. 87113): area approx. 1,021 sq.m., fair market value P428,820.00.
On April 21, 2004, Rey Viado executed an Affidavit of Loss purportedly by the spouses Soriano, forged their signatures, and caused annotation of that Affidavit on TCT Nos. T‑14466 and T‑14467.
Using forged signatures, Viado caused execution of a Special Power of Attorney and filed petitions for re‑issuance of Owner’s Duplicate Copies of TCT Nos. T‑14466 and T‑14467 before the Baguio City RTC; the RTC declared the owners’ duplicate copies legally lost and directed issuance of new titles.
Re‑issued (reconstituted) TCTs were thereafter used by Viado and others to secure loans from Maria Luzviminda Patimo (Patimo) and from petitioner BPI Family Savings Bank.
In Civil Case No. 6210‑R, plaintiffs alleged Jessica Jose, in confederation with Viado, executed an “Acknowledgment of Trust” appearing to derive from plaintiffs and resulting in transfer/registration of TCT No. T‑14467 to Jose (registered as TCT No. T‑85840); Jose obtained a loan from Patimo using that title as collateral.
In Civil Case No. 6211‑R, plaintiffs alleged Vanessa P. Hufana secured a P2,000,000.00 loan from BPI Family using TCT No. 87113 (claimedly registered in Hufana’s name) as collateral; plaintiffs alleged forgery and negligent bank inquiry.
Plaintiffs’ attorney‑in‑fact, Gloria Cruz, discovered unexpected transfers while attempting to pay realty taxes and thereafter annotated adverse claims and filed suit; adverse claim on TCT No. 87113 dated January 13, 2006.
Defendants Jose and Hufana defaulted after summons by publication; Viado filed an Answer admitting the Petition for issuance of new owner’s copies but denying execution of the Special Power of Attorney and claiming role as signatory to documents prepared and presented by Marilou Soriano.
BPI Family’s Answer in Civil Case No. 6211‑R admitted paragraphs 1 and 8 of the Complaint, denied material allegations, asserted it dealt with Hufana in full good faith, relied on the face of the title, and relied on notarized loan documents entitled to strong presumption of regularity.

Trial Court (RTC) Findings and Decision (July 19, 2011)

RTC found signatures of the spouses Soriano in the Special Power of Attorney, Affidavit of Loss, Acknowledgment of Trust, and Deed of Absolute Sale used by Viado and Hufana were forgeries.
RTC held that the subsequent reissued TCTs, including that presented to BPI Family, were null and void.
RTC nevertheless found Patimo and BPI Family dealt with the fraudulently acquired properties in good faith.
RTC judgments:
- Civil Case No. 6210‑R: Dismissed as to Patimo for lack of merit; Jose and Viado ordered to solidarily pay plaintiffs P1,000,000 (actual), P300,000 (moral), P200,000 (exemplary), P25,000 (attorney’s fees) and costs.
- Civil Case No. 6211‑R: Dismissed as to BPI Family for lack of merit; Viado and Hufana ordered to solidarily pay plaintiffs P2,000,000 (actual), P300,000 (moral), P200,000 (exemplary), P25,000 (attorney’s fees) and costs.
- Both cases: Jose, Viado and Hufana ordered to solidarily pay plaintiffs Php164,911.69 as actual expenses incurred in prosecution.

Court of Appeals Ruling (January 28, 2014) and Rationale

CA partially reversed the RTC as to BPI Family and reinstated the spouses Soriano’s copy of TCT No. T‑14466, holding:
- Transfer Certificate of Title No. T‑87113 and the Mortgage Loan Agreement dated July 25, 2005 with BPI Family were declared null and void.
- Register of Deeds ordered to cancel liens/encumbrances on original TCT No. T‑14466 and reinstate Owner’s Duplicate Copy of TCT No. T‑14466.
- BPI Family ordered to solidarily pay plaintiffs in accordance with the RTC’s July 19, 2011 Decision.
CA’s reasoning differentiated between Patimo and BPI Family:
- Patimo found a mortgagee in good faith: she conducted verification with the Register of Deeds and an ocular inspection; she was an experienced financier and exercised proper diligence.
- BPI Family found not a mortgagee in good faith: bank failed to exercise proper diligence expected of banking institutions; critical facts that should have raised a red flag were ignored, including that Hufana presenting a title in the name of the plaintiffs should have induced inquiries into her authority to mortgage the property.
- CA emphasized that persons who deliberately ignore a significant fact that could create suspicion are not innocent purchasers for value and that banks must exercise a greater degree of diligence than individuals.

Issues Presented to the Supreme Court

Whether the CA erred in reversing the RTC’s finding that BPI Family was a mortgagee in good faith.
Whether the CA erred in holding BPI Family solidarily liable for damages to the spouses Soriano.
Whether the CA erred in affirming the RTC’s award of moral and exemplary damages against BPI Family.

Supreme Court’s Review Standard and Scope

The question of whether a mortgagee is in good faith is primarily a question of fact, generally not reviewable in a Rule 45 petition.
Exception applied: the Court cons