Case Summary (G.R. No. 179625)
Facts and Procedural History
On June 6, 1982, Erlinda Concepcion borrowed P30,000 from the bank, purportedly using a SPA allegedly executed by petitioner as security for the loan. Concepcion failed to pay, prompting foreclosure and auction sale of petitioner’s house and lot without requisite notice. Petitioner contested the SPA’s validity and mortgage’s authenticity, claiming forgery and improper foreclosure. Respondent bank denied forgery and maintained compliance with legal requirements. The RTC declared the SPA and mortgage null and void, awarding attorney’s fees and moral damages to petitioner and ordering indemnity from Concepcion and her husband to the bank. The Court of Appeals reversed, affirming the validity of the SPA and mortgage and dismissing petitioner’s complaint, applying equitable estoppel to hold petitioner liable. Petitioner sought review on certiorari.
Applicable Law
The case was decided under the 1987 Philippine Constitution and pertinent laws, including the Civil Code provisions on agency and mortgages, and the Rural Bank Act. Article 1878 of the Civil Code mandates that to bind a principal, an agent must execute deeds expressly in the name and representation of the principal. The court also considered jurisprudence affirming that notarized documents enjoy the presumption of regularity but this may be overcome by evidence of forgery or lack of authority.
Issue Presented
The core issue was whether the SPA and the subsequent Real Estate Mortgage bind petitioner as principal, given that the mortgage was executed by Concepcion who signed in her personal capacity without expressly indicating agency. Further issues involved the validity of the foreclosure sale and whether petitioner was negligent or estopped to deny liability.
Petitioner’s Arguments
Petitioner contended that the SPA’s signatures were forged and that the mortgage was executed solely by Concepcion personally, not in a representative capacity. She denied incurring liability for Concepcion’s loan, disclaimed negligence, and argued the bank was at fault for failing to inspect titles and properties properly. Petitioner also assailed the foreclosure for lack of proper notice.
Respondent Bank’s Arguments
Respondent bank relied on the presumption of regularity of a notarized SPA and asserted compliance with foreclosure regulations, citing exemption from publication requirements under the Rural Bank Act for loans below P100,000. It attributed negligence to petitioner for entrusting her title to Concepcion and contended that the mortgage and foreclosure were valid and binding.
Supreme Court’s Ruling on Agency and Validity of Mortgage
The Supreme Court held that a mortgage signed by an agent in his or her personal capacity, without explicit notation that the agent acted for and on behalf of the principal, binds only the agent and not the principal. Citing precedent including Philippine Sugar Estates Development Co. v. Poizat and other cases, the Court reiterated that the mortgage must clearly show agency to be enforceable against the principal.
In this case, since the Real Estate Mortgage was signed by Concepcion solely in her own name without any indication of representative capacity, petitioner was not bound by it. Therefore, the mortgage was void and unenforceable against petitioner regardless of the SPA’s validity.
Ruling on Negligence and Liability
The Court found respondent bank liable for negligence, noting the bank’s failure to properly indicate agency in the mortgage, investigate the authenticity of the SPA, and exercise due diligence, especially given the hasty processing and approval of the loan within a few days. The bank’s failure to include language such as “as attorney-in-fact” in the mortgage instrument was a critical oversight precluding binding effect on petitioner.
Petitioner, while not entirely blameless in entrusting her title to Concepcion, was nevertheless not liable for the mortgage loan. The Court ordered the bank to pay petitioner’s attorney’s fees and costs of suit but deleted the award of moral damages due to lack of proof of bad faith or malice.
Liability of Third Parties
Erlinda Concepcion and her husband were held liable to respondent bank for the unpaid loan obligation under the
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Case Syllabus (G.R. No. 179625)
Facts and Procedural History
- On April 29, 1988, petitioner Nicanora G. Bucton filed a case against Erlinda Concepcion, the Rural Bank of El Salvador, and Sheriff Reynaldo Cuyong before the Regional Trial Court (RTC) of Cagayan de Oro, for annulment of mortgage, foreclosure, and special power of attorney (SPA).
- Petitioner claimed ownership of the property covered by Transfer Certificate of Title (TCT) No. T-3838 in Cagayan de Oro City.
- Concepcion borrowed the title on June 6, 1982, under the pretext of showing it to interested buyers, but instead obtained a loan of P30,000 from the respondent bank.
- The loan was secured by mortgaging petitioner’s house and lot via a SPA allegedly executed by petitioner in favor of Concepcion.
- Concepcion defaulted on the loan, leading to foreclosure by sheriff without proper Notice of Extrajudicial Foreclosure or Auction Sale.
- The property was auctioned and sold to the respondent bank.
- Respondent bank denied forgery accusations, asserted compliance with foreclosure procedures, and filed a third-party complaint against Concepcion and Agnes Bucton Lugod for indemnity.
- Summons to Concepcion was unserved; petitioner moved to drop her as defendant, which the court granted.
- During trial, petitioner denied executing or notarizing the SPA, claimed forgery of signatures, and asserted that the house foreclosed is covered by a different title (TCT No. 3839) than what was mortgaged.
- Witness Emma Nagac testified to signing the SPA under suspicious circumstances and that petitioner’s signature was forged.
- Respondent bank presented employees who testified to loan approval and property inspection, confirming that Concepcion executed the mortgage and loan in her personal capacity.
- The RTC ruled on February 23, 1998, that the SPA was forged and declared null and void the SPA, mortgage, foreclosure sale, and related titles, awarding attorney’s fees and moral damages to petitioner.
- The RTC later ordered Concepcion and husband to indemnify respondent bank under the third-party complaint.
- Upon appeal, the Court of Appeals (CA) reversed the RTC ruling, upheld the validity of the SPA, mortgage, foreclosure, and title, and dismissed petitioner’s complaint, citing equitable estoppel and petitioner’s negligence in entrusting the title.
- CA’s denial of petitioner’s motion for reconsideration led to this Petition for Review under Rule 45.
Issues Presented
- Whether petitioner can be held liable for the loan/mortgage when she neither executed it personally nor through an attorney-in-fact.
- Whether under Article 1878 of the New Civil Code, petitioner can be made primarily liable as surety in the absence of a valid SPA.
- Whether the CA was correct in dismissing petitioner’s claim based on alleged forged signatures and denying validity of RTC’s findings.
- Whether petitioner’s supposed negligence was the proximate cause of loss despite her denial of involvement in the loan or mortgage.
- Whether respondent bank’s employees’ testimonies regarding property inspection and SPA verification were