Case Summary (G.R. No. 50464)
Procedural Background
The case began when PNB sought to modify the October 19, 2010 Decision and July 11, 2011 Resolution of the Court of Appeals (CA) which affirmed the Regional Trial Court (RTC) ruling that annulled the SPA. The RTC had found that the consent of the Spouses Anay was vitiated during the execution of the SPA, thus declaring it void, along with subsequent documents tied to the foreclosure of their property.
Nature of the Loan and Security
Spouses Lee obtained a loan from PNB that was initially P400,000 but later increased to P7,500,000 under a Revolving Credit Line. To secure the loan, they utilized a parcel of land belonging to the Spouses Anay, covered by Transfer Certificate of Title (TCT) No. T-25805. The Spouses Anay executed an SPA authorizing the Spouses Lee to use their property as collateral.
Circumstances of Execution of the SPA
There were significant concerns about the circumstances surrounding the execution of the SPA. Spouses Anay, who were elderly and frail, did not fully understand the transaction. Their daughter facilitated the signing due to their physical limitations, underscoring a lack of informed consent. Despite being the registered owners of the property, the Spouses Anay did not receive any proceeds from the loan, suggesting a one-sided and coerced arrangement.
RTC Findings
The RTC concluded that the Spouses Anay's consent to the SPA was vitiated and subsequently declared the SPA null and void. This led to the invalidation of related documents, including the Sheriff’s Certificate of Sale that underpinned the foreclosure. The RTC ordered the reinstatement of TCT No. T-25805 in the name of the heirs of Angel Anay.
CA Ruling
PNB's appeal to the CA argued that the cancellation of its title constituted a collateral attack under Presidential Decree No. 1529. The CA dismissed this claim, ruling that the title’s issuance was illegal from the outset due to the annulled SPA. It also denied PNB's claims for restitution and damages, finding that these issues were not timely raised.
Arguments from PNB in the Petition
In its petition to the Supreme Court, PNB maintained that as a mortgagee in good faith, its title should not be subjected to collateral attack. PNB sought to shift liability for damages and restitution to the Spouses Lee, claiming that they acted in bad faith.
Supreme Court's Ruling
The Court upheld the CA's decision. It reaffirmed that the consent of the Spouses Anay was vitiated and that PNB, having taken part in the transaction, could not register its claim as a bona fide mortgagee. The Court determined that the validity of
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Case Background and Parties Involved
- The case is a Petition for Review on Certiorari filed by the Philippine National Bank (PNB), seeking modification of the Court of Appeals (CA) Decision dated October 19, 2010, and Resolution dated July 11, 2011.
- Respondents include Spouses Angel and Buenvenida Anay (Spouses Anay), and Spouses Francisco and Dolores Lee (Spouses Lee).
- The initial court ruling from the Regional Trial Court (RTC), Branch 23, Cagayan de Oro City, ordered the cancellation of PNB’s title concerning the property of the Spouses Anay.
Loan Agreement and Special Power of Attorney
- Spouses Lee acquired a loan from PNB, initially for P400,000.00, later increased to P7,500,000.00 under a Revolving Credit Line.
- To secure this loan, they used a property owned by Spouses Anay (5,503 square meters, covered by TCT No. T-25805) as collateral.
- The Spouses Anay executed a Special Power of Attorney (SPA) allowing Spouses Lee to use their property as security for the loan.
Foreclosure Proceedings
- Following the Spouses Lee's failure to meet loan obligations, PNB initiated extrajudicial foreclosure proceedings against the mortgaged properties, including that of the Spouses Anay.
- PNB became the highest bidder in the auction, resulting in the issuance of a Sheriff's Certificate of Sale and subsequent consolidation of title, with TCT No. T-25805 being canceled.
Legal Action by Spouses Anay
- The Spouses