FIRST DIVISION
G.R. No. 191636, January 16, 2017
PRUDENTIAL BANK (NOW BANK OF THE PHILIPPINE ISLANDS), Petitioner, v. RONALD RAPANOT AND HOUSING & LAND USE REGULATORY BOARD, Respondents.
D E C I S I O N
CAGUIOA, J:
WHEREFORE, premises considered, judgment is hereby rendered as follows:On July 25, 2002, the Bank received a copy of Rapanot's Manifestation dated July 24, 2002, stating that he had received a copy of the Arbiter's Decision.27 On July 29, 2002, the Bank filed a Manifestation and Motion for Clarification,28 requesting for the opportunity to file its position paper and draft decision, and seeking confirmation as to whether a decision had indeed been rendered notwithstanding the fact that it had yet to file such submissions.SO ORDERED.26ChanRoblesVirtualawlibrary
- Declaring the mortgage over the condominium unit No. 2308-B2 covered by Condominium Certificate of Title No. 2383 in favor of respondent Bank as null and void for violation of Section 18 of Presidential Decree No. 957[;]
- Ordering respondent Bank to cancel the mortgage on the subject condominium unit, and accordingly, release the title thereof to the complainant;chanrobleslaw
- Ordering respondents to pay jointly and severally the complainant the following sums:
- P100,000.00 as moral damages,
- P100,000.00 as exemplary damages,
- P50,000.00 as attorney's fees,
- The costs of litigations (sic), and
- An administrative fine of TEN THOUSAND PESOS (P10,000.00) payable to this Office fifteen (15) days upon receipt of this decision, for violation of Section 18 in relation to Section 38 of PD 957;
- Directing the Register of Deeds of Mandaluyong City to cancel the aforesaid mortgage on the title of the subject condominium unit; and
- Immediate[ly] upon receipt by the complainant of the owner's duplicate Condominium Certificate of Title of Unit 2308-B2, delivery of CCT No. 2383 over Unit 2308-B2 in favor of the complainant free from all liens and encumbrances.
x x x xProceedings before the Office of the President
With respect to the first issue, we find the same untenable. Records show that prior to the rendition of its decision, the office below has issued and duly sent an Order to the parties declaring respondent GDREC in default and directing respondent Bank to submit its position paper. x x x33 (Underscoring omitted)ChanRoblesVirtualawlibrary
Petitioner asserts that it was denied due process because it did not receive any notice to file its position paper nor a copy of the Housing Arbiter's Decision. Rapanot, meanwhile, contends that the Housing Arbiter sent petitioner a copy of the April 5, 2002 Order to file position paper by registered mail, as evidenced by the list of persons furnished with a copy thereof. However, according to Rapanot, petitioner "refused to receive" it.With respect to the Bank's liability for damages, the CA held thus:
x x x x
In the instant case, there is no denial of due process. Petitioner filed its Answer where it was able to explain its side through its special and affirmative defenses. Furthermore, it participated in the preliminary hearing and attended scheduled conferences held to resolve differences between the parties. Petitioner was also served with respondent's position paper and draft decision. Having received said pleadings of respondent, petitioner could have manifested before the Housing Arbiter that it did not receive, if correct, its order requiring the submission of its pleadings and therefore prayed that it be given time to do so. Or, it could have filed its position paper and draft decision without awaiting the order to file the same. Under the circumstances, petitioner was thus afforded and availed of the opportunity to present its side. It cannot make capital of the defense of denial of due process as a screen for neglecting to avail of opportunities to file other pleadings.37ChanRoblesVirtualawlibrary
Section 18 of PD 957, requires prior written authority of the HLURB before the owner or developer of a subdivision lot or condominium unit may enter into a contract of mortgage. Hence, the jurisdiction of the HLURB is broad enough to include complaints for annulment of mortgage involving violations of PD 957.The Bank filed a Motion for Reconsideration, which was denied by the CA in a Resolution dated March 17,2010.39 The Bank received a copy of the resolution on March 22, 2010.39-a
Petitioner argues that, as a mortgagee in good faith and for value, it must be accorded protection and should not be held jointly and severally liable with Golden Dragon and its President, Victoria Vasquez.
It is true that a mortgagee in good faith and for value is entitled to protection, as held in Rural Bank of Compostela vs. Court of Appeals but petitioner's dependence on this ruling is misplaced as it cannot be considered a mortgagee in good faith.
The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with property covered by a certificate of title, as mortgagees, are not required to go beyond what appears on the face of the title.
However, while a mortgagee is not under obligation to look beyond the certificate of title, the nature of petitioner's business requires it to take further steps to assure that there are no encumbrances or liens on the mortgaged property, especially since it knew that it was dealing with a condominium developer. It should have inquired deeper into the status of the properties offered as collateral and verified if the HLURB's authority to mortgage was in fact previously obtained. This it failed to do.
It has been ruled that a bank, like petitioner, cannot argue that simply because the titles offered as security were clean of any encumbrances or lien, it was relieved of taking any other step to verify the implications should the same be sold by the developer. While it is not expected to conduct an exhaustive investigation of the mortgagor's title, it cannot be excused from the duty of exercising the due diligence required of banking institutions, for banks are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered property, for their business is affected with public interest.
As aforesaid, petitioner should have ascertained that the required authority to mortgage the condominium units was obtained from the HLURB before it approved Golden Dragon's loan. It cannot feign lack of knowledge of the sales activities of Golden Dragon since, as an extender of credit, it is aware of the practices, both good or bad, of condominium developers. Since petitioner was negligent in its duty to investigate the status of the properties offered to it as collateral, it cannot claim that it was a mortgagee in good faith.38ChanRoblesVirtualawlibrary
(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. x x x45 (Emphasis supplied)ChanRoblesVirtualawlibraryThe Bank avers that the second, fourth and eleventh exceptions above are present in this case. However, after a judicious examination of the records of this case and the respective submissions of the parties, the Court finds that none of these exceptions apply.
Clearly, the Arbiter cannot be faulted for rendering his Decision, since the rules then prevailing required him to do so.RULE VI - PRELIMINARY CONFERENCE AND RESOLUTION
x x x x
Section 4. Position Papers. - If the parties fail to settle within the period of preliminary conference, then they will be given a period of not more than thirty (30) calendar days to file their respective verified position papers, attaching thereto the affidavits of their witnesses and documentary evidence.
In addition, as provided for by Executive Order No. 26, Series of 1992, the parties shall be required to submit their respective draft decisions within the same thirty (30)-day period.
Said draft decision shall state clearly and distinctly the findings of facts, the issues and the applicable law and jurisprudence on which it is based. The arbiter may adopt in whole or in part either of the parties' draft decision, or reject both and prepare his own decision.
The party who fails to submit a draft decision shall be fined P2,000.00.
Section 5. Summary Resolution - With or without the position paper and draft decision[,] the Arbiter shall summarily resolve the case on the basis of the verified pleadings and pertinent records of the Board. (Emphasis and underscoring supplied)ChanRoblesVirtualawlibrary
9. The claim that the Bank "refused to receive" the envelope that bore the Order cannot be given credence and is belied by the Bank's act of immediately manifesting before the Housing Arbiter that it had not yet received an order for filing the position paper and draft decision.52ChanRoblesVirtualawlibraryThis is specious, at best. More importantly, the records show that the Bank gained actual notice of the Arbiter's directive to file their position papers and draft decisions as early as May 22, 2002, when it was personally served a copy of Rapanot's position paper which made reference to the April 2002 Order.53 This shows as mere pretense the Bank's assertion that it learned of the Arbiter's Decision only through Rapanot's Manifestation.54 Worse, the Bank waited until the lapse of five (5) months before it took steps to secure a copy of the Arbiter's Decision directly from the HLURB for the purpose of assailing the same before the OP.
Section 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereof.ChanRoblesVirtualawlibraryIn Far East Bank & Trust Co. v. Marquez,58 the Court clarified the legal effect of a mortgage constituted in violation of the foregoing provision, thus:
The lot was mortgaged in violation of Section 18 of PD 957. Respondent, who was the buyer of the property, was not notified of the mortgage before the release of the loan proceeds by petitioner. Acts executed against the provisions of mandatory or prohibitory laws shall be void. Hence, the mortgage over the lot is null and void insofar as private respondent is concerned.59 (Emphasis supplied)ChanRoblesVirtualawlibraryThe Court reiterated the foregoing pronouncement in the recent case of Philippine National Bank v. Lim60 and again in United Overseas Bank of the Philippines, Inc. v. Board of Commissioners-HLURB.61
In Land Bank of the Philippines v. Belle Corporation, the Court exhorted banks to exercise the highest degree of diligence in its dealing with properties offered as securities for the loan obligation:In loan transactions, banks have the particular obligation of ensuring that clients comply with all the documentary requirements pertaining to the approval of their loan applications and the subsequent release of their proceeds.65
chanRoblesvirtualLawlibraryWhen the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for value is applied more strictly. Being in the business of extending loans secured by real estate mortgage, banks are presumed to be familiar with the rules on land registration. Since the banking business is impressed with public interest, they are expected to be more cautious, to exercise a higher degree of diligence, care and prudence, than private individuals in their dealings, even those involving registered lands. Banks may not simply rely on the face of the certificate of title. Hence, they cannot assume that, x x x the title offered as security is on its face free of any encumbrances or lien, they are relieved of the responsibility of taking further steps to verify the title and inspect the properties to be mortgaged. As expected, the ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of the bank's operations. x x x (Citations omitted)ChanRoblesVirtualawlibraryWe never fail to stress the remarkable significance of a banking institution to commercial transactions, in particular, and to the country's economy in general. The banking system is an indispensable institution in the modern world and plays a vital role in the economic life of every civilized nation. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have become an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, most of all, confidence. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required, of it.64 (Emphasis and underscoring supplied)ChanRoblesVirtualawlibrary
Petitioner argues that it is an innocent mortgagee whose lien must be respected and protected, since the title offered as security was clean of any encumbrance or lien. We do not agree.The Court can surely take judicial notice of the fact that commercial banks extend credit accommodations to real estate developers on a regular basis. In the course of its everyday dealings, the Bank has surely been made aware of the approval and notice requirements under Section 18 of PD 957. At this juncture, this Court deems it necessary to stress that a person who deliberately ignores a significant fact that could create suspicion in an otherwise reasonable person cannot be deemed a mortgagee in good faith.68 The nature of the Bank's business precludes it from feigning ignorance of the need to confirm that such requirements are complied with prior to the release of the loan in favor of Golden Dragon, in view of the exacting standard of diligence it is required to exert in the conduct of its affairs."x x x As a general rule, where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. This rule, however, admits of an exception as where the purchaser or mortgagee has knowledge of a defect or lack of title in the vendor, or that he was aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the property in litigation."ChanRoblesVirtualawlibraryPetitioner bank should have considered that it was dealing with a town house project that was already in progress. A reasonable person should have been aware that, to finance the project, sources of funds could have been used other than the loan, which was intended to serve the purpose only partially. Hence, there was need to verity whether any part of the property was already the subject of any other contract involving buyers or potential buyers. In granting the loan, petitioner bank should not have been content merely with a clean title, considering the presence of circumstances indicating the need for a thorough investigation of the existence of buyers like respondent. Having been wanting in care and prudence, the latter cannot be deemed to be an innocent mortgagee.
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as found by the Office of the President and by the CA. Petitioner should not have relied only on the representation of the mortgagor that the latter had secured all requisite permits and licenses from the government agencies concerned. The former should have required the submission of certified true copies of those documents and verified their authenticity through its own independent effort.
Having been negligent in finding out what respondent's rights were over the lot, petitioner must be deemed to possess constructive knowledge of those rights. (Emphasis supplied)ChanRoblesVirtualawlibrary
Endnotes:
1Rollo, pp. 8-23.
2 Id. at 28-41. Penned by Associate Justice Antonio L. Villamor, with Associate Justices Bienvenido L. Reyes (now a Member of this Court) and Japar B. Dimaampao, concurring.
3 Also spelled as "Vasquez" elsewhere in the records.
4Rollo, p. 30.
5 Id. at 31.
5-a Id. at 16-20.
6 Id. at 29.
7 Id. at 48.
8 Id. at 29.
9 Id. at 44.
10 Id. at 44-46.
11 Id. at 48 (dorsal portion).
12 Id. at 30, 68. P1,511,098.87 as reflected on page 68.
13 See id. at 11, 30.
14 Id. at 30.
15 Id.
16 Id. at 30-31, 69.
17 Id. at 31, 69.
18 Id. at 31, 70.
19 Id. at 12, 31.
20 Id. at 70.
21 Id.
22 Id. at 34, 75.
23 Id. at 75.
24 Id.
25cralawred Id.
26 Id. at 31-32.
27 Id. at 12.
28 Id. at 51-54.
29 Id. at 55-58.
30 Id. at 59-62. Based on the records, it appears that Rapanot's Motion for Execution and the Bank's Opposition thereto remain unresolved.
31 Id. at 13.
32 Id. at 32-33.
33 Id. at 14.
34 Id. at 14-15.
35 Id. at 15.
36 Id. at 34.
37 Id. at 34-36.
38 Id. at 37-40.
39 Id. at 42-43.
39-a Id. at 8.
39-b Id.
40 Id. at 65-89.
41 Id. at 92-99.
42 RULES OF COURT, Rule 45, Section 6.
43 Id.
44 Id. at Section 1.
45Ambray and Ambray, Jr. v. Tsourous, et al., G.R. No. 209264, July 5, 2016, pp. 6-7.
46Rollo, p. I 7.
47San Miguel Properties, Inc. v. BF Homes, Inc., G.R. No. 169343, August 5, 2015, 765 SCRA 131, 166.
48 Id.
49Rollo, p. 35.
50 Id.
51 Board of Commissioners Resolution No. R-586, series of 1996.
52Rollo, p. 94.
53 Id. at 70, 94.
54 Id. at 52.
55 Id. at 18.
56 Id. at 19.
57 The regulatory functions of the National Housing Authority was transferred to the Human Settlements Regulatory Commission (later HLURB) by virtue of Executive Order No. 648, series of 1981, which took effect on February 7, 1981.
58 465 Phil. 276 (2004).
59 Id. at 289.
60 702 Phil. 461 (2013).
61 G.R. No. 182133, June 23, 2015, 760 SCRA 300.
62 See rollo, p. 96.
63 G.R. No. 213241, August 1, 2016.
64 Id. at 8-9.
65Far East Bank and Trust Co. (now Bank of the Philippines Islands) v. Tentmakers Group, Inc., 690 Phil. 134, 146 (2012).
66Rollo, p. 69.
67 Supra note 58, at 287-288.
68Land Bank of the Philippines v. Belle Corporation, G.R. No. 205271, September 2, 2015, p. 13.