G.R. No. 199582 , July 7, 2020.
JULIE PARCON-SONG, PETITIONER, VS. LILIA B. PARCON, JOINED BY HER HUSBAND JOAQUIN A. PARCON, MAYBANK PHILIPPINES, INC. (FORMERLY PNB REPUBLIC BANK), AND THE REGISTER OF DEEDS OF QUEZON CITY, RESPONDENTS.

FACTS

Petitioner Julie Parcon-Song is the daughter of respondents Spouses Joaquin and Lilia Parcon. In 1995, the Parcon Spouses obtained loans from respondent Maybank Philippines, Inc. and executed a real estate mortgage over a parcel of land covered by Transfer Certificate of Title No. 107064 registered in Lilia Parcon’s name. In 2001, after the spouses defaulted, Maybank foreclosed the mortgage, emerged as the highest bidder, and was issued a certificate of sale. On March 4, 2003, Julie filed a Complaint for annulment of title, reconveyance, annulment of mortgage and foreclosure proceedings, and declaration of family home. She asserted she purchased the property in 1983, paid in full, and used her mother’s name by way of trust, with the title registered in Lilia’s name in 1994. She claimed her parents ignored her demands for reconveyance and mortgaged the property without her consent. The Parcon Spouses were declared in default. Maybank argued it was a mortgagee in good faith, having verified the title with the Register of Deeds. The Regional Trial Court dismissed the Complaint, finding the mortgage valid, no trust proven, and Maybank not affected by any unannotated interest. It also found the foreclosure valid and ruled evidence of Maybank being a foreign corporation irrelevant to the sale’s validity. The Court of Appeals affirmed, finding the title clean and Maybank a mortgagee in good faith, and ruled the extrajudicial sale valid under Act No. 3135 . It also found Maybank, as a licensed foreign bank, had the right to acquire the property in foreclosure under Republic Act No. 7721 , accorded equal treatment as domestic banks. Julie filed a Petition for Review on Certiorari, arguing the mortgage was void as she was the true owner, Maybank was not in good faith, and as a foreign corporation, Maybank was constitutionally prohibited from owning land. The case was referred to the Court En Banc.

ISSUE

The primary issues involve: (1) the validity of the real estate mortgage and foreclosure proceedings; (2) whether Maybank was a mortgagee in good faith; and (3) whether Maybank, as a foreign bank, is constitutionally prohibited from acquiring land through foreclosure.

RULING

The Supreme Court denied the Petition. It held that Maybank was a mortgagee in good faith. The bank exercised due diligence by verifying the title with the Register of Deeds, which showed Lilia Parcon as the registered owner with no liens or encumbrances. The Court emphasized that a mortgagee in good faith is entitled to rely on the face of the certificate of title. The claim of an implied trust by Julie was not annotated on the title and thus did not bind Maybank. Regarding the constitutional issue, the Court ruled that the acquisition of the foreclosed property by Maybank, a foreign bank, did not violate the constitutional prohibition on alien ownership of land. The Court cited Republic Act No. 7721 , as amended by Republic Act No. 10641 , which allows foreign banks to operate in the Philippines and grants them the same privileges and limitations as domestic banks, including the right to foreclose mortgages and acquire properties at foreclosure sales. However, such acquisition is not absolute ownership; the foreign bank holds the property in trust and is required to dispose of it to qualified Philippine nationals within a prescribed period (five years under relevant laws). This temporary possession and duty to sell ensure the preservation of national patrimony. The Court found the foreclosure proceedings valid and that Julie failed to substantiate her claims of ownership and trust.