G.R. No. 100755 February 10, 1994
CRISTETA BAUTISTA, REMEDIOS MEJIA-BADUA, CATALINA MEJIA, LAURETA MEJIA, ROSITA MEJIA, MILAGROS MEJIA, JUAN MEJIA, CANDIDA MEJIA, ADRIANA MEJIA, and FAUSTO MEJIA, petitioners, vs. MANGALDAN RURAL BANK, INC., THRU ITS PRESIDENT, DR. VICENTE JIMENEZ, REGISTER OF DEEDS OF PANGASINAN, EFREN RODRIGUEZ: and THE HONORABLE COURT OF APPEALS, respondents.

FACTS

Petitioner Cristeta Bautista mortgaged her conjugal share (one-half) of a parcel of land covered by TCT No. 1507 to respondent Mangaldan Rural Bank for P2,000.00 in December 1975, with the mortgage inscription specifically stating only half of the land was encumbered. The mortgage was extrajudicially foreclosed on April 18, 1978, and the bank became the highest bidder. After the redemption period lapsed, the bank consolidated ownership over the entire parcel of land, instead of only the mortgaged half. Consequently, a new title (TCT No. 130847) was issued in the bank’s name. On December 18, 1979, the bank sold the entire property to respondent Efren Rodriguez. Petitioners filed a complaint for annulment and/or cancellation of the subsequent deeds and titles. The trial court ruled in favor of petitioners, annulling the documents to the extent of one-half of the land and ordering respondents to jointly and severally place petitioners in possession of that half. It also awarded petitioners P5,000.00 in damages, P11,750.00 in attorney’s fees, and P5,000.00 in litigation expenses. The Court of Appeals reversed the awards for damages, attorney’s fees, and litigation expenses, prompting this petition.

ISSUE

Whether or not the petitioners are entitled to recover damages and attorney’s fees as a result of the admitted mistake of respondent bank in selling the entire lot, instead of only half thereof, to respondent Efren Rodriguez.

RULING

Yes. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision with modifications. The Court found that the respondent bank, through its president Dr. Vicente Jimenez, committed gross negligence in consolidating ownership of and selling the entire property, depriving petitioners of their rightful share. The bank’s subsequent apathy and failure to rectify the mistake, coupled with its filing of a counterclaim against petitioners, demonstrated bad faith. Respondent Rodriguez was found not to be an innocent purchaser for value, as examination of the title’s annotations would have revealed the mortgage covered only half the land, and he showed bad faith by refusing to return the half after being informed of the error. The cause of action was not contractual but based on quasi-delict under Article 20 of the Civil Code. For the mental anguish, sleepless nights, and serious anxiety suffered by petitioners, respondents were held jointly and severally liable for moral damages, increased to P10,000.00. To deter the bank from similar acts, exemplary damages of P10,000.00 were also awarded against it. The trial court’s awards for attorney’s fees and litigation expenses were reinstated.