GR 152483; (July, 2006) (Digest)
G.R. No. 152483 July 14, 2006
RURAL BANK OF SIATON, (NEGROS ORIENTAL), INC., petitioner, vs. FELIX MACAJILOS and QUIRICO MACAJILOS, JR., respondents.
FACTS
Respondents Felix and Quirico Macajilos, Jr. are the children and compulsory heirs of Gregoria Macalipay, who owned a parcel of land in Siaton, Negros Oriental. Upon Gregoria’s death in 1959, the respondents inherited the property. In 1975, they permitted their relative, Juanito Macalipay, to build and reside on the land. After Juanito’s death, his wife, Fidela Macalipay, and their son, Lamberto, continued possession. Lamberto was the manager of petitioner Rural Bank of Siaton, Inc. (RBSI). Fidela executed a falsified “Affidavit of Heirship” claiming sole ownership, secured a tax declaration in her name, and used the property as collateral for a loan from RBSI. Upon Fidela’s default, RBSI foreclosed and purchased the property at auction.
ISSUE
The principal issues are: (1) whether the Macajilos brothers have superior ownership rights over the property; and (2) whether RBSI was a mortgagee in good faith, thereby acquiring valid title through the foreclosure sale.
RULING
The Supreme Court affirmed the decisions of the lower courts, ruling in favor of the Macajilos brothers. On the first issue, the Court upheld their ownership, finding they successfully proved their inheritance from Gregoria through preponderant evidence, including tax declarations in their mother’s name and their continuous possession. Fidela’s claim, based on a falsified affidavit, conferred no valid title. On the second issue, the Court ruled RBSI was not a mortgagee in good faith. A mortgagee must exercise due diligence in verifying the mortgagor’s title. RBSI, through its manager Lamberto who was Fidela’s son, was in a position to know the property’s true ownership but failed to conduct a basic investigation. It relied solely on the tax declaration and affidavit without inspecting the premises or verifying claims with the actual occupants. This constituted gross negligence, preventing it from acquiring the status of a purchaser in good faith at the foreclosure sale. Consequently, the foreclosure and auction were declared null and void. The award of moral damages and attorney’s fees was sustained due to RBSI’s bad faith, but the award of exemplary damages was deleted for lack of sufficient basis.