G.R. No. 157862. April 16, 2009.
PHILIPPINE COUNTRYSIDE RURAL BANK (LILOAN, CEBU), INC., Petitioner, vs. JOVENAL B. TORING, Respondent.

FACTS

Respondent Jovenal B. Toring is the registered owner of a 13,890 sqm parcel of land covered by TCT No. 26401. On July 8, 1993, he secured a loan from petitioner Philippine Countryside Rural Bank. To secure the loan, a Real Estate Mortgage contract was executed covering the entire 13,890 sqm land, and respondent surrendered the owner’s duplicate copy of TCT No. 26401 to the bank. Respondent alleged that prior to the mortgage, he had sold 5,000 sqm of the land to Edwin Jumao-as on May 25, 1993, and that the bank, knowing of this sale, only approved a loan of ₱1,000,000. However, the mortgage contract stated the loan amount as ₱2,000,000 and covered the entire land area. Jumao-as later donated 2,000 sqm of the purchased portion to Barangay Basak. The Register of Deeds refused to register the deed of sale and donation due to lack of an approved subdivision plan. Barangay Basak filed a petition in the RTC of Lapu-Lapu City, which on November 23, 1993, ordered the annotation of the deed of sale on TCT No. 26401 and directed respondent to make the title available. Respondent requested the bank to produce the title for annotation, but the bank refused. Due to non-payment, the bank threatened to foreclose the mortgage on the entire property. Respondent filed a Complaint for Mandamus with Damages and Injunction in the RTC of Mandaue City, praying to restrain foreclosure of the entire property, arguing only 8,890 sqm was validly mortgaged, and to compel the bank to lend the title for annotation. The RTC issued a preliminary injunction. Respondent later filed an amended complaint, alleging the loan had been fully paid as evidenced by a Cancellation and Discharge of Mortgage on a separate condominium unit, and prayed for the return of TCT No. 26401. The bank denied the condominium secured the same loan. Respondent filed a Motion for Summary Judgment. The RTC granted it, ordering the bank to surrender the title for annotation and making the injunction permanent. The Court of Appeals initially reversed the RTC, recognizing the bank’s authority to foreclose the entire property. Upon respondent’s motion for reconsideration, the Court of Appeals reversed itself and affirmed the RTC’s summary judgment.

ISSUE

Whether the Court of Appeals erred in affirming the RTC’s grant of summary judgment in favor of respondent.

RULING

No. The Supreme Court affirmed the Court of Appeals’ resolution which upheld the RTC’s summary judgment. Summary judgment is proper when there is no genuine issue as to any material fact. The core factual issue was whether the bank had knowledge of the prior sale of a portion of the land at the time the mortgage was constituted. The bank’s branch manager, Joshur Judd D. Lanete, admitted in his testimony in a separate case that the bank knew of the sale to Jumao-as and that it approved only a ₱1,000,000 loan. This admission, coupled with the two certifications issued by Lanete on November 19, 1993, stating the bank had no objection to the donation and that the 2,000 sqm portion was free from liens, conclusively established the bank’s knowledge. These facts were not disputed by the bank. Since the bank was aware the respondent was no longer the owner of the 5,000 sqm portion at the time of the mortgage, it could not have validly accepted that portion as security. The mortgage covering the entire 13,890 sqm was therefore void with respect to the 5,000 sqm sold to Jumao-as. The bank’s argument that the deed of sale was simulated presented no genuine issue, as its own manager’s admissions and actions proved its knowledge of the sale. Thus, the RTC correctly rendered summary judgment, ordering the bank to surrender the title for annotation of the prior transactions and making permanent the injunction against foreclosing the sold portion.