G.R. No. 173168 ; September 29, 2014
PHILIPPINE AMANAH BANK (NOW AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINES, ALSO KNOWN AS ISLAMIC BANK), Petitioner, vs. EVANGELISTA CONTRERAS, Respondent.

FACTS

On July 21, 1981, respondent Evangelista Contreras filed a complaint for annulment of real estate mortgage, cancellation of title, reconveyance, recovery of possession, and damages against spouses Calinico and Elnora Ilogon and petitioner Philippine Amanah Bank. Contreras alleged he was the owner of a parcel of land. On August 1, 1980, he sought assistance from his brother-in-law, Calinico Ilogon, to obtain a loan from the bank, offering the land as security. Upon the bank’s suggestion, Contreras and Calinico executed a Deed of Confirmation of Sale on August 3, 1980, transferring the title to Calinico, who then mortgaged it to the bank. An Agreement dated October 25, 1980, stated the deed of sale was for loan purposes only. On May 20, 1981, Contreras wrote to the bank directing it not to release the loan to Calinico, but the bank released two loan amounts totaling ₱100,000.00 to Calinico. The bank later extrajudicially foreclosed the mortgage due to non-payment, purchased the property at auction, and obtained a new title after the redemption period.
The Regional Trial Court (RTC) dismissed Contreras’s complaint on September 13, 1993, ruling the bank was not aware of the agreement between Contreras and the Ilogons and was a lender and buyer in good faith. Contreras’s motion for reconsideration was filed out of time, and the RTC declared its decision final. Contreras filed a petition for relief from judgment, citing excusable negligence due to his wife’s death and his counsel’s late notification. The RTC denied this petition. On appeal, the Court of Appeals (CA) set aside the RTC order, declared the real estate mortgage null and void, and ordered the bank to reconvey the land to Contreras, finding the bank knew of conflicting claims and failed to exercise due diligence.

ISSUE

1. Whether the petition for relief from judgment was filed on time and based on excusable negligence.
2. Whether the real estate mortgage was valid and the bank was a mortgagee in good faith.

RULING

1. The petition for relief from judgment was filed out of time and did not involve excusable negligence. Under Rule 38, Section 3 of the 1997 Rules of Civil Procedure, a petition for relief must be filed within 60 days from knowledge of the judgment and not more than six months from its entry. Contreras’s counsel received the RTC decision on September 15, 1993, making the deadline November 14, 1993. The petition was filed on December 15, 1993, or 91 days later, thus filed out of time. The negligence of counsel in failing to file a timely motion for reconsideration is not excusable. The RTC decision had become final and executory, and relief from judgment is an equitable remedy requiring strict compliance with reglementary periods.
2. The real estate mortgage was valid, and the bank was a mortgagee in good faith. The bank relied on Calinico’s Original Certificate of Title (OCT No. P-2034), which was free from any liens or encumbrances on its face. The bank had no duty to look beyond the certificate of title to investigate the property’s ownership. The prohibition against alienation and encumbrance within five years on the OCT expressly excluded “the Government or any of its branches, units or institutions,” and the petitioner bank, as a government-owned or controlled corporation, was exempt from this prohibition. The bank was not privy to the private agreement between Contreras and Calinico regarding the loan’s purpose.
The Supreme Court GRANTED the petition, SET ASIDE the CA decision and resolution, and REINSTATED the RTC decision dated September 13, 1993, dismissing Contreras’s complaint.