GR 173864; (November, 2015) (Digest)
G.R. No. 173864 , November 23, 2015
Bangko Sentral ng Pilipinas, Petitioner, vs. Agustin Libo-on, Respondent.
FACTS
On August 29, 1997, and September 17, 1997, respondent Agustin Libo-on and his wife (Spouses Libo-on) secured loans from the Rural Bank of Hinigaran, Inc., executing promissory notes and a Deed of Real Estate Mortgage over a parcel of land as security. Subsequently, on September 19, 1997, and October 17, 1997, the Rural Bank of Hinigaran secured loans from petitioner Bangko Sentral ng Pilipinas (BSP), executing a “promissory note with trust receipt agreement.” As security for its loan, the Rural Bank pledged and deposited to BSP various promissory notes and supporting Transfer Certificates of Title, including those of the Spouses Libo-on. When both the Spouses Libo-on and the Rural Bank of Hinigaran failed to pay their respective loans, BSP demanded payment from the Spouses Libo-on and later filed an application for extrajudicial foreclosure of their mortgaged property. Agustin Libo-on filed an action for damages with a prayer for injunction, arguing that there was no privity of contract between him and BSP, that BSP was not authorized to act for the Rural Bank, and that the mortgage was not assigned to BSP. The Regional Trial Court ruled in favor of Libo-on, declaring the foreclosure irregular and unlawful and making the preliminary injunction permanent. The Court of Appeals affirmed this decision.
ISSUE
Whether the Bangko Sentral ng Pilipinas has the authority to foreclose the real estate mortgage constituted by the Spouses Libo-on in favor of the Rural Bank of Hinigaran.
RULING
The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of Appeals. The BSP does not have the authority to foreclose the mortgage. The Court held that there was no valid assignment of credit from the Rural Bank of Hinigaran to BSP. The “promissory note with trust receipt agreement” did not constitute a deed of assignment of credit or mortgage. For an assignment of credit involving real property to be effective against third persons, it must appear in a public instrument and be recorded in the Registry of Property, which BSP failed to present or comply with. Furthermore, the Rural Bank of Hinigaran could not have validly pledged the Spouses Libo-on’s title and mortgage documents to BSP because, during the term of the mortgage, the Rural Bank was neither the absolute owner of the property nor had the free disposal of it; the Spouses Libo-on remained the owners. The contract between the Rural Bank and BSP was a simple loan with pledge, not an assignment, and thus BSP acquired no right to foreclose the mortgage. The award of attorney’s fees and litigation expenses to Libo-on was upheld as he was forced to litigate to protect his rights.