G.R. No. 189316; June 1, 2013
PHILIPPINE NATIONAL BANK, Petitioner, vs. SPOUSES BERNARD and CRESENCIA MARAÑON, Respondents.

FACTS

Spouses Rodolfo and Emilie Montealegre mortgaged a parcel of land to petitioner Philippine National Bank (PNB) as security for a loan, using a Transfer Certificate of Title (TCT) No. T-156512 purportedly in Emilie’s name. Upon the spouses’ loan default, PNB foreclosed the mortgage, emerged as the highest bidder at the auction sale on August 16, 1991, and registered the Certificate of Sale on February 4, 1992. Before the redemption period expired, respondents Spouses Bernard and Cresencia Marañon filed a complaint for Annulment of Title, Reconveyance and Damages against the Spouses Montealegre, PNB, and others, alleging they were the true registered owners under TCT No. T-129577, which was illegally cancelled through a Deed of Sale bearing their forged signatures. PNB, in its Answer, claimed to be a mortgagee in good faith. The Regional Trial Court (RTC), in a Decision dated June 2, 2006, ruled in favor of the respondents, declaring the sale and title cancellation null and void due to forgery, ordering reconveyance of the title to the respondents, and holding that PNB was a mortgagee in good faith whose mortgage lien “shall stay and be respected.” This decision became final and executory as no party appealed or sought reconsideration. Subsequently, the respondents filed motions for the release of rental payments deposited with the Clerk of Court and paid to PNB by a tenant, Paterio Tolete. The RTC granted these motions, ordering PNB to release the ₱30,000.00 in rentals to the respondents, reasoning that as adjudged owners, they were entitled to the fruits of the property. PNB moved for reconsideration, arguing that as the mortgagee whose lien was upheld and as the owner after the expiration of the redemption period, it was entitled to the rentals. The RTC denied the motion. PNB then filed a petition for certiorari and mandamus with the Court of Appeals (CA), which affirmed the RTC’s orders. The CA further held that PNB was not a mortgagee in good faith as a financial institution should have exercised greater diligence. PNB’s motion for reconsideration was denied.

ISSUE

Whether the Court of Appeals erred in affirming the RTC’s orders directing PNB to release the rental payments to the respondents, despite the final and executory RTC Decision which declared PNB a mortgagee in good faith with a lien that “shall stay and be respected.”

RULING

The Supreme Court denied the petition and affirmed the CA’s decision. The Court held that the RTC’s June 2, 2006 Decision had attained finality and its dispositions were immutable. This final judgment declared the respondents as the true owners of the property and PNB as a mortgagee in good faith with a subsisting lien. The right to fruits, such as rentals, follows ownership. Since ownership was conclusively vested in the respondents by the final judgment, they are entitled to the civil fruits (rentals) of the property from the time their ownership was recognized. PNB’s claim to the rentals, based on its status as a mortgagee or as an alleged owner after the redemption period, cannot prevail over the respondents’ ownership rights, which were conclusively established. The Court clarified that while PNB’s mortgage lien remains valid and enforceable against the property itself, it does not entitle PNB to the fruits accruing from the property during the period the respondents’ ownership was upheld. The CA’s additional finding on PNB’s lack of good faith was a superfluity that did not affect the core ruling based on the final judgment.