GR 193804; (February, 2013) (Digest)
G.R. No. 193804 ; February 27, 2013
SPOUSES NILO RAMOS and ELIADORA RAMOS, Petitioners, vs. RAUL OBISPO and FAR EAST BANK AND TRUST COMPANY, Respondents.
FACTS
Petitioners Spouses Ramos executed a Real Estate Mortgage (REM) over their property in favor of respondent Far East Bank and Trust Company (FEBTC). They alleged they signed a blank mortgage form given by their friend, respondent Raul Obispo, to secure only a ₱250,000.00 loan for themselves. They claimed to have fully paid this loan through Obispo. Upon demanding their title, they discovered the REM annotated on their certificate of title secured a loan for ₱1,159,096.00 for Obispo’s benefit. They filed a complaint for annulment of mortgage, arguing they never consented to be accommodation mortgagors for Obispo’s larger loan.
FEBTC contended the REM was valid, securing credit accommodations for Obispo, and that the spouses were accommodation mortgagors. The Regional Trial Court ruled in favor of the spouses, declaring the mortgage void and awarding damages. The Court of Appeals reversed, dismissing the complaint. It held the spouses were third-party mortgagors under Article 2085 of the Civil Code and failed to prove their allegations of fraud or lack of consent.
ISSUE
Whether the Real Estate Mortgage executed by the petitioners is valid and binding.
RULING
The Supreme Court REVERSED the Court of Appeals and REINSTATED the RTC decision, declaring the mortgage void. The Court emphasized that while accommodation mortgages are legally permissible, consent must be real and intelligent. The petitioners’ consent was vitiated as they intended to mortgage their property only for their own ₱250,000.00 loan, not for Obispo’s separate and larger obligation. The contract was therefore voidable due to mistake or fraud.
Crucially, the Court found FEBTC negligent and not a mortgagee in good faith. Banks are required to exercise extraordinary diligence in their dealings. FEBTC failed in this duty by allowing its officers to act as instrumental witnesses to the mortgage deed’s signing even though the mortgagors did not actually execute the document in the officers’ presence. The bank relied solely on documents brought by Obispo without verifying the spouses’ true consent or Obispo’s authority. This failure to observe basic banking safeguards meant the bank assumed the risk of the fraudulent transaction. Consequently, the mortgage was annulled, and the award of moral damages and attorney’s fees was reinstated.