G.R. No. 247868 . October 12, 2022.
LAND BANK OF THE PHILIPPINES, PETITIONER, VS. ARTURO L. RAMOS, JOSEPHINE R. CO, MARGARITA R. TERRENAL, ROSALINDA R. SAN MIGUEL, EVANGELINE R. ALARTE, HERMINIA L. RAMOS, AND PILAR L. RAMOS, RESPONDENTS.

FACTS

Respondents, heirs of Juan C. Ramos and his spouse Pilar L. Ramos, sought the annulment of a Real Estate Mortgage (REM) over their property executed in favor of petitioner Land Bank of the Philippines (LBP). The mortgage was executed by the Parada Consumer and Credit Cooperative, Inc. (PCCCI), purportedly as attorney-in-fact of the owners based on a Special Power of Attorney (SPA). Respondents alleged that Pilar was induced by PCCCI officers to sign loan documents and surrender the title for a personal loan. Upon full payment, PCCCI refused to return the title, revealing the property had been mortgaged to LBP. Crucially, the SPA bore the signature of Juan, who had died in 1985, thirteen years before the SPA’s 1998 date. Respondents contended the SPA was falsified and thus the REM was void.
LBP admitted accepting the property as collateral for PCCCI’s loan obligations, relying on the submitted SPA. It claimed it conducted an appraisal and inspection and that the SPA and REM were duly annotated on the title. LBP argued it was a mortgagee in good faith. The Regional Trial Court (RTC) declared the SPA and the REM null and void, finding the SPA patently fictitious due to the deceased Juan’s signature and noting irregularities in its notarization. The RTC held LBP liable for damages for failing to exercise due diligence. The Court of Appeals (CA) affirmed the RTC’s nullification of the mortgage but deleted the award of moral damages against LBP.

ISSUE

Whether the Court of Appeals erred in affirming the nullity of the real estate mortgage and in holding petitioner Land Bank of the Philippines solidarily liable for attorney’s fees.

RULING

The Supreme Court denied the petition and affirmed the CA decision with modification, deleting the award of attorney’s fees against LBP. The Court upheld the nullity of the SPA and the subsequent REM. A mortgage executed by one who is not the owner or is not duly authorized is void. The SPA, which was the sole basis for PCCCI’s authority to mortgage, was incontrovertibly void. It was dated 1998 yet contained the signature of Juan who died in 1985, making its falsity apparent on its face. Given the SPA’s nullity, PCCCI had no authority to mortgage the property, rendering the REM void.
The Court rejected LBP’s claim of being a mortgagee in good faith. Banks are expected to exercise a higher degree of diligence than ordinary individuals. LBP failed in this duty. The face of the SPA itself, showing a co-owner had died years prior, should have prompted immediate verification. LBP’s own witness admitted the principals did not appear before the notary. These facts negate good faith. However, the Court agreed with the CA’s deletion of moral damages against LBP, as bad faith or fraud was not sufficiently proven for such an award. Nonetheless, the Court also deleted the award of attorney’s fees against LBP. While respondents were compelled to litigate, the primary cause was PCCCI’s fraudulent acts. LBP’s liability stemmed from negligence, not a deliberate act compelling litigation. Therefore, the solidary award of attorney’s fees was unwarranted. Only PCCCI, declared in default, remains liable for damages