G.R. No. 249281 , March 17, 2021
Malayan Bank Savings and Mortgage Bank, Petitioner, vs. Sps. Joseph & Jocelyn Cabigao represented by Edgardo S. Suarez, and Rosalinda E. Techico, Ferdinand Anthony C. Sevilleja (as the former Registrar of Deeds of Meycauayan, Bulacan), Respondents.

FACTS

Spouses Joseph and Jocelyn Cabigao, the registered owners of a lot under TCT No. T-282258 (M), discovered their title was cancelled and a new TCT was issued to Rosalinda Techico. They found a falsified Deed of Absolute Sale purportedly executed by Jocelyn in favor of Techico, who then mortgaged the property to Malayan Bank to secure a P13 Million loan. The Spouses Cabigao filed a Complaint for Annulment of Titles and Other Documents against Techico, Malayan Bank, and the Register of Deeds. They alleged the real estate mortgage was null and void as Techico was not the owner, making Malayan Bank a mortgagee in bad faith for failing to verify the registered owners. Malayan Bank countered it conducted due diligence, verified the title with the Registry of Deeds, and conducted an ocular inspection. During pre-trial, Malayan Bank failed to appear and submit required documents, leading the RTC to allow the presentation of evidence ex parte. The RTC declared the deeds of sale, the new TCTs, and the real estate mortgage null and void, ordered the reinstatement of the Spouses Cabigao’s original titles, and awarded damages. The CA affirmed the RTC’s findings, concluding Malayan Bank acted in bad faith.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s ruling that Malayan Bank was not a mortgagee in good faith and that the real estate mortgage was null and void.

RULING

The Supreme Court DENIED the petition and AFFIRMED the CA Decision. The Court held that the issue of good faith is factual, and the CA’s findings, consistent with the RTC and supported by evidence, are conclusive. Banks are held to a higher standard of care and cannot rely solely on the certificate of title. The evidence showed Malayan Bank’s Inspection and Appraisal Report indicated the property was still registered under Jocelyn Cabigao at the time of Techico’s loan application, proving it did not follow standard procedures. The haste in executing the mortgage shortly after the alleged sale was a badge of bad faith. The Deed of Absolute Sale was falsified, the notary lacked authority, and the tax clearances were fictitious. Malayan Bank’s failure to appear at pre-trial resulted in the loss of its right to adduce evidence, akin to a party in default, but it retained its right to appeal. The Court found no error in the CA’s conclusion that Malayan Bank was not a mortgagee in good faith.