FIRST DIVISION
[G.R. No. 202525. September 12, 2018.]
ALLIED BANKING CORPORATION, petitioner,vs. SPOUSES ARTEMIO M. VILLALUZ, SR. and FE PAULINA ROQUE VILLALUZ, SUBSTITUTED BY HER HEIRS, NAMELY: ARTEMIO M. VILLALUZ, SR., ARTEMIO ROQUE VILLALUZ, JR., and REUEL ROQUE VILLALUZ, respondents.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution datedSeptember 12, 2018, which reads as follows: HTcADC
"G.R. No. 202525 (ALLIED BANKING CORPORATION, Petitioner, v. SPOUSES ARTEMIO M. VILLALUZ, SR. and FE PAULINA ROQUE VILLALUZ, SUBSTITUTED BY HER HEIRS, NAMELY: ARTEMIO M. VILLALUZ, SR., ARTEMIO ROQUE VILLALUZ, JR., and REUEL ROQUE VILLALUZ, Respondents.) — This appeal assails the decision promulgated on February 3, 2012, 1 whereby the Court of Appeals (CA) affirmed the judgment rendered in Civil Case No. 35-3102 on August 24, 2009 by the Regional Trial Court (RTC), Branch 35, in Santiago City, Isabela. 2
Antecedents
In 1996, Remegio A. Roque, Jr., a nephew of Fe Paulina Roque-Villaluz, made respondents Spouses Artemio M. Villaluz, Sr. and Fe Paulina Roque-Villaluz (Spouses Villaluz) agree to his proposed joint loan application that included them signing a form for a real estate mortgage (REM). A month later, he told them that the lending bank had disapproved the loan application. Trusting in his word, they did not ask him to return the signed but unfilled form for the REM, and their owner's duplicate copy of Transfer Certificate of Title (TCT) No. T-63434 of the Registry of Deeds of the Province of Isabela.
In 2002, the Spouses Villaluz received a notice of extrajudicial foreclosure of the property covered by TCT No. T-63434 from the petitioner, and learned for the first time that the loan had been in fact processed and granted, and the proceeds thereof released to Remegio, Jr., who ultimately did not pay back the loan. Thus, they instituted this action in the RTC to seek the declaration of nullity of the REM, and pray for the issuance of a writ of preliminary injunction. aScITE
On November 22, 2002, the RTC enjoined Sheriff Juan Guerrero from conducting the scheduled extrajudicial foreclosure sale of the property of the Spouses Villaluz covered by TCT No. T-63434.
At the trial, the petitioner presented Mauricio Toledo and Lorenzo Fernandez to substantiate the due execution of the REM. Toledo testified that the Spouses Villaluz had signed the REM in his presence in 1996; and that the additional loan of 4.5M had been credited in the account of Remegio, Jr. and his wife as the principal borrowers. Fernandez, a signature verifier of the petitioner, attested that the signatures of the Spouses Villaluz appearing in the REM were the same as those in their signature card.
On August 24, 2009, the RTC rendered judgment nullifying the REM, 3 disposing:
WHEREFORE, in view of the foregoing considerations judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:
1.) NULLIFYING the real estate mortgage dated April 10, 1996 over the real property of the plaintiffs under TCT NO. T-63434;
2.) ORDERING the cancellation of Entry No. 6247 covering the real estate mortgage mentioned above appearing at the back of TCT NO. T-63434; and
3.) ORDERING the defendant bank to return to the plaintiffs their TCT NO. T-63434.
No other pronouncements for want of evidence.
SO ORDERED.
The petitioner appealed, but the CA affirmed the RTC through the assailed decision promulgated on February 3, 2012, 4 ruling:
WHEREFORE, premises considered, the appeal is DENIED for lack of merit. The Decision dated 24 August 2009 of the Regional Trial Court, Second Judicial Region, Branch 35, Santiago City in Civil Case No. 35-3102 is AFFIRMED. Costs against defendant-appellant bank.
SO ORDERED.
The CA justified the affirmance in the following manner, to wit: HEITAD
The appeal is bereft of merit.
It is a hornbook doctrine that the findings of fact of the trial court are entitled to great weight on appeal and should not be disturbed except for strong and valid reasons, because the trial court is in a better position to examine the demeanor of the witnesses while testifying. In the case at bar, We find no cogent reason to disturb the findings of the trial court.
In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term "greater weight of the evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the last analysis, means probability of the truth. It is evidence which is more convincing to the court as worthier or belief than that which is offered in opposition thereto. In the instant case, plaintiffs-appellees were able to discharge their burden.
Defendant-appellant posits that the trial court allegedly erred when it concluded that the contract of mortgage is void there being no meeting of the minds, and the price or consideration.
We are unpersuaded.
Article 1318 provides that "(t)here is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established."
A contract is a meeting of the minds between two persons, whereby one is bound to give something or to render some service to the other. A valid contract requires the concurrence of the following essential elements: (1) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (2) determinate subject matter; and (3) price certain in money or its equivalent. A contract is void if one of the essential requisites of contracts under Article 1318 of the New Civil Code is lacking. All these elements must be present to constitute a valid contract. Consent is essential to the existence of a contract, and where it is wanting, the contract is non-existent. In a contract of sale, its perfection is consummated at the moment there is a meeting of the minds upon the thing that is the subject of the contract and upon the price. Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. ATICcS
In the instant case, the Real Estate Mortgage (Exhibits "A" and "1") dated 10 April 1966 is void considering that two (2) of the essential requisites of contracts under Article 1318 of the Civil Code, i.e., consent or meeting of the minds and price certain in money or its equivalent, are absent.
The testimonies of the plaintiffs-appellees show that they signed a blank real estate mortgage form, and that they did not push through with the intended joint loan as defendant Remegio informed them that the loan was not approved by defendant-appellant bank.
Plaintiff-Appellee Artemio M. Villaluz, Sr. testified that, inter alia, that: in 1996, defendant Remegio, nephew of his wife, came to their house and proposed a loan venture with his wife who agreed with the proposal; Remegio brought a blank real estate mortgage form from the Allied Bank and asked them to sign the same; there was nothing written on it; the typewritten portions as they now appear were not there at that time; after he and his wife signed the printed blank form of the real estate mortgage at their house at Calao West, Santiago City, his wife gave the same to defendant Remegio who told them that it would be brought to the bank; after several months, defendant Remegio came to their house and told them that the joint loan was not approved by the bank, and when they signed the blank form of the real estate mortgage in 1996, there were no typewritten words on it. Plaintiff-appellee Fe Paulina Villaluz testified, inter alia that: in 1996, her nephew Remegio proposed that they apply for a joint loan; he came to their house and presented an application form to be signed by her and her husband; after several days, Remegio Roque, Jr. came to her and told her that the loan was disapproved; and when she signed the said document, the same was blank.
A perusal of the Real Estate Mortgage (Exhibits "A" and "1") shows that the signatures of plaintiffs-appellees are found at the same level and run through their printed names, which is highly unusual. Hence, it clearly appears that, as testified to by plaintiffs-appellees, they first affixed their signatures on a blank form of a real estate mortgage and later on, their names were superimposed thereon by defendant-appellant. It further appears that it was defendant-appellant's employee who made the typewritten notation which reads "Note: To secure the loan of borrowers Sps. Remigio Roque(,) Jr. and Evangelista Roque," which was non-existent in the blank form of the real estate mortgage that plaintiffs-appellees signed.
There is also no consideration for the Real Estate Mortgage insofar as plaintiffs-appellees are concerned considering that as testified to by plaintiffs-appellees Artemio M. Villaluz, Sr., they did not receive any loan from Allied Bank nor did they execute a promissory note in favor of the said bank. Likewise, plaintiff-appellee Fe Paulina Villaluz testified that she did not receive any loan proceeds from the bank and defendant Remegio. Even defendant-appellant bank's witness Mauricio Toledo admitted that the proceeds of the loan of P4.5 million were credited to the account of Sps. Remegio and Evangeline Roque, and not plaintiffs-appellees. TIADCc
Further, (a) mortgage is a mere accessory contract and its validity would depend on the validity of the loan secured by it. Hence, the consideration of the mortgage contract is the same as that of the principal contract from which it receives life, and without which it cannot exist as an independent contract. As an accessory contract, the mortgage agreement derives its validity from the principal contract of loan. Under Article 1934 of the Civil Code, a loan contract is perfected only upon the delivery of the object of the contract. In the instant case, as plaintiffs-appellees neither signed any promissory note nor received any loan proceeds from defendant-appellant, the Real Estate Mortgage cannot exist as an independent contract. Void are all contracts in which the cause or object does not exist at the time of the transaction. Article 1409(3) of the Civil Code provides that (t)he following contracts are inexistent and void from the beginning: x x x (3) Those whose cause or object did not exist at the time of the transaction; x x x
Defendant-Appellant bank asserts that the alleged act of plaintiffs-appellees after they signed the mortgage contract is a clear ground for estoppel because their inaction over the years made it believe that there was no irregularity in the said contract.
We are unswayed.
Estoppel, an equitable principle rooted in natural justice, prevents persons from going back on their own acts and representations, to the prejudice of others who have relied on them. (T)he elements of estoppel, as related to the party to be estopped, are: (1) conduct amounting to false representation or concealment of material facts; or at least calculated to convey the impression that the facts are other than, and inconsistent with, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts.
In the instant case, plaintiffs-appellees cannot be estopped considering that the elements of estoppel are absent. Moreover, they only saw the Real Estate Mortgage (Exhibit "A") in November 2002 when they received a foreclosure notice from the bank; they asked their counsel to make a research; and they became disgusted considering that they did not receive any loan from defendant-appellant bank nor executed any promissory note in favor of the latter. In fact, plaintiffs-appellees immediately filed the Complaint a quo on 20 November 2002. AIDSTE
Defendant-appellant postulates that the trial court allegedly erred when it ruled that there is a necessity of a public document authorizing the mortgage under the instant circumstance.
We are not convinced.
Articles 1317, 1403 (1) and (2) and 2085 of the Civil Code provide:
"Article 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party."
"Article 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
xxx xxx xxx"
"Article 2085. The following requisites are essential to the contracts of pledge and mortgage:
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(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.
xxx xxx xxx"
In the instant case, plaintiffs-appellees neither authorized defendant Remegio to mortgage their property covered by TCT No. T-63434 (Exhibit "B") nor ratified the said defendant's act of using the blank form of the real estate mortgage that they signed. Plaintiff-appellee Artemio M. Villaluz, Sr. testified that they never agreed to secure any loan of defendant Remegio. Plaintiff-appellee Fe Paulina Villaluz also testified that she did not execute a special power of attorney authorizing defendant Remegio to transact her title with a banking institution like Allied Bank. Thus, the Real Estate Mortgage (Exhibits "A" and "1") is also unenforceable, as against plaintiffs-appellees. AaCTcI
It bears stressing that the banking business is impressed with public trust. A higher degree of diligence is imposed on banks relative to the handling of their affairs than that of an ordinary business enterprise. Thus, the degree of responsibility, care and trustworthiness expected of their officials and employees is far greater than those of ordinary officers and employees in other enterprises. (Defendant-appellant), however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its operations.
As a bank, (defendant-appellant) must subject all its transactions to the most rigid scrutiny, since its business is impressed with public interest and its fiduciary character requires high standards of integrity and performance. In the case at bar, the subject property mortgaged by defendant Remegio with utmost caution, especially considering the fact that plaintiffs-appellees have no loan transaction with the bank. There is no showing that defendant-appellant bank sent its representatives to the subject mortgaged property which is in plaintiffs-appellees possession, for ocular inspection and to make inquiries why the same was being mortgaged by a person who is not the owner thereof. It also disregarded the lack of written authority of defendant Remegio to act on behalf of plaintiffs-appellees in connection with the mortgage of the latter's property, and threw caution to the wind when it released the proceeds of the loan by crediting the same to the account of defendant Remegio and his wife. Clearly, defendant-appellant failed to discharge the higher degree of diligence required of it as a banking institution.
As aptly found by the trial court, viz.:
"The Court have (sic) examined the document in question, that is the real estate mortgage (Exhibit "A"/"1") and the Court found two (2) significant features: 1] it is ready legal form most probably prepared by defendant Allied Bank's legal department because it bears its logo and letter head (sic), namely, Allied Banking Corporation, hence, it is evidently the author of the terms and conditions and provisions set forth therein. 2] It contains certain blank portions such as the name/s and personal circumstances of the mortgagor, the nature of the credit accommodation covered, the amount of the loan or credit line, the interest rate per centum per annum, the place and date of execution. The name and signature of the instrumental witnesses. There is also the bigger space purposely for the list of the properties mortgaged, and the notarial acknowledgment. And these blank portions are intended to be filled by typewritten entries including the names of the parties and witnesses. Notably, defendant bank had no representation in the instrument; nowhere did its duly authorized representative (sic) affix their signatures thereon, except its own employees, namely, Mr. Mauricio Toledo and Lorenzo Fernandez as witnesses. EcTCAD
xxx xxx xxx
More specifically, the Court examined the signatures of the plaintiffs as the mortgagors in the documents. The Court noticed that their printed names run through their signatures, or vice versa. Thus, their signatures do not appear above their typewritten names, in the same way that their typewritten names do not properly and clearly appear right below their signatures. On the contrary either would appear to be superimposed, their signatures on top of their written names or their signatures on top of their names on top of their signatures. But, to the mind and eyes of the Court, their printed names were superimposed on their signatures, which means that their signatures were affixed first without their printed names: otherwise, they would have normally affixed their signatures above their typewritten names, which is the standard requirement: i.e., "Signature over printed name"; unlike the signatures of the instrumental witness and signature verifier of the defendant bank, where they are located right over their printed names; hence, the absence of imposition or superimposition.
Thus the Court believes and so holds that, as they testified to the plaintiffs signed the subject document in blank. Consequently, the Court concludes that the real estate mortgage contract in issue may be considered a contract of adhesion.
xxx xxx xxx
In the instant case, the borrower or debtor is not the mortgagor and vice versa. Defendant Roque, Jr. is the borrower-debtor, while the plaintiffs appear to be the mortgagors; and defendant Allied Bank the creditor-mortgagee. But, as it is, there is no legal relationship, connection or obligation of the plaintiffs to defendant bank, for the simple and obvious reason that the plaintiffs are not borrowers or debtor to the bank, as they have not obtained any loan therefrom. x x x The subject mortgage contract is, therefore, unenforceable because defendant Remegio Roque, Jr. had no authority to mortgage plaintiff's property. HSAcaE
xxx xxx xxx
It was admitted by the defendant bank through its witnesses that the plaintiffs have not received any amount of money from it; neither from the proceeds of the loan of defendant Remegio Roque, Jr., and his wife; precisely, because the latter were the sole borrowers. Therefore, as far as the plaintiffs are concerned, there is lack of price or consideration. x x x
All told, We find the trial court did not commit the alleged errors assigned by the defendant-appellant.
The petitioner moved for reconsideration, but the CA denied its motion on May 30, 2012. 5
Hence, this appeal, wherein the petitioner submits that the CA erred: (1) in concluding that there was no consent to the REM by the Spouses Villaluz despite the clear showing that they had admitted having signed the REM for the purpose of obtaining a joint loan from the petitioner; (2) in finding that there was no consideration for the mortgage because the mortgage had been clearly an accommodation mortgage; (3) in holding that there was no estoppel despite the various factors justifying the application of the rule on estoppels having been shown; and (4) in ruling that the Spouses Villaluz as mortgagors had not authorized Remegio, Jr. to mortgage their property despite the former having themselves signed the REM in order to secure the obligation of the latter.
In short, was the nullification of the REM proper?
Ruling of the Court
We affirm.
The petitioner correctly argues that the consent of the parties to the REM was primarily evidenced by their signatures thereon; and that such consent, when coupled with their act of delivering the owner's duplicate copy of their TCT to the petitioner as the mortgagee for the purpose of the annotation of the REM, affirmed their participation in the transaction. Indeed, even if they signed the form for the REM in blank, they voluntarily extended the freedom to Remegio, Jr. as the person to whom the signed blank document was given to fill in the details. Once signed, the form for the REM came under the assumption that it had been read, understood and agreed to by the persons affixing their signatures thereon. The contents of the document became binding thereafter, especially upon its notarization, for a notarized document is executed to lend truth to the statements contained therein and to certify to the authenticity of the signatures. 6 This is the reason why a notarized document enjoys the presumption of regularity which can be overturned only by clear and convincing evidence to the contrary. 7 The evidence to overthrow such presumption of regularity must be clear, convincing and more than merely preponderant. 8 HESIcT
Nonetheless, an examination of the REM attached to the petition for review on certiorari displayed apparent irregularities that cannot be ignored because they cast grave doubt on the veracity of the stipulations contained therein. The REM thereby appeared to consist of four pages but the notarial acknowledgment thereof stated that the document consisted of only two pages. The discrepancy can only signify that two additional pages were inserted in the REM after it had been actually acknowledged before the notary public. The insertion is an index of bad faith on the part of the petitioner as the party annexing the four-paged copy of the REM to its petition. We reiterate that the acknowledgment of a document before a notary public cannot be regarded as an idle ceremony or act. By the notarial acknowledgment, a private document is transformed into a public document, rendering the same admissible in a court of law without further proof of its authenticity. The importance of the function of a notary public cannot be overemphasized, for no less than the public faith in the integrity of public documents is at stake in every aspect of the discharge of such function. 9
The notable discrepancy in the REM annexed to the petition is a matter that should be decisive in ascertaining the merits of the dispute herein. The first two pages of the REM annexed to the petition do not bear the signatures of the mortgagors and their instrumental witnesses as stated in the notarial acknowledgment. The first page bears only the signatures of the mortgagors but the second page carries only the signatures of the witnesses. Worth underscoring is that the requirement for the signatures of the parties and of their witnesses to appear on each and every page of the notarially acknowledged document safeguards that each and every page thereof was validated by them in the presence of the witnesses. The requirement is designed to avoid the falsification of the agreement after the parties duly executed it. 10
Although every notarized document, being a public document, has in its favor the presumption of regularity, and evidence to contradict the presumption must be clear and convincing, the REM annexed to the petition was likely altered in a manner that actually rendered it null and void. As a consequence, the presumption of regularity cannot be drawn, and the lower courts' uniform conclusion about the nullity of the REM itself becomes unavoidably warranted.
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated on February 3, 2012; and ORDERS the petitioner to pay the costs of suit.
SO ORDERED." Tijam, J., on official leave.
Very truly yours,
(SGD.) LIBRADA C. BUENAActing Division Clerk of Court
Footnotes
1.Rollo, pp. 26-45.
2.Id. at 52-64.
3.Id.
4.Id. at 26-45.
5.Id. at 46-47.
6.Llemos v. Llemos, G.R. No. 150162, January 26, 2007, 513 SCRA 128, 139.
7.Id.
8.Tapuroc v. Loquellano Vda. De Mende, G.R. No. 152007, January 22, 2007, 512 SCRA 97, 109.
9.Gerona v. Datingaling, A.C. No. 4801, February 27, 2003, 398 SCRA 148, 157.
10.Quilala v. Alcantara, G.R. No. 132681, December 3, 2001, 371 SCRA 311, 319.