Land Bank of the Philippines v. Barbara Sampaga Poblete;

G.R. No. 196577. February 25, 2013

On October 1997, respondent Poblete obtained a loan worth P300k from Kapantay Multi-Purpose. She mortgaged her Lot No.29 located in Buenavista, Sablayan, Occidental Mindoro, under OCT No. P-12026. Kapantay, in turn, used OCT No. P-12026 as collateral under its Loan Account No. 97-OC-013 with Land Bank-Sablayan Branch.

After a year, Poblete instructed her son-in-law Domingo Balen to look for a buyer for the Lot No. 29 in order to pay her loan and he referred Angelito Joseph Maniego. Both parties agreed that the lot shall amount to P 900k but in order to reduce taxes they will execute a P 300k agreed price appearing in the Deed of Absolute Sale dated November 9, 1998. In the Deed, Poblete specifically described herself as a widow. Balen, then, delivered the Deed to Maniego. Instead of paying the price, Maniego promised in an affidavit dated November 19, 1998 stating that the said amount will be deposited to her Land Bank Savings Account but he failed to do so.

On August 1999, Maniego paid Kapantay’s Loan Account for P448,202.08 and on subsequent year he applied for a loan worth P1M from Land Bank using OCT No. P-12026 as a collateral with a condition that the title must be first transferred on his name. On August 14, 2000, the Registry of Deeds issued TCT No. T-20151 in Maniego’s name pursuant to a Deed of Absolute Sale with the signatures of Mrs. Poblete and her husband dated August 11, 2000 and Maniego successfully availed the Credit Line Agreement for P1M and a Real Estate Mortgage over TCT No. T-20151 on August 15, 2000. On November 2002, Land Bank filed an Application for an Extra-judicial Foreclosure against the said Mortgage stating that Maniego failed to pay his loan.

Poblete filed a complaint for nullification of the Deed of Sale dated August 11, 2000 and TCT No. T-20151, Reconveyance of the Title and Damages with a Prayer for Temporary Restraining Order and/or Issuance of Writ of Preliminary Injunction against Maniego, Landbank and the Register of Deeds. The judgment of RTC, affirmed by the CA upon appeal, favors the plaintiff Poblete. Hence, this petition.

ISSUE:     WON the CA erred in upholding the finding of the trial court declaring the TCT No. T-20151 as null and void.

Held : 

The petition is meritorious.

It is well-entrenched rule, as applied, by the CA, that a forged or fraudulent deed is a nullity and conveys no title. Moreover, where the deed of sale states that the purchase price has been paid but in fact has never been, the deed is void ab initio for lack of consideration. Since the deed, is void, the title is also void. Since the land title has been declared void by final judgment, the Real Estate Mortgage over it is also void.

It is essential that the mortgagor be the absolute owner of the mortgage; otherwise, the mortgage is void. The doctrine ―the mortgagee in good faith as a rule does not apply to banks which are required to observe a higher standard of diligence. A bank cannot assume that, simply because the title offered as security is on its face, free of any encumbrances or lien, it is relieved of the responsibility of taking further steps to verify the title and inspect the properties to be mortgage.

The records do not even show that Land Bank investigated and inspected the actual occupants. Land Bank merely mentioned Maniego’s loan application upon his presentation of OCT No. P-12026, which was still under the name of Poblete. Land Bank even ignored the fact that Kapantay previously used Poblete’s title as collateral in its loan account with Land Bank.

Furthermore, only one day after Maniego obtained TCT No. P-20151 under his name, Land Bank and Maniego executed a Credit Line Agreement and Real Mortgage. It appears that Maniego’s loan was already completely processed while the collateral was still in the name of Poblete. Where said mortgagee acted with haste in granting the mortgage loan and did not ascertain the ownership of the land being mortgaged, it cannot be considered innocent mortgagee.

The pari delicto rule provides ―when two parties are equally at fault, the law leaves them as they are and denies recovery by either one of them. This court adopt the decisions of RTC and CA that only Maniego is at fault. Finally, on the issue of estoppels and laches, such question were not raised before the trial court. It is settled that an issue which are neither alleged in the complaint nor raised during the trial cannot be raised for the time on appeal.

The issue on the nullity of Maniego’s title had already been foreclosed when this Court denied Maniego’s petition for review in the Resolution dated 13 July 2011, which became final and executory on 19 January 2012. It is settled that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by the highest court of the land. This is without prejudice, however, to the right of Maniego to recover from Poblete what he paid to Kapantay for the account of Poblete, otherwise there will be unjust enrichment by Poblete. 

Bentir v Leanda

GR 128991 April 12, 2000

Facts:

On May 15, 1992, respondent Leyte Gulf Traders, Inc. (herein referred to as respondent corporation) filed a complaint for reformation of instrument, specific performance, annulment of conditional sale and damages with prayer for writ of injunction against petitioners Yolanda Rosello-Bentir and the spouses Samuel and Charito Pormida. Respondent corporation alleged that it entered into a contract of lease of a parcel of land with petitioner Bentir for a period of twenty (20) years starting May 5, 1968. According to respondent corporation, the lease was extended for another four (4) years or until May 31, 1992. On May 5, 1989, petitioner Bentir sold the leased premises to petitioner spouses Samuel Pormada and Charito Pormada. 

Respondent corporation questioned the sale alleging that it had a right of first refusal. Rebuffed, it filed Civil Case No. 92-05-88 seeking the reformation of the expired contract of lease on the ground that its lawyer inadvertently omitted to incorporate in the contract of lease executed in 1968, the verbal agreement or understanding between the parties that in the event petitioner Bentir leases or sells the lot after the expiration of the lease, respondent corporation has the right to equal the highest offer.

Issue:

Whether the complaint for reformation filed by respondent Leyte Gulf Traders, Inc. has prescribed

Whether it is entitled to the remedy of reformation sought

Held:

The remedy of reformation of an instrument is grounded on the principle of equity where, in order to express the true intention of the contracting parties, an instrument already executed is allowed by law to be reformed. The right of reformation is necessarily an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result is that an oral agreement is by court decree made legally effective. The remedy, being an extraordinary one, must be subject to limitations as may be provided by law. Our law and jurisprudence set such limitations, among which is laches. 

A suit for reformation of an instrument may be barred by lapse of time. The prescriptive period for actions based upon a written contract and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code. Prescription is intended to suppress stale and fraudulent claims arising from transactions like the one at bar which facts had become so obscure from the lapse of time or defective memory^. In the case at bar, respondent corporation had ten (10) years from 1968, the time when the contract of lease was executed, to file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24) years after the cause of action accrued, hence, its cause of action has become stale, hence, time-barred. 

The prescriptive period of ten (10) years provided for in Art. 1144 applies by operation of law, not by the will of the parties. Therefore, the right of action for reformation accrued from the date of execution of the contract of lease in 1968.

Prescription; Reformation of an instrument is that remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed. It is predicated on the equitable maxim that equity treats as done that which ought to be done. The rationale of the doctrine is that it would be unjust and unequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties. However, an action for reformation must be brought within the period prescribed by law, otherwise, it will be barred by the mere lapse of time.