G.R. No. 213241 - PHILIPPINE NATIONAL BANK, VS. JUAN F. VILA.DECISION - Supreme Court E-Library

Ruling

Accordingly, a Writ of Execution [11] was issued by the RTC on 14 December 1997. By unfortunate turn of events, the Sheriff could not successfully enforce the decision because the certificate of title covering the subject property was no longer registered under the names of the Spouses Cornista. Hence, the judgment was returned unsatisfied as shown in Sheriffs Return [12] dated 13 July 1999. Upon investigation it was found out that during the interregnum the Spouses Cornista were able to secure a loan from the PNB in the amount of P532,000.00 using the same property subject of litigation as security. The Real Estate Mortgage (REM) was recorded on 28 September 1992 under Entry No. 758171 [13] or month before the Notice of Lis Pendens was annotated. Eventually, the Spouses Cornista defaulted in the payment of their loan obligation with the PNB prompting the latter to foreclose the property offered as security. The bank emerged as the highest bidder during the public sale as shown at the Certificate of Sale issued by the Sheriff. As with the prior mortgage, the Spouses Cornista once again failed to exercise their right of redemption within the required period allowing PNB to consolidate its ownership over the subject property. Accordingly, TCT No. 131498 [14] in the name of the Spouses Cornista was cancelled and a new one under TCT No. 216771 [15] under the name of the PNB was issued. The foregoing turn of events left Vila with no other choice but to commence another round of litigation against the Spouses Cornista and PNB before the RTC of Viliasis, Pangasinan, Branch 50. In his Complaint docketed as Civil Case No. V-0567 , Vila sought for the nullification of TCT No. 216771 issued under the name of PNB and for the payment of damages. To refute the allegations of Vila, PNB pounded that it was a mortgagee in good faith pointing the fact that at the time the subject property was mortgaged to it, the same was still free from any liens and encumbrances and the Notice of Lis Pendens was registered only a month after the REM was annotated on the title. PNB meant to say that at the time of the transaction, the Spouses Cornista were still the absolute owners of the property possessing all the rights to mortgage the same to third persons. PNB also harped on the fact that a close examination of title was conducted and nowhere was it shown that there was any cloud in the title of the Spouses Cornista, the latter having redeemed the property after they have lost it in a foreclosure sale. [16] After the Pre-Trial Conference, trial on the merits ensued. The court a quo then proceeded to receive documentary and testimonial evidence from the opposing parties. Thereafter, the parties submitted their respective memorandum and the case was submitted for decision. On 22 June 2011, the RTC rendered a Decision [17] in favor of Vila and ruled that PNB is not a mortgagee in good faith. As a financial institution, the trial court held that PNB is expected to observe a high