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SECOND DIVISION

CEFERINO BAUTISTA G.R. No. 243296

(substituted by his son and legal
representative, PHILIP DE VERA
BAUTISTA), FELISA BAUTISTA, Present:
and NEHEMIAS BAUTISTA,
Petitioners, PERLAS-BERNABE, J,
Chairperson,
HERNANDO,
- versus - INTING,
DELOS SANTOS, and
BALTAZAR-PADILLA, JJ.
SPOUSES FRANCIS and MINDA
BALOLONG, METROPOLITAN
BANK AND TRUST COMPANY,
and THE REGISTER OF DEEDS, Promulgated:
LINGAYEN, PANGASINAN,
Respondents.
x-------------------------------------------------------------

DECISION

DELOS SANTOS, J.:

The Case

Before the Court is a Petition for Review on Certiorari 1 under Rule 45

of the Rules of Court assailing the Decision2 dated June 7, 2018 and the
3
Resolution dated November 12, 2018 of the Court of Appeals (CA) in CA-
G.R. CV No. 108449, which affirmed in toto the Decision4 of the Regional
Trial Court (RTC) of San Carlos City, Pangasinan, Branch 56, in finding
respondent Metropolitan Bank and Trust Company (Metrobank) a mortgagee
in good faith.

1
Rollo, pp. I 0-42.
2
Penned by Associate Justice Ricardo R. Rosario, with Associate Justices Eduardo B. Peralta, Jr. and
Ronaldo Roberto 8 . Martin, concurring; id. at 45-52 .
Id. at 53-54.

/
4
Penned by Presiding Judge Hermogenes C . Fernandez; id. at 55-66.
Decision 2 G.R. No. 243296

Facts and Procedural Antecedents

The present case originated from a Complaint5 for cancellation of

title/declaration of nullity of title, declaration of nullity of mortgage and
damages, with prayer for writ of preliminary injunction filed by Spouses
Ceferino and Felisa Bautista (Spouses Bautista), and their son Nehemias
Bautista (Nehemias; collectively, petitioners), against respondents Spouses
Francis Balolong (Francis) and Minda Balolong y Bautista (Minda;
collectively, Spouses Balolong), Metrobank, and the Register of Deeds of
Lingayen, Pangasinan before the RTC.

Spouses Bautista were the registered owners of two (2) parcels of land
situated in Lingayen, Pangasinan covered by Transfer Certificate of Title
(TCT) Nos. 1393626 and 163938.7

Sometime in the 1980s, Spouses Bautista and their son Nehemias

migrated to Canada leaving the subject properties to the care of their
daughter, Minda. Later, Minda married co-respondent Francis and they built
their home on the subject properties.

On June 17, 2003, Spouses Bautista's other son, Philip, who was
based in Marikina City, received a call from a Metrobank branch manager
informing him that the prope1ty, which was mortgaged by Minda to the bank
was due for foreclosure. 8

Upon investigation by pet1t10ners, TCT Nos. 139362 and 163938

under the name of Spouses Bautista were cancelled and the subject parcels
of land were subdivided into the following: (1) Lot 1 covered by TCT No.
2622449 in the name of respondents Minda and Francis; (2) Lot 2 covered by
TCT No. 262245 10 in the name of William Bautista (Minda's brother); and
12
(3) Lot 3 covered by TCT No. 262246 11 in the name ofNehemias. Minda
and Francis obtained a Pl,500,000.00 loan from Metrobank secured by a
mortgage on Lot 1.

Petitioners then filed a complaint before the RTC to stop the

foreclosure of Lot 1. They alleged that Minda and Francis, through fraud
and forgery, made it appear that Spouses Bautista sold Lot 1 to them.
13
Spouses Bautista belied the execution of the Deed of Absolute Sale dated

5
Id. at. 84- I 0 I.
6
Id. at 102.
7
Id. at 103.
8
TSN, August 22, 2005, pp. 167- 168 and November I4, 2005, pp. I 82-183 (Philip de Vera Bautista).
9
Rollo, p. I 04.
10
Id. at 105.
11
Id. at 106.
12
Id . at 46.
13
Id. at 107-108.

/
Decision 3 GR. No. 243296

March 9, 2002 and submitted proof that they were in Canada at that time.

Minda, on her part, denied any participation in the fraud and forgery
committed by her husband Francis. Minda further claimed that her husband
made her sign the mortgage under the belief that they were for a chattel
mortgage of their vehicle and that her signatures appearing on the
-
promissory notes and mortgage are ,:-1orgenes.
. 14

Francis did not file an answer so the RTC declared him in default.

Metrobank, however, insisted that they are a mortgagee in good faith.

They conducted due diligence and approved the loan based on Spouses
Balolong's capacity to pay the loan and on the identity of the subject
property offered as a collateral. The bank has examined the Certificate of
Title and found no defect on the title nor a reason to believe that there was
fraud involved. 15

The Ruling of the RTC

The RTC declared that the questioned Deed of Absolute Sale allegedly
executed by Spouses Bautista was void and that their signatures thereon
were forgeries. The falsity of the sale was also proven beyond reasonable
doubt when Francis was charged with and convicted for the crime of
Falsification of Public Documents by the Municipal Trial Court in Cities
(MTCC) 16 of San Carlos City in Criminal Case No. 7874 pertaining to the
subject Deed of Absolute Sale. However, the RTC deemed Metrobank as a
mortgagee in good faith. Metrobank exercised due diligence in its dealing
with Francis with respect to the subject mortgaged property. The ocular
inspection of the bank on the subject property and its verification of title in
the Register of Deeds showed no indicia of suspicion. The RTC dismissed
the case with respect to Minda and declared that only Francis is liable to
petitioners and he should be made liable for his manifest fraudulent acts to
petitioners based on the principle that no person shall enrich himself on the
17
expense of another and also for damages.

Thefallo of the RTC Decision reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered:

1. DISMISSING the case w ith respect to defendant Minda Balolong

and defendant Metrobank[;]
2. DECLARING the Real Estate Mortgage and TCT No. 262244 in
the name of defendants spouses Francis and Minda Balolong that
14
Id. at 142-146.
15
Id. at I I 9- 126.
16
Id. at 118.

I
17
Id. at 55-66.
Decision 4 G.R. No. 243296

was used as collateral in the real estate mortgage to be valid[,]

binding[,] and effective on the ground of the principle of innocent
mortgagee or buyer in good faith applicable to the defendant
bank[;]
3. DECLARING TCT No. 262245 in the name of William Bautista as
null and void;
4. DECLARING TCT No. 262246 in the name of plaintiff Nehemias
Bautista as null and void;
5. ORDERING defendant Francis Balolong to pay the plaintiffs
spouses Bautista an amount equivalent to the principal amount of
the loan, which is Phpl,500,000.00 as well as legal interest therein;
6. ORDERING defendant Francis Balolong to pay the plaintiffs
spouses Php50,000.00 as moral damages, Php50,000.00 as
exemplary damages[,] and PhpS0,000.00 as attorney's fees .

SO ORDERED. 18

Aggrieved, petitioners appealed the easer before the CA asserting that

the RTC e1Ted in dismissing the case against Minda and Metrobank.
Petitioners argued that the RTC en-ed in declaring the Real Estate
19
Mortgage and TCT No. 262244 under the name of Spouses Balolong on
the ground of the principle of mortgagee in good faith applicable to
Metrobank.

The Ruling of the CA

The CA affirmed the findings of the RTC in toto. The CA held that
despite its finding that the Deed of Absolute Sale dated March 9, 2002 was
void, the RTC correctly upheld the validity of the mortgaged property (Lot
1) and its foreclosure with Metro bank. Unlike ordinary mortgagees, banks
are required to exercise a higher degree of care when dealing with registered
lands. The CA opined that Metrobank had conducted the necessary due
diligence in dealing with the property mortgaged to secure the loan of
Francis and Minda. Metrobank was able to present sufficient evidence that
the mortgage contract emanated from a valid and regular transaction, and
that no fraud can be attributed to it in approving the real estate mortgage and
in foreclosing it. The CA further held that the RTC properly ordered Francis
to pay petitioners Pl ,500,000.00 by way of actual damages, in addition to
moral damages, exemplary damages, and attorney's fees in the total amount
20
of Pl 50,000.00.

The CA denied the motion for its reconsideration,2 1 thus prompting

petitioners to take recourse to this Court.

18
Id. at 65-66.
19
Id. at 114.

/
20
Id. at 49-52.
21
Id. at 54.
Decision 5 G.R. No. 243296

Issues

I.
Whether the CA committed serious and reversible error in ruling that
Metrobank is a mortgagee in good faith.

II.
Whether the CA committed serious and reversible error in upholding
the validity of the mortgage constituted over the subject property, as well as
the foreclosure thereof, under the principle of mortgagee in good faith.

Our Ruling

A petition for review on certiorari shall only raise questions of law.

At the outset, the Court notes that the issue on whether Metrobank is a
mortgagee in good faith generally cannot be entertained in a petition under
Rule 45 since the ascertainment of good faith or lack thereof is a factual
matter. The Court is not a trier of facts and is not into re-examination and
re-evaluation of testimonial and documentary evidence on record. Though
this rule admits of some exceptions,22 none is present in the case at bench.

Herein petitioners submit that the CA committed reversible error in

affirming the Decision of the RTC that Metrobank is a mortgagee in good
faith despite the lack of evidence on record to prove that it has exercised
extraordinary diligence before approving the loan and mo1igage contract.
Petitioners further asseverate that other than the lone testimony of Marlon
Magali (Magali), Branch Manager of Metrobank San Carlos City Branch,
that he conducted credit investigation and ocular inspection over the subject
property, Metrobank failed to present any credit investigation report, ocular
inspection report or any document which would prove that the branch
manager personally conducted neighborhood checking.

On the other hand, both the RTC and the CA ascertained good faith on
the part of Metrobank. In its assailed Decision, the CA concurred with the
RTC that Metrobank conducted the necessary due diligence in dealing with
the property mortgaged to secure the loan of Spouses Balolong and that
there was sufficient evidence to prove that the mo11gage contract emanated

22
Prudential Bank v. Rapanot, 803 Phil. 294 (20 17) : ( I) when the find ings, are grounded entirely on
speculation, surmi ses or conjectures; (2) when the infere nce made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings
the Court of Appeals went beyond the iss ues of the case, or its findings are contrary to the admissions of
both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the
findings are conc lusions without c itation of specific evidence on which they are based; (9) when the
facts set fort h in the petition as well as in the petitioner's main and reply briefs are not disputed by the
respondent; ( I 0) when the findings of fact are premised on the supposed absence of evidence and
contradi cted by the evidence on record; and ( 11) when the Court of Appeals manifestly overlooked
certa in relevant facts not disputed by the parties, which, if properly considered, would justify a di ffe ren/
conclusion.
Decision 6 G.R. No. 243296

from a val id and regular transaction.

Procedurally, each party in a case is required to present his or her own

affinnative assertions by the degree of evidence required by law. In civil
cases, a preponderance of evidence is the required quantum of evidence.
Preponderance of evidence means an evidence which is of greater weight, or
more convincing than that which is offered in opposition to it. 23 Thus, while
it is incumbent upon a plaintiff to prove his or her case, the respondent or
defendant must also prove his or her own allegations or defenses.

It is the discretion of each party to present all evidence at his or her

disposal as part of the procedural strategy to advance his or her case.

Now to the issue of sufficiency of evidence raised by petitioners, there

is no rule which requires that for testimonial evidence to be convincing, it
must be corroborated by documentary or object evidence. As long as the
testimonial evidence meet the required evidentiary quantum and is
sufficiently persuasive, it can be given credence and accorded probative
weight.

The testimony of Magali underwent the duress of cross-examination

and likewise the perusal of the trial court. During the proceedings before the
RTC, petitioners were given the opportunity to rebut the testimonies of
Magali and to impugn the actual conduct of the ocular inspection and
background check. It has not escaped the attention of this Court that in their
appeal before the CA, petitioners acknowledged that Magali conducted an
investigation although they insisted that such was conducted in haste.
Petitioners only raised the issue of lack of documentary evidence when they
moved for the reconsideration of the CA's Decision, which was rendered
against them.

Magali 's testimony dwelt on the specificities of the standard operating

procedure of background checking Metrobank's loan applicants. Magali
established that he conducted the due diligence required of bank officers
before approving loan and mortgage applications. Both the RTC and the CA
agreed that Metrobank, through Magali, conducted a thorough background
check on the subject properties by conducting an ocular inspection on the
property, verification of authenticity of the title with the Register of Deeds in
Lingayen, Pangasinan, and the neighborhood check. Petitioners admitted
that indeed Spouses Balolong resided on the subject land and that it was
registered under their name in the fraudulently acquired TCT No. 262244.

Therefore, on the issue on whether Metrobank is a mortgagee in good

faith, like the CA, this Court rules for respondent Metrobank.

23
Quintas v. Development Bank ofthe Philippines, 766 Phil. 60 I, 643 (20 I 5).
Decision 7 GR. No. 243296

As declared in Andres v. Philippine National Bank,24 the doctrine of

protecting mortgagees in good faith emanates from the . public interest
embedded in the legal concept of granting indefeasibility of titles. Thus, a
mortgagee has a right to rely in good faith on the Certificate of Title of the
mortgagor of the property offered as security, and in the absence of any sign
that might arouse suspicion, the mortgagee has no obligation to undertake
further investigation.25

However, such rule does not apply to banks, which businesses are
impressed with public interest. Thus, banks are expected to exercise a
higher degree of care and diligence compared to private individuals before
·
entermg a mortgage contract. 26

In Arguelles v. Malarayat Rural Bank, Inc. ,27 this Court held that:

Since its business is impressed with public interest, the mortgagee-bank is

duty-bound to be more cautious even in dealing with registered lands.
Indeed, the rule that [a] person dealing with registered lands can rely
solely on the certificate of title does not apply to banks. Thus, before
approving a loan application, it is a standard operating practice for these
institutions to conduct an ocular inspection of the property offered for
mortgage and to verify the genuineness of the title to determine the real
owners thereof. The apparent purpose of an ocular inspection is to protect
the "true owner" of the property as well as innocent third parties with a
right, interest or claim thereon from a usurper who may have acquired a
fraudulent certificate of title thereto.28

Again, this Court may only delve into the facts of the case if there is a
clear misapprehension of facts or when the inference drawn from the facts is
manifestly mistaken. It is likewise settled that factual findings of the trial
court, when affirmed by the CA, are generally binding on this Court. In the
case at bench, the Court finds no cogent reason to deviate from the findings
of both the RTC and the CA that respondent Metrobank was able to
successfully discharge its burden of proving its status as a mortgagee in
good faith. Thus, the Court quotes, with approval, the ruling of the CA
which affirms the factual findings of the RTC, to wit:

In this case, We find that Metrobank had conducted the necessary

due diligence in dealing with the prope11y mortgaged to secure the loan of
Francis and Minda. As correctly found by the trial court, Metrobank had
conducted a background check to find out if Minda and Francis had the
means to pay their loan, and found that they did. They also conducted a
neighborhood check to confirm the same. They visited the mortgaged lot
and found only Francis and Minda to be living thereon. They went to the
Register of Deeds of Lingayen, Pangasinan and verified that the title

24
745 Phil. 459(2014).
25
Bank of Commerce v. Spouses San Pablo, Jr., 550 Phil. 805, 82 1 (2007).
26
Ursa! v. Court ofAppeals, 509 Phil. 628, 642 (2005).
27
730Phil.226(2014).
28
Id . at 237.
Decision 8 G.R. No. 243296

covering Lot 1 is authentic. Thus, Metrobank presented sufficient

evidence that the mortgage contract emanated from a valid and regular
transaction, and that no fraud can be attributed to it in approving the real
estate mortgage and, later, in foreclosing Lot 1.

Indeed, there was nothing that could have put Metrobank on alert
that there was something suspicious about the entire transaction. Hard as
it might be to believe, even Minda herself did not suspect that her husband
Francis had committed the fraud that he did. Metrobank already did
everything possible to verify the information given by Francis, and had
29
gone out of its way to confirm the ownership of the lot mortgaged x x x.

As such, Metrobank, as a mortgagee in good faith, is entitled to the

protection such that its Real Estate Mo11gage Contract with Spouses
Balo long, as well as the registration of the subject parcel of land under TCT
No. 262244 will no longer be nullified.

WHEREFORE, premises considered, this Court resolves to DENY

the petition. The Decision dated June 7, 2018 and the Resolution dated
November 12, 2018 of the Court of Appeals in CA-G.R. CV No. 108449 are
hereby AFFIRMED.

SO ORDERED.

EDGAL DELOSSANTOS
Associate Justice

29
Ro/Lo, p. 5 1.
Decision 9 G.R. No. 243296

WE CONCUR:

ESTELAJ.{:~ERNABE
Senior Associate Justice
Chairperson

H E N ~ B . INTING
Associate Justice Associate Justice

--·· '
( ; I / '
-J/ (l, ~ -- tJ:fztL
p*fSCILLA J(JJALr.AtAR-PADILLA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

ESTELA M.~JtdBERNABE
Senior Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, A11icle VIII of the Constitution, and the

Division Chairperson's Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Com1's Division.

. PERALTA