FELICITO TAN AND THE PHILIPPINE NATIONAL BANK, ROMBLON AGENCY, REPRESENTED BY FELICIDARIO D. CABRAL AND TELESFORO MADRONA, PETITIONERS, VS. HON. INTERMEDIATE APPELLATE COURT (TH…

This petition for review on certiorari seeks to set aside,
reverse or modify the decision
of respondent court in AC-G.R. CV No. 63663-R promulgated on March 30, 1984* affirming the judgment of the Court of First
Instance of Romblon in Civil Case No. V-778 as
amended, the dispositive portion of which states:

“WHEREFORE, having reached the same conclusion as the Court a
quo in its decision dated
May 30, 1979 as amended on June 2, 1977, the same is hereby
affirmed in toto.” (p. 55, Rollo)

The undisputed facts of
this case as established during the pre-trial conference and the trial on the
merits are as follows:

“Plaintiffs Policarpio Martos, Lourdes Martos and
Victoria Martos de Aquino
are the surviving children of the deceased Pedro Martos
and Dalmacia Madali.  Plaintiff Berlina
Rodeo is the wife of Policarpio Martos.  Policarpio, Lourdes
and Berlina are all residents of Barrio Salingsing, Calatrava, Romblon; while Victoria
is a resident of San Jose, Mindoro. 
Victoria was informed only
in the year 1975 by Policarpio and Lourdes
of the mortgage of their inherited property to Felicito
Tan for One Hundred Fifty Pesos.

“Said brother and sisters are co-owners of a parcel of coconut
land, which is hilly, containing an area of 5.3246 hectares situated in then sitio Salingsing, barrio Calatrava (now a municipal district), San Agustin, Romblon.  Their
ownership is evidenced by Original Certificate of Title No. p-345 (Exh. 9-PNB) issued in the name of “HEIRS OF PEDRO
MARTOS.”

“On January 28, 1968
Policarpio and Lourdes
encumbered said property to Tan for the sum of One Hundred Fifty Pesos,
evidenced by a public document entitled “Deed of Sale with Right to
REPURCHASE” (Exh. A or Exh.
1-Tan).

“It appears from Exhs. 1-PNB, 2-PNB,
3-PNB and 4-PNB, the existence merely of which were admitted by plaintiffs, that the property in question was
placed as collateral for a loan in the amount of P2,400.00 obtained from the
defendant Philippine National Bank (see paragraphs 9, 10 and 11 of the
Pre-Trial Order).  Plaintiffs also admit
that a cashier’s check was issued by the PNB
for said amount, Exh. 5-PNB, but they deny
having received said amount.  Plaintiffs
vigorously asserted that they never obtained any loan from defendant bank.

“The possession of said land had been with plaintiffs since
the time the deed of sale with right to
repurchase was executed (par. 8, Pre-Trial Order).

“A certificate of sale was issued by Deputy Sheriff Norvel R. Lim on October 4, 1972,
exh. 6-PNB.

“Plaintiff Berlina Rodeo received a demand letter, Exh.
7-PNB, dated June 16, 1969 and paid partial payment on the loan account (pars. 14 and 15,
Pre-Trial Order).”
(pp. 48-49, Rollo)

As a result of
extra-judicial sale and because plaintiffs failed to redeem the property within the reglementary period.  Transfer Certificate of Title No. T-303 was
issued in favor of defendant bank (see exh. 9-PNB) (Record on Appeal, pp. 87-88).

On April 24, 1975, Policarpio Martos, Berlina
Rodeo and Lourdes Martos, private respondents herein,
filed with the Court of First Instance of Romblon, an
action for recovery of real property with rescission and annulment of contract
with damages against Felicito Tan, the Philippine
National Bank (Romblon Agency) and Rodrigo Roy, who
was later stricken off from the complaint as per
pre-trial order of August 12, 1976 (Record on Appeal, p. 63) which also ordered
the filing of an amended complaint to include Victoria Martos,
the other surviving daughter of Pedro Martos, as
co-plaintiff.  Accordingly, as amended
complaint was filed on April 27, 1977 (Record on Appeal, p. 74).

After trial on the merits the trial court rendered a decision
dated May 27, 1977 (Record, p. 86) in favor
of plaintiffs as amended on June 2, 1977, the dispositive
portion (Record, p. 100), of which reads:

“WHEREFORE, judgment is hereby rendered in favor of plaintiffs
and against defendants, as follows:

“1.  Declaring the
contract entered into between plaintiffs Policarpio Martos and Lourdes Martos, on the
one hand, and defendant Felicito Tan, on the other,
as an equitable mortgage;

“2.  Declaring Exhibits
1 to 5-PNB, the foreclosure proceedings had by the Sheriff’s Office, and Transfer Certificate
of Title No. T-303, null and void ab initio;

“3.  Ordering the
Register of Deeds of Romblon to issue a new Transfer
Certificate of Title in favor of plaintiffs Policarpio
Martos, Lourdes Martos and
Victoria Martos;

“4.  Ordering defendant Felicito Tan to pay plaintiffs the sum of Five Thousand
(P5,000.00) Pesos, Philippine Currency, as actual, moral and exemplary damages;

“5.          Ordering the
defendant Bank to surrender the physical and juridical possession of the land
in question to plaintiffs; and

“6.          Ordering
defendant Felicito Tan to pay the costs.”

The judgment of the trial
court was affirmed in toto by the
respondent appellate court in its decision promulgated on March
30, 1984 (Rollo, p. 48).  The
motion for reconsideration filed by defendants-appellants, petitioners herein,
was denied by respondent appellate court in its resolution dated September
28, 1984 (Rollo, p. 65).  Thus,
this petition for review filed with the Court on December 12, 1984 (Rollo, p. 12).

In the resolution of March 1,
1989 (Rollo, p. 155) the Court gave due
course to this petition and required the parties among others, to submit their
respective memoranda.  Petitioner PNB
filed its memorandum on May 30, 1989,
while private respondents filed theirs on December 16, 1989.

The main issue in this case is whether or not the questioned loan
documents are binding and enforceable against respondents Policarpio
Martos, Berlina Rodeo Martos and Lourdes Martos.

The documents at issue are: 
(1) PNB Application for Loan (Exh. 1-PNB); (2)
Real Estate Mortgage Contract (Exh. 2-PNB); (3)
Promissory Note (Exh. 3-PNB); and (4) Supplement to
Real Estate Mortgage Contract (Exh. 4-PNB).

The decisions of both the trial court and the respondent Court of
Appeals are generally based on the conclusion that the above-enumerated
documents were never executed by private respondents Policarpio,
Berlina and Lourdes
or if they were executed by them it was due to the misrepresentation and
trickery of petitioner Felicito Tan.

All the questioned documents, dated February 8, 1968 bear the signature of Berlina
Rodeo and the thumbmarks of Policarpio
Martos and Lourdes Martos,
private respondents herein as loan applicants, promissors
and mortgagors.

Respondent appellate court laid stress on the fact that Policarpio and Lourdes
are indeed illiterate,
so that pitted against the bank with branches nationwide and a municipal
vice-mayor, they deserve the protection mandated by Art. 24 of the Civil Code
that the trial court should be vigilant for the protection of the plaintiffs
who are the parties at a disadvantage in the present case (Rollo,
p. 58).

It was noted however that both courts have overlooked or failed
to appreciate certain facts or circumstances that would have altered the
results of the case.

Berlina Rodeo admitted having signed
all four documents, because she was made to understand by Felicito
Tan that the documents were in connection with the mortgage instrument she
signed the previous day.

Her pretenses however that she signed the documents by mistake
are not persuasive and must be rejected. 
She can read and write having reached the third grade (TSN, Hearing of
Nov. 24, 1976, p. 17).  It is improbable
that she missed reading the heading of the document, PHILIPPINE NATIONAL BANK,
printed in bold and big letters and immediately below it also printed in bold
letters, the title of the document “Application for Loan”.  Furthermore, she was the one identified by Felizardo Cabral, the Assistant Agent of the PNB, Romblon Agency, as the one who submitted to him the loan
papers and the one who guided him when he inspected the property mortgaged (TSN,
Hearing of February 24, 1977, pp. 5-6) and the one he advised after conducting
the inspection and appraisal of the property, to go to Romblon
to register the mortgage of the property in favor of the PNB (TSN, Hearing of
February 24, 1977, p. 9).  The mortgage
was in fact registered with the title of the property annotated (TSN, February
24, 1977, p. 10).

Lourdes Martos did not deny having made
her thumbmarks over her typewritten name in the four
documents.  Policarpio
Martos denied having affixed his thumbmark
in the four documents (TSN, Hearing November 24, 1976, p. 33), which was
corroborated by the aforesaid testimony of Berlina
Rodeo (TSN, Hearing of November 24, 1976, pp. 10-11).  The sub-agent of petitioner PNB at San
Agustin, Romblon, Solocano Faigao, identified the thumbmarks
over the typewritten name of Policarpio in the four
documents as belonging to Policarpio Martos himself which were affixed in his presence in his
office.  This includes the thumbmark over the name of Policarpio
Martos appearing with the thumbmarked
name of Lourdes Martos below the notation at the back
of the promissory note requesting the PNB Assistant Agent, Romblon,
Romblon, to deliver the proceeds of the loan to Mrs. Berlina Rodeo Martos.  Private respondents signed or thumbmarked the application for loan, the real estate mortgage contract, the promissory note
and the supplement to real estate mortgage before him in his office in the
municipal building where he holds office as Municipal Treasurer of San Agustin, Romblon
(TSN, Hearing of November 24, 1976, pp. 36-42).

His testimony was corroborated and confirmed by the testimony of
Rodrigo Roy who is employed as land tax clerk in the Office of the Municipal
Treasurer of San Agustin, Romblon, stating that he
was the one who prepared the documents which were signed or thumbmarked
by private respondents herein in the Office of the Municipal Treasurer.  He absolutely denied having any part in the
fraudulent transactions alluded to by the trial court.  In fact he signed the instruments together
with Faigao as witness (TSN, Hearing of November 24,
1976, pp. 56-59).  These testimonies
belied the declarations of private respondent Berlina
Rodeo that she signed the documents at her house in Barrio Salingsing
where it was brought by Felicito Tan who also made
her affix her thumbmark over the typewritten name of
her husband, Policarpio Martos,
in all the four documents.  Significantly
counsel for plaintiffs agreed at
the pre-trial conference that the name of Rodrigo Roy be stricken off from the
complaint which undoubtedly is an admission of Roy’s
non-involvement in any fraudulent act against private respondents.

Furthermore, the notary public who notarized the documents,
Lorenzo J. Morada, testified that all three private
respondents appeared in his office in connection with their application for a
loan with the PNB, which they personally presented to him together with two other documents – a real estate mortgage
for P2,400 and supplement to real estate mortgage – for notarization.  Since the documents were already signed he
simply summoned all of them and asked them one by one whether the signatures
and thumbmarks appearing on top of their names were
their true and genuine signatures and they answered in the affirmative (TSN, Hearing of November 24, 1976,
pp. 68-71).

Thus the fact that Policarpio Martos, with his wife Berlina
Rodeo and Lourdes Martos did execute the application
for loan, the real estate mortgage securing the loan of P2,400.00, the
promissory note, and the supplement to real estate mortgage, has been
established by the testimonies not only by the government officials whose
presumption of regularity in the performance of duty has not been rebutted but
also by the notary public before whom the notarized instrument was verified
which is admissible as evidence without further proof of its due execution and
is conclusive as to the truthfulness of its contents, in the absence of clear and convincing
evidence to the contrary (Baranda vs. Baranda, 150 SCRA 59, 60 [1987]).  All these unquestionably overrule the uncorroborated and
self-serving denials of Policarpio Martos of his participation
in the questioned documents and the improbable declarations of Berlina Rodeo that she signed the documents and thumbmarked them for Policarpio Martos, as requested by Felicito
Tan without knowing that she was executing an application for loan.

Moreover although the trial court had the thumbmarks
of Policarpio
Martos and Berlina Martos taken for analysis by the NBI there is nothing in the records to show that such
analysis if any had been presented to support the view that aforesaid thumbmarks belong to Berlina and
not to Policarpio (TSN, Hearing of November 24, 1976,
p. 35).

Accordingly it having been shown that a contract of loan has been
consummated or fully performed by private respondents with the PNB, Romblon Agency, the existence and binding effect of the
documents can no longer be disputed (Weldon Construction Corporation v. Court of Appeals, 154 SCRA 618 [1987]).

More importantly, the
mortgage constituted was not a mere private document.  It was registered (Exhibits, p. 15) and
therefore its validity cannot be questioned (Hechanova
v. Adil, 144 SCRA 450 [1986]).  It is not, however valid and binding against
private respondent Victoria Martos, one of the heirs
of Pedro Martos, as she never benefitted
from such mortgage (Ameral v. Bagumbayab,
154 SCRA 398 [1987].  In fact, it was not disputed that she
had no knowledge of the mortgage in question (TSN, Hearing of November 24,
1976, p. 27), and even the mortgage of the property executed in favor of Felicito Tan in 1968 except in 1975 when the complaint for
recovery of property and rescission of contract was filed with the trial court.

Furthermore, the registered owners of the mortgaged property are
the “Heirs of Pedro Martos“, but petitioner
bank failed to ascertain who the heirs of Pedro Martos
are, thereby abetting the mortgage of the property in question without the
knowledge of Victoria Martos, one of the heirs of
Pedro Martos. 
Consequently, Victoria Martos cannot be bound
by the ensuing transactions.

On the other hand, it is evident that Berlina
Rodeo received the proceeds of the loan in the amount of P2,400.00.  Telesforo Madrona, Cashier-Teller of the PNB Romblon
Agency testified that the check issued by the PNB in the name of Berlina Rodeo was personally
cashed by her.  When she presented the
check to him for payment he asked her for identification.  She presented a residence certificate. 
Only then did he tell her to endorse the check at the back (TSN, Hearing
of November 24, 1977, pp. 31-32).  Berlina Rodeo did endorse the check (Exhibits, p. 9).

PREMISES CONSIDERED, the judgment of respondent Court affirming in
toto the decision of the lower court is hereby
REVERSED insofar as the Philippine National Bank, Romblon
Agency is concerned and an Order MODIFYING the dispositive
portion of the affirmed decision
is issued:  (1) DECLARING the questioned
documents valid and binding as against private respondents Pedro Martos, Berlina Rodeo Martos and Lourdes Martos, but
not against the share of Victoria Martos who had no
knowledge of the same; (2) ORDERING the Register of Deeds of Romblon to cancel TCT No. T-303 and to ISSUE a new title in favor of PNB covering only the shares
of Policarpio and Lourdes and another title in favor of
Victoria Martos
but covering only her share; (3) EXEMPTING Felicito
Tan from liability for damages as adjudged by the trial court, there
being no sufficient evidence to support the view that he masterminded the
fraudulent transactions; (4) holding instead,
Berlina Rodeo Martos liable
to PNB for the payment of Five
Thousand (P5,000.00) Pesos, Philippine Currency, as actual, moral and exemplary
damages and to pay the costs and attorney’s fees.

SO ORDERED.

Melencio-Herrera, (Chairman),
Padilla, Sarmiento, and
Regalado, JJ., concur.

* Penned by Associate Justice Floreliana Castro Bartolome
concurred in by Associate Justices Jorge R. Coquia
and Mariano A. Zosa