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SPS. NILO RAMOS v. RAUL OBISPO

FACTS:

Nilo Ramos and Raul Obispo executed a real estate mortgage in favor of Far East Bank and Trust Company (FEBTC), but they alleged that they signed a blank form given by Obispo. They claimed that they only intended to secure a loan of P250,000, but were surprised to find out that their property was mortgaged for P1,159,096. After paying off the P250,000 loan, they demanded the release of their title, but Obispo refused. As a result, petitioners filed a complaint for annulment of the real estate mortgage and damages against FEBTC and Obispo. The Regional Trial Court (RTC) ruled in favor of the petitioners, but the Court of Appeals (CA) reversed the decision, declaring the mortgage valid. Petitioners appealed to the Supreme Court, claiming that the CA erred in upholding the mortgage's validity and dismissing their claim for damages.

ISSUES:

  1. Whether the petitioners have sufficiently proven their allegations of fraud and misrepresentation.

  2. Whether there is sufficient evidence to support the claim that the petitioners did not consent to the third-party mortgage approved by the bank.

  3. Whether the petitioners' actions constitute estoppel and waiver to question the invalidity of the mortgage.

  4. Whether or not the Real Estate Mortgage (REM) executed by the petitioners as accommodation mortgagors is valid.

  5. Whether or not the petitioners are liable for the loan obtained by the principal debtor.

RULING:

  1. The petitioners failed to provide enough evidence to prove that the respondent deceived them as to the debt secured by the real estate mortgage (REM). The court found that the petitioners' allegations were not supported by the evidence on record and inconsistent with ordinary experience and common sense.

  2. The court also concluded that there was no sufficient evidence to support the claim that the petitioners did not consent to the third-party mortgage approved by the bank. The court noted that the petitioners' conduct, such as accepting checks from the respondent instead of the bank and not directly dealing with the bank regarding their loan, suggested otherwise.

  3. Assuming that the REM was invalid, the court found that the petitioners' unjustified failure to act within a reasonable time after the respondent repeatedly failed to turn over the mortgage documents constituted estoppel and waiver to question its defect or invalidity.

  4. The Supreme Court ruled that the REM executed by the petitioners as accommodation mortgagors is valid. The Court held that an accommodation mortgagor is not necessarily a recipient of the loan, and it is not necessary for the accommodation mortgagor to be informed of the entire amount of the loan or to determine the loan amount before the execution of the Special Power of Attorney. In this case, the petitioners, as owners, signed the REM as mortgagors, and there is no evidence of fraud or irregularity in its execution. The Court also emphasized that the petitioners, as former overseas workers, are not considered ignorant or disadvantaged parties and are capable of understanding the consequences of their decisions.

  5. The Supreme Court held that the petitioners are liable for the loan obtained by the principal debtor. The Court found that there is no evidence to support the petitioners' claim that they only allowed the principal debtor to use their property as collateral to facilitate their own loan with the bank. The Court emphasized that the burden of proof lies with the party making the allegation. In this case, the petitioners failed to present any evidence, other than their bare assertion, to prove that they gave their title to the principal debtor to secure their own loan. The Court also noted that the petitioners received a certain amount of money from the principal debtor, which could be inferred as some form of remuneration for lending their title as security for the principal debtor's credit line with the bank.

PRINCIPLES:

  • In civil cases, the burden of proof lies with the party making allegations, who must prove them by a preponderance of evidence.

  • Fraud and mistake affecting a transaction must be substantiated by the party alleging them, as they are not presumed and must be proved by clear and convincing evidence.

  • Preponderance of evidence refers to the weight, credit, and value of the aggregate evidence on either side and is synonymous with the term "greater weight of the evidence" or "greater weight of the credible evidence."

  • Parties must rely on the strength of their own evidence, not on the weakness of the defense offered by their opponent.

  • Mortgagors who desire to attack a mortgage as invalid should act with reasonable promptness, and unreasonable delay may amount to ratification.

  • An accommodation mortgagor is not necessarily a recipient of the loan and may allow their property to be used as collateral for another party's loan.

  • The burden of proof lies with the party making the allegation, and a mere assertion without supporting evidence is not sufficient to prove a claim.

  • An allegation of fraud, duress, or undue influence in relation to the validity of a mortgage requires clear and convincing proof.