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PHILIPPINE NATIONAL BANK v. SPS. BERNARD

FACTS:

The dispute in this case revolves around a parcel of land that was mortgaged by Spouses Rodolfo and Emilie Montealegre to the Philippine National Bank (PNB). When Spouses Montealegre failed to repay the loan, PNB initiated foreclosure proceedings and became the highest bidder in the auction sale.

In response, Spouses Bernard and Cresencia Marañon filed a complaint seeking to annul the transfer of title to Spouses Montealegre. They alleged that the signatures in the Deed of Sale were forged.

The trial court ruled in favor of Spouses Marañon and declared the cancellation of the title and the issuance of a new one to be null and void.

PNB, on the other hand, appealed the trial court's decision in order to release rental payments deposited by a tenant. PNB argued that it was the rightful owner of the property.

The Court of Appeals upheld the trial court's ruling, asserting that Spouses Marañon cannot be deprived of the property's fruits and that PNB did not act as a mortgagee in good faith.

PNB's motion for reconsideration was subsequently denied.

ISSUES:

  1. Whether PNB, as a mortgagee in good faith, is entitled to the rental payments from the subject lot after the expiration of the redemption period.

  2. Whether the Court of Appeals erred in overturning the Regional Trial Court's declaration that PNB is a mortgagee in good faith entitled to the property’s fruits.

RULING:

  1. The Supreme Court held that PNB, despite being adjudged a mortgagee in good faith with its lien carried over to the newly issued title, is not entitled to the rental payments. The rentals from the subject lot belong to Spouses Marañon, the rightful owners, as per the final and executory judgment reconveying the property to them.

  2. The Supreme Court ruled that the Court of Appeals erred in overturning the RTC's pronouncement that PNB is a mortgagee in good faith. However, the CA’s ultimate decision to affirm the order releasing rental payments to Spouses Marañon was upheld.

PRINCIPLES:

  1. Doctrine of Immutability of Judgments: A judgment that has acquired finality becomes immutable and unalterable and may no longer be modified.

  2. Mortgagee in Good Faith: A mortgagee in good faith has its mortgage lien respected and carried over to the new certificate of title.

  3. Rent as Civil Fruit: Rent is a civil fruit belonging to the owner of the property producing it by right of accession.

  4. Article 2127 of the Civil Code: A mortgage extends to natural accessions, improvements, growing fruits, and rents not yet received when the obligation becomes due.

  5. Ownership and Accession: For the mortgage to include improvements and rents, the mortgagor must be the true owner of the mortgaged property.

  6. Right of Purchaser in Public Auction: The purchaser at a public auction acquires only the right, title, interest, and claim of the mortgagor to the property at the time of levy, subject to final judgments on ownership rights.