318 Landbank vs.

Belle Corporation,
Darth
G.R. No. 205271, September 2, 2015
Just focused on R.E.M.
Peralta, J
TOPIC: Real Estate Mortgage
FACTS:
1. Respondent Belle Corporation filed a Complaint for quieting of title against Bautista. Alleging that Belle Corp is
the registered owner in possession of four (4) parcels of land (Lot 1,2,3,4).
2. On October 31, 1996, it received a demand letter from Bautista's counsel which ordered the immediate stoppage of
its occupation and use of a substantial portion of the land that she purportedly owns claiming that Belle Corp had
illegally constructed a road on said property without her prior notice or permission. Before a response could be
sent, Bautista caused the posting of a signboard on the entrance access road to Tagaytay Highlands International
Golf Club and the Country Club of Tagaytay Highlands, notifying the public as follows:
Please be informed that based on a geodetic re-survey a substantial portion of this entrance road leading to Tagaytay Highlands was found
to be inside the perimeter of a private property covered by TCT No. P-671.
Effective November 1, 1996, the registered owner of TCT No. P-671 will enforce her rights and entry and/or exit to her property without her
prior consent and approval will be strictly prohibited.6

3. A copy of TCT No. P-671 (disputed title) showed that it emanated from Original Certificate of Title (OCT) No.
OP-283 which, in tum, appears to have been issued pursuant to Free Patent No. (IV-4) 12573 on January 20, 1977
and registered on February 4, 1977.7 Respondent thus sought to cancel the free patent for being null and void,
constituting a cloud on its own title.
4. On May 5, 1997, Bautista filed an Answer claiming that as shown on the face of TCT No. P-1863 said title
originated not from OCT No. 0-216 but from OCT No. OP-287 pursuant to a Free Patent issued in the name of Paz
M. Del Rosario, which was granted by the President of the Philippines on January 27, 1977 and registered on
February 14, 1977.
5. Belle Corp impleaded Land Bank as indispensable party alleging that Bautista mortgaged to landbank the land
covered by the disputed title. Bautista failed to pay, it was foreclosed. Bautista failed to redeem and a title was
issued to Landbank. Landbank claimed to be an innocent mortgagee for value, and made to believe that there is no
other persons/entity interested in the property.
6. Liezel 's Garments, Inc. (which was impleaded in the third party complaint) stressed that the subject property is
free from all forms of liens and encumbrances when the mortgage contract was executed with landbank, since
Bautista was then its absolute and lawful owner with a clean and valid title. It reiterated that there is nothing from
Bautista's title which could arouse suspicion and, by reason thereof, the bank has no obligation to look beyond
what appears on the face of the certificate of title.
7. RTC for landbank. CA reversed. Hence this petition.
ISSUE(S): 1.) WON landbank was an innocent mortgagee
HELD: 1) NO. Ladbank was in bad faith. It disregarded facts that aroused suspicion
RATIO:
1.) When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for value is
applied more strictly.48 Being in the business of extending loans secured by real estate mortgage, banks are presumed to
be familiar with the rules on land registration.49 Since the banking business is impressed with public interest, they are
expected to be more cautious, to exercise a higher degree of diligence, care and prudence, than private individuals in their
dealings, even those involving registered lands.50 Banks may not simply rely on the face of the certificate of title. Hence,
they cannot assume that, simply because the title offered as security is on its face free of any encumbrances or lien, they
are relieved of the responsibility of taking further steps to verify the title and inspect the properties to be mortgaged.52 As
expected, the ascertainment of the status or condition of a property offered to it as security for a loan must be a standard
and indispensable part of a bank's operations.53 It is of judicial notice that the standard practice for banks before approving
a loan is to send its representatives to the property offered as collateral to assess its actual condition, verify the genuineness
of the title, and investigate who is/are its real owner/s and actual possessors.
It the instant case, petitioner readily admitted that during the appraisal and inspection of the property on January 11, 1994
it duly noted the observation that the subject property was traversed by an access road leading to the Tagaytay Highlands
Golf Course. However, it concluded, albeit erroneously, that the access road is still a part of TCT No. P-671 because its
existence cannot be established despite verifications conducted by its property appraisers with the DENR's Land
Management Section Region IV and Tax Mapping Section of the Tagaytay City Assessor's Office due to lack of records
of any survey plan delineating the portion occupied by the said road from the subject property."55

A person who deliberately ignores a significant fact that could create suspicion in an otherwise reasonable person is
not a mortgagee in good faith. A mortgagee cannot close his eyes to facts which should put a reasonable man on his
guard and claim that he acted in good faith under the belief that there was no defect in the title of the mortgagor.
His mere refusal to believe that such defect exists or the willful closing of his eyes to the possibility of the existence
of a defect in the mortgagor's title will not make him an innocent mortgagee for value if it afterwards develops that
the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery
had he acted with that measure of precaution which may reasonably be required of a prudent man in a like
situation.
Here, the facts show that petitioner disregarded circumstances that should have aroused its suspicion. After encountering a
dead end in the DENR's Land Management Section' Region IV and the Tax Mapping Section of the Tagaytay City
Assessor's Office, it manifestly failed to inquire further on the identity of possible adverse claimants and the status of their
occupancy. Had petitioner earnestly probed, by simply talking to Bautista or asking the possessors/owner of adjacent lots
as regards the presence of the traversing access road, it. could have. easily discovered the opposing claim of respondent,
which is a known real estate developer in the area. Indeed, failing to make such inquiry would hardly be consistent with
any pretense of good faith. Given the suspicious-provoking presence of the concrete road on the mortgaged lot, it
behooved petitioner to conduct a more exhaustive investigation on the history of Bautista's title. The acceptance of the
mortgaged property; notwithstanding the existence of an actual and visible improvement thereon constitutes gross
negligence amounting to bad faith.56 Where the mortgagee acted with haste in granting the mortgage loan and did not
ascertain the ownership of the land being mortgaged it cannot be considered an innocent mortgagee.57
Granting, for the sake of argument, that petitioner is a mortgagee in good faith, still it. cannot be said that it is an innocent purchaser
for value. A purchaser in good faith is defined as one who buys a property without notice that some other person has a right to, or
interest in, the property and pays full and fair price at the time of purchase or before he has notice of the claim or interest of other
persons in the property. When a prospective buyer is faced with facts and circumstances as to arouse his suspicion, he must take
precautionary steps to qualify as a purchaser in good faith. Even if there was yet no annotated notice of lis pendens at the time the lot
covered by TCT P-671 was mortgaged, such notice already existed when petitioner purchased the lot during the foreclosure sale. The
notice of lis pendens was inscribed on TCT P-671 on November 20, 1996, the same day when Civil Case No. TG-1672 was filed, while
the public auction was held on September 1 0, 1997.59cralawrednad

The foregoing considered, by reason of its bad faith, there is no merit on petitioner's conviction that attorney's fee cannot
be recovered as cost in this case.
One important matter, however. It cannot escape Our notice that the CA ordered Bautista and Liezel's Garments, Inc. to
jointly pay petitioner 16,327,991.40, the amount for which the disputed property was sold to petitioner at public auction.
Only the bank filed a petition for review before Us, which, as expected, did not raise the issue of propriety of such order.
This notwithstanding, We deem it proper to rectify the directive. The Supreme Court is clothed with ample authority to
review an issue, even not assigned as an error on appeal if it finds that its consideration is necessary in arriving at a just
decision and complete resolution of the case or to serve the interests of justice.
It must be emphasized that Bautista, who by now may have already turned 87 years old, is considered as a third-party or
accommodation mortgagor. She mortgaged her property to stand as security for the indebtedness of Liezel 's Garments,
Inc. She is not a party to the principal obligation but merely secured the latter by mortgaging her own property. In fact, it
was only Dolores E. Bautista, theh the President and General Manager of Liezel's Garments, Inc., who was the sole
signatory of the Omnibus Credit Line Agreement dated August 16, 1994 and August 30, 199561 as well as the promissory
note dated June 30, 1995 and September 30, 1995.62
Neither petitioner nor Liezel's Garments, Inc. presented proof that Bautista is a director, officer or employee of Liezel's
Garments, Inc. Although Bautista acted as such, it is a basic rule that a corporation is a juridical entity which is vested with
a legal personality separate and distinct from those acting for and in its behalf and from the people comprising it, who, in
general, are not personally liable for obligations incurred by the corporation unless the veil of corporate fiction is pierced
to justify that it is used as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, or to confuse legitimate issues.65cralawrednad
CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 179491

January 14, 2015

ALEJANDRO C. ALMENDRAS, JR., Petitioner,

vs.
ALEXIS C. ALMENDRAS, Respondent.
DECISION
SERENO, CJ:
We resolve the Petition for Review filed by petitioner Alejandro C. Almendras, Jr., from the 27 January 2006 Decision
and 28 August 2007 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 73088.1 The CA affirmed the Decision
and Order of the Regional Trial Court (RTC) in Civil Case No. 33432 finding petitioner liable for damages.
THE FACTS
As culled from the CA, petitioner sent letters with similar contents on 7 February 1996 to House Speaker Jose de Venecia,
Jr., and on 26 February 1996 to Dr. Nemesio Prudente, President of Oil Carriers, Inc. The controversial portion of the first
and second letters reads as follows:
This is to notify your good self and your staff that one ALEXIS "DODONG" C. ALMENDRAS, a brother, is not vested
with any authority to liaison or transact any business with any department, office, or bureau, public or otherwise, that has
bearing or relation with my office, mandates or functions. x x x.
Note worthy to mention, perhaps, is the fact that Mr. Alexis "Dodong" C. Almendras, a reknown blackmailer, is a bitter
rival in the just concluded election of 1995 who ran against the wishes of my father, the late Congressman Alejandro D.
Almendras, Sr. He has caused pain to the family when he filed cases against us: his brothers and sisters, and worst against
his own mother.
I deemed that his act of transacting business that affects my person and official functions is malicious in purpose, done
with ill motive and part of a larger plan of harassment activities to perforce realise his egoistic and evil objectives.
May I therefore request the assistance of your office in circulating the above information to concerned officials and
secretariat employees of the House of Representatives.3
xxxx
These letters were allegedly printed, distributed, circulated and published by petitioner, assisted by Atty. Roberto Layug,
in Digos, Davao del Sur and Quezon City, with evident bad faith and manifest malice to destroy respondent Alexis C.
Almendras good name. Hence, the latter filed an action for damages arising from libel and defamation against petitioner
in the Regional Trial Court (RTC), Branch 19, Digos City.
THE RTC RULING
In the course of trial at the lower court, petitioner failed to present any evidence, except his Answer, despite several
rescheduling of hearings at his instance.4 The trial court thus submitted the case for decision, and eventually ruled that
respondent was libeled and defamed. For the sufferings, social ridicule, defamation and dishonor caused by petitioners
letters, respondent was awarded damages, as follows: "P5,000,000.00 as moral damages; P100,000.00 as exemplary
damages; P10,000.00 for litigation expenses; and attorneys fees in the amount of 25% of whatever amounts actually
received by plaintiff for this judgment."pp5

Petitioner moved for reconsideration and/or new trial,6 but the same was denied by the trial court.7
THE CA RULING
On intermediate appellate review, the CA ruled that petitioner was not denied due process. It noted that petitioner was
given full opportunity to present his evidence, but he vehemently disregarded the proceedings by merely absenting
himself from trials without valid excuses.8 The appellate court also ruled that the letters were not privileged
communications, since petitioner was not acting as a member of the Congress when he sent them. In fact, his letter stated
that he extends his "apology for bringing this personal matter in the open." He was, as maintained by the respondent,
sending open libelous and unsealed letters, duly published and circulated in Digos, Davao del Sur, and Quezon City.9
Consequently, the CA upheld the damages awarded by the trial court, the amounts being consistent with the social and
financial standing of the parties involved.10
We now rule on the final review of the case.
THE ISSUES
From the foregoing, we reduce the issues to the following:
(1) Whether or not petitioner was deprived due process;
(2) Whether or not the letters are libelous in nature;
(3) Whether or not the letters fall within the purview of privileged communication; and
(4) Whether or not respondent is entitled to moral and exemplary damages, attorneys fees and litigation expenses.
OUR RULING
We deny the petition.
Petitioner anchors his appeal on the ground that his letters are covered by privileged communications. He insists that he
has the legal, moral, or social duty to make the communication, or at least, had an interest to protect, being then a
Congressman duty-bound to insulate his office and his constituents from the dubious and mistrustful pursuits of his elder
brother.11 Moreover, the letters were also not meant to be circulated or published. They were sent merely to warn the
individuals of respondents nefarious activities, and made in good faith and without any actual malice. Respondents
testimony that he learned the existence of the letter from others cannot be countenanced, as no witness corroborated this.
At best, it is only hearsay.12
On the denial of his motion for reconsideration and/or new trial, he maintains that his own counsel Atty. Leonardo D.
Suario categorically admitted that he did not know of petitioners ailment and thus did not make the proper manifestations
in Court. His failure to attend the hearing was not of his own volition, but because of his doctors strict advice since he
earlier underwent a quadruple coronary artery bypass at the St. Lukes Medical Center-Heart Institute in Quezon City
on16 July 2001, just a day before the Motion for Reconsideration and/or New Trial was filed. While his counsel
represents him, the latters mistakes should not deprive him of his day in court to present his side.13
As to the damages, petitioner avers that since respondent never testified on any suffering he sustained or why he is entitled
to them, the same must not be awarded.
On the other hand, respondent asserts that petitioners letters do not fall within the purview of privileged communication
because it was published and read by the secretariat of the House of the Representatives, and not exclusively
communicated to persons who have some interest or duty in the matter and who have the power to furnish the protection
sought by the author of the statement. Moreover, he was no tacting as a member of congress when he sent the letters. The
writing of a personal matter (which petitioner admitted in the letters), not relating to the functions of a member of
Congress cannot, by any stretch of imagination, be deemed to be privileged and insulated from suit arising therefrom.14

Malice has also been sufficiently proven because the language of the letters in fact shows that the writer had some illfeeling towards the respondent by using the words such as "reknown blackmailer" and "bitter rival." There is sufficient
showing that petitioner bore a grudge against the respondent and that there was rivalry or ill-feeling between them.15
Anent the damages, respondent believes that they were rightly awarded, taking into consideration his testimony in the
lower court,16 and the financial and social standing of the parties herein.17
First, we rule that petitioner was not deprived of his right to due process.
Settled is the rule that a client is bound by the mistakes of his counsel. The only exception is when the negligence of the
counselis so gross, reckless and inexcusable that the client is deprived of his day in court. In such instance, the remedy is
to reopen the case and allow the party who was denied his day in court to adduce evidence. However, perusing the case at
bar, we find no reason to depart from the general rule.18
Petitioner was given several opportunities to present his evidence or to clarify his medical constraints in court, but he did
not do so, despite knowing full well that he had a pending case incourt. For petitioner to feign and repeatedly insist upon a
lack of awareness of the progress of an important litigation is to unmask a penchant for the ludicrous. Although he
rightfully expected counsel to amply protect his interest, he cannot just sit back, relax and await the outcome of the case.
In keeping with the normal course of events, he should have taken the initiative "of making the proper inquiries from his
counsel and the trial court as to the status of his case." For his failure to do so, he has only himself to blame.19 The Court
cannot allow petitioner the exception to the general rule just because his counsel admitted having no knowledge of his
medical condition. To do so will set a dangerous precedent of never-ending suits, so long as lawyers could allege their
own fault or negligence to support the clients case and obtain remedies and reliefs already lost by the operation of law.20
Second, we find that petitioners letters are libelous in nature and do not fall within the purview of privileged
communication.
For an imputation to be libelous under Article 353 of the Revised Penal Code, the following requisites must be present: (a)
it must be defamatory; (b) it must be malicious; (c) it must be given publicity; and (d) the victim must be identifiable.21
Consequently, under Article 354, every defamatory imputation is presumed to be malicious, even if true, if no good
intention and justifiable motive is shown. As an exception to the rule, the presumption of malice is done away with when
the defamatory imputation qualifies as privileged communication.22 In order to qualify as privileged communication
under Article 354, Number 1,23 the following requisites must concur: (1) the person who made the communication had a
legal, moral, or social duty to make the communication, or at least, had an interest to protect, which interest may either be
his own or of the one to whom it is made; (2) the communication is addressed to an officer or a board, or superior, having
some interest or duty in the matter, and who has the power to furnish the protection sought; and (3) the statements in the
communication are made in good faith and without malice.24
Were petitioners letters defamatory in nature? We believe so.
In determining whether a statement is defamatory, the words used are to be construed in their entirety and should be taken
in their plain, natural, and ordinary meaning as they would naturally be understood by the persons reading them, unless it
appears that theywere used and understood in another sense.25 In the instant case, the letters tag respondent as a "reknown
black mailer," a vengeful family member who filed cases against his mother and siblings, and with nefarious designs.
Even an impartial mind reading these descriptions would be led to entertain doubts on the persons character, thereby
affecting that persons reputation.
Malice can also be presumed inasmuch as the letters are not privileged in nature. Petitioners contention that he has the
legal, moral or social duty to make the communication cannot be countenanced because he failed to communicate the
statements only to the person or persons who have some interest or duty in the matter alleged, and who have the power to
furnish the protection sought by the author of the statement. A written letter containing libelous matter cannot be
classified asprivileged when it is published and circulated among the public.26 Examination of the letters would reveal
that petitioner himself intended for the letters to be circulated (and they were so) when he said that:
May I therefore request the assistance of your office in circulating the above information to concerned officials and
secretariat employees of the House of Representatives.27

This lack of selectivity on his part is indicative of malice and is anathema to his claim of privileged communication
because such publication created upon the minds of the readers a circumstance which brought discredit and shame to
respondents reputation.28
Lastly, having duly proved that all the elements of libel are present in this case, we rule that the damages awarded by the
trial court and affirmed by the appellate court must be modified and equitably reduced.
In awarding damages in libel cases, the court is given ample discretion to determine the amount, depending upon the facts
of the particular case.29 Article 2219 of the Civil Code expressly authorizes the recovery of moral damages in cases of
libel, slander or any other form of defamation. However, "while no proof of pecuniary loss is necessary in order that moral
damages may be awarded, x x x it is nevertheless essential that the claimant should satisfactorily show the existence of the
factual basis of damages and its causal connection to defendants acts."30 Considering that respondent sufficiently
justified his claim for damages (i.e. he testified that he was "embarrassed by the said letters [and] ashamed to show his
face in [sic] government offices"31), we find him entitled to moral and exemplary damages.
However, we equitably reduce the amounts32 awarded because even though the letters were libellous, respondent has not
suffered such grave or substantial damage to his reputation to warrant receiving P5,000,000 as moral damages and
P100,000.00 as exemplary damages. In fact, he was able to successfully secure an elected position in recent years.
Accordingly, we reduce the award of moral damages from P5,000,000 to P100,000 and exemplary damages from
P100,000 to P20,000.
The award of attorney's fees is not proper because respondent failed to justify satisfactorily his claim, and both the trial
and appellate courts failed to explicitly state in their respective decisions the rationale for the award.33 It is an accepted
doctrine that the award thereof as an item of damages is the exception rather than the rule, and counsel's fees are not to be
awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 of the Civil
Code demands factual, legal and equitable justification, without which the award is a conclusion without a premise, its
basis being improperly left to speculation and conjecture. In all events, the court must explicitly state in the text of the
decision, and not only in the decretal portion thereof, the legal reason for the award of attorney's fees.34 The same is true
for the award of litigation expenses because respondent failed to satisfactorily justify his claim. WHEREFORE, we
DENY the instant petition. The 27 January 2006 Decision and 28 August 2007 Resolution of the Court of Appeals in CAG.R. CV No. 73088 are hereby MODIFIED, in that: (1) the award of moral damages is reduced from P5,000,000 to
P100,000; (2) the award of exemplary damages is reduced from P100,000 to P20,000; and (3) litigation expenses and
attorney's fees are deleted.
SO ORDERED.
MARIA LOURDES P.A. SERENO
Chief Justice, Chairperson
WE CONCUR:
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
LUCAS P. BERSAMIN
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
ESTELA M. PERLAS-BERNABE
Associate Justice