Far East Bank and Trust Company and Borja vs. Sps. Cayetano

9/14/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 611
G.R. No. 179909. January 25, 2010.*
FAR EAST BANK AND TRUST COMPANY (NOW BANK

OF THE PHILIPPINE ISLANDS) AND ROLANDO BORJA,
DEPUTY SHERIFF, petitioners, vs. SPS. ERNESTO AND
LEONOR C. CAYETANO, respondents.
Civil Law; Laches; Laches is negligence or omission to assert a

right within a reasonable time warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it;
Essential Elements of Laches.—Notwithstanding the nullity of the real
estate mortgage executed by Tabing and her husband, we find that the
equity principle of laches is applicable in the instant case. Laches is
negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. Its essential elements are: (1)
conduct on the part of the defendant, or of one under whom he claims,
giving rise to the situation complained of; (2) delay in asserting
complainant’s right after he had knowledge of the defendant’s conduct
and after he has an opportunity to sue; (3) lack of knowledge or notice
on the part of the defendant that the complainant would assert the right
on which he bases his suit; and (4) injury or prejudice to the defendant
in the event relief is accorded to the complainant.
Same; Same; There is no absolute rule on what constitutes laches;
Laches, the essence of which is the neglect to assert a right over a long
period of time, may prevent recovery of a titled property.—There is no
absolute rule on what constitutes laches. It is a creation of equity and
applied not really to penalize neglect or sleeping upon one’s rights but
rather to avoid recognizing a right when to do so would result in a
clearly inequitable situation. The question of laches, we said, is
addressed to the sound discretion of the court and each case must be
decided according to its particular circumstances. Verily, in a number
http://www.central.com.ph/sfsreader/session/00000165d3ec158a8b86ab8f003600fb002c009e/t/?o=False 1/11
of cases, it had been held that laches, the essence of which is the
neglect to assert a right over a long period of time, may prevent
recovery of a titled property.
_______________
* FIRST DIVISION.
97
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Bongat, Borja & Associates for petitioner.
Leoncio M. Clemente and Benito B. Nate for respondents.
VILLARAMA, JR., J.:
This is a petition for review1 under Rule 45 of the 1997
Rules of Civil Procedure, as amended, of the December 8, 2006
Decision2 of the Court of Appeals in CA-G.R. CV No. 76382
which affirmed the May 24, 2002 Decision3 of the Re-
_______________
1 Rollo, pp. 10-26.

2 Id., at pp. 30-37. Penned by Associate Justice Mario L. Guariña III and
concurred in by Associate Justices Roberto A. Barrios and Lucenito N. Tagle.
The dispositive portion of the Decision reads as follows:
“IN VIEW OF THE FOREGOING, the decision appealed from is
MODIFIED in that the interest rate shall be the stipulated 23 percent per annum
instead of 12 percent. All other aspects of the decision are AFFIRMED.
SO ORDERED.”
3 Id., at pp. 88-95. Penned by Executive Judge Corazon A. Tordilla. The
dispositive portion of the Decision reads as follows:
“WHEREFORE, the real estate mortgage executed in favor of the defendant
Bank is hereby declared void and unenforceable against plaintiffs.
Consequently, the Transfer Certificates of Title Nos. 24272 and 24273 are
hereby ordered annulled.
“The loan however, of the spouses Tabing in the amount of Php 100.000.00
shall remain valid and enforceable against them solodarily, as stated in the two
promissory notes they executed (Exhs. “A” & “B”).
“Applying the ruling of the Supreme Court in the case of Medel vs. Court of
Appeals, G.R. No. 131622, November 27, 1998, (299 SCRA 481), the spouses
Tabing are to pay to the
98
gional Trial Court (RTC) of Naga City, Branch 61 and

dismissed petitioner Far East Bank and Trust Company’s
appeal. The appellate court likewise denied its motion for
reconsideration in a Resolution4 dated September 6, 2007.
The undisputed facts of the case are summarized as follows:
Respondent Leonor C. Cayetano (Cayetano) executed a
special power of attorney in favor of her daughter Teresita C.
Tabing (Tabing) authorizing her to contract a loan from
petitioner in an amount not more than three hundred thousand
pesos (P300,000.00) and to mortgage her two (2) lots located in
Barangay Carolina, Naga City with Transfer Certificate of Title
Nos. 12304 and 11621.5 For the approval of the loan, Cayetano
also executed an affidavit of non-tenancy.6 Petitioner loaned
Tabing one hundred thousand pesos (P100,000.00) secured by
two (2) promissory notes and a real estate mortgage over
Cayetano’s two (2) properties.7 The mortgage document was
signed by Tabing and her husband as mortgagors in their
individual capacities, without stating that Tabing was executing
the mortgage contract for and in behalf of the owner
(Cayetano).8
Petitioner foreclosed the mortgage for failure of the
respondents and the spouses Tabing to pay the loan. A notice of
_______________
Far East Bank & Trust Company the amount of Php 100,000.00 from July
13, 1989 with interest thereon of 12% per annum until the amount due is fully
paid. They are also to pay attorney’s fees equivalent to 25% of the amount due.
“For insufficiency of evidence, the complaint against Sheriff Rolando Borja
is hereby dismissed.
“SO ORDERED.”
4 Id., at p. 49.
5 Id., at pp. 145-146.
6 Id., at p. 160.
7 Id., at pp. 147-151.

8 Id., at pp. 149-151.
99
public auction sale, to be conducted on September 18, 1991,9

was sent to respondents. The latter’s lawyer responded with a
letter10 to petitioner requesting that the public auction be
postponed. Respondents’ letter went unheeded and the public
auction was held as scheduled wherein the subject properties
were sold to petitioner for one hundred sixty thousand pesos
(P160,000.00).11 Subsequently, petitioner consolidated its title
and obtained new titles in its name after the redemption period
lapsed without respondents taking any action.
More than five (5) years later, Tabing, on behalf of
Cayetano, sent a letter dated September 10, 1996 to petitioner
expressing the intent to repurchase the properties for two
hundred fifty thousand pesos (P250,000.00) with proposed
terms of payment.12 Petitioner refused the offer stating that the
minimum asking price for the properties was five hundred
thousand pesos (P500,000.00) and it was not amenable to the
proposed terms of payment. Petitioner nevertheless gave
respondents the chance to buy back the properties by joining a
bidding to be set in some future date.13 However, respondents
filed on December 18, 1996 a complaint for annulment of
mortgage and extrajudicial foreclosure of the properties with
damages in the RTC of Naga City. Respondents sought
nullification of the real estate mortgage and extrajudicial
foreclosure sale, as well as the cancellation of petitioner’s title
over the properties.14
After trial, the RTC rendered judgment in favor of the
respondents, holding that the principal (Cayetano) cannot be
bound by the real estate mortgage executed by the agent
(Tabing) unless it is shown that the same was made and signed
in the name of the principal; hence, the mortgage will
_______________
9 Id., at pp. 152 and 161.

10 Id., at p. 153.
11 Id., at pp. 154-155.

12 Id., at pp. 156-157.
13 Id., at p. 158.
14 Id., at pp. 50-55.
100
bind the agent only. The trial court also found that there was no
compliance with the requirement of publication of the
foreclosure sale in a newspaper of general circulation as
provided in Act No. 3135, as amended. Such requisite must be
strictly complied with as any slight deviation therefrom will
render the sale voidable.15
The Court of Appeals affirmed the RTC’s ruling. It held that
it must be shown that the real estate mortgage was executed by
the agent on-behalf of the principal, otherwise the agent may be
deemed to have acted on his own and the mortgage is void.
However, the appellate court further declared that the principal
loan agreement was not affected, which had become an
unsecured credit. The Court of Appeals denied petitioner’s
motion for reconsideration.16
Hence, the present petition.
The only issue before us is whether or not the principal is
bound by the real estate mortgage executed by the authorized
agent in her own name without indicating the principal.
The issue is not novel. The RTC and the Court of Appeals
are both correct in holding that our decision in The Philippine
Sugar Estates Development Co., Ltd., Inc. v. Poizat, et al.17
(Poizat Case), as reiterated in the case of Rural Bank of Bombon
(Camarines Sur), Inc. v. Court of Appeals18 (Bombon Case),
finds application in the instant case. The factual circumstances
of said cases are similar to the case at bar, where an authorized
agent executed a real estate mortgage on the principal’s
property in her own name without indicating that she was acting
on behalf of the principal.
In the Poizat Case, Gabriela Andrea de Coster (Coster)
executed a general power of attorney authorizing her hus-
_______________
15 Id., at pp. 92-94.

16 Id., at pp. 34-36.
17 48 Phil. 536 (1925).
18 G.R. No. 95703, August 3, 1992, 212 SCRA 25.
101
band, Juan Poizat (Poizat), to obtain a loan and to secure the

same with mortgage, pledge or personal securities. Poizat
obtained a credit of ten thousand (10,000) Pounds Sterling from
petitioner therein, and executed a mortgage upon the real
property of his wife. Although the provisions of the real estate
mortgage mentioned that it was entered also in Poizat’s capacity
as attorney-in-fact of Coster, Poizat signed the contract in his
own name without any indication that he also signed it as the
attorney-in-fact of his wife. For failure to pay the loan, the
petitioner foreclosed on the mortgage but this was opposed by
Coster. The Court ruled on the legal force and effect of the real
estate mortgage in question, by whom and for whom it was
executed, and whether or not it was void as to Coster, in this
wise:
“It is a general rule in the law of agency that, in order to bind the
principal by a mortgage on real property executed by an agent, it must
upon its face purport to be made, signed and sealed in the name of the
principal, otherwise, it will bind the agent only. It is not enough
merely that the agent was in fact authorized to make the mortgage,
if he has not acted in the name of the principal. Neither is it
ordinarily sufficient that in the mortgage the agent describes himself as
acting by virtue of a power of attorney, if in fact the agent has acted in
his own name and has set his own hand and seal to the mortgage. This
is especially true where the agent himself is a party to the instrument.
However clearly the body of the mortgage may show and intend
that it shall be the act of the principal, yet, unless in fact it is
executed by the agent for and on behalf of his principal and as the
act and deed of the principal, it is not valid as to the principal.”
[EMPHASIS SUPPLIED]
Thus, while Poizat may have had the authority to borrow

money and mortgage the real property of his wife, the law
specifies how and in what manner it must be done, and the
stubborn fact remains that, as to the transaction in question, that

power was never exercised. The mortgage in question was
executed by him and him only, and for such reason, it is not
binding upon the wife, and as to her, it is null and void.
102
In Bombon, respondent Ederlinda M. Gallardo (Gallardo)

authorized Rufino S. Aquino (Aquino) to contract a loan from
any bank and secure it with mortgage on her property. Gallardo
also delivered her owner’s copy of Transfer Certificate of Title
to Aquino. Aquino obtained a loan from petitioner bank and
executed a deed of real estate mortgage without indicating that
he was acting in behalf of Gallardo. At the beginning of the
mortgage deed, it was mentioned that the mortgage was
executed by Aquino, attorney-in-fact of Gallardo, together with
a description of his legal capacity to contract. Gallardo and her
husband filed a complaint for annulment of mortgage against
the petitioner and Aquino and one (1) of the grounds raised was
that the mortgagor in the deed was Aquino instead of Gallardo.
The trial court ordered the suspension of the foreclosure of the
real estate mortgage until after the decision in the annulment
case shall have become final and executory. The dismissal of
the complaint for annulment of mortgage was appealed to the
Court of Appeals which reversed the trial court and declared the
mortgage contract void and unenforceable against Gallardo.
Upon elevation to this Court, we held that “Aquino’s act of
signing the Deed of Real Estate Mortgage in his name alone as
mortgagor, without any indication that he was signing for and in
behalf of the property owner, Ederlinda M. Gallardo, bound
himself alone in his personal capacity as a debtor of the
petitioner Bank and not as the agent or attorney-in-fact of
Gallardo.”19
In the fairly recent case of Gozun v. Mercado,20 respondent
Mercado denied having authorized his sister-in-law (Lilian) to
borrow money from petitioner who gave her “cash advance” of
P253,000.00 allegedly for allowances of poll watchers.
Petitioner sued respondent to collect on various sums due from
the latter including the “cash advance” obtained by Lilian. The
trial court found for the petitioner and ordered the respondent to
pay all amounts being claimed by the petitioner.
_______________
19 Id., at p. 30.
20 G.R. No. 167812, December 19, 2006, 511 SCRA 305.
103
The Court of Appeals reversed the trial court’s decision and

dismissed the complaint for lack of cause of action. When the
case reached this Court, petitioner argued that respondent had
informed him that he had authorized Lilian to obtain the loan
and hence, following Macke v. Camps which held that one who
clothes another with apparent authority as his agent, and holds
him out to the public as such, respondent cannot be permitted to
deny the authority. We sustained the Court of Appeals’ ruling
on the matter and held that respondent was not liable for the
“cash advance” given by petitioner to Lilian who signed the
receipt in her name alone, without indicating therein that she
was acting for and in behalf of respondent. She thus bound
herself in her personal capacity and not as an agent of
respondent or anyone for that matter.21
Notwithstanding the nullity of the real estate mortgage
executed by Tabing and her husband, we find that the equity
principle of laches is applicable in the instant case. Laches is
negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it
either has abandoned it or declined to assert it.22 Its essential
elements are: (1) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation complained
of; (2) delay in asserting complainant’s right after he had
knowledge of the defendant’s conduct and after he has an
opportunity to sue; (3) lack of knowledge or notice on the part
of the defendant that the complainant would assert the right on
which he bases his suit; and (4) injury or
_______________
21 Id., at pp. 314-316, citing Rural Bank of Bombon v. Court of Appeals
(supra), Philippine Sugar Estates Development Co. v. Poizat, (supra) and
Aguenza v. Metropolitan Bank and Trust Co., 337 Phil. 448, 457; 271 SCRA 1
(1997).
22 Republic v. Sandiganbayan, G.R. Nos. 112708-09, March 29, 1996, 255
SCRA 438, 451.
104
prejudice to the defendant in the event relief is accorded to the

complainant.23
There is no absolute rule on what constitutes laches. It is a
creation of equity and applied not really to penalize neglect or
sleeping upon one’s rights but rather to avoid recognizing a
right when to do so would result in a clearly inequitable
situation. The question of laches, we said, is addressed to the
sound discretion of the court and each case must be decided
according to its particular circumstances.24 Verily, in a number
of cases, it had been held that laches, the essence of which is the
neglect to assert a right over a long period of time, may prevent
recovery of a titled property.25
In the present case, records clearly show that respondents
could have filed an action to annul the mortgage on their
properties, but for unexplained reasons, they failed to do so.
They only questioned the loan and mortgage transactions in
December 1996, or after the lapse of more than five (5) years
from the date of the foreclosure sale. It bears noting that the real
estate mortgage was registered and annotated on the titles of
respondents, and the latter were even informed of the
extrajudicial foreclosure and the scheduled auction. Instead of
impugning the real estate mortgage and opposing the scheduled
public auction, respondents’ lawyer wrote a letter to petitioner
and merely asked that the scheduled auction be postponed to a
later date. Even after five (5) years, respondents still failed to
oppose the foreclosure and the subsequent transfer of titles to
petitioner when their agent, Tabing, acting in behalf of
Cayetano, sent a letter proposing to buy back
_______________
23 Catholic Bishop of Balanga v. Court of Appeals, G.R. No. 112519,

November 14, 1996, 264 SCRA 181, 194.
24 Chavez v. Bonto-Perez, G.R. No. 109808, March 1, 1995, 242 SCRA 73,
80.
25 Ignacio v. Basilio, G.R. No. 122824, September 26, 2001, 366 SCRA 15;
Po Lam v. Court of Appeals, G.R. No. 116220, December 6, 2000, 347 SCRA
86; and Declaro v. Court of Appeals, G.R. No. 119747, November 27, 2000,
346 SCRA 57.
105
the properties. It was only when the negotiations failed that

respondents filed the instant case. Clearly, respondents slept on
their rights.26
WHEREFORE, the petition is GRANTED. The Decision
dated December 8, 2006 and the Resolution dated September 6,
2007 of the Court of Appeals in CA-G.R. CV No. 76382, as
well as the Decision dated May 24, 2002 in Civil Case No. 96-
3684 of the Regional Trial Court, Branch 61, Naga City, are
hereby SET ASIDE.
The complaint for annulment of mortgage and extrajudicial
foreclosure with damages and cancellation of titles filed by
respondents is hereby DISMISSED.
No costs.
SO ORDERED.
Puno (C.J., Chairperson), Carpio-Morales, Leonardo-De

Castro and Bersamin, JJ., concur.
Petition granted, judgment and resolution set aside.
Note.—It is well-settled doctrine that laches cannot be used

to defeat justice or perpetuate fraud and injustice. (Llemos vs.
Llemos, 513 SCRA 128 [2007])
——o0o——
_______________
26 Vide: Carpo v. Chua, G.R. Nos. 150773 & 153599, September 30, 2005,
471 SCRA 471, 483; Landrito, Jr. v. Court of Appeals, G.R. No. 133079,
August 9, 2005, 466 SCRA 107, 115; and Navarro v. Metropolitan Bank and
Trust Company, G.R. No. 165697, August 4, 2009, 595 SCRA 149.
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9/14/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 611

G.R. No. 179909. January 25, 2010.*

FAR EAST BANK AND TRUST COMPANY (NOW BANK

Civil Law; Laches; Laches is negligence or omission to assert a

PETITION for review on certiorari of the decision and

1 Rollo, pp. 10-26.

gional Trial Court (RTC) of Naga City, Branch 61 and

7 Id., at pp. 147-151.

public auction sale, to be conducted on September 18, 1991,9

9 Id., at pp. 152 and 161.

11 Id., at pp. 154-155.

15 Id., at pp. 92-94.

band, Juan Poizat (Poizat), to obtain a loan and to secure the

Thus, while Poizat may have had the authority to borrow

stubborn fact remains that, as to the transaction in question, that

In Bombon, respondent Ederlinda M. Gallardo (Gallardo)

The Court of Appeals reversed the trial court’s decision and

prejudice to the defendant in the event relief is accorded to the

23 Catholic Bishop of Balanga v. Court of Appeals, G.R. No. 112519,

the properties. It was only when the negotiations failed that

Puno (C.J., Chairperson), Carpio-Morales, Leonardo-De

Petition granted, judgment and resolution set aside.

Note.—It is well-settled doctrine that laches cannot be used

© Copyright 2018 Central Book Supply, Inc. All rights reserved.

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