Pbcom Vs Ca Et Al GR # 109803, Apr 20, 1998: Doctrine of Equitable Estoppel Facts

*** Doctrine of Equitable Estoppel
T12.1 PBCom vs CA et al GR # 109803, Apr 20, 1998

FACTS: Chee Puen, then the general manager of Global, Inc. and husband of respondent,
informed the latter that their company needed a P300,000 loan for its operational expenses.
She proposed that her paraphernal lot in Makati be used as collateral. She was asked to sign three
3 sets of blank forms of real estate mortgage of petitioner bank. He wrote down in pencil the
figure 300 under the space provided for the amount to be loaned and respondent signed the blank
mortgage forms due to Chee Puen's representation.
Chee Puen had the mortgage document later notarized by Atty. Arzadon, using a residence
certificate bearing respondent's forged signature. Chee Puen then applied for a P3,000,000.00
loan from petitioner bank for Global, Inc. To secure the loan, he mortgaged respondent's
paraphernal lot in Makati, using the blank real estate mortgage forms signed by her. He also
submitted a "Secretary's Certificate of Board Resolution" where he misrepresented himself as
president and acting corporate secretary of Global, Inc.
Petitioner bank was grossly negligent when it took no step to verify whether the respondent was
really offering her paraphernal property as collateral, made no credit check on respondent and
conducted no investigation on the authenticity of the "Secretary's Certificate of Board
Resolution"
Respondent filed a criminal case for falsification against Chee Puen, a disbarment complaint
against Atty. Edilberto Arzadon who notarized the mortgage deed, an administrative complaint
in the Central Bank against the petitioner and a complaint for nullification of Real Estate
Mortgage in the RTC of Pasig, Metro Manila. These prompt and decisive actions on the part of
the respondent do not warrant the assumption that she has abandoned or declined to assert her
right to annul the subject real estate mortgage. Her complaint for annulment cannot by any
stretch of the imagination be characterized as a stale demand. Petitioner bank contended that the
Honorable Court of Appeals erred in affirming the ruling of the lower court that the respondent
was not estopped/barred from questioning the legality/validity of the real estate mortgage.
ISSUE: WON CA erred in affirming the ruling of RTC that the respondent was estopped from
questioning the validity of the real estate mortgage.
RULING: NO. Court rejected petitioner's plea that the equitable principle of estoppel be applied
against the respondent. Article 1431 provides that "through estoppel, an admission or
representation is rendered conclusive upon the person making it and cannot be denied or
disproved as against the person relying thereon." Implementing this substantive law, section 2 (a)
of Rule 131 provides: "Whenever a party has by his own declaration, act or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration, act or omission be permitted to
falsify it." Case law tells us that the elements of estoppel are: "first, the actor who usually must
have knowledge, notice or suspicion of the true facts, communicates something to another in a
misleading way, either by words, conduct or silence; second, the other in fact relies, and relies
reasonably or justifiably, upon that communication; third, the other would be harmed materially
if the actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth,
the actor knows, expects or foresees that the other would act upon the information given or that a
reasonable person in the actor's position would expect or foresee such action."
The established facts preclude the application of estoppel against the respondent.
Respondent did not deliberately or intentionally lead the petitioner bank to believe that she was
putting up her paraphernal property to secure a P3 M loan of Global, Inc. It was Chee Puen who
made the misrepresentation thus defrauding respondent herself. Furthermore, petitioner's reliance
on the mortgage application signed in blank by respondent is not a reasonable reliance. As a
banking institution, petitioner bank was grossly negligent The business of a bank is affected with
public interest and it should observe a higher standard of diligence when dealing with the public.
Neither will it matter that petitioner bank itself was misled by Chee Puen, a third person to the
contract. Under Article 1342 of the Civil Code, the misrepresentation of a third person will
vitiate consent if it has resulted in substantial mistake and the same is mutual. Petition is
dismissed.
T12.2 PNB vs IAC Sept 18, 1990

FACTS: On March 20, 1968, Leticia de la Vina-Sepe executed a real estate mortgage in favor of
PNB over a lot registered in her name to secure the payment of a sugar crop loan of P3,400.
Later, Leticia Sepe, acting as attorney-in-fact for her brother-in-law, private respondent Romeo
Alcedo, executed an amended real estate mortgage to include his (Alcedo's) Lot as additional
collateral for Sepe's increased loan of P16,500.Leticia Sepe and private respondent Alcedo
verbally agreed to split fifty-fifty (50-50) the proceeds of the loan but failing to receive his one-
half share from her, Alcedo wrote a letter on May 12, 1970 to the PNB, San Carlos Branch,
revoking the Special Power of Attorney which he had given to Leticia Sepe to mortgage his Lot.
PNB Branch Manager, Jose T. Gellegani advised Alcedo that his land had already been included
as collateral for Sepe's 1970-71 sugar crop loan, which the latter had already availed. Sepe was
still able to obtain an additional loan from PNB with the total amount P56,638.69 on the security
of Alcedo's property as collateral. Thereafter, Alcedo received 2 letters from PNB that Sepe
failed to pay her loan and that 6 days shall be given to settle their obligation otherwise forclosure
shall commence. Alcedo requested Sepe to pay her accounts to forestall foreclosure proceedings
against his property, but to no avail. Alcedo filed a complaint against Sepe and PNB while the
latter filed a case for extrajudicial foreclosure. Alcedo filed and amended complaint withdrawing
his action to collect his one-half share out of the proceeds of the sugar crop loans obtained by
Sepe. PNB alleged that it had no knowledge of the agreement between Mrs. Sepe and Alcedo to
split the crop loan proceeds between them. It required Sepe to put up other collaterals when it
granted her an additional loan because Alcedo informed the Bank that he was revoking the
Special Power of Attorney he gave Sepe; that the revocation was not formalized in accordance
with law.
ISSUE: Whether or not PNB estopped and may not validly foreclosed the real estate mortgage
on Alcedo's property despite notice of Alcedo's revocation of the Special Power of Attorney
authorizing Leticia Sepe to mortgage his property as security for her sugar crop loans.
RULING: YES. We(SC) agree with the opinion of the appellate court that under the doctrine of
promissory estoppel enunciated in the case of Republic Flour Mills, Inc. vs. Central Bank, L-
23542, August 11, 1979, the act and assurance given by the PNB to Alcedo “that we shall
exclude the aforementioned lot [Lot No. 1402] as a collateral of Leticia de la VinaSepe in our
recommendation for her 1971-72 sugar crop loan” (p. 37, Rollo) is binding on the bank. Having
given that assurance, the bank may not turn around and do the exact opposite of what it said it
would not do. One may not take inconsistent positions (Republic vs. Court of Appeals, 133
SCRA 505). A party may not go back on his own acts and representations to the prejudice of the
other party who relied upon them (Lazo vs. Republic Surety & Insurance Co., Inc., 31 SCRA
329.)

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*** Doctrine of Equitable Estoppel

T12.1 PBCom vs CA et al GR # 109803, Apr 20, 1998

T12.2 PNB vs IAC Sept 18, 1990

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