G.R. No.

196118, July 30, 2014

Castillo vs. Security Bank Corp
Peralra, J.

Facts:

Petitioner Leonardo C. Castillo filed a complaint for the partial annulment of a real estate mortgage against respondents
Spouses Leon C. Castillo, Jr. and Teresita Flores-Castillo, and Security Bank Corporation (SBC). Leonardo contended that a
property he owned, covered by TCT No. 28297, was used as collateral for a loan obtained by the Spouses Castillo from
SBC without his consent. He claimed the Special Power of Attorney (SPA) purportedly authorizing the mortgage was
falsified, as the Community Tax Certificate (CTC) cited therein was issued after the SPA's notarization date. The Spouses
Castillo obtained loans amounting to P45,000,000.00 and P2,500,000.00, secured by mortgages over several parcels of
land. Upon default, SBC proceeded with the foreclosure of the properties, except for the lots under TCT Nos. 28302 and
28297, which Leonardo specifically challenged.

RTC Ruling:

The Regional Trial Court (RTC) of San Pablo City ruled in favor of Leonardo, declaring the real estate mortgage, the
Memorandum of Agreement, and the Certificate of Sale null and void insofar as Leonardo's property under TCT No. 28297
was concerned. It ordered SBC to return the ownership of TCT No. 28297 to Leonardo and awarded him moral and
exemplary damages.

Court of Appeals Ruling:

The Court of Appeals (CA) reversed the RTC decision, upholding the validity of the real estate mortgage. The CA found
that the preponderance of evidence favored the respondents, making the SPA and subsequent mortgage binding. It noted
that Leonardo failed to provide convincing proof of the alleged forgery and highlighted inconsistencies in his claims
regarding his whereabouts and actions related to the mortgage.

Issue:

Whether the real estate mortgage constituted over the property under TCT No. T-28297 is valid and binding.

Supreme Court Ruling:

Yes. The Supreme Court denied the petition, affirming the CA's decision. It emphasized that allegations of forgery must be
proven by clear, positive, and convincing evidence, which Leonardo failed to do. The Court also highlighted that defective
notarization does not invalidate a document if its validity is established by preponderance of evidence. Furthermore, the
Court found no merit in Leonardo's claims against the interest and penalty charges imposed by SBC, deeming them
neither excessive nor unconscionable. Thus, the Supreme Court affirmed the validity of the real estate mortgage, including
the SPA authorizing the mortgage of the property covered by TCT No. 28297.