JULIE PARCON-SONG, PETITIONER, VS.

LILIA suspicious about the genuineness and execution of

B. PARCON, JOINED BY HER HUSBAND the title. By way of counterclaim, it also sought
JOAQUIN A. PARCON, MAYBANK PHILIPPINES, damages and attorney's fees.17
INC. (FORMERLY PNB REPUBLIC BANK), AND
THE REGISTER OF DEEDS OF QUEZON CITY, Initially, the Regional Trial Court dismissed the case
RESPONDENTS. after Julie had failed to prosecute. On
reconsideration, however, it eventually allowed her to
DECISION present evidence. Yet, Julie was still unable to
continue her direct testimony and conduct cross-
LEONEN, J.: examination as her counsels failed to appear. Thus,
the trial court deemed her to have waived her right to
This Court resolves a Petition for Review on formally offer her evidence.18
Certiorari1 assailing the Decision2 and Resolution3 of
the Court of Appeals, which affirmed the Regional In the trial proceedings, Julie moved for the judicial
Trial Court Decision4 dismissing Julie Parcon-Song's admission that Maybank is a foreign corporation,
(Julie) Complaint for annulment of title, reconveyance disqualified under the Constitution to own private
of transfer certificate of title, annulment of mortgage lands. The Regional Trial Court took judicial notice of
and foreclosure proceedings, and declaration of family Maybank's Articles of Incorporation and General
home.5 Information Sheet.19

Julie is the daughter of Spouses Joaquin and Lilia Eventually, the Regional Trial Court, in its July 14,
Parcon (the Parcon Spouses).6 In 1995, the Parcon 2008 Decision,20 dismissed Julie's Complaint. It found
Spouses obtained two loans from Maybank that the mortgage was valid and that there was no
Philippines, Inc. (Maybank).7 As security, they implied or express trust on the property.21 It ruled
executed a real estate mortgage over a parcel of land that since the title was not annotated, Maybank
covered by Transfer Certificate of Title No. 107064, cannot be affected by any interest Julie had over the
registered in the name of Lilia Parcon.8 The real property.22
estate mortgage was annotated on the title.9
The trial court further found that the foreclosure
In 2001, when the Parcon Spouses defaulted on their proceedings were valid, barring Julie from seeking the
loans, Maybank foreclosed the mortgage. In the sale's cancellation.23 Additionally, it ruled that the
foreclosure proceedings, Maybank emerged as the evidence showing that Maybank was a Malaysian-
highest bidder, and thus, was issued a certificate of owned foreign corporation had no relevance to the
sale.10 The certificate of sale was registered with the validity of the sale.24
Register of Deeds.11
The Court of Appeals, in its August 17, 2011
On March 4, 2003, Julie filed a Complaint praying that Decision,25 affirmed the Regional Trial Court
the following be declared void: (1) Transfer Certificate Decision.
of Title No. 107064; (2) the real estate mortgage
dated November 28, 1995 in favor of Maybank; and The Court of Appeals found that the title to the
(3) the foreclosure proceedings. She likewise sought property was clean, not forged or fake, with no
that the property be reconveyed to her as its true and registered liens and encumbrances, and registered in
lawful owner. Julie also prayed for a declaration of the mortgagor's name, Lilia Parcon.26  Thus, it ruled,
family home and that Maybank be ordered to pay Maybank could very well rely on the title as a
damages.12 mortgagee in good faith, and did not need to further
investigate.27
Julie asserted that she had purchased the property
from PACE Realty Investment, Inc. in August 1983, The Court of Appeals also ruled that the extrajudicial
paying it in full. By way of trust, she used her sale was valid as the applicable law, Act No. 3135,
mother's name to acquire the property.13 Thus, in only required that the mortgage be registered. It
1994, the title was registered in Lilia Parcon's explained that while a family home is generally
name.14 exempt from execution, but if it was mortgaged to
secure a debt, then it may be subject to execution,
Julie claimed that since then, Lilia Parcon has claimed forced sale, or attachment.28
ownership over the property. She contended that her
parents merely ignored her repeated demands to Finally, the Court of Appeals found that Maybank, a
reconvey the property. She also alleged that the foreign bank, was still given a license to operate in
property was mortgaged in favor of Maybank without the Philippines, which satisfied the requirement to
her consent.15 protect Philippine equity. It cited Section 8 of Republic
Act No. 7721, which accorded foreign banks equal
The Parcon Spouses did not file an answer, and thus, treatment as domestic banks, in ruling that Maybank
were declared in default16 had the right to acquire the mortgaged property in
foreclosure proceedings.29
For its part, Maybank argued in its Answer that it was
a mortgagee in good faith and for value.s It alleged In its November 28, 2011 Resolution,30 the Court of
that it verified the property with the Register of Deeds Appeals denied the Motion for Reconsideration. Thus,
of Quezon City, and it found no defect or anything Julie filed this Petition.31
Petitioner argues that the real estate mortgage is void the voting stock of only one (1) domestic bank or new
as she is the property's real owner. She claims that banking subsidiary.
she paid for it with her own money and her parents
were only holding the property in trust for her—facts It notes that the foreign bank may operate in the
that her parents supposedly did not dispute.32 Philippines.48 It adds that the bank had entered the
Philippine banking system by purchasing Philippine
Petitioner also claims that respondent Maybank is not National Bank-Republic Bank from the Philippine
a mortgagee in good faith.33 She posits that had the government,49 which meant it has the same
bank investigated, it would have discovered that she, functions, privileges, and limitations as all Philippine
not her parents, had been in open and adverse banks.50
possession of the property. Instead, the bank only
relied on the title, which she says is a sign of bad The Office of the Solicitor General adds that Republic
faith.34 Act No. 10641 has allowed foreign banks to bid and
take part in foreclosure sales of real property
Petitioner also contends that as a foreign corporation, mortgaged to them and to possess it within five
respondent Maybank is prohibited under Article XII, years.51
Section 3 of the 1987 Constitution from owning real
property in the Philippines.33  She further questions The Office of the Solicitor further notes that the
the bank's mode of entry as a foreign bank in the constitutional prohibition on alien ownership of lands
Philippine banking system, saying it did not comply does not apply in this case, as respondent Maybank
with Section 2 of Republic Act No. 7721.36 As such, did not become the absolute owner of the
the equal treatment accorded to Philippine banks and property.52 Unlike a domestic bank,53 a foreign bank
foreign banks under Section 8 does not apply.37 does not acquire the property as an absolute owner,
but only as a possessor with a "special right and duty
In its Comment,38 respondent Maybank asserts that to sell"54 the property to a qualified Philippine
it is a mortgagee in good faith as it had inspected the national within five years. Even if no redemption is
property. Petitioner allegedly failed to prove that it did made within a year of registration of the certificate of
not do so.39 sale, a foreign bank still cannot encumber, transform,
or destroy the property it acquired in a foreclosure
Respondent Maybank also claims that it is a foreign sale.55
bank authorized to operate in the Philippines under
Section 2(i) of Republic Act No. 7721.40 It further The Office of the Solicitor General maintains that the
claims that its operations were justified by Section 73 national patrimony remains preserved, because
of Republic Act No. 8791.41 It asserts that it was Republic Act Nos. 4882 and 10641 prohibit title
granted a license by the Monetary Board to operate transfers to foreign banks and require them to sell the
as a foreign bank, and is thus accorded equal foreclosed property to qualified Philippine nationals.56
treatment as domestic banks. As such, it can
foreclose and acquire mortgaged properties.42 It On June 5, 2018, this Court ordered the Monetary
notes that its ownership of the mortgaged property is Board of the Bangko Sentral ng Pilipinas (Bangko
only temporary, as it is required to dispose of its Sentral) and the Bankers Association of the
foreclosed asset within five years after its Philippines (the Bankers Association) to each
acquisition.43 comment on whether the foreclosure and acquisition
of respondent Maybank's properties, a fully-owned
Since this case raised the issue of the constitutionality foreign corporation, is allowed under the
of the property acquisition, it was referred to the Constitution.57
Court En Bane.44 In an August 8, 2017 Resolution,
the Court En Bane accepted the case and directed the Bangko Sentral maintains that foreign banks are
Office of the Solicitor General to comment.45 authorized to foreclose mortgages on real property,
but are not allowed to acquire or own real
In its Comment,46 the Office of the Solicitor General properties.58  It explains that engaging in banking
posits that the respondent Maybank's foreclosure of business is distinct from owning or acquiring land in
the mortgage and acquisition of the property did not the Philippines. The business of foreign banks in    
violate the Constitution.47 the Philippines is governed by Republic Act No. 7721,
as amended by Republic Act No. 10641, while owning
SECTION 2. Modes of Entry. — The Monetary Board or acquiring land is regulated under the Public Land
may authorize foreign banks to operate in the Act and the 1987 Constitution.59
Philippine banking system through any of the
following modes of entry: (i) by acquiring, purchasing Citing the Senate and House's bicameral conference
or owning up to sixty percent (60%) of the voting on the bill that soon became the General Banking
stock of an existing bank; (ii) by investing in up to Law, Bangko Sentral distinguishes the policy on
sixty percent (60%) of the voting stock of a new foreign ownership of land from that of banks. It
banking subsidiary incorporated under the laws of the explains that the prohibition on land ownership is
Philippines; or (iii) by establishing branches with full stricter because unlike land, the foreign ownership of
banking authority: Provided, That a foreign bank may a bank is still limited by its engaging of business in
avail itself of only one (1) mode of entry: Provided, Philippine money.60 It likewise asserts that the
further, That a foreign bank or a Philippine liberalization of entry of foreign banks is not meant to
corporation may own up to a sixty percent (60%) of allow foreign ownership of land.61
Bangko Sentral also states that Republic Act No. First, whether or not respondents Joaquin and Lilia
7721, as amended by Republic Act No. 10641, is Parcon are holding the property in trust for petitioner
constitutional. It explains that the law, as affirmed in Julie Parcon-Song;
special laws and rules, only allows foreign banks to
foreclose real estate mortgages and possess Second, whether or not respondent Maybank
foreclosed land,62 but not to consolidate title over the Philippines, Inc. is a mortgagee in good faith;
properties.63
Third, whether or not respondent Maybank
For its part, the Bankers Association maintains that Philippines, Inc. is a foreign bank authorized by the
respondent Maybank's foreclosure, bid, certificate of Monetary Board to operate in the Philippine banking
sale, and possession of the property are not void.64 It system; and Finally, whether or not respondent
contends that foreign banks are not prohibited from Maybank Philippines, Inc.'s foreclosure and acquisition
participating in foreclosure proceedings and of the properties are authorized under the
possessing land, as long as they hold the title within Constitution despite it being a fully-owned foreign
the limits allowed under banking laws.65 In any case, corporation.
it adds, the matter is addressed if the land is
subsequently transferred to a Philippine national.66 This Court will no longer rule on the first and third
issues.
The Bankers Association also points out that since the
foreclosure happened before Republic Act No. 10641 Both the existence of the trust and respondent
was passed, the original Republic Act No. 7721 Maybank's authority to operate in the Philippines as a
applies in this case.67 foreign bank are questions of fact. These are not
proper to raise in a Rule 45 petition, which generally
On Republic Act No. 7721, the Bankers Association only entertains questions of law.76
elaborates that the law provides equal treatment to
foreign banks and grants them functions and This Court's jurisdiction is limited to errors of law. It is
privileges similar to domestic banks, including the not our function to examine the evidence all over
right to extrajudicially foreclose a security under a again. If the lower courts' findings are not shown to
valid loan agreement.68 be unsupported by evidence or based on a gross
misapprehension of facts, their factual conclusions
The Bankers Association points out that the loan shall be respected.77
business component, a core function of banks, will be
rendered ineffective if banks are prevented    from Here, both lower courts found that respondent
enforcing their rights as secured creditors. Likewise, Maybank is a foreign bank authorized by the
to deny foreclosure and acquisition rights to foreign Monetary Board to operate in the Philippine banking
banks will disincentivize their entry, which is contrary system.78 The Regional Trial Court further ruled that
to the policy behind Republic Act No. 7721.69 It no trust existed between petitioner and her
likewise asserts that it will also benefit the economy, parents.79 The Court of Appeals also noted that the
particularly small and medium enterprises, if more title was clean, registered in the name of Lilia Parcon,
lending and borrowing is encouraged.70 Furthermore, and had no annotations of liens, encumbrances, or
to disallow foreign banks from doing so may let adverse claims.80
unscrupulous persons to take advantage of this
prohibition by borrowing from foreign banks, There is no evidence that these findings were
defaulting, and defeating enforcement proceedings unsupported or manifestly erroneous. Petitioner
with impunity.71 contested these findings, yet she did not present any
proof to establish her allegations.81 It is a basic
The Bankers Association also adds that under Section evidentiary rule that "[t]he party who alleges a fact
6 of Republic Act No. 10641, foreign banks may bid has the burden of proving it."82 Bare allegations
and take part in foreclosure sales of land mortgaged warrant no merit.83 In Republic v. Estate of Hans
to them and to conditionally possess the Menzi:84
property.72 Thus, while land ownership is still limited
to Philippine nationals, the law is not unduly It is procedurally required for each party in a case to
restrictive on the operations of foreign banks.73 prove his own affirmative allegations by the degree of
evidence required by law. In civil cases such as this
Finally, the Bankers Association contends that the one, the degree of evidence required of a party in
five-year period allowing foreign banks to possess the order to support his claim is preponderance of
property is the same period allowed under the evidence, or that evidence adduced by one party
General Banking Law for all banks to dispose of which is more conclusive and credible than that of the
foreclosed real properties. It surmises that this other party. It is therefore incumbent upon the
general rule is the reason why Republic Act No. 7721 plaintiff who is claiming a right to prove his case.
was silent on such power of foreign banks.74 In any Corollarily, the defendant must likewise prove its own
case, it points out that this power has been made allegations to buttress its claim that it is not liable.
explicit in Republic Act No. 10641.75
The party who alleges a fact has the burden of
For this Court's resolution are the following proving it. The burden of proof may be on the plaintiff
issues: or the defendant. It is on the defendant if he alleges
an affirmative defense which is not a denial of an
essential ingredient in the plaintiffs cause of action, delay transactions, and, thus, achieve a less optimal
but is one which, if established, will be a good welfare level for the entire society.92 (Citation
defense - i.e., an "avoidance" of the claim.83 omitted)
(Citations omitted)
However, when the mortgagee is a bank, a higher
Thus, this Court affirms the lower courts' findings as standard is imposed before it is considered a
to the absence of the trust and the authority of mortgagee in good faith. Banks cannot simply rely on
respondent Maybank to operate as a foreign bank in the title alone, but must further investigate the
the Philippines. property to ensure the genuineness of the
title.93 In Land Bank of the Philippines v. Belle
II Corporation:94

Likewise, the real estate mortgage is valid. When the purchaser or the mortgagee is a bank, the
rule on innocent purchasers or mortgagees for value
Under the doctrine of mortgagee in good faith, a is applied more strictly. Being in the business of
mortgage is deemed valid if the mortgagee relied in extending loans secured by real estate mortgage,
good faith on what appears on the face of the banks are presumed to be familiar with the rules on
certificate of title. This is so even if the mortgagor land registration. Since the banking business is
fraudulently acquired the title to the impressed with public interest, they are expected to
property.86 In Cabuhat v. Court of Appeals:87 be more cautious, to exercise a higher degree of
diligence, care and prudence, than private individuals
However, it is well-settled that even if the in their dealings, even those involving registered
procurement of a certificate of title was tainted with lands. Banks may not simply rely on the face of the
fraud and misrepresentation, such defective title may certificate of title. Hence, they cannot assume that,
be the source of a completely legal and valid title in simply because the title offered as security is on its
the hands of an innocent purchaser for value. . . . face free of any encumbrances or lien, they are
relieved of the responsibility of taking further steps to
Just as an innocent purchaser for value may rely on verify the title and inspect the properties to be
what appears in the certificate of title, a mortgagee mortgaged. As expected, the ascertainment of the
has the right to rely on what appears in the title status or condition of a property offered to it as
presented to him, and in the absence of anything to security for a loan must be a standard and
excite suspicion, he is under no obligation to look indispensable part of a bank's operations. It is of
beyond the certificate and investigate the title of the judicial notice that the standard practice for banks
mortgagor appearing on the face of the said before approving a loan is to send its representatives
certificate. Furthermore, it is a well-entrenched legal to the property offered as collateral to assess its
principle that when an innocent mortgagee who relies actual condition, verify the genuineness of the title,
upon the correctness of a certificate of title and investigate who is/are its real owner/s and actual
consequently acquires rights over the mortgaged possessors.95 (Citations omitted)
property, the courts cannot disregard such
rights.88 (Citations omitted) Likewise, in Andres:

Generally, if the certificate of title indicates nothing The general rule allows every person dealing with
that will raise concern, and the mortgagee is unaware registered land to rely on the face of the title when
of any defect in the title or any other problematic determining its absolute owner.
circumstance surrounding the property, the
mortgagee is not required to further investigate.89 ...

The rationale for this doctrine is the public's interest However, the banking industry belongs to a different
in sustaining the certificate of title's indefeasibility "as category than private individuals. Banks are
evidence of the lawflil ownership of the land or of any considered businesses impressed with public interest,
encumbrance"90 on it. In Andres v. Philippine requiring "high standards of integrity and
National Bank:91 performance." Consequently, banks must exercise
greater care, prudence, and due diligence in their
The doctrine protecting mortgagees and innocent property dealings. The standard operating practice for
purchasers in good faith emanates from the social banks when acting on a loan application is "to
interest embedded in the legal concept granting conduct an ocular inspection of the property offered
indefeasibility of titles. The burden of discovery of for mortgage and to verify the genuineness of the
invalid transactions relating to the property covered title to determine the real owner(s)
by a title appearing regular on its face is shifted from thereof."96 (Citations omitted)
the third party relying on the title to the co-owners or
the predecessors of the title holder. Between the third Thus, a bank is a mortgagee in good faith if it
party and the co-owners, it will be the latter that will inspected and investigated the property in
be more intimately knowledgeable about the status of accordance with the standards imposed on
the property and its history. The costs of discovery of banks.
the basis of invalidity, thus, are better borne by them
because it would naturally be lower. A reverse However, this Court rules that a bank should not
presumption will only increase costs for the economy, necessarily be made liable if it did not investigate or
inspect the property. If the circumstances reveal that Petitioner questions the constitutionality of
an investigation would still not yield a discovery of respondent Maybank's foreclosure and acquisition of
any anomaly, or anything that would arouse the mortgaged property, arguing that it violates the
suspicion, the bank should not be liable. prohibition on alien ownership of real property under
Article XII, Section 3 of the 1987 Constitution.104
Here, both lower courts consistently held that
Transfer Certificate of Title No. 107064 was clean. It We decline to rule on the constitutionality of the
was registered in the name of respondent Lilia Parcon foreclosure. This case may be resolved on the basis of
and bore no annotations evidencing any trust, lien, or a statute.
encumbrance on the property. The title was not
forged or fake. There is likewise no showing that III (A)
respondent Maybank was aware of any defect or any
other conflicting right on the title when the property Respondent Maybank's acquisition of the property is
was mortgaged to it.97 void. At the time of the foreclosure sale, the
governing law provided that foreign banks may not
There is no factual finding on whether respondent participate in the foreclosure and acquisition of
Maybank actually inspected the property. The Court mortgaged properties.
of Appeals simply ruled that the inspection is not
necessary and respondent Maybank's reliance on the As a foreign bank, respondent Maybank is authorized
clean title was sufficient.98 Similarly, the Regional to operate in the Philippine banking system, with the
Trial Court found that it cannot be prejudiced by same rights and privileges as Philippine
rights over the property not duly annotated in the banks.105 Under Republic Act No. 8791, or the
title.99 General Banking Law, the entry of foreign banks is
governed by Republic Act No. 7721, or the Foreign
Regardless, the circumstances show that had Bank Liberalization Act.106
respondent Maybank conducted an investigation, it
would still not have discovered any issue on the Enacted in 1994, 107 the underlying policy of the
mortgaged property. Foreign Bank Liberalization Act is to develop a more
"stable, competitive, efficient, and dynamic banking
Petitioner has the burden to prove that she is in and financial system"108 by encouraging greater
actual possession of the property—a burden she foreign participation. It allowed foreign banks to
failed to discharge.     operate in the Philippine banking system through any
of the following modes of entry:
By her account, petitioner allegedly purchased the
property from PACE Realty Investment, Inc. using her (i) by acquiring, purchasing or owning up to sixty
own money, but used her mother's name to acquire percent (60%) of the voting stock of an existing
it.100 Thus, in 1994, the title was registered in bank; (ii) by investing in up to sixty percent (60%) of
respondent Lilia Parcon's name.101 Petitioner the voting stock of a new banking subsidiary
admitted that she let her parents and siblings occupy incorporated under the laws of the Philippines; or (iii)
the property and gave them financial support.102 by establishing branches with full banking
authority[.]109
Clearly, the ones in actual possession of the property
were the Parcon Spouses and petitioner's Under this provision, a foreign bank may own up to
siblings.103 Thus, had respondent Maybank 60% of the voting stock of only one domestic bank or
investigated the property, it would still not have found new banking subsidiary.110
any issue.
Nonetheless, the law maintained the State policy to
Petitioner had had several chances to substantiate her keep the financial system "effectively controlled by
claims. The Regional Trial Court had initially dismissed Filipinos."111 It mandated the Monetary Board to
the case because of her failure to prosecute. When always ensure that "the control of seventy percent
she moved for reconsideration, the trial court (70%) of the resources or assets of the entire
reinstated the case and allowed her to present her banking system is held by domestic banks which are
evidence. Nonetheless, she was unable to continue at least majority-owned by Filipinos[.]"112
her direct testimony and did not conduct a cross-
examination because her counsels failed to appear. Prior to its amendment in 2014, the Foreign Bank
Thus, the trial court deemed her to have waived her Liberalization Act was silent on whether foreign banks
right to formally offer her evidence. can foreclose mortgages and acquire mortgaged
properties.
Without clear and convincing evidence that
petitioner's claims are facts, respondent Maybank Generally, for matters not covered by the Foreign
remains a mortgagee in good faith. Hence, this Court Bank Liberalization Act, the provisions of the General
affirms the lower courts' finding that the mortgage is Banking Law applied to foreign banks."113 The
valid. General Banking Law allowed banks to foreclose real
estate mortgages and to acquire real properties
III mortgaged to it in good faith.  Its Section 52
provides:
SECTION 52. Acquisition of Real Estate by Way of of entry under Section 2 hereof shall be allowed to
Satisfaction of Claims. —Notwithstanding the bid and take part in foreclosure sales of real property
limitations of the preceding Section, a bank may   mortgaged to them, as well as to avail of enforcement
acquire,   hold   or   convey   real   property   under   and other proceedings, and accordingly take
the   following circumstances: possession of the mortgaged property, for a period
not exceeding five (5) years from actual possession:
52.1.   Such as shall be mortgaged to it in good faith Provided, That in no event shall title to the property
by way of security for debts; be transferred to such foreign bank. In case said bank
is the winning bidder, it shall, during the said five (5)-
.... year period, transfer its rights to a qualified Philippine
national, without prejudice to a borrower's rights
Any real property acquired or held under the under applicable laws. Should the bank fail to transfer
circumstances enumerated in the above paragraph such property within the five (5)-year period, it shall
shall be disposed of by the bank within a period of be penalized one half (1/2) of one percent (1%) per
five (5) years or as may be prescribed by the annum of the price at which the property was
Monetary Board: Provided, however, That the bank foreclosed until it is able to transfer the property to a
may, after said period, continue to hold the property qualified Philippine national.118
for its own use, subject to the limitations of the
preceding Section. (25a) (Emphasis supplied) Thus, a foreign bank can now participate in
foreclosure sales of real property mortgaged to it, and
However, a more specific rule is found in Republic Act even possess it. There are limitations, namely: (a) the
No. 4882, which amended Republic Act No. 133. It possession must be limited to five years; (b) the
states: property title shall not be transferred to it; and (c)
within the five-year period, it must transfer its rights
SECTION 1. Any provision of law to the contrary to a qualified Philippine national. In case a foreign
notwithstanding, private real property may be bank fails to transfer the property, it will be liable to
mortgaged in favor of any individual, corporation, or pay half of 1% per annum of the foreclosure price
association, but the mortgage or his successor in until it transfers the property.
interest, if disqualified to acquire or hold lands of the
public domain in the Philippines, shall not take Clearly, under Republic Act No. 10641, foreign banks
possession of the mortgaged property during the may now foreclose and acquire mortgaged properties.
existence of the mortgage and shall not take
possession of mortgaged property except after default However, Republic Act No. 10641, which was enacted
and for the sole purpose of foreclosure, receivership, in 2014, does not apply in this case. Here, the loans
enforcement or other proceedings and in no case for were obtained and the real estate mortgage was
a period of more than five years from actual executed and annotated on the title in 1995.119 The
possession and shall not bid or take part in any sale default on the loans, the foreclosure of the mortgage,
of such real property in case of foreclosure: Provided, and the property acquisition took place in 2001.120
That said mortgagee or successor in interest may
take possession of said property after default in The law then in place was Republic Act No. 4882.
accordance with the prescribed judicial procedures for Consequently, respondent Maybank was still a
foreclosure and receivership and in no case exceeding mortgagee disqualified to acquire lands in the
five years from actual possession.114  (Emphasis Philippines. It may possess the mortgaged property
supplied) after default and solely for foreclosure, but it cannot
bid or take part in any foreclosure sale.
Thus, a mortgagee who is prohibited from acquiring
public lands may possess the property for five years Thus, the sale to respondent Maybank is invalid.
after default and for the purpose of foreclosure.
However, it may not bid or take part in any III (B)
foreclosure sale of the real property.
Evidently, this case could be resolved without tackling
In 2014, Congress enacted Republic Act No. 10641 to whether a foreign bank's participation in a foreclosure
amend the Foreign Bank Liberalization Act. The sale of real property is constitutionally allowed. This
amendment allowed the full entry of foreign banks in Court shall follow the dictates of the constitutional
the Philippines,115 though it maintained the State policy of avoidance.
policy to keep the financial system effectively
controlled by Filipinos.116 Notably, it gave authorized Before this Court may determine the constitutionality
foreign banks the same functions, privileges, and of a government act, the requisites for judicial review
limitations as domestic banks of the same category. must be satisfied. In In Re: Save the Supreme Court
Likewise, any right, privilege, or incentive granted to Judicial Independence and Fiscal Autonomy
foreign banks is extended to Philippine Movement:121
banks.117 Thus, a new provision on foreclosure
proceedings was added: The power of judicial review, like all powers granted
by the Constitution, is subject to certain limitations.
SEC. 9. Participation in Foreclosure Proceedings. — Petitioner must comply with all the requisites for
Foreign banks which are authorized to do banking judicial review before this court may take cognizance
business in the Philippines through any of the modes of the case. The requisites are:
 (1)    there must be an actual case or must be necessary to the decision of the case."
controversy calling for the exercise of judicial (Italics supplied)
power;
The aforequoted decision in Macasiano merely
(2)    the person challenging the act must reiterated the ruling in Laurel vs. Garcia, where this
have the standing to question the validity of Court held:
the subject act or issuance; otherwise stated,
he must have a personal and substantial "The Court does not ordinarily pass upon
interest in the case such that he has constitutional questions unless these questions are
sustained, or will sustain, direct injury as a properly raised in appropriate cases and their
result of its enforcement; resolution is necessary for the determination of the
case[.] The Court will not pass upon a constitutional
(3)    the question of constitutionality must be question although properly presented by the record if
raised at the earliest opportunity; and the case can be disposed of on some other     found
such as the application of a statute or general
(4)    the issue of constitutionality must be the law[.]"128 (Emphasis in the original, citations
very lis mota of the case.122 (Citation omitted)
omitted)
In Spouses Mirasol v. Court of Appeals,129 this Court
The fourth requisite is relevant here.  Courts are explained that the presumption of constitutionality is
obligated to presume that the acts of Congress are anchored on the doctrine of separation of powers.
valid, unless the contrary is clearly shown. Thus, Courts should not assume that legislative and
courts avoid resolving the constitutionality of a law if executive acts were done without thoughtful
the case can be ruled on other grounds.123 The consideration:
question of constitutionality will only be passed upon
if it is indispensable to the resolution of the As regards the second issue, petitioners contend that
case,124 but it cannot be raised collaterally.125 This P.D. No. 579 and its implementing issuances are void
Court ruled: for violating the due process clause and the
prohibition against the taking of private property
Judicial review of official acts on the ground of without just compensation. Petitioners now ask this
unconstitutionality may be sought or availed of Court to exercise its power of judicial review.
through any of the actions cognizable by courts of
justice, not necessarily in a suit for declaratory relief. . Jurisprudence has laid down the following requisites
. . The constitutional issue, however, (a) must be for the exercise of this power: First, there must be
properly raised and presented in the case, and (b) its before the Court an actual case calling for the
resolution is necessary to a determination of the case, exercise of judicial review. Second, the question
i.e., the issue of constitutionality must be the very Us before the Court must be ripe for adjudication. Third,
mota presented.126(Citation omitted) the person challenging the validity of the act must
have standing to challenge. Fourth, the question of
These principles were further discussed in Ty v. constitutionality must have been raised at the earliest
Trampe:127   opportunity, and lastly, the issue of constitutionality
must be the very lis mota of the case.
Having already definitively disposed of the case
through the resolution of the foregoing two issues, As a rule, the courts will not resolve the
we find no more need to pass upon the third. It is constitutionality of a law, if the controversy can be
axiomatic that the constitutionality of a law, settled on other grounds.  The policy of the courts is
1âшphi1

regulation, ordinance or act will not be resolved by to avoid ruling on constitutional questions and to
courts if the controversy can be, as in this case it has presume that the acts of the political departments are
been, settled on other grounds. In the recent case of valid, absent a clear and unmistakable showing to the
Macasiano vs. National Housing Authority, this Court contrary. To doubt is to sustain. This presumption is
declared: based on the doctrine of separation of powers. This
means that the measure had first been carefully
"It is a rule firmly entrenched in our jurisprudence studied by the legislative and executive departments
that the constitutionality of an act of the legislature and found to be in accord with the Constitution before
will not be determined by the courts unless that it was finally enacted and approved.
question is properly raised and presented in
appropriate cases and is necessary to a determination The present case was instituted primarily for
of the case, i.e., the issue of constitutionality must be accounting and specific performance. The Court of
the very lis mota presented. To reiterate, the Appeals correctly ruled that PNB's obligation to render
essential requisites for a successful judicial inquiry an accounting is an issue, which can be determined,
into the constitutionality of a law are: (a) the without having to rule on the constitutionality of P.D.
existence of an actual case or controversy involving a No. 579. In fact there is nothing in P.D. No. 579,
conflict of legal rights susceptible of judicial which is applicable to PNB's intransigence in refusing
determination, (b) the constitutional question must be to give an accounting. The governing law should be
raised by a proper party, (c) the constitutional the law on agency, it being undisputed that PNB
question must be raised at the earliest opportunity, acted as petitioners' agent. In other words, the
and (d) the resolution of the constitutional question requisite that the constitutionality of the law in
question be the very lis mota of the case is absent. bank Philippines, Inc. are deemed VALID.  Petitioner
Thus we cannot rule on the constitutionality of P.D. Julie Parcon-Song's prayer to transfer the property to
No. 579.130 (Citations omitted) her as its true and lawful owner
is DENIED.   However, the foreclosure sale of the
In this case, the applicable law that governed the sale property in favor of respondent Maybank Philippines,
is not Republic Act No. 10641. The foreclosure took Inc. is declared VOID, without prejudice to another
place in 2001, prior to the enactment of Republic Act foreclosure sale under Republic Act No. 10641 if
No. 10641 in 2014. Republic Act No. 10641 is not in warranted.
question; thus, its constitutionality cannot be
addressed. SO ORDERED.

Moreover, this case was filed for annulment of title,

reconveyance of the transfer certificate of title,
annulment of mortgage and foreclosure proceedings,
and declaration of family home. All the issues may be
resolved without determining the constitutionality of
Republic Act No. 10641.

The judicial review requirement that a constitutional

issue seasonably raised should be the lis mota of the
case is rooted in two constitutional principles: first,
the principle of deference; and second, the principle
of reasonable caution in striking down an act by a co-
equal political branch of government.

Article VIII, Section 1 of the Constitution, which

specifies that courts may act on any grave abuse of
discretion by any government branch or
instrumentality, does not license this Court to issue
advisory opinions. Apart from an actual case or
controversy, this Court must be satisfied that the
reliefs prayed for require the resolution of a
constitutional issue.

There are exceptions, namely: (a) when a facial

review of the statute is allowed, as in cases of actual
or clearly imminent violation of the sovereign rights to
free expression and its cognate rights; or (b) when
there is a clear and convincing showing that a
fundamental constitutional right has been actually
violated in the application of a statute, which are of
transcendental interest. The violation must be so
demonstrably and urgently egregious that it
outweighs a reasonable policy of deference in such
specific instance. The facts constituting that violation
must either be uncontested or established on trial.
The basis for ruling on the constitutional issue must
also be clearly alleged and traversed by the parties.
Otherwise, this Court will not take cognizance of the
constitutional issue, let alone rule on it.

This case is no exception. We decline to resolve the

constitutionality of Section 9 of Republic Act No.
10641 as it is not the very lis mota of the case. The
relief can be granted simply by examining the
applicable statute. Besides, there was no
constitutional violation so urgently egregious that it
should outweigh our reasonable policy of deference to
the two other constitutional branches of government.

WHEREFORE, this Court PARTIALLY GRANTS the

Petition. The August 17, 2011 Decision and November
28, 2011 Resolution of the Court of Appeals in CA-
G.R. CV No. 93681 is MODIFIED. Transfer Certificate
of Title No. 107064 in the name of respondent Lilia
Parcon and the real estate mortgage  dated
November  28,   1995   in  favor of respondent May