EN BANC
[ G.R. No. 250636, January 10, 2023 ]
MERLINDA PLANA v. LOURDES TAN CHUA +
MERLINDA PLANA, PETITIONER, VS. LOURDES TAN CHUA AND HEIRS OF RAMON CHIANG, RESPONDENTS.
D E C I S I O N
LAZARO-JAVIER, J.:
This Petition for Review on Certiorari[1] assails the following dispositions of the Court of Appeals in CA-G.R. CEB-CV No. 04831:
- Decision[2] dated June 25, 2018, granting respondent Lourdes Tan Chua's (Lourdes) petition to inscribe her real estate mortgage on Transfer Certificate of Title (TCT) No. T-57961 in the name of Nelson Plana married to petitioner Merlinda Relano; and
- Resolution[3] dated October 16, 2019, denying petitioner's motion for reconsideration.
On August 25, 2000, petitioner Merlinda Relano (Merlinda) filed a Complaint for Reconveyance of Lot 10031 against Ramon Chiang (Ramon) and Lourdes Tan Chua (Lourdes) before the Regional Trial Court (RTC) - Iloilo City. The case was docketed Civil Case No. 00-26387 and raffled to Branch 39.
Merlinda alleged that she and her first husband (now deceased) Nelson Plana (Nelson) owned five (5) lots covered by TCT Nos. T-57960, T-57961, T-57962, T-57963 and T-57864 located in Santa Barbara, Iloilo.[4] On December 15, 1971, Nelson died. Four (4) years later, or on March 17, 1975, she got married to Ramon. But in 1979, they got separated from bed and board.[5]
While she and Ramon were still together, the latter fraudulently made her sign a Deed of Definite Sale[6] dated December 17, 1975 purportedly selling the five (5) lots to him. Consequently, TCT Nos. T-57960, T-57961, T-57962, T-57963 and T-57864 were all cancelled and five (5) new titles were issued in the name of Ramon alone, viz.: TCT Nos. T-86912, T-86913, T-86914, T-86915, and T-86916.[7]
In 1980, she sued Ramon for recovery of the four (4) lots under TCT Nos. T-86912, T-86913, T-86914, T-86915 which Ramon sold to one Serafin Modina (Serafin). On October 29, 1999, the Court in Modina v. Court of Appeals[8] declared as void the Deed of Definite Sale over the four (4) lots for being simulated and without consideration. Hence, the Court also declared as void the subsequent sale of these four (4) lots to Serafin.[9]
On June 25, 1996, Ramon mortgaged the 5th lot (Lot 10031) covered by TCT No. T-86916 to Lourdes to secure the amount of P130,000.00 which he borrowed from Lourdes. On July 15, 1996, the mortgage was annotated on the back of TCT No: T-86916 under Entry No. 656728.[10]
Since the Deed of Definite Sale through which Ramon was supposedly able to secure ownership of Lot 10031 was already declared void by the Court with finality, Ramon did not have the right to mortgage Lot 10031 to Lourdes. Too, Lourdes was not a mortgagee in good faith because she knew of this defect when she executed the mortgage contract with Ramon.[11]
In his Answer,[12] Ramon riposted that he was the lawful and registered owner of Lot 10031. In fact, the lot remained in his possession as owner, he had every right to mortgage it to Lourdes as security for his loan.[13]
On the other hand, Lourdes claimed she was an innocent mortgagee for value. She honestly believed that Ramon was the sole owner of Lot 10031 as TCT No. T-86916 bore the entry "single" pertaining to the civil status of Ramon. By law, she was not required to go beyond the face of the title.[14] In addition, the title contained Entry No. 271220 indicating that in 1976, the lot was mortgaged to the Development Bank of the Philippines (DBP) and that mortgage was cancelled on November 11, 1980. As a banking institution, DBP was expected under the law to have observed strict procedure in its property ownership investigation. Thus, she could not have suspected the title of Ramon to be improper or irregular when the same was subsequently mortgaged to her.[15] At any rate, Lot 10031 was never mentioned in the Modina Decision dated October 29, 1999. Finally, Merlinda failed to challenge the validity of TCT No. T-86916 in the name of Ramon for more than twenty-five (25) years since December 17, 1975. Merlinda's action, therefore, was already barred by laches.
After due proceedings, the RTC rendered its Decision[16] dated November 12, 2012, (1) declaring as void the sale of Lot 10031 to Ramon and the subsequent mortgage thereof to Lourdes; (2) ordering the cancellation of TCT No. T-86916 issued in the name of Ramon, as well as the annotation. thereon of "Entry No. 656728 - Real Estate Mortgage in favor of Lourdes;" (3) ordering the reinstatement of TCT No. T-57961 in the name of "Nelson Plana married to Merlinda Relano;" (4) directing Ramon to pay Merlinda P100,000.00 as moral damages, P100,000.00 as exemplary damages, and P50,000.00 as attorney's fees; and (7) pronouncing no cost against Lourdes.[17]
Lourdes alone appealed. She insisted that the mortgage was valid because she was a mortgagee in good faith. Merlinda, on the other hand, countered anew that Lourdes had prior knowledge that Ramon was not the real owner of Lot 10031.[18]
Under Decision[19] dated June 25, 2018, the Court of Appeals affirmed with modification. It found that there was no preponderant evidence to show that Lourdes had prior knowledge of the defect in the title of Ramon. Merlinda's claim that Lourdes used to be an acquaintance of both herself and her late first husband Nelson; and that Lourdes and the son of Ramon were both Chinese members of the Lion's Club -- hardly demonstrated that Lourdes acted in bad faith.[20]
These circumstances did not necessarily require Lourdes to look beyond what appeared on the certificate of title, particularly since Ramon was able to present to her a copy of the TCT No. T-86916 which bore his name as the owner. According to the Court of Appeals, "it would be pushing the rule too far to burden the mortgagee with the expectation of doing a background check of his mortgagor, simply because the former has a remote social connection with the latter."[21] Thus, Lourdes cannot be faulted for merely relying on what appeared on TCT No. T-86916 indicating that Ramon, the mortgagor, was indeed the owner of the mortgaged property.[22]
The Court of Appeals though ruled that since Lourdes was a mortgagee in good faith, the real estate mortgage should be deemed valid. In a contract of mortgage, the mortgagor, as a rule, should be the absolute owner of the property, otherwise the mortgage is void. The exception is the doctrine of a mortgagee in good faith, where even if the mortgagor is not the owner of the mortgaged property, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy.[23]
Consequently, the Court of Appeals ordered the annotation of the Real Estate Mortgage dated June 25, 1996 on TCT No. T-57961 under the name of "Nelson Plana married to petitioner Merlinda Relano."[24]
Merlinda's Motion for Reconsideration was denied under Resolution[25] dated October 16, 2019.
Merlinda now faults the Court of Appeals for declaring Lourdes as a mortgagee in good faith, and the real estate mortgage between her (Lourdes) and Ramon, as valid. She reiterates that (1) Lourdes was a mortgagee in bad faith; and (2) considering the invalid sale, the mortgage was also invalid.[26]
Notably, Merlinda, for the first time, mentions in her petition before the Court that on July 13, 1998, Ramon filed a Complaint for Accounting and Damages against Lourdes docketed Civil Case No. 25285. It was also raffled to the same RTC Branch 39, Iloilo City which heard and resolved Civil Case No. 25285.[27]
In his Complaint,[28] Ramon allegedly asserted that out of his P130,000.00 loan, he already paid Lourdes P46,500.00. Hence, his remaining debt was now only P83,500.00. By way of consignation and as payment therefor, he deposited the amount of P83,500.00 with Branch 39, with due notice to Lourdes.[29]
Lourdes filed her Answer with Counterclaim for Judicial Foreclosure of Real Estate Mortgage and Damages in Civil Case No. 25285.[30] She claimed that Ramon's deposit with Branch 39 was not enough to fully satisfy the loan in view of the 3% monthly interest attached to it. Ramon never paid interest since December of 1997. Thus, reckoned from December 1997, Ramon's debt already accumulated to P300,000.00 as of the filing of the complaint in 1998. Lourdes prayed that Lot 10031 be foreclosed to satisfy Ramon's indebtedness. Too, Ramon should pay her P500,000.00 as moral damages, P200,000.00 as exemplary damages, attorney's fees equivalent to 25% of the amount collectible in the counterclaim plus P50,000.00, and P15,000.00 as litigation expense.[31]
Merlinda also attached to the present petition a certified true copy of the following Partial Compromise Agreement[32] which according to Merlinda was jointly executed and signed by Ramon and Lourdes in Civil Case No. 25285, viz.:
In her Comment,[34] Lourdes and her counsel did not refute the existence, due execution, and contents of the Partial Compromise Agreement in Civil Case No. 25285. They simply reiterated that she had no knowledge of the defect in the title of Ramon over Lot 10031.PARTIAL COMPROMISE AGREEMENT
FOR THE RELEASE OF COURT DEPOSIT
xxx xxx WHEREFORE, the parties most respectfully and jointly pray that the foregoing partial compromise agreement be APPROVED. That, consequently, the Honorable Court issues an order ordering the Clerk of Court, Regional Trial Court, 6th Judicial Region, Iloilo City to RELEASE the amount of [P]83,500.00 court deposit, covered by Official Receipt No. 9043772 dated July 8, 1998 to defendants, through defendant Lourdes Tan Chua, upon the surrender of the original of the said official receipt and compliance with the usual procedure for the said release.
- THE DEFENDANTS will accept the amount of [P]83,500.00 deposited by the plaintiff in court under Official Receipt No. 9043772 (photocopy of the receipt was attached as Annex "C" to the complaint)", subject and without prejudice to, all other defenses and allegations in their answer.
- PLAINTIFF ON the other hand (agrees) to the conditional acceptance of the defendants as stated in paragraph 1 above.
- CONSEQUENTLY, PARTIES jointly request the Honorable Court for an order releasing the same [P]83,500.00 deposit to the defendants, through defendant Lourdes Tan Chua.
Iloilo City, March 15, 2001.
(signed) (signed) RAMON CHIANG LOURDES TAN CHUA and Plaintiff EMILIO TAN CHUA Defendants
xxx xxx[33]
Meantime, Ramon had passed on, thus, he was substituted by his surviving heirs, his children. Despite the Court's directive, they did not file their comment on the petition. Consequently, they are deemed to have waived the right to do so.
Our Ruling
Lourdes was a mortgagee in good faith |
The Court has time and again ruled that the issue of whether a person is a mortgagee in good faith is factual, thus, outside the scope of Petition for Review on Certiorari.[35] Notably, both the RTC and the Court of Appeals found that Lourdes was a mortgagee in good faith, and for that matter, petitioner failed to adduce any special compelling reason to depart from this concurrent finding.
In Cavite Development Bank v. Lim,[36] the Court explained the doctrine of a mortgagee in good faith, viz.:
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.[37] (Emphasis supplied.)The recent case of Jimenez v. Jimenez[38] reiterated that the doctrine only applies when the following requisites concur, viz.: (a) the mortgagor is not the rightful owner of, or does not have valid title to, the property; (b) the mortgagor succeeded in obtaining a Torrens title over the property; (c) the mortgagor succeeded in mortgaging the property to another person; (d) the mortgagee relied on what appears on the title and there exists no facts and circumstances that would compel a reasonably cautious man to inquire into the status of the property; and (e) the mortgage contract was registered.
These requisites are all present here, thus, (a) in 1999, the Court decreed as void the Deed of Definite Sale dated December 17, 1975 where Ramon derived his title to Lot 10031;[39] (b) prior to this ruling, however, TCT No. T-86916 covering Lot 10031 had already been issued in the name of Ramon; (c) on June 25, 1996, Ramon mortgaged to Lourdes Lot 10031 covered by TCT No. T-86916 bearing his name as the registered owner as well as his civil status as "Single;" (d) Lourdes relied on Ramon's title and no circumstance was adduced which would have caused her to doubt its validity; and (e) she immediately caused the registration of the mortgage under Entry No. 656728 on the back of TCT No. T-86916.[40]
In Claudio v. Spouses Saraza,[41] the Court pronounced that one who enters into a mortgage contract with a mortgagor holding a certificate of title under his name over the property, is a mortgagee in good faith, For a mortgagee has the right to rely in good faith on the certificate of title of the mortgagor of the property given as security and has no obligation to undertake further investigation in the absence of any sign that might arouse suspicion.[42]
More, prior to the mortgage of Lot 10031 to Lourdes, Ramon had already mortgaged the same lot to DBP using the same TCT No. T-86916 under his name. As a banking institution, DBP is presumed to have conducted its due diligence prior to entering into any transaction involving real property with the general public. In Prudential Bank v. Rapanot,[43] the Court stressed that banks are expected to have exercised a higher degree of diligence than private individuals in dealing with registered lands, viz.:
It bears stressing that banks are required to exercise the highest degree of diligence in the conduct of their affairs. The Court explained this exacting requirement in the recent case of Philippine National Bank v. Vila, thus:Indeed, the fact that DBP had previously accepted Lot 10031 as security for the loan extended by the bank to Ramon speaks volumes of the reason Lourdes believed in the validity of his title when the lot covered thereby was subsequently mortgaged to her, also by Ramon. To repeat, there was no reason at all for Lourdes to suspect that she was not dealing with the true owner of the property. She had every right to rely on what appeared on the title of the property.
In Land Bank of the Philippines v. Belle Corporation, the Court exhorted banks to exercise the highest degree of diligence in its dealing with properties offered as securities for the loan obligation:
When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for value is applied more strictly. Being in the business of extending loans secured by real estate mortgage, banks are presumed to be familiar with the rules on land registration. 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. Banks may not simply rely on the face of the certificate of title. Hence, they cannot assume that, x x x 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. 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 the bank's operations.[44] x x x (Citations omitted)
As aptly observed by the Court of Appeals, the fact that Lourdes was a friend of both Merlinda and her first husband Nelson; and that Lourdes and Ramon's son were both members of the Lion's Club did not ipso facto mean that Lourdes knew of the defect in Ramon's title.
The real estate mortgage should be cancelled |
True, we have ruled in several cases that a void title may be the source of a valid title in the hands of an innocent purchaser for value.[45] In Spouses Bautista v. Spouses Jalandoni (Spouses Bautista),[46] however, the Court clarified that where the true owner has not been found negligent or has not committed an act which could have brought about the issuance of another title relied upon by the purchaser or mortgagee for value, then the true innocent owner, whether still registered or deemed registered, has a better right over the mortgagee in good faith. For "the law protects and prefers the lawful holder of registered title over the transferee of a vendor bereft of any transmissible rights."[47]
In Spouses Bautista, the Spouses Bautista acquired fraudulent titles to the real properties of Spouses Jalandoni and had successfully mortgaged these properties to Manila Credit Corporation (MCC). The Court found MCC to be a mortgagee in good faith. But the Court also found that Spouses Jalandoni had not been negligent nor performed any act which had otherwise led MCC itself to rely on the validity of the impostors' titles. Consequently, the Court ruled that whatever rights MCC may have acquired over the real properties as a mortgagee-in-good-faith cannot prevail over the superior rights of Spouses Jalandoni as true owners thereof.[48]
Here, insofar as the issuance of TCT No. T-86916 is concerned, Merlinda was not shown to have been directly or indirectly caused it through her fault or negligence. Nor was it shown that, in one way or another, she led Lourdes, a mortgagee in good faith, to believe in, let alone, rely on the said title. It did not matter that Merlinda had by then been eased out, or erased, as the lot's registered owner due to the fraud perpetrated on her by Ramon.
In the earlier case of Modina[49] which involved the same Deed of Definite Sale dated December 17, 1975 used by Ramon to cause five TCTs, including TCT No. T-86916 to be registered in his name, the Court sustained Merlinda's claim that Ramon employed fraudulent acts to obtain these Torrens titles over Merlinda's properties. Note that the case only involved four titles, TCT Nos. T-86912, T-86913, T-86914, T-86915, simply because Merlinda at that time was seeking to recover only the properties under these titles. It was only much later that she also sought to recover the property subject of the present case under TCT No. T-86916.
Even then, the ruling of the Court on the invalid Deed of Definite Sale dated December 17, 1975, which was the root of all evils that befell Merlinda; and the fact that no fault may be properly attributed to Merlinda in the issuance of the fraudulent titles nor in causing third parties to rely thereon, applies with equal force to the present case involving TCT No. T-86916, viz.:[50]
The Court of Appeals, on the other hand, adopted the following findings a quo: that there is no sufficient evidence establishing fault on the part of MERLINDA, and therefore, the principle of in pari delicto is inapplicable and the sale was void for want of consideration. In effect, MERLINDA can recover the lots sold by her husband to petitioner MODINA. x x x (Emphasis supplied)Applying Spouses Bautista and Modina here, Merlinda's title over Lot 10031 should prevail over the right of Lourdes as a mortgagee in good faith. In other words, whatever right Lourdes may have acquired over Lot 10031 must yield to the superior right of Merlinda as the true owner thereof. For no one can acquire a better right than what the transferor has.[51] To rule otherwise would be the height of injustice. For then, registered owners without the least fault on their part could be divested of their title and deprived of their property.[52]
As the Court aptly elucidated in Baltazar v. Court of Appeals,[53] "such disastrous results which would shake and destroy the stability of land titles had not been foreseen by those who had endowed with indefeasibility land titles issued under the Torrens system."[54] In fine, the appellate court correctly decreed the reinstatement of TCT No. T-57961 in the name of Nelson Plana, married to Merlinda Relano free from any lien or encumbrance in favor of Lourdes Tan Chua.
Merlinda is entitled to damages from the Estate of Ramon Chiang through his heirs |
Moral damages are treated as compensation to alleviate physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury caused by the defendant's culpable action.[55] Exemplary damages, on the other hand, may be imposed by way of example or correction for the public good. They are "imposed not to enrich one party or impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions."[56]
Meanwhile, Article 2208 of the Civil Code states the policy that should guide the courts when awarding attorney's fees to a litigant, viz.:
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:As aptly found by the appellate court, Merlinda had long suffered from Ramon's fraudulent acts which resulted in the undue deprivation of her property. Though incapable of pecuniary estimation, we find reasonable the award of P100,000.00 as moral damages to be reasonable. We also affirm the award of P100,000.00 as exemplary damages in favor of Merlinda. Lastly, since Merlinda was compelled to litigate to protect her interest, the award of P50,000.00 as attorney's fees is likewise affirmed. The total amount shall earn legal interest at six percent (6%) per annum in accordance with Nacar v. Gallery Frames.[57]
(1) When exemplary damages are awarded;In all cases, the attorney's fees and expenses of litigation must be reasonable. (Emphasis supplied)
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.
Appropriate Remedy for Lourdes
Curiously, Lourdes has not claimed any relief from the trial court, nor from the appellate court, or even from this Court. She and her counsel simply maintain that she is a mortgagee in good faith.
Notably, Lourdes and her counsel do not deny the veracity of the material information brought to fore for the first time by Merlinda in this proceeding. This is with respect to the existence of Civil Case No. 25285 for accounting and damages filed by Ramon against Lourdes way back in 1998. The case involved the same loan subject of the present case. Lourdes and her counsel do not deny either that she filed an answer to the complaint admitting Ramon's payment, and her receipt of P46,500.00 out of the P130,000.00 loan amount. Nor do they deny that a deposit by way of consignation with RTC, Branch 39 was made by Ramon as payment for the remaining amount of P83,500.00 he still owed Lourdes. Most of all, they do not refute the genuineness and due execution of the Partial Compromise Agreement which Lourdes jointly signed with Ramon in that case.
By their silence, Lourdes and her counsel are considered to have admitted every piece of information Merlinda has revealed in her petition regarding Civil Case No. 25285. It is clear, therefore, that long before the present case arose in 2001, Ramon already paid Lourdes a substantial, if not full settlement of the loan. And after the lapse of twenty-four (24) years since it was filed in 2001, in all probability, the case already got terminated. But even in the remote possibility that the case is still alive, whatever remedy or remedies Lourdes may still be seeking relative to the loan and the mortgage were already brought into that case where she prayed for the following awards:
Obviously, Civil Case No. 25285 is the reason Lourdes has never asked for any affirmative relief in the present case. She already received a substantial, if not full satisfaction of the loan or that which rightfully belonged to her as mortgagee of Ramon. Verily, she has been amply protected and will still be even with the consequent cancellation of the mortgage. We, therefore, delete the award of damages decreed by the Court of Appeals in her favor.
Lourdes and her counsel must show cause why they should not be cited in contempt of court for failing to disclose material facts dispositive of this case |
We express our collective disappointment with the cavalier attitude of Lourdes and her counsel in not disclosing facts that are material to the just resolution of the instant case. We reiterate that had the facts been adequately revealed, as Lourdes and her counsel are ethically obliged to do, the issue about how to deal fairly with Lourdes as a mortgagee would have already been expeditiously settled.
As stated, from the facts we have unearthed, Lourdes had already received a substantial, if not full satisfaction of the loan or that which was rightfully due her as a mortgagee of Ramon. Civil Case No. 25285 was the appropriate forum for her claims and this should have been disclosed by her. The deliberate withholding of the facts surrounding this civil case and the concomitant Partial Compromise Agreement nearly led to an award that did not rightfully befit her. She would have been compensated twice for a single obligation to pay her.
For these reasons, we have no choice but to require Lourdes and her counsel to show cause why each of them should not be cited in contempt of court for failing to disclose material facts dispositive of her allegations before the Court. This measure should serve as warning as well to litigants and their counsel seeking relief before the Court to be always candid and forthright in pleading facts in all matters involving them. For a single lie could delay the speedy disposition of cases and bring the entire administration of justice to disrepute and embarrassment if not unwanted and unnecessary convolutions.
ACCORDINGLY, the Petition is PARTLY GRANTED. The Decision dated June 25, 2018 and Resolution dated October 16, 2019 of the Court of Appeals in CA-G.R. CEB-CV No. 04831 are AFFIRMED with MODIFICATION, thus:
(1) TCT No. T-86916 issued m the name of Ramon Chiang is cancelled;
(2) The annotation of the Real Estate Mortgage on the back of TCT No. T-86916 under Entry No. 656728 in favor of Lourdes Tan Chua is likewise cancelled;
(3) TCT No. T-57961 issued in the name of Nelson Plana married to Merlinda Relano is reinstated;
(4) The Estate of Ramon Chiang, through his heirs is ordered to pay Merlinda Plana the following amounts:
- P100,000.00 as moral damages;
- P100,000.00 as exemplary damages;
- P50,000.00 as attorney's fees; and
- six percent (6%) interest per annum on these amounts from finality of this Decision until fully paid.
SO ORDERED.
Inting, Zalameda, M. Lopez, Gaerlan, Rosario, J. Lopez, Dimaampao, and Marquez, JJ., concur.
Gesmundo, C.J., see separate opinion.
Leonen, SAJ. and Caguioa, J., see separate concurring opinion.
Hernando,* J., on leave.
Kho, Jr., J., with concurring and dissenting opinion.
Singh, J., joined the concurring opinion of Justice Caguioa.
* On leave.
[1] Rollo, pp. 23-41.
[2] Id. at 45-58. Penned by Associate Justice Geraldine Fiel-Macaraig and concurred in by Associate Justices Pamela Ann Abella Maxino and Louis P. Acosta.
[3] Id. at 78-82. Penned by Associate Justice Pamela Ann Abella Maxino and concurred in by Associate Justices Gabriel T. Ingles and Dorothy P. Montejo-Gonzaga.
[4] Id. at 29. See Petition for Review on Certiorari.
[5] Id. at 29.
[6] Id. at 197-198.
[7] Id.
[8] 376 Phil. 44 (1999).
[9] Rollo, p. 29.
[10] Id. at 50-51.
[11] Id.
[12] Records, pp. 39-44.
[13] Id.
[14] Id.
[15] Rollo, pp. 181-182.
[16] CA rollo, pp. 61-67. Penned by Judge Edgardo R. Catilo.
[17] Id. at 67.
[18] Rollo, p. 51.
[19] Id. at 45-58.
[20] Id. at 52.
[21] Id. at 52-53.
[22] Id. at 53.
[23] Torbela v. Spouses Rosario, 678 Phil. 1, 45 (2011).
[24] Rollo, pp. 57-58.
[25] Id. at 78-82.
[26] Id. at 27-40.
[27] Id.
[28] Id. at 90-95.
[29] Id. at 90-92.
[30] Id. at 113-122.
[31] Id. at 116-120.
[32] Id. at 135-136.
[33] Id. at 135-136.
[34] Id. at 180-196.
[35] Ruiz v. Dimailig, 799 Phil. 273, 281 (2016); See also Claudio v. Spouses Saraza, 767 Phil. 857, 866 (2015), citing Arguelles v. Malarayat Rural Bank, Inc., 730 Phil. 226, 234 (2014).
[36] 381 Phil. 355 (2000).
[37] Id.
[38] G.R. No. 228011, February 10, 2021, citations omitted.
[39] Modina v. Court of Appeals, supra note 8.
[40] Rollo, p. 51.
[41] 767 Phil. 857, 867 (2015).
[42] Homeowners' Association of Talayan Village, Inc. v. JM Tuason & Co., 772 Phil. 556, 573 (2015). Also see Naawan Community Rural Bank, Inc. v. Court of Appeals, 443 Phil. 56, 66 (2003) and Republic of the Philippines v. Limbonhai and Sons, 800 Phil. 163, 179 (2016).
[43] 803 Phil. 294 (2017).
[44] Id. at 311-312.
[45] See Spouses Bautista v. Spouses Jalandoni, 722 Phil. 144, 158 (2013), citing Tan v. De la Vega, 519 Phil. 515, 529 (2006), PNB v. Court of Appeals, 265 Phil. 703, 708 (1990).
[46] Id. at 158-159.
[47] Id. at 159.
[48] Id. at 160.
[49] Modina v. Court of Appeals, supra note 8.
[50] Id. at 51.
[51] Id. at 160.
[52] Id. at 159.
[53] 250 Phil. 349 (1988).
[54] Id. at 361.
[55] Spouses Bautista v. Jalandoni, supra note 45 at 157.
[56] Id. at 158.
[57] 716 Phil. 267, 278-279 (2013).
[58] Id. at 118-120.
SEPARATE OPINION
GESMUNDO, C.J.:
The undersigned respectfully maintains his proposal to revisit the standing doctrines which award disputed lands to innocent mortgagees for value instead of true landowners.
Briefly, the facts of the case involve parcels of land covered by transfer certificates of title (TCTs) issued pursuant to a December 17, 1975 "Deed of Definite Sale" executed between Merlinda Plana (petitioner) and her then second husband Ramon Chiang (Ramon) which was subsequently declared void by this Court in Modina v. Court of Appeals[1] (Modina) by way of affirming the Court of Appeals and Regional Trial Court's respective Decisions. One of these parcels of land covered by the Deed of Definite Sale (under TCT No. T-86916), but was not among the subject properties in Modina, was mortgaged to a third person prior to such ruling of invalidation.
To be fair, the ponencia applied existing doctrines in upholding the validity of the subject mortgage. The reasons being that: (1) a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as security and has no obligation to undertake further investigation in the absence of any sign that might arouse suspicion;[2] (2) prior to herein mortgage to the third person, the same subject parcel of land was previously mortgaged to the Development Bank of the Philippines (DBP) which "is presumed to have conducted its due diligence prior to entering any transaction involving real property with the general public;"[3] (3) public policy requires that mortgage rights over lots emanating from a void sale should be maintained when the mortgagee was proven to have acted in good faith;[4] and (4) a void title may become the root of a valid title if the derivative title was obtained in good faith and for value.[5]
I respectfully disagree and, instead, propose for a thorough revisit of the doctrines relating to an innocent mortgagee's status of ownership.
I. |
Nature of Certificates of Title |
Essential to analyzing the rights of third persons under the Torrens System is a concise introspection into the nature of certificates of title themselves.
To begin with, a certificate of title is merely an evidence of ownership or title over the particular property described therein.[6] It merely confirms or records title already existing and vested.[7] As such, it cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others.[8] Otherwise, the acceptability of the Torrens System would be impaired if it is utilized to perpetuate fraud against the real owners.[9] This is also the reason why good faith must concur with registration because, otherwise, registration would be an exercise in futility.[10] As a consequence, when the instrument presented is forged, even if accompanied by the owner's duplicate certificate of title, the registered owner does not thereby lose his or her title, and neither does the assignee in the forged deed acquire any right or title to the property.[11] Furthermore, if the registration of the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee.[12]
II. |
Mortgages and Third-Party Dealings of Land |
As to the essential requisites of pledge and mortgage contracts, Article 2085 of the Civil Code provides:
Article 2085. The following requisites are essential to the contracts of pledge and mortgage:From the aforecited provision, it is clear that for a person to validly constitute a valid mortgage on real estate, he or she must be the absolute owner thereof.[13] This is consistent with the legal maxim strongly moored in basic logic that that no one can transfer a right to another greater than what he or she himself or herself has - nemo dat quod non habet.[14] Rightly so because, like "the spring that cannot rise above its source," a void contract cannot create a valid and legally enforceable right.[15] In consequence, when there is no valid real estate mortgage, there could also be no valid foreclosure or valid auction sale, either.[16] Thus, a void title under a simulated deed of sale, for instance, cannot ripen into a valid title.[17]
Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.
Contrastingly, there has been a recognized exception recognized in the oft-cited case of Torbela v. Spouses Rosario,[18] even if the mortgagor is not the rightful owner of the mortgaged property, or does not have a valid title therein, the mortgagee in good faith is nonetheless entitled to protection. The doctrine of upholding the validity of a real estate mortgage despite the invalidity of the underlying principal contract if the mortgagee dealt with relied in good faith on the certificate of title of the mortgagor, is founded on reasons of public policy.[19] To be specific, such public policy is based on the principle that "all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title."[20] As such, the ordinary buyer will not be considered an innocent purchaser for value if there is anything on the certificate of title that arouses suspicion, and the buyer failed to inquire or take steps to ensure that there is no cloud on the title, right, or ownership of the property being sold.[21] This has been reiterated in the case of Spouses Cusi v. Domingo,[22] to supposedly strengthen the Torrens System.
III. |
Violation of the Family Code on Proscription of Sale of Properties Between Spouses |
In the present case, there is one crucial fact unrebutted by the parties which militates the application of statutory protections available to innocent mortgagees for value: petitioner Merlinda Plana and mortgagor Ramon Chiang were spouses who are prohibited by law to sell property to each other. Obviously, when the object is contrary to law, a contract is void.[23] This is shown in Art. 1490 of the Civil Code, the law governing the marriage of petitioner and mortgagor Ramon, which provides:
Article 1490. The husband and the wife cannot sell property to each other, except:To have a meaningful appreciation of the aforementioned provision's effects, it should be read together with Art. 5 of the Civil Code which states:
Article 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity.To date, there has been no law providing for any exception to Art. 1490 of the Civil Code other than those already appearing in the same provision - particularly those relating to innocent mortgagees who happen to deal with lands registered pursuant to deeds violating such provision. Even equitable considerations would not justify the Court to carve out additional exceptions to Art. 1490 as equity is applied only in the absence, never in contravention, of statutory law.[24] As stated earlier and as pointed by the ponencia, the Court in Modina had already declared void the December 17, 1975 Deed of Definite Sale for being simulated and for being devoid of consideration. The same ruling also highlighted that the principle of in pari delicto non oritur actio does not apply to a sale deemed as void or inexistent for violating Art. 1490 of the Civil Code. As such, the issue as to the validity of the December 17, 1975 Deed of Definite Sale cannot anymore be re-litigated in this case as it is one of those issues which had already been "actually and directly resolved" in Modina and, thus, barred under the res judicata principle of conclusiveness of judgment.[25]
In effect, since the December 17, 1975 Deed of Definite Sale is void for being entered into in violation of law, petitioner now has a right to file an action for reconveyance over the parcels of land covered under such spurious deed. Therefore, the inevitable question arises: What effect does petitioner's right (as the true owner to pursue an action for reconveyance) has on respondent Lourdes Tan Chua's (Lourdes) right as a supposed innocent mortgagee for value? To answer the question, it is first imperative to trace the origins of the doctrine which holds that innocent mortgagees for value are preferred over true landowners in disputes involving subsequent dealings of registered lands.
IV. |
Jurisprudential Re-evaluation |
The doctrine which holds that innocent mortgagees are also entitled to the protection accorded to "innocent purchasers for value" was first established in Blanco v. Esquierdo[26] where: (1) Section 38 of the Land Registration Act[27] extends the foregoing protection to innocent lessees, mortgagees, or other encumbrancer for value; and (2) it was held that the remedy of the persons prejudiced is to bring an action for damages against those causing the fraud, and if the latter are insolvent, an action against the Treasurer of the Philippines may be filed for the recovery of damages against the Assurance Fund. As to the first justification in Blanco, the same was replicated in Sec. 32 of the Property Registration Decree[28] (PRD) which reads:
Section 32. Review of decree of registration; Innocent purchaser for value. The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.Relatedly, as to the subsequent dealings and registrations of lands already covered under existing certificates of title, Sec. 53 of the PRD provides:
Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud. (Emphases supplied)
Section 53. Presentation of owner's duplicate upon entry of new certificate. No voluntary instrument shall be registered by the Register of Deeds, unless the owner's duplicate certificate is presented with such instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause shown.With the aforementioned provisions as guideposts, the following can be readily deduced:
The production of the owner's duplicate certificate, whenever any voluntary instrument is presented for registration, shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder for value of a certificate of title. After the entry of the decree of registration on the original petition or application, any subsequent registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or other instrument, shall be null and void. (Emphases and italics supplied)
At this point, the legal issue left to be resolved is: whether the protection in favor of innocent lessees, mortgagees, and other encumbrancers for value also extends to registrations procured by presentation of a forged deed or instrument.
- Sec. 32 of the PRD refers to "decrees" of registration which are issued as a result of an adjudication - not a purely administrative and ministerial - process relative to original certificates of title.
- Sec. 32 of the PRD protects innocent lessees, mortgagees, and other encumbrancers for value from the effects of wrongful registrations.
- Sec. 53 of the PRD renders null and void "subsequent" registrations procured by presentation of a forged deed or instrument.
The answer emphatically points to the negative.
Statutes are said to be in pari materia when they relate to the same person or thing, or to the same class of persons or things, or have the same purpose or object.[29] They should be read and construed together because enactments of the same legislature on the same subject are supposed to form part of one uniform system; later statutes are supplementary or complementary to the earlier enactments and, in the passage of its acts, the legislature is supposed to have in mind the existing legislations on the subject and to have enacted its new act with reference thereto.[30] Thus, statutes in pari materia, although in apparent conflict, are so far as reasonably possible construed to be in harmony with each other.[31] The same is also consistent with the reason why implied repeals are disfavored unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old laws.[32]
In this case, the protection in favor of innocent mortgagees for value accorded by Sec. 32 of the PRD appears to be incongruent with Art. 2085 of the Civil Code on the requisites for a valid mortgage. To resolve this conflict, there is a need to examine closely the phrase "whose rights may be prejudiced" in Sec. 32 of the PRD as it relates to innocent purchasers, lessees, mortgagees, and other encumbrancers for value and as opposed to an owner's right to enjoy and dispose of a thing under Art. 427 of the Civil Code.
There is an apparent prejudice of rights against an innocent mortgagee for value when foreclosure and eventual consolidation of title cannot be obtained despite fulfillment or occurrence of necessary conditions in a mortgage contract by reason of an adverse ruling affecting registration. However, such apparent prejudice is addressed by Sec. 95 of the PRD which reads:
Section 95. Action for compensation from funds. A person who, without negligence on his part, sustains loss or damage, or is deprived of land or any estate or interest therein in consequence of the bringing of the land under the operation of the Torrens system of arising after original registration of land, through fraud or in consequence of any error, omission, mistake or misdescription in any certificate of title or in any entry or memorandum in the registration book, and who by the provisions of this Decree is barred or otherwise precluded under the provision of any law from bringing an action for the recovery of such land or the estate or interest therein, may bring an action in any court of competent jurisdiction for the recovery of damages to be paid out of the Assurance Fund. (Emphases supplied)Under the aforementioned provision, the following conditions which must be met, before compensation out of the Assurance Fund may be paid to those prejudiced by the consequence of bringing a land under the operation of the Torrens system, had been deduced in Register of Deeds of Negros Occidental v. Anglo, Sr.[33] as follows:
Among these conditions, the last one presents a question on who between the true landowner and the innocent mortgagee for value can bring an action under the law to recover the land lost as consequence of bringing such under the operation of the Torrens system.
- The individual must sustain loss or damage, or the individual is deprived of land or any estate or interest.
- The individual must not be negligent.
- The loss, damage, or deprivation is the consequence of either: (a) fraudulent registration under the Torrens system after the land's original registration; or (b) any error, omission, mistake, or misdescription in any certificate of title or in any entry or memorandum in the registration book.
- The individual must be barred or otherwise precluded under the provision of any law from bringing an action for the recovery of such land or the estate or interest therein.[34]
As between a true owner and an innocent mortgagee for value, it is the true owner who has the recognized right under Art. 428 of the Civil Code to file an action for recovery. This means that the true owner cannot claim against the Assurance Fund as he or she is not "barred or otherwise precluded under the provision of any law from bringing an action for the recovery of such land or the estate or interest therein." For this purpose, a true owner may file an action for reconveyance which is one of those actions that fall under the classification of cases that involve "title to, or possession of, real property, or any interest therein."[35]
In comparison, an innocent mortgagee for value has no recognized right in either the Civil Code or the PRD to initiate an action for reconveyance in case his or her right to have the property subject of the mortgage contract foreclosed and eventually consolidated under his or her title. All that Secs. 32 and 53 of the PRD assure is that the rights of innocent mortgagees for value may not be "prejudiced" as regards any adverse consequences of registration. As such, a reasonable interpretation of the phrase "whose rights may be prejudiced" in Sec. 32 of the PRD should be to allow innocent mortgagees for value to claim against the Assurance Fund as they are effectively "barred or otherwise precluded under the provision of any law from bringing an action for the recovery" due to the lack of an express statutory grant of any right to file an action for reconveyance. All told, as between a true land owner and an innocent mortgagee for value, it is the latter who cannot file an action for reconveyance due to the absence of a statute recognizing such remedy and, thus, is entitled to recover from the Assurance Fund - not as against the subject realty.
In other words, such "prejudice" contemplated in Secs. 32 and 53 of the PRD should not operate to forfeit the true owner's rights to recover the property thru an action for reconveyance - especially if the underlying basis is the nullity of the deed effecting the assailed prior conveyance. These provisions do not operate to shift the burden to and to reclassify the true owners as the ones burdened under Sec. 95 of the PRD to file another action in order to claim against the Assurance Fund. Such right belongs to innocent mortgagees for value so as not to prejudice their rights adversely affected by the effects of registration.
Besides, as previously discussed, a certificate of title is merely evidence of ownership over the property described therein. Even if Sec. 32 of the PRD makes a judicial decree of registration along with the resultant issuance of a certificate of title "incontrovertible" after the lapse of one year of such decree, the same does not mean that the title or ownership itself is also unassailable. What is "incontrovertible" under Sec. 32 of the PRD is merely the "certificate" and not the title itself. Registering a piece of land under the Torrens System does not create or vest title as it is simply not a mode of acquiring ownership.[36] Such process of confirming title presupposes that the same must still be in good faith and must not be a result of fraud to prevent the rights of true owners, as well as innocent purchasers and mortgagees for value, from being prejudiced. Therefore, as a necessary consequence of a faulty and invalid registration, a true owner is not foreclosed from pursuing other statutory remedies to recover title to the land in an appropriate proceeding.
In sum and for the reasons above, it is the burden of the innocent mortgagee for value, instead of the true landowner and on the assumption that no other feasible statutory remedy is available, to claim against the Assurance Fund.
V. |
Reassessment of the Torrens System Principle in View of the Indefeasibility Principle |
As pointed out in the immediately preceding discussions, the reason as regards "strengthening" the Torrens System by not requiring one to "go behind the certificate of title"[37] is not enough to potentially deprive thru foreclosure an innocent landowner of his or her ownership rights over a piece of land. This would be the height of injustice as a true owner should be fully protected of his, her or its rights under the law against fraudulent schemes. Such practice would give an unwarranted premium to those who dispose of another's property without the latter's knowledge and/or consent (either thru express authorization or otherwise). More importantly, such doctrine is inconsistent with Art. 1378 of the Civil Code which states in part that "[i]f the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests." To allow the mortgagee in good faith the possibility of foreclosing a piece of land mortgaged by one who is not a landowner would not even result in a "reciprocity of interest" in favor of the actual landowner. In other words, the doctrine of favoring mortgagees in good faith - as to the award of ownership and possession - to strengthen the Torrens System goes against Art. 1378 of the Civil Code if the protection accorded to innocent mortgagees for value would be extended to registrations procured by presentation of a forged deed or instrument.
While it is true that the party injured without fault may claim against the erring party or the Assurance Fund, ruling in favor of the innocent third person who dealt with the land covered under a defective title instead of the true owner provides for an avenue of fraudulent schemes, limited only by imagination, to flourish. This is not consistent with the purpose for which the Torrens System was designed by law.
Therefore, it is respectfully proposed instead that the remedy of a mortgagee in good faith is to claim damages against the mortgagor for being the proximate cause of the legal injury suffered by the former. In case of the mortgagor's insolvency, then the innocent mortgagee's remedy would be to file an action against the Assurance Fund contemplated in Sec. 96 of the PRD. A true landowner should never be burdened with the problem of having to sue a mortgagor for damages and enduring an intangible emotional scar for having lost a real property through fraudulent acts. After all, the proximate cause of the mortgagee in good faith's legal injury was the mortgagor - not the landowner.
VI. |
Relevance of DBP's Failure to Exercise Due Diligence |
Evidence is the means, sanctioned by these rules, of ascertaining in a judicial proceeding the truth respecting a matter of fact.[38] To be admissible as evidence, proof adduced must comply with two qualifications: (1) relevance; and (2) competence.[39] Evidence is relevant if it has a relation to the fact in issue as to induce a belief in its existence or nonexistence.[40] Hence, a proponent must show the relevancy, materiality and competency of the proof adduced to qualify as evidence.[41]
In this case, the respondent-mortgagee cannot use DBP's non- exercise of due diligence to prove (or, at the very least, form a presumption) that mortgagor Ramon's representation as landowner is not irregular. This is irrelevant to prove that respondent-mortgagee Lourdes had no knowledge that the subject land was previously owned by petitioner- landowner Merlinda Plana and her late husband Nelson Plana. DBP's omission is independent of Lourdes' ability to perceive any anomaly that her transaction with Ramon may reveal. As such, it is not capable of inducing a belief, at least on the part of the courts, of Ramon's ostensibly valid representation.
Besides, is there a showing that the respondent-mortgagee Lourdes had no knowledge of the previous ownership of the land considering that she and Nelson Plana (as well as by petitioner's son) are Chinese members of the Lion's Club? This circumstance cannot just be lightly brushed aside considering that membership in associations like the Lion's Club are usually founded on securing networks or connections in the business community in support of their collective civic works or charitable pursuits. Moreover, Lourdes should have been alarmed under the circumstances as Ramon's status on the face of the subject certificate of title involving the 5th lot is written as "single"[42] instead of married. Even the ponencia observed that both petitioner and mortgagor Ramon had only separated in fact;[43] which means that they continued to be married to each other at the time of the mortgage. Since respondent Lourdes is not a mere acquaintance of mortgagor Ramon and his family, she cannot claim good faith in not investigating further despite irregularity of the mortgagor and purported landowner's status. Such countervailing facts make DBP's non-exercise of due diligence all the more irrelevant as it pertains to the supposed regularity of Ramon's representation.
VII. |
Conclusion |
The purpose of adopting the Torrens System in our jurisdiction is to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized.[44] This is to avoid any possible conflicts of title that may arise by giving the public the right to rely upon the face of the Torrens title and dispense with the need of inquiring further as to the ownership of the property.[45] Another equally compelling purpose of the law is that, once a title is registered, the owner may rest secure - without the necessity of waiting in the portals of the court, or sitting in the "mirador de su casa" - to avoid the possibility of losing his or her land.[46]
As applied in this case, a foreclosure - being a mere consequence - cannot be considered valid if the mortgage contract itself is void. In turn, a void foreclosure cannot effectively transfer the ownership of land from the owner of such mortgaged realty to the mortgagee, even if the latter dealt in good faith.
As incisively pointed out by Justice Alfredo Benjamin S. Caguioa's Separate Concurring Opinion in Spouses Stilianopoulos v. Register of Deeds for Legaspi City,[47] failure to comply with the registration requirements averts the registration process and prevents the underlying transaction from affecting the land subject of the registration. Rightly so because a void or inexistent contract is one which has no force and effect from the very beginning.[48] Void documents cannot be the source of rights and must be treated as mere scraps of paper.[49] In effect, an innocent mortgagee for value cannot have a better right over a true landowner as he or she merely steps into the shoes of the mortgagor. This is because registration does not give the registrant a better right than what the registrant had prior to the registration.[50]
As between persons adjudged with finality to be true and rightful owners of land and innocent mortgagees for value, the scales of justice should be tilted in favor of the former if the Torrens System is to stand the test of time against those who hack into the system and use it to perpetrate their devious schemes to the prejudice of innocent landowners. An interpretation shifting the burden of claiming against the Assurance Fund from true landowners to innocent mortgagees for value does not mean that the latter will be prejudiced with finality as they still have the right to be compensated. The same interpretation is also meant to put a stop to fraudulent and ingenious land-grabbing schemes perpetrated by persons who mortgage lands belonging to another to third persons who may pose as innocent mortgagees for value.
Most importantly, a title cannot be considered "indefeasible" if it can be easily defeated by the registration of a spurious deed with the effect of transferring ownership from one to another who claims to be an innocent party in the entire land dealing. As such, there is a need to reinforce the strength of the Torrens System by upholding the true landowner's rights above those of third person's even if the latter is eventually be adjudged innocent. Strengthening the Torrens System's stability ensures that property rights are adequately protected and will eventually reduce land-related disputes. In this regard, the undersigned is of the view that there is a need for the Court to revisit its doctrines pertaining to the conflicting rights of true landowners and innocent mortgagees for value.
WHEREFORE, I vote for the Court to declare that, as between the true owner and the innocent mortgagee for value, it is the innocent mortgagee for value which should be burdened to claim from the Assurance Fund instead of the true owner for the reasons stated above.
[1] 376 Phil. 44 (1999) [Per J. Purisima, Third Division].
[2] Ponencia, p. 7, citing Homeowners Association of Talayan Village, Inc. v. JM Tuason & Co., Inc., 772 Phil. 556 (2015) [Per J. Perez, First Division]; see also Republic v. Limbonhai and Sons, 800 Phil. 163 (2016) [Per J. Peralta, Third Division]; Naawan Community Rural Bank, Inc. v. Court of Appeals, 443 Phil. 56 (2003) [Per J. Corona, Third Division].
[3] Id. at 7-8.
[4] Id. at 7, citing Cavite Development Bank v. Lim, 381 Phil. 355 (2000) [Per J. Mendoza, Second Division].
[5] Id. at 8, citing Spouses Bautista v. Spouses Jalandoni, 722 Phil. 144 (2013) [Per J. Mendoza, Third Division].
[6] Dy v. Aldea, 816 Phil. 657, 672 (2017) [Per J. Mendoza, Second Division].
[7] Spouses Yu v. Ayala Land, Inc., 851 Phil. 421, 442 (2019) [Per J. Peralta, Special Second Division].
[8] Hortizuela v. Tagufa, 754 Phil. 499, 508 (2015) [Per J. Mendoza, Second Division].
[9] Heirs of Clemente Ermac v. Heirs of Vicente Ermac, 451 Phil. 368, 376-377 (2003) [Per J. Panganiban, Third Division].
[10] Heirs of Arao v. Heirs of Eclipse, 843 Phil. 391, 404 (2018) [Per J. J. Reyes, Jr., Third Division].
[11] Dizon v. Beltran, 803 Phil. 608, 627 (2017) [Per J. Reyes, Third Division].
[12] Spouses Reyes v. Montemayor, 614 Phil. 256, 275 (2009) [Per J. Chico-Nazario, Third Division].
[13] Lagrosa v. Court of Appeals, 371 Phil. 225, 236 (1999) [Per J. Gonzaga-Reyes, Third Division].
[14] Development Bank of the Philippines v. Prudential Bank, 512 Phil. 267, 278 (2005) [Per J. Corona, Third Division].
[15] Mactan-Cebu International Airport Authority v. Unchuan, 786 Phil. 23, 33 (2016) [Per J. Mendoza, Second Division].
[16] Cruz v. Bancom Finance Corporation (now Union Bank of the Philippines), 429 Phil. 225, 244 (2002) [Per J. Panganiban, Third Division].
[17] See Spouses Velasquez v. Court of Appeals, 399 Phil. 193, 203 (2000) [Per J. Gonzaga-Reyes, Third Division].
[18] 678 Phil. 1 (2011) [Per J. Leonardo-De Castro, First Division].
[19] Id. at 45.
[20] Id.
[21] Heirs of Lopez v. Development Bank of the Philippines, 747 Phil. 427, 440 (2014) [Per J. Leonen, Second Division].
[22] 705 Phil. 255 (2013) [Per J. Bersamin, First Division].
[23] Article 1409(1) of the Civil Code.
[24] Agra v. Philippine National Bank, 368 Phil. 829, 844 (1999) [Per J. Panganiban, Third Division].
[25] Cf. Ley Construction and Development Corporation v. Philippine Commercial International Bank, 635 Phil. 503, 511 (2010) [Per J. Leonardo-De Castro, First Division].
[26] 110 Phil. 494, 497-498 (1960) [Per J. Gutierrez David].
[27] Act No. 496 (November 6, 1902).
[28] Presidential Decree No. 1529 (June 11, 1978).
[29] Philippine Global Communications, Inc. v. Relova, 229 Phil. 388, 396 (1986) [Per J. Feria, En Banc].
[30] Tan Co v. Civil Register of Manila, 467 Phil. 904, 913 (2004) [Per J. Callejo, Sr., En Banc].
[31] Gayo v. Verceles, 492 Phil. 592, 603 (2005) [Per J. Callejo, Sr., Second Division].
[32] See Javier v. Commission on Elections, 777 Phil. 700, 725 (2016) [Per J. Brion, En Banc].
[33] 765 Phil. 714 (2015) [Per J. Leonen, Second Division].
[34] Id. at 736.
[35] Heirs of Concha, Sr. v. Spouses Lumocso, 564 Phil. 580, 596 (2007) [Per C.J. Puno, First Division].
[36] Heirs of Dela Cruz v. Court of Appeals, 358 Phil. 652, 660 (1998) [Per J. Romero, Third Division].
[37] See Spouses Cusi v. Domingo, supra note 22, at 267.
[38] RULES OF COURT, Rule 128, Sec. 1.
[39] Gumabon v. Philippine National Bank, 791 Phil. 101, 118 (2016) [Per J. Brion, Second Division].
[40] Id., citing RULES OF COURT, Rule 128, Sec. 4.
[41] See Catuira v. Court of Appeals, 306 Phil. 424, 426 (1994) [Per J. Bellosillo, Third Division].
[42] As found in Modina v. Court of Appeals, supra note 1, at 53.
[43] Ponencia, p. 2.
[44] Cagatao v. Almonte, 719 Phil. 241, 253 (2013) [Per J. Mendoza, Third Division].
[45] Casimiro Development Corporation v. Mateo, 670 Phil. 311, 323 (2011) [Per J. Bersamin, First Division].
[46] Legarda v. Saleeby, 31 Phil. 590, 593 (1915) [Per J. Johnson].
[47] 835 Phil. 351 (2018) [Per J. Perlas-Bernabe, En Banc].
[48] Francisco v. Herrera, 440 Phil. 814, 849 (2002) [Per J. Quisumbing, Second Division].
[49] Fullido v. Grilli, 781 Phil. 840, 857 (2016) [Per J. Mendoza, Second Division].
[50] Chavez v. Public Estates Authority, 433 Phil. 506, 581-582 (2002) [Per J. Carpio, En Banc].