SECOND DIVISION
|
ARACLEO ERASUSTA, JR., GONZALO ERASUSTA and FAUSTINO ERASUSTA, in
substitution of their mother LUCENA DE LOS REYES, Petitioners, -
versus - COURT OF APPEALS, PACIFIC BANKING CORPORATION, ANTONIO PRIETO, SR.,
and AMPARO AMORIN, IMELDA, EVANGELINE, TERESITA, FORTUNATO, JR., REYNALDO,
MARIBEL and ELIZABETH, all surnamed AMORIN, Respondents. |
G.R.
No. 149231
Present:
PUNO, J., Chairperson SANDOVAL-GUTIERREZ, AZCUNA,
and GARCIA,
JJ. Promulgated: July
17, 2006 |
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D E C I S I O N
GARCIA, J.:
By this petition for
review on certiorari petitioners seek to nullify and set aside the
Decision[1] [1]
dated
The
first assailed issuance reversed an earlier decision[3]
[3] dated January 23, 1986 and Order[4] [4]
dated August 9, 1996 of the Regional Trial Court at Manila, Branch 34 in Civil
Case No. 95800, an action for Recovery of
Ownership with Damages, filed by respondents Amparo J. Amorin and children
(Amorins) against Lucena De Los Reyes (De Los Reyes) petitioners’ mother and
predecessor-in-interest and respondent Pacific Banking Corporation (Bank). The
second assailed issuance, on the other hand, denied reconsideration of the
first.
Subject of controversy are two lots
located at
On
Sometime in September 1973, a
representative from respondent Bank went to the Amorins’ house at
As it turned out De Los Reyes was deceived
by a certain Benjamin Valenzuela
(Valenzuela) to whom she entrusted the documents evidencing her rights
over Lot 19-A, Lots 11, and Lot 34-D, on Valenzuela’s representation that he
would assist De Los Reyes in transferring the titles to said properties to her
three (3) children. Unfortunately, Valenzuela fraudulently transferred the
rights over the lots to his name. The
subdivision owner, Prieto, unaware of the fraud and forged instrument, executed
a deed of sale over the said properties in favor of Valenzuela who eventually
secured transfer certificates of title in his name (TCT No. 73596 over Lot
34-D; TCT No. 73955 over Lot 19-A; and 74018 over Lot 11). Thereafter, Valenzuela mortgaged the
aforesaid real estates to respondent Bank.
Upon discovery of the fraud perpetrated
by Valenzuela, De Los Reyes filed two criminal complaints for estafa thru
falsification of public documents against Valenzuela. The cases were docketed
as Criminal Cases No. 15922 and 15923 at the Court of First Instance of Manila,
Branch IV and Branch VII respectively. Valenzuela was convicted in both cases. His
conviction in Criminal Case No. 15922 was affirmed by the Court of Appeals in
CA-G.R. No. 19147-CR.[5]
On
Meanwhile, respondent Amparo J. Amorin
confronted De Los Reyes regarding the Bank’s eviction notices but the latter
maintained that the Bank was just mistaken as
Bewildered and desperate, Amparo Amorin
demanded that De Los Reyes and the latter’s tenants surrender and vacate
Finally, the Amorins were compelled to
file an action for Recovery of Ownership
with Damages against De Los Reyes, the latter’s tenants Eladia R. Buhay,
spouses Jose and Asuncion Mendoza, Alfredo Ramos and the respondent Bank at the
former Court of First Instance of Manila, Branch 1, now, Manila Regional Trial
Court, Branch 34. In the same proceedings De Los Reyes filed a cross-claim
against the respondent Bank and a motion for third-party complaint against
Prieto.
In her
cross-claim,[6]
De Los Reyes asked the trial court to declare as null and void 1) the deed of
real estate mortgage and deed of absolute sale covering Lot 11, 2) deed of
transfer and/or assignment of Lots 19-A and 34-D, 3) the transfer certificate
of titles issued to Valenzuela TCT No. 74049 over Lot 11, TCT No. 73955 over
Lot 19-A, TCT No. 73956 over Lot 34-D, 4) the transfer certificate of title
issued to respondent Bank TCT No. 105546 over Lot 11, TCT No. 105545 over Lot
34-D and TCT No. 105541 over Lot 19-A.
As third-party
plaintiff, De Los Reyes prayed for a judgment ordering Prieto, the subdivision
owner, to correct Subdivision Plan (LRC) Psd-8216 to conform to his
representations and those of his employees that Lot 19-C is that on which house
No. 933 stands and that Lot 19-A is that lot on which house No. 925 stands, and
thereafter order the corresponding titles and deeds of absolute sale on the
subject properties.
On January 23,
1986, the trial court rendered a Decision[7]
ordering the cancellation of the titles issued to respondent Bank, the correction
of the titles of the Amorins by the Register of Deeds to correspond to the
master plan of the LRC and the correction of the subdivision plan pertaining to
the property of the Amorins to correspond to the master plan of the LRC. The
decretal portion of the decision is hereunder quoted:
Premises
considered, this Court hereby orders the cancellation of the title of defendant
Pacific Bank No. TCT-105544 for being obtained from a fraudulent source. Ordering the Register of Deeds of Manila to
correct the title of plaintiff TCT-95442 to correspond to the subdivision plan
of the Land Registration Commission as Lot 19-A; ordering third-party Antonio
Prieto to correct its plan to the lot in question in accordance with the master
plan of the Land Registration; ordering third-party Antonio Prieto to pay
plaintiffs the sum of P5,000.00 as attorney’s fees and costs. Let the case as against defendants Jose and
Anunciacion Mendoza and Alfredo Ramos be dismissed. Claims and other counter-claims against each
other by the parties are hereby dismissed.
SO
ORDERED.
De Los Reyes filed
a Motion for Modification of Decision alleging that in order to conform with
the findings of the trial court that the titles of the forger Valenzuela over
Lots 11, 34-D and 19-A are null and void, the titles secured by the latter,
namely TCT Nos. 74048, 73955 and 73956 should be ordered cancelled and as a
consequence, TCT Nos. 105546, 105545 and 105544 in the name of respondent Bank
must likewise be ordered cancelled. Additionally,
De Los Reyes also prayed for the corresponding correction of the technical
description of Lot 19-A to correspond to the technical description of Lot 19-C
of the subdivision plan (LRC) Psd-8216 since in the dispositive part of the
court’s decision, the correction of the title of the Amorins to Lot 19-C was
ordered to correspond to the technical description of Lot 19-A,.
In the Order[8]
dated August 9, 1996 the trial court modified its earlier decision by 1) ordering the
cancellation of respondent Bank’s TCT No. 105546 (Lot 11) TCT No. 105545 (Lot
34-B) and Benjamin Valenzuela’s TCT No. 74048 (Lot 11) TCT No. 73955 (Lot 19-A)
and TCT No. 73956 for having been obtained from fraudulent source and 2) ordering
the Register of Deeds to interchange the technical descriptions of the subject
lots:
WHEREFORE,
in order that the dispositive portion may conform to the findings of the Court,
the dispositive portion of the decision dated
1. Ordering
the cancellation of defendant Pacific Bank’s Title over TCT No. 105546 (
2. This
Court further orders the Register of Deeds to intercharge [sic] the Technical Description of Lot 19-A and 19-C so that the
technical description of Lot 19-C will become that of 19-A and that of 19-A
should become 19-C all of the subdivision plan of the Land Registration
Commission psd 8216.
Let
copy of this Order be furnished all the parties for their guidance and
compliance.
SO
ORDERED.
Respondent Bank
and De Los Reyes interposed separate appeals to the Court of Appeals (CA)
whereat the case was docketed as CA-G.R. CV No. 60752.
De Los Reyes lamented
the trial court’s failure to order the cancellation of respondent Bank’s TCT
No. 105544 (
For its part, respondent
Bank argued that
the
trial court erred, in ordering the cancellation of its TCTs No. 105545 Lot
34-D and 105546
Lot
11 despite the fact that the forger Valenzuela, the previous registered owner
from whom it acquired the properties was not impleaded as an indispensable
party in the case; and in allowing De Los Reyes to collaterally attack the
validity of said TCTs in the suit filed by the Amorins, notwithstanding that
the said properties were not involved in the complaint.
During
the pendency of the Appeal in the CA, De Los Reyes died and was substituted by her
sons Aracleo, Jr., Gonzalo and Faustino, all surnamed Erasusta, herein
petitioners.
On
WHEREFORE,
premises considered, the appeal by defendant Pacific Banking Corporation is
hereby GRANTED and that of defendant Lucena De Los Reyes is hereby
DISMISSED. The Decision dated
1) The complaint as against
defendant-appellant Pacific Banking Corporation is hereby DISMISSED and TCT
Nos. 105544 over Lot 19-A, 105546 over Lot 11 and 105545 over Lot 34-D in the
name of Pacific Banking Corporation are hereby declared valid and subsisting;
2) Defendant-appellant Lucena De Los Reyes
is hereby ordered to execute the necessary deed of transfer of rights over Lot
No. 19-C located at
3) Third-party defendant Antonio Prieto is
hereby ordered to pay to plaintiffs-appellees and defendant-appellant Lucena De
Los Reyes the sum of P10,000.00 each as and for attorney’s fees, and costs of
suit; and
4) The cross-claim of defendant-appellant
Lucena De Los Reyes against defendant-appellant Pacific Banking Corporation is
hereby dismissed. The counterclaim of
defendant-appellant Pacific Banking Corporation is likewise dismissed.
No
pronouncement as to costs.
SO
ORDERED.[9]
Aggrieved,
petitioners come to this Court via
the present recourse principally contending that the CA committed reversible
error when it declared respondent Bank an innocent purchaser for value entitled
to the protection of the law with a better right over lot 19-A located at 933 Maria
Luisa st. than petitioners and the Amorins
We find merit in the petition.
Consistently, this
Court has ruled that every person dealing with registered land may safely rely
on the correctness of the certificate of title issued therefor and the law will
in no way oblige him to go beyond the certificate to determine the condition of
the property. A person is charged with notice only of such burdens and claims
as are annotated on the title. Thus, where there is nothing in the certificate
of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what
the Torrens Title upon its face indicates in quest for any hidden defects or
inchoate right that may subsequently defeat his right thereto.[10] The
CA anchored its decision on these precepts.
The CA disagreed
with the RTC’s conclusion that the respondent Bank was not a bona fide purchaser or mortgagee for
value, as the case may be, of the subject property, based on circumstances
which we now proceed to review. It is settled that this Court has to
inquire into questions of fact if the courts below have conflicting findings.[11]
Of course it is beyond cavil that the fraudulent
registration of the property in the forger Valenzuela’s name using the forged
deed of sale is not sufficient to vest title to the property in
him. Settled is the rule that a certificate is not conclusive
evidence of title;[12]
registration
does not vest title, it is merely evidence of such title over a particular
property.[13]
Certificates
of title merely confirm or record title already existing and vested. They
cannot be used to protect a usurper from the true owner, nor can they be used
as a shield for the commission of fraud, nor to permit one to enrich himself at
the expense of others.[14]
The
While, it is a
familiar doctrine that a forged or fraudulent document may become the root of a
valid title,[16]
if the
property has already been transferred from the name of the owner to that of the
forger, the same is not true. This doctrine serves to emphasize that a
person who deals with registered property in good faith will acquire good title
from a forger and be absolutely protected by a Torrens title. In the
final analysis, the resolution of this case depends on whether the respondent
Bank is a purchaser in good faith.
It is a matter of
judicial notice that a banking institution, before approving a loan, sends its
representative to the premises of the land offered as collateral and
investigates who are the true owners and possessors thereof.
Here, respondent
Bank did not make any investigation of the premises at all. As established in the trial court an employee
of respondent Bank by the name of Jesus Ortega was a close friend of Valenzuela[17]. In fact it was never disputed that no officer
or employee of the respondent Bank inspected the premises before the mortgage
of the subject realties were executed.
To be sure,
neither the mortgagor nor seller was in possession of the lands mortgaged or
sold to respondent Bank. This should
have aroused suspicion on the part of respondent Bank. However, contrary to standard practice of
banks, respondent Bank did not conduct any on-the-spot investigation,
manifestly showing its gross negligence.
It cannot be
overemphasized that respondent Bank, being in the business of extending loans
secured by real estate mortgage, is familiar with rules on land registration.
As such, it was, as here, expected to exercise more care and prudence than
private individuals in their dealing with registered lands. Accordingly, given
inter alia the suspicion-provoking presence of occupants other than the
owner on the land to be mortgaged, it behooved respondent Bank to conduct a
more exhaustive investigation on the history of the mortgagor’s title. That
respondent Bank accepted in mortgage the property in question
notwithstanding the existence of structures on the property and which were
in actual, visible and public possession of a person other than the mortgagor,
constitutes gross negligence amounting to bad faith.
Verily, in the two
criminal cases filed against Valenzuela, and the trial court found that
Valenzuela never took possession of the premises, and it was De Los Reyes, who
has been in continuous possession of the subject lots. In Criminal Cases Nos.
15922 it was found:
That
the assignment by complainant of whatever rights he may have over the two lots
in question to the herein accused is fictitious emanating from a falsified
signature, becomes more convincing form the very admission of the accused
himself that he had never taken possession of said property, exercised any act
of ownership and possession over the same, nor shouldered the corresponding
liability and obligation as owner thereof, as in fact, he had not paid even a
single centavo by way of taxes for the said property.[18]
While in Criminal Case No. 15923
the trial court held:
Although
already technically deprived of their property, complainants, however, never
parted with their possession thereof, thru their two tenants, until the
present, and likewise, they continued to pay real estate taxes therefor.
That
the real estate mortgage embodied in Exhibit “A”, and the deed of sale in
Exhibit “C”, both in favor of Benjamin Valenzuela, are forgeries are well
established not only by the declarations of complainants that they never
executed nor signed them, nor received the purported considerations therefor,
but also by the circumstances that Benjamin Valenzuela never took possession of
the lot, never paid taxes thereon, nor exercised any act indicative of
ownership thereof other than to mortgage the same successively to the three
banks aforementioned.[19]
In Gatioan vs. Gaffud, [20] this Court held that it is a matter of
judicial notice that before a bank grants a loan on the security of land, it
first undertakes a careful examination of the title of the applicant as well as
a physical and on-the-spot investigation of the land itself offered as
security. Undoubtedly, had herein respondent
Bank taken such a step which is demanded by the most ordinary prudence it would
have easily discovered the flaw in the title of Valenzuela; and if it did not
conduct such examination and investigation, it must be held to be guilty of
gross negligence in granting him the loans secured by the lots in question. In
either case, respondent Bank cannot be considered as a mortgagee in good faith
within the contemplation of the law.
Significantly, there
are matters of record that should have put the respondent Bank upon inquiry and
investigation as to the possible defects of the title of Valenzuela. The Deed of Assignment over Lot Nos. 19-A and 34-D purportedly
executed by De Los Reyes in favor of Valenzuela shows that only the second page
of the two-page document was signed and only one attesting witness was present.[21]
These facts should
have put respondent Bank upon inquiry and investigation. Regrettably no such
investigation of the premises in question was done before the Bank granted the
loans to Valenzuela with the lots in question as collaterals.
In the absence
of such inquiry,
the respondent Bank cannot and should
not be regarded as a mortgagee/purchaser in good faith.
In Republic v. De Guzman,[22] the Court declared that a buyer who fails to
investigate or inquire concerning the rights of those in actual possession of
the property being mortgaged or sold, can hardly be regarded as a buyer in good
faith.
In the case of Cruz v. Bancom Finance Corporation,[23]
which is akin to this case the Court had
this to say:
Respondents
claims that, being an innocent mortgagee, it should not be required to conduct
an exhaustive investigation on the history of the mortgagor’s title before it
could extend a loan.
Respondent,
however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is
expected to exercise greater care and prudence in its dealings, including those
involving registered lands. A banking
institution is expected to exercise due diligence before entering into a
mortgage contract. 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 its operations.
Respondent Bank
contends that its titles over
Certificate
not Subject to Collateral attack. – A certificate of title shall not be subject
to collateral attack. It cannot be
altered, modified, or cancelled except in a direct proceeding in accordance
with law.
What cannot be collaterally attacked is the certificate of
title and not the title. The certificate
referred to is that document issued by the Register of Deeds known as the
Transfer Certificate of Title (TCT). By title,
the law refers the ownership which is represented by that document. Petitioner apparently confuses certificate with
title. Placing a parcel of land under
the mantle of the
Moreover, we note
that, respondent Bank did not raise the issue of non-collateral attack on its
titles as a defense in the trial court. Hence, it cannot be raised for the
first time on appeal. This defense, if
at all, is deemed waived.[26]
Respondent Bank would
argue that the forger, Valenzuela who committed the fraud against De Los Reyes
and respondent bank is an indispensable party without whom no valid judgment
can be rendered.
Respondent Bank
contends that Benjamin Valenzuela is an indispensable party. An indispensable party is one without whom
there can be no final determination of the action.
In Criminal Case
No. 15922, the lower court in its decision dated November 28, 1975, declared as
forged the Deed of Assignment of Rights over Lots 19-A and 34-D purportedly
executed by De Los Reyes in favor of Valenzuela which enabled him to secure
T.C.T. No. 73955 and T.C.T. No. 73956 which he mortgaged to secure the
loans. Valenzuela appealed to the CA
which affirmed Valenzuela’s conviction with modification only as to the penalty
imposed.[27]
As for Criminal Case No. 15923 the trial court’s decision
The forgeries and
falsifications of the Deed of Assignment of Lot 19-A, 34-D and Lot 11 of
Valenzuela had been well established proven beyond reasonable doubt. Hence,
there was no need to implead Valenzuela.
The decisions in Criminal Cases Nos. 15922 and 15923 including the
decision of the Court of Appeals in CA-G.R. No. 19147-CR were presented in
evidence. To be sure, the trial court took cognizance of the case and took into
consideration the findings of the courts in the two criminal cases finally,
rendering the judgment on
All told, we agree with the RTC’s conclusion that for merely relying on the certificates of title and for its failure to ascertain the status of the mortgaged properties as is the standard procedure in its operations, respondent Bank is a mortgagee in bad faith[28].
WHEREFORE, petition is granted. The assailed
a) Benjamin
Valenzuela’s Transfer Certificate of Title No.
74048 over Lot 11;
Transfer Certificate of Title No.
73955 over
b) Respondent
Pacific Bank’s Transfer Certificate of Title No. 105546 over Lot 11, Transfer Certificate of Title
No. 105545 over Lot 34-D and Transfer
Certificate of Title No. 105544 over Lot 19-A are hereby ordered cancelled for
being null and void.
c) The
Register of Deeds
is ordered to interchange the Technical Description of Lot
19-A and 19-C to conform with the subdivision
plan of the Land Registration Commission Psd 8216.
SO ORDERED.
CANCIO C. GARCIA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairperson
|
ANGELINA SANDOVAL-GUTIERREZ Associate Justice |
RENATO C. CORONA Associate Justice |
ADOLFO S. AZCUNA
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the
above decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairperson, Second Division
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of
the Constitution, and the Division Chairperson's Attestation, it is hereby
certified that the conclusions in the above decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court.
ARTEMIO V. PANGANIBAN
Chief Justice
[1] Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices Conrado M. Vasquez, Jr. and Eliezer R. De Los Santos concurring.
[2] Rollo, p. 95.
[3]
[4]
[5]
[6]
[7] See note 3.
[8] See note 4.
[9]
[10] State Investment House, Inc. v. Court of Appeals, 324 Phil. 642 (1996).
[11] Sacay v. Sandiganbayan, 226 Phil. 496, 510 (1986).
[12] Mathay v. Court of Appeals, 356 Phil. 869 (1998).
[13] Vda. de Cabrera v. Court of Appeals, 335 Phil. 19 (1997).
[14] Esquivias
v. Court of Appeals, 339 Phil. 184 (1997).
[15] Heirs of Teodoro dela Cruz v. Court of Appeals, 358 Phil. 652 (1998).
[16] Fule v. Legare, 117 Phil. 367 (1963).
[17] TSN, October 29, 1979, p. 39
[18] Decision, Criminal Case No. 15922,
p. 15.
[19]
[20] No.
L-21953,
[21] Exh. A, also Exh. 1.
[22] G.R. No. 105630, 326 SCRA 267(2000).
[23] G.R. No. 147788. 379 SCRA 490 (2002).
[24] Property Registration Decree of
[25] Lee Tek Sheng vs. Court of Appeals, 292
SCRA 544 (1998).
[26]
Sec.
1, Rule 9, 1997 Rules of Civil Procedure.
Keng Hua Paper Products Co. Inc. vs. Court
Of Appeals; Regional Trial
[27] See footnote 5.
[28] Consolidated Rural Bank (