PHILIPPINE NATIONAL BANK, G.R. No. 164801
Petitioner,
Present:
Quisumbing (Chairman),
- versus - Ynares-Santiago,
Carpio, and
Azcuna, JJ.
HEIRS OF ESTANISLAO MILITAR
AND DEOGRACIAS MILITAR,
represented by TRANQUILINA
MILITAR,
Respondents.
x
----------------------------------------------- x
SPOUSES JOHNNY LUCERO G.R. No. 165165
AND NONA ARIETE,
Petitioners,
- versus -
HEIRS OF ESTANISLAO MILITAR,
DEOGRACIAS
MILITAR, and
TRANQUILINA
MILITAR (deceased),
now represented by AZUCENA
MILITAR, FREDDIE MILITAR,
EDUARDO MILITAR, ROMEO L.
MILITAR, NELLY LY BOLANIO, Promulgated:
LETICIA LY and DELIA LY SI
ASOYCO,
Respondents.
x
----------------------------------------------------------------------------------------
x
YNARES-SANTIAGO, J.:
Before
us are the motions for reconsideration filed by petitioners Philippine National
Bank (PNB) in G.R. No. 164801 and Spouses Johnny Lucero and Nona Ariete (Lucero
Spouses) in G.R. No. 165165 seeking a reconsideration of our August 18, 2005
Decision in these consolidated cases which affirmed in toto the June 4,
2004 Decision and August 4, 2004 Resolution of the Court of Appeals in CA-G.R.
CV No. 54831 holding that both petitioners PNB and the Lucero Spouses were not
mortgagee and buyers in good faith, respectively.
In
their separate motions for reconsideration, both petitioners PNB and the Lucero
Spouses in the main assert that they were mortgagee and buyers for value in
good faith, respectively. Thus, the
Lucero Spouses pray that we “take a second hard look at the facts and
circumstances of the case.” Respondents
however argue that PNB cannot be considered a mortgagee in good faith as it
failed to inspect the disputed property when offered to it as security for the
loan, which could have led it to discover the forged instruments of sale. Similarly, the Lucero Spouses cannot be
regarded as innocent purchasers for value, respondents’ claim, as they failed
to inquire from the occupants of the disputed property the status of the
property. Before revisiting the facts
and circumstances of the instant case, a review of existing jurisprudence may
be expedient in resolving the twin motions for reconsideration.
In
Cabuhat v. Court of Appeals, we said
that “it is well-settled that even if the procurement of a certificate of title
was tainted with fraud and misrepresentation, such defective title may be the
source of a completely legal and valid title in the hands of an innocent
purchaser for value. Thus –
Where
innocent third persons, relying on the correctness of the certificate of title
thus issued, acquire rights over the property the court cannot disregard such
rights and order the total cancellation of the certificate. The effect of such an outright cancellation
would be to impair public confidence in the certificate of title, for everyone
dealing with property registered under the
Cabuhat was later invoked by Clemente v. Razo[2]
and Velasquez, Jr. v. Court of Appeals.[3] Accordingly,
in Lim v. Chuatoco we said that “it
is a familiar doctrine that a forged or fraudulent document may become the root
of a valid title, if the property has already been transferred from the name of
the owner to that of the forger. 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 petitioners are
purchasers in good faith.”[4]
In a litany of cases, we have defined
a purchaser in good faith as one who buys property of another without notice
that some other person has a right to, or interest in, such property and pays
full and fair price for the same at the time of such purchase or before he has
notice of the claim or interest of some other person in the property.[5]
Thus, as a general rule, where the
land sold is in the possession of a person other than the vendor, the purchaser
must go beyond the certificate of title and make inquiries concerning the
actual possessor. A buyer of real
property which is in possession of another must be wary and investigate the
rights of the latter. Otherwise, without
such inquiry, the buyer cannot be said to be in good faith and cannot have any
right over the property.[6] We explained this principle in Consolidated
Rural Bank (Cagayan Valley), Inc. v.
Court of Appeals and also held therein that this rule likewise
applies to mortgagees of real property[7]
–
As
this Court explained in the case of Spouses
Mathay v. Court of Appeals:
Although
it is a recognized principle that a person dealing on a registered land need
not go beyond its certificate of title, it is also a firmly settled rule that
where there are circumstances which would put a party on guard and prompt him
to investigate or inspect the property being sold to him, such as the presence
of occupants/tenants thereon, it is of course, expected from the purchaser of a
valued piece of land to inquire first into the status or nature of possession
of the occupants, i.e., whether or not the occupants possess the land en
concepto de dueño, in the concept of the owner. As is the common practice in the real estate
industry, an ocular inspection of the premises involved is a safeguard a
cautious and prudent purchaser usually takes.
Should he find out that the land he intends to buy is occupied by
anybody else other than the seller who, as in this case, is not in actual
possession, it would then be incumbent upon the purchaser to verify the extent
of the occupant’s possessory rights. The
failure of a prospective buyer to take such precautionary steps would mean
negligence on his part and would thereby preclude him from claiming or invoking the rights of
a “purchaser in good faith.”
This
Rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of Appeals the Court held –
It
is a well-settled rule that a purchaser or mortgagee cannot close his eyes to
facts which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of
his vendor or mortgagor. His mere
refusal to believe that such defect exists, or his willful closing of his eyes
to the possibility of the existence of a defect in the vendor’s or mortgagor’s
title, will not make him an innocent purchaser or mortgagee for value, if it
afterwards develops that the title was in fact defective, and it appears that
he had such notice of the defects as would have led to its discovery had he
acted with the measure of a prudent man in like situation.
Accordingly, for a purchaser of a
property in the possession of another to be in good faith, he must exercise due
diligence, conduct an investigation, and weigh the surrounding facts and
circumstances like what any prudent man in a similar situation would do. In Domalanta v. Commission on Elections[8]
we noted the use in other jurisdictions of the terms “man of reasonable
caution”[9]
and “ordinarily prudent and cautious man.”[10] These terms, we said, are legally synonymous
and their reference is not to a person with training in law such as a
prosecutor or a judge but to the average man on the street. It ought to be emphasized that the average
man weighs facts and circumstances without resorting to the calibration of our
technical rules of evidence of which his knowledge is nil. Rather, he relies on the calculus of common
sense of which all reasonable men have an abundance. And, “[b]y law and jurisprudence, a mistake
upon a doubtful or difficult question of law may properly be the basis of good
faith.”[11]
On the other hand, a mortgagee,
particularly a bank or financial institution whose business is impressed with
public interest, is expected to exercise more care and prudence than a private
individual in its dealings, even those involving registered lands.[12] In Sunshine
Finance and Investment Corp. v. Intermediate Appellate Court we presumed
that an investment and financing corporation “is experienced in its
business. Ascertainment of the status
and condition of properties offered to it as security for loans it extends must
be a standard and indispensable part of its operations. Surely, it cannot simply rely on an
examination of a
In fine, the diligence with which the
law requires the individual or a corporation at all times to govern a
particular conduct varies with the nature of the situation in which one is
placed, and the importance of the act which is to be performed.[14]
Similarly, in ascertaining good
faith, or the lack of it, which is a question of intention, courts are
necessarily controlled by the evidence as to the conduct and outward acts by
which alone the inward motive may, with safety, be determined. Good faith, or want of it, is capable of
being ascertained only from the acts of one claiming its presence, for it is a
condition of the mind which can be judged by actual or fancied token or signs.[15] Good faith, or want of it, is not a visible,
tangible fact that can be seen or touched, but rather a state or condition of
mind which can only be judged by actual or fancied token or signs.[16] Good faith connotes an honest intention to
abstain from taking unconscientious advantage of another.[17] Accordingly, in University of the East v. Jader we said that “[g]ood faith connotes
an honest intention to abstain from taking undue advantage of another, even
though the forms and technicalities of law, together with the absence of all
information or belief of facts, would render the transaction unconscientious.”[18]
Withal, in Sigaya v. Mayuga the
Court said that “good faith consists in the possessor’s belief that the person
from whom he received the thing was the owner of the same and could convey his
title. Good faith, while it is always to
be presumed in the absence of proof to the contrary, requires a well founded
belief that the person from whom title was received was himself the owner of
the land, with the right to convey it.
There is good faith where there is an honest intention to abstain from
taking any unconscientious advantage of another. Otherwise stated, good faith is the opposite
of fraud and it refers to the state of mind which is manifested by the acts of
the individual concerned.”[19]
Contrastingly,
in Magat, Jr. v. Court of Appeals the
Court explained that “[b]ad faith does not simply connote bad judgment or
negligence. It imports a dishonest
purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through
some motive or interest or ill will that partakes of the nature of fraud.”[20] In Arenas
v. Court of Appeals the Court held that the determination of whether one
acted in bad faith is evidentiary in nature.[21] Thus “[s]uch acts (of bad faith) must be
substantiated by evidence.”[22] Indeed, the unbroken jurisprudence is that
“[b]ad faith under the law cannot be presumed; it must be established by clear
and convincing evidence.[23]
All told, the ascertainment of good
faith, or lack of it, and the determination of whether due diligence and
prudence were exercised or not, are questions of fact. And while settled is the principle that this
Court is not a trier of facts[24]
and the general rule is that the determination of whether or not a buyer or
mortgagee is in good faith is generally outside the province of this Court to
determine in a petition for review,[25]
in Gabriel v. Spouses Mabanta we said that “[t]his rule, however,
is not an iron-clad rule. In Floro v. Llenado we enumerated the
various exceptions and one which finds application to the present case is when the findings of the Court of Appeals
are contrary to those of the trial court.”[26] Thus, in Clemente
v. Razo we held that “the issue of whether or not one is an innocent purchaser
for value is a question of fact which, as a rule, is not for this Court to
determine. In the same breath, however,
there are recognized exceptions to such rule, not the least of which is when,
as in this case, the findings of the Court of Appeals are contrary to that of
the trial court.”[27]
In the instant case, the trial court
which had the sole opportunity to observe first hand the demeanor of witnesses
and consider the relative weight of the evidence presented, concluded that
“Philippine National Bank and Spouses Johnny Lucero and Nona Ariete are
purchasers in good faith.” Respondent
appellate court however found that neither the PNB nor the Lucero Spouses can
be regarded as buyers in good faith as they failed to inquire from the
possessors the status of the disputed property.
We thus go back to the records of the case and the substantiated
allegations.
We begin with petitioner PNB. While it may be true that the bank could not
have known the forgery committed by the Jalbuna Spouses at the time the
disputed property was mortgaged to it, still it could not be completely
exonerated from any liability arising from its apparent omission, if not
negligence, to further investigate the nature of the possession or the title of
the respondents who were the alleged occupants of the property. PNB did not present any witness before the
trial court who had personal knowledge of whether or not the bank had conducted
the requisite ocular inspection or investigation before accepting the property
as security for the loan of the Jalbuna Spouses.
Perhaps PNB inordinately relied on
the presumption of regularity in its compliance with the requirements for the
Extrajudicial Foreclosure of Mortgage, such as the publication of the notice of
auction sale, and assumed that the burden of proof was on the respondents to
prove that the bank was remiss in its obligation. Perhaps too, the bank assumed that its
presumed compliance with the foregoing requirements was sufficient to operate as
a constructive notice to all those claiming ownership of or a right to possess
the mortgaged property, or those who would be adversely affected by the
impending foreclosure sale. It does not
however alter the fact that the only witness presented by PNB merely inherited
from his predecessor the records relating to the account of the Jalbuna
Spouses, and hence had no personal knowledge of whether or not an ocular
inspection was in fact conducted on the property. Thus –
Atty.
Bañares:
Q Did you not know whether there was an
inspector who made the inspection of the property?
A I do not know.[28]
x x x x
Q So, is it safe to conclude now that you
do not know whether Philippine National Bank sent some inspectors to Lot 3017-B
before the loan…
Court:
Answered, he did not know. How will he know?
Atty.
Bañares:
That will be all, Your Honor.[29]
Indeed, had petitioner PNB conducted
an ocular inspection as it claims, it would have found out that the mortgagors,
Spouses Jalbuna, were not in actual possession of the property but herein
respondents and their predecessors-in-interest, which information should have
put it on inquiry as to the real status of the property. Consequently, petitioner PNB should have
inquired into the circumstances of the possession by herein respondents and
their predecessors in interest.
In fine, there is no showing that
petitioner PNB, a banking institution, which is expected to exercise more care
and prudence in its dealings involving registered land, ascertained the status
and condition of the property being offered to it as a security for the loan
before it approved the loan. Hence, we therefore find that there is no
reversible error committed by the Court of Appeals in finding that PNB could
not be considered a mortgagee in good faith.
We now go to petitioners Lucero
Spouses. The Lucero Spouses knew from
the very beginning that the disputed property was occupied by third
parties. They resided in the adjoining
property. Thus, they went beyond the
title of petitioner PNB, and upon inquiry, were made to believe that the
partial occupation by private respondents of the disputed property was merely
being tolerated by the rightful owner.
Accordingly, before the trial court, petitioner Nona A. Lucero testified
that –
Atty.
Posecion:
Q Did your mother not tell you that the
Militar family has been residing in the land so that it would be difficult if
you buy the land?
A No, because I will make (the)
transaction (with) the Philippine National Bank, not (with) the Militars.
Q So that you disregarded whatever right
the Militars have over the land, right?
A No, because the vendee/buyer has the
authority to make expenses for all the squatters.[30]
The Lucero Spouses also knew that
petitioner PNB had already acquired the property in a foreclosure sale and that
petitioner PNB had in fact transferred the title to its name for almost five
years already. Their belief that
petitioner PNB thereafter had the right to transfer title over the disputed
property was strengthened by the fact that they similarly consolidated their
ownership over the adjoining property after buying it from respondent Romeo
Militar and assuming his loan with petitioner PNB.[31]
The reliance of the Lucero Spouses,
who never participated in the auction sale, on the right of petitioner PNB
which had the title in its name for almost five years already is not totally
misplaced. On P119,961.36.
Some four years thereafter, or on
The Lucero Spouses purchased the
disputed property from petitioner PNB as an acquired asset for P229,000.00
and only on
And between the bank whose proof of
ownership is the title acquired after years of foreclosure proceedings and
sale, and the supposed tolerated occupation of herein respondents whose rights
are dubious, and at best vague, petitioners Lucero Spouses cannot be faulted
for considering petitioner PNB as having a better right over herein respondents
and could very well rely on the title of the bank. After all, even this Court has “take(n)
judicial notice of the uniform practice of financing institutions to
investigate, examine and assess the real property offered as security for any
loan application.”[35] It must be remembered that the prudence required
of the Lucero Spouses is not that of a person with training in law, but rather
that of an average man who “weighs facts and circumstances without resorting to
the calibration of our technical rules of evidence of which his knowledge is
nil.”[36] Hence, petitioners Lucero Spouses bought the
disputed property with the honest belief that petitioner PNB was its rightful
owner and could convey title to the property.
They can therefore be considered as buyers in good faith as they have
exercised due diligence required under the circumstances.
Also, nowhere in the records does it
show that the Lucero Spouses were in bad faith.
Neither were private respondents able to prove it, much less were they
able to establish it by clear and convincing evidence as required by the
rules. On the contrary, the trial court
found that the Lucero Spouses acted in good faith “since they bought the lot in
question from defendant, Philippine National Bank.”[37] They could rely on what appears on the face
of the Certificate of Title in light of the attendant circumstances, especially
after considering that the requirements for the extrajudicial foreclosure of
mortgage such as publication and notice appear to have been religiously
complied with by PNB.
In contrast, we find, after a
meticulous scrutiny of the records, that the respondents are not entirely
blameless. They have not established
their right or interest in the property aside from their belated and
unsubstantiated allegation that they were the successors-in-interest of Deogracias,
Glicerio, Tomas and Caridad, all surnamed Militar. Deogracias died on
Thus, to reiterate for emphasis, the
Deed of Sale which transferred the property to the Spouses Jalbuna was executed
on
The Jalbuna Spouses acquired title to
the property on
On
Philippine National Bank foreclosed
the mortgage on
On
It would appear that it was PNB who
exercised acts of ownership over the property during the five-year period, not
the respondents who are now claiming to be the owners. There is no evidence of any act of ownership exercised
by the respondents, such as payment of taxes and introduction of improvements
which would have shown, by preponderance of evidence, the right of ownership to
or interest in the property, aside form their occupation thereof by mere
tolerance. Since the death of their
predecessors, there has not even been a showing that respondents verified,
inquired or investigated with the Register of Deeds or the Assessor’s Office as
to the status of the property. If only
respondents have been more vigilant in the enforcement of their alleged rights
and interests, the property would not have been sold to third persons who paid
valuable consideration thereto. Far from
being vigilant, however, respondents have shown sheer disinterest in their
claim to the property, thus leading to the well-founded conclusion that their
claimed ownership rights are not anchored in reality. Vigilantibus
sed non dormientibus jura subveniunt.
The law aids the vigilant, not those who slumber on their rights.
More.
On
WHEREFORE, the
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE
CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
ANTONIO T. CARPIO ADOLFO S.
AZCUNA
Associate Justice Associate Justice
ATTESTATION
I
attest that the conclusions in the above resolution were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
LEONARDO
A. QUISUMBING
Associate Justice
Chairman, Special First Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, it is hereby certified that the conclusions in the above Resolution
were reached in consultation before the cases were assigned to the writer of
the opinion of the Court’s Division.
REYNATO
S. PUNO
Acting Chief
Justice
[1]
G.R. No. 122425,
[2]
G.R. No. 151245,
[3]
G.R. No. 138480 (consolidated with Ayala Land, Inc. v. Velasquez, Jr., G.R.
No. 139449),
[4]
G.R. No. 161861,
[5] See Sigaya
v. Mayuga, G.R. No. 143254, August 18, 2005, 467 SCRA 341,
354-355; San Lorenzo Development Corp. v. Court of Appeals, G.R. No. 124242, January 21, 2005,
449 SCRA 99, 117; Sps. Occeña v. Esponilla, G.R. No. 156973, June 4, 2004, 431
SCRA 116, 124; Spouses Castro v. Miat, G.R. No. 143297, February 11, 2003,
397 SCRA 271, 284; AFP Mutual Benefit Association, Inc. v. Court
of Appeals, G.R. No. 104769
(consolidated with Solid Homes, Inc. v. Investco, Inc.,
G.R. No. 135016), September 10, 2001, 364 SCRA 768, 771; Republic
of the Philippines v. Court of Appeals, G.R. No. 99331, April 21, 1999, 306 SCRA 81, 87; Sandoval
v. Court of Appeals, G.R. No. 106657, August 1, 1996, 260 SCRA 283,
296-297.
[6] See Sps. Castro v. Miat, supra note 5; Lu v. Manipon, G.R.
No. 147072, May 7, 2002, 381 SCRA 788, 798-799; Republic of the Philippines v.
De Guzman, G.R. No. 105630, February 23, 2000, 326 SCRA 267, 277; David
v. Malay, G.R. No. 132644, November 19, 1999, 318 SCRA 711, 724; Embrado
v. Court of Appeals, G.R. No. 51457, June 27, 1994, 233 SCRA 335,
346.
[7]
G.R. No. 132161,
[8]
G.R. No. 125586,
[9] Citing Brinegar v. US, 338 US 160 (1949).
[10] Citing Del Carmen, Criminal Procedure,
Law and Practice, 3rd ed., p. 86.
[11] Development Bank of the Philippines v. Court
of Appeals, G.R. No. 111737, October 13, 1999, 316 SCRA 650, 664.
[12] Consolidated Rural Bank (Cagayan Valley),
Inc. v. Court of Appeals, supra
note 7 at 367.
[13]
G.R. Nos. 74070-71,
[14] See Cruz v. Judge Gangan, G.R. No.
143403, January 22, 2003, 395 SCRA 711, 717 (citations therein, omitted); and Bulilan v. Commission on Audit, G.R. No. 130057, December 22, 1998,
300 SCRA 445, 453.
[15] Expresscredit
Financing v. Spouses Velasco, G.R. No. 156033, October 20, 2005, 473
SCRA 570, 577-578, citing Leung
Yee v. FL Strong Machinery, 37 Phil. 644, 651 (1918).
[16] Balatbat
v. Court of Appeals, G.R. No. 109410, August 28, 1996, 261 SCRA 128,
143, citing Bautista v. Court of Appeals,
G.R. No. 106042, February 28, 1994, 230 SCRA 446, 454-455.
[17] Equatorial
Realty Development, Inc. v. Mayfair Theater, Inc., G.R. No. 106063, November 21, 1996,
264 SCRA 483, 508.
[18]
G.R. No. 132344,
[19] Supra note 5 at 355, citing Lim v. Chuatoco, supra note 4.
[20]
G.R. No. 124221,
[21]
G.R. No. 126640, 345 SCRA 617, 629.
[22] ABS-CBN Broadcasting Corp. v. Court of
Appeals, G.R. No. 128690, January 21, 1999, 301 SCRA 572, 604.
[23] Philippine Airlines v. Miano, G.R. No.
106664, March 8, 1995, 242 SCRA 235, 240; LBC
Express, Inc. v. Court of Appeals, G.R. No. 108670, September 21, 1994, 236
SCRA 602, 608, citing People’s Bank and Trust Co. v. Syvel’s Inc.,
L-29280, August 11, 1988, 164 SCRA 247.
[24] Alipoon v. Court of Appeals, G.R. No.
127523,
[25] Sigaya
v. Mayuga, supra note 5; Orquiola
v. CA, G.R. No. 141463, August 6, 2002, 386 SCRA 301, 309; Spouses
Uy v. Court of Appeals, G.R. No. 109197, June 21, 2001, 359 SCRA
262, 268-269.
[26]
G.R. No. 142403,
[27] Supra note 2 at 775.
[28]
TSN,
[29]
[30]
TSN,
[31]
[32]
Exhibit 5.
[33]
Exhibit 6.
[34]
Exhibit 8.
[35] State
Investment House, Inc. v. Court of Appeals, G.R. No. 115548,
[36] See Domalanta v. Commission on Elections,
supra note 8.
[37]
Decision of the trial court, p. 9.
[38]
Sec. 51, P.D. 1959.