Philippine National Bank v. Court of Appeals
REITERATIONFacts
The Antecedents: The property in question was originally conjugal property of spouses Iñigo Bitanga and Rosa Ver. Iñigo died on September 25, 1935, survived by Rosa and their children (herein respondents Pedro, Fernando, Gregorio, Guillermo, and Clarita Bitanga). On October 20, 1936, Rosa Ver mortgaged the entire property to the Philippine National Bank (PNB) for P500.00. This mortgage was registered on November 12, 1936, but not annotated on the original certificate of title (OCT) issued on December 15, 1937. A power of attorney in favor of PNB was annotated on February 27, 1941. Meanwhile, Rosa Ver defaulted on an obligation with Manila Trading Company (MTC), leading to the annotation of an attachment on her share on February 14, 1940, and the subsequent sale of her interest to MTC on May 25, 1940. MTC later sold its rights to Santiago Sambrano. Intervenors Melitona Lagpacan and Jorge Malacas acquired rights to one-half of the property through a separate civil case involving Santiago Sambrano. Due to Rosa Ver's failure to pay PNB, the bank foreclosed the mortgage, emerged as the highest bidder, and consolidated its title. PNB then petitioned to declare OCT No. 7683 void and issue a new title in its name, which was granted, resulting in TCT No. T-2701. Subsequently, PNB sold the property to Felizardo Reyes, who obtained TCT No. T-3944. Procedural History: The Bitanga heirs filed a complaint for reconveyance and damages against PNB, Register of Deeds, and Felizardo Reyes. Melitona Lagpacan and Jorge Malacas intervened. The Court of First Instance (CFI) ruled in favor of the plaintiffs and intervenors, declaring the PNB and Reyes' titles void and ordering the issuance of new titles in favor of the plaintiffs and intervenors. The Court of Appeals (CA) affirmed the CFI decision with modifications, particularly regarding the division of shares. PNB appealed to the Supreme Court. The Petition: PNB sought review of the CA decision, raising issues regarding the validity and extent of the mortgage, the effect of non-annotation on the title, estoppel, laches, and the validity of the intervenors' acquisition.
Issue(s)
Whether the mortgage executed by Rosa Ver in favor of PNB is valid and, if so, to what extent does it cover the property. Whether the mortgage deed is still subsisting despite not being annotated on the original certificate of title, and the effect of the Torrens system on subsequent transferees. Whether estoppel and/or laches bar the respondents from asserting their rights over the property. Whether the acquisition of the other half portion of the lot by the intervenors-spouses Melitona Lagpacan and Jorge Malacas is valid, considering the rights of Manila Trading Company (MTC) as a purchaser for value and in good faith. Whether Felizardo Reyes was a purchaser in good faith, and the proper division of shares among the parties.
Ruling
The Supreme Court affirmed the Court of Appeals' decision with modification. The mortgage executed by Rosa Ver in favor of PNB was declared valid only with respect to her one-half (1/2) conjugal share. The titles issued to PNB and Felizardo Reyes were declared null and void. The Register of Deeds was ordered to issue a new certificate of title reflecting an undivided two-fifths (2/5) share for the Bitanga heirs and an undivided three-fifths (3/5) share for the intervenors-spouses Malacas.
Ratio Decidendi
On the validity and extent of the mortgage: The Court held that the mortgage executed by Rosa Ver in favor of PNB was valid only with respect to her one-half (1/2) share of the conjugal property. Since Iñigo Bitanga died before the mortgage, his one-half share was transmitted to his heirs, establishing co-ownership between them and Rosa Ver. Under Article 2085 of the Civil Code, a mortgagor must be the absolute owner of the property. Rosa Ver, as a co-owner, could only mortgage her share. The Court reiterated the principle of nemo dat quod non habet (one cannot give what one does not have). Furthermore, under the Old Civil Code, Rosa Ver, as a surviving spouse, only had usufructuary rights over her deceased husband's share and could not alienate or dispose of it, thus reinforcing the limitation of the mortgage to her own share. On the effect of non-annotation and the Torrens system: The Court affirmed the CA's ruling that the mortgage deed was no longer subsisting with respect to the heirs' share because it was not annotated on the original certificate of title. The Court emphasized the indefeasibility and conclusiveness of a Torrens title under Act 496 (now PD 1529). Section 39 of Act 496 provides that a subsequent purchaser for value and in good faith holds the title free from encumbrances not noted on the certificate. The Court cited Snyder v. Provincial Fiscal of Cebu, holding that failure to claim an interest during registration proceedings and have it annotated bars subsequent claims against a clean title. The PNB's failure to annotate its mortgage lien within one year from the issuance of the decree of registration rendered its claim ineffective against subsequent transferees for value and in good faith, such as the Manila Trading Company. On estoppel and laches: The Court rejected PNB's claim of estoppel and laches. Regarding Guillermo Bitanga signing as a witness, the Court distinguished between signing as a witness and signing to give consent or approval, stating that mere witnessing does not bind him to the mortgage's contents without proof of his awareness. The Court also noted that PNB did not rely on Guillermo's signature but on the tax declaration in Rosa Ver's name. The Court found no evidence of reliance or intention to mislead, which are essential elements of estoppel. The notarization by Atty. Rabago, Rosa Ver's son-in-law, was also deemed insufficient to bind the heirs, as his actions as a notary did not necessarily create an attorney-client relationship that would bind the heirs to the mortgage. Pedro Bitanga's offer to buy the property was interpreted as an attempt to avoid litigation, not an admission of PNB's absolute ownership, especially since he explicitly stated that the bank's rights were limited to his mother's and brother's shares. The Court applied the principle that mere lapse of time cannot validate void contracts, citing Angeles v. Court of Appeals. On the intervenors' acquisition: The Court found the intervenors' acquisition of the other half portion to be valid. This was based on the ruling that the PNB's mortgage was only valid for Rosa Ver's share. The intervenors, as successors-in-interest of Manila Trading Company (MTC), acquired rights from MTC, which was a purchaser for value and in good faith. MTC's acquisition occurred after the decree of registration and before the annotation of the sale in its favor, and importantly, the original certificate of title was issued free from any mortgage lien. Therefore, as between PNB and MTC, MTC had better rights. On Felizardo Reyes and the division of shares: The Court noted that Felizardo Reyes, the ultimate buyer from PNB, was found to be a purchaser in bad faith due to a notice of lis pendens annotated on the title. The Court modified the CA's division of shares. It clarified that MTC acquired not only Rosa Ver's share but also Guillermo Bitanga's share (1/5 of the other half). Thus, the intervenors, as successors-in-interest of MTC, were entitled to 6/10 or 3/5 of the entire lot. The remaining 2/5 share was allocated to the Bitanga heirs (Pedro, Fernando, Gregorio, and Clarita).
Main Doctrine
A mortgage executed by a surviving spouse on the entire conjugal property, without the consent of the heirs of the deceased spouse, is valid only with respect to the surviving spouse's share. Failure to annotate a mortgage lien on the original certificate of title within the one-year period after the decree of registration renders the title indefeasible and free from such encumbrance, barring subsequent claims by the mortgagee.