CASE TITLE
:
TIO VS. ABAYATA
CITATION
:
556 SCRA 175 (2008)
TOPIC
:
GROSS INADEQUACY OF PRICE
FACTS: Respondents, who are the successors-in-interest of the late Celedonio Abayata filed an action for annulment of mortgage, mortgage sale, a subsequent sale and certificates of title against petitioners David Sia Tio and Robert Sia Tio and the Commercial Rural Bank of Tabogon (Cebu), Inc. Respondents alleged that through machinations, defendant Benjamin Lasola (Lasola) was able to register the subject property in his name and mortgage it to secure a loan (in the amount of P100,000.00) from the aforesaid Rural Bank. The Rural Bank foreclosed the mortgage and bought the subject property at the extra-judicial sale (at P108,185.34). The Rural Bank then sold the property (for P150,000.00) to petitioners who registered the property in their names. Petitioners and the Rural Bank, on the other hand, answered that that they were innocent purchasers for value and in good faith. The RTC rendered its decision declaring respondents as the absolute owners of the subject property. The lower court also declared as null and void the certificates of title issued to the Tios. On appeal, the Court of Appeals affirmed the lower court’s decision. The Tios elevated the case to the Supreme Court. One of the errors assigned by the Tios is that the lower court erred in concluding that the P100,000.00 loan of Benjamin Lasola from the Bank with a collateral allegedly worth of P800,000.00 excites suspicion, hence, both the Tios and the Rural Bank were guilty of bad faith. ISSUE: Whether or not the Tios and the Rural Bank were guilty of bad faith. HELD: The Supreme Court says No. Mere inadequacy of price is not ipso facto a badge of lack of good faith. To be so, the price must be grossly inadequate or shocking to the conscience such that the mind revolts against it and such that a reasonable man would neither directly nor indirectly be likely to consent to it. While there is an apparent wide disparity in the value of the subject property between 1989 and 1990, undisputed attendant circumstances show the reasonableness of the purchase price of the sale between Lasola and the Rural Bank. It must be stressed that the property was mortgaged by Lasola to the Rural Bank for P100,000.00. It wa s bought by the Rural Bank at the extra-judicial sale of P108,185.34. Also, the Certificate Authorizing Registration issued by the Bureau of Internal Revenue to petitioners shows that the prevailing fair market value of the property in 1989 was P85,260.00. All these show that the pr ice in the amou nt of P150,000.00 paid by petitioners for the purchase of the property was within reasonable bounds.
CASE TITLE
:
SANTIAGO VS. CA
CITATION
:
247 SCRA 336 (1995)
TOPIC
:
OBLIGATION TO INVESTIGATE OR TO FOLLOW LEADS
FACTS: Evelyn
Mercado
and
her
brothers
and
sisters
are
the
owners
of
the
subject property. They first sold the subject property to the petitioner spouses who were able to secure a new certificate of title over the same. However, Mercado and her brothers and sisters again sold the same parcel of land to respondent Aquilino Arevalo. Arevalo did not attempt to register the sale. Later, however, Arevalo executed an affidavit of adverse claim over the subject property and register the same with the Register of Deeds. Arevalo then filed an action before the trial court for specific performance in order to cancel the title over the subject property which was issued to petitioner spouses. The trial court ruled in favor of Arevalo while the appellate court affirmed said lower court’s decision. ISSUE: Whether or not respondent Aquilino Arevalo has superior right over the subject property. HELD: The Supreme Court says NO. It bears repeated emphasis that the vendors did not disturb the peaceful possession and full over the lot. Not only did petitioners buy the
ownership of petitioners lot ahead of respondent
Arevalo but they also took possession of the property and have remained in possession up to the present time. They had their deed of sale registered. They now are the title holders of the property. It is inconceivable how a second buyer who never asked to look, much more to take possession of the title of his alleged vendors and who never registered his deed of sale and never entered into possession of the property should be declared owner. The disputed
lot
was
adjacent
to
another
lot
which
petitioners
had
previously
purchased from the same vendors only two and a half months before they paid the earnest money on the second lot. Obviously, petitioners wanted the two adjacent lots to form one integrated whole. If the second buyer in a double sale of real property does not insist in obtaining possession of the owner's copy of the Torrens title, does not inspect the property in the absence of said copy to ascertain who is in possession, and does not try to have the deed of sale registered until after he learns that there was a buyer of the same lot ahead of him, his rights cannot prevail over the first buyer who did all these things. The records show that petitioners are the first buyers of the disputed land. They are the only party to obtain and take hold of the owner's copy of the Torrens title. They are the only party to thereupon take possession of the property. They are the only registrants of the sale for which they have been issued a certificate of title in their names. All these circumstances and acts can only be indicative of good faith. It follows that their title to the land should be upheld and remain undisturbed.
CASE TITLE
:
MARTINEZ VS. COURT OF APPEALS
CITATION
:
358 SCRA 38 (2001)
TOPIC
:
OBLIGATION TO INVESTIGATE OR TO FOLLOW LEADS
FACTS: Petitioner
and
private
respondents
entered
into
an
oral
contract
for
the sale of the subject property. Although petitioner was able to pay in full the purchase price of the subject property, the private respondents did not deliver the Deed of Sale which they promised to petitioner. Petitioner constructed a house over the subject property. Respondents then sold the subject property, with right to repurchase, to respondents Reynaldo and Susan Veneracion
who
never
took
actual
possession
of
the
subject
property.
Petitioner discovered that the subject proerty had been sold to the spouses Veneracion after receiving a letter from private respondent Reynaldo Veneracion, claiming ownership of the land and demanding that they vacate the property and remove their improvements thereon. Petitioner, in turn, demanded through counsel the execution of the deed of sale from private respondents De la Paz and informed Reynaldo Veneracion that he was the owner of the property as he had previously purchased the same from private respondents De la Paz. The
matter
regarding
the
subject
property
was
referred
to
the
Katarungang Pambarangay but the parties failed to reach an agreement. Respondent Reynaldo Veneracion brought an action for ejectment in the Municipal Trial Court handpetitioner caused
against petitioner and his mother. On the other a notice of lis pendens to be recorded on the
certificate of title covering the subject property. The MTC ruled in favor of petitioner, declaring the latter as the rightful possessor of the subject property. On appeal to the RTC, private respondents Veneracion were declared as the true owners of the subject lot by virtue of their prior registration with the Register of Deeds. The Court of Appeals upheld the trial court’s decision in declaring the Veneracions to be owners of the lot. ISSUE: Whether
or
not
private
respondents
Veneracion
are
purchasers
in
good
faith. HELD: The Supreme Court says NO. With regard to the second sale, which is the true contract of sale between the parties, it should be noted that this Court in several cases, has ruled that a purchaser who is aware of facts which should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in good faith. Private respondent Reynaldo himself admitted during the pre-trial conference in the MTC in Civil Case No. 9523 (for ejectment) that petitioner was already in possession of the property in dispute at the time the second Deed of Sale was executed on June 1, 1983 and registered
on
March
4, 1984.
He,
therefore,
knew
that there
were
already
occupants on the property as early as 1981. The fact that there are persons, other than the vendors, in actual possession of the disputed lot should have put private respondents on inquiry as to the nature of petitioner’s right over the property. But he never talked to petitioner to verify the nature of his right. He merely relied on the assurance of private respondent Godofredo De la Paz, who was not even the owner of the lot in question, that he would take care of the matter.
This does not meet the standard of good faith.
CASE TITLE
:
SAMSON VS. COURT OF APPEALS
CITATION
:
238 SCRA 397 (1994)
TOPIC
:
OBLIGATION TO INVESTIGATE OR TO FOLLOW LEADS
FACTS: Private respondent Angel Santos and his store, Santos & Sons, Inc. are the lessees of a commercial unit of a building owned by Susana Realty Corporation. Susana Realty informed Santos that the lease contract will no longer be renewed upon expiration. Petitioner Manolo Samson, on the other hand, offered to buy the store from Santos and to lease the subject premises and said offer was accepted by Santos. Samson tendered a down payment and both he and Santos agreed that the balance shall be paid upon renewal of the lease contract between Santos and Susana Realty. Santos however, failed to renew his lease over the premises and so Susana realty demanded that the store vacate the leased premises. Consequently,
petitioner
Samson
then
filed
an
action
for
damages
against private respondent. Petitioner claimed that he was defrauded by respondent Samson who misrepresented himself so as to induce petitioner in purchasing the store and the leasehold right of private respondent. The trial court rendered its judgment in favour of Samson. On appeal to the
CA,
the
appellate
court
modified
the
trial
court’s
decisions
after
it
found that the Santos did not exercise fraud or bad faith in its dealings with petitioner. Samson elevated the case to the Supreme Court. ISSUE: Whether or not Samson was correct in imputing bad faith on the part of Santos. HELD: The Supreme Court says NO. Indeed, petitioner had every opportunity to verify the status of the lease contract of private respondent with Susana Realty. As held by this Court in the case of Caram, Jr. v. Laureta, the rule caveat emptor requires the purchaser to be aware of the supposed title of the vendor and he who buys without checking the vendor's title takes all the risks and losses consequent to such failure. In the case at bench, the means of verifying for himself the status of private respondent's lease contract with Susana Realty was open to petitioner. Nonetheless, no effort was exerted by petitioner to confirm the status of the subject lease right.
He cannot now claim that he has been deceived.
CASE TITLE
:
EAGLE REALTY CORP. VS. REPUBLIC
CITATION
:
557 SCRA 77, 94 (2008)
TOPIC
:
OBLIGATION TO INVESTIGATE OR TO FOLLOW LEADS
FACTS: Petitioner Eagle Realty, a company engaged in the real estate business, bought a parcel of land from Pilarita Reyes in 1984 via a Deed of Sale. Reyes, in turn, acquired the land from one Martina Medina who earlier acquired the said land by surreptitiously entering a false record in the records of the Land Registration Commission. Eagle Realty was able to secure a TCT over the subject parcel of land. Eventually, the true owners of the said land, the de Leons, discovered the fraudulent title which was issued to Medina over the same parcel of land. The De Leons were able to have the said title annulled as well as the TCT issued to Eagle Realty by virtue of the Deed of Sale. ISSUE: Whether or not Petitioner Eagle Realty is a purchaser in good faith. HELD: The Supreme Court says NO. Indeed, the general rule is that a purchaser may rely on what appears on the face of a certificate of title. He may be considered a purchaser in good faith even if he simply examines the latest certificate of title. An exception to this rule is when there exist important facts that would create suspicion in an otherwise reasonable man (and spur him) to go beyond the present title and to investigate those that preceded it. The presence of anything which excites or arouses su spicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor as appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith, hence, does not merit the protection of the law. Petitioner
is
a
corporation
engaged
in
the
real
estate
business.
A
corporation engaged in the buying and selling of real estate is expected to exercise a higher standard of care and diligence in ascertaining the status and condition of the property subject of its business transaction. Similar to investment and financing corporations, it cannot simply rely on an examination of a Torrens certificate to determine what the subject property, looks like as its condition is not apparent in the document. Petitioner’s
claim
against
the
Assurance
Fund
must
necessarily
fail.
Its situation does not come within the ambit of the cases protected by the Assurance Fund. It was not deprived of land in consequence of bringing it under the operation of the Torrens system through fraud or in consequence of any error, omission, mistake or misdescription in the certificate of title It was simply a victim of unscrupulous individuals. More importantly, it is a condition sine
qua
non that
the
person
who
brings
the
action
for
damages
against the Assurance Fund be the registered owner and, as the holders of transfer certificates of title, that they be innocent purchasers in good faith and for value. And we have already established that petitioner does not qualify as such.
CASE TITLE
:
HEIRS OF RAMON DURANO, SR. VS. UY
CITATION
:
344 SCRA 238 (2000)
TOPIC
:
LAND IN ADVERSE POSSESSION
FACTS: The
late
Congressman
Ramon
Durano,
Sr.
and
his
spouse
Elizabeth
Hotchkiss Durano filed an action for damages before the trial against the respondent. It appears that Durano claims ownership over a 128 hectare parcel of land situated in Danao City which the former allegedly had bought from Cebu Portland Cement Co. officiated a hate campaign
Durano alleged that the private respondents against him and his spouse, depicting them as
usurpers, land grabbers, oppressors, etc. On owners
the
of
hand,
the
land
Uy
and
which
the they
other
respondents
acquire
by
way
of
assert
that
they
inheritance.
are
the
Respondents
maintained that the y were unaware of anyone claiming adverse possession or ownership over the subject parcel of land until the bulldozing operations led by Durano. The
trial
court
rendered
its
decision
in
favour
of
the
respondents,
ordering the Duranos to indemnify said respondents for their destroyed properties during the demolition operation. The Court of Appeals, on appeal, affirmed the trial court’s decision. ISSUE: Whether or not the Duranos are purchasers in good faith. HELD: The Supreme Court says NO. A purchaser of a parcel of land cannot close his eyes to facts which should put a reasonable man upon his guard, such as when the property subject of the purchase is in the possession of persons other than the seller. A buyer who could not have failed to know or discover that the land sold to him was in the adverse possession of another is a buyer in bad faith. In the herein case, respondents were in open possession and occupancy of the properties when Durano & Co. supposedly purchased the same from Cepoc. Petitioners made no attempt to investigate the nature of respondents’ possession before they ordered demolition in August 1970.
CASE TITLE
:
KINGS PROPERTIES CORP. VS. GALIDO
CITATION
:
606 SCRA 137 (2009)
TOPIC
:
EXISTENCE OF LIS PENDENS
FACTS: Respondent
Canuto
A.
Galido
executed
a
deed
of
sale
with
the
late
Rufina Eniceo and Maria Eniceo over the subject property. The certificate of title covering the subject property was delivered to Galido. On the hand the Eniceo heirs, filed a petition for the issuance of a new certificate of title over the subject property. A new certificate of title was issued to the Eniceo heirs. The Eniceo then sold the subject property to petitioner Kings Properties Corp. and a new certificate of title was issued to the latter. When Galido found out that a new certificate of title was issued to the Eniceo heirs, he filed a criminal case against them for false testimony. Respondent also filed a civil complaint with the trial court against the Eniceo heirs and petitioner. The trial court ruled against Galido, declaring that the latter slept on his rights. On appeal to the CA, the appellate court held that respondent is not guilty of laches. ISSUE: Whether or not respondent Galido is guilty of laches. HELD: The
Supreme
Court
says
NO.
Petitioner
contends
that
respondent
is
guilty of laches because he slept on his rights by failing to register the sale of the Antipolo property at the earliest possible time. Petitioner claims that despite respondent’s knowledge of the subsequent sale in 1991, respondent still failed to have the deed of sale registered with the registry of deeds.
and
The essence of laches is the failure or neglect, for an unreasonable unexplained length of time, to do that which, through due diligence,
could have been done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it. Respondent
discovered
in
1991
that
a
new
owner’s
copy
of
OCT
No.
535 was issued to the Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of an adverse claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent’s actions negate petitioner’s argument that respondent is guilty of laches. True, unrecorded sales of land brought under Presidential Decree No. 1529 or the Property Registration Decree (PD 1529) are effective between and binding only upon the immediate parties. The registration required in Section 51 of PD 1529 is intended to protect innocent third persons, that is, persons who, without knowledge of the sale and in good faith, acquire rights to the property.
Petitioner, however, is not an innocent purchaser for value.
CASE TITLE
:
PO LAM VS. COURT OF APPEALS
CITATION
:
316 SCRA 721 (1999)AND 347 SCRA 86 (2000)
TOPIC
:
EXISTENCE OF LIS PENDENS
FACTS: Lim Kok Chiong sold to the Legaspi Avenue Hardware Company two parcels of
commercial
lots.
Lim
Kok
Chiong’s
brother,
Felix
Lim,
filed
an
action
before trial court, in order to seek the annulment of the sale on the ground that it included his inherited 3/14 portion. Felix caused the annotation of a notice of lis pendens on titles covering the two lots. Upon motion of Felix, the case against Lim Kok Chiong was dropped. The trial court also ordered the cancellation of the annotation of the notice of lis pendens on the titles. The annotation of the notice of lis pendens on one of the titles was cancelled but the other one remain because LAHCO mortgaged the lot covered by the said title with the bank. Felix Lim appealed to the Court of Appeals but the appellate court affirmed the ruling of the trial court and ordered the cancellation of the other TCT. On the other hand, Legazpi Avenue Hardware sold the lots to the spouses Po Lam, which they later leased to Jose Lee. Felix then impleaded the spoused Po Lam in the continuing civil case between him and his brother. After the expiration of his lease, Jose Lee refused to pay Po Lam and instead said he would deposit the payment to Felix. The Po Lam spouses filed an action with the trial court in Legazpi, which declared them the lawful owners of the lots. The RTC and CA sustained, but the SC through Justice Purisima reversed stating that the Po Lam spouses were vendees in bad faith because they knew of the notice of lis pendence annotated on the TCTs. ISSUE: Whether or not petitioners Po Lam spouses are purchasers in bad faith. HELD: The Supreme Court says YES. It is a firmly settled jurisprudence that a purchaser cannot close his eyes to facts which should put a reasonable man on guard and claim that he acted in good faith in the belief that there was no defect in the title of the vendor. His mere refusal to believe that such a defect exist, or his willful closing of his eyes to the possibility of the existence
of
a
defect
in
his
vendor’s
title,
will
not
purchaser for value, if it develops afterwards that
make
him
innocent
the title was in fact
defective, and it appears that he had notice of such defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. In the case under consideration, there exist circumstances which should have placed the herein petitioners on guard. As aptly stressed upon by the respondent court, while it is true that when the petitioners purchased Lot 1557,
the
notice
of lis pendens affecting
said
lot
had
been
cancelled,
it
could not be denied that such inscription appears on the Transfer Certificate of Title of the said lot together with the cancellation of the notice of lis pendens.
This
fact
coupled
with
the
non-canc ellation
of
the
notice
of lis pendens on Transfer Certificate of Title No. 2581 covering Lot 1558, should have sufficiently alerted the petitioners vis-a-vis a possible defect in
the
title
of
LACHO,
especially
so
that
Lots
1557
and
1558
were
simultaneously sold to the petitioners in a single deed of sale executed on May 28, 1969. Then too, considering that Lots 1557 and 1558 are prime commercial lots at the heart of the commercial district of Legaspi City, it is unbelievable
that
the
petitioners
who
were
assisted
in
purchasing
the
lots
by
Atty.
Rodolfo Madrid (who during his time was a well-known lawyer of competence in the Province of Albay) would have released the purchase price of 700,000.00 without inquiring into the status of the subject lots. Verily, spouses Roy Po Lam and Josefa Ong Po Lam willfully closed their eyes to the possibility The petitioners, very much aware of the pending litigation affecting the lots under controversy, gambled on of a defect in the vendor’s (LACHO) title.
the outcome of the litigation. Consequently, they cannot now be permitted to evade the outcome of the risk they assumed. Premises studiedly considered, the Court is of the ineluctable conclusion, and so holds, that the petitioners, Roy Po Lam and Josefa Ong Po Lam, are
transferees pendente lite and therefor e, not
the resolution of the Court of Appeals.
purchasers in
good by
CASE TITLE
:
TAN VS. BENOLIRAO
CITATION
:
604 SCRA 36 (2009)
TOPIC
:
ANNOTATION OF LIEN IN SETTLEMENT OF ESTATE
FACTS: Respondent Spouses Lamberto and Erlinda Benolirao, together with Spouses Reynaldo and Norma Taningco executed a Deed of Conditional Sale over the subject property in favor of petitioner Delfin Tan. A new title was issued to the subject property after Lamberto Benolirao died and his heirs executed a deed of extrajudicial settlement over said property. An annotation was made on the new title pertaining to the rights of the creditors of the some of the heirs. As a consequence, Tan refused to pay the balance of the purchase price despite repeated demands from the sellers, alleging that the annotation on the title renders the respondents unable in delivering to him a clean title over the subject property. Tan demanded for the return of his down payment but the sellers refused. Tan then filed a complaint for specific performance against the sellers, praying for the refund of the down payment and the rescission of the contract. Pending litigation of the complaint, Tan caused the annotat ion on the title of a notice of lis pendens. While the case of Tan was pending before the trial court, the respondents executed a Deed of Absolute Sale over the property in favor of Hector de Guzman. Respondents sought from the trial court the cancellation of the notice of lis pendens made by Tan. Respondent’s motion to cancel the lis pendens annotation on the title was granted by the trial court. De Guzman registered the subject property in his name and a new TCT was issued to him. Tan, on the hand, filed a motion to carry over the lisp endings annotation to the TCT issued to de Guzman but the trial court denied the motion. In
deciding
respondent’s
the
forfeiture
complaint of
Tan’s
filed down
by
Tan,
payment
the
was
trial
proper.
court On
ruled
appeal,
that
the
CA
affirmed the ruling of the trial court. ISSUE: Whether or not Tan is entitled to a refund of his down payment. HELD: The Supreme Court says YES. An annotation is placed on new certificates of issued pursuant to the distribution and partition of a decedent’s real properties to warn third persons on the possible interests of excluded heirs or title
unpaid creditors in these properties. The annotation, therefore, creates a legal encumbrance or lien on the real property in favour of the excluded heirs or creditors. Where a buyer purchases the real property despite the annotation, he must be ready for the possibility that the title could be subject to the rights of excluded parties. The cancellation of the sale would be the logical consequence where: (a) the annotation clearly appears on the title, warning all would-be buyers; (b) the sale unlawfully interferes with the rights of heirs; and (c) the rightful heirs bring an action to question the transfer within the two-year period provided by law. By the time Tan’s obligation to pay the balance of the purchase price arose
on May 21, 1993 (on account of the extensions granted by the respondents), a new certificate of title covering the property had already been issued on March 26, 1993, which contained the encumbrance on the property; the encumbrance would remain so attached until the expiration of the two-year period. Clearly, at this time, the vendors could no longer compel Tan to pay the balance of the purchase since considering they themselves could not fulfil their obligation to transfer a clean title over the property to Tan.
CASE TITLE
:
LUZON DEV. BANK VS. ENRIQUEZ
CITATION
:
639 SCRA 332 (2011)
TOPIC
:
BANKS ARE VESTED WITH PUBLIC INTEREST AND OBLIGATION TO EXERCISE EXTRAORDINARY DILIGENCE
FACTS: Luzon Development Bank is a domestic financial corporation that extends loans to subdivision developers/owners. Petitioner DELTA is a domestic corporation engaged in the business of developing and selling real estate properties. DELTA is owned by Ricardo De Leon who is the registered owner of the subject property. De Leon and his spouse executed a Deed of Real Estate of Mortgage in favour of Luzon Development Bank using the subject property as one of the securities. The mortgage was annotated on TCT of the subject property. DELTA defaulted on its loan obligation and the bank instead of foreclosing the mortgage, agreed to a dation in payment. The dation payment, however was not annotated on the TCT of the subject property.
in
Subsequently, DELTA, after obtaining a license to sell from the HLURB, executed a Contract to Sell with respondent Angeles Catherine Enriquez over the subject property. It was unknown to Enriquez that the subject property was among the properties assigned to petitioner bank. Aggrieved, Enriquez filed a complaint against DELTA and the Bank before the Regional Office of the HLURB. Enriquez alleged that DELTA violated the terms of its license to cell by selling the house and lots for a price exceeding that prescribed in Batas Pambansa (BP) Bilang 220 and (b) for failing to get a clearance for the mortgage from the HLURB. she paid to DELTA.
Enriquez also sought a full refund of the amount
The HLURB Arbiter upheld the validity of the purchase price but ordered DELTA to accept payment and to deliver upon such payment to Enriquez the title to the house and lot. On appeal to the HLURB, the Board held that DELTA violated the legal requirement that all developers should obtain a clearance for mortgage from the HLURB, regardless of the date when the mortgage was secured, because the law does not distinguish. The Board also upheld the validity of the contract to sell between DELTA and Enriquez. On appeal to the Office of the President, the OP affirmed in toto the HLURB Decisions.
Only
the BANK appealed the OP’s Decision to the CA. The BANK reiterated that DELTA
can no longer deliver Lot 4 to Enriquez because DELTA had sold the same to the BANK by virtue of the dacion en pago. The CA, however, ruled against the validity of the dacion en pago executed in favor of th e BANK on the ground that DELTA had earlie r relinquished its ownershi p over Lot 4 in favor of Enriquez via the Contract to Sell. Hence, these separate petitions of the BANK and DELTA. ISSUE: Whether or not Luzon Developoment Bank is a purchaser in good faith. HELD: The Supreme Court says NO. As an entity engaged in the banking business, the BANK is required to observe more care and prudence when dealing with registered properties. The Court cannot accept unaware of the Contract to Sell existing in favor of
that the Enriquez.
BANK was In Keppel
Bank Philippines, Inc. v. Adao, we held that a bank dealing with a property that is already subject of a contract to sell and is protected by the provisions of PD 957, is bound by the contract to sell (even if the contract to sell in that case was not registered).
In the Court’s words:
“It
registered certificate
is
true
that
persons
dealing
with
property can rely solely on the of title and need not go beyond
it. However, x x x, this rule does not apply to banks. Banks are required to exercise more care and prudence than private individuals in dealing even with registered properties for their business is affected with public interest. As its business, petitioner should have
master of sent its
representatives
properties
to
check
the
assigned
before signing the compromise agreement and it would have discovered that respondent was already occupying one of the condominium units and that a contract to sell existed between [the vendee] and [the developer]. In our view, petitioner was not a purchaser in good faith and we are constrained to rule that petitioner is bound by the contract to sell.” Bound by the terms of the Contract to Sell, the BANK is obliged to respect the same and honor the payments already made by Enriquez for the purchase price of Lot 4. Thus, the BANK can only collect the balance of the purchase price from Enriquez and has the obligation, upon full payment, to deliver to Enriquez a clean title over the subject property.
CASE TITLE
:
NAAWAN COMMUNITY RURAL BANK VS. COURT OF APPEALS
CITATION
:
395 SCRA 43 (2011)
TOPIC
:
WHEN SUBJECT IS UNREGIST ERED LAND
FACTS: Petitioner Naawan Community Rural Bank, Inc. instituted an action for ejectment against one Guillermo Comayas before the MTCC of Cagayan de Oro City over a parcel of land registered in the name of Comayas and situated in the said City. It appears that Comayas mortgaged said parcel of land to petitioner bank but was not able to redeem it so the mortgaged foreclosed. At the time of the mortgage, the subject property was
was not
registered
the
under
the
Torrens
System.
The
MTCC
decided
in
favour
of
petitioner bank. On appeal, the Regional Trial Court affirmed the decision of the MTCC. The Regional execution of
Trial Court issued an order for the issuance of a writ of its judgment. The MTCC, being the court of origin, promptly
issued said writ. However, when the writ was served, the property was no longer occupied by Comayas but by private respondents, spouses Alfredo and Annabelle Lumo. It appears that Comayas sold the property to the respondentspouses who were able to secure a transfer of certificate of title over the same in their name. The property was already registered under the Torrens System in the name of Comayas at the time he sold the same to respondentspouses. Alarmed
by
the
prospect
of
being
ejected
from
their
home,
private
respondents filed an action for quieting of before the Regional Trial Court of Cagayan de Oro City. The RTC rendered a decision declaring private respondents as purchasers fo r value and in good faith, and consequently declaring them as the absolute owners and possessors of the subject house and lot. Petitioner appealed to the Court of Appeals which in turn affirmed the trial court’s decision. Petitioner elevated the case to the Supreme Court. One of the petitioner’s contentions is that that the earlier registration of the sheriff’s deed of final conveyance in the day book under Act 3344 should prevail over the later registration of private respondents’ deed of absolute sale under Act 496,[4] as amended by the Property Registration Decree, PD 1529. ISSUE: Whether or not petitioner is correct in its contention. HELD: The Supreme Court says NO. Petitioner bank’s contention has no leg to stand on. It has been held that, where a person claims to have superior proprietary rights over another on the ground that he derived his title from a sheriff’s sale registered in the Registry of Property, Article 1473 (now Article 1544) of the Civil Code will apply only if said execution sale of real estate is registered under Act 496. Unfortunately, the subject property was still untitled when it was acquired by petitioner bank by virtue of a final deed of conveyance. On the other hand, when private respondents purchased the same property, it was already covered by the Torrens System. Thus, from April 17, 1984, the subject property was already under the operation of the Torrens System. Under the said system, registration is the operative act that gives validity to the transfer or creates a lien upon the land.
CASE TITLE
:
ABRIGO VS. DE VERA
CITATION
:
432 SCRA 544 (2004)
TOPIC
:
WHEN SUBJECT IS UNREGIST ERED LAND
FACTS: Gloria Villafania sold to Rosenda Tigno-Salazar and Rosita Cave-Go a house and lot that which were covered by a Tax Declaration. Rosenda TignoSalazar and Rosita Cave-Go later sold the house and lot to Petitioner-Spouses Noel and Julie Abrigo. Unknown to Rosenda Tigno-Salazar and Rosita Cave-Go, Gloria Villafania was able to obtain a free patent over the same lot. Villafania then sold the same house and lot to respondent Romana De Vera. De Vera sought to eject petitioner spouses from the subject property. Petitioner spouses in turn filed a case before the RTC for the annulment of documents against respondent De Vera and Gloria Villafania. The trial court ruled in favour of petitioner spouses. On appeal to the CA, the appeal of De Vera was initially dismissed but upon reconsideration, the appellate court found De Vera as a purchaser in good faith and for value since she relied on the Torrens title of her vendor and must thus be protected. ISSUE: Whether or not respondent De Vera has a better right over the subject property. HELD: The Supreme Court says YES. Applying the case of Carumba vs. Court of Appeals, the Supreme Court held that Article 1544 of the Civil Code has no application to land not registered under Act No. 496. Like in the case at bar, Carumba dealt with a double sale of the same unregistered land. The first sale was made by the original owners and was unrecorded while the second was an execution sale that resulted from a complaint for a sum of money filed against the said original owners. Applying [Section 33], Rule 39 of the Revised Rules of Court, the Supreme Court held that Article 15 44 of the Civil Code cannot be invoked to benefit the purchaser at the execution sale though the latter was a buyer in good faith and even if this second sale was registered. It was explained that this is because the purchaser of unregistered land at a sheriff’s execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter’s interest in the property sold as of the time the property was levied upon. “Applying this principle, x x x the execution sale of unregistered land in favor of petitioner is of no effect because the land no longer belonged to the judgment debtor as of the time of the said execution sale.”
Petitioners cannot validly argue that they were fraudulently misled into beli eving that the property was unregistered . A Torrens title, once registered, serves as a notice to the whole worl d. All persons must take notice, and no one can plead ignorance of the registration.
CASE TITLE
:
DAGUPAN TRADING CO. VS. MACAM
CITATION
:
14 SCRA 179 (1965)
TOPIC
:
WHEN SUBJECT IS UNREGIST ERED LAND
FACTS: Petitioner Dagupan Trading Co. filed an action before the CFI of Pangasinan against respondent Rustico Macam, praying that it be declared owner of one-eighth portion share of the subject property. It appears that petitioner bought the entire portion of the subject property from Manila Trading and Supply Company, which in turn bought the subject property at a public action. Subject property was levied upon in view of the a final judgment made by the Municipal Court of Manila against one Sammy Maron who, together with his brothers and sisters originally owned the subject property and each one of them has a one-eight portion share over the same. Respondent Macam on the other hand answered that that Sammy Maron's share in the subject property, as well as that of all his co-heirs, had been acquired by purchase by appellee before the issuance of the original certificate of title in their name; that at the time the levy in execution was made on Sammy Maron's share therein, the latter had no longer any right or interest in said property; that appellant and its predecessor in interest were cognizant of the facts already mentioned; that since the sales made in his favor, he had enjoyed uninterrupted possession of the property and introduced considerable improvements thereon. After trial upon the issue thus joined, the court rendered judgment dismissing the complaint, which, on appeal, was affirmed by the Court of Appeals. ISSUE: Whether or not subject property.
respondent
Rustico
Macam
has
a
better
right
over
the
HELD: The Supreme Court says YES. The Supreme Court applied the provision of paragraph of Section 35, Rule 39 of the Rules of Court, to the effect that upon the execution and delivery of the final certificate of sale in favor of the purchaser of land sold in an execution sale, such purchaser "shall be substituted to and acquire all the right, title, interest and claim of the judgment debtor to the property as of the time of the levy. The Supreme Court held that that at the time of the levy, Sammy Maron no longer has interest and claim over the one-eight portion of the property because for a considerable time prior to the levy, his interest had already been conveyed to respondent Macam, "fully and retrievably — as the Court of Appeals held. Consequently, subsequent levy made on the property for the purpose of satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading Company was void and of no effect. Needless to say, the unregistered sale and the consequent conveyance of title and ownership in favor of Rustico Macam could not have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the entire parcel of land. But to the above considerations must be added the important circumstance that, as already stated before, upon the execution of the deed of sale in his favor by Sammy Maron, Rustico Macam took possession of the land conveyed as owner thereof, and introduced considerable improvements thereon. To deprive him now of the same by sheer force of technicality would be against both justice and equity.
CASE TITLE
:
CARUMBA VS. COURT OF APPEALS
CITATION
:
31 SCRA 558 (1970)
TOPIC
:
WHEN SUBJECT IS UNREGIST ERED LAND
FACTS: Spouses
Amado
Canuto
and
Nemesio
Ibasco
sold
to
petitioner
Amado
Carumba and his spouse the subject parcel of land. Not only was the deed of sale never registered in the Register of Deeds but the person who notarized said instrument was not an authorized notary public. However, Carumba immediately took possession of the subject property the deed of sale.
after the execution of
Respondent Santiago Balbuena on the other hand, filed a case for collection of sum of money against Amado Canuto and Nemesia Ibasco. Judgment in said case was rendered in favour of Balbuena and the subject property was sold to him. The instrument was registered in the Register of Deeds. The CFI held that execution levy over the subject property is void and hence, Carumba was the owner of the subject property in holding. The Court of Appeals, however, held that there was a double sale of the subject property and
ruled
that
Balbuena’s
title
over
said
property
is
superior
to
that
of
Carumba’s. The appellate court held that Article 1544 of the Civil Code of
the Philippines is applicable to the present case, since the execution sale had been properly registered in good faith and the sale to Carumba was not recorded. ISSUE: Whether or not respondent Balbuena has a better right over the subject property. HELD: The Supreme Court says NO. While under the invoked Article 1544 registration in good faith prevails over possession in the event of a double sale by the vendor of the same piece of land to different vendees, said article is of no application to the case at bar, even if Balbuena, the later vendee, was ignorant of the prior sale made by his judgment debtor in favor of petitioner Carumba. The reason is that the purchaser of unregistered land at a sheriff's execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon. This is specifically provided by paragraph 2, section 35 of Rule 39 of the Revised Rules of Court. While the time of the levy does not clearly appear, it could not have been made prior to 15 April 1957, when the decision against the former owners of the land was rendered in favor of Balbuena. But the deed of sale in favor of Canuto had been executed two years before, on 12 April 1955, and while only embodied in a private document, the same, coupled with the fact that the buyer (petitioner Carumba) had taken possession of the unregistered land sold, sufficed to vest ownership on the said buyer. When the levy was made by the Sheriff, therefore, the judgment debtor no longer had dominical interest nor any real right over the land that could pass to the purchaser at the execution sale. Hence, the latter must yield the land to petitioner Carumba. The rule is different in case of lands covered by Torrens titles, where the prior sale is neither recorded nor known to the execution purchaser prior to the levy; but the land here in questio n is admittedly no t registered under Act No. 496.
CASE TITLE
:
ACABAL VS. ACABAL
CITATION
:
454 SCRA 555 (2005)
TOPIC
:
WHEN SUBJECT IS UNREGIST ERED LAND
FACTS: Alejandro Acabal and Felicidad Balasbas executed a Deed of Absolute Sale over a parcel of land in favor of their son, respondent Villaner Acabal (Villaner). Villaner was then married to Justiniana Lipajan. When he became a widower, he executed a deed conveying the same parcel of land in favor of petitioner Leonard o Acabal (Leonardo). However, Villaner later claims that the document he signed was a document captioned Lease Contract wherein he leased for the property for 3 years to Leonardo. Villaner filed a complaint with the Regional Trial Court (RTC) against Leonardo and Ramon Nicolas to whom Leonardo in turn conveyed the property for annulment of the deeds of sale. The RTC ruled in favor of Acabal and dismissed the complaint. The Court of Appeals (CA) however reversed the decision of RTC and held that the Deed of Absolute Sale executed by Villaner in favor of Leonardo was simulated and fictitious. ISSUE: Whether or not petitioner Acabal has a better right over the subject property. HELD: The Supreme Court says YES. The Supreme Court held that it ruling the previous case of Cruz vs. Leis is not applicable to the case at bar. In the case the SC Held: It is conceded that, as a rule, a co-owner such as Gertrudes could only dispose of her share in the property owned in common. Article 493 of the Civil Code provides: x
x
x
Unfortunately for private respondents, however, the property was registered in TCT No. 43100 solely in the name of “Gertrudes Isidro, widow.” Where a parcel of land, forming part of the undistributed properties of the dissolved conjugal partnership of gains, is sold by a widow to a purchaser who merely relied on the face of the certificate of title thereto, issued solely in the name of the widow, the purchaser acquires a valid title to the land even as against the heirs of the deceased spouse. The rationale for this rule is that “a person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property which are noted on the face of the register or the certificate of title. To require him to do more is to defeat one of the primary objects of the Torrens system.”
The Cruz case, however, is not applicable for the simple reason that in the case at bar the property in dispute is unregistered. The issue of good faith or bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where the property is an unregistered land. One who purchases an unregistered land does so at his peril. Nicolas’ claim of having bought the land in good faith is thus irrelevant.
CASE TITLE
:
HRS. OF SEVERINA SAN MIGUEL VS. COURT OF APPEALS
CITATION
:
364 SCRA 523 (2001)
TOPIC
:
OBLIGATIONS OF BUYER – PAY THE PRICE
FACTS: Severina San Miguel is the original claimant of the subject parcel of land. Unknown to Severina, respondents Dominador San Miguel, et al. managed to cause the subdivision of the subject parcel of land into three (3) lots. Dominador, et al. were able to secure from the CFI of Cavite a certificate of title over the subject property in their names. Severina sought the review of the CFI decision directing the issuance of a new certificate of title to Dominador, et al., alleging that the land registration proceedings were fraudulently concealed by Dominador San Miguel from her. The CFI resolved to set aside its decision and declared the OCT it issued to Dominador, et al. as null and void. Consequently, the Register of Deeds of Cavite issued a new TCT in the names of Severina and her heirs. Severina’s heirs then prayed for the issuance of a writ of possession over the subject property. The lower court granted the prayer but the writ of possession was returned unsatisfied. A writ of demolition was issued in favour of Severina but the same was not satisfied. Thereafter, Severina’s heirs decided not to pursue the writs of possession
and demolition and entered into a compromise, evidenced by a written Kasunduan, with Dominador, et al. whereby said heirs will sell the subject lots to Dominador, et al. for 1.5 million upon the purchase of another lot which was not yet titled at an additional sum of P300,000.00. Severina’s heirs and Dominador, et al. then executed a deed of sale. Thereafter, Dominador, et al. filed with the trial court a motion praying that Severina’s heirs deliver to them the owner’s copy of the Certificate of Title of the subject property. Severina’s heirs opposed the motion on the ground that the payment of P300,000.00 was not complied with. Dominador, et al. admitted nonpayment but for the reason that Severina’s heirs did not present to them any proof of ownership over the untitled parcel of land, which appears to be declared in the name of a third party named Emiliano Eugenio. Severina’s heirs countered that Dominador, et al. admitted in the Kasunduan the former’s ownership over the untitled parcel of land, dispesing with the requirement that Severina’s heirs produce actual proof of title over it. The trial court issued an order for Severina’s heirs to surrender the TCT of the subject property to Dominador, et al. Severina’s heirs appealed the case to the Court of Appeals which, however, affirmed the trial court’s decision.
ISSUE: Whether or not the delivery of the Certificate property to respondents Dominador, et al. is proper.
of
title
of
the
subject
HELD: The Supreme Court says YES. Severina’s heirs insist that delivery of the certificate of title is predicated on a condition - payment of three hundred thousand pesos (P300,000.00) to cover the sale of Lot 3 of LRO Psu 1312. The Supreme Court found the foregoing argument to be not meritorious. The condition cannot be honored for reasons afore-discussed. Article 1183 of the Civil Code provides that, “Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. xxx”
Hence, the non-payment of the three hundred thousand pesos (P300,000.00) is not a valid justification for refusal to deliver the certificate of title. Besides, the Supreme Court note that the certificate of title which covers Lots 1 and 2 of LRC Psu-1313, were fully paid for by Dominador, et al. Therefore, Severina’s heirs are bound to deliver the certificate of title covering the lots.
CASE TITLE
:
TORCUATOR VS. BERNABE
CITATION
:
459 SCRA 439 (2005)
TOPIC
:
OBLIGATIONS OF BUYER – PAY THE PRICE
FACTS: The subject property of the present case is a parcel of land which was purchased by respondents spouses Diosdado and Lourdes Salvador from developer, Ayala Corporation. The sale was subject to several restrictions imposed by Ayala Corporation. Salvadors later sold the subject property to the spouses Remigio and Gloria Bernabe but in view of the the above-stated restrictions imposed by Ayala Corporation, the Salvadors executed a special power of attorney authorizing the Bernabes to construct a residential house on the lot and to transfer the title of the property in their names. The Bernabes, on the other hand, did not make any improvement and proceeded to sell the subject property to petitioners, Spouses Mario and Elizabeth Torcuator. Due again to the restrictions imposed by Ayala Corporation, the parties agreed to cancel the deed of sale between the Salvadors and Bernabes and a new one was executed by the Salvadors in favor of the Torcuators. A new SPA was executed by the Salvadors for the Torcuators in order for the latter to build a house on the land in question, while an irrevocable SPA was executed by the Salvadors to the Bernabes authorizing the latter to sell, transfer and convey, with power of substitution, the subject property. However, no payment was tendered by the Torcuators to the Bernabes. Subsequently, the Bernabes sold the subject land to a third person, Leonardo Angeles. As a result, the Torcuators commenced the instant action against the Bernabes and Salvadors for Specific Performance or Rescission with Damages. The trial court, however, dismissed the complaint on the ground that no real damage was suffered by the Torcuators. The Torcuators appealed to the Court of Appeals, but the appellate court upheld the trial court’s conclusion and dismissed the appeal. The CA ruled, among others, that the sale between the Bernabes and the Torcuators was tainted with serious irregularities and bad faith. ISSUE: Whether or not the Torcuators are entitled to recission of the contract of sale. HELD: The Supreme Court says NO . Remarkably, the records are bereft of any indication that petitioners ever attempted to tender payment or consign the purchase price as required by law. The Complaint filed by petitioners makes no mention at all of a tender of payment or consignation having been made, much less that petitioners are willing and ready to pay the purchase price. Petitioners’ averments to the effect that they have sufficient funds to pay for the property and have even applied for a telegraphic transfer from their bank account to the Bernabes’ bank account, uncoupled with actual tender and consignation, are utterly self- serving.
The trial court correctly noted that petitioners should have consigned the amount due in court instead of merely sending respondents a letter expressing interest to push through with the transaction. Mere sending of a letter by the vendee expressing the intention to pay without the accompanying payment is not considered a valid tender of payment. Consignation of the amount due in court is essential in order to extinguish the obligation to pay and oblige the vendor to convey title. On this score, even assuming that the agreement was a contract of sale, respondents may not be compelled to deliver the property and execute the deed of absolute sale. In cases such as the one before us, which involve the performance of an obligation and not merely the exercise of a privilege or right, payment may be effected not by mere tender alone but by both tender and consignation. The rule is different in cases which involve an exercise of a right or privilege, such as in an option contract, legal redemption or sale with right to repurchase, wherein mere tender of payment would be sufficient to preserve the right or privilege. Hence, absent a valid tender of payment and consignation, petitioners are deemed to have failed to discharge their obligation to pay.
CASE TITLE
:
MONTECILLO VS. REYNES
CITATION
:
385 SCRA 244 (2002)
TOPIC
:
OBLIGATIONS OF BUYER – PAY THE PRICE
FACTS: Respondents Ignacia Reynes and Spouses Abucay filed a complaint for Declaration of Nullity and Quieting of Title against petitioner Rido Montecillo. Reynes asserted that she is the owner of the subject property, a portion of which he sold to the Abucay Spouses who built a residential house on the lot they bought. Reynes alleged further that she signed a Deed of Sale of the Mabolo Lot in favor of Montecillo. Reynes, being illiterate, signed by affixing her thumb-mark on the document. Montecillo promised to pay the agreed P47,000.00 purchase price within one mo nth from the signing of the Deed of Sale. Reynes and the Abucay Spouses alleged that they later received information that the Register of Deeds of Cebu City issued Certificate of Title No. 90805 in the name of Montecillo for the Mabolo Lot. Reynes and the Abucay Spouses argued that “for lack of consideration Thus, there (was) no meeting of the minds” between Reynes and Montecillo. the trial court should declare null and void ab initio Montecillo’s Deed of Sale, and order the cancellation of Certificate of Title issued in the name of Montecillo. In his Answer, Montecillo, a bank executive with a B.S. Commerce degree claimed he was a buyer in good faith and had actually paid the P47,000.00 consideration stated in his Deed of Sale. The trial court ruled that Montecillo’s Deed of Sale produced no effect whatsoever for want of consideration. Not satisfied with the trial court’s Decision, Montecillo appealed the same to the Court of Appeals. However, the appellate court affirmed the Decision of the trial court in toto and dismissed the appeal on the ground that Montecillo’s Deed of Sale is void for lack of consideration.
ISSUE: Whether
or
not
the
Deed
of
Absolute
Sale
executed
by
Montecillo
is
valid. HELD: The Supreme Court says NO. On its face, Montecillo’s Deed of Absolute Sale appears supported by a valuable consideration. Howev er, based on the evidence presented by both Reynes and Montecillo, the trial court found that Montecillo never paid to Reynes, and Reynes never received from Montecillo, the P47,000.00 purchase price. There was indisputably a total absence of consideration contrary to what is stated in Montecillo’s Deed of Sale.
This is not merely a case of failure to pay the purchase price, as Montecillo claims, which can only amount to a breach of obligation with rescission as the proper remedy. What we have here is a purported contract that lacks a cause - one of the three essential requisites of a valid contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. Where the deed of sale states that the purchase price has been paid but in fact has n ever been paid, the de ed of sale is null and void ab initio for lack of consideration.
CASE TITLE
:
PHILIPPINE TRUST CO. VS. PHILIPPINE NATIONAL BANK
CITATION
:
42 PHIL. 413 (1921)
TOPIC
:
DOCUMENTS OF TITLE – PURPOSE OF DOCUMENTS OF TITLE
FACTS: Salvador Hermanos filed a petition of insolvency in the Court of First Instance of the City of Manila. The petitions states, among others, that several properties and merchandise were pledged in favor of the Philippine National Bank. Gregorio Salvador, a member of the Hermanos firm, deliver certain goods, wares, and merchandise to and in the warehouse of Nieva, Ruiz and Company, and requested that firm to issue its receipt therefor to and in favor of the Philippine National Bank, and that, pursuant to such request, that firm did issue eight quedans, or warehouse receipts, to the bank. The Bank then sold all the personal property surrendered to it by the Hermanos firm and covered by said warehouse receipts, except for the property described in the three warehouse receipts which were earlier surrendered to the firm. Salvador Hermanos was declared insolvent and as a consequence thereof, the Philippine Trust Company was elected assignee of said firm and duly qualified. As such assignee, Philtrust made a demand upon the bank for the surrender and delivery of the property described in all of the above receipts, and, upon the bank's refusal, commenced this action to recover the value of said property. According to Philtrust, after the filing of the insolvency petition by the Hermanos firm, the bank unlawfully seized and converted for its own use. The bank made a general denial of all of the material allegations of the complaint. This presents the question as to who is the owner and entitled to possession of the property. ISSUE: Whether or not the Philippine National property covered by the warehose receipts.
Bank
is
the
owner
of
the
HELD: The Supreme Court says YES. The execution of the notes, the physical possession of the negotiable quedan, or warehouse receipt, and the recognition of ownership by the warehouseman, legally carried with it both the titled to, and the possession of, the property. In such a case, a title is not founded on a public instrument which should be authenticated by a notary or by competent public official. Legally speaking, the execution of the promissory notes and the pledging of the quedans, or warehouse receipts, as collateral, and the describing of them in the notes, and the manual delivery of the quedan, or warehouse receipt itself carries with it not only the title, but the legal possession of the property. In other words, as to the property described in the quedans, or warehouse receipts, which were pledged, as collateral, in January, 1919, to secure the eight respective promissory notes, both the title and the possession of that property were delivered to and vested in the defendant bank in January, 1919. Three of those quedans, or warehouse receipts, were returned to the firm by the bank on February 10, 1919, but the bank still owned and held the notes, which were secured by those warehouse receipts, and no part of the debt itself was paid by or through the surrender of the receipts. For such reason, as to the first cause of action, the plaintiff cannot recover, and, as to it, the judgment of the lower court should be affirmed.
CASE TITLE
:
SIY CONG BIENG VS. HONGKONG & SHANGHAI BANK
CITATION
:
56 PHIL. 598
TOPIC
:
DOCUMENTS OF TITLE – PURPOSE OF DOCUMENTS OF TITLE
FACTS: Plaintiff Siy Cong Bieng demanded from defendant Hongkong & Shanghai Banking Corporation the return of several quedens, or warehouse receipts, or their value, which it issued to one Otto Ranft. Said warehouse receipts cover bales of hemp which Siy Cong Bieng allegedly attempted to sell to Ranft but due to the untimely death of the latter, remained unpaid for. The demand of Siy Cong Bieng was refused by the bank on the ground that it was a holder of the quedans in due course. The trial court rendered judgment in favor of Siy Cong Bieng, and in so doing held that defendant bank did not act in good faith when the latter ordered that the quedans be delivered to the bank in order to secure the debts of Ranft despite the fact that Ranft has not yet paid for the same when endorse to said defendant. ISSUE: Whether or not Hongkong & Shanghai Banking Corporation acquired valid title over the warehouse receipts.
HELD: The Supreme Court says YES. In resolving the present case, the Supreme Court relied, among others, in the case of National Safe Deposit vs. Hibbs (229 U.S., 391), in which certain certificates of stock were pledged as collateral by the defendant in error to the plaintiff bank, which certificates were converted by one of the trusted employees of the bank to his own use and sold by him. The stock certificates were unqualified endorsed in blank by the defendant when delivered to the bank. The Supreme Court of the United States through Justice Day applied the familiar rule of equitable estoppel that where one of two innocent persons must suffer a loss he who by his conduct made the loss possible must bear it, using the following language:
think this case correctly states the “We principle, and, applied to the case in hand, is decisive of it. Here one of two innocent person must suffer and the question at last is, Where shall the loss fall? It is undeniable that the broker obtained the stock certificates, containing all the indicia of ownership and possible of ready transfer, from one who had possession with the bank's consent, and who brought the certificates to him, apparently clothed with the full ownership thereof by all the tests usually applied by business men to gain knowledge upon the subject before making a purchase of such property. On the other hand, the bank, for a legitimate purpose, with confidence in one of its own employees, instrusted the certificates to him, with every evidence of title and transferability upon them. The bank's trusted agent, in gross breach of his duty, whether with technical criminality or not is unimportant, took such certificates, thus authenticated with evidence of title, to one who, in the ordinary course of business, sold them to parties who paid full value for them. In such case we think the principles which underlie equitable estoppel place the loss upon him whose misplaced confidence has made the wrong possible. . . .” The Supreme Court regret that the plaintiff in this case has suffered the loss of t he quedans, but as fa r as it can see, there is now no remedy available to the plaintiff. The bank is not responsible for the loss; the negotiable quedans were duly negotiated to the bank and as far as the record shows, there has been no fraud on the part of the defendant.
