Adriano v.

Pangilinan
FACTS: Adriano is the registered owner of a parcel of land. Sometime on 1990, petitioner
entrusted the original owner's copy of the TCT to Salvador, a distant relative, for the
purpose of securing a mortgage loan. Thereafter without the knowledge and consent of
Adriano, Salvador mortgaged the property to Pangilinan. Subsequently when Adriano
verified the status of his title with the Register of Deeds of Marikina, he was surprised to
discover that there was already annotation for Real Estate Mortgage in the title,
purportedly executed by one Adriano, in favor of Pangilinan, in consideration of
P60,000.00. Adriano then denied that he executed deed and repeatedly demanded
Pangilinan to return or reconvey to him his title to the said property and when these
demands were ignored or disregarded, he instituted the present suit.
Pangilinan, in his defense, claimed that petitioner voluntarily entrusted his title Salvador
for the purpose of securing a loan, thereby creating a principal-agent relationship
between the plaintiff and Salvador for the aforesaid purpose. Thus, according to
respondent, the execution of the REM was within the scope of the authority granted to
Salvador; that in any event that since the said TCT has remained with petitioner, the
latter has no cause of action for reconveyance against him."
The trial court ruled in favor of Adriano, but the CA reversed the said decision.
ISSUE: Whether or not consent is an issue in determining who must bear the loss if a
mortgage contract is sought to be declared a nullity.
RULING: The court ruled in favor of the petitioner, setting aside the decision of the CA,
and reinstating the Ruling of the RTC. The court ruled that the mortgage is null and void,
for being entered into by a person who is not the absolute owner of the thing. The court
also found that the petitioner is a not a purchaser for value, that his negligence is the
proximate cause to the property being registered REM. According to the court the
respondent is a businessman and that while it is true that when dealing with Torrens title
one may rely on the face of the title, the court held that the negligence of the respondent
to ascertain the identity of the imposter is critical that it is due to this mistake that the
property is now encumbered by a REM. The court in granting that the respondent is
negligent finds that if there was any negligence eon the party of Salvador, then such is
inconsequential. The court therefore ruled in favor of the petitioner due to the negligence
of the respondent.
Supplemental Notes:

Art. 2085. The following requisites are essential to the contracts of pledge
and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of
their property, and in the absence thereof, that they be legally authorized for that
purpose.
Third persons who are not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property. (1857)

A Torrens certificate serves as evidence of an indefeasible title to the property in favor

of the person whose name appears therein. Moreover, the Torrens system does not
create or vest title. It only confirms and records title already existing and vested. It
does not protect a usurper from the true owner. It cannot be a shield for the
commission of fraud. It does not permit one to enrich himself at the expense of
another.