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SPS Jalbay vs PNB

The subject property is a 257-square-meter lot at Del-Nacia Ville No. 4, Sauyo Road,
Novaliches, Quezon City registered under the names of the Spouses Jalbay. On June
11, 1988, the TCT covering said property was destroyed when the Office of the
Quezon City Register of Deeds was gutted by fire. Upon reconstitution, the title was
issued in the name of Emiliano Jalbay, married to Mamerta C. Jalbay, and because
the Spouses Jalbay were then working and residing abroad, the title was released to
their daughter, Virginia Agus. Sometime in 1993, Virginia and her husband, Danilo
Agus , applied for a loan with PNB, in order to acquire additional funds for their
garments business operating under the name of VJA Garments. As a security, the
Spouses Agus constituted a real estate mortgage over the subject lot, which they
represented as being owned by siblings Emiliano Jalbay, Jr., and Teresita JalbayCinco. The aforesaid borrowers, however, failed to settle their loan obligation. As a
result, PNB foreclosed the mortgage over the property. It likewise emerged as the
highest bidder at the public auction. Subsequently, during a short vacation in the
country, the Spouses Jalbay learned about the mortgage and foreclosure of their
property. Contending that the real estate mortgage and the proceedings for its
foreclosure were invalid for lack of consent of the real registered owners, the
Spouses Jalbay filed a complaint against PNB before the Quezon City RTC.
On April 3, 2003, the RTC declared the assailed real estate mortgage as null and
void and the foreclosure proceedings without force and effect. Aggrieved, PNB and
the Spouses Agus appealed the case before the CA for the reversal of the RTC
ruling. On November 29, 2006, the appellate court reversed and set aside the
decision of the RTC and ordered the dismissal of the complaint.
The Spouses Jalbay thus filed a Motion for Reconsideration but the same was
ISSUE: WON the RTC was correct in finding that PNB was not a mortgagee in good
faith, making the mortgage constituted on the subject lot null and void.
Banks, in handling real estate transactions, are required to exert a higher degree of
diligence, care, and prudence than individuals. Unlike private individuals, it is
expected to exercise greater care and prudence in its dealings, including those
involving registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract. Indeed, there is a situation
where, despite the fact that the mortgagor is not the owner of the mortgaged
property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. This is the doctrine of
"the mortgagee in good faith," wherein buyers or mortgagees dealing with property
covered by a Torrens Certificate of Title are no longer required to go beyond what
appears on the face of the title. However, the rule that persons dealing with
registered lands can rely solely on the certificate of title is not applicable to banks.
Thus, before approving a loan application, it is a standard operating practice for
these institutions to conduct an ocular inspection of the property offered for
mortgage and to verify the veracity of the title to determine its real owners. An
ocular inspection is necessary to protect the true owner of the property as well as

innocent third parties with a right, interest or claim thereon from a usurper who may
have acquired a fraudulent certificate of title.
Here, the Court finds that PNB has complied with the required degree of
diligence, prudence, and care in dealing with the mortgagor. There was also no sign
or circumstance which could have possibly triggered suspicion on the banks part.
Aside from the fact that the certificate of title to the subject lot is authentic and
issued in the name of Emiliano Jalbay, he also appeared to have been the one
occupying said property. Hence, there is no compelling reason to depart from the
assailed rulings of the appellate court.


Spouses Victoriano and Spouses Calidguid executed a Compromise Agreement
binding themselves to pay P2,530,000.00 to Spouses Lee. The Sps. Calidguid failed
to comply with the terms of said decision leading the Sps. Jaime Lee to avail the
remedy of execution. A Writ of Execution was issued to satisfy the compromise
agreement and a property belonging to the Sps Calidguid was levied on execution.
During its sale at public auction, the judgment creditor Jaime emerged as the
highest bidder and Cert. of sale was granted in his favour.
As an assignee of Sps Calidguid, Sio Tiat King redeemed the property before 1
year period of right to redemption.
More than 11 years after the redemption of the subject property, King filed a motion
for the issuance of a writ of possession, which was granted by the RTC in its Order. A
Writ of Possession was thereafter issued.
On February 19, 2008, Lims filed a Joint Affidavit of Third Party Claim, alleging
that they are the registered owners of the same property under a different TCT. The
Lims filed an Entry of Appearance with Motion to Quash Writ of Execution. On March
14, 2008, the RTC issued an Order setting the case for preliminary conference on
April 11, 2008. On March 18, 2008, the actual and physical possession of a part of
the subject property was turned over to King, prompting the Lims to file an
Extremely Urgent Motion to Issue Status Quo Ante Order. On April 4, 2008, the
motion filed by the Lims was granted but to last only until April 11, 2008.
The primary issue is whether the Lims may be evicted from the property by virtue of
a writ of possession issued in favor of King.
Sec. 33. Deed and possession to be given at expiration of redemption period; by
whom executed or given. x x x.
x x x The possession of the property shall be given to the purchaser
or last redemptioner by the same officer unless a third party is actually
holding the property adversely to the judgment obligor.
King acquired his right over the property with TCT No. 85561 from the Spouses
Calidguid when their right to redeem the property was assigned to him and

subsequently, when redemption was made; whereas the Lims claim of ownership is
based on TCT No. 122207 registered in their names. This goes to show that the Lims
hold the property adversely to the judgment obligor, Spouses Calidguid. The Lims
are considered as a third party, whose possession over the subject property may
not be defeated summarily. The third partys possession of the property is legally
presumed to be based on a just title, a presumption which may be overcome by the
purchaser in a judicial proceeding for recovery of the property. Through such a
judicial proceeding, the nature of the adverse possession by the third party may be
determined, after such third party is accorded due process and the opportunity to
be heard. The third party may be ejected from the property only after he has been
given an opportunity to be heard, conformably with the time-honored principle of
due process.
The foregoing elucidations find legal basis under Article 433 of the Civil Code, to wit:
Art. 433. Actual possession under claim of ownership raises a disputable
presumption of ownership. The true owner must resort to judicial process for the
recovery of the property.
One who claims to be the owner of a property possessed by another must bring the
appropriate judicial action for its physical recovery. The judicial process could
mean no less than an ejectment suit or a reivindicatory action, in which the
ownership claims of the contending parties may be properly heard and