PURITA MIRANDA VESTIL and AGUSTIN VESTIL, petitioners, extended scientific discussion of the causal connection between the
usal connection between the dog
vs.
INTERMEDIATE APPELLATE COURT, DAVID UY and TERESITA
UY, respondents.
CRUZ, J.:
FACTS:
On July 29, 1915, Theness was bitten by a dog while she was playing with a
child of the petitioners in the house of the late Vicente Miranda, the father
of Purita Vestil, at F. Ramos Street in Cebu City. She was rushed to the Cebu
General Hospital, where she was treated for "multiple lacerated wounds on
the forehead" 1 and administered an anti-rabies vaccine by Dr. Antonio
Tautjo. She was discharged after nine days but was readmitted one week
later due to "vomiting of saliva." 2 The following day, on August 15, 1975,
the child died. The cause of death was certified as broncho-pneumonia. 3
Seven months later, the Uys sued for damages, alleging that the Vestils
were liable to them as the possessors of "Andoy," the dog that bit and
eventually killed their daughter. The Vestils rejected the charge, insisting
that the dog belonged to the deceased Vicente Miranda, that it was a tame
animal, and that in any case no one had witnessed it bite Theness. After trial,
Judge Jose R. Ramolete of the Court of First Instance of Cebu sustained the
defendants and dismissed the complaint. 4
ISSUE:
In the proceedings now before us, Purita Vestil insists that she is not the
owner of the house or of the dog left by her father as his estate has not yet
been partitioned and there are other heirs to the property.
RULING:
Pursuing the logic of the Uys, she claims, even her sister living in Canada
would be held responsible for the acts of the dog simply because she is one
of Miranda's heirs. However, that is hardly the point. What must be
determined is the possession of the dog that admittedly was staying in the
house in question, regardless of the ownership of the dog or of the house.
Article 2183 reads as follows:
The possessor of an animal or whoever may make use of the same
is responsible for the damage which it may cause, although it may
escape or be lost. 'This responsibility shall cease only in case the
damages should come from force majeure from the fault of the
person who has suffered damage.
Thus, in Afialda v. Hisole, 6 a person hired as caretaker of a carabao gored
him to death and his heirs thereupon sued the owner of the animal for
damages. The complaint was dismissed on the ground that it was the
caretaker's duty to prevent the carabao from causing injury to any one,
including himself.
While it is true that she is not really the owner of the house, which was still
part of Vicente Miranda's estate, there is no doubt that she and her
husband were its possessors at the time of the incident in question. She was
the only heir residing in Cebu City and the most logical person to take care
of the property, which was only six kilometers from her own
house. 13 Moreover, there is evidence showing that she and her family
regularly went to the house, once or twice weekly, according to at least one
witness, 14 and used it virtually as a second house. Interestingly, her own
daughter was playing in the house with Theness when the little girl was
bitten by the dog. 15 The dog itself remained in the house even after the
death of Vicente Miranda in 1973 and until 1975, when the incident in
question occurred. It is also noteworthy that the petitioners offered to
assist the Uys with their hospitalization expenses although Purita said she
knew them only casually. 16
ISSUE:
The petitioners also argue that even assuming that they were the
possessors of the dog that bit Theness there was no clear showing that she
died as a result thereof.
RULING:
On the contrary, the death certificate 17 declared that she died of
broncho-pneumonia, which had nothing to do with the dog bites for which
she had been previously hospitalized. The Court need not involve itself in an
bites and the certified cause of death except to note that, first, Theness
developed hydrophobia, a symptom of rabies, as a result of the dog bites,
and second, that asphyxia broncho-pneumonia, which ultimately caused her
death, was a complication of rabies. That Theness became afraid of water
after she was bitten by the dog is established by the testimony of Dr. Tautjo.
On the strength of the testimony, the Court finds that the link between the
dog bites and the certified cause of death has beep satisfactorily established.
We also reiterate our ruling in Sison v. Sun Life Assurance Company of
Canada, 20 that the death certificate is not conclusive proof of the cause of
death but only of the fact of death. Indeed, the evidence of the child's
hydrophobia is sufficient to convince us that she died because she was
bitten by the dog even if the death certificate stated a different cause of
death. The petitioner's contention that they could not be expected to
exercise remote control of the dog is not acceptable. In fact, Article 2183 of
the Civil Code holds the possessor liable even if the animal should "escape
or be lost" and so be removed from his control. And it does not matter
either that, as the petitioners also contend, the dog was tame and was
merely provoked by the child into biting her. The law does not speak only of
vicious animals but covers even tame ones as long as they cause injury. As
for the alleged provocation, the petitioners forget that Theness was only
three years old at the time she was attacked and can hardly be faulted for
whatever she might have done to the animal.
According to Manresa the obligation imposed by Article 2183 of the Civil
Code is not based on the negligence or on the presumed lack of vigilance of
the possessor or user of the animal causing the damage. It is based on
natural equity and on the principle of social interest that he who possesses
animals for his utility, pleasure or service must answer for the damage
which such animal may cause. 21
We sustain the findings of the Court of Appeals and approve the monetary
awards except only as to the medical and hospitalization expenses, which
are reduced to P2,026.69, as prayed for in the complaint. While there is no
recompense that can bring back to the private respondents the child they
have lost, their pain should at least be assuaged by the civil damages to
which they are entitled.
EL DEPOSITO V LOOD
PER CURIAM:p
Petitioners filed on April 15, 1970 this action for certiorari and prohibition
with preliminary injunction to set aside respondent court's questioned
orders dated February 9, 1970 and March 30, 1970 denying petitioners'
motions for issuance of a writ of preliminary injunction to stay the
demolition and removal of their houses and structures on a parcel of public
land in barrios Corazon de Jesus and Halo Halo in San Juan, Rizal, (more
popularly known as "El Deposito" from the Spanish times), pending final
outcome of Civil Case No. 11078 filed by them before respondent court.
Petitioners' action below was one for declaratory relief to declare as null
and void as ex post facto legislation, municipal ordinance No. 89, as
amended, of respondent Municipality of San Juan, prohibiting squatting on
public property and providing a penalty therefor, under which ordinance,
petitioners claimed, respondents were summarily demolishing and
removing their houses and improvements.
On April 20, 1970, upon issuance of summons requiring respondents to
answer the petition, the Court issued a temporary restraining order
restraining respondents, until further orders, "from proceeding with the
summary destruction, removal and demolition of all other houses found in
the premises of the land in barrio Corazon de Jesus and barrio Halo Halo,
San Juan, Rizal, by reason of Ordinance No. 89-Amd. as amended, passed by
the Municipal Council of San Juan, Rizal, on April 26, 1968 ... ."
Respondents filed their answer in due course and the case was thereafter
submitted for decision with the filing by the parties of their respective
memoranda in lieu of oral argument.
As restated by petitioners themselves in their memorandum, the main issue
at bar is whether respondent judge "exceeded his authority and jurisdiction
and gravely abused his discretion"1 in issuing the questioned orders of
February 9, and March 30, 1970, denying the preliminary injunction sought
to stay demolition and removal of petitioners' houses and structures.
Petitioners raise as issues also the issue of validity and constitutionality of
municipal ordinance No. 89-Amended as questioned by them in their action
below, and whether respondent Engineer may remove or demolish their
houses without a special court demolition order under said challenged
ordinance; and furthermore, "whether the filing of the petition for
compulsory registration in LRC Cad. Case No. N-6, LRC Cad. Rec. No. N-511
which placed in issue the status of the land as demanded for reasons of
public interest where the houses and other improvements of the petitioners
as claimants in the cadastral proceeding are found, precludes the
enforcement of municipal ordinance No. 89-Amd."2
Subsequent events have cleared up the matter of this last issue as to the
alleged pendency of a petition in petitioner's favor for compulsory
registration of the land in question, as shown by proceedings held in the
Rizal court of first instance and this Court as hereinafter recounted.
A motion to reopen the cadastral proceedings3 was filed under date of
August 2, 1971 by petitioners as claimants, citing the passage on June 19,
1971 of Republic Act No. 6236 which extended the time limit (not to extend
beyond December 31, 1976) for filing of applications for free patents and
for judicial confirmation of imperfect and incomplete titles to public
agricultural lands.
The court of first instance of Rizal, Branch I, presided by Judge Emilio V.
Salas had denied such reopening of the proceedings as per its order dated
August 20, 1971, "it appearing that the instant case was dismissed without
prejudice in our order dated April 6, 1970, which order was affirmed by the
Supreme Court in its resolution in G.R. No.
L-32156, dated August 10, 1970, which became final and executory since
September 1, 1970."4
Petitioners-claimants' motion for reconsideration, notwithstanding,
withdrawal of the opposition of respondent municipality of San Juan, Rizal,
was denied in the Rizal court of first instance's order dated November 16,
1971.
A special civil action for certiorari and mandamus was then filed on
December 13, 1971 by petitioners-claimants and docketed as Case L-34438
of this Court. 5 Said action was dismissed for lack of merit per the Court's
resolution therein of December 16, 1971. Reconsideration was denied for
lack of merit per the Court's resolution of May 23, 1972, after the Court had
received the comment of the therein respondent Metropolitan Waterworks
and Sewerage System, (as successor-in-interest of Nawasa) asserting its
ownership of the property since its survey in 1910 as conducted for the
Metropolitan Water District (predecessor-in-interest of Nawasa) and
approved by the Director of Lands. In its comment, said therein respondent
MWSS further averred that within the property which had been declared
for taxation purposes in the name of the old Metropolitan Water District
(with a total area of 132,597 square meters, of which 14,138 square meters
are used for public roads)6 are "aqueducts and an underground reservoir",
and that its predecessor-in-interest (Nawasa) had sold a portion (16,409 sq.
meters) of the property to the Municipality of San Juan (on which are
constructed the municipality's elementary school, home economics building
and gymnasium), leased a portion thereof (4,102 sq. meters) for the
municipality's public high school, and "leased some lots to those who have
squatted on the said property." 50,000 square meters or five hectares of
the property were likewise leased by the Nawasa to the Pinaglabanan
Commemorative Commission (created by Executive Order No. 263 of the
President of the Philippines dated August 15, 1957)7 for a 99-year period
from August 21, 1963 for the site of the national shrine to commemorate
the "Battle of Pinaglabanan" on August 28 and 29, 1896 between the
Katipunan revolutionaries and the Spanish garrison defending the
gunpowder dump (called the "polvorin") in San Juan, Rizal. Final entry of the
dismissal order of December 16, 1971 was made as of June 12, 1972. Hence,
it is quite clear that as of now, there exist no proceedings, cadastral or
otherwise, questioning the public character of the land and asserting
petitioners' alleged claims of ownership thereto.
On the main issue at bar, the Court is satisfied that by no means may
respondent court be said to have exceeded its authority or gravely abused
its discretion in issuing its questioned orders denying petitioners' motion
below for a writ of preliminary injunction allegedly "to maintain the status
quo" and stay demolition and removal of their illegal constructions found to
be public nuisances per se and serious hazards to public health,8 by virtue
of the following principal considerations:
1. As found in respondent court's extended two-page order of February 9,
19709 and ten-page order of March 30, 1970 10 denying reconsideration,
petitioners' motions to maintain the alleged status quo were based on the
same grounds already reiterated before and denied by then Judge (now
appellate associate justice) Andres Reyes who was then presiding over
respondent court in an order dated September 19, 1968, 11 which was
upheld in a similar action for certiorari by the Court of Appeals in its
decision of February 4, 1969. 12
2. In both said proceedings before Judge Reyes and the Court of Appeals,
petitioners succeeded in obtaining restraining orders or preliminary writs of
injunction to stay demolition, which were dissolved upon said court's
handing down their order or decision on the merits of the injunction
petitions submitted by petitioners. With petitioners definitely having lost
their bid to reopen the cadastral proceedings to pursue their alleged claims
of ownership over the lands occupied by their constructions, supra, no
further reason or justification exists to continue the stay order against the
removal and demolition of their constructions.
3. As was well stated in then Judge Reyes' order of September 19, 1968,
petitioners failed after several hearings "to show that they have even a
color of title to entitle them to exercise the right of possession to the
premises in question. On the other hand, the land is admittedly public land
and consequently the petitioners have no right to possession thereof....." 13
4. Petitioners' lack of right to the injunction sought by them was further
shown in the Court of Appeals' decision of February 4, 1969, where it noted
that "their very evidence, their documentary proof, would justify that their
houses were built upon land of the Metropolitan Water District, that is to
say, of the Philippine Government, therefore, such tax declarations of
petitioners' houses themselves are the best proof of their admission that
their possession of the lands they occupy was not and could not be
adverse" 14 and that "their shanties pose a veritable danger to public
health." 15
5. No error, much less abuse of authority or discretion, could be attributed
to respondent court's statements and reasons for denying the injunction
sought by petitioners, as per its order of March 30, 1970, denying
reconsideration, as follows:
... The issues raised by the pleadings to determine whether or not the
petitioners are entitled to a writ of preliminary injunction, or a status quo,
in the words of the petitioners, had been resolved several times not only by
this Court but also by the Court of Appeals, and this Court believes that
insofar as the same grounds are concerned, they are res judicata
xxx xxx xxx
Lastly, the Court does not lose sight of the fact that the land in question is
public land, in the sense that it is untitled. However, as the government now
contends, the land in question is clothed with a public purpose to be utilized
for public service by the government. This fact has not been denied and as a
matter of fact, the petitioners admit that the land in question is public
land. ...
6. The question of validity or unconstitutionality of municipal ordinance No.
89-Amended need not be resolved in this proceeding, as it should first
properly be submitted for resolution of the lower court in the action below.
Suffice it to note that the Solicitor General appears to have correctly stated
the actual situation in that petitioners do not dispute the authority of the
San Juan council to pass ordinances providing for the summary abatement
of public nuisances, and that the ordinance in question may not be faulted
for being ex post facto in application since it "does not seek to punish an
action done which was innocent before the passage of the same. Rather, it
punishes the present and continuing act of unlawful occupancy of public
property or properties intended for public use." 16 At any rate, the decisive
point is that independently of the said ordinance, petitioners' constructions
which have been duly found to be public nuisances per se (without
provision for accumulation or disposal of waste matters and constructed
without building permits contiguously to and therefore liable to pollute one
of the main water pipelines which supplies potable water to the Greater
Manila area) may be abated without judicial proceedings under our Civil
Code. 17
As stated in Sitchon vs. Aquino, 18 the police power of the state justifies the
abatement or destruction by summary proceedings of public nuisances per
se. No error, much less any abuse of discretion, grave or otherwise, may
therefore be attributed against respondent court in having issued its orders
denying for imperative reasons of public health and welfare the preliminary
injunction sought again by petitioners to allow them to continue occupying
the land in question with their condemned constructions and structures.
ACCORDINGLY, judgment is hereby rendered dismissing the petition. The
temporary restraining order heretofore issued on April 20, 1970 is hereby
dissolved and such dissolution is declared immediately executory. No
pronouncement as to costs.
LEONOR FARRALES, assisted by her husband, EMILIO FARRALES vs. THE
CITY MAYOR OF BAGUIO, THE CHIEF OF POLICE, THE MARKET
SUPERINTENDENT AND THE CITY TREASURER
FACTS: Plaintiff was the holder of a municipal license to sell liquor and
sari-sari goods. When the temporary building where she had her stall was
demolished in order that the city might construct a permanent building,
Plaintiff was ordered to move her goods to another temporary place until
the permanent building was completed. Instead, Plaintiff built a temporary
shack at one end of the Rice Section, Baguio City Market without seeking
prior permit from any city official. When the police threatened to demolish
the shack, Plaintiff sought an injunction before the CFI which asked her that
she present proper permit. Upon failure of petitioner to comply with the
order, the CFI denied the petition for injunction, and the police then
demolished the shack.
ISSUES: (1) WON the shack or temporary stall was a nuisance; (2) WON the
police officers are liable for damages in extrajudicially abating the nuisance.
RULING: Judgment Affirmed.
(1) The SC held that the shack was a nuisance. In the first place she had no
permit to put up the temporary stall in question in the precise place where
she did so. In the second place, its location on the cement passageway at
the end of the Rice Section building was such that it constituted an
obstruction to the free movement of people.
(2) According to Article 707 of the CC, a public official extrajudicially abating
a nuisance shall be liable for damages in only two cases: (a) if he causes
unnecessary injury; or (b) if an alleged nuisance is later declared by the
courts to be not a real nuisance.
In the case at bar, no unnecessary injury was caused to the appellant, and
not only was there no judicial declaration that the alleged nuisance was not
really so but the trial court found that it was in fact a nuisance. Indeed it
may be said that the abatement thereof was not summary, but through a
judicial proceeding. The denial of petitioner’s petition for injunction was in
effect an authority for the police to carry out the act which was sought to
be enjoined.
CAVITE DEVT BANK V LIM
Facts:
Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust
Company (FEBTC) are banking institutions duly organized and existing under
Philippine laws. On or about June 15, 1983, a certain Rodolfo Guansing
obtained a loan in the amount of P90,000.00 from CDB, to secure which he
mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma,
Quezon City and covered by TCT No. 300809 registered in his name. As
Guansing defaulted in the payment of his loan, CDB foreclosed the
mortgage.
At the foreclosure sale held on March 15, 1984, the mortgaged property
was sold to CDB as the highest bidder. Guansing failed to redeem, and on
March 2, 1987, CDB consolidated title to the property in its name. TCT No.
300809 in the name of Guansing was cancelled and, in lieu thereof, TCT No.
355588 was issued in the name of CDB.1âwphi1.nêt
On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker
named Remedios Gatpandan, offered to purchase the property from CDB.
Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB
P30,000.00 as Option Money, for which she was issued Official Receipt No.
3160, dated June 17, 1988, by CDB. However, after some time following up
the sale, Lim discovered that the subject property was originally registered
in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing,
under TCT No. 91148.
Aggrieved by what she considered a serious misrepresentation by CDB and
its mother-company, FEBTC, on their ability to sell the subject property, Lim,
joined by her husband, filed on August 29, 1989 an action for specific
performance and damages against petitioners in the Regional Trial Court.
On March 10, 1993, the trial court rendered a decision in favor of the Lim
spouses. Petitioners brought the matter to the Court of Appeals, which, on
October 14, 1997, affirmed in toto the decision of the Regional Trial Court.
Issue: WON there was a valid sale.
Held: NO.
In this case, the sale by CDB to Lim of the property mortgaged in 1983 by
Rodolfo Guansing must, therefore, be deemed a nullity for CDB did not have
a valid title to the said property. To be sure, CDB never acquired a valid title
to the property because the foreclosure sale, by virtue of which, the
property had been awarded to CDB as highest bidder, is likewise void since
the mortgagor was not the owner of the property foreclosed.
A foreclosure sale, though essentially a "forced sale," is still a sale in
accordance with Art. 1458 of the Civil Code, under which the mortgagor in
default, the forced seller, becomes obliged to transfer the ownership of the
thing sold to the highest bidder who, in turn, is obliged to pay therefor the
bid price in money or its equivalent. Being a sale, the rule that the seller
must be the owner of the thing sold also applies in a foreclosure sale. This is
the reason Art. 2085 of the Civil Code, in providing for the essential
requisites of the contract of mortgage and pledge, requires, among other
things, that the mortgagor or pledgor be the absolute owner of the thing
pledged or mortgaged, in anticipation of a possible foreclosure sale should
the mortgagor default in the payment of the loan.
There is, however, 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" based on the rule that all persons dealing with property covered
by a Torrens Certificate of Title, as buyers or mortgagees, are not required
to go beyond what appears on the face of the title. The public interest in
upholding the indefeasibility of a certificate of title, as evidence of the
lawful ownership of the land or of any encumbrance thereon, protects a
buyer or mortgagee who, in good faith, relied upon what appears on the
face of the certificate of title.
This principle is cited by petitioners in claiming that, as a mortgagee bank, it
is not required to make a detailed investigation of the history of the title of
the property given as security before accepting a mortgage.
We are not convinced, however, that under the circumstances of this case,
CDB can be considered a mortgagee in good faith. While petitioners are not
expected to conduct an exhaustive investigation on the history of the
mortgagor's title, they cannot be excused from the duty of exercising the
due diligence required of banking institutions. In Tomas v. Tomas, we noted
that it is standard practice for banks, before approving a loan, to send
representatives to the premises of the land offered as collateral and to
investigate who are real owners thereof, noting that banks are expected to
exercise more care and prudence than private individuals in their dealings,
even those involving registered lands, for their business is affected with
public interest.
HEIRS OF EDUARDO MANLAPAT, G.R. No. 125585
represented by GLORIA MANLAPAT-
,
- versus - AUSTRIA-MARTINEZ,
Acting Chairman,
CALLEJO, SR.,
TINGA, and
Before this Court is a Rule 45 petition assailing
the Decision [1]
dated 29 September 1994 of the Court of Appeals that
reversed the Decision[2] dated 30 April 1991 of the Regional Trial Court (RTC)
of Bulacan, Branch 6, Malolos. The trial court declared Transfer Certificates
of Title (TCTs) No. T-9326-P(M) and No. T-9327-P(M) as void ab initioand
ordered the restoration of Original Certificate of Title (OCT) No. P-153(M) in
the name of Eduardo Manlapat (Eduardo), petitioners
predecessor-in-interest.
The controversy involves Lot No. 2204, a parcel of land with an
area of 1,058 square meters, located at Panghulo, Obando, Bulacan. The
property had been originally in the possession of Jose Alvarez, Eduardos
grandfather, until his demise in 1916. It remained unregistered until 8
October 1976 when OCT No. P-153(M) was issued in the name of Eduardo
pursuant to a free patent issued in Eduardos name[3] that was entered in
the Registry of Deeds of Meycauayan, Bulacan.[4] The subject lot is adjacent
to a fishpond owned by one
Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo
Cruz and Rosalina Cruz-Bautista (Cruzes).[5]
On 19 December 1954, before the subject lot was titled, Eduardo
sold a portion thereof with an area of 553 square meters to Ricardo. The
sale is evidenced by a deed of sale entitled Kasulatan ng Bilihang Tuluyan
ng Lupang Walang Titulo (Kasulatan)[6] which was signed by Eduardo
himself as vendor and his wife Engracia Aniceto with a certain Santiago
Enriquez signing as witness. The deed was notarized by Notary Public
Manolo Cruz.[7] On 4 April 1963, the Kasulatan was registered with the
Register of Deeds of Bulacan.[8]
On 18 March 1981, another Deed of Sale[9] conveying another
portion of the subject lot consisting of 50 square meters as right of way was
executed by Eduardo in favor of Ricardo in order to reach the portion
covered by the first sale executed in 1954 and to have access to his fishpond
from the provincial road.[10] The deed was signed by Eduardo himself and
his wife Engracia Aniceto, together with Eduardo Manlapat, Jr. and Patricio
Manlapat. The same was also duly notarized on 18 July 1981 by Notary
Public Arsenio Guevarra.[11]
In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact
of his father-in-law Eduardo, executed a mortgage with the Rural Bank of
San Pascual, Obando Branch (RBSP), for P100,000.00 with the subject lot as
collateral. Banaag deposited the owners duplicate certificate of OCT No.
P-153(M) with the bank.
On 31 August 1986, Ricardo died without learning of the prior
issuance of OCT No. P-153(M) in the name of Eduardo.[12] His heirs, the
Cruzes, were not immediately aware of the consummated sale between
Eduardo and Ricardo.
Eduardo himself died on 4 April 1987. He was survived by his heirs,
Engracia Aniceto, his spouse; and children, Patricio, Bonifacio, Eduardo,
Corazon, Anselmo, Teresita and Gloria, all surnamed Manlapat.[13] Neither
did the heirs of Eduardo (petitioners) inform the Cruzes of the prior sale in
favor of their predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes
came to learn about the sale and the issuance of the OCT in the name of
Eduardo.
Upon learning of their right to the subject lot, the Cruzes
immediately tried to confront petitioners on the mortgage and obtain the
surrender of the OCT. The Cruzes, however, were thwarted in their bid to
see the heirs. On the advice of the Bureau of Lands, NCR Office, they
brought the matter to the barangay captain of Barangay Panghulo,
Obando, Bulacan. During the hearing, petitioners were informed that the
Cruzes had a legal right to the property covered by OCT and needed the
OCT for the purpose of securing a separate title to cover the interest of
Ricardo. Petitioners, however, were unwilling to surrender the OCT.[14]
Having failed to physically obtain the title from petitioners, in July
1989, the Cruzes instead went to RBSP which had custody of the owners
duplicate certificate of the OCT, earlier surrendered as a consequence of
the mortgage. Transacting with RBSPs manager, Jose Salazar (Salazar), the
Cruzes sought to borrow the owners duplicate certificate for the purpose of
photocopying the same and thereafter showing a copy thereof to the
Register of Deeds. Salazar allowed the Cruzes to bring the owners duplicate
certificate outside the bank premises when the latter showed
the Kasulatan.[15] The Cruzes returned the owners duplicate certificate on
the same day after having copied the same. They then brought the copy of
the OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and
showed the same to him to secure his legal opinion as to how the Cruzes
could legally protect their interest in the property and register the
same.[16] Flores suggested the preparation of a subdivision plan to be able
to segregate the area purchased by Ricardo from Eduardo and have the
same covered by a separate title.[17]
Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla
(Arandilla), Land Registration Officer, Director III, Legal Affairs Department,
Land Registration Authority at Quezon City, who agreed with the advice
given by Flores.[18] Relying on the suggestions of Flores and Arandilla, the
Cruzes hired two geodetic engineers to prepare the corresponding
subdivision plan. The subdivision plan was presented to the Land
Management Bureau, Region III, and there it was approved by a certain Mr.
Pambid of said office on 21 July 1989.
After securing the approval of the subdivision plan, the Cruzes
went back to RBSP and again asked for the owners duplicate certificate
from Salazar. The Cruzes informed him that the presentation of the owners
duplicate certificate was necessary, per advise of the Register of Deeds, for
the cancellation of the OCT and the issuance in lieu thereof of two separate
titles in the names of Ricardo and Eduardo in accordance with the approved
subdivision plan.[19] Before giving the owners duplicate certificate, Salazar
required the Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal
counsel of RBSP, to secure from the latter a clearance to borrow the title.
Atty. Santiago would give the clearance on the condition that only Cruzes
put up a substitute collateral, which they did.[20] As a result, the Cruzes got
hold again of the owners duplicate certificate.
After the Cruzes presented the owners duplicate certificate, along
with the deeds of sale and the subdivision plan, the Register of Deeds
cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M) covering
603 square meters of Lot No. 2204 in the name of Ricardo and TCT No.
T-9327-P(M) covering the remaining 455 square meters in the name of
Eduardo.[21]
On 9 August 1989, the Cruzes went back to the bank and
surrendered to Salazar TCT No. 9327-P(M) in the name of Eduardo and
retrieved the title they had earlier given as substitute collateral. After
securing the new separate titles, the Cruzes furnished petitioners with a
copy of TCT No. 9327-P(M) through the barangay captain and paid the real
property tax for 1989.[22]
The Cruzes also sent a formal letter to Guillermo Reyes, Jr.,
Director, Supervision Sector, Department III of the Central Bank of the
Philippines, inquiring whether they committed any violation of existing bank
laws under the circumstances. A certain Zosimo Topacio, Jr. of the
Supervision Sector sent a reply letter advising the Cruzes, since the matter is
between them and the bank, to get in touch with the bank for the final
settlement of the case.[23]
In October of 1989, Banaag went to RBSP, intending to tender full
payment of the mortgage obligation. It was only then that he learned of the
dealings of the Cruzes with the bank which eventually led to the subdivision
of the subject lot and the issuance of two separate titles thereon. In
exchange for the full payment of the loan, RBSP tried to persuade
petitioners to accept TCT No. T-9327-P(M) in the name of Eduardo.[24]
As a result, three (3) cases were lodged, later consolidated, with
the trial court, all involving the issuance of the TCTs, to wit:
(1) Civil Case No. 650-M-89, for reconveyance
with damages filed by the heirs of Eduardo Manlapat
against Consuelo Cruz, Rosalina Cruz-Bautista, Rural
Bank of San Pascual, Jose Salazar and Jose Flores, in his
capacity as Deputy Registrar, Meycauayan Branch of the
Registry of Deeds of Bulacan;
(2) Civil Case No. 141-M-90 for damages filed
by Jose Salazar against Consuelo Cruz, et. [sic] al.; and
(3) Civil Case No. 644-M-89, for declaration of
nullity of title with damages filed by Rural Bank of San
Pascual, Inc. against the spouses Ricardo Cruz and
Consuelo Cruz, et al.[25]
After trial of the consolidated cases, the RTC of Malolos rendered
a decision in favor of the heirs of Eduardo, the dispositive portion of which
reads:
WHEREFORE, premised from the foregoing,
judgment is hereby rendered:
1.Declaring Transfer Certificates of
Title Nos. T-9326-P(M) and T-9327-P(M) as
void ab initio and ordering the Register of
Deeds, Meycauayan Branch to cancel said
titles and to restore Original Certificate of
Title No. P-153(M) in the name of plaintiffs
predecessor-in-interest Eduardo Manlapat;
2.-Ordering the defendants Rural
Bank of San Pascual, Jose Salazar, Consuelo
Cruz and Rosalina Cruz-Bautista, to pay the
plaintiffs Heirs of Eduardo Manlapat, jointly
and severally, the following:
a)P200,000.00 as moral damages;
b)P50,000.00 as exemplary
damages;
c)P20,000.00 as attorneys fees;
and
d)the costs of the suit.
3.Dismissing the counterclaims.
SO ORDERED.[26]
The trial court found that petitioners were entitled to the reliefs of
reconveyance and damages. On this matter, it ruled that petitioners
were bona fide mortgagors of an unclouded title bearing no annotation of
any lien and/or encumbrance. This fact, according to the trial court, was
confirmed by the bank when it accepted the mortgage unconditionally on
25 November 1981. It found that petitioners were complacent and
unperturbed, believing that the title to their property, while serving as
security for a loan, was safely vaulted in the impermeable confines of RBSP.
To their surprise and prejudice, said title was subdivided into two portions,
leaving them a portion of 455 square meters from the original total area of
1,058 square meters, all because of the fraudulent and negligent acts of
respondents and RBSP. The trial court ratiocinated that even assuming that
a portion of the subject lot was sold by Eduardo to Ricardo, petitioners were
still not privy to the transaction between the bank and the Cruzes which
eventually led to the subdivision of the OCT into TCTs No. T-9326-P(M) and
No. T-9327-P(M), clearly to the damage and prejudice of petitioners.[27]
 Concerning the claims for damages, the trial court found the same
to be bereft of merit. It ruled that although the act of the Cruzes could be
deemed fraudulent, still it would not constitute intrinsic fraud. Salazar,
nonetheless, was clearly guilty of negligence in letting the Cruzes borrow
the owners duplicate certificate of the OCT. Neither the bank nor its
manager had business entrusting to strangers titles mortgaged to it by
other persons for whatever reason. It was a clear violation of the mortgage
and banking laws, the trial court concluded.
The trial court also ruled that although Salazar was personally
responsible for allowing the title to be borrowed, the bank could not escape
liability for it was guilty of contributory negligence. The evidence showed
that RBSPs legal counsel was sought for advice regarding respondents
request. This could only mean that RBSP through its lawyer if not through its
manager had known in advance of the Cruzes intention and still it did
nothing to prevent the eventuality. Salazar was not even summarily
dismissed by the bank if he was indeed the sole person to blame. Hence,
the banks claim for damages must necessarily fail.[28]
The trial court granted the prayer for the annulment of the TCTs as a
necessary consequence of its declaration that reconveyance was in order.
As to Flores, his work being ministerial as Deputy Register of the Bulacan
Registry of Deeds, the trial court absolved him of any liability with a stern
warning that he should deal with his future transactions more carefully and
in the strictest sense as a responsible government official.[29]
Aggrieved by the decision of the trial court, RBSP, Salazar and the
Cruzes appealed to the Court of Appeals. The appellate court, however,
reversed the decision of the RTC. The decretal text of the decision reads:
THE FOREGOING CONSIDERED, the appealed
decision is hereby reversed and set aside, with costs
against the appellees.
SO ORDERED.[30]
The appellate court ruled that petitioners were not bona
fide mortgagors since as early as 1954 or before the 1981 mortgage,
Eduardo already sold to Ricardo a portion of the subject lot with an area of
553 square meters. This fact, the Court of Appeals noted, is even supported
by a document of sale signed by Eduardo Jr. and Engracia Aniceto, the
surviving spouse of Eduardo, and registered with the Register of Deeds of
Bulacan. The appellate court also found that on 18 March 1981, for the
second time, Eduardo sold to Ricardo a separate area containing 50 square
meters, as a road right-of-way.[31] Clearly, the OCT was issued only after the
first sale. It also noted that the title was given to the Cruzes by RBSP
voluntarily, with knowledge even of the banks counsel.[32] Hence, the
imposition of damages cannot be justified, the Cruzes themselves being the
owners of the property. Certainly, Eduardo misled the bank into accepting
the entire area as a collateral since the 603-square meter portion did not
anymore belong to him. The appellate court, however, concluded that there
was no conspiracy between the bank and Salazar.[33]
Hence, this petition for review on certiorari.
Petitioners ascribe errors to the appellate court by asking the
following questions, to wit: (a) can a mortgagor be compelled to receive
from the mortgagee a smaller portion of the originally encumbered title
partitioned during the subsistence of the mortgage, without the knowledge
of, or authority derived from, the registered owner; (b) can the mortgagee
question the veracity of the registered title of the mortgagor, as noted in
the owners duplicate certificate, and thus, deliver the certificate to such
third persons, invoking an adverse, prior, and unregistered claim against the
registered title of the mortgagor; (c) can an adverse prior claim against a
registered title be noted, registered and entered without a competent court
order; and (d) can belief of ownership justify the taking of property without
due process of law?[34]
The kernel of the controversy boils down to the issue of whether
the cancellation of the OCT in the name of the petitioners
predecessor-in-interest and its splitting into two separate titles, one for the
petitioners and the other for the Cruzes, may be accorded legal recognition
given the peculiar factual backdrop of the case. We rule in the affirmative.
Private respondents (Cruzes) own
the portion titled in their names
Consonant with law and justice, the ultimate denouement of the
property dispute lies in the determination of the respective bases of the
warring claims. Here, as in other legal disputes, what is written generally
deserves credence.
A careful perusal of the evidence on record reveals that the
Cruzes have sufficiently proven their claim of ownership over the portion of
Lot No. 2204 with an area of 553 square meters. The duly notarized
instrument of conveyance was executed in 1954 to which no less than
Eduardo was a signatory. The execution of the deed of sale was rendered
beyond doubt by Eduardos admission in his Sinumpaang Salaysay dated 24
April 1963.[35] These documents make the affirmance of the right of the
Cruzes ineluctable. The apparent irregularity, however, in the obtention of
the owners duplicate certificate from the bank, later to be presented to the
Register of Deeds to secure the issuance of two new TCTs in place of the
OCT, is another matter.
Petitioners argue that the 1954 deed of sale was not annotated
on the OCT which was issued in 1976 in favor of Eduardo; thus, the Cruzes
claim of ownership based on the sale would not hold water. The Court is not
persuaded.
Registration is not a requirement for validity of the contract as
between the parties, for the effect of registration serves chiefly to bind
third persons.[36] The principal purpose of registration is merely to notify
other persons not parties to a contract that a transaction involving the
property had been entered into. Where the party has knowledge of a prior
existing interest which is unregistered at the time he acquired a right to the
same land, his knowledge of that prior unregistered interest has the effect
of registration as to him.[37]
Further, the heirs of Eduardo cannot be considered third persons
for purposes of applying the rule. The conveyance shall not be valid against
any person unless registered, except (1) the grantor, (2) his heirs and
devisees, and (3) third persons having actual notice or knowledge
thereof.[38] Not only are petitioners the heirs of Eduardo, some of them
were actually parties to the Kasulatan executed in favor of Ricardo. Thus,
the annotation of the adverse claim of the Cruzes on the OCT is no longer
required to bind the heirs of Eduardo, petitioners herein.
Petitioners had no right to constitute
mortgage over disputed portion
The requirements of a valid mortgage are clearly laid down in
Article 2085 of the New Civil Code, viz:

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 the purpose.
Third persons who are not parties to the
principal obligation may secure the latter
by pledging or mortgaging their own
property. (emphasis supplied)
For a person to validly constitute a valid mortgage on real estate, he must
be the absolute owner thereof as required by Article 2085 of the New Civil
Code.[39] The mortgagor must be the owner, otherwise the mortgage is
void.[40] In a contract of mortgage, the mortgagor remains to be the owner
of the property although the property is subjected to a lien. A mortgage
[41]
is regarded as nothing more than a mere lien, encumbrance, or security for
a debt, and passes no title or estate to the mortgagee and gives him no
right or claim to the possession of the property.[42] In this kind of contract,
the property mortgaged is merely delivered to the mortgagee to secure the
fulfillment of the principal obligation.[43] Such delivery does not empower
the mortgagee to convey any portion thereof in favor of another person as
the right to dispose is an attribute of ownership.[44]The right to dispose
includes the right to donate, to sell, to pledge or mortgage. Thus, the
mortgagee, not being the owner of the property, cannot dispose of the
whole or part thereof nor cause the impairment of the security in any
manner without violating the foregoing rule.[45] The mortgagee only owns
the mortgage credit, not the property itself.[46]
Petitioners submit as an issue whether a mortgagor may be
compelled to receive from the mortgagee a smaller portion of the lot
covered by the originally encumbered title, which lot was partitioned during
the subsistence of the mortgage without the knowledge or authority of the
mortgagor as registered owner. This formulation is disingenuous, baselessly
assuming, as it does, as an admitted fact that the mortgagor is the owner of
the mortgaged property in its entirety. Indeed, it has not become a salient
issue in this case since the mortgagor was not the owner of the entire
mortgaged property in the first place.
Issuance of OCT No. P-153(M), improper
It is a glaring fact that OCT No. P-153(M) covering the property
mortgaged was in the name of Eduardo, without any annotation of any
prior disposition or encumbrance. However, the property was sufficiently
shown to be not entirely owned by Eduardo as evidenced by the Kasulatan.
Readily apparent upon perusal of the records is that the OCT was issued in
1976, long after the Kasulatan was executed way back in 1954. Thus, a
portion of the property registered in Eduardos name arising from the grant
of free patent did not actually belong to him. The utilization of the Torrens
system to perpetrate fraud cannot be accorded judicial sanction.
Time and again, this Court has ruled that the principle of
indefeasibility of a Torrens title does not apply where fraud attended the
issuance of the title, as was conclusively established in this case. The
Torrens title does not furnish a shied for fraud.[47] Registration does not
vest title. It is not a mode of acquiring ownership but is merely evidence of
such title over a particular property. It does not give the holder any better
right than what he actually has, especially if the registration was done in
bad faith. The effect is that it is as if no registration was made at all.[48] In
fact, this Court has ruled that a decree of registration cut off or extinguished
a right acquired by a person when such right refers to a lien or
encumbrance on the landnot to the right of ownership thereofwhich was
not annotated on the certificate of title issued thereon.[49]
Issuance of TCT Nos. T-9326-P(M)
and T-9327-P(M), Valid
The validity of the issuance of two TCTs, one for the portion sold
to the predecessor-in-interest of the Cruzes and the other for the portion
retained by petitioners, is readily apparent from Section 53 of the
Presidential Decree (P.D.) No. 1529 or the Property Registration Decree. It
provides:
SEC 53. Presentation of owners duplicate upon
entry of new certificate. No voluntary instrument shall
be registered by the Register of Deeds, unless the
owners duplicate certificate is presented with such
instrument, except in cases expressly provided for in
this Decree or upon order of the court, for cause shown.
The production of the owners duplicate
certificate, whenever any voluntary instrument is
presented for registration, shall be conclusive
authority from the registered owner to the Register of
Deeds to enter a new certificate or to make a
memorandum of registration in accordance with such
instrument, and the new certificate or memorandum
shall be binding upon the registered owner and upon all
persons claiming under him, in favor of every purchaser
for value and in good faith.
In all cases of registration procured by fraud,
the owner may pursue all his legal and equitable
remedies against the parties to such fraud without
prejudice, however, to the rights of any innocent holder
of the decree of registration on the original petition or
application, any subsequent registration procured by
the presentation of a forged duplicate certificate of title,
or a forged deed or instrument, shall be null and void.
(emphasis supplied)
Petitioners argue that the issuance of the TCTs violated the third
paragraph of Section 53 of P.D. No. 1529. The argument is baseless. It must
be noted that the provision speaks of forged duplicate certificate of
title and forged deed or instrument. Neither instance obtains in this case.
What the Cruzes presented before the Register of Deeds was the very
genuine owners duplicate certificate earlier deposited by Banaag, Eduardos
attorney-in-fact, with RBSP. Likewise, the instruments of conveyance are
authentic, not forged. Section 53 has never been clearer on the point that
as long as the owners duplicate certificate is presented to the Register of
Deeds together with the instrument of conveyance, such presentation
serves as conclusive authority to the Register of Deeds to issue a transfer
certificate or make a memorandum of registration in accordance with the
instrument.
The records of the case show that despite the efforts made by the
Cruzes in persuading the heirs of Eduardo to allow them to secure a
separate TCT on the claimed portion, their ownership being amply
evidenced by the Kasulatan and Sinumpaang Salaysay where Eduardo
himself acknowledged the sales in favor of Ricardo, the heirs adamantly
rejected the notion of separate titling. This prompted the Cruzes to
approach the bank manager of RBSP for the purpose of protecting their
property right. They succeeded in persuading the latter to lend the owners
duplicate certificate. Despite the apparent irregularity in allowing the
Cruzes to get hold of the owners duplicate certificate, the bank officers
consented to the Cruzes plan to register the deeds of sale and secure two
new separate titles, without notifying the heirs of Eduardo about it.
Further, the law on the matter, specifically P.D. No. 1529, has no
explicit requirement as to the manner of acquiring the owners duplicate for
purposes of issuing a TCT. This led the Register of Deeds of Meycauayan as
well as the Central Bank officer, in rendering an opinion on the legal
feasibility of the process resorted to by the Cruzes. Section 53 of P.D. No.
1529 simply requires the production of the owners duplicate certificate,
whenever any voluntary instrument is presented for registration, and the
same shall be conclusive authority from the registered owner to the
Register of Deeds to enter a new certificate or to make a memorandum of
registration in accordance with such instrument, and the new certificate or
memorandum shall be binding upon the registered owner and upon all
persons claiming under him, in favor of every purchaser for value and in
good faith.
Quite interesting, however, is the contention of the heirs of
Eduardo that the surreptitious lending of the owners duplicate certificate
constitutes fraud within the ambit of the third paragraph of Section 53
which could nullify the eventual issuance of the TCTs. Yet we cannot
subscribe to their position.
Impelled by the inaction of the heirs of Eduardo as to their claim,
the Cruzes went to the bank where the property was mortgaged. Through
its manager and legal officer, they were assured of recovery of the claimed
parcel of land since they are the successors-in-interest of the real owner
thereof. Relying on the bank officers opinion as to the legality of the means
sought to be employed by them and the suggestion of the Central Bank
officer that the matter could be best settled between them and the bank,
the Cruzes pursued the titling of the claimed portion in the name of Ricardo.
The Register of Deeds eventually issued the disputed TCTs.
The Cruzes resorted to such means to protect their interest in the
property that rightfully belongs to them only because of the bank officers
acquiescence thereto. The Cruzes could not have secured a separate TCT in
the name of Ricardo without the banks approval. Banks, their business
being impressed with public interest, are expected to exercise more care
and prudence than private individuals in their dealings, even those involving
registered lands.[50] The highest degree of diligence is expected, and high
standards of integrity and performance are even required of it.[51]
Indeed, petitioners contend that the mortgagee cannot question
the veracity of the registered title of the mortgagor as noted in the owners
duplicate certificate, and, thus, he cannot deliver the certificate to such
third persons invoking an adverse, prior, and unregistered claim against the
registered title of the mortgagor. The strength of this argument is diluted by
the peculiar factual milieu of the case.
A mortgagee can rely on what appears on the certificate of title
presented by the mortgagor and an innocent mortgagee is not expected to
conduct an exhaustive investigation on the history of the mortgagors title.
This rule is strictly applied to banking institutions. A mortgagee-bank must
exercise due diligence before entering into said contract. Judicial notice is
taken of the standard practice for banks, before approving a loan, to send
representatives to the premises of the land offered as collateral and to
investigate who the real owners thereof are.[52]
Banks, indeed, should exercise more care and prudence in dealing
even with registered lands, than private individuals, as their business is one
affected with public interest. Banks keep in trust money belonging to their
depositors, which they should guard against loss by not committing any act
of negligence that amounts to lack of good faith. Absent good faith, banks
would be denied the protective mantle of the land registration statute, Act
496, which extends only to purchasers for value and good faith, as well as to
mortgagees of the same character and description.[53] Thus, this Court
clarified that the rule that persons dealing with registered lands can rely
solely on the certificate of title does not apply to banks.[54]
Bank Liable for Nominal Damages
Of deep concern to this Court, however, is the fact that the bank
lent the owners duplicate of the OCT to the Cruzes when the latter
presented the instruments of conveyance as basis of their claim of
ownership over a portion of land covered by the title. Simple rationalization
would dictate that a mortgagee-bank has no right to deliver to any stranger
any property entrusted to it other than to those contractually and legally
entitled to its possession. Although we cannot dismiss the banks
acknowledgment of the Cruzes claim as legitimized by instruments of
conveyance in their possession, we nonetheless cannot sanction how the
bank was inveigled to do the bidding of virtual strangers. Undoubtedly, the
banks cooperative stance facilitated the issuance of the TCTs. To make
matters worse, the bank did not even notify the heirs of Eduardo. The
conduct of the bank is as dangerous as it is unthinkably negligent. However,
the aspect does not impair the right of the Cruzes to be recognized as
legitimate owners of their portion of the property.
Undoubtedly, in the absence of the banks participation, the
Register of Deeds could not have issued the disputed TCTs. We cannot find
fault on the part of the Register of Deeds in issuing the TCTs as his authority
to issue the same is clearly sanctioned by law. It is thus ministerial on the
part of the Register of Deeds to issue TCT if the deed of conveyance and the
original owners duplicate are presented to him as there appears on theface
of the instruments no badge of irregularity or
nullity.[55] If there is someone to blame for the shortcut resorted to by the
Cruzes, it would be the bank itself whose manager and legal officer helped
the Cruzes to facilitate the issuance of the TCTs.
The bank should not have allowed complete strangers to take
possession of the owners duplicate certificate even if the purpose is merely
for photocopying for a danger of losing the same is more than imminent.
They should be aware of the conclusive presumption in
Section 53. Such act constitutes manifest negligence on the part of the bank
which would necessarily hold it liable for damages under Article 1170 and
other relevant provisions of the Civil Code.[56]
In the absence of evidence, the damages that may be awarded
may be in the form of nominal damages. Nominal damages are adjudicated
in order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.[57] This award rests
on the mortgagors right to rely on the banks observance of the highest
diligence in the conduct of its business. The act of RBSP of entrusting to
respondents the owners duplicate certificate entrusted to it by the
mortgagor without even notifying the mortgagor and absent any prior
investigation on the veracity of respondents claim and
character is a patent failure to foresee the risk created by the act in view of
the provisions of Section 53 of P.D. No. 1529. This act runs afoul of every
banks mandate to observe the highest degree of diligence in dealing with its
clients. Moreover, a mortgagor has also the right to be afforded due process
before deprivation or diminution of his property is effected as the OCT was
still in the name of Eduardo. Notice and hearing are indispensable elements
of this right which the bank miserably ignored.
Under the circumstances, the Court believes the award
of P50,000.00 as nominal damages is appropriate.
Five-Year Prohibition against alienation
or encumbrance under the Public Land Act
One vital point. Apparently glossed over by the courts below and
the parties is an aspect which is essential, spread as it is all over the record
and intertwined with the crux of the controversy, relating as it does to the
validity of the dispositions of the subject property and the mortgage
thereon. Eduardo was issued a title in 1976 on the basis of his free patent
application. Such application implies the recognition of the public dominion
character of the land and, hence, the five (5)-year prohibition imposed by
the Public Land Act against alienation or encumbrance of the land covered
by a free patent or homestead[58] should have been considered.
The deed of sale covering the fifty (50)-square meter right of way
executed by Eduardo on 18 March 1981 is obviously covered by the
proscription, the free patent having been issued on 8 October 1976.
However, petitioners may recover the portion sold since the prohibition was
imposed in favor of the free patent holder. In Philippine National Bank v. De
los Reyes,[59] this Court ruled squarely on the point, thus:
While the law bars recovery in a case where the object
of the contract is contrary to law and one or both
parties acted in bad faith, we cannot here apply the
doctrine of in pari delicto which admits of an exception,
namely, that when the contract is merely prohibited by
law, not illegal per se, and the prohibition is designed
for the protection of the party seeking to recover, he is
entitled to the relief prayed for whenever public policy
is enhanced thereby. Under the Public Land Act, the
prohibition to alienate is predicated on the fundamental
policy of the State to preserve and keep in the family of
the homesteader that portion of public land which the
State has gratuitously given to him, and recovery is
allowed even where the land acquired under the Public
Land Act was sold and not merely encumbered, within
the prohibited period.[60]
The sale of the 553 square meter portion is a different story. It
was executed in 1954, twenty-two (22) years before the issuance of the
patent in 1976. Apparently, Eduardo disposed of the portion even before he
thought of applying for a free patent. Where the sale or transfer took place
before the filing of the free patent application, whether by the vendor or
the vendee, the prohibition should not be applied. In such situation, neither
the prohibition nor the rationale therefor which is
to keep in the family of the patentee that portion of the public land which
the government has gratuitously given him, by shielding him from the
temptation to dispose of his landholding, could be relevant. Precisely, he
had disposed of his rights to the lot even before the government could give
the title to him.
The mortgage executed in favor of RBSP is also beyond the pale of
the prohibition, as it was forged in December 1981 a few months past the
period of prohibition.
WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject to
the modifications herein. Respondent Rural Bank of San Pascual is hereby
ORDERED to PAY petitioners Fifty Thousand Pesos (P50,000.00) by way of
nominal damages. Respondents Consuelo Cruz and Rosalina Cruz-Bautista
are hereby DIVESTED of title to, and respondent Register of Deeds of
Meycauayan, Bulacan is accordingly ORDERED to segregate, the portion of
fifty (50) square meters of the subject Lot No. 2204, as depicted in the
approved plan covering the lot, marked as Exhibit A, and to issue a new title
covering the said portion in the name of the petitioners at the expense of
the petitioners. No costs.
SO ORDERED.
DANTE
CAGUNGUN V. PLANTERS DEVELOPMENT BANK, 473 SCRA 259 (2005)
Facts: The spouses Cagungun filed a suit against, then, Country
Development Bank (after a merger, known as Planters Development Bank).
Vicente Cagungun has since died and was substituted by their children as
plaintiff. Country opened an extension office in Olongapo City and the
Cagungun spouses opened some accounts with them, 2 of which, they were
issued Savings Passbooks, in the name of “Puring’s Dry Goods and Savings”
and “V/L Cagungun”. Cagungun spouses claimed that because of the nature
of their businesses, requiring daily deposits and their trust to Country, they
entrusted and left them with said saving passbooks, with the arrangement
that Branch manager, Ruperto Reyes, or a certain Bong and Ding would
collect their funds, round it off and deposit to their account. The remainder
of which would then be applied to their mortgage loan balance. The
arrangement went well, when they received a notice that their loan was
past due. Hence, they investigated, finding out that on the dates of October
8, 18, 20 and 31 and November 15, and December 4 and 8, with the use of
withdrawal slips, a total of P220,000.00 was withdrawn from their Savings.
These withdrawals were invalid for no such withdrawal was authorized,
made or received by the depositors, and the signatures of Vicente on the
slips were forgeries, as confirmed by the NBI Chief of Questioned
Documents Division. Planters did not cooperate with the investigation made
by the Cagungun spouses. Furthermore, they explained that the October 8
withdrawal of P20,000.00 and the other withdrawals of a total of
P30,000.00, were placed on time deposits by Vicente in 5 accounts held
with their children. And the other withdrawals were also made by Vicente in
exchange for Manager’s Checks made in the names of payees Santiago Lee,
Rosita Saldana, Benito Yap and Joaquin Aganda. Hence this petition.

Issue: Whether or not was grossly negligent and entitles the plaintiff for
damages
Held: YES, the bank was indeed grossly negligent when it allowed the sum
of P220,000.00 to be withdrawn through falsified withdrawal slips without
petitioners’ authority and knowledge and its failure to comply with
petitioners’ instruction to apply their deposits on their loan. In so doing,
respondent bank breached the trust that petitioners reposed on it.
We agree in the findings of the two courts below that the unauthorized
transactions were committed by one or some of the employees of
respondent bank for which it should be liable. The evidence showed that
respondent did not exercise the degree of diligence it ought to have
exercised in dealing with its clients -- diligence higher than that of a good
father of a family. If only respondent exercised such diligence, no anomaly
or irregularity would have happened.
Hence the court awards moral damages and exemplary damages – The
Cagungun spouses are granted moral damages for the reason that Planters
was grossly negligent when it allowed the P220,000.00 to be withdrawn and
its failure to comply with the instructions. As a settled rule, the gross
negligence of the bank in handling the deposit of its clients amounts to bad
faith and calls for an award of moral damages. Moral damages are meant to
compensate the claimant for any physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation and similar injuries unjustly caused. As a bank, it should
have exercised diligence higher than that of a good father of the family.
Furthermore, for the non-cooperation of Planters with the investigation
initially made by the Cagungun spouses, attempting to cover up the
misdeeds of its employees, exemplary damages are also to be awarded.