G.R. No. L-17641; January 30, 1965
Register of Deeds, petitioner-appellee, vs. Philippine National Bank, oppositor-appellant.

FACTS

Datu Sinarimbo Binasing was the original owner of four lots, with Original Certificates of Title (OCTs) issued in his name in 1935. On July 23, 1938, he sold these lots to Soledad C. de Teruel, and Transfer Certificates of Title (TCTs) were issued in her name. During the Pacific War, the Office of the Register of Deeds was burned, destroying the records, including the OCTs in Binasing’s name. In 1947, Datu Binasing secured certified copies of the decrees and, based on an affidavit falsely stating he had never secured titles for the lots, obtained new OCTs in his name from the Register of Deeds. Using these new titles as security, Binasing obtained a loan from the Philippine National Bank (PNB). The mortgage was later extrajudicially foreclosed, with PNB as the highest bidder. Meanwhile, in 1948, Soledad C. de Teruel procured a reconstitution of her TCTs. Discovering the existence of two sets of titles for the same lots in different names, the Register of Deeds filed a petition to cancel the 1947 OCTs issued to Binasing on the ground they were issued erroneously based on false representations. PNB opposed, claiming protection as an innocent mortgagee for value.

ISSUE

Whether the Philippine National Bank, as an innocent mortgagee for value, is entitled to protection under the Torrens System, thereby preventing the cancellation of the erroneously issued certificates of title in the name of Datu Binasing.

RULING

No. The Supreme Court affirmed the lower court’s decision ordering the cancellation of the 1947 OCTs issued to Datu Binasing and declaring valid the TCTs of Soledad C. de Teruel. The indefeasibility of a Torrens title cannot be claimed if a previous valid title to the same land already exists. The titles issued to Teruel in 1938 are prior and therefore superior to the titles issued to Binasing in 1947. The principle of “prior in tempore, potior in jure” applies. A mortgagee cannot acquire a better title than what the mortgagor possesses; since Binasing had no valid title after the 1938 sale, he could not transmit any title to PNB. The Bank’s claim to protection as an innocent mortgagee for value fails because the mortgagor had no true title to the land. The Court noted that PNB’s recourse, if any, would be against the Assurance Fund. It also addressed a procedural question, stating that Soledad C. de Teruel was not a necessary party to the petition, as the action sought only to cancel the erroneously issued OCTs to protect the Register of Deeds, and her titles were not being questioned.