GR 164801; (June, 2006) (Digest)
G.R. No. 164801 & G.R. No. 165165 ; June 30, 2006
PHILIPPINE NATIONAL BANK and SPOUSES JOHNNY LUCERO AND NONA ARIETE, Petitioners, vs. HEIRS OF ESTANISLAO MILITAR, et al., Respondents.
FACTS
The case involves consolidated motions for reconsideration. The Heirs of Estanislao Militar filed a complaint for annulment of sale, mortgage, and titles against petitioners. The property in question was originally owned by Estanislao Militar. Through forged deeds of sale, the title was transferred to a certain Apolonio G. Militar, who then mortgaged it to Philippine National Bank (PNB) and later sold it to Spouses Johnny Lucero and Nona Ariete. The Heirs, who were in actual possession of the land, sought to recover it. The trial court and the Court of Appeals ruled in favor of the Heirs, declaring the deeds and titles null and void and ordering the property’s reconveyance.
The appellate court found that PNB was not a mortgagee in good faith because it failed to conduct an ocular inspection of the property, which would have revealed the Heirs’ possession and cast doubt on the mortgagor’s claim. Similarly, the Lucero Spouses were not buyers in good faith because they purchased the property despite knowing it was occupied by persons other than their vendor. They failed to investigate the nature of this possession, which constitutes negligence.
ISSUE
Whether petitioners PNB and the Lucero Spouses are mortgagees and buyers in good faith, respectively, entitled to protection under the Torrens system.
RULING
The Supreme Court denied the motions for reconsideration and affirmed its prior decision. The Court reiterated the legal principle that while the Torrens system protects innocent purchasers for value, this protection is not absolute. A purchaser or mortgagee cannot ignore facts that should prompt a reasonable person to investigate. When a property is in the possession of someone other than the vendor or mortgagor, the duty arises to inquire into the possessor’s rights.
PNB failed in this duty by not inspecting the property. An inspection would have revealed the Heirs’ actual, adverse possession, putting the bank on notice of a potential flaw in the mortgagor’s title. Similarly, the Lucero Spouses were aware of occupants on the land but willfully omitted to verify the status of their possession. This failure to exercise due diligence precludes them from claiming good faith status. Consequently, as they were not in good faith, the forged documents in their chain of title could not become the root of valid rights over the property. The forged deeds remained void, and the rightful owners, the Heirs in possession, were entitled to recover the land.