G.R. No. 165836 February 18, 2009
PHILIPPINE NATIONAL BANK, Petitioner, vs. ADELA SIA and ROBERT NGO, Respondents.

FACTS

Midcom Interline Development Corporation (MIDCOM) was the registered owner of a property covered by TCT No. 156156. On August 20, 1984, MIDCOM entered into a Contract to Sell the property to spouses Felicisimo and Myrna Galicia for ₱480,000, with an unpaid balance of ₱70,000. On October 1, 1984, MIDCOM sold the same property via a Deed of Absolute Sale to Apolonia Sia Ngo and respondent Adela Sia for ₱630,000. The Galicias were notified of the rescission of their contract. The Galicias filed a complaint for Specific Performance and Damages against MIDCOM, et al. (Civil Case No. 84-27347), causing the annotation of a notice of lis pendens on the title. Despite a temporary restraining order, TCT No. 156156 was cancelled and TCT No. 164726 was issued in the names of Apolonia S. Ngo and Adela Sia on February 26, 1985. On October 7, 1986, the RTC decided in favor of the Galicias, ordering MIDCOM to execute a deed of sale, and the Register of Deeds to issue title to the Galicias. Upon finality, a writ of execution was issued, TCT No. 164726 was cancelled, and TCT No. 195378 was issued in the Galicias’ name on January 22, 1991. On January 23, 1991, the Galicias mortgaged the property to Philippine National Bank (PNB) to secure a ₱5,000,000 loan. Respondents Adela Sia and Robert Ngo filed various petitions challenging the decision in Civil Case No. 84-27347 for lack of jurisdiction due to non-inclusion of indispensable parties, but these were denied by the Court of Appeals and the Supreme Court (G.R. No. 103054). Respondents then filed a complaint for quieting of title (Civil Case No. 91-58130) before the RTC, later amended to implead PNB. The RTC dismissed the complaint, holding it was barred by res judicata, but ordered MIDCOM to pay respondents the purchase price. On appeal, the Court of Appeals reversed the RTC, declaring respondents as co-owners, ordering the cancellation of the Galicias’ title and the reinstatement of respondents’ title, and holding PNB as a mortgagee in bad faith. PNB filed this petition for review.

ISSUE

Whether the Court of Appeals erred in reversing the RTC decision and in declaring respondents as co-owners entitled to reinstatement of their title, and in finding PNB to be a mortgagee in bad faith.

RULING

The Supreme Court GRANTED the petition, REVERSED and SET ASIDE the Decision and Resolution of the Court of Appeals, and REINSTATED the August 29, 1994 Decision of the RTC. The Court held that the action for quieting of title was barred by res judicata. The issues raised by respondents had already been conclusively settled by the final and executory decision in Civil Case No. 84-27347, which ordered the conveyance of the property to the Galicias and the cancellation of the title in the names of Apolonia Ngo and others. Respondents’ repeated attempts to nullify that judgment via certiorari and annulment of judgment petitions had been denied with finality. The Court also found that PNB was a mortgagee in good faith. The mortgage was executed on January 23, 1991, after TCT No. 195378 was issued in the Galicias’ name on January 22, 1991. PNB had the right to rely on the face of the title, which showed the Galicias as the registered owners, and was not required to look beyond the certificate of title. The Court of Appeals’ inference of bad faith based on the dates of the loan application and recommendation was erroneous, as these were mere preliminary steps and the mortgage was perfected only after the title was issued to the mortgagors.