G.R. No. 171628 ; June 13, 2011
ARMANDO V. ALANO [Deceased], Substituted by Elena Alano-Torres, Petitioner, vs. PLANTER’S DEVELOPMENT BANK, as Successor-in-Interest of MAUNLAD SAVINGS and LOAN ASSOCIATION, INC., Respondent.

FACTS

Petitioner Armando V. Alano and his late brother Agapito V. Alano, Jr. inherited a parcel of land in Manila. Using proceeds from its sale, they purchased a residential house in Quezon City on September 22, 1988. The title was not immediately transferred due to a fire at the Quezon City Hall. Upon Agapito’s death on June 27, 1990, his wife Lydia and their four children adjudicated the Quezon City property to themselves, resulting in the issuance of TCT No. 18990 solely in their names. Petitioner executed an Affidavit of Adverse Claim, which was annotated on the title. Lydia later filed an Affidavit of Cancellation of Adverse Claim, causing its cancellation. Subsequently, through a Deed of Absolute Sale from her children, TCT No. 18990 was cancelled and TCT No. 90388 was issued solely in Lydia’s name. On February 8, 1994, Slumberworld, Inc., represented by its President Melecio A. Javier and Treasurer Lydia, obtained a loan of ₱2.3 million from respondent Maunlad Savings and Loan Association, Inc., secured by a Real Estate Mortgage over the property covered by TCT No. 90388. Petitioner filed a complaint seeking cancellation of TCT No. 90388, issuance of a new title for his one-half share, and nullification of the mortgage on his share. The Regional Trial Court (RTC) declared petitioner the owner of one-half of the property based on an implied trust but sustained the validity of the mortgage, finding Maunlad to be a mortgagee in good faith entitled to rely on the Torrens title. The Court of Appeals affirmed the RTC decision.

ISSUE

1. Whether the real estate mortgage executed by Lydia J. Alano was valid and binding with respect to petitioner’s co-owner’s share in the subject property.
2. Whether Maunlad Savings and Loan Association, Inc. was an innocent mortgagee in good faith.
3. Whether petitioner may rightfully be made to suffer the consequences of Lydia J. Alano’s wrongful act of mortgaging the subject property.

RULING

The Supreme Court granted the petition. It held that Maunlad Savings and Loan Association, Inc. was not a mortgagee in good faith. Banks and financial institutions, imbued with public interest, are held to a higher standard of care and due diligence than ordinary individuals. They must exercise extraordinary diligence in ascertaining the status and ownership of properties offered as collateral. Maunlad failed in this duty. Its credit investigator admitted during cross-examination that the ocular inspection was cursory, checking only the house’s finishing and number of rooms, and failed to discover petitioner’s apartment at the back of the property or ascertain the actual occupants. Furthermore, while the adverse claim had been cancelled from TCT No. 90388, Maunlad’s failure to conduct a more thorough investigation, given the property’s history and the circumstances, demonstrated a lack of the required diligence. Consequently, the mortgage was void with respect to petitioner’s one-half undivided share in the property. The principle “no one can give what he does not have” (Nemo dat quod non habet) applies. Lydia could only mortgage her own interest, not the share belonging to petitioner as co-owner. The Court ordered the Register of Deeds to cancel TCT No. 90388 and issue a new title in the names of Armando V. Alano (½ share) and Lydia J. Alano (½ share), free from the mortgage lien. The case was recognized as an exception to the rule barring factual reviews under Rule 45, as the lower courts’ findings were based on a misapprehension of facts.