G.R. No. 193551 November 19, 2014
HEIRS OF GREGORIO LOPEZ, represented by Rogelia Lopez, et al., Petitioners, vs. DEVELOPMENT BANK OF THE PHILIPPINES [Now substituted by Philippine Investment Two (SPVAMC), Inc.], Respondents.

FACTS

Gregoria Lopez owned a property in Bustos, Bulacan. Upon her death in 1922, she was survived by her three sons: Teodoro, Francisco, and Carlos. Only Teodoro was survived by children: Gregorio, Enrique, Simplicio, and Severino. Petitioners are the heirs of Gregorio, Simplicio, and Severino. In 1990, Enrique executed an affidavit of self-adjudication, falsely declaring himself as Gregoria’s only surviving heir, and sold the entire property to Marietta Yabut. Petitioners demanded nullification of the affidavit and sale. Marietta later obtained a loan from respondent Development Bank of the Philippines (DBP) and mortgaged the property as security. An Original Certificate of Title was issued in Marietta’s name in 1993, and the mortgage was annotated. Petitioners filed a complaint for annulment of documents, recovery of possession, and reconveyance, and caused the annotation of a notice of lis pendens on the title in 1994. Marietta defaulted on her loan, DBP foreclosed the mortgage, and the property was consolidated in DBP’s favor after no redemption. The Regional Trial Court ruled in favor of petitioners, nullifying the affidavit, sale, and mortgage. The Court of Appeals reversed, holding DBP was a mortgagee in good faith.

ISSUE

Whether the property was validly transferred to Marietta Yabut and, eventually, to Development Bank of the Philippines.

RULING

No. The Supreme Court granted the petition and reversed the Court of Appeals. The affidavit of self-adjudication executed by Enrique Lopez was invalid as he falsely claimed to be the sole heir. Upon Gregoria’s death, her property passed to her heirs, and upon the deaths of her sons, their shares passed to their children, making Gregorio, Enrique, Simplicio, and Severino co-owners, each with a one-fourth undivided share. Applying the principle “nemo dat quod non habet” (no one can give what one does not have), Enrique could only validly convey his own one-fourth share to Marietta; the sale of the remaining three-fourths belonging to his co-heirs was void. Consequently, Marietta acquired only Enrique’s one-fourth share. DBP was not an innocent mortgagee for value. At the time the mortgage was constituted, the property was not yet registered under the Torrens system; it was only covered by a tax declaration. A tax declaration is not conclusive proof of ownership. DBP, as a banking institution, was required to exercise a higher degree of diligence in ascertaining the mortgagor’s title. The subsequent issuance of a certificate of title in Marietta’s name did not cure the defect, as the notice of lis pendens was annotated before the foreclosure, serving as a warning to all prospective buyers, including DBP. Therefore, the mortgage and the subsequent foreclosure sale were invalid with respect to the three-fourths share belonging to petitioners.