G.R. No. 250636, January 10, 2023
MERLINDA PLANA, PETITIONER, VS. LOURDES TAN CHUA AND HEIRS OF RAMON CHIANG, RESPONDENTS.

FACTS

The case involves parcels of land covered by Transfer Certificates of Title (TCTs) issued pursuant to a December 17, 1975 “Deed of Definite Sale” executed between petitioner Merlinda Plana and her then second husband, Ramon Chiang. This Deed was subsequently declared void by the Supreme Court in Modina v. Court of Appeals for being simulated and devoid of consideration. One parcel from this void sale (under TCT No. T-86916), not a subject in Modina, was mortgaged to a third person, respondent Lourdes Tan Chua, prior to the ruling of invalidation. The ponencia (main decision) applied existing doctrines to uphold the mortgage’s validity, citing the mortgagee’s right to rely on the certificate of title, the prior mortgage to the Development Bank of the Philippines (presumed diligent), public policy favoring good faith mortgagees, and that a void title can become a root of a valid derivative title obtained in good faith and for value.

ISSUE

Whether the existing doctrines that award disputed lands to innocent mortgagees for value, instead of the true landowners, should be revisited.

RULING

In his Separate Opinion, Chief Justice Gesmundo respectfully disagrees with the ponencia and proposes a thorough jurisprudential re-evaluation of the doctrines protecting innocent mortgagees over true landowners. He argues that a certificate of title is merely evidence of ownership and cannot be used to perpetuate fraud against the true owner. He emphasizes that for a valid mortgage under Article 2085 of the Civil Code, the mortgagor must be the absolute owner (nemo dat quod non habet). He highlights that the void Deed of Definite Sale violated Article 1490 of the Civil Code, which prohibits sales between spouses, making the contract void. Since the sale was declared void in Modina, the petitioner has a right to reconveyance. The opinion traces the doctrine protecting innocent mortgagees to Blanco v. Esquierdo and Section 32 of the Property Registration Decree but suggests it may have been misinterpreted. He posits that the protection for “innocent purchasers for value” extended to mortgagees might only apply to situations involving a “decree of registration” from original registration proceedings, not to subsequent dealings involving already registered land under Section 53 of the Property Registration Decree. He concludes that the Court should re-examine whether the true owner’s right to recover property based on a void title should be subordinated to a mortgagee who relied on that same void title, as the current rule may unjustly enrich one party at the expense of the true owner and undermine the Torrens system’s integrity.