GR 47566; (July, 1942) (Digest)
G.R. No. 47566; July 3, 1942
THE DIRECTOR OF LANDS, petitioner, vs. BASILIO ABACHE, ET AL., claimants; SANTIAGO, movant-appellee, vs. LUIS MENESES, oppositor-appellant.
FACTS
In a cadastral proceeding in the Court of First Instance of Albay, Lina F. de Vda. Imperial and Santiago Imperial claimed lot No. 8305, with Santiago asserting ownership and Lina asserting a usufructuary right as a widow. After a hearing where Santiago Imperial was the sole witness, the court initially awarded the lot to them. However, the subsequently rendered written decision awarded the lot to Inocencio, Simeona, David, Constancio Salvacion, and Solomon, all surnamed Adornado, who had neither presented a claim nor appeared at the trial. Original certificate of title No. 15150 was then issued in the Adornados’ names. The Adornados later mortgaged the lot to Luis Meneses. Santiago Imperial filed a motion to have the certificate of title and the mortgage lien declared null and void and to have a new title issued in his favor, as his mother had died.
ISSUE
Whether a certificate of title issued by a cadastral court in favor of persons who filed no claim and asserted no right can be declared null and void when an innocent third party (a mortgagee) has acquired rights relying on that title.
RULING
The Court modified its initial ruling. It held that a cadastral court has no authority to award property to persons who filed no claim and asserted no right of ownership, and a certificate of title issued under such circumstances is null and void. However, when innocent third persons, like a mortgagee, acquire rights over the property in good faith and for value, relying on the correctness of the certificate of title, the court cannot disregard such rights and order the total cancellation of the certificate. To do so would impair public confidence in the Torrens System, as it would force parties to inquire behind every certificate of title. The law (Section 39 of Act No. 496) protects those who take a certificate of title for value and in good faith.
The Court modified the judgment accordingly: Certificate of Title No. 15150 issued to the Adornados was declared null and void, and a new certificate was ordered issued in favor of Santiago Imperial, but subject to the mortgage lien of Luis Meneses noted on the old title. Meneses was allowed to sue both the Adornados (as primary obligors) and Santiago Imperial (as owner) for his mortgage credit, without prejudice to any right Santiago Imperial may have against the assurance fund.