PACIFICO GARCIA and PHILIPPINE NATIONAL BANK, petitioners-appellants, vs. BENJAMIN M. GOZON, et al., and COURT OF APPEALS, et al., respondents-appellees.
FACTS
The case involves a double titling controversy over two parcels of land (Lots E and G) originally part of Hacienda Maysilo covered by Original Certificate of Title (OCT) No. 983. On August 9, 1918, a deed of sale for these lots was executed in favor of Ismael Lapus. This deed was registered on January 15, 1920, leading to the issuance of Transfer Certificate of Title (TCT) No. 4910 to Lapus and TCT No. 4911 for the remaining lots from OCT No. 983. Lapus and his successors, including his daughter Carolina Lapuz-Gozon, possessed the lots for over seventy years. However, due to an unexplained anomaly, OCT No. 983 was not cancelled as it should have been.
In 1962, alleged heirs of Maria de la Concepcion Vidal (the Riveras) moved to claim the land under the uncancelled OCT No. 983. The court granted their motion, cancelling OCT No. 983 and issuing TCT No. 112236 to the Riveras in 1963. Lots 5 and 7 from this title, corresponding to the original Lots E and G, were subsequently assigned to Sergio Cruz and Pacifico Garcia, who obtained separate TCTs. Garcia and Cruz later mortgaged or sold their lots to third parties, including the Philippine National Bank (PNB). This resulted in two sets of TCTs for the same land: one derived from Lapus’s 1920 title and another from the Riveras’ 1963 title.
ISSUE
The core issue is which of the two conflicting sets of transfer certificates of title should prevail, given the principle of indefeasibility of a Torrens title.
RULING
The Supreme Court ruled in favor of the respondents-appellees, the successors of Ismael Lapus, affirming the Court of Appeals. The legal logic hinges on the fundamental principle of land registration that the earlier certificate of title issued is superior and must prevail. TCT No. 4910, issued to Lapus in 1920 upon registration of the 1918 deed of sale, is the earlier title. The subsequent issuance of TCT No. 112236 to the Riveras in 1963, based on the anomalously uncancelled OCT No. 983, was invalid as the original title had already been effectively replaced. The Torrens system cannot countenance two certificates of title for the same land; the first in time is controlling.
The Court rejected the petitioners’ arguments. It held that PNB could not be considered a mortgagee or purchaser in good faith. A mortgagee must exercise due diligence by conducting an on-the-spot investigation to verify the mortgagor’s possession and claims. PNB’s failure to do so negates good faith. Furthermore, the notice of lis pendens annotated on the title before PNB’s purchase at auction provided clear warning. The anomaly of the uncancelled OCT No. 983 was not attributable to Lapus or his heirs, who were bona fide occupants and purchasers. Therefore, the title originating from the 1920 registration is indefeasible and superior.
