GR 82971; (September, 1989) (Digest)
G.R. No. 82971 September 15, 1989
PHILIPPINE NATIONAL BANK, petitioner, vs. THE HONORABLE COURT OF APPEALS, THE REGIONAL TRIAL COURT, JUDICIAL REGION V, BRANCH 43, EPIFANIO MATIENZO, AND FLORENCIA MATIENZO, respondents.
FACTS
The spouses Epifanio and Florencia Matienzo were the owners of a parcel of land. In 1977, they agreed to sell one-half of the property to the Molina partners for P20,800, as evidenced by a promissory note and an affidavit stating the true intent. However, the subsequently executed Deed of Absolute Sale covered the entire lot, with Domingo Molina appearing as the vendee. This deed was later used to transfer the title to Orlando Molina, who then mortgaged the whole property to the Philippine National Bank (PNB) to secure a loan. The Molinas defaulted on both their payment to the Matienzos and their loan to PNB. PNB foreclosed the mortgage, purchased the property at auction, and consolidated its ownership.
The Matienzos filed an action for reconveyance against the Molinas and the Manager of PNB’s Virac Branch. The trial court dismissed the case against the PNB Manager, finding no cause of action. It later dismissed the entire case, finding no actionable fraud. On appeal, the Court of Appeals reversed the trial court. It ordered the Molinas to pay the balance of the purchase price and, significantly, ordered PNB—declaring it a party on appeal—to reconvey one-half of the foreclosed property to the Matienzos.
ISSUE
Whether the Court of Appeals erred in ordering PNB to reconvey one-half of the mortgaged property to the Matienzos.
RULING
Yes, the Supreme Court granted PNB’s petition and annulled the appellate court’s order for reconveyance. The legal logic is anchored on the principles governing innocent mortgagees for value and proper party joinder. PNB was an innocent mortgagee in good faith and for value. It relied on Orlando Molina’s clean certificate of title, which showed no lien or encumbrance, and had no notice of the Matienzos’ unregistered claim over a half portion. The bank’s rights, having accrued from a regular foreclosure proceeding, are protected under the Torrens system.
Furthermore, the Court of Appeals committed a reversible error in procedure by purporting to join PNB as a party directly through its decision. PNB was an indispensable party to the suit for reconveyance affecting its titled property. However, it was never properly impleaded as a defendant; only its branch manager was sued, and the case against him was dismissed. The proper remedy for the appellate court, upon noticing the absence of an indispensable party, was to remand the case to the trial court to allow the Matienzos to amend their complaint and formally implead PNB. It could not, by a mere declaration in a decision, compel a non-party to comply with a judgment. Thus, the order against PNB was issued without jurisdiction and is void.