Philippine National Bank vs. Court of Appeals

The Article 160 presumption that property of the marriage belongs to the conjugal partnership does not prevail against an innocent third party who deals with registered land titled solely in the name of a widow and relies on the face of the Torrens certificate. Where the title states acquisition by a widow and shows no lien or encumbrance, a mortgagee acting without actual knowledge of any flaw is a mortgagee in good faith, and as purchaser for value at foreclosure its right is beyond question.

Clodualdo Vitug contracted two marriages: first to Gervacia Flores, with three children and grandchildren from deceased sons, and second to Donata Montemayor, with eight children or their heirs. Clodualdo died intestate on May 20, 1929, and his estate was settled in Special Proceeding No. 422 of the Court of First Instance of Pampanga with Donata as administratrix. Prior litigation between the two sets of heirs in Vitug vs. Montemayor had found 30 parcels to be conjugal, while the titles thereafter stood solely in the name of Donata Montemayor, widow, under the Torrens system governed by Act 496 and the Civil Code presumption in Article 160.

Donata Montemayor was the second wife of Clodualdo Vitug, who died intestate on May 20, 1929 leaving children of both marriages. After his death, several parcels were covered by Transfer Certificates of Title in the name of Donata Montemayor, of legal age, Filipino, widow and resident of Lubao, Pampanga, free from all liens and encumbrances.

On November 28, 1952, Donata, through her son Salvador M. Vitug, mortgaged to Philippine National Bank several parcels covered by Transfer Certificate of Title No. 2289-Pampanga to guarantee the P40,900.00 loan granted to Salvador Jaramilla and Pedro Bacani, duly registered in Pampanga. On December 1, 1963, she likewise mortgaged properties covered by TCT Nos. 2887 and 2888-Pampanga to guarantee the P35,200.00 loan account of her son Salvador Vitug, also duly registered. Meanwhile, on May 12, 1958, Donata leased Lot No. 24 covered by TCT No. 2887-R to her children Pragmacio and Maximo Vitug, extended on August 31, 1963; by virtue of a general power of attorney executed September 19, 1966 in favor of Pragmacio, the latter executed on September 19, 1967 a lease of said lot in favor of Maximo.

When Salvador Vitug failed to pay, the bank foreclosed the TCT Nos. 2887 and 2888 properties, sold at public auction on May 20, 1968 with PNB as highest bidder, and consolidated title in its name. When Jaramilla and Bacani failed to settle, PNB likewise foreclosed the properties covered by TCT No. 2889, bought them at public auction, obtained a certificate of sale on August 30, 1968, and consolidated title in its name. On September 2, 1969, PNB sold the TCT Nos. 2887 and 2888 properties to Jesus M. Vitug, Anunciacion V. de Guzman, Prudencia V. Fajardo, Salvador Vitug and Aurora V. Gutierrez, in whose names corresponding titles were issued.

According to Pragmacio and Maximo, the 30 parcels were conjugal property of Clodualdo and Donata, entitling them to 2/11 of one-half thereof, and the mortgages and auctions were null and void in light of Vitug vs. Montemayor, L-5297, decided October 20, 1953, finding the properties conjugal. On March 21, 1970, they filed partition, reconveyance and damages against the special administrator of Donata's estate, their co-heirs, and PNB. The trial court found the titles stood exclusively in Donata's name as widow without encumbrance, that plaintiffs had dealt with her as owner-lessor and long known of the mortgages and sales without action, and dismissed the suit.

• Stare Decisis and Prior Conjugal Finding: Petitioner argued that the ruling in Florencia Vitug vs. Donata Montemayor, et al., 91 Phil. 286 (1953) should not control because a provision of a special law prevails over judicial interpretation of a general law, stare decisis is not a mechanical formula of adherence, PNB was not a party thereto and had no knowledge thereof, and similarly Pragmacio and Maximo were not parties therein.
• Conclusiveness of Torrens Title: Petitioner maintained that the conclusiveness of the certificate of title under Act 496, as amended, must be recognized, the properties being registered exclusively in the name of Donata Montemayor as widow and free from liens and encumbrances.
• Estoppel by Lease: Petitioner argued that private respondents, as lessees who entered into contracts of lease with Donata as owner-lessor, were concluded as to her ownership and could not dispute it.
• Good Faith Mortgagee: Petitioner maintained that PNB was not a mortgagee in bad faith, having relied on the face of the titles without awareness of any flaw.

• Conjugal Character and Share: Respondents claimed the 30 parcels were conjugal property of spouses Donata Montemayor and Clodualdo Vitug, of which they claimed a share of 2/11 of one-half thereof.
• Nullity of Mortgage and Auction: Respondents assailed the mortgages to PNB and the public auction sales as null and void, invoking Vitug vs. Montemayor, L-5297, decided October 20, 1953, as an action for partition and liquidation wherein the properties were found to be conjugal in nature.

• Conjugality Presumption vs. Torrens Title: Whether the Article 160 presumption of conjugality of properties acquired during coverture applies to property covered by a Torrens certificate in the name of the widow against an innocent third party.
• Conclusiveness of Title and Good Faith: Whether PNB, which relied on Torrens titles in the name of Donata Montemayor as widow, was a mortgagee and purchaser for value in good faith.
• Binding Effect of Prior Decisions: Whether the earlier Vitug vs. Montemayor decisions finding the 30 parcels conjugal bind PNB which was not a party thereto.
• Estoppel and Laches: Whether Pragmacio and Maximo Vitug, as lessees of Donata and long aware of the mortgages and sales, are estopped and guilty of laches in questioning her title.

• Conjugality Presumption vs. Torrens Title: No. The presumption cannot prevail where title is in the name of only one spouse who appears as widow and innocent third-party rights are involved, with no showing of when the spouse acquired the property.
• Conclusiveness of Title and Good Faith: Yes. PNB had the right to rely solely on what appeared on the certificates and was a mortgagee in good faith and purchaser for value in good faith at foreclosure.
• Binding Effect of Prior Decisions: No. Recovery and partition are actions in personam binding only parties thereto, and PNB, not a party and unaware of the decisions, is not bound.
• Estoppel and Laches: Yes. As occupants-lessees respondents cannot dispute the lessor's ownership, having asserted paraphernal exclusivity, long acquiesced, and sued only after 17 years.

• Conjugality Presumption vs. Torrens Title: Article 160 presumes property of the marriage belongs to the conjugal partnership unless proved exclusive, applied to property acquired during the husband and wife's lifetime. Here the titles on their face showed acquisition by Donata when already a widow, and where property is registered in one spouse's name alone with no showing of time of acquisition, exclusivity is indicated. Precedent holds the Article 160 presumption yields when title is in one spouse only and innocent third-party rights intervene.
• Conclusiveness of Title and Good Faith: One dealing with registered land may rely on the face of the Torrens certificate without further inquiry, absent actual knowledge of facts impelling inquiry by a reasonably cautious person. The certificates showed Donata as widow-owner without liens or encumbrances, giving PNB reason to rely in granting the loans and constituting registered mortgages. A Torrens title concludes controversy over ownership, allowing the owner and those dealing with the owner to rest assured; PNB, unaware of any flaw at constitution, and as highest bidder for value at public auction, held rights beyond question.
• Binding Effect of Prior Decisions: Although the May 15, 1952 recovery action and October 20, 1953 partition action found the 30 parcels conjugal and awarded Florencia Vitug her share, the trial court therein observed Clodualdo's unequivocal intention to transmit full ownership to Donata, treating one-half of conjugal funds advanced as reimbursable to his estate — explaining registration in Donata's name as widow. In any event, real actions for recovery and partition operate in personam as to the particular individuals who are parties. PNB was never a party nor shown aware of those decisions when it extended the loans; had it known of conjugality it would have required consent of all heirs or co-owners.
• Estoppel and Laches: Private respondents in the two earlier cases answered that the properties were paraphernal and exclusively Donata's, not conjugal. They then leased from their mother as owner for many years, possessed the property, and knew of the mortgages to PNB and subsequent auction sales yet did nothing until asserting rights after 17 years. Laches therefore barred the claim, and as lessees they could not dispute the lessor-owner's title under Section 3(b), Rule 131.

• Reliance on Torrens Certificate of Title — A person dealing with registered land has a right to rely on the face of the Torrens certificate and dispense with further inquiry, except when possessed of actual knowledge of facts and circumstances that would impel a reasonably cautious person to inquire. The Court applied it to sustain PNB's reliance on titles showing Donata Montemayor as widow-owner free of liens in granting and registering the mortgage loans.
• Conclusiveness of Torrens Title — A Torrens title, upon final decree of registration, concludes all controversy over ownership of the land covered, so the owner may rest assured without resort to courts to preserve the land. The Court applied it to protect both Donata's registered ownership as it appeared and PNB's derivative mortgage and foreclosure-purchase rights.
• Article 160 Conjugal Presumption and Its Limit — All property of the marriage is presumed conjugal unless proved exclusive to husband or wife, applying to property acquired during the spouses' lifetime; but when property is registered in one spouse alone with no showing of time of acquisition, exclusivity is indicated, and the presumption cannot prevail where title is in one spouse only and innocent third-party rights are involved. The Court applied it to deny extension of the prior conjugal finding against PNB, an innocent mortgagee-purchaser.
• Actions in Personam in Recovery and Partition — Although actions for recovery of real property and partition are real actions, they bind only the particular individuals who are parties thereto. The Court applied it, citing Ang Lam vs. Rosillosa and Hernandez vs. Rural Bank of Lucena, to hold the Vitug vs. Montemayor conjugal findings non-binding on PNB as non-party.
• Mortgagee and Purchaser in Good Faith — A mortgagee unaware of any flaw at constitution and a foreclosure purchaser for value without notice take rights beyond question. The Court applied it to hold PNB a good-faith mortgagee when the mortgages were constituted and a good-faith purchaser at the public auctions.
• Estoppel of Lessee and Laches — A lessee-occupant cannot dispute the lessor's ownership, and unreasonable delay in asserting a known right bars recovery. The Court applied it to bar Pragmacio and Maximo Vitug, who leased from Donata as owner, previously asserted her exclusive paraphernal ownership, long acquiesced in the mortgages and sales, and sued only after 17 years.

• "The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely upon the face of the torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man make such inquiry." — States the controlling reliance rule that made PNB a good-faith mortgagee entitled to dispense with inquiry beyond the widow's clean title.
• "A torrens title concludes all controversy over ownership of the land covered by a final degree of registration." — Defines the conclusiveness of registration relied upon to protect titles derived from Donata's Torrens certificates.
• "When the property is registered in the name of a spouse only and there is no showing as to when the property was acquired by said spouse, this is an indication that the property belongs exclusively to said spouse." — Limits the Article 160 conjugality presumption where, as here, the face of the title showed acquisition by a widow.
• "At any rate, although actions for recovery of real property and for partition are real actions, however, they are actions in personam that bind only the particular individuals who are parties thereto." — Explains why the earlier conjugal findings in Vitug vs. Montemayor did not bind PNB as a non-party.

• Vitug vs. Montemayor, 91 Phil. 286 and 93 Phil. 99 — Earlier recovery and partition decisions finding the 30 parcels conjugal; invoked by respondents but held not binding on PNB as non-party and distinguished because of Torrens reliance and good faith.
• Capital Subdivision vs. Province of Negros Occidental, L-16257 and Fule vs. Legare, L-17951 — Authorities for the rule allowing reliance on the face of the Torrens title; followed to sustain PNB's good faith.
• Legarda and Prieto vs. Salleeby, 31 Phil. 590 — Authority that Torrens title concludes ownership controversy; followed on conclusiveness of registration.
• Director of Lands vs. Court of Appeals, 122 SCRA 37 — Authority that a registered owner may rest assured without guarding against loss; followed on security of title.
• Maramba vs. Lozano, 20 SCRA 474 — Authority that registration in one spouse alone without showing time of acquisition indicates exclusivity; followed to limit Article 160.
• Nable Jose vs. Nable Jose, 41 Phil. 713; Seva vs. Nolan — Authorities that Article 160 presumption cannot prevail against innocent third parties where title is in one spouse only; followed.
• Cui and Joven vs. Henson, 51 Phil. 606; Roxas vs. Dinglasan, L-27234 — Authorities on good-faith mortgagee status absent awareness of flaw; followed for PNB.
• Arches vs. Billanes, L-20452 — Authority supporting purchaser for value in good faith at auction; followed for PNB's foreclosure purchase.
• Ang Lam vs. Rosillosa, L-3595; Hernandez vs. Rural Bank of Lucena, L-29791 — Authorities that recovery and partition bind only parties as actions in personam; followed to exclude PNB.
• Tijam vs. Sibonghanoy, L-21450 — Authority on laches; followed to bar respondents' delayed assertion after 17 years.

• Article 160, Civil Code — Provides all property of the marriage is presumed conjugal unless proved exclusive; held inapplicable against PNB because titles showed the widow's sole ownership and innocent third-party rights intervened.
• Act 496, as amended (Land Registration Act) — Provides conclusiveness of the certificate of title; applied to uphold PNB's right to rely on Donata's clean Torrens titles in constituting and registering the mortgages.
• Section 3(b), Rule 131, Rules of Court — Estops a tenant from denying the landlord's title; applied to preclude respondents as lessees from disputing Donata's ownership.

Teehankee, C.J., Narvasa and Cruz, JJ., concur. Paras, J., concur in the result.