Philippine National Bank vs. Garcia

A co-owner cannot validly mortgage the entire co-owned property without the consent of the other co-owners; the mortgage remains valid only to the extent of the mortgagor's undivided share in the property, and is void as to the shares of the non-consenting co-owners.

Jose Garcia Sr. acquired a parcel of residential land located in Barrio Olango, Mallig, Isabela during his marriage to Ligaya Garcia. Ligaya died on January 21, 1987, survived by Jose Sr. and their children Nora, Jose Jr., Bobby, and Jimmy. In 1989, Spouses Rogelio and Celedonia Garcia obtained a loan facility from the Philippine National Bank (PNB), which they increased over time to P600,000.00. To secure the increased obligation, Jose Sr. executed Special Powers of Attorney in 1992 and 1993 authorizing the Spouses Garcia to mortgage the subject property covered by TCT No. T-44422, which was registered solely in Jose Sr.'s name as "widower." Jose Sr. also executed an Amendment of Real Estate Mortgage in favor of PNB. All these transactions were effected without the knowledge or consent of Jose Sr.'s children.

• Jose Garcia Sr. acquired the subject property during his marriage to Ligaya Garcia, as evidenced by his testimony admitting he was already married at the time of purchase.
• Ligaya Garcia died on January 21, 1987, leaving Jose Sr. and their children Nora, Jose Jr., Bobby, and Jimmy as compulsory heirs.
• The subject property, covered by TCT No. T-44422, was registered solely in the name of Jose Sr. as "widower."
• In 1989, Spouses Rogelio and Celedonia Garcia obtained a loan from PNB, which eventually increased to P600,000.00.
• Jose Sr. executed Special Powers of Attorney dated April 14, 1992 and October 6, 1993, authorizing the Spouses Garcia to secure loans and mortgage the subject property.
• Jose Sr. executed an Amendment of Real Estate Mortgage over the entire subject property to secure the Spouses Garcia's loan, without the knowledge or consent of his children.
• The loan matured on April 20, 1994, and remained unpaid despite demands.
• On January 12, 1996, the respondents (Jose Sr.'s children) filed a complaint for nullity of the mortgage, alleging the property was conjugal and they were co-owners entitled to their mother's share.
• During the proceedings, the children executed a Special Power of Attorney dated May 31, 1996, authorizing Jose Sr. to act as their attorney-in-fact for pretrial purposes.
• The Spouses Garcia claimed Jose Sr. volunteered the property as security to settle his own debt to them amounting to P133,800.00.

• The subject property was registered solely in Jose Sr.'s name as "widower," indicating it was his exclusive property and no longer conjugal.
• As a mortgagee in good faith, PNB had the right to rely on the mortgagor's certificate of title and had no obligation to investigate further whether the property was conjugal or exclusive property.
• Under Article 428 of the Civil Code, Jose Sr., as owner, had the right to mortgage the property without his children's consent.
• The issues raised are factual in nature (whether the property is conjugal and whether PNB is a mortgagee in good faith), which are beyond the scope of review under Rule 45 of the Rules of Court.

• The issues raised by petitioner are essentially factual; hence, they are beyond the competence of the Supreme Court in a petition for review under Rule 45.
• Only questions of law may be entertained in a certiorari petition under Rule 45 because the Supreme Court is not a trier of facts.

• Procedural:
  • Whether the petition raises questions of law or questions of fact, and whether the Supreme Court may review factual findings in a Rule 45 petition.
• Substantive Issues:
  • Whether the subject property is conjugal property or the exclusive property of Jose Garcia Sr.
  • Whether PNB is a mortgagee in good faith entitled to protection.
  • Whether the Amendment of Real Estate Mortgage executed by Jose Sr. over the entire property without the consent of his children is valid as to the entire property or only to Jose Sr.'s share.

• Procedural:
  • The petition raises questions of fact (whether the subject property is conjugal and whether PNB is a mortgagee in good faith), which cannot be entertained in a petition for review under Rule 45 as the Supreme Court is not a trier of facts.
  • The Court is bound by the factual findings of the Court of Appeals affirming those of the trial court absent any clear showing of arbitrariness, capriciousness, or palpable error.
• Substantive:
  • The subject property is conjugal in nature under Article 160 of the Civil Code because it was acquired during the marriage of Jose Sr. and Ligaya; registration in the name of one spouse alone does not destroy the presumption that property acquired during marriage is conjugal.
  • Upon Ligaya's death on January 21, 1987, the conjugal partnership was automatically dissolved under Article 175(1) of the Civil Code, and the property was converted into an implied ordinary co-ownership between Jose Sr. and his children as compulsory heirs under Article 777 of the Civil Code.
  • Under Article 493 of the Civil Code, a co-owner may only mortgage his undivided share; the effect of the mortgage with respect to the other co-owners is limited to the portion allotted to the mortgagor upon partition.
  • The mortgage executed by Jose Sr. over the entire property without his children's consent is void insofar as it affects their undivided shares, but remains valid as to Jose Sr.'s share (consisting of his half of the conjugal partnership plus his share as heir in the other half).
  • PNB failed to present strong, clear, and convincing evidence to rebut the presumptive conjugal nature of the property.

• Presumption of Conjugal Partnership — Under Article 160 of the Civil Code, all property acquired during marriage is presumed to belong to the conjugal partnership unless it can be proven that it pertains exclusively to one spouse. This presumption is not defeated by mere registration in the name of one spouse.
• Mortgagee in Good Faith — A mortgagee has the right to rely on what appears in the certificate of title and is not required to investigate further absent circumstances that would arouse suspicion; however, this protection does not extend to mortgagees who fail to verify facts that would affect the validity of the mortgage over property that may be co-owned.
• Co-ownership under Article 493 of the Civil Code — Each co-owner has full ownership of his undivided share and may alienate or mortgage it, but the effect of such alienation or mortgage is limited to the portion that may be allotted to him upon termination of the co-ownership; a co-owner cannot mortgage the specific portions of other co-owners without their consent.
• Conversion of Conjugal Partnership to Co-ownership — Upon the death of either spouse, the conjugal partnership of gains is automatically dissolved and terminated, and the property is converted into an implied ordinary co-ownership between the surviving spouse and the heirs of the deceased spouse, pending liquidation and partition.

• "Registration of a property alone in the name of one spouse does not destroy its conjugal nature. What is material is the time when the property was acquired."
• "In order to rebut the presumptive conjugal nature of the property, the petitioner must present strong, clear and convincing evidence of exclusive ownership of one of the spouses."
• "While under Article 493 of the New Civil Code, each co-owner shall have the full ownership of his part... the effect of the alienation or the mortgage with respect to the co-owners, shall be limited... to the portion which may be allotted to him in the division upon the termination of the co-ownership."
• "An individual co-owner cannot adjudicate to himself or claim title to any definite portion of the land or thing owned in common until its actual partition by agreement or judicial decree."

• Nufable v. Nufable (369 Phil. 135) — Cited for the rule that a co-owner does not lose his part ownership when his share is mortgaged by another co-owner without his knowledge and consent, and that such mortgage is not binding against co-heirs who never benefitted.
• Carvajal v. Court of Appeals (197 Phil. 913) — Cited for the principle that a co-owner cannot adjudicate to himself a definite portion of the co-owned property until actual partition, and that what a co-owner may dispose of is only his undivided aliquot share.
• Century Iron Works, Inc. v. Banas — Cited for the rule that in Rule 45 petitions, only questions of law may be put into issue and questions of fact cannot be entertained.
• Fuentes v. Court of Appeals — Cited for the principle that the Supreme Court is bound by the factual findings of the Court of Appeals absent serious error.
• Metropolitan Bank and Trust Co. v. Pascual — Cited for the doctrine that upon the death of a spouse, the conjugal partnership is converted into an implied ordinary co-ownership between the surviving spouse and the heirs.
• Aguirre v. Court of Appeals — Cited for the interpretation of Article 493 regarding the limited effect of alienation or mortgage by a co-owner.

• Article 119 of the Civil Code — Governs the conjugal partnership of gains applicable to marriages celebrated prior to the effectivity of the Family Code.
• Article 160 of the Civil Code — Establishes the presumption that all property of the marriage belongs to the conjugal partnership unless proven otherwise.
• Article 175(1) of the Civil Code — Provides for the termination of the conjugal partnership upon the death of either spouse.
• Article 777 of the Civil Code — States that rights to succession are transmitted from the moment of death of the decedent.
• Article 428 of the Civil Code — Invoked by petitioner regarding the owner's right to dispose of property; held inapplicable to co-ownership situations.
• Article 493 of the Civil Code — Governs the rights of co-owners to dispose of their undivided shares and limits the effect of such disposition to the portion allotted upon partition.