China Bank v. De Chung (G.R. No. 218168. August 5, 2015)


CASE DIGEST: G.R. No. 218168. China Banking Corporation, petitioner v. Josephine Dee Vda. De Chung, Concepcion Dee-Jen Sen, Priscilla Dee-Go, Blandina Dee-Gauglitz, Arthur G. Dee, Jr., Veronica Dee-Bevis, Socorro Dee-Corpuz and Gerald G. Dee, respondents. August 5, 2015.

The petitioner's motion for an extension of thirty (30) days within which to file a petition for review on certiorari is GRANTED, counted from the expiration of the reglementary period.

Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court are the Decision[1] and the Resolution[2] dated 9 January 2015 and 6 May 2015 of the Court of Appeals in CA-G.R. CV No. 100877.

This case stemmed from a Complaint for Quieting of Title filed by herein respondents Josephine Dee Vda. De Chung, Concepcion Dee-Jen Sen, Priscilla Dee-Go, Blandina Dee-Gauglitz, Arthur G. Dee, Jr., Veronica Dee-Bevis, Socorro Dee-Corpuz and Gerald G. Dee against herein petitioner China Banking Corporation and the Register of Deeds of Cavite[3] before the Regional Trial Court (RTC) of Imus City, Branch 20, docketed as Civil Case No. 1111-06.

In their Complaint, respondents alleged that their parents, Arthur Dee and Rosario Gotamco-Dee, were the registered owners of a parcel of land in Sitio Baluctot, Salawag, Dasmariñas, Cavite, covered by Transfer Certificate of Title (TCT) No. T-35957 of the Registry of Deeds of Cavite (subject property). Upon their parents' death, respondents decided to update all the realty tax delinquencies of their parents' properties. But, when respondents tried to pay the real estate tax of the subject property, they found out that it has already been transferred and registered in the name of petitioner bank under TCT No. T-867374, which issuance is highly anomalous and improbable since TCT No. 35957 in the name of their deceased parents is very much intact, existing and had remained in their possession. As such, respondents filed the aforesaid Complaint to seek the nullification of the owner's duplicate and original copies of TCT No. T-867374 and Tax Declaration No. 05-038-21715 in the name of petitioner's bank and the payment of moral and exemplary damages and attorney's fees.[4]

Petitioner bank, in turn, filed its Answer averring that the title of the subject property in the name of Rosario Gotamco, married to Arthur Dee, was cancelled and a new one was issued in favor of Rosario G. Chu, who, in turn, mortgaged it to petitioner bank to secure a loan of P9.3 Million. For failure to pay thereof, petitioner bank foreclosed the subject property thereby ownership was consolidated with it upon failure to redeem the same. Petitioner bank maintained that there was nothing irregular in the transfer of the title of the subject property in its name as the same was actually acquired in the regular course of its business and in good faith.[5]

After trial, the RTC rendered a Decision[6] dated 23 July 2012 in favor of the respondents. The RTC ruled that the title of petitioner bank, that is, TCT No. T-867374 constitutes a cloud over the title of the respondents, which is TCT No. T-35957.[7] Thus, the RTC ordered the (1) Register of Deeds of Cavite to cancel TCT No. T-867374 under the name of petitioner bank; and (2) petitioner bank to pay the respondents the amount of P50,000.00 as and by way of attorney's fees and the costs of suit.[8] In arriving at such conclusion, the RTC held that:
Carefully reviewing the records would show, however, that [herein petitioner bank] traces its title all the way from a Special Power of Attorney (SPA) dated 20 June 1989 allegedly issued by Rosario Gotamco and Arthur Dee in favor of Evanswinda C. Morales. A close scrutiny of the said SPA would reveal that at the time of its execution, Arthur Dee was already dead for more than fourteen (14) years having died on 05 August 1975 as evidenced by his Certificate of Death. Verily, subject SPA could not have been validly issued thereby rendering the said document as of no force and effect. Rationally, a defective SPA could not validly convey to Evanswinda C. Morales the power to sell and dispose the subject property in favor of Rosario [G.] Chu even though they executed a Deed of Absolute Sale. Consequently, the title of Rosario [G.] Chu which was later on transferred to [petitioner bank], as well as, that of the [petitioner bank] are both invalid or inoperative despite the prima facie appearance of validity or legal efficacy. Basic is the rule that 'Nemo dat quod non habet.' One cannot give what he does not have.[9] (Emphasis and italics supplied)
Petitioner bank's Motion for Reconsideration thereof was denied in an Order dated 14 March 2013.[10]

On appeal, the Court of Appeals rendered the assailed Decision dated 9 January 2015 affirming the RTC decision. The Court of Appeals ruled in this wise:
In the present case, the averments in the complaint for quieting of title filed by [herein respondents] readily show that the action is a direct attack on the title of [herein petitioner bank] because its object is to nullify and declare as null and void TCT No. 867374 and the Tax Declaration No. 05-038-21715.

Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty affecting title to real property. Whenever there is a cloud on title to real property or any interest in real property by reason of any instrument, record, claim, encumbrance, or proceeding that is apparently valid or effective, but is, in truth and in fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title x x x

Here, the court a quo correctly ruled that [respondents] have presented preponderant evidence to show that the title of [petitioner bank] constitutes a cloud in [respondents'] title. A scrutiny of the records will show that respondents have in their possession the original owner's copy of TCT No. T-35957 whereas petitioner's bank derived its title from Rosario Chu who improperly obtained a reconstituted owner's copy of TCT No. T-35957, where the same was used as collateral to obtain a loan from petitioner's bank.A scrutiny of the trial court's decision granting the reconstitution of the alleged lost title of Rosario Gotamco which was eventually sold to Rosario Chu, from where [petitioner bank's] title emanated is tainted with fraud. The decision was handed down in a short span of time (less than one month after the petition for issuance of an owner's copy of TCT No. T-35957 was filed by Rosario Chu) without publication in the Official Gazette and without notice to the occupants or persons in possession of the property, of the owners of the adjoining properties and all persons who may have any interest in the property in accordance with Sections 3 and 12 of RA 26[11] and, worse, without the appearance from the Office of the Solicitor General as the notice of appearance was dated [7 February 1995] or six (6) days after the issuance of the Decision in LRC Case No. 049-95 on [1 February 1995] x x x With such defects, the trial court was not vested with the authority of jurisdiction to proceed with the case x x x thereby rendering all proceedings utterly null and void.

x x x A reconstituted title x x x by itself does not vest ownership of the land or estate covered thereby. Here, the original duplicate certificate of title in the name of Rosario Gotamco is intact and is in the possession of [the respondents]. In other words, there is nothing to reconstitute since said title is not actually lost or destroyed but in the possession of [the respondents].

Nonetheless, even on the assumption that the reconstitution proceedings is valid, still, [petitioner bank] is considered a mortgagee in bad faith considering that it failed to exercise extraordinary diligence required of a banking institution, which is expected to exercise more care and prudence in its dealings involving registered lands. [Petitioner bank] failed to ascertain the status and condition of the property being offered to it as a security for the loan before it approved the loan x x x

[Petitioner bank] failed to present evidence to prove that it is a mortgagee in good faith. It did not present as witness the Credit Investigator who allegedly conducted the credit investigation of the mortgagors and the property subject of the mortgage. Thus, We agree with the trial court's finding that [petitioner bank] is considered as "not a mortgagee in good faith." [Petitioner bank's] act of accepting in mortgage the property in question notwithstanding the existence of structures on the property which were in actual, visible and public possession of persons other than the mortgagors constitutes gross negligence amounting to bad faith.[12] Emphasis supplied.)
Petitioner bank moved for its reconsideration but it was denied in the questioned Resolution dated 6 May 2015.

Hence, this Petition raising the following grounds: (a) the Court of Appeals grossly erred when it ruled that the special civil action for quieting of title is the proper remedy to annul and set aside TCT No. T-867374 of the petitioner bank; and (b) the Court of Appeals grossly erred when it ruled that petitioner bank was not a mortgagee in good faith.[13]

The Supreme Court resolves to DENIED the Petition.

The issues raised by the petitioner bank were already comprehensively discussed in the assailed Court of Appeals decision to which this Court conforms.

As aptly held by the Court of Appeals, the action filed by respondents is a direct attack on the title of petitioner bank as its object is to nullify and declare as null and void TCT No. 867374 and the Tax Declaration No. 05-038-21715 under its name. Moreover, respondents have presented preponderant evidence to show that petitioner bank's title constitutes a cloud in their title. The records showed that respondents have in their possession the original owner's copy of TCT No. T-35957 whereas petitioner's bank derived its title from Rosario Chu, who improperly obtained a reconstituted owner's copy of TCT No. T-35957, which was used as collateral to obtain a loan from petitioner's bank.

Petitioner bank cannot also be regarded as mortgagee in good faith. As explained by the Court of Appeals, petitioner bank failed to exercise extraordinary diligence that is required of a banking institution in its dealings involving registered lands as it failed to ascertain the status and condition of the property being offered to it as a security for the loan before it approved the loan. Petitioner bank's act of accepting in mortgage the property in question notwithstanding the existence of structures on the property which were in actual, visible and public possession of persons other than the mortgagors constitutes gross negligence amounting to bad faith.

[1] Penned by Associate Justice Stephen C. Cruz with Associate Justices Fernanda Lampas Peralta and Nina G. Antonio-Valenzuela, concurring; rollo, pp. 8-16.
[2] Id. at 18-20.
[3] Court of Appeals Decision dated 9 January 2015; id. at 9.
[4] Id.
[5] Id. at 9-10.
[6] Penned by Presiding Judge Fernando L. Felicen; id. at 63-68.
[7] Id. at 10.
[8] Id. at 68.
[9] Id. at 10 and 65.
[10] Id. at 10.
[11] An Act Providing A Special Procedure for the Reconstitution of Torrens Certificates of Title Lost or Destroyed.
[12] Rollo, pp. 12-15.
[13] Petition for Review on Certiorari dated 29 June 2015; id. at 29-30.

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