ONOFRE ANDRES v.

PHILIPPINE NATIONAL BANK (2014) ○ The document purportedly stated that Reynaldo Andres
was the sole heir of his father, Roman Andres, who died
● This case involves a 4.6k parcel of land in Sto. Domingo, Nueva in 1968, and his mother, in 1969.
Ecija, covered by TCT No. NT-7267, which Spouses Victor and ○ However, at the time, his mother was then still alive and
Filomena Andres (Sps 1) acquired during their marriage. his father died only in 1990.
○ They had 9 children – among them were Onofre Andres ● PNB’S DEFENSE
and Roman Andres who is the father of Reynaldo Andres, ● Argued that it conducted an investigation on the property, and
the respondent in this case. found that the title presented by Reynaldo Andres and his wife was
● Victor passed away in 1955, while Filomena, died in 1973. clear and free from adverse claims.
● Sometime in 1965, Filomena and six of the children — Onofre, ● RTC: Ruled in favor of Onofre Andres by voiding all derivative
Roman, Juana, Guillermo, Felisa, and Maxima — agreed in an titles from TCT No. NT-7267.
extrajudicial partition with sale to adjudicate ½ of the land to each ● CA: Modified RTC Decision, declaring as valid and existing TCT
of them pro indiviso. No. N-24660 in PNB's name.
○ The document also provided that for P1,000.00, they all
sold, transferred, and conveyed to Roman Andres their W/N A VALID TITLE MAY BE DERIVED FROM A VOID TITLE? YES.
respective rights and participation to ½ of the property.
○ This was annotated on the title. ● Based on the records, PNB followed the standard practice of banks
○ Consequently, the previous TCT was cancelled, and a new before approving a loan by sending representatives to inspect the
title was issued in the name of Roman Andres and his property offered as collateral, and even investigated on where and
wife Lydia. from whom the title originated.
● 1968: The Philippine National Bank (PNB) alleged that Spouses ● Evidence disclosed that Spouses Reynaldo Andres and his wife
Roman and Lydia Andres (Sps 2) mortgaged the property to the submitted TCT No. N-7725 as proof of their ownership.
Bank for P3,000.00. No objections were made, even after the ○ Pursuant to this, PNB's property appraiser, Gerardo
mortgage had been cancelled in 1972. Pestaño, conducted an investigation and verified the status
● 1992: The Nueva Ecija RTC cancelled the guardianship issued in of the property with the Register of Deeds and Assessor's
favor of the Security Bank, and transferred ownership of the Office.
properties of the deceased Spouses to their only living heir, ○ He went to the property and personally met with the
Reynaldo Andres. borrowers, who told him they were living in the property.
○ Thus, the previous TCT was cancelled, and a new title ○ He also went to the Municipal Trial Court to check on any
was transferred to Spouses Reynaldo Andres and his wife pending cases, particularly on estafa, filed against the
● Using this title, the Spouses (Sps 3) mortgaged the property to Spouses.
PNB for a P1.2 million loan. ○ Upon verification from ROD, he learned that all previous
○ However, this was made without the consent of Onofre annotations on the titles have been cancelled.
Andres, Reynaldo’s uncle. ● Thus, there was nothing on the face of the title that would
● This prompted the latter to file a complaint for cancellation of title excite any suspicion of an irregular issuance.
and reconveyance of the property alleging that title in mortgagor's ● Philippine Banking Corporation v. Dy: “While it is settled that a
name was based on a falsified document denominated as simulated deed of sale is null and void, and therefore, does not
“Self-Adjudication of Sole Heir.” convey any right that could ripen into a valid title,
○ for reasons of public policy, the subsequent nullification
of title to a property is not a ground to annul the
 Economic Benefits of Land Registration (Gershon
contractual right which may have been derived by a ANALYSIS: Feder and Akihiko Nishio, The World Bank)
purchaser, mortgagee or other transferee in good faith.” ● Tenure is insecure when there is a perceived probability of losing
● The doctrine protecting mortgagees and innocent purchasers specific rights in land such as the right to cultivate the land, graze,
in good faith emanates from the social interest embedded in the fallow, and transfer through sale, rent or inheritance.
legal concept granting indefeasibility of titles. ● Registration systems and land titles have emerged in mankind’s
● The burden of discovery of invalid transactions relating to the history as an institutional arrangement to reduce such insecurity.
property covered by a title appearing regular on its face is ○ With ownership officially documented and verified, the
shifted from the third party relying on the title to the risk of challenges to ownership is reduced, and the
co-owners or the predecessors of the title holder. likelihood of having to incur high costs in defending one’s
● Between the third party and the co-owners, it will be the latter possession of land is lower, incentives to invest are
that will be more intimately knowledgeable about the status of enhanced, and land productivity is increased.
the property and its history. ● Moreover, whereas land transactions have been taking place since
● The costs of discovery of the basis of invalidity, thus, are better the dawn of history, the extent of such transactions is affected by
borne by them because it would naturally be lower. the asymmetry between buyers and sellers.
● A reverse presumption will only increase costs for the economy, ○ Customary systems usually evolve to handle transactions
delay transactions, and, thus, achieve a less optimal welfare within the community, and they can function effectively.
level for the entire society. ○ But as land markets expand and transactions increase
● The general rule allows every person dealing with registered land between individuals who are not closely related,
to rely on the face of the title when determining its absolute owner. uncertainty over the entitlement of an owner to transfer
○ Thus, a mortgagee has a right to rely in good faith on the land rights becomes increasingly relevant.
certificate of title of the mortgagor of the property given ○ Thus, one way to reduce or eliminate ownership
as security and in the absence of any sign that might uncertainty, and thereby improve market efficiency, is to
arouse suspicion, has no obligation to undertake further provide landowners with titles, backed by a legal system
investigation. capable of enforcing those property rights.
○ Such protection likewise finds support in the Land ● In the absence of such arrangements, the uncertainty faced by
Registration Act, which provides that: potential buyers reduces the volume of demand for land and
■ “in no case shall a petition for reopening and depresses the offer price of land.
review of decree of registration be entertained by ● As registration systems and titling largely eliminate the
the court where an innocent purchaser for value uncertainty, they facilitate more transactions and ultimately induce
has acquired the land or an interest therein, a better allocation of land and a higher level of economic
whose rights may be prejudiced.” well-being.
● Finally, banks are considered businesses impressed with public
interest, requiring high standards of integrity. They must exercise
greater care, prudence, and due diligence in their property dealings.
○ The standard operating practice for banks when acting on
a loan application is to conduct an ocular inspection of the
property offered for mortgage and to verify the
genuineness of the title to determine the real owner
thereof, which was sufficiently met by PNB.
● THUS: CA Decision is affirmed.