Philippine National Bank vs.

Court of Appeals
G.R. No. L-57757
31 August 1987

FACTS: Donata Montemayor is the administrator of 30 parcels of land of her late
husband Clodualdo Vitug who died intestate. Several portions of such land (TCT-2289,
TCT-2887, and TCT-2888) were mortgaged to PNB as security for certain loans
availed by Salvador Vitug, Salvador Jaramilla and Pedro Bacani, respectively. The
loans were never paid so the bank foreclosed all the mortgaged properties. PNB as the
highest bidder, purchased the lots, and subsequently sold the same to the Vitugs and
the Fajardos.
Meanwhile, Donata executed a contract of lease for a lot covered by TCT-2887-
R to her sons Pragmacio and Maximo Vitug. After a few years, the same brothers filed
an action for partition and reconveyance with damages in the CFI Pampanga against
the PNB, the Vitugs, the Fajardos, and Marcelo Mendiola, the special administrator of
Donatas intestate estate. They claimed that the 30 parcels of land form part of the
conjugal property of the spouses Donata and Clodualdo and they claim a share
interest of 2/11 of 1/2 thereof. They assailed the mortgage of said properties to the
PNB and the subsequent public auction. They invoked the Vitug vs. Montemayor case
where the SC ruled on the conjugal nature of the 30 parcels of land.

ISSUES: (1) Can the PNB rely merely on the Torrens Certificate of Title covering
Donatas properties for the processing of the respective mortgage loan applications?
(2) Is the earlier action for reconveyance and partition concerning the 30
lots real actions and binding upon the PNB by virtue of the Vitug vs. Montemayor
decision?

RULING: (1) Yes. The PNB had sufficient reason to rely on the Torrens Certificate
of Title of the mortgaged properties. The SC ruled that in processing the loan
applications, the PNB had the right to rely upon the face of the certificate of title.
Clearly, it appears that Donata (a widow) owns the properties and the PNB had no
reason to doubt her status and ownership. The PNB also found no liens or
encumbrances covering the properties. The clean facts reasonably cancel the need to
make further inquiry.
The Court applied the well-known rule in jurisdiction that a person has a
right to rely upon the face of the Torrens Certificate of Title when dealing with a
registered land. It is not necessary to inquire beyond its face, except when such
person has an actual knowledge of facts and circumstances that would prompt him to
inquire further. The Court ruled that a Torrens title concludes all controversy over
ownership of the land covered by a final degree of registration and upon such
registration, the person is assured of ownership without going to court or sitting at the
veranda of his house to avoid the fear of losing his land.
(2) No. The SC maintained that although actions for recovery of real property
and for partition are real actions, they are actions in personam which are binding only
upon the persons who are parties thereto. The PNB is not a party in the cited case and
is therefore not bound by the decision. In addition, there is no showing that the PNB
was aware of the case decision when it extended the mortgage loan involving the
subject properties. The court settled that if the PNB knew that said properties were
conjugal, it would not have approved the mortgage application without securing the
consent of the its co-owners. Therefore, the PNB is considered as a purchaser for
value in good faith when it sold the foreclosed properties at a public auction.
The complaint is dismissed.