PNB V Chu Kim Kit

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FACTS:
PHILIPPINE NATIONAL BANK vs. COURT OF APPEALS

[G.R. No. L-43972 July 24, 1990]

On September 6, 1968, Chu Kim Kit, represented by his uncle, Chu Tong U , filed in the Court of
First Instance of Leyte against Felisa Boyano an action for cancellation of the latter's Certificate of Title
No. T-1439. The complaint alleged that Chu Kim Kit, a Chinese national and son of defendant Boyano, is
the absolute owner of a commercial lot and building in Rizal Avenue, Tacloban City, registered in his
name under TCT No. T-1412 of the Registry of Deeds of Tacloban City. In 1945, Chu Kim Kit went to
mainland China and he was prevented from returning to the Philippines when the Communists took
over mainland China. Through letters, he requested Chu Tong U to take care of his aforementioned
property. Although defendant Boyano was aware that her son was still alive, she executed an affidavit
adjudicating to herself as his sole heir the above-described property and by means of which, she was
able to obtain Transfer Certificate of Title No. T-1439 in her name. Thereafter, she mortgaged the
property to the Philippine National Bank, Tacloban Branch, to secure a loan of P25,000 and she is
about to dispose of the property.

On October 11, 1968, the defendant filed her answer, admitting that Chu Kim Kit was still alive
but she alleged that she signed the affidavit of adjudication without having read its contents, the same
being written in English which she does not understand. As affirmative defense, she alleged that
plaintiff Chu Tong U is not the real party in interest, being only an uncle of Chu Kim Kit and co-heir to
his estate. Lucy Perez and the Philippine National Bank, as mortgagees, were allowed by the trial court
to intervene in the action. On February 27, 1970, the trial court rendered a decision in favor of the
plaintiff. Both intervenors, appealed the decision to the Court of Appeals. On February 27, 1976, the
Court of Appeals rendered judgment affirming the trial court's decision. It ruled among others that the
plaintiff is Chu Kim Kit, the real party in interest. Granting, arguendo, that the intervenors are
mortgagees in good faith, as between them and the innocent owner, the latter is entitled to first
consideration. The PNB elevated the case before the Supreme Court seeking a review of the Court of
Appeals' decision.

ISSUES:

Whether or not PNB is an innocent mortgagee in good faith and for value.

DECISION:

There is no question that the petitioner PNB is a mortgagee in good faith and for value. At the
time the mortgage was constituted on the property on October 30, 1963, it was covered by TCT No. T-
1439 in the name of Felisa Boyano.The title carried no annotation, defect or flaw that would have
aroused suspicion as to its authenticity. "The certificate of title was in the name of the mortgagor when
the land was mortgaged to the PNB. Such being the case, petitioner PNB had the right to rely on what
appeared on the certificate of title, and in the absence of anything to excite suspicion, it was under no
obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the
face of the certificate.

Where innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the Torrens System would have to inquire
in every instance as to whether the title had been regularly or irregularly issued by the court. Indeed,
this is contrary to the evident purpose of the law. Every person dealing with registered land may safely
rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to
go behind the certificate to determine the condition of the property. Stated differently, an innocent
purchaser for value relying on a torrens title issued is protected. A mortgagee has the right to rely on
what appears in the certificate of title and, in the absence of anything to excite suspicion, he is under
no obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the
face of said certificate.

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redemption and to claim reimbursement with damages from the mortgagor, Felisa Boyano. Costs
against the private respondent.

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PHILIPPINE NATIONAL BANK vs. COURT OF APPEALS

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