Cruz v. Bancom Finance Corp.

Innocent Purchaser in good faith and for value

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Case DigestWeek 3–4 — The Registries of Deeds and Original Registration

Cruz v. Bancom Finance Corp.

G.R. No. 147788 · March 19, 2002 · Supreme Court — Third Division

Innocent Purchaser in good faith and for value

Gist

The relationship of the case of Edilberto Cruz and Simplicio Cruz v. Bancom Finance Corporation, G.R. No. 147788, March 19, 2002, to the assigned topic of Section 32 of Presidential Decree No. 1529 (Review of Decree; Grounds for Review: Innocent Purchaser/Mortgagee in Good Faith and for Value) is DIRECT. The triggering controversy arose when Rev. Fr. Edilberto Cruz and Simplicio Cruz executed a simulated Deed of Absolute Sale in favor of Candelaria Sanchez, who in turn executed another simulated Deed of Absolute Sale in favor of Norma Sulit on the same day, for the sole purpose of allowing Norma Sulit to obtain a bank loan using the land as collateral. Without the knowledge of Rev. Fr. Edilberto Cruz and Simplicio Cruz, Norma Sulit mortgaged the property to Bancom Finance Corporation to secure a loan of ₱569,000.00, and subsequent to the default of Norma Sulit, Bancom Finance Corporation foreclosed the mortgage and purchased the property as the highest bidder. The Supreme Court of the Philippines granted the petition, reversed the Court of Appeals, and reinstated the Regional Trial Court decision nullifying the deeds of sale, the mortgage, and the foreclosure sale. The central doctrine established by the Supreme Court of the Philippines is that under Section 32 of Presidential Decree No. 1529, in relation to Section 39 of Act No.

Core Doctrine

The Rule on Bank Mortgagee Diligence: Unlike private individuals, banks and other financial institutions are expected to exercise greater care and prudence in real estate dealings, including those involving registered lands, as the business of banking is imbued with public interest. A bank cannot hide behind the mirror doctrine of the Torrens system if the bank fails to conduct a proper ocular inspection and investigation of the actual occupants of the property offered as collateral.

Facts

Rev. Fr. Edilberto Cruz and Simplicio Cruz owned 33.9335 hectares in Barangay Pulang Yantoc, Angat, Bulacan under TCT No. 19587. In May 1978 Norma Sulit offered ₱700,000.00 and paid ₱25,000.00 earnest money, title to pass only on payment of the ₱675,000.00 balance.
She never paid the balance. When the brothers refused to transfer title anyway, she used Candelaria Sanchez's closeness to them to obtain, on June 21, 1978, a Deed of Absolute Sale to Sanchez — on the understanding Sanchez would take a bank loan against the land — and on the same day Sanchez deeded the land to Sulit.
Both deeds recited only ₱150,000.00, and nothing was ever paid. TCT No. 19587 was cancelled and TCT No. T-248262 issued to Sulit, who six days later mortgaged the land to Federal Insurance for ₱500,000.00.
On September 1, 1978 Sulit signed a Special Agreement assuming the ₱655,000.00 balance within six months; on August 22, 1979 she mortgaged instead to Bancom Finance Corporation for ₱569,000.00.
Sulit defaulted and vanished. The brothers annotated an adverse claim on October 30, 1979 and a notice of lis pendens on December 10, 1979 with their reconveyance suit — and Bancom registered its mortgage only on March 14, 1980, after both. The RTC voided the sales and mortgage on January 25, 1996; the CA reversed on March 30, 2001.

Arguments of the Parties

Petitioners. The brothers argued the two deeds were absolutely simulated and void ab initio for total want of consideration, executed only as a subterfuge to enable a loan against the land; that Bancom was no mortgagee in good faith, having registered after their adverse claim and lis pendens; and that the bank never conducted an ocular inspection, which would have shown the brothers, not Sanchez or Sulit, in continuous possession.

Respondent. Bancom argued the deeds were genuine, the brothers having shown an intent to be bound by later executing the Special Agreement for the balance; that it was an innocent mortgagee entitled to rely on a clean certificate without exhaustive investigation; that its mortgage contract of August 22, 1979 predated the annotations and so ranked ahead; and that the brothers themselves acted in bad faith, knowing of the mortgage when they annotated.

Common Ground / Stipulations (if any). The parties agreed that both deeds were executed on the same day, June 21, 1978; that no part of the loan proceeds ever reached the brothers; and that the adverse claim (October 30, 1979) and lis pendens (December 10, 1979) were annotated before the mortgage was registered on March 14, 1980.

Issue

MAIN ISSUE (Good-faith-centered). Whether a bank is an innocent mortgagee for value under Section 32 where it omits any ocular inspection of the collateral and registers its mortgage only after an adverse claim and notice of lis pendens have been annotated.

SECONDARY ISSUES. Whether the successive deeds were absolutely simulated and void; whether a mortgage constituted by one who acquired under a void deed can be valid; and whether prior registration of an adverse claim and lis pendens outranks a later-registered mortgage.

ANCILLARY / INCIDENTAL ISSUES (if any). None separately resolved.

Ruling

On the MAIN ISSUE: NO — banks and financial institutions, their business "imbued with public interest," owe greater care, prudence and due diligence than ordinary buyers and cannot rest on a clean certificate where circumstances would arouse suspicion. Bancom made no ocular inspection, which would at once have shown neither Sanchez nor Sulit in possession but the brothers occupying continuously; and its good faith was destroyed outright by registering only on March 14, 1980, well after the annotations charged it with constructive notice. On simulation: YES — under Article 1346 a contract the parties never intended to bind them is void from the beginning, and with no money exchanged and the deeds serving only as a device to raise a loan, they "produced no legal effect whatsoever." On the mortgage: VOID — nemo dat quod non habet; Article 2085 makes absolute ownership an essential requisite, so Sulit having acquired nothing could encumber nothing, and there being no valid mortgage there could be no valid foreclosure or sale. On priority: YES — registration binds third persons, and a prior lien's preference retroacts to the date of annotation. The dispositive portion reads verbatim: "WHEREFORE, the Petition is GRANTED and the assailed Decision SET ASIDE. The Decision of the RTC of Bulacan, (Branch 21) dated January 25, 1996 is REINSTATED. No costs."

Ratio

Simulation may be absolute or relative; it is absolute where the parties never intended to be bound, and such a contract is void ab initio under Article 1346. Two deeds on one day, for a recited ₱150,000.00 never paid, with the buyers never asserting ownership or taking possession, are absolutely simulated.
Registration is not a mode of acquiring ownership — a certificate is evidence of a title already vested — so registering the simulated deeds and issuing TCT No. T-248262 vested Sulit with nothing.
Article 2085 requires that the mortgagor be absolute owner with free disposal of the thing; a void sale leaves the supposed buyer without either, so the mortgage and everything built on it fall.
The mirror doctrine of Section 44 does not shelter banks: holding depositors' money in trust, they may not assume a clean title excuses them from investigating the title and inspecting the premises.
Ocular inspection is standard, indispensable banking practice before approving a loan; had Bancom made one it would have found possession with the brothers, alerting it to the fraud.
Under Section 51 registration is the operative act binding third persons, and a prior registered lien creates a preference that later registration of an earlier-executed mortgage cannot diminish — so the mortgage bound only Bancom and Sulit, and was ineffectual against the brothers.

Doctrine

Doctrines / Rules / Principles Laid Down.

Banks are held to a higher standard of diligence than ordinary dealers in registered land and cannot invoke the mirror doctrine where they omit the ocular inspection and investigation their business requires.
An absolutely simulated sale is void ab initio and transfers nothing, so a mortgage constituted by the simulated buyer is void and the foreclosure purchaser takes no title.
And prior registration of an adverse claim or notice of lis pendens creates a preference over a mortgage registered afterwards, the preference retroacting to the date of annotation.

Distinctions / Limitations / Qualifications.

The innocent-purchaser-for-value exception that ordinarily cuts off reconveyance under Section 32 does not reach a bank that skipped the mandatory inspection and registered behind an annotated adverse claim — such a mortgagee is in bad faith.
And the mirror doctrine yields generally where facts exist that would excite suspicion in a reasonable person, or where the party dealing is an institution whose business is affected with public interest.

Topic/Subtopic Integration (Mandatory).

DIRECT: the Court marked the outer limit of Section 32's protection, holding it unavailable to a negligent bank, so that the Torrens system remains a register of title rather than a shield for fraudulent conveyances against the true registered owners.

Separate Opinions

None. The Third Division decided unanimously, with no separate concurring or dissenting opinion filed.

Full Digest — Recitation Format

Facts

Prior to May 1978: Rev. Fr. Edilberto Cruz and Simplicio Cruz were the registered owners of a 339,335 square meter (33.9335 hectares) parcel of agricultural land, with improvements, located in Barangay Pulang Yantoc, Angat, Bulacan, covered by Transfer Certificate of Title (TCT) No. 19587.
Sometime in May 1978: Norma Sulit, after being introduced to Rev. Fr. Edilberto Cruz by Candelaria Sanchez, offered to purchase the land for ₱700,000.00.
Sometime in May 1978: Rev. Fr. Edilberto Cruz and Simplicio Cruz accepted ₱25,000.00 as earnest money from Norma Sulit, with the agreement that the title would be transferred only upon payment of the balance of ₱675,000.00.
Sometime between May 1978 and June 21, 1978: Norma Sulit failed to pay the balance of ₱675,000.00 and proposed that the title be transferred to the name of Norma Sulit anyway, which proposal Rev. Fr. Edilberto Cruz refused due to a lack of trust in Norma Sulit.
On June 21, 1978: Norma Sulit, leveraging the close relationship of Candelaria Sanchez with Rev. Fr. Edilberto Cruz and Simplicio Cruz, persuaded the brothers to execute a Deed of Absolute Sale in favor of Candelaria Sanchez, with the understanding that Candelaria Sanchez would obtain a bank loan in the name of Candelaria Sanchez using the land as collateral.
On June 21, 1978: On the same day, Candelaria Sanchez executed another Deed of Absolute Sale conveying the same property to Norma Sulit.
On June 21, 1978: In both Deeds of Absolute Sale, the stated consideration was only ₱150,000.00, and no actual consideration or purchase price was ever paid to Rev. Fr. Edilberto Cruz or Simplicio Cruz.
Sometime thereafter: By virtue of the simulated Deeds of Sale, Transfer Certificate of Title (TCT) No. 19587 in the names of Rev. Fr. Edilberto Cruz and Simplicio Cruz was cancelled, and Transfer Certificate of Title (TCT) No. T-248262 was issued in the name of Norma Sulit.
On June 27, 1978: Six days after the execution of the Deeds of Sale, Norma Sulit mortgaged the property to Federal Insurance Company to secure a loan of ₱500,000.00.
On September 1, 1978: Norma Sulit executed a "Special Agreement" assuming the obligation of Candelaria Sanchez to pay Rev. Fr. Edilberto Cruz and Simplicio Cruz the actual balance of the purchase price, amounting to ₱655,000.00, within six months.
On August 22, 1979: The mortgage in favor of Federal Insurance Company was cancelled, and Norma Sulit executed another real estate mortgage over the property in favor of Bancom Finance Corporation to secure a loan of ₱569,000.00.
On October 30, 1979: Due to the failure of Norma Sulit to pay the amount stipulated in the Special Agreement and the subsequent disappearance of Norma Sulit, Rev. Fr. Edilberto Cruz and Simplicio Cruz caused the annotation of an adverse claim on Transfer Certificate of Title (TCT) No. T-248262.
On December 10, 1979: Rev. Fr. Edilberto Cruz and Simplicio Cruz filed a Complaint for the reconveyance of the land before the Regional Trial Court of Bulacan, and on the same day, caused the annotation of a notice of lis pendens on Transfer Certificate of Title (TCT) No. T-248262.
On February 11, 1980: Norma Sulit filed an Answer to the complaint but failed to appear in the subsequent court proceedings and was eventually declared in default.
On March 14, 1980: Bancom Finance Corporation registered the real estate mortgage in the Office of the Register of Deeds of Bulacan, which registration occurred long after the annotations of the adverse claim and notice of lis pendens.
On May 20, 1980: Bancom Finance Corporation filed a motion for leave to intervene in the civil case, which motion the trial court granted.
Sometime in the middle of 1980: Norma Sulit defaulted in the payment of the loan to Bancom Finance Corporation, prompting the bank to foreclose the mortgage. At the public auction, Bancom Finance Corporation was declared the highest bidder and was issued a certificate of sale.
On January 25, 1996: The Regional Trial Court of Bulacan rendered a Decision declaring the Deeds of Sale absolutely simulated and void, nullifying the mortgage in favor of Bancom Finance Corporation, and holding that Bancom Finance Corporation was not a mortgagee in good faith.
On March 30, 2001: The Court of Appeals reversed the Regional Trial Court, declaring the Deeds of Sale and Mortgage valid, and ordering the cancellation of the notice of lis pendens.
On March 19, 2002: The Supreme Court of the Philippines Second Division (sitting as the Third Division) promulgated the Decision reversing the Court of Appeals, declaring the sales and mortgage null and void, and reinstating the trial court's judgment in favor of the brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz.

Arguments of the Parties

Petitioners (Rev. Fr. Edilberto Cruz and Simplicio Cruz).

Simulation of Deeds: The petitioners argue that the Deed of Sale executed in favor of Candelaria Sanchez and the subsequent Deed of Sale in favor of Norma Sulit were absolutely simulated and void ab initio because there was a complete lack of any consideration and no money was ever paid.
True Intent of Execution: The petitioners contend that the deeds were executed merely as a subterfuge or a procedural device to facilitate a bank loan using the property as collateral, and not to transfer actual ownership.
Bad Faith of Mortgagee: The petitioners assert that Bancom Finance Corporation is not a mortgagee in good faith because the bank registered the real estate mortgage on March 14, 1980, which registration was subsequent to the prior annotations of the adverse claim (October 30, 1979) and notice of lis pendens (December 10, 1979) by the petitioners.
Negligence of Bank: The petitioners argue that Bancom Finance Corporation failed to exercise the standard of care and prudence required of banking institutions because the bank failed to conduct an ocular inspection of the property, which inspection would have easily revealed that the property was actually and continuously occupied and possessed by the petitioners, and not by Candelaria Sanchez or Norma Sulit.

Respondent (Bancom Finance Corporation).

Validity of Deeds: The respondent argues that the Deeds of Sale were valid, binding, and not simulated because the petitioners intended to be bound, as shown by the execution of a subsequent Special Agreement to enforce the payment of the balance of the purchase price.
Mortgagee in Good Faith: The respondent contends that Bancom Finance Corporation is an innocent mortgagee for value and is entitled to rely on the face of a clean Torrens certificate of title without conducting an exhaustive investigation of the history of the title.
Priority of Mortgage: The respondent asserts that the contract of mortgage with Norma Sulit was executed on August 22, 1979, which was prior to the annotations of the adverse claim and notice of lis pendens by the petitioners, and thus, the mortgage lien of the bank has a preferential right over the petitioners' claim.
Bad Faith of Petitioners: The respondent claims that the petitioners were in bad faith because the petitioners already had knowledge of the mortgage when the petitioners caused the annotations of the adverse claim and notice of lis pendens.

Common Ground.

Execution of Deeds: Both parties admit that the two Deeds of Absolute Sale (from the petitioners to Candelaria Sanchez, and from Candelaria Sanchez to Norma Sulit) were executed on the same day, June 21, 1978.
Lack of Consideration: Both parties acknowledge that no part of the proceeds of the loan obtained by Norma Sulit from Bancom Finance Corporation was ever paid to or received by the petitioners.
Dates of Annotation and Registration: Both parties agree that the adverse claim was annotated on October 30, 1979, and the notice of lis pendens on December 10, 1979, while the mortgage in favor of Bancom Finance Corporation was registered on March 14, 1980.

Issue

MAIN ISSUE.

Whether a bank can be considered an innocent mortgagee/purchaser in good faith and for value under Section 32 of Presidential Decree No. 1529 if the bank fails to conduct an ocular inspection of the property offered as collateral, and registers the real estate mortgage only after the prospective heirs or owners have already annotated an adverse claim and a notice of lis pendens on the certificate of title.

SECONDARY ISSUES.

Whether a contract of sale is absolutely simulated and void ab initio under Article 1345 and Article 1346 of the Civil Code when there is a complete absence of any consideration and the contract is executed merely as a subterfuge to facilitate a bank loan.
Whether a simulated deed of sale can convey any rights that could ripen into a valid title, such that a subsequent mortgage executed by the simulated buyer in favor of a bank can be declared valid.
Whether the prior registration of an adverse claim and a notice of lis pendens creates a preference over a mortgage contract that was executed prior to the annotations but registered only after the annotations.

Ruling

Ruling on the MAIN ISSUE. NO. The Supreme Court of the Philippines ruled that Respondent Bancom Finance Corporation cannot be considered an innocent mortgagee or purchaser in good faith and for value. The Supreme Court of the Philippines held that unlike ordinary individuals, banks and other financial institutions are expected to exercise greater care, prudence, and due diligence in real estate dealings, as the business of banking is deeply imbued with public interest. A bank cannot simply rely on the face of a clean Torrens certificate of title if there exist important facts or circumstances that would arouse suspicion in an otherwise reasonable person. In this case, the bank failed to conduct an ocular inspection of the property before constituting the mortgage, which inspection would have easily revealed that neither Candelaria Sanchez nor Norma Sulit was in possession of the land, and that the property was actually and continuously occupied by the petitioners. Furthermore, the bank's claim of good faith was completely destroyed because the bank registered the mortgage only on March 14, 1980, which was long after the annotations of the adverse claim and the notice of lis pendens on October 30, 1979 and December 10, 1979, respectively, thereby charging the bank with constructive notice of the fraud.

Ruling on SECONDARY ISSUE 1. YES. The Supreme Court of the Philippines ruled that the Deeds of Absolute Sale were absolutely simulated and void ab initio. The Supreme Court of the Philippines held that under Article 1345 and Article 1346 of the Civil Code, a contract is absolutely simulated and void from the beginning when the parties do not intend to be bound at all. The records show that there was no exchange of money or payment of the purchase price, and the deeds were executed merely as a subterfuge to facilitate the use of the property as collateral to secure a bank loan. Consequently, the simulated agreements produced no legal effect whatsoever.

Ruling on SECONDARY ISSUE 2. NO. The Supreme Court of the Philippines held that a simulated deed of sale cannot convey any rights that could ripen into a valid title. Under the principle of nemo dat quod non habet (no one can give what one does not have), a person who is not the absolute owner of the property cannot validly pledge or mortgage the property under Article 2085 of the Civil Code. Since the simulated deeds of sale were null and void, Norma Sulit never acquired ownership over the property, and the subsequent real estate mortgage Norma Sulit constituted in favor of Bancom Finance Corporation was also null and void. Consequently, there being no valid mortgage, there could be no valid foreclosure or auction sale, and the bank acquired no title as the highest bidder.

Ruling on SECONDARY ISSUE 3. YES. The Supreme Court of the Philippines ruled that the prior registration of an adverse claim and a notice of lis pendens creates a preference over a mortgage contract that was registered later. The Supreme Court of the Philippines held that while a mortgage is binding between the parties even if unregistered, registration of the mortgage is indispensable under Section 51 of Presidential Decree No. 1529 to bind third parties. A prior registration of a lien creates a preference, and any subsequent registration of a prior mortgage cannot diminish this preference, which retroacts to the date of the annotations. Thus, because Bancom Finance Corporation registered the mortgage only after the annotations of the adverse claim and notice of lis pendens, the mortgage was binding only between the bank and Norma Sulit, and was completely ineffectual against the petitioners as third parties.

Dispositive portion (verbatim).

"WHEREFORE, the Petition is GRANTED and the assailed Decision SET ASIDE. The Decision of the RTC of Bulacan, (Branch 21) dated January 25, 1996 is REINSTATED. No costs."

Ratio

The Nullity of Absolutely Simulated Contracts: Under Article 1345 of the Civil Code, a simulated contract of sale may be absolute or relative. Absolute simulation occurs when the parties have no intention to be bound at all, rendering the contract void ab initio under Article 1346 of the Civil Code. In this case, the consecutive Deeds of Absolute Sale executed on the same day—from the petitioners to Candelaria Sanchez, and from Candelaria Sanchez to Norma Sulit—were completely void because no consideration was ever paid, and the transactions were executed solely to facilitate a bank loan. The buyers never attempted to assert any rights of ownership or take physical possession of the land.
Registration Does Not Vest Title: Under the Torrens system of land registration, the act of registration is not a mode of acquiring ownership, as a certificate of title merely serves as evidence of an ownership already existing and vested. Consequently, the fraudulent registration of the simulated Deeds of Sale and the subsequent issuance of Transfer Certificate of Title (TCT) No. T-248262 in the name of Norma Sulit did not vest Norma Sulit with any valid ownership or title over the property.
Absolute Ownership as an Essential Requisite of a Mortgage: Under Article 2085 of the Civil Code, absolute ownership of the property by the mortgagor is an essential requisite of a contract of mortgage, alongside the requirement that the mortgagor have the free disposal of the thing mortgaged. Since the simulated deeds of sale were null and void, Norma Sulit was never the owner of the property and had no legal right to encumber the property. Therefore, the real estate mortgage Norma Sulit constituted in favor of Bancom Finance Corporation was also null and void, and the subsequent foreclosure and auction sale carried no legal force or effect.
The Stricter Diligence Standard Imposed on Banks: Although the general rule under Section 44 of Presidential Decree No. 1529 (former Section 39 of Act No. 496) is that every person dealing with registered land has the right to rely on the face of the Torrens certificate of title, this rule does not apply to banks and financial institutions. Because the business of banks is deeply impressed with public interest, keeping in trust the money of depositors, banks are held to a higher and more rigorous standard of care, prudence, and due diligence. A bank cannot assume that a clean title offered as security relieves the bank of the responsibility to investigate the title and inspect the premises.
Ocular Inspection as a Standard Banking Practice: The standard and indispensable practice of banks, before approving a loan, is to conduct an ocular inspection of the property offered as collateral to verify who the actual owners and possessors are. Bancom Finance Corporation failed to perform this duty. Had the bank inspected the Bulacan property, the bank would have discovered that possession was neither with Candelaria Sanchez nor with Norma Sulit, but remained continuously with the petitioners, which fact would have alerted the bank to the fraudulent nature of the title.
The Construction of Constructive Notice and Priority: Under Section 51 of Presidential Decree No. 1529, a real estate mortgage must be registered in the Office of the Register of Deeds to bind third parties, as registration is the operative act that conveys or affects registered land [1030, 288, 289]. A prior registration of a lien, such as an adverse claim or a notice of lis pendens, creates a preference that binds all subsequent registrants. Because Bancom Finance Corporation registered the mortgage only on March 14, 1980—months after the annotations of the petitioners' adverse claim and notice of lis pendens—the bank had constructive notice of the petitioners' claim, and the mortgage was completely ineffectual against the petitioners as third parties.

Doctrine

Doctrines / Rules / Principles Laid Down.

The Rule on Bank Mortgagee Diligence: Unlike private individuals, banks and other financial institutions are expected to exercise greater care and prudence in real estate dealings, including those involving registered lands, as the business of banking is imbued with public interest. A bank cannot hide behind the mirror doctrine of the Torrens system if the bank fails to conduct a proper ocular inspection and investigation of the actual occupants of the property offered as collateral.
The Rule on Simulated Contracts and Forged Deeds: An absolutely simulated contract of sale is void ab initio and transfers no ownership right; consequently, a mortgage constituted by a simulated buyer is void, and the buyer at a foreclosure sale acquires no title.
The Priority Rule in Registered Encumbrances: Under Section 51 of Presidential Decree No. 1529, the prior registration of an adverse claim or notice of lis pendens creates a preference as against a mortgage registered later, and any subsequent registration of the mortgage cannot diminish this preference, which retroacts to the date of the annotations.

Distinctions / Limitations / Qualifications.

The Innocent Purchaser for Value Exception: Under Section 32 of Presidential Decree No. 1529, the right of a defrauded owner to reopen a decree of registration or seek reconveyance is limited and cannot be entertained if the property has already passed to an innocent purchaser for value in good faith and for valuable consideration. However, this exception is inapplicable to a mortgagee bank that fails to perform the mandatory ocular inspections and registers the mortgage only after the adverse claim has been annotated, as such bank is deemed a mortgagee in bad faith.
The Non-Applicability of the Mirror Doctrine: The general rule that a person dealing with registered land may rely solely on the correctness of the Torrens title does not apply when there exist important facts or circumstances that would excite suspicion in an otherwise reasonable person, or when the transferee is a bank or real estate corporation whose business is affected with public interest.

Topic/Subtopic Integration (Mandatory).

Classification of Relationship: DIRECT.
Integration: The case of Cruz v. Bancom Finance Corporation is a leading and controlling authority on Section 32 of Presidential Decree No. 1529 because the case establishes the precise limits of the "innocent purchaser for value" protection when invoked by banking institutions. The decision clarifies that the mirror doctrine under Section 32 is not absolute and cannot be utilized as a shield for gross negligence or to protect a bank that failed to conduct an ocular inspection of the mortgaged property. By reinforcing that banks must observe a higher standard of diligence before approving real estate mortgages, G.R. No. 147788 ensures that the Torrens system remains a reliable system of title registration rather than a tool for facilitating fraudulent double sales and double titling at the expense of rightful, registered owners.

Separate Opinions

NOT APPLICABLE / NOT IN RECORD. (The decision of the Third Division of the Supreme Court of the Philippines was rendered unanimously, with Associate Justice Artemio V. Panganiban as the ponente, and with Associate Justices Jose A.R. Melo, Angelina Sandoval-Gutierrez, and Antonio T. Carpio concurring, and with Associate Justice Jose C. Vitug being abroad on official business; no separate concurring or dissenting opinions were filed).

Cited Laws & Provisions

Every statute, rule, and issuance the decision turns on — the text as written, and the work it does in this case.

Special Law

Section 32, P.D. No. 1529

Review of decree of registration; Innocent purchaser for value

Presidential Decree No. 1529 (Property Registration Decree, 1978)

The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud.

Why it is cited here

The innocent-purchaser shield, and this case extends the heightened bank standard to a setting lenders often assume is safer.

Section 32 protects the purchaser or mortgagee in good faith and for value absolutely — even against a decree obtained by actual fraud.

Banks and other financial institutions must show greater care and prudence than private individuals to earn it, and the case makes clear this holds including in dealings where the title appears clean on its face. A spotless certificate is where a bank's inquiry begins, not where it ends.

What the standard asks for is concrete: an ocular inspection, an inquiry into who occupies the land and by what right, and attention to anything irregular in the chain — a recent transfer, an unexplained reconstitution, a price out of line with the property.

A bank that skips these is not merely careless; it is not an innocent mortgagee at all, and loses the protection entirely rather than partially.

Civil Code

Article 1346, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title II (Contracts), Chapter 2 (Essential Requisites of Contracts), Section 1 (Consent)

An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. (n)

Why it is cited here

The provision behind the defect in the underlying transaction: "An absolutely simulated or fictitious contract is void. A relatively simulated contract, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement."

Read with Article 1345 — simulation is absolute "when the parties do not intend to be bound at all" — the distinction is between a contract that is a pretence and one that conceals a different real agreement.

Absolute simulation produces a void conveyance, and a void conveyance transmits nothing. That is what makes the mortgagee's good faith decisive: without it, there is no valid title anywhere in the chain for the mortgage to attach to.

Civil Code

Article 2085, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title XVI (Pledge, Mortgage and Antichresis), Chapter 1 (Provisions Common to Pledge and Mortgage)

The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (1857)

Why it is cited here

The requisite the whole dispute reduces to: the mortgagor must be the absolute owner of the thing mortgaged.

Where the transfer to the mortgagor was simulated and void, he never became owner, so the requisite fails and the mortgage is void — unless the mortgagee's good faith rescues it under Section 32.

Hence the sequence to work through in any bank-mortgage problem: was the mortgagor's title valid? If yes, the mortgage stands. If no, was the mortgagee in good faith by the standard applicable to it? For a bank, that is the demanding standard, and the answer usually turns on whether anyone went to look at the land.

Source: Cruz v. Bancom Finance Corp., G.R. No. 147788, March 19, 2002

Cited laws & provisions

Section 32, P.D. No. 1529

Special Law

Review of decree of registration; Innocent purchaser for value

Presidential Decree No. 1529 (Property Registration Decree, 1978)

Why it is cited here

The innocent-purchaser shield, and this case extends the heightened bank standard to a setting lenders often assume is safer.

Section 32 protects the purchaser or mortgagee in good faith and for value absolutely — even against a decree obtained by actual fraud.

A bank that skips these is not merely careless; it is not an innocent mortgagee at all, and loses the protection entirely rather than partially.

Full entry below ↓

Article 1346, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title II (Contracts), Chapter 2 (Essential Requisites of Contracts), Section 1 (Consent)

Why it is cited here

Full entry below ↓

Article 2085, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title XVI (Pledge, Mortgage and Antichresis), Chapter 1 (Provisions Common to Pledge and Mortgage)

The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (1857)

Why it is cited here

The requisite the whole dispute reduces to: the mortgagor must be the absolute owner of the thing mortgaged.

Full entry below ↓

Facts

Rev. Fr. Edilberto Cruz and Simplicio Cruz owned 33.9335 hectares in Barangay Pulang Yantoc, Angat, Bulacan under TCT No. 19587. In May 1978 Norma Sulit offered ₱700,000.00 and paid ₱25,000.00 earnest money, title to pass only on payment of the ₱675,000.00 balance.
She never paid the balance. When the brothers refused to transfer title anyway, she used Candelaria Sanchez's closeness to them to obtain, on June 21, 1978, a Deed of Absolute Sale to Sanchez — on the understanding Sanchez would take a bank loan against the land — and on the same day Sanchez deeded the land to Sulit.
Both deeds recited only ₱150,000.00, and nothing was ever paid. TCT No. 19587 was cancelled and TCT No. T-248262 issued to Sulit, who six days later mortgaged the land to Federal Insurance for ₱500,000.00.
On September 1, 1978 Sulit signed a Special Agreement assuming the ₱655,000.00 balance within six months; on August 22, 1979 she mortgaged instead to Bancom Finance Corporation for ₱569,000.00.
Sulit defaulted and vanished. The brothers annotated an adverse claim on October 30, 1979 and a notice of lis pendens on December 10, 1979 with their reconveyance suit — and Bancom registered its mortgage only on March 14, 1980, after both. The RTC voided the sales and mortgage on January 25, 1996; the CA reversed on March 30, 2001.

Arguments of the Parties

Issue

ANCILLARY / INCIDENTAL ISSUES (if any). None separately resolved.

Ruling

Ratio

Simulation may be absolute or relative; it is absolute where the parties never intended to be bound, and such a contract is void ab initio under Article 1346. Two deeds on one day, for a recited ₱150,000.00 never paid, with the buyers never asserting ownership or taking possession, are absolutely simulated.
Registration is not a mode of acquiring ownership — a certificate is evidence of a title already vested — so registering the simulated deeds and issuing TCT No. T-248262 vested Sulit with nothing.
Article 2085 requires that the mortgagor be absolute owner with free disposal of the thing; a void sale leaves the supposed buyer without either, so the mortgage and everything built on it fall.
The mirror doctrine of Section 44 does not shelter banks: holding depositors' money in trust, they may not assume a clean title excuses them from investigating the title and inspecting the premises.
Ocular inspection is standard, indispensable banking practice before approving a loan; had Bancom made one it would have found possession with the brothers, alerting it to the fraud.
Under Section 51 registration is the operative act binding third persons, and a prior registered lien creates a preference that later registration of an earlier-executed mortgage cannot diminish — so the mortgage bound only Bancom and Sulit, and was ineffectual against the brothers.

Doctrine

Doctrines / Rules / Principles Laid Down.

Banks are held to a higher standard of diligence than ordinary dealers in registered land and cannot invoke the mirror doctrine where they omit the ocular inspection and investigation their business requires.
An absolutely simulated sale is void ab initio and transfers nothing, so a mortgage constituted by the simulated buyer is void and the foreclosure purchaser takes no title.
And prior registration of an adverse claim or notice of lis pendens creates a preference over a mortgage registered afterwards, the preference retroacting to the date of annotation.

Distinctions / Limitations / Qualifications.

The innocent-purchaser-for-value exception that ordinarily cuts off reconveyance under Section 32 does not reach a bank that skipped the mandatory inspection and registered behind an annotated adverse claim — such a mortgagee is in bad faith.
And the mirror doctrine yields generally where facts exist that would excite suspicion in a reasonable person, or where the party dealing is an institution whose business is affected with public interest.

Topic/Subtopic Integration (Mandatory).

DIRECT: the Court marked the outer limit of Section 32's protection, holding it unavailable to a negligent bank, so that the Torrens system remains a register of title rather than a shield for fraudulent conveyances against the true registered owners.

Separate Opinions

None. The Third Division decided unanimously, with no separate concurring or dissenting opinion filed.

Full Digest — Recitation Format

Facts

Prior to May 1978: Rev. Fr. Edilberto Cruz and Simplicio Cruz were the registered owners of a 339,335 square meter (33.9335 hectares) parcel of agricultural land, with improvements, located in Barangay Pulang Yantoc, Angat, Bulacan, covered by Transfer Certificate of Title (TCT) No. 19587.
Sometime in May 1978: Norma Sulit, after being introduced to Rev. Fr. Edilberto Cruz by Candelaria Sanchez, offered to purchase the land for ₱700,000.00.
Sometime in May 1978: Rev. Fr. Edilberto Cruz and Simplicio Cruz accepted ₱25,000.00 as earnest money from Norma Sulit, with the agreement that the title would be transferred only upon payment of the balance of ₱675,000.00.
Sometime between May 1978 and June 21, 1978: Norma Sulit failed to pay the balance of ₱675,000.00 and proposed that the title be transferred to the name of Norma Sulit anyway, which proposal Rev. Fr. Edilberto Cruz refused due to a lack of trust in Norma Sulit.
On June 21, 1978: Norma Sulit, leveraging the close relationship of Candelaria Sanchez with Rev. Fr. Edilberto Cruz and Simplicio Cruz, persuaded the brothers to execute a Deed of Absolute Sale in favor of Candelaria Sanchez, with the understanding that Candelaria Sanchez would obtain a bank loan in the name of Candelaria Sanchez using the land as collateral.
On June 21, 1978: On the same day, Candelaria Sanchez executed another Deed of Absolute Sale conveying the same property to Norma Sulit.
On June 21, 1978: In both Deeds of Absolute Sale, the stated consideration was only ₱150,000.00, and no actual consideration or purchase price was ever paid to Rev. Fr. Edilberto Cruz or Simplicio Cruz.
Sometime thereafter: By virtue of the simulated Deeds of Sale, Transfer Certificate of Title (TCT) No. 19587 in the names of Rev. Fr. Edilberto Cruz and Simplicio Cruz was cancelled, and Transfer Certificate of Title (TCT) No. T-248262 was issued in the name of Norma Sulit.
On June 27, 1978: Six days after the execution of the Deeds of Sale, Norma Sulit mortgaged the property to Federal Insurance Company to secure a loan of ₱500,000.00.
On September 1, 1978: Norma Sulit executed a "Special Agreement" assuming the obligation of Candelaria Sanchez to pay Rev. Fr. Edilberto Cruz and Simplicio Cruz the actual balance of the purchase price, amounting to ₱655,000.00, within six months.
On August 22, 1979: The mortgage in favor of Federal Insurance Company was cancelled, and Norma Sulit executed another real estate mortgage over the property in favor of Bancom Finance Corporation to secure a loan of ₱569,000.00.
On October 30, 1979: Due to the failure of Norma Sulit to pay the amount stipulated in the Special Agreement and the subsequent disappearance of Norma Sulit, Rev. Fr. Edilberto Cruz and Simplicio Cruz caused the annotation of an adverse claim on Transfer Certificate of Title (TCT) No. T-248262.
On December 10, 1979: Rev. Fr. Edilberto Cruz and Simplicio Cruz filed a Complaint for the reconveyance of the land before the Regional Trial Court of Bulacan, and on the same day, caused the annotation of a notice of lis pendens on Transfer Certificate of Title (TCT) No. T-248262.
On February 11, 1980: Norma Sulit filed an Answer to the complaint but failed to appear in the subsequent court proceedings and was eventually declared in default.
On March 14, 1980: Bancom Finance Corporation registered the real estate mortgage in the Office of the Register of Deeds of Bulacan, which registration occurred long after the annotations of the adverse claim and notice of lis pendens.
On May 20, 1980: Bancom Finance Corporation filed a motion for leave to intervene in the civil case, which motion the trial court granted.
Sometime in the middle of 1980: Norma Sulit defaulted in the payment of the loan to Bancom Finance Corporation, prompting the bank to foreclose the mortgage. At the public auction, Bancom Finance Corporation was declared the highest bidder and was issued a certificate of sale.
On January 25, 1996: The Regional Trial Court of Bulacan rendered a Decision declaring the Deeds of Sale absolutely simulated and void, nullifying the mortgage in favor of Bancom Finance Corporation, and holding that Bancom Finance Corporation was not a mortgagee in good faith.
On March 30, 2001: The Court of Appeals reversed the Regional Trial Court, declaring the Deeds of Sale and Mortgage valid, and ordering the cancellation of the notice of lis pendens.
On March 19, 2002: The Supreme Court of the Philippines Second Division (sitting as the Third Division) promulgated the Decision reversing the Court of Appeals, declaring the sales and mortgage null and void, and reinstating the trial court's judgment in favor of the brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz.

Arguments of the Parties

Petitioners (Rev. Fr. Edilberto Cruz and Simplicio Cruz).

Simulation of Deeds: The petitioners argue that the Deed of Sale executed in favor of Candelaria Sanchez and the subsequent Deed of Sale in favor of Norma Sulit were absolutely simulated and void ab initio because there was a complete lack of any consideration and no money was ever paid.
True Intent of Execution: The petitioners contend that the deeds were executed merely as a subterfuge or a procedural device to facilitate a bank loan using the property as collateral, and not to transfer actual ownership.
Bad Faith of Mortgagee: The petitioners assert that Bancom Finance Corporation is not a mortgagee in good faith because the bank registered the real estate mortgage on March 14, 1980, which registration was subsequent to the prior annotations of the adverse claim (October 30, 1979) and notice of lis pendens (December 10, 1979) by the petitioners.
Negligence of Bank: The petitioners argue that Bancom Finance Corporation failed to exercise the standard of care and prudence required of banking institutions because the bank failed to conduct an ocular inspection of the property, which inspection would have easily revealed that the property was actually and continuously occupied and possessed by the petitioners, and not by Candelaria Sanchez or Norma Sulit.

Respondent (Bancom Finance Corporation).

Validity of Deeds: The respondent argues that the Deeds of Sale were valid, binding, and not simulated because the petitioners intended to be bound, as shown by the execution of a subsequent Special Agreement to enforce the payment of the balance of the purchase price.
Mortgagee in Good Faith: The respondent contends that Bancom Finance Corporation is an innocent mortgagee for value and is entitled to rely on the face of a clean Torrens certificate of title without conducting an exhaustive investigation of the history of the title.
Priority of Mortgage: The respondent asserts that the contract of mortgage with Norma Sulit was executed on August 22, 1979, which was prior to the annotations of the adverse claim and notice of lis pendens by the petitioners, and thus, the mortgage lien of the bank has a preferential right over the petitioners' claim.
Bad Faith of Petitioners: The respondent claims that the petitioners were in bad faith because the petitioners already had knowledge of the mortgage when the petitioners caused the annotations of the adverse claim and notice of lis pendens.

Common Ground.

Execution of Deeds: Both parties admit that the two Deeds of Absolute Sale (from the petitioners to Candelaria Sanchez, and from Candelaria Sanchez to Norma Sulit) were executed on the same day, June 21, 1978.
Lack of Consideration: Both parties acknowledge that no part of the proceeds of the loan obtained by Norma Sulit from Bancom Finance Corporation was ever paid to or received by the petitioners.
Dates of Annotation and Registration: Both parties agree that the adverse claim was annotated on October 30, 1979, and the notice of lis pendens on December 10, 1979, while the mortgage in favor of Bancom Finance Corporation was registered on March 14, 1980.

Issue

MAIN ISSUE.

Whether a bank can be considered an innocent mortgagee/purchaser in good faith and for value under Section 32 of Presidential Decree No. 1529 if the bank fails to conduct an ocular inspection of the property offered as collateral, and registers the real estate mortgage only after the prospective heirs or owners have already annotated an adverse claim and a notice of lis pendens on the certificate of title.

SECONDARY ISSUES.

Whether a contract of sale is absolutely simulated and void ab initio under Article 1345 and Article 1346 of the Civil Code when there is a complete absence of any consideration and the contract is executed merely as a subterfuge to facilitate a bank loan.
Whether a simulated deed of sale can convey any rights that could ripen into a valid title, such that a subsequent mortgage executed by the simulated buyer in favor of a bank can be declared valid.
Whether the prior registration of an adverse claim and a notice of lis pendens creates a preference over a mortgage contract that was executed prior to the annotations but registered only after the annotations.

Ruling

Dispositive portion (verbatim).

"WHEREFORE, the Petition is GRANTED and the assailed Decision SET ASIDE. The Decision of the RTC of Bulacan, (Branch 21) dated January 25, 1996 is REINSTATED. No costs."

Ratio

The Nullity of Absolutely Simulated Contracts: Under Article 1345 of the Civil Code, a simulated contract of sale may be absolute or relative. Absolute simulation occurs when the parties have no intention to be bound at all, rendering the contract void ab initio under Article 1346 of the Civil Code. In this case, the consecutive Deeds of Absolute Sale executed on the same day—from the petitioners to Candelaria Sanchez, and from Candelaria Sanchez to Norma Sulit—were completely void because no consideration was ever paid, and the transactions were executed solely to facilitate a bank loan. The buyers never attempted to assert any rights of ownership or take physical possession of the land.
Registration Does Not Vest Title: Under the Torrens system of land registration, the act of registration is not a mode of acquiring ownership, as a certificate of title merely serves as evidence of an ownership already existing and vested. Consequently, the fraudulent registration of the simulated Deeds of Sale and the subsequent issuance of Transfer Certificate of Title (TCT) No. T-248262 in the name of Norma Sulit did not vest Norma Sulit with any valid ownership or title over the property.
Absolute Ownership as an Essential Requisite of a Mortgage: Under Article 2085 of the Civil Code, absolute ownership of the property by the mortgagor is an essential requisite of a contract of mortgage, alongside the requirement that the mortgagor have the free disposal of the thing mortgaged. Since the simulated deeds of sale were null and void, Norma Sulit was never the owner of the property and had no legal right to encumber the property. Therefore, the real estate mortgage Norma Sulit constituted in favor of Bancom Finance Corporation was also null and void, and the subsequent foreclosure and auction sale carried no legal force or effect.
The Stricter Diligence Standard Imposed on Banks: Although the general rule under Section 44 of Presidential Decree No. 1529 (former Section 39 of Act No. 496) is that every person dealing with registered land has the right to rely on the face of the Torrens certificate of title, this rule does not apply to banks and financial institutions. Because the business of banks is deeply impressed with public interest, keeping in trust the money of depositors, banks are held to a higher and more rigorous standard of care, prudence, and due diligence. A bank cannot assume that a clean title offered as security relieves the bank of the responsibility to investigate the title and inspect the premises.
Ocular Inspection as a Standard Banking Practice: The standard and indispensable practice of banks, before approving a loan, is to conduct an ocular inspection of the property offered as collateral to verify who the actual owners and possessors are. Bancom Finance Corporation failed to perform this duty. Had the bank inspected the Bulacan property, the bank would have discovered that possession was neither with Candelaria Sanchez nor with Norma Sulit, but remained continuously with the petitioners, which fact would have alerted the bank to the fraudulent nature of the title.
The Construction of Constructive Notice and Priority: Under Section 51 of Presidential Decree No. 1529, a real estate mortgage must be registered in the Office of the Register of Deeds to bind third parties, as registration is the operative act that conveys or affects registered land [1030, 288, 289]. A prior registration of a lien, such as an adverse claim or a notice of lis pendens, creates a preference that binds all subsequent registrants. Because Bancom Finance Corporation registered the mortgage only on March 14, 1980—months after the annotations of the petitioners' adverse claim and notice of lis pendens—the bank had constructive notice of the petitioners' claim, and the mortgage was completely ineffectual against the petitioners as third parties.

Doctrine

Doctrines / Rules / Principles Laid Down.

The Rule on Bank Mortgagee Diligence: Unlike private individuals, banks and other financial institutions are expected to exercise greater care and prudence in real estate dealings, including those involving registered lands, as the business of banking is imbued with public interest. A bank cannot hide behind the mirror doctrine of the Torrens system if the bank fails to conduct a proper ocular inspection and investigation of the actual occupants of the property offered as collateral.
The Rule on Simulated Contracts and Forged Deeds: An absolutely simulated contract of sale is void ab initio and transfers no ownership right; consequently, a mortgage constituted by a simulated buyer is void, and the buyer at a foreclosure sale acquires no title.
The Priority Rule in Registered Encumbrances: Under Section 51 of Presidential Decree No. 1529, the prior registration of an adverse claim or notice of lis pendens creates a preference as against a mortgage registered later, and any subsequent registration of the mortgage cannot diminish this preference, which retroacts to the date of the annotations.

Distinctions / Limitations / Qualifications.

The Innocent Purchaser for Value Exception: Under Section 32 of Presidential Decree No. 1529, the right of a defrauded owner to reopen a decree of registration or seek reconveyance is limited and cannot be entertained if the property has already passed to an innocent purchaser for value in good faith and for valuable consideration. However, this exception is inapplicable to a mortgagee bank that fails to perform the mandatory ocular inspections and registers the mortgage only after the adverse claim has been annotated, as such bank is deemed a mortgagee in bad faith.
The Non-Applicability of the Mirror Doctrine: The general rule that a person dealing with registered land may rely solely on the correctness of the Torrens title does not apply when there exist important facts or circumstances that would excite suspicion in an otherwise reasonable person, or when the transferee is a bank or real estate corporation whose business is affected with public interest.

Topic/Subtopic Integration (Mandatory).

Classification of Relationship: DIRECT.
Integration: The case of Cruz v. Bancom Finance Corporation is a leading and controlling authority on Section 32 of Presidential Decree No. 1529 because the case establishes the precise limits of the "innocent purchaser for value" protection when invoked by banking institutions. The decision clarifies that the mirror doctrine under Section 32 is not absolute and cannot be utilized as a shield for gross negligence or to protect a bank that failed to conduct an ocular inspection of the mortgaged property. By reinforcing that banks must observe a higher standard of diligence before approving real estate mortgages, G.R. No. 147788 ensures that the Torrens system remains a reliable system of title registration rather than a tool for facilitating fraudulent double sales and double titling at the expense of rightful, registered owners.

Separate Opinions

NOT APPLICABLE / NOT IN RECORD. (The decision of the Third Division of the Supreme Court of the Philippines was rendered unanimously, with Associate Justice Artemio V. Panganiban as the ponente, and with Associate Justices Jose A.R. Melo, Angelina Sandoval-Gutierrez, and Antonio T. Carpio concurring, and with Associate Justice Jose C. Vitug being abroad on official business; no separate concurring or dissenting opinions were filed).