Home Bankers Savings and Trust Company

(HBSTC) v. CA
(Austria-Martinez, J.)
FACTS: Each of private respondents entered into
separate contracts to sell with TransAmerican Sales
and Exposition (TransAmerican) through the latters
Owner/General Manager, Engr. Jesus Garcia,
involving certain portions of land covered by Transfer
Certificate of Title (TCT) No. 19155, located at No. 45
Gen. Lim Street, Heroes Hill, Quezon City, together
with one unit three-storey townhouse to be built on
each portion, as follows:
Respondent Pablo N. Arevalo
purchased the portion of land
denominated as Unit No. 5 for the
amount of P750,000.00 on August
21, 1988 and had already fully paid
the purchase price on September 3,
1988;
Respondent Alfredo Lim purchased
the portion of land denominated as
Unit No. 1 for the amount of
P800,000.00 on December 22, 1988
and fully paid the same upon
execution of the agreement on the
same day;
Respondent
Francisco
A.
Uy
purchased the portion of land
denominated as Unit No. 6 on
October 29, 1988 in the amount of
P800,000.00 payable in installments
and had allegedly made a total
payment
of
P581,507.41.
He
ordered to stop the payment of all
[postdated] checks from September
1990 to November 1995 on the
ground of non-completion of his unit
and had later learned of the
foreclosure of the property;

had been fully paid as of March 18,

1989; Santos Lim subsequently sold
and assigned his share of the
property to private respondent Felisa
Chi Lim on May 12, 1989.
It is stipulated in their respective contracts that their
individual townhouses will be fully completed and
constructed as per plans and specifications and the
respective titles thereto shall be delivered and
transferred to private respondents free from all liens
and encumbrances upon their full payment of the
purchase price. However, despite repeated demands,
Garcia/TransAmerican failed to comply with their
undertakings.
On May 30, 1989, Engr. Garcia and his wife Lorelie
Garcia obtained from petitioner Home Bankers
Savings and Trust Company (formerly Home Savings
Bank and Trust Company) a loan in the amount of
P4,000,000.00 and without the prior approval of the
Housing and Land Use Regulatory Board (HLURB),
the spouses mortgaged eight lots covered by TCT
Nos. 3349 to 3356 as collateral. Petitioner registered
its mortgage on these titles without any other
encumbrance or lien annotated therein. The proceeds
of the loan were intended for the development of the
lots into an eight-unit townhouse project. However,
five out of these eight titles turned out to be
private respondents townhouses subject of the
contracts to sell with Garcia/TransAmerican.
When the loan became due, Garcia failed to pay his
obligation to petitioner. Consequently, petitioner
instituted an extrajudicial foreclosure8 on the subject
lots and being the highest bidder in the public auction,
a certificate of sale in its favor was issued by the
sheriff on February 26, 1990. Subsequently, the
sheriffs certificate of sale was registered and
annotated on the titles of the subject lots in the
Register of Deeds of Quezon City.

Respondent spouses Leandro A.

Soriano, Jr. and Lilian Soriano
purchased the portion of land
denominated as Unit No. 3 on
February 15, 1990 in the amount of
P1,600,000.00 and had allegedly
made a payment of P669,960.00.
They had stopped paying because of
non-completion of the project and
had later learned of the foreclosure
of the property;

On November 8, 1990, private respondents filed a

complaint with the Office of Appeals, Adjudication and
Legal
Affairs
(OAALA),
HLURB,
against
Garcia/TransAmerican as seller/developer of the
property and petitioner, as indispensable party, for
non-delivery of titles and non-completion of the
subdivision project. They prayed for the completion of
the units, annulment of the mortgage in favor of
petitioner, release of the mortgage on the lots with
fully paid owners and delivery of their titles, and for
petitioner to compute individual loan values of
amortizing respondents and to accept payments from
them and damages.

Respondents Alfredo Lim and

Santos Lim purchased the portion of
land denominated as Unit No. 7 for
P700,000.00 on October 1988 and

Petitioner filed its Answer contending that private

respondents have no cause of action against it; that
at the time of the loan application and execution
of the promissory note and real estate mortgage

by Garcia, there were no known individual buyers

of the subject land nor annotation of any
contracts, liens or encumbrances of third persons
on the titles of the subject lots; that the loan was
granted and released without notifying HLURB as it
was not necessary.

or titles offered as security were clean of any

encumbrances or lien, that it was thereby relieved of
taking any other step to verify the over-reaching
implications should the subdivision be auctioned on
foreclosure.

The OAALA rendered its decision in favor of private

respondents,
ruling
that
the
mortgage
is
unenforceable and ordering the cancellation of the
annotations of the Certificate of Sale in favor of
petitioner. The OAALA likewise ordered the delivery of
the TCTs that cover the private respondents
townhouses. Petitioner appealed the said decision but
the same was affirmed.

Domingo Realty, Inc. and Ayala Steel

Manufacturing Co., Inc. v. CA and Antonio M.
Acero
(Velasco, Jr., J.)

In this present Petition, HBSTC contends that,

granting
arguendo
that
the
mortgage
is
unenforceable, it is not obliged to go beyond the
certificates of title registered and had every reason to
rely on the correctness and validity of those titles.
ISSUE: W/n a mortgagee is obliged to look beyond
the certificate of title prior to entering into the
transaction in question.
HELD: Yes. While the cases cited by petitioner held
that the mortgagee is not under obligation to look
beyond the certificate of title when on its face, it was
free from lien or encumbrances, the mortgagees
therein were considered in good faith as they were
totally innocent and free from negligence or
wrongdoing in the transaction. In this case, petitioner
knew that the loan it was extending to
Garcia/TransAmerican was for the purpose of the
development
of
the
eight-unit
townhouses.
Petitioners insistence that prior to the approval of the
loan, it undertook a thorough check on the property
and found the titles free from liens and encumbrances
would not suffice. It was incumbent upon petitioner to
inquire into the status of the lots which includes
verification on whether Garcia had secured the
authority from the HLURB to mortgage the subject
lots. Petitioner failed to do so. We likewise find
petitioner negligent in failing to even ascertain from
Garcia if there are buyers of the lots who turned out to
be private respondents.
Petitioners want of
knowledge due to its negligence takes the place of
registration, thus it is presumed to know the rights of
respondents over the lot. The conversion of the
status of petitioner from mortgagee to buyer-owner
will not lessen the importance of such knowledge.
Neither will the conversion set aside the consequence
of its negligence as a mortgagee.
Judicial notice can be taken of the uniform practice of
banks to investigate, examine and assess the real
estate offered as security for the application of a loan.
We cannot overemphasize the fact that the Bank
cannot barefacedly argue that simply because the title

FACTS: Petitioner Domingo Realty filed a complaint

against private respondent Acero for recovery of
possession of three parcels of land located in Cupang,
Muntinlupa. Acero allegedly constructed a factory
building for hollow blocks on a portion of these lands.
In Aceros answer, he claimed that he merely leased
the land from David Victorio who in turn assailed the
validity of petitioners TCTs by claiming that he and his
predecessors-in-interest had been in possession of
the property for more than 70 years and that the TCTs
emanated from spurious deeds of sale.
A Compromise Agreement was eventually executed
by the parties-in-interest which prompted the RTC to
adopt the same in its Decision. Petitioner, in order to
implement the Decision, filed a motion asking
permission to conduct a re-survey of the subject
properties, which was granted in an Order dated Jan.
22, 1988. Acero subsequently filed a motion to nullify
the said Agreement, claiming that the re-survey would
violate the Agreement since the whole area he
occupied will be adjudged as owned by petitioner. The
same was denied. The results of the re-survey
showed that the land occupied by the factory of Acero
is covered by the TCTs of petitioner. Petitioners (with
Ayala Steel being the transferee) filed a motion for
execution on Dec. 10, 1991 which was approved on
Jan. 15, 1992.
Aggrieved, respondent moved for the annulment of
the Order granting the issuance of the Writ of
Execution on the ground that the survey plan (results
of the re-survey by petitioners) violated the
Compromise Agreement in such a way that he will be
forced to vacate the whole of the property he was
occupying instead of vacating only a portion of the
same (since the compromise agreement was only as
to a portion of the land occupied by him which 2000
sqm more or less). The same was denied.
In the CA, respondent prayed for the issuance of a
TRO and the annulment of the RTC Order granting
the execution of the judgment. The CA ruled in favor
of him, holding that his belief that he would only be
vacating a portion of the property he was occupying
was a mistake that is a basis for the nullification of the
compromise agreement.

ISSUE: W/n the compromise agreement should be set

aside on the ground of mistake.
HELD: No. it is presumed that the parties to a
contract know and understand the import of their
agreement. Thus, civil law expert Arturo M. Tolentino
opined that:
To invalidate consent, the error must
be excusable. It must be real error,
and not one that could have been
avoided by the party alleging it. The
error must arise from facts unknown
to him. He cannot allege an error
which refers to a fact known to him,
or which he should have known by
ordinary diligent examination of the
facts. An error so patent and obvious
that nobody could have made it, or
one which could have been avoided
by ordinary prudence, cannot be
invoked by the one who made it in
order to annul his contract. A mistake
that is caused by manifest
negligence cannot invalidate a
juridical act. (Emphasis supplied.)
Prior to the execution of the Compromise Agreement,
respondent Acero was already aware of the technical
description of the titled lots of petitioner Domingo
Realty and more so, of the boundaries and area of the
lot he leased from David Victorio. Before consenting
to the agreement, he could have simply hired a
geodetic engineer to conduct a verification survey and
determine the actual encroachment of the area he
was leasing on the titled lot of petitioner Domingo
Realty. Had he undertaken such a precautionary
measure, he would have known that the entire area
he was occupying intruded into the titled lot of
petitioners and possibly, he would not have signed the
agreement.
In this factual milieu, respondent Acero could have
easily averted the alleged mistake in the contract; but
through palpable neglect, he failed to undertake the
measures expected of a person of ordinary prudence.
Without doubt, this kind of mistake cannot be resorted
to by respondent Acero as a ground to nullify an
otherwise clear, legal, and valid agreement, even
though the document may become adverse and even
ruinous to his business.
Moreover, respondent failed to state in the
Compromise Agreement that he intended to vacate
only a portion of the property he was leasing. Such
provision being beneficial to respondent, he, in the
exercise of the proper diligence required, should have
made sure that such matter was specified in the
Compromise Agreement. Respondent Aceros failure
to have the said stipulation incorporated in the

Compromise Agreement is negligence on his part and

insufficient to abrogate said agreement.

DBP v. The Acting Register of Deeds of Nueva

Ecija
(Narvasa, J.)
FACTS: On June 13, 1980, the Development Bank of
the Philippines (hereafter, DBP) presented for
registration to the Register of Deeds of Nueva Ecija,
Cabanatuan City, a sheriff's certificate of sale in its
favor of two parcels of land covered by Transfer
Certificates of Title Nos. NT-149033 and NT-149034,
both in the names of the spouses Andres Bautista and
Marcelina Calison, which said institution had acquired
as the highest bidder at an extrajudicial foreclosure
sale. The transaction was entered as Entry No. 8191
in the Registry's Primary Entry Book and DBP paid the
requisite registration fees on the same day.
Annotation of the sale on the covering certificates of
title could not, however be effected because the
originals of those certificates were found to be missing
from the files of the Registry, where they were
supposed to be kept, and could not be located. On the
advice of the Register of Deeds, DBP instituted
proceedings in the Court of First Instance of Nueva
Ecija to reconstitute said certificates, and
reconstitution was ordered by that court in a decision
rendered on June 15, 1982. For reasons not apparent
on the record, the certificates of title were
reconstituted only on June 19, 1984.
On June 25, 1984, DBP sought annotation on the
reconstituted titles of the certificate of sale subject of
Entry No. 8191 on the basis of that same four-year-old
entry. The Acting Register of Deeds, being in doubt of
the proper action to take on the solicitation, took the
matter to the Commissioner of Land Registration by
consulta raising two questions: (a) whether the
certificate of sale could be registered using the old
Entry No. 8191 made in 1980 notwithstanding the fact
that the original copies of the reconstituted certificates
of title were issued only on June 19, 1984; and (b) if
the first query was answered affirmatively, whether he
could sign the proposed annotation, having assumed
his duties only in July 1982.
The resolution on the consulta held that Entry No.
8191 had been rendered "... ineffective due to the
impossibility of accomplishing registration at the time
the document was entered because of the nonavailability of the certificate (sic) of title involved. For
said certificate of sale to be admitted for registration,
there is a need for it to be re-entered now that the
titles have been reconstituted upon payment of new
entry fees," and by-passed the second query as
having been rendered moot and academic by the

answer to the first. Aggrieved, DBP appealed the

resolution to the CA.
ISSUE: W/n the refusal of the ROD to annotate the
reconstituted titles is proper.
HELD: No. The appealed resolution appears to be
based upon a reading of the cited Section 56 of PD
No. 1529, and particularly of the provision therein
referring to the Register's act of making a primary
entry as "...a preliminary process in registration...," as
depriving of any effect a primary entry without a
corresponding annotation thereof on the certificate of
title to which the instrument subject of said entry
refers.
That view fails to find support from a consideration of
entire context of said Section 56 which in another part
also provides that the instrument subject of a primary
entry "... shall be regarded as registered from the time
so noted ...," and, at the very least, gives such entry
from the moment of its making the effect of putting the
whole world on notice of the existence the instrument
on entered. Such effect (of registration) clearly
attaches to the mere making of the entry without
regard to the subsequent step of annotating a
memorandum of the instrument subject of the entry on
the certificate of title to which it refers. Indeed, said
Section, in also providing that the annotation, "...
when made ... shall bear the same date ..." as the
entry, may be said to contemplate unspecified
intervals of time occurring between the making of a
primary entry and that of the corresponding annotation
on the certificate of title without robbing the entry of
the effect of being equivalent to registration. Neither,
therefore, is the implication in the appealed resolution
that annotation must annotation entry immediately or
in short order justified by the language of Section 56.

of sale was registrable on its face. 11 DBP, therefore,

complied with all that was required of it for purposes
of both primary entry and annotation of the certificate
of sale. It cannot be blamed that annotation could not
be made contemporaneously with the entry because
the originals of the subject certificates of title were
missing and could not be found, since it had nothing
to do with their safekeeping. If anyone was
responsible for failure of annotation, it was the
Register of Deeds who was chargeable with the
keeping and custody of those documents.
It does not, therefore, make sense to require DBP to
repeat the process of primary entry, paying anew the
entry fees as the appealed resolution disposes, in
order to procure annotation which through no fault on
its part, had to be deferred until the originals of the
certificates of title were found or reconstituted.
Flor Martinez v. Ernesto G. Garcia and Edilberto M.
Brua
(Peralta, J.)
FACTS: Respondent Brua was the registered owner
of a parcel of land located in Mandaluyong, Rizal
covered by TCT No. 346026. The same property was
mortgaged several times, as evidenced by
annotations found at the back of its TCT. On Oct. 22,
1991, Brua sold the property in the amount of P 705K
to Garcia, as partial payment of the formers mortgage
indebtedness to the latter. Garcia then registered the
said deed with the ROD of Rizal and TCT No. 5204
was issued in Garcia and his wifes name. However,
the several annotations at the back of the previous
title were carried over, such as Entry no. 2881
showing a notice of levy on execution in favor of
petitioner Flor Martinez.

Furthermore, it is amply clear that the four-year hiatus

between primary entry and proposed annotation in
this case has not been of DBP's making. Though it
was under no necessity to present the owner's
duplicates of the certificates of title affected for
purposes of primary entry, since the transaction
sought to be recorded was an involuntary transaction,
and the record is silent as to whether it presented
them or not, there is nonetheless every probability that
it did so. It was the mortgagee of the lands covered by
those titles and it is usual in mortgage transactions
that the owner's duplicates of the encumbered titles
are yielded into the custody of the mortgage until the
mortgage is discharged. Moreover, the certificates of
title were reconstituted from the owner's duplicates,
and again it is to be presumed that said duplicates
were presented by DBP, the petitioner in the
reconstitution proceedings.

It appeared that the annotations found at the back of

the title of the subject property in favor of petitioner,
i.e., Notice of Levy on Attachment and/or Levy, Notice
of Levy on Execution, and Certificate of Sale, were all
made in connection with petitioner's action for
Collection of Sum of Money, in which a decision was
rendered in favor of petitioner, where the RTC ordered
respondent Brua to pay the former the amount of
P244,594.10, representing the value of the
dishonored checks plus 12% interest per annum as
damages and the premium paid by petitioner for the
attachment bond. The decision became final and
executory as respondent Brua failed to appeal the
same, and a notice of levy on execution was issued. A
public auction was subsequently conducted, where
the subject property was awarded to petitioner as the
sole bidder in the amount of P10,000.00, and a
Certificate of Sale was issued in her favor.

It is, furthermore, admitted that the requisite

registration fees were fully paid and that the certificate

On February 9, 1994, respondents Garcia and Brua

filed with the RTC of Pasig, Branch 267, an Action to

Quiet Title, initially against petitioner due to the

encumbrances/liens
annotated
on
respondent
Garcia's new title. They contended that these
encumbrances/liens were registered subsequent to
the annotation of respondent Garcia's adverse claim
made in 1980, and prayed that these be canceled.
Subsequently, the complaint was amended to include
Pilipinas Bank as an additional defendant. Petitioner
and Pilipinas Bank filed their respective Answers
thereto.
The RTC dismissed Garcias action. In so ruling, the
RTC found that the adverse claim which respondent
Garcia caused to be annotated on the previous title of
the subject property, i.e, TCT No. 346026, on June 23,
1980 was predicated on his interest as a mortgagee of
a loan of P150,000.00, which he extended to
respondent Brua; that respondent Garcia's adverse
interest was merely that of a second mortgagee, as he
was not yet the purchaser of the subject property as of
said date; that when the judicial liens, i.e., Notice of
Levy on Attachment and/or Levy and Notice of Levy
on Execution, were caused to be registered by
petitioner on respondent Brua's title on January 8,
1981 and July 8, 1998, respectively, by virtue of
petitioner being adjudged judgment creditor by Branch
60 of RTC Makati, respondent Garcia's claim became
inferior to that of petitioner.
The CA reversed the RTC ruling. The CA said that a
subsequent sale of property covered by a certificate of
title cannot prevail over an adverse claim, duly sworn
to and annotated on the certificate of title previous to
the sale; that while one who buys a property from the
registered owner need not have to look behind the
title, he is nevertheless bound by the liens and
encumbrances annotated thereon; and, thus, one who
buys without checking the vendor's title takes all the
risks and losses consequent to such failure.
ISSUE: W/n petitioner has a better right with respect
to the property in question.
HELD: No. Petitioner contends that the adverse claim
of respondent Garcia inscribed on the title of the
subject property is but a notice that the latter has an
interest adverse to respondent Brua's title, to the
extent of P150,000.00 secured by a real estate
mortgage, and such adverse claim cannot be
considered superior to that of a final sale conducted
by the sheriff by virtue of a court judgment that has
attained finality.
Sec. 12, Rule 39 of the Rules of Court provides:
SEC. 12. Effect of levy on execution as
to third persons. The levy on execution
shall create a lien in favor of the
judgment obligee over the right, title

and interest of the judgment obligor in

such property at the time of the levy,
subject to liens and encumbrances
then existing.
Clearly, the levy does not make the judgment creditor
the owner of the property levied upon. He merely
obtains a lien. Such levy on execution is subject and
subordinate to all valid claims and liens existing
against the property at the time the execution lien
attached, such as real estate mortgages.
Respondent Garcia's adverse claim, which refers to
the deed of mortgage executed by respondent Brua in
his favor, was annotated on respondent Brua's title
registered with the Registry of Deeds of Rizal on June
23, 1980 as Entry No. 49853. The adverse claim was
already existing when the Notice of Levy on
Execution, as well as the Certificate of Sale in favor of
petitioner, was inscribed on July 11, 1988 and
September 2, 1988, respectively; and, hence, the
adverse claim is sufficient to constitute constructive
notice to petitioner regarding the subject property.
When petitioner registered her Notice of Levy on
Execution on the title of the subject property, she was
charged with the knowledge that the subject property
sought to be levied upon on execution was
encumbered by an interest the same as or better than
that of the registered owner thereof. Thus, no grave
abuse of discretion was committed by the CA when it
held that the notice of levy and subsequent sale of the
subject property could not prevail over respondent
Garcia's existing adverse claim inscribed on
respondent Brua's certificate of title.
The annotation of an adverse claim is a measure
designed to protect the interest of a person over a
piece of real property, where the registration of such
interest or right is not otherwise provided for by the
Land Registration Act or Act No. 496 (now P.D.
No.1529 or the Property Registration Decree), and
serves a warning to third parties dealing with said
property that someone is claiming an interest on the
same or a better right than that of the registered
owner thereof.
Petitioner cannot be considered as a buyer in good
faith. A purchaser in good faith and for value is one
who buys the property of another without notice that
some other person has a right to or interest in such
property and pays a full and fair price for the same at
the time of such purchase, or before he has notice of
the claims or interest of some other person in the
property. Here, petitioner admitted on crossexamination that when she registered her notice of
attachment in 1981 and the levy on execution on July
11, 1988, she already saw respondent Garcia's
adverse claim inscribed on respondent Brua's title on
June 23, 1980.