PENULLAR vs. PNB

No. L-­32762. January 27, 1983.

TOPIC:  Torts, Negligence

FACTS:

There was a land registration case between Cristina Penullar and Florencio Felix for the declaration of absolute nullity of judicial proceedings in a land registration case. While the case was pending, the land was mortgaged to PNB for a loan by the defendants of the case for declaration of nullity of judicial proceedings.

The CA in that case declared the judicial proceedings void and all Certificates of Title flowing from the proceedings null and void, but at the same time declared the mortgage of PNB valid on the basis of being a mortgagor in good faith.

Penullar claimed that PNB was negligent in allowing the void title to be mortgaged.

ISSUE: Whether or not PNB was negligent

HELD:

NO. PNB had a right to rely on the torrens titles presented to it, furthermore, Petitioner Penullar was also found to have been negligent, to wit:

He whose negligence had enabled a third person to cause damages shall, as between two innocent parties, bear the loss – “In the present case, [if herein petitioner] had appealed from the decision in the registration case, no certificate of Title would have been issued just like that in the name of the [petitioner] and no mortgage could have been constituted by them in favor of Bank but as it is, said [petitioner] failed to do that, instead they let the decision in the registration case gain the status of finality; allowed without prior protest, the certificate of title to be issued; did not even as early as possible, annotate an adverse claim on the titles; and they filed this case only several months afterwards, it was their negligence that permitted said adjudicatees in the said registration case to apply for and secure mortgages from the Bank.