RIGHTS OF CREDITORS/ASSIGNEES of CO-OWNERS

PHILIPPINE NATIONAL BANK,

vs.
THE HON. COURT OF APPEALS (SPECIAL FIRST DIVISION), PEDRO BITANGA,
FERNANDO BITANGA, GREGORIO BITANGA, GUILLERMO BITANGA, CLARITA
BITANGA together with her husband AGRIPINO L. RABAGO and MELITONA
LAGPACAN, assisted by her husband JORGE MALACAS.
G.R. No. L-34404. June 25, 1980.

Petition for REVIEW of the decision of the CA, which affirmed with certain modifications the
judgment of the CFI of Ilocos Norte in favor of the respondents.

FACTS:

Property in question originally belonged to the conjugal property of Inigo Bitanga and Rosa Ver.
The original certificate of title was issued to them and inserted in the register of deeds of Ilocos
Norte. However, this issuance was only given on December 15, 1937 which was after Inigo died
(September 25, 1935).

Still before the issuance of the title, Rosa mortgaged the entire property in favour of PNB on
October 20, 1936 for the sum of 500 pesos. However, the mortgaged lien was not annotated in
the register of deeds when the original certificate was issued. Nevertheless, the power of attorney
in favour of PNB stated that in the event Rosa defaults, it would have the capacity to take
possession of, and retain the property mortgaged, to sell or lease the same or any part of it, and to
do such other acts as necessary in the performance of the power granted to the mortgagee. This
PA was, on the other hand, annotated on the original certificate title.

Meanwhile, Rosa Ver defaulted in the fulfilment of her obligation with Manila trading. So, MTC
levied upon her share in the lot in question on December 13, 1939 and had the attachment
annotated on the title. Rosa’s interest in the lot in question was sold at a public auction and was
sold to MTC as the highest bidder. A deed of sale was executed in favour of MTC and was again
annotated on the title.

MTC sold its rights over the lot to Santiago Sambrano and, again, had the sale annotated on the
title. One-half of the property passed into the hands of MELITONA LAGPACAN, and her
husband JORGE MALACAS.

Meanwhile, Rosa failed to settle her obligation with PNB. Hence, PNB, pursuant to the PA, sold
the WHOLE LOT at a public auction. PNB became the owner since it was the highest bidder.
Rosa failed to redeem and PNB consolidated its title over the lot. However, the consolidation
was not annotated on the owner’s duplicate title since Rosa failed to surrender it.

On November 25, 1950, PNB filed a petition before the trial court which asked that the original
title over the land be declared null and void and prayed that a new title be issued in its name.
Trial court acted favourably on PNB’s petition and ordered what was prayed for on October 2,
1951.

On May 24, 1954, PNB sold the property to Felizardo Reyes. A new owner’s duplicate title was
issued in Reyes’s name.

On May 17, 1954, the heirs of Heirs of Inigo Bitanga, filed a complaint before the Court of First
Instance of Ilocos Norte against the Philippine National Bank, the Register of Deeds of Ilocos
Norte and Felizardo Reyes, for reconveyance of real property and damages, with a prayer for the
issuance of an ex-parte writ of preliminary injunction restraining and enjoining the PNB and
Felizardo Reyes from consummating the sale of the property in question and prohibiting the
Register of Deeds from registering the sale in favor of Felizardo Reyes. the writ of preliminary
injunction was issued. During the pendency of the case, Melitona Lagpacan and Jorge Malacas,
filed a Motion to admit their complaint in intervention, alleging that they had a legal interest in
the subject matter of the case, and the same was granted.

On November 16, 1960, the CFI ruled in favour of the heirs of Bitanga and the Malacas spouses.
It mentioned that the lot in question was conjugal in nature; that half would go to the heirs and
half would go to rosa ver. The mortgage to PNB is not an existing lien since it did not have a
special mention in the decree of registration and that the acquisition of MTC was valid and legal.
Since the MTC acquisition was valid and legal, the sale made to Sambrano is likewise valid and
legal, as well as the sale to the Malacas spouses.

Felizardo Reyes was deemed not a purchaser in good faith and the trial ordered the cancellation
of the duplicate title in Reyes’ name.

PNB and Reyes appealed to the CA. CA affirmed the judgment of the lower court and ordered
that new titles be issued in the names of the heirs of Bitanga and spouses Malacas (half to the
heirs and half to the Spouses). It also mentioned that the new titles would be free from
encumberance regarding the claims of PNB and Reyes.

PNB filed an M.R. to the CA but was denied, hence, the current petition.

In this petition, respondents filed a motion to dismiss on the ground that the CA decision became
final and executory since Reyes failed to join PNB in this recourse. Moreover, it assailed the
issues of PNB because they were questions of fact and not of law, hence, they are proper for the
review of SC.

SC denied petition initially but PNB filed an M.R. stating that it still has interests in the property.
S.C. reconsidered.

ISSUES:

WON Rosa Ver could really mortgage the entire lot to PNB. (NO)
WON the sale of PNB and/or the sale of MTC were valid. (PNB:NO ; MTC: YES)
HELD:

SC said that lot was conjugal. When Inigo died, a co-ownership was established between the
heirs and Rosa Ver. Hence, Rosa cannot validly mortgage the whole lot since it would prejudice
the rights of her co-owners, the heirs.
One of the essential requisites to the contract of pledge and mortgage is that the pledgor or
mortgagor be the absolute owner of the thing. The effect of the mortgage, with respect to the co-
owners, shall be limited to the portion which may be allotted to him in the division upon the
TERMINATION OF THE CO-OWNERSHIP. Thus, Rosa could only mortgage her share and
not the whole lot. She cannot give what is not hers.
She only had usufrutuary rights over the estate left by the husband. Not being an owner, she
cannot alienate or dispose of the objects included in the usufruct. (as per the old civil code which
was in force during the time of Inigo’s death).

Though there were tax declarations in the name of Rosa, it does not alter the conjugality of the
lot. Tax declarations are not sufficient evidences of title and should not prejudice the rights of the
co-owners. As far as the shares are concerned, the respective shares of the co-owners were not
included in the mortgage.
Thus, mortgage/subsequent sale to PNB and subsequent sale of PNB to Reyes were invalid.

On the other hand, there is no showing that the Manila Trading Company (MTC) had any
knowledge or notice of the prior mortgage in favor of the PNB, hence, it may be safely presumed
that it (MTC) acquired the rights of Rosa Ver and Guillermo Bitanga as an innocent purchaser
for value and free from all incumbrances. From the MTC, the aforesaid rights of Rosa and
Guillermo passed to Santiago Sambrano, and from the latter, to the Malacas Spouses. There is no
question, therefore, as to spouses’ rights over the property, as against the PNB or its transferee,
Felizardo Reyes. The intervenors merely stepped into the shoes of MTC, a prior purchaser in
good faith, and thereby became entitled to all the defenses available to said Company, including
those arising from the acquisition of the property in good faith and for value.

The judgment of the CA was AFFIRMED but was modified with respect to the shares of the
Spouses Malacas and the Heirs (since the spouses stepped into the shoes of the MTC, they also
acquired the rights and interests of Guillermo Bitanga, hence the heirs now have 2/5 while the
spouses have 3/5).