TL;DR

The Supreme Court ruled that an individual cannot validly sell or mortgage property belonging to co-heirs based solely on an affidavit of self-adjudication. Enrique Lopez’s attempt to transfer the entire property to Marietta Yabut, and Yabut’s subsequent mortgage to Development Bank of the Philippines (DBP), were deemed invalid concerning the shares of Lopez’s co-heirs. The Court emphasized that DBP, as a banking institution, failed to exercise due diligence in verifying Yabut’s ownership before accepting the property as security. This decision underscores the importance of verifying property ownership and the limitations of relying solely on a certificate of title, especially when dealing with unregistered land or potential co-ownership.

The Inheritance Impasse: When a False Claim Undermines a Bank’s Security

This case revolves around a parcel of land in Bulacan originally owned by Gregoria Lopez. After her death, the property was inherited by her sons, and subsequently by their heirs, including Enrique Lopez. However, Enrique unilaterally declared himself the sole heir and sold the land, which was then mortgaged to DBP. The central legal question is whether Enrique’s actions, and the subsequent transactions, validly transferred ownership of the entire property, particularly affecting the rights of the other heirs and the mortgagee bank.

The legal principle of nemo dat quod non habet, meaning “no one can give what one does not have,” is central to the court’s analysis. This principle dictates that a seller can only transfer ownership of what they actually own or have the authority to transfer. In the context of inheritance, rights to a deceased person’s property are immediately passed to their heirs upon death. These heirs become co-owners, each entitled to a specific share of the property. Therefore, Enrique Lopez could only legally sell his own one-fourth share of the Bulacan property, not the portions belonging to his siblings or their heirs.

Enrique’s execution of an affidavit of self-adjudication, falsely claiming to be the sole heir of Gregoria Lopez, did not grant him the right to sell the entire property. The court emphasized that this affidavit was invalid due to its falsity, as Enrique’s siblings were still alive and entitled to their respective shares. The subsequent issuance of an original certificate of title in favor of Marietta Yabut, the buyer, did not cure Enrique’s lack of title or authority to convey his co-owners’ portions of the property. A certificate of title serves as evidence of ownership but does not, in itself, grant ownership.

The concept of an innocent purchaser for value is also crucial. Such a purchaser buys property without notice of any defect or irregularity in the seller’s right or interest. Ordinarily, a buyer can rely on the certificate of title. However, this protection does not apply if there are circumstances that should arouse suspicion. In this case, Yabut could not claim the protection of an innocent purchaser because, at the time of the sale, the property was unregistered and only covered by a tax declaration under the name of “Heirs of Lopez.” This should have prompted her to inquire further into Enrique’s rights, which she failed to do.

Building on the principle that one cannot mortgage what one does not own, the court found that the mortgage executed by Yabut in favor of DBP was also invalid concerning the undivided portions of the property belonging to the other heirs. One of the essential requisites of a valid mortgage contract is that the mortgagor must be the absolute owner of the property being mortgaged. Since Yabut did not acquire valid title or ownership over the entire property, she could not validly mortgage it to DBP. This led to the court addressing the “mortgagee in good faith” doctrine.
However, this exception applies only when the mortgagor already has a certificate of title in their name at the time of the mortgage.

The court emphasized that DBP, as a banking institution, is held to a higher standard of diligence. Banks are expected to exercise greater care and prudence in their dealings, including those involving land. They cannot simply rely on the face of a certificate of title. In this case, DBP disregarded the fact that Yabut only had a tax declaration at the time of the mortgage. This should have raised suspicion and prompted further investigation. The court distinguished this case from Blanco v. Esquierdo, where the certificate of title was already in the mortgagor’s name when the property was mortgaged to DBP. The contracts involving the sale and mortgage of unregistered property by a person who was not the owner are void.

FAQs

In conclusion, the Supreme Court’s decision reinforces the importance of due diligence in property transactions, especially for banking institutions. It clarifies the limitations of self-adjudication and the responsibilities of mortgagees to thoroughly investigate the ownership status of properties offered as security. This ruling protects the rights of legitimate heirs and underscores the principle that one cannot transfer rights they do not possess.

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Heirs of Gregorio Lopez vs. DBP, G.R. No. 193551, November 19, 2014