[ G.R. No. 237506, July 28, 2020 ]
SAN MIGUEL CORPORATION, PETITIONER, VS. LEONARA* FRANCISCO VDA. DE TRINIDAD, SPS. TEODORICO F. TRINIDAD AND SUSANA COSME-TRINIDAD, SPS. GEMMA F. TRINIDAD-GANDIONGCO* AND ALFREDO M. GANDIONGCO,** JR., SPS. MANUEL F. TRINIDAD AND RUBI REMIGIO TRINIDAD AND SPS. GRACE F. TRINIDAD-MALOLOS AND BISMARK D. MALOLOS, ROBERTO N. GANDIONCO, RESPONDENTS.
CONCURRING OPINION
CAGUIOA, J.:
I agree with the ponencia.
I submit this Concurring Opinion only to expound on the significance of delivering the physical possession of the original owner's duplicate Transfer Certificates of Title (TCTs) to Roberto N. Gandionco (Roberto), purported agent of the registered owners thereof (respondents).
To reiterate the facts - petitioner San Miguel Corporation (SMC) requires its dealers to submit sufficient collateral to secure the beer stocks taken out of SMC.1 Roberto approached respondents for help with the submission of the collateral requirement.2 Pursuant thereto, respondents executed similarly worded Special Powers of Attorney (SPAs) authorizing respondent Roberto to "offer as collateral" TCT Nos. T-52796, T-5433, T-6347, and T-6346 in favor of SMC.3 Respondents likewise delivered physical possession of the original owner's duplicate TCTs to Roberto on four different occasions and over the course of several years.4 Thereafter, real estate mortgages (REMs) were executed and annotated on some of the aforementioned titles.5 When Roberto failed to pay, SMC foreclosed on the mortgages.6 It was only then that respondents purportedly learned that Roberto had mortgaged their properties. They informed SMC that the SPAs had been revoked and thereafter filed a complaint for annulment of mortgage and foreclosure sale.7
Based on the foregoing, respondents should be deemed bound by the mortgages under the doctrine of agency by estoppel.
As acutely observed by the ponencia, in addition to executing similarly worded SPAs expressly authorizing Roberto to offer specific properties as collateral and to do all things necessary in furtherance of said purpose, respondents delivered their original owner's duplicate certificates of title to Roberto.8 Notably, no reason was proffered as to why respondents did not or could not instead provide photocopies or certified true copies of the same. Worse, respondents delivered the same on four different occasions over the course of several years.9 During this period, it appears that respondents failed to exercise even ordinary diligence to inquire about the status or whereabouts of their owner's duplicates. This is fatal to respondents' case.
The legal significance of delivering the original owner's duplicate certificate of title must be understood in the context of its distinct and irreplaceable function in the land registration system. In Philippine Bank of Communications v. The Register of Deeds for the Province of Benguet,10 the Court explained:
It is a fundamental principle in land registration that the certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. It is conclusive evidence with respect to the ownership of the land described therein. In The Heirs of Alfredo Cullado v. Gutierrez, the Court explained:
Indeed, the bedrock of the Torrens system is the indefeasibility and incontrovertibility of a land title where there can be full faith reliance thereon. Verily, the Government has adopted the Torrens system due to its being the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. To the registered owner, the Torrens system gives him complete peace of mind, in order that he will be secured in his ownership as long as he has not voluntarily disposed of any right over the covered land. On the part of a person transacting with a registered land, like a purchaser, he can rely on the registered owner's title and he should not run the risk of being told later that his acquisition or transaction was ineffectual after all, which will not only be unfair to him, but will also erode public confidence in the system and will force land transactions to be attended by complicated and not necessarily conclusive investigations and proof of ownership, x x x
In other words, ownership of registered land is evidenced by the certificate of title, which is indefeasible and incontrovertible. Presidential Decree No. (P.D.) 1529 or the "Property Registration Decree" mandates the issuance of this certificate of title in duplicates - the original certificate of title, which is either an original certificate of title or TCT to be kept by the Register of Deeds and an owner's duplicate certificate of title to be kept by the registered owner, x x x
x x x x
x x x [T]here is no doubt that the owner's duplicate certificate of title is a fundamental aspect of the Torrens system. While a registered owner is free to exercise and enjoy all manner of rights over his/her property [i.e., (1) Jus possidendi or the right to possess; (2) Jus utendi or the right to use and enjoy; (3) Jus fruendi or the right to the fruits; (4) Jus accessionis or right to accessories; (5) Jus abutendi or the right to consume the thing by its use; (6) Jus disponendi or the right to dispose or alienate; and (7) Jus vindicandi or the right to vindicate or recover] and non-registration thereof does not affect the validity of said acts as between the parties, no voluntary transaction affecting the land will be registered (and thus bind third persons) without the owner's duplicate certificate of title as mandated by P.P. 1529, viz.:
CHAPTER V
SUBSEQUENT REGISTRATION
I. VOLUNTARY DEALINGS WITH REGISTERED LANDS
GENERAL PROVISIONS
SEC. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration.
The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies.
SEC. 52. Constructive notice upon registration. - Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.
SEC. 53. Presentation of owner's duplicate upon entry of new certificate. - No voluntary instrument shall be registered by the Register of Deeds, unless the owner's duplicate certificate is presented with such
instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause shown.
The production of the owner's duplicate certificate, whenever any voluntary instrument is presented for registration, shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder for value of a certificate of title. After the entry of the decree of registration on the original petition or application, any subsequent registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or other instrument, shall be null and void.
SEC. 54. Dealings less than ownership, how registered. - No new certificate shall be entered or issued pursuant to any instrument which does not divest the ownership or title from the owner or from the transferee of the registered owners. All interests in registered land less than ownership shall be registered by filing with the Register of Deeds the instrument which creates or transfers or claims such interests and by a brief memorandum thereof made by the Register of Deeds upon the certificate of title, and signed by him. A similar memorandum shall also be made on the owner's duplicate. The cancellation or extinguishment of such interests shall be registered in the same manner, x x x
The requirement that the owner's duplicate certificate of title be presented for voluntary transactions is precisely what gives the registered owner "security" and "peace of mind" under the Torrens System. Without the owner's duplicate certificate of title, transfers and conveyances like sales and donations, mortgages and leases, and agencies and trusts while valid, will not bind the registered land. As such, the owner's duplicate certificate of title safeguards ownership, x x x11
Evidently, the owner's duplicate certificate is "crucial to the full and effective exercise of ownership rights over registered land."12 It is a fundamental aspect of the Torrens system. Presentation of the owner's duplicate certificate constitutes conclusive authority from the registered owner in favor of the Register of Deeds (RD) to enter a new certificate or to make a memorandum of registration in accordance with the accompanying voluntary instrument.13 Conversely, non-presentation of the owner's duplicate certificate of title absolutely bars the registration of any and all voluntary transactions.14 In other words, without the owner's duplicate, a sale or mortgage while valid, will not and cannot bind registered land.
In view of this distinctive function, registered owners are expected to exercise reasonable diligence in safeguarding the original owner's duplicate certificates of title and in ensuring that they remain in their possession or in the possession of persons they trust. Under these premises, the voluntary delivery of original owner's duplicates gains new significance.
As applied to the instant case, the presentation of (1) an express authority to offer specific properties as collateral (2) together with the original owner's duplicate certificates, would indubitably lead any reasonable person to believe that the agent indeed possesses the requisite authority to constitute the REMs and to register the same with the RD. As such, respondents should be deemed bound by the mortgages under Article 1911 of the Civil Code, viz.:
ART. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers, (n)15
The Court has held that "one who clothes another with apparent authority as his agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he is what he appears to be."16 In an agency by estoppel, "the principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing."17 Thus, in the early case of Macke v. Camps,18 the Court held a cafe owner liable for the payment of goods received by a certain Ricardo Flores, after it was shown that the former left the latter in charge of the business and allowed him to use the title of "managing agent" during periods of prolonged absence. Similarly, the Court in Cuison v. Court of Appeals19 held petitioner liable for the payment of various paper products delivered in accordance with orders made by a certain Tiu Huy Tiac, after it was shown that petitioner held the latter out to the public as the manager of his store. The Court therein explained:
By his representations, petitioner is now estopped from disclaiming liability for the transaction entered into by Tiu Huy Tiac on his behalf. It matters not whether the representations are intentional or merely negligent so long as innocent third persons relied upon such representations in good faith and for value. As held in the case of Manila Remnant Co., Inc. v. Court of Appeals (191 SCRA 622 1990):
"More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had plenary powers. Article 1911 of the Civil Code provides:
'Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.'
The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both the principal and the agent may be considered as joint tortfeasors whose liability is joint and solidary.
Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have had actual knowledge of the agent's misdeed is of no moment."
Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an agent of petitioner by estoppel. Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person reiving thereon (Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back on his own acts and representations to the prejudice of the other party who, in good faith, relied upon them (Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 1990).
Taken in this light, petitioner is liable for the transaction entered into by Tiu Huy Tiac on his behalf. Thus, even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers (Article 1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiu Huy Tiac defrauded his principal (petitioner) in not turning over the proceeds of the transaction to the latter, such fact cannot in any ' way relieve nor exonerate petitioner of his liability to private respondent. For it is an equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss (Francisco vs. Government Service Insurance System, 7 SCRA 577 1963).20
Even assuming therefore that Roberto's authority to mortgage the property was insufficient, respondents absolutely affirmed and confirmed said authority when they repeatedly executed the aforementioned SPAs and successively delivered the corresponding owner's duplicate TCTs to Roberto in a span of four years.
In this regard, I find respondents' assertion that "[w]hen asked about the status of the certificates of title, Roberto would explain that the titles were still in SMC's possession which has yet to decide which title to accept as collateral"21 to be a flimsy excuse, which cannot justify the years of neglect and inaction. Why would SMC require the original owner's duplicates if it had yet to decide which title to accept as collateral? Certainly, a photocopy or certified true copy would have served the same purpose. Why would SMC retain the original owner's duplicates if it had no intention to constitute mortgages thereon? These matters should have alerted respondents to investigate with the RD as to the status of their titles. Evidently, respondents were grossly negligent.
Indeed, an ordinary registered owner would not casually part with his or her original owner's duplicate. Certainly, an ordinary registered owner would never allow a third person to retain the same for any significant period without cause. Undoubtedly, an ordinary registered owner would inquire about the whereabouts of his or her owner's duplicates and demand its return after the lapse of a reasonable period. By delivering said owner's duplicates to Roberto and allowing SMC to retain the same, respondents repeatedly held Roberto out as their agent and clothed him with the apparent authority to continuously deal with SMC, to execute the REMs, and to register the same with the RD.
I likewise find respondents' claims that they did not specifically authorize Roberto to execute the REMs but merely agreed that the latter would bring the necessary documents for the former to sign once SMC accepted their certificates of title22 to be nonsensical and irrelevant. Notably, Article 1900 of the Civil Code expressly states that "[s]o far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent." Further, Article 1902 unequivocally holds that "x x x [p]rivate or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown to them." Although it appears that Roberto defrauded respondents, such fact cannot relieve respondents of their liability to SMC for "it is an equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss."23
In the landmark case of Blondeau v. Nano,24 which involved a purportedly forged mortgage constituted through the aid of a purported agent who had possession of the original owner's duplicate TCTs, the Court upheld the validity of the mortgage and held:
But there is a narrower ground on which the defenses of the defendant-appellee must be overruled. Agustin Nano [(purported agent)] had possession of Jose Vallejo's [(registered owner/purported mortgagor)] title papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been perpetuated, x x x
The Torrens system is intended for the registration of title, rather than the muniments of title. It represents a departure from the orthodox principles of property law. Under the common law, if the pretended signature of the mortgagor is a forgery, the instrument is invalid for every purpose and will pass no title or rights to anyone, unless the spurious document is ratified and accepted by the mortgagor. The Torrens Act on the contrary permits a forged transfer, when duly entered in registry, to become the root of a valid title in bona fide purchaser. The act erects a safeguard against a forged transfer being registered, by the requirement that no transfer shall be registered unless the owner's certificate was produced along with the instrument of transfer. An executed transfer of registered lands placed by the registered owner thereof in the hands of another operates as a representation to a third party that the holder of the transfer is authorized to deal with the lands. (53 C. J., 1141, 1142; Act No. 496, as amended, sees. 47, 51, 55.)
x x x x
Other incidental facts might be mentioned and other incidental legal propositions might be discussed, but in its final analysis this is a case of a mortgagee relying upon a Torrens title, and loaning money in all good faith on the basis of the title standing in the name of the mortgagors only thereafter to discover one defendant to be an alleged forger and the other defendant, if not a party to the conspiracy, at least having by his negligence or acquiescence made it possible for the fraud to transpire. Giving to the facts the most favorable interpretation for Vallejo, yet, as announced by the United States Supreme Court, the maxim is, as between two innocent persons, in this case Angela Blondeau and Jose Vallejo, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss, in this case Jose Vallejo. x x x25
In Domingo v. Robles,26 which was likewise cited by the ponencia, the Court upheld the purportedly forged sale made with the aid of an agent who had possession of the original owner's duplicate, and held:
The sale was admittedly made with the aid of Bacani, petitioner's agent, who had with him the original of the owner's duplicate Certificate of Title to the property, free from any liens or encumbrances. The signatures of Spouses Domingo, the registered owners, appear on the Deed of Absolute Sale. Petitioner's husband met with Respondent Yolanda Robles and received payment for the property. The Torrens Act requires, as a prerequisite to registration, the production of the owner's certificate of title and the instrument of conveyance. The registered owner who places in the hands of another an executed document of transfer of registered land effectively represents to a third party that the holder of such document is authorized to deal with the property.27
The foregoing reasoning is applicable by analogy to the instant case. By repeatedly signing the subject SPAs and by repeatedly placing the original owner's duplicate TCTs in the hands of Roberto, respondents represented to SMC that Roberto was duly authorized to mortgage the properties. As discussed, without the owner's duplicates, the mortgages could never have been registered.28 Relying in good faith on this apparent authority and believing that the mortgages were validly constituted, SMC approved Roberto's dealership application and delivered beer stocks amounting to about P7,000,000.00.29 In view of the foregoing, respondents are estopped from denying Roberto's authority and are bound to comply with the obligations validly executed in their name.
Although respondents are likewise victims of Roberto's fraud, they cannot escape liability to SMC under the principle "that as between two innocent persons, one of whom must suffer the consequences of a breach of trust, the one who made it possible by his act of confidence must bear the loss."30 In any event, respondents' liability herein is without prejudice to their right to seek reimbursement and/or to recover damages from Roberto.31
In conclusion, (1) the authority "to offer" the subject properties "as collateral, security or property bond with SMC," (2) with the "full power and authority" to do all that is necessary for all intents and purposes of the contract, (3) coupled with the act of physically delivering to Roberto's possession the owner's duplicate TCTs - result in any person's understanding that Roberto had the specific and express authority to mortgage the subject properties in favor of SMC. To hold otherwise, is not only to contravene clear unequivocal provisions of law, but worse, to justify a deception, and accordingly make the Court complicit to this fraud.
(Sgd.)ALFREDO BENJAMIN S. CAQGUIOA
Associate Justice
Footnotes
1Ponencia, p. 2.
2Id.
3Id. at 2-3.
4Id.
5Id.
6Id.
7Id.
8Id. at 8.
9Id. at 2.
10G.R. No. 222958, March 11, 2020.
11Id. at 7-12.Citations omitted; underscoring supplied.
12Id. at 12.
13PROPERTY REGISTRATION DECREE, Presidential Decree No. (P.D.) 1529, June 11, 1978, Sec. 53.
14Id.
15Underscoring supplied.
16Cuison v. Court of Appeals, 298 Phil. 162, 167 (1993).
17AFP Retirement and Separation Benefits System v. Sanvictores, 793 Phil. 442, 452-453 (2016).
187 Phil. 553, 555(1907).
19Supra note 16.
20Id. at 170-171; underscoring supplied.
21Ponencia, p. 3.
22Id.
23Cuison v. Court of Appeals, supra note 16 at 172.
2461 Phil. 625(1935).
25Id. at 627-632; underscoring supplied.
26493 Phil. 916(2005).
27Id. at 922; underscoring supplied.
28P.D. 1529, Sec. 51.
29Ponencia, p. 3.
30Tenio-Obsequio v. Court of Appeals, 300 Phil. 588, 601 (1994).
31CIVIL CODE, An. 1909 states:
ART. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.
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