BANKING.docx

Believe that such defect exists or his willful

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believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor's or mortgagor's title, will not make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with the measure of a prudent man in a like situation. Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands. Hence, for merely relying on the certificates of title and for its failure to ascertain the status of the mortgaged properties as is the standard procedure in its operations, we agree with the Court of Appeals that CRB is a mortgagee in bad faith. (Citations omitted.) Because Allied Bank was a mortgagee in bad faith, its foreclosure on the mortgage and the subsequent public auction sale of the subject property, in which the bank was the highest bidder, are null and void. Allied Bank asseverates that its title to the subject property cannot be collaterally attacked in this case, which is for breach of contract, rescission, and damages. We are not persuaded. Allied Bank did not present a certificate of title for the subject property in its name, but even if it had, it would not accord the bank any protection. As we pointed out in Erasusta, Jr. v. Court of Appeals 58 : The concept of non-collateral attack of title is based on Section 48, P.D. 1529, which provides: Certificate Not Subject to Collateral attack . - A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. Clear it is from the above that what cannot be collaterally attacked is the certificate of title and not the title itself. As it is, a certificate of title is the document issued by the Register of Deeds in case of conveyance of real estates and is known as TCT. But by title, the law refers to the ownership which a certificate of title merely represents. Apparently, respondent Bank confuses a certificate of title with the title itself. Placing a parcel of land under the mantle of the Torrens system does not mean that ownership thereof can no longer be disputed. Ownership is different from a certificate of title. (Citations omitted.) We also expounded in Consolidated Rural Bank (Cagayan Valley), Inc. 59 that "[w]hile certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or record title already existing and vested. They cannot be used to protect a
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usurper from the true owner, nor can they be used for the perpetration of fraud; neither do they permit one to enrich himself at the expense of others." If the spouses Pantaleon fail to pay the balance of the purchase price within the term set by the RTC judgment, GGDI is entitled to rescission of the Deed of Sale.
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