G.R. No. 53776 - Caniza vs. People

The case involves Philippine National Bank (PNB) as petitioner and Felisa Boyano, through the action initiated by Chu Kim Kit (represented by his uncle, Chu Tong U), as respondents.
Chu Kim Kit, a Chinese national and son of Felisa Boyano, is the absolute owner of a commercial lot and building on Rizal Avenue, Tacloban City, originally registered under Transfer Certificate of Title (TCT) No. T-1412.
Prior to leaving for mainland China in 1945, Chu Kim Kit entrusted the property to his mother, Felisa Boyano, allowing her to administer and enjoy the benefits of the property.

Felisa Boyano, although aware that her son was still alive, executed an affidavit of adjudication on May 21, 1963, falsely declaring that Chu Kim Kit had died. This affidavit was used to transfer title from TCT No. T-1412 to TCT No. T-1439 in her own name.
Subsequently, Felisa Boyano mortgaged the property to PNB, Tacloban Branch, to secure a loan of P25,000, and was on the verge of disposing of the property.
Defense by Felisa Boyano included her claim that she did not understand the English language in which the affidavit was written and that Chu Tong U, her representative, was not the real party in interest since he was only an uncle and a co-heir.

Action for cancellation of TCT No. T-1439 was initiated on September 6, 1968 in the Court of First Instance of Leyte by Chu Kim Kit (through Chu Tong U), seeking rescission of the forged title and reinstatement of TCT No. T-1412.
The trial court (February 27, 1970) ruled in favor of the private respondent, declaring TCT No. T-1439 null and void, ordering its cancellation, and reinstating TCT No. T-1412.
Intervenors – Philippine National Bank and Lucy Perez (mortgagees) – were allowed to participate in the action, and their interests were considered in the trial court’s decision, which clarified that while the mortgages were null as liens over the property, they continued to evidence Felisa Boyano’s indebtedness.

Both intervenors appealed the trial court decision to the Court of Appeals, which, on February 27, 1976, affirmed the ruling of the lower courts.
The Court of Appeals recognized Chu Kim Kit as the real party in interest and noted that despite any fraudulent acts, the intervenors, being innocent mortgagees in good faith, were entitled to rely on the certificate of title.
The intervening issue centered on whether the protection given to innocent parties dealing with the Torrens system should extend to a mortgagee who relied on a title eventually tainted by fraud.

The Supreme Court, while acknowledging that it is not a trier of facts, emphasized its power to reverse factual findings not conforming with the record, referencing Ongsiako vs. Intermediate Appellate Court.

Evidence showed that Chu Kim Kit had entrusted TCT No. T-1412 to his mother, thereby permitting Felisa Boyano to administer the property—which led to the manipulation of title.
The conduct of Chu Kim Kit, by acting with confidence in his mother, contributed indirectly to the fraudulent transaction.
Despite these irregularities, PNB, as an innocent mortgagee for value, had relied on the certificate of title as it appeared, without any warning indication of fraud.

Whether the Transfer Certificate of Title (TCT) No. T-1439, allegedly obtained through fraud by Felisa Boyano, could be declared null and void in light of the fraudulent affidavit and transaction.
To what extent the acts of confidence by Chu Kim Kit in his mother, which indirectly facilitated the fraud, affect the title’s validity.

Whether Philippine National Bank, having mortgagee rights based on a certificate of title that appeared authentic at the time of the transaction, should be protected under the Torrens system despite underlying fraudulent circumstances.
Whether the innocent purchaser-for-value or mortgagee is entitled to the doctrine of indefeasibility and reliance on the face of the title without delving into its history.

How the established doctrines and policies of the Land Registration Law, particularly the principles safeguarding the certificate of title in the hands of an innocent party, apply to the case.
Whether recourse against the fraudulent act should not impair the rights already acquired by PNB and other innocent parties relying solely on the certificate of title.