G.R. No. 189477, February 26, 2014
HOMEOWNERS SAVINGS AND LOAN BANK, Petitioner-Appellant, v. ASUNCION P. FELONIA AND LYDIA C. DE GUZMAN, REPRESENTED BY MARIBEL FRIAS, Respondents-Appellees.
MARIE MICHELLE P. DELGADO, REGISTER OF DEEDS OF LAS PIÑAS CITY AND RHANDOLFO B. AMANSEC, IN HIS CAPACITY AS CLERK OF COURT EX-OFFICIO SHERIFF, OFFICE OF THE CLERK OF COURT, LAS PIÑAS CITY, Respondents-Defendants.
D E C I S I O N
WHEREFORE, judgment is hereby rendered directing the [Felonia and De Guzman] and the [Delgado] to execute a deed of mortgage over the property in question taking into account the payments made and the imposition of the legal interests on the principal loan.Aggrieved, Delgado elevated the case to the CA where it was docketed as CA-G.R. CV No. 49317. The CA affirmed the trial court decision. On 16 October 2000, the CA decision became final and executory.7crallawlibrary
On the other hand, the counterclaim is hereby dismissed for lack of merit.
No pronouncements as to attorney’s fees and damages in both instances as the parties must bear their respective expenses incident to this suit.6crallawlibrary
WHEREFORE, judgment is rendered-By virtue of the RTC decision, Delgado transferred the title to her name. Hence, TCT No. T-402, registered in the names of Felonia and De Guzman, was canceled and TCT No. 44848 in the name of Delgado, was issued.
- Declaring [DELGADO] as absolute owner of the subject parcel of land covered by Transfer Certificate of Title No. T-402 of the Register of Deeds of Las Piñas, Metro Manila;
- Ordering the Register of Deeds of Las Piñas, Metro Manila to cancel Transfer Certificate of Title No. T-402 and issue in lieu thereof a new certificate of title and owner’s duplicate copy thereof in the name of [DELGADO].9crallawlibrary
Entry No. 8219/T-44848 - NOTICE OF LIS PENDENS - filed by Atty. Humberto A. Jambora, Counsel for the Plaintiff, that a case been commenced in the RTC, Branch 38, Manila, entitled ASUNCION P. FELONIA and LYDIA DE GUZMAN thru VERONICA P. BELMONTE, as Atty-in-fact (Plaintiffs) v.s. MARIE MICHELLE DELGADO defendant in Civil Case No. 91-59654 for Reformation of Instrument. Copy on file in this Registry.On 20 November1997, HSLB foreclosed the subject property and later consolidated ownership in its favor, causing the issuance of a new title in its name, TCT No. 64668.
Date of Instrument - Sept. 11, 1995
Date of Inscription - Sept. 14, 1995 at 9:55 a.m.11crallawlibrary
WHEREFORE, the petition is GRANTED and the subject judgment of the court a quo is ANNULLED and SET ASIDE.13crallawlibraryOn 29 April 2003, Felonia and De Guzman, represented by Maribel Frias (Frias), claiming to be the absolute owners of the subject property, instituted the instant complaint against Delgado, HSLB, Register of Deeds of Las Piñas City and Rhandolfo B. Amansec before the RTC of Las Piñas City for Nullity of Mortgage and Foreclosure Sale, Annulment of Titles of Delgado and HSLB, and finally, Reconveyance of Possession and Ownership of the subject property in their favor.
WHEREFORE, premises considered, the Court hereby finds for the [Felonia and De Guzman] with references to the decision of the Court of Appeals in CA-G.R. CV No. 49317 and CA-G.R. SP No. 43711 as THESE TWO DECISIONS CANNOT BE IGNORED and against [Delgado] and [HSLB], Register of Deeds of Las Piñas City ordering the (sic) as follows:chanRoblesVirtualawlibraryOn appeal, the CA affirmed with modifications the trial court decision. The dispositive portion of the appealed Decision reads:chanRoblesVirtualawlibrary
- The Register of Deeds of Las Piñas City to cancel Transfer Certificate of Title Nos. 44848 and T-64668 as null and void and reinstating Transfer Certificate of Title No. T-402 which shall contain a memorandum of the fact and shall in all respect be entitled to like faith and credit as the original certificate of title and shall, thereafter be regarded as such for all intents and purposes under the law;
- Declaring the Mortgage Sheriff’s Sale and the Certificate of Sale issued in favor of HSLB null and void, without prejudice to whatever rights the said Bank may have against [Delgado];
- Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PHP500,000.00 for compensatory damages;
- Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PHP500,000.00 for exemplary damages;
- Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PHP500,000.00 for moral damages;
- Ordering [Delgado] to pay 20% of the total obligations as and by way of attorney’s fees;
- Ordering [Delgado] to pay cost of suit.14
WHEREFORE, in the light of the foregoing, the decision appealed from is AFFIRMED with the MODIFICATIONS that the awards of actual damages and attorney’s fees are DELETED, moral and exemplary damages are REDUCED to P50,000.00 each, and Delgado is ordered to pay the appellees P25,000.00 as nominal damages.15crallawlibraryHence, this petition.
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising there from are given effect by reason of public policy. This is the doctrine of “the mortgagee in good faith” based on the rule that all persons dealing with property covered by the Torrens Certificates of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding indefeasibility of a certificate of title, as evidence of lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.When the property was mortgaged to HSLB, the registered owner of the subject property was Delgado who had in her name TCT No. 44848. Thus, HSLB cannot be faulted in relying on the face of Delgado’s title. The records indicate that Delgado was at the time of the mortgage in possession of the subject property and Delgado’s title did not contain any annotation that would arouse HSLB’s suspicion. HSLB, as a mortgagee, had a right to rely in good faith on Delgado’s title, and in the absence of any sign that might arouse suspicion, HSLB had no obligation to undertake further investigation. As held by this Court in Cebu International Finance Corp. v. CA:18crallawlibrary
The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have a valid title to, the mortgaged property, the mortgagee or transferee in good faith is nonetheless entitled to protection.However, the rights of the parties to the present case are defined not by the determination of whether or not HSLB is a mortgagee in good faith, but of whether or not HSLB is a purchaser in good faith. And, HSLB is not such a purchaser.
Although it is a recognized principle that a person dealing on a registered land need not go beyond its certificate of title, it is also a firmly settled rule that where there are circumstances which would put a party on guard and prompt him to investigate or inspect the property being sold to him, such as the presence of occupants/tenants thereon, it is of course, expected from the purchaser of a valued piece of land to inquire first into the status or nature of possession of the occupants, i.e., whether or not the occupants possess the land en concepto de dueño, in the concept of the owner. As is the common practice in the real estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent purchaser usually takes. Should he find out that the land he intends to buy is occupied by anybody else other than the seller who, as in this case, is not in actual possession, it would then be incumbent upon the purchaser to verify the extent of the occupant’s possessory rights. The failure of a prospective buyer to take such precautionary steps would mean negligence on his part and would thereby preclude him from claiming or invoking the rights of a purchaser in good faith.In the case at bar, HSLB utterly failed to take the necessary precautions. At the time the subject property was mortgaged, there was yet no annotated Notice of Lis Pendens. However, at the time HSLB purchased the subject property, the Notice of Lis Pendens was already annotated on the title.21crallawlibrary
The notice of lis pendens in question was annotated on the back of the certificate of title as a necessary incident of the civil action to recover the ownership of the property affected by it. The mortgage executed in favor of petitioner corporation was annotated on the same title prior to the annotation of the notice of lis pendens; but when petitioner bought the property as the highest bidder at the auction sale made as an aftermath of the foreclosure of the mortgage, the title already bore the notice of lis pendens. Held: While the notice of lis pendens cannot affect petitioner’s right as mortgagee, because the same was annotated subsequent to the mortgage, yet the said notice affects its right as purchaser because notice of lis pendens simply means that a certain property is involved in a litigation and serves as a notice to the whole world that one who buys the same does so at his own risk.26crallawlibraryThe subject of the lis pendens on the title of HSLB’s vendor, Delgado, is the “Reformation case” filed against Delgado by the herein respondents. The case was decided with finality by the CA in favor of herein respondents. The contract of sale in favor of Delgado was ordered reformed into a contract of mortgage. By final decision of the CA, HSLB’s vendor, Delgado, is not the property owner but only a mortgagee. As it turned out, Delgado could not have constituted a valid mortgage on the property. That the mortgagor be the absolute owner of the thing mortgaged is an essential requisite of a contract of mortgage. Article 2085 (2) of the Civil Code specifically says so:chanRoblesVirtualawlibrary
Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:chanRoblesVirtualawlibraryReyes v. De Leon28 cited the case of Philippine National Bank v. Rocha29 where it was pronounced that “a mortgage of real property executed by one who is not an owner thereof at the time of the execution of the mortgage is without legal existence.” Such that, according to DBP v. Prudential Bank,30 there being no valid mortgage, there could also be no valid foreclosure or valid auction sale.
x x x x
(2) That the pledgor or mortagagor be the absolute owner of the thing pledged or mortgaged.
Succinctly, for a valid mortgage to exist, ownership of the property is an essential requisite.27crallawlibrary
* Per Special Order No. 1644 dated 26 February 2014.
** Per Special Order No. 1636 dated 17 February 2014.
1 CA rollo, pp. 87-98; Penned by Associate Justice Apolinario D. Bruselas, Jr., with Associate Justices Bienvenido L. Reyes (now a member of this Court) and Mariflor P. Punzalan Castillo concurring.
2 Id. at 112-114.
3Rollo, pp. 170-177; Penned by Presiding Judge Lorna Navarro Domingo.
4 Records, pp. 779-781.
5 Id. at 95.
6 Id. at 46.
7 Id. at 729-742; Exhibits “F-H.”
8Rollo, p. 17; LRC Case No. M-3302, RTC-Las Piñas City, Branch 275.
9 Records, p. 49.
10Felonia, et al. v. Hon. Alfredo R. Enriquez, et al., CA-G.R. SP No. 43711, Court of Appeals, Eight Division.
11 Records, p. 114.
12 Id. at 752-759; Exhibits “N-O.”
13 Id. at 757.
14Rollo, pp. 176-177.
15 CA rollo, p. 98.
16Rollo, p. 15.
17 G.R. No. 167848, 27 April 2007, 522 SCRA 713, 726 citing Cavite Development Bank v. Spouses Lim, 381 Phil. 355, 368 (2000) as cited in Ereña v. Querrer-Kauffman, G.R. No. 165853, 22 June 2006, 492 SCRA 298, 319.
18 335 Phil. 643, 655 (1997).
19 See Sigaya v. Mayuga, 504 Phil. 600, 613 (2005); San Lorenzo Development Corp v. CA, 490 Phil. 7, 24 (2005); Occeña v. Esponilla, G.R. No. 156973, 4 June 2004, 431 SCRA 116, 124; Sps. Castro v. Miat, 445 Phil. 282, 298 (2003); AFP Mutual Benefit Association, Inc. v. CA, G.R. No. 104769 (consolidated with Solid Homes, Inc. v. Investco, Inc., G.R. No. 135016), 417 Phil. 250, 256 (2001); Republic of the Philippines v. CA, 365 Phil. 522, 529 (1999) and Sandoval v. CA, 329 Phil. 48, 62 (1996).
20 356 Phil. 870, 892 (1998).
21 Records, p. 744; Exhibits “I-3.”
22People v. RTC of Manila, 258-A Phil. 68, 75 (1989) citing Baranda, et al. v. Gustilo, 248 Phil. 205 (1988); Tanchoco v. Judge Aquino, 238 Phil. 1 (1987); Marasigan v. Intermediate Appellate Court, 236 Phil. 274 (1987); St. Dominic Corporation v. Intermediate Appellate Court, 222 Phil. 540 (1985); Constantino v. Espiritu, 150-A Phil. 953 (1972); Jose v. Cayetano, 149 Phil. 451 (1971); Nataño, et al. v. Esteban, et al., 124 Phil. 1067 (1966); See also Rehabilitation Finance Corporation v. Morales, 101 Phil. 171 (1957), and Jamora v. Duran, 69 Phil. 3 (1939).
23Laroza v. Guia, G.R. No. L-45252, 31 January 1985, 134 SCRA 341, 345.
24Rollo, p. 83.
25 101 Phil. 171 (1957).cralawred
26 Id. at 171-172.
27Reyes v. De Leon, 126 Phil. 710, 716 (1967).
29 55 Phil. 497 (1930).
30 512 Phil. 267, 278 (2005) citing Cruz v. Bancom Finance Corporation, 429 Phil. 225 (2002).
31 Supra note 17.