View full case

MAMERTA LOPEZ CLAUDIO v. SPS. FEDERICO

FACTS:

In the case, the petitioners sought the annulment of a sale, power of attorney, and mortgage against the respondents. The petitioners argued that the sale and mortgage were void due to forged signatures and lack of consideration. Additionally, they alleged that the mortgagees were aware of the invalid sale and acted in bad faith. The Regional Trial Court (RTC) denied the respondents' motion to dismiss, but later granted their demurrer to evidence, resulting in the dismissal of the complaint without prejudice. The petitioners appealed this decision to the Court of Appeals (CA), which upheld the RTC's ruling and deemed the mortgagees innocent mortgagees for value. The CA determined that the mortgagees were entitled to rely in good faith on the certificate of title. Unfazed by the CA's decision, the petitioners brought their case to the Supreme Court by filing a petition for review. Various issues related to the respondents' good faith and the validity of the mortgage were raised in the petition for review.

ISSUES:

  1. Whether or not the RTC erred in granting Spouses Saraza's demurrer to evidence.

  2. Whether or not Spouses Saraza are mortgagees in good faith.

  3. Whether or not the Real Estate Mortgage is valid and binding against the whole world.

  4. Whether or not the Spouses Saraza acted in good faith when they entered into the mortgage contract.

  5. Whether the evidence presented by the petitioners, along with the inferences and conclusions drawn from it, sufficiently supports their claim against Spouses Saraza.

RULING:

  1. The Court finds that the RTC erred in granting Spouses Saraza's demurrer to evidence.

  2. Spouses Saraza are not mortgagees in good faith.

  3. The Real Estate Mortgage is not valid and binding against the whole world. The Court of Appeals' declaration that the mortgage contract was executed on August 11, 2004, which contradicts the evidence on record, creates an absurd scenario. The annotation of the mortgage contract on the title of the property was placed on June 28, 2004, which is inconsistent with the claim that it was executed on a later date. Furthermore, the protection afforded to mortgagees in good faith does not apply when the mortgagor does not have a certificate of title in his or her name at the time of the mortgage. Since Florentino, the mortgagor, did not have a title to the property when the mortgage contract was executed, the Spouses Saraza cannot claim the protection of an innocent mortgagee for value.

  4. The Spouses Saraza did not act in good faith when they entered into the mortgage contract. Good faith requires an honest intention to abstain from taking unconscientious advantage of another. The Spouses Saraza knew that they were not dealing with the registered owner of the property and that the subject land had yet to be titled in the name of Florentino. Therefore, the protection accorded to a mortgagee in good faith cannot be extended to the Spouses Saraza, who knowingly entered into the mortgage agreement with Florentino, who did not have the legal authority to mortgage the property.

  5. The Court held that the petitioners' evidence, standing alone and in the absence of controverting evidence, would provide sufficient basis for a judgment in their favor and against Spouses Saraza. The evidence presented by the petitioners made out a strong case against the defendants, justifying recovery from them. Therefore, the Court granted the petition, reversed and set aside the decision of the Court of Appeals, and reinstated the civil case against Spouses Saraza.

PRINCIPLES:

  • The determination of good faith and negligence are factual matters outside the scope of a petition for review on certiorari, except when there is a misapprehension of facts or manifestly mistaken inference.

  • The mortgagee in good faith doctrine protects buyers or mortgagees who rely in good faith on the certificate of title of the mortgagor and do not have an obligation to undertake further investigation, unless there are signs of suspicion.

  • The mortgagor must have obtained a Torrens title in their name before mortgaging the property to another who relies on the said title.

  • A mortgagee is not in good faith when they deliberately ignore a significant fact that would create suspicion to a reasonable person regarding the ownership of the property being presented as security for a loan.

  • A person who deliberately ignores a significant fact that would create suspicion in an otherwise reasonable person is not an innocent purchaser (mortgagee) for value.

  • An innocent mortgagee for value is one who entered into a mortgage contract with a mortgagor bearing a certificate of title in his name over the mortgaged property.

  • The protection afforded to mortgagees in good faith does not apply if the mortgagor does not have a certificate of title in his or her name at the time of the mortgage.

  • Good faith requires an honest intention to abstain from taking unconscientious advantage of another.

  • A forged or fraudulent deed is a nullity and conveys no title.

  • A real estate mortgage contract is void if the mortgagor is not the absolute owner of the property to be mortgaged.

  • In determining sufficiency of evidence, the court considers whether the evidence presented, together with inferences and conclusions drawn from it, supports the allegations necessary to the claim. If the evidence is sufficient, it warrants a judgment in favor of the party presenting it.

  • A party may be deemed to have waived their right to present evidence if they fail to do so within the prescribed period. However, such waiver does not prejudge the judgment on the merits that will be rendered by the court.