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EVELYN V. RUIZ v. BERNARDO F. DIMAILIG

FACTS:

Respondent Bernardo Dimailig entrusted the owner's copy of the Transfer Certificate of Title (TCT) for his property to his brother, Jovannie, for the purpose of selling it. However, without Bernardo's knowledge and consent, the property was mortgaged to Evelyn Ruiz. Bernardo filed a suit to annul the Real Estate Mortgage (REM), alleging that his signature in the REM was forged. During the trial, Bernardo testified that he personally informed Evelyn that the REM was fake and demanded the return of his title, but Evelyn refused. Jovannie also testified that he gave the owner's copy of the TCT to a broker named Editha Sanggalang, who later misplaced it, resulting in the title being in Evelyn's possession due to the REM. Evelyn argued that she was a mortgagee in good faith and accepted the mortgage based on representations made by Jovannie and Editha. The Regional Trial Court initially dismissed the complaint, finding Evelyn to be a mortgagee in good faith. Bernardo appealed to the Court of Appeals, which reversed the RTC's decision and declared the REM null and void. The CA held that Evelyn could not be protected as a mortgagee in good faith because the REM was forged, and the rightful owner's title was not transferred to the mortgagor.

ISSUES:

  1. Whether the petitioner is a mortgagee in good faith.

  2. Whether the Deed of Real Estate Mortgage is a forged instrument and conveys no title.

  3. Whether the principle of mortgagee in good faith applies in this case.

  4. Whether the respondent, Evelyn, deliberately ignored pertinent facts that should have aroused suspicion regarding the veracity of the title of the mortgagor.

RULING:

  1. The Court ruled that the petitioner is not a mortgagee in good faith. The burden of proof lies with the petitioner to prove that she acted in good faith and that no circumstance should have aroused suspicion on the title of the mortgaged property. However, the Court found that the petitioner failed to discharge her burden. The Deed of REM was established to be a forged instrument, and the title to the property remained in the name of the rightful owner, not the impostor. As such, the petitioner cannot rely on the doctrine of mortgagee in good faith to protect her rights.

  2. The Deed of Real Estate Mortgage is a forged instrument and conveys no title. The signature on the mortgage contract was not affixed or signed by the registered owner of the property. The impostor who signed as the mortgagor was without rightful ownership of the property and did not have a Torrens title in his own name.

  3. The principle of mortgagee in good faith does not apply in this case. The title to the subject property remained registered in the name of the true owner and was not transferred to the impostor's name when the respondent transacted with him.

  4. The respondent deliberately ignored pertinent facts that should have aroused suspicion regarding the veracity of the title of the mortgagor. She did not take the necessary steps to determine any defect in the title of the alleged owner of the property and failed to verify the identity of the impostor. Additionally, the respondent hastily granted the loan and entered into the mortgage contract without verifying the ownership of the property being mortgaged.

PRINCIPLES:

  • A mortgagee cannot simply ignore facts that should have put a reasonable person on guard and claim good faith.

  • The doctrine of mortgagee in good faith assumes that the title to the subject property had already been transferred or registered in the name of the impostor who thereafter transacts with a mortgagee who acted in good faith.

  • The burden of proof lies with the person claiming to be a mortgagee in good faith.

  • No valid mortgage will arise unless the mortgagor has a valid title or ownership over the mortgaged property.

  • A forged instrument is a nullity and conveys no title.

  • The principle of mortgagee in good faith does not apply when the title to the property remains registered in the name of the true owner.

  • A mortgagee must take necessary steps to determine any defect in the title of the mortgagor and cannot be considered an innocent mortgagee in good faith if the loan is granted hastily without verifying the ownership of the property.