Crisostomo v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Socorro Costa Crisostomo was the registered owner of a residential house and lot. Respondent Norma San Jose offered to buy the property for P300,000.00, to be paid from a loan San Jose would obtain using Crisostomo's title as collateral. Crisostomo executed two Deeds of Absolute Sale in favor of San Jose. San Jose registered the second deed, and a new title was issued in her name. San Jose issued postdated checks totaling P300,000.00, which were all dishonored due to an "Account Closed" notation. San Jose's loan application was disapproved due to insufficient collateral. San Jose signed an undertaking for the forfeiture of P20,000.00 earnest money in favor of Crisostomo and promised to return the title within one month. San Jose failed to return the title and make any payment. Crisostomo discovered the title was with respondent Diana J. Torres, the mortgagee. Crisostomo demanded reconveyance from Torres, which was not satisfied. Procedural History: Crisostomo filed a civil case against San Jose, later amended to include Torres. San Jose filed a separate case against Torres. Both cases were consolidated and jointly tried. The Regional Trial Court (RTC) ruled in favor of Crisostomo, ordering rescission of the sale, cancellation of San Jose's title, reconveyance, damages, attorney's fees, costs, and nullification of the mortgage to Torres. The RTC also ordered San Jose to pay Torres P100,000.00. The Court of Appeals (CA) modified the RTC decision, ordering the Deed of Real Estate Mortgage in favor of Torres to be noted on the re-issued title to Crisostomo and excluding Torres from indemnifying Crisostomo for damages, attorney's fees, and costs, but affirming other aspects. Crisostomo's motion for partial reconsideration was denied. The Petition: Crisostomo filed a petition for review on certiorari, questioning whether respondent Diana Torres is a mortgagee in good faith.
Issue(s)
Whether private respondent Diana Torres is a mortgagee in good faith. Whether the Court of Appeals erred in finding Diana Torres as a mortgagee in good faith; specifically, whether the knowledge or negligence of her agent, Atty. Flor Martinez, can be attributed to her.
Ruling
The petition is impressed with merit. The decision of the Court of Appeals is REVERSED and SET ASIDE, and the decision of the trial court is REINSTATED.
Ratio Decidendi
On Whether private respondent Diana Torres is a mortgagee in good faith: The Supreme Court found that the Court of Appeals erred in concluding that Diana Torres was a mortgagee in good faith. There were strong indications that Atty. Flor Martinez, Torres's lawyer, knew of the defect in San Jose's title. Atty. Martinez, a close acquaintance of San Jose, was referred the property as collateral and was instructed to inspect it and ascertain the genuineness of the title. During the inspection, Atty. Martinez feigned ignorance of the owner but later admitted on cross-examination that Socorro Crisostomo was the owner from whom San Jose allegedly bought the property. Furthermore, Atty. Martinez allowed herself to be introduced to Crisostomo, who was occupying the house, as a Bank Inspector to convince Crisostomo that the procedure was in accordance with her agreement with San Jose. This conduct, along with Torres's own evasiveness in seeing Crisostomo, pointed to knowledge of San Jose not being the real owner. The Court reiterated the principle that a person dealing with registered land has a right to rely on the Torrens Certificate of Title, but this is only true when the party concerned has no actual knowledge of facts and circumstances that would impel a reasonably cautious person to make further inquiries. On Whether the Court of Appeals erred in finding Diana Torres as a mortgagee in good faith; specifically, whether the knowledge or negligence of her agent, Atty. Flor Martinez, can be attributed to her: Torres, even if she did not personally know the circumstances, is bound by the knowledge of her agent, Atty. Martinez, or by the latter's negligence. The Court cited Philippine National Bank vs. Court of Appeals and Gonzales vs. Intermediate Appellate Court for the principle that a purchaser or mortgagee cannot close their eyes to facts that should put them on guard and then claim good faith. The negligence of an agent is attributable to the principal, as established in PCIB vs. Villalva. Therefore, Torres was not a mortgagee in good faith, and there was no sufficient basis for the CA to order the notation of the mortgage on Crisostomo's title.
Main Doctrine
A mortgagee cannot close their eyes to facts that should put a reasonable person on guard; their willful ignorance of a defect in the mortgagor's title does not make them an innocent mortgagee for value if the defect could have been discovered with ordinary prudence. The negligence of an agent in investigating the title is attributable to the principal.